Enacts the automobile fraud prevention act of 2010

Summary of provisions

Section 1. This act shall be known and may be cited as the "automobile insurance fraud prevention act of 2010."

Section 2. Fair claims settlement. (2) The failure of an insurer to issue a denial within 30 days of it becoming overdue shall not preclude the insurer or self-insurer from presenting evidence to establish that (A) the services or items billed for in a claim were not provided; (B) certain portions of the charges for the charges for services in a claim exceed, by more than ten percent, the charges permissible under the fee schedules prepared and established pursuant to subsections (a) and (b) of section five thousand one hundred eight of this article, or (c) the event from which the claim arose was based upon an intent to defraud an insurer or self-insurer. Nothing contained in this paragraph shall preclude an insurer from contesting the existence of applicable insur- ance coverage for the loss claimed.

(3) An insurer may deny a claim on the basis of lack of medical necessi- ty not later than sixty days after the date upon which the claim became overdue. However any denial of a claim which is based on lack of medical necessity shall be based upon review by a licensed provider who typical- ly provides the health care service or treatment under review. Copies of all reports prepared by a health care provider who examines a claimant must provide the claimant with copies of those reports within thirty days.

(c) (2) The commencement of a court proceeding or the submission of a dispute to arbitration shall not preclude a claimant from electing to submit other disputes arising from the same instance of use of operation of a motor vehicle to the alternate forum.

(3) Requires arbitrators to follow and apply substantive law. A master arbitrator, after having modified or vacated a n award by an arbitrator, shall offer the parties to opportunity to submit written briefs. The grounds for vacating or modifying an arbitrator's award by a master arbitrator shall also include factual, legal and procedural errors. (c) With respect to an action for serious personal injury, the award of an arbitrator or master arbitrator, other than an award pertaining to

the existence of insurance coverage, shall not constitute collateral estoppels of the issues arbitrated.

(d) With respect to an arbitration or an action commenced in court initiated to obtain payment for an overdue claim for medical benefits, prima facie entitlement to benefits shall be established by a verifica- tion by the claimant setting forth that: (1) the claimant was licensed to render the services or that the items were provided; (2) the services were rendered or items supplied by the claimant; (3) the services were medically necessary or for services or supplies provided pursuant to a prescription, were properly supported by a prescription: (4) the claim- ant received an assignment of benefits from the injured party or the guardian or parent of the injured party; (5) the claimant authorized the particular attorney or law firm to commence the suit.

(e) With respect to an action commenced in court to obtain benefits pursuant to this article: (1) a rebuttable presumption of admissibility attaches to claims forms, denial of claim forms, verification requests and responses, when such are accompanied by an affidavit when such forms are business records according to rule forty-five hundred eighteen of the CPLR.

(2) A rebuttable evidentiary presumption shall attach to the documents referenced in paragraph one that such are valid.

(3) A rebuttable evidentiary presumption shall attach to the documents referenced in paragraph one that were mailed to the address contained thereon, on the date contained thereon.

(4) A rebuttable evidentiary presumption shall attach to proofs of payment that such payments were made by the insurer and received by the plaintiff.

(5) In matters where the insurer's denial is based upon an alleged lack of medical necessity, a rebuttable presumption of admissibility attaches to medical reports of the claimant's treating providers.

(6) Nothing in this section shall preclude a party from offering evidence at trial to rebut any of the aforementioned presumptions nor will an insurer be precluded from offering evidence at trial on any meritorious, non-precluded defense to payment of the benefits.

(7) The deposition of any person may be used by any party without the necessity of showing unavailability or special circumstances, subject to the right of any party pursuant to section 3103 of the CPLR to prevent abuse, provided that the party against whom the evidence is offered had been afforded the opportunity to participate and questions the witness at the deposition.

§3. Section 5109 of the insurance law, as added by chapter 423 of the laws of 2005 is amended.

§5109. Unauthorized providers of health services. The superintendent of insurance shall be regulation, promulgate standards and procedures for investigating and suspending or removing the authorization for providers of health services to demand or request payment as specified in para- graph one of subsection (a) of section 5102 of this article. As used in this section "health services" means services, supplies, therapies or other treatment specified in subparagraph (i), (ii) or (iv) of paragraph one of subsection (a) of section 5102 of this article.

(b)Following a hearing conducted pursuant to the procedure and regu- lation promulgated pursuant to this section, the superintendent may prohibit a provider of health services from demanding or requesting payment for health services under this article for a period not exceed- ing three years if the superintendent determines, after notice and hear- ing that the provider of health services: (I) has admitted to or been found guilty of professional misconduct in connection with health services rendered under Article 51; (2) has exceeded the limits of his or her professional competence in rendering medical care under this article or has knowingly made a false statement or representation as to the material fact in any medical report; (3) solicited or employed another person to solicit for the provider or another person or entity, professional treatment, examination or care of a person in connection with any claim under Article 51; (4) refused to appear before, or answer any question upon request of the Superintendent, or refused to produce any relevant information concerning the provider's conduct in connection with health services rendered under Article 51; (5) engaged in a pattern of billing for: health services alleged to have been rendered under Article 51 when the health services were not rendered, provided that this shall not be construed to apply to good faith disputes regarding the appropriateness of a particular coding to describe a health care service; (6) utilized unlicensed person to render health services under Article 51; (7) utilized licensed persons to render health services; when rendering the health services is beyond the authorized scope of a person's license; (8) unlawfully ceded ownership, operation or control of a business entity that provides health services to a person not licensed to render the health services for which the entity is legally authorized to provide, unless otherwise permitted by law; (9) committed a fraudulent insurance act as defined in Penal Law § 176.05; (10) has been convicted of a crime involving fraudulent or dishonest practices; (11) has, after warning by the superintendent, engaged in a pattern of unlawfully attempting to collect payment directly from the patient or eligible person for services rendered under this article when such attempts violate the terms of an enforceable assignment of benefits.

(c) The superintendent shall by regulation develop due process proce- dures to assure a health provider accused under this section has appro- priate notice, an opportunity for a fair hearing and appeal prior to a determination that the health provider may not bill for services under this section. A provider of health services shall not demand or request payment for any health services under this article that are rendered during the term of the prohibition ordered by the superintendent pursu- ant to subsection (b) of this section. The prohibition ordered by the

superintendent may be a defense in any action by the provider of health services for payment for health services rendered pursuant to this arti- cle at any time after such provider has been prohibited from demanding or requesting payment for such health services in connection with any claim under this article.

(d) Requires the Superintendent to maintain a database containing a list of providers of health services that the Superintendent has prohibited from demanding or requesting payment for health services rendered under Article 51, and to make this information available to the public

(e) The Superintendent may levy a civil penalty not exceeding $50,000 on any provider of health services that the Superintendent prohibits from demanding or requesting payment for health services pursuant to Insur- ance Law §5109(b). However, any civil penalty imposed for a fraudulent insurance act must be levied pursuant to Article 4 of the Insurance law. A determination of the Superintendent pursuant to subsection (b) of this section shall not be binding upon the commissioner of health or the commission of education in a professional discipline proceeding relating to the same conduct.

§4. Paragraph 2 of subsection (b) of section 5103 of the insurance law is amended.

(2) Prohibits a no-fault insurer from excluding from coverage a person who was injured as a result of operating a motor vehicle while intoxi- cated or drug impaired, with respect to necessary emergency health services rendered in a general hospital, including ambulance services attendant thereto and related medical screening. It also provides that where a covered person is found to have violated section eleven hundred ninety-two of the vehicle and traffic law, the insurer has a cause of action for the amount of first party benefits paid or payable on behalf of such covered person against such covered person.

§5. Subsection (d) of section 5102 of the insurance law, as amended by chapter 955 of the laws of 1984 is amended to add to the definition of "serious injury" a complete tear or rupture of a nerve, tendon, liga- ment, cartilage or muscle; a tear, rupture or impingement of a nerve, tendon, ligament, cartilage or muscle which results in a significant impairment of a body organ, member, function or system.

§6. Subsection (j) of section 3420 of the insurance law is amended by adding a new paragraph 4.

(4) The term "covered person" as used in this article shall mean a pedestrian injured through the use or operation of, or any owner, opera- tor or occupant of, a motor vehicle which has in effect the financial security required by article six or eight of the vehicle and traffic law or which is referred to in subdivision two of section three hundred twenty-one of such law; or any other person entitled to first party benefits. For the purpose of this article, "covered person" shall also include any person injured as the result of a staged, planned or inten-

tional accident, provided that such person is not a perpetrator of or a knowing participant in the staging or planning of the accident.

§7. Section 5202 of the insurance law is amended by adding a new subsection (m)

(m) The term "covered person" as used in this article shall mean a pedestrian injured through the use or operation of, or any owner, opera- tor or occupant of, a motor vehicle which has in effect the financial security required by article six or eight of the vehicle and traffic law or which is referred to in subdivision two of section three hundred twenty-one of such law; or any other person entitled to first party benefits. For the purpose of this article, "covered person" shall also include any person injured as the result of a staged, planned or inten- tional accident, provided that such person is not a perpetrator of or a knowing participant in the staging or planning of the accident.

§8. Effective Date.

Justification

In the 1970's, it appeared as though no-fault automobile insurance was a genuinely superior policy innovation that would displace convention tort-based automobile insurance regimes. The central idea of a no-fault system is that, rather than seek recovery against another driver under conventional principles of tort law, an insured automobile-accident victim could simply recover the costs of the accident from his or her own insurance company. More than 30 years later, no fault had lost much of its popularity among insurers and consumer groups.

The State Insurance Department's Fraud Bureau has seen an increase in the number of referrals alleging no-fault insurance fraud of approxi- mately ten percent each year since 2006. In 2009 alone, the number of no-fault referrals accounted for 54 percent of all referrals received by the Frauds Bureau and there is little doubt that this trend will contin- ue well into 2010. There is absolute correlation between instances of fraud and increased automobile insurance premiums and healthcare costs forced on consumers. These abuses cost insurers tens to hundreds of millions of dollars, which ultimately result in substantially increased premiums for New York's consumers.

This piece of legislation will combat fraud with two significant changes to current law:

First, it will amend the Insurance Law with respect to preclusion of insurance company defenses. Currently, an insurer that does not deny a claim within 30-days is precluded from asserting a defense to payment based on lack of medical necessity or other grounds, including fraud, and must pay that claim. This encourages unscrupulous individuals and providers to flood the system with multiple claims, knowing claims not denied within 30-days will have to be paid. Investigations into fraud cases take much longer than 30-days and often require additional time to

determine the appropriate course of action. Therefore, this legislation permits the insurer to issue a denial and assert a defense after the 30-day period.

Secondly, this bill would provide the Superintendent of Insurance with the authority to terminate no- fault payments to deceitful providers of medical care. For years, some professional service corporations have abused the no-fault system by intentionally-staging accidents and bill- ing insurers for health services that were unnecessary or never rendered. In some instances, individuals have been known to actually purchase the names, signatures and licenses of currently-licensed physi- cians in order to fraudulently bill the insurers. Current law attempts to curb such abuses by requiring the Department of Health and the State Education Department to investigate providers who engage in misconduct. However, implementation of this specific section is deemed to be too diffuse to be effective, thus, in an effort to rein in this form of fraud, this legislation would authorize the Superintendent of Insurance to prohibit a provider from demanding or requesting payment for services rendered under Article 51 for a period not exceeding 3-years if a hear- ing determines that provider participated in illicit behavior. This bill would not preclude the Commissioners of Health or Education from taking appropriate action under any other provision of law. Moreover, the Superintendent will maintain a database of these individuals which will be publicly available.

Additionally, the process by which no-fault claims are tried civilly results in exorbitant costs to taxpayers in the State of New York and is cumbersome to claimants. This legislation would promote the use of arbi- tration in no-fault cases and require arbitrators to apply substantive law, and would offer parties to arbitration the opportunity to submit written briefs. In personal injury cases other than an award pertaining to the issue of the existence of insurance coverage, the arbitrator's award shall not constitute collateral estoppel of the issue.

Prior legislative history

This is a new bill.

Fiscal implications

None.

Effective date

This act shall take effect immediately; provided that: (a) section two of this act shall apply to benefits initiated on or after the one hundred eightieth day after this act shall have become a law (b) sections three, six and seven of this act shall take effect on the one hundred eightieth day after it shall become a law provided that the superintendent of insurance shall immediately promulgate rules and regu- lations pursuant to section 5109 of the insurance law as amended by section three of this act and sections six and seven of this act shall

apply to all new policies and policies that are renewed or modified after such one hundred eightieth day; and (c) section four of this act shall apply to actions commenced on or after the thirtieth day after this act shall have become a law.