OGC Op. No. 08-12-07

The Office of General Counsel issued the following opinion on December 30, 2008, representing the position of the New York State Insurance Department.

Re: New York State Health Care Reform Act (HCRA) Surcharges

Question Presented:

Are New York State HCRA surcharges recoverable or reimbursable under Insurance Law § 5105?

Conclusion:

No. New York State HCRA surcharges are not considered first-party benefits and therefore are not recoverable or reimbursable under Insurance Law § 5105.

Facts:

The inquiry is of a general nature, without reference to particular facts.

Analysis:

The New York State HCRA set forth in Public Health Law § 2807-c and related provisions establish the requirement that no-fault insurers and self-insurers pay a surcharge on payments made for services rendered in general hospitals, diagnostic and treatment centers, and freestanding clinical laboratories to the Public Goods Pool.

Insurance Law § 5105 is relevant to the inquiry. That statute authorizes, under specified circumstances, for the recovery of no-fault payments between insurers to the extent that covered parties would have been liable to pay damages in an action at law. The conditions set forth in that statute read as follows:

a) 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 which another insurer would otherwise be obligated to pay pursuant to subsection (a) of section five thousand one hundred three of this article or section five thousand two hundred twenty-one of this chapter 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, 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. However, in the case of occupants of a bus other than operators, owners, and employees of the owner or operator of the bus, an insurer which, pursuant to paragraph one of subsection (a) of section five thousand one hundred three of this article, provides coverage for first party benefits for such occupants under a policy providing first party benefits to the injured person and members of his household for loss arising out of the use or operation of any vehicle of such household, shall have no right to recover the amount of such benefits from the insurer of such bus.

(b) The sole remedy of any insurer or compensation provider to recover on a claim arising pursuant to subsection (a) hereof, shall be the submission of the controversy to mandatory arbitration pursuant to procedures promulgated or approved by the superintendent. Such procedures shall also be utilized to resolve all disputes arising between insurers concerning their responsibility for the payment of first party benefits.

(c) The liability of an insurer imposed by this section shall not affect or diminish its obligations under any policy of bodily injury liability insurance.

Thus, insurers may recover first-party benefits under the no-fault law from one another under limited circumstances. Insurance Law § 5102(b) defines “first party benefits” as “payments to reimburse a person for basic economic loss on account of personal injury arising out of the use or operation of a motor vehicle…” (Emphasis added.) “Basic economic loss,” in turn, is defined in Insurance Law § 5102(a) 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:

(1) All necessary expenses incurred for: (i) medical, hospital (including services rendered in compliance with article forty-one of the public health law, whether or not such services are rendered directly by a hospital), surgical, nursing, dental, ambulance, x-ray, prescription drug and prosthetic services; (ii) psychiatric, physical therapy (provided that treatment is rendered pursuant to a referral) and occupational therapy and rehabilitation; (iii) any non-medical remedial care and treatment rendered in accordance with a religious method of healing recognized by the laws of this state; and (iv) any other professional health services; all without limitation as to time, provided that within one year after the date of the accident causing the injury it is ascertainable that further expenses may be incurred as a result of the injury. For the purpose of determining basic economic loss, the expenses incurred under this paragraph shall be in accordance with 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. An employee who is entitled to receive monetary payments, pursuant to statute or contract with the employer, or who receives voluntary monetary benefits paid for by the employer, by reason of the employee's inability to work because of personal injury arising out of the use or operation of a motor vehicle, is not entitled to receive first party benefits for “loss of earnings from work” to the extent that such monetary payments or benefits from the employer do not result in the employee suffering a reduction in income or a reduction in the employee's level of future benefits arising from a subsequent illness or injury.

(3) All other reasonable and necessary expenses incurred, up to twenty-five dollars per day for not more than one year from the date of the accident causing the injury.

…

Basic economic loss does not include HCRA surcharges to insurers. Accordingly, first-party benefits do not encompass those surcharges, either. Therefore, although Insurance Law § 5105 permits the recovery of first-party benefits between no-fault insurers under certain limited circumstances, HCRA surcharges are not recoverable or reimbursable under Insurance Law § 5105, as they do not come within the definition of “first party benefits” set forth in Insurance Law § 5102.

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