"Pending Adjuster's Review" Doesn't Toll 30-Day Pay or Deny Period for No-Fault Billing

NO-FAULT – VERIFICATION – DELAY LETTER – INSURANCE LAW § 5106(A) – 30-DAY PAY OR DENY RULE
NYU-Hospital for Joint Diseases v American Intl. Group, Inc.
(2nd Dept., decided 11/1/2011) 

You knew this already.  A delay letter stating that payment of the provider's bill was being delayed "pending adjuster's review" and "investigation" does not serve to toll the 30-day pay or deny period of New York Insurance Law § 5106(a) and 11 NYCRR § 65-3.8.  Without a timely denial of PIP benefits, the insurer was precluded from asserting that intoxication of the insured was a contributing cause of the accident and injuries.  Summary judgment for the plaintiff hospital. 

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?

Two Out of Three Ain't Bad, or Is It?

For folks like Dave Barshay over at No-Fault Paradise who keep score, of the six decisions decided by the Appellate Term, Second Department, on November 26th and posted to the New York Official Reports website last Wednesday, December 1st,  four were reversals in favor of the defendant insurers' motions for summary judgment, all on lack of medical necessity grounds:

Pomona Med. Diagnostics, P.C. v GEICO Ins. Co.
2010 NY Slip Op 52059(U) (App. Term, 2nd, 11th & 13th Dists., decided 11/26/2010)

Triangle R, Inc. v GEICO Ins. Co.
2010 NY Slip Op 52060(U) (App. Term, 2nd, 11th & 13th Dists., decided 11/26/2010)

Elmont Open MRI & Diagnostic Radiology, P.C. v Clarendon Natl. Ins. Co.
2010 NY Slip Op 52061(U) (App. Term, 9th & 10 Dists., decided 11/26/2010)

Dynamic Med. Imaging, P.C. v New York Cent. Mut. Fire Ins. Co.
2010 NY Slip Op 52062(U) (App. Term, 9th & 10th Dists., decided 11/26/2010)

One was an affirmance of summary judgment to the self-insurer on the assignor's IME no-show:

Trimed Med. Supply, Inc. v ELRAC, Inc.
2010 NY Slip Op 52057(U) (App. Term, 2nd, 11th & 13th Dists., decided 11/26/2010)

And one was an affirmance of partial summary judgment to the hospital provider on a verification issue:

St. Vincent's Hosp. & Med. Ctr. v American Tr. Ins. Co.
2010 NY Slip Op 52063(U) (App. Term, 9th & 10th Dists., decided 11/26/2010)

What does the high proportion of reversals at the Appellate Term mean?  Some might conclude that the lower courts don't know what they're doing.  Some others might conclude (and have already concluded) that the Appellate Term favors insurers on no-fault issues.  Regardless, it seems appealing to the Appellate Term has become a necessary part of the no-fault litigation process in metro New York and Long Island.

Nassau District Court Rules that a No-Fault Insurer May Not Obtain Documentary Material Relating to a Mallela Defense in an EUO Request

NO-FAULT – VERIFICATION – PROVIDER EUO – DOCUMENT REQUESTS – MALLELA DEFENSE
Dynamic Med. Imaging, P.C. a/a/o Staffa Pasqualino v State Farm Mut. Auto. Ins. Co.
(Nassau Dist, 1st Dist., decided 7/15/2010)

From the judge who last inspired me to quote Lewis Carroll's Jabberwocky comes this decision, another head scratcher.

New York no-fault mavens know that the Mallela defense is not subject to the 30-day pay-or-deny preclusion rule of Insurance Law § 5106(a) and 11 NYCRR § 65-3.8(a)(1).  They may also know that under New York procedural law, a litigant must have a good faith basis for alleging something that's in a complaint or an answer.  Having a good faith basis to allege something usually depends on having already obtained some factual information about the allegation or defense.  

In State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005]), the New York Court of Appeals held that a health care provider which is fraudulently incorporated or organized in violation of New York Business Corporation Law §§ 1507, 1508, and New York Education Law § 6507(4)(c) is not entitled to reimbursement from no-fault insurers for medical services rendered by licensed medical practitioners.  New York state licensing requirements prohibit nonphysicians from owning or controlling medical service corporations. Only an appropriately licensed professional licensed may be the owner of a profession corporation [Business Corporation Law §1507], a professional limited liability company [Limited Liability Company Law §1207]or a professional limited liability partnership [Partnership Law §121-1500(q)], and only licensed professionals can obtain payment of no-fault benefits. 11 NYCRR § 65-3.16(a)(12).

Plaintiff submitted bills to State Farm for lumber and cervical MRIs and 3D renderings ordered by the assignor's treating chiropractor.  State Farm sought to determine whether the plaintiff, Dynamic Medical Imaging, P.C., was properly incorporated and operating, so it requested that the PC's purported owner, Steven Brownstein, M.D., appear for an examination under oath (EUO) and produce the following documents and records:

(i) documents evidencing ownership of the P.C., at the time of the treatment for which you seek payment, by one or more licensed professionals, including but not limited to a copy of the certificate of incorporation for the P.C., receipts for filing, stock certificates, and the stock ledger for the P.C.;

(ii) documents relating to the income and expenses of the P.C., including but not limited to tax returns and general ledgers of the P.C. for the past twelve months;

(iii) a list of the individuals who provided and/or supervised the health care services for which you seek payment, identification of the type of professional license each individual holds, and documents (i.e, W-2, 1099, etc.) identifying the relationship between the individual and the P.C. (e.g. whether the individual is an employee or independent contractor and how that individual is compensated);

(iv) a list of days of the week and hours that any owner of the P.C. provides or supervises services for the P.C. during the period for which payment is sought for services rendered;

(v) all documents, including all schedules, attachments or addenda, relating to the relationship between the P.C., and/or any entity of individual that leases equipment or space to or from the P.C., or provides management, consulting, administrative or billing services to the P.C. and any payments made to any person or entity that rendered such services to the P.C.; and

(vi) complete, sign and return the enclosed NF-3 form.

Dr. Brownstein twice did not appear for the EUO, scheduled for October 30, 2007 and November 19, 2007, and none of the requested documents was provided to State Farm.  By letter dated December 12, 2007, State Farm denied payment of the plaintiff's bills, based on Dr. Brownstein's failure to appear for an EUO and the provider's failure to comply with 11 NYCRR 65-3.16(a)(12).  Plaintiff commenced this action on January 24, 2008 to recover payment of its bills, and State Farm moved for summary judgment.

In DENYING State Farm's motion, Justice Fred Hirsh concluded that by requesting Mallela materials, State Farm's EUO request was "palpably improper" and that a no-fault insurer should not be allowed to obtain what in essence Justice Hirsh believes constituted pre-action discovery in conjunction with a duly requested EUO:

No-fault is a statutory/regulatory system. See, Medical Society of the State v. Serio, 100 NY2d 854 (2003). No fault is in derogation of the common law. East Acupuncture, P.C. v. Allstate Ins. Co., 61 AD3d 202 (2nd Dept. 2009).  The rights of an insurer are limited to those expressly provided for by the statute and regulations. Presbyterian Hosp. in City of NY v. Maryland Cas. Co., 90 NY2d 274, rearg. denied 90 NY2d 937 (1997)The regulation provide for an examination under oath. The term "examination under oath" is not defined by the no-fault regulations. Word used in regulations that are not specifically defined in the regulations are to be given their ordinary meaning. Oefelein v. Town of Thomson Planning Board, 9 AD3d 556 (3rd Dept. 2004); Parker v. Kelly, 140 AD2d 993 (4th Dept. 1988); McCarter v. Beckwith, 247 App.Div 289 (2nd Dept. 1936: and McKinney's Statutes §76. Examination is defined as the questioning of a witness by an attorney. See, Law.Com Law Dictionary. Examination can also be defined as a formal interrogation. Webster's Unabridged Dictionary 2nd Ed. (1998) p.673. Therefore, the term "examination under oath" as used in the no-fault regulations means the insurer can request the injured party or the assignee of the injured party appear and give oral testimony after having been sworn or under affirmation.

The regulations do not provide an insurer with the right to obtain written documentation other than such documentation as may be demanded as verification. In addition to appearing for an examination under oath, the assignee can be compelled to execute a written proof of claim under oath and provide other pertinent information as may assist the insurer in determining the amount due and payable. 11 NYCRR 65-1.1. The regulation do not give the insurer to right to ask an assignee to produce documents relating to the corporate structure or finances of a medical provider. 11 NYCRR 65.3.5(a). Upon receipt of the completed verification form, the insurer can request additional verification. 11 NYCRR 65-3.5(b). The regulations only permit the insurer to obtain written information to verify the claim. 11 NYCRR 65-3.5(c). See generally, V.M.V. Management Co, Inc. v. Peerless Ins., 15 AD3d 647 (2nd Dept,. 2005). Nothing in the No-Fault regulations permits an insurer to request an assignee to produce corporate organizational and financial documents a week in advance of an EUO.

An examination under oath permits the insurer to question the injured party or the its assignee regarding the claim. While an examination under oath has been treated by the courts as condition precedent to coverage, the no fault regulations treat the examination under oath as a form of verification. Thus, where a carrier properly demands an examination under oath, "...the verification is deemed to have been received by the insurer on the day the examination was performed." 11 NYCRR 65-3.8(a)(1). The insurer has 30 days from the day the EUO is conducted to is conducted to pay or deny the claim. Id. 

The purpose for demanding verification is to extend or toll the carriers time to pay or deny the claim so the carrier can obtain information regarding the claim. Hospital for Joint Disease v. New York Central Mutual Fire Ins. Co., 44 AD3d 903 (2nd Dept. 2007); and 11 NYCRR 65-3.5(c); and 11 NYCRR 65-3.8(a)(1). The extension of time in which to pay or deny the claim is extremely important in circumstances in which the insurer is seeking information regarding a defense the insurer would be precluded from raising if the defense is not stated in a timely served denial. Fair Price Medical Supply Corp. v. Travelers Indemnity Co., 10 NY3d 556 (2008); and Lincoln General Ins. Co. v. Alev Medical Supply Inc., 25 Misc 3d 1019 (Dist. Ct. Nassau Co. 2009).

However, this rationale does not apply to a Malella [sic] defense since a Malella [sic] defense is non-precludable. State Farm Mutual Ins. Co. v. Malella [sic], 4 NY3d 313 (2005).

While Malella [sic] has been called a fraudulent incorporation defense, the rationale underlying Malella [sic] is that only an appropriately licensed professional licensed may be the owner of a profession corporation [Business Corporation Law §1507], a professional limited liability company [Limited Liability Company Law §1207]or a professional limited liability partnership [Partnership Law §121-1500(q)] and only licensed professionals can obtain payment of no-fault benefits. 11 NYCRR 65-3.16(a)(12). The Malella [sic] defense permits an insurer to look behind a facially proper business structure to determine if persons not duly licensed to practice the profession are the actual owners of the medical provider. Andrew Carothers, M.D., P.C. v. Insurance Companies Represented by Bruno, Gerbino & Soriano, LLP, 26 Misc 3d 448 (Civil Ct. Richmond Co. 2009). If the provider is not owned by a licensed professional or if the provider is controlled by a non-professional, then the provider may not obtain payment of no-fault benefits. State Farm Mutual Ins. Co. v. Malella [sic], supra.

If a carrier believes the provider/assignee is subject to a Malella  [sic] defense, the proper way to assert it as an affirmative defense it in its answer. New York First Acupuncture P.C. v. State Farm Mut. Auto. Ins. Co., 25 Misc 3d 134(A) (App Term2nd, 11th & 13th Jud. Dists. 2009). 

The document demand contained in State Farm's EUO letters to Dynamic and Dr. Brownstein are essentially a demand for pre-action discovery regarding a Malella  [sic] defense. CPLR 3102(c) permits pre-action discovery only by court order and only to aid in bringing an action. Some of the documentation requested in the EUO letters State Farm might not be able to obtain even if it had been requested in a duly served notice for discovery and inspection.^[FN3]

The oft stated purpose of the No-fault Law is to insure prompt payment for medical services rendered to persons injured in motor vehicle accidents. Fair Price Medical Supply Corp. v. Travelers Indemnity Co., supra; and Hospital for Joint Diseases v. Travelers Property Casualty Ins. Co., 9 NY3d 312 (2007); and Presbyterian Hosp. in City of NY v. Maryland Cas. Co., supra. Permitting an insurer to obtain what would be tantamount to full discovery regarding a Malella  [sic] defense as part of an EUO would defeat that purpose and is beyond the scope of the No-fault Law and regulations relating to EUO.

Permitting an insurer to demand what has been demanded by State Farm in this action for an EUO is fraught with the potential for abuse. See, Unitrim Advantage Ins. Co. v. Carothers, 17 Misc 3d 1121(A) (Sup. Ct. NY Co. 2007); and Gegerson v. State Farm Ins. Co., 27 Misc 3d 1207(A) (District Ct. Nassau Co. 2010). An insurer should not be able to defeat no fault claims by making an onerous and improper document demand relating to an EUO.

If an insurer has a reasonable basis for believing a medical provider cannot obtain payment of no-fault benefits because the provider is "fraudulently incorporated", then it should assert the defense in its answer and litigate the issue on the merits in the action brought by the provider for no-fault benefits. The insurer should move to consolidate all of the actions brought by the provider and have the issue of whether the provider is subject to a Malella  [sic] defense determined in one action. See, Andrew Carothers, M.D., P.C. v. Insurance Companies Represented by Bruno, Gerbino & Soriano, LLP, supra. Alternatively, an insurer can commence a declaratory judgment action seeking a judgment declaring the provider ineligible to receive no-fault payments. See, State Farm Mutual Ins. Co. v. Malella  [sic] , supra.

While State Farm may have reason to believe Dynamic is not eligible to receive no-fault benefits for Malella  [sic] reasons, State Farm cannot use a palpably improper EUO demand not subject to court review as a basis for obtaining summary judgment. See, Westchester Medical Center v. Progressive Casualty Ins. Co., 51 AD3d 1012 (2nd Dept. 2008). 

Since the EUO demand was improper, defendant's motion for summary judgment is denied.

Expect an appeal.  And a reversal, in my opinion.   In my respectful view, Justice Hirsh's misunderstanding of the Mallela decision and its defense is not confined to its spelling.  Denying no-fault insurers an opportunity to obtain verification of a provider's proper licensing and ownership in conjunction with the verification of their bills would force insurers to do something the New York courts have repeatedly said litigants should not do, i.e., allege something in a complaint or answer without a good faith, factual basis for doing so. And as to Footnote # 2, an NF-3 is the prescribed Verification of Treatment by Attending Physician or Other Provider of Service form, not the Verification of Hospital Treatment form, which is an NF-4.  Here's a bookmark of the current forms.

To Infinity and Beyond, or Actually Before -- Kings Civil Rules that No-Fault Insurer Not Required to Wait 30 Days After Initial IME Letter to Send Second IME Letter

NO-FAULT – TIMING OF FOLLOW-UP VERIFICATION – INSURANCE LAW § 5106(A) – 11 NYCRR § 65-3.6(B)
Perfect Point Acupuncture, P.C. a/a/o Jocelyn Louis v. Auto One Ins. Co.
(NYC Civil Ct., Kings Co., decided 1/6/2010)

Just under two months ago, the Appellate Division, Second Department, held in Infinity Health Products, Ltd. v Eveready Ins. Co., 67 AD3d 862, that a health care provider which ignores the no-fault insurer's verification requests altogether is estopped from claiming that the insurer's early or premature follow-up verification request -- sent on Day 27 in that case -- precludes any defenses from being asserted, including the defense that the provider's action is premature because it did not respond to the insurer's verification requests.

In this case, the plaintiff provider argued that by not waiting 30 days from the mailing of its initial IME request letter to send the second IME letter -- that second letter having been mailed only 17 days after the first -- Auto One violated  11 NYCRR § 65-3.6(b), rendering its subsequent IME no-show-based denial defective.  In rejecting that argument, Kings County New York City Civil Court Judge Peter Sweeney cited Infinity Health Products and held:

The [Infinity Health Products] Court held that "inasmuch as the plaintiff did not respond to either of the verification requests, the 30-day period within which the defendant was required to pay or deny the claim did not commence to run . . . and that . . . plaintiff's action [was therefore] premature" (Id.). The Court further held that "plaintiff was not entitled to summary judgment on the complaint, and the defendant's cross motion for summary judgment dismissing the complaint should have been granted . . .without prejudice to commencement of a new action" (Id. [citations omitted]).

In this Court's view, the holding in Infinity Health Products, Ltd. requires dismissal of the within action, without prejudice to its recommencement. Here, as in Infinity Health Products, Ltd., it would be inequitable to award summary judgment to the plaintiff, whose assignor ignored two verification requests, merely because the defendant did not strictly adhere to the time frames set forth in 11 NYCRR 65-3.6[b] for mailing out second requests for additional verification of a claim . It would be incongruous to conclude that 11 NYCRR 65-3.6[b] mandates a result that would penalize the defendant for its diligent attempts to obtain additional verification of the claims and reward plaintiff whose assignor ignored the requests.

This court recognizes that this case is not on all fours with Infinity Health Products, Ltd.. In Infinity Health Products, Ltd., the defendant sent its second written verification request a mere 3 days before the expiration of a full 30 days after the first verification request had been sent. Here, the second written verification request was sent out 13 days before the expiration of the 30 day period referred to in 11 NYCRR 65-3.6[b]. Under the facts and circumstances of this case, however, this distinction does not warrant a contrary result.

When plaintiff's assignor failed to appear for the IME on September 6, 2009, the re-scheduling letter was mailed to her on the following day. Unlike in Infinity Health Products, Ltd., once plaintiff's assignor failed to appear for the IME, there is no legitimate reason why defendant should have waited a full 30 days from the mailing of the first letter to mail out the re-scheduling letter. Indeed, had defendant waited a full 30 days, it would have had acted in contravention of one of the primary policies underlying the "no-fault law"; which is "to promote the expeditious handling of verification requests and prompt claim resolution" (Infinity Health Products, Ltd., supra, 67 AD3d 862, 2009 NY Slip Op 08585 at 2). Further, the Court notes that when plaintiff's assignor failed to appear for the re-scheduled IME, 30 days had elapsed from the time that the first scheduling letter had been sent to her.

The absurdity of an argument can sometimes cause a court to favor the opposing position.  This "early" or "premature" follow-up verification argument has always seemed counterintuitive and contrary to the spirit of Regulation 68 to me.  Apparently it does to Judge Sweeney, also.

Provider that Ignored Verification Requests Estopped from Arguing that Insurer's Premature Follow-Up Verification Request Precludes Any Defenses

NO-FAULT – TIMING OF FOLLOW-UP VERIFICATION – INSURANCE LAW § 5106(A) – 11 NYCRR § 65-3.6(B)
Infinity Health Prods., Ltd. v. Eveready Ins. Co.
(2nd Dept., decided 11/17/2009)

This is for you half-a-loaf folks.

The first sentence of 11 NYCRR § 65-3.6(b) provides:

At a minimum, if any requested verifications has not been supplied to the insurer 30 calendar days after the original request, the insurer shall, within 10 calendar days, follow up with the party from whom the verification was requested, either by telephone call, properly documented in the file, or by mail. (Bold added.)

If a no-fault insurer does not wait the entire 30-day period to issue a follow-up verification request pursuant to § 65-3.6(b), does it "lose" the tolling effect of such verification requests and is it precluded from relying on defenses related to those requests?  Prior to the Second Department's decision in this case, this was the box score on this question:

Psych. & Massage Therapy Assoc., PLLC a/a/o Kendra Harrell v. Progressive Cas. Ins. Co.	5 Misc3d 723 (NYC Civil, Queens Co., decided 11/4/2004)	No preclusion.
Seaside Medical P.C. a/a/o Sandra Bond v. State Farm Mut. Auto Ins. Co.	12 Misc3d 1127 (NYC Civil, Richmond Co., 2006)	Yes, preclusion.
Park Slope Med. & Surgical Supply, Inc. a/a/o Alicia Marsh v. Country-Wide Ins. Co.	19 Misc 3d 1138(A)(NYC Civil, Richmond Co., decided 5/27/2008)	No preclusion.
Infinity Health Prods., Ltd. a/a/o Jermaine Thomson v. Eveready Ins. Co.	21 Misc3d 1 (App. Term, 2nd Dept., decided 7/10/2008)	Yes, preclusion.
Unitrin Advantage Ins. Co. v. Painless Medical, P.C.	2008 NY Slip Op 32365(U) (Sup.Ct., New York Co., decided 8/22/2008)	No preclusion.
Alur Med. Supply, Inc. a/a/o Teresa Radriguez v. Progressive Ins. Co.	23 Misc 3d 130(A) (App. Term, 2nd Dept., decided 4/7//2009)	Yes, preclusion.

In REVERSING the Appellate Term's finding of defense preclusion in this case, the Appellate Division, Second Department, has narrowly ruled that a provider which ignores the no-fault insurer's verification requests altogether is estopped from claiming that the insurer's early or premature follow-up verification request -- sent on Day 27 in this case -- precludes any defenses from being asserted, including the defense that the provider's action is premature because it did not respond to the insurer's verification requests.

It is important to note, as Jason Tenenbaum does over at No Fault Defender, that the Second Department has not ruled that all early or premature follow-up verification requests are okay and inconsequential to the insurer's claim defenses.  That broader question may be answered when the Second Department decides Progressive's appeal in Alur Medical, which does not appear to involve a situation in which the provider completely ignore the insurer's allegedly premature follow-up verification request (sent on Day 30 in that case).

Instead, the Second Department reversed and granted Eveready's cross motion for summary judgment, "on the facts and in the exercise of discretion", dismissing plaintiff's action as premature, "without prejudice to commencement of a new action."  The Second Department held:

There is no dispute here that the defendant timely requested initial verification by sending out its verification request within seven days (on March 21, 2001) after receipt of the plaintiff's claim (on March 14, 2001). There also is no dispute that the plaintiff did not respond to the defendant's timely initial verification request. An insurer does not have to pay or deny a claim until it has received verification of all of the relevant information requested (see 11 NYCRR former 65.15[g][1][i], [2][iii]). The issue in this case is whether an insurer loses the toll of the 30-day rule to pay or deny the claim, which is afforded by an initial timely request for verification, simply because its follow-up verification request is sent 3 days before the expiration of a full 30 days after a plaintiff fails to respond to the initial request. The Insurance regulations stated, in pertinent part, that "if any requested verification has not been supplied to the insurer 30 calendar days after the original request, the insurer shall, within 10 calendar days, follow up with the party from whom the verification was originally requested" (11 NYCRR former 65.15[e][2]).

Although the defendant in this case did not strictly comply with the time limitation set forth in the rule regarding the submission of a second verification request, under the circumstances of this case, the plaintiff is estopped from claiming that the defendant is precluded from asserting any defense to the claim. It would be inequitable to award summary judgment to the plaintiff, which ignored two verification requests, merely because the defendant, slightly prematurely, sent its second verification request a mere 3 days before the expiration of a full 30 days after the first verification request had been sent (see New York & Presbyt. Hosp. v American Tr. Ins. Co., 287 AD2d 699; see generally Chemical Bank v City of Jamestown, 122 AD2d 530; Guberman v William Penn Life Ins. Co. of N.Y., 146 AD2d 8). Indeed, in light of the particular factual circumstances herein, it would be incongruous to conclude that the Insurance regulation regarding follow-up verification, or any other statute or rule, warrants a result which would, in effect, penalize an insurer who diligently attempts to obtain the information necessary to make a determination of a claim, and concomitantly, rewards a plaintiff who makes no attempt to even comply with the insurer's requests. Such a result is not contemplated by the "no-fault law" or its regulations, which should be interpreted to promote the expeditious handling of verification requests and prompt claim resolution.

Furthermore, inasmuch as the plaintiff did not respond to either of the verification requests, the 30-day period within which the defendant was required to pay or deny the claim did not commence to run (see 11 NYCRR former 65.15[g][1][i], [2][iii]; Westchester County Med. Ctr. v New York Cent. Mut. Fire Ins. Co., 262 AD2d 553). Thus, the plaintiff's action is premature (see Hospital for Joint Diseases v New York Cent. Mut. Fire Ins. Co., 44 AD3d 903; Hospital for Joint Diseases v ELRAC, Inc., 11 AD3d 432).

The court could have disposed of this appeal simply by ruling that an early or premature follow-up verification request is of no legal consequence.  It did not do so, however, perhaps suggesting to some that had plaintiff responded to Eveready's verification requests, the result in this case would have been  an affirmance.

I'm not going to speculate on that possibility, but instead await the outcome of Progressive's Alur Medical appeal.   I will say, however, that I believe the Second Department is already incorrect in viewing the 30-day period of 65-3.6(b) as a "time limitation".  If that period truly were a time limitation, such as a statute of limitations period, the early issuance of a follow-up verification request could not be deemed to violate it, since time limitations necessarily connote an outside limit for doing something, rather than proscribe certain conduct during the limitations period. The 30-day period of 65-3.6(b) should properly be viewed as a minimum prescription, rather than an absolute proscription.  

New York statutes contain numerous examples of actual proscriptive waiting periods.  For instance, Insurance Law § 3420(a)(2) effectively requires a judgment creditor to wait at least 30 days after serving an insured and its insurer with notice of entry of a money judgment before suing that insurer to enforce the judgment.  Similarly, General Municipal Law § 50-i requires a party claiming personal injury, wrongful death or property damage due to the negligence of a municipality to wait at least 30 days after serving a notice of claim before commencing suit against the municipality. Legislators and regulators know how to draft proscriptive waiting periods.  The 30-day period of 65-3.6(b) is not such a period. 

When the Second Department revisits the 30-day period of 65-3.6(b), I hope it doesn't overlook the first three words of that section.  "At a minimum" must mean something.  To me, those words must mean that "at a minimum", no-fault insurers must send follow-up verification requests within 30+10 days after their initial additional verification requests.  The "minimum" is the insurer's minimum handling requirement.  Substitute "at the very least" into the first sentence of 65-3.6(b) and the incongruity and inequity of penalizing a no-fault insurer for sending a follow-up verification request sooner than 31 days after the initial additional verification request becomes obvious.  At least to me.  At a minimum.

Second Department Appellate Division Grants Progressive Insurance Company Leave to Appeal in Alur Medical Supply

Hat tip to Dave Gottlieb, hat tipping Damin Toell. 

On November 5, 2009, the Appellate Division, Second Department, granted the unopposed motion of Progressive Insurance Company for leave to appeal the Appellate Term, Second Department's April 7, 2009 decision in Alur Med. Supply, Inc. a/a/o Teresa Radriguez v. Progressive Ins. Co., 23 Misc 3d 130(A) (App. Term, 2d Dept., 2d, 11th & 13th Dists., decided 4/7/2009).

In Alur Medical, the Appellate Term held that a no-fault insurer can be penalized for doing something too quickly.  Yes, that's right.  Or wrong.  The court held for the second time that a follow-up verification request sent before the expiration of that initial 30-day period of 11 NYCRR § 65-3.6(b) is premature and a nullity, rendering the no-fault insurer's eventual denial untimely and precluding it from raising most defenses, including lack of medical necessity.  Progressive had sent its follow-up verification request on Day 30, instead of on Days 31 through 41. 

Assuming a standard briefing schedule, we should see a decision from the Second Department in mid-2010.

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.

Follow-Up Verification Requests Sent on Day 30 Held to be Premature and Ineffective

NO-FAULT – TIMING OF FOLLOW-UP VERIFICATION REQUESTS – 11 NYCRR § 65-3.6(B)
Alur Med. Supply, Inc. a/a/o Teresa Radriguez v. Progressive Ins. Co.
(App. Term, 2nd Dept., decided 4/7/2009)

Section 65-3.6(b) of Regulation 68, provides:

     (b) Verification requests. At a minimum, if any requested verifications has not been supplied to the insurer 30 calendar days after the original request, the insurer shall, within 10 calendar days, follow up with the party from whom the verification was requested, either by telephone call, properly documented in the file, or by mail. At the same time the insurer shall inform the applicant and such person’s attorney of the reason(s) why the claim is delayed by identifying in writing the missing verification and the party from whom it was requested.

If the no-fault insurer sends the follow-up verification request on Day 30, instead of Days 31 through 41, after the original request, does it "lose" the tolling effect of such verification requests and is it precluded from relying on defenses related to those requests?  The Appellate Term, Second Department, has again said yes, Progressive's follow-up request sent before the expiration of that initial 30-day period was premature and a nullity, rendering Progressive's eventual denial untimely and precluding it from raising most defenses, including lack of medical necessity:

Since defendant's papers established that it mailed its follow-up requests for verification on the 30th calendar day after it mailed its verification requests, the follow-up requests were premature and without effect (see General Construction Law § 20; Insurance Department Regulations [11 NYCRR] § 65-3.6 [b]; Infinity Health Prods., Ltd. v Eveready Ins. Co., 21 Misc 3d 1 [App Term, 2d & 11th Jud Dists 2008]). Consequently, defendant failed to timely deny plaintiff's claim and is precluded from raising most defenses, including its proffered defense of lack of medical necessity (see Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d 556 [2008]; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282 [1997]). Accordingly, the Civil Court properly granted plaintiff's motion for summary judgment, and the judgment is affirmed.  

This is the second time the Appellate Term, Second Department, has construed 65-3.6(b) in this manner to, in effect, penalize a no-fault insurer for sending a follow-up request too soon.  Its Infinity Health Prods. 2-1 decision from July 2008 was the first time (follow-up request mailed on Day 27).   Other than in this case, that decision has not since been cited in any reported New York case on the 65-3.6(b) follow-up verification issue.

Richmond Civil Holds that Obligation to Notify Applicant of Reason for Claim Delay Does Not Apply to Pre-Claim EUOs

NO-FAULT – VERIFICATION – "PRE-CLAIM" EUO REQUEST – 11 NYCRR §§ 65-3.5 & 3.6
Prime Psychological Servs., P.C. a/a/o Andrea Ortiz v. Nationwide Prop. & Cas. Ins. Co.
(NYC Civil, Richmond Co., decided 3/5/2009)

Posted yesterday to the New York Official Reports is this decision from Richmond County New York City Civil Court Judge Katherine Levine, addressing the "novel issue of whether the notice requirements for verification requests, as contained in 11 NYCRR §§ 65-3.5 and 3.6, apply to examinations under oath... that are noticed prior to the insurance company's receipt of claim forms[.]"  Judge Levine says no, 11 NYCRR § 65-3.6(b)'s requirement that a no-fault insurer notify an applicant and the applicant's attorney why the claim is delayed by identifying in writing the missing verification and the party from whom it was requested does not apply to pre-claim EUOs. 

I'll fill in the rest later.

Question of Fact Found on Hospital's Compliance with Verification Requests

NO-FAULT – VERIFICATION
St. Barnabas Hosp. v. American Tr. Ins. Co.
(2nd Dept., decided 12/2/2008)

In this no-fault medical provider case, the Second Department MODIFIED Nassau Supreme's order granting summary judgment to plaintiff hospital on its first cause of action. The Second Department held that although plaintiff "made a prima facie showing of entitlement to judgment as a matter of law on the first cause of action to recover no-fault benefits by demonstrating that the prescribed statutory billing forms were mailed to and received by the defendant and that payment was overdue * * * the defendant raised a triable issue of fact as to whether the Hospital timely complied with the demand for verification[.]"

The Second Department added that American Transit "was not obligated to pay or deny the claim until all demanded verification was provided by the Hospital[.]" No mention or explanation of why the court did not dismiss the first cause of action as premature rather than denying summary judgment to both parties. Perhaps it had something to do with the sufficiency of American Transit's cross motion papers, alike Allstate's papers in Mount Sinai Hosp. v Allstate Ins. Co., 25 AD3d 673 (2d Dept 2006), to which the Second Department cited in this case.

Appellate Term Holds that If Uncertain, Provider Must Ask What Follow-Up Verification Is Still Missing

NO-FAULT – NF-5 HOSPITAL FACILITY FORM – VERIFICATION – PRESUMPTION OF RECEIPT
Mary Immaculate Hosp. a/a/o Jonnise Atwater & Cossandra Cogdell v. New York Cent. Mut. Fire Ins. Co.
(App. Term, 2nd Dept., decided 10/9/2008)

Somethings old, something new in this decision.

In affirming that part of the Nassau District Court's granting plaintiff's cross motion for summary judgment on its first cause of action (assignee Atwater's bills), the Appellate Term held that a no-fault insurer must accept a completed hospital facility form (NF-5) submitted by a provider of health services with respect to the claim of that provider in lieu of a prescribed application for no-fault benefits from the eligible injured person (NF-2) See, 11 NYCRR § 65-3.5 [g]. NYCM acknowledged receipt of NF-5s for both assignees and, therefore, Nassau District properly denied its motion for summary judgment on this ground.

With respect to Atwater's hospital records, the Appellate Term held:

[W]ith respect to Ms. Atwater's hospital records, plaintiff's submissions, consisting of a certified mail receipt and a signed return receipt postcard, each bearing the same number and a notation to the relevant medical records, created a presumption of their receipt (see e.g. New York & Presbyt. Hosp. v Countrywide Ins. Co., 44 AD3d 729, 730-731 [2007]). Since defendant failed to rebut said presumption (id.), it did not demonstrate that plaintiff failed to respond to this request for verification. Therefore, it cannot be said that defendant was entitled to summary judgment, with respect to plaintiff's first cause of action, on the ground that plaintiff failed to provide it with Ms. Atwater's hospital records. Nor did defendant raise a triable issue of fact sufficient to defeat plaintiff's cross motion. Accordingly, the court below properly granted plaintiff's cross motion for summary judgment with respect to plaintiff's first cause of action.

It was with respect to NYCM's follow-up verification request for assignee Cogdell's assignment of benefit form, however, that the Appellate Term paved new ground on the roadway of no-fault decisional law:

However, with respect to the verification request seeking a completed assignment of benefits form executed by Ms. Cogdell, the record shows that defendant timely mailed the verification request and follow-up request seeking said assignment of benefits form, and that plaintiff did not respond to said requests. Contrary to plaintiff's assertions, the affidavit of defendant's no-fault litigation examiner was sufficient to demonstrate that said requests were properly mailed (see Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679 [2001]), and the follow-up request was in proper form (see Insurance Department Regulations [11 NYCRR] § 65-3.6 [b]; Doshi Diagnostic Imaging Servs. v State Farm Ins. Co., 16 Misc 3d 42 [App Term, 9th & 10th Jud Dists 2007]). While plaintiff argues that the follow-up request was defective in that it failed to identify "in writing the missing verification" (see Insurance Department Regulations (11 NYCRR) § 65-3.6 [b]), we find that this contention lacks merit because the initial and the follow-up request were both seeking verification from plaintiff and, if plaintiff was uncertain as to what information defendant's follow-up request was seeking, plaintiff should have resolved the issue by communicating with defendant rather than ignoring the follow-up request (see Westchester County Med. Ctr. v New York Cent. Mut. Fire. Ins. Co., 262 AD2d 553 [1999]; Metroscan Med. Diagnostics, P.C. v Progressive Cas. Ins. Co., 15 Misc 3d 126[A], 2007 NY Slip Op 50500[U] [App Term, 9th & 10th Jud Dists 2007]).

Regular readers may recall several recent decisions in which New York courts have put the onus on no-fault insurers to do something rather than nothing in the face of what they believe are incomplete verification requests. See, e.g., Media Neurology, P.C. a/a/o Harris v. Countrywide Ins. Co. (NYC Civil, Kings Co., decided 9/15/08); Lenox Hill Radiology, PC, a/a/o Busanet v. Allstate Ins. Co., (NYC Civil, New York Co., decided 8/4/2008).

The Appellate Term, Second Department, has now served notice on providers that they, too, may not simply ignore a follow-up verification request but must ask if they are uncertain of what is being sought.

No-Fault Insurer Found Obligated to Inform Provider That Its Response To Additional Verification Requests Was Insufficient and/or Incomplete

NO-FAULT – ADDITIONAL VERIFICATION – OBLIGATION TO INFORM ASSIGNEE THAT RESPONSE DEEMED INSUFFICIENT OR INCOMPLETE
Media Neurology, P.C. a/a/o Justin Harris v. Countrywide Ins. Co.
(NYC Civil, Kings Co., decided 9/15/2008)

When a no-fault insurer receives what it believes to be insufficient and/or incomplete responses to its request for additional verification, what should it do? According to Kings Civil Court Judge Sylvia Ash, it should something, not nothing.

Plaintiff sought recovery of no-fault benefits for supplies furnished to its assignor. Countrywide contended that plaintiff's claim was premature because plaintiff had failed to comply with an additional verification request. Plaintiff argued that it responded to Countrywide's verification request, but Countrywide claimed that the response failed to fully comply with the request.

In awarding judgment to plaintiff, Judge Ash held:

There is no dispute that Plaintiff responded to the additional verification request. There is also no dispute that upon receipt, Defendant did not request any further response from Plaintiff. The issue before the Court is whether Defendant was obligated to notify Plaintiff that its response to their additional verification request was insufficient and/or incomplete. In All Health Medical Care, P.C. v. Government Employees Insurance, 2 Misc 3d 907, the Court reasoned that while "... the regulations are silent as to what, if anything, the insurance company must do if it receives insufficient verification, that it is clear that the insurance company must affirmatively act once it receives a response to its verification request." (see also Westchester County Medical Center v. NY Central Mutual Fire Ins Co., 262 AD2d 553).

In the case at Bar, once Plaintiff submitted its response to Defendant's additional verification request, it was then incumbent on Defendant to inform Plaintiff that said response was insufficient and/or incomplete. Any confusion or disagreement on the part of the Defendant as to what was being sought should have been addressed by further communication, not inaction (see Westchester County Medical Center v. NY Central Mutual Fire Ins Co., supra). Neither party may ignore communications from the other without risking its chance to prevail in the matter (see All Health Medical Care, P.C. v. Government Employees Insurance Co., supra).

The judicial trend, at least in the NYC civil courts, seems to be favoring action, not inaction. See, NYC Civil Court Finds That No-Fault Insurer Must Take "Final Action" Even If Verification Response Believed To Be Inadequate. No-fault insurers should be advised accordingly.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

NYC Civil Court Finds That No-Fault Insurer Must Take "Final Action" Even If Verification Response Believed To Be Inadequate

NO-FAULT – OUTSTANDING VERIFICATION REQUESTS – PREMATURE CAUSE OF ACTION
Lenox Hill Radiology, PC, a/a/o Gerald Busanet v. Allstate Ins. Co.
(NYC Civil, New York Co., decided 8/4/2008)

A certain blawg reader and occasional commenter, who is a named partner in a certain law firm that represents a certain number of medical providers, including the plaintiff in this case, brought this as-of-yet unpublished decision to my attention yesterday under the email subject reference "Equal Time Doctrine" and with the request that I compare its holding to Judge Arlene Bluth's May 21st decision in Lenox Hill Radiology & MIA P.C. a/a/o Nila Sokol v. Global Liberty Ins., which I blogged on May 28th in my "What Part of "No" Did You Not Understand? Provider's Action Dismissed as Premature Based on Billing Counsel's Refusal to Provide Verification" post.

I did so and, in the interest of bloggeristic (it's a word, a new word, but a word) fairness and integrity, offer this short decision for your comparison and consideration.

In the AAO Sokol v. Global Liberty case, BSBGFM&N unsuccessfully argued that its letter responses to Global Liberty's verification requests not only were adequate, but that Global Liberty failed to present a "good reason" why additional verification was necessary. Judge Bluth rejected those arguments, holding that "[b]ecause 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."

In this case, plaintiff submitted two claims for payment, presumably through BSBGFM&N. Allstate timely sent verification and follow-up verification requests for the two claims at issue. The parties stipulated that plaintiff responded to the "second round" of verification requests. According to the decision, plaintiff's letter responses to the two follow-up verification requests essentially stated that all the information sought by the verification request were submitted with "the initial claim". The decision does not make clear what the "second round" of verification requests was, or whether the "initial claim" refers to the first bill sent to Allstate.

When Allstate didn't pay, plaintiff sued, and the matter proceeded to trial on August 4, 2008. Allstate argued that its time to pay or deny was tolled by plaintiff's failure to adequately answer its verification request. Plaintiff argued that it did answer the verification request, and that Allstate was required to deny or pay on the claim after its receipt, but that it was not entitled to do nothing.

In accepting plaintiff's argument and finding for plaintiff, New York Civil Court Judge Peter Moulton held:

The sole issue to be decided by the court is whether defendant was compelled to deny or pay the claim, or whether defendant could deem plaintiff's letter responses insufficient. Defendant argues that its time to pay or deny is tolled by a failure to adequately answer a verification request. * * * * *

The court finds that defendant may not treat a response it deems inadequate as no response at all. The statutory scheme, which is "designed to promote prompt payment of legitimate claims" (Nyack Hospital v General Motors Acceptance Corp., 8 NY3d 294), is better served by defendant taking final action after receipt of a response to a verification request - even if finds that the request [sic] is inadequate. (See All Health Medical Care, P.C. v GEICO, 2 Misc3d 907.)

No, judge. With all due respect, the sole issue was whether Allstate was correct or incorrect in its position that plaintiff's verification responses were adequate or not.

It's arguable, at least to me, that this decision is four-square on point with and in diametric opposition to Judge Bluth's decision in the AAO Sokol v. Global Liberty case. In that case, it was clear from the decision that certain items requested were not provided at all, such as a letter of medical necessity. It's not so clear from this decision that the same occurred in this case. Judge Moulton's decision instead implies that the verification requests were duplicative on the two claims, and that plaintiff provided the requested materials or information in relation to the first but not second claim.

If that was the case, the court's decision is less befuddling, although Judge Bluth, in my opinion, got it right in realizing that it is the court's job in the first instance to decide whether a verification response was adequate or not, thus determining whether the claim was "due" and whether the insurer was therefore required to pay or deny the verified claim within 30 days.

There are several potential problems with Judge Moulton's decision. If a no-fault insurer believes verification is incomplete, Regulation 68 prohibits a denial. Period. There's no box on the NF-10 for denying a claim based on verification responses believed or "deemed" to be inadequate. The very act of denying a claim implies that verification is complete. If the rule of this case were to spread and/or be followed, and no-fault insurers were to issue "final action" precautionary denials even though they hadn't received what they asked for and ostensibly needed to verify a claim, the "premature action" defense will all but disappear, and it is conceivable that medical providers and their attorneys will argue, perhaps successfully to some judges, that the insurers' verification requests weren't reasonable or valid in the first place.

No-fault insurers probably realize that they run the risk of a court finding verification responses to be adequate rather than inadequate, as the insurer may have initially believed and contended. In such cases, the 30-day rule will apply to preclude all but coverage defenses, and interest and attorneys' fees will be awarded on overdue bills -- a stiff enough deterrent, it would seem, to making the wrong call on the adequacy or inadequacy of verification responses. Nonetheless, rather than imposing a "final action" requirement that Regulation 68 itself prohibits if indeed verification is incomplete, the courts should simply review and make that call themselves -- verification responses were adequate or not.

Requiring insurers, in effect, to deny claims when they believe verification is incomplete not only undermines the verification process, but runs contrary to both the letter and the spirit of Regulation 68. Perhaps Judge Moulton didn't realize that his decision, if followed, instead of "promot[ing] prompt payment of legitimate claims" may effectively force no-fault insurers either to deny claims believed to be as-of-yet unverified, or abandon their verification requests. How much is enough, after all? I'll give you this, but not this, this and that. Now take "final action" and make a claim decision.

Watch for more litigation on this issue.

Comments anyone?

People Who Live In Glass Houses Should Not Throw Stones

NO-FAULT – VERIFICATION – MEDICAL NECESSITY – WORKERS' COMPENSATION FEE SCHEDULE
Lenox Hill Radiology a/a/o Jose Almadovar v. New York Central Mut. Fire Ins. Co.
(Dist. Ct., Nassau Co., decided 7/25/2008)

Nassau County District Court Judge Andrew Engel has authored another instant classic on issues of no-fault claim verification and the workers' compensation fee schedule. Never shy of expressing his judicial sentiment on an issue or argument, Judge Engel ends his lengthy, citation-rich decision with:

Finally, that branch of the Plaintiff's motion which seeks the imposition of sanctions against the Defendant, pursuant to 22 N.Y.C.R.R. § 130-1, for alleged frivolous conduct, is denied. "People who live in glass houses should not throw stones."

Med providers' and insurers' houses, or lawyers' houses? Hold that question.

Plaintiff performed cervical and lumbar MRIs on January 4, 2002. Billed for $1,791.16 on April 5, 2002 (old Reg 68 rules). New York Central received the bill on April 11, 2002 and sent a verification request for records from the referring DC on April 24, 2002. Having received nothing within 30 days, New York Central sent a follow-up request on May 28, 2002. New York Central received the requested verification information on June 5, 2002, made partial payment of the bill in the amount of $1,571.24 on July 1, 2002, and denied the balance of $219.92, asserting that the fees charged for the MRIs in question were in excess of the Workers' Compensation fee schedule. Plaintiff commenced this action on July 15, 2002. New York Central moved and plaintiff crossmoved for summary judgment.

In denying New York Central's motion, Judge Engel agreed with plaintiff that New York Central had failed to submit proper proof in admissible form that plaintiff's bills were in excess of the appropriate Workers' Compensation Fee Schedule. The court found defense counsel's affirmation to be of no probative value, the statement of one of New York Central's litigation examiners regarding the correct fee schedule amounts to be "conclusory", and New York Central's reliance on an unreported federal court decision to be "misplaced." Judge Engel also rebuffed plaintiff's counsel's castigation of New York Central's verification requests, holding:

The Plaintiff accuses the Defendant of "us[ing] the verification protocols to delay payment of the claim, and than (sic) once it determined the services were medically necessary, sought out a different basis to refuse payment. The verification requests do not extend the time in which the defendant has to deny the claim unless the defendant bases its denial on the requested verification." (Hayes Affirmation 4/2/08) The Plaintiff further posits that "a failure by the insurer to issue a denial when it is in possession of the necessary information serves as a waiver of any right to deny a claim based on such information." (Hayes Affirmation 4/2/08) The Plaintiff does not cite any case law or regulation that supports either of these propositions. The controlling regulations and case law are, in fact, contrary to the Plaintiff's argument.

Similarly, the court denied plaintiff's cross motion for summary judgment or partial summary judgment, finding that plaintiff had failed to lay a proper business record foundation for the admission of its claim form:

The Plaintiff attempts to lay this foundation through the affidavit of Nicole Simeona, who advises the court that she is "employed by plaintiff's counsel[,] (Simeona Affidavit 4/3/08) not by the Plaintiff. Ms. Simeona further avers that she is intimately familiar with the administration of all aspects of the collection department." (Simeona Affidavit 4/3/08) She does not indicate whose collection department, the Plaintiff's or her employer's. Moreover, nowhere does Ms. Simeona allege that she has any knowledge of the Plaintiff's record keeping practices and the creation of the Plaintiff's claim form.

Which brings us back to where we started. Plaintiff's motion apparently included a request for sanctions against New York Central for alleged "frivolous conduct", which Judge Engel summarily denied with the "people who live in glass houses..." reference. Lawyers are people, too.