ALBANY, N.Y., November 23 – The New York Court of Appeals, in a six to one decision, concluded that Travelers Property Casualty Insurance Companys failure to timely request verification of a patients assignment of benefits to the Hospital for Joint Diseases precludes Travelers from contesting the validity of the assignment.

The court upheld the decision of the Appellate Division, Second Department.

New York and Presbyterian Hospital treated William Browne for injuries sustained in an auto accident and billed Travelers, via certified mail, for $24,344.96 for Brownes treatment. The hospital submitted a hospital billing form, a uniform billing form, and an assignment of benefits form. The assignment of benefits form was not signed by Browne, but said his signature was on file and was signed by William Browne by Peter Kattis, authorized representative. Travelers did not request additional verification within 10 days, nor did it pay or deny the claim within the 30 day period set by state regulations.

The hospital sued and Travelers cross-moved to dismiss on the grounds that the hospital lacked standing because it did not have a valid assignment of benefits. Supreme Court granted the hospitals motion, awarding the full amount of the bill with interest and attorneys fees, saying the hospital made out a prima facie case of entitlement to benefits after the defendant received the [claim forms] and the claim was overdue.

The court held that, regardless of the basis for Travelers challenge to the validity of the assignment, the insurers failure to object to the completeness of the forms or seek verification of the assignment as required by 11NYCRR 65.15(d) constitutes a waiver of the defenses herein.

Appellate Division affirmed, ruling that Travelers failure to timely object to the adequacy of the claims forms or seek verification of the assignment constituted a waiver of any defenses based thereon

Judge Victoria A. Graffeo, writing for the Court of Appeals, said, After Travelers obtained the NYS Form NF-5 and the assignment of benefits form " both of which plainly stated the patients signature was on file " it did not ask for further verification or request the original assignment, as permitted by the regulations. Travelers also failed pay or deny the claims within 30 calendar days of receipt of the hospitals proof of claim. Nevertheless, Travelers argues that its neglect in demanding verification of timely denying coverage is irrelevant because the hospitals failure to proffer a validly executed assignment equates to a lack of coverage.... We disagree.

She pointed out that there is no dispute that the hospital rendered the service, that Brownes policy with Travelers was in effect at the time of the accident, and that the policy covered the accident. In our view, any defect or deficiency in the assignment between Browne and the hospital simply does not implicate a lack of coverage warranting exemption from the preclusion rule. We therefore determine that the failure by Travelers to seek verification or the assignment in a timely manner prevents the carrier from litigating the issue now.

To conclude otherwise, Graffeo said, as proposed by the dissent, frustrates a core objective of the no-fault regime " to provide a tightly timed process of claim, disputation and payment (Presbyterian, 90 NY2d at 28l). Upon receipt of a no-fault claim, the regulations shift the burden to the carrier to obtain further verification or deny or pay the claim. When, as here, an insurer does neither, but instead waits to be sued for nonpayment, the carrier should bear the consequences of its nonaction. To allow an insurance company to later challenge a hospitals standing as an assignee merely encourages the carrier to ignore the prescribed statutory scheme.

Travelers contended that an assignment of benefits is a necessary component of the hospitals prima facie case for recovery of no-fault benefits. Even assuming that this is true, we conclude that an assignment form stating that the patients signature is on file satisfies that burden where the carrier does not timely take action to verify the existence of a valid assignment. Since Travelers does not otherwise contest the hospitals entitlement to no-fault payments, the courts below appropriately awarded summary judgment to the hospital.

Judge Eugene F. Piggott, in his dissent, said a carriers defense based on the lack of a valid assignment equates to a defense implicating lack of coverage within the insurance agreement and thus, should similarly not be precluded.

[The] policy here does not contemplate payment to the hospital in the first instance. Indeed, the hospital has no legal right to collect payment if and until a valid assignment is obtained from the patient. Thus, in my view, Travelers defense challenging the validity of the assignment is akin to a defense premised upon lack of coverage.

Further, contrary to the majoritys position, in my view, standing cannot be artificially created by a carriers failure to object within the time periods set forth in the no-fault insurance regulations. Put another way, a medical services provider cannot establish standing by merely relying upon a carriers pre-litigation inaction. By allowing a plaintiff to do so, the majority, in essence, creates a rule whereby a plaintiff can establish its standing by estoppel, as a result not only of a defendants inaction, but by its simple neglect, oversight or clerical error. I must take issue with the majoritys view that this position would encourage noncompliance with the no-fault statutory and regulatory scheme.

He went on to say that these matters are better resolved in an arbitration setting rather than through the courts, as has occurred here. Our decision today, in my view, encourages the use of the courts by eliminating an essential element of most lawsuits " standing, and runs the risk of encouraging this type of litigation at the carriers peril.

Chief Judge Judith Kaye and Judges Carmen Beauchamp Ciparick, Susan Phillips Read, Roberts S. Smith and Theodore T. Jones concurred with Judge Graffeos decision. Judge Eugene F. Pigott dissented and voted to reverse.