Windfall Interest Denied: No-Fault Provider's Three-Year Delay Tolls Statutory Interest

Key Takeaways

• The Appellate Term tolled statutory no-fault interest where the plaintiff did nothing to prosecute its action for approximately three years after stipulating to vacate a dismissal.
• 11 NYCRR 65-3.9 sets a deliberately punitive 2% per month interest rate on overdue no-fault benefits — but courts will not let a plaintiff’s own inaction convert that rate into a windfall.
• The judgment was modified to stay accrual of interest to February 27, 2009, and the matter was remitted to Civil Court for recalculation.
• Carriers should audit every interest demand for periods of plaintiff-side dormancy; providers should calendar their inventory so dormant files do not forfeit years of interest.

Understanding Statutory Interest in No-Fault Insurance Cases

In no-fault insurance litigation, statutory interest serves as compensation for delays in payment and an incentive for timely case resolution. However, courts have consistently held that plaintiffs cannot benefit from their own inaction when seeking interest awards. The case of V.S. Med. Servs., P.C. v Travelers Ins. Co. illustrates this principle perfectly, showing how a medical provider’s three-year delay in prosecuting their case cost them significant interest payments.

This decision reinforces important precedents about interest when liability is stipulated and demonstrates the courts’ unwillingness to reward procedural delays with financial windfalls in personal injury no-fault cases.

The Decision

Jason Tenenbaum’s Analysis:

V.S. Med. Servs., P.C. v Travelers Ins. Co., 2015 NY Slip Op 51760(U)(App. Term 2d Dept. 2015)

“With respect to the award of statutory interest, the record shows that plaintiff did nothing to prosecute this action for approximately three years after the parties had stipulated to vacate the dismissal of the action. Plaintiff should not be rewarded for its years of inaction by receiving a windfall of interest (see 11 NYCRR 65-3.9 ; Aminov v Country Wide Ins. Co., 43 Misc 3d 87, 89 ).

Accordingly, the judgment is modified by providing that the accrual of statutory interest is further stayed to February 27, 2009, and the matter is remitted to the Civil Court for a recalculation of the interest in accordance herewith and the entry of an appropriate amended judgment thereafter.”

This makes sense.

The Legal Framework: 11 NYCRR 65-3.9 and the 2% Rate

A few pieces of background explain why a tolling ruling like this carries real money with it. Under New York’s no-fault scheme, a claim becomes overdue if it is not paid or denied within 30 days, and overdue benefits accrue interest at 2% per month under 11 NYCRR 65-3.9. That works out to 24% per year — far above ordinary commercial or judgment rates — because the regulation is intentionally punitive. It exists to push carriers toward prompt claim adjustment.

The flip side of a punitive rate is that it invites gamesmanship. A provider holding an old, unresolved claim has little economic reason to hurry: every month of delay adds 2% to the recovery. The Appellate Term’s answer, in this case and in Aminov v Country Wide Ins. Co. (cited in the decision above), is that interest is tolled for periods in which the plaintiff fails to take meaningful steps to prosecute the action. The accrual clock measures the carrier’s delay, not the plaintiff’s strategic patience.

Here, the parties had stipulated to vacate a dismissal — and then the file sat. For roughly three years, nothing happened. When the provider finally pressed the case to judgment and sought interest for the entire period, the Appellate Term refused, staying accrual to February 27, 2009 and sending the matter back to Civil Court for a recalculation.

Why This Matters for Carriers and Providers

For carriers, this line of cases is a checklist item on every aged judgment. Before paying an interest figure on an old no-fault claim, defense counsel should reconstruct the procedural history: when was the action commenced, what motions were made, and were there multi-year gaps in which the plaintiff did nothing? A successful tolling argument can shrink an interest award dramatically — on a claim that sat for three years, the tolled interest can exceed the first-party benefits themselves.

For medical providers and their collection counsel, the lesson is case management. A dormant inventory of no-fault suits is not an appreciating asset. Courts applying 65-3.9 and Aminov will carve out the dormant years, so the only reliable way to capture statutory interest is to actually move the cases — serve discovery, file the motion, notice the trial.

For injured people, the principle is broader than no-fault: New York courts consistently refuse to let a party profit from its own litigation delay, whether the issue is interest, laches-style equitable arguments, or tolling disputes.

Practice Pointers

• Defense side: plead and preserve the tolling issue. Raise plaintiff’s inaction at the judgment stage with a concrete timeline; the Appellate Term modified here because the record showed the three-year gap.
• Defense side: remember that a stipulation to vacate a dismissal restarts the plaintiff’s obligation to prosecute — it is not a license to warehouse the claim.
• Plaintiff side: document activity. If delay was attributable to the carrier (outstanding discovery, adjournment requests), build that record, because the toll only reaches delay fairly chargeable to the plaintiff.
• Both sides: when a judgment is remitted for recalculation, confirm the amended judgment actually applies the stayed accrual date; clerical interest errors are common and expensive at 2% per month.

Related Resources

• Case remanded to Civil Court to determine whether interest was tolled
• Interesting? Snooze and Lose
• Tolling of interest
• The prima facie case in no-fault litigation — the firm’s cluster hub on proof burdens
• The firm’s Legal Encyclopedia
• No-Fault Defense practice page

Frequently Asked Questions

What is the interest rate on overdue New York no-fault benefits?

Overdue first-party no-fault benefits accrue interest at 2% per month under 11 NYCRR 65-3.9. A claim is overdue when the carrier neither pays nor denies it within 30 days. The rate is intentionally punitive to encourage prompt claim handling.

Can a no-fault plaintiff lose interest by delaying its own case?

Yes. As V.S. Med. Servs. v Travelers shows, courts toll statutory interest for periods in which the plaintiff did nothing to prosecute the action. A plaintiff cannot warehouse a claim for years and then collect 2% per month for its own inaction.

What happens after an appellate court tolls no-fault interest?

The case is typically remitted to the trial court — here, the Civil Court — to recalculate interest using the corrected accrual period and to enter an amended judgment reflecting the reduced figure.