New York Wins Battle Over Anti-Fraud Regulation

|

By Daniel Hays

|

NU Online News Service, Oct. 21, 4:26 p.m. EDT?New York's highest court yesterday upheld a regulatory change bythe State Insurance Department, which the agency said was designedto thwart fraudulent auto injury claims.

|

The Court of Appeals decision in favor of tighter time framesfor reporting an injury was hailed by insurers as an action thatwill help New York's no-fault system, which has been burdened by anestimated $1 billion a year in fraudulent injury claims.

|

David Snyder, vice president and assistant general counsel forthe Washington-based American Insurance Association, whichsubmitted a friend of court brief in the case, said the ruling fromthe high court in Albany, N.Y. will likely be an end to the legalbattle against Regulation 68 that has been waged by trial attorneysand some health providers

|

He said he doubted there would be any grounds for a federalappeal, because the rule was "basically a state regulationcontested under state administrative law and involved state lawprinciples."

|

He said the opinion included much that affirmed the regulatoryauthority of the state's insurance superintendent.

|

Regulation 68, which has been in force for more than a year,reduced the time to give notice of an injury claim from 90 days to30 days and cut the time limit for submitting medical bills from180 days to 45 days.

|

The unanimous decision by five judges of the court took note ofstate and insurers' briefs outlining how the looser time limitswere exploited by auto injury fraud rings.

|

As outlined in the briefs, ringleaders often associated withorganized crime would purchase minimum automobile insurance onwrecked or salvaged vehicles, fill them with confederates, cause anaccident and then have the "victims" attend corrupt medical clinicsto feign aches, pains and soft tissue injuries.

|

The medical mills would generate stacks of bills for eachpassenger and the insurer would be notified of the accident 90 daysafter it occurred. When the insurer investigated, only a wreckedvehicle remained.

|

Just before the 180-day deadline for medical bills, insurerswould be hit with a stack of bills. Once the bills were received,under New York law, insurers had only 30 days to pay or deny themor face a penalty for delay. Insurers, the court was told, had achoice between undertaking largely ineffective investigations andpaying questionable claims.

|

Opponents of the rule change, who included the New York TrialLawyers Association and others, had argued that the superintendentlacked authority under the no-fault statute to make them, but thecourt found that New York "regulators have commonly filled instatutory interstices by prescribing time limits when an enablingstatute has been silent."

|

The court, in the opinion written by Chief Judge Judith Kaye,rejected arguments that the rule would deny benefits to innocentaccident victims.

|

While some claims will be time-barred, the court noted that "inthe year and a half that the regulations have been in effect,petitioners' predictions that thousands of innocent accidentvictims will fail to meet the new filing deadlines and be deniedbenefits, or that hospitals or other medical providers will proveunable to bill for services within 45 days, appear not to havematerialized."

|

The National Association of Independent Insurers called theruling "a major victory for insurance consumers" and theProfessional Insurance Agents of New York State Inc. hailed "theNew York State Insurance Department and Superintendent Gregory V.Serio for standing victorious over the hard-won legal battle toenact rules that will prevent no-fault fraud.

|

Bernard Bourdeau, president of the New York InsuranceAssociation in Albany, said the regulation, which his group hasfought for, will "help combat the rampant fraud in New York'sno-fault system that is costing auto insurance policyholders andinsurance companies $2 million per day."

|

Mr. Bourdeau said the legislature should now enact a package ofanti-fraud measures proposed by Gov. George Pataki and theInsurance Department "to close other legal loopholes in the state'sno-fault system.."

Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader

  • All PropertyCasualty360.com news coverage, best practices, and in-depth analysis.
  • Educational webcasts, resources from industry leaders, and informative newsletters.
  • Other award-winning websites including BenefitsPRO.com and ThinkAdvisor.com.
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.