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The Rogak Report: 29 July 2005

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  • Lawrence Rogak
    Message 1 of 1 , Jul 28, 2005
    • 0 Attachment

      National Union Fire Insurance Co. v. Farmers New Century Ins. Co., 8
      Misc.3d 1004(A), 2005 WL 1429883 (Supreme Court, New York County
      2005) (YATES, j)

      On October 26, 2001, Wayne Wells, an employee of the URS
      Corporation, was involved in an automobile accident on his way home
      from work. As a result of the accident, Wells sustained serious
      injuries and filed a workers' compensation claim and a no-fault claim
      for payment of medical bills and lost wages. He also filed a claim
      for disability benefits with First UNUM Life Insurance Company and a
      personal injury action.

      Farmers New Century Insurance Company was the no-fault carrier for
      Mr. Wells. URS was insured by National Union Fire Insurance Company
      for Workers' Compensation. AIG handles workers' compensation claims
      that URS employees bring under the National policy. AIG denied Mr.
      Wells workers' compensation benefits on the ground that he was not
      injured during the course of his employment. As a result of
      National's denial of coverage and pursuant to its insurance policy
      with the insured, Farmers alleged it paid first-party benefits to Mr.
      Wells. First UNUM, URS and claimant's major medical insurer also paid
      monies to Mr. Wells. Since other insurers paid benefits to the
      claimant, AIG allegedly alerted the Workers' Compensation Board of
      this fact and requested that the Board determine the amounts due as
      reimbursement from AIG.

      On June 10, 2002, the Workers' Compensation Board issued a decision
      finding that claimant's injuries were work-related, entitling him to
      an award. On that date, AIG withdrew its objections to claimant's
      claim. By application dated January 7, 2004, Farmers commenced
      arbitration proceedings against National Union at Arbitration Forums,
      Inc. Farmers claimed it paid no-fault benefits to Mr. Wells from the
      date of the accident until June 10, 2002 in the amount of $
      55,460.45, and now was seeking reimbursement from National Union
      through arbitration.

      After receiving notice of the intent to arbitrate, National Union
      commenced this proceeding for a stay of arbitration, arguing it could
      not be obligated to participate in the arbitration. First, National
      Union argued that the Workers' Compensation Board is vested with
      primary jurisdiction as to the applicability of workers' compensation
      or no-fault insurance coverage in work-related motor vehicle
      accidents. National then contended that the matter was already
      pending before the Workers' Compensation Board, that Farmers was
      included and involved in that action and that the only proper forum
      for determining the amounts, if any, which AIG was responsible to
      repay to respondent was the Board. In the alternative, National
      argued that if the court allowed the arbitration to proceed, then the
      court should add the claimant as an additional respondent in the
      arbitration proceeding, so that the arbitrator would be able to make
      an award, if any, against the proper party, the claimant himself.

      Farmers opposed the petition, arguing that there was no basis for a
      stay. To avoid inconsistent decisions on the matter, a temporary stay
      of the arbitration was granted by this Court pending a decision by
      the Board on the issue of lien priority among the disability carrier,
      employer, and the no-fault carrier.

      On July 29, 2004, a Workers' Compensation Board hearing was held.
      Frost. National alleged that Farmers failed to submit a brief to the
      Board explaining the reasons Farmers believed it was entitled to
      reimbursement. Following the hearing at which Farmers was allowed to
      participate, a decision was issued on November 19, 2004, finding that
      no-fault benefits were not reimbursable, as a matter of law, under
      the Workers' Compensation statute. The Board determined that the
      disability carrier was liable for paying benefits pending the outcome
      of the compensation litigation. Because the disability carrier was
      legally obligated to pay benefits during the period in question and
      the employer was not obligated to continue wage payments to claimant
      during the same period, the Board held that the disability carrier's
      lien had priority over the employer's lien. Therefore, the disability
      carrier was to be reimbursed in full for the period of time in which
      benefits were paid.

      After the disability carrier's lien was satisfied, the employer could
      be reimbursed for "the difference between the proper compensation
      rate payable to claimant during that period and the amount reimbursed
      to the disability carrier."

      The WCB judge also held that the compensation carrier was not
      entitled to a lien under Workers' Compensation Law section 29 on the
      amount of monies claimant received under his employer's
      underinsurance coverage. He reasoned that the lien and offset
      provisions of section 29 could only be applied against recoveries
      from third-party tortfeasors who were responsible for Wells'
      injuries. Furthermore, he found "irrelevant that the underinsured
      policy claimant received these proceeds from the employer because the
      employer was not the person whose negligence or wrong caused the
      claimant's injuries." The case was to continue on the issue of proper
      awards consistent with the decision.

      Farmers argued that the dispute is subject to mandatory arbitration
      pursuant to Workers Compensation Law 29(1-a) and the loss transfer
      provisions of Insurance Law section 5105. National argued that if
      Farmers made any erroneous payments to claimant, AIG's remedy is to
      seek reimbursement of these monies directly from claimant or his
      medical providers. As well, National contended that if Farmers is
      entitled to reimbursement of any sum of money, it is not entitled to
      the amount claimed.

      The Court held that "By definition, uninsured motorist coverage
      compensates for 'noneconomic' loss and economic loss in excess of
      basic economic loss, and shall not duplicate any element of basic
      economic loss. Workers' compensation benefits by definition are
      limited to reimbursement for basic economic loss."

      Insurance Law section 5105 is the loss transfer statute. It provides
      that "(a) 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 which another insurer
      would otherwise be obligated to pay pursuant to subsection (a) of
      section five thousand one hundred three of this article or section
      five thousand two hundred twenty one of this chapter has the right to
      recover the amount paid from the insurer of any other covered person
      to the extent that such other covered person to the extent that such
      other covered person would have been liable, but for the provisions
      of this article, to pay damages in an action at law. In any case, 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.... (b) The sole
      remedy of any insurer or compensation provider to recover on a claim
      arising pursuant to subsection (a) hereof, shall be the submission of
      the controversy to mandatory arbitration pursuant to procedures
      promulgated or approved by the superintendent. Such procedures shall
      also be utilized to resolve all disputes arising between insurers
      concerning their responsibility for the payment of first party

      "Insurance Law section 5105," held the Court, "is inapplicable in
      this matter. The mandatory arbitration provisions are concerned with
      a party's status as an insurer or compensation provider. While the
      statutory scheme requires mandatory arbitration to resolve all
      disputes arising between insurers concerning their responsibility for
      the payment of first-party benefits or between compensation
      providers, the courts have held that a workers' compensation carrier
      is not bound to arbitrate a claim by a no-fault insurer for money it
      was obligated to pay during the time that the workers' compensation
      carrier was contesting the claim."

      "Although a good case could be made for including a no-fault
      insurer's action to recover from a workers' compensation carrier
      within the mandatory arbitration provision... the statute did not
      encompass this kind of controversy. The failure of the Legislature to
      include a particular situation was an excellent indication that its
      exclusion was intended."

      "That being the case, Farmers does not possess an arbitrable claim
      against AIG and the demand that arbitration be ordered is denied.
      As well, an insurer can present a claim to recover basic economic
      loss from the insurer of another covered person, if (a) one of the
      motor vehicles involved in the accident weighs more than 6,500 lbs.
      unloaded; or (b) is a motor vehicle used for the transportation of
      persons or property for hire. Under those circumstances, arbitration
      is mandatory. There was no evidence presented that the vehicles
      involved in the accident met this condition precedent to arbitration.
      The Court, by this decision, does not mean to imply that respondent
      is not entitled to reimbursement. The decision is limited merely to a
      finding that the parties have not agreed to arbitration and Insurance
      Law section 5105 does not impose arbitration upon them."

      The Arbitration was permanently stayed.

      Larry Rogak
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