Why Trust This Analysis
This article is part of our ongoing no-fault coverage, with 271 published articles analyzing no-fault issues across New York State. Attorney Jason Tenenbaum brings 24+ years of hands-on experience to this analysis, drawing from his work on more than 1,000 appeals, over 100,000 no-fault cases, and recovery of over $100 million for clients throughout Nassau County, Suffolk County, Queens, Brooklyn, Manhattan, and the Bronx. For personalized legal advice about how these principles apply to your specific situation, contact our Long Island office at (516) 750-0595 for a free consultation.
When insurance companies suspect fraudulent activity by their insureds, they face a critical decision: pursue immediate financial recovery or maintain the integrity of their policy cancellation. This tension came to a head in a recent New York case that highlights a fundamental principle in insurance law — accepting premium payments after canceling a policy can have serious legal consequences for insurers.
The case of Sensational Services, Inc. v. American Trust Insurance Co. involved an insurance company that canceled a policy due to suspected fraud but then made the costly mistake of cashing a premium check from the very policyholder they had terminated. This decision ultimately cost them over $166,000 and serves as a cautionary tale for insurance companies navigating New York No-Fault Insurance Law.
This scenario is particularly relevant in the no-fault insurance context, where insurance fraud cases are unfortunately common. Insurance companies must be vigilant about maintaining clear documentation and consistent actions when dealing with suspected fraudulent claims. The legal principle at stake — known as waiver — occurs when an insurance company’s conduct is inconsistent with their claimed position, potentially undermining their ability to deny coverage.
The implications extend beyond simple premium collection. When insurers accept payments after policy termination, courts may interpret this as evidence that the insurer has waived its right to claim the policy was void from inception. This can significantly impact the insurer’s ability to pursue fraud claims or deny coverage for legitimate claims that arose during the disputed period.
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Jason Tenenbaum’s Analysis:
Sensational Serv., Inc. v American Tr. Ins. Co., 2015 NY Slip Op 30343(U)
Short term monetary gain ($166,505.79) or long term common sense? Read.
Key Takeaway
Insurance companies must exercise extreme caution when handling premium payments from policyholders whose coverage they have already canceled. The act of depositing or cashing these payments can be interpreted by courts as a waiver of the insurer’s right to claim the policy was properly terminated. This legal principle serves as a reminder that consistency in business practices is crucial — insurers cannot have their cake and eat it too by accepting the financial benefits of a policy while simultaneously claiming that policy never existed or was properly canceled due to fraud.
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Legal Context
Why This Matters for Your Case
New York's no-fault insurance system, established under Insurance Law Article 51, is one of the most complex insurance frameworks in the country. Every motorist must carry Personal Injury Protection coverage that pays medical expenses and lost wages regardless of fault, up to $50,000 per person.
But insurers routinely deny valid claims using peer reviews, EUO scheduling tactics, fee schedule reductions, and coverage defenses. The Law Office of Jason Tenenbaum has handled over 100,000 no-fault cases since 2002 — from initial claim submissions through arbitration before the American Arbitration Association, trials in Civil Court and Supreme Court, and appeals to the Appellate Term and Appellate Division. Jason Tenenbaum is one of the few attorneys in the state who both writes his own appellate briefs and tries his own cases.
His 2,353+ published legal articles on no-fault practice are cited by attorneys throughout New York. Whether you are dealing with a medical necessity denial, an EUO no-show defense, a fee schedule dispute, or a coverage question, this article provides the kind of detailed case-law analysis that helps practitioners and claimants understand exactly where the law stands.
About This Topic
New York No-Fault Insurance Law
New York's no-fault insurance system requires every driver to carry Personal Injury Protection (PIP) coverage that pays medical expenses and lost wages regardless of who caused the accident. But insurers routinely deny, delay, and underpay valid claims — using peer reviews, IME no-shows, and fee schedule defenses to avoid paying providers and injured claimants. Attorney Jason Tenenbaum has litigated thousands of no-fault arbitrations and court cases since 2002.
271 published articles in No-Fault
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Disclaimer: This article is published by the Law Office of Jason Tenenbaum, P.C. for informational and educational purposes only. It does not constitute legal advice, and no attorney-client relationship is formed by reading this content. The legal principles discussed may not apply to your specific situation, and the law may have changed since this article was last updated.
New York law varies by jurisdiction — court decisions in one Appellate Division department may not be followed in another, and local court rules in Nassau County Supreme Court differ from those in Suffolk County Supreme Court, Kings County Civil Court, or Queens County Supreme Court. The Appellate Division, Second Department (which covers Long Island, Brooklyn, Queens, and Staten Island) and the Appellate Term (which hears appeals from lower courts) each have distinct procedural requirements and precedents that affect litigation strategy.
If you need legal help with a no-fault matter, contact our office at (516) 750-0595 for a free consultation. We serve clients throughout Long Island (Huntington, Babylon, Islip, Brookhaven, Smithtown, Riverhead, Southampton, East Hampton), Nassau County (Hempstead, Garden City, Mineola, Great Neck, Manhasset, Freeport, Long Beach, Rockville Centre, Valley Stream, Westbury, Hicksville, Massapequa), Suffolk County (Hauppauge, Deer Park, Bay Shore, Central Islip, Patchogue, Brentwood), Queens, Brooklyn, Manhattan, the Bronx, Staten Island, and Westchester County. Prior results do not guarantee a similar outcome.
