If an insurer requires additional verification to process a no-fault claim, it "shall be requested within 15 business days of receipt of the prescribed verification forms." 11 NYCRR 65-3.5(b). "The insurer is entitled to receive all items necessary to verify the claim directly from the parties from whom such verification was requested." 11 NYCRR 65-3.5(c). Moreover, "if any requested verifications [sic] has not been supplied to the insurer 30 calendar days after the original request, the insurer shall, within 10 calendar days, follow up with the party from whom the verification was requested, either by telephone call, properly documented in the file, or by mail. At the same time the insurer shall inform the applicant and such person's attorney of the reason(s) why the claim is delayed by identifying in writing the missing verification and the party from whom it was requested." 11 NYCRR 65-3.6(b).

While an insurer ordinarily has 30 days from receipt of a claim to pay or deny it, upon making a request for additional verification, such time period is tolled until the insurer receives all relevant information requested. Ins. Law §5106(a); 11 NYCRR 65-3.8; see Nyack Hospital v. General Motors Acceptance, 8 N.Y.3d 294 (2007); Hosp. for Joint Diseases v. New York Cent. Mut. Fire Ins. Co., 2007 NY Slip Op 08038 (2d Dept. 2007) ("Since the requested verification was not provided, the 30-day period within which the defendant was obligated to pay or deny the hospital's claim did not begin to run."); Beta Supply v. Government Empls. Ins. Co., 20 Misc.3d 129(A) (App. Term 1st Dept. 2008) ("Inasmuch as an insurer is not required to pay or deny a claim until it receives verification of all relevant requested information … and it being undisputed on this record that plaintiff did not respond to defendant's verification requests, plaintiff's claim for payment was premature.").

While an insurer need not pay a claim with a pending verification request, such claim is deemed an open claim, which may not be closed and which remains in that state indefinitely until the requested verification is received, if ever. Thus, in response to insurers' requests for a change, and noting that "[t]he current regulation imposes no deadline for responding to a verification request nor permits an insurer to deny a claim if it never receives the requested verification, allowing some claims to remain open indefinitely" (NYS Register, DFS Rulemaking Activities, May 6, 2012, p.6), the Department of Financial Services amended the No-Fault Regulations, effective April 1, 2013, to add a new Subsection O to §65-3.5, to provide:

An applicant from whom verification is requested shall, within 120 calendar days from the date of the initial request for verification, submit all such verification under the applicant's control or possession or written proof providing reasonable justification for the failure to comply. The insurer shall advise the applicant in the verification request that the insurer may deny the claim if the applicant does not provide within 120 calendar days from the date of the initial request either all such verification under the applicant's control or possession or written proof providing reasonable justification for the failure to comply. This subdivision shall not apply to a prescribed form (NF-form) as set forth in Appendix 13 of this Title, medical examination request, or examination under oath request. This subdivision shall apply, with respect to claims for medical services, to any treatment or service rendered on or after April 1, 2013 and with respect to claims for lost earnings and reasonable and necessary expenses, to any accident occurring on or after April 1, 2013. (Fourth Amendment to 11 NYCRR 65-3, Insurance Regulation 68-C)

Section 65-3.8(b)(3), which prohibits an insurer from issuing "a denial of claim form (NYS form N-F 10) prior to its receipt of verification of all of the relevant information" was similarly amended to provide, inter alia:

However, an insurer may issue a denial if, more than 120 calendar days after the initial request for verification, the applicant has not submitted all such verification under the applicant's control or possession or written proof providing reasonable justification for the failure to comply, provided that the verification request so advised the applicant as required in section 65-3.5(o) of this Subpart. (Fourth Amendment to 11 NYCRR 65-3, Insurance Regulation 68-C)

Thus, with certain exceptions (the amended regulation specifically excludes requests for submission of statutory No-Fault forms, medical examinations and examinations under oath), an insurer would henceforth (for claims for services on or after April 1, 2013) be permitted to deny a claim if the applicant fails to properly respond to the verification request within 120 days of the initial request.

The impact of this regulatory amendment is clear in some respects and not so clear in others. For example, an insurer would clearly not be permitted to deny a claim under this rule if the applicant medical provider is given less than 120 days to respond to the verification request, and a denial issued before the 120-day period has elapsed would necessarily be precluded or be deemed a nullity. Moreover, the provision for a follow-up request, as cited above in §65-3.6(b) still stands, and if an insurer fails to issue such follow-up request, the request itself, and therefore the 120-day denial, must be deemed a nullity.

One issue that arises from time to time is what, if any, is the time deadline for an insurer to deny a claim under the 120-day Rule? If the insurer properly sends initial and follow-up verification requests and the applicant fails to properly respond (by either submitting the relevant verification in its possession or control or providing reasonable justification for its failure to do so) within 120 days of the initial request, when is the denial due? Does the 30-day denial rule apply? If so, when the does the 30-day period to pay or deny start? Must the insurer deny the claim within the 30-day period after the 120-day verification period has expired?

The recent case of Chapa Prods. v. MVAIC, 2019 NY Slip Op 29341 (App. Term 2d, 11th & 13th Jud. Dists. 2019) addressed this issue. In that case, the defendant insurer mailed an initial and follow-up verification request to the plaintiff medical provider who failed to properly respond to the requests. The defendant issued a denial of claim, 208 days after the first request, based on the plaintiff's failure to properly respond. The plaintiff argued that such denial was late and therefore, the defense presented was precluded. The lower court granted the defendant's cross-motion for summary judgment and dismissed the case with prejudice. On appeal, the Appellate Term held, with respect to the 120-day rule, "the regulations do not specify a time frame for issuing such a denial. As a general rule, '[n]o-fault benefits are overdue if not paid within 30 calendar days after the insurer receives proof of claim.' 11 NYCRR 65-3.8(a)(1). Defendant implicitly argues that, in the absence of a required time frame, an insurer should be allowed to issue such a denial at any time after the 120-day period has passed. We disagree." Id.

Analogizing this matter with an EUO or IME no-show defense, in which the insurer has 30 days from the last scheduled missed EUO or IME to deny the claim, the court held "that the deadline to issue a denial based upon the ground that an applicant failed to provide complete verification (see 11 NYCRR 65-3.5(o); 65-3.8(b)(3)) is 150 days after the initial request for verification—or 30 days after the insurer is permitted to conclude that there was a failure to fully comply with a verification request, i.e., the date on which the 120-day period ends." Id. As the denial in that case was issued over 50 days late, the "defendant did not preserve the precludable, complete defense that plaintiff had not provided all of the requested verification within 120 days after the initial verification request." Thus, the court held "that a denial of claim form issued following the expiration of the 150-day period after the issuance of the initial request for verification is a nullity with respect to that defense." The court, nonetheless, further held that as the plaintiff failed to fully and properly respond to the verification requests, the claim is still open, the suit was premature and, therefore, the case was dismissed without prejudice.

Under the holding of Chapa Prods., an insurer who might otherwise be inclined to allow an applicant additional time (a 30-day extension, for example) to submit the requested verification would be unable to do so, because if with the extension of time, the applicant still fails to properly respond, the insurer would be precluded from denying the claim, as its denial would be untimely. Thus, the insurer would be compelled to stick with the 120-day schedule, not grant an extension and issue a denial within the following 30 days. Thus, some may argue that the holding of this case may be too rigid and detrimental to both applicants and insurers. A response to this argument is that the goal of the statutory no-fault scheme is the creation of a "swift, uncontested resolution of no-fault claims" (Viviane Etienne Med. Care, P.C. v. Country-Wide Ins. Co., 25 N.Y.3d 498 (2015)) and, like the 45-day deadline to submit medical claims or the 30-day period to pay or deny claims, the strict deadline imposed by this regulation is both intentional and beneficial to all parties.

Worker's Compensation Defense

As between worker's compensation benefits and no-fault insurance benefits, worker's compensation is primary. Where there is a triable issue of fact as to whether a claimant's automobile accident injuries are covered by worker's compensation insurance, primary jurisdiction rests with the Worker's Compensation Board to make that determination. LMK Psychological Serv., P.C. v. American Tr. Ins. Co., 64 A.D.3d 752 (2d Dept. 2009); Devonshire Surgical Facility, L.L.C. v. Hereford Ins. Co. (30 Misc.3d 129(A) (App. Term 1st Dept. 2010); AEE Med. Diagnostic, P.C. v. Travelers Prop. Cas. Co. of Am., 57 Misc.3d 131(A) (App. Term 1st Dept. 2017).

While some have argued that a worker's compensation defense is a coverage defense and therefore not subject to the preclusion rule, the court in Westchester Med. Ctr. v. Lincoln Gen. Ins. Co., 60 A.D.3d 1045 (2d Dept. 2009), disagreed and held "the defendant's possible entitlement to offset any no-fault benefits it pays by any recovery pursuant to a Workers' Compensation claim does not constitute a defense of lack of coverage, which is not subject to the requirement that there be timely service of the disclaimer."

Recently, in the case of Y.A.M. Med. Supply v. Global Liberty Ins. Co. of NY, 65 Misc.3d 147(A) (App. Term 2d, 11th & 13th Jud. Dists. 2019), the defendant insurer cross moved to hold the action in abeyance pending a determination by the Worker's Compensation Board as to whether the injured person is eligible for worker's compensation benefits. The lower court denied the cross-motion and the defendant insurer appealed. The Appellate Term affirmed and held, consistent with Westchester Med. Ctr.:

The defense that the assignor is eligible for workers' compensation benefits is subject to preclusion … As defendant failed to demonstrate that it had timely denied plaintiff's claims on the ground that the assignor was injured in the course of his employment … defendant's cross motion was properly denied.

David M. Barshay is a member of Sanders Barshay Grossman in Garden City. Steven J. Neuwirth, a member of the firm, assisted in the preparation of this article.