ELMONT OPEN MRI DIAGNOSTIC RADIOLOGY MRI v. COUNTRY WIDE INSURANCE CO (2007)

The Plaintiff commenced this action to recover no-fault first party benefits for medical services provided to its assignor on February 14, 2004, in the total sum of $1,791.73, which have not been paid.   The action was commenced on or about June 6, 2005;  and, issue was joined on or about June 16, 2005.   The Plaintiff now moves for summary judgment.   The Defendant opposes the motion.

 The Plaintiff alleges that it properly served its bills dated February 27, 2004 upon the Defendant and that same were received by the Defendant on March 10, 2004.   The Defendant does not deny such receipt and admits same in its Denial of Claim, thereby curing any defect in the Plaintiff's proof of mailing.  Prestige Medical & Surgical Supply, Inc. v. Clarendon National Insurance Company, 13 Misc.3d 127(A), 824 N.Y.S.2d 758 (App. Term 2nd and 11th Jud. Dists.2006);  Magnezit Medical Care, P.C. v. New York Central Mutual Fire Ins. Co., 12 Misc.3d 144(A), 824 N.Y.S.2d 763 (App. Term 2nd and 11th Jud. Dists.2006)

The Plaintiff further alleges that the Defendant's denial, alleging lack of medical necessity, albeit timely, was improper.   According to the Plaintiff, the Defendant's denial was not on a properly prescribed Denial of Claim form and that the form used by the Defendant omitted many fields, all in violation of 11 N.Y.C.R.R. §§ 65-3.4(c)(11) and 65-3.8(c)(1).

The Defendant argues that, because its denial was timely, the Plaintiff will only be entitled to summary judgment if Plaintiff eliminates the defense of lack of medical necessity as a matter of law, as part of its prima facie motion.   According to the Defendant, having failed to proffer competent medical evidence demonstrating that the subject medical services were necessary, the Plaintiff's motion must be denied.

 To make out a prima facie case, the Plaintiff must establish the proper submission of its claim and the carrier's failure to either pay or issue a valid denial within thirty (30) days.  11 N.Y.C.R.R. § 65-3.8(c);  Presbyterian Hospital in the City of New York v. Maryland Casualty Company, 90 N.Y.2d 274, 660 N.Y.S.2d 536, 683 N.E.2d 1 (1997);  Nyack Hospital v. State Farm Mutual Automobile Insurance Company, 11 A.D.3d 664, 784 N.Y.S.2d 136 (2nd Dept.2004);  Westchester Medical Center v. AIG, Inc., 36 A.D.3d 900, 829 N.Y.S.2d 180 (2nd Dept.2007);  New York Craniofacial Care, P.C. v. Allstate Insurance Company, 11 Misc.3d 1071(A), 816 N.Y.S.2d 698 (Civ.Ct. Kings Co., 2006).   As will be discussed below, the Plaintiff has established its prima facie right to the relief requested.

Although the timeliness of the Defendant's denial is admitted and not in issue, it must still be demonstrated that it was facially sufficient to have any effect.  Nyack Hospital v. State Farm Mutual Automobile Insurance Company, supra.;  Amaze Medical Supply, Inc. v. Allstate Insurance Company, 3 Misc.3d 43, 779 N.Y.S.2d 715 (App. Term 2nd and 11th Jud. Dists.2004).

In relevant part, 11 N.Y.C.R.R. § 65-3.8(c)(1) provides:  “If the insurer denies a claim in whole or in part involving elements of basic economic loss or extended economic loss, the insurer shall notify the applicant or the authorized representative on the prescribed denial of claim form ․” 11 N.Y.C.R.R. § 65-3.4(c) provides that Appendix 13 of the regulations includes the “prescribed claim forms that must be used by all insurers, and shall not be altered unless approved by the superintendent:  (11) Denial of Claim Form (NYS Form N-F 10).”

The Defendant does not dispute the Plaintiff's documented allegations that the its denial of claim was not on the prescribed form, was on a form disapproved for use by the New York State Insurance Department after May 1, 2003 and that the form used by the Defendant redacted fifteen (15) areas of inquiry.   Viewing this uncontroverted evidence in a light most favorable to the Defendant, Corvino v. Mount Pleasant Central School District, 305 A.D.2d 364, 757 N.Y.S.2d 896 (2nd Dept.2003);  Tassone v. Johannemann, 232 A.D.2d 627, 648 N.Y.S.2d 708 (2nd Dept.,1996), the court finds no genuine issue of fact, Sillman v. Twentieth Century-Fox Film Corporation, 3 N.Y.2d 395, 165 N.Y.S.2d 498, 144 N.E.2d 387 (1957);  Rotuba Extruders, Inc. v. Ceppos, 46 N.Y.2d 223, 413 N.Y.S.2d 141, 385 N.E.2d 1068 (1978) to be resolved at trial concerning the propriety of the Defendant's denial, which is insufficient as a matter of law.  Nyack Hospital v. State Farm Mutual Automobile Insurance Company, supra.;  Nyack Hospital v. Metropolitan Property & Casualty Insurance Company, 16 A.D.3d 564, 791 N.Y.S.2d 658 (2nd Dept.2005) lv. den.   5 N.Y.3d 713, 806 N.Y.S.2d 163, 840 N.E.2d 132 (2005);  Spineamericare Medical, P.C. v. United States Fidelity & Guaranty Company, 12 Misc.3d 138(A), 824 N.Y.S.2d 766 (App. Term 9th and 10th Jud. Dists.2006).

 The Defendant's argument that the Plaintiff must still demonstrate the medical necessity for the services rendered is without merit.   It is well established that:

“proof of a properly submitted statutory claim form, or its substantial equivalent, establishes a prima facie case of medical necessity on a plaintiff's motion for summary judgment (Amaze Med. Supply v. Eagle Ins. Co., 2 Misc.3d 128(A), 784 N.Y.S.2d 918, 2003 WL 23310886 [App. Term, 2d & 11th Jud. Dists.];   see also Damadian MRI in Elmhurst v. Liberty Mut. Ins. Co., 2 Misc.3d 128(A), 784 N.Y.S.2d 919, 2003 WL 23310887 [App. Term, 9th & 10th Jud. Dists.] ).   The burden then shifts to defendant who, if not precluded, may rebut the presumption and establish the lack of medical necessity by submitting proof, such as a detailed peer review report or the results of an IME, that the health benefits provided were not medically necessary (Amaze Med. Supply v. Eagle Ins. Co. 2 Misc.3d 128(A), 784 N.Y.S.2d 918, 2003 WL 23310886, supra;  see also Damadian MRI in Elmhurst v. Liberty Mut. Ins. Co., 2 Misc.3d 128(A), 784 N.Y.S.2d 919, 2003 WL 23310887, supra ).”

Stephen Fogel Psychological, P.C. v. Progressive Casualty Insurance Company, 7 Misc.3d 18, 793 N.Y.S.2d 661 (App. Term 2nd and 11th Jud. Dists.2004) aff'd 35 A.D.3d 720, 827 N.Y.S.2d 217 (2nd Dept.2006) The Defendant has offered nothing to substantiate its claim of lack of medical necessity.

It being uncontested, and determined as a matter of law, that the Plaintiff's claim was timely submitted and that the Defendant failed to pay or properly deny that claim within thirty (30) days, having failed to raise a claim of fraud or lack of coverage, the Defendant is precluded from raising a defense to the Plaintiff's suit.  New York Hospital Medical Center of Queens v. Country-Wide Insurance Company, 295 A.D.2d 583, 744 N.Y.S.2d 201 (2nd Dept.2002);  Presbyterian Hospital in the City of New York v. Maryland Casualty Co., 226 A.D.2d 613, 641 N.Y.S.2d 395 (2nd Dept.1996);  Mount Sinai Hospital v. Triboro Coach Inc., 263 A.D.2d 11, 699 N.Y.S.2d 77 (2nd Dept.1999).

Based upon the foregoing, the Plaintiff's motion for an order granting it summary judgment is granted;  and, the Plaintiff is entitled to the entry of a judgment in the sum of $1,791.73, plus interest and attorney's fees.   The question has arisen, however, as to when interest begins to run.   The Plaintiff suggests interest accrues beginning thirty (30) days after proper submission of its claims.   The Defendant suggests interest did not begin to accrue herein until the commencement of this action.   Approximately fifteen (15) months of interest is in question.

There is no dispute that the applicable regulatory provisions governing an award of interest are 11 N.Y.C.R.R. §§ 65-3.8(a)(1), 65-3.8(c), 65-3.9(a) and 65-3.9(c).  The dispute, as noted in Alpha Chiropractic P.C. v. State Farm Mutual Auto Ins., 14 Misc.3d 673, 827 N.Y.S.2d 632 (Civ.Ct. Queens Co.2006), lies in how these provisions are to be applied.   As Judge Bernice Daun Siegal noted therein, recent case law has been wrestling with the interpretation and inter-relationship of these provisions, with differing results.   See:  East Acupuncture, P.C. v. Allstate Ins. Co., 8 Misc.3d 849, 799 N.Y.S.2d 878 (Civ.Ct. Kings Co.2005);  Chao, M.D. v. Country-Wide Insurance Company, 11 Misc.3d 1090(A), 819 N.Y.S.2d 852 (Dist. Ct. Nassau Co.2006).   This court will attempt to grapple with these issues as well.

As is relevant herein, 11 N.Y.C.R.R. §§ 65-3.9(a) unequivocally provides:

(a) All overdue mandatory and additional personal injury protection benefits due an applicant or assignee shall bear interest at a rate of two percent per month.

As applicable, 11 N.Y.C.R.R. §§ 65-3.8 provides, “(a)(1) No-fault benefits are overdue if not paid within 30 calendar days after the insurer receives proof of claim ․ (c) Within 30 calendar days after proof of claim is received, the insurer shall either pay or deny the claim in whole or in part.”   Reading these two (2) subparagraphs together, it has been held that a claim is “overdue” when the carrier has failed to either pay or properly deny the claim within thirty (30) days of its receipt.  Presbyterian Hospital in the City of New York v. Maryland Casualty Company, 90 N.Y.2d 274, 660 N.Y.S.2d 536, 683 N.E.2d 1 (1997);  Nyack Hospital. v. State Farm Mutual Automobile Insurance Company, 11 A.D.3d 664, 784 N.Y.S.2d 136 (2nd Dept.2004);  New York Craniofacial Care, P.C. v. Allstate Insurance Company, 11 Misc.3d 1071(A), 816 N.Y.S.2d 698 (Civ.Ct. Kings Co., 2006).   It is worth noting, at this point, the distinction between a claim which is properly denied, as opposed to one which is simply denied.

The aforesaid sections are internally consistent and unequivocal in their statement that interest begins to run if the payment of a claim is “overdue”, to wit:  neither paid nor properly denied within thirty (30) day, on the thirtieth (30th) day after the claim is submitted.   The section which is causing all of the problems is 11 N.Y.C.R.R. §§ 65-3.9(c), which provides, in pertinent part:

(c) If an applicant does not request arbitration or institute a lawsuit within 30 days after the receipt of a denial of claim form or payment of benefits calculated pursuant to Insurance Department regulations, interest shall not accumulate on the disputed claim or element of claim until such action is taken.

On a cursory reading, this section appears to be at odds with the preceding sections.

Judge Milagros A. Matos, in East Acupuncture, P.C. v. Allstate Ins. Co., supra., resolves this apparent conflict by noting that 11 N.Y.C.R.R. § 65.15(h)(3), now Section 65-3.9(c), makes specific reference to “an applicant” whereas 11 N.Y.C.R.R. § 65.15(h)(1), now Section 65-3.9(a), makes specific reference to interest payable to “an applicant or assignee.”   Applying “a basic principle of statutory construction that a court will not by implication read into a clause of a rule or statute a limitation for which no sound reason can be found” Kurcsics v. Merchants Mutual Ins. Co., 49 N.Y.2d 451, 426 N.Y.S.2d 454, 403 N.E.2d 159 (1980), and deferring to the “special competence and expertise [of the Superintendent of Insurance] with respect to the insurance industry”, Judge Matos held that 11 N.Y.C.R.R. § 65.15(h)(3) [Section 65-3.9(c) ] does not apply to provider/assignees, but only to “applicants.”

As pointed out by Judge Anthony W. Paradiso, in Chao, M.D. v. Country-Wide Insurance Company, supra, and recently reiterated by the Appellate Division Second Department, in Long Island Radiology v. Allstate Insurance Company, 36 A.D.3d 763, 830 N.Y.S.2d 192 (2nd Dept.2007), however, an assignee has no greater rights than its assignor and “stands in the shoes” of its assignor.   Arena Construction Co., Inc. v. Sackaris & Sons, 282 A.D.2d 489, 722 N.Y.S.2d 884 (2nd Dept.2001);  Dilon Medical Supply Corp. v. Travelers Insurance Company, 7 Misc.3d 927, 796 N.Y.S.2d 872 (Civ.Ct. Kings Co.2005) As such, the assignee must be held to the same obligations and restrictions as its assignor, the “applicant.”

The above notwithstanding, this court must nevertheless respectfully disagree with Judge Paradiso's application of these apparently conflicting regulations.   The court in Chao held that the restrictions of Section 65-3.9(c) apply to all claimants because to rule otherwise “encourages delayed suits and thrusts an unjustified financial burden on insurance companies who are forced to pay years worth of punitive interest payments that are eventually reflected in higher insurance premiums (citation omitted).”   This latter argument, however, is directly contradicted by 11 N.Y.C.R.R. § 65-3.9(f), which explicitly provides, “An insurer may not include in its ratemaking calculations any interest paid on an overdue claim.”   Moreover, the interpretation of these regulations applied in Chao overlooks appellate authority which holds that interest accrues on all “overdue” payments, those not made within thirty (30) days after a proper demand, without regard to when suit is commenced.   Smithtown General Hospital v. State Farm Mutual Automobile Insurance Company, 207 A.D.2d 338, 615 N.Y.S.2d 426 (2nd Dept.1994);  Hempstead General Hospital v. Insurance Company of North America, 208 A.D.2d 501, 617 N.Y.S.2d 478 (2nd Dept.1994);  New York & Presbyterian Hospital v. Allstate Insurance Company, 30 A.D.3d 492, 819 N.Y.S.2d 268 (2nd Dept. 2006);  St. Clare's Hospital v. Allstate Insurance Company, 215 A.D.2d 641, 628 N.Y.S.2d 128 (2nd Dept.1995)

This court believes there is a third interpretation to be given to these regulations, as proffered by the Plaintiff herein and as alluded to by Judge Siegal in Alpha Chiropractic P.C. v. State Farm Mutual Auto Ins., supra., which meets the stated objectives of the statutory no-fault scheme, encouraging prompt resolution of and compensation for losses incurred by accident victims, Presbyterian Hospital in the City of New York v. Maryland Casualty Company, 90 N.Y.2d 274, 660 N.Y.S.2d 536, 683 N.E.2d 1 (1997), without rewarding a dilatory assignee with a windfall of interest or rewarding a dilatory insurance company which has failed to pay or properly deny a claim, by delaying the accrual of interest.

As the court pointed out in Alpha Chiropractic P.C. v. State Farm Mutual Auto Ins., supra., “the patently clear and unambiguous language in § 65-3.9(c) referring to the receipt of a denial of claim form' [is] a key element in determining the date of accrual thereunder.”   Significantly, the defendant therein never issued a denial;  and, based thereon, Judge Siegal found the defendant's argument, that interest does not accrue until the commencement of arbitration or suit to be “totally without merit.”   The same must be said of denials, such as the one herein, which, although timely served, are patently invalid on their face.   Distinguished from such denials, however, are denials which are timely and properly stated, e.g. a denial, in proper form, based on the alleged lack of medical necessity, which sets forth a factual basis sufficient to establish, prima facie, the absence of medical necessity.   See:  Amaze Medical Supply Inc. v. Allstate Insurance Company, 12 Misc.3d 142(A), 824 N.Y.S.2d 760 (App. Term 2nd and 11th Jud. Dists.2006) [proper denial defeated provider's motion for summary judgment and defendant permitted to proceed with defense];  compare, Park Neurological Services P.C. v. GEICO Insurance, 4 Misc.3d 95, 782 N.Y.S.2d 507 (App. Term 9th and 10th Jud. Dists.2004) [defendant failed to set forth factual basis for alleged lack of medical necessity precluding the defendant from asserting such defense and mandating summary judgment for the plaintiff]

 Based upon all of the foregoing, it is the holding of this court that, in accordance with the unambiguous language of 11 N.Y.C.R.R. §§ 65-3.9(a) and 65-3.8(a) and (c), interest on overdue payments, those where there is less than full payment and no valid denial issued within thirty (30) days of receipt of the claim, interest shall run from thirty (30) days after receipt of the claim.  Smithtown General Hospital v. State Farm Mutual Automobile Insurance Company, supra;  Hempstead General Hospital v. Insurance Company of North America, supra;  New York & Presbyterian Hospital v. Allstate Insurance Company, supra.;  St. Clare's Hospital v. Allstate Insurance Company, supra.   In all other cases, where the carrier has issued a proper and timely denial, establishing a prima facie defense to the claim, interest shall run from the institution of arbitration or suit, if no such action is taken within thirty (30) days after the plaintiff's receipt of the denial of claim, in accordance with 11 N.Y.C.R.R. §§ 65-3.9(c).  In making this distinction, the court notes that subparagraph (a) makes specific reference to “All overdue” payments, whereas subparagraph (c) specifically omits such language.

The court believes that this dichotomy is not only mandated by the clear and specific language of the regulations, but is consistent with and promotes the underlying purpose of the no-fault scheme, to eschew treating claimants as adversaries and to provide for prompt payment or disclaimer of first party benefits to injured individuals, Dermatossian v. New York City Transit Authority, 67 N.Y.2d 219, 501 N.Y.S.2d 784, 492 N.E.2d 1200 (1986);  Presbyterian Hospital in the City of New York v. Maryland Casualty Company, supra.   Claimants should not expect, and the regulations do not allow, that they will be rewarded with a windfall of accumulating interest, in the face of a timely and valid denial, by delaying the prosecution of their claims. By the same token, insurance companies should not be heard to complain that interest will accumulate against them where they have, and continue to, fail to pay or properly deny a claim.   In this way, the regulatory scheme is designed to provide incentive to both sides to administer and prosecute claims in a timely fashion.

Finally, the Defendant's argument that the total attorney's fee herein should be no more than $850.00 is mooted by the fact that the Plaintiff concedes that under any method of calculation the fee herein will not exceed $850.00.

Accordingly, the Plaintiff's motion for summary judgment is granted;  and, the Plaintiff is entitled to the entry of a judgment in the principle sum of $1,791.73, plus interest at the rate of two (2%) percent per month compounded from April 9, 2004 and counsel fees in the sum of twenty (20%) percent of principle award plus the interest thereon, but no more than $850.00.

All other matters not decided herein are hereby denied.

This constitutes the decision and order of this court.

ANDREW M. ENGEL, J.