N.Y. Court of Appeal Rejects Reg 68 Challenge, Praised as Victory Against Fraud

The New York Court of Appeals has unanimously upheld the state Insurance Department’s right to implement the reforms contained in Regulation 68, which would require notice of a “no-fault” claim to be filed within 30, rather than 90, days of an accident, and claims for medical treatment to be made within 45 days, rather than the current 180.

The regulations, first proposed in 2001, have been the subject of repeated challenges by trial lawyers and medical groups, but have now apparently survived them all. New York Insurance Superintendent Gregory V. Serio issued the following brief statement: “We are deeply gratified by the State Court of Appeal’s favorable and unanimous decision upholding Regulation 68. Under Governor Pataki’s leadership, the Insurance Department has launched a comprehensive effort to help consumers by combating auto insurance fraud and abuse, and today’s decision is a major victory for thousands of hardworking motorists throughout New York.”

The decision was widely hailed by a number of Insurance Organizations. Gerald L. Zimmerman, assistant general counsel for the National Association of Independent Insurers, which had filed an amicus brief in the appeal, said in a written statement: “This is a tremendous victory for the Insurance Department and insurers. The decision is also a victory for consumers because a rollback of Regulation 68 would have dramatically increased auto insurance rates.”

The NAII bulletin noted that “Regulation 68 was promulgated after the Superintendent determined that the most common way to perpetrate no-fault fraud was to exploit the time lag between the alleged loss and the deadline for submitting proof of loss, coupled with the fact that insurers have only 30 days to review and investigate claims before risking penalty for denied or delayed claims.”

Ann Spragens, senior vice president and general counsel for the Alliance of American Insurers, said in a written statement, “The Alliance joined with other industry trades associations in filing an amicus brief urging the court to affirm the decision and to uphold the Superintendent’s authority to promulgate this regulation. We are pleased that the state’s highest courts have agreed with our arguments and that this lengthy battle is finally over. We continue to support Director Serio’s efforts to combat insurance fraud and applaud the courts for upholding his authority to make the regulatory changes necessary to stop the fraud and abuse perpetrated on the system.”

The Professional Insurance Agents of New York State Inc. also hailed the decision. “This long-fought battle is testimony to the perseverance of Greg Serio of the NYSID as well as to the numerous organizations, including PIANY that have supported this effort to fight fraud,” said PIANY President T.J. Derella, in a written statement. “We knew this day would happen, I’m just not sure anyone thought it would take so long. We are very pleased that the legal fight is over and that New York’s insurance-buying public has won,” he concluded.

The PIANY bulletin, however, also warned members not to be complacent, as additional problems with New York’s no-fault system still need to be addressed. Derella noted that the ” PIANY has warned the sponsors of S.1277/A.269 that this bill would undo all that Regulation 68 has accomplished.” In a letter to the sponsors last March, PIANY urged them to pull this bill and remove themselves from sponsorship, stating: “We strongly oppose this measure because it would roll back reforms that have been made by New York’s Insurance Department in amending Regulation 68. These well-considered changes have begun to show a positive effect. To roll them back would send absolutely the wrong signal to those who prey upon the state’s no-fault auto insurance system and pervert its intention of providing quick payment to accident victims regardless of their fault.”

American Insurance Alliance vice president and assistant general counsel David Snyder issued a written statement indicating that “This is a victory for New York’s consumers and the insurance marketplace. Fraud and abuse of the system under the old guidelines has driven up insurance costs in the state. The timeframes in this regulation, which have now been upheld at the highest level of the state’s judiciary, provide insurers with needed tools to fight fraud and abuse and contain costs.”

The AIA bulletin added: “While this regulation is an important tool to fight fraud and abuse, AIA believes more reform is needed in New York, including establishing flexible medical treatment guidelines to reduce inflated billing of injuries and eliminating phony or dubious medical treatments; giving insurers more time to investigative claims where there is a strong suspicion of fraud. Currently, they have only 30 days to determine if an auto claim is fraudulent; increasing penalties for those convicted of no-fault fraud. This would include making it a felony to be found guilty of being a ‘runner’ or the facilitator in a no-fault scheme. In addition, medical professionals found guilty of claim fraud would be ‘decertified’ and no longer able to bill no-fault when treating patients injured in auto accidents; making arbitration mandatory in disputed no-fault claims.”