Follow-Up Verification Requests Sent Less Than 30 Days After Original Requests Held to be Timely

NO-FAULT – STAGED ACCIDENT – TIMING OF FOLLOW-UP VERIFICATION REQUESTS – FAILURE TO ATTEND IMEs – FAILURE TO ATTEND EUOs
Unitrin Advantage Ins. Co. v. Painless Medical, P.C.
(Sup. Ct., New York Co., decided 8/22/2008)

If a no-fault insurer does not wait the entire 30-day period to issue a follow-up verification request pursuant to 11 NYCRR § 65-3.6(b), does it "lose" the tolling effect of such verification requests and is it precluded from relying on defenses related to those requests? This court says "no." See, also, Park Slope Med. & Surgical Supply, Inc. v Country-Wide Ins. Co., 19 Misc 3d 1138(A) (NYC Civil Ct., Richmond Co., 2008).

Unitrin issued a personal auto policy to non-party Hector Sanchez, Jr. on November 28, 2006. Sanchez was involved in a sideswipe collision on December 16, 2006. On January 5, 2007, the three claimants, Ruben Oliver, Ricardo Santos and Marie Mora, were involved in another sideswipe collision with the insured vehicle, which Unitrin contended was staged. According to Unitrin's research, Oliver and Santos had been involved in another collision just 8 months earlier, in May 2006. All three claimants refused medical treatment at the scene.

After Unitrin's special investigator was unable to obtain statements from the claimants, Unitrin requested EUOs and IMEs of each claimant in order to confirm the legitimacy of their claims. Unitrin sent its initial EUO scheduling letter on February 22, 2007, and forwarded a second letter on March 8, 2007 , less than 30 days later. The the initial IME letters were mailed to the claimants on February 12, 2007, and the second letters were mailed two weeks later, on February 28, 2007. Neither Santos nor Mora appeared for their EUOs. In addition, none of the claimants appeared for their IMEs. Unitrin then denied all claims based on the claimants' failure to appear for their IMEs, and because Oliver made material misrepresentations at his EUO.

Unitrin commenced this action against the three claimants and their medical providers seeking a declaration that it was not obligated to pay no-fault benefits to the claimants or their assignees because: (1) Santos and Mora failed to appear for EUOs and all three claimants failed to appear for IMEs; and (2) the January 5, 2007 accident was staged and, therefore, that the claimants' treatment was not related to a motor vehicle "accident".

Defendants Painless Medical PC, Eastern Star Acupuncture, PC (Anatoly Yuryev, Chairman/CEO), and Improved Care Chiropractic PC (Gregory Pinsky DC, Chairman/CEO) moved for summary judgment, contending that Unitrin did not properly deny their allegedly assigned no-fault claims because Unitrin: (1) failed to wait 30 days before rescheduling the EUOs, thereby failing to properly toll the 30-day period within which it had to deny moving defendants’ claims; (2) failed to submit proof that requests for IMEs were made, and regardless, failed to toll its time to deny moving defendants’ claims since Unitrin failed to wait 30 days before making a second request for IMEs of the claimants; (3) submitted vague denials with respect to moving defendants’ claims concerning Oliver in that: (a) the denial was not specific; and (b) Unitrin neglected to mark certain boxes reflecting the reason for the denial on the claim form. Unitrin cross-moved for summary judgment and to compel discovery.

New York County Supreme Court Justice Martin Shulman denied both defendants' motion and Unitrin's cross motion for summary judgment. In rejecting the moving defendants' argument that Unitrin improperly issued follow-up verification requests before waiting 30 days, Justice Shulman ruled:

“There is no case law or statutory authority for the proposition that an insurer must wait 30 days before sending its follow-up request, or it will be precluded from offering defenses at trial” (Psych. & Massage Therapy Assoc., PLLC v Progressive Cas. Ins. Co., 5 Misc.3d 723, 725 [Civ Ct, Queens County 2004]).*** There is significant case law which addresses the timeliness of follow-up requests (see New York & Presbyterian Hosp. v. American Tr. Ins. Co., supra [court held that the defendant insurer’s request for additional verification on October 5, 1999 and its follow-up letter, 27 days later on November 1, 1999 were timely]; New York Hosp. Med Ctr. of Queens v State Farm Auto Ins. Co., 293 A.D.2d 588 [2d Dept 2002] [holding insurer timely sent follow-up verification requests exactly 30 days after initial requests]; Pysch. & Massaqe Therapy Assoc., PLLC v. Progressive Cas. Ins. Co., 5 Misc.3d at 725 [holding that “penalizing [insurer] for sending a follow-up request twenty-five days after its initial request is inconsistent with the goals of the No Fault Law”]).

Moreover, Unitrin has proffered sufficient proof that the follow-up requests were properly mailed to claimants (see lnwood Hill Med., P.C. v General Assurance Co., 10 Misc.3d 18 [App Term, 1st Dept 20051). Following the rational in Presbyterian, Unitrin “did not sit on its rights but rather promptly requested additional verification of the claim” (New York & Presbyterian Hosp., supra). Moving defendants seek to penalize Unitrin for being too prompt, which is in direct contravention of the goals of the No Fault law (see Pysch. & Massaqe Therapv Assoc., 5 Misc.3d at 725-726). As such, the court finds moving defendants’ tolling argument without merit.

Justice Shulman also rejected the moving defendants' argument that Unitrin's denial was vague and legally insufficient:

Unitrin specifically noted in the denial of claim form the reasons that the claim was being denied (Denial of Claim Form dated June 8, 2007, Affirmation in Support, Exh. E). Specifically, the denial of claim form states:

This entire no-fault claim was previously denied based on failure to show for scheduled independent medical exams on 03/06/07 and 04/03/07. Treatment rendered is considered overlapping, excessive and/or concurrent care. Therefore, this treatment is denied. This matter has been referred to the Insurance Fraud Bureau. Our review of the medical records submitted, our investigation, and accepted medical practices reveals that the services alleged to have been rendered were not medically necessary. Therefore, your claim is denied for lack of medical necessity. Material misrepresentations were made at the Examination Under Oath which was performed on March 29, 2007.

Where, as here, “the claims were denied based on the claimants’ failure to appear at the scheduled independent medical examinations”, the denial of claim is sufficiently specific to deny the claims assigned by Oliver as a matter of law[.]

Finally, with respect to Unitrin's motion to compel discovery, the court held that Unitrin was entitled to any discovery that either supported or rebutted its claim that the underlying accident was staged, and discovery pertaining to its fraudulent incorporation claims, including depositions of the moving defendants' alleged owners.

*** Although Justice Shulman may not have been aware of it, in a July 2008, 2-1 decision, the Appellate Term, 2nd Department, ruled that a follow-up verification request sent 27 days after the initial request was "premature and without effect", precluding the insurer "from raising most defenses, including its proffered defense of excessive fees". Infinity Health Prods., Ltd. a/a/o Jermaine Thomson v Eveready Ins. Co., 2008 NYSlipOp 28271 (App. Term, 2nd Dept., decided 7/10/2008). The 2-justice majority (Pesce and Steinhardt) read the 2nd Department's decision in New York & Presbyterian Hosp. v. American Tr. Ins. Co. differently than Justice Shulman did in this case, and Justice Golia in his dissent noted:

The majority makes this finding even though the cited Appellate Division case deals with a verification request that was dated October 5, 1999 and a follow-up request that was sent and dated November 1, 1999. Certainly, the first day of November is less than 30 days from the fifth day of October.

Plaintiff argues, in substance, that because the Appellate Division did not specifically state that the letter that was dated 27 days later was actually mailed on the date that was noted, the case cannot be read to say that the follow-up was actually mailed 27 days later.

A review of the file that was submitted to the Appellate Division in New York & Presbyt. Hosp. v American Tr. Ins. Co. indicates that there is contained in that file, among other references, the reply affirmation of the plaintiff. It states, "The defendant's letters of October 5, 1999 and November 1, 1999 were not prescribed verification forms." There is no indication from this or any other document in that file that the letter dated November 1, 1999 was mailed on any date other than November 1, 1999. Nor, according to my review, was this issue raised.

I do not support the theory that the Appellate Division found that the November 1, 1999 letter was, in fact, dated November 1, 1999 but not mailed before November 5, 1999, nor was it mailed after November 14, 1999.

I, however, do believe that the Appellate Division understood exactly what was presented to it when it found that the follow-up request for verification that was sent within 30 days of the first request, specifically 27 days, was, in fact, timely and in all respects proper.

Just like its decision on fees in excess of the workers' compensation fee schedule, the Appellate Term, Second Department's ruling on this issue is incorrect and should eventually be reversed.