On November 10, 2009 the Senate and Assembly passed bills S.2 and A.2, which were forwarded to the Governor for his signature. This bill amends several sections of several different laws. However, it also created Section 5-335 of the General Obligations Law. This statute abrogates any right of reimbursement or subrogation that a private insurance company may have against a settling defendant or plaintiff in a personal injury or wrongful death action. Presuming that the Governor signs this bill, it will apply to all actions that will be filed after the date the Governor signs the bill, or have been filed where there has been no trial or settlement.

The Legislature has removed all liens, rights to subrogation or reimbursement against any party entering into a settlement in a civil lawsuit. There are only two exceptions to this rather broad rule. First, the legislature has explicitly exempted subrogation claims seeking recovery of additional first party benefits that were provided under New York’s no-fault statute. Additionally, this statute does not infringe on any right to subrogation or reimbursement that emanates from a statute such as Medicaid liens. Essentially, the legislature has removed the right of subrogation against the settling parties when this right arises from either common law or contract.

In order to abrogate the rights of subrogation and/or reimbursement from a settling party, the Legislature is creating a conclusive presumption that a settlement does not include compensation for healthcare services, loss of earnings, or other economic loss that is covered by insurance. What this effectively does is prohibits a finding that the funds recovered by plaintiff in a settlement compensated plaintiff for the same damages that the insurance policy compensated him for. The Legislature has also determined that a plaintiff “shall not be deemed to have taken an action in derogation” of an insurance carrier’s rights. Additionally, plaintiff’s entering into a settlement is deemed not to be a violation of the contract between plaintiff and a benefit provider as a matter of law.

These statutory presumptions preclude an insurance carrier from recouping the funds from either party as defendant did not compensate plaintiff for a covered loss.