The Court of Appeals discusses a condition precedent

New York & Presbyt. Hosp. v Country Wide Ins. Co., 2011 NY Slip Op 07149 (2011).

This case has a lot of value for many reasons.  Like so many cases from the appellate courts, the value comes from what some have denominated as dicta or other powerful statements that surround the central holding.

The question presented was relatively straightforward.  The answer really made the reader wonder whether the Court of Appeals agrees with the Unitrin holding.  Clearly, there was no reason to even get within 100 feet of this issue; yet, the Court of Appeals came really close to reaching it.  Pretty scary.

Query: could a hospital satisfy the 30-day prompt notification rule through submitting a timely proof of claim within 45-days of the date of service?  The argument from the hospital was that since the NF-5 is the functional equivalent of an NF-2 and an NF-3, the submission of it within 45-days should satisfy both regulations.  Otherwise, the argument follows, why would the NF-5 substitute for both of those forms?  Public policy would on some level support the hospitals’ argument because the NF-5 was created just for hospitals, and the “fraud prevention” goal of the 2002 amendments to Part 65 of the regulations are not directed to hospitals.  Rather, as the Court of Appeals discussed in Serio, this purpose of the regulations is directed towards the Brooklyn medical mills.  (I editorialized a bit there)

The Court of Appeals held that a submission of the NF-5 which is after the 30-day time period (to submit proof of loss) but prior to the 45-day time period (to submit a bill), where there was no prior proof of loss would be violative of the condition precedent to coverage under the policy.

To quote from the case:

“By ruling that the notice of accident condition was satisfied based on the plain language of 11 NYCRR 65-3.3 (d), the Appellate Division disregarded the separate and distinct nature and purpose of these requirements. Even more troubling, such a construction effectively reads the 30-day written notice of accident requirement out of the no-fault regulations. But nothing in 11 NYCRR 65-3.3 (d) explicitly dispenses with the 30-day notice of accident requirement. Rather, 11 NYCRR 65-3.3 (d) merely provides that a NF-5 form may constitute the written notice required under the notice of accident provision.

In other words, these regulations (read alone or in tandem) cannot be interpreted to mean that a hospital/assignee’s timely submission of a proof of claim for health services within 45 days of discharge of the injured person excuses the insured/assignor’s failure to give the threshold notice of accident within 30 days of the accident, or that health care service providers are exempt from the written 30-day notice of accident requirement. Neither 11 NYCRR 65-1.1 nor 11 NYCRR 65-3.3 (d) contains such language. That is, while 11 NYCRR 65-3.3 (d) allows a completed hospital facility form to satisfy the written notice of accident requirement, the regulation does not provide (or suggest) that a “proof of claim” in that form filed within 45 days of treatment satisfies the 30-day notice of accident requirement where, as here, the form was submitted to Country Wide after the 30-day period has expired.”

For the first time, the Court of Appeals discussed the reasonable excuse issue.  This was discussed after holding that the Hospital’s arguments “where the insurer is not readily identifiable” lacked merit.  In this regard, the Court of Appeals cited 65-3.5(l): “Indeed, the regulations specifically direct carriers to consider whether the injured person was a pedestrian or an occupant of a vehicle who may have difficulty identifying the proper carrier in assessing untimely notices of accident”

I suspect this overturns the sweeping holding of the Appellate Term, First Department in Bronx Expert Radiology, P.C. v NYC Tr. Auth., 32 Misc 3d 140(A)(App. Term 1st Dept. 2011), as it construes the due consideration portion of 65-3.5(l), since the Court of Appeals appear to have relegated this to more of a regulatory market conduct issue.

My favorite part of this opinion, and the dicta that I discussed above is right here:

“Finally, as an assignee of all the rights, privileges and remedies to which Benitez was entitled under the No-Fault law, Presbyterian stood in the shoes of Benitez and acquired no greater rights than he had (see Matter of International Ribbon Mills [Arjan Ribbons], 36 NY2d 121, 126 [1975] [Chief Judge Breitel wrote, “[i]t is elementary ancient law that an assignee never stands in any better position than his assignor.”]). Here, because no written notice of accident was given, there was a failure to fully comply with the terms of the no-fault policy, which is a condition precedent to insurer liability.”

“As a result, the assignment effectively became worthless (i.e., Benitez assigned nothing to Presbyterian) — you cannot assign your right to benefits if your right to those benefits has not been triggered, or if you had no right to those benefits in the first place.

So it follows that maybe there is a reason why the Court of Appeals did not grant leave in the Unitrin matter.

Call this a win for the carriers – the nature and extent seems pretty significant.  That would make it two significant victories for the defense bar in one year.