The Office of General Counsel issued the following informal opinion on December 24, 2002, representing the position of the New York State Insurance Department.
Re: Priority of Payments in a No-Fault Claim.
Is a New York No-Fault insurer which has been placed on verbal notice that a $50,000 in-patient hospital expense is being incurred by its No-Fault claimant, but for which no bill has yet been presented to the insurer, obligated to pay the $50,000 bill when the bill for such services is eventually submitted to it but by which time the insurer has already been presented with and has paid a substantial number of other claims for other first party benefits for elements of basic economic loss to the No-Fault claimant?
Pursuant to the No-Fault Regulation, N.Y. Comp. Codes R. & Regs. tit. 11 § 65.15(n), the insurer is not obligated as a result of verbal notice of an anticipated claim to set aside $50,000 of No-Fault benefits to be used to pay the hospital expenses in anticipation that such claim may later be made to the insurer. Under these circumstances, should a hospital expense claim later be made to the insurer at a time prior to the exhaustion of the policy limits, the hospital expense bill would have to be paid by the insurer, but only up to the amount of No-Fault coverage that is then remaining from the insurance policy.
A No-Fault claimant initially provided the insurer with presumably timely notice of his or her No-Fault accident. Thereafter, the insurer was given verbal notice that the claimant is accruing a large in-patient hospital bill of $50,000, but no bill for hospital services is submitted to the insurer at the time verbal notice is given. Before any of this hospital bill is presented to the insurer for payment, the insurer is presented with written claims for various other expenses for elements of basic economic loss, claims which the insurer pays promptly in the order in which the services (or loss of income) have been incurred.
The inquirer wishes to know whether or not the No-Fault insurer, under such circumstances as you describe, is under a duty to pay a $50,000 in-patient hospital bill that has not been submitted to it as a claim, but of which it has previously been verbally informed would be submitted in the future, where the insurer has been presented with and has paid a substantial number of other claims for other covered expenses that were rendered to the No-Fault claimant. For purposes of this response, we will assume that the policy in question provides basic New York No-Fault insurance personal injury protection coverage in the amount of $50,000 for basic economic loss.
N.Y. Ins. Law § 5106 (McKinney Supp. 2003) of the New York No-Fault Law governs fair claims settlement. Subdivision (a) addresses the priority of payments, specifying that payments of first party benefits (and additional first party benefits) " shall be made as the loss is incurred. Such benefits are overdue if not paid within thirty days after the claimant supplies proof of the fact and amount of loss sustained ." Thus, the statute requires insurers to pay bills as each expense is incurred, when proof of claim is submitted, within 30 days. Under the New York No-Fault Law, the insurer is required to promptly pay the claimant or his/her assignee for covered expenses as claims for those expenses are submitted to it. Under the No-Fault Law, claims for elements of basic economic loss are payable in the order in which the services (or loss of income) are incurred.
The No-Fault Regulation, N.Y. Comp. Codes R. & Regs. tit. 11 § 65.15(n) (Regulation 68), contains the rule governing the priority of payments for elements of basic economic loss under No-Fault. It provides, as follows:
(n) Computation of basic economic loss. When claims aggregate to more than $50,000, payments for basic economic loss shall be made to the applicant and/or assignee in the order in which each service was rendered or each expense was incurred, provided claims therefor were made to the insurer prior to the exhaustion of the $50,000. If the insurer pays the $50,000 before receiving claims for services rendered prior in time to those which were paid, the insurer will not be liable to pay such late claims. If the insurer receives claims of a number of providers of services, at the same time, the payments shall be made in the order of rendition of services.
A claimant may not indicate to the No-Fault insurer which particular bills for elements of basic economic loss are to be paid by the insurer, or how benefits are to be allocated. The claimant in this instance, by giving verbal notice to the insurer that a substantial hospital bill would be incurred before the claimant presented the insurer with a bill for such health services, does not constitute the making of a claim to the insurer. The insurer could not, based upon receipt of verbal notice of hospital expenses being incurred by a claimant, set aside part of the $50,000 of coverage for basic economic loss for the hospital expenses that are anticipated but for which no claim has as yet been made to it. Instead, under these circumstances, the insurer is obligated to pay No-Fault claims as they are made to it by, or on behalf of, the No-Fault claimant. It must pay those claims in the order in which each service was rendered or each expense was incurred. If the entire $50,000 of coverage for elements of basic economic loss is exhausted before the claim for hospital expense is made to it as a claim for payment, the insurer would not be responsible for paying the bill. If, however, when the hospital expense bill is submitted the $50,000 in coverage has not yet been exhausted, the hospital expense should be paid by the insurer to the extent of the remaining coverage.
For further information you may contact Associate Attorney Barbara Kluger at the New York City Office.