Chapter Twenty-Three

• Jurisdiction: New York

Chapter Twenty-three

No-Fault Insurance

Skip Short, Esq. Michael Billy, Jr., Esq. Christopher O’Donnell, Esq.*

* The authors acknowledge the contributions of the firm’s member Patrice Soberano, who assisted with the update of this chapter.

I. Introduction ²⁸⁵⁵

In 1973, New York enacted the no-fault law, which is now part of N.Y. Insurance Law article 5 (Insurance Law), entitled “Comprehensive Motor Vehicle Insurance Reparations.” The law is designed to provide certain mandatory insurance benefits to persons involved in motor vehicle accidents and to reduce the number of lawsuits arising from motor vehicle accidents. Benefits are paid regardless of fault. A person has a right to commence suit for non-economic loss—that is, pain and suffering—only when he suffers a serious injury.²⁸⁵⁶

From 1973 when it first promulgated implementing regulations until 2011, the no-fault program was implemented by the New York State Insurance Department, and there are numerous references to the Insurance Department throughout the case law. In 2011, the Departments of Banking and Insurance were abolished and replaced by the Department of Financial Services (Department). Regulations were promulgated in 2013 to change the name of the appropriate agency in the claims forms and in the Regulation.²⁸⁵⁷

The no-fault law requires insurance policies issued in New York State to provide for the payment of first-party benefits to eligible injured persons.²⁸⁵⁸ First-party benefits payments mean reimbursing a person for basic economic loss on account of personal injury arising out of the use of a motor vehicle.²⁸⁵⁹ In general, basic economic loss, subject to a $50,000 maximum, is defined as

1. all necessary expenses, including medical, hospital, surgical, nursing, dental, ambulance, X-ray, prescription drug and prosthetic services, psychiatric, physical and occupational therapy and rehabilitation, and any other professional health service;²⁸⁶⁰

2. loss of earnings from work, which the person would have performed had he not been injured, up to $2,000 per month for not more than three years; and

3. all other reasonable and necessary expenses incurred up to $25 per day for not more than one year from the date of the accident.²⁸⁶¹

Payments for first-party benefits for lost earnings are reduced by 20 percent of basic economic loss. First-party benefits are further reduced by amounts recovered from Social Security disability, workers’ compensation benefits and Medicare.²⁸⁶²

An insured also can obtain additional protection of $25,000 to cover basic economic loss and can apply this coverage to loss of earnings and/or psychiatric, physical or occupational therapy and rehabilitation.²⁸⁶³ Also, an insured can buy additional personal injury protection.²⁸⁶⁴

In an effort to reduce parties’ resorting to the courts, the law provides claimants with the option to litigate or arbitrate any dispute with an insurer regarding PIP benefits.²⁸⁶⁵ In addition, implementation regulations have been issued which cover many details of the claims process.²⁸⁶⁶

The question of entitlement to no-fault benefits raises a variety of issues including

1. eligible injured persons,

2. timeliness of the claim,

3. policy exclusions,

4. denials of claim and

5. resolution of disputes.

II. Eligible Injured Persons

Automobile accidents involving personal injury must be analyzed for no-fault coverage. Department regulations establish rules for priority of payment where there are multiple insurance coverages.²⁸⁶⁷

No-fault coverage is mandatory pursuant to Insurance Law § 5103. There is also mandatory coverage for a nonresident vehicle involved in an accident in New York that is insured by an insurer that does business in New York.²⁸⁶⁸ Section 5103(a) of the Insurance Law sets forth four categories of mandatory coverage, as follows:

(1) Persons, other than occupants of another motor vehicle or a motorcycle, for loss arising out of the use or operation in this state of such motor vehicle. ²⁸⁶⁹ In the case of occupants of a bus other than operators, owners, and employees of the owner or operator of the bus, the coverage for first party benefits shall be afforded under the policy or policies, if any, providing first party benefits to the injured person and members of his household for loss arising out of the use or operation of any motor vehicle of such household. In the event there is no such policy, first party benefits shall be provided by the insurer of such bus. ²⁸⁷⁰

(2) The named insured and members of his household, other than occupants of a motorcycle, for loss arising out of the use or operation of (i) an uninsured motor vehicle or motorcycle, within the United States, its territories or possessions, or Canada; and (ii) an insured motor vehicle or motorcycle outside of this state and within the United States, its territories or possessions, or Canada.

(3) Any New York resident who is neither the owner of a motor vehicle with respect to which coverage for first party benefits is required by this article nor, as a member of a household, is entitled to first party benefits under paragraph two of this subsection, for loss arising out of the use or operation of the insured or self-insured motor vehicle outside of this state and within the United States, its territories or possessions, or Canada.

(4) The estate of any covered person, other than an occupant of another motor vehicle or a motorcycle, a death benefit in the amount of two thousand dollars for the death of such person arising out of the use or operation of such motor vehicle which is in addition to any first party benefits for basic economic loss.

Occupants of a motorcycle are not covered, although a motorcycle must have no-fault insurance to cover pedestrians.²⁸⁷¹ Occupants of an automobile are covered under the vehicle’s policy if the accident occurred in New York State, and are excluded from the policies of the other motor vehicles involved if the accident occurred in New York State. Pedestrians are not covered by this exclusion and may potentially present their claim to one of several insurers in a multi-vehicle accident.

III. Timeliness of the Claim

A claimant must timely present a no-fault claim; otherwise, the insurer will have the right to deny part or all of the claim. There are two distinct claim requirements: timely written notice of claim and timely written proof of claim. These are set forth in a Department regulation and in the mandatory endorsement contained in the regulation.

Title 11, § 65-1.1 of the N.Y.C.R.R. sets forth the mandatory no-fault endorsement, which must be incorporated in every New York automobile policy. It creates the insurer’s rights to timely written notice and timely written proof of claim. The regulation provides in relevant part:

Notice. In the event of an accident, written notice setting forth details sufficient to identify the eligible injured person, along with reasonably obtainable information regarding the time, place and circumstances of the accident, shall be given by, or on behalf of, each eligible injured person, to the Company, or any of the Company’s authorized agents, as soon as reasonably practicable, but in no event more than 30 days after the date of the accident, ²⁸⁷² unless the eligible injured person submits written proof providing clear and reasonable justification for the failure to comply with such time limitation. . . .

Proof of Claim. Medical, Work Loss, and Other Necessary Expenses. In the case of a claim for health service expenses, the eligible injured person or that person’s assignee or representative shall submit written proof of claim to the Company, including full particulars of the nature and extent of the injuries and treatment received and contemplated, as soon as reasonably practicable but, in no event later than 45 days after the date services are rendered. The eligible injured person or that person’s representative shall submit written proof of claim for work loss benefits and for other necessary expenses to the Company as soon as reasonably practicable but, in no event, later than 90 days after the work loss is incurred or the other necessary services are rendered. The foregoing time limitations for the submission of proof of claim shall apply unless the eligible injured person or that person’s representative submits written proof providing clear and reasonable justification for the failure to comply with such time limitation. . . .

Additional specific requirements relating to written proof of claim are set forth in the mandatory endorsement²⁸⁷³ and the claims-processing regulation,²⁸⁷⁴ which provide an insurer with the rights to request information through the prescribed verification forms and to request additional verification.

A. Timely Written Notice of Claim

Under the old regulations, a claimant was required to provide written notice to the insurer within 90 days of the accident. Such notice had to state (1) there has been an accident; (2) the claimant has been injured; and (3) the time, place and circumstances of the accident. While the content of the notice has not changed under the current regulations, the time period to provide notice has been reduced from 90 days to 30 days. While claimants will certainly need to act earlier, most insureds and household members know who their insurer is on the date of the accident and should be able to comply. However, there will be some injured claimants who may not easily be able to obtain the insurance information.

The current regulations provide several safeguards to protect claimants when the insurer is not readily known. First, insurers are required to establish standards for review of determinations that notice is untimely, including, but not limited to, “difficulty ascertaining the identity of the insurer.”²⁸⁷⁵ Second, an expedited arbitration process has been created to resolve untimely denial disputes. Finally, and perhaps most significantly, the excuse for untimely claims has been...