Exhaustion of benefits – strict priority of payment regimen is somewhat abrogaded

Harmonic Physical Therapy, P.C. v Praetorian Ins. Co., 2015 NY Slip Op 50525(U)(App. Term 1st Dept. 2015)

“The defendant-insurer made a prima facie showing of entitlement to summary judgment dismissing the action for first-party no-fault benefits.  The evidentiary proof submitted by defendant established that, following the timely denial of plaintiff-provider’s claim on the ground of lack of medical necessity, the governing insurance policy’s coverage limits had been exhausted through payment of no-fault benefits in satisfaction of arbitration awards rendered in favor of other health care providers, and that such payments were made in compliance with the priority of payment regulation (see 11 NYCRR 65-3.15; Nyack Hosp. v General Motors Acceptance Corp., 8 NY3d 294 [2007]; New York and Presbyt. Hosp. v Allstate Ins. Co., 28 AD3d 528 [2006]).

In opposition, plaintiff failed to raise a triable issue. Contrary to plaintiff’s contention, defendant was not precluded by 11 NYCRR 65-3.15 from paying other providers’ legitimate claims subsequent to the denial of plaintiff’s claims.  Adopting plaintiff’s position, which would require defendant to delay payment on uncontested claims, or, as here, on binding arbitration awards – pending resolution of plaintiff’s disputed claim – “runs counter to the no-fault regulatory scheme, which is designed to promote prompt payment of legitimate claims” (Nyack Hosp. v General Motors Accept. Corp., 8 NY3d at 300).”

This case stands for the proposition that if you timely and properly handle claims but later have to pay out billing where the denials are vacated causing the policy to exhaust, then you maintain your policy exhaustion defense for the timely and properly denied claims.  It is a proposition of law with which various master arbitrators agree.  It also makes sense since penalizing an insurance carrier for timely and proper claims handling is antithetical to common sense and logic.  And, congratulations to Maureen Knodel (drafter of the brief) and Kevin Glynn (argued it) from Moira Doherty’s office for a great result.

The First Department on Madison Avenue says no dice to Geico

M.N. Dental Diagnostics, P.C. v Government Employees Ins. Co., 2011 NY Slip Op 01333 (1st Dept. 2011)

The Appellate Division, First Department, in an appeal by permission from the Appellate Term, First Department, affirmed the order of the Civil Court, which found that: (a) priority of payment is not a coverage issue; and (b) disputes in this regard must be resolved through intercompany arbitration.  This decision was correctly decided and, actually, benefits the defense bar as much as the plaintiffs bar.  Why you ask?

Well, have you ever been third-partied by Geico?  My clients have.  Exactly – CPLR 3211(a)(7) – see you later.

Finally, I must conclude by congratulating Steven Neuwirth, from Baker, Sanders, Barshay, Fass, Muhlstock & Neuwirth.  Not only did he defeat me in A&A Dental v. State Farm, but he is now the case citation on priority of payment.

A garage policy which insures a temporary substitute is not on the hook for liability coverage (and possibly PIP)

The Fourth Department – yes the same Justices who told us that collateral estoppel does not apply to arbitration decisions (see, In re Falzone, 64 AD3d 1149 [4th Dept. 2009])- released a really interesting opinion today.  Progressive Cas. Ins. Co. v Harco Natl. Ins. Co., 2010 NY Slip Op 01282 (4th Dept. 2010).  The facts are simple.  Tortfeasor receives a loaner vehicle and gets into accident.  Accident victim sues tortfeasor.  Tortfeasor has insurance through Progressive on a family vehicle.  Harco insures the temporary substitute.

Forget the competing excess and primary liability clauses in the insurance contracts for a minute.  That is what the Appellate Division wants us to think this case is about. The question I have is more fundamental and does not rely on contractual interpretation or the admissibility of parol evidence.  Namely, which insurance carrier should be deemed primary as to liability coverage and presumptively no-fault coverage?  Elrac Inc. v. Ward, 96 NY2d 58 (2001) would suggest that Harco should be primary.  Well, you would be wrong so says the Fourth Department.  Not only is Harco not primary but: “[F]inally, because the Harco policy does not provide coverage for the Webb defendants, there is no merit to Progressive’s contention that Harco had a duty to provide a timely disclaimer for the subject accident (see State Farm Mut. Auto. Ins. Co. v John Deere Ins. Co., 288 AD2d 294, 297). Thus, [*3]even assuming, arguendo, that the written disclaimer provided by Harco was insufficient, we conclude that “the failure to disclaim coverage does not create coverage which the policy was not written to provide” (Zappone v Home Ins. Co., 55 NY2d 131, 134).

We thus conclude that the Progressive policy provides primary coverage for the subject accident and that Harco is not obligated to defend or indemnify the Webb defendants in the underlying action.”

Perhaps the no-fault endorsement of the garage policy should be read differently from the remainder of the garage policy since it is separate and distinct from the underlying liability policy.  Utica Mut. Ins. Co. v Timms , 293 AD2d 669, 670 (2d Dept. 2002).  Also, since this is a garage policy and not a standard liability policy, maybe we can avoid the ultimate PIP primacy issue that I see here.  But, I cannot help but think that priority of payment litigation involving rental cars is going to arise again.  This time, however, the rental car company is going to say that their contract supersedes 65-3.12.  But see, M.N. Dental Diagnostics, P.C. v. Government Employees Ins. Co., 24 Misc.3d 43 (App. Term 1st Dept. 2009); SZ Medical, P.C. v. Lancer Ins. Co., 7 Misc.3d 86 (App. Term 2d Dept. 2005).  Could this decision somehow be related to the “Graves Amendment”.  See, 49 USC sec 30106.

Needless to say, I am confused right now.