Loss Transfer limitations

Matter of Fiduciary Ins. Co. v American Bankers Ins. Co. of Fla., 2015 NY Slip Op 06343 (2d Dept. 2015)

Follow the facts and the law on this case.

(1) “Johnson filed a claim with the petitioner seeking to recover first-party benefits, more commonly known as “no-fault” benefits, under Insurance Law § 5103. The petitioner ultimately paid Johnson a total of $59,906.97 in no-fault benefits.”

(2) “In the order appealed from, the Supreme Court denied the petition to vacate the arbitration award, granted the cross petition, and confirmed the award. The court began its analysis by noting that “here are two types of no-fault disputes between insurers that are subject to mandatory arbitration: loss transfer and priority of payment (_see_Insurance Law § 5105; 11 NYCRR 65-3.12; 11 NYCRR 65-4.11). The arbitration procedures established pursuant to section 5105 of the Insurance Law apply to disputes over priority of payment among insurers who are liable for the payment of first-party benefits (see Insurance Law § 5105; 11 NYCRR 3.12).”

(3) “Contrary to the petitioner’s contention, the arbitrator had the authority to rule on the issue of whether the controversy was subject to mandatory arbitration under Insurance Law § 5102 and its implementing regulations. An arbitrator’s authority generally “extends to only those issues that are actually presented by the parties” (Matter of Joan Hansen & Co., Inc. v Everlast World’s Boxing Headquarters Corp., 13 NY3d 168, 173). Therefore, an arbitrator is precluded from identifying and considering an affirmative defense that is not pleaded by a party to the arbitration. Here, however, the issue before the arbitrator cannot be characterized as an affirmative defense, such as lack of coverage.   Nor was the issue whether the petitioner satisfied a condition precedent to recovery in a loss-transfer proceeding (see Matter of Allstate Ins. Co. v New York Petroleum Assn. Compensation Trust, 104 AD3d 682). Rather, the issue before the arbitrator was the threshold issue of whether American Bankers was an “insurer” subject to the mandatory arbitration procedures of Insurance Law § 5105, and 11 NYCRR 3.12(b)”

(4) “To be upheld, an award in a compulsory arbitration proceeding must have evidentiary support and cannot be arbitrary and capricious” (Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co., 89 NY2d at 223 ; see Matter of Santer v Board of Educ. of E. Meadow Union Free Sch. Dist., 23 NY3d 251, 261; Matter of Public Serv. Mut. Ins. Co. v Fiduciary Ins. Co. of Am., 123 AD3d 933, 934; Matter of State Farm Mut. Auto. Ins. Co. v City of Yonkers, 21 AD3d 1110, 1111). Moreover, with respect to determinations of law, the applicable standard in mandatory no-fault arbitrations is whether “any reasonable hypothesis can be found to support the questioned interpretation”

(5) “Here, the American Bankers’ policy did not provide no-fault insurance coverage for the type of accident underlying this dispute. Moreover, American Bankers did not insure a person, vehicle, or animal involved in the underlying accident, but only the stables at which the animal was boarded. Accordingly, American Bankers cannot be deemed to be an “insurer” as that term is defined by Insurance Law article 51 and the pertinent regulations.

(6) “Moreover, Insurance Law § 5105 does not apply here because New York’s No-Fault Law would not preclude American Bankers’ insureds from being held liable to pay damages in an action at law. The decision of this Court in Matter of Purex Indus. v Nationwide Mut. Ins. Co. (110 AD2d 67), does not support a contrary result. In that case, this Court ruled that the petitioner was “the self-insured owner of the vehicle involved in the accident” (id. at 69) and, thus, satisfied the statutory definition of an “insurer” that is “subject to mandatory arbitration for adjusting the payment of no-fault benefits between insurers,” since, “ut for the No-Fault Law, petitioner would be liable as an insurer’ to insured in an action at law” (id. at 68). Here, on the other hand, the No-Fault Law would not preclude American Bankers’ insureds from being held liable in an action at law (see Hunter v OOIDA Risk Retention Group, Inc., 79 AD3d at 12).

According to this case, an insurance carrier that does not insure the actual instrumentality of a loss will not be liable in loss transfer to the payor carrier.  The issue of coverage or lack thereof may always be raised in arbitration. This should be contrasted to conditions precedent to bringing forth an arbitration, i.e., contact in UM cases.

Related Articles

• Causation – Be aware of seeking a trial de novo after a master arbitrator affirms an award
• Understanding collateral estoppel in New York no-fault insurance cases
• Summary judgment when loss was not an insured event
• New York No-Fault Insurance Law

Legal Update (February 2026): Since this 2015 post, the regulations governing loss transfer limitations and mandatory arbitration procedures (11 NYCRR 65-3, 11 NYCRR 65-4) may have been amended, and Insurance Law provisions including sections 5102, 5103, and 5105 may have been modified through legislative action. Practitioners should verify current arbitration procedures and loss transfer requirements, as regulatory updates in the no-fault insurance context frequently occur.

Related: What “de novo” means in New York — trial de novo and de novo review, explained.