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Statute of limitations--rental cars: in the Matter of the Arbitration between: Continental Medical PC and State Farm Mutual Automobile Ins. Co. and Citiwide Auto Leasing Inc.

This no-fault award came to two significant conclusions: (1) That when a renter is driving a rental car, the rental car pays the PIP claims; and (2) When an insurer issues a denial before the time to do so runs out, the statute of limitations does not begin to run on the date of denial, but on the date that the bills would have become overdue (i.e., the day after the time to pay or deny runs out).

"This claim is for $6,962.22 and involves medical, chiropractic, physical therapy, electrodiagnostic testing and MRI testing all rendered by applicant for the allegedly eligible injured person/assignor for the care and treatment of injuries sustained in an accident that occurred on June 27th, 2003. Both respondents contend that applicant did not commence this proceeding within the applicable statute of limitations and consequently this claim should be time barred."

"Respondent State Farm contends that claimant was operating a noninsured motor vehicle at the time of the accident and that primary no-fault coverage rests with the registered owner of that vehicle, which was Citiwide Auto Leasing, Inc. doing business as Dollar Rent A Car. Respondent Citiwide Auto Leasing contends that claimant used her own insurance policy with State Farm by declining contractually offered coverage and that therefore primary no-fault coverage should be provided by her household automobile insurer, State Farm Insurance."

"The underlying accident took place on June 27th, 2003, at about 8:15 AM, in Brooklyn, NY, when claimant was operating a 2003 Chevrolet motor vehicle that she had rented earlier that very same morning from Citiwide Auto Leasing, Inc. d/b/a Dollar Rent A Car. A copy of the car rental agreement was submitted by the parties. It appears that claimant declined to purchase optional coverages that were offered. To my understanding, none of the optional coverages either purchased or declined by claimant involve mandatory no-fault coverage required to be provided by the owner of the vehicle. It is alleged that claimant sustained injuries in this accident for which she received treatment at applicant's facility."

"At the time of the accident, claimant also was the registered owner of a 1987 Honda motor vehicle that she had insured with State Farm Automobile Insurance Company, under policy # 66 1880-C11-22, with effective dates of coverage March 11th, 2003 through March 11th, 2004. No other motor vehicles were listed as being insured by claimant under this policy issued by State Farm.

"Following the accident, claimant proceeded to make claims for no-fault coverage with both Citiwide Auto Leasing and with State Farm insurance, and she timely submitted applications for no-fault benefits with both of those companies. Eventually, applicant herein began to submit its bills for services rendered to both of these companies, presumably to make sure that its bills were submitted to the correct no-fault carrier. On July 3rd, 2003, less than one week after the accident, State Farm issued a general denial of claim to claimant indicating that its investigation revealed that the accident occurred while she was occupying a non-insured vehicle and that the primary source of no-fault coverage for her because of the accident would rest with the insurance carrier for that vehicle. The registered owner of that vehicle was Citiwide Auto Leasing, Inc. doing business as Dollar Rent A Car."

"On February 18th, 2004, State Farm reissued another general denial of claim based on the exact same grounds, i.e. that the primary source of no-fault coverage would rest with the insurer for the owner of the vehicle. Thereafter, on August 13th, 2003, State Farm issued several specific denials of claim to applicant herein on the basis that the bills submitted were duplicates of bills that had already been submitted. State Farm has also submitted copies of letters issued on November 19th, 2003, allegedly accompanying specific denials of claim that it issued for the services claimed herein."

"On December 12th, 2003, Citiwide Auto Leasing issued specific denials of claim for all of the bills applicant has submitted in this matter to applicant and copied to claimant. The alleged basis for the denials was that claimant used her own insurance when she rented the vehicle in question, and that she was insured with State Farm Insurance Company at the time of the incident."

"Thus, with the exception of the re-issuance of the general denial of claim by State Farm Insurance on February 18th, 2004, all of the services in dispute had been denied by both State Farm Insurance and Citiwide Auto Leasing on or before December 12th, 2003. Neither State Farm nor Citiwide Auto Leasing have paid any of applicant's bills for services rendered on behalf of claimant."

"On December 15th, 2009, more than 6 years after the date when the last denials of claim had been issued, applicant prepared its AR-1 form which listed all of the bills that were being claimed in this case totaling $6,962.22 for dates of services from June 27th to October 23rd, 2003. That AR-1 form was received by the AAA on December 22nd, 2009. Based on the facts as outlined above, I agree entirely with respondent, State Farm Insurance, that it was not the primary source of no-fault coverage for this claim, and I sustain its denials of claim on the basis that Citiwide Auto Leasing, Inc. was required by law to provide primary no-fault insurance coverage for the vehicle it owned, and that State Farm Insurance, as the family auto insurer, did not provide primary no-fault coverage to claimant while operating a non-insured owned vehicle."

"Although not essential to the determination of the case, I would also add that applicant did not timely commence this arbitration proceeding against respondent, State Farm Insurance Company."

"A major dispute between applicant and respondent, Citiwide Auto Leasing, Inc. concerns what is the applicable statute of limitations for the claims in this arbitration dispute, and what constitutes the accrual date for of the claim for statute of limitations purposes. It was those two distinct issues that required me to order additional submissions of those parties after the initial hearing date."

"Dealing first with the time period for the statute of limitations of these no-fault claims, I agree with applicant that the applicable time limit is 6 years, and not the 3 years argued by respondent, Citiwide Auto Leasing, Inc. The statute of limitations for all claims arising under a contract would be 6 years from the accrual date of the claim, and that would be applicable to claims brought under a standard automobile insurance policy, or for claims brought under a car rental agreement. Mandarino v. Travelers Property Casualty Ins. Co., 37 AD3d 775, 831 NYS2d 452 (2d Dept., 2007); Travelers Indemnity Co. of Connecticut v. Glenwood Medical, PC, 48 AD3d 319, 853 NYS2d 26 (1st Dept., 2008)."

"An action to recover first-party no-fault benefits from a self-insured entity is subject to the same 6-year statute of limitations as an action against an insurer pursuant to a policy. Richard Denise, MD, PC v. New York City Transit Authority, 25 Misc. 3d 13, 887 NYS2d 742 (App. Term, 1st Dept., 2009; Spring World Acupuncture, PC v. New York City Transit Authority, 24 Misc. 3d 39, 884 NYS2d 556 (App. Term, 2nd Dept., 2009). Although respondent, Citiwide Auto Leasing, is self-insured for no-fault claims, it is dear from the case law that it does not benefit from a shortened statute of limitations period unavailable to automobile insurance companies that issued policies containing no-fault coverage. The coverage in this case is based on the mandatory no-fault endorsement applicable to sell-insurers, and not by virtue of a specific insurance contract entered into between claimant and Citiwide Auto Leasing, Inc."

"The more vexing legal issue is what constitutes the accrual date for the running of the statute of limitations in this case. Contrary to what was my previous understanding, counsel for applicant submitted a legal decision that provided it with an opportunity to allege a later accrual date for the running of the statute of limitations than what I though was either 30 days after the claim was received by the insurance carrier or the date the claim was denied, whichever is earlier. Micha v. Merchants Mutual Ins. Co., 94 AD2d 835, 463 NYS2d 110 (3rd Dept., 1983)."

"Instead, applicant has submitted the decision of Judge Peter Sweeney in the case of Chester Medical, PC v. Kemper Casualty Insurance Company, 2008 NY Slip Op. 52009U, 873 NYS2d 232 (Civil Court, Kings County, 2008) which held that an insurance carrier's denial of a claim before the expiration of the 30-day pay or deny provision of the regulations constituted an anticipatory breach of the insurance contract, allowing a health care provider to commence a lawsuit within 6 years after the claim became overdue. What that means in the present case is that respondent, Citiwide Auto Leasing, Inc. received applicant's bills on December 9th, 2003, and in the absence of verification requests it could have either paid or denied the claim for those bills on or before January 9th, 2004. Instead, respondent nearly immediately thereafter issued denials of applicant's bills on December 12th, 2003."

"Whereas I previously thought that under the Micha case cited above applicant had to demand arbitration within 6 years after December 12th, 2003, which would have been the accrual date for the statute of limitations, the court in Chester Medical held that the accrual date was actually January 9th, 2004 which was the date when the claims became overdue. Citing to a nearly 100 year old Court of Appeals decision in the case of Ga Nun v. Palmer, 202 NY 483, 96 NE 99 (1911), Judge Sweeney stated that "when someone wrongfully renounces a contract he has voluntarily entered into he can not justly complain if he is immediately sued for compensation in damages by a man whom he has injured; and it seems reasonable to allow an option to the injured party to either sue immediately (i.e. after the issuance of the denial) or to wait until the time when the act was to be done (i.e. when the claim became overdue, when it has remained unpaid more than 30 days after it has been presented).'"

"Since applicant in the instant case did demand arbitration on December 15th, 2009 (the AR-1 was sent to the AAA and respondents on December 15th, 2009 and received by the AAA on December 22nd, 2009), according to the Chester court the arbitration proceeding was commenced in a timely manner since it was instituted less than 6 years after the claim became overdue (which occurred on January 9th, 2004)."

"Although I may have some personal reservations about the import of the Chester decision, it did involve a claim for no-fault benefits, and it was decided on the basis of the regulations in effect at the present time. Furthermore, after applicant provided a copy of the Chester decision in its supplemental memorandum on March 30th, 2010, respondent did not submit any distinguishing legal authority undercutting the holding of that decision that the accrual date of the claim for statute of limitations purposes either when the claim is denied by respondent in the nature of an anticipatory breach of contract, or the end of the 30-day period calculated after a health care provider submits proof of claim, whichever is later."

"Thus, having rejected respondent, Citiwide Auto Leasing Inc's statute of limitations defense, and by also finding that State Farm is not the primary no-fault insurance carrier, and there being no other viable defense alleged by respondent, Citiwide Auto Leasing, Inc., I find that applicant has submitted sufficient evidence to establish a prima facie case, and I award applicant the total amount of $6,962.22. Therefore, my award is in favor of applicant and against respondent, Citiwide Auto Leasing, Inc., in the total amount of $6,962.22."

Comment: I am completely in agreement with the proposition that the rental car, not the renter's own auto policy, pays the PIP. That was settled by the Court of Appeals in Elrac v. Ward. The decision in Chester Medical, followed by this arbitrator, is interesting, although I am not sure it stands on solid ground. There is no question that the issuance of a denial is the day that the cause of action accrues and the claimant may sue or demand arbitration that day. But there is also some logic to the argument that the statute of limitations begins to run on the day the bill becomes overdue. In any event, there is a certain justice to this award, because Citiwide's stated argument--that the renter "used her own insurance" when she rented the car because she declined to purchase optional coverage at the time of the rental--is so legally baseless that the award, plus nearly seven years' interest, is well-deserved.
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Title Annotation:COURT SIDE
Author:Rogak, Lawrence N.
Publication:Insurance Advocate
Date:Jun 21, 2010
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