12 N.Y.3d 217 (2009)

When calculating attorney’s fees in no-fault insurance claims, the fee should be based on the aggregate amount awarded for each insured, not each individual bill, and the tolling provision for interest applies even if the denial of claim was untimely.

Summary

LMK Psychological Services sued State Farm for failing to pay no-fault insurance benefits. The lower courts calculated attorney’s fees on a per-bill basis and did not apply the interest tolling provision due to State Farm’s allegedly improper and untimely denials. The Court of Appeals reversed, holding that attorney’s fees should be calculated based on the aggregate amount for each insured, consistent with the Superintendent of Insurance’s interpretation. The Court also held that the interest tolling provision applies regardless of the timeliness of the denial, as it encourages prompt resolution of disputes.

Facts

LMK Psychological Services, P.C., and another medical provider, treated automobile accident victims insured by State Farm. State Farm denied some of the no-fault insurance benefit claims assigned to the providers by the insureds. The providers sued, alleging that State Farm failed to pay or deny multiple bills within the required 30 days.

Procedural History

The Supreme Court granted summary judgment to the providers, awarding attorney’s fees calculated on each bill and interest without applying the tolling provision. The Appellate Division affirmed, finding the attorney’s fees calculation proper and the tolling provision inapplicable due to State Farm’s allegedly improper denials. The Court of Appeals granted State Farm leave to appeal.

Issue(s)

1. Whether attorney’s fees in no-fault insurance claims should be calculated on a per-bill basis or based on the aggregate amount awarded for each insured?

2. Whether the interest tolling provision in no-fault insurance claims applies when the denial of claim was untimely or improper?

Holding

1. No, because the Superintendent of Insurance’s interpretation of the regulation is reasonable and entitled to deference; attorney’s fees should be calculated based on the aggregate of all bills for each insured.

2. Yes, because the purpose of the no-fault law is to encourage prompt resolution of disputes, and the tolling provision should apply regardless of the timeliness of the denial.

Court’s Reasoning

The Court deferred to the Superintendent of Insurance’s interpretation regarding the calculation of attorney’s fees. The Superintendent’s opinion letter stated that attorney’s fees should be based on the aggregate amount of payment required to be reimbursed based on the amount awarded for each bill submitted and denied for each insured, and not on each bill individually. The Court stated that “[w]e have long held that the Superintendent’s ‘interpretation, if not irrational or unreasonable, will be upheld in deference to his special competence and expertise with respect to the insurance industry, unless it runs counter to the clear wording of a statutory provision’” (quoting Matter of New York Pub. Interest Research Group v New York State Dept. of Ins., 66 NY2d 444, 448 [1985]).

Regarding the tolling provision, the Court again deferred to the Superintendent’s interpretation. The Court reasoned that “it is consistent with section 5106, entitled ‘Fair claims settlement,’ the purpose of which is to encourage claimants to swiftly seek to resolve any dispute concerning their entitlement to no-fault benefits. Once a denial is issued, even if an untimely one, a claimant should still be encouraged to act to resolve the dispute quickly.” Therefore, the tolling provision should apply regardless of whether the denial was timely or proper. The court emphasized that the Superintendent’s interpretation was “not irrational or unreasonable” (quoting Matter of Council of City of NY v Public Serv. Commn. of State of N.Y., 99 NY2d 64, 74 [2002]).