New Jersey Automobile Medical Fee Schedule Held to Apply to New York No-Fault Claim

NO-FAULT – NEW JERSEY FEE SCHEDULE – PREVAILING FEE IN THE GEOGRAPHIC LOCATION OF THE PROVIDER – EXCESSIVE FEE DEFENSE PRECLUSION
Surgicare Surgical Assoc. v National Interstate Ins. Co.
(App. Term, 1st Dept., decided 10/8/2015)

It's not that the care for persons injured in New York motor vehicle accidents is better in New Jersey.  It's that some providers think the New York Workers' Compensation Fee Schedule does not apply to health care services rendered in New Jersey and they get to charge New York no-fault insurers whatever they want for such services.  An appellate-level court in New York has finally addressed this issue, holding:

where a reimbursable health care service is performed outside the State of New York in a jurisdiction that has enacted a medical fee schedule prescribing the permissible charge for the service rendered, an insurer may properly rely on such fee schedule to establish the "prevailing fee" within the meaning of 11 NYCRR 68.6, and demonstrate compliance therewith by payment in accordance with that fee schedule.

Plaintiff's patient was injured in in a New York motor vehicle accident but treated at plaintiff's New Jersey location. Plaintiff billed defendant National Interstate $10,800 for arthroscopic knee surgery, but National Interstate paid only $5,996.67 in accordance with the New Jersey Automobile Medical  Fee Schedule.  Plaintiff brought this action for the $4,803.33 difference between the billed and paid amounts.  Bronx County Civil Court GRANTED National Interstate's CPLR 3211 motion to dismiss the complaint, and plaintiff appealed.

In AFFIRMING, the order appealed from, the Appellate Term, First Department, first noted that New York Insurance Regulation (11 NYCRR) § 68.6 provides that "[i]f a professional health service reimbursable under Insurance Law § 5102(a)(1) is performed outside New York State, the permissible charge for such service shall be the prevailing fee in the geographic location of the provider."  The appellate court then cited and relied on a 2003 opinion letter of the then-New York State Insurance Department (who remembers those?) in holding:

Significantly, the Superintendent of Insurance issued an opinion letter stating that the reimbursement amount under section 68.6 "is determined by the permissible cost" in the out-of-state location (Guatemala) (see Ops Gen Counsel NY Ins Dept No 03-04-03 [Apr 2003]). The Superintendent's interpretation is entitled to deference, since it is neither irrational nor unreasonable, nor counter to the clear wording of a statutory provision (see LMK Psychological Servs., P.C. v State Farm Mut. Auto. Ins. Co., 12 NY3d 217, 223 [2009]). Indeed, the Superintendent's reliance upon the "permissible cost" in the foreign jurisdiction is consistent with [*2]the legislative purpose underlying Insurance Law § 5108 and implementing regulations - to "significantly reduce the amount paid by insurers for medical services, and thereby help contain the no-fault premium" (Goldberg v Corcoran, 153 AD2d 113, 118 [1989], appeal dismissed 75 NY2d 945 [1990]). 

Applying section 68.6 as interpreted by the Superintendent, the "prevailing fee in the geographic location of a provider" is the "permissible" reimbursement rate authorized in the foreign jurisdiction. Here, the permissible rate authorized in New Jersey for the services rendered by plaintiff is set forth in New Jersey's no-fault statute and applicable fee schedule. Allowing plaintiff to bill at a rate significantly higher than the permissible charges in the New Jersey fee schedule would undermine the purpose of Insurance Law § 5108, and thwart the core objectives of the No-Fault Law - "to provide a tightly timed process of claim, disputation and payment" (Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 319 [2007][citation omitted]), to "reduce the burden on the courts and to provide substantial premium savings to New York motorists" (Matter of Medical Socy. of State of NY v Serio, 100 NY2d 854, 860 [2003]).

Contrary to plaintiff's claim, the omission of the term "fee schedule" from the regulation does not indicate that its exclusion was intended. Construed within the context of the regulation, whose scope and application broadly extends to all geographic locations outside the State of New York, the legislature's use of the comprehensive term "prevailing fee," rather than the less inclusive term "fee schedule," comports with common sense and the reality that the different jurisdictions have not unanimously adopted a no-fault regime, and/or uniformly based the permissible reimbursement charge upon a medical fee schedule.

Plaintiff provider also argued that National Interstate's excessive fee/fee schedule defense was precluded because it was not raised within 30 days of defendant's receipt of the plaintiff's bill.  In rejecting that argument, the appellate court further held that "since the services here were rendered after April 1, 2013, the defense of excessive fees is not subject to preclusion (see 11 NYCRR 65-3.8[g][eff Apr. 1, 2013)."

On the same day (October 8, 2015), the Appellate Term, First Department, issued a similar decision in Cliffside Park Imaging & Diagnostic v Travelers Ins. Co., holding that "[i]nasmuch as the health services underlying plaintiff's no-fault claim were rendered in New Jersey, defendant may properly rely upon the New Jersey fee schedule to establish the 'prevailing fee' within the meaning of 11 NYCRR 68.6[.]"

New Jersey Automobile Medical Fee Schedule Held to Apply to New York No-Fault Claimant's Treatment in New Jersey

PIP – PREVAILING FEE FOR HEALTH CARE SERVICES RENDERED OUTSIDE NEW YORK – NEW JERSEY AUTOMOBILE MEDICAL FEE SCHEDULE
Matter of Arbitration Between Specialty Surgical of Secaucus, LLC and Geico Ins. Co.
(AAA Case 412012124315, Arbitrator Michael B. Parson, Esq., decided 1/13/2014)

A New York EIP, insured under a New York auto policy. (is picked up by a limo, driven to, and) treats in northern New Jersey for injuries sustained in a New York motor vehicle accident.  What fee must the NY PIP insurer pay for the the NJ health care provider's services?

11 NYCRR § 68.6, also known as Regulation 83, answers that question:

If a professional health service reimbursable under section 5102 (a)(1) of the insurance law is performed outside New York State, the permissible charge shall be the prevailing fee in the geographic location of the provider.  

So what is "the prevailing fee in the geographic location"?  Who decides what that is?  Can the rates set by the New Jersey Automobile Medical Fee Schedule be considered the prevailing fees for New Jersey locations?  In the opinion of AAA No-Fault Arbitrator Michael B. Parson, Esq., the answer to that last question is yes, the New Jersey fee schedule applies to determine the NY PIP-compensable fee.

Arbitrator Parson reasoned as follows:

The question before me therefore is, what is the prevailing fee and how is it to be determined in this forum? Applicant would argue that the regulation does not limit reimbursement to a foreign state's fee schedule. I agree to the extent that a fee schedule is not itself dispositive of the issue. However, I find that in a state like New Jersey, which has established a fee schedule specifically for patients being treated as a result of an automobile accident, the expectation of providers in New Jersey in treating such injuries is that they will be limited to the fees in the schedule. The fact that a person seeking treatment resides in another state, is, in my view, simply incidental and does not change that expectation. I find that the New Jersey fee schedule is therefore a fair indication of the prevailing fees for treating injuries sustained in a motor vehicle accident in the geographic location where the treatment was rendered in this case.

Treating a New York resident should not provide an opportunity for a provider to charge as high a fee for services as possible due solely to the accident of residency. Under the present health care system in the United States, there are many different fees charged for the same procedure in most jurisdictions, depending on the circumstances. For example, in situations that do not involve automobile accidents, a person with private health insurance will pay far less, as will the private insurance company, than someone who is not covered. Different insurance companies will pay different rates, depending on a number of factors. Because of these types of variances in fees charged and paid, I must look to the intentions of the foreign state relative to the treatment of persons injured in automobile accidents. Both New York and New Jersey have sought, by the institution of fee schedules for treatment of persons injured in automobile accidents, to limit fees that may be charged for such services. There are many policy reasons for this, not the least of which is to permit coverage and treatment that will not exhaust the policy limits of the injured parties. I note too that NJSA 11:3-29.1, in describing the purpose and scope of the New Jersey fee schedule for automobile accident related treatment does not make any exclusion for out of state patients, does not limit its terms to in-state accidents and states, at 11:3-29.5:

No health care provider may demand or request any payment from any person in excess of those permitted by the medical fee schedules and this subchapter, nor shall any person be liable to any health care provider for any amount of money that results from the charging of fees in excess of those permitted by the medical fee schedules and this subchapter.

Accordingly, I find that the New Jersey fee schedule should apply to the surgery and take judicial notice of that fee schedule. Although there was vigorous argument from Applicant's counsel that the New Jersey fee schedule should not be the basis upon which my determination of the prevailing facility fee in Northern New Jersey is made, both parties herein agreed at hearing that were I to find that that the New Jersey fee schedule applies, the sum provided in that schedule for the CPT code billed here, for the services rendered by the Applicant is $1,265.10. My own examination of the New Jersey fee schedule, reveals that the $1,265.10 figure is correct.

Accordingly, I find that the Applicant should be paid in the total sum of $1,265.10.

Appellate Division, First Department, Holds that Fee Schedule is a Precludable Defense

NO-FAULT – WORKERS' COMPENSATION FEE SCHEDULE – DEFENSE PRECLUSION – UNTIMELY DENIAL – INSURANCE LAW § 5106
Mercury Cas. Co. v. Encare, Inc.
(1st Dept., decided 12/13/2011) 

If a New York no-fault insurer does not issue a timely denial of PIP benefits, is it precluded from limiting payment to the amounts prescribed by the New York workers' compensation fee schedule?  In the opinion of the Appellate Division, First Department, the answer is YES, it is precluded from asserting the fee schedule defense.

Nor do we find it significant, in light of the genesis and purposes of the preclusion rule, that Insurance Law § 5108 prohibits a medical provider from seeking fees in excess of the fee schedule. Virtually every application of the preclusion rule involves the compromise of statute, policy provision, or judge-made rule in service of effectuating the important purposes of the No-Fault Law. The expansion of the lack of coverage exception proposed by Mercury would substantially weaken the long-established rule of preclusion.

Jason Tenenbaum, who represented Mercury in this case, offers his observations of this decision here.

Madness.  Simply madness.

A Minor Factual Discrepancy Does Not a Defective NF-10 Make

NO-FAULT – SUFFICIENCY OF PARTIAL DENIAL – SUFFICIENCY OF NON-MOVANT'S OPPOSITION PAPERS
Westchester Med. Ctr. v. Nationwide Mut. Ins. Co.
(2nd Dept., decided 11/30/2010)

Plaintiff hospital sued Nationwide for monetary damages as a result of defendant's alleged failure to make timely payments on plaintiff's no- fault insurance claims, specifically $124,996 plus statutory no-fault interest and attorney's fees.  Plaintiff moved for summary judgment and Nationwide opposed the motion.

Nassau County Supreme Court (Karen V. Murphy, J.) denied plaintiff's motion, holding:

To meet its burden and establish its entitlement to judgment as a matter of law, Plaintiff must submit evidence that the prescribed statutory biling forms have been timely mailed and received, and that the defendant failed to pay or deny the claim within the requisite 30-day period (See N.Y. and Presbyterian Hosp. v. Allstate Ins. Co., supra; LMK Psychological Serv., P.C. v. Liberty Mut. Ins., supra, Mount Sinai Hosp. v. Joan Service Corp.,  22 A.D.3d 649, 803 N.Y.S.2d 102 (2d Dept., 2005)).  Plaintiff has failed in meeting its burden.  This Court is satisfied that Defendant did partially deny the claim in a timely fashion by indicating the fees sought were not in accordance with the applicable fee schedules.   This Court does not find that the forms submitted were defective or improperly identified the applicant for benefits.

Plaintiff appealed and the Second Department, Appellate Division, AFFIRMED: 

Here, the plaintiff failed to establish its prima facie entitlement to judgment as a matter of law on its claim for benefits since the evidence demonstrates that the defendant made a partial payment and a partial denial of the claim within 30 days after receipt thereof (see New York & Presbyt. Hosp. v Allstate Ins. Co., 31 AD3d 512; see generally Alvarez v Prospect Hosp., 68 NY2d 320).

Furthermore, under the circumstances of this case, the minor factual discrepancy contained in the defendant's denial of claim form did not invalidate the denial. In addition, the denial was not conclusory or vague, and did not otherwise involve a defense which had no merit as a matter of law (see Nyack Hosp. v State Farm Mut. Auto. Ins. Co., 11 AD3d 664, 665, quoting Amaze Med. Supply v Allstate Ins. Co., 3 Misc 3d 43, 44; cf. New York Univ. Hosp. Rusk Inst. v Hartford Acc. & Indem. Co., 32 AD3d 458, 460; Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564).

Since the plaintiff failed to establish its prima facie entitlement to judgment as a matter of law, we need not consider the sufficiency of the defendant's papers in opposition to the motion (see Moore v Stasi, 62 AD3d 764; Marshak v Migliore, 60 AD3d 647). Accordingly, the Supreme Court properly denied the plaintiff's motion for summary judgment on the complaint.

If any readers know exactly what the "minor factual discrepancy" of the NF-10 was, please let us all know in a comment to this post.  Thanks. 

Great Wall Acupuncture Continues to Control Fees Charged by Licensed Acupuncturists

With the comment period still open on the New York State Insurance Department's proposed amendment to Regulation 83 regarding licensed acupuncture fees, New York no-fault professionals know that most New York acupunturists continue to bill at and litigate over "prevailing geographic rates" for their services. 

Over at Arbiters of NY No-Fault, another legal blog of my law firm, my associate, Scott Mancuso, reports on two recent no-fault arbitration decisions in which the arbitrators adhered to the Appellate Term's holding in Great Wall Acupuncture, P.C. a/a/o Maria Gonzalez v. Geico Ins. Co., 26 Misc.3d 23 (App. Term, 2d Dept., 2009) that no-fault insurers "may use the workers' compensation fee schedule for acupuncture services performed by chiropractors to determine the amount which a licensed acupuncturist is entitled to receive for such acupuncture services".  Check out that post here.  

Proposed Amendment to Regulation 83 -- Licensed Acupuncture Fees

Today the New York State Insurance Department published notice of its Proposed Thirty-Second Amendment to Regulation No. 83 (11 NYCRR 68).  The proposed regulation would add new Part L to Appendix 17-C of 11 NYCRR to read as follows:

(L)  Licensed Acupuncture fees

     (a)     A licensed acupuncturist is an individual who has complied with the requirements of Article 160 of the Education Law.

     (b)     The maximum permissible charge for treatment rendered by a licensed acupuncturist shall not exceed the maximum permissible charge for a licensed physician certified to perform acupuncture in accordance with the Official New York Workers' Compensation Medical Fee Schedule referenced in 12 NYCRR 329.3.

The Department's Regulatory Impact Statement for this proposed amendment explains the "Needs and benefits" of this proposed regulatory change as follows:

The Workers’ Compensation Board fee schedules were initially adopted in 1977 and have been revised regularly since that time in order to reflect inflationary increases and to incorporate other necessary enhancements. Similar modifications and improvements have also been applied to those fee schedules established by the Insurance Department for various health care services related to automobile accidents that are not covered in any fee schedule established by the WCB. Periodic revision to the fee schedules is a part of the ongoing process of keeping the fee schedules current and reflective of changes in the health care industry, thereby facilitating access to health care for motor vehicle accident victims while controlling costs.

The WCB currently has a fee schedule for acupuncture services performed by medical doctors certified to perform acupuncture and another fee schedule for chiropractors licensed to perform acupuncture. The WCB does not have a fee schedule for acupuncture services performed by licensed acupuncturists.

The current regulation does not establish the appropriate level of reimbursement for acupuncture treatment rendered by an acupuncturist, which leads to many fee disputes going to arbitration or court to be adjudicated. In order to reduce the number of these disputes, to assure a sufficient pool of health providers, and provide a uniform method of reimbursement by no-fault insurers, this proposed rule states that the maximum permissible charge for treatment rendered by a licensed acupuncturist shall not exceed the maximum permissible charge for a physician certified to perform acupuncture in accordance with the Workers’ Compensation Medical fee schedule contained in 12 NYCRR 329.3.

Pursuant to 11 NYCRR Part 65, Section 65-3.16(a)(6) of Regulation 68 acupuncturists must be licensed in order to be reimbursed for acupuncture treatment rendered to no-fault patients. There is no Department certification requirement for acupuncturists to handle no-fault patients. Acupuncture treatment rendered by licensed acupuncturists is the primary service they perform and for which they bill. The WCB permits an additional fee for the reimbursement of acupuncture treatment rendered by a chiropractor licensed to perform acupuncture as an adjunct service to the primary services that the chiropractor performs and for which the chiropractor bills. The WCB also establishes a fee for reimbursement of acupuncture treatment rendered by a medical doctor certified to perform acupuncture as an adjunct service to the primary services that the doctor performs and for which the doctor bills, which in many instances is greater than the fee permitted to be charged by a chiropractor. Since the acupuncture treatments are the primary service performed and billed by licensed acupuncturists and the acupuncturist is not permitted to bill for any other services, the superintendent has determined that such treatments merit reimbursement at the same rate that medical doctors receive for comparable services.

The establishment by the superintendent of fees for acupuncture treatment rendered by licensed acupuncturists will reduce disputes regarding the fees to be charged, provide for more timely payment of acupuncturist’s charges, and result in a significant reduction in litigation costs that are presently being incurred due to the lack of a fee schedule for licensed acupuncturists. Utilization of a maximum permissible fee for licensed acupuncturists should significantly reduce the number of disputes between insurers and licensed acupuncturists, resulting in more uniform, efficient, and cost-effective processing and payment of no-fault claims.

Pursuant to the accompanying Notice of Proposed Rule Making, public comment on this proposed amendment will be received until 45 days after today, its publication date, or through September 4, 2010.  Comments may be submitted to Buffy Cheung at the Department. 

If adopted and promulgated, this amendment to Regulation 83 will take effect 90 days after its publication in the New York State Register. 

Appellate Term Again Holds that Licensed Acupuncturists Properly Reimbursed Under Workers' Compensation Fee Schedule for Acupuncture Performed by Chiropractors

NO-FAULT – REIMBURSEMENT RATE FOR ACUPUNCTURE SERVICES – WORKERS' COMPENSATION FEE SCHEDULE
Great Wall Acupuncture, P.C. a/a/o Maria Gonzalez v. Geico Ins. Co.
(App. Term, 2d Dept., 2d, 11th & 13th Dists., decided 11/17/2009)

Geico paid plaintiff acupuncture PC for acupuncture services using the the workers' compensation fee schedule for acupuncture services performed by chiropractors.  Plaintiff claimed that its licensed acupuncturists were not limited to the fee schedule for acupuncture services performed by chiropractors -- there being no separate fee schedule for for acupuncture services performed by licensed acupuncturists -- and commenced this action to recover additional payment.  The parties stipulated to all but the propriety of the fees charged.  Following a non-jury trial on that issue, Civil Queens granted judgment to Geico, dismissing the complaint.  Plaintiff appealed. 

In AFFIRMING the judgment dismissing the complaint, the Appellate Term held:

A person who seeks to practice acupuncture must be either licensed (Education Law § 8214) or certified (Education Law § 8216) to do so (see Education Law § 8212). The training to obtain a license remains the same even if the person seeking to practice acupuncture has a license in a different profession, such as a chiropractic license (see 8 NYCRR 52.16[b]; cf. 8 NYCRR 52.16[a]). Indeed, at trial, plaintiff's witness, who was both a licensed acupuncturist and a licensed chiropractor, so testified. Accordingly, in light of the licensure requirements, we hold, as a matter of law, that an insurer may use the workers' compensation fee schedule for acupuncture services performed by chiropractors to determine the amount which a licensed acupuncturist is entitled to receive for such acupuncture services (see Great Wall Acupuncture v GEICO Gen. Ins. Co., 16 Misc 3d 23 [App Term, 2d & 11th Jud Dists 2007]; see also AVA Acupuncture, P.C. v GEICO Gen. Ins. Co., 23 Misc 3d 140[A], 2009 NY Slip Op 51017[U] [App Term, 2d, 11th & 13th Jud Dists 2009]; AVA Acupuncture, P.C. v GEICO Gen. Ins. Co., 17 Misc 3d 41 [App Term, 2d & 11th Jud Dists 2007]; 2004 Ops Gen Counsel NY Ins Dept No. 04-10-03 [Oct 2004] [http://www.ins.state.ny.us/ogco2004/rg041003.htm]). Consequently, since it is undisputed that the instant defendant reimbursed plaintiff pursuant to the workers' compensation fee schedule for acupuncture services rendered by a chiropractor, plaintiff is not entitled to any additional reimbursement.

Appellate Term, Second Department, No-Fault Decisions

NO-FAULT – MAILING – PROVING IME NO-SHOW
Radiology Today, P.C. a/a/o Charles Rawlins v. GEICO Ins. Co.
(App. Term, 2nd Dept., 2nd, 11th & 13th, decided 10/23/2009)

Order of Richmond Civil (Katherine Levine, J.) REVERSED.  Defendant's unopposed motion for summary judgment dismissing the complaint should have been granted.

• Affidavit of a manager employed by the independent medical review service retained by defendant to schedule and conduct IMEs sufficiently set forth the standard office practice and procedure for the generation and mailing of IME notices designed to ensure that said notices were properly addressed and mailed.
• The affirmations and affidavits of the medical professionals who were to perform the IMEs established that plaintiff's assignor failed to appear for said IMEs.

NO-FAULT – SUFFICIENCY OF PEER REVIEW
Richmond Radiology, P.C. a/a/o Arkady Polevoy v. GEICO Ins. Co.
(App. Term, 2nd Dept., 2nd, 11th & 13th, decided 10/23/2009)

Order of New York Civil (Diane A. Lebedeff, J.) denying plaintiff's motion for summary judgment AFFIRMED. 

• The doctor performing the peer review did not conclude that he had insufficient information upon which to base a conclusion. Instead, the affirmed report raised a triable issue of fact because "the report clearly indicates that the pertinent [treating] physician's reports and other documentation had been requested and provided for the purpose of conducting a peer review, and the conclusion of lack of medical necessity is based on the peer reviewer's opinion, in effect, that there was no substantiation in the reports and documents reviewed of medical necessity for the [services] provided[.]"

NO-FAULT – PROOF OF MAILING – USE OF WORKERS' COMPENSATION FEE SCHEDULE FOR ACUPUNCTURE SERVICES
New Wave Oriental Acupuncture, P.C. a/a/o Gerard Ikezi v. Government Employees Ins. Co.
(App. Term, 2nd Dept., 2nd, 11th & 13th, decided 10/23/2009)

Order of New York Civil (Robin S. Garson, J.) granting summary judgment to plaintiff REVERSED. 

• The affidavit submitted by defendant sufficiently established that the denial of claim forms were timely mailed in accordance with defendant's standard office practices and procedures.
• It was proper for defendant to use the workers' compensation fee schedule for acupuncture services performed by chiropractors to determine the amount which plaintiff was entitled to receive.

NO-FAULT – LEAVE TO AMEND ANSWER – FRAUDULENT INCORPORATION DEFENSE  – COMPELLING DEPOSITION OF PROVIDER'S OWNER
New York First Acupuncture, P.C. a/a/o Anitta Allen v. State Farm Mut. Auto. Ins. Co.
(App. Term, 2nd Dept., 2nd, 11th & 13th, decided 10/23/2009)

Order of Richmond Civil (Diane A. Lebedeff, J.) granting defendant's motion to amend its answer to assert a fraudulent incorporation defense and compel plaintiff to produce its owner for a deposition AFFIRMED.

• The Civil Court did not improvidently exercise its discretion in granting defendant's application for leave to amend its answer in order to interpose the affirmative defense of fraudulent incorporation, in the absence of any showing that prejudice or surprise would result therefrom and since the proposed affirmative defense was neither devoid of merit nor palpably insufficient as a matter of law.
• Plaintiff's contention, that the defense of fraudulent incorporation must be asserted in a timely denial of claim form, is without merit. 
• Defendant sufficiently demonstrated that the deposition testimony of plaintiff's owner, Valentina Anikeyeva, regarding plaintiff's corporate structure was material and necessary so as to warrant the granting of the branch of its motion seeking to compel Ms. Anikeyeva's deposition.

Justice Golia's concurring memorandum is worth a look:

While I agree with the ultimate disposition in the decision reached by the majority, I strenuously disagree with the majority gratuitously raising a nonexistent issue, namely that a Mallela defense (State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005]) may be disallowed if "prejudice or surprise would result therefrom." This impression was created by the majority in choosing here to excise an important requirement with regard to the law of amending an answer. The actual statement by the Court of Appeals in McCaskey, Davies & Assoc. v New York City Health & Hosps. Corp. (59 NY2d 755, 757 [1983] [emphasis added, citations and internal quotations marks omitted]) is that, "Leave to amend the pleadings shall be freely given absent prejudice or surprise resulting directly from the delay."

Inasmuch as it is inconceivable that a Mallela defense of fraudulent incorporation could ever create prejudice or surprise that resulted directly from the delay in raising such defense, it is clear that such analysis is unwarranted.

To me, it is extremely unlikely that an individual who creates a fraudulent entity for the purpose of defrauding an insurance company would forget that he/she did so and be prejudiced or surprised when it was discovered. Such would be akin to a person running a "Ponzi" scheme deciding to invest in his own firm because it was obtaining such good results.

So is Dave Gottlieb's observation on Justice Golia's point.  What do you think?  I get Justice Golia's point on the no surprise part, but I guess whether the "absent prejudice or surprise" aspect attaches to an insurer's leave to amend its answer to add a Mallela defense depends on one's definition of "prejudice". 


NO-FAULT – UNTIMELY PROOF OF CLAIM – WAIVER
Delta Diagnostic Radiology, P.C. a/a/o Frank Louigarde v. Interboro Ins. Co.
(App. Term, 2nd Dept., 2nd, 11th & 13th, decided 10/23/2009)

Judgment of Queens Civil (William A. Viscovich J.) in favor of plaintiff AFFIRMED.

• Although plaintiff's claim was submitted more than 45 days after the services at issue were rendered, defendant waived its reliance on the 45-day rule as a basis to deny the claim because defendant had failed to communicate to plaintiff, as required by the No-Fault Regulations, that late submission of the proof of claim will be excused where the applicant can provide a reasonable justification for the late submission. 
• Defendant also failed to demonstrate that discovery was needed in order to show the existence of a triable issue of fact.

New York State Insurance Department Office of General Counsel Opinions for May, June, July & August 2009

Got some catching up to do.  From the NYS Insurance Department's website come these eight Office of General Counsel Opinions from May, June, July and August 2009 relevant to property and casualty insurers doing business in New York.  See each opinion letter for its analysis.  

Limit on Charges by Providers of Health Services Under the No-Fault Law 
OGC Op. No. 09-05-01 (May 15, 2009)

Questions Presented:

1.  May a provider of health services bill a patient and/or the patient’s health insurer for treatment of injuries arising out of the use of a motor vehicle at the provider’s standard rates when the patient’s no-fault insurer has denied the medical provider’s claim because available coverage for basic economic loss has been exhausted?

2.  May a provider of health services bill a patient and/or the patient’s health insurer for treatment of injuries arising out of the use of a motor vehicle at the provider’s standard rates when the patient’s no-fault insurer has denied the medical provider’s claim because of a policy exclusion, including driving while intoxicated?

Conclusion:

1.  No.  Pursuant to N.Y. Insurance Law § 5108(a) (McKinney 2000), a provider of health services may not bill a patient and/or the patient’s health insurer for treatment of injuries arising out of the use of a motor vehicle at the provider’s standard rates when the patient’s no-fault insurer has denied the medical provider’s claim because available coverage for basic economic loss has been exhausted.

2.  No.  A medical provider may not bill a patient and/or the patient’s health insurer treatment of injuries arising out of the use of a motor vehicle at the provider’s standard rates when the patient’s no-fault insurer has denied the medical provider’s claim because of a policy exclusion, such as driving while intoxicated. The provider of health services is limited to billing at the no-fault rates established pursuant to Insurance Law § 5108 for any treatment of injuries arising out of the automobile accident which are covered under the no-fault law.

No-Fault Lost Wage Claim  
OGC Op. No. 09-05-04 (May 14, 2009)

Question Presented:

Is an insured person entitled to reimbursement for no-fault lost wage claims after being medically cleared to return to work when such person was employed at the time of the accident giving rise to the claim, was unable to return to work due to her injuries, and her vacant position was subsequently filled due to her inability to return to work, so that she could not resume her employment at such time when she was medically cleared to return to work?

Conclusion:

Yes.  Pursuant to N.Y. Ins. Law § 5102(a)(2), an eligible injured person is entitled to lost earnings from “work which the person would have performed had he not been injured.” When an injured insured is unable to return to work due to injuries arising from an automobile accident and the insured’s employer hires another person to fill the insured’s vacant position during the insured’s period of disability, so that the insured cannot immediately resume her employment when she is medically cleared to return to work, the insured may recover lost wages for the period after she is medically cleared but before she actually resumes work.

Fire Insurance Fee and Businessowners Policies 
OGC Op. No. 09-06-06 (June 15, 2009)

Questions Presented:

1.  What is the method for calculating the fire insurance fee for a businessowners policy that has separate, divisible premiums for property and liability coverages?

2.  Should the fire insurance fee be levied on the whole property premium, when there are portions of the premium that do not include the peril of fire?

3.  If inland marine coverage is included in a businessowners policy, is it subject to the fire insurance fee?

Conclusions:

1.  The method for calculating the fire insurance fee for a businessowners policy that has separate, divisible premiums for the property and liability coverages, as set forth in N.Y. Ins. Law § 9101(b) (McKinney 2000), is to multiply 100% of the property premium by 1.25%, subject to the exceptions discussed below.

2.  It depends. If the premium property is divisible and there are portions that do not include the peril of fire, then the fire insurance fee is not levied on that portion of the property premium. However, if the property premium is not divisible, then the fire insurance fee is levied on the whole property premium.

3.  No, if inland marine coverage is included in a businessowners policy and the premium is divisible, it is not subject to the fire insurance fee.

Interpreting the Amendments to Insurance Law § 3420 
OGC Op. No. 09-06-08 (June 23, 2009)

Questions Presented:

1.  Do the Chapter 388 amendments to Insurance Law § 3420, which apply to any “liability policy issued or delivered in this state,” include policies issued in New York but delivered outside of the state?

2.  Does the prejudice rule set forth in Insurance Law § 3420 only apply to liability policies?

3.  Does Insurance Law § 3420 apply to claims-made policies?

4.  May a third party bring a direct cause of action against a New York insurer in a foreign jurisdiction subsequent to a denial for late notice if the policy was delivered in a foreign jurisdiction that requires a judgment against, or settlement with, the insured prior to the initiation of such cause of action?

Conclusions:

1.  Yes.  The term “issued or delivered in this state” includes policies issued in New York but delivered outside of the state.

2.  Insurance Law § 3420 sets forth minimum requirements for liability policies, which includes the prejudice rule. However, insurers may provide more liberal provisions in their policies to benefit their insureds, and thus may include a prejudice rule in other kinds of policies, too.

3.  Yes, Insurance Law § 3420 applies to claims-made policies. However, Chapter 388 recognizes the distinctive nature of claims-made policies and does not allow for duplicate claims under multiple policy periods, or a late claim under a prior policy period. 

4.  No.  Insurance Law § 3104(b) allows a New York insurer to include in any policy of insurance issued for delivery in another jurisdiction any provision required by the laws of such other jurisdiction applicable to such policy.

Examinations Under Oath of Assignees 
OGC Op. No. 09-06-10 (June 24, 2009)

Question Presented:

May an insurer, when requesting verification in the form of an examination under oath of an assignee of no-fault personal injury protection (“PIP”) benefits, require a corporate assignee to designate a specific person to be examined?

Conclusion:

No.  Neither the Insurance Law nor the regulations promulgated thereunder permit an insurer to require that a corporate assignee of no-fault benefits designate a specific person of the insurer’s choice to submit to an examination under oath.

Insurer In-House Counsel 
OGC Op. No. 09-08-01 (August 4, 2009)

Question Presented:

Do the New York Insurance Law and regulations promulgated thereunder require Insurance Department approval for the creation of an insurer in-house law firm?

Answer:

No.  Neither the Insurance Law nor the regulations promulgated thereunder require Insurance Department approval for the creation of an insurer in-house law firm.

Acceptance of Third-Party Subpoena by the Superintendent 
OGC Op No 09-08-02 (August 5, 2009)

Question Presented:

May the Superintendent accept service of a subpoena on an authorized insurer when the insurer is not a defendant in the underlying legal action (“a third-party subpoena”)?

Conclusion:

No.  The Superintendent is not authorized to accept such a subpoena, because N.Y. Ins. Law § 1212 only requires an insurer to appoint the Superintendent to accept lawful process on its behalf when such process is associated with an action against the insurer.

Electronic Delivery of Insurance Policies 
OGC Op No 09-08-04 (August 7, 2009)

Questions Presented:

1.  Does Office of General Counsel (“OGC”) Opinion 09-01-01 (January 6, 2009) apply to commercial lines insurance policies?

2.  May an insurer electronically send an insurance policy to an insured without first obtaining the insured’s consent to engage in an electronic transaction, if the insurer also offers the insured the option to insist upon being sent a paper copy of the policy?

3.  Is the insurer or the insurance producer responsible for delivery of the insurance policy to the insured?

4.  If an insurance policy is issued electronically by an insurer to an insurance producer, may the producer electronically send the policy to the insured without first obtaining the insured’s consent to electronically receive the insurance policy?

Conclusions:

1.  Yes. OGC Opinion 09-01-01 (January 6, 2009) applies to commercial lines insurance policies.

2.  No. An insurer may not electronically send an insurance policy to an insured unless the insured has first consented to engage in an electronic transaction, even if the insurer provides the insured with an option to insist upon receiving a paper copy of the policy.

3.  Yes. An insurer is responsible for delivery of the insurance policy to the insured or such person that the insured designates, but the insurer may delegate such task to either its insurance agent or the insurance broker.

4.  No. Even if the insurer electronically sends the insurance policy to the insurance producer, the insurance producer may not electronically forward the policy to the insured unless the insured has consented to engage in an electronic transaction.

New York State Insurance Department Office of General Counsel Opinions for April 2009

Posted yesterday to the NYS Insurance Department's website are the Office of General Counsel Opinions for April 2009. Two of the 6 posted opinions are relevant to P&C insurers doing business in New York.

Applicability of Workers' Compensation Board Directive to Durable Medical Equipment Fee Schedule in No-Fault Claims (April 6, 2009)

Question Presented:

Is the Workers’ Compensation Board’s (“WCB”) directive of July 18, 2008 concerning the inapplicability of the durable medical equipment (“DME”) fee schedule to medical providers supplying such equipment applicable to no-fault claims?

Conclusion:

Yes, the WCB’s directive of July 18, 2008 concerning the inapplicability of the DME fee schedule to medical providers supplying such equipment is applicable to no-fault claims.

Facts:

The inquiry is of a general nature, without reference to particular facts.

Analysis:

Under New York’s “no-fault” insurance law, see Article 51 of the New York Insurance Law, a provider of health services is limited in what he can charge to an insurer by the amounts specified in the workers’ compensation fee schedules. See N.Y. Ins. Law § 5108 (McKinney 2000). Section 68.1(a) of N.Y. Comp. Codes R. & Regs. tit. 11, pt. 68 (Regulation 83) adopts certain workers’ compensation fee schedules for purposes of the no-fault law. That regulatory provision reads as follows:

The existing fee schedules prepared and established by the chairman of the Workers’ Compensation Board for industrial accidents are hereby adopted by the Superintendent of Insurance with appropriate modification so as to adapt such schedules for use pursuant to the provisions of section 5108 of the Insurance Law.

Furthermore, 11 N.Y.C.R.R. 68.1(b)(1) incorporates the grounds rules of the workers’ compensation fee schedules by providing in relevant part that “[t]he general instructions and ground rules in the workers’ compensation fee schedules apply” for purposes of no-fault billing. Thus, any charges for health services submitted to an insurer for reimbursement under the no-fault law are limited to the fee schedules and ground rules put forth by the WCB. This includes charges for DME, for which the WCB has established a fee schedule. 

Injured persons typically receive DME either directly from a medical provider or from a DME supplier, as when the equipment has been prescribed by a physician. On July 18, 2008, the WCB issued a directive addressing the fee schedule for DME. The directive makes the DME fee schedule inapplicable to medical providers supplying DME, and reads in relevant part as follows:

The Durable Medical Equipment Fee Schedule does not apply to medical providers supplying durable medical equipment to injured workers as part of medical treatment described in the New York Workers’ Compensation Medical Fee Schedule. Billing and reimbursement follows the ground rules as described in the fee schedule.

The directive thus establishes a separate reimbursement system for medical providers supplying DME directly to patients, while leaving in effect the current DME fee schedule for suppliers of DME (who are not licensed medical providers) to patients. 

For those medical providers, the directive states that billing and reimbursement will instead follow “the ground rules” set forth in the fee schedule. With respect to the reimbursement of medical providers, Ground Rule No. 4 of the Medical Fee Schedule reads in pertinent part as follows:

Supplies and materials provided by the physician…over and above those usually included with the office visit or other service rendered may be charged for separately…. Payment shall not exceed the invoice cost of the item.

Ground Rule No. 4 thus requires that the compensation physicians may receive for providing DME directly to patients shall not exceed the invoice cost of the item.

Since 11 N.Y.C.R.R. 68.1(b)(1) (Regulation 83) adopts the WCB’s fee schedules and ground rules for no-fault billing and reimbursement, and because physicians are excluded from the DME fee schedule, the WCB’s directive interpreting the DME fee schedule applies to charges arising from no-fault claims, in accordance with the clear intent of Insurance Law § 5108(a) to ensure that no-fault health services are reimbursed in accordance with the WCB fee schedule. Thus, the DME fee schedule applies only to DME suppliers, and not to medical providers supplying DME directly to patients, for purposes of reimbursing the cost of DME under the no-fault law.

For further information you may contact Principal Attorney Lawrence M. Fuchsberg at the New York City office.

Insurer's Obligation to Notify the Insured's Authorized Agent of the Insurer's Nonrenewal of the Policy (April 8, 2009)

Question Presented:

Does an insurer have an obligation to notify an insured's authorized agent if the insurer mails a notice of its intention not to renew a non-commercial automobile insurance policy to the named insured?

Conclusion:

Yes.  Under N.Y. Ins. Law § 3425(h)(3) (McKinney Supp. 2009), if an insurer mails a notice of intention not to renew a non-commercial automobile insurance policy to the named insured, the insurer shall mail, deliver or transmit a copy of the notice to the insured's authorized agent or broker within seven days of the time the notice is mailed to the named insured.

Facts:

The inquiry is of a general nature, without reference to particular facts.

Analysis:

Insurance Law § 3425 is germane to the inquiry. The statute applies to most non-commercial automobile insurance policies other than those issued through the New York Automobile Insurance Plan. Insurance Law § 3425(a)(1) defines a "covered policy" to mean an insurance policy issued or issued for delivery in this State by an authorized insurer, on a risk located or resident in this State, and that insures against losses or liabilities arising out of the ownership, operation or use of a motor vehicle, when a natural person is the named insured.

Insurance Law § 3425(h)(3) is relevant to the inquirer’s inquiry because that provision governs an insurer's obligation to notify the insured's authorized agent or broker if the insurer mails a notice of its intention not to renew a non-commercial automobile insurance policy to the named insured. Insurance Law § 3425(h)(3) reads as follows:

(3) A copy of every notice of cancellation, reduction of limits, substitution of policy form, elimination of coverages, conditioned renewal or of intention not to renew, including the reasons therefor, or a summary of such notice, shall be mailed, delivered or transmitted to the insured's authorized agent or broker within seven days of the time such notice is mailed to the named insured. Electronic transmission or any other means of delivery or transmission of information commonly used by the insurer to communicate with agents or brokers shall be deemed sufficient for compliance with this paragraph. Failure to mail, deliver or transmit a copy of such notice to the insured's authorized agent or broker pursuant to this paragraph shall not render any such notice ineffective, provided that all of the other requirements of this section are met and shall not be considered failure to include a provision required by this section for purposes of paragraph two of this subsection. (Emphasis supplied.)

Insurance Law § 3425(h)(1), too is relevant here, because proof of mailing of a notice of intention not to renew a non-commercial automobile insurance policy constitutes sufficient proof of notice. Insurance Law § 3425(h)(1) reads as follows:

(h) (1) Proof of mailing of a notice of cancellation, reduction of limits, substitution of policy form, elimination of coverages, conditioned renewal or of intention not to renew, or proof of the mailing of the reasons therefor, to the named insured at the address shown in the policy, shall be sufficient proof of the giving of notice and the giving of reasons required by this section.

For further information, you may contact Senior Attorney Robert Freedman at the New York City office.

Court Upholds Payment of Acupuncture Services at Chiropractic Rates

NO-FAULT – PAYING ACUPUNCTURE AT CHIROPRACTIC RATES – WORKERS COMPENSATION FEE SCHEDULE
Midwood Acupuncture, P.C. a/a/o Yensi Alan v. Allstate Ins. Co.
(NYC Civil, Kings Co., decided 3/6/2009)

Plaintiff and Allstate mutually stipulated that plaintiff proved its prima facie case and the defendant timely denied the claims. The acupuncture bills and denials were admitted into evidence, and plaintiff rested.  Allstate then moved to dismiss plaintiff's case, contending that an insurer is entitled to remit payment at the chiropractic rate indicated in the Workers' Compensation Fee Schedule. Plaintiff argued in opposition that Allstate was required to reveal its procedures for choosing the rate and the calculation of the amount. The court reserved its decision.

Allstate then presented its claim representative, who testified that the Workers' Compensation Fee Schedule is the tool used to pay healthcare providers. Since that schedule does not address licensed acupuncturists, Allstate had compared the educational and licensing requirements and found that the chiropractic requirements are closest to those for licensed acupuncturists. Therefore, the plaintiff was paid at the chiropractic rate. On cross-examination, the claim representative testified that he was not the representative who denied the plaintiff's claims, but indicated that the representative processed and issued the claims in accord with Allstate's policies and procedures, including using the Workers' Compensation Fee Schedule.

In granting judgment in favor of Allstate and dismissing the complaint, Kings County Civil Court Judge Genine Edwards held:

After due deliberation of the credible evidence submitted, this Court finds that the defendant shouldered its burden of producing a proper grounds for denying full payment of the no-fault benefits based upon the Workers' Compensation Fee Schedule. Great Wall Acupuncture, 16 Misc 3d at 23; Ava Acupuncture, P.C., 17 Misc 3d at 41; Ops Gen. Counsel NY Ins. Dept. 10-06-04. The plaintiff did not rebut this defense.

So it appears, at least in Judge Edwards' court, that an insurer has the burden of producing a witness to explain why acupuncture services were paid at chiropractic rates. Relying solely on the submission of the Workers' Compensation Fee Schedule might not be enough. 

Court Rules that DME Provider's Illegal Billing Is Excused by No-Fault Insurer's Untimely Denial

NO-FAULT – DME BILLING – DEFENSE PRECLUSION – FEE SCHEDULE DEFENSE – INSURANCE LAW § 5108
Yklik, Inc. a/a/o Tammy Agosto v. Allstate Ins. Co.
(NYC Civil Ct., Richmond Co., decided 12/31/2008)

New York Insurance Law § 5108 provides:

§ 5108. Limit on charges by providers of health services.

(a) The charges for services specified in paragraph one of subsection (a) of section five thousand one hundred two of this article and any further health service charges which are incurred as a result of the injury and which are in excess of basic economic loss, shall not exceed the charges permissible under the schedules prepared and established by the chairman of the workers' compensation board for industrial accidents, except where the insurer or arbitrator determines that unusual procedures or unique circumstances justify the excess charge.

(b) The superintendent, after consulting with the chairman of the workers' compensation board and the commissioner of health, shall promulgate rules and regulations implementing and coordinating the provisions of this article and the workers' compensation law with respect to charges for the professional health services specified in paragraph one of subsection (a) of section five thousand one hundred two of this article, including the establishment of schedules for all such services for which schedules have not been prepared and established by the chairman of the workers' compensation board.

(c) No provider of health services specified in paragraph one of subsection (a) of section five thousand one hundred two of this article may demand or request any payment in addition to the charges authorized pursuant to this section. Every insurer shall report to the commissioner of health any patterns of overcharging, excessive treatment or other improper actions by a health provider within thirty days after such insurer has knowledge of such pattern. (Emphasis added.)

Plaintiff DME provider sued to recover $317 in unpaid bills and moved for summary judgment. Allstate opposed the motion on two grounds: (1) that plaintiff had failed to establish a prima facie case because the affidavit of its billing manager was not based on personal knowledge of the plaintiff's office practices and billing procedures; and (2) that because plaintiff's claims were in excess of the fee schedule contained in the Workers' Compensation Law, and because defendant made a partial payment to plaintiff, a triable issue of fact existed as to whether Allstate paid the appropriate amount for medical services. Plaintiff argued that Allstate's late denial precluded it from raising and relying on the fee schedule defense.

Richmond County NYC Civil Court Judge Katherine Levine agreed with plaintiff and found that Allstate's late denial (57 days after receipt of plaintiff's billings) precluded it from asserting the statutory fee schedule defense. After discussing the preclusion rule in general, Judge Levine held:

A medical provider must limit its charges to those permitted by approved fee schedules. Ins. Law §5108(a), 11 NYCRR 68.0(f) "which protects a patient from erosion of available benefits by inflated charges" Complete Orthopedic Supplies, Inc. v. State Farm Ins. Co., 16 Misc 3d 996, 1005 (Civil Ct., Queens Co. 2007)) citing from Ops. Gen Counsel NY Ins. Dept. No. 04-06-11 ( 6/16, 2004). The fees for services and procedures are governed by the workers compensation fee schedule ( 11 NYCRR 68.1) and durable medical goods fees are governed by the NY Medicaid fee schedule (11 NYCRR part 68). An insurer who raises this defense will prevail if it demonstrates that it was correct in its reading of the fee schedules unless the plaintiff shows that "an unusual procedure or unique circumstance justifies the necessity" for a charge above the schedules fee ( 11 NYCRR 68.4) Complete Orthopedic Supplies , Inc, supra 16 Misc 3d at 1005. However, before this defense can be invoked an insurer must prove a timely denial.

In Fair Price, supra , the Court distinguished the defense that the assignor never received the medical supplies from the plaintiff from the defense raised by the insurance company in Chubb, supra - that the claimant's injuries arose out of a prior related accident rather than a car accident. Only the latter - "a lack of coverage defense" - fell outside the preclusion rule since if in fact the injuries were unrelated to the accident, the treatment would not have been covered by the automobile liability policy in the first instance. 10 NY3d at 564 citing Chubb, supra at 199. The defense that the billed for services were never rendered, on the other hand, was more akin to a normal exception from coverage, like the defense of billing for unnecessary procedures found by the Chubb court to fall within the preclusion rule. 10 NY3d at 564 citing Chubb, 90 NY2d at 199 (over billing does not ordinarily implicate a coverage matter). This is so because in both situations, there was an actual accident and an actual injury, where "coverage legitimately came into existence". Id. at 565 citing Fair Price, supra , 42 AD3d at 285.

The same reasoning applies to the defense that the claims were in excess of a fee schedule. The parties do not dispute that the assignor is entitled to no-fault insurance benefits. There was an actual accident where the assignor sustained real injuries; the assignor was covered by defendant under an actual insurance policy; and the assignor was prescribed medical equipment which Yklik provided and for which the insurer was billed. Thus, an insurer can only preserve a fee schedule defense by first complying with the 30 day rule and issuing a timely denial. Complete Orthopedic Supplies, supra at 1005; Jamil M. Abraham v. Park Health Center Rockaway Blvd., 3 Misc 3d 130A, 787 NYS2d 678 (App. Term, 2d Dept. 2004)("by virtue of a timely claims denial an insurer is entitled to raise a fee schedule defense and establish that charges exceeded those permitted by law"). See Forrest Chen Acupuncture v. GEICO, 54 AD3d 996 (2d Dept. 2008).

In light of these opinions, it is clear that the defenses of fee schedule non-compliance and partial payment made in accordance with the fee schedule are precluded if defendant fails to disclaim coverage in timely manner pursuant to the no-fault regulations. Here, the denial annexed to plaintiff's papers as Exhibit "3" reveals that defendant received the claims on July 10, 2007 and mailed the denial on 9/04/07, waiting approximately 56 days to send out its denial. By failing to timely submit its denial, defendant is precluded from raising the defense of non-compliance with the fee schedule and summary judgment is granted to plaintiff.

Unfortunately, the cases cited by Judge Levine -- Complete Orthopedic Supplies, Abraham, and Forrest Chen Acupuncture -- do not actually hold that "an insurer can only preserve a fee schedule defense by first complying with the 30 day rule and issuing a timely denial", and it is arguable whether they implicitly support that conclusion.

In 1989, the Second Department held that Insurance Law § 5108 was not unconstitutional, finding that "a person of average intelligence would understand this [statute] to constitute a prohibition against accepting any payments in excess of the fee schedule[.]" Goldberg v. Corcoran, 153 AD2d 113, 119 (2d Dept. 1989). Fair Price can be distinguished because it involved a fraud defense and did not involve any statutory prohibition against billing for DMEs that were not actually delivered. It is doubtful that, in enacting Insurance Law § 5108, the New York State Legislature intended the first sentence of subsection (c) to become "[n]o provider of health services . . . may demand or request any payment in addition to the charges authorized pursuant to this section [unless the no-fault insurer does not issue a timely denial of payment, in which case the provider may demand or request payment of whatever excessive charges it wishes]." For this stautory prohibition to have any real meaning, it cannot be dependent on a no-fault insurer's response to illegally excessive charges. Illegal conduct does not become legal simply because someone does not object to it.

This defense is not a coverage defense at all; it's a statutory defense. That's why it cannot be analyzed under the Fair Price and Central General Hospital, Presbyterian Hospital and Hospital for Joint Diseases defense preclusion rubric. Thou shall not, means thou shall not. Period.

Not Sworn, Not Retro, Not Enough

NO-FAULT – MEDICAL NECESSITY DEFENSE – UNSWORN IME REPORT
OS Tigris Acupuncture, P.C. a/a/o Janeth Agarpao v. Liberty Mut. Ins. Co.
(App. Term, 1st Dept., decided 10/7/2008)

No surprise here. The Appellate Term, First Department, AFFIRMED New York Civil's award of summary judgment to the plaintiff medical provider because: (1) plaintiff made its prima facie showing by submitting evidentiary proof that the prescribed statutory billing forms had been mailed and received, and that payment of no-fault benefits was overdue; (2) the unsworn chiro's negative IME report was properly excluded from consideration; and (3) besides, that report only concluded that further acupuncture treatment was not necessary, and did not raise a question of fact about the medical necessity of the acupuncture treatment that the assignor had already received; and (4) Liberty did not produce competent evidence in support of its defense of the plaintiff's nonconformity with the applicable fee schedule.

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.

New No-Fault Pharmacy Fee Schedule Effective July 7, 2008

The New York State Insurance Department today announced that the NYS Workers' Compensation Board has adopted a new Pharmacy Fee Schedule applicable to all prescription drugs dispensed on or after July 7, 2008. This fee schedule is also applicable to prescription drugs dispensed on or after July 7, 2008 to all No-Fault eligible injured parties.

The new fee is computed by using the Average Wholesale Price (AWP) minus 12% for brand plus the dispensing fee and the AWP minus 20% for generic plus the dispensing fee. The AWP means the average wholesale price of a prescription provided in the Red Book, Medi-Span Master Drug Database, Blue Book or other nationally recognized drug pricing index adopted by the Chair or Chair's designee.

To search the allowable reimbursement amounts for drugs prescribed in relation to either New York Workers' Compensation or No-Fault claims, go here.

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

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

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

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

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

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

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

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

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


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


3. A person with a disqualifying felony conviction may be employed by an unaffiliated law firm that is retained by an insurer to defend its insureds in third-party lawsuits.

1033 Waiver (April 23, 2008)

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

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

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

Hospital Balance Billing (April 25, 2008)

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

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

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

1. The “two percent rule” set forth in NY Insurance Law § 3425(f)(1), which limits to 2% per calendar year the number of personal lines automobile insurance policies that an insurer may non-renew or conditionally renew based upon a reduction or elimination of coverage, is not applicable to commercial automobile insurance policies governed by Insurance Law § 3426. Insurance Law § 3425(f)(1) specifically applies to automobile insurance covering motor vehicles predominantly used for non-business purposes, where a natural person is the named insured. Insurance Law § 3426, which governs commercial automobile policies, nowhere limits the number of policies that an insurer may non-renew in a given year.
   
2. Private passenger automobiles used predominantly for commercial purposes and written on commercial policies are governed by Insurance Law § 3426, and are not subject to the two percent rule prescribed in Insurance Law § 3425(f)(1). The applicability of the statutes depends on the principal use of the vehicle, not the classification of the motor vehicle.

DRG Medical Implants and No-Fault Insurance Reimbursement (April 30, 2008)

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

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

(b) Payments to general hospitals for reimbursement of inpatient hospital services provided to patients eligible for payments pursuant to the comprehensive motor vehicle insurance reparations act… shall be case based payments per discharge, for each diagnosis-related group[.]

Chapter 592 of the Laws of 2006 amended Workers’ Compensation Law (“WCL”) § 13 to increase the rates of payment for implantable hardware and instrumentation in connection with certain spinal procedures performed under the workers’ compensation system. As codified at WCL § 13(a-1), Chapter 592 limits the scope of the statute to procedures performed under the workers’ compensation system; there is nothing in the statutory provision with respect to reimbursement under the no-fault system or the Public Health Law. Stated differently, Chapter 592 did not amend the Insurance Law, Public Health Law or the DRGs promulgated thereunder in any manner. Therefore, the Public Health Law, through the setting of DRG rates, remains the sole statutory mechanism for establishing permissible charges for inpatient hospital health services rendered under the no-fault system, including the spinal procedures made applicable to workers’ compensation under WCL § 13(a-1).

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