“Prompt Pay Law” Affords a Private Right of Action Against An Insurer Which Fails to Pay a Patient’s Undisputed Medical Claim

In a full-fledged opinion by Justice Austin, the Second Department determined the so-called “Prompt Pay Law” (Insurance Law 3224-a) affords an implied private right of action.  The law, therefore, can be enforced by a private lawsuit based upon its breach.  The defendant insurance company (First United) argued only the NYS Insurance Department could enforce the statute.

The Prompt Pay Law requires an insurer to pay undisputed claims within 30 days after receipt of an electronic submission or within 45 days after receipt by other means (see Insurance Law § 3224-a[a]). If a claim is disputed, the insurer is obligated to pay the undisputed portion of the claim, if there is any, and, within 30 days of receipt of the claim, notify the policyholder, covered person, or health care provider in writing of the specific reason that the insurer is not liable to pay the claim (see Insurance Law § 3224-a[b][1]). In the alternative, the insurer may request additional information necessary to determine its potential liability with respect to payment of the claim (see Insurance Law § 3224-a[b][2]). First United allegedly did neither. An insurer that fails to comply with the provisions of the Prompt Pay Law is obligated to pay the health care provider or the person submitting the claim the full amount of the claim, plus 12% interest per annum, to be computed from the date the claim was required to be paid (see Insurance Law § 3224-a[c][1]). * * *

Where a statute does not expressly confer a private cause of action upon those it is intended to benefit, a private party may seek relief under the statute “only if a legislative intent to create such a right of action is fairly implied’ in the statutory provisions and their legislative history” … . This inquiry involves three factors:” (1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme'” … .Only the third factor, which is generally the “most critical” … is disputed here. * * *

A review of the legislative history of the Prompt Pay Law reflects that the law was directed toward the protection of health care providers and patients from late payment of claims, and was not primarily designed to provide a mechanism for preventing harm to the public in general.  Maimonides Med Ctr v First United Am Life Ins Co, 2014 NY Slip Op 01441, 2nd Dept 3-5-14