NO-FAULT COVERAGE

by

Joseph M. Schnitter, Esq. Schnitter Ciccarelli Mills PLLC

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Presented by: Joseph M. Schnitter, Esq.

8770 Transit Road, Suite 3, East Amherst, NY 14051 | 716-204-1861 | F 716-639-7317 |

JSchnitter@scm-law.com www.scm-law.com

June 2015

NO-FAULT COVERAGE

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NO-FAULT COVERAGE I. THE VARIOUS ENDORSEMENTS: 1. The Basic Personal Injury Protection (“PIP”) Endorsement This is a mandatory coverage in New York, where the no-fault carrier must provide policy limits in the amount of $50,000. This provides the first layer of no-fault coverage. This endorsement covers lost wages up to $2,000 a month for three years; medical bills not limited by a time period as long as the treatment is necessary and related to injuries from the accident; and all other reasonable and necessary expenses up to $25 a day for one year after the accident. 2. Optional Basic Economic Loss Endorsement This is an optional coverage and ordinarily provides the second layer of coverage. The policy limits are $25,000. The eligible injured person is permitted to select how these limits will be allocated. For example, the eligible injured person could designate that the limits should only cover lost wages. Alternatively, the eligible injured person could designate that all of the benefits should cover physical therapy. 3. Additional Personal Injury Protection (“APIP”) Endorsement This is an optional coverage. The policy limits can vary based upon the premium paid by the insured. Ordinarily, this provides the last layer of no-fault coverage. However, if the eligible injured person earns more than $2,500 a month, the APIP endorsement will make a lost wage payment on top of the amount paid by the Basic PIP endorsement. For accidents in New York, coverage follows the vehicle. Thus, if Mr. Smith is an occupant of a motor vehicle owned by Mr. Brown, Mr. Brown’s no-fault carrier will be responsible for affording no-fault coverage to Mr. Smith. It is possible that Mr. Brown has paid a premium for only Basic PIP coverage while Mr. Smith may have secured OBEL and/or APIP coverage. In that situation, Mr. Brown’s carrier will provide the initial $50,000 in no-fault coverage for an accident in New York State. Mr. Smith’s no-fault carrier will then provide OBEL and/or APIP coverage. For out-of-state accidents, coverage follows the person. Thus, if the accident occurs in Pennsylvania when Mr. Smith is an occupant of Mr. Brown’s car, Mr. Smith’s carrier will afford Basic PIP coverage to him.

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II. WHO IS ELIGIBLE TO MAKE A NO-FAULT CLAIM? 1. The named insured and any resident relative who sustains injury

arising out of the use or operation of any motor vehicle, while not occupying another motor vehicle with no-fault coverage.

2. Any other person who sustains personal injury arising out of the

use or operation of the insured motor vehicle in New York State. This includes occupants of the insured motor vehicle and pedestrians struck by that vehicle.

3. Any New York State resident who sustains personal injury arising

out of the use or operation of the insured motor vehicle outside of New York while not occupying another motor vehicle. See the Mandatory PIP Endorsement set forth at 11 N.Y.C.R.R. §65-1.1.

III. FILING REQUIREMENTS 1. Notice

Written notice must be provided to the no-fault carrier within 30 days identifying the eligible injured person, plus the time, place and circumstances of the accident.

2. Proof of Claim (a) 45-day Rule: medical bills must be submitted within 45 days after the date

services are rendered. (b) 90-day Rule: a claim for lost wages and “other necessary expenses” must be

submitted within 90 days after the work loss is incurred or the other necessary services are rendered.

3. The Exception The above deadlines can be extended if the claimant submits written proof providing clear and reasonable justification for the failure to comply with these time limitations. See 11 N.Y.C.R.R. §65-1.1(d). IV. DISCOVERY THE NO-FAULT CARRIER CAN REQUEST 1. Authorizations for medical and employment records. 2. A medical examination. 3. An examination under oath.

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V. THE 30 DAY RULE The no-fault carrier is permitted to verify a claim by requesting various records, such as medical records and employment records. Once all the records for verification have been supplied, the no-fault carrier has 30 days to either pay a claim or issue a denial. 11 N.Y.C.R.R. §65-3.8. If the loss does not fall within the insuring clause, the no-fault carrier will not be obligated to afford coverage, even if it fails to issue a timely denial. On the other hand, if the no-fault carrier intends to rely upon a policy exclusion or condition, it must then issue a timely denial or it will waive the right to deny coverage. Central General Hospital v. CHUBB, 90 N.Y.2d 195, 659 N.Y.S.2d 246 (1997); Presbyterian Hospital v. Maryland Casualty Company, 90 N.Y.2d 274, 660 N.Y.S.2d 536 (1997). VI. CHOICE OF FORUM 1. The American Arbitration Association. The applicant must submit all documentation supporting his/her position along with the request for arbitration. 2. Lawsuit. The New York courts have recognized that an insurance carrier must disclose its file up to the date of the denial or the commencement of suit. The claim representative must also attend an oral deposition. Heimbach v. State Farm Insurance, 114 A.D.3d 1221, 979 N.Y.S.2d 916 (4th Dept. 2014); Gibson v. Encompass Ins. Co., 23 A.D.3d 1047, 804 N.Y.S.2d 226 (4th Dept. 2005); Cain v. New York Central Mutual Fire Ins. Co., 38 A.D.3d 1344, 830 N.Y.S.2d 685 (4th Dept. 2007). In the context of a SUM or a no-fault claim, I have argued that certain parts of the file should be protected from disclosure based upon CPLR 3101(d)(2). This statute states that when the plaintiff has a substantial need for the materials prepared by the insurance carrier in anticipation of litigation or for trial and is unable without undue hardship to obtain the substantial equivalent of the materials by other means, “the court shall protect against disclosure of the mental impressions, conclusions, opinions or legal theories of an attorney or other representative of a party concerning the litigation.” I then redact from the file those entries that qualify as mental impressions, conclusions, opinions or legal theories. I provide opposing counsel with a privilege log referencing for the redacted items the date of the entry in the file, a general description of the contents of the entry, and the reason for not disclosing same. If opposing counsel brings a motion to discover the redacted materials, the court will typically conduct an in camera inspection to determine whether those materials should be disclosed. VII. WHAT CAN BE RECOVERED 1. No-fault benefits.

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2. Attorney’s fees which are set by regulation. 11 N.Y.C.R.R. §65-4.6. 3. Interest at the rate of 2% per month. 11 N.Y.C.R.R. §65-3.9. VIII. STATUTE OF LIMITATIONS An action against an insurer, or a self-insured, is governed by the six year statute of limitations that begins to run on the date of the denial. Benson v. Boston Old Colony Ins. Co., 134 A.D.2d 214, 521 N.Y.S.2d 14 (1st Dept. 1987); Mandarino v. Travelers Prop. Cas. Ins. Co., 37 A.D.3d 775, 831 N.Y.S.2d 452 (2d Dept. 2007). However, a no-fault claim against MVAIC is subject to a three year statute of limitations. Kings Highway Diagnostic Imaging, P.C. v. MVAIC, 19 Misc.3d 69, 860 N.Y.S.2d 794 (App. Term 2d and 11th Jud. Dists. 2008). IX. THE ARBITRATION PROCESS 1. Claimant files the AR-1 requesting arbitration. 2. The no-fault carrier submits its response. All records should be included that the

carrier wants the arbitrator to consider. The arbitrator has discretion whether to accept any written materials that are submitted after the deadline.

3. The conciliation process comes to an end if it appears to the AAA that the matter

cannot be settled. 4. The AAA forwards a notice scheduling the hearing. 5. The arbitrator conducts the hearing. The attorneys may rely upon their written

submissions, or present live testimony. The approach depends upon the issues in dispute. The arbitrator is the judge of the relevance and materiality of the evidence offered, and strict conformity to legal rules of evidence shall not be necessary. The arbitrator may question any witness or party and independently raise any issue that the arbitrator deems relevant to making an award that is consistent with the Insurance Law and department regulations. 11 N.Y.C.R.R. §65-4.5(o)(1).

6. The AAA forwards the arbitration award. 7. Either party can appeal to a master arbitrator within 21 days after the mailing of

the award. A master arbitrator can reverse a lower arbitrator if the award was based upon an error of law, or if the award has no rational basis. If the no-fault carrier does not intend to appeal to a master arbitrator, the award must be paid within 30 calendar days of the date of the transmittal of the award to the parties.

X. 120 DAY RULE

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When the no-fault carrier requests verification, the applicant (the injured party or a medical provider with an assignment of benefits form) must, within 120 calendar days from the initial request for verification, provide all requested verification under the applicant’s control or possession or submit written proof providing a reasonable justification for the failure to comply. The insurer must advise the applicant in the verification request that if the applicant fails to provide within 120 days either the requested verification or written proof providing reasonable justification for the failure to comply, the claim may be denied. This provision does not apply to a prescribed form (NF-Form) as set forth in Appendix 13 of the Regulations, a medical examination request, or an examination under oath request. Basically, this subdivision applies to the request for medical records from a medical provider and records supporting a lost wage claim. This regulation applies with respect to medical treatment or services rendered on or after April 1, 2013 and with respect to claims for lost earnings and reasonable and necessary expenses for any accident occurring on or after April 1, 2013. In Avanguard Medical Group, PLLC v. Country-Wide Insurance Company, AAA Case No. 412013134285, the arbitrator rejected a denial based upon the 120 day verification provision. The arbitrator accepted an affidavit from the biller for the applicant attesting that the applicant received the July 29, 2013 request for verification and responded with all of the requested verification on September 11, 2013. The applicant furnished the certified mail tracking number and the tracking search demonstrating that the materials were delivered to the no-fault carrier. In Dosi Diagnostic Imaging Service, P.C. v. GEICO Insurance Company, AAA Case No. 412014008700, the arbitrator upheld a denial based upon the 120 day verification rule. The no-fault carrier denied receipt of any response to its verification requests and the applicant failed to submit sufficient proof that it did in fact mail and/or fax the requested documents. Although the applicant provided a fax confirmation sheet indicating successful transmittal to a certain fax number, there was no proof that this number belonged to the no-fault carrier. The applicant also submitted a letter addressed to the no-fault carrier at the address provided on the verification request, but the applicant did not submit any proof of mailing for the letter. In Sun Medical Care of Nassau, P.C. v. Liberty Mutual Fire Insurance Company, AAA Case No. 412013121111, the no-fault carrier issued a global denial based upon an IME report. Subsequently, the no-fault carrier issued verification requests on May 7, 2013 and July 6, 2013. When the applicant failed to respond, the no-fault carrier issued a denial based upon the applicant’s failure to comply with the outstanding items of the verification request. The applicant argued that based upon State Farm v. Domotor, 266 A.D.2d 219, 697 N.Y.S.2d 348 (2d Dept. 1999), that once no-fault benefits have been terminated based upon the results of an IME, the applicant is no longer required to respond to the no-fault carrier’s verification requests. The arbitrator agreed with the applicant that once the no-fault carrier had denied the claim, the no-fault carrier could not insist upon adherence to any of the terms of the policy by the applicant. In N.Y. Med v. GEICO Insurance Company, AAA Case No. 412013162462, the applicant maintained that it complied with the 120 day calendar verification request. The carrier submitted a copy of its letter, dated June 5, 2013 including the requested verification. The applicant

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provided an affidavit stating that it had served the response by mail on June 5, 2013. The applicant also submitted a copy of its Certificate of Mailing--Bulk stamped by the United States Postal Service indicating the letter was mailed on July 11, 2013. The arbitrator found this sufficient proof to demonstrate the applicant had provided the requested verification within the 120 day period. In N.S. Radiology, PLLC v. American Transit Insurance Company, AAA Case No. 412013148338, the arbitrator did not uphold the denial based upon the failure to provide the verification materials within 120 days because the verification requests from the no-fault carrier failed to state that the claim could be denied if the applicant failed to timely provide the documents or written proof of a reasonable justification for the failure to comply. See also Bruce Jacobson, D.C. v. GEICO Insurance Company, AAA Case No. 412013123525. In Sun Medical Care of Nassau, P.C. v. Liberty Mutual Fire Insurance Company, AAA Case No. 412013130710, the no-fault carrier submitted two letters requesting verification. However, the letters were not addressed to the applicant provider Sun Medical Care of Nassau, P.C. at 1975 Linden Boulevard, Elmont, New York 11003, the address furnished by the applicant on the bills submitted and the NF-3. The arbitrator recognized that the no-fault carrier could not rely upon the 120 day verification rule merely by providing a copy of the verification requests, without some form of proof of mailing to the medical provider. In Yuan Acupuncture, P.C. v. Nationwide Affinity Insurance Company of America, AAA Case No. 412013113797, the no-fault carrier issued a denial based upon the applicant failing to provide a response to the request for verification. At the arbitration hearing, the applicant did not submit any evidence that it had responded to the request for documents or a statement providing a reasonable justification for the failure to comply. As a result, the arbitrator upheld the no-fault denial. XI. USE OR OPERATION OF A MOTOR VEHICLE The New York courts have adopted a three pronged test to determine whether a loss arises out of the “use or operation” of a motor vehicle. In Matter of Manhattan and Bronx Surface Transit Operating Authority (Gholson), 71 A.D.2d 1004, 420 N.Y.S.2d 298 (2d Dept. 1979), a bus driver was stabbed by a passenger when he refused to discharge from the bus at a location other than a designated bus stop. The bus driver filed a claim for no-fault benefits. The court explained that all three of the following requirements must be satisfied in order for a loss to arise out of the “use or operation” of a motor vehicle: 1. The accident must arise out of the inherent use of a motor vehicle as a motor

vehicle; 2. The accident must occurred within the natural territorial limits of the motor

vehicle, and the accidental use, loading, or unloading must not have terminated; and

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3. The motor vehicle must not merely contribute to cause the condition which produces the injury, but must, itself produce the injury.

The court noted that the refusal by the driver to stop the bus may have been a motivating factor in precipitating the assault. However, the loss did not arise from the use or operation of a motor vehicle because the claimant did not satisfy either the first or the third prongs. Specifically, the assault did not arise from the use of the bus as a motor vehicle, and the bus did not, itself, produce the injury. Consequently, the court upheld the denial of coverage. Similarly, in Hayden v. New York Central Mutual, 209 A.D.2d 927, 619 N.Y.S.2d 910 (4th Dept. 1994), a four wheel drive vehicle became stuck on a railroad bridge. One of the passengers exited the vehicle, walked around the vehicle attempting to determine how the vehicle could be extricated, and then fell through an opening in the bridge. The court concluded that this loss did not result from the use or operation of a motor vehicle; but rather, it resulted from the claimant falling through a bridge. However, in other cases with unusual facts, the courts have concluded that a loss did arise from the use or operation of a motor vehicle. For example, in Farm Family Cas. Ins. Co. v. Trapani, 301 A.D.2d 740, 753 N.Y.S.2d 198 (3rd Dept. 2004), Diana Talerico lost control of her car and struck a utility pole. This caused the power lines to short out, so that sparks and hot pieces of wire fell down onto the plaintiff, who was standing in her garden along the roadway near her home. In attempting to run from this hazard, the plaintiff fell injuring her head and left knee. After the plaintiff received the $25,000 policy limits from Talerico, she pursued a SUM claim. The SUM carrier denied coverage, claiming that the plaintiff’s injuries did not arise out of the use, maintenance or operation of a motor vehicle. The court held that the plaintiff’s injuries did result from the use of the motor vehicle. The court observed that the impact of Talerico’s car with the utility pole was not a cause so remote in either time or space from the plaintiff’s injuries as to break the causal relationship. XII. CAUSATION The motor vehicle accident must be a cause of the injuries claimed by the applicant. In Walton v. Lumberman’s Mut. Cas. Co., 88 N.Y.2d 211, 644 N.Y.S.2d 133, a truck driver sustained injury when a lifting platform known as a levelator, located on a loading dock, collapsed while he unloaded his truck. The Court of Appeals held that the truck driver was not entitled to no-fault coverage because his injuries were caused by the levelator’s mechanical failure and it was merely fortuitous that the plaintiff’s injury occurred while he was unloading the truck. The Third Department has recognized that no-fault will not afford coverage, even if the claimant is inside of a moving vehicle at the time of the accident, if the injuries do not arise out of the use or operation of a motor vehicle. In Hammond v. GMAC Ins. Group, 56 A.D.3d 882, 866 N.Y.S.2d 456 (3d Dept. 2008), the plaintiff stopped for gas and, while pumping the gasoline, the gas pump nozzle popped out of the car’s fuel tank, causing some gasoline to spill on the ground and, unbeknownst to him, on his clothing. The plaintiff entered the gas station store to purchase a pack of cigarettes. After returning to the car, the plaintiff occupied the front passenger seat as

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the vehicle went forward. When the plaintiff attempted to light a cigarette, the gasoline on his clothing ignited. The plaintiff suffered severe burns to the right side of his body. GMAC Insurance denied no-fault benefits on the ground that the injuries did not arise out of the use or operation of a motor vehicle. Plaintiff commenced a lawsuit seeking to recover no-fault benefits in Supreme Court. Both sides moved for summary judgment. The court held that no-fault benefits were not recoverable because the plaintiff’s injuries did not arise out of the use or operation of a motor vehicle. Specifically, the court cited Walton in support of the proposition that the vehicle must be a proximate cause of the injury before no-fault benefits can be recovered. Because plaintiff’s injuries occurred when he attempted to light a cigarette, thereby igniting gasoline he had spilled on his clothing, the injuries did not arise out of the use of the vehicle. The court observed that plaintiff’s injuries would have taken place even if he had never re-entered the vehicle. The court concluded that the plaintiff was not entitled to no-fault benefits, even though his injuries occurred while he was inside the vehicle, because the vehicle itself did not cause the injuries. XIII. ASCERTAINABILITY In Stanavich v. General Accident, 229 A.D.2d 872, 645 N.Y.S.2d 657 (3d Dept. 1996), the Third Department noted that an injury is not ascertainable if no evidence of it is submitted to the no-fault carrier within a year of the accident. For example, if during the first year after the accident, the injured party submitted expenses for a cervical injury and then two years later submitted expenses for a knee injury, the knee injury would not be ascertainable within the first year, so it would not be covered by no-fault. On the other hand, if there was later treatment for a cervical injury, that injury would be ascertainable because expenses for treatment for that injury had been submitted to the no-fault carrier within the one year period. An insurer may prove that an injury was not ascertainable within a year after the accident through the testimony of a non-medical claims examiner who reviewed records submitted or denials made on claims within the first year of the accident and found nothing related to the claimed injury for which no-fault benefits were sought after the one year period. AP Orthopedics & Rehabilitation, P.C. v. Allstate Ins. Co, 27 Misc.3d 698, 896 N.Y.S.2d 612 (Civ. Ct. Richmond County 2010). In Dudzik Chiropractic, P.C. v. New York Central Mutual Fire Insurance Company, AAA Case No. 412011063403, the claimant was involved in a motor vehicle accident on October 11, 2006. At the emergency room, claimant made complaints regarding the neck and back. It was not until February 23, 2007, when the claimant filed a no-fault application describing the injury as whiplash, back and neck pain. In the application, the claimant stated that she did not anticipate further treatment. The claimant did not treat again until March of 2008 when an x-ray indicated a reversal of the cervical curvature suggesting spasm. A cervical MRI performed on May 3, 2006 revealed a C5-6 small right lateral disc herniation. From July 2, 2008 through October 30, 2009, Dudzik Chiropractic, P.C. provided treatment. The no-fault carrier issued a denial based upon ascertainability.

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The arbitrator rejected the no-fault denial because the no-fault carrier had received a copy of the emergency room records indicating neck and back complaints on the day of the accident, the same parts of the claimant’s body treated by the chiropractor. The arbitrator observed that the statement on the NF-2 that the claimant did not expect further treatment did not provide a basis for the denial. The arbitrator observed that the no-fault carrier would have been better served with a peer review that addressed the issue of causation and the substantial gap in treatment following the minimal treatment after the accident. XIV. THE ACCIDENT REQUIREMENT The Court of Appeals has permitted a pedestrian, who was intentionally struck by a car, to recover no-fault and uninsured motorists benefits. In State Farm Mut. Auto. Ins. Co. v. Langan, 16 N.Y.3d 349, 922 N.Y.S.2d 233 (2011), State Farm denied coverage based upon the absence of an “accident” because the driver intentionally struck the pedestrian. In rejecting that argument, the Court of Appeals held that the “accident” requirement was satisfied because from the perspective of the insured (i.e., the injured party), the loss was unexpected, usual and unforeseen. XV. GENERAL PRINCIPLES A prima facie case of entitlement to no-fault is made out by the applicant submitting evidence that the prescribed statutory billing form has been mailed and received, and that the payment of the benefits were overdue. Westchester Medical Center v. Lincoln General Ins. Co., 60 A.D.3d 1045, 877 N.Y.S.2d 340 (2d Dept. 2009). The burden is on the insurer to prove that the medical services were unnecessary. Behavioral Diagnostics v. Allstate Ins. Co., 3 Misc.3d 246, 776 N.Y.S.2d 178 (Civ. Ct. Kings County 2004); A.B. Medical Services v. GEICO Ins. Co, 2 Misc.3d 26, 773 N.Y.S.2d 773 (App. Term, 2d and 11th Jud. Dists. 2003). When a denial is premised upon the lack of medical necessity, it must be supported by a peer review or other competent medical evidence which sets forth a clear factual basis and medical rationale for denying the claim. Healing Hands Chiropractic, P.C. v. National Assurance Co., 5 Misc.3d 975, 787 N.Y.S.2d 645 (Civ. Ct. N.Y. County 2004); Citywide Social Work v. Travelers Ind. Co., 3 Misc.3d 608, 777 N.Y.S.2d 241 (Civ. Ct. King County 2004). Once the respondent meets this burden of proof, then the burden shifts back to the applicant to present competent medical proof as to the medical necessity for the disputed billing by a preponderance of the credible evidence. West Tremont Medical Diagnostic, P.C. v. GEICO, 13 Misc.3d 131 [A], 824 N.Y.S.2d 759 (App. Term 2nd and 11th Jud. Dists. 9/29/06); A. Khodadadi Radiology, P.C. v. New York Central Mutual Fire Ins. Co., 16 Misc.3d 131 [A], 841 N.Y.S.2d 824 (App. Term 2nd and 11th Dists. 7/3/08). Ultimately, the burden of proof rests with the applicant. Insurance Law §5102; Be Well Medical Supply, Inc. v. New York Central Mutual Fire Ins. Co., 118 Misc.3d 139 [A], 859 N.Y.S.2d 892 (App. Term 2nd and 11th Dists. 2/21/08). XVI. INTEREST

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When a claim becomes “overdue”, the insurer must pay interest at the rate of 2% per month. 11 N.Y.C.R.R. §65-3.9. If the applicant does not request arbitration or institute a lawsuit within 30 days after the receipt of the denial of claim, interest will not accumulate until such action is taken. 11 N.Y.C.R.R. 2165-3.9(c). This tolling of interest takes place irrespective of whether the denial was timely or not. LMK Psychological Services P.C. v. State Farm Mut. Auto. Ins. Co., 12 N.Y.3d 217, 879 N.Y.S.2d 14 (2009).

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