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Cyrus Dugger

NY Auto Insurance Nightmare Continues: The Option of Indefinite Denial & Access to Your Med. Insurance

Did you know that in NY, if you are involved in an accident you are legally prohibited from making a claim against your medical insurer until your no-fault auto insurer pays or denies your claim? And it gets worse: there's no telling how long this may take.

It's true. Until your NY auto insurance company decides one way or another about your claim, your medical insurer can legally refuse payment for the amount covered by your no-fault insurance. Usually NY auto insurers have about thirty days to pay or deny a claim, and are assessed some penalties if they exceed this amount of time. If you are caught in this situation, your only option seems to be to take your auto insurance company to arbitration. However, arbitration is unlikely to be helpful when the problem is not an outright denial, but a refusal to pay or deny. Auto insurance companies are able to legally refuse to pay or deny as long as they are investigating your claim (at least as long as they mention so in their contract). Hypothetically, your no-fault auto insurance carrier can simply refuse to deny or pay your claim for any number of months during which you both receive no benefits from them, and are prohibited from making claims against your medical insurer.

How do you pay your medical bills during this "in-between" time? Nobody knows. I spent about an hour calling New York State's Insurance Department and spoke with three different staff members in three different sub-departments. After all of these conversations nobody there could tell me of any way for a person in this "in-between" situation to get their medical bills paid. The consensus answer was that this "in-between" issue would "never happen," and that I should "not worry about it." The best advice was to just call them if it did happen (at which point I would have been without bill payment for at least a month). Sadly, nobody could tell me whether or not it was legal for this to happen. Finally, I called the agency's legal counsel directly, and was told to put my question in writing and to expect an answer in approximately three weeks (during which time I would still be without medical coverage).

A new bill proposed by Assemblyman Heastie will make this a much larger problem than it already is. Heastie's bill substantially reduces the penalty insurance companies face when they exceed the standard 30-day time limit to pay or deny. The bill proposes to no longer prohibit auto insurance companies from raising defenses to claims if they take longer than the allowed 30 days to pay or deny. This reduced penalty will often make not paying or denying claims for extended periods of time a very rational business choice for auto insurance companies.

Think about what happens.

Most claimants do not have the financial resources for a protracted litigation, and many may simply give up their fight if the insurance company waits long enough without paying or denying.

Even if they don't give up, and they ultimately win in court, the very best that they can get in compensation is the value of their original claim + 2% per month + 20% of their original claim. Of course this 20% is meant to cover reasonable attorney fees, leaving the claimant with only what they were rightfully already owed --- plus 2% monthly. For example, if your claim had originally been for $7,800 dollars, you will end up with what you were already owed and a check for $156. Of course this also assumes that your attorney fees consisted of only $1560.

If this new bill passes you very well may find yourself "in-between" your no-fault auto insurer, your medical insurer, and a very hard place in which nobody is legally obligated to pay for your medical expenses.

All the while, you will still be expected to pay both your auto and medical insurance premiums - on time - of course.

To see the previous posting on this issue click here.

If you or your organization is interested in learning more about or working on these types of civil justice issues, please feel free to contact me at

Cyrus Dugger
Senior Fellow in Civil Justice
Drum Major Institute for Public Policy

Cyrus Dugger: Author Bio | Other Posts
Posted at 10:22 AM, Jun 26, 2006 in Civil Justice | Economic Opportunity | Governmental Reform | Insurance Industry | Middle-class squeeze
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