Petition — Aetna Life & Casualty Co. v. Gurnee

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81-2348

3 Office - Supreme Court, U.S.

Is THe JUN 23 1962

Supreme Court of the D Staten. stevas.

CLERK

Ooronnn Term, 1981

Aurxa Lire anp Casuautry Company,

Petitioner,

—against—

Monnts C. Guanzez,

Respondent.

Srare-Wive Insurance Company, et al.,

Petitioners,

—against—

Mosue WEtnRzIcH,

Respondent.

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PETITION FOR A WRIT OF CERTIORARI TO THE

COURT OF APPEALS OF THE STATE OF NEW YORK

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Cuartzs Piatto

80 Pine Street

New York, New York 10005

(212) 825-0100

Counsel for Petitioners

Listed on the Inside Cover

Of Counsel:

Wausau E. Hecarry

Susan Bucxizy

Kevin J. Burke

Canna Gorvon & RN DRI.

Rates L. HAlrmx

Raicuiz, Bax xINd, Weiss & Haren

June 23, 1982

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Petitioners:

Aetna Casualty & Surety Company ; Aetna Insurance Company ; Aetna

Life Insurance Company; Allstate Insurance Company; American Auto-

mobile Insurance Company; American Mutual Liability Insurance Com-

pany; Amica Mutual Insurance Company; Atlantic Mutual Liability In-

surance Company; Banner Casualty Company; Boston Old Colony

Insurance Company; Centennial Insurance Company; Century Indemnity

Company; Colonial Penn Insurance Company; Commercial Insurance

Company of Newark, N. J.; Commercial Union Insurance Company; Con-

tinental Casualty Company; The Continental Insurance Company; Crite-

rion Insurance Company; Eagle Insurance Company (sued as Lion

Insurance Company); Employers Mutual Casualty Company; Federal

Insurance Company ; Fidelity and Casualty Company of New York; Fire-

man’s Fund Insurance Company; Firemen’s Insurance Company of

Newark, N.J.; General Accident Insurance Company of America (sued as

General Accident Fire & Life Assurance Corporation, Ltd.); Glens Falls

Insurance Company; Globe Indemnity Company ; Government Employees

Insurance Company; Graphic Arts Mutual Insurance Company; Great

American Insurance Company; Hanover Insurance Company; Hartford

Accident & Indemnity Company; Hartford Casualty Insurance Company;

Home Indemnity Company; Home Insurance Company; Ideal Mutual In-

surance Company; Insurance Company of North America; Liberty Mutual

Insurance Company; The Lumbermen’s Mutual Insurance Company;

Maryland Casualty Company; Merchants Mutual Insurance Company;

Michigan Mutual Insurance Company (sued as Michigan Mutual Liability

Company); National Grange Mutual Insurance Company; Nationwide

Mutual Insurance Company; New Jersey Manufacturers Insurance Com-

pany ; Newark Insurance Company ; The North River Insurance Company ;

Prudential Property & Casualty Insurance Company; Reliance Insurance

Company; Royal Insurance Company (sued as Royal-Globe Insurance

Company); Royal Indemnity Company; Safeco Insurance Company of

America; St. Paul Fire & Marine Insurance Company; Sentry Insurance

Mutual Company; State Farm Mutual Automobile Insurance Company;

State-Wide Insurance Company; Transamerica Insurance Company;

Travelers Indemnity Company; Travelers Indemnity Company of Illinois;

Travelers Insurance Company; Unigard Insurance Group; United States

Fidelity & Guaranty Company; USAA Casualty Insurance Company;

Utiea Mutual Insurance Company; Wausau Underwriters Insurance Com-

pany (sued as Volkswagen Insurance Company); Western Employers

Insurance Company (sued as Leatherby Insurance Company); Zurich

Insurance Company.

Question Presented

Whether a state which for six years directed insurance

carriers to provide maximum coverage of up to $800 per

month to no-fault claimants and prohibited the carriers

from charging premiums which would have provided

greater coverage may, consistent with the Fifth and Four-

teenth Amendments to the United States Constitution and

Article I, Section 10 of the Constitution, require the car-

riers to pay retroactively and without recoupment up to

$200 per month in additional benefits for all claims made

during the entire six year period?

Parties Below

The parties to these two actions which were consolidated

for argument and decision below were:

Gurnee v. Aetna Life and Casualty Company

Appellant :

Morris C. Gurnee, For Himself and All Persons En-

titled to First Party Benefits Similarly Situated

Respondent :

Aetna Life and Casualty Company, Itself and All

Other Insurance Companies Under New York State

Law Owing First Party Benefits Similarly Situated

Weinreich v. State-Wide Insurance Company

Appellant :

Moshe Weinreich, Suing Individually on His Own Be-

half and Representatively On Behalf of a Class of

Plaintiffs Similarly Situated

Respondents :

State-Wide Insurance Company, Allstate Insurance

Company, Hartford Accident & Indemnity Company,

Liberty Mutual Insurance Company, Government Em-

ployees Insurance Company, individually and repre-

sentatively on behalf of a class of defendants similarly

situated, and The Aetna Casualty & Surety Company,

Aetna Insurance Company, Aetna Life Insurance

Company, American Automobile Insurance Company,

Amica Mutua] Insurance Company, American Mutual

Liability Insurance Company, Atlantic Mutual Liabil-

ity Insurance Company, Banner Casualty Company,

iii

Buffalo Insurance Company, Boston Old Colony Insur-

ance Company, Centennial Insurance Company, Cen-

tury Indemnity Company, Colonial Penn Insurance

Company, Commercial Insurance Company of Newark,

N.J., Commercial Union Insurance Company, Conti-

nental Casualty Company, Cosmopolitan Mutual In-

surance Company, The Continental Insurance Com-

pany, Country-Wide Insurance Company, Criterion

Insurance Company, Employers Mutual Casualty

Company, Federal Insurance Company, Fidelity &

Casualty Company of New York, Fireman’s Fund In-

surance Company, Firemen’s Insurance Company of

Newark, New Jersey, General Accident Fire & Life

Assurance Corporation, Ltd., Globe Indemnity Com-

pany, Glens Falls Insurance Company, Graphic Arts

Mutual Insurance Company, Great American Insur-

ance Company, The Greater New York Mutual Insur-

ance Company, Guardian Royal Exchange Assurance

Company, Hanover Insurance Company, Hartford

Casualty Insurance Company, The Home Insurance

Company, The Home Indemnity Company, Ideal

Mutual Insurance Company, Insurance Company of

Greater New York, Insurance Company of North

America, Leatherby Insurance Company, Liberty Mu-

tual Insurance Company, Lion Insurance Company,

The Lumbermen’s Mutual Insurance Company, Lum-

bermen’s Mutual Casualty Company, Maryland Casu-

alty Company, Merchants Mutual Insurance Company,

Michigan Mutual Liability Company, Nassau Insurance

Company, National Grange Mutual Insurance Com-

pany, Nationwide Mutual Insurance Company, New

Jersey Manufacturers Insurance Company, Newark

Insurance Company, The North River Insurance Com-

pany, Prudential Property & Casualty Company, Reli-

ance Insurance Company, Royal-Globe Insurance

Company, Royal Indemnity Company, Safeco Insur-

ance Company of America, St. Paul Fire & Marine

Insurance Company, Sentry Insurance Mutual Com-

pany, State Farm Mutual Automobile Insurance Com-

pany, Transamerica Insurance Company, Travelers

Indemnity Company, Travelers Indemnity Company of

Illinois, Travelers Insurance Company, Underwriters

Insurance Company, Unigard Insurance Company,

United States Fidelity & Guaranty Company, Utica

Mutual Insurance Company, Worcester Mutual In-

surance Company, Zurich Insurance Company, USAA

Casualty Insurance Company and Volkswagen Insur-

ance Company.“

TABLE OF CONTENTS

PAGE

—

Question Presented

Parties Below

Table of Authoritl es

Opinions Below

Jurisdiction

Constitutional, Statutory and Regulatory Provisions ....

Statement of the Case

The Statutory Scheme

The Kurcsics Decision and the Instant Actions

The Decision of the Court of Appeals

Reasons for Granting the Writ

Conciusion

—

F S „ eo awe wo e

Tanz or AuTHORITIES

PAGE

Cases:

Allied Structural Steel Co. v. Spannaus, 438 U.S. 234

(1978) 15, 16

Atlantic Coast Line R. R. v. Florida, 295 U.S. 301 (1935) 11

Bouie v. City of Columbia, 378 U.S. 347 (1964) — 12, 14

Brinkerhoff-Faris Trust d Savings Co. v. Hill, 281 U.S.

673 (1930) 12, 15

Chevron Oil Co. v. Huson, 404 U.S. 97 (1971) .............. 8

City of El Paso v. Simmons, 379 U.S. 497 (1965) 13

City of Los Angeles, Dep’t of Water d Power v. Man-

hart, 435 U.S. 702 (1978) 11, 15, 16

Coz v. Louisiana, 379 U.S. 559 (1965) 14

Erie R.R. v. Tompkins, 304 U.S. 64 (1938) 17

Gelpcke v. City of Dubuque, 68 U.S. (1 Wall.) 175

(1863) 17

Government Employees Insurance Co. v. Sparrow, 66

A D.2d 782, 410 N.Y.8.2d 657 (2d Dep’t 1978) 0... 5

Great Northern Ry. v. Sunburst Oil & Refining Co., 287

U.S. 358 (1932) 12

Kurcsics v. Merchants Mutual Insurance Co., 49 N.Y.2d

451, 403 N. E. 2d 159, 426 N. V. S. 2d 454 (1980), rev’g

65 A.D.2d 192, 411 N.Y.8.2d 90 (4th Dep’t 1978) 2, 5-9

Lemon v. Kurteman, 411 U.S. 192 (1973) 12

Marks v. United States, 430 U.S. 188 (1977) — Oe

Mullaney v. Wilbur, 421 U.S. 684 (1975) «ae

Rabe v. Washington, 405 U.S. 313 (19727 14

vii

PAGE

Raley v. Ohio, 360 U.S. 423 (1959) 14

Swift v. Tyson, 41 U.S. (16 Pet.) 1 (1842) 17

Tidal Oil Co. v. Flanagan, 263 U.S. 444 (1924) ....... 17

United States v. United States Coin and Currency, 401

US. 715 (1971) 17

Constitutional Provisions

United States Constitution

Art. I, §10 8, 10, 15, 16, 17

Amend. V 8

Amend. XIV passim

Statutes:

Judicial Code

28 U.S.C. § 1257 (3) (1976) 3

28 U.S.C. 5 1652 (1976) 16

N.Y. Insurance Law

§5 (McKinney Supp. 1981-82) 45

510 (McKinney 1966) 3

2 (McKinney 1966) 4

§ 40(6) (McKinney 1966) 5

$183 (McKinney 1966) 5

§§ 670-678 (McKinney Supp. 1981-82) 3

§ 671 (McKinney Supp. 1981-82) 4,5

§ 672 (McKinney Supp. 1981-82) 3

§ 675 (McKinney Supp. 1981-82) 7n

$677 (McKinney Supp. 1981-82) 5

N.Y. Vehicle & Traffic Law

9312 (McKinney Supp. 1981-82) 3

§ 321 (McKinney Supp. 1981-82) 3

§ 370 (McKinney 1970 & Supp. 1981-82) 3

onus, wo

Ix THE

Supreme Court of the United States

Ocroser Term, 1981

Aura Lave Ab Casvauty Company,

Petitioner,

—against—

Morus C. Gunxxx,

Respondent.

Srate-Wiwe Insurance Company, et al.,

Petitioners,

—against—

Mosue Wetnreicsa,

Respondent.

PETITION FOR A WRIT OF CERTIORARI TO THE

COURT OF APPEALS OF THE STATE OF NEW YORK

Opinions Below

The memorandum decision of the New York Supreme

Court, County of Erie, dismissing the complaint in Gurnee

v. Aetna Life and Casualty Co. (“Gurnee”) is reported at

104 Mise.2d 840, 428 N.Y.S.2d 992 and is set forth in the

appendix at la-7a. The Court’s order of dismissal is un-

reported and is set forth in the appendix at 8a-10a. The

order of the Appellate Division, Fourth Judicial Depart-

ment, unanimoasly affirming the order of the Supreme

Court, County of Erie, is reported at 79 A.D.2d 960, 437

N.Y.S.2d 944 and is set forth in the appendix at 11a-12a.

The memorandum decision and the order of the New

York Supreme Court, County of New York, dismissing

the complaint in Weinreich v. State-Wide Insurance Co.

(“Weinreich”) are unreported and are set forth in the ap-

pendix at 13a-20a and 21a-23a, respectively. The order of

the Appellate Division, First Judicial Department, unani-

mously affirming the order of the Supreme Court, County

of New York, is reported at 80 A.D.2d 756, 437 N.Y.S.2d

994 and is set forth in the appendix at 24a-27a.

The opinion of the New York Court of Appeals reversing

the determinations of the Appellate Division, Fourth and

First Judicial Departments, in Gurnee and Weinreich re-

spectively, is reported at 55 N.Y.2d 184, 433 N.E.2d 128,

448 N. T. S. 2d 145 and is set forth in the appendix at 28a-34a.

The order of the Court of Appeals denying reargument is

reported at 56 N.Y.2d 567 and is set forth in the appendix

at 35a.

Also included in the appendix at 36a-49a are the majority

and dissenting opinions of the Court of Appeals in Kurc-

sics v. Merchants Mutual Insurance Co., 49 N.Y.2d 451, 403

N.E.2d 159, 426 N.Y.S.2d 454 (1980), a decision adopting

a new interpretation of section 671 of the New York In-

surance Law contrary to the prior regulations of the Super-

intendent of Insurance which implemented the statute. In

the instant actions, the Court of Appeals ruled that its

decision in Kurcsics was to be applied retroactively to the

period covered by the regulations.

Jurisdiction

The judgment of the Court of Appeals was er red on

February 18, 1982. (A. 28a-34a)* Petitioners’ timely mo-

tion for reargument was denied on March 25, 1982. (A. 35a)

~T Raforences to “A...”

my to are to appropriate pages of the appendix

Jurisdiction is conferred on this Court by 28 U.S.C.

51257 (3) (1976).

Constitutional, Statutory and Regulatory Provisions

Relevant portions of constitutional, statutory and regula-

tory provisions involved herein appear in the appendix at

the end of this petition at 1s-20s.

Statement of the Case

The Statutory Scheme

On February 1, 1974 the New York Comprehensive Auto-

mobile Insurance Reparations Act, Insurance Law, Article

18, §§ 670-78 (McKinney Supp. 1981-82), commonly re-

ferred to as the “No-Fault Law,” went into effect. Similar

No-Fault Laws are now in effect in more than half the

States. The No-Fault Law, as suggested by its name, guar-

antees a threshold level of reimbursement to persons in-

jured in automobile accidents without regard to fault.

Every carrier writing auto insurance in the State of New

York is required to provide for No-Fault coverage in its

policies. Every motor vehicle owner in the State of New

York is required to carry No-Fault coverage, and to pay

premiums for the coverage afforded. N.Y. Insurance Law

§ 672(1); N.Y. Vehicle and Traffic Law 66 312, 321 & 370

(McKinney 1970 & Supp. 1381-82).

Under the New York Insurance Law, the Insurance De-

partment, a part of the Executive branch headed by the

Superintendent, is charged with the responsibility of super-

vising the business of insurance in New York and the oper-

ations and wractices of insurance carriers doing business

in the State. N.Y. Insurance Law § 10 (McKinney 1966).

The Superintendent of Insurance is also responsible for

mandating terms and provisions of insurance policies and

approving rates and premiums. The Superintendent is re-

quired by statute to promulgate regulations implementing

the Insurance Law, including the No-Fault Law. See N.Y.

Insurance Law § 21 (McKinney 1966) and 56 672-678 (Me-

Kinney Supp. 1981-82).

One of the key provisions of the No-Fault Law is section

671(2), which provides for the payment by insurers of

“first party benefits” to reimburse claimants for their de-

fined “basic economic loss” less certain offsets including a

20% reduction of lost earnings benefits (to reflect the tax-

free nature of the recovery). “Basic economic loss,” against

which offsets are to be deducted, is defined in section 671(1)

to include lost earnings of up to $1,000 per month for up

to three years.

In accordance with his statutory mandate, on the same

day the No-Fault Law went into effect, the Superintendent

of Insurance promulgated a series of regulations designed

to implement the Law. One of the regulations that became

effective on February 1, 1974 was section 65.6(n)(2)

(xi), 11 NYCRR § 65.6(n)(2)(xi) (A. 20s), which specif-

ically implemented section 671 of the No-Fault Law. Under

this regulation, carriers were required to limit lost earnings

payments to a maximum of $800 per month as a result of

applying the required 20% offset to the $1,000 “basic eco-

nomic loss” maximum, rather than to lost earnings in excess

of $1,000. This regulation or re-enactments thereof (11

NYCRR 5 65.15 n) (2) (xi) (A. 20s)) remained in effect for

more than six years.

During the period 1974-1980:

Insurance carriers were bound to follow the regula-

tions of the Superintendent of Insurance which limited

payment to $800 per month. They would have been

subject to civil and criminal sanctions if they did not.

See Weinreich v. State-Wide Insurance Co. (Sup. Ct.

N.Y. Co.) (A. 16a); see also N.Y. Insurance Law 65

(McKinney Supp. 1981-82) and §40(6) (McKinney

1966).

Hates and premiums were required to be set in accord-

ance with the regulations. The premiums paid were

for coverage of up to $800 per month. Carriers were

not entitled to collect premiums to provide higher cov-

erage. N.Y. Insurance Law §183 (McKinney 1966)

and § 677 (McKinney Supp. 1981-82).

—The terms of each No-Fault insurance contract in the

State were mandated by the Superintendent of Insur-

ance. The carriers were not permitted to alter those

terms if they so desired. 11 NYCRR §§ 65.2, 65.12.

Informational brochures bearing the picture and signa-

ture of the Governor of New York State were prepared

by the Insurance Department and set forth in simple

terms the $800 limit. The carriers were required to

distribute these brochures to policyholders along with

their insurance contracts. 11 NYCRR 66 65.8(a) (1)

(i), 65.12(e). A copy of the brochure appears in the

appendix at 50a.

—In the event of a claim, carriers were obligated to

distribute mandatory claim form cover letters in the

form prescribed by the Insurance Department which

also specified the $800 limitation. 11 NYCRR § 65.15

(e)(3)(i). A copy of the letter appears in the appen-

dix at 5la-53a.

—Two of the four Appellate Divisions of New York’s

Supreme Court were asked to rale on the extent of

the coverage provided for by section 671 of the Insur-

ance Law and both unanimously held that the maxi-

mum coverage was limited to $800 per month. Govern-

ment Employees Insurance Co. v. Sparrow, 66 A. D. 2d

782, 410 N.Y.S.2d 657 (2d Dep't 1978); Kurcsics v.

Merchants Mutual Insurance Co., 65 A.D.2d 192, 411

N. V. S. 2d 90 (4th Dep’t 1978).

It is undisputed that from the time the No-Fault Law

went into effect, carriers necessarily complied with the reg-

ulations limiting payments to $800 per month. Gurnee v.

Aetna Life and Casualty Co., 104 Mise.2d 840, 844, 428

N.Y.S.2d 992, 995 (Sup. Ct. Erie Co. 1980) (A. 5a); Wein-

reich v. State-Wide Insurance Co. (Sup.Ct. N.Y. Co. 1981)

(A. 14a, 16a). The Superintendent of Insurance confirmed

that if the carriers had not limited payments in this fashion

they would have been subjected to sanctions for failing to

comply with mandatory regulations of the Insurance De-

partment and “for wasting insurance company assets.”

Weinreich v. State- Mid. Insurance Co. (Sup. Ct. N.Y. Co.

1981) (A. 16a). See also WR 217.“

The Kurcsics Decision and the Instant Actions

On February 20, 1980—more than six years after the

effective dates of the No-Fault Law and the regulations

implementing it—the New York Court of Appeals issued a

declaratory judgment in Kurcsics v. Merchants Mutual In-

surance Co., 49 N.Y.2d 451, 403 N.E.2d 159, 426 N. V. S. 2d

454 (1980), holding that section 671 required lost earnings

payments of up to $1,000 per month, rather than $800 per

month. In its decision the Court of Appeals acknowledged

that the Superintendent of Insurance had for six years re-

quired by regulation that lost earnings benefits under sec-

tion 671 were to be limited to $800 per month. The Court

did not find that the regulations were unconstitutional or

that their promulgation was an act in excess of the Super-

intendent’s delegated powers. The Court ruled, however,

* References to “WR” are to the record on appeal in the Wein-

reich action. References to “GR” are to the record on appeal in

the Gurnee action.

that the regulations were of no consequence and directed

that the individual plaintiff be paid an additional $200 per

month for the period of his claim (up to 36 months) plus

attorneys’ fees and statutory interest at the rate of 2%

per month.“

In deciding Kurcsics, the Court of Appeals did not ad-

dress the question of whether its decision was to be given

retroactive effect to the thousands of claimants over a six-

year period who had previously been paid maximum bene-

fits of $800 per month, but had never sought or received

additional payments, and had not paid premiums for cov-

erage in excess of that amount.

In the wake of the Kurcsics decision, numerous proposed

class and individual actions were filed in courts throughout

the State of New York seeking retroactive application of

Kurcsics. The instant actions, Gurnee v. Aetna Life and

Casualty Co. (Sup. Ct. Erie Co.) and Weinreich v. State-

Wide Insurance Co. (Sup.Ct. N.Y. Co.), were brought as

proposed, all-encompassing class actions on behalf of all

prior wage loss benefit recipients ag inst every insurance

carrier which issued No-Fault policies in the State seeking

additional payments of up to $200 per month for up to

thirty-six months plus statutory interest and attorneys’

fees.

The carriers immediately moved to dismiss the com-

plaints in the instant actions on the grounds that general

retroactive application of the Kurcsics decision would vio-

late the New York and United States Constitutions and

would be impermissible as a matter of law and equity. In

ae oot on Insurance Law provides for a penalty

of 2% per month interest Se Senge he weep Sewanee

carriers fail to make No-Fault payments in a timely fashion.

accordance with state-mandated requirements would vio-

late the Due Process Clause of the Fourteenth Amendment.

Additionally, the carriers urged that to grant such relief

under cireumstances where they were barred from recoup-

ing an amount equivalent to the premiums which otherwise

would have been assessed to provide for the additional

coverage constituted a taking of property without just

compensation in violation of the Fifth Amendment as made

applicable to the States through the Fourteenth Amend-

ment.“ Finally the carriers urged that to apply the Kurc-

sics decision retroactively would violate Article I, Section

10 of the Constitution in that it would substantially impair

the contractual obligations incorporated in all No-Fault

policies issued, the scope and terms of which had been man-

dated by the State.

The Supreme Courts for Erie and New York Counties

granted defendants’ motions to dismiss in Gurnee and

Weinreich respectively, applying the equitable principles

enunciated by this Court in Chevron Oil Co. v. Huson, 404

U.S. 97 (1971), without reaching the federal consitutional

issues. Gurnee v. Aetna Life and Casualty Co., 104 Misc. 2d

840, 428 N.Y.S.2d 992 (Sup. Ct. Erie Co. 1980) (A. 1a-7a);

Weinreich v. State-Wide Insurance Co. (Sup.Ct. N.Y. Co.

1981) (A. 13a-20a). The decisions were unanimously af-

firmed by the Appellate Division for the Fourth and First

Departments. Gurnee v. Aetna Life and Casualty Co., 79

A. D. ad 860, 437 N. V. S. 2d 944 (4th Dep’t 1981) (A. 11a-12a) ;

Weinreich v. State-Wide Insurance Co., 80 A.D.2d 756, 437

N. V. S. 2d 994 (Ist Dep't 1981) (A. 24a-27a). The Court of

tafe and Co, 15 1 0 004 840, 844-45, 428 N. V. S. 2d 992,

290 (Sup Co. 1980) A. 6a); Weinreich v. State-Wide

var af 1981) (A. 17a); WR 105, 220,

22 14, OR N.Y. Insurance Law § 677(5) (McKin-

Appeals granted leave to appeal and the cases were argued

and considered together. The Solicitor General of New

York State appeared on behalf of the Superintendent of

Insurance as amicus curiae and argued in support of the

carriers that the decision in Xurcsics should not be retro-

actively applied.

The Decision of the Court of Appeals

On February 18, 1982 the Court of Appeals reversed the

unanimous determinations of the Appellate Divisions and

held that the decision in Kurcsics should be retroactively

applied to prior claims. Gurnee v. Aetna Life and Casualty

Co., 55 N.Y.2d 184, 433 N. E. 2d 128, 448 N.Y.8.2d 145 (1982)

(A. 28a-34a). The Court found that the equities favored

the claimants on the ground that they were deprived of the

additional benefits they were entitled to by statute even

though they had never sought or paid for such benefits.

The Court dismissed without comment the fact that the

carriers were legally obligated to follow the regulations

until the Kurcsics decision, on the ground that the Court

had ultimately ruled in Kurcsics that the regulations were

incorrect. The Court dismissed the federal constitutional

issues as “unpersuasive” concluding rather that “equitable

considerations” required that its Kurcstcs decision be ap-

plied retroactively. Id. at 194, 433 N.E.2d at 131, 448

N.Y.8.2d at 148 (A. 33a).

Reasons for Granting the Writ

For six years under the force of law the State of New

York regulated insurance carriers in their collection of

premiums and payment of benefits under the No-Fault Law.

Now, the State has reversed itself and is requiring the

carriers to pay out massive additional retroactive benefits

without compensation. As a result of the decision of the

New York Court of Appeals in the instant actions, the in-

surt uce carriers of New York State now face the prospect

of paying out tens of millions of dollars of retroactive

benefits and penalties although they were previously pro-

hibited from paying such benefits and from collecting the

premiums which would have provided for the benefits and

cannot now recoup the underlying premiums. Having com-

plied for six years with the binding regulations of the

Superintendent of Insurance, the carriers are now being

penalized for doing so.

The decision of the New York Court of Appeals is viola-

tive of fundamental constitutional principles. The retro-

active overruling of regulations which the carriers were

required by law to follow and the penalizing of the car-

riers for their prior compliance with those regulations

violates the Due Process Clause of the Fovrteenth Amend-

ment. The requirement of payment of benefits without the

possibility of collecting premiums is an unconstitutional

taking in violation of the Fifth Amendment as applied to

the States through the Fourteenth Amendment. The New

York Court of Appeals’ determination that insurance car-

riers must provide benefits over and above those provided

for in the rate structure of their insurance contracts is an

impairment of contract in violation of Article I, Section 10

of the Constitution.

This decision will affect the administration of the In-

surance Law in New York and other States. Indeed, it will

undoubtedly affect administrative regulation in all areas

of the law and in all States. If this decision is allowed to

stand, regulated entities in New York State, and other

States, will never aguin be able to rely on the administra-

tive regulations they are bound to follow. They will be

placed in the position of challenging regulations and seek-

1¹

ing court review ab initio or operating for years under the

regulations at their own peril. This will create chaos and

make government unworkable.

In Atlantic Coast Line R.R. v. Florida, 295 U.S. 301

(1935), this Court ruled, without reaching the constitutional

issue, that a federal court could not, in effect, retroactively

overrule the regulations of a federal agency so as to require

additional payments by regulated entities that had com-

plied with the regulations. Writing for the Court, Justice

Cardozo recognized that:

“The carrier was not at liberty to take the law into its

own hands and refuse submission to the order [of the

agency] without the sanction of a court. It would have

exposed itself to suits and penalties, both criminal and

civil, if it had followed such a path. . Obedience was

owing while the order was in force.” 295 U.S. at 311

(citations omitted).

The decision of the New York Court of Appeals ignores

theae principles.

The decision below also ignores this Court’s caution

against retrosctive judicial rulings in the field of insurance:

“The occurrence of major unforeseen contingencies,

however, jeopardizes the insurer’s solvency and, ulti-

mately, the insureds’ benefits. Drastic changes in the

legal rules governing pension and insurance funds, like

other unforeseen events, can have this effect. Conse-

quently, the rules that apply to these funds should not

be applied retroactively unless the legislature has

plainly commanded that result.” City of Los Angeles,

Dep’t of Water & Power v. Manhart, 435 U.S. 702, 721

(1978) (footnote omitted).

It has nevertheless been suggested by the respondents

and by the Court of Appeals itself that the decision below

does not raise any constitutional issues and thus is not

subject to review by this Court. Upon parsing the objec-

tions, it becomes apparent that fundamental constitutional

issues do exist.

Plaintiffs suggested below on the basis of this Court’s

decision in Great Northern Ry. v. Sunburst Oil & Refining

Co., 287 U.S. 358 (1932), that the retroactive application

of a judicial decision does not raise a constitutional issue.

In Sunburst, however, this Court also held that prospective

relief may be constitutionally fashioned when a long-

sanctioned rule of law is overturned. Furthermore, in more

recent rulings the Court has made clear that the Sunburst

decision does not dispose of independent constitutional

questions that may be raised by the retroactive application

of a judicial decision. See, e. g., Bowie v. City of Columbia,

378 U.S. 347 (1964); Lemon v. Kurteman, 411 U.S. 192,

200 n.2 (1973). Significant independent constitutional

issues are indeed raised by the decision helow.

The Due Process Issues Are Substantial

In Brinkerhof'-Faris Trust & Savings Co. v. Hill, 281

U.S. 673 (1930) Justice Brandeis, writing for a unanimous

Court, stated:

“If the [retroactive] result above stated were attained

by an exercise of the State’s legislative power, the

transgression of the due process clause of the Four-

teenth Amendment would be obvious. Eittor v. Ta-

coma, 228 U.S. 148. The violation is nonetheless clear

when the result is accomplished by the state judiciary

in the course of construing an otherwise valid (First

National Bank of Greeley v. Weld County, 264 U.S.

450) state statute. The federal guaranty of due pro-

cess extends to state action through its judicial as well

as through its legislative, executive or administrative

branch of government.” Id. at 679-80 (footnotes

omitted).

There is no more fundamental a guarantee protected by

the Due Process Clause than the right to fair notice of what

the law requires. As fundamenal is the proposition “that

men should not have to act at their peril, fearing always

that the State might change its mind and alter the legal

consequences of their past acts so as to take away their

lives, their liberty or their property.” City of El Paso v.

Simmons, 379 U.S. 497, 522 (1965) (Black, J., dissenting).

Yet the decision below is irreconcilable with such prin-

ciples.

The Court below found tha: there was no denial of due

process or an unconstitutional taking on the theory that

the carriers simply were being required now to pay out

what the statute required. However, this begs the question.

The carriers were told for more than six years by the

authoritative state agency that the statute did not require

that additional benefits be paid and, of course, that they

could not collect premiums for such additional benefits. But

now, the state, acting through its judiciary, is telling the

carriers that the statute requires and always required the

payment of additional benefits, which the carriers must

now pay, even though they are forbidden from recouping

the corresponding premiums. Further, the carriers are

now threatened with a 2% per month punitive interest

charge and attorneys’ fees for failing to make the pay-

ments they were prohibited from making.

The issue thus becomes whether a government based on

laws can conduct itself in this fashion, changing obligations

in midstream without notice and without compensation,

and in so doing penalizing the carriers for their prior law-

ful conduct.

In Raley v. Ohio, 360 U.S. 423 (1959) and Cox v. Louisi-

ana, 379 U.S. 559 (1965) this Court ruled that the Due Pro-

cess Clause requires that citizens not be punished for rely-

ing on otherwise lawful directives of state agencies or

officers even when they are subsequently determined to be

erroneous. To hold otherwise, as this Court stated, “would

be to sanction the most indefensible sort of entrapment by

the State. Raley v. Ohio, supra, 360 US. at 438,

quoted in Cox v. Louisiana, supra, 379 U.S. at 571.

In Bowie v. City of Columbia, supra, this Court held that

the retroactive imposition of criminal penalties as a result

of an unforeseen judicial construction of a statute violates

the Due Process Clause.

Whey [an] unforeseeable state-court construction of a

criminal statute is applied retroactively to subject a

person to criminal liability for past conduct, the effect

is to deprive him of due process of law in the sense of

fair warning that his contemplated conduct constitutes

a crime.” 378 U.S. at 354-55.

Accord: Marks v. United States, 430 U.S. 188 (1977) ; Mul-

laney v. Wilbur, 421 U.S. 684 (1975); Rabe v. Washington,

405 U.S. 313 (1972) (per curiam).

Here, too, under the decision below, the carriers would

be deprived of their property and be subjected to civil pen-

alties without the warnings and other protections required

by due process notwithstanding their reliance on the man-

datory directives of a state agency. Whether the guaran-

tees of notice afforded by the Fourteenth Amendment can

be ignored in the civil context is an issue worthy of this

Court’s consideration. Cf., Brinkerhoff-Faris Frust & Sav-

ings Co. v. Hill, supra.

Further, there can be little question that the requirement

that the carriers now make payments when they were pro-

hibited from collecting the underlying premiums amounts

to a taking by the State, and we urge the Court to consider

whether such action is permissible under the Fifth Amend-

ment.

The Contract Clar len- Is Substantial

Since February, 1974 not only were petitioners’ payment

obligations mandated by regulations of the Department of

Insurance, so too were the terms of the No-Fault insurance

policies petitioners issued. The basic term, the premium

paid as consideration for the policy, was required to be set

on the basis of an $800 per month maximum liability. Yet,

as a result of the Court’s decision below, the entire con-

sideration structure has been altered: Policyholders are to

receive a windfall for which no underlying compensation

has been paid and petitioners’ obligations are dramatically

reformed.

In Allied Structural Steel Co. v. Spannaus, 438 U.S. 234

(1978), this Court held that a Minnesota statute which

sought retroactively to expand employers’ contractual ob-

ligations to provide pension benefits not provided for in

the pension plan was an unconstitutional impairment of

contract in violation of Article I, Section 10 of the United

States Constitution. In terms strikingly applicable to this

ease, and quoting at length from this Court’s earlier deci-

sion in City of Los Angeles, Dep't of Water & Power v.

Manhart, supra, the Court stated:

“Not only did the state law thus retroactively mod-

ify the compensation that the company had agreed to

pay its employees from 1963 to 1974, but also it did so

by changing the company’s obligations in an area

where the element of reliance was vital—the funding

of a pension plan. As the Court has recently recog-

nized :

These [pension] plans, like other forms of insur-

ance, depend on the accumulation of large sums

to cover contingencies. The amounts set aside

are determined by a painstaking assessment of

the insurer’s likely liability. Risks that the in-

surer foresees will be included in the calculation

of liability, and the rates or contributions charged

will reflect that calculation. The occurrence of

major unforeseen contingencies, however, jeopar-

dizes the insurer’s solvency and, ultimately, the

insureds’ benefits. Drastic changes in the legal

rules governing pension and insurance funds, like

other unforeseen events, can have this effect.’

City of Los Angeles Dept. of Water d Power v.

Manhart, 435 U.S. 702, 721.”

Allied Structural Steel Co. v. Spannaus, supra, 438

US. at 246-47 (footnote omitted).

The Court below dismissed the impairment of contract

issue out of hand on the grounds that a judicial construc-

tion could not constitute a law impairing the obligation of

contracts within the meaning of Article I, Section 10 of

the Constitution. Such a narrow view is of doubtful valid-

ity today.

Article I, Section 10 provides “No State shall . . pass

any . . law impairing the obligation of contracts. The

contemporaneous Rules of Decision Act, part of the Judi-

ciary Act of 1789 and now 28 U.S.C. 6 1652 (1976), specifies

that [t Ihe laws of the several States” shall be regarded as

rules of decision in civil actions in the federal courts. In

Gelpcke v. City of Dubuque, 68 U.S. (1 Wall.) 175 (1863),

and Douglass v. County of Pike, 101 U.S. 677 (1879), this

Court held that a judicial construction of a statute may

constitute an unconstitutional impairment. Later, in Tidal

Oil Co. v. Flanagan, 263 U.S. 444 (1924), the Court held

that only state legislation was comprehended by the “law”

to which the vontract clause refers. The Court distin-

guished Gelpcke and Douglass on the ground that those

cases were diversity actions in which federal common law

had been applied pursuant to Swift v. Tyson, 41 U.S. (16

Pet.) 1 (1842), and that those decisions did not interpret

the constitutional provision. It is clear, however, that Tidal

Oil was decided under the pervasive influence of Swift v.

Tyson, supra, and its progeny which had held, for many

decades before Tidal Oil, that the State “laws” of the Rules

of Decision Act also encompassed only legislation. That

limited interpretation of “State law” has long since been

abandoned in favor of the more realistic reading of Erie

R.R. v. Tompkins, 304 U.S. 64 (1938), which brings judge-

made law within the scope of the laws“ of the Rules of

Decision Act. The propriety of a similar view of “law”

as it appears in Article I, Section 10 should now be con-

firmed by this Court. This Court has not yet had occasion

to rule on the issue of judicial impairments of contracts in

light of the redefinition of the concept of State “law” in

Erie, although the Gelpcke case and its principles have been

cited with approval by several members of the Court in

recent years. See United States v. United States Coin and

Currency, 401 U.S. 715, 730 (1971) (White, J. dissenting,

joined by Burger, C. J., Stewart, J. and Blackmun, J.).

CONCLUSION

The action of the State of New York in first requiring

insurance carriers to comply for six years with binding

regulations governing their premiums, policies and pay-

ments and then reversing those regulations so as to in-

validate past practices and impose new retroactive obli-

gations on the carriers along with penalties and with no

recoupment does indeed raise serious constitutional ques-

tions that merit review by the Court.

The petition for a writ of certiorari should be granted.

Respectfully submitted,

Cartes Piatto

80 Pine Street

New York, New York 10005

(212) 825-0100

Counsel for Petitioners

Of Counsel:

Wu E. Heoarty

Susan Buckle

Kevin J. Burke

Canna Gorpvon & RN.

Rates L. Hrn

Raich, Bax NN, Weiss & Hatrern

June 23, 1982

CONTENTS

PAGE

Memorandum Decision of the Supreme Court, County

of Erie, Granting Defendants’ Motion to Dismiss the

Complaint in Gurnee v. Aetna Life and Casualty

Company (“Gurnee”) la

Order of the Supreme Court, County of Erie, Dismiss-

ing the Complaint in Gurnee 8a

Order of the Appellate Division, Fourth Judicial De-

partment, Affirming the Order of the Supreme Court,

County of Erie, Dismissing the Complaint in Gurnee lla

Memorandum Decision of the Supreme Court, County

of New York, Granting Defendants’ Motion to Dis-

miss the Complaint in Weinreich v. State-Wide In-

surance Company (“Weinreich”) 13a

Order of the Supreme Court, County of New York, Dis-

missing the Complaint in Weinreich 21a

Order of the Appellate Division, First Judicial Depart-

ment, Affirming the Order of the Supreme Court,

County of New York, Dismissing the Complaint in

Weimreich 24a

Opinion and Order of the New York Court of Appeals,

Reversing the Orders of the Fourth and First Judi-

cial Departments of the Appellate Division in Gurnee

and Weimreich 28a

Order of the New York Court of Appeals Denying

Defendants’ Motion for Reargument 35a

PAGE

Majority and Dissenting Opinions of the New York

Court of Appeals in Kurcsics v. Merchants Mutual

Insurance Company 36a

Informational Brochure of the New York Department

of Insurance (1977) 50a

Mandatory Claim Form Cover Letter (19777) 51a

Memorandum Decision of the New York Supreme Court,

County of Erie

Mornis C. Gurwer, on Behalf of Himself and All Other

Persons Similarly Situated, Plaintiff v. Aztwa Lire xp

Casvatty Company, on Behalf of Itself and All Other

Insurance Companies Similarly Situated, Defendant.

Supreme Court, Erie County, June 17, 1980

Orion oF THE CouRT

James B. Kanz, J.

This action arises out of the February 20, 1980 decision

of the Court of Appeals in Kurcsics v. Merchant Mut. Ins.

Co. (49 NY2d 451) wherein it was held that a covered

person who has sustained a loss of earnings in excess of

$1,000 per month is entitled to recover as first-party benefits

80% of his actual lost earnings up to a maximum recovery

of $1,000 per month and not the $800 per month as directed

by the New York State Department of Insurance. Kuresics

was awarded the $200 monthly difference plus 2% interest

per month on the overdue amount and reasonable at-

torneys’ fees.

Plaintiff, in this action thereafter, on February 27, 1980

caused a summons and complaint to be served upon defen-

dant seeking the same relief as awarded in Kurcsics on his

own behalf and for all others similarly situated not only

from Aetna but from all other insurance companies simi-

larly situated. Subsequently, plaintiff by notice of motion

advised defendant that plaintiff would be moving pursuant

to CPLR 902 for certification of the plaintiff and defendant

classes. Before the return date of the class action motion

defendant, after failing to obtain plaintiff’s counsel’s con-

sent, moved for an extension of time to answer or otherwise

move in response to plaintiff’s complaint. This court in a

Memorandum Decision of the New York Supreme Court,

County of Erie

written decision gave defendant an extension until May 15,

1980.

Defendant by notice of motion dated May 15, 1980 in-

formed plaintiff that on May 29, 1980 defendant would

move for an order pursuant to CPLR 2201 staying plain-

tiff’s action pending the final determination of a motion

to dismiss a similar action pending in the Supreme Court,

New York County; or in the alternative for an order pur-

suant to CPLR 3211 dismissing plaintiff’s complaint for

failure to state a cause of action. Plaintiff thereon moved

for reargument of the prior motion and to enjoin all other

similar actions pending in New York State.

Plaintiff contends the court should either move to certify

the plaintiff and defendant classes or somehow consolidate

all of the other pending similar actions before considering

defendant’s motion to dismiss. Defendant contends that

the court should first address defendant’s motion to dismiss

in that if the court determined Kurcsics was not to be given

retroactive application, there would be no basis for plain-

tiff’s individual or class action claim.

The court will initially address defendant’s motion to dis-

miss in order to avoid the possibly unnecessary costs and

disbursements associated with class notification, discovery

and certification.

Defendant asserts various reasons Kurcsics may not or

should not be given retroactive effect.

Defendant contends that a retroactive application of

Kurcsics would be in violation of the New York and United

States Constitutions in that it would be a taking of private

property without just compensation due to the calculations

used by defendant to establish the prior premium rate

structure. Additionally, as to certain subgroups of plain-

Memorandum Decision of the New York Supreme Court,

County of Erie

tiff's proposed class defendant contends a retroactive ap-

plication of Kurcsics would be an impairment of a private

contract and, therefore, in violation of section 10 of article

I of the United States Constitution.

However, the court finds it unnecessary to address the

constitutional issues since in the court’s opinion equity

would prevent a retroactive application of Kurcsics in this

situation even if such an application was found to be con-

stitutional.

In Chevron Oil Co. v. Huson (404 US 97, 106-107), the

Supreme Court stated: “In our cases dealing with the non-

retroactivity question, we have generally considered three

separate factors. First, the decision to be applied nonretro-

actively must establish a new principle of law, either by

overruling clear past precedent on which litigants may have

relied [citation omitted] or by deciding an issue of first

impression whose resolution was not clearly foreshadowed

{citation omitted] Second, it has been stressed that ‘we

must * * * weigh the merits and demerits in each case by

looking to the prior history of the rule in question, its pur-

pose and effect, and whether retrospective operation will

further or retard its operation.’ [Citation omitted.] Fin-

ally, we have weighed the inequity imposed by retroactive

application, for ‘[w]here a decision of this Court could

produce substantial inequitable results if applied retro-

actively, there is ample basis in our cases for avoiding the

“injustice or hardship” by a holding of nonretroactivity.’ ”

Upon a consideration of these factors it is the court’s

opinion that Kurcsics should not be applied retroactively.

The Court of Appeals in Kurcsics (49 NY2d 451, 454,

supra) began its opinion by stating: “This appeal raises a

question of first impression in this court concerning the con-

Memorandum Decision of the New York Supreme Court,

County of Erie

struction of the phrase ‘first party benefits’”. The Court

of Appeals resolution of this “question of first impression”

cannot be said to have been clearly foreshadowed. In fact

the Court of Appeals decision overruled the unanimous de-

termination of the Appellate Division, Fourth Department,

in Kurcsics (65 AD2d 192), the unanimous determination

of the Appellate Division, Second Department, in Matter of

Government Employees Ins. Co. v. Sparrow 66 AD2d

782) and the clear language of the regulations promulgated

by the New York State Department of Insurance, which

defendant had been compelled to follow.

The purpose of the no-fault legislation basically was to

eliminate the vast majority of auto accident negligence

suits from the judicial arena and to assure prompt compen-

sation to accident victims of substantially all of their eco-

nomic loss without regard to fault (Montgomery v. Daniels,

38 NY2d 41, 46, 55). Insurance basically involves a shar-

ing of risks. The foreseeable risks and the limits of poten-

tial exposure are included in the calculation of insurer’s

liability and the premiums charged reflect this calculation.

Defendant in submitting its premium rate schedule to the

Insurance Department, as required by section 677 of the

Insurance Law, based its calculations on a potential maxi-

mum exposure of $800 per month and not $1,000 per month.

A retroactive application of the Court of Appeals decision

in Kurcsics, overruling the Insurance Department’s inter-

pretive regulations” on maximum exposure, could possibly

jeopardize some of the insurers’ solvency and ultimately

the benefits of other insured individuals. For this reason

it has been held that rules applying to insurance or pension

funds should not be given retroactive effect unless the Leg-

islature has plainly commanded that result (Los Angeles

Dept. of Water d Power v. Manhari, 435 US 702).

Memorandum Decision of the New York Supreme Court,

County of Erie

Since the practical construction of the Insurance Law re-

garding maximum first-party benefits for loss of earnings

had been well known, 11 NYCRR 65.6 (n) (2) (xi) estab-

lishing maximum payment of $800 per month has been

followed since its effective date of February 1, 1974, the

Legislature is charged with knowledge of this construction

and its failure to interfere indicates its acquiescence (see

RKO-Keith-Orpheum Theaters v. City of New York, 308

NY 493, 500; Engle v. Talarico, 33 NY2d 237, 242; Matter

of Hellerstein v. Assessor of Town of Islip, 37 NY2d 1,

10). Retroactive application of Kurcsics could not be said

to be commanded by the Legislature.

Besides possibly jeopardizing the solvency of some of the

insurers and thereby ultimately the benefits of other in-

sured individuals a retroactive application of Kurcsics is

not necessary to insure that future claims up to a maximum

of $1,000 per month are promptly paid.

Finally, a retroactive application of Kurcsics would pro-

duce substantial inequitable results.

There is no evidence of bad faith on the part of defen-

dant. Defendant felt it was mandated to follow the regula-

tions established by the Insurance Department in regards

to the maximum recoverable first-party benefits and it did

so. Defendant relied on these regulations in assessing its

premium rate schedule pursuant to section 183 of the In-

surance Law and in paying $800 maximum per month on

the claims submitted to it. It is well established that re-

liance interests weigh heavily in the shaping of an appro-

priate equitable remedy (Lemon v. Kurieman, 411 US 192,

203). The Court of Appeals in New York Pub. Interest

Research Group v. Steingut (40 NY2d 250, 261) after

determining that certain legislative allowances were un-

Memorandum Decision of the New York Supreme Court,

County of Erie

constitutionally authorized held that “equitable interests of

fairness and justice” mandate that no reimbursement be

demanded from the recipients who, in good faith and sup-

ported by long-continued practice, relied on the disburse-

ments as authorized and proper.

These “equitable interesis of fairness and justice” would

seem to forbid a retroactive application of Kurcsics. In

New York Pub. Interest Research Group v. Steingut

(supra), the legislators actually received unauthorized

funds while in the present situation defendant never

charged, nor would have been able to justify charging in-

creased premiums to cover the difference between a maxi-

mum monthly exposure of $1,000 as opposed to $800. De-

fendant has taken nothing from plaintiff that equity de-

mands he should be compelled to return (see Atlantic Coast

Line v. Florida, 295 US 301, 310).

Additionally, defendant in a supporting affidavit by an

actuary with Allstate alleges that Ilulnder commonly ac-

cepted insurance ratemaking principles, ratemaking is pro-

spective for losses which are anticipated to be incurred in

connection with insurance policies to be issued on or after

specified future date. Nonrecurring past losses, such as

those which would directly flow from the retroactive appli-

eation of the Kurcsics decision, would not be recovered in

future ratemaking proceedings”. If there exists no methods

for defendant to recoup or somehow recover the losses

incurred by a retroactive application of Kuscsics such an

application would clearly bring about an equitable result.

Precedent exists for and equity demands a prospective

application of a decision such as Kurcsics (New York Pub.

Interest Research Group v. Stemgut, supra; Chevron Oil

Co. v. Huson, 404 US 97, supra; Atlantic Coast Line v.

Memorandum Decision of the New York Supreme Court,

County of Erie

Florida, supra; Miranda v. Arizona, 384 US 436). The

Court of Appeals in Hellerstein v. Assessor of Town of

Islip (37 NY2d 1, supra), after determining that frac-

tional assessment was in violation of the New York Con-

stitution felt that equity demand that their determination

be given prospective application not just from the date of

the decision, June 5, 1975 but from December 31, 1976,

approximately a year and one-half later.

For the reasons stated above it is this court’s opinion

that Kurcsics is not to be given retroactive application and

for that reason defendant’s motion for an order pursuant

to CPLR 3211 dismissing plaintiff's complaint for fe ‘lure

to state a cause of action is granted.

Order of the New York Supreme Court, County of Erie

At a Special Term of this Court held in and for

the County of Erie at the Erie County Hall

in the City of Buffalo, New York on the

28th day of May 1980.

Present:

How. James B. Kane,

Justice Presiding.

STATE OF NEW YORK

Supreme Court—Covunrty or Er

Index No. E-77549

Morris C. Gurnee,

Plaintiff,

vs.

Arrxa Lave anv Casvatty Company,

Defendant.

Ono

A motion having been made by the defendant Aetna Life

and Casualty Company for an order staying this action

pending the final determination of a motion to dismiss the

action pending in the Supreme Court, County of New York,

entitled “Moshe Weinreich vs. State-Wide Insurance Com-

pany”, Index No. 05272/80 (the Weinreich action“); or, in

the alternative, for an order dismissing the complaint in

this action for failure to state a cause of action; and a

motion having been made by the plaintiff for an order for

Order of the New York Supreme Court, County of Erie

renewal and or reargument, vacatur and modification of

the order granted herein on May 14, 1980 and for an order

for injunctive relief staying the defendant from proceed-

ing with motions to dismiss and for class certifications and

other such motions and other same and similar actions

until the motions in this action are heard and determined

or until further order of this Court,

Now, on reading the complaint, the notice of motion

dated May 15, 1980, the affidavit of Ralph L. Halpern sworn

to May 12, 1980, the exhibits annexed thereto, the order

to show cause dated May 20, 1980, the affidavit of Willard

M. Pottle, Jr. sworn to May 20, 1980, the order herein dated

May 23, 1980, the affirmation of Ralph L. Halpern dated

May 23, 1980, the affidavit of Willard M. Pottle, Jr. sworn

to May 23, 1980 and the affidavit of Charles Platto sworn

to May 26, 1980, and upon all the pleadings and proceed-

ings heretofore had and taken herein and after hearing

Raichle, Banning, Weiss & Halpern (Ralph L. Halpern of

counse]) and Cahill Gordon & Reindel (William E. Hegarty,

Charles Platto, Donald 8. Parker, Charles Gilman and

Kenneth Vittor of counsel), both attorneys for the defen-

dant, in support of defendant’s motion and in opposition

to plaintiff's motion, Dobozin & Pottle (Willard M. Pottle,

Jr. of counsel), attorneys for the plaintiff, in opposition

to defendant’s motion and in support of plaintiff's motion,

and due deliberation having been had and a memorandum

decision dated June 17, 1980 having been filed, it is

Onperep, that the motion for an order dismissing the

complaint for failure to state a cause of action be and the

same hereby is granted; and it is further

Onbunnn, that the complaint be and the same hereby is

dismissed ; and it is further

10a

Order of the New York Supreme Court, County of Erie

Onpenrzp, that, accordingly, all the other requested relief

be and the same hereby is denied as moot and academic.

/s/ James B. Kane

JSC.

GRANTED

Jun 18 1980

court lun A. Dm«rno

lla

Order of the Appellate Division,

Fourth Judicial Department

SUPREME COURT OF THE STATE OF NEW YORK

Appetiate Drviston—Fovrtsa Jupicia, DeparTMENT

Present:

Carpamone, J. P.,

Srmions, Hancock, CaAAAAHAx, Mou, JJ.

Morris C. Gurnee, for Himself and All Persons Entitled

to First Party Benefits Similarly Situated,

Appellant,

Aetna Life and Casualty Company, Itself and All Other

Insurance Companies Under New York State Law Ow-

ing First Party Benefits Similarly Situated,

Respondent.

The above named Morris C. Gurnee, for himself and all

persons entitled to first party benefits similarly situated

having appealed to this Court from an order of the Su-

preme Court, entered in the Erie County Clerk’s office on

June 19, 1980 and said appeal having been argued by Wil-

lard Pottle of counsel for appellant, Charles Platto of

counsel for respondent and submitted by Abraham Fuchs-

berg, amicus curiae for Samuel Uretsky, et al. and due

deliberation having been had thereon,

It is hereby onperep, That the order so appealed from

be and the same hereby is unanimously affirmed with costs

12a

Order of the Appellate Division,

Fourth Judicial Department

on the opinion at Special Term, Kane, J. (428 NYS2d 992).

The motion to strike the appendix from respondent’s brief

is denied.

Entered: Dec 12 1980

Many F. Zouzzr,

Clerk

SUPREME COURT

Arrmarn Drvision

Fourth Jupicur Department

Clerk’s Office, Rochester, N. T.

I, Many F. Zouzr, Clerk of the Appellate Division of the

Supreme Court in the Fourth Judicial Department, do here-

by certify that this is a true copy of the original order,

now on file in this office.

In Wrrwess Wueneor, I have hereunto set my

hand and affixed the seal of said Court at

the City of Rochester, New York, this Dec

12, 1980

/s/ Many F. Zoran

Clerk.

13a

Memorandum Decision of the New York Supreme Court,

County of New York

SUPREME COURT, NEW YORK COUNTY

Seeciat Term, Part I

Index No. 5272/80

Cal. No. 16 of 6/25/80

Mosne Wernreicn, suing individually on his own behalf

and representatively on behalf of a class of plaintiffs

similarly situated,

Plaintiff,

—against—

Srate-Wive Insurance Company, Auistate Insurance Con-

pany, Hartrorp Accipent & Iwpemniry Company,

Laserty Murvat Insurance Company, GoverNMEXT

Emp.ovees Insurance Company, individually and rep-

resentatively on behalf of a class of defendants similarly

situated,

Defendants.

Schwarz, J.:

Motions no. 16, 31, 32, 33, 76 and 77 of June 25, 1980 are

consolidated for disposition.

The defendants State-Wide Insurance Company, Allstate

Insurance Company, Hartford Accident & Indemnity Com-

pany, Liberty Mutual Insurance Company, Government

Employees Insurance Company, individually and repre-

sentatively on behalf of a class of defendants similarly

situated, move for an order dismissing the complaint for

failure to state a cause of action.

14a

Memorandum Decision of the New York Supreme Court,

County of New York

Plaintiff moves for an order determining that this action

may be maintained as a class action.

The Attorney General of the State of New York requested

and was granted leave to appear herein for the Superin-

tendent of Insurance of the State of New York, as amicus

curiae on the question of the retroactive application of

Kurcsics v. Merchants Mutual Insurance Company, 49 N.Y.

2d 451 (1980).

Plaintiff's claim is for additional benefits for loss of

earnings resulting from personal injuries allegedly sus-

tained on July 1, 1975 in an accident involving a motor

vehicle insured under a policy of insurance issued by de-

fendant State-Wide Insurance Company (“State-Wide”)

pursuant to the provisions of the New York Comprehensive

Automobile Insurance Reparations Act, Insurance Law,

Article 18 §§670-78 (McKinney Supp. 1979-80), commonly

referred to as the “No-Fault Law.”

For 35 montbs plaintiff received payments from State-

Wide reimbursing him for loss of earnings of up to $800

per month. The $800 monthly payments were made in

accordance with governing Insurance Department regula-

tions providing that the maximum permissible payment

under the No-Fault Law for loss of earnings was $300 per

month for up to 36 months.

Insurance Law §671(1) provides: “1. ‘Basic economic

loss’ means, up to fifty thousand dollars per person.

(b) loss of earnings from work which the injured person

would have performed had he not been injured, and reason-

able and necessary expenses incurred by such person in

obtaining services in lieu of those that he would have per-

formed for income, up to one thousand dollars per month

for not more than three years from the date of the accident

causing the injury... .”

15a

Memorandum Decision of the New York Supreme Court,

County of New York

Insurance Law §671(2) provides: “2. ‘First party bene-

fits’ means payments to reimburse a person for basic eco-

nomic loss on account of personal injury arising out of the

use or operation of a motor vehicle, less: (a) twenty per-

cent of lost earnings pursuant to paragraph (b) of sub-

division one of this section.

Insurance Department Regulations 65.6(n)(2)(xi) and

65.15(n)(2)(xi) provided that the $1,000 per month lost

earnings component, of basic economic loss defined in Sec-

tion 671(1) of the Insurance Law, when reduced by a 20%

offset as required by Section 671(2) of the Insurance Law,

resulted in a maximum payment of $800 per month.

On February 20, 1980, the Court of Appeals, in Kurcsics

v. Merchants Mutual Insurance Co., 49 N.Y.2d 451, dealing

with what it characterized on p. 454 as “a question of first

impression”, issued a declaratory judgment holding that

under the Insurance Law an injured person can recover up

to $1,000 per month from the insurer for lost earnings.

The instant complaint seeks general retroactive applica-

tion of the holding in Kurcsics. Plaintiff claims that he and

the class which he seeks to represent comprising all other

persons who received $800 per month rather than $1,000

should recover the additional $200 per month for up to three

years under Section 671 of the Insurance Law, with stat-

utory interest at the rate of 2% per month and attorneys’

fees under Section 675 of the Insurance Law. Plaintiff

estimates that there may be more than 300,000 such persons

in this class.

The Superintendent of Insurance of the State of New

York (“Superintendent”), as amicus curiae, submits an

affidavit opposing the retroactive application of the holding

in Kurcsics. The Attorney General submits a memorandum

of law arguing that the retroactive application of the

16a

Memorandum Decision of the New Fork Supreme Court,

County of New York

Kurcsics decision would be inequitable to both consumers

and the insurance industry.

In February 1974, the New York Comprehensive Auto-

mobile Insurance Reparations Act, (commonly known as

the No-Fault Law) Insurance Law, Article 18 §§670-78

(McKinney Supp. 1979), went into effect. At the time of

the enactment of the No-Fault Law and amendments there-

to, a series of regulations were promulgated by the Super-

intendents of Insurance. Among these regulations were 11

NYCRR 65.6(n)(2)(xi) and 65.15(n)(2)(xi) which pro-

vided for maximum wage loss payments of up to $800 per

month.

Insurance carriers under the jurisdiction of the Insur-

ance Department were obligated to abide by these regula-

tions. Rates were to be set in accordance with these regula-

tions, and premiums were to be collected in accordance with

them. Policies of insurance issued pursuant to the No-Fault

Law were in the form mandated by the Insurance Depart-

ment regulations, and claim reserves were required to be

established by insurers in accordance with these regulations.

Insurers were required to provide their policyholders with

informational brochures and cover letters setting forth,

inter alia, the $800 per month ceiling.

These regulations were enforced by the Insurance De-

partment. The Superintendent states that if the insurance

carriers had not complied with these regulations (e.g., if

the insurance carriers had paid claimants $1,000 per month

in lost earnings benefits or had established their claim

reserves at that level) they would have been subjected to

administrative sanctions by the Insurance Department for

failing to comply with mandatory regulations of the In-

surance Department and for wasting insurance company

assets.

17a

Memorandum Decision of the New York Supreme Court,

County of New York

The Superintendent emphasizes that he is not seeking to

collatorally attack the Kurcsics decision. He states that he

has ordered that insurers and self-insurers give full pro-

spective implementation of Kurcsics. The Superintendent

contends, nevertheless, that as a matter of sound law and

policy, a retroactive application of Kurcsics would be harm-

ful to the public and establish a harmful precedent.

The Superintendent points out that if Kurcsics is applied

retroactively, licenses of the Insurance Department and

other agencies could no longer rely on governmental reg-

ulations and would find it necessary to seek declaratory

judgments on substantially all regulations, present and

future, which have not yet been construed by this state’s

highest court. The Insurance Department and other State

agencies could not function effectively under such condi-

tions.

It is argued that retroactive application of Kurcsics

would also restrict the availability of insurance in this

state generally, since retroactive payments of many millions

of dollars would reduce every insurer’s capacity to write

business. Any retroactively-directed payments could not

be recovered in future ratemaking proceedings and would

have to come out of an insurer’s surplus.

Thousands of arbitrations, resolved by settlement or

award, could be subject to challenge. Self insurers, such as

utilities, public authorities, and taxi fleets would all be

potentially subject to substantial retroactive claims for

which they are not covered and have not received any

premiums.

In Chevron Od Co. v. Huson, 404 U.S. 97 (1971) the

United States Supreme Court stated at pp. 106-107:

“In our cases dealing with the nonretroactivity ques-

tion, we have generally considered three separate fac-

18a

Memorandum Decision of the New York Supreme Court,

County of New York

tors. First, the decision to be applied nonretroactively

must establish a new principle of law, either by over-

ruling clear past precedent on which litigants may

have relied, see e.g., Hanover Shoe v. United Shoe

Machinery Corp., supra (392 U.S.], at 496, or by de-

ciding an issue of first impression whose resolution

was not clearly foreshadowed, see, e.g., Allen v. State

Board of Elections, supra (393 U.S.], at 572. Second,

it has been stressed that ‘we must . weigh the merits

and demerits in each case by looking to the prior his-

tory of the rule in question, its purpose and effect, and

whether retrospective operation will further or retard

its operation.’ Linkletter v. Walker, supra [381 U.S.],

at 629. Finally, we have weighed the inequity imposed

by retroactive application, for [where a decision of

this Court could produce substantial inequitable re-

sults if applied retroactively, there is ample basis in

our cases for avoiding the “injustice of hardship” by

a holding of nonretroactivity.’ Cipriano v. City of

Houma, supra (395 U.S.], at 706.”

Applying the standards as set forth in Chevron Oil Co. v.

Huson to the case at bar, equitable considerations dictate

against a retroactive application of the Kurcsics decision.

In the first place, the Court of Appeals recognized that

the issue in Kurcsics was one “of first impression in this

Court concerning the construction of the phrase ‘first party

benefits’ .. .” (49 N.Y.2d at p. 54). Indeed, the Court of

Appeals decision in that case overruled the unanimous

Appellate Division, Fourth Department decision in that

ease, 65 A.D.2d 192, the unanimous decision of the Appel-

late Division, Second Department in Government Employ-

ees Insurance Department v. Sparrow, 66 A.D.2d 782, and

19a

Memorandum Decision of the New York Supreme Court,

County of New York

was contrary to the interpretation of the statute promul-

gated by the Insurance Department in its regulations which

all insurers were required to follow. The interpretation of

the statute by the Court of Appeals in Kurcsics can not be

said to have been “clearly foreshadowed.”

Applying the second factor of the Chevron Oil Co. v.

Huson formula, the basic purpose of the “No Fault” legis-

lation was designed to combat the spiraling cost of auto

insurance by reducing the number of auto accident negli-

gence suits and by passing along the resultant savings to

the consumers in the form of lower automobile insurance

premiums. (See Montgomery v. Daniels, 38 N.Y.2d 41, 46).

A key element in reducing the cost of auto insurance was

the adoption of the 20% offset provision which was based

on recognition that since work-loss benefits were not tax-

able, payment of the maximum work-loss benefits of $1,000

per month without a 20% offset would produce a windrall

to the wage earner. The rates of the insurers that were

approved by the Insurance Department were based upon

the premises that loss earnings benefits were to be limited

to a maximum of $800 per month. If the maximum benefits

payable for wage loss had been $1,000 per month, the in-

surers would necessarily have had to charge the public

higher premiums to reflect their increased liability.

As to the third factor, a retroactive application of

Kurcsics would produce substantial inequitable results. The

insurers whose rates had been based upon maximum liabil-

ity for wage loss of $800 per month would be exposed to

additional payments of up to $1,000 a month without the

possibility of adjusting their rates to cover this loss. In

addition, insurers would be liable to interest payments of

2% per month and attorneys fees to those parties who are

now found to be retroactively entitled to $1,000 per month

Memorandum Decision of the New York Supreme Court,

County of New York

despite the fact that the insurers had not been dilatory but

had been following the Insurance Department’s regulations.

It would be inequitable for insureds who paid premiums

based on the maximum potential of receiving $800 per

month for such earnings to now receive $1,000 a month and

have the additional windfall of not being required to pay

taxes on such payments.

It is clear that the inequity imposed by retroactive ap-

plication of the Kurcsics holding provides ample basis for

avoiding the “injustice of hardship” by a holding of non-

retroactivity. (Chevron Oil Co. v. Huson, supra; Cipriano

v. City of Houma, 395 U.S. at page 706).

In the recent case of Gurnie v. Aetna Life and Casualty

Company (N.Y.L.J. 6/26/80, Sup. Ct. Erie County) the

court held that the Kurcsics decision of the Court of Ap-

peals should not be given retroactive effect, stating “. . in

the court’s opinion equity would prevent a retroactive ap-

plication of Kwrcsics in this situation even if such an ap-

plication was found to be constitutional.”

Accordingly, this court finds that the decision in Kurcsics

v. Merchants Mutual Insurance Company, (supra) should

not be given retroactive effect.

The motions by defendants for an order dismissing the

complaint is granted. Plaintiff's motion is denied.

Settle order.

Dated: August 5, 1980.

/s/ H. G. S.

J. S. C.

Order of the New York Supreme Court,

County of New York

Impex No. 05272/80

How. Huna G. Scuwartz,

Justice.

At a Special Term of this Court in and for the

County of New York, at the Courthouse, 60

Centre Street, New York, New York on the

9th day of September, 1980.

Mosue Werwreics,

Plaintiff,

—against—

Srare-Wwe Iwsvrance Compary, et al.,

Defendants.

Ononn

Motions having been made by the defendants hereto, for

an order pursuant to CPLR § 3211 di«missing this action

for failure to state a cause of action; and a motion having

been made by plaintiff Moshe Weinreich for an order pur-

suant to CPLR 5 902 certifying this action as a class action,

And the Court having issued its memorandum decision

dated August 5, 1980,

Now, upon reading and filing the complaint, defendants’

notice of motion dated May 15, 1980, the affidavit of Wu-

Order of the New York Supreme Court,

County of New York

uam E. Hnaanrr, Esq., sworn to May 14, 1980 and exhibits

annexed thereto, defendants’ notice of motion dated May

16, 1980, the affidavit of Camus Piatto, Esq., sworn to

May 16, 1980, the supplemental affidavit of Wuius E.

Hnaanrr, Esq., sworn to June 19, 1980, the notice of motion

dated May 15, 1980, the affidavit of Evozne A. Lantax,

sworn to May 15, 1980, the notice of motion dated

16, 1980, the affidavit of Hexszrr Dicxsn, Esq., sworn

1980, the affidavit of Invixe Rosen, Esq., sworn

1980, the notice of motion dated June 2, 1980, the affirma-

tion of Hanotp M. Fosrsn, affirmed June 3, 1980, the notice

of cross-motion dated June 5, 1980, the affidavit of Inv

Rossy, sworn to June 5, 1980, and the affidavit of Alu

rence Mn senc, Esq., sworn to June 12, 1980, the opposition

affidavit of Lawzexce Mun, Esq., sworn to June 24,

1980, and the response affidavit of Lawzences Mund, sq.,

sworn to June 24, 1980.

Now, on motions of attorneys for defendants, it is or-

dered that motions No. 16, 31, 32, 33, 76 and 77 are consoli-

dated for disposition; and it is further

Oxpzrep, that the motions for an order dismissing the

complaint for failure to state a cause of action is granted;

and it is further

Order of the New York Supreme Court,

County of New York

Orpzrep, that the complaint is dismissed and the clerk is

directed to enter judgment accordingly; and it is further

Oxpenrep, that the motion for class certification is denied.

/s/ H. G. 8.

JSC.

FILED

Ser 11 1980

New Ton

24a

Order of the Appellate Division,

First Judicial Department

At a term of the Appellate Division of the Su-

preme Court held in and for the First Ju-

dicial Department in the County of New

York, on February 19, 1981.

Present:

How. Txueopore R. Kuprerman, Justice Presiding.

Hunt Bins, Leonarp H. Sanpuer, Samvet J. Su.vermay,

Arnot L. Fem, Justices.

10108

Mosue Wannen suing individually on his own behalf and

representatively on behalf of a class of plaintiffs sim-

ilarly situated,

Plaintiff-Appellant,

—against—

Srarn- Wm Insurance Company, Auistate Ixsurance Com-

pany, Harrrorp Accwsent & Inpemnrry Company,

Laszerty Murua Insurance Company, GovernMENT

EurLornns Insurance Company, individually and repre-

sentatively on behalf of a class of defendunts similarly

situated,

Defendants-Respondents,

and

Aut Crry Insurance Company and Empme Murua

Casuatty Insurance Company,

Defendants,

and

Tun Agrwa Casvatty & Sunery Company, Aztys Insun-

ance Compary, Azrwa Lars Insuzance Company, Au-

25a

Order of the Appellate Division, First Judicial Department

can AvtomosiLe Insurance Co., Amica Mutua Ixsun-

ance Company, American Mutua Liasmity Insurance

Company, Atitantic Mutua. Liasmary Insurance Com-

pany, Banner CASUAL Company, BurraLo Insurance

Company, Boston OD Colon Insurance Company,

CentrenniaL Insurance Company, Century INDEMNITY

Company, Cotontua, Penn Insurance Company, Com-

MERCIAL InsuRaNcE Company or Newark, N. J., Couunn-

cra. Unton Insurance Company, ContinentaL Casualty

Company, Cosmopouitan Murua, Insurance Company,

Tue ContinentaL Insurance Company, Country-Wme

Insurance Company, Crrrenton Insurance Company,

Emptovers Murvat Casual Company, New Jersey

Manvuracturers Insurance Company, Newark Ixsun-

ance Company, Tun Norra River Insurance Co., Prv-

DENTIAL Property & Casuauty Company, Feperau Insur-

ANCE Company, Fmskrry & Casvauty Company or New

York, Frremen’s Funp Insurance Company, Frremen’s

Insurance Company or Newark, New Jersey, Generan

Accwenrt Fire & Lire Assurance Corporation, Leb.,

Glonn Inpemnrry Company, Guews Fals Insurance

Company, Grapuic Aurs Murua Insurance Company,

Great American Insurance Company, THe Greater

New York Murvat Insurance Company, Guarpian

Royat Excnance Assurance Company, Hanover Insur-

ance Co., Hartrorp Casuaury Insurance Company, THE

Home Insurance Company, Tue Home Invemntry Com-

pany, Home Inpemwyrry Co., Inga, Mutvan Insurance

Company, Insurance Compasy or Greater New Yor,

Insurance Company or Nortn America, Leatuersy Ix-

suRANCE Company, Liserty Murvat Insurance Com-

pany, Lion Insurance Company, Tun Lu=1permen’s

Mourvat Insurance Company, Lumpenmen’s Morus.

26a

Order of the Appellate Division, First Judicial Department

Cas, Co., Maryann Casuatty Compayy, Mercnants Mu-

TuaL Insurance Company, Micuican Mutua Liasinity

Company, Nassau Insurance Company, National GRANGE

Murvat Insurance Company, Nationwmwe Murtvat Ix-

surance Company, Rewance Insurance ComPary,

Royat-Guiose Insurance Company, Royat InpeMNITY

Compaxy, Sareco Insurance Company or Amenica, Sr.

Paul, Fre & Manx Insurance Co., Sentry Insurance

Murvat Company, Strate Farm Mutua, AvtTomosiLe

Insurance Co., TransamMerntca Insurance ComPaNy,

Traveters Inpemniry Company, TraveLers [NDEMNITY

Company or Iuurvouw, Traverers Insurance Compayy,

Unperwarrers Insurance Company, Unicarp Insurance

Company, Unrrep Srates Froeurry & Guaranty Con-

pany, Utica Mutua Insurance Company, WorcEsTER

Murvat Insurance Company, Zunicu Insurance Con-

pany, USAA Casvatty Insurance Company and Votxs-

wacen Insurance ComMPaNy,

Defendants-Respondents.

An appeal having been taken to this Court by the plain-

tiff-appellant from an order of Supreme Court, New York

County (H. Schwartz, J.), entered on September 11, 1980,

which dismissed the complaint of plaintiff on the ground

of failure to state a cause of action and denied his motion

for class certification,

And said appeal having been argued by Mr. Jerome M.

Congress of counsel for the plaintiff-appellant, by Mr.

William E. Hegarty of counsel for defendants-respondents,

except Maryland Casualty Company, by Mr. Hugene A.

Leiman of counsel for defendant-respondent Maryland

Casualty Company, and an amicus curiae brief having been

27a

Order of the Appellate Division, First Judicial Department

submitted by Mr. Robert S. Hammer, of counsel for the

Superintendent of Insurance, in support of affirmance; and

due deliberation having been had thereon,

It is unanimously ordered that the order so appealed

from be and the same is hereby affirmed, without costs

and without disbursements.

ENTER:

/8/ Josern J. Luo

Clerk.

FILED

Fes 19 1981

28a

Opinion of the Court of Appeals

of the State of New York

Morais C. Guawez, Appellant, v Aerwa Lire anp Casvauty

Company, Respondent.

Mosue Wenvreice, Appellant, v Srare-Wive Insurance

Company et al., Respondents, et al., Defendants.

Argued January 12, 1982; decided February 18, 1982.

Oprion or THE CourRT

Chief Judge Cooks.

These cases present the question whether the holding of

Kurcsics v. Merchants Mut. Ins. Co. (49 NY2d 451) should

be given retroactive effect. For the outlined reasons, this

court holds that Kurcsics should be applied to all claims

not barred by the Statute of Limitations.

In Kurcsics, the court construed the phrase “first party

benefits”, contained in section 671 of the Insurance Law, as

it related to no-fault insurance protection. The court held

that under section 671, a covered person injured in a motor

vehicle accident who sustained lost earnings of more than

$1,000 per month can recover as first-party benefits 80% of

his or her actual lost earnings up to a maximum of $1,000

per month. The court rejected the Superintendent of Insur-

ance’s interpretation of section 671 as limiting recovery for

lost earnings to a maximum of 80% of $1,000, or $800.

Morris Gurnee, plaintiff in one of the instant actions,

was injured in November, 1977 while driving a car owned

by an insured of Aetna Life and Casualty Company. He

claimed lost wages of more than $3,200 per month. Aetna

paid him $800 per month, in accordance with State Insur-

ance Department regulations. After this court decided

29a

Opinion of the Court of Appeals

of the State of New York

Kurcsics in February, 1980, Gurnee sued Aetna, claiming

he was entitled to the maximum $1,000 per month for lost

earnings. Supreme Court granted defendant’s motion to

dismiss the complaint for failure to state a cause of action,

holding that Kurcsics should not be applied retroactively.

That court also denied as academic plaintiff's motion to

maintain the lawsuit as a class action. The Appellate

Division affirmed.

Moshe Weinreich was injured in an accident in July,

1975 involving a vehicle insured by State-Wide Insurance

Company. In the wake of Kurcsics, he sued State-Wide,

alleging that it refused to pay him more than $800 per

month in lost wages even though he was entitled to $1,000.

Weinreich also moved for an order determining that the

suit could be brought as a class action. Supreme Court

granted defendant’s motion to d miss for failure to state a

cause of action, holding that Kurcsics was not retroactive,

and denied the motion for class certification. Appellate

Division affirmance followed.

In determining whether the holding of Kurcsics is appli-

cable to other claims that arose before the decision was

handed down, it is questionable whether retroactivity anal-

ysis is relevant with respect to the application of the

first decision of the State’s highest court interpreting a

new statute. Such analysis is traditionally used where

there has been an abrupt shift in controlling decisional

law. In Kurcsics, this court merely construed, at its first

opportunity to do so, the language of a statute that had

been in effect since 1974.

Even under what might be described as the traditional

retroactivity analysis, however, it is clear that Kurcsics

should be accorded full retroactive effect. Several prin-

30a

Opinion of the Court of Appeals

of the State of New York

ciples provide guidance for such examination. First, it is

well established that, “consonant with the common law’s

policy-laden assumptions, a change in decisional law usu-

ally will be applied retrospectively to all cases still in the

normal litigating process” (Gager v. White, 53 NY2d 475,

483; see People v. Pepper, 53 NY2d 213, 219-220; People v.

Morales, 37 NY2d 262, 267-269; Kelly v. Long Is. Light. Co.,

31 NY2d 25, 29, n 3; Knapp v. Fasbender, 1 NY2d 212, 243).

As an exception to this general rule, however, “where there

has been such a sharp break in the continuity of law that

its impact will ‘wreak more havoc in society than society’s

interest in stability will tolerate’” a court may direct that

the new pronouncement operate prospectively alone (Gager

v. White, supra, at pp. 483-484, quoting Fairchild Limita-

tion of New Judge-Made Law to Prospective Effect Only:

“Prospective Overruling” or “Sunbursting”, 51 Marq L

Rev 254).

In Chevron Oil Co. v. Huson (404 US 97, 106-107), the

Supreme Court outlined three factors to consider in deter-

mining if a ruling should be prospective only. “First, the

decision to be applied nonretroactively must establish a

new principle of law, either by overruling clear past prece-

dent on which litigants may have relied * * * or by decid-

ing an issue of first impression whose resolution was not

clearly foreshadowed” (404 US, at p 106). Second, the prior

history of the rule at issue and the impact of retroactive

application upon its purpose and effect should be consid-

ered. Finally, the court should take into account any in-

equity that would be created by retroactive application

(id.).

Turning to the instant cases, defendants argue that

Kurcsics should not be applied retroactively because its

31a

Opinion of the Court of Appeals

of the State of New York

result was not clearly foreshadowed. In this regard it is

important to emphasize that Kurcsics did not “establish a

new principle of law.” It merely construed a statute that

had been in effect for a number of years. It is true that the

Insurance Department had promulgated regulations based

on a construction of section 671 contrary to that subse-

quently articulated by this court. A judicial decision con-

struing the words of a statute, however, does not constitute

the creation of a new legal principle. Additionally, the

definitional language of section 671 itself foreshadowed

the conclusion this court first had the opportunity to ex-

press in Kurcsics.

With respect to the second factor set forth in Chevron,

defendants argue that the purposes of the legislation would

not be furthered because retroactive application of Kurc-

sics would reduce neither insurance premium rates nor the

number of law suits stemming from automobile accidents,

both admittedly salutary goals of the no-fault scheme. In

Montgomery v. Daniels (38 NY2d 41, 55), however, this

court stated that a crucial facet of the Legislature’s plan in

enacting article 18 of the Insurance Law consisted of

“gnaranteeing prompt and full compensation of economic

losses up to $50,000 without the necessity of recourse to the

courts” (emphasis added). It is this right of an injured

party to prompt and full compensation that offsets the no-

fault law’s elimination of the ability to recover for pain and

suffering for relatively minor injuries (see NY Legis Ann,

1973, p 298; 2 McKinney’s Session Laws of NY, 1973, p

2335). An important aspect of the no-fault scheme, then,

was the provision of first-party benefits. “Full compensa-

tion” under the scheme includes the amount of lost earn-

ings allowed by section 671. To argue that application of

32a

Opinion of the Court of Appeals

of the State of New York

the correct interpretation of section 671 will not further

the purposes of the no-fault legislation is to ignore these

crucial benefits. Indeed, to deny Kurcsics application to

these cases would directly contradict the legislative design.

The third factor cited in Chevron entails weighing rela-

tive burdens that would be imposed upon either party if

Kurcsics were given retroactive effect. Defendants main-

tain that they based their premium rates upon the assump-

tion that their liability for lost carnings would be limited

to $800 per month. They assert that a determination that

their maximum liability was $1,000 per month would create

severe financial hardships. Whatever hardships may be

suffered by insurers who erroneously believed that their

maximum exposure was $800 per month for lost earnings,

however, is more than outweighed by the hardship suf-

fered by those injured individuals who received only

$800 per month for lost earnings although entitled to a

maximum of $1,000 per month. As this court observed in

Montgomery v. Daniels (38 NY2d 41, 55, supra), the no-

fault legislation foreclosed recovery for pain and suffering

by persons who had suffered relatively minor injuries in

automobile accidents, but balanced this by providing a

means of obtaining prompt and full recovery for certain

economic losses. Plaintiffs were denied the ability to sue

for pain and suffering, yet they were also denied the full

recovery to which they were entitled under that scheme.

The unfairness to such injured persons outweighs what-

ever financial burden may be imposed on insurers. With

respect to this burden, it should be noted that the applica-

ble six-year Statute of Limitations has already extin-

guished a portion of the insurers’ potential liability (sea

CPLR 213).

Opinion of the Court of Appeals

of the State of New York

When all of the applicable criteria are considered, retro-

active application of Kurcsics is mandated. In sum, that

case established no new principle of law; it merely con-

strued the language of a statute that was already in

existence. Also, the purposes of the no-fault insurance

legislation would be furthered by retroactive application of

Kurcsics. And, finally, a balancing of the equities dictates

that the injured parties not be made to bear the burden of

foregoing part of the recovery to which they were statuto-

rily entitled.

Defendants also raise constitutional challenges to retro-

active application of Kurcsics. These arguments, however,

are unpersuasive. Kurcsics merely construed the language

of a statute governing certain provisions required of auto-

mobile insurance contracts. Such a judicial construction

cannot, by its very nature, constitute a Law impairing the

Obligation of Contracts” (US Const, art I, 6 10, par 1).

Likewise, retroactive application of Kurcsics effects no un-

constitutional taking of property without due process. Re-

quiring defendants to pay covered persons according to

the command of a statute governing their insurance poli-

cies and in effect when those policies were written simply

is not a “taking”. There is thus no persuasive reason why

this court’s construction of section 671 should not be held

applicable to all claims that are not time-barred. To the

contrary, equitable considerations and the nature of this

court’s decision in Kurcsics require that Kurcsics be ap-

plied retroactively. Plaintiff's complaints therefore should

not have been dismissed for failure to state a cause of

action.

With respect to plaintiffs’ motions for orders determin-

ing that they could bring their suits as class actions, this

34a

Opinion of the Court of Appeals

of the State of New York

court has no occasion at this point to address the merits.

The motions were denied as academic, in one case explic-

itly and in the other implicitly, in light of the dismissals of

plaintiffs’ complaints for failure to state a cause of action.

Given the inherently factual and discretionary nature of

such determinations (see Ray v. Marine Midland Grace

Trust Co., 35 NY2d 147, 155; Siegel, New York Practice,

6147), the merits of the motions should first be explored

and considered by the trial courts (see CPLR 901-909).

Accordingly, the orders of the Appellate Divisions should

be reversed, with costs, and defendants’ motions to dis-

miss the complaints should be denied.

Judges Janz, Gan, Jones, Wacutizr and Merer

concur; Judge Fucussere taking no part.

In Gurnee v. Aetna Life & Cas. Co.: Order reversed, with

costs, and defendants’ motions to dismiss the complaint

denied.

In Weinreich v. State-Wide Ins. Co.: Order reversed,

with costs, and defendants’ motions to dismiss the complaint

denied.

Order of the Court of Appeals Denying Reargument

Mo. No. 260

Morais C. Gurwen, for Himself &.

Appellant,

vs.

Agrwa Lire ayp Casual Company, &.

Respondent.

Appellant,

Mosue WII, &c.,

vs.

Srarn- Ws Insurance Compary, et al.,

Respondents.

Deciston Cover or Arpzats, Mane 25, 1982

Motion for reargument denied with twenty dollars costs

and necessary reproduction disbursements.

Motion for a stay pending application to the United

States Supreme Court for a writ of certiorari dismissed.

Motion for a stay referred to Chief Judge Cooke for de-

termination pursuant to 28 U.S.C. sec. 2101 (f).

Judge Fuchsberg took no part.

Opinion of the Court of Appeals of the State of

New York in Kurcsics v. Merchants Mutual Insurance Co.

Orro Kuncszos, Appellant v. Mercnants Mutua. Ixsun-

ances Company, Respondent.

Argued January 2, 1980; decided February 20, 1980

Orixiox or THe Court

Jagan, J.

This appeal raises a question of first impression in this

court concerning the construction of the phrase “first party

benefits” as used in article 18 of the Insurance Law (§§ 670-

678), New York’s Comprehensive Automobile Insurance

Reparations Act, which provides no-fault insurance protec-

tion to “covered persons”. Specifically, we are asked to

décide whether a covered person who has sustained lost

earnings in excess of $1,000 per month is entitled to recover

as first-party benefits 80% of actual lost earnings with a

maximum limitation of $1,000 per month, or, whether, such

person’s recovery is limited to only $800 per month as first-

party benefits, such figure representing 80% of actual earn-

ings “up to one thousand dollars per month.”

The facts are undisputed and may be simply stated.

On April 1, 1977, plaintiff Otto Kuresies, while riding a

motorcycle, was struck and injured by an automobile driven

by one James Gantzer. A policy of automobile liability in-

surance issued to Gantzer by Merchants Mutual Insurance

Co., defendant herein, complied with the requirements of

section 672 of the Insurance Law and thus provided for the

payment of first-party benefits to various classes of per-

37a

Opinion of the Court of Appeals of the State of

New York in Kurcsics v. Merchants Mutual Insurance Co.

As a result of the accident and injury suffered, plaintiff

submitted claims to defendant for payment of both medical

expenses and lost wages.’ Although plaintiff produced

proper documentation of the fact that he had sustained a

loss of $1,400 per month in wages since the time of the acci-

dent, defendant has paid him only $800 per month, con-

tending that this amount is the maximum to which plaintiff

is entitled. In contrast, plaintiff maintains that the statute

specifically allows “up to one thousand dollars per month”

for lost wages and not the sum of $800 as interpreted by

the defendant.

This disagreement as to the amount of loss of earnings

plaintiff is entitled to recover as first-party benefits

spawned this litigation. By this action, plaintiff seeks a

declaratory judgment construing section 671 of the Insur-

38a

Opinion of the Court of Appeals of the State of

New York in Kurcsics v. Merchants Mutual Insurance Co.

an injured person will be allowed to receive up to a maxi-

mum of $1,000 per month from the carrier for lost wages.”

(93 Misc. 2d, at p. 283.) Special Term, however, denied

plaintiff's request for interest and attorney’s fees.

On appeal, a unanimous Appellate Division modified

the judgment of Special Term by deleting therefrom “the

provisions interpreting section 671 of the Insurance Law as

requiring defendant to increase its monthly payments to

plaintiff to the sum of $1,000 retroactive to April 1, 1977

and directing defendant to make such payments.” (65 A.D.

2d, at p. 197.) The order of the Appellate Division should

be reversed, and the case remitted to Special Term for the

award of reasonable attorney’s fees and interest.

The controversy in this case centers upon an ambiguity

which is perceived to exist in section 671 of the Insurance

Law. The term “basic economic loss” is defined to include

as one of its components “loss of earnings from work which

the injured person would have performed had he not been

injured, and reasonable and necessary expenses incurred by

such person in obtaining services in lieu of those that he

would have performed for income, up to one thousand dol-

lars per month for not more than three years from the date

of the accident causing the injury.” (Insurance Law, § 671,

subd. 1, par [b].) In contrast, the phrase “first party bene-

fits“, as far as is applicable to this appeal, “means payments

to reimburse a person for basic economic loss on account of

personal injury arising out of the use or operation of a

motor vehicle, less: (a) twenty percent of lost earnings

pursuant to paragraph (b) of subdivision one of this

section.”

Defendant takes the position that inasmuch as its duty to

compensate is couched in “first party benefit” terms (see

Opinion of the Court of Appeals of the State of

New York in Kurcsics v. Merchants Mutual Insurance Co.

Insurance Law, § 672), its obligation for lost earnings can-

not exceed the figure of $800 per month. Defendant arrives

at this sum by reasoning that since first-party benefits are

defined as basic economic loss less 20% of lost earnings as

defined in section 671 (subd 1, par [b]) of the Insurance

Law and, further, since loss of earnings as defined in such

section have an outer limit of $1,000 per month, the 20%

reduction works to limit recovery as first-party benefits for

lost earnings to $800 per month.

Plaintiff, on the other hand, contends that since the Leg-

islature has authorized expressly the recovery “up to one

thousand dollars per month” for loss of earnings, the 20%

reduction should not be interpreted as limiting this figure to

read “up to $800” instead of $1,000 as clearly stated in the

statute. Rather, plaintiff forwards as the reasonable and

correct interpretation of these statutory provisions that the

20% deduction was intended to be computed against the

gross amount of lost earnings claimed. Thus, an individual

is entitled to actual lost earnings claimed less 20%, unless

such reduced figure exceeds $1,000 per month, in which case

such person would be entitled to a maximum of $1,000 due

to the outer net limit imposed by section 671 (subd. 1, par

[bl) of the Insurance Law. We agree with this contention.

There can be little doubt that the 20% deduction was

included in the statutory scheme by the Legislature to pre-

vent both windfall recovery to injured persons and financial

hardship to insurance carriers. As has been stated: [T Ihe

20% credit or deduction was designed to give the insurance

carrier a monetary benefit based upon the fact that the lost

earnings compensated under this law, are not includable in

income for the purposes of federal income taxation and

accordingly, since the claimant derives a benefit in that

respect, the insurance carrier should share in said benefits

40a

Opinion of the Court of Appeals of the State of

New York in Kurcsics v. Merchants Mutual Insurance Co.

through the 20% deduction.” (N.Y. No-Fault Arbitration

Reports, NF-1, vol. 1, No. 1, Jan., 1977; see, also, Strain v.

Kechbaum, 83 Misc.2d 1066, 1067; Comment, New York

Adopts No-Fault: A Summary and Analysis, 37 Albany L.

Rev. 662, 689-690; Report of Joint Legis. Committee on Ins.

Rates, Regulation and Recodification of Insurance Law,

N.Y. Legis. Doc., 1973, No. 18, p. 10.) Thus, by limiting

first-party benefits to 80% of lost earnings, the Legislature

has attempted to compensate the accident victim for the

earnings he or she would have, in fact, realized, while, at

the same time, ensuring that an unjustified financial burden

is not thrust upon the insurance companies which would

eventually be reflected in higher insurance premiums. In

addition, the possible motivation for recovered accident vic-

tims to refrain from returning to work, if windfall recovery

would be permitted, is minimized, if not entirely eliminated.

While the legislative purpose behind the enactment of the

20% deduction embodied in section 671 (subd. 1, par [b]) of

the Insurance Law is readily identifiable, the issue to be

resolved on this appeal remains whether the 20% deduction

was intended to operate so as to limit recovery for loss of

earnings to $800 per month, or whether it was meant to

reduce only actual lost earnings claimed, thereby allowing

a maximum recovery of $1,000 per month as first-party

benefits. We believe that the statutory provisions support

the latter interpretation.

Section 671 (subd. 1, par. [b]) of the Insurance Law pro-

vides that one of the components of “basic economic loss”

is loss of earnings from work and further states, in un-

equivocal terms, that this amount shall not exceed “one

thousand dollars per month for not more than three years

from the date of the accident causing the injury.” Thus, it

is abundantly clear that this provision contemplates re-

4la

Opinion of the Court of Appeals of the State of

New York in Kurcsics v. Merchants Mutual Insurance Co.

covery for loss of earnings up to $1,000 per month, and we

would be remiss in reading the 20% deduction embodied in

section 671 (subd. 2, par. [a]) of the Insurance Law as re-

writing paragraph (b) of subdivision 1 to limit the maxi-

mum recovery to $800 per month for loss of earnings. If

the Legislature had so intended, section 671 (subd. 1, par.

[b]) would limit recovery to $800 per month and not au-

thorize, as it presently does, recovery “up to one thousand

dollars per month” for loss of earnings. The 20% deduction

should not be treated as taking away what benefits section

671 (subd. 1, par. [b]) bestows for “[i]t remains a basic

principle of statutory construction that a court will ‘not

by implication read into a clause of a rule or statute a limi-

tation for which * * * no sound reason [can be found] and

which would render the clause futile’ ” (Matter of Indus-

trial Comr. of State of N.Y. v. Five Corners Tavern, 47

N.Y.2d 639, 646-647, quoting Lederer v. Wise Shoe Co., 276

N.Y. 459, 465.)

In our opinion, the language of section 671 (subd. 2, par.

[a]) which reads “lost earnings pursuant to paragraph (b)

of subdivision one of this section” refers only to so much of

paragraph (b) of subdivision 1 which defines lost earnings,

to wit: “loss of earnings from work which the injured per-

son would have performed had he not been injured, and

reasonable and necessary expenses incurred by such per-

son in obtaining services in Lieu of those that he would have

performed for income”. The $1,000 per month limitation

embodied in section 671 (subd. 1, par. [b]) is not part and

parcel of the definition of lost earnings, but, merely, repre-

sents the outer limit of recovery set down by the Legisla-

ture in the no-fault automobile insurance scheme. Thus,

we hold today that an injured person can recover up to

42a

Opinion of the Court of Appeals of the State of

New York in Kurcsics v. Merchants Mutual Insurance Co.

$1,000 per month from the insurance carrier for lost earn-

ings. The statutory scheme envisions nothing less.“

We recognize that the Superintendent of Insurance has

interpreted the applicable provisions of section 671 of

the Insurance Law as limiting recovery for lost earnings to

$800 per month. (11 NYCRR 65.6 [In] [2] [xi].) Where the

interpretation of a statute or its application involves knowl-

edge and understanding of underlying operational practices

or entails an evaluation of factual data and inferences to be

drawn therefrom, the courts regularly defer to the govern-

mental agency charged with the responsibility for admin-

istration of the statute. If its interpretation is not irra-

tional or unreasonable, it will be upheld. (Matter of

Howard v. Wyman, 28 N.Y.2d 434; ef. Ostrer v. Schenck, 41

N.Y.2d 782, 786.) Where, however, the question is one of

pure statutory reading and analysis, dependent only on

accurate apprehension of legislative intent, there is little

basis to rely on any special competence or expertise of the

administrative agency and its interpretive regulations are

therefore to be accorded much less weight. And, of course,

if the regulation runs counter to the clear wording of a sta-

tutory provision, it should not be accorded any weight.

(See Matter of Adams [Government Employees Ins. Co.],

ee * b *

Ate

1114

43a

Opinion of the Court of Appeals of the State of

New York in Kurcsics v. Merchants Mutual Insurance Co.

One final point requires comment. Plaintiff argues that

he is entitled not only to the $200 per month which has

been improperly withheld from him, but, in addition, should

recover 2% interest per month on the overdue amount and

the reasonable cost of attorney’s fees in collecting the defi-

ciency. We agree.

Subdivision 1 of section 675 of the Insurance Law ex-

pressly provides tuat “[a]ll overdue payments shall bear

interest at the rate of two percent per month. If a valid

claim or portion thereof was overdue and such claim was

not paid before an attorney was retained with respect to

the overdue claim, the claimant shall also be entitled to

recover his attorney’s reasonable fee.” In accordance with

this statutory mandate, plaintiff is entitled to the interest

claimed and reasonable attorney’s fees.

Accordingly, the order of the Appellate Division should

be reversed, with costs, and the case remitted to Supreme

Court, Special Term, Erie County, to award reasonable

attorney’s fees and interest claimed.

Gasrre.i, J. (dissenting). With respect, I must dissent.

The majority first embraces a rather strained interpreta-

tion of the statutory definition of first-party no-faalt bene-

fits and then proceeds to conclude that the contrary inter-

pretation, which was adopted by the Superintendent of

Insurance, is not entitled to the usual deference because it

“runs counter to the clear wording of [the] statutory pro-

visions”. Since I am far from convinced that the language

of the statute unambiguously supports the majority’s read-

ing of it, I would vote to uphold the interpretation of the

pretation, we would note that at the time the under-

tak the revision of the Noault Automobile Tnourane Lew, the

with

question presented here—that this interpretation conflicts

legislative intent—had not been raised to alert the Legislature.

44a

Opinion of the Court of Appeals of the State of

New York in Kurcsics v. Merchants Mutual Insurance Co.

superintendent, who is, after all, charged with the respon-

sibility of administering the complex provisions of the In-

surance Law (Ostrer v. Schenck, 41 N.Y.2d 782, 786).

Indeed, a plain reading of the statutory provisions sug-

gests that the superintendent’s interpretation, which is em-

bodied in Insurance Department regulations (11 NYCRR

65.6 [n] [2] [xi]), is the correct one. Under subdivision 1

of section 672 of the Insurance Law, the insurer is obligated

to pay an injured claimant “first party benefits” if certain

statutorily defined conditions are met. First-party benefits

consist of the injured claimant’s “basic economic loss” (see

Insurance Law, § 671, subd. 2), which, in turn, includes

“loss of earnings from work which the injured person would

have performed had he not been injured * up to one

thousand dollars per month” (Insurance Law, § 671, subd.

1, par. [b]; emphasis supplied). In order to compute the

correct figure for monthly “first party benefits” under the

statute, however, it is necessary to reduce the amount at-

tributable to “lost earnings” by 20%. This deduction, as

noted by the majority, was included in the statutory scheme

as a means of making the “lost earnings” component of

first-party benefits, which are not subject to income tax,

roughly equivalent to the after-tax income that the claim-

ant would have enjoyed had he not been injured (Report

of the Joint Legis. Committee on Ins. Rates, Regulation

and Recodification of the Insurance Law, N.Y. Legis. Doc.,

1973, No. 18, p. 10).

In describing the manner in which the deduction is to be

calculated, the Legislature clearly stated that the claim-

ant’s “basic economic loss” must be reduced by “twenty per-

cent of lost earnings pursuant to paragraph (b) of subdivi-

sion one of this section [§671]” (Insurance Law, § 671,

45a

Opinion of the Court of Appeals of the State of

New York in Kurcsics v. Merchants Mutual Insurance Co.

subd. 2, par. [a]; emphasis supplied). I find the reference

to section 671 (subd. 1, par. [bl) particularly significant

because it suggests that the Legislature intended that the

term “lost earnings” be construed as a statutory term of

art whose meaning is to be ascertained by reference to that

subdivision. In other words, it was the Legislature’s inten-

tion to incorporate the entire statutory definition of “lost

earnings” into section 671 (subd. 2, par. [a]) and then to

apply the 20% reduction to the resulting figure. Since the

statutory definition of “lost earnings” is circumscribed by

a $1,000 per month maximum, it would seem that the figure

against which the 20% reduction is to be applied can never

exceed $1,000 per month. Accordingly, as the Superinten-

dent of Insurance has concluded, the amount of first-party

benefits that are attributable to “lost earnings” as a com-

ponent of “basic economic loss” could never exceed $800 per

month of $1,000 per month less 20%.

Having found the superintendent’s interpretation of the

statute to be an eminently reasonable one, I would carry the

inquiry no further. The Legislature has vested in the super-

intendent the responsibility of overseeing the highly com-

plex, interrelated provisions known collectively as the No-

Fault Automobile Insurance Law (Insurance Law, art 18),

and, hence, under existing legal principles, the superinten-

dent’s reading of the no-fault provisions is entitled to be

accorded great weight (Ostrer v. Schenck, 41 N. V. ad 782,

786, supra; see, also, Breen v. Cunard Lines 8.8. Co., 33

N.Y.2d 508, 511; ef. Matter of Howard v. Wyman, 28 N.Y.2d

434, 438). Moreover, the fact that the Legislature has not

found it necessary to correct the superintendent’s long-

standing interpretation of section 671 (subd. 2, par. [a])

lends further support to the contention that this interpreta-

46a

Opinion of the Court of Appeals of the State of

New York in Kurcsics v. Merchants Mutual Insurance Co.

tion does not conflict with legislative intent. The Legisla-

ture is presumed to have been aware of the superinten-

dent’s interpretation, which was promulgated in the form

of an Insurance Department regulation as early as 1974.

Surely, if the Legislature had disapproved of the superin-

tendent’s interpretation of the statute, it would have acted

to clarify the provision in 1977, when it undertook a major

revision of the State’s No-Fault Automobile Insurance Law

(L 1977, ch. 892). I find this especially persuasive.

In an apparent recognition of the fact that the superin-

tendent’s construction of the statute is at least as reason-

able as its own, the majority has found it necessary to

announce a new rule for reviewing an administrative

agency’s interpretation of its governing statutes. Hereto-

fore, it has been the unquestioned rule that the role of a

reviewing court is limited to determining whether an

agency regulation “is so lacking in reason for its promulga-

tion that it is essentially arbitrary” (Matter of Marburg v.

Cole, 286 N.Y. 202, 212). As we have previously observed,

“‘(t]}he judicial function is exhausted when there is found

to be a rational basis for the conclusions approved by the

administrative body’” (Ostrer v. Schenck, supra, at p. 786,

quoting Mississippi Val. Barge Co. v. United States, 292

U.S. 282, 286-287; see Matter of Dumbleton v. Reed, 40

N.Y.2d 586, 590 [Jowzs, J., dissenting]; Matter of Howard

v. Wyman, 28 N.Y.2d 434, 438, supra). Yet, despite the

well-established practice of this court to refrain from sub-

stituting its judgment for that of the administrative agency

charged with enforcing a statute, the majority has blandly

asserted without further analysis that “there is little basis

to rely on any special competence or expertise of the ad-

ministrative agency”. With this I cannot agree. Our prior

47a

Opinion of the Court of Appeals of the State of

New York in Kurcsics v. Merchants Mutual Insurance Co.

decisions in this area have been premised upon our convic-

tion that the various administrative agencies, which are

part of the executive branch of government, are entitled to

have a significant role in the interpretation of legislative

enactments. This is particularly so where, as here, the

Legislature has delegated to the administrative agency the

task of implementing complex and highly technical rules

respective functions of the judicial

ten an $800 per month maximum into the definition of “lost

earnings” if it intended the recovery attributable to “lost

48a

Opinion of the Court of Appeals of the State of

New York in Kurcsics v. Merchants Mutual Insurance Co.

earnings” to be limited to that amount. An analysis of the

entire legislative design, however, belies this assumption.

In addition to being used in subdivision 2 of section 671 as

a touchstone for measuring “first party benefits”, the term

“basic economic loss”, which includes “lost earnings”, is

also used in subdivision 1 of section 673 to define the thresh-

old amount of damages which must be sustained in order

for an injured claimant to be permitted to maintain a

common-law tort action (see Montgomery v. Daniels, 38

N. T. ad 41, 47). This alternate use of “basic economic loss”

in the no-fault article, in my view, provides adequate ex-

planation for the Legislature’s decision not to incorporate

the $800 per month limitation on recoverable lost earnings

directly into the statutory definition of that term. Indeed,

contrary to the majority’» assertions, it seems perfectly

reasonable to conclude that the Legislature intended the

term “lost earnings” to be circumscribed by a $1,000 per

month maximum for purposes of section 673 and, at the

same time, intended that the $1,000 per month maximum

be reduced by 20% for purposes of computing recoverable

first-party benefits attributable to lost earnings.

In summary, I would stress that my disagreement with

the majority stems not so much from our differing views

concerning the proper interpretation of the statute as from

the majority’s apparent refusal to acknowledge that the

statute is reasonably susceptible of more than one inter-

pretation. In order to overcome the principle that the views

of an administrative agency are entitled ta great deference

in matters of statutory interpretation, the majority has had

to drastically curtail the application of that well-settled

principle and, in the process, has overridden the superin-

tendent’s highly sensible reading of the statute. Yet, as the

Opinion of the Court of Appeals of the State of

New York in Kurcsics v. Merchants Mutual Insurance Co.

foregoing discussion illustrates, the interpretation prof-

fered by the Superintendent of Insurance is amply sup-

ported by both the language of the statute and the

legislative design. Under such circumstances, our prior

case law would seem to require that the court refrain from

substituting its views for those of the administrative

agency charged with implementing the statute (see Matter

of Marburg v. Cole, 286 N.Y. 202, 212, supra).

For the foregoing reasons, I would affirm the order of the

Appellate Division and uphold the existing Insurance De-

partment regulations.

Chief Judge Cooxe and Judges Jonzs, Wacutizr, Fucus-

unnd and Meyver concur with Judge Jasew ; Judge Gasrre.ii

dissents and votes to affirm in a separate opinion.

Order reversed, with costs, and the case remitted to Su-

preme Court, Erie County, for further proceedings in ac-

cordance wtih the opinion herein.

Informational Brochure of the Department of Insurance

—

traditional liability insurance, or both.

Your New York policy automatically provides that

you have the basic insurance required by other states.

Your New York no-fault benefits and additional

coverages, if you have them, will protect you and rela-

tives living in your household for out-of-state accidents.

How Can | Lower My Insurance Costs?

It pays to comparison shop for insurance and this

is as true for no-fault as for other types of insurance.

You can reduce your insurance costs by: increasing

amount; or, if you have a car with low market value,

eliminating one or both physical damage coverages en-

tirely. Remember, you can never collect more than the

market value of your car in a physical damage claim.

Where You Can Get More information And Help

You should call on your insurance agent or broker,

or contact your insurance company directly for infor-

mation and assistance. If you need more information

or help, phone or arrange to visit your New York State

Insurance Department during normal business hours by

calling:

New York City... . 2... 6... c ee. (212) 775-1011

All other (toll free) (800) 522-4370

New York, New York 10047

New York State Insurance Department

Box 7312

Albany, New York 12224

STATE OF NEW YORK

EXECUTIVE CHAMBER

ALBANY 12224

HUGH L. CAREY

Governor

To the Insurance Buying Public:

No- fault automobile insurance has served our

State well by providing faster payment for losses and

more insurance coverage for the average New Yorke:.

However, costs must be contained, so your State

government revised the no-fault law to eliminate !aw-

suits involving non-serious injuries, control medical

costs, and stop some duplicate payments. In addition.

the ew law closed certain gaps in coverage and in.

creased the number of people covered.

This brocture is designed to give you an over

view of the benefits available under the no fault law.

For the specific terms of your no-fault coverage, in

cluding exclusions, you should read your policy

care y.

Your State Insurance Department has written

this general brochure to tell you .. .

WHAT YOU SHOULD KNOW

ABOUT THE REVISED NO-FAULT

AUTOMOBILE INSURANCE LAW

igh ay

KEEP THIS WITH YOUR POLICY

What Are The Changes From the Old Law?

This brochure contains important information

about your auto insurance. Please read it carefully and

keep it with your policy for future reference.

The revised no-fault automobile insurance law be-

came effective December 1, 1977. Generally, the law

covers all occupants of motor vehicles who are involved

in accidents within New York State, except for motor-

cycle drivers and their passengers. Pedestrians injured in

the State by motor vehicles and motorcycles are also

covered. In addition, you and relatives living in your

household may also be covered for out-of-state accidents.

The prompt payment feature of no-fault remains

the same. You receive payment from your insurer in-

stead of having to pay bills and expenses out of your

own funds while waiting for the results of a lawsuit.

This means that if you are invovied in an accident,

your insurance company pays you, your passengers or

any pedestrian injured by your car for economic losses

(wage loss, medical and other related expenses as they

occur) regardless of who actually caused the accident.

The other driver's insurance company pays the wage

losses and medical bills of the driver, passenger or any

pedestrian injured by the other car.

Economic losses of up to $50,000 per person are

covered under no-fault, but higher coverages are avail-

able at your option for an additional charge.

In summary, the important advantages of no-fault

insurance continue to be:

1) prompt and sure payment for losses;

2) elimination of lawsuits for non-serious injuries;

3) rehabilitation of accident victims; and

4) the existence of standard minimum coverages.

The revised no-fault a contains several new pro-

visions which are now a standard part of your basic

no-fault insurance coverage:

1) Your right to sue for pain and suffering is now deter-

mined only by the seriousness of your injuries

instead of the dollar amount of your medical bills.

2) You and your relatives living with you may be

covered for out-of-state accidents.

3) A $2,000 auto accident death benefit has been

added to the basic coverage.

4) Pedestrians injured by motorcycles are eligible for

no-fault benefits from the motorcycie’s insurer;

however, drivers and passengers of motorcycles are

no longer covered by no-fault when invoived in an

accident with an automobile.

5) No- fault benefits duplicating Medicare benefits are

mostly eliminated as are some other duplicate bene-

fits. Your insurer will pay the Medicare co-insur-

ance and deductible amounts. As a result, if you are

eligible, your no-fault premiums may be reduced.

6) Charges for health service costs are limited by fee

schedules established or adopted by the Superinten-

dent of Insurance.

7) New York State Disability Benefits are restored to

automobile accident victims and such benefits will

be deducted from the $50,000 no-fault package.

8) Occupants of a bus or schoo! bus will generally look

to their own insurer for no-fault benefits.

9) New arbitration procedures have been established

and the filing fee for arbitration of a denied or over-

due claim has been reduced from $25 to $15.

10) Victims of accidents involving uninsured motor

vehicles in New York State who are not covered

under any no-fault policy can now obtain no-fault

benefits from the Motor Vehicle Accident Indemni-

fication Corporation (MVAIC).

Where Do | File A Claim?

Generally, you are required to file your no-fault

claim with the insurer of the car you were in when the

accident occurred. If you are a pedestrian, you file

with the insurer of the automobile that struck you.

If you are injured in or by an uninsured vehicle,

you should file your no-fault claim with your own

automobile insurer, or if you do not own an automo-

bile, you should file your claim with the insurer of any

automobile in your family’s household. If you are not

covered by any auto insurance of your own or your

family’s and you are injured by an uninsured vehicle,

you should immediately report your accident to the

police and within 90 days of the accident file a no-

fault and liability claim with the Motor Vehicle Acci-

dent Indemnification Corporation (MVAIC), 116 John

Street, New York, New York 10038.

Do | Have The Right To Sue?

Your right to sue a negligent driver for property

damage is not affected by no-fault, but your right to

sue for personal injuries is limited to cases involving:

1) serious injury as defined by the revised law: 2)

death resulting from injuries; and 3) economic losses

that are greater than those for which your basic no-

fault coverage provides (for example, losses above

$50,000 or wage loss in excess of $1,000 per month).

In the case of serious injury, in addition to receiving

no-fault benefits you can also sue for “pain and suffer-

ing’, as well as economic loss that exceeds the basic

no-fault coverage.

“Serious injury” is a technical term defined in the

law as:

“{A] personal injury which results in death;

dismemberment, significant disfigurement; a

fracture; permanent loss of use of a body

organ, member, function or system; perma-

nent consequential limitation of use of a body

Can | Be Sued?

Yes. Just as you may sue in some situations, you

may also be sued if you are a negligent driver: (1) for

property damage, and (2) for personal injury losses in

one of the three cases mentioned above.

Therefore, you and all other automobile owners

are still required to carry minimum liability insurance

(bodily-injury coverage for up to $10,000 per person

and $20,000 per accident, and property damage cover-

age of $5,000). As always, you have the choice of buy-

ing higher amounts of liability insurance. Remember,

collision and comprehensive coverage are not included

in no-fault and are not required by law.

What Are The Amounts Of Basic No- Fault

Benefits?

If an auto accident occurs in New York State,

your insurance company will pay up to $50,000 in

basic economic losses to you, $50,000 to each injured

occupant of your car and $50,000 to each pedestrian

injured by your car. For an accident occurring out of

New York, only you as the insured person and your

relatives living in the household are protected when in-

jured in an automobile accident.

However, benefits may be less than the injured

person's actual loss, because only 80% of lost earnings

up to a maximum of $800 per month is payable. Bene-

fits will be reduced by a deductible if there is one, as

well as by benefits that are payable by Workmen's

Compensation, Social Security Disability, New York

State Disability Benefits (DBL), Medicare benefits, and

certain employer wage continuation“ plans where an

employee does not lose any future sick leave benefits.

Included in the coverage of $50,000 per person in

economic losses, the basic no-fault benefits are:

1) all necessary health service expenses payable in ac-

cordance with fee schedules established or adopted

by the New York State Insurance Department;

2) lost earnings up to $1,000 per month for three

years, less 20% because the benefit payrnents,

unlike earnings, will not be taxable; and

5la

Claim Form Letter

New York Moror Ventoize No-Favutt Insurance Law

Cover LerrTzr

Name and address of 1

Insurer or self-insurer

Name of Insurer’s Claim Representative |*

Address of Representative

Phone Number of Representative

Date Policyholder Policy Number

Date of Accident File Number

Name and Address of Applicant |

Dear Applicant :

This will acknowledge receipt of notice that you may have

sustained injuries in the above captioned accident. The New

York No-Fault Law provides for the payment of benefits

to victims of motor vehicle accidents to reimburse them for

their basic economic loss. Briefly summarized, basic eco-

nomic loss consists of the following:

a. necessary medical and rehabilitation expenses,

b. loss of earnings of up to $1,000 per month for up to

three years, less 20% because these benefits are not

taxable ($800 per month maximum collectible),

52a

Claim Form Letter

e. up to $25 per day for up to one year for other rea-

sonable and necessary expenses incurred on account

of the injury, and

d. a $2,000 death benefit.

Additional benefits may be owed to you if the above policy

has been endorsed to include optional additional coverage.

‘Nore. The No-Fault Law provides that if you are in-

jured on a bus or a school bus in New York State, no-

fault benefits must be paid by your auto insurer or if

you have no auto, the auto insurer of a relative with

whom you reside. The law further provides that you

should only file a no-fault claim with us if there is no

such auto policy in your household. The above rule

does not apply and you may file a no-fault claim with|**

us if you are the operator, owner or employee of the

| owner of the bus company.

In determining the benefits payable to you under the No-

Fault Law, amounts recovered or recoverable on account

of this accident from Workmen’s Compensation, New York

State Disability, Medicare, and certain wage continuation

plans will reduce your no-fault benefits. Therefore, if you

are entitled to any of these benefits you should make your

claim for them promptly.

To enable us to determine if you are entitled to any no-fault

benefits, please complete, Sian and immediately return the

enclosed Application for Motor Vehicle No-Fault Benefits

along with copies of any bills you have received to date.

You are entitled to receive health service benefits without

any time limit if it is possible to determine during the first

year after the accident that further health services may be

required after the first year. As you receive additional

53a

Claim Form Letter

medical bills or any other bills which you believe to be

covered send them to us. We will reimburse you as soon as

we are able to verify that they are covered expenses under

no-fault. Please identify all communications with us with

the file number shown above. Should you have any ques-

tions concerning your claim, we will be most happy to assist

you. Please feel free to call us at the above phone number.

Very truly yours,

Important REMINDER

PLEASE ANSWER ALL QUESTIONS ON THE APPLICATION FORM

AND SIGN BOTH AUTH») ZATIONS 80 THAT WE MAY GIVE PROMPT

ATTENTION TO YOUR An.

* Bracketed language to be filled in by insurer or self-

insurer.

** Bracketed language to be used only by insurers of buses

and school buses or self-insured buses or school buses.

APPENDIX OF CONSTITUTIONAL,

STATUTORY AND REGULATORY PROVISIONS

CONTENTS

PAGE

Relevani Provisions of the Constitution of the United

States 1s

Article XVIII of the New York Insurance Law ............ 2s

Pertinent Regulations of the New York Department of

Insurance 208

Constitutional Provisions

Article I, Section 10 of the United States Constitution

provides, in part:

“No State shall. pass any . . . Law impairing the

Obligation of Contracts

The Fifth Amendment to the United States Constitution

provides, in part:

“No person shall. . . be deprived of life, liberty, or prop-

erty, without due process of law; nor shall private

property be taken for public use without just com-

pensation.”

The Fourteenth Amendment to the United States Con-

stitution provides, in part:

„ no State... shall deprive any person of life, liberty,

or property, without due process of law.

Statutory Provisions

(New York Insurance Law, Article XVIII)“

Comprenensive AvTomositz Insurance Reparations Act

§ 670. Title.

This article shall be known as the “Comprehensive Auto-

mobile Insurance Reparations Act.”

§ 671. Definitions.

1. “Basic economic loss” means, up to fifty thousand

dollars per person:

(a) all necessary expenses incurred for: (i) medical,

hospital, surgical, nursing, dental, ambulance, x-ray, pre-

scription drug and prosthetic services; (ii) psychiatric,

physical and occupational therapy and rehabilitation ; (iii)

any non-medical remedial care and treatment rendered in

accordance with a religious methed of healing recognized

by the laws of this state; and, (iv) any other professional

health services; all without limitation as to time, provided

that within one year after the date of the accident causing

the injury it is ascertainable that further expenses may be

incurred as a result of the injury;

(b) loss of earnings from work which the injured person

would have performed had he not been injured, and reason-

able and necessary expenses incurred by such person in

obtaining services in lieu of those that he would have per-

formed for income, up to one thousand dollars per month

for not more than three years from the date of the accident

causing the injury; and

* As in effect on February 20, 1980.

Statutory Provisions

(e) all other reasonable and necessary expenses incurred,

up to twenty-five dollars per day for not more than one

year from the date of the accident causing the injury.

The items of basic economic loss in this subdivision are

all subject to the limitations and requirements of section

six hundred seventy-eight of this article.

“Basic economic loss” shall not include any loss incurred

on account of death; subject, however, to the provisions of

paragraph (e) of subdivision one of section six hundred

seventy-two of this article.

For the purpose of determining basic economic loss, the

expenses incurred under paragraph (a) of this subdivision

shall be in accordance with the limitations of section six

hundred seventy-eight of this article. An employee who is

entitled to receive monetary payments, pursuant to statute

or contract with the employer, or who receives voluntary

monetary benefits paid for by the employer, by reason of

such employee’s inability to work because of personal in-

jury arising out of the use or operation of a motor vehicle,

shall not be entitled to receive first party benefits for “loss

of earnings from work” to the extent that such monetary

payments or benefits from the employer do not result in the

employee suffering a reduction in income or a reduction in

such employee’s level of future benefits arising from a

subsequent illness or injury.

2. “First party benefits” means payments to reimburse

a person for basic economic loss on account of personal

injury arising out of the use or operation of a motor vehicle,

less:

(a) twenty percent of lost earnings pursuant to para-

graph (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

Statutory Provisions

disability benefits, or workmen’s compensation benefits, or

disability benefits under article nine of the workmen’s com-

pensation law, or medicare benefits (other than lifetime

reserve days and provided further that the medicare bene-

fits utilized herein do not result in a reduction of such

person’s medicare benfits for a subsequent illness or in-

jury) ; and

(e) any amounts deductible under the applicable insur-

ance policy.

3. “Non-economic loss” means pain and suffering and

similar nonmonetary detriment.

4. “Serious injury” means a personal injury which re-

sults in death; dismemberment ; significant disfigurement ;

a fracture; permanent loss of use of a body organ, member,

function or system; permanent consequential limitation of

use of a body organ, or member ; significant limitation of use

of a bodyfunction or system; or a medically determined

injury or impairment of a non-permanent nature which

prevents the injured person from performing substantially

all of the material acts which constitute such person’s usual

and customary daily activities for not less than ninety days

during the one hundred eighty days immediately following

the occurrence of the injury or impairment.

5. “Owner” shall have the meaning asctibed in section

one hundred twenty-eight of the vehicle and traffic law.

6. “Motor vehicle” shall have the meaning ascribed in

section three hundred eleven of the vehicle and traffic law,

except that (a) it shall also include fire and police vehicles,

and (b) it shall not include a motorcycle, as such term is

defined in section one hundred twenty-three of the vehicle

and traffic law.

Statutory Provisions

7. “Insurer” means the insurance company or seif-

insurer, as the case may be, which provides the financial

security required by article six or eight of the vehicle and

traffic law.

8. “Member of his household” means a spouse, child or

relative of the named insured who regularly resides in his

household.

9. “Uninsured motor vehicle” means a motor vehicle,

the owner of which is (a) a financially irresponsible motor-

ist (as defined in subdivision j of section six hundred one

of this chapter) or (b) unknown and whose identity is un-

ascertainable. |

10. “Covered person” means any pedestrian injured

through the use or operation of, or any owner, operator or

occupant of, a motor vehicle which has in effect the financial

security required by articles six or eight of the vehicle and

traffic law or which is referred to in subdivision two of

section three hundred twenty-one of such law; or any other

person entitled to first party benefits.

§ 672. Entitlement to first party benefits ; additional finan-

cial security required.

1. Every owner’s policy of liability insurance issued on

a motor vehicle in satisfaction of the requirements of arti-

cles six or eight of the vehicle and traffic law shall also pro-

vide for; ; every owner who maintains another form of finan-

Statutory Provisions

(a) persons, other than occupants of another motor ve-

hicle or a motorcycle, for loss arising out of the use or

operation in this state of such motor vehicle; provided that,

in the case of occupants of a bus or school bus (as defined

in sections one hundred four and one hundred forty-two of

the vehicle and traffic law) other than operators, owners,

and employees of the owner or operator of such bus or

school bus, the coverage for first party benefits for such

occupants shall be afforded under the policy or policies,

if any, providing first party benefits to the injured person

and members of his household for loss arising out of the

use or operation of any motor vehicle of such household,

and in the event there is no such policy or policies, then

first party benefits shall be provided by the insurer of such

bus or school bus; and

(b) the named insured and members of his household,

other than occupants of a motorcycle, for loss arising out

of the use or operation of an uninsured motor vehicle and,

outside of this state, of an insured motor vehicle; and

pant of another motor vehicle or a motorcycle, as a death

benefit in the amount of two thousand dollars for the death

of such person arising out of the use or operation of such

motor vehicle, such amount being in addition to any first

party benefits for basic economic loss.

2. An insurer may exclude from coverage required by

subdivision one a person who (a) intentionally causes his

own injury; (b) is injured as a result of operating a motor

vehicle while in an intoxicated condition or while his ability

to operate such vehicle is impaired by the use of a drug

(within the meaning of section eleven hundred ninety-two

of the vehicle and traffic law); or (e) is injured while he is:

Statutory Provisions

(i) commiting an act which would constitute a felony, or

seeking to avoid lawful apprehension or arrest by a law

enforcement officer, or

(ii) operating a motor vehicle in a race or speed test, or

(iii) operating or occupying a motor vehicle known to

him to be stolen.

8. Each insurance company which offers insurance to

satisfy the requirements of subdivision one of this section

shall offer such insurance without a deductible and with a

family deductible of up to two hundred dollars (which de-

ductible should apply only to the loss of the named insured

and members of his household.) The superintendent may

approve a higher deductible in the case of insurance pol-

icies providing additional benefits or pursuant to a plant

designed an implement to coordinate first party benefits

with other benefits.

4. Insurance policy forms for insurance to satisfy the

requirements of subdivision one of this section shall be sub-

ject to approval pursuant to articles seven-A and eight of

this chapter. Minimum benefit standards for such policies

and for self-insurers, and rights of subrogation, examina-

tion and other such matters, shall be established by regula-

tion pursuant to section twenty-one of this chapter.

5. Every owner’s policy of liability insurance issued in

satisfaction of articles six or eight of the vehicle and traffic

law shall also provide, when a motor vehicle covered by

such policy is used or operated in any other state or in any

Canadian province, insurance coverage for such motor ve-

hicle at least in the minimum amount required for such ve-

hiele by the laws of such other state or Canadian province.

Statutory Provisions

6. Every owner’s policy of liability insurance issued on

a motorcycle in satisfaction of the requirements of articles

six or eight of the vehicle and traffic law shall also provide

for; every owner who maintains another form of financial

security on a motorcycle in satisfaction of the requirements

of such articles shall be liable for; and every owner of a

motorcycle required to be subject to the provision of this

article by subdivision two of section three hundred twenty-

one of the vehicle and traffic law shall be liable for; the

payment of first party benefits to persons, other than the

occupants of such motorcycle, another motorcycle, or any

motor vehicle, for loss arising out of the use or operation

within this state of such motorcycle; provided, however,

that every insurer and self-insurer may exclude from the

coverage required by this subdivision a person who inten-

tionally causes his own injury or is injured while com-

mitting an act which would constitute a felony, or while

seeking to avoid lawful apprehension or arrest by a law

enforcement officer.

7. A company authorized to provide the insurance spec-

ified in subdivision three of section forty-six of this chapter

or a corporation organized pursuant to article nine-c of this

chapter may, individually or jointly, with the approval of

the superintendent upon a showing that the company or

corporation is qualified to provide for all of the items of

basic economic loss specified in paragraph (a) of subdivi-

sion one of section six hundred seventy-one of this chapter,

provide coverage for such items of basic economic loss to

the extent that an insurer (as defined in this article) would

be required to provide therefor. Where a policyholder

elects to be covered under such an arrangement the insurer

providing coverage for the automobile shall be furnished

with the names of all persons covered by the company or

Statutory Provisions

corporation under the arrangement and such named per-

sons shall not be entitled to benefits for any of the items of

basic economic loss specified in paragraph (a) of subdivi-

sion one of section six hundred seventy-one. The premium

for the automobile insurance policy shall be appropriately

reduced to reflect the elimination of coverage for such items

of basic economic loss. Coverage by the automobile insurer

of such eliminated items of basic economic loss shall be

effected or restored upon request therefor by the insured

and payment of the premium for such coverage. All com-

panies and corporations providing coverage for items of

basic economic loss pursuant to the authorization of this

subdivision shall have only those rights and obligations

which are applicable to an insurer subject to this article.

§ 673. Causes of action for personal injury.

1. Notwithstanding any other law, in any action by or on

behalf of a covered person against another covered person

for personal injuries arising out of negligence in the use

or operation of a motor vehicle in this state, there shall be

no right of recovery for non-economic loss, except in the

case of a serious injury, or for basic economic loss. The

owner, operator or occupant of a motorcycle which has in

effect the financial security requ.red by article six or eight

of the vehicle and traffic law, or which is referred to in sub-

division two of section three hundred twenty-one of such

law, shall not be subject to an action by or on behalf of a

covered person for recovery for non-economic loss, except

in the case of a serious injury, or for basic economic loss.

2. In any action by or on behalf of a covered person,

against a non-covered person, where damages for personal

injuries arising out of the use or operation of a motor vehi-

10s

Statutory Provisions

cle or a motorcycle may be recovered, an insurer which paid

or is liable for first party benefits on account of such in-

juries shall have a lien against any recovery to the extent of

benefits paid or payable by it to the covered person. No

such action may be compromised by the covered person

except with the written consent of the insurer, or with the

approval of the court, or where the amount of such settle-

ment exceeds fifty thousand dollars. The failure of such

person to commence such action within two years after the

accrual thereof shall operate to give the insurer a cause of

action for the amount of first party benefits paid or pay-

able against any person who may be liable to the covered

person for his persona! injuries, which cause of action shall

be in addition to the cause of action of the covered person;

provided, however, uin any action subsequently com-

menced by the covered person for such injuries, the amount

of his basic economic loss shall not be recoverable.

3. Where there is no right of recovery for basic economic

loss, such loss may nevertheless be pleaded and proved to

the extent that it is relevant to the proof of noneconomic

loss.

§ 674. Settlement between insurers.

1. Any insurer liable for the payment of first party bene-

fits to or on behalf of a covered person shall have the right

to recover the amount of such benefits so paid from the in-

surer of any other covered person if and 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. Such right to recover shall exist, however, only if

at least one of the motor vehicles involved is a motor vehi-

cle weighing more than six thousand five hundred pounds

lls

Statutory Provisions

unloaded or is a motor vehicle used principally for the

transportation of persons or property for hire; provided,

however, that in the case of occupants of a bus or school

bus (as defined in sections one hundred four and one hun-

dred forty-two of the vehicle and traffic law) «cher than

operators, owners, and employees of the owner or operator

of such bus or school bus, an insurer which, pursuant to the

requirements of paragraph (a) of subdivision one of sec-

tion six hundred seventy-two of this article, provides cov-

erage for first party benefits for such occupants under the

policy or policies providing first party benefits to the in-

jured person and members of his household for loss arising

out of the use or operation of any vehicle of such house-

hold, shal] have no right to recover the amount of such

benefits from the insurer of such bus or school bus.

2. The sole remedy of any insurer to recover on a claim

arising under subdivision one of this section, shall be the

submission of the controversy to mandatory arbitration

pursuant to procedures to be promulgated or approved by

the superintendent. Such mandatory arbitration proce-

cedures shall also be utilized to resolve all disputes arising

between insurers concerning their responsibility for the

payment of first party benefits.

3. The liability of an insurer imposed by this section

shall not affect or diminish its obligations under any policy

of bodily injury liability insurance.

4. (a) “Compensation provider”, for the purposes of this

means the state insurance fund or the person, association,

corporation or insurance carrier or statutory fund liable

under state or federal laws for the payments of workers’

compensation law.

12s

Statutory Provisions

(b) Any compensation provider liable for the payment

of workers’ compensation benefits under state or federal

laws or disability benefits under article nine of the workers’

compensation law, to or on behalf of a covered person shall

have the right to recover the amount of such benefits so

paid which were in lieu of first party benefits which another

insurer would otherwise have been obligated to pay pur-

suant to section six hundred twenty-one-a or subdivision

one of section six hundred seventy-two of this chapter from

the insurer of any other covered person if and 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. Such right to recover shall exist, however,

only if at least one of the motor vehicles involved in a

motor vehicle weighing more than six thousand five hun-

dred pounds unloaded or is a motor vehicle used princi-

pally for the transportation of persons or property for

hire; provided, however, that in the case of occupants of a

bus or school bus (as defined in section one hundred four

and one hundred forty-two of the vehicle and traffic law)

other than operators, owners and employees of the owner

or operator of such bus or school bus, a compensation pro-

vider shall have no right to recover the amount of such

benefits from the insurer of such bus or school bus.

recover on a claim arising under paragraph (b) of this

subdivision shall be the submission of the controversy to

mandatory arbitration pursuant to procedures to be prom-

ulgated or approved by the superintendent.

§ 675. Fair claims settlement.

1. Payments of first party benefits and additional first

party benefits shall be made as the loss is incurred. Such

13s

Statutory Provisions

benefits are overdue if not paid within thirty days after

the claimant supplies proof of the fact and amount of loss

sustained. If proof is not supplied as to the entire claim,

the amount which is supported by proof is overdue if not

paid within thirty days after such proof is supplied. All

overdue payments shall bear interest at the rate of two

percent per month. If a valid claim or portion thereof was

overdue, the claimant shall also be entitled to recover his

attorney’s reasonable fee, for services necessarily per-

formed in connection with securing payment of the overdue

claim, which shall be subject to limitations promulgated by

the superintendent in regulations.

2. Every insurer shall provide a claimant with the option

of submitting any dispute involving the insurer’s liability

to pay first party benefits, or additional first party benefits,

the amount thereof or any other matter which may arise

under subdivision one of this section to arbitration pur-

suant to simplied procedures to be promulgated or ap-

proved by the superintendent.

An award by an arbitrator may be vacated or modified

by a master arbitrator in accordance with simplified pro-

cedures to be promulgated or approved by the superinten-

dent. The grounds for vacating or modifying any arbitra-

tor’s decision by a master arbitrator shall not be limited to

those grounds for review set forth in article seventy-five of

the civil practice law and rules. The decision of an arbi-

trator shall be binding except where vacated or modified by

a master arbitrator. The decision of a master arbitrator

shall be binding except for the grounds for review set forth

in article seventy-five of the civil practice law and rules,

and provided further that where the amount of such master

arbitrator’s award is five thousand dollars or greater, ex-

clusive of interest and attorney’s fees, the insurer or the

14s

Statutory Provisions

claimant may institute an action in a court of competent

jurisdiction to adjudicate the dispute de novo.

§ 676. Coverage for non-resident motorists driving in this

state.

Every insurer authorized to transact or transacting busi-

ness in this state, or controlling or controlled by or under

common control by or with an insurer authorized to trans-

act or transacting business in this state, which sells a pol-

icy providing motor vehicle liability insurance coverage, or

any similar coverage, in any state or Canadian province

shall include in each such policy coverage to satisfy the

financial security requirements of articles six or eight of

the vehicle and traffic law and to provide for the payment

of first party benefits pursuant to subdivision one of sec-

tion six hundred seventy-two of his chapter when a motor

vehicle covered by such policy is used or operated in this

state, and every such policy shall be construed as if such

coverage were embodied therein.

5677. Return to insureds of premium savings.

1. On or before November first, nineteen hundred sev-

enty-three, each insurer shall file with the superintendent

the schedule of rates, rating plans, rating rules and rate

manuals, together with the supporting information re-

quired by section one hundred seventy-eight of this chap-

ter, which it proposes to use in connection with the insur-

158

Statutory Provisions

ernor and the legislature a report showing the rates for

166

Statutory Provisions

standing any inconsistent provisions or of article seven-A

of this chapter; provided, however, that changes in such

rates, rating plans, rating rules and rate manuals may be

made effective without such approval if the rates which

result from such changes are no higher than the insurer’s

highest rates in effect at any time after the effective date

of this act. The provisions of this subdivision shall be

applicable only to policies covering losses or liabilities

arising out of ownership, operation or use of a motor

(a) predominantly used for nonbusiness purposes, when

a natural person is the named insured under a policy of

automobile insurance; or (b) used principally for the

transportation of persons for hire, including a bus or a

school bus as defined in sections one hundred four and

one hundred forty-two of the vehicle and traffic law.

4. Each insurer which has in effect on February first,

nineteen hundred seventy-four, with a previous inception

date, an owner's policy of liability insurance shall compute

and refund to the insured (no later than the next renewal

178

Statutory Provisions

or damage to a motor vehicle shall establish a fair, prac-

ticable and nondiscriminatory plan for refunding or other-

wise crediting to those purchasing such policies their share

of the insurer’s excess profit, if any, on such policies. An

excess profit shall be a profit beyond such percentage rate

of return on net worth attributable to such policies, as

computed in accordance with the regulation required by

subdivision three of section one hundred seventy-eight of

this chapter, as is determined by the superintendent to be

so far above a reasonable average profit as to amount to

an excess profit (taking into consideration the fact that

losses or profits below a reasonable average profit not be

recouped from such policy-holders). Each such plan shall

apply to policy periods between January first, nineteen

hundred seventy-four and December thirty-first, nineteen

hundred eighty-two. In prescribing such regulations the

superintendent may limit the duration of such plans, waive

any requirement for refund or credit which he determines

to be de minimis or impracticable, adopt forms of returns

which shall be made to him in order to establish the amount

of any refund or credit due, establish periods and times

for the determination and distribution of refunds and

credits, and shall provide that insurers receive appropri-

ate credit against any refunds or credits required by any

such plan for policy-holder dividends and for return pre-

mium which may be due under rate credit or retrospective

188

Statutory Provisions

by virtue of the provisions of the last paragraph of sub-

division one of section six hundred seventy-one of this

article, the premium attributable to coverage under the

automobile insurance policy for such items shal] be appro-

priately modified to reflect the insurer’s reduced exposure

to loss.

§ 678. Limitations of charges by providers of

health services.

1. The charges for services specified in paragraph (a)

of subdivision one of section six hundred seventy-one of

this article and any further health service charges which

are incurred as a result of the injury and which are in

excess of basic economic loss, shall not exceed the charges

permissible under the schedules prepared and established

by the chairman of the workmen’s compensation board for

industrial accidents, except as otherwise provided in sec-

tion thirteen-a of the workmen’s compensation law.

2. The superintendent, after consulting with the chair-

Statutory Provisions

addition to the charges authorized in subdivisions one and

Regulatory Provisions

(Pertinent Regulations of the Insurance Department

of the State of New York)*

Regulation 68, 11 NYCRR § 65.6(n)(2)(xi) provides:

(xi) Maximum amount payable under mandatory cover-

age for loss of earnings from work. The $1,000 monthly

work loss limitation on basic economic loss, when reduced

by the statutory 20-percent offset, results in a maximum

payable first-party benefit, for loss of earnings from work

under the mandatory coverage, of $800 per month.

Regulation 68, 11 NYCRR § 65.15(n)(2)(xi) provides:

(xi) Maximum amount payable under mandatory cover-

age for loss earnings from work. The $1,000 monthly work

loss limitation on basic economic loss, when reduced by

the statutory 20-percent offset, results in a maximum pay-

able first-party benefit for loss of earnings from work

under the mandatory coverage of $800 per month.

* As in effect on February 20, 1980.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.