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

• Decision Date: 05 March 2014
• Parties: MAIMONIDES MEDICAL CENTER, respondent, v. FIRST UNITED AMERICAN LIFE INSURANCE COMPANY, appellant.
• Court: New York Supreme Court — Appellate Division

116 A.D.3d 207

981 N.Y.S.2d 739

2014 N.Y. Slip Op. 01441

MAIMONIDES MEDICAL CENTER, respondent,

v.FIRST UNITED AMERICAN LIFE INSURANCE COMPANY, appellant.

Supreme Court, Appellate Division, Second Department, New York.

March 5, 2014.

Southerland Asbill & Brennan LLP, New York, N.Y. (Ellen M. Dunn and Peter Ligh of counsel), for appellant.

Proskauer Rose LLP, New York, N.Y. (Edward S. Kornreich, Roger A. Cohen, and Yafang Deng of counsel), for respondent.

Greenberg Traurig, LLP, Albany, N.Y. (Harold N. Iselin and Cynthia Neidl of counsel), for amicus curiae New York Health Plan Association, Inc.

REINALDO E. RIVERA, J.P., MARK C. DILLON, THOMAS A. DICKERSON, and LEONARD B. AUSTIN, JJ.

AUSTIN, J.

Insurance Law § 3224–a, known as the Prompt Pay Law, imposes standards upon insurers for the “prompt, fair and equitable” payment of claims for health care services. The statute sets forth time frames within which an insurer must either pay a claim, notify the claimant of the reason for denying a claim, or request additional information. An insurer that fails to comply with the provisions of the Prompt Pay Law is obligated to pay the full amount of the claim, with interest. In this case of first impression for this Court, we are asked to determine whether the Prompt Pay Law affords claimants a private right of action to recover payment for health care services based on a violation of the statute, or whether enforcement of the statute is vested solely with the New York State Insurance Department. For the reasons that follow, we hold that the Prompt Pay Law affords an implied private right of action, and that the plaintiff health care provider may thus assert claims against the defendant insurer for its alleged violation of the statute.

The plaintiff, Maimonides Medical Center (hereinafter Maimonides), a not-for-profit hospital in Brooklyn, furnished services to six patients who had supplemental Medicare insurance coverage policies, known as “Medigap” policies, with the defendant, First United American Life Insurance Company (hereinafter First United), from 2007 through 2011. The six patients assigned their benefits under their respective First United policies to Maimonides. Maimonides billed First United more than $19 million for services rendered to these six patients. In response, First United paid Maimonides slightly more than $4 million.

Maimonides commenced this action against First United to recover the balance owed for its care of the six patients on theories of breach of contract, violation of the Prompt Pay Law, and unjust enrichment. The complaint detailed the service dates and the amount of the bills issued by Maimonides to First United for each of the patients, and alleged that, despite repeated demands for payment in full, First United failed to pay the balance owed. Maimonides also alleged that First United never provided written notice, as required by the Prompt Pay Law, that it was not obligated to pay in full the amounts billed by Maimonides for services furnished to the six patients.

The Prompt Pay Law requires an insurer to pay undisputed claims within 30 days after receipt of an electronic submission or within 45 days after receipt by other means ( seeInsurance Law § 3224–a[a] ). If a claim is disputed, the insurer is obligated to pay the undisputed portion of the claim, if there is any, and, within 30 days of receipt of the claim, notify the policyholder, covered person, or health care provider in writing of the specific reason that the insurer is not liable to pay the claim ( seeInsurance Law § 3224–a[b] [1] ). In the alternative, the insurer may request additional information necessary to determine its potential liability with respect to payment of the claim ( seeInsurance Law § 3224–a[b][2] ). First United allegedly did neither. An insurer that fails to comply with the provisions of the Prompt Pay Law is obligated to pay the health care provider or the person submitting the claim the full amount of the claim, plus 12% interest per annum, to be computed from the date the claim was required to be paid ( seeInsurance Law § 3224–a[c][1] ). In its second, fourth, sixth, eighth, tenth, and twelfth causes of action, which alleged violation of the Prompt Pay Law, Maimonides sought the outstanding balance due under the claims submitted on behalf of the six subject patients, plus 12% interest per annum.

Prior to answering the complaint, First United moved, inter alia, pursuant to CPLR 3211(a)(7) to dismiss the six causes of action which alleged violation of the Prompt Pay Law. In support of its motion, First United argued that these claims failed to state a cause of action because, under the Prompt Pay Law, there is no private right of action—express or implied. It contended that the enforcement of the Prompt Pay Law is vested solely in the New York State Superintendent of Insurance (hereinafter the Superintendent), who is obligated to determine violations arising from either his or her own investigation or complaints from health care providers or policyholders. First United maintained that recognition of an implied private right of action based on the Prompt Pay Law would be inconsistent with the legislative scheme, as well as most insurance statutes, which are part of a regulatory framework that provides for administrative remedies for statutory violations. First United contended that the Prompt Pay Law only provided for the Superintendent to impose penalties for violations, including an award of 12% interest per annum.

In opposition, Maimonides contended that it had an implied right of action under the Prompt Pay Law. It maintained that this was so since (a) the Prompt Pay Law was enacted to protect health care providers such as itself, (b) the recognition of a private right of action furthered the legislative purpose of the Prompt Pay Law by assuring that claims were promptly paid by insurers, and (c) a private right of action was consistent with the legislative scheme.

In reply, First United argued that public and private avenues of enforcement are not in harmony since the enactment of the Prompt Pay Law was part of a comprehensive legislative scheme to regulate the insurance industry. It contended that the power to enforce the relevant statutes and regulations resided solely with the New York State Department of Insurance (hereinafter the Insurance Department), which is now part of the New York State Department of Financial Services (hereinafter the Financial Services Department).

The Supreme Court denied those branches of First United's motion which were to dismiss the six causes of action which alleged violation of the Prompt Pay Law, concluding that a close reading of the statute revealed “an express legislative intent to confer a private right of action upon the intended beneficiary patients and their providers to seek payment directly from an insurer” ( Maimonides Med. Ctr. v. First United Am. Ins. Co., 35 Misc.3d 570, 576, 941 N.Y.S.2d 447). First United appeals from so much of the order as denied those branches of its motion which were to dismiss the Prompt Pay Law causes of action. Although we disagree with the Supreme Court's conclusion that the Prompt Pay Law expressly provides a private right of action, we find that such a right is implied under the statute. We thus affirm the order of the Supreme Court insofar as appealed from.

The analysis of whether the six claims predicated upon the alleged violation of the Prompt Pay Law state viable causes of action depends upon whether the Prompt Pay Law provides Maimonides with a private right of action.

Where a statute does not expressly confer a private cause of action upon those it is intended to benefit, a private party may seek relief under the statute “only if a legislative intent to create such a right of action is ‘fairly implied’ in the statutory provisions and their legislative history” ( Brian Hoxie's Painting Co. v. Cato–Meridian Cent. School Dist., 76 N.Y.2d 207, 211, 557 N.Y.S.2d 280, 556 N.E.2d 1087, citing Sheehy v. Big Flats Community Day, 73 N.Y.2d 629, 633, 543 N.Y.S.2d 18, 541 N.E.2d 18;see Carrier v. Salvation Army, 88 N.Y.2d 298, 302, 644 N.Y.S.2d 678, 667 N.E.2d 328;Burns Jackson Miller Summit & Spitzer v. Lindner, 59 N.Y.2d 314, 325, 464 N.Y.S.2d 712, 451 N.E.2d 459). This inquiry involves three factors:

“ ‘(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’ ” ( Carrier v. Salvation Army, 88 N.Y.2d at 302, 644 N.Y.S.2d 678, 667 N.E.2d 328, quoting Sheehy v. Big Flats Community Day, 73 N.Y.2d at 633, 543 N.Y.S.2d 18, 541 N.E.2d 18;see Cruz v. TD Bank, N.A., 22 N.Y.3d 61, 70, 979 N.Y.S.2d 257).

Only the third factor, which is generally the “most critical” ( Carrier v. Salvation Army, 88 N.Y.2d at 302, 644 N.Y.S.2d 678, 667 N.E.2d 328 [internal quotation marks omitted]; Brian Hoxie's Painting Co. v. Cato–Meridian Cent. School Dist., 76 N.Y.2d at 212, 557 N.Y.S.2d 280, 556 N.E.2d 1087), is disputed here.

First United contends that the third factor has not been satisfied because private enforcement of the statute would be inconsistent with the legislative scheme, which delegates enforcement to the Superintendent. The amicus health plan organization agrees. This contention is not persuasive. We conclude that a private right of action, in addition to administrative enforcement, is fully consistent with the legislative scheme, and that a private right of action is to be implied.

“Analysis begins, of course, with the statute itself” ( Burns Jackson Miller Summit & Spitzer v. Lindner, 59 N.Y.2d at 325, 464 N.Y.S.2d 712, 451 N.E.2d 459). The Prompt Pay Law was enacted in 1997 ( see L. 1997, ch. 637, § 3). It is entitled “Standards for prompt, fair and equitable settlement of claims for...