Thursday, November 12, 2009

New York State Legislature Passes New Anti-Subrogation Law -- Effective November 12, 2009

On November 10, 2009, both the New York State Senate and Assembly passed Senate Bill S66002, as substituted for Assembly Bill A40002.  The bill was delivered to Governor Paterson, who signed it today, November 12, 2009.

Comprising six separate parts, A through F, the bill is self-described as:
AN ACT to amend the insurance law, in relation to municipal cooperative health benefit plans, a study of community rating and the provision of claims experience to a municipality (Part A); to amend the general municipal law and the highway law, in relation to mutual aid (Part B); to amend the public health law, in relation to the composition of county and part-county boards of health (Part C); to amend the general municipal law, in relation to purchasing requirements (Part D); to amend the public authorities law and the local finance law, in relation to authorizing certain bonds to be issued or purchased by the municipal bond bank agency (Part E); and to amend the civil practice law and rules, in relation to treating public and private defendants equally when considering the impact of collateral source payments in tort claims for personal injury, property damage or wrongful death; to amend the general obligations law, in relation to protecting parties to the settlement of a tort claim from certain unwarranted lien, reimbursement and subrogation claims; and to repeal certain provisions of the civil practice law and rules relating to collateral source payments (Part F)
It is Part F that will affect the prospective handling of tort claims in New York State.  The nine sections of Part F of the bill are:
  • § 1 -- repeals subdivisions (a) and (b)of CPLR § 4545
  • § 2 -- amends subdivision (c) and reletters it as subdivision (a) of CPLR § 4545
  • § 3 -- reletters subdivision (d) and as subdivision (b) of CPLR § 4545
  • § 4 -- repeals subdivision (e) of CPLR Rule 4111
  • § 5 -- amends subdivision (f) and reletters it subdivision (e) of CPLR Rule 4111
  • § 6 -- amends subdivision (b) of CPLR § 4213
  • § 7 -- adds a new subdivision 4 to General Obligations Law § 5-101
  • § 8 -- adds new section 5-335 to General Obligations Law 
  • § 9 -- provides for the effective dates of these amended and new statutes
The complete text of the entire bill is here.  The text of Part F, with stricken statutory language language bracketed and struckthrough and new provisions capitalized and underlined, is as follows:

PART F

19  Section 1. Subdivisions (a) and (b) of section 4545 of the civil prac-
   20  tice law and rules are REPEALED.
   21    § 2. Subdivision (c) of section 4545 of the  civil  practice  law  and
   22  rules,  as  added by chapter 220 of the laws of 1986, is amended to read
   23  as follows:
   24    [(c)] (a) Actions for personal injury, injury to property or  wrongful
   25  death.    In  any action brought to recover damages for personal injury,
   26  injury to property or wrongful  death,  where  the  plaintiff  seeks  to
   27  recover  for  the  cost  of medical care, dental care, custodial care or
   28  rehabilitation services,  loss  of  earnings  or  other  economic  loss,
   29  evidence shall be admissible for consideration by the court to establish
   30  that  any  such past or future cost or expense was or will, with reason-
   31  able certainty, be replaced or indemnified, in whole or  in  part,  from
   32  any  collateral  source  [such  as  insurance (], except for life insur-
   33  ance[), social security (except  those  benefits  provided  under  title
   34  XVIII  of  the  social  security act), workers' compensation or employee
   35  benefit programs (except such collateral  sources  entitled  by  law  to
   36  liens  against any recovery of the plaintiff)]  AND THOSE PAYMENTS AS TO
   37  WHICH THERE IS A STATUTORY RIGHT OF REIMBURSEMENT.  If the  court  finds
   38  that any such cost or expense was or will, with reasonable certainty, be
   39  replaced or indemnified from any SUCH collateral source, it shall reduce
   40  the  amount  of  the award by such finding, minus an amount equal to the
   41  premiums paid by the plaintiff for such benefits for the two-year period
   42  immediately preceding the accrual of such action  and  minus  an  amount
   43  equal  to the projected future cost to the plaintiff of maintaining such
   44  benefits. In order to find that any future cost or  expense  will,  with
   45  reasonable  certainty,  be  replaced  or  indemnified  by the collateral
   46  source, the court must find that the plaintiff is  legally  entitled  to
   47  the  continued receipt of such collateral source, pursuant to a contract
   48  or otherwise  enforceable  agreement,  subject  only  to  the  continued
   49  payment  of  a  premium  and  such other financial obligations as may be
   50  required by such agreement.  ANY COLLATERAL SOURCE DEDUCTION REQUIRED BY
   51  THIS SUBDIVISION SHALL BE MADE BY THE TRIAL COURT AFTER THE RENDERING OF
   52  THE JURY'S VERDICT.   THE PLAINTIFF MAY PROVE  HIS  OR  HER  LOSSES  AND
   53  EXPENSES  AT THE TRIAL IRRESPECTIVE OF WHETHER SUCH SUMS WILL LATER HAVE
   54  TO BE DEDUCTED FROM THE PLAINTIFF'S RECOVERY.
       S. 2                               19                               A. 2

    1    § 3. Subdivision (d) of section 4545 of the  civil  practice  law  and
    2  rules is relettered subdivision (b).
    3    §  4. Subdivision (e) of rule 4111 of the civil practice law and rules
    4  is REPEALED.
    5    § 5. Subdivision (f) of rule 4111 of the civil practice law and rules,
    6  as amended by chapter 100 of the laws of 1994, is relettered subdivision
    7  (e) and amended to read as follows:
    8    (e) Itemized verdict in certain  actions.  In  an  action  brought  to
    9  recover  damages  for  personal  injury,  injury to property or wrongful
   10  death, which is not subject to [subdivisions] SUBDIVISION (d) [and  (e)]
   11  of this rule, the court shall instruct the jury that if the jury finds a
   12  verdict awarding damages, it shall in its verdict specify the applicable
   13  elements  of  special  and general damages upon which the award is based
   14  and the amount assigned to each element including, but not  limited  to,
   15  medical expenses, dental expenses, loss of earnings, impairment of earn-
   16  ing ability, and pain and suffering. Each element shall be further item-
   17  ized  into  amounts  intended  to  compensate for damages that have been
   18  incurred prior to the verdict and amounts  intended  to  compensate  for
   19  damages  to  be incurred in the future. In itemizing amounts intended to
   20  compensate for future damages, the jury shall set forth  the  period  of
   21  years  over which such amounts are intended to provide compensation.  In
   22  actions in which article fifty-A or fifty-B of this chapter applies,  in
   23  computing  said  damages, the jury shall be instructed to award the full
   24  amount of future damages, as calculated, without  reduction  to  present
   25  value.
   26    §  6.  Subdivision  (b)  of section 4213 of the civil practice law and
   27  rules, as separately amended by chapters 485 and  682  of  the  laws  of
   28  1986, is amended to read as follows:
   29    (b)  Form  of  decision.  The  decision of the court may be oral or in
   30  writing and shall state the facts it deems  essential.  In  [a  medical,
   31  dental  or podiatric malpractice action or in an action against a public
   32  employer or a public employee who is subject  to  indemnification  by  a
   33  public  employer  with respect to such action or both, as such terms are
   34  defined in subdivision (b) of section forty-five hundred forty-five, for
   35  personal injury or wrongful death arising out of an injury sustained  by
   36  a public employee while acting within the scope of his public employment
   37  or  duties,  and  in]  any [other] action brought to recover damages for
   38  personal injury, injury to  property,  or  wrongful  death,  a  decision
   39  awarding  damages  shall  specify the applicable elements of special and
   40  general damages upon which the award is based and the amount assigned to
   41  each element, including but not  limited  to  medical  expenses,  dental
   42  expenses,  podiatric  expenses,  loss of earnings, impairment of earning
   43  ability, and pain and suffering. In a medical, dental or podiatric malp-
   44  ractice action, [and in any other action brought to recover damages  for
   45  personal  injury,  injury  to  property, or wrongful death, each element
   46  shall be further  itemized  into  amounts  intended  to  compensate  for
   47  damages  which  have  been  incurred  prior  to the decision and amounts
   48  intended to compensate for damages to be  incurred  in  the  future.  In
   49  itemizing  amounts  intended to compensate for future damages, the court
   50  shall set forth the period of years over which such amounts are intended
   51  to provide compensation. In computing  said  damages,  the  court  shall
   52  award  the  full  amount  of  future  damages,  as  calculated,  without
   53  reduction to present value] COMMENCED ON OR AFTER JULY TWENTY-SIXTH, TWO
   54  THOUSAND THREE, THE COURT'S DECISION AS TO FUTURE DAMAGES SHALL BE ITEM-
   55  IZED IN ACCORDANCE WITH SUBDIVISION (D) OF RULE FORTY-ONE HUNDRED ELEVEN
   56  OF THIS CHAPTER.  IN ANY ACTION BROUGHT TO RECOVER DAMAGES FOR  PERSONAL
       S. 2                               20                               A. 2

    1  INJURY,  INJURY  TO  PROPERTY  OR  WRONGFUL DEATH, OTHER THAN A MEDICAL,
    2  DENTAL OR PODIATRIC MALPRACTICE ACTION COMMENCED ON OR AFTER JULY  TWEN-
    3  TY-SIXTH,  TWO THOUSAND THREE, THE COURT'S DECISION AS TO FUTURE DAMAGES
    4  SHALL  BE  ITEMIZED IN ACCORDANCE WITH SUBDIVISION (E) OF RULE FORTY-ONE
    5  HUNDRED ELEVEN OF THIS CHAPTER.
    6    § 7. Section 5-101 of the general obligations law is amended by adding
    7  a new subdivision 4 to read as follows:
    8    4. AS USED IN SECTION 5-335 OF THIS ARTICLE, THE TERM "BENEFIT PROVID-
    9  ER" MEANS ANY INSURER, HEALTH MAINTENANCE ORGANIZATION,  HEALTH  BENEFIT
   10  PLAN,  PREFERRED  PROVIDER  ORGANIZATION, EMPLOYEE BENEFIT PLAN OR OTHER
   11  ENTITY WHICH PROVIDES  FOR  PAYMENT  OR  REIMBURSEMENT  OF  HEALTH  CARE
   12  EXPENSES,  HEALTH CARE SERVICES, DISABILITY PAYMENTS, LOST WAGE PAYMENTS
   13  OR ANY OTHER BENEFITS UNDER A POLICY OF INSURANCE OR  CONTRACT  WITH  AN
   14  INDIVIDUAL OR GROUP.
   15    §  8.  The  general obligations law is amended by adding a new section
   16  5-335 to read as follows:
   17    § 5-335. LIMITATION OF  NON-STATUTORY  REIMBURSEMENT  AND  SUBROGATION
   18  CLAIMS IN PERSONAL INJURY AND WRONGFUL DEATH ACTIONS.  (A) WHEN A PLAIN-
   19  TIFF SETTLES WITH ONE OR MORE DEFENDANTS IN AN ACTION FOR PERSONAL INJU-
   20  RIES,  MEDICAL,  DENTAL, OR PODIATRIC MALPRACTICE, OR WRONGFUL DEATH, IT
   21  SHALL BE CONCLUSIVELY PRESUMED THAT THE SETTLEMENT DOES NOT INCLUDE  ANY
   22  COMPENSATION  FOR  THE COST OF HEALTH CARE SERVICES, LOSS OF EARNINGS OR
   23  OTHER ECONOMIC LOSS TO THE EXTENT THOSE LOSSES OR EXPENSES HAVE BEEN  OR
   24  ARE OBLIGATED TO BE PAID OR REIMBURSED BY A BENEFIT PROVIDER, EXCEPT FOR
   25  THOSE  PAYMENTS AS TO WHICH THERE IS A STATUTORY RIGHT OF REIMBURSEMENT.
   26  BY ENTERING INTO ANY SUCH SETTLEMENT, A PLAINTIFF SHALL NOT BE DEEMED TO
   27  HAVE TAKEN AN ACTION IN DEROGATION OF  ANY  NONSTATUTORY  RIGHT  OF  ANY
   28  BENEFIT  PROVIDER  THAT  PAID  OR  IS  OBLIGATED  TO PAY THOSE LOSSES OR
   29  EXPENSES; NOR SHALL A PLAINTIFF'S ENTRY INTO SUCH SETTLEMENT  CONSTITUTE
   30  A  VIOLATION  OF  ANY  CONTRACT  BETWEEN  THE PLAINTIFF AND SUCH BENEFIT
   31  PROVIDER.
   32    EXCEPT WHERE THERE IS A STATUTORY RIGHT  OF  REIMBURSEMENT,  NO  PARTY
   33  ENTERING  INTO SUCH A SETTLEMENT SHALL BE SUBJECT TO A SUBROGATION CLAIM
   34  OR CLAIM FOR REIMBURSEMENT BY A BENEFIT PROVIDER AND A BENEFIT  PROVIDER
   35  SHALL  HAVE NO LIEN OR RIGHT OF SUBROGATION OR REIMBURSEMENT AGAINST ANY
   36  SUCH SETTLING PARTY, WITH RESPECT TO THOSE LOSSES OR EXPENSES THAT  HAVE
   37  BEEN OR ARE OBLIGATED TO BE PAID OR REIMBURSED BY SAID BENEFIT PROVIDER.
   38    (B)  THIS  SECTION SHALL NOT APPLY TO A SUBROGATION CLAIM FOR RECOVERY
   39  OF  ADDITIONAL  FIRST-PARTY  BENEFITS  PROVIDED  PURSUANT   TO   ARTICLE
   40  FIFTY-ONE  OF  THE INSURANCE LAW. THE TERM "ADDITIONAL FIRST-PARTY BENE-
   41  FITS", AS USED IN THIS SUBDIVISION, SHALL HAVE THE SAME MEANING GIVEN IT
   42  IN SECTION 65-1.3 OF TITLE 11 OF THE CODES, RULES AND REGULATIONS OF THE
   43  STATE OF NEW YORK AS OF THE EFFECTIVE DATE OF THIS STATUTE.
   44    § 9. This act shall take effect immediately and  shall  apply  to  all
   45  actions  and  proceedings  commenced  on  or  after such date; provided,
   46  however, that sections four through eight of this act shall  also  apply
   47  to  any action or proceeding which was commenced prior to such effective
   48  date where, as of such date, either (a) a trial of the  issues  has  not
   49  yet  commenced,  or  (b)  the parties have not yet entered into a stipu-
   50  lation of settlement.
Effective Dates:

Sections 1, 2 and 3 of Part F of this act (the changes to CPLR § 4545) will take effect "immediately" upon the Governor's signature of this bill (which occurred on November 12, 2009) and will apply to all actions commenced on and after that date.

Sections 4, 5 (changes to CPLR Rule 4111), 6 (change to CPLR § 4213),7 (addition of General Obligations Law § 5-101[4]), and 8 (addition of General Obligations Law § 5-335) will also apply to any applicable action or proceeding that was commenced prior to November 12, 2009, (Governor's signing date) if as of such date either the trial had not yet commenced or the parties had not "entered into" (settlement memorialized in writing or one "spread on the record") a stipulation of settlement. 

For medical, dental, or podiatric malpractice actions commenced on and after July 26, 2003, the court's decision on future damages must be itemized in accordance with CPLR Rule 4111(d).

For actions brought to recover damages for personal injury, injury to property or wrongful death commenced on and after July 26, 2003, that are not medical, dental or podiatric malpractice actions, the court's decision on future damages must be itemized in accordance with the relettered CPLR Rule 4111(e).

Purpose of Part F:

When predecessor Senate Bill S6068 was passed by just the Senate back in July, the New York State Trial Lawyers Association website pronounced it a legislative victory:
NYSTLA is proud to announce that the New York State Senate voted to pass a mandate relief bill, S.6068 (Sampson), on July 17th, 2009, which includes an anti-subrogation provision. This is a major victory for the civil justice system and injured New Yorkers. The anti-subrogation provision amends the general obligations law to protect all settling plaintiffs and defendants in a personal injury action from certain unwarranted reimbursement and subrogation claims.

This bill will remedy recent, ill-advised Court of Appeals decisions such as Teichman v. Community Hosp. of Western Suffolk , 87 N.Y.2d 514 (1996), and Fasso v. Doerr, 12 N.Y.3d 80 (Feb. 24, 2009). These decisions incorrectly opened the door to benefits providers, such as health insurers, "double-dipping" by seeking reimbursement from settling defendants who have caused personal injuries to a plaintiff who has health insurance.
APIP Subrogation Exempted:

Notice that the new GOL § 5-335 specifically exempts subrogation claims for recovery of "additional first-party benefits" as provided for in Insurance Law Article 51 and defined by the prescribed APIP endorsement found at 11 NYCRR § 65-1.3.  This means that APIP subrogation claims are still fully viable. 

Property Damage Subrogation Claims Unaffected:

On its face, the new GOL § 5-335 will apply only to and limit non-statutory reimbursement and subrogation claims in personal injury and wrongful death actions, and, as to such actions, only insurers or entities qualifying as a "benefit provider" will be affected.  GOL § 5-101(4) will define a "benefit provider" as "any insurer, health maintenance organization, health benefit plan, preferred provider organization, employee benefit plan or other entity which provides for payment or reimbursement of health care expenses, health care services, disability payments, lost wage payments or any other benefits under a policy of insurance or contract with an individual or group."

GOL § 5-335 should not apply to insurers that afford first-party property coverage benefits to their insureds and then seek to exercise their subrogation rights because those insurers should not fall within the definition of a "benefit provider" under that section. 

Common Law Anti-Subrogation Rule Unaffected:

The new law should not affect what has come to be known as New York's common law "antisubrogation rule".  The common law rule operates as a party's liability defense based on coverage principles, not a recovery right of subrogation.

8 comments:

TheSubro said...

This is an awful new law.

1. Health Insurance rates are based upon expected net losses. With the elimination of healthcare subrogation, insurance companies will be compelled to raise their premiums rates. This means that the cost for this measure will fall entirely onto all of us who pay for healthcare.

2. Insurance company subrogation has been in place for 100s of years and came to the US when the English did... and has kept the cost of healthcare down every step of the way - placing the ultimate burden for medical expenses on the person who caused the injury.

3. This short-sighted measure was promoted and pushed through the legislature by the personal injury trial lawyers' lobby so they would not need to reduce their fees by the recoveries that had to be turned over to the healthcare carriers - the rightful recipients of any monies recovered for medical bills paid and arising from accidents.

I just wish that the insurance buyig public was made more aware of the effect of this new bill and the special interest group the legislature and Governor were looking to appease at the collective expense of the rest of us.

Ken Levine

J. Michael Hayes said...

Roy, I agree that this is an extremely poorly drafted and conceived law. Fasso addressed all the concerned issues adequately. Now, there is the opportunity for excess & opportunism by plaitiff's counsel. See my knol: NY CPLR 4545 & GOL 5-335.
J. Michael Hayes

Anonymous said...

Actually, under most personal injury retainers, the liens don't come off the top -- they come out of the plaintiff's share. So this won't affect attorneys' fees at all.

Michael Laffey said...

December 23, 2009


Re: The vitality of personal injury claims in New York after §5-335;
Is this the end of small case litigation?
Did the Trial Bar shoot themselves - and their clients - in the Wallet?

Dear Colleagues,

As you know, the winds of change once again blew through the halls of the State Assembly this year with passage of The Governor’s Program Bill #95/S66002, which Governor Paterson signed into law on November 12, 2009. With it came a new section of the New York General Obligations Law (§5-335) which outlawed common law subrogation in all pending and future actions for personal injuries, medical, dental, podiatric malpractice or wrongful death. In the coming months that law will be challenged on various grounds, but before you contribute in a fight to sustain it, I ask that you consider the intended and unintended consequences of §5-335 and the effect it will have on your client’s cases and many of your practices.

It is obvious, but still paramount to note, that part of your client’s claims used to include subrogable medical and wage loss claims. These claims are now gone with the wind. Now nearly all of the medical expenses and wage losses previously asserted in the cases which you are prosecuting on behalf of injured clients are no longer a part of the equation by which property and casualty carriers calculate settlements or potential verdicts. Before you conclude that you can make this up with a higher percentage of settlements in your current case portfolios now that the medicals are no longer “in the way,” consider the following:

Property and casualty adjusters will assign lower values to settlements in many of your cases (e.g. premises liability, slip and falls, dog bites, products liability). Your 62 year old client who slipped and fell, breaking her hip, does not have to pay back the $60,000 operation to the health carrier. Consequently, your client no longer has that claim. Rather, you are relegated to making a claim of pain and suffering, or trying to prove your client’s incontinence or arthritis was caused by the fall and not by a pre-existing condition. And, of course, there is no wage claim.

For the dog bite and small injury claims, no longer can you claim a settlement value of 3-5 times the $2,000 emergency room charge. Counsel will be required to prove specials with greater specificity. You will see settlement values decline in all areas of personal injury. In the past, if needed, you could call in the health insurer and offer to protect their interest for a fee if the defendant was particularly reticent about including anything for provable medicals. Those days are gone. Plaintiffs recoveries in this segment of the market will drop by at least 20% and the days of easy fees from health insurers are gone.

This law will not affect the incidences of medical malpractice. While it is axiomatic in commercial law that payment is only due upon the successful completion of a task, such has never been the case with medical providers who expect to be paid for their services regardless of whether or not they were performed negligently. Plaintiffs used to be able to make a claim for the cost of not only corrective surgery but for deficient services. These claims are now extinguished. Where is the value in a left-sponge or instrument case now?


There are numerous examples where there simply is not enough money to pay the plaintiffs and the subrogation claims. Those cases have been addressed by the Fasso v. Doerr decision which limits the health insurers in those situations. There is simply no need to cut out the subrogation wage claims just to spite the carriers.


Michael J. Laffey

ichael Laffey said...

Pt 2
Many claims which would have been questionable (like the intoxicated patron who fell from a railing and becomes a quadriplegic) are now not worth considering because there is a significantly reduced recovery potential without the medical and wage specials, subrogable or not. And, of course, under the Common Fund Doctrine, the carrier always pays the attorney for his efforts.

The death of small cases in New York is not the entire story here. It may seem insignificant to some, but small cases are for many attorneys what krill are to the food chain.
§5-335 will eliminate those cases for all but the philanthropic among us and it will diminish the ability of many plaintiffs’ attorneys to survive and prosper.

In the common example of the child who bears one noticeable scar from a dog bite, we must now tell his parents that the case is not worth the time and effort it will take to recover reasonable compensation. In that type of case and in many others you will have to confront the new reality that §5-335 has wrought upon the entire plaintiffs bar

To concede that the people of New York must learn to live with a less vital plaintiffs’ bar or to leave this as part of our legacy is sinful. Knowing the impact that eliminating medical and wage damages will have on all our futures should be unacceptable.

§5-335 is not change worthy of your support.

Your Colleague,

Scott J. Kreppein said...

My understanding is that these were collateral source payments for which the plaintiff was not permitted to recover from a jury, but which the defense insurers could claim as a collateral source set-off against personal injury proceeds. The comments seem to disagree with this.

The issue is more which insurance company bears the loss for the medical costs: the plaintiff (out of their recovery from a third-party), or the primary insurance that received premiums from or on the plaintiff's behalf to insure against the risk.

Personally, I think the law should have been broader, and also limit the recovery of certain workers comp liens.

Richard Halpern said...

Query:

What about a settlement of a personal injury claim where a lawsuit was not yet instituted? Would this new law protect the settling parties from a right of subrogation by a private health insurer?

The law talks about "plaintiffs", "defendants" and "actions and proceedings".

My initial opinion is that GOL 5-335, based on that language, would not apply to a pre-suit settlement. Agree/disagree?

Aaron said...

Point 1: Liens have to be paid from the net of the settlement or award because they are the expense of the client. Thus, the new law has no effect on the fees of the attorney.

Point 2: Regarding this concern that the new law will cause insurance rates to go up:

Insurance carriers should be paid back by tortfeasors for the expenses that have to be laid out for injured parties.

The nuance here is that carriers almost never go after the tortfeasor directly for reimbursement. Before the new law carriers merely relied on the hard work of plaintiffs' counsel and then demanded payment at the end of the case. In short, the carriers were getting a free.

If the carriers are so concerned with getting reimbursed and keeping down the cost of health care they should put their money where their mouths are and start using their subro rights to sue tortfeasors directly instead of using plaintiff's lawyers as their defacto collections counsel.

This new law puts an end to that unfair practice.

Amen.