Court Opinion

ID: 5850277
Source: CourtListenerOpinion
Date Created: 2022-01-12 23:58:46.819426+00
Date Added: 2024-06-11T08:44:04.054318
License: Public Domain

Sandler, J. (dissenting).
On April 10,1978, the claimant Armando Barone sustained injuries on the premises of Elan’s Service Station, Inc. (Elan), when he was struck by a vehicle driven by Eliahou Haim, president of the corporation that owned the station. Mr. Barone, not a regular employee of the service station, was patching a hole on the premises of the station at Mr. Haim’s request when Haim entered an automobile, which was awaiting repairs, drove it toward the repair bays, accidentally hit Mr. Barone and injured him.
A referee disallowed Mr. Barone’s claim for first-party (no-fault) benefits for basic economic loss from Empire Mutual Insurance Co. (Empire), insurer of the automobile. Special Term confirmed the referee’s report. I disagree and would reverse Special Term’s order to the extent of disaffirming the referee’s report, sustaining claimant’s right to no-fault benefits, and remanding for further proceedings.
Section 672 (subd 1, par [a]) of the Insurance Law provides in pertinent part for payment of first-party benefits to any person “for loss arising out of the use or operation in this state” of a motor vehicle insured in satisfaction of the requirements of article 6 or 8 of the Vehicle and Traffic Law. The vehicle in question was so insured. The dispositive question is whether claimant’s injuries were sustained through the “use or operation” of the car that struck him. “[U]se or operation” is not defined in the statute. In a regulation promulgated by the Superintendent of Insurance on October 3, 1973, 11 NYCRR 65.2 (a) (“Other Definitions”, [h]), the term was defined as follows: “(h) ‘use or operation’ of a motor vehicle includes the loading or unloading of such vehicle but does not include conduct within the course of a business of repairing, servicing, or otherwise maintaining motor vehicles, unless the conduct occurs off the business premises.”
In disallowing the claim for any no-fault benefits, Special Term gave a literally correct application to the immediately relevant words of the regulation. But if the literal *211interpretation is the correct one as applied to the present facts, it is immediately apparent that as so applied the regulation is unauthorized and invalid. The broad power of the superintendent under section 21 of the Insurance Law to issue regulations “not inconsistent with the provisions of this chapter” does not authorize the superintendent to define critical statutory words in a manner wholly contrary to their obvious and usual meaning with the result of excluding from coverage claims clearly authorized by the plain meaning of the statutory language and wholly consistent with the statutory purposes.
However, it is unnecessary here to find the regulation invalid as applied to the instant facts because there are available alternative constructions of the regulation which, though not entirely satisfactory as a matter of textual analysis, have the decisive merit of reconciling in a plausible way the regulation with the plain meaning of the dispositive sections of the statute.
In the opening sentence of the regulation which defines “use or operation” of a motor vehicle to include “loading or unloading”, the Superintendent of Insurance undertook to resolve an issue that would otherwise have been open to varying interpretations, and did so in accordance with a previous body of case law construing coverage under insurance policies. (See Continental Ins. Cos. v Transport Ins. Co. of Transport Group, 52 AD2d 210; Cosmopolitan Mut. Ins. Co. v Baltimore & Ohio R.R. Co., 18 AD2d 460.) A different issue is presented by a proposed construction of the following clause that would exclude from the meaning of the word “operation” a vehicle actually being driven. A driven car is in “operation”. That is its normal, accepted meaning. If, as seems doubtful, the regulation was intended to give a meaning to the word “operation” wholly at variance with its universally accepted understanding, it would represent an unauthorized and improper exercise of the superintendent’s power to issue rules and regulations in furtherance of the statute and to that extent would be invalid. (See Servido v Superintendent of Ins., 53 NY2d 1041; Matter of Adams [Government Employees Ins. Co.], 52 AD2d 118, 121.)
*212Nor could the regulation as so interpreted and applied be sustained as an appropriate method for the superintendent to set forth a broadly limiting interpretation on the scope of no-fault coverage under the statute. There is simply no basis in the statute for exempting from no-fault coverage a pedestrian injured by a driven vehicle on service station premises. As already noted, section 672 (subd 1, par [a]) of the Insurance Law provides for- payment of first-party benefits to any person “for loss arising out of the use or operation in this state” of a motor vehicle insured as was the vehicle here. The section does not go on to qualify the broad sweep of the quoted language to exclude from coverage losses occurring “within the course of a business of repairing, servicing, or otherwise maintaining motor vehicles”. Subdivision 2 of section 672 of the Insurance Law explicitly identifies those whom “[a]n insurer may exclude from coverage required by subdivision one”. No authority is there presented for the exclusion urged here.
In an effort to find a plausible basis for the construction adopted at Special Term, Empire has argued that the regulation was in some way influenced by a body of decisions which, with some exceptions, gave effect to a provision in automobile liability insurance policies that excluded from coverage service stations, public garages, and the like. The argument is unpersuasive. The essential holding of these cases was that automobile liability insurers by an appropriate limitation could avoid responsibility for judgments rendered against the varied types of facilities described above. Neither the clause referred to, nor the cases interpreting it, limited the liability of the insqred car owner for injuries sustained when the owned vehicle was driven by a service station or garage employee, and in no way limited the liability of the insurer in the event of a judgment against its insured. (See 6C Appleman, Insurancé Law and Practice [Buckley ed], § 4372.) In the absence of any specific indication that the regulation was in some way influenced by this body of authority, Empire’s claim of a relationship appears extremely tenuous.
Indeed, a compelling argument directly to the contrary appears when section 672 (subd 1, par [a]) of the Insurance Law is compared with section 388 of the Vehicle and *213Traffic Law. Subdivision 1 of section 388 of the Vehicle and Traffic Law provides in pertinent part: “Every owner of a vehicle used or operated in this state shall be liable and responsible for death or injuries to person or property resulting from negligence in the use or operation of such vehicle, in the business of such owner or otherwise, by any person using or operating the same with the permission, express or implied, of such owner”.
In Farber v Smdlack (20 NY2d 198, 204) the Court of Appeals explained the reason for the addition of the words “in this state” in 1958 to the predecessor section of section 388 (subd 1): “It was substituting ‘in this state’ for the former words ‘upon a public highway’ in order to cover the situation of an accident on private roadways and parking lots (1958 Report of N. Y. Law Rev. Comm. [N. Y. Legis. Doc., 1958, No. 65], pp. 589-590).”
It is not easy to believe that the Legislature intended to authorize the Superintendent of Insurance to interpret section 672 (subd 1, par [a]) to reintroduce into the law of this State in a broadly remedial statute substantially the sfime limitation that had been definitively eliminated years earlier.
The construction accepted by Special Term creates a perplexing gap in no-fault coverage, without any discernible support in the statute, its purposes, or prior authority, and inexplicably relegates someone in the claimant’s position to a traditional negligence action against the service station, the owner of the vehicle, or both. It is not surprising that advisory opinions of the Department of Insurance have explicitly rejected a construction of the regulation that excludes someone in the claimant’s position from no-fault coverage.
In short, the regulation is not correctly interpreted to exclude from no-fault coverage a pedestrian injured by a vehicle in the course of being driven in the business of a service station, or the like. If the regulation in fact had that meaning, it would represent an unacceptable departure from the plain meaning of the statutory language that it purported to define and thus would be unauthorized and invalid. (See Servido v Superintendent of Ins., supra; Matter of Adams [Government Employees Ins. Co.], supra.)
*214When the regulation is examined with an awareness tjiat it was not intended, and could not have been intended^ to define “use or operation” in a manner wholly inconsistent with the accepted meaning of these words, alternative constructions of the regulation, more consistent with the statutory language and its purposes, become apparent. In this light it seems likely that the pivotal provision in the regulation was the definition of “use or operation” to include “loading or unloading”. The following clause, the one with which we are concerned, is preceded by the word “but”, and thus appears to be a limited qualification to the broad interpretation of “use and operation” previously set forth.
Thus one possible interpretation, of the critical language is that it represented an effort to make clear that the definition of “use or operation” first set forth was not to be interpreted as sweeping within the scope of no-fault coverage activities on business premises associated with the repáir and maintenance of vehicles of a kind that might otherwise be viewed as “loading or unloading” or sufficiently analogous to come within the scope of the earlier definition.
Á somewhat different interpretation is advanced in the department’s advisory opinions which state that the pertinent clause of the regulation was designed to exclude from no-fault coverage employees injured while engaged in the business of repairing and servicing motor vehicles on the business premises. Undeniably this purpose was not conveyed in the regulation as clearly as, it should have been, and one may readily foresee situations in which there might appear a-conflict between the apparent meaning of the regulation and the department’s own interpretation. At, a minimum, however, the advisory opinions of the department confirm that under the circumstances disclosed in this case the claimant was entitled to recovery of no-fault payments. Although presented without a detailed analysis of the language, it may well be that the statement of the regulation’s purpose presented in the department’s advisory opinions rests upon an analysis of the regulation similar to that set forth above.
*215Although a thoughtful contribution to an understanding of the problem presented, the majority opinion seems to me ultimately to fail in its efforts to provide a satisfactory basis for the anomalous result reached. As construed by the majority, and found by them to be a reasonable exercise of the superintendent’s regulatory power, the regulation mandates a manifestly unfair result in which no-fault benefits are available to anyone struck by a moving vehicle anywhere in this State with the single exception that recovery is denied if the person is struck on business premises by a vehicle being used or operated “within the course of a business of repairing, servicing, or otherwise maintaining motor vehicles”.
The majority opinion reasons that the superintendent, concerned with the level of premiums, concluded that as between the no-fault insurer and the garage or repair shop insurer, the burden of payment should fall on the latter. As applied to the situation presented here, this explanation is unpersuasive.
Preliminarily the event with which we are concerned, a nonemployee on business premises struck by a vehicle being driven in the course of the business, is surely an unusual one, most unlikely to have a statistically significant impact on insurance rates. Moreover, subdivision 2 of section 673 of the Insurance Law carefully protects the right of the no-fault insurer to indemnification for basic economic loss payments in the event that the insured person recovers a judgment in a negligence action. The impact of the regulation as construed by the majority opinion, and found by them to be reasonable, occurs precisely when the injured person does not or cannot recover in a negligence action. This will most often occur either where the injured person is unable to establish culpability or where the anticipated recovery is not sufficient to justify the expenses and problems of litigation. In short, the regulation as construed by the majority will require the injured person, if he is to recover for his loss, to undertake precisely the kind of . negligence action which the no-fault statute was specifically designed to eliminate.
No doubt such actions may from time to time result in the ultimate payment by the business insurer of the equiv*216alent of basic economic loss that would otherwise have been expeditiously paid by the no-fault insurer. Even in those situations the recovery will impose on the injured person litigation expenses and delay in recovery that the statute was intended to avoid. Indeed such actions will inevitably entail additional litigation expenses for no-fault insurers as well. But surely the most unfortunate result will be that the injured person will be unable to recover for any part of his losses either because he is unable to establish fault or because the limited character of his losses will not justify the expenses and uncertainties of litigation. The injured person, not either of the insurers, will bear the loss. This seems to me so clearly wrong, so totally discordant with the wording and purpose of the no-fault statute, that the regulation if interpreted to require such a result, must be considered unreasonable.
In the light of this discussion, it may be possible to state more precisely the purpose and intended scope of the regulation. The superintendent reasonably recognized that the overwhelming majority of injuries incurred on-premises in the course of the described business, those involving injuries to employees covered by workers’ compensation while engaged in the actual repair of stationary vehicles, do not properly fall within the scope of no-fault coverage. Arguably, although less clearly, the same judgment might be made with regard to injuries sustained by business employees struck by vehicles being driven in the course of the business. Also arguably, although to me less likely, the same evaluation might be made with regard to injuries sustained by nonemployee visitors ás a result of action by employees engaged in the actual repair of stationary vehicles. What seems to me inconceivable is that the superintendent intended to exclude from no-fault coverage nonemployees injured as a result of being struck by a moving vehicle on business premises. It may be that language was improvidently used in the regulation that inexorably requires the interpretation reached by the majority, although I am not convinced that this is so for reasons stated earlier. If so, as applied to the present circumstances, the regulation departs so radically from the statutory lan*217guage and produces a result so manifestly unjust, that it should, to that extent, be found unauthorized and invalid.
The final issue is presented by the claimant’s settlement for $150,000, while this appeal is pending, of an action brought by him against Elan’s Service Station. At the time the action was settled, Special Term had ruled that claimant was hot entitled to receive first-party benefits. Accordingly, from the limited information available, it appears possible that the settlement may well have embraced damages for basic economic loss.
Empire contends that the settlement independently precludes claimant’s right to recover no-fault benefits since it allegedly impaired Empire’s lien rights under subdivision 2 of section 673 of the Insurance Law. That section provides in pertinent part: “In any action by or on behalf of a covered person, against a noncovered person * * * an insurer which paid or is liable for first party benefits on account of such injuries shall have a lien against any recovery to the extent of benefits paid or payable by it to the covered person.”
It is unnecessary to resolve the preliminary question as to whether or not Elan was a “noncovered person” within the meaning of the section. Since it seems likely that Elan was sued on the basis that it was a noncovered person and the lawsuit was settled on that understanding, the section should be deemed applicable.
Subdivision 2 of section 673 of the Insurance Law goes on to provider “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 settlement exceeds fifty thousand dollars.” The record is clear that the court approved the settlement, and that the settlement exceeded $50,000. Therefore, there Appears no basis whatever for Empire’s contention that the settlement bars the claim for no-fault benefits. It may be noted that the problem would not have arisen except for the fact that Empire had resisted successfully the claim for no-fault benefits. Since the record does not disclose what portion, if any, of the $150,000 settlement represented recovery for basic economic loss, a hearing on the issue is *218required to determine whatever rights Empire may have to a setoff. (See United States iFid. & Guar. Co. v Stuyvesant Ins. Co., 61 AD2d 1122.)
The order of the Supreme Court, New York County (Asch, J.), entered May 28, 1980, affirming the report of the referee denying and dismissing the claim against the insurer, shpuld be reversed, en the law, the motion te confirm should be denied, the claimaht’s right to no-fault coverage payments should be sustained, and the matter should be remanded for a hearing to determine whether any portion of the settlement was attributable to economic loss and, if so, what portion was so attributable.
Kupferman, J. P., and Carro, J., concur with Sullivan, J.; Sandler and Ross, JJ., dissent in an opinion by Sandler, J.
Order, Supreme Court, New York County, entered on March 28, 1980, affirmed, without costs and without disbursements.