IN TODAY'S LAW JOURNAL

An important and somewhat novel issue has been decided in New Era Massage Therapy PC v. Progressive Casualty Ins. Co., CV-065009-08/QU, which is a decision of interest in today's New York Law Journal.

At trial, the parties agreed by stipulation to consolidate the above actions for decision. The issue effecting each case is whether the claimants' failure to appear for examinations under oath ("EUO") a proper basis for the defendant's disclaimer of benefits. The parties submitted briefs on the action bearing index number 065009-08 and agreed that this Court's decision in that case would be controlling in the remaining six causes of action.

The parties have further agreed that the actions bearing Index Numbers 065000-08 and 065005-08 involve an additional issue.

That is, whether the defendant properly preserved the fee schedule defense and, if so, whether the defendant has met its burden of establishing that an improper fee was assessed for the services rendered thus changing the amount defendant would be obligated to pay.

The first issue is whether the defendant properly denied claimant Ludmillia Jean-Francis' (Jean-Francis) no-fault benefits as submitted by plaintiff New Era Massage Therapy, P.C. ("New Era"). A review of the record reveals that New Era submitted bills for massage treatments performed upon Jean-Francis between September and December 2007. Defendant paid one bill in the amount of $578.80 and denied three bills for $578.80, $405.16, and $289.40. The denials were based upon Jean-Francis' nonappearance for EUOs that were scheduled on 10/26/07, 11/30/07, and 1/15/08.

New Era argues that the defendant failed to tender any evidence to prove that Jean-Francis' attitude constituted a pattern of willful and avowed obstruction. New Era contends that the defendant cannot meet its burden by merely showing that Jean-Francis adjourned two EUOs and failed to appear for one. New Era further argues that the defendant never asserted that it attempted to contact Jean-Francis or even ascertain the reason for her nonappearance at the January EUO. Plaintiff also maintains that the interaction between the parties is demonstrative of a cooperative rather than noncooperative relationship.

Defendant contends that Jean-Francis' appearance at the scheduled EUOs is a condition precedent to its liability on the insurance policy. Defendant maintains that multiple requests to adjourn EUO appointments do not negate Jean-Francis' failure to show on three (3) different occasions. Defendant also posits that New Era's argument runs afoul of the core objectives of no-fault law, because it would require insurers to reschedule EUOs for an indefinite period of time.

Under Insurance Law 5102 (a) and 11 NYCRR 65-3.5, an insurer is required to either pay or deny a claim for no-fault benefits within thirty (30) days from the date an applicant supplies proof of claim or it will be precluded from offering any defenses at trial (Mt. Sinai Hosp. v. Chubb Group of Ins. Cos., 43 AD3d 899-90 [2d Dept 2007]). An insurer may toll the thirty (30) day period by properly requesting verification within fifteen (15) days from the receipt of the proof of claim form or bill (11 NYCRR 65.15 (d)(1); Capio Medical, P.C. v. Progressive Cas. Ins. Co., 7 Misc3d 129(A) [App Term, 2d & 11th Jud Dists 2005]). The insurance regulations provide for IMEs and EUOs as part of an insurer's entitlement to additional verification following receipt of the provider's statutory claim forms (Stephen Fogel Psychological v. Progressive Casualty Ins. Co., 7 Misc3d 18, 19 [App Div, 2d Dept 2004]).

Failure to comply with the provision of an insurance policy requiring the insured to submit to an examination under oath…is a material breach of the policy, precluding recovery of the policy proceeds (Argento v. Aetna Cas. and Sur. Co.,184 AD2d 487 [App Div, 2d Dept 1992]). However, in order for an insurer to prevail on a defense premised upon a claimant's failure to appear for a scheduled EUO, the insurer must show that the claimant's attitude was one of willful and avowed obstruction involving a pattern of noncooperation for which no reasonable excuse is offered (Unitron Advantage Ins. Co. v. Carothers, 17 Misc3d 1121(A) [Sup Ct, New York County 2007]). The burden of proving noncooperation is a heavy one (Thrasher v. United States Liability Ins. Co., 19 NY2d 159 [1967]; State Farm Mutual Automobile Ins. Co. v. Figueroa, 8 Misc3d 1011(A) [Sup Ct, Bronx County 2005]). The insurer must demonstrate that it acted diligently and its efforts were reasonably calculated to bring about the insured's cooperation and that the insured's attitude was one of willful and avowed obstruction after the cooperation was sought (Thrasher, 19 NY2d at 168). Under this standard, the insured need not have openly "avowed" the intent to obstruct the insurer; however, the showing must support the inference that the insured's failure to cooperate was deliberate (State Farm Automobile Ins. Co., 8 Misc3d 1011(A)).

Applying these principles, there is no evidence tending to show or even support an inference that Jean-Francis willfully thwarted New Era's verification process. The defendant scheduled three EUO appointments over a three-month period. Jean-Francis' attorney contacted the defendant to adjourn two EUOs and Jean-Francis failed to show for the third. It is well settled, however, that an adjournment may occur pursuant to an agreement between the parties, court order, or even unilaterally if a party decides to exercise a right to postpone a matter (see generally Shoff v. Taylor, 162 Misc 681, 685 [Sup Ct, Oneida Cty 1925]; Reynolds v. Cropsey, 241 NY 389, 394 [1925]). Therefore, this Court will not view the 10/26/07 and 11/30/07 adjournments as noncooperation or willful obstruction. In fact, the court can find no affirmative acts on the part of Jean-Francis or her attorney tending to demonstrate ill will or noncooperation. Neither is there any indication that the defendant exerted efforts to engage Jean-Francis in the verification process and that same was met with noncooperation. There is simply no evidence that Jean-Francis actively encumbered the verification process. The only affirmative acts to speak of are those of Jean-Francis' attorney who contacted the defendant to adjourn the October and November EUOs. Thus, the defendant's disclaimer based on its contention that Jean-Francis failed to cooperate is not supported by legally sufficient evidence.

...

Accordingly, this court denies that portion of defendant's argument that the plaintiff's claims should be denied due to the claimants' nonappearance for examinations under oath. That part of the defendant's claim seeking reduction of the amounts to be paid on claims submitted under Index Numbers 065000-08/QU and 065005-08/QU is denied. Defendant shall tender payment in full for each outstanding bill under Index Numbers 065002-08/QU ($1910.04), 065009-08/QU ($1273.36), 065000-08/QU ($3328.00), 065005-08/QU ($2868.00), 065006-08/QU ($863.54), 065004-08/QU ($2139.26), 065008-08/QU ($1234.24) together with statutory interest, costs, and attorneys fees.

For other posts on the Non-cooperation issue, Click HERE and HERE.