Health Insurer Can't Subrogate Against No-Fault Carrier

NO-FAULT – HEALTH INSURER – SUBROGATION – LACK OF PRIVITY– "PROVIDER OF HEALTH CARE SERVICES" UNDER NO-FAULT
Oxford Health Plan v. State-Wide Ins. Co.
(Sup.Ct., NY Co., decided 2/28/2008)

State-Wide paid no-fault benefits to/for Martha Delgado for injuries she sustained in an MVA. Four months after the accident, State-Wide discontinued no-fault payments, denying further coverage based on the insured's alleged late notice of her claim. Oxford, Delagato's health insurer, thereafter paid the cost of her spinal surgery, and then sued State-Wide to recover the $30,518.97 it had paid for Delgado's MVA-related health care, asserting causes of action based on breach of contract and unjust enrichment or equitable subrogation.

The court first held that Oxford does not and can not assert that it may proceed under 11 NYCRR § 65-3.1 1 which provides, in relevant part, that "an insurer shall pay benefits for any element of loss, other than death benefits, directly to the applicant or, ... upon assignment by the applicant ... shall pay benefits directly to providers of health care services[.]" The court ruled that Oxford, as a health insurer, is clearly not a "provider of health care services" under Regulation 68.

In denying summary judgment based on the breach of contract claim, the court noted that Oxford, as a separate insurer, had no privity of contract with State-Wide and did not show that it was an intended third-party beneficiary of State-Wide's policy with Delagado.

With respect to Oxford's subrogation claim, the court noted that subrogation did not lie because the insured - Delgado - suffered no "loss" as a result of State-Wide's denial. Oxford was seeking to recover for its own rather than its insured's loss. The court reasoned and held:

[P]laintiff Oxford may have a subrogation cause of action against the individual whose vehicle struck Delgado's vehicle, the "third-party tortfeasor" spoken of in the decisional authority. However, research reveals and Oxford cites to no statutory or decisional authority which would authorize it to maintain a subrogation action against State-Wide to recover the sums it was contractually obligated to pay to its insured, Delgado. To allow it to do so would create an entirely new right of action unsupported by the long settled subrogation principles.

The New York State Insurance Department's Office of General Counsel opined back on January 28, 2008, that an HMO is not entitled to subrogate its recovery pursuant to New York Insurance Law § 5105(a) because it does not fit the definition of “insurer” under the no-fault insurance law scheme. See, HMO as No-Fault Subrogee, NYSID OGC Opinion dated 1/28/2008 and Health Ins. Plan of Greater New York v. Allstate Ins. Co., 2007 N.Y.Slip Op 33925(U) (Sup. Ct., NY Co., decided 11/20/2007).