Maimonides Med. Ctr. v. First United American Life Ins. Co.

• Decision Date: 22 February 2012
• Citation: 35 Misc.3d 570,941 N.Y.S.2d 447,2012 N.Y. Slip Op. 22039
• Parties: MAIMONIDES MEDICAL CENTER, Plaintiff, v. FIRST UNITED AMERICAN LIFE INSURANCE COMPANY, Defendant.
• Court: New York Supreme Court

2012 N.Y. Slip Op. 22039
35 Misc.3d 570
941 N.Y.S.2d 447

MAIMONIDES MEDICAL CENTER, Plaintiff,
v.
FIRST UNITED AMERICAN LIFE INSURANCE COMPANY, Defendant.

Supreme Court, Kings County, New York.

Feb. 22, 2012.

[941 N.Y.S.2d 448]

Edward S. Kornreich, Roger A. Cohen, Proskauer Rose LLP, New York, attorneys for plaintiff.

Ellen M. Dunn, Suman Chakraborty, Dewey & LeBoeuf LLP, New York, attorneys for defendant.

CAROLYN E. DEMAREST, J.

The following papers numbered 1 to 5 read on this motion: Papers Numbered:

+------------------------------------+
                ¦Notice of Motion ¦1¦
                +----------------------------------+-¦
                ¦Memorandum of Law in Support ¦2¦
                +----------------------------------+-¦
                ¦Affirmation in Support ¦3¦
                +----------------------------------+-¦
                ¦Memorandum of Law in Opposition ¦4¦
                +----------------------------------+-¦
                ¦Reply Memorandum of Law in Support¦5¦
                +------------------------------------+
                

[941 N.Y.S.2d 449]

[35 Misc.3d 571] Defendant First United American Life Insurance Company (“First United”) moves, pursuant to CPLR 3211(a)(1) and (7), to dismiss the second, fourth, sixth, eighth, tenth, twelfth, and thirteenth causes of action in plaintiff Maimonides Medical Center's (“Maimonides”) complaint. Plaintiff alleges breach of contract and violation of Insurance Law § 3224–a (the “Prompt Pay Law”) in connection with six patients that plaintiff treated who were each covered under one of defendant's supplemental Medicare insurance (“Medigap”) plans. Alternatively, plaintiff pleads a single cause of action for unjust enrichment. Defendant contends that the Prompt Pay Law, which authorizes the recovery of delinquent health insurance claim payments plus interest at a rate the greater of twelve percent or the rate set by the Commissioner of Taxation and Finance for corporate taxes, contains no express or implied private right of action and that plaintiff's demands for such relief should therefore be dismissed. Defendant also argues that plaintiff's cause of action for unjust enrichment is duplicative of its breach of contract claims and is thus improper. Should the contracts be deemed invalid or inapplicable[35 Misc.3d 572] , defendant maintains, the relationship between First United and Maimonides would be too tenuous to sustain a cause of action for unjust enrichment.

BACKGROUND

At various times from 2007 until 2011, Maimonides, a not-for-profit hospital located in Brooklyn, New York, provided inpatient health care services to six patients who, during each of their hospital stays, held Medigap policies issued by insurance company First United. Each patient's policy, pursuant to state regulations establishing standardized Medigap plans, provided 100% coverage of hospitalization expenses after the patient exhausted his or her Medicare coverage, subject to a lifetime maximum of 365 additional days.¹ For the six patients, collectively, Maimonides billed First United $19,075,525.90 and received only $4,078,663.29. Plaintiff alleges that each of the six patients “entered into a binding, valid, and enforceable contract” with defendant and that each assigned his or her benefits to Maimonides. Plaintiff claims that it has provided services for which it has not received full payment and asserts six causes of action for breach of contract against defendant, one for each of the six patients. Defendant does not challenge these causes of action in the instant motion.

Plaintiff also alleges six separate causes of action for violation of the Prompt Pay Law, which provides that where an insurer is clearly liable to pay a health care claim, the health care provider or patient must be paid within 30 days of receipt of an electronically transmitted claim, or within 45 days of receipt of a claim transmitted by any other means (Insurance Law § 3224–a [a] ). Where liability for the claim is not reasonably clear, the insurer must pay any undisputed portion and, within 30 days of receipt of the claim, provide either written notification specifying the reasons why it is not liable or a written request for any additional information necessary to determine its liability (Insurance Law § 3224–a

[941 N.Y.S.2d 450]

[b] ). An insurer that fails to abide by these standards “shall be obligated to pay to the health care provider or person submitting the claim” the full amount of the claim plus interest at the statutorily authorized rate (Insurance Law § 3224–a [c][1] ). The Prompt Pay Law authorizes the Superintendent[35 Misc.3d 573] of Insurance (now called the Superintendent of Financial Services) to investigate violations and assess civil penalties, both on his own accord and upon complaint from an individual health care provider or policyholder (Insurance Law § 3224–a [c][2] ). Whether the individual claimant patient or provider has a right to bring suit to recover the funds alleged to be due, together with the statutorily imposed interest, is the issue before the Court.

Plaintiff alleges that defendant failed to pay its claims in full and did not provide written notification citing the specific reasons why it claims not to be obligated to pay the full value of the claim, nor did it send a written request for information to determine its liability. Because more than 45 days have elapsed since defendant received each unpaid or partially unpaid bill, plaintiff contends that it is entitled to the full value of its services plus statutory interest. With regard to these six causes of action, defendant's sole contention is that there is no private right of action under the Prompt Pay Law. It argues that the Court should therefore dismiss plaintiff's second, fourth, sixth, eighth, tenth, and twelfth causes of action, which all seek relief under the statute.

Finally, for its thirteenth cause of action, plaintiff asserts one claim of unjust enrichment, seeking full payment for the services it provided to all six patients plus interest. Plaintiff alleges that it had a reasonable expectation that it would receive full payment from defendant for its services, that defendant has failed to provide full payment, and that defendant is thus unjustly enriched, at plaintiff's expense, in the amount of $14,996,862.61 plus interest. Defendant argues that, because the parties are connected only through the alleged contracts and assignments, this equitable cause of action is duplicative of plaintiff's breach of contract claims. Defendant further contends that if there were no contracts governing the transactions, the relationship between plaintiff and defendant would be “too attenuated” to sustain a cause of action for unjust enrichment.

DISCUSSION

Defendant moves, pursuant to CPLR 3211(a)(7), to dismiss plaintiff's causes of action for violation of Insurance Law § 3224–a. Under CPLR 3211(a)(7), a “party may move for judgment dismissing one or more causes of action asserted against him” because “the pleading fails to state a cause of action.” In ruling on a CPLR 3211(a)(7) motion, “the court must afford the [35 Misc.3d 574] pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord the plaintiff the benefit of every possible inference, and determine only whether the facts as alleged fit within any cognizable legal theory” ( Breytman v. Olinville Realty, LLC, 54 A.D.3d 703, 703–04, 864 N.Y.S.2d 70 [2d Dept 2008]; see Leon v. Martinez, 84 N.Y.2d 83, 87, 614 N.Y.S.2d 972, 638 N.E.2d 511 [1994] ). If, as defendant contends, Insurance Law § 3224–a does not contain an express private right of action, then, to discern whether plaintiff has properly stated its second, fourth, sixth, eighth, tenth, and twelfth causes of action, the relevant question is whether a private right of action “may fairly be implied” ( Sheehy v. Big Flats Community Day, 73 N.Y.2d 629, 633, 543 N.Y.S.2d 18, 541 N.E.2d 18 [1989] ). In any event, “[a]bsent explicit legislative direction ... it is for the courts to determine ... what the Legislature intended”

[941 N.Y.S.2d 451]

( Burns Jackson Miller Summit & Spitzer v. Lindner, 59 N.Y.2d 314, 325, 464 N.Y.S.2d 712, 451 N.E.2d 459 [1983] ).

The essential factors to consider in determining whether a statute has an implied private right of action are “(1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme” ( Sheehy, 73 N.Y.2d at 633, 543 N.Y.S.2d 18, 541 N.E.2d 18). In the instant case, plaintiff clearly satisfies the first two prongs of the Sheehy test, and defendant does not appear to argue otherwise.

The Prompt Pay Law was enacted to protect health care providers and patients against insurance companies that fail to pay claims in a timely fashion (Governor's Approval Mem., Bill Jacket, L. 1997, ch. 637, at 6). Senator Holland, who sponsored the original bill, noted that the unnecessary withholding of reimbursement to health care providers who have already rendered services “hinders [their] ability to manage [their] own accounts and balance [their] books” (Sponsor's Mem., Bill Jacket, L. 1997, ch. 637, at 7). Maimonides, a health care provider that has already rendered services to the six patients over the past several years, is thus a member of the class that the Legislature intended to benefit by passing the Prompt Pay Law. Further, the express legislative purpose is to prevent delay in the payment of health care claims ( see id.). Allowing individual providers to seek the full amount of their health care claims plus upwards of 12% interest directly through the courts, and not just administratively through application to the Superintendent, clearly advances the prompt payment of compensation and deters unwarranted delay and thus promotes the legislative purpose.

[35 Misc.3d 575] Defendant urges that plaintiff does not, however, satisfy the third prong of the Sheehy test, which the Court of...