The Office of General Counsel issued the following informal opinion on January 24, 2002, representing the position of the New York State Insurance Department.
Re: New York Changes in Business Auto Coverage Forms
Why does New York require that the third-party liability exclusion provision in a business automobile policy be deleted from New York policies?
The exclusion is not permissible under N.Y. Comp. Codes R. & Reg. tit. 11, Part 60-1 (1999) (Regulation 35-A), which establishes the minimum provisions for all motor vehicle policies in New York that provide coverage in satisfaction of the financial security requirements of the Vehicle & Traffic Law.
No particular facts are provided. Attorney A notes that in a commercial automobile policy, a New York endorsement resulted in a more limited exclusion. The policy contained an exclusion for "employee indemnification and employers liability," which excluded coverage not only for the employee of the insured arising out of, and in the course of, employment by the insured, but also the spouse, child, parent, brother or sister of that employee as a consequence of such employment. The New York endorsement was limited to the employee, which meant that the relative would be covered. Attorney A asked whether the intent of the more limited exclusion was to preserve third-party liability coverage for employers with regard to a Dole v. Dow Chemical Co., 30 N.Y.2d 143, 282 N.E.2d 288, 331 N.Y.S.2d 382 (1972) third-party claim brought by a defendant against a plaintiffs employer.
N.Y. Veh. & Traf. Law Art. 6 (McKinney 1996) was enacted to help ensure that innocent victims of motor vehicle accidents would be recompensed for the injury and financial loss inflicted upon them. N.Y. Veh. & Traf. Law § 310 (McKinney 1996). N.Y. Veh. & Traf. Law § 312 (McKinney 1996) requires that every driver maintain proof of financial security. One method of maintaining financial security is through an "owners policy of liability insurance." N.Y. Veh. & Traf. Law § 311(McKinney 1996), and its predecessor section 93-a, requires the Superintendent of Insurance to prescribe by regulation the minimum provisions for an owners policy of liability insurance. Section 311(4)(a) further provides that the "superintendent before promulgating such regulations or any amendment thereof, shall consult with all insurers licensed to write automobile liability insurance in this state and shall not prescribe minimum provisions which fail to reflect the provisions of automobile liability insurance policies issued within this state at the date of such regulation or amendment thereof."
In accordance with the Vehicle & Traffic Law, the Superintendent promulgated Regulation 35 on July 17, 1956. Regulation 35 was repealed and replaced on November 24, 1958, by the present Regulation 35-A, which was subsequently codified as Part 60 of N.Y. Comp. Codes R. & Reg. tit. 11, and later renumbered as subpart 60-1, and amended several times. Unless permitted by statute or judicial decision, no owners policy of liability insurance used to satisfy the financial security requirements of the Vehicle & Traffic Law may contain an exclusion other than one expressly permitted under Regulation 35-A. The regulation does not apply to policies that are not used to satisfy the financial security requirements.
There are several permissible exclusions contained in the regulation that pertain to employees, including § 60-1.2(d), which applies to "bodily injury to or sickness, disease or death of any employee of the insured arising out of and in the course of (1) domestic employment by the insured or (2) other employment by the insured." However, no provision of the regulation permits an exclusion for an injury to the spouse, child, parent, brother or sister of an employee as a consequence of such employment.
The permissible exclusions essentially reflect the insurance policy exclusions extant in 1956 when Regulation 35 was first enacted and remain narrow in furtherance of the policy mandate that innocent victims have a source for financial recompense. Hence the insistence that an exclusion in the policy be modified to provide coverage for an employees relatives was not specifically because of Dole v Dow, but simply because the regulation does not permit the exclusion.
For further information you may contact Principal Attorney Paul A. Zuckerman at the New York City Office.