Protects the parties to a tort settlement from any claims by an insurer

BILL NUMBER:S5715A

Title of bill

An act 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

Purpose

Chapter 494 of the laws of 2009, inter alia added a new subdivision 4 to section 5-101 of the general obligations law and amended section 5-335 of the general obligations law. That legislation was intended to protect parties to the settlement of a tort claim from certain unwarranted lien, reimbursement and subrogation claims by insurers.

The purpose of this bill is to correct any misunderstanding as to the applicability and scope of that law by refining its definition and applicability to precluding liens, reimbursements and subrogation claims with respect to any cost of health care services, loss of earnings or other economic loss to the extent those losses or expenses have been or are obligated to be paid or reimbursed by an insurer.

Summary of provisions

This bill would provide for the following:

1) It will now be conclusively presumed that, except with respect to Medicare, Medicaid or Workers' Compensation payments for which there is a statutory right of reimbursement, the money paid in settlement of any personal injury or wrongful death action did not include compensation for the losses or expenses that were or will be paid by an insurer; and

2) Except for those payments made by Medicare, Medicaid or an insurer providing Workers' Compensation benefits for which there is a statutory right of reimbursement, no defendant that enters into a settlement with the personal injury or wrongful death plaintiff shall be thereafter subject to any insurers' claim for subrogation or reimbursement.

Justification

In 2009, the legislature enacted the current General Obligations Law §§ 5-101 and 5-335 to protect plaintiffs and defendants from unwarranted liens, reimbursement and subrogation claims by insurers. Since the 2009 enactment of the current law, it has been relied upon by all parties to settlements involving tort claims.

In a recent federal court decision (Wurtz v. Rawlings Co., LLC, 2013 WL 1248631 (E.D.N.Y.)), federal ERISA law was found to preempt New York's General Obligation Law with regard to an insurer's (of an ERISA plan) right of subrogation, undermining the intent of this legislature.

This bill is a corrective measure that will bring the General Obligation Law firmly under ERISA's savings clause, which allows States to regulate an insurers subrogation rights. As this was the legislature original intent, the bill will apply to all settlements entered into on or after November 12, 2009 -- the effective date of that year's amendments to the relevant provisions of the General Obligations Law.

Legislative history

New bill

Fiscal implications

None.

Effective date

This act will take effect immediately and apply to any settlement entered into on or after November 12, 2009.