Article51 of the New York insurance law mandates that injured parties inmotor vehicle accidents may be compensated for basic economic loss,which is defined as losses up to $50,000 for certain necessaryexpenses such as medical costs.

No-fault cases revolve around the same repetitive issues —Medical Necessity, IME or EUO no-show, fee schedule, the primafacie case, etc. Once in a while, a decision from the appellatecourts comes along and has an impact on how different no-faultissues are decided.

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Currently, there is a pending case waiting to be heard which canalter how cases are currently decided, but even more significantly,it can impact the way insurance companies do business.

Pay claims in order of services rendered

The no-fault regulations provide that an insurer is required topay claims in the order the services were rendered. Section 65-3.15of Regulation 68 states the following:

65-3.15 Computation of basic economicloss.

When claims aggregate to more than$50,000, payments for basic economic loss shall be made to theapplicant and/or an assignee in the order in which each service wasrendered or each expense was incurred, provided claims thereforwere made to the insurer prior to the exhaustion of the $50,000. Ifthe insurer pays the $50,000 before receiving claims for servicesrendered prior in time to those which were paid, the insurer willnot be liable to pay such late claims. If the insurer receivesclaims of a number of providers of services, at the same time, thepayments shall be made in the order of rendition of services.

The Appellate Division is slated to hear an appeal inAlleviation Med. Servs., P.C. v. Allstate Ins. Co., 55Misc.3d 44 (App. Term, 2d Dept., 2d, 11th & 13th Jud. Dists.2017). In this case, the court ruled that a claim that wasdenied on medical necessity prior to the exhaustion of the no-faultpolicy, retains its position in the pecking order of priority ofpayments as a result of the implicit acknowledgment by theinsurance company that the claim was fully verified when it issueda denial for that particular bill.

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Therefore, when the denial was later determined to beunsupported, the insurance company was still obligated to pay theoutstanding bill, regardless of the fact that the underlyinginsurance policy had already been exhausted.

In making its decision, the Appellate court reached a conclusionantithetical to that of the other court. Ironically, both courtsrelied on the same Court of Appeals case of Nyack Hosp. v.General Motors Acceptance, 8 N.Y.3d 294, 300 (2007) to supporttheir positions.

Exhaustion of the policy

In Nyack Hospital, the Court of Appeals was faced witha case where the plaintiff, Nyack Hospital, submitted a claim forreimbursement under the no-fault regulations, but the defendantinsurer, General Motors, issued verification requests asking forthe patient's complete hospital records. By the time the hospital'sresponses were received by the insurer, the insurer had alreadypaid other claims, causing the exhaustion of the policy.

The plaintiff argued “that once it submitted the requisite formsto make a claim that caused aggregate claims to exceed $50,000, theinsurer had a duty under 11 NYCRR 65-3.15, the priority-of-paymentregulation, to keep the money that was due the [hospital] inreserve (up to the policy limits),” and therefore the “insurershould have delayed paying no-fault claims subsequently receivedfrom other health service providers, pending the hospital'sresponse to the insurer's request for additional verification.”

The Court of Appeals ruled in favor of the insurer and reasonedthat “[t]o adopt the priority-of-payment regime advocated by thehospital, we would have to interpret 'claims' in section 65-3.15 toencompass claims that have not been verified in accordance withsection 65-3.5. This approach runs counter to the no-faultregulatory scheme, which is designed to promote prompt payment oflegitimate claims.”

The Court of Appeals thus established that an unverified claimdoes not maintain a right to payment so long as it remainsincomplete.

Inconsistency between N.Y. courts

Inconsistency between the two courts may result in illogicaloutcomes. The tug of war of values seems to pull both ways andthe ultimate decision may very well come from the Court ofAppeals.

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Henry R. Guindi is a trial attorney with the KorsunskiyLegal Group.