Barclay Damon
Barclay Damon

Legal Alert

New York State Appellate Court Recognizes Implied Private Right of Action Under the Prompt Pay Law

Recently, in Maimonides Med. Ctr. v. First United Am. Life Ins. Co. (2014 NY Slip Op 1441), the Appellate Division, Second Department held that Insurance Law 3224-a, known as the Prompt Pay Law, affords an implied private right of action, and that a health care provider may thus assert claims against an insurer for its alleged violation of the statute. Plaintiff, Maimonides Medical Center (“Maimonides”) furnished medical care and treatment to six patients who had supplemental Medicare insurance coverage policies with First United American Life Insurance Company (“First United”). Maimonides billed First United for more than $19 million for services rendered to those six patients. In response, First United paid Maimonides slightly more than $4 million. Following this, Maimonides filed a lawsuit against First United alleging, among other causes of action, violations of the Prompt Pay Law.

Under the Prompt Pay Law an insurer is required to pay undisputed claims within 30 days of receipt of an electronic submission (45 days if received by other means). If a claim is disputed, the insurer, within 30 days of receipt of the claim, is to pay any undisputed portion of the claim and to notify the health care provider in writing the reason the insurer is not liable to pay the claim. Alternatively, the insurer may request additional information in order to make a determination as to whether they are liable to pay the claim. If an insurer fails to comply with the Prompt Pay law they are obligated to pay the full amount of the claim, plus 12% interest per annum, computed from the date the claim was required to be paid.

Supreme Court denied First United’s motion to dismiss those causes of action based on violations of the Prompt Pay Law and found that a close reading of the statute revealed an express private right of action for patients and their providers to seek payment directly from an insurer. On appeal, the Appellate Division disagreed with the Supreme Court’s conclusion that the Prompt Pay Law provides an express private right of action; rather, the Appellate Division held that the Prompt Pay Law includes an implied private right of action. Thus, the Appellate Division affirmed the Supreme Court’s order.

The Appellate Division’s ruling focused on whether the creation of a private right of action would be consistent with the legislative scheme of the Prompt Pay Law. Beginning with an analysis of the language of the statute itself, the Court found that the Prompt Pay Law provides that an insurer “shall be obligated” to pay health care providers, in full settlement of the claim, the amount of the claim plus interest (Insurance Law 3224-a[c][1]). The Court found that this language imposes a specific duty upon insurers and creates rights for a health care provider, thus militating in favor of the recognition of an implied private right of action to enforce such rights.

The Court distinguished the Prompt Pay Law from Insurance Law § 2601, which it notes was aimed at the prevention of unfair settlement practices committed with such frequency as to indicate a “general business practice.” Courts have consistently refused to recognize a private right of action under § 2601, holding that unfair claims practices aimed at the general public are properly enforced only by the Superintendent of Insurance.

This decision affords health care providers and patients a powerful tool in redressing violations of the Prompt Pay Law.

Should you have questions regarding the information presented in this alert, please contact Anthony J. Piazza at (585) 295-4420 or apiazza@hblaw.com.