The Civil Procedure & Federal Courts Blog is on top of it. The SCOTUS blog is all over it as well.
I posted about this case a little while ago here and over at theCPLRblog. And it was in the NYLJ Wrap-Up. I’m sure you’ve been wondering about it. I have.
You can read the transcript HERE. Or, if you don’t want to get it from me, you can go over to The Civil Procedure & Federal Courts Blog, and get it from them.
In the September 30th 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 and I (not a partner) discuss the recent developments in no-fault law. This edition covers a few topics, including a SCOTUS case. Yes, a friggin SCOTUS case.
The Excerpts:
The U.S. Supreme Court recently granted certiorari in Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co.1 from the U.S. Court of Appeals for the Second Circuit.2
Shady Grove Orthopedic Associates (a Maryland corporation) and Sonia E. Galvez3 brought a class action against Allstate (an Illinois corporation) in the Eastern District of New York4 for unpaid interest on no-fault claims pursuant to a New York insurance policy.5 Those claims were paid, but for the interest. Shady Grove argued that it could get into federal court through 28 U.S.C. §1332(d)(2)(A), which gives the federal courts original jurisdiction in a class action where the amount in controversy is more than $5 million and diversity exists, and FRCP 23 allows class certification for the relief requested.
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First, the court addressed the Erie9 issue. Under Erie, when a federal court sits in diversity jurisdiction, it must apply a state’s substantive law and the federal procedural law. It found that FRCP 23 does not conflict with CPLR §901(b); that there is no “direct collision” with §901. It reasoned that, because FRCP 23 does not determine which actions can or cannot be brought, “it leaves room for the operation of §901(b),” finding it to be a substantive rule.
But would the application of CPLR §901(b) “serve the twin aims10 of Erie?” The court answered in the affirmative. Not applying the rule would, according to the court, encourage plaintiffs to file in the federal courts, rather than in New York, and it would allow them to recover in federal court, when they could not in New York.
Second, the court then discussed (and ultimately dismissed) Shady Grove’s argument that under N.Y. Ins. Law §5106(a) the lawsuit can be maintained via class action because 11 NYCRR §65-3.9(c)11contemplates class actions in this context, and therefore satisfies the exception clause of CPLR §901(b). In rejecting this argument, the court found that N.Y. Ins. Law §5106(a) contains no authorization for class actions to recover a penalty and that 11 NYCRR §65-3.9(c) did not specificallyauthorize12 class actions to recover a penalty. The Second Circuit interpreted the language of CPLR §901(b) “provides that where a statute creates a penalty, the ‘statute‘ itself must ‘specifically authorize‘” the class action. “At most, [the] regulation contemplates the recovery of a penalty in a class action,” and contemplation is not enough. The Eastern District’s decision was affirmed.
Oral argument before the Supreme Court is scheduled for Nov. 2, 2009.
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Staged Accidents
In proving that an accident was intentional, defendant does not have to prove fraud. Such is the rule according to the Appellate Term, 2nd, 11th, and 13th Judicial Districts. In V.S. Med. Servs., P.C. v. Allstate Ins. Co.23 defendant must only show that “at least one driver intended to make contact,” because, “[a] deliberate collision caused in furtherance of an insurance fraud scheme is not a covered accident.”24 And defendant must show that the accident was intentional by a preponderance of the evidence, not by clear and convincing evidence.
The court did not cite or address State Farm Mut. Auto. Ins. Co. v. Langan,25 an Appellate Division case decided well after State Farm Mut. Auto. Ins. Co. v. Laguerre.26 Langan, readers might recall,27 held that in no-fault, even if an accident is intentional, if the injured person was not complicit in “misconduct, provocation, or assault” and if the accident “was unexpected, unusual, and unforeseen” by the injured person, no-fault coverage exists. V.S. Med does not tell us whether plaintiff’s assignor was somehow complicit in the manufactured accident.
I left out all of the footnotes to save space.
While the first decision deals almost entirely with class certification, it also makes it clear that “documented costs” is not part of a plaintiff’s prima facie case.
Globe Surgical Supply v GEICO Ins. Co., 2008 NY Slip Op 10583 (App. Div., 2nd)
These appeals require us to address whether it is appropriate to certify a class action challenging the validity, under regulations in effect prior to October 6, 2004, of a no-fault insurer’s use of the prevailing geographic rate or the reasonable and customary rate for health care services in calculating first-party benefits due to a claimant or health-care provider. In 2004 the plaintiff, Globe Surgical Supply (hereinafter Globe), as assignee of Remy Gallant, commenced the instant class action alleging, inter alia, that the defendant, GEICO Insurance Company (hereinafter GEICO), violated the regulations promulgated by the New York State Insurance Department (hereinafter the Insurance Department) pursuant to the no-fault provisions of the Insurance Law, by systematically reducing its reimbursement for medical equipment and supplies, specifically, durable medical equipment (hereinafter DME), based on what it deemed to be “the prevailing rate in the geographic location of the provider,” or “the reasonable and customary rate for the item billed.” Specifically, Globe alleges that GEICO wrongfully adjusted or reduced reimbursement payments of claims for DME subject to former Part E of the 23rd Amendment to Insurance Department Regulation 83 (11 NYCRR 68 Appendix 17-C, former Part E) (hereinafter former Part E), to an amount less than the amount charged in the proof of claim.…The Litigation
In a complaint dated July 19, 2004, Globe alleged that GEICO “[a]t some point in time . . . ceased paying claims in accordance with the terms of the [No Fault] regulations and . . . instituted a systematic pattern and practice of reviewing claims for reimbursement against what it deemed to be the prevailing rate in the geographic location of the provider,’ the reasonable and customary rate for [the] item billed,’ or similar rationales . . . There is nothing in [former] Part E which permits an insurer to reduce reimbursements for [DME] by such factors as reasonable and customary charges or geographically prevailing rates. Yet, that is precisely what defendant GEICO is doing and has been doing.”
Specifically, Globe alleged that its assignor, Remy Gallant, was injured in an accident on February 10, 2001, with a GEICO policyholder. According to the complaint, Gallant purchased a transcutaneous electric nerve stimulator (hereinafter the TENS Unit) from Globe, which cost $340. Globe submitted the claim to GEICO, as assignee of Gallant, in the amount of $510 (representing [*3]150% of the actual cost). On May 23, 2001, GEICO denied the claim for that amount and only reimbursed Globe in the amount of $200. As noted on Gallant’s claim form, GEICO partially denied the claim because the cost submitted was “far in excess of the industry average which is $107.82 . . . Based on this, a reasonable reimbursement is 150% over this amount which is $161.73. However, in consideration of the potential range, $200.00 will be reimbursed.”
Globe sought injunctive relief and asserted four causes of action sounding in (1) violation of the No-Fault Law, (2) breach of contract, (3) violation of General Business Law § 349, and (4) unjust enrichment. The Supreme Court granted that branch of GEICO’s motion which was to dismiss the first cause of action for failure to state a cause of action, and those branches of GEICO’s motion which were to dismiss the third and fourth causes of action for lack of standing. In denying that branch of GEICO’s motion which was to dismiss the second cause of action alleging breach of contract, the Supreme Court noted that the “plaintiff’s claim is based upon Insurance Department Regulations, which are part of the policy as a matter of law (see Insurance Law § 5103[h]) and which are specifically set forth in plaintiff’s complaint . . . Insurance policies covering other members of the proposed class need not be identified at this stage of the action.”
Globe purportedly commenced this action on behalf of itself and all members of a class “consisting of all persons who had reimbursement payments of claims for medical equipment and supplies subject to [former] Part E of the Twenty-Third Amendment to Regulation No. 83 (11 NYCRR 68) ( Part E Reimbursements’) adjusted or reduced by Geico.”
…
Class Certification: Burden of Proof and Liberal ConstructionArticle 9 of the CPLR is to be “liberally construed” (Beller v William Penn Life Ins. Co. of N.Y., 37 AD3d 747, 748; Wilder v May Dept. Stores Co., 23 AD3d 646, 649; Jacobs v Macy’s E, Inc., 17 AD3d 318, 319; Kidd v Delta Funding Corp., 289 AD2d 203; Friar v Vanguard Holding Corp., 78 AD2d 83, 91; see generally 3 Weinstein Korn & Miller, New York Civil Practice CPLR, Lexis-Nexis (MB)(2008) at 901.04, 901.05, and 901.20) in favor of the granting of class certification if all of the prerequisites of CPLR 901(a)(1)-(5) (see Matter of Colt Indus. Shareholder Litig., 77 NY2d 185, 194; Klein v Robert’s Am. Gourmet Food, Inc., 28 AD3d 63, 69; Ackerman v Price Waterhouse, 252 AD2d 179, 191; Friar v Vanguard Holding Corp., 78 AD2d at 90-91) and CPLR [*5]902(1)-(5) (see Ackerman v Price Waterhouse, 252 AD2d at 191) are met.
The prerequisites articulated in CPLR 901(a) include proof that the proposed class is so numerous that joinder of all members is impracticable, that common questions of law and fact applicable to the class predominate over questions affecting only individual members, that claims or defenses of the representative parties are typical of the claims or defenses of the class, and that the class action is superior to other available methods for the fair and efficient adjudication of the controversy.
Read the entire decision to see how it turns out. I’ll edit it down further later on today.
Montefiore Med. Ctr. v Auto One Ins. Co., 2008 NY Slip Op 10596 (App. Div., 2nd)
The Supreme Court providently exercised its discretion in denying the defendant’s motion pursuant to CPLR 5015(a)(1) to vacate a judgment entered upon its default in appearing or answering the complaint since it failed to demonstrate a reasonable excuse for the default (see Eugene Di Lorenzo, Inc. v A.C. Dutton Lbr. Co., 67 NY2d 138, 141; Giovanelli v Rivera, 23 AD3d 616). The plaintiffs established that they effectuated service upon the defendant through delivery of the summons and complaint upon the Assistant Deputy Superintendent and Chief of Insurance (see Insurance Law § 1212; Hospital for Joint Diseases v Lincoln Gen. Ins. Co., 55 AD3d 543; New York & Presbyt. Hosp. v Allstate Ins. Co., 29 AD3d 968; Kaperonis v Aetna Cas. & Sur. Co., 254 AD2d 334; see also CPLR 311[a][1]). The defendant did not contend that the address on file with the Superintendent of Insurance was incorrect, and the mere denial of receipt of the summons and complaint was insufficient to rebut the presumption of proper service created by the affidavit of service (see Commissioners of State Ins. Fund v Nobre, Inc., 29 AD3d 511; [*2]Carrenard v Mass, 11 AD3d 501; Truscello v Olympia Constr., 294 AD2d 350, 351). Even if the defendant’s motion were treated as one made pursuant to CPLR 317 (see Eugene Di Lorenzo, Inc. v A.C. Dutton Lbr. Co., 67 NY2d 138, 143; Mann-Tell Realty Corp. v Cappadora Realty Corp., 184 AD2d 497, 498), the defendant failed to meet its burden of showing that it did not receive actual notice of the summons in time to defend the action (see General Motors Acceptance Corp. v Grade A Auto Body, Inc., 21 AD3d 447; cf. Hospital for Joint Diseases v Lincoln Gen. Ins. Co., 55 AD3d 543).