The Office of General Counsel issued the following informal opinion on May 1, 2002, representing the position of the New York State Insurance Department.
Third Party Liability Claims and N.Y. Comp. Codes R. & Regs. tit. 11, §§ 216.0-216.12 (Regulation 64) (2001)
1. May a third party claimant accept a settlement, made in accordance with N.Y. Comp. Codes R. & Regs. tit. 11, § 216.7 (1999), under protest and then sue the insured for an additional amount?
2. Under the regulation, does the cashing of a check by the third party claimant constitute an accord and satisfaction?
3. Does N.Y. Comp. Codes R. & Regs. tit. 11, §§ 216.0-216.12 (2001) address a conflict of laws question?
1. N.Y. Comp. Codes R. & Regs. tit. 11, § 216.7(c) (1999) does not preclude that action.
2. In and of itself, the cashing of a check by the third party claimant would not operate as an accord and satisfaction. N.Y. Comp. Codes R. & Regs. tit. 11, § 216.6(g) (1998).
3. The regulation does not address a conflict of laws question.
An insurer offered a third party claimant a settlement computed in accordance with the N.Y. Comp. Codes R. & Regs. tit. 11, § 216.7(c) (1999) requirements for adjusting a total loss. The third party claimant took the settlement under protest and then proceeded to sue the insured in small claims court. The insurer, in defending its insured, asserted that, because the claim was settled in accordance with the regulation, there was no further liability.
In another instance, a third party claimant accepted the settlement check without protest and then proceeded to sue the insured, contesting the insurers estimate for the repair cost and its assessment of fault. The insurer asserted that cashing the check operated as an accord and satisfaction.
Mr. A anticipates that a case may come before him in which the plaintiff and the defendant will be from differing states and the question of the applicability of N.Y. Comp. Codes R. & Regs. tit. 11, §§ 216.0-216.12 (2001) will arise in the context of a conflict of laws issue.
N.Y. Comp. Codes R. & Regs. tit. 11, § 216.7 (1999) (Regulation 64), entitled Standards for Prompt, Fair and Equitable Settlement of Motor Vehicle Physical Damage Claims, contains the standards and requirements for adjustment of total losses. Certain of these standards and requirements are made applicable to claims arising under motor vehicle liability insurance contracts affording coverage for claims of property damage by third parties caused by the alleged negligence of the insured. N.Y. Comp. Codes R. & Regs. tit. 11, § 216.10 (1999). Thus, in adjusting a third party claim for a total loss of an automobile, the insurer must comply with the requirements in N.Y. Comp. Codes R. & Regs. tit. 11, § 216.7(c)(1), (3), (4) (1999), which specifies how the insurers minimum offer, subject to applicable deductions, should be computed.
There is nothing in the regulation that would preclude the third-party claimant, after accepting the insurers settlement check under protest, from suing the insured.
N.Y. Comp. Codes R. & Regs. tit. 11, § 216.6(g) (1998) provides:
Checks or drafts in payment of claims; releases. No insurer shall issue a check or draft in payment of a first party claim or any element thereof, arising under any policy subject to this Part, that contains language or provision that expressly or impliedly states that acceptance of such check or draft shall constitute a final settlement or release of any or all future obligations arising out of the loss. No insurer shall require execution of a release on a first- or third-party claim that is broader than the scope of the settlement.
With respect to both first- and third-party claims, an insurer may not require execution of a release that is broader than the scope of the settlement. In order to ensure that the release is not broader than the scope of the settlement, the release must describe the claim with specificity, and include an explanation and calculation of the payment that the insurer will make in settlement of the claim.1 The Department has advised insurers accordingly. Although in this instance the insurer has not required the execution of any release, its claim that the third-party claimant has, by cashing the check, released the insurer from further liability outside the scope of the settlement contravenes the regulation. It would be inconsistent to prohibit the insurer from requiring the execution of a release that is broader than the scope of the settlement but, yet, allow the insurer to interpret the claimants cashing of the check in a manner that achieves the same result.
N.Y. Comp. Codes R. & Regs. tit. 11, § 216.0 (1984) provides in relevant part:
Section 2601 of the Insurance Law prohibits insurers doing business in this State from engaging in unfair claims settlement practices and provides that, if any insurer performs any of the acts or practices proscribed by that section without just cause and with such frequency as to indicate a general business practice, then those acts shall constitute unfair claims settlement practices. . . .
There is no provision in either the statute or the regulation regarding resolution of a conflict of laws issue.
For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.
1 OGC opinion letter from Associate Counsel Sidney Glaser to Mr. B dated October 27, 2000.