Policy exhaustion -or was it?

Policy Exhaustion Defense Falls Short on Evidentiary Foundation

Insurance companies frequently assert policy exhaustion as a defense in New York no-fault insurance cases, claiming they’ve already paid out the maximum benefits available under a policy. However, simply claiming exhaustion isn’t enough – insurers must provide proper legal foundation for their payment records.

A recent Appellate Term decision demonstrates how technical evidentiary requirements can derail what might seem like a straightforward defense. The case highlights the ongoing challenges insurance companies face when trying to establish their payment histories in court, particularly regarding the foundational requirements under CPLR 4518(a).

This ruling serves as a reminder that even routine insurance defense strategies require careful attention to procedural requirements. Claims representatives’ affidavits must meet specific legal standards to be admissible as evidence of payments made.

Jason Tenenbaum’s Analysis:

JPC Med., P.C. v State Farm Mut. Auto. Ins. Co., 2022 NY Slip Op 50562(U)(App. Term 2d Dept. 2022)

“To obtain summary judgment on its asserted defense of policy exhaustion, defendant had to prove that it had paid the limits of the policy in accordance with 11 NYCRR 65-3.15 (see Nyack Hosp. v General Motors Acceptance Corp., 8 NY3d 294 ; Alleviation Med. Servs., P.C. v Allstate Ins. Co., 55 Misc 3d 44 , affd 191 AD3d 934 ). Here, defendant failed to demonstrate, as a matter of law, that it had made any payments under the policy because, as plaintiff argues, defendant’s claim specialist did not lay a sufficient foundation for the payment log, upon which defendant relied, to be accepted as proof that the payments listed therein had been made (see CPLR 4518 ; People v Kennedy, 68 NY2d 569 ; Charles Deng Acupuncture, P.C. v 21st Century Ins. Co., 61 Misc 3d 154, 2018 NY Slip Op 51815 )”

The 3.15 argument is what it is. But the failure to satisfy 4518(a)? Those are five lines in the a claims rep affidavit.

Key Takeaway

This decision underscores that insurance companies cannot simply submit payment logs without proper foundational testimony. Even seemingly minor deficiencies in a claims representative’s affidavit can defeat a policy exhaustion defense, emphasizing the importance of meticulous documentation in no-fault insurance litigation.

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• Reasonable excuse standards in no-fault default judgment cases
• New York No-Fault Insurance Law