Are volunteer members of New York's No-Fault and SUM arbitrator screening committees protected by the state's defense-and-indemnification statute when sued for committee work?

Plain-English summary

The New York Department of Financial Services runs two arbitrator screening committees. One vets arbitrators for no-fault auto insurance disputes (under Insurance Law § 5106(b) and 11 N.Y.C.R.R. Part 65). The other vets arbitrators for supplementary uninsured/underinsured motorist (SUM) disputes (under Insurance Law § 3420(f)(2) and 11 N.Y.C.R.R. Part 60). Members of both committees are appointed and serve without pay. Some include industry, plaintiffs' bar, and arbitrator representatives.

DFS Superintendent Adrienne Harris asked whether these volunteer committee members are eligible for the state's defense-and-indemnification regime under Public Officers Law § 17 if they are sued for what they do on the committees. AG Letitia James said yes. Section 17 protects "officers or employees of the state" who hold positions "by appointment" and serve "the state." Both screening committees act under formal regulations promulgated by DFS, perform a substantive role in qualifying arbitrators, and operate under state oversight. That is enough to bring members within the statute's coverage.

The result: a screening committee member who is sued for actions within the scope of committee duties can ask the Attorney General's office to provide defense and (subject to the conditions in § 17(3)) indemnification, just like a salaried state employee.

What this means for you

If you serve on a DFS arbitrator screening committee

Treat your service as state employment for indemnification purposes. If you are sued in connection with your committee work (vetting an arbitrator, recommending removal, considering a complaint), notify the Attorney General's office promptly so the state can step in to defend. The opinion does not extend coverage to acts outside the scope of committee duties or to intentional wrongdoing, but ordinary committee work falls inside.

If you advise a state agency that uses unpaid expert volunteers

The opinion's reasoning generalizes. When a regulation creates a body, gives it substantive duties, and ties its composition to state-defined criteria, members are usually "employees" under § 17 even if they receive no salary. Document the appointment process and the regulatory authority for the committee so any later defense request has a clean paper trail.

If you are an insurance defense or plaintiffs' bar member sitting on the committee

You are eligible for state coverage for committee work, but litigation arising out of your private practice is unaffected. Conflict-of-interest rules in the screening regulations still apply, and acting outside committee duties can put coverage at risk.

If you are an arbitrator subject to a screening decision

The opinion does not change the substance of how committees operate. It only tells you that suing a committee member personally over a screening decision will land in the Attorney General's hands, with state-funded defense for the member.

Common questions

Q: Does Public Officers Law § 17 cover unpaid volunteers?
A: Yes, when the volunteer holds a position "by appointment" and is "in the service of the state." Salary is not the dividing line; the appointment and the state function are.

Q: Are screening committee acts considered state action for federal civil rights purposes too?
A: This opinion only addresses § 17 coverage, not federal § 1983 liability or state-action doctrine. Those questions turn on different tests.

Q: What if a committee member acts outside the scope of duties?
A: Section 17 limits the state's defense and indemnification to acts within the scope of state employment. A member who, for example, retaliates against an arbitrator outside the committee process would likely fall outside the statute's protection.

Q: How does a member request defense?
A: Notify the Attorney General's office promptly upon being served with the lawsuit. The state's duty to provide defense begins from the time of timely notification, subject to the cooperation requirements in § 17(4).

Q: Does the opinion bind future AGs?
A: AG opinions are persuasive but not binding. A future opinion or a court decision could reach a different result, but the structural reasoning here (regulations create the role, the state oversees it, members hold positions by appointment) is the standard test.

Background and statutory framework

Public Officers Law § 17 obligates the state to provide a defense, and in many cases indemnification, for employees who are sued in their personal capacity for acts within the scope of state employment. The statute defines "employee" broadly to include officers, employees, and "any person holding a position by appointment or employment in the service of the state."

The two committees the opinion addresses sit inside DFS's regulatory framework for auto insurance arbitration. The No-Fault Arbitrator Screening Committee operates under 11 N.Y.C.R.R. § 65-4.5 and reviews candidates for the no-fault arbitrator pool, where most disputes between auto insurers and treating providers are resolved. The Supplementary Uninsured/Underinsured Motorists (SUM) Arbitrator Screening Committee operates under 11 N.Y.C.R.R. § 60-2.3 and § 60-2.4, vetting arbitrators who decide claims against an at-fault driver's insurance limits when those limits are inadequate.

The opinion's analysis treats the regulatory framework itself as the appointment instrument. DFS's regulations specify the composition (industry representatives, claimant counsel, arbitrators), the duties (recruiting, screening, reviewing complaints), and the relationship to DFS's broader regulatory mission. Members are not freelancing; they are carrying out a function the state has chosen to delegate to a structured advisory body. That makes them functionally "in the service of the state" for purposes of § 17.

Volunteer status does not defeat coverage. Section 17 covers unpaid as well as paid members. The historical view of § 17 has consistently treated formal advisory committees with regulatory backing as employer-employee relationships for indemnification purposes, even when no compensation flows.

Citations and references

Statutes:
- Public Officers Law § 17, defense and indemnification
- Insurance Law § 3420(f)(2), supplementary uninsured/underinsured motorist coverage
- Insurance Law § 5106(b): no-fault arbitration

Regulations:
- 11 N.Y.C.R.R. Part 60, SUM arbitration
- 11 N.Y.C.R.R. Part 65: No-fault arbitration

Source

• Landing page: https://ag.ny.gov/libraries-documents/opinions/opinions-year
• Original PDF: https://ag.ny.gov/sites/default/files/opinions/2023-f1.ws__15.pdf

Original opinion text

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, 654.5(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
Superintendent
Department of Financial Services
One State Street, 20th Floor
New York, NY 10004

Formal Opinion
No. 2023-F1

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 sixmember 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

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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. §§ 602.3(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. § 602.4(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 nonvoting 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).

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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

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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