Opinion
Index No. CV-736122-16/KI
10-29-2021
QUALITY HEALTH SUPPLY CORP., a/a/o Shea Evertz, Plaintiff, v. AMICA MUTUAL INSURANCE COMPANY, Defendant.
Plaintiff's Firm, Oleg Rybak, Attorney at Law, The Rybak Firm, PLLC 1810 Voorhies Ave, 3rd Fl., Ste. 7, Brooklyn, New York 11235 Telephone: (718) 975-2037 orybak@rybakfirm.com Defendant's Firm: Lawrence N. Rogak, Attorney at Law, Office of Lawrence N. Rogak LLC, 3355 Lawson Blvd Unit 2, Oceanside NY 11572, Telephone: (516)-763-2996, InsuranceLawyer@yahoo.com
Plaintiff's Firm, Oleg Rybak, Attorney at Law, The Rybak Firm, PLLC 1810 Voorhies Ave, 3rd Fl., Ste. 7, Brooklyn, New York 11235 Telephone: (718) 975-2037 orybak@rybakfirm.com
Defendant's Firm: Lawrence N. Rogak, Attorney at Law, Office of Lawrence N. Rogak LLC, 3355 Lawson Blvd Unit 2, Oceanside NY 11572, Telephone: (516)-763-2996, InsuranceLawyer@yahoo.com
Patria Frias-Colón, J.
Decision, pursuant to Civil Procedure Law and Rules ("CPLR") § 4213 ("Trial by the Court"), following virtual trial via the Teams application platform, held on September 1, 2021, and trial briefs submitted by counsel representing both parties.
Papers submitted for the above-listed index Received:
Plaintiff's Trial Memorandum of Law August 30, 2021
Defendant's Trial Memorandum of Law August 30, 2021
Procedural History
Plaintiff Quality Health Supply Corp. ("Plaintiff") filed this case against Defendant Amica Mutual Insurance Company ("Defendant") on October 3, 2016 seeking assigned no-fault benefits in the amount of $1,452.56 for services it rendered to Assignor Shea Evertz, as well as statutory interest and attorney's fees, arising from injuries reportedly suffered by the assignor in an automobile accident in Brooklyn on October 1, 2015 while riding as a passenger in Defendant's policy-holder's car See Defendant's Exhibits 1 and 6. Defendant filed its answer on or about November 21, 2016. See D. Ex. 2.
At trial, the parties stipulated to the following Defendant's exhibits admitted into evidence: Plaintiff's Summons and Complaint (D. Ex. 1); Defendant's Answer dated Nov. 9, 2016 (D. Ex. 2); Decisions/Orders of the New York City Civil Court, Judge Odessa Kennedy, Kings County, entered January 11, 2018 and January 13, 2020 (D. Ex. 3); Policy-holder's insurance policy (D. Ex. 4); Defendant's payment ledger (D. Ex. 5); copies of cashed claim-payment checks (D. Ex. 6); and Defendant's Witness Disclosure form (D. Ex. 7). (See T. at 6-7). All of Defendant's trial exhibits for the trial were uploaded to the Kings County Civil Court via the Electronic Document Delivery System ("EDDS") under EDDS number 8FEEOO (T. at 7). The EDDS # for Plaintiff's Trial Memorandum of Law is A3AAK4.
By decision dated January 11, 2018, Judge Odessa Kennedy denied Defendant's motion for summary judgment and Plaintiff's cross-motion for summary judgment, finding that there were triable issues of fact as to the defense of non-receipt of certain bills. By decision dated January 7, 2020, that court sua sponte vacated its prior decision and re-addressed both the motion and the cross-motion, adding that it would also address Defendant's motion for summary judgment on the additional ground of policy exhaustion.
With respect to Defendant's argument that it was entitled to summary judgment because its policy limits had been exhausted, Judge Kennedy ruled that Defendant's reliance on a payment ledger absent information as to who and how the ledger was created and maintained, failed to meet the evidentiary requirements of CPLR § 4518 (D. Ex. 3). That Court further found that Defendant's references to the payment ledger's entries for "paid date", "service period start" and "service period end" were insufficiently supported with other proof such that the ledger was too ambiguous to make a prima facie showing that Defendant was entitled to summary judgment relief. Accordingly, that Court held that policy exhaustion and receipt of bills remained triable issues of fact thereby denying both motions. (T. at 19-20; D. Ex. 3).
New York's no-fault insurance law provides compensation of up to $50,000 of "basic economic loss" incurred by individuals who are injured in automobile accidents. See NY Ins. Law § 5102.
On or about August 30, 2021, both counsel submitted trial memoranda of law in support of their respective positions. Defendant opposes any award to Plaintiff on the grounds that an insurer is not required to make additional payments where the policy limits of $50,000 in basic economic loss insurance coverage have been paid-out/exhausted, as it had done here. Plaintiff asserts entitlement to judgment because it submitted the disputed bills prior to the policy being exhausted and before other claims were submitted that Defendant did pay; therefore, Defendant is precluded from asserting that defense.
Statement of Facts and Evidence from the Trial
On September 1, 2021, this Court conducted a Microsoft TEAMS video trial. The parties stipulated that Plaintiff timely and properly submitted its bills to Defendant before the policy limits were exhausted, and that Defendant neither requested additional verification on the claims nor denied them (T. at 6, 14-15). The parties also stipulated that the testimony given by Maryanne Gentile, who was employed by Defendant as a Supervising Claims Representative and who testified on September 1, 2021 in Jules Francois Parisien, M.D. a/a/o Shea Evertz v. Amica Mutual Ins. Co. (CV 736124-16/KI), a case which involved the same attorneys, same accident and same assignor, would be given full force and effect in the instant case (T. 6).
Defendant's answer to Plaintiff's Summons and Complaint (D. Ex. 1) denied the contents of 28 paragraphs of the Summons and Complaint, including those referencing the submission of the unpaid bills. See D. Ex. 2. However, this Court finds the trial stipulations, as well as an email sent by Defendant's counsel referenced at trial (see T. at 6), show that Defendant relied entirely on the defense of policy-exhaustion and abandoned the defense that it did not receive the bills.
On or about October 9, 2015, Plaintiff provided the assignor with certain medical supplies. See D. Ex. 1. Defendant made one payment to Plaintiff in the amount of $3,337.96 by check dated February 23, 2016. See Exhs. 5 and 6. Defendant neither made nor denied payment of several of Plaintiff's bills. See Ex. 1.
Reviewing Exhibit 5 (Defendant's Payment Ledger) and Exhibit 6 (Copies of checks paid), Defendant's payments to Plaintiff totaled $3,337.96.
This included a bill for $699.00 that was mailed to Defendant on or about November 12, 2015 for services provided on October 27, 2015; $398.00 that was mailed to Defendant on or about November 12, 2015 for services provided on October 27, 2015; and $355.56 that was mailed to Defendant on or about November 12, 2015 for services provided on October 27, 2015. This totals $1452.56. See Defendant's Ex. 1.
Defendant's Exhibits 5 and 6 demonstrate that Defendant made payments to providers of services or equipment beginning on or about February 22, 2016, with the last payment on or about October 24, 2016. Maryanne Gentile, was in charge of processing no-fault claims testified that Defendant paid-out $50,000 on behalf of Assignor Evertz, which was the personal injury protection ("PIP") limit on the policy and thereby exhausted the policy benefits when it was reached on October 24, 2016 (T. at 27, 33, 36, Jules Francois Parisien M.D. a/a/o Shea Evertz v. Amica Mutual Ins. Co. , CV 736124-16/KI, Sept. 1, 2021).
NY Ins. Law § 5102(a) states that basic economic loss means up to $50,000 of medical expense, work loss and other expense of each eligible injured person on account of any single accident. Basic economic loss also includes an option to purchase an additional $25,000 of coverage after the $50,000 of basic economic loss has been exhausted. See NY Ins. Law § 5102(a)(5) ; 11 NYCRR § 65-1.2(a).
Gentile testified that, even after the policy was exhausted, certain payments were made, but that these were expense-related payments and not claim-related payments, i.e., loss payments, that go towards the treatment of the claimant (T. at 51-52, CV 736124-16/KI; D. Ex. 5). She testified that a loss payment is one typically made to a service provider and the amount paid goes towards the $50,000 limit, whereas the expense payments are other types of fees, such as for an Independent Medical Examination ("IME") and to pay defense counsel (T. at 52, CV 736124-16/KI).
Issues Presented:
Whether Plaintiff is entitled to reimbursement, despite the policy payout limit of $50,000 having been reached by the Defendant.
Positions of the Parties:
Plaintiff argues that Defendant cannot argue policy-exhaustion as a reason for not paying its claims when it initially denied payment on other grounds prior to the policy being exhausted. In support of its argument, Plaintiff first cites New York's no-fault insurance rule/regulation 11 New York Codes, Rules and Regulations ("NYCRR") § 65-3.15 for the principle that payments for basic economic loss shall be made to the applicant and/or assignee in the order in which each service was rendered or each expense was incurred, provided claims therefor were made to the insurer prior to the exhaustion of the policy. Plaintiff cites Nyack Hosp. v. General Motors Acceptance Corp. , 8 N.Y.3d 294, 301, 832 N.Y.S.2d 880, 864 N.E.2d 1279 (2007) as treating 11 NYCRR § 65-3.15 as a "priority-of-payment rule" meaning that if Plaintiff has submitted a fully-verified claim to Defendant-insurer, Defendant must pay Plaintiff ahead of any other unpaid verified claims or expenses incurred later, up to the policy's limits.
Plaintiff cites Alleviation Med. Servs. v. Allstate Ins. Co. , 55 Misc 3d 44 (App. Term 2017), aff'd on other grounds, 191 A.D.3d 934 (2d Dep't 2021), for its application of the priority-of-payment rule and the Nyack Hosp. decision, where the Court found that:
by denying the claim, defendant implicitly declared that the claim at issue was fully verified. As we read Nyack Hosp. to hold that fully verified claims are payable in the order they are received, defendant's argument—that it need not pay the claim at issue because defendant paid other claims after it had denied the instant claim, which subsequent payments exhausted the available coverage—lacks merit. (Defendant's Trial Memorandum at 2 [quoting Alleviation Med. Servs. , 55 Misc 3d at 45 ]).
Plaintiff argues that Defendant cannot argue policy-exhaustion as a reason for not paying its claims when it failed to timely seek verification or timely deny the bills and paid claims to other providers ahead of Plaintiff's claims before the $50,000 threshold was reached.
Plaintiff further argues that the Appellate Term's decision in Alleviation Med. Servs. , followed by its decisions in several other cases including but not limited to Island Life Chiropractic, P.C., v. Commerce Ins. Co. , 56 Misc 3d 129(A) (App. Term, 2d Dep't 2017), requires this Court to find that "Defendant is prohibited from alleging as a defense to payment that the underlying insurance policy is exhausted for all claims that Defendant denied on other grounds prior to exhaustion." (Plaintiff's Trial Memorandum at 3). Following that assertion, Plaintiff is seeking payment for its bills of $699.00, $398.00 and $355.56 for services it provided on October 27, 2015, which it billed on or about November 12, 2015, for a total of $1452.56.
Plaintiff further argues that "as is blackletter law, ‘the Civil Court is bound by the decisions of’ the Appellate Term of this Department" (Plaintiff's Trial Memorandum at 3, citing Quality Health Prods., Inc. v. Travelers Indem. Co. , 44 Misc 3d 135(A), 999 N.Y.S.2d 798 {A} App. Term, 2d Dep't 2014).
Defendant acknowledges that the Appellate Term in Alleviation Med. Servs. v. Allstate rejected Allstate's argument that policy exhaustion warranted summary judgment for previously received claims that had been denied. However, Defendant contends the Appellate Term did not hold that a policy exhaustion defense is precluded if not raised previously (see Defendant's Trial Memorandum of Law at pp. 3-4). Defendant further argues that the "different grounds" relied upon by the Appellate Division in affirming Alleviation Med. Servs. was that "Allstate failed to prove, in its summary judgment motion, that its policy was exhausted " (see Defendant's Trial Memorandum of Law at p.4). Defendant was not precluded from interposing a defense of policy exhaustion, it must only show that it did not "pick and choose in bad faith" as to which providers are paid prior to exhaustion (T. at 18-19).
Discussion:
New York's No-Fault insurance regulations provide that payments for basic economic loss shall be made to the applicant and/or assignee on account of any single accident and not exceed $50,000, at which point the policy-limit is deemed exhausted. See NY Ins. Law § 5102(a) ; 11 NYCRR § 65-1.2(a) ; cf. Nyack Hosp. v. General Motors Acceptance Corp. , 8 N.Y.3d at 296, 832 N.Y.S.2d 880, 864 N.E.2d 1279 (policy included mandatory no-fault endorsement, providing coverage for basic economic loss up to $50,000 per person/per accident). An insurer is not required to pay a claim where the policy limits have been exhausted. See, e.g. , NY & Presbyterian Hosp. v. Progressive Cas. In. Co. , 5 AD2d 568, 570 (2d Dep't 2004). Further, "payments for basic economic loss shall be made to the applicant and/or assignee in the order in which each service was rendered or each expense was incurred, provided claims therefor were made to the insurer prior to the exhaustion of the policy" 11 NYCRR § 65-3.15.
In Nyack Hosp. v. General Motors Acceptance Corp. , plaintiff-hospital treated a patient over several weeks for injuries suffered in a car accident. See 8 N.Y.3d at 296, 832 N.Y.S.2d 880, 864 N.E.2d 1279. The patient was a covered person under an auto insurance policy that included no-fault coverage for basic economic loss up to $50,000. See id. The hospital submitted a claim to the insurer ("GMAC") totaling $74,489.28. See id. GMAC requested that the hospital provide it with additional verification for its claims. See id. at 296-297, 832 N.Y.S.2d 880, 864 N.E.2d 1279. Ultimately GMAC paid the hospital $19,325.67 out of the $50,000 basic economic loss coverage and then notified the hospital that benefits under the policy had been exhausted, precluding further payment. See id. at 297, 832 N.Y.S.2d 880, 864 N.E.2d 1279. After the hospital sued for the balance owed of $55,163.61, the Supreme Court, agreeing with GMAC that it was not required to pay sums in excess of policy limits, granted it summary judgment and dismissed the complaint. See id. The Appellate Division affirmed. See id. at 298-299, 832 N.Y.S.2d 880, 864 N.E.2d 1279.
On appeal to the Court of Appeals, that court defined the "priority-of-payment" of 11 NYCRR § 65-3.15 as one that would only encompass claims that had been verified, i.e., claims that were legitimate rather than "bare-bones" claims designed to cause "policy limits to be exceeded and thereby block[ ] other payments." See id. at 300, 832 N.Y.S.2d 880, 864 N.E.2d 1279 (emphasis added); cf. County-wide Ins. Co., v. Walter E. Mendoza Chiropractic P.C. , 2020 NY Misc. LEXIS 1960, at 5 (Sup. Ct. NY, New York County 2020) (insurer's payment on others’ legitimate claims subsequent to denying provider's claims, even if policy-limit became exhausted prior to arbitration decision on the propriety of the denials, was consistent with the intent of the no-fault regulatory scheme which is designed to promote prompt payment of legitimate claims). In applying priority-of-payment to the case, the Court calculated that the verification date was 16 days earlier than the lower courts’ determination. See Nyack Hosp. , 8 N.Y.2d at 300-301, 206 N.Y.S.2d 569, 169 N.E.2d 913.
As the decision in Nyack Hosp. construed that it was possible that in applying the earlier verification date the result could be that there had been additional payouts to other claimants during that sixteen-day period, it would be necessary to review the payments made during that time. Accordingly, the Court of Appeals modified the lower courts’ order by denying GMAC's summary judgment motion and remitted the matter to the Supreme Court "for further proceedings in accordance with this opinion and, as so modified, affirmed" See id. at 301, 206 N.Y.S.2d 569, 169 N.E.2d 913.
Plaintiff states that the Appellate Term in Alleviation Med. Servs. v. Allstate Ins. Co. , 55 Misc 3d 44, 45 (App. Term 2017), aff'd on other grounds, 191 A.D.3d 934 (2d Dep't 2021), held that Nyack Hosp. v. General Motors Acceptance Corp. ’s interpreted "priority-of-payment" as meaning that denied claims would be considered fully verified, i.e., "complete" in accordance with 11 NYCRR § 65-3.5. But the Appellate Term did not state that "fully verified" meant "legitimate", [non]-"bare-bones" and "medically necessary", and that such claims must be paid. See, e.g., Hosp. for Joint Diseases v. State Farm Mut. Auto. Ins. Co. , 8 A.D. 533, 536 (2d Dep't 2004) ("An insurer is not obligated to pay or deny a claim until it has received verification of all relevant information requested") (emphasis supplied).
In Alleviation Med. Servs. , Defendant Allstate denied Plaintiff's claim on the grounds of lack of medical necessity. See 55 Misc 3d at 45. Upon plaintiff's ensuing lawsuit, in 2014 Allstate moved for summary judgment to dismiss the complaint on the ground that the amount of available coverage had been exhausted through payments made to other providers at some point after the initial denial. See id. While Plaintiff may be implying that the Appellate Term held that Allstate had to pay the claim, that Court only held that Allstate was not entitled to summary judgment. See 55 Misc 3d at 45-46 ; Island Life Chiropractic, P.C., v. Commerce Ins. Co. , 56 Misc 3d 129(A), 2017 NY Misc. LEXIS 2478 at 2.
To the extent that Plaintiff claims that the decision in Alleviation Med. Servs. prohibits this Defendant "from alleging as a defense to payment that the underlying insurance policy is exhausted for all claims that Defendant denied on other grounds prior to exhaustion" (see Plaintiff's Trial Memorandum at 3), the Appellate Term said the opposite: "At the outset, we note that, although defendant did not deny the claim on the ground that the coverage limits of the insurance policy at issue had been exhausted, this defense is not precluded ." See 55 Misc 3d at 45 (emphasis added); see also Ortho Passive Motion, Inc. v. Allstate Ins. Co. , 2018 NY Misc. LEXIS 5805, at 2 (App. Term, 2d Dep't 2918); cf. NY & Presbyterian Hosp. v. Allstate Ins. Co. , 12 A.D.3d 579, 786 N.Y.S.2d 68 (2d Dep't 2004) (insurer's failure to issue a denial within 30 days does not preclude a policy-exhaustion defense).
Accordingly, Plaintiff's assertion that "as is blackletter law, ‘the Civil Court is bound by the decisions of’ the Appellate Term of this Department’ " (see Plaintiff's Memorandum of Law at 3) , is inapplicable in the instant case for several reasons, one of which is that the Appellate Term's decision denying summary judgment to the insurer defendant is not the same as ordering payment to the service-provider. Second, the Appellate Division's affirmance on "other grounds" in Alleviation Med. Servs. requires this Court to recognize that Court's reasoning. See 191 AD3d at 934. What the Appellate Division decided in Alleviation Med. Servs. was that Allstate's motion for summary judgment on policy-exhaustion grounds could have been granted but for the fact that it was "bereft of any specific information regarding [the] claim" See 191 A.D.3d at 935. Under those circumstances, the Appellate Division could not find that Allstate was entitled to summary judgment as a matter of law as there were issues of fact remaining as to when the claim was denied, and the basis and efficacy of the denial" See id. Accordingly, the Appellate Division in Alleviation Med. Servs. said "we affirm, albeit on different grounds than those relied upon by the Civil Court or the Appellate Term"). 191 A.D.3d at 934.
In Quality Health Products , the Appellate Term reversed the decision of a judicial hearing officer who, in refusing to allow Defendant's expert witnesses testify to their opinion of medical necessity of certain supplies, "explicitly stat[ed] that he would not "follow" an appellate term decision, Urban Radiology, P.C. v. Tri-State Consumer Ins. Co. , 27 Misc 3d 140(a), 911 N.Y.S.2d 697 (App. Term, 2d 2010), ruling the other way. See 44 Misc 3d 135(A), 999 N.Y.S.2d 798. Plaintiff's reliance on Urban Radiology is misplaced as there was no subsequent Appellate Division review in that case, much less a finding by the Appellate Division "on different grounds" than what was decided by the lower courts.
While this Court finds that Defendant was not precluded from interposing a defense of policy exhaustion, Defendant's claim that it did "not pick and choose in bad faith" (T. at 18-19) is unsupported by the evidence presented at the trial. The evidence at trial shows that Defendant neither made nor denied payment of three of Plaintiff's bills sent on or about November 12, 2015, for services that Plaintiff claims were provided to the assignor on October 27, 2015. (D. Ex. 1, T. 14). If Defendant had taken thirty days to either pay or deny those claims, pursuant to 11 NYCRR § 65.15(g)(3) and NY Ins. Law § 5106(a), without any demand for further verification, the thirty-day period would have expired on December 12, 2015. Excluding the $3,337.96 payment made to Plaintiff by check dated February 23, 2016, Defendant's Exhibits 5 and 6 in evidence indicate that Defendant made about twenty separate payments totaling $46,662.04 to other providers between December 12, 2015 and October 24, 2016, when the $50,000 coverage limit was reached and thus exhausted. Of that $46,662.04 paid to other service providers, Defendant paid $44,529.61 (in about seventeen separate payments) for services provided after October 27, 2015 (the date on which Plaintiff provided services for which it was not paid). See D. Ex. 5. Of that $44,529.51, Defendant paid-out $7,268.02 to others for services provided after December 12, 2015 (the 30-day verification deadline after Plaintiff sent its bills on November 12, 2015). See D. Ex. 1. From all calculations gleaned from the evidence, it appears that Defendant had funds available with which to pay Plaintiff prior to exhaustion of the policy.
The record is bereft as to what the Plaintiff specifically provided to the assignor on October 9, 2015 that resulted in a bill of $3,337.96, which Defendant paid. See Defendant's Exs. 5 and 6. The record is likewise bereft as to what Plaintiff specifically provided to the assignor on October 27, 2015 that resulted in bills being sent to Defendant on or about November 12, 2015 in the amounts of $699.00, $398.00 and $355.56. See D. Ex. 1.
As for its lack of "bad faith" in apparently making payments out of order, Defendant has provided no reason for its inaction with respect to Plaintiff's unpaid bills, much less statutory or caselaw supporting its claim that lack of "bad faith" is the applicable standard. Accordingly, and consistent with 11 NYCRR § 65-3.15 and the "priority-of-payment" rule (see Nyack Hosp. v. General Motors Acceptance Corp. , 8 N.Y.3d at 301, 832 N.Y.S.2d 880, 864 N.E.2d 1279 ), even though it is going to cause Defendant to pay in excess of the $50,000 coverage limit on the policy, it must pay Plaintiff on the three bills totaling $1,452.56.
The evidence presented at trial does not indicate who prescribed the goods or services provided by Plaintiff to the assignor. In addition, there was no evidence stipulated to, or presented at this trial as to whether the goods or services were reviewed to determine their medical necessity. Nor was a defense presented at trial that the unpaid bills were never received by Defendant. In the absence of additional proof, the evidence of Defendant's failure to pay indicates inattentiveness or might be arbitrary and capricious.
Conclusion:
Therefor Judgment is entered for Plaintiff in the amount of $1,452.56, plus statutory interest, costs and attorney fees.
This constitutes the Decision and Order of the Court.