Business records exception and medical provider’s burden of proof on its motion for summary judgment for payment of services rendered to no-fault claimant

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.