Claimant Must Inform Insurer It Does Not Have Requested Verification Items, or Face Denial of Claim

Medex Pharmacy v State Farm Mutual Automobile Insurance Company

Edited by Lawrence N. Rogak

?The crucial issue in this PIP arbitration is whether a claimant must respond to an insurer’s request for verification, when the items requested are not in the claimant’s possession.

The Applicant seeks $1,350.67 for a compound cream dispensed to the injured claimant.  According to the IP he was sitting in a 2004 Toyota with his passenger with the engine off. The vehicle was parked at the corner of Melrose Street and Knickerbocker Avenue, Brooklyn, with the driver’s side closest to the curb. The adverse vehicle struck the rear passenger side corner of the vehicle as it made a left turn from Knickerbocker Avenue onto Melrose Street. 

The driver of the adverse vehicle, JS, advised the police that 2004 Toyota was unoccupied at the time of the accident. JS purportedly took photos of the vehicle immediately thereafter to prove no one was in the car at the moment of impact.  

Based upon this information respondent commenced an investigation to determine whether or not the 2004 Toyota was unoccupied at the time of the alleged loss.

An EUO of the IP was completed on 7/20/16. Thereafter by letter dated 7/26/16 respondent insurer timely requested the IP respond to post EUO verification.

Specifically respondent requested photographs of all durable medical equipment to allow respondent to determine the manufacturer and model information of each equipment items dispensed to the IP and the complete name and address of the cell phone service provider and an authorization allowing the cell phone service provider to release all records regarding phone calls and text messages made from the IP cell phone number for a period including the date of loss.

When no response was forthcoming, a follow-up letter was generated and mailed on 8/30/16. Each post EUO verification request reminded the IP and his attorney that the request was made pursuant to section 65 – 3.5 (o) which requires the applicant to submit all verification under its control and possession or present written proof providing reasonable justification for the failure to comply within 120 days of the initial verification request.

On 7/18/16 respondent received applicant’s claim for $1,350.67. On 8/1/16 it advised applicant by correspondence that, “we will require the submission of the following verification items from you and or we are advising you of the following verification items that are outstanding.” Specifically and based upon the IP’s EUO, respondent requested photographs of durable medical equipment and the release and production of cell phone records of the injured party. Further, respondent was seeking production of a digital/video recording of the alleged motor vehicle accident from a restaurant located at the corner of Knickerbocker Avenue and Melrose Street as well as statements fromwitnesses to the alleged accident. An identical follow up letter was generated and mailed on 9/1/16.

On 12/14/16 (141 days after respondent’s initial 7/26/16 post EUO request of the IP) respondent denied applicant’s claim for the compound cream based upon the failure to provide response to verification within 120 days from the date of the initial request.

The denial further provides that based upon respondent investigation the IP misrepresented that he was an occupant of the 2004 Toyota and injured as a result of the 5/12/16 MVA. Lastly, respondent argues that the submitted claim is in excess of the New York State Worker’s Compensation fee schedule. At hearing, respondent withdrew all defenses except for the failure to provide documentary verification within 120 days of the initial request (11 NYCRR§65-3.8(b)(3) and 11 NYCRR§ 65-3.5(o)).

ANALYSIS

Applicant has established its prima facie entitlement to reimbursement for no fault benefits based upon the submission of a properly completed claim form setting forth the amount of the loss sustained and that payment is overdue. Respondent’s denials and verification requests establish receipt.

Respondent’s post EUO requests of the IP were timely. Likewise, the 8/1/16 and 9/1/16 letters directed to applicant were timely. Respondent’s denial was issued more than 120 days after the initial 8/1/16 request directed to applicant.

Applicant opined that the 8/1/16 and 9/1/16 letters were not verification requests but rather a delay letters. Respondent did not request any information from applicant but rather advised that it was waiting for information from the IP. Certainly the items requested including photographs of the DME and the IP cell phone records were not within the possession or control of applicant. Therefore, respondent could not expect the applicant to forward the information requested or endeavor to secure them from the IP. Respondent was simply advising applicant of its ongoing investigation.

To the contrary, respondent opined that the 8/1/16 and 9/1/16 letters specified a particular form of verification and the person or entity from which the verification was sought.

Further, the respondent showed due diligence in its investigation and properly and timely requested the necessary information from the proper party. Respondent relies upon 11 NYCRR §65 – 3.5(c) which provides that an insurer is entitled to receive all items necessary to verify the claim directly from the parties from whom such verification is requested. This last section does not confine or require the insurer to seek information solely from the provider but rather contemplates that verification information may be sought from any source. 

Whether the claimant possesses the verification requested or it is in the hands of a referring physician, it cannot shift its obligation to verify a claim to the insurer. D & R Medical Supply, Inc. v. Clarendon National Insurance Company, 22 Misc. 3dd 1127 (A), 881 NYS 2d 362 (Civil Ct. Kings County 2009).

There is no need for me to consider whether or not respondent may rely on its “120 day rule” denial directed to the IP; in this case I find that respondent’s verification requests are proper and timely. Respondent complied with all statutory protocols. Applicant did not in any way acknowledge respondent’s correspondence.

Applicant relies on D & R Medical Supply v. Progressive Insurance Company, 24 Misc.3d 521 (Civil Ct. Kings County 2009). The court noted that, “plaintiff unequivocally advised defendant that it was not in possession of the medical reports that defendant was seeking. Certainly there is no evidence before the court suggesting that these materials were ever in plaintiffs care, custody or control… While the no-fault regulations provide that an insurer is entitled to receive all items necessary to verify the claim directly from the parties from whom such verification was requested (11 NYCRR§ 65 – 3.5 (c)), this should not be construed as requiring the provider to provide materials over which it has no control. A contrary construction would violate the core objective of the no-fault law: “to assure claimants expeditious compensation for their injuries through prompt payment of first party benefits without regard to fault and without expense to them…  Imposing upon a medical provider the obligation to provide an insurer with materials that are not in its care, custody or control would also be illogical.”

Alternatively respondent opines that in seeking additional verification an insurer is not limited to seek from the applicant. Doshi Diagnostic Imaging Services v. State Farm Insurance Company, 16 Misc. 3d 42, 842 NYS 2d 153 (App. Term 9th and 10th Districts 2007). Further, whether the claimant possesses the verification requested or it is in the hands of the referring physician, it cannot shift its obligation to verify a claim to the insurer.

The Doshi court however was clearly aware of the dilemma in which an applicant would be left if a third party, with no particular interest in the applicant’s getting paid, does not bother to respond. The court tried to alleviate such a situation by stating the following:  “By its terms, 11 NYCRR§ 65 – 3.6 (b) requires the insurer to inform the “applicant” of the nature of previously requested and unproduced verification, the identity of the party from whom it was requested and that the request is renewed. The provisions clearly contemplate that an applicant may not be the only appropriate party from whom, for example, medical necessity verification may most readily be obtained… Where verification is sought from a party other than the applicant, the applicant is entitled to be timely informed of the nature of the verification sought and from whom it is requested when, after initial verification remains unsatisfied, a follow-up request is necessary (see 11 NYCRR§ 65 – 3.6 [b]). As the claims of providers, such as MRI facilities, are subject to the medical necessity defense, notwithstanding that they may neither be responsible for the medical necessity determination or, in the case of a non-physician provider, competent to make such determination, permitting verification requests of non-applicants upon proper notification to the applicants furthers the regulatory objective that verification proceed as expeditiously as possible and assist applicants to determine the propriety of verification demands to monitor the insurer’s exercise of the verification sieges and facilitate the timely production of verification.”

In this matter, respondent has established due diligence in attempting to secure all necessary verification from the appropriate parties. Applicant was kept apprised of its efforts. Respondent timely and properly requested verification from the IP.

I am faced with two reasonable but paradoxical philosophies. Applicant is entitled to reimbursement for services rendered. It cannot provide documentation it never had and has no control over. Alternatively, respondent is not required to provide a blank checkbook to the plaintiff. The carrier has a right to inquire before it pays the bills. Lenox Hill Radiology and Mia, PC v. Global Liberty Insurance Company, 20 Misc. 3d 434 (Civil Ct. New York County 2008).

Based upon the facts presented I find that respondent properly and timely denied applicant’s claim. It has diligently taken steps necessary to assure compliance and kept applicant apprised of its actions to expedite payment of the claims presented.

Significantly, applicant offers no explanation for its failure to respond to either letter.  Even [if] applicant objected to the demand and was unable to comply it was under an obligation to explain its position to respondent. Respondent has proved that it timely mailed its request and follow-up request for verification to applicant.

I find for the respondent and the claim is denied.

Comment: The key lesson here is that if a claimant is not in possession of items demanded from the insurer, it must inform the insurer of that fact.

AAA Case No. 17-17-1059-1567
(Rhonda Barry, arbitrator)
Award date: 03/13/2018