Opinion
43154/03.
Decided June 18, 2004.
Inwood Hill Medical P.C. and Bronx Neurodiagnostics P.C., as assignees of Jose Rincon, Plaintiffs.
Plaintiffs represented by: Amos Weinberg, Esq., Great Neck, NY.
Allstate Insurance Company, Defendant.
Defendant represented by: Stern Montana LLP, New York, NY.
In this action to recover first-party no-fault benefits, plaintiffs Inwood Hill Medical P.C. ("IHM" or "assignee") and Bronx Neurodiagnostics P.C. ("BN" or "assignee") as assignees of Jose Rincon ("Rincon" or "assignor") move for an order pursuant to CPLR § 3212 granting plaintiffs summary judgment against defendant Allstate Insurance Company ("Allstate" or "defendant") in the sum of $8,418.49. Defendant opposes the motion.
Background
Rincon was allegedly in a motor vehicle accident on April 11, 2002. He allegedly suffered personal injuries and was treated by health care providers IHM and BN. The next day, Rincon assigned to IHM and BN his right to recover benefits from Allstate for health care services rendered to him. (See, Exhibit "C" to the Motion). Plaintiffs then mailed the executed assignment of benefits forms and an application for motor vehicle no-fault benefits ("NF-2") to Allstate. Between June 20, 2002 and October 16, 2002, IHM and BN mailed several claim forms denominated as "Verification of Treatment By Attending Physicians or Other Provider of Health Service" ("NF-3" or "claim form") to Allstate. (See, Exhibits "D" "E" to the Motion).
By letter dated July 18, 2002, Allstate via its counsel sent Rincon a notice to appear for an Examination Under Oath ("EUO") on August 23, 2002 to verify his claim for no-fault benefits. Thereafter, by letter dated August 22, 2002, Allstate and Rincon agreed to adjourn the EUO from August 23 to September 16, 2002. (See, Exhibit "G" to the Opposition papers). Allstate conducted Rincon's EUO on September 16, 2002. Allstate also conducted EUO's of Rincon's co-claimants, David Villones (Allstate's policy holder) and Floyd Spencer on August 22, 2002 and September 16, 2002, respectively. (See, Exhibits "C," "D," and "E" to the Opposition papers).
Allstate conceded that it received IHM's and BN's claim forms and it issued its denials as follows: Date of Claim Date Received Date of Denial Claim/Bill Amount
June 18, 2002 June 25, 2002 October 8, 2002 $ 154.30 June 18, 2002 June 25, 2002 October 8, 2002 $ 80.02 June 18, 2002 June 25, 2002 October 8, 2002 $ 1,560.09 June 18, 2002 June 25, 2002 October 8, 2002 $ 2,163.20 June 19, 2002 June 21, 2002 October 8, 2002 $ 265.82 July 2, 2002 July 8, 2002 October 8, 2002 $ 245.81 July 2, 2002 July 8, 2002 October 8, 2002 $ 642.96 July 8, 2002 July 22, 2002 September 18, 2002 $ 2,619.20 July 10, 2002 July 17, 2002 October 8, 2002 $ 132.91 October 2, 2002 October 18, 2002 October 30, 2002 $ 554.18 $ 8,418.49 (See, Exhibits "D" "E" to the Motion and Exhibit "F" to the Opposition papers).Specifically, Allstate denied the bulk of plaintiffs' claim forms by Denial of Claim Forms ("NF-10" or "denials") dated October 8, 2002, stating that "No-Fault benefits are denied based on EUO (Examination Under Oath) of the Claimant and Failure to Establish proof of claim." With respect to a $2,619.20 claim form dated July 8, 2002, Allstate denied it on September 18, 2002 for an additional reason "based on [an unproduced] peer review by Dr. Joseph Cole."
As a result of nonpayment of first-party no-fault benefits, this action ensued by service of a summons and complaint. (See, Exhibit "A" to the Motion). Allstate interposed an answer with several affirmative defenses asserting, inter alia, a lack of coverage under the applicable insurance policy. (See, Exhibit "B" to Opposition papers, Answer at ¶ 11).
Summary Judgment
The movant has the initial burden of proving entitlement to summary judgment. Winegrad v. New York University Medical Center, 64 NY2d 851, 487 NYS2d 316 (1985). Once such proof has been offered, in order to defend the summary judgment motion, the opposing party must "show facts sufficient to require a trial of any issue of fact." CPLR § 3212(b); Alvarez v. Prospect Hospital, 68 NY2d 320, 508 NYS2d 923 (1986); Zuckerman v. City of New York, 49 NY2d 557, 427 NYS2d 595 (1980); Friends of Animals, Inc. v. Associated Fur Mfrs., 46 NY2d 1065, 416 NYS2d 790 (1979); Freedman v. Chemical Construction Corp., 43 NY2d 260, 401 NYS2d 176 (1977); Spearmon v. Times Square Stores Corp., 96 AD2d 552, 465 NYS2d 230 (2d Dept 1983). "It is incumbent upon a [litigant] who opposes a motion for summary judgment to assemble, lay bare and reveal [his, her, or its] proof, in order to show that the matters set up in [the pleadings] are real and are capable of being established upon a trial." Spearmon, 96 AD2d at 553 (quoting Di Sabato v. Soffes, 9 AD2d 297, 301, 193 NYS2d 184, 189 [1st Dept 1959]). If the opposing party fails to submit evidentiary facts to controvert the facts set forth in the movant's papers, the movant's facts may be deemed admitted and summary judgment granted since no triable issue of fact exists. Kuehne Nagel, Inc. v. F.W. Baiden, 36 NY2d 539, 369 NYS2d 667 (1975). In addition, an affidavit or affirmation by an attorney or individual who does not have personal knowledge of the facts is insufficient in support or opposition to the motion as it lacks probative value. Wehringer v. Helmsley Spear, 91 AD2d 585 (1st Dept 1982), affd 59 NY2d 688, 463 NYS2d 417 (1983).
No-Fault Law
History
Approximately thirty years ago, the Legislature enacted sweeping changes to our inadequate tort system of reparations for personal injuries suffered in automobile accidents. This program under Title 18 of the Insurance Law was titled "Comprehensive Automobile Insurance Reparations Act." (L. 1973, ch. 13, effective February 1, 1974, former Insurance Law § 670, et seq). This legislation is commonly referred to as the No-Fault Law because it provides a plan for compensation of victims of motor vehicle accidents for economic losses without regard to fault or negligence. Montgomery v. Daniels, 38 NY2d 41, 378 NYS2d 1 (1975); Overly v. Bangs Ambulance, Inc., 96 NY2d 295, 727 NYS2d 378 (2001).
The noble and stated intent of the No-Fault Law was to create a new and improved insurance reparations system:
[W]hich assures that every auto accident victim will be compensated for substantially all of his economic loss, promptly and without regard to fault; [and] will eliminate the vast majority of auto accident negligence suits, thereby freeing our courts for more important tasks. (Governor's Memorandum of Approval, 1973 N.Y. Legis. Ann. 298). (Emphasis added, quotation marks omitted)
Granger v. Urda, 44 NY2d 91, 98, 404 NYS2d 319, 322 (1978). A lynch-pin of the No-Fault Law was the prompt payment of victim's claims under the so-called "30-day rule" as first-party benefits were "overdue if not paid within thirty-days after the claimant supplies proof of the fact and the amount of loss sustained." Former Insurance Law § 675(1); Montgomery v. Daniels, 38 NY2d 41, 378 NYS2d 1 (1975).
Effective September 1, 1984, the No-Fault Law was re-codified without substantial change from the "Comprehensive Automobile Insurance Reparations Act" to the "Comprehensive Motor Vehicle Insurance Reparations Act" under Article 51 of the Insurance Law. (L. 1984, ch. 367 ch. 805).
For more than thirty years, the Superintendent of Insurance promulgated regulations implementing the No-Fault Law, which were adopted as Regulation 68 and codified at 11 NYCRR part 65. Matter of Medical Society of the State of N.Y. v. Serio, 100 NY2d 854, 768 NYS2d 423 (2003) (" Medical Society II"). In 1999, in an effort to combat abuse of the no-fault laws, the Superintendent proposed an amended Regulation 68. The amended regulation was successfully challenged in the courts. Matter of Medical Society of the State of N.Y., Inc. v. Levin, 185 Misc 2d 536 (Sup Ct, N.Y. County 2000), affd 280 AD2d 309 (1st Dept 2001) (" Medical Society I"). However, while the appeal in that case was pending, the Superintendent reinitiated the rule-making process and promulgated another revised Regulation 68, which was also challenged. In Medical Society II, the Court of Appeals upheld the Superintendent's authority to promulgate the challenged regulations as being fully consistent with Article 51 of the Insurance Law.
Among the most significant changes adopted in the revised regulations was a reduction in the time frames applicable to the filing of notices and proofs of claim. This was based on the Superintendent's determination that much of the abuse was associated with the lengthy time frames within which claims could be presented to insurers. Medical Society II, 100 NY2d at 862, 768 NYS2d at 427. The Superintendent also concluded that the shorter time frames would better effectuate the legislative purpose of providing prompt compensation "as the loss is incurred" pursuant to Insurance Law § 5106(a). Id.
The revised regulations reduced the time limit for filing a notice of claim from ninety (90) to thirty (30) days. 11 NYCRR §§ 65- 1.1; 65-2.4(b). The revised regulations also reduced the time in which to submit proof of loss due to medical treatment from one hundred eighty (180) to forty-five (45) days, and proof of work loss from "as soon as reasonably practicable" to ninety (90) days. 11 NYCRR §§ 65- 1.1; 65-2.4(c). In addition, the revised regulations also increased the time limit for the insurer to seek additional verification requests from ten (10) business days to fifteen (15) business days. 11 NYCRR § 65-3.5(b) and former 11 NYCRR § 65.15(d)(2).
These new regulations have been in effect since April 4, 2002. Medical Society II, 100 NY2d at 862, 768 NYS2d at 427, n 2. This is an important date as the old regulations would apply to a motor vehicle accident occurring prior to April 4, 2002.
Insurance Law § 5106(a)The general framework for payment of first-party benefits derives from Insurance law § 5106(a). It states as follows:
(a) Payments of first-party benefits and additional first-party benefits shall be made as the loss is incurred. Such benefits are overdue if not paid within thirty days after the claimant supplies proof of the fact and amount of loss sustained. If proof is not supplied as to the entire claim, the amount which is supported by proof is overdue if not paid within thirty days after such proof is supplied. All overdue payments shall bear interest at the rate of two percent per month. If a valid claim or portion was overdue, the claimant shall also be entitled to recover his attorney's reasonable fee, for services necessarily performed in connection with securing payment of the overdue claim subject to limitations promulgated by the superintendent in regulations.
Regulation 68, 11 NYCRR § 65
The Insurance Department is the governmental agency responsible for the administration of Article 51 of the Insurance Law. In this capacity, the Superintendent of Insurance, interpreting Insurance Law § 5106, promulgated Regulation 68 and codified it under 11 NYCRR § 65. These regulations contain the specific details for payment of first-party benefits such as notice requirements, claim procedures, follow-up requirements and payment or denial of claims. The courts defer to the special expertise of the Insurance Department in interpreting the Insurance Law except where "the regulation runs counter to the clear wording of a statutory provision [and the regulation then] should not be accorded any weight (citations omitted)." Kurcsics v. Merchants Mutual Ins. Co., 49 NY2d 451, 459, 426 NYS2d 454, 458 (1980).
Four sections of these regulations §§ 65-2.4, 65-3.5, 65-3.6 and 65-3.8 form the blueprint or outline for processing of first-party no-fault claims.
The process begins when an injured party provides notice to the insurer within thirty days after the date of the accident. 11 NYCRR § 65-2.4(b). This notice requirement may be deemed satisfied when the injured party submits an "Application for Motor Vehicle No-Fault Benefits (NYS Form NF-2)." The injured party or that party's assignee (i.e., health care provider) must submit a "written proof of claim" to the insurer for health service expenses within forty-five days after the date services are rendered, and submit proof of work loss within ninety days. 11 NYCRR § 65-2.4(c). For proof of claim for health service expenses, the health care provider usually submits a "Verification of Treatment by Attending Physician or Other Provider of Health Service (NYS Form NF-3)," or less commonly, "Verification of Hospital Treatment (NYS Form NF-4)," or "Hospital Facility Form (NYS Form NF-5)."
Within ten business days after receipt of the completed no-fault application (NF-2), the insurer must forward verification forms for health care or hospital treatment (NF-3, NF-4 or NF-5) to the injured party or that party's assignee. After receipt of the completed verification of health care or hospital treatment forms (NF-3, NF-4 or NF-5), the insurer may seek "additional verification" or further proof of claim from the injured party or that party's assignee within fifteen business days thereof. 11 NYCRR § 65-3.5(b). For instance, the insurer may seek an independent medical examination ("IME") of the injured party which must be held within thirty calendar days from receipt of the initial verification forms ( 11 NYCRR § 65-3.5[d]), or an examination under oath ("EUO") which "must be based upon the application of objective standards so that there is specific objective justification supporting the use of such examination." 11 NYCRR § 65-3.5(e). The injured party must be reimbursed for "any loss of earnings and reasonable transportation expenses." Id. Of course, the insurer may seek various medical documentation as proof of claim within the prescribed fifteen business days. Id.
If any requested additional verification (e.g., IME, EUO or other medical documentation) has not been supplied to the insurer thirty calendar days after the original request, the insurer shall, within ten calendar days, follow-up with the recalcitrant party "either by telephone call, properly documented in the file, or by mail." 11 NYCRR § 65-3.6(b). "At the same time, the insurer shall inform the applicant and such party'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." Id.
After receipt of the notice and proof of claim, the onus then shifts to the insurer to pay or deny the claim within thirty calendar days. 11 NYCRR § 65-3.8(a)(1) (c). No-fault benefits are overdue if not paid within thirty calendar days. Id. Hence, this is called the "30-day rule." If the insurer denies the claim, it often uses a prescribed "Denial of Claim Form (NF-10)" providing a detailed explanation for the denial.
Much confusion has arisen relating to the method of counting the thirty calendar days described in 11 NYCRR § 65-3.8(j). It states as follows:
(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.
Example: Where an insurer sends an application for motor vehicle no-fault benefits 15 days after notice is received at the address of the insurer's proper claim processing office instead of five business days, the 30 calendar days permitted by subdivision (a) of this section are reduced to 20 calendar days.
The best case discussing the method of counting vis-a-vis the 30-day rule is Keith v. Liberty Mutual Fire Ins. Co., 118 AD2d 151, 503 NYS2d 441 (2d Dept 1986). "Although the clock does not begin to run on the thirty-day calendar day requirement until the insurer receives all of the necessary verification . . . the insurer's lack of diligence in obtaining the verification may reduce the thirty-day period even before verification is obtained." Keith, 118 AD2d at 154, 503 NYS2d at 443. In that case, the insurer was four business days late in requesting verification of hospital records. The Appellate Division, Second Department held that the insurer's thirty calendar days to pay or deny the claim must be reduced by four days, leaving twenty-six days. Id. However, the Appellate Division also applied the insurer's follow-up requirements for verification requests set forth in our current regulations, 11 NYCRR § 65-3.6(b), which may be excluded by the plain wording of the regulation. The inconsistency may be resolved by stating that the insurer's time is not reduced where it sought the additional verification requests late but within the prescribed thirty calendar days (i.e., more than fifteen business days and up to twenty-nine calendar days which would not effectively reduce the thirty days to zero). Where the insurer either seeks additional verification requests or even provides a time to respond outside the thirty calendar days, the proverbial clock has run and there is no need to resort to the 11 NYCRR § 65-3.8(j) counting requirement. A contrary interpretation of the regulation would run counter to the clear wording of Insurance Law § 5106(a) providing for the strict 30-day rule. See, Kurciscs v. Merchants Mutual Ins. Co., 49 NY2d 451, 426 NYS2d 454 (1980).
Prima Facie Case
There is a growing debate as to what constitutes the prima facie case in first-party no-fault benefits actions. See, Metroscan Imaging v. American Transit Ins. Co., NYLJ, December 10, 1999, at 27, col 5 (Civ Ct NY County, Smith, J.); Neuro Care Center II v. Allstate Ins. Co., NYLJ, January 28, 2003, at 17, col 5 (Civ Ct NY County, Billings, J.).
To establish a prima facie case, plaintiffs have the burden of proof of demonstrating (1) standing to bring the action; and (2) the submission of completed proofs of claims to defendant which defendant did not pay or deny within thirty days.
Standing
Standing is defined as "a party's right to make a legal claim or seek judicial enforcement of a duty or right." Black's Law Dictionary, Seventh Edition, 1999. The United States Supreme Court nicely articulated the meaning of standing as follows:
Have the appellants alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions? This is the gist of the question of standing.
Baker v. Carr, 369 US 186, 204, 82 S Ct 691, 703 (1962) (Brennan, J.).
First-party no-fault benefits actions are no different and require standing to be addressed. Where the injured party assigned his/her claim to a health care provider or hospital, such assignment of benefits forms must be provided as part of the prima facie case. At the very least, the assignment of benefits forms must include the assignor and assignee's name, the date of the accident, and be signed and dated by the assignor. The plaintiffs' burden in proving standing is satisfied once they submit properly completed assignment of benefits forms. Defendant must then come forward with evidence of a deficiency or a claimed defect in the assignment or such defense will be waived unless it was alleged in the insurer's denial of claim. See, Presbyterian Hospital v. Aetna Casualty Surety Co., 233 AD2d 433, 650 NYS2d 602 (2d Dept 1996), lv dismissed 89 NY2d 1030, 658 NYS2d 245 (1997); Quality Medical Healthcare, P.C. v. Lumberman's Mutual Casualty Co., 2002 N.Y. Slip Op 50098(U), 2002 WL 496433 (App Term 1st Dept, March 19, 2002). An example of a waivable defect is the inclusion of a "reservation of rights" provision in the assignment of benefits form. See, Park Health Center a/a/o Sharpe v. Eveready Ins. Co., 2001 N.Y. Slip Op 40665(U), 2001 WL 1807733 (App Term 2d 11th Jud Dists, December 17, 2001).
This analysis may be best analogized to the defendant's waiver of personal jurisdiction defenses. Plaintiffs must present a completed affidavit of service to satisfy their service requirements. The affidavit of service raises a presumption of delivery which may be either rebutted or waived. See, Slater v. Congress of Racial Equality, Inc., 48 AD2d 623, 367 NYS2d 789 (1st Dept 1975).
Proof of Claims
Plaintiffs must submit completed proofs of claims in similar form to the NYS NF-3, 4, or 5 Forms. Significantly, the forms provide the defendant with the name of the policyholder, name and address of the provider, policy number, date of accident, date of health care service, place of service, description of treatment/service rendered and charges billed. The NF-3 and NF-4 forms also contain an assignment of no-fault benefits option that may be executed by the injured party.
Next, plaintiffs must show that these claims were mailed to the insurer. This can be accomplished in one of at least three ways. First, plaintiffs may provide an affidavit of service and/or proof of mailing. Second, plaintiffs may provide proof of a standard office practice or procedure designed to ensure that claims are properly addressed and mailed. See Amaze Medical Supply Inc. a/a/o Tsigelman v. Allstate Ins. Co., 3 Misc 3d 133(A), NYLJ, June 2, 2004, at 27, col 6, 2004 NY Slip Op 50447(U), 2004 WL 1197345 (App Term 2d 11th Jud Dists, May 20, 2004). Lastly, the date the claim was received as specified on the Denial of Claim (NF-10) form serves as an admission by the insurer and is sufficient proof of mailing. A.B. Medical Services PLLC v. New York Central Mutual Fire Ins. Co., NYLJ, June 2, 2004, at 27, col 4, 2004 NY Slip Op 50507(U), 2004 WL 1302031 (App Term 2d 11th Jud Dists, May 26, 2004); Ocean Diagnostic Imaging, P.C. a/a/o Grishchenko v. Lumbermens Mutual Casualty Co., NYLJ, June 2, 2004, at 27, col 3, 2004 NY Slip Op 50510(U), 2004 WL 1301952 (App Term 2d 11th Jud Dists, May 26, 2004).
Once plaintiffs show that properly completed claim forms were submitted to the insurer, they must then demonstrate that the claims were not paid or denied by the insurer within thirty calendar days of receipt thereof, as discussed below.
30-Day Rule
The Court of Appeals in the landmark case of Presbyterian Hospital in the City of N.Y. a/a/o DiGuisto v. Maryland Casualty Co., 90 NY2d 274, 282, 660 NYS2d 536, 542 (1997), declared that "an insurer may be precluded from interposing a statutory exclusion defense for failure to deny a claim within 30 days as required by Insurance Law § 5106(a)." The Court of Appeals explained that the strict construction of the "30-day rule" was intended as a "trade-off of the no-fault reform [which] still allows carriers to contest ill-founded, illegitimate and fraudulent claims, but within a strict, short-leased contestable period and process designed to avoid prejudice and red-tape dilatory practices." Presbyterian, 90 NY2d at 285, 660 NYS2d at 542.
Lately, the courts have liberally interpreted the plaintiffs' burden as to require only submission of "complete proofs of claims to defendant which defendant did not pay or deny within 30 days." Amaze Medical Supply Inc. a/a/o Darlington v. Allstate Ins. Co., 2 Misc 3d 134(A), 2004 NY Slip Op 50211(U), 2004 WL 758248 (App Term 2d 11th Jud Dists, March 26, 2004). See also, Melbourne Medical, P.C. a/a/o Cabreja v. Utica Mutual Ins. Co., NYLJ, June 11, 2004, at 30, col 6 (App Term 2d 11th Jud Dists); Amaze Medical Supply, Inc. v. Colonial Penn Ins. Co., NYLJ, March 3, 2004, at 26, col 1, 2004 NY Slip Op 50471(U), 2004 WL 1243410 (App Term 2d 11th Jud Dists, March 3, 2004); A.B. Medical Services PLLC a/a/o Suzolyanski v. CNA Ins. Company, 1 Misc 3d 137(A), 2004 NY Slip Op 50061(U), 2004 WL 314819 (App Term 1st Dept, February 11, 2004); Damadian MRI in Elmhurst, P.C. a/a/o Jones v. Liberty Mutual Ins. Co., 2 Misc 3d 128(A), 2003 NY Slip Op 51700(U), 2003 WL 23310887 (App Term 9th 10th Jud Dists, Dec. 24, 2003); A.B. Medical Services PLLC a/a/o Boliere v. Lumbermens Mutual Casualty Co., NYLJ, June 2, 2004, at 27, col 4, 2004 NY Slip Op 24194, 2004 WL 1301910 (App Term 2d 11th Jud Dists, May 26, 2004); A.B. Medical Services PLLC v. New York Central Mutual Fire Ins. Co., NYLJ, June 2, 2004, at 27, col 4, 2004 NY Slip Op 50507(U), 2004 WL 1302031 (App Term 2d 11th Jud Dists, May 26, 2004); Amaze Medical Supply Inc. a/a/o Bermudez v. Eagle Ins. Co., 2 Misc 3d 128(A), 2003 N.Y. Slip Op 51701(U), 2003 WL 23310886 (App Term 2d 11th Jud Dists, December 24, 2003); Amaze Medical Supply Inc. a/a/o Tsigelman v. Allstate Ins. Co., 3 Misc 3d 133(A), NYLJ, June 2, 2004, at 27, col 6, 2004 NY Slip Op 50447(U), 2004 WL 1197345 (App Term 2d 11th Jud Dists, May 20, 2004); Liberty Queens Medical, P.C. v. Liberty Mutual Ins. Co., 2002 NY Slip Op 40420(U), 2002 WL 31108069 (App Term 2d 11th Jud Dists, June 27, 2002) ("plaintiff health care provider established a prima facie case by the submission of statutory forms of proof of claim and the amount of the loss . . ." [citations omitted]).
Moreover, the Appellate Term, First Department has recently held that due to an untimely denial, the insurer "waived any defenses relating to the adequacy of plaintiffs' claim forms, including the alleged absence of necessary signatures." A.B. Medical Services PLLC a/a/o Suzolyanski v. CNA Ins. Co., 1 Misc 3d 137(A), 2004 NY Slip Op 50061(U), 2004 WL 314819 (App Term 1st Dept, February 11, 2004).
The rationale for this standard was best expressed by the Appellate Term, Second Department in both Amaze Medical Supply Inc. v. Eagle Ins. Co., 2 Misc 3d 128(A), 2003 N.Y. Slip Op 51701(U), 2003 WL 23310886 (App Term 2d 11th Jud Dists, December 24, 2003) and Damadian MRI in Elmhurst, P.C. a/a/o Jones v. Liberty Mutual Ins. Co., 2 Misc 3d 128(A), 2003 NY Slip Op 51700(U), 2003 WL 23310887 (App Term 9th 10th Jud Dists, Dec. 24, 2003), as follows:
The situation may be analogized to an account stated where, upon the insurer's failure to timely and properly deny the bill as embodied in the claim form, the insurer is presumed to have acquiesced to its correctness, thereby rendering the insurer liable thereon.
However, the Court of Appeals has also held that an untimely disclaimer or denial does not prevent the insurer from raising a lack of coverage defense "premised on the fact or founded belief that an alleged injury does not arise out of an insured incident." Central General Hospital a/a/o Mandrels v. Chubb Group of Ins. Cos., 90 NY2d 195, 199, 659 NYS2d 246, 248 (1997). Thus, even if the insurer fails to pay or deny a claim within thirty days of its submission, it may still raise a lack of coverage defense.
Medical Necessity
Courts have held that plaintiffs need not demonstrate medical necessity as part of their prima facie case. Dermatossian v. New York City Transit Authority, 67 NY2d 219, 224, 501 NYS2d 784, 787 (1986) ("A claimant to receive payment need only file a 'proof of claim' . . . and the insurers are obligated to honor it promptly or suffer the statutory penalties"); A.B. Medical Services PLLC v. Geico Ins., 2 Misc 3d 26, 773 NYS2d 773 (App Term 2d Dept 2003) ("We have rejected arguments that a no-fault benefits claimant is obligated to prove the treatment's medical necessity, at the claim stage or in support of its motion for summary judgment in a subsequent action on the claim [citations omitted]"); Choicenet Chiropractic, P.C. v. Allstate Ins. Co., 2003 NY Slip Op 50672(U), 2003 WL 1904296 (App Term 2d 11th Jud Dists, January 23, 2003); Liberty Queens Medical, P.C. v. Liberty Mutual Ins. Co., 2002 NY Slip Op 40420(U), 2002 WL 31108069 (App Term 2d 11th Jud Dists, June 27, 2002).
The insurer may raise the defense that a claimed procedure was not medically necessary with a timely denial pursuant to the 30-day rule. Presbyterian, 90 NY2d 274, 282, 660 NYS2d 536, 542 (1997); Liberty Queens Medical, P.C. v. Liberty Mutual Ins. Co., 2002 NY Slip Op 40420(U), 2002 WL 31108069 (App Term 2d 11th Jud Dists, June 27, 2002). If there is an untimely disclaimer or denial in derogation of the 30-day rule, the insurer's lack of medical necessity defense is precluded. Amaze Medical Supply Inc. a/a/o Darlington v. Allstate Ins. Co., 2 Misc 3d 134(A), 2004 NY Slip Op 50211(U), 2004 WL 758248 (App Term 2d 11th Jud Dists, March 26, 2004).
Furthermore, in support of or opposition to a summary judgment motion or at trial, the defense that the claim was not medically necessary must be supported by sufficient factual evidence or proof and cannot simply be conclusory. Amaze Medical Supply Inc. v. Eagle Ins. Co., 2 Misc 3d 128(A), 2003 N.Y. Slip Op 51701(U), 2003 WL 23310886 (App Term 2d 11th Jud Dists, December 24, 2003); Choicenet Chiropractic, P.C. v. Allstate Ins. Co., 2003 NY Slip Op 50672(U), 2003 WL 1904296 (App Term 2d 11th Jud Dists, January 23, 2003).
Fraud
No-fault insurance fraud is a rising and significant problem. The Court of Appeals listed alarming statistics as follows:
Between 1992 and 2001, reports of suspected automobile insurance fraud increased by 275%, the bulk of the increase occurring in no-fault insurance fraud. Reports of no-fault fraud rose from 489 cases in 1992 to 9,191 in 2000, a rise of more than 1700%. No-fault fraud accounted for three quarters of the 16,902 reports of automobile-related fraud received by the Insurance Department's Frauds Bureau in 2000, and more than 55% of the 22,247 reports involving all types of insurance fraud. In 1999, the Superintendent established a No-Fault Unit within the Frauds Bureau to focus specifically on no-fault fraud and abuse. By one estimate, the combined effect of no-fault insurance fraud has been an increase of over $100 per year in annual insurance premium costs for the average New York motorist.
Medical Society II, 100 NY2d at 861, 768 NYS2d at 426.
Notwithstanding the above, where a defense is based on fraud, the defendant insurer must allege in detail the particular facts constituting the wrong as mandated by CPLR § 3016(b). The general standard the insurer must assert for a lack of coverage or fraud defense is one "premised on the fact or founded belief that the alleged injury does not arise out of an insured incident" but was a deliberate event staged in furtherance of a scheme to defraud the insurer. Central General Hospital v. Chubb Group of Ins. Cos., 90 NY2d at 199, 659 NYS2d at 248. See also, Metro Medical Diagnostic, P.C. v. Eagle Ins. Co., 293 AD2d 751, 741 NYS2d 284 (2d Dept 2002). Thus, the insurer has the burden to come forward with proof in admissible form to establish "the fact" or "foundation for its belief" that the alleged incident was a staged event to defraud the insurer. Mount Sinai Hospital v. Triboro Coach Inc., 263 AD2d 11, 699 NYS2d 77 (2d Dept 1999). Indeed, unsupported conclusions and "suspicions" as well as "unsubstantiated hypotheses and suppositions" are insufficient to raise a triable issue of the assignor's alleged fraud. See, A.B. Medical Services PLLC v. Eagle Ins. Co., 3 Misc 3d 8, 776 NYS2d 434 (2d Dept 2002); A.B. Medical Services PLLC v. Lumbermen's Mutual Casualty Co., NYLJ, September 30, 2003, at 17, col 1 (Civ Ct Kings County, Schack, J.); Bonetti v. Integan National Ins. Co., 269 AD2d 413, 703 NYS2d 217 (2d Dept 2000); Melbourne Medical, P.C. a/a/o Cabreja v. Utica Mutual Ins. Co., NYLJ, June 11, 2004, at 30, col 6 (App Term 2d 11th Jud Dists); A.M. Medical P.C. v. New York Central Mutual Ins. Co., 2 Misc 3d 1012(A), NYLJ, April 29, 2004, at 19, col 1, 2004 N.Y. Slip Op 50298(U), 2004 WL 869595 (Civ Ct Queens County, Butler, J.) ("low impact report" failed to show that incident was a staged event to defraud the insurer).
There is a dearth of case law to provide guidance as to what is required for the insurer to establish a fraud defense. The Appellate Division, Second Department stated that "an expert's affidavit will usually [but not always] be necessary to effectively establish the basis of an insurer's founded belief." Mount Sinai Hospital v. Triboro Coach Inc., 263 AD2d at 20, 699 NYS2d at 84 (emphasis added). Also, where it is proven that the vehicles were involved in several collisions within a short period of time after the insurer issued insurance policies for vehicles registered to the insured, that may satisfy the definition of "founded belief." State Farm Mutual Automobile Ins. Co. v. Laguerre, 305 AD2d 490, 759 NYS2d 531 (2d Dept 2003). The proof adduced may be an affidavit of the investigator who has personal knowledge of the alleged fraud investigation and affidavits from individuals involved in the collisions and/or the police accident report for each of the collisions, if any. Id.; Melbourne Medical, P.C. a/a/o Cabreja v. Utica Mutual Ins. Co., NYLJ, June 11, 2004, at 30, col 6 (App Term 2d 11th Jud Dists).
Specificity of Denial of Claim
It is well settled law that to deny or disclaim coverage for bodily injuries, an insurer must give written notice "as soon as is reasonably possible" to the injured party and the insured with a high degree of specificity of the grounds on which the denial or disclaimer is predicated. See, Insurance Law § 3420(d); General Accident Ins. Group v. Cirucci, 46 NY2d 862, 414 NYS2d 512 (1979); State Farm Mutual Automobile Ins. Co. v. Cooper, 303 AD2d 414, 756 NYS2d 87 (2d Dept 2003). The Court of Appeals concisely explained the need for specificity as follows:
Absent such specific notice, a claimant might have difficulty assessing whether the insurer will be able to disclaim successfully. This uncertainty could prejudice the claimant's ability to ultimately obtain recovery. In addition, the insured's responsibility to furnish notice of the specific ground on which the disclaimer is based is not unduly burdensome, the insurer being highly experienced and sophisticated in such matters.
General Accident Ins. Group v. Cirucci, 46 NY2d at 864, 414 NYS2d at 514. Therefore, the insurer is limited to the specific grounds alleged in its written Denial of Claim.
Discussion
Plaintiffs have demonstrated their prima facie case by submitting executed assignment of benefits forms and completed copies of proofs of claims which were mailed and received by the defendant, but not paid or denied within thirty days of receipt. (See Exhibits "C," "D," "E" to the Motion). The burden then shifts to the defendant to demonstrate the existence of a material issue of fact. See, Alvarez v. Prospect Hospital, 68 NY2d 320, 508 NYS2d 923 (1986).
Inasmuch as the lack of coverage defense may essentially be asserted at any time, defendant really does not argue that plaintiffs' claims were timely denied, but rather that "Mr. Rincon's [assignor's] injuries did not arise from the accident, or that the accident may have been staged." (See Affidavit of Maureen Carbone, Claim Representative, in Opposition to Motion, sworn to on April 21, 2004, at ¶ 7). Defendant's claim representative bases this conclusion on EUO testimony of Rincon as well as his two co-claimants, Villones and Spencer, as follows:
i) The claimants declined medical treatment at the scene of the accident, did not seek treatment at any hospital, and waited approximately 2-5 days to seek treatment at the same clinic where they received similar to identical treatment. (Rincon Tr: 59, 62; Villones Tr: 40, 48; Spencer Tr: 50, 53)
ii) Claimants missed minimal, if any, time from work as a result of the accident. (Rincon Tr: 10; Spencer Tr: 11)
iii) Claimants did not consult with their regular physicians or medical centers in regard to the accident. (Rincon Tr: 37; Villones Tr: 16; Spencer Tr: 26)
iv) Claimants set forth sharply discrepant accounts as to the arrangements for and purpose of their meeting on the day of the accident, how much time elapsed before the accident occurred after having entered the vehicle, whether or not the adverse vehicle fled the scene of the accident, how the police were alerted to the scene, and how they learned of the clinic. (Rincon Tr: 43-45, 51-52, 58, 63; Villones Tr: 21-22, 37-38; Spencer Tr: 33-36, 41, 50, 52).
(See Affidavit of Maureen Carbone, Claim Representative, in Opposition to Motion, sworn to on April 21, 2004, at ¶ 6).
In this case, the minor discrepancies in the testimony as well as the claimants' minimal work loss and use of the same clinic, are insufficient as a matter of law to demonstrate a triable issue as to a fraud defense "premised on the fact or founded belief that the alleged injury does not arise out of an insured incident." Central General Hospital v. Chubb Group of Ins. Cos., 90 NY2d at 199, 659 NYS2d at 248. Defendant failed to present either competent evidence such as expert testimony (e.g., peer review report) that the alleged injuries were not causally related to the accident or even an investigator's report. Mount Sinai Hospital v. Triboro Coach Inc., 263 AD2d at 20, 699 NYS2d at 84. The sum and substance of the defendant's defense is based on "unsubstantiated hypotheses and suppositions." A.B. Medical Services PLLC v. Eagle Ins. Co., 3 Misc 3d 8, 10, 776 NYS2d 434, 436 (2d Dept 2002).
Moreover, the defendant's explanation in the denial of claim forms justifying the denial "based on EUO testimony," is vague and lacks the "high degree of specificity" on which the denials must be predicated. See, Insurance Law § 3420(d); CPLR § 3016(b); General Accident Ins. Group v. Cirucci, 46 NY2d 862, 414 NYS2d 512 (1979).
Conclusion
Based on the foregoing, this Court grants plaintiffs summary judgment against defendant in the sum of $8,418.49 with statutory interest at a rate of two percent per month and attorneys' fees of 20% thereof. 11 NYCRR §§ 65-3.9(a) 65-3.10; St. Clare's Hospital v. Allstate Ins. Co., 215 AD2d 641, 628 NYS2d 128 (2d Dept 1995). Submit judgment on notice to all parties.
The foregoing constitutes the decision and order of this Court. Courtesy copies of this decision and order have been mailed to counsel for the parties.