Arzu v NYC Tr. Auth.
Annotate this CaseDecided on January 9, 2012
Civil Court of the City of New York, Kings County
Lucia Arzu, Plaintiff,
against
NYC Transit Authority, Defendants.
33018/2001
Attorneys for Plaintiff:
Bruce S. Reznick, P.C.
958 East 81st Street
Brooklyn, NY 11236
Attorneys for Defendant:
Jones, Jones & O'Connell, LLP
45 Main Street, 11th Floor
Brooklyn, NY 11201
Katherine A. Levine, J.
Recitation, as required by CPLR 2219(a), of the papers considered in the review of this motion:
PapersNumbered
Notice of Motion and Affidavits Annexed......................................................1
Order to Show Cause and Affidavits Annexed.....................................
Answering Affidavits........................................................................................2
Replying Affidavit of defendant......................................................................3
Exhibits...................................................................................................
Other: .......................................................................................................
In this rarely ruled upon issue, the court must decide what the term "undue delay" means, as contained in 11 NYCRR § 65-3.9(d), so as to warrant the stay of accumulation of interest that a no fault applicant who timely files a lawsuit is ordinarily entitled to.
Plaintiff Lucia Arzu ("Arzu" or "plaintiff"), commenced this action on January 29, 2001 against defendant New York City Transit Authority ("Authority" or "defendant") seeking recovery of no fault benefits in the amount of $25,000, attorney fees and interest at a rate of 2% per month. Defendant served its answer and discovery demands on July 13, 2001. Plaintiff failed to serve the responses for nearly four years resulting in defendant filing a motion to preclude plaintiff from offering evidence. On May 4, 2005, the parties resolved defendant's motion by entering into a So-Ordered stipulation whereby plaintiff was to provide copies of the allegedly unpaid bills within 45 days or be precluded from offering such evidence at trial. While defendant disputes that it ever received the sought disclosure, plaintiff's submissions indicate that [*2]on May 10, 2005, plaintiff mailed the bills to the defendant by certified mail. On December 17, 2010, defendant served plaintiff with a notice to resume prosecution and file a note of issue within ninety days as per CPLR §3216(b)(3). Plaintiff thereupon filed a certificate of readiness for trial.
After argument, the Court took submissions solely on the issue of whether plaintiff is precluded from collecting interest allowed by 11 NYCRR §65-3.9 after it failed to prosecute the case for five years after complying with defendant's discovery requests. Plaintiff contends that the tolling provisions do not apply because defendant could have served a notice to resume prosecution and file a note of issue five years ago upon receiving the discovery. In essence, plaintiff contends that the burden rests upon the defendant insurer to ensure that prosecution of the claim proceeds expeditiously, hence obviating any claim of undue delay on the part of plaintiff.
The no-fault automobile insurance system is designed "to ensure prompt payment of claims incurred by accident victims without regard to fault or negligence, to reduce the burden on the courts and to provide substantial premium savings to New York motorists." LMK Psychological Services PC v. State Farm Mut. Auto. Ins. Co., 12 NY3d 217, 221 (2009) citing Hosp. For Joint Diseases v. Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 317 (2007). The core objective of the no-fault scheme is to "provide a tightly timed process of claim, disputation and payment." Hosp. for Jt. Diseases, supra at 319. Therefore, an insurer's failure to pay or deny a claims within the requisite time period of 30 days "carries significant consequences, including the payment of attorneys' fees and interest." LMK Psychological, supra, 12 NY3d at 222. Hosp. For Joint Diseases, supra at 317.
Insurance Law § 5106 (a) provides that first-party benefits are overdue "if not paid within thirty days after the claimant supplies proof of the fact and amount of loss sustained . . . [and that] overdue payments shall bear interest at the rate of two percent per month. The interest provision of 24% per annum "is punitive in nature...and designed to inflict an economic sanction or penalty on those insurers who do not comply with the No-Fault time Frames." East Acupuncture. P.C. v. Allstate, 61 A.D. 202, 210 (2d Dept. 2009). See, Canarsie Medical Health v. National Grange Mut. Ins. Co., 21 Misc 3d 791, 794 (Sup Ct., NY Co. 2008).
Significantly, claimants or applicants are also required to act promptly or face the tolling of insurance. Pursuant to 11 NYCRR §65-3.9(c), where the applicant does not commence litigation within 30 days of the denial of the claim or payment of benefits, the interest shall be tolled until such action is taken. Pursuant to 11 NYCRR §65-3.9(d), interest shall accrue once the applicant has submitted a dispute to arbitration of the courts "unless the applicant unreasonably delays the ...court proceeding." Thus, "[f]ailure to act promptly after a denial of claim results in a toll of the statutory interest provisions, for to do otherwise would reward a recalcitrant plaintiff with a windfall of punitive interest payments and would contravene the legislative goal of promptly resolving no fault claims." Devonshire Surgical Facility et al v. American Transit Ins. Co., 2011 NY Slip Op 50793(U), 31 Misc 3d 1221(A) (Civil Ct., NY Co., 2011). See East Acupuncture. P.C., supra, 61 AD3d at 210. [*3]
It appears that only one court has defined the term "unreasonable delay," as contained in 11 NYCRR §65-3.9(d ), within the context of the prolongation of litigation after the claim has been filed in court. In Igor Shtarkman v. Allstate,. 191 Misc 2d 76 (Dist Ct. Nass. Co. 2002) the defendant moved for an order to stay the accrual of interest, for two and a half years, nunc pro tunc, to the date it served its responses to plaintiff's discovery demands, on the grounds that plaintiff had unreasonably delayed the prosecution of the case. As in the instant matter, the plaintiff responded that a stay on accrual of interest was not justified as the defendant could just as easily moved the matter forward. The court adopted the plaintiff's position, finding that the plaintiff merely "neglected to proceed" in the prosecution of the case, as opposed to "unreasonably delaying" the proceeding which presumed a finding that plaintiff affirmatively obstructed the case. 191 Misc 2d at 78-79.
This Court disagrees with the Shtrakman ruling. Pursuant to the tenets of statutory construction, "the starting point in any case of interpretation must always be the language itself, giving effect to the plain meaning thereof", Majewski v. Broadalbin-Perth Cent. School Dist. 91 NY2d 577, 583 (1998); East Acupuncture P.C. v. Allstate, 61 AD3d 202, 208-09 (2d Dept. 2009). 11 NYCRR §65-3.9 contains two distinct subdivisions which clearly placed the burden upon the applicant to move the case forward or face the tolling of the accrual of interest. Subd.(c) punishes an applicant who does not institute the lawsuit within 30 days after the receipt of a denial of claim form by staying the accrual of interest until such claim is filed. Once the claim is filed interest may accrue unless the applicant "unreasonably delays" the proceeding (Subd. d).
Per the clear language of the regulation, the interest which accrues on overdue no fault penalties acts as an incentive for both insurers and claimants to act promptly. The insurer must first promptly adjust the claims or face payment of interest to an applicant who prevails in litigation. However, once a denial or payment of benefits has been made by the insurer, the incentive to act promptly switches to the applicant who first initiate the lawsuit within 30 days of the denial and must then not unreasonably delay the prosecution of the case in order to avoid the tolling of interest. See, Devonshire Surgical, supra at 4; See also, LMK Psychological Services, Inc., 12 NY3d 217, 223-24 (2009) (the Superintendent of Insurance has interpreted the tolling of interest provision contained in subdivision (c) to apply, regardless of whether the particular denial at issue was untimely so as to encourage applicants to swiftly seek to resolve any dispute). Canarsie Med. Health, P.C. v. National Grange Mut. Ins. Co., 21 Misc 3d 791, 797 (Sup. Ct., NY Co. 2008)(The regulation contains a "built-in protection against potential delay by providing that where an applicant chooses not to timely press forward to seek redress for a denial, there will be no interest penalty assessed against the insurer until such time as the applicant chooses a remedy. This is in keeping with the intent of the No-Fault Law as a whole because it seeks to encourage the parties moving forward toward a quick resolution, while not economically favoring one side or the other.").
Here, plaintiff's delay in prosecuting the case is especially egregious. Plaintiff first waited nearly four years to respond to discovery demands resulting in defendant filing a motion to preclude plaintiff from offering evidence. Only upon receipt of this motion did plaintiff enter into a So-Ordered stipulation whereby plaintiff was to provide copies of the allegedly unpaid [*4]bills within 45 days or be precluded from offering such evidence at trial. Defendant disputes that it ever received the sought disclosure as a rationalization as to why it did not serve plaintiff with a notice to resume prosecution and file a note of issue for approximately five years. Yet, ironically, plaintiff claims that it actually mailed the sought after discovery in 2005. Hence, by its own admission, plaintiff concedes that it waited five years to resume prosecution of the case, and that it was spurred to action by being served by defendant with a notice to resume prosecution and file a note of issue.
To make both the insurer and applicant equally responsible for moving the case forward would contravene both the explicit language of the regulations and the intent of the legislation by creating an incentive for the applicant to do nothing and hence receive a windfall in punitive interest payments as the case languished in perpetuity. As such, this Court holds that inaction on the part of the applicant for five years after it received discovery from the defendant constitutes an unreasonable delay and directs that the interest be tolled from one year after plaintiff complied with the discovery request.
The foregoing shall constitute the Decision and Order of the Court.
Dated: January 9, 2012
Katherine A. LevineJudge, Civil Court
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