Hospital for Joint Diseases v. Travelers

• Decision Date: 20 November 2007
• Docket Number: No. 140.,140.
• Citation: 849 N.Y.S.2d 473,9 N.Y.3d 312,879 N.E.2d 1291
• Parties: HOSPITAL FOR JOINT DISEASES, as Assignee of Jodi Friedman and Another, Plaintiff, and New York and Presbyterian Hospital, as Assignee of William Browne, Respondent, v. TRAVELERS PROPERTY CASUALTY INSURANCE COMPANY et al., Appellants.
• Court: New York Court of Appeals Court of Appeals

879 N.E.2d 1291

9 N.Y.3d 312

849 N.Y.S.2d 473

HOSPITAL FOR JOINT DISEASES, as Assignee of Jodi Friedman and Another, Plaintiff, and New York and Presbyterian Hospital, as Assignee of William Browne, Respondent, v. TRAVELERS PROPERTY CASUALTY INSURANCE COMPANY et al., Appellants.

No. 140.

Court of Appeals of New York.

November 20, 2007.

McDonnell & Adels, P.C., Garden City (Martha S. Henley and Zara G. Friedman of counsel), for appellants.

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

Short & Billy, P.C., New York City (Skip Short and Amanda Jehle of counsel), for Property Casualty Insurers Association of America and others, amici curiae.

Rivkin Radler LLP, Uniondale (Evan H. Krinick, Barry I. Levy, Cheryl F. Korman and Stuart M. Bodoff of counsel), for New York Insurance Association, Inc., amicus curiae.

[849 N.Y.S.2d 316]

OPINION OF THE COURT

GRAFFEO, J.

In this action, a hospital seeks to recover no-fault insurance benefits for services rendered to a patient injured in a motor vehicle accident. We conclude that the insurance company's failure to timely request verification of the patient's assignment of benefits to the hospital precludes the carrier from now contesting the validity of the assignment. We therefore affirm the order of the Appellate Division so holding.

Plaintiff New York and Presbyterian Hospital treated patient Browne in 2004 for injuries he sustained as a result of an automobile accident. At the time of the accident, Browne had an automobile insurance policy with defendant Travelers Property Casualty Insurance Company affording him first-party no-fault coverage. In October 2004, the hospital, through its contract billing agent — Hospital Receivables Systems, Inc. — sought payment of $24,344.96 from Travelers for services provided to Browne. The billing agent sent Travelers a hospital facility form (NYS Form NF-5), a UB-92 form and an assignment of benefits form (NYS Form NFAOB). The assignment portion of the NYS Form NF-5 and the assignment of benefits form both indicated that Browne's signature was "on file," but neither form displayed his actual signature.

Travelers did not reject the forms or request verification of the assignment. After Travelers failed to pay or deny the claim within 30 days of its receipt, the hospital commenced this action against Travelers and Farmington Casualty Company (an affiliated carrier) for payment of its bill as well as statutory interest and attorneys' fees under Insurance Law § 5106(a).¹ In its answer, Travelers raised as an affirmative defense the lack of a valid assignment between Browne and the hospital.

Both parties moved for summary judgment and Supreme Court granted the hospital's motion and directed entry of judgment

[849 N.Y.S.2d 317]

against Travelers in the amount of $24,344.96 plus statutory interest and attorneys' fees. The court held that Travelers' failure to timely contest any deficiency in the assignment documents precluded the carrier from raising the issue in this proceeding. The Appellate Division affirmed and we granted Travelers leave to appeal.

New York's no-fault automobile insurance system is designed "to ensure prompt compensation for losses incurred by accident victims without regard to fault or negligence, to reduce the burden on the courts and to provide substantial premium savings to New York motorists" (Matter of Medical Socy. of State of N.Y. v. Serio, 100 N.Y.2d 854, 860, 768 N.Y.S.2d 423, 800 N.E.2d 728 [2003]). In furtherance of these goals, the Superintendent of Insurance has adopted regulations implementing the No-Fault Law (Insurance Law art 51), including circumscribed time frames for claim procedures.

These regulations require an accident victim to submit a notice of claim to the insurer as soon as practicable and no later than 30 days after an accident (see 11 NYCRR 65-1.1, 65-2.4[b]). Next, the injured party or the assignee (typically a hospital, as in the case here) must submit proof of claim for medical treatment no later than 45 days after services are rendered (see 11 NYCRR 65-1.1, 65-2.4[c]).² Upon receipt of one or more of the prescribed verification forms used to establish proof of claim, such as the NYS Form NF-5, an insurer has 15 business days within which to request "any additional verification required by the insurer to establish proof of claim" (11 NYCRR 65-3.5[b]).³ An insurer may also request "the original assignment or authorization to pay benefits form to establish proof of claim" within this time frame (11 NYCRR 65-3.11[c]). Significantly, an insurance company must pay or deny the claim within 30 calendar days after receipt of the proof of claim (see Insurance Law § 5106[a]; 11 NYCRR 65-3.8[c]). If an insurer seeks additional verification, however, the 30-day window is tolled until it receives the relevant information requested (see 11 NYCRR 65-3.8[a][1]).

An insurer's failure to pay or deny a claim within 30 days carries substantial consequences. By statute, overdue payments

[849 N.Y.S.2d 318]

earn monthly interest at a rate of two percent and entitle a claimant to reasonable attorneys' fees incurred in securing payment of a valid claim (see Insurance Law § 5106[a]). More importantly, a carrier that fails to deny a claim within the 30-day period is generally precluded from asserting a defense against payment of the claim (see Presbyterian Hosp. in City of N.Y. v. Maryland Cas. Co., 90 N.Y.2d 274, 282, 660 N.Y.S.2d 536, 683 N.E.2d 1 [1997]), rearg. denied 90 N.Y.2d 937, 664 N.Y.S.2d 275, 686 N.E.2d 1370 [1997]. This Court has recognized a narrow exception to this preclusion remedy for situations where an insurance company raises a defense of lack of coverage (see Central Gen. Hosp. v. Chubb Group of Ins. Cos., 90 N.Y.2d 195, 199, 659 N.Y.S.2d 246, 681 N.E.2d 413 [1997]). In such cases, an insurer who fails to issue a timely disclaimer is not prohibited from later raising the defense because "the insurance policy does not contemplate coverage in the first instance, and requiring payment of a claim upon failure to timely disclaim would create coverage where it never existed" (Matter of Worcester Ins. Co. v. Bettenhauser, 95 N.Y.2d 185, 188, 712 N.Y.S.2d 433, 734 N.E.2d 745 [2000]).

As a corollary to the Presbyterian preclusion rule, Appellate Division case law consistently holds that a carrier's failure to seek verification or object to the adequacy of claim forms pursuant to 11 NYCRR 65-3.5 precludes it from interposing any defenses based on such deficiencies (see e.g. Westchester Med. Ctr. v. Safeco Ins. Co. of Am., 40 A.D.3d 984, 837 N.Y.S.2d 207 [2d Dept.2007]; LMK Psychological Servs., P.C. v. Liberty Mut. Ins. Co., 30 A.D.3d 727, 728-729, 816 N.Y.S.2d 587 [3d Dept.2006]). We concur and note that an insurer that requests additional verification after the 10- or 15-business-day periods but before the 30-day claim denial window has expired is entitled to verification. In these instances, the 30-day time frame to pay or deny the claim is correspondingly reduced (see 11 NYCRR 65-3.8[j]; Nyack Hosp. v. General Motors Acceptance Corp., 8 N.Y.3d 294, 300, 832 N.Y.S.2d 880, 864 N.E.2d 1279 [2007]).

Here, after Travelers obtained the NYS Form NF-5 and the assignment of benefits form — both of which plainly stated that the patient's signature was "on file" — it did not ask for further verification or request the original assignment, as permitted by the regulations. Travelers also failed to pay or deny the claim within 30 calendar days of receipt of the hospital's proof of claim. Nevertheless, Travelers argues that its neglect in demanding verification or timely denying coverage is irrelevant because the hospital's failure to proffer a validly executed assignment equates to a lack of coverage, a defense that is not subject to preclusion under Chubb. We disagree.

[849 N.Y.S.2d 319]

In Chubb, the insurer asserted as a defense that the claimant's injuries arose out of a prior work-related accident rather than a car accident. Alternatively, the carrier refused payment on the ground that the patient's treatment was excessive. We held that the insurer was not barred from arguing that the injuries were unrelated to the accident because, if true, the treatment would not have been covered by the automobile liability policy in the first instance. On the other hand, we indicated that an excessive treatment defense ordinarily does not implicate a coverage issue, in which situation the preclusion rule applies (90 N.Y.2d at 199, 659 N.Y.S.2d 246, 681 N.E.2d 413).⁴

Here, there is no dispute that the hospital rendered medical services to Browne in the amount of $24,344.96 for injuries arising out of a motor vehicle accident, that Browne's policy with Travelers was in effect at the time of the accident and that the policy covered the accident. In our view, any defect or deficiency in the assignment between Browne and the hospital simply does not implicate a lack of coverage warranting exemption from the preclusion rule. We therefore determine that the failure by Travelers to seek verification of the assignment in a timely manner prevents the carrier from litigating the issue now.⁵

To conclude otherwise, as proposed by the dissent, frustrates a core objective of the no-fault regime — "to provide a tightly timed process of claim, disputation and payment" (Presbyterian, 90 N.Y.2d at 281, 660 N.Y.S.2d 536, 683 N.E.2d 1). Upon receipt of a no-fault claim, the regulations shift the burden to the carrier to obtain further verification or deny or pay the claim. When, as here, an insurer does

[849 N.Y.S.2d 320]

neither, but instead waits to be sued for nonpayment, the carrier should bear the consequences of its nonaction. To allow an insurance company to later challenge a hospital's standing as an assignee merely encourages the carrier to ignore the prescribed statutory scheme. As we observed in Presbyterian:

"No-fault reform was enacted to provide prompt...