Policy Exhaustion goes to Madison Avenue/Someone from the Insurance Defense side should be putting in Amicu
Ameriprise Insurance Company v Kensington Radiology Group, P.C, 2018 NYSlipOp 80613(U)(1st Dept. 2018)
Respondent having moved for leave to appeal to this Court from the decision and order of the Appellate Term entered in the office of the Clerk of the Supreme Court, New York County, on or about December 22, 2017, Now, upon reading and filing the papers with respect to the motion, and due deliberation having been had thereon,It is ordered that the motion is granted. Respondent-appellant shall file two copies of the pre-argument statement and of this order with the Clerk of the Appellate Term with proof of service, pursuant to Section 600.17 of the Rules of this Court.
Ameriprise Ins. Co. v Kensington Radiology Group, P.C., 58 Misc. 3d 144(A)(App. Term 1st Dept. 2017)
Petitioner appeals from an order and judgment of the Civil Court of the City of New York, New York County (Erika M. Edwards, J.), entered on or about November 30, 2016, which denied its petition to vacate an arbitration award in favor of respondent, awarding it unpaid no-fault benefits in the principal sum of $3,548.01, and confirmed the arbitration award.
Order and judgment (Erika M. Edwards, J.), entered November 30, 2016, reversed, without costs, and matter remanded to Civil Court for a framed issue hearing regarding whether the $50,000 policy limit of the subject insurance policy was exhausted before petitioner became obligated to pay respondent’s claim.
When an insurer “has paid the full monetary limits set forth in the policy, its duties under the contract of insurance cease” (Countrywide Ins. Co. v Sawh, 272 AD2d 245, 708 N.Y.S.2d 862 ). A defense that the coverage limits of the policy have been exhausted may be asserted by an insurer despite its failure to issue a denial of the claim within the 30—day period (New York & Presbyt. Hosp. v Allstate Ins. Co., 12 AD3d 579, 580, 786 N.Y.S.2d 68 ), and an arbitrator’s award directing payment in excess of the $50,000 limit of a no-fault insurance policy exceeds the arbitrator’s power and constitutes grounds for vacatur [*2] of the award (see Matter of Brijmohan v State Farm Ins. Co., 92 NY2d 821, 822-823, 699 N.E.2d 414, 677 N.Y.S.2d 55 ; Countrywide Ins. Co. v Sawh, 272 AD2d at 245; 11 NYCRR 65-1.1).
Here, petitioner-insurer’s submissions in support of its petition to vacate the arbitration award – including an attorney’s affirmation, the policy declaration page showing the $50,000 limit and a payment ledger listing in chronological order the dates the claims by various providers were received and paid – raised triable issues as to whether the $50,000 policy limit had been exhausted by payments of no fault benefits to respondent and other providers before petitioner became obligated to pay the claims at issue here (see Allstate Prop. & Cas. Ins. Co. v Northeast Anesthesia & Pain Mgt., 51 Misc 3d 149[A], 41 N.Y.S.3d 448, 2016 NY Slip Op 50828[U] [App Term, 1st Dept 2016]; Allstate Ins. Co. v DeMoura, 30 Misc 3d 145[A], 926 N.Y.S.2d 342, 2011 NY Slip Op 50430[U] [App Term, 1st Dept 2011]). [**2] Therefore, we remand the matter to Civil Court for a framed issue hearing on that issue.
If you represent no-fault carriers and do not want the Second Department priority of payment rule to be the law of the State, file an Amicus with the First Department. Your help is absolutely required. Without your help, the wind may very well determine the outcome of this issue. Is that what you want?
Ameriprise Ins. Co. v Kensington Radiology Group, P.C., 2017 NY Slip Op 51911(U) (App. Term 1st Dept. 2017)
“Here, petitioner-insurer’s submissions in support of its petition to vacate the arbitration award – including an attorney’s affirmation, the policy declaration page showing the $50,000 limit and a payment ledger listing in chronological order the dates the claims by various providers were received and paid – raised triable issues as to whether the $50,000 policy limit had been exhausted by payments of no fault benefits to respondent and other providers before petitioner became obligated to pay the claims at issue here (see Allstate Prop. & Cas. Ins. Co. v Northeast Anesthesia & Pain Mgt., 51 Misc 3d 149[A], 2016 NY Slip Op 50828[U] [App Term, 1st Dept 2016]; Allstate Ins. Co. v DeMoura, 30 Misc 3d 145[A], 2011 NY Slip Op 50430[U] [App Term, [*2]1st Dept 2011]). Therefore, we remand the matter to Civil Court for a framed issue hearing on that issue.”
This looks like pure priority of payment, which does not look good,
Alleviation Medical Services P.C. v Allstate Insurance Company, 2017 NY Slip Op 96489(U) (2d Dept. 2017)
“Motion by Allstate Insurance Company for leave to appeal to this Court from an order of the Appellate Term, Second, Eleventh, and Thirteenth Judicial Districts, dated August 4, 2017, which affirmed an order of the Civil Court of the City of New York, Queens County, entered April 1, 2015. Separate motion by New York Insurance Association, Inc., for leave to file papers, as amici curiae, in support of the motion by Allstate Insurance Company.
Upon the papers filed in support of the motion for leave to appeal and the papers filed in opposition and in relation thereto, and upon the papers filed in support of the motion for leave to file papers, as amici curiae, and the papers filed in opposition thereto, it is
ORDERED that the motion by New York Insurance Association, Inc., is granted and its papers have been considered in the determination of the motion by Allstate Insurance Company; and it is further,
ORDERED that the motion by Allstate Insurance Company is granted.”
This really should not surprise anyone. The Appellate Term should have granted leave in the first instance. Instead, they tried to hide this case as (U) cite and quietly denied leave to appeal. My prediction? Unless DFS submits amicus (and I think they will sit on the sidelines), this will probably be affirmed. The fallback here is Harmonic v. Praetorian, which I think is the correct rule. But in light of Dust, I cannot see this Court applying Harmonic v. Praetorian.
Should this be affirmed, expect an amendment within a year after affirmance.
Island Life Chiropractic, P.C. v Commerce Ins. Co., 2017 NY Slip Op 50856(U)(App. Term 2d Dept. 2017)
“Defendant’s motion sought summary judgment on the ground that the amount of available coverage had been exhausted. Although the insurance policy had been issued in Massachusetts, defendant acknowledged that, pursuant to New York law, the insurance policy provided $50,000 in personal injury protection benefits. Defendant further contended that claims exceeding $50,000 had been received and that defendant had paid $50,000 in accordance with 11 NYCRR 65-3.15. However, defendant failed to establish, as a matter of law, an exhaustion of the [*2]coverage limits of the insurance policy at issue, as defendant did not demonstrate that the policy had been exhausted at the time the claim at issue was complete (see 11 NYCRR 65-3.15; Nyack Hosp. v General Motors Acceptance Corp., 8 NY3d 294 ). Consequently, defendant did not establish its entitlement to summary judgment dismissing the complaint.”
My thought here is straight forward. We all agree that the Massachusetts $10,000 PIP policy was deemed to $50,000 because the accident occurred in New York. Does this mean that 65-3.15 applies?
Defendant for reasons I will never understand stated that claims were paid in accordance with 65-3.15. By doing this, counsel for the carrier kicked down the door in this case, begging a court to apply priority of payment rules and, therefore, allowing a finding that coverage exceeding the policy maximum could be afforded.
The correct argument appears to be that under a choice of law analysis, Massachusetts law applies to the $50,000 coverage limit. Therefore, once $50,000.00 in coverage is exhausted, there is nothing left on the policy. That is because except for New York, no other state (absent bad faith) ever requires an insurance carrier to pay more than the monetary limits of a policy under so-called “priority of payment”
Now, Commerce n/k/a Mapfre will go over policy. Leave it to Rybak to torture people.
Ortho Passive Motion, Inc. v Allstate Ins. Co., 2017 NY Slip Op 50771(U)(App. Term 2d Dept. 2017)
(1) “Following a nonjury trial in this action by a provider to recover assigned first-party no-fault benefits, the Civil Court (Lisa S. Ottley, J.) awarded plaintiff a judgment in the principal sum of $2,114.50. The court noted that the parties had stipulated that, among other things, defendant had timely denied the claims at issue. The judgment was entered on March 3, 2014. Eight months later, defendant moved, insofar as is relevant to this appeal, pursuant to CPLR 5019 (a) and 5240, to modify the judgment on the ground that the coverage limits of the insurance policy had been exhausted. Plaintiff opposed the motion. Defendant appeals from so much of an order of the Civil Court entered July 6, 2015 as denied defendant’s motion.”
(2) “In support of its motion, defendant argued that there are no funds available to pay the judgment because the $50,000 policy limit in basic personal injury protection had been exhausted. Assuming, arguendo, that such contention, if established, would entitle defendant to some form of postjudgment relief (see e.g. CPLR 5015 [a]), we find that, in any event, defendant’s motion papers failed to establish an exhaustion of the coverage limits of the insurance policy at issue, as defendant failed to demonstrate that the policy had been exhausted at the time the claims at issue were deemed complete (see 11 NYCRR 65-3.15; Alleviation Med. Servs., P.C. v Allstate Ins. Co., 55 Misc 3d 44 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2017]; see Nyack Hosp. v General Motors Acceptance Corp., 8 NY3d 294 )”
[Court discusses that 5019(a) and 5240 are not a valid basis to vacate judgment]
This case does not establish a set of facts engendering sympathy. Allstate should have known the policy was exhausted when the trial occurred (this would not change the outcome but it could have avoided procedural nuances that make this case problematic outside the substantive issue). Assuming the policy exhausted after entry of judgment, then Allstate really messed up since they knew they had or would receive a judgment. Looks like a bad set of facts.
Alleviation Med. Servs., P.C. v Allstate Ins. Co., 2017 NY Slip Op 27097
This is a really important issue and I will give an extended discussion in this post about the policy exhaustion issue before discussing the impact of Alleviation on this issue.
The bean counters have told me that the average amount that is paid upon a no-fault claim is between $11,000-$13,000. That amount creeps up at the rate of inflation. The New Jersey game and the necessity of a surgery to occur before an insurance company will authorize an indemnity payment in excess of $25,000, less comparative negligence, has placed upward pressure on aggregate first-party claim payouts. Some can blame the insurance carriers on the third-party side for creating this first-party monster. Others will blame opportunistic Plaintiffs for trying to create a 6 figure settlement or jury verdict from a motor vehicle accident involving delta forces equal to the act of mastication. I really have no opinion (or one I will publicly share); I express this opening to give you some thoughts as to why $50,000 PIP policies exhaust more frequently than they really should.
With policy exhaustion comes the tension between the law stating that an insurance carrier should never have to pay more than the agreed upon policy limits and the priority of payment regulation which, taken at face value, invites policies to offer more coverage than the amount that is contracted.
For those unaware, the priority of payment regulation requires no-fault payments to be made in the order a bill is received. For billing received on the same date, priority is for earlier dates of service. Through Court of Appeals case law a decade ago, a bill is deemed received when it is fully verified, i.e., the latter of receipt or when timely and proper verification is received. Bills must be paid in priority order: first come, first serve. The case law penalty for the failure to pay bills in the order of receipt is to be forced to pay more than the contracted for policy amount. The Court of Appeals in Nyack Hosp. v General Motors Acceptance Corp.,8 NY3d 294 (2007) compelled GMAC to pay over policy due to the holding up of funds under the basic PIP policy prior to receipt of the OBEL election. The Appellate Division expressly held in another matter that the failure to follow the priority of regimen mandates insurance carriers to pay more than the policy. Mount Sinai Hosp. v. Dust Transit Inc. 104 AD3d 823 (2d Dept. 2013).
To explain this another way, if an insurance carrier pays bills “out of line”, the insurance carrier runs the risk of exceeding the applicable coverage limits. This is because when a policy exhaustion defense is presented, the existence of coverage on a disputed bill is looked at through the vantage point of how much coverage is available on the policy when the bill was received or fully verified.
Now, assuming the disputed bill was not properly handled, i.e., untimely denied, defectively denied, not denied, or denied on a completely and wholly meritless defense, the courts and the insurance department will not engender sympathy to the insurance carrier who dropped the ball.
However, the Appellate Term First Department in Harmonic Physical Therapy, P.C. v Praetorian Ins. Co., 47 Misc 3d 137(A)(App. Term 1st Dept. 2017), created what I classified as a very limited safe-harbor provision to the priority of payment regulation. In essence, an insurance carrier that timely denies a bill on the basis of lack of medical necessity will be granted a safe-harbor from the priority of payment regulation. This makes sense. An insurance carrier that legitimately disputes a billing should not be placed in an all or nothing position. If anything, a medical provider or injured person who receives this type of disclaimer should quickly challenge the disclaimer, since it is only the insured, putative insured or their assignee who will sustain a policy exhaustion defense should they they sit on their rights. And quickly challenge does not mean filing a lawsuit in a venue where it will take 3-6 years to have a case fully adjudicated.
Harmonic makes sense as it accomplishes two things. First, it ensures that an insurance carrier that fails to properly handle a claim will feel the swift consequences of a law that is narrowly construed and inures to the benefits of the injured person and their assignee. Second, it allows an insurance carrier to properly medically manage billings without having to worry about paying more than the contacted policy coverage amounts.
Harmonic strikes a balance that we all can live with, although begrudgingly. The insurance carrier who properly trains their claims handlers and properly manages the claims will not feel the knife being plunged into their back should the billings exceed the amount of contracted coverage. Yet, the insurance carrier who fails to timely and properly deny bills will be unhappy that they will have to pay an amount in excess of the applicable coverage limits. This is a compromise that fits within the spirit of no-fault law and basic contract law.
The consumer can live with the fact that an insurance carrier that is negligent and fails to properly handle the claims will have to pay all disputed billings. Yet, a consumer will be unhappy that all of their treatments are not being paid because they were under the belief when they received their 6 month EOB that more money was left on the policy than what was there in reality.
This now brings me to Alleviation, which states the following:
In Nyack Hosp. v General Motors Acceptance Corp. (8 NY3d 294 ), the Court of Appeals, noting that no-fault benefits are overdue if not paid within 30 calendar days after receipt of a fully complete claim, held that the word “claims,” as used in 11 NYCRR 65-3.15, the priority-of-payment regulation, does not encompass claims that are not yet complete because they have not been fully verified in accordance with 11 NYCRR 65-3.5 (b). In contrast, in the instant case, by denying the claim on May 10, 2011, 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 (see 11 NYCRR 65-3.8 [b] ; 65-3.15; Nyack Hosp., 8 NY3d 294), 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 (see 11 NYCRR 65-3.15; cf. Nyack Hosp., 8 NY3d 294; but see Harmonic Physical Therapy, P.C. v Praetorian Ins. Co., 47 Misc 3d 137[A], 2015 NY Slip Op 50525[U] [App Term, 1st Dept 2015]). Consequently, defendant has not established its entitlement to summary judgment dismissing the complaint.
The facts here were that the billing was timely denied on the basis that the services lacked medical necessity. The insurance policy subsequently exhausted. The Court explicitly did not apply the case-law created safe-harbor provision for billings timely and properly denied on lack of medical necessity.
I think Alleviation is incorrect from a policy standpoint. I sense that if the Appellate Division, Second Department grants leave, they will be constrained to affirm. The law from the Second Department, especially the Dust case, suggests that there is no safe-harbor provision to be read into the priority of payment regulation. With that said, I wonder if leave will even be granted when Allstate makes it motion to the Appellate Term and later to the Appellate Division, Second Department?
At the end of the day, the ball is going to be in the Department of Financial Services’ Court to fix what I think is an unintended reading of the priority of payment regulation,
Allstate Prop. & Cas. Ins. Co. v Northeast Anesthesia & Pain Mgt., 2016 NY Slip Op 50828(U)(App. Term 1st Dept. 2016)
(1) “An arbitrator’s award directing payment in excess of the monetary limit of a no-fault insurance policy exceeds the arbitrator’s power and constitutes grounds for vacatur of the award”
(2) “Petitioner’s submissions in support of its petition to vacate the award and in opposition to the cross motion to confirm – including an attorney’s affirmation, the policy declaration page showing the $50,000 policy limit, and a payment ledger listing in chronological order the dates the claims by various providers were received and paid – raised triable issues as to whether the $50,000 policy limit had been exhausted by payments of no-fault benefits to respondent and other health care providers before petitioner was obligated to pay the claims at issue here”
(insurer relied upon “affirmation of its attorney with attachments of alleged payout sheets, bills submitted by providers, and other documents” to show policy limits exhausted)
(3) “We note that, contrary to respondent’s contention, defendant was not precluded by 11 NYCRR 65-3.15 from paying other legitimate claims subsequent to the denial of respondent’s claims”
This is interesting from the standpoint that the court will adjudge priority of payment disputes under a de novo level of review. Again, the Harmonic Physical Therapy exception to priority of payment rules applies to these disputes.
Brand Med. Supply, Inc. v Infinity Ins. Co., 2016 NY Slip Op 50738(U)(App. Term 2d Dept. 2016)
(1) “In support of its defense of exhaustion of the policy limits, defendant unsuccessfully attempted to have the applicable insurance policy’s declaration page, which set forth, among other things, the coverage limits of the policy (see e.g. Matter of Government Empls. v Ally, 106 AD3d 736 ; Matter of State Farm Mut. Auto. Ins. Co. v Gray, 68 AD3d 1002 ), admitted into evidence. Upon a review of the record, we find that the Civil Court erred in excluding the insurance policy declaration page from evidence. Defendant was not required to lay a CPLR 4518 (a) foundation for the declaration page, since a declaration page is not hearsay, but rather, as part of an insurance contract, it “has independent legal significance and need only be authenticated to be admissible””
(2) “Here, the testimony of defendant’s senior no-fault representative sufficiently identified the document as an accurate representation of the declaration page which defendant maintained electronically (see CPLR 4539 [a]; Kaliontzakis v Papadakos, 69 AD3d 803). Furthermore, in describing defendant’s procedure for generating a declaration page, defendant’s witness satisfactorily set forth the “manner or method in which tampering or degradation of the reproduction is prevented” (CPLR 4539 [b]).”
What I want to know is why counsel could not get the document in as a business record? I am very much curious as to what happened here. Very curious.
Interboro v. Miriam Cantor, Index #: 601298/14 (Sup. Ct. Nassau Co. 2014)
Here, Defendant sought no-fault reimbursement before AAA in the amount of $10,888.33. Defendant was awarded $7,934.24. Defendant was paid out $5,228.18, the amount remaining on the policy. Plaintiff files a master arbitration demand. Defendant then asserts that bill was paid in full. Defendant changed his mind and the briefing schedule expired. So, Plaintiff filed a demand for a trial de novo asserting policy exhaustion and an alternative cause of action based upon the lack of medical necessity of the services.
The court plainly stated -without a priority of payment debate – that through paying the $5,228.18 (the remaining amount on the policy), Plaintiff’s obligation under the policy ceased.
Interesting procedural dynamic to say the least.
Mount Sinai Hosp. v Dust Tr., Inc., 2013 NY Slip Op 01811 (2d Dept. 2013)
“The plaintiff hospital, as assignee of Alison Cassani, commenced this action to recover no-fault medical benefits from the defendant, a self-insured taxi corporation. The plaintiff moved for summary judgment on the complaint. However, the Supreme Court denied that motion on the ground that the defendant had not yet received all requested verification. The plaintiff subsequently moved for leave to reargue its motion for summary judgment. The Supreme Court, in an order entered September 28, 2011, granted leave to reargue and, upon reargument, granted the plaintiff’s motion for summary judgment on the complaint, finding that the requested verification had been received. A judgment was entered on October 13, 2011, in favor of the plaintiff and against the defendant in the principal sum of $59,609.44, plus interest, costs, and an attorney’s fee.”
(So at this point, it is learned that Defendant did not have a defense to the no-fault claim)
“The defendant thereafter made a motion, denominated as one pursuant to CPLR 2221(a) to modify so much of the order entered September 28, 2011, as, upon reargument, granted the plaintiff’s [*2]motion for summary judgment on the complaint, and to vacate the judgment, asserting that the judgment, together with the total amount of $181,379.82 it previously paid medical providers on behalf of Cassani, exceeded its no-fault coverage of $200,000, which was the amount of coverage required by the Rules of the New York City Taxi & Limousine Commission (see TLC Rule [35 RCNY] § 58-13[a], [d][i]). The defendant asserted that the plaintiff may only recover the sum of $18,620.18, which was the available balance of its coverage. The Supreme Court granted the defendant’s motion, and, in effect, upon renewal, vacated the order entered September 28, 2011, and the judgment entered October 13, 2011, and, thereupon, granted the plaintiff’s motion for summary judgment only to the extent of permitting it to recover the sum of $18,620.18 from the defendant, inclusive of interest, costs, and an attorney’s fee.”
(Motion to renew in actuality. Defendant is seeking to limit its exposure now knowing that it is doomed on the merits)
“The issue of partial exhaustion of the defendant’s coverage was raised for the first time after the judgment was entered, even though the plaintiff had previously moved for summary judgment on the complaint, seeking a certain amount of benefits (see Westchester Med. Ctr. v Lincoln Gen. Ins. Co., 82 AD3d 1085, 1086). No reasonable justification was provided for the failure to raise the issue of partial exhaustion earlier.”
(Court says this should have been part of an omnibus motion for summary judgment)
“The failure to present such reasonable justification by itself requires denial of the defendant’s motion, and, in any event, the evidence submitted in support of the motion, i.e., an affidavit of the defendant’s claims manager setting forth the policy limits and the amount of benefits allegedly paid to other medical providers, failed to establish the order in which the medical services were rendered, and the order in which the claims were received. Thus, on this record, it cannot be determined whether the defendant’s purported payments were made in compliance with 11 NYCRR 65-3.15.”
This is a very tough loss to take.