OGC Op. No. 10-09-05
The Office of General Counsel issued the following opinion on September 14, 2010 representing the position of the New York State Insurance Department.
Re: Accrual of Interest on Overdue No-Fault Claims
1. Does the tolling provision set forth in Section 65-3.9(c) of the N. Y. Comp. Codes R. & Regs. (“NYCRR”) tit. 11, Pt 65 (Regulation 68-C) apply to a no-fault claim where the claimant fails to timely request arbitration or commence a lawsuit regardless of whether the denial of claim form was timely issued?
2. Is interest tolled pursuant to 11 NYCRR
1. Yes. The tolling provision set forth in 11 NYCRR
2. No. Interest is not tolled during the period that a claim becomes overdue until the insurer issues to the insured a denial of claim. Interest is only suspended or tolled from the date the claimant fails to commence an action within 30 days of the receipt of the denial of claim form until an action is actually commenced.
The inquiry is of a general nature, without reference to particular facts.
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 not paid within thirty days after such proof is supplied. All overdue payments shall bear interest at the rate of two percent per month. . . .
All overdue mandatory and additional personal injury protection benefits due an applicant or assignee shall bear interest at a rate of two percent per month, calculated on a pro-rata basis using a 30-day month. . . .
Thus, where an insurer fails to pay or deny a claim within the requisite 30-day period, the claim becomes overdue and interest begins to accrue at that point. Interest continues to accrue on an overdue claim until the claimant receives payment or a denial of claim form.
If the claimant fails to request arbitration or commence a lawsuit within 30 days after the receipt of the denial of claim form for payment of benefits, accrual of interest is tolled from the date that the claimant fails to request arbitration or commence a lawsuit until an action is commenced. See 11 NYCRR
If an applicant 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, interest shall not accumulate on the disputed claim or element of claim until such action is taken. . . .
1. Accrual of interest regardless of the timeliness of the denial
The inquirer seeks clarification as to whether the Court of Appeals in LMK Psychological Servs., P.C., et al. v. State Farm Mut. Auto. Ins. Co., 12 N.Y.3d 217 (2009) held generally that the accrual of interest on no-fault claims is tolled regardless of whether the insurer issued a timely denial. In LMK, the Court of Appeals was asked specifically to decide whether the lower court erred in holding that the insurer could not avail itself of the tolling of interest provision where the claimant failed to timely request arbitration or commence a lawsuit because the insurer issued an untimely denial of claim form. In answering that question, the Court held that the accrual of interest is tolled, regardless of the timeliness of the denial, if the plaintiff fails to request arbitration or commence a lawsuit within 30 days of the receipt of the denial, pursuant to 11 NYCRR
2. Accrual of interest on an overdue claim where claimant fails to commence an action
The inquirer further asks whether interest is tolled from the time that a claim becomes overdue when the claimant fails to request arbitration or commence a lawsuit. The court in LMK did not address whether interest accrues between the time that a claim becomes overdue and the time that the denial was issued where the claimant subsequently fails to request arbitration or commence a lawsuit within 30 days of its receipt of the denial of claim. Insurance Law
For further information, you may contact Senior Attorney Camielle A. Barclay at the New York City office.