No-Fault Decision Displays Shift in Law

June 26, 2017 | Insurance Fraud

A recent decision from Civil Court in Kings County, published in the New York Law Journal, acknowledged a shift in the law regarding the enforcement of time requirements imposed on insurance carriers, specifically, the timeliness of insurers’ requests for additional verification from medical providers for no-fault claims submitted for treatment rendered to eligible injured parties under the No-fault Regulations and Insurance Law.

In 2013, the New York State Department of Financial Services (formerly the Department of Insurance) promulgated the Fourth Amendment to 11 NYCRR § 65-3, which, in part, addressed technical, non-material defects in insurers’ verification requests and denials of claim forms. The stated intention of the amendment was to allow cases to be determined on the merits and not on procedural grounds, especially where the perceived technical defects were non-prejudicial and, with regard to the verification requests, the providers exhibited no proclivity to comply with the reasonable requests. Specifically, 11 NYCRR § 65-3.5 (p) was added as follows:

(p) With respect to a verification request and notice, an insurer’s non-substantive technical or immaterial defect or omission, as well as an insurer’s failure to comply with a prescribed time frame, shall not negate an applicant’s obligation to comply with the request or notice. This subdivision shall apply to medical services rendered, and to lost earnings and other reasonable and necessary expenses incurred, on or after April 1, 2013. (emphasis added)

In Z.M.S. & Y. Acupuncture, P.C. v GEICO Gen. Ins. Co. , 2017 NY Slip Op 27189 (Civ. Ct. Kings Cty., May 26, 2017), Judge Richard Montelione was presented with a scenario in which the insurer’s follow-up request for an examination under oath (“EUO”) was issued eleven (11) days after the medical provider’s failure to appear at a previously scheduled EUO. Significantly, 11, NYCRR § 65-3.6(b) requires that follow-up requests must be issued within ten (10) days of a provider’s failure to appear at a scheduled EUO. Accordingly, Plaintiff  Z.M.S. & Y. Acupuncture, P.C., through its attorneys, argued that Defendant GEICO’s follow-up request was one (1) day late and, therefore, untimely, thereby negating GEICO’s subsequent denial based on its failure to comply with the statutory time frame and properly toll the time to pay or deny the claim while GEICO was seeking verification.

Vincent Valente and Jack Vobis presented arguments on behalf of GEICO, asserting that, based on the 2013 amendment to the No-fault Regulations, GEICO’s one-day lapse was not fatal to its defense, and given Plaintiff’s complete disregard for GEICO’s requests for an EUO, Plaintiff should not benefit from its failure to comply. Notably, Judge Montelione had previously ruled against GEICO under similar circumstances. GEICO’s motion papers, prepared by Vincent Valente, outlined the arguments and rebutted Plaintiff’s case law, stating that the Department of Financial Services, in promulgating 11 NYCRR § 65-3.5 (p), intended to address factual situations exactly like the facts in this case. At oral argument, Jack Vobis exhorted Judge Montelione to abandon the premise of his prior decisions and look to the intent of the DFS in drafting and implementing the Fourth Amendment. Specifically, Vobis pointed out a May 2012 press release from Benjamin M. Lawsky, Superintendent of Financial Services, which stated that the proposed (at the time) amendment “[c]loses the loophole that allows courts and arbitrators to force insurers to pay fraudulent claims simply because the insurer made minor paperwork errors when processing a claim.” The statement went on: “Under current law, if there is a small and insignificant error in an insurer’s verification request or a claim denial, the healthcare provider can seek to fight it through the courts or arbitration. The new amendment states that a technical error cannot be used to avoid responding to a verification request and does not invalidate an otherwise proper claim denial. The amendment should substantially reduce litigation and arbitration over these issues, reducing yet another obstacle to the timely resolution of no-fault claims.”  Additionally, it was pointed out that  all of the case law relied upon by Plaintiff pre-dated the implementation of the Fourth Amendment to 11 NYCRR § 65-3.  Critically, there was no appellate authority on the issue, so Judge Montelione was left to himself to interpret the apparent disparity in the No-fault Regulations.

In a decision and order, issued May 26, 2017, Judge Montelione ruled in favor of GEICO, adopting the arguments proffered by defense counsel and granting summary judgment, dismissing Plaintiff’s Complaint. Judge Montelione held that, despite the acknowledged untimeliness of GEICO’s follow-up request, “under 11 NYCRR §  65-3.5(p), plaintiff’s obligation to appear for an EUO was not negated based upon the one-day tardiness in light of the fact that there were three prior EUOs previously scheduled in a timely manner, where plaintiff failed to appear for all four scheduled EUOs and where plaintiff ‘failed to allege, much less prove, that it had responded in any way to the EUO requests at issue.’” Moreover, Judge Montelione adapted the holding of the Appellate Division, Second Department in Infinity Health Prod., Ltd. v. Eveready Ins. Co., 67 AD3d 862, 890 N.Y.S.2d 545 (App. Div. 2nd Dept 2009), wherein that court held that “it would be incongruous to conclude that the Insurance regulation regarding follow-up verification, or any other statute or rule, warrants a result which would, in effect, penalize an insurer who diligently attempts to obtain the information necessary to make a determination of a claim, and concomitantly, rewards a plaintiff who makes no attempt to even comply with the insurer’s requests.”

Although Judge Montelione limited his decision to the facts and circumstances of this case, the very same issues arise often in no-fault litigation, and the decision and its underlying rationale will be useful in defense of future claims.

To view a copy of the decision, Click Here.

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