Gary Tsirelman, P.C., Brooklyn, for Plaintiff. Law Offices of Teresa M. Spina, Woodbury, for Defendant.
Gary Tsirelman, P.C., Brooklyn, for Plaintiff. Law Offices of Teresa M. Spina, Woodbury, for Defendant.
KATHERINE A. LEVINE, J.
This matter was submitted on the unresolved issue of whether interest begins to accrue in no fault actions at the time of filing or service of the summons and complaint, and whether the tolling of interest provisions contained in the Regulations of the Commissioner of Insurance impact this determination. Here, plaintiff failed to commence the lawsuit within 30 days after receipt of defendant's denial of claim form or payment of benefits, hence triggering the tolling of interest provisions.
A number of other cases were submitted by the same parties on this exact issue. In all cases the defendant has conceded that plaintiff is entitled to judgment.
Central to this determination is whether Section 412 of the New York City Civil Court Act (“CCA”) applies to no-fault actions brought in Civil Court. Section 412, entitled Accrual of Interest, provides:
“In any action, petition, order to show cause or other proceeding wherein interest accrues from the date of the inception of the action, petition, ... said entitlement to interest shall not begin to accrue until service is completed by the actual index number being properly depicted on the summons and provided to the party to be charged with the payment of interest.”
Plaintiff contends that interest accrues on the date of filing. It argues that Section 412 is inapplicable because under the No Fault Law, interest does not accrue from the “inception of the action”—i.e. when plaintiff files the summons and complaint in court—but rather 30 days after the claim or bill is submitted to the insurer. Furthermore, plaintiff contends that the tolling of interest provision removes no fault actions from the ambit of section 412. Alternatively, plaintiff contends that CCA is inapplicable because the provisions of the CPLR governing interest supercede the interest provisions contained in the Insurance Law and regulations.
Defendant argues that Section 412 governs this matter because interest does accrue at the inception of the action, and that the date of service should trigger the accrual of interest. Defendant further argues that providers should not be allowed to obtain a windfall of interest by prolonging the time between when the filing and service dates.
It is well established that the CPLR provisions governing interest are inapplicable to no fault actions since Insurance Law § 5106 and the regulations promulgated thereto “supercede” the interest provisions contained in the CPLR. MTTR of Geico v. Lombino, 57 A.D.2d 957, 959, 394 N.Y.S.2d 898 (2d Dept.1977). See Corona Heights Medical P.C., v. Liberty Mutual In. Co., 32 Misc.3d 8, 10, 927 N.Y.S.2d 278 (App. Term, 2d Dept.2011).
Insurance Law 5106(a) and 11 NYCRR 65–3.9(a) mandate that “first-party no fault benefits are overdue if not paid within thirty days after the claimant supplies proof of the fact and amount of loss sustained”, at which point interest shall accumulate at the rate of 2% per month on all overdue benefits. However, pursuant to 11 NYCRR § 65–3.9(c), if the plaintiff fails to request arbitration or commence an action “within 30 days after the receipt of a denial of claim form or payment of benefits ..., interest shall not accumulate on the disputed claim or element of claim until such action is taken.” Furthermore, if a dispute has been submitted to arbitration or to the courts, “interest shall accumulate, unless the applicant unreasonably delays ... the court proceeding.” 11 NYCRR § 65–3.9(d).
The statutory language therefore provides two points at which interest may start to accrue on a claim submitted by a medical services provider. If the provider commences a no fault action within 30 days after the receipt of a denial of claim form, interest will start running on the date that the claim is overdue—30 days after the claim is presented to the defendant for payment until the claim is paid. See LMK Psychological Services, P.C. v. State Farm Mutual Auto., 12 N.Y.3d 217, 223, 879 N.Y.S.2d 14, 906 N.E.2d 1046 (2009); Corona Heights Medical, supra 32 Misc.3d at 9, 927 N.Y.S.2d 278. Where the defendant has not established the proper mailing of the denial of claim form, the claim is considered not to have been denied, payment of benefits is considered overdue, and interest on the claim will commence “30 days after the claim was presented to the defendant for payment” until the claim is paid. Corona Heights Medical, supra, 32 Misc.3d at 10, 927 N.Y.S.2d 278. However, where the provider fails to commence the lawsuit within 30 days after receipt of the denial form, whether the denial is timely or not, interest is tolled until the commencement of the lawsuit. LMK Psychological, supra, 12 N.Y.3d at 223, 879 N.Y.S.2d 14, 906 N.E.2d 1046.
This Court rules that either scenario falls within the scope of CCA 412. Professor David D. Siegel asserts that one of the majorimpetus' behind the promulgation of Chapter 452 of the Laws of 2005, which amended §§ 400 and 409 of the CCA to make commencement by filing applicable to the civil, district and city courts. and added § 412, were abuses in the no fault system. See, Siegel's Practice Rev., No. 164 (August 2005) and 165. Under the old commencement by service system, no fault providers would serve hundreds of summons and complaints without ever obtaining index numbers or filing the summons and proof of service in the clerk's office. “This meant that the clerk's office had nothing what ever in its files to indicate that the case was there, and the civil court lost revenue by not collecting filing fees.” Siegel's Practice Review, # 165 at pp. 2, 3. Thus, under section 412, a medical service provider is entitled to interest only after “service is completed by the actual index number being properly depicted on the summons.” Id.
Professor Siegel also asserts that 11 NYCRR § 65–3.9 served as the model for the legislature's language in Section 412 making the commencement of the action the point at which interest starts accruing. Siegel's Practice Review, # 165, September 2005. The staff of the civil court, according to Siegel, “pinpointed the claim the legislature had in mind with the insertion ... of § 412.” They found “an insurance department regulation that makes the inception of the action the starting time of interest.” Siegel, supra, # 165 at p. 1.
The tolling provision contained in 11 NYCRR § 65–3.9(c) does not take no fault actions outside the ambit of section 412. Section 412 merely requires that once the action is commenced by filing, the plaintiff must complete service by providing to the party charged with the payment of interest a summons with the actual index number being properly depicted affixed upon it before if interest can start accruing. This requirement merely ensures that the chaos and lack of notice which existed prior to the amendment of CCA §§ 400 and 409 do not resurface.
Furthermore, the tenets of statutory construction mandate that the Court review section 412 in light of the mischief sought to be remedied by the new legislation and to construe it in such a fashion as will suppress the evil and advance the remedy. (Statutes, § 95). See, N.Y. Life Ins. Co. v. State Tax Commission, 80 A.D.2d 675, 436 N.Y.S.2d 380 (3rd Dept.1981). Similarly, all parts of a statute are to be read and construed together in order to determine the legislative intent. Statutory words must be read in their context and words of a section should be interpreted with reference to the entire scheme. Statutes, § 97. See, In re Jude F. (Anonymous), 291 A.D.2d 165, 170, 740 N.Y.S.2d 80 (2d Dept.2001).
The “core objective” of the no fault automobile insurance system was “to provide a tightly timed process of claim, disputation and payment.” LMK Psychological Services, P.C. v. supra at 221, 879 N.Y.S.2d 14, 906 N.E.2d 1046 citing Hosp. for Joint Diseases v. Travelers Prop. Cas. Ins. Co., 9 N.Y.3d 312, 319, 849 N.Y.S.2d 473, 879 N.E.2d 1291 (2007). Therefore, an insurer's failure to pay or deny a claims within the requisite time period of 30 days “carries significant consequences, including the payment of attorneys' fees and interest.” LMK Psychological, supra, 12 N.Y.3d at 222, 879 N.Y.S.2d 14, 906 N.E.2d 1046.
Plaintiffs are under a similar duty to proceed expeditiously. “To do otherwise would reward a recalcitrant plaintiff with a windfall of punitive interest payments and would contravene the legislative goal of promptly resolving no fault claims.” Arzu v. NYC Transit Authority, 35 Misc.3d 210, 213, 936 N.Y.S.2d 877 (Civ. Ct. Kings Co.2012); Devonshire Surgical Facility, et al. v. American Transit Ins. Co., 2011 N.Y. Slip Op. 50793(U), 2011 WL 1678433 (Civil Ct. N.Y. Co.2011). The Superintendent of Insurance has interpreted the tolling of interest provision contained in subdivision (c) to apply, regardless of whether the particular denial at issue was untimely, so as to encourage applicants to swiftly seek to resolve any dispute, LMK Psychological Services, supra, 12 N.Y.3d at 223–24, 879 N.Y.S.2d 14, 906 N.E.2d 1046. See also, Canarsie Med. Health, P.C. v. National Grange Mut. Ins. Co., 21 Misc.3d 791, 797, 865 N.Y.S.2d 499 (Sup. Ct. N.Y. Co.2008)(11 NYCRR § 65–3.9 contains a “built-in protection against potential delay by providing that where an applicant chooses not to timely press forward to seek redress for a denial, there will be no interest penalty assessed against the insurer until such time as the applicant chooses a remedy. This is in keeping with the intent of the No–Fault Law as a whole because it seeks to encourage the parties moving forward toward a quick resolution, while not economically favoring one side or the other”).
CCA § 412's mandate that interest commence accruing upon service similarly serves as an incentive for plaintiff to promptly pursue and resolve no fault claims. It is to the plaintiff's benefit to serve the summons and complaint as quickly as possible after filing the case in court so as to start accruing interest. These same goals are fulfilled by the tolling provision, which acts as an incentive for the provider to rapidly commence the lawsuit, even where it has failed to initiate the action within 30 days of receipt of the denial.
Since plaintiff waited over 30 days after it received a denial to initiate a no fault action, interest shall commence accruing on the date that service of the summons and complaint was completed in accordance with CCA § 412.
The foregoing shall constitute the Decision and Order of the Court.