Saturday, May 31, 2008

Certified Toxicology Report Sufficient to Prove Intoxication

NO-FAULT – INTOXICATION EXCLUSION – CERTIFIED TOXICOLOGY REPORT
Westchester Med. Ctr. a/a/o Michael Forthmuller v. Progressive Cas. Ins. Co.
(2nd Dept., decided 5/27/2008)

It rarely happens, so when it does, especially in a coverage case, it's worth taking notice. What's that? An appellate court granting reargument of a decided appeal AND vacating its earlier decision for an amended one.

That's what happened in this case. In its original decision issued on December 11, 2007, the Second Department held that the lower court should not have conditionally granted Progressive's cross motion for summary judgment pending receipt of a certified toxicology report from the first hospital to which plaintiff's assignor had been taken following his one-car crash into a telephone pole because "[e]ven if the subject lab results were contained in certified hospital records, the defendant failed to lay a proper foundation for the admission of this evidence. Absent a proper foundation, certified laboratory results would be insufficient to make a prima facie showing that Forthmuller was intoxicated at the time of the accident[.]"

As the commenter to Dave Gottlieb's No-Fault Paradise posting on this case indicates, the Second Department's original decision was "problematic" to the defense bar. To "lay a proper foundation" for the admission of hospital toxicology records would require both chain of custody witnesses as well as expert testimony.

But that holding remained "on the books" only for five and a half months. Last week, the Second Department reissued an amended decision which, while identical in many respects to the original decision, states:
A blood alcohol test result, as set forth in a certified hospital record, constitutes prima facie evidence of the test result pursuant to CPLR 4518(c) (citations omitted). Thus, the blood alcohol test results contained in a certified hospital record from Sound Shore would be sufficient to make a prima facie showing that Forthmuller was intoxicated at the time of the accident[.]
Therefore, under this ruling, a certified hospital record containing a blood alcohol test result in excess of legal limits should be sufficient to make a prima facie showing of the assignor's intoxication at the time of an accident. But that's only half of the equation. An insurer that has denied no-fault benefits based on the mandatory PIP endorsement's intoxication exclusion must also prove that the assignor's intoxication was the proximate cause of the accident, the issue central to the Second Department's other decision by the same case name on May 27th.

20-Day SOL for Commencing Special Proceeding to Stay UM Arbitration Held Not Applicable to Question of Whether Claimant Qualifies as "Insured"

AUTO – UM – CPLR § 7503(C) – 20-DAY SOL TO COMMENCE SPECIAL PROCEEDING FOR STAY – RESIDENCY ISSUE
Matter of Interboro Ins. Co. v. Maragh
(2nd Dept., decided 5/27/2008)

In what sometimes is called the shortest SOL in New York, CPLR § 7503(c) provides that a UM insurer which fails to commence a special proceeding to stay arbitration within 20 days after being served with a notice of intention or demand to arbitrate is generally precluded from objecting to the arbitration thereafter. The New York courts have held that an otherwise untimely petition to stay arbitration may be entertained, however, when its basis is that the parties never agreed to arbitrate the dispute in the first place or that a condition precedent to arbitration has not been met.

In this case, Interboro Insurance Company, which had comenced this special proceeding more than 20 days after being served with a demand to arbitrate, contended that the claimaint did not qualify as an "insured" under the UM provisions of the policy because he did not reside with the named insured, his mother, at the time of his accident.

In REVERSING the lower court's dismissal of the petition as untimely and remitting the matter back to Supreme Court for a hearing on the claimant's residency issue, the Second Department held:
In this case, Interboro raised a factual issue through sworn statements of Chouquette, its named insured, who denied that Maragh, her son, was a resident of her household at the time of the accident. * * * The provision of the subject policy for uninsured motorists coverage defines an "insured" as the named insured or any "family member," the latter being defined as "a person related to [a named insured] by blood . . . who is a resident of [the named insured's] household." Resolution of the factual issue as to whether Maragh was an insured under the subject policy is a condition precedent to arbitration (citations omitted). Further, if Maragh was not an insured under the subject policy, then no agreement to arbitrate existed between him and Interboro, and the 20-day time limit set forth in CPLR 7503(c) is inapplicable[.]

UM Arbitration Stayed Due to No Physical Contact with Hit-and-Run Vehicle

AUTO – UM – HIT-AND-RUN – NO PHYSICAL CONTACT
Matter of Government Employees Ins. Co. v. Steinmetz
(2nd Dept., decided 5/27/2008)

GEICO commenced this special proceeding for a permanent stay of arbitration of defendant's uninsured motorists (UM) coverage claim, contending that there had been no physical contact between the defendant's vehicle and the alleged hit-and-run vehicle, as required for UM coverage. After a hearing, the lower court agreed and granted GEICO's petition.

In AFFIRMING the lower court's ruling, the Second Department held:
"Where, as here, a case is tried without a jury, this Court's power to review the evidence is as broad as that of the trial court, taking into account in a close case the fact that the trial judge had the advantage of seeing the witnesses'" (Terry v State of New York, 39 AD3d 846, 846, quoting Northern Westchester Professional Park Assoc. v Town of Bedford, 60 NY2d 492, 494). We decline to disturb the Supreme Court's finding that there was no physical contact between the appellant's vehicle and an alleged hit-and-run vehicle (see Matter of Progressive Northeastern Ins. Co. v Sheikh, 40 AD3d 763, 764; Matter of Metropolitan Prop. and Cas. Co. v Sands, 5 AD3d 601, 602).

Discovery of State Farm's "Claims Procedure Guide" Denied

AUTO – DECLARATORY JUDGMENT – DISCOVERY
State Farm Ins. Co. v. Aracena-Almonte
(2nd Dept., decided 5/27/2008)

State Farm brought this DJ action to declare that it is not obligated to defend or indemnify its insured in relation to an underlying personal injury action. State Farm alleged that the underlying automobile collision was intentional and not an accident. A defendant in the DJ action moved purusant to CPLR 3126 to dismiss State Farm's complaint insofar as asserted against him unless the plaintiff provided him with a copy of its "Claims Procedure Guide", and the lower court granted that motion.

In REVERSING the lower court's order and denying the motion, the Second Department held that the moving defendant failed to establish the relevancy of State Farm's "Claims Procedure Guide" to the issues to be decided in this DJ action, namely, whether the underlying automobile collision was intentional or accidental. "Since the defendant was not entitled to discovery of such document, the Supreme Court erred in granting that branch of his motion which was pursuant to CPLR 3126 to dismiss the complaint insofar as asserted against him unless the plaintiff provided him with the document."

Friday, May 30, 2008

Follow-Up Verification Request Sent on the 30th Day After the Original Request Held to be Timely

NO-FAULT – FOLLOW-UP VERIFICATION – PREMATURE CAUSE OF ACTION
Park Slope Med. & Surgical Supply, Inc. a/a/o Alicia Marsh v. Country-Wide Ins. Co.
(NYC Civil, Richmond Co., decided 5/27/2008)

Back to work...

Recite the additional verification, follow-up verification formula with me:

(Prescribed verification forms receipt date) + (additional verification request within the next 15 business days per 65-3.5(b)) + (if no verification supplied within 30 calendar days) + (follow-up request within the next 10 calendar days per 65-3.6(b)) = timely additional/follow-up verification requests.

If an insurer does not wait the entire 30 days to see whether the requested verification arrives, but sends the follow-up request on, let's say, the 30th day instead of the 31st day, is the follow-up request timely? The court in this case said yes, such a follow-up request is timely.

In dismissing the DME provider's action as premature, Richmond County NYC Civil Court Judge Katherine A. Levine first noted that two, prior Civil Court decisions are diametrically opposed in their rulings:

> Psych. & Massage Therapy Assoc., PLLC v. Progressive Cas. Ins. Co., 5 Misc 3d 723 (Civ. Ct., Queens Co., 2004), in which the court found that the insurer's sending of its follow-up verification request 25 days after its initial request did not violate 11 NYCRR § 65-3.6(b), and that the 30-day time frame was a limit to the amount of
time an insurer may wait before sending a follow-up request.

> Seaside Medical P.C. v. State Farm Mutual, 12 Misc 3d 1127, 819 NYS2d 819(Civ. Ct., Richmond Co., 2006), in which the court held that toll "occasioned by defendant [insurer's] initial verification requests dissapated ab initio" by reason of it having sent out the follow-up verification request only 28 days after the initial
request.
Judge Levine then noted that the Second Department, Appellate Division, found in New York & Presbyterian Hosp. v. American Transit Ins. Co., 287 AD2d 699 (2nd Dept. 2001) that the 30-day period in which an insurer must pay or deny a claim is tolled where there was an outstanding follow up verification request that was sent before the 30-day waiting period expired. Specifically at issue in that case, however, was the form as opposed to the timeliness of the verification request letters. The Second Department commented that American Transit had timely requested additional verification of the claim when it sent a follow-up letter approximately 27 days after its initial first request.

Judge Levine does a nice review of both the regultory language and the interpretative case law before concluding:

It is imperative in ruling upon No Fault insurance matters not to lose sight of the fundamental goal of the regulatory scheme, which is "designed to promote prompt payment of legitimate claims." * * * Accordingly, a court must interpret and apply the No-Fault Regulations in a manner leading to the prompt payment of valid, documented claims. In light of the aforesaid principles of statutory construction and the purpose behind the No-Fault Regulations, this Court finds that defendant's sending the follow up verification request on the 30th day after the original request for verification was timely and in accordance with the regulations.

Complaint dismissed as premature. Score: 3-1 for insurers on issuing follow-up verification requests prior to the 31st day.

Of Fishing and Filosophy

Okay, you've seen evidence in this blog of the coverage lawyer and litigator aspects of my profile to the right, so I thought I'd provide some evidence of the angler aspect and share how I spent my evening last evening on Lake Erie, wrestling this 46", 35# muskie to and into the boat with only one good hand, whilst ruminating over my response to David Barshay's late afternoon comment to my What Part of "No" Did You Not Understand? post, pushed to my BB. Yes, that's a duct-taped, ZipLoc bag covering a cast on my left hand/arm, and don't tell my orthopod, please.

My aim in this blawg is to provide balanced reporting of New York insurance coverage cases and issues. Oh sure, my stripes may show from time to time, but I would never 86 a court decision simply because its holding is adverse to an insurer. You'll see 'em all here, folks. And I don't mind at all if you want to get on board and "cast" a few comments out there. After all, it's about fishing, not catching. That's why it's called the former, and not the latter.

Nice fish, eh? She was released successfully to go make baby muskies.

Thursday, May 29, 2008

No Flitting Between Forums For No-Fault Claim

NO-FAULT – STAY OF ARBITRATION – CHOICE OF FORUM
Travelers Indem. Co. v. Sung Won Lee
(Sup. Ct., Queens Co., decided 5/28/2008)

By summons and complaint dated January 24, 2006, defendant EIP commenced an action against Travelers in Queens County Civil Court for "at least $25,000" in no-fault benefits, presumably for surgical costs that Mr. Lee had not yet incurred. Travelers answered and served discovery demands and a motion to dismiss. In October 2007, the court granted Travelers' motion "without prejudice" on the grounds that the lawsuit was premature as having been filed prior to plaintiff's surgery in August of 2007.

Two weeks later, Lee filed for no-fault arbitration of his claim for $19,000 in surgical costs with the American Arbitration Association. Travelers commenced this special proceeding for a permanent stay of that arbitration pursuant to CPLR article 75. Travelers argued that Lee was barred from proceeding with the arbitration since he had exercised his option and elected the courts as the forum within which to prosecute his claims. In response, Lee argued that the AAA arbitration may proceed as there currently was no court action pending in the subject no-fault dispute and because he did not have the option of filing for arbitration at the time he commenced the civil court action in January of 2006 since his surgery had not yet been performed.

In granting Traveler's petition for a permanent stay of the AAA arbitration, Queens County Supreme Court Justice Jaime Rios held:
Having decided his course of recovery, Lee cannot flit between forums for the resolution of issues or items of damages arising from the same injury (see Roggio v Nationwide Mut. Ins. Co., 106 AD2d 3 [3d Dept., 1985]; see also Gibeault v Home Ins. Co., 221 AD2d 826 [3d Dept., 1995]). To hold otherwise would create an intolerable drain on our resources for dispute resolution, senselessly prolonging controversies and inviting inconsistent adjudication (see A.B. Medical Services PLLC v. New York Cent. Mut. Fire Ins. Co., 2006 WL 901211 [Kings Cty Civ Ct, 2006]; Advanced Medical Care, PLLC ex rel. Kabelsky v Travelers Property Cas., 6 Misc 3d 1040[A] [NY City Civ Ct,2005]).

Wednesday, May 28, 2008

What Part of "No" Did You Not Understand? Provider's Action Dismissed as Premature Based on Billing Counsel's Refusal to Provide Verification

NO-FAULT – OUTSTANDING VERIFICATION REQUESTS – PREMATURE CAUSE OF ACTION – PROOF OF MAILING
Lenox Hill Radiology & MIA P.C. a/a/o Nila Sokol v. Global Liberty Ins.
(NYC Civil, New York Co., decided 5/21/2008)

The med billers over at Baker Sanders may want to tweak their form letters. Or stop suing their providers' no-fault recovery actions in New York Civil.

Here's the riveting screenplay-by-play from New York County Civil Court Judge Arlene Bluth:

Late April, 2007
FADE IN:

EXT. Somewhere in metro NYC (presumably)

Nila Sokol merits mention on a police accident report for her reported involvement in a motor vehicle accident.

FADE OUT.

June 7, 2007
FADE IN:

INT. Lenox Hill Radiology & Medical Imaging Associates, P.C.

Patient Sokol lies still on the MRI machine as it rat-a-tat-tats around her. Twice in fact. Once for $879.72, and the second time for $912.

FADE OUT.

June 12, 2007
FADE IN:

INT. Lenox Hill Radiology & Medical Imaging Associates, P.C.

Patient/assignor Nila again lies on the MRI machine a third time in five days as it rat-a-tat-tats another $878.67-worth around her.

FADE OUT.

Some days prior to June 26, 2007
FADE IN:

INT. Offices of BSBGFM&N

BILLING CLERK/WORD PROCESSOR/LETTER WRITER (V.O.)
Dear Insurance Company:
Although there's no legal dispute that we're aware of yet,
we represent Lenox Radiology blah blah blah...
Three times we verily say to thee,
thou must deal with us, only us, and only us.
Failure to to do may result in unnecessary [sic] litigation.
Any enclosed bills, forms, "doctor's reports, notes and narratives
were prepared solely by the above-referenced provider."

FADE OUT.

July 10, 2007
FADE IN:

INT. Offices of Global Liberty Insurance -- Workspace of no-fault claims examiner Cinnamon Houston

CINNAMON HOUSTON
Dear BSBGFM&N:
Thank you so much for your lovely form letter
and for forwarding your client's bill for $879.72,
which we received on June 26, 2007.
To verify this claim, would you please send us two items:
(1) a letter of medical necessity from the referring physician; and
(2) a claim form, like an NF-3 perhaps, with a valid signature of the provider.

FADE OUT.

July 17, 2007
FADE IN:

INT. Offices of BSBGFM&N

UNNAMED BSBGFM&N ATTORNEY
Re: Verification Compliance
Dear Ms. Houston:
Whatever we gave you was good enough
and this provider is not giving you anything else.
If you need something from someone else,
go ask them. Now pay the bill.
"Any further requests to this provider are deemed unnecessary
and in violation of 11 NYCRR 65-3.2 (c)."

FADE OUT.

August 13, 2007
FADE IN:

INT. Offices of Global Liberty Insurance -- Workspace of no-fault claims examiner Cinnamon Houston

CINNAMON HOUSTON
Dear BSBGFM&N:
Thank you for your July 17, 2007 letter
and stern warning but we really, really
need the stuff we asked for on July 10, 2007.
No kidding.

FADE OUT.

REPEAT THESE LINES TWICE MORE, THE THIRD TIME LEAVING OUT ANY RESPONSE TO THE REQUEST FOR INITIAL AND FOLLOW-UP REQUESTS FOR VERIFICATION.

Sometime after August 10, 2007 and prior to January 1, 2008
FADE IN:

INT. New York City Civil Court Clerk's Office

BSBGFM&N CLERK/PARALEGAL
Good morning. Would you please file this
and the other 3,187 summonses and complaints
that I've brought with me today?

COURT CLERK
Of course I will. Just pile them up over there.
Is this bleach free, recycled paper?

FADE OUT.

Sometime after January 1, 2008
FADE IN:

INT. Offices of Barry & Associates, LLC

DEFENSE ATTORNEY
GLI moves for summary judgment because
it timely requested but received
no verification of the three billings,
making this action premature.

CINNAMON HOUSTON
I personally prepared each verification request,
put each in an envelope,
checked that each was properly addressed,
and put each in my outgoing mail bin.
GLI's regular office practice is that the mail person
comes by at approximately 3:45 each afternoon,
collects and stamps the mail,
and then delivers it to the post office that day.

FADE OUT.

Sometime later
FADE IN:

INT. Offices of BSBGFM&N

BSBGFM&N ATTORNEY
Hold up there, defense attorney.
No summary judgment for you because:
(1) Ms. Houston did not swear that it was her duty
to ensure compliance with GLI's mailing procedures
and did not herself drop each verification request in the mailbox.
(2) In any event, GLI's verification requests were defective
because, even though we three times told it to do so,
GLI sent the verification requests only to us
and not also to our client, the provider.

FADE OUT.

May 21, 2008
FADE IN:

INT. Chambers of Judge Arlene P. Bluth

JUDGE BLUTH
The Court finds Ms. Houston's affidavit explaining preparation
of the verification requests and the mailing procedures with respect
to all of the verification requests (the initial three and the follow-up requests)
sufficient to prove timely and proper mailings.
* * * * *
Although plaintiff's opposition correctly notes that Ms. Houston
did not swear that it was her duty to ensure compliance with defendant's
mailing procedures and that she did not herself drop it in the mailbox,
it is enough that "the defendant submitted admissible evidence
in the form of an affidavit of an employee with knowledge of the defendant's
standard office practices or procedures designed to ensure
that items were properly addressed and mailed".
Ms. Houston's detailed affidavit fulfills this requirement.

The verification requests were sent to the plaintiff's law firm.
A letter properly mailed is presumed to have been received.
Although an associate of that law firm submitted an affirmation in opposition
to this motion, no attempt to rebut the presumption was made;
conspicuously absent from that affirmation is a simple denial
of receipt of the requests for verification.
* * * * *
The affirmant in opposition was in the position to,
but did not, even attempt to rebut the presumption
that plaintiff's law firm received the requests for verification
shortly after Ms. Houston stated that they were mailed.
Therefore, there is no question of fact as to proper mailing of the verification requests.

Having determined that defendant proved its timely and proper mailing
of the requests for verification, the Court turns to the other bases
for plaintiff's opposition. Plaintiff claims that defendant failed to present
a "good reason" why further verification was necessary; this Court disagrees.
This Court does not believe that it is unreasonable to ask for a letter
of medical necessity before a carrier pays more than $2500 for three MRIs
conducted during the course of one week, approximately six weeks
after an alleged accident. Defendant is not required to provide
a blank checkbook to plaintiff. Rather, defendant is entitled to find out
whether and why each MRI was prescribed; in other words,
the carrier is entitled to inquire as to the medical necessity before it pays the bills.

Plaintiff also claims defendant violated 11 NYCRR 65-3.6 (b) * * *
Plaintiff argues that because defendant did not send the follow-up
verification requests both to it and to its attorneys,
the requests are defective. This argument lacks merit.

Because the attorney's cover letter clearly put defendant on notice
that the law firm was the agent for the medical provider for all purposes
with respect to the bill submitted, sending the verification request
to the attorneys was the same as sending the request to the principal.
Accordingly, defendant's notice to the law firm-agent was notice to
the principal-provider as a matter of law. Under the circumstances
presented here, there was no need for the insurer to send another
copy to the principal.

In addition, in interpreting 11 NYCRR 65-3.6 (b), courts have found
that the additional notification to the applicant and its attorney
is required when the verification is requested from a third party,
not when, as here, the verification is requested from the applicant.
"Where verification is sought from a party other than the applicant,
the applicant is entitled to be timely informed of the nature of the
verification sought and from whom it is requested when, after an initial
verification request remains unsatisfied, a follow-up request is necessary".
This Court notes that this very plaintiff advanced the same arguments
that the second verification request was defective because the insurer
did not send an additional notification to the attorney's client/principal,
in Lenox Hill Radiology and Mia, P.C. (Dejesus) v Progressive Casualty Insurance,
Civ Ct, NY County, Index. No. 31019/07 (2008); there, albeit after trial,
Judge Jeffrey Oing also found the argument to be without merit.

Because plaintiff failed to respond to defendant's valid and proper
verification requests, the 30-day period within which defendant had
to either pay or deny the claim did not begin to run.
Therefore, plaintiff's claims for No-Fault benefits are not overdue,
this action is premature and must be dismissed.

For the forgoing reasons, defendant's motion for summary judgment
is granted and plaintiff's complaint is hereby dismissed.

FADE OUT.

Tuesday, May 27, 2008

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.

Provider Fails to Make Prima Facie Showing for Summary Judgment

NO-FAULT – MEDICAL NECESSITY – PRIMA FACIE SHOWING – ADMISSIBILITY OF CLAIM FORMS – SO-ORDERED STIPULATION
Rockaway Med. & Diagnostic, P.C. a/a/o Kareem Bruce v. Utica Mut. Ins. Co.
(App. Term, 2nd Dept., decided 4/30/2008)

Plaintiff medical provider moved for summary judgment on its $1,758.40 in billings, submitting in support of its motion an affirmation from plaintiff's counsel, an affidavit from plaintiff's office services supervisor, and an unaffirmed, undated letter of medical necessity. Defendant Utica Mutual opposed plaintiff's motion based on the asserted inadmissibility of the documents annexed to plaintiff's motion papers and cross-moved for summary judgment based on the plaintiff's assignor's failure to appear for an EUO and plaintiff's asserted breach of a "so-ordered" discovery stipulation (one prepared by counsel and submitted to the judge for a "so ordered" signature).

In REVERSING the lower court's award of summary judgment to the plaintiff, the Appellate Term agreed with Utica Mutual that plaintiff had failed to establish the admissibility of the claim forms annexed to its motion papers:
The affidavit submitted by plaintiff's office services supervisor was insufficient to establish that he possessed personal knowledge of plaintiff's practices and procedures so as to lay a foundation for the admission, as business records, of the documents annexed to plaintiff's moving papers. In any event, plaintiff failed to annex to its motion for summary judgment the claim forms upon which it sought to recover. Accordingly, plaintiff failed to make a prima facie showing of its entitlement to summary judgment.
With respect to Utica Mutual's cross motion, however, the Appellate Term sustained the lower court's denial of that cross motion, holding that Utica Mutual had failed to demonstrate that plaintiff's causes of action were premature (Editor's Note: Utica Mutual apparently must also have asserted an incomplete verification defense). The court also pointed out that plaintiff did not breach the so-ordered discovery stipulation because discovery was stayed during the pendency of plaintiff's summary judgment motion, in accordance with CPLR § 3214(b) and the so-ordered stipulation made no provision for extensions being prohibited without leave of court (Practice Pointer: consider including such a provision in so-ordered discovery stipulations).

The decision says nothing either way about Utica Mutual's defense based on the assignor's failure to appear for an EUO. Don't know what became of that defense or why Utica Mutual apparently argued incomplete verification rather than breach of the EUO condition in support of its cross motion and/or on appeal.

Monday, May 26, 2008

No Replacement of Property Within 2 Years Results in Dismissal of RC Holdback Suit

PROPERTY – REPLACEMENT COST COVERAGE – DEADLINE TO REPAIR OR REPLACE – CONTRACTUAL SUIT LIMITATIONS PERIOD – DECLARATORY JUDGMENT
Alloush v. Nationwide Mut. Fire Ins. Co.
(NDNY, decided 2/26/2008)

Went to the Mura & Storm archives for this one. Kudos to my partner, Scott Storm, for obtaining this excellent result.

This case addresses two, occasionally recurring questions in property claims: (1) How long does an insured really have to repair or replace an insured dwelling to obtain the RC holdback?; and (2) Can an insured use a declaratory judgment action to obtain a ruling on whether a certain, unpurchased property qualifies for RCV coverage? Answers from this decision are: (1) Two years. (2) No.

Mr. Alloush sustained a fire loss to his home on August 24, 2003. Nationwide estimated the dwelling damage to be $196,849.26 on a RCV basis and $141,825.24 on an ACV basis, leaving the potentially recoverable depreciation (commonly referred to as the "RC holdback") to be $55,024.02.

Nationwide paid the dwelling ACV on February 19, 2004. Mr. Alloush completed repairs on the insured dwelling but did not make a claim for the RC holdback because he could not substantiate expenditures in repairing the insured premises in excess of what Nationwide had paid in ACV. Instead, even though Mr. Alloush had decided to repair the insured premises and continued to reside there, he wanted to recover the RC holdback by purchasing another property.

In July 2005 (the month before the two-year anniversary of the loss date), Mr. Alloush contacted Nationwide and informed it that he intended to buy a single-family house in New Jersey as a replacement for the insured premises (Mr. Alloush's ex-wife happened to own that home and lived there with four of their eight children). In response, Nationwide reminded Mr. Alloush and his public adjuster of the policy's two-year contractual suit limitation condition and the need for Mr. Alloush to replace the insured premises and file his RC holdback claim before that time period expired. At the time he filed this action, however, Mr. Alloush had not replaced the insured premises.

In granting summary judgment to Nationwide, Senior Judge Frederick Scullin ruled that: (1) since the policy unambiguously stated that Nationwide was not required to pay any more than the ACV of the insured premises "until the repair or replacement is made," and Mr. Alloush had not replaced the insured premises, Nationwide had not breached the policy; and (2) Mr. Alloush was improperly seeking an advisory opinion about a future event that may or may not occur, namely, the replacement of the insured dwelling:

[T]his case would only be ripe for decision if and when Plaintiff purchased a replacement for the insured premises and incurred some costs in doing so. Moreover, dispute would still be hypothetical unless and until Plaintiff filed a claim to recover those replacement costs and Defendant refused to pay that claim. Therefore, the Court concludes that there is no current controversy between these parties and dismisses the complaint for lack of jurisdiction.

This claim scenario must be contrasted with one in which the insurer denies all coverage based on one or more coverage defenses and does not pay ACV to the insured. See, discussion of the O&E Growers, Inc. v. Selective Ins. Co. of Amer. case in If At First You Don't Succeed, Sue Again. We obtained a similar result for Security Mutual Insurance Company in New York state court in Finley v. Security Mut. Ins. Co., Index No. 02-0594 (Sup.Ct., Jefferson Co., decided 6/21/2005). This is now the second decision that we are aware of in which a court has agreed that a property insurance policy's two-year contractual suit limitations period, in effect, represents the deadline by which an insured who has received a building ACV payment must repair or replace the building and submit the RC holdback claim.

What this case adds to the legal landscape, however, is authority for rejecting insureds' attempts to use the declaratory judgment suit mechanism as a means of "staying" that two-year deadline and attempting to obtain what can only be regarded as an advisory opinion, something DJ actions are not intended to provide.

Sunday, May 25, 2008

NF-10 Wars -- Untimely & Defective Denials Rejected

NO-FAULT – DEFECTIVE NF-10 – UNTIMELY DENIAL – VERIFICATION – PREMATURE CAUSE OF ACTION
New York Methodist Hospital a/a/o Kyle Cook v. Travelers Prop. & Cas. Ins. Co.
(Sup.Ct., Nassau Co., decided 5/7/2008)

Hat tip to Dave Gottlieb and his commenter (without any endorsement of the commenter's castigation of Travelers' defense counsel's arguments) over at No-Fault Paradise for reporting this decision.

Unlike the name of the case's primary plaintiff, this matter involved two hospitalization billings from Westchester Medical Center (WMC) as assignee of Colin Smith and Segundo Tapia.

Smith was injured in an MVA on August 1, 2007, and treated at WMC from August 1-3, 2007. WMC sent Travelers an NF-5 and UB-92 on August 20, 2007, claiming $2,279.77 in hospitalization costs. Travelers received the billing on August 24, 2007 and requested verification on September 18 and October 23, 2007. WMC did not respond fully to Travelers' verification requests until January 2, 2008, two and a half months after commencing this action.

Tapia was injured in an MVA on January 1, 2007, and treated at WMC from January 1-4, 2007. WMC sent Travelers anNF-5 and UB-92 on July 19, 2007 , claiming $15,151.77 in hospitalization costs (although the UB-92 listed $52,402.00 as the costs). Travelers received the billing on July 23, 2007 and issued an NF-10 denial of claim 33 days later on August 25, 2007, citing the assignor's late notice of the MVA, but incorrectly identifying the assignor/injured party as "Segundo Lupercio" and incorrectly listing $52,402 in Box 30 as the amount of the billing. The decision does not say whether Travelers also denied WMC's billing based on late proof of claim (billing submitted more than 45 days after dates of service) and, if not, why not.

Travelers apparently had issued an earlier denial directly to Tapia on May 16, 2007 based on late notice of the acccident (the decision indicating that telephone notice was first provided on April 4, 2007), but that NF-10 incorrectly listed Tapia's name as "Segundo R. Lupercio" and listed nothing in Boxes 23-32.

With respect to WMC's claim a/a/o Smith, the court agreed with Travelers that WMC's suit was premature because it did not fully respond to Travelers' verification requests until after it commenced this suit. "Since all requested verification was not received until January 2, 2008, the claim was not overdue when the action was commenced , on October 17, 2007, and the action was therefore premature." The court rejected Travelers' argument that WMC had failed to establish a prima facie case because the UB-92 identified the patient as "Trauma Russia", a name, WMC explained, given to a patient who is unconscious or non-responsive when they come into the hospital. The decision does not indicate whether Travelers paid or denied the Smith billing within 30 days of receiving the completed verification.

With respect to WMC's claim a/a/o Tapia, the court granted summary judgment to WMC, rejecting Traveler's arguments that the denial was not defective, despite the incorrect and missing information, because the basis for the denial was claimant's failure to fulfill a condition precedent required by the policy which was addressed to the entire claim and not any specific bill, and that an insurer can deny a claim retroactively to the date of loss for a claimant's failure to fulfil a condition precedent, irrespective of the 30-day rule of Insurance Law § 5106(a). Because Travelers did not deny WMC's billing until 33 days after it received the NF-5 and UB-92, its denial was found to be untimely. Although arguably dictum, Nassau County Supreme Court Justice William LaMarca also concluded that both NF-10s issued by Travelers were "incomplete and defective."

Friday, May 23, 2008

Default Judgment for Declaratory Relief Denied

PROFESSIONAL LIABILITY – RESCISSION – DECLARATORY JUDGMENT RELIEF – DEFAULT JUDGMENT
Certain Underwriters at Lloyd's of London v. Bellettieri, Fonte & Laudonio, P.C.
(Sup. Ct., Westchester Co., decided 4/28/2008)

We have a new contender for longest plaintiff's name in a caption. Someone call Guiness (the record book people, not the brewers). The plaintiffs' name designation in this case is:

Certain Underwriters at Lloyd's of London Subscribing to Lawyers Professional Liability Policies of Insurance Designated by Policy No. Rpg0001841, and Covering the Periods October 19, 2003 to October 19, 2004, October 19, 2004 to November 18, 2005, November 18, 2005 to November 18, 2006 and November 18, 2006 to November 18, 2007, Plaintiffs
Nice. What's the official NY Style Manual abbreviation for that run-on?

In any event, the long-monikered plaintiffs brought this action for a declaratory relief against the defendant law firm and its three named partners, Bellettieri, Fonte and Laudonio, alleging that four professional liability (lawyer malpractice) policies issued to the law firm from 2003 through 2007 were void ab initio and should be rescinded due to misrepresentations or non-disclosures of material fact in each of the policies' applications. In 2007, Bellettieri pled guilty to bank fraud and mail fraud arising from a "check-kiting" scheme and other fraudulent conduct, admitting to massive thefts of some $20 million, a significant part of which resulted from the siphoning off of monies from bank accounts maintained by the law firm from 2003 through November, 2006. At least three actions had been commenced against Bellettieri, the law firm, Fonte, and Laudonio, and numerous other claims had been made and grievances filed.

The court noted that plaintiffs may have brought this action "in order to short-cut the need to litigate over the 'innocent co-insured' provision" of the policies, defendants Fonte and Laudonio having contended that they were unaware of their partner's crimes, did not complete or sign any of the applications, and were "innocent co-insureds" as to whom the policy could not be rescinded.

Plaintiffs moved for a default judgment against Bellettieri and the law firm, contending that each had been properly served with the complaint. The court found that service had not been properly made on Bellettieri (because although Bellettieri's attorney advised that he had been authorized to accept service of the complaint on behalf of Bellettieri, there was no evidence submitted that Bellettieri knew about his lawyer's representations to that effect), but had been properly made on the law firm.

In denying plaintiffs' motion for a default judgment against the law firm, however, the court cited to established New York case law holding:

[D]eclaratory relief should rarely, if ever, be granted solely upon default and without inquiry by the court into the merits * * * and may not be granted where the judgment would affect the rights of other parties not in default or would affect the rights of non-parties. * * * Plaintiffs have not explained how it is plausible to enter a default judgment declaring that the policies are void as against the Law Firm though litigation must continue as to whether the policies provide coverage as to Fonte and Laudonio. Nor have Plaintiffs explained what effect, if any, a declaratory judgment voiding the policies as to the Law Firm would have if such a judgment has no impact on the rights, if any, of Fonte and Laudonio. A declaratory judgment should not be issued unless it would serve some useful purpose and it not has not been established that a default judgment against the Law Firm only would serve any useful, practical purpose in the absence of an adjudication as to Fonte and Laudonio.

* * * * *

Should Fonte and Laudonio prevail in this action, and a declaratory judgment issue that they are entitled to the protection of the policies issued by Plaintiffs, such a determination would be fundamentally inconsistent with the declaration that Plaintiffs would have the Court issue now as against the defaulting Law Firm that the policies are void. Thus, the granting of a default and severance could lead to fundamentally inconsistent judgments.

* * * * *

The granting of a default and severance could potentially lead to fundamentally inconsistent judgments a result that could impact upon the rights of non-parties. To the extent that a default declaratory judgment as to the Law Firm would have no impact on Fonte and Laudonio or any one else, it would be a meaningless exercise until the balance of this case is heard. On the other hand, to the extent that such a default judgment would impact the rights of Fonte, Laudonio, or the persons suing to recover because of Bellettieri's misconduct, it would not quiet or stabilize the disputed jural relations but only serve to engender further litigation and controversy. Thus, the granting of Plaintiffs' motion would not "serve some practical end".

Default judgments are difficult to obtain in affirmative declaratory judgment actions especially where, as here, not all of the named defendants have defaulted and the interests of the defendants in the policy(ies) at issue are joint.

Raptor Quad Not an "Uninsured Motor Vehicle"

UM – ATV – "MOTOR VEHICLE" – "MOTORCYCLE" – STAY OF ARBITRATION
Matter of Progressive Northeastern Ins. Co. v. Scalamandre
(2nd Dept., decided 5/20/2008)

Scalamandre was injured when her automobile collided with a four-wheeled "Raptor Quad" all-terrain vehicle. Progressive insured Scalamandre's car and the ATV was uninsured. Scalamandre submitted a demand for arbitration seeking UM benefits under her Progressive policy. Progressive sought to permanently stay arbitration on the ground that the ATV did not constitute an "uninsured motor vehicle."

The lower court granted Progressive's petition and the Second Department AFFIRMED.

Contrary to the appellant's contention, Progressive's policy is not ambiguous. A plain reading of the language contained in the subject policy leads to the conclusion that a four-wheeled ATV does not constitute a "motor vehicle" for purposes of invoking the policy's UM endorsement (citations omitted). In addition, although UM coverage extends to all "motor vehicles," as defined by Vehicle and Traffic Law § 125 (citation omitted), ATVs are specifically excluded from the definition of motor vehicles set forth therein. Moreover, unlike the situation in Matter of Nationwide Mut. Ins. v Riccadulli (183 AD2d 111), wherein the three-wheeled ATV involved could be considered a motorcycle, thereby rendering UM benefits available, the "Raptor Quad" ATV was a four-wheeled vehicle. Consequently, this ATV does not fit the statutory description of a motorcycle, which is limited to a vehicle with no more than "three wheels in contact with the ground" (Vehicle and Traffic Law § 123; see Vehicle and Traffic Law § 125-a).
Three-wheeled ATVs -- possible UM coverage.
Four-wheeled ATVs -- no UM coverage.

Cost of Post-Loss Guard Services to Protect Covered Property Awarded

COMMERCIAL PROPERTY – LOSS CONDITIONS – COST OF GUARD SERVICES TO PROTECT THE COVERED PROPERTY AFTER LOSS
NIACC, LLC v. Greenwich Ins. Co.
(2nd Dept., decided 5/20/2008)

Plaintiff insured hired a guard service to protect its property following a fire loss. When Greenwich did not pay for the cost of those services, the insured sued.

In AFFIRMING the lower court's denial of summary judgment to Greenwich and grant of summary judgment to the insured, the Second Department agreed that certain provisions in the insured's policy which pertained to "Loss Conditions" were ambiguous and that, construed against Greenwich, the provisions required Greenwich to reimburse the insured for guard services retained to protect the subject property after a fire that was the covered cause of loss. Greenwich apparently had argued that the property was valueless after the fire and, therefore, there was nothing on the site to protect from further damage, but the Second Department found that the record on appeal did not support Greenwich's argument.

Although the decision does not quote the policy provision at issue, it probably was subparagraph a.(4) of the "Duties In The Event Of Loss Or Damage" condition of a commercial property policy, which provides:

a. You must see that the following are done in the event of loss or damage to Covered Property:

(4) Take all reasonable steps to protect the Covered Property from further damage, and keep a record of your expenses necessary to protect the Covered Property, for consideration in the settlement of the claim. This will not increase the Limit of Insurance. However, we will not pay for any subsequent loss or damage resulting from a cause of loss that is not a Covered Cause of Loss. Also, if feasible, set the damaged property aside and in the best possible order for examination.

Thursday, May 22, 2008

NYS DMV Forms & Police Accident Report Cover Sheet

While we're at it, here's the link for the NYS DMV Police Accident Report Cover Sheet "N". I can never find my copy when I need to decode boxes 10, 15&16, and 19-22.

Other NYS DMV forms can be found here.

Editor's Note (01.27.14) ~~ Cover Sheet N has apparently been replaced with NYS DMV Form MV-104COV, which you can view and download here.

DMV Insurance Codes and Company Contacts

The New York State Insurance Department has published an updated list of New York auto insurer company contacts and their DMV insurance codes. Access and bookmark the list here.

Wednesday, May 21, 2008

NYS Insurance Department Office of General Counsel April 2008 Opinions -- Part II



Just posted to the NYS Insurance Department's website are the Office of General Counsel opinions from the second half of April.

Construction Company Acting as a Public Adjuster (April 22, 2008)

A roofing contractor that specializes in catastrophic claims arising from wind, ice, or other storm damage, estimates roof damage, offers insureds opinions as to whether the roof damage is from a storm or other incident normally covered by the insured’s homeowners’ insurance, but does not file a claim on behalf of the insured, charge any fees for meeting with and dealing the insurer's representatives, or negotiate with the insurer is not acting as a public adjuster and does not need to be licensed as such to perform those services. Under Insurance Law § 2101(g)(2), a "public adjuster" is any person, including a corporation, who or which for money, commission or thing of value "acts or aids in any manner on behalf of an insured in negotiating for, or effecting, the settlement of a claim or claims for loss or damage to property of the insured in this state."

In the scenario presented, the OGC opined that the roofing contractor "does not not appear to negotiate or effect the settlement of a claim for money, a commission, or any other thing of value pursuant to Insurance Law § 2101(g)(2), and therefore need not be licensed by the Department as a public adjuster." OGC Assistant Attorney Joana Lucashuk added, however, that "[the contractor] must limit any communications between ABC and the insurer to responding to questions posed by the insurer with regard to the damage to the home. [The contractor] may not advocate on behalf of the insured."

1033 Waiver Pursuant to 18 U.S.C. § 1033 (April 23, 2008)

The Violent Crime Control and Law Enforcement Act of 1994, 18 U.S.C. § 1033(e) prohibits a person who has been convicted of a felony involving dishonesty or breach of the trust, or of an offense under 18 U.S.C. § 1033 whose activities affect interstate commerce, from engaging in the “business of insurance” unless the person has obtained written consent from any insurance regulatory official authorized to regulate the insurer, such as the Superintendent (“1033 waiver”).

At issue here is a conviction under 18 U.S.C. § 1014, a Class B felony. Section 1014 makes it a crime to knowingly make any false statement or report, or willfully overvalue any land, property or security for the purpose of influencing the action of certain entities, such as banks and credit unions, “upon any application, advance, discount, purchase, purchase agreement, repurchase agreement, commitment, or loan, or any change or extension of any of the same, by renewal, deferment of action or otherwise, or the acceptance, release, or substitution of security therefor . . . .”

  1. A felony conviction under 18 U.S.C. § 1014 constitutes a felony involving dishonesty or breach of the trust within the meaning of 18 U.S.C. § 1033 ("a disqualifying conviction").

  2. An insurer may not employ a person who has a disqualifying conviction, including as an in-house staff attorney or as a claim examiner or adjuster whose activities affect interstate commerce and the business of insurance, unless the person has obtained written consent from any insurance regulatory official authorized to regulate the insurer, such as the Superintendent of Insurance of the State of New York.

  3. A person with a disqualifying felony conviction may be employed by an unaffiliated law firm that is retained by an insurer to defend its insureds in third-party lawsuits.
1033 Waiver (April 23, 2008)

The inquirer reported that he was denied employment as a service associate trainee for an insurer because he has a class E felony conviction for criminal possession of a forged instrument. He asked whether an insurer could refuse employment on that basis.

Answer: Yes, an insurer that employs a person who has been convicted of a felony involving dishonesty or breach of the trust, or of an offense under 18 U.S.C. § 1033, runs afoul of The Violent Crime Control and Law Enforcement Act of 1994, 18 U.S.C. § 1033(e), unless the person has obtained written consent from an insurance regulatory official authorized to regulate the insurer, such as the Superintendent ("a 1033 waiver").

At issue here was a felony conviction for possession of a forged instrument. Forgery clearly constitutes an act involving dishonesty because dishonesty is commonly defined to include deceiving another. It logically follows that a person who knowingly has a forged instrument in his or her possession is engaged in an act that involves dishonesty. Given this circumstance, the Department was of the view that a felony conviction for possession of a forged instrument is a criminal felony involving dishonesty within the meaning of the Act.

Hospital Balance Billing (April 25, 2008)

Question: May a hospital balance bill a psychiatric patient who is hospitalized, but stays longer than the contract between the hospital and insurer provides, and whose stay for the last few days is not deemed medically necessary by the insurer?

Answer: Broadly speaking, reimbursement rates between an insurer and a hospital that is participating in the insurer’s network are negotiated pursuant to a contract. The New York Insurance Law does not address whether a hospital may bill a patient for continued care beyond that which is covered under the provider contract. Since the Insurance Department regulates insurers—not hospitals—any steps that a hospital may take should be addressed to the appropriate regulatory authority. The New York State Department of Health regulates contracts between hospitals and managed care organizations.

Applicability of the “Two Percent Rule” to Commercial Lines Insurance (April 29, 2008)

  1. The “two percent rule” set forth in NY Insurance Law § 3425(f)(1), which limits to 2% per calendar year the number of personal lines automobile insurance policies that an insurer may non-renew or conditionally renew based upon a reduction or elimination of coverage, is not applicable to commercial automobile insurance policies governed by Insurance Law § 3426. Insurance Law § 3425(f)(1) specifically applies to automobile insurance covering motor vehicles predominantly used for non-business purposes, where a natural person is the named insured. Insurance Law § 3426, which governs commercial automobile policies, nowhere limits the number of policies that an insurer may non-renew in a given year.
  2. Private passenger automobiles used predominantly for commercial purposes and written on commercial policies are governed by Insurance Law § 3426, and are not subject to the two percent rule prescribed in Insurance Law § 3425(f)(1). The applicability of the statutes depends on the principal use of the vehicle, not the classification of the motor vehicle.
DRG Medical Implants and No-Fault Insurance Reimbursement (April 30, 2008)

Workers' Compensation Law § 13(a-1) does not alter the payment rates for medical procedures performed under the no-fault insurance system. WCL § 13(a-1) only applies to payment rates for the spinal procedures performed under the workers’ compensation system.

Because the no-fault system has adopted the workers' compensation fee schedule (Insurance Law § 5108 and 11 NYCRR § 68.1[a]), reimbursement for professional health services is customarily comparable for both systems. Inpatient services such as the spinal procedures at issue here are an exception, however, because payments to health providers for inpatient services are governed by the New York Public Health Law, which generally provides that inpatient health providers are to be reimbursed by third party payors on a Diagnostic Related Group (DGR) basis, as set by the New York State Department of Health. Public Health Law § 2807-c reads, in relevant part as follows:

(b) Payments to general hospitals for reimbursement of inpatient hospital services provided to patients eligible for payments pursuant to the comprehensive motor vehicle insurance reparations act… shall be case based payments per discharge, for each diagnosis-related group[.]
Chapter 592 of the Laws of 2006 amended Workers’ Compensation Law (“WCL”) § 13 to increase the rates of payment for implantable hardware and instrumentation in connection with certain spinal procedures performed under the workers’ compensation system. As codified at WCL § 13(a-1), Chapter 592 limits the scope of the statute to procedures performed under the workers’ compensation system; there is nothing in the statutory provision with respect to reimbursement under the no-fault system or the Public Health Law. Stated differently, Chapter 592 did not amend the Insurance Law, Public Health Law or the DRGs promulgated thereunder in any manner. Therefore, the Public Health Law, through the setting of DRG rates, remains the sole statutory mechanism for establishing permissible charges for inpatient hospital health services rendered under the no-fault system, including the spinal procedures made applicable to workers’ compensation under WCL § 13(a-1).

* * * * * * *

Recently added to the NYSID's website is a search engine for OGC opinions dating back to 2000. Check it out and bookmark it.

Tuesday, May 20, 2008

Should You Wish To Increase Your Consumer Complaint Ratio

It's never been easier to drive a New York insurer's consumer complaint ratio higher. Insureds or their "authorized" representatives can now sit at their computers at all hours of the day and night (just like coverage bloggers) and file online electronic complaints against their insurers. Beats licking a 42¢ stamp.

What I've never understood is the seeming eagerness of some insurers to promote or facilitate the filing of consumer complaints -- not by misbehaving, but by tacitly inviting their insureds to complain, in every piece of correspondence that leaves the insurer's offices. Earlier today, for example, I saw such a misplaced invitation in a letter denying commercial auto liability coverage to a general contractor for injuries from a workplace accident. I'll explain.

Most New York insurers know that Regulation 64 (11 NYCRR Part 216) requires certain letters to "prominently set out" the following advisory paragraph (see Editor's Note of 01.28.14 below):
Should you wish to take this matter up with the New York State Insurance Department, you may file with the Department either on its website at www.ins.state.ny.us/complhow.htm or you may write or visit the Consumer Services Bureau, New York State Insurance Department, at: 25 Beaver Street, New York, NY 10004; One Commerce Plaza, Albany, NY 12257; 200 Old Country Road, Suite 340, Mineola, NY 11501;or Walter J. Mahoney Office Building, 65 Court Street, Buffalo, NY 14202.
Many New York insurers apparently remain uncertain, however, of what kinds of letters must actually include that advisory paragraph. Under Regulation 64, there are only two kinds of letters that must do so:

  1. letters "rejecting any element of a claim involving personal property insurance" (11 NYCRR § 216.6[h]); and
  2. letters explaining or rejecting any element of a claim for auto physical damage (11 NYCRR § 216.7[d][3]).
Let's take these in reverse order. Everyone knows what an "auto physical damage" claim is, right? We're talking first-party, not third-party claims. Indeed, § 216.7 begins by stating that “[t]his section is applicable to claims arising under motor vehicle collision or comprehensive coverages”. Thus, by implication, letters regarding third-party property damage claims need not include the advisory paragraph. Notice also that § 216.7(d)(3) is somewhat broader in its scope than § 216.6(h) in that the advisory paragraph must be included in both coverage rejection and explanation letters.

Which brings us to letters "rejecting any element of a claim involving personal property insurance", the first type of letter in which the advisory paragraph must be included. A letter rejecting an element of a personal property claim is not:
  • an acknowledgement letter;
  • an ROR letter;
  • a non-waiver agreement;
  • a letter written solely to explain personal property coverage or payments;
  • a letter forwarding payment to an insured;
  • a disclaimer and denial letter written solely with respect to other than personal property claims, such as real property/structure or ALE/LOU claims, or liability coverage claims; or
  • every other letter that leaves the insurer's office addressed to an insured or claimant.
In a January 6, 2004 opinion letter, the NYS Insurance Department's OGC (Office of General Counsel) opined:
The term "personal property insurance" in Section 216.6(h) limits the applicability of subdivision (h) to personal lines property insurance. Thus, subdivision (h) is not applicable to commercial lines property insurance or to liability insurance.
Letters rejecting commercial lines property insurance -- no advisory paragraph required.
Letters rejecting (disclaiming/denying) liability coverage -- no advisory paragraph required.

See?

I'm a less-is-more, strict constructionist, kind of coverage attorney when it comes to regulatory issues such as this. If it were my call (which I openly concede it is not), I'd follow the reg. Reduce toner usage AND one's consumer complaint ratio at the same time. What could be better? You insurer Reg 64 compliance people won't mind, I'm sure. Unless you really like responding to consumer complaints, in which case you may want to consider printing the advisory paragraph on bills and policy forms, as well. Or not.

Editor's Note (12.07.10) ~~  Since originally posting this back in May 2008, it has come to my attention that the New York State Insurance Department takes the position that if a policy under which coverage is being denied includes personal property coverage, sch as a homeowners policy, a letter rejecting any element of the claim must include the advisory paragraph regardless of whether the claim is just for building or dwelling coverage.  For that reason and although I may disagree with the Insurance Department on this point, I've struck the reference to denials for other than personal property claims in the above bullet list.

Editor's Note (01.28.14) ~~ See today's blog post for the updated verbiage of the advisory paragraph.

2007 Annual Report of the NYS Insurance Department Superintendent


Packing 70 tables and 8 color charts, this year's 248-page Annual Report of the Superintendent of Insurance to the New York State Legislature was released on May 15, 2008 and has already climbed to #33 on the New York Times' Paperback Nonfiction Best Sellers List.

Okay, maybe that's not true, but the report does contain some useful information to non-actuarial types like you and me.

With respect to auto insurance, the report advises the following (page 67):

18. Automobile Insurance

a. New York Automobile Insurance Plan

The number of vehicles insured in the Plan has continued to decline in the past few years and is now at an historic low. Approximately 1.2% of New York private passenger registered vehicles are insured in the Plan as compared to a range of 12% to 17% over 15 years ago. Furthermore, at year-end 2007, there were approximately 31% fewer vehicles in-force than year-end 2006 and approximately 51% fewer than year-end 2005. This continual decrease in the Plan population can be attributed, at least in part, to various Department initiatives such as those to combat fraud and incentives to voluntary market insurers that provide coverage to drivers who otherwise would have been placed in the Plan.

b. Legislation

Chapter 268 of the Laws of 2007 extends until June 30, 2008 the provisions of Section 2328 regarding the prior approval of rates for Public Automobile insurance. It also extends until June 30, 2008 the provisions of Section 3425 regarding the cancellation and non-renewal of private passenger automobile policies.

c. No-Fault Motor Vehicle Insurance Law Activity – 2007
i. Impact of recent case law on the Automobile No-Fault system

Two 1997 Court of Appeals decisions, Central General Hospital v. Chubb, 90 N.Y.2d 195 (1997), and Presbyterian Hospital v. Maryland Casualty, 90 N.Y.2d 274 (1997), had an enormous impact on No-Fault adjudication and the number of disputes generated by the No-Fault system. These cases generally established that a No-Fault insurer may not assert a defense when it does not timely deny a claim within 30 days of receipt. In Fair Price Medical Supply v. Travelers, 42 A.D. 3rd 277 (2nd Dept.) (2007), the Appellate Division, Second Department upheld the application of a preclusion sanction for a late denial where durable medical equipment supplies were billed for and never provided, so that any amount billed by a health provider for non-existent services must be paid by the insurer when there is a late denial. Essentially, the fundamental requirements established by the Legislature in 1973 that all reimbursable No-Fault health care expenses must be necessary and billed in accordance in the fee schedule limits have been frustrated by the Judiciary’s application of the Court of Appeals decisions mentioned above. Therefore, the Legislature should enact legislation similar to the bill proposed by the Senate last year in S2638 that would restore the fundamental requirements for No-Fault health care expenses to be reimbursable by permitting an insurer to assert a defense when it does not deny a claim within 30 days of receipt.

ii. Mandatory arbitration for all No-fault insurance disputes
According to the authors of an article that appeared in the June 21, 2007 edition of the New York Law Journal, the Civil Court of the City of New York and District Courts in Nassau and Suffolk Counties have been inundated with lawsuits filed by medical providers seeking reimbursement of No-Fault benefits for services rendered to injured claimants. This strain on the judiciary’s resources led the Chief Administrative Judge's Local Courts Advisory Committee (Unified Court System) to propose a bill in 2006 that would amend NYIL §5102 to require mandatory arbitration for all No-fault insurance disputes. Since the improvements in the administration of the No-Fault Arbitration System in the past few years permit it to process substantially more requests for arbitration without compromising the goal of a speedy dispute resolution system, the Legislature should consider legislation that would reduce the strain on the judiciary’s resources by revising NYIL §5102 to require mandatory arbitration for all No-fault insurance disputes.

iii. Decertification of Health Care Providers
Chapter 424 of the Laws of 2005 added a new Section 5109 to the Insurance Law to require the Superintendent, in consultation with the Commissioners of Health and Education, to promulgate standards and procedures for investigating and suspending or removing a health care provider’s ability to be reimbursed under the No-Fault system. The Commissioners of Health and Education are required to maintain a list of providers who they deem, after a reasonable investigation, not authorized to submit claims for reimbursement under No-Fault. This list, which must be updated regularly, must be posted on each agency’s website and provide a toll free telephone number for the public to access the information. Under the law, health care providers can be decertified if the provider:
  • was found guilty of professional or other misconduct or incompetency in connection with medical services rendered under No-Fault; or
  • has exceeded the limits of his or her professional competence in rendering medical care under No-Fault or has knowingly made a false statement or representation as to a material fact in any medical report made in connection with any claim under No-Fault; or
  • solicited, or has employed another to solicit for himself or herself or for another, professional treatment, examination or care of an injured person in connection with any claim under No-Fault; or
  • has refused to appear before, or to answer upon request of, the Commissioner of Health, the Superintendent, or any duly authorized officer of the state, any legal question, or to produce any relevant information concerning his or her conduct in connection with rendering medical services under No-Fault; or
  • has engaged in patterns of billing for services which were not provided.

The Insurance, Health and Education Departments have had discussions concerning the standards and procedures that should be implemented.

* * * * *

Private passenger automobile rate filings reviewed and approved in 2007 can be found in Table 41 beginning on page 85 of the report.

A legislative and regulatory recap runs from pages 179 to 191.

Passing percentages for licensing examinations administered in 2007 (Table 62, page 221): public adjusters - 39%; independent adjusters (overall) - 51%; agents & brokers (overall) - 44%.

Monday, May 19, 2008

NF-10 Wars -- Arbitrator Held to Have Erroneously Invalidated PT Denial Based on Lack of Medical Rationale Set Forth in Denial

NO-FAULT – NCV-EMG COSTS – SPECIAL PROCEEDING TO VACATE MASTER ARBITRATION AWARD – NF-10 SUFFICIENCY – MEDICAL RATIONALE – PROVIDING COPY OF IME-PEER REVIEW REPORT WITH DENIAL
American Transit Ins. Co. v. 21st Ave. Medical Plaza, P.C. a/a/o Dennene Baker
(Sup. Ct., New York Co., decided 5/8/2008)

In April 2007, the Second Department issued its decision in A.B. Med. Servs., PLLC v. GEICO Cas. Ins. Co., 39 AD3d 778, holding that a no-fault insurer is not required to set forth with sufficient particularity the factual basis and medical rationale upon which NF-10 denial of claim forms are based:

The applicable regulations provide that if a no-fault claim is denied in whole or in part based on a medical examination or peer review report requested by the insurer, then the insurer shall release a copy of that report to, among others, the applicant or its attorney, upon written request (see 11 NYCRR 65-3.8 [b] [4]). Had it been the intent of the Department of Insurance to require the carrier to set forth a medical rationale in the prescribed denial of claim form (see NYS Form N-F 10; 11 NYCRR 65-3.4 [c] [11]), it would have so provided.
In this case, defendant conducted NCV/EMG (nerve conduction velocities/electromyography) studies of and provided PT (physical therapy) to the defendant's assignor in conjunction with defendant's treatment of her. American Transit denied payment of both the NCV/EMG and PT billings, based on negative peer review and IME reports, respectively. Plaintiff provider sought payment of those services in compulsory no-fault arbitration.

One day before the Second Department decided A.B. Med. Services, PLLC v. GEICO, the arbitrator ruled against American Transit, finding: (1) that the peer review report relied upon to deny payment of the NCV/EMG studies was "not very persuasive"; and (2) that American Transit's denial of reimbursement for PT treatments based on the negative IME performed by a consulting physiatrist was defective because a copy of the IME report had not been sent to the assignor within thirty days of the date American Transit issued the denial. The lower arbitrator stated that because the IME report was not timely sent to the claimant, she was "constrained to
preclude the IME report."

American Transit appealed the lower arbitrator's decision to a master arbitrator, who, based on the Appellate Term's (not Division's) decision in A.B. Med. Services, PLLC v. GEICO, upheld the arbitrator's decision in both respects. American Transit then brought this CPLR article 75 special proceeding to vacate the master arbitrator's decision.

In partly denying and partly granting American Transit's petition, New York County Supreme Court Justice Kibbie F. Payne found: (1) that the lower arbitrator acted within her authority in considering but rejecting as legally and factually deficient and unpersuasive the peer review report concerning the NCV/EMG studies; and (2) that the master arbitrator's decision upholding the lower arbitrator's refusal to consider the IME report and invalidation of America Transit's NF-10 for PT services violated existing law and was not rationally based.

Post-Service But Pre-Suit Suspension of MD Owner/Manager of PLLC Removes Standing to Maintain No-Fault Recovery Suit

NO-FAULT – MALLELA DEFENSE – PRE-SUIT SUSPENSION OF PLLC'S MD OWNER – LACK OF STANDING – LIMITED LIABILITY COMPANY LAW
A.B. Med. Servs. PLLC a/a/o Frantz Beauliere v. Travelers Indem. Co.
(Nassau Dist.Ct., decided 5/19/2008)

There have been a number of reported decisions in New York addressing the consequence of a doctor's post-service de-licensing on the recoverability of no-fault benefits, most if not all such courts holding that recovery is still allowed if the de-licensing occurred after the services otherwise were properly delivered. In this case, although the court did not vary from those holdings, it did deny recovery, at least temporarily, to the medical provider on a different, somewhat procedural ground.

A chronology of the facts salient to this case is as follows:

>> December 8, 1999 - A.B. Medical Services, PLLC, is formed, listing "A Braver" of Staten Island, as its sole member.

>> December 18, 2003 to January 8, 2004 - plaintiff PLLC provides treatment to the assignor.

>> June 15, 2006 - Dr. Alexander Braver, reportedly a psychiatrist and the sole member of the plaintiff PLLC, pleads guilty to one count of attempted grand larceny in the 3rd degree, a felony.

>> October 19, 2006 - Dr. Braver is sentenced to three years probation and ordered to make restitution of $28,000 for Medicaid billing fraud.

>> January 26, 2007 - Dr. Braver is suspended for three years from the practice of medicine by the New York State Board for Professional Medical Conduct.

>> March 3, 2007 - effective date of Dr. Braver's suspension.

>> August 14, 2007 - Plaintiff PLLC commences this action.

In defense of this action, Travelers argued that Dr. Braver's suspension rendered A.B. Medical Service, PLLC, a fraudulently formed entity under the holding of State Farm Mut. Auto. Ins. Co. v. Mallela, 4 NY3d 313, 794 NYS2d 700 (2005). Plaintiff PLLC argued in response that since the PLLC validly existed prior to Dr. Braver's suspension, it was entitled to collect such fees as it legally earned prior to the suspension of its managing doctor.

After discussing and distinguishing the core issue and holding of Mallela, Nassau District Court Judge David Goodsell reasoned:

The provision set forth in 11 NYCRR 65-3.16(a)(12) bars payment to a fraudulently formed entity regardless of whether the services it performed occurred before or after April 2, 2002, the effective date of the regulation. (Citations omitted). The proper licensing of the provider is a condition precedent to payment. (Citations omitted).

A distinction must be drawn between the terms "licensed" and "formed." While physicians within professional service corporations and limited liability companies are licensed in accordance with Education Law § 6522, corporations and limited liability companies are incorporated, organized or formed in accordance with Business Corporation Law § 1503 and Limited Liability Company Law § 1203. A professional limited liability may only practice medicine except by "individuals authorized by law to render such professional service, as individuals . . .," Limited Liability Company Law § 1204(a).

Noting that no evidence has been presented that the plaintiff PLLC was subjected to disciplinary proceedings, or had been subjected to any licensing sanctions, Judge Goodsell observed that the suspension of Dr. Braver involved medical services rendered by Dr. Braver which resulted in overbilling Medicaid, not no-fault insurers:

Therefore, the question presented is whether the suspension of the license of the sole member/manager of a professional limited liability company renders the existence of the entity to be fraudulent under the holding of Mallela, supra, and to violate Insurance Law § 5102(a)(1) and 11 NYCRR 65-3.16(a)(12) thereby precluding reimbursement for services rendered.
Finding that plaintiff's distinction as a "PLLC" (professional service limited liability company) was significant, Judge Goodsell turned to the provisions and requirements of New York's Limited Liability Company Law to reach his decision:

The Limited Liability Act [sic] § 1209 and § 1210 provide for a situation in which a member is disqualified from the practice of medicine. Under § 1209 a physician legally disqualified from the practice of medicine "shall sever all employment with and financial interests (other than interests as a creditor or vested rights under a bona fide retirement program) in such limited liability company forthwith or as otherwise provided by in § 1210 of this Article . . . . such legal disqualification . . . shall be deemed to constitute an irrevocable offer by the disqualified member to sell his, her or its membership interests to the professional service limited liability company pursuant to § 1210 of this Article."

The failure to enforce the disqualification process described in the statute is grounds for dissolution of the entity. Limited Liability Company Law § 1210 requires the sale of membership interests by a disqualified member with six months after the disqualification. The statute provides for a means to immediately value the company in the event of a repurchase of the interest by the entity in the event the operating agreement fails to do so. However, the failure to sell the interests provides no penalties to the disqualified member where there are no other members to effectuate buy-out since the only penalty is to award attorney's fees and costs to the buyer for the seller delaying such a sale. Additionally, the statute permits a sale within the six month window to a qualified third party purchaser again subject to the operating agreement. However, as noted above, the failure of the member to sever ties with the entity is grounds for dissolution. Limited Liability Company Law § 1209.

Section 1210 goes on to note that the provisions of the section do not prevent the company from paying pension benefits or other deferred compensation to a former member of the company. The guidelines for dissolution is set forth in Limited Liability Law § 701 in accordance with § 1213 which governs professional services limited liability companies. The entity since it is without members and since it has not taken steps to transfer ownership to a qualified member, must dissolve and wind up its affairs in accordance with Article VII of the Limited Liability Company Law.

The facts established in this case do not support the defendant that the entity is fraudulently formed as outlined in Mallela, supra. However, neither the plaintiff nor Dr. Braver offer any rationale for failing to adhere to the requirements of the Limited Liability Company Law. Dr. Braver raises through an affidavit in opposition that he is being persecuted by the insurance companies, but fails to offer any other defense to the defendant's allegation of fraudulent formation. Dr. Braver had the opportunity to avail himself voluntarily of options to continue the entity through a valid transfer but failed to do so. Therefore, the plaintiff while properly formed in light of the suspension of its sole member is now required to dissolve and wind up its affairs. As such, it does not have standing to the continued maintenance of this action.

Clearly, Dr. Braver is not permitted to continue as a member of the entity. This however does not mean that Dr. Braver must forfeit his rights to payment or that the potential debt of the defendant is erased. The entity is allowed as part of its winding up affairs to pursue claims Limited Liability Company Law § 703(b). Dr. Braver, as a creditor of the entity, would be entitled to payments earned.

The action was commenced after the suspension of Dr. Braver, but before the expiration of the six month period to take action on the disqualification. (Limited Liability Company Law § 1210). Therefore while the action was timely and properly commenced, the maintenance of the action without a qualified member in ownership of the entity must be considered a nullity. Even though the defendant failed to couch the application to dismiss on other than alleged fraudulent grounds, the plaintiff has not shown legal basis to maintain this action. Clearly, the plaintiff must satisfy the legal requirements in order to maintain its case and pursue causes of actions available.

In fashioning an appropriate remedy which considers both the rights of the plaintiff to seek payment for services provided and the defendant which is entitled to a prompt adjudication of the matter. [sic] CPLR § 2201 provides that a "court in which an action is pending may grant a stay of procedures in a proper case, upon such terms as may be just." In order to do so in this case a stay pursuant to CPLR § 2201 is granted sua sponte to allow for the filling of Articles of Dissolution and the appointment of a representative to wind up the affairs of the entity to allow final resolution of all matters including the present lawsuit. The stay shall suspend the accumulation of interest under no-fault regulations 11 NYCRR 65.3.9(a) should interest ultimately be awarded, retroactive to the date issue was joined until lifting of the stay since the plaintiff should not benefit from its failure to adhere to its statutory obligations under the Limited Liability Law (citations omitted).

In the end, the form of business and the named party matter. Adherence to the laws governing the conduct of a business must be followed. Therefore, the motion of the plaintiff is denied without prejudice since no authority to prosecute the claim exists. The cross motion is denied as the defendants have failed to demonstrate a fraudulent formation of the prosecuting entity. * * * This case is stayed for a period not to exceed six months or until such time as an order from a court of competent jurisdiction appoints a proper party to file Articles of Dissolution and to wrap up the affairs of the entity. (Emphasis added.)

In the end, this may be only a tempory "win" for Travelers, given that the court did not dismiss the suit, instead holding that it could not be maintained and prosecuted with its sole member having been suspended from the practice of medicine. Had the PLLC commenced this action more than six months after Dr. Braver's effective suspension date, however, Judge Goodsell presumably would have concluded that plaintiff PLLC lacked standing at the time this action was commenced and dismissed it as not having been properly commenced. Of course, it remains to be seen, and perhaps litigated, whether plaintiff PLLC or any similarly situated PLLC could bring such an action more than six months after the suspension of its MD owner by first filling Articles of Dissolution and appointing a representative to, as Judge Goodsell says, "wrap up the affairs" and pursue the accounts of the PLLC.