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

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on April 30, 2003, representing the position of the New York State Insurance Department.

Re: No-Fault Lien - Out of State Accident

Questions Presented:

(1) When a New York No-Fault insurer pays No-Fault benefits to its eligible injured insured, resulting from an accident occurring outside of New York, does that insurer have a right to inter-company loss transfer from the insurer of an out-of-state vehicle, under the New York No-Fault law?

(2) If the New York No-Fault insurer is ineligible for inter-company loss transfer for benefits paid to its eligible injured insured, may the New York insurer assert a lien against the proceeds from a third party action against the tortfeasor of the out-of-state vehicle?

Conclusions:

(1) No. No-Fault inter-company loss transfer under New York Ins. Law § 5105(a) is not available when the tortfeasor of the out-of-state vehicle is not a covered person under the New York No-Fault law.

(2) Yes. The New York No-Fault insurer may assert a lien for benefits paid to its insured against a recovery in a third party action from a non-covered tortfeasor of an out-of-state vehicle pursuant to New York Ins. Law § 5104(b).

Facts:

The owner-operator of a New York motor vehicle was injured as a result of a motor vehicle accident occurring in the State of New Jersey. The No-Fault insurer of the New York vehicle thereafter paid No-Fault benefits to its eligible injured insured person. The accident was due to the negligence of the operator of the other vehicle, a New Jersey resident operating a New Jersey registered vehicle.

Analysis:

(1) N.Y. Ins. Law § 5105(a) (McKinney 2003) provides that in two specific instances, "any insurer liable for the payment of first party benefits to or on behalf of a covered person and any compensation provider paying benefits in lieu of first party benefits….has the right to recover the amount paid from the insurer of any other covered person…", when the other covered person was at fault for the accident, and would have been liable to pay damages in a lawsuit to the injured party. The provision provides that "…the right to recover exists only if at least one of the motor vehicles involved is a motor vehicle weighing more than six thousand five hundred pounds unloaded or is a motor vehicle used principally for the transportation of persons or property for hire…". Section 5105(b) states that the sole remedy of an insurer to recover, when authorized under Section 5105(a), is "…mandatory arbitration pursuant to procedures promulgated or approved by the superintendent…"

Prior to determining whether one of the vehicles in the accident can trigger the applicability of the inter-company loss transfer provisions of Section 5105, the threshold question is whether or not the parties in the accident are "covered" persons under the No-Fault law. Pursuant to N.Y. Ins. Law § 5102(j)(McKinney 2003), a covered person is one whose No-Fault coverage arises out of a motor vehicle policy issued in New York. Since in this particular instance, the non-New York vehicle’s policy was issued in New Jersey, those persons insured under that policy would not be "covered" persons under No-Fault, so that Section 5105 inter-company loss transfer would not be available.

(2) With respect to the availability of a lien to a No-Fault carrier who has paid first party benefits to its insured, N.Y. Ins. Law § 5104(b)(McKinney 2003) provides that in any action by or on behalf of a covered person, against a non-covered person, where damages for personal injuries arising out of the use or operation of a motor vehicle or a motorcycle may be recovered, an insurer which paid or is liable for first party benefits on account of such injuries has a lien against any recovery to the extent of benefits paid or payable by it to the covered person.

Therefore, in the factual situation presented, since the third party action would be brought by a covered person against a non-covered person, the No-Fault carrier would have a lien for first party benefits paid to the covered person out of the proceeds of the recovery received by the covered person through the lawsuit brought against the non-covered person.

For further information you may contact Supervising Attorney Lawrence M. Fuchsberg at the New York City Office.