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Third Departments Errs in Awarding Attorney’s Fee
By: Shawn Kelleher

FOR THE DEFENSE
Third Departments Errs in Awarding Attorney’s Fee
in No-Fault Matter based per Claim, not per Assignor

By: Shawn Kelleher Esq.
Bruno, Gerbino & Soriano, LLP
Melville, New York


The calculation of attorney’s fees in No-Fault cases was designed to be a matter of little contention. According to the Insurance Law and No-Fault Regulations, a claimant is entitled to recover attorney’s fees which total 20% of the amount of first-party benefits subject to a limit of $850. (See Ins. Law. § 5106(a) and 11 N.Y.C.R.R. § 65 et seq.) However, the Appellate Division, Third Department, recently issued a decision regarding the calculation of attorney’s fees in a No-Fault case which has complicated this matter and created contention between the parties where there was designed to be none.
The Appellate Division, Third Department, in LMK Psychological Services, P.C., et al., v. State Farm Mut. Ins. Co., held that attorney’s fees in a No-Fault Matter are to be calculated on a per claim basis instead of a per assignor basis. In LMK Psychological Services, the respondents, two psychological services providers, sued State Farm Mutual Insurance Company in Supreme Court, Greene County, for the recovery of no-fault claims assigned by individuals insured by State Farm. The Supreme Court granted summary judgment to the Plaintiff, awarding attorney’s fees on a per claim basis. The Appellate Division, Third Department, upheld the decision of the Supreme Court and held that “[t]he Superintendent’s interpretation undermines the goal of the no-fault law to fully compensate a claimant for economic loss resulting from the wrongful denial of a claim and wastes judicial assets by encouraging the commencement of multiple actions in order to recover the maximum available counsel fees. “
In holding that the attorney’s fees are to be calculated on a per claim basis, the Third Department directly contradicted an opinion by the Superintendent of Insurance. The Superintendent, in 2003, had found that claims were to be awarded on a per assignor basis. “Section 65-4.6(e) makes it clear that the amount of attorney’s fees awarded will be based upon 20% of the total amount of first party benefits awarded. That total amount is derived from the total amount of individual bills disputed in either a court action or arbitration, regardless of whether one bill or multiple bills are presented as part of a total claim for benefits, based upon the health services rendered by a provider to the same eligible insured.” (Ops. Gen. Counsel. N.Y. Ins. Dept. No. 03-10-04.) In holding that the Insurance Department’s interpretation of its own Regulation was incorrect, the Court found that the Insurance Department had misconstrued the Regulation and that the opinion of the Superintendent of Insurance need not be given any deference as that “interpretation conflicts with the explicit language of the controlling statute.”
The major flaw with the Third Department’s decision is that the Third Department does not define what it means by a “claim.” Is a claim a single bill or every cause of action relating to a claimant, or is it just all the claims of one assignor on a lawsuit? This question leaves a hole large enough to drive a truck through. The Court’s rejection of the Insurance Department’s insightful look into the Regulation leaves more ambiguity now than there was prior to the LMK decision.
There is no easy answer to the question of what is a claim? A claim is what the Insurance Department had originally said. A claim for litigation purposes is the total amount of first-party benefits demanded in a summons and complaint. That can be either in multiple or a single cause of action. This would cap the amount of attorney’s fees a Plaintiff’s attorney would be allowed to recovery yet still reasonably compensate the Plaintiff for their legal work. This is the clearly the intent of Insurance law § 5106, to “reasonably” compensate the Plaintiff’s attorney. To rule otherwise, will subject an insurance company to almost limitless liability, encourage medical providers to bill for each procedure separately, and provide a Plaintiff’s attorney with an unjustified windfall.
Furthermore, as a matter of public policy, the Court’s decision will only create an adverse effect on the public as a whole. While this may be considered a “victory” for the Plaintiff’s bar, this decision may lead to an increase in the cost of everyone’s Mandatory Personal Injury Protection. The more money insurance companies have to dole out to Plaintiff’s attorneys, the more money consumers will have to pay to insure that the insurance companies stay in the black.
The long term effect of this case is still to be determined. What ultimately needs to happen is a revision of the Insurance Regulation whereby the Insurance Department clearly enunciates a standard by which attorney’s fees are to be calculated. Until then, there will continue to be contention and litigation where there was designed to be none.
Editors Note: Shawn Kelleher is a recent graduate of Touro Law School and is an associate at Bruno, Gerbino & Soriano, LLP in Melville, New York.

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