Opinion
123807 CV 2004.
Decided on February 23, 2005.
Kenneth F. Nwele, Esq., Brooklyn, for plaintiff Valley Stream Medical Rehab, P.C.
Bee Ready Fishbein Hatter Donovan, LLP, by Lee-David Weiner, Esq., Mineola, for defendant Liberty Mutual Insurance Company.
Alden Banniettis, Esq., by Damien Semel-DeFeo and Jeff Henle, Esqs., Brooklyn, for plaintiff A.M. Medical Services, P.C.
Bruno, Gerbino Soriano, LLP, by Akwei Oko Acquaye, Esq., Melville, for defendant Allstate Insurance Company.
Two motions bring up for review the treatment of attorney fee awards in court cases seeking payment of no-fault economic loss benefits. Treated together for the purposes of motion disposition, these cases form the basis for an inquiry into the recently disputed question of the proper formula to use for computation of a no-fault attorney fee award to a prevailing plaintiff's counsel in routine no-fault litigation, as well as an exploration of the situations in which a plaintiff is not entitled to an attorney fee award.
The General Attorney Fee Rule for a Prevailing No-Fault Plaintiff
It is well established that a prevailing no-fault claimant may claim an award of attorney fees (Insurance Law § 5106 [a], such attorney's fees are "subject to limitations promulgated by the superintendent [of the NY State Dept. of Insurance]"). A number of formulas for such fees may be found in the "thicket" of no-fault Insurance Department regulations ( Presbyterian Hosp. in the City of New York v Maryland Cas. Co., 90 NY2d 274, 280, rearg denied 90 NY2d 937).
Internet links to the text of the current regulations, the superseded older regulations effective through April 5, 2002, the no-fault statute, various no-fault fee schedules, and Insurance Department circular letters and opinion letters may be found at http: //www.ins.state.ny.us/r68_link.htm (accessed February 23, 2007).
The current regulation's provisions applicable to attorney fee awards in court proceedings appear within 11 NYCRR § 65-4.6, to be distinguished from numerous other rules applicable in other situations, such as in claims processing and late payment of arbitration awards ( 11 NYCRR § 65-3.10), lien and offset situations ( 11 NYCRR § 65-3.19) and proceedings before a master arbitrator ( 11 NYCRR § 65-4.10 [j]).
There is, however, only a single provision governing an attorney fees award in routine court litigation for a no-fault unpaid economic loss claim, which is that such an "attorney's fee shall be . . . 20 percent of the amount of first-party benefits, plus interest thereon, awarded by the . . . court, subject to a maximum fee of $850" and a "minimum attorney's fee . . . [of] $60" ( 11 NYCRR § 65-4.6 [e] and [c]). Long established appellate authority hold that such fees were to be calculated "per claim," which means for each separate claim form submitted to an insurer ( Smithtown Gen. Hosp. v State Farm Mut. Auto Ins. Co., 207 AD2d 338, 339 [2nd Dept 1994], trial court "failed to follow the formula" of the regulations and "incorrectly interpreted the $850 ceiling to apply to the entire action, rather than to each claim, and failed to set a minimum fee of $60 per claim"). This "per claim" calculation was accepted as the proper approach prior to and subsequent to that Second Department decision (see Hempstead General Hosp. v Allstate Ins. Co., 120 Misc 2d 303, 311 [Sup Ct Nassau Co 1983], revd on other grounds 106 AD2d 429 [2d Dept 1984] affd 64 NY2d 958; Hempstead General Hosp. v Insurance Co. of North America, 208 AD2d 501, 501 [2d Dept. 1994], "per claim"; St. Clare's Hosp. v Allstate Ins. Co., 215 AD2d 641, 641 [2d Dept. 1995], fees to be fixed "per claim" and minimum applied to "each such claim").
Although the applicable language of the mathematical formula remained unchanged over time, amendments did increase the dollar amount of the maximum and minimum figures and changed the context in which the formula appeared. The older regulation is quoted in full in Hempstead General Hosp. v Allstate Ins. Co., supra, 106 AD2d at 429-430.
This conclusion has seemingly been drawn into question by an opinion letter issued by the Office of the General Counsel of the Insurance Department on October 8, 2003. Entitled "No-Fault Attorney Fees for Multiple Provider Bills," it opines that specifically in relation to court actions "the amount of attorney's fees awarded will be based upon 20% of the total amount of first party benefits awarded" and that "the 20% calculation is based upon benefits awarded from the total number of disputed bills in a court action" (text appears at http: //www.ins.state.ny.us/ogco2003/rg031004.htm, accessed February 23, 2007), which would potentially lower legal fees awards by applying the dollar cap to all combined claims, instead of treating claims separately. The opinion letter represents that its conclusion springs from a plain reading of the regulations and it contains no legal rationale, points to no change in governing case law, and does not rest upon a contemporaneous amendment of the regulatory language.
Three courts recently addressed this 2003 no-fault attorney fee opinion letter. In A.M. Medical Services P.C. v New York Central Mutual Fire Ins. Co., n.o.r., NYLJ, July 24, 2006, at 25, col 1 (Civ Ct Queens Co 2006, Raffaele, J), the court declined to follow the opinion letter and calculated attorney fees based upon each claim form, noting that the "total award" basis "flies in the face of existing decisional precedent," "gives the defendant insurers a windfall by limiting their exposure for litigation fees," "provides carriers with a disincentive to settlement, and encourages . . . no-fault litigation. . . ." In Alpha Chiropractic P.C. v State Farm Mut. Auto Ins., ___ Misc 3d ___, 2006 NY Slip Op 26498 (Civ Ct Queens County 2006, Siegel, J), the court found the opinion letter unpersuasive, for similar reasons. In Smithtown-Marigliano, LMT v NY Central Mutual Fire Insurance Co., 13 Misc 3d 1079 (Civ Ct Richmond County 2006, Sweeney, J), the court deferred to the opinion letter on the basis of limited arguments.
This court finds the attorney fee opinion letter does not merit departure from settled law for three interrelated reasons. First, it must be recognized that this document is not a regulation adopted in conformity with the State Administrative Procedure Act (SAPA § 101, et seq.), and facially falls in the class of exempt "interpretive statements and statements of general policy which in themselves have no legal effect but are merely explanatory" (SAPA § 102 [2][b][iv]). Courts often find such opinion letters merit no weight ( see State Farm Mut. Auto. Ins. Co. v. Mallela, 175 F Supp2d 401, 418 fn 12 [EDNY 2001, Sifton, J], declining to follow a Department of Insurance opinion letter and noting that another opinion letter "relied upon by plaintiff, was authored at the instance of lead counsel for the insurers in . . . [a] matter pending in state court, who provided the Department with a five-page exposition of the issues presented").
Second, Insurance Department opinion letters which endorse a litigation or arbitration result contrary to existing judicial dictates specifically find little judicial favor. Such dismissive treatment was given to a 2000 Insurance Department opinion letter entitled "No-Fault Burden of Proof," which was generally recognized to be an administrative attempt to avoid the Court of Appeals' preclusion rule announced in Presbyterian Hospital in the City of New York v Maryland Casualty Company, supra, by requiring a no-fault claimant to prove medical necessity even if the issue were not preserved by a timely denial. That 2000 opinion letter was given so little regard that its rejection was not even discussed in Pradip Das/N.Y. Medical Rehab P.C. v Allstate Ins. Co., 297 AD2d 321 (2d Dept 2002), although extensively argued therein, which was described at length in Application of Park Radiology P.C. v Allstate Ins. Co., 2 Misc 3d 621 (Civ Ct Richmond County 2003), and Preferred Medical Imaging, P.C. v Liberty Mut. Fire Ins. Co., 11 Misc 3d 1059 (A), 2006 NY Slip Op. 50278(U) (Dist Ct Suffolk County 2006).
Third and most compelling, absent any change in statutory law or regulations, common law precedent principles require all lower trial courts view as binding applicable Appellate Division decisions, unless and until there is any conflicting authority ( People v Towndrow, 187 AD2d 194, 195 [4th Dept 1993], app dismissed 81 NY2d 1021, "It should hardly need to be stated that trial courts are bound to follow the holdings of the Appellate Division"; Mountain View Coach Lines, Inc. v Storms, 102 AD2d 663, 664 [2d Dept 1984, Titone, J], "doctrine of stare decisis requires trial courts in this department to follow precedents set by the Appellate Division of another department until the Court of Appeals or this [department] pronounces a contrary rule" which doctrine is "necessary to maintain uniformity and consistency"). Given stare decisis precepts, this court is not free to depart from settled legal precedent and must is barred from according any weight or consequence to the subject opinion letter.
Based on the foregoing, the court determines that the prevailing no-fault claimant's attorney fees herein are to be calculated on a per claim basis under settled principles of law. Accordingly, the court rejects the contrary argument raised in A.M. Medical Services, P.C. v Allstate Insurance Company and, because there is no objection to the plaintiff's mathematical calculation, awards legal fees in the amount requested by successful plaintiff for the two claim forms at issue.
Exceptions To The General Rule for No-Fault Plaintiff's Attorney Fee
There are also situations in which a no-fault plaintiff is not entitled to an attorney fee under the regulations, directly or by construction. No legal fee is available, of course, in cases in which a plaintiff has no valid claim at the outset of the action ( 11 NYCRR § 65-4.6 [a], "If . . . a court action was commenced by an attorney on behalf of an applicant and the claim or portion thereof was not denied or overdue at the time . . . the action was commenced, no attorney's fees shall be granted'). And, in certain defined situations, litigation concerning a no-fault fee schedule dispute might not support an attorney's fee ( 11 NYCRR § 65-4.6 [ i], "if the charges by a health care provider . . . exceed the limitations contained in the [fee] schedules established pursuant to section 5108 of the Insurance Law, no attorney's fee shall be payable" unless the litigation "involve[s] interpretation of such schedules or inadvertent miscalculation or error").
However, the regulations facially do not address the situation where a plaintiff had a valid claim for unpaid no-fault benefits at the commencement of the litigation but, for reasons independent of the litigation, has no proper claim for no-fault damages at its conclusion. In Valley Stream Medical Rehab., P.C. v Liberty Mutual Insurance Company, one of the two cases at bar, raises after service of the summons and complaint, the plaintiff itself subsequently pursued and secured a settlement in arbitration for the same claim through different counsel. Given these facts, plaintiff is unable to demonstrate that even some small part of the original claim remained unpaid ( compare Dondysh v Lumbermans Mut. Ins. Co., 168 Misc 2d 121 [App Term 2d Dept 1996], some interest remained unpaid). In short, there is no outstanding obligation on the part of the insurer shown.
As to the regulation, it bases a claimant's attorney fee calculation upon consideration of "the amount of first-party benefits, plus interest thereon, awarded by the . . . court" ( 11 NYCRR § 65-4.6 [e]), and the regulation is interpreted literally ( Hempstead General Hosp. v Allstate Ins. Co., supra, 106 AD2d at 432, modification of judgment because the "fee upon a fee' awarded to plaintiff . . . is not authorized by the regulations"). Here, given that neither benefits nor interest are due to plaintiff, there is no dollar figure to which the percentage calculation, the dollar maximum, or the dollar minimum attaches and there is no basis upon which legal fees may be awarded.
Accordingly, the court denies the application for the legal fees in Valley Stream Medical Rehab., P.C. v Liberty Mutual Insurance Company. The court does not address whether the client has any obligation to pay an attorney fee to its attorney of record, given that such an issue is outside the scope of the instant papers.
This decision constitutes the order of the court.