New York: The “Loss Transfer” Opportunity to Recover Otherwise Non-Recoverable First-Party Benefits

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New York’s “no-fault” legislation reflects a public policy designed to make the insurer of first-party benefits absorb the economic impact of loss without resort to reimbursement from its insured or, by subrogation, from the tortfeasor. Country Wide Ins. Co. v. Osathanugrah, 94 A.D.2d 513, 515 (N.Y. 1st Dept. 1983).  The no-fault concept embodied in New York’s Insurance Law modifies the common law system of reparation for personal injuries under tort law.  Safeco Ins. Co. of Am. v. Jamaica Water Supply Co., 83 A.D.2d 427, 431 (N.Y. 2nd Dept. 1981).  “[F]irst party benefits are a form of compensation unknown at common law, resting on predicates independent of the fault or negligence of the injured party.”  Id. at 431.  The purpose of New York’s no-fault scheme is “to promote prompt resolution of injury claims, limit cost to consumers and alleviate unnecessary burdens on the courts.”  Byrne v. Oester Trucking, Inc., 386 F. Supp. 2d 386, 391 (S.D.N.Y. 2005).

New York’s no-fault scheme—contained in Article 51 of its Consolidated Laws (“Comprehensive Motor Vehicle Insurance Reparations”)—requires owners of vehicles to carry insurance with $50,000 minimum limits which covers basic economic loss, i.e., first-party benefits, on account of personal injury arising from the use or operation of a motor vehicle. Basic economic loss includes, among other things:  (1) medical expenses; (2) lost earnings up to $2,000 per month for three years; and (3) out-of-pocket expenses up to $25 per day for one year.  N.Y. INS. LAW § 5102(a).

Where workers’ compensation insurance coverage exists for an injured motorist— i.e., where the motorist is operating a vehicle while in the course and scope of her employment—the workers’ compensation insurer must pay the injured motorist’s basic economic loss up to $50,000.  N.Y. INS. LAW § 5102(b)(2).  The compensation insurer in this scenario is said to become “primary.”  And since first-party benefits are guaranteed regardless of fault, there is no corresponding right of subrogation for the carrier reimbursing an injured motorist for items of basic economic loss. Condon v. Hathaway, 740 N.Y.S.2d 600, 603 (N.Y. Sup. Ct. 2002).

Instead, New York provides a compensation insurer with what is referred to as “loss transfer.”  Loss transfer is simply an opportunity to recover from the negligent motorist’s vehicle insurer the first-party benefits the compensation insurer became obligated to pay as a result of the accident.  But the right of a compensation insurer to recover under the loss transfer exception depends on the existence of either of two conditions: At least one of the motor vehicles involved (1) weighs more than 6,500 lbs. unloaded, or (2) is used principally for the transportation of persons (e.g., taxi, bus) or property for hire (e.g., FedEx, delivery truck)1.  N.Y. INS. LAW § 5105(a).  If one of these two conditions is met, a compensation insurer is free to pursue a loss transfer against the negligent motorist’s vehicle insurer for the recovery of the $50,000 first-party benefits it became obligated to pay under Section 5102(b)(2).

The “sole remedy” for pursuing a loss transfer against the negligent motorist’s vehicle insurer is, without exception, arbitration. N.Y. INS. LAW § 5105(b).  Thus there is no signatory requirement as arbitration is the sole remedy of any insurer seeking a loss transfer arising from a motor vehicle accident in New York. The New York Insurance Department has selected Arbitration Forums as the administrator of loss transfer arbitration and, through its regulations contained in 11 NYCRR § 65.10 (2003), has granted Arbitration Forums the authority to “make appropriate administrative rules for arbitration.”

It is important to remember that loss transfer is only applicable to the $50,000 first-party benefits a compensation insurer becomes obligated to pay under Section 5102(b)(2) of New York’s Insurance Law. Recovery of “APIP” 3 —or, additional benefits paid over and above the $50,000 no-fault threshold—can be had through conventional workers’ compensation subrogation provided under N.Y. WORKERS’ COMP LAW § 29.

New York’s loss transfer scheme is fraught with nuance and hidden exceptions, found not only in Article 51 itself, but also in the Insurance Department’s extensive regulations and in the rules promulgated by Arbitration Forums pursuant to its authority given by the Insurance Department. It is critical that counsel be sought as soon as practicable in a potential loss transfer case to not only preserve a loss transfer opportunity but to develop a comprehensive strategy for a successful recovery.

Robert M. Caplan is Counsel with White and Williams LLP and Workers’ Compensation Subrogation Team Leader. In addition to litigating and trying cases, Rob is a frequent lecturer at national and regional conferences held by the National Association of Subrogation Professionals (NASP) where he has been a Track Leader for the Workers’ Compensation Subrogation Track. Rob can be reached at and 215.864.7012.

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