8 N.Y.3d 294 (2007)
The priority-of-payment regulation in New York’s no-fault insurance system (11 NYCRR 65-3.15) does not prohibit an insurer from paying already verified claims while waiting for information to verify a pending claim that may cause aggregate claims to exceed $50,000.
Summary
Nyack Hospital treated Allen Zadwdyas, who was insured by General Motors Acceptance Corporation (GMAC), for injuries sustained in an auto accident. The hospital submitted a claim for $74,489.28. GMAC requested additional verification and, while awaiting it, paid other claims, reducing the available coverage. The hospital sued, arguing that GMAC violated priority-of-payment rules by paying later claims before its own. The New York Court of Appeals held that GMAC didn’t violate the regulation because it’s not required to reserve funds for unverified claims, thereby upholding the regulatory scheme’s intent for prompt payment of legitimate, verified claims. The court modified the order, finding GMAC late in requesting additional verification but ultimately not in violation.
Facts
Allen Zadwdyas was injured in an automobile accident and treated at Nyack Hospital from July 15, 2003, to August 6, 2003. Zadwdyas was insured by GMAC with a policy that included $50,000 in basic economic loss coverage and $25,000 in optional basic economic loss (OBEL) coverage. On August 20, 2003, the hospital submitted a claim to GMAC for $74,489.28 for medical services rendered. On September 12, 2003, GMAC requested additional verification in the form of Zadwdyas’ complete inpatient hospital records. While awaiting the records, GMAC paid other claims for Zadwdyas’ lost earnings and claims from other health service providers. GMAC received the requested verification on October 20, 2003. By November 24, 2003, when GMAC received Zadwdyas’ OBEL election form, GMAC asserted only $19,325.67 of the $50,000 basic economic loss coverage remained. On December 9, 2003, GMAC paid the hospital $19,325.67, exhausting the policy limits.
Procedural History
The hospital sued GMAC, alleging failure to pay or deny the claim within 30 days, as required by Insurance Law § 5106 (a) and 11 NYCRR 65-3.8 (a)(1). Supreme Court denied the hospital’s motion for summary judgment and granted GMAC’s cross-motion to dismiss the complaint. The Appellate Division affirmed, holding that GMAC did not violate 11 NYCRR 65-3.15 because the hospital’s initial claim was incomplete until GMAC received additional verification on October 20, 2003. The Court of Appeals granted the hospital permission to appeal.
Issue(s)
Whether an insurer waiting for information to verify a pending claim that causes aggregate claims to exceed $50,000 is prohibited by the priority-of-payment regulation (11 NYCRR 65-3.15) from paying already verified claims in the meantime?
Holding
No, because the priority-of-payment regulation does not require an insurer to reserve funds for unverified claims. The insurer is only obligated to pay or deny a verified claim within 30 days of receipt, thus promoting the prompt payment of legitimate claims.
Court’s Reasoning
The court reasoned that the no-fault regulations are designed to promote prompt payment of legitimate claims. Requiring insurers to reserve funds for unverified claims would hinder this process, as it would incentivize providers to delay supplying necessary information to substantiate their claims. The court emphasized that 11 NYCRR 65-3.8(a)(1) requires payment within 30 days after receiving “proof of claim, which shall include verification of all of the relevant information requested pursuant to section 65-3.5.” It stated, “[t]o read section 65-3.15 in isolation and apart from the rest of the revised no-fault program — which sets tight deadlines for submittal and payment and stresses the justifying of claims — would frustrate this legislative intent.” Although GMAC requested additional verification one day late, this only reduced the time GMAC had to pay or deny the claim, not excuse payment. The court found that the priority-of-payment regulation came into play on October 20, 2003, when GMAC received the hospital records. At that point, GMAC should have prioritized the hospital’s claim over later claims. The court modified the Appellate Division’s order, remitting the case for further proceedings, finding that GMAC was late in its request for verification but the hospital’s claim was subject to the priority of payment rule once the verification was provided.