Relates arbitration of claims under the comprehensive motor vehicle insurance reparations act

BILL NUMBER:S2369

Title of bill

An act to amend the insurance law, in relation to requiring arbitration for no fault claims under the comprehensive motor vehicle reparations act

Purpose

To provide for arbitration of no-fault disputes.

Summary of provisions

Section 1 of this bill would require arbitration of no-fault disputes. Section 2 of the bill is the effective date.

Justification

On February 29, 2012, the Manhattan U.S. Attorney announced the indictment of 36 people for participating in a $279 million no-fault fraud scheme. One of the methods medical mills and no-fault fraud crime rings use in their no-fault schemes is flooding insurers with numerous lawsuits in order to make it difficult for insurers to defend these numerous lawsuits and force the insurers to settle and pay non-meritorious claims. In fact, no-fault fraud enterprises will often file a separate lawsuit for each bill for each treatment provided to an injured person. These lawsuits are often quite small in amount and have resulted in the New York City courts being flooded with suits. The court system is not equipped to handle the caseload resulting from this practice.

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 Obviously, this protracted delay was not contemplated by the legislature when they originally enacted the no-fault system which was intended to ensure prompt payment for medical costs resulting from auto accidents.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. It should also be noted that the arbitrators handling no-fault cases handle these cases regularly and have expertise in issues relating to no-fault disputes. This expertise allows for more the more equitable and expeditious handling of no-fault disputes. Mandating arbitration would also greatly reduce litigation expenses for insurers and would significantly reduce costs in the no-fault system.

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 Mandating arbitration of no-fault disputes would help to reduce lawsuit abuse by no-fault fraud rings and would assist in reducing fraud in the no-fault system and the costs associated with fraud.

Legislative history

S.3544 of 2013-14; S.6708 of 2011-12

Fiscal implications

None.

Effective date

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.