BOAI ZHONG YI ACUPUNCTURE SERVICES v. PROGRESSIVE CASUALTY INSURANCE CO

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Supreme Court, Appellate Term, New York.

BOAI ZHONG YI ACUPUNCTURE SERVICES P.C. a/a/o Mykhaylo Pistsov, Appellant, v. PROGRESSIVE CASUALTY INSURANCE CO., Respondent.

Decided: November 28, 2006

Present:  GOLIA, J.P., RIOS and BELEN, JJ. Alden Banniettis, Brooklyn (Jeff Henle of counsel), for appellant.

Appeal by plaintiff from an order of the Civil Court of the City of New York, Queens County (Anna Culley, J.), entered March 10, 2005. The order denied plaintiff's motion for summary judgment and granted defendant's cross motion for summary judgment dismissing the complaint.

Order reversed without costs, plaintiff's motion for summary judgment granted, defendant's cross motion for summary judgment denied, and matter remanded to the court below for the calculation of statutory interest and an assessment of attorney's fees.

In this action to recover first-party no-fault benefits for health care services provided its assignor, plaintiff established a prima facie entitlement to summary judgment by proof that it submitted claims, setting forth the fact and the amounts of the losses sustained, and that payment of no-fault benefits was overdue (see Insurance Law § 5106[a];  Mary Immaculate Hosp. v. Allstate Ins. Co., 5 A.D.3d 742, 774 N.Y.S.2d 564 [2004];  Amaze Med. Supply v. Eagle Ins. Co., 2 Misc.3d 128(A), 2003 N.Y. Slip Op. 51701[U], 2003 WL 23310886 [App.Term, 2d & 11th Jud. Dists.] ).   Plaintiff submitted, inter alia, defendant's timely claim denial forms, which conceded receipt of the four claims and asserted only the lack of medical necessity for the services provided as the ground for the denials, citing in the first three denials a peer review report, and in the final denial, additionally, the report of an independent medical examination (IME).

 It is well-settled that “a timely denial alone does not avoid preclusion where said denial is factually insufficient, conclusory, vague or otherwise involves a defense which has no merit as a matter of law” (A.B. Med. Servs. PLLC v. Commercial Mut. Ins. Co., 12 Misc.3d 8, 10, 820 N.Y.S.2d 378 [App.Term, 2d & 11th Jud. Dists. 2006], quoting Amaze Med. Supply v. Allstate Ins. Co., 3 Misc.3d 43, 44, 779 N.Y.S.2d 715 [App.Term, 2d & 11th Jud. Dists. 2004];  see also Nyack Hosp. v. Metropolitan Prop. & Cas. Ins. Co., 16 A.D.3d 564, 791 N.Y.S.2d 658 [2005] ).   While defendant was not required to attach to its denial forms either the peer review report upon which the denials were purportedly based or the IME report cited in the final denial (see 11 NYCRR 65-3.8[b][4];  A.B. Med. Servs. PLLC v. Nationwide Mut. Ins. Co., 7 Misc.3d 132(A), 2005 N.Y. Slip Op. 50605[U], 2005 WL 948879 [App. Term, 2d & 11th Jud. Dists.] ), the lack of medical necessity defense is properly interposed when the claim denial form, and any other documentation submitted within the 30-day claim determination period, “set[s] forth with sufficient particularity the factual basis and medical rationale for [the] denial” (A.B. Med. Servs. PLLC v. GEICO Cas. Ins. Co., 12 Misc.3d 30, 31, 816 N.Y.S.2d 821 [App.Term, 2d & 11th Jud. Dists. 2006] ).   The denials herein were couched entirely in conclusory language and contained no facts to satisfy the NF-10 claim denial form's requirement that the insurer state the reason for a denial “fully and explicitly” (see also 11 NYCRR 65-3.2[e] [“Claim practice principles to be followed by all insurers ․ (e) Clearly inform the applicant of the insurer's position regarding any disputed matter”];  Nyack Hosp. v. Metropolitan Prop. & Cas. Ins. Co., 16 A.D.3d 564, 565, 791 N.Y.S.2d 658 [2005] [“A proper denial of claim must include the information called for in the prescribed denial of claim form”];  Nyack Hosp. v. State Farm Mut. Auto. Ins. Co., 11 A.D.3d 664, 664, 784 N.Y.S.2d 136 [2004] [“A proper denial ․ must promptly apprise the claimant with a high degree of specificity of the ground or grounds on which the disclaimer is predicated”], quoting General Acc. Ins. Group v. Cirucci, 46 N.Y.2d 862, 864, 414 N.Y.S.2d 512, 387 N.E.2d 223 [1979] ).

In our view, a claimant's entitlement to a copy of a peer review report upon demand (11 NYCRR 65-3.8[b][4] [“If the specific reason for a denial of a no-fault claim ․ is a ․ peer review report requested by the insurer, the insurer shall release a copy ․ to the applicant ․ upon ․ written request”] ) creates no exception to the requirement that the statutorily-mandated NF-10 form (which provides that the insurer must “attach extra sheets if needed”) state the ground for the denial with the “high degree of specificity” required by regulation and case law.   We do not read the reference to a peer review report as the “specific reason” for a denial to mean that the bare recitation of reliance on such a report satisfies the requirement that a denial based on the lack of medical necessity, which this Court has held on numerous occasions to require the assertion of facts and a medical rationale based thereon, is satisfied by the mere invocation of a peer review report as the basis of a denial.   Rather, the regulation merely guarantees a claimant's right to obtain a copy of the report upon written demand when its content is specifically alleged to justify a claim's denial.

Finally, the sufficiency of either report to establish a triable issue of medical necessity need not be addressed as “even assuming said reports' admissibility and that they set forth a sufficient factual basis and medical rationale for denial of the claims, they cannot remedy the factual insufficiency of defendant's denials” (A.B. Med. Servs. PLLC v. GEICO Cas. Ins. Co., 12 Misc.3d at 32, 816 N.Y.S.2d 821).   Therefore, because defendant failed properly to interpose the medical necessity defense at the “claim stage” and failed to establish any defense that survived the preclusion sanction, defendant's cross motion for summary judgment should have been denied and plaintiff's motion for summary judgment granted.

Accordingly, the matter is remanded to the court below for the calculation of statutory interest and an assessment of attorney's fees pursuant to Insurance Law § 5106(a) and the regulations promulgated thereunder.

I am constrained to agree with the disposition reached by the ultimate majority.   However, I wish to note that I do not agree with certain propositions of law set forth in cases cited therein which are inconsistent with my prior expressed positions and generally contrary to my views.

In this regard, I note my dissent in A.B. Med. Servs. PLLC v. GEICO Cas. Ins. Co., 12 Misc.3d 30, 816 N.Y.S.2d 821 [App.Term, 2d & 11th Jud. Dists. 2006] in which I assert that a denial of claim predicated upon a peer review report is sufficient to comply with the regulations.

The plaintiff herein claims that it sent a written request to the defendant for a copy of the peer review report which, plaintiff insists, it never received, and that the defendant “ignored the request.”   However, plaintiff failed to establish any proof regarding the mailing of such request, and absent such proof, this Court should not consider the alleged failure of the defendant to provide a copy of the report.   The Appellate Term has consistently rejected an insurer's proof of its claim denial form upon a finding that defendant failed to proffer acceptable proof of mailing (e.g. PDG Psychological P.C. v. Utica Mut. Ins. Co., 11 Misc.3d 128(A), 2006 N.Y. Slip Op. 50246[U], 2006 WL 460941 [App.Term 2d & 11th Jud. Dists.] ).   I submit, the Appellate Term should likewise reject plaintiff's papers upon plaintiff's failure to proffer appropriate proof of mailing.

Notwithstanding, the defendant's alleged failure to provide a copy of the peer review report is a non-issue.   In point of fact, the regulations do not require the defendant to provide a copy of the report.   They only require the defendant to pay or deny a claim within 30 days of receipt.   Had the defendant sent such a denial after 30 days, or had it sent the denial within 30 days but failed to proffer sufficient proof of mailing, the majority, I submit, would have applied their former holdings and granted summary judgment to the plaintiff.   In this case the majority concedes a timely denial and proper proof of mailing.

I would, however, prefer to find that the defendant complied with all the rules and regulations and met the clear language of 11 NYCRR 65-3.8(b)(4) which provides, “If the specific reason for a denial of a no-fault claim, or any element thereof, is a medical examination or peer review report requested by the insurer, the insurer shall release a copy of that report to the applicant for benefits, the applicant's attorney, or the applicant's treating physician, upon the written request of any of these parties” (emphasis added).

In order to substantiate their position, my colleagues claim that the language in the form promulgated by the Insurance Department provides that additional pages “must” be attached.   The mere fact that the form allows for additional pages is not equivalent to a mandate requiring additional pages as needed, nor does it establish that the reason for a denial must be long winded and verbose.

In the present case, the plaintiff filed a claim for payment and the defendant thereupon submitted the claim file for an independent peer review.   Upon receiving the peer review report, defendant sent out a timely denial predicated upon the peer review report containing the specific grounds of the denial.

This procedure is entirely within the terms and conditions of the regulations.   If the plaintiff wished to learn the particulars of the report, it need only send a written request appropriately mailed, and defendant would be required to provide a copy of that report.   Although plaintiff claims to have done so in this case, it failed to provide any proof of mailing.   Consequently, the request should not be considered.

To hold as the majority does, in my opinion, would usurp the regulations which require the Department of Insurance to promulgate its own rules and regulations.   It would require the defendant to produce the peer review report within 30 days of the claim despite the fact that the regulations do not require that the report be produced at all, unless requested in writing by the plaintiff.   This is a burden the regulations do not impose upon an insurer.

It is very clear to me that the regulations provide for a logical and reasonable procedure for the disposition of a claim, and that my colleagues' analysis is strained.   The majority acknowledges that the regulations do not require a defendant to annex a copy of the doctor's independent medical examination (IME) report to the NF-10 denial of claim form which is predicated upon that report;  however, they assert that the NF-10 form must include reasons for the denial with a “high degree of specificity.”

In order to comply with the mandates as set forth by the majority, a defendant insurance company must direct their claim examiners (many of whom are not medical doctors) to do the following:  they must first read and understand the IME report which was written by a medical doctor, digest all the medically salient points, and then draft a denial of claim which lists all those salient medical points with a “high degree of specificity.”   The other alternative is to simply send an NF-10 form with the notation “see attached IME report” as the reason for the denial and, of course, attach a copy of the report.

The problem with this analysis is that the first alternative is burdensome, inefficient and down right unnecessary, whereas the second alternative is clearly and specifically not required by the regulation.

A more reasonable analysis is to simply follow the requirements set forth by the regulation.   The defendant insurance carrier receives a copy of an IME report which asserts that the medical treatments, or the medical examination, or the medical supplies provided, were not medically necessary for the medical reasons enumerated in the IME report.   The carrier then sends an NF-10 denial of claim form which asserts that the claim is being denied for the specific reason that the IME doctor issued a report recommending denial.   In the event the provider wishes to learn the precise medical reasons that led to that result, it need only send a written request, and a copy of the IME report will be sent to it free of charge.

Simple, reasonable and effective, and most importantly, the aforesaid procedure is in accordance with the regulations.

I would prefer to deny plaintiff's motion for summary judgment.

RIOS and BELEN, JJ., concur. GOLIA, J.P., concurs in a separate memorandum.