December 13, 2011

Mercury Cas. Co. v Encare, Inc. (2011 NY Slip Op 08969)

Headnote

An insurer cannot avoid preclusion of a fee-schedule defense by treating excessive fees as a lack of coverage. The Appellate Division, First Department, affirmed dismissal of the insurer's complaint for failure to state a claim and denial of its cross motion for partial summary judgment. Under Insurance Law § 5106 and 11 NYCRR 65-3.8 (c), an untimely or otherwise defective denial precludes the challenge. The narrow lack-of-coverage exception concerns injuries that do not arise from an insured incident. Insurance Law § 5108's prohibition on fees exceeding the fee schedule did not justify expanding that exception and weakening preclusion.

Reported in New York Official Reports at Mercury Cas. Co. v Encare, Inc. (2011 NY Slip Op 08969)

Mercury Cas. Co. v Encare, Inc.
2011 NY Slip Op 08969 [90 AD3d 475]
Dcmbr 13, 2011
Appellate Division, First Department
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
As corrected through Wednesday, February 1, 2012


Mercury Casualty Co., Appellant,
v
Encare, Inc., as Assignee of Robert Manley, Respondent.

—[*1] Law Office of Jason Tenenbaum, P.C., Garden City (Jason Tenenbaum of counsel), for appellant.

Werner, Zaroff, Slotnick, Stern & Ashkenazy LLP, Lynbrook (Howard J. Stern of counsel), for respondent.

Order, Supreme Court, New York County (Saliann Scarpulla, J.), entered July 18, 2011, which granted defendant’s motion to dismiss the complaint for failure to state a claim and denied plaintiff’s cross motion for partial summary judgment, unanimously affirmed, without costs.

The trial court properly dismissed the complaint on the ground that a no-fault insurer who issues the denial of a claim in an untimely or otherwise defective manner is prohibited from challenging the claim (see Insurance Law § 5106; 11 NYCRR 65-3.8 [c]; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274 [1997]).

We are unpersuaded by Mercury’s effort to fit this case within the narrow exception for denials based on lack of coverage (see Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195 [1997]). Central General Hospital and its progeny address situations in which “[the] lack of coverage defense [is] premised on the fact or founded belief that the alleged injury does not arise out of an insured incident” (90 NY2d at 199).

Nor do we find it significant, in light of the genesis and purposes of the preclusion rule, that Insurance Law § 5108 prohibits a medical provider from seeking fees in excess of the fee schedule. Virtually every application of the preclusion rule involves the compromise of statute, policy provision, or judge-made rule in service of effectuating the important purposes of the No-[*2]Fault Law. The expansion of the lack of coverage exception proposed by Mercury would substantially weaken the long-established rule of preclusion.

Accordingly, the trial court’s order is affirmed. Concur—Gonzalez, P.J., Friedman, Moskowitz, Acosta and Richter, JJ. [Prior Case History: 2011 NY Slip Op 32166(U).]

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