Brainerd Mfg. Co. v. Dewey Garden Lanes, Inc.

• Decision Date: 23 January 1981
• Citation: 78 A.D.2d 365,435 N.Y.S.2d 417
• Parties: BRAINERD MANUFACTURING CO., Appellant, v. DEWEY GARDEN LANES, INC. and Bowling Corporation of America, Respondents.
• Court: New York Supreme Court — Appellate Division

Page 417

435 N.Y.S.2d 417

78 A.D.2d 365

BRAINERD MANUFACTURING CO., Appellant, v. DEWEY GARDEN LANES, INC. and Bowling Corporation of America Respondents.

Supreme Court, Appellate Division, Fourth Department.

Jan. 23, 1981.

Bayer & Smith, Rochester, for appellant; Gary Abelson, Rochester, of counsel.

Snyder & Snyder, Rochester, for respondent; Sherwood Snyder, Rochester, of counsel.

Before CARDAMONE, J. P., and SIMONS, HANCOCK, SCHNEPP and DOERR, JJ.

CARDAMONE, Justice:

The only issue on this appeal is whether a no-fault insurer can reduce first-party benefits when a claimant's employment is terminated for reasons other than the claimant's disability. Such reduction is authorized in the regulations (11 NYCRR 65.6(n)(2)(vi)) promulgated by the Superintendent of Insurance under Article XVIII of the Insurance Law. In deciding a motion for summary judgment in favor of claimant Special Term determined that such a reduction in benefits was not contemplated by the Legislature when it enacted the New York Comprehensive Automobile Insurance Reparations Act (No-Fault Law). In so holding Special Term abrogated section 65.6(n)(2)(vi) of title 11 of the Official Compilation of Codes, Rules and Regulations of the State of New York. We find that this regulation is a valid interpretation of the Insurance Law and reverse the order at Special Term.

On August 24, 1976 claimant, James Brooks, was injured while riding in an automobile insured by appellant, State Farm Mutual Automobile Insurance Companies (State Farm) . In accordance with the provisions of the No-Fault Law appellant paid respondent first-party benefits. Since claimant was disabled in the accident appellant made periodic payments to him as compensation for his loss of earnings. These payments were made at the rate of $145.52 per week, or 80% of his previous wage as a laborer employed by the City of Rochester. In September claimant was informed by his employer that he would be laid-off effective October 3, 1976. The layoff was caused by lack of work for laborers and did not result from Brooks' disability. Claimant applied for unemployment benefits, but his application was denied because he was unable to work due to the broken arm he had received in the auto accident. It was not until April 1977 that appellant learned that Brooks had been officially laid-off. When so informed, appellant commenced the instant action against claimant seeking to recover what it alleges to be overpayments tendered by mistake. State Farm's theory of recovery is that its duty to pay first-party benefits in the amount of 80 percent of lost earnings ceased as of the date Brooks was laid off. It claims that from October 3, 1976 to April 11, 1977 it owed claimant no more than what he would have collected as unemployment insurance, i. e., $91 per week. Claimant Brooks contends that such a reduction is not authorized by the No-Fault Law and that such an interpretation of the statute under the regulation is contrary to the legislative intent.

In 11 NYCRR § 65.6 the Superintendent of Insurance has provided rules for the settlement of claims for personal injuries. In subdivision (n), paragraph (2) guidance has been furnished for determining loss of earnings from work. This regulation provides generally that benefits from collateral sources are not a deduction; that demonstrated future earnings may be considered; that earnings from seasonal work may be considered; that an unemployed claimant is entitled to receive payments equal to the unemployment benefit he would have received had he not been disabled. Clause (v) states that if "the applicant, while disabled, is discharged from employment solely because of inability to work due to the injury, benefits for basic loss shall continue at the same level while the disability continues." Clause (vi) applies directly to this case and provides as follows: "If an applicant, while disabled, is discharged from employment, benefits shall cease if the position would have been lost had the accident not occurred (e. g., plant shutdown, strikes, etc.). However, the insurer shall reimburse the applicant for benefits lost which would have been received had he not been disabled (e. g., union strike benefits, unemployment, etc.)."

This regulation was promulgated in accordance with the power vested by law (Insurance Law, § 21) in the Superintendent of Insurance to interpret the provision of the Insurance Law. The Superintendent's power "to interpret, clarify, and implement the legislative policy" is broad (Breen v. Cunard Lines S.S. Co., 33 N.Y.2d 508, 511, 355 N.Y.S.2d 333, 311 N.E.2d 478) and, unless inconsistent with a specific statutory provision, regulations issued by the Superintendent are valid exercises of his power (Ostrer v. Schenck, 41 N.Y.2d 782, 785-786, 396 N.Y.S.2d 335, 364 N.E.2d 1107). Judicial review of a regulation is limited and where it is not irrational or unreasonable the regulation must be upheld (Ostrer v. Schenck, supra, p. 786, 396 N.Y.S.2d 335, 364 N.E.2d 1107; Matter of Howard v. Wyman, 28 N.Y.2d 434, 322 N.Y.S.2d 683, 271 N.E.2d 528).

The No-Fault Law was enacted primarily to assure "that every auto accident victim will be compensated for substantially all of his economic loss, promptly and without regard to fault" (N.Y.Legis.Ann., 1973, Governor's Memoranda on Bills Approved # 1, p. 298; Comment, New York Adopts No-Fault: A Summary and Analysis, 37 Albany L.Rev. 662, 671). According to the legislative scheme an injured individual "is entitled to actual lost earnings claimed less 20%, unless such reduced figure exceeds $1,000 per...