This appeal was taken from an order of the Civil Court, Kings County (Milagros A. Matos, J.). The order granted plaintiffs motion for summary judgment to the extent that statutory interest on theclaims shall be calculated pursuant to 11 NYCRR 65.15(h)(1). The Appellate Term reversed and remanded to the court below for a new calculation of interest in accordance with this decision.

In this action to recover overdue assigned first-party no-fault benefits, the parties stipulated to settle the principal amount owed on all claims for which defendants denials were timely and for which defendant issued no denials, as well as the statutory interest and attorneys fees due thereon. Unable to agree on the date interest accrued on the claims for which defendant issued untimely denials, the parties stipulated to submit the question to the court below. The plaintiff sought interest from 30 days after the claims submission, while defendant insisted that interest accrued only from the date plaintiff commenced the action. The court found for plaintiff and defendant appealed.

An insurer is obligated to pay or deny a claim within 30 calendar days of the receipt of proof of claim (11 NYCRR 65-3.8 [c])[FN1]. Interest accrues when the payment of no-fault benefits is overdue (11 NYCRR 65-3.9 [a]), and benefits are overdue only if not paid within 30 calendar days of when the insurer receives a claim or verification. The effect of a denial on interest is set forth in 11 NYCRR 65-3.9 (c), which states that an applicant must request arbitration or commence an action within 30 days after the receipt of a denial of claim form or payment of benefits calculated pursuant to Insurance Department regulations and bars interest until such action is taken.

Where, as here, there is no payment and an untimely denial, interest accrues 30 days from the date the claim is submitted. Interest is thereafter stayed only where the claimant fails to submit the claim to arbitration or to commence an action within 30 days after receipt of the untimely denial of claim and resumes when either action is taken.

Noting that 11 NYCRR 65-3.9 (a) addresses both applicant and assignee, the court below construed the absence of a reference to an assignee in 11 NYCRR 65-3.9 (c) to manifest the intent of the superintendent of insurance to exclude assignees from the requirement that an applicant seek arbitration or commence an action within 30 days of the receipt of the denial of claim form or be barred from interest until such action is taken.

However, in an amicus brief, the superintendent states that in promulgating 11 YCRR 65-3.9 (c), the Department of Insurance had no intent to distinguish eligible injured persons from their assignees when it provided that interest on denied claims is tolled until the applicant seeks arbitration or commences an action, notwithstanding what it characterizes as a redundant reference to assignees in 11 NYCRR 65-3.9 (a). In matters of statutory and regulatory interpretationlegislative intent is the great and controlling principle, and the proper judicial function is to discern and apply the will of the [enactors].

As the Legislature granted the superintendent broad power to interpret, clarify, and implement the legislative policy in the no-fault arena, when the superintendent properly crafts a rule within the scope of[his or her] authority, that rule has the force of law and represents the policy choice of this state. Further, an agencys interpretation of a regulation it promulgated is entitled to deference. Accordingly, deference must be accorded the superintendents expression of intent herein with respect to the no-fault regulations, in light of the superintendents special competence and expertise with respect to the insurance industry unless, according to the normative rules of construction, the purported intent is unreasonable or irrational or so conflicts with the plain meaning of the promulgated language that the courts are obligated to disregard it.

A review of the use of applicant, eligible injured person, and assignee in the no-fault regulations reveals that, while they are often employed interchangeably and occasionally redundantly, context invariably yields content. Many regulations refer to applicant generically, where eligible injured persons and their provider-assignees are clearly meant (e.g. 11 NYCRR 65-3.2 [b]; 65-3.3 [a]; 65-3.8 [b]; 65-4.2 [b] [1] [i]). Other regulations refer to applicant when only an eligible injured person can be meant (11 NYCRR 65-3.8 [g]), and still others address, variously, an eligible injured person or such persons attorney (11 NYCRR 65-3.6 [a]) and an applicant and such persons attorney (11 NYCRR 65-4.6 [b]) when provider-assignees are also contemplated.

Still other regulations refer only to applicant when either an eligible injured person or both eligible injured persons and their assignees are meant, depending on the remedy provided therein (11 NYCRR 65-3.5 [e]; 65-3.5 [l]).

Indeed, the superintendent, whose interpretation of the Insurance Departments regulations, as noted, is entitled to deference, acknowledges that the terms applicant and assignee are used elsewhere in the regulations where applicant, employed generically, and in lieu of claimant would have sufficed. The superintendent urges that such is the case with 11 NYCRR 65-3.9 (a)...

There is an additional reason why it is not reasonable to suppose the Insurance Department intended to omit reference to assignees in 11 NYCRR 65-3.9 (c). The interest provision, presently at 24 percent per annum, is punitive in nature and designed to inflict an economic sanction or penalty on those insurers who do not comply. As the no-fault law is in derogation of the common law and must be strictly construed, the regulations must be interpreted in a manner conducive to the legislative goal of deterring dilatory responses to claims.

Indeed, if interest is a penalty provision and a key mechanism of the Legislatures mandate to establish a quick, sure and efficient system for obtaining compensation for economic loss suffered as a result of accidents, the imposition of a disparate application of the penalty depending on whether the applicant is an eligible injured person or a provider/assignee would contravene that goal.

The construction adopted by the court below creates the anomalous result that, rather than acting promptly to resolve a dispute, assignees only may decline to act on a claim upon which a mandatory punitive interest penalty is imposed, for as long as the statute of limitations for breach of contract has yet to run, and receive interest at a rate more than twice what is provided for ordinary breach of contract actions. The regulations do not permit eligible injured persons to delay arbitration or suit for such a purpose and there is no rationale discernable in purposes of the no-fault law to support such a result.

The regulations, read as a whole in accordance with the rules of construction, the deference to be accorded the superintendents assertion of intent, and the undesirable consequences of exempting assignees from the limitation imposed by 11 NYCRR 65-3.9 (c), lead to the conclusion that the reference to applicant in 11 NYCRR 65-3.9 (c) includes an eligible injured persons assignee. Accordingly, the matter is remanded to the court below for a calculation of thestatutory interest due in accordance with the decision herein.

Comment: In case you dont realize what this was all about, the plaintiff was arguing that the term applicant did not refer to medical providers, who are assignees of the applicants claim, so that the regulation which states that interest does not begin to run until the applicant files a lawsuit or arbitration, would not apply to them. If the lower courts ruling had been upheld, it would permit medical providers to delay filing suit or arbitration for years, until the statute of limitations had almost run out, allowing interest to accrue at two percent per month, and thus reap a bonanza in interest. This Appellate Term ruling confirms that providers, as well as the injured person, are bound by the rule that if they do not file suit or arbitration within 30 days of the date of denial (or the date the denial should have been issued), then interest does not begin to accrue until they do file. [IA]

East Acupuncture, P.C. a/a/o Arkady Derin, Denis Vassiljev, Stella Martyanova, Leonid Petlakh, Vickran Mohabir, Dora Simcha, Leon Diggs v. Allstate Insurance Company, 2007 NYSlipOp 27109 (App. Term, 2d Dept.)