Fox v. Atlantic Mut. Ins. Co.

• Decision Date: 23 November 1987
• Citation: 521 N.Y.S.2d 442,132 A.D.2d 17
• Parties: Edward FOX, Appellant, v. The ATLANTIC MUTUAL INSURANCE COMPANY, s/h/a The Atlantic Companies, Respondent.
• Court: New York Supreme Court — Appellate Division

Page 442

521 N.Y.S.2d 442

132 A.D.2d 17

Edward FOX, Appellant, v. The ATLANTIC MUTUAL INSURANCE COMPANY, s/h/a The Atlantic Companies, Respondent.

Supreme Court, Appellate Division Second Department.

Nov. 23, 1987.

John P. FitzMaurice, P.C., Tuckahoe, for appellant.

Before BROWN, J.P., and NIEHOFF, EIBER and SULLIVAN, JJ.

EIBER, Justice.

The parties to this action are in controversy over whether the defendant insurance carrier is liable to the plaintiff for the payment of any sums pursuant to the uninsured motorist provisions of an automobile insurance policy. Employing the summary procedure set forth in CPLR 3222, the parties have filed with the court a statement of those facts upon which the resolution of the controversy depends.

According to the parties' statement of facts, the plaintiff Edward Fox was seriously injured on January 12, 1982, while operating a motor vehicle in the course of his employment. The vehicle in question was owned by the plaintiff's employer, Utica Mutual Insurance Company. As a result of the accident, the plaintiff sustained injuries which were stipulated to be "serious * * * within the meaning of the Insurance Law [and] which * * * would entitle the plaintiff to a tort recovery in excess of $20,000".

In effect at the time of the accident was a policy of insurance issued by the defendant, the Atlantic Mutual Insurance Company, which provided for uninsured motorist coverage and hit and run coverage with a liability limitation of $20,000. Although the statement filed with the court pursuant to CPLR 3222 does not specify whether the accident in question involved another vehicle, the plaintiff, in his appellate brief, has indicated that the accident was of the "hit and run" variety. It may, therefore, be inferred that the accident was caused, in whole or part, by the negligence of an unidentified driver who thereafter fled the scene. ¹

The parties' submission further discloses that the policy of insurance issued by the defendant also contained the mandatory personal injury protection (hereinafter no-fault) endorsement (see, Insurance Law § 5103[a] ). Pursuant to this endorsement, the plaintiff would, ordinarily, be entitled to receive payments which would compensate him for his "basic economic loss" (see, Insurance Law § 5102[a] ). However, the stipulated statement of facts reveal that the plaintiff was paid in excess of $20,000 in Workers' Compensation benefits.

The Insurance Law of this state expressly provides that Workers' Compensation benefits serve as an offset against any "first-party benefits" payable pursuant to the no-fault scheme as compensation for "basic economic loss" (see, Insurance Law § 5102[b][2] ). Thus, any payments specifically intended to reimburse a person for his basic economic loss are to be diminished by amounts recovered or recoverable under Workers' Compensation (see, Palmer v. Allstate Ins. Co., 101 A.D.2d 127, 133, 475 N.Y.S.2d 436). The central issue on appeal, however, is whether the Workers' Compensation payments may also offset any sums that the defendant would otherwise be required to pay pursuant to the uninsured motorist endorsement contained in its policy.

It is the defendant's principal contention that in view of the fact that the plaintiff has been paid Workers' Compensation benefits in excess of $20,000 and in view of the provision in the policy which states, in essence, that any amount payable under the uninsured motorist endorsement "shall be reduced by * * * all sums paid or payable under Workers' Compensation", the entire limit of the uninsured motorist coverage, to wit, $20,000 has been offset, and that the plaintiff, therefore, has no further right of recovery.

The plaintiff, however, counters with the argument that the intent of the Legislature in adopting the no-fault system of compensation was to assure that injured motorists receive full and prompt compensation for their basic economic losses. Moreover, the Legislature additionally intended to assure that seriously injured motorists obtain additional compensation for noneconomic losses by way of an action at law against an insured tortfeasor or pursuant to the uninsured motorist endorsement required in every policy of insurance issued or delivered in this State. The essential thrust of the plaintiff's argument in support of his quest for the uninsured motorist proceeds at issue, is that the benefits recoverable under the Workers' Compensation Law should be deemed the equivalent of "first-party benefits" which, under the no-fault scheme, are designed to compensate an insured for his basic economic loss. Thus, just as uninsured motorist proceeds may be recovered in addition to first party benefits in situations where serious injuries have been sustained, so, by the same token, should the coverage afforded by this endorsement be in addition to and not offset by benefits recoverable under Workers' Compensation.

The Supreme Court, Westchester County, essentially adopted the argument advanced by the defendant, permitted the offset, and concluded that no additional sums were owed to the plaintiff since he had received Workers' Compensation benefits in excess of the $20,000 liability limit of the uninsured motorist endorsement. We, however, do not agree with this conclusion and, therefore, reverse.

We begin our analysis by noting that the Supreme Court expressly relied upon Matter of Durant (MVAIC), 15 N.Y.2d 408, 260 N.Y.S.2d 1, 207 N.E.2d 600, rearg. denied 16 N.Y.2d 716, 261 N.Y.S.2d 1028, 209 N.E.2d 565 and Matter of Napolitano (MVAIC), 21 N.Y.2d 281, 287 N.Y.S.2d 393, 234 N.E.2d 438, in upholding the provision in the defendant's insurance policy which permits the amounts payable under the uninsured motorist endorsement to be reduced or offset by any sums received under the Workers' Compensation Law. Both the Durant and Napolitano endorsements, which were virtually identical to the one in question, were held to be legally enforceable. The aforecited cases, however, preceded the enactment of New York's no-fault system of automobile reparations (see, Insurance Law former art. 18, as added by L.1973, ch. 13, eff. Feb. 1, 1974). Prior to the advent of the no-fault law, no distinction was recognized with respect to the treatment of economic and noneconomic loss. Hence, under the pre-existing system of reparation, a party injured in a motor vehicle accident had to resort to the judicial process and to "classic principles of tort law" in order to obtain compensation for the injuries sustained (see, Montgomery v. Daniels, 38 N.Y.2d 41, 46, 378 N.Y.S.2d 1, 340 N.E.2d 444).

Recognizing that such tort recovery was often precluded by the fact that many third-party tortfeasors were uninsured, the Legislature, in 1958, created the Motor Vehicle Accident and Indemnification Corporation (hereinafter MVAIC), a fund supported by contributions from insurers in New York, the purpose of which was to provide compensation for individuals injured by uninsured motorists (see, Matter of Lloyd [MVAIC], 23 N.Y.2d 478, 297 N.Y.S.2d 563, 245 N.E.2d 216). Furthermore, legislation was also enacted which required the inclusion of uninsured motorist protection in every automobile liability policy issued or delivered in this State, covering vehicles principally garaged in this State (see, L.1958, ch. 759, §§ 2, 4, eff. January 1, 1959, currently codified in Insurance Law § 3420[f][1]; § 5201, et seq.). The primary objective of this legislation was to afford the innocent victims of uninsured motorists the same protection available to victims of insured motorists with respect to their relative ability to obtain compensation for losses sustained in an automobile accident (see, McCarthy v. Motor Vehicle Acc. Ind. Corp., 16 A.D.2d 35, 224 N.Y.S.2d 909, affd. 12 N.Y.2d 922, 238 N.Y.S.2d 101, 188 N.E.2d 405; Matter of Beagle Motor Vehicle Acc. Ind. Corp., 26 A.D.2d 313, 274 N.Y.S.2d 60, appeal dismissed 19 N.Y.2d 834, 280 N.Y.S.2d 399, 227 N.E.2d 313). At the time this legislation was enacted, however, there was no legally significant distinction between economic and noneconomic loss. Therefore, recovery under the then-existing standard uninsured motorist endorsement included both of these elements of damages. Accordingly, since all losses suffered in an automobile accident were treated as a unitary concept, the pre-no-fault uninsured motorist endorsement under consideration in Durant and Napolitano, perforce, referred to Workers' Compensation benefits as an offset against any insurance proceeds which might otherwise have been recoverable regardless of whether the proceeds emanated from economic or noneconomic loss. The uninsured motorist endorsement that is at the center of this controversy must, however, be examined in light of the policies and purposes underlying this state's no-fault statute and, especially, in light of the critical distinction which now exists between noneconomic and basic economic loss, as those terms are defined in the statute. Thus, contrary to the conclusion of the Supreme Court, the holdings of the Durant and Napolitano cases are not dispositive of the issue raised herein, in view of this subsequent legislation which, when considered as part of a larger scheme, clearly suggests to us that while Workers' Compensation benefits do serve as an offset against amounts payable as compensation for basic economic loss, such benefits should not serve to offset or diminish the sums recoverable as compensation for an injured party's noneconomic loss.

Since the enactment of the no-fault law in 1973, the Legislature has endeavored to integrate that statute with New York's Workers' Compensation program and with its system of compensating the victims of uninsured motorists. In 1977, various sections of the Insurance Law were amended to provide that recovery, on account of "non-economic" loss, would be permitted under uninsured motorist coverage, only if the claimant had suffered "serious injury"...