IN TODAY'S LAW JOURNAL

Today's New York Law Journal contains the most recent edition of the No-Fault Wrap up, authored by David M. Barshay, Esq. of Baker, Sanders, Barshay, Grossman, Fass, Muhlstock and Neuwirth and Mitchell S. Lustig of Nicolini, Paradise Ferretti & Sabella, with contributions by Joaquin Lopez, an associate at Baker Sanders and Jill Lakin Schatz, a solo practitioner.

The topics discussed in this edition include: The recent Court of Appeals decision: Fair Price Medical Supply Corp. v. Travelers Indem. Co., The Appellate Term, 2nd Department following LMK, Verification requests, Intoxication defenses, and much much more.

Here are some of the relevant parts:

Fair Price

The Court of Appeals noted whether a specific defense is precluded under Presbyterian2 or available under Chubb3 hinges on whether the defense is more like a "normal" exception from coverage (e.g., a policy exclusion), or a lack of coverage (i.e., a defense implicating a coverage matter), the former being precludable and the latter not. The Court found that where there is "an actual accident and actual injuries" coverage is invoked and Presbyterian's preclusion rule applies. The Court found unavailing defendant's argument that preclusion would require them to pay a no-fault claim it might not have been obligated to honor if timely disclaimed, finding that the same could be said of any policy defense subject to preclusion.

In dissent, Judges Robert S. Smith and Eugene F. Pigott Jr. said that a defense that the services were never provided should be treated as a "lack of coverage" defense, obviating the need for a timely denial. They reasoned, "Neither the insurance policy at issue here nor any other covers wholly fabricated claims."

App. Term Follows LMK

In April, the Appellate Term, Second Department, followed LMK and reversed a civil court order that granted attorney's fees on a "per action" basis.7 The Appellate Term reasoned that it was bound by LMK under stare decisis and also that the Second Department's Appellate Division previously determined attorney's fees in a similar manner as the Third Department did in LMK.8 While the Appellate Term, First Department, has not yet ruled on the issue, it is anticipated that that court will hold it is also bound by LMK.9

Circular Letter re: Interest

On June 10, the department of Insurance issued a circular letter reminding insurers of their obligations with respect to settling no-fault claims.11

In sum, the letter advises insurers that it is unlawful for the insurer, or counsel representing the insurer, "to suggest or require, as a condition of settlement of a contested claim, waiver of any interest that is due." The letter also put the burden on the insurer "to take all necessary measures to ensure" that its employees and legal counsel fully comply with the proscription. Finally, the Insurance Department noted that it will enforce compliance with the mandate through, inter alia, "targeted investigations of insurers," when warranted.

Verification

In Park Slope Medical and Surgical Supply Inc. v. Country-Wide Insurance Co.,14 the Civil Court of Richmond County addressed a much-debated issue: Must an insurer wait 30 days after the initial verification request to send a follow-up request under 11 N.Y.C.R.R. 65-3.6(b)?

In Park Slope, the court determined the literal meaning of the statute was unclear and thus resorted to an analysis of the "spirit and purpose" of the law. The court determined that penalizing the insurer for being too prompt would hamper a major objective of the no-fault law: Prompt payment of claims. Finding the "early" follow-up sufficient, plaintiff's action was dismissed as premature.

EUOs

Concerning the second inquiry, the court determined that the insurer, upon receipt of the claim on Feb. 14, 2005, was required to adhere to the statutory and regulatory scheme for the processing of the claim. To wit, pay or deny the claim within 30 days of receipt or timely request additional verification. The court held:

Here, while defendant had already scheduled [the assignor's] EUO for April 21, 2005 before it had received the claim, if defendant insisted upon conducting the EUO before deciding whether to pay or deny the claim, it had no choice but to reschedule the EUO to a date within 30 calendar days from Feb. 14, 2005, the date it received the claim. As a matter of law by failing to reschedule the EUO, defendant could not assert [the assignor's] failure to appear for the EUO as its basis to deny the claim.