Interest does not toll absent proof that a denial was mailed

Corona Hgts. Med., P.C. v Liberty Mut. Ins. Co., 2011 NY Slip Op 21130 (App. Term 2d Dept. 2011)

“Where, as here, a defendant has not established the proper mailing of the denial of claim form, the claim is considered not to have been denied and payment of benefits will therefore be considered to be “overdue” within the meaning of Insurance Law § 5106 (a). Accordingly, interest on the claim will not be tolled (cf. LMK Psychological Servs., P.C. v State Farm. Mut. Auto. Ins. Co., 12 NY3d 217, 223 [2009]), and commences to accrue “30 days after the claim was presented to the defendant for payment until the date the claim was or is paid” (Hempstead Gen. Hosp. v Insurance Co. of N. Am., 208 AD2d 501 [1994]). As plaintiff calculated interest on the claims in question as commencing 30 days after defendant’s receipt of said claims, the Civil Court erred, in its order entered March 26, 2009, in directing that interest be recalculated from the date of the commencement of the action. Similarly, it was error to direct that interest accrue until the date of the order granting plaintiff’s motion for summary judgment, since interest accrues “until the date the claim was or is paid” (id.). It is noted that plaintiff is not entitled to interest pursuant to the Civil Practice Law and Rules, since Insurance Law § 5106 (a) and the regulations promulgated thereunder supersede the provisions for interest contained in the CPLR (Matter of Government Empls. Ins. Co. [Lombino], 57 AD2d 957, 959 [1977]; see also Smith v Nationwide Mut. Ins. Co., 211 AD2d 177 [1995])”

The dissent is interesting, but I think there are three issues here.

First, the regulation that the court quotes says the following: “If arbitration is not requested or an action is not commenced “within 30 days after the receipt of a denial of claim form or payment of benefits calculated pursuant to Insurance Department regulations, interest shall not accumulate on the disputed claim or element of claim until such action is taken”  Seems to me the burden is on the plaintiff to prove lack of receipt as part of a prima facie case to avoid the tolling.

Second, “if a dispute has been submitted to arbitration or to the courts, “interest shall accumulate, unless the applicant unreasonably delays the . . . court proceeding” (Insurance Department Regulations [11 NYCRR] § 65-3.9 [d]).”  Does waiting six years before commencing an action constitute an “unreasonable delay”?

Third, no-fault interest runs until the bil; or judgment is paid.


3 Responses

  1. This case will open up a whole can of worms that is not necessary and is contrary to the Court of Appeals decision in LMK v. State Farm. Since the decision by the Court of Appeals in the latter case, it has been universally accpeted that so long as the insurer issued a denial, even a late denial, interst accrued upon the filing of the Summons and Complaint. The holding was sufficient to foreclose all questions at to mailing. Now, the whole issue is clouded. The plaintiff can now challenge any denial, even a timely one, by simply arguing that the affidavit of mailing was not proper. The whole area of mailing is murky and this case could lead to bad results for no-fault insurers. It was not neccesary and, I would argue, contrary to LMK for the Court to open up this loophole.

  2. Mitch I have to disagree with you. Failure to issue a denial (aka establish that it was mailed) means that there was, in effect, no denial. I fail to see how LMK impacts the decision.

  3. Kurt, how does an insurer establish that a denial is properly mailed. The case law is very murky. Different judges interpret the case law on mailing in different ways. What would be acceptable to the Court.? Would the First and Second Department differ? Let’s say we wanted to settle a case and I showed you a denial that was timely on its face, could you then request to see a copy of my mailing Affidavit and then argue that is not proper and therefore request interest from 30 days after the bills were received rather than from the date of filing.

    LMK set up a system that worked fairly easy. We want to settle a case. I show you a denial, timely or not. Under LMK, interest would run from the filing of the summons and complaint. Now you could request to see my mailing affidavit and argue that it is not proper because I missed some minute procedure. We would then have a big argument over when interst should accure.

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