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 opinion on July 24, 2002, representing the position of the New York State Insurance Department.

RE: Payment of Insurance Settlement

Question Presented:

Once an action to recover damages has been settled, is there a legal time limit for the defendant to pay the settlement amount?

Conclusion:

Yes. Pursuant to N.Y. C.P.L.R. § 5003-a(a) (McKinney Supp. 2002), when an action to recover damages has been settled, unless section 5003-a (b) or (c) apply, a defendant must pay all sums due to the plaintiff within twenty-one days of tender.

Facts:

Mrs. A states that three years ago, her mother, then eighty-six was hit by a car. After almost three years of litigation, the case was finally settled. However, the insurer took approximately ten weeks to pay the settlement. It is unclear from the inquiry when this ten week period began to elapse, before or after the settlement papers were served upon the defendant. Mrs. A would like to know whether there is a legal time limit for the defendant to pay the settlement amount, once an action to recover damages is settled.

Analysis:

N.Y. C.P.L.R. § 5003-a (McKinney Supp. 2002), entitled "Prompt payment following settlement", provides as follows:

(a) When an action to recover damages has been settled, any settling defendant, except those defendants to whom subdivisions (b) and (c) of this section apply, shall pay all sums due to any settling plaintiff within twenty-one days of tender, by the settling plaintiff to the settling defendant, of a duly executed release and a stipulation discontinuing action executed on behalf of the settling plaintiff.

(b) When an action to recover damages has been settled and the settling defendant is a municipality or any subdivision thereof, or any public corporation that is not indemnified by the state, it shall pay all sums due to any settling plaintiff within ninety days of tender, by the settling plaintiff to it, of duly executed release and a stipulation discontinuing action executed on behalf of the settling plaintiff. The provisions of this paragraph shall not inure to the benefit of any insurance carrier for a municipality or any subdivision thereof, or any public corporation that is not indemnified by the state. Any such insurance carrier shall pay all sums due to any settling plaintiff in accordance with the provisions of subdivision (a) of this section.

(c) When an action to recover damages has been settled and the settling defendant is the state, an officer or employee of the state entitled to indemnification pursuant to section seventeen of the public officers law, or a public benefit corporation indemnified by the state, payment of all sums due to any settling plaintiff shall be made within ninety days of the comptroller’s determination that all papers required to effectuate the settlement have been received by him. The provisions of this paragraph shall not inure to the benefit of any insurance carrier for the state, an officer or employee of the state entitled to indemnification pursuant to section seventeen of the public officers law, or a public benefit corporation indemnified by the state. Any such insurance carrier shall pay all sums due to any settling plaintiff in accordance with the provisions of subdivision (a) of this section.

Pursuant to N.Y. C.P.L.R. § 5003-a (g) (McKinney Supp. 2002), the term "tender" is defined as either to personally deliver or to mail the settlement papers to the defendant by registered or certified mail, return receipt requested. The statute does not specify when tender must be made.

Accordingly, unless section 5003-a (b) or (c) apply, a defendant must pay all sums due to the plaintiff within twenty-one days of tender, in accordance with section 5003-a(a).1 The consequence of not paying the settlement on time is that the plaintiff may seek the entry of a judgment against the defendant for the amount of the settlement, plus costs, lawful disbursements and interest on the amount of the settlement, measured from the date of tender. See N.Y. C.P.L.R. § 5003-a(e) (McKinney Supp. 2002).

N.Y. Ins. Law § 3420 (McKinney 2000) contains the minimum standard provisions that must be included in liability insurance policies. Section 3420(a)(2) requires insurers to include:

(a)(2) A provision that in case judgment against the insured or his personal representative in an action brought to recover damages for injury sustained or loss or damage occasioned during the life of the policy or contract shall remain unsatisfied at the expiration of thirty days from the serving of notice of entry of judgment upon the attorney for the insured, or upon the insured, and upon the insurer, then an action may, except during a stay or limited stay of execution against the insured on such judgment, be maintained against the insurer under the terms of the policy or contract for the amount of such judgment not exceeding the amount of the applicable limit of coverage under such policy or contract.

Thus, generally speaking, if a plaintiff seeks an entry of judgment against a defendant for the amount of the settlement, plus costs, lawful disbursements and interest and this judgment remains unsatisfied after thirty days of service of the notice of entry of judgment, an action may be maintained against the insurer pursuant to the terms of the policy or contract for the amount of the judgment, so long as it does not exceed the policy limits. See Pothos v. Averne Houses, Inc., 269 A.D.2d 377, 702 N.Y.S.2d 392 (2d Dept. 2000).

For further information, you may contact Attorney Pascale Joasil at the New York City office.


1Please note that section 5003-a does not apply to the future payment portions of structured settlements or settlements that are subject to article seventy-four of the Insurance Law (which governs the rehabilitation, liquidation, conservation and dissolution of insurers) or to future installment payments to be paid pursuant to a structured settlement. See N.Y. C.P.L.R. § 5003-a(f) (McKinney Supp. 2002).