Assignment to Different Entity Leaves Provider Without Standing to Arbitrate

NO-FAULT – ASSIGNMENT OF BENEFITS – LACK OF STANDING – MASTER ARBITRATION – PETITION TO VACATE
L.I. Community Medical, P.C. a/a/o Victoria Ramos v. Allstate Ins. Co.
(App. Term, 2nd Dept., decided 5/1/2008)

It would be easy to overlook the potential significance, or at least noteworthiness, of this very short decision from the Appellate Term.

Petitioner medical provider brought a CPLR article 75 special proceeding to vacate a master arbitration award upholding Allstate's denial of no-fault benefits.

In AFFIRMING the lower court's denial of the petition to vacate, the Appellate Term ruled that the master arbitrator's award was rationally based and not arbitrary or capicious because the assignment of benefits was to an entity different from the petitioner and, thus, the petitioner lacked standing to seek reimbursement of no-fault benefits. In so ruling, the Appellate Term cited its 2004 decision in Damadian MRI in Garden City, P.C., a/a/o Sharon Gamboa v. Windsor Group Ins., 2 Misc 3d 138[A], (App. Term, 2d & 11th Jud. Dists., 2004), in which the court similarly held, albeit in the context of an action to recover no-fault benefits rather than an arbitration, that "plaintiff failed to establish its prima facie entitlement to summary judgment inasmuch as it did not show that the assignor made an assignment to plaintiff Damadian MRI in Garden City, P.C."

The issue of whether proof of a valid assignment is a required part of a provider's prima facie showing in a no-fault recovery suit remains somewhat muddled.

Both the Second and Third Departments of the Appellate Division, as well as the Court of Appeals, have previously held that a no-fault insurer's "failure to object to the adequacy of . . . claim forms within 10 days of receipt constitute[s] a waiver of any defenses based thereon, including the alleged lack of a valid assignment of benefits." Hospital for Joint Diseases v. Travelers Prop. Cas. Ins. Co., 34 A.D.3d 532 (2nd Dept. 2006), affd. 9 N.Y.3d 312 (2007)("In our view, any defect or deficiency in the assignment * * * simply does not implicate a lack of coverage warranting exemption from the preclusion rule. We therefore determine that the failure by Travelers to seek verification of the assignment in a timely manner prevents the carrier from litigating the issue now."); see, also, Hosp. for Joint Diseases v. Allstate Ins. Co., 21 A.D.3d 348 (2nd Dept. 2005); Nyack Hosp. v. Metro. Prop. & Cas. Ins. Co., 16 A.D.3d 564 (2nd Dept. 2005); LMK Psychological Servs., P.C. v. Liberty Mut. Ins. Co., 2006 NY Slip Op 4486, 1 (3rd Dept. 2006).

Contrast those decisions to Kings County New York City Civil Court Judge Genine Edwards' July 2006 decision in Elite Med. Care, P.C. v. Travelers Prop. & Cas. Ins. Co., 2006 NY Slip Op. 51397U (NYC Civ. Ct., Kings Co., 2006):

This Court is aware of the many summary judgment decisions that have found that the defendant waives its right to raise the deficiencies in the assignment of benefits forms when the denial was untimely and/or did not allege such defects. Nyack Hosp. v. Metropolitan Prop. & Cas. Ins. Co., 16 A.D.3d 564, 791 N.Y.S.2d 658 (2nd Dept. 2005); Nyack Hosp. v. Encompass Ins. Co., 23 A.D.3d 535, 806 N.Y.S.2d 643 (2nd Dept. 2005); Chiropractic Neurodiagnostics, P.C. v. Travelers Indem. Co., 11 Misc. 3d 644, 812 N.Y.S.2d 300 (NYC Civ. Ct., New York Co., 2006); SZ Medical P.C. v. Country-Wide Ins. Co., 12 Misc. 3d 52, 817 N.Y.S.2d 851, 2006 NY Slip Op. 26194, 2006 N.Y. Misc. LEXIS 1182 (App. Term 2nd & 11th Jud. Dists. 2006); Delta Diagnostic Radiology, P.C. v. Progressive Cas. Ins. Co., 11 Misc. 3d 136(A), 816 N.Y.S.2d 694 (App. Term 2nd & 11th Jud. Dists. 2006); Hospital for Joint Diseases v. Allstate Ins. Co., 21 A.D.3d 348, 800 N.Y.S.2d 190 (2nd Dept. 2005) Hosp. for Joint Diseases v. Allstate Ins. Co., 21 A.D.3d 348, 800 N.Y.S.2d 190 (2nd Dept. 2005); Multiquest PLLC, 10 Misc. 3d 1061(A), 814 N.Y.S.2d 563, supra. However, those decisions discuss deficiencies in the forms. This Court is faced with rendering a decision in a bench trial of a no-fault action where there is lack of proof of an assignment. To be certain, a broad interpretation of a "technical defect" in the claim forms as discussed in Chiropractic Neurodiagnostics, P.C., supra, does not include the scenario where, at trial, there is no proof of an assignment at all.

So what should we make of the Appellate Term's ruling in the captioned case? Can it be reconciled with the Court of Appeals' 2007 decision in Hospital for Joint Diseases v. Travelers? Did Judge Edwards correctly note a distinction between alleged "technical defects" in an assignment versus no assignment at all? Is legal standing from a valid assignment part of a provider's prima facie showing or not?

A clue in answering these questions may be found in Judge Graffeo's majority's opinion in Hospital for Joint Diseases v. Travelers:

Finally, Travelers contends that an assignment of benefits is a necessary component of the hospital's prima facie case for recovery of no-fault benefits. Even assuming that this is true, we conclude that an assignment form stating that the patient's signature is "on file" satisfies that burden where the carrier does not timely take action to verify the existence of a valid assignment.

Notice that the Court of Appeals' majority did not reject, as it easily could have, Traveler's contention that an assignment of benefits is a necessary component of the hospital's prima facie case for recovery of no-fault benefits. Instead, the Court found that the "signature on file" assignment submitted by the provider satisfied such a burden "where the carrier does not timely take action to verify the existence of a valid assignment."

Defense counsel can and will argue that only "signature on file" assignments that otherwise properly identify the provider and are submitted in admissible form in support of a provider's motion for summary judgment fall within the Court of Appeals' holding in Hospital for Joint Diseases v. Travelers. Providers' counsel will argue the contrary, viz, that legal standing to sue by virtue of a proper and admissible assignment is not part of a provider's prima facie burden of proof on a motion for summary judgment.

This appears to be an issue that will foster additional litigation before becoming settled. At this point, it appears certain that insurers that wish to defend no-fault billings based on alleged defects in assignment of benefit forms must timely request verification and/or deny claims on that basis in order to preserve their right to raise such a defense. On the other hand, providers wishing to obtain summary judgment would be well advised to continue submitting in admissible form the assignments upon which they base their claims for recovery.