Major medical provider does not have standing to bring action against no-fault carrier

Understanding Standing in No-Fault Insurance Cases

The relationship between major medical insurance providers and no-fault carriers can create complex legal scenarios, particularly when it comes to who has the right to pursue claims. A recent New York Supreme Court case highlights the intricate issues surrounding standing when major medical carriers attempt to recover benefits they’ve paid on behalf of injured parties.

This case demonstrates how assignment of rights doesn’t always provide the clear pathway to recovery that healthcare providers might expect. The decision also reveals potential errors in arbitration proceedings that could have significant implications for similar disputes between insurance carriers.

Jason Tenenbaum’s Analysis:

AETNA Health Plans v Hanover Ins. Co., 2013 NY Slip Op 33221(U)(Sup. Ct. Bronx Co. 2013)

In this case, Defendant provided no-fault services to Plaintiff’s Assignor. Defendant cut-off Plaintiff’s Assignor, who then sought to have medical benefits paid for by Aetna. When all was said and done, Aetna paid over $42,000 in benefits. Plaintiff asserted a lien on its assignor’s personal injury case and its assignor sought arbitration with AAA. The arbitrator found that since major medical paid for the benefits, the assignor could not maintain an case against no-fault carrier. The master arbitrator affirmed.

Now, Plaintiff assigns whatever rights it has to the Assignee major medical carrier. This does not go anywhere as is discussed in this opinion.

Just note that the lower arbitrator’s and master arbitrator’s decisions were wrong based upon Todaro v. Geico.

Legal Significance

This case exposes fundamental tensions in the relationship between no-fault carriers, major medical insurers, and injured parties when coverage gaps or terminations occur. When no-fault carriers discontinue benefits—whether properly or improperly—injured parties often turn to their major medical coverage for continued treatment. This creates potential double recovery issues and priority of payment questions that courts and arbitrators must navigate.

The arbitrator’s determination that the assignor could not maintain a case against the no-fault carrier once major medical paid benefits reflects one view of priority and payment obligations. Under this view, major medical payment satisfies the injured party’s need for benefits, eliminating the assignor’s ability to pursue the original no-fault claim. However, as Jason notes, this conflicts with established precedent in Todaro v Geico, which addressed similar priority and assignment issues.

The assignment from the injured party to Aetna attempted to transfer whatever rights remained against the no-fault carrier after major medical payment. However, courts are skeptical of such assignments when they appear to transfer rights that may not exist or that have been extinguished by subsequent events. If the arbitrator correctly determined the assignor lacked claims against the no-fault carrier, the assignment conveyed nothing of value to Aetna.

This creates a problematic scenario: Aetna paid over $42,000 in benefits that arguably should have been covered by the no-fault carrier, but cannot pursue recovery either in the assignor’s name (due to the arbitration determination) or in its own name (due to standing issues). The no-fault carrier benefits from its cut-off—even if improper—because the injured party’s needs were met through major medical coverage, eliminating the assignor’s incentive or ability to challenge the termination.

Practical Implications

For major medical carriers, this decision highlights the risks of paying benefits when no-fault coverage disputes exist. Before covering services that may fall within no-fault obligations, major medical carriers should investigate whether no-fault benefits have been improperly terminated. If termination appears improper, major medical carriers might condition coverage on the injured party pursuing arbitration or litigation against the no-fault carrier, or require assignment of rights before the injured party proceeds to arbitration.

For injured parties, the case demonstrates the importance of pursuing no-fault disputes before seeking alternative coverage. Once major medical pays benefits, the leverage and incentive to challenge no-fault terminations diminishes. Injured parties should exhaust no-fault arbitration and litigation options before turning to major medical, preserving their ability to recover from the carrier that should primarily provide coverage.

For no-fault carriers, the decision reveals a potential strategy: when cutting off benefits, carriers may benefit if injured parties obtain alternative coverage rather than immediately challenging the termination. Alternative payment can moot disputes and eliminate the injured party’s standing or incentive to pursue recovery, even when the original cut-off was improper.

The case also illustrates arbitration’s limitations. While arbitration provides streamlined dispute resolution, arbitration determinations that conflict with controlling precedent like Todaro v Geico can create problematic results that courts may struggle to correct, particularly when standing and procedural issues prevent review of the merits.

Key Takeaway

This case illustrates the challenges major medical providers face when attempting to recover benefits through assignment of rights. Even when significant amounts are at stake—over $42,000 in this instance—courts may find that the assignment doesn’t confer proper standing to pursue claims against no-fault carriers, particularly when arbitrators have made determinations that may conflict with established precedent. The decision highlights the importance of injured parties pursuing no-fault disputes before seeking alternative coverage, as subsequent major medical payment can eliminate standing and incentive to challenge potentially improper benefit terminations.

Related Articles

• Understanding standing requirements in no-fault cases
• Assignment of benefits validity during pending litigation
• Subrogation rights and priority of payment in multi-carrier cases
• Arbitration determinations and court review standards
• New York No-Fault Insurance Law