Insurance Circular Letter No. 3 (2019)
April 12, 2019

STATUTORY REFERENCES: Insurance Law §§ 5105 and 5108; 11 NYCRR 83 (Insurance Regulation 68); 12 NYCRR 329, 333, 343, and 348

I. Purpose

The purpose of this circular letter is to provide guidance to all insurers authorized to write motor vehicle insurance in New York, motor vehicle self-insurers, and the Motor Vehicle Accident Indemnification Corporation (collectively, “no-fault insurers”) and to all compensation providers as defined in Insurance Law § 5102(l)^[1] with respect to the application of the emergency adoption of the 34th amendment to 11 NYCRR 68 (Insurance Regulation 83) to the settlement of controversies between no fault insurers and compensation providers pursuant to Insurance Law § 5105 (the “inter-company loss transfer” provisions).

II. Background

Insurance Law Article 51 (otherwise known as the “no-fault law”) mandates that every motor vehicle owner’s liability insurance policy issued in satisfaction of the requirements of N.Y. Vehicle and Traffic Law Article 6 or 8 provide coverage for “basic economic loss,” including health-related expenses, lost earnings, and certain other reasonable and necessary expenses, up to $50,000 per person, for individuals who sustain injuries arising out of the use or operation of a motor vehicle in New York State.

11 NYCRR 68 implements Insurance Law § 5108, which provides that the charges for services specified in Insurance Law § 5102(a)(1) and any further health service charges that are incurred as a result of the injury and that are in excess of basic economic loss, shall not exceed the charges permissible under the schedules prepared and established by the Chair of the Workers’ Compensation Board (“Chair”), except where the insurer or arbitrator determines that unusual procedures or unique circumstances justify the excess charge. The Superintendent of Financial Services (“Superintendent”) has adopted fee schedules implemented by the Chair, and established fee schedules for health service benefits payable under the no-fault system for those services for which schedules have not been prepared and established by the Chair. These fee schedules only apply to providers rendering services in New York State.

Under Insurance Law § 5105 (the “inter-company loss transfer provisions”), a no-fault insurer that pays first party benefits to a “covered person” under no-fault or a compensation provider that pays compensation benefits to a claimant may recover such payments from a no-fault insurer whose insured is a covered person under no-fault and who is found to be at-fault for the accident. However, this right to recover exists only if: (1) at least one of the vehicles involved in the accident weighs more than 6500 pounds unloaded; or (2) one of the vehicles involved is used principally for the transportation of persons or property for hire.

Controversies between insurers under Insurance Law § 5105 must be settled through mandatory arbitration as prescribed in 11 NYCRR 65-4.11. The arbitrator must decide all disputes between the parties, including apportionment of liability, and whether the first party benefits or compensation benefits for which an insurer seeks recovery were paid to a claimant in accordance with the workers’ compensation fee schedules in effect at the time those benefits were paid.

III. Discussion

On December 11, 2018, the Chair promulgated expansive new amendments to its medical fee schedules effective April 1, 2019. See 12 NYCRR 329, 333, 343, and 348. In turn, the Superintendent adopted those fee schedules for purposes of no-fault effective October 1, 2020. Since the first implementation of Insurance Law § 5108 and the regulations promulgated thereunder, fee schedules determining compensation benefits and no-fault benefits have been the same; therefore, there would have been no disputes between no-fault insurers and compensation providers as to which fee schedules should be applicable. However, because of the difference in the effective dates of the Chair’s new medical fee schedules – April 1, 2019 for workers’ compensation claims, and October 1, 2020, for no-fault claims –this is not currently the case.

Under § 5105, the amount that the no-fault insurer of the at-fault covered person is required to reimburse a no-fault insurer or compensation provider who pays benefits to a covered person or compensation claimant, shall be determined, after the issue of liability is settled, based on the amount paid by the no-fault insurer or compensation provider, to the extent that such other covered person would have been liable, but for the provisions of Article 51, to pay damages in an action at law. Any such payments must be as set forth in the fee schedules that were in effect for the no-fault insurer or compensation provider respectively at the time those payments were made. Therefore, the only pertinent issue subject to arbitration under 11 NYCRR 65-4.11 is whether a compensation provider seeking recovery made payments in accordance with the fee schedules applicable to the compensation provider at the time of payment, not whether the no-fault insurer from whom recovery is sought would have paid in accordance with those fee schedules had the no-fault insurer paid the benefits in the first instance.

IV. Conclusion

Subject to the covered person’s liability, a compensation provider that pays compensation benefits in accordance with the fee schedules effective April 1, 2019, shall be entitled to recovery from a no-fault insurer under Insurance Law § 5105 the amounts the compensation provider actually paid pursuant to those fee schedules, although they are not applicable to the no-fault insurer from whom recovery is sought until October 1, 2020.

Please direct any questions regarding this circular letter to Camielle Barclay, Associate Attorney, Office of General Counsel, by mail at New York State Department of Financial Services, One State Street, 20th Floor, New York, New York 10004, or by email at [email protected].

Very truly yours,

Nathaniel Dorfman
General Counsel

^[1] Insurance Law § 5102(l) defines “compensation provider” as the State Insurance Fund or the person, association, corporation, insurer, or statutory fund liable under state or federal laws for the payment of workers’ compensation benefits or disability benefits under Workers’ Compensation Law Article 9.