Effective January 19, 2009, important changes were implemented with respect to New York's Declaratory Judgment Rules.  Section 3001 of the CPLR was amended allowing a party who has brought a claim of personal injuries or wrongful death to maintain a Declaratory Judgment action directly against the insurer as provided in Section 3420(a)(6) of the New York Insurance Law.  Prior to this amendment, Section 3420(a)(2) of the New York Insurance Law required a plaintiff seeking to enforce their rights as against the carrier who has disclaimed coverage to proceed to judgment, either through Inquest after a default, or obtain a judgment after trial against the party who had retained private counsel.  Only after a judgment was obtained and served on the insured, or his personal representative and the insurance carrier, following the expiration of thirty (30) days without payment, could a plaintiff then maintain a direct action against the insurance carrier.  CPLR �3001 now allows an aggrieved party to maintain a direct action against the insurer.

Fasso v. Doerr resulted in the legislative amendment signed by the Governor on November 12, 2009 regarding liens of health insurance providers.  The plaintiff, Paula Fasso, sued the defendant, Dr. Ralph Doerr, claiming the doctor's malpractice caused her to undergo two liver transplants.  A lien holder, Independent Health Association, Inc., asserted liens of $780,000.00 and intervened in the medical malpractice action.  The case was ultimately settled for $900,000.00 and the lower Court dismissed the subrogation action claiming the plaintiff was not "made whole" by the approved settlement.  Citing the 1995 Court of Appeals in Winkelmann v. Excelsior Insurance Company, 85 N.Y.2d 577, the lower Court held the health insurer was not entitled to recovery unless the injured party was fully compensated.  The Court of Appeals reversed and indicated the dismissal of the health insurers' subrogation action was improper.  A plaintiff and defendant as parties to a personal injury claim could not extinguish the right of subrogation of the health insurer without the consent of the subrogee.  This decision lead to legislative changes discussed below.

Effective November 12, 2009, General Municipal Law �5-535 is amended to indicate "when a plaintiff settles with one or more defendants in an action for personal injuries or wrongful death it shall be conclusively presumed that any compensation does include the cost of health care services paid or obligated to be paid by a benefit provider".  This provision takes effect immediately and applies to all actions pending on or after November 12, 2009.  Exceptions include statutory liens, Medicare, Medicaid, APIP and Workers Compensation liens.  The new law goes beyond the "made whole" exception and provides complete protection to settling plaintiffs or defendants where the health insurer seeks to recover on a subrogation claim, even where the policy limits are not exhausted.  This legislation may create more problems than solved.  The health insurance lien is not extinguished and the health insurance provider may still pursue a subrogation action, although they can not assert a lien on the settlement proceeds.

As of July 1, 2009, a law signed by President Bush in December of 2007 known as the Medicare Secondary Payer Act became effective.  The law is complete with a 223 page user guide provided by the Federal Government.  This law requires insurers to ascertain whether a claimant is entitled to Medicare/Medicaid benefits and if so, to submit information about the claim to the Secretary of Health and Human Services.  If a liability insurer fails to comply the penalties set forth are set at $1,000.00 per day. 

New rules with respect to timely notice have been instituted by the New York Legislature.  For policies issued on or after January 17, 2009, the failure to give notice within the time frame prescribed under the policy shall not invalidate a claim made by an insured, injured person, or any other claimant (exceptions exist for claims made policies).  Insurance Law �3420(a)(6) now provides if an insurance carrier disclaims coverage based upon the failure to give timely notice, the injured person or any other claimant may maintain an action against the insurer directly, unless within sixty days after issuing disclaimer, the insurance carrier initiates a DJ action to declare their rights and obligations under the policy and names the injured party or other claimant as a party to the DJ action.

Insurance Law �3420(a)(2) was also amended to provide in any action in which the insurer alleged that it was prejudiced as a result of the failure to provide timely notice the burden of proof is on the insurer to prove it was prejudiced if notice was provided within two years of the time limit required under the policy.  If notice is provided to the insurer more than two years after the time limit under the policy the burden of proof shifts back to the insured to prove the insurer was not prejudiced.  The new standard under Insurance Law �3420(a)(2) is "the insurer's rights shall not be deemed prejudiced unless the failure to provide timely notice materially impairs the ability of the insurer to investigate and defend the claim.  An exception exists and a "irributtable presumption of prejudice" is noted if prior to notice to the insured's carrier, liability has been determined by a Court or through arbitration or if the insured has resolved the case by settlement or other compromise.