Bus Passenger, Work Comp, and Loss Transfer

Saturday, October 22, 2005 | 0

BUS PASSENGER'S COMP CARRIER MAY BRING LOSS TRANSFER ARBITRATION AGAINST BUS'S LIABILITY INSURER

A.I. Transport v. New York State Ins. Fund, 301 A.D.2d 380, 753 N.Y.S.2d 466 (1st Dept 2003)

A liability insurer brought a petition to stay loss transfer arbitration demanded by a workers' compensation insurer to recover benefits that the comp carrier paid to a passenger injured on a bus insured by the liability insurer. The Supreme Court, New York County, denied the stay and the liability insurer appealed. The Appellate Division held that the motion court correctly held that arbitration could proceed.

"We construe Insurance Law 5105(a) to provide that where one of the vehicles involved in an accident is a bus, then any insurer liable to a bus passenger for payment of no-fault first party benefits -- including a workers' compensation provider, such as respondent, 'paying in lieu of first party benefits' -- can recover the amounts it paid to the passenger from the insurer of a liable party except where the loss arises 'out of the use or operation in this state of such motor vehicle.' Accordingly, the motion court correctly held that because respondent is a workers' compensation insurer, not an automobile insurer, this exception does not apply, and the arbitration can proceed.

Comment: How does this decision comport with the rule that buses are exempt from loss transfer arbitration? Only if one accepts that the Court was correct in carving out an exception for a bus passenger's comp carrier bringing loss transfer against the bus's insurer. This, apparently, is considered differently from a situation where the comp carrier or the no fault carrier for an injured person who was in a different vehicle (in an accident involving a bus) were to attempt to bring loss transfer arbitration against the bus's insurer (which should be prohibited by Ins. Law 5105).

The situation which arose in this 2003 decision has apparently not been repeated, as the case has never been cited in any other decision and no other court decisions on the subject are reported. Put this one in your notebook as an exception to the general rule that loss transfer is not allowed against buses for benefits paid to bus passengers.

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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