First: what is loss transfer?
A person injured in a motor vehicle accident has the right to recovery under the New York No Fault Statute. If they were in the course of their employment at the time of the car accident, they are also entitled to workers’ compensation benefits. The Workers’ Compensation insurer is the “primary” insurance which is responsible for paying out the lost wages and medical benefits which normally would be the respobsility of the No Fault carrier. See § 5102(1) of the New York Insurance Law.
The Workers’ Compensation carrier can recover benefits – up to $50,000 – issued to the claimant in this situation from the No Fault carrier. See §5105. The recovery is made by way of intercompany loss transfer arbitration for payment of medical and lost wage benefits made by a Workers’ Compensation insurer authorized under § 5105(a) of the Insurance Law. This is specialized litigation in an arbitration forum. But are SLU awards recoverable?
Old decision: a Scheduled Loss of Use Award is not “Basic Economic Loss.”
Under the older opinion (General Counsel Informal Opinion #02-11-19), the Workers’ Compensation insurer had no right to recovery through inter-company loss transfer for schedule awards made by a workers’ compensation insurer that is authorized under Section 5105(a) of the Insurance Law.
In arriving at that opinion, the New York Insurance Department specifically addressed the loss transfer provisions, instructing “in enacting the loss transfer provisions of § 5105, the Legislature made it clear that in the two limited instances where a No-Fault insurer has a right to recover amounts paid from the No-Fault carrier of the tortfeasor vehicle, when either vehicle weighs over 6,500 pounds or is used “principally for transporting persons or property for hire,” recovery for amounts paid is strictly limited to “the payment of first party benefits” made for basic economic loss.” See General Counsel Informal Opinion #02-11-19 (emphasis added). This is a premise which underscores the basic rationale of the loss transfer statute to provide first party benefits to the claimant which the No Fault carrier would have been responsible for in the first place.
Limitation to first-party benefits.
Since loss transfer is limited to only first party benefits, the scope of first party benefits must be understood in order to assess exactly what is recoverable through loss transfer. The term “first party benefits” is defined in N.Y. Ins. Law § 5102(b) to mean 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, less certain deductions, including amounts recovered or recoverable on account of such injury from workers’ compensation benefits. See N.Y. Ins. Law §5102(b). This language allowed the New York Insurance Department to characterize first party benefits as “basic economic losses”.
But what is a “non-economic” loss?
The term “non-economic loss” is defined under N. Y. Ins. Law § 5102(c) as “pain and suffering and similar non-monetary detriment.” Payments for pain and suffering may be due when a vehicle occupant suffers “serious injury” as defined by N.Y. Ins. Law Section § 5102(d) and therefore is permitted to sue tortfeasors in the other vehicle(s) involved in the accident, under their third party liability coverage, for non-economic loss. See N.Y. Ins. Law Section § 5102(d) In considering “economic” and “non-economic” losses, non-economic losses could be considered as pain and suffering losses which were incompatible with recovery of first party benefits which are recoverable under the loss transfer arbitrations.
The New York Insurance Department took it one step further and characterized SLU awards as non-economic “pain and suffering” awards which would take SLU awards outside the ambit of loss transfer recovery. Under N. Y. Workers’ Comp. Law § 15 awards are made to injured employees for temporary or permanent, total or partial disabilities, based upon monetary schedules. “The § 15 awards are separate and apart from payments made by Workers’ Compensation carriers for medical benefits and are akin to “pain and suffering” damages when eligible under the No-Fault law.” See General Counsel Informal Opinion #02-11-19.
This rationale allowed the New York Insurance Department to come to the conclusion that payments made for § 15) Workers’ Compensation awards which encompass pain and suffering are excluded from loss transfer in the same way that recovery for No-Fault serious injury damages which encompass pain and suffering are also excluded from loss transfer under Section 5105. They concluded that Workers’ Compensation loss awards are not recoverable in loss transfer arbitrations.
New decision: a SLU award is compensation for loss of wage earning ability and may be recoverable.
A more recent decision considers whether a workers’ compensation insurer… has a right under N.Y. Ins. Law § 5105(a) 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. [See General Counsel Informal Opinion #07-06-09]http://www.dfs.ny.gov/insurance/ogco2007/rg070609.htm.
In this subsequent opinion, the New York Insurance Department concluded that Schedule Loss of Use awards for permanent partial disability made pursuant to N.Y. Workers’ Comp. Law § 15(3) 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). See General Counsel Informal Opinion #07-06-09
The primary motivation for a re-assessment of the previous opinion was the status of SLU awards in relation to No-Fault benefits was addressed by the New York Court of Appeals in the case of Dietrick v. Kemper Insurance Co., 76 N.Y. 2d 248(1990). In Dietrick, 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. Instead, 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.” 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))”.
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 New York Insurance Department opined 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. See General Counsel Informal Opinion #07-06-09.
SLU awards can be recovered.
Based on that opinion, the previous opinion of the New York Insurance Department which found SLU award non-recoverable under loss transfer litigation was overturned. With this opinion which now characterized SLU awards as first party benefits, a Workers’ Compensation carrier can now recover an SLU award under the theory that the SLU award is in lieu of lost wages which are characterized as first party benefits. Payments which can be recovered (through loss transfer) specifically include loss of wages, which are reimbursable as No-Fault benefits under Insurance Law §5102(a)(1) and (2).