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Checking it Twice: 2nd Circuit Affirms Dismissal of Doctor’s Suit Against Insurer for Bad Faith Reporting (NY)

December 23, 2019

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<p style="text-align: justify;">Recently, in the lawsuit captioned: <em><a href="https://www.wcmlaw.com/wp-content/uploads/2019/12/Haar-v.-Nationwide.pdf">Haar v. Nationwide</a>,</em> the Second Circuit affirmed the New York Court of Appeals decision that a doctor is unable to sue an insurer for bad faith reporting under New York Public Health Law § 230(11)(b) because the statute does not create a private right of action.</p>
<p style="text-align: justify;">In 2017, Harr sued Nationwide because it submitted a complaint to the New York Department of Health’s Office of Professional Misconduct (OPMC) based on Harr’s conduct in the treatment of four patients in 2012 and 2013. Each of the patients was injured in a vehicle insured by Nationwide and each claim was either partially or fully denied because of the absence of a “cause and effect relationship” between the injuries and the accident or because of the applicable fee schedule. The OPMC investigated the complaint and cleared Harr. Harr subsequently sued Nationwide arguing that the insurer was guilty of bad faith reporting.</p>
<p style="text-align: justify;">The statute states that “[a]ny person, organization, institution, insurance company, osteopathic or medical society who reports or provides information to the [state board for professional misconduct] in good faith, and without malice shall not be subject to an action for civil damages or other relief as the result of such report.” The Court utilized the three <em>Schlessinger</em> factors to determine whether an implied right of action exists under this statute: 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. <u>Schlessinger v. Valspar Corp.</u>, 686 F.3d 81, 87 (2d Cir. 2012). The Court found that Harr did not meet any of the factors. First, the statute was not enacted to benefit the individual being reported, but rather to protect the individual making the complaint. Second, the legislative purpose was to encourage reporting, not to discourage bad faith reporting as Harr argued. Lastly, allowing for a private right of action would be inconsistent with the legislative scheme because the statute specifically states that reports of misconduct are confidential and inadmissible in administrative or judicial proceedings.</p>
<p style="text-align: justify;">The case brings interesting closure to an issue that lacked high court precedent in New York.</p>
<p style="text-align: justify;">Thanks to Priscilla Torres for her contribution to this post.  Please email <a href="mailto:chayes@wcmlaw.com">Colleen E. Hayes</a> with any questions</p>

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