Priority of payment, again

No-fault insurance disputes often hinge on timing—specifically, when claims were received and paid relative to policy limits. The concept of “priority of payment” determines which medical providers get paid when an insurance policy’s limits are insufficient to cover all claims. This principle becomes particularly important when multiple healthcare providers are competing for payment from the same exhausted policy.

In cases involving policy exhaustion, insurers must demonstrate that funds were depleted by earlier claims before they can deny payment to subsequent providers. However, establishing this timeline requires careful documentation and often leads to contested proceedings when providers challenge an insurer’s payment chronology.

The legal framework governing priority of payment disputes reflects New York’s statutory requirement that no-fault insurers process claims in the order received. When policy limits are exhausted, the chronological sequence of claim receipts and payments becomes the determinative factor in resolving coverage disputes. Medical providers who submitted claims before policy exhaustion have superior rights to payment over those whose claims arrived after the policy limits were depleted.

Case Background

In Ameriprise Insurance Co. v Kensington Radiology Group, P.C., the insurer sought to vacate an arbitration award that required payment to the medical provider respondent. The dispute centered on whether Ameriprise’s $50,000 policy limit had been exhausted by earlier payments to other providers before the insurer became obligated to pay Kensington Radiology Group’s claims.

Ameriprise submitted documentary evidence including the policy declaration page showing the $50,000 limit, payment ledgers listing dates when various provider claims were received and paid, and an attorney’s affirmation. The insurer argued these submissions demonstrated that the policy funds were depleted before Kensington’s claims became payable, thereby relieving Ameriprise of any obligation to the respondent provider.

The Appellate Term, First Department reviewed whether this evidence was sufficient to warrant vacatur of the arbitration award or whether factual disputes remained regarding the timing and sequence of payments relative to the policy exhaustion.

Jason Tenenbaum’s Analysis:

Ameriprise Ins. Co. v Kensington Radiology Group, P.C., 2017 NY Slip Op 51911(U) (App. Term 1st Dept. 2017)

“Here, petitioner-insurer’s submissions in support of its petition to vacate the arbitration award – including an attorney’s affirmation, the policy declaration page showing the $50,000 limit and a payment ledger listing in chronological order the dates the claims by various providers were received and paid – raised triable issues as to whether the $50,000 policy limit had been exhausted by payments of no fault benefits to respondent and other providers before petitioner became obligated to pay the claims at issue here (see Allstate Prop. & Cas. Ins. Co. v Northeast Anesthesia & Pain Mgt., 51 Misc 3d 149, 2016 NY Slip Op 50828 ; Allstate Ins. Co. v DeMoura, 30 Misc 3d 145, 2011 NY Slip Op 50430 1st Dept 2011]). Therefore, we remand the matter to Civil Court for a framed issue hearing on that issue.”

This looks like pure priority of payment, which does not look good,

Legal Significance

The Appellate Term’s decision to remand rather than affirm or reverse the arbitration award reflects the fact-intensive nature of priority of payment disputes. While insurers commonly prevail in policy exhaustion defenses when they present comprehensive chronological payment records, courts require more than documentary submissions—they must determine whether the insurer’s payment timeline accurately reflects compliance with the priority of payment regimen mandated by New York Insurance Law.

This decision reinforces that arbitration awards in no-fault cases are not immune from collateral attack when insurers can raise triable issues regarding policy exhaustion. However, insurers must do more than simply submit payment ledgers; they must demonstrate through admissible evidence that their payment practices adhered to statutory requirements and that the challenged claims fell outside the available policy limits.

The case also highlights the strategic considerations for medical providers. When insurers assert policy exhaustion defenses based on priority of payment, providers should carefully scrutinize the insurer’s payment chronology for inconsistencies, improper denial practices, or violations of the statutory payment sequence requirements. Discovery of the insurer’s full claims file and payment records becomes essential to challenging the exhaustion defense.

Practical Implications

For healthcare providers seeking no-fault reimbursement, this decision underscores the importance of prompt claim submission. The first-in-time priority system means that providers who delay submitting claims risk being shut out entirely if other providers exhaust the policy limits. Providers should implement systems to ensure claims are submitted immediately upon completion of services rather than batching claims for later submission.

Insurance carriers defending policy exhaustion cases must maintain meticulous records documenting the date each claim was received, the date payment was issued, and the running balance of available policy limits. The Ameriprise court’s focus on chronological payment ledgers demonstrates that general assertions of exhaustion are insufficient—insurers must provide detailed transactional documentation.

The remand for a framed issue hearing also signals that priority of payment disputes often cannot be resolved on the papers alone. Both insurers and providers should prepare for evidentiary hearings where witnesses may testify regarding the insurer’s claims handling procedures, the accuracy of payment records, and compliance with statutory payment requirements. This procedural requirement increases litigation costs and complexity for both parties.

Key Takeaway

The court’s decision to remand for a hearing demonstrates that priority of payment disputes require factual determination rather than summary judgment. When insurers present chronological payment records showing policy exhaustion, courts must examine whether the timing truly supports the insurer’s position—a process that can significantly impact provider recovery rights.

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