Tolling of No-Fault Interest for Failure to Prosecute: When the 2% Clock Stops and Restarts

Key Takeaways

• Overdue no-fault benefits accrue statutory prejudgment interest at 2% per month under 11 NYCRR 65-3.9 — unless the applicant unreasonably delays the court proceeding.
• In Delta Diagnostic Radiology, P.C. v Country-Wide Ins. Co., the toll for failure to prosecute did not run from the day suit was filed; it began only once the plaintiff actually stopped reasonably prosecuting the case.
• Because motions and discovery demands were being exchanged through late 2007, the plaintiff earned interest from commencement (March 30, 2006) through January 27, 2008, even though the notice of trial was not filed until 2013.
• The toll is conduct-based and date-specific: courts look at what the plaintiff was actually doing on the litigation timeline, not just the gap between filing and the notice of trial.
• At 2% simple interest per month, the tolling fight is frequently worth more than the underlying bill.

The Decision

Delta Diagnostic Radiology, P.C. v Country-Wide Ins. Co., 2018 NY Slip Op 50118(U)(App. Term 2d Dept. 2018)

No-fault statutory prejudgment interest accrues upon overdue first-party no-fault benefits at the rate of two percent per month “unless the applicant unreasonably delays the … court proceeding” (11 NYCRR 65-3.9 , ). While the court found that plaintiff was not entitled to the interest which had accrued between the commencement of the action on March 30, 2006 and the date plaintiff filed the notice of trial, May 30, 2013, plaintiff’s argument that the toll upon the accrual of interest should not begin until January 28, 2008, as plaintiff had not unreasonably delayed prosecution of the action prior to that date, is correct. Motions were made and discovery demands were served during the period between the commencement of the action and December 27, 2007, the date plaintiff served its second demand for interrogatories. Consequently, a motion by plaintiff to compel defendant to respond to the demand for interrogatories would have been premature prior to January 28, 2008 (see CPLR 2103 ; 3133 ; General Construction Law § 25-a). As a result, plaintiff is entitled to no-fault statutory prejudgment interest from the commencement of the action on March 30, 2006 through January 27, 2008.

that extra 40% interest on a $2,000 radiology bill will go a long way to paying fro Mr. Delta’s upkeep and expenses…

The Legal Framework: 2% Per Month, With a Conduct-Based Toll

New York’s no-fault regulation is unusually generous on interest. Under 11 NYCRR 65-3.9, a claim that is not paid or denied within the regulatory timeframes becomes overdue, and overdue first-party no-fault benefits accrue interest at 2% per month — 24% a year, far above the ordinary 9% CPLR rate. The regulation pairs that rate with a safety valve: interest stops accruing when the applicant “unreasonably delays” the arbitration or court proceeding.

The recurring question is when the toll attaches. Carriers tend to argue that any long gap between commencement and the notice of trial is per se unreasonable delay. Delta Diagnostic rejects that arithmetic approach. The toll begins only when the plaintiff’s reasonable prosecution of the action actually stops — measured against the procedural posture, including service rules under CPLR 2103, the interrogatory mechanics of CPLR 3133, and time computation under General Construction Law § 25-a.

Here, the plaintiff was moving the case along through December 27, 2007, when it served its second demand for interrogatories. A motion to compel before January 28, 2008 would have been premature. So even though seven years separated commencement from the notice of trial, the first 22 months of interest survived.

Why This Matters for Carriers and Providers

For no-fault carriers, interest exposure is often the real economics of aged inventory. A bill that sat in suit for a decade can carry interest exceeding the principal several times over. Delta Diagnostic gives carriers a defined target on a motion or at judgment: identify the date on which the plaintiff’s prosecution went dormant, and argue the toll from that date — but it also warns that a blanket “they took seven years” argument will not capture the early, actively litigated period.

For medical providers, the decision rewards a documented paper trail. Every demand served, motion made, and response awaited extends the period of accruing interest. Conversely, once the file goes quiet, the meter stops — and it generally does not restart until the plaintiff resumes prosecution, typically by filing the notice of trial.

For both sides, the case is a reminder that interest disputes are litigated date-by-date. Counsel should be prepared to reconstruct the docket: when demands were served, when responses came due under the CPLR’s mailing additions, and when a motion to compel first became ripe. The same diligence mindset applies to claims practice generally, where the verification timeline rules control when a claim becomes overdue in the first place.

Practice Pointers

• Calculate the overdue date first. Interest runs only on overdue benefits, so the 30-day pay-or-deny clock and any verification tolls set the starting point before 65-3.9’s prosecution toll ever matters.
• Build the timeline exhibit. On any interest dispute, attach a chronology of every demand, response, and motion, with CPLR 2103 mailing days computed — that is precisely the showing that won the extra interest period in Delta Diagnostic.
• Carriers settling old files should run the interest both ways (toll from commencement vs. toll from last prosecution activity); the spread frames the negotiation.
• Providers should not let files sleep. The cheapest way to preserve 2% monthly interest is steady, documented prosecution through the notice of trial.

Frequently Asked Questions

What interest rate applies to overdue no-fault benefits in New York?

Two percent per month under 11 NYCRR 65-3.9 — simple interest of 24% a year on overdue first-party benefits, far above the standard 9% CPLR prejudgment rate.

When is no-fault interest tolled for failure to prosecute?

When the applicant unreasonably delays the court proceeding or arbitration. Under Delta Diagnostic, the toll begins on the date reasonable prosecution actually stopped — not automatically on the date suit was filed — and it generally runs until the plaintiff resumes prosecuting, such as by filing the notice of trial.

Why do small no-fault bills produce large judgments?

Because 2% monthly interest accrues for every untolled month the claim remains unpaid. On a bill that has been in litigation for years, accrued interest can exceed the principal several times over, which is why tolling disputes are fought so hard.

Related Resources

• Verification and the 120-day rule (Chapa) — cluster hub
• The firm’s Legal Encyclopedia
• No-fault defense practice
• This one fell under the radar
• Understanding New York’s 2% Interest Rule on Overdue No-Fault Claims
• Previous case on tolling of interest
• Interest was not tolled in similar circumstances

Legal Update (February 2026): Since this 2018 post, New York’s no-fault interest regulations under 11 NYCRR 65-3.9 and related procedural rules governing discovery timelines in CPLR 2103 may have been amended or modified. Practitioners should verify current regulatory provisions and case law developments regarding interest tolling standards and discovery prosecution requirements in no-fault litigation.