New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following informal opinion on August 15, 2002, representing the position of the New York State Insurance Department.

RE: Accident & Health Insurance, Workers’ Compensation Offset

Question Presented:

Where an insured has settled a tort action for injuries arising from an accident as a consequence of employment, and the employer’s workers’ compensation insurer has asserted a lien for past benefits and will take a credit against its future obligation, is the injured person’s accident & health insurer obligated to reimburse the insured for health care required as a result of the accident?

Conclusion:

No. In the case of a work-related injury, the workers’ compensation carrier is obligated to cover the injured person’s health expenses.

Facts:

A New York resident employed by a New York employer was seriously injured in an automobile accident in Connecticut. Since the accident arose as a consequence of employment, the employer’s workers’ compensation insurer paid the ensuing medical expenses. In addition, since the accident arose out of the operation of a motor vehicle, the injured employee is collecting No-Fault benefits.

The employee commenced a tort action and the insurer insuring the operator of the other vehicle has offered a settlement in excess of $100,000. The workers’ compensation insurer has asserted a lien for an amount in excess of $21,000, representing benefit payments to date, and has indicated it would take a credit against future benefits until the settlement amount is exhausted.

One of the considerations in any decision as to whether the employee should enter into the settlement is whether the employee’s accident & health insurer could also take the settlement proceeds into account in relation to its contractual obligation.

Conclusion:

Since the inquiry is limited to the respective obligations of the accident & health insurer and the workers’ compensation insurer, an explication of the relative obligation of the no-fault insurer vis-a-vis the workers’ compensation insurer is not provided herein.

Although workers’ compensation is the sole and exclusive remedy against the employer, New York Workers’ Compensation Law § 11 (McKinney 1994 and 2001 Supplement), the employee is free to commence a tort action against third parties. New York Workers’ Compensation Law § 29(1) (McKinney 1994 and 2001 Supplement) provides, in pertinent part:

If an employee entitled to compensation under this chapter be injured . . . by the negligence or wrong of another not in the same employ, such injured employee . . . need not elect whether to take compensation and medical benefits under this chapter or to pursue his remedy against such other but may take such compensation and medical benefits and at any time either prior thereto or within six months after the awarding of compensation . . . pursue his remedy against such other subject to the provisions of this chapter. . . . In such case, . . . insurance carrier liable for the payment of such compensation . . . shall have a lien on the proceeds of any recovery from such other, whether by judgment, settlement or otherwise, after the deduction of the reasonable and necessary expenditures, including attorney's fees, incurred in effecting such recovery, to the extent of the total amount of compensation awarded under or provided or estimated by this chapter for such case and the expenses for medical treatment paid or to be paid by it and to such extent such recovery shall be deemed for the benefit of such fund, person, association, corporation or carrier. Should the employee or his dependents secure a recovery from such other, whether by judgment, settlement or otherwise, such employee or dependents may apply on notice to such lienor to the court in which the third party action was instituted, or to a court of competent jurisdiction if no action was instituted, for an order apportioning the reasonable and necessary expenditures, including attorneys' fees, incurred in effecting such recovery. Such expenditures shall be equitably apportioned by the court between the employee or his dependents and the lienor. Notice of the commencement of such action shall be given within thirty days thereafter to the chairman, the employer and the insurance carrier upon a form prescribed by the chairman.

The right of the workers’ compensation insurer to assert a lien is limited by New York Workers’ Compensation Insurance Law § 29(1-a):

Notwithstanding any other provision of this chapter, . . . insurance carrier . . . liable for the payment of such compensation and/or medical benefits shall not have a lien on the proceeds of any recovery received pursuant to subsection (a) of section five thousand one hundred four of the insurance law, whether by judgment, settlement or otherwise for compensation and/or medical benefits paid which were in lieu of first party benefits which another insurer would have otherwise been obligated to pay under article fifty-one of the insurance law. The sole remedy of any of the foregoing providers to recover the payments specified in the preceding sentence shall be pursuant to the settlement procedures contained in section five thousand one hundred five of the insurance law.

Therefore, under New York law, the workers’ compensation insurer could validly assert a lien against the settlement equal to benefits paid and take a credit against future payments up to the amount of the lien, less expenses apportioned in accordance with New York Workers’ Compensation Law § 29(1).

An accident & health insurer is generally required to pay medical expenses arising from any accident involving its insured. However, the Regulations of this Department, N.Y. Comp. Codes R & Regs. tit. 11, § 52.16(c) (1999) provide, in pertinent part:

No policy shall limit or exclude coverage by type of illness, accident, treatment or medical condition, except as follows: . . . (8) treatment provided in a government hospital; benefits provided under . . . any State or Federal workers' compensation, employers' liability or occupational disease law; benefits to the extent provided for any loss or portion thereof for which mandatory automobile no-fault benefits are recovered or recoverable . . . .

Since, absent the tort settlement, the workers’ compensation insurer would be obligated to continue to pay the employee’s medical bills, and is taking a credit against such obligation because of the tort settlement, that portion of the tort settlement allocated to future medical expenses is the equivalent of benefits provided under a workers’ compensation statute.

Therefore, should the employee enter into the proposed settlement, under New York law, the medical expenses would be met by that portion of the settlement allocated to medical expenses. After exhaustion of that amount, if there are still medical expenses due and owing, the workers’ compensation insurer would be obligated to resume making payments under the New York Workers’ Compensation Law. Accordingly, under the facts presented, the employee’s accident & health insurer would not be obligated to make payment for such expenses.

For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.