Effective December 1, 1999, the Insurance Department contracted with the American
Arbitration Association (AAA) to handle day-to-day responsibility for the conciliation
function of the No-Fault arbitration system. One of the goals of this transfer was to
improve the efficiency of the process and enable the Department to improve its oversight
of the No-Fault reparations system.
Circular Letter No. 30 of
1999, which advised insurers and self-insurers of the transfer of the conciliation
function, also directed each self-insurer and insurer to designate, for each No-Fault
claims office, a responsible staff member who the AAA could contact to attempt immediate
resolution of disputes. However, it has been the AAA’s experience that its
conciliators have often been unable to contact knowledgeable claims personnel or that
insurers have not designated responsible supervisory personnel to oversee whether their
staff has expended the effort needed to review the merits of the disputes in conciliation.
Furthermore, too many disputes have proceeded to the arbitration stage without any
meaningful communication occurring between the parties until the dates of the arbitration
hearings.
The Insurance Department has engaged in a
comprehensive review of the No-Fault arbitration process. Currently, the No-Fault
arbitration inventory of pending cases has been caused by a dramatic increase in the
number of filings by health care providers. The Department is committed to significantly
reducing the arbitration case inventory and the resulting delays in the scheduling of
hearings.
In furtherance of this goal the Department is
proceeding with the following initiatives:
- The appointment of an additional 40 to 50 new No-Fault arbitrators;
- Improved efficiency in the scheduling of arbitration hearings by
batching cases that involve the same applicant and the same insurer and linking cases that
involve claims arising out of the same accident;
- Amendment to Regulation 68 (11 NYCRR 65) to require the submission of
documents during the conciliation phase of the arbitration process in order to provide
earlier disclosure of the positions of the parties;
- Amendment to Regulation 68 (11 NYCRR 65) in order to expedite the
scheduling of hearings for those who request arbitration promptly after a claim is denied
or becomes overdue;
- Amendment to Regulation 68 (11 NYCRR 65) to permit arbitrators to
impose the costs of administration upon an applicant if the arbitrator concludes that the
applicant has filed an arbitration that was frivolous or totally without merit; and
- Amendment to Regulation 68 (11 NYCRR 65) to permit insurers to
negotiate attorneys’ fees, subject to specified limitations, in order to resolve
disputed claims prior to the transmittal of disputes to arbitration.
The 25th Amendment to Regulation
68 (11 NYCRR 65) is attached.
The Department recognizes and is addressing
abuses of the No-Fault system by some claimant health care providers and their attorneys.
The Department has also noted that many insurers frustrate the purpose of the streamlined
No-Fault system by making little effort to resolve claims at the conciliation phase of the
arbitration process and then agreeing to consent awards after the case is transmitted to
arbitration. Such behavior impedes the efficiency of the no-fault system and also
increases administrative and defense costs of insurers. More than 2/3 of the cases that
are scheduled for hearings before arbitrators result in either consent awards or
withdrawal of the arbitration request.
The improvement of the arbitration process will
require a substantial commitment of resources for many insurers. Several insurers have
thousands of cases pending in the No-Fault arbitration system. To address this caseload
effectively, insurers must have as their goals:
- Expedient response and effective communication with the AAA during
the conciliation process, to 100% of the cases that have been and will continue to be
filed with the AAA’s Conciliation Center;
- The review of all pending cases that have been transmitted to
arbitration with the goal of resolving those that should not require an arbitration
hearing; and
- The presentation of an effective defense in those cases that require
an arbitration proceeding.
In order to improve communication between
insurers, the AAA and the Department, each insurer and self-insurer is required to submit
an action plan that will detail the manner in which it will respond to its pending
caseload in both conciliation and arbitration. That action plan must designate a single
individual who will be responsible for coordination of the insurer or self-insurer’s
No-Fault arbitration program. This individual will be responsible for addressing issues
that may arise with either the AAA or the Department. The plan must include the measures
that will be taken to assure adequate response to conciliation efforts and to arbitration
proceedings, including the measures that are in place to assure that the goals, noted
above, will be attained.
The action plan must be submitted in writing no later than January 21, 2002 to Holford
Marshall, Senior Examiner, Property Bureau (2nd Floor), New York State
Insurance Department, 25 Beaver Street, New York, NY 10004. Any questions regarding this
Circular Letter can be directed to Mr. Marshall at this address or by telephone at
212-480-5660.
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