No-Fault Compound Interest Must Exclude Periods of Claimant-Caused Unreasonable Delay Under 11 NYCRR 65-3.9(d)

1. Introduction

This CPLR article 75 proceeding arose from a no-fault dispute between a medical provider, 563 Grand Medical, P.C. (“Grand Medical”), and the insurer, Country-Wide Ins. Co. (“Country-Wide”), concerning reimbursement for medical services rendered to Grand Medical’s assignor after an August 3, 1999 motor vehicle accident.

The central fight was not over the principal award (only $4,999), but over interest: an arbitrator (affirmed by a master arbitrator) awarded statutory compound interest at 2% per month dating back to September 10, 2003—producing an interest figure of $597,733.63 in the judgment. Country-Wide argued that interest should not run (or should be limited to a later period) because Grand Medical unreasonably delayed pursuing arbitration for many years.

The Second Department’s decision establishes a practical boundary on no-fault compound interest: even where compound interest is authorized by the applicable (former) regulation, courts will require exclusion of time periods during which the applicant unreasonably delays the arbitration or court proceeding under 11 NYCRR 65-3.9(d).

2. Summary of the Opinion

• The appeal from the intermediate order was dismissed as terminated by entry of judgment under Matter of Aho.
• The court affirmed the master arbitrator’s determination that Grand Medical was entitled to payment of the no-fault benefits (principal).
• The court agreed that the applicable interest regime was the former no-fault regulation allowing compound interest (because it was in effect at the time of the accident/claim submission).
• The court held that the determination that Grand Medical did not unreasonably delay the matter from September 10, 2003 through November 6, 2018 lacked evidentiary support and rational basis. Therefore, that period must be excluded from the interest computation under 11 NYCRR 65-3.9(d).
• The case was remitted for recalculation of interest excluding that period and for determination of additional attorneys’ fees for the appeal.

3. Analysis

3.1 Precedents Cited

Procedural / Appellate Review

• Matter of Aho, 39 NY2d 241, 248: The court used this rule to dismiss the appeal from the order because entry of judgment terminated the right to appeal directly from the order. The substantive issues were still reviewable on appeal from the judgment (reinforced by the statutory “brought up for review” concept).
• CPLR 5501[a][1]: Cited to explain that issues raised on appeal from the order were considered on appeal from the judgment.

Forum Election / Procedural History Catalyst

• Roggio v Nationwide Mut. Ins. Co. (66 NY2d 260, 263-264 [1985]): This case was pivotal in the backstory: Country-Wide obtained summary judgment in the Civil Court action because Grand Medical had “elected arbitration” as its forum. That history mattered because it framed why Grand Medical returned to arbitration years later, but it did not immunize the long gap from scrutiny under the “unreasonable delay” regulation when interest was computed.

Standard of Review for Compulsory No-Fault Arbitration Awards

• Matter of Bay Needle Care Acupuncture, P.C. v Country Wide Ins. Co., 176 AD3d 695, 696 (quoting Matter of Farrell [Allstate Ins. Co.], 232 AD2d 934, 935): The court reiterated that because no-fault arbitration is compulsory, judicial review of a master arbitration award is limited to whether it is “arbitrary and capricious, irrational or without a plausible basis.” This narrow lens preserved the principal award for Grand Medical.
• Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co., 176 AD3d 800, 802: Cited consistent with Bay Needle Care to reinforce the limited review standard.

Support for Confirming the Merits (Principal Amount)

• Matter of American Tr. Ins. Co. v Big Apple Pain Mgt., PLLC, 242 AD3d 1198, 1199 and Matter of V.S. Care Acupuncture, P.C. v Country-Wide Ins. Co., 176 AD3d 832, 833: These citations supported the conclusion that the master award on entitlement/payment had evidentiary support and was not arbitrary and capricious.

Which Interest Regulation Applies (Former Compound Interest Rule)

• Matter of B.Z. Chiropractic, P.C. v Allstate Ins. Co., 197 AD3d 144, 155 and New Generation Wellness Chiropractic, P.C. v Country-Wide Ins. Co., 75 Misc 3d 54, 55 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists]: These authorities were used to uphold applying the former no-fault regulation providing for compound interest (former 11 NYCRR 65.15[h]) when it was in effect at the time of the accident/claim submission. The court thus accepted compound interest in principle.

Unreasonable Delay Bars Interest Accrual for the Delayed Period

• Vitality Chiropractic, P.C. v Countrywide Ins., 59 Misc 3d 150[A] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists], Kew Gardens Med & Rehab, P.C. v Country-Wide Ins. Co., 52 Misc 3d 143[A] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists], and Aminov v Country Wide Ins. Co., 43 Misc 3d 87 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists]: These cases supplied the operational principle that interest should not accumulate during applicant-caused unreasonable delay and that such periods should be excluded from interest calculations. Relying on them, the Second Department concluded the 2003–2018 period should be excluded.

Attorneys’ Fees on Appeal

• 11 NYCRR 65-4.10[j][4] and Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co., 170 AD3d 1168: These supported Grand Medical’s entitlement to additional attorneys’ fees for litigating the appeal, prompting remittal for calculation.

3.2 Legal Reasoning

The court separated the dispute into distinct legal questions and applied the appropriately deferential standard of review where required:

1. Confirmation of principal award (deferential review): Under the “arbitrary and capricious/irrational” standard for compulsory no-fault arbitration, the court found a plausible evidentiary basis for awarding the $4,999, so it refused to disturb that portion.
2. Whether compound interest can apply at all (regulatory timing): The court agreed that the former regulation authorizing compound interest applied because it was in effect at the relevant time, rejecting the insurer’s attempt to avoid compounding categorically.
3. Whether interest should accrue across a long gap (unreasonable delay limitation): The crucial move was applying 11 NYCRR 65-3.9(d), which stops interest accumulation where “the applicant unreasonably delays the arbitration or court proceeding.” The court held there was no evidentiary support or rational basis to find no unreasonable delay from September 10, 2003 to November 6, 2018, and ordered that period excluded from the interest computation.
4. Remedy: Rather than vacating the award wholesale, the court modified the judgment/award to remove the improperly calculated interest and remitted for recalculation and determination of appellate attorneys’ fees.

3.3 Impact

• Constrains “interest windfalls” in stale no-fault matters: The decision directly addresses the disproportionate effect of 2% monthly compounding over long periods by insisting that periods of applicant-caused unreasonable delay must be excluded.
• Preserves the former compound-interest regime when applicable: Insurers cannot defeat compounding merely by pointing to later regulatory formulations if the former regulation governs.
• Focuses litigation on delay attribution and record support: Future disputes are likely to turn on evidentiary showings about who caused procedural dormancy and whether the record supports (or refutes) a finding of “unreasonable delay.”
• Reinforces limited judicial review while still policing regulatory limits: Even under deferential review, courts will intervene where the interest computation contradicts the regulation or lacks a rational basis.
• Fee-shifting pressure: Confirming entitlement to additional attorneys’ fees on appeal (where authorized) may influence insurers’ cost-benefit analysis in appealing no-fault awards, especially where only interest calculations are disputed.

4. Complex Concepts Simplified

• “Master arbitration” and “master arbitrator”: In New York no-fault, an initial arbitration decision may be reviewed internally by a master arbitrator. Courts reviewing a master arbitration award generally do not re-try the case; they ask whether the result was irrational/arbitrary.
• “Arbitrary and capricious, irrational or without a plausible basis”: A highly deferential standard. The court will uphold the award if there is a reasonable basis in the record, even if another result is possible.
• “Compound interest at 2% per month”: Interest is calculated not only on the unpaid principal but also on previously accumulated interest, causing growth to accelerate over time. Over many years, even a small principal can generate extremely large interest totals.
• “Former 11 NYCRR 65.15[h]” vs current regulations: The decision treats the applicable interest rule as tied to timing (the regulation in effect at the relevant time), which can make older claims subject to different interest mechanics than newer claims.
• 11 NYCRR 65-3.9(d) (unreasonable delay): This is a safety valve: if the applicant causes unreasonable delay in arbitration or litigation, interest does not accumulate during that period. Here, the court required exclusion of the 2003–2018 period from interest.
• “Remittal”: The appellate court sent the case back to the Supreme Court to do the math again (recalculate interest under the appellate ruling) and to set the amount of additional attorneys’ fees for the appeal.

5. Conclusion

Matter of 563 Grand Med., P.C. v. Country-Wide Ins. Co. draws a sharp line between (1) honoring the governing no-fault interest regime— including compound interest under the former regulation—and (2) preventing that regime from producing extreme outcomes where the applicant unreasonably delayed the proceeding.

The key takeaway is operational: in no-fault cases, even when compound interest is legally available, interest must be tolled/excluded for periods of applicant-caused unreasonable delay under 11 NYCRR 65-3.9(d). The decision also underscores that while judicial review of compulsory no-fault arbitration is narrow, courts will correct interest calculations that lack record support or a rational basis, and will enforce regulatory limitations alongside confirming the underlying award.