New York Court of Appeals Rejects Health Insurer’s Claim Seeking Reimbursement Against Automobile Insurer for Claim Payments Under New York’s No-Fault Law

The New York Court of Appeals issued a decision yesterday that will have wide-ranging impact on issues of reimbursement between health insurers and automobile insurers.  In Aetna Health Plans v. Hanover Insurance Company, the court concluded, by a 5-2 vote, that Aetna, a health insurer, was not entitled to seek reimbursement from Hanover, a no-fault insurer, for payments that it made to health care providers for services provided to a health care plan participant as a result of an automobile accident.

In the underlying matter, Luz Herrera sustained personal injuries in a motor vehicle accident.  At the time of the accident, Herrera, whose vehicle was insured by Hanover, also had private health insurance through Aetna.   Herrera received medical care for her injuries, and bills were sent by the health care providers to Aetna, rather than to Hanover, who issued payment.   Aetna then initiated suit against Hanover, claiming that it had both a legal and equitable right to be reimbursed for the payments that it had made to the health care providers.

In the majority opinion authored by Associate Judge Eugene F. Pigott Jr., the Court noted that New York’s no-fault regulation permits an assignment to be made by an insured only to a provider of health care services, and rejected Aetna’s position that it was entitled to bring this lawsuit, holding:

Aetna argues, however, that it stands in Herrera’s shoes because Herrera assigned her no-fault rights to it. This argument fails for two reasons. First, since Herrera’s health care providers were able to bill and recoup payment from Aetna, an assignment by Herrera of her no-fault rights had already been made, leaving her with no rights to assign to Aetna. Second, by its very language, the no-fault regulation permits only the insured — or providers of health care services by an assignment from the insured — to receive direct no-fault benefits. Because Aetna does not fall under the term “health care provider,” Herrera could not assign her rights.

Judge Pigott’s opinion was joined by Chief Judge Janet DiFiore and Associate Judge Sheila Abdus-Salaam.

In a concurring opinion, Associate Judge Leslie E. Stein went further, rejecting Aetna’s claim that it was entitled to recover against Hanover under principles of equitable subrogation, stating “… in the typical example of subrogation, an insurer attempts to recoup covered medical expenses from the tortfeasor who caused the insured’s injuries and need for treatment in the first place… In such circumstances, as a matter of fairness, an insurer who was compelled by contract to pay for medical treatment required by its insured due to the negligent or intentional actions of another ought to be able to obtain reimbursement from the party who was at fault and caused those damages. Here, however, defendant Hanover Insurance Company is Luz Herrera’s no-fault insurer, not the wrongdoer…” She added, “While purporting to sue as the subrogee of Herrera, as its insured, Aetna is actually suing to recover for its own losses due to incorrect billing, rather than Herrera’s losses.”  Judge Stein’s opinion was joined by Associate Judge Michael Garcia.

Rivkin Radler was retained by Hanover to argue the case before the New York Court of Appeals.  The case was originally argued in January 2016 and further argument was held in April 2016 at the Court’s direction.  The appeal was handled by Barry I. Levy and Evan H. Krinick.  Erin M. Crowley, in-house counsel for Hanover, worked as co-counsel with Rivkin Radler.

“We are very pleased that the Court of Appeals agreed with our client’s positon on this issue,” stated Barry I. Levy, of Rivkin Radler. “The decision puts to rest issues that recur between health insurers and automobile insurers concerning whether and under what circumstances liability for payments can be shifted between payor systems.”

An amicus curiae brief was filed by the American Insurance Association.

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