The Office of General Counsel issued the following opinion on September 13, 2002, representing the position of the New York State Insurance Department.
Re: Group Independent Contractor Work Accident Insurance, Subrogation Clause and N.Y. Ins. Law § 3221 (McKinney 2000 and Supp. 2002).
Questions Presented:
- A licensed foreign insurer is authorized to write accident and health insurance in New York. It issues a policy of Group Independent Contractor Work Accident Insurance in another jurisdiction where it is licensed to issue such coverage. The Group Master Policy states that it is "...issued and delivered in Indiana and is governed by the laws of Indiana." New York residents are among the certificate holders under the Group Master Policy. Is the Group Master Policy subject to the approval of the New York State Insurance Department?
- Assuming that the Group Master Policy is subject to approval by the New York State Insurance Department, does any applicable New York Insurance statute or regulation prohibit inclusion, in an accident and health insurance policy, of a provision whereby the insurer has the right to recover amounts paid to or on behalf of the injured party, either from a third party tortfeasor or directly from the insured, to the extent that such amounts are recovered by the insured from another source?
Conclusions:
- The inquirer provided insufficient facts concerning the composition of the "group" to allow for resolution of this issue. N.Y. Ins. Law § 3201 (McKinney 2000 & Supp. 2002) requires that policies of accident and health insurance delivered in this state must be filed with and approved by the superintendent prior to being offered in New York. The requirement is also applicable to certificates issued in New York pursuant to a group master policy. However, an exception is made for policies and certificates delivered without the state, if the insured group is of a "type" described in certain specified sections of N.Y. Ins. Law Article 42 (McKinney 2000 & Supp. 2002). If the group does not qualify for the "exception", then the certificates issued to New York residents would have to provide covered persons with protections substantially similar to those provided by certificates delivered in this state. N.Y. Ins. Law § 3201 (McKinney 2000 & Supp. 2002). Because of the resolution of the second question presented, however, it is not crucial that the first query be resolved.
- No. N.Y. Ins. Law § 3221 (McKinney 2000 & Supp. 2002) establishes requirements relating to accident and health insurance delivered or issued for delivery in this state. Nothing in the statute or in N.Y. Comp. Codes R. & Regs. tit. 11, § 52 (1999) (Insurance Department Regulation 62), which implements and/or clarifies the requirements of the statute, would prohibit inclusion of the subrogation provision in the Group Master Policy or certificates issued pursuant thereto. However, N.Y. C.P.L.R. § 4545 (McKinney 1992), the "collateral source" provision, could affect the insurer's right to recover in those instances where the injured party has had a verdict awarding damages for the injuries covered under the insurance policy.
Facts:
The inquirer represents Mr. A, a Covered Person under a Group Independent Contractor Work Accident Insurance Policy (the Group Master Policy) issued to a group sponsor by ABC Insurance Company, a foreign insurer licensed to write accident and health insurance in New York State. This policy would be classified as a form of accident and health insurance under N.Y. Ins. Law § 1113(a)(3)(McKinney 2000 & Supp. 2002).
The certificate issued to the Covered Person includes a provision whereby the insurer has the right to recover amounts paid to or on behalf of the injured party, either from a third party tortfeasor or directly from the insured (hereinafter referred to as the subrogation provision), to the extent that such amounts are recovered by the insured from another source. The policy further states that it is issued and delivered in Indiana and is governed by the laws of that state.
For purposes of this inquiry, the policy contains several provisions that are extremely relevant. Clause 1 of the "General Provisions", regarding eligibility for coverage, reads as follows:
Eligibility - To be eligible for this insurance, a Covered Person must:
a. Be an independent contractor, self-employed, have self-employed activities in the trucking industry and be under contract to the group sponsor: or
b. Be a significant owner or partner in any entity which is an independent contractor in the trucking industry under contract to the Group Sponsor, and the Covered Person must generate the majority of revenue for said entity; but in any event,
c. Not eligible for workers compensation or occupational disease benefits in the event of injury or death covered by this policy.
The policy defines a Covered Person to be "-an individual insured under the Group Master Policy." Clause 4 of the General Provisions of the policy, titled "Subrogation", reads as follows:
Subrogation - We shall be subrogated to any and all rights of recovery which any Covered Person may have or acquire against any party or the insurer of any party for benefits paid or payable under the Group Master Policy. Any Covered Person who receives benefits from us for any accidental injury or death therefrom shall be deemed to have assigned their right of recovery for such benefits to us and agree to do whatever is necessary to secure such recovery, including execution of all appropriate papers to cause repayment to us. If the third party pays a Covered Person as a result of judgment, arbitration, compromise settlement or other arrangement for injuries sustained by the Covered Person for which benefits were paid under the Group Master Policy, the Covered Person agrees to repay us for all benefits paid. Costs of collection including attorney's fees and court costs shall be shared pro rata between the Covered Person and us.
In addition, if benefits are payable to a Covered Person under the Group Master Policy after a third party pays the Covered Person, we will take credit for all amounts received by the Covered Person, less amounts paid to us, against all future payments under the Group Master Policy. No amount shall be owed by us until the amount of benefits we would have paid on behalf of or to the Covered Person exceeds the amount received by the Covered Person from a third party.
Clause 22 of the General Provisions reads as follows:
The Group Master Policy is issued and delivered in Indiana and is governed by the laws of Indiana. If any part(s) of the Group Master Policy is contrary to such laws, that part(s) is hereby amended to conform to such laws.
Mr. A is a resident of New York. He was injured in an auto accident and may be entitled to payments for lost earnings under the Group Master Policy. Thus far, he has been collecting no-fault benefits for lost earnings. As applied to Mr. A, the inquirer questioned the validity of the subrogation provision. To date, Mr. A has not submitted a lost earnings claim under the Group Master Policy. In addition, the inquirer questioned the validity of the Group Master Policy being governed by Indiana Law.
Analysis:
N.Y. Ins. Law § 3201(b) (McKinney 2000 & Supp. 2002) reads, in relevant part, as follows:
(b) (1) No policy form shall be delivered or issued for delivery in this state unless it has been filed with and approved by the superintendent as conforming to the requirements of this chapter and not inconsistent with law. A group life, group accident, group health, group accident and health or blanket accident and health insurance certificate evidencing insurance coverage on a resident of this state shall be deemed to have been delivered in this state, regardless of the place of actual delivery, unless the insured group is of the type described in:
(B) section four thousand two hundred thirty-five except subparagraph (D) where the group policy is issued to a trustee or trustees of a fund established or participated in by two or more employers not in the same industry with respect to an employer principally located within the state, subparagraph (K), (L) or (M) of paragraph one of subsection (c) thereof;
...and where the master policies or contracts were lawfully issued without this state in a jurisdiction where the insurer was authorized to do an insurance business. With regard to any certificate deemed to have been delivered in this state by virtue of this paragraph, the superintendent shall (i) require that the premiums charged be reasonable in relation to the benefits provided, except in cases where the policyholder pays the entire premium; (ii) have power to issue regulations prescribing the required, optional and prohibited provisions in such certificates; (iii) establish an accelerated certificate form approval procedure available to an insurer which includes a statement in its policy form submission letter that it is the company's opinion that the certificate form or forms comply with applicable New York law and regulations. The superintendent, upon receipt of such a filing letter, shall grant conditional approval of such certificate form or forms in reliance on the aforementioned statement by the company upon the condition that the company will retroactively modify such certificate form or forms, to the extent necessary, if it is found by the superintendent that the certificate form fails to comply with applicable New York laws and regulations. The superintendent may, with regard to the approval of any certificate deemed to have been delivered in this state by virtue of this paragraph, approve such certificate if the superintendent finds that the certificate affords insureds protections substantially similar to those which have been provided by certificates delivered in this state. Any regulations issued by the superintendent pursuant to this paragraph may not impose stricter requirements than those applicable to similar policies and certificates actually delivered in this state.
N.Y. Ins. Law § 4235 (McKinney 2000 & Supp. 2002) establishes requirements regarding group accident and health insurance policies issued in New York State, including establishment of permissible "groups."
The Master Group Policy issued in the instant matter states that it is "...issued and delivered in Indiana and is governed by the laws of Indiana." The issuing insurer is licensed to transact accident and health insurance in the State of Indiana. The Group Master Policy and certificates issued pursuant thereto (including certificates issued to New York residents) would not be subject to approval by the superintendent if the group "qualifies" under N.Y. Ins. Law § 4235 (McKinney 2000 & Supp. 2002). If the group does not qualify for the exception, then the certificates issued to New York residents would be "deemed" to be issued in this state and be subject to review by the superintendent pursuant to N.Y. Ins. Law § 3201 (McKinney 2000 & Supp. 2002). In the later case, the superintendent must find that "... the certificate affords insureds protections substantially similar to those which have been provided by certificates delivered in this state."
We have insufficient facts concerning the composition of the "group" to allow us to determine whether the Group Master Policy and/or the certificates issued pursuant thereto would require filing and approval by
The superintendent prior to a certificate being issued to a New York resident. However, since the subrogation provision contained in the Group Master Policy is not prohibited by any New York Insurance Law or Regulation, it is unnecessary to resolve that question.
N.Y. Ins. Law § 3221 (McKinney 2000 & Supp. 2002) establishes requirements regarding standard provisions of group or blanket accident and health insurance policies issued in New York State. The statute requires that any policy provision reducing benefits shall be printed in the policy with the same prominence as the benefits to which the provision applies. N.Y. Ins. Law § 3221(c) (McKinney 2000 and Supp. 2002). If the subrogation provision were found to be a provision reducing benefits, the statutory requirement would appear to be satisfied by the provision in the Group Master Policy, which clearly states when the provision applies and the method for calculation of the amount of recovery that the insurer will be entitled to.
N.Y. Ins. Law § 3221 (McKinney 2000 and Supp. 2002) contains no provision that would prohibit inclusion of the subrogation provision in a policy of accident and health insurance. Nor does N.Y. Comp. Codes R. & Regs. tit. 11, § 52 (1999) (Insurance Department Regulation 62), which implements and/or clarifies the requirements of the statute.
Based on the lack of any prohibition, clauses similar to the subrogation provision have been approved by the Department's Health Bureau. The rationale for allowing such a provision is supported by a decision of the New York Court of Appeals, Teichman, et al. v. Community Hospital of Western Suffolk et al., 87 N.Y.2d 514 (1996). The Court of Appeals reasoned that, if the policy so provides, the carrier should be allowed to recover amounts paid to the insured, to the extent that such amounts are recovered in a settlement funded by another source. N.Y. C.P.L.R. § 4545 (McKinney 1992), the "collateral source" provision, may dictate a different result in those instances where the insured is awarded damages for injuries that are covered under an insurance policy by a verdict and the amount paid under the policy is deducted from the verdict.
The Health Bureau has allowed policy provisions whereby the insurer secures the right to pursue a third party (stepping into the shoes of the insured) and provisions allowing the insurer to seek the return of amounts paid from the insured (either by reducing future payments or by seeking a return of amounts already paid to the insured). Again, N.Y. C.P.L.R. § 4545 (McKinney 1992), the "collateral source" provision, may dictate a different result in those instances where the insured has recovered by virtue of a judgment or verdict awarding damages. In any event, the intent is to avoid a situation where the injured party will receive multiple recoveries for the same illness or injury.
In addition, the inquirer's letter expressed concern that, based upon the language of the subrogation clause, the insurer may be able to recover monies received by the Covered Person that are in compensation for losses not covered under the Master Group Policy. The Teichman case addresses this issue and reasons that any amounts recovered by the insurer should be from payments intended to compensate the insured party for the same losses covered by the policy.
For further information, you may contact Associate Attorney Sam Wachtel at the New York City office.