Presbyterian Hosp. in the City of New York v. Maryland Cas. Co.

• Decision Date: 10 June 1997
• Citation: 660 N.Y.S.2d 536,90 N.Y.2d 274
• Parties: , 683 N.E.2d 1 PRESBYTERIAN HOSPITAL IN THE CITY OF NEW YORK, as Assignee of Karen DeGuisto, Respondent, v. MARYLAND CASUALTY COMPANY, Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 536

660 N.Y.S.2d 536

90 N.Y.2d 274, 683 N.E.2d 1

PRESBYTERIAN HOSPITAL IN THE CITY OF NEW YORK, as Assignee of Karen DeGuisto, Respondent, v. MARYLAND CASUALTY COMPANY, Appellant.

Court of Appeals of New York.

June 10, 1997.

Short & Billy, P.C., New York City (Michael Billy, Jr., of counsel), for appellant.

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

OPINION OF THE COURT

BELLACOSA, Judge.

Plaintiff-respondent Presbyterian Hospital sues to recover no-fault medical payments for services and treatment provided to an insured of defendant-appellant Maryland Casualty Company. We must resolve whether the lower courts properly precluded Maryland from raising an intoxication defense in the ensuing lawsuit on the ground that it did not timely deny the subject no-fault claim pursuant to both the Superintendent's regulations and the Insurance Law (see, 11 NYCRR 65.15[g][3]; Insurance Law § 5106[a] ).

Supreme Court granted Presbyterian's motion for summary judgment, awarding approximately $26,000 in no-fault benefits, statutory interest and attorney's fees. The Appellate Division affirmed and we granted Maryland leave to appeal. We, too, affirm.

I.

Karen DeGuisto was hurt in a single-car accident on December 26, 1993, when the automobile she was driving hit a utility pole. Maryland was her no-fault insurer. She was admitted to Presbyterian Hospital in New York City on two separate occasions for treatment of her injuries. Only the medical expenses for the hospitalization and treatment rendered from June 7 to June 10, 1994 are the subject of this lawsuit.

On August 5, 1994, Presbyterian presented a no-fault claim form, as the insured's assignee, seeking first-party benefits. Maryland received the document on August 9, 1994. On September 15, 1994, by which time the insurer had neither paid nor denied the claim, the hospital sued to recover the benefits. Maryland interposed an answer with an affirmative defense stating that the claim was not overdue because it had not yet received all of the available information relating to the incident, such as a police report on the insured's blood-alcohol test results.

Maryland had applied to the police department for public access to the insured's blood-alcohol test results on April 19, 1994, after receiving a police accident report noting alcohol on DeGuisto's breath and that a blood specimen had been taken. On October 13, 1994, Maryland requested verification of the insured's alleged intoxication from Presbyterian in the form of interrogatories. Subsequently, on November 3, 1994, the insurer requested the blood-alcohol test results from the local District Attorney's office.

On November 7, 1994, Presbyterian moved for summary judgment, asserting that Maryland's failure to timely deny the claim barred interposition of the intoxication defense in the action. Thereafter, on December 5, 1994, Maryland received the test results, which indicated a blood-alcohol level of 0.13% at the time of the insured's accident. Maryland issued a denial of the claim that same day.

The Appellate Division affirmed Supreme Court's grant of summary judgment to Presbyterian, stating that "[r]ecent precedent squarely holds that ' "preclusion of the insurance company's ability to deny the claim is the appropriate remedy" ' where, as here, the insurance company neither denies a claim within 30 days after receiving it nor seeks to extend that time by requesting verification in the prescribed forms" (226 A.D.2d 260, 261, 641 N.Y.S.2d 266). It is on that singular, narrow basis that we affirm.

II.

Maryland first argues that it properly and timely denied the hospital's no-fault claim. We disagree. Resolution of this issue, however, involves consideration of a complex sequence and interplay of insurance regulations governing the time requirements for delaying or denying payment of a no-fault automobile claim on intoxication exclusion grounds.

Pursuant to both the Insurance Law and the regulations promulgated by the Superintendent of Insurance, an insurer is required to either pay or deny a claim for no-fault automobile insurance benefits within 30 days from the date an applicant supplies proof of claim (see, Insurance Law § 5106[a]; 11 NYCRR 65.15[g][3] ). Failure to pay benefits within the 30-day requirement renders benefits "overdue," and all overdue payments bear interest at a rate of 2% per month (Insurance Law § 5106[a]; 11 NYCRR 65.15[h] ). Additionally, a claimant is entitled to recover attorney's fees where a "valid claim or portion" was denied or overdue (Insurance Law § 5106[a]; 11 NYCRR 65.15[i] ). Notably, interest and attorney's fees are prescribed sanctions only in late payment circumstances, not as to untimely denials of claims.

When a denial of no-fault benefits rests on the statutory exclusion of intoxication (see, Insurance Law § 5103[b][2] ), the Superintendent's regulations trigger a series of additional timing and notification requirements. Initially, upon determining that benefits may not be payable due to the insured's intoxication, the insurer must notify the applicant within 10 business days of its denial of the claim (11 NYCRR 65.15[g][5] ). Failure to satisfy this 10-day requirement, however, expressly does not result in preclusion against an insurer ultimately asserting such a defense to payment (11 NYCRR 65.15[g][5] ).

Pertinently, when an insurer believes that intoxication may have been a contributing cause to an accident, the insurer is entitled to all available information regarding the insured's condition at the time of the accident (11 NYCRR 65.15[g][7] ). "Proof of a claim shall not be complete until the information which has been requested, pursuant to paragraph (d)(1) or (2) of this section, has been furnished to the insurer by the applicant or the authorized representative" (11 NYCRR 65.15[g][7] ). In order to properly and timely request such information, the insurer must forward the prescribed verification forms to the parties required to complete them within 10 business days after receipt of the completed application (11 NYCRR 65.15[d][1] ). Notably, "[t]he insurer is entitled to receive all items necessary to verify the claim directly from the parties from whom such verification was requested" (11 NYCRR 65.15[d][1] ). Finally, "[a] failure to observe any of the time frames specified in this section shall not prevent an insurer from requiring proper proof of claim" (11 NYCRR 65.15[g][6] ).

A.

Maryland's primary contention in this timing-and-remedy facet of the dispute is that the no-fault regulations allow the insurer to delay payment or denial of a claim by requesting verification from third parties. The insurer argues that 11 NYCRR 65.15(g)(7) does not require it to request proof of claim directly from the applicant, here Presbyterian. Rather, it specifically refers to 11 NYCRR 65.15(d)(1), which provides that "[t]he insurer is entitled to receive all items necessary to verify the claim directly from the parties from whom such verification was requested." The insurer thus asserts that its eventual request of the insured's blood-alcohol test results from the District Attorney brought it within this regulation and, in effect, tolled its time-controlled denial of payment requirement.

We note in this connection that the insurer already had "reason to believe that the applicant was operating a motor vehicle while intoxicated" (see, 11 NYCRR 65.15[g][7] ) on August 9, 1994, when the insurer received Presbyterian's claim for payment. We reiterate that the record shows that as early as April 19, 1994, Maryland had applied to the police department for access to the insured's blood-alcohol test results. That evident awareness triggered its responsibility to submit the prescribed verification forms to the appropriate parties within 10 days after receipt of Presbyterian's completed application, which occurred on August 9, 1994 (see, 11 NYCRR 65.15[d][1] ). Whether the pertinent forms relate to the specific problem underlying this case is irrelevant, since the carrier chose to sit on its rights and do nothing in this respect.

Maryland, instead, did not request verification or proof from Presbyterian, the applicant, until October 13, 1994, well beyond 10 days from receipt of proof of the claim. Furthermore, this distinct request for information was made in the form of interrogatories, not on or in conjunction with the requisite prescribed verification forms. Additionally, Maryland's request of the insured's blood-alcohol test results from the District Attorney was not made until November 3, 1994. That official, in any event, would not qualify as the applicant's authorized agent under this regulation. Thus, even accepting Maryland's contention that verification may be requested from third parties, it utterly failed to timely do so in any respect, pursuant to section 65.15(d)(1). Its threshold argument in this regard, thus, fails to carry its theory.

We note that the dissent's proffered analysis in this regard is inconsistent with the plain language of the regulations. In order for the insurer to have properly and timely requested the blood alcohol test results, it had to forward prescribed verification forms to the appropriate parties within 10 days after receipt of the completed application (see, 11 NYCRR 65.15[d][1] ). The insurer utterly and flatly failed to do so and, thus, chose or neglected to take advantage of its prescribed extension of time opportunity for considering denial of the hospital's claim. Despite the dissent's differing view of the Superintendent's requirement in this respect, we and the parties are bound by its plain language.

B.

Maryland next argues that when, as here, an insurer denies coverage based on the statutory exclusion of intoxication, the 30-day rule does not even apply. It urges that the situation instead is governed solely by the 10-day rule in 11 NYCRR 65.15(g)(5). That regulation...