Behavioral Diagnostics v. Allstate Ins. Co., 2004 NY Slip Op 24041 (NY 2/11/2004)

• Decision Date: 11 February 2004
• Citation: 2004 NY Slip Op 24041
• Parties: BEHAVIORAL DIAGNOSTICS, as Assignee of MARIA AREVALO and Others, Plaintiff, v. ALLSTATE INSURANCE COMPANY, Defendant.
• Court: New York Court of Appeals Court of Appeals

Page 1

2004 NY Slip Op 24041

BEHAVIORAL DIAGNOSTICS, as Assignee of MARIA AREVALO and Others, Plaintiff, v. ALLSTATE INSURANCE COMPANY, Defendant.

Civil Court of the City of New York, Kings County.

February 11, 2004.

Baker & Barshay, LLP, Hauppage (Joaquin Lopez of counsel), for plaintiff.

Peter C. Merani, New York City (Samuel Kamara of counsel), for defendant.

OPINION OF THE COURT

ELLEN GESMER, J.

Plaintiff Behavioral Diagnostics brings this action to obtain payment from defendant Allstate for services rendered by plaintiff to three of its patients, Marina Shaulov, Dwayne Dowdell and Maria Arevalo.^* All three patients are insured by defendant Allstate under New York State No-Fault Insurance Law § 5101 et seq., and all three assigned their insurance benefits to plaintiff. The court conducted a full trial of this matter on January 26, 2004 and makes the following findings.

Facts and Procedural History

Plaintiff's assignors were all in motor vehicle accidents. They each received medical treatment from plaintiff Behavioral Diagnostics. The parties stipulated that the plaintiff had sent proper and timely verifications of claims, as required by the regulations of the Insurance Department (11 NYCRR 65-2.4), to Allstate; that plaintiff was the assignee of the three patients; and that the defendant had sent proper and timely denials of the claims, as required by 11 NYCRR 65-3.8. For each of the three patients, plaintiff sought payment from defendant for $194.57 for a diagnostic interview; $67.24 for "record evaluation"; $975.10 for seven hours of psychological testing; and $103.31 for "Interpretation/Explanation of Results."

Allstate paid for the psychiatric interview for each patient, but denied payment of the other services based on its determination that they were not "medically necessary" as provided by 11 NYCRR 65-3.8 (b) (4).

Since the parties stipulated that the plaintiff had sent proper and timely verifications of claims, as required by 11 NYCRR 65-2.4, that plaintiff was the assignee of the three patients, and that the defendant had sent proper and timely denials of the claims, as required by 11 NYCRR 65-3.8, plaintiff met its burden of proving its claim (see Amaze Med. Supply Inc. v. Eagle Ins. Co., 2003 NY Slip Op 51701[U] [App Term, 2d & 11th Jud Dists 2003]; Liberty Queens Med., P.C. v. Liberty Mut. Ins. Co., 2002 NY Slip Op 40420[U] [App Term, 2d & 11th Jud Dists 2002]).

Consequently, the only issue to be determined at trial was whether the services rendered were medically necessary, as defined by Insurance Law § 5102 (a) (1). While there had been some uncertainty in the courts as to whether plaintiff bore the burden of showing medical necessity, or whether it was the defendant's burden to show lack of medical necessity, it is now clear in this judicial district that the burden rests on defendant to prove that the services rendered were not medically necessary (Choicenet Chiropractic P.C. v. Allstate Ins. Co., 2003 NY Slip Op 50672[U] [App Term, 2d & 11th Jud Dists 2003]; A.B. Med. Servs. v. GEICO Ins., 2 Misc 3d 26 [App Term, 2d Dept 2003]).

In support of its case, defendant presented the testimony of Dr. Michael Rosenfeld, who had conducted a peer review of the records of Ms. Shaulov, and Dr. Yakov Burstein, who had conducted peer reviews of Mr. Dowdell and Ms. Arevalo. Both Dr. Rosenfeld and Dr. Burstein are licensed psychologists with many years of experience in the field, and were qualified by the court to give expert testimony. Both Dr. Rosenfeld and Dr. Burstein testified that the diagnostic interviews were medically necessary. Dr. Burstein did not state any opinion as to the medical necessity for the record evaluation of Ms. Arevalo's file. Both doctors testified with a reasonable degree of medical certainty that all of the other services rendered by plaintiff to the three patients were not medically necessary.

In rebuttal, plaintiff presented the testimony of Dr. Dimara Maksa, who has worked for plaintiff since June 2003, and became a co-owner of plaintiff in January 2004. The court qualified Dr. Maksa to render expert testimony. Dr. Maksa testified that all of the services rendered were medically necessary.

The Absence of a Definition of "Medical Necessity"

The No-Fault Insurance Law provides no definition for medical necessity. Rather, it states that claimants are entitled to recover for "basic economic loss," which includes:

"(1) All necessary expenses incurred for: (i) medical, hospital (including services rendered in compliance with article forty-one of the public health law, whether or not such services are rendered directly by a hospital), surgical, nursing, dental, ambulance, x-ray, prescription drug and prosthetic services; (ii) psychiatric, physical and occupational therapy and rehabilitation; (iii) any non-medical remedial care and treatment rendered in accordance with a religious method of healing recognized by the laws of this state; and (iv) any other professional health services; all without limitation as to time, provided that within one year after the date of the accident causing the injury it is ascertainable that further expenses may be incurred as a result of the injury. For the purpose of determining basic economic loss, the expenses incurred under this paragraph shall be in accordance with the limitations of section five thousand one hundred eight of this article." (Insurance Law § 5102 [a] [1].)

The regulations, which set out the mandatory provisions for approved policies under the act, provide no additional guidance, and merely repeat the language of the statute (11 NYCRR 65.12 [e] [2]).

There is no appellate case law as yet on the subject. The increasing litigation on the issue confirms the comment of one court that it is not a "simple" issue (Albatros Med. v. Government Empls. Ins. Co., 196 Misc 2d 656 [Civ Ct, Queens County 2003]). The determination of the issue turns on credibility (General Psychiatric Evaluation & Care v. Kemper Ins. Co., 1 Misc 3d 499 [Civ Ct, Queens County 2003]), since courts cannot rely solely on the examining physician (Oceanside Med. Healthcare v. Progressive Ins., 2002 NY Slip Op 50188[U] [Civ Ct, Kings County 2002]; cf. Tudor v. Metropolitan Life Ins. Co., 143 Misc 2d 180 [Nassau Dist Ct 1989]), but must consider whether the treatment had a "valid medical purpose" and resulted in an "actual medical benefit" (Sunrise Med. Imaging, P.C. v. Liberty Mut. Ins. Co., 2001 NY Slip Op 40091[U], *4 [Nassau Dist Ct 2001]).

Courts have taken care that their attempts to fashion a definition of "medical necessity" are consistent with the dual (and potentially contradictory) goals of the No-Fault Insurance Law of providing full compensation to motor vehicle accident victims who suffered "serious injury," while simultaneously containing costs (Oceanside Med. Healthcare, P.C. v. Progressive Ins., 2002 NY Slip Op 50188[U] [Civ Ct, Kings County 2002], citing Oberly v. Bangs Ambulance, 96 NY2d 295 [2001], and Licari v. Elliott, 57 NY2d 230 [1982]). The Oceanside court noted with approval the definition adopted by the New Jersey Supreme Court in Thermographic Diagnostics, Inc. v. Allstate Ins. Co. (125 NJ 491, 512, 593 A2d 768, 780 [1991]):

"a necessary medical expense under the Act is one incurred for a treatment, procedure, or service ordered by a qualified physician based on the physician's objectively reasonable belief that it will further the patient's diagnosis and treatment. The use of the treatment, procedure, or service must be warranted by the circumstances and its medical value must be verified by credible and reliable evidence. That standard, in our view, is consistent with the reparation objectives of the Act in that it would allow reimbursement for innovative medical procedures warranted by the circumstances that have demonstrable medical value but have not yet attained general acceptance by a majority of the relevant medical community."

That definition was also discussed with approval in Elm Med., P.C. v. American Home Assur. Co. (2003 NY Slip Op 51357[U] [Civ Ct, Kings County 2003]), and Medical Expertise v. Trumbull Ins. Co. (196 Misc 2d 389, 395 [Civ Ct, Queens County 2003]). In Medical Expertise (at 395), Judge Siegal used the New Jersey definition to establish the following standard for determining the medical necessity of psychological tests: "could a psychologist hold an objective and reasonable belief that the tool used will further the patient's diagnosis and treatment and whether that tool is warranted given the circumstances." In Fifth Ave. Pain Control Ctr. v. Allstate Ins. Co. (196 Misc 2d 801, 807-808 [Civ Ct, Queens County 2003]), Judge Agate, after considering the dictionary definitions and the text of a bill pending in the Legislature, formulated the following definition of medical necessity:

"treatment or services which are appropriate, suitable, proper and conducive to the end sought by the professional health service in consultation with the patient. It means more than merely convenient or useful treatment or services, but treatment or services that are reasonable in light of the patient's injury, subjective and objective evidence of the patient's complaints of pain, and the goals of evaluating and treating the patient." (Id. at 807; internal quotation marks omitted.)

Consistent with this, Judge Agate went on to hold that "for treatment or services to be medically necessary, it must be reasonably determined by the health care professional in...