Burdens of Proof Under Regulations 68 and 83

There were a few decisions last week discussing the burdens of proof on various issues covered by AAA.  

 

Elite Medical Supply and Geico Insurance Company, AAA Case No. 412009032148 (Thomas McCorry, Awarded December 11 2009) discussed the burden of proof each party has when a claim is denied based on a lack of medical necessity.  This one, decided by Arbitrator McCorry, was a dispute over the timely denial of payment for a lumbar traction belt.  Respondent was found to have met it’s initial burden of proof, as the denial was based on an IME in which the examining physician stated that there was no need for additional medical supplies.  The burden therefore shifted to the Applicant/provider.

 

The provider stated on its letter of medical necessity that the belt prescription was “due to L-5 disc herniation with radiculopathy.”  Arbitrator McCorry stated that he understood that description to be “the diagnosis rather than an explanation as for why the belt was being prescribed.”  In making his decision, the Arbitrator stated:

“I find that the Respondent met its burden of shifting to the Applicant the burden of justifying the prescription of the lumbar traction belt.  I find further that the Applicant by stating a diagnosis rather than an explanation or reason for the prescription, did not meet its burden of proof. “

The insurer’s denial was therefore upheld.

 

Conversely, the burden of proof regarding a fee schedule defense is, and remains, on the Respondent.  It does not shift to the Applicant to justify the higher fee, and, similar to the advice given to the attendees at last month’s No-Fault seminar, is another good reason for Respondents to always be ready with the correct fee-schedule amount.

 

In Angela M. Patruno, LMT and Allstate Insurance Company, AAA Case No. 412009029305 (Kent Benziger, Awarded December 11, 2009) Respondent made a partial payment of the claim based on the argument that the fee scheduling for the massage therapist’s services – services not specifically provided for in the worker’s compensation fee schedule – was improperly high.

 

While Insurance Department Regulation No. 83, Section 68.5(b) permits a massage therapist to bill at the prevailing rate, that same regulation permits an insurer to reduce the bill if the insurer believes the bill is not consistent with similar procedures in the fee schedule.  However, the Arbitrator here noted that this Regulation still requires that fee schedule issues must be resolved by arbitration or litigation, and that the Regulation does not shift the burden of proof to providers.

 

The respondent must therefore always come forward with competent evidentiary proof supporting its fee schedule defense – the applicant need not prove it deserves the charged amount simply because the insurer denied on that basis.  See, eg Continental Med., P.C. v Travelers Indem. Co., 11 Misc 3d 145[A], 819 NYS2d 847 (1st Dept 2006).  Arbitrator Benziger quoted the court’s decision in Power Acupuncture, P.V. v. State Farm, 11 Misc.3d 1065A (2006), in which the court rejected the insurer-defendant’s position that the plaintiff provider has the burden of justifying its fee:

“The contention is inconsistent with both the structure and clear meaning of the governing regulation, which states that the permissible charge ‘shall be the prevailing fee,’ only ‘subject to review by the insurer.’  (See 11 NYCRR § 68.5(b)).  Whatever effect might be given the results of the insurer’s ‘review,’ the insurer that denies or reduces payment based upon such a review must bear the burden of, at least, coming forward with evidence that the provider’s fee is not ‘consistent with charges permissible for similar procedures.’ “

The Respondent argued that the fees should be similar to those of a physical therapist or physician conducted massage therapy.  However, as the Respondent did not submit any affidavits, peer reviews or evidence that the education, training and expertise of massage therapists is similar or comparable to that of a physical therapist or physician, the Respondent was found to have failed to sustain its burden in demonstrating that the reduction in fee was proper, and Applicant was awarded its full claim at rates higher than the insurer thought proper.

 

So, whereas an insurer shifts the burden of proof by denying based on a lack of medical necessity, a denial based on fees allegedly not in accordance with the fee schedule does not, in itself, shift the burden.  An applicant who performs services not specifically provided for in the fee schedule may bill at a rate without the burden of justifying the rate it chooses.  Instead, the insurer has the burden of supporting its position that the applicant overcharged.

Convenient Locations for EUOs

E & W Acupuncture P.C. and State Farm Mut. Auto Ins. Co.

AAA Case No. 412009031147, Arbitrator Laura A. Yantsos
Amount in Dispute: $1,104.22

State Farm requested that the provider applicant appear for an examination under oath (EUO).  Pursuant to 11 NYCRR 65-1.1, an EUO must be scheduled at a “reasonably convenient time and location.”  The applicant’s medical report showed that it provided treatment for its assignor in Woodside, New York in Queens County.  The provider also maintained offices however, in Bronx and Nassau Counties.

State Farm scheduled the EUO in Great Neck, New York in Nassau County and sent three scheduling letters to the provider’s three different offices in Bronx, Queens, and Nassau.  State Farm included language in the letters specifically inviting the applicant to call and change the time or place of the EUO if it was inconvenient.  The provider applicant failed to appear for the EUO and at arbitration argued that State Farm impermissibly requested an examination under oath in a county outside the county where the applicant had its office.

Arbitrator Yantsos held that if the applicant did not in fact have offices in Bronx and Nassau, the burden was on the applicant to deny having offices in these counties.  Further, Arbitrator Yantsos placed emphasis on the fact that State Farm explicitly invited the applicant to change the time or place of the EUO for want of convenience, an option which it failed to exercise.

Finally, Arbitrator Yantsos stated that the Regulation does not require that an EUO be “venued” in the same county where the applicant maintains its residence.  It merely requires that the location be “reasonably convenient.”   It is not enough to show that an EUO is scheduled outside the county of applicant’s office where services were provided.  Finally, Arbitrator Yantsos held that, regardless of whether applicant had an office in Nassau County, the distance between Great Neck in Nassau and Woodside in Queens (about 15 miles and 25-45 minutes travel time according to Google Maps) is not “inconvenient per se.”

Award:  Denied.

This award, or lack thereof, gives us some bright line rules with regard to the scheduling of EUOs:

• The burden is on the applicant to show that a location is inconvenient.
• The burden is on the applicant to deny that it has offices in locations that the insurer believes it to.
• It will undermine an applicant’s allegation of “inconvenience” to fail to exercise an option to change time/place as offered in a scheduling letter.
• When deciding what is “reasonably convenient,” emphasis will be placed on total distance over county of residence.
• An insurer does not necessarily need to schedule an EUO in the same county where services were provided.
• Fifteen miles/25-45 minutes of travel time is not “inconvenient per se.”

When Paying a Bill Twice May be Required

E & W Acupuncture P.C. and Donegal Mut. Auto Ins.

AAA Case No. 412009031623, Arbitrator Stacey E. Charkey
Amount in Dispute: $1,603.10, reduced by the Applicant to $981.62

The assignor was allegedly injured in a motor vehicle accident and received acupuncture treatment from the provider applicant.   The assignor executed an AOB form to the provider  on 08/08/08, and the provider began submitting bills to Donegal, which issued payment to the provider.  On one bill however, instead of issuing payment to the provider, Donegal sent a check to the assignor, who, not wishing to look the good fortune horse in the mouth, took the check and cashed it.  The provider, however, continued to demand payment from Donegal.

Arbitrator Charkey ultimately held that Donegal was obligated to re-issue payment to the applicant provider, despite the fact that this would result in a double payment.  Arbitrator Charkey stressed the importance of the AOB form to the no-fault claim process, citing to both case law and Regulation 68-C, which requires a provider to submit either Form NF-3 or Form NF-AOB in order to receive direct payment from an insurer.  It was also pointed out that Donegal was “fully aware” of the assignment in this matter where it had previously made payment to the provider assignee and there was no evidence the assignment had been revoked.

Finally, Arbitrator Charkey stated that though the assignor was clearly paid in error, the error was on the part of Donegal, which had unspecified “remedies” to recoup that payment from the assignor.

Award:  $981.62

The lesson here is the importance of making sure that once an assignment of benefits has been properly executed, payment must issue directly to the assignee so as not to mistakenly give assignors a windfall.  This could result in needless suits over unjust enrichment, one of the “remedies” that Arbitrator Charkey mostly likely alludes to in her award.

Master Arbitration Review

New York Insurance Law § 5106(c) provides:

(c) An award by an arbitrator shall be binding except where vacated or modified by a master arbitrator in accordance with simplified procedures to be promulgated or approved by the superintendent. The grounds for vacating or modifying an arbitrator’s award by a master arbitrator shall not be limited to those grounds for review set forth in article seventy-five of the civil practice law and rules. The award of a master arbitrator shall be binding except for the grounds for review set forth in article seventy-five of the civil practice law and rules, and provided further that where the amount of such master arbitrator’s award is five thousand dollars or greater, exclusive of interest and attorney’s fees, the insurer or the claimant may institute a court action to adjudicate the dispute de novo.

Although the official rules and procedures for master arbitration are set forth at 11 NYCRR § 65-4.10, the AAA reformulated, augmented, and published them here.   Participants in the master arbitration process should always defer to the rules and procedures published in Regulation 68-D, as the set published on the AAA’s website still refers to the old Reg 68 section numbering (11 NYCRR 65.1 et seq.) and things like “HSA arbitration”, which no longer exists.  Time to update your website, AAA.

Under 11 NYCRR § 65-4.10(a), there are five recognized grounds for master arbitration review of a no-fault arbitration award:

(1) any ground for vacating or modifying an award enumerated in article 75 of the Civil Practice Law and Rules (an article 75 proceeding), except the ground enumerated in CPLR subparagraph 7511(b)(1)(iv) (failure to follow article 75 procedure);

(2) that the award required the insurer to pay amounts in excess of the policy limitations for any element of first-party benefits; provided that, as a condition precedent to review by a master arbitrator, the insurer shall pay all other amounts set forth in the award which will not be the subject of an appeal, as provided for in section 65-4.4 or section 65-4.5 of this Subpart;

(3) that the award required the insurer to pay amounts in excess of the policy limitations for any element of additional first-party benefits (when the parties had agreed to arbitrate the dispute under the additional personal injury protection endorsement for an accident which occurred prior to January 1, 1982); provided that, as a condition precedent to review by a master arbitrator, the insurer shall pay all other amounts set forth in the award which will not be the subject of the appeal, as provided for in section 65-4.4 or section 65-4.5 of this Subpart;

(4) that an award rendered in an arbitration under section 65-4.4 or section 65-4.5 of this Subpart, was incorrect as a matter of law (procedural or factual errors committed in the arbitration below are not encompassed within this ground);

(5) that the attorney’s fee awarded by an arbitrator below was not rendered in accordance with the limitations prescribed in section 65-4.6 of this Part; provided that, as a condition precedent to review by a master arbitrator, the insurer shall pay all other amounts set forth in the award which will not be the subject of the appeal, as provided for in section 65-4.4 or section 65-4.5 of this Subpart.

In ordinary course, a master arbitration award issues within 97 calendar days after the AAA receives the request for master arbitration review.

Telephone Hearings in New York No-Fault Cases Increase

Telephone participation in hearings of cases in the New York No-Fault auto insurance arbitration program continues to become more popular, according to the American Arbitration Association.

There was telephone participation by at least one of the parties in 17.9 percent of the hearings for which an arbitrator issued an award in April through June 2009, according to the AAA’s New York State Insurance Case Management Center, which administers the arbitration of no-fault claims for the New York State Insurance Department. In comparison, there was telephone participation in only 7.4 percent of hearings in the last months of 2005, and telephone participation in 11.5 percent of hearings in April through June 2007.

The AAA allows parties and attorneys to participate in hearings by telephone if the arbitrator agrees that telephone discussions will meet his or her requirements to make a decision in the case. Telephone participation is more convenient for parties, and it is particularly useful for cases in which there are no witnesses and the attorneys make arguments based on documents.

Arbitrators and parties can advise the AAA in advance if they consent to telephonic hearings. Cases in which both parties have agreed to telephonic hearings are scheduled automatically with an arbitrator who has agreed to hold telephonic hearings. Parties reserve the right to request an in-person hearing for cases involving issues that require personal appearances. There are currently 43 arbitrators and 21 parties who have agreed to participate in automatic scheduling of telephone hearings.

In some cases, a party may request to participate by telephone due to unexpected obligations during the course of the day of the hearing. Sometimes, this results in a hearing in which one party is present with the arbitrator and the other party is on the telephone.

The AAA attributes the steady increase in telephone hearings of no-fault cases to the following:

• The use of telephone conferences by arbitrators and parties during the New York City transit strike in December 2005 lent greater acceptance of the telephone as a hearing resource.

• The AAA provided a speakerphone in each arbitrator’s hearing room, in conjunction with the installation of computers for Electronic Case Folder (ECF) hearings in 2006. The speakerphone facilitates hearings when the arbitrator and one party are present in the hearing room and the other party is on the telephone.

• The AAA has made available a conference call service provider to facilitate calls with a reserved access number for each arbitrator. This ensures high-quality connection for conference calls.

• Increased experience with telephone hearings by arbitrators and parties. The growing use of online case documents instead of paper documents also encourages parties to try telephone hearings.

Attorneys or parties interested in advance scheduling of telephonic hearings may contact Ben Carpenter, Customer Service Specialist, at 917-438-1660 or carpenterb@adr.org. Any attorney or party who wishes to participate by telephone in a particular scheduled case should contact the AAA case manager team identified in the notice of hearing.

NY Auto Insurance Cases Overview

The AAA’s website provides this overview of New York insurance cases in arbitration.   Electronic access and transmission of arbitration documents has improved the AAA’s administration of n-fault claims.

AAA Representatives and Arbitrators to Participate in CLE Courses on New York No-Fault Insurance

File this is the “old news” category.

Including at this coming Monday’s program in Melville, New York, the American Arbitration Association participated in four continuing legal education (CLE) courses on the New York no-fault auto insurance system and arbitration program in November and December 2009.  The full-day courses, sponsored by the National Business Institute, were offered to attorneys, paralegals, claims representatives and managers, and anyone interested in the latest information on New York no-fault insurance.

Mura & Storm associate Bethany Mazur attended the “Effective No-Fault Strategies” program in Buffalo on November 18th.  The program was geared for those practicing New York no-fault law at an intermediate level.  Bethany brought back a a few points she thought would be worth mentioning:

• Around 92% of cases submitted to the AAA result in some sort of recovery for the applicant.  This includes both the conciliation and arbitration processes.
• Any complaints regarding AAA arbitration, arbitrators, conciliators, etc. can be emailed directly to William Considine, the division vice president.  His email is considinew@adr.org.  The AAA also offers an online form for submitting feedback or complaints.
• Several arbitrators have now decided that if an insurer/respondent will not provide the workers’ compensation fee schedule, the arbitrator will not determine what the fee schedule amount is, but will instead award the full amount of the upheld bills.   So far this has only happened after a request for a fee schedule amount was not fulfilled, but it would be best to always know when you walk into arbitration how much the insurer would actually owe.  The fee schedule can be accessed here: http://www.ins.state.ny.us/r68/r83.htm.  Warning:  calculating the correct fee under the fee schedule can be highly mathematical at times.
• It’s beneficial to bring printed copies of any cited case law with you to the hearing for the arbitrators.  They don’t all have access to LexisNexis or Westlaw and find it very helpful to not have to research the cases themselves.
• The AAA representatives at the program made a point of telling everyone present that they should read every case cited by an opponent, especially if one is not especially familiar with no-fault law.  It was reported that many attorneys have cited case law that has absolutely nothing to do with the issues they are citing it for, mostly due to a misunderstanding of no-fault.
• AAA Arbitrators McCorry and O’Connor will usually review their cases before the hearing. They could not say the same about other arbitrators though, so always assume the arbitrator has no idea what your case is about.
• Recent decisions regarding medical necessity were discussed at length.  In accordance with the Appellate Division, Fourth Department’s 1999 decision in Hobby v. CNA Ins. Co., 267 AD2d 1084, AAA arbitrators do not consider “maximum medical improvement” to be a valid basis for denial.   A doctor who writes “has reached end result in my specialty, [chiropractic, neurology, etc]” is also not good enough.  Essentially, each IME an insurer uses to deny a claim must include the actual phrase “lack of medical necessity” or something extremely close or the denial will probably be found to be invalid.  There have been at least three recent arbitration decision in Erie County based on this type of language.  Here’s another.
• Also discussed were the importance of LMK v. State Farm, Savino v. Hartford, and Sunshine Imaging v. GEICO on no-fault claims handling, all of which have been blogged over at Coverage Counsel.
• Lastly, the speakers gave two important reminders to those attending:  (1) the standard for proving a staged collision in no-fault is only a preponderance of the evidence (51%); and (2) if a health insurer has paid a bill, the applicant may NOT recover for the health insurer in arbitration.

Timelines in NY Auto Insurance Arbitrations

The American Arbitration Association has provided these three, interactive timelines or “roadmaps” for New York auto insurance claim arbitrations:  (1) no-fault arbitration; (2) master appeal no-fault arbitration; and (2) SUM/UM arbitration.  Click on the images for the interactive timelines.

The beginning…

Today starts another blog endeavor for the lawyers at Mura & Storm.  It occurred to me recently that there is no resource dedicated just to New York no-fault arbitration awards/decisions and information.  So here’s one.

Mura & Storm attorneys Bethany Mazur and Scott Mancuso will be this blog’s chief contributors.  Our aim is to catalog and digest the awards/decisions coming out of the American Arbitration Association (AAA) and provide other information of interest to those who practice in New York no-fault arbitration arena.  To the extent that we can provide some statistical analysis of the issues decided, parties prevailing, and amounts awarded by each arbitrator, we will do so.  Because the AAA issues its awards in PDF format, make sure you have a working version of Acrobat Reader.

Now I just checked and found that in the first four days of December alone, the New York no-fault arbitrators have already issued 263 awards.  In November, the AAA issued 1318 no-fault arbitration awards.  That type of volume obviously precludes any meaningful treatment of each award, but we hope to be able at least to catalog all awards and digest the most interesting and noteworthy ones for you.  You can help content programming by letting us know what information from the arbitration awards you would like cataloged:  arbitrator, amount claimed, amount awarded, denial basis(es), issue(s) in dispute, treating provider, IME/peer review doctor, etc.

Looking forward to seeing how this develops.  Welcome to the process.

~~ Roy Mura