Civil Court of the City of New York, Kings County

105504/2004

Jaffe & Koumourdas

40 Wall Street -12th Floor

New York, NY 10005

Attorneys for Defendant

Moshe D. Fuld, P.C.

38 west 32nd Street -7th Floor

New York, NY 10001

Attorneys for Plaintiff

George J. Silver, J.

In this action to recover first-party no-fault benefits, interest and attorney’s fees pursuant to New York’s Insurance Law and no-fault regulations, defendant Country-Wide Insurance Company (hereinafter defendant) moves pursuant to CPLR § 5015 [a] [1] [2] and [3] for an order vacating the judgment entered against it.

Procedural Background

This action was commenced by plaintiff Deajess Medical Imaging PC (hereinafter plaintiff) by service of a summons and complaint upon defendant on or about October 21, 2004. Defendant served its answer on November 16, 2004. On November 4, 2005 summary judgment was granted in plaintiff’s favor as to all of plaintiff’s claims and judgment was entered against defendant in the amount of $18,694.39 plus statutory interest and attorney’s fees. In granting plaintiff’s motion for summary judgment, the motion court held that plaintiff had established its prima facie entitlement to no-fault benefits and that defendant failed to submit “admissible proof of any issue of fact.” The motion court rejected defendant’s argument that plaintiff’s motion was premature because discovery was still outstanding and held that defendant failed to annex exhibits in proper form to establish that discovery demands were served and not complied with. Defendant moved to reargue plaintiff’s summary judgment motion and on July 10, 2006, the return date of defendant’s motion, the parties entered into a written stipulation of settlement. The stipulation resolved defendant’s motion to reargue as follows: “[p]laintiff agrees to vacate the judgment for assignor Trinece Summer, defendant agrees to pay the remaining claims as per the Court’s Order of November 4, 2005 within 30 days inclusive of interest up until the day of payment.” The stipulation, which was a clear and unambiguous statement of the parties’ intent, was properly signed by the attorneys of record who were acting in an adversarial relationship. [*2]The stipulation was not so-ordered by the Court. Defendant now moves to have the judgment entered against it pursuant to the November 4, 2005 order vacated on the ground that newly discovered evidence exists which “if introduced at trial would probably have produced a different result and which could not have been discovered in time to move for a new trial under section 4404” (CPLR § 5015 [a] [2]). The newly discovered evidence cited by defendant includes a federal case involving Robert Scott Schepp, M.D., New York State appellate case law involving the plaintiff, a news article from Law.com, as well as the Andrew Carothers, M.D., P.C. trial in the New York City Civil Court, Richmond County, all of which defendant argues establish that plaintiff is fraudulently incorporated. Defendant also agues that the judgment was the product of “fraud, misrepresentation, or other conduct of an adverse party” (CPLR § 5015 [a] [3]) and that there was no meeting of the minds when the parties entered into the written stipulation of settlement. Finally, defendant contends that this case is subject to a stay issued by the Supreme Court, Nassau County in a separate action in which plaintiff and defendant are both parties (hereinafter the Nassau County action).

In opposition plaintiff contends that stipulations of settlement are favored by the courts and should be vacated only upon a showing of that the settlement was the product of fraud, overreaching, mistake or duress and argues that defendant has failed to make such a showing. Plaintiff also contends that this action has not been stayed by Nassau County action.

Discussion

It is well settled that stipulations of settlement are judicially favored and should not be lightly set aside (Cooper v Hempstead Gen. Hosp., 2 AD3d 566 [2d Dept]). “This is all the more so in the case of open court’ stipulations within CPLR § 2104, where strict enforcement not only serves the interest of efficient dispute resolution but also is essential to the management of court calendars and integrity of the litigation process” (Hallock v State of New York, 64 NY2d 224, 230; 474 NE2d 1178; 485 NYS2d 510 [1984] [citations omitted]). Stipulations of settlement are independent contracts that are subject to the principles of contract law (Hannigan v Hannigan, 2008 NY Slip Op 3589 [2d Dept]) and “[o]nly where there is cause sufficient to invalidate a contract, such as fraud, collusion, mistake or accident, will a party be relieved from the consequences of a stipulation made during litigation” (Hallock, 64 NY2d 224, 230). A “party seeking reformation of a contract by reason of a mistake must establish, with clear and convincing evidence, that the contract was executed under mutual mistake or a unilateral mistake induced by the other party’s fraudulent misrepresentation” (Moshe v Town of Ramapo, 2008 NY Slip Op 7238 [2d Dept] quoting Yu Han Young v Chiu, 49 AD3d 535, 536, 853 NYS2d 575 [2d Dept 2008]). “[E]ven a stipulation which was improvident will not be set aside unless it is manifestly unfair or unconscionable” (Cavalli v Cavalli, 226 AD2d 666, 667, 641 NYS2d 724 [2d Dept 1996]; see Wilutis v Wilutis, 184 AD2d 639, 640, 587 NYS2d 171 [2d Dept 1992]).

The only evidence offered by defendant in support of its claim that the settlement was procured through fraud or collusion are the conclusory allegations contained in the affirmations of defendant’s attorney. Bare, unsubstantiated allegations such as “[t]he purported judgment premised upon plaintiff’s misrepresentations”^[FN1] and “[p]laintiff obtained its judgment under false [*3]pretenses”^[FN2] and “[t]he judgment was obtained under collusion by the plaintiff and its attorney since plaintiff’s attorney was well aware of several litigations pending against their client based on their client’s corporate structure”^[FN3] are insufficient to vacate the stipulation as a product of collusion or fraud. Such speculation also fails to make the requisite showing to reform the stipulation on the ground that it was executed under a mutual or unilateral mistake (see M.S.B Dev. Co., Inc. v Lopes, 38 AD3d 723 [2d Dept 2007] [A party seeking reformation must show clearly that there has been a mistake] [emphasis added]). Moreover, defendant, a sophisticated insurer well-versed in no-fault litigation and represented by able and competent counsel at the time the stipulation was entered into, does not claim that the settlement was a product of duress or that its counsel lacked the authority to enter into the settlement.

Defendant’s claim that the stipulation of settlement should be vacated based upon newly discovered evidence of plaintiff’s allegedly fraudulent incorporation is also without merit.

Plaintiff and defendant entered into a second stipulation, so-ordered on March 26, 2007, in the Nassau County action in which defendant agreed that plaintiff’s right “to enforce voluntary settlements that have been entered into with any of the Insurers,” including defendant, would not be impaired. As a party to the Nassau County action defendant was certainly aware on March 26, 2007 that the plaintiff professional corporation may be fraudulently incorporated. Despite that awareness, defendant nevertheless agreed that plaintiff could freely enforce any and all voluntary settlements which plaintiff had previously entered into. This concession by defendant to plaintiff belies defendant’s argument that had it been aware of plaintiff’s allegedly fraudulent incorporation on July 10, 2006 it would not have entered into the stipulation at issue here. “Courts will not set aside a stipulation . . . simply because, in hindsight, a party decides that the agreement was improvident” (Town of Clarkstown v. M.R.O. Pump & Tank, Inc., 287 AD2d 497, 498, 731 NYS2d 231 [2d Dept 2001]). Therefore, because defendant has failed to meet any of the criteria necessary for the court to vacate the parties’ voluntary stipulation of settlement, defendant’s Order to Show Cause is denied in its entirety.

This constitutes the decision and order of the Court.

Dated: October 7, 2008

George J. Silver, J.C.C.

Jaffe & Koumourdas

40 Wall Street -12th Floor

New York, NY 10005

Attorneys for Defendant

Moshe D. Fuld, P.C.

38 west 32nd Street -7th Floor

New York, NY 10001

Attorneys for Plaintiff

Footnotes

Footnote 1: Defendant’sAffirmation in Support.

Footnote 2: Defendant’sAffirmation in Reply.

Footnote 3: Id.

Civil Court of the City of New York, Kings County

165871/2006

Counsel for Plaintiff:

Gary Tsirelman PC

55 Washington Street, Suite 606

Brooklyn, NY 11201

Tel.: (718) 438-1200

Counsel for Defendant:

Votto & Cassata, LLP

60 Bay Street, 3rd Floor

Staten Island, NY 10301

Tel.: (718) 720-2877

Peter P. Sweeney, J.

In this action pursuant to Insurance Law § 5101 et seq to recover assigned first-party no-fault benefits claimed to be due and owing under a policy of insurance issued by the defendant, defendant moves for summary judgment dismissing the action on the ground that plaintiff did not commence the action within the six-year statute of limitations contained in CPLR § 213[2]. Plaintiff cross-moves for summary judgment.

In support of its motion for summary judgment, defendant submitted admissible proof establishing that it received the underlying claim for first-party no-fault benefits on November 15, 2000, that it had issued a denial of the claim on November 29, 2000 on the ground that plaintiff’s assignor failed to attend an examination under oath (“EUO”) and that it had mailed a [*2]copy of the denial of claim to the plaintiff on the same day it was issued. Plaintiff commenced the action on December 1, 2006. Defendant argues that pursuant to CPLR § 213 [2], plaintiff was required to commence the action within six years from November 29, 2000 and that the commencement of the action on December 1, 2006 was untimely.

It is now fairly well settled that an action to recover assigned first-party no-fault benefits under a policy of insurance is fundamentally a breach of contract action subject to the six-year statute of limitations contained in CPLR §213[2] (see Mandarino v. Travelers Property Cas. Ins. Co., 37 AD3d 775, 831 NYS2d 452 [2nd Dep’t 2007]; Benson v. Boston Old Colony Ins. Co., 134 AD2d 214, 215, 521 NYS2d 14 [1st Dep’t1987], lv. denied 71 NY2d 801, 527 NYS2d 767, 522 NE2d 1065 [1988]; Travelers Indem. Co. of Connecticut v. Glenwood Medical, P.C., 48 AD3d 319, 319-320, 853 NYS2d 26, 26 [1st Dep’t 2008] ). The statute of limitations in a breach of contract action begins to run at the time the contract is breached, which in this case was when benefits become overdue (see Benson, 134 AD2d at 215; New Era Acupuncture, P.C. v. MVAIC, 18 Misc 3d 139(A), 2008 NY Slip Op. 50353(U) [App Term 2nd & 11 Jud Dists]. Benefits became overdue when the defendant failed to pay the claim within 30 days of November 15, 2000, when it received proof of the claim (see Insurance Law § 5106[a]; NYCRR § 65-3.8; Benson, 134 AD2d at 215; Micha v. Merchants Mutual Insurance Company, 94 AD2d 835, 463 NYS2d 110 [3rd Dep’t 1983] ). The commencement of the action on December 1, 2000 was therefore timely.

The fact that the defendant may have repudiated the contract on November 29, 2000 when it issued a denial of the claim and mailed a copy of the denial to the defendant does alter this result. Under the doctrine of anticipatory breach, where one party clearly and unequivocally repudiates his contractual obligations under a contract prior to the time performance is required, the non-repudiating party may deem the contract breached and immediately sue for damages (see American List Corp. v. U.S. News & World Report, 75 NY2d 38, 550 NYS2d 590, 549 NE2d 1161 [1989]; De Lorenzo v. Bac Agency Inc., 256 AD2d 906, 908, 681 NYS2d 846, 848 [3rd Dep’t 1998]; Long Is. R.R. Co. v. Northville Indus. Corp., 41 NY2d 455, 463, 393 NYS2d 925, 362 NE2d 558 [1977]).

While the plaintiff may have been entitled to bring the action under the doctrine of anticipatory breach when the defendant denied the claim, even though the 30 day period in which defendant had to pay the claim had yet to expire, plaintiff was well within its rights to elect to keep the contract in force and await the designated time for performance before bringing suit (Ga Nun v. Palmer, 202 NY 483, 493, 96 N.E. 99 [1911]; see also, Rachmani Corp. v. 9 East 96th Street Apartment Corp., 211 AD2d 262, 266, 629 NYS2d 382, 384 [1st Dep’t 1995] ). As the Court of Appeals wrote in Ga Nun: “The man who wrongfully renounces a contract into which he has deliberately entered cannot justly complain if he is immediately sued for a compensation in damages by the man whom he has injured; and it seems reasonable to allow an option to the injured party, either to sue immediately, or to wait until the time when the act was to be done, still holding it as prospectively binding for the exercise of this option, which may be advantageous to the innocent party, and cannot be prejudicial to the wrongdoer” (Ga Nun, 202 [*3]NY at 490-491, 96 N.E. at 101 – 102, citing Hochster v. De la Tour, 2 Ellis & Blackburn, 678). For the above reasons, defendant’s motion for summary judgment is DENIED.

Turning to plaintiff’s cross-motion for summary judgment, in Dan Medical, P.C. v. New York Cent. Mut. Fire Ins. Co.,14 Misc 3d 44 [App Term, 2d & 11th Jud Dists 2006] ) the Appellate Term held that absent a sufficient foundation to demonstrate that the plaintiff’s claim forms constituted evidence in admissible form as business records, the “plaintiff failed to tender proof in evidentiary form to establish its prima facie case” (id. at 47). The Dan Medical Court further held that any admissions by the defendant regarding receipt of the plaintiff’s claim forms “did not concede the facts asserted in the claim forms and it remained plaintiff’s burden to proffer such evidence in admissible form, which it failed to do” (id.; see also Bajaj v. General Assur., 18 Misc 3d 25 [App Term, 2d & 11th Jud Dists 2007]; Midborough Acupuncture, P.C. v. New York Cent. Mut. Fire Ins. Co., 13 Misc 3d 132[A], 2006 NY Slip Op 51879[U] [App Term, 2d & 11th Jud Dists 2006] ).

Here, plaintiff’s submissions are devoid of any admissible proof, such as an affidavit from someone familiar with plaintiff’s business practices, establishing the admissibility of the claim form as a business record. Accordingly, plaintiff did not establish its prima facie case of entitlement to summary judgment notwithstanding defendant’s admission that it received the claim on November 15, 2000. Plaintiff’s failure to make out a prima facie case of entitlement to summary judgment mandates the denial of the motion regardless of the sufficiency of opposing papers (Winegrad v. New York University Medical Center, 64 NY2d 851, 487 NYS2d 316 [1985] ).

For the above reasons, it is hereby

ORDERED that defendant’s motion for summary judgment and plaintiff’s cross-motion for summary judgment are DENIED.

This constitutes the decision and order of the court.

Date: October 7, 2008________________________________

Peter P. Sweeney

Civil Court Judge

[*1]

Civil Court of the City of New York, Kings County, September 25, 2008

APPEARANCES OF COUNSEL

Israel, Israel & Purdy, Great Neck (Jennifer Raheb of counsel), for plaintiff. Law Office of Teresa Spina, Woodbury (Victoria Thomas of counsel), for defendant.

{**21 Misc 3d at 799} OPINION OF THE COURT

Lila Gold, J.

{**21 Misc 3d at 800}In this action to recover first-party no-fault benefits in the amount of $878.67, for medical services rendered to its assignor, plaintiff and defendant stipulated to the proper and timely claim of the provider, thereby establishing a prima facie entitlement to payment. (Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U] [App Term, 2d & 11th Jud Dists 2003].) The plaintiff and defendant further stipulated that the denial of benefits was timely and that the only issue for trial was medical necessity based on a peer review. The stipulation additionally provided that the peer review and underlying medical records were to be admitted into evidence. Thus, the burden shifted to defendant to prove lack of medical necessity.

Defendant called Dr. Drew Stein, the author of the peer review dated July 6, 2007, who testified that the MRI of the right shoulder was not medically necessary. On cross-examination, Dr. Stein was asked to describe the purpose of a peer review. Dr. Stein’s answer was “to confirm or deny a prognosis.” He then was asked whether an MRI in this particular case was necessary in order to rule out a muscular-skeletal injury vis-à-vis a nerve root injury, to which he answered in the affirmative. In fact, the MRI did show possible nerve impingement.

Dr. Stein, who has been practicing medicine for only four years, was never qualified as an expert by defendant. Nor was his expertise established.

To rebut defendant’s witness, plaintiff called Dr. David Finkelstein who was deemed an expert by the court, without objection, in the field of neurology. Dr. Finkelstein testified that, based on his review of the medical records and the patient’s complaint of pain radiating from the neck to the right shoulder area, an MRI would be helpful to determine which body part should be treated, i.e., the neck or shoulder. He also indicated, from the muscular tests which were performed, there were signs of neurological involvement in that area which an MRI would clarify.

Although it is not the court’s opinion that the services were medically necessary per se, once the plaintiff had established its prima facie case, the burden shifted to the defendant to present sufficient evidence to establish a defense based on the lack of medical necessity. The court finds that Dr. Stein’s testimony was insufficient to establish a defense based on the lack of medical necessity, and, therefore, the burden never shifted back to plaintiff. (West Tremont Med. Diagnostic, P.C. v GEICO Ins. Co., 13 Misc 3d 131[A], 2006 NY Slip Op 51871[U] [App Term, 2d &{**21 Misc 3d at 801} 11th Jud Dists 2006].) Thus, after hearing the evidence, and despite Dr. Finkelstein’s testimony, the court does not need to reach the issue of the sufficiency of plaintiff’s rebuttal. Rather, the court, as trier of the facts, is free to assess and reject the testimony as it sees fit and, therefore, finds that the evidence presented by defendant was insufficient to sustain its burden as to the issue of lack of medical necessity.

Wherefore, judgment is to be entered in favor of plaintiff as against defendant in the sum of $878.67, together with statutory interest and attorneys fees, plus costs and disbursements.

Civil Court of the City of New York, Richmond County

21281/07

Katherine A. Levine, J.

Defendant, State Farm Mutual Inc. Co., (“State Farm” or “defendant”) moves to dismiss plaintiff Bay Plaza Chiropractic’s (“Bay Plaza” or “plaintiff”) complaint, with prejudice, pursuant to CPLR 3126, for plaintiff’s failure to appear for an examination before trial (“EBT”) or to provide verified, complete and meaningful responses to defendant’s discovery demands. In the alternative, defendant moves to vacate plaintiffs’s Notice of Trial and compel plaintiff to fully comply with plaintiff’s discovery demands and to then produce plaintiff’s purported owner, Dr. Geraldine McGowan for an EBT. In support of its motion, defendant presents an affirmation from its attorney as well as an affidavit from an investigator in its Special Investigative Unit (“SIU”) and documentary evidence.

Defendant claims that plaintiff may be a fraudulently incorporated facility that is actually owned, operated, and controlled by unlicensed persons. It alleges it first became suspicious about plaintiff when it consistently submitted bills for chiropractic services purportedly rendered to patients who were receiving physical therapy treatments for the same condition, at the same location, and during the same time period. Defendant avers that because the plaintiff s bills are often submitted c/o HIJ Management (“HIJ”), using that entity’s address, and because HIJ management’s owner, Jesse Haber, often submits affidavits of mailing for Bay Plaza as the “biller of Bay Plaza,” in support of its motions for summary judgment, that the plaintiff is actually owned by Jesse Haber in violation of 11 NYCRR § 65.15 and Insurance Law sec. 5108. Defendant then asserts that since payments from insurance companies will not go to the purported owner of plaintiff – Dr. McGowan – but to Haber, there is a “clear issue as to who is actually receiving the plaintiff’s profits, and who is truly controlling the plaintiff’s finances” (Affirmation of Stuart Flamen, Esq., ¶9. )

Defendant further alleges that an EBT of the purported owner McGowan is warranted [*2]since she is listed as the executive not only of Sue Ellen Ginsberg, DO, PC, but of several other facilities connected to improper licensors. For example, defendant claims McGowan is affiliated with several entities owned or formerly owned by one Stanley Sonn who is being sued in federal court by another insurance company. Thus, an EBT is “the only way to uncover who really owns and controls the plaintiff provider” (Flamen affirmation, ¶16).

Defendant surmises that plaintiff can very well be engaging in the “doc-in-the -box” scheme whereby the plaintiff is actually owned and controlled by non-professionals which would negate plaintiff’s standing to collect non-fault benefits. In this scheme, the nominal owner – the physician- does not receive the profits which go to the lay persons who own the management company that actually runs facility (¶¶17). As such, defendant contends that it has set forth a reasonable basis of suspicion for fraud .

Plaintiff responds that it provided responses to the discovery requests and that the remaining requests are patently oppressive and should be stricken. Plaintiff also notes that the courts normally do not allow a secondary disclosure device (such as depositions) unless the first chosen devise does not adequately disclose all evidence material and is necessary to the prosecution or defense of the action. Plaintiff further counters that the discovery demands are not proper because defendant has not shown either “good cause” or a “founded belief” that the plaintiff is fraudulently incorporated and moves for a protective order. Plaintiff also alleges that the defendant’s motion is defective since it failed to submit an affidavit from an investigator with defendant’s Special Investigations Unit (“SIU”) and is based upon an affidavit made without personal knowledge, and thus is based only on conjecture, speculation and exaggeration.

This court has previously addressed the issue of whether the language contained in State Farm Insurance v. Mallela, 4 NY3d 313 (2005) requiring that a defendant insurer show “good cause” by demonstrating behavior on the plaintiff ‘s part ” tantamount to fraud,” applies to

discovery requests and or verification requests. See Cambridge Medical P.C. v. Nationwide Property & Casualty Ins. Co., 2008 NY Slip. Op. 50629U, 19 Misc 3d 1110A, 859 NYS2d 901 (Civil Ct. Richmond Co. 2008). There, this court adopted Judge Sweeney’s reasoning in Carothers v. Insurance Companies et al, 13 Misc 3d 970 (Civil Ct., Richmond Co. 2006) that “good cause” is not a mandatory requisite to ordering discovery, but only applies to”investigations conducted by insurers during the claims process in accordance with their entitlement under the regulatory scheme to seek verification of claims (11 NYCRR part 65) and not those conducted by litigants during the discovery process.” 13 Misc 3d at 972.

Article 31 of the CPLR governs discovery actions before the civil court, and its disclosure provisions simply do not condition discovery upon a showing of “good cause”. The guiding principle behind article 31 of the CPLR is that there should be “full disclosure of all matter material and necessary in the prosecution and defense of an action” (CPLR §3101 (a)). The words “material and necessary” are to be interpreted liberally and the test is “one of usefulness and reason” to assist in the preparation for trial by sharpening the issues. Cambridge Medical. Slip op. At 3 at citing Carothers, supra , 13 Misc 3d at 973. [*3]

Furthermore, since the “defense of fraudulent incorporation is a complete defense to a claim for no-fault benefits, one that is not subject to the rules of preclusion,” it appears that the bar against which to measure whether a defendant has shown that its discovery requests on the issue of fraudulent incorporation are “material and necessary” is quite low. Carothers, supra at 975. See, Lexington Acupuncture P.C., v. State Farm Insurance Co., 12 Misc 3d 90, (App Term 2d Dept. 2006). In fact, in Mallela, the Court of Appeals specifically permitted insurers to “look

beyond the face of licensing documents to identify willful and material failure to abide by state and local law,” 4 NY3d at 321, in assessing whether to withhold reimbursement of no -fault claims to medical corporations they believe to be fraudulently incorporated. See, One Beacon Ins. Co. V. Midland Medical Care, 2008 NY Slip. Op. 06813, 2008 WL 4166851 ( App. Div., 2d Dept. 2008).

This court first finds that defendant has articulated a”founded belief” that plaintiff is actually controlled by a non-licensed professional. Defendant has therefore made allegations sufficient to raise an issue of fact as to whether plaintiff is fraudulently incorporated. See, Tahir v. Progressive Casualty Ins. Co., 12 Misc 3d 657, 664 (Civil Ct., NY Co. 2006)(“fraudulent intent is rarely established by direct proof, but we nevertheless conclude that there are sufficient badges of fraud’ in this case from which such intention can be inferred”) “citing Spires v. Mihou, 13 AD3d 1056,57 (4th Dept. 2007)). In support of its founded belief, and contrary to plaintiff’s allegation, defendant did submit an affidavit from its SIU investigator who had personal knowledge of the investigation. In numerous cases, defendant insurers have been permitted to proceed to trial based upon affidavits of investigators employed by the insurance company’s Special Investigations Unit (“SIU”) who allege personal knowledge of the alleged fraud. See, American Honda Finance Corp. V Progressive Casualty Ins. Co., 290 AD2d 850 (3d Dept. 2002) (“at this preliminary stage of the proceeding, a question of fact is lurking as to whether Perez committed fraud or made other material representations such that policy exclusion would preclude recovery); Northern Medical v. State Farm Mutual Automobile I ns. Co., 2008 NY Slip Op. 50753U, 19 Misc 3d 1117A (Civil Ct., Queens Co., 2008).

It should also be noted that even if defendant had not submitted an affidavit from its SIU investigator, the affirmation from defendant’s attorney, along with the attached documentation, would have been sufficient for this court to order further discovery. Where defendants raise the defense of fraudulent incorporation, the courts have denied motions for summary judgment by plaintiffs, despite the defendant’s failure to present an affidavit based upon personal knowledge, where the opposition papers set forth that facts essential to justify opposition may exist but cannot then be stated.” Midwood Acupuncture P.C. v. State Farm Mutual Auto Ins. , 14 Misc 3d 131A, 836 NYS2d 486 (App. Term, 2d Dept. 2007); Lexington Acupuncture, P.C., v. State Farm Ins. Co., 12 Misc 3d 90, 92 (App. Term, 2d Dept. 2006). The courts have reasoned that plaintiff’s motion for summary judgment are premature pending the completion of discovery. Id.,

However, in the end, “the scope of discovery is not unlimited” and is left to the broad discretion of the trial court, which must assess the request on a case by case basis taking into [*4]consideration the “intrusiveness of the discovery device and the merits, or lack thereof, of the claim” Carothers, supra 13 Misc 3d at 974 citing Greater NY Mutual Ins. Co. v. Lancer Ins. Co., 203 AD2d 515, 517 (2d Dept. 1994). To this end, Judge Sweeney found that the primary tool to be used by the court to control and supervise the scope of discovery was the protective order pursuant to CPLR §3103(a). Id at 974. . See Cambridge Medical, supra .

In light of the above, defendant has shown that it is material and necessary to compel further discovery and to depose Dr. McGowan with regard to the issue of fraudulent incorporation, a defense which is not precluded. As such, the court directs plaintiff to produce Dr. McGowan for an EBT within 30 days after the completion of discovery upon renotice by defendant. The Court also directs plaintiff to comply with all discovery requests that deal with corporate structure or that directly pertain to the issue of fraudulent incorporation including, but not limited to certificates of incorporation, management agreements, and the names of plaintiff’s shareholders and that it specifically answer Interrogatories 6,7,8, 23, 25, 26, and combined demands 4, 5, 9.29, 30.

The court is not convinced, at this juncture, that defendant has made a strong showing that the production of McGowan’s personal income taxes are “indispensable to the claim and cannot be obtained from other sources” and therefore will not order disclosure of McGowan’s personal income taxes. See, Benfeld v. Fleming Properties, 44 AD3d 599,600 (2d Dept. 2007); Altidor v. State-wide Ins. Co., 22 AD3d 435 ( 2d Dept. 2005); Great Wall Acupuncture v. State Farm Mutual Ins. 2008 NY Slip Op. 51529U, 20 Misc 3d 136A (Sup. Ct., App. Term, Sept. Dept. 2008). The court also finds that many of the other interrogatories or combined demands requests information are already in defendant’s possession or that are irrelevant or unduly burdensome. Since this court has repeatedly indicated that the parties are to work out discovery disputes between themselves, it will not at this juncture strike any protective order as to the irrelevant discovery requests.

The court will not dismiss the complaint since plaintiff has responded to some of the discovery requests and has not engaged in conduct that is willful, contumacious or in bad faith, as required by CPLR 3126. See, AVA Acupuncture P.C. v. State Farm Mutual Ins. Co., 16 Misc 3d 138A, (App. Term 2d and 11th Jud. Dist. 2007).

The court directs plaintiff to respond to the applicable defendant’s discovery request within 45 days of this decision and that defendant renotice Dr. McGowan for an EBT within 30 days after it receives plaintiff’s responses to its discovery requests. Plaintiffs must produce Dr. McGowan for the EBT.

The foregoing constitutes the Decision and Order of the Court. [*5]

DATED: September 22, 2008

Hon. Katherine A. Levine

Judge, Civil Court

ASN byon

Civil Court of the City of New York, Kings County

143763/06

Sylvia G. Ash, J.

Plaintiff a health care service provider seeks to recover no-fault benefits for supplies furnished to its assignor. Defendant contends that Plaintiff’s claim is premature because Plaintiff failed to comply with an additional verification request. Plaintiff argues that it responded to Defendant’s verification request. Defendant argues that the response failed to fully comply with the request.

There is no dispute that Plaintiff responded to the additional verification request. There is also no dispute that upon receipt, Defendant did not request any further response from Plaintiff. The issue before the Court is whether Defendant was obligated to notify Plaintiff that its response to their additional verification request was insufficient and/or incomplete. In All Health Medical Care, P.C. v. Government Employees Insurance, 2 Misc 3d 907, the Court reasoned that while “… the regulations are silent as to what, if anything, the insurance company must do if it receives insufficient verification, that it is clear that the insurance company must affirmatively act once it receives a response to its verification request.” (see also Westchester County Medical Center v. NY Central Mutual Fire Ins Co., 262 AD2d 553).

In the case at Bar, once Plaintiff submitted its response to Defendant’s additional verification request, it was then incumbent on Defendant to inform Plaintiff that said response was insufficient and/or incomplete. Any confusion or disagreement on the part of the Defendant as to what was being sought should have been addressed by further communication, not inaction (see Westchester County Medical Center v. NY Central Mutual Fire Ins Co., supra). Neither party may ignore communications from the other without risking its chance to prevail in the matter (see All Health Medical Care, P.C. v. Government Employees Insurance Co., supra).

Accordingly, Plaintiff motion is hereby granted, judgment in favor of plaintiff for $2,118.33 plus interest , attorney’s fee, costs and disbursements. [*2]

This constitute the Decision and Order of the Court.

DATED: September 15, 2008______________________________

Sylvia G. Ash, J.C.C.

Civil Court of the City of New York, Richmond County

11330/07

Katherine A. Levine, J.

This case raises the murky issue of what precise evidence a defendant insurer must present in support of its late denial based upon fraud to withstand the granting of summary judgment to a plaintiff medical services provider in a No-Fault case. It also raises anew whether the recent Court of Appeals decision in Fair Price Medical Supply Corp. V. Travelers Indemnity Co., 10 NY3d 556 (2008) requires an insurer to proffer the defense that a provider is fraudulently incorporated within 30 days or whether that defense remains non waivable.

Plaintiff, Manhattan Medical Imaging (“Manhattan Medical “or “plaintiff”), a medical service provider, seeks an order granting it summary judgment based upon a claimed prima facie showing that the bills were properly submitted and that the defendant State Farm Automobile Ins. Co. (“State Farm” or “defendant”) failed to pay or deny the claim within 30 days. Plaintiff also

asserts that defendant’s denial was untimely.

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).

State Farm asserts that plaintiff has failed to establish a prima facie case since the affidavit of plaintiff’s billing manager is “boilerplate” and not based upon her personal knowledge and therefore does not come in under the business records exception to the hearsay rule. The affidavit of plaintiff’s billing manager, Bella Kirzhner, clearly comes within the business records exception, as contained in CPLR 4518(a), as it exhaustively details the record keeping procedures of the business that created the records and clearly details the dates of the services, the amounts due, and her personal knowledge of the billing practices. See, Second Medical v. Auto One supra at 294-95. It details that the bills were made and kept in the ordinary course of business at the time the services were rendered and sets forth the precise mailing procedure which were followed. In fact, Kirzhner “personally packaged, sealed, applied postage to and mailed the bill.” As such, plaintiff has made a prima facie showing of entitlement.

The burden then shifts to the defendant in a no fault case to show a triable issue of fact. Alvarez v Prospect [*2]Hosp., 68 NY2d 320, 324 (1986). To defeat an award of summary judgment to plaintiff, defendant must provide proof, in evidentiary form, that it either paid or denied the claim within 30 days of receipt or that it asserts a non- precludable defense. Carle Place Chiropractic v. NY Central Mutual Fire Ins. Co., 2008 NY Slip Op 51065U at 7, 19 Misc 3d 1139A (Dist. Ct. Nass. Co. 2008). See Central General Hospital v. Chubb Insurance Co, 90 NY2d 195 (1997); Presbyterian Hosp. City of NY v. Maryland Casualty Co., 90 NY2d 274 (1997).

Defendant contends that plaintiff’s motion should be denied because the evidence strongly suggests that 1) plaintiff’s assignor was engaged in a “staged accident” caused in furtherance of an insurance fraud scheme and therefore there is no coverage; and 2) plaintiff may be fraudulently incorporated since it’s facility may “possibly” be owned by a non licensed physician thereby violating the Business Corporation Law, the No Fault Regulations. Defendant asserts that these are non-precludable defenses, regardless of when it issued its denials. In fact, the denial of claim forms( NF-10′) dated December 12th and 26th 2001 assert as the basis of denial that the loss was not caused by a covered accident but by intentional collusive acts and also because there were violations of the fraud provision.

STAGED ACCIDENT DEFENSE

In Fair Price Medical v. Travelers Ins., 10 NY3d 556 (2008), the Court of Appeals clarified when an insurance company would not be precluded from offering a defense to its refusal to pay no – fault benefits even though it denied the claims beyond the 30 day period. There, Travelers issued its denial nearly two years after receiving the claim, based upon the assignor’s statement that he had never received medical supplies from the plaintiff. The Civil Court denied plaintiff’s motion for summary judgment, finding that defendant was not precluded by the 30 day rule since it had asserted fraud as a defense. The Appellate Division affirmed the Appellate Term’s reversal of the lower court’s order denying plaintiff summary judgment on the grounds that :

in this case, unlike a staged accident case, there was an actual automobile accident, which

caused Nivelo to sustain actual injuries, for which he was treated by actual health care providers, who issued actual prescriptions for medical supplies to treat his injuries. Nivelo’s undisputably real accident had resulting injuries triggered with the coverage provided for in his insurance policy with the defendant” Fair Price Med. Supply Corp. V. Travelers Indem. Co. 42 AD3d 277, 284 (2d Dept. 2007) affg 9 Misc3d 76 (App. Term 2d and 11th Jud. Dist 2005).

In sum, the Appellate Division concluded that while Travelers could contest the assignor’s claim as fraudulent, it must do so within the tight deadlines imposed by the no -fault system. 42 AD3d at 286.

The Court of Appeals affirmed . It first cited to its recent review of the legal framework behind the No – Fault Law in Hospital for Joint Diseases v. Travelers Prop. Cas. Ins., 9 NY3d 312, 317 (2007); namely that the no fault insurance system was designed to ensure “prompt compensation for losses incurred by accident victims without regard to fault or negligence,” to reduce the burden on the courts, and to provide substantial premium savings to New York motorists. ” In furtherance of these goals, the Superintendent of Insurance promulgated regulations implementing the No Fault Law ( Ins. Law art. 51) including “circumscribed time frames for claim procedures” 9 NY3d at 317. The accident victim must submit a notice of claim to the insurer no later than 30 days after the accident (11 NYCRR 651.1, 65-2.4(b) and the insurance company must pay or deny the claim within 30 days after receipt of the proof of the claim (see Ins. Law §5106 (a), 11 NYCRR 65-3.8 ©). Substantial consequences flow from an insurer’s failure to company with this 30 day requirement including preclusion from asserting a defense against payment of a claim. Fair Price , 10 NY3d at 563 citing Hospital for Joint Diseases, 9 NY3d at 317-318. See, Presbyterian Hosp., supra, 90 NY2d at 278 (1997);Mt. Sinai Hosp. V. Chubb Group of Ins. Co., 43 AD3d 889-90 (2d Dept. 2007).

In Hospital for Joint Diseases, supra, the Court, citing to its prior decision in Central General Hospital, supra, 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. 9 NY3d at 318 . The Court explained that in such cases [*3]“an insurer who fails to issue a timely disclaimer is not prohibited from later raising the defense because 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. Fair Price, 10 NY3d at at 563 citing Joint Diseases, 9 NY3d at 318. See, e.g. Tahir v. Progressive Casualty Ins. Co., 12 Misc 3d 657, 662 (Civil Ct., NY Co., 2006) (“staged accident fraud” actually posed an issue of non coverage as opposed to fraud because under no -fault concepts, insurance coverage is limited to an “accident” ).

Thus, the “key issue” in every case is whether the ” facts fit within the narrow no-coverage exception to the preclusion rule” 10 NY3d at 564. A court, in determining 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.

It is well settled, as noted by the Appellate Division in Fair Price, that the defense of a staged automobile accident survives preclusion and, if substantiated would constitute a “complete defense to the action. 42 A.D. at 354. See, Mtr of Liberty Mutual Insurance Co. v Goddard, 29 AD3d 698, 699 (2d Dept. 2006); Melbourne Medical P.C. v Utica Mutual Ins. Co., 4 Misc 3d 92, 94 ( App. Term 2d Dept. 2004). A court must first ascertain , however, whether a defendant has adduced proof in admissible form sufficient to create a triable issue of fact. Melbourne Medical, supra. Plaintiff herein alleges that the defendant failed to rebut its prima facie case since the allegations of a non covered accident or a “staged” event are not supported by evidence in admissible form and that defendant failed to present a “founded belief” that the injuries did not arise out of the accident .

The general standard the insurer must assert for a lack of coverage or fraud defense is one “premised on the fact or founded belief that the alleged injury does not arise out of an insured

incident” but was a deliberate event staged in furtherance of a scheme to defraud the insurer.” Central General Hospital v Chubb Group of Ins. Cos., 90 NY2d at 199., See also, Metro Medical Diagnostics, P.C. v Eagle Ins. Co., 293 AD2d 751 (2d Dept 2002). Thus, the insurer has the burden to come forward with proof in admissible form to establish “the fact” or “foundation for its belief” that the alleged incident was a staged event to defraud the insurer. Mt. Sinai Hospital v Triboro Coach Inc., 263 AD2d 11(2d Dept 1999).

While opposition papers often stumble upon the failure to present evidentiary material in admissible form, an insurer may avoid this pitfall by submitting an opposition affidavit which “sets forth names of witnesses, the substance of their testimony, how it was known what their testimony would be and how the witnesses acquired their knowledge.” Complete Orthopedic Supplies, Inc. V. State Farm Insurance Co., 16 Misc 3d 996 (Civil Ct., Queens Co. 2007) citing Phillips v. Kantor & Co., 31 NY2d 307, 311-12 (1972). It is clear that “unsubstantiated hypotheses and suppositions,” such as an unsworn report of an investigator alleging that an “uncooperative” insured (but not assignor) had been involved in prior accidents alleged to be suspicious , are insufficient to raise a triable issue of the assignor’s fraud. A.B Medical Services PLLC v. Eagle Insurance Co., 3 Misc 3d 8, 10 (App. Term, 2 Dept. 2003). However, there is a dearth of case law as to what what precisely must be included within an investigator’s affidavit so as to defeat a plaintiff’s motion for summary judgment. See, Complete Orthopedic Supplies. Supra; PDG Psychological, P.C. v. State Farm Ins., Co, 12 Misc 3d 1183A, 824 N.Y.S. 2d 766 (Civil Ct., Kings Co. 2006); Inwood Hill Medical P.C. Bronx Neurodiagnostics v. Allstate Ins. Co., 3 Misc 3d 1110A, 787 N.Y.S.2d 678 (Civil Court, NY, Co. County 2004).

In a number of cases, defendant insurers have been permitted to proceed to trial based upon affidavits of investigators employed by the insurance company’s Special Investigations Unit (“SIU”) who allege personal knowledge of the alleged fraud. See, American Honda Finance Corp. V Progressive Casualty Ins. Co., 290 AD2d 850 (3d Dept. 2002) (“at this preliminary stage of the proceeding, a question of fact is lurking as to whether Perez committed fraud or made other material representations such that policy exclusion would preclude recovery); Northern Medical v. State Farm Mutual Automobile I ns. Co., 2008 NY Slip Op. 50753U, 19 Misc 3d 1117A (Civil Ct., Queens Co., 2008). [*4]

In PDG Psychological v. State Farm Ins. Co., 12 Misc 3d 1183 A, 824 N.Y.S. 2d 766 (Civil Ct. Kings Co. 2006), the defendant, in support of its defense of an intentional collision, proffered the testimony of an SIU investigator who stated that the claims had been denied because the accident occurred two months after the assignor’s policy had been instituted and because there were several discrepancies between the transcripts of the examinations under oath (“EUOs”) of the passengers and the assignor, including where they were going, when they all met, the time of the accident, where the car was at the time of the impact and the names of the passengers. These discrepancies, coupled

with the other driver’s statement, raised factual issues.

The evidence presented by defendant is somewhat similar to that presented in PDG Psychological, supra. Defendant presented statements of the assignors which, although unsworn and unsigned, were certified by the transcriber, and the signed and sworn to affidavit of Lee Ann Fink, who is employed in the Special Investigations Unit (“SIU”). Fink memorialized the somewhat minor inconsistencies in the various assignors’ statements, including the color and make of the car they were in that was supposedly involved in the accident, different reasons as to why they were all together with the same driver, who was seated in the front of the car at the time of the accident and whether the car was stopped at the point of the accident.

While this court does not believe that defendant presents a strong case of a staged accident, it presents enough inconsistencies to rise above the base level of “unsubstantiated hypothesis and suppositions” so as to permit this defense to go to trial. The court is not troubled that the statements of the assignors were not verified or signed since their transcribed statements were certified by the transcriber. See R. M. Newell Co. V. Rice, 236 AD2d 843, 844 ( 4th Dept. 1997), ( deposition transcripts certified as accurate by transcriber admissible on summary judgment motion even though unsigned). Nor is the court concerned that Fink was not present during the taking of the statements See, e.g, PDG Psychological, supra, Northern Medical, P.C., supra ((trial held despite late denial based upon SIU investigators’s finding that there was a staged accident based upon his review of the file for the first time a few weeks before the trial and his running a prior claim history on the assignor).

In sum, this court denies plaintiff’s motion for summary judgment with respect to defendant’s denial based upon a staged accident.

PROVIDER FRAUD

Defendant similarly is not precluded from raising its defense that plaintiff may be fraudulently incorporated since it is ” possibly” owned by both a physician and non physician, the latter of which is prohibited by both the Business Incorporation Law, the No – fault regulations and the seminal case of State Farm Mutual Auto Ins. V. Mallela, 4 NY3d 313 (2005).^[FN1]

`In Mallela, the Court of Appeals held that insurers may withhold payment for medical services provided by fraudulently licensed medical service corporations to which patients, who are covered by no-fault insurance, have assigned their claims. Insurance Law §5102 requires no-fault carriers to reimburse patients or their medical provider assignees for “basic economic loss”. In order to combat incidences of fraud, the Superintendent of Insurance promulgated 11 NYCRR 65-3.16(a)(12) , which excludes payments made to fraudulently licensed providers from the meaning of basic economic loss as contained in Section 5102. 4 NY3d at 320. After finding this regulation valid, the Court held that carriers “may look beyond the face of licensing documents to identify wilful and material failure to abide by state and local law.” Id at 321-22. See Cambridge Medical P.C. v. Nationwide Property and Casualty Ins. Co., 19 Misc 3d 1110A, 859 N.Y.S. 2d 901 ( Civil Ct., Richmond Co. 2008).

In Eastern Medical P.C. v. Allstate Ins. Co., 19 Misc 3d 775 (Dist. Ct. Nassau Co. 2008), the court rejected [*5]Allstate’s contention that Fair Price had reshaped the analysis of fraud based defenses so as to make a Mallela/ fraudulent incorporation defense untimely if not made within the 30 day denial period. The court first noted that there was no support for the premise behind defendant’s argument: that the Court of Appeals was ignorant of its own precedent when it decided Mallela and that the Fair Price Court chose to somehow abrogate Mallela in its decision. The court then noted that while the Court of Appeals precedent cited in Fair Price ^[FN2] dealt “with contract interpretation” or “the interplay between policies of insurance and applicable laws and regulations,” the Malella court dealt solely with statutory interpretation, 19 Misc 3d at 779. The Mallela defense was thus not predicated upon a policy exclusion or the extent of coverage provided by a contract of insurance but rather upon a statutory defense arising from a claimant’s failure to comply with applicable sections of the Business Corporation, Limited Liability and Education Laws. Id at 780.

The court then noted that even though there was no contention in Mallela that medical payments were not otherwise required by the policy, the Mallela court did not qualify the insurer’s right to deny payment to the fraudulently incorporated provider by requiring a timely denial. 19 Misc 3d at 780. Rather, 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.” Id at 780 citing 4 NY3d at 321 n.3. Therefore, Fair Price did not alter, much less address prior precedent that a fraudulent incorporation defense “is a non- waivable defense .and is therefore not subject to the 30-day preclusion rule” ( Midwood Acupuncture P.C. v. State Farm Mutual Auto, 14 Misc 3d 131A, 2007 N.Y Slip Op 50052 U ( App. Ter, 2d Dept. 2007). Id at 781. Nor is such a defense waived by the failure to assert it in a denial of claim form. Multiquest v. Allstate Ins. Co., 17 Misc 3d 37, 39 ( App. Term, 2d Dept. 2007).

Defendant is therefore not precluded from raising its defense of fraudulent incorporation provided that it presents a “founded belief”that the corporation is ineligible to obtain no-fault benefits by reason of a fraudulent corporate filing. Central General Hospital., supra,; Inwood Hill Medical AB Medical Services v. Prudential Property & Casualty Insurance Company, 11 Misc 3d 137 (A) (Appellate Term Second Dept. 2006). Defendant herein alleges that Dr. Brownstein is not the sole owner of Manhattan Medical but rather shares his ownership responsibilities with Sam Stern, a non physician. The attorney’s affirmation cites a number of certificates of incorporation which allegedly show a labyrinth of interconnections between plaintiff Manhattan Medical and Universal Diagnostic Imaging, the latter of which is purportedly owned by Stern. Defendant also alleges that Brownstein owns at least five other imaging companies and is allegedly facing civil fraud lawsuits stemming from his ownership of other entities. Also attached is an EBT of the assistant office manager of plaintiff who indicates that Stern is one of the other owners of plaintiff and the testimony of plaintiff’s business manager in another where she testified that Stern is a general partner of plaintiff.

The court finds that defendant has articulated a”founded belief” that plaintiff is fraudulently incorporated as it is actually controlled by a non-licensed professional. Defendant has therefore made

allegations sufficient to raise an issue of fact as to whether plaintiff is fraudulently incorporated. See,

Tahir v. Progressive Casualty Ins. Co., 12 Misc 3d 657, 664 (Civil Ct., NY Co. 2006)(“fraudulent intent is rarely established by direct proof, but we nevertheless conclude that there are sufficient badges of fraud’ in this case from which such intention can be inferred “citing Spires v. Mihou, 13 AD3d 1056,57 (4th Dept. 2007)).

The court directs plaintiff to respond to defendant’s discovery request within 60 days of this decision.

The foregoing constitutes the Decision and Order of the Court.

DATED: September 4, 2008

Hon. Katherine A. Levine [*6]

Judge, Civil Court

ASN byon

Footnotes

Footnote 1:This defense is typically referred to as the “Malella defense” or “fraudulent incorporation” defense.

Footnote 2:he precedents followed by Fair Price were Presbyterian Hospital ,supra and Central General Hosp., supra.

[*1]

Civil Court of the City of New York, Queens County, August 22, 2008

APPEARANCES OF COUNSEL

Israel Israel & Purdy, LLP, Great Neck (Scott H. Fisher of counsel), for plaintiff. Rossillo & Licata, P.C., Westbury (John J. Rossillo of counsel), for defendant.

{**21 Misc 3d at 437} OPINION OF THE COURT

William A. Viscovich, J.

In this matter, which appears to be a case of first impression, plaintiff provider brought the within action to recover payment under no-fault for medical services, namely, electromyogram testing and nerve conduction velocity testing (hereafter EMG and NCV testing, respectively) performed for Vanessa Garcia, its assignor. At trial, the parties stipulated to the sufficiency of plaintiff’s prima facie case and agreed that the only issue for this court to determine is whether defendant could demonstrate that the tests were not medically necessary.

Defendant’s unique and novel argument, as presented to this court over the course of several days of testimony, is that while the tests as prescribed were, in fact, medically necessary, they were done in a manner so incomplete that the results were useless in terms of the diagnosis and treatment of the patient. As such, defendant argues that they are rendered medically unnecessary as a practical matter and therefore not eligible for reimbursement under the state’s no-fault statutes. Plaintiff counters with three points: first, that the tests were medically necessary; second, that the test results were in fact useful; and third, that the only issue for this court to decide is the medical necessity of the tests as prescribed, the issue of whether or not they were done correctly being irrelevant.

In the instant case, State Farm’s medical expert, Dr. James B. Sarno, determined that a complete bilateral EMG/NCV of the upper and lower extremities was, in fact, medically necessary for the treatment and care of the assignor, Vanessa Garcia, for injuries she sustained in the subject motor vehicle accident. However, Dr. Sarno further determined that the EMG/NCV study as actually administered was so incompletely performed as to be contrary to the accepted standard of care for administering said test when utilizing it to assess “electro-diagnostic evidence of radiculopathy,” thus rendering it medically unnecessary. According to Dr. Sarno, this was particularly so in light of Ms. Garcia’s injuries, the suspicion of radiculopathy in both the upper and lower extremities, her complaints of pain and her nonresponsiveness to a rehabilitation program. The doctor’s position is that the tests, as administered, would have no utilization in determining and evaluating her past and future treatment.

According to Dr. Sarno, the tests were rendered useless due to the plaintiff’s failure to test the muscles in the forearm (other{**21 Misc 3d at 438} than the brachioradialis) and in the hand. As such, plaintiff failed to properly study the C7, C8 and T1 nerve roots, a deviation from the accepted standard of care for administering said test when “assessing evidence of electro-diagnostic radiculopathy.” In fact, Dr. Sarno testified that the impression purportedly obtained from said tests, a bilateral C4 radiculopathy, could not have been obtained to any degree of medical certainty from the incomplete nature of the muscles tested and that it was a deviation from accepted medical protocol to have concluded same from the minimal number of muscles tested.

As for the lower extremity EMG, Dr. Sarno maintained that by failing to test the muscles in the extensor hallus longus, the peronei, the glutei, all muscles in the quadriceps and the paraspinal muscles, the plaintiff deviated from the accepted standard of care for administering said test when assessing evidence of electrodiagnostic radiculopathy. As such, it is defendant’s contention that the subject EMG/NCV studies were found normal in the lower extremities due only to plaintiff’s failure to test the requisite muscles. Had they been done correctly, Dr. Sarno maintains, Ms. Garcia’s diagnosis and treatment plan may have been properly furthered and she could have actually benefitted from her rehabilitation.

Testifying for the plaintiff, Dr. Finkelstein, in sum and substance, agreed with Dr. Sarno that the tests were medically necessary. The disagreement between the two testifying experts, however, lies in Dr. Finkelstein’s belief that the tests as performed were not incomplete and that they were useful for the diagnosis and treatment of the patient. His position was that while the testing may not have been “thorough” it was “not incomplete.” More specifically, Dr. Finkelstein maintained that the tests as done had the benefit of confirming radiculopathies at both the C3-4 and C5-6 levels of the spine and could have an impact on the patient’s treatment.

Both Dr. Sarno and Dr. Finkelstein acknowledge that EMG/NCVs are extremely uncomfortable and painful for the patient. It should be noted that Dr. Sarno maintains that a proper testing regimen in this case required the placing of needles in 48 muscles, while Dr. Finkelstein’s position was that, for this case, the placing of needles in 22 muscles was sufficient, particularly if the patient was having a difficult time dealing with the procedure.{**21 Misc 3d at 439}

Conclusions of Law

New York’s no-fault law mandates that services must be reasonable and necessary in order to be reimbursable, but neither statute nor case law specifically addresses the issue of what constitutes “medical necessity” in the context of no-fault litigation. Given that the legislature, the Appellate Terms and the Appellate Divisions of this state have, it seems, yet to establish a specific definition or set of guidelines upon which this court could rely, they must be derived from lower court decisions. In this context, the two most regularly cited cases appear to be two matters decided in Queens County Civil Court. The first, Medical Expertise v Trumbull Ins. Co. (196 Misc 2d 389 [2003]), was written by Judge Bernice Siegal, and the second, Fifth Ave. Pain Control Ctr. v Allstate Ins. Co. (196 Misc 2d 801 [Civ Ct, Queens County 2003]), was written by Judge Augustus C. Agate when he sat in this court.

In Medical Expertise (supra), Judge Siegal cited with approval a definition of medical necessity provided by the New Jersey Supreme Court, to wit:

“[A] necessary medical expense under the [No-Fault] Act is one incurred for a treatment, procedure, or service ordered by a qualified physician based on the physician’s objectively reasonable belief that it will further the patient’s diagnosis and treatment. The use of the treatment, procedure, or service must be warranted by the circumstances and its medical value must be verified by credible and reliable evidence (Oceanside Med. Healthcare v Progressive Ins., 2002 NY Slip Op 50188[U], *5 [Civ Ct, Kings County, May 9, 2002], quoting Thermographic Diagnostics Inc. v Allstate Ins. Co., 125 NJ 491, 512, 593 A2d 768, 780 [1991].)

“It is not whether or not some ‘positive’ findings may be fashioned from the results of psychological tests, but rather could a psychologist hold an objective and reasonable belief that the tool used will further the patient’s diagnosis and treatment and whether that tool is warranted given the circumstances.” (196 Misc 2d at 395 [internal quotation marks omitted].)

In Fifth Ave. Pain Control Ctr., Judge Agate determined that medical necessity entailed

“treatment or services which are appropriate, suitable, proper and conducive to the end sought by the{**21 Misc 3d at 440} professional health service in consultation with the patient. It means more than merely convenient or useful treatment or services, but treatment or services that are reasonable in light of the patient’s injury, subjective and objective evidence of the patient’s complaints of pain, and the goals of evaluating and treating the patient.” (196 Misc 2d at 807.)

He went on to say that

“for treatment or services to be medically necessary, it must be reasonably determined by the health care professional in consultation with the patient, that the treatment or services are consistent with the patient’s condition, circumstances and the best interest of the patient with regard to the type of treatment or services rendered, the amount of treatment or services rendered, and the duration of the treatment or services rendered.” (Id.)

Judge Agate went further, however, holding that in order to find that treatment or services are not medically necessary “it must be reasonably shown by medical evidence, in consideration of the patient’s condition, circumstances, and the best interest of the patient, that the treatment or services would be ineffective or that the insurer’s preferred health care treatment or lack of treatment would lead to an equally good outcome.” (Id. at 807-808 [emphasis added].)

While the defendant agrees that the testing as prescribed by the plaintiff provider herein was clearly medically necessary, as defined by both Judges Siegal and Agate, its defense of lack of medical necessity is seemingly based on a single word (ineffective) in Judge Agate’s opinion. Defendant argues that the test is inherently unnecessary due to a supposedly improper methodology used in conducting it. Plaintiff counters that, as conducted, the tests were medically necessary and done correctly and that even if they were done incorrectly or incompletely, such failures do not arise, at least in the context of no-fault litigation for provider payment, to the level of being medically unnecessary.

Defendant’s position seeks a retrospective determination of medical necessity but this court can find nothing in the precedents discussed or in the no-fault statute and related regulations that establish such a position. In fact, to the contrary, they seem to require a determination of medical necessity be made prospectively from the standpoint of the insured at the time a treatment or service is rendered, not at a time when its effectiveness or lack thereof can be established retrospectively.{**21 Misc 3d at 441}

This is particularly true when one considers that the expenses sought in no-fault litigation are in reality expenses incurred by the insured, not the provider. A medical provider does not “incur” expenses when it treats an insured. Rather, the provider accepts an assignment of the insured’s benefits, allowing it to step into the shoes of the insured for litigation purposes. In theory, if not reality, the insured, not the provider, is the one seeking reimbursement for expenses already incurred. As such, the no-fault statute was clearly intended to “deliver better protection for the insured and to pay off claims quickly (NY Legis Ann, 1973, p 298)” (Pavone v Aetna Cas. & Sur. Co., 91 Misc 2d 658, 663 [Sup Ct, Monroe County 1977]), and no-fault regulations have been interpreted in favor of the insured’s rights (and through an assignment of benefits, the rights of the provider), especially as they relate toward speedy payment of proper claims on behalf of the insured. (See Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274 [1997].)

To adopt defendant’s position, quite frankly, would be to dramatically and judicially change the very nature of no-fault litigation. It would result in these proceedings all too often delving into issues more related to medical malpractice or professional misconduct litigation, a fact reflected by defendant’s brief, which cites as authority a matter decided before the State Board of Professional Medical Conduct (see Matter of Dobson, 2006 NY Phys Dec LEXIS 411 [2006]). The nature of such litigation would defeat the very purpose of the no-fault statute which is “to permit liberal recovery of moneys actually expended in the treatment of accident-related injuries.” (Vidra v Shoman, 59 AD2d 714, 716 [2d Dept 1977]; see also Presbyterian Hosp. in City of N.Y. v Aetna Cas. & Sur. Co., 233 AD2d 431 [2d Dept 1996].) This is only reinforced by the Court of Appeals findings that the regulations “are written to encourage prompt payment of claims, to discourage investigation by insurers and to penalize delays.” (Dermatossian v New York City Tr. Auth., 67 NY2d 219, 225 [1986].)

Nowhere in the statutory or regulatory scheme are “necessary expenses” defined to exclude charges for services that were duly prescribed, but improperly or inadequately performed. Insurance Law § 5102 (a) (1) defines “basic economic loss” as including, inter alia, “[a]ll necessary expenses incurred.” If either the legislature or the Superintendent of Insurance had intended that the determination regarding medical necessity should be made in hindsight, with regard for whether a procedure{**21 Misc 3d at 442} was properly performed, a statutory or regulatory change could be made to define necessary expenses as including payment for “properly performed medical procedures.” Neither has chosen to do so.

After a reading of the no-fault statutes and regulations, the precedents established by both Judge Siegal and Judge Agate and the testimony, evidence and briefs submitted in this matter, this court holds that even if defendant has demonstrated that a prescribed medical service or procedure may not have been conducted properly, reimbursement is warranted so long as said service or procedure was medically necessary. The issue of proper performance of such service or procedure is best left for other areas of litigation practice and/or, where appropriate, the State Board of Professional Medical Conduct.

The court further finds that the plaintiff in this matter, by stipulation of the parties, has established a prima facie case as to the medical necessity of the services rendered, thus shifting the burden of proof to the defendant to demonstrate, by a preponderance of the evidence, a lack of medical necessity for said services. Based on the testimony of the defendant’s own expert that the procedures in question, as prescribed, were, in fact, medically necessary and the rebuttal testimony of plaintiff’s expert explaining how the tests, as actually performed, could be of benefit to the patient, the defendant has failed to meet that burden.

Therefore, the court finds in favor of the plaintiff in the amount of $2,832.14, plus statutory interest, attorney fees and costs and disbursements.

[*1]

Civil Court of the City of New York, New York County, August 6, 2008

APPEARANCES OF COUNSEL

Law Offices of Teresa M. Spina, Woodbury, for defendant. Baker, Sanders, Barshay, Grossman, Fass, Muhlstock & Neuwirth, LLC, Mineola, for plaintiff.

{**20 Misc 3d at 948} OPINION OF THE COURT

Arlene P. Bluth, J.

{**20 Misc 3d at 949}At trial, the parties stipulated to the following facts: The underlying accident occurred on July 31, 2006. The policy covering this accident was issued after April 5, 2002. Plaintiff submitted the claims to defendant more than 45 days after the final date of service and defendant timely denied the claims.

11 NYCRR 65-1.1 (b), part of the Superintendent of Insurance’s regulations (new regulations), requires that all policies issued on or after April 5, 2002 contain a mandatory personal injury protection endorsement (Endorsement). Automobile policies have a one-year term (see Insurance Law § 3425 [a] [8]), and both parties agree that at the time the instant policy was issued the new regulations were in effect. The portion of the Endorsement relevant here requires that claims be submitted to insurers within 45 days after services are rendered.

Plaintiff admits that she failed to fulfill the requirements of the Endorsement, and sent the bills after the 45-day time limit. At the trial, the defendant did not produce the policy. Plaintiff asserts that it was defendant’s burden to produce the policy in order to establish that the policy actually included the Endorsement; defendant asserts that because the Endorsement is mandatory under the new regulations, it applies whether or not the policy actually contains it, and so it is not necessary to produce the policy. This court agrees with defendant and finds the introduction of the policy at trial is not necessary to prove that it contained the mandatory Endorsement.

The parties were given an opportunity to submit posttrial memoranda of law. In support of its position, the defendant relies upon the very recent Appellate Term, Second Department case Eagle Chiropractic, P.C. v Chubb Indem. Ins. Co. (19 Misc 3d 129[A], 2008 NY Slip Op 50525[U] [2008]), which holds that because the policy was issued after April 5, 2002, the Endorsement was mandatory and the defendant need not prove that the policy contained the Endorsement. Plaintiff did not distinguish Eagle on its facts, and indeed, on page four of her posttrial memorandum, acknowledges that if this court were bound to follow Eagle, then defendant would win. Instead, plaintiff claims that the law is different in this department. Plaintiff maintains that this court must follow SZ Med. P.C. v State Farm Mut. Auto. Ins. Co. (9 Misc 3d 139[A], 2005 NY Slip Op 51842[U] [App Term, 1st Dept 2005]), which requires a finding for plaintiff.

Plaintiff asserts that SZ Med. requires that a defendant always produce the policy in order to support its position that{**20 Misc 3d at 950} the new regulations apply. By taking language out of context, plaintiff misreads the holding of SZ Med. Indeed, there is no split between the Appellate Terms because SZ Med. and Eagle both hold that once it is established that the policy was issued on or after April 5, 2002, then the new regulations must apply.

In SZ Med., plaintiff moved for summary judgment on its prima facie case for claims submitted between December 2002 and April 2003; defendant opposed, claiming the new regulations applied. The trial court denied summary judgment, finding that because plaintiff submitted the claims after April 5, 2002, the new regulations applied. In reversing, the Appellate Term simply made clear that the date the policy was issued determines if the new regulations are applicable, not the date when plaintiff submits its claims. The defendant in that case did not come forward with proof of when the policy was issued, and there is no indication that this crucial date could have otherwise been determined; the Appellate Term granted plaintiff’s motion for summary judgment.

Here the defendant need not produce proof that the policy was issued after April 5, 2002, because the parties stipulated to that fact. Had there been no stipulation, however, the fact remains that the earliest date that the policy covering this July 31, 2006 accident could have been issued was July 31, 2005; this was more than three years after the effective date of the new regulations. Even if the insurance policy lacked the mandatory Endorsement, then the applicable provisions of the Insurance Law or the applicable regulation, which “has the force of law” (Raffellini v State Farm Mut. Auto. Ins. Co., 9 NY3d 196, 201 [2007]), are deemed to be part of the policy as though written into it. (See also Insurance Law § 3103 [a] [even if the policy or provision is “in violation of the requirements or prohibitions of this chapter it shall be enforceable as if it conformed with such requirements or prohibitions”]; Trizzano v Allstate Ins. Co., 7 AD3d 783 [2d Dept 2004] [auto policy]; TAG 380, LLC v ComMet 380, Inc., 10 NY3d 507 [2008] [fire policy].)

Where, as here, it is clear that the policy is subject to the new regulations, the mandatory Endorsement is read into the policy and the defendant is not required to produce it. Accordingly, after trial, the court awards judgment in favor of defendant Government Employees Insurance Company and against plaintiff Dana Woolfson, LMT. The complaint is dismissed with prejudice.

[*1]

Civil Court of the City of New York, Richmond County, June 26, 2008

APPEARANCES OF COUNSEL

Law Office of Peter C. Merani, New York City (William Larkin of counsel), for defendant. Baker, Sanders, Barshay, Grossman, Fass, Muhlstock & Neuwirth, Mineola (Joaquin J. Lopez of counsel), for plaintiff.

{**20 Misc 3d at 845} OPINION OF THE COURT

Katherine A. Levine, J.

Plaintiff Prime Psychological Services, P.C. and defendant American Transit Insurance Company stipulated at oral argument that the sole issue before the court was whether the defendant’s failure to issue the denial of claim form (N-F 10 form) “in duplicate” was a fatal error, thus precluding defendant from asserting a defense which would result in the granting of summary judgment to plaintiff. There is no dispute that plaintiff established a prima facie case and that defendant timely mailed its denial of claim form, setting forth the defense of lack of medical necessity, to plaintiff.^[FN1] Defendant does not assert in its opposition that the claim forms were mailed in duplicate but simply states that the omission, if any, was neither “basic” nor “numerous” (citing Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564 [2d Dept 2005]).

This issue presents a case of first impression since it appears that no court has directly ruled upon whether to grant summary judgment to a plaintiff when the sole deficiency in the denial of claim form was that it was not issued in duplicate. As such, a statutory analysis of the Insurance Law and the pertinent regulations promulgated thereto is in order.

Article 51 of the Insurance Law (Comprehensive Motor Vehicle Insurance Reparations Act) (added by L 1984, chs 367, 805, as amended), commonly known as New York’s No-Fault Insurance Law (No-Fault Law), provides a plan for compensation of victims of motor vehicle accidents for economic loss without regard to fault or negligence. (Oberly v Bangs Ambulance, 96 NY2d 295 [2001].) The general framework for payment of first-party benefits is contained in Insurance Law § 5106 (a), which states as follows:

“(a) Payments of first party benefits and additional first party benefits shall be made as the loss is incurred. Such benefits are overdue if not paid within thirty days after the claimant supplies proof of the fact and amount of loss sustained. If proof is not supplied as to the entire claim, the amount which is supported by proof is overdue if not paid{**20 Misc 3d at 846} within thirty days after such proof is supplied. All overdue payments shall bear interest at the rate of two percent per month.”

The Superintendent of the New York State Insurance Department promulgated Regulation 68 and codified it under 11 NYCRR part 65. The pertinent regulation in this case, 11 NYCRR 65-3.8, entitled “Payment or denial of claim (30 day rule),” provides in subdivision (c) (1) that

“[i]f the insurer denies a claim in whole or in part involving elements of basic economic loss . . . the insurer shall notify the applicant . . . on the prescribed denial of claim form, in duplicate, and shall furnish, if requested by the applicant, one copy of all prescribed claims form submitted by or on behalf of the applicant thereto” (emphasis supplied).

“The governing rule of statutory construction is that courts should look first to the statutory language in question, which is to be ‘generally given its natural and most obvious meaning.’ ” (Matter of Greenberg [Ryder Truck Rental], 70 NY2d 573, 577 [1987], quoting McKinney’s Cons Laws of NY, Book 1, Statutes § 94; Association of Contr. Plumbers of City of N.Y. v Contracting Plumbers Assn. of Brooklyn & Queens, Inc., 302 NY 495, 500 [1951].) “[I]f there is nothing to indicate a contrary intent, terms of general import will ordinarily be given their full significance without limitation.” (70 NY2d at 577, quoting Statutes § 114.)

The primary goal of the court in interpreting a statute is to determine and implement the legislature’s intent. (Matter of Tompkins County Support Collection Unit v Chamberlin, 99 NY2d 328, 335 [2003].) A court “may not reject a literal construction (of a statute) unless it is evident that a literal construction does not correctly reflect the legislative intent.” (A.J. Temple Marble & Tile v Union Carbide Marble Care, 87 NY2d 574, 580-581 [1996]; see Statutes § 73.) “[T]he legislative history of an enactment may also be relevant and ‘is not to be ignored, even if words be clear’ ” (Feher Rubbish Removal, Inc. v New York State Dept. of Labor, Bur. of Pub. Works, 28 AD3d 1, 5 [4th Dept 2005], quoting Riley v County of Broome, 95 NY2d 455, 463 [2000], quoting Statutes § 124, Comment, at 252). A construction which would result in absurdity is to be rejected (Statutes § 145; see McDonald v State of New York, 176 Misc 2d 130, 134 [Ct Cl 1998]). Furthermore, “[i]n construing a statute, the court should consider the mischief sought to be remedied{**20 Misc 3d at 847} and should favor the construction which will suppress the evil and advance the remedy.” (Matter of New York Life Ins. Co. v State Tax Commn., 80 AD2d 675, 677 [3d Dept 1981]; Marigliano v New York Cent. Mut. Fire Ins. Co., 15 Misc 3d 766, 771-772 [Civ Ct, NY County 2007].)

Therefore, despite the primary importance of literal construction, “[t]he courts may in a proper case indulge in a departure from literal construction and . . . sustain the legislative intention although it is contrary to the literal letter of the statute” (Feher Rubbish Removal, Inc. at 5, quoting Statutes § 111). “The letter of a statute is not to be slavishly followed when it . . . leads to conclusions, inconsistent with the general purpose of the statute or to consequences irreconcilable with its spirit and reason.” (Matter of Statewide Roofing v Eastern Suffolk Bd. of Coop. Educ. Servs., First Supervisory Dist. of Suffolk County, 173 Misc 2d 514, 517 [Sup Ct, Suffolk County 1997].) Thus, in [*2]construing a law, a court “will sometimes be guided more by its purpose than its phraseology, whereby a statute is not to be read with a literalness that destroys the meaning, intention, purpose or beneficial end for which the statute has been designed.” (Id.; see generally Statutes § 96.) In fact, the meaning of certain words may, in a proper case, be restricted or limited so as to avoid “absurd, unjust or other objectionable results.” (Matter of Statewide Roofing at 518; see Statutes § 113.)

It is imperative in ruling upon no-fault insurance matters not to lose sight of the fundamental goal of the regulatory scheme, which is “designed to promote prompt payment of legitimate claims” (Nyack Hosp. v General Motors Acceptance Corp., 8 NY3d 294, 300 [2007]) and prompt resolution of injury claims, to limit cost to consumers and to alleviate unnecessary burdens on the courts. (Pommells v Perez, 4 NY3d 566 [2005]; see also Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 285 [1997] [“The tradeoff of the no-fault reform still allows carriers to contest ill-founded, illegitimate and fraudulent claims, but within a strict, short-leashed contestable period and process designed to avoid prejudice and red-tape dilatory practices”]; All Health Med. Care v Government Empls. Ins. Co., 2 Misc 3d 907, 910 [Civ Ct, Queens County 2004] [the purpose of the no-fault statute is to encourage prompt payment of claims, to discourage investigation by insurers and to penalize delays].)

As the Court of Appeals noted in Matter of Medical Socy. of State of N.Y. v Serio (100 NY2d 854 [2003]), the most significant{**20 Misc 3d at 848} changes made by the Superintendent of Insurance, in adopting revised Regulation 68 (repealing and replacing the prior 11 NYCRR part 65),^[FN2] was a reduction in the time frames applicable to the filing of notices and proofs of claim—a consequence of the Superintendent’s determination that much of the abuse was associated with the lengthy time frames within which claims could be presented to insurers. The Superintendent also concluded that the shorter time frames would better effectuate the legislative purpose of providing prompt compensation “as the loss is incurred, while reducing rampant abuse.” (Id. at 867; Inwood Hill Med. at *4.) Accordingly, it is the court’s duty to interpret and apply the no-fault regulations in a consistent manner leading to the prompt payment of valid, documented claims. (See Marigliano v New York Cent. Mut. Fire Ins. Co. at 774.)

With these principles in mind, this court finds that the defendant’s failure to mail the N-F 10 form in duplicate is not fatal and does not render its denial a nullity. It should first be noted that contrary to plaintiff’s contention, no court has declared that a denial of claim form is fatally defective so as to warrant its preclusion solely on the grounds that it was not issued in duplicate. In New York Univ. Hosp. Rusk Inst. v Hartford Acc. & Indem. Co. (32 AD3d 458 [2d Dept 2006]) the plaintiff attacked the validity of the defendant’s denial, both because the defendant issued its partial denial by letter rather than by utilizing the prescribed N-F 10 form, and because the denial was not issued in duplicate. While finding that the denial letter adequately conveyed the information mandated by the prescribed N-F 10 form, the court still found the denial to be defective because “defendants failed to establish that the letter had been [*3]issued in duplicate and approved by the Department of Insurance.” (Id. at 460.) The Rusk court did not discuss plaintiff’s failure to serve the denial in duplicate. Furthermore, Rusk has only been cited for the proposition that the N-F 10 denial form was not sufficiently specific or particular to apprise the claimant of the grounds upon which the disclaimer is predicated and, hence, could not constitute a valid denial. (See Westchester Med. Ctr. v Allstate Ins. Co., 45 AD3d 579 [2d Dept 2007]; Elmont Open MRI & Diagnostic Radiology, P.C. v GEICO{**20 Misc 3d at 849} Ins. Co., 18 Misc 3d 1117[A], 2008 NY Slip Op 50113[U] [Nassau Dist Ct 2008] [N-F 10 denial form issued by respondent, neither on the prescribed form as it existed in 2005, nor on the form allegedly approved by the Insurance Department in 2002, was not valid since neither old nor new regulations permit an insurer to adjust or amend its forms on its own accord]; Olympic Chiropractic, P.C. v American Tr. Ins. Co., 14 Misc 3d 129[A], 2007 NY Slip Op 50011[U] [App Term, 2d Dept 2007].)

In fact, the source for the Rusk court’s pronouncement concerning the sufficiency of the N-F 10 denial form was Nyack Hosp. v State Farm Mut. Auto. Ins. Co. (11 AD3d 664, 665 [2d Dept 2004]), where the Second Department declared that “[a] proper denial of claim form must include the information called for in the prescribed denial of claim form (see 11 NYCRR 65-3.4 [c] [11]) and must ‘promptly apprise the claimant with a high degree of specificity of the ground or grounds on which the disclaimer is predicated.’ ” Furthermore, “[a] timely denial alone does not avoid preclusion where said denial is factually insufficient, conclusory, vague or otherwise involves a defense which has no merit as a matter of law” (Amaze Med. Supply v Allstate Ins. Co., 3 Misc 3d 43, 44 [App Term, 2d Dept 2004]).

In Nyack (supra), the court found the denial of claim form to be fatally defective in that it failed to include a number of the basic items called for in the prescribed form, such as the name of the health services provider, the date and amount of the claims being denied, and the date it received those claims. In Amaze (supra), the timely denial was found to be factually insufficient in that defendant failed to provide any specifics with regard to its conclusory defense that certain of the medical equipment was duplicative. Both of these cases found that preclusion was warranted because the content of the N-F 10 forms was not sufficiently specific.

There appears to be one case where a court addressed the repercussions that should attach to a party’s failure to serve a form in duplicate. In Nagy v Rothstein (53 Misc 2d 367 [Sup Ct, NY County 1966]) the defendant moved to dismiss the complaint because a notice of claim was never served and the complaint, which was not served in duplicate as required of a notice of claim, could not substitute for a notice of claim. The complaint, however, was served within the 90-day time period governing the service of a notice of claim. The court granted the plaintiff’s motion to treat the complaint, as originally served, as a notice of claim because the original complaint met all the statutory{**20 Misc 3d at 850} requirements of a notice of claim except that it did not set forth the plaintiff’s post office address and was not served in duplicate. The court first noted that it looks to the “substance of the paper served and not to its label,” and found that in accordance with the purpose behind the “notice of claim,” defendant “had due and timely notice of the incident and ample time to conduct its investigation.” (Id. at 369 [emphasis supplied].) As to the defendant’s assertion that no court has ever allowed a complaint to serve as both a notice of claim and a complaint, i.e., one paper served in place of two, the court stated that it “does not count the papers. It looks rather to their merit and their substance. No litigant who states a cause of action will be turned [*4]away by mistakes in labeling or in his counting of the papers required to be served.”^[FN3] (Id.)

The same reasoning applies to the instant matter. Plaintiff does not claim that the information contained in the N-F 10 was “insufficient, conclusory, vague or otherwise involves a defense which has no merit as a matter of law.” Nor does plaintiff contend that it was deprived of prompt specific notice as to the reasons for the insurer’s denial or that it was prejudiced because it only received one copy of the N-F 10. In fact, since the regulations set forth that both the original N-F 10 form and its duplicate shall be served on the medical provider, the service of the duplicate N-F 10 is basically redundant. As such, plaintiff’s contention that it must be awarded summary judgment because the denial was not issued in duplicate runs counter to the very legislative intent behind the No-Fault Law—to process claims within a short time frame and expeditiously so as to avoid prejudice and red tape dilatory practices.

As such, both plaintiff’s and defendant’s motions for summary judgment are denied and this case is to proceed to trial.

Footnotes

Footnote 1: Defendant commenced this motion requesting that the action be dismissed because plaintiff failed to rebut defendant’s denial of its claim on the grounds of lack of medical necessity. Plaintiff, in turn, brought a cross motion contending that it was entitled to summary judgment because defendant failed to establish that it had mailed the denial forms in duplicate, hence rendering its denial a nullity.

Footnote 2: For a detailed analysis of the history behind the amended Regulation 68, see Matter of Medical Socy. of State of N.Y. v Serio (100 NY2d 854, 860-864 [2003]) and Inwood Hill Med. v Allstate Ins. Co. (3 Misc 3d 1110[A], 2004 NY Slip Op 50565[U] [Civ Ct, NY County 2004]).

Footnote 3: While discussing the number of papers, the court never specifically addressed the fact that the complaint quo notice of claim was not served in duplicate. However, by granting plaintiff’s motion for leave to serve an amended notice of claim and an amended complaint, the court obviously did not find the failure to serve the papers in duplicate to be fatal.

[*1]

Civil Court of the City of New York, Queens County, June 13, 2008

APPEARANCES OF COUNSEL

Emilia I. Rutigliano, Brooklyn, for plaintiff. Law Office of Karen C. Dodson, Melville (William Angstreich of counsel), for defendant.

{**20 Misc 3d at 782} OPINION OF THE COURT

William A. Viscovich, J.

Plaintiff brought this action to recover no-fault payments totaling the sum of $1,559 for medical supplies provided to the insured/assignor on September 21, 2005 and on October 3, 2005, for treatment of alleged injuries sustained in a motor vehicle accident occurring on September 16, 2005, together with statutory interest, statutory attorneys fees and costs.

A previous decision by Judge Lebedeff of this court, issued on May 9, 2007, had determined that plaintiff had made out its prima facie case, that defendant’s NF-10 denial dated November 16, 2005 was timely issued, that said denial was based upon a peer review and that the only triable issue was as to the medical necessity of the items furnished to the assignor. The parties further stipulated at trial as to the expertise of the peer review doctor, Dr. Susan Corcoran, in internal medicine and to the introduction into evidence of the peer review itself.

Based upon Judge Lebedeff’s previous finding regarding the plaintiff’s prima facie case and the stipulation entered into by the parties, the plaintiff rested, thus shifting to the defendant insurer the burden of rebutting plaintiff’s prima facie case of medical necessity.

The defendant called Dr. Corcoran who testified, in sum and substance, that there was no medical necessity for any of the supplies provided. Of particular relevance in this matter is that while the parties did stipulate to the [*2]admission of the peer review, they did not stipulate to the entrance into evidence of any of the underlying medical records and reports upon which the peer review was based. Nor did the defendant attempt to have them introduced even though they were relied upon by Dr. Corcoran in preparing both the peer review and her testimony.

After Dr. Corcoran’s testimony was completed, the defendant rested. Plaintiff presented no witnesses and also rested. Defendant then moved for a directed verdict of dismissal, arguing that the findings and opinions of Dr. Corcoran in her peer review and in her testimony were sufficient to demonstrate the lack of medical necessity for the supplies provided to the assignor and that they were not rebutted by the plaintiff.

Plaintiff opposed the motion, contending that pursuant to Wagman v Bradshaw (292 AD2d 84 [2d Dept 2002]) Dr. Corcoran’s testimony must be disregarded by this court since it was based upon medical records and reports that were not in evidence{**20 Misc 3d at 783} and for which there was no evidence presented regarding their reliability. (See Hambsch v New York City Tr. Auth., 63 NY2d 723 [1984].) Defendant countered that this court should apply the ruling of the Appellate Term, First Department, in Cross Cont. Med., P.C. v Allstate Ins. Co. (13 Misc 3d 10 [2006]), wherein the court held that a “plaintiff may not be heard to argue that defendant’s expert opinion was not derived from a ‘professional[,] reliable’ source or to otherwise challenge the reliability of its own medical records and reports.” (Id. at 11.)

The court denied defendant’s motion for a directed verdict of dismissal, and reserved decision on the ultimate issue as to the medical necessity, or lack thereof, of the billed-for supplies, pending a determination as to the admissibility of Dr. Corcoran’s testimony.

For the reasons stated herein, the court now finds that the testimony of Dr. Corcoran regarding the various reports not in evidence is admissible. As such, judgment is made in favor of the defendant and the matter is dismissed.

“It is well settled that, to be admissible, opinion evidence must be based upon one of the following: first, personal knowledge of the facts upon which the opinion rests: second, where the expert does not have personal knowledge of the facts upon which the opinion rests, the opinion may be based upon facts and materials in evidence, real or testimonial; third, material not in evidence provided that the out-of-court material is derived from a witness subject to full cross-examination; and fourth, material not in evidence provided the out-of-court material is of the kind accepted by the profession as a basis in forming an opinion and the out-of-court material is accompanied by evidence establishing its reliability.” (Wagman v Bradshaw at 86-87.)

The Court of Appeals has held that an expert witness may testify that he or she relied on out-of-court material provided that it is of a kind generally accepted in the profession as reliable and there is evidence presented establishing the reliability of the out-of-court material referred to by the witness (Hambsch v New York City Tr. Auth., supra).

Clearly in this matter, the first three possible requirements are not relevant, thereby leaving this court to decide if, pursuant to Wagman, the material not in evidence, which was relied upon by defendant’s witness, is accompanied by any evidence establishing its reliability. [*3]Pursuant to Hambsch, the court must{**20 Misc 3d at 784} also determine if the material in question is the kind accepted in the profession and if there has been any evidence presented establishing the reliability of those materials.

As to the Wagman issue, an initial interpretation of the testimony in relation to that case seems to indicate that the defendant offered no evidence as to the reliability of the documents relied upon, therefore requiring the court to disregard the testimony and thereby find in favor of the plaintiff. However, in addition to Cross Cont. Med., P.C. (supra), several recent cases in both the First and Second Departments, including the Appellate Term, First Department, seem to indicate that, at least in the context of no-fault first-party benefits, a plaintiff may not challenge the reliability of its own medical records which were relied upon by the insurer in preparing a peer review report.

First, in Home Care Ortho. Med. Supply, Inc. v American Mfrs. Mut. Ins. Co. (14 Misc 3d 139[A], 2007 NY Slip Op 50302[U] [App Term, 1st Dept 2007]), the Appellate Term, First Department, reversed a judgment in favor of the plaintiff in an action, as in the case here, brought by a medical goods supply company to recover assigned, first-party no-fault benefits. The lower court’s decision was at least partially based on its preclusion of the insurer’s expert’s testimony because it relied, at least in part, on a review of the assignor’s medical records. Following its previous decision in Cross Cont. Med., P.C. (supra), the court held that “[p]laintiff may not be heard to challenge the reliability of the assignors’ medical records and reports, which, in response to defendant’s verification requests, were affirmatively relied upon by plaintiff as proof of claim” (at *1).

Following the decision in Home Care Ortho Med. Supply, Inc. (supra), Judge Peter Sweeney of the Civil Court of the City of New York rejected the plaintiff’s contention that the insured’s experts should have been precluded from basing their professional opinions, in part, on the information obtained from plaintiff’s assignors during independent psychological examinations. Judge Sweeney went further in finding that

“the holding in Home Care Ortho. Med. Supply, Inc. is consistent with the legislative policy reflected in the numerous provisions of the No-Fault Law which provide for the prompt verification and disposition of claims (Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co., 89 NY2d 214, 222 [1996]; Presbyterian Hosp. in City of New York v Maryland Cas. Co., 90{**20 Misc 3d at 785} NY2d 274, 281 [1997]; Dermatossian v New York City Tr. Auth., 67 NY2d 219, 224-225 [1986]; Stephen Fogel Psychological, P.C. v. Progressive Cas. Ins. Co. 827 NYS2d 217, 220 (35 AD3d 720) [2nd Dep’t 2006])” (Primary Psychiatric Health, P.C. v State Farm Mut. Auto Ins. Co., 15 Misc 3d 1111[A], 2007 NY Slip Op 50583[U], *3 [Civ Ct, Kings County 2007]).

Finally, in a very recent case, Andrew Carothers, M.D., P.C. v GEICO Indem. Co. (18 Misc 3d 1147[A], 2008 NY Slip Op 50546[U], *2 [Civ Ct, Kings County 2008]), the court, also citing Cross Cont. Med., P.C. (supra), actually permitted the plaintiff’s medical records, which at least in part formed the basis of its peer review, to be admitted into evidence through its claims examiner as defendant’s business records. That court rejected plaintiff’s argument that their admission was inappropriate since the claims examiner was incompetent to testify as to the reliability of the records as she had testified that they were received by the defendant from the [*4]treating physicians and she had no knowledge of how these doctors created or maintained their records in the regular course of business. While this court may not have extended the business records exception to the hearsay rule to such an extent, the holding is consistent with the holdings in the other cases referred to above.

As for the Hambsch requirement that the material be generally accepted in the profession as reliable and that there be evidence establishing its reliability, the cases referred to above clearly indicate that the plaintiff cannot be heard to challenge the reliability of the particular documents. As for the professional acceptability of these items, Dr. Corcoran testified that they were sufficient to form the basis of a peer review and her expertise was stipulated to by both parties. Without any testimony to the contrary, this court finds that the out-of-court documents relied upon by Dr. Corcoran in preparing her peer review and her testimony are of the type accepted in the profession as reliable.

As such, this court finds that the defendant has presented sufficient evidence to establish a defense based upon a lack of medical necessity, thus shifting the burden to the plaintiff to present its own evidence of medical necessity (see West Tremont Med. Diagnostic, P.C. v GEICO Ins. Co., 13 Misc 3d 131[A], 2006 NY Slip Op 51871[U] [App Term, 2d & 11th Jud Dists 2006]). Plaintiff presented no evidence or testimony in this matter,{**20 Misc 3d at 786} choosing instead to rely upon its argument made above and its cross-examination of Dr. Corcoran. Without more, this court finds that plaintiff has failed to refute defendant’s expert witness testimony and has failed to produce rebuttal evidence to prove the medical necessity of the medical supplies provided to its assignor.

Accordingly, judgment is hereby rendered for the defendant and plaintiff’s complaint is dismissed.