Question from an IIABNY member: My daughter is studying for the New York bar exam and asked me the following question: Regarding New York no-fault insurance law, what’s the difference between an insurance company asserting lack of coverage and the insurance company saying the policy specifically excludes coverage…or is it the same thing?
Answer: I think the two are very similar but with subtle differences. Lack of coverage could mean an exclusion, but it could also mean an expense that the endorsement does not cover or an incident that does not fall under the insuring agreement. The PIP insuring agreement (from ISO endorsement PP 05 87 07 02) states, “The company will pay first-party benefits to reimburse for basic economic loss sustained by an eligible injured person on account of personal injuries caused by an accident arising out of the use or operation of a motor vehicle or a motorcycle during the policy period and within the United States of America, its territories or possessions, or Canada.” (defined terms are in bold.) Examples of losses that do not fall within that agreement:
- The named insured rear-ends another car while he is vacationing in the Bahamas, causing him to suffer cuts to his head. The endorsement will not cover this because the accident took place outside of the U.S. and Canada.
- Because the insured is unable to work and is growing bored sitting at home, he buys a NetFlix subscription and submits the invoices for it to the insurance company. The endorsement defines “first-party benefits” as payments (other than death benefits) equal to basic economic loss reduced by certain amounts. “Basic economic loss” is medical expense, work loss and other expense. “Other expense” is “all reasonable and necessary expenses, other than medical expense and work loss, up to $25 per day…” The insurance company could reasonably argue that a NetFlix subscription is not a necessary expense resulting from the accident, so there would be no coverage.
- The endorsement defines “eligible injured person” in part as “any…person (other than the named insured and any relative) who sustains personal injury arising out of the use or operation of the insured motor vehicle in the State of New York while not occupying another motor vehicle.” If I’m driving my car through Pennsylvania with my friend Bob riding along, we get in an accident and Bob needs stitches, my No-Fault coverage will not apply to Bob because he does not meet the definition of “eligible injured person.” Bob has his own New York auto policy, so his policy should cover his injuries.
These are all examples of no-coverage situations that do not involve exclusions. The endorsement has a whole host of exclusions for things such as:
- Injuries sustained while riding a motorcycle
- Intentionally caused self-inflicted injuries
- Injuries a person sustains while operating a vehicle while drunk or on drugs (note: intoxicated passengers still have coverage)
- Injuries sustained while a person is committing a felony or evading arrest
- Injuries sustained while racing
- Injuries sustained while operating or occupying a vehicle the person knows is stolen.
There are several others. The point is “lack of coverage” can include exclusions, but it can mean other policy provisions.
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