March 14, 2011

Devonshire Surgical Facility v American Tr. Ins. Co. (2011 NY Slip Op 50793(U))


The court considered the fact that plaintiff, a professional corporation, sought to recover first-party, no fault benefits for services rendered to its assignor who was injured in an automobile accident in 2002. It also considered the numerous claims submitted by the plaintiff and the subsequent judgment and stay on entry and execution of that judgment due to miscalculated interest. The main issue decided was whether the plaintiff was entitled to its requested interest and whether defendant's motion to vacate or modify the judgment and stay enforcement should be granted. The holding of the case was that the motion to vacate or modify the judgment was denied, but the motion for an order staying enforcement was granted. The court also determined that the plaintiff was not entitled to compound interest and that the interest had been tolled as of a certain date due to plaintiff's unreasonable delay in entering the judgment.

Reported in New York Official Reports at Devonshire Surgical Facility v American Tr. Ins. Co. (2011 NY Slip Op 50793(U))

Devonshire Surgical Facility v American Tr. Ins. Co. (2011 NY Slip Op 50793(U)) [*1]
Devonshire Surgical Facility v American Tr. Ins. Co.
2011 NY Slip Op 50793(U) [31 Misc 3d 1221(A)]
Decided on March 14, 2011
Civil Court Of The City Of New York, New York County
O’Shea, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
As corrected in part through May 11, 2011; it will not be published in the printed Official Reports.
Decided on March 14, 2011

Civil Court of the City of New York, New York County

Devonshire Surgical Facility and Carnegie Hill Orthopedic Services, P.C. a/o/a SHONTA ROBINSON, Plaintiff,


American Transit Insurance Company, Defendant


Soraya Campbell, Esq. of Bruno Gerbino & Soriano LLP appeared in support of the motion

Christopher McCollum, Esq. appeared in opposition to the motion

O’Shea, J.

Plaintiff, a professional corporation, instituted this action to recover first-party, no fault benefits for services rendered to its assignor, Shonta Robinson, who was injured in an automobile accident on August 4, 2002. On or about October 28, 2002, plaintiff submitted three claims for payment totaling $14,929.08. On February 1, 2008, plaintiff was awarded summary judgment on its claims.

On December 17, 2008, plaintiff served a proposed judgment in the total amount of $55,090.03, which included statutory attorney’s fees and $39,151.85 in interest, which plaintiff calculated using compounded interest at the rate of 2% per month from the date defendant was required to pay or deny the claim (November 28, 2002) to the date of the proposed judgment (December 17, 2008). Shortly thereafter, on December 30, 2008, defendant paid the underlying claims in the amount of $14,929.08, along with the statutory attorneys fees in the amount of $850.00. Defendant then moved by order to show cause two weeks later seeking, inter alia, an order vacating or staying entry and execution of the judgment on the grounds that plaintiff [*2]miscalculated the interest. On May 18, 2009, four months after judgment was entered, a decision and order was issued staying “entry of this judgment . . . until the correct interest amount is added to the judgment.”

Sixteen months later, in September, 2010, plaintiff e-mailed defendant a copy of an amended application for judgment with interest in the amount of $40,238.48, calculated from April 5, 2005, the date the complaint was filed,[FN1] to the date of the new proposed judgment. Plaintiff again used a compounded rate of 2% per month in calculating the interest.[FN2] Nothing more happened. There is no record that the proposed amended judgment was ever entered by the Clerk or that plaintiff or defendant took any steps to challenge or compel entry of the newly proposed judgment or to lift the stay.

Three months later, on December 21, 2010, plaintiffs commenced enforcement proceedings on the original judgment. In its Execution With Notice to Garnishee, plaintiff stated as follows:

“[J]udgment was entered on January 7, 2009, . . . in the amount of $55,090.93, including costs, of which $57,391.12, together with interest from December 21, 2010, remains due and unpaid.”

One month later, on January 18, 2011, in a reprise of its January 2009 order to show cause, defendant moved for an order: (i) vacating or modifying the judgment; (ii) staying entry of the judgment; (iii) vacating or staying the execution of judgment; and (iv) staying execution of the judgment pending a hearing and determination of the motion. Defendant claims this relief on the grounds that (a) it was improper for plaintiff to seek execution of a judgment that was stayed and never entered by the Clerk; and (b) the interest calculation remains incorrect. Plaintiff opposes the motion on the grounds, inter alia, that the stay was self-executing and lifted when he served the amended application for judgment, and his calculations of interest are correct. The order to show cause initiating the instant motion provides that “pending the hearing and determination of this application, entry of judgment . . . is hereby stayed [and] pending the hearing of this application, any attempted enforcement of or execution on the judgment is hereby stayed. . . .”

In the exercise of its control over its judgments, a court may open them upon the application of anyone for sufficient reason in the furtherance of justice. Its power to do so is [*3]inherent and does not rely on any particular statute (Woodson v. Mendon Leasing Corp., 100 NY2d 62 [2003]; Ladd v. Stevenson, 112 NY 325 [1889]). However such relief generally should be resorted to only to relieve a party from judgments taken through fraud, mistake, inadvertence, surprise or excusable neglect (McKenna v. County of Nassau, 61 NY2d 739 [1984]). Correction of a miscomputation of interest constitutes just such an error (e.g. Kiker v. Nassau County, 85 NY2d 879 [1995][a mistake in assessing the amount of interest on a judgment may be corrected even after the appeals process has been completed, where the proper rate was clearly directed by statute]; see also Gaul v. Commercial Union Ins. Co., 268 AD2d 816 [3d Dep’t 2000]; Bauman v. Bauman, 200 AD2d 380 [1st Dep’t 1994]).

In recognition of the fact that the interest calculation was incorrect, on May 18, 2009, this Court granted Defendant a stay of the entry of the judgment until “the correct amount of interest is added to the judgment.” As the correct amount of interest has still not been added to the judgment, the May 18, 2009, stay remains in full force and effect. Accordingly, defendant’s new application for a stay of entry of the judgment is denied as unnecessary (see e.g., Med. Soc’y v. Serio, 99 NY2d 608 [2003]; Matter of Peter B., 2010 NY Slip Op 3920 [2d Dep’t 2010]).

Defendant’s motion to vacate or to modify the judgment is also denied. As defendant has not identified anything wrong with the judgment aside from the improper calculation of interest (which was already addressed in the prior motion), there is no reason to either vacate or modify it. However, Defendant’s motion for an order staying enforcement is granted. Until the judgment has properly been entered, there is nothing to enforce.

As for the calculation of interest itself, Plaintiff offers authority to suggest that he is entitled to compound interest, while Defendant argues that the interest should not be compounded. The “old” regulations found at 11 NYCRR § 65.15(h)(1) provided for interest at the rate of “two percent per month, compounded.” That regulation was superseded on April 5, 2002 by Insurance Department Regulations found at 11 NYCRR § 65-3.9(a) , which provides for “interest at a rate of two percent per month, calculated on a pro-rata basis using a 30-day month.”

Citing Belt Parkway Imaging, P.C. v State Wide Ins. Co., 2010 NY Slip Op 52229U [2010]). Plaintiff contends that it is up to Defendant to show that the new regulations apply, a determination made with reference to the contents of the policy in effect at the time of the accident. As Defendant has not met that alleged burden, plaintiff argues that it is entitled to interest calculated under the old regulations. In opposition, Defendant contends that the contents of the policy in effect at the time are irrelevant to this inquiry. Citing to Circular Letter No. 9, dated April 9, 2002,[FN3] Defendant asserts that only the notice of claim and proof of claim provisions are governed by the policy endorsement in effect at the time of the submission of the claim. Everything else is dictated by whether the claim was submitted before or after April 5, 2002.

Defendant’s interpretation finds support in the Court of Appeals determination in Medical [*4]Society v. Serio, 100 NY2d 854 [2003]). Describing the various aspects of the new regulations, the Court states as follows:

“Under the revised regulations, this interest is no longer to be compounded, as before, but is instead to be calculated as simple interest (11 NYCRR 65-3.9 [a])” (emphasis added)

See also Gokey v. Blue Ridge Ins. Co., 2009 NY Slip Op 50361U [Sup. Ct. Ulster Co. 2009]). This conclusion is further reinforced by the fact that the change in the interest calculation was reflective of the change in market conditions at the time. not on anything having to do with the insurance policy per se or its endorsement (see 2001-19 NY St. Reg. 17][noting, “The Department, by regulation, required compounding at a time of double-digit interest rates. In the current interest rate environment, compounding is not reflective of the financial market]; 2000-31 NY St. Reg. 19; 1999-16 NY St. Reg. 7). Plaintiff’s reliance on the determination by the Second Department in Belt Parkway Imaging, P.C. v State Wide Ins. Co., supra, is misplaced. There is no indication in the decision that the accident in question post-dated the inception of the new regulations. Accordingly, the interest in this case shall be calculated as simple not compound interest.

As for the proper term of the interest, Plaintiff contends that the term of the interest runs from the date of the commencement of this proceeding to the present, as interest was not tolled in the order staying execution of the judgment, while defendant argues that such an interpretation provides an inappropriate windfall to plaintiff. Defendant also argues that, in any event, plaintiff should not be entitled to accrual of interest past the date of the original judgment, as defendant paid the principal amount at that time.

On the subject of interest, the insurance regulations provide as follows:

(a) All overdue mandatory and additional personal injury protection benefits due an applicant or assignee shall bear interest at a rate of two percent per month, calculated on a pro rata basis using a 30-day month. 11 NYCRR § 65-3.9

The interest which accrues on overdue no-fault benefits at a rate of two percent per month is a statutory penalty designed to encourage prompt adjustments of claims and inflict a punitive economic sanction on those insurers who do not comply (East Acupuncture, P.C. v. Allstate Ins. Co., 61 AD3d 202 [2d Dep’t 2009]). Claimants are also required to act promptly. Failure to act promptly after a denial of claim results in a toll of the statutory interest provisions, for to do otherwise would reward a recalcitrant plaintiff with a windfall of punitive interest payments, and would contravene the legislative goal of promptly resolving no-fault claims ( see East Acupuncture, P.C. v Allstate Ins. Co., 61 AD3d 202, 210 [2d Dep’t 2009]; see also LMK Psychological Services, supra, 12 NY3d at 223-224).

Ordinarily prejudgment interest runs from the accrual of the claim or the occurrence of the damages until the date that a decision or verdict is made (see e.g., CPLR § 5001). However, in a no-fault context, regulations provide that where litigation is not commenced within 30 days of denial of the claim, interest is tolled until the date of commencement of the action (see 11 NYCRR 65-3-9[c]; see also LMK Psychological, supra, 12 NY3d at 223-224; Smith v. Nationwide Mut. Ins. Co., 211 AD2d 177 [4th Dep’t 1995][Insurance Law § 5106(a) supersedes the provisions for interest contained in CPLR 5002, 5003 and 5004]).The “closing” date for prejudgment interest ordinarily is the date of the decision rendering judgment (see CPLR § 5001[c] ). The actual entry of judgment occurs sometime later, and prejudgment interest also [*5]accrues between the rendering of judgment and the entry of judgment, and post-judgment thereafter (See CPLR §§ 5002 – 5004). In the case of Civil Court matters, CCA § 1401 requires the prevailing party to “prepare” the judgment within 30 days after the rendering of judgment by the Court, or the losing party may do so. This limitation is both short and precisely bounded so that the entry of judgment does not rely on the caprice or diligence of the prevailing party (see Henry Modell & Co. v. Minister, Elders & Deacons of the Reformed Protestant Dutch Church, 68 NY2d 456 [1986]).

Notwithstanding the requirement that judgment be prepared within 30 days of the rendering of judgment, plaintiff here waited ten months after judgment was rendered by Judge Mendez on February 1, 2008, before filing an application for judgment. Because the calculations of interest were incorrect, on May 18, 2009, the judgment was stayed to permit plaintiff the opportunity to correct the interest calculations. Two years have passed since the judgment was stayed and it has been three years since judgment was rendered. Yet, plaintiff contends that it is entitled to collect compounded interest at the rate of 2% per month throughout the entire period of its inaction, a contention with which this Court disagrees.

In February of 2010, the Second Department declined to pass on the issue of whether the accrual of interest may be tolled where it is found that there has been an unreasonable delay in the entry of judgment (SZ Med., P.C. v Lumbermens Mut. Cas. Co., 2010 NY Slip Op 20044 [App. Term Second Dep’t 2010]). While the majority noted that it shared the dissent’s concerns with regard to this issue, it declined to consider the matter as it was not raised in the court below.

Justice Golia, in his dissent, argued that permitting interest to accrue between the date of the order and the date of the actual entry of judgment “would be rewarding such delay with what amounts to essentially a windfall of punitive interest payments.” As the purpose of the no-fault regulations was to encourage the prompt resolution of no-fault claims, permitting a recalcitrant plaintiff to accrue interest after the conclusion of litigation “would be at odds with the legislative goal of promptly resolving no-fault claims.” (SZ Med., P.C. v Lumbermens Mut. Cas. Co., 2010 NY Slip Op 20044 [App. Term. 2d Dep’t 2010], Golia, J. dissenting).

No fault regulations provide for interest to accumulate throughout the course of the litigation “unless the applicant unreasonably delays the . . . court proceeding.” (11 NYCRR § 65-3.9[d]). A court proceeding ends with the entry of judgment. Judgment is to be prepared by the prevailing party within 30 days of the rendering of judgment (CCA § 1401). It follows that any delay thereafter, absent good cause, is unreasonable. Here, plaintiff waited ten months to enter the original judgment, miscalculated the interest, waited an additional 17 months after judgment was stayed correct the interest calculation, and then miscalculated it a second time. This was unreasonable. Accordingly, interest as provided by 11 NYCRR § 65-3.9 is tolled as of March 2, 2008 — 30 days after the Court initially rendered summary judgment for plaintiffand the date by which plaintiff should have prepared the judgment in the first instance.

Enter order accordingly.

Dated:March 14, 2011______________________________

Ann O’Shea, AJSC


Footnote 1: Plaintiff used the April 5, 2005, date in recognition of 11 NYCRR 65-3.9 and the Court of Appeals decision in LMK Psychological Services, PC v. State Farm Mutual Auto Insurance, 12 NY3d 217 (2009), which provided that the accrual of interest is tolled from 30 days after the claim is denied to the date the civil action is commenced. The regulation was adopted “to encourage claimants to swiftly seek to resolve any dispute concerning their entitlement to no fault benefits” (LMK Psychological, 12 NY3d at 223-224).

Footnote 2: Plaintiff also unilaterally increased the amount of attorney’s fees claimed from $850 to $1,700 and the costs of service of the summons and complaint from $25 to $40. In addition, plaintiff failed to credit defendant with the payment of the principal sum two years earlier.

Footnote 3:Circular Letter No. 9, dated April 9, 2002, by the Insurance Department, states that the new regulation “provides for revised endorsements with new notice provisions, [and that] these new provisions will not be applicable to claims until new policies containing the revised endorsements are issued or renewed” (see Brentwood Pain & Rehabilitation Servs., P.C. v Progressive Ins. Co., 2009 NY Slip Op 31881U [Sup. Ct. NY Co. 2009]).