The office of General Counsel issued the following informal opinion on September 19, 2000, representing the position of the New York State Insurance Department.

Re: Group Accident & Health Insurance, N.Y. Ins. Law §4235(McKinney 1985 and Supp. 2000)

Question Presented:

Would the following coverage, "group occupational accident policy" proposed by ABC Insurance Company be a permissible policy of group accident and health insurance?


Yes, it would be valid pursuant to N.Y. Ins. Law §4235(c)(1) (McKinney Supp. 2000).


In 1998 ABC Insurance Company filed a "group occupational accident" policy form with the Department’s Health Policy Bureau. The Bureau referred several questions regarding the filing to the Office of General Counsel.

The policyholders would be common carriers by motor vehicle that are engaged in the business of transporting commodities. The carriers enter into contractual relationships with independent truck drivers (who may operate on an individual basis, on a partnership basis with other drivers or as independent corporations). The insurer has represented that the driver’s are not common law employees of the carrier. The sample "Owner/Operator Service Lease Agreement", which you submitted for our review, is intended to establish that the drivers are independent contractors.

The truck drivers would be additional insureds under the policies and would be issued certificates of insurance by the insurer. The insurance premiums would be paid by the carrier, from funds contributed by the drivers. Coverage would only extend to injuries occurring while the drivers are working on behalf of the carrier.


N.Y. Ins. Law §1113(a)(3) (McKinney 1985) reads as follows:

(3) "Accident and health insurance," means (i) insurance against death or personal injury by accident or by any specified kind or kinds of accident and insurance against sickness, ailment or bodily injury, including insurance providing disability benefits pursuant to article nine of the workers' compensation law, except as specified in item (ii) hereof; and (ii) non-cancelable disability insurance, meaning insurance against disability resulting from sickness, ailment or bodily injury (but excluding insurance solely against accidental injury) under any contract which does not give the insurer the option to cancel or otherwise terminate the contract at or after one year from its effective date or renewal date.

The ABC Policy provides coverage for death and personal injuries suffered in accidents occurring while a driver is engaged in the business of the carrier, as well as providing non-occupational coverage for accidental bodily injuries. No coverage will be provided for injuries occurring while a driver is engaged in business on behalf of another carrier. Since the driver’s are not common law employees of the carriers, the proposed coverage would not be Workers’ Compensation Insurance, but would fall within the definition of accident and health insurance. N.Y. Ins. Law §§1113(a)(3) and (15) (McKinney 1985 and Supp. 2000).

11 N.Y. Comp. Codes R. & Regs. §52.9 (1983) (Insurance Department Regulation 162) provides that "Accident insurance is an insurance policy which provides coverage, singly or in combination, for death, dismemberment, disability, or hospital and medical care caused by accident or specified kinds of accidents." The regulation authorizes a provision such as that found in the ABC Policy, limiting coverage to injuries resulting from accidents which occur while a driver is engaged in work on behalf of the insured carrier.

N.Y. Ins. Law §4235(McKinney 1985 and Supp. 2000) establishes requirements regarding group accident and health insurance policies issued in New York State, including establishment of permissible "groups". §4235(c)(1)(A) defines one such permissible group as follows:

A policy issued to an employer or to a trustee or trustees of a fund established by an employer, which employer or trustee or trustees shall be deemed the policyholder, insuring with or without evidence of insurability satisfactory to the insurer, employees of such employer, and insuring, except as hereinafter provided, all of such employees or all of any class or classes thereof determined by conditions pertaining to the employment or a combination of such conditions and conditions pertaining to the family status of the employee, for insurance coverage on each person insured based upon some plan which will preclude individual selection. However, such a plan may permit a limited number of selections by employees if the selections offered utilize consistent plans of coverage for individual group members so that the resulting plans of coverage are reasonable. The premium for the policy shall be paid by the policyholder, either from the employer's funds, or from funds contributed by the insured employees, or from funds contributed jointly by the employer and employees. If all or part of the premium is to be derived from funds contributed by the insured employees, then such policy must insure not less than fifty percent of such eligible employees or, if less, fifty or more of such employees.

By letter dated September 8, 2000 the insurer’s Vice President and Legal Counsel has represented that the ABC Policy will be written in compliance with the above statutory provision and submitted to this Department for approval on that basis. The insurer’s letter also states that the ABC Policy will be written in conformity with the requirements of N.Y. Ins. Law §4235(d)(1)(McKinney 1985) (See below).

Another major issue is whether the drivers could be categorized as "employees" for purposes of establishing their eligibility for coverage under a group accident and health insurance policy. N.Y. Ins. Law §4235(d)(1)(McKinney 1985) states as follows:

(d)(1) In this section, for the purpose of insurance hereunder: "employees" includes the officers, managers, employees and retired employees of the employer and of subsidiary or affiliated corporations of a corporate employer, and the individual proprietors, partners, employees and retired employees of affiliated individuals and firms controlled by the insured employer through stock ownership, contract or otherwise; "employees" may be deemed to include the individual proprietor or partners if the employer is an individual proprietor or a partnership; and "employees" as used in subparagraph (A) of paragraph one of subsection (c) hereof may also include the directors of the employer and of subsidiary or affiliated corporations of a corporate employer.

The pivotal issue is whether the drivers are "affiliated individuals and firms controlled by the insured employer through stock ownership, contract or otherwise"?

N.Y. Ins. Law §107(a)(4)(McKinney 1985) states as follows:

" "Affiliate" means a corporation a majority of whose shares is owned or controlled by shareholders, directors or officers of another corporation, who own or control a majority of the shares of the other corporation."

If affiliate were to have the same meaning in §4235(d)(1) then the drivers could not be found to be affiliated with the carriers. However, §107 contains prefatory language which states that the definitions apply "unless the context otherwise requires". Since §4235(d)(1) refers to control by either stock ownership or contract it is clear that the §107 definition could not apply in this context and, therefore, the definition provided therein is not pertinent in our analysis of §4235(d)(1).

This is made even clearer when one examines the predecessor section to §4235(d)(1), §221(3) of the pre-1984 Recodification Insurance Law. The Legislative Declaration to the Recodification (L. 1984, c. 367 and c. 805) specifically states that it is a recodification of the former law, without substantive change.

The old statute (§221(3)) provided that employees could be deemed to include "…the individual proprietors, partners and employees of individuals and firms of which the business is controlled by the insured employer through stock ownership, contract or otherwise." The term affiliated was not even used.

The drivers are affiliated with the carriers in that they are associated in furtherance of a common purpose, the shipping of commodities by truck. The second issue is whether they are "controlled" through the terms of their contract with the carrier. The level of control required to satisfy the statute is "a significant and permanent level of ownership or management of the controlled party, rather than merely having some direction over the manner in which that party performs certain services." To determine whether the level of control is sufficient to deem the drivers to be employees of the carrier for purposes of the accident insurance policy, review of the contract between the parties is necessary.

We reviewed a sample "Service and Lease Agreement" that was submitted for review by counsel to ABC. The terms of the agreement are unquestionably intended to establish, for purposes of Workers’ Compensation Law requirements, that the drivers are independent contractors and not employees of the carrier. However, this does not mean that they may not be deemed employees for purposes of establishing an eligible group for accident insurance coverage.

Paragraph 7 of the sample contract concerns the right of the driver to take jobs from other carriers. It reads as follow:


Owner may take itself "out-of-service" prior to dispatch; provided, however, that Owner shall notify Carrier in advance of Owner’s intention to elect "out-of-service" status. Such notice must be given by Owner at the time of its immediately preceding dispatch by Carrier. Any losses incurred by Carrier due to rejection by owner of loads that have been accepted shall be borne by Owner, except as prohibited by law. Owner shall have the right independently to solicit "trip leases" with other authorized carriers to transport commodities exempt under applicable law if Carrier does not have freight available on a reasonably regular basis, subject, however, to an agreement with Carrier for the use of Carrier’s trailer(s) and ancillary equipment and subject to Owner’s indemnifying Carrier for and saving and holding it harmless for any loss claim arising out of or in any way related to any such independent trip lease. Owner must either voluntarily terminate this Agreement in the manner prescribed in Paragraph 15(A), below, or continue this Agreement, in which case the trip lease or contract for the transportation of exempt commodities must be presented by Owner to Carrier prior to transport. It is specifically understood that, because Owner and Carrier desire to maintain full control and direction of their respective independent businesses, Carrier will not be required to approve any such trip lease or contract of transportation, and Owner will not have the power to bind Carrier.

Paragraph 15(A) of the agreement, referenced above, requires either party to give the other 45 days written notice of its intent to terminate the agreement.

Paragraph 7 is not a model of clarity. Many of the provisions are intended to protect the driver’s independent contractor status, thus sparing the carrier from the legal responsibility to provide workers’ compensation insurance. For purposes of N.Y. Ins. Law §4235(d)(1)(McKinney 1985) our focus is on whether or not the carrier is exercising a sufficient level of control over the driver’s business to allow the drivers to be considered employees eligible for coverage under a group accident policy.

Paragraph 7 establishes that level of control. Fairly read, it dictates that as long as the carrier has enough work to utilize the driver(s), the driver’s must work for the carrier rather than seeking an "outside" job. Of course, the driver has the option of terminating the contract but, so long as he/she chooses to remain a party to the agreement, The carrier substantially controls the driver’s business.

There are other paragraphs in the agreement which indicate that the owner/driver must delegate substantial control over its business to the carrier. For example, the carrier has the authority to negotiate and settle claims for cargo, personal injury and property damage brought by third parties resulting from the activity of the driver. The carrier may settle the claim and then deduct the amount of the settlement from payments otherwise due to the driver (Paragraph 3F of the agreement).

There are also paragraphs that are intended to support the position that the owner/drivers are not employees for workers’ compensation purposes. However, on balance, the contract establishes a sufficient level of control to satisfy the requirements of N.Y. Ins. Law §4235(d)(1)(McKinney 1985 and Supp. 2000). The drivers are deemed employees for the purpose of establishing eligibility for group insurance under the statute.

For further information you may contact Associate Attorney Samuel Wachtel at the New York City Office.