N.Y. High Court: Insurer that Reported Fraud Immune From Defamation Suit

A New York City doctor cannot pursue a defamation claim against an insurance company that filed a fraud complaint against him with the state’s medical licensing board, New York’s highest court ruled on Thursday.

The New York Court of Appeals ruled that the statute that governs medical misconduct proceedings does not create a cause of action that would allow licensed physicians to pursue civil claims against entities that make bad-faith or malicious reports to the Office of Professional Medical Conduct. The 6-0 ruling resolves a perceived split in interpretations by two state appellate districts.

The Coalition Against Insurance Fraud and New York Insurance Association both filed amicus briefs in support of the insurer in the case, warning that a finding in the doctor’s favor would discourage fraud complaints.Dennis Jay, executive director of the anti-fraud coalition, said New York, like most states, provides immunity from defamation suits to protect people or companies that report suspected fraud in good faith.

“Anyone who is reporting a suspected fraud in good faith, they should have that immunity,” Jay said. “In most states the immunity is very board. When you start chipping away from that, we get very concerned.”

Dr. Robert D. Haar says Nationwide Mutual Insurance Co. sullied his name when it reported its suspicions of fraud relating to his treatment of four auto accident victims who had filed no-fault claims against the carrier. Nationwide had denied one claim, saying the injury was not caused by an auto accident, but paid for his treatment of the other three patients after adjusting Haar’s bills for amounts allowed by the state’s fee schedule.

Nationwide made no effort to verify that its suspicions about the treatment were valid. It did not perform independent medical examinations or depose the patients, as it is allowed to, Haar’s lawsuit says.

After the Office of Professional Medical Conduct found Nationwide’s complaint unfounded, Haar filed a defamation suit against the carrier in state court. Nationwide removed the case to federal court.

The district court found the suit was time-barred and Haar appealed. The Second Circuit Court of Appeals found that the First and Second New York Supreme Court Appellate Divisions had issued conflicting opinions on whether Public Health Law Section 230(aa)(b) implies that physicians have a private right of action against parties that unfairly accuse them of fraud.

The federal appellate court sent a certified question to the Court of Appeals — what New York calls its supreme court — seeking clarification.

Haar’s attorney argued that the numerous procedural protections afforded to doctors under the Public Health Law states shows that the statute was passed to protect physicians from unfounded allegations.

But in an opinion written by Judge Leslie Stein, the court said the statute in question was clearly intended to protect the public from misconduct by doctors, not the other way around.

The opinion noted that the Public Health Law protects the confidentiality of people who file complaints against doctors.

“This rule was designed to further encourage ‘those who were alleged victims of professional misconduct on the part of a physician to come forward without fear of disclosure so that appropriate investigations might be pursued,'” the opinion says, citing a prior ruling. “Although licensees may in some cases, as here, be aware of or discern the complainant’s identity, the confidentiality provision generally operates to prevent licensees from discovering the identity of complainants and, consequently, pressing any civil claims against them.”

Attorney Susan Phillips Read, who filed an amicus brief on behalf of the Coalition Against Insurance Fraud, said Haar’s argument basically turned the purpose of the indemnity statute on its head.

“If his logic had prevailed, I think every qualified immunity statute could arguably imply a private right of action (against) the beneficiary of the qualified immunity,” she said.