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 August 1, 2003, representing the position of the New York State Insurance Department.

Re: No-Fault OBEL Coverage and Loss Transfer

QUESTION PRESENTED

May the No-Fault insurer of a policy issued to a pedestrian, who has been injured in a motor vehicle accident in New York, when the insurer has paid No-Fault benefits to the pedestrian under such person’s optional basic economic loss coverage (hereinafter "OBEL"), assert a loss transfer claim against the No-Fault insurer of a truck which caused injury to the pedestrian, when the owner of the truck has not purchased OBEL coverage and the owner’s policy maintains only the minimum amount of No-Fault coverage required to operate a vehicle in New York?

CONCLUSION

Yes, the eligible injured party’s No-Fault insurer can assert a loss transfer claim for first party OBEL benefits paid to its insured against the No-Fault insurer of the at-fault truck.

FACTS

The inquirer describes a situation where a truck strikes and injures a pedestrian in New York. The pedestrian thereafter received $50,000 in first party benefits from the truck’s No-Fault policy, which maintained the minimum $50,000 in basic economic loss required under New York law. The pedestrian, who had purchased an additional $25,000 in optional basic economic loss coverage under his own automobile policy, received that additional $25,000 from his No-Fault insurer. As the truck involved weighed over 6,500 pounds, the pedestrian’s No-Fault insurer is seeking to recover the $25,000 in OBEL benefits it paid from the No-Fault insurer of the truck through inter-company loss transfer.

ANALYSIS

N.Y. Ins. Law §§ 5102(a)(McKinney 2003) defines "basic economic loss" under No-Fault as "up to fifty thousand dollars per person…", which is the minimum amount of No-Fault coverage which every motor vehicle operating in New York is required to provide. In 1997, the Legislature enacted a new Section 5102(a)(5), which stated that basic economic loss "shall also include an additional option to purchase, for an additional premium, an additional twenty-five thousands dollars of coverage…", which coverage may be designated by the insured to provide specifically for lost earnings and/or psychiatric, physical or occupational therapy benefits. Pursuant to N.Y. Ins. Law §§ 5102(b)(McKinney 2003), payments to reimburse a person for basic economic loss are defined as "first party benefits".

N.Y. Ins. Law §§ 5105(a) provides for inter-company loss transfer between No-Fault insurers in very limited instances for first party benefits paid. This provision states that:

  1. Any insurer liable for the payment of first party benefits…has the right to recover the amount paid from the insurer of any other covered person to the extent that such other covered person would have been liable, but for the provisions of this article (the No-Fault Law), to pay damages in an action at law. In any case, 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…

When first enacted, the loss transfer provision, where applicable, contemplated situations where both policies provided for basic economic loss of $50,000. However, when the Legislature amended the No-Fault law in 1991 to create OBEL coverage, it specifically provided that, when the option to purchase such coverage is exercised by an insured, the total amount of basic economic loss would rise to $75,000. Therefore, under current law, OBEL claims payments made by a No-Fault insurer constitute first party benefits paid under basic economic loss. As such, OBEL first party benefits would be eligible for loss transfer under Section 5105(a) when meeting the applicable requirements.

In the situation the inquirer presents, the truck injuring the pedestrian constitutes a vehicle in excess of over 6,500 pounds, thereby invoking the availability of loss transfer. The inquirer raises the question as to whether the truck’s insurer, who makes available only $50,000 in basic economic loss under the truck’s underlying policy, must now reimburse the pedestrian’s insurer for the extra $25,000 in OBEL benefits to the pedestrian under the loss transfer provision. Because OBEL coverage is an element of basic economic loss and therefore a first party benefit, the insurer of an at-fault vehicle in excess of 6,500 pounds or for hire, is obligated under the statute to provide the full amount of first party benefits paid by the other No-Fault insurer under Section 5105(a) loss transfer, including instances where first party benefits paid include No-Fault OBEL coverage.

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