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. 08-10-03

The Office of General Counsel issued the following opinion on October 6, 2008, representing the position of the New York State Insurance Department.

Re: Group Accident & Health Insurance

Question:

May a group occupational accident policy be issued by an insurer to cover a courier company’s independent contractor courier-drivers?

Conclusion:

No. N.Y. Ins. Law § 4235(c)(1) (McKinney 2007) allows a group occupational accident policy to cover independent contractor truck drivers when their contract with the trucking company contains provisions that vest the company with an element of “control” over the drivers. Thus, the drivers could be “employees” for insurance eligibility while maintaining their independent contractor status for other purposes. However, the insurer’s filing with the Insurance Department indicates that the requisite control by the courier company over the drivers at issue would be insufficient to allow a determination that the drivers would be “employees” for group insurance eligibility. In addition, New York Labor Department guidelines that help determine independent contractor status for couriers appear to preclude independent contractor couriers from such insurance eligibility.

Facts:

The inquirer reports that in 2004, the Department approved the issuance of a XYZ Insurance Company policy to trucking company policyholders, which insures independent truck drivers under contract to the trucking company. Pursuant to that plan, the drivers are additional insureds under the policies and are issued certificates of insurance by the insurer. The premiums are paid by the carrier from funds contributed by the drivers. Coverage extends only to injuries sustained while the drivers are working on behalf of the carrier.

The inquirer asks whether a similar policy form may be issued to courier companies by the inquirer's company, ABC Insurance (“ABC”), to insure independent drivers under contract to the courier company. The courier companies in question are engaged in the pick-up, transport and delivery of goods. The covered independent contractors would own or lease their vehicles. The couriers would be engaged in both “On Demand” and “Route Delivery” services.1 The couriers also would comply with the eligibility requirements set forth in ABC’s filing with the Department, which is based on the independent contractor status guidelines set forth by the New York Labor Department. The couriers would not be licensed as commercial drivers.

Analysis:

Insurance Law § 1113(a)(3) is relevant to the inquiry, and reads as follows:

“Accident and health insurance,” means (i) insurance against death or personal injury by accident or by any specified kind or kinds of accident and insurance against sickness, ailment or bodily injury, including insurance providing disability benefits pursuant to article nine of the workers’ compensation law, except as specified in item (ii) hereof; and (ii) non-cancellable disability insurance, meaning insurance against disability resulting from sickness, ailment or bodily injury (but excluding insurance solely against accidental injury) under any contract which does not give the insurer the option to cancel or otherwise terminate the contract at or after one year from its effective or renewal date.

The proposed policy provides coverage for death and personal injuries suffered by drivers in accidents occurring while a driver is engaged in the business of the carrier. Because the drivers are independent contractors, not employees, they would not be covered by workers’ compensation insurance.

Section 52.9 of the New York Comp. Codes R. & Regs. (“NYCRR”), Tit. 11, Pt. 52 (Regulation 162) provides that “accident insurance is an insurance policy which provides coverage, singly or in combination, for death, dismemberment, disability, or hospital and medical care caused by accident or specified kinds of accidents.” That regulation authorizes a provision, such as the one found in the ABC policy, limiting coverage to injuries resulting from accidents that occur while a driver is engaged in work on behalf of the insured carrier.

Insurance Law § 4235 sets forth requirements for the establishment of group accident and health insurance policies. Insurance Law § 4235(c)(1)(A) reads in pertinent part as follows:

A policy issued to an employer or to a trustee or trustees of a fund established by an employer, which employer or trustee or trustees shall be deemed the policyholder, insuring with or without evidence of insurability satisfactory to the insurer, employees of such employer, and insuring, except as hereinafter provided, all of such employees or all of any class or classes thereof determined by conditions pertaining to the employment or a combination of such conditions and conditions pertaining to the family status of the employee, for insurance coverage on each person insured based upon some plan which will preclude individual selection. However, such a plan may permit a limited number of selections by employees if the selections offered utilize consistent plans of coverage for individual group members so that the resulting plans of coverage are reasonable. The premium for the policy shall be paid by the policyholder, either from the employer’s funds, or from funds contributed by the insured employees, or from funds contributed jointly by the employer and employees, or from funds contributed jointly by the employer and employees. If all or part of the premium is to be derived from funds contributed by the insured employees, then such policy must insure not less than fifty percent of such eligible employees or, if less, fifty or more of such employees.

The inquirer represents that the proposed policy will be written in compliance with Insurance Law § 4235(c)(1)(A) and that such policy has been submitted to the Department for approval on that basis.

In Office of General Counsel (“O.G.C.”) Opinion No. 00-09-06 (September 19, 2000), the Department considered whether the Insurance Law permits independent contractor truck drivers to be covered by a group accident and health policy.

The threshold issue to discerning whether an independent contractor may be categorized as an “employee” for the purpose of establishing coverage under a group accident and health policy turns on Insurance Law § 4235(d)(1). That statute extends the concept of “employee” to include persons who are not usually regarded as such including employees of certain “affiliated individuals and firms.” Insurance Law § 4235(d)(1) reads as follows:

In this section, for the purpose of insurance hereunder: “employees” includes the officers, managers, employees and retired employees of the employer and of subsidiary or affiliated corporations of a corporate employer, and the individual proprietors, partners, employees and retired employees of affiliated individuals and firms controlled by the insured employer through stock ownership, contract or otherwise; “employees” may be deemed to include the individual proprietor or partners if the employer is an individual proprietor or a partnership; and “employees” as used in subparagraph (A) of paragraph one of subsection (c) hereof may also include the directors of the employer and of subsidiary or affiliated corporations of a corporate employer.

Thus, the question is whether an independent contractor is an “affiliated individual[s] and firm[s] controlled by the insured employer through stock ownership, contract or otherwise.”

In O.G.C. Opinion No. 00-09-06 (September 19, 2000), the Department concluded that the independent contractor drivers were affiliated with the trucking company because they were associated in furtherance of a common purpose - the pick-up and delivery of goods. Further, the Department opined that the independent contractor drivers were “controlled” through the terms of their contracts with the trucking company. Insurance Law § 107(a)(16) defines “control” as “the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an institution, whether through the ownership of voting securities, by contract or otherwise.” However, Insurance Law § 107 states that its definitions apply “unless the context otherwise requires.” In the case of Insurance Law § 4235(d)(1), the use of the term “controlled” expressly includes individuals as well as institutions. O.G.C. Opinion No. 00-09-06 (September 19, 2000) interpreted the required level of control under Insurance Law § 4235 to be whether there is “a significant and permanent level of ownership or management of the controlled party, rather than merely having some direction over the manner in which the party performs certain services.”

The fact pattern presented in O.G.C. Opinion No. 00-09-06 (September 19, 2000) referenced a trucking company contract that dictated the level of control of the drivers by the trucking company. The contract had a provision that a driver for the carrier could not seek an “outside” job if the carrier had enough work to utilize the driver. Thus, O.G.C. determined that the carrier had sufficient “control” over its drivers that allowed them to be classified as “employees” for the purpose of group insurance, while still maintaining their independent contractor status for other purposes.

However, that opinion is distinguishable from the facts presented by the instant inquiry because pursuant to ABC’s filing with the Department, the criteria for courier insurance eligibility includes requirements that a courier must “be free to accept or reject a dispatched assignment based upon conditions such as work hours and schedule” and “not be exclusive to a courier company and be free to obtain and accept assignments from others.” These provisions remove the control elements, however limited, that were present in the contract discussed in the O.G.C. Opinion No. 00-09-06 fact pattern.

Moreover, the New York Labor Department guidelines for determining the independent contractor status of couriers, which became effective on January 1, 2006, appear to note that if a courier is required to accept assignments from the courier company, and is not free to obtain assignments from others, such facts strongly indicate an employer-employee relationship.2 However, there are no established Labor Department guidelines to determine the independent contractor status of truck drivers, as opposed to couriers.

The strong reliance of O.G.C. Opinion No. 00-09-06 on contract provisions in the absence of New York Labor Department guidelines enabled O.G.C. at that time to conclude that the drivers could be employees for the purpose of insurance eligibility, while still maintaining independent contractor status for other purposes. Given the changed legal landscape, however, the Department likely would not render the same conclusion if presented with the same inquiry today.

For further information you may contact Associate Counsel Alexander Tisch at the New York City Office.

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1 “On Demand” drivers pick up and deliver items between two points that vary each day. “Route Delivery” drivers have an established route or territory within which are multiple locations for pick up and delivery of items that vary each day.

2 New York Labor Department guidelines set forth that “On Demand” couriers need not hold a commercial driver’s license. There is no reference to commercial driver’s licenses for “Route Delivery” couriers. By implication, “Route Delivery” couriers require a commercial driver’s license to be considered independent contractors. The inquirer represents that the independent contractor drivers are to engage in both “On Demand” and “Route Delivery” services, and that the drivers would not have commercial driver’s licenses. Therefore, because the couriers are to engage in both “On Demand” and “Route Delivery” services, they are considered to be independent contractors despite the lack of necessity for a commercial driver’s license for “On Demand” couriers.