Monies paid for fraudulently procured services or supplies may be recovered under limited circumstances

 In a case with major implications, the Appellate Term for the 9th and 10th Judicial Districts reached a key compromise behind the dicta found at the Appellate Term’s holding in Fair Price v. Travelers (a precluded defense based upon fraud and unjust enrichment may be recouped in a civil action) and one of the many holdings in Cornell Medical v. Mercury (counterclaims or civil actions for paid-out monies are not permitted when the defense to the paid-out monies has been precluded).

Namely, a counterclaim or civil action is permitted where the payments to the alleged fraudulent claims are made within 30-days of receipt of the bills.  To quote the court:

If an insurer is precluded from asserting a defense due to its failure to pay or deny a claim within the 30-day claim determination period, it may not later seek to recover amounts it paid on the claim based on a theory of unjust enrichment (see e.g. Cornell Med., P.C. v Mercury Cas. Co., 24 Misc 3d 58 [App Term, 2d, 11th & 13th Jud Dists 2009]). However, where, as here, an insurer timely pays a claim within the 30-day claim determination period, the insurer is not foreclosed from affirmatively commencing an action to recover the amounts paid on the claim when the insurer later discovers that the claim is fraudulent (see State Farm Mut. Auto Ins. Co. v Grafman, 655 F Supp 2d 212, 223-224 [ED NY 2009]; State Farm Mut. Auto Ins. Co. v James M. Liguori, M.D., P.C., 589 F Supp 2d 221 [ED NY 2008]; see also Carnegie Hill Orthopedic Servs. P.C. v GEICO Ins. Co., 19 Misc 3d 1111[A], 2008 NY Slip Op 50639[U] [Sup Ct, Nassau County 2008, Austin, J.]; Progressive Northeastern Ins. Co. v Advanced Diagnostic & Treatment Med., NYLJ, Aug. 2, 2001, at 18, col 2 [Sup Ct, NY County, Gammerman, J.]). The fact that the insurer chose to pay first-party no-fault benefits within the 30-day claim determination period, at a point when the insurer had no reason to deny the claim, “cannot in any sense be taken as a concession that the claim is legitimate”

This case has huge implications.  I will leave it at that.

Comments

Post a Comment

Popular posts from this blog

Intercompany arbitration is inappropriate in New Jersey between a PIP carrier and a major medical insurance carrier

One of the interesting aspects or evolution of New Jersey PIP law is that is has devolved from a comprehensive all encompassing benefit to one that is either limited or non-existent. The historians will remember that until the 1990 Fair Automobile Insurance Reform Act, there was not coverage limit. That changed to $250,000 in 1990 along with the ability to have major medical be deemed primary.. In 1998, AICRA brought the common $15,000 PIP policies and mandated arbitration.   The question that lurked is what happened when major medical said go to PIP, PIP as secondary pays and then seeks to subrogate against the major medical carrier. The Appellate Division said you’re out of luck. (1) “When a PIP-as-secondary insurer receives a claim eligible for primary coverage, it must deny coverage and send the insured a notice advising them to submit the claim to their health insurer” (2) ” Health insurers are also required to make prompt payment of claims, but are governed by N.J.A.C. 11:22-1.1
Read more

Fraudulent Procurement Defense Looks More Like a 3105 Defense

  Compas Med., P.C. v Praetorian Ins. Co. , 2016 NY Slip Op 51000(U)(App. Term 2d Dept. 2016) “Moreover, defendant failed to establish as a matter of law that the misrepresentation by plaintiff’s assignor as to his place of residence was material ( see Interboro Ins. Co. v Fatmir , 89 AD3d 993  [2011]). For the foregoing reasons, the branches of defendant’s cross motion seeking summary judgment dismissing the first through third causes of action should have been denied.” The citing of Fatmir now opens up a new door regarding the evidence necessary to substantiate “material misrepresentations” in establishing a fraudulent procurement defense. “A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented ( see  Insurance Law § 3105 [b];  Novick v Middlesex Mut. Assur. Co. , 84 AD3d at 1330;  Varshavskaya v Metropolitan Life Ins. Co. , 68 AD3d at 856). “To establish materiality as a matter of law, the insurer  must present documenta
Read more