Court Opinion

ID: 9374688
Source: CourtListenerOpinion
Date Created: 2023-02-23 18:06:34.698431+00
Date Added: 2024-06-11T17:16:52.332581
License: Public Domain

Insurance Law §§ 3420(f)(2), 5106(b); N.Y.C.R.R §§ 11, 60-2.3(c), 11, 6-2.3(f)(11), 11,
     60-2.4(b)(1), 11, 60-2.4(b)(2), 11, 60-2.4(b)(3), 11, 65-4.5(d)(1), 11, 65-4.5(d)(2), 11, 65-
     4.5(d)(3), 11, 65-4.5(d)(4); Public Officers Law §§ 17, 17(1)(a), 17(2)(a), 17(3)(a)

     Members of the No-Fault Arbitrator Screening Committee and the Supplementary
     Uninsured/Underinsured Motorists Arbitrator Screening Committee are persons
     holding a position “by appointment” and are in “the service of the state” and thus are
     “employees” for purposes of section 17 and are eligible for defense and
     indemnification pursuant to Public Officers Law § 17.

                                         February 10, 2023

     Adrienne A. Harris                                              Formal Opinion
     Superintendent                                                  No. 2023-F1
     Department of Financial Services
     One State Street, 20th Floor
     New York, NY 10004

     Dear Superintendent Harris:

           Department attorneys of the Office of General Counsel for Insurance have
     requested an opinion regarding whether the members of two arbitrator screening
     committees are eligible for defense and indemnification pursuant to section 17 of the
     Public Officers Law. For reasons that follow, we answer that question in the
     affirmative.

I.          Legal Framework of Arbitrator Screening Committees

            A.     The No-Fault Arbitrator Screening Committee

            The Comprehensive Motor Vehicle Insurance Reparations Act, the “no-fault”
     law, was enacted to establish a system of compensation for basic economic losses up
     to $50,000 suffered by injured parties arising out of the use and operation of motor
     vehicles without regard to fault or negligence. The statute provides that every motor
     vehicle insurer must provide a claimant with the option of submitting any dispute
     involving the settlement of first party benefits to arbitration in accordance with
     simplified procedures established and approved by the Superintendent of Financial
     Services. Insurance Law § 5106(b). The procedure for arbitrating such a dispute is
     governed by regulation. Under that procedure, the Superintendent appoints a six-
     member advisory committee, which reviews the qualifications of applicants to serve
     as no-fault arbitrator and the performance of the appointed arbitrators. 11
     N.Y.C.R.R. § 65-4.5(d)(1). The No-Fault Arbitrator Screening Committee consists of
     one representative of the New York State Bar Association, one representative of the
     New York State Trial Lawyers Association, two representatives of the insurance
Page 2

   industry who are selected by another arbitration committee, a non-voting
   representative of the organization designated by the Superintendent to administer
   the arbitration process, and one non-voting representative of the Department of
   Finance Services.       Id.    The Committee makes recommendations to the
   Superintendent relating to the appointment and dismissal of no-fault arbitrators. Id.
   Tie votes are reported as such to the Superintendent. Id. The Committee is
   authorized to determine the experience necessary to qualify an applicant to review
   and resolve the issues involved in no-fault insurance disputes; the Committee also is
   authorized to establish qualifications for appointment as a no-fault arbitrator, subject
   to approval of the Superintendent, in addition to those established by regulation. 11
   N.Y.C.R.R § 65-4.5(d)(2),(4). The Superintendent appoints no-fault arbitrators and
   forwards their names to the organization designated by the Superintendent to
   administer the arbitration process. 11 N.Y.C.R.R. § 65-4.5(d)(3).

         B.     Supplementary Uninsured/Underinsured Motorists (SUM) Arbitrator
                Screening Committee

           Insurance Law § 3420(f)(2) requires every motor vehicle liability insurer to
   offer supplementary uninsured and underinsured motorist (SUM) insurance coverage
   to New York policyholders.          The Superintendent has adopted regulations
   implementing the administration of section 3420(f)(2), including the establishment
   and administration of an optional arbitration process. 11 N.Y.C.R.R. §§ 60-
   2.3(c),(f)(11). By regulation, the Superintendent appoints a six-member advisory
   committee, which reviews the qualifications of applicants for the position of SUM
   arbitrator and the performance of the appointed arbitrators. 11 N.Y.C.R.R. § 60-
   2.4(b)(1). The SUM Arbitrator Screening Committee consists of one representative
   of the New York State Bar Association, one representative of the New York State
   Trial Lawyers Association, two representatives of motor vehicle insurers, a non-
   voting representative of the organization designated by the Superintendent to
   administer the arbitration process, and one non-voting representative of the
   Superintendent. Id. The SUM Committee makes recommendations to the
   Superintendent relating to the appointment and dismissal of SUM arbitrators. Id.
   Tie votes are reported as such to the Superintendent. Id. The Committee assists the
   Superintendent in determining the experience necessary to qualify an applicant to
   review and resolve the issues involved in SUM insurance disputes. The Committee
   also is authorized to establish qualifications for appointment as a SUM arbitrator,
   subject to approval of the Superintendent, in addition to those established by
   regulation.     11 N.Y.C.R.R. § 60-2.4(b)(2).     Based on the SUM Committee’s
   recommendations, the Superintendent appoints SUM arbitrators and forwards their
   names to the organization designated by the Superintendent to administer the
   arbitration process. 11 N.Y.C.R.R. § 60-2.4(b)(3).
Page 3

          Department attorneys have explained that members of both Committees are
   not compensated for their work but are eligible for reimbursement of their actual and
   necessary expenses incurred while performing their duties. The expenses are paid
   by the designated organization as part of the arbitration process that is financed by
   the insurance industry.

II.      Public Officers Law § 17

           Public Officers Law § 17 provides authority for the defense and indemnification
   of an employee of the State. Matter of O’Brien v. Spitzer, 7 N.Y.3d 239 (2006).
   “Employee” is a term of art defined in subdivision (1)(a) of section 17 as any person
   “holding a position by election, appointment or employment in the service of the state,
   . . . whether or not compensated, or a volunteer expressly authorized to participate in
   a state-sponsored volunteer program, but shall not include an independent
   contractor.” Public Officers Law § 17(1)(a). Under section 17, upon compliance by
   the employee with certain specified procedural requirements,

         the state shall provide for the defense of the employee in any civil action
         or proceeding in any state or federal court arising out of any alleged act
         or omission which occurred or is alleged in the complaint to have
         occurred while the employee was acting within the scope of his public
         employment or duties . . . . This duty to provide for a defense shall not
         arise where such civil action or proceeding is brought by or on behalf of
         the [S]tate.

    Id. § 17(2)(a). The statute provides for indemnification in the amount of any
   judgment obtained against the employee in any state or federal court or in the amount
   of any settlement of a claim, if the act or omission from which the judgment or
   settlement arose occurred while the employee was acting within the scope of his or
   her employment and not from intentional wrongdoing. Id. § 17(3)(a).

          Thus, the crucial question is whether the individual is an “employee” of the
   State within the meaning of section 17. If so, then such individual is eligible for
   defense and indemnification by the State. And that question distills to whether the
   members “hold[ ] a position by election, appointment or employment in the service of
   the state . . . whether or not compensated.” Id. § 17(1)(a).

          In our opinion, the members of both Arbitrator Screening Committees are
   persons holding a position “by appointment” and are in “the service of the state” and
   thus are “employees” for purposes of section 17. First, each member is appointed by
   a state officer—in this instance, the Superintendent of Financial Services—a factor
   that we have found relevant to section 17 determinations in the past. See Op. Att'y
Page 4

   Gen. No. 96-F9 (members of regional service councils who were designated by
   Commissioner of Health covered by section 17); Op. Att'y Gen. No. 89-F2 (members
   of local emergency committees appointed by Executive Department covered by section
   17); Op. Att'y Gen. No. 88-F10 (members of Lake George Park Commission appointed
   by Governor with Senate consent covered by section 17).

          Second, the Arbitrator Screening Committees were established as entities
   within the Department of Financial Services, an administrative department of the
   State, another factor indicating that its members are in the service of the State. Op.
   Att'y Gen. (Inf.) No. 88-F10 (Lake George Park Commission created within
   Department of Environmental Conservation). The Committees have no status
   independent of the State. Compare Op. Att'y Gen. No. 99-F4 (members of Deferred
   Compensation Board eligible for section 17 coverage) with Op. Att'y Gen. No. 91-F3
   (members of Harlem International Trade Center Corporation not eligible for section
   17 coverage).

         Third, the Committees, performing their duties on behalf of the
   Superintendent, serve a discrete but integral function in the State’s program of
   regulating property and casualty insurance: the State, through the Department of
   Financial Services, uses the expertise and experience of the Committees’ members,
   who include representatives of the insurance and dispute resolution industries, to
   develop and review standards for selecting the individuals who will arbitrate
   insurance disputes.

          For these reasons, we are of the opinion that the members of No-Fault
   Arbitrator Screening Committee and the SUM Arbitrator Screening Committee are
   eligible for defense and indemnification pursuant to Public Officers Law § 17.

                                                 Very truly yours,

                                                 LETITIA JAMES
                                                 Attorney General