|George E. Pataki
Gregory V. Serio
The Office of General Counsel issued the following opinion on February 26, 2003, representing the position of the New York State Insurance Department.
Re: Attorneys Fees Reimbursable under No-Fault
Where a No-Fault insurance claim has been denied by the insurer and the disputed claim was the subject of a court action and ended with a settlement prior to trial, what amount of the attorneys fee is the insurer required to pay for legal fees for services provided by the health providers attorney?
A health service provider (assignee) who files a No-Fault claim that was denied by the insurer before it became overdue and which claim dispute was brought before a court of law for resolution that was settled prior to trial, is entitled to reimbursement for an attorneys fee in the amount of 20% of the amount of first-party benefits, plus interest thereon, subject to a maximum fee of $850 under N.Y. Comp. Codes R. & Regs. tit. 11, § 65-4.6(e) (2002) (Regulation 68-D). The attorneys fee limitation contained in subdivision (e) is applicable to the instant circumstance, where an action in a court of law was commenced, as is specified in subdivision (g) of § 65-4.6 of the Regulation.
ABC Insurance Company ("ABC") has received an invoice from a health services providers attorney that includes (1) the providers fees for the health services provided to the No-Fault claimant; and (2) an additional 20% of the providers fee, for reimbursement of legal fees, which constitutes a request for compensation for the attorneys legal services for their efforts, on behalf of the provider, to get the No-Fault claim paid by ABC. The provider made the No-Fault claim as assignee of its patient, the eligible injured person.
ABC issued a denial of claim for future benefits and found further treatment to be medically unnecessary. Thereafter, a court action was instituted by the provider as assignee of the No-Fault claimant for first-party benefits. No court judgment was ever rendered and the case was settled before trial as the result of negotiations between ABCs claims adjuster and the providers attorney.
The providers attorney is demanding reimbursement for its legal fees in the amount of 20% of the first-party benefits, plus interest thereon, pursuant to N.Y. Comp. Codes R. & Regs. tit. 11, subdivision (e) of § 65-4.6 (2002) (Regulation 68D).
Subdivision (a) of N.Y. Ins. Law § 5106 (McKinney 2000) provides, as to the payment of interest on overdue claims and the reimbursement of attorneys fees in connection with No-Fault claims, in pertinent part, as follows:
(a) 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. If proof is not supplied as to the entire claim, the amount, which is supported by proof, is overdue if payments shall bear interest at the rate of two percent per month. If a valid claim or portion was overdue, the claimant shall also be entitled to recover his attorneys reasonable fee, for services necessarily performed in connection with securing payment of the overdue claim, subject to limitations promulgated by the superintendent in regulations.
N.Y. Comp. Codes R. & Regs. tit. 11, § 65-4 (2002) (Regulation 68-D) governs, under Section 4.6, attorneys fees reimbursable under No-Fault:
The following limitations shall apply to the payment by insurers of applicants attorneys fees for services necessarily performed in the resolution of no-fault disputes:
(a) If an arbitration was initiated or a court action was commenced by an attorney on behalf of an applicant and the claim or portion thereof was not denied or overdue at the time the arbitration proceeding was initiated or the action was commenced, no attorneys fees shall be granted.
(b) If the claim is resolved by the designated organization at any time prior to transmittal to an arbitrator, and it was initially denied by the insurer or overdue, the payment of the applicants attorneys fee by the insurer shall be limited as follows:
. . . .
(c) Except as provided in subdivisions (a) and (b) of this section, the minimum attorneys fee payable pursuant to this Subpart shall be $60.
(d) For disputes subject to arbitration by the no-fault arbitration forum where one of the issues involves a policy issue as enumerated on the prescribed denial of claim form (NYS form N-F 10), subject to the provisions of subdivisions (a) and (c) of this section, the attorneys fee for the arbitration of all issues shall be limited as follows:
. . . .
(e) For all other disputes subject to arbitration, subject to the provisions of subdivisions (a) and (c) of this section, the attorneys fee shall be limited as follows: 20 percent of the amount of first-party benefits, plus interest thereon, awarded by the arbitrator or court, subject to a maximum fee of $850. If the nature of the dispute results in an attorneys fee which could be computed in accordance with the limitations prescribed in both subdivision (d) and this subdivision, the higher attorneys fee shall be payable. . . .
(f) Notwithstanding the limitations listed in this section, if the arbitrator or a court determines that the issues in dispute were of such a novel or unique nature as to require extraordinary skills or services, the arbitrator or court may award an attorneys fee in excess of the limitations set forth in this section. . . .
(g) If a dispute involving an overdue or denied claim is resolved by the parties after it has been forwarded by the Insurance Department or the conciliation center to the appropriate arbitration forum or after a court action has been commenced, the claimants attorney shall be entitled to a fee which shall be computed in accordance with the limitations set forth in this section.
Subdivision (g) of Section 4.6 of Regulation 68-D provides that attorneys fees can be awarded in connection with a No-Fault dispute upon which a court action has been commenced pursuant to the limitations set forth in Section 4.6. Thus, the applicable limitation(s) on attorneys fees that is contained in subdivisions (a)-(f) governs the calculation of the amount of the attorneys fee ABC must pay in the instant situation.
The limitation contained in subdivision (a) does not apply in this instance because the claim was denied before the court action was commenced. The limitation contained in subdivision (b) does not apply in this instance because it is conditioned upon the claim having been submitted to arbitration. Subdivision (c) provides for a mandatory minimum attorneys fee. The limitation contained in subdivision (d) only applies where the dispute involves "policy issues," such as the policy was not in force on the date of the accident; the injured person is excluded from coverage under the policy; a policy condition has been violated; the injured person is not an eligible injured person; or if the claim is not within the scope of the Optional Basic Economic Loss coverage election. None of these policy issues apply to the instant claim. The limitation contained in subdivision (f) does not apply in this instance because the issue in dispute was not determined by either an arbitrator or a court as being of a novel or unique nature.
Subdivision (e), by its terms, does apply to the instant No-Fault dispute. The limitation contained in subdivision (e) applies broadly to "all other disputes subject to arbitration . . . ." The instant No-Fault dispute is "subject to arbitration" in the sense that the provider had the option to seek a resolution of the dispute by submitting it for No-Fault arbitration.
Under subdivision (e), the amount of the attorneys fee that ABC must reimburse the provider for is the sum of 20% of the amount of the settlement, and interest thereon, up to a maximum of $850. The attorneys fee that is calculated pursuant to the attorneys fee limitation contained in § 65-4.6(e) is further subject to the required minimum attorneys fee of $60, as specified in subdivision (c) of § 65-4.6. Therefore, should the amount of the attorneys fee calculated under subdivision (e) be less than $60, the amount reimbursed by ABC for attorneys fees would have to be $60.
For further information you may contact Associate Attorney Barbara Kluger at the New York City Office.