Rate Evasion/Garaging Fraud -- Obtaining a Declaratory Judgment of No No-Fault Coverage Owed

NO-FAULT – AUTO POLICY – APPLICATION MISREPRESENATION – RATE EVASION – GARAGING FRAUD 

State Farm Fire & Cas. Co. v. AutoRx
(Sup. Ct., NY Co., 11/10/2021)

Here's a good example of successfully investigating, denying and litigating a rate evasion/garaging fraud case.  

Mikheal Bogle applies for an auto policy from State Farm in February 2019, representing on his application that he lives and garages his vehicle in Lake Peekskill, Orange County, New York. 

That was false.  Although he once lived in Lake Peekskill (once, as in 12 years earlier), in reality he lived and garaged his vehicle in Rosedale, Queens County, New York, approximately 60 miles away.  

Problem (for State Farm, not initially for Bogle): had Bogle truthfully disclosed the Rosedale garaging address, his 6-month auto policy premium would have been $4,483.82 more than what it was for the Lake Peekskill address he gave. 

On April 28, 2019, Bogle allegedly was injured in a motor vehicle accident (in New York City, of course) and treated with the defendant medical providers, who took assignments of benefits from him and billed State Farm.  After conducting Bogle's EUO, "State Farm timely denied the numerous claims for benefits (see 11 NYCRR 65-3.8[a][1]), concluding that, based on Bogle's testimony at the EUO and its own investigation, Bogle made material misrepresentations in his initial application for the issuance of the subject insurance policy with respect to where the insured vehicle was usually garaged and maintained in order to lower the cost of obtaining the policy, and that coverage was thus vitiated."

State Farm then commenced this affirmative declaratory judgment action to confirm its no-fault coverage denials.  None of the defendants appeared and State Farm moved for a default judgment against all of them.  

Finding that State Farm had not properly served the FDNY defendant (emergency responder), the court denied State Farm's motion for a default judgment.  

But finding proper service of process against all other defendants, the court reviewed State Farm's burden of proof on its motion and State Farm's proof and GRANTED default judgment to State Farm those non-appearing defendants declaring that State Farm "is not obligated to pay no-fault benefits to the defendant Mikheal Bogle in connection with injuries that he sustained in a motor vehicle accident on April 28, 2019, or to reimburse the defendants Autorx, LLC, CHC Chiropractic, P.C., Ocean Spine and Joint Medical Care, P.C., also known as Comprehensive Chiropractic Center, Kanwarpaul Grewal, D.O., JCB Acupuncture, P.C., Ocean Valley Physical Medicine, P.C., or Stand-Up MRI of Lynbrook for treatment that they rendered or equipment and supplies that they provided to him for those injuries[.]" 

The court explained: 

With respect to the proof of the facts constituting the claim, 

"CPLR 3215 does not contemplate that default judgments are to be rubber-stamped once jurisdiction and a failure to appear have been shown. Some proof of liability is also required to satisfy the court as to the prima facie validity of the uncontested cause of action (see, 4 Weinstein-Korn-Miller, NY Civ Prac paras. 3215.22-3215.27). The standard of proof is not stringent, amounting only to some firsthand confirmation of the facts" 

(Joosten v Gale, 129 AD2d 531, 535 [1st Dept 1987]; see Martinez v Reiner, 104 AD3d 477, 478 [1st Dept 2013]; Beltre v Babu, 32 AD3d 722, 723 [1st Dept 2006]). Stated another way, while the "quantum of proof necessary to support an application for a default judgment is not exacting ... some firsthand confirmation of the facts forming the basis of the claim must be proffered" (Guzetti v City of New York, 32 AD3d 234, 236 [1st Dept 2006]). In other words, the proof submitted must establish a prima facie case (see id.; Silberstein v Presbyterian Hosp., 95 AD2d 773 [2d Dept 1983]). 

"Where a valid cause of action is not stated, the party moving for judgment is not entitled to the requested relief, even on default" (Green v Dolphy Constr. Co., 187 AD2d 635, 636 [2d Dept 1992]; see Walley v Leatherstocking Healthcare, LLC, 79 AD3d 1236, 1238 [3d Dept 2010]). In moving for leave to enter a default judgment, the plaintiff must "state a viable cause of action" (Fappiano v City of New York, 5 AD3d 627, 628 [2d Dept 2004]). In evaluating whether the plaintiff has fulfilled this obligation, the defendant, as the defaulting party, is "deemed to have admitted all factual allegations contained in the complaint and all reasonable inferences that flow from them" (Woodson v Mendon Leasing Corp., 100 NY2d 62, 71 [2003]). The court, however, must still reach the legal conclusion that those factual allegations establish a prima facie case (see Matter of Dyno v Rose, 260 AD2d 694, 698 [3d Dept 1999]). 

Proof that the plaintiff has submitted "enough facts to enable [the] court to determine that a viable" cause of action exists (Woodson v Mendon Leasing Corp., 100 NY2d at 71; see Gray v Doyle, 170 AD3d at 971) may be established by an affidavit of a party or someone with knowledge, authenticated documentary proof, or by complaint verified by the plaintiff that sufficiently details the facts and the basis for the defendant's liability (see CPLR 105[u]; Woodson v Mendon Leasing Corp., 100 NY2d at 71; Gray v Doyle, 170 AD3d at 971; Voelker v Bodum USA, Inc., 149 AD3d 587, 587 [1st Dept 2017]; Al Fayed v Barak, 39 AD3d 371, 371 [1st Dept 2007]; see also Michael v Atlas Restoration Corp., 159 AD3d 980, 982 [2d Dept 2018]; Zino v Joab Taxi, Inc., 20 AD3d 521, 522 [2d Dept 2005]; see generally Mitrani Plasterers Co., Inc. v SCG Contr. Corp., 97 AD3d 552, 553 [2d Dept 2012]). 

Where an insured makes material misrepresentations on his or her application for insurance as to where he or she regularly garages a vehicle sought to be insured, coverage is defeated (see Remedial Med. Care, P.C. v Infinity Prop. & Cas. Co., 2017 NY Slip Op 50391 [U], 55 Misc 3d 130[A] [App Term, 2d, 11th & 13th Jud Dists, Mar. 31, 2017]; Jamaica Dedicated Med. Care, P.C. v Praetorian Ins. Co., 2015 NY Slip Op 50756[U], 47 Misc 3d 147[A] [App Term, 2d, 11th & 13th Jud Dists, May 6, 2015]; see also Liberty Mut. Ins. Co. v Mendez, 2021 NY Slip Op 30071[U], *4, 2021 NY Misc LEXIS 85, *6-7 [Sup Ct, N.Y. County, Jan. 7, 2021]; see generally State Farm Fire & Cas. Co. v Jewsbury, 169 AD3d 949, 950 [2d Dept 2019]). State Farm's proof establishes, prima facie, the facts underpinning its contentions, namely, that when Bogle first applied for insurance coverage on February 2, 2019, he represented that he resided at 93 Hollowbrook Road, Apartment 2, Lake Peekskill, New York 10537, and garaged the insured vehicle there, but actually lived at 244-07 136th Avenue, Rosedale, New York 11422, an address located in Queens County, and kept the vehicle garaged there, where premium rates are substantially higher than those for vehicles garaged in Lake Peekskill. 

As set forth in the affidavit of State Farm's claims specialist Tim Dacey, who investigated the claim, the subject collision occurred in Queens County, Bogle's Queens County address is listed on all no-fault benefit forms submitted by Bogle and the medical defendants, Bogle treated and received therapy in Queens County, Bogle is registered to vote at the Rosedale address in Queens County, and a video search revealed that all sightings of the insured vehicle were in Queens County and western Nassau County, with no sightings at or near Lake Peekskill. In addition, Dacey averred that a State Farm representative visited Bogle's Rosedale address, and confirmed with an occupant of those premises, a neighbor, and a postal delivery employee that Bogle resided there, while another representative visited the Peekskill Lake address, and was informed by a long-time resident at a neighboring address that he had never seen Bogle at the Peekskill Lake address identified on Bogle's application. Dacey further explained that the garaging the vehicle at the Queens County address costs $4,483.82 more, for each six-month period of coverage, than garaging the vehicle at Peekskill Lake. 

In fact, although Bogle procured the policy on February 2, 2019, he testified at his EUO on July 26, 2019 that he had resided solely at the Rosedale address since 2013, and that although he had lived in Peekskill Lake in 2007, he hadn't lived there since for 12 years. He averred that he receives all of his mail in Rosedale, has all of his credit cards issued to that address, and maintains of his personal property there. Bogle admitted that he had never garaged the insured vehicle in Peekskill Lake, but used that address on his application because of his poor driving record and his understanding that he would not be able to procure insurance had he used his actual residence address. 

The denial-of-claim statements show that the relevant denials of coverage were expressly based on the ground that Bogle made material misrepresentations in connection with his application for insurance with respect to the where the vehicle was regularly garaged in order to reduce her insurance premium rates. 

Hence, State Farm is entitled to a declaratory judgment against the defendants that were properly served with process.

See?  Rate evasion on a personal auto policy in New York CAN have negative first-party (physical damage/PIP/UM/UIM) coverage consequences provided, especially in a no-fault claim context, the suspected garaging fraud is timely identified and investigated (and coverage denied).  

$481.30 Awarded on a $62,830.97 No-Fault Claim -- Coronary Bypass Surgery and Related Hospital Services Found Unrelated to the MVA

NO-FAULT – CAUSATION – CORONARY BYPASS SURGERY – AAA ARBITRATION DECISION

Matter of United Health Services Hospital  aao JK and Preferred Mutual Ins. Co.
(AAA Case No. 17-18-1089-4199, issued 11/23/2020)

78-year old man passes out driving and crashes.  At the hospital, he is found to have suffered a myocardial infarction and severe coronary artery disease.  Eight days, one coronary bypass surgery and $62,830.97 later, he goes home.  A few weeks later, the hospital bills the man's no-fault insurer, Preferred Mutual, for the cost of the heart surgery and related services.  Preferred Mutual obtains a cardiologist's peer review opinion and denies payment.  Approximately four years and 100% in interest later, the hospital demands AAA arbitration of the denial. 

After a hearing, AAA Arbitrator Fred Lutzen concluded:

After reviewing the entire peer review and the submitted records, I find the peer provides a satisfactory medical rationale and relies on the facts present, so that Respondent has met its burden and proven, prima facie, that the hospital services and surgery related to his heart condition were unrelated to the motor vehicle accident. 

The arbitrator did award the hospital a total of $481.30 for the ER charge and a CT scan.  

Ryan Mura of this office ably defended Preferred Mutual's denial position in this arbitration.  Nice job, Ryan.   

What Is New York's No-Fault Scheme Ill-Equipped to Handle? (The right answer is not "claims".)

NO-FAULT – RICO AFFIRMATIVE ACTION – PRELIMINARY INJUNCTION STAYING COLLATERAL ARBITRATIONS & LITIGATION – MOTION TO DISMISS

GEICO v. Mikhail Strut, MD, RES Physical Medicine & Rehabilitation Services, PC, and Cheryle Hart, MD
(WDNY, 4/10/2020)

Those of you dealing with Mikhail Strut, MD (f/k/a Mikhail Strutsovskiy) and his medical practice,  RES Physical Medicine & Rehabilitation Services, PC, may want to read this decision (click the case name) and follow this case.  

In this decision and order, WDNY Judge Sinatra adopted Magistrate Judge Scott's recommendations to:

• DENY defendants' motion to dismiss GEICO's complaint, which alleges causes of action based on RICO, fraud and unjust enrichment; and

• GRANT GEICO's motion for a preliminary injunction and a stay of all collateral no-fault suits and arbitrations, upon GEICO posting $500,000 security. 

In rejecting Dr. Stut's argument that GEICO was trying "improperly to circumvent New York's no-fault scheme" by litigating Strut's claims in federal court, Judge Sinatra remarked:  "Well, isn't that the pot calling the kettle black?  But the law is clear that Plaintiffs may maintain RICO and fraud claims in federal court, notwithstanding New York's no-fault scheme, because the no-fault scheme is ill-equipped to handle claims involving systemic fraud." 

Okay, Judge Sinatra didn't write the pot/kettle thing.  But he did deny Dr. Strut's motion to dismiss and grant GEICO's preliminary injunction application.  If you're a New York no-fault insurer and are facing growing numbers of suits and arbs while you race to complete a global DJ action to confirm your non-coverage position, consider moving for preliminary injunctive relief.  

Yes, that Mikhail Strut.

The Unopposed Loss -- Court Denies Declaratory Judgment to No-Fault Insurer Based Solely on Default of Non-Answering Defendants

NO-FAULT – HIT-AND-RUN – AFFIRMATIVE ACTION – DEFAULT JUDGMENT – DECLARATORY JUDGMENT – INJUNCTIVE RELIEF

Ameriprise Ins. Co. v. Kim
(2nd Dept., 7/29/2020)

We've run into this before.

Your insurer client brings a global affirmative action against all carbon-based life-form claimants and their health care(less) assignee-providers spawned from a single, reported motor vehicle accident, seeking declaratory and injunctive relief.  All of the defendants are served, but most if not all them don't answer or move against the complaint.  Your client makes a motion for a default judgment against the non-answering defendants, who don't appear and oppose the motion.  Your client proves up good service of the summons and complaint, the non-answering defendants' default, and the facts constituting your client's claim.

Mark it down as a win, right?  Wrong.

In AFFIRMING Supreme Court's denial of Ameriprise's default judgment motion, the Second Department reminded:

"A plaintiff seeking leave to enter a default judgment must file proof of proper service of the summons and the complaint, the defendant's default, and the facts constituting the claim" (Global Liberty Ins. Co. v Surgery Ctr. of Oradell, LLC, 153 AD3d 606, 606; see CPLR 3215[f]). "[A] default judgment in a declaratory judgment action will not be granted on the default and pleadings alone for it is necessary that [the plaintiff] establish a right to a declaration'" against the defendants (JBBNY, LLC v Dedvukaj, 171 AD3d 898, 902, quoting Dole Food Co., Inc. v Lincoln Gen. Ins. Co., 66 AD3d 1493, 1494; see Merchants Ins. Co. of N.H. v Long Is. Pet Cemetery, 206 AD2d 827, 828).

Here, while the plaintiff submitted proof of proper service of the summons and the complaint, the non-answering defendants' default, and the facts constituting the plaintiff's claim, the plaintiff's submissions in support of the motion failed to establish its right to the declarations sought (see JBBNY, LLC v Dedvukaj, 171 AD3d at 903). As such, we agree with the Supreme Court's determination denying that branch of the plaintiff's motion which was for leave to enter a default judgment against the non-answering defendants.

Take-Away Point #1:  Establishing one's entitlement on motion to declaratory relief requires more than what is minimally required to obtain a default judgment.  Insurers must "establish their right" to the declaration, with a quantum of evidence equivalent to what is needed to avoid a directed verdict at trial.

Take-Away Point #2:  Although not apparent from this short memorandum decision, even if the movant establishes its right to a declaration, the decision whether to grant a declaratory judgment rests within the sound discretion of the court (CPLR 3001) and is "dependent upon facts and circumstances rendering it useful and necessary."  Denial of a default judgment is proper if the declaratory relief sought clearly affects the rights of other parties not alleged to be in default.  See Merchants Ins. Co. of N.H. v Long Is. Pet Cemetery, 206 AD2d 827, 828).

NYSSIU Legal Update 2019-2020 Edition

 LEGAL UPDATE

I have been privileged since incorporating the New York State Chapter of Special Investigation Units (NYSSIU) in 1997 to serve as its Counsel.  Many times I have prepared and presented the NYSSIU Legal Update to members and guests at NYSSIU meetings.  Some of those updates even made it to NYSSIU's website.  

On May 6, 2020, my son Ryan Mura prepared and virtually presented the 2019-2020 edition of the NYSSIU Legal Update.  That edition digests eight no-fault, six property and two criminal law case decisions, as well as providing updates on New York legislative and regulatory developments affecting New York property and casualty insurers. 

You can read that Legal Update here.  Case decisions are hyperlinked within.  Questions can/should be directed to Ryan.

No-Fault Insurer's Denial Based on Rate Evasion Upheld in Arbitration

NO-FAULT – RATE EVASION – AAA ARBITRATION DECISION

Matter of Classic Medical Diagnostic Rehab, P.C.  aao SI and State Farm Fire & Cas. Co.
(AAA Case No. 17-18-1095-2802, issued 1/7/2020)

Here's another AAA award/decision that upholds our client's denial of no-fault benefits based on the assignor's proven rate evasion:

In its written submission, Respondent submitted the following evidence and made the following contentions in support of its position: 

* * * * *  

6. Assignor appeared for an EUO on 12/11/17 at which she testified that she lived in Albany, New York with her three children, two of whom attend school in Brooklyn, but that she could not remember if they had a different residence listed for their school in Brooklyn. Assignor testified that she moved to Albany in 2015 but that she and her children commute to Brooklyn four or five days per week and that they drive about 2 1/2 hours "coming and going." Assignor testified that she presently works full-time in Brooklyn, and that her previous jobs were also located in Brooklyn. The Albany address which she provided in her application for insurance benefits and at which she stated she lived in her deposition is a home owned by her aunt to whom she pays rent. Assignor testified that the home is in the middle of the block, she could not recall its color, and stated that there was a covered porch in the front of the house. Respondent revised her testimony on the errata sheet to reflect that the house is on the corner and that there is no porch. Assignor could not fully describe the route she takes from Brooklyn to Albany on her commute. Assignor is registered to vote at her old address in Brooklyn and voted in the last election at a school in Brooklyn.

At the hearing of this matter, counsel for Applicant asserted that the EUO transcript alone is not sufficient to substantiate the alleged discrepancies contained therein without additional information, and further asserted that Assignor stated that she was in fact living in Albany New York. I am not convinced by Applicant's position, however.  Assignor provided sworn testimony under oath. Assignor subsequently amended her testimony with respect to the location of the house in which she purportedly resides in Albany, and whether it had a porch. Respondent submitted a form NF 2 executed by Assignor which lists her address in Brooklyn, New York. Likewise, the Assignment of Benefits form executed by Assignor on 10/24/17 lists an address in Brooklyn, New York. In addition, I find that Applicant's testimony that she drives 4 to 5 days per week from Albany to Brooklyn to get to her job in Brooklyn and to bring her children to school in Brooklyn is not credible, given the distance such a commute would involve, as described in Respondent's submission.

Upon consideration of the arguments of counsel and upon a review of the evidence submitted in this case, I find that Respondent has submitted sufficient evidence to meet its burden of demonstrating that Assignor made material misrepresentations in the procurement of the underlying automobile insurance policy. Applicant's claims for reimbursement are therefore denied. 

In this case, the assignor's EUO, which my office conducted, proved to be key in supporting the insurer's rate evasion-based denial of first-party benefits.

Do you know the color of your home and where it sits on its street/block?

Denial of No-Fault Benefits Based on Biomechanical Injury Causation Analysis Report Upheld in AAA Arbitration & Master Arbitration

AMERICAN ARBITRATION ASSOCIATION – NO-FAULT – BIOMECHANICAL EXPERT OPINION – USE OR OPERATION – CAUSAL RELATIONSHIP – EMG/NCV TESTING 

Matter of Arbitration between Scott A. Croce, DC, PC/Erie County Chiropractic aao [Assignor] and Preferred Mut. Ins. Co.
(Arbitrator Fred Lutzen, dated 3/28/2019)
(Master Arbitrator Marilyn Felenstein, dated 7/15/2019)

Mura & Storm associate Ryan Mura was privileged to represent Preferred Mutual Insurance Company (PMIC) in this American Arbitration Association mandatory no-fault arbitration matter.

PMIC denied payment of the applicant's EMG/NCV testing billing based on the "Biomechanical Injury Causation Analysis" peer review report of expert biomechanist Dr. Jacqueline M. Lewis, Ph.D., which had concluded:

1.  On May 18, 2017, [IP/Assignor] was the driver of a 2011 Buick LaCrosse that was traveling in the Walgreens parking lot (3288 Main Street), in Buffalo, New York, when contact occurred between the rear of a 2001 Ford Focus and the front of her vehicle. 

2.  The subject incident is consistent with a Delta-V of less than 6.4 miles per hour, and more comparable to 2.5 miles per hour with an average acceleration of less than 1.7g, and more comparable to 0.65g for the subject Buick in which [IP/Assignor] was seated. 

3.  The accelerations experienced by [IP/Assignor] were within the limits of human tolerance, and were comparable to those experienced during various daily activities. 

4.  Had the subject incident been sufficient to initiate occupant motion, [IP/Assignor] would have moved primarily forward relative to the subject Buick's interior. 

5.  There is no injury mechanism present in the subject incident to account for [IP/Assignor]'s claimed cervical spine injuries. As such, a causal relationship between the subject incident and the claimed cervical spine injuries cannot be made. 

6.  There is no injury mechanism present in the subject incident to account for [IP/Assignor]'s claimed thoracic spine injury. As such, a causal relationship between the subject incident and the claimed thoracic spine injury cannot be made.  

7.  There is no injury mechanism present in the subject incident to account for [IP/Assignor]'s claimed lumbar spine injuries. As such, a causal relationship between the subject incident and the claimed lumbar spine injuries cannot be made.  

8.  There is no injury mechanism present in the subject incident to account for [IP/Assignor]'s claimed bilateral knee injuries. As such, a causal relationship between the subject incident and the claimed bilateral knee injuries cannot be made.

In finding that PMIC had demonstrated by a preponderance of credible evidence that the assignor's claimed injuries did not arise out of the use or operation of a motor vehicle, AAA No-Fault Arbitrator Fred Lutzen held:

I find that Respondent's expert has sufficient scientific and technical knowledge, and is competent based on her credentials and experience to provide the aforementioned opinion. The report appears to be based on sufficient facts or data, is the product of reliable principles and methods, and Dr. Smith has applied the principles and methods reliably to the facts of this case (see, FRE 702). 

The 14-page report provides an extremely detailed analysis, which includes calculating the IP/Assignor's weight, speed of the vehicle, vehicle damages, and other relevant factors. Dr. Smith concludes that the vehicle was traveling approximately 2.5 mph, and that any impact would have produced acceleration that was comparable to or less than typical activities of daily living. She concludes that the reported injuries were not caused by the accident. 

Applicant's counsel argued that the medical records and reports establish a causal connection between the disputed treatment and the accident. I have reviewed all of the evidence submitted. Without additional evidence, like the IP/Assignor's own statement adequately explaining the injury onset and causality, Dr. Smith's accepted opinion is not sufficiently rebutted.The records alone are not sufficiently persuasive to overcome the extremely detailed, comprehensive, and convincing expert opinion by Dr. Smith. 

I find that the preponderance of credible evidence presented in this case supports that the IP/Assignor's EMG/NCV testing performed on 9/7/17 was unrelated to the accident that occurred on 5/18/17, and that the purported injuries did not arise out of the use or operation of a motor vehicle.

The applicant filed for master arbitration, and AAA No-Fault Master Arbitrator Marilyn Felenstein, in AFFIRMING Arbitrator Lutzen's award, found:

Arbitrator Lutzen, in his award, explained why he reached his conclusion that the claimed injuries could not have been caused by the claimed incident. He refer to the police report and the photographs attached thereto and notes that the police report indicated “no injury reported and no visible injury seen”. He notes the facts of the accident and discusses in detail the report by Dr. Lewis. The arbitrator found Respondent’s expert to be qualified to make the analysis regarding causation and found that Applicant had failed to rebut the expert’s conclusion. 

It is clear that a lower arbitrator has the authority to assess the facts and apply the relevant case law. He had the right to determine what evidence would be considered, including the expert report submitted by Respondent. I have carefully reviewed the parties’ briefs and the record on appeal. The arbitrator’s findings were within the arbitrator’s sound discretion and rational interpretation of the evidence and I find no reversible error within my purview as a Master Arbitrator. Per 11 NYCRR 65-4.5[o][1], the arbitrator shall be the judge of the relevance and materiality of the evidence offered. It would be improper for me, as a Master Arbitrator, to conduct a de novo review of the case and I cannot substitute my interpretation or my view as the weight or credibility of the evidence over that of the lower arbitrator. 

Furthermore, considering that there is case law to support the position that New York courts have specifically held that a biomechanical engineer is qualified to give opinion testimony regarding whether the force of impact in an accident could case the alleged injuries, it cannot be said that the arbitrator’s conclusion was not rational. Plate v. Palisade Film Delivery Corp., 39 AD3d 835 (2nd Dept. 20017). The request for vacatur of the award is denied. 

You can read both awards/decisions for more details.  Any questions about this matter can be directed to Ryan Mura at ryan.mura@muralaw.com.  

Denial of No-Fault Benefits to Assignee of Rate Evader Upheld in Arbitration

NO-FAULT – RATE EVASION – AAA ARBITRATION DECISION

Matter of Bronx Chiropractic Health Services, PC aao SB and State Farm Fire & Cas. Co.
(AAA Case No. 17-18-1114-9479, issued 8/23/2019)

This morning my office received this AAA award/decision, upholding our client's denial of no-fault benefits based on the assignor's proven rate evasion:

The EUO on the EIP/insured took place on October 29, 2018. The information that was provided based upon the testimony of the insured is that there was no real connection to the state of Maine, the policy under which the car was insured. The EIP's driver's license was NY and she was employed at Columbia Hospital. There was no real nexus between the EIP and Maine. The Respondent therefore provided the affidavit of Christina XXXX and [sic] underwriter for the Respondent. Had the Respondent been aware of the false information the policy would never had been issued. 

Applicant has not submitted any evidence to rebut the contentions made by the Respondent. 

Based upon the facts herein and the evidence provided, I find that Respondent has demonstrated by a preponderance of the evidence as a matter of law that EIP made material misrepresentations as to the facts surrounding the issuance of the policy. 

Applicant's claim is therefore denied.

In this case, the assignor's EUO, which my office conducted, proved to be key in supporting the insurer's rate evasion-based denial of first-party benefits. 

Use or Operation of Bus Found to Be Proximate Cause of Passenger's Injury for New York No-Fault Purposes

NO-FAULT – USE OR OPERATION OF A MOTOR VEHICLE – COURT REVIEW OF ARBITRATION RULINGS

Matter of New York City Tr. Auth. v Physical Medicine & Rehab of NY PC
(1st Dept., 2/22/2018)

Passenger steps off a bus into a hole and falls, injuring herself.  No-fault compensable?  No, per the New York Court of Appeals in Cividanes v. City of New York. The bus was neither the proximate cause nor the instrumentality of the injury

Passenger with walker boards a bus after the bus driver activates the bus's lift device to assist the passenger.  When exiting, however, the bus driver neither lowers the bus nor again activates the lift device.  Passenger places her walker onto the street and falls while trying to exit the bus, injuring herself.  No-fault compensable? 

Yes, in the opinion of the no-fault arbitrator, master arbitrator, Supreme Court and Appellate Division, First Department:

Contrary to petitioner's arguments, the facts of this case are distinguishable from those in Cividanes v City of New York (20 NY3d 925 [2012]), in which the Court of Appeals found that benefits were not available under the no-fault Insurance Law because the plaintiff's injury did not arise out of the "use or operation of a motor vehicle" (Insurance Law § 5104[a]). In that case, the plaintiff exited a stopped bus and fell when she stepped into a hole in the street. The Court determined that the bus was neither a "proximate cause" nor an "instrumentality" that produced her injury (id. at 926 [internal quotation marks omitted]; see also Walton v Lumbermens Mut. Cas. Co., 88 NY2d 211 [1996]). 

Here, the bus driver activated the lift device of the bus to assist Valerie Mathis when she boarded the bus. Subsequently, when she was exiting the bus, the bus driver refused to activate the lift device or to lower the bus. As a result, she was forced to place her walker out in the street, and then fell over while attempting to exit the bus.  

Thus, the arbitrator and master arbitrator rationally found that the bus was a "proximate cause" of the injury and that the accident involved the "use or operation" of a motor vehicle within the meaning of Insurance Law § 5104(a).

An EUO No-Show By Any Other Name...

NO-FAULT – EUO NO-SHOW 

Active Care Med. Supply Corp. v. ELRAC Inc.
(NYC Civ. Ct., Kings Co., decided 11/17/2017)

How many assignor EUO no-shows does it take to change a light bulb?  I mean, to deny an assignee's no-fault claim?  Two, right?  Wrong.  Not when the first no-show is not a "failure to appear".

ELRAC's defense counsel scheduled an EUO of the provider's assignor.  Counsel was informed that the assignor would be unable to appear for the first scheduled EUO, so counsel rescheduled the EUO to a second date.  After the assignor no-showed on the second scheduled EUO date, ELRAC denied no-fault benefits, and the assignee sued.  After a bench trial the court found and entered judgment in favor of the assignee plaintiff, holding with respect to ELRAC's EUO no-show defense:

[G]iven that [ELRAC's defense counsel] testified that he was informed that the assignor would be unable to appear for the first scheduled examination under oath [on April 14, 2011], the examination under oath should have been rescheduled. As such, the assignor's inability to appear on April 14, 2011 does not constitute a "failure to appear." Plaintiff's "no show" on May 5, 2011 constituted his first "failure to appear," and Defendant should have followed up with a second request for an examination under oath as required pursuant to 11 NYCRR 65-3.6.

Make sense?

The AAA Insurance Reporter & The Impact of Fraudulent Procurement of Auto Policies on New York No-Fault Claims

In 2017, after a six-year hiatus, the American Arbitration Association's New York State Insurance Division brought back a "new and improved" quarterly newsletter.  If you work with either New York no-fault or SUM claims, you should have received the four quarterly issues of the AAA Insurance Reporter for 2017.  If you aren't on the email distribution list for that newsletter, don't bother looking on the AAA's website for those quarterly issues.  They're not there.  I don't know why.

The newsletters reside on the Web, however, and their URLs make it easy to find 2017's four issues:

• 2017 Issue 1
• 2017 Issue 2
• 2017 Issue 3
• 2017 Issue 4

Each issue contains a "Developments in New York No-Fault" section that digests "a cross section of recent, well-reasoned arbitration awards that are consistent with current New York precedent and address commonly raised issues in the No-Fault forum."  According to Issue 1, the reported and digested awards "were objectively selected by an editorial board consisting of No-Fault arbitrators with a view toward promoting discussion and analysis of relevant issues."  Could it be that sitting AAA no-fault arbitrators want participants to pay more attention to these issues?

Issue 1 digested no-fault arbitration awards regarding:

• the finality of a Worker's Compensation Board's decision; 
• IME no-shows; 
• verification requests; 
• reasonable justification/45-day rule; 
• medical necessity; and
• use or operation (including an arbitration decision holding that the birth of a healthy baby following the mother's involvement in a MVA is not a compensable "injury" under New York no-fault law). 

Issue 2 treated:

• lost earnings; 
• post-EUO/Mallela verification requests;
• partial response to verification; 
• medical necessity--IME awards; and
• verification requested not under applicant’s control or possession.

Issue 3 addressed:

• jurisdiction; 
• intoxication;
• New Jersey certificate of authority;
• surgery fee schedule; and
• EUO no-shows.

Rounding out the year, Issue 4 included abstracts regarding:

• DME & verification request for wholesale invoice;
• death benefit claims;
• fraudulent procurement of the policy;
• 30-day notice of accident and late receipt of NF-2; and
• additional verification requested after a denial on a workers’ compensation defense.

Issue 4's abstracts on the impact of fraudulent procurement of the auto insurance policy on the applicant's no-fault claim are copied below (I've added links to the actual awards):

M.G. & State Farm Fire & Cas. Co.,
AAA Case No. 17-15-1021-8978 (4/15/16) (Gary Peters, Arb.)

Arbitrator Peters addressed whether respondent established its defense based upon fraudulent procurement of the policy. Respondent submitted an affidavit from an employee of State Farm Mutual Insurance Company in the Underwriting Department, which referenced that although applicant’s vehicle was insured at a residence in Yonkers, New York, an investigation revealed that applicant was not residing in Yonkers, New York, and that the vehicle was principally garaged in the Bronx. The affidavit further referenced that had State Farm been aware of this, they would not have issued the subject policy. The applicant/injured person provided testimony at the hearing before arbitrator Peters. The applicant/injured person testified that at the time of accident, he resided in Yonkers, New York, and was the operator of a motor vehicle that was registered to his wife at the Yonkers address. The applicant/injured person also testified that he resided in the Bronx “off and on” due to marital difficulties. The applicant/injured person testified that he never misrepresented the location of where the vehicle was garaged in order to obtain cheaper rates. However, due to marital difficulties, his wife moved out of the marital residence in Yonkers, New York, to live with her sister in Mayopac, New York and took the vehicle with her. Arbitrator Peters reviewed the EUO transcript of testimony taken of the applicant/injured person in which he testified that in November, 2014, the policy was changed to the Mayopac, New York address. Despite marital problems, he stayed at the Mayopac address on and off. Arbitrator Peters found that although the applicant/injured person had “multiple residences” wherein he lived in the Bronx, Yonkers and Mayopac for different periods of time, the applicant/injured person believed that the vehicle was garaged primarily in Mayopac, New York, and he was only utilizing the car a few days per week. Arbitrator Peters noted that Insurance Law Sec. 3105 governs material misrepresentation and fraudulent procurement of insurance contracts and that there was no intentional false misrepresentation in this case, since the applicant/injured person did in fact reside at three (3) different locations and his wife principally used the vehicle to care for his children’s needs. 

Isurply, LLC & State Farm Mut. Automobile Ins. Co.,
AAA Case No. 17-16-1026-4904 (12/9/16) (Jeffrey Silber, Arb.)

Arbitrator Silber addressed whether respondent established its defense based upon fraudulent procurement of the policy. Arbitrator Silber noted that although VTL Sec. 313 does not permit an insurer to cancel an automobile insurance policy retroactively on the grounds of fraud or misrepresentation, an insurer is entitled to raise the affirmative defense of fraudulent procurement of the policy in an action to recover benefits thereunder. Arbitrator Silber cited to relevant case law that referenced that misrepresenting residency status for the purpose of rate evasion, if proven, constitutes a material misrepresentation that precludes recovery under the policy. The injured person provided testimony at an examination under oath (EUO), and respondent “outlined” a list of eighteen (18) discrepancies, which the respondent argued established that the injured person actually resided in Brooklyn and not Port Jervis, and thus the injured person made intentional and material misrepresentations in the application for his insurance policy. Arbitrator Silber considered all of the evidence and found that respondent failed to establish its defense based upon fraudulent procurement of the policy. Arbitrator Silber noted that the injured person worked in Brooklyn, where the accident occurred and lived in Port Jervis. Although the injured person testified that she travelled for one and a half hours every day to work, arbitrator Silber found that this did not constitute a misrepresentation, as many people travel that amount of time to work. The injured person testified that her grandmother lives in Brooklyn and that she stayed there the night before the accident. The injured person also testified that her children attend school in Brooklyn and that she was treated at a Brooklyn medical facility. However, the injured person was registered to vote in Port Jervis, and all her mail was delivered to the policy address. Thus, respondent’s defense was not established. 

Jacobson Chiropractic, PC & National Liability & Fire Ins. Co.,
AAA Case No. 17-16-1026-5243 (2/9/17) (Lucille S. DiGirolomo, Arb.)

Arbitrator DiGirolomo addressed whether respondent established its defense based upon fraudulent procurement of the policy. Respondent argued that the assignor used a Saranac Lake, New York, address to procure the policy of insurance when he never lived there. Respondent submitted an SIU report wherein the investigator advised that he went to the Saranac Lake address and spoke to various occupants who had no knowledge of applicant residing at the premises. Moreover, the SIU investigator was advised that the apartment allegedly rented by the assignor was occupied by a different individual, who was a pilot at the local airport and had resided there since February, 2015. Respondent submitted an EUO transcript of testimony in which the assignor testified that although he planned on moving to Saranac Lake for school and would start in September, he never lived in Saranac Lake. Arbitrator DiGirolomo cited to relevant case law that referenced that the standard for determining residency for purposes of insurance coverage requires something more than temporary or physical presence and requires at least some degree of permanence and intention to remain. Arbitrator DiGirolomo found that the mere intention to reside at certain premises is not sufficient. Accordingly, arbitrator DiGirolomo found that respondent’s defense was established. 

New York Community Hospital & Utica National Ins. Co.,
AAA Case No. 17-15-1016-6707 (4/21/16) (Rhonda Barry, Arb.)

Arbitrator Barry addressed whether respondent established its defense based upon fraudulent procurement of the policy. Arbitrator Barry noted that although pursuant to VTL Sec. 313, a policy may not be canceled retroactively, the insurance carrier may assert the fraudulent procurement of the policy by the assignor in an action by a health care provider assignee for no-fault benefits. To sustain its defense, the insurer must provide that the subject insurance policy was procured through material misrepresentation. See, Insurance Law Sec. 3105. Arbitrator Barry cited to relevant case law noting that a misrepresentation is material only if the insurer would not have issued the policy had it known the facts misrepresented. Arbitrator Barry reviewed the available record, which included the EUO transcript of testimony taken of the injured person. The injured person testified that he lived in Rochester from January, 2014 through the date of accident in November, 2014. However, the injured person had no bills, receipts or cancelled checks documenting that he resided at that location. The injured person testified that he paid rent to his friend in Rochester for the last six months of 2013 in cash and traveled back and forth between Rochester and Brooklyn. The injured person was unable to testify regarding the amount of time spent at either location and could not adequately describe his residence in Rochester. Arbitrator Barry noted that the no-fault application provided a Brooklyn address and the injured person had a New York State commercial driver’s license that provided a Brooklyn address. Respondent also submitted an investigative report that referenced that the investigator spoke with the landlord of the premises in Rochester where the injured person purportedly resided and the landlord did not know the injured person. Respondent provided the affidavit of its underwriter who averred that the injured person listed a Rochester, New York, address as his place of residence and the location where the insured vehicle would be garaged when in fact he resided in Brooklyn. This was done to save on policy premiums, as the cost of the policy premiums for a vehicle to be listed as principally garaged in Rochester, New York, as opposed to Brooklyn, New York, is significantly less. Respondent maintained that it would not have issued the policy to the injured person at the same rate had the insured provided truthful information. Based on the foregoing, arbitrator Barry found that respondent’s defense based upon fraudulent procurement was established.

For those keeping score, the applicant prevailed on two of these four arbitrations; the insurers prevailed on the other two.

Proven rate evasion supports the denial of no-fault benefits (and other first-party coverages) to or on behalf of any EIP who was complicit in the fraudulent procurement of the auto policy.  The operative question is NOT whether the insurer would have insured the risk at all had it known the true facts, but whether it would have issued the SAME policy on the same terms and premium.  If the answer to that question is no, the misrepresentation is material.  Although New York personal auto policies may not be rescinded (retroactively canceled) because of New York's financial responsibility laws, first-party benefits may be denied to those complicit in the fraudulent procurement of the policy.

Additionally, remember that the rate evasion/fraudulent policy procurement defense is not subject to the 30-day preclusion rule.  In A.B. Medical Services, PLLC a/a/o Yevgenya Ioffe v. Commercial Mut. Ins. Co., 12 Misc.3d 8 (App. Term, 2nd Dept., 2006), the Appellate Term , Second Department, stated:

Contrary to plaintiffs' contention, the defense of fraudulent procurement of an insurance policy, which is nonwaivable and hence exempt from the 30-day preclusion rule, may be asserted as against plaintiffs providers in this action seeking to recover assigned no-fault benefits (cf. Matter of Metro Med. Diagnostics v Eagle Ins. Co., 293 AD2d 751, 751-752 [2002]). 

For more discussion, cases and awards on this issue, click the rate evasion label below.

New York Court of Appeals Now Tweeting Insurance Coverage Decisions

No, not really. That's just a click-baiting title.

But seriously, the court's issuance on December 14, 2017 of 259-character and 219-character decisions in insurance coverage cases could have fit within Twitter's new 280-character limit.  Here are the cases and why they're so short.

Section 500.11 of the New York Court of Appeals' Rules of Practice -- Alternative Procedure for Selected Appeals

22 NYCRR § 500.11(a) provides in pertinent part that "[o]n its own motion, the Court [of Appeals] may review selected appeals by an alternative procedure. Such appeals shall be determined on the intermediate appellate court record or appendix and briefs, the writings in the courts below and additional letter submissions on the merits."

In other words, no record, no briefs and no oral argument to the Court of Appeals.  And a faster and likely shorter decision.

What cases make the alternative review cut, you ask?  Per Rule 500.11(b), the Court of Appeals may select cases for such alternative review based on:

1. questions of discretion, mixed questions of law and fact or affirmed findings of fact, which are subject to a limited scope of review; 
2. recent, controlling precedent; 
3. narrow issues of law not of statewide importance; 
4. unpreserved issues of law; 
5. a party's request for such review; or
6. other appropriate factors.

By my count (actually Google Scholar's count),  the New York Court of Appeals has invoked Rule 500.11 six previous times in insurance coverage cases:

• addressing the question of what constitutes "maintenance" of an auto for purposes of a CGL policy's auto exclusion;
• involving the insured's asserted good-faith belief that the underlying plaintiffs in a libel action would not seek to hold the insured liable (late notice excuse); 
• holding that the injured party failed to use reasonable diligence in providing notice to the insurer; 
• finding triable issues of fact on successor liability; 
• adopting the dissenting memorandum of the Appellate Division on the "stage hand" exclusion; and
•  concerning an insurer's mailing procedures for policy amendments.

Here are the Court of Appeals' latest Tweet-sized insurance coverage decisions:

NO-FAULT – LOSS OF EARNINGS – SPECULATIVE NATURE OF CLAIM
Freligh v. Government Employees Insurance Company
(Ct. Apps., decided 12/14/2017)

Loss of earnings claim.  One of those "Oh, I know I wasn't employed at the time of the accident but I was just about to start a new job" kind of claim.  Regulation 68 permits an eligible injured person to recover "demonstrated future earnings reasonably projected" (11 NYCRR 65-3.16[b][3]).

At the time of the December 23, 2012 MVA, the plaintiff, who had worked in the automotive parts and repair industry for a number of years, had been unemployed for approximately seven months. In January 2013 plaintiff submitted an application for no-fault benefits.  With respect to the LOE portion of his application, plaintiff indicated that he "was due to start [a] new job" but had been unable to work since the MVA  as a result of the injuries that he had sustained in the accident. Plaintiff further indicated that details regarding his position, including his salary and the employer's name and address, would be provided.

Plaintiff thereafter provided GEICO with a copy of an employment application dated December 15, 2012, which purportedly reflected that plaintiff had been offered a $2,000 a week job at a failing auto parts business owned by plaintiff's friend of 15 years who, the record showed, (1) had previously pleaded guilty to insurance fraud and offering a false instrument, (2) had made false sworn statements in regard to the bankruptcy proceeding of a corporation, (3) had initiated that bankruptcy proceeding as a "ruse" to forestall creditors and (4) had paid his wife a salary from the parts business while she was a student at Columbia University for her "learning purposes."

In reversing Supreme Court's denial of GEICO's summary judgment motion, the three-justice majority of the Appellate Division, Third Department, held that "material evidence established as a matter of law that the projection that plaintiff would have received $2,000 a week from the parts business is unreasonable[.]"

Invoking its alternative review authority under Rule 500.11, the New York Court of of Appeals REVERSED the Appellate Division's order and reinstated the complaint.  The Court's 259-character (not counting spaces) decision:

On review of submissions pursuant to section 500.11 of the Rules, order reversed, with costs, and case remitted to the Appellate Division, Third Department, for consideration of issues raised but not determined on the appeal to that court. Triable issues of fact exist as to plaintiff's claim for lost wages.

That's it.  Triable issues of fact regarding the EIP's LOE claim for the jury to hear and decide.  Appellate Division order reversed.  The  Court of Appeal's seventh Rule 500.11 alternative review of an insurance coverage case.  

PERSONAL UMBRELLA – CANCELLATION – DIVISIBILITY
Garcia v. Government Employees Insurance Company
(Ct. Apps., decided 12/14/2017)

Appeal from another 3-2 decision at the Appellate Division (Second Department), but GEICO won this one at the Court of Appeals.

The insured had a $1 million personal umbrella policy with GEICO; the annual premium for that policy was $306.  On renewal the insured asked GEICO to increase the umbrella policy limit to $2 million, which GEICO did so, resulting in an increased premium of $199 for the umbrella policy.  When the insured paid only the prior year's premium of $306 GEICO cancelled the umbrella policy effective 12:01 a.m. on May 19, 2006.  As unluck would have it, the insured's vehicle was involved in a motor vehicle accident later that day in which the plaintiff, Garcia, was injured.

In pursuing coverage under the umbrella policy, Garcia argued that the umbrella policy's declarations were ambiguous, that GEICO's insured had made a payment sufficient to keep $1 million in umbrella coverage in force, and that the the umbrella policy's first and second million dollars of umbrella coverage were divisible.

The 3-2 majority of the Appellate Division, Second Department, disagreed:

Next, because there is no ambiguity in what Rakowski contracted for — $2,000,000 in coverage, as stated in the Amended Declarations of the policy — there is likewise no ambiguity in GEICO's notice of cancellation, which referred to the policy number of Rakowski's umbrella policy. The cancellation notice could only have pertained to Rakowski's coverage of $2,000,000, which was the only coverage the policy provided for the policy period (see First Sav. & Loan Assn. of Jersey City, N. J. v American Home Assur. Co., 29 NY2d at 300).

Invoking its alternative review authority under Rule 500.11, the New York Court of of Appeals AFFIRMED the Appellate Division's order, with costs.  The Court's 219-character (not counting spaces) decision:

On review of submissions pursuant to section 500.11 of the Rules, order affirmed, with costs. There is no ambiguity in the policy as to coverage or divisibility. The parties contracted for $2 million of coverage. Plaintiff's remaining contention lacks merit.

That's it.  No ambiguity.  Insurer wins.  The  Court of Appeal's eighth Rule 500.11 alternative review of an insurance coverage case.  

No-Fault Insurer Found Entitled to Breakdown of What Hospital Services Constituted Necessary Emergency Health Services

NO-FAULT – NECESSARY EMERGENCY HEALTH SERVICES – STABILIZATION – INTOXICATION-CAUSED INJURIES

St. Barnabas Hospital v. Government Employees Insurance Company
(Sup. Ct., Nassau Co., decided 2/1/2017)

Once upon a time (before 2011) New York no-fault insurers could deny personal injury protection (no-fault) coverage benefits to a person "injured as a result of operating a motor vehicle while in an intoxicated condition or while his ability to operate such vehicle is impaired by the use of a drug within the meaning of section [1192] of the vehicle and traffic law[.]"

Since January 26, 2011, when the amended Insurance Law § 5103(b)(2) went into effect, however, New York no-fault insurers could no longer exclude from coverage payments for "necessary emergency health services rendered in a general hospital" to a person injured as the result of operating a motor vehicle while in an alcohol intoxicated or drug impaired condition.

In August 2015 I blogged about the new law and was surprised to report that in the more than four years since the new law's effective date, no New York court had yet issued a decision on its interpretation and application to no-fault claims.  In that blog post I did digest the 15 AAA awards issued since January 2011 that mentioned NEHS.

We now have our first (and so far only) New York reported decision on necessary emergency health services in the no-fault context, and it comes from Nassau County Supreme Court.

Utilizing a Hospital Facility Form (Form NF-5) and a UB-04, St. Barnabas Hospital submitted a bill for hospital services to GEICO in the amount of $43,212.59.  Based in part on the hospital's own toxicology report showing that GEICO's insured had a BAC of 0.15% and THC in her system at the time of her admission to the hospital's emergency room, GEICO timely requested verification in the form of a breakdown of which hospital services constituted necessary emergency health services (NEHS). Specifically, GEICO requested a "breakdown of charges up to where the patient was found to be stabilized".

In response to GEICO's verification request, the hospital stated that GEICO's "request for a `breakdown of charges up to where the patient was found to be stabilized' is not required under the insurance regulations or no fault law'", and added that "[t]he patient received `Necessary Emergency Health Services' during his admission at the hospital."

When GEICO did not pay the bill, plaintiff commenced this action contending, in part, that GEICO's payment was overdue because GEICO's verification request did not toll the 30-day deadline to pay or deny the hospital's bill.  GEICO argued that the hospital's action was premature because it had not responded to GEICO's proper verification request.  Both parties moved for summary judgment.

In DENYING the plaintiff's motion and GRANTING GEICO's motion for summary judgment, dismissing the complaint, Supreme Court reasoned:

The Plaintiff's position that the verification request was improper because it is not required under the insurance regulations or no fault law is without merit. The Defendant, GEICO, referenced Circular Letter No. 4 dated January 12, 2011, issued by the State of New York Insurance Department, in its original request for additional verification. The purpose of the Circular Letter is to advise no-fault insurers and health insurers of the amendment of Insurance Law §5103(b)(2) and to interpret the regulations related thereto. While the Plaintiff concedes that the law was amended in January 2011 to reflect that insurers are prohibited from excluding from coverage necessary emergency health services even where the patient was intoxicated by alcohol or drugs, the Plaintiff fails to address the portion of the Circular Letter at issue here. Specifically, the Plaintiff submits no argument or opposition with regard to the portion of the Circular Letter that permits a no-fault insurer to request a hospital to specify what portion of the bill consists of "necessary emergency health services". Rather, the Plaintiff claims that the statutory language does not explicitly provide as such. The Court disagrees. 11 NYCRR 65-3.5(c) provides that "[t]he insurer is entitled to receive all items necessary to verify the claim directly from the parties from whom such verification was requested." 

The Court also disagrees with the Plaintiff's contention that it fully responded to the Defendant's verification requests by merely stating, "[t]he patient received `Necessary Emergency Health Services' during his admission at the hospital." The Plaintiff's response is vague in that it fails to delineate whether some, most or all of the services were in fact "necessary emergency health services". Further, in its Circular Letter, the Insurance Department contemplated the need for hospitals to specify what portion of the bill consists of such emergency services. The Insurance Department also defined "necessary emergency health services" as sudden pain or injury that is treated until the patient is stabilized, generally in the emergency room. 

In the matter sub judice, the patient was admitted to St. Barnabas for approximately three (3) days from April 10, 2016 through April 13, 2016. The Defendant, GEICO, submitted sufficient proof in admissible form showing that the patient was intoxicated by alcohol and Marijuana at the time of the accident. As such, GEICO was entitled to request information concerning the breakdown of services until the patient was found to be stabilized in accordance with the Insurance Law §5103(b)(2), as amended, and the related Circular Letter No. 4 interpreting the statute. Such information would permit GEICO to assess when the no-fault insurance coverage ceases, if at all, and the appropriate amount of the claim that must be paid. 

Pursuant to 11 NYCRR 65-3.6(b), where there is a timely original request for verification, but no response to the request for verification is received within 30 calendar days thereafter, or the response to the original request for verification is incomplete, then the insurer, within 10 calendar days after the expiration of that 30-day period, must follow up with a second request for verification. When a no-fault medical service provider fails to respond or inadequately responds to two timely verification requests, the 30 days in which to pay or deny the claim is tolled and does not begin to run. Accordingly, any claim for payment by the medical service provider after two timely requests for verification is premature (See Sound Shore Med. Ctr. V. New York Cent. Mut. Fire Ins. Co., 963 N.Y.S.2d 282 [2d Dept. 2013].

New York no-fault insurers that would seek to deny PIP benefits on intoxication grounds must always be mindful of their burden to show not only that its insured was alcohol intoxicated or drug impaired, but also that the insured's intoxication or impairment was a proximate cause of the accident.  Failure to make a prima facie demonstration of both may undermine an NEHS verification request or defense, like in this arbitration matter.  

Since I last blogged about NEHS in August 2015, 14 AAA arbitration awards have mentioned NEHS.  You can search those yourself by doing a date-limited, exact phrase, full text search for awards with "necessary emergency health services" here.  Relative to the NEHS issue, the most notable seven of those arbitration awards are:

Erie County Medical Center aao [Redacted] and Geico Ins. Co.  (Arbitrator Mona Bargnesi, issued 3/8/17)

"I find that 'good reasons' for Respondent's verification request are lacking in the present circumstances, as the outcome of criminal charges has no effect on whether emergency services should be reimbursed. * * * As the services provided in the instant case were 'necessary emergency services rendered in a general hospital', the insurer cannot exclude Assignor from coverage. Respondent did not contend that the criminal charges related to anything other than intoxication. Therefore, Respondent's pend of the claim for suspected intoxication was improper in this case."

North Shore University Hospital aao [Redacted] and Hertz Rent A Car  (Arbitrator Greta Vilar, issued 11/28/16)

"Admittedly, the burden placed upon the respondent in this case [to prove causation] is a high one. However, it is the burden placed upon the respondent by the statutory framework applicable to this case. Having determined that the respondent has failed to meet its burden of proof, I do not reach the additional issues raised at the hearing of this matter including what portion of the treatments provided to the patient constituted emergent care prior to stabilization (an issue upon which an IHC's opinion was sought). This issue would only be relevant in the event that the respondent proved that the patient was intoxicated, and that the intoxication was the cause the accident. In light of my holding, the argument is moot. I find in favor of the applicant."

Westchester Medical Center aao [Redacted] and New York Central Mut. Fire. Ins. Co.  (Arbitrator Marcelle Brandes, issued 5/30/16)

"After a careful and thorough review of the evidence, it is hereby determined that Applicant's claim is denied. Respondent has established that Assignor was intoxicated at the time of the accident (Assignor's statements to the police and EMS), and that this single car crash was the proximate cause of the accident, (police report). Moreover, the medical services provided to Assignor at Westchester Medical Center does not fall within the "necessary emergency health services" as defined by the Department of Finance [sic] circular letter inasmuch as Assignor was not transported directly from the scene of the motor vehicle accident to Applicant's facility."

Nassau University Medical Center aao [Redacted] and Liberty Mut. Fire Ins. Co.  (Arbitrator Anthony Joseph Bianchino, issued 3/7/16)

"Here based upon the bill submitted by the Applicant I find that the Applicant has made a prima facie showing that the services the patient received on December 26, 2013 in the emergency room were 'necessary emergency health services'.  As such the burden now shifts to the Respondent to prove that the emergency room services in dispute were not 'necessary emergency health services'.  However since the Respondent has submitted nothing from a medical professional which states that the emergency room services the patient received on December 26, 2013 were not 'necessary emergency health services' I find that the Respondent has not rebutted the Applicant's prima facie showing that the emergency room services in dispute were 'necessary emergency health services'. Therefore since the emergency room services in dispute were 'necessary emergency health services' based upon Section 5103 (b) (2) of the New York State Insurance Law the Respondent must provide No-Fault coverage for these services. As such I find that the Applicant is entitled to be reimbursed for the emergency room services in dispute."

Westchester Medical Center aao [Redacted] and Allstate Ins. Co.  (Arbitrator John Kannengieser, issued 12/15/15)

Allstate paid $27,011.31 of applicant's $47,011.31 bill on the basis that the lesser amount represented payment for NEHS to stabilize the EIP (which Allstate delineated as number of days the EIP spent in the hospital's ICU).  The EIP's admission was for a period of six days.  Applicant's coding expert "re-ran DRG 912-3 with the EIP's stay as if it had been four days instead of six days (the length of time the EIP was in the ICU), and the DRG rate came out the same at $47,011.31. The reason for this is that DRG rates are primarily determined based on the injuries, as well as the admitting diagnosis and discharge diagnosis. The length of stay and treatment rendered have a minimal effect on the DRG assigned, and the proper billing was $47,011.31."

Westchester Medical Center aao [Redacted] and Geico Ins. Co.  (Arbitrator Ben Feder, issued 11/3/15)

"Upon a thorough review of the evidence submitted and position statements presented at the hearing, it is this Arbitrator's determination that Respondent's expert failed to explain why Applicant's medical treatment did not fall under the definition of necessary emergency medical care. The peer review is not supported by factual evidence. No medical authority was provided that supports the position that extubation is deemed the end of necessary emergency medical care. I find no basis for Dr. Sharahy's statements other than her own opinion on the matter. I find that the peer review report is insufficient to meet Respondent's burden of proof as referenced above, the burden of which shifts to Respondent once Applicant has established a prima facie case." 

Westchester Medical Center aao [Redacted] and Geico Ins. Co.  (Arbitrator Michael Achtziger, issued 10/25/15) 

"Applicant further noted that Respondent's denial was defective on its face in not stating that these were not emergency health services. In any event, Applicant noted its following services were emergency health services:  An exploratory emergency laporotomy, bladder repair, repair of colonic serosal tear.  Applicant's counsel noted that Dr. Benatar confirmed the emergency nature of the hospitalization, and Applicant's counsel justified its mandated billing (Diagnostic related Group), and that a breakdown of charges is not required with Respondent obligated pursuant to 11 NYCRR 65-3.5(g) to accept an NF5 Form or an NF5 Form with a UBF-1. Counsel noted Respondent was sent a UB-04 and Master Output Report. Finally, counsel noted that a split of the DRG to award only the emergency health care portion of the bill would release the DRG rate and create a balance due of $51,746.00.  Accordingly, as Applicant has proven its entitled pursuant to law and its appropriate breakdown of charges. Applicant is awarded $27,933.45."

Declaratory Judgment Granted on Default Serves as Res Judicata of Previously Commenced Provider Recovery Claim

NO-FAULT – DECLARATORY JUDGMENT – DEFAULT JUDGMENT – RES JUDICATA
Daily Med. Equip. Distrib. Ctr., Inc. v. American Tr. Ins. Co.
(App. Term, 2nd Dept., decided 12/18/2015)

Collateral estoppel is issue preclusion.  Res judicata, Latin for "a matter [already] judged", is claim preclusion.

Plaintiff provider sued American Transit in Queens Civil for for medical supplies provided to its assignor.  After this action was commenced, American Transit commenced a declaratory judgment action in Bronx Supreme against the assignor and all billing providers.  All defendants defaulted in that Bronx Supreme action, and Supreme Court granted American Transit's motion for a default judgment against all defendants, finding that all defendant providers, including the plaintiff in this action, Daily Medical Equipment Distribution Center, were not entitled to recover no-fault benefits arising out of the subject motor vehicle accident.  American Transit then cross-moved for summary judgment in this action based on the declaratory judgment that had been granted by default in Bronx Supreme.

In AFFIRMING Queens Civil's order that denied plaintiff's motion and granted American Transit's cross motion for summary judgment, the Appellate Term agreed that res judicata applied to preclude plaintiff's claim for recovery, even though the declaratory judgment had been granted on default:

Contrary to plaintiff's contention, the instant action is barred under the doctrine of res judicata based upon the declaratory judgment (see Vital Meridian Acupuncture, P.C. v Republic W. Ins. Co., 46 Misc 3d 147[A], 2015 NY Slip Op 50222[U] [App Term, 2d, 11th & 13th Jud Dists 2015]; EBM Med. Health Care, P.C. v Republic W. Ins., 38 Misc 3d 1 [App Term, 2d, 11th & 13th Jud Dists 2012]). To hold otherwise could result in a judgment in this action which would destroy or impair rights established by the Supreme Court (see Schuykill Fuel Corp. v Nieberg Realty Corp., 250 NY 304, 306—307 [1929]; Ava Acupuncture, P.C. v NY Cent. Mut. Fire Ins. Co., 34 Misc 3d 149[A], 2012 NY Slip Op 50233[U] [App Term, 2d, 11th & 13th Jud Dists 2012]). Moreover, the declaratory judgment is a conclusive final determination notwithstanding that it may have been entered on default (see Lazides v P & G Enters., 58 AD3d 607 [2009]; Matter of Allstate Ins. Co. v Williams, 29 AD3d 688, 690 [2006]; Matter of Eagle Ins. Co. v Facey, 272 AD2d 399 [2000]; Ava Acupuncture, P.C. v NY Cent. Mut. Fire Ins. Co., 34 Misc 3d 149[A], 2012 NY Slip Op 50233[U]).