Aetna wrote to Hanover seeking reimbursement for the medical bills it had paid, but Hanover did not respond. At the same time, Aetna filed a lien for reimbursement should Ms. Herrera recover in the personal injury action that she had brought against the alleged tortfeasor who had caused her injuries in the accident.

Ms. Herrera, through her attorneys, submitted copies of the medical bills paid by Aetna to Hanover, demanding payment. Hanover did not respond to Ms. Herrera's demands, either.

Ms. Herrera then demanded arbitration pursuant to her policy with Hanover, claiming that she was entitled to the no-fault benefits because Aetna maintained a lien against her for reimbursement and Hanover, which was responsible for the bills, had neither paid nor denied coverage for the bills submitted.

The arbitrator denied Ms. Herrera's claim in its entirety, reasoning that the documents submitted by Ms. Herrera – copies of the medical bills paid by Aetna – were not “bills.” Further, the arbitrator declared that even if they were considered “bills,” Ms. Herrera lacked standing to make the claim because Aetna had paid them. The arbitrator determined that, although Aetna had a lien against Ms. Herrera, until that lien was satisfied, Ms. Herrera lacked standing to pursue her claim.

A master arbitrator affirmed that decision.

In addition to the payments that were the subject of the arbitration, Ms. Herrera's medical providers continued to submit bills to Aetna for her ongoing treatment, and Aetna paid an additional $23,525.73 in medical bills.

Thereafter, Ms. Herrera, through her attorney, resubmitted all of the medical bills to Hanover and informed it that she had assigned her rights against Hanover to Aetna.

Aetna brought an action against Hanover, seeking reimbursement for the amounts it had paid on Ms. Herrera's behalf, plus interest and attorneys' fees.

Aetna moved for summary judgment, arguing that Hanover had breached its contract of insurance with its assignor, Ms. Herrera. Aetna claimed that as the assignee of Ms. Herrera's claim for no-fault benefits, it stood in the shoes of Ms. Herrera and was entitled to reimbursement for the monies it had paid for the medical treatment she had received resulting from the motor vehicle accident.

Hanover opposed the motion and cross-moved to dismiss the complaint based on lack of standing.

The trial court granted Hanover's motion to dismiss. It concluded that because Aetna was not a “health care provider” under the no-fault statute, it was not entitled to direct payment of no-fault benefits. It further held that Aetna was not in privity of contract with Hanover and had not shown that it was an intended third-party beneficiary of Hanover's contract with Ms. Herrera. Finally, the trial court determined that Aetna could not sustain a cause of action under subrogation principles because “there was no authority permitting a health insurer to bring a subrogation action against a no-fault insurer for sums the health insurer was contractually obligated to pay its insured.”

An intermediate appellate court affirmed. It declared that Aetna was “not a 'health care provider' under [11 NYCRR 65–3.11(a)], but rather a heath care insurer” that Hanover had no legal obligation to directly reimburse it. The appellate court concluded that the provisions of Insurance Law §§ 5105 and 5106(d) provided for “a limited window of arbitration between no-fault insurers” that did “not pertain to a health insurer such as Aetna” and, consequently, that Aetna could not maintain a subrogation claim against Hanover. The appellate court stated that, because there was no “privity of contract” between Aetna and Hanover, and because Aetna was not a “third-party beneficiary of the contract” between Hanover and Ms. Herrera, Aetna could not assert a breach of contract claim against Hanover.

The dispute reached the New York Court of Appeals.

The No-Fault Regulation

The no-fault regulation at issue provides that:

an insurer shall pay benefits for any loss, other than death benefits, directly to the applicant or, … upon assignment by the applicant … shall pay benefits directly to providers of health care services …

11 NYCRR 65.3.11(a) (emphasis added).

The New York Court of Appeals Decision

The court affirmed.

In its decision, the court first noted that Aetna had conceded that, as a health insurer, it was not a “provider of health care services” as contemplated by the language of 11 NYCRR 65.3.11(a).

The court then rejected, for two reasons, Aetna's contention that it stood in Ms. Herrera's shoes because she had assigned her no-fault rights to it. The court said that because Ms. Herrera's health care providers had been able to bill and recoup payment from Aetna, an assignment by Ms. Herrera of her no-fault rights already had been made, leaving her with no rights to assign to Aetna. It added that 11 NYCRR 65.3.11(a) permits only the insured – or providers of health care services by an assignment from the insured – to receive direct no-fault benefits. Because Aetna did not fall under the term “health care provider,” Ms. Herrera could not assign her rights to it, the court concluded.

The case is Aetna Health Plans v. Hanover Ins. Co. (N.Y. June 14, 2016). Attorneys involved include: Jonathan A. Dachs, for appellant; Barry Levy, for respondent; American Insurance Association, amicus curiae.