Opinion
August 9, 2001.
Israel Israel, Great Neck, for plaintiff.
Murray Lemonik, Jericho, for defendant.
The instant motion presents an issue which is both of first impression, and of substantial significance to the no-fault insurance system.
This motion represents an attempt to expand beyond its already capacious bounds the much-litigated preclusion doctrine first enunciated by the Court of Appeals in Presbyterian Hospital in the City of New York v. Maryland Casualty Co., 90 N.Y.2d 274 (1997). The plaintiff's position is superficially supported by broad dicta contained in both the Presbyterian Hospital decision itself, and in Appellate Division decisions. Nevertheless, scrutiny of the factual context within which those appellate tribunals made their statements; the text of the applicable Insurance Department regulations; and the statutory intent sought by those regulations to be implemented, leads to a rejection of the plaintiff's attempted interpretation.
For the reasons more fully set forth below, the Court of Appeals and Appellate Division dicta relied upon by the plaintiff is deemed confined to its facts. The plaintiff's motion is denied.
This is an action brought by a plaintiff provider of medical services, as assignee of the provider's patient, against the patient's insurer, for the recovery of an unpaid medical no-fault bill, statutory interest and attorney's fees. The plaintiff moves to strike the affirmative defenses alleged by the defendant in its answer, and to grant summary judgment to the plaintiff.
Insurance Law § 5106 (a) provides, inter alia, that "[p]ayments of first party benefits and additional first party benefits . . . are overdue if not paid within thirty days after the claimant supplies proof of the fact and amount of the loss sustained." New York State Department of Insurance Regulations govern the applicable claim procedure.
11 NYCRR § 65.15 (d)(1) provides that "[w]ithin ten business days after receipt of the completed application for motor vehicle no-fault benefits, the insurer shall forward, to the parties required to complete them, those prescribed verification forms it will require prior to payment of the initial claim." If, following receipt of the completed prescribed verification forms, additional verification is needed, 11 NYCRR § 65.15 (d)(2) gives the insurer another ten business days to request the same. 11 NYCRR § 65.15 (g)(1)(i) provides that "[n]o-fault benefits are overdue if not paid within thirty calendar days after the insurer receives verification of all of the relevant information requested pursuant to subdivision (d) of this section."
Under the line of cases beginning with Presbyterian Hospital, supra, and Central General Hospital v. Chubb Group of Insurance Companies, 90 N.Y.2d 195 (1997), the Court of Appeals established that a failure of an insurer to comply with the "thirty day rule" will result in the insurer being precluded from raising any defense, other than lack of coverage, to an action (such as the instant one) for benefits. Moreover — and notwithstanding the defendant's argument in the instant case to the contrary — it has been established that the preclusion will extend to a defendant insurer's argument that there has been an insufficient showing of the "medical necessity" of the services for which reimbursement is sought. Central General Hospital v. Chubb Group of Insurance Companies, 228 A.D.2d 406, 407 (2nd Dep't 1996), rev'd on other grounds, 90 N.Y.2d 195 (1997), Vinings Spinal Diagnostic, P.C. v. Liberty Mutual Insurance Company, 186 Misc.2d 287 (Dist.Ct., Nassau Co. 2000). Accord, Mount Sinai Hospital v. Triboro Coach Inc., 263 A.D.2d 11, 18 (2nd Dep't 1999) ("It is clear from the text of Central General that an insurer may not claim . . . that the treatment rendered was . . . unnecessary."); Country-Wide Insurance Co. v. Zabloski, 257 A.D.2d 506, 507 (1st Dep't), lv. to app. den'd, 93 N.Y.2d 809 (1999). A hearing on the merits is, therefore, basically unavailable to the insurer once the "thirty day rule" is breached.
In the instant case, it is not disputed that the plaintiff's claim, together with supporting documentation, was submitted to the defendant insurer; and that it was more than thirty calendar days thereafter before the insurance company denied the claim. The crucial issue in this case, therefore, is whether the defendant insurer obtained an extension of the thirty days.
As noted above, the regulations themselves provide for such an extension if a request is made for additional verification. In such an event, the insurer gets until thirty days after the receipt of the requested additional proof to make a determination on the claim.
The regulations require the request for additional verification to be made within ten days of the receipt of the claim. The parties have stipulated for purposes of this motion that the defendant insurer's request for additional verification was not made until eleven business days until after receipt of the claim.
The plaintiff argues that because the request for additional verification was untimely, the defendant insurer waived its right to extend the thirty day period, and was therefore required to make a determination on the claim within thirty days of the original submission.
The plaintiff's position finds apparent support in Presbyterian Hospital. In Presbyterian Hospital, the insurer was precluded by a violation of the "thirty day rule" from advancing an intoxication exclusion defense. The Court stated, 90 N.Y.2d at 280-281, that the insurer, because no request for verification was made within the allotted 10 days, had failed to obtain an extension of the 30 days:
In order for the insurer to have properly and timely requested the blood alcohol test results, it had to forward prescribed verification forms to the appropriate parties within 10 days after receipt of the completed application (see, 11 NYCRR § 65.15 [d][1]). The insurer utterly and flatly failed to do so and, thus, chose [not] or neglected to take advantage of its prescribed extension of time opportunity for considering denial of the hospital's claim.
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[S]ince Maryland neither denied the claim within 30 days after receiving it nor properly sought to extend that time frame by requesting verification, using the prescribed forms, within 10 days after receipt of the hospital's completed application, it failed to comply with its obligation to timely deny or disclaim Presbyterian's no-fault claim.
Language utilized by the Appellate Division, too, would appear to support the plaintiff. In Presbyterian Hospital in the City of New York v. Aetna Casualty Surety Co., 233 A.D.2d 431, 432 (2nd Dep't 1996), lv. to app. den'd, 90 N.Y.2d 802 (1997), the Appellate Division stated that the regulatory requirement that if a request for verification is not responded to within thirty days it must be "followed up" within 10 days "must be strictly construed," and imposed preclusion against an insurer who failed to follow up within the allotted 10 day period. See also, Mount Sinai Hospital v. Triboro Coach Incorporated, 263 A.D.2d 11, 17 (2nd Dep't 1999) (insurer's "failure to raise such objections [to adequacy of claim forms] within the 10-day verification period constitutes a waiver of any defenses based thereon [citation omitted].").
11 NYCRR § 65.15 (g)(10), however, appears to contradict this case authority. 11 NYCRR § 65.15 (g)(10) provides:
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 . . . 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 business 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 paragraph (1) of this subdivision are reduced to 20 calendar days.
The unmistakable regulatory intent was that any delay by the defendant insurer in sending out forms requesting additional verification will act to shorten the defendant insurer's time for considering the claim upon receipt of full proof, but will not wholly bar the insurer from obtaining the benefit of a deferred period to obtain and consider the required proof.
The clear effect — but obscure nature — of this regulatory provision has been noted by commentators in the field. As observed in Jaffe and Chu, Using Independent Medical Examiners in No-fault, N.Y. Law Journal, May 10, 2001, at 1, col. 1 (footnote omitted):
Most [plaintiff's attorney's] learn quickly that the thirty days are extended by verification requests. Some know the exceptions to the preclusionary rule. Almost no one knows that a verification request more than 10 business days subsequent to receipt of a claim is not defective, but rather reduces the number of days from 30 in which and insurer must pay or deny.
The cases which appear to support the plaintiff are in fact not to the contrary. In each of those cases, the insurer had delayed to such an extent that not only was the 10 day limit surpassed, but more than 30 days had been exceeded, so that even the application of 11 NYCRR § 65.15 (g)(10) could not have saved the insurer. See, Presbyterian Hospital, supra, 90 N.Y.2d at 277, 280 (claim form submitted on August 15, 1994, and verification not requested until October 13, 1994); Aetna Casualty, supra, 233 A.D.2d at 432-433 (Verification requested November 13, 1992, thirty calendar days thereafter was December 12, 1992, 10 days limit for follow-up expired, but no follow-up made before February 26, 1993); Mount Sinai Hospital, supra, 263 A.D.2d at 13-17 (claim form submitted November 14, 1997, but first request for verification made thereafter was December 22, 1997). Those appellate courts were therefore not required by the facts before them to focus on the specific issue presented here, and the broad general language utilized by them should not be construed as determinative of it.
The statute itself — Insurance Law § 5106 — gives the insurer thirty days "after the claimant supplies proof of the fact and amount of loss sustained" to deny the claim. The regulatory scheme standardizes and delimits the procedure and time frame for obtaining that proof, and thus properly implements the statutory purpose. To determine, however, as the plaintiff here requests, that a one day deviation from the promulgated standards deprives the insurer entirely of an opportunity to obtain and review the needed "proof," would contravene rather than implement the statutory intent.
As held in Vinings Spinal Diagnostic P.C. v. Liberty Mutual Insurance Company, supra, 186 Misc.2d at 291, "the raison d'etre of the Presbyterian Hospital-Central General line of cases is 'a focus on avoiding prejudice to insureds by providing for prompt payment or disclaimers of claims.'" [quoting Presbyterian Hospital]. By providing that any delay by the insurer in mailing out the verification forms will penalize the insurer by truncating the presumptive thirty day period which the insurer itself would otherwise have to eventually review the proof submitted, 11 NYCRR § 65.15 (g)(10) adequately serves this purpose. Not so the draconian result which the plaintiff would visit upon the insurer by dint of a single day's delay.
In the instant case, after receipt of the plaintiff's verification, the defendant insurer is conceded to have denied the plaintiff's claim well within the 29 days which remained to it under 11 NYCRR § 65.15 (g)(10). The defendant insurer is therefore entitled to have this case addressed upon its merits.