Enacts provisions relating to comprehensive motor vehicle reparations; including limited assignment of benefits; preclusion lift and mandatory arbitration

Summary of provisions

Section 1 of the bill amends section 5102 of the insurance law to define "health service provider"

Section 2 of the bill amends section 5106(a) of the insurance law to clarify that preclusion of defenses to a claim is not the penalty for late paid or denied claims and would make burden of proof requirements more equitable.

Current law provides that claims for benefits must be paid or denied within 30 days of receipt and provides for substantial interest (2% per month) as a penalty for the failure of an insurer to meet that standard This provision is intended to ensure the insurers' prompt payment of meritorious claims. Case law has added an additional penalty, i.e., that the insurer is precluded from denying a non-meritorious claim, or asserting any defense if it has violated the "30-day rule," thereby mandating the payment of excessive and even fraudulent claims. This section would ensure that insurers are not forced to pay non-meritorious claims by providing that interest would be the exclusive remedy when an insurer fails to issue a timely payment or denial of claim and that insurers' defenses, such as a lack coverage or fraud, would not be precluded.

This section would also make burden of proof requirements in no-fault disputes more equitable Our civil legal system places the burden on the plaintiff to prove the basic elements of their case in order to prevail Over the years, no-fault case law in New York has shifted that burden of proof entirely to the insurer to the point whereby a medical provider (as an "assignee" under an "assignment of benefits") needs only to provide a bill to establish a claim for benefits The burden is on the insurer to request information to "verify" that the services billed for are medically necessary and in accordance with the no-fault law. Frequently, a lengthy exchange of paperwork ensues. This section would make burden of proof requirements in the no-fault context more equitable by requiring the medical provider to present information that the services billed are medically necessary and billed in accordance with the applicable fee schedule.

Section 3 of the bill amends section 5106(b) of the insurance law to require mandatory arbitration of no-fault disputes. Over 400,000 no-fault cases are filed annually in the New York City courts. The court system is not equipped to handle the pending caseload. It currently takes between eighteen and thirty-six months to adjudicate a no-fault case Obviously, this protracted delay was not contemplated by the legislature when they originally enacted the no-fault system which was intended to ensure prompt payment for medical costs resulting from auto accidents. Mandating arbitration for no-fault claims would provide for the expeditious and streamlined resolution of no-fault disputes and would reduce the excessive litigation which is currently clogging courts in New York City Unlike the court system, it currently

takes only four to six months for a no-fault dispute to be handled through arbitration. Mandating arbitration would also greatly reduce litigation expenses for insurers and would significantly reduce costs in the no-fault system

Section 4 of the bill adds a new section 5110 to the insurance law to provide assignment of benefit rules for no-fault which are similar to assignment of benefit rules applicable to other types of medical claims Assignment of benefits is common in all types of medical claims In such a document, the patient/claimant authorizes the medical provider to submit charges for payment to an insurer, provide information to support the claim and receive benefits directly from the insurer on behalf of the patient. The provider does not receive a right to sue any third party independently; that right remains with the patient/claimant.

The assignment used in New York no-fault claims differs from those commonly used, in that it assigns "all rights and privileges and remedies" to the provider to pursue benefits under the no-fault law. This allows the provider "assignee" the right to contest all issues, including "policy" issues such as coverage eligibility and the patient/clamant/assignor's duties to comply with policy conditions, such as attending independent medical examinations or examinations under oath. The result is a huge amount of litigation, instigated by the providers/assignees with little or no involvement from the injured party. This section would address this problem by providing that the right to contest denials of claims involving policy issues would belong to the claimant only and the assignment would not be valid when coverage or compliance with policy terms is in dispute.

Section 5 of the bill amends section 5109 of the insurance law to revise current provisions authorizing the decertification of medical providers who engage in fraud and certain other practices from receiving payment under no-fault so as to allow for the implementation of these provisions. The existing law authorizing the decertification of medical providers who engage in fraud and certain other practices from receiving payment under the no-fault system has not been implemented due to the cumbersome nature of the current statute. This statute should be amended so that the Insurance Department is authorized to review and decertify unscrupulous medical providers from billing and collecting no-fault benefits

Sections 6 and 7 of the bill amend sections 5108 and 5106 of the insurance law, respectively, to provide for the use of treatment guidelines in the no-fault system. Treatment guidelines have been adopted in New York for the workers compensation system and are a valuable tool in preventing the fraudulent overutilization of unnecessary medical treatments This section would also prohibit insurers from paying any charge which exceeds the applicable fee schedule or which is not provided for under the fee schedule or compensable under Medicare.

Section 8 of the bill amends section 3425(b) of the insurance law to allow insurers to rescind or cancel a policy within the first 60 days back to the inception of the policy where there is nonpayment of the initial premium or initial installment or where it is discovered that the payment proceeds or identity of the policyholder were stolen. It

is common for those engaging in fraud to take out a policy without paying the premium and with the sole purpose of engaging in insurance fraud. They will then quickly stage an accident and bill the insurer for fraudulent treatments. Under current law, the insurer may be on the hook for those treatments. When a policy is taken out fraudulently, an insurer should not be required to provide benefits under that policy. This section would address this issue and deter this type of no-fault fraud.

Section 9 of the bill is the effective date.

Justification

New York's no fault system is plagued by fraud and abuse which is adding significant costs to auto premiums in New York and a major contributing factor making New Yorkers pay among the highest auto insurance premiums in the nation. In fact, a recent Insurance Research Council study found that in the New York City area, about one in every five no-fault auto insurance claims closed in 2010 appear to have elements of fraud. In addition, New York's no-fault claim costs have far outpaced that of other no-fault states and the overall cost of medical care. From 2004 through the 2nd Quarter of 2010, the average PIP claim cost rose 60.4 percent in New York, nearly 42 points faster than the 18.6 percent growth rate in the Consumer Price Index cost of medical goods and services found in the region. The cost of no-fault personal injury protection (PIP) coverage has also soared. New York's average no-fault PIP claim cost $9,007 is the third highest in the nation as of 2nd quarter 2010

In order to address this rampant fraud and abuse problem and reduce no-fault costs, comprehensive reform is necessary. This bill includes a number of important reforms that will give insurers the tools that they need to fight fraud and abuse and reduce no-fault costs. Honest New York drivers should not have to pay the price for those that are gaming the system and this bill will make the necessary changes to the law to get tough on no-fault fraud and abuse

Legislative history

S 3538 of 2013-14; S.2816-A of 2011-12

Fiscal implications

None.

Effective date

This act shall take effect immediately and shall apply to all actions and proceedings commenced on or after such date; and shall also apply to any action or proceeding which was commenced prior to such effective date where, as of such date, a trial of the issues has not yet commenced.