[*1]

Big Apple Ortho Prods., Inc. v State Farm Mut. Auto. Ins. Co.

2016 NY Slip Op 50768(U) [51 Misc 3d 1222(A)]

Decided on March 22, 2016

Civil Court Of The City Of New York, Kings County

Cohen, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 22, 2016

Civil Court of the City of New York, Kings County

Big Apple Ortho Products, Inc. as Assignee of Searles, Peter S., Plaintiff, against State Farm Mutual Automobile Ins. Co., Defendant.

CV-037717-13/KI
Devin P. Cohen, J.

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

Notice of Motion and Affidavits Annexed 1

Order to Show Cause and Affidavits Annexed

Answering Affidavits 2

Replying Affidavits

Exhibits

Other

Upon review of the foregoing papers, defendant’s motion for summary judgment is decided as follows:

In this action to recover assigned first-party no-fault benefits, defendant denied plaintiff’s claim for benefits on the basis that New York State no-fault law does not apply because the accident occurred in Georgia. Pursuant to 11 NYCRR § 65-1.1(j), New York State no fault coverage does not apply to personal injury sustained by:

any New York State resident other than the named insured or relative injured through the use or operation of the insured motor vehicle outside of New York State if such resident is the owner or a relative of the owner of a motor vehicle insured under another policy providing the coverage required by the New York Comprehensive Motor Vehicle Insurance Reparations Act.

According to the Affidavit of Lynn Johnson, a claims representative employed by defendant in its Atlanta, Georgia office, plaintiff’s assignor, Peter Searles, was a passenger is a car insured by defendant. Ms. Johnson’s affidavit refers to a police report, annexed to the motion papers, which [*2]purports to show that the accident occurred in Georgia. However, the police report is unsworn and uncertified, and is therefore inadmissible (Pavane v Marte, 109 AD3d 970, 971 [2d Dept 2013]; Cheul Soo Kang v Violante, 60 AD3d 991, 991-92 [2d Dept 2009]). Furthermore, defendant does not establish whether or not the assignor is a New York State resident, or if he is the “owner or a relative of the owner of a motor vehicle insured under another policy providing the coverage required by the New York Comprehensive Motor Vehicle Insurance Reparations Act,” as required by 11 NYCRR § 65-1.1(j).

For the reasons stated above, defendant’s motion for summary judgment is denied without prejudice.

This constitutes the decision and order of the court.

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

East Coast Acupuncture, P.C. v Hereford Ins. Co.

2016 NY Slip Op 26042 [51 Misc 3d 441]

February 9, 2016

Cohen, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

As corrected through Wednesday, May 4, 2016

[*1]

East Coast Acupuncture, P.C., as Assignee of Kenia Perez, Plaintiff, v Hereford Insurance Company, Defendant.

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

APPEARANCES OF COUNSEL

Lawrence Robert Miles, Long Island City, for defendant.

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

Devin P. Cohen, J.

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

Factual Background

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

Discussion

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

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

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

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

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

As the Court of Appeals made clear in Viviane Etienne,

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

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

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

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

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

Downtown Acupuncture PC v State Wide Ins. Co.

2015 NY Slip Op 25371 [50 Misc 3d 461]

October 22, 2015

Levine, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

As corrected through Wednesday, January 27, 2016

[*1]

Downtown Acupuncture PC, as Assignee of Linnette Thomas, Plaintiff, v State Wide Ins. Co., Defendant.

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

APPEARANCES OF COUNSEL

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

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

Katherine A. Levine, J.

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

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

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

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

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

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

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

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

Collateral Estoppel or Issue Preclusion

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

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

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

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

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

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

Discussion

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

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

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

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

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

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

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

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

Footnotes

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

Jamaica Wellness Med., P.C. v USAA Cas. Ins. Co.

2015 NY Slip Op 25313 [49 Misc 3d 926]

September 11, 2015

Ciccotto, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

As corrected through Wednesday, November 2, 2015

[*1]

Jamaica Wellness Medical, P.C., et al., as Assignees of Anderson Billy, Plaintiffs, v USAA Casualty Insurance Company, Defendant.

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

APPEARANCES OF COUNSEL

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

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

Theresa M. Ciccotto, J.

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

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

Factual and Procedural Background

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

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

The following documentation sought includes:

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

Said subpoena also directs TD Bank to produce all documents pertaining to account number (REDACTED) for the time period January 1, 2008 to the present (see aff in opp, exhibit A).Positions of the Parties

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

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

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

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

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

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

Conclusions of Law

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

[*3]

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

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

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

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

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

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

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

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

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

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

In the case at bar, the court does not find the subject subpoena to be unduly restrictive or prejudicial. As such, it does not believe that granting plaintiffs’ application for a protective order is necessary.

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

37 Ave Medical, P.C., ELECTIVE ACUPUNCTURE P.C., AKA CHIROPRACTIC, P.C. A/A/O FELIX CORDOVA, Plaintiffs, against Metlife Auto & Home Ins. Co., Defendant.

720728/12

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

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

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

Reginald A. Boddie, J.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This constitutes the decision and order of the court.

Dated: September 2, 2015

____________________

Hon. Reginald A. Boddie

Acting Supreme Court Justice

Acuhealth Acupuncture, PC a/a/o/ ANDRE MASON, Plaintiff, against Country-Wide Insurance Company, Defendants.

15621/12

Attorney For Petitioner: Acuhealth Acupuncture, P.C.
Gary Tsirelman, P.C.
129 Livingston Street
Brooklyn, New York 11201

Attorney For Respondent: Country-Wide Insurance Company
Jaffe & Koumourdas
40 Wall Street – 12th Floor
New York, New York 10005

Ellen M. Spodek, J.

PapersNumbered

Notice of Motion and Affidavit………………………………………………..____1_____

Notice of Cross Motion and Affidavit ……………………………..____2_____

Answering Affidavits ……………………………………………………………..____3_____

Replying Affidavits ………………………………………………………………..____4_____

Exhibits …………………………………………………………………………………____5_____

Other .__________

Upon the foregoing papers, petitioner ACUHEALTH ACUPUNCTURE, PC moves for an order to vacate the Master Arbitrator’s award, pursuant to CPLR § 7511. Respondent COUNTRY-WIDE INSURANCE COMPANY opposes the motion and moves for an order to confirm the Master Arbitrator’s award, pursuant to CPLR § 7510.

This case arises out of an automobile accident with petitioner’s assignor on August 8, 2010. At the time of the accident, there was an existing No-Fault policy issued by the Respondent. Petitioner rendered health services to the assignor for the personal injuries sustained in the car accident. When petitioner did not receive full reimbursement for the services provided, the matter proceeded to arbitration. Respondent denied payment for acupuncture services on the contention that petitioner was owned and controlled by a person who is contrary to the New York State No-Fault law requirements, which states that “A provider of health care services is not eligible for reimbursement . . . if the provider fails to meet any applicable New York State . . . licensing requirement necessary to perform such service in New York.” 11 NYCRR § 65-3.16(a)(12). Respondent provided evidence that ACUHEALTH ACUPUNCTURE, PC was owned, controlled, and operated by Andrey Anikeyev, who is not a licensed medical practitioner. Petitioner submitted an affidavit from Natalya Kornilova stating that she is the sole owner of petitioner. As Ms. Kornilova was ill at the time of the arbitration, Arbitrator Weiner dismissed the petitioner’s claim without prejudice to afford respondent the opportunity to subpoena Ms. Kornilova and examine her under oath during the proceedings. Petitioner appealed and Master Arbitrator D’Ammora affirmed.

“An arbitration award can be vacated by a court pursuant CPLR § 7511(b) on only three narrow grounds: if it is clearly violative of a strong public policy, if it is totally or completely irrational, or if it manifestly exceeds a specific, enumerated limitation on the arbitrator’s power.” Matter of Erin Constr. & Dev. Co., Inc. v. Meltzer, 58 AD3d 729 (2009). Even if the arbitrator commits errors of fact or law, the [*2]court should not vacate the arbitrator’s award.” Wien & Malkin LLP v. Helmsley-Spear, Inc., 6 NY3d 471 (2006). In this case, Arbitrator Weiner’s ruling and Master Arbitrator D’Ammora’s affirmation do not meet the three narrow grounds for the Court to vacate the award pursuant to CPLR § 7511. The award is not against public policy of any kind, it is not irrational, and it does not exceed the powers of the arbitrator in any capacity. As such, the Court has no recourse but to affirm the arbitrator’s award.

Petitioner argues that the respondent should be estopped from litigating this case since a similar case was litigated in prior proceedings in this Court. “The two elements that must be satisfied to invoke the doctrine of collateral estoppel are that (1) the identical issue was decided in the prior action and is decisive in the present action, and (2) the party to be precluded from relitigating the issue had a full and fair opportunity to contest the prior issue.” Luscher v. Arrua, 21 AD3d 1005, 1007 (2005). However, petitioner does not provide the Court with any evidence or details of the prior rulings of Judge King or Judge Bayne. Their decisions only state that the case be remanded. In order for collateral estoppel to apply, this Court would need details of the reasoning behind the prior decisions of Judge King and Judge Bayne to determine whether the issues in this case were previously decided. As such details were not provided by the petitioner, respondent is not estopped from litigating this issue.

Petitioner argues that Arbitrator Weiner acted impermissibly and incorrectly as a matter of law by raising the issue of subpoenaing Natalya Kornilova sua sponte. However, an “arbitrator . . . may subpoena witnesses . . . upon the arbitrator’s own initiative or upon the request of any party, when the issues to be resolved require such witnesses.” 11 NYCRR § 65-4.5(o)(2), (see also NY CPLR § 7505, 11 NYCRR § 65-4.4 [e]). Petitioner cites a case, Matter of Health & Endurance Med., P.C. v. Deerbrook Ins. Co., 44 AD3d 857 (2007), which has no relevance to this matter. In that case, the arbitrator raised an issue not relevant for determination of the issues. In this case, the contents of Ms. Kornilova’s deposition were integral to the determination of the issues in question, namely the ownership of the petitioner. As such, the Arbitrator was well within his power to issue a subpoena to Ms. Kornilova.

Petitioner argues that Arbitrator Weiner impermissibly dismissed the case without prejudice. Petitioner contends that a dismissal without prejudice is only warranted when the filing is premature. However, petitioner does not provide any case law to support this proposition. To the contrary, an arbitrator can dismiss a case without prejudice when a party “has failed to establish a prima facie case, but it appears that proof which would support a prima facie case is available.” Kilduff v. Donna Oil Corp., 74 AD2d 562, 563 (1980). A dismissal without prejudice indicates that there was no final determination on the merits and a subsequent action should not be barred. Id. In this case, petitioner is still entitled to bring their claim to an arbitrator at a time Ms. Kornilova is healthy enough to be examined under oath by respondent. As such, the dismissal without prejudice was permissible.

Petitioner further contends that Arbitrator Weiner’s findings were arbitrary and capricious or incorrect as a matter of law regarding the question of whether Petitioner is fraudulently incorporated. As indicated earlier, “even if the arbitrator commits errors of fact or law, the court should not vacate the arbitrator’s award.” Wien & Malkin LLP v. Helmsley-Spear, Inc., 6 NY3d 471 (2006). Arbitrator Weiner’s findings were not so egregious or against public policy as to vacate the award. As explained in Arbitrator D’Ammora’s affirmation, “Arbitrator Weiner could have reached several different results in his decision.” See Affirmation in Opposition, Exhibit B. Arbitrator Weiner’s decision was logical and reasonable and does not warrant the Court vacating the award.

The Court finds that petitioner has failed to provide any evidence to demonstrate that Arbitrator Weiner and Arbitrator D’Ammora acted in any way that was against public policy, completely irrational, or manifestly exceeded a specific enumerated limit on the arbitrator’s powers. Petitioner’s motion to vacate or remand the arbitration award is denied. Pursuant to CPLR § 7510, Master Arbitrator D’Ammora’s award dated October 28, 2014 is confirmed.

This constitutes the decision and order of the Court.

ENTER,

____________________

JSC

AR Med. Rehabilitation v State-Wide Ins. Co.

2015 NY Slip Op 25287 [49 Misc 3d 918]

July 1, 2015

Levine, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

As corrected through Wednesday, November 2, 2015

[*1]

AR Medical Rehabilitation, as Assignee of Michelle Estrella and Others, Plaintiff, v State-Wide Insurance Company, Defendant.

AR Medical Rehabilitation, as Assignee of Wayne Cohen, Plaintiff, v State-Wide Insurance Company, Defendant.

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

APPEARANCES OF COUNSEL

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

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

Katherine A. Levine, J.

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

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

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

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

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

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

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

AR Medical Rehabilitation, P.C. a/a/o JOHNNY TAYLOR, Plaintiff, against State-Wide Ins. Co., Defendant.

70806/2005

Gary Tsirelman, PC
Attorney for Plaintiff
129 Livingston Street
Brooklyn, NY 11201
by Stefan Belinfanti, Esq.

Law Office of Deirdre J. Tobin & Assoc.
Attorney for Defendant
P.O. Box 9330
Garden City, NY 11530
by Janine Gentile, Esq.

Reginald A. Boddie, J.

Plaintiff brought this action to recover assigned first-party no-fault benefits in the amount of $3,960.57. Trial commenced on February 13, 2015, and was continued over several days. The issues presented were whether plaintiff may establish submission and receipt of its claim through the use of defendant’s witness and whether defendant insurer asserted a valid defense in denying payment.

At trial, instead of the customary method of establishing a prima facie case by calling a witness of the provider, plaintiff called defendant’s claims examiner, Ms. Dachs. Ms. Dachs testified that defendant received plaintiff’s bills for dates of service 11/17/03-1/19/04.

She further established that, in response to the bills, the insurer sent plaintiff three delay letters, dated 1/30/04, 4/12/04, and 7/6/04, which stated, “All No Fault Benefits are pending investigation.” The delay letters were followed by a denial, also admitted into evidence.

The denial, dated 7/26/04, indicated bills in the amount of $3,962.57, for dates of service 11/17/03-1/19/04, were received between 1/23/03 [sic] and 3/1/04. It also stated, “By the claimants [sic] own admission he allegedly was treated by a chiropractor and acupuncturist. [*2]However carrier received bills from an orthopedic [sic] and a physical therapist as well. Claimant stated that the receptionist at the chiropractors [sic] office gave him supplies, not an outside vendor as carrier was billed from. Carrier questions validity of claim/treatment.” Neither party presented the actual bills and defendant relied on these latter statements as the basis for the denial. Both parties rested and moved for a directed verdict. The court reserved decision and heard closing arguments.

In no-fault insurance cases, plaintiff’s prima facie burden requires establishing proof of submission to the defendant of the claim and that defendant failed to pay or deny the claim within thirty days or issued a denial that was vague, conclusory or without merit as a matter of law (see Insurance Law § 5106 [a]; Viviane Etienne Med. Care, P.C. v Country-Wide Ins. Co., 114 AD3d 33 [2d Dept 2013]; Ave T MPC Corp. v Auto One Ins. Co., 32 Misc 3d 128[A], 2011 NY Slip Op 51292[U], *1 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2011]; see Westchester Med. Ctr. v Nationwide Mut. Ins. Co., 78 AD3d 1168 [2d Dept 2010]).

In Optimal Well-Being Chiropractic, P.C. v Chubb Indem. Ins. Co. (46 Misc 3d 129[A], 2014 NY Slip Op 51807[U], *1 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2014] [citations omitted]), the court noted, at trial, a no-fault plaintiff’s prima facie burden is to demonstrate proof of the submission of the claim forms at issue to defendant. The court indicated where the record establishes that the bills were denied and the denials admit receipt of the bills, plaintiff may prevail at trial (id. at *1-*2 [citations omitted]).

The Appellate Term reached a similar result in Prestige Med. & Surgical Supply, Inc. v Clarendon Natl. Ins. Co. (13 Misc 3d 127[A], 2006 NY Slip Op 51672[U], *1 [App Term, 2d Dept, 2d & 11th Jud Dists 2006]). There, the court, albeit in the context of a motion for summary judgment, found that although a “provider [ordinarily] establishes the submission’ of the claim form by demonstrating proof of proper mailing, which gives rise to the presumption that the claim form was received by the addressee,” where plaintiff’s proof was insufficient to establish mailing, the “deficiency was cured by defendant’s acknowledgment of receipt in its denial of claim forms [citations omitted] and by the admissions of the claims’ receipt in the affidavits by defendant’s claims adjusters” (id. at *2). As such, the court found plaintiff met its prima facie burden and the burden shifted to defendant to demonstrate triable issues of fact (id. [citations omitted]).

Thus, after the provider establishes submission of the bills, defendant’s burden is to prove that it paid or denied the claims within 30 days as required by statute (see Insurance Law § 5106 [a]; Insurance Department Regulations [11 NYCRR] § 65-3.8 [c]). Defendant may extend its time to pay or deny the claims by issuing timely requests for verification (11 NYCRR 65-3.5 [b]). However, it is well-established that delay letters that do not timely request verification will not serve to toll the time to pay or deny a claim (see 11 NYCRR 65-3.5 [a] [1]; Nyack Hosp. v Encompass Ins. Co., 23 AD3d 535 [2d Dept 2005] [citations omitted]).

Here, rather than the customary method of establishing submission and receipt of the claim through introduction of a witness of the assignee or its billing company, as was articulated in Viviane Etienne (114 AD3d at 45), plaintiff proved such through the testimony of defendant’s witness and the introduction of the denial into evidence, which referenced the bills at issue. The court finds plaintiff was not constrained to prove its case through the conventional method of producing its own witness, but was permitted to prove such through admissible evidence using the documents and witnesses of the defendant insurer (Prestige Med. & Surgical Supply, Inc., 13 Misc 3d 127[A], 2006 NY Slip Op 51672[U], at * 2; Optimal Well-Being Chiropractic, P.C., [*3]46 Misc 3d 129[A], 2014 NY Slip Op 51807[U], at *1-*2; East Acupuncture, P.C. v Electric Ins. Co., 16 Misc 3d 128[A], 2007 NY Slip Op 51281[U], *1 [App Term, 2d Dept, 2d & 11th Jud Dists 2007] [holding NF-10 claim denial forms and affidavits of defendant’s claims examiner cured deficiencies in plaintiff’s proof of mailing]).

Furthermore, it is well-settled that “a medical provider is not required, as part of its prima facie case, to demonstrate the admissibility of its billing records or the truth of their content under the business records exception to the hearsay rule” (New York Hosp. Med. Ctr. of Queens v QBE Ins. Corp., 114 AD3d 648 [2d Dept 2014], citing see CPLR 4518 [a]; Viviane Etienne Med. Care P.C., 114 AD3d at 45). Where the insurer fails to timely contest the adequacy of the claims forms at the claims stage, as here, it is precluded from relying on any deficiencies in those forms or raising evidentiary challenges to the admissibility of the contents of the billing forms under the business records exception at the litigation stage (New York Hosp. Med. Ctr. of Queens, 114 AD3d at 649 [citations omitted]).

Therefore, defendant’s attack on the validity of the bills at trial here will not suffice to defeat plaintiff’s proof of a prima facie case. The testimony of Ms. Dachs and the denials were accepted into evidence and treated as admissions of receipt of the bills and the amount billed and not as a testament to the truth of their content (see Viviane Etienne Med. Care, P.C., 114 AD3d at 45). This result is consistent with the regulatory scheme for the prompt payment and processing of no-fault claims (see id.). Thus, plaintiff sufficiently met its prima facie burden by eliciting the credible testimony of defendant’s witness and admission of defendant’s denials. By establishing submission and receipt of the bills, the plaintiff shifted the burden to defendant to establish a valid defense for its failure to timely issue payment (see Viviane Etienne Med. Care, P.C., 114 AD3d at 45, 47; see Westchester Med. Ctr., 78 AD3d at 1169).

Defendant failed to meet its burden of establishing a justiciable defense because it failed to pay or deny the claims within 30 days as required by statute (see Insurance Law § 5106 [a]; 11 NYCRR 65-3.8 [c]). Defendant also failed to extend its time to pay or deny the claims by issuing timely requests for verification (11 NYCRR 65-3.5 [b]). As defendant is sufficiently aware, delay letters, as here, that do not timely request verification will not suffice to toll the time to pay or deny a claim (see 11 NYCRR 65-3.5 [a] [1]; Nyack Hosp. v Encompass Ins. Co., 23 AD3d 535 [2d Dept 2005]). After the fact, only a non-precluded defense will suffice to prevent payment (see 11 NYCRR 65-3.8). Further, although defendant denied these claims based on alleged fraud, no fraud was demonstrated at trial and defendant failed to produce a competent witness or other evidence from which same could be adduced.

Accordingly, based on the credible testimony of Ms. Dachs and examination of the denial and other exhibits admitted into the record, the court finds plaintiff met its prima facie burden of establishing proof of submission of the bills to defendant, receipt of the bills, and that payment is overdue (see Viviane Etienne Med. Care, P.C., 114 AD3d 33; see Westchester Med. Ctr., 78 AD3d 1168; see Ave T MPC Corp., 32 Misc 3d 128[A]). Defendant failed to establish an adequate defense to payment (see 11 NYCRR 65-3.8; see Viviane Etienne Med. Care, P.C., 114 AD3d at 45-47; see Nyack Hosp. v Encompass Ins. Co., 23 AD3d at 536). Therefore, plaintiff is entitled to a judgment.

The Clerk of the Court shall enter judgment for the plaintiff in the amount of $3,960.57 plus statutory costs, interest, and attorney’s fees. The motions for directed verdict are denied as moot. This constitutes the Decision and Order of the Court.

Dated: April 27, 2015

_________________________

Hon. Reginald A. Boddie

Acting Supreme Court Justice

Prestige Med. P.C. v Travelers Home & Mar. Ins. Co.

2014 NY Slip Op 24317 [56 Misc 3d 284]

October 5, 2014

Levine, J.

Civil Court of the City of New York, Kings County

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

As corrected through Wednesday, July 19, 2017

[*1]

Prestige Medical P.C., as Assignee of Khalil Abdullah, Plaintiff, v Travelers Home and Marine Ins. Co., Defendant.

Civil Court of the City of New York, Kings County, October 5, 2014

APPEARANCES OF COUNSEL

Law Offices of Aloy O. Ibuzor, New York City, for defendant.

Korsunskiy Legal Group, P.C., Brooklyn, for plaintiff.

Katherine A. Levine, J.

This case raises anew the seemingly irreconcilable tensions that arise from treating an examination before trial (EUO) as{**56 Misc 3d at 285} both a condition precedent to coverage and as part of the verification procedures. It appears that no court has ruled upon whether an insurance company can issue a denial beyond the 30 day period for failure to appear for an EUO when the insurance company itself has failed to comply with the time lines specified in the verification procedures. This matter was submitted on the issue of whether an insurance company must schedule an EUO of the provider, pursuant to 11 NYCRR 65-3.5 (b), within 15 business days after it completes the assignor’s EUO, and what are the ramifications that flow from a late request for an additional EUO.

Plaintiff Prestige Medical P.C. (plaintiff, provider, or Prestige), a medical provider, brought this action for $2,423.58 for medical services it provided to its assignor Khalil Abdullah (assignor or Abdullah). After the EUO of the assignor was held on February 14, 2012, defendant Travelers Home and Marine Insurance Company (defendant, insurer, or Travelers), by letter dated March 13, 2012, requested an EUO of the provider, and thereafter scheduled the EUO for April 3, 2012. After the provider failed to appear, Travelers issued a follow-up letter, dated April 3, 2012, which rescheduled the EUO for April 23, 2012. After the provider again failed to appear, Travelers issued a denial dated May 9, 2012, based upon the provider’s EUO no-show.

Defendant moves for summary judgment based upon the plaintiff’s EUO no-show and outstanding verification. Plaintiff cross-moves for summary judgment on the grounds that the defendant failed to send out a scheduling letter to the provider for an EUO within 15 business days after holding the EUO of the assignor, as mandated by 11 NYCRR 65-3.5 (b).

In Unitrin Advantage Ins. Co. v Bayshore Physical Therapy, PLLC (82 AD3d 559 [1st Dept 2011]), the First Department held that a failure to attend an EUO (or independent medical exam [IME]) is a violation of a condition precedent to coverage which vitiates the policy. The First Department reasoned that since failure to appear for an EUO (or IME) cancels the contract as if there was no coverage in the first instance, an insurer could deny all claims retroactively to the date of loss and outside of the 30 day deadline in which to issue a denial. This court has followed Neomy Med., P.C. v American Tr. Ins. Co. (31 Misc 3d 1208[A], 2011 NY Slip Op 50536[U] [Civ Ct, Kings County 2011]; see also Tarnoff Chiropractic, P.C. v{**56 Misc 3d at 286} GEICO Ins. Co., 35 Misc 3d 1213[A], 2012 NY Slip Op 50670[U] [Nassau Dist Ct 2012] [court within Second Department follows Unitrin holding that denial need not be timely]).

[*2]

The Second Department has also recognized that failure to comply with the insurance policy’s requirement to submit to an EUO or IME “is a material breach of the policy, precluding recovery of the policy proceeds.” (Interboro Ins. Co. v Clennon, 113 AD3d 596, 597 [2d Dept 2014], citing to Unitrin.) However, the Appellate Term, Second Department, while noting the Unitrin decision, still appears to hold that failure to appear for an EUO or IME is a precludable defense. (Clinton Place Med., P.C. v New York Cent. Mut. Fire Ins. Co., 43 Misc 3d 127[A], 2014 NY Slip Op 50472[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2014]; Clinton Place Med., P.C. v New York Cent. Mut. Fire Ins. Co., 43 Misc 3d 126[A], 2014 NY Slip Op 50468[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2014].)

As cogently noted by the Honorable Fred J. Hirsh in Tarnoff, “[a]n EUO is a hybrid between a condition precedent to coverage and verification” (2012 NY Slip Op 50670[U], *5). Most of the provisions relating to EUOs are contained in regulations relating to verification. (Id.; see 11 NYCRR 65-3.5.) Nor does the insurer have an “unfettered right to request an EUO,” as it must have both an objective basis and justification for requesting it. (Id.)

To that end, this court holds that before an insurance company can take advantage of denying the claim beyond the 30 day period pursuant to Unitrin, it must first comply with the notification time lines contained in the verification procedures. 11 NYCRR 65-3.5 (b) authorizes an insurer to request “any additional verification required . . . to establish proof of claim . . . within 15 business days of receipt of the prescribed verification forms” (i.e., the completed application for no-fault benefits [N-F 2 form]) (Nyack Hosp. v General Motors Acceptance Corp., 8 NY3d 294, 299 [2007]). By properly requesting this additional verification within 15 business days from receipt of the proof of claim form, an insurer may toll the 30 day period in which it must deny the claim. (Prime Psychological Servs., P.C. v Nationwide Prop. & Cas. Ins. Co., 24 Misc 3d 230, 233 [Civ Ct, Richmond County 2009]; see Psych. & Massage Therapy Assoc., PLLC v Progressive Cas. Ins. Co., 5 Misc 3d 723, 724 [Civ Ct, Queens County 2004], citing 11 NYCRR former 65.15 [d] [1].) If the requested verification has not been supplied to the insurer within 30 days after the original{**56 Misc 3d at 287} request, the insurer shall, within 10 days, follow up upon its request for verification either by a telephone call or by mail. (11 NYCRR 65-3.6 [b].)

The insurance regulations provide for EUOs and IMEs as part of an insurer’s “entitlement to ‘additional verification’ following the insurer’s receipt of a provider’s statutory claim forms.” (Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 7 Misc 3d 18, 19 [App Term, 2d Dept, 2d & 11th Jud Dists 2004], affd in part 35 AD3d 720 [2006].) Section 65-3.5 (d) provides that if the additional verification required by the insurer is a medical examination, it must be scheduled within 30 days from date of receipt of the prescribed verification forms. (See Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 7 Misc 3d 18, 19 [App Term, 2d Dept, 2d & 11th Jud Dists 2004]; see also Prime Psychological, 24 Misc 3d at 233; All-Boro Med. Supplies, Inc. v Progressive Northeastern Ins. Co., 20 Misc 3d 554 [Civ Ct, Kings County 2008]; Lumbermens Mut. Cas. Co. v Inwood Hill Med., P.C., 8 Misc 3d 1014[A], 2005 NY Slip Op 51101[U] [Sup Ct, NY County 2005].) Where an EUO is requested as additional verification, an insurer must schedule it within a reasonable time frame and as “expeditiously as possible.” (Eagle Surgical Supply, Inc. v Progressive Cas. Ins. Co., 21 Misc 3d 49, 51 [App Term, 2d Dept, 2d & 11th Jud Dists 2008].) An insurer that conducts an EUO has 30 days from the date the EUO is conducted to pay or deny the claim. (Tarnoff, 2012 NY Slip Op 50670, *11, *12; see 11 NYCRR 65-[*3]3.8 [a] [1].)

After the EUO of the assignor was conducted on February 14, 2012, the insurer did not issue a letter requesting an EUO of the provider until March 13, 2012, some 28 calendar days, or 19 business days after the EUO had been conducted. When the provider failed to appear for the scheduled April 3, 2012 EUO, the insurer, on that same day, issued a follow-up letter rescheduling the EUO for April 23, 2012. After the provider again failed to appear, Travelers issued a denial dated May 9, 2012 based upon the provider’s EUO no-show.

This court rules that since defendant failed to abide by the 15 day time frame in which to request additional verification in the form of an additional EUO, as required by 11 NYCRR 65-3.5 (b), it forfeited its right to issue an untimely denial as permitted by the Unitrin decision. The other ramification of Travelers’ untimely request for an additional EUO is the reduction of its time in which to issue its denial after the provider failed to appear for the rescheduled EUO on April 23, 2012.{**56 Misc 3d at 288}

In Nyack Hosp. v General Motors Acceptance Corp. (8 NY3d at 300), the Court of Appeals found that per 11 NYCRR 65-3.8 (j), any deviation from the rules governing verification shall reduce the 30 calendar day period in which an insurer can deny the claim. 11 NYCRR 65-3.8 (l) provides that “[f]or the purposes of counting the 30 calendar days . . . , with the exception of section 65-3.6 [follow-up requirements] . . . , any deviation from the rules set out in this section shall reduce the 30 calendar days allowed.” Since Travelers requested the EUO of the provider 19 days, rather than within 15 days after the EUO of the assignor had been held, its time in which to issue a denial is reduced by four days. Travelers therefore had 26 days from April 23, 2012, or until May 19th, in which to issue a denial. Travelers issued a timely denial on May 9, 2012. Accordingly, Traveler’s motion for summary judgment is granted and the plaintiff’s cross motion for summary judgment is denied.

Rutland Med., P.C. v State Farm Ins. Co.

2014 NY Slip Op 24298 [45 Misc 3d 1033]

October 1, 2014

Cohen, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

As corrected through Wednesday, January 1, 2014

[*1]

Rutland Medical, P.C., as Assignee of Ted Nimmons and Another, Plaintiff, v State Farm Insurance Company, Defendant.

Civil Court of the City of New York, Kings County, October 1, 2014

APPEARANCES OF COUNSEL

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

Law Office of Stephen Goldblatt, P.C., Brooklyn, for plaintiff.

Devin P. Cohen, J.

Defendant’s motion for summary judgment is decided as follows:

Defendant’s motion is granted to the extent that it established the timely and proper generation and mailing of examination under oath (EUO) scheduling letters and plaintiff’s failure to appear on the scheduled EUO dates of January 18, 2013 and February 13, 2013. Defendant also established that the claims were timely denied.

Plaintiff, in opposition, does not challenge the timely mailing of defendant’s EUO [*2]requests or denials or that plaintiff failed to appear on the scheduled dates. Rather, plaintiff objects to the reasonableness of the EUO requests and attaches copies of letters addressed to defendant’s law firm responding to defendant’s EUO requests. In a letter dated January 17, 2013 plaintiff indicates that “there appears to be a disparity between [the position of the law firm] and that of State Farm.” Specifically, plaintiff requests clarification as to whether defendant was requesting both the production of documents and an EUO or whether defendant would consider the production of the documents to be sufficient. It is unclear whether and to what extent defendant responded to this letter as no responsive letter is included in the papers. Plaintiff’s subsequent letter, dated February 7, 2013, objects to appearing for an EUO and indicates that plaintiff believes it has fully met its obligation under the no-fault policy to comply with all reasonable requests for verification. Again, it is unclear whether defendant responded to plaintiff’s correspondence.

This court previously held in Five Boro Psychological & Licensed Master Social Work Servs., PLLC v GEICO Gen. Ins. Co. (38 Misc 3d 354 [Civ Ct, Kings County 2012, Cohen, J.]) that an objection must be timely to be meaningful. Thus, the court found that an objection to EUO requests raised for the first time after the action was commenced was too late to constitute a legitimate response and was insufficient to preserve an objection to reasonableness of those requests (see Five Boro, 38 Misc 3d 354, 357; see also Viviane Etienne Med. Care, P.C. v{**45 Misc 3d at 1035} State Farm Mut. Auto. Ins. Co., 35 Misc 3d 127[A], 2012 NY Slip Op 50579[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2012]). Here, in contrast, plaintiff offers evidence of a timely and specific objection to the reasonableness of defendant’s EUO requests and, as such, is not precluded from raising that objection in opposition to defendant’s motion (cf. Five Boro, 38 Misc 3d 354; see Viviane Etienne Med. Care, P.C., 35 Misc 3d 127[A], 2012 NY Slip Op 50579[U]).

Under the circumstances, plaintiff raises a question of fact with respect to the reasonableness of the EUO requests and whether, if defendant failed to respond, plaintiff’s failure to appear for the EUOs was excusable (cf. Five Boro, 38 Misc 3d 354; see Canarsie Chiropractic, P.C. v State Farm Mut. Auto. Ins. Co., 27 Misc 3d 1228[A], 2010 NY Slip Op 50950[U] [Civ Ct, Kings County 2010, Ash, J.]). The matter shall proceed to trial on the issues of plaintiff’s prima facie case and the reasonableness of defendant’s EUO requests.