Aetna Health Plans,, Appellant,v.Hanover Insurance Company, Respondent.BriefN.Y.May 4, 2016APL-2015-00009 Bronx County Clerk’s Index No. 303241/12 Court of Appeals of the State of New York AETNA HEALTH PLANS, as assignee of LUZ HERRERA, Plaintiff-Appellant, – against – HANOVER INSURANCE COMPANY, Defendant-Respondent. BRIEF FOR AMICUS CURIAE AMERICAN INSURANCE ASSOCIATION WHITE AND WILLIAMS LLP Attorneys for Amicus Curiae Times Square Tower 7 Times Square, Suite 2900 New York, New York 10036 Tel.: (212) 244-9500 Fax: (212) 244-6200 Date Completed: November 24,2015 TABLE OF CONTENTS CORPORATE DISCLOSURE STATEMENT ................................................................ 1 PRELIMINARY STATEMENT .......................................................................................... 1 INTEREST OF AMICUS CURIAE ................................................................................... 1 SUMMARY OF ARGUMENT ............................................................................................ 2 ARGUMENT .......................................................................................................................... 4 POINT I ................................................................................................................................... 4 BECAUSE AETNA IS NOT A HEALTH CARE PROVIDER, THE NO-FAULT STATU'IE AND REGULATIONS PRECLUDE ITS THEORIES OF RECOVERY ................................................................................. 4 I. Aetna is Not Eligible to Receive an Assignment of Benefits ..................... 4 II. Aetna may not recover from Hanover through subrogation ..................... 7 POINT II ................................................................................................................................. 9 AETNA'S "PUBLIC POLICY" APPROACH WOULD EFFECTIVELY RE-WRITE THE NO-FAULT SYSTEM ................................ 9 CONCLUSION .................................................................................................................... 12 -1- 16296296v.l TABLE OF AUTHORITIES Page(s) CASES 427 W 51 St. Owners Corp. v. DHCR, 3 N.Y.3d 337 (N.Y. 2004) ......................................................................................................... 8 A.M Mea. Servs., P. C. v. Progressive Cas. Ins. Co., 101 A.D.3d 53 (2d Dep't 2012) ................................................................................................. 6 Blue Cross of Cali. , Inc. v. Am. Int'l Underwriters Corp., No. 0101922/2006,2007 NY Slip Op 33487(U), (Sup. Ct, N.Y. Cnty. Oct 15, 2007) .................................................................................................................................... 7 E. Acupuncture v. Allstate Ins. Co., 15 Mise.3d 104 (Sup. Ct, App. Tenn 2007) ............................................................................. 6 Feggans v. Reliance Ins. Co. of NY., 100 A.D.3d 570 (2d Dep't 1984) ............................................................................................. 11 Globe Surgical Supply v. Geico Ins. Co., 59 A.D.3d 129 (2d Dep't 2008) ............................................................................................... 10 Health Ins. Plan of Greater N.Y. v. Allstate Ins. Co., No. 0106881/2006,2007 Slip Op 33925(U) (Sup. Ct., N.Y. Cnty. Nov. 20, 2007) ...................................................................................................................................... 7, 8 Matter of Gaines v. New York State Div. of Hous. & Cmty. Renewal, 90 N.Y.2d 545 (N.Y. 1997) ....................................................................................................... 8 Med. Society of NY. v. Serio, 100 N.Y.2d 854 (N.Y. 2003) ............................................................................................... 2, 10 Montgomery v. Daniels, 38 N.Y.2d 41 (N.Y. 1975) ......................................................................................................... 6 NY. and Presbyterian Hosp. v. Country-Wide Ins. Co., 17 N.Y.3d 586 (N.Y. 2011) ..................................................................................................... 10 Nyack Hospital v. General Motors, 8 N.Y.3d 294 (N.Y. 2007) ......................................................................................................... 6 Pommels v. Perez, 4 N.Y.3d 566 (N.Y. 2005) ......................................................................................................... 9 Rockaway Blvd. Med. P. C. v. Progressive Ins., 9 Mise.3d 52 (2d Dep't 2005) .................................................................................................... 6 -11- 16296296v.l Viviane Etienne Med. Care, PC v. Country- Wide Ins. Co., 114 A.D. 3d 33 (2d Dep't 2013) ............................................................................................... 10 Winkelmann v. Excelsior Ins. Co., 85 N.Y.2d 577 (N.Y. 1995) ....................................................................................................... 7 STATUTES Insurance Law §§ 5101 109 ......................................................................................................... 10 Insurance Law § 5102(a)(1) ......................................................................................................... 5, 9 Insurance Law § 51 06(a) ............................................................................................................. 3, 4 New York Insurance Law § 5105(a) (McKinney 2007) .................................................................. 9 OTHER AUTHORITIES 11 NYCRR § 65-3.11(a) .......................................................................................................... 2, 4, 5 11 NYCRR § 65.15(g)[21] .............................................................................................................. 3 22 NYCRR § 500.1(f) ...................................................................................................................... 1 CPLR § 3211(a)(7) .......................................................................................................................... 2 -111- 16296296v.l CORPORATE DISCLOSURE STATEMENT Pursuant to the New York Court of Appeals Rules of Practice, 22 NYCRR § 500.1 (f), the American Insurance Association states that it is an incorporated entity that is not publicly traded and of which no publicly traded entity has an ownership interest. It has no parents, subsidiaries, or affiliates. PRELIMINARY STATEMENT This amicus curiae brief is submitted by the American Insurance Association (hereafter "AlA") in opposition to the appeal by Plaintiff-Appellant Aetna Health Plans ("Aetna"). Aetna appeals an order of the Appellate Division, First Department, dated April 15, 2014, affirming the order of the Supreme Court, Bronx County (Briganti-Hughes, J.) (entered January 7, 2013) ("Supreme Court'') dismissing Aetna's Complaint against Hanover Insurance Company ("Hanover"). INTEREST OF AMICUS CURIAE AlA is the leading national property-casualty insurance trade organization. It represents more than 325 insurers that write in excess of $127 billion in premiums each year, including nearly $1.5 billion in automobile insurance in this State. AlA advocates on behalf its members for sound and progressive policies concerpjng legislative and regulatory matters. It also submits amicus curiae briefs in cases such as this one, where AlA's expertise can assist the Court. AlA .. has submitted amicus curiae briefs in state and federal courts across the country, including this Court. 16296296v.1 The interests of AlA in this case are underscored by the statement in Aetna's brief to this Court that "[t]he instant case involves issues of great significance and importance to the insurance industry-including health insurers, No-Fault insurers, and millions of individual insurance consumers in the State." AlA agrees with that statement, but it disagrees with Aetna's position, which essentially seeks a judicial amendment to New York's no-fault system. It is beyond dispute that property and casualty insurers, as well as providers and insureds, have relied upon recognized and accepted procedures of the no-fault system, including the manner in which claims are processed. For the reasons set forL~ in tl-.J.s brief, that system's efficiencies would be placed at risk if the decision below is not affirmed in all respects. SUMMARY OF ARGUMENT The Appellate Division, First Department's unanimous decision to uphold the ruling of the Supreme Court granting Hanover's motion to dismiss the Complaint with prejudice pursuant to CPLR 3211 (a) (7) should be affirmed. Aetna's position that a health insurer be included within the definition of "health care provider" under 11 NYCRR § 65-3.11 (a) is not supported by any statute, regulation, court ruling, or administrative opinion. Additionally, the procedure offered by Aetna would be contrary to the "primary aims" of the no-fault system "to ensure prompt cornpensation for losses incurred by accident victims ... [and] to reduce the burden on courts and to provide substantial premium savings to New York motorists." Med Society ofN.Y. v. Serio, 100 N.Y.2d 854 (N.Y. 2003). -2- 16296296v.l Indeed, the procedures for the submission of claims that are set forth in the no-fault statutory and regulatory scheme unambiguously relate to claims by the eligible insured person or that person's medical provider. Aetna does not fit either of these criteria. Notwithstanding the clarity in the procedures, Aetna still sued Hanover for reimbursement of medical bills that it paid to its insured (pursuant to private medical insurance), asserting a right to recovery under Insurance Law § 5106(a) and 11 NYCRR § 65.15(g)[21]. In its opinion dismissing the Complaint, the Supreme Court found that because -LJ\etna was not a provider of health care services it was not eligible under the no-fault regulations for payments pursuant to an assignment of benefits. The court also held that because Aetna was "not in privity of contract" with Hanover nor was it "an intended third-party beneficiary" it could not recover from Hanover under a breach of contract theory. Finally, the court rejected Aetna's attempt to recover under a subrogation theory, holding that a health insurer could not recover from a no-fault insurer for payments that the fonner was obligated to make. Aetna's appeal to the Appellate Division, First Department, was resolved by that court in two succinct paragraphs. In the first, it reiterated that only the applicant or a health care provider may receive no-fault benefits, while Aetna is a "health care insurer." Next, the Appellate Division agreed with the Supreme Court that neither subrogation nor breach of contract were available avenues of recovery. The rulings below discounting Aetna's claims properly left undisturbed a basic and integral -3- 16296296v.l principle of New York's no-fault system, that benefits are only payable to the eligible insured person or a health care provider pursuant to an assignment. AlA adopts and incorporates by reference the Counterstatement of the Facts Presented by Defendant-Respondent. Additionally, AlA agrees with Hanover that Aetna has recourse for payments that it believes should have been reimbursed by Hanover. Aetna can seek to recoup those payments from the medical providers, which can then seek no-fault reimbursement from Hanover. ARGUMENT POINT I BECAUSE AETNA IS NOT A HEALTH CARE PROVIDER, THE NO- FAULT STATUTE AND REGULATIONS PRECLUDE ITS THEORIES OF RECOVERY I. Aetna is Not Eligible to Receive an Assignment of Benefits The Supreme Court agreed with Defendant-Respondent that the lawsuit must be dismissed because Aetna is not a "health care provider." There is no lack of clarity' in that requirement under the applicable law and regulations. To conclude otherwise could open the door to expanding the definition of the term "health care provider" contrary to the underlying intent of the no-fault system. Insurance Law § 5106(a) details the process by which payments of first party benefits are made and specifies that the demand for those payments must be made by a "claimant." It is clear that the applicable regulation, 11 NYCRR § 65-3.11 (a), relates -4- 16296296v.l solely to two classes of persons: (1) the applicant or one legally responsible for the applicant's necessities; or (2) a provider of health care services: An insurer shall pay benefits for any element of loss other than death benefits, directly to the applicant or, when appropriate, to the applicant's parent or legal guardian or to any person legally responsible for necessities, or, upon assignment by the applicant or any of the aforementioned persons, shall pay benefits directly to providers of health care services as covered under section five thousand one hundred two (a) (1) of this article, or to the applicant's employer for loss of earnings from work as authorized under section five thousand one hundred two (a)(2) of this article. Death benefits shall be paid to the estate of the eligible injured person. Thus, the regulation is purposefully specific, referencing "providers of health care setvlces as covered under section five thousand one hundred two (a) (1) of this article .. ," See id. The serV1ces covered under the referenced Section 5102(a)(1) include: All necessary expenses incurred for: (i) medical, hospital (including services rendered in compliance with article forty-one of the public health la'vv, whether or not such services are rendered direcdy by a hospital), surgical, nursing, dental, ambulance, x-ray, prescription drug and prosthetic services; (ii) psychiatric, physical therapy (provided that treatment is rendered pursuant to a referral), and occupational therapy and rehabilitation; (iii) any non-medical remedial care and treatment rendered in accordance with a religious method of healing recognized by the laws of this state; and (iv) any other professional health services; all without limitation as to time, provided that within one year after the date of the accident causing the injury it is ascertainable that further expenses may be incurred as a result of the injury. For the purpose of determining basic economic loss, the expenses incurred under this paragraph shall be in accordance with the limitations of section five thousand one hundred eigh t 0 f this article. Although Aetna is an entity which may compensate others who render the defined -5- 16296296v.l services, it is not a "provider of health care services," as contemplated by the language of this regulation. The Legislature's careful description of what constitutes a provider of health care services, like the rest of Article 18, has been recognized by the Court of Appeals as resting upon "an uncommonly sturdy legislative basis." Montgomery v. Daniels, 38 N.Y.2d 41, 52 (N.Y. 1975). Furthermore, the forms that are promulgated by the Insurance Department to allow for an assignment are unambiguous, referencing "Attending Physician or Other Provider of Health Service" (Form NF-3), Hospital (Form NF-4), or Hospital Facility (Form J\JF-S). These persons are, without question, providers of health care services. Courts have consistently used the term "providers of services" in the context of a physician or other health care provider. For example, in Njack Hospital v. General Motors, 8 N.Y.3d 294 (N.Y. 2007), this Court specifically discussed the processing of no-fault claims in the context of "health services providers," See id. at 299-300; see also A.M .... "';fed SerJs., P.C. v. Progressive Cas. Ins. Co., 101 A.D.3d 53, 62 (2d Dep't 2012) (noting that "the term logically denotes the specific provider or providers of health care services to the applicant/insured giving rise to the 0 claim"); Rockawcry Blvd Med P.C. v. Progressive Ins., 9 Misc.3d 52, 54-55 (2d Dep't 2005). The regulations promulgated by the Insurance Department should be afforded substantial deference. E. Acupuncture v. Allstate Ins. Co., 15 Misc.3d 104, 107-08 (Sup. Ct., App. Term 2007), aJj'd, 61 A.D.3d 202 (2d Dep't 2009). The language used in the regulation was chosen purposefully and is not susceptible to the expansion advocated -6- 16296296v.l by Aetna. Clearly, the use of the term "providers of health care services" in no way would encompass a health insurance provider. 5 ee Blue Cross of Cali., Inc. v. Am. Int'l Underwriters Corp., No. 0101922/2006, 2007 NY Slip Op 33487(U), at *2-3 (Sup. Ct., N.Y. Cnty. Oct. 15, 2007) (holding "Blue Cross, as a health insurer, is clearly not a 'provider of health care services"') (emphasis in original); see also Health Ins. Plan of Greater N. Y. v. Allstate Ins. Co., No. 0106881/2006, 2007 Slip Op 33925(U), at *2-3 (Sup. Ct., N.Y. Cnty. Nov. 20, 2007) ("HIP, as a health insurer, is clearly not a 'provider of health care services."') (emphasis in original). II. Aetna may not recover from Hanover through subrogation The Appellate Division explicidy determined that the no-fault law does not permit Aetna to recover under subrogation principles, agreeing with the Supreme Court's ruling on this argument. There is no reason to overturn that decision. Any common law remedy for subrogation or implied indemnity is inconsistent with the statutory scheme that regulates not only the time frame for reimbursement but who can seek such reimbursement. This Court has explained that "[s Jubrogation is the principle by which an insurer, having paid the losses of its insured, is placed in the position of its insured so that it may recover from the third party legally responsible for the loss." Winkelmann v. Excelsior Ins. Co., 85 N.Y.2d 577, 581 (N.Y. 1995). Here, the loss which Aetna seeks to recover is its own, not that of the insured. The reason a health insurer, like Aetna, is unable to sue the no-fault insurer under a subrogation theory was explained by the court in Blue Cross of California, 2007 -7- 16296296v.l NY Slip Op 33487 (U). In rejecting Blue Cross's effort to pursue recovery from the no-fault insurer through subrogation, the court wrote that while Blue Cross "may have a subrogation cause of action against the individual whose vehicle struck" the insured's vehicle, there is "no statutory or decisional authority which would authorize it to maintain a subrogation action against [the no-fault insurers] to recover the sums it was contractually obligated to pay to its insured. . .. To allow it to do so would create an entirely new right of action unsupported by the long settled principles of equitable subrogation." Id. at *3-4. The court's rulings in Blue Cross of California and Health Insurance Plan of Greater New York, 2007 Slip Op 33925(U), are consistent with the Opinion of the General Counsel of the Insurance Department of January 28, 2008 (the "2008 Opinion"), found at http://www.dfs.ny.gov/insurance/ogc02008/rg080108.htm. which was referenced approvingly by the Supreme Court's decision as "non-binding" but "certainly informative." In fact, this Court has acknowledged that an agency's interpretation of a regulation that it has promulgated and administers "is entitled to deference if that interpretation is not irrational or unreasonable." Matter of Gaines v. New York State Div. of Hous. & Cmry. Renewal, 90 N.Y.2d 545, 548-49 (N.Y. 1997); see also 427 IV. 51 Sf. Owners Corp. v. D.HCR, 3 N.Y.3d 337,342 (N.Y. 2004) (same). The 2008 Opinion addressed the following inquiry: Where an insured does not appeal, by either litigation or arbitration, a no-fault insurer's denial of benefits, does an HMO that pays the benefits on account of an alleged personal injury arising out of the use -8- 16296296v.l or operation of a motor vehicle have standing, as subrogee, to proceed against an automobile operator's no-fault insurer under a claim of equitable subrogation in the N ew York State Supreme Court? In responding to this question, counsel for the New York State Insurance Department cited the court's opinion in Health Insurance Plan of Greater New York and opines that an HMO "is not entitled to subrogate its recovery pursuant to New York Insurance Law § 5105(a) (McKinney 2007), because it does not fit the definition of 'insurer' under the no-fault insurance scheme." The opinion further questioned "whether the HMO performed services that would bring it within the definition of a 'h lth· 'd' d T L ~ t;1 ()')( )(1) " ea servtce proVl er un er .... llsurance aw ~ .J.J.v",",,\a • POINT II AETNA'S "PUBLIC POLICY" APPROACH WOULD EFFECTIVELY RE- WRITE THE NO-FAULT SYSTEM The no-fault system was designed to promptly and efficiently compensate insureds for their losses in motor vehicle accidents. It is also aimed at reducing the burden on the courts and providing significant reductions in the costs of automobile insurance to consumers. Pommels v. Perez, 4 N.Y.3d 566, 571 (N.Y. 2005). Yet, in its "public policy" argument, Aetna maintains that the courts below erred in following the law and applicable regulations. This is simply not the case. Over the course of the last five years, there was an annual average of more than 160,000 personal injury protection insurance claims in New York. The Legislature has determined that claims from motor vehicle accidents should be processed -9- 1629 6296v.1 pursuant to the no-fault statutory and regulatory scheme. Globe Surgical SupplY v. Geico Ins. Co., 59 A.D. 3d 129, 131 (2d Dep't 2008). The statutory authority is found in the Comprehensive Motor Vehicle Reparations Act (Insurance Law §§ 5101-5109) and the administrative procedures contained in Regulation 68, 11 NYCRR part 65, promulgated by the Superintendent of Insurance. The N ew York State Insurance Department's regulations, which implement the legislative policy, specifically identify the stakeholders essential to the no-fault system: the injured person, the health care provider and the no-fault insurance company. In l\ledical S ociery of the State of New York, 1 00 ~~ .Y.2d at 862, trJs Court explained that the time frames contained in Regulation 68 were designed to achieve "prompt compensation" of claims. The objective of efficient processing of claims benefits consumers, health care providers, and auto insurers. This Court has recognized the importance of the no-fault regulations and the timing requirements they impose. See, e.g., NY. and Presbyterian Hosp. v. Country-Wide Ins. Co., 17 N.Y.3d 586, 591 (N.Y. 2011) ("In furtherance of these objectives, 'the Superintendent of Insurance ... adopted regulations ... including circumscribed time frames for claim procedures."') (emphasis in original). At the same time, it has been acknowledged that auto insurers face difficulties from the demands placed upon them by the no-fault system's deadlines. Viviane Etienne Med. Care, PC v. Country-Wide Ins. Co., 114 A.D.3d 33, 41 (2d Dep't 2013) (describing the consequences that insurance companies face if they fail to meet timing requirements concerning claims), afj'd, 25 N.Y.3d 498 (N.Y. 2015). -10- 16296296v.1 Aetna's position on appeal suggests a result that would undermine the no-fault statute and render the regulations meaningless. Indeed, Aetna's position would vitiate the regulatory requirements that encourage the efficient and prompt processing of claims: the submission of claims by the injured party within thirty days of a covered incident, and the submission of bills by medical providers within forty-five days of the dates services were rendered. The suggestion that these requirements can be disregarded creates an untenable result. The Superintendent of the New York Insurance Department has determined that meaningful verification of no-fault claims is necessary for the operation of the no-fault program and that judgment should be respected. Feggans v. Reliance Ins. Co. of N. Y., 100 A.D.3d 570, 571 (2d Dep't 1984). Finally, Aetna is not without recourse. It may seek reimbursement from the providers for payments that it believes it made erroneously. That practice would allow Aetna to seek its remedy without placing the no-fault insurer in the position where it has no opportunity to utilize the verification procedures authorized by the regulations. -11- 16296296v.l CONCLUSION For the foregoing reasons, AlA respectfully requests that this Court affinn the decision of the Appellate Division, First Department, in all respects. Dated: November 24,2015 New York, New York 16296296v.1 By: WHITE AND WILLIAMS LLP Jay U.l-.LU~j~ 7 Times Suite 2900 New York, New York 10036 Phone: (212) 714-3063 Fax: (212) 631-1240 shapiroj@whiteandwilliams.com A tto rnrys for Amicus Curiae American Insurance Association