Fair Price Med. Supply Corp.
Travelers Indem. Co.
Carol R. Finocchio, for appellant.
Jeff Henle, for respondent.
New York Central Mutual Fire Insurance Company et al.; New York Insurance Association, Inc., amici curiae.
Cesar Nivelo was injured on May 8, 2001 when the car that he was driving was rear-ended. On May 9, 2001, a chiropractor prescribed certain durable medical equipment and orthotic appliances to alleviate his pain and speed his recovery; on June 18, 2001, a physiatrist prescribed additional orthopedic devices and portable physiotherapeutic equipment for Nivelo. Plaintiff Fair Price Medical Supply Corporation claims to have furnished Nivelo with all these items, which included a Transcutaneous Electrical Nerve Stimulator, an infrared heat lamp, a massager, a heating pad, a cervical pillow, and a lumbosacral support. On May 11, 2001 and June 22, 2001, Nivelo executed "Assignment of Benefits" forms to transfer to Fair Price his right to recover the cost of these medical supplies. The forms enumerated the prescribed items under the heading "Equipment Delivered" and the subheading "I have received [the] following supplies."
By claims dated September 18, 2001 and October 13, 2001, Fair Price asked for payment of Nivelo's no-fault benefits from defendant Travelers Indemnity Company, his no-fault insurance carrier. These two claims itemized the medical supplies allegedly received by Nivelo in May and June 2001, and sought reimbursement in the total amount of $1,638.98. By letter dated September 26, 2001, Travelers informed Fair Price that it was "unable to process" the claim for services rendered Nivelo in May 2001 "[p]ending verification of the facts of the loss including statements from all parties involved" and "a letter of medical necessity for Supplies." By the same form letter dated October 19, 2001, Travelers also requested a letter of medical necessity for the supplies claimed to have been furnished to Nivelo in June 2001.
On November 6, 2001, Fair Price mailed Travelers the requested letters of medical necessity from the chiropractor and the physiatrist, as well as consultation reports from the physiatrist and the internist who referred Nivelo to the physiatrist. Travelers did not pay the two claims, and did not deny them until August 15, 2003 — nearly two years after they were first submitted.
Travelers' denial was based upon item number 190 in a 10-page questionnaire entitled "No Fault Statement," dated October 4, 2001, less than 30 days after Fair Price made the first claim, and nine days before it made the second one. Item number 190 asked "What medical supplies did you receive?" In response, the word "none" was handwritten. The questionnaire purported to record information given by Nivelo to Travelers' investigator, and was signed by Nivelo, a witness and a Spanish translator.
By summons and complaint dated August 26, 2003, Fair Price commenced this action in the Civil Court of the City of New York to recover the cost of the medical supplies it claimed to have provided Nivelo in May and June 2001. In an answer dated October 14, 2003, Travelers pleaded, as one of its affirmative defenses, that Fair Price's request for reimbursement was "properly denied by [Travelers] based upon a statement from Cesar Nivelo that no supplies were ever furnished by [Fair Price] to Mr. Nivelo."
Fair Price subsequently moved and Travelers cross-moved for summary judgment. Travelers took the position that, at a minimum, the "No Fault Statement" created a triable issue of fact as to whether Nivelo ever received the prescribed medical supplies. Travelers argued further that the defense of fraud was available even assuming its disclaimer was insufficient or untimely. In a decision and order dated March 3, 2004, Civil Court denied both motions on the ground that Travelers had raised a triable issue of fact, and that Travelers' untimely denial of coverage did not preclude it from asserting fraud as a defense. Fair Price appealed.
The Appellate Term, with one Justice dissenting, reversed Civil Court's order denying Fair Price summary judgment, granted the motion in the principal sum of $1,628.98, and remanded the case for a calculation of statutory interest and attorneys' fees pursuant to Insurance Law § 5106(a) and its implementing regulations. The two-Justice majority opined that the "clear implication" of Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co. (90 N.Y.2d 274');">90 N.Y.2d 274 ) was that "a defense based on a provider's alleged fraudulent claim for no-fault benefits is precluded by an insurer's failure effectively to invoke its remedies in the 'contestable period,' one of the 'tradeoff[s] of the no-fault reform' which the Legislature recognized as the cost of providing 'prompt uncontested, first-party insurance benefits'" (Fair Price Med. Supply Corp. v Travelers Indem. Co., 9 Misc.3d 76');">9 Misc.3d 76, 79 [App Term, 2d and 11th Jud Dists 2005], quoting Presbyterian, 90 N.Y.2d at 285 [alteration in Appellate Term opinion]). The dissenting Justice protested that this reading of Presbyterian "mandate[d] the payment of an intentional false claim for treatment, services or medical equipment that was never provided, i.e., pure fraud (classic fraud)" (Fair Price Med. Supply Corp., 9 Misc.3d at 81). The Appellate Term subsequently granted Travelers permission to appeal to the Appellate Division.
The Appellate Division unanimously affirmed, noting that
"[i]n this case, unlike a staged-accident case, there was an actual automobile accident, which caused Nivelo to sustain actual injuries, for which he was treated by actual health care providers, who issued actual prescriptions for medical supplies to treat his injuries. Nivelo's undisputedly real accident and resulting injuries triggered the coverage provided for in his insurance policy with the defendant" (Fair Price Med. Supply Corp. v Travelers Indem. Co., 42 A.D.3d 277');">42 A.D.3d 277, 284 [2d Dept 2007]).
"In sum," the Appellate Division concluded, "while [Travelers] certainly was entitled to contest [Nivelo's] claim as fraudulent, it was required to do so within the rules of the no-fault system," which impose tight deadlines (id. at 286). The Appellate Division thereafter granted Travelers leave to appeal, and asked us whether its opinion and order was properly made. We now affirm, and answer the certified question "Yes."
Just recently, in Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co. (9 N.Y.3d 312');">9 N.Y.3d 312 ), we discussed the legal framework governing this appeal. There, we noted that "New York's no-fault automobile insurance system is designed 'to ensure prompt compensation for losses incurred by accident victims without regard to fault or negligence, to reduce the burden on the courts and to provide substantial premium savings to New York motorists'" (id. at 317, quoting Matter of Medical Socy. of State of N.Y. v Serio, 100 N.Y.2d 854');">100 N.Y.2d 854, 860  [upholding regulations reducing time frames for claiming and proving entitlement to no-fault benefits]). "In furtherance of these goals, the Superintendent of Insurance has adopted regulations implementing the No-Fault ...