Civil Court, Kings County

95623/04

Delores J. Thomas, J.

In this action brought by a health care provider to recover no-fault benefits as assignee of Alex Zubaty, plaintiff moves for an order granting summary judgment against defendant in the sum of $540.00 plus statutory interest together with statutory attorney’s fees.

The No-Fault Law provides for payments for medical supplies provided to a person injured as a result of an accident arising out of the use or operation of a motor vehicle. To recover first-party benefits, a claimant must demonstrate a prima facie entitlement to summary judgment by setting forth proof that it submitted a claim, the fact and amount of losses sustained and that payment of benefits is overdue (see Insurance Law § 5106 [a]; Mary Immaculate Hosp. v. Allstate Ins. Co., 5 AD3d 742 [2d Dept 2004]).

It is undisputed that defendant did not pay or deny the claim within the required 30-[*2]day period. Plaintiff contends there was no extension of the time period through verification requests. Although defendant requested an examination under oath (EUO), unless defendant can establish that the policy in effect entitled defendant to conduct an EUO and that it made a timely and proper verification request, tolling does not occur. Policies issued on or after April 5, 2002 must contain the revised prescribed endorsement to entitle the insurer to conduct an EUO (see, SZ Medical P.C. v. State Farm Mutual Auto Ins. Co., 9 Misc 3d 139 [A], 2005 NY Slip Op 51842 [U] [App Term, 1st Dept 2005]). Here, defendant has not demonstrated any basis to toll the 30-day period.

An untimely denial precludes defendant from interposing most defenses including the defense of lack of medical necessity (Amaze Med. Supply Inc. v. Eagle Ins. Co., 2 Misc 3d 139 [A], 2004 NY Slip Op 050279 [U] [App Term, 2d & 11th Jud Dists 2004]). However, defendant is not precluded from asserting the defense that the injuries do not arise out of a covered accident or a defense premised on staged accident fraud (see, Central Gen. Hosp. v. Chubb Group of Ins. Cos., 90 NY2d 195 [1997]; Metro Med. Diagnostics v. Eagle Ins. Co., 293 AD2d 751 [2nd Dept 2002]). However, to withstand a motion for summary judgment, defendant must raise a triable issue of fact (Alvarez v. Prospect Park Hospital, 68 NY2d 320 [1986]).

The denial of claim form (Exhibit A, annexed to Notice of Motion) states: “All no fault benefits denied based in part on A) the EUO; B) failure to establish proof of claim; C) failure to establish that the injuries arose out of the use and operation of the insured vehicle; and D) the treatment was not causally related to the claimed injuries.” In addition, in support of its fraud defense defendant submits the affidavit of Jeffrey Billington, claims adjuster in the no-fault department of defendant insurer. Billington does not state that he is a special insurance investigator or that he is trained in fraud detection. He asserts that plaintiff received aggressive medical treatment for a “relatively minor collision” as a basis for the EUO and to support a fraud claim. Billington concludes there is a “discernable pattern of circumstances and conduct consistent with staging of an accident.” He refers to the fact that the assignor sought treatment six days after the accident from a provider other than his personal doctor, that he was referred to get an MRI on an initial visit and that he was involved in a prior accident (four years ago) which was settled by the same attorney now representing plaintiff.

The insurer has the burden to come forward with proof in admissible form to establish the basis for its belief that there is no coverage (see, Mount Sinai Hospital v. Triboro Coach Inc., 263 AD2d 11 [2d Dept 1999]). An insurer’s “founded belief” that an accident was staged cannot be based upon unsubstantiated hypotheses and supposition (see, A.B. Medical Services v. Eagle Ins. Co., 3 Misc 3d 8 [App Term, 2d Dept 2003]). The statements made by defendant’s counsel in the affirmation in opposition, that the injuries did not arise from the accident and/or that the accident was staged, are not based on personal knowledge and are of no probative value. In addition, the Court finds the assertions made by the claims representative are insufficient to support his finding of a pattern of circumstances and conduct which constitutes fraud. Defendant’s belief that treatments were unduly “aggressive” or unnecessary might have been addressed through a defense of lack of medical necessity if there had been a timely denial. Defendant has not submitted any proof specific to the circumstances of the accident to support a “founded belief” that the accident was staged.

Accordingly, plaintiff’s motion for summary judgment is granted. The clerk is directed to enter judgment in favor of plaintiff in the sum of $540.00 together with statutory interest and attorney’s fees. [*3]

This constitutes the decision and order of the Court.

DATED: December 30, 2005

Brooklyn, New York

DELORES J. THOMAS

Judge Civil Court

Civil Court, Queens County

96837/04

Kevin J. Kerrigan, J.

Defendant’s motion for summary judgment dismissing the complaint is denied. Plaintiff’s cross-motion for summary judgment is also denied.

Plaintiff commenced the underlying action pursuant to the Comprehensive Motor Vehicle Reparations Act (Insurance Law §5101, et seq) (the “no-fault” law) seeking payment of its bills for treatment of its assignor for psychological injuries allegedly sustained by her in an automobile accident on May 17, 1998. The psychological services for which plaintiff is seeking payment were performed on July 30, 1998. Plaintiff argues that it is entitled to reimbursement from defendant because it timely submitted a completed proof of claim for no-fault benefits, which defendant neither paid nor denied within 30 days.

An insurer must either pay or deny a claim for first-party no-fault benefits within 30 days after receiving proof of the claim (see Insurance Law §5106 (a); 11 NYCRR §65.15 (g) (3), now 11 NYCRR 65-3.5 [a]). Failure to deny timely renders no-fault benefits overdue, and the insurer is precluded from raising any defenses, other than lack of coverage, to its obligation to pay (see Presbyterian Hosp. v. Maryland Cas. Co., 90 NY2d 274 [1997]; NY Hosp. Med. Center of Queens v. Country-Wide Ins. Co., 295 AD2d 583 [2nd Dept 2002]).

It is undisputed that defendant did not issue a denial of claim (NF-10 form). Defendant [*2]argues that it was not required to issue a denial of claim because the corporate structure of plaintiff was defective in that it did not have a psychologist as an “owner,” the treating psychologist was an independent contractor, its billing was fraudulent and the assignment of benefits form was defective. Therefore, according to defendant, there is no coverage under the insurance policy.

Defendant argues, first and foremost, that plaintiff is not entitled to reimbursement under the no-fault law, notwithstanding defendant’s failure to issue a timely denial of plaintiff’s claim, because plaintiff did not have a psychologist as an “owner” at the time it billed for psychological services and was, thus, defectively, or fraudulently, organized. The arguments that defendant proffers in its motion to establish the relevance of plaintiff’s improper organizational structure to the no-fault law are entirely inapposite.

Defendant argues that plaintiff’s failure to have a psychologist as an “owner” of the “corporation” at the time it provided psychological services to its assignor herein was a violation of §1504 (a) of the Business Corporation Law (“BCL”), which requires a professional service corporation (“PC”) to provide professional services only through individuals authorized to render such services. This violation, reasons defendant, also constituted non-compliance with the provisions of the New York State Workers’ Compensation Fee Schedule for Psychological Services (the “Fee Schedule”) adopted by the no-fault regulations and, therefore, the services provided by plaintiff at the time it did not have a psychologist as an “owner” were not covered under the no-fault law.

In the first instance, BCL §1504 (a) does not concern the organizational structure of a PC. Moreover, plaintiff is not a PC but a professional limited liability company (PLLC) and, thus, all references to the BCL are inapposite.

The Fee Schedule was incorporated into the no-fault law (see Insurance Law §5108; 11 NYCRR §68.0). However, the Fee Schedule has no requirements concerning the corporate or organizational structure of a PC or PLLC. It merely provides, in relevant part, “[P]sychological services will be rendered by or under the active supervision of an authorized psychologist” (see 12 NYCRR Appendix C-7). Defendant offers no proof to establish that the psychological services provided to plaintiff’s assignor were not rendered by a psychologist but, rather, by unlicensed “assistants,” as it alleges. Moreover a defense asserting a violation of the Fee Schedule is precluded since it was not raised in a timely denial of claim (see, e.g. Park Health Center v. Prudential Property & Cas. Ins. Co., 2001 NY Slip Op 40650 [U] [2nd & 11th Jud Dists]).

Thus, defendant, in its motion, cites no provision of the Insurance Law or its implementing regulations relating to the membership requirements of a PLLC. The relevant line of argument bearing upon the issue of whether plaintiff may collect no-fault benefits if it is improperly organized is introduced by plaintiff in its cross-motion (perhaps in anticipation of the Court raising the issue sua sponte). Plaintiff informs the Court of 11 NYCRR §65-3.16 (a) (12), which is the only provision of the no-fault law that keys the right to reimbursement under no-fault to the lawful licensing of the health care provider. That section states:

A provider of health care service is not eligible for reimbursement under section 5102 (a) (1) of the Insurance Law if the provider fails to meet any applicable New York State or [*3]local licensing requirement necessary to perform such service in New York or meet any applicable licensing requirement necessary to perform such service in any other state in which such service is performed.

The Court of Appeals has recently held that, on the basis of this section of the insurance regulations, an insurer may deny payment to a fraudulently incorporated health care provider (see State Farm Mutual Auto. Ins. v. Mallela, 4 NY3d 313 [2005]) (hereinafter referred to as “Mallela III”).

Plaintiff contends that §65-3.16 (a) (12) and the holding in Mallela III do not contemplate the fact pattern of the present case and that even if they did, the claim herein antedates the regulation and, thus, is not subject to it. Furthermore, argues plaintiff, defendant is precluded from raising the regulation as a defense because defendant failed to assert it in a timely denial of claim. Defendant, in its reply, argues that §65-3.16 (a) (12) need not be raised in a timely denial of claim and that on the basis of that section and Mallela III, it is not obligated to reimburse plaintiff for the claims it submitted.

Plaintiff contends that there was no fraud to bring this case within the scope of §65-3.16 (a) (12), as interpreted by the Court of Appeals in Mallela III, because a licensed acupuncturist was an owner and that he acted upon the advice of his attorney that it was legal to practice multiple specialties as long as one of the owners was licensed in one of the specialties. This argument overlooks the uncontroverted facts presented herein that plaintiff was, in fact, in violation of licensing requirements and that it filed false articles of organization by listing therein a licensed individual who was not part of its company.

Pursuant to Limited Liability Company Law §1203 (a), “[O]ne or more professionals each of whom is authorized by law to render a professional service within the state, or one or more professionals, at least one of whom is authorized by law to render a professional service within the state, may form . . . a professional service limited liability company . . . for the purpose of rendering the professional service or services as such professionals are authorized to practice” (emphasis added). Thus, a PLLC may not be formed to render psychological services unless a member thereof is a licensed psychologist. The licensed psychologist who was listed in plaintiff’s articles of organization had no ownership interest, managerial position or employee status with plaintiff.

It is undisputed that plaintiff was formed as a PLLC in 1998 for the purpose of engaging in the business of providing psychological and acupuncture services. Plaintiff also admits that it provided psychological services predominantly, if not exclusively. The articles of organization list Yuegeny Gorbatov and Kathryn Clark as the “original members and the original managers” of the PLLC (see Exhibit “D” to motion). It is also undisputed that of these two individuals, only Clark is a licensed psychologist. However, in her examination under oath (see Exhibit “F” to motion), she states that she was, in fact, never a member of plaintiff, that she never consented to be designated as such on plaintiff’s organization documents and that she was unaware, until it was brought to her attention by defendant, that she was named in plaintiff’s articles of organization. Additionally, she asserts that her only affiliation with plaintiff was as an independent contractor hired by plaintiff to perform psychological services, and was not even an [*4]employee of the company (see EUO transcript at 6, lines 18-21).

Plaintiff’s only explanation of Clark’s EUO testimony is through an inadmissible hearsay affidavit by an individual with no personal knowledge stating that Gorbatov “thought” that Clark was listed only as a manager and not an owner.Thus, at the time it provided psychological services to its assignor and filed its claim in 1998, plaintiff was in violation of the licensing requirements for PLLCs and was fraudulently organized, having filed false articles of organization representing that Clark was an original owner and/or manager, when, in fact, she was neither.

Nevertheless, this Court must agree with plaintiff that §65-3.16 (a) (12) does not apply retroactively to bar recovery of the instant no-fault claim that accrued prior to the effective date of the regulation.

Section 65-3.16 (a) (12) was added as part of the latest revision of the insurance regulations, which became effective April 5, 2002 (see 11 NYCRR §§65-1, et. seq., hereinafter referred to as the “new regulations”), replacing the regulations that had been effective until that date (see 11 NYCRR §§65.1, et. seq.). It is a well-settled principle that legislative rules and revisions of administrative regulations apply prospectively unless their language mandates otherwise (see, e.g. Good Samaritan Hosp. v. Axelrod, 150 AD2d 775 [2nd Dept 1989]). If the new regulations could be construed as applying retroactively to claims antedating their promulgation, then the establishment of an effective date would be meaningless. Indeed, it has been held that the insurance regulations have no retroactive application (see Colonial Life Ins. Co. of America v. Curiale, 205 AD2d 58, 62 [3rd Dept 1994] [“Our review of the regulations reveals that they were not retroactive since they were not made effective as of a date prior to their promulgation”]).

The question of whether §65-3.16 (a) (12) applies retroactively was posed by the Second Circuit in State Farm Mutual Auto. Ins. Co. v. Mallela (372 F 3d 500 [2nd Circuit 2004]) (“Mallela II“) as it considered the central issue presented to it on appeal from the Eastern District (2002 WL 31946762 [E.D.NY]) ( “Mallela I“) of whether a health care provider that is fraudulently incorporated is entitled to reimbursement under no-fault for services rendered by licensed practitioners. This main question was certified to and answered in the negative by the Court of Appeals in Mallela III. But in answering this question, it also addressed the subsidiary issue of retroactivity which was raised by the Mallela II Court.

Proceeding from the standpoint that a cause of action for fraud and unjust enrichment can be maintained against a fraudulently incorporated provider that accepts payments from an insurer in derogation of §65-3.16 (a) (12), the Court of Appeals stated:

Because we rest our holding on the Superintendent’s amended regulation declaring fraudulently licensed corporations ineligible for reimbursement, no cause of action for fraud or unjust enrichment would lie for any payments made by the carriers before that regulation’s effective date of April 4, 2002^[FN1]. State Farm’s complaint does not clearly indicate, one way or the other, whether [*5]it has paid money to defendants after the amended regulation took effect. We therefore answer only the certified question and decline to consider whether State Farm has alleged sufficient facts to support causes of action for fraud or unjust enrichment (Mallela III, 4 NY3d at 322).

Plaintiff, in the Mallela case, sought a judgment declaring that it was not required under no-fault to reimburse a fraudulently incorporated provider and a judgment for restitution for fraud and unjust enrichment seeking recovery of sums already paid to the provider. In answering the certified question, the Court of Appeals made it clear that its holding that the an insurer may deny payment to a fraudulently incorporated provider is based solely on §65-3.16 (a) (12) of the new regulations. Therefore, a cause of action for fraud and unjust enrichment deriving from that section of the new regulations would not lie for payments made upon claims prior to the effective date of that section. In other words, the regulation does not apply retroactively to create a cause of action for fraud or unjust enrichment.

The Court of Appeals answered the retroactivity question in the abstract and did not decide whether the insurer had, in fact, made out a cause of action for fraud or unjust enrichment, since the record was devoid as to whether any claims were paid after the regulation’s effective date.

Thus, this Court finds that Mallela III supports the principle that §65-3.16 (a) (12) does not apply retroactively to claims accruing prior to its effective date of April 5, 2002. Indeed, it has recently been held that this section of the regulations has no retroactive application (see, Multiquest, PLLC v. Allstate Ins. Co. (Jeune), __Misc 3d__, 2005 NY Slip Op 25512 [Civil Court, Queens County, December 1, 2005]). Since the claim in the instant action arose in 1998, §65-3.16 (a) (12) does not apply to this case and, therefore, the defense of defective, or fraudulent, organization is not available to defendant as a basis to deny the instant claim.

This Court does not read the following statement in Mallela III as contradicting the above analysis: “The Superintendent’s regulation allowing carriers to withhold reimbursement from fraudulently licensed medical corporations governs this case” (Mallela III, 4 NY3d at 321). This language has occasioned a contrary interpretation (see Metroscan Imaging P.C. v. GEICO, 8 Misc 3d 829 [Civil Court, Queens County 2005]). However, this Court is of the opinion that Mallela III is merely saying here that §65-3.16 (a) (12) applies to that case’s fact pattern forming the question that was certified, which is whether payment may be withheld from a fraudulently incorporated provider, not that the cause of action was a pre-April 5, 2002 claim and the regulation applies retroactively to bar that claim.

The insurer in Mallela had also argued that the regulation must be viewed as retroactive in effect because it is merely a clarification and not a new rule. The promulgation of §65-3.16 (a) (12) was accompanied by an explanatory notice stating that the section was “added to clarify that a health care provider must be properly licensed to be eligible for reimbursement under no-fault” (NY Reg, May 19, 2001, at 19). Therefore, argued the insurer, the Superintendent of Insurance, in promulgating §65-3.16 (a) (12), was merely articulating a mandate that was “always” in effect (see Mallela II, 372 F 3d at 509). This Court finds said argument unpersuasive. The Superintendent of Insurance is empowered to implement the no-fault law by promulgating [*6]regulations that interpret and clarify the legislative policy (see Ostrer v. Schenck, 41 NY2d 782 [1977]; Insurance Law §301). Hence, every section of the regulations issued by the Superintendent may be considered essentially interpretative or clarifying. The Superintendent’s notice explaining the reason for the addition of §65-3.16 (a) (12) is not to be taken as a pronouncement that the effective date of the regulations is to be ignored with respect to this section.

In light of the determination by this Court that §65-3.16 (a) (12) has no retroactive application and, hence, does not apply to this case, the issue of whether that section is subject to the preclusion rule is academic. However, this Court notes that the holding in Mallela III is dispositive of this issue as well.

Lack of coverage is a defense that survives an untimely denial of claim (see Central General Hosp. V. Chubb Group of Ins. Cos., 90 NY2d 195 [1997]; Presbyterian Hosp. v. Maryland Cas. Co., supra). Plaintiff urges that §65-3.16 (a) (12) does not preclude coverage but merely creates a statutory condition precedent to an insurer’s entitlement to payment, and, therefore, a defense based upon §65-3.16 (a) (12) is subject to the 30-day rule.

An injured party (or his assignor) may only be reimbursed under the no-fault law for “basic economic loss” (see Insurance Law §5102, et seq). The Court of Appeals found that the Superintendent of Insurance, by promulgating §65-3.16 (a) (12), interpreted this statute and “excluded from the meaning of basic economic loss’ payments made to unlicensed or fraudulently licensed providers, thus rendering them ineligible for reimbursement” (Mallela III, 4 NY3d at 320). Thus, the expenses incurred from services rendered by a provider who fails to meet licensing requirements are no longer covered and are, thus, outside the orbit of the no-fault law and its time requirements.

The Mallela III Court does not contradict its holding in Servido v. Superintendent of Insurance (53 NY2d 1041 [1981], revg on dissenting op 77 AD2d 70, 76-86 [1st Dept 1980]) wherein it concluded that the Superintendent’s authority does not extend to creating any new exclusion by regulation. The Superintendent, in promulgating §65-3.16 (a) (12), did not impermissibly add any new category of exclusion to an enumerated list of exclusions circumscribed in the Insurance Law. Rather, the Superintendent interpreted the term “professional health services” in Insurance Law §5102 (a) as no longer encompassing those rendered by health care providers who are in violation of licensing requirements. Therefore, holds the Mallela III Court, this regulation was within the scope of the Superintendent’s authority to promulgate and is, accordingly, valid.

In addition, by holding in Mallela III that §65-3.16 (a) (12) does not apply retroactively to support a cause of action for fraud or unjust enrichment for payments made prior to April 4, 2002, and by stating that it would not reach the question of whether plaintiff had shown sufficient facts to support such a cause of action absent any indication that any payments were made after April 4, 2002, the Court of Appeals is implicitly recognizing the viability of a cause of action for fraud and unjust enrichment pursuant to §65-3.16 (a) (12). Such acknowledgment presupposes the inapplicability of the 30-day rule. Since an insurer who has paid a claim has obviously not denied it, a cause of action for fraud or unjust enrichment could never arise if §65-3.16 (a) (12) were subject to preclusion.

Thus, it is clear that §65-3.16 (a) (12) is not subject to preclusion but may be raised even [*7]if not included in a timely denial of claim.

Defendant also argues that the subject psychological services were provided by an independent contractor and, therefore, plaintiff was not entitled to recover no-fault benefits. Plaintiff denies that any services to its assignor were rendered by an independent contractor and contends that even were they so provided, that defense was waived as it was not raised in a timely denial of claim. Plaintiff, citing the Chubb rule that the only defense that survives an untimely denial of claim is one asserting lack of coverage, argues that the independent contractor defense was waived since it does not relate to a lack of coverage under the policy of insurance. Plaintiff’s argument is without merit.

A billing provider may not recover no-fault benefits for services performed by an independent contractor, since the services billed were not rendered by it or its employees and, therefore, it is not a “provider” of health care services within the meaning of 11 NYCRR 65.15 (j) (1) (now 11 NYCRR 65-3.11 [a]) (see Rockaway Boulevard Medical P.C. v. Progressive Ins., 9 Misc 3d 52 [App Term 2nd & 11th Jud Dists 2005]). Such defense is non-waivable and is not subject to the preclusion rule (id).

Nevertheless, defendant fails to submit any proof that the services provided to plaintiff’s assignor were by an independent contractor. Although Clark, in her EUO, states that she worked as an independent contractor, she does not state that she rendered any services to plaintiff’s assignor herein. Therefore, on this record, defendant has not conclusively established that the treating provider was not an employee of plaintiff but an independent contractor.

Defendant also argues that there was no coverage under the insurance policy because the billing was fraudulent. This argument also lacks merit.

Lack of coverage is a defense “premised on the fact or founded belief that the alleged injury does not arise out of an insured incident” (Chubb, supra at 199). Defendant does not deny that plaintiff’s claim arose out of a legitimate motor vehicle accident. A defense of fraud in billing is not preserved if untimely raised in a proper denial of claim (see Chubb, supra; Melbourne Medical P.C. v. Utica Mutual Ins. Co., 4 Misc 3d 92 [App Term 2nd & 11th Jud Dists 2004]). Defendant’s appeal to the insurance policy that contains a provision declaring that there is no coverage under the policy if the insured conceals, misrepresents or makes any false statements of fact is unavailing. The mandatory no-fault endorsement is an “internally complete and distinct part of the insurance policy [that] . . . cannot be qualified by . . . conditions . . . of the liability portions of the policy” (Melbourne Medical P.C. v. Utica Mutual Ins. Co., supra, quoting Utica Mutual Ins. Co. v. Timms, 293 AD2d 669, 670 [2nd Dept 2002]). An insurer may not alter the mechanism of the no-fault law by adding contrary provisions in its contract of insurance. Since defendant has not issued a denial of claim, its defense asserting fraudulent billing is precluded.

Finally, defendant contends that it is entitled to summary judgment on the ground that the assignment of benefits form is defective. Defendant’s argument is without merit. For the reasons heretofore stated, a defense premised upon a defect in the assignment of benefits form is waived if not preserved in a timely denial of claim.

Plaintiff’s cross-motion for summary judgment is also denied. Plaintiff has failed to establish that it mailed a completed proof of claim to defendant. The affidavit of service of Joseph Indelicato, dated October 12, 2005, is insufficient to establish that the bill was mailed, in that it fails to describe the office procedure for the mailing of bills or the method of mailing. [*8]Thus, plaintiff has failed to establish a prima facie entitlement to summary judgment.

Accordingly, the motion and cross-motion must be denied.

Dated: December 19, 2005___________________________

KEVIN J. KERRIGAN, J.C.C.

Footnotes

Footnote 1:The effective date is actually April 5, 2002. The new regulations were originally filed on August 2, 2001, setting an effective date of September 1, 2001. However, their effectiveness was stayed pending legal challenge. The stay was overruled on April 4, 2002 and the new regulations became effective on April 5, 2002 (see NYCRR T. 11, Ch III, Subch. B, Pt. 65, Refs & Annos).

Civil Court, Queens County

119638/04

Diccia T. Pineda-Kirwan, J.

Upon the foregoing cited papers, and after conference, it is ordered that plaintiff’s motion for an order, pursuant to CPLR 3212, granting summary judgment is denied and defendant’s cross motion for an order, pursuant to CPLR 3212, granting summary judgment is granted and the complaint is dismissed.

Inasmuch as the adjourned date of the motion was ten months after the original return date, and inasmuch as there had been an intervening order amending defendant’s answer, on consent of the parties, all papers were accepted and the parties were permitted to submit supplemental papers briefing the remaining issues for the Court.

In order to succeed on a motion for summary judgment, the movant must tender admissible evidentiary proof demonstrating the absence of any genuine issues of material fact for trial. (CPLR 3212; Winegrad v New York University Medical Center, 64 NY2d 851 [1985].) Civil Practice Law and Rules 3212 (b) provides that a motion for summary judgment shall be supported by an affidavit by a person “having knowledge of the facts; it shall recite all the material facts; and it shall show that there is no defense to the cause of action or that the … defense has no merit.” The affirmation of an attorney, even one without personal knowledge of the facts, may serve as the vehicle for the submission of acceptable attachments which provide [*2]evidentiary proof in admissible form. (See Zuckerman v New York, 49 NY2d 557 [1980].) An attorney’s affirmation could also be accepted with respect to admissions of a party made in the attorney’s presence. (Id.) Once a prima facie showing of entitlement to judgment as a matter of law is made, the burden shifts to the nonmovant to produce evidentiary proof sufficient to establish the existence of material issues of fact which require a trial of the action. (Alvarez v Prospect Hospital, 68 NY2d 320 [1986].)

According to the annexed complaint, this is an action brought pursuant to Insurance Law 5101 et seq and the regulations of the New York State Insurance Department (11 NYCRR 65.10 et seq), to recover the cost of health care services rendered by plaintiff to its assignor, Herbert Paige, for dates of treatment in May and June 1999.

Defendant’s answer contains sixteen affirmative defenses and, by Court Order dated September 9, 2005, and on consent of the parties, the answer was amended to add two more affirmative defenses: fraud in the incorporation and that the services were provided by an independent contractor and not by plaintiff or its employee such that plaintiff is not entitled to receive direct payment from defendant.

In support of the motion, plaintiff submits an affidavit of Joseph Indelicato, Ph.D., plaintiff’s owner, in which he does not attest to personal knowledge of this claim but states that he is “fully familiar with all the policies, practices and procedures” of plaintiff. This statement, however, is insufficient to lay a foundation for the exhibits attached to the moving papers. (CPLR 4518; ; People v Kennedy, 68 NY2d 569 [1986].) Significantly, plaintiff fails to establish the mailing of its claim to defendant, a necessary element of its prima facie case. (See Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742 [2d Dept 2004; Residential Holding Corp v Scottsdale Insurance Co, 286 AD2d 679 [2d Dept 2001].)

Plaintiff has failed to tender evidence, by proof in admissible form, to establish the cause of action sufficient to warrant summary judgment. (See Zuckerman v City of New York, 49 NY2d 557 [1980].) Accordingly, as the burden does not shift to defendant on plaintiff’s prima facie case, the motion is denied without regard to the opposition. (See Winegrad v NYU Med Center, 64 NY2d 851 [1985].)

Defendant, as cross movant, argues that it is entitled to summary judgment as a matter of law on several grounds: (1) at the time services were rendered to its assignor, plaintiff’s corporate structure was defective as it did not have a psychologist as an owner and under Business Corporation Law, all professional service corporations that are licensed to practice medicine must be owned and controlled only by licensed physicians, (See BCL 1507 and 1508), (2) services were rendered by independent contractors and not an employee of plaintiff, (3) plaintiff’s billing is fraudulent, and (4) the assignment of benefits form is defective.

In support of its cross motion, defendant submits a certified examination under oath of Kathryn Clark, Psy. D., signed by the witness, in which she states that at no time did she give her consent to plaintiff to use her name as a member of the corporation as the designated [*3]psychologist of the corporation and that plaintiff did so without her knowledge and consent. Further, the witness states that she began working for plaintiff as an independent contractor towards the end of 1998 until 2000, but that she may have done very little work for plaintiff in 2001. The witness stated that she had never been an employee of plaintiff. Defendant annexes copies of Department of Treasury – IRS Form 1099 for the years 1998-2000, listing plaintiff as the “PAYER” and Dr. Clark as the “RECIPIENT,” and which provide information for each of those years in Box 7 of the form, entitled “nonemployee compensation.”

In further support of its cross motion, defendant submits plaintiff’s responses to discovery notices which include, inter alia: (1) two bills from plaintiff regarding its assignor, addressed to defendant, and which include, under plaintiff’s letterhead and type written”Kathryn L. Clark, PhD/NY Lic No.012553-1/Tax ID # 11-3450114,” (2) a “Letter of Medical Necessity Regarding Psychological Testing” and a “Psychological Assessment,” both on plaintiff’s letterhead and signed

by Kathryn L. Clark, Psy.D. regarding plaintiff’s assignor, Herbert Paige, and (3) the filing receipt from the New York State Secretary of State for “Multiquest Psychological & Acupuncture Services, PLLC” indicating that the articles of organization were filed on July 14, 1998. While plaintiff’s discovery responses do not include said articles of incorporation, a certificate of amendment of the articles of organization dated September 28, 2001 and signed by Joseph Indelicato, are included as well as a Department of the Treasury-IRS Form W9, again signed by Joseph Indelicato indicating that plaintiff’s tax payer identification number is 11-3450114, the same tax number indicated on plaintiff’ s bills for Kathryn Clark.

Defendant submits the original articles of organization, missing from plaintiff’s response, naming Kathryn Clark as an original member and manager of plaintiff corporation. In its reply papers, defendant annexes a March 2000 amendment to plaintiff’s articles of organization amending plaintiff’s name to “Multiquest Psychological, Acupuncture, Massage Therapy & Social Work Services, PLLC” and which indicates that Kathryn L. Clark is licensed to practice psychology.

The affidavit of Mike Bruno, submitted in support of the cross motion was not considered as it was executed out of state and fails include the required certificate of conformity. (CPLR 2309[c]; Real Property Law 299-a[1].) The two Opinion Letters issued by the Department of Insurance on the issue of independent contractors, also annexed to the motion, are, according to their own terms, informal and not binding on any court. (See State Farm Mut Auto Ins Co v Mallela, 372 F3d 500 [2d Cir 2004].)

Defendant argues that it is entitled to summary judgment on the basis that plaintiff was fraudulently incorporated at the time of treatment and thus not entitled to reimbursement. Plaintiff opposes the cross motion arguing that the regulations in effect at the time services were rendered did not bar payment on that basis.

Since 1973, when the New York State Legislature passed the Comprehensive Motor Vehicle Insurance Reparations Act (“No-Fault Law”), replacing common law tort [*4]remedies for the majority of injuries associated with automobile accidents the legislative purpose has been to protect the “right of an injured party to prompt and full compensation” (See L 1973, ch 13; Ins Law 5101 et seq; Gurnee v Aetna Life & Cas Co, 55 NY2d 184, 193, [1982] cert den 459 US 837 [1982].) The goal was to create a simple, efficient system that would provide prompt compensation to accident victims without regard to fault, and in that way reduce costs for both courts and insureds. (See NY Medical Soc’y v Serio, 100 NY2d 854 [2003].) The legislation, however, was considered a compromise: “prompt payment for basic economic loss to injured persons regardless of fault, in exchange for a limitation on litigation to cases involving serious injury.” (Pommels v Perez, 4 NY3d 566 [2005] citing Montgomery v Daniels, 38 NY2d 41 [1975]). This “tradeoff” allowed insurers to contest fraudulent claims but only within “a strict, short-leashed contestable period and process designed to avoid prejudice and red-tape dilatory practices.” (Presbyterian Hosp v Maryland Cas Co, 90 NY2d 274, 285 [1997].)

The issue of insurance fraud, however, has undermined the goal of No-Fault Law and recent Court of Appeals decisions involving No-Fault Law have directly addressed it. (See Pommells v Perez, 4 NY3d 566 [2005] “[Abuse . . . abounds]”; State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 “rapidly growing incidences of fraud in the no-fault regime”]; Med Soc’y v Serio, 100 NY2d 854 [2003]) [“suspected automobile insurance fraud increased by 275%”].) Thus, the salutary purpose of No-Fault law has been hampered considerably by the rise in illegitimate and fraudulent claims.

For the past thirty years, the responsibility of administering the No-Fault Law has belonged to the Superintendent of Insurance who has the broad power to interpret, clarify, and implement the legislative policy through the promulgation of the “Regulations Implementing The Comprehensive Motor Vehicle Insurance reparations Act” also known as Regulation 68 and codified at 11 NYCRR part 65. (See Insurance Law 301 and 5101 et seq; Med. Soc’y v Serio, 100 NY2d 854 supra; Ostrer v Schenck, 41 NY2d 782 [1977]). The Superintendent’s “interpretation, if not irrational or unreasonable, will be upheld in deference to his special competence and expertise with respect to the insurance industry, unless it runs counter to the clear wording of a statutory provision.” (See Matter of Medical Malpractice Ins Assn v Superintendent of Ins of State of NY, 72 NY2d 753 [1988]; Matter of NYPIRG, Inc v New York State Dept of Ins, 66 NY2d 444 [1985]. The Superintendent of Insurance must, however, follow the State Administrative Procedure Act’s requisite procedures for promulgating regulations, otherwise the regulations will be struck down as unconstitutional. (SAPA 202; Medical Soc’y of NY, Inc v Levin, 185 Misc 2d 536 [Sup Ct NY County] affd 280 AD2d 309 [1st Dept 2002].).

In an effort to combat the widespread abuse in no fault insurance claims, in 1999, the Superintendent proposed an amended Regulation 68, with an effective date of February 1, 2000. (See Med Socy v Serio, 100 NY2d 854, supra.) The amended rule pertinent to this action provided: “[a] provider of health care services is not eligible for reimbursement under section 5102 [a][1] of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such service in New York.” (11 NYCRR 65-[*5]3.16[a][12].) As above stated, under Business Corporation Law, all professional service corporations that are licensed to practice medicine must be owned and controlled only by licensed physicians. (See BCL 1507 and 1508.)

Prior to the effective date for the Amended Regulation 68, in January 2000, the Superintendent of Insurance issued two Opinion Letters, both of which addressed the requirement that providers who are given an assignment by an eligible injured person and become the claimant for purposes of reimbursement must be properly licensed to perform services, so as not to engage in the corporate practice of medicine. Again, those Opinion Letters have no binding effect. (State Farm Mut Auto Ins Co v Mallela, 372 F3d 500 [2d Cir 2004].) On June 9, 2000, the amended regulations were struck down for failure to substantially comply with the State Administrative Procedure Act. (Matter of the Medical Society of the State of New York, Inc. v Levin, 280 AD2d 309, supra.) Thus, as of the date of that decision, the additional licensing requirement in the regulation still had no force and effect. While an appeal from that decision was pending, the Superintendent again revised Regulation 68 which was later approved by the Court of Appeals. (Med Socy v Serio, 100 NY2d 854, supra.)

In 2005, on the same issue of a provider’s licensing status, by certified question from the United States Court of Appeals for the Second Circuit, in 2005 the Court of Appeals answered the following question affirmatively: “Whether, under our “no-fault” insurance laws (see Insurance Law §§ 5101, et seq. and implementing regulations), insurance carriers may withhold payment for medical services provided by fraudulently incorporated enterprises to which patients have assigned their claims.” (See State Farm Mut Auto Ins Co v Mallela, 4 NY3d 313, supra.) By so doing, the Court held that 11NYCRR 65-3.16[a][12] which requires compliance with New York State licensing laws in order to be reimbursed, was valid, had the force of law, and was to be enforced as written. In the decision, the Court noted in two instances that the effective date of the regulation was April 4, 2002. (State Farm Mut Auto Ins Co v Mallela, 4 NY3d 313, 320 and 322, supra.) What the Court did not expressly do was to give 11NYCRR 65-3.16[a][12] retroactivity.

Generally, retroactivity will be applied only where the language of the law expressly allows for such an application. (See Kaye v Whalen, 44 NY2d 754 [1978].) Had the Court given the rule retroactivity, it would have rewritten the Regulation, sidestepped the required procedures of the State Administrative Procedure Act and it would have made “an abrupt shift in controlling decisional law.” (See SAPA 201 and 202; Gurnee v Aetna Life & Casualty Co., 55 NY2d 184, supra.; Medical Soc’y of NY, Inc. v Levin 280 AD2d 309, supra.)

At the time plaintiff’s assignor was treated in 1999, the amended Regulation 68 had not yet taken effect and the regulation that was then in effect provided only that “upon assignment by the applicant . . ., [an insurer] shall pay the providers of services . . . directly.” (11 NYCRR 65.15[j][1].) Although defendant has demonstrated that there is no issue of fact as to [*6]plaintiff’s fraudulent incorporation and plaintiff has failed to raise an issue of fact in that regard, as the rule then in effect contained no further requirement as to licensing, that part of the motion seeking summary judgment based on the retroactivity of the amended regulation is denied. While mindful of the extent that fraud has undermined the policy of No-Fault Law, as above cited in detail, and notwithstanding an undesirable result, nevertheless, the regulation should not be applied retroactively.

Defendant’s next basis for arguing that it is entitled to summary judgment as a matter of law is that the treating provider was in fact an independent contractor and thus plaintiff is not entitled to reimbursement.

In opposition to the cross motion, plaintiff argues that defendant’s allegations are vague and unsubstantiated and that no distinction should be made between an independent contractor and an employee of plaintiff. In its reply, defendant submits an affirmation from its attorney, James K, Hogan, in which he states that in another matter pending in Civil Court, Bronx County, on September 28, 2005, he conducted the deposition of plaintiff’s current owner, Joseph Indelicato, Ph.D., during which deposition Dr. Indelicato admitted under oath that all psychologists employed by Multiquest were employed as independent contractors until 2002.

A billing provider seeking to recover no-fault benefits for services which were not rendered by it or its employees, but by a provider who is an independent contractor, is not a “provider” of the medical services rendered within the meaning of the applicable insurance regulations and is therefore not entitled to recover direct payment of assigned no-fault benefits from the defendant insurer. (AB Med Servs PLLC v New York Cent Mut Fire Ins Co, 7 Misc 3d 1018A, 2005 NY Slip Op 50662U [App Term 2d & 11th Jud Dists].) A provider’s entitlement to recovery of no-fault benefits directly from the insurer is contingent upon an assignment of such benefits, and the assignment must be made to the “providers of services.” (See Rockaway Blvd Med PC v Progressive Ins, 2005 NY Slip Op 25278 [App Term 2d & 11th Jud Dists].) (See Rockaway Blvd Med PC v Progressive Ins, 2005 NY Slip Op 25278 [App Term 2d & 11th Jud Dists].) A defense that the plaintiff in an assigned first-party no-fault action may not maintain the action because it is not a “provider” within the meaning of the insurance regulations “is non-waivable and not subject to the preclusion rule.” (Id. at 2)

In light of the above, defendant has demonstrated, through proof in admissible form, including the EUO transcript, the IRS forms and plaintiff’s owner’s admission, that there is no issue of fact that the treating provider Kathryn Clark who rendered services to plaintiff’s assignor was an independent contractor such that plaintiff may not recover no-fault benefits. In opposition, plaintiff’s evidence fails to raise an issue of fact in this regard notwithstanding the additional opportunity it was given to do so.

In view of the foregoing, the motion is denied and the cross motion dismissing the complaint is granted. As defendant’s cross motion is granted, its remaining arguments will not be [*7]addressed.

The Clerk shall enter judgment accordingly.

This constitutes the decision and order of the Court.

Dated:December 19, 2005___________________________

DICCIA T. PINEDA-KIRWAN

Judge, Civil Court

Civil Court, Kings County

96502/04

Eileen N. Nadelson, J.

Plaintiff, a medical provider, instituted this action to recover first party No-Fault benefits from Defendant insurer. Plaintiff moved for summary judgment, alleging that Defendant neither paid nor denied the claim within the statutorily mandated thirty-day period after receipt of the claims. Ins. Law sec. 5106; Regulations sec. 65-3.8. Plaintiff further alleged that the Denial of Claim form (NF-10) was defective in that it did not indicate the reason for the denial with specificity as is required by section 65-3.4( c) of the Regulations.

Defendant, in opposition, claimed that the denials were timely and that the grounds for the denial are sufficiently specific to apprise Plaintiff as to the reasons for not paying the claim.

After argument, the court has concluded that the NF-10 form was properly mailed within the statutory time frame. Consequently, the only issue remaining for the court is whether Defendant’s reason for the denial, as stated in its Denial of Claim form, is legally sufficient to forestall Plaintiff’s motion for summary judgment. [*2]

The explanation for Defendant’s denial of the first party benefits, as stated in section 33 of its NF-10, is: “The Claim is Denied Based On An Examination Under Oath.”

In 1979, the New York Court of Appeals established the general guidelines for insurers when denying coverage. According to General Accident insurance Group v. Cirucci, 46 NY2d 862, 414 N.Y.S. 2d 512 (1979):

...the notice of disclaimer must promptly apprise the claimant with a high

degree of specificity of the ground or grounds on which the disclaimer is

predicated. Absent such specific notice, a claimant might have difficulty

assessing whether the insurer will be able to disclaim successfully. This

uncertainty could prejudice the claimant’s ability to ultimately obtain

recovery. In addition, the insurer’s responsibility to furnish notice of the

specific ground on which the disclaimer is based is not unduly burdensome,

the insurer being highly experienced and sophisticated in such matters.

Therefore, a timely denial alone does not avoid preclusion of a provider’s motion for summary judgment where said denial is factually deficient, conclusory, vague or otherwise involves a defense which has no merit as a matter of law. Nyack Hospital v. Metropolitan Property & Casualty Ins. Co., 16 AD3d 564, 791 N.Y.S. 2d 658 (2d Dept. 2005); Nyack Hospital v. State Farm Mut, Auto. Ins. Co., 11 AD3d 664, 784 N.Y.S. 2d 136 (2d Dept. 2004).

The blanket statement of Defendant on its NF-10 is too vague and ambiguous to alert Plaintiff as to the actual grounds for the denial of benefits. Stating that a denial is based on an Examination Under Oath, without indicating what about that examination merits denial of first-party benefits under No-fault law, does not set forth a factual basis on which to mount a meritorious legal defense. Park Neurological Services, P.C. v. Geico Insurance, 4 Misc 3d 95, 782 N.Y.S. 2d 507 (Sup. Ct. App. Term 2004). Therefore, because Defendant’s explanation of its reasons for denying Plaintiff’s claim on its NF-10 form was not stated with a high degree of specificity, it is insufficient to overcome Plaintiff’s summary judgment motion. All-Country Medical & Diagnostic P.C. v. Progressive Casualty Insurance Co., 8 Misc 3d 616, 795 N.Y.S. 2d 434 (Nassau County 2005).

The clerk is ordered to enter judgment in favor of Plaintiff in the amount of $1024.00, plus statutory interest, costs and attorneys’ fees.

Dated: October 3, 2005

__________________________

EILEEN N. NADELSON, J.C.C.

[*1]

Civil Court of the City of New York, Kings County, October 3, 2005

APPEARANCES OF COUNSEL

Amos Weinberg, Great Neck, for plaintiffs. Jaffe & Nohavicka, New York City, for defendant.

OPINION OF THE COURT

Peter P. Sweeney, J.

In this action to recover assigned first-party no-fault benefits, the novel issue presented is whether it is appropriate to grant leave to a plaintiff billing provider to amend a fatally defective proof of claim once the action to recover on the claim has been commenced. For the reasons set forth below, the court concludes such a motion should be denied.

Factual Background

The four plaintiff assignees, A.B. Medical Services PLLC, DAV Chiropractic P.C., Daniel Kim’s Acupuncture P.C. and G.A. Physical Therapy P.C., commenced this action seeking to recover on multiple unpaid claims for assigned first-party no-fault benefits for medical services provided to their mutual assignor, Nelson Vargas.

The matter appeared before the undersigned for trial on June 16, 2005. Prior to the commencement of the trial, the parties entered into a written stipulation of admitted facts. Pursuant to the stipulation, the defendant admitted that it received all the proofs of claim at issue (the NF-3 claim forms). Defendant further admitted that it did not pay the claims in full within 30 days of their receipt and that the only payments it made on the claims were those referenced in plaintiffs’ complaint. Defendant admitted that it never requested verification of the claims following their receipt thereby tolling the 30-day period in which it had to pay or deny the claims.

Although the defendant claims to have issued timely denials of the claims asserting lack of medical necessity as its only defense, pursuant to the stipulation, defendant withdrew the denials and the defenses raised therein.

Defendant’s counsel correctly pointed out that in all of the NF-3s, copies of which were stipulated into evidence, the “treating providers” were identified as “independent contractors” of the plaintiff billing providers. Defendant maintained that, for this reason alone, the entire action must be dismissed. In support of its position, defendant cited A.B. Med. Servs. PLLC v Liberty Mut. Ins. Co. (9 Misc 3d 36[*2][App Term, 2d & 11th Jud Dists 2005]). Therein, the court held that a billing provider is ineligible to recover assigned first-party benefits where the medical services were provided by an independent contractor.

Plaintiffs maintained that defendant waived the independent contractor defense recognized in A.B. Med. Servs. PLLC by failing to timely object to plaintiffs’ claim forms and by failing to assert the defense in a timely denial. Plaintiffs further maintained that the treating providers identified in the NF-3s were actually employees of the plaintiffs and that plaintiffs simply made a mistake by identifying them as independent contractors. Plaintiffs moved at trial for leave to amend the NF-3s to correct the mistake and asked for the opportunity to introduce evidence at trial to establish the treating providers’ correct status.

The court reserved decision on all issues and gave the parties permission to submit memorandums of law supporting their respective positions. The court permitted plaintiffs to offer evidence at trial on the issue of whether the treating providers were independent contractors or employees but ruled that such evidence would be considered only if plaintiffs’ motion to amend the proofs of claim were granted.

After due consideration and having had the opportunity to review the memorandums of law submitted by the parties, the court hereby denies plaintiffs’ motion to amend the NF-3 proof of claim forms and directs that judgment be entered in favor of the defendant dismissing the action on the ground that the proofs of claim identified the treating providers as independent contractors thus rendering the claims fatally defective on their face.

Discussion

In A.B. Med. Servs. PLLC (supra), the court held that 11 NYCRR 65.15 (j) (1) (now 11 NYCRR 65-3.11 [a]) prohibits a billing provider from recovering assigned first-party no-fault benefits where the medical services were performed by an independent contractor. 11 NYCRR 65.15 (j) (1) (now 11 NYCRR 65-3.11 [a]) provides that “[a]n insurer shall pay benefits . . . directly to the applicant or . . . upon assignment by the applicant . . . [to] the providers of services.” The court interpreted the phrase “providers of services” to mean an actual provider of medical services and held that a “billing provider seeking recovery of assigned no-fault benefits for medical services which were not performed by it or its employees, but by an independent contractor identified as the ‘treating provider’ on NF-3 claim forms, is not a ‘provider’ of . . . services . . . and is hence not entitled to recover ‘direct payment’ of assigned no-fault benefits” (9 Misc 3d at 37).

Plaintiffs’ contention that defendant waived the independent contractor defense by failing to timely object to plaintiffs’ claim forms and by failing to assert the defense in a timely denial is well taken. Indeed, it is well established that an insurer’s failure to object to the adequacy of plaintiff’s proof of claim within 10 days of receipt (now 15 business days) “constitutes a waiver of any defenses with respect thereto” (see A.B. Med. Servs. PLLC v Nationwide Mut. Ins. Co., 6 Misc 3d 70, 71 [App Term, 2d & 11th Jud Dists 2004]; Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564 [2d Dept 2005]; New York Hosp. Med. Ctr. of Queens v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640 [2d Dept 2004]). It is also well established that, except for the defense that there is no coverage at all for a claim, “preclusion of the insurance company’s ability to deny the claim is the appropriate remedy where, as here, the insurance company neither denies a claim within 30 days after receiving it nor seeks to extend that time by requesting verification in the prescribed forms” (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 278 [1997] [internal quotation marks deleted]; see also Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195 [1997]).

Notwithstanding these principles, in a case decided on July 7, 2005, the Supreme Court, Appellate Term, held that the independent contractor defense is “nonwaivable and not subject to the preclusion rule” (Rockaway Blvd. Med. P.C. v Progressive Ins., 9 Misc 3d 52, 54 [App Term, 2d & 11th Jud Dists 2005]). The court must therefore conclude that the principles of waiver and preclusion do not apply where the proof of claim, on its face, demonstrates the applicant’s nonentitlement to payment of the claim. Turning to plaintiffs’ motion for leave to amend their proofs of claim, it is the opinion of the court that the motion must be denied. CPLR 3025 (b) provides that “[a] party may amend his pleading . . . at any time by leave of court” (emphasis added). A proof of claim is not a pleading and the court is unaware of any statute or constitutional provision permitting the amendment of a proof of claim by leave of court, especially where an action is pending that is predicated upon the submission of the proof of claim. Unlike the Supreme Court, this court’s equitable jurisdiction is very limited (Parker v Rich, 140 AD2d 177 [1st Dept 1988]) and absent a particular constitutional or statutory empowerment, this court lacks subject matter jurisdiction to grant equitable relief (see Goldstein v Stephens, 118 Misc 2d 614, 615 [App Term, 1st Dept 1983]). The relief plaintiffs are requesting can only be viewed as equitable in nature and, as stated above, the court is unaware of any statute or constitutional provision empowering this court to grant the relief.

Even if it were within the court’s power to grant plaintiffs’ motion, it would decline to do so. The Insurance Law and the regulations promulgated thereunder give an insurer “30 calendar days after proof of claim is received . . . [to] either pay or deny the claim in whole or in part” (11 NYCRR 65-3.8 [c]; Insurance Law § 5106 [a]). Furthermore, within 10 days of receipt of a claim (now 15 business days), an insurer is entitled to request verification of a claim (11 NYCRR 65.15 [d] [1], now 11 NYCRR 65-3.5 [a]). It would be fundamentally unfair to permit the plaintiffs to cure their fatally defective proofs of claim and then allow them to proceed to trial on the amended claims without giving the defendant an opportunity to pay or deny the amended claims within the allotted time period or an opportunity to request further verification of the claims.

For the above reasons, it is hereby ordered that judgment be entered in favor of the defendant dismissing the entire action.

[*1]

Civil Court of the City of New York, New York County, August 30, 2005

APPEARANCES OF COUNSEL

Thomas G. Connolly for defendant. Leon Kucherovsky for plaintiff.

OPINION OF THE COURT

Manuel J. Mendez, J.

The defendant moves for an order dismissing the case on the ground that the plaintiff lacks standing to prosecute the action. Plaintiff opposes that motion.

Facts

Plaintiff health care provider, T & G Medical Supplies, Inc. as assignee of Yolette Milford, mailed a bill to defendant, National Grange Mutual Insurance Company, regarding treatment for dates of services it rendered the assignor on April 21, 2003, April 24, 2003, April 29, 2003, May 1, 2003, May 5, 2003, and May 6, 2003. Defendant received the bill on June 5, 2003 and timely denied it on June 6, 2003. Defendant now moves this court to dismiss the action on the ground that plaintiff has no standing to sue because no valid assignment has been exchanged with the plaintiff’s responses to the defendant’s discovery demands.

Issue

Does the plaintiff have standing to sue?

Law

To establish a prima facie claim for the recovery of first-party no-fault benefits for medical supplies or equipment, plaintiff assignees must show a policy in effect issued by defendant covering the treated person and motor vehicle collision, assignment of policy benefits, cost of the equipment or supplies, presentation of the claims to the insurer and failure to pay or deny within 30 days (see, 11 NYCRR 65.15 [g] [6]; Westchester County Med. Ctr. v New York Cent. Mut. Fire Ins. Co., 262 AD2d 553 [2d Dept 1999]; Neuro Care Ctr. II v Allstate Ins. Co., NYLJ, Jan. 28, 2003, at 19, col 5; Metroscan Imaging v American Tr. Ins. Co., NYLJ, Dec. 10, 1999, at 27, col 5 [Civ Ct, NY County]; Vinings Spinal Diagnostic v Liberty Mut. Ins. Co., 186 Misc 2d 287 [2000]; King’s Med. Supply v Travelers Prop. Cas. Corp., 194 Misc 2d 667 [2003]). Plaintiff must demonstrate it has standing to bring the action and that completed proofs of claims were presented to the insurer who failed to pay or deny within 30 days.

Recently, the Appellate Term, Second Department, held that admissible proof authenticating an assignor’s signature on an assignment form is not necessary to establish its prima facie entitlement to summary judgment (see, A.B. Med. Servs. PLLC v Nationwide Mut. Ins. Co., 6 Misc 3d 70 [App Term 2d & 11th Jud Dists 2004]). It also held that the only thing required of a health care provider/assignee plaintiff in regard to an assignment is that it submit a “properly executed assignment” on one of four forms (at 71). The four forms the court names are (1) the NYS form NF-3 which is the prescribed verification of treatment by the attending physician or other provider of service form; (2) the NYS form NF-4 which is the prescribed verification of hospital treatment form; (3) the NYS form NF-5 which is the prescribed hospital facility form, and (4) the NYS form NF-AOB which is the prescribed no-fault assignment of benefits form (see, A.B. Med. Servs. PLLC v Nationwide Mut. Ins. Co., supra; 11 NYCRR 65-3.11 [b] [2]). [*2]

Courts have also held that a defendant’s failure to pay or deny a claim, whether in whole or partially, within the 30 days mandated by the statute, prevents it from alleging any defense related to the adequacy of the claim forms provided by the plaintiff including the lack of necessary signatures on an assignment form (see A.B. Med. Servs. PLLC v CNA Ins. Co., 1 Misc 3d 137[A], 2004 NY Slip Op 50061[U] [App Term, 1st Dept 2004]; Diagnostic Rehab. Medicine Serv., P.C. v Farm Family Cas. Ins. Co., NYLJ, June 29, 2005, at 24, col 2 [1st Dept 2005]).

In the case at bar, the defendant moves to dismiss plaintiff’s claim on the ground that plaintiff does not have standing to sue because there is no assignment. This distinguishes it from the cases discussed above where plaintiff moved for summary judgment based on defendant’s failure to pay or deny the claim.

In A.B. Med. Servs. PLLC v CNA Ins. Co. and Diagnostic Rehab. Medicine Serv. v Farm Family Cas. Ins. Co., defendants failed to pay or deny the claim within the statutory time or to seek verification. This case is distinguishable from those cases in that defendant received plaintiff’s bill on June 5, 2003 and issued a timely denial on June 6, 2003 (see A.B. Med. Servs. PLLC v CNA Ins. Co., 1 Misc 3d 137[A], 2004 NY Slip Op 50061[U], supra; Diagnostic Rehab. Medicine Serv., P.C. v Farm Family Cas. Ins. Co., NYLJ, June 29, 2005, at 24, col 2, supra).

Plaintiff argues that defendant’s motion should be denied because it failed to state any deficiency regarding the assignment in its denial, thereby waiving any defense not included in the denial.^[FN1]

Standing to sue is one of the basic elements in any action. Notably, without it, you are not entitled to begin an action (see Black’s Law Dictionary 1413 [7th ed 1999]). As such, the issue of standing cannot be waived even if a defendant fails to object to the issue of standing beforehand. (See Stark v Goldberg, 297 AD2d 203, 204 [1st Dept 2002]; Axelrod v New York State Teachers’ Retirement Sys., 154 AD2d 827 [1989].) In order to establish standing in a no-fault claim, plaintiff health care providers must produce “properly executed” assignments of insurance benefits, signed by the patient naming the provider as assignee (see 11 NYCRR 65-3.11 [b] [2]; A.B. Med. Servs. PLLC v Highland Ins. Co., NYLJ, May 27, 2003, at 21, col 3; Advanced Med. Rehabilitation P.C. v Travelers Prop. Cas. Ins. Co., 2 Misc 3d 1004[A], 2004 NY Slip Op 50141[U]; T&G Med. Supplies, Inc. v State Farm Mut. Auto. Ins. Co., 7 Misc 3d 1017[A], 2005 NY Slip Op 50636[U]). Like any contract, the assignment should reflect the names of the assignor and assignee, the date the accident leading to treatment occurred, the signatures of both parties, and the date the assignment took place (see, T&G Med. Supplies, Inc., 7 Misc 3d 1017[A], 2005 NY Slip Op 50636[U], supra). In fact, the assignment of benefit form provided by New York State Department of Motor [*3]Vehicles provides blank spaces for the patient/assignor’s name; for the health care provider/assignee’s name; for the date of the accident; for the signatures and addresses of both assignor and assignee; and for the date of the assignment (see NYS form NF-AOB). The form clearly illustrates that the particular information requested is required in order for the assignment to be deemed valid and for plaintiff to have standing to sue. In this case, the assignment in question happens to be on a NYS form NF-AOB^[FN2] and the only section of the assignment that is completed is the signature of the alleged assignor. Conspicuously absent is the name of the party receiving the assignment, who in the future would have standing to bring an action.

Conclusion

Upon a review of all the papers, the court finds that defendant made out a prima facie case of its entitlement to summary judgment. Specifically, defendant argues that plaintiff has not established that it has standing to maintain this action. The undated assignment it provided does not contain the name of the assignor, the signature of the assignee or the date of the alleged occurrence.^[FN3] Upon a reading of the purported assignment, one is not certain who the alleged assignor is delegating her rights to or when she did so. The assignment also fails to state when she suffered the injuries leading to the need for medical supplies. These defects in the alleged assignment of benefits to plaintiff illustrate its lack of standing to maintain this action.

Accordingly, defendant’s motion is granted and the action is dismissed.

Footnotes

Footnote 1: See paragraph 4 of plaintiff’s affirmation in opposition.

Footnote 2: See exhibit C of moving papers, a copy of the assignment of benefit form.

Footnote 3: See exhibit C of the moving papers—the assignment.

[*1]

Civil Court of the City of New York, Queens County, August 30, 2005

APPEARANCES OF COUNSEL

Belesi, Donovan & Conroy, P.C., Garden City, for plaintiff. Bruno, Gerbino & Soriano, LLP, Melville, for defendants.

OPINION OF THE COURT

Denis J. Butler, J.

Plaintiff, Multiquest, PLLC, brought suit to recover payment under the No-Fault Law for medical services provided to assignor Paulette Cleckley. Plaintiff moves for summary judgment pursuant to CPLR 3212. Defendant cross-moves for summary judgment dismissing plaintiff’s cause of action.

Plaintiff contends that it properly issued a claim on behalf of the assignor and that such claim was not timely denied. Defendant does not dispute the untimeliness of its denial. Defendant contends, however, that plaintiff is not entitled to recover payment for such medical services allegedly provided under the No-Fault Law as the plaintiff’s medical facility was fraudulently incorporated at the time the alleged services were rendered to the assignor. For the foregoing reasons, the court finds in favor of defendant.

Plaintiff proved that it submitted a timely and proper notice of claim, which defendant has not paid in full, for services rendered to the assignor beginning November 5, 1998. The [*2]defendant, according to its denial of claim form, received such claim on July 11, 2001 and issued an untimely denial on August 11, 2001, 31 days after the date of receipt. The No-Fault Law requires the insurer to either pay or deny the claim for no-fault benefits within 30 days from the date the applicant supplies proof of claim. (Insurance Law § 5106 [a]; 11 NYCRR 65.15 [g] [3].)

Defendant, in its cross motion, asserts that plaintiff’s medical facility was fraudulently incorporated at the time the services were rendered to the assignor and that plaintiff is therefore not entitled to recover on such claim. In support, defendant provides a copy of plaintiff’s application for employer identification dated September 4, 1998, which lists Yeugeny Gorbatov, a licensed acupuncturist, as president of Multiquest Psychological and Acupuncture Services, PLLC. Defendant also provides a copy of the Articles of Organization filed with the New York State Department of State on July 14, 1998, which lists Mr. Gorbatov and Kathryn Clarke, a licensed psychologist, as “original members and managers” of Multiquest Psychological and Acupuncture Services, PLLC.

Defendant also submits a copy of a stock certificate labeled “Number 2” which was issued to Dr. Joseph Indelicato on September 6, 2001 and which lists Dr. Indelicato as an owner of Multiquest. The defendant, in its affirmation in opposition, asserts that, as president of Multiquest, Mr. Gorbatov should have been issued stock certificate “Number 1” in 1998 when the company was first formed. Therefore, defendant contends that had there been a proper incorporation in 1998 a second stock certificate would have been issued by the medical facility to a licensed psychologist. However, the documents submitted on the motion herein do not indicate that Ms. Clarke or any other licensed psychologist was ever issued a stock certificate by the medical facility in 1998.

Defendant, in further support of such cross motion, submits a copy of a certified transcript of an examination under oath of Ms. Clarke dated April 26, 2004, wherein Ms. Clarke denied ever being a member or owner of Multiquest. Furthermore, Ms. Clarke stated that she never gave Multiquest permission to list her as a principal in the professional corporation. The court notes that defendant submitted, in the cross motion, the Articles of Organization filed by Mr. Gorbatov on July 14, 1998 listing Ms. Clarke as one of the owners. The defendant asserts in its cross motion that Mr. Gorbatov fraudulently listed Ms. Clarke as one of the owners in such document for the sole purpose of acquiring a valid New York state license to perform psychological services.

Plaintiff, in reply to defendant’s cross motion, merely asserts that defendant’s denials were untimely. With respect to defendant’s allegations of fraud and misconduct, plaintiff merely alleges that Ms. Clarke’s testimony is not credible as it was provided pursuant to an agreement wherein defendant agreed not to commence an action against Ms. Clarke in exchange for such testimony. Plaintiff, however, fails to submit any documentary proof rebutting defendant’s assertions of fraud or misconduct. Additionally, plaintiff fails to submit an affidavit from someone with personal knowledge of the facts disputing such allegations by defendant.

The Court of Appeals has ruled that under New York State’s No-Fault Law and implementing regulations, insurance carriers may withhold payment for medical services provided by fraudulently incorporated enterprises. (State Farm Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005] [Mallela III].) The Mallela III court followed the Superintendent of Insurance’s [*3]promulgation prohibiting the reimbursement of benefits on behalf of unlicensed or fraudulently licensed providers. (11 NYCRR 65-3.16 [a] [12] [eff Apr. 4, 2002].) Accordingly, Mallela III ruled that medical providers fraudulently incorporated are therefore not entitled to reimbursement. Pursuant to the proof submitted in support of the motion and cross motion, it appears that plaintiff provider, Multiquest, was not properly licensed at the time the alleged medical services were provided. Additionally, defendant has submitted uncontroverted testimony under oath that the Articles of Organization improperly listed Ms. Clarke as an owner without her knowledge or consent.

The court now must determine whether 11 NYCRR 65-3.16 (a) (12) (eff Apr. 4, 2002) applies to claims made prior to the effective date of April 4, 2002 and, if so, whether such ruling applies when there is an untimely denial. This court finds that the intent of the Mallela III court was that 11 NYCRR 65-3.16 (a) (12) be applied to claims prior to April 4, 2002. The analysis of this court concurs with the decision in Metroscan Imaging P.C. v GEICO Ins. Co., to the extent that reading “the Mallela III decision as only pertaining to claims maturing post-April 4, 2002 is simply illogical” and would negate the intent of the Mallela III court. (Metroscan Imaging PC v GEICO Ins. Co., 8 Misc 3d 829, 834 [Civ Ct, Queens County 2005].) The Mallela III court, in considering such determination, relies on the argument presented in the amicus brief of the Superintendent of Insurance which alleges that such rule was promulgated to “combat rapidly growing incidences of fraud in the no-fault regime, fraud that he has identified as correlative with the corporate practice of medicine by nonphysicians.” (4 NY3d at 320 n 2.) Clearly, the Mallela III court strongly concurred with the findings of the Superintendent of Insurance that services provided by fraudulently licensed no-fault “providers” should not be reimbursed.

It is well settled that despite an untimely denial, an insurer is not precluded from raising the issue of coverage such as a breach of a condition precedent of the terms of the insurance contract. (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274 [1997].) In addition, the court notes that proper licensing of a medical provider is a condition precedent to payment. (Valley Physical Medicine & Rehabilitation v New York Cent. Mut. Ins. Co., 193 Misc 2d 675 [App Term, 2d Dept 2002].)

Furthermore, defendant, in its cross motion, alleges that plaintiff in addition to being improperly incorporated is also seeking compensation for medical tests provided to the assignor which were administered by individuals who were not licensed to administer such tests. Business Corporation Law § 1504 (a) provides that a professional service corporation may not “render professional services except through individuals authorized by law to render such professional services as individuals.” At the examination under oath dated April 26, 2004, Ms. Clarke testified that she was merely employed as an independent contractor for Multiquest and that she witnessed “assistants” administering psychological testing to the patients. Pursuant to the New York Workers’ Compensation Psychology Fee Schedule, “psychological services will be rendered by or under the active supervision of an authorized psychologist.” (12 NYCRR 333.2 [incorporated by reference].) It appears from the testimony of Ms. Clarke that Multiquest has provided psychological services which were not administered by or under the supervision of an authorized psychologist. [*4]

Accordingly, as the plaintiff has failed to proffer sufficient evidence to rebut defendant’s allegations that the medical provider was fraudulently incorporated at the time the alleged services were provided to the assignor and that it provided services by unlicensed psychologists, the medical services provided by the plaintiff to its assignor are therefore not covered under the No-Fault Law. Accordingly, plaintiff’s motion for summary judgment is denied, plaintiff’s cross motion for summary judgment is granted and the case is dismissed.

Civil Court, Queens County

87720/04

Howard G. Lane, J.

Plaintiff commenced this action to recover first-party no-fault benefits for medical services rendered to its assignor, Donnette Coburn, pursuant to New York’s No-Fault Insurance Law § 5101 et. seq., as well as statutory interest and attorney’s fees. Thereafter, plaintiff moved for summary judgment on its claims in the amount of $510.00, on the ground that defendant failed to pay or to deny its claims within the statutory 30-day period as required by Insurance Law § 5106 (a).

The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law by tendering sufficient evidence in admissible form to demonstrate the absence of any material issues of fact (see Alvarez v. Prospect Hosp., 68 NY2d 320 [1986]; Stahl v. Stralberg, 287 AD2d 613 [2d Dept 2001]). The motion must be supported by an affidavit from a person with knowledge of the facts, setting forth all material facts (see CPLR § 3212[b]). [*2]Failure to make such showing requires denial of the motion regardless of the sufficiency of the opposing papers (see Winegrad v. New York Univ. Med. Ctr., 64 NY2d 851 [1985]). If, in opposing the motion, the other party comes forward with evidence of issues of fact requiring a trial, the motion will be denied. (see Rebecchi v. Whitmore, 172 AD2d 600 [2d Dept 1991]).

Pursuant to both the Insurance Law and the regulations promulgated by the Superintendent of Insurance, within thirty (30) days after a claimant submits proof of the fact and the amount of loss sustained, an insurer is required to either pay or deny a claim for insurance coverage of medical expenses arising from a motor vehicle accident (see 11 NYCRR 65.15 [g] [3]; Central Gen. Hosp. v. Chubb Group of Ins. Co., 90 NY2d 195 [1997]; Mount Sinai Hosp., v. Triboro Coach, 263 AD2d 11 [2d Dept 1999]; New York Med. Ctr. of Queens v. Country-Wide Ins. Co., 295 AD2d 583 [2d Dept 2002]).

The only exception to the 30-day rule is where an insurer’s untimely denial is based upon the defense of lack of coverage, or where a medical condition for which the patient was treated, was not related to the accident (Central Gen. Hosp. v. Chubb Group of Ins. Co., 90 NY2d 195 [1997]). To withstand a summary judgment motion based on this defense, the insurer has the burden to come forward with proof in admissible form to establish the fact or the evidentiary foundation for its belief that the patient’s treatment was unrelated to the accident [see generally Metro Med. Diagnostics, P.C., v. Eagle Ins. Co., 293 AD2d 751 [2d Dept 2002]).

Failure to pay or deny a claim within the 30-day period requirement, absent a request for additional verification, renders benefits overdue, and precludes the insurer from disclaiming liability based on a breach of a policy condition or a statutory exclusion defense (St. Clare’s Hosp. v. Allcity Ins. Co., 201 AD2d 720 [2d Dept 1994]). All overdue payments bear interest at a rate of 2% per month, and the claimant is entitled to recover attorney’s fees where a “valid claim or portion” was denied or overdue (see Insurance Law § 5106 [a]; Presbyterian Hosp. in City of New York v. Maryland Cas. Co., 90 NY2d 274 [1997]).

PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

Plaintiff’s motion for summary judgment is denied. In support of the motion, plaintiff submits the affirmation of its attorney and the affidavit of Asnodin Dianalan, a purported corporate officer of plaintiff corporation. It is well settled that an affidavit or affirmation from a party’s attorney who lacks personal knowledge of the facts, is of no probative value and is insufficient to support an award of summary judgment (see Zuckerman v. City of New York, 49 NY2d 557 [1980]; Amaze Med. Supply, Inc. v. Allstate Ins. Co., 3 Misc 3d 133(A), [App Term, [*3]2d and 11th Jud Dists 2004]; Wisnieski v. Kraft, 242 AD2d 290 [2d Dept 1997]; Lupinsky v. Windham Constr. Corp., 293 AD2d 317 [1st Dept 2002]). On a summary judgment motion, the insufficiency of an attorney’s affirmation which is not based upon personal knowledge is not cured even when the attorney’s purported knowledge is based upon the attorney’s review of the client’s file (see Park Health Ctr. v. Green Bus Lines, Inc., 2002 NY Slip Op. 40029[U]) (holding an attorney affirmation submitted in opposition to motion for summary judgment in no-fault action arising out of automobile accident, which asserted that attorney’s knowledge regarding whether proper no-fault insurance form had been sent was obtained from reading of the files, rather than his own personal knowledge of the facts, was insufficient to establish existence of triable issue of fact). Thus, although the affirmation of plaintiff’s attorney affirms that she “reviewed the Assignee’s and Defendant’s (sic) business records in the above-captioned file,” it is still of no probative value and is insufficient to establish the existence of any triable issue of fact.

The affidavit of Asnodin Dianalan, a corporate officer of Maximum Physical Therapy, P.C., is also insufficient to establish that there are no issues of fact concerning plaintiff’s claim in that the affidavit fails to indicate the specific sources of his knowledge (e.g. business records or other documents he may have researched or reviewed or persons with whom he consulted) (Barraillier v. City of New York, 12 AD3d 168 [1st Dept. 2004] and contains conclusory allegations regarding his personal knowledge (Wechsler v. People of State of NY, 13 AD3d 941 [3d Dept. 2004]). Mr. Dianalan’s affidavit contains no recitations of fact particular to this action, such as one or more of the following: the specific corporate office held (i.e., president, treasurer, secretary, etc.), the date or dates of service, the services or supplies allegedly provided, date or dates of mailing, or amount outstanding. Rather, Mr. Dianalan’s affidavit contains boilerplate language about the authenticity of non-specified bills and assignment from a non-specified assignor which was witnessed either by him or someone on his staff in his office on an unspecified date (see e.g. Vista Surgical Supplies Inc. v. Utica Mutual Ins. Co., 7 Misc 3d 833 [Civ Ct, Kings County 2005]). It is implicit in Mr. Dianalan’s affidavit that his knowledge has been obtained either from unnamed and unsworn employees or from unidentified and unproduced business records. The cogent parts of the affidavit are not facts but conclusions. Such impermissible conclusions and hearsay cannot justify a grant of summary judgment (Republic Natl. Bank of NY v. Winston, 107 AD2d 581 [1st Dept 1985]).

Instead of proffering the facts in admissible form, Mr. Dianalan merely adopts the statements of plaintiff’s counsel as contained in the attorney’s affirmation. Plaintiff by reference to the attorney affirmation does not cure the insufficiencies of his affidavit, as the attorney’s affidavit is a mixture of factual statements, inferences, conclusions and legal argument (see Howell Mfg. Corp. v. [*4]Leiblein, 32 Misc 2d 50 (Dist Ct., Nassau County, 1962) (where the court held that the practice of adoption by reference of an attorney’s affirmation on a motion for summary judgment “should not be encouraged.”) By adopting the contents of an affirmation which has no probative value, plaintiff’s affidavit which is devoid of material facts is also of no probative value.

Additionally, the affidavit of plaintiff’s corporate officer is defective as to form to the extent of one or more of the following: the affidavit contains no caption, no venue, no opening statement and the signature is not at the bottom of the document, but is on the top of a page isolated by itself, making it appear to the court that it is separate and not a part of the body of the document. Each paper used in a case should have a caption which consists of the name of the court and the venue of the action, its title, and, to the right of the title, what the paper is (e.g., affidavit in support of motion, affirmation in support of motion) (see Siegel, NY Prac § 205 at 324 [3d ed]). An affidavit should ordinarily begin with a recitation of venue (the state, county, and city in which it is made) and contain an opening statement (i.e., “John Smith, being duly sworn, deposes and says”). The signature of the affiant in an affidavit should appear at the bottom of the statement, as opposed to being isolated on the last page, separate and apart from the entire body of the document (see Mellinkoff’s Dictionary of American Legal Usage 17 [1992]). Moreover, to facilitate the clear presentation of the matters set forth in the affidavit, so that, allegations might easily be referenced in subsequent legal papers, the affidavit should contain separate, numbered paragraphs for each factual allegation (see generally Phillips v. Girdich, 408 F3d 124 [2d Cir 2005)].

Because plaintiff’s affidavit does not satisfy CPLR § 3212(b), plaintiff is not entitled to summary judgment. Accordingly, plaintiff’s motion is denied. Plaintiff failed to prove that it submitted a timely and proper notice of claim pursuant to the No-Fault statue for medical treatment or services rendered, which defendant had not paid (see Park Health Center v. Prudential Insurance Co., 2001 NY Slip Op 40650[U]). As plaintiff’s submissions do not constitute evidentiary proof in admissible form (A.B. Medical Servs. v. Eagle Ins. Co., 3 Misc 3d 8 [NY App. Term, 2003]; Rue v Stokes, 191 AD2d 245 [1st Dept 1993]), and plaintiff has failed to provide a proper and sufficient affidavit from a person with personal knowledge of the facts (see CPLR § 3212), it has failed to raise triable issues of fact.

Accordingly, as there are issues of fact requiring a trial, summary judgment

is unwarranted.

This constitutes the decision and order of this court. [*5]

Dated, July 7, 2005________________________________

Howard G. Lane

Judge, Civil Court

[*1]

Civil Court of the City of New York, New York County, May 12, 2005

APPEARANCES OF COUNSEL

Moore & Associates, New York City (Michael L. Rappaport of counsel), for defendant. Leon Kucherovsky, New York City (Matthew Viverito of counsel), for plaintiff.

OPINION OF THE COURT

Ellen Gesmer, J.

Plaintiff brings this action to recover $1,791.73 under the No-Fault Law for MRIs that it allegedly performed on its assignor, Olga Papirova. Defendant Travelers Insurance Company moves for summary judgment on the grounds that (1) plaintiff lacks standing to assert the claim because the doctor who performed the MRIs was an independent contractor on whose behalf the plaintiff may not submit a claim, and (2) the MRIs were not medically necessary. Plaintiff [*2]opposes the first claim on the grounds that defendant waived this argument by failing to raise it in a timely denial. Plaintiff opposes the second claim on the grounds that, since it is a radiology facility, it need not prove the medical necessity of the tests administered. For the reasons set forth below, the court grants defendant’s motion on the grounds that it has satisfactorily shown that the MRIs were not medically necessary.

The court’s function on a motion for summary judgment is issue finding rather than issue determination. (Brown v Achy, 9 AD3d 30, 33 n 2 [1st Dept 2004], citing Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395 [1957].) The movant must tender evidence, by proof in admissible form, to establish the cause of action “sufficiently to warrant the court as a matter of law in directing judgment” (see CPLR 3212 [b]; Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). “Failure to make such showing requires the denial of the motion, regardless of the sufficiency of the opposing papers.” (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]; Vitiello v Mayrich Constr. Corp., 255 AD2d 182, 184 [1st Dept 1998].) Once the movant has offered sufficient proof to establish a prima facie case, “the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action.” (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986].)

To establish its first argument, defendant points out that the MRIs were performed by Dr. Ravindra Ginde who, as plaintiff acknowledges, is an independent contractor and not an employee of plaintiff. Defendant then argues, based on an informal opinion of the Department of Insurance dated February 21, 2001, that plaintiff may not seek reimbursement for Dr. Ginde’s services since a professional medical corporation may only bill for services rendered by an employee. (See also Rockaway Blvd. Med. P.C. v Progressive Ins., 4 Misc 3d 444, 445 [Civ Ct, Queens County 2004].) However, since this defense does not assert either noncoverage or insurance fraud by the assignor, the defense is waived unless asserted in a timely denial. (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 202 [1997]; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 283 [1997]; A & S Med. P.C. v Allstate Ins. Co., 15 AD3d 170, 171 [1st Dept 2005]; Country-Wide Ins. Co. v Zablozki, 257 AD2d 506, 507 [1st Dept 1999]; A.B. Med. Servs. v CNA Ins. Co., 1 Misc 3d 137[A], 2004 NY Slip Op 50061[U] [App Term, 1st Dept 2004].) Since defendant did not raise this defense in its denial of plaintiff’s claim, defendant waived the defense and the court may not grant summary judgment for defendant on this issue.

I now turn to defendant’s defense of lack of medical necessity, which defendant properly raised in a timely denial. Defendant supports its defense with the affirmed peer review report of Dr. Arthur Bernhang. (See A.B. Med. Servs. v CNA Ins. Co., 1 Misc 3d 137[A], 2004 NY Slip Op 50061[U] [App Term, 1st Dept 2004]; Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 139[A], 2004 NY Slip Op 50279[U], *1 [App Term, 2d & 11th Jud Dists 2004]; S&M Supply, Inc. v Allstate Ins. Co., 2003 NY Slip Op 51191[U] [App Term, 2d & 11th Jud Dists 2003].) Dr. Bernhang concluded that the MRIs performed on plaintiff’s assignor were not medically necessary. He noted that Ms. Papirova was pregnant at the time of the motor vehicle accident on January 25, 2002. He further pointed out that, when she was examined on February 13, 2002, Dr. St. Hill, the examining doctor, had recommended that [*3]her spine should be x-rayed after she gave birth. Dr. Bernhang found that, contrary to the recommendation, Ms. Papirova did not undergo spinal x-rays after she gave birth. He also noted that she did not have a neurological examination after she gave birth, which would have indicated whether the neurological symptoms found by Dr. St. Hill were attributable to the pregnancy or to the accident. Absent x-rays and a follow-up neurological exam, Dr. Bernhang found that the MRIs were not medically necessary. This finding is sufficient to shift the burden to plaintiff to show that the MRIs were in fact medically necessary. (Alvarez v Prospect Hosp., 68 NY2d at 324.) If plaintiff fails to meet its burden, defendant’s proof may entitle it to summary judgment in its favor. (Damadian MRI in Elmhurst v Liberty Mut. Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51700[U] [App Term, 2d & 11th Jud Dists 2003].)

In response, plaintiff has not submitted any documentation in admissible form (or indeed, any documentation at all) to establish that the services rendered were medically necessary. Instead, plaintiff relies on the decision in West Tremont Med. Diagnostics, P.C. v GEICO (8 Misc 3d 423 [Civ Ct, Richmond County, McMahon, J.]) to support its argument that it cannot be deprived of compensation, even if the insurer establishes that the services performed were not medically necessary, because, as a radiological facility, plaintiff “merely fills referrals.” Respectfully, the court disagrees with the conclusion in West Tremont Med. and rejects plaintiff’s argument.

Under the No-Fault Law, individuals are entitled to be compensated for “basic economic loss” resulting from injuries caused by the operation of a motor vehicle. (Insurance Law § 5101 et seq.) “Basic economic loss” is defined to include “all necessary expenses” for medical services. (Insurance Law § 5102 [a] [1]; 11 NYCRR 65-1.1.) Consistent with that, when a claimant, or its assignee, makes a claim, an insurer may deny it on the grounds that the services rendered are not medically necessary. (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d at 202; Country-Wide Ins. Co. v Zablozki, 257 AD2d at 507; A.B. Med. Servs. v CNA Ins. Co., 1 Misc 3d 137[A], 2004 NY Slip Op 50061[U], *1; Damadian MRI in Elmhurst v Liberty Mut. Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51700[U].) Neither the statute, the regulations nor the courts have recognized any exception to this requirement, apart from West Tremont. Consequently, apart from that decision, there is no support for the proposition that a medical provider may be reimbursed for a service which is not medically necessary, and that MRIs, or any other form of medical treatment, are exempt from the requirement that they be medically necessary in order to be eligible for reimbursement.

In West Tremont, which was decided after trial, the court found that the defendant’s expert testified unequivocally that “the MRIs were performed unnecessarily.” (West Tremont at 425.) Notwithstanding that finding, the court held that defendant had not met its burden of proof to establish that the MRIs were medically unnecessary. In reaching this anomalous conclusion, the court cited the testimony of defendant’s expert who testified that plaintiff diagnostic center was “not the entity that determines what test is necessary for the patient to undergo.” (Id. at 427.) The court then went on to hold that the defense of medical necessity “should not be available” against the plaintiff since it “does not make an independent medical evaluation of the patient.” (Id. at —, 2005 NY Slip Op 25176 at *3.) The court held that this result is consistent with “the purpose and intent of the Insurance Law no-[*4]fault benefits statute which is expedient payment of benefits to automobile accident victims.” (Id.) This court respectfully disagrees with this result.

In reaching its conclusion, the West Tremont court violated two fundamental rules of statutory construction. First, “[w]here words of a statute are free from ambiguity and express plainly, clearly and distinctly the legislative intent, resort may not be had to other means of interpretation.” (McKinney’s Cons Laws of NY, Book 1, Statutes § 76.) When construing statutes, the court’s job is to ascertain and give effect to the legislative intent, but the “intention of the Legislature is first to be sought from a literal reading of the act itself.” (McKinney’s Cons Laws of NY, Book 1, Statutes § 92 [b].) The no-fault statute is clear and unambiguous: claimants may only be reimbursed for “necessary” medical services. (Insurance Law § 5102 [a] [1].) In light of the clarity of the statute, “there is no occasion to resort to other means of interpretation.” (Di Marco v Hudson Val. Blood Servs., 147 AD2d 156, 158 [1st Dept 1989]; Roth v Michelson, 55 NY2d 278, 283 [1982] [statute to be interpreted literally, in the absence of ambiguity]; People v Ayala, 142 AD2d 147, 161 [2d Dept 1988] [explanation is superfluous in the absence of ambiguity].) Therefore, the West Tremont court had no reason to look to legislative history or the legislative purpose to interpret the statute. It should have simply recognized that the defense of medical necessity is available against all medical providers.

Secondly, the West Tremont decision discusses only one aspect of the statutory purposes and ignores the rest. While it is true that the No-Fault Law was adopted in order to expedite the processing of claims, the prevention of fraud and “widespread abuse” was also a major concern. (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 862 [2003].) To permit medical providers to receive reimbursement even when the insurer has proven that the service provided was not medically necessary would encourage fraud, rather than combat it. Thus, this construction would cause “objectionable results” in violation of the court’s obligation to avoid results which would cause “injustice, mischief, or absurdity.” (McKinney’s Cons Laws of NY, Book 1, Statutes § 141.) In fact, the construction urged by plaintiff would require insurers to pay for MRIs of the entire spine when the insured suffered a broken toe, or for full body scans for broken arms; indeed, insurers would have to pay for all radiological testing, no matter how unrelated to the insured’s injuries. Plaintiff’s analysis would also require insurers to pay for all medical supplies, since medical suppliers, like radiology facilities, do not “make an independent medical evaluation of the patient.” This result would be absurd and in total derogation of the statute.

At oral argument, plaintiff’s counsel argued that requiring radiology providers to rebut a showing of lack of medical necessity would place an impossible burden on them. The court disagrees. At worst, the problem is one of cost rather than impossibility; the provider is free to retain a doctor to submit an affirmation as to the medical necessity of the treatment rendered. Moreover, having recognized the problem, there are a variety of ways in which a radiology facility could protect itself. For example, it might require an affidavit of medical necessity from the referring doctor, in addition to a prescription, as a condition for accepting an assignment of benefits from the patient. But given the clarity and lack of ambiguity in the statute, the problem, [*5]if there is one, cannot be solved by the courts, since it is our obligation simply to enforce the plain language of the statute.

For these reasons, the court refuses to follow the holding in West Tremont. Instead, the court will follow the well-established rule that the failure of the medical facility to rebut the insurer’s showing that the service provided was not medically necessary requires denial of reimbursement. (Alvarez v Prospect Hosp., 68 NY2d at 324; A.B. Med. Servs. v New York Cent. Mut. Fire Ins. Co., 3 Misc 3d 136[A], 2004 NY Slip Op 50507[U], *2 [App Term, 2d & 11th Jud Dists]; A.B. Med. Servs., PLLC v State Farm Mut. Auto. Ins. Co., 7 Misc 3d 822, 825 [Civ Ct, Kings County 2005].)

Accordingly, defendant’s motion for summary judgment is granted.

Civil Court, Kings County

046401/04

Loren Baily-Schiffman, J.

This action for first-party No-Fault benefits was tried to completion on February 8, 2005. Plaintiff seeks payment of claims for $708 for services to James Percine and $1600.50 for services provided to Antoine Wekson. Defendant denied plaintiff’s claims on the basis that “[w]e do not provide coverage for any ‘insured’ who has made fraudulent statements or engaged in fraudulent conduct in connection with any accident or loss for which coverage is sought under this policy.” At the start of trial, the parties stipulated that Plaintiff’s bills had been timely submitted and that Defendant’s denial would be admitted into evidence along with a number of exhibits. Plaintiff then made several motions in limine.

Plaintiff first sought the exclusion from evidence of transcripts of Examinations Under Oath (hereinafter “EUO”) of Plaintiff’s assignors. The Court granted this motion on the basis that the transcripts had not been signed by the assignors and that such documents would be hearsay.^[FN1] Plaintiff also sought a determination by the Court that subpoenas for testimony of the assignors are defective and, accordingly, no adverse inference can be drawn from the non-appearance of the assignors at trial. The Court granted this application on the basis that the subpoenas had not been properly served.

The trial then proceeded on defendant’s affirmative defense of fraud. Defendant called Philip Tirone as its only witness. Mr. Tirone is employed by defendant as an investigator in its Special Investigation Unit. He was assigned to investigate the subject claims. Mr. Tirone testified that the assignors allegedly sought treatment from plaintiff as a result of an accident [*2]between two cars. There were several passengers in the cars, including the assignors involved in this action. As part of his investigation, Mr. Tirone attempted to contact his insured, Ms. Paul, and assignor Wekson who gave the same home address as Ms. Paul. He was not able to reach either Ms. Paul or Mr. Wekson. He contacted assignor Percine, but testified that he got no helpful information from Mr. Percine. Mr. Tirone then recommended to defendant’s attorney that EUOs be scheduled of Ms. Paul, Mr. Wekson and the other passengers. After more than one attempt to obtain appearances at EUOs, Mr. Wekson, Mr. Percine and Ms. Jerome appeared for EUOs with their attorneys and their testimony was taken. Mr. Tirone testified that other than his unsuccessful attempts to obtain signatures of the witnesses to their EUO transcripts, no further efforts were made to investigate the subject claims.

The Court ruled that the EUO transcripts were not admissible but Mr. Tirone could testify to his recollection of the testimony of the witnesses at their examinations. The basis of the Court’s ruling was that the assignors and the Plaintiff/assignee were united in interest and, therefore, statements made by the assignors are binding on the assignee as admissions.

Mr. Tirone continued his testimony as to the statements made by Mr. Wekson and Mr. Percine at their EUOs and the conclusions he drew from this testimony which resulted in the denial of these claims on the basis of fraud. The testimony that Mr. Tirone says supports his conclusion that the accident in question was staged are as follows:

The two witnesses testified differently concerning the order in which the passengers in their car were picked up and dropped off by the driver;

Mr. Percine delayed his medical treatment until two (2) weeks after the accident and that Mr. Wekson referred him to the provider;

Mr. Wekson sought treatment from a different provider than he had been treated by for injuries from a prior accident;

The provider from which Mr. Wekser sought treatment was not located near his work or his home.

According to the arguments of counsel, other factors that contributed to Mr. Tirone’s recommendation that the claims be denied on the basis of fraud are:

that the driver of the second car appears to have been “selected”; (No basis for this conclusion was presented at trial)

that the witnesses would not sign their EUO transcripts;

that the passengers in the first car refused to give statements to the investigator;

that the witnesses’ statements at EUO seemed to follow a script;

that the driver of the second car was a woman.

At the close of the trial, the Court invited counsel to present legal memoranda on the standard of proof applicable to defendant’s fraud defense and any other legal issues that had been presented in the trial. Defendant submitted a memorandum on the burden of proof issue. [*3]Plaintiff presented a memorandum arguing that Mr. Tirone should not have been permitted to testify to statements made by the assignors at their EUOs as such statements are hearsay and on the standard of proof issue.

STANDARD OF PROOF APPLICABLE TO FRAUD

In New York, proof of fraud must be made by clear and convincing evidence. Rudman v. Cowles Communications, 30 NY2d 1 (1972). Although defendant argued at trial that in a No-Fault case fraud need only be proven by a preponderance of the evidence, no cases could be found to support this position. In a second submission to the Court, dated March 19, 2005, defendant presented a copy of Hon. Jack Battaglia’s decision in AB Medical Services, PLLC v. State Farm Mut. Auto Ins., 2005 NY Slip Op 25089 (Civil Court, Kings Co.) and argued that it supports defendant’s position that the defense of “staged accident” in a No-Fault case only be proven by a preponderance of the evidence and not by clear and convincing evidence. To the extent that Judge Battaglia’s decision finds that the defense of staged accident need only be proven by a preponderance of the evidence, this Court respectfully disagrees with Judge Battaglia. This Court holds that the insurer’s defense of fraud, whether it be a staged accident or other fraud, requires proof by clear and convincing evidence.

ARE ASSIGNEES’ STATEMENTS MADE AT EXAMINATIONS UNDER OATH ADMISSIBLE AS ADMISSIONS AS AGAINST THE ASSIGNEE/PLAINTIFF?

At trial, the Court permitted defendant’s witness to testify to statements made by the assignors at their Examinations Under Oath on the theory that these statements are admissions by persons united in interest with the plaintiff/assignee. Plaintiff objected at trial that this testimony is hearsay. In its Post Trial Memorandum, plaintiff again argues that its objection at trial should have been sustained. Plaintiff cites to Richardson on Evidence, Farrell 11th ed. (hereinafter “Richardson”), §§8-239 and 8-241 for the “New York doctrine” which states the following:

In New York declarations of a vendor or assignor of a chattel or chose in action, whether made before or after the transfer, are inadmissible to affect the claim or title of a subsequent transferee for value.

Richardson, §8-242.

This rule stems from the decision in Paige v. Cagwin, 7 Hill (NY)361 (Sup Ct 1843) (action on a promissory note) and has been followed in Wangner v. Grimm, 169 NY 421 (1902) (action on a promissory note); Kelly v. Beers, 194 NY 60 (1909) (gift of savings bank account); Merkle v. Beidleman, 165 NY 21 (1900) (mortgage foreclosure). Except where the statements were made by the real party in interest, such as a decedent, and are offered against a person who claims through representation, such as the executor of that decedent, the New York doctrine will apply and the statements of the former owner, vendor or assignor will not be admissible to affect [*4]the claim of the subsequent owner or assignee.

Pursuant to the New York doctrine, the Court erred in permitting defendant’s witness, Mr. Tirone, to testify to the statements of the assignees, Mr. Wekson and Mr. Percine at their EUOs. The Court should have sustained plaintiff’s objections to this testimony. The Court now reverses that ruling and strikes from the record so much of the testimony of Mr. Tirone as concerned the statements of Mr. Wekson and Mr. Percine at their EUOs. With that testimony stricken from the record, the conclusion Mr. Tirone reached, that the accident was staged, is without substantial basis in the record and will not be credited by the Court.

TESTIMONY OF DEFENDANT’S WITNESS

It must be noted that even if all of the evidence of defendant’s witness is credited, defendant has not met its burden of establishing by clear and convincing evidence that the accident in question was staged. Mr. Tirone relied on minor inconsistencies in the testimony of passengers in his insured’s car; the statement that Mr. Percine did not seek medical assistance until two (2) weeks after the accident and then went to a provider referred by Mr. Wekson; that Mr. Wekson sought treatment from a different provider than had treated him for injuries in a prior accident; and that Mr. Wekson obtained treatment from a provider not near his home or work, in concluding that the accident was staged. Each of these facts is capable of a motivation other than that of fraud and together they do not establish clear and convincing proof that the accident in question was staged.

Mr. Tirone testified as to his training and experience in the field of insurance investigation, although there was no request that he be treated as an expert witness. An insurer’s “founded belief” that an accident was staged cannot be based upon “unsubstantiated hypotheses and supposition”. AB Medical Services PLLC v. Eagle Ins. Co., 3 Misc 3d 8 at 9 (App. Term 2nd & 11th Jud. Dists., 2003). However, what experience or training led Mr. Tirone to his conclusions based upon the facts adduced in his investigation is missing from the record. The Court is left to wonder why the fact that an assignor sought medical treatment in a neighborhood different from his home or work is significant. Similarly, the significance of the other car being driven by a woman is not provided by Mr. Tirone’s testimony, yet he relies on this as a basis for finding that the accident was staged. While Mr. Tirone’s trained opinion is entitled to some weight, Travelers Indemnity Co. v. Morales, 188 AD2d 350, 351 (1st Dept 1992), here there is no testimony in the record relating Mr. Tirone’s training and experience to the conclusions he reached based upon the facts of this case. Accordingly, even had the Court not stricken any of Mr. Tirone’s testimony from the record, the determination would be the same that defendant has failed to meet its burden to prove fraud by clear and convincing evidence.

CONCLUSION

For all the foregoing reasons, the Court finds that defendant has failed to meet its burden [*5]at trial to prove its defense of fraud by clear and convincing evidence. Accordingly, judgment is granted to plaintiff for $708 on Mr. Percine’s claim and $1600.50 on Mr. Wekson’s claims. In addition, plaintiff is granted statutory attorneys fees, interest and costs to be computed by the Clerk of the Court.

This constitutes the Decision and Order of the Court.

Exhibits may be retrieved in Chambers, Room 705.

Dated:March 23, 2005

_______________________

LOREN BAILY-SCHIFFMAN

J.C.C.

Footnotes

Footnote 1:Notwithstanding the decision of my colleague in PSG Psychological, PC v. State Farm Ins. Co., 2004 WL 2997955, this Court is of the opinion that EUO transcripts are not governed by CPLR §3116 as they are taken prior to the commencement of litigation and are not part of the Article 31 disclosure process.