Thursday, February 12, 2009

4th Dep't addresses course of performance

In Westfield Family Physicians, P.C. v. Healthnow New York, Inc., 2009 WL 281296 (4th Dep't 2009), the 4th Department held that an ambiguous contract provision (i.e., not drafted by ABL) was best interpreted through the lens of the parties' course of performance. The case involved a risk-sharing provision in an agreement governing the compensation between a health insurer and a medical group. The group claimed entitlement to X and the insurer contended that the group was entitled to X-Y. The distributions were settled annually. In the first contract year with a supplement, the group was paid X-Y. They did not object. The next year there was no surplus (and thus no payment). That year, the individual physicians were also presented with provider contracts (in case they left the group). Due to a clerical error that caused a missing page, the provider agreements appeared to suggest that the physicians would get X. The following year, there was a surplus, and the group was paid X-Y. This time they objected. The Group's president also testified that the provider agreements (which he believed replaced the group agreement) were a "welcome change" because they clarified that the physicians would get X rather than X-Y.

The 4th Dep't. held that the group's failure to timely object when they were paid X (i.e., $90K less than what they claimed) rather than X-Y -- as well as deposition testimony elicited by ABL -- showed that the parties intended the contract to provide compensation under the X-Y formula.


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