Civil Court of the City of New York, Kings County

064253-11KI

Attorneys for Plaintiff:

The Rybak Firm, PLLC.

1506 Kings Highway, 2nd Fl

Brooklyn, NY 11229

Attorney for Defendant

Conway, Farrell, Curtin & Kelly, P.C

48 Wall Street

Woodbury, New York 10005

Katherine A. Levine, J.

Plaintiff Canarsie Chiropractic, P.C. (“plaintiff” or “Canarsie Chiropractic”), a medical services company, brings this action pursuant to Insurance Law § 5106(a) to recover monies for medical services provided to its assignor Harry Brenton (“assignor” or “Brenton”), a New York resident, for injuries he allegedly suffered in an automobile accident in New York. The car’s owner, Adama Ndiaye (“Ndiaye”), obtained the insurance policy for the car at issue, as well as for additional cars he owned in Michigan from Defendant Auto Club Insurance Association AAA Michigan (“Auto Club” or “defendant”). Per the policy, the cars were to be driven and principally garaged in that state. [*2]

After several vehicles that Ndiaye owned and insured with Auto Club were involved in auto accidents in New York between 2007 and 2009, the defendant initiated its investigation into Ndiaye’s place of residence. The investigation revealed that Ndiaye was in fact operating a commercial taxi/livery cab service in New York with the insured vehicles, in violation of the insurance policy term mandating that the vehicles be garaged in Michigan. cab service in New York and that all the vehicles were principally garaged in New York. Auto One thereupon obtained a default judgment from the Michigan Circuit Court, Auto Club Ins. Co. v Adama Ndiaye, C/A No: 10-758-CK (Hon. Timothy P. Connors) declaring the policy void ab initio and that plaintiff Auto One was “neither bound by, nor liable to [Ndiaye] or any other person or entity, whether known or unknown, under any contractual provision [of the policy].”

Auto Club moves for summary judgment on the ground that Michigan law applies, since the underlying no fault policy was procured and issued in Michigan to a Michigan resident. Plaintiff opposes the motion and argues that New York law applies since Auto One does business in New York. A conflict of law issue exists since Michigan law voids the policy ab initio when there is fraud in the procurement of the policy where as New York law does not permit an insurance policy to be cancelled retroactively. See, Mtr. of Allstate Ins. Co., (Stolarz), 81 NY2d 219 (1993); Jiminez v. Monadnock Constr., Inc., 109 AD3d 514 (2d Dept. 2012).

In Michigan, the various doctrines of fraud do not require the party asserting fraud to have investigated all assertions and representations made by its contracting partner as a prerequisite to establishing fraud. Titan Ins. Co. v. Hyten, 491 Mich. 547, 557 817 N.W.2d 562 (2012). Rather, the party asserting fraud has a plethora of legal and equitable remedies, including the right to “retroactively avoid contractual obligations through traditional remedies such as cancellation, rescission or reformation.” Id at 558. Therefore, Michigan has long held that an insurer can rescind a policy and declare it void ab initio as against an insured who seeks benefits when the insured procured the policy through fraud, even where the fraud was easily ascertainable. Titan Ins. Co. Supra, 491 Mich. At 555. See also Jackimowicz v. Citizens Ins. Co. of America, 2011 Mich. App. LEXIS 396 (Mich. Ct. App. 2011); Hammoud v. Metropolitan Property and Casualty Ins. Co., 222 Mich. App. 485, 488, 563 N.W.2d 716, 718 (1997).

In Titan, supra, the Michigan Supreme Court definitively ruled that an insurer could avail himself of these equitable principles to avoid liability under an insurance policy on the ground of fraud in the procurement notwithstanding that “the fraud might have been easily ascertainable…and the claimant was a third party.” 491 Mich. At 562. The Court reversed precedent which found that the public policy of the state recognizing the right to reimbursement under the no fault law trumped the common law which enabled insurers to obtain traditional forms of relief when they were victims of fraud and that third parties needed to protected. Id at 565- 569. Rather, “(t)hird-party victims of automobile accidents have a variety of means of recourse under the no-fault act (including tort actions), and it is to those means that such person [*3]must look.” Id at 565.

In New York, both the common law and the Insurance Law permit an insurance carrier to rescind and or void an insurance policy where a material misrepresentation was made at the time of the procurement of the policy. Stracar Medical Services v. Nationwide Mut. Ins. Co., 2013 NY Slip Op 50633(U), 39 Misc 3d 1216(A) (Civil Ct., Kings Co. 2013). See, Kiss Construction NY Inc. v. Rutgers Casualty Ins. Co., 61 AD3d 412 (1st Dept. 2009); Ins. Law §3105. However, VTL §313 (1) (a), which prohibits the termination of a contract of insurance until after the insurer mails a notice of termination to the insured, “supplants an insurance carrier’s common law right to cancel a contract of insurance retroactively on the grounds of fraud or misrepresentation and mandates that the cancellation of a contract pursuant to its provisions may only be effected prospectively.” Liberty Mut. Ins. Co. v. McClellan, 127 AD2d 767 (2d Dept. 1987). See, Mtr. Of Met Life Auto & Home v. Aguedelo, 8 AD3d 571, 572 (2d Dept. 2004). This section thus “places the burden on the insurer to discover any fraud before issuing the policy, or as soon as possible thereafter, and protects innocent third parties who may be injured due to the insured’s negligence.” Mtr. Of Ins. Co. v. Kaplan, 274 AD2d 293, 298 (2d Dept. 2000). However, only innocent third parties who are injured are protected and “not a health care provider who deals with the assignor-insured at its peril in accepting an assignment of the insured’s no-fault benefits.” Mtr of Met life, supra, 12 Misc 3d at 11-12.

The insurance carrier may assert as an affirmative defense that the insured misrepresentations and/or fraud in obtaining the policy precludes any recovery by the insured. A.B. Medical Services PLLC v. Commercial Mutual Ins. Co., 12 Misc 3d 8,11-12 (App. Term, 2d Dept. 2006). The defense of fraudulent procurement of an insurance policy is nonwaivable and hence exempt from the 30-day procurement rule, and may be asserted as against health care providers who seek to recover assigned benefits from the insured. AB Medical Services, supra, 12 Misc 3d at 11-12. The insurance company may also bring an action against its insured to recover any losses it incurred by paying benefits under the policy to the innocent third party. Mtr. Of Ins. Co. v. Kaplan, 274 AD2d 293, 298 (2d Dept. 2000).

Here, the assignor was an innocent third party as he was a passenger in a livery car owned by the insured and played no role in the insured’s fraudulent misrepresentation. Therefore, plaintiff health care provider, which stepped into the shoes of the assignor, is an innocent third party in the instant matter.

Traditionally, conflict of law questions relating to contracts were resolved by application of the law of the jurisdiction where the contract was made or was to be performed.” Mtr. of Eagle Ins. Co v. Singletary, 279 AD2d 56, 59 (2nd Dept. 2000). New York has long recognized the use of center of gravity or groupings of contacts as the appropriate analytical approach to choice of law questions in contract cases. Mtr of Midland Ins. Co., 16 NY3d 536 (2011) citing Zurich Ins. Co. v Shearson Lehman Hutton, 84 NY2d 309, 317, 319 (1994). This grouping of [*4]contacts approach establishes which State has the most significant relationship to the transaction and the parties, and allows that state “paramount control over the legal issues arising out of a particular factual context.” Mtr of Midland Ins. Co., supra, 16 NY3d at 543; Jiminez v. Monadnock Constr. Inc., 109 AD3d 514, 516 (2d Dept. 2013). Significant contacts include the place of contracting, negotiation and performance, the location of the subject matter of the contract, and the domicile or place of business of the contracting parties. Mtr. of Allstate Ins. Co. supra, 81 NY2d at 227; Jiminez, supra at 516; Mtr. Of Eagle Ins. Co. v. Singletary, 279 AD2d 56, 58-59 (2nd Dept. 2000).

In the context of liability insurance contracts, the courts look to the law of the state which the parties understood was to be the principal location of the insured risk. Mtr of Midland Ins. Co. supra 16 N.Y.3rdat 544; Eagle v. Singletary, supra, 279 AD3d at 59; Conflict of Laws § 193. The principle location of the insured risk will be deemed to be the state where the insured is incorporated, domiciled and has its principal place of business. Midland, supra, 16 NY2d at 544. In the case of a noncommercial vehicle insurance, the principal location of the insured risk is the place where the vehicle is to be principally garaged. Eagle Ins. Co., supra, at 57 citing Restatement [Second] of Conflict of Laws, § 193, comment c.

Applying this analytical framework to the facts, Michigan clearly had the most significant contacts. Defendant’s casualty claims representative averred that at the time Ndiaye procured the policy, he provided a Michigan address and stated that the four vehicles registered on his policy were to be garaged in that State. The subject insurance policy was negotiated in and issued to Ndiaye in Michigan and incorporated Michigan law. See, GEICO v. Nichols, 8 AD3d 564 (2d Dept. 2004) (retroactive cancellation of policy under Florida law permitted where the policy was issued in Florida to Florida residents for a vehicle registered in Florida and policy incorporated Florida law; the only connection to New York was that insured was driving car in NY at time of accident); Mtr of Eagle Ins. Co supra (retroactive cancellation of policy under Virginia law for fraudulent misrepresentation permitted where the policy was issued in Virginia to a Virginia resident for a vehicle garaged in Virginia, and the only connection to New York was that the accident occurred in NY and the injured passenger was a NY resident); Careplus Medical Supply Inc v. Selective Insurance Co of America, 25 Misc 3d 48 (App Term, 2d Dept. 2009) (New Jersey law governs where the policy was negotiated and entered into in New Jersey, the insureds lived in New Jersey, and the vehicle was garaged and registered in New Jersey; the only connection to New York was that the accident occurred there); R.E.G Flushing Medical v. Integon Nat. Ins. Co., 2011 NY Slip Op 50975(U), 31 Misc 3d 1234(A) (Dist. Ct., Nass. Co. 2011) (North Carolina law applies where policy was issued to insured in North Carolina, the policy listed a North Carolina address for the insured and the insured certified that his cars were garaged at the address listed).

Applying Michigan law, it is clear that the defendant properly cancelled the policy at issue because of fraud in its procurement. Plaintiff argues that even if Michigan Law applies, the [*5]motion cannot be granted because its out of state affidavit lacks a certificate of conformity required by RPL 299-a (1). This section mandates that an affidavit signed outside of the state by a foreign notary be accompanied by a certificate of conformity certifying that the manner in which the acknowledgment was taken conforms with New York law or other place where the acknowledgment was taken. The certificate must be made by an attorney admitted to practice in New York State who resides in the other jurisdiction, or by an attorney admitted to practice in the other jurisdiction, or any other person deemed qualified by any court of the State of New York. RPL ｧ 299-a (1).

Here, the Michigan notary of the public who notarized defendant’s affidavit does not fall within any of the categories allowed by RPL 299-a (1). Nevertheless, the absence of a valid certificate of conformity for an out-of-state affidavit is not a fatal defect and can be cured nunc pro tunc. Fredette v Town of Southampton, 95 AD3d 940, 941 (2nd Dept. 2012); Art of Healing Medicine, P.C. v. Amica Mutual Ins. Co., 2013 NY Slip Op 52014(U), 41 Misc 3d 141(A) (App. Term, 2nd Dept. 2013). Accordingly, the defendant is given 45 days from receipt of this decision to provide a certificate of conformity to this Court and the other side. Upon receipt of proper certificate, this Court will grant the motion for summary judgment and dismiss the case.

This constitutes the Decision and Order of the Court.

DATED: March 10, 2014

_____________________________

KATHERINE A. LEVINE

Acting Justice, Supreme Court

Civil Court of the City of New Y ork, Kings County

003036/11

Attorneys for Plaintiff NATURAL THERAPY ACUPUNCTURE, P.C. a/a/o ADA OKIKA

The Rybak Firm, PLLC

1810 Voorhies Avenue, 3rd Floor

Brooklyn, NY 11235

Attorneys for Defendant STATE FARM MUTUAL INSURANCE COMPANY

McDonnell & Adels, PLLC

401 Franklin Avenue

Garden City, NY 11530

Carol Ruth Feinman, J.

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

review of this Notice of Motion for Summary Judgment:

PapersNumbered

Notice of Motion and Affidavits Annexed (Plaintiff)………..1 & 2 [Exh. 1-5]

Opposition and Affidavits Annexed …….(Defendant)…………3 [Exh. 1-6]

Notice of Motion and Affidavits Annexed..(Defendant)…….. 4 & 5 [Exh. 1-10]

Opposition and Affidavits Annexe (Plaintiff)…………………..6 [Exh. 1-8]

Replying Affidavits (Defendant) ……………………………7 [Exh. E-M]

Other………Plaintiff Post-Motion Memorandum……………..8 [Exh. 1]

Defendant Post-Motion Memorandum9 [Exh. M,N,O,P,L]

Upon the foregoing cited papers and after oral argument, the Decision/Order on [*2]the defendant’s motion seeking Summary Judgment and the plaintiff’s motion seeking Summary Judgment are decided herein as follows:

Plaintiff health service provider brought the within no-fault insurance action against the defendant insurance company to recover first-party no-fault benefits for medical services rendered, pursuant to §5106 of the New York State Insurance Law (hereforth “Insurance Law”) and Regulations of the New York State Insurance Department [11 N.Y.C.R.R. §65-1.1 et. seq.]. Plaintiff is seeking to recover no-fault benefits in the total amount of $600, including statutory interest and attorney fees, for services rendered to its assignor, Ada Okika, between March 9, 2010 to April 16, 2010, relating to injuries allegedly arising out of a motor vehicle accident which occurred on February 13, 2010. Plaintiff seeks reimbursement for no-fault benefits for the following invoices:

a. $535.00 for services rendered between March 9, 2010 and April 10, 2010; and

b. $65.00 for services rendered on April 16, 2010.

Defendant moves herein for an order granting summary judgment and dismissing plaintiff’s complaint as a matter of law, on the grounds that plaintiff failed to establish its prima facie entitlement to no-fault payments, that plaintiff breached a condition precedent to coverage, to wit, its failure to appear for an examination under oath (hereinafter “EUO”), pursuant to 11 N.Y.C.R.R §65-1.1 and §65-3.5, and that plaintiff is fraudulently incorporated, thus arguing that plaintiff is not entitled to receive no-fault payment.

Plaintiff opposes defendant’s application, arguing the reasonableness of defendant’s EUO request, and that such notices and denials from defendant were neither properly generated nor timely mailed.

Plaintiff subsequently also moves herein for an order granting summary judgment as a matter of law, on the grounds that it has established its prima facie case, in that Ada Okika assigned her “no-fault” benefits to plaintiff health service provider pursuant to the terms of the insurance policies sold by the defendant, and plaintiff timely submitted invoices and/or bills to defendant in accordance with the New York State Insurance Law. The plaintiff asserts herein that the defendant failed to properly pay or deny the various claims within thirty (30) days of receipt, as required by the New York State Insurance Law and Regulations.

Defendant opposes Plaintiff’s application, arguing that plaintiff failed to establish its prima facie entitlement to reimbursement, and also that plaintiff fraudulently incorporated its practice.

The court notes that there are two sets of motions filed in the instant action, [*3]referencing the same applications to the court, wherein both parties are seeking relief in their favor. Defendant filed a summary judgment motion seeking relief, in which plaintiff filed opposition papers. Plaintiff also subsequently filed a summary judgment motion seeking relief, in which defendant filed opposition papers. This court, in the interest of judicial economy, shall hereby decide both parties’ motions in this instant decision. The court has considered all submitted documents of both parties herein, along with the additional post-motion briefs the court directed both parties to submit. The court finds that this will cause no prejudice to either party.

The rule governing summary judgment requires the proponent of a summary judgment motion to make a prima facie showing of entitlement to summary judgment as a matter of law, offering sufficient evidence to eliminate any material issues of fact from the case. See, Winegrad v. New York University Medical Center, 64 NY2d 851 [1985]; Tortello v. Carlin, 260 AD2d 201 [1st Dept. 1999]; Cox v. Kingsboro Medical Group, 214 AD2d 150 [2nd Dept. 1995]. The burden of proof, as well as persuasion, rests with the proponent of the summary judgment motion. Once the burden is satisfied, the opponent of the motion must produce sufficient evidence, in admissible form, establishing the existence of at triable issue of fact. See, Alvarez v. Prospect Hospital, 68 NY2d 320 [1986], citing Zuckerman v. City of New York, 49 NY2d 557 [1980].

Pursuant to both the Insurance Law and the Regulations promulgated by the Superintendent of Insurance, an insurer is required to pay or deny a claim for no-fault automobile insurance benefits within thirty (30) days from the date a claimant supplies proof of claim forms. See, Insurance Law §5106(a); 11 N.Y.C.R.R. §65.15(h). Failure to pay benefits within the 30-day requirement renders the benefits “overdue,” and all overdue payments bear interest at a rate of 2% per month. See 11 N.Y.C.R.R. §65-3.9(a). In addition, the claimant is entitled to recover attorney’s fees where a “valid claim or portion” was denied or overdue. See, Presbyterian Hospital in the City of New York v. Maryland Casualty Company, 90 NY2d 274 [1997].

After oral argument previously conducted, this court found that plaintiff had established its prima facie entitlement to no-fault reimbursement. However, the court determined that the remaining issues to be determined were the reasonableness of defendant’s EUO verification request, the timeliness and proper mailing of the EUO verification request, and personal knowledge of the assignor’s appearance or failure of same. The court reserved decision and directed both parties to submit additional briefs regarding these remaining issues, which the court notes it only received additional briefs from defendant. Thus, the court shall render its decision based upon the record herein.

REASONABLENESS OF EUO REQUEST

As a condition to coverage under the revised Personal Injury Endorsement (“PIP”), “the eligible person … shall … as may reasonably be required, submit to examinations under oath by any person named by the [insurer] and subscribe to same. Another condition to coverage under this section sets forth that an eligible person shall [*4]submit to medical examination by physicians selected by or acceptable to the insurer as often as the insurer may reasonably require.” See, 11 N.Y.C.R.R. § 65—1.1(d) [Sec. I. Conditions, Proof of Claim (b) ].

It is well settled that a defendant insurance company is within its rights to request an examination under oath (“EUO”) of a plaintiff provider based upon the fact that all no-fault endorsements issued in the state since April 2002 allow for the taking of same, for the purposes of verifying a claim. Moreover, an EUO of a medical provider has been held to be appropriate where the insurer can demonstrate a valid and necessary reason for doing so. See 11 N.Y.C.R.R. §65-1.1. See also, W & Z Acupuncture, P.C. v Amex Assurance Co., 24 Misc 3d 142(A) [App. Term 2nd, 11th & 13th Jud. Dists. 2009]. Appearance at a properly demanded EUO is a condition precedent to an insurance carrier’s liability to pay no-fault benefits. See, Five Boro Psychological Services, P.C. v. Progressive Northeastern Ins. Co., 27 Misc 3d 141(A) [App. Term 2nd, 11th and 13th Jud. Dists. 2010].

The regulations provide for an examination under oath. The term “examination under oath” is not defined by the no-fault regulations. Word used in regulations that are not specifically defined in the regulations are to be given their ordinary meaning. See, Oefelein v. Town of Thompson Planning Board, 9 AD3d 556 [3rd Dept.2004]; Parker v. Kelly, 140 AD2d 993, [4th Dept.1988]; McCarter v. Beckwith, 247 App.Div 289 [2nd Dept.1936]. Examination is defined as the questioning of a witness by an attorney. See, Law.Com Law Dictionary. Examination can also be defined as a formal interrogation. See, Webster’s Unabridged Dictionary 2nd Ed., [1998; p. 673]. Therefore, the term “examination under oath” as used in the no-fault regulations means the insurer can request the injured party or the assignee of the injured party appear and give oral testimony after having been sworn or under affirmation.

In the instant record, defendant proffers the Affidavit of Dawn Madalone, an investigator employed in defendant’s Special Investigative Unit. Ms. Madalone attests to her personal knowledge of the instant matter, due to her involvement in the investigation of plaintiff provider. Ms. Madalone sets forth the factors and circumstances which led to defendant insurance company to initially investigate plaintiff. Ms. Madalone also sufficiently substantiates the defendant’s request for an EUO, as a part of defendant’s further investigation and verification of plaintiff no-fault reimbursement claims. Moreover upon further review, defendant insurance company did in fact advise plaintiff provider in the EUO scheduling letters that it requested an EUO based on, inter alia, the “rendition and necessity of [plaintiff’s] billing practices, as well as the patten in the nature and frequency of the medical services.” These letters clearly delineate defendant’s further reasons as to why it sought verification of the claims.

However, despite defendant’s arguments herein for seeking such verification, the regulations do not provide an insurer with the right to obtain written documentation other than such documentation as may be demanded as verification. In addition to [*5]appearing for an examination under oath, the assignee can be compelled to execute a written proof of claim under oath and provide other pertinent information as may assist the insurer in determining the amount due and payable. See, 11 NYCRR 65—1.1. The regulations also do not give the insurer to right to ask an assignee to produce documents relating to the corporate structure or finances of a medical provider. See, 11 NYCRR 65—3.5(a). Upon receipt of the completed verification form, the insurer can request additional verification. See, 11 NYCRR 65—3.5(b). The regulations only permit the insurer to obtain written information to verify the claim. See, 11 NYCRR 65—3.5(c); See also, generally, V.M.V. Management Co., Inc. v. Peerless Ins., 15 AD3d 647 [2nd Dept., 2005]. Nothing in the No—Fault regulations permits an insurer to request an assignee to produce corporate organizational and financial documents a week in advance of an EUO.

However, before this court can refuse to accept defendant’s arguments in favor of its verifications requests seeking EUOs, plaintiff must first establish that it had objected to or responded to such requests indicating and specifying the claims of unreasonableness. In the present case, the plaintiff provider has in no way established that it ever objected to any part of the defendant’s EUO notices. The Appellate Term has clearly decided that due to such a failure by a plaintiff provider to submit any objections prior to an application to the court, it will decline to consider the plaintiff’s argument. See for example, Viviane Etienne Medical Care, P.C. v State Farm Mutual Ins. Co., 35 Misc 3d 127(A) [App. Term 2nd Dept. 2012]; Crescent Radiology v. American Transit, 31 Misc 3d 134(A) [App. Term 2nd Dept. 2011]; See also, Westchester Medical Center v New York Central Fire, 262 AD2d 553 [2nd Dept. 1999]. Thus, this court, in following precedent, will also decline to consider the instant plaintiff’s argument.

In light of the findings above, plaintiff’s application seeking summary judgment is hereby denied.

TIMELY AND PROPER MAILING OF EUO and PERSONAL KNOWLEDGE OF FAILURE TO APPEAR

In order to establish that the claimant failed to appear for the scheduled EUOs, the defendant is required to establish that the EUO scheduled letters were mailed. See for example, Stephen Fogel Psychological, P.C. v. Progressive Cas. Ins. Co., 35 AD3d 720 [2nd Dept. 2006]. There are three distinct methods to demonstrate proof of mailing: (1) provide an affidavit from an individual with personal knowledge of the actual mailing (see for example, Carle Place Chiropractic v. New York Cent. Mut. Fire Ins. Co., 19 Misc 3d 1139(A) [N.Y.Dist.Ct. 2008]); (2) acknowledgment by the adverse party that it received the subject document (see for example, A.B. Medical Services v. New York Central Mutual Fire Ins. Co., 3 Misc 3d 136(A) [App. Term 2nd & 11th Jud. Dists. 2004]); and (3) where the party provides proof of a standard office procedure, which ensures that documents are properly addressed and mailed (see for example, Lenox Hill Radiology, P.C. v. Tri State Consumer Ins. Co.,31 Misc 3d 13 [App. Term 1st Dept. 2010]). [*6]

Additionally, the defendant must also meet the burden of establishing with an affidavit by a person with personal knowledge that the plaintiff’s assignor failed to appear for the scheduled EUOs (see, Infinity Health Products, LTD., v. Progressive Insurance Company, 28 Misc 3d 133(A) [App. Term 2nd, 11th, & 13th Jud. Dists. 2010]; Fair Price Medical Supply Corp., v. New York Cent. Mut. Fire Ins. Co., 14 Misc 3d 141(A) [App. Term 2nd & 11th Jud. Dists. 2007].

In support of its motion, defendant submitted herein both the Affidavit of Dawn Madalone and the Affidavit of Neil Gahl, Claims Representatives employed by defendant insurance company. Contrary to plaintiff’s contentions, the court finds that such affidavits of Ms. Madalone and Mr. Gahl sufficiently establishe the standard office procedures and practices for the preparation and generation of verification letters and NF-10 denial of claim forms in which defendant institutes. Specifically, both Affidavits sufficiently establish the process defendant institutes regarding all incoming mail of proof of claims, as well as the process defendant institutes regarding all out-going mail, including but not limited to the verification request letters and NF-10 denials (of which are previously prepared by a designated claims representative). In addition, both Affidavits sufficiently establish the process of mailing of same by way of daily pick up by a U.S. Postal Service. Both Affidavits assert that defendant received plaintiff’s first proof of claim invoice on April 19, 2010, and that an EUO verification request/delay letter was thereafter issued and mailed on May 4, 2010, directing the plaintiff to appear for the EUO on June 1, 2010. Additionally, upon defendant’s receipt of an additional proof of claim on April 30, 2010, an additional verification request/delay letter was issued and mailed on May 14, 2010. Both Affidavits indicated that upon plaintiff’s failure to appear for the initial EUO scheduled date of June 1, 2010, a follow-up EUO request was issued and mailed to plaintiff on June 7, 2010, directing plaintiff to appear for the EUO on June 29, 2010. Both Affidavits also indicated that upon plaintiff’s failure to appear for the re-scheduled EUO of June 29, 2010, a denial of no-fault reimbursement was thus issued, based upon plaintiff’s failure to satisfy a condition precedent of attending the EUO.

In addition, the defendant’s presentation herein of a copy of its mail receipt by United States Postal Service is not only additional prima facie proof of mailing, but is key to creating the presumption of receipt. See, Hernandez v. Merchants Mutual Ins. Co., 14 Misc 3d 1215(A) [Civ. Ct. Bronx Co. 2006].

The defendant further submitted herein the Affirmation of Joseph A. Schwarzenberg,

Esq. , who attested he was employed as an attorney at the law offices of McDonnell & Afels, PLLC, which represents the defendant herein. Mr. Schwarzenberg asserted that he was assigned to handle the EUO, and was present in the office where the EUOs were scheduled to be conducted, on both dates of June 1, 2010 and June 29, 2010, wherein [*7]plaintiff failed to appear on either date. The Court finds that such Affirmation of Mr. Schwarzenberg sufficiently attests to having personal knowledge of the plaintiff’s failure to appear for three duly scheduled EUOs. See, Infinity Health Products, Ltd., v. Progressive Insurance Company, 28 Misc 3d 133(A) [App. Term 2nd, 11th, & 13th Jud. Dists. 2010]; Fair Price Medical Supply Corp., v. New York Cent. Mut. Fire Ins. Co., 14 Misc 3d 141(A) [App. Term 2nd & 11th Jud. Dists. 2007]; Chi Acupuncture, P.C. v. Kemper Auto & Home Ins. Co., 14 Misc 3d 141(A) [App. Term 9th & 10th Jud. Dists. 2007].

In reviewing the contentions made by the plaintiff within its opposition to defendant’s application for summary judgment, the court finds that it has failed to rebut the presumption of defendant’s prima facie timely mailing of the EUO verification requests and denials, and plaintiff’s failure to appear for either of the properly scheduled EUOs. In light of such, the Court finds that the plaintiff’s submissions in opposition are insufficient to raise a triable issue of fact as to whether the defendant timely issued a denial of its outstanding claims. See for example, Zuckerman v. City of New York, 49 NY2d 557 [1980].

In light of the this condition precedent, it is clear that plaintiff’s failure to comply (or even properly object to preserve its objection for court review) with a condition precedent to coverage voids the policy contract ab initio, and defendant is not obligated to pay the claim, regardless of whether defendant issued denials beyond the thirty (30) day period. See for example, Unitrin Advantage Ins. Co. v. Bayshore Physical Therapy, PLLC, 82 AD3d 559 [1st Dept. 2011]; see also, Neomy Medical, P.C., v American Transit Ins. Co., 31 Misc 3d 1208(A) [Kings County Civ. Ct.]. This court finds, based upon the foregoing analysis, that the plaintiff has failed to establish its entitlement to summary judgment, and the defendant has sufficiently established its entitlement to summary judgment herein regarding the plaintiff’s claims. See, Winegrad v. NYU Medical Center, 64 NY2d 851 [1985]; Zuckerman v. City of New York, 49 NY2d 557 [1980].

Based upon the foregoing, the plaintiff’s application seeking summary judgment is hereby denied. In addition, the defendant’s application seeking summary judgment against the plaintiff is hereby granted, and the matter is dismissed.

This constitutes the Decision and Order of this Court.

DATED:November ___, 2013

Brooklyn, New York

_____________________

CAROL RUTH FEINMAN

Judge, Civil Court

Civil Court of the City of New York, Kings County

47305/2011

Attorney Information:

Bruno, Gerbino & Soriano, LLP (Attorney for Defendant)

445 Broad Hollow Road, Suite 220

Melville, New York 11747

Law Offices of Emilia Rutigliano, P.C. (Attorney for Plaintiff)

1733 Sheepshead Bay Road, Suite 11

Brooklyn, New York 11235

Ingrid Joseph, J.

Part 41

Index No.: 47305/2011

Motion Cal. No.: 103/104

DECISION/ORDER

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

considered in the review of this Motion

PapersNumbered

Notice of Motion and Affidavits Annexed .1 – 2

Cross Motion and Affidavits Annexed,……………3-4

Answering Affidavit ……………………………………..5

Replying Affidavits …….. 6In this action by a provider to recover assigned first-party no fault benefits, the plaintiff seeks summary judgment, and the defendant cross moves for the same relief.

Plaintiff claims that it provided medical services to assignor, Joseph Howe (“Mr. Howe”), for injuries that he sustained as a result of a motor vehicle accident that occurred on 11/07/09. The plaintiff established by proof in admissible form that it sent bills to the defendant for dates of service 12/09/09 to 1/06/10 ($718.17); 1/07/10 to 2/02/10 ($743.60); 2/05/10 to 3/02/10 ($743.60); and 7/06/10 to 8/14/10 ($1460.00) and that the total amount owed ($3665.98) remains outstanding. [*2]

The defendant, a Massachusetts-based insurance company, acknowledges receiving the bills and established that it sent a delay letter to plaintiff on 11/19/09 in response to the first bill for date of service 12-09/09 to 1/06/10 in the amount of $718.17. The delay letter states that the request for payment can not be satisfied due to a pending investigation into a potential policy violation. There is no evidence that the defendant sent a denial of claim form for the first bill after completing its investigation. However, the defendant demonstrated that it sent denials for the remaining bills on 2/16/10, 3/22/10, and 8/30/10, respectively. The defendant noted on each NF-10 form that the claims were denied due to plaintiff’s assignor’s non-cooperation based on his failure to provide documents to establish that he resides in Massachusetts. The defendant cross moves summary judgment dismissing the action on that ground.

At the outset, the court notes that the applicable Massachusetts laws conflict with New York No-Fault law. The analysis used in resolving choice of law issues in this context is the “grouping of contacts” or “center of gravity” approach (Babcock v Jackson, 12 NY2d 473 [1963]). This approach accommodates the competing interests in tort cases with multi-state contacts by giving controlling effect to the law of the jurisdiction based on the relationship or contact with the occurrence, or where the parties have the greatest concern with the specific issue raised in the litigation (id.). Upon application of this analysis, the court finds that the dispositive factors weigh in favor of applying Massachusetts law. The motor vehicle accident giving rise to this dispute occurred at the intersection of Pitkin Avenue and Hendrix Street in Brooklyn, New York. However, the insurance contract was entered into and written in Massachusetts. The defendant is a domiciliary of Massachusetts and maintains its principal place of business in that state. Additionally, Mr. Howe had a Massachusetts license, purported to have a Massachusetts address, and the vehicles (Toyota and Lexus) covered under the policy were registered in Massachusetts .

In order to avoid coverage based upon non-cooperation by an insured, the insurer bears the burden of proving (1) a substantial and material breach of the duty to cooperate; (2) actual prejudice to the insurer’s interest due to the lack of cooperation, i.e., serious impairment of the insurer’s investigation or defense of the action; and (3) the insurer’s exercise of diligence and good faith in obtaining the insured’s cooperation (Darcy v Hartford Ins. Co., 407 Mass. 481, 488-491 [1990]). Even when these elements are met, the insurer will be obligated to provide coverage if the insured (or the party standing in the shoes of the insured) is able to prove that the insurer waived its right to assert the policy breach as a ground for denying liability (Rose v Regan, 344 Mass. 223, 229 [1962]; Merrimack Mut. Fire Ins. Co. v Nonaka, 414 Mass. 189, 190 [1993]). Waiver may be inferred from the circumstances when an insurer has exercised dominion over a case, which made a significant and irrevocable change in the insured’s position, without issuing a timely and effective reservation of rights and disclaimer letter (DiMarzo v American Mut. Ins. Co., 389 Mass. 85, 99-100 [1983]). [*3]

Here, the defendant’s underwriter, Ania Cryan, stated in her affidavit that Mr. Howe represented at the time the policy was issued that he resided at L3 Franklin Square, Randolph, Massachusetts (“Massachusetts address”). Ms. Cryan indicated that the defendant would not have issued the insurance policy had it known that Mr. Howe resided in New York and not in Massachusetts. The defendant’s claims adjuster, Melissa Thompson, also stated in her affidavit that the defendant was under the impression that Mr. Howe resided at the Massachusetts address. Ms. Thompson asserted that the defendant became suspicious, because the NF-2 application indicates that Mr. Howe’s address is 126-39 146th Street, Jamaica, New York (“Jamaica, Queens address”). Ms. Thompson did not set forth the defendant’s procedures when receiving NF-2 forms, but the dates on Mr. Howe’s NF-2 form appears to contradict Ms. Thompson’s assertions. The NF-2 is dated 11/13/09 and bears a received stamp of 11/18/09, and the reservation of rights letter was sent on 11/13/09 to the Jamaica, Queens address. Based on these dates, it appears that the defendant sent the reservation of rights letter to Mr. Howe’s Jamaica, Queens address before receiving the NF-2 application. The defendant has also failed to proffer any evidence that it sent the letter to the Massachusetts address, which is the address of record on the insurance policy according to Ms. Thompson. The court is unable to ascertain when the defendant first became aware of a potential discrepancy with Mr. Howe’s residency so as to disclaim coverage on that ground. This is relevant because under Massachusetts law, the defendant could be potentially barred from disclaiming coverage on estoppel grounds, or if waiver applies (Sweeney v Frew, 318 Mass. 595 [1945]). Waiver of a policy defense can be inferred from an insurer’s actions, and, in the court’s view, accepting premium payments from an insured when the insurer is aware of a potential policy violation or discrepancy with an insured’s purported residence may estop the defendant from availing itself of the lack of coverage defense.

There is also a question as to the effectiveness of the letter that was sent to Mr. Howe. The letter indicates that the defendant is reserving its right to disclaim and to assert a defense of no coverage based upon its contention that it may have been provided with false, deceptive, misleading or incomplete information regarding the garaging of Mr. Howe’s vehicles. The letter outlines provision 18 under the policy, which states, in pertinent part,

“After an accident or loss, you or anyone else covered under this policy must cooperate with us in the investigation, settlement and defense of any claim or lawsuit. We must be sent copies of all legal documents in connection with the accident or loss.

Failure to cooperate with us may result in the denial of the claim.”

The letter states that the defendant will need to obtain a recorded statement from Mr. Howe in reference to the garaging of his vehicles, and it states that Mr. Howe will need to provide [*4]documents showing that he resides in Massachusetts. After receiving reports from two investigators and a recorded statement from Mr. Howe, the defendant did not disclaim its obligation under the subject insurance policy based upon false, deceptive, misleading or incomplete information regarding the garaging of Mr. Howe’s vehicles. Instead, the defendant disclaimed its obligations under the policy based upon its contention that Mr. Howe’s did not submit the requested documentation and therefore, failed to cooperate with its investigation.

The defendant’s contention that Mr. Howe failed to cooperate when applied to Massachusetts law regarding the waiver of defenses, raises several issues. First, there is no showing that Mr. Howe received the reservation of rights letter. The defendant failed to annex actual proof of mailing or provide an affidavit of an individual with personal knowledge to establish the practices and procedures that were in place at the time to ensure that such letters are sent. Ms. Thompson’s conclusory statement that she mailed the letter to Mr. Howe is insufficient. Second, before receiving the NF-2 application or completed reports from its investigators, the defendant sent the letter to the Jamaica, Queens address only and not to the address of record on the insurance policy. Third, there is a notation in the letter that the defendant enclosed a self-addressed, stamped envelope for Mr. Howe to return acknowledgment of receipt of the letter. The defendant’s claims adjuster, Ms. Thompson, failed to address whether a signed acknowledgment of receipt was received from Mr. Howe. Lastly, there is no showing that a reservation of rights or disclaimer letter was sent to the plaintiff, who stands in the shoes of Mr. Howe.

Assuming arguendo that Mr. Howe received the reservation of rights letter, there is no showing that the defendant exercised diligence and good faith in obtaining Mr. Howe’s cooperation. The letter is vague and ambiguous as to the type of documentation required, and there is no evidence that a more detailed, follow up letter was sent to Mr. Howe before disclaiming coverage. Furthermore, the defendant has failed to demonstrate that Mr. Howe’s alleged failure to submit documentation as to his proof of residency constituted a substantial and material breach of the duty to cooperate. The defendant received detailed reports from both investigators and Mr. Howe submitted to an in person, recorded interview with one of the investigators, Timothy Cunningham, on 11/20/09. When asked by Mr. Cunningham for his current address, Mr. Howe responded that he resides at L3 Franklin Square Condo, Randolph, Mass., 02368 . Mr. Howe presented the investigator with a Massachusetts driver license but provided a New York area code phone number. Mr. Howe claimed that he worked full time at American Airlines (JFK Airport location) over a seventeen year period before retiring in April 2009. Mr. Howe indicated that he stayed at the Jamaica, Queens address, his mother’s home, when he was working. He claimed that he did not pay rent at that address but stated that the Direct TV bill was in his name. Mr. Howe also stated that he did not pay rent or utilities at the Massachusetts address, and he acknowledged that he did not own that property. Mr. Howe told the investigator that he sometimes stays at the [*5]Massachusetts address and at his daughter’s house, located at Herman Street in Roxbury, Massachusetts.

Additionally, the defendant has not established that it has or will suffer prejudice or serious impairment due to Mr. Howe’s alleged failure to produce documentation. Mr. Cunningham investigated Mr. Howe’s New York address, and the other investigator, Robert DiMare, investigated the Massachusetts address. In addition to the results of the in person interview with Mr. Howe, Mr. Cunningham reported that a search using Mr. Howe’s social security number connected him to the Jamaica, Queens address from 1993 through November 2009. Mr. Cunningham also located Mr. Howe’s bankruptcy filing from May 2005, which revealed that Mr. Howe used the Jamaica, Queens address at that time. Mr. Cunningham also indicated that a search with the New York Department of Motor Vehicles showed that Mr. Howe had a New York driver’s license that expired in 1981 . He also reported that Mr. Howe has received tickets for disobeying traffic devices in Brooklyn, New York on 4/13/09 and 2/02/07 as well as a parking ticket in New York City on 5/20/09. Mr. Cunningham reported further that he found a telephone listing for “Joseph N. Howe” at the Jamaica, Queens address on the Whitepages.com website. According to Mr. Cunningham, one of the neighbors near the Jamaica, Queens address indicated that Mr. Howe has resided there for several years. Mr. Cunningham reported that he observed both of the vehicles covered under the subject policy (a Toyota and Lexus) parked on a street by the Jamaica, Queens address, and he noted that the Lexus had extensive front end damage.

Mr. DiMare reported that he found no records relating to Mr. Howe at the Randolph Town Hall, Registrar of Voters Office, or Assessor’s Office. He also indicated that he found nothing identifiable with Mr. Howe at the Massachusetts address after reviewing available telephone company records for that area. Mr. DiMare questioned the residents of attached townhouses to the L3 Franklin address and none were familiar with or had knowledge of Mr. Howe. Mr. DiMare interviewed Wendy Jillian of Brooks Management Company, which oversees the operation of the townhouse complex. Ms. Jillian confirmed that the property is owned by another individual and that Mr. Howe is not listed as the current or former owner. Mr. DiMare reported that he conducted a series of spot checks during the evening hours of 11/16/09 and that he did not observe either of the insured’s vehicles parked in close proximity to the Massachusetts address.

Essentially, both investigators concluded in reports that were provided to the defendant (on 11/23/09 and 12/04/09) that Mr. Howe resides primarily in New York. Despite receiving the reports and a transcript of Mr. Howe’s interview, the defendant disclaimed its obligation under the subject policy on the ground that Mr. Howe failed to cooperate by not submitting documentation. However, there is no showing that Mr. Howe’s alleged failure to provide documentation was material and substantial, or that it impaired the defendant’s investigation concerning this matter.

The defendant has submitted sufficient information to rebut plaintiff’s prima facie [*6]showing regarding the outstanding bills but has failed to establish its defense of lack of cooperation based upon Mr. Howe’s failure to remit documentation. The court is cognizant that Massachusetts courts have held that furnishing information known to be false and of a material nature before or at trial is a ground for disclaiming coverage based on an insured’s non-cooperation (Williams v Travelers Ins. Co., 330 Mass. 476, 479 [1953]; Jertson v Hartley, 342 Mass. 597, 602 [1961] and see Mello v Hingham Mut. Fire Ins. Co., 421 Mass. 333 [1995][duty to cooperate a condition precedent to affixing liability]). However, the defendant has not raised that defense, and, even if it had, there are questions of fact as to whether the defendant waived its right to disclaim on that ground. Waiver may apply if the defendant is estopped from disclaiming coverage on equitable grounds, and there is an issue as to the

effectiveness, or lack thereof, of the reservation of rights and disclaimer letters that were sent in this case.

Accordingly, plaintiff’s motion and the defendant’s cross motion are denied.

This constitutes the decision and order of the court.

July 17, 2013____________________________

Hon. Ingrid Joseph

Acting Supreme Court Justice

Civil Court of the City of New York, Kings County

072854/09

Attorney for Plaintiff:

Gary Tsirelman P.C.

65 Jay Street, 3rd Floor

Brooklyn, NY 11201

Attorney for Defendant:

Law Office of Solowan & Welden

Dominick Dale, Esq.

170 Froehlich Farm Blvd.

Brooklyn, NY 11797

Katherine A. Levine, J.

The novel issue presented at trial is whether the bill submitted by plaintiff Jamaica Medical Supply Inc. (“plaintiff” or “Jamaica”), for the rental of medical supply equipment on its face constituted a reasonable justification for plaintiff’s untimely submission of written proof of claim or whether plaintiff had an independent obligation to submit a written reasonable justification for its late bill upon receiving the denial from defendant Geico Insurance Company (“Geico”).^[FN1]

Plaintiff Jamaica Medical Supply Inc. (“plaintiff” or “Jamaica”), a medical equipment company, commenced this action to recover the sum of $3475.00 for medical supplies it rented to its assignor Hilma Thornhill (“Thornhill”). At the commencement of the trial, both sides stipulated to each other s prima facie cases. In its NF-10 form, Geico denied the claim on the grounds that plaintiff violated the revised Mandatory Personal Injury Protection Endorsement (“Endorsement”or “PIP”) contained in the revised No-Fault Regulations—11 NYCRR ｧ65-1.1— [*2]by failing to submit its proof of claim for services to Geico within 45 days from the date services were rendered. The denial contained an explanation under reason 45 and set forth that “late notice will be excused where the applicant can provide reasonable justification of the failure to give timely notice.” The burden therefore shifted to plaintiff at trial to establish a clear and reasonable excuse for its untimely submission of the bill.

During the trial, defendant made a motion in limine to preclude the testimony of plaintiff’s owner on the ground that plaintiff failed to respond, during the claims phase, to defendant’s request in its denial to provide a reasonable excuse for its late claim. The Court took the motion under advisement but allowed the plaintiff to testify. Admitted into evidence were two no fault bills dated May 1, 2009, for a water circulating pump/cold pad and for a “passive motion exercise machine (“CPM”) along with the setting up and fitting of the machine and a pad. While both medical supplies were dispensed on March 6, 2009, the return receipt for the water circulating pad was dated March 20, 2009 where as the return receipt for the CPM unit was dated April 6, 2009. Also admitted into evidence were delivery receipts for the CPM unit and water circulating pump wherein Thornhill acknowledged receiving the items and promised to return the units in the same condition as received within two- six weeks of delivery.

Based upon the above, it is clear that plaintiff submitted a claim for the water circulating pump/cold pad 56 days after it was delivered and 42 days after it was returned by the assignor. Plaintiff submitted the claim for the CPM Unit/soft pad kit 56 days after it was delivered and 25 days after it was returned to plaintiff. While both claims were therefore submitted to Geico beyond the 45 days from date of delivery of the equipment, they were sent within 45 days after the rental equipment was returned.

Plaintiff’s president and owner, Mike Kmaimov (“Kmaimov”), testified that due to the exorbitant price of the equipment, Jamaica Medical only rents the CPM unit and water circulating pump. Since the equipment is rented, it was not possible for plaintiff to send the no -fault bill to the insurer within 45 days of disbursement since plaintiff could not ascertain the number of the days that the machines would be rented, and hence the cost of the rental, until the machines were returned. Kmaimov also testified that in some instances a doctor will be re prescribe the machines and it is “impracticable” for the plaintiff to pick up a new prescription and redeliver the machines.

Plaintiff submits that its provision of all the rental documents and no fault bills to defendant on May 1st constituted a reasonable excuse for the alleged late submission of the claim. Plaintiff argues that defendant bears the burden of reviewing the claim documents which clearly showed that the since the durable medical equipment (“DME”) were rentals, they “could not have been billed 45 days” from their initial disbursement. Plaintiff therefore asserts it could not send the no fault bill to defendant until the rental was complete. Yet, in the same breadth, plaintiff admits that case law and state DME guidelines mandate that the date of service must be [*3]the date the supplies were dispersed.

Pursuant to 11 NYCRR §65-1.1 (b) all claims must be submitted within “45 days after the date (the) services (were) rendered”. Where one proof of claim is submitted for several medical treatments, the 45 day period commences “the day after the first treatment is rendered.” SZ Med. P.C. v. Country-Wide Ins. Co., 12 Misc 3d 52, 55 (App. Term, 2d Dept. 2006) citing NY Ins Dept Informal Op No. 03-06-30 (June 30, 2003). See, Health Care Associates (Varallo) v. Geico, 2010 NY Slip Op 50094(U), 26 Misc 3d 1214(A) (Civil Ct., Richmond Co. 2010). These time limitations shall apply “unless the eligible injured person [or that person’s representative] submits written proof providing clear and reasonable justification for the failure to comply with such time limitation.” 11 NYCRR ｧ65-1.1. This duty follows from an insurer’s obligation to include within a denial, based upon the failure to timely submit a proof of claim advise to the applicant that late notice will be excused where the applicant can provide reasonable justification of the failure to give timely notice. 11 NYCRR ｧ65-3.3 (e). See, Radiology Today, P.C. v. Citiwide Auto Leasing, Inc., 15 Misc 3d 92 (App. Term, 2d Dept. 2007).

As plaintiff concedes that the case law and state DME guidelines mandate that the date of service be the date the supplies were dispersed, it cannot argue that its 45 days to submit a claim runs from the date that the rental equipment is returned. Furthermore, both of the rented DMEs were returned within the 45 day period, thus making it possible for plaintiff to still timely submit its claim forms to defendant. Given this fact, plaintiff’s attempt to distinguish rental equipment from equipment it sells to the assignor is of no significance. Similarly, plaintiff’s attempt to explain away the 45 day rule at trial by claiming that both the disbursement and return rental forms that it sent to defendant were self explanatory has no merit. Had the items been returned after the 45 days had already expired, the Court might consider whether these forms on their face constituted a reasonable justification for failure to give timely notice.

Since plaintiff could have timely submitted its claims upon the return of the rental equipment, defendant was not under an obligation to some how glean why plaintiff waited until May 1, 2010 to submit its claim forms. Defendant followed the regulations by including within its denial advice to plaintiff that its late notice excused it plaintiff could provide a reasonable justification. Having failed to respond to defendant’s request at the claims phase, plaintiff cannot interpose its justification at trial. Prestige Medical & Surgical Supply, Inc. v. Chubb Indemnity, 2010 NY Slip Op 50449(U), 26 Misc 3d 145(A) (App. Term, 2d Dept. 2010); Delta Diagnostic Radiology, P.C. v. MVAIC, 2007 NY Slip Op. 52143(U), 17 Misc 3d 1125(A) (Civil Ct., Kings Co. 2007).

As such, the complaint is dismissed with prejudice.

The foregoing constitutes the Decision and Order of the Court.

Dated: June 10, 2013______________________________

Hon. Katherine A. Levine

Judge, Civil Court

ASN by _______on___________

Footnotes

Footnote 1:A number of cases were consolidated at trial for the purposes of this issue.

Civil Court of the City of New York, Kings County

068326/2011

ATTORNEYS FOR PLAINTIFF:

Ilona Finkelshteyn, Esq

2503 65th Street

Brooklyn, NY 11204

ATTORNEYS FOR DEFENDANT:

Law Offices of Spina, Korshin & Welden

170 Froehlich Farm Blvd.

Woodbury, NY 11797

Katherine A. Levine, J.

PapersNumbered

Notice of Motion and Affidavits Annexed………….. …………………………1

Notice of Cross-Motion and Affidavits Annexed.. ………………………….2

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

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

Exhibits………………………………………………………………………………………..

Other: ………………………………………………………………………………………….

Upon the foregoing cited papers, the Decision/Order on this Motion is as follows:

This case was submitted solely on the unanswered question of whether the No-Fault Regulations require a defendant insurance company to respond to a letter from a plaintiff medical provider objecting to an EUO request as being unreasonable.

Plaintiff LK Health Products, Inc. (“plaintiff” or “LK”), a medical equipment company, [*2]commenced this action to recover the sum of $2,779.63 for medical supplies it provided to its assignor. Defendant GEICO General Insurance Company (“defendant” or “GEICO”) cross moves for summary judgment based upon plaintiff’s failure to show up at an EUO. Defendant sent plaintiff two EUO requests which explained that GEICO’s investigation into plaintiff’s business practices raised questions as to the accuracy of its billing and coding practices, its calculations, and whether the items billed for were the actual items provided to the patients.

In response to the defendant’s EUO request, plaintiff sent a letter which referenced the assignor’s name, the date of service and the amount outstanding. It read: “Please acknowledge this as a formal objection to the EUO request. It is my belief that you do not have a reasonable basis for an EUO request as regulation 68 requires. If there is any kind of information that you need, please request it in the form of verification request. In response to your attached letter, please find out filing receipt and verification of true ownership.” Plaintiff sent a filing receipt and verification of true ownership in response to defendant’s EUO letter.

In its motion plaintiff argues that defendant lacked a specific objective justification for the requested EUO and s that once plaintiff objected to the EUO, the burden shifted to the defendant to respond why its EUO request was reasonable. Plaintiff cites to 11 NYCRR §65 – 3.2, entitled “Claim Practice Principles to be Followed by All Insurers,” which provides that insurers are to: “(e) Clearly inform the applicant of the insurer’s position regarding any disputed matter and (f) Respond promptly, when a response is indicated, to all communications from insureds, …” in support of its position.

Defendant counters that its EUOs were properly scheduled based upon the results of its special investigation into the plaintiff’s business practices. Since its initial EUO scheduling letter explained the need for the EUO, defendant argues that it did not have to respond to plaintiff’s objection letter. It also argues that plaintiff’s boilerplate and nonspecific objection to an EUO did not obviate plaintiff’s obligation to appear.

The Court finds plaintiff’s argument unavailing. First, 11 NYCRR 65-3.2 is a generic provision which applies to all claim practices by insurers. In contrast, the Insurance Department has specifically addressed the obligations of insurers regarding No-Fault EUOs. The Department found that 11 NYCRR 65-3.5(e) does not require an insurer to justify its EUO requests or include language setting forth the reasons for requiring the EUO in either its notices for the EUO or its denials based upon an EUO no show. Nor need it even file with the Insurance Department the standards it maintains for determining when EUOs will be requested. (See Office of General Counsel, NYS Ins Dept. Opinion dated 12/22/2006).

The Court first notes that plaintiff has no standing to even raise this argument since it did not request that defendant provide its reasons for seeking an EUO but rather issued an objection letter indicating that it refused to appear. Furthermore, since no justification for an EUO request is necessary, this Court rules that an insurer is not obligated to reply to a plaintiff letter refusing to appear at an EUO and requesting that a defendant justify its reason for the EUO. Here, [*3]defendant went beyond its obligation by providing its reasons for the EUO in its initial scheduling letter. Finally, to rule otherwise would sanction the parties’ sending countless letters to each other, which would violate the intent of the No-Fault Law which encourages the prompt resolution of no fault claims. See New York and Presbyterian Hosp. v. Country-Wide Ins. Co., 17 NY3d 586, 589 (2011); All Boro Psychological Services, P.C. v. GEICO, 38 Misc 3d 268, 272 (Civ. Ct., Kings Co. 2012). The no-fault regulations were adopted by the Superintendent of Insurance in furtherance of these objectives. New York and Presbyterian Hosp., supra at 589 citing Hospital for Joint Diseases v. Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 317, (2007).

It is well established that a plaintiff may preserve its right to challenge the reasonableness of the EUO request at the litigation stage if it objects to a requested EUO at the time it receives the notice. Eagle Surgical Supply, Inc v. AIG Ins Co., 2012 NY Slip Op 51711(U), 36 Misc 3d 153(A)(App. Term, 2nd Dept. 2012); All Boro Psychological Services, P.C. v. State Farm Mutual Automobile Ins. Co., 2012 NY Slip Op 51346(U), 36 Misc 3d 135(A)(App. Term, 2nd Dept. 2012). Here, the Court finds that the plaintiff timely objected to the defendant’s EUO request in writing. However, the defendant provided a clear and unambiguous affidavit from its Special Investigative Unit (“SIU”) Manager which substantiated the need for the EUO based upon an investigation it commenced of plaintiff for improper management and billing operations. Therefore, the defendant was justified in requesting the EUO of the plaintiff.

Plaintiff’s failure to show up for an EUO constituted a violation of a condition precedent to coverage, which voided the contract ab initio. Accordingly, the defendant insurer is not obligated to pay the claim, regardless of whether it issued denials beyond the 30 day period. Neomy Medical, P.C. v. American Transit Ins. Co., 2011 NY Slip Op 50536(U), 31 Misc 3d 1208(A)(Civ. Ct., Kings Co. 2011). See Lender Medical Supply, Inc v. Hartford Ins. Co., 2012 NY Slip Op 50903(U), 35 Misc 3d 1226(A)(Civ. Ct., Kings Co 2012). Since the contract has been vitiated, defendant may deny all the claims retroactively to the date of loss. Id.

In light of the above, the plaintiff’s motion is denied, the defendant’s motion is granted and the case is dismissed with prejudice.

The foregoing shall constitute the Decision and Order of the Court.

Dated: May 9, 2013___________________________

Katherine A. LevineJudge, Civil Court

Civil Court of the City of New York, Kings County

71119/2010

Attorneys for Plaintiff STRACAR MEDICAL SERVICES

Law Offices of Gary Tsirelman

65 Jay Street, 3rd Floor

Brooklyn, NY 11201

Attorneys for Defendant NATIONWIDE MUTUAL INS. CO.

Epstein, Harms, McDonald, Esqs.

One Whitehall Street, 13th Floor

New York, NY 10004

Harriet Thompson, J.

Motion Cal No.90Motion Seq. #

Papers Submitted to Special Term

on5/18/2012,

DECISION/ORDER

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

considered in the review of this Motion

PapersNumbered

Notice of Motion ………………………………. ..1-2

Order to Show Cause and Affidavits Annexed _____________ [*2]

Answering Affidavits .._____1_____

Replying Affidavits ._____________

Exhibits _____________

Other …………………………………………………._____________

PROCEDURAL HISTORY

Every now and then, a clever legal maneuver can change the course of litigation. In this Civil Court action, the Plaintiff had served, in or about July 29, 2010, a Summons and Verified Complaint to recover first-party No-Fault benefits as a result of alleged injuries arising out of an automobile accident which occurred on June 28, 2008. In or about October 22, 2010, the Defendant interposed a Verified Answer which contained various affirmative defenses and a demand for a Bill of Particulars.

The Defendant moves this Court by Notice of Motion returnable on November 7, 2011 for summary judgment pursuant to CPLR §3212 on the grounds that the Plaintiff failed to submit proper verification of the claim and failed to attend two properly scheduled Examinations Under Oath (hereinafter “EUO”), a condition precedent to insurance coverage and a violation of the Insurance regulations, precluding recovery of the medical claim. More significantly, the Defendant asserts that the medical services must be denied based on the fraudulent procurement of the insurance policy by the assignor.

On the return date, the attorneys, by written agreement, adjourned the motion to May 9, 2012 for the parties to engage in motion practice.

On the adjourned date, the Plaintiff served and filed opposition papers to the Defendant’s motion. The Plaintiff asserts several claims, to wit: the Defendant failed to properly establish its defense of fraudulent procurement of the insurance policy; procedural irregularities such as the insurance policy annexed to the motion is uncertified and the denials are unsigned; and attacks the credibility of the supporting fact affidavit based on a discrepancy in the number of bills received by the Defendant.

The Defendant relies exclusively on Gramatan Home Investors Corp v. Lousi N. Lopez, 46 NY2d 481, 386 NYS2d 308 (1979) for the proposition that a sister state consent decree that terminated the insurance policy ab initio is not binding on the Plaintiff. The Plaintiff’s rationale is that a “judgment in a prior action against the assignor could not be used to estop the assignee from raising certain matters determined there in the subsequent action where the assignment was made prior to the initiation of the action against [the] assignor” (Affirmation of MARINA MORARU at ¶6). In addition, the Plaintiff argues that the facts in this case are akin to the facts in Gramatan, and concludes that “the assignment in this matter was executed prior to the commencement of the action against the assignor and the Defendant is estopped from relitigating the issue. (Affirmation of MARINA MORARU at ¶7).

The court record does not contain a reply to the opposition by the Plaintiff. [*3]

After oral argument, this court reserved decision and submitted this motion sub judice.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The following facts are uncontroverted. MACKLIN SANTERRIA executed an assignment of benefits before her treatment by the Plaintiff on July 14, 2008. MACKLIN SANTERRIA was treated by the above named Plaintiff for alleged injuries for dates of services from August 13, 2008-September 9, 2008 for the sum of $1,329.23 and for dates of service from September 8, 2008-October 20, 2008 for the sum of $544.68 for a grand total sum of $1,873.91. These bills for the above services were received by the Defendant on September 29, 2008 and October 27, 2008, respectively. The Defendant requested verification on October 6, 2008 and October 27, 2008, respectively. The purported verification stated that the Defendant was conducting an investigation to determine “whether the alleged injuries arose out of the use and operation of our insured vehicle and whether the injured party is an eligible injured party entitled to No-Fault benefits under the above mentioned policy. As a result, we have requested an EUO of the claimant. The EUO is currently scheduled from 10/7/2008.”

The second purported verification provided that the investigation was continuing; the EUO is currently scheduled for 11/7/2008 and requested the production of the following documents from the Plaintiff: office notes and physical therapy notes.

On December 23, 2008, the Defendant notified the assignor that their investigation revealed that the application for the policy of insurance revealed that material misrepresentations were made to the insurer in the procurement of the policy and based on those misrepresentations the company voided the policy back to the date of the insurance application on December 1, 2004.

On December 29, 2008, the medical claims were denied by the Defendant.

In or about February 17, 2009, the Defendant commenced an action in the state of Virginia to void the insurance policy based on fraud by the claimant in the application for the insurance policy.

On August 18, 2009, the assignor, represented by counsel and the Defendant Corporation, also represented by counsel, entered into a Dismissal Order in the state of Virginia which stated, in pertinent part, that “[w]ithout conceding any wrongdoing on her part, Defendant (claimant-assignor) agrees that the policy should be voided ab initio, so that it is ORDERED that the policy described in the Complaint filed herein is voided ab initio”.

The initial substantive issue before this court is whether the affidavits of mailing meet the requirements of the No-Fault law to establish proper proof of mailing of the denials. To that end, and as previously ruled by this court, the common law doctrine of presumption of regularity is still alive in New York State despite arguments to the contrary. (Quality Psychological Services, PC., v. Hartford Insurance Company, 2013 NY Slip Op 50045(U)). Generally speaking, a letter or notice that is properly stamped, addressed and mailed is presumed to be received by the addressee. News Syndicate Co. v. Gatti Paper Stock Corp., 256 NY 211, 176 NE 169 (NY, [*4]1931); New York New Jersey Products Dealers Coop v. Mocker, 59 AD2d 970, 399 NYS2d 280 (NY A.D., 3d Dept., 1977). A simple denial of receipt has been held insufficient to rebut this presumption. Countrywide Home Loans, Inc. v. Brown, 305 AD2d 626, 760 NYS2d 200 (NY AD2d Dept., 2003) .

As Judge Tapia recently stated in Hastava & Aleman Assoc. P.C. v. State Farm Mut. Auto Ins. Co., 24 Misc 3d 1239(A), 899 NYS2d 59 (Civ. Ct., Bx Ct., 2009) “the regulation uses “forward” to describe the manner in which notification is to be effectuated. The only kink is determining what constitutes sufficient “notice” because the regulation does not specify the mailing procedure by which to notify the injured party.” In that case, the court determined that the mailing of a letter by certified mail, return receipt requested is entitled to the same presumption of receipt as regular first-class mail in the absence of the signed returned receipt”. Furthermore, “satisfying No-Fault policy conditions does not have to be compromised at the expense of challenging mailing procedures because proof of mailing of verification letters via regular USPS is enough to create a presumption of receipt. In addition, the use of certified mail does not create a more demanding presumption of mailing and receipt beyond that of a letter that was properly mailed. The regulations make no distinction between sending a letter via regular mail or via certified mail.”

The presumption of receipt 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. Residential Holding Corp. v. Scottsdale Ins. Co., 286 AD2d 679, 729 NYS2d 776 (2001); Nassau Ins Co. v. Murray, 46 NY2d 828, 414 NYS2d 117 (1978); Matter of Francis v. Wing, 263 AD2d 432, 694 NYS2d 29 (NY A.D. 1st Dept., 1999); Azriliant v. Eagle Chase Assoc., 213 AD2d 573, 575, 624 NYS2d 238 (NY AD2d Dept., 1995); Phoenix Ins. Co v. Tasch, 306 AD2d 288, 762 NYS2d 99 (NY AD2d Dept., 2003); Matter of Colyar, 129 AD2d 946, 947, 515 NYS2d 330 (NY AD3d Dept., 1987). Therefore, affidavits that merely state that the bills were mailed within the statutory time period have been held insufficient to establish proof of actual mailing. Comprehensive Medical v. Lumbermens Mutual Ins. Co., 4 Misc 3d 133(A) (App. Term 9 & 10th Jud. Dists, 2004).

The burden is on the insurer to present an affidavit of an employee who personally mailed the verification and/or denial, or on the other hand, an affidavit of an employee with personal knowledge of the office’s mailing practices and procedures. Such individual must describe those practices or procedures in detail, explicitly denoting the manner in which she/he acquired the knowledge of such procedures or practices, and how a personal review of the file indicates that those procedures or practices were adhered to with respect to the processing of that particular claim (emphasis added).

By demonstrating its routine and reasonable office procedures, the Defendant meets its burden of proof that the notices were mailed to the plaintiff and were received. The burden then shifts to the plaintiff to rebut the presumption of receipt. Abuhamra v. New York Mut. Underwriters, 170 AD2d 1003, 566 NYS2d 156 (NY A.D. 4th Dept., 1991); Residential Holding Corp. v. Scottsdale Ins. Co., supra. Indeed, “[i]n addition to a claim of no receipt, there must be a showing that the routine office practice was not followed or was so careless that it would be unreasonable to assume that the notice was mailed. Nassau Ins Co. v. Murray, 46 NY2d 828, 414 [*5]NYS2d 117 [1978]; See also Badio v. Liberty Mutual Fire Ins. Co., 12 AD23d 229, 785 NYS2d 52 (App. Div., 1st Dept., 2004).

Now, the next significant issue in this case involves the fraudulent procurement of the insurance policy by the assignor.

Both New York common law and the Insurance Law establish that the insurance carrier may rescind and/or void any insurance policy if it can be shown that a material misrepresentation was made at the time of the procurement of the insurance policy. See BW Sportswear , Inc. v. Those Certain Underwriters at Lloyd’s of London, 32 Misc 3d 1245(A), 2011 435767, 2 (NY Sup. Ct., NY County, 2011)(Oing, J.) citing Kiss Construction NY Inc. v. Rutgers Casualty Ins. Co., 61 AD3d 412, 877 NYS2d 253 (1st Dept., 2009); NY Ins. Law §3105. As part of the Motor Vehicle Financial Security Act, the Vehicle and Traffic Law (hereinafter “VTL”) § 313 states in part that: “(1)(a) No contract of insurance for which a certificate of insurance has been filed with the commissioner shall be terminated by cancellation by the insurer until at least twenty days after mailing to the named insured at the address shown on the policy a notice of termination by regular mail, except where the cancellation is for non-payment of premium in which case fifteen days notice of cancellation by the insurer shall be sufficient.” See also Rules of New York Automobile Insurance Plan §18 [2] which provides that VTL §313 also applies to the cancellation of a policy issued under the assigned risk plan. (Aetna Cas. & Sur. Co. v. O’Connor, 8 NY2d 359, 207 NYS2d 679, 170 NE2d 681 (1960)). It has long been recognized that this provision “supplants the insurance carrier’s common law right to cancel a contract of insurance retroactively on the grounds of fraud or misrepresentation, and mandates that the cancellation of a contract pursuant to its provisions may only be effected prospectively” (Teeter v. Allstate Ins. Co., 9 AD2d 176, 192 NYS2d 610, affd, 9 NY2d 655, 212 NYS2d 71, 173 NE2d 47; Aetna Cas. & Sur. Co., v. O’Connor, 8 NY2d 359, 207 NYS2d 679, 170 NE2d 681; Olivio v. GEICO of Washington D.C., 46 AD2d 437, 362 NYS2d 873; Reliance Ins. Co. v. Daly, 38 AD2d 715, 329 NYS2d 504 (AD2d Dept., 1972) ; See also Matter Liberty Mut. Ins. Co. v. McClellan, 127 AD2d 767; DiDonna v. State Farm Mut. Auto. Ins. Co., 259 AD2d 727; A-Drive Corp v. General Acc. Group, 114 AD2d 430; Pilato v. Nassau Ins. Co., 79 AD2d 971.

It has also been held that by allowing only prospective cancellation of an automobile liability insurance contract, the law places on the insurer the burden of discovery of any fraud before issuing a policy or at the earliest possible moment thereafter, and prevents interference with the rights of third parties who may have been injured as a result of the negligence of the insured during the term of the contract. Aetna Cas. & Sur. Co., v. O’Connor, supra; Matter Liberty Mut. Ins. Co. v. McClellan, supra; Olivio v. GEICO of Washington D.C., supra. See also Matter of Insurance Co of North America v. Kaplun, 274 AD2d 293, 713 NYS2d 214 [AD2d Dept., 2000].

The insurance carrier that is precluded from rescinding a policy retroactively due to fraud is not without a remedy. For example, if the insurer is required to pay benefits under the policy to a third party, it may bring an action against its insured to recover such losses (See Reliance Ins. Co. v. Daly, 38 AD2d 715, 329 NYS2d 504 (AD2d Dept., 1972)). In Reliance Ins. Co v. Daly, supra, the Appellate Division refused to allow the insurance carrier to rescind the policy because [*6]of the misrepresentations of its insured, but concluded that “nothing in the applicable law precludes a suit for damages after the insurer’s responsibilities to a third party have been satisfied” (38 AD2d at 716).

In addition, and most significant, when the insured brings an action to recover benefits under a policy, the insurance carrier may assert as an affirmative defense that the insured’s misrepresentation and/or fraud in obtaining the policy precludes any recovery by the insured (See DiDonna v. State Farm Mut. Auto. Ins. Co., supra; Mooney v. Nationwide Mut. Ins. Co., 172 AD2d 144). “Just as the public interest is not disserved by a suit brought by the insurer against its insured who fraudulently procured the policy, neither is it disadvantaged if the insurer is relieved of a claim asserted against it by such an insured. If it is established, as defendant here affirmatively alleges, that plaintiff acquired his policy by fraudulent means, denying plaintiff the right to recover would not impinge in any way upon the protection the policy accords innocent victims, would not subvert the statutory proscription against retroactive cancellation and would comport with elementary fairness” (Mooney v. Nationwide Mut Ins. Com., supra, at 149). Similarly, where the right to coverage is asserted in a declaratory judgment action by the insured, the insurance carrier may defend on the ground that the insured was a participant in the fraudulent issuance of the policy (Taradena v. Nationwide Mut. Ins. Co., 239 AD2d 876; Travelers Indem. Co. v. Avelino, 191 AD2d 229; cf., Eagle Ins. Co. v. Liberty Mut. Ins. Co., 267 AD2d 347).

The only limitation to the above rule was recently brought to the fore front by the Appellate Division in the case of Westchester Med. Centre v. GMAC, 2011 NY Slip Op 00217 [80 AD3d 603] in which the court held that “although the defendants contend that they submitted evidence showing that the plaintiff’s assignor misrepresented his state of residence in connection with the issuance of the subject insurance policy, the defendants are precluded from asserting that defense, as a result of their untimely denial of the claim (See Fair Price Med. Supply Corp. v. Travelers Indem. Co., 10 NY3d 556; 564 [2008]; Hospital for Joint Diseases v. Travelers Prop. Cas. Ins. Co., 98 JNY3d at 319; Westchester Med. Ctr v. Lincoln Gen. Ins. Co., 60 AD3d 1045, 1046-1047- [2009]).

In A.B. Medical Servs. PLLC v. Commercial Mut. Ins. Co., 12 Misc 3d 8, 820 NYS2d 378 At 2d Dept., 2006) the Appellate Term found that the rule that an insurer cannot retroactively cancel a contract of insurance on the grounds of fraud or misrepresentation protects only innocent injured third parties and does not apply to a health care provider who deals with the assignor-insured at its peril in accepting an assignment of the insured No-Fault benefits. Consequently, the defense of fraudulent procurement of an insurance policy, which is nonwaivable, and thus exempt from the 30 day preclusion rule, was available to the Defendant. “We hold that only innocent third parties who are injured are protected (id at 298) and not health care providers who deals with the assignor-insured at its peril in accepting an assignment of the insured’s no-fault benefits. (cf. Matter of Metro Med. Diagnostics v. Eagle Ins. Co., 293 AD2d 751, 75-752 [2002])”.

Based on the above, it appears that there is a conflict in authority between the Appellate Division and the Appellate Term. The former states that the procurement defense is waivable if not preserved in the denials and the latter states that it is a nonwaivable defense. Since this issue [*7]is not before the court, this court is not duty bound to address this issue.

One final issue that has been raised by the Plaintiff. The Plaintiff seeks to convince this court that based on the ruling in Gramatan Home Investors Corp. supra, the Dismissal Order from the Virginia court is not binding on this Plaintiff. The Plaintiff argues that the assignment in this case that was executed prior to the commencement of this action would not estop the Plaintiff from relitigating this case. The facts in Gramatan are worth a brief discussion. A vinyl siding company entered into a contact with a homeowner. The company assigns the rights to the contract to Home Investors Trust who then assigned to Gramatan. Subsequently, the Attorney General prosecuted the vinyl company for fraud and voided the contract between the homeowner and the company. After the conclusion of that case, Gramatan sued the homeowner on the contract. The homeowner moved for summary judgment stating the judgment in the earlier case collaterally estopped the plaintiffs from enforcing the terms of the contract. The court, reversing the Appellate Division, stated that “an assignee is deemed to be in privity with the assignor where the action against the assignor is commenced before there has been an assignment. In that situation the subject matter of the assignment was then embroiled in litigation and was subject to the claims of third parties and the assignee is charged with notice that his rights to the assignment are subject to competing claims. Conversely, an assignee is not privy to a judgment where the succession to the rights affected thereby has taken place prior to the institution of the suit against the assignor [S]ince there is no dispute that the assignment was made well before commencement of the consumer fraud action against the plaintiff’s assignor, plaintiff is not bound by the terms of that judgment”. The Plaintiff reasons that since the assignment in this case was granted before the Virginia Dismissal Order, the Plaintiff is not bound by the terms of that order. This Court disagrees and as provided below, Gramatan is clearly distinguishable from the instant case.

Notwithstanding arguments by Plaintiff and the rule in Gramatan, the primary issue is whether the judgment of dismissal in the Virginia court is entitled to enforcement in the Civil Court in this county. Absolutely.

As a general rule, there are two types of foreign judgments: the judgment of a court of another state-“sister-state judgment”, and the judgment of a court of another nation.

The Uniform Enforcement of Foreign Judgments Act that is embodied in Article 54 of the CPLR prescribes the procedural requirements for enforcement of foreign judgments in New York State. As Professor David A. Siegel observed the title of the statute is a bit misleading. Although it seems to apply to all foreign judgments, in fact, it applies only to the American judgments. See CPLR Practice Commentaries, §C5401:1.

It has been long established by federal and state law that the Full Faith and Credit Clause of the United States Constitution dictate compulsory recognition of sister-state judgments including judgments of federal courts, territorial courts, the District of Columbia as well as judgments of courts of other states. Justice Cooper, in Peng v. Hsieh, 31 Misc 3d 528, 528 NYS2d 285, 2011 NY Slip Op 21061, recently discussed that long standing federal right. He stated that “it is the firm principal of our federalist system of government that full faith and credit must be given to each state to those “public Acts, Records, and judicial proceedings of every other state.” US Cons., Art. IV, §1. This doctrine is premised on the notion that “[t]he judgment [*8]of a state court should have the same credit, validity and effect, in every other court of the United States which it had in the state where it was pronounced Hampton v. McConnel, 16 U.S. (3Wheat) 234, 235, 4 L.Ed. 378 (1818); See also Williams v. North Carolina, 317 U.S. 287, 63 S.Ct. 207, 87 L.Ed. 279 (1942)”. See also Matter of Bennett, 84 AD3d 1365, 1367, 923 NYS2d 715; Madjar v. Rosa, 83 AD3d 1011, 923 NYD2d 561.

The constitutional requirement of full faith and credit precludes any inquiry into the merits of the judgment, the logic or inconsistency of the decision underlying it or the validity of the legal principles on which it is based (Cradle Co. v. Tri-Angle Assoc., 18 AD3d 100, 798 NYS2d 360 (1st Dept., 2005). Based on these underlying principles, out of state judgments inherently possess res judicata effect as to those issues conclusively decided, thereby avoiding relitigation of those previously decided issues in any other state. Said another way, the application of full faith and credit to the judgment of sister-state is the functional equivalent of “interstate res judicata” (DiCaprio v. DeCaprio, 219 AD2d 819, 631 NYS2d 975 appeal dismissed 87 NY2d 967, 642 NYS2d 195, 644 NE2d 1258, lv denied 88 NY2d 802, 645 NYS2d 445, 668 NE2d 416 rearg, denied 89 NY2d 861, 653 NYS2d 283, 675 NE2d 1236).

While the merits of the judgment of a sister-state may not be collaterally attacked, a judgment debtor may challenge the judgment on the basis of a lack of personal jurisdiction (J D Fin. Co v. Patton, 284 AD2d 164, 166, 727 NYS2d 71 (2001). The court’s review of a foreign judgment, is thus, limited to whether the rendering court had jurisdiction, an inquiry which the courts steadily mandate to include due process considerations (Fiore v. Oakwood Plaza Shopping Ctr., 78 NY2d 572, 577, 578 NYS2d 115, 585 NE2d 364 Cert. denied 506 US 823, 113 S.Ct. 75, 121 L.Ed.2d 40; HO v. McCarthy, 90 AD3d 710, 935 NYS2d 310 (AD2d Dept., [2011]); Fleet v. Costelloe, Inc., 19 Misc 3d 29, 856 NYS2d 436 (AT 2d Dept., [2008]; Mortgage Money Unlimited, v. Schaffer, 1 AD2d 773, 774 [2003]). See also States Resources Corp. v. Whittingham, 32 Misc 3d 1210(A), 932 NYS2d 763, 2011 WL 2640864 (NY. Sup.), 2011 NY Slip Op 51241(U).

In addition, see a recent decision by Chief Justice Lippman in the matter of John Galliano S.A. v. Stallion, Inc., 15 NY3d 75, 930 N.E.2d 756, 904 NYS2d 683 (2010) which involved a foreign money judgment and his analysis of CPLR Article 53, namely, CPLR 5304 which sets forth grounds for nonrecognition of a foreign judgment including the lack of personal jurisdiction (CPLR§5304[a][2]) or the failure of the aggrieved party to receive “notice of the proceedings in sufficient time to enable him to defend” (CPLR §5304[b][2]). See also Khallad v. Blanc, 96 AD3d 1574, 947 NYS2d 859 (NY AD 4d Dept., 2012) finding that the Florida Court had personal jurisdiction over a husband and thus, the judgment was entitled to full faith and credit.

A default judgment of a sister-state can also be accorded full faith and credit in New York (HO v. McCarthy, 90 AD3d 710, 935 NYS2d 310 (AD2d Dept., [2011]); Rockland Industries, Inc. v. Horowitz, 50 AD3d 661, 854 NYS2d 232 (2d Dept., 2008); Progressive Intern. Co. v. Varun Continental, Ltd., 16 AD3d 476, 791 NYS2d 181 (2d Dept., 2005); JDC Finance Comp. I LP v. Patton, 284 AD2d 164, 727 NYS2d 71 (AD 1st Dept., 2001); Staton Wholesale v. Barker, 257 AD2d 902, 684 NYS2d 44 (3d Dept., 1999).The public policy of this state in favoring resolution of disputes on the merits does not preclude enforcement of a foreign default judgment. John Galliano S.A. v. Stallion, Inc., supra. [*9]

This court has purposely limited its discussion to sister-state judgments and not foreign states or nations. Those decrees of other nations are accorded recognition only through comity; only recognized in the court’s discretion, guided and controlled, among other things, by the circumstances of that particular case and provided that the foreign court had proper jurisdiction, the judgment was not fraudulently obtained and does not go against our state’s public policy. (Galliano S.A. v. Stallion, Inc., supra; Society of Lloyd’s v. Grace, 278 AD2d 169, 718 NYS2d 327 (1st Dept. 2000).

Having discussed the frame work of the insurance law and regulations to lay the proper foundation for our analysis in the case at bar, the court makes the following findings of facts and conclusions of law.

It is undisputed that the Plaintiff submitted a proper proof of claim in the form of a health care services application (NF-3) for reimbursement for health care services rendered to the assignor, MACKLIN SANTERRIA.

The Plaintiff claims that there is a question of fact as to whether the denials and letters are copies of documents sent to the assignor have no merit. The affidavits of STEVEN KLIMEK, a Claims Specialist at the Defendant Corporation since October 9, 2000, sufficiently informs the court of his handling of No Fault claims including investigations of all claims; making coverage determinations; evaluating the bills; making a determination of verification requests and if an IME or peer review are needed, to determine insurance coverage. He also stated with sufficient detail the Defendant’s mailing procedures used in connection with written requests for EUO’s and/or the production of other documents as well as the mailing of any denial of claim forms based upon his employment duties at Nationwide. He explicitly describes the mailing procedures of the Defendant in paragraphs 9 (a)-(f). Based upon his knowledge of Defendant’s mailing practices and procedures and his review of the file in the instant matter, he informs the court that the Defendant received the medical bills on September 29, 2008 and October 20, 2008 and describes the verification process which is part of his daily responsibilities. He affirms that he personally handled this claim and brings to this court’s attention that the denials annexed as Exhibit E were issued by him and mailed pursuant to standard office practice and procedures. This evidence is not disputed by the Plaintiff, except by inadequate generalities, which can not defeat a motion for summary judgment.

The Defendant also proffers the affidavit of EDWARD MCGUIRE, a No Fault Claims Manager, who completes the practices and procedures of the Defendant insurer’s mailing procedures. He affirms that the denials and EOBs are completed by the Claims Reps, printed by them, and are printed and mailed in duplicate and placed in the mail baskets for pick for delivery to the mail room in the North Syracuse and New York claims office. All of the mail that is picked up on a particular day is delivered to the US Post Office on the same day. The court also finds this affidavit reliable and is ample proof of the completion of the mailing practices and procedure of the Defendant.

By demonstrating its routine and reasonable office procedures, the Defendant meets its burden of proof that the notices were mailed to the Plaintiff and were received. The burden now shifts to the Plaintiff to rebut the presumption of receipt and to raise a triable issue of fact. Abuhamra v. New York Mut. Underwriters, supra; Residential Holding Corp. v. Scottsdale Ins. [*10]Co., supra.

The bills for the above services were received by the Defendant on September 29, 2008 and October 27, 2008, respectively. The Defendant requested verification on October 6, 2008 and October 27, 2008, respectively. The prescribed thirty (30) day time line to pay or deny a claim was tolled until the insurer received proper verification of all relevant information requested of the injured party or provider. 11 NYCRR 65.15 (g), (7); St. Vincent Hospital of Richmond v American Tr. Ins. Co., 299 AD2d 338, 370 750 NYS2d 98 (NY A.D., 2002). The burden does not shift to the insurer to pay or deny the claim until the required party has complied with the verification request.

Instead of making any further verification request, on December 23, 2008, the Defendant voided the policy back to the date of the application of December 1, 2004, and subsequently, the medical bills were denied by the Defendant on December 29, 2008 by written notice in the form of a denial.

The court has reviewed the answer in this case and notes that the Defendant did not specifically allege fraud in the procurement of this insurance policy. However, the denial explicitly preserves the fraud in the procurement of the policy defense and as provided above, the denial was timely.

However, based on the well settled case precedent discussed above, New York law prohibits the termination of the insurance policy retroactively and this court finds that the termination action ab initio by the Defendant is void as a matter of law. Notwithstanding the impropriety of the termination of the insurance policy by the Defendant, the assignor, with the assistance of counsel, agreed in a two attorney stipulation in the Dismissal Order in Virginia, to void the insurance policy ab initio. It is well-settled law in New York that stipulations of settlement are favored by the courts and are not likely cast aside. (Hallock v. State of New York, 64 NY2d 224, 485 N.Y.S.2d 510, 474 N.E.2d 1178 (Ct of Appeals, 1984), citing Matter of Galasso, 35 NY2d 319, 321, 361 N.Y.S.2d 871 [1974]) particularly when made in open court (Hallock, 64 NY2d at 230, 485 N.Y.S. 510, 474 N.E.2d 1178, citing Matter of Dolgin Eldert Corp., 31 NY2d 1, 10, 334 N.Y.S.2d 833 [1974]).

Therefore, a Stipulation “will not be destroyed without a showing of good cause sufficient to invalidate a contract such as fraud, collusion, mistake, accident, or some other ground of the same nature.” (Campbell v. Bussing, 274 A.D. 893, 893, 82 N.Y.S.2d 616 [2nd Dept. 1947]; see also Hallock, 64 NY2d at 230, 485 N.Y.S. 510, 474 N.E.2d 1178; Matter of Frutiger, 29 NY2d 143, 149-150, 324 N.Y.S.2d 36 [1971]; Canino v. Electric Tech Corp., et al., 49 AD3d 1050, 1051, 856 N.Y.S.2d 683 [3d Dept. 2008] [applying the standard for vacating a stipulation in the context of amending a stipulation]. Thus, absent a showing of fraud, collusion or mutual mistake, a party to a stipulation may not avoid the consequences of the agreement. (Romero v. Martinez, 280 AD2d 58, 721 N.Y.S.2d 17 [1st Dept. 2001]).

The facts in this case does not support any finding that the Dismissal Order of Virginia was based on fraud, collusion, mistake, accident, or some other ground of like import. A party may waive their rights, even constitutional rights, in a stipulation and the court will not impose on the rights of the parties to chart their own litigation course. The court can only presume that [*11]the assignor had little alternative than to resolve the case in the state of Virginia since the evidence, if true, was overwhelmingly favorable to the Defendant Corporation. The assignor was probably also highly motivated to resolve the Virginia case to avoid possible prosecution and to enable her to obtain automobile insurance from another carrier.

As important, this sister-state Dismissal Order is entitled to recognition by this court and is the procedural equivalent of “interstate res judicata”. To determine otherwise, would be contrary to the spirit and letter of federal and state law. As provided above, the constitutional requirement of full faith and credit precludes any inquiry into the merits of the judgment, the logic or inconsistency of the decision underlying it or the validity of the legal principles on which it is based (Cradle Co. v. Tri-Angle Assoc., 18 AD3d 100, 798 NYS2d 360 (1st Dept., 2005). There is apparently no issue of the lack of personal jurisdiction since the assignor appeared with counsel and consented to the terms of the Dismissal Order. Therefore, this court will enforce the Virginia Dismissal order according to its terms. The claimant acknowledged and agreed in a sister state’s order that the policy was void from its inception and based on her agreement, there were no rights that she could have assigned to the Plaintiff. Hence, the court finds that there was no policy of insurance in effect for the claimant on the date of the accident and any claims by the Plaintiff against the Defendant are void. However, in the event that any innocent third parties seek claims under this insurance policy, notwithstanding, the Dismissal Order, the Defendant is required to protect and provide coverage to those third parties who may have been injured as a result of the negligence of the insured during the term of the contract. Aetna Cas. & Sur. Co., v. O’Connor, supra; Matter Liberty Mut. Ins. Co. v. McClellan, supra; Olivio v. GEICO of Washington D.C., supra. See also Matter of Insurance Co of North America v. Kaplun, 274 AD2d 293, 713 NYS2d 214 [AD2d Dept., 2000]. To determine otherwise, would be contrary to our state laws and case precedent.

After reviewing the other contentions raised by the Plaintiff, this court finds that they lack merit in fact and law.

For all of the reasons stated above, the Defendant’s motion for summary judgment is granted and the complaint is dismissed with prejudice.

This order and decision is without prejudice to any claims that the Plaintiff may have against the assignor for the payment of medical services provided herein. See Reliance Ins. Co. v. Daly, 38 AD2d 715, 329 NYS2d 504 (A.D., 2nd Dept., 1972).

A courtesy copy of this decision and order shall be mailed by the court to both parties.

The Defendant shall submit a judgment of dismissal to the Clerk of the Court and upon issuance thereof, shall serve a copy of the judgment and this order and decision with notice of entry on the Plaintiff within 30 days thereafter.

This constitutes the decision and order of this court.

_____________________________________________________________ ________ [*12]

DateApril 22, 2013HON. HARRIET THOMPSON

Judge of the Civil Court

Civil Court of the City of New York, Kings County

053664/11

Attorneys for Plaintiff:

Bruno, Gerbino & Soriano, LLP

445 Broad Hollow Road, Suite 220

Melville, New York 11747

Defendant Pro-Se:

Natural Healing Acupuncture, P.C.

P.O. Box 350-076

Brooklyn, NY 11235

Katherine A. Levine, J.

Recitation, as required by CPLR 2219(a), of the papers considered in the review of this motion

PapersNumbered

Notice of Motion and Affidavits Annexed………….. ………………………………………………1

Notice of Cross-Motion and Affidavits Annexed.. ……………………………………………….

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

Replying Affidavit of defendant………………………………………………………………………….

Exhibits……………………………………………………………………………………………… …………….

Other: ………………………………………………………………………………………………………………

Upon the foregoing cited papers, the Decision/Order on this Motion is as follows:

Petitioner Allstate Insurance Company (“petitioner” or “Allstate”) moves pursuant to CPLR §7511 to vacate the master arbitrator’s award dated July 1, 2011 for $927.99. Petitioner challenges the master arbitrator’s confirmation of the original arbitrator’s decision on the grounds that it is “arbitrary, capricious and contrary to well-settled law.” [*2]

Pursuant to Insurance Law ｧ5106, entitled “Fair Claims Settlement,” the master arbitrator has the authority to review an arbitrator’s award and vacate or modify it “in accordance with simplified procedures to be promulgated or approved by the superintendent.” These procedures are contained in 11 NYCRR 65-4.10(a) and include (1) any ground provided in article 75 of the CPLR, except CPLR 7511(b)(1)(iv) and (4) that an award rendered was incorrect as a matter of law, with the exclusion of procedural or factual errors committed in the arbitration. See Petrowsky v. Allstate Ins. Co., 54 NY2d 207, 210 (1981).

CPLR ｧ7511(b) provides that an award may be vacated if the court finds that the rights of a party were prejudiced by (i) corruption, fraud or misconduct in procuring the award, (ii) the arbitrator’s partiality, or (iii) an arbitrator exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made. The master arbitrator’s power to review an arbitrator’s award is therefore broader than the parameters contained in CPLR article 75. See Petrofsky v. Allstate, supra at 210.

Arbitrations held pursuant to Insurance Law ｧ5106 are classified as compulsory because insurers are required to submit no-fault claims to binding arbitration at the option of the claimant. State Farm Mutual Automobile Ins. Co. v. Kissena Medical Imaging, PC, 2009 NY Slip Op 52094(U), 25 Misc 3d 1214(A)(Sup. Ct., Nassau Co. 2009) citing Nyack Hosp. v. GEICO., 139 AD2d 515, 516 (2nd Dept. 1988). In cases of compulsory arbitration, judicial review under CPLR article 75 is broad and imports the “arbitrary and capricious” standard included in Article 78 proceedings. Petrofsky, supra at 211.

The award must be in accord with due process and supported by adequate evidence in the record. Santer v. Bd. of Educ., East Meadow U. F. S. D, 101 AD3d 1026, 1027 (2nd Dept. 2012) citing Motor Veh. Mfrs. Assn. of U.S. v State of New York, 75 NY2d 175, 186 (1990). Due process of law requires that the arbitrator’s determination have a basis not only in his good faith, but in the law and record. Santer, supra at 1027 citing Mt. St. Mary’s Hosp. of Niagara Falls v Catherwood, 26 NY2d 493, 507 (1970). Furthermore, the standard is whether the award was supported by a reasonable hypothesis’ and was not contrary to what could be fairly described as settled law. Mtr of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co., 89 NY2d 214, 224 (1996); Metropolitan Radiological Imaging, P.C. v. Country-Wide Ins. Co., 2008 NY Slip Op 50539(U), 19 Misc 3d 130(A)(App. Term, 2nd Dept. 2008) citing Mtr of State Farm Mut. Auto. Ins. Co. v Lumbermens Mut. Cas. Co., 18 AD3d 762, 763 (2nd Dept. 2005). These standards govern both a master arbitrator’s review of the original arbitration award and the court’s review of the master arbitrator’s award. Petrofsky, surpa at 211.

The issue before the original arbitrator was which fee schedule should apply in the absence of a discrete Workers’ Compensation Fee Schedule applicable to licensed acupuncturists. Petitioner contended that licensed acupuncturists are entitled to be paid at the same fee schedule rates as medical doctors certified in acupuncture. The original arbitrator looked to the proposed amendment to 11 NYCRR ｧ68, which would permit licensed acupuncturists to charge the same fee that licensed physicians certified to perform acupuncture were permitted to charge. The Regulatory Impact Statement accompanying the proposed amendment reasoned that the higher fee should govern since acupuncturists may only bill for acupuncture treatment, while [*3]chiropractors and medical doctors certified in acupuncture may bill for acupuncture along with their primary service. The arbitrator therefore found that “fairness dictates that licensed chiropractors [or acupuncturists] be reimbursed at the higher medical fee schedule rate.”

The arbitrator failed to mention, much less follow the Appellate Term’s decision in Great Wall Acupuncture v. GEICO Gen. Ins. Co., 16 Misc 3d 23 (App. Term, 2nd Dept. 2007), which addressed the issue and applied the fee schedule for licensed chiropractors to acupuncture services provided by licensed acupuncturists. In Great Wall, the Appellate Term analogized licensed chiropractors to licensed acupuncturists based on the similar training they underwent for licensure in order to perform acupuncture services, while contrasting them to physicians, who only had to obtain certification in order to perform acupuncture. The Appellate Term further noted the Department of Insurance’s lack of “specific guidance as to which particular fee schedule should be applied to a licensed acupuncturist performing acupuncture,” and urged it to do so. Great Wall, supra at 24.

Although acknowledging Great Wall, supra, and the fact that the proposed legislation to increase the reimbursement rates for both chiropractors and acupuncturists was still pending, the master arbitrator confirmed the award. The master arbitrator found that Allstate impermissibly sought to have him conduct a de novo review, and that the lower arbitrator’s award had “a plausible basis in the evidence presented” and thus conformed to applicable law.

This Court does not understand the reasoning behind the master arbitrator’s award. Allstate did not seek a de novo or a factual review, as prohibited by Petrofsky, supra. Rather, petitioner argued that the decision was arbitrary and capricious and contrary to well settled law. This Court cannot countenance an award which finds that proposed or pending legislation trumps well established precedent, i.e. Great Wall, supra. Therefore, the award is vacated and the Court directs that the arbitrator calculate the fees owed to respondent in accordance with the fee schedule for licensed chiropractors who perform acupuncture.

The foregoing constitutes the Decision and Order of the Court.

Dated: April 3, 2013__________________________

Katherine A. LevineJudge, Civil Court

[*1]

Supreme Court, Kings County, March 29, 2013

APPEARANCES OF COUNSEL

McDonnell & Adels, PLLC, Garden City (Evan W. Klestzick of counsel), for plaintiff. Gary Tsirelman, P.C., Brooklyn (Sarah A. Adam of counsel), for Utopia Equipment, Inc., defendant.

{**40 Misc 3d at 173} OPINION OF THE COURT

Wayne P. Saitta, J.

Plaintiff, Lancer Insurance Company, moves this court for an order pursuant to CPLR 3212 for summary judgment against the insured participant defendants and for a default judgment against defendants Juana Torres and Catherine Duran.

Plaintiff’s motion is denied for the reasons set forth below.

Plaintiff brings this motion seeking a default judgment in its declaratory action against Torres and Duran, stating that a motor vehicle accident of June 5, 2010 (the accident), was staged, and that plaintiff has no obligation to provide no-fault coverage or indemnity or defense to any of the participants named in its declaratory action. The motion also seeks dismissal of the counterclaims of defendant Utopia Equipment for no-fault benefits as assignee of the named defendants and seeking attorneys’ fees for the cost of defending this action.

Plaintiff brought this declaratory action and effectuated service against all of the defendants with the exceptions of Torres and Duran. Plaintiff was granted a default judgment as against each defendant except Torres and Duran.

Plaintiff thereafter obtained an order to serve Torres and Duran by publication on November 15, 2011. Plaintiff served defendants by publication but neither defendant has appeared or answered.

The November 15, 2011 order also granted a judgment against the defaulting defendants declaring that the accident of June 5, 2010 was an intentional and uncovered event, and that Lancer had no duty to afford any insurance coverage to those defendants.

The declaratory judgment was not granted as to defendants Torres and Duran. The [*2]order made no determinations as to Utopia’s rights under the policy by the purported assignments of Torres and Duran.

Plaintiff submits the affidavit of a supervisor for Lancer, Jim Dunn, in support of its motion. Dunn states his opinion is based in part on the depositions of several defendants and the police accident report. However, since Dunn does not reference the{**40 Misc 3d at 174} sources of his information, it is unclear where he obtained certain of his facts as they are not found in the depositions or the police report annexed to the plaintiff’s motion.

Dunn alleges that Marleny Reyes contacted D. Wiltshire Stretch Limo Inc. for a ride to an event. The limo, driven by Leslie Lezea, picked up Reyes and two other female passengers at 141st Street and Cyprus Avenue, Bronx, New York. Dunn states the passengers directed Lezea to take them to a liquor store and then to return to 141st and Cyprus to pick up four more passengers. They then directed Lezea to take a particular route to a location in Manhattan for a birthday party. While en route, at approximately Cyprus and 135th Street, the limo was struck by a minivan. Plaintiff alleges a minivan intentionally sideswiped the limo.

Plaintiff argues that because the passengers in the limo were all intoxicated when they entered the limo, they cannot testify about any fact related to the loss. Plaintiff alleges that although the passengers did not know one another, they all sought the same treatment at the same facilities. The police officer who reported to the scene stated that he “concludes accident is suspicious and injuries questionable.”

Plaintiff argues that evidence gathered in that investigation supports the fact that the accident was staged. Among the facts it argues are indicia of fraud are that Laura Ezequiel purchased the minivan a month prior to the loss for $800, she obtained insurance on it but did not know from whom she purchased the vehicle, that she was out of work and had to borrow money to purchase the vehicle, and that she changed her cell phone number after the accident and did not remember it. Plaintiff also argues that similarities between the passengers in the limo and Ezequiel support its position that the accident was staged, including the fact that they are all Honduranian. Plaintiff also points out that Ezequiel was going drinking that day, and that the passengers in the limo were drunk.

Plaintiff argues that it is entitled to a declaratory judgment that the accident of June 5, 2010 was intentionally staged and therefore an uncovered event and it owes no coverage, indemnification or defense to any party to this action.

Plaintiff argues that Utopia’s counterclaims for no-fault benefits assigned to it by Torres and Duran should be dismissed as the accident was staged and thus an uncovered event. Plaintiff argues that Utopia’s claims for attorneys’ fees should be denied for the additional reasons that it is premature and{**40 Misc 3d at 175} that neither it nor its assignors were named insureds on the policy.

Utopia argues that it is an assignee of the two injured defendants who remain in the case, Torres and Duran, and that Utopia is entitled to their no-fault medical benefits as it provided medical equipment to the defendants in reliance on the understanding that Utopia would be compensated for its services under the terms of the policy issued by Lancer.

Utopia argues that the order granting a declaratory judgment against defaulting defendants does not extinguish Utopia’s claims.

[*3]Default Judgment against Torres and Duran

Plaintiff argues that it is entitled to a default judgment against defendants Torres and Duran as they were served by publication but failed to answer or appear in this action.

Plaintiff’s motion for a default judgment against defendants Torres and Duran must be denied as the order which permitted service by publication did not comply with the provisions of CPLR 316 (a). CPLR 316 (a) specifically requires that the order designate the publications most likely to give notice to the person to be served.

Since the November 15, 2011 order did not specify the publications in which the notice was to be published, it was necessary for plaintiff to obtain a further order of the court designating the publications to be used. The service made without first having the court designate the publications to be used was improper and insufficient to obtain jurisdiction over the defendants. Having failed to obtain jurisdiction over Torres and Duran, plaintiff is not entitled to a default judgment against them.

Declaratory Judgment

That part of plaintiff’s motion seeking a declaratory judgment against the defendants that the accident of June 5, 2010 was intentionally staged must also be denied.

Even accepting all the facts asserted by plaintiff as true, at best they provide some circumstantial evidence that a fraud might have occurred.

The allegations that the defendants were drunk and that they were Hondurans are of no probative value. The allegation that certain of the passengers did not know other passengers in the limousine is open to a variety of different interpretations. The allegation that the passengers all treated at the same facility after the accident is merely some circumstantial evidence that{**40 Misc 3d at 176} could, together with other evidence, support an inference that the accident was staged.

Dunn’s affidavit, submitted by Lancer, is not based on personal knowledge but refers to findings from an investigation allegedly conducted by Esurance, the insurer of the minivan that struck the limousine. However, the report of the investigation by Esurance is not admissible and Lancer does not submit any admissible evidence to support Esurance’s findings. There is no affidavit from any person with knowledge as to any investigation or the findings which resulted.

Dunn states in his affidavit that “CLINTON PLACE MEDICAL, PC referred the insured passengers to their attorneys.” He then cites the depositions of Reyes, Bernardez, Saravia, Guity and Mariano. In fact, only Bernardez and Mariano in their depositions stated that they were referred to their attorneys by Clinton. Reyes testified someone who she did not identify gave her a card for an attorney and Saravia and Guity were not asked, nor did they mention, being referred to an attorney.

Dunn also states that the insured passengers were provided transportation to the clinic for treatment, and cites the depositions of Reyes, Bernardez, Saravia, Guity and Mariano. While Bernardez, Guity and Mariano acknowledged this to be true, neither Reyes nor Saravia was asked or commented about transportation.

Dunn further states that none of the same passengers was ever given the results of their MRIs. Both Reyes and Bernardez state they did not receive MRI results. Saravia’s testimony is unclear, and neither Guity nor Mariano were asked if they received MRI results. [*4]

Circumstantial evidence may permit a finding of negligence, but only when the proof is so convincing and the response to that proof results in an inescapable finding of negligence. (Simmons v Neuman, 50 AD3d 666, 667 [2d Dept 2008].)

At best plaintiff makes out a circumstantial case from which a reasonable jury could infer either that this was or that this was not a staged accident. The circumstantial evidence presented in the moving papers is not sufficient to meet the burden for summary judgment.

Assignment of Torres’ and Duran’s Rights

As passengers in the vehicle insured by Lancer, Torres and Duran have a right to first-party benefits from Lancer, which they also had the right to assign. An accident victim may assign{**40 Misc 3d at 177} his or her no-fault claim to a medical provider who has provided a medical service (see 11 NYCRR 65-3.11). Lancer has not contested the validity of the assignment. In this case it is clear that Lancer was aware of the assignment as it joined Utopia as a defendant.

An assignee “stands in the shoes” of an assignor. (Long Is. Radiology v Allstate Ins. Co., 36 AD3d 763, 765 [2d Dept 2007].) Where there is a valid assignment of a claim, the assignor is divested of all control and right to the cause of action. The assignee is the proper party in interest and has the right to commence and prosecute an action in its own name without joining the assignor as a necessary party. (Cardtronics, LP v St. Nicholas Beverage Discount Ctr., Inc., 8 AD3d 419 [2d Dept 2004].)

An assignee is bound by the acts of the assignor which occur prior to the assignment, but not those which occur after the assignment. (Gramatan Home Invs. Corp. v Lopez, 46 NY2d 481 [1979].)

Utopia was assigned the right to payment from the insureds prior to Lancer’s initiation of the declaratory action and therefore the rights assigned to Utopia would be unaffected in the event that Torres and Duran should default, as any default would be subsequent to the assignment of the rights.

Right to Recover Attorneys’ Fees

An insured is entitled to recover legal expenses incurred in defending a declaratory judgment brought as a result of an insurer’s disclaimer. (Fischer v Michigan Millers Mut. Ins. Co., 103 Misc 2d 508 [1st Dept 1980]; Mighty Midgets v Centennial Ins. Co., 47 NY2d 12 [1979]; see also Glens Falls Ins. Co. v United States Fire Ins. Co., 41 AD2d 869, 870 [1973].)

Utopia is entitled to the same rights that Duran and Torres would have been entitled to if they defended against Lancer’s declaratory judgment and prevailed.

As a preliminary matter, the fact that Lancer denied coverage for what it asserts is fraud does not affect Utopia’s right to attorneys’ fees should it successfully defend against the declaratory judgment action. If the defense were successful, it would necessarily mean there was no finding that the accident was staged.

Also, while Utopia is not entitled to attorneys’ fees unless it is successful in the declaratory judgment action, it is not premature for Utopia to seek attorneys’ fees as a counterclaim in the same action. The counterclaims would only be awarded in the event Utopia defeats the declaratory judgment action.{**40 Misc 3d at 178} [*5]

An insured is entitled to recover the expenses of defending a declaratory judgment action brought as a result of an insurer’s breach of its obligation to defend a tort action. (Johnson v General Mut. Ins. Co., 24 NY2d 42 [1969]; Mighty Midgets v Centennial Ins. Co., 47 NY2d 12 [1979].) The courts have generally related the right to recover to the breach of the insurance contract, specifically, a provision to provide a defense. The Court of Appeals in Mighty Midgets v Centennial, noted that when a party is cast in a defensive posture, “an insurer’s responsibility to defend reaches the defense of any actions arising out of the occurrence,” including declaratory judgments to deny coverage. (47 NY2d at 21.)

The cases dealing with the right to attorneys’ fees for successfully defending a declaratory judgment action by an insurer all involve insureds who were defendants in personal injury actions. There appear to be no reported decisions involving attorneys’ fees for successfully defending against a declaratory judgment action to deny first-party benefits under no fault.

The right to attorneys’ fees when an insured has been cast in a defensive posture by the legal steps taken by the insurer to free itself from its obligations under the policy arise from the provision in the policy to provide defense to the insured. “[T]he right to such recovery is derived exclusively from the contractual relationship between the insured and the insurer.” (Fischer v Michigan Millers Mut. Ins. Co., 103 Misc 2d 508, 511 [1st Dept 1980].)

Insurance Law § 5103 (a) (3) provides that any New York resident who does not otherwise have coverage for first-party benefits “is entitled to first party benefits” through the liability policy of the insured. The statute does not provide that such residents are deemed insureds under the policy.

Since the Insurance Law does not deem passengers insureds, the question is whether the policy, by its terms, makes the passengers insureds, and therefore entitled to defense, including attorneys’ fees under the policy. In some policies, the definition of “persons insured” may include persons in addition to the named insured or policyholder, such as those operating the vehicle with the permission of the named insured. (Fischer v Michigan Millers Mut. Ins. Co., 103 Misc 2d 508 [1st Dept 1980].) Whether passengers are deemed “persons insured” depends on the specific terms of the policy.

Even if the passengers are deemed insureds under the policy, they would only be entitled to attorneys’ fees for defending this{**40 Misc 3d at 179} action if the policy required the insurer to provide them with defense, as well as indemnity. If the policy entitled them to indemnification for losses incurred only, they would not be entitled to attorneys’ fees for defending a declaratory judgment action. If passengers are deemed insureds and if they are entitled to defense and indemnification, the scope of the duty to defend and whether it would extend to the defense of a declaratory judgment would be determined by the terms of the policy, specifically the provision to defend.

A provision that the insurer would provide defense for all actions arising from an occurrence would include defense of declaratory judgment actions. However, a more restrictive defense clause which, for example, limited defense to personal injury actions or third-party actions might not.

Since the policy was not provided to the court, it cannot be determined at this time whether Utopia’s defense of this action would be covered under the terms of the policy. Therefore, that part of the motion to dismiss Utopia’s counterclaims for attorneys’ fees for [*6]defending this action must be denied.

Wherefore, plaintiff’s motion for a default judgment against defendants Torres and Duran, for summary judgment on its claim for a declaratory judgment, and for dismissal of Utopia’s counterclaims is denied.

Civil Court of the City of New York, Kings County

CV-100846/2006

Attorney for Plaintiff:

Stefan Belinfanti

Gary Tsirelman, P.C.

65 Jay Street, 3rd Floor

Brooklyn, NY 11201

Attorney for Defendant:

Dominick Dale

Korshin & Weldon, Esqs.

170 Froehlich Farm Boulevard

Woodbury, New York 11797

Ingrid Joseph, J.

Plaintiff AR Medical Rehabilitation, P.C. (referred to interchangeably as “plaintiff” or “AR Medical Rehabilitation”) initiated this action against defendant Geico General Ins. Co. (“defendant”) to recover assigned first party no fault benefits for services provided to assignors Celeste Russell, Robin Williams, and Edwina McDonald. This court conducted a bench trial on January 14, 2013, wherein the parties were represented by counsel.

Prior to commencement of the trial the defendant made an oral motion in limine to preclude Alexander Rozenberg, M.D. (“Dr. Rozenberg”) from testifying and to dismiss the case based upon its contention that the instant action raises Mallela issues pursuant to State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005]. The defendant claimed Dr. Rozenberg conspired with two individuals, Inna Polack and Alexander Polack (collectively, the “Polacks”), to fraudulently incorporate multiple medical professional service corporations, including AR Medical Rehabilitation. The defendant indicated that Dr. Rozenberg operated as the straw man for the illegal companies but the Polacks, who are lay persons and unauthorized to collect no fault benefits under New York law, actually owned the businesses. The defendant posited that there were prior rulings [*2]from different court proceedings that when taken together support its position.

The defendant presented the court and plaintiff’s counsel with two decisions that were rendered at various stages of a RICO (Racketeer and Influenced Corrupt Organizations Act) action, wherein Allstate Insurance Company sued the Polacks, Dr. Rozenberg, two other individuals, three medical management companies (Mighty Management Group Inc., Mighty Management LLC, and Blue Wave Management), the plaintiff in this action, AR Medical Rehabilitation, and two other professional medical companies (AR Medical Art, P.C. and Yonkers Medical Art, P.C.). The documents submitted consisted of a decision rendered by United States District Court Judge Arthur Spatt (“Judge Spatt”) (Allstate Insurance Company v Rozenberg, 590 F Supp 2d 384 [ED NY 2008]) and a Report and Recommendation prepared by Magistrate Judge Boyle (“Magistrate Boyle”) (Allstate Insurance Company v Polack, 2012 WL 4489282 [ED NY 2012]) (collectively, “RICO action”) (defendant’s exhibits A and B, respectively). The defendant also submitted two decisions from the Supreme Court, Kings County, Criminal Term (People v Rozenberg, 21 Misc 3d 235, 862 NYS2d 895 [Sup Ct, Kings County 2008] and People v Rozenberg, Sup Ct, Kings County, April 24, 2009, McKay, J., Indictment No. 5545-06) as well as the Determination and Order from a hearing conducted by the State of New York Department of Health Board for Professional Medical Conduct (Matter of Alexander Rozenberg, BPMC No.10-271, December 17, 2010) (defendant’s exhibits C-E, respectively). The defendant indicated that each proceeding evinced the same operative fact pattern of insurance fraud involving Dr. Rozenberg and AR Medical Rehabilitation.

Plaintiff’s attorney countered that the cases were not dispositive on the issue of whether AR Medical Rehabilitation can pursue no fault benefits in a civil action, because none of the cases resulted in a determination that the company is a Mallela corporation. Plaintiff also argued that Judge Spatt’s 2008 decision should not be considered with respect to the in limine issue since that decision addressed only whether certain causes of action should be dismissed. Additionally, plaintiff pointed out that Magistrate Boyle’s report and recommendation was not binding, because there was no proof that it had been adopted by Judge Spatt.

The defendant, with the plaintiff’s consent and the court’s permission, was given an extension of time to produce Judge Spatt’s decision adopting the recommendations of Magistrate Boyle. On the day of trial, the court reserved decision on the in limine issue and permitted plaintiff to call Dr. Rozenberg as a witness with the understanding that such testimony would be stricken and a verdict rendered in favor of the defendant if the court later determined, based on the documents submitted, that in limine relief is warranted. Subsequently, on January 19, 2013, the defendant submitted a third case (Allstate Insurance Company v Polack, US Dist Ct, SD NY, 08-CV-565, Spatt, J., 2012) from the RICO action.

The court is being asked to determine whether the defendant’s motion in limine should be granted, or, if in limine relief is not warranted, whether the plaintiff met its prima facie case of entitlement to no fault benefits at trial?

After carefully reviewing the documents submitted, the court finds that the defendant has failed to demonstrate entitlement to the relief sought in its in limine application. While the decisions submitted are replete with discussion about an alleged conspiracy to defraud New York’s No Fault regime, they are devoid of any finding that Dr. Rozenberg was a participant, or that AR Medical Rehabilitation was the fruit of a fraudulent scheme. Judge Spatt’s 2008 decision addresses two motions to dismiss for failure to state a cause of action that were made by Dr. Rozenberg and other defendants in that case. Judge Spatt discussed the allegations contained in Allstate’s complaint but did not reach a conclusion as to whether AR Medical Rehabilitation was an illegally formed [*3]company, nor did he render a decision concerning Dr. Rozenberg’s involvement in the alleged illegal activity. Thus, there are no findings of fact or even an adverse inference that can be drawn from that decision that would have a binding effect on Dr. Rozenberg or the plaintiff in this case.

The defendant’s reliance on Magistrate Boyle’s report and recommendation and Judge Spatt’s 2012 decision adopting that report is misplaced. Allstate moved for default judgment in the RICO action against some of the defendants, and Judge Spatt referred the matter to Magistrate Boyle to report and recommend a decision on the motion. Magistrate Boyle referenced Dr. Rozenberg and AR Medical Rehabilitation in his analysis but stated clearly at the outset of the report, that Allstate voluntarily dismissed the action against Dr. Rozenberg and AR Medical Rehabilitation (Allstate Insurance Company v Polack, 2012 WL 4489282 [ED NY 2012]). Consequently, there were no recommendations that would have an effect on any of the issues central to this trial, because neither Magistrate Boyle in his report, nor Judge Spatt in his order adopting that report (Allstate Insurance Company v Polack, US Dist Ct, SD NY, 08 Civ 565, Spatt, J., 2012) addressed the issue of Dr. Rozenberg or the corporate structure of AR Medical Rehabilitation on the merits.

Additionally, the criminal case and Determination and Order of the State Board for Professional Medical Conduct (“BPMC”) run counter to the defendant’s argument. In the criminal matter Dr. Rozenberg was indicted on multiple counts of falsifying business records and insurance fraud but convicted only of certain charges that pertain to an assignor not named in the instant action (see People v Rozenberg, 21 Misc 3d 235, 862 NYS2d 895 [Sup Ct, Kings County 2008] and People v Rozenberg, Sup Ct, Kings County, April 24, 2009, McKay, J., Indictment No. 5545-06). In this case, the doctor testified, on direct examination, that he had been indicted on several criminal charges but stated that fifty-six (56) of the charges resulted in either a dismissal or acquittal. Dr. Rozenberg admitted that he was convicted on one count of falsifying business records and one count of insurance fraud but explained that the convictions concerned a specific patient whose “initial evaluation” had been coded and erroneously billed as a “consultation” (tr. 16-19). Dr. Rozenberg indicated that there is a $25.00 difference between the two codes and that he was found guilty of falsifying that specific business record. Subsequently, by order dated December 17, 2010, the Board for Professional Medical Conduct determined that revocation of the doctor’s license to practice medicine was the appropriate penalty for committing the aforementioned crimes. The court finds that while Dr. Rozenberg’s convictions and license revocation may have some bearing on his credibility, they do not affect his ability to testify as a prima facie witness.

The court has discussed the defendant’s substantive arguments and will now address the procedural issues attendant to this matter. Despite the defendant’s characterization of the motion as one for in limine relief, the court finds that the application amounts to a motion for summary judgment. Essentially, the defendant alleged that there were no issues of fact based upon its contention that AR Medical Rehabilitation is a Mallela corporation and its true owners, the Polacks, are unauthorized to collect no fault benefits under New York law. The underlying policy of requiring that a summary judgment motion be made within a certain period of time is to prevent the practice of delaying such motions until the eve of trial (Pallotta v Saltru Associates Joint Venture, NY, 32 Misc 3d 1208(A) [Sup Ct, Kings County 2011] citing Miceli v State Farm Mutual Automobile Ins. Co., 3 NY3d 725, 726 [2004]). For that reason, inter alia, the Appellate Division Second Department has held that a motion in limine is an inappropriate substitute for a motion for summary judgment (In re Singer, 99 AD3d 802, 803 [2d Dept 2012]; Brewi-Bijoux v City of New York, 73 AD3d 1112, 1113 [2d Dept 2010] quoting Rondout Elec. v Dover Union Free School Dist., 304 AD2d 808, 810-811 [2d Dept 2003]). Furthermore, an in limine motion is generally made [*4]within the context of a jury trial to protect against the prejudice that could result if a jury hears inadmissible, irrelevant, or inflammatory evidence (Matter of PCK Dev. Co., LLC v Assessor of Town of Ulster, 43 AD3d 539 [3d Dept 2007], and State of New York v Metz, 241 AD2d 192, 198 [1st Dept 1998]; Caster v Increda-Meal, Inc., 238 AD2d 917, 918 [4th Dept 1997], see also 4 NY Prac., Com. Litig. in New York State Courts § 38:1-8 [3d Ed.]). In a bench trial, as is the case here, there is little use for that safeguard because the trier of fact would be exposed to the objectionable evidence whether such evidence is couched in an application for in limine relief or presented via documentary or testimonial evidence at trial. Indeed, the Court of Appeals has held that a Judge is uniquely capable of distinguishing the issues and making an objective determination based upon appropriate legal criteria, despite awareness of facts which cannot properly be relied upon in making decisions (People v Moreno, 70 NY2d 403, 406 [1987]).

Based upon the preceding analyses, the defendant’s motion in limine is denied.

The court will now address whether the plaintiff proffered sufficient evidence to meet its prima facie burden. Under New York No Fault law, a plaintiff establishes its prima facie case by demonstrating that it submitted a claim form to the defendant insurer, tendering proof of the fact and amount of the loss sustained, and that payment of no-fault benefits is overdue (Insurance Law § 5106[a]; Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742 [2d Dept 2004]). It is well settled that the plaintiff provider must call a witness at trial that can lay the proper foundation for admission of its claim forms into evidence under the business record exception to the hearsay rule (see CPLR 4518; Art of Healing Medicine, P.C. v Travelers Home & Mar. Ins. Co., 55 AD3d 664 [2d Dept 2008]; Bajaj v General Assur. Co., 18 Misc 3d 25, 28-29 [App Term, 2d & 11th Jud. Dists 2007]).

The court finds that Dr. Rozenberg’s testimony was insufficient to lay the foundation necessary to establish that plaintiff’s billing documents are business records. Dr. Rozenberg indicated that although Kevi Management Company (“Kevi”) was located in the same building, it was a separate entity that handled all of the collection and billing tasks for AR Medical Rehabilitation (71, 81-82). Dr. Rozenberg stated that Kevi employees generated the bills and that he would sign or stamp them, but the witness failed to adequately describe the procedure that Kevi employees followed when creating bills (tr 25-26, 71). The doctor testified that after receiving the signed or stamped bill, a Kevi employee (1) inserted bills in an envelope, (2) placed the envelopes in a plastic bag, (3) delivered the entire package to the post office for mailing, then (4) recorded the mailing of each bill in a notebook that was kept in the office (tr 24, 28).

Additionally, the doctor’s testimony was laden with inconsistencies. Dr. Rozenberg initially stated that he and the owner of the Kevi Company established the billing procedures together, but he later admitted on cross-examination that he provided no input on the process (tr 72-73). The doctor testified that he personally checked claim forms for accuracy before signing or stamping them, and he averred that there were no deviations from that practice (tr 20, 33). However, on voir dire, the witness conceded that there were exceptions to that rule when presented with a bill that was neither signed nor stamped by him (tr at 68). Dr. Rozenberg attempted to mitigate the discrepant testimony by explaining that he signed or stamped only the bills generated from services he provided and the chiropractor, physical therapist, acupuncturist, and orthopedic surgeon were responsible for signing or stamping their own bills (tr 69, 74-75). Dr. Rozenberg acknowledged that he did not check the other specialists’ bills and even answered in the affirmative when asked whether he was only concerned about his own bills (tr at 74). The doctor testified that he supervised the billing process but later acknowledged that the Kevi Company employed its own supervisors (tr at 35). At one point, Dr. Rozenberg even delineated his umbrella of responsibility from that of the billers by stating [*5]that he was responsible for ensuring the bills were correct, while Kevi employees were responsible for mailing the bills within the requisite period of time (tr at 82).

Based upon the inconsistencies and gaps in Dr. Rozenberg’s testimony and the plaintiff’s failure to produce a witness from the Kevi Company, the court finds that plaintiff failed to lay the proper foundation for admission of the documents in evidence under the business record exception to the hearsay rule (see CPLR 4518[a]; compare Art of Healing Medicine, P.C. v Travelers Home and Marine Ins. Co., 55 AD3d 644 [2d Dept 2008] and Viviane Etienne Medical Care, P.C., 31 Misc 3d 21 [2d 11 13 Jud Dists 2011] with Andrew Carothers, M.D., P.C. v Geico Indemnity Co., 79 AD3d 864 [2d Dept 2010]. Consequently, the court hereby rescinds its decision to admit plaintiff’s bills into evidence as business records on the day of trial.

Even if the documents were allowed in evidence, they would be accorded little, if any, weight, because plaintiff failed to proffer sufficient evidence to demonstrate that Dr. Rozenberg actually checked the bills for accuracy. The claim forms at issue in this case contain charges for services that run the gamut, including office visits, supplies, therapeutic exercises, and range of motion tests. Dr. Rozenberg did not testify that he provided those services, and there is conflicting testimony as to whether he supervised, signed, stamped, or checked the accuracy of bills from services rendered by other professionals in the office.

Accordingly, the court awards a verdict in favor of the defendant.

This constitutes the Decision and Order of the court.

March 27, 2013_____________________________

HON. INGRID JOSEPH

Acting Supreme Court Justice

[*1]

Supreme Court, Kings County, March 11, 2013

APPEARANCES OF COUNSEL

Freiberg, Peck & Kang, LLP, Armonk (Jason T. George of counsel), for petitioner. The Geller Law Group, P.C., Brooklyn (Jeffrey Silber of counsel), for respondent.

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

Francois A. Rivera, J.

By order to show cause and petition filed on November 26, 2012, petitioner Infinity Insurance Company sought an order pursuant to CPLR 7503 (b) to temporarily stay an arbitration that was demanded by the respondent, Daily Medical Equipment Distribution Center, Inc., until the court decided Infinity’s request for a permanent stay.

Daily Medical has opposed the petition.

Background

On November 26, 2012, Infinity commenced the instant special proceeding pursuant to CPLR 7503 (b) seeking a permanent stay of an arbitration demanded by Daily Medical by filing an order to show cause and verified petition. Infinity’s petition alleges, among other things, that it issued an automobile insurance policy to Derrick St. Louis which it rescinded pursuant to Pennsylvania law based on a misrepresentation made by St. Louis in the procurement of the subject policy.

Daily Medical, as assignee of St. Louis, filed a request to arbitrate with the American Arbitration Association (AAA) seeking reimbursement of approximately $1,800 for no-fault benefits it provided to St. Louis. AAA set a hearing date of January 15, 2013. Infinity contends that Daily Medical has no right to arbitrate because of the proper rescission of the subject policy ab initio.

Motion Papers

Infinity’s motion papers consist of an order to show cause, a verified petition, two affirmations of its counsel, an affidavit of its claim adjuster and seven exhibits labeled A through G. Exhibit A is a copy of AAA’s notice of arbitration. Exhibit B is described as [*2]the declaration page of the subject policy. Exhibit C is described as the insured’s application for the subject policy. Exhibit D is described as a rescission letter purportedly sent to the insured. Exhibit E is described as correspondence sent to the insured. Exhibit F is described as a check which was purportedly sent to St. Louis to return the premiums he paid on the subject policy. Exhibit G is described as correspondence sent to the Pennsylvania Attorney General’s office.{**39 Misc 3d at 584}

Daily Medical’s opposition papers consist of the affirmation of its counsel and three annexed exhibits labeled A through C. Exhibit A is the respondent’s demand for arbitration. Exhibit B is the answer dated August 10, 2012, which Infinity served upon AAA and upon Daily Medical in response to Daily Medical’s arbitration demand. Exhibit C is described as a document from the website maintained by the New York State Department of Financial Services which lists the petitioner as an entity authorized to do business in the State of New York.

Infinity replied with an affirmation of its counsel.

Law and Application

Infinity claims that under Pennsylvania law, it had the right to rescind St. Louis’ insurance policy based on a misrepresentation he made regarding where the car was garaged when he first applied for insurance. Infinity further claims that its rescission of the subject policy voids the arbitration clause contained therein, such that there is no longer any insurance coverage or any agreement to arbitrate.

Daily Medical contends, among other things, that Infinity’s petition is time-barred and supported by uncertified and inadmissible documents. Daily Medical also contends that Infinity cannot seek a stay because it has already answered and participated in the arbitration proceeding.

By order issued on January 11, 2013, at oral argument of the instant petition, the court denied Infinity’s application for a temporary stay of the subject arbitration and reserved decision on the petition for a permanent stay. For the reasons set forth below Infinity’s application for a permanent stay must be denied.

It is always useful to bear in mind that the announced policy of this State favors and encourages arbitration as a means of conserving the time and resources of the courts and the contracting parties (Matter of Nationwide Gen. Ins. Co. v Investors Ins. Co. of Am., 37 NY2d 91, 95 [1975]; see also McSpedon v Profile Elec., 137 AD2d 669, 670 [2d Dept 1988]).

Pursuant to CPLR 7503 (b), a party may apply to stay an arbitration on the grounds that a valid agreement to arbitrate has not been made or has not been complied with, or that the claim would be barred by the relevant statute of limitations had the claim been asserted in a court of the State (see Matter of County of Rockland [Primiano Constr. Co.], 51 NY2d 1 [1980]). Further, a court may stay arbitration when the particular claim{**39 Misc 3d at 585} to be arbitrated is not within the scope of the arbitration agreement (Matter of New York City Tr. Auth. v Amalgamated Tr. Union of Am., AFL-CIO, Local 1056, 284 AD2d [*3]466, 468 [2d Dept 2001]).

In instances when the existence or validity of an arbitration agreement is timely raised by a party seeking a stay of arbitration or opposing an application to compel arbitration, issues relating to the validity of the contract must be determined by the court (Housekeeper v Lourie, 39 AD2d 280 [1st Dept 1972], appeal dismissed 32 NY2d 832 [1973]).

CPLR 7503 (c) mandates that an application to stay arbitration be made within 20 days after service of the demand for arbitration (see Matter of State Farm Mut. Auto. Ins. Co. v Urban, 78 AD3d 1064, 1065 [2d Dept 2010]). “An insurer which fails to seek a stay of arbitration within 20 days after being served with a notice of intention or demand to arbitrate under CPLR 7503 (c) is generally precluded from objecting to the arbitration thereafter” (Matter of Liberty Mut. Ins. Co. v Argueta, 59 AD3d 446, 447 [2d Dept 2009]).

Infinity’s motion papers contain a copy of the notice it received from AAA dated October 26, 2012. However, Infinity did not state whether it received a demand for arbitration other than the October 26, 2012 notice from AAA. Daily Medical, on the other hand, claimed that it served a demand to arbitrate on August 1, 2012. It is unclear whether the documents submitted by Daily Medical included a complete copy of its demand to arbitrate.

A demand to arbitrate that fails to identify the agreement under which arbitration is sought or omits the 20-day warning specified by CPLR 7503 (c) deprives the party seeking arbitration of the preclusive effect of the statute. In other words, the opponent may raise threshold issues after the expiration of 20 days from receipt of the demand (see Allstate N.J. Ins. Co. v Tse, 102 AD3d 473 [1st Dept 2013]).

Therefore, based on the date the instant petition was commenced, Infinity’s instant petition may be untimely. However, the court cannot definitely determine that issue without a complete copy of the demand notice.

CPLR 7503 (b) specifically states in pertinent part that a party who has not participated in the arbitration and who has not made or been served with an application to compel arbitration may apply to stay arbitration on the ground that a valid{**39 Misc 3d at 586} agreement was not made or has not been complied with or that the claim sought to be arbitrated is barred by limitation under subdivision (b) of section 7502.

“Because arbitrability is a threshold question going to the arbitrator’s power to resolve the dispute, a party can seek judicial intervention to determine whether the dispute is arbitrable before consenting to arbitration. Moreover, the CPLR requires that in order to raise the ‘did-they-agree-to-arbitrate’ prong of arbitrability in a motion to vacate, a party must move to stay before participating in arbitration” (Matter of United Fedn. of Teachers, Local 2, AFT, AFL-CIO v Board of Educ. of City School Dist. of City of N.Y., 1 NY3d 72, 79 [2003]).

Daily Medical annexed a copy of the cover letter and enclosures that Infinity sent [*4]to AAA in support of its contention that Infinity had participated in an arbitration proceeding. Infinity claimed in its reply affirmation sending these documents to AAA did not constitute participation in the arbitration.

The cover letter dated August 10, 2012 acknowledged Infinity’s receipt of Daily Medical’s arbitration request. It stated that the claim was for an accident that occurred in New Jersey under Infinity’s Pennsylvania policy. It opined that New York State no-fault benefits did not apply, and because of that its belief that arbitration through AAA also should not apply. It advised that the claim was being investigated and would be paid if appropriate in accordance with Pennsylvania law. It further requested that Daily Medical consider voluntarily withdrawing its arbitration request. It also stated that there were enclosures without specifying what they were. The enclosed documents included a New Jersey police crash investigation report of St. Louis’ car accident. Also included was a copy of the declaration page of the subject policy and three letters denominated as “explanation of benefits.” Each one of the explanation of benefits letters stated that Infinity received Daily Medical’s request for reimbursement on April 16, 2012. In one letter Daily Medical sought $844.13, in the other it sought $502.63 and in the third it requested $464.44. Infinity stated in each of the letters that it would not pay the claim. Also included was another copy of the cover letter showing a postmark by AAA dated August 20, 2012.

Two months after submitting the August 10, 2012 letter to AAA and Daily Medical, Infinity commenced the instant special{**39 Misc 3d at 587} proceeding by order to show cause seeking a temporary stay pending resolution of its application for a permanent stay of the arbitration. CPLR 7503 (b) entitles only a party who has not participated in the arbitration to apply to stay arbitration on the ground that a valid agreement was not made. (Matter of Commerce & Indus. Ins. Co. v Nester, 90 NY2d 255, 263 [1997].) Therefore, when parties to arbitration of a claim, including parties who never executed an agreement to arbitrate, participate in the arbitration, they waive their right to a judicial determination of the arbitrability of the claim. (Matter of United Fedn. of Teachers, Local 2, AFT, AFL-CIO v Board of Educ. of City School Dist. of City of N.Y., 1 NY3d 72, 78-79 [2003].) Once they have taken part in the arbitration proceeding by serving and filing an answer to an arbitration demand and participated in selecting the arbitrator, they no longer are entitled to stay further progress of the arbitration proceeding, even if they are not subject to any arbitration agreement (Nachmani v By Design, LLC, 74 AD3d 478, 479 [1st Dept 2010]).

Contrary to Infinity’s contention, by sending the aforementioned documents to AAA it did participate in the arbitration proceeding. Infinity’s participation in the subject arbitration effectively bars its application for a stay of arbitration pursuant to CPLR 7503 (b). In light of the foregoing, the court need not and does not address Daily Medical’s contention that Infinity’s instant petition was untimely and supported by uncertified and inadmissible documents.

Therefore, Infinity’s motion for a permanent stay of the subject arbitration is denied and [*5]the instant special proceeding is dismissed.