Citywide Social Work & Psychological Servs., P.L.L.C. v State Farm Mut. Auto. Ins. Co. (2006 NY Slip Op 51831(U))

Suffolk Dist Ct

HUC 406-04

C. Stephen Hackeling, J.

This is an action for first-party benefits (recovery of unpaid health services bill, statutory interest and statutory attorneys’ fees) brought pursuant to No-Fault Insurance Law by a health services provider who rendered medical services to a patient in exchange for an assignment of the patient’s right to collect No-Fault benefits. The Plaintiff moves for summary judgment on the first two causes of action contained in the original complaint. For the purposes of clarification, the Court notes that causes of action 3 through 6, contained in the original complaint, were severed from this action and discontinued without prejudice by a written stipulation of the parties which was so-ordered by the Court on May 16, 2006. Pursuant to said stipulation and order, the four severed causes of action were intended to have been deleted from the caption (which has been effectuated). Accordingly, this Amended Order pertains only to the assignor noted in the caption above, and amends the prior decision of this Court, dated September 7, 2006, which inadvertently included the name of an unrelated entity, (Citywide Acupuncture Services, PLLC) within the Memorandum portion of said decision. Defendant opposes the Plaintiff’s motion.

On a motion for summary judgment the test to be applied is whether or not triable issues of fact exist or whether on the proof submitted the Court may grant judgment to a party as a matter of law (Andre v. Pomeroy, 35 NY2d 361; CPLR 3212(b)). It has been held that “the remedy of summary judgment is a drastic one, which should not be granted where there is any doubt as to the existence of a triable issue…or where the issue is even [*2]arguable.” (Gibson v. American Export Isbrandtsen Lines, 125 AD2d 65,74 [citations omitted]; see Andre v. Pomeroy, supra). It is the opinion of this Court that there exists triable issues of fact that preclude the granting of summary judgment in the instant case.

Under the No-Fault Law, an insurance carrier is required to either pay or deny a claim for benefits within 30 days from its receipt of the claim (see, 11 NYCRR §65.15[g][3]). “Such benefits are overdue if not paid within thirty days after the claimant supplies proof of the fact and amount of the loss sustained” (Insurance Law §5106[a]). Therefore, for the Defendant to properly deny a claim, it must generate its denial and mail it to the Plaintiff within 30 days. A fraud defense, however, may be asserted beyond the requisite 30 day denial period where fraud, if proven, would establish there was no coverage at all for the claim. If the fraud defense does not go to the issue of coverage (eg., medically excessive treatment, fraudulent billing), it must be asserted in a timely denial to avoid preclusion.

Here, the Defendant’s denial of claim form clearly indicates that the Defendant received the Plaintiff’s claim on March 7, 2003 and did not deny the Plaintiff’s claim until April 22, 2003, by stating that “New York No-Fault PSYCHOLOGICAL benefits are denied based upon the physical examination by LAURENCE ABELOVE, PhD on 4/3/03 advising that your injury is not causally related to motor vehicle accident of 12/15/02.” Thus, the Defendant failed to deny the Plaintiff’ s claim within the requisite 30 day period from the receipt of claim. Further, the Defendant provides documentary evidence that on March 25, 2003, more than ten (10) business days after it received the Plaintiff’s bill, it advised the Plaintiff that there would be a “delay” in processing the payment of the bill pending an independent medical examination of Plaintiff’s assignor. The time in which an insurer has to pay or deny a claim is extended only upon a proper request for verification pursuant to 11 NYCRR §65.3.5(a). Since the Defendant did not serve its verification request within ten (10) business days after receipt of the Plaintiff’s completed application for No-Fault benefits, the 30 day payment or denial period was not tolled. Consequently, the Defendant is precluded from raising the defense of lack of medical necessity.

The Defendant, however, in its opposition papers also raises the defenses of fraudulent billing practices by the Plaintiff, and the Plaintiff being a fraudulently licensed medical facility. The Defendant has submitted the affidavit of an investigator with its Special Investigations Unit, Dawn Madalone, dated August 23, [*3]2005, who undertook an investigation of the billing practices, and the licensing/ownership of the Plaintiff herein. With regard to the defense of fraudulent or excessive billing practices, where the fraud does not go to the issue of coverage, it must be asserted in a timely denial to avoid preclusion (see, Central General Hospital v. Chubb Group of Ins. Cos., 90 NY2d 195; Careplus Medical Supply Inc. v. State Farm Mutual Auto Ins. Co., 5 Misc 3d 1014A, 2004 Misc LEXIS 454). A scheme to bill for unnecessary or excessive medical treatment must be asserted in a timely denial (see, Melbourne Medical PC v. Utica Mutual Ins. Co., 4 Misc 3d 92 [App. Term, 2nd & 11th Jud. Dists., 2004]). Since the Defendant failed to timely deny the Plaintiff’s claim on the basis of fraudulent billing, the defense is precluded.

Nevertheless, the Defendant does raise the defense and supply an affidavit of merits that the Plaintiff is allegedly a fraudulently licensed provider, and/or fraudulently incorporated. The defense that the Plaintiff, a provider of health care services, is not eligible for reimbursement of No-Fault benefits (see, State Farm Mutual Auto Ins. Co. V. Mallela, 4 NY3d 313) is not subject to preclusion (see, AB Medical Services, PLLC v. Prudential Prop. & Casualty Ins. Co., 11 Misc 3d 137[A], 2006 NY Slip Op. 50504[u][App. Term, 2nd & 11th Jud. Dists.]). The Court is satisfied that to the extent that the Defendant did not timely deny the Plaintiff’s claim, the Defendant herein is not precluded from raising the Plaintiff’s allegedly fraudulent corporate licensure and ownership structure as a defense. A provider of health care services is not eligible for reimbursement of No-Fault benefits unless it meets state and local licensing requirements. (See, State Farm Mutual Auto. Ins. Co. v. Mallela, supra; First Help Acupuncture PC v. State Farm Ins. Co., 2006 NY Slip Op. 51043[U], 2006 NY Misc LEXIS 1356 [App. Term, 2nd & 11th Jud. Dists., 2006]). Pursuant to 11 NYCRR §65-3.16(a)(12), “[a] provider of health care services is not eligible for reimbursement under section 5102(a)(1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such services in New York or meet any applicable licensing requirement necessary to perform such service in any other state in which such service is performed.” Further, the Education Law provides that only persons licensed are permitted to practice psychology pursuant to Education Law §7601, and Business Corporation Law §1504(a). Moreover, in Mallela, the Court of Appeals upheld 11 NYCRR §65-3.16(a)(12) and stated that “carriers may look beyond the face of licensing documents to identify willful and material failure to abide by state and local law”.

In the matter sub judice, the Court has reviewed the [*4]pleadings, the affidavits and the documentary evidence submitted. Based upon such a review, the Court is of the opinion that even though the Plaintiff has satisfied its burden of demonstrating a prima facie case by submission of the statutory forms setting forth “the fact and amount of loss sustained” (Damadian MRI in Elmhurst, PC v. Liberty Mutual Insurance Co., 2 Misc 3d 128[A], 2003 NY Slip Op. 51700[U][App. Term, 9th & 10th Jud. Dists.]), the Defendant has met its burden by showing the existence of a triable issue of fact by submitting documentary and testimonial evidence that the Plaintiff is “owned by lay persons and not by licensed professionals as is required under New York State Law.” The Defendant contends that:

New York State Department of Insurance regulations provide that to be compensated under no-fault, professional health services must be provided by a licensed provider within the scope of his or her license. 11 NYCRR §65.15(o)(1)(vi)& NYCRR §65-3.16(6).

In order to be eligible to receive no-fault benefits, an assignee provider such as Plaintiff must adhere to all applicable New York statutes which grant the authority to provide health services in New York State.

Because of the fraud it facilitated, Plaintiff stands in violation of Article 15 of New York’s Business Corporation Law and are [sic] thus is [sic] not eligible to submit payments for or receive assigned no-fault benefits.

Clearly, payments to unlicensed or fraudulently licensed providers are excluded from the meaning of “basic economic loss” (Ins. Law §5102[a][1]) as interpreted by the Superintendent of Insurance (see, State Farm Mutual Auto. Ins. Co. V. Mallela, supra). The defense that a provider, like the Plaintiff, is fraudulently licensed and ineligible for reimbursement of No-Fault benefits is non-waivable, and not subject to preclusion (see, First Help Acupuncture PC v. State Farm Ins. Co., supra). A denial based on improper licensing or improper incorporation of the provider is not precluded by untimeliness (see, Multiquest PLLC a/a/o Cleckley v. Allstate Ins. Co., 9 Misc 3d 1031; Multiquest PLLC a/a/o Manzo v. Allstate Ins. Co., 10 Misc 3d 1061[A], 2005 NY Slip Op. 52069[U], 2005 NY Misc LEXIS 2836).

Whether or not contained in a timely denial of claim, a denial of claim based on the fact that the Plaintiff is not eligible for reimbursement of No-Fault benefits due to the fact that the health services provided were not provided by licensed professionals, and that the Plaintiff may be fraudulently owned [*5]and operated does not preclude an insurer from raising such a defense in opposition to a Plaintiff’s motion for summary judgment. Because the Defendant has demonstrated the existence of a triable issue of fact, the Plaintiff’s motion for summary judgment is denied. Further, this summary judgment motion is premature in the Court’s opinion since discovery seeking corporate information to determine whether the owners and employees of this provider corporation are properly licensed and incorporated is clearly germane to the question of whether the Plaintiff is eligible for reimbursement (see, Lexington Acupuncture PC v. State Farm Ins. Co., 2006 NY Slip Op 26251, 2006 NY Misc LEXIS 1605 [App. Term, 2nd & 11th Jud. Dists., 2006]).

Accordingly, the Plaintiff’s motion is denied.

______________________________

J.D.C.

dated: September 26, 2006

at: Huntington,NY