May 9, 2013
LK HEALTH CARE PRODUCTS INCa/a/o Jean Yves Talleyrand, Plaintiff,
GEICO GENERAL INSURANCE CO., Defendant. No. 068326/2011.
This decision has been referenced in a table in the New York Supplement.
Ilona Finkelshteyn, Esq., Brooklyn, for Plaintiff.
Law Offices of Spina, Korshin & Welden, Woodbury, NY, for defendant.
KATHERINE A. LEVINE, J.
| Notice of Motion and Affidavits Annexed || 1 |
| Notice of Cross-Motion and Affidavits Annexed || 2 |
Upon the foregoing cited papers, the Decision/Order on this Motion is as follows:
This case was submitted solely on the unanswered question of whether the No-Fault Regulations require a defendant insurance company to respond to a letter from a plaintiff medical provider objecting to an EUO request as being unreasonable.
Plaintiff LK Health Products, Inc. (" plaintiff" or " LK" ), a medical equipment company, commenced this action to recover the sum of $2,779.63 for medical supplies it provided to its assignor. Defendant GEICO General Insurance Company (" defendant" or " GEICO" ) cross moves for summary judgment based upon plaintiff's failure to show up at an EUO. Defendant sent plaintiff two EUO requests which explained that GEICO's investigation into plaintiff's business practices raised questions as to the accuracy of its billing and coding practices, its calculations, and whether the items billed for were the actual items provided to the patients.
In response to the defendant's EUO request, plaintiff sent a letter which referenced the assignor's name, the date of service and the amount outstanding. It read: " Please acknowledge this as a formal objection to the EUO request. It is my belief that you do not have a reasonable basis for an EUO request as regulation 68 requires. If there is any kind of information that you need, please request it in the form of verification request. In response to your attached letter, please find out filing receipt and verification of true ownership." Plaintiff sent a filing receipt and verification of true ownership in response to defendant's EUO letter.
In its motion plaintiff argues that defendant lacked a specific objective justification for the requested EUO and s that once plaintiff objected to the EUO, the burden shifted to the defendant to respond why its EUO request was reasonable. Plaintiff cites to 11 NYCRR § 65-3.2, entitled " Claim Practice Principles to be Followed by All Insurers," which provides that insurers are to: " (e) Clearly inform the applicant of the insurer's position regarding any disputed matter and (f) Respond promptly, when a response is indicated, to all communications from insureds, ..." in support of its position.
Defendant counters that its EUOs were properly scheduled based upon the results of its special investigation into the plaintiff's business practices. Since its initial EUO scheduling letter explained the need for the EUO, defendant argues that it did not have to respond to plaintiff's objection letter. It also argues that plaintiff's boilerplate and nonspecific objection to an EUO did not obviate plaintiff's obligation to appear.
The Court finds plaintiff's argument unavailing. First, 11 NYCRR 65-3.2 is a generic provision which applies to all claim practices by insurers. In contrast, the Insurance Department has specifically addressed the obligations of insurers regarding No-Fault EUOs. The Department found that 11 NYCRR 65-3.5(e) does not require an insurer to justify its EUO requests or include language setting forth the reasons for requiring the EUO in either its notices for the EUO or its denials based upon an EUO no show. Nor need it even file with the Insurance Department the standards it maintains for determining when EUOs will be requested. (See Office of General Counsel, NYS Ins Dept. Opinion dated 12/22/2006).
The Court first notes that plaintiff has no standing to even raise this argument since it did not request that defendant provide its reasons for seeking an EUO but rather issued an objection letter indicating that it refused to appear. Furthermore, since no justification for an EUO request is necessary, this Court rules that an insurer is not obligated to reply to a plaintiff letter refusing to appear at an EUO and requesting that a defendant justify its reason for the EUO. Here, defendant went beyond its obligation by providing its reasons for the EUO in its initial scheduling letter. Finally, to rule otherwise would sanction the parties' sending countless letters to each other, which would violate the intent of the No-Fault Law which encourages the prompt resolution of no fault claims. See New York and Presbyterian Hosp. v. Country-Wide Ins. Co., 17 N.Y.3d 586, 589 (2011); All Boro Psychological Services, P .C. v. GEICO, 38 Misc.3d 268, 272 (Civ.Ct., Kings Co.2012). The no-fault regulations were adopted by the Superintendent of Insurance in furtherance of these objectives. New York and Presbyterian Hosp., supra at 589 citing Hospital for Joint Diseases v. Travelers Prop. Cas. Ins. Co., 9 N.Y.3d 312, 317, (2007).
It is well established that a plaintiff may preserve its right to challenge the reasonableness of the EUO request at the litigation stage if it objects to a requested EUO at the time it receives the notice. Eagle Surgical Supply, Inc v. AIG Ins Co., 2012 N.Y. Slip Op 51711(U), 36 Misc.3d 153(A)(App.Term, 2nd Dept.2012); All Boro Psychological Services, P.C. v. State Farm Mutual Automobile Ins. Co ., 2012 N.Y. Slip Op 51346(U), 36 Misc.3d 135(A)(App.Term, 2nd Dept.2012). Here, the Court finds that the plaintiff timely objected to the defendant's EUO request in writing. However, the defendant provided a clear and unambiguous affidavit from its Special Investigative Unit (" SIU" ) Manager which substantiated the need for the EUO based upon an investigation it commenced of plaintiff for improper management and billing operations. Therefore, the defendant was justified in requesting the EUO of the plaintiff.
Plaintiff's failure to show up for an EUO constituted a violation of a condition precedent to coverage, which voided the contract ab initio. Accordingly, the defendant insurer is not obligated to pay the claim, regardless of whether it issued denials beyond the 30 day period. Neomy Medical, P.C. v. American Transit Ins. Co., 2011 N.Y. Slip Op 50536(U), 31 Misc.3d 1208(A)(Civ. Ct., Kings Co.2011). See Lender Medical Supply, Inc v. Hartford Ins. Co., 2012 N.Y. Slip Op 50903(U), 35 Misc.3d 1226(A)(Civ. Ct., Kings Co 2012). Since the contract has been vitiated, defendant may deny all the claims retroactively to the date of loss. Id.
In light of the above, the plaintiff's motion is denied, the defendant's motion is granted and the case is dismissed with prejudice.
The foregoing shall constitute the Decision and Order of the Court.