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. 09-05-04

The Office of General Counsel issued the following opinion on May 14, 2009, representing the position of the New York Insurance Department.

Re: No-Fault Lost Wage Claim

Question Presented:

Is an insured person entitled to reimbursement for no-fault lost wage claims after being medically cleared to return to work when such person was employed at the time of the accident giving rise to the claim, was unable to return to work due to her injuries, and her vacant position was subsequently filled due to her inability to return to work, so that she could not resume her employment at such time when she was medically cleared to return to work?

Conclusion:

Yes. Pursuant to N.Y. Ins. Law § 5102(a)(2) (McKinney 2009), an eligible injured person is entitled to lost earnings from “work which the person would have performed had he not been injured.” When an injured insured is unable to return to work due to injuries arising from an automobile accident and the insured’s employer hires another person to fill the insured’s vacant position during the insured’s period of disability, so that the insured cannot immediately resume her employment when she is medically cleared to return to work, the insured may recover lost wages for the period after she is medically cleared but before she actually resumes work.

Facts:

The inquirer reports that his client was injured in a motor vehicle accident and was temporarily unable to return to work. The inquirer further reports that while the client was recovering, her employer changed ownership, retained the insured’s position and offered her continued employment, but was subsequently unable to wait for her to return to work and thus had to hire someone else for her vacant position in the interim. Thus, when she was medically cleared to return to work, there was no position available to her. The insurer paid the client lost wages based on what she would have earned up until she was medically cleared to return to work. At that point, the insurer denied the client’s ongoing lost wage claim on the basis that she had been medically cleared to return to work and that the change in ownership was an unforeseeable event that terminated the obligation to pay lost wage benefits after the period of disability ended.

Analysis:

New York’s no-fault insurance law provides compensation for up to $50,000 of “basic economic loss” incurred by individuals who are injured in automobile accidents. N.Y. Ins. Law § 5102(a)(2) (McKinney 2000) provides that basic economic loss includes “[l]oss of earnings from work which the person would have performed had he not been injured.” Furthermore, § 65-3.16(b)(3) of N.Y. Comp. Codes R. & Regs. tit. 11 (Regulation 68-C) states that “[l]oss of earnings from work shall not necessarily be limited to the applicant’s actual level of earnings at the time of the accident, but may also include demonstrated future earnings reasonably projected.” Thus, under the no-fault scheme, injured persons may recover certain future earnings in addition to earnings from employment at the time of the accident.

Herman v. Government Employees Ins. Co., 115 Misc. 2d 146 (Civ. Ct. Queens Co. 1982), is relevant here. There, the injured plaintiff “would have had earnings from his old position until he was re-employed but for the accident in which he was involved.” Id. at 148. Consequently, the court held that the insurer was required “to provide loss of earnings payments to one who has lost his position through no fault of his own until he regains employment.” Id. at 149.

In refusing to pay lost earnings after the client was medically cleared to return to work, the insurer here relied on Sharpe v. Allstate, 14 A.D.3d 774 (3rd Dep’t 2005). In that case, the injured plaintiff, who was unemployed at the time of the accident, filed a no-fault claim for lost wages attributable to time lost while seeking a job. The insurer denied the claim. The plaintiff thereafter took and passed an examination for employment with the State Police, and passed the physical examination two years later, after a period of rehabilitation from the injury resulting from the automobile accident. The plaintiff then sought to recover lost wages based on his expected earnings as a trooper, on the grounds that his injury delayed his employment with the State Police. The Third Department held that the insurer properly denied the lost wage claim, finding that “the language of both [Insurance Law § 5102(a)(2)] and [11 N.Y.C.R.R. § 65-3.16(b)(3)] contemplates a degree of certainty in the calculation of lost wages and they apply to reimburse a claimant for wages actually lost from employment engaged at the time of the accident…. Here, that degree of certainty is entirely lacking. Plaintiff's entry into the State Police Academy and its deferral as a result of the knee injury could not have been reasonably contemplated by either party at the time of the accident, rendering his claim entirely speculative.” Sharpe, 14 A.D.3d at 775.

In partially denying the client’s claim for lost wages, the insurer here suggested that Sharpe trumps Herman: “[t]he portion of [Herman] which allows benefits to be realized while a person is not disabled due to a situation that is not foreseeable is not proper in light of [Sharpe].” But the facts here are plainly distinguishable from those in Sharpe, insofar as the client was employed at the time of the accident, and would have continued to be employed but for the injuries she sustained in the accident. Moreover, she was prepared to return to work, but unable to do so only because, through no fault of her own, her position was subsequently filled. In the Department’s estimation, therefore, the client’s reliance on Herman was proper.

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