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IMPROPER ASSIGNMENT OF CLAIM FORMS MUST BE VERIFIED WITHIN THIRTY DAYS
By: Annette Hader, Esq

FOR THE DEFENSE

IMPROPER ASSIGNMENT OF CLAIM FORMS MUST BE VERIFIED WITHIN THIRTY DAYS


By: Annette Hader, Esq.
Bruno, Gerbino & Soriano, LLP
Melville, New York


Is an insurance company precluded from raising a defense of lack of a valid assignment of benefits between the assignor and assignee if it did not seek verification of the assignment in a timely manner? Secondarily, is a properly filled out assignment of benefits form a necessary component of Plaintiff’s prima facie case where Defendant has failed to timely request verification?

The Court of Appeals has recently decided these two issues in Hospital for Joint Diseases v. Travelers Prop. Cas. Ins. Co., 2007 N.Y. Slip. Op. 09067 . The Court held that an insurance carrier is precluded from contesting the validity of the assignment and thus waives any objection to same if it failed to ask for timely verification. The Court further held that an assignment form stating that a patient’s signature is “on file” satisfies Plaintiff’s burden where the carrier does not timely take action to verify the existence of a valid assignment.

In Hospital for Joint Diseases, the plaintiff hospital brought suit against defendant insurance carrier after it failed to make payment or deny the claim within the thirty day time period allotted by the insurance regulations. The assignment portion of the assignment of benefits form indicated that the assignor’s signature was ‘on file,’ but the form itself failed to display his actual signature.

Defendant then raised as an affirmative defense in its answer the defense of lack of a valid assignment of benefits between the hospital and the assignor; Mr. Browne. Both parties moved for summary judgment in the Supreme Court. The Supreme Court granted the plaintiff’s motion upon a finding that “Travelers failure to timely contest any deficiency in the assignment documents precluded the carrier from raising the issue in this proceeding.” The carrier appealed to the Appellate Division, which upheld the Supreme Court’s determination. The carrier then appealed to the Court of Appeals, where the decision was again upheld.

The Court of Appeals ruled that Travelers failure to timely request verification of the assignment precluded the carrier from raising that issue as an affirmative defense, expressly shooting down Travelers argument that Plaintiff’s failure to provide a complete assignment of benefits form equated to a lack of coverage. In doing so, the Court of Appeals declined to extend the narrow exception to the preclusion rule that was established in Chubb FN. The Court, seemingly chastised the insurance carriers by stated that when an insurer does not request verification or deny or pay the claim, “but instead waits to be sued for nonpayment, the carrier should bear the consequences of its nonaction. To allow an insurance company to later challenge a hospital’s standing as an assignee merely encourages the carrier the ignore the prescribed statutory scheme.”

The Court concluded that in the instant case, the assignment of benefits form bearing the patient’s signature was not a necessary component of the hospital’s prima facie case. The Court further held that as Travelers did not “otherwise contest the hospital’s entitlement to no-fault payments” that an assignment form stating that the patient’s signature was “on file” was sufficient.

It is worth noting that there was a dissent filed by Hon. Pigott in the opinion. Hon. Pigott, citing Chubb, stated that in his view “a carrier’s defense based on the lack of a valid assignment equates to a defense implicating ‘lack of coverage within the insurance agreement and thus, should similarly not be precluded.” Hon. Pigott further felt that the majority was permitting no-fault Plaintiffs to artificially create standing by estoppel.

Lastly, Hon. Piggot, seemingly defending the insurance carriers, rebuked the majority and stated, “I must take issue with the majority’s view that this position would encourage noncompliance with the no-fault statutory and regulatory scheme. If an insurer fails to timely pay a valid claim, it is subject to the payment of interest at 2% plus attorneys fees…” and that the majority’s decision “…encourages the use of the courts by eliminating an essential element of most lawsuits – standing, and runs the risk of encouraging this type of litigation at the carrier’s peril.”

Editor’s note: Annette Hader, Esq., is a graduate of Touro Law School and an associate at Bruno, Gerbino & Soriano, LLP, located in Melville, New York.

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