You've Gotcha Mail -- Appellate Term, First Department, Recommends "Time Out" for No-Fault Litigants

NO-FAULT – VERIFICATION – PROOF OF MAILING – PREMATURE ACTION
Lenox Hill Radiology, PC v. Tri-State Consumer Ins. Co.
(App. Term, 1st Dept., decided 12/30/2010)

Plaintiff MRI provider billed.  Defendant no-fault insurer requested verification.  Plaintiff sued.  At the nonjury trial, in support of its defense that plaintiff's action was premature because it had not responded to defendant's verification requests, defendant  produced the claims examiner who had prepared the verification requests and who testified about the defendant's standard office mailing practices, but acknowledged on cross examination that she had no personal knowledge of the mailroom's actual clerical procedures.  Plaintiff offered no evidence that it had ever responded to the verification requests, arguing only that defendant's proof of mailing of the verification requests was insufficient because the claims examiner who testified at trial did not have personal knowledge of the defendant's actual mail handling procedures.  The trial judge agreed and awarded judgment to plaintiff for $4,390.16.  Defendant appealed.

In REVERSING the judgment and dismissing the complaint, the two-justice majority concluded that defendant presented sufficient evidence at trial of its standard office mailing practice:

The witness's credible and consistent account of the mailing procedures generally followed by defendant, including how the mail was systematically picked up during the work day, when it would "go out," and what steps would be taken if a verification letter was returned as undeliverable (an event which, the witness noted, did not occur here), "obviated the necessity of producing a witness with personal knowledge of the actual mailing" of defendant's verification letters (see Badio v Liberty Mut. Fire Ins. Co., 12 AD3d 229, 230 [2004]). Nor was it incumbent upon defendant to produce a witness, such as a mail clerk or other clerical employee, whose duty it was to ensure compliance with its mailing procedures or who possessed personal knowledge of such compliance see Delta Diagnostic Radiology, P.C. v Chubb Group of Ins., 17 Misc 3d 16 [2007]).

What is most notable about this decision, however, is the majority's excoriation of what has become our New York no-fault litigation system:

Before concluding, we would be remiss in failing to note that the facts and circumstances of this action do much to illustrate the disturbing reality that first-party no-fault benefits litigation has become the antithesis of what was supposed to be an expeditious and simplified process for the payment of medical costs for injuries sustained in motor vehicle accidents (see Walton v Lumbermans Mutual, 88 NY2d 211, 214 [1996]).  Too often, lawsuits with a value akin to a small claims action become bogged down by an insistence by one party or another that mailing of routine forms be established with scientific precision, asking judges, already burdened to the breaking point with the veritable legion of no-fault cases overflowing from our court dockets (while very able arbitrators remain underutilized), to require multiple witnesses to be summoned to the courthouse, merely to establish a presumption of mailing, even in the absence of an express denial of receipt of the disputed correspondence. Unfortunately, this class of cases has spawned a body of "gotcha" jurisprudence, marked by a near manic preoccupation with form over substance.

How we have reached this sorry state is of little moment. Perhaps all branches of government need to call a "time out" and, working together, endeavor to construct a workable process to achieve what the framers of the No-Fault statute had in mind when they sought to establish a simplified and expeditious process to reimburse those of our citizenry injured in automobile accidents. For sure, the system now in place is not achieving that laudable aim.

Amen and pass the salt.  Enough already.

Albany, your courts are calling.  Again.  Shall I take a message or will you answer the call this time?

By Dint of a One-Day Tardiness -- Richmond Civil Rules that There is No Repercussion for a Late Follow-Up Verification Request

NO-FAULT – FOLLOW-UP VERIFICATION – INSURANCE LAW § 5106(A)
Pine Hollow Med., P.C. a/a/o Jonathan Aurelien v. Global Liberty Ins. Co. of N.Y.
(NYC Civil, Richmond Co., decided 6/18/2009)

There's nothing like a Richmond County NYC Civil Court Judge Katherine Levine decision to restart the blogging after two weeks.  Although it's several weeks old, I didn't see this decision posted on any of the usual corners, so I thought I'd restart here.

In no-fault parlance, additional verification is what must be requested within 15 business days of the no-fault insurer's receipt of prescribed verification forms (N-F 3 thru 7).  So says 11 NYCRR § 65-3.5(b).

Follow-up verification is what must be requested within 10 calendar days after 30 days have elapsed from the insurer's additional verification request and the requested verification has not been supplied.  So says 11 NYCRR § 65-3.6(b).

If the no-fault insurer requests additional verification on the 16th business day after receiving an N-F 3, i.e., one day late, its 30 calendar days to pay or deny the associated billing once the requested verification is received is correspondingly reduced by one day to 29 days.  So says 11 NYCRR § 65-3.8(j). 

But what if the insurer is late in making its follow-up verification request?  Sends the follow-up verification request beyond the 10-day period?  Is there any negative repercussion?  Defense preclusion?  No, says Judge Levine.  Why?  Because of what 11 NYCRR § 65-3.8(j) says:  

(j) For the purposes of counting the 30 calendar days after proof of claim, wherein the claim becomes overdue pursuant to section 5106 of the Insurance Law, with the exception of section 65-3.6 of this subpart, any deviation from the rules set out in this section shall reduce the 30 calendar days allowed (emphasis added).

In acknowledging a "seeming anomaly between precedent and the insurance regulations" (which is a judicially delicate way of saying that a lower court disagrees with a higher court), Judge Levine held:   

Since the regulations only address the repercussion that attaches to an insurer's late submission of an additional verification request and the tenets of statutory construction mandate that different parts of one statute are to be construed together, this court concludes that an insurance carrier should not be subject to greater penalties for submitting a late follow-up verification requests than for submitting a late additional verification request.

This matter involved a follow-up verification request sent one day late.  Plaintiff had not provided the requested verification and sued to collect its $699.34 billing.  Global Liberty moved for summary judgment on the ground that plaintiff's action was premature because it had not provided the requested verification.  Plaintiff did not dispute Global Liberty's assertion that it never provided the requested information, but argued  that Global Liberty's follow-up verification request was late because it was made on the 11th day after 30 days had already transpired since Global Liberty's first (additional) verification request, in violation of 11 NYCRR § 65-3.6(b).

After discussing various case decisions addressing the claim impact of no, early and late follow-up verification requests, Judge Levine ruled:

Based upon the two aforementioned precedent, it is clear that defendant should not be deprived entirely of the opportunity to review and obtain the needed proof by dint of its one day tardiness in submitting its follow up request. 11 NYCRR 65-3.8(j) only addresses the repercussions of an insured's failure to request the additional verification within the set time lines, since it expressly excludes section 65-3.6 which discusses follow up verification requests, and then sets forth that any deviation from the time frame shall reduce the 30 calendar days allowed in which to pay or deny the claim. As such, the regulations do not even contain a punitive provision for an insurer who does not make a follow up verification request within the 10 day period face. A statute or legislative act is to be construed as a whole, and all parts of an act are to be read and construed together to determine the legislative intent. "McKinney's, Statutes § 97.; Frank v. Meadowlakes Dev. Corp., 6 NY3d 687, 691 (2006), and construed so as to harmonize with one another. Anglin v Anglin, 80 NY2d 553, 558 ( 1992 ). In the interpretative context, a court must read the entire law and accord respect to the interlocking and interrelated features of all its parts." Anglin, supra at 558. Furthermore, even apparently conflicting provisions of a statute must be reconciled in a manner most consistent with the overall legislative intent. Statutes § 98; Schulman v. Group Health Inc., 39 AD3d 223 ( 1st Dep't 2007). Finally, the common mandate of statutory construction is to assume that the Legislature "did not intend a patently absurd result. Covington v. Walker, 307 AD2d 908 ( 2d Dep't 2003) See, McKinney's Statutes § 145; In re Adamo, 619 F.2d 216, 219 ( 2d Cir. 1980). 

It would be patently absurd and contravene the meaning of the 11 NYCRR 65-3.8(j) to impose a more draconian punishment on an insurer who is one day late in requesting follow-up verification than on an insurer who is one day late in requesting additional verification. Since in the latter situation, the only repercussion to the insurer's tardiness is the diminution in the time it has to issue a denial or pay the claim, it begs all credulity to impose the more drastic remedy of precluding the insurer from even issuing a denial because of its tardiness in requesting follow up verification. If anything, the aforementioned regulation imposes no repercussion upon the insurer who is tardy in requesting follow up.

Since defendant has yet to receive any response to its verification requests, its 30 day period in which to deny or pay the claim has not yet commenced and the instant action is premature. In light of the above, it is not necessary for this court to determine whether the defendant's time to deny or pay the claim, once it does receive the requested information, is diminished by one day.

Absent from Judge Levine's decision is any mention of the Second Department Appellate Term's decisions in Alur Med. Supply, Inc. v Progressive Ins. Co. , 23 Misc3d 130(A) (App Term, 2d & 11th Jud Dists 2009) and Infinity Health Prods., Ltd. v Eveready Ins. Co., 21 Misc3d 1 (App Term, 2d & 11th Jud Dists 2008), in which that court held that an early follow-up verification request voids the tolling of the 30-day pay/deny rule that stems from a timely additional verification request. Of course, Richmond County is the 13th Judicial District and does not fall within the jurisdiction of the Second Department, Appellate Term for the 2nd & 11th Judicial Districts.  [P.S. 2:45 p.m. -- See comments to this post.]

One certainly could argue that this decision runs contrary to the Second Department's 1996 decision in Presbyterian Hosp., City of NY v. Aetna Cas. & Surety Co., 233 AD2d 431 (2d Dept. 1996), lv. denied, 90 802 (1997), in which the court held where the insurer issued no follow-up verification request, its time either to pay or deny the claim had run even before the verification was received.  The distinction of there having been no follow-up verification request in that case, as opposed to a late request, may or may not be the classic one without a difference.

Judge Levine's logic seems simple enough, though -- if the "punishment" to a no-fault insurer for a late additional verification request is "only" a corresponding reduction in the 30-day pay/deny period, the "with the exception of section 65-3.6 of this subpart" language of 65-3.8(j) must mean that there should be no greater, and possibly a lesser or no punishment for a late follow-up verification request.  Otherwise, that exception would have no meaning, right?

Notably, having found that plaintiff's action was premature because it had not provided the requested verification, Judge Levine did not address the question of whether the insurer's time to deny or pay the claim is diminished by a late follow-up verification request.  One could argue that the potential usefulness of this decision, therefore, is limited to situations in which there has been no response to the insurer's follow-up verification requests, timely or not. 

So what if instead of no follow-up verification request (Presbyterian Hosp.), the follow-up verification request was really late by, let's say, 31 days?  Would the 65-3.8(j) exception still apply or would the 30-day pay/deny period be deemed to have run?  If there is no negative repercussion for a late follow-up verification request, doesn't the exception of 65-3.8(j) swallow up the rule of 65-3.6(b)?

Question for my friends over at BSBGFM&N -- appeal or leave this one alone?  The greater good/greater harm question.

Unresponded Verfication Requests -- Provider's Action Dismissed as Premature

NO-FAULT – VERIFICATION – PREMATURE ACTION
Beta Supply, Inc. v. Government Empls. Ins. Co.
(App. Term, 1st Dept., decided 7/16/2008)

GEICO established that it had timely requested verification from plaintiff, and that plaintiff had not responded to such requests. In REVERSING New York Civil's award of summary judgment to plaintiff and "searching the record" (what a court does before it grants relief to a non-moving party), the Appellate Term, First Department, awarded summary judgment to GEICO, dismissing the action. "Inasmuch as an insurer is not required to pay or deny a claim until it receives verification of all relevant requested information (see 11 NYCRR 65-3.8[b][3]; Nyack Hosp. v State Farm Mut. Auto. Ins. Co., 19 AD3d 569 [2005]), and it being undisputed on this record that plaintiff did not respond to defendant's verification requests, plaintiff's claim for payment was premature."

Hospital's Action Dismissed as Premature -- Incomplete Verification

NO-FAULT – HOSPITAL BILLING – INTOXICATION EXCLUSION – VERIFICATION
Westchester Medical Center a/a/o Mitchell Fuchs v. Mercury Cas. Co.
(Sup. Ct., Nassau Co., decided 6/27/2008)

WMC sued for payment of a $42,024.64 hospital bill. The assignor was injured in a November 10, 2007 MVA, and Mercury received the billing on January 10, 2008. On January 22, 2008, Mercury sent an additional verification request to WMC and the assignor requesting receipt of the insured' s blood alcohol level and a copy of the police report. Having received neither within 30 days, Mercury sent a timely follow-up additional verification request, which also went unanswered.

WMC argued that Mercury's additional verification requests were defective because it only drew but did not test the assignor's blood and did not have possession of the police report. In addition to establishing that it sent the additional verification and follow-up requests, Mercury claimed that it had yet to receive the consent to obtain the assignor's blood sample, or an application for no-fault benefits.

In denying WMC's motion for summary judgment and granting Mercury's motion, dismissing the complaint as premature, Nassau County Supreme County Justice Kenneth Davis held:

Here, Mercury Casualty requested its initial verification form requesting a consent to obtain the blood sample, the actual blood sample and an application for benefits, to both the insured and Westchester Medical on January 22, 2008 , twelve days after receipt of the application. Although the verification request was sent 2 days after the statutory prescribed 10 business days, the insurer was not prevented from requiring proof of claim. 11 NYCRR 65.15(g)(6).

When both the insured and Westchester Medical failed to respond, a second request was made on February 22, 2008. The Court finds that the information was timely requested from the appropriate parties, the insured and the health care provider, along with the third party police department. In order for the insurer to have properly and timely requested the blood alcohol test results, it had to forward prescribed verification forms to the appropriate parties within 10 days after receipt of the completed application. 11 NYCRR 65.15(d)(1); Presbyterian Hosp. the City of New York v. Maryland Cas. Co. , 90 N.Y.2d 274 (1997). The Courts finds that Mercury took the appropriate action, and properly sought to extend the time frame by requesting verification. Therefore Westchester Medical' s motion for summary judgment is denied.

The defendant demonstrated its entitlement to summary judgment by proving that it timely requested additional verification from the plaintiff, regarding the issue of the driver's alleged intoxication at the time of the accident, within the requisite periods, and that such information was never received. In opposition, Westchester Medical Center failed to demonstrate the existence of a triable issue of fact. Moreover, pursuant to § 5103(b)(2), and 11 NYCCRR § 65-8 the defendant was acting within its rights to request the verification.

Regarding Westchester Medical's claim that the additional information requested was not in its custody or control, the Court finds this argument is without merit. 11 NYCRR 65-3.8(g) provides that proof of claim is not complete until the insurer is furnished with "all available information" relating to the insured's condition at the time of the accident. However, "available information" includes only information within the control of the health care provider or the insured, or information obtainable by those parties through reasonable effort.

Westchester Medical claims that they merely drew the plaintiff's blood and did not actually test it, however with reasonable efforts Westchester could have provided Mercury with the information requested as the insured's medical information (i.e. blood alcohol level) was available to the treating hospital. Moreover, the insured could reasonably have provided consent to release the information requested, even if in the custody and control of the police department. The insurer is entitled to receive all items necessary to verify the claim "directly from the parties from whom such verification is requested." 11 65-3.5(c). Mercury took timely action to attain the requested information from the appropriate party. Mercury also took action to attain the information requested from the appropriate third party police department. The Court finds that the plaintiff' failure to provide the information requested rendered the claims incomplete.

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.