No-Fault Auto and Work Comp - How to Do the Math

Thursday, June 24, 2004 | 0

What is the interplay between workers comp lost wage benefits and no-fault lost wage benefits? Does no-fault pick up where workers comp leaves off (i.e., excess) and compensate a claimant's lost wages up to his actual loss or no-fault's $2000 monthly benefit, whichever comes first? Do workers comp lost wage benefits get deducted from the claimant's actual wage loss? Or do workers comp benefits get deducted from the no-fault lost wage benefits?

This is a topic where even the so-called experts often don't know the real answer. One prominent no-fault defense firm which published a no-fault manual has an answer to this question, and even gives examples of the math. The only problem is, they are wrong.

There is only one court case on the subject. Fortunately, the case went up to the Court of Appeals, so the answer is a definitive one.

The case is HEITNER v. GOVERNMENT EMPLOYEES INSURANCE COMPANY, et al., 486 N.Y.S.2d 933, 64 N.Y.2d 834 (1985). Plaintiff commenced this class action suit in Supreme Court, Nassau County, naming several insurance carriers representing a class consisting of all insurers who issued no-fault coverage in New York at the time. The complaint alleged that all no fault carriers had, since December 1, 1977, received claims for lost earnings by eligible injured insureds who earned in excess of $1,250.00 per month and had received workers comp disability benefits and each had processed and paid those claims by offsetting the amounts received as disability benefits from the sum of $1,000.00 [at the time, the maximum no-fault lost wage benefit] instead of from the claimant's actual loss of earnings less the 20% offset.

"The dispute narrows to one complex point," stated the Court: "are the statutory setoffs... to be deducted by the no fault carriers from the wage loss outer limit ... that is, $1,000.00 -- or are such setoffs to be deducted from the 'gross' or 'actual' wage loss of the injured insured, so that the no fault insurer remains liable, notwithstanding recovery from such collateral sources for a maximum payment of $1,000.00?"

Plaintiff Heitner was injured in an auto accident in a vehicle insured by Geico. Plaintiff was eligible to recover for lost earnings and medical expenses under the no fault law and, in addition, was eligible for disability benefits pursuant to the Workers' Compensation Law.

Geico reimbursed plaintiff under his no fault coverage for his medical expenses plus his wage loss of up to $1,000 per month less the amount of Workers Comp disability benefits. Geico paid plaintiff the sum of $582.00 per month; Geico arrived at this amount by deducting the sum of $418 per month representing New York State Disability Benefits (DBL), which plaintiff was entitled to receive, from the $1,000 maximum no-fault benefit for wage loss.

The Court, looking at the no-fault statute, stated that no fault carriers are not obligated to pay for all basic economic loss sustained, but only for "first party benefits". The law defines "first party benefits" as follows:

"... payments to reimburse a person for basic economic loss ... less;
(a) twenty per cent of lost earnings pursuant to paragraph (b) of subdivision one of this section;
(b) amounts recovered or recoverable on account of such injury under state or federal laws providing social security disability benefits, or workmen's compensation benefits, or disability benefits under article nine of the workmen's compensation law, or medicare benefits (other than lifetime reserve days and provided further that the medicare benefits utilized herein do not result in a reduction of such person's medicare benefits for a subsequent illness or injury); and
(c) any amounts deductible under the applicable insurance policy."

"First party benefits, therefore," concluded the Court, "are the claimant's 'basic economic loss' reduced by the sums recovered under specified statutory programs.... The policy underlying no fault is prompt and full compensation only to the limits of basic economic loss." No case law exists that "supports a right to claim full compensation for all losses."

The statutory language, held the Court, "is clear and unambiguous. First party benefits are not synonymous with basic economic loss, but rather are equal to basic economic loss less any applicable statutory offset. The Court finds that the legislature, in fixing the "outer limit" of "wage loss recovery" at $1,000.00, intended such figure to represent the total recovery from both the no fault carrier (as the secondary source) and designated other insurers (as the primary source), subject, of course, to further recovery by way of plenary tort action. That is, the legislature wished that 'disability payments' be primary and 'be deducted' from no fault benefits.

The decision, written by the brilliant jurist Judge Arthur Spatt (later elevated to Federal court), was overturned by the Appellate Division. But the Appellate Division was overturned yet again by the Court of Appeals, "for the reasons stated in Judge Spatt's opinion."

Therefore, the math works like this: say a claimant has an actual wage loss of $5000/month. He receives workers comp lost wage payments of $1200/month. The maximum no-fault lost wage benefit is $1600/month ($2000 minus the statutory 20%). The math goes like this:

No-fault lost wage benefit............. $1600
Workers comp lost wage benefit......... -1200
NET NO-FAULT LOST WAGE BENEFIT......... $400

The claimant therefore gets a total of $1600 in lost wage benefits, and suffers a net wage loss of $3400 per month.

This is the real answer from the highest source in New York.

Article by Larry Rogak. Lawrence N. Rogak is an insurance defense attorney in New York. He writes The Rogak Report, a daily insurance law newsletter, and his insurance law articles appear in several industry publications. For more information see www.Rogak.com.

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