NEW YORK'S TOP COURT LIMITS SUBROGATION RECOVERY.

The statute of limitations for a subrogation action by an insurer starts from the date of the accident, not the date when the first of the affected benefits were paid, the New York Court of Appeals ruled.

The case before the state's highest court, Allstate Insurance Co. v. Daniel J. Stein (No. 16), arose after a May 1995 crash in which the car Stein was driving hit a car Amy Walker was driving, seriously injuring her.

Walker had first-party coverage from Allstate, as called for under New York's no-fault law. She also had bought Additional Personal Injury Protection coverage covering "extended economic loss" beyond that covered under the mandatory no-fault coverage.

In August 1996, however, Walker sued Stein alleging she had sustained serious enough injury to exceed the state's no-fault threshold.

By June 1998, after paying the basic no-fault benefits, Allstate began paying APIP benefits, eventually amounting to more than $42,000.

Walker and Stein settled her lawsuit, but Allstate didn't agree and in May 2001 filed a subrogation action against Stein.

Stein argued that a subrogation action, in which the insurer stands in the shoes of a policyholder to whom it has paid benefits, is governed by the same statute of limitations that would apply to Walker - that is, requiring the action to be filed within three years of May 1995.

Allstate argued that the clock began to tick when it began paying the APIP benefits in 1998.

The company argued it was not asserting an ordinary subrogation right but one created by Insurance Department regulations.

It cited a 1996 Court of Appeals decision in Motor Vehicle Accident Indemnity Corp. v. Aetna Casualty Insurance Co., involving no-fault benefits MVAIC had paid after the vehicle's insurer denied coverage. It said MVAIC's right to reimbursement was "created or imposed by statute" and wouldn't exist without the law.

The court rejected the argument.

"This case is different . . . because it involves a traditional equitable subrogation, not a liability created by statute. Indeed, no statute even refers to APIP benefits, much less a subrogation claim by an APIP carrier against a tortfeasor," Judge Robert S. Smith wrote for the court.

Allstate missed its chance, he said.

"Nothing required Allstate to acquiesce, as it did, in a settlement between Walker and Stein in which all the consideration went to Walker and none to Allstate," Smith said, and the company passed up its chance to recover from the settlement Walker received.