As a practicing New York physician, you know that when you render medical services to the victim of a motor vehicle crash and receive his or her assignment of benefits, you can make a claim for reimbursement from his or her insurance company. You also likely know that the insurance company must pay or deny your claim within 30 days per New York’s no fault insurance laws. Oftentimes, however, the insurance company stalls, and instead, sues you, alleging that your claim is fraudulent because you illegally incorporated your medical corporation.
Unfortunately, ever since the case of State Farm Mutual Auto Ins. Co. v. Mallela that the New York Court of Appeals decided 13 years ago, the number of these kinds of lawsuits against physicians has skyrocketed. The reason is that the Court held that medical providers who fail to adhere to New York’s licensing requirements lose their eligibility to obtain reimbursement from an insurance company for their no fault insurance claims.
The Mallela decision
Specifically, the Court held that while insurance companies must reimburse the medical provider(s) to whom their policyholders assign benefits for “basic economic loss,” they need not do so if the provider(s) run afoul of New York’s physician licensing laws. For instance, you and/or other licensed physicians must own your corporation, not a management company or other entity owned by a nonphysician.
Not only did the Court relieve insurance companies of the necessity to pay such claims, it also granted them the right to “look beyond” a medical corporation’s licensing documents in order to discover any possible licensing violations and therefore fraud.
Widened discovery rules
As you might expect, insurance companies applauded the Mallela decision and then ran with it. Some companies have gone to far as to routinely file a Mallela lawsuit against any physician who makes a claim for reimbursement under New York’s no fault insurance laws.
Should an insurance company file such a lawsuit against you, you can expect to be bombarded with all of the following:
- Requests for production of documents
- Requests for admissions
- Examinations Under Oath
As long as the insurance company alleges that the things it is asking you for are “material and necessary” to its supposed fraud investigation, it need not show cause for demanding them.
While you have virtually no recourse against having to go through this long, slow discovery process or avoiding the hassles it entails, be aware that few Mallela lawsuits ever go to trial. Instead, once you complete the EUO and verification protocols proving that you are, in fact, a duly licensed medical provider, the insurance company likely will settle your claim once your attorney sends it a pay-or-deny letter. In all likelihood, the settlement will include a confidentiality agreement that prevents either you or the insurance company from revealing the specifics of the settlement you reached.