[*1]

Civil Court of the City of New York, Kings County, June 30, 2016

APPEARANCES OF COUNSEL

The Rybak Firm, PLLC, Brooklyn, and Law Offices of Kopelevich & Feldsherova, P.C., Brooklyn (Mikhail Kopelevich of counsel), for plaintiff.

Law Office of McCormack & Mattei, P.C., Garden City (Jesse Lubin of counsel), for defendant.

Because of common issues of law and fact, the court consolidated for trial the following matters: Charles Deng Acupuncture, PC, as Assignee of Kesha James v Titan Ins. Co. (CV-005920-14 [the trial commenced and concluded on Feb. 16, 2016]); Pravel, Inc., as Assignee of Yvette Decosta v Nationwide Ins. Co. (index No. CV-019112-14 [the trial commenced and concluded on Feb. 16, 2016]); and Jules Francois Parisien, MD, as Assignee of Hans Destine v Progressive Ins. Co. (index No. CV-032931-14 [the trial commenced and concluded on Feb. 17, 2016]). These matters will result in separate decisions, orders and judgments. The court has considered each party’s posttrial memorandum of law and/or copies of cases provided to it.

In these actions by providers to recover assigned first-party no-fault benefits, the parties stipulated that the plaintiffs met their respective prima facie burdens by timely mailing of bills for payment. (See 11 NYCRR 65-1.1.) The burden now shifts to the defendant to show timely mailing of the notices of the examinations under oath (EUO) and the failure of the providers to attend the scheduled EUOs. (See 11 NYCRR 65-3.5, 65-3.6.)

When the issue involves EUOs, defendant must prove that its EUO requests were timely mailed and that plaintiff’s assignor failed to appear for same. (See Crescent Radiology, PLLC v American Tr. Ins. Co., 31 Misc 3d 134[A], 2011 NY Slip Op 50622[U] [App Term, 2d Dept, 9th & 10th Jud Dists 2011]; Crotona Hgts. Med., P.C. v Farm Family Cas. Ins. Co., 27 Misc 3d 134[A], 2010 NY Slip Op 50716[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2010]; Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 35 AD3d 720 [2d Dept 2006].)

“Such a showing is established by affidavit on motion for summary judgment and by live testimony at trial (see generally Great Wall, 16 Misc. id at 25; {**53 Misc 3d at 218}Power Acupuncture P.C. v. State Farm Mut. Auto Ins. Co., 11 Misc 3d 1065, 816 N.Y.S.2d 700, 2006 NY Slip Op 50393[U] [Civ. Ct, King’s County 2006]; Roberts Physical Therapy, P.C. v. State Farm Mut. Auto Ins. Co., 14 Misc 3d 1230[A], 836 N.Y.S.2d 495, 2006 NY Slip Op 52565[U] [Civ-Ct, Kings County 2006]; AVA Acupuncture P.C. v. ELCO Administrative Services Co., 10 Misc 3d 1079[A], 814 N.Y.S.2d 889, 2006 NY Slip Op 50158[U] [Civ Ct, Kings County 2006]).” (See New Era Massage Therapy PC v Progressive Cas. Ins. Co., 2009 NY Misc LEXIS 2554, *12, 242 NYLJ 2 [Sup Ct, Queens County, June 26, 2009, CV-065009-08/QU].)

The court accepts the testimony from defendant’s witnesses regarding the policies and procedures for sending out EUO scheduling letters and the court finds that defendant proved timely mailing of the EUO scheduling letters.

The court further accepts the testimony of defendant’s witness, Jamila Shukry, Esq., a senior trial attorney, regarding the policies and procedures concerning the taking of testimony at the examination before trial and the documentation regarding an EUO “no show.” The witness testified that the transcripts were generated in the usual course of its business, that it was the usual course of its business to generate such a record, and that it was made at the time reflected in the transcript. The witness who appeared at the trial, however, was not the assigned attorney and was not personally present at the place where the EUOs were scheduled to take place.

The only remaining issue before the court is whether or not the EUO transcripts allegedly generated at the scheduled EUOs are business records which may be used to show that the respective providers failed to appear at their scheduled EUOs, and the weight to give these records if they are admissible.

The court reviewed the certified EUO transcript of February 21, 2014 alleging the failure of a representative of Pravel, Inc. to appear and the scheduling letter attached (re: assignor Yvette Decosta, exhibit A); the certified EUO transcript of March 11, 2014 alleging the failure of a representative of Pravel, Inc. to appear and the scheduling letter attached (re: assignor Yvette Decosta, exhibit B); the certified EUO transcript of October 15, 2013 alleging the failure of a representative of{**53 Misc 3d at 219} Charles Deng, LAC to appear and the scheduling letter attached (re: assignor Yvette Decosta, exhibit C); the certified EUO transcript of October 31, 2013 alleging the failure of a representative of Charles Deng, LAC to appear and the scheduling letter attached (re: assignor Yvette Decosta, exhibit D); the certified EUO transcript of December 2, 2013 alleging the failure of a representative of Charles Deng, LAC to appear and the scheduling letter attached (re: assignor Yvette Decosta, exhibit E); the certified EUO transcript of December 11, 2013 alleging the failure of a representative of Charles Deng, LAC to appear and the scheduling letter attached (re: assignor Yvette Decosta, exhibit F); the certified EUO transcript of December 18, 2013 alleging the failure of a representative of Charles Deng, LAC to appear and the scheduling letter attached (re: assignor Yvette Decosta, exhibit G); the certified EUO transcript of December 27, 2013 alleging the failure of a representative of Charles Deng, LAC to appear and the scheduling letter attached (re: assignor Yvette Decosta, exhibit H); the certified EUO transcript of September 19, 2013 alleging the failure of a representative of Charles Deng, LAC to appear and the scheduling letter attached (re: assignor Kesha James, exhibit A); and the certified EUO transcript of October 7, 2013 alleging the failure of a representative of Charles Deng, LAC to appear and the scheduling letter attached (re: assignor Kesha James, exhibit B).

There is no question that the certified EUO transcripts can be used in a motion for summary judgment (see MML Med. Care, P.C. v Praetorian Ins. Co., 46 Misc 3d 127[A], 2014 NY Slip Op 51792[U] [2014]; Active Chiropractic, P.C. v Praetorian Ins. Co., 43 Misc 3d 134[A], 2014 NY Slip Op 50634[U] [2014]), but there appears to be no cases on “all fours” concerning the use of such EUO transcripts at trial.

The gravamen of the plaintiff’s objection to the transcript being admitted into evidence is that the transcripts are hearsay, that the transcripts were not prepared by the defendant’s law firm, but by the stenographer, and by allowing such a record to be admitted into evidence denies the respective plaintiffs their right to cross-examine the person who allegedly made the record and therefore cannot be a business record. Clearly the transcripts are hearsay, but the question is whether or not the transcripts of the EUO “no shows” are business records which are an exception to the hearsay rule and admissible at trial.{**53 Misc 3d at 220}

CPLR 4518 (a) reflects the following:

“Generally. Any writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence or event, shall be admissible in evidence in proof of that act, transaction, occurrence or event, if the judge finds that it was made in the regular course of any business and that it was the regular course of such business to make it, at the time of the act, transaction, occurrence or event, or within a reasonable time thereafter. An electronic record, as defined in section three hundred two of the state technology law, used or stored as such a memorandum or record, shall be admissible in a tangible exhibit that is a true and accurate representation of such electronic record. The court may consider the method or manner by which the electronic record was stored, maintained or retrieved in determining whether the exhibit is a true and accurate representation of such electronic record. All other circumstances of the making of the memorandum or record, including lack of personal knowledge by the maker, may be proved to affect its weight, but they shall not affect its admissibility. The term business includes a business, profession, occupation and calling of every kind.” (Emphasis added.)

The court in Kearney v City of New York (144 Misc 2d 201 [Sup Ct, Kings County 1989]) admitted into evidence the unsworn transcript of a district attorney as a business record to show mandated disclosures made to the defendant in the presence of his counsel. The present matters are distinguishable because the court in Kearney considered a transcript of criminal proceedings made in open court and not in the offices of counsel using a privately paid stenographer. Notwithstanding this distinction, the court in Kearney found a legal duty on the part of both the attorney, as an officer of the court (22 NYCRR 700.4 [a]; People ex rel. Karlin v Culkin, 248 NY 465, 470-471 [1928]; Matter of Mitchell, 40 NY2d 153, 157 [1976]), and the court’s stenographer, to accurately report the information recorded (Judiciary Law arts 9, 15; § 292; see also Judiciary Law § 90).

This court must now consider whether the EUO transcripts, some of which are electronically signed, meet the requirements of the business exception to the hearsay rule under CPLR {**53 Misc 3d at 221} 4518 (a). Here, whether in or out of court, an attorney is an officer of the court (22 NYCRR 700.4 [a]) and is subject to discipline and severe sanctions if s/he misleads the court (Judiciary Law § 487; Rules of Professional Conduct [22 NYCRR 1200.0] rule 3.3, reprinted in Judiciary Law Appendix).

Turning to the certifications made by the stenographers, each certification, except for the name of the respective stenographer, reflects the following:

“I, Christa D’Alessandro, a Notary Public in and for the State of New York, do hereby certify:

“THAT the within is a true and accurate transcript of this statement on the record.

“I further certify that I am not related, either by blood or marriage, to any of the parties to this action; and

“THAT I am in no way interested in the outcome of this matter.

“IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of April, 2014.

“Christa D’Alessandro.”

To begin with, a notary public must be licensed by the State of New York, be of high moral character, and must not be convicted of a felony or certain other crimes (Executive Law § 130). A notary may be removed from office “for acts of misconduct as related” since he (or she) is a public officer whose right to remain in office is measured not only by his (or her) activities as such but also by trustworthiness and competence exhibited in other areas in which the public is concerned. (Matter of Patterson v Department of State of State of N. Y., 35 AD2d 616, 617 [3d Dept 1970]; NY CLS Executive Law § 130, Notes to Decision [Case Notes].)

A notary is required to place a statement as to her/his authority, the name of the county in which s/he originally qualified, and the date upon which her/his commission expires. (See Executive Law § 137.) What is crucial for the court’s consideration is found under Executive Law § 137,

“If any notary public shall wilfully fail to comply with any of the provisions of this section, he [or she]^[FN*] shall be subject to disciplinary action by the secretary of state. In all the courts within this state the certificate of a notary public, over his [or her]{**53 Misc 3d at 222} signature, shall be received as presumptive evidence of the facts contained in such certificate; provided, that any person interested as a party to a suit may contradict, by other evidence, the certificate of a notary public.” (Emphasis added.)

This court finds that given the reliability of unsworn statements made by attorneys as officers of the court (22 NYCRR 700.4 [a]), and the standards and licensing requirements of notaries in the State of New York (Executive Law § 130), and the notary’s certificate with its “presumptive evidence of the facts contained in such certificate” (Executive Law § 137), and the language within the certificate “THAT the within is a true and accurate transcript of this statement on the record,” and given that the court credits the testimony of the defendant’s witnesses that the transcripts were generated in the usual course of its business and it was in the usual course of its business to generate such a document, and further given that such transcripts are routinely used and accepted by courts in motions for summary judgment, and given that plaintiff, as an “interested party,” had the opportunity to “contradict, by other evidence, the certificate of a notary public,” and the failure of the plaintiff to appear at trial or to contradict by other evidence the certificate of the respective notaries, this court admits into evidence all the EUO transcripts in this matter. The court further notes that it would be the duty of the defendant to make a record when a party or assignor fails to appear two times for an EUO because unless documented there is no basis to deny benefits for a failure to appear at an EUO under the no-fault law (Stephen Fogel Psychological, P.C.).

This court recognizes there is a qualitative difference between a transcript containing pretrial testimony of a party where CPLR 3117 (a) (2) applies and a transcript which contains an unsworn statement which is certified by the stenographer who is a notary and where CPLR 4518 (a) may apply.

The court in CPT Med. Serv., P.C. v Utica Mut. Ins. (12 Misc 3d 237 [Civ Ct, Queens County 2006, Bernice D. Siegal, J.]) determined that an EUO transcript, which involved an assignor who was not a party to the action, cannot be used in the same manner as a real party in interest under CPLR 3117. This decision is consistent with other holdings regarding the use of depositions from General Municipal Law § 50-h hearings and the inadmissibility of such transcripts when used against{**53 Misc 3d at 223} parties who were not given prior notice of such proceedings. (See and cf. Rivera v New York City Tr. Auth., 54 AD3d 545 [1st Dept 2008].) But in the present matter, the real party in interest, the respective providers, never gave any testimony whatsoever because it is alleged each failed to appear altogether. None of the cases cited by either side considered whether the EUO transcript can be used as a business record at trial under CPLR 4518 (a).

The court in Rizz Mgt. Inc. v State Farm Mut. Auto. Ins. Co. (20 Misc 3d 1102[A], 2008 NY Slip Op 51191[U], *4 [Nassau Dist Ct 2008, Andrew M. Engel, J.]), in the context of a motion for summary judgment, refused to consider the EUO transcript, but that court had a very good reason for doing so because, “[n]otably absent from the transcripts submitted are certifications as to the transcripts’ accuracy, executed by the Notary Public who purportedly took the testimony.” In the instant matter, these certifications are attached to each of the transcripts.

Plaintiff argues that the transcripts are neither affirmations of counsel nor affidavits of laypersons and are nothing but self-serving. Plaintiff further argues that the stenographer transcribes nothing more than an unsworn statement of what was said by defendant’s counsel. But most business records are not affirmations of counsel or affidavits, but simply records kept in the usual course of business or profession to reflect “any act, transaction, occurrence or event.” (See CPLR 4518 [a].) What makes the EUO transcripts “inherently highly trustworthy” is the consequences to the attorney who misleads the court (Judiciary Law §§ 487, 90; Rules of Professional Conduct [22 NYCRR 1200.0] rule 3.3, reprinted in Judiciary Law Appendix), the loss of licensure of the notary public for failing to accurately transcribe which is the backbone which allows the “presumptive evidence of the facts contained in such [stenographer’s] certificate” (Executive Law § 137), and the right of the plaintiff to cross-examine and otherwise challenge the defendant’s witnesses. The arguments that plaintiff has made in its memorandum really apply to the weight given the EUO transcripts and not the admissibility of these exhibits as business records.

This court now weighs the evidence in the form of the EUO transcripts, along with the testimony regarding the policies and procedures of the defendant, and finds that the defendant has proved by a preponderance of the evidence that the providers{**53 Misc 3d at 224} have failed to appear at least two times for their respectively scheduled EUOs. No provider appeared at trial to testify.

Based on the foregoing, the clerk is directed to issue a final judgment in favor of the defendant and dismiss the complaint.

Footnotes

Footnote *:The pronoun inserted in the brackets was to balance the referred gender found within the Executive Law without changing its meaning.

010395/15

Plaintiff is represented by the Law Offices of Emilia Rutigliano, by Rachel Berzin, Esq., 1733 Sheepshead Bay Road, Suite 11, Brooklyn NY 11235; Defendant is represented by Bruno, Gerbino & Soriano LLP, by Catarina Oliveira, Esq., 445 Broad Hollow Road, Suite 220, Melville NY 11474.

Plaintiff’s motion and Defendant’s cross-motion for summary judgment pursuant to CPLR 3212 came before the Court on March 23, 2016. In addition to the oral arguments of counsel, the Court has considered the following listed submissions of the parties, pursuant to CPLR 2219(a):

Title/Number

Plaintiff’s Notice of Motion for Summary Judgment dated May 5, 2015; Affidavit of Maxim Tyorkin, M.D., sworn to on May 7, 2015; and Exhibits 1-4 1

Defendant’s Notice of Cross-Motion for Summary Judgment dated August 26, 2015; Attorney Affirmation of Dianne Galluzzo, Esq., affirmed on August 26, 2015; Affidavit of Zach Trahan, sworn to on August 12, 2015; Affidavit of Tammie Ulmer, sworn to on August 14, 2015; Affidavit of Raina Lira, sworn to on August 13, 2015; Affidavit of Lashelda Moreno, sworn to on August 24, 2015; Affirmation of Michael Baskies, M.D., affirmed on August 18, 2015; and Exhibits A-F 2

Plaintiff’s Attorney Affirmation in Opposition of Ilona Finkelshteyn, Esq., affirmed on February 8, 2016; Affidavit of Maxim Tyorkin, M.D., sworn to on February 2, 2016 (Exhibit 1 is the foregoing affidavit) 3

In an action by a provider to recover first-party no-fault benefits, Defendant moves for summary judgment based upon a negative peer review of the services rendered, or, alternatively, that Plaintiff purportedly billed above New Jersey Fee Schedule and thus is not eligible for reimbursement.

Plaintiff argues that affidavits proffered by Defendant are conclusory and fail to establish that the Denial of Claim forms were properly mailed and that Defendant’s IME report is not in admissible form.

In an apparent case of first impression, the issue before the Court is whether an insurer, when receiving a bill from a medical provider, who rendered services in New Jersey and is making a claim for New York no-fault benefits, is required to issue a Denial of Claim form, specifically, the New York State NF-10.

The no-fault regulations require an insurer to either pay or deny a claim for no-fault benefits within 30 days from the date of receipt of the claim (Insurance Law§ 5106(a); 11 NYCRR 65-3.8 (a)). An insurer who fails to timely deny the claim is generally precluded from interposing a defense to that claim. Hosp. for Jt. Disease v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 318, 879 N.E.2d 1291, 849 N.Y.S.2d 473 (2007); Nyack Hosp. v Metropolitan Property & Cas. Ins. Co., 16 AD3d 564, 791 N.Y.S.2d 658 (2d Dept. 2005). A review of Insurance Regulation 68 indicates that there are specific requirements for the issuance of a denial of claim form. See 11 NYCRR 65-3.8. For instance, in denying a claim, a form created by the Insurance Department, known as the NF-10, must be used. See id. In other instances, specific language is required to be inserted in the issuances of NF-10’s. See id.

11 NYCRR 65-3.8(c)(1) advises as follows:

(1) If the insurer denies a claim in whole or in part involving elements of basic economic loss or extended economic loss, the insurer shall notify the applicant or the authorized representative on the prescribed denial of claim form, in duplicate, and shall furnish, if requested by the applicant, one copy of all prescribed claim forms submitted by or on behalf of the applicant thereto. However, where a denial involves a portion of a health provider’s bill, the insurer may make such a denial on a form or letter approved by the department which is issued in duplicate. No form or letter shall be approved unless it contains substantially the same information as the prescribed form which is relevant to the claim denied.

In the case at bar, Defendant’s affiant, Raina Lira, a Claims Adjuster employed by Defendant, avers that Defendant, through its vendor, Auto Injury Solutions (AIS), mailed the [*2]Explanation of Reimbursement Form (EOR) to the medical provider. There is no indication that a NF-10 form was issued in this matter although Ms. Lira avers that in applicable instances, the Denial of Claim Form (NF-10) is sent. Further, there is no indication that the EOR form, which was the only document issued in response to Plaintiff’s claim, is a form or letter approved by the Department as so allowed by 11 NYCRR 65-3.8(c)(1). Thus, notwithstanding both parties’ arguments with regards to the substantive merits of the peer review defense, the Court finds that such defense is precluded by Defendant’s failure to issue a NF-10 Denial of Claim form.

Alternatively, Defendant contends that upon a proffer of a review of the bill by its Certified Coder, Lashelda Moreno, and the same indicates that Plaintiff billed above the New Jersey Fee Schedule, summary judgment must be granted in its favor.

The Fourth Amendment to Regulation 68 states that a fee schedule defense is no longer precluded by the 30 day rule in actions for services rendered after April 1, 2013.

11 NYCRR 65-3.8(g) advises the following:

Proof of the fact and amount of loss sustained pursuant to Insurance Law section 5106 (a) shall not be deemed supplied by an applicant to an insurer and no payment shall be due for such claimed medical services under any circumstances:

(i) when the claimed medical services were not provided to an injured party; or

(ii) for those claimed medical service fees that exceed the charges permissible pursuant to Insurance Law sections 5108(a) and (b) and the regulations promulgated thereunder for services rendered by medical providers.

(g)(2) This subdivision shall apply to medical services rendered on or after April 1, 2013.

This Court, as well as at least two Courts in the First Department, agree on the interpretation of the statute to be there is no preclusion of the fee schedule defense. See Surgicare Surgical Assoc. v National Interstate Ins. Co., 50 Misc 3d 85 (App. Term 2015); see also East Coast Acupuncture, P.C. v Hereford Ins. Co., 26 N.Y.S.3d 684, 685 (Civ. Ct. Kings Cty 2016); Saddle Brook Surgicenter, LLC v All State Ins. Co., 48 Misc 3d 336, 345-346 (Civ. Ct. Bronx Cty 2015).

In Surgicare Surgical Assoc v National Interstate Ins Co, the Appellate Term affirmed the Civil Court’s holding that “where a reimbursable health care service is performed outside the State of New York in a jurisdiction that has enacted a medical fee schedule prescribing the permissible charge for the service rendered, an insurer may properly rely on such fee schedule to establish the “prevailing fee” within the meaning of 11 NYCRR 68.6, and demonstrate compliance therewith by payment in accordance with that fee schedule.” Surgicare Surgical Assoc. v National Interstate Ins. Co, supra. Thus, the Appellate Term found that Plaintiff was only entitled to reimbursement for the permissible rate authorized in New Jersey for the services rendered by Plaintiff as set forth in New Jersey’s no-fault statute and applicable fee schedule.

Likewise, in this instance, the Court finds that Defendant’s fee schedule defense is neither precluded by timeliness or its failure to issue a Denial of Claim form as the language of the statute strictly mandates that “no payment shall be due .under any circumstances” for medical service fees that exceed the fee schedule charges. 11 NYCRR 65-3.8(g). In other words, [*3]Plaintiff would only be entitled to the payment of the subject bill at the rates permissible and authorized in the state of New Jersey. The Court is unpersuaded by Defendant’s argument that payment for Plaintiff’s bill is outright prohibited simply because the billed amount is higher than permissible. The regulation only reduces payment to the amount authorized by the applicable fee schedule.

With regard to the amount ultimately due to Plaintiff, Defendant proffers an explanation by Lashelda Moreno, a Certified Professional Coder employed by AIS on Defendant’s behalf. Upon review of the same, the Court finds that Ms. Moreno did not explain the exact amounts allowable in a coherent manner. In one portion of Ms. Moreno’s analysis, she lists the following with no further details:

According to the New Jersey Physicians’ Fee Schedule Exhibit 1:

Physician Fee North:

CPT 29877: $3,398.38

CPT 29875: $2,712.06 x 50% for MPR = $1356.03

CPT 29877: $3,398.38 x 20% for Assistant Surgeon = $679.68 (reimbursed BA)

CPT 29875: $2,712.06 x 20% for Assistant Surgeon = $542.41 (reimbursed BA)

In Ms. Moreno’s affidavit, upon which she concludes that the proper amount of the bill would be $5,976.50, rather than the billed amount of $10,144.88, there is no further explanation as to what the sum comprises of. While the Court may consider an attorney affirmation in the explanation of fee schedule provisions and the Court may take judicial notice of the fee schedule (see Kingsbrook Jewish Med. Ctr. v Allstate Ins. Co., 61 AD3d 13, 18 [App. Div. 2d Dep’t 2009]), the attorney affirmation of Dianne Galluzzo neither explains Ms. Moreno’s analysis or explains allowable reductions. The Court cannot presume to be knowledgeable of fee schedule reductions that, on its face, cannot be specifically adduced, and will not make any findings of fact as to such reductions. As such, a triable issue of fact remains as to its fee schedule defense. Further, the Court notes that while Ms. Moreno’s analysis sufficiently raises a triable issue, her analysis alone is inarticulate and insufficient to be the basis of summary judgment.

The Court finds that Plaintiff met its prima facie burden in establishing the timely mailing of the bills at issue through the affidavit of Maxim Tyorkin, M.D., the annexed bill and the annexed USPS mail extract pertaining to the bill at issue. See Viviane Etienne Med. Care v Country-Wide Ins. Co., 2015 NY Slip Op 04787 (2015).

Based on the foregoing, Plaintiff’s motion for summary judgment is granted to the extent that it established its prima facie case for purposes of trial. Defendant’s cross-motion is granted to the extent that it established its prima facie case for purposes of trial. The sole issue for trial is Defendant’s fee schedule defense for which Defendant bears the burden of establishing.

This constitutes the Decision and Order of the Court.

Dated: May 20, 2016
__________________________________
Richard J. Montelione, A.J.S.C.

[*1]

Civil Court of the City of New York, Kings County, April 11, 2016

APPEARANCES OF COUNSEL

The Rybak Firm, PLLC, Brooklyn, for plaintiff.

Peter C. Merani, P.C., New York City, for defendant.

{**52 Misc 3d at 492} OPINION OF THE COURT

Plaintiff’s and defendant’s respective motions for summary judgment are decided as follows:

I. Factual Background[*2]

In this action to recover assigned first-party no-fault benefits, plaintiff submitted a claim form and invoice to defendant for services rendered to Cosby Reavis on October 8, 2013. According to plaintiff’s claim, these services related to three different codes promulgated under the Official New York Workers’ Compensation Medical Fee Schedule. These codes are 99215, 20553 and 20999. Through the affidavit of its owner, Ksenia Pavlova, plaintiff contends it has made a prima facie case because it timely mailed a claim (NYS Form NF-3) for services rendered to Cosby Reavis, in accordance with its office procedure for generating and mailing bills, and that defendant has not paid the bill.

Defendant received plaintiff’s claim on October 21, 2013, and issued a denial (NYS Form NF-10) of the claim on December 3, 2013, based on a defense of lack of medical necessity of the services rendered, and based upon its contention that plaintiff did not bill its services in accordance with the applicable fee schedule. Defendant submits a copy of the denial with the affidavit of its claims representative, Nancy Kowalchuk, who describes defendant’s procedure for receiving and reviewing claims, and for sending denials to its Southwest Output Processing Center. Defendant also submits the affidavit of Janine{**52 Misc 3d at 493} Wicks of its Southwest Output Processing Center, who describes defendant’s procedure for mailing responses to claims for benefits, such as plaintiff’s claim. Lastly, defendant submits the sworn statement of Dr. Dorothy Scarpinato, who describes her determination that plaintiff’s services were not medically necessary, based on her independent medical examination of Cosby Reavis.

II. Discussion

A. Fee Codes 99215 and 20553

[1] To prevail on a motion for summary judgment, a medical provider must establish its prima facie case by proving it mailed its “completed claim form to the insurer,” and the insurer failed to pay or deny the claim within 30 days of receipt of the claim (Viviane Etienne Med. Care, P.C. v Country-Wide Ins. Co., 25 NY3d 498, 507 [2015]). With regard to the claims bearing codes 99215 and 20553, this court holds that plaintiff has met its prima facie burden. However, for the reasons stated below, the court finds that plaintiff has not met its prima facie burden as to the claim bearing code 20999.

Following submission of the bill, defendant had 30 days to pay or deny the claim for any defense, except for any non-precludable defense (Viviane Etienne, 25 NY3d at 506). As defendant denied plaintiff’s claim more than 30 days from the date of receipt, defendant did not preserve its defense of medical necessity (Bonetti v Integon Natl. Ins. Co., 269 AD2d 413, 414 [2d Dept 2000] [lack of medical necessity is a precludable defense]). In addition, defendant’s motion omits any argument concerning the proper billing of services associated with codes 20553 and 99215. Accordingly, this court grants plaintiff’s motion for summary judgment with regard to services related to codes 20553 and 99215.

B. “By Report” Code 20999

[2] With regard to the remaining code 20999, defendant argues that plaintiff has not satisfied its prima facie burden because plaintiff’s claim is incomplete. Specifically, defendant contends plaintiff did not provide sufficient information in support of the amount it charged for the services it designated with code 20999 of the Fee Schedule. Instead of having a relative value associated with the service, code 20999 is designated “By Report,” abbreviated “BR.” The Fee Schedule states that, in order to determine the appropriate monetary value of services designated [*3]“BR,” plaintiff must provide certain information.

{**52 Misc 3d at 494}“Information concerning the nature, extent, and need for the procedure or service, time, skill and equipment necessary, etc., is to be furnished using all of the following:

“A) Diagnosis (postoperative), pertinent history and physical findings.

“B) Size, location, and number of lesions or procedures where appropriate.

“C) A complete description of the major medical procedure and the supplementary procedures.

“D) When possible, list the closest similar procedure by code and relative value unit. The ‘BR’ relative value unit shall be consistent in relativity with the other relative value units in the schedule.

“E) Estimated follow up period, if not listed.

“F) Operative time.” (See Fee Schedule § 4, Surgery at 4, Surgical Ground Rule No. 10 [June 1, 2012 ed].)

In its papers, plaintiff makes no showing that it provided this information.

Neither plaintiff nor defendant provides any case law to support or refute defendant’s argument that this information is part of plaintiff’s prima facie burden, and this court has found no governing precedent. Thus, this issue appears to be a matter of first impression in this jurisdiction.

This court views “By Report” information as, by definition, part of the proof of plaintiff’s “completed claim form” (see Viviane Etienne, 25 NY3d at 507), and thus part of plaintiff’s prima facie burden. The Fee Schedule, which has been adopted into New York’s no-fault regulations (see 11 NYCRR 68.1 [a]), places an affirmative duty on the medical provider to submit this information to justify its billing. By omitting this information, plaintiff deprived defendant of sufficient notice of the claim. Without sufficient notice, defendant should not be expected to evaluate and pay the claim. Consequently, plaintiff did not establish its prima facie case for services related to code 20999.

Separate from the language of the Fee Schedule, defendant also argues that, pursuant to the recently amended 11 NYCRR 65-3.8 (g) (1), plaintiff must prove it billed in accordance with the Fee Schedule as part of its prima facie burden. As this court held in East Coast Acupuncture, P.C. v Hereford Ins. Co. (51 Misc 3d 441, 442-443 [Civ Ct, Kings County 2016]), the amended 11 NYCRR 65-3.8 (g) (1) does not per se require a{**52 Misc 3d at 495} medical provider to prove it billed in accordance with the Fee Schedule as part of its prima facie burden. Instead, the regulation states that, to the extent plaintiff bills amounts in excess of the Fee Schedule, the claim is not established.^[FN*] Therefore, this court held that the fee schedule defense is, under the amended [*4]regulation, non-precludable. Consistent with that opinion is the implication that, to even be considered, the basis of a bill must be established. Fee Schedule encoding generally acts as an agreed shorthand for the value of services. By exception, claims submitted through “By Report” codes have no predetermined relative value, and therefore, must be properly documented and detailed (as described in Surgical Ground Rule No. 10) before they can be considered established and complete. Accordingly, this court holds that, by failing to provide the information specified in the Fee Schedule in support of its services, plaintiff has not made its prima facie case as to code 20999.

III. Conclusion

For the foregoing reasons, plaintiff’s motion is granted with respect to the services billed under codes 20553 and 99215, in the amount of $267.79, and plaintiff may enter judgment for $267.79 plus statutory costs, attorney’s fees, disbursements and interest. Defendant’s motion is granted with respect to services billed under code 20999, and plaintiff’s claim with respect to those services is dismissed.

Footnotes

Footnote *:In any event, defendant does not argue that plaintiff billed in excess of the Fee Schedule. Rather, defendant argues that its fee schedule denial arose because plaintiff failed to provide the information necessary to determine the appropriate fee for its services related to code 20999.

CV-027848-14/KI
Devin P. Cohen, J.

Recitation, as required by CPLR §2219 (a), of the papers considered in the review of this Motion: Papers Numbered

Order to Show Cause and Affidavits Annexed

Answering Affidavits 2-3

Replying Affidavits 4-5

Exhibits

Other

Upon review of the foregoing papers, defendant’s motion for summary judgment, and plaintiff’s cross-motion for summary judgment are decided as follows:

In this action to recover assigned first-party no-fault benefits, defendant moves for summary judgment to dismiss plaintiff’s claim on the basis that defendant is not the proper insurer. Although defendant states it is the insurer for a proper workers’ compensation claim, it claims it did not insure the assignor’s employer for no-fault claims. However, in its original motion, defendant submits only the affidavit of its attorney, which is not evidence and does not serve to establish its assertions for summary judgment (Cullin v Spiess, 122 AD3d 792, 793 [2d Dept 2014]). In its reply papers, defendant submits an affidavit from an employee who claimed to have reviewed the file and determined that defendant was not the proper insurer. However, the court cannot consider new facts submitted on reply (Rengifo v City of New York, 7 AD3d 773, 773 [2d Dept 2004]). Furthermore, defendant fails to attach the insurance policy, rendering its employee’s statements as to the alleged contents of the policy hearsay (Nassau Ins. Co. v Manzione, 112 AD2d 408, 409 [2d Dept 1985] [best evidence of policy language is the policy itself]). Moreover, the police report defendant offers is uncertified, and is therefore inadmissible (Cheul Soo Kang v Violante, 60 AD3d 991, 991 [2d Dept 2009]). Accordingly, defendant’s [*2]motion for summary judgment is denied.

Plaintiff also moves for summary judgment and to compel discovery. However, plaintiff cannot assert that it is entitled to summary judgment if it also contends that discovery is not complete and that the incomplete discovery is needed (see CPLR 3212[f]; and see Points of Health Acupuncture, P.C. v Lancer Ins. Co., 28 Misc 3d 133[A], at *3 [App Term, 2d , 11th and 13th Jud Dists 2010]; Five Boro Psychological Servs., P.C. v Autoone Ins. Co., 27 Misc 3d 89, 90-91 [App Term, 2d , 11th and 13th Jud Dists 2010]). Accordingly, plaintiff’s motion for summary judgment is denied without prejudice. As defendant does not provide this court with any objections to plaintiff’s discovery requests, defendant must serve all nonprivileged information and documents responsive to plaintiff’s discovery requests on or before May 18, 2016 (All Boro Psychological Servs., P.C. v Allstate Ins. Co., 40 Misc 3d 131[A], at *2-3 [App Term, 2d , 11th and 13th 2013]).

For the reasons stated above, defendant’s motion for summary judgment is denied, plaintiff’s cross-motion for summary judgment is denied, and plaintiff’s motion to compel discovery is granted, to the extent described above.

This constitutes the decision and order of the court.

Date: March 22, 2016
DEVIN P. COHEN
Acting Justice, Supreme Court

Decided on March 22, 2016

Civil Court of the City of New York, Kings County

[*1]

Civil Court of the City of New York, Kings County, February 9, 2016

APPEARANCES OF COUNSEL

Lawrence Robert Miles, Long Island City, for defendant.

Perchekly Law Group, P.C., Brooklyn, for plaintiff.

Defendant’s motion for summary judgment, submitted on default and without written opposition or appearance by the plaintiff, is decided as follows:

Factual Background

In this action to recover assigned first-party no-fault benefits, plaintiff submitted claims for payment for medical services it rendered to Kenia Perez in August, September and October 2013. Defendant does not contest that it received the claim from plaintiff, but denied the claim [*2]because it claims plaintiff did not bill the services in accordance with the applicable fee schedule. Defendant recalculated the amount pursuant to its reading of the fee schedule, and paid plaintiff the amount it calculated.

Discussion

Defendant moves for summary judgment on the basis that it paid plaintiff the amount to which plaintiff was entitled pursuant to the fee schedule. Defendant further contends that, under the amended version of 11 NYCRR 65-3.8, which applies to services rendered after April 1, 2013, plaintiff must prove it billed in accordance with the fee schedule in order to make its prima facie case.

Pursuant to 11 NYCRR 65-3.8 (g) (1),

“[p]roof of the fact and amount of loss sustained pursuant to Insurance Law section 5106(a) shall not be deemed supplied by an applicant to an insurer and no payment shall be due for such claimed medical services under any circumstances: . . .

“(ii) for those claimed medical service fees that exceed the charges permissible pursuant to Insurance Law sections 5108(a) and (b) and the regulations promulgated thereunder for services rendered by medical providers.”

Defendant argues that the amendments to 11 NYCRR 65-3.8 (g) (1) change the nature of plaintiff’s prima facie proof. As set forth below, this court holds that the insurer’s objection to plaintiff’s alleged over-billing remains an affirmative defense. Thus, the only issue is whether the defense is precluded or not precluded if it is rendered later than 30 days after defendant receives the claim (see Viviane Etienne Med. Care, P.C. v Country-Wide Ins. Co., 25 NY3d 498, 510 [2015]).{**51 Misc 3d at 443}

As the Court of Appeals made clear in Viviane Etienne,

“a medical provider seeking reimbursement from a no-fault insurer demonstrates its entitlement to reimbursement of overdue benefits when it proves that it submitted a completed claim form to the insurer. A claim is overdue if it is not denied or paid within 30 days of the insurer’s receipt of proof of claim” (id. at 507).

The language of 11 NYCRR 65-3.8 (g) (1) does not conflict with the holding in Viviane Etienne. The regulation does not place any additional requirements on the medical provider, such as a requirement, in the general case, to substantiate the calculation of its fees. The plain language of the regulation requires that the insurance company determine if the medical provider billed its services in accordance with the applicable fee schedule. If the insurance company determines that the bill contravenes the fee schedule, the regulation states that the insurance company need not pay the bill. Therefore, the burden remains on the insurer to assert a defense that the provider billed in excess of the fee schedule.

Although the amendment does not change plaintiff’s prima facie burden, I find that the new language establishes that a fee schedule defense, for services after April 1, 2013, is not precluded if it is not asserted within 30 days of receipt of the claim. The regulation appears to be a carve-out from 11 NYCRR 65-3.8 (a) (1), which states that “[n]o-fault benefits are overdue if not paid within 30 calendar days after the insurer receives proof of claim, which shall include verification of all of the relevant information requested pursuant to section 65-3.5 of this Subpart.” Conversely, 11 NYCRR 65-3.8 (g) (1) imposes no deadline on the insurance company’s determination. At least two courts in the First Department concur with this court’s interpretation of 11 NYCRR 65-3.8 (g) (1) (see Saddle Brook Surgicenter, LLC v All State Ins. Co., 48 Misc 3d [*3]336, 344-345 [Civ Ct, Bronx County 2015]; Surgicare Surgical Assoc. v National Interstate Ins. Co., 50 Misc 3d 85, 87 [App Term, 1st Dept 2015]).

Based on this interpretation of 11 NYCRR 65-3.8 (g) (1), defendant may assert in this action a defense that plaintiff’s claim exceeds the applicable fee schedule. In support of this defense, defendant submits the affidavit of Veronica Pabon, a certified medical coder and biller employed by defendant as a fee schedule team leader (Rogy Med., P.C. v Mercury Cas. Co., 23 Misc 3d 132[A], 2009 NY Slip Op 50732[U], *2 [App Term,{**51 Misc 3d at 444} 2d Dept, 2d, 11th & 13th Jud Dists 2009]). Ms. Pabon states that defendant paid plaintiff, an acupuncturist, in accordance with the rate paid to chiropractors for the same services (see Great Wall Acupuncture, P.C. v GEICO Ins. Co., 26 Misc 3d 23, 24-25 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2009]). Ms. Pabon described the process by which defendant calculated the fees and supported those calculations with reference to the applicable fee schedule. Defendant also provided copies of the checks it sent to plaintiff. Based on this unopposed evidence, defendant paid plaintiff in accordance with the fee schedule, and does not owe plaintiff any additional payment.

For the foregoing reasons, defendant’s motion for summary judgment is granted and plaintiff’s complaint is dismissed.

[*1]

Civil Court of the City of New York, Kings County, October 22, 2015

APPEARANCES OF COUNSEL

Gary Tsirelman, P.C., Brooklyn, for plaintiff.

Law Offices of Deirdre J. Tobin & Associates, Garden City, for defendant.

In 2004, plaintiff Downtown Acupuncture, a medical services provider, filed this action to recover assigned first-party no-fault benefits for acupuncture services in the amount of $914.33 from defendant State Wide Insurance Co. Citing to a declaratory{**50 Misc 3d at 463} judgment by Supreme Court, Nassau County involving a different insurance company—State Farm Mutual Ins. Co.—that found the instant plaintiff and other acupuncture professional corporations (PCs) to be unlawfully incorporated, defendant argued [*2]that plaintiff was collaterally estopped from arguing that it was eligible to recover assigned no-fault benefits in the instant matter and moved to dismiss the complaint with prejudice. It is salient to note that defendant State Wide did not move to amend its answer to include collateral estoppel as an affirmative defense or raise at any time the defense of fraudulent incorporation. This action therefore raises the issue of whether under this set of facts, a defendant insurance company, which was not a party to a previous declaratory judgment action, may proactively invoke collateral estoppel to bar a plaintiff medical provider, which was a party to the previous action, from recovering no-fault benefits due to the finding of fraudulent incorporation.

In March 2010, State Farm brought an action in Supreme Court, Nassau County for a declaratory judgment (State Farm Mut. Ins. Co. v Anikeyeva, Sup Ct, Nassau County, Jaeger, J., index No. 4399/2010 [declaratory judgment]) that alleged that the instant plaintiff Downtown, as well as a number of other acupuncture PCs, were not owned and controlled by licensed acupuncturists, as required by New York law and regulations, and that the services provided therein were performed by independent contractors, also in violation of the state regulations. Specifically, the complaint alleged that in 2004, defendant received no-fault claims from a number of corporations owned by one Valentina Anikeyeva, a licensed acupuncturist. State Farm’s investigation revealed that Valentina formed professional corporations for her husband, Andrey, who was not licensed in New York State to operate, own, and control the acupuncture businesses and that Andrey, in turn, hired independent contractors to perform acupuncture services at the PC defendants’ offices. State Farm sought declaratory judgment that it need not reimburse the PC defendants for assigned claims submitted under the no-fault law.

At some point the parties in the declaratory judgment action entered into a stipulation, so-ordered on November 20, 2012, which granted plaintiff’s motion to compel discovery and conditionally struck defendant PCs’ answer unless they fully complied with all of the discovery demands. In relevant part, Justice Jaeger directed that “[PC defendants’] answer is conditionally stricken unless Defendants fully comply with all{**50 Misc 3d at 464} of [State Farm’s] discovery demands by [January 7, 2013].” Plaintiff State Farm subsequently moved for a default judgment based upon the PCs noncompliance with discovery.

By decision dated April 29, 2013 (2013 NY Slip Op 34010[U] [2013]), Justice Jaeger granted State Farm’s motion to strike the defendants’ answer resulting in the nonappearance of the defendants and entitling plaintiff to a judgment of default. In so ruling, the court found that the PC defendants’ pattern of noncompliant behavior was “willful and contumacious.” (2013 NY Slip Op 34010[U], *11.) He also noted that defendants had stipulated to the consequences of their conduct and “proffered no adequate excuse for their noncompliance [with discovery]” (2013 NY Slip Op 34010[U], *13). Moreover, the defendants attempted to avoid the consequences of the conditional order by serving responses about a month late which were “evasive, unresponsive and consisting mostly of objections.” (Id.)

Despite defendants’ default, Justice Jaeger noted that the court still had to reach the legal conclusion that plaintiff’s now undisputed factual allegations established a prima facie case. (2013 NY Slip Op 34010[U], *14, citing to Walley v Leatherstocking Healthcare, LLC, 79 AD3d 1236 [3d Dept 2010].) After reviewing the voluminous record (see id. at *6 n 2) Justice Jaeger concluded that plaintiff had established a prima facie case of fraudulent incorporation in that defendants had violated both Business Corporation Law §§ 1507 and 1508 and 11 NYCRR 65-3.16 and 65-3.11 (a):

“In sum, the overwhelming evidence indicates that the P.C. defendants were not owned [*3]and controlled by a licensed acupuncturist, therefore rendering them ineligible to receive reimbursement, and to collect payment on outstanding claims. Additionally, a billing provider which utilizes an independent contractor to provide the services in question, is not a ‘provider’ of the services in question and is not entitled to recover direct payment of assigned no-fault benefits from the defendant insurer.” (2013 NY Slip Op 34010[U], *18.)

Furthermore, on May 31, 2013, Justice Jaeger signed an order granting judgment to State Farm by default against all PC defendants, including Downtown. The order stated that “[the PC defendants] are unlawfully incorporated and are not entitled to collect No-Fault Benefits for any charges which they{**50 Misc 3d at 465} have submitted to State Farm” and that “State Farm is not obligated to pay the PC defendant” or their assignors for any health benefits provided. The order also decreed that “the PC defendants are not entitled to collect, and State Farm is not obligated to pay, No-Fault benefits for any charges that the PC defendants submitted to State Farm as such professional health services were provided by independent contractors or other non-employees of the PC defendants.” (Defendants’ exhibit A2.) The order with notice of entry was apparently served upon Gary Tsirelman, P.C., the attorney for then defendants Anikeyeva and Downtown and current attorney for plaintiffs herein. The Second Department affirmed this decision finding that defendants had failed to demonstrate reasonable excuse for their default in complying with the terms of the conditional order and a meritorious defense to the complaint. (State Farm Mut. Auto. Ins. Co. v Anikeyeva, 130 AD3d 1007, 1008 [2015].)

Before the instant trial began in late 2014, the defendant moved to have the case dismissed based on the doctrine of collateral estoppel. Defendant argued that Justice Jaeger’s order and decision precluded Downtown from arguing that it is eligible to receive no-fault benefits. Although defendant discussed its intention to utilize collateral estoppel in a pretrial conference, it never sought leave to amend its answer. In its brief, Downtown argued that defendant is barred from raising collateral estoppel because of defendant’s failure to amend its answer and the inapplicability of collateral estoppel in this case. Plaintiff also argued that collateral estoppel should not apply because the prior judgment was granted on default.

Collateral Estoppel or Issue Preclusion

It is well settled that a party may invoke the common-law doctrine of collateral estoppel to preclude another party from relitigating in a subsequent proceeding an issue clearly raised in a prior action and decided against that party or those in privity, whether or not the causes of action are the same. (In re Ferrandina, 533 BR 11 [ED NY 2015]; Ryan v New York Tel. Co., 62 NY2d 494, 500 [1984]; Lavian v Bleier, 2010 NY Slip 31542[U] [Sup Ct, NY County 2010]; see Abrahams v Commonwealth Land Tit. Ins. Co., 120 AD3d 1165 [2d Dept 2014].) The issue must have been essential to the decision rendered in the first action and must be the point to be decided in the second action such that “a different judgment in the second would destroy or impair rights or interests established in the{**50 Misc 3d at 466} first.” (Psychology YM P.C. v Travelers Prop. Cas. Ins. Co., 33 Misc 3d 1201[A], 2011 NY Slip Op 51744[U], *2 [2011], citing Ryan at 501.)

Collateral estoppel bars relitigation of an issue when “[1] the identical issue [was] . . . decided in the prior action and [is] decisive [in] the present action, and [2] the party to be precluded from [*4]relitigating the issue . . . had a full and fair opportunity to contest the prior [issue].” (Kaufman v Eli Lilly & Co., 65 NY2d 449, 455 [1985]; see also Evans v Ottimo, 469 F3d 278, 281 [2d Cir 2006]; Gramatan Home Invs. Corp. v Lopez, 46 NY2d 481, 485 [1979].) The proponent of collateral estoppel must demonstrate the identity of the issues whereas the party seeking to defeat its application has the burden of establishing the “absence of a full and fair opportunity to contest the prior determination.” (Buechel v Bain, 97 NY2d 295, 304 [2001]; Kaufman, 65 NY2d at 456; see Jeffreys v Griffin, 1 NY3d 34, 39 [2003]; Morrow v Gallagher, 113 AD3d 827, 828-829 [2d Dept 2014]; Nappy v Nappy, 100 AD3d 843, 845 [2d Dept 2012]; Windowizards, Inc. v S & S Improvements, Inc., 11 Misc 3d 130[A], 2006 NY Slip Op 50310[U], *2-3 [App Term, 2d Dept, 2d & 11th Jud Dists 2006].)

As to the first prong, preclusive effect will only be given where the particular issue was “actually litigated, squarely addressed and specifically decided.” (Crystal Clear Dev., LLC v Devon Architects of N.Y., P.C., 97 AD3d 716, 717-718 [2d Dept 2012].) To satisfy the “actually litigated” prong of this test, it “must have been properly raised by the pleadings or otherwise placed in issue and actually determined in the prior proceeding.” (Evans v Ottimo, 469 F3d at 282, citing D’Arata v New York Cent. Mut. Fire Ins. Co., 76 NY2d 659, 667 [1990]; Matter of Abady, 22 AD3d 71, 81 [1st Dept 2005].) For an identity of issues to exist, the issues presented must involve substantially identical legal theories and causes of action, and have no significant factual differences. (Kaufman, 65 NY2d at 455; see also Restatement [Second] of Judgments § 27, Comment c [1982] [court should consider whether there is substantial overlap between the evidence or argument, whether the new evidence or argument involves application of the same rule of law, whether pretrial preparation and discovery relating to the matter presented in the first action could be reasonably expected to have embraced the matter sought to be presented in the second, and how closely related the claims involved in the two proceedings are].){**50 Misc 3d at 467}

As to the second prong, a determination as to whether a full and fair opportunity was provided requires consideration of the “realities of the prior litigation” including the importance of the claim in the prior litigation, the forum and extent of the litigation, the incentive and initiative to litigate, the competence and expertise of counsel and the forseeability of future litigation. (Psychology YM at 5-6, citing to Ryan at 501; Gilberg v Barbieri, 53 NY2d 285, 292 [1981]; see Focus Radiology, P.C. v New York Cent. Mut. Ins. Co., 24 Misc 3d 126[A], 2009 NY Slip Op 51218[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2009].) An issue is not actually litigated if “there has been a default, a confession of liability, [a failure to provide discovery], a failure to place a matter in issue by proper pleading or even because of a stipulation” (Kaufman at 456-457; Matter of Abady at 83), and therefore a dismissal on these grounds will not usually be on the merits so as to bar a subsequent identical action. (Choicenet Chiropractic, P.C. v Clarendon Ins. Co., 24 Misc 3d 1216[A], 2009 NY Slip Op 51472[U] [Civ Ct, Richmond County 2009].)

A limited exception applies “where the party against whom collateral estoppel is sought to be invoked has appeared in the prior action or proceeding and has, by deliberate action, refused to defend or litigate the charge or allegation that is the subject of the preclusion request.” (Matter of Abady, 22 AD3d at 83-84; see Kalinka v Saint Francis Hosp., 34 AD3d 742, 744 [2d Dept 2006] [res judicata applies where dismissal in prior action was upon the grant of an order of [*5]preclusion after court determined that Kalinka willfully and contumaciously failed to comply with disclosure]; Kanat v Ochsner, 301 AD2d 456, 458 [1st Dept 2003] [collateral estoppel applies to judgment obtained upon default where defendants appeared and answered in prior action and engaged in extensive motion practice caused in large part by their “wilful and contumacious pattern of selective, partial responses to . . . pretrial discovery demands.” They therefore had a full and fair opportunity to fully litigate the underlying merits of the prior action “but affirmatively chose not to by their own failure to comply with court orders”]; Matter of Latimore, 252 AD2d 217 [1st Dept 1999] [collateral estoppel applies where respondent had ample opportunity to contest allegations in prior action yet allowed a default judgment to be entered against her and then failed to persuade the court to vacate said default].) To that end, a judgment issued as a result of preclusion after a party has refused to comply with discovery{**50 Misc 3d at 468} “is in fact a judgment on the merits” and must be given collateral effect. (Lavian v Bleier, 2010 NY Slip 31542[U], *6; see Strange v Montefiore Hosp. & Med. Ctr., 59 NY2d 737 [1983].)

Collateral estoppel may be invoked offensively as a sword in subsequent litigation by a nonparty to the prior litigation, provided that the party seeking to apply collateral estoppel can show that his opponent participated in the prior litigation and had a full opportunity to litigate the action on its merits. (B. R. DeWitt, Inc. v Hall, 19 NY2d 141, 147-148 [1967]; see also Windowizards, 11 Misc 3d 130[A], 2006 NY Slip Op 50310[U], *6 [App Term, 2d Dept, 2d & 11th Jud Dists 2006]; Klein v Gutman, 38 Misc 3d 1211[A], 2012 NY Slip Op 52427[U] [Sup Ct, Kings County 2012]; Uptodate Med. Servs., P.C. v State Farm Mut. Auto. Ins. Co., 23 Misc 3d 42 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2009] [where insurer offensively utilized collateral estoppel based on prior declaratory action finding the provider was fraudulently incorporated].) Again, the proponent of collateral estoppel must show that the decisive issue was necessarily decided in the prior action and the party opposing collateral estoppel must show the absence of a full and fair opportunity to litigate the issue at hand. (Windowizards, 2006 NY Slip Op 50310[U], *4, citing Buechel v Bain, 97 NY2d at 304.)

Discussion

In the instant proceeding, defendant State Wide seeks to use collateral estoppel against Downtown based upon a declaratory judgment, granted on default, that Downtown and other PC defendants were unlawfully incorporated and therefore not entitled to receive no-fault benefits. The predicate for the Supreme Court finding was that the purported owner of Downtown and other acupuncture PCs, Valentina Anikeyeva, did not actually own and control the PCs which were actually owned and controlled by unlicensed acupuncturists, in violation of New York law and regulations, and that the services provided therein were performed by independent contractors also in violation of the state regulations. As set forth above, State Wide may assert this doctrine even though it was not a party to the previous action brought by a different insurance company—State Farm—because Downtown was a party to the prior action.

[1] In the prior proceeding, Downtown Acupuncture and its purported owner had more than a full and fair opportunity to litigate the issue of fraudulent incorporation. Downtown{**50 Misc 3d at 469} submitted answers in the declaratory judgment action, was represented by the same attorney appearing on behalf of Downtown herein, and had ample opportunity to comply with Justice Jaeger’s conditional order [*6]of preclusion. Justice Jaeger found that all of the PCs, including Downtown, had engaged in “willful and contumacious” behavior by failing to comply with plaintiff’s discovery demands and his conditional order of preclusion. He also found that defendants had stipulated to the consequences of their conduct and proffered “no adequate excuse for their noncompliance.” Finally, rather than merely basing his decision on defendants’ default, Justice Jaeger searched the record based upon plaintiff’s “now undisputed factual allegations” and found that plaintiff had legally made out a prima facie case of fraudulent incorporation.

[2] However, at this juncture, defendant State Wide cannot meet the first prong of the test for collateral estoppel—that there is “an identity of issues” between the two cases involving the same legal theories and causes of actions. State Wide never amended its answer to include the defense of unlawful incorporation and thus has not met the threshold of even raising the issue of fraudulent incorporation. As it has not raised the issue, it cannot now argue that there is an identity of issues warranting collateral estoppel. It must first amend its answer.

[3] The defense of fraudulent incorporation, also known as the “Mallela defense,“^[FN*] is a “statutory defense” arising from a claimant’s failure to comply with the Business and Education Laws, as opposed to a policy exclusion or extent of coverage issue provided by a contract of exclusion. (Manhattan Med. Imaging, P.C. v State Farm Mut. Auto. Ins. Co., 20 Misc 3d 1144[A], 2008 NY Slip Op 51844[U] [Civ Ct, Richmond County 2008], citing Eastern Med., P.C. v Allstate Ins. Co., 19 Misc 3d 775 [Dist Ct, Nassau County 2008].) Healthcare service providers are not eligible to receive no-fault benefits if they are incorporated in violation of the applicable New York licensing requirements{**50 Misc 3d at 470} contained in Business Corporation Law §§ 1507, 1508 and Education Law § 6507 (4) (c) (I). (See Liberty Mut. Ins. Co. v Excel Imaging, P.C., 879 F Supp 2d 243, 256 [ED NY 2012]; Concourse Chiropractic, PLLC v State Farm Mut. Ins. Co., 35 Misc 3d 1213[A], 2012 NY Slip Op 50676[U], *4-5 [Dist Ct, Nassau County 2012] [“The factual foundation of a Mallela defense involves proof that persons not licensed to practice the profession for (which) the professional corporation . . . was formed are the actual owner or are actually controlling the operation of the business”]; Multiquest, P.L.L.C. v Allstate Ins. Co., 17 Misc 3d 37, 39 [App Term, 2d Dept, 2d & 11th Jud Dists 2007].) “Nor may a medical services corporation bill for services provided by physicians who are not employees of the corporation, such as independent contractors.” (Liberty Mut. Ins. Co., 879 F Supp 2d at 257; see 11 NYCRR 65-3.11 [a].)

The Mallela defense is not subject to preclusion and hence is non-waivable. (Lexington Acupuncture, P.C. v General Assur. Co., 35 Misc 3d 42, 48 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2012]; see Lexington Acupuncture, P.C. v State Farm Ins. Co., 12 Misc 3d 90, 92 [App Term, 2d Dept, 2d & 11th Jud Dists 2006]; Concourse Chiropractic, PLLC v State Farm Mut. Ins. Co., 35 Misc 3d 1213[A], 2012 NY Slip Op 50676[U], *5 [Dist Ct, Nassau County 2012]; Manhattan Med. Imaging, P.C. v State Farm Mut. Auto. Ins. Co., 20 Misc 3d 1144[A], 2008 NY Slip Op 51844[U] [Civ Ct, Richmond County 2008].) A defendant may plead this defense at any time since the courts have interpreted 11 NYCRR 65-3.16 (a) (12) to bar reimbursement of no-fault benefits without regard to when the services were rendered. (Multiquest, P.L.L.C. v Allstate Ins. Co., 17 Misc 3d 37, 39 [App Term, 2d Dept, 2d & 11th Jud Dists 2007], citing Allstate Ins. Co. v Belt Parkway Imaging, P.C., 33 AD3d 407, 408 [1st Dept 2006]; Urban Radiology, P.C. v GEICO Ins. Co., 28 Misc 3d 1230[A], 2010 NY Slip Op 51554[U], *1 [Civ Ct, Kings County 2010].) A court may even grant a motion for summary judgment on this unpleaded defense where a plaintiff has not asserted any surprise or prejudice. (Multiquest, P.L.L.C. v Allstate Ins. Co., 17 Misc 3d at 39; see also Ingordo v Square Plus Operating Corp., 276 AD2d 528 [2d Dept 2000].) Therefore, even if defendants did not include the Mallela defense in their answer they could raise it before the trial.

However, defendant is two steps removed from asserting collateral estoppel in the instant matter. The proper way to assert a claim of fraudulent incorporation is to plead it as a defense{**50 Misc 3d at 471} to an action to obtain reimbursement of assigned no-fault benefits or to bring a declaratory action seeking judgment that the provider is not eligible to obtain no-fault benefit because it has failed to comply with the licensing requirements of 11 NYCRR 65-3.16 and 65-3.11 (a). (Concourse Chiropractic, PLLC v State Farm Mut. Ins. Co., 35 Misc 3d 1213[A], 2012 NY Slip Op 50676[U], *6 [Dist Ct, Nassau County 2012].) Here, defendant never even sought to amend its answer to include the Mallela defense and must do so prior to even raising collateral estoppel as an affirmative defense.

Similarly, collateral estoppel is an affirmative defense that should generally be pleaded in the answer or a pre-answer motion to dismiss. (CPLR 3018, 3211 [a] [5]; see also Surlak v Surlak, 95 AD2d 371, 383 [2d Dept 1983].) While the courts have considerable discretion to permit amendment of pleadings in the absence of a showing of prejudice (CPLR 3025 [b]; see also Aurora Loan Servs., LLC v Dimura, 104 AD3d 796, 796 [2d Dept 2013]; Worthen-Caldwell v Special Touch Home Care Servs., Inc., 78 AD3d 822, 823 [2d Dept 2010]), the proponent seeking to amend the pleadings must make a formal motion. (See Laundry v Bolton, 43 Misc 3d 1205[A], 2014 NY Slip Op 50498[U] [Sup Ct, Kings County 2014]; Fernandez v The New Happy Nail, Inc., 2014 WL 8735152 [Sup Ct, Queens County 2014]; CPLR 3025 [b].)

This court cannot even entertain defendant’s request for collateral estoppel until it seeks to amend its answer to raise Mallela as a defense and hence create an apparent identity of issues between the declaratory judgment action and the instant matter. In the same motion to amend it can also assert collateral estoppel. After defendant formally moves to amend, plaintiff will be afforded the opportunity to argue how it would be prejudiced by such a motion. The court is quite dubious that plaintiff will be able to show any prejudice or surprise since the Appellate Term noted as early as 2012 that “[t]here exists a rich history of litigation, involving a multitude of cases before the Appellate Term, in which health care facilities allegedly owned by Ms. Anikeyeva have been asked to supply Mallela discovery.” (Lexington Acupuncture, P.C., 35 Misc 3d at 49 [Golia, J. concurring].) However, sometimes form over substance does matter and plaintiff must be afforded the opportunity to argue prejudice or disclaim the apparent identity of issues.

Footnotes

Footnote *:In State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005]), the Court of Appeals held that professional corporations that are improperly incorporated or licensed are ineligible to recover no-fault benefits and that insurance carriers may withhold payment for medical services provided by fraudulently incorporated enterprises to which patients have assigned their claims. At issue in Mallela was the prohibition of “nonphysicians . . . owning or controlling medical service[s] corporations.” (Id. at 321; see Lexington Acupuncture, P.C. v General Assur. Co., 35 Misc 3d 42, 45 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2012].)

[*1]

Civil Court of the City of New York, Kings County, September 11, 2015

APPEARANCES OF COUNSEL

Law Office of Melissa Betancourt, P.C., Brooklyn, for plaintiffs.

Bruno, Gerbino & Soriano, LLP, Melville, for defendant.

Plaintiffs move, via order to show cause (OSC), for an order pursuant to CPLR 2304, 2303, and 311, quashing defendant’s judicial subpoena duces tecum and granting plaintiffs a protective order pursuant to CPLR 3103 (a). Defendant opposes.

After a review of the papers presented, all relevant statutes and case law, the court grants the OSC in part and denies it in part.

The instant action was commenced to recover first-party no-fault benefits in the amount of $3,674.68, for medical services rendered to plaintiffs’ assignor as a result of injuries he allegedly sustained in an automobile accident occurring on or about May 19, 2012. Plaintiffs commenced the action via service of a summons and complaint on or about May 17, 2013. Defendant interposed its answer on or about August 22, 2013.

On or about April 2, 2014, defendant served a subpoena duces tecum upon TD Bank, located at 1701 Route 70, East Cherry Hill, NJ 08034. The subject subpoena indicates that the information sought is related to the time period of “January 1, 2008 or the date of the account origination, whichever is earlier, to the present.” Additionally, the subpoena demands the production of all documentation related to specific account number (REDACTED). No names of any individuals appear therein.

The following documentation sought includes:

“a) monthly account transaction statements; b) copies of all checking statements, cancelled checks, including both the front of the check and the back; c) copies of all bank reconciliations; d) account formation and governance documents, including but not limited to signature cards, powers of attorney and corporate resolutions; e) all documents{**49 Misc 3d at 928} reflecting or relating to deposits and/or cash withdrawals, electronic fund transfers and/or wire transfers, including but not limited to all deposit and/or withdrawal slips; f) copies of all documentation relating to any and all loan accounts and/or investment accounts, including but not limited to mortgages and lines of credit, and any and all statements, payments and loan draws; and g) all correspondence between the bank and each of the account holders identified above.”

Plaintiffs argue that their OSC to quash the subject subpoena is an absolute necessity in view of said subpoena’s numerous fatal defects. First, they argue that the subpoena was not properly served in accordance with the methods promulgated by CPLR 311, and also that no proof of service has been submitted. Next, they argue that defendant’s subpoena fails to tender, in advance, traveling expenses to the witness(es) as required by CPLR 2303. Plaintiffs further argue that since the subpoena is overly broad, excessive, and fails to name the holder of the aforementioned account number, it is tantamount to the proverbial “fishing expedition,” where the sole intent is to “ascertain [*2]whether documents exist rather than to compel the production of specific documents” (OSC ¶ 8). Lastly, plaintiffs argue that this court should grant their request for a protective order, so as to shift the burden on defendant to prove that the information it seeks is “material and necessary” for its defense in this action (id. ¶ 17).

In opposition, defendant argues that it properly served the subpoena on the nonparty witness, TD Bank, pursuant to CPLR 2303. Defendant annexes a copy of the affidavit of service demonstrating that on April 18, 2014, personal service was effected upon Michael Esposito, “Store Manager,” of the TD Branch located at 2025 Broadhollow Road, Farmingdale, NY 11735 (aff in opp, exhibit A). Said affidavit also indicates that Ryan LeGrady, the individual who served same, requested Mr. Esposito to provide photo identification. In response, Mr. Esposito produced a New York State driver’s license. Defendant also argues that the absence of the witness fee requirement does not render the subpoena defective, in that the instant{**49 Misc 3d at 929} subpoena seeks documents, as opposed to the actual appearance of any individual(s). Defendant further argues that plaintiffs lack standing to challenge the basis of the subpoena because they simply “do not have a proprietary or possessory interest in the bank records sought” (id. ¶ 7).

Furthermore, defendant argues that it is entitled to the production of the demanded documents because they are material and necessary evidence related to defendant’s Mallela defense (State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005]). In Mallela, the Court of Appeals held that a

“medical corporation that was fraudulently incorporated under N.Y. Business Corporation Law §§ 1507, 1508, and N.Y. Education Law § 6507 (4)(c) [is not] entitled to be reimbursed by insurers, under New York Insurance Law §§ 5101 et seq., and its implementing regulations, [even] for medical services rendered by licensed medical practitioners” (Mallela, 4 NY3d at 320).

In support of its Mallela argument, defendant annexes the examination under oath transcript of Dr. Brij Mittal, owner of plaintiff Jamaica Wellness Medical, P.C., as its exhibit E. Defendant argues that Dr. Mittal’s testimony raises increasing suspicion regarding the formation and ownership of Jamaica Wellness Medical, P.C. Specifically, Dr. Mittal testified that his license had previously been revoked for misuse and that he took over a “fully functional medical practice, with support staff, without any payment or agreement” (aff in opp ¶ 15). Furthermore, defendant asserts that this testimony unequivocally demonstrates that “Dr. Mittal is completely unfamiliar with the practice of retaining physical therapists from an ‘agency’ whose name he does not know and that Dr. Mittal admitted to practices that constitute improper billing for services rendered by non-employees in violation of the No-Fault Regulations” (id.).

Therefore, defendant argues that it has demonstrated that its Mallela-based defenses are meritorious and that the subpoena at issue seeks material related to said defenses. Furthermore, defendant argues that since its disclosure demands are made with good cause, plaintiffs are not entitled to the issuance of a protective order.

Conclusions of Law

The court first finds that service of the subject subpoena was proper, in that it was personally served “upon [a] domestic . . . {**49 Misc 3d at 930}corporation, to [a] . . . managing . . . agent,” in accordance with CPLR 311 (a) (1). The court rejects plaintiffs’ contention that defendant’s subpoena is defective in that defendant failed to tender traveling expenses in advance to the witness as required by CPLR 2303. The subject subpoena specifically pertains to the production of documents, not any individual, and clearly states that said documents may be mailed to defendant’s attorney.

The court now addresses what it perceives to be the more significant issue at hand, that is the substance and relevance of the subject subpoena. The court finds defendant’s argument that plaintiffs lack standing to contest the subpoena to be unavailing. A motion to quash may be made by the nonparty witness or “by one of the parties or a party’s lawyer” (McDaid v Semegran, 16 Misc 3d 1102[A], 2007 NY Slip Op 51227[U], *3 [Sup Ct, Nassau County 2007]; see also Snedeker v Schiff Hardin LLP, 2010 NY Slip Op 30151[U] [Sup Ct, Nassau County 2010]). “An application to quash a subpoena should be granted ‘[o]nly where the futility of the process to uncover anything legitimate is inevitable or obvious’ . . . or where the information sought is ‘utterly irrelevant to any proper inquiry’ ” (Matter of Kapon v Koch, 23 NY3d 32, 38 [2014]; see also Anheuser-Busch, Inc. v Abrams, 71 NY2d 327, 331-332 [1988], citing Matter of Edge Ho Holding Corp., 256 NY 374, 382 [1931]). The party moving to vacate the subpoena bears the burden of establishing that the subpoena should be vacated under such circumstances (see Matter of Dairymen’s League Coop. Assn., Inc. v Murtagh, 274 App Div 591 [1st Dept 1948]; Ledonne v Orsid Realty Corp., 83 AD3d 598, 599 [1st Dept 2011]).

In contemplating the relevance and extent of the disclosure/discovery demanded in a subpoena duces tecum, one must first look to CPLR 3101 for guidance and instruction. Pursuant to CPLR 3101 (a) (4), a party may obtain discovery from a nonparty in possession of material and necessary evidence, provided that the nonparty is informed of the circumstances or reasons disclosure is sought. CPLR 3101 provides in pertinent part: “(a) Generally. There shall be full disclosure of all matter material and necessary in the prosecution or defense of an action, regardless of the burden of proof, by: . . . (4) any other person, upon notice stating the circumstances or reasons such disclosure is sought or required.”

“The [phrase] ‘material and necessary’ [is] . . . to be interpreted liberally to require disclosure, upon request, of any{**49 Misc 3d at 931} facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity. The test is one of usefulness and reason” (Allen v Crowell-Collier Publ. Co., 21 NY2d 403, 406 [1968]; see also Yoshida v Hsueh-Chih Chin, 111 AD3d 704, 705 [2d Dept 2013]; Medical Polis, P.C. v Progressive Specialty Ins. Co., 34 Misc 3d 153[A], 2012 NY Slip Op 50342[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2012]; Lexington Acupuncture, P.C. v General Assur. Co., 35 Misc 3d 42 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2012]).

CPLR 3101 (a) (4) also contains a notice requirement with regard to nonparties, wherein the subpoenaing party must first state either on the face of the subpoena, or in a notice accompanying it, “the circumstances or reasons such disclosure is sought or required” (Kapon v Koch, 23 NY3d at 34). It is evident that the CPLR imposes more rigid and stringent requirements for disclosure demands made on a nonparty as opposed to an actual party, “presumably to afford a nonparty who has no idea of the parties’ dispute or a party affected by such request an opportunity to decide how to respond” (Velez v Hunts Point Multi-Serv. Ctr., Inc., 29 AD3d 104, 110 [1st Dept 2006]).

In Kapon, the Court of Appeals rejected the argument “that CPLR 3101 (a) [(4)] contains distinctions between disclosure required of parties and nonparties” (Kapon at 36), and has also instructed that CPLR “3101 (a) (4) imposes no requirement that the subpoenaing party demonstrate that it cannot obtain the requested disclosure from any other source” (id. at 38). Moreover, if the subpoenaing party complies with the notice requirement promulgated by CPLR [*4]3101 (a) (4), it merely needs to establish that the discovery it seeks is “material and necessary” to the prosecution or defense of the action (id.). However, with a motion to quash a subpoena, the party or nonparty still must establish that the discovery sought is “utterly irrelevant” to the action or that the “futility of the process to uncover anything legitimate is inevitable or obvious” (id., citing Matter of Edge Ho Holding Corp. at 382; see also Ferolito v Arizona Beverages USA, LLC, 119 AD3d 642, 643 [2d Dept 2014]).

This court has witnessed the meteoric rise of the Mallela defense in the past year. In some cases, the carrier denies a plaintiff no-fault benefits based solely on the mere suspicion of fraudulent activity. In other cases, the carrier establishes a well articulated and reliable basis for its denial. Consequently, with regard to the issue of whether a professional entity is{**49 Misc 3d at 932} fraudulently incorporated, the court has grappled with the two profound competing interests involved. These interests are a plaintiff’s right to privacy with regard to its financial records and business affairs, and defendant’s right to the disclosure of and access to “relevant” information in its legitimate quest to expose a fraudulently incorporated professional service corporation. Indeed, this appears to be the primary reason that “[t]he supervision of discovery, the setting of reasonable terms and conditions for disclosure, and the determination of whether a particular discovery demand is appropriate, are all matters within the sound discretion of the trial court, which must balance competing interests” (Kooper v Kooper, 74 AD3d 6, 17 [2d Dept 2010]).

In the case at bar, the court acknowledges defendant’s zealous attempt to illuminate what, quite frankly, does appear to be illegal conduct. However, the deficiency inherent in the subpoena it relies on to obtain proof of same, severely undermines its efforts. Simply put, defendant’s subpoena fails to state on its face, or via an accompanying notice, “the circumstances or reasons such disclosure is sought or required” (Kapon, 23 NY3d at 39). This is a procedural defect which this court cannot overlook.

“As to motions for a protective order, CPLR 3103(a) not only permits a non-party witness to seek such an order in his/her own right, but also permits any party opposing the disclosure to make the motion” (McDaid v Semegran, 2007 NY Slip Op 51227[U], *2, quoting Matter of MacLeman, 9 Misc 3d 1119[A], 2005 NY Slip Op 51675[U], *5 [Sur Ct, Westchester County 2005]; see also Snedeker v Schiff Hardin LLP; Nexray Med. Imaging PC v Allstate Ins. Co., 39 Misc 3d 1237[A], 2013 NY Slip Op 50910[U] [Nassau Dist Ct 2013]). The burden is on the moving party to establish the need for a protective order (see Koump v Smith, 25 NY2d 287, 294 [1969]; Vivitorian Corp. v First Cent. Ins. Co., 203 AD2d 452, 452-453 [2d Dept 1994]).

“A motion for a protective order . . . is addressed to the sound discretion of the trial court” (Boylin v Eagle Telephonics, 130 AD2d 538, 538 [2d Dept 1987]). CPLR 3103 (a) provides that

“[t]he court may at any time on its own initiative, or on motion of any party or of any person from whom or about whom discovery is sought, make a protective order denying, limiting, conditioning or regulating the use of any disclosure device. Such{**49 Misc 3d at 933} order shall be designed to prevent unreasonable annoyance, expense, embarrassment, disadvantage, or other prejudice to any person or the courts.”

Therefore, in accordance with the foregoing, it is hereby[*5] ordered that the portion of plaintiffs’ OSC wherein they seek to quash the subpoena is granted based on defendant’s failure to provide the nonparty witness with the notice required under CPLR 3101 (a) (4); and it is further ordered that the portion of plaintiffs’ OSC wherein they seek a protective order is denied; and it is further ordered that defendant may serve the subpoena again, accompanied by the required notice.

720728/12

Evan Polansky, Esq.
Counsel for plaintiffs
Gary Tsirelman, PC
129 Livingston Street
Brooklyn, NY 11201

Richard C. Aitken, Esq.
Bruno, Gerbino & Soriano, LLP
Counsel for defendant
445 Broad Hollow Road
Suite 220
Melville, NY 11747

Stephen Goldblatt, Esq.
Counsel for defendant
3315 Nostrand Avenue
Suite L1-A
Brooklyn, NY 11229

In this action to recover assigned first-party no-fault insurance benefits, three medical providers sought reimbursement for services rendered to the assignor as the result of an automobile accident that occurred on August 4, 2010, in Brooklyn, New York. Defendant [*2]insurance carrier averred that plaintiffs may not obtain payment of first-party insurance benefits as a result of the accident because the assignor’s policy was terminated ab initio due to material misrepresentations in securing the policy. In opposition, plaintiffs contended that Rhode Island law does not permit termination of an automobile insurance policy ab initio. The parties stipulated to the facts, leaving the court to determine only whether a Rhode Island automobile insurance policy issued by the Rhode Island Automobile Insurance Plan may be terminated ab initio.

Pursuant to a deposition of Felix Cordova, the assignor, recorded on November 22, 2010, the parties agreed that Mr. Cordova did not know his Rhode Island address by memory and had to read it from his driver’s license. Mr. Cordova resided at 703 Ditmas Avenue, Brooklyn, New York for thirteen to fourteen years with his wife, daughter and granddaughter, and resided in Rhode Island only on weekends for three years at a property that was owned by friends. Mr. Cordova purported to be the owner of the Brooklyn property, although his wife is listed as the owner. Mr. Cordova owns a car repair shop/dealership located in Bridgeton, New Jersey. The parties further stipulated that the assignor made a material misrepresentation in his application for the subject policy and defendant issued a reservation of rights letter on October 28, 2010, and a denial letter on March 14, 2011.

The parties agreed that if plaintiffs prevailed, 37th Avenue Medical, P.C. would be entitled to reimbursement in the amount of $1,903.68, Elective Acupuncture, P.C. would receive $2,472.53, and AKA Chiropractic, P.C. would receive $526.54, and that although Rhode Island does not provide no-fault medical reimbursement, as in New York, coverage would be provided under the “out of state accident” coverage clause of the policy, which requires the insurer to provide the minimum coverage required in the state where the accident occurred.

Rhode Island General Laws § 31-33-8 (a) governs certain specialty automobile insurance plans, and provides,

After consultation with the insurance companies authorized to issue automobile liability and/or physical damage policies in this state, the insurance commissioner shall approve a reasonable plan or plans fair to the insurers and equitable to their policy holders, for the apportionment among the companies of applicants for motor vehicle liability and/or physical damage insurance who are in good faith entitled to but are unable to procure insurance through ordinary methods.

The policy at issue is such a liability and property damages policy issued through the Rhode Island Automobile Insurance Plan (see also Rhode Island General Laws § 31-47-16). The only portion of the policy in dispute here is the liability section since no claim for property damages was asserted.

Regulation 16, section 10, which was promulgated by Rhode Island General Laws §§ 27-8-11, 27-9-1 et seq., 31-47-4 and 42-14-17, governs cancellation and renewal of all Rhode Island automobile insurance policies, unless specifically exempted. It states:

No insurer may rescind ab initio coverage required by the terms of R.I. Gen Laws § 31-47-1 et seq. [requiring mandatory automobile liability insurance]. Whether or not rescission ab initio is available for other coverages is not addressed by this Regulation and shall be governed by the applicable statutory and case law of this state. Nothing in [*3]this section shall vary the ability of the insurer to cancel automobile liability coverage on a prospective basis, as long as the requirement of all statutes and Regulations governing cancellation are met [emphasis added].

Thus, according to Regulation 16, rescission ab initio is generally not permitted for Rhode Island automobile liability insurance policies.

Moreover, Regulation 16, sections 4, 5 and 6, prescribe the grounds for cancellation and non-renewal of automobile policies and the required notices. Specifically excluded is liability insurance policies issued through the Rhode Island Insurance Plan. The court will not presume that this omission was inadvertent.

The Rhode Automobile Insurance Plan Handbook and Rhode Island Department of Business Regulation provide further guidance as to the rules of cancellation and rescission of the insurance policy here. Section 15 (B) (g) (2) of the Rhode Automobile Insurance Plan Handbook states that rescission is only allowed to the extent permitted by law. The Rhode Island Department of Business Regulation also addressed this issue in Insurance Bulletin 2003-3, dated January 31, 2003, and provided as follows:

It is the Department’s position that the common law right of rescission of contracts has been preempted by the enactment of the Motor Vehicle Reparations Act R.I. Gen. Laws § 31-47-1 et seq. with regard to automobile liability insurance. Therefore, an insurer may not rescind an automobile liability insurance policy on any ground which may have been available at common law. In cases where automobile liability is one of a number of coverages in the policy, the automobile liability portion is severed from the remainder of the policy for this purpose and the remainder of the policy is subject to rescission pursuant to the legal requirements for such action. This position does not affect an insurer’s ability to prospectively cancel an Automobile Liability policy in accordance with all statutes and Regulation governing cancellation (2003 WL 25270929 [RI INS BUL]).

Therefore, it is apparent that Rhode Island has elected not to terminate automobile liability insurance policies retroactively even when procured by material misrepresentations. As such, the automobile liability insurance policy here may not be rescinded ab initio.

Accordingly, plaintiffs are entitled to judgment. The Clerk of the Court shall enter judgment in favor of 37th Avenue Medical, P.C. in the amount of $1,903.68, Elective Acupuncture, P.C. in the amount of $2,472.53, and AKA Chiropractic, P.C. in the amount of $526.54. In addition, plaintiffs shall each be compensated for costs, statutory interest, and attorney’s fees.

This constitutes the decision and order of the court.

____________________

Hon. Reginald A. Boddie

Acting Supreme Court Justice

[*1]

Civil Court of the City of New York, Kings County, July 1, 2015

APPEARANCES OF COUNSEL

Deirdre J. Tobin & Associates, Garden City, for defendant.

Gary Tsirelman P.C., Brooklyn (Stefan Belinfanti of counsel), for plaintiff.

Plaintiff AR Medical Rehabilitation P.C., a medical services provider, seeks to recover no-fault benefits for services it provided to its assignors. Defendant State-Wide Insurance Co. moves to dismiss the claim on the ground that plaintiff failed to establish its prima facie case by offering proof of mailing. The issue is whether a plaintiff may offer an NF-10 denial of claim form into evidence to prove that it mailed the subject claim form and that the insurer received it.

The Second Department has repeatedly held that a plaintiff no-fault provider establishes its prima facie entitlement to judgment by submitting proper evidentiary proof that it generated and mailed the prescribed statutory billing forms to the defendant insurer, that the defendant [*2]received it, and that the no-fault benefits were overdue. (Westchester Med. Ctr. v Progressive Cas. Ins. Co., 89 AD3d 1081, 1082 [2d Dept 2011]; see New York Hosp. Med. Ctr. of Queens v QBE Ins. Corp., 114 AD3d 648 [2d Dept 2014]; Lexington Acupuncture PC v MVAIC, Civ Ct, Kings County, 2012, index No. 13328/09; New York Hosp. Med. Ctr. of Queens v Motor Veh. Acc. Indem. Corp., 12 AD3d 429 [2d Dept 2004]; Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742, 742-743 [2d Dept 2004].)

In Viviane Etienne Med. Care, P.C. v Country-Wide Ins. Co. (25 NY3d 498, 506 [2015]), the Court of Appeals affirmed the aforementioned precedent, stating that in a no-fault summary judgment motion where benefits are overdue, the plaintiff must prove that the “statutory claim forms were mailed to and received by the insurer,” citing with approval New York Hosp. Med. Ctr. of Queens v QBE Ins. Corp. Amplifying on this standard, the Court ruled that a medical provider must “submit proof of mailing through evidence in admissible form,” which proof may include “the verification of treatment form and/or an affidavit from a person or entity (1) with knowledge of the claim and how it was sent to the insurer or (2) who has relied upon the forms in the performance of their business.” (Id. at 507.)

{**49 Misc 3d at 920}In affirming the Second Department holding, the Court of Appeals also upheld the lower court’s holding that the burden of proving submission is generally met by an affidavit of a billing agent or an employee averring that he or she personally mailed the claim forms to the insurer or averring that a standard office practice or procedure designed to ensure that items were properly addressed and mailed was followed. (Viviane Etienne Med. Care, P.C. v Country-Wide Ins. Co., 114 AD3d 33, 45 [2d Dept 2013]; see also NYU Hosp. for Joint Diseases v Country Wide Ins. Co., 84 AD3d 1043, 1043-1044 [2d Dept 2011] [Plaintiff established its prima facie case by submitting, among other things, the certified mail receipt, and the signed return receipt card referencing the patient and the forms, which demonstrated that the plaintiff mailed the necessary billing documents to the defendant]; Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679, 680 [2d Dept 2001] [“The presumption (of mailing) may be created by either proof of actual mailing or proof of a standard office practice or procedure designed to ensure that items are properly addressed and mailed”].) The Court of Appeals emphasized that affidavits in support of the motion for summary judgment, which presumably would include affidavits of mailing, must fall within the business record exception in CPLR 4518 to the rule against hearsay.

Neither the Court of Appeals nor the Second Department in Viviane Etienne addressed whether at trial a medical provider could forgo evidentiary proof of its mailing procedure by relying upon its receipt of a denial form from the insurer. Prior to Viviane Etienne, the Appellate Term, Second Department found that a medical provider’s receipt of an NF-10 denial form from the insurer was sufficient to establish that the claim form was sent by the medical provider and received by the insurer. (See Eagle Surgical Supply, Inc. v Allstate Ins. Co., 42 Misc 3d 145[A], 2014 NY Slip Op 50343[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2014]; EMC Health Prods., Inc. v Geico Ins. Co., 43 Misc 3d 139[A], 2014 NY Slip Op 50786[U], *1 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2014]; Oleg Barshay, D.C., P.C. v State Farm Ins. Co., 14 Misc 3d 74 [App Term, 2d Dept, 2d & 11th Jud Dists 2006]; Accessible & Advance Med. P.C. v Allstate Ins. Co., 12 Misc 3d 147[A], 2006 NY Slip Op 51599[U], *1 [App Term, 2d Dept, 2d & 11th Jud Dists 2006]; Prestige Med. & Surgical Supply, Inc. v Clarendon Natl. Ins. Co., 13 Misc 3d 127[A], 2006 NY Slip Op 51672[U], {**49 Misc 3d at 921} *2 [App Term, 2d Dept, 2d & 11th Jud Dists 2006]; see also AR Med. Rehabilitation, P.C. v State-Wide Ins. Co., 47 Misc 3d 1215[A], 2015 NY Slip Op 50631[U] [Civ Ct, Kings County 2015].) This is because plaintiff is not trying to use the denial as its own business record pursuant to CPLR 4518 (a) but rather as an admission by defendant that the claim form has been received. (Eagle Surgical, 2014 NY Slip Op 50343[U], *1; EMC Health Prods., 2014 NY Slip Op 50786[U], *1 [“Defendant’s denials admitted the receipt of the bills at issue . . . and plaintiff was not required to establish a CPLR 4518 foundation for the bills”]; King’s Med. Supply Inc. v Country-Wide Ins. Co., 5 Misc 3d 767, 770 [Civ Ct, Kings County 2004].)

Accordingly, a plaintiff may establish its prima facie case by submitting a copy of its proof of claim form accompanied by an affidavit or testimony of its billing manager as to his personal knowledge of the issuance of the claim and a copy of the defendant’s denial form indicating when defendant received the claim and when it denied it. (Oleg Barshay; King’s Med. Supply at 770.) The Viviane Etienne ruling does not alter this equation since the NF-10 is not being admitted for the truth of the matters asserted therein and therefore does not need to fall within the business records exception delineated in the Etienne decisions.

In light of the above, the court finds that plaintiff’s submission into evidence of the NF-10 denial is sufficient to establish that defendant received the claim. Plaintiff therefore established its prima facie case. As defendant did not present any witnesses to establish its defense, judgment is awarded to plaintiff.