OGC Op. No. 07-06-09
The Office of General Counsel issued the following opinion on June 13, 2007, representing the position of the New York State Insurance Department.
RE: Reconsideration of Office of General Counsel Informal Opinion #02-11-19 Concerning Recovery of Workers’ Compensation Loss Awards under No-Fault Inter-company Loss Transfer
Does a workers’ compensation insurer, or a company that is a self-insurer with respect to providing workers’ compensation benefits to its employees, have a right under N.Y. Ins. Law § 5105(a) (McKinney 2006) to recover workers’ compensation schedule loss of use awards that it made to an employee from the No-Fault insurer of the at fault (tortfeasor) vehicle, when the employee has suffered permanent partial disability resulting from a vehicular accident during the course of employment?
Yes. Schedule loss of use (“SLU”) awards for permanent partial disability made pursuant to N.Y. Workers’ Comp. Law § 15(3) (McKinney 2006) constitute compensation for the loss of a claimant’s earning ability that are made in lieu of No-Fault benefits for loss of earnings for work, and are covered No-Fault benefits under Insurance Law § 5102(a)(2). Therefore, SLU awards paid by a workers’ compensation provider may be recoverable in loss-transfer arbitrations when warranted pursuant to Insurance Law § 5105(a). This conclusion supersedes the view previously expressed in Informal Opinion #02-11-19.
It is the view of the New York State Workers’ Compensation Board that an informal opinion previously issued by the Office of General Counsel, #02-11-19 (November 22, 2002), was contrary to the Workers’ Compensation Law. The opinion concluded that SLU awards made by a workers’ compensation provider did not constitute payments made in lieu of No-Fault benefits that may be recoverable in loss-transfer arbitration under Insurance Law § 5105(a). The Workers’ Compensation Board requests that The Office of General Counsel reconsider the conclusion reached in the 2002 informal opinion. The facts presented in that opinion were as follows:
A municipal employee is involved in a motor vehicle accident, while in the course of his employment, with a motor vehicle weighing in excess of 6,500 pounds. The municipal employer, a self-insurer, thereafter paid workers’ compensation benefits in lieu of No-Fault benefits. The Workers’ Compensation Board rendered a decision that contained a schedule loss of use award to the employee. The self-insured employer seeks to initiate a loss-transfer arbitration against the No-Fault insurer of the tortfeasor’s vehicle, seeking reimbursement recovery for its payment of the workers’ compensation schedule loss of use award.
Pursuant to Insurance Law § 5103(a), every owner’s policy of liability insurance issued on a motor vehicle in New York must provide, and every motor vehicle self-insurer must maintain, “first party” No-Fault benefits of up to $50,000 (which include medical and health expenses, and loss of earnings from work) for an eligible person injured as a result of a motor vehicle accident. However, under Insurance Law § 5102(b)(2), No-Fault coverage is not primary when an employee sustains injuries as a result of a motor vehicle accident that occurs while in the course of employment. In that instance, primary coverage is provided under the Workers’ Compensation Law by a compensation provider that makes payments for medical expenses and lost wages in lieu of the payment of No-Fault benefits.
Insurance Law § 5105(a) provides that "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 … has the right to recover the amount paid from the insurer of any other covered person", when the other covered person was at fault for the accident, and would have been liable to pay damages in a lawsuit to the injured party. The provision also states that "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". Insurance Law § 5105(b) provides that the sole remedy of an insurer or “compensation provider” to recover the SLU benefits paid is "mandatory arbitration pursuant to procedures promulgated or approved by the superintendent."
Insurance Law § 5102(l) defines a “compensation provider” to include “the person, association, corporation or insurance carrier or statutory fund liable under state or federal laws for the payment of workers’ compensation benefits or disability benefits under article nine of the workers’ compensation law.” Thus, when workers’ compensation insurance provides primary coverage for a motor vehicle accident that occurs in the course of employment, the compensation provider is authorized to pursue recovery for payments made in lieu of No-Fault benefits when authorized under the limited circumstances set forth in Insurance Law § 5105(a). Such payments may include medical and health expenses and loss of wages, which are reimbursable as No-Fault benefits under Insurance Law § 5102(a)(1) and (2).
The status of SLU awards in relation to No-Fault benefits was addressed by the Court of Appeals in Dietrick v. Kemper Insurance Co., 76 N.Y. 2d 248 (1990). There, the court construed the intent of N.Y. Workers’ Comp. Law § 29(1-a), which does not provide compensation providers with a statutory lien against the proceeds of a recovery in a third party action brought by an employee injured in a motor vehicle accident against the tortfeasor vehicle. Rather, that statute limits the remedy of a compensation provider under such circumstances to “compensation and or medical benefits paid which were in lieu of first party benefits which another insurer would have been liable to pay under Article 51 of the Insurance Law”, pursuant to loss transfer procedures established under Insurance Law § 5105.
Dietrick considered the status of SLU awards made pursuant to Workers’ Compensation Law § 1503(a) in relation to what constitutes “compensation and or medical benefits” paid in lieu of No-Fault benefits under Workers’ Compensation Law § 29(1-a). In assessing the types of permanent partial disability SLU awards made, which include facial or head disfigurement, the court stated that such injuries have a “tendency to impair the earning power of (their) victims” 76 N.Y.2d at 252. The court further noted that SLU awards do not require a specific finding that the employee’s earning capacity has been impaired. Id. The court thus concluded that “SLU awards for permanent partial disability or facial disfigurement… may clearly include, and may therefore generally be deemed, compensation in lieu of first party benefits, because such awards are directly related to plaintiff’s basic economic loss, i.e. lost earnings, whether actual or presumed. (Insurance Law § 5102(a)(2))”. Id. at 253.
Applying Dietrick to the question of whether SLU awards constitute payments made by a compensation provider in lieu of No-Fault benefits (so as to be eligible for inter-company loss transfer under Insurance Law § 5105(a)), the Department is of the view that when compensation providers make payments for SLU awards that are in lieu of lost wage No-Fault first party benefits covered under Insurance Law § 5102(a)(2), the compensation providers have the right to recover against an insurer through inter-company loss transfer and loss transfer arbitration.
Given this conclusion, the Department’s Informal Opinion #02-11-19 issued on November 22, 2002 is superseded, and should no longer be followed.
For further information you may contact Supervising Attorney Lawrence M. Fuchsberg at the New York City Office.