In the Matter of Medical Society
of the State of New York, et al.,
Appellants,
v.
Gregory Serio, &c., et al.,
Respondents.
2003 NY Int. 113
This appeal tests the authority of the Superintendent
of Insurance to promulgate certain new regulations respecting no-
fault automobile insurance benefits, primarily those reducing the
time frames for claiming and proving entitlement to such
benefits. Petitioners challenge the regulations on a variety of
statutory and constitutional grounds. We hold that promulgation
of the challenged regulations was within the lawful authority of
the Superintendent; that their adoption was undertaken in
substantial compliance with the State Administrative Procedure
I.
In 1973, the Legislature enacted the Comprehensive Motor Vehicle Automobile Insurance Reparations Act ( see L 1973, ch 13), which supplanted common law tort actions for most victims of automobile accidents with a system of no-fault insurance. Under the no-fault system, payments of benefits shall be made as the loss is incurred (Insurance Law § 5106 [a]). The primary aims of this new system were to ensure prompt compensation for losses 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 ( see Governor's Mem approving L 1973, ch 13, 1973 McKinney's Session Laws of NY, at 2335).
For 30 years, the Superintendent has promulgated regulations implementing the No-Fault Law, presently codified in article 51 of the Insurance Law.
In 1977, the Superintendent first adopted regulations
establishing time frames in which to submit forms and notices
pertaining to no-fault claims. Those regulations, adopted as
Regulation 68 and codified at 11 NYCRR part 65, required an
accident victim to submit a notice of claim to the insurer within
90 days of the accident (11 NYCRR 65.11 [m][2]; 65.12). Proof of
medical expenses for which compensation was sought was required
Between 1992 and 2001, reports of suspected automobile insurance fraud increased by 275%, the bulk of the increase occurring in no-fault insurance fraud. Reports of no-fault fraud rose from 489 cases in 1992 to 9,191 in 2000, a rise of more than 1700%. No-fault fraud accounted for three-quarters of the 16,902 reports of automobile-related fraud received by the Insurance Department's Frauds Bureau in 2000, and more than 55% of the 22,247 reports involving all types of insurance fraud. In 1999, the Superintendent established a No-Fault Unit within the Frauds Bureau to focus specifically on no-fault fraud and abuse. By one estimate, the combined effect of no-fault insurance fraud has been an increase of over $100 per year in annual insurance premium costs for the average New York motorist.
According to the Superintendent and certain
Around 90 days after the staged accident, the insurer
would be notified of the claim, but not of the large number of
bills to follow. When the insurer investigated, only a wrecked
vehicle remained. Later, just before expiration of the 180-day
period for submitting proof of loss, the medical mills would
submit stacks of false bills generated over six months, often
reaching the statutory no-fault cap of $50,000 for each
passenger.[1]
By the time the insurer received the bills and
attempted to investigate, the passenger would be pronounced
cured, thus frustrating the insurer's ability to perform its own
In 1999, in an effort to combat this widespread abuse,
the Superintendent proposed an amended Regulation 68. Among the
most significant change was a reduction in the time frames
applicable to the filing of notices and proofs of claim -- a
consequence of the Superintendent's determination that much of
the abuse was associated with the lengthy time frames within
which claims could be presented to insurers. The Superintendent
also concluded that the shorter time frames would better
effectuate the legislative purpose of providing prompt
compensation as the loss is incurred (Insurance Law § 5106
[a]). Petitioners successfully challenged these regulations for
failure to substantially comply with the State Administrative
Procedure Act (SAPA) ( see Matter of Medical Society of the State
of New York, Inc. v Levin, 185 Misc 2d 536 [Sup Ct, NY County
2000], affd 280 AD2d 309 [1st Dept 2001] [ Medical Society I]).
While the appeal was pending, the Superintendent re-initiated the
rulemaking process and promulgated revised Regulation 68
Like the regulations invalidated in Medical Society I, the revised regulations, now in effect, reduce the time limit for filing a notice of claim from 90 to 30 days (11 NYCRR 65-1.1; 65- 2.4 [b]). They also reduce the time in which to submit proof of loss due to medical treatment from 180 to 45 days, and proof of work loss from as soon as reasonably practicable to 90 days (11 NYCRR 65-1.1; 65-2.4 [c]). At the same time, the new regulations relax the standard for accepting late filings, replacing the previous rule that late filings were permitted only when written proof showed that compliance with a deadline was impossible (11 NYCRR 65.11 [m][2], [3]; 65.12), with a standard excusing a missed deadline when there is a clear and reasonable justification for the delay (11 NYCRR 65-1.1; 65-2.4 [b], [c]).
The revised regulations further specify that claims may
never be denied as untimely when the reason for the delay is the
failure of an employer or other third party to provide
information necessary to establish proof of claim for lost wages
(11 NYCRR 65-3.5 [m]). In addition, insurers are directed to
establish standards for review of their determinations that
Shortly before the revised regulations were scheduled
to take effect, petitioners, by order to show cause, brought this
proceeding seeking a declaration of invalidity pursuant to CPLR 3001 and annulment of the regulations pursuant to CPLR article
78. Supreme Court declared that promulgation of the revised
regulations did not constitute improper legislative policymaking
or an improper delegation of rulemaking authority and dismissed
the petition insofar as it sought article 78 relief. The court
concluded that the Superintendent had acted within the scope of
his authority and jurisdiction, and that respondents had
II.
Responsibility for administering the Insurance Law
rests with the Superintendent of Insurance ( see Insurance Law §
301), who has broad power to interpret, clarify, and implement
the legislative policy ( Ostrer v Schenck, , 41 NY2d 782, 785
[1977]). Although petitioners dispute that the substantially
reduced time frames are necessary to combat concededly rampant
fraud, the Superintendent's interpretation, if not irrational or
unreasonable, will be upheld in deference to his special
competence and expertise with respect to the insurance industry,
unless it runs counter to the clear wording of a statutory
provision ( Matter of New York Public Interest Research Group,
Inc. v New York State Dept. of Ins., , 66 NY2d 444, 448 [1985]
[ NYPIRG]). Petitioners contend that the current regulations
violate the constitutional doctrine of separation of powers;
exceed the scope of the Superintendent's authority to interpret
and implement the Insurance Law; and improperly delegate
rulemaking authority to private insurers in violation of the
State Constitution and the State Administrative Procedure Act.
We consider each of these challenges in turn.
Separation of Powers The legislative power of this state is vested in the
Senate and Assembly (NY Const, art III, § 1). While the
Pursuant to Insurance Law § 301, [t]he superintendent
shall have the power to prescribe and from time to time withdraw
or amend, in writing, regulations, not inconsistent with the
provisions of [the Insurance Law] * * * (a) governing the duties
assigned to the members of the staff of the [insurance]
department; (b) effectuating any power, given to him under the
provisions of [the Insurance Law] * * * to prescribe forms or
otherwise make regulations; (c) interpreting the provisions of
[the Insurance Law] * * * and (d) governing the procedures to be
followed in the practice of the department. This broad grant of
regulatory power does not cede to the executive branch
fundamental legislative or policymaking authority, which remains
at all times with the Legislature. Accordingly, the enabling
statute does not violate the separation of powers.
Since the Legislature's initial grant of authority to
the administrative agency was constitutional, the next question
is whether the Superintendent exceeded the scope of his
constitutional authority by engaging in inherently legislative
activity by promulgating the challenged regulations. In this
regard, Boreali is instructive. In Boreali, the Public Health Council -- authorized by
its enabling statute to establish sanitary regulations deal[ing]
with any matters affecting the * * * preservation and improvement
of public health (Public Health Law § 225 [5][a]) -- promulgated
a comprehensive code to regulate tobacco smoking in areas open to
the public, thereby effectuat[ing] a profound change in social
and economic policy ( Boreali, 71 NY2d at 8). The Council acted
following the Legislature's failure to adopt any comprehensive
laws governing smoking and so, without any legislative guidance,
reached its own conclusions about the proper accommodation among
nonsmokers, smokers, affected businesses and the public. Even
under the broadest and most open-ended of statutory mandates, an
administrative agency may not use its authority as a license to
correct whatever societal evils it perceives ( id. at 9). The
Council exceeded the scope of its constitutional authority in
drafting a code embodying its own assessment of what public
policy ought to be ( id.), thus transgressing the difficult-to-
Here, by contrast, the Superintendent did not
promulgate regulations on a blank slate without any legislative
guidance, nor did the revised regulations effectuate a profound
change in social and economic policy. The cornerstone of
administrative law is derived from the principle that the
Legislature may declare its will, and after fixing a primary
standard, endow administrative agencies with the power to fill in
the interstices in the legislative product by prescribing rules
and regulations consistent with the enabling legislation ( Matter
of Nicholas v Kahn, , 47 NY2d 24, 31 [1979]). That occurred here. According to petitioners, however, only the
Legislature, not the Superintendent, may prescribe time limits
for filing no-fault claims.[3]
But contrary to petitioners'
contention, the absence of a specific statutory delegation of
authority to establish time frames does not bar the challenged
regulations. The Superintendent has, for more than 25 years and
Nor do the reduced time limits unlawfully create a new
class of exclusion from coverage. Insurance Law § 5103 (b) lists
the permissible categories of persons who may be excluded from
no-fault coverage. In Servido v Superintendent of Ins. (53 2
1041 [1981], revg on dissenting op 77 AD2d 70, 76-86 [1st Dept
1980]), we held that the Superintendent has no power to create
any new exclusion by regulation. There, the Superintendent had
promulgated a regulation excluding from coverage uninsured family
members, a class of persons not enumerated in Insurance Law §
5103 (b). Here, however, the challenged regulations create not a
new category of exclusion, but rather merely a condition
Nevertheless, petitioners assert that the reduced time
frames adopted by the Superintendent will have the effect of
denying benefits to innocent accident victims who fail to meet
the shortened deadlines. Of course, any limitation period,
including the longer period in existence since 1977, will, by
definition, result in some time-barred claims. But because the
Superintendent's determination does not run counter to the clear
wording of any statutory provision, his expert judgment that the
reduced time frames will not have the effect of excluding a
significant number of legitimate claims is not to be second-
guessed by the courts. As represented at oral argument by
counsel for respondents, in the year and a half that the
regulations have been in effect, petitioners' predictions that
thousands of innocent accident victims will fail to meet the new
filing deadlines and be denied benefits, or that hospitals or
other medical providers will prove unable to bill for services
within 45 days, appear not to have materialized. In any event,
the Superintendent has determined that the revised regulations
are the most effective means of advancing the legislative intent
of providing prompt payment of benefits as the loss is incurred,
while reducing rampant abuse. That being so, this Court may not
substitute its judgment for that of the Superintendent, but may
determine only whether the Superintendent acted within the scope
Article IV, § 8 of the New York State Constitution
mandates that [n]o rule or regulation made by any state
department * * * shall be effective until it is filed in the
office of the department of state. SAPA § 102 (2)(a)(i), in
turn, defines a rule as the whole or part of each agency
statement, regulation or code of general applicability that
implements or applies law, or * * * the procedure or practice
requirements of any agency, including the amendment, suspension
or repeal thereof. Petitioners contend that in requiring insurers to
establish standards for reviewing late-filed claims ( see 11 NYCRR
65-3.5 [l]), the revised regulations improperly delegate
rulemaking authority to private companies. They further argue
that the failure of the Superintendent to file these insurer
standards as rules with the Department of State and to publish
them in the New York Codes, Rules and Regulations violates the
State Constitution and SAPA. In Matter of New York City Tr. Auth. v New York State
Dept. of Labor (88 2 225, 229 [1996] [NYCTA]), we held that
Here, the actual rule -- that late filing must be
excused upon a showing of clear and reasonable justification
for the delay -- has been duly promulgated by the Superintendent
and adopted and published in compliance with the Constitution and
SAPA. This standard is significantly more flexible than that
contained in the former regulations, in which late filing could
be excused only when compliance with a deadline was impossible.
Also incorporated into the revised regulations is the fixed,
general principle that claims may never be denied as untimely
when the reason for the delay is the failure of an employer or
other third party to provide information necessary to establish
proof of claim for lost wages ( see 11 NYCRR 65-3.5 [m]). Contrary to petitioners' contention, the
Superintendent's further action in directing that insurers
establish objective standards for reviewing late claims does not
delegate rulemaking authority within the meaning of SAPA.
Rather, this requirement affords additional protection to
claimants by ensuring that insurers cannot deny claims based on
subjective or arbitrary criteria. By regulation, the insurers'
Since these standards encompass case-specific
mitigating factors and vest the decisionmakers with significant
discretion with which to independently exercise their
professional judgment, the standards constitute not rules but
guidelines ( see NYCTA, 88 NY2d at 229-230; Schwartfigure v
Hartnett, , 83 NY2d 296, 301 [1994]). Choosing to take an action
* * * based on individual circumstances is significantly
different from implementing a standard or procedure that directs
what action should be taken regardless of individual
circumstances ( Alca Indus., Inc. v Delaney, , 92 NY2d 775, 778
[1999]). Accordingly, the standards need not be filed with the
Department of State. Nor is self-regulation by private parties forbidden, as
long as the delegation of authority is properly circumscribed by
agency oversight. As this Court noted in 8200 Realty Corp. v
Lindsay (27 2 124, 131-132 [1970]), That members of a complex
industry play a part in guiding government to a fair regulation
of the industry is an obvious advantage as long as government
Article 2 of the State Administrative Procedure Act
governs administrative rulemaking in New York. Pursuant to SAPA
§ 202 (8), each rule or regulation proposed by an agency must be
promulgated in substantial compliance with SAPA §§ 202 (setting
forth general procedures for rulemaking), 202-a (requiring
consideration of the regulatory impact of the proposed rule), and
202-b (requiring consideration of regulatory flexibility for
small businesses). Petitioners allege that the promulgation of
the revised regulations did not comport with this statutory
standard. According to petitioners, respondents failed to
analyze alternative approaches raised in public comments made
pursuant to SAPA §§ 202-a, 202-b, and 202 (5); failed to supply
an adequate Regulatory Impact Statement (RIS) and Regulatory
The record reveals, however, that the revised
regulations were indeed promulgated in substantial compliance
with SAPA. During the rulemaking process, respondents -- having
received public comments from a wide array of interests and in an
attempt to cure the procedural shortcomings identified in Medical
Society I -- made substantive revisions to the proposed
regulations and issued a Notice of Revised Proposed Rulemaking
that contained a revised Regulatory Impact Statement (RIS), a
revised Regulatory Flexibility Analysis for Small Businesses and
Local Government (RFA), a Revised Job Impact Statement, a Revised
Rural Area Flexibility Analysis, and an Assessment of Public
Comment. The Revised RIS included a statement of alternative
suggestions received during the public comment period and an
explanation of why most were not adopted; identified suggestions
received that were adopted and incorporated into the final
version of the revised regulations; and contained statements
regarding the potential costs and paperwork implications of the
revised regulations for insurers, self-insurers, health care
providers, and claimants. The Revised RFA, too, discussed the impact that the
revised regulations may have on small businesses, including
health care providers, transportation companies, billing
agencies, attorneys, and local governments, and concluded that
any increased costs associated with the revised regulations would
likely be offset by greater efficiencies in the claims process,
more prompt payment of benefits, and reductions in systemic fraud
and abuse. The Assessment of Public Comment responded to a
variety of public comments and set forth the reasons why the
Insurance Department regarded some suggestions as unworkable or
less efficacious than those proposed in the revised regulations.
In response to comments that the time period for comment was too
short, respondents extended the public comment period for an
additional 15 days. In addition to the provisions relating to filing
deadlines, the new regulations amended certain other provisions
of the regulatory scheme, several of which petitioners contend
violate the Insurance Law. Pursuant to Insurance Law § 5106 (a), benefits are
overdue if not paid by the insurer within 30 days after
submission of proof of loss ( see also 11 NYCRR 65-3.8). The
statute further provides that all overdue payments shall bear
interest at the rate of two percent per month ( see Insurance Law
§ 5106 [a]). Under the revised regulations, this interest is no
Insurance Law § 5106 (a) further provides that if a
valid claim or portion is overdue, claimants shall also be
entitled to recover reasonable attorney fees for services
necessarily performed in connection with securing payment of the
overdue claim, subject to limitations promulgated by the
superintendent in regulations (emphasis added). Under the
revised regulations, attorney fees are no longer to be paid to a
health care provider who submits claims in excess of the
applicable fee schedules established pursuant to Insurance Law §
5108, except when the charges involve interpretation of the
schedules or inadvertent miscalculation or error (11 NYCRR 65-4.6
[i]). This amendment was adopted in order to deter health care
providers from overcharging by filing claims in excess of the
amount to which they are statutorily entitled, and constitutes a
permissible limitation[] promulgated by the Superintendent in
regulations (Insurance Law § 5106 [a]). The new regulations no longer permit the assignment to
health care providers of benefits for non-health related services
(typically housekeeping and transportation expenses) (11 NYCRR
Finally, Insurance Law § 5106 (b) provides that
[e]very insurer shall provide a claimant with the option of
submitting any dispute involving the insurer's liability to
pay * * * benefits * * * the amount thereof or any other matter
which may arise [with respect to overdue benefits] * * * to
arbitration pursuant to simplified procedures to be promulgated
or approved by the superintendent. The revised regulations thus
In short, we agree with Supreme Court and the Appellate
Division in rejecting petitioners' challenges. Regulation 68
does not transgress the lawful authority of the Superintendent of
Insurance or the State Administrative Procedure Act. Accordingly, the order of the Appellate Division should
be affirmed, with costs. 1 A second common form of no-fault fraud involved padding
otherwise legitimate claims with unnecessary and excessive office
visits and diagnostic tests. 2 Days before the effective date of September 1, 2001,
Supreme Court stayed enforcement of the revised regulations. On
April 4, 2002, however, the Appellate Division denied
petitioners' motion for a further stay, and the regulations have
been in effect since that date. 3 We note that in 1997, the Legislature considered
legislation to reduce the time frames for the filing of no-fault
claims to those since adopted by the Superintendent. In opposing
that legislation, one of the petitioners here argued before the
Legislature that the proposed statute unnecessarily usurp[s] the
authority vested in the Superintendent of Insurance to promulgate
those regulations deemed to be necessary to implement the No-
Fault Reparations Act * * * and in the absence of any proposed
amendment to his regulation, the Legislature should refrain from
substituting its judgment as to what the time limits for timely
notice should be in this area. 4 See e.g. 22 NYCRR 202.16 (g) [setting time limit for
responses to demands for expert information in matrimonial
proceedings, despite silence of CPLR 3101 (d)]; 22 NYCRR 202.12
(b) [setting time limit for preliminary conference not provided
for in CPLR]; 10 NYCRR 63.4 (a) [setting time limit for medical
examiners to report HIV infection as required by Public Health Law § 2786]; 18 NYCRR 387.14 [setting time limit for food stamp
eligibility, despite silence of Social Services Law § 95]. 5 We note that in another context, the Legislature itself
has established a time limit of 30 days for providing notice of a
claim for benefits ( see Workers' Compensation Law § 18).
Scope of Authority
Delegation of Rulemaking Authority
State Administrative Procedure Act
III.
Footnotes