To Whom NY General Obligations Law § 5-335 May Concern...

I generally like the insurance professionals who volunteer their time to hear intercompany arbitration matters for companies like Arbitration Forums.  I really do.  They provide a valuable cost-savings service to those insurers who participate in intercompany arbitration.  But folks, please.  Please slow down and take the time to actually read the statute you're citing to deny and dismiss that med pay subrogation claim. 

On November 12, 2009, section 5-335 was added to the New York General Obligations Law (GOL).  That day I blogged about that bill and that section here. I quoted the new statutory sections, listed their effective dates, and explained what types of claims were and were not encompassed by the new law. 

Just recently a New York auto insurer client contacted me to report that intercompany arbitrators have been  routinely rejecting the company's med pay intercompany subrogation claims based on GOL § 5-335.  Reportedly, the arbitrators were citing that statute for the proposition that it statutorily precludes all such claims.  It does not. 

Assuming there has been no settlement between the insured and the negligent party against whom the auto insurer is subrogating (and be sure to verify that before filing your intercompany arb), your subrogation departments should include the following in their intercompany arb submissions:

Please note that New York General Obligations Law § 5-335(a) does not apply to preclude this subrogation claim.  That statute only applies to situations in which the injured person has entered into a settlement with the negligent party.  That statute states, in pertinent part:

Except where there is a statutory right of reimbursement, no party entering into such a settlement shall be subject to a subrogation claim or claim for reimbursement by a benefit provider and a benefit provider shall have no lien or right of subrogation or reimbursement against any such settling party, with respect to those losses or expenses that have been or are obligated to be paid or reimbursed by said benefit provider (emphasis added). 

There has been no such settlement, and the respondent’s insured is not a settling party within the meaning of section 5-335(a).  Thus, General Obligations Law § 5-335(a) does not apply to this matter to bar or preclude recovery of this subrogation claim. 

Capisci?

No Do-Overs in Intercompany Arbitration

NO-FAULT – LOSS TRANSFER – INTERCOMPANY ARBITRATION – INSURANCE LAW § 5105 – RES JUDICATA
Matter of Progressive N. Ins. Co. v. Sentry Ins. A Mut. Co.
(2nd Dept., decided 5/13/2008)

Progressive paid no-fault benefits to its insured for injuries she sustained in a motor vehicle accident with Sentry's insured, and then commenced an intercompany arbitration proceeding against Sentry, seeking reimbursement under the priority-of-payment section of Regulation 68 (11 NYCRR § 65-3.12[b]; 65-4.11). In that first arbitration proceeding, the arbitrator ruled against Progressive and denied reimbursement.

Progressive commenced a second intercompany arbitration proceeding against Sentry, this time asserting a loss-transfer claim under Insurance Law § 5105. Sentry argued that Progressive was barred by res judicata from re-arbitrating its reimbursement claim, and the arbitrator agreed, denying Progressive's loss-transfer claim on that basis.

Progressive then commenced this CPLR article 75 special proceeding to vacate the second arbitration decision. In AFFIRMING the lower court's denial of Progressive's petition, the Second Department held that the arbitrator did not exceed its authority by rendering an award in favor of Sentry:

[I]t is clear that the instant claim made by Progressive arose out of the same transaction as the prior claim that was denied in the prior arbitration (citations omitted). While Progressive now alleges different facts regarding how the accident occurred, and a different theory upon which reimbursement is sought, the instant arbitration and the instant claim involve the same accident and the same parties, while Progressive seeks reimbursement of the same payments, albeit on a different legal theory (citations omitted).

Based on res judicata, the denial of Progressive's petition to vacate the second arbitration decision was upheld.