Civil Court of the City of New York, Kings County

CV 061389/09

Sara Pankowski, Esq.

Attorney for Plaintiff

Gary Tsirelman, PC

65 Jay Street

3rd Floor

Brooklyn NY 11201

718-438-1200

Morgan MacKay, Esq.

Attorney for Defendant

Law Offices of Teresa M. Spina

170 Froehlich Farm Blvd.

Woodbury NY 11797

516-496-5822

Reginald A. Boddie, J.

In this action, plaintiff seeks to recover assigned first-party no-fault benefits for psychological services alleged to have been provided to the subject assignor. Plaintiff seeks reimbursement for an initial interview in the amount of $194.58, evaluation of records in the amount of $67.24, five hours of psychological testing in the amount of $696.50, and explanation and interpretation of results in the amount of $103.31 (plaintiff’s bill). Plaintiff was paid for the initial interview. The remainder of the services were denied as medically unnecessary and for fees not in accordance with the fee schedules (defendant’s NF-10). [*2]

The case was tried on December 8, 2010. At trial, plaintiff and defendant stipulated in writing to plaintiff’s prima facie case, defendant’s timely denials, admission of the expert witness disclosure package, which included the peer review report and medical records reviewed, and that the only issues for trial were lack of medical necessity and fees not in accordance with fee schedules.

Plaintiff rested, relying on the stipulation that it had established its prima facie case. Defendant’s witness was unavailable, and defendant moved to adjourn the trial to a later date to call a witness. Since defendant failed to show good cause, the application to adjourn was denied (NY City Civ Ct Act § 1302 [a]). Plaintiff then moved for a directed verdict on the ground that defendant was not ready to proceed and could not establish its defenses (CPLR 4401). Relying on the stipulation, defendant opposed plaintiff’s motion and cross-moved for a judgment in its favor on the ground that it established timely and proper denials, and that the peer review report and medical records were in evidence. The court reserved decision and the parties submitted post-trial briefs on January 2, 2012 and January 12, 2012. After consideration of the evidence and the parties’ arguments, plaintiff’s motion for a directed verdict is denied. Defendant’s motion for judgment is granted in part and denied in part for the reasons stated herein.

Under New York no-fault law, plaintiff must establish its prima facie case by demonstrating submission to the defendant of a claim form, proof of the fact and amount of the loss sustained, and proof either that the defendant failed to pay or deny the claim within the requisite 30-day period, or that the defendant issued a timely denial that was conclusory, vague or without merit as a matter of law (see Insurance Law § 5106 [a]; Westchester Med. Ctr. v Nationwide Mut. Ins. Co., 78 AD3d 1168 [2010]; Ave T MPC Corp. v Auto One Ins. Co., 32 Misc 3d 128[A], 2011 NY Slip Op 51292[U] [App Term, 2d, 11th & 13th Jud Dists 2011]).

Here, plaintiff did not demonstrate the denial was untimely, conclusory, vague or without merit as a matter of law. Nevertheless, as a consequence of the parties’ prima facie stipulation, the burden shifted to defendant to prove the timeliness of its denials and the defenses stated therein (Amaze Med. Supply Inc. v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U] [App Term, 2d & 11th Jud Dists 2003; Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 7 Misc 3d 18, 2004 NY Slip Op 24527 [App Term, 2d & 11th Jud Dists 2004]). Because the parties also stipulated that defendant timely denied the bills, the only issues for trial were lack of medical necessity and fees not in accordance with fee schedules.

Defendant “bears both the burden of production and persuasion” as to its defenses (Nir v Allstate Ins. Co., 7 Misc 3d 544 [Civ Ct, Kings County 2005],citing King’s Med. Supply Inc. v Country-Wide Ins. Co., 5 Misc 3d 767, 771 [Civ Ct, Kings County 2004]). To meet its burden of proof at trial on the defense of lack of medical necessity, at a minimum, defendant must establish a factual basis and medical rationale for the lack of medical necessity for the services for which reimbursement is sought (Nir, 7 Misc 3d at 546-547, [citations omitted]).

To establish the factual basis, the defense must be supported by sufficient factual evidence or proof and cannot be conclusory (Nir at 547, citing Inwood Hill Med. v Allstate Ins. Co., 3 Misc 3d 1110[A], 2004 Slip Op 50565[U] [Civ Ct, New York County 2004]). A peer [*3]review report may be found to have insufficient factual basis “…if it fails to provide specifics of the claim, is conclusory, or otherwise lacks a basis in the facts of the claim” (Nir at 547, citing Amaze Med. Supply v Allstate Ins. Co., 3 Misc 3d 43, 2004 NY Slip Op 24119 [App Term, 2d Dept 2004]).

Further, the medical rationale referenced in a peer review report must be within the generally accepted medical or professional practice. “Generally accepted practice is that range of practice that the profession will follow in the diagnosis and treatment of patients in light of the standards and values that define its calling” (Nir at 547, citing Citywide Social Work & Psychological Serv. PLLC v Travelers Indem. Co., 3 Misc 3d 608, 616 [Civ Ct, Kings County 2004]). A peer review report may be found insufficient when unsupported or controverted by evidence of “generally accepted medical/professional practice” (id.). However, where plaintiff rebuts the defendant’s evidence with its own demonstrating that the medical services were consistent with generally accepted medical practice, the defendant’s peer report may be accorded less weight, and the court may find that defendant failed to meet its burden (Nir at 547, citing see Elm Med. P.C. v Am. Home Assur. Co., 2003 NY Slip Op 51357[U] [Civ Ct, Kings County 2003]).

In support of its defense of lack of medical necessity, defendant proffered the peer review report of Michael H. Rosenfeld, Psy.D., a New York State Licensed Psychologist, whose report and resume were stipulated into evidence. As a preliminary matter, the court notes that the peer review report of Dr. Rosenfeld was signed and notarized on November 14, 2007, one day after the date stamped on the denial. Despite this fact, the court is compelled to consider the report as direct evidence of defendant’s defense since a court may not cast aside an open-court stipulation, as here, absent proof it was entered into by “fraud, collusion, mistake, accident or other such ground” (Matinzi v Joy, 60 NY2d 835, 836 [1983]; In re Frutiger’s Estate, 29 NY2d 143 [1971]; Gage v Jay Bee Photographer, Inc.,222 AD2d 648, 649 [2d Dept 1995]). Here, no such proof was alleged or demonstrated.

Dr. Rosenfeld stated that he reviewed the patient’s records concerning the services provided by John R. Braun, Ph.D., the treating psychologist, as well as the reports and recommendations related thereto, and found the services allegedly provided not medically necessary. The assignor was a fifty-seven year old female, involved in a motor vehicle accident on May 18, 2007, and allegedly suffered head, neck, lower back, and bilateral knee pain (Narrative Report at 2). The court notes, Dr. Rosenfeld’s peer report incorrectly lists bilateral shoulder pain among the alleged injuries and omits the head and bilateral knee pain (Peer Review Report at 2).

Dr. Rosenfeld further stated, “[t]he claimant received a diagnostic interview, a review of medical records, five hours of psychological testing and an explanation of results” (id. at 1). Claimant went to Long Island College Hospital after the accident (id. at 2). ” There was no loss of consciousness, head trauma, fractures, or lacerations” (id.). “The initial subjective complaints included: increased general nervousness, fear of driving or riding in cars, nightmares, headaches, dizziness, sleep disturbance, feeling weak and fatigued, etc.” (id.). [*4]

Dr. Braun treated claimant from August 3, 2007 to August 10, 2007 (id. at 1). He performed a mental status examination and gave claimant a series of self-administered checklist tests, including the Beck Depression Inventory (BDI), Beck Hopelessness Scale (BHS), Beck Anxiety Inventory (BAI), Neuro-Psychological Symptom Checklist (NSC), Patient Pain Profile (P-3), and Posttraumatic Stress Diagnostic Scale (PDS) (Narrative Report at 4). The doctor billed for a diagnostic interview, a review of medical records, five hours of psychological testing and an explanation of results (plaintiff’s bill).

Dr. Rosenfeld stated, “Given the complaints, the initial intake was appropriate, however, the psychological testing was excessive, unnecessary, and deviates from accepted standard practice in psychology” (Peer Review Report at 2). He reasoned that the standard practice in psychology for establishing a diagnosis and developing a treatment plan is to conduct a thorough diagnostic interview and mental status examination of the patient. He stated, “Psychological testing is never considered necessary unless there are subtle or complex issues to investigate and the diagnosis cannot be determined based upon the clinical interview/mental status examination alone (i.e., testing could be necessary to rule out mental retardation, to rule out psychosis, to rule out a mild head injury, etc.).” (Id.)

Dr. Rosenfeld further stated this case was straightforward and without subtle or complex issues to investigate; the diagnosis and treatment plan should have been based on the interview and mental status examination alone; and the psychological testing was unnecessary and inconsistent with acceptable standards of psychological practice (id.). He indicated that the review of the records was medically unnecessary because it is normally part of the initial interview, and the explanation and interpretation of results was medically unnecessary since the tests were not warranted (id. at 3).

Plaintiff failed to rebut defendant’s evidence with testimonial or other documentary evidence (see Innovative Chiropractic, P.C. v Mercury Ins. Co., 25 Misc 3d 137[A], 2009 NY Slip Op 5232[U][App Term, 2d, 11th & 13th Jud Dists 2009], citing see Pan Chiropractic, P.C. v Mercury Ins. Co., 24 Misc 3d 136[A], 2009 NY Slip Op 51495 [App Term, 2d, 11th & 13th Jud Dists 2009]). The court acknowledges there are circumstances where a live witness would be required to embellish defendant’s position. Here, the court finds defendant was not required to present an expert witness to testify at trial, particularly since plaintiff did not offer a witness or any evidence whatsoever on rebuttal. Accordingly, the court finds defendant successfully proved lack of medical necessity for four of the tests administered and the related explanation and interpretation of results.

The court limits the relief awarded because Dr. Rosenfeld’s report only meaningfully referred to and discussed four tests allegedly administered to the assignor, the BAI, BHS, BDI and PDS (see Nir, 7 Misc 3d at 548, citing Amaze, 3 Misc 3d 43). The peer review report did not discuss the NSC or P-3. Accordingly, the court finds Dr. Rosenfeld’s peer review report sets forth a sufficient factual basis and medical rationale for the lack of medical necessity of four of the six psychological services allegedly provided, the review of records, and the explanation and interpretation of results. The court finds defendant failed to meet its burden of establishing its defense of lack of medical necessity for the NSC and P-3 tests, and the relevant explanation and [*5]interpretation of results.

Finally, as to defendant’s defense of fees not in accordance with fee schedules, it was the “defendant’s burden to come forward with competent evidentiary proof’ supporting its fee schedule defenses” (Robert Physical Therapy v State Farm Mut. Auto. Ins. Co., 13 Misc 3d 172, 175 [Civ Ct, Kings County 2006] [citations omitted]). Defendant had the burden to “…proffer sufficient evidence to establish as a matter of law that the amounts charged in said claims were in excess of the amounts permitted by the fee schedule” (Rogy Med. P.C. v Mercury Cas. Co., 23 Misc 3d 132[A]; 2009 NY Slip Op 50732[U] [App Term, 2d, 11th & 13th Jud Dists 2009], [citations omitted]).

Here, defendant proffered no testimonial or documentary evidence to prove its fee schedule defense. Therefore, defendant’s fee schedule defense fails. Nevertheless, defendant proved lack of medical necessity for all but two of the services billed. Accordingly, a partial judgment is granted to plaintiff in the amount of $266.61, plus statutory interest from the date of filing, costs, and attorney’s fees. The balance of the claim is dismissed with prejudice.

This constitutes the Decision and Order of the court.

Dated:January 31, 2012 ______________________Hon. Reginald A. Boddie

Judge, Civil Court

[*1]

Civil Court of the City of New York, New York County, January 17, 2012

APPEARANCES OF COUNSEL

Leon Kucherovsky, New York City (Matthew Viverito of counsel), for plaintiff. Short & Billy P.C., New York City (Mark Puleo of counsel), for defendant.

{**35 Misc 3d at 583} OPINION OF THE COURT

Andrea Masley, J.

Plaintiff Stephen Matrangolo, D.C., P.C., a chiropractic practice, commenced this action in June 2007 for the recovery of no-fault benefits for services rendered to assignors Tina Espinozo-Hernandez and Edgar Hernandez for injuries arising from a car accident in December of 2006. The answer dated August 17, 2007 consists of six affirmative defenses including: (2) plaintiff lacks standing; (4) services provided by an independent contractor; and (6) the referral was an improper self-referral. After trial on June 9, 2011, the court reserved decision and the parties were directed to submit posttrial memoranda on issues raised but not resolved at trial.^[FN*] [*2]

{**35 Misc 3d at 584}For the following reasons, the court finds that Public Health Law § 238-a does not apply to the electromuscular testing provided here and thus is not a bar to Dr. Matrangolo’s claim. However, based on the testimony and evidence before it, the court finds that Dr. Matrangolo is not entitled to compensation for services provided by Dr. Brawner.

The parties stipulated at trial to all 11 outstanding health insurance claim forms for electromuscular testing services rendered in the amount of $2,168.82 for Ms. Espinozo-Hernandez and $2,807.64 for Mr. Hernandez. All services for assignor Tina Espinozo-Hernandez were rendered on December 11, 18, and 27 of 2006. For assignor Edgar Hernandez, services were rendered on December 18 and 27 of 2006, and on January 3 and 8 of 2007. Maria Ingrassia, Dr. Matrangolo’s medical biller, the sole witness, testified for plaintiff that Baldwin Medical referred the assignors to Dr. Matrangolo for neuromuscular testing, and that bills for plaintiff’s services were timely submitted and remain unpaid. Defendant stipulated to plaintiff’s prima facie case and asserted, as affirmative defenses, that the referral to Dr. Matrangolo constitutes a violation of Public Health Law § 238-a and that plaintiff lacks standing since it is billing for services provided by a nonparty physician. Plaintiff argued that defendant has failed to rebut its prima facie case and that Public Health Law § 238-a applies to physicians but not to chiropractors such as himself.

Defendant sought to introduce a lease between plaintiff and Baldwin Medical over objection from plaintiff. Defendant sought sanctions for plaintiff’s noncompliance with its May 13, 2011 subpoena ad testificandum and duces tecum of Dr. Matrangolo which seeks the patient file for each AAO; the leases between Dr. Matrangolo and the referring provider for 2006, 2007 and 2008; records of payments made by Dr. Matrangolo to the referring provider; all correspondence between Dr. Matrangolo and the referring provider; all W-2s or 1099s issued by Dr. Matrangolo to the technician who administered the tests in 2006, 2007 and 2008; and all documents regarding the financial relationship between plaintiff and the referring provider.

On cross-examination, Ms. Ingrassia identified Dr. Matrangolo’s signature on the lease and defendant offered it into evidence as an admission against interest. Had plaintiff responded{**35 Misc 3d at 585} to defendant’s trial subpoena, defendant could have offered the lease as a business record. However, by refusing to comply and not moving for relief from the subpoena, plaintiff robbed defendant of the opportunity to establish the requisite foundation. (CPLR 4518.) The lease had been identified by plaintiff in response to interrogatories which had been court ordered. Alternatively, defendant asked the court to make an adverse inference against plaintiff based on plaintiff’s failure to respond to the trial subpoena and allow the lease into evidence.

The witness also identified Dr. Brawner as a doctor who is associated with Baldwin Medical but who is not an employee of Dr. Matrangolo.

Defendant read plaintiff’s responses to interrogatories, as to the electromuscular testing of the AAOs, into the record. As to who administered the test to the AAOs, plaintiff responded Dr. Josephine Brawner. In response to the question how many people do the testing for Dr. Matrangolo, plaintiff responded Dr. Brawner. At trial, plaintiff objected to the interrogatories as evidence because plaintiff’s counsel explained that Dr. Matrangolo made a mistake when he responded to the interrogatories; an employee not Dr. Brawner administered the tests here. The [*3]court struck plaintiff’s counsel’s testimony. The court rejects all of plaintiff’s attempts to change plaintiff’s discovery responses in its posttrial brief. Plaintiff did not supplement its discovery or issue a correction. The time for testimony and evidence was at trial.

Exhibit A in evidence is a lease between Baldwin Medical Services P.C. and Dr. Stephen Matrangolo Corporation from January 1, 2007 to December 31, 2008. This lease was introduced at trial by defendant over plaintiff’s objection. Plaintiff produced this lease in discovery. Indeed, plaintiff annexed the lease to plaintiff’s posttrial memorandum as evidence of its compliance with discovery. Accordingly, there is no reason to believe the lease is not trustworthy. Plaintiff’s objection to admission of the lease is curious since the existence of a valid lease in effect from January 1, 2007 establishes a safe harbor for plaintiff for those services rendered in 2007. However, having failed to produce in discovery or at trial a lease for 2006, plaintiff would not be entitled to the protection of Public Health Law § 238-a (5) (b) (i). Therefore, if Public Health Law § 238-a applied to plaintiff, then he would be entitled to reimbursement only for those services rendered after January 1, 2007. Accordingly, it is unnecessary to otherwise address the subpoena issues.{**35 Misc 3d at 586}

In its posttrial memorandum, defendant argues that Dr. Matrangolo rents space from the referring provider Dr. Brawner for purposes of rendering services for which he is referred, and that this relationship in and of itself constitutes an improper referral under Public Health Law § 238-a. The absence of a lease for the 2006 calendar year, according to defendant, constitutes evidence of an improper referral. Lastly, defendant argues that plaintiff lacks standing since he billed for services rendered by Dr. Brawner, a nonparty physician.

Public Health Law § 238-a prohibits a practitioner from making a referral for services to a provider when the practitioner or an immediate family member of such practitioner has a “financial relationship” with the provider. (Stephen Matrangalo, DC, P.C. v Allstate Ins. Co., 31 Misc 3d 129[A], 2011 NY Slip Op 50517[U] [App Term, 1st Dept 2011].) A financial relationship is defined in Public Health Law § 238 (3) as “an ownership interest, investment interest or compensation arrangement.” A compensation arrangement is defined as “any remuneration between a practitioner . . . and a health care provider.” (Public Health Law § 238-a [5] [a].) The statute is clear that compensation does not include payments for the rental or lease of office space if there is a written agreement signed by the parties, for a rental term of at least one year, consistent with fair market value in an amount that does not vary with “volume or value of any referrals of business between the parties.” (Public Health Law § 238-a [5] [b] [i] [A].)

A plain reading of the statute supports plaintiff’s interpretation that, as a chiropractor, his services fall outside the ambit of Public Health Law § 238-a. Public Health Law § 238-a provides:

“1. (a) A practitioner authorized to order clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or{**35 Misc 3d at 587} imaging services may not make a referral for such services to a health care provider authorized to provide such services where such practitioner or immediate family member of such practitioner has a financial relationship with such health care provider.

“(b) A health care provider or a referring practitioner may not present or cause to be presented to any individual or third party payor or other entity a claim, bill, or other demand for payment for clinical laboratory services, pharmacy services, radiation therapy services, physical [*4]therapy services or x-ray or imaging services furnished pursuant to a referral prohibited by this subdivision.

“2. Subdivision one of this section shall not apply in any of the following cases:

“(a) practitioners’ services—in the case of practitioners’ services provided personally by, or under the supervision of, another practitioner in the same group practice as the referring practitioner;

“(b) in-office ancillary services—in the case of health or health related items or services (i) that are furnished personally by the referring practitioner, personally by a practitioner who is a member of the same group practice as the referring practitioner, or personally by individuals who are employed by such practitioner or group practice and who are supervised by the practitioner or by another practitioner in the group practice; and in a building in which the referring practitioner, or another practitioner who is a member of the same group practice, furnishes practitioners’ services unrelated to the furnishing of such items or services, or in the case of a referring practitioner who is a member of a group practice, in another building which is used by the group practice for the centralized provision of such items or services of the group; and (ii) that are billed by the practitioner performing or supervising the services, by a group practice of which such practitioner is a member, or by an entity that is wholly owned by such practitioner or such group practice.” (Emphasis added.)

Public Health Law § 238 (11) defines “Practitioner” as “a licensed or registered physician, dentist, podiatrist, chiropractor, nurse, midwife, physician assistant or specialist assistant, physical therapist, or optometrist.” (Emphasis added.)

Public Health Law § 238 defines each of the five enumerated “services”:

“1. ‘Clinical laboratory services’ shall mean the microbiological, serological, chemical, hematological, biophysical, cytological or pathological examination of materials derived from the human body, for the purposes of obtaining information for the diagnosis, prevention, or treatment of disease or the assessment of health condition . . .{**35 Misc 3d at 588}

“13. ‘X-ray or imaging services’ shall mean diagnostic imaging techniques which shall include but not be limited to the following:

“(a) Conventional x-ray or radiology.

“(b) Fluoroscopy.

“(c) Digital radiography.

“(d) Computed tomography.

“(e) Magnetic resonance imaging.

“(f) Nuclear imaging.

“(g) Ultrasonography.

“(h) Angiography.

“14. ‘Pharmacy services’ shall mean the preparing, compounding, preserving or, the dispensing of drugs, medicines and therapeutic devices on the basis of prescriptions or other legal authority.

“15. ‘Radiation therapy services’ shall mean the use of high energy x-rays, particles, or radiation materials for the treatment of cancer and other diseases.

“16. ‘Physical therapy services’ means physical therapy as defined by section sixty-seven [*5]hundred thirty-one of the education law.”

According to Education Law § 6731, “Physical therapy” is defined as

“a. The evaluation, treatment or prevention of disability, injury, disease, or other condition of health using physical, chemical, and mechanical means including, but not limited to heat, cold, light, air, water, sound, electricity, massage, mobilization, and therapeutic exercise with or without assistive devices, and the performance and interpretation of tests and measurements to assess pathophysiological, pathomechanical, and developmental deficits of human systems to determine treatment, and assist in diagnosis and prognosis.

“b. The use of roentgen rays or radium, or the use of electricity for surgical purposes such as cauterization shall not be included in the practice of physical therapy.” (Emphasis added.)

The service at issue here is “electromuscular testing,” which is not an enumerated service in Public Health Law § 238-a. Education Law § 6551 defines the practice of “chiropractic” as:

“1. The practice of the profession of chiropractic is defined as detecting and correcting by manual or mechanical means structural imbalance, distortion,{**35 Misc 3d at 589} or subluxations in the human body for the purpose of removing nerve interference and the effects thereof, where such interference is the result of or related to distortion, misalignment or subluxation of or in the vertebral column.

“2. a. A license to practice as a chiropractor shall not permit the holder thereof to use radio-therapy, fluoroscopy, or any form of ionizing radiation except X-ray which shall be used for the detection of structural imbalance, distortion, or subluxations in the human body.

“b. The requirements and limitations with respect to the use of X-ray by chiropractors shall be enforced by the state commissioner of health and he is authorized to promulgate rules and regulations after conferring with the board to carry out the purposes of this subdivision.

“c. Chiropractors shall retain for a period of three years all X-ray films taken in the course of their practice, together with the records pertaining thereto, and shall make such films and records available to the state commissioner of health or his representative on demand.

“3. A license to practice chiropractic shall not permit the holder thereof to treat for any infectious diseases such as pneumonia, any communicable diseases listed in the sanitary code of the state of New York, any of the cardio-vascular-renal or cardio-pulmonary diseases, any surgical condition of the abdomen such as acute appendicitis, or diabetes, or any benign or malignant neoplasms; to operate; to reduce fractures or dislocations; to prescribe, administer, dispense or use in his practice drugs or medicines; or to use diagnostic or therapeutic methods involving chemical or biological means except diagnostic services performed by clinical laboratories which services shall be approved by the board as appropriate to the practice of chiropractic; or to utilize electrical devices except those devices approved by the board as being appropriate to the practice of chiropractic. Nothing herein shall be construed to prohibit a licensed chiropractor who has successfully completed a registered doctoral program in chiropractic, which contains courses of study in nutrition satisfactory to the department, from using nutritional counseling,{**35 Misc 3d at 590} [*6]including the dispensing of food concentrates, food extracts, vitamins, minerals, and other nutritional supplements approved by the board as being appropriate to, and as a part of, his or her practice of chiropractic. Nothing herein shall be construed to prohibit an individual who is not subject to regulation in this state as a licensed chiropractor from engaging in nutritional counseling.” (Emphasis added.)

Not one of the enumerated “services” includes neuromuscular electrical testing or chiropractic services. The statute clearly bars Dr. Matrangolo as a “practitioner” from making a referral to a family member or entity in which he has a financial interest, but it does not bar a practitioner, such as Dr. Brawner, from referring a patient to Dr. Matrangolo for chiropractic services or testing that falls within the scope of chiropracty because chiropracty is not one of the five enumerated services in Public Health Law § 238-a.

“Public Health Law § 238-a has an obvious and salutary purpose: to prevent the provision of health care from being based on financial incentive rather than patient welfare and medical necessity.” (Matrangolo, as Assignee of David Fitzhugh v Progressive Cas. Ins. Co., Civ Ct, NY County, Dec. 1, 2010, index No. 52599/09.) It is clear from the legislative history that the legislature was concerned about physician investors making self-referrals to clinical laboratories, imaging services and physical therapy. (Mem of Assemblyman Richard N. Gottfried, 1992 NY Legis Ann, at 513; Governor’s Mem approving L 1992, ch 803, 1992 NY Legis Ann, at 515.) Pharmacies were added in 1993. (Governor’s Program Bill Mem approving L 1993, ch 443, 1993 NY Legis Ann, at 321.) Whether to include “chiropracty” or “electromuscular” testing as an enumerated service in Public Health Law § 238-a is a decision to be made by the legislature. Although the Public Health Law is not a bar to plaintiff’s claims, Dr. Matrangolo is not entitled to payment because the evidence before the court is that Dr. Brawner, not Dr. Matrangolo, provided the services. (A.B. Med. Servs. PLLC v Liberty Mut. Ins. Co., 9 Misc 3d 36 [App Term, 2d Dept 2005].) In the claim forms in evidence, plaintiff states that the tests were administered by Dr. Brawner.

Accordingly, it is ordered, that the case is dismissed with prejudice.

Footnotes

Footnote *: The purpose of the posttrial memoranda was to provide the parties an opportunity to explain the legal basis for arguments made during trial; not for the submission of additional testimony or evidence. Accordingly, the court rejects Dr. Matrangolo’s affidavit. The time for his testimony was at trial in response to defendant’s subpoena. Likewise, the court rejects defendant’s submission of examinations before trial of Dr. Matrangolo taken in other cases (e.g. June 5, 2008 transcript, without an index number, states that it was taken by order of Justice Lebedeff in Queens County Civil Court where the as assignee of [AAO] is Ashak Akram; and March 12, 2007, in 116 different matters for which the index numbers are not listed).

Civil Court of the City of New York, Bronx County

045155/08

Plaintiff represented by:

David Streiner, Esq.

Law Offices of Melissa Betancourt PC

Defendant represented by:

John DeOliveira, Esq.

Law Offices of Teresa M. Spina

Jose A. Padilla Jr., J.

The issue raised in this no-fault action for first party benefits concerns the admissibility of identifiable confidential medical records in a public civil judicial proceeding where no HIPAA authorization or Privacy Rule exception has been demonstrated. On 9/19/11, this Court conducted a bench trial in this no-fault action, wherein the parties stipulated to plaintiff’s prima facie case thus shifting the burden of proof to defendant insurer. In response to the Court’s inquiry whether defense counsel had a HIPAA authorization executed by assignor Shalina Akter (“Akter”), defense counsel conceitedly replied that he neither had one nor required one. Defense counsel argued HIPAA was inapplicable to a no-fault action, but did not cite any statutory or regulatory scheme to allow disclosure of Akter’s identifiable confidential health information in a public civil trial.

The Privacy Rule (45 CFR Titles 160 and 164) promulgated by the United States Department of Health and Human Services under authority granted in the Health Insurance Portability and Accountability Act (“HIPAA”) (Pub. L. No. 104-991, 110 US Stat 1936, codified in various titles of the United States Code) prohibits the disclosure of an identifiable patient’s medical record in a public civil judicial proceeding without the patient’s authorization, subject to certain exceptions (45 CFR §164.508; Matter of Miguel M., 17 NY3d 37, rearg den __NY3d __, 2011 NY Slip Op 86319). The Privacy Rule contains exemptions for disclosure of confidential health records where: 1) the information is to be exchanged for billing purposes (45 CFR [*2]§164.506); 2) in a workers’ compensation action (45 CFR §164.512 [1]); or 3) submission of a claim to an arbitration panel (45 CFR §164.506). None of these scenarios are present herein.^[FN1] HIPAA regulations can be pre-empted upon a demonstration that state law offers “more stringent” protections (see, HIPAA §264 [c][2]; Privacy Rule 45 CFR §160.203 [b]), but none was shown by counsel, nor found to exist herein by this Court.

The Privacy Rule authorizes disclosure of health information, subject to certain conditions, “in the course of any judicial or administrative proceeding,” in a response to “an order of a court or administrative tribunal” (45 CFR §164.512 [e][1][i]) or “a subpoena, discovery request or other lawful process” (45 CFR § 164.512 [e][1][ii]). The Privacy Rule also contains an exception for subpoenas and the like. This exception is conditioned on the demonstration of “satisfactory assurance,” from the party seeking the information, of compliance with the elements set forth in 45 CFR §165.512 (e)(1)(iii). Due to defendant’s position that HIPAA did not apply to no-fault actions, it intentionally failed to avail itself of the above-noted procedures under the Privacy Rule. The Court notes that plaintiff’s counsel never offered nor acknowledged if its office had ever obtained a HIPAA authorization from its assignor or exchanged one with opposing counsel.

Previously, this Court had repeatedly informed defendant’s law firm, among others, of the need to comply with the HIPAA statute’s authorization prerequisites.^[FN2] While HIPAA does not create a private cause of action for those aggrieved (see, 65 CFR §2566), failure to comply with HIPAA and the Privacy Rule can result in imposition of federal civil and criminal penalties (42 USC §1320d-5). These fines and penalties range from as low as $100 per incident/annual maximum of $25,000 for repeat violations for negligent disclosures, to $50,000 per violation with annual maximum of $1.5 million for uncorrected wilful negligent violations; along with fines of up to $250,000 and imprisonment for up to 10 years where unauthorized identifiable health information has been intentionally used for “commercial advantage” (see, American Recovery and Reinvestment Act of 2009, Public L. No. 111-5). The mere “inconvenience” to the insurer or assignee of first party no-fault benefits does not justify disregarding the confidentiality interest protected by HIPAA and the Privacy Rule. Accordingly, this Court imposes the judicially sanctioned remedy of exclusion of proposed medical testimonial evidence (Matter of Miguel M., supra [medical records obtained in violation of HIPAA or the Privacy Rule and the information contained in those records were deemed inadmissible in a proceeding to compel assisted outpatient treatment]), in the absence of a HIPAA authorization or compliance with the Privacy Rule exceptions. [*3]

In light of the stipulation between the parties, the exclusion of any proposed defense medical testimony on the issue of medical necessity and the lack of any other evidence submitted in opposition to plaintiff’s prima facie case, the Clerk of the Court is directed to enter judgment in favor of plaintiff against defendant insurer GEICO Insurance Company in the sum of $1346.76 with statutory interest, cost and fees as of 5/29/08.

This constitutes the Decision and Order of this Court.

Dated:11/3/11_______________________

Jose A. Padilla, Jr.

Judge of the Civil Court

Footnotes

Footnote 1:“The maxim expression unius est exclusio alterius is applied in the construction of the statutes, so that where a law expressly describes a particular act, thing or person to which it shall apply, an irrefutable inference must be drawn that what it omitted or not included was intended to be omitted or excluded,” (NY Statutes §240). Since HIPAA explicitly exempts pre-authorization in workers compensation and arbitration cases but made no exemption for no-fault actions, the only inescapable conclusion is that Congress did not mean to exclude no-fault benefits related actions from HIPAA or the Privacy Rule.

Footnote 2: Defense counsel’s reliance on the NYS Department Insurance Opinion Letter, dated July 8, 2003, is misplaced as that letter’s analysis and conclusion dealt primarily with HIPAA’s inapplicability in a workers’ compensation setting.

[*1]

Civil Court of the City New York, Queens County, October 6, 2011

APPEARANCES OF COUNSEL

Lewin, Goodman & Baglio, LLP, Melville (Brendan Kearns of counsel), for plaintiff. Rossillo & Licata, P.C., Westbury (Susan Schenck of counsel), for defendant.

{**34 Misc 3d at 377} OPINION OF THE COURT

Carmen R. Velasquez, J.

A bench trial was held before this court on August 19, 2011 in this action by the plaintiff to recover no-fault benefits for chiropractic services provided to Dana Schepanski. At the trial, Dr. Daniel Sposta, D.C., testified on behalf of the defendant and the plaintiff, Dr. John Kraft, D.C., testified on his own behalf. The parties also stipulated to the admission of the peer review report and underlying medical documents. After reviewing and assessing all of the evidence, including the testimony of the witnesses and the exhibits introduced by the parties, the court renders the following decision:

Plaintiff, Dr. John Kraft, D.C., as assignee of Dana Schepanski, seeks payment for chiropractic services, consisting of manipulation under anesthesia of the spine and hips, provided on July 28, 2009. At trial the parties stipulated to plaintiff’s prima facie case of no-fault entitlement and to the timeliness and propriety of defendant’s denial of the claims that are the basis of this action. The parties further stipulated that the sole issue to be determined by this court was the medical necessity of the chiropractic manipulation under anesthesia (MUA) performed by plaintiff.

Plaintiff’s assignor, Dana Schepanski, had been involved in a motor vehicle accident on October 28, 2008, which left her with headaches, neck pain radiating to the shoulders and lower back pain radiating to the left buttocks and hip region. After several months of chiropractic care, physical therapy and pain medication, assignor’s progress had plateaued. Medical progress notes dated from November 2008 to January 2009 consistently denoted her functional status as no greater than fair with continuing pain, spasms and tightness. On January 28, 2009, plaintiff, as co-surgeon, performed five manipulations of the assignor’s spine and hip joints while she was under anesthesia. On March 27, 2009, defendant, State Farm Mutual Automobile Ins. Co., denied payment of all services rendered by plaintiff on January 28, 2009.

Although the parties stipulated that the only issue before this court was the medical necessity of the disputed services, the defendant, both at trial and in the explanation of review, contended that an MUA performed on the hip joint is outside the scope of chiropractic service. Also raised, tangentially, was the frequently encountered contention that a chiropractor is not authorized to perform MUA procedures.{**34 Misc 3d at 378}

[*2]Whether manipulation under anesthesia is a procedure exceeding the scope of lawful chiropractic service is not an issue of first impression for this court. In an unpublished decision, dated July 23, 2010, this court found that chiropractors were authorized to perform manipulations of the spine under anesthesia and awarded judgment to the chiropractor who performed the manipulations and to the chiropractor who assisted him (Lezamiz v Nationwide Mut. Ins. Co., index No. CV-021277/08; Palumbo v Nationwide Mut. Ins. Co., index No. CV-035624/08). The New York State Workers’ Compensation Board, which supplies the fee structure by which the procedures at issue are to be compensated, has also consistently authorized chiropractors to perform manipulations under anesthesia (Employer: Solomon Schecter Day School, 2006 WL 3889159, 2006 NY Wrk Comp LEXIS 11146 [WCB No. 2040 8277]; Employer: Eckerd Drugs, 2008 WL 922458, 2008 NY Wrk Comp LEXIS 2647 [WCB No. 4060 1307]; Employer: Aramak, 2009 WL 456874, 2009 NY Wrk Comp 535411 [WCB No. 0053 5411]; see also John Giugliano, DC, P.C. v Merchants Mut. Ins. Co., 29 Misc 3d 367 [Civ Ct, Kings County 2010]).

The relevant statute, Education Law § 6551 (1), provides that

“The practice of the profession of chiropractic is defined as detecting and correcting by manual or mechanical means structural imbalance, distortion, or subluxations in the human body for the purpose of removing nerve interference and the effects thereof, where such interference is the result of or related to distortion, misalignment or subluxation of or in the vertebral column.”

In light of its unambiguous language, the statute must be given its literal meaning (see Matter of Encore Coll. Bookstores v Auxiliary Serv. Corp. of State Univ. of N.Y. at Farmingdale, 87 NY2d 410, 418 [1995]; Roth v Michelson, 55 NY2d 278, 283 [1982]). Nothing in the language of this statute, which defines chiropractic practice, suggests that lawful manipulations performed by chiropractors on conscious patients become unlawful once those patients are sedated. However, another subdivision of the Education Law provides that the holder of a chiropractic license is not permitted “to prescribe, administer, dispense or use in his practice drugs or medicines.” (Education Law § 6551 [3].) Nevertheless, as the State Education Department has acknowledged in a letter dated September 18, 2007, the Education Law does not prohibit a chiropractor from{**34 Misc 3d at 379} performing spinal manipulations on patients who are under anesthesia, although the chiropractor cannot administer the anesthesia. Therefore, manipulation under anesthesia is within the lawful scope of chiropractic services provided that, as in this case, the anesthesia utilized for the procedure is administered by a licensed professional and not by the chiropractor.

Defendant’s claim that Education Law § 6551 (1) does not permit the holder of a chiropractic license to treat a hip joint lacks merit. The statute limits the purpose of chiropractic treatment but not its scope. It allows treatment of the “human body,” without qualifying the term “human body” so as to preclude treatment of a particular part thereof. The only requirement is that the purpose of treatment be the removal of nerve interference and its effects resulting from or related to “distortion, misalignment or subluxation of or in the vertebral column.” Thus chiropractors licensed in the State of New York may treat any part of the human body, including the hip joint, provided that treatment is for the purpose stated in Education Law § 6551 (1). In fact, the New York State Workers’ Compensation Board has specifically authorized a chiropractor to perform manipulation of the bilateral hip areas under anesthesia, when the stated purpose was to break up fibrous adhesions and [*3]scar tissue that had formed on and around the claimant’s spinal column (Employer: Aramak, 2009 WL 456874, 2009 NY Wrk Comp 535411).

The defendant does not contend and has introduced no evidence that the MUA of the hip joints conducted on plaintiff’s assignor was for a purpose other than alleviating nerve interference related to the vertebral column. The medical records of plaintiff’s assignor indicate she had back pain, which radiated to the hip area, and the diagnosis codes in the explanation of review include closed dislocation of the sacrum. The sacrum is the segment of the vertebral column that articulates the hip bone on either side (Stedman’s Medical Dictionary [26th ed], sacrum at 1566). Therefore, based on the trial evidence, the court finds that the MUA of the hip joints performed by the plaintiff was related to the vertebral column and within the scope of lawful chiropractic practice as defined in the Education Law.

In support of the lack of medical necessity defense, defendant’s witness, Dr. Sposta, testified that plaintiff failed to meet three requirements: (1) chiropractic patients must seek a second opinion before undergoing an MUA procedure; (2) a chiropractor co-surgeon prior to performing an MUA must review the{**34 Misc 3d at 380} patient’s medical records; (3) pursuant to protocols established by the National Academy of MUA Physicians (NAMUA), MUA is only appropriate where conventional manipulation could not be performed due to pain, apprehension, muscle contraction or muscle splinting.

Dr. Sposta cited no authority to support his contention that a second opinion is necessary before an MUA procedure is performed on a chiropractic patient. As Dr. Kraft testified, the New York State Workers’ Compensation Board medical treatment guidelines contain no such requirement. As for plaintiff’s alleged failure to personally review the patient’s medical records prior to the MUA, even if established it would be insufficient, on its own, to rebut the presumption of medical necessity. Finally, while there is no evidence that plaintiff’s assignor was incapable of withstanding conventional manipulation, NAMUA protocol does not limit the availability of the MUA procedure to this criteria. As per NAMUA, patients whose conditions justify MUA include those “whereby manipulation of the spine or other articulations is the treatment of choice, however, due to the extent of the injury mechanism, conservative manipulation has been minimally effective in 2-6 weeks of care and a greater degree of movement of the affected joint(s) is needed.” (NAMUA National Guidelines http://www.namuap.org/mcms/mua/content.cfm?pulldata=scmscontent.cfm & entity_id=8&content_id=180 [accessed Sept. 15, 2011].) The assignor’s treatment prior to the MUA in this case well exceeded such minimum. Her medical records reveal that she was not a surgical candidate and had received several months of conservative care with little to no improvement, thereby justifying the MUA procedures performed by plaintiff.

The court finds that the plaintiff, as a licensed chiropractor, was authorized to perform the disputed manipulations under anesthesia and that the defendant has failed to rebut the presumption of medical necessity of these procedures by a fair preponderance of the credible evidence. Accordingly, verdict in favor of the plaintiff, Dr. John Kraft, D.C., in the amount of $1,594.10 (the agreed disputed amount) with statutory interest, attorney fees, costs and disbursements.

Civil Court of the City of New York, Kings County

089993/09

Michael Weaver, Esq.

Bruno, Gerbino & Soriano, LLP

Attorneys for Defendant

445 Broad Hollow Road, Suite 220

Melville, NY 11747

631-390-0010

Law Offices of Melissa Betancourt, P.C.

Attorney for Plaintiff

155 Kings Highway, 3rd Floor

Brooklyn, New York 11223

718-336-8076

Lisa S. Ottley, J.

This action was commenced by the Plaintiff seeking payment of no-fault party benefits for services rendered on behalf of Sara Mounier pursuant to CPLR 5106(a) of the Insurance Law and Regulation of the New York State Insurance Department (11 NYCRR Sect. 65-1.1 et. seq.).

Defendant moves for an order pursuant to CPLR §3025(b), for leave to amend its Verified Answer, and upon this court granting defendant leave to amend its answer, for dismissal of the complaint pursuant to CPLR §3211(a) 5, under the doctrines of res judicata and collateral estoppel.

Discussion

Leave to amend a pleading pursuant to CPLR 3025(b) should be granted where there is no significant prejudice or surprise to the opposing party and where the proof submitted in support of the motion indicates that the amendment may have merit. See, Edenwald Contr. Co. v. City of New York, 60 NY2d 957 [1983].

Based upon the documents submitted in support of its motion for leave to amend its Verified Answer, the court hereby grants defendant’s motion to amend its Verified Answer. See, Uptodate Medical Service, P.C., v. State Farm Mutual Automobile Insurance Company , 22 Misc 3d 128(A), 880 N.Y.S.2d 227 (AT 2nd, 11th & 13th Judicial Dists., 2009).

Next, this court will address the issue as to whether defendant is entitled to dismissal of the action on the grounds of res judicata and collateral estoppel.

In the case at bar, the defendant-insurer brought an action in Supreme Court, Nassau County, seeking declaratory relief by the filing of a Summons and Complaint which the court deemed to have been duly served upon all the defendants named within the action, which failed to appear and/or interpose or serve an answer in the action. [See, Exh. “A” annexed to defendant’s moving papers herein]. By notice of motion, the defendant herein, and the plaintiff in the Supreme Court action moved pursuant to CPLR § 3215 for an order and judgment granting plaintiff the relief sought upon default, which was granted by the Hon. Anthony L. Parga, on October 1, 2010.

The defendant moves for dismissal of this action for payment of no-fault benefits [*2]on the grounds of res judicata and collateral estoppel, inasmuch as the declaratory judgment held that no coverage existed due to the fact the loss resulted from a staged accident.

Plaintiff argues, that a declaratory judgment granted on default does not have preclusive effect, and therefore, collateral estoppel does not preclude a party from litigating the action.

Although there is case law in support of plaintiff’s argument, the cases in support of plaintiff’s argument are distinguishable from this case. As argued by defendant, in Magic Recovery Med & Surgical Supply, Inc. v. State Farm Mutual Auto Insurance Company, 27 Misc 3d 67, 901 N.Y.S.2d 774 (AT 2nd, 11 & 13th Jud. Dists., 2010), the insurance company failed to name the party in the declaratory action, therefore, the res judicata and collateral estoppel could not be granted. In EMA Acupuncture, P.C. v. Lumbermens Mutual Casualty Company, 27 Misc 3d 141, 911 N.Y.S.2d 692 (AT 2nd, 11 & 13th Jud. Dists., 2010), which was not the basis of a default declaratory judgment, but was based on whether an Order issued on default pursuant to CPLR §3216 which fails to specify whether the dismissal is with prejudice or on the merits, has a preclusive effect.

Recently, this Court in a decision by the Hon. Devin P. Cohen, denied defendant’s motion to dismiss on the ground of collateral estoppel. As in this case, the motion raised the question of the effect of a declaratory judgment order, issued on default with respect to collateral actions seeking to litigate the same issue. Judge Cohen provides a detailed analysis of the applicable law and policies underlying declaratory judgments, collateral estoppel and default judgments. See, Beford Medical Care, P.C., a/a/o Vincent Meyers v. Encompass Insurance Company, 31 Misc 3d 222, 915 N.Y.S.2d 452 [Civ. Ct., Kings Co., 2011].

Interestingly, however, the decision does not address the doctrine of res judicata. Perhaps, the defendant in that case, did not move for dismissal on the ground of res judicata.

The doctrines of res judicata and collateral estoppel are designed to put an end to a matter once it is duly decided. See, Siegel, NY Practice §442 at 747 [4th Ed.]. Res judicata, or claim preclusion, is invoked when a party, or one in privity with the party, seeks to relitigate a disposition on the merits of claims, or causes of action, arising out of the same, or series of, transactions which were raised, or could have been raised, in the [*3]

prior action. See, Matter of Hunter, 4 NY3d 260 [2005]. Res judicata applies “when a different judgment in the second [action] would destroy or impair rights or interests established by the first. See, Matter of Hunter, 4 NY3d 260 [2005]; Schuykill Fuel Corp. v. Nieberg Realty Corp., 250 NY 304.

In SZ Medical, P.C., Life Chiropractic, P.C., JH Chiropractic, P.C., New Wave Oriental Acupuncture, P.C., a/a/o Clinton Charles v. Erie Insurance Company, 24 Misc 3d 126(A), 889 N.Y.S.2d 884 [AT 2nd, 11th & 13th Judicial Dists., 2009], the court affirmed the dismissal of the case on the lower level, and held the following:

The determination as to whether there was coverage is crucial to both

plaintiffs and defendant herein, and arises out of the same transaction,

i.e., the subject accident (see e.g. Abraham v. Hermitage Ins. Co., 47

AD3d 855 [2008]; Sabatino v. Capco Trading, Inc., 27 AD3d 1019,

1020 [2006]), and a different judgment in the instant action would

destroy or impair rights or interests established by the Supreme

Court judgment (see, e.g. Schuykill Fuel Corp. v. Nieberg Realty

Corp., 250 NY at 306-307). Moreover, the record established that

defendant and the wholly owned subsidiary had the requisite privity

(see, e.g. Spasiano v. Provident Mut. Life Ins. Co., 2 AD3d 1466

[2003]). Consequently, plaintiffs were barred from relitigating the

claim pursuant to the doctrine of res judicata.

Thereafter, the First Department in Pomona Medical Diagnostics, P.C., a/a/o Jarrod Ward v. Metropolitan Casualty Ins. Co., 29 Misc 3d 138(A), 920 N.Y.S.2d 243 (1st Dept., 2010), citing SZ Medical, P.C., Life Chiropractic, P.C., JH Chiropractic, P.C., New Wave Oriental Acupuncture, P.C., a/a/o Clinton Charles v. Erie Insurance Company, 24 Misc 3d 126(A), 889 N.Y.S.2d 884 [AT 2nd, 11th & 13th Judicial Dists.], reversed the lower court’s denial of defendant’s motion for summary judgment, and held: “Contrary to plaintiff’s claim, the Supreme Court judgment is a conclusive final determination, notwithstanding that it was entered on default of plaintiff, since res judicata applies to a judgment taken by default that has not been vacated (see, Trisingh Enters., Inc., v. Kessler 249 AD2d 45 [1998]; Robbins v. Growney, 229 AD2d 356 [1996].

Herein, the plaintiff-provider, as determined by the Supreme Court, was duly served with the Summons and Complaint in the declaratory action, and therefore, judgment was entered in favor of the defendant-insurer, on October 1, 2010, due to the [*4]provider’s failure to serve and file an answer to the Summons and Complaint. There is nothing in the record to indicate that the plaintiffs, Altercare, et .al., have moved to vacate the default judgment in the Supreme Court.

Accordingly, defendant’s motion to dismiss on the ground of res judicata is hereby granted.

This constitutes the order of this Court.

Court Attorney to notify.

Dated: Brooklyn, New York

August 30, 2011

______________________________

LISA S. OTTLEY, A.J.S.C.

[*1]

Civil Court of the City of New York, Kings County, July 7, 2011

APPEARANCES OF COUNSEL

Law Office of Teresa M. Spina, Woodbury (Dominick Dale of counsel), for defendant. Gary Tsirelman, P.C., Brooklyn (Wesley Mead of counsel), for plaintiff.

{**32 Misc 3d at 716} OPINION OF THE COURT

Genine D. Edwards, J.

In the instant actions for no-fault benefits, bench trials were held on April 13, 2011 and April 14, 2011. After establishing how the bills were created and given to Israel & Israel for [*2]mailing, plaintiff’s witness, Vladmir Grinsberg, could not set forth how the bills were mailed. Mr. Grinsberg instead offered that the denial of claims indicated defendant received the bills. Plaintiff’s counsel contended that the defendant’s denial of claim forms were admissible as party admissions for the limited purpose of proving the bills were mailed and received. Defendant objected and argued that plaintiff has to lay a foundation for the admission of the denial of claim forms. Hence, a directed verdict should be rendered in defendant’s favor in all three actions.

This court requested post-trial memoranda regarding the admissibility of the defendant’s denial of claim forms as party admissions for the limited purpose of establishing that plaintiff mailed its bills to the defendant.

After due deliberation of the evidence adduced at trial, as opposed to documents annexed to a summary judgment motion, this court adheres to the Appellate Term’s ruling that denial of claim forms shall be admitted into evidence only upon the laying of a business record foundation. (Bath Med. Supply, Inc. v Utica Mut. Ins. Co., 23 Misc 3d 141[A], 2009 NY Slip Op 51030[U] [App Term, 2d, 11th & 13th Jud Dists 2009]; Bajaj v General Assur., 18 Misc 3d 25 [App Term, 2d Dept 2007].) Besides testifying that he received the denial of claim forms, Mr. Grinsberg failed to proffer any evidence to authenticate the denial of claim forms.

Accordingly, defendant’s motions for directed verdict in each of the three actions are granted because plaintiff failed to shoulder its prima facie burden.

Civil Court of the City of New York, Kings County

164656/07

Attorney for Plaintiff

Law Offices of Melissa Betancourt, P.C.

155 Kings Highway, 3rd Floor

Brooklyn, NY 11223

Attorney for Defendant

Law Offices of Daniel J. Tucker

American Transit Insurance Co.

330 West 34th St., 10th Floor

New York, NY 10001

Katherine A. Levine, J.

This motion raises the issue of whether an insurer must issue a denial within 30 days of an injured party’s failure to appear for a post claim IME. The court concludes that since a failure [*2]to appear for a post claim is a violation of a condition precedent to the contract, as opposed to a policy exclusion, a denial on this ground is not subject to the preclusion rule.

Plaintiffs Neomy Medical, P.C., Perfect Point Acupuncture, P.C., and Chiropractic Back Care, P.C., (collectively “plaintiffs”), all medical service companies, commenced this action pursuant to Insurance Law 5106(a) to recover the sum of $5,854.55 for medical services they provided to their assignor Fan fan Both (“assignor” or “Both”). Defendant American Transit Ins. Co. (“American” or “defendant”) cross moved for summary judgment based on its claim that the assignor failed to appear at an independent medical examination (“IME”)(“IME no show”).

During oral argument, defendant conceded that only some of its denials were timely; ie mailed within 30 days of receipt of claim form. Defendant contended, however, that its late denials were not fatal since failure to appear for an IME is a violation of a condition precedent to the insurance policy which vitiates the contract and makes such s violation a non- precludable defense which survives a late denial. Plaintiff countered that an IME no show is a precludable defense. The court requested briefs solely on this issue.

To grant summary judgment, “it must clearly appear that no material and triable issue of fact is presented. Forrest v. Jewish Guild for the Blind, 3 NY3d 295 (2004); Zuckerman v, City of New York, 49 NY2d 557 (1980). A plaintiff establishes a prima facie entitlement to judgment as a matter of law by submitting evidentiary proof that the prescribed statutory billing form has been mailed and received, and that payment of no-fault benefits was overdue.” Mary Immaculate Hosp. v. Allstate Ins., 5 AD3d 742, 743 (2d Dept.2004); Second Medical v. Auto One Ins., 20 Misc 3d 291, 293 (Civil Ct., Kings Co.2008).

Condition Precedent

11 NYCRR 65-1.1 (d) provides for the mandatory personal injury protection endorsement (“PIP”). Under the subheading entitled “Conditions”, “Action against Company,” the regulation provides that “No action shall lie against the [c]ompany unless, as a condition precedent thereto, there shall have been full compliance with the terms of this coverage.” One provision under this subheading provides that the eligible person shall submit to medical examinations by physicians selected by or acceptable to the insurer…when, and as often as, the Company may reasonably require.” 11 NYCRR §65 – 1.1(d)[Sec. I. Conditions, Proof of Claim (b)]. Another condition to coverage under this section is that an eligible person shall, as may reasonably be required, submit to examinations under oath (“EUO”) by any person named by the insurer. Id. ^[FN1]

In Stephen Fogel Psychological, P.C. v. Progressive Cas. Ins. Co., 7 Misc 3d 18, 20 (App. Term, 2d Dept. 2004) aff’d 35 AD3d 720 (2d Dept. 2006), the Appellate Term found that [*3]an insurer had the right to conduct an IME prior to its “receipt of the statutory claim form or its statutory equivalent which “under the regulations, trigger the verification process.” The right to an IME, at this juncture was not afforded by the verification procedures, as the “detailed and narrowly construed verification protocols are not amenable to application at a stage prior to submission of a claim form.” Id at 21. The court then noted the “Conditions” section in the Mandatory PIP predicates the right to commence an action against the insurer upon an eligible injured person’s (“assignor”) compliance with the terms of coverage. Fogel, supra, 7 Misc 3d at 25 (Golia, J., conc. in part and diss. in part).”Where an eligible injured person fails to submit to a reasonably requested IME, the insurance policy, by its terms…affords no coverage for the otherwise eligible injured person.” 7 Misc 3d at 25 citing to Orr. v Continental Cas. Co., 205 AD2d 599 (2d Dept. 1994) (Under New York law, the insurer has the right to declare the contract at the end where the insured breaches a term upon which the contract was conditioned). Thus, an insured’s refusal to comply with a reasonably requested IME which was not opposed or adequately refuted, constitutes a complete defense to the claim warranting dismissal. 7 Misc 3d at 25.

In affirming the Appellate Term, the Second Department found that there was no distinction between the contractual remedies available for failure to appear for pre claim as opposed to post claim IMEs and that the ” appearance of the insured for IMEs at any time is a condition precedent to the insurer’s liability on the policy.” Fogel v. Progressive Cas. Ins. Co., 35 AD2d 720, 721 (2d Dept. 2006).^[FN2]

The First Department subsequently found failure to comply with a request for an IME, whether pre-or post claim was a violation of a condition of coverage which would preclude an action against an insurer for payment of health services provided. Inwood Hill Medical, P.C. v. General Assurance Co., 10 Misc 3d 18. 20 (App. Term, First Dept. 2005).In Inwood Hill Medical, P.C. v. General Assurance Co., 10 Misc 3d 18, 20 (1st Dept. 2005), the First Department ruled that “inasmuch as attendance at a medical examination is a condition of coverage under Section 65-1.1, it follows that an eligible injured person’s failure to comply with a request for an IME precludes an action against an insurer for payment of health services provided.”

Preclusion Rule

Insurance Law § 5106(a) sets forth that no fault benefits “are overdue if not paid within 30 days after the claimant provides proof of the fact and the amount of loss sustained.” Similarly 11 NYCRR §65-3.8 c require that “(w)ithin 30 calendar days after proof of claim is received, the insurer shall either pay or deny the claim in whole or part.” See Presbyterian Hosp. v Maryland Cas. Co., 90 NY2d 274, 278-79(1997) (“30 day rule”). [*4]

A timely disclaimer is not required, however, when the policy on which the claim rests does not, by its terms, cover the incident giving rise to liability. Handlesman v. Sea Insurance Co., 85 NY2d 96 (1994). “Under those circumstances, the insurance policy does not contemplate coverage in the first instance, and requiring payment of a claim upon failure to timely disclaim would create coverage where it never existed. ” Mtr. Of Worcester Ins. Co. V. Bettenhauser, 95 NY2d 185, 189 ( 2000). However, a timely disclaimer is necessary when the denial of coverage is based upon a policy exclusion or a breach of a policy condition without which the claim would be covered. Id. See, Zappone v, Home Ins. Co., 55 NY2d 131 (1982),

Although there are legions of cases discussing the preclusion rule, “drawing the line” between a lack of coverage in the first instance ( requiring no disclaimer) and a lack of coverage based on a policy exclusion (requiring a timely denial) has proven to be “problematic”. Mtr. Of Worcester, supra , 95 NY2d at 189.

In Fair Price Medical v. Travelers Ins., 10 NY3d 556 (2008), the Court of Appeals further clarified when the non-preclusion rule applied. Citing to its prior decision in Central General Hospital v. Chubb Group, 90 NY2d 195 (1997), the Court cautioned that there was only one “narrow” exception to the preclusion rule for those situations where an insurance company raises the defense of lack of coverage.Fair Price, 10 NY3d at at 563. A determination as to whether a specific defense is precluded under the 30 day rule or falls within the exception entails a judgment as to whether the defense is more like a “normal exception ” from coverage such as a policy exclusion or a lack of coverage in the first instance, i.e. a defense “implicating a coverage matter.” 10 NY3d at 565.

The oft cited distinction between policy exclusions and lack of coverage was further elaborated upon in State Farm Mut. Auto Ins. V. Mallela, 4 NY3d 313 (2005). In finding that medical corporations that are fraudulently incorporated are not entitled to reimbursement the Court of Appeals pointed to 11 NYCRR 65-3.16(a)(12), which excludes from the meaning of “basic economic loss” payments made to unlicensed or fraudulently licensed providers “thus rendering them ineligible for reimbursement” 4 NY3d at 320. These revised regulations (which include the PIP) do not ” create not a new category of exclusion, but rather merely a condition precedent with which all claimants must comply in order to receive benefits under statute”. 4 NY3d at 321 citing Mtr. Of Medical Society of NY v. Serio, 100 NY2d 854.866 (2003).

In Travelers indemnity Co. v. Milan Medical, 2009 NY Slip Op. 31604U, 2009 NY Misc LEXIS 3867 (Sup. Ct. NY Co. 2009), the court found that the Mallela defense was a “coverage defense: and as such was not subject to the preclusion rule. Id at 5. See Multiquest PLLC v. Allstate Ins. Co., 17 Misc 3d 37 (App. Term, 2d Dept. 2007); Crossbay Acupuncture v. State Farm Mut. Auto. Ins. Co., 15 Misc 3d 110 (App. Term, 2d dept. 2007); Eastern Medical P.C. v. Allstate Ins. Co., 19 Misc 3d 775, 790 ( the challenged regulation in Mallela did not create a new category of exclusion but rather was “a condition precedent with which all claimants must comply in order to receive benefits.” ). The court rejected the defendant’s contention that the [*5]defense of fraudulent incorporation did not fit within the “tight restrictions of the exception to preclusion outlined in General Hospital v. Chubb, 90 NY2d 199. Chubb, like Mallela, “spoke to a threshold coverage matter” Id.

In the very recent decision of Unitrin Advantage Ins. Co. V. Bayshore Physical Therapy, 2011 NY Slip Op 1948 (App. Div., 1st Dept. 3/17/11), the First Department explicitly found that “the failure to appear for IMEs requested by an insurer…is a breach of a condition precedent to coverage under the No-Fault policy, and therefore fits squarely within the exception to the preclusion doctrine. Id at 2 citing Central General Hosp. V. Chubb, 90 NY2d 195 (1997)(defense that injured person’s condition and hospitalization were unrelated to the accident was non precludable ). The First Department justified its finding that an IME no show was a non -precludable defense on the ground that a “breach of a condition precedent to coverage voids the policy ab initio.” Thus, the failure to appear for an IME cancels the contract as if there was no coverage in the first instance and the insurer has the right to deny all claims retroactively to the date of loss, regardless of whether the denials were timely. Id.

In light of the afore-mentioned precedent, it is clear that the claimant’s failure to comply with a condition precedent to coverage voids the contract ab initio and defendant is not obligated to pay the claim, regardless of whether it issued denials beyond the 30 day period. Furthermore, since the contract has been vitiated, defendant may deny all the claims retroactively to the date of loss. In light of the above, the case is dismissed with prejudice.

This constitutes the Amended Decision and Order of the Court which replaces the Decision and Order of the Court dated March 30, 2011, which is hereby recalled and vacated.

DATED: April 7, 2011__________________________

KATHERINE A. LEVINE

JUDGE, CIVIL COURT

Footnotes

Footnote 1:Since the right to conduct EUOs and IMEs both appear in the PIP, and thus constitute conditions precedent to coverage, the case law treats both of these examinations in the same fashion.

Footnote 2: The majority found that the language mandating compliance with the terms of the coverage as a condition precedent to bringing a lawsuit applied solely to “an insureds cooperation with the post claim verification protocols with regard to IMEs.” 7 Misc 3d at 22.

Civil Court of the City of New York, Kings County

161737/07

Ingrid Joseph, J.

Recitation, as required by CPLR §2219 (a), of the papers

considered in the review of this Motion

PapersNumbered

Notice of Motion Affidavits Annexed ………….1

Opposition/Answering Affidavits .. ..2

Replying Affidavits .

In this action to recover assigned first-party no-fault benefits, plaintiff filed a motion for summary judgment on or about September 16, 2009, which was returnable on October 6, 2009. The parties signed a written adjournment stipulation on the return date since the defendant failed to submit opposition. In the stipulation, the litigants agreed that the defendant would serve responsive papers upon plaintiff on or before January 29, 2010 and that any cross-motion served beyond the extended date would be denied as untimely. The defendant breached the agreement by serving the cross-motion and opposition on March 5, 2010, approximately one month after the due date. Consequently, the court rejected the defendant’s submissions when the parties appeared on March 29, 2010. The defendant now seeks an order pursuant to CPLR § 2221(e)(2) & (e)(3), granting leave to renew plaintiff’s prior motion for summary judgment and upon renewal, an order denying plaintiff’s motion and granting defendant’s cross-motion for summary judgment.

The issue before the court is whether the defendant can move for leave to renew its adversary’s motion on the basis that its cross-motion and opposition, which was rejected and not entertained, constitutes new facts?

The defendant’s untimely responsive papers, once rejected, constituted a default on the part of the defendant in opposing plaintiff’s motion (Lumbermen’s Mut. Cas. Co. v Fireman’s Fund American Ins. Co., 117 AD2d 588 [2d Dept 1986]; and see Omega Diagnostic Imaging, P.C. v MVAIC, 2011 WL 817397 [Sup. Ct, App Term 2nd, 11th and 13th Jud Dists 2011]; Manhattan Medical Imaging, P.C. v Nationwide Ins. Co., 27 Misc 3d 127(A)[Sup. Ct, App Term 2nd, 11th and 13th Jud Dists 2010]; Acupuncture Healthcare Plaza, P.C. v Zurich Ins. Co., 22 [*2]Misc 3d 126(A) [Sup. Ct, App Term 2nd, 11th and 13th Jud Dists 2008][the court’s grant of relief requested in an unopposed motion is considered a default judgment]). Even though the court allowed the defendant to orally address the issue of whether plaintiff met its prima facie burden, the resulting judgment in plaintiff’s favor was a default judgment. The court is cognizant that CPLR § 2221 is silent as to who may bring a motion to renew, but the Appellate Term has held that a party cannot renew a motion upon which it defaulted (Manhattan Medical Imaging, P.C., 27 Misc 3d 127(A)[Sup. Ct, App Term 2nd, 11th, 13th Jud. Dists 2010]). The appropriate procedural device for obtaining relief from a default judgment is a motion to vacate pursuant to CPLR § 5015(a)(1)(Eugene Di Lorenzo, Inc. v A.C. Dutton Lumber Co., Inc., 67 NY2d 138, 141 [1986]).

Even assuming arguendo that a motion for leave to renew was appropriate in this context or the court converted the motion into one to vacate the default judgment, the defendant has failed to meet the criteria for relief under either theory.

A motion for leave to renew, pursuant CPLR § 2221, creates an avenue for a party to provide the court with pertinent facts that it failed to include in the previous motion when such motion was before the court (8 NY Prac., Civil Appellate Practice § 5:2). The motion must be based upon new facts not offered on the prior motion that would change the prior determination or shall demonstrate that there has been a change in the law that would change the prior determination and shall contain reasonable justification for the failure to present such facts on the prior motion (CPLR § 2221(e)(2) & (e)(3); Rizzotto v Allstate Ins. Co., 300 AD2d 562 [2d Dept 2002]). In order to garner relief under CPLR § 5015, the defendant must show a reasonable excuse for the default and a meritorious defense.

The defendant’s cross-motion and opposition do not constitute new facts within the contemplation of CPLR § 2221, because the information contained therein is not newly discovered and would have been available when plaintiff’s motion was before the court but for the defendant’s untimeliness. Additionally, the defendant’s excuse of law office failure is untenable for purposes of CPLR §§ 2221 and 5015. Law office failure can be accepted as a reasonable excuse in the exercise of the court’s sound discretion, but the movant must submit supporting facts to explain and justify the default and mere neglect is not acceptable as a reasonable excuse (Cole-Hatchard v Grand Union, 270 AD2d 447 [2d Dept 2000] quoting Bravo v New York City Hous. Auth., 253 AD2d 510 [2d Dept 1998] and Davito v Marine Midland Bank, 100 AD2d 510 [2d Dept 1984]). The defendant’s excuse, that the task of responding to plaintiff’s motion was assigned to an attorney who left the firm, and the opposition due date had lapsed before the law office could “sort through” the former attorney’s caseload, represents nothing more than the law office’s neglect in managing its active cases. Furthermore, the defendant failed to provide details or submit any evidence in support of its explanation. Thus, the court finds that the excuse is conclusory and insufficient.

Accordingly, the defendant’s motion is denied.

This constitutes the decision and order of the court.

March 15, 2011_____________________________

HON. Ingrid Joseph

Judge, Civil Court

Civil Court of the City of New York, New York County

17035/05

Soraya Campbell, Esq. of Bruno Gerbino & Soriano LLP appeared in support of the motion

Christopher McCollum, Esq. appeared in opposition to the motion

O’Shea, J.

Plaintiff, a professional corporation, instituted this action to recover first-party, no fault benefits for services rendered to its assignor, Shonta Robinson, who was injured in an automobile accident on August 4, 2002. On or about October 28, 2002, plaintiff submitted three claims for payment totaling $14,929.08. On February 1, 2008, plaintiff was awarded summary judgment on its claims.

On December 17, 2008, plaintiff served a proposed judgment in the total amount of $55,090.03, which included statutory attorney’s fees and $39,151.85 in interest, which plaintiff calculated using compounded interest at the rate of 2% per month from the date defendant was required to pay or deny the claim (November 28, 2002) to the date of the proposed judgment (December 17, 2008). Shortly thereafter, on December 30, 2008, defendant paid the underlying claims in the amount of $14,929.08, along with the statutory attorneys fees in the amount of $850.00. Defendant then moved by order to show cause two weeks later seeking, inter alia, an order vacating or staying entry and execution of the judgment on the grounds that plaintiff [*2]miscalculated the interest. On May 18, 2009, four months after judgment was entered, a decision and order was issued staying “entry of this judgment . . . until the correct interest amount is added to the judgment.”

Sixteen months later, in September, 2010, plaintiff e-mailed defendant a copy of an amended application for judgment with interest in the amount of $40,238.48, calculated from April 5, 2005, the date the complaint was filed,^[FN1] to the date of the new proposed judgment. Plaintiff again used a compounded rate of 2% per month in calculating the interest.^[FN2] Nothing more happened. There is no record that the proposed amended judgment was ever entered by the Clerk or that plaintiff or defendant took any steps to challenge or compel entry of the newly proposed judgment or to lift the stay.

Three months later, on December 21, 2010, plaintiffs commenced enforcement proceedings on the original judgment. In its Execution With Notice to Garnishee, plaintiff stated as follows:

“[J]udgment was entered on January 7, 2009, . . . in the amount of $55,090.93, including costs, of which $57,391.12, together with interest from December 21, 2010, remains due and unpaid.”

One month later, on January 18, 2011, in a reprise of its January 2009 order to show cause, defendant moved for an order: (i) vacating or modifying the judgment; (ii) staying entry of the judgment; (iii) vacating or staying the execution of judgment; and (iv) staying execution of the judgment pending a hearing and determination of the motion. Defendant claims this relief on the grounds that (a) it was improper for plaintiff to seek execution of a judgment that was stayed and never entered by the Clerk; and (b) the interest calculation remains incorrect. Plaintiff opposes the motion on the grounds, inter alia, that the stay was self-executing and lifted when he served the amended application for judgment, and his calculations of interest are correct. The order to show cause initiating the instant motion provides that “pending the hearing and determination of this application, entry of judgment . . . is hereby stayed [and] pending the hearing of this application, any attempted enforcement of or execution on the judgment is hereby stayed. . . .”

In the exercise of its control over its judgments, a court may open them upon the application of anyone for sufficient reason in the furtherance of justice. Its power to do so is [*3]inherent and does not rely on any particular statute (Woodson v. Mendon Leasing Corp., 100 NY2d 62 [2003]; Ladd v. Stevenson, 112 NY 325 [1889]). However such relief generally should be resorted to only to relieve a party from judgments taken through fraud, mistake, inadvertence, surprise or excusable neglect (McKenna v. County of Nassau, 61 NY2d 739 [1984]). Correction of a miscomputation of interest constitutes just such an error (e.g. Kiker v. Nassau County, 85 NY2d 879 [1995][a mistake in assessing the amount of interest on a judgment may be corrected even after the appeals process has been completed, where the proper rate was clearly directed by statute]; see also Gaul v. Commercial Union Ins. Co., 268 AD2d 816 [3d Dep’t 2000]; Bauman v. Bauman, 200 AD2d 380 [1st Dep’t 1994]).

In recognition of the fact that the interest calculation was incorrect, on May 18, 2009, this Court granted Defendant a stay of the entry of the judgment until “the correct amount of interest is added to the judgment.” As the correct amount of interest has still not been added to the judgment, the May 18, 2009, stay remains in full force and effect. Accordingly, defendant’s new application for a stay of entry of the judgment is denied as unnecessary (see e.g., Med. Soc’y v. Serio, 99 NY2d 608 [2003]; Matter of Peter B., 2010 NY Slip Op 3920 [2d Dep’t 2010]).

Defendant’s motion to vacate or to modify the judgment is also denied. As defendant has not identified anything wrong with the judgment aside from the improper calculation of interest (which was already addressed in the prior motion), there is no reason to either vacate or modify it. However, Defendant’s motion for an order staying enforcement is granted. Until the judgment has properly been entered, there is nothing to enforce.

As for the calculation of interest itself, Plaintiff offers authority to suggest that he is entitled to compound interest, while Defendant argues that the interest should not be compounded. The “old” regulations found at 11 NYCRR § 65.15(h)(1) provided for interest at the rate of “two percent per month, compounded.” That regulation was superseded on April 5, 2002 by Insurance Department Regulations found at 11 NYCRR § 65-3.9(a) , which provides for “interest at a rate of two percent per month, calculated on a pro-rata basis using a 30-day month.”

Citing Belt Parkway Imaging, P.C. v State Wide Ins. Co., 2010 NY Slip Op 52229U [2010]). Plaintiff contends that it is up to Defendant to show that the new regulations apply, a determination made with reference to the contents of the policy in effect at the time of the accident. As Defendant has not met that alleged burden, plaintiff argues that it is entitled to interest calculated under the old regulations. In opposition, Defendant contends that the contents of the policy in effect at the time are irrelevant to this inquiry. Citing to Circular Letter No. 9, dated April 9, 2002,^[FN3] Defendant asserts that only the notice of claim and proof of claim provisions are governed by the policy endorsement in effect at the time of the submission of the claim. Everything else is dictated by whether the claim was submitted before or after April 5, 2002.

Defendant’s interpretation finds support in the Court of Appeals determination in Medical [*4]Society v. Serio, 100 NY2d 854 [2003]). Describing the various aspects of the new regulations, the Court states as follows:

“Under the revised regulations, this interest is no longer to be compounded, as before, but is instead to be calculated as simple interest (11 NYCRR 65-3.9 [a])” (emphasis added)

See also Gokey v. Blue Ridge Ins. Co., 2009 NY Slip Op 50361U [Sup. Ct. Ulster Co. 2009]). This conclusion is further reinforced by the fact that the change in the interest calculation was reflective of the change in market conditions at the time. not on anything having to do with the insurance policy per se or its endorsement (see 2001-19 NY St. Reg. 17][noting, “The Department, by regulation, required compounding at a time of double-digit interest rates. In the current interest rate environment, compounding is not reflective of the financial market]; 2000-31 NY St. Reg. 19; 1999-16 NY St. Reg. 7). Plaintiff’s reliance on the determination by the Second Department in Belt Parkway Imaging, P.C. v State Wide Ins. Co., supra, is misplaced. There is no indication in the decision that the accident in question post-dated the inception of the new regulations. Accordingly, the interest in this case shall be calculated as simple not compound interest.

As for the proper term of the interest, Plaintiff contends that the term of the interest runs from the date of the commencement of this proceeding to the present, as interest was not tolled in the order staying execution of the judgment, while defendant argues that such an interpretation provides an inappropriate windfall to plaintiff. Defendant also argues that, in any event, plaintiff should not be entitled to accrual of interest past the date of the original judgment, as defendant paid the principal amount at that time.

On the subject of interest, the insurance regulations provide as follows:

(a) All overdue mandatory and additional personal injury protection benefits due an applicant or assignee shall bear interest at a rate of two percent per month, calculated on a pro rata basis using a 30-day month. 11 NYCRR § 65-3.9

The interest which accrues on overdue no-fault benefits at a rate of two percent per month is a statutory penalty designed to encourage prompt adjustments of claims and inflict a punitive economic sanction on those insurers who do not comply (East Acupuncture, P.C. v. Allstate Ins. Co., 61 AD3d 202 [2d Dep’t 2009]). Claimants are also required to act promptly. Failure to act promptly after a denial of claim results in a toll of the statutory interest provisions, for to do otherwise would reward a recalcitrant plaintiff with a windfall of punitive interest payments, and would contravene the legislative goal of promptly resolving no-fault claims ( see East Acupuncture, P.C. v Allstate Ins. Co., 61 AD3d 202, 210 [2d Dep’t 2009]; see also LMK Psychological Services, supra, 12 NY3d at 223-224).

Ordinarily prejudgment interest runs from the accrual of the claim or the occurrence of the damages until the date that a decision or verdict is made (see e.g., CPLR § 5001). However, in a no-fault context, regulations provide that where litigation is not commenced within 30 days of denial of the claim, interest is tolled until the date of commencement of the action (see 11 NYCRR 65-3-9[c]; see also LMK Psychological, supra, 12 NY3d at 223-224; Smith v. Nationwide Mut. Ins. Co., 211 AD2d 177 [4th Dep’t 1995][Insurance Law § 5106(a) supersedes the provisions for interest contained in CPLR 5002, 5003 and 5004]).The “closing” date for prejudgment interest ordinarily is the date of the decision rendering judgment (see CPLR § 5001[c] ). The actual entry of judgment occurs sometime later, and prejudgment interest also [*5]accrues between the rendering of judgment and the entry of judgment, and post-judgment thereafter (See CPLR §§ 5002 – 5004). In the case of Civil Court matters, CCA § 1401 requires the prevailing party to “prepare” the judgment within 30 days after the rendering of judgment by the Court, or the losing party may do so. This limitation is both short and precisely bounded so that the entry of judgment does not rely on the caprice or diligence of the prevailing party (see Henry Modell & Co. v. Minister, Elders & Deacons of the Reformed Protestant Dutch Church, 68 NY2d 456 [1986]).

Notwithstanding the requirement that judgment be prepared within 30 days of the rendering of judgment, plaintiff here waited ten months after judgment was rendered by Judge Mendez on February 1, 2008, before filing an application for judgment. Because the calculations of interest were incorrect, on May 18, 2009, the judgment was stayed to permit plaintiff the opportunity to correct the interest calculations. Two years have passed since the judgment was stayed and it has been three years since judgment was rendered. Yet, plaintiff contends that it is entitled to collect compounded interest at the rate of 2% per month throughout the entire period of its inaction, a contention with which this Court disagrees.

In February of 2010, the Second Department declined to pass on the issue of whether the accrual of interest may be tolled where it is found that there has been an unreasonable delay in the entry of judgment (SZ Med., P.C. v Lumbermens Mut. Cas. Co., 2010 NY Slip Op 20044 [App. Term Second Dep’t 2010]). While the majority noted that it shared the dissent’s concerns with regard to this issue, it declined to consider the matter as it was not raised in the court below.

Justice Golia, in his dissent, argued that permitting interest to accrue between the date of the order and the date of the actual entry of judgment “would be rewarding such delay with what amounts to essentially a windfall of punitive interest payments.” As the purpose of the no-fault regulations was to encourage the prompt resolution of no-fault claims, permitting a recalcitrant plaintiff to accrue interest after the conclusion of litigation “would be at odds with the legislative goal of promptly resolving no-fault claims.” (SZ Med., P.C. v Lumbermens Mut. Cas. Co., 2010 NY Slip Op 20044 [App. Term. 2d Dep’t 2010], Golia, J. dissenting).

No fault regulations provide for interest to accumulate throughout the course of the litigation “unless the applicant unreasonably delays the . . . court proceeding.” (11 NYCRR § 65-3.9[d]). A court proceeding ends with the entry of judgment. Judgment is to be prepared by the prevailing party within 30 days of the rendering of judgment (CCA § 1401). It follows that any delay thereafter, absent good cause, is unreasonable. Here, plaintiff waited ten months to enter the original judgment, miscalculated the interest, waited an additional 17 months after judgment was stayed correct the interest calculation, and then miscalculated it a second time. This was unreasonable. Accordingly, interest as provided by 11 NYCRR § 65-3.9 is tolled as of March 2, 2008 — 30 days after the Court initially rendered summary judgment for plaintiffand the date by which plaintiff should have prepared the judgment in the first instance.

Enter order accordingly.

Dated:March 14, 2011______________________________

Ann O’Shea, AJSC

Footnotes

Footnote 1: Plaintiff used the April 5, 2005, date in recognition of 11 NYCRR 65-3.9 and the Court of Appeals decision in LMK Psychological Services, PC v. State Farm Mutual Auto Insurance, 12 NY3d 217 (2009), which provided that the accrual of interest is tolled from 30 days after the claim is denied to the date the civil action is commenced. The regulation was adopted “to encourage claimants to swiftly seek to resolve any dispute concerning their entitlement to no fault benefits” (LMK Psychological, 12 NY3d at 223-224).

Footnote 2: Plaintiff also unilaterally increased the amount of attorney’s fees claimed from $850 to $1,700 and the costs of service of the summons and complaint from $25 to $40. In addition, plaintiff failed to credit defendant with the payment of the principal sum two years earlier.

Footnote 3:Circular Letter No. 9, dated April 9, 2002, by the Insurance Department, states that the new regulation “provides for revised endorsements with new notice provisions, [and that] these new provisions will not be applicable to claims until new policies containing the revised endorsements are issued or renewed” (see Brentwood Pain & Rehabilitation Servs., P.C. v Progressive Ins. Co., 2009 NY Slip Op 31881U [Sup. Ct. NY Co. 2009]).

[*1]

Civil Court of the City of New York, Kings County, January 3, 2011

APPEARANCES OF COUNSEL

Bruno, Gerbino & Soriano, L.P., Melville, for defendant. Yelena Shlyamkovich, P.C., Brooklyn, for plaintiff.

{**2011 N.Y. Slip Op. at 1} OPINION OF THE COURT

Devin P. Cohen, J.

Defendant’s motion to dismiss pursuant to CPLR 3211 (a) (5) is decided as follows:

Procedural History

This action arises from an August 6, 2008 incident wherein plaintiff’s assignor allegedly sustained personal injuries and subsequently received treatment from plaintiff health services provider. On August 27, 2009, plaintiff commenced this action seeking to recover first-party no-fault benefits for services rendered to its assignor. Issue was joined by service of defendant’s{**2011 N.Y. Slip Op. at 2} [*2]answer on or about October 7, 2009.

Prior to the commencement of this lawsuit, defendant initiated a declaratory judgment action in Kings County Supreme Court, seeking a declaration that the incident of August 6, 2008 was a “staged or intentional incident” and therefore “not a covered event as defined by the applicable policy of insurance issued by Encompass” (plaintiff’s exhibit A). Plaintiff and its assignor, Vincent Meyers, were both named defendants in the declaratory judgment action. Neither plaintiff nor its assignor answered or appeared in the declaratory judgment action, and defendant moved for a default judgment.

On January 10, 2010 Justice Robert J. Miller granted the default judgment against plaintiff and its assignor and issued a declaratory judgment finding that defendant, “by reason of no coverage, is not required to provide a defense and/or indemnification to [plaintiff or its assignor] . . . in any current or future proceedings . . . including lawsuits seeking to recover no-fault benefits . . . arising out of the alleged incident of August 6, 2008” (defendant’s exhibit A at 3). Defendant now moves this court pursuant to CPLR 3211 (a) (5) for an order dismissing the complaint in this action, with prejudice, on the grounds of collateral estoppel based upon the order issued in the declaratory judgment action, and “for such other and further relief this court deems just and proper” (defendant’s motion to dismiss at 1).

This case raises the question of the effect of a declaratory judgment order, issued on default, with respect to collateral actions seeking to litigate the same issue. To address this question requires an analysis of the intersection of the applicable law and policies underlying declaratory judgments, collateral estoppel and default judgments.

Legal Standards

CPLR 3001 provides that “[t]he supreme court may render a declaratory judgment having the effect of a final judgment as to the rights and other legal relations of the parties to a justiciable controversy whether or not further relief is or could be claimed.” The general purpose of the declaratory judgment is often described as “to serve some practical end in quieting or stabilizing an uncertain or disputed jural relation either as to present or prospective obligations” (James v Alderton Dock Yards, 256 NY 298, 305 [1931]). Thus, a primary goal in seeking a declaratory judgment is a decisive determination as to the rights of the parties in ongoing or future collateral actions.

The Court of Appeals in Kaufman v Eli Lilly & Co. (65 NY2d 449 [1985]) outlined the purpose of the doctrine of collateral estoppel and the circumstances under which it is applied. Generally, the doctrine “precludes a party from relitigating an issue which has previously been decided against him in a proceeding in which he had a fair opportunity to fully litigate the point” (id. at 455 [internal quotation marks omitted]). The doctrine stems from the principles of judicial economy and fairness (id. at 455).

In order for the doctrine of collateral estoppel to apply, two requirements must be satisfied: (1) “the identical issue necessarily must have been decided in the prior action and be decisive of the present action” (id. at 455); and (2) “the party to be precluded from relitigating the issue must have had a full and fair opportunity to contest the prior determination” (id. at 455). “The party seeking the benefit of [preclusion] has the burden of demonstrating the identity of the issues [while] the party [opposing] application [of the doctrine] has the burden of establishing the absence of a full and fair opportunity to litigate” (id. at 456).

The doctrine of collateral estoppel will only apply to matters “actually litigated and{**2011 N.Y. Slip Op. at 3} [*3]determined” in a prior action (Restatement [Second] of Judgments § 27). Without “actual litigation” there is no identity of issues (see Kaufman, 65 NY2d at 457). In general, courts have taken the position that “an issue is not actually litigated if . . . there has been a default” (Kaufman, 65 NY2d at 456-457; see Restatement [Second] of Judgments § 27, Comments d, e). More recently both in Zimmerman v Tower Ins. Co. of N.Y. (13 AD3d 137 [1st Dept 2004]) and Magic Recovery Med. & Surgical Supply Inc. v State Farm Mut. Auto. Ins. Co. (27 Misc 3d 67 [App Term, 2d Dept 2010]) appellate courts have reiterated their adherence to this principle and its application to declaratory judgments. Each court held that declaratory judgments issued on default would not be given preclusive effect in collateral proceedings.

The Parties’ Contentions

Defendant contends that collateral estoppel should apply and the case should be dismissed based upon the determination in the declaratory judgment action that the alleged accident was not a covered incident. Defendant contends that the decisive issue of coverage is the same in both actions. Furthermore, defendant (plaintiff in the declaratory judgment action) contends that plaintiff (a defendant in that action) had a full and fair opportunity to litigate the matter in the declaratory judgment action in that it was duly served with the summons and complaint and failed to appear or interpose an answer. Finally, defendant contends that, as a policy matter, “to not give preclusive effect to the Supreme Court judgment is to create a disincentive for a provider, or an Eligible Injured Person, to ever appear and litigate the issues of the Declaratory Judgment” (defendant’s reply at 2).

In opposition, plaintiff cites the general rule articulated above that collateral estoppel does not apply where there has been a default because the issues have not been “actually litigated” (see Zimmerman, 13 AD3d 137; Kaufman, 65 NY2d at 457). Plaintiff offers no explanation for its default in the declaratory judgment action.

Analysis

The line of appellate cases referenced above adheres to the principle that collateral estoppel does not apply where there has been a default in the prior action. It has been argued that when it first articulated this principle in Kaufman, the Court of Appeals did not intend it to be applied in such a bright-line manner, but rather intended a more case-specific evaluation of whether the issue had been “actually litigated” (see Staatsburg Water Co. v Staatsburg Fire Dist., 72 NY2d 147, 153 [1988] [in analyzing the application of collateral estoppel “no rigid rules are possible, because . . . factors may vary in relative importance depending on the nature of the proceedings”]; see Kaufman, 65 NY2d at 457). In the no-fault context specifically, the argument has been made that declaratory judgments rendered on default should be given collateral estoppel effect (see Magic, 27 Misc 3d at 69-76 [Golia, J., dissenting]). That said, in light of the current appellate case law, the court is constrained from dismissing this case on the basis of collateral estoppel.

However, the fact that collateral estoppel does not apply does not mean that the instant action should proceed. The efficacy of a declaratory judgment relies on the assumption that it will be given preclusive effect in collateral actions. To allow the action to continue as though the declaratory judgment (DJ) action never occurred would create a disincentive for no-fault providers to ever appear in declaratory judgment actions and would undermine the purpose of the declaratory judgment process. While plaintiff/DJ defendant cannot, under the case law, be prejudiced by the default finding, neither should plaintiff/DJ defendant be unfairly advantaged [*4]by its own default.{**2011 N.Y. Slip Op. at 4}

In general, a default judgment is a presumptively valid judgment entitled to enforcement, unless or until reversed or set aside (All Terrain Props. v Hoy, 265 AD2d 87 [1st Dept 2000]; but see also Fleet Bus. Credit, LLC v Michael P. Costelloe, Inc., 19 Misc 3d 29 [App Term, 2d & 11th Jud Dists 2008] [limited exception for out-of-state defaults where defendant alleges a lack of personal jurisdiction in the prior action]). To avoid enforcement of a default judgment, a defendant must move to vacate and offer both a reasonable excuse for its default and a meritorious defense to the underlying action (CPLR 317). In the court’s view, a declaratory judgment, issued on default, should be treated in the same manner. Plaintiff’s proper recourse, if it wishes to proceed with this action, is to move to vacate the default judgment in the declaratory judgment action by offering a reasonable excuse for its failure to appear and a meritorious defense to that action.

The court is empowered to stay its own proceedings “[e]xcept where otherwise prescribed by law . . . in a proper case, upon such terms as may be just” (CPLR 2201). One instance in which the staying of a given action is often deemed appropriate is when another (collateral) action is pending (see Connors, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR C2201:4 [discussing implied stay provision on a motion to dismiss pursuant to CPLR 3211 (a) (4)]). Since plaintiff contends that the declaratory judgment cannot be given preclusive effect because it was not “actually litigated,” this court will stay the instant matter to afford plaintiff the opportunity to move to vacate its Supreme Court default and, if granted, to “actually litigate” the coverage question in the declaratory judgment action.

Conclusion

For the foregoing reasons, the court exercises its discretion to stay this action indefinitely pending any vacatur of the default judgment in the collateral declaratory judgment action. This decision is without prejudice to defendant to remake or renew this motion in the event that plaintiff is unsuccessful in vacating the declaratory judgment.