First, it’s helpful to remember a few basics from the no-fault regulations. 11 NYCRR 65-3.2(a)-(g) emphasize the obligation of the carrier to be helpful and not adversarial: “Have as your basic goal the prompt and fair payment to all automobile accident victims.” Next, the definition of lost earnings is not at all defined by corporate status (i.e.) 11 NYCRR 65-1.1 defines ‘Work Loss’ as “loss of earnings from work which the eligible injured person would have performed had such person not been injured”. Finally, 11 NYCRR 65-1.1 Exclusions lists the individuals who are ineligible to receive no-fault benefits. The excluded persons list includes intoxicated drivers, felons, street drag racers and those who commit suicide. Interestingly, law abiding, S-corporation owners are not on the list of excluded persons.

More specifically, the presumption by the no-fault carrier that the salary not taken during disability will end up in the pocket of the S-corporation owner anyway fails to acknowledge the intrinsic value of the work not performed by the injured owner — as if working and not working had the same value. Obviously, it’s ludicrous to suggest that the corporation would profit with or without the owner’s work, anymore than the no-fault carrier would prosper without its employees who work on no-fault claims, but the ‘salary not taken’ theory suggests just that.

Generally speaking, insurance carriers who provide no-fault benefits give extra scrutiny to applications for lost wage benefits submitted by the self-employed as a result of disability arising from an automobile accident. Because the self employed have control over the reporting of their earnings, no-fault carriers request the production of a variety of financial documents including, but not limited to, tax returns, quarterly statements, and bank statements to verify earnings. However, notwithstanding compliance with these various requests, owners of S-corporations may encounter unique resistance in the approval of their lost wage claim.

In essence, S-corporations are pass-through tax entities. Although S-corporations file an informational federal return (Form 1120S), no income tax is paid at the corporate level. The profits and / or losses of the business are effectively passed through the business and reported on the owners’ personal tax returns. No-fault carriers and the forensic accountants they retain, seize on the pass through nature of the S-corporation to argue that an owner who stops taking a salary because of injury, actually increases the S-corporation’s income by the amount of salary not taken. Because the S-corporation’s profit is in essence the profit of the owner, no-fault carriers argue that the salary not paid because of disability goes back to the owner eventually as profit through the corporation, hence there is no loss. More…

In February of 2006 Dr. Neil Goldstein was in the basement of his new home on a ladder installing a new cable television line for the exercise area he and his wife Patti had created in the basement. As he moved along one of the floor joists he noticed a whitish-yellow substance on the fabricated wood joist. He got a flashlight and saw that virtually every joist in the basement had this substance growing on it. The next day a representative of the Monroe County Health Department confirmed his suspicion that what was growing on in his basement was mold, and as it turned out, it was a type of mold that caused illness.

Thus began a saga that took the Goldsteins through negotiations with their builder, litigation and eventually a jury trial in June of 2010. In the process they learned that the corporation that they contracted with to build their home, Brookwood Building Corporation, did not have any employees and was merely a shell corporation. They also learned that Spall Homes, the entity named on the website where the development was advertised, was no longer an active corporation either and that the mastermind behind this empire, Ted Spall, had created multiple shell corporations in attempt to shield him from any accountability for building defects caused by faulty construction of any of these homes. Eventually, Spall Realty Corp., the entity that hired the contractors and supervised the construction was added to the lawsuit, but just as quickly, a new corporation named Spall Management Corporation took on all of the employees who had worked for Spall Realty leaving that corporation only a shell as well. More…