LOSS TRANSFER AND PRIORITY OF PAYMENT TRAINING: MENACING TERMINOLOGY, BUT IT IS REALLY NOT THAT BAD

LOSS TRANSFER AND PRIORITY OF PAYMENT TRAINING:
MENACING TERMINOLOGY, BUT IT IS REALLY NOT THAT BAD
© 2015
718.777.0400
NEW YORK INSURANCE COMPANY ASSET RECOVERY TRAINING SERIES
INSTALLMENT 1
PARDALIS & NOHAVICKA LLP, ASTORIA NY --
718.777.0400
“ANOTHER KIND OF LAWFIRM”

Loss Transfer and Priority of Payment, are terms of art in the New York Insurance Industry. Simply put, when two insured vehicles
are involved in an accident, the insurer for each vehicle will pay out No-fault benefits in the form of medical payments or lost
earnings up to $50,000 for each claimant. The people who are injured can sue the driver and owner responsible for personal
injuries. But, generally, the insurer that pays out the benefits under the auto policy that was not at fault cannot sue the driver or
owner of the at-fault vehicle. But under certain circumstances the insurer of the innocent vehicle can recover from the insurer of
the at-fault insurer. The process is called Loss Transfer. Priority of Payment is different but handled similarly. A passenger in
the at-fault vehicle has the option of putting a claim in for No-Fault benefits to the insurer for either of the two vehicles. However,
if the claimant recovers benefits from the vehicle that they were not in at the time of the accident, the insurer of that vehicle has a
Priority of Payment claim against the insurer of the host vehicle. The assets recovered go right to the insurer’s (or self-insurer’s)
bottom line. So let’s master this:
718.777.0400

Loss Transfer
Hypothetical:
The driver of vehicle one
runs a stop sign and
collides with vehicle two.
Both drivers are injured
and require medical
treatment. Each is entitled
to no-fault benefits (also
called first-party benefits)
from their respective
insurers regardless of
which driver was at fault.
718.777.0400

THE INSUREDS CANNOT
SUE OR BE SUED FOR NO-
FAULT BENEFITS PAID OUT
The Insurance Law does
not permit the innocent
driver in this model to
recover first-party benefits
from the offending driver.
Nor can the innocent
driver's insurer maintain
an action against the
offending insured driver to
recover first-party benefits
paid to their insured.
718.777.0400

LOSS TRANSFER STATUTE:
NEW YORK INSURANCE
LAW SECTION 5105
Insurance Law §5105,
permits an INSURER
that pays first-party
benefits to recover the
amount paid from the
insurer of the offending
driver’s INSURANCE
COMPANY so long as at
least one of the motor
vehicles involved weighs
more than 6,500 pounds
unloaded or …
718.777.0400

OVER 6500 LBS. OR
VEHICLE FOR HIRE
…is used principally for
the transportation of
persons or property for
hire.
The phrase "a motor
vehicle used principally
for the transportation of
persons or property for
hire" refers to vehicles
hired to transport
people, and livery
vehicles hired to
transport property.
718.777.0400

FAULT IS IRRELEVANT FOR
PURPOSES OF LOSS
TRANSFER QUALIFICATION
For the determination of
whether the incident
qualifies for Loss Transfer,
it is not necessary that the
at-fault vehicle fits within
the Insurance Law §5105
exception. Just as long as
there is a qualifying vehicle
that was involved in the
accident, you are good to
go.
718.777.0400

Mandatory Arbitration Under
Insurance Law § 5105 –
Loss Transfer In Legalese
As part of the No-Fault Law, the Legislature enacted section 674 (now section 5105)
adopting the procedure that authorizes first-party benefits with a resulting
equitable adjustment between insurers without the need for the formalities
applicable to litigation of claims. Matter of City of Syracuse v Utica Mut. Ins. Co., 61
N.Y.2d 691, 460 N.E.2d 1085, 472 N.Y.S.2d 600 [1984]; see generally Joseph D.
Nohavicka, “Loss Transfer of No-Fault PIP Benefits: Statute of Limitations,” New
York Law Journal (Jun 11, '04 ).
Section 5102(g) of the Insurance Law defines an insurer as follows: "The insurance
company or self-insurer, as the case may be, which provides the financial security
required by article six or eight of the vehicle and traffic law." Where first-party
benefits are paid, the insurer's right to transfer the loss to the insurer of the owner
and operator of the other vehicle depends on the application of Insurance Law
section 5105 and 11 NYCRR section 65.10 of the Regulations of the
Superintendent of Insurance, which provide for mandatory arbitration of certain
priority of payment or joint coverage situations. As well, an insurer can present a
claim to recover basic economic loss from the insurer of another covered person,
if (a) one of the motor vehicles involved in the accident weighs more than 6, 500
lbs. unloaded; or (b) is a motor vehicle used for the transportation of persons or
property for hire. Under those circumstances, arbitration is mandatory.
That statute reads, in part, as follows:
Settlement between insurers. (a) Any insurer liable for the payment of first party
benefits to or on behalf of a covered person and any compensation provider
paying benefits in lieu of first party benefits which another insurer would
otherwise be obligated to pay pursuant to subsection
(a) of section five thousand one hundred three of this article or section five
thousand two hundred twenty one of this chapter has the right to recover the
amount paid from the insurer of any other covered person to the extent that such
other covered person to the extent that such other covered person would have
been liable, but for the provisions of this article, to pay damages in an action at
law. In any case, the right to recover exists only if at least one of the motor
vehicles involved is a motor vehicle weighing more than six thousand five hundred
pounds unloaded or is a motor vehicle used principally for the transportation of
persons or property for hire.* * *
(
718.777.0400
b) The sole remedy of any insurer or compensation provider to
recover on a claim arising pursuant to subsection (a) hereof, shall
be the submission of the controversy to mandatory arbitration
pursuant to procedures promulgated or approved by the
superintendent. Such procedures shall also be utilized to resolve all
disputes arising between insurers concerning their responsibility or
the payment of first party benefits."

Arbitration Forums, Inc. –
The Sponsoring Agency
Arbitration Forums, Inc., (“AFI),” is a
company that administers no-fault
mandatory arbitrations in New York.
See Matter of Utica Mut. Ins. Co. v.
Selective Ins. Co. of Am., 2006 NY Slip Op
2261, 2006 N.Y. App. Div. LEXIS 3559 (3d
Dep’t 2006).
All loss transfer arbitrations are
conducted by appointed volunteer
arbitrators in accordance with the
aforementioned procedures established
by AFI and approved by the
Superintendent of the new York State
Insurance Department.
Arbitrators are “appointed by Arbitration
Forums from full-time salaried
representatives of insurers, on the basis
of their experience and qualifications,
and shall serve without compensation.”
718.777.0400

LET’S TRY A CLAIM
718.777.0400
In the photograph we see two
autos in an intersection accident:
question of lights – operator of
vehicle one (woman’s vehicle on
the left) states that she had a
steady green light; operator of
vehicle two (man’s vehicle on the
right),states that he accidentally
ran a red light. Woman begins
treatment for injuries caused by
the accident; woman’s insurer
pays her medical benefits in the
amount of $5,000.
Is there a viable Loss Transfer
claim here by the woman’s
insurer?
Absolutely correct! No vehicle over 6500 lbs. involved, no
vehicle for hire involved, no Loss Transfer available.

ANOTHER SCENARIO
Limousine versus pickup. Liability is
100% against the pickup. Limo weighs
6300 lbs. and the pickup weighs 4300
lbs. You are the No-fault Specialist for
the Limo’s carrier. You just paid out
$50,000 to the hospital for one of the
claimants. What do you do next? Loss
Transfer?
Yes! Although neither of the vehicles
weighs more than 6500 lbs., your
insured’s vehicle is one that is
principally used for hire. Because
liability is 100%, your company gets
back the full $50,000 from the carrier
for the pickup. So, send out the letter
putting the pick-up’s carrier on notice
along with any proofs you have
regarding liability along with a printout
of the payment made to the hospital.
718.777.0400

MORE PRACTICE
Bus versus compact. Liability is 100%
against the compact. Compact weighs
2300 lbs. You are the No-fault
Specialist for the compact’s carrier. You
just paid out $50,000 to the hospital
for one of the claimants. What do you
do next? Loss Transfer?
No! Although one of the vehicles
weighs more than 6500 lbs., your
insured’s vehicle is one that is
completely at fault. Because liability is
100%, your company gets back
nothing from the bus. If there had
been any fault at all to apportion to
the bus, you would send out the letter
putting the bus company (assuming it
is self-insured) on notice along with
any proofs you have regarding liability
along with a printout of the payment
made to the hospital.
718.777.0400

ANOTHER ONE
Red tractor trailer v. silver Smart Car v.
black Dump Truck.
The Smart car has 0% liability. 50% on
the red trailer for a hit in the rear, and
50% on black dump truck for backing
up in an unsafe manner. Remarkably,
the driver of the Smart Car walked
away without a scratch. The passenger
in the red trailer, however, needed
$50,000 worth of treatment. You are
the Specialist for the trailer. You paid
out $50k. Loss Transfer?
Yes! Even though 50% liability was
apportioned to your vehicle, you still
have a Loss Transfer claim against the
dump truck.
718.777.0400

MAKE SURE YOU DETERMINE THE TYPE AND WEIGHT
OF ALL VEHICLES INVOLVED IN THE ACCIDENT
718.777.0400
THESE VEHICLES DO NOT QUALIFY FOR LOSS TRANSFER

IF LOSS QUALIFIES, ASSESS LIABILITY
718.777.0400

PUT THE ADVERSE CARRIER OR SELF-INSURED ON NOTICE OF THE CLAIM AS SOON AS
YOU HAVE DETERMINED THAT THE CLAIM QUALIFIES FOR LOSS TRANSFER OR
PRIORITY OF PAYMENT ARBITRATION. IF THE ADVERSE CARRIER IS ON THE BALL AND
THEY REALIZE THEY HAVE EXPOSURE ON A LOSS TRANSFER CLAIM, THEY MAY WANT
TO ASSUME COVERAGE AND START TAKING STEPS FOR COST CONTAINMENT
(EXAMINATIONS UNDER OATH, INDEPENDENT MEDICAL EVALUATIONS, FRAUD
INVESTIGATION), WHICH ARE EXPENSES AND NOT RECOVERABLE AS PART OF LOSS
TRANSFER RECOVERY. IF YOUR CARRIER DETERMINES THAT LOSS TRANSFER WILL YIELD
100% OF PAYOUTS , WHAT IS THE INCENTIVE TO INCUR EXPENSES? ANSWER: NONE.
718.777.0400

AS SOON AS A PAYMENT IS
ISSUED BEGIN TAKING STEPS
TOWARD RECOVERY.
You have three years to file
for arbitration from the date
of each payment. The date of
loss has nothing to do with
the statute of limitations on a
Loss Transfer Claim. This is
very important. You must
treat each check issued as a
separate claim for purposes of
loss transfer.
See Joseph D. Nohavicka,
“Loss Transfer of No-Fault PIP
Benefits: Statute of
Limitations,” New York Law
Journal (Jun 11, '04 ).
718.777.0400

CHEAT SHEET
Any vehicle involved weigh over 6500
lbs.?
Any vehicle involved a commercial
vehicle used for purposes of
transporting people or things? Taxi,
limo, tow truck, bus?
How is your insured’s liability? Even if
you can apportion a small amount of
liability to the adverse vehicle, you
can use the claim to offset the Loss
Transfer claim that is coming against
your carrier. But you must make a
determination as to whether you want
to wake up the other side as to their
claim.
File for arbitration three years from
date of payment, or you (or the
adverse carrier), are out of luck.
718.777.0400

LOSS TRANSFER POTENTIAL
SHOULD BE ON YOUR MIND
FROM THE BIRTH OF THE
CLAIM
If you have made a positive
determination, put the case
on the radar and start making
separate copies of move
copies of the following
documents to a Loss Transfer
File: first reports, interview,
accident reports, MV104,
witness statements, etc.
Remember, this is arbitration
and the rules of evidence are
relaxed dramatically. If
liability is clear, contact the
adverse carrier and let them
know you will be setting up a
Loss Transfer Arb File even
before a payment is made.
718.777.0400

LAST LOOK. AND GOOD
LUCK WITH YOUR LOSS
TRANSFER OR PRIORITY
OF PAYMENT RECOVERY
1. 6500 LBS.
2. Vehicle for hire.
3. Liability assessment.
4. Assemble all proofs
5. Notice to adverse carrier.
6. File for Arbitration within three
years from date of each payment
(not date of loss – for example,
date of accident is January 1,
2007, you had until January 1,
2010 to file a complaint). If a No-
fault payment for medical
benefits was made for treatment
of injuries suffered in that 2007
accident is made on January 1,
2012, you had to have filed for
arbitration by January 1, of this
year – 2015.
718.777.0400
FROM PARDALIS & NOHAVICKA,
GOOD LUCK ON YOUR RECOVERY
EFFORTS.

NEW YORK INSURANCE COMPANY ASSET RECOVERY TRAINING SERIES INSTALLMENT 1
P&N, LLP, handles an eclectic caseload comprised of
civil and criminal litigation including commercial
disputes, construction, torts, insurance coverage,
corporate disputes, employment law, real estate, and
criminal matters. The firm has a strong presence in all
the state and federal trial courts in New York City,
Westchester County and Long Island, and has
recently litigated a commercial matter to a successful
verdict in the United States District Court for the
Central District of California. The firm had three
matters litigated in the Appellate Divisions for the
Third, Second and First Departments; all were
successful.
P&N, also handled matters successfully in the
following tribunals: New York State Department of
Licensing; New York State Unemployment Insurance
Appeals Board; New York State Division of Human
Rights; New York City Department of Buildings; New
York City Environmental Control Board; New York City
Commission on Human Rights; U.S. Equal
Employment Opportunity Commission. Our firm has
also represented individuals during investigations
conducted by the United States Securities and
Exchange Commission and the New York State
Department of Insurance.
www.pnlawyers.com
718.777.0400

LOSS TRANSFER AND PRIORITY OF PAYMENT TRAINING: MENACING TERMINOLOGY, BUT IT IS REALLY NOT THAT BAD

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LOSS TRANSFER AND PRIORITY OF PAYMENT TRAINING: MENACING TERMINOLOGY, BUT IT IS REALLY NOT THAT BAD