In Today’s New York Law Journal, Mitchell Lustig, Esq. and Vince A. Sabella, Esq. of Nicolini, Paradise, Ferretti & Sabella discuss LMK Psychological Services, PC v. State Farm Mutual Automobile Ins. Co, in their article: Accrual Date for Payment of Interest in No-Fault Cases. You may recall the issue being discussed in the January 31st edition of the No-Fault Wrap Up in the Law Journal, authored by David M. Barshay, Esq. and Mitchell Lustig, Esq.

In their article, Mr. Sabella and Mr. Lustig argue that the “distinction crafted by the Third Department in LMK between timely and untimely denied claims as it relates to the accrual of interest is not supported by a reasonable interpretation of the governing no-fault regulatory framework or controlling case law.”

Here are some of the pertitnenent parts:

It is the interrelationship between [11 NYCRR 65-3.9(a) and 11 NYCRR 65-3.9(c)] that is at the crux of the dispute between medical providers and no-fault insurers as to the question of when interest accrues. In reconciling this regulatory maze, the function of the court is to construe the regulation as a whole and to harmonize the conflicting provisions with one another so as to effectuate the intent and purpose of the superintendent of insurance in enacting the regulatory scheme.

Accordingly, while it can be reasonably argued that interest should not be tolled until the commencement of an action where the no-fault insurer fails to issue a denial of claim form, there is nothing in the regulatory scheme, when properly construed in its entirety, to support the holding of the Third Department that the toll on interest should not be applicable where the no-fault insurer issues a denial of claim, albeit an untimely one.

The fundamental flaw with the holding of the Third Department is that it completely ignores 11 NYCRR 65-3.9(c), which specifically provides for a toll on interest, as if it were not an integral part of the regulatory scheme. This has the undesirable effect of awarding an unjustified windfall to a dilatory medical provider.

. . .

In support of its holding that interest on untimely denied claims accrues 30 days after the no-fault insurer’s receipt of the bill, the Third Department cites the decision of the Appellate Term, Second Department in East Acupuncture. This is a clear misreading of the Appellate Term’s decision in the latter case. A review of the facts in East Acupuncture reveals that the no-fault insurer’s denials therein were untimely.

. . .

In Brooklyn Chiropractic Associates PC v. Progressive Casualty Insurance Co., decided a few months after East Acupuncture but well before the Third Department’s decision in LMK, the Appellate Term, Second Department again reaffirmed that interest on untimely denied no-fault claims accrues upon commencement of the lawsuit.

. . .

Moreover, the Third Department’s decision in LMK is contrary to the stated objectives of the no-fault law. As noted by the Court of Appeals in Walton v. Lumbermens Mutual Casualty Co., the purpose of the no-fault law is “to establish a quick, sure and efficient system for obtaining compensation for economic loss.” However, the decision in LMK undermines this purpose by encouraging delayed lawsuits by medical providers and frustrates a core and essential objective of the regulations, “that is, to provide a tightly timed process of claim, disputation and payment.”