No-Fault Intoxication Exclusion Cut Back by NYS Legislature

While everyone's focus was on the direct DJ/late notice/prejudice bill, the NYS Legislature passed a bill last week that prohibits no-fault insurers from excluding basic economic loss benefits for health care services for a person who is injured as a result of operating a motor vehicle while in an alcohol intoxicated or drug impaired condition.

Senate Bill # S8294-A passed the Senate on June 17 by a 61-0 vote, and passed the Assembly on June 19. It awaits the Governor's signature or veto, and if signed, will become law 180 days afterwards and will apply to all policies issued, renewed, modified or altered on or after the effective date.

The bill amends Insurance Law § 5103(b)(2) to read as follows:

§ 5103. Entitlement to first party benefits; additional financial security required.

(b) An insurer may exclude from coverage required by subsection (a) hereof a person who:

(2) Is injured as a result of operating a motor vehicle while in an intoxicated condition or while his ability to operate such vehicle is impaired by the use of a drug within the meaning of section eleven hundred ninety-two of the vehicle and traffic law, provided, however that an insurer may not exclude from the coverage required by subsection (a) of this section basic economic loss as defined in paragraph one of subsection (a) of section five thousand one hundred two of this article. Notwithstanding any other law, where the covered person is found to have violated section eleven hundred ninety-two of the vehicle and traffic law, the insurer has a cause of action for the amount of first party benefits paid or payable on behalf of such covered person against such covered person. (Added language underlined.)

For those of you who don't have it memorized, Insurance Law § 5102(a)(1) defines basic economic loss to include:

(1) All necessary expenses incurred for: (i) medical, hospital (including services rendered in compliance with article forty-one of the public health law, whether or not such services are rendered directly by a hospital), surgical, nursing, dental, ambulance, x-ray, prescription drug and prosthetic services; (ii) psychiatric, physical therapy (provided that treatment is rendered pursuant to a referral) and occupational therapy and rehabilitation; (iii) any non-medical remedial care and treatment rendered in accordance with a religious method of healing recognized by the laws of this state; and (iv) any other professional health services; all without limitation as to time, provided that within one year after the date of the accident causing the injury it is ascertainable that further expenses may be incurred as a result of the injury.

If this bill is signed by the Governor, the intoxication exclusion will no longer apply to these kind of professional health care expenses. Ambulance and hospital bills will be payable even if the eligible injured person is legally intoxicated. Follow-up medical care will also be payable. Lost earnings (5102[a][2]) and other reasonable and necessary expenses (5102[a][3]), however, may still be excluded under the intoxication exclusion.

Note that the bill gives insurers the right to sue EIPs found guilty of violating Vehicle & Traffic Law § 1192 to recover the first-party benefits paid or payable on behalf of those EIPs. Those will be interesting actions. Collateral estoppel effect from the criminal conviction?

The sponsor's memorandum states that the purpose of this bill is:

To make certain that health care providers are compensated for their services regardless of the fact that the insured was injured as a result of operating a motor vehicle in an intoxicated condition and to allow insurers a right of recovery where the injured person is found guilty of operating a motor vehicle while in an intoxicated condition or while his ability to operate a motor vehicle is impaired by the use of drugs or alcohol.

The sponsor's memorandum gives the following as justification for this bill:

Section 2805-b of the Public Health Law and the federal Emergency Medical Treatment and Active Labor Act (EMTALA) require health care providers such as hospitals, emergency room physicians, nurses and surgeons to provide emergency medical services to persons in need of care, and screening, stabilization and treatment of persons seeking medical care at hospitals. At the same time, New York's No-fault auto insurance law allows insurers to deny reimbursement when insureds are injured while operating a motor vehicle in an intoxicated condition. It is grossly unfair to permit health care institutions and professionals to provide lifesaving care, and then provide no compensation. Health care providers offer the life-saving services that are needed when a person is in a motor vehicle accident. In addition, there is no evidence that current No-fault standards deter drunk driving; they simply penalize health care providers for the irresponsible and dangerous behavior of others. This bill would correct the gross inequity by providing for No-fault medical reimbursement for these dedicated professionals and institutions when they provide care pursuant to state and federal guidelines.

The current exclusion on No-fault benefits also represents a serious barrier that prevents individuals with substance abuse problems from getting the treatment they need. Health care providers who test accident victims for blood alcohol levels usually in emergency rooms - risk the loss of tens of thousands of dollars in insurance reimbursement. Without testing, individuals with substance abuse problems are not required to seek counseling or treatment. Instead, they continue their self-destructive behavior and may harm or kill others in the future. This bill will eliminate the financial disincentives health care providers face when considering whether to perform tests that could force individuals with substance abuse problems into confronting their illness. This bill will also eliminate the gross inequity of an insurance system that penalizes health care professionals and institutions for providing life saving care that is required by law.

Alas, the days of playing "hide the toxicology report" appear to be coming to an end. We must wait to see whether the Insurance Department will promulgate a new prescribed PIP endorsement with a revised intoxication exclusion. In any event, if the bill is signed, all New York auto policies issued, renewed, modified or altered 180 days or more later will be deemed to include the revised and limited intoxication exclusion.

Update (September 29, 2008) -- On September 25, 2008, Governor Paterson VETOED this bill. See my post regarding that veto here.