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Court Clarifies New York Public Health Law for Doctors in Bad Faith Claims


Court Clarifies New York Public Health Law for Doctors in Bad Faith Claims

March 03, 2020
Meghan M. Brown

This article originally appeared in Goldberg Segalla’s Professional Liability Matters. Read the issue here.

New York State’s highest court recently clarified that the Public Health Law provision on reporting of medical misconduct was enacted to protect the complainants and not the physicians or other targets of the complaints. As a result, doctors cannot use the law to sue people who report them in bad faith to the state’s Office of Professional Medical Conduct (OMPC).

The U.S. Court of Appeals for the Second Circuit certified the following question to the New York State Court of Appeals: “Does New York Public Health Law § 230(11)(b) create a private right of action for bad-faith and malicious reporting to the Office of Professional Medical Conduct?” In November, the Court of Appeals answered in the negative in its 6-0 opinion in Haar v. Nationwide Mutual Fire Insurance Co. The court held that there was no indication that the legislature intended to create a private right of action in this section of the statute and that existing common-law remedies were sufficient to protect the targets of complaints from bad-faith or malicious reports of misconduct.

The decision arose from a lawsuit by Robert D. Haar, an orthopedic surgeon, against the insurer Nationwide. Haar treated four patients injured in automobile accidents and insured by Nationwide. Nationwide denied each of the claims and filed complaints with the OPMC alleging insurance fraud by Haar. After an investigation, the OPMC declined to impose any discipline on the doctor. Dr. Haar then sued Nationwide, alleging defamation and that its complaints to the OPMC lacked a good faith basis in violation of Public Health Law § 230(11)(b).

The action was removed to federal court, and a federal judge in Manhattan dismissed both causes of action in the complaint. On appeal, because of a split in New York State law over whether Public Health Law § 230(11)(b) implies a private right of action, the Second Circuit turned to the Court of Appeals for an answer.

Section 230 of the New York Public Health Law governs the proceedings of the state board for medical misconduct. Subsection 11 addresses the reporting of professional misconduct. Aside from certain enumerated mandated reporters, any other person, such as Nationwide, may report “ any information . . . which reasonably appears to show that a licensee is guilty of professional misconduct” as that term is defined in the Education Law. Further, “[a]ny person, organization, institution, insurance company, osteopathic or medical society who reports or provides information to the board 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.”

It was undisputed that this statute did not expressly create a cause of action against a complainant who allegedly files a report in bad faith or maliciously. The court rejected the plaintiff’s efforts to imply a private right of action by negative implication; that the “good faith” language in the statute makes bad-faith reporting actionable. In considering the legislative intent, the court explained that this statutory provision was enacted to protect the public from medical misconduct by encouraging reporting and to alleviate fear of litigation from entities encouraged to report misconduct. It was not added to protect physicians accused of misconduct. Thus, Haar was not the intended beneficiary of this provision. That alone was enough to conclude that there is no implied right of action under Public Health Law § 230(11)(b). Going further, however, the court noted that the legislature’s goal was to increase reporting, which would be undermined if a private right of action was found that would increase the possibility of litigation for those reporting suspected misconduct and a private right of action would discourage mandatory reporting and impede the effectiveness of the statute, inconsistent with the legislative scheme.

Based on the negative answer to the certified question, the Second Circuit concluded that Haar’s claim was properly dismissed. The decision should provide a level of protection to SIU units that are charged with investigating and reporting suspected fraud.

Professional Liability Magazine, a collaborative effort of Goldberg Segalla’s Management and Professional Liability Practice Group, examines the latest best practices, emerging developments, and influential court decisions impacting the defense of professional service providers. Read our latest issue here.