Presbyterian Hospital v. Maryland Casualty Co.

683 N.E.2d 1, 90 N.Y.2d 274, 660 N.Y.S.2d 536, 1997 N.Y. LEXIS 1358

• Court: New York Court of Appeals
• Decided: June 10, 1997
• Status: Published

Opinions

OPINION OF THE COURT

Bellacosa, J.

Plaintiff-respondent Presbyterian Hospital sues to recover no-fault medical payments for services and treatment provided to an insured of defendant-appellant Maryland Casualty Company. We must resolve whether the lower courts properly precluded Maryland from raising an intoxication defense in the ensuing lawsuit on the ground that it did not timely deny the subject no-fault claim pursuant to both the Superintendent’s regulations and the Insurance Law (see, 11 NYCRR 65.15 [g] [3]; Insurance Law § 5106 [a]).

Supreme Court granted Presbyterian’s motion for summary judgment, awarding approximately $26,000 in no-fault benefits, statutory interest and attorney’s fees. The Appellate Division affirmed and we granted Maryland leave to appeal. We, too, affirm.

L

Karen DeGuisto was hurt in a single-car accident on December 26, 1993, when the automobile she was driving hit a utility pole. Maryland was her no-fault insurer. She was admitted to Presbyterian Hospital in New York City on two separate occasions for treatment of her injuries. Only the medical expenses for the hospitalization and treatment rendered from June 7 to June 10, 1994 are the subject of this lawsuit.

On August 5, 1994, Presbyterian presented a no-fault claim form, as the insured’s assignee, seeking first-party benefits. Maryland received the document on August 9, 1994. On September 15, 1994, by which time the insurer had neither paid nor denied the claim, the hospital sued to recover the benefits. Maryland interposed an answer with an affirmative defense stating that the claim was not overdue because it had not yet received all of the available information relating to the incident, such as a police report on the insured’s blood-alcohol test results.

Maryland had applied to the police department for public access to the insured’s blood-alcohol test results on April 19, 1994, after receiving a police accident report noting alcohol on DeGuisto’s breath and that a blood specimen had been taken. On October 13, 1994, Maryland requested verification of the insured’s alleged intoxication from Presbyterian in the form of interrogatories. Subsequently, on November 3, 1994, the insurer requested the blood-alcohol test results from the local District Attorney’s office.

On November 7, 1994, Presbyterian moved for summary judgment, asserting that Maryland’s failure to timely deny the claim barred interposition of the intoxication defense in the action. Thereafter, on December 5, 1994, Maryland received the test results, which indicated a blood-alcohol level of 0.13% at the time of the insured’s accident. Maryland issued a denial of the claim that same day.

The Appellate Division affirmed Supreme Court’s grant of summary judgment to Presbyterian, stating that "[rjecent precedent squarely holds that ' "preclusion of the insurance company’s ability to deny the claim is the appropriate remedy” ’ where, as here, the insurance company neither denies a claim within 30 days after receiving it nor seeks to extend that time by requesting verification in the prescribed forms” (226 AD2d 260, 261). It is on that singular, narrow basis that we affirm.

IL

Maryland first argues that it properly and timely denied the hospital’s no-fault claim. We disagree. Resolution of this issue, however, involves consideration of a complex sequence and interplay of insurance regulations governing the time requirements for delaying or denying payment of a no-fault automobile claim on intoxication exclusion grounds.

Pursuant to both the Insurance Law and the regulations promulgated by the Superintendent of Insurance, an insurer is required to either pay or deny a claim for no-fault automobile insurance benefits within 30 days from the date an applicant supplies proof of claim (see, Insurance Law § 5106 [a]; 11 NYCRR 65.15 [g] [3]). Failure to pay benefits within the 30-day requirement renders benefits "overdue,” and all overdue payments bear interest at a rate of 2% per month (Insurance Law § 5106 [a]; 11 NYCRR 65.15 [h]). Additionally, a claimant is entitled to recover attorney’s fees where a "valid claim or portion” was denied or overdue (Insurance Law § 5106 [a]; 11 NYCRR 65.15 [i]). Notably, interest and attorney’s fees are prescribed sanctions only in late payment circumstances, not as to untimely denials of claims.

When a denial of no-fault benefits rests on the statutory exclusion of intoxication (see, Insurance Law § 5103 [b] [2]), the Superintendent’s regulations trigger a series of additional timing and notification requirements. Initially, upon determining that benefits may not be payable due to the insured’s intoxication, the insurer must notify the applicant within 10 business days of its denial of the claim (11 NYCRR 65.15 [g] [5]). Failure to satisfy this 10-day requirement, however, expressly does not result in preclusion against an insurer ultimately asserting such a defense to payment (11 NYCRR 65.15 [g] [5]).

Pertinently, when an insurer believes that intoxication may have been a contributing cause to an accident, the insurer is entitled to all available information regarding the insured’s condition at the time of the accident (11 NYCRR 65.15 [g] [7]). "Proof of a claim shall not be complete until the information which has been requested, pursuant to paragraph (d) (1) or (2) of this section, has been furnished to the insurer by the applicant or the authorized representative” (11 NYCRR 65.15 [g] [7]). In order to properly and timely request such information, the insurer must forward the prescribed verification forms to the parties required to complete them within 10 business days after receipt of the completed application (11 NYCRR 65.15 [d] [1]). Notably, "[t]he insurer is entitled to receive all items necessary to verify the claim directly from the parties from whom such verification was requested” (11 NYCRR 65.15 [d] [1]). Finally, "[a] failure to observe any of the time frames specified in this section shall not prevent an insurer from requiring proper proof of claim” (11 NYCRR 65.15 [g] [6]).

A.

Maryland’s primary contention in this timing-and-remedy facet of the dispute is that the no-fault regulations allow the insurer to delay payment or denial of a claim by requesting verification from third parties. The insurer argues that 11 NYCRR 65.15 (g) (7) does not require it to request proof of claim directly from the applicant, here Presbyterian. Rather, it specifically refers to 11 NYCRR 65.15 (d) (1), which provides that "[t]he insurer is entitled to receive all items necessary to verify the claim directly from the parties from whom such verification was requested.” The insurer thus asserts that its eventual request of the insured’s blood-alcohol test results from the District Attorney brought it within this regulation and, in effect, tolled its time-controlled denial of payment requirement.

We note in this connection that the insurer already had "reason to believe that the applicant was operating a motor vehicle while intoxicated” (see, 11 NYCRR 65.15 [g] [7]) on August 9, 1994, when the insurer received Presbyterian’s claim for payment. We reiterate that the record shows that as early as April 19, 1994, Maryland had applied to the police department for access to the insured’s blood-alcohol test results. That evident awareness triggered its responsibility to submit the prescribed verification forms to the appropriate parties within 10 days after receipt of Presbyterian’s completed application, which occurred on August 9, 1994 (see, 11 NYCRR 65.15 [d] [1]). Whether the pertinent forms relate to the specific problem underlying this case is irrelevant, since the carrier chose to sit on its rights and do nothing in this respect.

Maryland, instead, did not request verification or proof from Presbyterian, the applicant, until October 13, 1994, well beyond 10 days from receipt of proof of the claim. Furthermore, this distinct request for information was made in the form of interrogatories, not on or in conjunction with the requisite prescribed verification forms. Additionally, Maryland’s request of the insured’s blood-alcohol test results from the District Attorney was not made until November 3, 1994. That official, in any event, would not qualify as the applicant’s authorized agent under this regulation. Thus, even accepting Maryland’s contention that verification may be requested from third parties, it utterly failed to timely do so in any respect, pursuant to section 65.15 (d) (1). Its threshold argument in this regard, thus, fails to carry its theory.

We note that the dissent’s proffered analysis in this regard is inconsistent with the plain language of the regulations. In order for the insurer to have properly and timely requested the blood alcohol test results, it had to forward prescribed verification forms to the appropriate parties within 10 days after receipt of the completed application (see, 11 NYCRR 65.15 [d] [1]). The insurer utterly and flatly failed to do so and, thus, chose or neglected to take advantage of its prescribed extension of time opportunity for considering denial of the hospital’s claim. Despite the dissent’s differing view of the Superintendent’s requirement in this respect, we and the parties are bound by its plain language.

B.

Maryland next argues that when, as here, an insurer denies coverage based on the statutory exclusion of intoxication, the 30-day rule does not even apply. It urges that the situation instead is governed solely by the 10-day rule in 11 NYCRR 65.15 (g) (5). That regulation expressly eliminates any preclusion consequence for such untimely action.

A plain reading of the regulations — as much as is reasonably possible amidst such a thicket — suggests that the 10-day denial requirement in 11 NYCRR 65.15 (g) (5) is not exclusive and does not avoid the application of the 30-day rule in 11 NYCRR 65.15 (g) (3) and Insurance Law § 5106 (a). Rather, the interrelationship between the 30-day requirement and the 10-day requirement warrants a complementary consideration when an insurer tries to avoid payment of first-party assigned benefits on the basis of an exclusion due to an insured’s intoxication. In other words, 11 NYCRR 65.15 (g) (5) imposes a distinct and additional time requirement on insurers who wish to rely on the statutory exclusion of intoxication.

In Keith v Liberty Mut. Fire Ins. Co. (118 AD2d 151), the Appellate Division concluded that when an insurer denies no-fault benefits based on the statutory exclusion of intoxication, "the regulations contain the separate requirement that the insurer notify the applicant of its decision to deny benefits within 10 business days of when the determination to deny is made” (id., at 154 [citing now-11 NYCRR 65.15 (g) (5) (iii)]). Similarly, in Presbyterian Hosp. v Maryland Cas. Co. (226 AD2d 613, Iv dismissed 89 NY2d 916), the companion case to the instant matter, the court expressly rejected a similar, narrow, either/or interpretation by the insurer.

We can find no evidence indicating that 11 NYCRR 65.15 (g) (5) was intended to displace the 30-day requirement of 11 NYCRR 65.15 (g) (3) or that it should have the more potent effect of obviating the pertinent statutory language of Insurance Law § 5106 (a). The insurer’s more restrictive contention and interpretation is not otherwise supportable in logic, analysis or policy, because it would frustrate a core and essential objective in these particular insurance regulations — that is, to provide a tightly timed process of claim, disputation and payment.

Therefore, since Maryland neither denied the claim within 30 days after receiving it nor properly sought to extend that time frame by requesting verification, using the prescribed forms, within 10 days after receipt of the hospital’s completed application, it failed to comply with its obligation to timely deny or disclaim Presbyterian’s no-fault claim.

m.

That predicate being so, Maryland and the dissent nevertheless also assert that preclusion of an exclusion defense in an eventual action is an unavailable remedy under both the Insurance Law and Insurance Department regulations. This argument essentially hinges on predicates that (1) the common law does not preclude defenses, (2) neither the Insurance Law nor the Superintendent’s regulations expressly provide for such preclusion, and (3) the Legislature’s prescribed penalties for overdue payments (statutory interest and attorney’s fees) are exclusive remedies and impliedly exclude the more effective incentive and sanction of ultimate preclusion. We hold that an insurer may be precluded from interposing a statutory exclusion defense for failure to deny a claim within 30 days as required by Insurance Law § 5106 (a) and 11 NYCRR 65.15 (g) (3).

In a parallel universe and more general context, this Court has precluded insurers from disclaiming or denying liability after untimely notification of denials, related to liability coverage (see, Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1029 [applying preclusion remedy to former Insurance Law § 167 (8) (superseded by Insurance Law § 3420 [d])3; Allstate Ins. Co. v Gross, 27 NY2d 263 [same]; see also, Zappone v Home Ins. Co., 55 NY2d 131). Insurance Law § 3420 (d) provides that "[i]f under a liability policy delivered or issued in this state, an insurer shall disclaim liability or deny coverage for death or bodily injury arising out of a motor vehicle accident or any other type of accident occurring within this state, it shall give written notice as soon as is reasonably possible of such disclaimer of liability or denial of coverage to the insured and the injured person or any other claimant” (Insurance Law § 3420 [d] [emphasis added]).

Notably, though Insurance Law § 3420 (d) has some distinctive features from the present circumstances, it shares one very important attribute — it does not expressly authorize the preclusion remedy. As with 11 NYCRR 65.15 (g) (3) and Insurance Law § 5106 (a), the statute — Insurance Law § 3420 (d)— also is silent in that respect. In fact, Insurance Law § 3420 (d) does not require an insurer to disclaim coverage; rather, that statute only requires notice of intent to disclaim.

This Court, nevertheless, concluded that although "[i]ts literal language requires prompt notice of disclaimer after decision to do so * * * by logical and practical extension, there is imported the obligation to reach the decision to disclaim liability or deny coverage promptly too” (Allstate Ins. Co. v Gross, 27 NY2d 263, 266, supra). In Allstate, the Court refused to allow the insurer to "seek[ ] shelter behind the words of the statute” (id.). Rather, it relied upon "the statutory plan to protect the injured parties and their alternative source of compensation,” and "the risks unnecessarily delayed disclaimers of liability or denials of coverage pose to each” (id., at 267-268 [emphasis added]). The Court, therefore, affirmed the lower court’s preclusion remedy and declaration obligating the insurer to defend the insured on the basis of its untimely disclaimer (id., at 270; see also, Hartford Ins. Co. v County of Nassau, 46 NY2d 1028, 1029, supra).

Zappone v Home Ins. Co. (55 NY2d 131, supra) is similarly instructive and supportive. There, we noted that "[t]he purpose for which subdivision 8 of section 167 was enacted was to avoid prejudice to the insured, the injured claimant and the Motor Vehicle Accident Indemnity Corporation, each of whom could be harmed by delay in learning of the carrier’s position” (id., at 137 [emphasis added], citing Allstate Ins. Co. v Gross, 27 NY2d 263, 267, supra). In Zappone, the Court distinguished an insurer’s denial of liability based upon a policy exclusion and a breach of a policy condition from an insurer’s denial based on lack of coverage, such as where no contractual relationship exists with respect to the subject vehicle and incident (id., at 136-137). The Court concluded that the insurer was not subject to preclusion in the lack of coverage situation where "there never was any insurance in effect” (id., at 138; compare, Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195 [decided today]). Zappone explained, however, that where "the policy covers the driver and the vehicle and the accident would be covered except for the specific policy exclusion,” such as occurred here, "the carrier must deny coverage on the basis of the exclusion if it is not to mislead the insured and the injured person to their detriment” (Zappone v Home Ins. Co., supra, 55 NY2d, at 136 [emphasis added]).

We are persuaded that, until and unless the Legislature clearly declares otherwise, the preclusion analysis that we have employed in this other branch of the Insurance Law should also be discretely applicable with respect to the 30-day requirement in the no-fault context of the instant case. In fact, in addition to consistency and a fair, reasonable and logical policy fit, the no-fault situations also benefit from the availability of preclusion against insurers in situations such as the instant one.

The Legislature and the Superintendent surely did not intend to afford insurers greater rights in this particular respect with regard to no-fault insurance, nor do their enactments imply less interest in stimulating timely disclaimers and denials with regard to no-fault payments in such circumstances. The unavailability of preclusion, as urged by the carrier and dissent, would materially frustrate the purposes and retard the goals of the speedy payment objective of the No-Fault Law. Those goals, a driving force behind both the no-fault and liability coverage insurance laws, focus on avoiding prejudice to insureds by providing for prompt payment or disclaimers of claims. We, therefore, refuse to carve out such an artificial demarcation between no-fault and liability coverage for these purposes with potentially even more confusing consequences than already exist (see, Nahmias v Merchants Mut. Ins. Co., 91 AD2d 680 [applying now-Insurance Law § 3420 in a no-fault context]; see also, Keith v Liberty Mut. Fire Ins. Co., 118 AD2d 151, 153, supra; Allstate Ins. Co. v Centennial Ins. Co., 187 AD2d 690, 691; Government Empl. Ins. Co. v Long Is. Coll. Hosp., 82 AD2d 797).

Moreover, Maryland’s sweeping preclusion prohibition argument has been repelled with some frequency and consistency in the context of the very no-fault provisions at issue in the instant action — Insurance Law § 5106 (a) and 11 NYCRR 65.15 (g) (3) (see, Presbyterian Hosp. v Atlanta Cas. Co., 210 AD2d 210, 211; Loudermilk v Allstate Ins. Co., 178 AD2d 897, 898 [involving defense of intoxication exclusion]; Bennett v State Farm Ins. Co., 147 AD2d 779, 781 [same]). Emphatically, in Bennett, the Court concluded that "[although the statute does not expressly provide for the preclusion of the insurer from denying or disclaiming benefits because of such untimeliness and lack of diligence, the structure of the Insurance Law and implementing regulations compel the conclusion that preclusion is a proper remedy” (Bennett v State Farm Ins. Co., supra, 147 AD2d, at 781 [emphasis added]). Appellant insurer urges this Court to overturn these precedents in order to reach its desired reversal in the instant case. We are not persuaded to do so.

Finally, we must address Insurance Regulation 65.15 (g) (5), which expressly excludes preclusion as a remedy for an insurer’s failure to comply with the 10-day notice requirement for statutory exclusions. That alone does not decide this case because it does not go far enough in considering all relevant provisions. In fact, we are satisfied that this provision impliedly recognizes the availability of the preclusion remedy under 11 NYCRR 65.15 (g) (3), since 11 NYCRR 65.15 (g) (5) is the only insurance regulation which expressly prohibits preclusion. The interpretive canon, of inclusio unius, exclusio alterius helps us to conclude that had the Superintendent or Legislature intended to foreclose preclusion as a remedy in the 30-day time lapse circumstance under the no-fault intoxication regime, they would have done so again — and certainly could have— expressly in order to avoid the anomalies and confusion that would otherwise ensue — as demonstrated in this very case. Analogously, we have noted that "[t]he failure of the Legislature to include a matter within a particular statute is an indication that its exclusion was intended” (Pajak v Pajak, 56 NY2d 394, 397).

Thus, we reject a blanket prohibition of the preclusion remedy as essentially frustrative of the purpose of the Insurance Law and the Superintendent’s regulations. Insurers simply have no precedential or statutory recourse to sit on their many procedural rights and requirements and then belatedly deny claims they should have acted upon earlier. We emphasize that our holding here is keyed solely to the insurer’s failure to comply with the 30-day notification requirement, set forth in Insurance Law § 5106 (a) and 11 NYCRR 65.15 (g) (3).

We also note our disagreement with the dissent’s view regarding the exclusivity of the remedies made available under the statute and regulations. The theory goes too far and does not hold up. Both the statute and regulations provide for interest only with regard to "overdue payments” (see, Insurance Law § 5106 [a]; 11 NYCRR 65.15 [h]), and allow for attorney’s fees only when a "valid claim” was denied or overdue (see, Insurance Law § 5106 [a]; 11 NYCRR 65.15 [i]). Therefore, untimely denials might suffer no sanction in situations where the insurer is not required to pay the claim and where the claim is ultimately deemed invalid. Consequently, the "remedies” provided by the statute and regulations are not plenary or exclusive and should not be deemed so by this Court exercising its interpretative authority. That is a matter for the Legislature to rule on expressly or more certainly.

No-fault reform was enacted to provide prompt uncontested, first-party insurance benefits (see, Montgomery v Daniels, 38 NY2d 41). That is part of the price paid to eliminate common-law contested lawsuits. Indeed, contrary to the insurer’s assertions, preclusion of this type was an available remedy at common law, and if this important facet of the juridical rights and remedies among the various interested parties is to be deemed eliminated, it must be evident more plainly and expressly as this would be in derogation of a common-law protection. The tradeoff of the no-fault reform still allows carriers to contest ill-founded, illegitimate and fraudulent claims, but within a strict, short-leashed contestable period and process designed to avoid prejudice and red-tape dilatory practices.

To string out belated and extra bites at the apple is, on the present state of the law, inherently contradictory and unfounded under the statutes, regulations and policies that pertain to and govern this dispute, and we should not countenance such practices on the state of this record and these regulations and statutes. If more harmony and clarity are to be achieved, we earnestly invite the Legislature to study and remedy the Rube-Goldberg-like maze. In the meantime, we discern no justification for penalizing injured parties or their provider assignees by recognizing disincentives against prompt attention and action for otherwise valid, first-party insurance payment claims.

In sum, Maryland was rightly precluded by the lower courts from raising an intoxication exclusion defense at this stage of this no-fault payment litigation, because it neither denied the claim within 30 days of receipt of the claim nor effectively extended the 30-day time requirement.

Accordingly, the order of the Appellate Division should be affirmed, with costs.