OGC Op. No. 04-04-23
The Office of General Counsel issued the following opinion on April 26, 2004, representing the position of the New York State Insurance Department.
Re: No-Fault Lump-Sum Settlements for Medical Settlements
When an eligible injured person is receiving No-Fault health service benefits and wishes to accept a lump sum settlement payment from a No-Fault insurer in lieu of the submission of bills for reimbursement for all future necessary health service benefits, is such settlement permissible under the New York No-Fault law?
No. A lump-sump payment of a claim for No-Fault health service benefits by an insurer is not permitted pursuant to No-Fault Regulation 68, Section 65-3.16(b)(13)(ii) and (iii), except for loss of earnings.
An eligible injured individual ("Mr. Doe") has been collecting reimbursement for No-Fault health claims from an insurer and still has a significant amount of benefits available for the reimbursement of eligible expenses under Additional Personal Injury Protection coverage. Mr. Doe has requested that the No-Fault insurer enter into an agreement with him to make a one-time lump-sum settlement amount for health service claims in exchange for Mr. Does agreement not to submit further health-related claims.
Pursuant to N.Y. Comp. Codes R. & Reg. tit. 11, § 65-3.16(b)(13)(ii), the only permissible lump-sum settlement under No-Fault is for loss of earnings. Section 65-3.16(b)(13)(i) allows insurers to, at their option, enter into lump-sum settlement agreements, provided certain criteria are met. However, Section 65-3.16(b)(13)(ii) limits lump-settlements, by stating that "Lump-sum settlements shall be permitted only for the payment of loss earnings from work ." (emphasis added). This is further enforced in Section 65-3.16(b)(13)(iii), which states that "No lump-sum settlement shall be permitted unless the form for lump-sum settlement, Appendix 13-A, infra, is executed by the parties .". That prescribed form, NYS Form NF-12, is limited solely to lump-sum settlements for loss of earnings claims.
It should be noted that the regulations purpose in prohibiting lump-sum settlements of medical claims is to protect No-Fault applicants from waiving their rights to reimbursement for later necessary medical expenses, in excess of the settlement amount, that they are legally entitled to, but would become non-reimbursable due to acceptance of the lump-sum settlement which would absolve the insurer from meeting their obligations under the No-Fault law and regulations.
For further information you may contact Supervising Attorney Lawrence M. Fuchsberg at the New York City Office.