In today’s edition of the No-Fault Insurance Wrap-Up, in the New York Law Journal, David M. Barshay, a partner at Baker, Sanders, Barshay, Grossman, Fass, Muhlstock and Neuwirth in Mineola. Jill Lakin Schatz, a solo practitioner in Manhattan (With contributions by Melissa A. Pirillo, an associate at Baker Sanders and Mitchell S. Lustig) discuss the recent developments in no-fault law. Topics covered include:
Intentional Accidents Are Covered Under No-Fault,,’Dan Medical’ Softened? (Redux),’MVAIC’, ‘Unrebutted’ Proof of Lack of Medical Necessity, Verification Requests, and Default Judgments.
Here are some excerpts:
In State Farm Mut. Auto Ins. Co. v. Langan,1 in a ground-breaking decision, the Appellate Division, Second Department, held that intentional accidents, while not covered under uninsured motorist (UM), are covered under no-fault insurance.
…On appeal, the Second Department, in a sharply divided 3-2 decision, modified the Supreme Court’s Order, finding that the Supreme Court properly determined State Farm was not obligated to provide UM coverage. The Appellate Division reasoned that UM coverage is designed to afford an injured person the same protection as he would have had if he had been injured in an accident by an identifiable automobile covered by a standard automobile liability insurance policy in effect at the time of the accident and that “no standard automobile liability insurance policy would have provided coverage to [Mr.] Popadich for injuries he intentionally inflicted on [Mr.] Spicehandler.”
However, the Appellate Division held that in contexts other than UM, namely no-fault insurance, coverage is unaffected by whether the accident was intentionally caused. Rather the question is whether, from the viewpoint of the individual seeking benefits, the event was “unexpected, unusual and unforeseen” and not brought about by the individual’s own “misconduct, provocation, or assault.” If so, the injury claimed is properly classified as “accidental” within the meaning of the no-fault endorsement and coverage must be afforded. Accordingly, the Appellate Division determined that State Farm was obligated to pay no-fault benefits to Mr. Langan on behalf of Mr. Spicehandler.
There is a great probability that this case will reach the Court of Appeals. Until then, it appears that no-fault carriers will be unable to prevail on an intentional or “staged accident” defense unless they can show that the claimant was somehow complicit in the staging of the accident.
‘Dan Medical’ Softened? (Redux)
In NYC East-West Acupuncture P.C. v. Maryland Cas. Co.,6 the Appellate Term found that although plaintiff failed to lay a proper foundation for the admission of its claim forms as business records under Dan Medical, such insufficiency was cured by the defendant’s admission that it received plaintiff’s claim and that payment was due. Unlike Delta, it cannot be said that such admission is atypical. Rather, this is an admission made by insurers in most cases. Accordingly, it appears that under this new case, an admission by the insurer that it received a claim and such is overdue would suffice to establish a plaintiff’s prima facie case on summary judgment motions.‘Unrebutted’ Proof
• Of Lack of Medical Necessity. As previously noted in this space,11 defendant insurers continue to realize great success in dismissing providers’ claims at the summary judgment stage based upon unrebutted affirmed peer reviews.12 However, the Appellate Term recently found that even where plaintiff fails to rebut the conclusions in the affirmed peer review report, summary judgment in the defendant’s favor will nevertheless be denied where the report does not establish, in the first place, that the medical services were not medically necessary.
In Eagle Surgical Supply Inc. v. Progressive,13 defendant cross-moved for summary judgment alleging lack of medical necessity for two separate claims, and plaintiff did not oppose the cross-motion. In regard to one of the claims in which defendant attached an IME report, the court found that defendant established its prima facie showing of a lack of medical necessity. Since plaintiff failed to rebut said showing, defendant’s motion was granted for that portion. However, concerning the second claim, the court held: “Inasmuch as the affirmed peer review report annexed to defendant’s cross-motion did not establish that supplies for which plaintiff sought to recover on this claim . . . were medically unnecessary, defendant is not entitled to summary judgment dismissing said claim.”
Accordingly, it is clear that the burden is still on defendant to prove services are medically unnecessary before the burden shifts to plaintiff to rebut defendant’s prima facie showing.
Verification Requests
• And a Strict Reading of the Regulations. The Appellate Term recently addressed the much-debated issue of whether an insurer must wait 30 days after its initial verification request to send a follow-up request under 11 NYCRR §65-3.6(b). As previously reported in this space,14 the lower courts were at odds on the issue, with one holding a premature follow-up carried no penalty,15 while another held such prematurity results is a waiver of defenses.16
In Infinity Health Products, Ltd. v. Eveready Ins. Co.17 the Appellate Term found that the failure to strictly adhere to the 30-day waiting period required under 11 NYCRR §65-3.6(b) invalidates the follow-up request and results in the waiver of defenses. The court held: “Defendant admits that it mailed a follow-up verification demand 27 days after it mailed its initial demand, and we find the second request premature and without effect . . . . As a result, defendant is precluded from raising most defenses, including its proffered defense of excessive fees.”
Default JudgmentsNotwithstanding the strong public policy in New York state that actions be resolved on their merits,23 in two recent cases, the Appellate Term, Second Department, reversed decisions of the lower courts which granted insurers’ motions to vacate default judgments. In both instances, the court held that the insurer failed to establish a reasonable excuse for the default.
In Neurology and Acupuncture Service, P.C. v. State Farm Mut. Auto. Ins. Co.,24 the insurer’s answer was only three days late. However, the court held that the excuse for the delay proffered by defendant’s attorney was deficient since “it did not allege personal knowledge of his assertions.”
Likewise, in Avenue T MPC Corp. v. Chubb Indem. Ins. Co.,25 defense counsel asserted in her affirmation in support of the motion to vacate that the insurer delayed in forwarding the summons and complaint to her office and further noted that the summons and complaint had been “lost in the shuffle” by the insurance company. In denying the motion, the court reiterated that, to establish a reasonable excuse for a default, counsel “must submit supporting facts in evidentiary form sufficient to justify the default . . . and include a detailed explanation of [the] oversights.”
These decisions represent the continuation of a trend by the appellate courts in rebuffing insurers’ attempts to vacate default judgments.