BILL NUMBER:S6708

TITLE OF BILL:
An act to amend the insurance law, in relation to requiring arbitration
for no fault claims under the comprehensive motor vehicle reparations
act

PURPOSE:
To provide for arbitration of no-fault disputes.

SUMMARY OF PROVISIONS:
Section 1 of this bill would require arbitration of no-fault disputes.

Section 2 of the bill is the effective date.

JUSTIFICATION:
On February 29, 2012, the Manhattan U.S.Attorney announced the indict-
ment of 36 people for participating in a $279 million no-fault fraud
scheme. One of the methods medical mills and no-fault fraud crime rings
use in their no-fault schemes is flooding insurers with numerous
lawsuits in order to make it difficult for insurers to defend these
numerous lawsuits and force the insurers to settle and pay non-meritori-
ous claims. In fact, no-fault fraud enterprises will often file a sepa-
rate lawsuit for each bill for each treatment provided to an injured
person. These lawsuits are often quite small in amount and have resulted
in the New York City courts being flooded with suits The court system is
              

not equipped to handle the caseload resulting from this practice.

It currently takes between eighteen and thirty-six months to adjudicate
a no-fault case. Obviously, this protracted delay was not contemplated
by the legislature when they originally enacted the no-fault system
which was intended to ensure prompt payment for medical costs resulting
from auto accidents. Mandating arbitration for no-fault claims would
provide for the expeditious and streamlined resolution of no-fault
disputes and would reduce the excessive litigation which is currently
clogging courts in New York City.  Unlike the court system, it currently
takes only four to six months for a no-fault dispute to be handled
through arbitration. It should also be noted that the arbitrators handl-
ing no-fault cases handle these cases regularly and have expertise in
issues relating to no-fault disputes. This expertise allows for more the
more equitable and expeditious handling of no-fault disputes. Mandating
arbitration would also greatly reduce litigation expenses for insurers
and would significantly reduce costs in the no-fault system.

New York's no fault system is plagued by fraud and abuse which is adding
significant costs to auto premiums in New York and a major contributing
factor making New Yorkers pay among the highest auto insurance premiums
in the nation. In fact, a recent Insurance Research Council study found
that in the New York City area, about one in every five no-fault auto
insurance claims closed in 2010 appear to have elements of fraud. In
addition, New York's no-fault claim costs have far outpaced that of

other no-fault states and the overall cost of medical care. From 2004
through the 2nd Quarter of 20 10, the average PIP claim cost rose 60.4
percent in New York, nearly 42 points faster than the 18.6 percent
growth rate in the Consumer Price Index cost of medical goods and
services found in the region.  The cost of no-fault personal injury
protection (PIP) coverage has also soared. New York's average no-fault
PIP claim cost $9,007 is the third highest in the nation as of 2nd quar-
ter 2010. Mandating arbitration of no- fault disputes would help to
reduce lawsuit abuse by no-fault fraud rings and would assist in reduc-
ing fraud in the no-fault system and the costs associated with fraud.

LEGISLATIVE HISTORY:
New bill.

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
Immediately and shall apply to all actions and proceedings commenced on
or after such date; and shall also apply to any action or proceeding
which was commenced prior to such effective date where, as of such date,
a trial of the issues has not yet commenced.