St. Barnabus Hosp. v. Allstate Ins. Co., 2009 NY Slip Op 07824 (2d Dept. 2009)
“Contrary to Allstate’s contention, however, the Supreme Court properly determined that the denial of claim, which incorrectly stated the amount of the claim and gave an invalid reason for the denial”
Note that this case does not really change the governing law as it relates to what is required to be stated on a denial to preserve the underlying defense. First, there is an “and” in the holding of the decision, which denotes that multiple defects or omissions are usually required to render a denial invalid. Second, the case clearly holds that the failure to articulate in the denial what the proffered defense was is fatal per se.
First: the “and” in the holding of this decision comes from the line of cases which held that a denial was invalid because of multiple mistakes and omissions that appeared on the face of the denial. Those cases were cited in the decision: Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d at 565 (2d Dept. 2006); Nyack Hosp. v State Farm Mut. Auto. Ins. Co., 11 AD3d at 665 (2d Dept. 2006).
Second: the defect here involved the failure to state the correct defense. In all areas of law, this defect in and of itself will render an otherwise timely disclaimer invalid. This should be contrasted, however, with the situation where the denial correctly states the general reason of the defense but does not give explicit details regarding the defense. In the situation that I bolded, the denial will be deemed valid. A.B. Medical v. Liberty Ins. Co., 39 AD3d 779 (2d Dept. 2009)(appraising the carrier of the medical necessity defense); Al Correa Neurologist, P.C. v. State Farm Ins. Co., 15 Misc.3d 140 (App. Term 1st Dept. 2009)(same). The rule that has developed is that a denial, which does not put the medical provider on notice of what the underlying defense is, will be deemed invalid per se.
This case reinforces the two rules regarding the facial validity of denials that have developed over the last 5 years: (1) Numerous mistakes or omissions will be render the denial invalid; and (2) Failing to state the proper reason (or any reason) for denying benefits in the disclaimer will render the ensuing denial invalid per se.
For more insight on this topic, see No-Fault Paradise.
