[*1]

Argued May 1, 2019; decided June 11, 2019

Andrew Carothers, M.D., P.C. v Progressive Ins. Co., 150 AD3d 192, affirmed.

Only licensed physicians may practice medicine in New York. The unlicensed are not bound by the ethical rules that govern the quality of care delivered by a physician to a patient. By statute, regulation, and the common law, the corporate form cannot be used as a device to allow nonphysicians to control the practice of medicine.

In State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005]), we held that, pursuant to 11 NYCRR 65-3.16 (a) (12), an insurer may withhold payment for medical services provided{**33 NY3d at 394} by a professional corporation when there is “willful and material failure to abide by” licensing and incorporation statutes (Mallela, 4 NY3d at 321). Today we clarify that Mallela does not require a finding of fraud for the insurer to withhold payments to a medical service corporation improperly controlled by nonphysicians. The trial court did not err in declining to give a charge requiring the jury to find fraudulent intent or conduct “tantamount to fraud” (id. at 322), in order to reach a verdict in favor of the insurers.

I.

[*2]The factual background is essential in understanding our legal conclusion. The plaintiff in this case, Andrew Carothers, M.D., P.C., a professional service corporation, was formed by Andrew Carothers, M.D., a radiologist, in 2004. The company provided magnetic resonance imaging (MRI) services. Plaintiff was incorporated after Carothers met Hillel Sher, a nonphysician who owned and controlled two companies that together held long-term leases for three, fully equipped, operational MRI facilities in New York City. They had been introduced by an MRI equipment repair technician who knew that Carothers was in financial distress and that Sher was “looking for a doctor.” In 2005-2006, plaintiff subleased the facilities and associated equipment from Sher’s companies.

Specifically, plaintiff agreed in January 2005 to lease the premises and MRI equipment for a fee comprised of $547,000 per month for the equipment^[FN1] and $30,000 per month for the three premises. Sher had the right to terminate each lease without cause, regardless of payment, on 30 days’ notice. No similar provision allowed plaintiff to terminate the leases without cause. Indeed, the leases contained clauses whereby they automatically renewed unless terminated by Sher, giving plaintiff no exit.

The rental fees charged to plaintiff for the MRI equipment were exorbitant. For example, a piece of equipment that one of Sher’s companies leased from a third party for a monthly payment of $5,950 was leased to plaintiff for $75,000 per month. Indeed, Sher’s companies charged plaintiff far more per year to rent the MRI machines, which were about 10 or 11 years old, than it would have cost to buy them outright. There was trial testimony that for two months’ rent charged by Sher in one of{**33 NY3d at 395} the equipment leases, a company could have owned a similar used MRI unit. As of December 2004, plaintiff could have bought used equipment to replace all the MRI equipment in the leases for less than $600,000. This amount is not significantly more than plaintiff paid each month to lease the equipment. All in all, the difference between the fair market value of six MRI scanners and what Sher charged plaintiff in one year to rent them was $4,680,000. Similarly, plaintiff paid $60,000 per year to lease nine used fax machines, even though the company could have purchased scores of new machines every year for that price.

Carothers opened a bank account on behalf of plaintiff. It was at the bank that Sher introduced Carothers to Irina Vayman, another nonphysician, whom Carothers hired as plaintiff’s executive secretary. Carothers never wrote a check from the bank account; Vayman would write the checks.

At the MRI facilities, Carothers’s oversight of the provision of medical services was practically nonexistent. Prior to signing the leases, Carothers did not seek out the referring physicians who generated patient traffic to the practices, and it was Vayman, not Carothers, who subsequently had contact with those physicians. Patient care protocols had already been set up by Carothers’s predecessor. Carothers was not involved in evaluating or disciplining employees. Carothers rehired a second radiologist, who had worked for Carothers’s predecessor, to interpret scans, and Carothers himself reviewed at most 79 reports out of a total of some 38,000.

At trial, an expert on radiology practice testified that “there was absolutely no quality control; there was no supervision; . . . the reports did not reflect [the] reality [of] what the films showed,” and “the quality of what was being produced . . . was abysmal.” The expert opined that

“what was being done here was not being done with an eye towards producing any kind of a quality product. This was . . . being done to sort of get an image on the film. And those images are not the images that would lend themselves towards being highly diagnostic types of examinations. . . . [A] lot of the images are replete with a tremendous amount of artifacts that reflect . . . inadequate equipment performance.”

Most of the scans performed at plaintiff’s facilities were of patients allegedly injured in motor vehicle accidents. The{**33 NY3d at 396} patients assigned their rights to receive first-party no-fault insurance benefits to plaintiff, which billed insurance companies to recover payment on the assigned claims. Sher introduced Carothers to an entity named Medtrex, with which plaintiff entered into a loan and security agreement. Vayman, not Carothers, was the authorized borrower’s representative on the Medtrex agreement. Medtrex advanced loans to plaintiff on a weekly basis. Payments from the insurance companies were then used to pay back Medtrex’s loans and pay its fees.

Carothers’s salary, at $133,000 from January 2005 through December 2006, was lower than that of plaintiff’s executive secretary, Vayman, who earned $120,000 a year. Throughout her employment, Vayman transferred large sums of money from plaintiff’s bank account to her own personal bank account and used plaintiff’s account to cover expenses such as lease payments on her car and water bills on a house in Las Vegas owned by Sher. Even larger sums were transferred from plaintiff’s account to an account of Sher’s. Carothers eventually opened two more accounts in plaintiff’s name to facilitate payments made by Vayman and Sher, including wire transfers to overseas accounts totaling $2,900,000. A certified public accountant who had conducted a “forensic investigation” of plaintiff testified at trial that some $12,200,000 was funneled through plaintiff to Sher and Vayman.

Vayman introduced Carothers to a tax preparer, whom Carothers hired to file tax returns for plaintiff. Sher’s telephone number, not Carothers’s, was listed on plaintiff’s tax return. The filed return contained egregious errors, such as a deduction taken for fictitious management fees in excess of $1,000,000. At trial, the accountant who had conducted the forensic investigation of plaintiff testified that it had “no books and records,” such as financial statements, ledgers, and invoices.

Insurance companies stopped paying plaintiff’s no-fault claims in 2006. Although Carothers had not personally guaranteed the leases, he did personally guarantee the Medtrex loans and he ended up owing that company over $7,000,000. Plaintiff closed in December 2006 after Medtrex refused to make any more advances.

II.

The procedural history begins with multiple collection actions filed by plaintiff against the insurance carriers, in the{**33 NY3d at 397} Civil Court of the City of New York, seeking to recover unpaid claims of assigned first-party no-fault insurance benefits. The carriers’ defense is that plaintiff was not eligible to seek reimbursement of the insurance benefits under 11 NYCRR 65-3.16 (a) (12) (stating that “[a] provider of health care services is not eligible for reimbursement . . . if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such service in New York”), because it was controlled by unlicensed nonphysicians (see Business Corporation Law § 1507 [a] [requiring all shareholders of a professional service corporation to be “individuals who are authorized by law to practice in this state a profession which such corporation is authorized to practice and who are or have been engaged in the practice of such profession in such corporation or a predecessor entity, or who will engage in the practice of such profession in such corporation within thirty days of the date such shares are issued”] and § 1508 [a] [imposing similar requirements on directors and officers of a professional service corporation]). The defendants also relied on our decision in State Farm Mut. Auto. Ins. Co. v Mallela, which held, in light of the above-cited provisions, that insurance carriers may withhold payment for medical services provided by “fraudulently incorporated” enterprises to which patients have assigned their claims, regardless of the quality of care such entities have provided.

The defendants contended that Carothers was merely a nominal owner of plaintiff, and that the professional corporation was actually owned and controlled by Sher and Vayman, who were not physicians. They also maintained that plaintiff was not entitled to payment because Carothers, the shareholder with a medical license, did not personally engage in the practice of medicine through the professional corporation.

At their depositions, Sher and Vayman invoked their Fifth Amendment privileges against self-incrimination and refused to answer almost all the questions, numbering in the hundreds, posed to them by the defendants. Specifically, in response to each question (other than identifying themselves), Sher and Vayman answered, simply, “Fifth.” By way of examples, Sher and Vayman responded in that manner to the following questions: “Are you [Sher] the owner of [plaintiff]?”; “Did you [Sher] pay Dr. Carothers money in exchange for the use of his professional license in order to operate [plaintiff]?”; “Did you [Sher] ever charge [plaintiff] fair market value for the use of MRI{**33 NY3d at 398} machines at the facilities where [plaintiff] conducted its business?” “Mr. Sher, did you exercise any control over the entity known as [plaintiff]?”; “Are you [Vayman] a part owner of [plaintiff]?”; “Is Hillel Sher a part owner of [plaintiff]?”

The cases, involving 54 insurance carriers, were consolidated and a joint trial was held in Civil Court. The parties stipulated that Sher and Vayman were not available to testify at trial within the meaning of CPLR 3117 (a) (3).^[FN2] Plaintiff moved to preclude the insurance companies from reading into evidence the depositions of Sher and Vayman in which they had serially invoked their Fifth Amendment privileges, on the ground that the invocation of the Fifth Amendment by a nonparty could not be used against a party. Civil Court denied the motion.

In opening remarks, the lead defense counsel told the jury that it would not hear from Sher and Vayman “because both of those witnesses chose to take the [F]ifth [A]mendment privilege against self-incrimination.” As the first piece of evidence presented, Sher’s entire deposition testimony was read to the jury, including his repeated invocations of the Fifth Amendment. The same approach was taken with Vayman’s deposition testimony. Plaintiff’s counsel objected.

During the trial, the jury heard from multiple witnesses whose testimony supported the defendants’ assertions that plaintiff’s profits were funneled to Sher and Vayman, through grossly inflated equipment lease payments to Sher’s companies and through the transfer of plaintiff’s funds to personal accounts. The accountant who had conducted a forensic investigation of plaintiff opined that

“Dr. Carothers was not in control of [plaintiff] as a true business owner would be. . . . [H]e was not actively involved in the operations or the financial aspects of the company. . . . [T]he core business assets . . . were owned and controlled by Hillel Sher. . . . Hillel Sher not only controlled the company, but profited from the monies that were in [plaintiff]. . . . Dr. Carothers, based on everything that I read, did no due diligence that a true business owner would before he signed leases for millions of dollars. . . . [S]ince a medical practice is the only way you can bill an insurance company,{**33 NY3d at 399} [plaintiff] was used as a vehicle to siphon money to Sher and Vayman . . . .”

In the expert’s view, the lease agreements between plaintiff and Sher’s companies were not made at arm’s length, because the terms of those agreements were not mutually beneficial to both parties.

Carothers himself testified, but he was not able to account for the transactions described by the other witnesses called by the insurance carriers. He suggested that the payments to Vayman’s personal account were for back wages and payment of corporate expenses and that the only payments for Sher’s benefit were to repay a $400,000 bridge loan, for which he presented no proof. Although he testified that a general ledger compiled by an accounting firm in 2007 accounted for all transactions, no such ledger was admitted into evidence.

During summation, the insurance carriers’ counsel repeatedly mentioned that Sher and Vayman had invoked their Fifth Amendment privileges.

Plaintiff’s counsel requested that the court give a jury instruction on “the traditional elements of fraud,” including fraudulent intent, on the theory that Mallela allows insurers to withhold payments, under 11 NYCRR 65-3.16 (a) (12), only in situations where the professional corporation’s ostensible or real managers engaged in conduct “tantamount to fraud” (Mallela, 4 NY3d at 322). The trial court denied the request and the jury charge contained no instruction on fraudulent intent or the elements of fraud. The court told the jury that it could “find that [plaintiff] was fraudulently incorporated” if it concluded “that reasonable people would say that Mr. Sher and/or Miss Vayman were de facto . . . owners of the corporation or that they exercised substantial control over the corporation.” The jury could “look beyond the certificate of incorporation.” The trial court further instructed the jury that

“[t]o find that Mr. Sher and [or] Miss Vayman were de facto owners of [plaintiff], [the jury] must find that they exhibited the attributes of ownership, particularly that they exercised dominion and control over the corporation and its assets, and that they shared risks, expenses[,] and interest in the profits and los[s]es of the corporation.”

{**33 NY3d at 400}The jury was instructed that, in order to find that Sher and Vayman “exercised substantial control over the corporation,” it “must find that they had a significant role in the guidance, management and direction of the business of the corporation.” The trial court then enumerated 13 factors that the jury might consider relevant in deciding whether Sher and Vayman were de facto owners of or exercised substantial control over plaintiff. The court also required the jury to decide whether Carothers was engaged in the practice of medicine through plaintiff, within the meaning of Business Corporation Law § 1507.

In the course of its instructions, Civil Court charged the jury that it could, but was not obliged to, draw an adverse inference against plaintiff on the basis of the invocations by Sher and Vayman of their Fifth Amendment rights, but could not rely on such an adverse inference as the only basis for concluding that plaintiff was not solely owned or controlled by Carothers.

The jury found that the defendants had proved that plaintiff was “fraudulently incorporated” and that Carothers did not engage in the practice of medicine through plaintiff in 2005-2006.

Plaintiff moved under CPLR 4404 (a) to set aside the verdict and for judgment as a matter of law or in the alternative to set aside the verdict as against the weight of the evidence or in the interest of justice and for a new trial. Plaintiff contended that the trial court erred by failing to instruct the jury regarding the elements of fraud and in particular by failing to instruct the jury that the defendants must have established that there was a fraudulent intent at the time of plaintiff’s incorporation. Plaintiff also argued that it was error for Civil Court to set forth the particular list of factors it gave to assist the jury in determining whether Sher and Vayman were de facto owners of or exercised substantial control over the plaintiff. Additionally, plaintiff contended that it was error to permit Sher’s and Vayman’s deposition testimony to be read to the jury, because any probative value of reading the depositions was outweighed by its prejudicial effect, and that this error was further compounded by the court’s instruction that the jury could draw an adverse inference against plaintiff based upon the invocations of Fifth Amendment privileges. Finally, plaintiff challenged{**33 NY3d at 401} the verdict that Carothers had not practiced medicine through plaintiff, as contrary to the weight of the evidence.^[FN3]

The trial court denied plaintiff’s motion (26 Misc 3d 448 [Civ Ct, Richmond County 2009]). It was then agreed, by a so-ordered stipulation, that, with the exception of one action against defendant Progressive Insurance Company (Progressive), judgments would not be entered, pending the disposition of the appeal. Accordingly, Civil Court entered a single judgment in favor of Progressive and against plaintiff, dismissing the complaint.

The Appellate Term affirmed Civil Court’s judgment dismissing the complaint, insofar as appealed from (42 Misc 3d 30 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2013]). The appellate court set aside, as contrary to the weight of the evidence, so much of the verdict as determined that Carothers failed to practice medicine, but upheld so much of the verdict as found that the plaintiff was fraudulently incorporated, affirming the judgment on that basis.

The Appellate Term held that Civil Court erred in permitting the defense to read the deposition transcripts of Sher and Vayman to the jury, in which those witnesses repeatedly invoked the Fifth Amendment.

“The error was compounded by the repeated references to the nonparties’ depositions in the defense summation to the jury, and in the decision of the court to charge an adverse inference. While it is proper for the court to give such an instruction to the jury in a civil action when a party invokes his or her Fifth Amendment privilege, generally, the adverse inference is inappropriate when it is based on a nonparty’s decision to remain silent.” (Id. at 44-45 [citations omitted].)

The Appellate Term reasoned, however, that the errors were harmless under CPLR 2002, on the basis that the outcome of the trial, on the question whether plaintiff was in violation of the requirement that it be owned and controlled solely by licensed professionals, “would have been the same notwithstanding [the] errors” (id. at 45-46).

{**33 NY3d at 402}The Appellate Term upheld Civil Court’s jury charge.

[*5]“Although both the United States Court of Appeals for the Second Circuit and New York’s Court of Appeals employed the term ‘fraudulently incorporated’ in the Mallela case, which was the term used in the certified question, the essence of the defense in that case, as here, was the provider’s ‘lack of eligibility,’ which does not require a finding of fraud or fraudulent intent, but rather, addresses the actual operation and control of a medical professional corporation by unlicensed individuals.

“[A] reading of the Mallela case demonstrates that the case involved fraud ‘in the corporate form’ rather than the more traditional forms of common-law fraud.” (Id. at 40-41 [citation omitted].)

Plaintiff appealed to the Appellate Division, pursuant to permission granted by that Court. Progressive did not appeal.

The Appellate Division affirmed the Appellate Term’s order insofar as appealed from (150 AD3d 192 [2d Dept 2017]).

The Appellate Division upheld the Appellate Term’s holding that Civil Court erred in permitting the defendants to read the transcripts into evidence and in instructing the jury that it could draw an adverse inference, and agreed with the Appellate Term majority that the error could not have affected the outcome of the trial and therefore was harmless. The Appellate Division reasoned that there was “overwhelming evidence” that “Carothers was merely the nominal owner of the plaintiff and that the plaintiff was actually owned and controlled by nonphysicians Sher and Vayman, who funneled the plaintiff’s profits to themselves, and . . . the outcome of the trial would have been the same absent the error” (id. at 204).

In addition, the Appellate Division held that Civil Court properly declined to give plaintiff’s requested charges on common-law fraud and fraudulent intent.

“Mallela involved fraud ‘in the corporate form’ rather than the more traditional forms of common-law fraud. With respect to fraudulent intent at the time of incorporation, Mallela instructs that even if a professional corporation did not intend to yield control to unlicensed parties at the time of incorporation, it nonetheless would be ineligible for no-{**33 NY3d at 403}fault reimbursement if the nominal physician owner yielded control of the corporation at some later date. Good faith compliance with the requirements of a professional corporation at the time of incorporation does not end when the certificate of incorporation is filed and does not defeat a claim of fraudulent incorporation if the evidence demonstrates that at some point after the initial incorporation, the nominal physician owner turned over control of the business to nonphysicians in contravention of state regulations.” (Id. at 202 [citations omitted].)

The Appellate Division rejected plaintiff’s challenge to Civil Court’s list of 13 factors and its remaining contentions.

Plaintiff moved at the Court of Appeals for leave to appeal. We dismissed the motion on the basis that the Court of Appeals does not have jurisdiction to entertain a motion for leave to appeal from an order commenced in Civil Court (29 NY3d 1047 [2017]). Plaintiff then moved at the Appellate Division for leave to appeal to this Court. The Appellate Division granted plaintiff’s motion, certifying the question whether its opinion and order was properly made (2017 NY Slip Op 90794[U]). We subsequently denied a motion by Progressive to dismiss the appeal (32 NY3d 1073 [2018]).

III.

In New York, a professional service corporation may be owned and controlled only by licensed professionals (see Business Corporation Law § 1507). Moreover, licensed professionals are permitted to incorporate only if they are the sole organizers, owners, and operators of the professional corporation (see Business Corporation Law §§ 1503 [a], [b]; 1508). To incorporate, the licensed individual must obtain a “certificate . . . issued by the [New York State [*6]Department of Education] certifying that each of the proposed shareholders, directors and officers is authorized by law to practice a profession which the corporation is being organized to practice” (Business Corporation Law § 1503 [b] [ii]), and the Department of Education may not issue a certificate of authority to a professional service corporation unless it meets these qualifications (see Education Law § 6507 [4] [c] [i]). Once the professional corporation is formed, shareholders may not transfer their voting power to any person who is not a licensed professional in the field (see{**33 NY3d at 404} Business Corporation Law § 1507 [a]); only shareholders or licensed professionals engaged in the practice may be directors and officers (see Business Corporation Law § 1508 [a]).

New York law prohibits unlicensed individuals from organizing a professional service corporation for profit or exercising control over such entities. In the medical context, the underlying policy concern is “that the so-called ‘corporate practice of medicine’ could create ethical conflicts and undermine the quality of care afforded to patients” (State Farm Mut. Auto. Ins. Co. v Mallela, 372 F3d 500, 503 [2d Cir 2004]). Control of medical service corporations by unlicensed individuals leads to higher costs, less effective medical treatment, and mistrust of the no-fault insurance system. More generally, the common law in New York has long recognized the need to ensure that providers of professional services are not unduly influenced by unlicensed third parties who are free of professional responsibility requirements and may disregard patient care in operating a “corporation . . . organized simply to make money” (Matter of Co-operative Law Co., 198 NY 479, 484 [1910]).

In State Farm Mut. Auto. Ins. Co. v Mallela, this Court held that, under 11 NYCRR 65-3.16 (a) (12), a regulation adopted by the Commissioner of Insurance pursuant to New York’s “no-fault” insurance laws (see Insurance Law § 5101 et seq.), insurance carriers may withhold payment for medical services provided by a professional corporation that has been “fraudulently incorporated.” There, we considered a certified question from the United States Court of Appeals for the Second Circuit: whether “a medical corporation that was fraudulently incorporated under . . . Business Corporation Law §§ 1507, 1508, and . . . Education Law § 6507(4)(c) [is] entitled to be reimbursed by insurers, under . . . Insurance Law §§ 5101 et seq. and its implementing regulations, for medical services rendered by licensed medical practitioners” (Mallela, 372 F3d at 510). We answered the question in the negative, determining that a provider that was not solely owned and controlled by physicians was not eligible for no-fault insurance reimbursements.

The Mallela decision interpreted 11 NYCRR 65-3.16 (a) (12) to allow insurance carriers to withhold reimbursement for no-fault claims that are “provided by fraudulently incorporated enterprises to which patients have assigned their claims” (Mallela, 4 NY3d at 319). In Mallela, nonphysicians paid physicians to use their names on paperwork to establish medical service corporations, and the nonphysicians then operated the companies,{**33 NY3d at 405} while billing the physicians inflated rates so that profits were channeled to them. The nonphysicians contended that the professional corporations were “entitled to reimbursement even if fraudulently licensed” (id. at 321). The Mallela Court rejected the argument, reasoning that if this were so, reimbursement would go “to the medical service corporation that exists to receive payment only because of its willfully and materially false filings with state regulators” (id.). In our holding, this Court clarified that insurers may “look beyond the face of licensing documents to identify willful and material failure to abide by state and local law,” such as actual ownership or operation of the practice by an unlicensed individual (id.).

The Mallela Court warned insurance carriers, however, that insurers could not delay payments of reimbursement claims to pursue investigations unless they had “good cause” (id. at 322; see 11 NYCRR 65-3.2 [c]) and that “[i]n the licensing context, carriers will be unable to show ‘good cause’ unless they can demonstrate behavior tantamount to fraud” (Mallela, 4 NY3d at 322). The Court further cautioned that “[t]echnical violations will not do. For example, a failure to hold an annual meeting, pay corporate filing fees or submit otherwise acceptable paperwork on time will not rise to the level of fraud” (id.).

Plaintiff, citing our language in Mallela, contends that the trial court erred in denying its request to instruct the jury that it had to find fraudulent intent or, at least, conduct “tantamount to fraud.” We conclude that there was no error. Neither 11 NYCRR 65-3.16 (a) (12) nor our interpretation of that regulation in Mallela requires that an insurance carrier, seeking to demonstrate that a professional service corporation engaged in corporate practices that violate Business Corporation Law §§ 1507, 1508, or Education Law § 6507 (4) (c), show that the professional service corporation or its managers engaged in common-law fraud. We drew the term “fraudulently incorporated” from the Second Circuit’s certified question, but the term may be misleading. A [*7]corporate practice that shows “willful and material failure to abide by” licensing and incorporation statutes (Mallela, 4 NY3d at 321) may support a finding that the provider is not an eligible recipient of reimbursement under 11 NYCRR 65-3.16 (a) (12) without meeting the traditional elements of common-law fraud.

Nor is a jury required to evaluate the extent to which corporate misconduct approximates fraud. The no-fault insurance regulations make providers ineligible for reimbursement{**33 NY3d at 406} when their violations of the cited statutes are more than merely technical and “rise to the level of” a grave violation such as fraud (id. at 322). Insurance carriers do not have good cause to delay or deny payments of reimbursement claims on the basis of a provider’s slight divergence from licensing requirements. Here, the jury’s finding that plaintiff was in material breach of the foundational rule for professional corporation licensure—namely that it be controlled by licensed professionals—was enough to render plaintiff ineligible for reimbursement under 11 NYCRR 65-3.16 (a) (12). The trial court committed no error in refusing to issue a charge requiring a “tantamount to fraud” finding by the jury.^[FN4]

Plaintiff also suggests that in Mallela the corporate misconduct was more egregious than here, in that Mallela’s company had pleaded guilty to billing fraud and Mallela had surrendered his license. We can discern no salient factual difference between Mallela and this appeal that would justify a distinct analysis. The allegations in Mallela were very similar to the evidence presented at trial here; both cases involve alleged funneling of profits to nonphysicians who owned companies that billed the professional corporation inflated rates. Our decision in Mallela was not based on fraudulent billing. In fact, we did not mention in our opinion that Mallela had pleaded guilty to that charge.

Finally, plaintiff is incorrect to characterize the improper control of plaintiff by unlicensed persons as simply an instance of improper fee splitting of the professional corporation’s profits with a nonphysician in violation of 8 NYCRR 29.1 (b) (4). Although the Appellate Division held in Matter of Allstate Prop. & Cas. Ins. Co. v New Way Massage Therapy P.C. (134 AD3d 495, 495 [1st Dept 2015], lv denied 28 NY3d 909 [2016]) that a “fee-sharing arrangement . . . does not constitute a defense to a no-fault action,” the jury in this case determined that plaintiff was controlled by unlicensed persons, rather than merely splitting fees with them. Control of a professional corporation by nonprofessionals violates foundational New York licensing requirements and rendered plaintiff ineligible for insurer{**33 NY3d at 407} reimbursement, for exactly the same reason the medical service corporation in Mallela was ineligible for reimbursement.

IV.

 Plaintiff’s other principal contention is that the trial court erred in admitting the deposition testimony in which Sher and Vayman repeatedly invoked the Fifth Amendment and in giving the jury an adverse inference instruction.

While the Fifth Amendment accords an individual the privilege not to answer questions in a civil proceeding if the answers might incriminate the person in future criminal proceedings (see Baxter v Palmigiano, 425 US 308, 316 [1976]), a witness who asserts this Fifth Amendment privilege in a civil trial is not necessarily protected from consequences in the same manner as in a criminal trial. This Court has held that, in a civil case, failure to answer questions by a witness who is a party “may be considered by a jury in assessing the strength of evidence offered by the opposite party on the issue which the witness was in a position to controvert” (Marine Midland Bank v Russo Produce Co., 50 NY2d 31, 42 [1980]). In a civil trial, “an unfavorable inference may be drawn against a party from the exercise of the privilege against self-incrimination” (Jerome Prince, Richardson on Evidence § 5-710). We have not previously decided whether a nonparty’s invocation of the Fifth Amendment may trigger an adverse inference [*8]instruction against a party in a civil case, and we have no occasion to do so here because any error by the trial court was harmless (see CPLR 2002). There is no reasonable view of the evidence under which plaintiff could have prevailed (see Marine Midland Bank, 50 NY2d at 43). We agree with the Appellate Division that, based on the trial evidence, the jury could rationally infer only one conclusion: plaintiff was in violation of the requirement of Business Corporation Law § 1507 that a professional service corporation be owned and controlled solely by licensed professionals.

Accordingly, the order of the Appellate Division should be affirmed, with costs, and the certified question not answered as unnecessary.

Chief Judge DiFiore and Judges Rivera, Stein, Garcia, Wilson and Feinman concur.

Order affirmed, with costs, and certified question not answered as unnecessary.

Footnotes

Footnote 1:In this opinion, we use the figures given by the Appellate Division.

Footnote 2:CPLR 3117 (a) (3) states conditions under which “the deposition of any person may be used” at a trial due to the witness’s unavailability.

Footnote 3:Plaintiff also maintained that a decision by the trial court to preclude evidence of some $18 million in accounts receivable allegedly owed to plaintiff by the insurance companies prejudiced plaintiff’s ability to respond to the fraudulent incorporation defense. That argument was properly rejected by the lower courts.

Footnote 4:We reject plaintiff’s argument that it was error for Civil Court to set forth the particular list of factors it gave to assist the jury in determining whether Sher and Vayman were de facto owners of or exercised substantial control over plaintiff. Although we do not endorse the trial court’s specific list of factors, in this case the trial court’s charge satisfactorily directed the jury to the ultimate inquiry of control over a professional corporation.

[*1]

Argued January 13, 2016; reargued May 4, 2016; decided June 14, 2016

Aetna Health Plans v Hanover Ins. Co., 116 AD3d 538, affirmed.

The issue presented in this appeal is whether a health insurer who pays for medical treatment that should have been covered by the insured’s no-fault automobile insurance carrier may maintain a reimbursement claim against the no-fault insurer within the framework of the Comprehensive Motor Vehicle Insurance Reparations Act (Insurance Law § 5101 et seq.) (the No-Fault Law). Because New York’s “no-fault” statutory law and regulatory scheme does not contemplate such reimbursement to a health insurer, as opposed to a health care provider, we hold that it may not.

I.

On April 25, 2008, Luz Herrera sustained personal injuries while operating a vehicle insured by defendant Hanover Insurance Company. At the time of the accident, Herrera also had private health insurance through plaintiff Aetna Health Plans.

Herrera received medical treatment for her injuries from various medical providers. Although Aetna alleges that the bills should have been paid by Hanover, the no-fault insurer,{**27 NY3d at 580} the medical providers submitted some of their bills for treatment directly to Aetna. Aetna paid the bills, initially totaling $19,649.10.

Aetna, through its representative, wrote to Hanover in March 2009 seeking reimbursement for the medical bills it had paid, but Hanover did not respond. At the same time, Aetna filed a lien for reimbursement should Herrera recover in a personal injury action that she had brought against the alleged tortfeasor who caused her injuries in the accident.

On January 6, 2010, Herrera, through her attorneys, submitted copies of the medical bills paid by Aetna to Hanover, demanding payment. Hanover did not respond to Herrera’s demands either.

Herrera then demanded arbitration pursuant to her policy with Hanover, claiming that she was entitled to the no-fault benefits because Aetna maintained a lien against her for reimbursement and Hanover, who was responsible for the bills, had neither paid nor denied coverage for the bills submitted. The arbitrator denied Herrera’s claim in its entirety, reasoning that the documents submitted by Herrera—copies of the medical bills paid by Aetna—were not “bills.”^[FN1] Further, the arbitrator asserted that even if they were considered “bills,” Herrera lacked standing to make the claim because Aetna had paid them. The arbitrator determined that, while Aetna had a lien against Herrera, until that lien was satisfied, Herrera lacked standing to pursue her claim. A Master Arbitrator affirmed that decision.

In addition to the payments that were the subject of the arbitration, Herrera’s medical providers continued to submit bills to Aetna for her ongoing treatment, and Aetna continued to pay an additional $23,525.73 in medical bills.

Thereafter, Herrera, through her attorneys, resubmitted all of the medical bills to Hanover and informed it that she had assigned her rights against Hanover to Aetna.

II.

Aetna commenced this action against Hanover, seeking reimbursement for the amounts paid on Herrera’s behalf, plus interest and attorneys’ fees. Hanover answered, generally denying Aetna’s allegations and asserting affirmative defenses.{**27 NY3d at 581}

Aetna moved for summary judgment, arguing that Hanover breached its contract of insurance with its assignor, Herrera. Aetna claimed that as the assignee of Herrera’s claim for no-fault benefits, it stood in the shoes of Herrera and was entitled to reimbursement for the monies it paid for the medical treatment Herrera received resulting from the motor vehicle accident.

Hanover opposed the motion and cross-moved to dismiss the complaint based upon lack of standing, arguing that Aetna was not entitled to direct reimbursement under 11 NYCRR 65-3.11 (a) because it was an insurance company and not a provider of health care services, the only type of assignee permitted by regulation, and Aetna was not in privity of contract with Hanover. Hanover cross-moved for summary judgment dismissing the complaint as neither Herrera nor Aetna timely submitted the medical bills to Hanover.

Aetna responded that Hanover was judicially estopped from arguing that Aetna lacked standing because in the prior arbitration Hanover asserted—and the arbitrators agreed—that Aetna was the proper party with standing, not Herrera.

Supreme Court granted Hanover’s cross motion to dismiss the complaint pursuant to CPLR 3211 (a) (7), and denied Aetna’s motion for summary judgment on liability as moot (2013 NY Slip Op 33221[U] [Sup Ct, Bronx County 2013]). The court concluded that because Aetna was not a “health care provider” under the no-fault statute, it was not entitled to direct payment of no-fault benefits (id. at *5). It further held that Aetna was not in privity of contract with Hanover and had not shown that it was an intended third-party beneficiary of Hanover’s contract with Herrera. Finally, the court determined that Aetna could not sustain a cause of action under subrogation principles because “[t]here [was] . . . no authority permitting a health insurer to bring a subrogation action against a no-fault insurer for sums the health insurer was contractually obligated to pay to its insured” (id. at *6).

The Appellate Division unanimously affirmed (116 AD3d 538 [1st Dept 2014]). The Court determined that Aetna “is not a ‘health care provider’ under [11 NYCRR 65-3.11 (a)], but rather a heath care insurer” that Hanover had no legal obligation to directly reimburse (id. at 539). It concluded that the provisions of Insurance Law §§ 5105 and 5106 (d) provide for “a limited window of arbitration between no-fault insurers” that “does not {**27 NY3d at 582}pertain to a health insurer such as Aetna” and consequently Aetna could not maintain a subrogation claim against Hanover (id.). The Court stated that, because there was no “privity of contract” between Aetna and Hanover, nor was Aetna a “third-party beneficiary of the contract” between Hanover and Herrera, Aetna could not assert a breach of contract claim against Hanover (id.).

III.

Article 51 of the Insurance Law, enacted as the Comprehensive Motor Vehicle Insurance Reparations Act (see L 1973, ch 13), governs payments to reimburse a person for basic economic loss for personal injury arising out of the use or operation of a motor vehicle, irrespective of fault. Article 51 is commonly known as the No-Fault Law. The purpose of the No-Fault Law was to promote “prompt resolution of injury claims, limiting cost to consumers and alleviating unnecessary burdens on the courts” (Pommells v Perez, 4 NY3d 566, 570-571 [2005] [citation omitted]). Under no-fault, an insured who has been in a motor vehicle accident can claim first party benefits from her motor vehicle insurer of up to $50,000 to cover “basic economic loss” as defined in Insurance Law § 5102 (a). In the event of “serious injury” as defined in the statute, a person may initiate suit against the car owner or driver for damages caused by the accident (Insurance Law § 5104 [a]).

The applicable regulation, 11 NYCRR 65-3.11 (a), provides, in relevant part, that “[a]n insurer shall pay benefits for any . . . loss[,] other than death benefits, directly to the applicant or, . . . upon assignment by the applicant . . . , shall pay benefits directly to providers of health care services” (emphasis added). Aetna concedes that as a health insurer it is not a “provider of health care services” as contemplated by the language of this regulation (see Health Ins. Plan of Greater N.Y. v Allstate Ins. Co., 2007 NY Slip Op 33925[U] [Sup Ct, NY County 2007]; see also Ops Gen Counsel NY Ins Dept No. 08-01-08 [Jan. 2008]). Aetna argues, however, that it stands in Herrera’s shoes because Herrera assigned her no-fault rights to it.

This argument fails for two reasons. First, since Herrera’s health care providers were able to bill and recoup payment from Aetna, an assignment by Herrera of her no-fault rights had already been made, leaving her with no rights to assign to Aetna. Second, by its very language, the no-fault regulation{**27 NY3d at 583} permits only the insured—or providers of health care services by an assignment from the insured—to receive direct no-fault benefits. Because Aetna does not fall under the term “health care provider,” Herrera could not assign her rights to it.^[FN2]

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Stein, J. (concurring).

I am in complete agreement with the majority’s analysis regarding plaintiff Aetna Health Plans’ inability to recover under the No-Fault Law and related regulations. However, I write separately to address the dissent’s analysis of Aetna’s equitable subrogation claim. In my view, Supreme Court properly dismissed the complaint because Aetna’s claims are inconsistent with, and would improperly supplant, the tightly-regulated and comprehensive no-fault statutory scheme crafted by the legislature, and because the principles of equitable subrogation do not apply under the circumstances presented here. I, therefore, concur with the majority’s conclusion that the Appellate Division’s order should be affirmed.

As the majority aptly explains, the no-fault insurance statutes and regulations provide a comprehensive framework for the resolution and payment of no-fault benefits in connection with covered injuries. Those statutes and regulations provide no basis for a health maintenance organization (HMO) to recover from a no-fault insurer. Thus, under circumstances in which an HMO attempts to recover from a no-fault insurer for payments made on behalf of their mutual insured, the doctrine of equitable subrogation does not apply.

The State Insurance Department’s Office of General Counsel has issued an informal opinion on the topic of subrogation by an HMO (such as Aetna) (see Ops Gen Counsel NY Ins Dept No. 08-01-08 [Jan. 2008] [HMO as No-Fault Subrogee], available at http://www.dfs.ny.gov/insurance/ogco2008/rg080108.htm, cached at http://www.nycourts.gov/reporter/webdocs/HMOasNo-FaultSubrogee.pdf).^[FN1] In its opinion, the Insurance Department stated that an “HMO is not entitled to subrogate its recovery pursuant to New York Insurance Law{**27 NY3d at 584} § 5105(a) . . . , because it does not fit the definition of ‘insurer’ under the no-fault insurance law scheme.” The Insurance Department reasoned that an HMO is not required to pay for the insured’s treatment in the first place because it is permitted to exclude coverage for treatment that is recovered or recoverable under no-fault (see 11 NYCRR 52.16 [c] [8]). Further, the key no-fault regulation permits direct payment from no-fault insurers to medical providers (see 11 NYCRR 65-3.11) and, in most situations, the insured assigns the benefits to such providers, which then undertake the responsibility of seeking payment from the no-fault insurer.

Essentially, based on its interpretation of the no-fault statutes and regulations, the Insurance Department has advised insurers that an HMO should refuse to pay for any treatment covered under no-fault because, under the no-fault scheme, the HMO will not be able to subrogate its recovery if it makes such payments. While not binding on courts, such informal opinions and interpretations of insurance law are entitled to deference unless irrational or unreasonable, due to the Superintendent’s “ ’special competence and expertise with respect to the insurance industry’ ” (A.M. Med. Servs., P.C. v Progressive Cas. Ins. Co., 101 AD3d 53, 64 [2d Dept 2012], quoting Matter of New York Pub. Interest Research Group v New York State Dept. of Ins., 66 NY2d 444, 448 [1985]; see also Financial Services Law § 202 [a]).

As the dissent notes, the doctrine of equitable subrogation can be

“broad enough to include every instance in which one party pays a debt for which another is primarily answerable and which in equity and good conscience should have been discharged by the latter, so long as the payment was made either under compulsion or for the protection of some interest of the party making the payment, and in discharge of an existing liability” (Gerseta Corp. v Equitable Trust Co. of N.Y., 241 NY 418, 425-426 [1926]).

However, unlike the traditional equitable subrogation situation—involving an active wrongdoer (tortfeasor) and an innocent insurer—equity does not dictate the outcome of who should pay for medical treatment under the no-fault scheme when the dispute is between two types of insurers, neither of which caused the physical injuries. Moreover, Aetna’s payments{**27 NY3d at 585} were not made to discharge an existing liability because, according to the Insurance Department opinion and pursuant to 11 NYCRR 52.16 (c) (8), an HMO has no obligation to reimburse for no-fault recoverable treatment.

“Subrogation allocates responsibility for the loss to the person who in equity and good conscience ought to pay it, in the interest of avoiding absolution of a wrongdoer from liability simply because the insured had the foresight to procure insurance coverage” (North Star Reins. Corp. v Continental Ins. Co., 82 NY2d 281, 294 [1993]; see Millennium Holdings LLC v Glidden Co., 27 NY3d 406, 414 [May 5, 2016]). Thus, in the typical example of subrogation, an insurer attempts to recoup covered medical expenses from the tortfeasor who caused the insured’s injuries and need for treatment in the first place (see e.g. ELRAC, Inc. v Ward, 96 NY2d 58, 75-76 [2001]; Teichman v Community Hosp. of W. Suffolk, 87 NY2d 514, 521-522 [1996]).^[FN2] In such circumstances, as a matter of fairness, an insurer who was compelled by contract to pay for medical treatment required by its insured due to the negligent or intentional actions of another ought to be able to obtain reimbursement from the party who was at fault and caused those damages (see Allstate Ins. Co. v Stein, 1 NY3d 416, 422 [2004], citing Ocean Acc. & Guar. Corp. v Hooker Electrochemical Co., 240 NY 37, 47 [1925]).

Here, however, defendant Hanover Insurance Company is Luz Herrera’s no-fault insurer, not the wrongdoer (i.e., the third-party tortfeasor who caused the underlying loss or injury to Herrera). It does not appear that either Aetna or the medical providers are completely without fault concerning the billing issue with which we are now confronted. The medical providers submitted their bills to the incorrect insurer, creating the false impression that Aetna’s policy covered Herrera’s treatment, when her injuries were actually related to her no-fault accident. For its part, Aetna continued to pay those bills, without notifying the providers of this mistake, even after Aetna learned that they should have been submitted to Hanover. On the other hand, no argument is made that Hanover is responsible for the incorrect billing. Aetna has apparently{**27 NY3d at 586} not sought to recoup directly from the tortfeasor Aetna’s payments on Herrera’s behalf, instead relying on a lien it placed against any recovery by Herrera in her action against that party.^[FN3] While purporting to sue as the subrogee of Herrera, as its insured, Aetna is actually suing to recover for its own losses due to incorrect billing, rather than Herrera’s losses (see Federal Ins. Co. v Spectrum Ins. Brokerage Servs., 304 AD2d 316, 317 [1st Dept 2003]). That is not true subrogation.

As the dissent suggests, it would certainly be easier for Aetna to proceed against Hanover for all of the bills paid on Herrera’s behalf, rather than pursuing multiple medical providers for repayment of each of their bills. However, we have long held that “equity will not entertain jurisdiction where there is an adequate remedy at law” (Boyle v Kelley, 42 NY2d 88, 91 [1977]; see Lichtyger v Franchard Corp., 18 NY2d 528, 537 [1966]; Lewis v City of Lockport, 276 NY 336, 342 [1938]). Thus, while equity is, indeed, a flexible concept, it may not be invoked when an adequate remedy exists at law, merely because a party would prefer an easier route to recovery.

In that regard, we emphasize that Aetna may seek recovery from the medical providers that improperly billed Aetna for treatment that should have been covered by Hanover. Contracts between Aetna and the treatment providers—which are not in the record before us—may even spell out the right to, and procedures for, such clawbacks. The medical providers could then submit their bills to Hanover for payment under Herrera’s no-fault policy.^[FN4] The availability to Aetna of this legal remedy renders inappropriate the expansion of equitable subrogation into the complex and comprehensive no-fault scheme. Finally, providing an equitable remedy could create additional burdens on the courts—which is contrary to one of the purposes of the No-Fault Law (see Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 317 [2007])—and would complicate and add confusion to that statutory{**27 NY3d at 587} and regulatory scheme. Accordingly, the lower courts properly concluded that Aetna’s complaint should be dismissed.

Fahey, J. (dissenting).

I respectfully dissent because, in my view, Supreme Court erred in granting defendant’s cross motion to dismiss the complaint.

I generally agree with the majority’s recitation of the relevant facts. Both parties accepted premiums in exchange for the assumption of an obligation to insure Luz Herrera. Plaintiff covered Herrera pursuant to a policy of health insurance, while defendant provided coverage for her under a policy of automobile insurance, which included personal injury protection (PIP) (see 11 NYCRR 65-1.1 [d] [mandatory PIP endorsement]). In April 2008, Herrera was injured in an automobile accident; afterwards, defendant paid some, but not all, of the costs of medical treatment Herrera received as a result of the personal injuries she sustained in that incident. The balance of those costs was paid by plaintiff in its capacity as Herrera’s health insurer. Plaintiff subsequently asserted a lien against any recovery Herrera may have in the personal injury action she commenced in relation to the accident. At some point, Herrera assigned her rights against defendant to plaintiff.

According to plaintiff, its involvement in payment for Herrera’s medical care following the accident is attributable to the fact that Herrera’s medical providers mistakenly submitted bills for treatment of her accident-related injuries to plaintiff when, in fact, such bills should have been tendered to defendant. No matter, those facts speak to the core problem underlying this appeal, that is, that plaintiff, as Herrera’s health insurer, paid medical expenses arising from the accident that defendant, Herrera’s no-fault insurer, should have paid and has since refused to pay.

Based on those facts plaintiff commenced this action seeking damages in the amount of medical expenses that it had paid on Herrera’s behalf in defendant’s stead. In my view, the claims asserted in the complaint speak to what effectively is a single cause of action sounding in equitable subrogation. I also believe that, on this record, plaintiff should be permitted to pursue that subrogation cause of action.

Subrogation, of course, “is the principle by which an insurer, having paid losses of its insured, is placed in the position of its insured so that it may recover from the third party legally responsible for the loss” (Winkelmann v Excelsior Ins. Co., 85{**27 NY3d at 588} NY2d 577, 581 [1995]; see generally 16 Steven Plitt et al., Couch on Insurance 3d § 225:5).^[FN1] Said another way, “[s]ubrogation allocates responsibility for the loss to the person who in equity and good conscience ought to pay it, in the interest of avoiding absolution of a wrongdoer from liability simply because the insured had the foresight to procure insurance coverage” (North Star Reins. Corp., 82 NY2d at 294; see Millennium Holdings LLC v Glidden Co., 27 NY3d 406, 414 [May 5, 2016] [same]). “The right arises by operation of law when the insurer makes payment to the insured” (North Star Reins. Corp., 82 NY2d at 294), and the doctrine

“is broad enough to include every instance in which one party pays a debt for which another is primarily answerable and which in equity and good conscience should have been discharged by the latter, so long as the payment was made either under compulsion or for the protection of some interest of the party making the payment, and in discharge of an existing liability” (Gerseta Corp. v Equitable Trust Co. of N.Y., 241 NY 418, 425-426 [1926]).

In concluding that the Appellate Division order should be affirmed, the majority suggests that to permit plaintiff to proceed against defendant here would be inconsistent with the no-fault scheme (see majority op at 579, 582-583).^[FN2] As the theory goes, because plaintiff is not a “provider[ ] of health care services” within the meaning of 11 NYCRR 65-3.11 (a), it is ineligible to receive direct payment from defendant.

Nothing in the no-fault scheme precludes plaintiff from pursuing this action. Trouble with respect to a remedy does not{**27 NY3d at 589} equate to trouble with respect to the merits of a cause of action. Recovery with respect to plaintiff’s cause of action—which, as noted, in my view sounds in equitable subrogation—would be indirect. That is, plaintiff, likely barred from receiving direct payments from defendant by the no-fault regulations (see 11 NYCRR 65-3.11 [a]), theoretically would seek reimbursement through the medical providers to be reimbursed by defendant pursuant to the responsibilities defendant may have under the policy of automobile insurance through which it covers Herrera (see 11 NYCRR 65-1.1 [d] [including the requirement that the insurer “will pay first-party benefits to reimburse for basic economic loss sustained by an eligible injured person on account of (qualifying) personal injuries,” subject to the insured’s satisfaction of policy conditions]). Those providers, in turn, would reimburse plaintiff for double payments, that is, full payments made by both plaintiff and defendant for a single service rendered, either voluntarily or pursuant to contractual clawback efforts initiated by plaintiff. A meandering path to recovery does not mean that an equitable subrogation “road” to plaintiff is closed here.^[FN3]

Finally, in my view, permitting plaintiff to proceed with its equitable subrogation cause of action is consistent with the purpose of the no-fault scheme. Complex as the scheme may be (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 286 [1997], rearg denied 90 NY2d 937 [1997]), its mission includes consumer protection through a structure designed to limit costs and promptly resolve injury claims (see Pommells v Perez, 4 NY3d 566, 570-571 [2005]). Here, although Herrera has been harmed twice—through both the accident and the lien placed by plaintiff on any recovery she may have with respect to that incident—defendant has not been required to answer for its claims handling and coverage determination.^[FN4] No-fault was designed to avoid such a result.{**27 NY3d at 590}

It is beyond dispute that the no-fault scheme was not intended to impose upon an injured person such as Herrera either the significant additional burden of the lien in question or the toll associated with discharging that claim and seeking to hold defendant to its coverage obligations. That the scheme is comprised of a thicket of rules and regulations does not mean that the inequitable result here should stand.

For the foregoing reasons I would hold that the lower courts erred in concluding that the complaint should be summarily dismissed, and I would modify the Appellate Division order by denying defendant’s cross motion.

Chief Judge DiFiore and Judges Abdus-Salaam, Stein and Garcia concur; Judge Stein in a concurring opinion; Judge Fahey dissents in an opinion in which Judge Rivera concurs.

Order affirmed, with costs.

Footnotes

Footnote 1:The documents stated, “This is not a bill.”

Footnote 2:Contrary to the view of the dissent, there is nothing inequitable in adhering to the “no-fault” statutory and regulatory law in resolving this claim for reimbursement.

Footnote 1:The former Insurance Department now falls within the Department of Financial Services (see Financial Services Law § 102), which has posted the former agency’s informal opinions on its website.

Footnote 2:Subrogation may also be available under a contract, which is distinguishable from equitable subrogation. In addition, there may be equitable subrogation situations outside the no-fault context in which an insurer seeks recovery from another party who is not a wrongdoer, but we have no occasion to address such situations here.

Footnote 3:The validity of that lien, which has been asserted in a separate action, is not before us.

Footnote 4:Under this scenario, while Hanover might deny payment due to untimely submission (see 11 NYCRR 65-1.1), the medical providers would be the ones suffering the loss of payment, which would not be inequitable because they submitted the bills to the incorrect insurer in the first instance. This only highlights how permitting Aetna to recover via equitable subrogation would be inconsistent with the no-fault scheme, especially the insistence on timely resolution of claims (see e.g. Insurance Law § 5106 [a]; 11 NYCRR 65-1.1, 65-2.4 [b], [c]; 65-3.8 [c]).

Footnote 1:Although subrogation has its roots in equity (see ELRAC, Inc. v Ward, 96 NY2d 58, 75 [2001]; North Star Reins. Corp. v Continental Ins. Co., 82 NY2d 281, 294 [1993]), we have recognized a right of subrogation based on a contractual relationship, that is, “where the subrogee’s rights are defined in an express agreement between the insurer-subrogee and the insured-subrogor” (Federal Ins. Co. v Arthur Andersen & Co., 75 NY2d 366, 372 [1990]). That doctrine of “contractual subrogation” is distinguishable from the principle of “equitable subrogation” at issue here.

Footnote 2:The majority also concludes that plaintiff cannot proceed against defendant here because Herrera assigned her rights against defendant to her medical providers and therefore no longer has “shoes” in which to permit plaintiff to “stand” on her behalf (see majority op at 582-583). Even assuming, arguendo, that Herrera had assigned the right to direct payment from defendant to her health care providers (see 11 NYCRR 65-3.11 [a]), she retained both her right to seek enforcement of defendant’s obligations under the mandatory PIP endorsement (11 NYCRR 65-1.1 [d]) and the ability to assign that right.

Footnote 3:The majority essentially concludes that the no-fault scheme preempts or forecloses a common-law remedy here because of the difficulty inherent in recovering with respect to that cause. However, there is always room for equity.

Footnote 4:It may be that defendant has a valid defense to coverage based on Herrera’s delay in notifying defendant of her claims (see 11 NYCRR 65-1.1 [d] [providing, in relevant part, that in the case of a claim for health services rendered, an eligible injured person shall submit written proof of a claim within 45 days after the date services were rendered unless there is a clear and reasonable justification for the failure to comply with that time limitation]). However, the questions whether Herrera gave timely notice of her claims and, if not, whether defendant is precluded from denying some or all of those claims (see Presbyterian Hosp. in City of N.Y., 90 NY2d at 278; see also Mount Sinai Hosp. v New York Cent. Mut. Fire Ins. Co., 120 AD3d 561, 562 [2d Dept 2014]) are not now for this Court given the posture of this case.

[*1]

Argued February 10, 2016; decided March 31, 2016

Government Empls. Ins. Co. v Avanguard Med. Group, PLLC, 127 AD3d 60, affirmed.

Defendant Avanguard Medical Group, PLLC claims that Insurance Law § 5102 requires a no-fault insurance carrier to pay a facility fee to a New York State-[*2]accredited office-based {**27 NY3d at 25}surgery (OBS) center for the use of its physical location and related support services. We conclude that neither the applicable statutory nor regulatory frameworks mandate payment for OBS facility fees.

I.

Avanguard is a professional service limited liability company, accredited under New York’s Public Health Law as a facility for the provision of OBS, defined as “any surgical or other invasive procedure, requiring general anesthesia, moderate sedation, or deep sedation” performed “in a location other than a hospital” (Public Health Law § 230-d [1] [h]). Its owner is a medical doctor who conducts OBS procedures at Avanguard on patients covered under article 51 of the Insurance Law, enacted as the Comprehensive Automobile Insurance Reparations Act (see L 1973, ch 13), commonly referred to as the “No-Fault Law” (see Pommells v Perez, 4 NY3d 566, 570 [2005]). The doctor billed for his professional services through Metropolitan Medical & Surgical P.C., and separately billed for facility fees associated with his OBS services through Avanguard. According to Avanguard, the OBS facility fees are a charge for the use of the physical location and equipment, and also include payment for technicians and medical assistants who helped with the surgical procedures.

Plaintiffs, insurers Government Employees Insurance Co.; GEICO Indemnity Co.; GEICO General Insurance Co., and GEICO Casualty Co. (collectively GEICO), paid the doctor’s professional fees, but declined reimbursement for the facility fees. GEICO then commenced this action in Supreme Court for a declaratory judgment that GEICO is not legally obligated under Insurance Law § 5102 to reimburse Avanguard for OBS facility fees. The disputed fees total in excess of $1.3 million.

GEICO unsuccessfully moved to stay Avanguard’s pending arbitration and judicial actions, and for a preliminary injunction against any new filings (2012 NY Slip Op 31516[U] [Sup Ct, Nassau County 2012]). GEICO thereafter sought summary judgment, which Supreme Court also denied (2013 NY Slip Op 33849[U] [Sup Ct, Nassau County 2013]). The Second Department reversed and granted GEICO’s motion for summary judgment declaring GEICO is not required to reimburse Avanguard for OBS facility fees (127 AD3d 60 [2d Dept 2015]). Subsequently the Second Department dismissed GEICO’s appeal from the order denying the preliminary injunction as “academic” {**27 NY3d at 26}(125 AD3d 803, 803 [2d Dept 2015]). We granted leave to appeal from the Appellate Division’s order granting GEICO’s motion for summary judgment (25 NY3d 907 [2015]).

II.

Avanguard asserts that pursuant to Insurance Law § 5102 (a) (1), OBS centers may recover a facility fee as a reimbursable “basic economic loss,” payable at a rate to be determined in accordance with 11 NYCRR 68.5. We reject Avanguard’s interpretation of the No-[*3]Fault Law framework, because it would permit Avanguard and other OBS centers to collect facility fees even though these types of fees are not expressly permitted by statute or payment schedules authorized thereby, and regardless of the fact that costs for the use of an OBS center are not reimbursable services under 11 NYCRR 68.5. Moreover, Avanguard’s view of the law undermines the obvious legislative purpose behind this framework, to contain costs by subjecting service charges to statutory ceilings and regulatory-fixed rates.

A. Legal Framework

Our analysis begins, as it must, with the statute. Indeed, “the text of a provision ‘is the clearest indicator of legislative intent and courts should construe unambiguous language to give effect to its plain meaning’ ” (Matter of Albany Law School v New York State Off. of Mental Retardation & Dev. Disabilities, 19 NY3d 106, 120 [2012], quoting Matter of DaimlerChrysler Corp. v Spitzer, 7 NY3d 653, 660 [2006]). In accordance with the No-Fault Law, automobile insurers, like GEICO, must provide up to $50,000 of coverage for an insured’s “basic economic loss” (Insurance Law § 5102 [a]), which includes,

“[a]ll necessary expenses incurred for: (i) medical, hospital (including services rendered in compliance with article forty-one of the public health law, whether or not such services are rendered directly by a hospital), surgical, nursing, dental, ambulance, x-ray, prescription drug and prosthetic services; (ii) psychiatric, physical therapy (provided that treatment is rendered pursuant to a referral) and occupational therapy and rehabilitation; (iii) any non-medical remedial care and treatment rendered in accordance with a religious method of healing{**27 NY3d at 27} recognized by the laws of this state; and (iv) any other professional health services” (Insurance Law § 5102 [a] [1]).

Expenses for basic economic loss, as described in this paragraph, “shall be in accordance with the limitations of” Insurance Law § 5108 (id.). Section 5108, titled “Limit on charges by providers of health services,” authorizes the Chair of the Workers’ Compensation Board to adopt fee schedules for basic economic losses, and mandates the Superintendent of the Department of Financial Services, in consultation with the Chair, to establish fee schedules “for all such services” not covered by the Chair’s schedules (Insurance Law § 5108 [b]).

Section 5108 also provides that basic economic loss service charges “shall not exceed the charges permissible” under the Chair’s schedule, “except where the insurer or arbitrator determines that unusual procedures or unique circumstances justify the excess charge” (Insurance Law § 5108 [a]). Furthermore, a health care provider may not “demand or request any payment in addition to the charges authorized pursuant to this section” under the Chair and Superintendent’s fee schedules (Insurance Law § 5108 [c]). Enforcement is, in part, facilitated by mandated self-regulation, which requires an insurer to report to the Commissioner of Health, [*4]among other improper conduct, “any patterns of overcharging, excessive treatment or other improper actions by a health provider” (id.). As this language illustrates, the legislature sought to cap payments and impose uniform fee rates in accordance with the regulatory schedules.

The Chair and the Superintendent have promulgated fee schedules for a wide variety of reimbursable services (see Official New York Workers’ Compensation Medical Fee Schedule [eff June 1, 2012] [these services include, among others, allergy/immunology, anesthesiology, critical care, pain management, dermatology, and sports medicine]). This includes facility fees for hospitals and ambulatory surgery centers (ASC) (see New York State, Workers’ Compensation Board, Health Care Information, 2014 Medical Fee Schedules, http://www.wcb.ny.gov/content/main/hcpp/MedFeeSchedules/2014medfee.jsp [accessed Mar. 3, 2016], cached at http://www.nycourts.gov/reporter/webdocs/2014MedicalFeeSchedules.pdf). In addition, the Superintendent has promulgated Regulation 83, codified at 11 NYCRR 68.5, which provides two alternative methods for establishing payment for{**27 NY3d at 28} a health service, “reimbursable under section 5102(a)(1) . . . but is not set forth in fee schedules adopted or established by the superintendent.”

Under 11 NYCRR 68.5, “if the superintendent has adopted or established a fee schedule applicable to the provider, then the provider . . . establish[es] a fee or unit value consistent with other fees or unit values for comparable procedures shown in such schedule” (11 NYCRR 68.5 [a]). In those cases where the

“superintendent has not adopted or established a fee schedule applicable to the provider, then the permissible charge for [the] service shall be the prevailing fee in the geographic location of the provider subject to review by the insurer for consistency with charges permissible for similar procedures under schedules already adopted or established by the superintendent” (11 NYCRR 68.5 [b]).

As is obvious from its text, the regulation allows payment only for reimbursable services, and is structured to ensure consistency between those payments issued under the regulation, and those made pursuant to the Superintendent’s existing fee schedules.

B. Analysis of Avanguard’s Claims

It is undisputed that the fee schedules provide reimbursement for professional services delivered in an OBS setting, and include payment for a doctor’s services. It is also undisputed that the schedules do not expressly permit reimbursement for OBS facility fees, but do allow facility fee payments for hospitals and ASCs.

In support of its claim that the statute requires payment of OBS facility fees, Avanguard argues that a suitable facility is necessary to the provision of the surgical services covered by section 5102, and, therefore, costs associated with the facility constitute a “necessary expense” that are part of the reimbursable “basic economic loss.” Avanguard notes that [*5]arbitrators have awarded payment for OBS facility fees, suggesting that such fees are understood to fall within the statute’s intended coverage.

Avanguard’s argument misses the mark because the basic economic loss provided for under Insurance Law § 5102 (a) (1) {**27 NY3d at 29}is subject to the limitations of section 5108, which provides that charges for services “shall not exceed the [permissible] charges” promulgated under the Chair’s schedules. Here, no existing schedules provide reimbursement for OBS facility fees. Moreover, since facility fees are specifically mentioned and intended to be paid to hospitals and ASCs, the absence of such language with regard to OBS facilities is no mere oversight.

Avanguard argues alternatively that because the Superintendent has also failed to adopt a fee schedule that includes OBS facility fees, those fees are reimbursable under 11 NYCRR 68.5, which Avanguard claims serves as a catchall for all other services. Avanguard’s reliance on the Superintendent’s regulation is misplaced because 11 NYCRR 68.5 expressly applies solely to “professional health services” and facility fees are not services. Instead, they are expenses incurred for services. The difference is recognized in section 5102 (a) (1) which provides for reimbursement of expenses for services, and categorizes the types of procedures—e.g., medical, dental, surgical—and includes “any other professional health services” (Insurance Law § 5102 [a] [1] [iv] [emphasis added]). Since facility fees are not services, for purposes of 11 NYCRR 68.5, the fees cannot be recouped under the authority of this section.

Moreover, the intent gleaned from the language of 11 NYCRR 68.5 is that reimbursement for services should be provided in a manner that ensures consistency and thus inherently limits the range of payment amounts. However, because an OBS facility fee is a separate and recurring cost associated with a service, the inclusion of such a fee necessarily produces inconsistent results in total payment amounts within service categories.

To the extent Avanguard argues that based on the surgical and medical services it provides in its facility it should be treated similarly to hospitals and ASCs we note that unlike OBS centers, hospitals and ASCs are regulated under Public Health Law article 28, and are subject to strict standards under the Public Health Law and State Department of Health Regulations that cover, inter alia, facility licensing and maintenance (see 10 NYCRR part 446 [detailing the extensive reporting requirements], 10 NYCRR 400.3 [requiring all hospitals and ASCs to maintain and, if required, reproduce any medical report or record]). Their reimbursable facility fees are based on calculations implemented in the fee schedules and include a surcharge imposed by the State Health Care Reform Act ({**27 NY3d at 30}Public Health Law § 2807-j [1]), which helps subsidize uncompensated care (see Governor’s Approval Mem at 2, Bill Jacket, L 1996, ch 639, 1996 Legis Ann at 470).

By comparison, OBS facilities are not licensed by New York State or regulated by the Department of Health. Although Public Health Law § 230-d (1) requires that OBS providers meet the standards of a nationally-recognized accrediting agency, the Department of Health does [*6]not permit OBS practices to include the terms “facility,” “center,” or “clinic” as part of the business name (New York State, Department of Health, Office-Based Surgery [OBS] Frequently Asked Questions [FAQ’s] for Practitioners, https://www.health.ny.gov/professionals/office-based_surgery/obs_faq.htm [accessed Mar. 2, 2016], cached at http://www.nycourts.gov/reporter/webdocs/Office-BasedSurgery(OBS)FrequentlyAskedQuestions(FAQs)forPractition.pdf). Thus, we agree with the Appellate Division that given these differences between hospitals and ASCs, and OBS centers, there is no basis to interpret the statute to mandate reimbursement for OBS facility fees.

Notably, Avanguard does not challenge the legality of the fee schedules on the ground that the schedules fail to incorporate OBS facility fees. Indeed, Avanguard concedes that the Chair and Superintendent are authorized to promulgate schedules that deny reimbursement. Avanguard simply argues that in order to do so the administrators must expressly disallow payment. We disagree for several reasons. First, there is no statutory duty imposed on the Chair and Superintendent to announce the services and fees they intend to exclude from their schedules. Second, contrary to Avanguard’s suggestion, the administrators may exercise their administrative authority through silence, and as such implicitly reject reimbursement for OBS facility fees. Third, it would be unreasonable to interpret the No-Fault Law, which was intended “to establish a quick, sure and efficient system for obtaining compensation for economic loss suffered as a result of [vehicular] accidents” (Walton v Lumbermens Mut. Cas. Co., 88 NY2d 211, 214 [1996]), in a manner that encourages an even greater level of administrative minutia in the promulgation of what already are mathematically technical, complex fee schedules (see Official New York Workers’ Compensation Medical Fee Schedule [eff June 1, 2012]).{**27 NY3d at 31}

III.

As the statutory language illustrates, the legislature capped total payments for basic economic loss, and delegated the determination of fee rates to the Chair and the Superintendent. Neither administrator has chosen to include OBS facility fees in the regulatory schedules. It is not for this Court to decide, contrary to Avanguard’s contention, whether this is a “good idea” or if it would be better for patients covered by no-fault insurance, and for the efficient management of our health care system, to require reimbursement of OBS facility fees as a means to ensure that OBS facilities continue to be viable options for patients. “These policy determinations are beyond our authority and instead best left for the legislature” (People v Jones, 26 NY3d 730, 741 [2016], citing Matter of Manouel v Board of Assessors, 25 NY3d 46, 54 [2015]).

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Chief Judge DiFiore and Judges Pigott, Abdus-Salaam, Stein, Fahey and Garcia concur.

Order affirmed, with costs.

[*1]

Argued February 12, 2015; reargued June 2, 2015; decided July 1, 2015

Matter of State Farm Mut. Auto. Ins. Co. v Fitzgerald, 112 AD3d 166, reversed.

More than a quarter-century ago, in Matter of State Farm Mut. Auto. Ins. Co. v [*2]Amato (72 NY2d 288 [1988]), we squarely “h[e]ld” that “Insurance Law § 3420 (f)—providing that all ‘motor vehicle’ insurance policies must contain uninsured motorist coverage—has no application to police vehicles” (id. at 295). Nonetheless, in this case, the Appellate Division deemed that holding inapplicable to supplementary uninsured/underinsured motorist (SUM) coverage mandated by Insurance Law § 3420 (f) (2). Distinguishing Amato on its facts, the Appellate Division proceeded to define “motor vehicle” for purposes of statutorily required SUM coverage as inclusive of police vehicles.

This was error. With respect to the statutory definition of the critical term “motor vehicle,” there is no material distinction between the uninsured motorist coverage at issue in Amato and the disputed SUM coverage here, and the factual differences between this case and Amato do not compel a different result. Consequently, a police vehicle is not a “motor vehicle” covered by a SUM endorsement under Insurance Law § 3420 (f) (2) (A). Furthermore, to the extent there is any question of the continuing precedential force of Amato—and the parties here have not raised such a question—the language and legislative history of Insurance Law § 3420, as well as the doctrine of stare decisis, fully support our retention of Amato as binding precedent in this matter of statutory interpretation.

I

While riding in a police vehicle driven by fellow Officer Michael Knauss, respondent Police Officer Patrick Fitzgerald was injured when the allegedly intoxicated driver of an underinsured vehicle struck the police car. At the time, Knauss maintained an automobile liability insurance policy issued by appellant State Farm Mutual Automobile Insurance Company, and the policy included a SUM endorsement. In addition to covering Knauss as the named insured and his family, the SUM endorsement insured against injuries to “any other person while occupying” Knauss’s personal vehicle or “any other motor vehicle while being operated by [the named insured] or [the{**25 NY3d at 802} named insured’s] spouse” (some emphasis added and some emphasis omitted). The policy did not define the term “motor vehicle.”^[FN1]

On or before July 25, 2011, GEICO, the insurer for the underinsured motorist who had hit Knauss’s car, tendered payment to Fitzgerald in the amount of $25,000, which was the limit of the underinsured motorist’s policy. On August 18, 2011, based on the injuries he received while occupying Knauss’s police vehicle during the accident, Fitzgerald made a demand upon State Farm for underinsured motorist arbitration under the SUM endorsement of Knauss’s [*3]policy. State Farm refused to make any payment to Fitzgerald on the ground that he had occupied a police vehicle at the time of the accident, which was not a covered “motor vehicle” within the meaning of the SUM endorsement. State Farm then filed a petition to permanently stay arbitration based on the asserted unavailability of SUM benefits for Fitzgerald.

Supreme Court granted State Farm’s petition to permanently stay arbitration. As relevant here, the court held that, although an individual who is the principal insured can receive benefits under his or her own insurance policy when he or she is in a police vehicle during an accident, that rule does not apply to an individual such as Fitzgerald, who seeks coverage under a SUM endorsement in someone else’s insurance policy. Citing Amato, the court determined that Insurance Law § 3420 (f) (2) (A), which controls the SUM endorsement in Knauss’s policy, incorporates Vehicle and Traffic Law § 388 (2)’s definition of a covered “motor vehicle,” which specifically excludes police vehicles such as the one containing Fitzgerald at the time of the accident. Thus, the court concluded that Knauss’s policy does not cover Fitzgerald, and it permanently stayed arbitration on Fitzgerald’s claim for coverage. Fitzgerald appealed.

The Appellate Division unanimously reversed Supreme Court’s order and denied the petition to permanently stay arbitration, holding that the police car in which Fitzgerald had been riding at the time of the accident constituted a “motor vehicle” under the SUM endorsement in Knauss’s automobile insurance policy (see 112 AD3d 166, 167-170 [2d Dept 2013]). In that regard, since neither the SUM endorsement itself nor{**25 NY3d at 803} Insurance Law § 3420 (f) defines the term “motor vehicle,” the Appellate Division looked to the provisions of the Vehicle and Traffic Law defining that term (see id. at 168). In that Court’s view, since Vehicle and Traffic Law § 125 sets forth the general definition of a “motor vehicle” to be used throughout the Vehicle and Traffic Law, that statute provides the most widely applicable definition of the term, which encompasses all motor-powered vehicles and includes police vehicles (see id. at 168-169). Thus, the Court opined, Vehicle and Traffic Law § 125 “should be used to define the term ‘motor vehicle,’ as it appears in the uninsured/underinsured motorist endorsement,” because “Vehicle and Traffic Law § 125 is a general provision that defines the relevant terminology for the entire Vehicle and Traffic Law” (id. at 169). Citing its prior decision in Matter of Progressive Northeastern Ins. Co. v Scalamandre (51 AD3d 932 [2d Dept 2008]) and the Fourth Department’s decision in Matter of Liberty Mut. Fire Ins. Co. v Rondina (32 AD3d 1230 [4th Dept 2006]), the Court said, “Additionally, it has been recognized that uninsured motorist coverage extends to all ‘motor vehicles,’ as defined by Vehicle and Traffic Law § 125” (id.).

The Court noted that Vehicle and Traffic Law § 388 (2) defines the term “vehicle” for purposes of civil liability as “a ‘motor vehicle,’ as defined in [Vehicle and Traffic Law § 125] . . . , except fire and police vehicles,” but the Court found that definition inapplicable because Vehicle and Traffic Law § 388 (2) does not feature the most common general definition of “vehicle” and defines the term “vehicle” rather than the critical term “motor vehicle” at issue here (id. at 168-169). The Court attempted to distinguish Amato, positing that, there, this Court decided only that New York City as a self-regulating insurer did not have to provide liability coverage for police vehicles under Insurance Law § 3420 (e) and (f) (1) because a [*4]police vehicle does not qualify as a “motor vehicle” under those statutes, whereas here the issue is whether a separate statutory subsection, Insurance Law § 3420 (f) (2), classifies a police car as a “motor vehicle” (see id.). Given that Vehicle and Traffic Law § 125’s definition of “motor vehicle” applies to Insurance Law § 3420 (f) (2) and encompasses police vehicles, the Court maintained, “the police vehicle at issue here falls within the definition of a ‘motor vehicle’ under the uninsured/underinsured motorist endorsement,” and consequently, respondent was entitled to SUM benefits under the policy that State Farm issued to Knauss (id. at 170).{**25 NY3d at 804}

Upon State Farm’s application, we granted a stay of the Appellate Division’s order and leave to appeal (22 NY3d 1168 [2014]). We now reverse.

II

Principles of Interpretation, Insurance Law § 3420 and Amato

Although provisions of an insurance policy drafted by the insurer are generally construed against the insurer if ambiguous (see Dean v Tower Ins. Co. of N.Y., 19 NY3d 704, 708 [2012]), a policy provision mandated by statute must be interpreted in a neutral manner consistently with the intent of the legislative and administrative sources of the legislation (see Matter of Country-Wide Ins. Co. v Wagoner, 45 NY2d 581, 586-587 [1978]). Since State Farm did not choose the terms of the SUM endorsement here of its own accord but, rather, was required to offer SUM coverage in compliance with the terms of Insurance Law § 3420 (f) (2) (A) and Department of Insurance regulations (see 11 NYCRR 60-2.3 [f]), we must interpret the SUM endorsement and the language of the statute in the manner intended by the neutral sources of that enactment (see generally Governor’s Approval Mem, Bill Jacket, L 1977, ch 892; see also Bill Jacket, L 1958, ch 759; Letter from Executive Secretary of NY Law Rev Commn to Governor’s Counsel, Mar. 28, 1958, Bill Jacket, L 1958, ch 577).

Insurance Law § 3420 specifies the standard forms of coverage that must be included in a liability insurance policy. Subsection (e) requires automobile insurance policies to insure against civil liability for the negligence of those who drive the principal insured’s car with his or her permission, saying:

“No policy or contract of personal injury liability insurance or of property damage liability insurance, covering liability arising from the ownership, maintenance or operation of any motor vehicle or of any vehicle as defined in section three hundred eighty-eight of the vehicle and traffic law, or an aircraft, or any vessel as defined in section forty-eight of the navigation law, shall be issued or delivered in this state . . . unless it contains a provision insuring the named insured against liability for death or injury sustained . . . as a result of negligence in the operation or use of such vehicle, aircraft or vessel” (Insurance Law § 3420 [e] [emphasis added]).

{**25 NY3d at 805}Subsection (f) (1) mandates that automobile insurance policies feature uninsured motorist coverage, which covers liability arising from an accident involving the named insured [*5]and a motorist who has no applicable insurance coverage. Thus, subsection (f) (1) states that

“[n]o policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any natural person arising out of the ownership, maintenance and use of a motor vehicle by the insured shall be issued or delivered . . . unless it contains a provision whereby the insurer agrees that it will pay to the insured, as defined in such provision . . . all sums . . . which the insured or his legal representative shall be entitled to recover as damages from an owner or operator of an uninsured motor vehicle.” (Insurance Law § 3420 [f] [1] [emphasis added].)

Subsection (f) (2) (A) declares that “[a]ny such policy shall, at the option of the insured, also provide supplementary uninsured/underinsured motorists insurance for bodily injury,” which is a species of uninsured motorist insurance that covers liability stemming from accidents involving the named insured and a motorist who possesses automotive insurance with limits or other restrictions that are inadequate to cover the full extent of the loss. The statute further states that SUM coverage is triggered “if the limits of liability under all bodily injury liability bonds and insurance policies of another motor vehicle liable for damages are in a lesser amount than the bodily injury liability insurance limits of coverage provided by such policy” (Insurance Law § 3420 [f] [2] [A]). Insurance Law § 3420 (f) (2) does not use the term “motor vehicle,” but because that subsection applies to “[a]ny such policy,” referring to a policy of the kind described in Insurance Law § 3420 (f) (1), Insurance Law § 3420 (f) (2) necessarily restricts SUM coverage to “motor vehicle[s]” in the same manner as subsection (f) (1).

As noted, Insurance Law § 3420 (e) and (f) (1) do not directly define “motor vehicle” in so many words, but Insurance Law § 3420 (e) does refer to “a[ ] motor vehicle or . . . a[ ] vehicle {**25 NY3d at 806}as defined in [Vehicle and Traffic Law § 388 (2)].” Vehicle and Traffic Law § 388 is the sole provision of Vehicle and Traffic Law article 11, which governs civil liability for negligence in the operation of vehicles. Vehicle and Traffic Law § 388 (2) states, “As used in this section, ‘vehicle’ means a ‘motor vehicle’, as defined in [Vehicle and Traffic Law § 125], except fire and police vehicles,” and certain other vehicles not relevant here. The Vehicle and Traffic Law also includes a definition of the term “motor vehicle” in Vehicle and Traffic Law § 125, which is part of the article defining terms of general use in the Vehicle and Traffic Law. Under that statute, “motor vehicle” means “[e]very vehicle operated or driven upon a public highway which is propelled by any power other than muscular power,” with exceptions for all-terrain vehicles, snowmobiles and mobility aids for the disabled (Vehicle and Traffic Law § 125). Vehicle and Traffic Law § 125 exempts police vehicles from registration requirements under title IV of the Vehicle and Traffic Law, but does not otherwise list any exclusion for police vehicles. Other provisions of the Vehicle and Traffic Law and the Insurance Law also set forth definitions of the term “motor vehicle,” often exempting police vehicles (see Vehicle and Traffic Law § 311 [2]; Insurance Law § 5202 [a]).

In Amato, this Court resolved two consolidated cases by specifying the types of vehicles that, when involved in an accident, can trigger uninsured motorist coverage under [*6]Insurance Law § 3420 (f). In one case, Police Officer Amato had uninsured motorist coverage for his personal vehicle under a policy issued by State Farm (see Amato, 72 NY2d at 291). The City insured any police vehicles used by Amato, but it did not provide uninsured motorist coverage under its policy (see id. at 290-291). While Amato was riding on his police scooter, he was struck by a stolen taxicab, which was not covered by the cab owner’s insurance (see id. at 290). When Amato filed a claim with State Farm, State Farm petitioned for a permanent stay of arbitration under the policy, asserting that Amato had to look to the City for uninsured motorist coverage because the City was required by statute to provide such coverage (see id. at 291). Special Term denied the petition, reasoning that the City did not have to give Amato uninsured motorist coverage and that therefore State Farm was responsible for covering Amato’s loss (see id.).

In the companion case, a motorist, who ultimately turned out not to have active insurance coverage, ran into the rear of Police Officer Rutherford’s police car (see id. at 291). Rutherford filed a claim with State Farm, which, as in Amato’s case, denied coverage, citing the City’s status as the primary insurer and its supposed statutory obligation to provide uninsured motorist coverage for police vehicles (see id. at 292). In a consolidated{**25 NY3d at 807} appeal in Amato’s and Rutherford’s cases, the Appellate Division reversed and held that the City had the primary obligation to grant uninsured motorist coverage to the officers pursuant to Insurance Law § 3420 (f) (see id. at 292; Matter of State Farm Mut. Auto. Ins. Co. v Amato, 129 AD2d 221, 225-227 [2d Dept 1987]).

On further appeal, this Court reversed (72 NY2d 288, 290-292 [1988]). The Court began its opinion by describing the statutory provisions, such as Vehicle and Traffic Law articles 6 and 7, which reflect the legislature’s desire to ensure that motorists have sufficient financial security to cover the consequences of an accident, and the Court explained that Insurance Law § 3420 (f) mandates the inclusion of uninsured motorist coverage in every automobile insurance policy issued in New York addressing the “use of a motor vehicle by the insured” (id. at 292-293, quoting Insurance Law § 3420 [f]).^[FN2]

The Court agreed with the Appellate Division that self-insurers, such as the City, “generally have the same statutory responsibility as other insurers to provide uninsured motorist coverage,” but it found that point irrelevant to the question at hand because no liability coverage existed at all, regardless of the insurer, if the liability does not arise from the use of a “motor vehicle” within the meaning of Insurance Law § 3420 (e) (id. at 294). And, the Court determined, Insurance Law § 3420 (e) excludes police vehicles from the term “motor vehicle,” [*7]for that statute cites Vehicle and Traffic Law § 388 (2), which governs civil liability for negligence in the use of motor vehicles and explicitly excludes police vehicles from its scope (see id.). “Although this exclusionary language is not repeated in the uninsured motorist provision of the Insurance Law (Insurance Law § 3420 [f]),” the Court concluded that “it would be illogical to assume that, while there is no legal obligation to insure police vehicles for death or bodily injury in the first instance, the City is nevertheless required to provide uninsured motorist coverage for its police vehicles” (id.).

Thus, the Court stated that, in light of the “need to interpret the statutes relating to uninsured motorist coverage as a whole and in a way consistent with their legislative purpose,” “we hold that Insurance Law § 3420 (f)—providing that all ‘motor {**25 NY3d at 808}vehicle’ insurance policies must contain uninsured motorist coverage—has no application to police vehicles” (id. at 295). The Court further “h[e]ld” that “there is no such statutory obligation” for the City, as an unregulated self-insurer, to insure police officers against injuries caused by an uninsured motorist hitting their police vehicles (id. at 290). Accordingly, the Court decided that the City had no statutory obligation to provide uninsured motorist coverage for Amato’s and Rutherford’s police vehicles (see id. at 290, 294). Two Judges dissented because, in their view, the legislature’s failure to create an express exemption for police vehicles within the text of Insurance Law § 3420 (f) reflected a legislative intent to place all motor vehicles, including police vehicles, within the scope of statutory uninsured motorist coverage (see id. at 295-296 [Wachtler, Ch. J., dissenting]).

The Parties’ Contentions

With this legal background in mind, we turn to the arguments advanced by the parties here. In this case, State Farm and Fitzgerald agree that the disputed SUM endorsement’s coverage of accidents involving a “motor vehicle” must use the same definition of that term employed by Insurance Law § 3420 (f), and Fitzgerald has not proceeded under any other statute, such as the No-Fault Law. However, the parties dispute whether that definition includes police vehicles like the one occupied by Fitzgerald.

State Farm contends that, because Insurance Law § 3420 (e) refers to Vehicle and Traffic Law § 388 (2)’s definition of “vehicle,” which in turn incorporates Vehicle and Traffic Law § 125’s definition of “motor vehicle” and yet also excludes police vehicles, the closely related provisions of Insurance Law § 3420 (f) should be read to similarly define “motor vehicle” in accordance with Vehicle and Traffic Law § 388 (2), thereby excluding police vehicles from SUM coverage. According to State Farm, Amato adopted this approach, as the Amato Court interpreted the term “motor vehicle” in Insurance Law § 3420 (f) (1) to have the same meaning as it does in Insurance Law § 3420 (e), i.e., to exclude police vehicles. By logical extension, State Farm urges, “motor vehicle” must mean the same thing under Insurance Law § 3420 (f) (2) as it does in subsections (e) and (f) (1) because the statute must be interpreted as a cohesive whole.

In response, Fitzgerald does not argue that Amato was wrongly decided or should be altered in any way, but instead{**25 NY3d at 809} tries to parse that decision and the statutory text in a manner favorable to him. Fitzgerald asserts that Insurance Law § 3420 (f) must be read to incorporate the most common and generalized statutory meaning of the term “motor vehicle,” and that therefore one must look to the general definition of “motor vehicle” in Vehicle and Traffic Law § 125 to define the same term in the insurance statute. Because Vehicle and Traffic Law § 125 defines a “motor vehicle” as essentially any powered vehicle, including a police vehicle, Fitzgerald posits that Insurance Law § 3420 (f) provides SUM coverage for accidents involving police vehicles via its inherent incorporation of the Vehicle and Traffic Law § 125 definition of “motor vehicle.” In Fitzgerald’s view, it does not matter that Insurance Law § 3420 (e) covers accidents arising from the operation “of any motor vehicle or of any vehicle as defined in [Vehicle and Traffic Law § 388 (2)]” (emphasis added) because that statute only references Vehicle and Traffic Law § 388 (2) to define the distinct term “vehicle,” and it does not define the separate term “motor vehicle.” That being so, Fitzgerald says, Insurance Law § 3420 (f) does not adopt Vehicle and Traffic Law § 388 (2)’s exclusion of police vehicles from the definition of “vehicle” because Insurance Law § 3420 (f) does not use the term “vehicle” at all, instead using the entirely different term “motor vehicle” as defined in Vehicle and Traffic Law § 125 to establish the breadth of its coverage. According to Fitzgerald, Amato is factually distinguishable because that case involved the liability of an unregulated self-insurer for uninsured motorist coverage under Insurance Law § 3420 (f) (1), whereas the issue here is whether a private insurer must provide SUM coverage under Insurance Law § 3420 (f) (2).

The simple answer to Fitzgerald’s claims, and hence to this whole case, is that Amato means what it says: “Insurance Law § 3420 (f)—providing that all ‘motor vehicle’ insurance policies must contain uninsured motorist coverage—has no application to police vehicles” (Amato, 72 NY2d at 295). Just as the term “motor vehicle” in Insurance Law § 3420 (f) generally, and paragraph (1) in particular, does not encompass police vehicles, that same term in paragraph (2) likewise does not bring police vehicles within its scope. Therefore, both uninsured motorist coverage under paragraph (1) and SUM coverage under paragraph (2) clearly exclude police vehicles in accordance with subsection (f) (1)’s reference to Vehicle and Traffic Law § 388 (2).

{**25 NY3d at 810}Indeed, as we have noted post-Amato, SUM coverage under Insurance Law § 3420 (f) (2) is a subspecies of uninsured motorist coverage under Insurance Law § 3420 (f) (1), and the reach of the two statutory subsections is essentially coterminous, except that Insurance Law § 3420 (f) (2) covers accidents involving underinsured motorists and can provide for a higher limit on the amount of recovery (see Raffellini v State Farm Mut. Auto. Ins. Co., 9 NY3d 196, 204-205 [2007]). In light of the similarities between the two paragraphs of Insurance Law § 3420 (f), the term “motor vehicle” must have the same definition under those paragraphs and limit the benefits they provide in the same manner. Given that police vehicles do not fall within the ambit of Insurance Law § 3420 (f) (1) and (2), State Farm rightly declined to cover Fitzgerald, who was a passenger in a police vehicle at the time of the crash.

Fitzgerald seeks to distinguish Amato, observing that Amato involved the priority of coverage to be provided by a self-insurer, the City of New York, and an automobile insurance company, State Farm. But, in Amato, we never suggested that we were limiting our holding to a self-insurer or to situations involving the priority or “stacking” of coverage. In fact, we specifically noted that, under prior precedent, “self-insurers generally have the same statutory responsibility as other insurers to provide uninsured motorist coverage,” and thus, our decision turned not on the City’s status as a self-insurer but instead on the definition of the term “motor vehicle” under Insurance Law § 3420 (f), which we found to exclude police vehicles (Amato, 72 NY2d at 294-295). Nor does it make sense to conclude that the term “motor vehicle” in Insurance Law § 3420 (f) means one thing when the priority of coverage must be determined and yet means something completely different when the scope of coverage is at issue. Surely, a term in a single undivided subsection of a statute—here subsection (f) (2) (A)—cannot have more than one definition depending on the facts of the case to which it is applied.^[FN3]

{**25 NY3d at 811}Fitzgerald also points out that Insurance Law § 3420 (e) applies to a policy that covers any “motor vehicle” as well as any “vehicle as defined in [Vehicle and Traffic Law § 388 (2)],” whereas Insurance Law § 3420 (f) applies to a policy that covers only “motor vehicles” without mentioning “vehicles” under Vehicle and Traffic Law § 388 (2). Fitzgerald takes this as proof that Insurance Law § 3420 (f), unlike Insurance Law § 3420 (e), extends coverage to cases involving any “motor vehicle” as that term is defined in Vehicle and Traffic Law § 125, including police vehicles.

But we essentially rejected that notion in Amato. There, we noted, as Fitzgerald does now, that Insurance Law § 3420 (e)’s “exclusionary language” and citation to Vehicle and Traffic Law § 388 (2) are “not repeated in the uninsured motorist provision of the Insurance Law (Insurance Law § 3420 [f])” (Amato, 72 NY2d at 294). Nonetheless, we determined that the legislature intended to carry the exclusion of police vehicles from Insurance Law § 3420 (e) over to Insurance Law § 3420 (f) because “it would be illogical to assume that, while there is no legal obligation to insure police vehicles for death or bodily injury in the first instance, the City is nevertheless required to provide uninsured motorist coverage for its police vehicles” (id.).

Even without the benefit of Amato‘s binding precedent, Fitzgerald’s attempt to import Vehicle and Traffic Law § 125’s definition of “motor vehicle” into Insurance Law § 3420 (f), but not into Insurance Law § 3420 (e), would make no sense. After all, Insurance Law § 3420 (e) and (f) do not mention Vehicle and Traffic Law § 125 at all, and as a result, there is no reason to suppose, as Fitzgerald does, that the legislature meant to incorporate Vehicle and Traffic Law § 125’s broad definition of “motor vehicle” into either of those insurance statutes. Rather, the only Vehicle and Traffic Law provision cited by the relevant{**25 NY3d at 812} statutes is Vehicle and Traffic Law § 388 (2), which explicitly exempts police vehicles from the definition of “motor vehicle.” Accordingly, the legislature presumably meant to exclude police vehicles from coverage under the interrelated provisions of Insurance Law § 3420 (e), (f) (1) and (2), and the SUM endorsement here necessarily features that same exclusion. For that reason, we have never looked to Vehicle and Traffic Law § 125 for guidance as to the meaning of the term “motor vehicle” under Insurance Law § 3420 (f), instead relying on the use of comparable terms in Vehicle and Traffic Law § 388 (2) (see Amato, 72 NY2d at 293-294) and the MVAIC Act (Insurance Law art 52) (see Wagoner, 45 NY2d at 586-588).

While Insurance Law § 3420 (e)’s use of the phrase “of any motor vehicle or of any vehicle as defined in [Vehicle and Traffic Law § 388 (2)]” may be confusing insofar as the terms are inherently conflicting in their scope under the Vehicle and Traffic Law, it appears that the legislature chose those words as an imprecise expression of its intent to incorporate Vehicle and Traffic Law § 388 (2)’s limitations into the relevant sections of the Insurance Law. Significantly, Vehicle and Traffic Law § 388 (2)’s definition of “vehicle” is narrower than that of “motor vehicle” under Vehicle and Traffic Law § 125 in most respects. Vehicle and Traffic Law § 388 (2) incorporates nearly all of the exclusions listed in Vehicle and Traffic Law § 125 by defining “vehicle” as a “motor vehicle” within the meaning of Vehicle and Traffic Law § 125, and adding extra exclusions for a variety of agricultural equipment, fire vehicles, police vehicles and onsite construction vehicles. Vehicle and Traffic Law § 388 (2)’s only additional inclusions are for trailers and for vehicles used on roads other than highways.

As a result, a literal reading of Insurance Law § 3420 (e)’s reference to the negligent operation “of any motor vehicle or of any vehicle as defined in [Vehicle and Traffic Law § 388]” would be largely self-contradictory. It would suggest that the statute covers “[e]very vehicle operated or driven upon a public highway which is propelled by any power other than muscular power,” including police vehicles, agricultural vehicles and the like (Vehicle and Traffic Law § 125), or, somewhat paradoxically, a motor vehicle, excluding police vehicles, agricultural vehicles, and onsite construction equipment, but including non-highway vehicles and trailers. Of course, had the legislature wished for the broader definition of Vehicle and Traffic Law § 125 to apply to Insurance Law § 3420 (e) and (f), it could {**25 NY3d at 813}have easily referred to Vehicle and Traffic Law § 125 alone. And if the legislature was solely concerned about placing trailers and vehicles on non-public roads in the ambit of the insurance statute, it could have directly referred to those minor differences between the inclusions of the two Vehicle and Traffic Law statutes without citing Vehicle and Traffic Law § 388 (2). Since the legislature did not refer to Vehicle and Traffic Law § 125 at all in drafting Insurance Law § 3420 (e), did not indicate a desire to define “motor vehicle” without limitation in that section and directly cited the narrow provisions of Vehicle and Traffic Law § 388, it plainly intended to narrow the definition of “motor vehicle” for purposes of Insurance Law § 3420 (e).^[FN4]

Legislative History Supporting Amato

The legislative history of these statutes buttresses our conclusion, as previously stated in Amato, that Insurance Law § 3420 (f) does not define “motor vehicle” to include police vehicles. In that regard, even at time of the passage of the Vehicle and Traffic Law, the general definition of “motor [*10]vehicle” in that statutory scheme excluded police vehicles, and the original civil liability provision of the Vehicle and Traffic Law imposed such liability only for the negligent operation of “motor vehicles,” excluding police vehicles (see L 1936, ch 911, § 1; L 1929, ch 54 [enacting Vehicle and Traffic Law §§ 2 (8); 59]; Letter from Commr of Highways, St Dept of Pub Works, to Governor’s Counsel, Mar. 6, 1929, Bill Jacket, L 1929, ch 54 at 8; see also Arnold W. Wise, The History of the Vehicle and Traffic Law, McKinney’s Cons Laws of NY, Book 62A at xv [1960 ed]). Hence, from its inception, the Vehicle and Traffic Law did not provide for civil liability arising out of the negligent operation of police vehicles.{**25 NY3d at 814}

Later, when the legislature amended the predecessor to Insurance Law § 3420, it used language that paralleled the civil liability provisions of the Vehicle and Traffic Law, and it used the term “motor vehicle” to define the scope of statutorily required automobile liability insurance, thereby presumably excluding police vehicles in a similar way (see L 1939, ch 882 [enacting Insurance Law § 167]). Accordingly, at the time the predecessors to Vehicle and Traffic Law § 125, Vehicle and Traffic Law § 388 and Insurance Law § 3420 (e) were enacted, the relevant laws had these salient features: (1) the term “motor vehicle” in general excluded police vehicles; (2) statutory civil liability did not lie for the negligent use of police vehicles; and (3) insurers were not statutorily required to cover vicarious liability with respect to vehicles that were not “motor vehicles,” which term was continued in the Insurance Law at a time when the only statute defining it, Vehicle and Traffic Law § 2 (8), clearly excluded police vehicles (see L 1938, ch 183, § 1).

When Vehicle and Traffic Law § 125 was enacted, it did not contain the police vehicle exclusion in its definition of “motor vehicle,” but that was of no moment because Vehicle and Traffic Law § 125 did not apply to the civil liability statute within the Vehicle and Traffic Law (see L 1957, ch 698 [adding Vehicle and Traffic Law §§ 125, 100]). Likewise, after the predecessor to Vehicle and Traffic Law § 388 was amended to define the scope of civil liability based on the operation of “vehicles” rather than “motor vehicles,” a 1958 bill ensured that it still referred to a section of the Vehicle and Traffic Law that incorporated the police vehicle exclusion, thereby maintaining that limitation (see L 1958, ch 577, § 1).

The same bill made a “conformity amendment” to the predecessor to Insurance Law § 3420 (e) to “make it clear that the term ‘motor vehicle’ as used in that section includes all vehicles as defined in section 59 [the predecessor to Vehicle and Traffic Law § 388]” (Recommendation of Law Rev Commn to Legislature, Bill Jacket, L 1958, ch 577 at 45). Maintaining the consistency between the predecessors to Vehicle and Traffic Law § 388 and Insurance Law § 3420 (e), the legislature added a citation to Vehicle and Traffic Law § 388’s predecessor and its terminology to define the coverage of the requisite liability insurance policy. To the existing clause of Insurance Law § 3420 (e)’s predecessor that said, “No policy or contract of personal {**25 NY3d at 815}injury liability insurance . . . covering liability arising from the ownership, maintenance or operation of any motor vehicle,” the legislature appended the phrase “or of any vehicle as defined in section fifty-nine of the vehicle and traffic law” (L 1958, ch 577, § 3). As the Bar Association of the City of New York noted, this change was “a source of confusion” insofar as the terms “vehicle” and “motor vehicle” were conflicting under the Vehicle and Traffic Law, but it was nonetheless “underst[oo]d” that “the intended application of Section [*11]167(2) [the predecessor to Insurance Law § 3420 (e)] [wa]s only to the liability arising under Vehicle and Traffic Law § 59” (Mem of Assn of Bar of City of NY Comm on St Legis, Bill Jacket, L 1958, ch 577 at 19 [emphasis added]). The Law Revision Commission, which proposed the legislation, essentially confirmed this understanding of the reach of the predecessor to Insurance Law § 3420 (e) (see Recommendation of Law Rev Commn to Legislature, Bill Jacket, L 1958, ch 577 at 38-39). Therefore, in enacting the 1958 amendments to Vehicle and Traffic Law § 388’s and Insurance Law § 3420 (e)’s antecedents, the legislature adopted legislation meant to continue to exclude police vehicles from the ambit of the predecessor to Insurance Law § 3420 (e) (see also Mem of Assistant Director of Research of Law Rev Commn, Bill Jacket, L 1962, ch 825 at 19 [“section 167(2) of the Insurance Law . . . now require(s) coverage of the insured’s liability under section 388 of the Vehicle and Traffic Law,” which was the successor to Vehicle and Traffic Law § 59 and still exempted police vehicles]).

1958 also brought the advent of uninsured motorist coverage. The legislature sought to guarantee that all owners of covered vehicles had uninsured motorist coverage from one of two sources: (1) automobile insurance policies including that coverage; or (2) uninsured motorist benefits paid by the Motor Vehicle Accident Indemnification Corporation to those who did not have such insurance (see generally L 1958, ch 759). Accordingly, the legislature crafted a new article 17-A of the Insurance Law, establishing MVAIC and directing it to process all claims for uninsured motorist benefits, regardless of whether the claims ultimately were to be paid by an insurance company or by MVAIC itself (see id.). Under that article, a “motor vehicle” to which uninsured motorist benefits applied was not{**25 NY3d at 816} inclusive of police vehicles (see L 1958, ch 759, § 2; see also former Vehicle and Traffic Law § 2 [1958]).^[FN5]

The legislature also amended Insurance Law § 167 (2), the predecessor to Insurance Law § 3420 (e), to compel insurers to add uninsured motorist endorsements to automobile insurance policies. The legislature placed the uninsured motorist provision in a new subsection (2-a) immediately following subsection (2) of Insurance Law § 167 (see L 1958, ch 759, § 4). Like its modern counterpart, Insurance Law § 167 (2-a) mandated that uninsured motorist coverage be contained in any “policy insuring against loss resulting from liability imposed by law for bodily injury or death . . . arising out of the ownership, maintenance and use of a motor vehicle by the insured,” and that the policy had to establish that coverage either through the insurer itself or through MVAIC (L 1958, ch 759, § 4 [emphasis added]). Tellingly, although the statute did not define “motor vehicle,” it was placed immediately following Insurance Law § 167 (2) and its incorporation of a definition of “motor vehicle” that exempts police vehicles. Indeed, the legislature saw the relationship between these two statutory subsections as quite close, for Insurance Law § 167 (2-a) was meant to fill what were simply “loopholes” (Sponsor’s Mem, Bill Jacket, L 1958, ch 759 at 6) or “gaps” (Governor’s Open Letter to Legislature, Bill Jacket, L 1958, ch 759 at 11) in the compulsory insurance statutes and Insurance Law § 167 (2), merely adding an uninsured motorist subdivision as an appendage to the existing law.

Along those lines, uninsured motorist endorsements under Insurance Law § 167 (2-a) were also intended to extend the same coverage as the MVAIC statute, and nothing more, because the statutory uninsured motorist endorsements and MVAIC were regarded as related “prong[s]” of the same “attack” {**25 NY3d at 817}on the problem of uninsured motorists (Mem of Supt, St Ins Dept, Bill Jacket, L 1958, ch 759 at 23; see also McCarthy v Motor Veh. Acc. Indem. Corp., 16 AD2d 35, 38-42 [4th Dept 1962] [“The MVAIC Law was not designed to supplement the insurance coverage of insured automobiles or to protect injured persons against risks which were not covered by the standard automobile liability policies” because “(t)hey are, and under the scheme of the statute, they must be, coextensive,” and certain terms in policies under Insurance Law § 167 (2-a) must be given the same meaning as under the MVAIC Law], affd 12 NY2d 922 [1963]; Moffitt v Moffitt, 46 AD2d 944, 945 [3d Dept 1974] [in the context of uninsured motorist accident, “MVAIC coverage is coextensive with that of a standard policy and article 17-A of the Insurance Law does not supplement the coverage of insured automobiles or protect insured persons against risks not covered by a standard policy”]). So it was that, in Wagoner (45 NY2d 581), we looked to the definitions section of the MVAIC Law as authority for the proposition that a “motorcycle” was a “motor vehicle” under Insurance Law § 167 (2-a), which was section 3420 (f)’s predecessor, because it was defined as such for purposes of the MVAIC Law (see id. at 586-588). This suggests that, just as MVAIC did not generally define a “motor vehicle” as inclusive of police vehicles, the uninsured motorist statute likewise removed police vehicles from the ambit of that term. And, the state of affairs remained the same [*12]following the passage of the legislation that rearranged and renumbered portions of the Vehicle and Traffic Law into its modern configuration (see L 1959, ch 775 [adding Vehicle and Traffic Law §§ 125, 125-a, 388 (2)]; L 1960, ch 608, § 4; L 1967, ch 139, § 1).

SUM coverage became compulsory in 1977 via an amendment to Insurance Law § 167 (2-a). This combined uninsured motorist/SUM coverage statute retained the original language of the uninsured motorist provision and added within that same undivided subsection the following:

“Any such policy shall, at the option of the insured, also provide supplementary uninsured motorists insurance for bodily injury, in an amount up to the bodily injury liability insurance limits of coverage provided under such policy, subject to a maximum of [$100,000 due to bodily injury or death per accident].” (L 1977, ch 892, § 3.)

{**25 NY3d at 818}As we have recognized, these statutory SUM benefits were “designed to give insureds the same level of protection that would have been available to others under the policy if the insureds were the tortfeasors who caused personal injuries,” and the legislature first addressed SUM coverage and general uninsured motorist coverage in the same statutory section because “both paragraphs of section 167 (2-a) related to uninsured motorist benefits and supplementary coverage was framed as an extension of the mandatory coverage outlined in the first paragraph” (Raffellini, 9 NY3d at 204-205). Therefore, SUM coverage was an extension of uninsured motorist coverage that generally applied in the same situations, just with different policy limits.

Finally, in 1984, the Insurance Law was renumbered in its entirety, resulting in the transfer of the old SUM, uninsured motorist and general liability coverage provisions into new Insurance Law § 3420. As a result, the requirements of general liability insurance policies are now outlined in Insurance Law § 3420 (e), uninsured motorist coverage requirements can be found in Insurance Law § 3420 (f) (1), and SUM coverage provisions are in Insurance Law § 3420 (f) (2) (A) (see L 1984, ch 367). Despite the separation of the uninsured motorist and SUM measures into distinct subsections (f) (1) and (f) (2), “[t]his recodification was not meant to effect a substantive change in the law—certainly, there is no reason to conclude that the Legislature split the two paragraphs into separate subsections to create a distinction between the two types of coverages that did not already exist” (Raffellini, 9 NY3d at 205; see Letter from Supt of Ins to Governor’s Counsel, July 13, 1984, Bill Jacket, L 1984, ch 367 at 7).

When Amato arrived in this Court, the law stood as follows: New York had traditionally exempted police vehicles from statutes dealing with civil liability under the Vehicle and Traffic Law; the legislature had long bound the Vehicle and Traffic Law civil liability statute and the predecessors to Insurance Law § 3420 (e) together, making their coverage coextensive; the legislature had also created essentially coterminous MVAIC and uninsured motorist statutes, the former of which defined “motor vehicle” to exclude police vehicles; the legislature had expressed a desire to maintain [*13]consistency in the scope of coverage of general automobile liability insurance and uninsured motorist coverage; and statutory uninsured motorist coverage and SUM coverage gave rise to matching benefits and limitations, such that if one excluded police vehicles, the other logically did so as well.{**25 NY3d at 819}

Against this backdrop, the Amato Court had every reason to conclude that, because the liability insurance provision of Insurance Law § 3420 (e) had traditionally dovetailed with the coverage of Vehicle and Traffic Law § 388 and its predecessors, Insurance Law § 3420 (e) employed the phrase “of a motor vehicle or of a vehicle as defined in [Vehicle and Traffic Law § 388]” as an imprecise way of incorporating the limitations of Vehicle and Traffic Law § 388 into Insurance Law § 3420 (e). In other words, Insurance Law § 3420 (e) used Vehicle and Traffic Law § 388 (2) to redefine “motor vehicle” as exempting police vehicles from the automobile insurance sections of Insurance Law § 3420. Given that the uninsured motorist and SUM coverage sections of Insurance Law § 3420 had originated as outgrowths designed to simply fill the uninsured or underinsured motorist “gaps” in the compulsory insurance statute and Insurance Law § 3420 (e), rather than to expand the class of covered vehicles, the Court rightly decided that Insurance Law § 3420 (f) (1) and (2) logically applied to the limited category of “motor vehicles” referenced in Insurance Law § 3420 (e), thus also excluding police vehicles. Since SUM coverage under Insurance Law § 3420 (f) (2) was just a variant of uninsured coverage under subsection (f) (1) of the same statute, the Court appropriately found that SUM coverage was likewise limited to non-police vehicles. Accordingly, the Amato Court properly interpreted Insurance Law § 3420 (f) (2) in a manner fully consistent with the legislature’s intent.

Stare Decisis and Developments Post-Amato

Even if we were to disagree with our holding in Amato, we would nonetheless be bound to follow it under the doctrine of stare decisis. “ ’Stare decisis is the doctrine which holds that common-law decisions should stand as precedents for guidance in cases arising in the future’ and that a rule of law ‘once decided by a court, will generally be followed in subsequent cases presenting the same legal problem’ ” (People v Peque, 22 NY3d 168, 194 [2013], quoting People v Damiano, 87 NY2d 477, 488 [1996, Simons, J., concurring]). Even under the most flexible version of the doctrine applicable to constitutional jurisprudence, prior decisions should not be overruled unless a “compelling justification” exists for such a drastic step (People v Lopez, 16 NY3d 375, 384 n 5 [2011]; see People v Silva, 24 NY3d 294, 300 [2014]). As we recently reiterated, an even more extraordinary and compelling justification is needed to{**25 NY3d at 820} overturn precedents involving statutory interpretation, such as Amato, because unlike in constitutional cases, “if the precedent or precedents have misinterpreted the legislative intention [embodied in a statute], the Legislature’s competency to correct the misinterpretation is readily at hand” (Palladino v CNY Centro, Inc., 23 NY3d 140, 151 [2014] [internal quotation marks and citations omitted]). Indeed, in Palladino, we upheld a statutory interpretation precedent that we found to [*14]be riddled with shortcomings both at the time it had been decided and thereafter. While we openly “question[ed]” the “utility or wisdom” of that precedent, we nonetheless followed it (id. at 150; see also id. at 147-150).

Here, Fitzgerald does not so much as ask us to overturn Amato, much less advance any compelling justification for disturbing that precedent. Nor do we find it appropriate to discard Amato on our own initiative, as there is no evidence that it has become unworkable, is unjust or has created an irreconcilable conflict in our case law. Certainly, legislative developments since our decision in Amato have not cast doubt on its validity, for the legislature has repeatedly amended Insurance Law § 3420 after Amato without making any effort to undo that decision (see L 2013, ch 11, § 1; L 2012, ch 496, § 1; L 2008, ch 388, §§ 2-6; L 2002, ch 584, §§ 1-2; L 1997, ch 568, § 1; L 1997, ch 547, § 2; L 1995, ch 305, § 1; L 1994, ch 425, § 2; see generally Bill Jacket, L 2013, ch 11; Bill Jacket, L 2012, ch 496; Bill Jacket, L 2008, ch 388; Bill Jacket, L 2002, ch 584; Bill Jacket, L 1997, ch 547; Bill Jacket, L 1995, ch 305). This is true even with respect to the specific amendments altering the limits of SUM coverage, and even at times when the legislature made efforts to overturn other pertinent judicial decisions with which it disagreed (see L 2012, ch 496, § 1; L 1997, ch 568, § 1; L 1997, ch 547, § 2; see e.g. Sponsor’s Mem, Bill Jacket, L 1997, ch 547 at 6-7 [seeking to expedite disclosure of coverage of SUM policies in response to Appellate Division case law strictly construing timing requirements for filing of SUM claims, and also citing this Court’s decision in Maurizzio v Lumbermens Mut. Cas. Co. (73 NY2d 951 [1989])]; Mem of NY Law Rev Commn, Bill Jacket, L 2002, ch 584 at 9 [calling legislature’s attention to need for amendment to overrule Black v Allstate Ins. Co. (274 AD2d 346 [1st Dept 2000])]).

Therefore, stare decisis compels retention of Amato. Because there is no basis for distinguishing that case from the one before us, Fitzgerald’s status as a passenger of a police vehicle{**25 NY3d at 821} at the time of the accident dooms his claim under Amato and Insurance Law § 3420 (f) (2) (A).

III

An unbroken line of historical practice, legislative history, statutory text and precedent establishes that a SUM endorsement prescribed by Insurance Law § 3420 (f) (2) (A) exempts police vehicles from its definition of the term “motor vehicle” absent a specific provision to the contrary in a given SUM endorsement. Since there is no contrary provision in the SUM endorsement here, it does not cover liability for injuries arising from the use of a police vehicle of the sort occupied by Fitzgerald during his accident. While Fitzgerald may pursue the available remedies, if any, under the No-Fault Law, a lawsuit or any insurance policy he has purchased for himself, he cannot recover under the SUM endorsement of Knauss’s policy, and the Appellate Division erred in overturning the stay of arbitration under that policy. Accordingly, the order of the Appellate Division should be reversed, with costs, and the petition for a permanent [*15]stay of arbitration granted.

Pigott, J. (dissenting).

The issue in this case is simple: whether plaintiff can recover from State Farm, the carrier that issued a SUM endorsement to Knauss’s personal motor vehicle insurance policy. Plaintiff, a person injured while occupying a motor vehicle driven by Knauss, is entitled to recover under the SUM endorsement.

In Matter of State Farm Mut. Auto. Ins. Co. v Amato (72 NY2d 288 [1988]), this Court was asked to decide whether the City of New York, as an unregulated self-insurer, was statutorily required to provide uninsured motorist coverage to two of its police officers who were injured when their police vehicles were struck by uninsured motor vehicles (Amato, 72 NY2d at 294). The officers each filed uninsured motorist claims with State Farm, their insurance carrier, to recover for their personal injuries (see id.). When State Farm denied their claims, both officers sought to arbitrate their uninsured motorist claims, and, in both cases, State Farm petitioned to stay the arbitration (see id.). State Farm argued that it was not obligated to provide uninsured motorist coverage because the City of New York, “as owner of the host vehicle, had the primary obligation to provide uninsured motorist coverage” (id. at 292 [internal quotation marks omitted]). This Court rejected that{**25 NY3d at 822} contention, holding that, as an unregulated self-insurer, the City was not statutorily required to provide uninsured motorist coverage to its officers (id. at 290). The Amato Court recognized nonetheless that the officers may make a claim against their own uninsured motorist policy (id. at 293 n 1; see also Williams v City of New York, 144 AD2d 553 [2d Dept 1988] [finding that while the City had no obligation to provide uninsured motorist benefits to the police officer plaintiff, she was entitled to summary judgment against the insurer of her personal vehicle]).

Here, plaintiff is not seeking uninsured motorist coverage from the City, as it is settled under Amato that the City has no obligation to provide the plaintiff with uninsured motorist benefits. It therefore follows, as in our prior precedent, that plaintiff is entitled to coverage under the Knauss’s SUM endorsement.

The legislature intended to make compensation available in cases in which insured persons suffer automobile accident injuries at the hands of financially irresponsible motorists. As this Court recognized in Amato, “[The] Legislature has specifically declared its grave concern that motorists who use the public highways be financially responsible to ensure that innocent victims of motor vehicle accidents be recompensed for their injuries and losses” (Amato, 72 NY2d 288, 292, citing Matter of Allstate Ins. Co. v Shaw, 52 NY2d 818, 819 [1980]). Under the majority’s holding, plaintiff is left without uninsured motorist coverage altogether. Clearly, neither the legislature nor this Court would ever intend such a result.

For these reasons, I dissent and would affirm the order of the Appellate Division.

Judges Read, Stein and Gonzalez^[FN*] concur; Judge Pigott dissents and votes to affirm in an opinion in which Chief Judge Lippman and Judge Fahey concur; Judge Rivera taking no part.

Order reversed, with costs, and petition for a permanent stay of arbitration granted.

Footnotes

Footnote 1:The record does not disclose whether Fitzgerald had automobile insurance or liability insurance at the time of the accident. In his motion papers and correspondence with State Farm, Fitzgerald did not discuss his own insurance status, and he did not claim to be uninsured.

Footnote 2:At the time of the Court’s decision in Amato, Insurance Law § 3420 (f) had already been divided into paragraphs (1) and (2) (see L 1984, ch 367), though the Court did not distinguish between those two paragraphs for purposes of its analysis.

Footnote 3:The dissent opines that we should direct State Farm to extend coverage to Fitzgerald because, in Amato, we noted that the officers there could receive SUM coverage under their own insurance policies (see dissenting op at 822). But that aspect of Amato is of no help to Fitzgerald. In Amato, we commented that the officers could not receive Motor Vehicle Accident Indemnification Corporation (MVAIC) benefits because they were designated “beneficiaries” of the particular “uninsured motorist indorsement contained in their respective policies with State Farm” (Amato, 72 NY2d at 293 n 1). In other words, the officers in Amato could still receive uninsured motorist benefits because, presumably, they were named insureds under State Farm’s policy, and State Farm extended uninsured motorist coverage to them regardless of the type of vehicle they occupied. In fact, here, Officer Knauss was covered for the same reason: the SUM indorsement expressly identified him as a named insured entitled to such coverage under any circumstances. By contrast, Fitzgerald was not a named insured under Knauss’s policy, and hence he could not receive coverage on the same grounds that Knauss or the officers in Amato could. Rather, Fitzgerald could only qualify for SUM coverage under the statutorily required SUM clause in Knauss’s policy, which limited coverage to occupants of statutory “motor vehicles.” As we have explained, Fitzgerald was not occupying a “motor vehicle” at the time of his accident, and he was not entitled to SUM coverage.

Footnote 4:When confronted with another phrase in this statute joined by a similarly perplexing coordinating conjunction, we have previously declined to construe the phrase literally to create an expansion of coverage not otherwise clearly contemplated by the legislature (see Matter of Allstate Ins. Co. v Libow, 65 NY2d 807, 809 [1985] [affirming “for the reasons stated in the opinion” of the Appellate Division, which refused to interpret literally a clause in former Insurance Law § 3420 (f), which requires payment of “all sums, not exceeding a maximum amount or limit of ten thousand dollars exclusive of interest and costs, on account of injury to and all sums, not exceeding a maximum amount or limit of fifty thousand dollars exclusive of interest and costs, on account of death of one person, in any one accident” because the literal reading would have permitted the unintended aggregation of certain claims under that statute]; see also Matter of Allstate Ins. Co. v Libow, 106 AD2d 110, 116-118 [2d Dept 1984]).

Footnote 5:Today, the MVAIC statute still defines “motor vehicle” as “exclud[ing] fire and police vehicles” (Insurance Law § 5202 [a]). The Amato Court stated that “the uninsured occupant of a police vehicle may file a claim with the MVAIC for injuries sustained in an accident caused by an uninsured motor vehicle,” but that “police vehicles are exempted from the provisions of the MVAIC statute to the extent that otherwise eligible claimants are barred from filing a claim for injuries caused by the negligent operation of a police vehicle” (Amato, 72 NY2d at 294 n 2). Thus, the Court seems to have found that, although a police vehicle is not a “motor vehicle” under the MVAIC Law, it can still be involved in an actionable “motor vehicle accident” under that statutory scheme (Insurance Law § 5208 [a] [1]), as long as its operation is not the cause of the accident.

Footnote *:Presiding Justice of the Appellate Division, First Department, designated pursuant to NY Constitution, article VI, § 2 to serve as an Associate Judge of the Court of Appeals.

[*1]

Argued April 28, 2015; decided June 10, 2015

Viviane Etienne Med. Care, P.C. v Country-Wide Ins. Co., 114 AD3d 33, affirmed.

This appeal requires us to determine what proof a plaintiff medical provider must [*2]advance to make a prima facie showing of entitlement to summary judgment in a no-fault insurance action. We hold that a plaintiff demonstrates prima facie entitlement to summary judgment by submitting evidence that payment of no-fault benefits are overdue, and proof of its claim, using the statutory billing form, was mailed to and received by the defendant insurer. Proof evincing the mailing must be presented in admissible form, including, where it is applicable, meeting the business records exception to the hearsay rule. Applying this rule to the facts of this case, plaintiff demonstrated entitlement to summary judgment. Therefore, the order of the Appellate Division should be affirmed, insofar as appealed from, and the certified question answered in the affirmative.

I.

Following an automobile accident in June 2004, Alem Cardenas received treatment for his injuries at the office of plaintiff Viviane Etienne Medical Care, P.C. Cardenas’s automobile liability insurance policy with defendant Country-Wide Insurance Company contained a New York State no-fault endorsement. Cardenas assigned his right to receive no-fault benefits to plaintiff. To receive reimbursement for the services it rendered to Cardenas, plaintiff submitted to defendant eight verification of treatment forms^[FN1] demonstrating the services rendered or equipment provided, and the corresponding cost. Each form was signature stamped with “V Etienne MD.” Within 15 days from receipt of the verification of treatment form, an insurer may seek further verification (see 11 NYCRR 65-3.5 [b]) and within 30 days after receiving the verification of treatment form, the insurer must pay or deny the claim (see Insurance Law § 5106 [a]; 11 NYCRR 65-3.8 [c]). Defendant denied payment on one claim in the amount of $139 dated November 17, 2004. Defendant did not respond to any of the other claims.

Plaintiff commenced this action seeking to recover no-fault insurance benefits, asserting that it timely submitted bills and{**25 NY3d at 502} claims for payment to defendant in the amount of $6,130.70,^[FN2] but defendant had yet to make any payments, deny the requests, or ask for verification of the claims. Plaintiff also requested interest and attorney’s fees under the Insurance [*3]Law. Defendant answered and asserted as an affirmative defense that payment for plaintiff’s claims was not overdue because plaintiff failed to submit “proper proof of the fact and amount of loss” as required by the Insurance Law.

Plaintiff moved for summary judgment on its claims, arguing that it had met its prima facie burden of showing the fact and amount of loss sustained, and that the payment of the benefits was overdue. As support, plaintiff submitted the aforementioned eight verification of treatment forms as proof of claim, along with seven mailing ledgers stamped by the United States Postal Service indicating the date the forms were mailed, and the denial of claim form. Additionally, plaintiff submitted the affidavit of Roman Matatov, President of SUM Billing Corp. (SUM Billing), a third-party billing company hired by plaintiff.

In the affidavit, Matatov explained the company’s billing procedures. The medical providers must submit an assignment of benefits form signed by the injured party along with the injured party’s identification prior to SUM Billing sending out the verification of treatment forms to the insurance companies for reimbursement. Matatov personally obtains the insurance cards and police reports pertaining to the accident. He incorporates all the above documents into SUM Billing’s records and relies upon them in the performance of his business. In generating the verification of treatment forms, Matatov requires the medical providers to submit to SUM Billing all information necessary to complete the forms and sees that any missing information is obtained from the providers. Matatov then enters all the information to be included in the verification of treatment form into a custom-designed software system that creates the completed forms. Matatov averred that after the forms are created, he logs the bills into a mailing ledger, and personally mails the bills to the insurance company. The mailing ledger is stamped by the United States Postal Service. Matatov stated that he “retain[s] sole responsibility for the mailing of the documents created by [SUM Billing], and [he]{**25 NY3d at 503} personally inspect[s] and verif[ies] the accuracy and completeness of every envelope set to leave the office.” The affidavit also described the eight proof of claim forms that plaintiff submitted with its motion for summary judgment. Matatov affirmed that consistent with the described procedures, he mailed the eight proof of claim forms to defendant.

Defendant opposed the motion, arguing that plaintiff failed to meet its prima facie burden as it did not put forth evidence in admissible form, because all of plaintiff’s exhibits were hearsay with no applicable exception. It asserted that Matatov’s affidavit did not provide sufficient foundation for the admission of the hearsay under the business records exception because the affidavit “merely state[d] the bills were mailed” but gave no other details required to meet the business records exception under CPLR 4518 (a).

Civil Court denied plaintiff’s motion for summary judgment “for failure to establish a prima facie case.” The Appellate Term, for the Second, Eleventh and Thirteenth Districts, affirmed (31 Misc 3d 21 [2011]). Relying on the Second Department’s decision in Art [*4]of Healing Medicine, P.C. v Travelers Home & Mar. Ins. Co. (55 AD3d 644 [2d Dept 2008]), the Appellate Term held that Matatov’s affidavit failed to lay a sufficient foundation for the business records hearsay exception. Specifically, the court stated that the “affidavit failed to demonstrate that [Matatov] ha[d] personal knowledge of plaintiff’s practices and procedures and that he [was] competent to testify about those practices and procedures” and alternatively failed to demonstrate that SUM Billing “incorporated plaintiff’s medical records into its own and relied upon them” (31 Misc 3d at 24, 25).

Insofar as relevant here, the Appellate Division, with two Justices dissenting, granted plaintiff’s motion for summary judgment with respect to all the claims that were not timely denied by the insurer (114 AD3d 33 [2013]).^[FN3] The Court declined to follow its decision in Art of Healing Medicine, P.C. v Travelers Home & Mar. Ins. Co. (55 AD3d 644 [2d Dept 2008]), wherein it held that the plaintiffs there “failed to establish their prima facie entitlement to judgment as a matter of law” because “[t]he plaintiffs’ medical service providers failed to demonstrate the admissibility of their billing records under the{**25 NY3d at 504} business records exception to the hearsay rule” (id. at 644). The Court concluded that “Art of Healing constitutes an anomaly, a jurisprudential drift from [the] Court’s well-established precedent” (114 AD3d at 44, 45).^[FN4]

The Court stated:

“We reaffirm the long-standing precedent that, in this context, the plaintiff makes a prima facie showing of entitlement to judgment as a matter of law by submitting evidence, in admissible form, that the prescribed statutory billing forms were mailed to and received by the defendant insurer, which failed to either pay or deny the claim within the prescribed 30-day period” (114 AD3d at 35).

Applying that standard, the Appellate Division determined that, with the exception of the claim that was denied, plaintiff established prima facie entitlement to summary judgment as a matter of law “by demonstrating that its prescribed statutory billing forms used to establish proof of claim were mailed to and received by the defendant and that . . . defendant failed to either timely pay or deny the claims” (id. at 46 [citation omitted]). The Court determined that defendant in [*5]opposition failed to raise a triable issue of fact because it was precluded from raising the defense that the proof of claim forms were inadmissible under the business records exception to hearsay as it did not deny the claim within the statutory time frame (id. at 47).^[FN5]

The Appellate Division remitted the case to Civil Court to determine whether plaintiff was entitled to statutory interest and attorney’s fees. Thereafter, the Court granted defendant’s motion for leave to appeal to this Court, certifying the question of whether its determination was properly made.

II.

The Comprehensive Motor Vehicle Insurance Reparations Act, commonly referred to as the “No-Fault Law” (see Insurance Law art 51) is aimed at ensuring “prompt compensation for losses incurred by accident victims without regard to fault{**25 NY3d at 505} or negligence, to reduce the burden on the courts and to provide substantial premium savings to New York motorists” (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 860 [2003], citing Governor’s Mem approving L 1973, ch 13, 1973 McKinney’s Session Laws of NY at 2335). This Court has recognized the complicated nature of the statutory and regulatory scheme of the No-Fault Law (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 286 [1997] [describing the scheme as a “ ’Rube-Goldberg-like maze’ ”]). In Fair Price Med. Supply Corp. v Travelers Indem. Co., we described the no-fault regime as follows:

“ ’The[ ] regulations require an accident victim to submit a notice of claim to the insurer as soon as practicable and no later than 30 days after an accident (see 11 NYCRR 65-1.1, 65-2.4 [b]). Next, the injured party or the assignee . . . must submit proof of claim for medical treatment no later than 45 days after services are rendered (see 11 NYCRR 65-1.1, 65-2.4 [c]). Upon receipt of one or more of the prescribed verification forms used to establish proof of claim, . . . an insurer has 15 business days within which to request “any additional verification required by the insurer to establish proof of claim” (11 NYCRR 65-3.5 [b]). An insurer may also request “the original assignment or authorization to pay benefits form to establish proof of claim” within this time frame (11 NYCRR 65-3.11 [c]). Significantly, an insurance company must pay or deny the claim within 30 calendar days after receipt of the proof of claim (see Insurance Law § 5106 [a]; 11 NYCRR 65-3.8 [c]). If an insurer seeks additional verification, however, the 30-day window is tolled until it receives the relevant information requested (see 11 NYCRR 65-3.8 [a] [1])’ ”[*6] (Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d 556, 562-563 [2008], quoting Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 317 [2007]; see Insurance Law § 5106 [a]).^[FN6]

{**25 NY3d at 506}Where an insurer fails to pay or deny a claim within the requisite 30 days under the statute and regulations following its receipt of the proof of claim, the insurer is subject to “substantial consequences,” namely, preclusion “from asserting a defense against payment of the claim” (Fair Price, 10 NY3d at 563 [internal quotation marks omitted]). The only exception to preclusion recognized by this Court arises where an insurer raises lack of coverage as a defense (see id.; Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d at 318; Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1997]). This Court has recognized that preclusion may require an insurer to pay a no-fault claim it might not have had to honor if it had timely denied the claim (see Presbyterian Hosp., 90 NY2d at 285). Nonetheless, we emphasized that the great convenience of “prompt uncontested, first-party insurance benefits” is “part of the price paid to eliminate common-law contested lawsuits” (id.; see Fair Price, 10 NY3d at 565-566).

Prior to Art of Healing and following its abandonment, the Second Department has held that

“[i]n an action to recover no-fault benefits, a plaintiff makes a prima facie showing of entitlement to judgment as a matter of law by submitting evidentiary proof that the prescribed statutory billing forms were mailed to and received by the relevant insurance carrier, and that payment of no-fault benefits was overdue” (Westchester Med. Ctr. v Progressive Cas. Ins. Co., 89 AD3d 1081, 1082 [2d Dept 2011]; see New York Hosp. Med. Ctr. of Queens v QBE Ins. Corp., 114 AD3d 648, 648 [2d Dept 2014]).

Other Appellate Division Departments have adopted the Second Department’s approach and articulated the same standard (see e.g. Sunshine Imaging Assn./WNY MRI v Government Empls. Ins. Co., 66 AD3d 1419, 1420 [4th Dept 2009]; Countrywide Ins. Co. v 563 Grand Med., P.C., 50 AD3d 313, 314 [1st Dept 2008]; LMK Psychological Servs., P.C. v Liberty Mut. Ins. Co., 30 AD3d 727, 728 [3d Dept 2006]).

We agree with the Appellate Division Departments that a summary judgment motion in a no-fault insurance case where the benefits are overdue requires proof that the statutory claim forms were mailed to and received by the insurer. The legislative design of the no-fault insurance scheme demonstrates an interest in prompt resolution of reimbursement claims, a desire{**25 NY3d at 507} to avoid litigation, and statutory consequences on an insurer to incentivize it to seek verification of a claim, deny it, or pay. As this Court has stated:

“No-fault reform was enacted to provide prompt uncontested, first-party insurance benefits. That is part of the price paid to eliminate common-law contested lawsuits. . . . The tradeoff of the no-fault reform still allows carriers to contest ill-founded, illegitimate and fraudulent claims, but within a strict, short-leashed contestable period and process designed to avoid prejudice and red-tape dilatory practices” (Presbyterian, 90 NY2d at 285 [citation omitted]; see Hospital for Joint Diseases, 9 NY3d at 320).

Consistent with these interests, a medical provider seeking reimbursement from a no-fault insurer demonstrates its entitlement to reimbursement of overdue benefits when it proves that it submitted a completed claim form to the insurer. A claim is overdue if it is not denied or paid within 30 days of the insurer’s receipt of proof of claim (see 11 NYCRR 65-3.8 [a] [1]; Insurance Law § 5106 [a]). Thus, it follows that a claim is not overdue when it is timely denied by the insurer.

The requisite proof in a no-fault insurance case is “proof of the fact and amount of loss sustained” (Insurance Law § 5106 [a]). To establish entitlement to summary judgment on overdue no-fault benefits, the medical provider is required to submit proof of mailing through evidence in admissible form. Such proof may include the verification of treatment form and/or an affidavit from a person or entity (1) with knowledge of the claim and how it was sent to the insurer or (2) who has relied upon the forms in the performance of their business.^[FN7] Thus, even where an insurer is precluded from raising a defense to the proof of claim form because of its failure to timely deny the claim, the plaintiff medical provider must, as an initial matter, demonstrate its entitlement to summary judgment by submission of proof in admissible form.{**25 NY3d at 508}

Admissible evidence may include “affidavits by persons having knowledge of the facts [and] reciting the material facts” (GTF Mktg. v Colonial Aluminum Sales, 66 NY2d 965, 967 [1985]; CPLR 3212 [b]; see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). Certain affidavits and documents submitted in support of a motion for summary judgment may [*8]be deemed admissible where those documents meet the requirements of the business records exception to the rule against hearsay under CPLR 4518 (see e.g. JPMorgan Chase Bank, N.A. v Clancy, 117 AD3d 472, 472 [1st Dept 2014]; Education Plus, Inc. v Glasser, 112 AD3d 1125, 1125-1126 [3d Dept 2013]; Melendez v 176 Hopkins Assoc., LP, 28 AD3d 723, 723 [2d Dept 2006]). CPLR 4518 (a) provides:

“Any writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence or event, shall be admissible in evidence in proof of that act, transaction, occurrence or event, if the judge finds that it was made in the regular course of any business and that it was the regular course of such business to make it, at the time of the act, transaction, occurrence or event, or within a reasonable time thereafter.”

III.

Applying these principles to the instant facts, the Appellate Division properly determined that plaintiff met its prima facie summary judgment burden. As relevant here, to support its motion, plaintiff submitted the eight verification of treatment forms and Matatov’s affidavit. The documents submitted by plaintiff meet the business records exception to the hearsay rule.

Matatov’s affidavit states that based on his business agreement with plaintiff, SUM Billing created the verification of treatment forms in the regular course of its business and that the forms were created soon after the services were provided by plaintiff to Cardenas. Indeed, the tight timetable of the no-fault scheme requires prompt submission of proof of claim in order to receive reimbursement. Matatov’s affidavit outlines the office practices and procedures used by SUM Billing to mail claim forms to insurers and demonstrates that Matatov himself mails the forms. Matatov explained that SUM Billing relies on these forms in the performance of its business. Further, the affidavit states how and when the forms at issue here were created and that they were mailed to defendant within{**25 NY3d at 509} the statutory time frame. Thus, as plaintiff was able to demonstrate SUM Billing’s office mailing practices and procedures, “a presumption arises that those notices have been received by the insure[rs]” (Nassau Ins. Co. v Murray, 46 NY2d 828, 829 [1978]). It is undisputed that defendant did not pay or deny seven out of the eight claims at issue. Consequently, those claims are overdue. Plaintiff, therefore, satisfied its burden on summary judgment by demonstrating the mailing of the proof of claim forms, and their receipt by the insurer.

The Appellate Division also properly determined that defendant failed to raise a triable issue of fact in opposition. In fact, defendant concedes that it is precluded from raising any defense due to its failure to timely deny the claims.

Contrary to the dissent’s contention, the risk of an insurer paying out fraudulent claims has been recognized by this Court (see Presbyterian Hosp., 90 NY2d at 285); however, as we have stated that risk is part of the price paid for swift, uncontested resolution of no-fault [*9]claims. Where no-fault benefits are not overdue, because of timely denial, the insurer’s compliance with the statute and regulations allows it to retain its right to contest the claims and prevent payment of fraudulent claims. An insurer providing no-fault benefits may not simply sit on its hands until litigation is commenced. Some action is required.

Accordingly, the order of the Appellate Division, insofar as appealed from, should be affirmed, with costs, and the certified question answered in the affirmative.

Stein, J. (dissenting). The majority holds that a plaintiff medical provider in a no-fault case establishes prima facie entitlement to summary judgment by demonstrating that the insurer was billed and failed to timely deny or pay the billed claim. In my view, neither the statutory and regulatory no-fault scheme, nor our cases concerning the preclusion doctrine, obviate a plaintiff’s burden to demonstrate its prima facie entitlement to benefits sought, as compared to only proof of billing and nonpayment. I, therefore, respectfully dissent.

Pursuant to the statutory no-fault scheme, automobile insurance policies must provide for the payment of first party benefits to certain persons “for loss arising out of the use or operation in this state of [a] motor vehicle” (Insurance Law § 5103 [a] [1]; see 11 NYCRR 65-1.1). Stated simply, first party benefits are capped “payments to reimburse a person for basic economic loss on account of personal injury arising out of the{**25 NY3d at 510} use or operation of a motor vehicle” (Insurance Law § 5102 [b]; see Insurance Law § 5102 [a]). Covered expenses include those incurred for “necessary” medical services (Insurance Law § 5102 [a] [1]). Thus, to establish entitlement to no-fault benefits for medical services, a party must demonstrate that the loss arose from an automobile accident and that the expenses incurred were medically necessary.

Under the detailed no-fault regulations implementing the Insurance Law, a claimant must submit a notice of claim to the insurer as soon as reasonably practicable, but no later than 30 days after the accident (see 11 NYCRR 65-1.1, 65-2.4 [b]; Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d 556, 562-563 [2008]). If the claimant receives medical services, the claimant—or his or her assignee—must submit written proof of claim for that treatment to the insurer within 45 days of the provision of services (see 11 NYCRR 65-1.1, 65-2.4 [c]). This proof of claim must include “full particulars of the nature and extent of the injuries and treatment received and contemplated” (11 NYCRR 65-1.1 [d]). Upon receipt of a prescribed verification form, the insurer has 15 business days to request “any additional verification required . . . to establish proof of claim” (11 NYCRR 65-3.5 [b]; Fair Price, 10 NY3d at 563).

As particularly relevant here, an insurer must pay or deny a claim, in whole or in part, within 30 calendar days of receipt of the proof of claim or any additional verification requested (see Insurance Law § 5106 [a]; 11 NYCRR 65-3.8 [a] [1]; [c]; Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 317 [2007]). The majority accurately states that a failure to do so carries “substantial consequences” (Hospital for Joint Diseases, 9 [*10]NY3d at 317). Namely, pursuant to Insurance Law § 5106 (a), a failure to pay or deny benefits within 30 days of receipt of “proof of the fact and amount of loss sustained” renders benefits “overdue,” and all overdue payments bear interest at a rate of 2% per month (see 11 NYCRR 65-3.8 [a] [1]; Hospital for Joint Diseases, 9 NY3d at 317-318). Further, a claimant is entitled to recover attorney’s fees for overdue payments (see Insurance Law § 5106 [a]). In addition to the statutory penalties, we have held that a failure to timely pay or deny a claim will result in an insurer being precluded from interposing a defense against payment of the claim, except where the defense raised is lack of coverage (see Fair Price, 10 NY3d at 563-565; Hospital for Joint Diseases, 9 NY3d at 318-319; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 283 [1997]).{**25 NY3d at 511}

Defendant Country-Wide Insurance Company readily concedes that, assuming that plaintiff Viviane Etienne Medical Care, P.C., has met its prima facie burden of showing entitlement to payment of its claims, the statutory penalties are applicable and defendant is precluded from raising a defense due to its failure to timely pay or deny the claims. The majority holds that, because these penalties are applicable to plaintiff’s claims, plaintiff is entitled to judgment based on its showing of proof of billing, receipt, and nonpayment. I, however, find no basis to conclude that any of the aforementioned penalties that may be imposed against defendant obviate plaintiff’s burden to make a prima facie showing of entitlement to benefits—i.e., that the loss arose from an automobile accident and that the expenses incurred were medically necessary—a showing that defendant would then be precluded from challenging.

As indicated by the lack of a direct citation to any statutory authority for the majority’s position, no language in the Insurance Law or the relevant regulations compels the conclusion that the legislature intended to excuse a no-fault plaintiff from demonstrating entitlement to benefits as a penalty to the insurer. The Insurance Law does not provide that, because benefits are “overdue” and the insurer is therefore subject to certain enumerated repercussions, a plaintiff need not proffer admissible evidence establishing the basic elements of a no-fault claim. Rather, the rule now adopted by the majority—that only proof of billing and the absence of timely denial or payment are required to obtain reimbursement—was derived by the Appellate Division Departments from our cases creating and defining the preclusion rule (see e.g. Westchester Med. Ctr. v Progressive Cas. Ins. Co., 89 AD3d 1081, 1082 [2d Dept 2011], citing Presbyterian Hosp., 90 NY2d 274; New York & Presbyt. Hosp. v Selective Ins. Co. of Am., 43 AD3d 1019, 1020 [2d Dept 2007], citing Presbyterian Hosp., 90 NY2d 274). In my view, the extension of the preclusion doctrine established by the majority in this case is misguided because our preclusion cases did not effectuate a change to a plaintiff’s burden on summary judgment.

It is well established that “the proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient [*11]evidence to demonstrate the absence of any material issues of fact” (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]). In other{**25 NY3d at 512} words, “ '[t]o obtain summary judgment it is necessary that the movant establish [a] cause of action . . . “sufficiently to warrant the court as a matter of law in directing judgment” in [the movant’s] favor (CPLR 3212, subd [b]), and [the movant] must do so by tender of evidentiary proof in admissible form’ ” (Zuckerman v City of New York, 49 NY2d 557, 562 [1980], quoting Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065, 1067 [1979]; see Bush v St. Clare’s Hosp., 82 NY2d 738, 739 [1993]). “Failure to make such prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers” (Alvarez, 68 NY2d at 324). Applying these uncontroverted principles here, the preclusion rule, which prevents an insurer from raising most defenses to a no-fault claim, comes into play only after the plaintiff’s prima facie case has been demonstrated. That is, the preclusion doctrine has no application to the facts before us because defendant seeks only to hold plaintiff to its initial summary judgment burden.

While proof of billing and the absence of timely denial or payment may be required in order to invoke the preclusion rule, we have never held that such proof constitutes a prima facie showing of entitlement to judgment in a no-fault plaintiff’s favor. In fact, the State Insurance Department has interpreted the interplay between summary judgment and the preclusion rule in exactly the manner I propose, taking the view that, “[t]hough an insurer’s defense to payment of claim may be precluded under the [preclusion] cases, . . . the claimant must still meet the statutory requisite and make out a prima facie case of entitlement to benefits,” which requires that “reimbursable expenses must arise out of a motor vehicle accident and be medically necessary to treat the injuries” (Ops Gen Counsel NY Ins Dept No. 00-01-02 [Jan. 2000]). Likewise, while we held that the insurer in Hospital for Joint Diseases was precluded from contesting the validity of a signature on an assignment form, we separately addressed the insurer’s challenge insofar as it implicated the plaintiff’s burden to demonstrate a prima facie case (see 9 NY3d at 319-320). Unlike our approach in that case, the majority now conflates the preclusion rule with the summary judgment burden, effectively eviscerating our long-settled summary judgment principles in the no-fault context despite the absence of any such direction from the legislature.

The practical effect of the majority’s holding today is that courts lack authority to verify that a no-fault plaintiff has{**25 NY3d at 513} established the basic facts supporting a claim prior to awarding judgment, which is a result inconsistent with our summary judgment rules and, indeed, is not one endorsed even with respect to defaulting defendants (compare CPLR 3215 [f]). These rules are designed, at least in part, to prevent the perpetration of fraud upon the court. Moreover, an insurer’s duty to pay or deny a claim within 30 days is not triggered until it receives “proof of the fact and amount of loss sustained” (Insurance Law § 5106 [a]; see 11 NYCRR 65-3.8 [a] [1]). Yet, the majority’s rule arguably eviscerates any avenue for insurers to contest even whether a [*12]verification of treatment form contains sufficient information to constitute “proof of the fact and amount of loss sustained”—or in other words, whether the payments were actually overdue—since proof of the mailing of the prescribed form, without any regard to its contents or its completeness, will now carry a plaintiff’s burden on summary judgment. In a system that we have recognized as already plagued by widespread abuse (see generally Pommells v Perez, 4 NY3d 566, 571 [2005]; Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 861 [2003]), the majority’s rule unnecessarily increases the risk that insurers will be required to pay out fraudulent claims, which is detrimental, not only to the insurer, but also to claimants, whose entitlement to benefits (which is subject to a maximum amount) will consequently be reduced. This is a result that should not be countenanced by our judicial system, whose duty it is to fairly apply the law, and one which was not intended by either the legislature or our preclusion cases.

It also bears noting that the rationale behind the preclusion doctrine, upon which the majority implicitly relies, does not support its application here. To be sure, a “core and essential objective” of the no-fault structure “is . . . to provide a tightly timed process of claim, disputation and payment” (Presbyterian Hosp., 90 NY2d at 281), and the preclusion doctrine provides an incentive for insurers to comply with the regulatory time frame. However, where, as here, the objection is to the evidentiary admissibility of the NF-3 verification of treatment forms—not to the accuracy or validity of their contents—it would be impossible for the insurer to raise the objection before the plaintiff’s summary judgment motion was brought, inasmuch{**25 NY3d at 514} as the insurer would have no way of knowing what evidentiary foundation would be offered.^[FN*]

Significantly, requiring a plaintiff to establish its prima facie entitlement to benefits, rather than mere proof of billing, would not place on no-fault claimants an onerous burden that would impede the timely resolution of valid claims or increase no-fault litigation. The statutory NF-3 verification of treatment form is a permissible proof of claim with respect to a non-hospital health care provider (see 11 NYCRR 65-3.11 [b]). This form contains, among other things: necessary information regarding the provider, insurer, and the insured; a space for the “diagnosis and concurrent conditions”; boxes to check, indicating when the symptoms [*13]appeared and whether they are solely a result of an automobile accident; a space for a “report of services rendered”; and an assignment of benefits section. As the Appellate Division dissenters aptly stated, plaintiff’s prima facie case on the merits “would have been satisfied here if the plaintiff had simply submitted the proof of claim forms in admissible form” (114 AD3d at 49).

However, the affidavit proffered by plaintiff to support admission of the NF-3 forms—which must be received for their truth to establish the “fact and amount of loss sustained” (Insurance Law § 5106 [a]), as should be required—falls short. Although the affidavit of Roman Matatov, the president of plaintiff’s third-party billing service, stated that he had personal knowledge of the mailing of the NF-3 forms to defendant, he had no personal knowledge of plaintiff’s record-keeping procedures or practices in creating the documents based on which he compiled those forms. Thus, Matatov was unable to lay a sufficient foundation for the admissibility of the NF-3 forms under the business records exception to the hearsay rule (see CPLR 4518 [a]; People v Brown, 13 NY3d 332, 341 [2009]; People v Cratsley, 86 NY2d 81, 90 [1995]; Matter of Leon RR, 48 NY2d 117, 122-123 [1979]), and inadmissible hearsay is insufficient to establish a prima facie case entitling plaintiff to summary judgment (see generally Zuckerman, 49 NY2d at 562). I simply{**25 NY3d at 515} do not see why it would be unduly burdensome to require plaintiff to submit a proper affidavit, either from Matatov or a knowledgeable employee of the medical provider’s practice.

In sum, in light of the absence of any explicit language in the no-fault statutes or regulations eliminating a plaintiff’s burden to establish a prima facie case of entitlement to benefits or any indication of a legislative intent to eliminate such burden, and because the preclusion doctrine is not triggered until a prima facie showing has been made, I find no basis to diverge from our traditional rules pertaining to summary judgment motions. Thus, I would conclude that proof of billing, receipt, and nonpayment is simply insufficient to carry plaintiff’s prima facie case here. Rather, plaintiff should be obligated to proffer, in accordance with the basic rules of evidence, admissible NF-3 forms to demonstrate the merits of its claims, which defendant would then be precluded from contesting. Accordingly, I would reverse the Appellate Division order.

Chief Judge Lippman and Judges Pigott, Rivera and Fahey concur; Judge Stein dissents in an opinion in which Judge Read concurs.

Order, insofar as appealed from, affirmed, with costs, and certified question answered in the affirmative.

Footnotes

Footnote 1:The forms used by the plaintiff are a standard form distributed by the New York State Department of Financial Services.

Footnote 2:Due to an error in calculation, the reimbursement amount sought in plaintiff’s complaint was wrong. The actual total amount billed to the insurer was $6,566.46. Plaintiff moved to amend its complaint to reflect the actual amount of damages.

Footnote 3:All of the courts below denied plaintiff’s motion for summary judgment on one of its claims dated November 17, 2004, in the amount of $139, as it was timely denied by the insurer. The propriety of that determination is not before this Court as plaintiff did not cross-appeal its denial.

Footnote 4:The Court noted that it had relied upon Art of Healing in the context of no-fault insurance in only one case, Matter of Carothers v GEICO Indem. Co. (79 AD3d 864, 864-865 [2d Dept 2010]).

Footnote 5:The dissenting Justices concurred in part and dissented in part, voting to affirm the order of Appellate Term and uphold the decision in Art of Healing.

Footnote 6:Plaintiff commenced this action in September 2005, prior to adoption of the April 1, 2013 amendments to the no-fault insurance regulations, including the additions to 11 NYCRR 65-3.5 and 65-3.8. The amended regulations are not applicable to this case and, therefore, have no bearing on this decision.

Footnote 7:While many of the Appellate Division decisions determining that a medical provider had submitted sufficient proof of mailing and overdue reimbursement do not describe the actual documents submitted to support the motion for summary judgment (see e.g. Westchester Med. Ctr. v Progressive Cas. Ins. Co., 89 AD3d 1081, 1082 [2d Dept 2011]; LMK Psychological Servs., P.C. v Liberty Mut. Ins. Co., 30 AD3d 727, 728 [3d Dept 2006]), it appears that verification of treatment forms and/or affidavits describing the mailing are the types of documents typically considered.

Footnote *:To the extent the majority implies that an insurer should routinely issue timely denials of claims or verification requests in order to preserve its right to contest those claims, it seems to me, that this approach would directly conflict with the principles of fair practice set forth in the no-fault regulations. Such regulations provide that insurers should utilize fair claims processes and refrain from demanding verification “unless there are good reasons to do so” (11 NYCRR 65-3.2 [a], [c]).

[*1]

Argued September 6, 2011; decided October 13, 2011

New York & Presbyt. Hosp. v Country-Wide Ins. Co., 71 AD3d 1009, reversed.

{**17 NY3d at 587} OPINION OF THE COURT

Jones, J.

The question before the Court is whether a health care services provider, as assignee of a person injured in a motor vehicle accident, can recover no-fault benefits by timely submitting the{**17 NY3d at 588} required proof of claim after the 30-day period for providing written notice of the accident has expired. We hold it cannot.

On July 19, 2008, Joaquin Benitez was injured in a traffic accident which took place in Manhattan, and treated at New York and Presbyterian Hospital (Presbyterian) from that date through July 26, 2008. On the date of Benitez’s discharge, he and Presbyterian executed an [*2]assignment of no-fault benefits form under which he assigned to Presbyterian “all rights[,] privileges and remedies to payment for health care services provided by [Presbyterian] to which [Benitez is] entitled under Article 51 (the No-Fault statute) of the Insurance Law.” Benitez and Presbyterian also executed a completed NYS Form NF-5 (i.e., a hospital facility form). Neither Benitez nor Presbyterian provided the required written notice of accident to his no-fault insurer, Country-Wide Insurance Company (Country-Wide), within 30 days of the accident as required by the New York insurance regulations (11 NYCRR 65-1.1).

On August 25, 2008, Presbyterian, as assignee of Benitez, billed Country-Wide (i.e., sought no-fault benefits) for the sum of $48,697.63. In billing Country-Wide, Presbyterian submitted a number of documents, including the required proof of claim (the NF-5 form). Country-Wide received the bill and other documents on August 28, 2008, 40 days after the accident. Country-Wide denied Presbyterian’s claim on the ground it had not received timely notice of the accident under 11 NYCRR 65-1.1 (d), which requires an “eligible insured person” to give written notice to the insurer “in no event more than 30 days after the date of the accident.”

Presbyterian brought this action against Country-Wide to compel payment of no-fault benefits in the amount of its bill, plus statutory interest and attorney’s fees, alleging it had provided timely notice and proof of claim under 11 NYCRR 65-1.1, which requires an insured person’s assignee to submit written proof of claim no later than 45 days after the date health care services are rendered. Presbyterian and Country-Wide each moved for summary judgment.

Supreme Court granted Presbyterian summary judgment, ruling that the hospital satisfied its notice obligation by timely submitting the proof of claim (Wyckoff Hgts. Med. Ctr. v Country Wide Ins. Co., 2009 NY Slip Op 33263[U] [2009]). Citing 11 NYCRR 65-3.3 (d), the Appellate Division affirmed (71 AD3d 1009 [2d Dept 2010]), stating, “[c]ontrary to the insurer’s contention, the hospital’s submission of a completed hospital facility {**17 NY3d at 589}form . . . within 45 days after services were rendered satisfied the written notice requirement set forth in 11 NYCRR 65-1.1″ (id. at 1010). This Court granted Country-Wide leave to appeal and we now reverse.

Country-Wide argues that the Appellate Division decision eviscerates the 30-day written notice of accident requirement and that the aforementioned regulations do not contain any language which provides that submission of a proof of claim for health care services within 45 days excuses the failure to give the threshold notice of accident within 30 days of the accident. In response, Presbyterian construes the stated no-fault regulations as exempting health care providers from the 30-day notice of accident requirement. In Presbyterian’s view, its filing of the hospital facility form within 45 days of the date services were rendered constitutes both “proof of claim” and timely “notice of accident.” For the reasons that follow, we agree with Country-Wide’s position.

The primary goals of New York’s no-fault automobile insurance system are “to ensure prompt compensation for losses incurred by accident victims without regard to fault or [*3]negligence, to reduce the burden on the courts and to provide substantial premium savings to New York motorists” (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 860 [2003]). In furtherance of these objectives, “the Superintendent of Insurance has adopted regulations implementing the No-Fault Law (Insurance Law art 51), including circumscribed time frames for claim procedures” (Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 317 [2007] [emphasis added]).

11 NYCRR 65-1.1 (d), the mandatory personal injury protection endorsement for motor vehicle liability insurance policies, provides:

“Conditions

“Action Against [Insurance] Company. No action shall lie against the Company unless, as a condition precedent thereto, there shall have been full compliance with the terms of this coverage.

“Notice. In the event of an accident, written notice setting forth details sufficient to identify the eligible injured person, along with reasonably obtainable information regarding the time, place and circumstances of the accident, shall be given by, or on{**17 NY3d at 590} behalf of, each eligible injured person, to the Company, or any of the Company’s authorized agents, as soon as reasonably practicable, but in no event more than 30 days after the date of the accident . . .

“Proof of Claim; Medical, Work Loss, and Other Necessary Expenses. In the case of a claim for health service expenses, the eligible injured person or that person’s assignee or representative [e.g., a health care services provider] shall submit written proof of claim to the Company, including full particulars of the nature and extent of the injuries and treatment received and contemplated, as soon as reasonably practicable but, in no event later than 45 days after the date services are rendered” (emphasis added).

In addition, 11 NYCRR 65-3.3 (d) states:

“The written notice required by . . . the mandatory and additional personal injury protection endorsement(s) shall be deemed to be satisfied by the insurer’s receipt of a completed prescribed application for motor vehicle no-fault benefits (NYS Form N-F 2) forwarded to the applicant pursuant to subdivision 65-3.4(b) of this subpart or by the insurer’s receipt of a completed hospital [*4]facility form (NYS Form N-F 5)” (emphasis added).

The “notice of accident” and “proof of claim” under 11 NYCRR 65-1.1 are independent conditions precedent to a no-fault insurer’s liability (see Hospital for Joint Diseases, 9 NY3d at 317 [“These regulations require an accident victim to submit a notice of claim to the insurer as soon as practicable and no later than 30 days after an accident. Next, the injured party or the assignee (typically a hospital . . .) must submit proof of claim for medical treatment no later than 45 days after services are rendered” (emphasis added and citations omitted)]). By ruling that the notice of accident condition was satisfied based on the plain language of 11 NYCRR 65-3.3 (d), the Appellate Division disregarded the separate and distinct nature and purpose of these requirements. Even more troubling, such a construction effectively reads the 30-day written notice of accident requirement out of the no-fault regulations. But nothing in 11 NYCRR 65-3.3 (d) explicitly dispenses with the 30-day notice of accident requirement. Rather, 11 NYCRR 65-3.3 (d) merely provides that a NF-5 form may constitute the written notice required under the notice of accident provision.{**17 NY3d at 591}

In other words, these regulations (read alone or in tandem) cannot be interpreted to mean that a hospital/assignee’s timely submission of a proof of claim for health services within 45 days of discharge of the injured person excuses the insured/assignor’s failure to give the threshold notice of accident within 30 days of the accident, or that health care service providers are exempt from the written 30-day notice of accident requirement. Neither 11 NYCRR 65-1.1 nor 11 NYCRR 65-3.3 (d) contains such language. That is, while 11 NYCRR 65-3.3 (d) allows a completed hospital facility form to satisfy the written notice of accident requirement, the regulation does not provide (or suggest) that a “proof of claim” in that form filed within 45 days of treatment satisfies the 30-day notice of accident requirement where, as here, the form was submitted to Country-Wide after the 30-day period has expired.

Although the Department of Insurance has not issued any interpretive statements or opinions regarding the subject regulations, our case law provides some guidance as to the importance of the “notice of accident” and “proof of claim” requirements to the no-fault regulatory scheme. In Serio, the Court explained that in 2001, the Superintendent of Insurance, in response to an alarming increase in insurance fraud over the preceding nine years, amended these regulations (see 100 NY2d at 861-863). Specifically, the notice of accident requirement was reduced from 90 days to 30 days, and the time to provide proof of claim was reduced from 180 days to 45 days (id. at 860, 862) in order to, among other things, prevent the fraud and abuse the Superintendent linked to the lengthy time frames (id. at 862)—for example, there were numerous cases where individuals were “exploiting the time lag between the alleged loss and the deadline for submitting proof of the loss, coupled with the reality that insurers are given only 30 [*5]days to review and investigate claims before paying them without risk of penalties for denying or delaying a claim” (id. at 861). Thus, it is clear that the Superintendent of Insurance—the official responsible for administering the Insurance Law and promulgating the insurance regulations—viewed both the “notice of accident” and “proof of claim” as integral requirements/time periods that further the goals of the no-fault system. Moreover, Presbyterian’s interpretation of 11 NYCRR 65-3.3 (d) would undercut the anti-fraud purpose of the reduced time periods, particularly in cases where treatment does not occur until months or years after the accident.{**17 NY3d at 592}

Based on the foregoing, the proper construction of the subject regulations is that an NF-5 form (or other form that can serve as proof of claim) may constitute timely notice of an accident, as permitted by 11 NYCRR 65-3.3 (d), only if such proof of claim is given within the 30-day period prescribed by 11 NYCRR 65-1.1. Any other construction is unwarranted and would undermine the importance of the 30-day time period to the no-fault system.

Presbyterian nevertheless argues that interpreting 11 NYCRR 65-3.3 (d) in Country-Wide’s favor “would severely impact the hospital’s ability to submit a timely bill” in cases where the insurer is not readily identifiable. But the Superintendent has addressed these concerns. The regulations allow late notices of accident if there is “written proof providing clear and reasonable justification for the failure to comply with such time limitation” (11 NYCRR 65-1.1 [d]).^[FN*] Indeed, the regulations specifically direct carriers to consider whether the injured person was a pedestrian or an occupant of a vehicle who may have difficulty identifying the proper carrier in assessing untimely notices of accident:

“The insurer shall establish standards for review of its determinations that applicants have provided late notice of claim or late proof of claim. In the case of notice of claim, such standards shall include, but not be limited to, appropriate consideration for pedestrians and non-related occupants of motor vehicles who may have difficulty ascertaining the identity of the insurer” (11 NYCRR 65-3.5 [l]).

Finally, as an assignee of all the rights, privileges and remedies to which Benitez was entitled under the No-Fault Law, Presbyterian stood in the shoes of Benitez and acquired no greater rights than he had (see Matter of International Ribbon Mills [Arjan Ribbons], 36 NY2d 121, 126 [1975] [Chief Judge Breitel wrote, “(i)t is elementary ancient law that an assignee never stands in any better position than his assignor”]). Here, because no written notice of accident was given, there was a failure to fully comply with the terms of the no-fault policy,{**17 NY3d at 593} which is a condition precedent to insurer liability. As a result, the assignment effectively became worthless (i.e., Benitez assigned nothing to Presbyterian)—you cannot assign your right to benefits if your right to those benefits has not been triggered, or if you had no right to those benefits in the first place.

For the foregoing reasons, the submission of the proof of claim within 45 days of the date health care services are rendered may not serve as timely written notice of accident after the 30-day period for providing such written notice has expired.

Accordingly, the order of the Appellate Division should be reversed, with costs, defendant’s motion for summary judgment granted and the complaint dismissed.

Chief Judge Lippman and Judges Ciparick, Graffeo, Read, Smith and Pigott concur.

Order reversed, etc.

Footnotes

Footnote *: See also 11 NYCRR 65-3.3 (e), which provides:

“When an insurer denies a claim based upon the failure to provide timely written notice of claim or timely submission of proof of claim by the applicant, such denial must advise the applicant that late notice will be excused where the applicant can provide reasonable justification of the failure to give timely notice.”

[*1]

Argued February 8, 2011; decided March 29, 2011

State Farm Mut. Auto. Ins. Co. v Langan, 55 AD3d 281, modified.

{**16 NY3d at 352} OPINION OF THE COURT

Chief Judge Lippman. [*2]

At issue in this appeal is whether the insured decedent, the victim of an intentional crime, was injured as the result of an accident within the meaning of the uninsured motorist endorsement and certain other provisions of the insured’s policy. Since the occurrence must be viewed from the insured’s perspective, we conclude that it was indeed an accident and that the insured is entitled to benefits under the policy provisions at issue.

Decedent, Neil Conrad Spicehandler, was struck by a vehicle at 7th Avenue and 32nd Street in Manhattan on February 12, 2002. He sustained a compound fracture of his left lower leg, requiring surgery, and died from complications shortly after the operation. Decedent was one of many who were injured when the driver, Ronald Popadich, intentionally drove his vehicle into pedestrians. Popadich later pleaded guilty to second degree murder and admitted that he intended to cause Spicehandler’s death.

Decedent was an insured under an automobile liability policy purchased by defendant Langan through plaintiff State Farm. As the administrator of decedent’s estate, Langan made a claim{**16 NY3d at 353} seeking to recover benefits under the policy’s uninsured/underinsured motorist (UM) endorsement, mandatory personal injury protection endorsement (PIP endorsement) and death, dismemberment and loss of sight endorsement (Coverage S).^[FN*] The policy’s UM endorsement provides that it

“will pay all sums that the insured or the insured’s legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by the insured, caused by an accident arising out of such uninsured motor vehicle’s ownership, maintenance or use”

State Farm commenced this declaratory judgment action seeking a declaration that it was not obligated to provide benefits in connection with decedent’s death. Defendant answered and counterclaimed, requesting a declaration that State Farm was required to provide coverage under the policy. Plaintiff’s motion and defendant’s cross motion for summary judgment were denied because the parties had not, at that point, provided the court with information regarding [*3]the outcome of the criminal action against Popadich, which the court deemed “essential” to determining whether decedent’s injuries were caused by an intentional act (2004 NY Slip Op 30243[U]). The Appellate Division upheld the portion of the Supreme Court order that denied summary judgment on the issue of whether the incident was covered by the policy, finding that there was insufficient proof to determine whether decedent had been the victim of an intentional crime, but that, if he had, the incident would not be covered (18 AD3d 860, 862 [2d Dept 2005]).

After Popadich was convicted of second degree murder, State Farm renewed its motion for summary judgment, again seeking{**16 NY3d at 354} a declaration that it was not required to provide benefits under the policy. Langan opposed the motion and cross-moved for summary judgment, urging that whether the incident was an accident within the meaning of the policy must be determined from the perspective of the insured. Supreme Court granted State Farm’s motion and denied Langan’s cross motion on the basis of Popadich’s conviction (2006 NY Slip Op 30400[U]).

On appeal, a majority of the Appellate Division modified to declare that State Farm was required to provide benefits under the mandatory PIP and Coverage S endorsements and, as so modified, affirmed (55 AD3d 281 [2d Dept 2008]). The Court determined that State Farm was not required to provide UM benefits because the purpose of statutorily required uninsured motorist coverage is to provide an individual with the same level of coverage he or she would be entitled to if injured in an accident with an insured motorist covered by an applicable policy. Since a standard liability policy would not have covered Popadich for his intentional criminal conduct, the Court found that Langan’s UM coverage was not applicable under the circumstances presented here. However, the Court determined that in other contexts it was appropriate to determine whether a particular event was an accident from the insured’s point of view, that the incident was clearly unexpected from decedent’s perspective and that, as a result, State Farm was required to provide coverage under the PIP and Coverage S endorsements.

Two Justices dissented in part and would have affirmed Supreme Court’s order declaring that State Farm was not required to provide coverage. The dissent agreed that Langan was not entitled to UM benefits under current law based on Popadich’s intentional conduct, but observed that there had been a recent national trend to allow for coverage in similar circumstances and that strong public policy considerations weighed in favor of coverage. The dissent would have denied PIP and Coverage S benefits based on the law of the case and, in any event, disagreed that the same term should be interpreted differently within the same policy. Both parties appeal pursuant to leave granted by the Appellate Division, which certified for our review the question of whether its order was properly made. We modify and answer the certified question in the negative.

This appeal turns on whether decedent’s injuries were caused by an accident [*4]within the meaning of the policy. Although the endorsements at issue do not define the term “accident,” we have previously held that it is not to be “given a narrow,{**16 NY3d at 355} technical definition,” but should be interpreted according to how it would be understood by the average person (Miller v Continental Ins. Co., 40 NY2d 675, 676 [1976]). We have determined that, for purposes of automobile insurance policies, the term “accident” means an event typically involving violence or the application of external force (see Michaels v City of Buffalo, 85 NY2d 754, 758 [1995]). In order to determine whether a particular event was ” ‘accidental, it is customary to look at the casualty from the point of view of the insured, to see whether or not . . . it was unexpected, unusual and unforeseen’ ” (Miller, 40 NY2d at 677 [citation omitted]). Although we have noted that the perspective of the injured victim should not be used to determine whether an accident has occurred, ” ‘[b]ecause an injury is always fortuitous to a non-consenting victim’ ” (Michaels, 85 NY2d at 759 [citation omitted]), here we have the situation where the victim is also the insured.

It is clear that, viewed from the insured’s perspective, the occurrence was an unexpected or unintended event—and therefore an “accident”—even though Popadich admittedly intended to strike decedent with the vehicle. The language of the policy also suggests that this type of situation would be covered as it was an accident caused by the use of a motor vehicle that did not have an applicable insurance policy. Significantly, Insurance Department regulations require that an automobile owner’s liability insurance policy contain a provision specifying “that assault and battery shall be deemed an accident unless committed by or at the direction of the insured” (11 NYCRR 60-1.1 [f]). Although the provisions at issue here do not involve liability coverage, the regulation is relevant to the understanding of the extent of coverage provided by the endorsements.

The argument against requiring coverage, advanced by State Farm and relied upon by the Appellate Division, is based on the general principle that mandatory uninsured motorist benefits are meant to provide coverage that is coextensive with, and not greater than, that afforded by a standard liability policy. They rely on our statement that the purpose of mandatory UM benefits is ” ‘to provide the insured with the same level of protection he or she would provide to others were the insured a tortfeasor in a bodily injury accident’ ” (Raffellini v State Farm Mut. Auto. Ins. Co., 9 NY3d 196, 204 [2007], quoting Matter of Prudential Prop. & Cas. Co. v Szeli, 83 NY2d 681, 687 [1994]).

In support of its position, State Farm relies on McCarthy v Motor Veh. Acc. Indem. Corp. (16 AD2d 35 [4th Dept 1962], affd{**16 NY3d at 356} 12 NY2d 922 [1963]), a case where the plaintiff victim was injured when the insured motorist committed an intentional assault against her using his vehicle. After the insurer denied coverage because the occurrence was not an [*5]accident within the meaning of the policy, plaintiff sought to recover under the policy’s MVAIC endorsement—a statutorily required endorsement intended to afford coverage to a person injured by an uninsured or unidentified motorist, equal to that available to one injured by a motorist covered by an applicable liability policy (see McCarthy, 16 AD2d at 38). MVAIC is funded by assessments levied against all of the insurance companies licensed to conduct business in the state (see McCarthy, 16 AD2d at 39). McCarthy held that since an intentional assault committed by an insured motorist was not an accident subject to coverage under the standard liability policy, such an occurrence would likewise be excluded from coverage under the MVAIC endorsement (see 16 AD2d at 43). The Court also determined that allowing recovery under MVAIC would be inconsistent with the purpose for which the special fund had been established (see McCarthy, 16 AD2d at 44).

This case differs from McCarthy in two important respects. First, UM coverage, although required by statute, is part of the insured’s own policy—a policy that the insured selected and for which he pays premiums. Benefits received through coverage under the UM endorsement do not come out of a state fund. Second, the insured is the victim in this case, not the tortfeasor, and the public policy against providing coverage for an insured’s criminal acts is not implicated.

We hold that, consistent with the reasonable expectation of the insured under the policy and the stated purpose of the UM endorsement (to provide coverage against damage caused by uninsured motorists), the intentional assault of an innocent insured is an accident within the meaning of his or her own policy. The occurrence at issue was clearly an accident from the insured’s point of view and Langan is entitled to benefits under the UM endorsement.

This result is also in keeping with the national trend toward allowing innocent insureds to recover uninsured motorist benefits under their own policies when they have been injured through the intentional conduct of another (see e.g. American Family Mut. Ins. Co. v Petersen, 679 NW2d 571 [Iowa 2004]; Shaw v City of Jersey City, 174 NJ 567, 811 A2d 404 [2002]; Wendell v State Farm Mut. Auto. Ins. Co., 293 Mont 140, 974{**16 NY3d at 357} P2d 623 [1999]). Although the above decisions are not binding on this Court, we are persuaded that the view that has been adopted by these jurisdictions is the better one.

For many of the same reasons, Langan is entitled to coverage under the PIP endorsement and Coverage S. The average insured’s understanding of the term “accident” is unlikely to vary from endorsement to endorsement within the same policy. The occurrence, from the insured’s perspective, was certainly unexpected and unforeseen and should be considered an accident subject to coverage. Contrary to State Farm’s argument, we perceive no danger that this result will frustrate efforts to fight fraud in the no-fault insurance system. Significantly, there is [*6]no allegation whatsoever of fraud in this case and it is patent that benefits should continue to be denied to those who intentionally cause their own injuries.

The argument that Langan is entitled to attorneys’ fees was not addressed by the courts below and should be remitted to Supreme Court for its determination in the first instance.

Accordingly, the order of the Appellate Division should be modified, without costs, by granting defendant judgment declaring in accordance with this opinion and remitting to Supreme Court for further proceedings in accordance with this opinion, and, as so modified, affirmed. The certified question should be answered in the negative.

Smith, J. (dissenting). I would affirm the order of the Appellate Division.

As a general matter, it is true that whether a particular event is an “accident” should be viewed from the point of view of the insured. The insured here was Spicehandler, the event was an accident from his point of view, and his estate was therefore properly allowed to recover under the so-called PIP and Coverage S endorsements.

But uninsured/underinsured motorists (UM) coverage is different. Its purpose is to protect an insured who is injured by a tortfeasor without liability insurance—a purpose accomplished by putting the insured in the position that he would have been in if the tortfeasor had been insured. This requires a determination of whether the tortfeasor could have made a claim under a hypothetical policy of liability insurance—and the tortfeasor should thus be treated as the “insured” for purposes of analysis. Since Popadich drove his car into Spicehandler on purpose, the event was not an accident from Popadich’s point of view;{**16 NY3d at 358} Popadich could not have obtained indemnification from a liability insurer; and Spicehandler’s estate should not be permitted to recover under the UM endorsement.

This is essentially what we held when we affirmed the Appellate Division’s decision in McCarthy v Motor Veh. Acc. Indem. Corp. (16 AD2d 35 [4th Dept 1962], affd 12 NY2d 922 [1963]). The majority tries to distinguish McCarthy on what it calls two grounds, which seem really to be one—that UM coverage is “part of the insured’s own policy” and that “the insured is the victim in this case, not the tortfeasor” (majority op at 356). The distinction will not withstand analysis. The purpose of UM coverage is the same as the purpose of the MVAIC endorsement at issue in McCarthy: “to afford coverage,” as the majority puts it, “to a person injured by an uninsured or unidentified motorist, equal to that available to one injured by a motorist covered by an applicable liability policy” (majority op at 356). The essential rationale for McCarthy is that the victim of an uninsured motorist should not be in a better position than the victim of an insured one. That rationale was sound in McCarthy, and is sound here. [*7]

I see no justification for departing from McCarthy. A more serious argument might be made—though it is not made here—for a more significant change in the law: modifying, in cases involving automobile liability policies required by statute, the general rule that liability insurance cannot cover intentional torts. As McCarthy mentions, a standard automobile liability policy provides coverage only for accidents, and thus would not cover “an assault and battery committed by the insured” (16 AD2d at 41; see also e.g. Matter of Travelers Indem. Co. v Richards-Campbell, 73 AD3d 1076 [2d Dept 2010]; Matter of Aetna Cas. & Sur. Co. v Perry, 220 AD2d 497 [2d Dept 1995]). This limitation seems to be derived from the long-established rule, based on public policy, that insurance may not indemnify a tortfeasor for intentional wrongdoing (Messersmith v American Fid. Co., 232 NY 161, 165 [1921]; Town of Massena v Healthcare Underwriters Mut. Ins. Co., 98 NY2d 435, 445 [2002]). Courts in some jurisdictions have made compulsory liability insurance an exception to this rule, reasoning that the purpose of liability insurance, to the extent that it is required by law, is to protect injured victims, not tortfeasors, and that victims should be protected no less against intentional than against negligent torts (e.g. Speros v Fricke, 98 P3d 28, 36-38 [Utah 2004]; Dotts v Taressa J.A., 182 W Va 586, 390 SE2d 568 [1990]; Wheeler v{**16 NY3d at 359} O’Connell, 297 Mass 549, 9 NE2d 544 [1937]). Whether such an exception is justified, and if so whether it should be created by judges or by legislators, are questions that we should not address until we have a case that presents them.

Judges Ciparick, Graffeo, Pigott and Jones concur with Chief Judge Lippman; Judge Smith dissents and votes to affirm in a separate opinion in which Judge Read concurs.

Order modified, etc.

Footnotes

Footnote *: This action solely concerns claims made under Langan’s own policy—not the policy of either the driver or the vehicle.

[*1]

Argued September 16, 2010; decided October 21, 2010

Matter of Falzone (New York Cent. Mut. Fire Ins. Co.), 64 AD3d 1149, affirmed.

{**15 NY3d at 532} OPINION OF THE COURT

Jones, J.

In this CPLR article 75 proceeding arising from respondent’s determination denying petitioner’s claim for supplementary uninsured/underinsured motorist (SUM) benefits, the primary issue before this Court is whether the SUM arbitrator exceeded the scope of his authority by not [*2]giving preclusive effect to a prior arbitration award involving the same parties and accident.

On May 15, 2004, petitioner was involved in a two-car collision. Subsequently, she filed a claim for no-fault benefits with respondent insurer, alleging she had injured her shoulder. When respondent denied petitioner’s no-fault claim on the ground that her shoulder injury was not related to the accident, petitioner challenged the denial in arbitration. Disagreeing with respondent’s denial, the no-fault arbitrator, in May 2008, ruled{**15 NY3d at 533} that respondent’s denial based on lack of relatedness was inappropriate and awarded petitioner $4,354.56 in no-fault benefits.

After petitioner settled her lawsuit against the driver of the other vehicle for that driver’s $25,000 policy limit, she sought SUM benefits in the amount of $75,000 from respondent insurer. Citing the prior denial of no-fault benefits as being unrelated to the accident, respondent denied the claim for SUM benefits. On February 28, 2008, during the pendency of the no-fault arbitration, petitioner sought to challenge the denial of SUM benefits in a separate arbitration proceeding.

At the hearing in the SUM arbitration, held about two months after the decision in the no-fault arbitration, respondent again argued that the injury was unrelated to the accident, while petitioner countered that the SUM arbitrator was bound by the prior determination of the no-fault arbitrator under the doctrine of collateral estoppel. After the hearing, in August 2008, the SUM arbitrator issued an award in favor of respondent denying SUM benefits. In a finding directly opposite that of the no-fault arbitrator, the SUM arbitrator concluded that petitioner’s injury was not caused by the accident, and also found that her recovery from the other driver was more than adequate compensation for any injuries sustained in the accident.

Thereafter, petitioner commenced this CPLR article 75 proceeding to set aside the SUM arbitration award in respondent’s favor. Petitioner argued that respondent was collaterally estopped from relitigating the causation issue. Respondent sought confirmation of the award.

Supreme Court vacated the SUM arbitration award and ordered that a new arbitration be scheduled before a different arbitrator. The court concluded that although it is within an arbitrator’s discretion to determine the preclusive effect of a prior arbitration award, here, there was nothing in the SUM arbitrator’s decision to indicate whether petitioner’s collateral estoppel argument was even considered.

By a 3-2 vote, the Appellate Division reversed Supreme Court’s order and confirmed the SUM arbitration award (64 AD3d 1149 [4th Dept 2009]). The majority concluded that (1) “[t]he fact that a prior arbitration award is inconsistent with a subsequent award” is not a ground, pursuant to CPLR 7511, for vacating an arbitration award, (2) it is within the arbitrator’s sole discretion to determine the preclusive effect of a prior award, and (3) “the SUM arbitrator [*3]was not required to state{**15 NY3d at 534} that he had considered” the collateral estoppel argument raised before him. (64 AD3d at 1150.) The dissenting Justices countered that the SUM arbitrator exceeded his power by disregarding the preclusive effect of the prior no-fault arbitration award, which involved the same parties and was based on the same facts. Petitioner appeals as of right pursuant to CPLR 5601 (a); we now affirm.

It is well settled that a court may vacate an arbitration award only if it violates a strong public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator’s power (see Matter of New York City Tr. Auth. v Transport Workers’ Union of Am., Local 100, AFL-CIO, 6 NY3d 332, 336 [2005]; Matter of United Fedn. of Teachers, Local 2, AFT, AFL-CIO v Board of Educ. of City School Dist. of City of N.Y., 1 NY3d 72, 79 [2003]; CPLR 7511 [b] [1] [iii]). Even where an arbitrator has made an error of law or fact, courts generally may not disturb the arbitrator’s decision (see Transport Workers’ Union of Am., Local 100, AFL-CIO, 6 NY3d at 336 [“(C)ourts are obligated to give deference to the decision of the arbitrator. This is true even if the arbitrator misapplied the substantive law in the area of the contract” (citations omitted)]). Here, petitioner’s claim—that the arbitrator erred in failing to apply collateral estoppel to preclude litigation of the causation issue in the SUM arbitration—falls squarely within the category of claims of legal error courts generally cannot review.

In this appeal, we are merely applying this State’s well-established rule that an arbitrator’s rulings, unlike a trial court’s, are largely unreviewable (see Board of Educ. of Patchogue-Medford Union Free School Dist. v Patchogue-Medford Congress of Teachers, 48 NY2d 812, 813 [1979] [this Court, addressing the doctrine of res judicata, held that if a grievance is within the scope of the arbitration agreement and would do no harm to the State’s public policy in favor of arbitration, further judicial inquiry into arbitrability is foreclosed and “any remaining questions, including whether a prior award constitutes a bar to the relief sought, are within the exclusive province of the arbitrator to resolve” (citations omitted)]; Matter of City School Dist. of City of Tonawanda v Tonawanda Educ. Assn., 63 NY2d 846, 848 [1984] [“The effect, if any, to be given to an earlier arbitration award in subsequent arbitration proceedings is a matter for determination in that forum”]; compare with Clemens v Apple, 65 NY2d 746 [1985], and Matter of American Ins. Co. [Messinger—Aetna Cas. & Sur. Co.], 43{**15 NY3d at 535} NY2d 184, 191 [1977] [holding that if an issue between identical parties is resolved in an arbitration proceeding, the determination as to that issue may be binding on subsequent court proceedings under the doctrine of collateral estoppel where the parties have had a full and fair opportunity to litigate the issue]). Thus, if a court makes an error and fails to properly apply collateral estoppel, the issue can be reviewed and corrected on appeal. By contrast, if an arbitrator erred in not applying collateral estoppel, the general limitation on judicial review of arbitral awards precludes a court from [*4]disturbing the decision unless the resulting arbitral award violates a strong public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator’s power.

Here, the prior (no-fault) arbitration award involved the same parties, the same accident, the same injuries, and resolution of the same issue (causation) as the subsequent (SUM) arbitration award. Respondent insurer, a party to the prior arbitration, lost on the causation issue. Petitioner, the prevailing party on that issue in the prior arbitration, reasonably argued that collateral estoppel should apply to bar relitigation of the causation issue in the subsequent SUM arbitration. The SUM arbitrator rejected petitioner’s argument, had the parties relitigate the causation issue and, contrary to the no-fault arbitrator’s determination, found in respondent insurer’s favor on the causation issue.

It is not for us to decide whether the SUM arbitrator erred in not applying collateral estoppel (i.e., not giving preclusive effect to the no-fault arbitrator’s determination on the issue of causation). Because the SUM arbitration award was not patently irrational or so egregious as to violate public policy, the instant SUM arbitration award (and whether the SUM arbitrator erred or exceeded his authority) is beyond this Court’s review powers.

Since the instant claim involves the doctrine of collateral estoppel, not res judicata, petitioner’s reliance on Appellate Division decisions barring subsequent arbitrations on res judicata grounds is misplaced.

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Pigott, J. (dissenting). I respectfully dissent. In my view, the SUM arbitrator exceeded his authority in disregarding the no-fault arbitrator’s finding on the issue of causation and substituting his own, when the identical parties had previously litigated the identical issue.{**15 NY3d at 536}

Insurance Law § 5106, titled “Fair claims settlement,” was designed for its titled purpose: to provide a forum where persons sustaining injuries in auto accidents could quickly adjudicate whether or not their no-fault carriers would pay their claims (see Roggio v Nationwide Mut. Ins. Co., 66 NY2d 260, 264 [1985]). Here, petitioner applied for no-fault benefits and the insurer denied those benefits because its physician concluded that the shoulder injury was not related to the accident. Petitioner sought arbitration of that decision, taking a significant risk that a negative outcome on the causation issue would preclude her from bringing a civil suit to [*5]recover against her tortfeasor and, subsequently, her SUM carrier, for her shoulder injury (see Clemens v Apple, 65 NY2d 746, 748-749 [1985]).

Petitioner submitted her own medical evidence to counter the insurer’s, and prevailed at the no-fault arbitration. The arbitrator concluded that petitioner’s shoulder injury was causally related to the accident and awarded her approximately $4,300. The insurer did not move to vacate or modify the award even though Insurance Law § 5106 (c) provides that “[a]n 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” (emphasis supplied).

Having lost at the no-fault arbitration and paying, in full, the sum awarded to petitioner for her shoulder injury, the insurer thereafter consented to petitioner’s settlement with the tortfeasor’s insurer for the face amount of the tortfeasor’s policy. However, the insurer again challenged causation relative to petitioner’s shoulder injury, this time during the SUM arbitration and over petitioner’s objection.

Apparently, what is sauce for the goose is no longer sauce for the gander. Had the arbitrator during the original no-fault arbitration found against the petitioner, any direct action against the tortfeasor would have been met with the defense of issue preclusion, with the tortfeasor relying on the no-fault arbitrator’s finding of no causation (see Clemens, 65 NY2d 746 [1985]). That, in turn, would have precluded petitioner from even bringing a SUM claim against her carrier, as it would have been impossible for her to succeed on such a claim without first exhausting the tortfeasor’s policy limits.

When a claim is initially denied, a no-fault claimant is faced with making the difficult choice: either (1) potentially losing at the no-fault arbitration and being precluded from bringing a{**15 NY3d at 537} civil suit, or (2) not seeking arbitration of the no-fault carrier’s denial of benefits so that the claimant can preserve his or her ability to bring a civil suit at a later date against the tortfeasor, thereby transferring the cost of the claimant’s medical care to his or her private insurance carrier, public insurance, or delaying payment.

These results, however, contradict the primary legislative purpose behind the no-fault law, namely, to ensure ” ‘that every auto accident victim will be compensated for substantially all of his economic loss promptly and without regard to fault,’ ” such that the insurer has nothing to lose and everything to gain from denying no-fault claims (Norman H. Dachs and Jonathan A. Dachs, Time to Reconsider ‘Clemens v. Apple’?, NYLJ, Nov. 14, 1995, at 3, col 1, quoting Rep of Joint Legislative Comm on Insurance Rates, Regulation and Recodification of the Insurance Law, 1973 NY Legis Doc No. 18, at 7; Norman H. Dachs and Jonathan A. Dachs, Collateral Estoppel and Res Judicata in Arbitration, NYLJ, Feb. 13, 1990, at 3, col 1). Simply put, under [*6]the majority holding there is a great deal of incentive for a no-fault carrier to deny claims because even if it loses at arbitration, it can revisit the issue in a later SUM proceeding.

In my view, petitioner should be permitted to rely on the no-fault arbitration causation findings in support of any subsequent arbitration involving the same issue against the same party, just as the tortfeasor and insurer would have been able to rely on that initial finding had petitioner been unsuccessful and instituted a civil suit. It cannot be reasonably argued that the insurer did not have a full and fair opportunity to litigate causation in the no-fault proceeding. After all, it submitted medical proof from its own physician after he conducted an examination that petitioner was contractually obligated to attend.

Moreover, the majority’s holding directly contradicts the dictates of Insurance Law § 5106 (c) that arbitration awards are binding unless vacated or modified by a master arbitrator because it allows an unsuccessful insurer to do an end run around that statute to the extent that it effectively nullifies the findings of the no-fault arbitrator. By accepting the SUM arbitrator’s “discretion” to disregard the findings of an arbitrator on an identical issue between the same parties, this Court grants the arbitrator more authority than a trial court, appellate court, or this Court, none of which are accorded the power to review the arbitrator’s rejection of petitioner’s issue preclusion argument.{**15 NY3d at 538}

All of the cases cited by the majority involve arbitrations arising from the invocation of arbitration provisions contained in either collective bargaining agreements or inter-company insurance arbitration agreements—parties of equal size and nature who together agree to submit to the resolution of their claims in a non-judicial forum. Petitioner, like so many motorists, is forced by a sophisticated insurer to choose between arbitration and engaging, at her own expense, in the costly litigation that is itself discouraged by the statute. Having done so, she finds herself in a hall of mirrors where winning in arbitration is only the beginning, not the end of her travail.

Finally, I note that the mere finding of a causal relation between the accident and petitioner’s shoulder injury at the no-fault arbitration stage would not have necessarily resulted in a finding that petitioner was entitled to recover damages for non-economic loss in the SUM arbitration. Petitioner would still be required to prove that her damages exceeded the amount of any policy of insurance that covered the original tortfeasor (see Raffellini v State Farm Mut. Auto. Ins. Co., 9 NY3d 196, 205 [2007]). Indeed, that was the issue before the SUM arbitrator in this case, yet he never reached the “serious injury” threshold issue, opting instead to revisit the previously-determined causation finding and reach a different conclusion. Based on the foregoing, it is my view that the SUM arbitrator exceeded his authority by not granting the no-fault arbitrator’s causation finding preclusive effect, and I would therefore reverse. [*7]

Chief Judge Lippman and Judges Ciparick, Graffeo, Read and Smith concur with Judge Jones; Judge Pigott dissents and votes to reverse in a separate opinion.

Order affirmed, with costs.

[*1]

Argued June 3, 2009; decided June 25, 2009

Matter of Central Mut. Ins. Co. (Bemiss), 54 AD3d 499, affirmed.

{**12 NY3d at 651} OPINION OF THE COURT

Read, J.

We are asked in this appeal whether consent-to-settle and subrogation-protection provisions in the supplementary uninsured/underinsured motorists (SUM) endorsement in an automobile liability insurance policy fall by the wayside once an insured has exhausted the available policy limits of a single tortfeasor in a multi-tortfeasor accident. We hold that these provisions remain in force and govern any settlements that the insured may subsequently make with other [*2]tortfeasors.

I.

During the morning rush hour on April 12, 2005, a chain-reaction automobile accident unspooled in the westbound lane of Interstate 90 in the City of Albany when the first car in the ensuing five-vehicle pileup stopped in traffic to avoid becoming entangled in a two-car collision. The vehicle driven by Beverly Bemiss (the third in line in the pileup) was struck twice in the rear—once by the vehicle driven by Kati Kowalczyk, the fourth in line; and again when the automobile driven by John Genski, the fifth in line, rear-ended Kowalczyk’s vehicle, pushing it into the back of Bemiss’s vehicle a second time. As a consequence of this accident, Bemiss seriously injured her right foot and ankle, which required surgery to repair the Achilles tendon.

Kowalczyk was insured for motor vehicle liability under a policy issued by Government Employees Insurance Company (GEICO), with bodily injury liability limits of $25,000; Genski was insured under a policy issued by Progressive Northeastern{**12 NY3d at 652} Insurance Company, also with bodily injury liability limits of $25,000. Central Mutual Insurance Company was Bemiss’s automobile liability insurance carrier. Her single limit policy provided $100,000 per accident for bodily injury and property damage, and a SUM endorsement for $100,000 per accident. The provisions in her SUM endorsement were prescribed by the New York State Department of Insurance (the Department) in Regulation 35-D (11 NYCRR subpart 60-2). And since both Kowalczyk’s and Genski’s bodily injury liability limits were less than Bemiss’s, her SUM coverage was activated or triggered as to each of them (see Matter of Prudential Prop. & Cas. Co. v Szeli, 83 NY2d 681, 685 n 1, 686-688 [1994]). SUM benefits are not payable, however, until the available policy limits of a single tortfeasor have been exhausted by payment or settlement (see S’Dao v National Grange Mut. Ins. Co., 87 NY2d 853, 854-855 [1995]).

By letter dated July 27, 2006, Bemiss’s attorney informed Central that GEICO, Kowalczyk’s insurance carrier, had tendered the policy limits of $25,000. He further advised that Bemiss intended to accept this offer and execute a release on or after August 27, 2006 unless Central advanced this amount to her in return for her cooperation in any lawsuit on her behalf. Central did not respond to the letter. Bemiss also at some point agreed to settle with Genski and his insurer, Progressive, for $2,500—i.e., less than the $25,000 policy limit. Bemiss never notified Central that she intended to settle with Genski, or solicited Central’s consent.

On December 21, 2006, Bemiss executed a single general release in favor of Kowalczyk, GEICO, Genski, and Progressive in consideration of the sum of $27,500—$25,000 from GEICO and $2,500 from Progressive. The release did not preserve Central’s subrogation rights with respect to any payment that might be made to Bemiss under her SUM coverage. Earlier in December (and therefore before exhausting Kowalczyk’s policy), Bemiss served Central with a request for arbitration, seeking $72,500 in SUM benefits.

On January 9, 2007, Central’s attorney wrote to Bemiss’s attorney to ask whether [*3]an action had been filed against Genski. On January 17, 2007, Bemiss’s attorney replied that his client had settled with Genski and his insurance carrier for $2,500, and that Bemiss was seeking $72,500 from Central under the SUM endorsement.{**12 NY3d at 653}

By letter dated January 26, 2007, Central disclaimed liability to Bemiss and denied coverage. Specifically referencing Condition 10 (without waiving any other ground that it might have for disclaimer), Central told Bemiss that she had violated policy conditions by “settl[ing] with both responsible parties [i.e., Kowalczyk and Genski] in this loss, and in signing the release, waived [Central’s] subrogation rights.” Condition 10 allows an insured to collect under SUM coverage in a multiple-tortfeasor accident before exhaustion by settlement or judgment. Specifically, 30 days after having given the insurer notice of a tortfeasor’s offer to settle for the maximum available policy limits, the insured may execute a general release with the tortfeasor and retain SUM eligibility unless, in the meantime, the insurer has agreed to advance the settlement amount in exchange for the insured’s cooperation with its subrogation claim.

In March 2007, Bemiss served Central with another request for arbitration, having withdrawn the December notice after arbitration was temporarily stayed at Central’s behest. She again sought $72,500 in SUM benefits. And Central again successfully moved by order to show cause, entered on March 26, 2007, to stay arbitration temporarily pending disposition of its application for an order permanently staying arbitration and vacating Bemiss’s notice.

Central maintained that Bemiss was not entitled to SUM benefits because she did not protect its subrogation rights, give prior written notice of her intent to settle, or obtain its written consent before settling with Genski/Progressive. In opposition, Bemiss argued that

“[t]he policy . . . reads that when there are multiple tortfeasors, and one of those tortfeasors offers the maximum coverage under its policy, then written notice must be given of the policy tender before execution of a release. The policy [does not contain] any language that requires the insured to provide written notice for a partial tender from a second tortfeasor.”

In May 2007, Supreme Court granted Central’s application and permanently stayed arbitration, reasoning that, under the terms of the SUM endorsement, Central “expressly require[d] that it retain the right to subrogate regardless of the exact nature of the settlement.” Thus, “[e]ven if the Court were to accept [Bemiss’s] argument that once [she] settled for the entire{**12 NY3d at 654} amount of coverage with [GEICO], [she] could settle with Progressive without notice and consent of [Central], this argument does nothing to remedy the fact that [Bemiss] failed to preserve Central’s right to subrogate.” Bemiss appealed.

The Appellate Division, with one Justice dissenting, affirmed. As an initial matter—and contrary to Supreme Court’s assessment—both the majority and the dissenting Justice concluded that Condition 10 in the SUM endorsement “permitted [Bemiss] to settle with the first [*4]tortfeasor [Kowalczyk] without preserving [Central’s] subrogation rights” with respect to Kowalczyk (Matter of Central Mut. Ins. Co. [Bemiss], 54 AD3d 499, 500 [3d Dept 2008]). The majority, however, rejected Bemiss’s additional claim that once she qualified for SUM payments by exhausting Kowalczyk’s policy, she was free to settle with Genski without obtaining Central’s prior written consent or safeguarding its subrogation rights. The dissent disagreed, and we granted Bemiss permission to appeal (11 NY3d 711 [2008]). We now affirm.

II.

To decide this appeal, we must examine the interplay of the consent-to-settle (Condition 10), exhaustion (Condition 9), and subrogation-protection (Condition 13) provisions in the standard SUM endorsement prescribed by Regulation 35-D, which the Department designed to “reduce confusion regarding [SUM] coverage, make it easier to collect benefits and, when disputes arise, make it simpler to resolve those disputes” (NY Reg, Apr. 22, 1992, at 21). To put these provisions in perspective, a bit of history is in order.

Insurance Law § 3420 (f) (2) (A) provides that “[a]s a condition precedent to the obligation of the insurer to pay under the [SUM] insurance coverage, the limits of liability of all bodily injury liability bonds or insurance policies applicable at the time of the accident shall be exhausted by payment of judgments or settlements.” And in S’Dao, we concluded that “the exhaustion requirement of section 3420 (f) (2) relates back to the statute’s reference to ‘another motor vehicle’ and indicates that the proper focus is on the underinsured status of each individual tortfeasor” (87 NY2d at 854). As a result, SUM benefits are payable in a multiple-tortfeasor accident once the insured exhausts the bodily injury liability limits applicable to any single tortfeasor. Our decision in S’Dao reversed the Appellate Division, which had interpreted the statute to require a SUM{**12 NY3d at 655} claimant to exhaust the bodily injury liability limits of the policies held by all tortfeasors—i.e., to exhaust the aggregate limits of liability of all applicable policies. Further, in Weinberg v Transamerica Ins. Co. (62 NY2d 379, 381-382 [1984]), we held that in settling personal injury claims arising out of a motor vehicle accident,

“an insured will be held to have prejudiced the subrogation rights of his insurer unless he establishes by express provision in the release . . . or by necessary implication arising from the circumstances of the execution of the release that the settling parties reserved the rights of the insurer against the third-party tort-feasor or otherwise limited the extent of their settlement to achieve that result.”

As a corollary, an insured who settles with a tortfeasor without his carrier’s written consent forfeits SUM benefits (see State Farm Mut. Auto. Ins. Co. v Taglianetti, 122 AD2d 40 [2d Dept 1986]).

These principles created what commentators referred to as a “Catch-22” for the SUM claimant (see e.g. Dachs and Dachs, Insurance and No-Fault Law, The Underinsured Motorist, NYLJ, Dec. 11, 1990, at [*5]3, col 1). That is, if the insured’s carrier withheld its consent to an offer of a tortfeasor’s full available policy limits in exchange for a general release (which was naturally always demanded), the insured faced unpalatable options: either refuse the offer and litigate the case to judgment in order to exhaust the tortfeasor’s policy and become eligible to receive SUM benefits, or accept the offer and risk losing SUM coverage on account of having prejudiced the carrier’s subrogation rights. The Department set out to eliminate this dilemma when it formulated Regulation 35-D.

To this end, Regulation 35-D, as initially drafted by the Department, mandated the following in the standard SUM endorsement as Conditions 7 and 8:

“7. Exhaustion Required: Except as provided in Condition 8, we will pay under this SUM coverage only after the limits of liability have been used up under all motor vehicle bodily injury liability insurance policies or bonds applicable at the time of the accident in regard to a person that may be legally liable for the bodily injury sustained by the insured.{**12 NY3d at 656}

“8. Release or Advance: In accidents involving the insured and one or more negligent parties, if such insured settles with all such parties for the aggregate limits of the liability coverage of such parties, release may be executed with such parties after thirty calendar days actual written notice to us, unless within this time period we agree to advance such settlement amounts to the insured in return for the cooperation of the insured in our lawsuit on behalf of the insured.

“We shall have a right to the proceeds of any such lawsuit equal to the amount advanced to the insured and any additional amounts paid under this SUM coverage. Any excess above those amounts shall be paid to the insured.

“An insured shall not otherwise settle with any negligent party, without our written consent, such that our rights would be impaired” (see Dachs and Dachs, The Undersinsured Motorist, NYLJ, Dec. 11, 1990, at 3, col 1 [discussing development of Department’s proposed Regulation 35-D; Dachs and Dachs, Insurance and No-Fault Law, SUM Regulation Redux, NYLJ, June 9, 1992, at 3, col 1 [comparing text of proposed and final Regulation 35-D]).

Notice of proposed Regulation 35-D was published in the State Register on September 11, 1991.

In response to comments and criticism, Regulation 35-D was subsequently [*6]amended and another notice was published in the State Register on April 22, 1992.^[FN*] In the amended version, Conditions 7 and 8 of Regulation 35-D were renumbered Conditions 9 and 10, and provided respectively as follows:

“9. Exhaustion Required: Except as provided in Condition 10, we will pay under this SUM coverage only after the limits of liability have been used up under all motor vehicle bodily injury liability{**12 NY3d at 657} insurance policies or bonds applicable at the time of the accident in regard to any one person who may be legally liable for the bodily injury sustained by the insured.

“10. Release or Advance: In accidents involving the insured and one or more negligent parties, if such insured settles with any such party for the available limit of the motor vehicle bodily injury liability coverage of such party, release may be executed with such party after thirty calendar days actual written notice to us, unless within this time period we agree to advance such settlement amounts to the insured in return for the cooperation of the insured in our lawsuit on behalf of the insured.

“We shall have a right to the proceeds of any such lawsuit equal to the amount advanced to the insured and any additional amounts paid under this SUM coverage. Any excess above those amounts shall be paid to the insured.

“An insured shall not otherwise settle with any negligent party, without our written consent, such that our rights would be impaired” (11 NYCRR 60-2.3 [f]).

By changing the reference in Condition 9 (former proposed Condition 7) from “a person that” to “any one person who,” eliminating the reference in Condition 10 (former proposed Condition 8) to “aggregate limits” and substituting the singular “party” for the plural “parties,” the Department unambiguously applied the exhaustion requirement in section 3420 (f) to any single tortfeasor, not to all potential tortfeasors. This is exactly how we subsequently [*7]interpreted the statute in S’Dao.

Urging us to read Conditions 9 and 10 together, Bemiss contends that “where multiple tortfeasors are involved and the insured has permissibly settled with one tortfeasor for his/her policy limits, . . . the insure[r] has no right under Regulation 35-D to be notified of and withhold consent to a settlement with another tortfeasor for less than his/her policy limit” even though Condition 10 mandates that “[a]n insured shall not otherwise settle with any negligent party, without our written consent, such that our rights would be impaired.” In her view, this restriction “is intended to apply to an insured seeking . . . to settle for the policy limits of [the first] tortfeasor . . . The{**12 NY3d at 658} goal is to allow the settlement to be consummated while giving the insurer the opportunity to protect its subrogation right”—i.e., to remedy the “Catch-22.” Bemiss argues that to read Condition 10 as governing an insured’s settlement with a second tortfeasor would “take away” what Condition 9 and our decision in S’Dao give—i.e., the rule that SUM benefits become payable in a multiple-tortfeasor accident after one tortfeasor’s policy has been exhausted.

As already noted, an insured generally may not settle with a tortfeasor without the SUM insurer’s written consent, and may not prejudice the SUM insurer’s subrogation rights. As to the latter point, Condition 13 of the SUM endorsement specifically states as follows:

“13. Subrogation: If we make a payment under this SUM coverage, we have the right to recover the amount of this payment from any person legally responsible for the bodily injury or loss of the person to whom, or for whose benefit, such payment was made to the extent of the payment. The insured or any person acting on behalf of the insured must do whatever is necessary to transfer this right of recovery to us. Except as permitted by Condition 10, such person shall do nothing to prejudice this right” (11 NYCRR 60-2.3 [f] [emphasis added]).

The final sentence of Condition 10—the crux of Bemiss’s argument—specifies that the insured “shall not otherwise settle with any negligent party, without [the SUM carrier’s] written consent, such that [the SUM carrier’s] rights would be impaired” (emphasis added). Looking at both this language and the structure of Condition 10, “otherwise” refers back to the settlement scenario delineated in the first sentence—i.e., an insured’s 30 days’ written notice to the insurer of a tortfeasor’s offer to settle for the maximum available policy limits. And while Bemiss contends that “any negligent party” refers only to the first tortfeasor whose policy is exhausted so as to make SUM benefits payable, this is not readily apparent from the words used or the regulatory history. In the original version of Condition 10 (former Condition 8), “any negligent party” clearly referred to all the tortfeasors in a multiple-tortfeasor accident. When the Department revised the SUM endorsement to make the exhaustion requirement applicable to any single tortfeasor rather than the aggregate limits of the liability coverage of all tortfeasors, it [*8]retained in new Condition 10 the stipulation that{**12 NY3d at 659} the insured could not “otherwise settle with any negligent party” (emphasis added). Bemiss, in effect, asks us to read this provision to mean “otherwise settle with the first party to tender the available limit of his/her motor vehicle bodily injury liability coverage.” Even if Bemiss’s interpretation of “any negligent party” were correct, there is nothing in the SUM endorsement to suggest that the subrogation-protection provisions in Condition 13 become inoperative once an insured has exhausted a single tortfeasor’s policy limits in a multiple-tortfeasor accident.

In short, Condition 10 delineates the sole situation in which an insured may settle with any tortfeasor in exchange for a general release, thus prejudicing the insurer’s subrogation rights, without the carrier’s written consent. Here, Bemiss violated Condition 10 when she settled with Genski for less than the maximum available policy limits without Central’s written consent, such that its subrogation rights were impaired. Moreover, this result is not inconsistent with our decision in S’Dao or Condition 9 of the SUM endorsement. In this case, Bemiss settled with Kowalczyk in compliance with Condition 10, thereby also fulfilling the exhaustion requirement in Condition 9. At that point, she was entitled to make a claim for $75,000 under her SUM coverage and, if Central disagreed, to proceed to arbitration. That is, she did not have to pursue a claim against Genski in order to become eligible to collect up to the remaining limits of her SUM policy. But once having chosen to resolve her claim against Genski, she was not free under the SUM endorsement to compromise Central’s subrogation rights unilaterally.

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Chief Judge Lippman and Judges Ciparick, Graffeo, Smith, Pigott and Jones concur.

Order affirmed, with costs.

Footnotes

Footnote *: Trade associations and insurers brought a CPLR article 78 proceeding to challenge Regulation 35-D, which resulted in a stay of enforcement and a delay in implementation (see Matter of National Assn. of Ind. Insurers v Curiale, 190 AD2d 597 [1st Dept 1993], lv denied 81 NY2d 711 [1993]; see also Dachs and Dachs, Insurance and No-Fault Law, The Latest on Regulation 35-D, NYLJ, Nov. 10, 1992, at 3, col 1; Dachs and Dachs, Insurance and No-Fault Law, Regulation 35-D: A Reality at Last, NYLJ, Sept. 14, 1993, at 3, col 1).

[*1]

Argued February 11, 2009; decided April 2, 2009

LMK Psychological Servs., P.C. v State Farm Mut. Auto. Ins. Co., 46 AD3d 1290, reversed.

{**12 NY3d at 221} OPINION OF THE COURT

Pigott, J.

Plaintiffs, two medical providers that treated various automobile accident victims insured by defendant State Farm Mutual Automobile Insurance Company, commenced this action against State Farm after it denied no-fault insurance benefit claims assigned to plaintiffs by the insureds. Plaintiffs asserted one cause of action for each insured treated, alleging that State Farm failed to pay or deny multiple bills within the requisite 30 days. [*2]

Plaintiffs were granted summary judgment awarding them, among other things, attorneys’ fees and interest. As relevant to this appeal, attorneys’ fees were awarded “on each claim within each cause of action”; in other words, attorneys’ fees were calculated on each bill submitted for each insured. This amount differed substantially from that proposed by State Farm, which sought a calculation of attorneys’ fees on a per insured basis.

In addition, Supreme Court awarded plaintiffs interest at the statutory rate of 2% per month, without applying the tolling provision set forth in the Insurance Department regulations, which provide for the suspension of interest 30 days after denial of payment until plaintiffs commence an action seeking payment.

On appeal, the Appellate Division rejected State Farm’s contention that Supreme Court failed to properly apply the tolling provision in awarding interest to plaintiffs (46 AD3d 1290 [2007]). The court held that because State Farm did not issue a proper and timely denial to plaintiffs’ no-fault claims, it was not entitled to the benefit of the tolling provision.

As it pertained to attorneys’ fees, the court held that Supreme Court properly awarded fees on a per bill basis rather than a per insured basis. The court expressly rejected an opinion letter of the Superintendent of Insurance, finding it in conflict with the express language of Insurance Law § 5106, as well as case law. This Court granted defendant leave to appeal (10 NY3d 717 [2008]) and we now reverse.

“New York’s no-fault automobile insurance system is designed ‘to ensure prompt compensation for losses incurred by accident victims without regard to fault or negligence, to reduce the burden on the courts and to provide substantial premium savings to New York motorists’ ” (Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 317 [2007] [citation{**12 NY3d at 222} omitted]). We recently reiterated that the no-fault scheme’s core objective is “to provide a tightly timed process of claim, disputation and payment” (id. at 319, quoting Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 281 [1997]). In furtherance of this objective, an insurer’s failure to pay or deny a claim within the requisite time period carries significant consequences, including the payment of attorneys’ fees and interest.

Insurance Law § 5106 (a) provides that “[if] a valid claim or portion was overdue, the claimant shall . . . be entitled to recover his attorney’s reasonable fee, for services necessarily performed in connection with securing payment of the overdue claim . . . .” Pursuant to the authority delegated to him by section 5106 (a), the Superintendent of Insurance promulgated regulation 11 NYCRR 65-4.6 establishing a minimum attorneys’ fee and further providing that the “attorney’s fee shall be limited as follows: 20 percent of the amount of first-party benefits, plus interest thereon, awarded by the . . . court, subject to a maximum fee of $850” (11 NYCRR 65-4.6 [e]).

On October 8, 2003, the Superintendent issued an opinion letter interpreting that regulation and stating that the minimum amount of attorneys’ fees awarded to an assignee health [*3]care provider pursuant to Insurance Law § 5106 is

“based upon the aggregate amount of payment required to be reimbursed based upon the amount awarded for each bill which had been submitted and denied. The minimum attorney fee . . . is not due and owing for each bill submitted as part of the total amount of the disputed claim sought in the court action” (Ops Gen Counsel NY Ins Dept No. 03-10-04 [Oct. 2003]).

In referring to the regulations, specifically 11 NYCRR 65-4.6 (e), the Superintendent stated:

“[That provision] makes it clear that the amount of attorney’s fees awarded will be based upon 20% of the total amount of first party benefits awarded. That total amount is derived from the total amount of individual bills disputed in either a court action or arbitration, regardless of whether one bill or multiple bills are presented as part of a total claim for benefits, based upon the health services rendered by a provider to the same eligible insured” (id.).{**12 NY3d at 223}

We have long held that the Superintendent’s “interpretation, if not irrational or unreasonable, will be upheld in deference to his special competence and expertise with respect to the insurance industry, unless it runs counter to the clear wording of a statutory provision” (Matter of New York Pub. Interest Research Group v New York State Dept. of Ins., 66 NY2d 444, 448 [1985]). The responsibility for administering the Insurance Law and, in particular, fair claims settlement under the No-Fault Law rests with the Superintendent (see Insurance Law §§ 301, 5106 [a]). For purposes of calculating attorneys’ fees, the Superintendent has interpreted a claim to be the total medical expenses claimed in a cause of action pertaining to a single insured, and not—as the courts below held—each separate medical bill submitted by the provider. Because this interpretation is neither irrational, unreasonable, nor counter to the clear wording of the statute, it is entitled to deference. Thus, this Court accepts the Insurance Department’s interpretation of its own regulation and, upon remittitur, directs Supreme Court to calculate attorneys’ fees based on the aggregate of all bills for each insured.

State Farm next contends that the Appellate Division erred in finding that an insurance company that fails to issue a proper and timely denial is not entitled to the benefit of the tolling provision. We agree.

Pursuant to Insurance Law § 5106 (a), interest accrues on overdue no-fault insurance claims at a rate of 2% per month. A claim is overdue when it is not paid within 30 days after a proper demand is made for its payment (Insurance Law § 5106 [a]; 11 NYCRR 65.15 [g]). The Superintendent’s regulation tolls the accumulation of interest if the claimant “does not request arbitration or institute a lawsuit within 30 days after the receipt of a denial of claim form or payment of benefits calculated pursuant to Insurance Department regulations” (11 NYCRR 65-3.9 [c]). [*4]

The Superintendent has interpreted this provision to mandate that the accrual of interest is tolled, regardless of whether the particular denial at issue was timely. That interpretation is similarly entitled to deference given that it is “not irrational or unreasonable” (Matter of Council of City of N.Y. v Public Serv. Commn. of State of N.Y., 99 NY2d 64, 74 [2002]). Indeed, it is consistent with section 5106, entitled “Fair claims settlement,” the purpose of which is to encourage claimants to swiftly seek to resolve any dispute concerning their entitlement to no-fault benefits. Once a denial is issued, even if an untimely one, a{**12 NY3d at 224} claimant should still be encouraged to act to resolve the dispute quickly. Supreme Court is therefore directed to calculate appropriate interest on each claim, taking into consideration the tolling provision of section 5106 (a) as interpreted by the Superintendent of Insurance.

Accordingly, the order of the Appellate Division, insofar as appealed from, should be reversed, with costs, and the matter remitted to Supreme Court for further proceedings in accordance with this opinion.

Judges Ciparick, Graffeo, Read, Smith and Jones concur; Chief Judge Lippman taking no part.

Order, insofar as appealed from, reversed, etc.