ALPHA CHIROPRACTIC v. STATE FARM MUTUAL AUTO INS (2006)

Plaintiff, a health care provider, commenced the within action to recover reimbursement from defendant insurer for services rendered to plaintiff's assignors including Victoria Orlando,¹ pursuant to New York State's No-Fault Insurance Law. At trial, the parties stipulated to the following facts:

Plaintiff had mailed and defendant had received eight separate bills, together with an assignment of benefits as per the following:

A claim in the amount of $235.90 for services from February 17, 2004 to March 11, 2004, mailed on March 30, 2004;  a claim in the amount of $67.40 for services from April 7, 2004 to April 15, 2004, mailed on May 10, 2004;  a claim in the amount of $33.70 for services on April 20, 2004, mailed on June 1, 2004;  a claim in the amount of $101.10 for services from May 4, 2004 to May 26, 2004, mailed on June 17, 2004;  a claim in the amount of $122.13 for services from November 24, 2003 to November 26, 2003, mailed on December 24, 2003;  a claim in the amount of $202.20 for services from December 3, 2003 to December 18, 2003, mailed on January 13, 2004;  a claim in the amount of $235.90 for services from December 22, 2003 to January 14, 2004, mailed on February 12, 2004 and a claim for $202.20 for services from January 20, 2004 to February 5, 2004, mailed on March 10, 2004-the total sum of the above eight claims being $1,200.53.

It was further stipulated that the defendant had failed to deny any of the claims and that the claims remain unpaid.   After the stipulation was duly noted for the record, both sides rested.   However, despite the acquiescence by defendant as to the principal amounts due and owing, two issues of law were presented, along with a third asserted by defendant in its post-trial memorandum of law.

(1) What are the statutory attorneys fees due plaintiff?

(2) What is the statutory interest due plaintiff ?

and

(3) When does the statutory interest accrue?

The relevant provisions governing interest, under the relevant No-Fault regulations, are 11 NYCRR § 65-3.8(a)(1) and 11 NYCRR § 65-3.9(a) and (c).

11 NYCRR 65-3.8(a), as is pertinent hereto, provides that:

“(1) No-fault benefits are overdue if not paid within 30 calendar after the insurer receives proof of claim* * *”.

Section 65-3.9(a), provides as follows:

“All overdue mandatory and additional personal injury protection benefits due an * * * assignee shall bear interest at a rate of two percent per month, calculated on a pro rata basis using a 30-day month.   When payment is made on an overdue claim, any interest calculated to be due in an amount exceeding $5 shall be paid to the * * * applicant's assignee without demand therefor.”

Section 65-3.9 (c) provides, as is relevant hereto, that:

“If an applicant does not request arbitration or or institute a lawsuit within 30 days after the receipt of a denial of claim form* * *, interest shall not accumulate on the disputed claim* * *until such action is taken.”

The relevant provisions governing attorney's fees, under the relevant regulations, are the following:11 NYCRR § 65-3.10, which provides, in pertinent part, as follows:  “(a) an applicant or an assignee shall be entitled to recover their attorney's fees, for services necessarily performed in connection with securing payment, if a valid claim or portion thereof was denied or over due.  * * * If such a claim was overdue but not denied, the attorney's fee shall be equal to 20 percent of the amount of the first-party benefits and any additional first-party benefits plus interest payable pursuant to section 65-3.9 of this subpart, subject to a maximum fee of $60.”

However, pursuant to Insurance Law § 5106(a), such attorney's fees are “subject to limitations promulgated by the superintendent [of the N.Y. State Dept. of Insurance].”   The regulation setting forth those limitations is 11 NYCRR § 65-4.6 which, as is relevant to the matter at bar, provides that:

“(c) Except as provided in subdivisions (a) and (b) of this section [those sections dealing with claims that were neither denied nor overdue or which were resolved prior to arbitration], the minimum attorney's fee payable pursuant to this Subpart shall be $60.”

* * *

“(e) * * * the attorney's fee shall be limited as follows:  20 percent of the amount of first-party benefits, plus interest thereon, awarded by the* * * court, subject to a maximum fee of $850.* * * ”

The dispute between the parties is not so much as to the applicability of the foregoing provisions, but rather the manner in which they are to be applied:  the plaintiff provider contending that the statutory interest and attorney's fees awarded should be based upon each individual claim as submitted through an NF-3 proof of claim;  the defendant insurer arguing that the measure of the statutory interest and attorney's fees be determined by the aggregate of bills which are the subject of the within no-fault action and that interest should be calculated from the date of the commencement of the arbitration or lawsuit.

 Proceeding backwards from the third issue presented:  when does the interest accrue-the court acknowledges case law wrestling with the interpretation of 11 NYCRR § 65.15(h)(3) (the predecessor to § 65-3.9(c)), such as the meaning of “applicant” vis a vis an “assignee” provider and whether a distinction should be made between timely denials and late denials (see Chao v. Country-Wide Insurance Company, 11 Misc.3d 1090(A), 2006 WL 1168760 [District Court, Nassau Co.2006];  East Acupuncture, P.C. v. Allstate Insurance Company, 8 Misc.3d 849, 799 N.Y.S.2d 878 [Civil Court, City of New York, Kings Co.2005] ).   However, the patently clear and unambiguous language in § 65-3.9(c) referring to “the receipt of a denial of claim form” as a key element in determining the date of accrual thereunder, shows the defendant's argument to be wholly disingenuous, especially in view of the fact that defendant had stipulated at trial that there were no denials.   Clearly, then, the defendant's contention on this issue is totally without merit and whatever interest accruing in this case is to be calculated, pursuant to 11 NYCRR § 65-3.8, from 30 days after receipt of the particular claim.

With respect to the other issues presented, the court notes that the language of the aforementioned provisions refer to “claim” in the singular.   However, the question remains whether a “claim” refers to each bill submitted or, as argued by the defendant, to the aggregate of the bills for which a provider seeks reimbursement through a single court action.²

 With respect to interest, the clear implication found in appellate case law in the Second Department is that statutory no-fault interest is payable as per each claim as per each particular NF-3 submitted for payment (see New York & Presbyterian Hospital v. Allstate Insurance Company, 30 A.D.3d 492, 819 N.Y.S.2d 268 [2nd Dept.2006];  Smithtown General Hospital v. State Farm Mutual Automobile Insurance Company, 207 A.D.2d 338, 615 N.Y.S.2d 426 [2nd Dept.1994] ).   Furthermore, this court finds such interpretation to be the most logical and reasonable, especially, where as here, the plaintiff's complaint seeks to recover upon several different claims, each of which has a different date upon which interest begins to accrue (i.e., 30 days from receipt of the particular NF-3).

The case law, however, regarding the manner in which the attorney's fees provisions are to be applied appears less clearly settled.   The Appellate Division in Smithtown General Hospital v. State Farm, supra, in reversing a decision regarding attorney's fees, held that the lower court “incorrectly interpreted the $850 ceiling to apply to the entire action, rather than to each claim, and failed to set a minimum fee of $60 per claim.”  (207 A.D.2d 338, at 339, 615 N.Y.S.2d 426).   Following the Smithtown case insofar as awarding attorney's fees for each claim set forth in separate causes of action, as opposed to the entire action, are the decisions in Willis Acupuncture, P.C. v. GEICO, 6 Misc.3d 1002(A), 2004 WL 3029867 [Civil Court, City of New York, Kings Co.2004] and A.M. Medical Services P.C. v. New York Central Mutual Fire Insurance Company, N.Y.L.J., 7/24/06, p.25, col. 1 [Civil Court, City of New York, Queens Co.]

On the other hand, the court notes a recent decision holding contra to Smithtown-Marigliano, LMT v. NY Central Mutual Fire Insurance Company, 13 Misc.3d 1079, 827 N.Y.S.2d 572, 2006 N.Y. Slip Op. 26395, 2006 WL 2828586 [Civil Court, City of New York, Richmond Co.], citing an October 8, 2003 opinion letter issued by the New York State Department of Insurance (which opinion letter was also cited by the defendant in its memorandum).   The court found such opinion not inconsistent with the Smithtown decision which dealt with multiple claims of several assignors, rather than of one assignor, as is the case herein and in Marigliano.   The opinion letter states that “the total amount [of attorney's fees] is derived from the total amount of individual bills disputed in * * *a court action* * *, regardless of whether one bill or multiple bills are presented as part of a total claim for benefits, based upon the health services rendered by a provider to the same eligible insured.”

 Courts have recognized opinions of governmental agencies responsible for the administration of a statute, such as opinion letters from the New York State Department of Insurance, to be entitled to great deference “[w]here the interpretation of a statute or its application involves knowledge and understanding of underlying operational practices or entails an evaluation of factual data and inferences to be drawn therefrom * * * [unless] the question is one of pure statutory reading and analysis, dependent only on accurate apprehension of legislative intent [in which case] there is little basis to rely on any special competence or expertise of the administrative agency and its interpretative regulations are therefore to be accorded much less weight.”  Kurcsics v. Merchants Mutual Insurance Company, 49 N.Y.2d 451, at 459, 426 N.Y.S.2d 454, 403 N.E.2d 159 [1980];  see also Matter of KSLM-Columbus Apartments, Inc. v. New York State Division of Housing and Community Renewal, 5 N.Y.3d 303, 801 N.Y.S.2d 783, 835 N.E.2d 643 [2005];  New York Life Insurance Co. v. State Tax Commission, 80 A.D.2d 675, 436 N.Y.S.2d 380 [3rd Dept.1981].   The same principle has similarly been applied to an agency's interpretation of its own regulations (see Howard v. Wyman, 28 N.Y.2d 434, 322 N.Y.S.2d 683, 271 N.E.2d 528 [1971];  Matter of Visiting Nurse Service of New York Home Care v. New York State Department of Health, 5 N.Y.3d 499, 806 N.Y.S.2d 465, 840 N.E.2d 577 [2005];  Matter of 427 West 51st Street Owners Corp. v. Division of Housing and Community Renewal, 3 N.Y.3d 337, 786 N.Y.S.2d 416, 819 N.E.2d 1032 [2004];  Ocean Diagnostic Imaging, P.C. v. State Farm Mutual Automobile Insurance Company, 9 Misc.3d 73, 803 N.Y.S.2d 333 [App. Term 2nd & 11th Jud. Dists.2005] ).   However, “[A]lthough the interpretation of regulations made by the agency responsible for their administration is generally to be accorded deference, an agency is not thereby freed of the obligation to read those regulations reasonably and rationally” (Matter of Mutual Redevelopment Houses, Inc. v. New York City Water Board, 279 A.D.2d 300, at 301, 720 N.Y.S.2d 7 [1st Dept.2001] ) (see also Howard v. Wyman, supra;  Kurcsics v. Merchants Mutual, supra;  KSLM v. DHCR, supra;  427 West 51st Street Owners Corp., supra).

 Notwithstanding the Marigliano court's well-written decision in support of the October 8, 2003 opinion letter, this court respectfully disagrees and finds the opinion letter unpersuasive for several reasons.

Firstly, the court finds that, upon reading the opinion letter in question, there is nothing contained therein indicative of the Insurance Department's involvement, in issuing such opinion, of “knowledge and understanding of underlying operational practices or [entailing] an evaluation of factual data and inferences to be drawn therefrom* * * [or reliance] on any special competence or expertise” rather than being a matter of “pure statutory reading and analysis, [which in the latter instance is] to be accorded much less weight” (Kurcsics, supra at 459, 426 N.Y.S.2d 454, 403 N.E.2d 159).

Secondly, whether or not involving a matter reliant upon the agency's expertise, the court finds the interpretation offered by the defendant herein, as well as by the Superintendent in the opinion letter and by the court in Marigliano, to be unreasonable.   In the letter in question, the term “total”, a word not found in § 65-4.6(e), is inserted as a qualifier of the term “first party benefits” without any clear and apparent explanation for doing so, aside from creating a basis for the Department's interpretation.   Perhaps the most compelling argument against the supposed “reasonableness” of such interpretation, making the awarding of statutory attorney's fees applicable to the aggregate of claims in a no-fault action, whether or not pertaining to only one or more than one assignor, is that it runs counter to a bedrock principle of the “No-Fault” law itself, i.e., Article 51 of the Comprehensive Motor Vehicle Insurance Reparations Act, specifically, in Insurance Law § 5106(a):  “Payments of first party benefits and additional first party benefits shall be made as the loss is incurred [italics by the court for emphasis].”   As the Court of Appeals has expressed it, “the goals of the speedy payment objective of the No-Fault Law* * * a driving force behind * * * the no-fault* * * insurance laws, focus on avoiding prejudice to insureds by providing for prompt payment or disclaimers of claims.”   (Presbyterian Hospital in the City of New York v. Maryland Casualty Company, 90 N.Y.2d 274, at 284, 660 N.Y.S.2d 536, 683 N.E.2d 1 [1997];  see also Medical Society of the State of New York v. Serio, 100 N.Y.2d 854, 768 N.Y.S.2d 423, 800 N.E.2d 728 [2003];  Dermatossian v. New York City Transit Authority, 67 N.Y.2d 219, 501 N.Y.S.2d 784, 492 N.E.2d 1200 [1986] ).

The interpretation sought by the Superintendent also would force a provider to wait until all treatment is concluded before billing an insurance company-an interpretation plainly running afoul of other insurance regulations.   As was also said by the court in A.M. Medical Services, supra, “such standard [proffered by the defendant herein and the Department of Insurance] not only flies in the face of the regulatory policy of promoting prompt payment of claims, but also provides carriers with a disincentive to settlement, and encourages the undesirable effect of increasing the existing tsunami that is pending no-fault litigation in this county.”

Moreover, there is the unambiguous, explicit language of the Appellate Division in the Smithtown decision.  (See Visiting Nurse Service of New York, supra, at 506, 806 N.Y.S.2d 465, 840 N.E.2d 577;  Oberly v. Bangs Ambulance, Inc., 96 N.Y.2d 295, 727 N.Y.S.2d 378, 751 N.E.2d 457 [2001] ).   This court cannot ignore the plain fact that the statutory “proof of claim ” form [italics by the court for emphasis] refers to an NF-3 (or functional equivalent) which, while often enumerating a number of medical services provided over more than one date, relates to a single bill, there also often being more than one NF-3 upon which a no-fault complaint seeks recovery.   The court also finds significant the fact that, despite years of opportunity to advocate the amending of the no-fault regulations set forth above to either clarify or redefine the term “claim” as it relates to the application of interest and attorney's fees, the Insurance Department has failed to do so, while a number of no-fault provisions have been amended (e.g., §§ 65-3.10 ³ and 65-4.6 ⁴ -the very subject of the opinion letter have, together, been amended several times since 2001).

Therefore, this court, following Smithtown and its progeny, finds that the statutory attorney's fees shall be awarded as per each NF-3 herein, rather than upon the total principle awarded by the court.

Accordingly, judgment is awarded to plaintiff provider in the principal aggregate amount of $1,200.53, with interest accruing on each of the eight claims at the rate of 2% per month in accordance with § 65-3.9(a), each said amount of interest accruing from 30 days from the date of submission of each such claim.

Plaintiff shall further be awarded attorneys fees as to each NF-3 herein pertaining to assignor Victoria Orlando, equal to 20% of the amount set forth in each such NF-3 plus interest, provided that each such fee is not less than the statutory minimum of $60 nor exceed the statutory maximum of $850.

Plaintiff shall submit judgment, in accordance with the within decision, upon 5 days notice to the defendant.

The foregoing constitutes the decision and order of the court.

FOOTNOTES

1.   Prior to trial, the claims with respect to all assignors other than Victoria Orlando had been settled between the parties.

2.   It is worth noting that the defendant argues in favor of aggregating the claims without any justification except it would have to pay more for interest and attorney's fees, but the court notes that the bills themselves represent, with the exception of one NF3, bills for services rendered over a period of a month and, nothing to the contrary in defendant's memorandum, appear to be a reasonable and rational billing practice.

3.   Sec. filed Aug. 2, 2001;  amd. filed Jan. 17, 2003 eff. Feb. 5, 2003.   Amended (a).

4.   Sec. filed Aug. 2, 2001;  amds. filed:  April 11, 2002 as emergency measure;  July 9, 2002 as emergency measure;  Oct. 4, 2002 as emergency measure:  November 27, 2002 as emergency measure;  Jan. 17, 2003 as emergency measure;  Jan. 17, 2003 eff. Feb. 5, 2003.   Amended (b),(e).

BERNICE DAUN SIEGAL, J.