On November 14, 2018, the New York State Department of Financial Services
(“DFS”) published the Proposed Ninth Amendment to Regulation
68 (“Proposed Amendment”). If adopted, the Proposed Amendment would give the no-fault insurer the
option to void the assignment of benefits (“AOB”) when the
insurer issues a denial for the patient’s failure to attend either
an independent medical examination (“IME”) or an examination
under oath (“EUO”) (collectively “No-Show Denials).
If the no-fault insurer opts to void the AOB between the patient and his
treating healthcare provider, what would this mean for both the patient
and the no-fault healthcare provider?
- Only the patient, and not the treating healthcare provider, would be permitted
to litigate and/or arbitrate No-Show Denials.
- The patient would be forced to litigate/arbitrate the denial of his no-fault
benefits to protect himself from mounting medical bills once his billing
is switched to “self-pay” by his treating healthcare provider(s).
The unrepresented patient (i.e. the patient without a personal injury attorney)
would be in an extremely vulnerable position as he would be ill equipped
to deal with the complex legal issues associated with the IME and EUO
verification processes. Said patient would be more likely to default in
appearing for an IME/EUO in the first instance as he would not understand
the significance of appearing for same. Furthermore, if said patient were
to receive an improper No-Show Denial (i.e. after requesting an adjournment,
etc.), then said unrepresented patient would be less likely to commence
a lawsuit/arbitration to contest the validity of said denial. Thus, the
unrepresented (i.e. non-litigious) patient would be more vulnerable to
having his policy voided
ab initio, making him personally responsible for all medical bills related to the
- If the patient has a personal injury action pending, then the patient’s
personal injury attorney (rather than the healthcare provider’s
no-fault attorney) would be forced to arbitrate the denial of the patient’s
no-fault benefits to protect the potential proceeds of the personal injury
action from extensive liens, which could exceed the limits of the bodily
injury liability portion of the automobile policy.
- The patient would have to pay upfront and out-of-pocket for any future
medical treatment (i.e. surgeries, injections, physical therapy). Alternatively,
the patient would have to forego necessary medical treatment until he
was able to obtain a decision overturning the No-Show Denial, which could
take upwards of one-year in both court and in arbitration.
The Healthcare Provider:
- The healthcare provider’s only means of obtaining reimbursement for
medical services previously rendered would be to switch the underlying
billing to “self-pay” and attempt to collect same directly
from the patient, who may or may not have a pending personal injury action.
- If the patient has a pending personal injury action, then the treating
healthcare provider would be forced to file a lien against said action.
Depending on the duration of the personal injury action, it could take
the healthcare provider years to obtain reimbursement, if ever.
- If the patient does not have a personal injury action pending and the patient
does not voluntarily tender payment, then the healthcare provider would
have to pursue collection efforts.
- The no-fault healthcare provider would be forced to demand payment upfront
from the patient.
The DFS argues that the Proposed Amendment is necessary to curb “widespread
abuse by unscrupulous medical mills that often obtain patients from ‘runners’
who are paid to steer injured persons to the mills, or are part of a staged
accident ring.” The DFS further posits that forcing the patient to litigate/arbitrate
the validity of these types of denials would reduce the number of court
and arbitration filings dealing with No-Show denials for two reasons. First, a patient connected to a staged accident ring or otherwise engaged
in fraudulent activities concerning no-fault is unlikely to contest the
insurer’s denials for IME and EUO no-shows. Second, the disposition of the patient’s case would apply to all
related claims of the patient arising out of the accident. The rationale
that the DFS, as the protector of the public, is using to rationalize
the Proposed Amendment is disturbing because it presupposes that persons
injured in automobile accidents, the healthcare providers treating them
(with the exception of hospitals), and the attorneys representing them
both, are all engaged in a fraudulent scheme against the no-fault insurers.
It is the Firm’s position that DFS’ rationale with respect
to both the need for and the benefit of the Proposed Amendment is fundamentally
flawed. First, it is the unrepresented patient (i.e. the non-litigious
patient), and not the co-conspirator to a staged loss, who is less likely
to either appear for an IME/EUO or to commence an action to overturn an
improper No-Show Denial. The unrepresented patient is less likely to understand
the necessity of appearing for the IME/EUO in the first instance and is
also less likely to understand the process for commencing a lawsuit/arbitration.
On the other hand, the co-conspirator to a staged loss, who is probably
being coached by a “ringleader” and whose entire goal is to
obtain a large monetary payout, would be incentivized to comply with policy
preconditions and to challenge the validity of a No-Show denial, which
would jeopardize his future payout.
Second, the Proposed Amendment is not needed to reduce the number of court/arbitration
filings dealing with No-Show Denials for two reasons. Once one no-fault
healthcare provider obtains a court or arbitration decision addressing
the validity of the No-Show Denial, then the doctrine of
collateral estoppel operates to preclude other no-fault healthcare providers from successfully
re-litigating/arbitrating the same issue as they are mere assignees of
the patient. Additionally, no-fault insurers already have a remedy for
reducing the number of court/arbitration cases that they have to defend,
which they use actively for this very purpose—the Declaratory Judgment
action. A sampling of the Firm’s data reveals that a single no-fault
healthcare provider can receive upwards of 20 new Declaratory Judgment
Actions per month seeking to void all personal injury protection benefits
(often for multiple patients) based on No-Show Denials.
Not only is the Proposed Amendment unnecessary to achieve its stated purpose—to
curb fraud and reduce the number of court/arbitration filings dealing
with No-Show Denials—but, if enacted, the Proposed Amendment would
have the following detrimental consequences:
It would lead to an increase in the number of IME/EUOs sought by the no-fault
insurers as their verification practices would no longer be routinely
scrutinized by no-fault healthcare providers striving to protect their
billing by filing lawsuits/arbitrations as a means of challenging and
overturning defective No-Show Denials;
- There would be negative cost impact on the patient who will be forced to
litigate/arbitrate the denial of his no-fault benefits and to pay upfront
and out-of-pocket for any future medical treatment after receiving a No-Show Denial;
- There would be negative cost impact on the healthcare provider which will
have to switch its outstanding claims to self-pay and attempt to collect
same directly from the patient who may or may no have a pending personal
- It would upend the current no-fault system, which utilizes the AOB to facilitate
prompt payment of medical expenses and wage loss for those parties injured
as a result of an automobile accident;
- In effect, it would make the mandatory $50,000.00 in personal injury protection
(“PIP”) benefits a lien against the bodily injury liability
(“BI”) portion of the automobile policy.
The Firm has already had an early opportunity to discuss the Proposed Amendment
with representatives of the DFS and also plans to submit extensive remarks
addressing the negative impact it will have on the public before the expiration
the Comment Period on January 13, 2019.
The Firm encourages other attorneys as well as healthcare providers, that
will be negatively impacted by the Proposed Amendment, to submit their
own comments to the DFS on or before January 13, 2019. While the Firm
does not expect members of the personal injury bar that do not regularly
handle their clients’ no-fault cases to appreciate the full impact
that the Proposed Amendment may have on their clients, every personal
injury attorney and plaintiff no-fault attorney should be incensed by
the DFS’ negative characterization of persons injured in automobile
accidents, the healthcare providers with whom they treat, and
implicitly the lawyers that represent them. The DFS’s position in the Regulatory
Impact Statement diminishes the public’s view of persons injured
in automobile accidents and the attorneys that represent them.
The Firm shall keep you apprised of any new information related to this proposal.
Please direct any questions regarding this memorandum to Erin S. Stamper,
Supervising Associate in the No-Fault and Health Care Law Department of
Russell Friedman & Associates by e-mail at email@example.com.
 The Proposed Ninth Amendment to Regulation 68, the New York State Register,
Rule Making Activities, November 14, 2018, p. 9-11 https://docs.dos.ny.gov/info/register/2018/november14/rulemaking.pdf
 In its current form, the no-fault insurer may not opt to void the AOB
between the patient and the hospital.
 See, Regulatory Impact Statement, §3, Needs and Benefits, p. 9 https://docs.dos.ny.gov/info/register/2018/november14/rulemaking.pdf
 See, Regulatory Impact Statement, §3, Needs and Benefits, p. 10 https://docs.dos.ny.gov/info/register/2018/november14/rulemaking.pdf
 See, Regulatory Impact Statement, §4 Costs, p. 10
 Currently, when the Firm arbitrates the validity of No-Show Denials on
behalf of its healthcare providers, it is often successful in overturning
said denials based on the no-fault insurer’s failure to comply the
claims practice procedures prescribed in Regulation 68.