Sutter Med. Care P.C. v Progressive Cas. Ins. Co. (2013 NY Slip Op 50117(U))

District Court of Nassau County, First District

CV-019669-12

Baker Sanders LLC, Attorneys for Plaintiff, 100 Garden City Plaza, Suite 500, Garden City, New York 11530, 516-741-4799; McCormack & Mattei, P.C., 1035 Stewart Avenue, Second Floor, Garden City, New York 11530, 516-505-0600

Michael A. Ciaffa, J.

Defendant, Progressive Casualty Ins. Co. (“Progressive”), moves for summary judgment dismissing plaintiff’s no-fault complaint on grounds of res judicata and collateral estoppel. Plaintiff, Sutter Medical Care, P.C. (“Sutter Med”) opposes the motion.

The issues presented by Progressive’s motion arise in the context of a broader dispute between Progressive and Sutter Med respecting the provider’s entitlement to no-fault benefits under New York law. In January, 2012, Progressive and its related companies commenced a declaratory judgment action against Sutter Med in the Supreme Court, Nassau County (index no. 000119/12). The complaint in that case (defendant’s ex. B) alleged, inter alia, that Sutter Med had failed to satisfy conditions precedent to Progressive’s obligation to cover a series of no-fault claims by failing to appear for examinations under oath, and by failing to provide requested verification of the claims. Based upon these allegations, Progressive requested a declaration that it had “no obligation to pay” any outstanding claims for services rendered by Sutter Med to the 14 named claimants referenced in the complaint. Plaintiff’s assignor in this matter, Atisha Grant, was one of those named claimants.

Sutter Med failed to answer Progressive’s declaratory judgment complaint. By order dated April 19, 2012, the Supreme Court (Brown, J.) granted Progressive’s motion for a default judgment against Sutter Med and directed Progressive to submit a judgment for the court’s approval. Sutter Med made no effort to contest Progressive’s entitlement to such relief from the Supreme Court. Instead, in early June, 2012, it commenced a series of no-fault lawsuits against Progressive in the District Court, Nassau County, [*2]seeking payment of no-fault benefits. At least six of these lawsuits involve claims for payment for medical services that it rendered to six of the same claimants who were specifically referenced in the declaratory judgment complaint. Progressive now moves before this Court for orders dismissing each of those six cases on the ground that each lawsuit is barred by the default judgment rendered in the declaratory judgment action. This matter is one of those six cases.

The papers before the Court on the instant motion confirm that the summons and complaint in this case was filed on June 4, 2012. It includes allegations that Sutter Med rendered necessary medical services to its assignor, Atisha Grant, which are the subject of three unpaid no-fault bills. As shown in an exhibit to the complaint, the services in question were rendered between June 17 and August 31, 2011. Each of the three bills submitted to defendant Progressive arose from the same accident date (April 8, 2011) and bear the same Progressive claim number (114814153).

Defendant’s answer to the complaint was served on June 27, 2012. It includes twenty-four separately stated affirmative defenses, including defenses asserting that plaintiff failed to properly verify its claims, and failed to satisfy a condition precedent to coverage. However, the answer does not include as defenses a claim that the action is barred by res judicata or collateral estoppel.

On the same date that defendant’s answer was served (June 27, 2012), the Supreme Court’s judgment (defendant’s ex. C) was formally entered, granting judgment to Progressive “on default … as to the claims that are the subject of this within action.” The Supreme Court’s judgment went on to declare that Sutter Med “…is not entitled to reimbursement for medical services … based upon [Sutter Med’s] failure to satisfy conditions precedent to coverage or to verify [its] claims.” The default judgment also declared: “Plaintiff [Progressive] is under no obligation to pay any of the no-fault claims … for which examinations under oath and documents were requested on the grounds that the Defaulting Defendant [Sutter Med] has not complied with conditions precedent to reimbursement …”

For reasons not explained, Progressive made no effort to amend its answer, as of right (see CPLR 3025[a]), following entry of the Supreme Court’s judgment. By law, it could have served an amended answer at any time within 20 days of the date of its original answer (id). Such an amended answer could have included allegations that plaintiff’s claims were now barred under principles of res judicata and collateral estoppel. Nor did defendant move for leave to amend its answer at any time thereafter seeking permission to include such defenses to plaintiff’s lawsuit. See generally Prof. David D. Siegel’s Practice Commentaries to McKinney’s CPLR 3211, at C3211:62. Instead of doing so, defendant simply made its summary judgment motion upon copies of the instant pleadings (defendant’s ex. A), its declaratory judgment complaint in the Supreme Court (ex. B), and the default judgment entered in the declaratory judgment action (ex. C).

In opposing the instant motion for summary judgment, Sutter Med challenges [*3]Progressive’s arguments for dismissal on procedural and substantive grounds. Ordinarily, a res judicata or collateral estoppel defense is deemed waived unless raised by a CPLR 3211(a)(5) motion to dismiss or asserted in the defendant’s responsive pleading. See CPLR 3211(e). Moreover, pursuant to the requirements of CPLR 3018(b), such affirmative defenses ordinarily must be included in the defendant’s answer. Based upon these rules, plaintiff argues, with considerable force, that defendant waived its right to seek dismissal on grounds of res judicata and collateral estoppel by not making a timely motion to dismiss or including these two affirmative defenses in its answer.

The Court rejects plaintiff’s argument. Contrary to plaintiff’s contention, defendant’s failure to raise these affirmative defenses earlier is not necessarily fatal. See, e.g. Sullivan v American Airlines, Inc., 80 AD3d 600, 602 (2d Dept 2011) (an unpleaded affirmative defense “may serve as the basis for granting summary judgment in the absence of surprise or prejudice”); Sheils v County of Fulton, 14 AD3d 919 (3d Dept 2005), lv den 4 NY3d 711 (2005) (granting summary judgment to defendant on unpleaded affirmative defense that plaintiff failed to exhaust administrative remedies); Kirilescu v American Home Prods. Corp., 278 AD2d 457 (2d Dept 2000), lv den 96 NY2d 933 (2001) (granting summary judgment to defendant upon unpleaded affirmative defense based upon federal preemption); Strauss v. BMW Financial Services, 29 Misc 3d 362, 364 (Sup Ct Kings Co. 2010) (granting summary judgment to defendant on unpleaded affirmative defense of immunity). As the Court explained in Strauss: “When a defendant fails to plead an affirmative defense, but asserts said defense in connection with a motion for summary judgment, the waiver is said to have been retracted and the court can grant or deny summary judgment based on the never plead affirmative defense.” Id. “The relevant inquiry…is the prejudice or surprise associated with assertion of a never plead affirmative defense.” Id. The risk of prejudice and surprise are “ameliorated when…the plaintiff has had a full and fair opportunity to respond and oppose the defense…” Id.

In any event, even if the Court were otherwise inclined to deny summary judgment on the ground that defendant waived its res judicata and collateral estoppel defenses by not asserting them in an answer or amended answer or in a timely CPLR 3211(a)(5) motion to dismiss, defendant could easily correct its oversight by seeking leave to amend its answer pursuant to CPLR 3025[b]. See, e.g. Complete Management, Inc. v. Rubinstein, 74 AD3d 722, 723 (2d Dept 2010) (although defendants waived affirmative defense of lack of capacity to sue “by failing to raise it in their answer or in a motion to dismiss made prior to answering, … defenses waived under CPLR 3211[e] can nevertheless be interposed in an answer amended by leave of court pursuant to CPLR 3025[b] so long as the amendment does not cause the other party prejudice or surprise”) ; Giacamazzo v. Moreno, 94 AD2d 369 (1st Dept. 1983) ( trial court properly allowed defendant to amend its answer at trial to assert previously waived affirmative defense of res judicata). Prolonging the case for that reason makes no sense.In this Court’s [*4]previous unpublished rulings in cases involving similar issues, it has made plain that Progressive need not seek to formally amend its answers before moving to dismiss a pending no-fault action on grounds of res judicata. See, e.g. New Century Medical Diagnostics, P.C. v Progressive Casualty Ins. Co., index no. 026933, decision dated December 5, 2012 (Dist Ct Nassau Co., Ciaffa, J.); Healthy Physique Physical Therapy P.C. v Progressive Casualty Ins. Co., index no. 019457, decision dated November 27, 2012 (Dist Ct Nassau Co., Ciaffa, J.). This Court reiterates the rulings it made in those cases.

Consistent with the principle that the CPLR should be “liberally construed to secure the just, speedy and inexpensive determination of every civil judicial proceeding” (CPLR §104), the Court concludes that it may properly consider defendant’s motion for summary judgment upon its unplead res judicata and collateral estoppel defenses. See New Century Medical Diagnostics, P.C. v Progressive Casualty Ins. Co., supra; Healthy Physique Physical Therapy P.C. v Progressive Casualty Ins. Co., supra. Plaintiff here has been afforded a full and fair opportunity to oppose the defenses on the merits. It cannot claim that defendant’s motion comes as a surprise. It makes no claim of colorable prejudice based upon delay. The Court accordingly turns to the merits of the motion.

The basic rules are well settled. Res judicata principles broadly prohibit a party from seeking to relitigate a claim “where a judgment on the merits exists from a prior action between the same parties involving the same subject matter.” In re Hunter, 4 NY3d 260, 269 (2005). Collateral estoppel, in turn, applies more narrowly to the attempted relitigation of “identical” issues which were “necessarily … decided” in the prior action. See Kaufman v Eli Lilly and Co., 65 NY2d 449, 455 (1983).

Progressive’s moving papers amply establish the prior action and the instant action both involve identical claims by Progressive that Sutter Med failed to provide proper no-fault verification for medical services rendered to Atisha Grant, and that Sutter Med failed to satisfy a condition precedent to coverage by not appearing for a requested EUO. As plaintiff’s counsel readily acknowledges, the judgment issued in the declaratory judgment case specifies that Progressive “is under no obligation to pay any of the no-fault claims … for which examinations under oath and documents were requested …” However, counsel points to the absence of any evidence of EUO requests or denial of claim forms respecting the subject three bills in this action. In the absence of such proof, plaintiff contends that defendant cannot meet its burden of proving that the issues presented in this case were necessarily litigated in the declaratory judgment action.

The Court rejects plaintiff’s contention. The declaratory judgment action concerned the same parties and the same subject matter. The complaint in the declaratory judgment action includes verified allegations that Progressive requested EUOs for a series of specific claims, including claims for services rendered to plaintiff’s assignor, Atisha Grant, under claim number 114814513 (defendant’s ex. B, ¶ 19). According to the [*5]insurer’s verified complaint, each of the EUO and document requests were timely mailed to Sutter Med, and each of the EUO requests asked for documents from Sutter Med which it failed to provide (ex. B, ¶¶ 20, 28). Progressive further alleged that it had sufficient basis to request the EUOs and documents, but Sutter Medical Care did not respond or appear for any of the EUOs (ex. B, ¶¶ 27, 28). As a consequence, all no-fault billings for services rendered to plaintiff’s assignors, including Atisha Grant, were allegedly denied and/or delayed, as allowed by applicable no-fault regulations (ex. B, ¶ 31).

Reading the complaint by Progressive and the Supreme Court’s declaratory judgment together, the default judgment entered in the declaratory judgment action clearly precludes plaintiff from pursuing assigned claims for medical services rendered to plaintiff’s assignor, Atisha Grant, under claim number 114814513. Based upon the verified allegations in the declaratory judgment action and Sutter Med’s default in answering the complaint, the Supreme Court issued a declaration that Sutter Med is “not entitled to reimbursement for medical services” rendered to Atisha Grant, and that Progressive has “no obligation to pay” any of such claims. Sutter Med cannot dispute that res judicata principles apply equally to judgments entered on default.See, e.g.Ava Acupuncture P.C. v NY Central Mut. Fire Ins. Co., 2012 NY Slip Op 50233 (App Term 2d Dept); see also Tantillo v Giglio, 156 AD2d 664 (2d Dept 1989), discussing Blair v Bartlett, 75 NY 150 (1878). Accordingly, the Supreme Court’s declarations are binding upon the parties in this lawsuit, and provide Progressive with a complete defense to the claims made in this proceeding. See, e.g. Ava Acupuncture P.C. v NY Central Mut. Fire Ins. Co., supra; EBM Med. Health Care, P.C. v Republic Western Insurance, 2012 NY Slip Op 22300 (App Term 2d Dept).

Under the circumstances presented, Sutter Med cannot avoid the preclusive effect of the declaratory judgment upon the particular bills and claims advanced in its complaint. Contrary to plaintiff’s contention, Progressive need not submit evidence establishing that it requested EUOs and documents from Sutter Med respecting each of the three bills referenced in the instant complaint. In view of the broad declaration issued by the Supreme Court, establishing that Sutter Med breached a condition precedent to coverage of Sutter Med’s claims for services rendered to Atisha Grant, the absence of such proof is immaterial. The complaint in the instant case, like the complaint in the declaratory judgment action, specifically references and concerns medical services provided by Sutter Med to Atisha Grant under claim number 114814513. The papers before the Court are sufficient to demonstrate an identity between the claims and issues in both cases.

Therefore, the declaratory judgment issued by the Supreme Court necessarily precludes pursuit of claims by Sutter Medical Care in this action, seeking payment for medical services rendered to Atisha Grant under that very same claim number. See, e.g. Naqiy Medical P.C. v Unitrin Direct Ins. Co., index no. 050030/10, decision dated May 1, 2012 (Dist Ct Nassau Co., Ciaffa, J.). “To hold otherwise could result in a judgment in [*6]the instant action which would destroy or impair rights established by the order rendered in the declaratory judgment action.” Id, quoting Ava Acupuncture P.C. v NY Central Mut. Fire Ins. Co., supra, citing Schykill Fuel Corp. v. Nieberg Realty Corp., 250 NY 304, 306-7 (1929).

Nor does it matter that Progressive may have partially paid other claims for services rendered to Atisha Grant upon receipt of other bills which are not the subject of the claims made in this no-fault action. Although plaintiff’s opposition includes documentary proof that defendant partially paid one such claim in July 2011, the EUO defaults alleged in the declaratory judgment complaint occurred the following month, in August 2011 (see defendant’s ex. B, ¶ 19). As of that date, but not before, Sutter Medical breached the condition precedent to Progressive’s obligation to provide coverage for pending claims. Cf. Arco Med.NY, P.C. v Lancer Ins. Co., 37 Misc 3d 90, 92-3 (App Term 2d Dept 2012). Accordingly, the fact that Progressive may have paid earlier bills provides no basis for defeating the instant motion. It likewise fails to present a triable issue whether the validity of the claims made in this case were necessarily determined by the default judgment in the declaratory judgment action.

In closing, Sutter Med does not dispute that it had a full and fair opportunity to contest the allegations made in the declaratory judgment action. It failed to contest the allegations. A default judgment was entered as a result. That judgment is final and binding with respect to Progressive’s liability for paying for medical services rendered to Atisha Grant under claim number 114814513.

For these reasons, defendant’s motion is GRANTED and the complaint is DISMISSED.So Ordered:

District Court Judge

Dated: January 24, 2013

cc:McCormack & Mattei, P.C.

Baker, Sanders, LLC