As 2006 draws to a close, the Appellate Dvision, 2d Department has given us one of the most important no-fault decisions of the year. In Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 2006 NY Slip Op 09604 (App. Div, 2d Dep't, 2006), a unanimous Court overturned that portion of the prior Appellate Term, 2d Dep't decision that held that an assignor's failure to appear for an independent medical examination ("IME") prior to the subject services having been rendered results only in a rebuttal of the presumption of medical necessity in the favor of the plaintiff provider. Instead, although agreeing with the concurrence/dissent of Golia, J. in the App. Term Fogel case and the Appellate Term, 1st Department decision in Inwood Hill Med., P.C. v General Assur. Co., 2005 NYSlipOp 25437 (App. Term, 1st Dep't, 2005), the App. Div. has gone even further. They now hold that failure to appear at an IME is a violation of a condition precedent to no-fault coverage, regardless of when the no-show occurred as compared with the date(s) of service of a given claim. Indeed, the App. Div. now holds that a carrier may deny claims "retroactively to the date of loss" when a no-show occurs.
This has numerous potential implications. A denial of coverage retroactive to the date of the loss should render the defense one that survives preclusion regardless of whether it is preserved in a timely denial of claim form. See generally, Central General v. Chubb, 90 N.Y.2d 195 (1997). Other explicit conditions precedent to coverage listed in the PIP Endorsement (11 NYCRR § 65-1.1) should also be subject to the same rule.
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Interesting post about a very important decision. But I have to disagree with your final comment regarding the applicability of Central General v. Chubb, in which you state that the failure to appear at an IME, a condition precedent to coverage, qualifies as an exception to the preclusion rules established under Presbyterian. The violation of a policy conditon does not, in fact, constitute a coverage question, as conceived under Chubb. Rather, Chubb address circumstances under which no coverage exists, e.g., where an injury does no arise out of a motor vehice accident. In the case of an IME "no show", there is indeed existing no-fault coverage... it is only a particular claimed loss that is excluded for failure to comply.
The Central General v. Chubb defense applies to situations where "a particular claimed loss" is excluded from coverage, though. As the Court of Appeals held in Central General, "[t]he insurer is not precluded, despite its untimely disclaimer, from raising as a defense its denial of liability on the ground that the services rendered to treat the injuries at issue did not arise from a covered accident." (Emphasis added.) In that case, it was alleged that the assignor's injuries were pre-existing, and so were not related to a covered loss. The App. Div. has gone on to hold that this applies when the circumstances of the loss are such that it is not covered because it is outside the definition of a covered loss (e.g., because it was non-accidental). So, under Central General, the fact that a single given loss was not a covered accident due to the specific circumstances thereof is sufficient to provide the carrier with a non-precludable "coverage" defense.
In Fogel, the App. Div. has now held that appearance at an IME is a "condition precedent to the insurer's liability on the policy." Similarly, the App. Term, 1st Dep't held in Inwood Hill that "attendance at a medical examination is a condition of coverage."
As a result, if an eligible injured person fails to satisfy a condition precedent to coverage, it should be the case that the subject alleged loss is not a covered incident as to that person. Accordingly, the carrier should not be precluded from pleading as an affirmative defense, no matter the "timeliness," that there is no coverage as to a given person for a given loss.
In the Chubb case, the Court sought to carve out an exception in very specific limited situations where coverage simply does not exist (and cannot therefore be created), and in no other circumstances. That provision is to be narrowly construed, and was never intended to apply where there was any type of failure to comply under an existing policy.
(continuation of above)
...as in the Presbyterian case, where a defense predicated upon exclusion from coverage as a result of intoxication was nevertheless precluded as untimely.
That all sounds nice to say, but I don't see the relevant legal distinction between "situations where coverage simply does not exist" and situations where conditions precedent to coverage have failed to come to be, resulting in a lack of coverage. The Presbyterian/Central General dichotomy is one between situations where coverage is present but a defense exists to the cause of action (in Presbyterian) and where the subject loss is not covered or the injuries are not related to such a covered loss (in Central General). When, how, or why the lack of coverage occurs is irrelevant. Presbyterian does not provide that the 30-day rule applies for some special class of cases where "there-is-no-coverage-but". There is no "but." If there is no coverage, there is no coverage. And if there is no coverage, a carrier may not be precluded from interposing such a defense, "timeliness" notwithstanding.
Maybe what's hanging you up is that not all types of failure to comply with the terms of a policy results in a lack of coverage. Only those policy provisions listed as conditions precedent in the PIP Endorsement should qualify. For example, you would be correct that a provider's failing to submit charges that comply with the Workers Compensation Fee Schedule would not qualify as a coverage defense, as it does not preclude coverage. Similarly, it would not be a coverage defense that a medical provider failed to use an NF-3 claim form. However, attendance at an IME is denominated as a condition precedent to coverage in the PIP Endorsement, and failure to comply therewith results in a lack of coverage for a given loss for a given person. Whether this somehow comports with the intention of the Court in Central General is rather beside the point. If anything, a lack of coverage resulting from the failure to comply with a condition precedent falls much more squarely in the language of Central General than the fact that the services were rendered by an independent contractor or pursuant to a self-interested referral, both of which have been held to be non-precludable defenses by the Appellate Term.
The Presbyterian distinction concerning exclusions is of no avail in this situation. A condition precedent is one that must be fulfilled before coverage exists. When an exclusion is used, coverage is conceded, but the insured is excluded from receiving benefits for some other reason. Indeed, the PIP Endorsement's differing categorization of exclusions versus conditions precedent should highlight this distinction. When a condition precedent has failed to occur, unlike when an exclusion occurs, coverage has never attached.
In arbitration and in court, late denials based upon a failure to comply with requests for IME have been virtually uniformly [and properly] precluded. How would you explain this?
1. I would strongly disagree with your "uniformly" assertion. I have appeared before Arbitrator Joseph O'Brien, for example, who held at that time that, when a carrier denies it as such, an IME no-show is a violation of a condition precedent to coverage.
2. There's no necessary connection between the law and what arbitrators/judges do. A slew of arbitrators still hold that medical necessity is an element of a claimant's prima facie case, even where such defense is precluded.
3. The App. Div. Fogel decision is a new one, so it's unclear yet what arbitrators/judges plan on doing with it.
4. If experience practitioners can cause such a fuss over these distinctions, can we really expect arbitrators/judges to be effective at sorting through it all?
Again, I think we can get overly technical and miss the judicial intent behind Chubb, which was motivated by the desire to ensure that Presbyterian did not result in the creation of coverage and/or payment of claims under untenable circumstances (e.g., staged accidents, and more recently expanded to include cases of improper licensing, self-referrals, etc.) That aside, I agree with your (1) above and haven't stated otherwise, i.e., failure to submit to IME is a breach of a condition precedent to coverage, which is completely separate and apart from the issue of whether this defense is subject to preclusion. Anyway, as you've said, we'll have to wait and see...
If failure to attend an IME truly is a failure to satisfy a condition precedent to coverage, then all of the legal effects of a "normal" lack of coverage defense must also come into play. Otherwise, calling attendance at an IME a condition precedent to coverage is just meaningless lip service.
If a lack of coverage is a non-precludable defense, then so must an IME no-show be. If the preclusion rule applies, then it isn't a coverage defense after all. As I stated earlier, we don't have a "there-is-no-coverage-but" defense. Either there is coverage, or there isn't. If there isn't coverage, Central General tells us that the defense isn't subject to the preclusion rule. There is no special sub-exception to the Central General rule for situations where the lack of coverage arises from the failure to satisfy a condition precedent. Upon a failure to satisfy a condition precedent, an EIP loses coverage for a given loss. This is made very clear when the App. Div. says in Fogel that the carrier may deny retroactively to the date of loss - there was never coverage for the loss in the first place. When that occurs, any injuries treated were not causally-related to a covered incident. If we take all of those legal effects seriously, then this puts us in the explicit language of Central General - no tribute need be paid to some other intent of the Court of Appeals. If this is overly-technical, then we might as well toss out the Regs and all case law and go with our gut guesses regarding intent every time out.
However the lack of coverage arises, and whatever we would like to state about judicial intent, a carrier may not be precluded from interposing such a defense, regardless of the purported timeliness of any denials. If you truly agree that an IME no-show is a condition precedent to coverage, then you would have to also concede that the preclusion rule doesn't apply - we can't split the baby. In the end, to have it your way would morph conditions precedent to coverage into mere policy exclusions where coverage is conceded. And then what of the intent of the Mandatory PIP Endorsement?
Just as an afterthought, I re-read Chubb, as well as Zappone v. Home Ins. Co., 55 NY2d 131, and don't think the Court could be clearer than when, in allowing that an insurer could at any time assert a lack of coverage defense where the alleged injury did not arise out of an insured incident, it went on to say, "The denial of liability based upon lack of coverage within the insurance agreement...is distinguishable from disclaimer attempts based on a breach of a policy condition". This distinction is made repeatedly in both cases.
Thanks for the mention in today's entry... and have a happy new year!
Not to beat a dead horse moreso than we have already, there is a distinction between the violation of a "normal" policy condition (that is is, an exclusion or a condition subsequent - e.g., that the driver was intoxicated or that the fees for medical services be calculated as per the Workers Comp fee schedule) and a condition precedent to coverage.
The Court of Appeals indicated as such in Zappone. They concluded that "the Legislature in using the words 'denial of coverage' did not intend to require notice when there never was any insurance in effect." Zappone v. Home Ins. Co., 55 N.Y.2d 131, 138 (1982). If a condition precedent to coverage has been violated, there was never any insurance in effect.
"Indeed, a distinction is to be drawn between the denial of a claim based upon an exclusion from coverage as opposed to noncoverage. In the former situation, the policy covers the claim but for the applicability of the exclusion and, therefore, a notice of disclaimer is required. In the latter, the claim is not within the ambit of the policy and, therefore, mandating coverage on the basis of an insurer's failure to serve a timely notice of disclaimer would be to create coverage where none previously existed." Greater N.Y. Mut. Ins. Co. v. Clark, 205 A.D.2d 857, 858 (3d Dep't, 1994) (citations omitted), app. den., 84 N.Y.2d 807 (1994).
"[W]here the coverage of the policy does not attach, either because no contract of insurance was made with the person and for the vehicle involved, or where the policy had been terminated by act of the insured or cancellation by the insurer, there is no duty to disclaim." Aetna Casualty & Surety Co. v. Mari, 102 A.D.2d 772, 774 (1st Dep't, 1984) (emphasis added), citing to Zappone.
"The requirement that a claimant file a sworn statement with the insurer within 90 days after the accident is a condition precedent to coverage under the uninsured 'hit and run' motorist endorsement of the subject automobile policy. The appellant's failure to file such a statement is therefore fatal to her claim for benefits thereunder.
* * *
Contrary to the appellant's contention on appeal, Aetna was not required to disclaim coverage pursuant to Insurance Law § 3420 (d) since, under the terms of the policy, the failure to file the 90-day statement resulted in noncoverage as opposed to rendering her claim excluded from coverage." Aetna Life & Cas. v. Ocasio, 232 A.D.2d 409 (citations omitted, emphasis added).
The Fogel court stated that "an insurer may deny a claim retroactively to the date of loss for a claimant's failure to attend IMEs "when, and as often as, the [insurer] may reasonably require" (11 [*3]NYCRR 65-1.1)."
Other cases have held that a request for an IME is a request for verification and that therefore, you must make two requests for the IME. If the EIP never shows for the IME (on the first or second notice), the IME verification is still outstanding and, under the regulations, an insurer "shall not issue a denial of claim form prior to its receipt of verification of all of the relevant information requested pursuant to section 65-3.5 of this subpart." 65-3.8(b)(3).
Since you can't deny for outstanding verification, how does an insurer deny the bill if the court considers the failure to appear for the IME to be verification? Thanks.
IME's appear in the Reg as both a condition AND verification. I would say that the insurer has the perogative to treat it as either. According to Fogel, the MAY deny benefits retroactively based upon a failure to comply.
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