David M. Barshay
David M. Barshay ()

In our June 9, 2016, No-Fault Insurance Law Wrap-Up column,1 we reported on several appellate decisions concerning an insurer’s obligation to pay claims once the underlying insurance policy is exhausted. The relevant regulation, 11 NYCRR 65-3.15, which provides the order in which claims should be paid when a policy is at or near exhaustion, provides:

When claims aggregate to more than $50,000, payments for basic economic loss shall be made to the applicant and/or an assignee in the order in which each service was rendered or each expense was incurred, provided claims therefor were made to the insurer prior to the exhaustion of the $50,000. If the insurer pays the $50,000 before receiving claims for services rendered prior in time to those which were paid, the insurer will not be liable to pay such late claims. If the insurer receives claims of several providers of services, at the same time, the payments shall be made in the order of rendition of services.

Thus, if a policy is near exhaustion, an insurer that receives several claims should pay the claims in the order in which the services were rendered or in which the expense was incurred. Once the policy is exhausted, an insurer need not pay any subsequent claims.

An all-too-common scenario is where the insurer receives a claim before the policy is exhausted, denies the claim based on a policy exclusion, for example, such as lack of medical necessity or a fee schedule defense, and then receives and pays subsequent claims for later dates of service. By the time the applicant with the denied claim litigates or arbitrates its claim, the policy is exhausted. The issue arises: assuming the basis for denying the claim is later found to lack merit (e.g., at trial, the insurer fails to prove lack of medical necessity or fails to prove its fee schedule defense), is the insurer required to pay the denied claim? Under a strict reading of §65-3.15, the answer should be yes, as the denied claim was received before the policy exhausted, and the claim was for dates of service preceding the later claims that were paid. Several Appellate Term, First Department decisions reported on in our previous article, however, held otherwise. Harmonic Physical Therapy, P.C. v. Praetorian Ins. Co.,2 for example, held

Contrary to plaintiff’s contention, defendant was not precluded by 11 NYCRR 65-3.15 from paying other providers’ legitimate claims after the denial of plaintiff’s claims. Adopting plaintiff’s position, which would require defendant to delay payment on uncontested claims, or, as here, on binding arbitration awards—pending resolution of plaintiff’s disputed claim—”runs counter to the no-fault regulatory scheme, which is designed to promote prompt payment of legitimate claims.”3

In Allstate Prop. & Cas. Ins. Co. v. Northeast Anesthesia & Pain Mgt.,4 the court issued an almost identical holding. Thus, at least where an insurer issues a denial-of-claim, the Appellate Term, First Department, holds that §65-3.15 would not preclude the insurer from paying subsequent claims, and, apparently, if such payments result in exhaustion of the policy, the insurer may be relieved from paying the earlier denied claim.

Recently, the Appellate Term, Second Department in Alleviation Med. Servs., P.C. v. Allstate Ins. Co.5 had an opportunity to rule on this same issue, but held differently. In this case, the defendant insurer denied the plaintiff medical provider’s bill based on lack of medical necessity, and then paid other claims, resulting in exhaustion of the underlying policy. The defendant moved for summary judgment dismissal, based on its defense that the policy was exhausted. The lower court denied the motion and on appeal, the Appellate Term affirmed, holding:

In Nyack Hosp. v. General Motors Acceptance Corp. (8 NY3d 294 [2007]), the Court of Appeals, noting that no-fault benefits are overdue if not paid within 30 calendar days after receipt of a fully complete claim, held that the word “claims,” as used in 11 NYCRR 65-3.15, the priority-of-payment regulation, does not encompass claims that are not yet complete because they have not been fully verified in accordance with 11 NYCRR 65-3.5 (b). In contrast, in the instant case, by denying the claim on May 10, 2011, defendant implicitly declared that the claim at issue was fully verified. As we read Nyack Hosp. to hold that fully verified claims are payable in the order they are received (see 11 NYCRR 65-3.8 [b] [3]; 65-3.15; Nyack Hosp., 8 NY3d 294), defendant’s argument—that it need not pay the claim at issue because defendant paid other claims after it had denied the instant claim, which subsequent payments exhausted the available coverage—lacks merit (see 11 NYCRR 65-3.15; cf. Nyack Hosp., 8 NY3d 294; but see Harmonic Physical Therapy, P.C. v. Praetorian Ins. Co., 47 Misc 3d 137[A], 2015 NY Slip Op 50525[U] [App Term, 1st Dept 2015]).

Thus, the Appellate Term, Second Department, rejects the argument (and the holding in Harmonic Physical Therapy and in Allstate Prop. & Cas. Ins. Co., supra) that an insurer’s denial of a claim permits it to pay subsequent claims, as such out-of-order payments run contrary to the priority-of-payment provision of §65-3.15. Consistent with the Court of Appeals decision in Nyack Hosp. v. General Motors Acceptance,6 the Appellate Term, Second Department, holds that once a claim is complete (i.e., no outstanding verification requests), it must be paid in the order received. Hence, there appears to be a split in the Appellate Departments, with the First Department apparently applying a looser interpretation of §65-3.157 and the Second Department applying a stricter interpretation of §65-3.15.8

Holding that once a claim is denied, the priority provisions of §65-3.15 permit an insurer to pay claims after the denied claim and if because of those payments, the policy is exhausted, the insurer need not pay the denied claim. The Second Department, on the other hand, apparently applies a stricter interpretation of §65-3.15 and holds that once a claim is “verified” or “complete,” the insurer is required to pay claims in the order received, not in the order it chooses.

Additional Attorney Fees

Attorney fees are recoverable by a successful no-fault insurance claimant in an arbitration or lawsuit. Pursuant to 11 NYCRR 65-4.6, attorney fees are generally 20 percent of the principal benefit amount, plus interest, limited to a maximum of $1,360.9 Where either party to an arbitration requests a master arbitration appeal, a prevailing applicant is entitled to an additional attorney fee of $65 per hour, to a maximum of $650.10

A recent case, Matter of GEICO Ins. Co. v. AAAMG Leasing,11 involved a successful applicant medical provider who sought additional attorney fees beyond the two provisions noted above. In that case, the applicant arbitrated its claim for reimbursement and upon prevailing, was awarded, $850 in attorney fees, the maximum attorney fee available at the time. The respondent insurer sought master arbitration of the claim and the master arbitrator affirmed the lower arbitrator and awarded an additional $650, representing the maximum fee available for a master arbitration award. The insurer then filed a CPLR Article 75 proceeding in Supreme Court, seeking to vacate the master and lower arbitration awards. The medical provider cross petitioned to confirm the arbitration award, and sought additional attorney fees. The lower court confirmed the arbitration awards, but denied, without comment or explanation, the request for additional attorney fees. On appeal, the Appellate Division found that the relevant section of the No-Fault regulations is 11 NYCRR 65-4.10(j)(4), which provides:

The attorney’s fee for services rendered in connection with a court adjudication of a dispute de novo, as provided in §5106(c) of the Insurance Law, or in a court appeal from a master arbitration award and any further appeals, shall be fixed by the court adjudicating the matter.

As this court action was a CPLR Article 75 proceeding to vacate an arbitration award, and not a dispute de novo, which applies only when the principal award arbitration award was $5,000 or more,12 the first portion of §65-4.10(j)(4) (attorney fees in disputes de novo) could not apply to support additional attorney fees. Therefore, the only possible provision supporting additional attorney fees in that case was the second portion of §65-4.10(j)(4) (i.e., “a court appeal from a master arbitration award and any further appeals”). To that, the Appellate Division held: “The term ‘court appeal’ applies to a proceeding such as this, taken pursuant to CPLR article 75 to vacate or confirm a master arbitration award (see Matter of Hempstead Gen. Hosp. v. National Grange Mut. Ins. Co., 179 AD2d 645).” The Appellate Division then remanded to the Supreme Court for a determination of the amount of additional attorney fees to which the prevailing medical provider was entitled.13

A successful applicant may therefore be entitled to additional attorney fees for each stage of arbitration or litigation, and should be familiar with each applicable provision in the No-Fault Regulations.

Lack of Certificate Not Fatal

CPLR 2309(c) provides:

An oath or affirmation taken without the state shall be treated as if taken within the state if it is accompanied by such certificate or certificates as would be required to entitle a deed acknowledged without the state to be recorded within the state if such deed had been acknowledged before the officer who administered the oath or affirmation.

The certificate referred to in this section is commonly known as a certificate of conformity. In a recent case, Healthy Way Acupuncture, P.C. v. 21st Century Indem. Ins. Co.,14 the defendant insurer moved to dismiss, arguing that after it applied a $200 deductible contained in the underlying insurance policy, it paid the plaintiff’s claim in accordance with the applicable fee schedule. In opposition, the plaintiff argued, inter alia, that the insurance policy, which was supported by an out-of-state certification, was inadmissible because it lacked a proper certificate of conformity. The lower court granted the motion. On appeal, the Appellate Term affirmed, holding, “the absence of a certificate of conformity is not a fatal defect … as the defect may be disregarded pursuant to CPLR 200115 where a substantial right of a party is not prejudiced … In the case at bar, plaintiff failed to make any showing of prejudice.”


1. See David M. Barshay, “Policy Exhaustion; Restoring Case to Trial Calendar” NYLJ, June 9, 2016.2. 47 Misc.3d 137(A) (App. Term, 1st Dept. 2015).

3. Id. (citing Nyack Hosp. v. General Motors Accept., 8 N.Y.3d 294, 300 (2007)).

4. 2016 NY Slip op. 50828(U) (App. Term, 1st Dept. 2016)

5. 2017 NY Slip op. 27097 (App. Term 2d, 11th & 13th Jud. Dists. 2017).

6. 8 N.Y.3d 294 (2007).

7. The First Department holds that once a claim is denied, the priority provisions of §65-3.15 permit an insurer to pay claims subsequent to the denied claim, and if as a result of those payments, the policy is exhausted, the insurer need not pay the denied claim.

8. The Second Department, holds that once a claim is “verified” or “complete,” the insurer is required to pay that claim before it pays subsequent claims.

9. Formerly, there was a minimum of $60, and the maximum attorney fee per assignor, per suit or arbitration was $850. Pursuant to the Sixth Amendment to Regulation 68-D, effective for suits or arbitrations filed on or after Feb. 4, 2015, the minimum was eliminated and the maximum was increased to $1,360 for each applicant per arbitration or court proceeding.

10. 11 NYCRR 65-4.10(j)(2). Additionally, pursuant to §65-4.10(j)(3), a master arbitrator may award a higher fee if he/she “determines that the issues in dispute were of such a novel or unique nature as to require extraordinary skills or services.”

11. 2017 NY Slip op. 01552 (2d Dept. 2017).

12. 11 NYCRR 65-4.10(h)(1)(ii).

13. The Appellate Division also noted that in determining the amount of additional attorney fees, the court “shall not consider any time spent by the appellant’s attorney in applying for and substantiating his fee, as the appellant is not entitled to a “fee upon a fee.”

14. 54 Misc.3d 142(a) (App. Term 2d, 11th & 13th Jud. Dists. 2017).

15. CPLR 2001 provides that if a substantial right of a party is not prejudiced, a mistake, omission, defect or irregularity shall be disregarded.