SIEGEL v. PROGRESSIVE CASUALTY INS CO (2004)

This case presents squarely the question of whether an assignment is an essential element of a claim for first party no-fault benefits, and whether the failure to include it is a waivable defect. For the reasons set forth below, the Court holds that an assignment is an essential element of a claim for no-fault benefits, which cannot be waived.

In this action, the verified complaint alleges that Melvin Reyes was injured in a car accident on May 12, 2003 and received treatment from plaintiff to whom he assigned his rights to benefits under the No-Fault Insurance Law § 5101 et seq.   Plaintiff brings this action, as the assignee of Mr. Reyes, to recover $3,080.00 in first party no-fault benefits.   Plaintiff moves for summary judgment, and defendant opposes it, because of plaintiff's failure to establish that it submitted an assignment of benefits to defendant with its notice of claim.   Plaintiff contends that submission of an assignment of benefits is not part of its prima facie case and that any objections to the assignment are waived if not asserted in the defendant's denial.   Here, defendant concededly did not object in its denial to plaintiff's failure to include an assignment in its proof of claim.

In making its argument, plaintiff relies on NY Hosp. Med. Ctr. v. N.Y. Cent. Mut. Fire Ins. Co., 8 A.D.3d 640, 779 N.Y.S.2d 548 [2d Dept. 2004].   That case would appear to support plaintiff's position.   There, the Appellate Division held that the insurance company's failure to prove that it had mailed timely requests for verification of the assignments upon which the respondents' claims were based prevented it from objecting to the claims “on the basis of lack of proof of the assignments.”  (See also NY Hosp. Med. Ctr. of Queens v. AIU Ins. Co., 8 A.D.3d 456, 779 N.Y.S.2d 503 [2d Dept. 2004] ).   Recently, citing NY Hosp. Med. Ctr., the Appellate Term for the 2d and 11th Judicial Districts, reversed a trial court which had dismissed a no-fault case because the plaintiff had submitted an assignment which did not designate an assignee (Diagnostic Rehab. Medicine Serv. PC v. Travelers Indemnity Co., 6 Misc.3d 68, 792 N.Y.S.2d 288, 2004 N.Y. Slip Op. 24505 [App. Term, 2d & 11th Jud. Dists. 2004] ).   Specifically, the Appellate Term held that the defendant insurer, “having failed to seek any additional verification or allege any deficiency in the assignment in its denial of claim form, had waived any defenses with respect thereto.”

In its decision, the Appellate Term also overruled its own prior decision in A.B. Medical Serv. (Virgile) v. Progressive Ins., 2003 N.Y. Slip Op. 50790 [U], 2003 WL 21005006 [App. Term, 2d & 11th Jud. Dists. 2003],¹ in which it had affirmed the denial of a plaintiff medical provider's motion for summary judgment on the ground that the “purported assignment” did not bear the name of any assignee.   Strikingly however, the Appellate Term did not disown its decision in A.B. Med. Servs. (Turenne) v. State Farm Mut. Auto. Ins. Co., 4 Misc.3d 141(A), 2004 WL 2101825 [App. Term, 9th & 10th Jud. Dists. 2004].   In that case, decided three months after NY Hosp. Med. Ctr., 8 A.D.3d 640, 779 N.Y.S.2d 548, the Appellate Term reversed the grant of a plaintiff's motion for summary judgment finding, inter alia, that one of the plaintiffs had failed to prove its prima facie case because the record did not contain an assignment.   The Appellate Term reached that result even though the decision does not indicate that the defendant asked for verification of the assignment or issued a timely denial on that basis.   This Court concludes that A.B. Med. Servs. (Turenne) v. State Farm Mut. Auto. Ins. Co., 4 Misc.3d 141(A), 2004 WL 2101825 [App. Term, 9th & 10th Jud. Dists. 2004] is still good law, both because the Appellate Term did not overrule it and because, for the reasons set forth below, it is consistent with governing precedent.   Applying that decision to this case, this Court must deny plaintiff's motion for summary judgment since it failed to prove that it included an assignment in its notice of claim.

The continued validity of A.B. Med. Servs. (Turenne), 4 Misc.3d 141(A), 2004 WL 2101825 notwithstanding the Appellate Division decision in NY Hosp. Med. Ctr., 8 A.D.3d 640, 779 N.Y.S.2d 548, is entirely consistent with the policies and principles stated in Central Gen. Hosp. v. Chubb Group of Ins. Cos., 90 N.Y.2d 195, 659 N.Y.S.2d 246, 681 N.E.2d 413 [1997].   In that case, the Court of Appeals held that a defense of non-coverage cannot be waived in a no-fault case, even if the insurer fails to raise it in its denial.   That decision extended to the no-fault context the Court's holdings in Zappone v. Home Ins. Co., 55 N.Y.2d 131, 447 N.Y.S.2d 911, 432 N.E.2d 783 [1982] and Albert J. Schiff Assoc. Inc. v. Flack, 51 N.Y.2d 692, 435 N.Y.S.2d 972, 417 N.E.2d 84 [1980] that the defense of non-coverage could not be waived in cases concerning liability policies and professional indemnity insurance.   The underlying theory of all of these cases is that if the insurer is not liable to the alleged insured under the contract of insurance, then contractual liability cannot be created by waiver (Albert J. Schiff Assoc. Inc. v. Flack, 51 N.Y.2d 692, 698, 435 N.Y.S.2d 972, 417 N.E.2d 84 [1980];  Zappone v. Home Ins. Co., 55 N.Y.2d 131, 135-6, 447 N.Y.S.2d 911, 432 N.E.2d 783 [1982];  Central Gen. Hosp. v. Chubb Group of Ins. Cos., 90 N.Y.2d 195, 201, 659 N.Y.S.2d 246, 681 N.E.2d 413 [1997] ).   The Court of Appeals explained that, if for example, the insurance company had no contract of insurance at all with the alleged insured, or had no contract with its insured concerning the vehicle in the accident, then “there simply is no insurance at all and, therefore, no obligation to disclaim or deny.”  (Zappone v. Home Ins. Co., 55 N.Y.2d 131, 139, 447 N.Y.S.2d 911, 432 N.E.2d 783).

An assignment essentially extends the rights created by contract from the assignor to the assignee, so the assignee can sue on behalf of its assignor only if it has a valid assignment.   Accordingly, the insurance company has no contractual obligation to the assignee in the absence of a valid assignment.   Consequently, if the absence of an assignment could be waived by the insurance company's failure to raise it, then contractual liability between the insurance company and the assured's assignee would be created by waiver.   But that should not be permitted, just as the Courts do not permit a contractual obligation between the insurance company and its alleged insured to be created by waiver (Albert J. Schiff Associates, Inc. v. Flack, 51 N.Y.2d 692, 698, 435 N.Y.S.2d 972, 417 N.E.2d 84;  Zappone v. Home Ins. Co., 55 N.Y.2d 131, 135-6, 447 N.Y.S.2d 911, 432 N.E.2d 783;  Central Gen. Hosp. v. Chubb Group of Ins. Cos., 90 N.Y.2d 195, 201, 659 N.Y.S.2d 246, 681 N.E.2d 413).   Therefore, when no assignment is tendered, the insurance company has no contractual obligation to the assignee, and its objections to the absence of the assignment cannot be waived.

In this case, there simply was no assignment.   Plaintiff did not attach one to its moving papers or to its reply papers.   Therefore, plaintiff has failed to establish that defendant has any contractual obligation to it, and the Court cannot grant summary judgment in its favor.

This constitutes the Decision and Order of the Court.

FOOTNOTES

1.   The Court is including the name of the plaintiff's assignor in the titles of cases because the same assignee appears in many published no-fault cases.   Including the name of the assignor will enable the reader to distinguish more easily among the cited cases.

ELLEN GESMER, J.