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 26, 2004, representing the position of the New York State Insurance Department.

Re: No-Fault Lump-Sum Settlements for Medical Settlements

Question Presented:

When an eligible injured person is receiving No-Fault health service benefits and wishes to accept a lump sum settlement payment from a No-Fault insurer in lieu of the submission of bills for reimbursement for all future necessary health service benefits, is such settlement permissible under the New York No-Fault law?

Conclusion:

No. A lump-sump payment of a claim for No-Fault health service benefits by an insurer is not permitted pursuant to No-Fault Regulation 68, Section 65-3.16(b)(13)(ii) and (iii), except for loss of earnings.

Facts:

An eligible injured individual ("Mr. Doe") has been collecting reimbursement for No-Fault health claims from an insurer and still has a significant amount of benefits available for the reimbursement of eligible expenses under Additional Personal Injury Protection coverage. Mr. Doe has requested that the No-Fault insurer enter into an agreement with him to make a one-time lump-sum settlement amount for health service claims in exchange for Mr. Doe’s agreement not to submit further health-related claims.

Analysis:

Pursuant to N.Y. Comp. Codes R. & Reg. tit. 11, § 65-3.16(b)(13)(ii), the only permissible lump-sum settlement under No-Fault is for loss of earnings. Section 65-3.16(b)(13)(i) allows insurers to, at their option, enter into lump-sum settlement agreements, provided certain criteria are met. However, Section 65-3.16(b)(13)(ii) limits lump-settlements, by stating that "Lump-sum settlements shall be permitted only for the payment of loss earnings from work …." (emphasis added). This is further enforced in Section 65-3.16(b)(13)(iii), which states that "No lump-sum settlement shall be permitted unless the form for lump-sum settlement, Appendix 13-A, infra, is executed by the parties ….". That prescribed form, NYS Form NF-12, is limited solely to lump-sum settlements for loss of earnings claims.

It should be noted that the regulation’s purpose in prohibiting lump-sum settlements of medical claims is to protect No-Fault applicants from waiving their rights to reimbursement for later necessary medical expenses, in excess of the settlement amount, that they are legally entitled to, but would become non-reimbursable due to acceptance of the lump-sum settlement which would absolve the insurer from meeting their obligations under the No-Fault law and regulations.

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