Central General Hosp. v. Chubb Group of Ins. Companies

• Decision Date: 10 June 1997
• Citation: 681 N.E.2d 413,659 N.Y.S.2d 246,90 N.Y.2d 195
• Parties: , 681 N.E.2d 413 CENTRAL GENERAL HOSPITAL, as Assignee of Pamela Mandresh, Respondent, v. CHUBB GROUP OF INSURANCE COMPANIES, Also Known as Chubb and Son, Inc., Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 246

659 N.Y.S.2d 246

90 N.Y.2d 195, 681 N.E.2d 413

CENTRAL GENERAL HOSPITAL, as Assignee of Pamela Mandresh, Respondent, v. CHUBB GROUP OF INSURANCE COMPANIES, Also Known as Chubb and Son, Inc., Appellant.

Court of Appeals of New York.

June 10, 1997.

Bertram Herman, P.C., East Norwich (Bertram Herman, of counsel), for appellant.

Joseph Henig, P.C., Bellmore (Joseph Henig and Gregory Henig, of counsel), for respondent.

Bruce Somerstein & Associates, P.C., New York City (Robert Nizewitz, of counsel), for Travelers Indemnity Company and another, amici curiae.

Short & Billy, P.C., New York City (Skip Short, of counsel), for New York Central Mutual Fire Insurance Company and others, amici curiae.

OPINION OF THE COURT

BELLACOSA, Judge.

This appeal stems from a lawsuit by Central General Hospital, pursuant to Insurance Law § 5106(a), to recover no-fault billings from Chubb Group of Insurance Companies for medical services rendered to an allegedly injured motorist. Defendant-appellant insurer, the assignor of its patient's claimed benefits, argues that its untimely disclaimer does not prevent it from raising a defense of lack of coverage. The insurer's defense was premised on its assertions that the injured person's condition and hospitalization were unrelated to the accident and that the medical treatment was excessive.

The lower courts ruled in favor of the hospital and against the insurer. This Court granted leave to appeal and we now reverse the order of the Appellate Division and hold unanimously that the insurer's untimely disclaimer does not preclude it from denying liability on a strict lack of coverage ground.

Central General Hospital provided medical treatment to Pamela Mandresh on four separate occasions for injuries allegedly sustained in an automobile accident. Chubb insured the automobile Mandresh was driving at the time she was allegedly injured. The hospital submitted standard requests for payment of no-fault billings totaling $2,403.50. Chubb rejected them on the grounds that the injuries were not related to the accident and the treatments were excessive. Chubb insists that Mandresh's injuries were sustained in a separate work-related accident about a year prior to the automobile accident. Chubb alleges that Mandresh was treated by the same physician for the same cervical spine torticollis condition after both incidents.

Chubb neither paid nor denied the claims within 30 days as required by Insurance Law § 5106(a) and 11 NYCRR 65.15(g)(3), and failed to request verification within the prescribed time frames (see, 11 NYCRR 65.15[d][1], [2] ). The hospital then commenced the specifically authorized action, pursuant to Insurance Law § 5106(a), to recover its assigned no-fault billing charges.

Following joinder of issue, Central General moved for summary judgment and Chubb cross-moved to bar the hospital from offering any evidence based upon its failure to supply a bill of particulars. Supreme Court granted Central General's motion for summary judgment. It ruled that Chubb was precluded from disclaiming coverage because it did not deny the claim within 30 days or seek verification within 10 days after receipt of the claim. The court incidentally denied Chubb's cross motion with respect to the bill of particulars, an aspect of the case effectively subsumed by the primary disposition and, therefore, a matter we neither can nor need to pass on.

The Appellate Division essentially upheld the Supreme Court ruling (228 A.D.2d 406, 643 N.Y.S.2d 654). It distinguished cases "in which the claimant, the vehicle, or the subject event was facially outside of the four corners of the insurance contract" (see, e.g, Zappone v. Home Ins. Co., 55 N.Y.2d 131, 447 N.Y.S.2d 911, 432 N.E.2d 783), noting that the injuries in this case were reported to have been a result of a covered accident (id., at 407, 643 N.Y.S.2d 654).

We are persuaded that an insurer, despite its failure to reject a claim within the 30-day period prescribed by Insurance Law § 5106(a) and 11 NYCRR 65.15(g)(3), may assert a lack of coverage defense premised on the fact or founded belief that the alleged injury does not arise out of an insured incident. The denial of liability based upon lack of coverage within the insurance agreement, as framed in part by the litigation strategy and nature of the instant dispute, is distinguishable from disclaimer attempts based on a breach of a policy condition (see, Zappone v. Home Ins. Co., supra, 55 N.Y.2d, at 136-137, 447 N.Y.S.2d 911, 432 N.E.2d 783; contrast, Presbyterian Hosp. v. Maryland Cas. Co., 90 N.Y.2d 274, 660 N.Y.S.2d 536, 683 N.E.2d 1 [decided today] ). Precedent and logical analysis support the extension of the Zappone exception here. Strict compliance with the time requirements of both the statute and regulations may be obviated and the preclusion remedy rendered unavailable when denial of claims is premised on a lack of coverage. Our precise holding is, therefore, narrower than the sweep of the proposition advanced by the concurring opinion.

We would not, for example, extend this exceptional exemption to excuse Chubb's untimely defense in relation to the treatment being deemed excessive by the insurer. That would not ordinarily implicate a coverage matter and, therefore, failure to comply with the Insurance Law time restriction might properly preclude the insurer from a belated rejection of the billing claim on that basis.

Insurance Law § 5106(a) provides that "[p]ayments of first party benefits * * * are overdue if not paid within thirty days after the claimant supplies proof of the fact and amount of loss sustained." This statute corresponds with Insurance Department regulation 11 NYCRR 65.15(g)(3), which prescribes that "[w]ithin 30 calendar days after proof of claim is received, the insurer shall either pay or deny the claim in whole or in part." Notably, 11 NYCRR 65.15(g)(5) requires that an insurer denying a claim on a no coverage basis "notify the applicant within 10 business days after such determination." A failure to provide such notification, however, does not preclude an insurer from resisting a summary judgment motion in an Insurance Law § 5106(a) action with a defense based on lack of coverage (11 NYCRR 65.15[g][5] ).

In Zappone v. Home Ins. Co., 55 N.Y.2d 131, 447 N.Y.S.2d 911, 432 N.E.2d 783, supra, this Court held that an insurer's failure to timely disclaim coverage pursuant to former Insurance Law § 167(8) (superseded by Insurance Law § 3420[d] ) does not preclude it from later denying liability on the ground that the insurance agreement itself does not cover the particular automobile involved in the accident (id., at 135, 447 N.Y.S.2d 911, 432 N.E.2d 783; see also, Matter of Prudential Prop. & Cas. Ins. Co. v. Hobson, 67 N.Y.2d 19, 20-21, 499 N.Y.S.2d 637, 490 N.E.2d 504). Zappone distinguished a denial of liability circumstance based upon a policy exclusion and a breach of a policy condition from the situation in which an insurer claims no contractual relationship with respect to the subject vehicle and incident (Zappone v. Home Ins. Co., supra, at 136-137, 447 N.Y.S.2d 911, 432 N.E.2d 783; contrast, Presbyterian Hosp. v. Maryland Cas. Co., 90 N.Y.2d 274, 660 N.Y.S.2d 536, 683 N.E.2d 1, supra [decided today] ). Interpreting former Insurance Law § 167(8), the Court concluded "that the Legislature in using the words 'denial of coverage' did not intend to require notice when there never was any insurance in effect, and intended by that phrase to cover only situations in which a policy of insurance that would otherwise cover the particular accident is claimed not to cover it because of an exclusion in the policy" (id., at 138, 447 N.Y.S.2d 911, 432 N.E.2d 783). The Court reasoned that "[a] contrary rule would impose an intolerable burden on carriers, subject as they are to penalty for a misrepresentation concerning coverage" (id., at 138, 447 N.Y.S.2d 911, 432 N.E.2d 783).

The language in Zappone construing former Insurance Law § 167(8) and its rationale are similarly and logically instructive for our application in this Insurance Law § 5106(a) no-fault matter. We are satisfied that no reasonable justification has been presented for distinguishing between liability and no-fault coverage in this regard (see, Presbyterian Hosp. v. Maryland Cas. Co., 90 N.Y.2d 274, 660 N.Y.S.2d 536, 683 N.E.2d 1, supra [decided today] ). To the contrary, the concerns we expressly recognized in Zappone against burdening insurers with uncovered claims similarly applies in the no-fault...