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

David A. Paterson
Governor

Eric R. Dinallo
Superintendent

OGC Op. No. 08-05-17

The Office of General Counsel issued the following opinion on May 15, 2008, representing the position of the New York State Insurance Department.

Re: No-Fault Insurance Policy Additional Personal Injury Protection

Question Presented:

Does Article 51 of the New York Insurance Law (commonly known as the “No-fault” law) and the regulations promulgated thereunder require that additional personal injury protection (“APIP”) coverage issued pursuant to N.Y. Comp. Codes R. and Regs. tit. 11, Pt. 65 (Regulation 68) alter personal injury protection (“PIP”) loss of earnings from work limits set forth in N.Y. Ins Law § 5102(a)(2) (McKinney Supp. 2008)?

Conclusion:

No. While Regulation 68 requires that APIP coverage alter the time or dollar limits of PIP basic economic loss, the regulation does not specify which PIP basic economic loss limits must be altered. Basic economic loss, as defined in Insurance Law § 5102(a), has multiple time and dollar limits, including the loss of earnings from work limits set forth in Insurance Law § 5102(a)(2). Regulation 68 requires that APIP coverage supplement basic economic loss available in the no-fault scheme by altering at least one basic economic loss time or coverage limit available under PIP. While APIP may alter all of the PIP basic economic limits, including the time and financial loss of earnings from work limits, it is not legally obligated to do so.

Facts:

The inquirer reports that he purchased a one year no-fault insurance policy issued on June 11, 2003. In addition to the PIP coverage provided by the inquirer’s policy, the insurer also offered APIP, at an additional cost, which the inquirer also purchased. The declaration page of the insurance policy that the inquirer provided to the Insurance Department in connection with the inquirer’s inquiry sets forth basic economic loss limits of $50,000 for PIP and $150,000 for APIP. The declaration page also establishes a maximum of $2,000 for monthly loss of earnings. The declaration page provides no time limit for the availability of work loss benefits. The inquirer asks about the terms of his coverage.

Analysis:

Article 51 of the Insurance Law and Regulation 68 are relevant to the inquirer’s inquiry. Together, they set forth the insurance coverage requirements and limits following a personal injury arising out of the use or operation of a motor vehicle. The no-fault law requires that individuals who are entitled to “first party benefits,” pursuant to Insurance Law § 5103, are compensated for their “basic economic loss.” Insurance Law § 5102 defines “basic economic loss” as follows:

(a) “Basic economic loss” means, up to fifty thousand dollars per person of the following combined items, subject to the limitations of section five thousand one hundred eight of this article:
(2) Loss of earnings from work which the person would have performed had he not been injured, and reasonable and necessary expenses incurred by such person in obtaining services in lieu of those that he would have performed for income, up to two thousand dollars per month for not more than three years from the date of the accident causing the injury…
(5) “Basic economic loss” shall also include an additional option to purchase, for an additional premium, an additional twenty-five thousand dollars of coverage which the insured or his legal representative may specify will be applied to loss of earnings from work and/or psychiatric, physical or occupational therapy and rehabilitation after the initial fifty thousand dollars of basic economic loss has been exhausted. This optional additional coverage shall be made available and notice with explanation of such coverage shall be provided by an insurer at the first policy renewal after the effective date of this paragraph, or at the time of application.

The coverage levels of basic economic loss required pursuant to Insurance Law § 5102(a)(2) are commonly known as PIP. Under the no-fault scheme, PIP loss of earnings compensation is limited by a monthly maximum compensation rate of $2,000 and a maximum period of compensation of three years. PIP coverage also is subject to the $50,000 aggregate cap on total basic economic loss.

As a supplement to PIP coverage, many no-fault insurers offer optional APIP coverage for purchase by insureds. APIP supplements the PIP coverage by converting the PIP basic economic loss to “extended economic loss,” which is defined in 11 NYCRR § 65-1.3 as follows:

(a) basic economic loss sustained on account of an accident occurring within the United States of America, its possessions or territories, or Canada, which is not recovered or recoverable under a policy issued in satisfaction of the requirements of article 6 or 8 of the New York Vehicle and Traffic law and article 51 of the New York Insurance Law;

(b) the difference between

(i) basic economic loss; and

(ii) basic economic loss recomputed in accordance with the time and dollar limits [set out in the declarations]; and

[(c) an additional death benefit in the amount set out in the declarations]

As set forth in 11 NYCRR § 65-1.3(b)(ii), APIP extends basic economic loss by permitting insurers to alter time and dollar limits in the policy declaration page beyond the limits of PIP basic economic loss. Although APIP must confer an additional benefit on the insured by altering the time and/or dollar limits available under PIP, the manner by which APIP confers this additional benefit is left to the discretion of the insurer.

Here, the declaration page that the inquirer provided to the Insurance Department states that the inquirer’s basic economic loss was increased to $200,000. However, it neither increased the monthly loss of earnings from work limit, nor extended the three year compensation period established by Insurance Law § 5102(b)(2). Indeed, the declaration page specifies a maximum monthly loss of earnings from work limit of $2,000 – which is the same as PIP – and makes no reference to a change in the time limit. Thus, the mandatory time and financial loss of earnings from work limits remain unchanged by the inquirer’s purchase of the APIP coverage.

For further information, you may contact Principal Attorney Lawrence M. Fuchsberg at the New York City office.