Question from an IIABNY member:Can you please explain the Reimbursement and Trust clause of the NY Basic PIP endorsement. We have a client who was involved in an auto accident and was injured along with two children. There is an argument between her carrier and the claimants carrier as to who should provide PIP benefits ( a story for another time) Right now her carrier is providing the PIP benefits with the intent to go to arbitration against the claimant carrier. In the meantime the liability department of the claimant carrier wants to negogiate a BI settlement and secure a release. This will be for a nominal amount in the $3,000 range. It is my understanding that the carrier paying the PIP benefits has a right to be reimbursed for the first $50K of benefits. The claimant's carrier says I'm wrong, it is everything over the first $50K. I don't see that in the policy form unless I misunderstand it. My end goal (if the PIP carrier has a right to reimbursement) is to ask them to waive the right so the nominal settlement amount to secure the release goes to our client.
Answer: New York Insurance Law Sect. 5104(b) states:
In any action by or on behalf of a covered person, against a non-covered person, where damages for personal injuries arising out of the use or operation of a motor vehicle or a motorcycle may be recovered, an insurer which paid or is liable for first party benefits on account of such injuries has a lien against any recovery to the extent of benefits paid or payable by it to the covered person. No such action may be compromised by the covered person except with the written consent of the insurer, or with the approval of the court, or where the amount of such settlement exceeds fifty thousand dollars. The failure of such person to commence such action within two years after accrual gives the insurer a cause of action for the amount of first party benefits paid or payable against any person who may be liable to the covered person for his personal injuries. The insurer's cause of action shall be in addition to the cause of action of the covered person except that in any action subsequently commenced by the covered person for such injuries, the amount of his basic economic loss shall not be recoverable.
If an injured person can sue for non-economic damages, the no-fault insurer has a lien against the settlement equal to whatever it paid for no-fault first party benefits. The injured person may not “compromise” the action (which I take to mean settle separately with the other party) unless one of the following is true:
- The insurer has given written consent
- The court has approved the settlement
- The amount of the settlement exceeds $50,000
If none of these is true, the injured person cannot do anything to impede the insurer’s right to recovery. The key amount is the amount of the settlement, not the amount of first party benefits paid. The insurer’s right to recovery is not limited to $50,000, nor does it have a $50,000 “deductible” (which is what it sounds like the claimant’s carrier is saying.) I’m not sure where they’re getting that.
Please check Insurance law 5105 (McKinney's 2007). That states that the insurer has only limited options to recover the first $50,000 paid out under no-fault...one of the vehicles involved is over 6,500 pounds unloaded or being used for the transportation of people or property for a fee.
Posted by: Don Reese | May 12, 2011 at 10:59 AM
Don,
Thanks for pointing that out. You're quite right: For a no-fault insurer to recover its payment, the at-fault vehicle has to be one that has an unloaded weight of 6,500 or one that transports people or property for a fee. In addition, the no-fault insurer has no right of recovery if its insured suffered injuries while occupying a bus. Lastly, disputes over subrogation in these limited instances are subject to mandatory arbitration.
I love it when readers of this blog add to the body of knowledge. :) Please, don't be shy about speaking up!
Posted by: Tim Dodge | May 13, 2011 at 07:41 AM