Article 51 of the New York insurance law mandates that injured parties in motor vehicle accidents may be compensated for basic economic loss, which is defined as losses up to $50,000 for certain necessary expenses such as medical costs.

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

Currently, there is a pending case waiting to be heard which can alter 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 to pay claims in the order the services were rendered. Section 65-3.15 of Regulation 68 states the following:

65-3.15 Computation of basic economic loss.

When claims aggregate to more than $50,000, payments for basic economic loss shall be made to the applicant and/or an assignee in the order in which each service was rendered or each expense was incurred, provided claims therefor were made to the insurer prior to the exhaustion of the $50,000. If the insurer pays the $50,000 before receiving claims for services rendered prior in time to those which were paid, the insurer will not be liable to pay such late claims. If the insurer receives claims of a number of providers of services, at the same time, the payments shall be made in the order of rendition of services.

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

Therefore, when the denial was later determined to be unsupported, the insurance company was still obligated to pay the outstanding bill, regardless of the fact that the underlying insurance policy had already been exhausted.

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

Exhaustion of the policy

In Nyack Hospital, the Court of Appeals was faced with a case where the plaintiff, Nyack Hospital, submitted a claim for reimbursement under the no-fault regulations, but the defendant insurer, General Motors, issued verification requests asking for the patient's complete hospital records. By the time the hospital's responses were received by the insurer, the insurer had already paid other claims, causing the exhaustion of the policy.

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

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

The Court of Appeals thus established that an unverified claim does not maintain a right to payment so long as it remains incomplete.

Inconsistency between N.Y. courts

Inconsistency between the two courts may result in illogical outcomes. The tug of war of values seems to pull both ways and the ultimate decision may very well come from the Court of Appeals.

Henry R. Guindi is a trial attorney with the Korsunskiy Legal Group.

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