Limits remedies for overdue first party claim under no-fault automobile insurance and authorizes refusal to pay for treatment by certain health care providers

Summary of provisions

This bill would enact measures to reduce no-fault fraud in New York State including the following:

Enhance opportunity to challenge fraud

Recent court decisions have required insurers to payor deny a claim within 30 days and insurers are precluded from raising fraud as a defense to payment after this time frame. It is often difficult for insurers to determine within 30 days whether fraud exists, particularly when bills are often accumulated for six months prior to being submitted to the insurer.

Section one of this bill would allow insurers to raise defenses after this thirty day period. Any claims not paid within this 30 day period would bear interest at 2% per month and claimants would be entitled to recover reasonable attorney's fees for securing payment of overdue claims. Twenty-four percent interest per year plus attorney's fees is certainly an adequate deterrent to failing to pay claims in a timely manner. Prohibiting insurers from challenging claims after this time period only makes it easier for those committing fraud to get away with it if the insurer is unable to detect tile fraud within thirty days.

Increasing penalties for insurance fraud

Sections 2 through 7 of this bill would increase penalties for insurance fraud, particularly for repeat offenders, so as to give prosecutors more incentive to prosecute these cases and to ensure that those committing insurance fraud will be put behind bars where they belong. Specifically, to facilitate the prosecution of these crimes, this bill would cut in half the value of property obtained through fraud in order to be convicted of insurance fraud in each degree and would add two new degrees of aggravated insurance fraud to get tough on repeat offenders.

Temporary panel on medical care and treatment under no-fault

Section 10 of this bill would establish a temporary panel on medical care and

treatment under the no-fault system to consider and report on issues relating to medical treatment under the New York no-fault system in order to identify ways to further improve the system by reducing fraud and abuse, eliminating disputes, and speeding payments for legitimate injuries.

Passing along savings to consumers

Section 11 of this bill would require the Superintendent of Insurance to consider the impact of these fraud fighting measurers when making determinations about future rate filings for no-fault insurance and will require that savings resulting from these measures be reflected in rates.

Justification

According to the Insurance Information Institute, no-fault fraud cost New Yorkers more than $204 million last year, a cost absorbed by all policyholders in the form of increased premiums. While recent efforts to Combat fraud have improved this situation somewhat, no-fault fraud Continues to be a very serious problem in New York.

Most of no-fault fraud costs result from the fraud perpetuated by organized crime rings and a small number of unscrupulous doctors and attorneys. Participants in fraud rings are often paid to stage accidents, feign injuries and receive bogus treatments from medical mills. One staged accident with more than one claimant can result in hundreds of treatments including such services as aroma therapy and massage therapy all on the tab of the insurer.

This bill would enact measures which will ensure that insurers are able to challenge fraud and ensure that criminals profiting off this activity are put in jail where they belong, this bill would also ensure that consumers benefit from the savings resulting from these measures.

Legislative history

S.4371 of 2007-08 S.6449 of 2009-10

Fiscal implications

None to the State.

Effective date

Immediately.