No Fault Defender – A Defense Attorney's Perspective on New York No-Fault Law

Archive for the ‘Preservation of defenses on NF-10’ Category

Quality Psychological Servs., P.C. v GEICO Ins. Co., 2010 NY Slip Op 51423(U)(Civ Kings. 2010) Here are the five statements from this case that are important.

(1) “In an action to recover assigned first party no-fault benefits, defendant seeks leave to amend its answers, strike the notices of trial, and compel discovery, including a deposition.”

(2) “Though defendant admits that it did not deny plaintiff’s bills on the basis of fraudulent billing, it maintains that it has a cause of action to recover benefits paid under a theory of fraud or unjust enrichment.  Defendant therefore seeks leave to amend its answers to interpose counterclaims for fraud and unjust enrichment.”

(3) “Herein, defendant’s counterclaims for fraud and unjust enrichment are palpably insufficient and patently devoid of merit because the claims were not denied on the grounds of fraudulent billing.”

(4) “As all evidence indicates that the counterclaims pertain to a precluded defense, defendant may not assert them in an amended answer. See Cornell Med., P.C., 24 Misc 3d at 60 (App. Term, 2d Dept. 2009) (”In our opinion, since defendant’s proposed counterclaim [for unjust enrichment] pertains to a defense which is precluded due to defendant’s untimely denials, the Civil Court properly denied the branch of defendant’s motion seeking leave to amend the answer to assert the counterclaim.”).”

Civil Court decided to cite Cornell Medical twice, which is fine.  But does anyone out there even factually know what Cornell was about? Cornell was not about fraud.  Never was and never will be.  It involved a medical provider who believed that every visit within his practice was a consultation, and that the ground rule that limits x-ray reimbursement to 75% for each subsequent x-ray on the same date of service should not apply to that Plaintiff.   Cornell involved “greedy billing” or “stupid billing”.  However, it did not involve fraud.

The Appellate Term in Cornell made an unnecessarily broad statement when it held that a counterclaim would not be allowed for any precludable defense.  Insofar as Cornell did not involve “fraud”, the portion of the holding which held that a counterclaim would not lie upon any precludable defense, including fraud, should be read as dicta. As to this case, we never reached the merits of what the so-called fraud is.  But, if it really was fraud, then why would anyone prosecute that case?  Then again, if a civil action that seeks to recoup moneys paid out to a provider who engaged in some type of fraud may not be maintained, then perhaps I am wrong for even suggesting that this type of case should not be prosecuted.

Bath Med. Supply, Inc. v Allstate Indem. Co., 2010 NY Slip Op 20059 (App. Term 2d Dept. 2010)

First, the Appellate Term, Second Department, appears to have, for the first time that  I can recall, denied a 3212(f) application when the defense is based upon a corporate structure issue.  The court found it relevant that many of the corporate documents, which the 3212(f) defense was based upon, are readily available.

Second, the portion of the 3212(f) application, which was based upon the purported need for an EBT of the assignor based upon an allegation that the assignor received the supplies, was denied since the defense may have been precluded.

Third, even if the defense was not precluded, a deposition of the assignor without a subpoena, as we know, is palpably improper.

“The court denied plaintiff’s motion for summary judgment pursuant to CPLR 3212 (f) on the ground that defendant was entitled to discovery pertaining to its contention that plaintiff had billed insurance companies for medical supplies which were never provided. However, defendant failed to make any showing that its denial of claim forms were timely mailed and that it is not precluded from raising fraudulent billing as a defense (see Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d 556 [2008]; Presbyterian Hosp. in City of NY v Maryland Cas. Co., 90 NY2d 274, 282 [1997]). Consequently, the court’s determination that discovery was necessary to obtain facts relevant to this precluded defense was improper, and, thus, plaintiff’s motion for summary judgment should not have been denied on that basis.

A defense that plaintiff may be ineligible to recover no-fault benefits because it failed to adhere to applicable statutes (cf. State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005]) is not precluded, notwithstanding defendant’s failure to demonstrate that its denial of claim forms were timely sent. However, defendant has offered no factual basis for its contention that plaintiff was not properly incorporated as a provider of durable medical equipment or failed to obtain any license that may have been required at the time it delivered medical equipment to its assignor. Further, in light of the availability of public records documenting plaintiff’s licensing status, defendant “failed to demonstrate that discovery was needed in order to show the existence of a triable issue of fact (see CPLR 3212 [f])” (Delta Diagnostic Radiology, P.C. v Interboro Ins. Co., 25 Misc 3d 134[A], 2009 NY Slip Op 52222[U] [App Term, 2d, 11th & 13th Jud Dists 2009]; see also Corwin v Heart Share Human Servs. of NY, 66 AD3d 814, 815 [2009] [summary judgment should be deferred pending discovery only when the opponent "offer[s] an evidentiary basis to suggest that discovery might lead to relevant evidence and that facts essential to justify opposition to the motion were exclusively within the knowledge and control of the plaintiff”]).”

We note that, insofar as the order conditioned the grant of defendant’s cross motion on the nonappearance of plaintiff’s assignor for an examination before trial, the order was improper. As plaintiff’s assignor is neither a party to this action nor under plaintiff’s control (Leon v Martinez, 84 NY2d 83, 88 [1994]; Cardtronics, LP v St. Nicholas Beverage Discount Ctr., Inc., 8 AD3d 419, 420 [2004]; 6A NY Jur 2d, Assignments §§ 59, 85), the sanctions provided by CPLR 3126 (3) for nondisclosure cannot be imposed on plaintiff for failing to produce its assignor for an examination before trial (MIA Acupuncture, P.C. v Mercury Ins. Co., ___ Misc 3d ___, 2009 NY Slip Op 29509 [App Term, 2d, 11th & 13th Jud Dists 2009]).

This is not a new concept.   If you do not preserve your objection, then you waive the right to challenge the proffered piece of evidence.  In the no-fault context, we saw it in Continental v. Mercury, where Plaintiff’s failure to specifically object to the admissibility of an affidavit rendered the argument waived.  There also are a legion of 2309(c) cases where this issue crops up.  Also, in a case that never seems to get noticed, the Appellate Division in St. Vincent’s Hosp. & Medical Center v. Nationwide Mut. Ins. Co., 42 AD3d 523 (2d Dept. 2007), addressed a similar issue as set forth below:

“The Supreme Court correctly denied that branch of the motion which was for summary judgment in favor of St. Vincent’s on the first cause of action. The Supreme Court correctly concluded that the defendant issued a timely denial of claim on the prescribed N-F 10 form…and, accordingly, raised a triable issue of fact on the first cause of action

We decline to consider the issue of the adequacy of the defendant’s denial of claim, and specifically, St. Vincent’s argument that the N-F 10 form failed to adequately set forth the reason that the no-fault claim was denied. St. Vincent’s raised this issue for the first time in its reply papers, and there is no evidence that the defendant had an opportunity to submit a sur-reply.”

While St. Vincent did not discuss the issue regarding raising issues for the first time on appeal, the reasoning of the Appellate Division and the fact pattern in St. Vincent bears a striking resemblance to this interesting case that was decided immediately prior to Christmas, 2009 entitled Mid Atl. Med., P.C. v Electric Ins. Co., 2009 NY Slip Op 52597(U) (App. Term 2d Dept. 2009):

“Plaintiff further argues that defendant is precluded from relying upon plaintiff’s untimely notice of claim because defendant’s denial of claim form did not advise plaintiff that “late notice will be excused where the applicant can provide reasonable justification of the failure to give timely notice,” as required by Insurance Department Regulations (11 NYCRR) § 65-3.3 (e). Said issue was likewise raised for the first time on appeal, as it differs from plaintiff’s contention in the Civil Court, which did not challenge the sufficiency of defendant’s denial of claim form but, [*2]rather, asserted that defendant did not demonstrate that plaintiff had failed to provide a reasonable justification for the untimely notice of claim. Consequently, this contention by plaintiff is similarly waived. Accordingly, the order is affirmed.”

A general challenge to a denial’s validity is insufficient.  The appellate courts require that this challenge be specific to the denials’ purported deficiency.

I previously posed on this case.  I was trying to figure out what the factual basis was behind the following Appellate Division holding: “Contrary to Allstate’s contention, however, the Supreme Court properly determined that the denial of claim, which incorrectly stated the amount of the claim and gave an invalid reason for the denial was fatally defective”

I examined the motion papers at the Nassau County Clerk’s office and copied the relevant portions of the affirmations, affidavits and exhibits that comprised the underlying motion practice.  If you wish to download these papers, click on the hyperlink that follows this sentence. St. Barnabus motion papers

What appeared to have happened was that the carrier did not obtain written notice of the loss within 30-days of the loss (”30-day rule defense”).  However, there was oral notification of the loss.  The carrier after obtaining oral notification of the loss then sought to obtain an NF-2.  While this was happening, the Hospital (a few months after the loss), submitted a bill.  The bill was submitted more than 45-days after the discharge of the patient from the hospital.

The bill was timely denied based upon the 30-day rule defense.  Perhaps the carrier meant to also deny the bill upon the 45-day rule defense?  Furthermore, the amount stated on the denial was the full UB-92 amount, and not the DRG rated amount.

Upon reading the motion papers, there appeared to be a viable 30-day rule defense.  The claims affidavit annexed to the moving papers, however, failed to set forth in a non-conclusory fashion that written notice was not given within 30-days.  The affidavit focused on the failure to obtain an NF-2, despite Allstate’s valiant attempts to obtain the same.  We all know that written notice of loss may take the form of a police report, holographic correspondence or other means.  In other words, an NF-2 is just one way to obtain written notice of the loss.  Thus, a request to obtain an NF-2 is a verification request (Olympic Chiropractic, P.C. v. American Transit Inc. Co. 14 Misc.3d 129[A][App. Term 2d Dept. 2007]), which is satisfied upon receipt of an NF-2 or NF-5.

Yet, in this case, the record suggests that there was no written proof of loss prior to receipt of the NF-5.

I therefore think that the issue in this case was not so much that the denial was defective, but that the insurance carrier’s affidavit was lacking in substance.  The record revealed a viable 30-day rule defense.  Thus, as frequently happens in no-fault practice, the validity of the defense is contingent upon the language of the affidavit.  Here, the language of the affidavit was insufficient.

St. Barnabus Hosp. v. Allstate Ins. Co., 2009 NY Slip Op 07824 (2d Dept. 2009)

“Contrary to Allstate’s contention, however, the Supreme Court properly determined that the denial of claim, which incorrectly stated the amount of the claim and gave an invalid reason for the denial”

Note that this case does not really change the governing law as it relates to what is required to be stated on a denial to preserve the underlying defense.  First, there is an “and” in the holding of the decision, which denotes that multiple defects or omissions are usually required to render a denial invalid.  Second, the case clearly holds that the failure to articulate in the denial what the proffered defense was is fatal per se.

First: the “and” in the holding of this decision comes from the line of cases which held that a denial was invalid because of multiple mistakes and omissions that appeared on the face of the denial.  Those cases were cited in the decision: Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d at 565 (2d Dept. 2006); Nyack Hosp. v State Farm Mut. Auto. Ins. Co., 11 AD3d at 665 (2d Dept. 2006).

Second: the defect here involved the failure to state the correct defense.  In all areas of law, this defect in and of itself will render an otherwise timely disclaimer invalid.  This should be contrasted, however, with the situation where the denial correctly states the general reason of the defense but does not give explicit details regarding the defense. In the situation that I bolded, the denial will be deemed valid.  A.B. Medical v. Liberty Ins. Co., 39 AD3d 779 (2d Dept. 2009)(appraising the carrier of the medical necessity defense); Al Correa Neurologist, P.C. v. State Farm Ins. Co., 15 Misc.3d 140 (App. Term 1st Dept. 2009)(same).  The rule that has developed is that a denial, which does not put the medical provider on notice of what the underlying defense is, will be deemed invalid per se.

This case reinforces the two rules regarding the facial validity of denials that have developed over the last 5 years: (1) Numerous mistakes or omissions will be render the denial invalid; and (2) Failing to state the proper reason (or any reason) for denying benefits in the disclaimer will render the ensuing denial invalid per se.

For more insight on this topic, see No-Fault Paradise.

We kind of saw it in a previous post involving a Mercury case where a claim representative’s sworn affidavit could explain typographical errors in a resulting NF-10. Some wondered why the Appellate Term never expounded on this point. Now, they have.

Bath Med. Supply, Inc. v Country Wide Ins. Co.
2009 NY Slip Op 51145(U)(App. Term 2 Dept. 2009)

The highlights are as follows:

“Plaintiff contends that defendant’s opposing papers did not establish that the claim determination period was tolled because, while the affidavit of defendant’s no-fault litigation supervisor sets forth the dates on which the verification requests were mailed, the denial of claim forms set forth incorrect dates as to when final verification was requested. However, the unsworn denial of claim forms do not purport to state the dates on which defendant first requested verification, whereas, in the sworn affidavit, defendant’s no-fault litigation supervisor states the dates on which verification was first requested, the dates on which the verification was received and the dates on which the denial of claim forms were mailed. To the extent the unsworn denial of claim forms suggest that defendant may have sent a further request for verification after receiving the verification it initially sought, they do not contradict the sworn statement by defendant’s no-fault litigation supervisor or otherwise nullify defendant’s position that the claim determination period was tolled.”

My observation is that the days of challenging denials for typographical errors have ended. We saw this starting with AB v. Liberty and extending through Al Correa v. State Farm, as well as other cases decided subsequent to Al Correa.

I suppose the best questions to ask are as follows. First, how much of an NF-10 needs to be filled out in order to preserve the defense(s) on it? Second, how many mistakes are allowed to be present on the NF-10, so as to preserve the defenses on the denial? We shall await the answer to these questions.

The recent trend in Appellate Term jurisprudence involving cases with (u) or Misc (a) cites is to take the approach that the Appellate Division, Second Department takes in terms of reasoning a case. The Court will cite to other precedent which, on their facts, should guide the reader as to what the law is in the matter sub judice. The other trend is for the courts to deem certain challenges “unpreserved” or unpreserved, yet without merit if preserved.

Ortho-Med Surgical Supply, Inc. v Mercury Cas. Co.
2009 NY Slip Op 50731(U)(App. Term 2d Dept. 2009)

If you read the facts of this case, you would think this is another “medical necessity” summary judgment motion that another carrier interposed. Yet, if you read the record on appeal, you would see something different.

This case involved a denial that on its face was dated one month previous to its generation date. Therefore, the denial was dated prior to the receipt date of the bill. The carrier, in their motion for summary judgment, presented an affidavit from someone with personal knowledge that this was a scrivener’s error and based upon a review of the computer records and the paper file, the denial was generated one month following the date set forth on the denial. The affidavit then went on to state that it was mailed in the manner consistent with properly dated denials. Thus, it was mailed on the date it should have been dated or the next business date, in accordance with the carrier’s standard mailing procedures.

Plaintiff opposed the motion and cross-moved, arguing that the denial was fatally defective. The carrier prevailed on its motion and the plaintiff appealed.

On appeal, the plaintiff then went on to argue, besides its preserved argument, that the denial could not be considered a business record since it had the wrong date on it. If a denial is not deemed a business record, it may not be considered by the Court. Hospital v. Elrac and Montifiore v. Liberty stand for those propositions of law.

The carrier argued that a proper foundation was laid and any defects in the “business record” would go to the weight – not the admissibility – of the business record.

Following consideration of all the proofs, the Appellate Term affirmed the grant of summary judgment to the carrier.

Now if only the entire procedural history of this whole case were set forth in the opinion, it might be worth something more than a (u) cite.

But what I can say is that if a defect is not numerous and you spell it out in a decent affidavit, the Appellate Term will give you a pass.

At this point in our PIP jurisprudence, it has been taken for granted that a defense of medical necessity extends to the four corners of the peer review or the medical examination which recommends cessation of treatment.

The foundation for the principle appears in 11 NYCRR Sec. 65-3.8(a)(4), which states the following: “If the specific reason for a denial of a no-fault claim, or any element thereof, is a medical examination or peer review report requested by the insurer, the insurer shall release a copy of that report to the applicant for benefits, the applicant’s attorney, or the applicant’s treating physician, upon the written request of any of these parties.”

In construing this regulation, the Appellate Division observed in A.B. Medical Services, PLLC v. Liberty Mut. Ins. Co. 39 A.D.3d 779 (2d Dept. 2007): “The applicable regulations provide that if a no-fault claim is denied in whole or in part based on a medical examination or peer review report requested by the insurer, then the insurer shall release a copy of that report to, among others, the applicant or its attorney, upon written request. Had it been the intent of the Department of Insurance to require the carrier to set forth a medical rationale in the prescribed denial of claim form, it would have so provided”

Thus, it is has been assumed that the the peer or IME is an extension of the denial. This was the methodology behind the Appellate Term, Second Department’s holding in A.B. Medical Services, PLLC v. Liberty Mut. Ins. Co. 10 Misc.3d 128(A)(App. Term 2d Dept. 2005), prior to it being reversed by the Appellate Division, Second Department. See, 39 AD3d 779. In fact, all the Appellate Division really said was that the peer report or IME report does not have to be annexed to the denial.

Therefore, recent Appellate Term, First Department cases are quite questionable. In Mollins v Allstate Ins. Co. 20 Misc 3d 141(A)(App. Term 1st Dept. 2008), the Appellate Term, stated the following: “In opposition, defendant failed to raise a triable issue since it did not submit the IME report upon which its denials were based or any other evidentiary proof to support its defense of lack of medical necessity (see Vista Surgical Supplies, Inc. Travelers Ins. Co., 50 AD3d 778 [2008]; Response Med. Equip. v General Assur. Co., 13 Misc 3d 129[A], 2006 NY Slip Op 51765[U] [2006]).

And the Appellate Term case, Response Med. Equipment said the following: “With respect to the $650 claim for assignor Edwin Milanes, defendant failed to support its defense of lack of medical necessity with the peer review upon which the denial was based, or any other competent proof in admissible form.”

It therefore appears arguable that an insurance carrier may escape the four corners of the denial, as amplied by the peer review and denial. It should be interesting to see how the Appellate Term, First Department and the other courts rule when the “Cerucci” four corner rule collides with the “other competent proof in admissible form” rule.