A rider in a fidelity bond for computer systems fraud that covered “a fraudulent entry of Electronic Data or Computer Program” unambiguously refers only to unauthorized access into plaintiff’s computer system and not to fraudulent content that was input by authorized users. Universal Am. Corp. v National Union Fire Ins. Co. of Pittsburgh, PA., 2015 NY Slip Op 05516, CtApp 6-25-15
Plaintiff Universal Am. Corp. is a health insurer who offers Medicare Advantage plans to Medicare-eligible individuals who purchase Medicare coverage from private health insurers who in turn are reimbursed by the federal Centers for Medicare and Medicaid Services for health care services that are provided to the plans’ members. Plaintiff’s computerized billing system allowed health care providers to submit claims directly into the system. Plaintiff automatically processed, approved, and paid most of the claims without manual review.
Plaintiff suffered more than $18 million in losses from paying fraudulent claims for services that were never actually performed under its Medicare Advantage plans. When plaintiff sought payment from defendant bonding company for plaintiff’s post-deductible losses, defendant denied coverage on the ground that the rider did not encompass losses for Medicare fraud, i.e., losses from payment for claims submitted by health care providers.
Plaintiff sued defendant for declaratory relief and moved for partial summary judgment on the issue of coverage, and defendant cross-moved for summary judgment dismissing the complaint.
The Court of Appeals affirmed dismissal of the complaint, holding that the rider unambiguously applies to losses incurred from unauthorized access to Universal’s computer system, and not to losses resulting from fraudulent content that authorized users input into the computer system.
The Court applied the “reasonable expectations of the average insured upon reading the policy” (from Mostow, 88 NY2d at 326-27). The Court noted that the intentional word placement of “fraudulent” before “entry” and “change” manifests the parties’ intent to provide coverage for a violation of the integrity of the computer system through deceitful and dishonest access. The Court also relied on other language in the rider that evinced defendant’s intent to cover only fraudulent access and not fraudulent input.
The Court of Appeals held that plaintiff medical provider was entitled to summary judgment for payment of no-fault benefits by showing that the payments were overdue, and that the provider’s claim, using the statutory billing form, had been mailed to and received by the defendant insurer. With regard to the business -records exception to the hearsay rule, the affidavit of the president of plaintiff’s third-party billing company, which stated that he relied on the statutory billing forms generated by plaintiff, satisfied the business records exception. With regard to the facts that a medical provider must establish: because the carrier failed to respond in any fashion to plaintiff’s claim forms, the carrier waived all objections and defenses to those claims, and plaintiff did not need to establish prima facie that the expenses arose out of a motor vehicle accident and were medically necessary to treat the injuries. Viviane Etienne Med. Care v. Country-Wide Ins. Co., 2015 NY Slip Op 04787, Ct App 6-10-15. NB: This action was commenced in September 2005, before the adoption of the April 1, 2013 amendments to 11 NYCRR 65-3.5 and 11 NYCRR 65-3.8, which can be found at http://www.dfs.ny.gov/insurance/r_finala/2013/rf68ca4t.pdf.
In this case, the injured claimant had assigned to his medical provider his right to receive payment for no-fault medical benefits (i.e., payments for the the medical treatments his medical provider rendered to him for injuries he received in an auto accident.) Plaintiff medical provider submitted eight verification-of-treatment forms (statutory NF-3 forms) to defendant no-fault insurer for the services rendered. Defendant denied payment on one claim and failed to respond to the other seven.
Plaintiff sued, asserting that it had timely submitted bills and claims for payment to defendant but that defendant had failed to pay or deny the requests or ask for further verification of the claims. Plaintiff also requested interest and attorney’s fees under the Insurance Law. Defendant answered and asserted as an affirmative defense that payment for plaintiff’s claims was not overdue because plaintiff failed to submit “proper proof of the fact and amount of the loss” as required by the Insurance Law.
Plaintiff then moved for summary judgment on its claims, submitting in pertinent part the seven verification-of-treatment forms as proof of claim and seven mailing ledgers stamped by the United States Postal Service showing the date the forms were mailed. Plaintiff also submitted the affidavit of the president of plaintiff’s third-party billing company, who detailed the billing company’s reliance on plaintiff’s NF-3 claim forms and stated that he personally mailed the NF-3’s to defendant within the statutory 30-day time limit.
Defendant opposed the motion, arguing that plaintiff failed to satisfy the business records exception to the hearsay rule because the affidavit of the billing company’s president merely stated that the bills were mailed but gave no details as to plaintiff’s generation of the NF-3 claim forms.
The Court of Appeals relied on no-fault regulation 11 NYCRR 65-3.5(b), which stated that within 15 days from receipt of the verification of treatment form, the insurer may seek further verification) and Insurance Law §5106, and 11 NYCRR 65-3.8(c), which stated that within 30 days after receiving the verification of treatment form, the insurer must pay or deny the claim. As noted above, this action was commenced in September 2005, before the adoption of the April 1, 2013 amendments to 11 NYCRR 65-3.5 and 11 NYCRR 65-3.8, which can be found at http://www.dfs.ny.gov/insurance/r_finala/2013/rf68ca4t.pdf.
The Court of Appeals recited previous holdings to the effect that where an insurer fails to pay or deny a claim within the requisite 30 days after its receipt of the proof of claim, the insurer is precluded from asserting all defenses against payment of the claim except lack of coverage, and that although this preclusion requires carriers to pay claims that it might not have had to honor if it had timely denied the claim, the great convenience of prompt uncontested, first-party insurance benefits is part of the price paid to eliminate common-law contested lawsuits.
The Court of Appeals held that plaintiff met its prima facie burden of proving its entitlement to summary judgment because the documents submitted met the business records exception to the hearsay rule and that because plaintiff was able to demonstrate the billing and mailing practices, the insurer was presumed to have received those claims. And because defendant did not pay the seven claims, those claims were overdue and defendant’s failure to contest the claims waived its right to contest the claims as fraudulent. [NB: The amount at issue was about $6,000. At the same time the Appellate Division certified this question to the Court of Appeals, it remanded to Supreme Court to determine whether plaintiff was entitled to attorneys’ fees and interest, which runs at two percent per month from the date the payments became “overdue”.]
Dissent: Judges Stein joined by Judge Reed dissented, stating that neither the statutory nor regulatory deadlines obviated plaintiff’s burden to show prima facie that it was entitled to receive the benefits in the first place — i.e., that the loss arose from an automobile accident and that the expenses incurred were medically necessary. Judge Stein noted that the State Insurance Department interpreted the interplay between summary judgment and the preclusion rule in that manner, i.e., although an insurer’s defense to payment of claim may be precluded under the preclusion cases, the claimant must still meet the statutory requisite and make out a prima facie case of entitlement to benefits, which requires that reimbursable expenses must arise out of a motor vehicle accident and be medically necessary to treat the injuries. Ops. Gen Counsel NY Ins Dept No. 00-01-02 [January 2000].
Moreover, Judge Stein noted that plaintiff failed to establish its claim forms as business records: the billing company’s president had no personal knowledge of plaintiff’s procedures in creating the NF-3 claim forms, and that plaintiff should have been required to submit a proper affidavit as to the creation of the NF-3 forms.
(This recipe meets all criteria for a week-night main dish: good, fast, filling, and easy on the budget.)
1 box scalloped or au gratin potatoes, made according to the stovetop directions on the box (you may substitute water for any milk that the directions may call for, and you may omit any butter that is called for, if desired)
Salsa con queso: at least ½ cup; more if desired
Garnish (optional): paprika or colorante, salsa, green onions
1-2 cups cooked meat or poultry cut into ¾-inch cubes and warmed in the microwave
As soon as the potatoes have finished their simmering per the package directions, leave the heat on under the pan and fold in the salsa con queso to blend and warm up to the same temperature as the potatoes. Then fold in the cooked meat or poultry. Place in serving bowl (the more elegant the better) and garnish as desired.
(This is superb. It has Asian influences.)
Salmon: 1 two-pound bag of frozen salmon fillets (Wegman’s has this on sale occasionally) , thawed overnight in the refrigerator
2 Tbsp. molasses
1-2 Tbsp. soy sauce
1-2 Tbsp. balsamic vinegar
1-2 Tbsp. peanut or salad oil (optional, but helps keep the salmon from sticking to the grill)
1 clove garlic micro-planed
½ tsp. micro-planed fresh ginger (I buy a piece of fresh ginger, peel it, freeze it whole in a freezer bag, and micro-plane from the frozen piece however much I need)
Place the thawed salmon fillets in a single layer in a dish or plastic container with any liquid from the salmon that is in the package. Mix the remaining ingredients to make enough marinade/basting sauce to coat the salmon top and bottom. Spoon the marinade/sauce over the salmon, lifting up the salmon to let the sauce flow under the salmon. You may refrigerate for several hours or overnight if you have the time; otherwise, let it sit for however much time you have. Grill (or heat in a twelve-inch skillet) over medium heat until the salmon is no longer squishy when you press on the thickest part of each fillet with your finger. Baste with any sauce that may still be in the dish/container; there may not be much. Don’t overcook, because the salmon will fall apart on the grill and will be too dry in texture. Residual heat in the fillet will continue to cook the salmon.
(This salad uses lettuce, micro-greens sprouts, and green onions from my CSA share. Use balsamic vinegar and real parmesan or Romano cheese. Anything else is boring. And use an extra-large salad bowl in relation to the amount of lettuce you are using to give room to toss.
Leaf lettuce: 1 large head or 2 small heads (washed and dried and torn into bite-size pieces)
Bacon: 4-6 slices (cut into ½ inch dice)
Sprouts, micro-greens or alfalfa: Large handful
Parmesan or Romano cheese, solid chunk grated: at least ¼ cup ((do not use the stuff in the cardboard container with the shaker top; Wegman’s has re-closable packages of grated real parmesan and Romano cheese hanging on pegs in the dairy case that is very good).
Dressing (makes enough for several salads):
Fat from the bacon (mandatory)
Green onions: 4-6 (white and green parts, sliced on the diagonal) or 3-4 Tbsp chopped chives
Sugar: 1 Tbsp
Balsamic vinegar: 1/3 cup (mandatory; don’t substitute any other kind of vinegar; it will be boring)
Water: 1 cup
Ground pepper, freshly ground: ¼ tsp.
Bacon: Fry the bacon in a medium skillet until crisp. Remove from skillet with a slotted spoon onto paper towels.
Dressing: Using the same skillet and keeping all of the fat from the bacon, killet, add green onions if using (if you are using chives, wait), sugar, salt, vinegar, water, and pepper and simmer for 5 minutes. (Don’t boil; you’ll overcook the green onions.) If you are using chives, add them now.
Salad: Put lettuce into extra-large salad bowl. (Use an extra-large bowl to give yourself plenty of room for tossing the salad). Sprinkle on the sprouts (separate them so they are not an intertwined mass) and the bacon. Using a serving spoon, spoon the dressing over the salad 1 spoonful at a time. Using the serving spoon and a serving fork, toss after each spoonful taking care to scoop up the dressing that collects in the bottom as you toss. Stop adding dressing when there are two spoonfuls worth of dressing in the bottom of the bowl after you stop tossing. The point is to coat the salad greens, not drown them. Sprinkle on the Parmesan/Romano cheese and toss, again making sure to scoop up the dressing in the bottom. Serve immediately. Store left-over dressing in the refrigerator and warm it up for your next salad.
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