In this action for a declaratory judgment, the plaintiff appealed from an order of the Supreme Court, Nassau County (Parga, J.), which denied his motion for summary judgment declaring that he was not obligated to reimburse the Village of Lake Success for the money paid to him pursuant to General Municipal Law 207-c, and granted the cross motion of the village for summary judgment.

American Protection Insurance Company separately appealed from the denial of its motion for summary judgment, which contended that the village was not entitled to a lien against any underinsured motorist arbitration award that is made to the plaintiff, and granted the cross motion of the village declaring that the village is entitled to a lien against any award the plaintiff obtains in his UIM arbitration in the amount paid to him pursuant to General Municipal Law 207-c.

The Appellate Division reversed, holding that the village is not entitled to a lien in the amount it paid the plaintiff pursuant to General Municipal Law 207-c against any underinsured motorist arbitration award that is made to the plaintiff, and that the plaintiff is not obligated to reimburse the defendant Incorporated Village of Lake Success for the money paid to him pursuant to General Municipal Law 207-c.

Back Story

The plaintiff, a police officer employed by the Incorporated Village of Lake Success, was injured in the line of duty when an underinsured motorist collided with his police vehicle. Pursuant to General Municipal Law 207-c, the village paid the plaintiffs salary and medical expenses during the period of his disability. The plaintiff received a settlement from the underinsured motorists liability insurer, and thereafter filed a claim for underinsured motorist benefits with the defendant, American Protection Insurance Company (API), the insurer of the police vehicle.

When the UIM claim was set down for arbitration, the village sought to assert a lien against any arbitration award the plaintiff might recover from API, in the amount that the village had paid to the plaintiff pursuant to General Municipal Law 207-c.

The Supreme Court determined that the village had a lien against any such award, but the Appellate Division disagreed.

Appellate Justification

The Appellate Division stated, General Municipal Law 207-c(1) provides, inter alia, that a village must pay an officer on its police force who is injured in the line of duty the full amount of his regular salary or wages until his disability arising therefrom has ceased, in addition to covering the costs of all medical treatment and hospital care necessitated by reason of such injury. The village predicates its entitlement to the lien it seeks on General Municipal Law 207-c(6), which provides that a cause of action shall accrue to the municipalityfor reimbursement in such sum or sums actually paid as salary or wages and/or for medical treatment and hospital care as against any third party against whom the policeman shall have a cause of action for the injury sustained or sickness caused by such third party.

Contrary to the villages position, that provision does not provide a basis for the lien it asserts here.

A municipalitys right, pursuant to General Municipal Law 207-c(6), to the reimbursement of the salary and medical expenses it had previously paid to, or on behalf of an officer injured in the line of duty, is subject to the limitations articulated in the no-fault provisions of Insurance Law 5104.

Insurance Law 5104(a) limits the items of damage that may be recovered in an action commenced by a person injured in a motor vehicle accident against another motor vehicle operator or owner " [in this case] the uninsured motorist " to non-economic loss, i.e., pain and suffering, plus only that economic loss which exceeds basic economic loss, defined by statute as $50,000 for medical and hospital expenses, lost wages, and incidental expenses, with certain exceptions not applicable here.

The plaintiffs UIM claim, by definition, could only seek recovery only for non-economic loss and economic loss greater than basic economic loss. Thus, there can be no Insurance Law 5104(b) lien imposed upon any amount he might recover on account of non-economic loss in the arbitration which will determine that claim. Where no Insurance Law 5104(b) lien attaches, there can be no recovery under General Municipal Law 207-c(6).

An insured who has sustained personal injury should not be required to pay for his no-fault benefits out of his recovery for pain and suffering. As it pertains to the plaintiffs arbitration claim for non-economic loss, the situation presented here is no different.

Moreover, the statutory lien sought to be asserted by a third party on a recovery obtained by a person injured in a motor vehicle accident, on account of the sums paid by the third party to compensate the injured person for lost wages and medical expenses, extends only to so much of the recovery as also compensated the injured person for lost wages and medical expenses. Here, it is unclear whether the plaintiff, by pursuing arbitration with API, seeks to recover economic loss greater than basic economic loss, and thus, whether part of his claim is for lost wages and medical expenses greater than $50,000.

In any event, while the village has, in fact, compensated the plaintiff for lost wages and medical expenses in excess of basic economic loss, and thus asserts that the plaintiff, if successful, would unfairly recover the identical sum in arbitration, the lien created by Insurance Law 5104(b), by its terms, applies only to a recovery obtained by an injured person in any action. The recovery sought by the plaintiff from API is not pursuant to an action.

The plaintiff, by seeking arbitration pursuant to the SUM endorsement contained in the policy issued by API, is not commencing an actionagainst a non-covered person, as required by Insurance Law 5104(b), but is instead seeking to enforce a contractual right he has pursuant to statute against API. Hence, the limitations on the assertion of a lien, imposed by Insurance Law 5104, as applied to General Municipal Law 207-c(6), preclude the result sought by the village here.

Finally, General Municipal Law 207-c(6) permits a municipality to seek reimbursement of wages and medical expenses only from any third party against whom the policeman shall have a cause of action for the injury sustainedcaused by such third party. The plaintiff, from whom the village seeks reimbursement, and API, upon whose obligation the village seeks to impose a lien, are not parties who caused the injury. Hence, the cause of action created by General Municipal Law 207-c(6) is not available to the village insofar as it seeks to assert it against either the plaintiff or API. Furthermore, General Municipal Law 207-c, includes noprovision for an equitable lien. It merely gives the [municipality] a direct remedy against the person liable to the employee in negligence.

The court concluded, For all of these reasons, the village is not entitled to assert a lien pursuant to General Municipal Law 207-c(6), and the Supreme Court, therefore, improperly granted the villages cross-motion. Rather, it should have granted the relevant branch of the plaintiffs motion for summary judgment, and the relevant branch of APIs motion for summary judgment.

Since this is a declaratory judgment action, we remit the matter to the Supreme Court, Nassau County, for the entry of a judgment declaring that the village is not entitled to a lien, in the amount of salary and medical expenses it paid to the plaintiff pursuant to General Municipal Law 207-c, against any award the plaintiff receives in his underinsured motorist arbitration, and that the plaintiff is not obligated to reimburse the village for the money it paid pursuant to General Municipal Law 207-c.

Musgrove v American Protection Ins. Co. and Village of Lake Success