Kemper Independence Ins. Co. v Accurate Monitoring, LLC

2021 NY Slip Op 21253 [73 Misc 3d 585]

September 23, 2021

Lebovits, J.

Supreme Court, New York County

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

As corrected through Wednesday, November 17, 2021

[*1]

Kemper Independence Insurance Company, Plaintiff, v Accurate Monitoring, LLC, et al., Defendants.

Supreme Court, New York County, September 23, 2021

APPEARANCES OF COUNSEL

Goldberg, Miller & Rubin, P.C., New York City (Harlan R. Schreiber and Benjamin Bagenski of counsel), for plaintiff.

Gary Tsirelman, P.C., Brooklyn (Stefan Belinfanti of counsel), for Alpha Chiropractic P.C., defendant.

Gerald Lebovits, J.

This motion concerns plaintiff Kemper Independence Insurance Company’s potential obligation to pay no-fault insurance benefits. Defendants Lateef Fowler and Cynthia Brown were passengers in a vehicle that was involved in a collision in February 2018. The vehicle was covered by a no-fault insurance policy issued by Kemper. Fowler and Brown assigned their rights to collect no-fault benefits under that policy to various treating medical providers, including defendant Alpha Chiropractic P.C.

In May 2018, Kemper sent Alpha a letter requesting among other things that Alpha produce a witness for an examination under oath (EUO) on May 31, 2018. (See NY St Cts Elec Filing [NYSCEF] Doc No. 78 at 4.) Alpha did not appear on the scheduled EUO date. On June 5, 2018, Kemper sent a second letter, requesting that Alpha produce a witness on June 22, and warning that a second failure to appear would constitute a breach of the policy leading to a denial of Alpha’s claims. (See NYSCEF Doc No. 78 at 1-2.) On June 14, Alpha wrote back to Kemper, seeking a “reasonable justification for the instant EUO request.” (NYSCEF Doc No. 78 at 7.) Kemper declined. In a July 24, 2018 letter to Alpha, Kemper stated that “while the request for EUO is made in good faith and does seek to verify necessity and causality of treatment,” the “Department of Insurance has specifically found that disclosing of the basis for EUO is not required by an insurer.” (NYSCEF Doc No. 78 at 10.) Kemper adjourned the EUO to August 7, 2018, and requested that Alpha’s witness appear on that date whether or not Kemper had provided a “reasonable justification” for that request. (See id. at 11.) Alpha did not appear on August 7.

Kemper later brought this action, seeking a declaration that it is not required to pay no-fault benefits to Fowler and Brown,{**73 Misc 3d at 587} Alpha or the other medical-provider defendants. Kemper moves here for summary judgment under CPLR 3212 against Alpha. The motion is denied.

Discussion

A no-fault-benefits claimant must appear for an examination under oath (EUO) on the reasonable request of the insurer. (See 11 NYCRR 65-1.1.) A claimant’s failure without reasonable cause to appear for a timely and properly scheduled EUO is grounds to deny coverage. An EUO request “must be based upon the application of objective standards so that there is specific objective justification supporting” the choice to seek an EUO. (Id. § 65-3.5 [e].)

Here, Kemper argues that Alpha failed to appear for scheduled examinations under oath (EUOs), which breached Alpha’s obligations under the no-fault policy. Alpha, on the other hand, contends that because Kemper declined Alpha’s request to provide a specific justification for the EUO, Alpha’s refusal to appear for the rescheduled EUO did not breach the terms of the underlying no-fault insurance policy. This court agrees with Alpha.^[FN1]

Kemper relies in part on a 2006 interpretive opinion letter issued by the State Insurance Department (now the State Department of Financial Services [DFS]). This letter concluded that although section 65-3.5 (e) provides that an EUO notice will be effective only if it includes “language advising” the witness of the “right to reimbursement for lost earnings and transportation costs incurred in attending the EUO,” the regulation does not require that “an insurer must include language stating the reason(s) for requiring the EUO” in each {**73 Misc 3d at 588}scheduling notice. (Ops Gen Counsel NY Ins Dept No. 06-12-16 [Dec. 2006].)^[FN2]

The 2006 opinion letter does not, however, indicate whether it is intended also to address the extent of an insurer’s discretion to refuse to provide an EUO-justification should the benefits claimant request it after receiving an initial EUO scheduling notice—the issue presented here. Nor is this court aware of any Appellate Division authority (or, in the First Department, any appellate precedent at all) on the question.

The First Department has held that if a denial of a no-fault claim leads to coverage litigation, the insurer must on request disclose to the benefits claimant the insurer’s “specific objective justification” for having sought an EUO. (Kemper Independence Ins. Co. v AB Med. Supply, Inc., 187 AD3d 671, 671 [1st Dept 2020], quoting 11 NYCRR 65-3.5 [e]; see also American Tr. Ins. Co. v Jaga Med. Servs., P.C., 128 AD3d 441, 441 [1st Dept 2015] [same].) Given that holding, it is difficult to see why an insurer should be excused during the claims-verification process itself from providing on request the insurer’s EUO-justification.

The Department of Financial Services has explained that the EUO-request provisions of DFS’s no-fault regulations are intended to balance two interests: “the importance of EUOs in identifying fraud and violations of New York law in the submission of claims for reimbursement,” on the one hand; and the need “to ensure that insurers would not request EUOs on either a routine or arbitrary basis, but would only do so when reasonably warranted” based on the particular facts underlying a given no-fault claim, on the other. (Ops Gen Counsel NY Ins Dept No. 02-10-14 [Oct. 2002].)^[FN3] If an insurer need not provide specific reasons justifying a given EUO, should a claimant request that justification during the claims-verification process, the justification-requirement language in section 65-3.5 (e) has little teeth. At most, a claimant might, years after the fact, request and obtain a justification should coverage litigation result and proceed to discovery. That contingent possibility alone seems insufficient to fulfill the{**73 Misc 3d at 589} regulatory aim of ensuring that insurers issue EUO requests only when warranted by the facts of particular cases.

This is not to say that an insurer’s justification provided during the claims-verification process must necessarily be lengthy or detailed. Requiring extensive justification would [*2]undermine the regulatory goal of resolving the high volume of no-fault claims quickly, efficiently, and fairly. For that matter, the ultimate purpose of EUO requests is to prevent or limit the granting of fraudulent claims. The insurer thus has an important interest in avoiding overly detailed EUO-request explanations: such explanations would risk tipping the insurer’s hand about when it would—and would not—find a claim suspicious so as to warrant further investigation through EUOs.

To say, though, that an insurer’s “specific objective justification” during the claims-verification process for its EUO request may be satisfactory even if it does not go into granular detail is quite different from saying that an insurer need not offer any justification at all. (See American Chiropractic Care, P.C. v GEICO Ins., 57 Misc 3d 529, 535 [Civ Ct, Kings County 2017] [drawing this distinction].) Here, Kemper expressly refused Alpha’s request to explain Kemper’s reasons for asking Alpha to produce an EUO witness.^[FN4] Given that categorical refusal, Kemper’s second EUO request to Alpha was not reasonable; and Alpha’s failure or refusal to appear for the rescheduled EUO does not form a basis to deny Alpha’s benefits claim.

Kemper’s contrary argument on this point relies in part on a decision of the Appellate Term, Second Department. (See NYSCEF Doc No. 93 ¶ 9, citing Bronx Chiropractic Care, P.C. v State Farm Ins., 63 Misc 3d 132[A], 2019 NY Slip Op 50423[U], *1-2 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists, Mar. 22, 2019].) This court is not persuaded by the holding of Bronx Chiropractic. That decision relies on the two DFS/Insurance Department opinion letters quoted above. But as this court has already discussed, the 2006 opinion letter does not definitively resolve the key question here: whether an EUO scheduling notice{**73 Misc 3d at 590} must disclose the insurer’s justification for the EUO after that justification has been requested by the claimant.^[FN5]

The 2002 opinion letter is also consistent with this court’s conclusions here. That letter states that DFS deliberately decided in enacting its regulations to refrain from requiring insurers to disclose to claimants the insurers’ internal standards for making EUO requests. But requiring production of the “objective standards established by the insurer” regarding when to request EUOs is different from requiring a more limited disclosure of the “specific facts” that, applied to those internal standards in a given case, prompted the insurer to request an EUO. (Ops Gen Counsel NY Ins Dept No. 02-10-14.) The former is materially more intrusive, and more likely to provide a guide to no-fault fraudsters on how to evade insurer scrutiny and detection. Indeed, in Jaga Med. [*3]Servs. and AB Med. Supply, the First Department drew this same distinction: The Court held in those decisions that insurers must turn over in discovery their justifications for requesting EUO-based-verification of particular claims, notwithstanding DFS’s conclusion that section 65-3.5 (e) does not require insurers to produce their underlying internal standards. (See AB Med. Supply, 187 AD3d at 671; Jaga Med. Servs., 128 AD3d at 441; see also American Chiropractic, 57 Misc 3d at 534 [holding that the insurer’s obligation to maintain its internal standards for “Insurance Department( ) oversight” of those standards should be treated as distinct from an insurer’s obligation to provide an explanation for a given EUO request to determine “whether those standards were properly applied with regard to a particular provider”].)

Kemper thus was not entitled to deny Alpha’s no-fault benefits claims based on Alpha’s nonappearance at requested EUOs. Kemper’s motion for summary judgment is denied. Although the facts relating to Alpha’s EUO-nonappearances are undisputed, this court concludes that it would be premature to grant Alpha summary judgment as the nonmoving party under CPLR 3212 (b).{**73 Misc 3d at 591}

Kemper appears to be relying on this motion only on Alpha’s EUO nonappearances. (See NYSCEF Doc No. 75 at 6-7 ¶¶ 21-29 [counsel’s affirmation]; NYSCEF Doc No. 93 ¶ 2 [counsel’s reply affirmation].) But some of Kemper’s motion papers also suggest that even had Alpha appeared for EUOs, Kemper still would have denied its no-fault claims because Kemper had concluded the treatment for which benefits were being sought was not causally related to the underlying vehicle collision. (See NYSCEF Doc No. 75 at 5 ¶¶ 14-15 [counsel’s affirmation]; NYSCEF Doc No. 80 [medical reports].) There is, however, no claim-denial form in the record that might clarify this ambiguity.^[FN6] In these circumstances, this court concludes that a reasonable possibility exists that Kemper could yet establish a valid basis for a declaration of no coverage, making it premature to grant summary judgment to Alpha dismissing Kemper’s claim.

Accordingly, for the foregoing reasons, it is hereby ordered that Kemper’s motion for summary judgment under CPLR 3212 is denied.

Footnotes

Footnote 1:There is also significant reason to doubt that Kemper has established that its EUO letters were timely under the governing regulations, as required to obtain a declaration of no coverage. (See American Tr. Ins. Co. v Longevity Med. Supply, Inc., 131 AD3d 841, 841 [1st Dept 2015].) When the insurer makes an EUO request after receiving claim forms from the injured person or a medical-provider assignee, the request must be made within 15 business days of the insurer’s receipt of a claim form. (See 11 NYCRR 65-3.5 [a]-[b].) Here, Kemper’s first EUO letter states that Alpha “ha[s] made certain No-Fault claims for medical treatment to claimant.” (NYSCEF Doc No. 78 at 4.) But Kemper has not provided proof that this letter was sent within 15 days of receipt of any of those claims. Kemper also contends that its last EUO letter was sent within 15 days of receipt of a claim form. (See NYSCEF Doc No. 75 ¶ 28.) But that form, though dated prior to the last EUO letter, does not on its face reflect when Kemper received it. (See NYSCEF Doc No. 79.) Nor would a single EUO nonappearance support a claim denial in any event.

Footnote 2:This opinion letter appears on the DFS website at http://www.dfs.ny.gov/insurance/ogco2006/rg061216.htm (last visited Sept. 22, 2021).

Footnote 3:This opinion letter appears on the DFS website at https://www.dfs.ny.gov/insurance/ogco2002/rg021014.htm (last visited Sept. 22, 2021).

Footnote 4:Kemper contends that it did provide its reasons, by stating in its EUO letters that Kemper sought “to assess the necessity and causality of treatment and the business relationship of the treating provider to the company.” (NYSCEF Doc No. 93 ¶ 11; see also NYSCEF Doc No. 78 at 4, 10 [EUO letters].) Those statements, though, merely explained the information that Kemper was seeking to verify, not the specific objective justification for why Kemper believed it needed verification.

Footnote 5:An earlier Appellate Term decision cited by Bronx Chiropractic, Flow Chiropractic, P.C. v Travelers Home & Mar. Ins. Co. (44 Misc 3d 132[A], 2014 NY Slip Op 51142[U], *1 [App Term, 2d Dept, 9th & 10th Jud Dists 2014]) carries little weight here for similar reasons: The claimant in that case apparently did not respond to the insurer’s EUO notices at all, let alone request a justification for the EUO. And to the extent that Flow Chiropractic also concluded that an insurer need not provide an EUO-justification when sought in later coverage litigation (see id.), the First Department has since held otherwise in Jaga Med. Servs. and AB Med. Supply.

Footnote 6:The record is, in fact, unclear about whether Kemper ever formally denied Alpha’s claim. (Compare NYSCEF Doc No. 75 at 5 ¶ 15 [counsel’s opening affirmation, indicating that Kemper denied Alpha’s claims], and id. at 19 ¶ 25 [affidavit of no-fault claim representative, indicating that Kemper denied Alpha’s claims], with NYSCEF Doc No. 93 ¶¶ 36-38 [counsel’s reply affirmation, contending that Kemper was not required to have issued a denial-of-claim form to be entitled to a declaration of no coverage in later litigation].)

Lenox Hill Radiology & MIA, P.C. v Hereford Ins. Co.

2021 NY Slip Op 21157 [72 Misc 3d 702]

June 1, 2021

Tsai, J.

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

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

As corrected through Wednesday, August 25, 2021

[*1]

Lenox Hill Radiology and MIA, P.C., as Assignee of Shahrooz Sabzehroo, Plaintiff, v Hereford Ins. Co., Defendant.

Civil Court of the City of New York, New York County, June 1, 2021

APPEARANCES OF COUNSEL

Law Offices of Rubin & Nazarian, New York City (Joseph Kuroly of counsel), for defendant.

Sanders Barshay Grossman, PLLC, New York City (Edward A. Cespedes of counsel), for plaintiff.

Richard Tsai, J.

In this action seeking to recover assigned first-party no-fault benefits, defendant moves for summary judgment dismissing the complaint on the ground that the action is premature, because plaintiff did not provide MRI films demanded pursuant to a verification request (mot seq No. 001). Plaintiff opposes the motion, arguing that it had responded that it would send the films after it received payment from defendant for the reasonable costs of the films. It is undisputed that no payment for the films was ever sent.

The issue presented is whether the toll upon the insurer’s time to pay or otherwise deny a claim, which was triggered by a verification request for the provider to provide MRI films, ends when the provider responds that the films will be sent only after the insurer reimburses the provider for the reproduction costs of those films.

Background

On October 31, 2017, plaintiff’s assignor, Shahrooz Sabzehroo, was allegedly injured in [*2]an automobile accident (see defendant’s exhibit C in support of mot, police accident rep; see also defendant’s exhibit A in support of mot, complaint ¶ 3).

On December 5, 2017, plaintiff allegedly took MRIs of Sabzehroo’s right knee and left knee, billed separately in the amount of $878.67 for each knee (see defendant’s exhibit E in support of mot, NF-3 forms). On December 6, 2017, plaintiff allegedly took MRIs of Sabzehroo’s cervical and lumbar spine, billed in the amount of $879.73 and $912, respectively (see id., NF-3 forms). Plaintiff allegedly submitted these bills to defendant, and defendant allegedly neither paid nor denied the bills within 30 days of receipt (complaint ¶¶ 16-17, 20, 40-41, 44, 64-65, 68, 88-89, 92).

Verification Requests and Responses

On January 11, 2018, defendant allegedly mailed a verification request to plaintiff to submit, among other things, “copies of the MRI/CD Film for dates of services 12/5/17 & 12/6/17, lumbar, cervical, right knee, and left knee” (see defendant’s exhibit {**72 Misc 3d at 704}E, first request).^[FN1] On February 14, 2018, defendant allegedly mailed a follow-up verification request to plaintiff for those MRI films (see id., second request).

On February 16, 2018, and March 8, 2018, plaintiff’s counsel allegedly mailed to defendant undated letters bearing the heading “VERIFICATION COMPLIANCE” for the MRIs taken of Sabzehroo’s cervical spine and one of Sabzehroo’s knees (see plaintiff’s exhibit 1 in opp to mot).^[FN2] The letters identically stated,

“Please see the attached responses to your request for verification dated 01/11/2018. This comprises full and complete compliance with the demand based on documents and information in control of the Provider. . . .

“Pursuant to Radiology Ground Rule 8, a copy of the MRI Film/CD/or Electronic Media will be provided upon receipt of $5.00, made payable to Lenox Hill Radiology, P.C.” (see plaintiff’s exhibit 1 in opp to mot).

On March 13, 14, and 21, 2018, plaintiff’s counsel allegedly mailed to defendant undated “VERIFICATION COMPLIANCE” letters in response to defendant’s follow-up verification {**72 Misc 3d at 705}request dated February 14, 2018, with respect to all four bills (see id.).

Meanwhile, by a letter dated March 14, 2018, defendant acknowledged receipt of an undated “Verification Compliance” letter, and responded, in relevant part:

“When a carrier or self insured employer requests x-rays, MRI’s or other recorded images and satisfactory reproductions including electronic media are furnished in lieu of the original films, a fee of $5.00 may be charged for the first sheet of duplicating film or electronic media and $3.00 for each additional film or electronic media; payment issued under separate cover

“Your claim remain [sic] in delay for the requested verification. . . .

“In order to properly evaluate your claim, we are still awaiting:

“Submit the MRI film/CD of the right knee, left knee, lumbar spine and cervical spine performed on 12/05/17 and 12/06/17.

“Regulation 68 65-3.5 (c) states the insurer is entitled to receive all items necessary to verify the Claim directly from the parties from which such verification was requested[.]

“Until all verification is received, your claim will remain in delay status” (defendant’s exhibit E in support of mot).

On April 18, 2018, defendant allegedly mailed to plaintiff a similar letter stating,

“Payment for MRI invoice will be paid under separate cover[.]

“Your claim remain [sic] in delay for the requested verification. . . .

“In order to properly evaluate your claim, we are still awaiting:

“Submit the MRI film/CD of the right knee, left knee, lumbar spine and cervical spine performed on 12/05/17 and 12/06/17[.] . . .

“Until all verification is received, your claim will remain in delay status” (defendant’s exhibit E in support of mot).

On May 1, 2018, plaintiff’s counsel allegedly mailed to defendant undated “VERIFICATION COMPLIANCE” letters in {**72 Misc 3d at 706}response to defendant’s follow-up verification request dated March 14, 2018, with respect to all four bills, which were nearly identical to the prior responses which plaintiff sent in February and March 2018 (plaintiff’s exhibit 1 in opp to mot). On May 29, 2018, plaintiff’s counsel allegedly mailed to defendant undated “VERIFICATION COMPLIANCE” letters in response to defendant’s April 18, 2018 follow-up request, and the responses were nearly identical to plaintiff’s prior responses (id.).

Meanwhile, on May 15, 2018, defendant allegedly mailed to plaintiff another follow-up verification request, which was almost identical to the follow-up request which defendant allegedly mailed on April 14, 2018, i.e., that defendant was still awaiting the MRI films and that the claims were in delay status until they were received (see defendant’s exhibit E in support of mot). This follow-up request indicated that the MRI invoice was paid under separate cover (see id.).

The Instant Action

On September 27, 2018, plaintiff commenced this action seeking to recover assigned first-party no-fault benefits, with interest plus attorneys’ fees (defendant’s exhibit A in support of mot, summons and complaint). On October 30, 2018, defendant allegedly [*3]answered the complaint (id., answer and aff of service).

On December 15, 2020, the court held oral argument on defendant’s motion. At argument, the parties agreed that the only items requested for verification which remained outstanding were the MRI films. Additionally, it was undisputed that no payment for the MRI films was ever sent. The court allowed the parties to submit supplemental papers on the issue of whether defendant may be allowed to assert that the verification was outstanding due to MRI films, when defendant had not paid for the cost of those films, after due demand from plaintiff in accordance with New York Workers’ Compensation Medical Fee Schedule radiology ground rule 8. Plaintiff submitted a supplemental affirmation in opposition; defendant apparently did not submit any supplemental papers.

Discussion

“On a motion for summary judgment, the moving party must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of{**72 Misc 3d at 707} any material issues of fact. If the moving party produces the required evidence, the burden shifts to the nonmoving party to establish the existence of material issues of fact which require a trial of the action” (Xiang Fu He v Troon Mgt., Inc., 34 NY3d 167, 175 [2019] [internal quotation marks and citations omitted]).

Defendant argues that the action must be dismissed as premature because defendant’s time to pay or deny the claims is currently tolled, pending receipt of the MRI films from plaintiff (affirmation of defendant’s counsel ¶¶ 10-16). To establish that verification requests and follow-up verification requests were timely mailed, defendant submitted an affidavit from Tony Singh, a no-fault supervisor employed by defendant (see defendant’s exhibit D in support of mot, aff of Tony Singh ¶ 2). According to Singh, defendant received the four bills at issue on December 18, 2017 (Singh aff ¶ 6 [a]). Verification requests were issued and mailed on January 11, 2018, and February 14, 2018 (id.), and defendant submitted copies of proofs of mailing for these requests (see defendant’s exhibit E in support of mot).

According to Singh, defendant received a letter from plaintiff on February 27, 2018, and defendant issued a “Missing/Incomplete Verification” acknowledging receipt on March 14, 2018 (Singh aff ¶ 6 [a]). On March 19, 2018, defendant received another letter from plaintiff, and defendant issued another “Missing/Incomplete Verification” acknowledging receipt on April 18, 2018 (id.). On May 8, 2018, defendant received several letters from plaintiff, and defendant issued another “Missing/Incomplete Verification” acknowledging receipt on May 15, 2018 (id.). According to Singh, defendant has still not received the verification requested (id.).

In opposition, plaintiff argues that defendant’s motion should be denied for issues of fact as to whether plaintiff’s response to the verification requests was sufficient. Alternatively, plaintiff argues that “plaintiff’s claims were fully verified ending the toll on defendant’s time to pay or deny,” because defendant “failed to respond to plaintiff’s response” (affirmation of plaintiff’s counsel at 4). Lastly, plaintiff argues that defendant failed to demonstrate a “good reason” to request a copy of the MRI films in its verification request (id. at 5).

“[A]n insurer must either pay or deny a claim for motor vehicle no-fault benefits, in whole or in part, within 30 days after{**72 Misc 3d at 708} an applicant’s proof of claim is received” (Infinity Health Prods., Ltd. v Eveready Ins. Co., 67 AD3d 862, 864 [2d Dept 2009]).

“Where there is a timely original request for verification, but no response to the request for verification is received within 30 calendar days thereafter, or the response to the original request for verification is incomplete, then the insurer, within 10 calendar days [*4]after the expiration of that 30-day period, must follow up with a second request for verification (see 11 NYCRR 65-3.6 [b]). If there is no response to the second, or follow-up, request for verification, the time in which the insurer must decide whether to pay or deny the claim is indefinitely tolled. . . . Accordingly, any claim for payment by the medical service provider after two timely requests for verification have been sent by the insurer subsequent to its receipt of [a claim] form from the medical service provider is premature, if the provider has not responded to the requests” (Sound Shore Med. Ctr. v New York Cent. Mut. Fire Ins. Co., 106 AD3d 157, 163 [2d Dept 2013] [citations omitted]).

Defendant met its prima facie burden of establishing that the action was premature based on the affidavit of the no-fault supervisor, who averred that defendant has not received any MRI films in response to its initial and follow-up verification requests. Plaintiff’s argument that a triable issue of fact arises as to the sufficiency of plaintiff’s responses to defendant’s verification requests for the MRI films is without merit. Plaintiff does not dispute that the initial and follow-up verification requests were timely mailed. It is also undisputed that plaintiff did not provide any MRI films to defendant. There is no circumstance under which it could be reasonably inferred that plaintiff sent the MRI films. Thus, there are no disputed issues of fact for the trier of fact to determine.

To the extent that plaintiff argues that the action is not premature because: (1) its demand for reimbursement for the MRI films was a response that complied with the verification request, or (2) defendant “failed to act upon receipt of plaintiff’s response to defendant’s verification requests,” i.e., that defendant did not pay plaintiff for the costs of the MRI films when defendant had indicated payment was forthcoming, the analysis is more complex.

On the one hand, it is undisputed that plaintiff never provided the MRI films requested for verification. On the other{**72 Misc 3d at 709} hand, it is equally undisputed that a provider may charge the insurer a fee for the costs for reproduction of MRI films. Although neither party submitted a copy of radiology ground rule 8 of the New York State Workers’ Compensation Medical Fee Schedule, both parties agreed that, pursuant to ground rule 8, when an insurance carrier (or self-insured employer) requests X rays, MRIs, or other recorded images, and the provider furnishes satisfactory reproductions (including electronic media) in lieu of the original films, the provider may charge the insurer, at most, a fee of $5 for the first sheet of duplicating film or electronic media and $3 for each additional sheet of film or electronic media (compare defendant’s exhibit E in support of mot, with supplemental affirmation of plaintiff’s counsel in opp to mot at 3; see also Ops Gen Counsel NY Ins Dept No. 08-04-08 [Apr. 2008], available at https://www.dfs.ny.gov/insurance/ogco2008/rg080408.htm [accessed May 28, 2021]).

The issue presented is how the provider’s right to reimbursement for the reproduction of films fits within the no-fault regulatory scheme. If the provider’s duty to provide the MRI films is contingent upon the insurer’s payment of the reproduction costs, then plaintiff complied with the verification request when plaintiff demanded payment of the reproduction costs. However, if the provider has no right to insist that the insurer reimburse the reproduction costs before sending the MRI films, then plaintiff’s responses to the insurer would not be adequate, and it would be irrelevant whether the insurer had, in fact, paid the reproduction costs—even if the insurer had promised payment.

The no-fault regulations do not expressly require defendant to reimburse plaintiff in advance of receiving the MRI films. The no-fault regulations are silent as to when the provider [*5]must receive payment of these reproduction costs. Thus, the insurer’s duty to pay the reproduction costs appears independent from the insurer’s right to demand verification. Conceivably, plaintiff could have submitted the reproductions to defendant, along with a bill for the reproduction costs. Alternatively, plaintiff could have also decided to submit the original MRI films to defendant for verification in lieu of sending reproductions of the films. In that scenario, the insurer would not incur any fee for reproductions, but it would have to return the original films to the provider within 20 days of receipt (see Ops Gen Counsel NY Ins Dept No. 08-04-08). Thus, the question of whether or not the insurer must pay a reproduction fee at all lies within the control of the provider.{**72 Misc 3d at 710}

As a practical matter, it seems unlikely that providers would send originals to an insurer for verification, given the risk that originals could be lost while in transit to the insurer. This court also understands why a provider would insist that the reproduction costs be paid before the MRI films are sent, because a $5 bill for reproduction costs may go ignored.

However, to accept plaintiff’s approach that a provider may insist upon reimbursement before it must comply with a verification request for films “runs counter to the no-fault regulatory scheme, which is designed to promote prompt payment of legitimate claims” (Nyack Hosp. v General Motors Acceptance Corp., 8 NY3d 294, 300 [2007]). A core and essential objective in the no-fault regulations is “to provide a tightly timed process of claim, disputation and payment” (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 281 [1997]). In this case, the back-and-forth disagreement over whether defendant was paying the reproduction costs of the films went on for four months, before ending in a stalemate.

Plaintiff’s approach also goes too far. First, plaintiff essentially advocates that a provider would be excused from complying with any verification requests to provide the MRI films until it was reimbursed the reproduction costs. Second, plaintiff appears to argue that, when it responded that defendant must pay the reproduction costs before receiving the MRI films, the toll on the insurer’s time to pay or otherwise deny a claim ended, even though the verification sought was never provided, and plaintiff had not objected to providing the MRI films. Those arguments find no support in either the no-fault regulations themselves, or in the regulatory scheme.^[FN3] As discussed above, the decision to charge a reproduction fee is within the control of the provider.

While plaintiff’s approach would incentivize insurers to pay reproduction fees, the approach is unworkable and would add another layer of complexity and litigation over a host of new issues{**72 Misc 3d at 711} regarding the toll: Does the toll end when the plaintiff responds with a demand for payment? Does the toll restart if defendant sends payment for the reproduction costs? At what point in time would the toll be restarted? What would happen to the toll if the payment were [*6]delayed, or if plaintiff denies that the payment was ever sent? In this case, defendant promised payment, but payment was never sent. The host of issues that would follow from adopting plaintiff’s approach would undermine the objectives of the No-Fault Law of “promoting prompt resolution of injury claims, limiting cost to consumers and alleviating unnecessary burdens on the courts” (Pommells v Perez, 4 NY3d 566, 570-571 [2005]).

Finally, as a policy matter, the downside of plaintiff’s approach is that the sanction against the insurer for failing to pay the reproduction fees would be the entire amount of the claim, which could be significantly disproportionate to reproduction cost, which is very modest. Here, defendant would be liable for $3,549.07 because defendant did not pay $5 in reproduction fees.

Although plaintiff submitted decisions from no-fault arbitrations where the arbitrators ruled that the provider’s responses to demand payment of reproduction costs complied with the insurer’s verification requests (see plaintiff’s supplemental affirmation in opp, arbitration awards), this court declines to follow those arbitration decisions. Those decisions rest on the premise that the toll triggered by the insurer’s verification request ended when the provider demanded payment of the reproduction costs. However, as discussed above, in this court’s view, the insurer’s right to demand and receive verification is not contingent upon the insurer’s payment of the reproduction costs. Thus, the provider is not excused from complying with any verification requests to provide the MRI films until it was reimbursed the reproduction costs. Consequently, the toll did not end either when plaintiff responded that defendant must pay the reproduction costs before receiving the MRI films, or when defendant had promised but failed to pay the reproduction costs. The toll should not end because plaintiff had not objected to providing the MRI films, and the verification sought was never provided.^[FN4]

{**72 Misc 3d at 712}In its supplemental opposition papers, plaintiff argues that defendant failed to “[c]learly inform the applicant of the insurer’s position regarding any disputed matter,” which is one of the principles of claim settlement practices (see 11 NYCRR 65-3.2 [e]), in that defendant promised to send payment but never did (see plaintiff’s supplemental affirmation in opp at 6). As discussed above, because a provider has no right to insist upon payment of reproduction costs before complying with a verification request for MRI films, the insurer’s response to such demands is irrelevant. “[T]o 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” (LK Health Care Prods. Inc v GEICO Gen. Ins. Co., 39 Misc 3d 1230[A], 2013 NY Slip Op 50810[U], *3 [Civ Ct, Kings County 2013]).

Because the toll has not ended due to the outstanding MRI films, the action is therefore premature.

[*7]

Plaintiff’s objection to the reasonableness of the request for the MRI films is unavailing. It is readily apparent that copies of any MRI films (or lack of such films) would substantiate whether the billed MRIs were, in fact, actually performed. Moreover, plaintiff never objected to the request for these films in its verification responses (see Compas Med., P.C. v Travelers Ins. Co., 53 Misc 3d 136[A], 2016 NY Slip Op 51441[U], *1 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2016] [“plaintiff did not allege, much less demonstrate, that it objected to such requests during claims processing”]).

Therefore, defendant’s motion for summary judgment dismissing the complaint is granted, and the complaint is dismissed without prejudice as premature.

Conclusion

Upon the foregoing cited papers, it is hereby ordered defendant’s motion for summary judgment dismissing the complaint is granted, and the complaint is dismissed without prejudice.

Footnotes

Footnote 1:Defendant’s verification request and follow-up requests each combined all four bills into a single letter.

Footnote 2:Plaintiff’s counsel apparently responded to the verification requests with separate letters with respect to each bill. In its exhibits to the court, plaintiff’s counsel arranged all the undated responses to the verification requests and follow-up requests, which were sent on different dates and involved different bills, under a single exhibit tab. For the sake of clarity, the court will refer to documents submitted under that single exhibit tab based on the page number assigned by the document viewer used to access the electronically filed opposition papers.

Pages 7 through 14, and pages 15 through 20, of plaintiff’s opposition papers apparently pertain to the MRIs taken of Sabzehroo’s left and right knees. These pages reference dates of service on December 5, 2017, billed in the amount of $876.67.

Pages 21 through 26 apparently pertain to the MRI taken of Sabzehroo’s lumbar spine, as these pages reference a date of service on December 6, 2017, billed in the amount of $912.

Pages 27 through 34 apparently pertain to the MRI taken of Sabzehroo’s cervical spine, as these pages reference a date of service on December 6, 2017, billed in the amount of $879.73.

Because the MRIs of plaintiff’s knees were taken on the same day, and were billed for the same amount, it cannot be determined from the “Verification Compliance” letter allegedly mailed on February 16, 2018, whether that response was meant for the request of the MRI taken of the left or right knee.

Footnote 3:The no-fault regulations also specify that when an insurer requests examination under oath or independent medical examination, the insurer must reimburse the person being examined for “any loss of earnings and reasonable transportation expenses incurred in complying with the request” (11 NYCRR 65-3.5 [e]). The no-fault regulations are similarly silent as to when these costs must be paid.

Plaintiff’s approach that the insurer must reimburse costs in advance of the provider’s compliance because it is entitled to be reimbursed under the no-fault regulatory scheme could logically extend to these reimbursements as well.

Footnote 4:The court leaves open the question of whether the outcome might be different if an insurer had not paid the reproduction costs for the MRI films and yet sought dismissal of the claims, due to the provider’s failure to supply the requested verification within 120 days after the date of the initial verification request (see 11 NYCRR 65-3.5 [o]; see Psychology YME, P.C. v Travelers Ins., 65 Misc 3d 146[A], 2019 NY Slip Op 51798[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2019]). In that situation, the no-fault regulations allow a provider to provide written proof providing reasonable justification for the failure to comply (11 NYCRR 65-3.5 [o]), which does not apply here.

Country-Wide Insurance Company, Plaintiff, against Saquan Ware, THE JAMAICA HOSPITAL MEDICAL CENTER DIAGNOSTIC AND TREATMENT CENTER CORPORATION, LONGEVITY MEDICAL SUPPLY INC., BEACON ACUPUNCTURE, P.C., COLUMBUS IMAGING CENTER, LLC, DIRECT RX PHARMACY INC., SUN CHIROPRACTIC SERVICES, P.C., LIFE HEALTH CARE MEDICAL PC, MAG MEDICAL DIAGNOSTIC, P.C., ELSANAA PT PC, DR. WATSON CHIROPRACTIC, P.C., TOP Q INC., DITMAS PRIMARY MEDICAL CARE PC, and BRIDGES PSYCHOLOGICAL SERVICES P.C., Defendants.

650050/2020

Jaffe & Velazquez, LLP, New York, NY (Carl J. Gedeon of counsel), for plaintiff.

The Rybak Firm, PLLC, Brooklyn, NY (Oleg Rybak of counsel), for defendants Longevity Medical Supply, Inc., Columbus Imaging Center, LLC, and Bridges Psychological Services, P.C.

Gerald Lebovits, J.

This motion concerns plaintiff Country-Wide Insurance Company’s potential obligation to pay no-fault insurance benefits. Defendant Saquan Ware was the driver of a vehicle that was involved in a collision. The vehicle was covered by a no-fault insurance policy issued by Country-Wide. Ware assigned his right to collect no-fault benefits under that policy to the medical provider defendants. They applied for no-fault benefits from Country-Wide but were [*2]denied.

Country-Wide now moves for summary judgement under CPLR 3212 against defendants Jamaica Hospital Medical Center Diagnostic and Treatment Center (Jamaica Hospital Center), Columbus Imaging Center, Direct RX Pharmacy, Longevity Medical Supply, and Bridges Psychological Services. Country-Wide seeks a declaratory judgment that it is not liable to pay no-fault benefits to these medical-provider assignees because Ware failed to appear for duly scheduled independent medical examinations (IMEs).

The motion is granted on default and without opposition as to defendants Jamaica Hospital Center and Direct RX Pharmacy. The motion is granted as to defendants Columbus Imaging Center, Longevity Medical Supply, and Bridges Psychological Services.

DISCUSSION

I. Whether Country-Wide Timely Requested that Ware Appear for Timely Scheduled IMEs

A no-fault insurer seeking a declaratory judgment of no-coverage for the injured person’s failure to appear for IMEs must establish that it complied with the regulatory timeliness requirements for the processing of no-fault insurance claims. (See American Transit Ins. Co. v Longevity Med. Supply, Inc., 131 AD3d 841, 841 [1st Dept 2015].) Under those regulations, the insurer must request an IME within 15 business days of receipt of the forms that it requires to verify no-fault claims, such as the NF-3 forms in this case; and the IME must be scheduled to be held within 30 calendar days of receipt. (See 11 NYCRR 65-3.5[b], [d].)

Country-Wide submits affidavits from two administrative employees (with supporting documentation) representing that that the IME request form was mailed on January 13, 2017; that the IME was originally scheduled to be held on January 26; and that Ware failed to appear for his IME either on January 26 or on the rescheduled examination date. Country-Wide also provides the affidavit of its no-fault litigation supervisor representing that Country-Wide received, among others, provider bills on December 28, 2016, December 30, 2016, and January 9, 2017—along with copies of the date-stamped bills themselves. Country-Wide has thus established that Ware failed to appear for two timely requested and timely scheduled IMEs.

There is no merit to defendants’ argument that Country-Wide must demonstrate when it received the first bill from a given provider, nor that Country-Wide must demonstrate that it requested an IME within 15 business days of the very first bill received from any provider. Rather, for timeliness purposes it is sufficient for the insurer to establish that it requested an IME within 15 business days of receipt “of a medical provider claim (NF-3).” (Unitrin Direct Ins. Co. v Beckles, 188 AD3d 620, 620 [1st Dept 2020] [emphasis added].) And the First Department has made clear not only that an injured person’s failure twice to appear for a timely and properly scheduled IME “is a breach of a condition precedent to coverage” that “voids the policy ab initio,” but therefore also that this “coverage defense applies to any claim and is not determined [*3]on a bill by bill basis.”^[FN1] (Unitrin Advantage Ins. Co. v Dowd, 2021 NY Slip Op 03012 [1st Dept May 11, 2021] [emphasis added], citing PV Holding Corp. v. AB Quality Health Supply Corp., 189 AD3d 645, 646 [1st Dept 2020].)

Nor, given the detailed representations in the affidavits supplied by Country-Wide, is this court persuaded by defendants’ arguments (i) that those affidavits are insufficient to make the documents submitted by Country-Wide admissible as business records; or (ii) that the affidavits are insufficient to establish timely and proper IME mailings by Country-Wide and Ware’s failure to appear for the IMEs.

This court therefore concludes that Country-Wide has established as a matter of law that Ware failed twice to appear for properly scheduled IMEs. Given those failures to appear, Ware’s insurance coverage is void ab initio, and Country-Wide has no liability to pay him no-fault benefits. The medical-provider defendants on this motion, as Ware’s assignees, stand in his shoes and have no greater right to collect no-fault benefits than he does. Country-Wide has thus established that it has no liability to pay them no-fault benefits, either. Country-Wide’s motion for summary judgment is granted.

Settle Order.

DATE 5/28/2021

Footnotes

Footnote 1: There also is no merit to defendants’ oft-repeated argument that the First Department has retreated from or repudiated its holding in Unitrin Advantage Insurance Co. v Bayshore Physical Therapy, PLLC (82 AD3d 559 [1st Dept 2011])—or to defendants’ assertion that this court is free to disregard the First Department’s decision in Bayshore because it is (supposedly) bad law.

Liberty Mutual Insurance Company and LM GENERAL INSURANCE COMPANY, Plaintiffs, against Jason Carranza, DOS MANOS CHIROPRACTIC P.C., FIVE BOROUGH SUPPLY INC., et al., Defendants.

656336/2019

Burke, Conway & Stiefeld, White Plains, NY (Asher Grossman of counsel), for plaintiffs.

The Gabriel Law Firm, Rockville Centre, NY (Joseph Padrucco of counsel), for defendants Dos Manos Chiropractic P.C. and Five Borough Supply Inc.

Gerald Lebovits, J.

The following e-filed documents, listed by NYSCEF document number (Motion 002) 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 44, 45, 46, 47, 48, 49 were read on this motion for DEFAULT JUDGMENT

This is a no-fault insurance action for a declaration of no-coverage brought by plaintiffs Liberty Mutual Insurance Company and LM General Insurance Company (collectively, Liberty Mutual) against no-fault benefits claimant Jason Carranza and various medical providers to whom Carranza assigned his right to collect no-fault benefits. On this motion, Liberty Mutual moves under CPLR 3215 for a default judgment against defendant Carranza and against defaulting medical-provider assignees of Carranza. Defaulting defendants Dos Manos Chiropractic P.C. and Five Borough Supply Inc. (collectively, defendants) cross-move under CPLR 3012 (d) to compel Liberty Mutual to accept their otherwise-untimely answer.

DISCUSSION

I. Liberty Mutual’s Motion for Default Judgment

Liberty Mutual moves for a default judgment under CPLR 3215 against Carranza and the various defaulting medical-provider assignees of Carranza. The motion is denied.

Liberty Mutual has not shown proof of the facts necessary to constitute its claim, as the CPLR requires. (See CPLR 3215 [f].) In particular, Liberty Mutual has not established that it complied with the regulatory timeliness requirements for the processing of no-fault insurance claims. (See American Transit Ins. Co. v Longevity Med. Supply, Inc., 131 AD3d 841, 841 [1st Dept 2015].) Liberty Mutual’s motion papers do not include claimant’s NF-2 application for benefits or any NF-3 verification forms or bills submitted by the claimant or his treating medical providers. Liberty Mutual thus cannot establish that it requested an examination under oath (EUO) or independent medical examination (IME) within 15 business days of receiving claimant’s verification forms (see 11 NYCRR § 65-3.5 [b]); or that it scheduled the requested IME to be held within 30 calendar days from receipt of the verification forms (see id. § 65-3.5 [d]).

Liberty Mutual contends that it established its compliance with the applicable no-fault regulatory timeframes through the affidavit of Dawn Smith, its “Claims Department Team Manager[,] regarding the bill handling process and timely denials.” (NYSCEF No. 49 at ¶ 30.) This court disagrees. The Smith affidavit states only that “[a]ll the requests that have been made a part of this motion have been timely requested by a member of my team, having been requested within the regulatory time frame after each of the bills was received by Liberty Mutual,” and that “[a]ll verification requests and denials were timely mailed.” (NYSCEF No. 40 at ¶¶ 5, 13.) The affidavit does not identify which bills prompted Liberty Mutual to seek further verification in the form of an EUO or IME, nor when Liberty Mutual received those particular bills.^[FN1] And, as noted above, Liberty Mutual has not provided the bills themselves. The conclusory assertions contained in the Smith affidavit are not sufficient, standing alone, to provide proof of the timeliness element of plaintiffs’ claim.

Liberty Mutual claims, alternatively, that it is “not required to state when Defendants’ bills were received, as Plaintiffs are not requesting the EUO of the Defendants.” (NYSCEF No. 49 at ¶ see also id. at ¶¶ 34-35.) Instead, Liberty Mutual says, it must show only that it timely requested EUOs relative to “receipt of the claim filed by the Individual Defendant since it is the Individual Defendant’s EUO being sought.” (Id. at ¶ 33.) Liberty Mutual asserts that having (supposedly) met that burden, it is entitled to default judgment. This position—for which Liberty Mutual provides no authority—is without merit.

The governing no-fault regulations do not necessarily measure timeliness of an EUO or IME request from receipt of an NF-2 benefits application submitted by the eligible injured person (as Liberty Mutual suggests). Rather, upon receipt of the NF-2, the insurer is directed to [*2]forward its prescribed verification forms “to the parties required to complete them.” (11 NYCRR 65-3.5 [a].) That phrase on its face suggests that the insurer’s request for verification can encompass individuals or entities other than the benefits applicant—a suggestion bolstered by § 65-3.5 [c], which provides that the “insurer is entitled to receive all items necessary to verify the claim directly from the parties from whom such verification was requested.” And it is receipt of those completed verification forms, not the NF-2 alone, that starts running the 15-business-day deadline for request of an EUO or IME, and the 30-calendar-day deadline for conducting a requested IME. (See id. § 65-3.5 [b], [d].)

Relatedly, the regulatory provisions governing an insurer’s request for additional verification upon review of the initial verification forms limit only the timing of that request. They do not say from whom the additional verification shall be sought; nor which verification forms, from which source, may prompt the insurer to seek further verification. (See 11 NYCRR 65-3.5 [b]-[d].) These provisions thus provide no basis for Liberty Mutual’s apparent position, quoted above, that receipt of a medical-provider assignee’s NF-3 verification form will starts the 15-day regulatory clock running for the insurer only if it wishes then to seek the EUO of the provider—as opposed to the injured-claimant assignor.

Indeed, on Liberty Mutual’s interpretation, receipt of a medical provider’s NF-3 form would presumably never start the 15-day and 30-day regulatory clocks running for seeking an IME, because an IME could only be requested from the benefits applicant, as opposed to one of his treating providers. Nothing in the regulations requires (or even supports) such an anomalous result. More broadly, it is often the receipt of substantial treatment bills for a seemingly minor accident that will first prompt an insurer to request an EUO or IME from the applicant, so as to investigate and assess the possibility of a staged accident or medically unnecessary treatment. And in that scenario, exempting the insurer from the regulations’ tight 15-business-day and 30-calendar-day deadlines for requesting and scheduling EUOs and IMEs would undermine the regulatory goal of requiring the insurer to expeditiously investigate—and then expeditiously resolve—the claims for which it needs additional verification. (See 11 NYCRR 65-3.8 [a] [1], [c] [1] [requiring the insurer to pay or deny benefits claims within 30 calendar days from receipt of all requested verification].)

In any event, even if one were to regard receipt of the initial claim as the trigger for the insurer’s regulatory deadlines, Liberty Mutual does not attempt to establish—either in its opening papers or on reply—when it “recei[ved] the claim filed by the Individual Defendant” in this case. (NYSCEF No. 49 at ¶ 33.) At best, Liberty Mutual falls back on the conclusory statements in the Smith affidavit. (See id. at ¶ 30.) That will not do.^[FN2]

II. Defendants’ Cross-Motion to Compel Liberty Mutual to Accept Their Late Answer

Defendants cross-move under CPLR 3012 (d) to compel Liberty Mutual to accept their answer, which was served and filed approximately one month late. The cross-motion is granted.

In considering whether to grant a CPLR 3012 (d) motion or cross-motion, the court should take into account “the length of the delay, the excuse offered, the extent to which the delay was willful, the possibility of prejudice to adverse parties, and the potential merits of any defense.” (Emigrant Bank v Rosabianca, 156 AD3d 468, 472-473 [1st Dept 2017].) Here, the delay was only a matter of weeks. Plaintiff has not attempted to identify any prejudice from that delay. The excuse offered by defendants—essentially law-office failure stemming from a combination of an excessive caseload, service via the Secretary of State, and an ongoing firm reorganization and office move—although “not overwhelming,” is sufficient, particularly given the brief length of the delay. (Cirillo v Macy’s Inc, 61 AD3d 538, 540 [1st Dept 2009].) And for the reasons set forth in Point I, supra, this court concludes that defendants have established a potentially meritorious defense. Given the State’s “policy of resolving disputes on the merits,” defendants should be “granted an opportunity to defend plaintiffs’ claims” rather than having them be resolved on default. (Naber Elec. v Triton Structural Concrete, Inc., 160 AD3d 507, 598 [1st Dept 2018].)

Accordingly, it is hereby

ORDERED that Liberty Mutual’s motion under CPLR 3215 for a default judgment is denied; and it is further

ORDERED that the motion of defendants Dos Manos Chiropractic P.C. and Five Borough Supply Inc. under CPLR 3012 to compel Liberty Mutual to accept their late answer is granted; and it is further

ORDERED that Liberty Mutual has 30 days from service of a copy of this order with notice of its entry to bring a renewed default-judgment motion or the action will be dismissed as to the remaining defaulting defendants; and it is further

ORDERED that Dos Manos Chiropractic and Five Borough Supply shall serve notice of entry on all parties.

DATE 4/7/2021

Footnotes

Footnote 1: The affidavit also does not state that Liberty Mutual had made its request that Carranza appear for an EUO or IME (or both) prior to receiving any bills. (Cf. Mapfre Ins. Co. of New York v Manoo, 140 AD3d 468, 469 [1st Dept 2016] [holding that “notification requirements for verification requests under 11 NYCRR 65—3.5 and 65—3.6 do not apply to EUOs that are scheduled prior to the insurance company’s receipt of [an NF-3] claim form”].)

Footnote 2: Defendants also challenge Liberty Mutual’s basis for requesting that Carranza appear for an EUO. The no-fault regulations require a “specific objective justification” for requiring an EUO. (See 11 NYCRR 65-3.5 [e].) But the only justification that Liberty Mutual has provided for requesting Carranza’s EUO was that it was part of “an investigation . . . begun due to material misrepresentation-financial payments to policy.” (NYSCEF No. 35 at ¶ 3; NYSCEF No. 40 at ¶ 2.) This court is skeptical that this vague and cryptic statement meets Liberty Mutual’s burden under § 65-3.5 [e]. That said, the parties have not addressed whether an insurer seeking a no-coverage declaration based on an EUO no-show must affirmatively establish as an element of its claim the justification for the EUO request, such that an insurer’s failure to do so would warrant denial of a default-judgment motion. This court therefore declines on this motion to reach the merits of defendants’ challenge to Liberty Mutual’s justification for its EUO request.

Restorative Chiropractic Solutions, PC As Assignee of Lourdes Clyne, Plaintiff, against State Farm Mutual Automobile Ins. Co., Defendant.

CV- 704318-19/NY

John E. Fagan, Esq.
Restorative Chiropractic Solutions

Dianne M. Galluzzo, Esq. and Michael A. Soriano
State Farm Mutual Automobile Ins. Co.

Ilana J. Marcus, J.

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

Papers/Numbered

Notices of Motion and Affidavits Annexed 1

Answering Affidavits and Notice of Cross-Motion 2

Replying Affirmation and Opposition to Cross-Motion 3

Exhibits

Email Correspondence 4

Other

BACKGROUND

Plaintiff medical provider, Restorative Chiropractic Solutions, PC, brings this action against insurer defendant State Farm Mutual Automobile Ins. Co., to recover first-party no-fault benefits for medical services provided to its assignor, Lourdes Clyne (“plaintiff assignor”). Defendant makes the instant motion for summary judgment based on its denials of the claims. The bulk of the denials — three out of five of them — allege material misrepresentation in the procurement of the policy. Defendant asks that if this court does not grant summary judgment on a proper denial of material misrepresentation, that it determine its denials were at a minimum timely. Plaintiff [*2]opposes the motion and cross-moves for summary judgment.

Plaintiff assignor was involved in a motor vehicle accident on June 14, 2017, and sought medical treatment. This action seeks reimbursement for five claims corresponding to dates of service between August 1, 2017 to September 7, 2017, totaling $505.98. Defendant supplied the following chart that provides information relevant to its request for verification and denials:

Bill	Dates of Service	Amount of Bill	Amount Paid	Date Received	Delay letter	Date of Denial	Reason for Denial
1	8/01/17	$54.74	$43.79	9/05/17	N/A	9/12/17	Bill was partially paid and remainder was denied
2	8/02/17-8/10/17	$69.36	$55.49	9/05/17	N/A	9/12/17	Bill was partially paid and remainder was denied
3	8/11/17- 8/22/17	$173.40	$0	9/18/17	9/26/17-10/27/17	11/ 27/17	Material Misrepresentation in Procurement of the Policy
4	8/23/17-8/24/17	$69.36	$0	9/18/17	9/ 26/17-10/27/17	11/27/17	Material Misrepresentation in Procurement of the Policy
5	8/31/17-9/07/17	$138.72	$0	9/29/17	1 0/05/17	11/27/17	Material Misrepresentation in Procurement of the Policy

Plaintiff assignor acquired the policy with a residential address in Florida. The subject motor vehicle accident occurred in New York. Defendant’s investigation of the claims prompted questions about plaintiff assignor’s residency and principal garaging location of the insured vehicle (Galluzo Aff., ¶¶ 18-19). Defendant mailed verification request letters to plaintiff seeking an examination under oath (“EUO”) of plaintiff assignor to ascertain if there was a material misrepresentation in procurement of the policy (Galluzo Aff., Exh. E).

The EUO was held on November 3, 2017 (Galluzo Aff., Exh. G). Plaintiff assignor testified that at the time of the subject accident she resided in Brooklyn, New York, and principally garaged the insured vehicle there as well (id.; Galluzo Aff., ¶¶ 20 — 22 ). In fact, plaintiff assignor stated that the subject vehicle never entered the state of Florida (Galluzo Aff., Exh. G, p 44). Defendant claims that had it known plaintiff assignor resided in New York and would principally garage the subject vehicle there, it would not have issued the policy (Galluzo Aff., ¶ 22). Defendant issued Denial of Claim Forms (“NF-10s”) on September 12, 2017, and November 27, 2017 (Galluzo Aff., Exh. D).

DISCUSSION

The movant on a motion for summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law by tendering sufficient evidence to eliminate any material issues of fact from the case (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]; Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). CPLR 3212(b) provides that a summary judgment motion must be supported by an affidavit of a person with knowledge of the facts, as well as other admissible evidence (see JMD Holding Corp. v Congress Fin. Corp., 4 NY3d 373, 384-85 [2005]). Once such a showing is made, “the burden shifts to the party [*3]opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action” (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986], citing Zuckerman v City of New York, 49 NY2d at 562).

The no-fault insurance scheme is designed to provide a quick resolution of the reimbursement of claims, avoid litigation, and incentivize an insurer to seek verification of a claim, deny it, or pay it in short order (see Viviane Etienne Med. Care, P.C. v Country-Wide Ins. Co., 25 NY3d 498, 506-07 [2015]; Matter of Med. Socy. of State v Serio, 100 NY2d 854, 860 [2003]). The procedure to verify, deny, or pay claims is codified and governed by Insurance Law § 5106(a).

A claimant has 45 days after medical services are rendered to submit claims (see 11 NYCRR 65-1.1). An insurer may request verification of the claim(s) which shall be requested within 15 business days of receipt of the prescribed verification forms (see 11 NYCRR 65-3.5 [b]). If the requested verification has not been received within 30 days of the request, the insurer shall make a second request within 10 calendar days and, at the same time, “inform the applicant and such person’s attorney of the reason(s) why the claim is delayed by identifying in writing the missing verification and the party from whom it was requested” (11 NYCRR 65-3.6 [b]). An insurer shall either pay or deny the claim in whole or in part within 30 calendar days after proof of the claim(s), including the requested verification, is received (see 11 NYCRR 65-3.8[c]).

Timeliness of Defendant’s Denials

Even though plaintiff did not submit any evidence, this court searches the record presented and determines that plaintiff’s initial burden is met. There is no dispute that plaintiff timely submitted its claims to defendant. Defendant asks this court to find that it timely denied plaintiff’s claims as a matter of law. The claims for dates of service August 1st through August 10th, were timely denied after partial payment was made. As to claims for dates of service from August 11th through September 11th, defendant mailed verification requests and conducted an EUO before denying the claims for a material misrepresentation in the procurement of the policy. Plaintiff in its cross motion asks that this court determine that all the claims are overdue and unpaid, and thus, it is deserving of summary judgment.

Defendant submits the affidavits of Cathy Shandera, Lisa Edwards, Matthew Allen, and Paul Kosowski to demonstrate that it timely mailed delay letters, explanations of review, and NF-10s to plaintiff on the dates reflected in the chart above. Defendant claims that the affidavits are sufficient to establish the standard office practices and procedures of mailing these forms. Defendant argued that the contents of its delay letters clearly advised that it was investigating the loss and would request an EUO of plaintiff assignor, which consequently tolled the insurer’s obligation to deny or pay the claims (Soriano Aff. in Reply and Opp, ¶17).

In its opposition to defendant’s motion for summary judgment, plaintiff argues that defendant’s delay letters failed to toll the time to pay or deny plaintiff’s claims (Fagan Aff in Opp, ¶¶ 4, 18). Plaintiff claims the contents of the delay letters do not specifically inform it about what verification is needed other than stating an EUO is required (Fagan Aff in Opp, ¶ 18). Plaintiff also claims that defendant failed to provide copies of the EUO requests to plaintiff (Fagan Aff. in Opp, ¶19). As a result, it argues defendant’s NF-10s were untimely and defendant is precluded from the defense of material misrepresentation in the procurement of an insurance [*4]policy (Fagan Aff. in Opp, ¶¶ 17, 22).

Defendant’s affidavits and supporting exhibits establish the dates that the subject claims were received. Also, the delay letters to plaintiff were sufficient to toll the 30-day period (Galluzo Aff., Exh. E). Defendant’s additional verification letters were mailed within 15 days after it received plaintiff’s claims (see 11 NYCRR 65-3.5 [a],[b]; Hertz Vehicles, LLC v Best Touch PT, P.C., 162 AD3d 617, 618 [1st Dept 2018]). The delay letter was specific enough to communicate to plaintiff that an EUO was required. No further specificity is necessary. If plaintiff required any additional explanation of the delay letter, it is plaintiff’s responsibility to communicate about it (see Canarsie Chiropractic, P.C. v State Farm Mut. Auto. Ins. Co., 27 Misc 3d 1228(A) [Civ Ct, Kings Cty 2010]; Dilon Med. Supply Corp. v Travelers Ins. Co., 7 Misc 3d 927, 929 [Civ Ct, Kings Cty 2005]).

As to the claim that defendant failed to provide copies of the EUO request to plaintiff, this claim is controverted by the affidavit of Richard C. Aitken who submitted that his law office mailed plaintiff and the assignor an EUO scheduling letter (Galluzo Aff., p 14 [Aitken affidavit], and Exh. F). After the EUO took place on November 3, 2017, defendant denied those claims for material misrepresentation in procurement of the policy.

Defendant’s summary judgment motion established that plaintiff timely mailed the claims and that the claims were denied in a timely manner. As a result, plaintiff cannot establish that the claims are overdue.

Material Misrepresentation

As to the later three claims that were denied on the basis of material misrepresentation in the procurement of the policy, defendant refers the court to the affidavit of its underwriter, Dawn Thompson (Galluzo Aff., ¶¶4, 22; Soriano Aff. in Reply and Opp, ¶¶17, 38). Plaintiff correctly points out that no such affidavit was annexed to defendant’s submissions.

The insurer may raise the defense of fraudulent procurement of an insurance policy against health service providers seeking to recover assigned no-fault benefits, but this defense must be supported with sufficient proof that the misrepresentation was material (see Quality Medical Care, PC v Progressive Casualty Ins. Co., 56 Misc 3d 1214[A] [Civ Ct, Bronx Cty 2017]). A misrepresentation is material only if the insurer can demonstrate that it would not have issued the insurance policy if the correct information was known (see Interboro Ins. Co. v Fatmir, 89 AD3d 993 [2d Dept 2011]; Novick v Middlesex Mut. Assur. Co., 84 AD3d 1330 [2d Dept 2011]; Varshavskaya v Metropolitan Life Ins. Co., 68 AD3d 855 [2d Dept 2009]). Materiality of a misrepresentation is ordinarily a question for trial (see Kiss Const. NY, Inc. v Rutgers Cas. Ins. Co., 61 AD3d 412, 413-14 [1st Dept 2009]). A court may determine the issue of materiality when evidence is presented that is clear and substantially uncontradicted (see id. citing Process Plants Corp. v Beneficial Natl. Life Ins. Co., 53 AD2d 214 [1st Dept 1976], affd 42 NY2d 928 [1977]).

After reviewing defendant’s 286-page motion, and 14-page reply and opposition to the cross motion, this court emailed the parties on February 22, 2021, for help locating the underwriter’s affidavit. Defendant’s counsel responded by email that the underwriter’s affidavit was not annexed to its papers and any references to the affidavit were “a typographical error.” Without this evidence, defendant cannot establish materiality as a matter of law and therefore, its motion for summary judgment fails.

Accordingly, it is hereby

ORDERED, defendant’s motion for summary judgment and plaintiff’s cross motion for same are granted to the extent that the issues preserved for trial are the bases for the timely denials. Plaintiff’s bills were timely submitted, as were defendant’s denials. An issue of fact exists as to whether plaintiff assignor’s misrepresentation about her residence and garaging of the vehicle was material in the procurement of the insurance policy.

This constitutes the decision and order of the court.

Dated: New York, New York
March 12, 2021
______________________
Ilana J. Marcus
Civil Court Judge

Country-Wide Ins. Co. v Delacruz

2021 NY Slip Op 21019 [71 Misc 3d 247]

February 4, 2021

Lebovits, J.

Supreme Court, New York County

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

As corrected through Wednesday, April 14, 2021

[*1]

Country-Wide Insurance Company, Plaintiff, v Jeffrey Delacruz et al., Defendants.

Supreme Court, New York County, February 4, 2021

APPEARANCES OF COUNSEL

[*2]Jaffe & Velazquez, LLP, New York City (Carl J. Gedeon of counsel), for plaintiff.

The Rybak Firm, PLLC, Brooklyn (Oleg Rybak of counsel), for Healthway Medical Care P.C. and others, defendants.

Gerald Lebovits, J.

This motion concerns plaintiff Country-Wide Insurance Company’s potential obligation to pay no-fault insurance benefits. Defendant Jeffrey Delacruz was the driver of a vehicle that was involved in a collision. The vehicle was covered by a no-fault insurance policy issued by Country-Wide. Delacruz assigned the right to collect no-fault benefits under that policy to various treating medical providers. Those providers applied for no-fault benefits from Country-Wide but were denied.

Country-Wide then brought this action for a declaratory judgment that it is not required to pay no-fault benefits to Delacruz or to the other defendants (all medical-provider assignees of Delacruz). Country-Wide moved for, and was granted, a default judgment under CPLR 3215 against Delacruz and several non-appearing medical providers.

Country-Wide now moves for summary judgment under CPLR 3212 against the remaining medical-provider defendants: Healthway Medical Care P.C., Acupuncture Now P.C., SB Chiropractic, P.C., and Dr. Jules Francois Parisien. The motion is denied.

Discussion

Country-Wide argues that it is entitled to summary judgment because Delacruz’s failure to appear for scheduled examinations under oath (EUOs) defeats coverage under the no-fault policy, and thus forecloses the remaining medical providers’ claim to benefits.

A no-fault insurer seeking a declaration of no coverage due to asserted violations of the terms of the policy must first demonstrate that it complied with each of the procedural and timeliness requirements of 11 NYCRR 65-3.5, governing the handling of no-fault claims. (See American Tr. Ins. Co. v Longevity Med. Supply, Inc., 131 AD3d 841, 841 [1st Dept 2015].) A no-fault-benefits claimant must appear for an EUO when reasonably requested to do so by the insurer. (See 11 NYCRR 65-1.1.) And a claimant’s failure without reasonable cause to appear for a timely and properly scheduled EUO is grounds to deny coverage. An EUO request, though, “must be based upon the application of objective standards so that there is specific{**71 Misc 3d at 249} objective justification supporting the use of such examination.” (Id. § 65-[*3]3.5 [e].) And the request must be made within 15 days of the insurer’s receipt of the forms that it requires to verify no-fault claims (such as the standard NF-3 form). (See id. § 65-3.5 [a]-[b].)

This court agrees that Country-Wide has demonstrated that its EUO request was timely made and properly transmitted to Delacruz, and that Delacruz nonetheless failed twice to appear for his EUO. Defendants have, however, questioned whether Country-Wide had sufficient justification to have made that EUO request in the first place. Defendants also have shown that they requested—but have not yet received—material discovery from Country-Wide on this issue. This court concludes, therefore, that Country-Wide’s motion for summary judgment must be denied as premature under CPLR 3212 (f).

I. Whether Country-Wide Has Established That it Timely Requested Delacruz’s Appearance at an EUO

Here, the documents submitted by Country-Wide in support of summary judgment do not include any NF-3 forms submitted by Dr. Parisien. Country-Wide thus has not shown that it satisfied section 65-3.5’s 15-business-day time frame with respect to defendant Dr. Parisien. The motion for summary judgment is denied as to Dr. Parisien.

The absence of evidence as to Dr. Parisien, however, does not alone foreclose Country-Wide from obtaining the requested declaratory judgment as to the other medical providers. (See Unitrin Advantage Ins. Co. v Dowd, 67 Misc 3d 1219[A], 2020 NY Slip Op 50594[U], *3 [Sup Ct, NY County, May 21, 2020] [holding that where an “insurer’s EUO request is timely as to some (benefits) claims and untimely as to others, the insurer is entitled to deny coverage . . . as to those claims for which it timely requested verification”].)

With respect to the remaining three providers, Country-Wide has met its prima facie burden to establish its compliance with sections 65-3.5 (b) and 65-3.6 (b). Country-Wide has provided documentary evidence that (i) Country-Wide received verification forms from the medical providers on May 8, 2018 (see generally NY St Cts Elec Filing [NYSCEF] Doc No. 61 [NF-3 forms with date stamps indicating receipt]); (ii) Country-Wide first mailed its EUO request to Delacruz on May 16, 2018 (see NYSCEF Doc No. 53); and (iii) Country-Wide mailed the request to the address appearing on Delacruz’s NF-2 benefits-application form (compare NYSCEF Doc No. 19 [NF-2 form], with NYSCEF{**71 Misc 3d at 250} Doc No. 53 [first EUO letter]).^[FN1] Country-Wide also has provided documentary evidence that after the EUO was initially rescheduled, Delacruz twice failed to appear for his EUO despite receiving proper advance notice of the rescheduled EUO dates. (See NYSCEF Doc Nos. 54-57, 59.)

In opposing summary judgment, defendants argue that Country-Wide’s submissions are [*4]insufficient because those submissions do not demonstrate that the NF-3 forms relied on by Country-Wide were the earliest such forms that Country-Wide received in this case. (See NYSCEF Doc No. 63 ¶ 27.) This court disagrees. The forms Country-Wide submitted reflect billing by each defendant for treatments provided within a week of the underlying collision, and in some cases as early as one or two days after the collision. (See e.g. NYSCEF Doc No. 61 at 3, 6, 10.) On the record before the court, therefore, it is difficult to see how defendants could have (i) provided earlier treatments that were (ii) included in separate earlier NF-3 forms submitted to Country-Wide, and which (iii) Country-Wide would have received more than 15 business days before it mailed its first EUO request. At the very least Country-Wide has submitted sufficient evidence to meet its initial prima facie burden to show that the first EUO request was timely.^[FN2]

II. Whether Country-Wide Still Owes Defendants Material Discovery on Whether Country-Wide’s EUO Request was Reasonable

Defendants’ opposition papers do not provide countervailing evidence that would create a dispute of fact about whether Country-Wide timely asked Delacruz to appear for an EUO; or whether Delacruz failed to appear despite timely notice having been properly mailed to him. Instead, defendants argue that material discovery remains outstanding, rendering Country-Wide’s summary-judgment motion premature. (See NYSCEF Doc No. 63 at 20-23.) This court agrees.{**71 Misc 3d at 251}

A. Whether Country-Wide Has Sufficiently Established That its EUO Request was Reasonable Even Absent Discovery

As noted above, an insurer’s request that a no-fault applicant appear for an EUO must be reasonable and have a specific objective justification. The EUO notices that Country-Wide provided here to Delacruz did not include that justification on their face—they stated only that Country-Wide “would like to clarify some of the facts and circumstances surrounding this claim.” (E.g. NYSCEF Doc No. 53 at 2.) The defendants served a request for Country-Wide’s investigative file in the case (among other discovery) to learn the basis for the EUO request made to Delacruz. That request undisputedly remained pending when Country-Wide moved for summary judgment. (See NYSCEF Doc No. 63 ¶ 81.) The motion is therefore premature under CPLR 3212 (f). (See Kemper Independence Ins. Co. v AB Med. Supply, Inc., 187 AD3d 671, 671 [1st Dept 2020] [affirming denial of summary judgment as premature because plaintiff insurer had not yet provided defendant providers with the justification for its EUO request]; American Tr. Ins. Co. v Jaga Med. Servs., P.C., 128 AD3d 441, 441 [1st Dept 2015] [reversing grant of summary judgment because “(t)he reason for the EUO request is a fact essential to justify [*5]opposition to plaintiff’s summary judgment motion . . . and such fact is exclusively within the knowledge and control of the movant”].)

Country-Wide makes several arguments for why summary judgment may properly be granted even absent this discovery. None are persuasive.

Country-Wide suggests that the Mena-Sibrian affidavit included in its motion papers sufficiently explained the “factors that raised questions as to the legitimacy of the claim” (thereby prompting the underlying EUO request). (NYSCEF Doc No. 79 ¶ 28; see also id. ¶ 37.) Country-Wide does not, however, explain why it should be sufficient only to provide selected documents supporting the reasonableness of its EUO request at the time of the motion itself. Ordinarily, one would expect Country-Wide instead to have to turn over all relevant and responsive documents on the issue to defendants in discovery before moving for summary judgment.

Additionally, the Mena-Sibrian affidavit relied upon by Country-Wide states only that “material facts surrounding the accident required clarification.” (NYSCEF Doc No. 58 ¶ 10.) It does not identify what facts required clarification, or why. Although that paragraph of the affidavit refers also to “objective {**71 Misc 3d at 252}criteria stated herein” for making EUO requests (id.), no such criteria are in fact stated.^[FN3] Thus, even assuming Country-Wide could satisfy its burden to show a proper objective basis for its EUO request merely through its summary-judgment papers, Country-Wide has not done so here. (Cf. State Farm Mut. Auto. Ins. Co. v Sweetwater Chiropractic, P.C., 60 Misc 3d 1219[A], 2018 NY Slip Op 51177[U], *3 [Sup Ct, NY County, Aug. 6, 2018] [denying summary judgment as premature where an affidavit submitted by the insurer at summary judgment was not sufficiently specific about why the insurer requested an EUO in the case]; Unitrin Advantage Ins. Co. v Better Health Care Chiropractic, P.C., 2016 NY Slip Op 30837[U], *9 [Sup Ct, NY County, May 4, 2016] [adhering to denial of medical providers’ motion to compel discovery about the insurer’s EUO request in light of a detailed affidavit from the insurer’s claim representative about the basis to suspect that the collision was staged].)

B. Whether Any Challenge to the Justification for Country-Wide’s EUO Request Has Been Waived

Country-Wide also contends that defendants’ present challenge to the justification for the EUO request was waived because neither Delacruz nor his medical-provider assignees questioned the need for the EUO when it was first requested. (See NYSCEF Doc No. 79 ¶ 26, [*6]citing Longevity Med. Supply, Inc. v IDS Prop. & Cas. Ins. Co., 44 Misc 3d 137[A], 2014 NY Slip Op 51244[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists, July 28, 2014].) The cited Longevity Med. Supply decision, though—and indeed, nearly all of the cases that it cites in turn^[FN4]—was issued by the Appellate Term of Supreme Court, rather than by the Appellate Division. These cases are therefore at most persuasive authority.^[FN5] (See Kattan v 119 Christopher LLC, 69 Misc 3d 1223[A], 2020 NY Slip Op {**71 Misc 3d at 253}51469[U], *3-4 [Sup Ct, NY County, Dec. 11, 2020] [collecting cases].)

This court sees no basis to impose what would be in effect an exhaustion requirement on challenges to the basis for an insurer’s EUO request. The court reaches this conclusion for several reasons. The governing no-fault regulations give significant weight to the insurer’s obligation to limit EUO requests only to those cases where they are actually warranted. That is, the regulations require not merely that the insurer have a specific, objective justification for requesting an EUO in a given case, but also that the justification stems from applying preexisting objective standards prepared by the insurer, and that these standards be made “available for review by [Insurance Department] examiners.”^[FN6] (11 NYCRR 65-3.5 [e].) Imposing an exhaustion requirement on challenges to the basis for an EUO request would run contrary to the Insurance Department’s evident policy aim of policing insurers’ use of EUO requests.

Nor is there an offsetting policy interest here that favors exhaustion. Requiring a no-fault claimant to seek more information about the basis for an EUO request when made would not ward off disputes about whether a given EUO request was justified. Nor would it enable a specialist expert to resolve such disputes at the outset. Instead, it would simply mean that the issue of EUO justification could potentially arise twice—first at the time of the request itself, [*7]then later during any coverage{**71 Misc 3d at 254} litigation should the claimant not appear for the requested EUO.^[FN7]

Further, an exhaustion requirement would be particularly anomalous in the no-fault context. That is, the party required in the first instance to object to the lack of a basis for the EUO request would be no-fault claimants themselves. But the party foreclosed later from raising the challenge in litigation absent an objection often would be not claimants, but their medical-provider assignees. Those assignees likely would be unable to ensure that the claimant raised the issue at the time of the EUO request; yet they would be bound anyway by the absence of such a request. Such a result would be neither fair nor efficient.

This court therefore concludes that the provider defendants may still raise an argument that Country-Wide’s EUO request lacked the required specific and objective justification, and that defendants are entitled to obtain discovery from Country-Wide on that issue.

Accordingly, it is hereby ordered that the branch of Country-Wide’s motion under CPLR 3212 seeking summary judgment in its favor as to defendant Dr. Parisien is denied; and it is further ordered that the branch of Country-Wide’s motion under CPLR 3212 seeking summary judgment in its favor as to defendants Healthway Medical Care, Acupuncture Now, and SB Chiropractic is denied without prejudice as premature under CPLR 3212 (f); and it is further ordered that the parties shall appear for a telephonic status conference on February 17, 2021, to discuss an appropriate discovery schedule in this action going forward.

Footnotes

Footnote 1:The NF-2 form included in Country-Wide’s summary-judgment papers appears to have been taken inadvertently from a different, unrelated benefits claim. (See NYSCEF Doc No. 52.) But Country-Wide’s default-judgment motion papers attached the correct NF-2 form submitted by Delacruz. (See NYSCEF Doc No. 19.)

Footnote 2:To the extent defendants are arguing that even the forms submitted by Country-Wide do not “demonstrate the dates when Plaintiff received Provider Defendants’ verification forms” (see NYSCEF Doc No. 63 ¶¶ 40, 42), that argument is refuted not only by the affidavit of Jessica Mena-Sibrian (see NYSCEF Doc No. 58 ¶ 9), but also by date stamps evidencing receipt that appear on the forms themselves (see generally NYSCEF Doc No. 61).

Footnote 3:Similarly, Country-Wide’s reply references certain facts that might call into question the legitimacy of a no-fault claim—and suggests that those facts are set forth in the Mena-Sibrian affidavit submitted in support of summary judgment. (See NYSCEF Doc No. 79 ¶ 37.) They are not. (See NYSCEF Doc No. 58.) Nor does any other document submitted by Country-Wide establish that it believed the referenced facts to be present in this case, or that this belief prompted Country-Wide’s EUO request.

Footnote 4:The lone exception, Westchester County Med. Ctr. v New York Cent. Mut. Fire Ins. Co., addresses a different issue not presented here—whether two demands by an insurer for further verification of a no-fault claim sufficed to toll the insurer’s time to pay or deny the claim. (See 262 AD2d 553, 555 [2d Dept 1999].)

Footnote 5:Additionally, Longevity Med. Supply v IDS Prop. & Cas., and the cases it cites, are decisions of the Appellate Term, Second Department, which in turn is bound by precedent of the Appellate Division, Second Department. And that precedent has imposed a greater burden on medical-provider assignees challenging the basis for an insurer’s EUO request than exists in the Appellate Division, First Department. (Compare Interboro Ins. Co. v Clennon, 113 AD3d 596, 597 [2d Dept 2014] [rejecting medical providers’ argument that the insurer’s summary-judgment motion was premature absent discovery into the specific justifications for the insurer’s EUO request], with Jaga Med. Servs., 128 AD3d at 441 [accepting this argument], and AB Med. Supply, 187 AD3d at 671 [same].)

Footnote 6:It also appears relevant, if perhaps not dispositive, that the requirement that an insurer have a specific justification for its EUO requests appears in section 65-3.5: With respect to several other requirements governing EUO requests in section 65-3.5, the First Department has held that an insurer moving for summary judgment must affirmatively establish its compliance with those requirements. (See e.g. Hertz Vehicles, LLC v Best Touch PT, P.C., 162 AD3d 617, 617-618 [1st Dept 2018].)

Footnote 7:Indeed, given the possibility of no-fault arbitration and ensuing de novo litigation (see Insurance Law § 5106), the issue might in fact come up three different times in a single case.

Allstate Insurance Company, Plaintiff, against DHD Medical, P.C., A/A/O Miraculeuse Alexis, Defendant.

656547/2017

Law Offices of Peter C. Merani, New York, NY (Adam Waknine of counsel), for plaintiff.

Gottlieb Ostrager LLP, Hauppauge, NY (Aaron E. Meyer of counsel), for defendant.

Gerald Lebovits, J.

The following e-filed documents, listed by NYSCEF document number (Motion 003) 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 46, 47, 48, 49, 50, 51, 60 were read on this motion for SUMMARY JUDGMENT.

The following e-filed documents, listed by NYSCEF document number (Motion 004) 52, 53, 54, 55, 56, 57, 58, 59 were read on this motion to EXTEND TIME.

In this action, plaintiff, Allstate Insurance Company, seeks a de novo adjudication of defendant DHD Medical, P.C.’s entitlement to no-fault insurance benefits, following an arbitration award in DHD Medical’s favor of $5,786.91.

DHD Medical’s assignor, Miraculeuse Alexis, was struck and injured by an automobile insured by Allstate. Alexis subsequently received medical treatment and physical therapy from doctors and staff at DHD Medical. She assigned her right to collect no-fault insurance benefits to DHD Medical. Allstate later denied DHD Medical’s claim for benefits on the ground that the treatment provided was not medically necessary.

DHD Medical challenged the denial of benefits in a no-fault arbitration proceeding under Insurance Law § 5106 (b). In the arbitration proceeding, Allstate relied on the report of a physician who conducted an independent medical examination (IME) of Alexis, and found no need for further treatment, prior to the treatments for which DHD Medical was seeking no-fault benefits. DHD Medical relied on several reports from its treating physicians and physical therapists who had diagnosed and treated Alexis. The first-level arbitrator found DHD Medical’s evidence more persuasive and held that DHD Medical was entitled to $5,786.91 in no-fault [*2]benefits. That decision was affirmed on administrative appeal to a master arbitrator.

Allstate then brought this action under Insurance Law § 5106 (c) seeking a de novo adjudication of whether Allstate is liable to pay any no-fault benefits. DHD Medical initially defaulted, and this court granted Allstate’s motion for default judgment. DHD Medical later moved to vacate its default, which this court granted. The answer that DHD Medical sought leave to serve included a counterclaim for the $5,786.91 in benefits. Allstate did not timely file a reply to the counterclaim.

In motion sequence 003, Allstate moves for summary judgment in its favor on its claim that it has no benefits liability to DHD Medical. DHD Medical cross-moves for summary judgment dismissing Allstate’s claim. Also in motion sequence 003, DHD Medical moves for default judgment under CPLR 3215 on its counterclaim for the $5,786.91. In motion sequence 004, Allstate seeks to compel DHD Medical to accept its late reply to counterclaims under CPLR 3012 (d).

The motions are consolidated here for disposition. Allstate’s motion under CPLR 3012 in motion sequence 004 is granted. The parties’ respective motion and cross-motion for summary judgment in motion sequence 003 are denied. DHD Medical’s cross-motion for default judgment in motion sequence 003 is denied.

DISCUSSION

Where a no-fault insurance arbitrator has issued a benefits award of more that $5,000 (exclusive of interest and attorney fees), either the insurer or the claimant may bring an action in court to adjudicate the benefits dispute de novo. (See Insurance Law § 5106 [c].) Here, each party contends that under CPLR 3212 it is entitled to judgment as a matter of law on Allstate’s de novo claim that it properly denied DHD Medical’s application for benefits. This court disagrees.

Both Allstate and DHD Medical rely essentially on the same medical evidence that they put before the arbitrators—i.e., the IME report of the physician who examined Alexis for Allstate, and the medical records of Alexis’s treatment by DHD Medical physicians and physical therapists (plus an accompanying explanatory physician’s affirmation). This conflicting medical evidence creates an obvious question of fact about whether DHD Medical provided Alexis necessary medical treatment. Summary judgment must therefore be denied.^[FN1] (See Lynch v Security Indemnity Ins. Co., 302 AD2d 295, 295-296 [1st Dept 2003].) The court declines DHD Medical’s invitation to assess at summary judgment whether Allstate’s IME report is credible and entitled to evidentiary weight. (See Wagner v Baird, 208 AD2d 1087, 1089 [3d Dept 1994] [reversing grant of summary judgment in de novo action under Insurance Law § 5106].)

DHD Medical also cross-moves for default judgment on its $5,786.91 counterclaim; and Allstate moves to compel DHD Medical to accept its untimely reply to that counterclaim. DHD Medical’s cross-motion is denied, and Allstate’s motion is granted. The affidavit of Allstate’s counsel establishes that Allstate’s failure to reply timely to the counterclaim was due essentially to law-office failure. This court concludes that in the circumstances of this case—including pandemic-related confusion and dislocation over the last 10 months—that law-office failure [*3]constitutes a reasonable excuse. Allstate also has a potentially meritorious defense based on the IME report (and underlying physician’s examination) discussed above.

Additionally, the central issue on DHD Medical’s counterclaim—whether Allstate properly denied DHD Medical’s no-fault benefits application—is identical to the issue presented by Allstate’s main claim. Granting DHD Medical’s motion for default judgment on its counterclaim would thus effectively terminate the entire action in DHD Medical’s favor. The court concludes that the action should instead be resolved on its merits.

Accordingly, it is hereby

ORDERED that Allstate’s motion for summary judgment under CPLR 3212, seeking judgment in Allstate’s favor on its liability to pay no-fault benefits to DHD Medical (motion sequence 003) is denied; and it is further

ORDERED that the branch of DHD Medical’s cross-motion seeking summary judgment in its favor on Allstate’s liability to pay no-fault benefits (motion sequence 003) is denied; and it is further

ORDERED that the branch of DHD Medical’s cross-motion seeking default judgment under CPLR 3215 on DHD Medical’s counterclaims for the disputed amount in no-fault benefits (motion sequence 003) is denied; and it is further

ORDERED that Allstate’s motion under CPLR 3012 to require DHD Medical to accept Allstate’s untimely reply to DHD Medical’s counterclaims is granted; and it is further

ORDERED that the parties shall inform the court how they intend to proceed with the action going forward at a status conference to be held telephonically on January 21, 2020.

Dated: January 8, 2021
Hon. Gerald Lebovits
J.S.C.

Footnotes

Footnote 1:To the extent that Allstate now seeks to rely on other grounds for denying DHD Medical’s benefits application (such as an asserted failure to prove that supporting medical bills were properly submitted), the court declines to reach that argument because those grounds were neither the proffered basis for the denial nor raised in arbitration.

American Transit Insurance Company, Plaintiff, against Surgicore of Jersey City LLC A/A/O JOSE VELASQUEZ, Defendant.

156859/2019

Short & Billy, P.C., New York, NY (Christopher E. O’Donnell of counsel), for plaintiff.

Samandarov & Associates, P.C., Floral Park, NY (David M. Gottlieb of counsel), for defendant.

Gerald Lebovits, J.

Plaintiff, American Transit Insurance Company, brought this action under Insurance Law § 5106 (c) to obtain a de novo adjudication of the entitlement to no-fault insurance benefits of defendant, Surgicore of Jersey City LLC. Surgicore moves to dismiss part of American Transit’s claim for benefits under CPLR 3211 (a) (2), arguing that this court lacks subject-matter jurisdiction over that aspect of the claim. The motion is denied.

BACKGROUND

In July 2017, Surgicore’s assignor, Jose Velazquez, was allegedly involved in a motor-vehicle collision. In October 2017, a Surgicore physician performed surgery on Velazquez’s right shoulder and right knee, allegedly to treat injuries suffered in the July 2017 collision. In [*2]preparation for the surgery, another Surgicore physician administered a nerve block to nerves in Velazquez’s right shoulder and arm.

Surgicore sought insurance reimbursement for the nerve block and the surgery. American Transit, concluding that these procedures were not medically necessary, denied reimbursement. Surgicore then brought two no-fault arbitration proceedings (one for the nerve block, one for the surgery) to challenge the denial of its reimbursement claim.

An arbitrator held a hearing at which Surgicore’s claims in the two proceedings were considered together. The arbitrator concluded, in very similar decisions issued the same day, that Surgicore failed to support adequately its lack-of-medical necessity defense as to either the nerve block or the surgery. The arbitrator therefore awarded the amounts claimed by Surgicore at the hearing—$517.89 for the nerve block and $25,962.93 for the surgery—plus interest and attorney fees. American Transit sought review of these decisions before a master arbitrator. The master arbitrator, in very similar decisions issued the same day, affirmed the arbitration awards in their entirety.

American Transit then brought this action, seeking a de novo adjudication under Insurance Law 5106 (c) of the award to Surgicore of $517.89 and $25,962.93 for the procedures performed on Velazquez. Surgicore moves to dismiss under CPLR 3211 (a) (2) and (a) (7).

DISCUSSION

Insurance Law § 5106 (c) provides that the award of a master arbitrator in a no-fault arbitration proceeding “shall be binding . . . provided . . . that where the amount of such master arbitrator’s award is five thousand dollars or greater, exclusive of interest and attorney’s fees, the insurer or the claimant may institute a court action to adjudicate the dispute de novo.”

Here, as a formal matter, there are two awards issued by the master arbitrator—one, for the pre-operative nerve block, plainly under the $5,000 threshold; and one, for the operation itself, plainly over the $5,000 threshold. Surgicore argues that this court lacks subject-matter jurisdiction over American Transit’s de novo challenge to the master arbitrator’s award of $517.89 (plus interest and fees) for the nerve block,^[FN1] and therefore that this aspect of American Transit’s action must be dismissed.^[FN2] This court is not persuaded by Surgicore’s argument.

To be sure, this court agrees with Surgicore that § 5106 (c)’s reference to a “master arbitrator’s award,” singular, must be given effect. A plaintiff may not, therefore, “aggregate[e] various [arbitral] awards in order to meet the statutory minimum” of $5,000.^[FN3] (Repwest Ins. Co. v Advantage Radiology, P.C., Index No. 156431/2012, 2013 WL 5924820, at *1 [Sup Ct, NY County Oct. 29, 2013].) That principle, though, is not sufficient to resolve this case.

It is undisputed that the two claims for reimbursement at issue here arose from treatments performed on one day on one patient-assignor by staff of one medical-provider assignee in connection with one operation. It is also undisputed that after American Transit denied the claims, Surgicore’s arbitral challenges to those denials were considered at the same hearing by one arbitrator and decided by that arbitrator on the same day for the same reasons; and that American Transit’s requests for review of those decisions were decided on the same day for the same reasons by one master arbitrator.

This court concludes that in these circumstances, the master arbitrator’s award of $517.89 for the pre-operation nerve block and of $25,962.93 for the operation itself are properly considered a single, unified “award” for purposes of the de-novo-challenge provision of Insurance Law § 5106 (c). Separating these two monetary awards for § 5106 purposes, merely because Surgicore chose to assert its two claims for reimbursement in separate arbitrations, would exalt form over substance to no purpose. And Surgicore provides no reason why they should be separated—instead simply taking it as given that they are separate.

Surgicore argues that several prior decisions issued by justices of this court demonstrate that Surgicore’s claims for reimbursement must be considered separately for purposes of § 5106 (c)’s $5,000 threshold. Those decisions, however, present a materially different factual scenario: they each involve multiple patients, multiple providers, or both.^[FN4] Those decisions are thus [*3]distinguishable because, unlike here, they do, in substance, involve multiple benefits awards rather than a single, unitary award.

Finally, Surgicore argues that this court should defer to the view expressed via email by a senior attorney at the Department of Financial Services that the language of § 5106 (c) “precludes the stacking or linking of awards in the first instance.” (NYSCEF No. 9 at 2, quoting NYSCEF No. 10, at 1.) Setting aside whether this email, standing alone, warrants deference, the email’s conclusion does not resolve the issue presented by this motion. The question posed to the DFS attorney was whether “an insurer is permitted to ‘consolidate’ arbitration awards” to meet the $5,000 statutory threshold. (NYSCEF No. 10 at 2.) Unsurprisingly, the DFS attorney’s response was that “stacking or linking of awards” to meet the statutory threshold is not permitted. (Id. at 1.) But that response does not address the key issue on this motion—whether the master arbitrator’s decisions here should be deemed to have made separate awards in the first place.

This court concludes that the master arbitrator’s decisions, properly understood, constituted a single arbitral award for purposes of the $5,000 threshold of Insurance Law § 5106 (c). The amount of that award, $26,480.52, exceeds the statutory threshold. American Transit’s de novo challenge to the award under § 5106 (c) therefore states a cause of action.

Accordingly, it is hereby

ORDERED that Surgicore’s motion to dismiss under CPLR 3211 is denied.

DATE 11/19/2020

Footnotes

Footnote 1:The $5,000 threshold imposed by Insurance Law § 5106 (c) is phrased in terms of when an insurer or claimant “may institute a court action” seeking de novo adjudication, rather than when Supreme Court or Civil Court may hear a de novo challenge. This threshold is thus perhaps better understood as a limit on the § 5106 cause of action rather than on the scope of the court’s subject-matter jurisdiction over § 5106 actions. The Appellate Division, First Department, has not had occasion to address this issue, however; and the Second Department has referenced it only in passing dicta. (See Avenue C. Med., P.C. v Encompass Ins. of MA, 130 AD3d 764, 764 [2d Dept 2015].) Although this distinction is not necessarily academic—a cause-of-action defense is waivable, for example, whereas a jurisdictional defense is not—it does not affect the resolution of the motion to dismiss in the current case.

Footnote 2:Surgicore’s motion papers are ambiguous as to whether it seeks dismissal only of American Transit’s de novo challenge to the $517.89 nerve-block award, or dismissal of the entire action. Since American Transit’s de novo challenge to the $25,962.93 surgery award plainly may be maintained in this court, this court construes Surgicore’s motion as addressed only to the challenge to the nerve-block award.

Footnote 3:American Transit argues, citing the Court of Appeals’ decision in Matter of Greenberg v Ryder Truck Rental, Inc. (70 NY2d 573 [1987]), that multiple awards can be challenged de novo in the same action as long as they are part of the same dispute between insurer and claimant (and the aggregate amount of those awards is over $5,000). (See NYSCEF No. 18 at 5-6.) But in Matter of Greenberg, the issue was limited to whether a de novo challenge asserted after the award of damages in a single, bifurcated arbitration proceeding also brought up for review the arbitrator’s liability determination made at the first stage of the bifurcated proceeding. The Court held that if the $5,000 threshold is satisfied, a de novo challenge encompasses both the arbitral award and the prior, predicate liability determination in the arbitration proceeding. (See 70 NY2d at 576-577.) That holding, though, did not resolve whether a de novo challenge to an award over $5,000 in one arbitral proceeding can also bring up for review awards made in other, related arbitral proceedings—as opposed to determinations made at an earlier stage of the same proceeding.

Footnote 4:See NYSCEF No. 9 at 3, citing Imperium Ins. Co. v Innovative Chiropractic Servs., P.C. (2014 NY Slip Op 50697[U] [App Term 2014]); Decision & Order, Hereford Ins. Co. v Iconic Wellness Surgical Servs., LLC, Index No. 157166/2018, NYSCEF No. 35 (Jan. 29, 2019). See also NYSCEF No. 22 at 1, citing Decision & Order, American Transit Ins. Co v Health Plus Surgery Ctr., LLC, Index No. 156988/2019, NYSCEF No. 18 (Feb. 7, 2020). Accord Decision & Order, American Transit Ins. Co. v HealthPlus Surgery Ctr., LLC, Index No. 155561/2019, NYSCEF Nos. 21, 24 (Mar. 2, 2020) (multiple providers); Repwest, 2013 WL 5924820, at *1 (addressing claims for benefits assigned by “nine parties injured in three separate automobile accidents”).

AMERICAN TRANSIT INSURANCE COMPANY, Plaintiff, against JUAN ROMERO-RICHIEZ, AUTORX, BALANCE FIT CHIROPRACTIC PC, COHEN & KRAMER MD PC, INWOOD MEDICAL CARE PLLC, NAGLE ACUPUNCTURE PC, RIGHT CHOICE SUPPLY INC, SABAS NY SERVICES INC, and WESTCHESTER RADIOLOGY & IMAGING PC, Defendants.

Index No. 650138/2019

Larkin Farrell LLC, New York, NY (William Larkin of counsel), for plaintiff.

Law Offices of Viktoriya Litvenko P.C. (Viktoriya Litvenko of counsel), for defendant Right Choice Supply, Inc.

Gerald Lebovits, J.

This motion concerns the potential obligation to pay no-fault insurance benefits of [*2]plaintiff American Transit Insurance Company. Defendant Juan Romero-Richiez was in a vehicle that was involved in a collision. The vehicle was covered by a no-fault insurance policy issued by American Transit. Romero-Richiez assigned the right to collect no-fault benefits under that policy to various treating medical providers, including defendant Right Choice Supply Inc. Romero-Richiez himself applied for no-fault benefits, which American Transit denied.

American Transit brought this action for a declaratory judgment that it is not required to pay no-fault benefits to Romero-Richiez or to the other defendants (all medical-provider assignees of his). Romero-Richiez and several of the medical-provider defendants did not appear. American Transit moved for default judgment under CPLR 3215 against Romero-Richiez and the other non-appearing defendants.

This court granted the default-judgment motion without opposition. In October 2019 the court issued a declaration that Romero-Richiez and the non-appearing providers “are not entitled to no-fault benefits as a result of a motor vehicle accident involving Juan Romero-Richiez . . . due to Romero-Richiez’s failure to appear for duly scheduled independent medical examinations.” (NYSCEF No. 30 at 2 [capitalization omitted].)

American Transit now moves for summary judgment under CPLR 3212 against Right Choice.^[FN1] The motion is denied.

DISCUSSION

This action is the latest in a series of cases before this court, each brought by American Transit, on what evidentiary showing is required for a no-fault insurer to obtain a declaration of no-coverage based upon the injured party’s failure to appear for an independent medical examination (IME) or examination under oath (EUO).

American Transit has consistently taken the position in these cases that all it need show to obtain summary judgment is proof that (i) after receiving the injured-person assignor’s NF-2 application for no-fault benefits, American Transit properly mailed the injured person two requests to appear for an IME or EUO; (ii) the injured person twice failed to appear as requested (or to seek rescheduling of the IME or EUO); and (iii) American Transit sought and obtained a default judgment of no-coverage against the injured-person assignor for failure to appear for the duly scheduled IME or EUO.

This court has consistently rejected this position. (See, e.g., American Transit Ins. Co. v Martinez, 2020 NY Slip Op 50930[U] [Sup Ct, NY County Aug. 21, 2020]; American Transit Ins. Co. v. Reynoso, 2020 WL 5524771 [Sup Ct, NY County Sept. 11, 2020].) Instead, this court has held that under the decisions of the Appellate Division, First Department, in American Transit Ins. Co. v Longevity Med. Supply, Inc. (131 AD3d 841, 841 [1st Dept 2015]), and [*3]Mapfre Ins. Co. of NY v Manoo (140 AD3d 468, 469 [1st Dept 2016]), American Transit also must satisfy one of two additional elements to show its entitlement to summary judgment.

First, American Transit could establish that it has met the timeliness requirements of 11 NYCRR § 65-3.5 (b) and (d) through evidence that it requested an IME or EUO within 15 business days of receiving claimant’s NF-3 verification forms or bills submitted by the injured person’s medical providers (see 11 NYCRR § 65-3.5 [b]), and (in the case of an IME) scheduled the IME to be held within 30 calendar days of receipt of those forms. (See Longevity Medical Supply, 131 AD3d at 841.) Second, American Transit could establish that it did not need to satisfy these requirements because it had requested an IME or EUO prior to receiving an NF-3 form or a provider bill. (See Manoo, 140 AD3d at 469.)

Here, American Transit has not attempted to do either. Instead, it rests on the same evidentiary showing that this court has previously held insufficient. And its motion papers emphasize that numerous decisions rendered by other judges of Supreme Court, New York County, have granted it default judgment or summary judgment on that showing. (See NYSCEF No. 57 at 1-5; NYSCEF No. 58 [reproducing decisions].) These decisions, even if not binding on this court, might carry persuasive force. But American Transit does not contend that other judges have had before them the particular arguments about American Transit’s evidentiary burden that this court has found persuasive in its prior rulings—much less that other judges have considered and rejected those arguments.

That said, given the extent to which the issue has recurred, this court feels it appropriate to lay out in further detail why it finds American Transit’s position on the required evidentiary showing—and the three principal contentions supporting that position—to be without merit.

1. American Transit asserts that if an insurer obtains a default judgment against a injured-party assignor—thereby establishing prima facie that the assignor failed to comply with the requirement to appear for requested IMEs or EUOs—the assignee is bound by this judgment because the assignee has no more rights than those possessed by the assignor. (See NYSCEF No. 57 at 5-6.) But American Transit still fails to grapple with the decision of the Appellate Division, Second Department, holding that when an assignment of no-fault benefits is made prior to the institution of legal action, a decision on default against the assignor does not bar the assignee from asserting a claim to no-fault benefits. (See Lakeside Hosp. v Government Empls. Ins. Co., 70 AD2d 658, 658 [2d Dept 1979], citing Gramatan Home Inv. Corp. v Lopez, 46 NY2d 481, 486-487 [1979].) Absent a contrary decision of the Court of Appeals or Appellate Division, First Department, the holding of Lakeside Hospital is binding on this court. (See D’Alessandro v Carro, 123 AD3d 1, 6 [1st Dept 2014].) American Transit has not identified—and this court is not aware of—any such contrary decision.^[FN2]

2. American Transit argues that under the First Department’s decision in Unitrin Advantage Insurance Co. v Bayshore Physical Therapy, PLLC (82 AD3d 559 [1st Dept 2011]), the failure to appear for IMEs is a breach of a condition precedent to coverage, such that the insurer cannot be precluded from denying the claim for failure to appear. (See NYSCEF No. 57 at 7-8, citing Central Gen. Hosp. v Chubb Grp. of Ins. Cos., 90 NY2d 195 [1997].) But, as this court noted in Martinez, Reynoso, and others, the rule in Bayshore does not sweep that far. Since Bayshore, the First Department has held that a plaintiff insurer’s motion for summary judgment is properly denied when the plaintiff fails to establish either that it complied with the IME-scheduling requirements of 11 NYCRR § 65-3.5, or that those requirements are inapplicable. (See, e.g., American Transit Ins. Co. v Longevity Med. Supply, Inc., 131 AD3d 841, 841 [1st Dept 2015] [failure to establish compliance]; Kemper Indep. Ins. Co. v Adelaida Physical Therapy, P.C., 147 AD3d 437, 438 [1st Dept 2017] [failure to establish inapplicability].)

Indeed, Longevity Medical Supply expressly distinguished Bayshore on the ground that in that case the insurer had established “that it requested IMEs in accordance with the procedures and time frames set forth in the no-fault implementing regulations.” (131 AD3d at 842, quoting Bayshore, 82 AD3d at 560 [emphasis in Longevity]; accord Adelaida Physical Therapy, 147 AD3d at 438 [construing Bayshore to require an insurer to establish either timeliness or inapplicability of the timeliness requirements].) And this makes sense: the issue before the Court of Appeals in Central General Hospital was whether an insurer is precluded in litigation from raising an otherwise-valid lack-of-coverage defense by a prior failure to timely deny the claim (see 90 NY2d at 199-201)—not whether a failure-to-appear-for-IME defense is valid absent evidence that the IME was timely requested.

3. American Transit claims that the 15-business-day deadline to request an IME after receipt of a set of verification forms, and the 30-calendar-day period for holding the IME after receipt of the set of verification forms, “only appl[y] to medical examinations that are necessary to determine if th[e] particular claim” dealt with in that set of forms “should be paid.” (NYSCEF No. 57 at 10.) American Transit points out that the no-fault insurance endorsement mandated by regulation requires “the eligible injured person” to “submit to medical examination . . . when, and as often as, the Company may reasonably require.” (11 NYSCRR § 65-1.1.) Thus, where an IME “is being scheduled” under this provision “for a more broad reason, ie to determine, generally, if the claimant needs future treatment,” the 15- and 30-day deadlines assertedly do not apply. (NYSCEF No. 57 at 11.) This court is not persuaded.

American Transit cites no authority of any kind for its position. Given the sheer number of no-fault decisions issued by New York courts at all levels, this dearth of authority is striking. And none of the eleven First Department decisions issued on timeliness of IME/EUO requests over the last five years even suggest that some requests made after the insurer has received a claim for benefits are nonetheless exempt from the timeliness requirements of § 65-3.5.^[FN3] Instead, [*4]these decisions have looked only at whether an IME/EUO request was made prior to the receipt of a claim form or provider bill (in which case the request is governed by the rule announced in Manoo), or after receipt (in which case the timeliness requirements of § 65-3.5 apply).

Moreover, on American Transit’s position, an IME request made more than 15 business days after receipt of a given claim could still be timely—as long as the request were made for reasons other than assessing the validity of that particular claim. As a corollary, therefore, a failure to appear for the timely requested IME would assertedly warrant denial of the pending claim for breach of a condition precedent to coverage. Yet in All of NY, the First Department reversed the trial court and held that failure to appear for an EUO that had been requested untimely relative to a particular benefits claim would not warrant denial of that claim. (See 158 AD3d at 449.) American Transit provides no explanation about how in practice an arbitrator or a court would be able to distinguish between an IME/EUO request that was late (because it was made more than 15 business days after receipt of a given claim or bill), or timely (because it was not intended to seek verification of any particular claim or bill).

This potential confusion points to an additional shortcoming of American Transit’s interpretive argument. The carefully drafted, intricate no-fault-benefits regulatory framework contains no language drawing the distinction about types of IME/EUO requests that American Transit finds in “the plain language of the regulation” (NYSCEF No. 57 at 10). And the regulations do not contain provisions offering guidance to arbitrators and courts on how to determine on which side of that distinction a given IME/EUO request falls.

Further, American Transit’s argument heavily emphasizes the potential utility of an IME in assessing whether an individual needs further treatment, separate and apart from any individual claim. (See NYSCEF No. 57 at 9-10.) Yet the same mandatory insurance endorsement requires the injured person or their assignee to appear for EUOs “as may reasonably be required,” just like IMEs. (11 NYSCRR § 65-1.1.) And it is much harder to see how an EUO (i.e., a deposition) would be informative in assessing an individual’s general need for treatment.

To be sure, an EUO (or an IME) might well be helpful if the insurer suspects that an individual’s claimed injuries are exaggerated, or indeed invented altogether, as in the case of a staged “accident.” Yet the insurer’s interest in using IMEs and EUOs to limit potential insurance fraud is fully accommodated by its ability either (i) to request an IME or EUO based on suspicions of fraud that arise before claims have come in, which under Manoo would not be subject to the timeliness requirements of § 65-3.5; or (ii) to request an IME or EUO consistent with § 65-3.5 because particular claims for treatment have raised questions about excessive or unnecessary treatment. American Transit does not explain why, given these options, it would [*5]also be necessary to be able to request an IME (or EUO), in effect, preemptively in order to assess the injured person’s general need for further treatment before providers have submitted claims for such further treatment.

Finally, even if this court were inclined to accept American Transit’s argument that an IME/EUO request is outside the scope of § 65-3.5 if made out of a desire to assess the injured person’s general need for treatment, American Transit has not submitted any evidence that the IME request at issue in this case was made for that general-need-for-treatment reason. Absent such evidence—and absent any evidence about when the IME request was made relative to when American Transit received verification forms or bills from providers—American Transit cannot establish its prima facie entitlement to judgment regardless.

Accordingly, for the foregoing reasons it is hereby

ORDERED that American Transit’s motion under CPLR 3212 for summary judgment in its favor is denied.

DATE: 10/9/2020

Footnotes

Footnote 1:American Transit has separately settled with several other medical-provider defendants. (See NYSCEF Nos. 24, 25, 54.)

Footnote 2:The Court of Appeals decision on which American Transit relies, New York & Presbyterian Hospital v Country-Wide Insurance Co., involved a ruling on the merits in an action brought by an assignee against an insurer, rather than a ruling about the effects of a default judgment obtained by an insurer against an assignor. (See 17 NY3d 586, 588 [2011].)

Footnote 3:See Global Liberty Ins. Co. v Evans (176 AD3d 599 [1st Dept 2019]); Hertz Vehs. LLC v Best Touch PT, P.C. (162 AD3d 617 [1st Dept 2018]); Hereford Ins. Co. v Lida’s Med. Supply, Inc. (161 AD3d 442 [1st Dept 2018]); Unitrin Advantage Ins. Co. v All of NY, Inc. (158 AD3d 449 [1st Dept 2018]); Hertz Vehs. LLC v. Significant Care, PT, P.C. (157 AD3d 600 [1st Dept 2018]); Adelaida Physical Therapy (147 AD3d 437); Manoo (140 AD3d 468); National Liability & Fire Ins. Co. v Tam Medical Supply Corp. (131 AD3d 851 [1st Dept 2015); American Transit Ins. Co. v Vance (131 AD3d 849 [1st Dept 2015]); Longevity Medical Supply (131 AD3d 841); American Transit Ins. Co. v Clark (131 AD3d 840 [1st Dept 2015]).

American Transit Insurance Company, Plaintiff, against Jeremy Martinez, EMPRESS AMBULANCE SERVICE, FOREST PARK ACUPUNCTURE PC, NEIGHBORHOOD MEDICAL HEALTH CARE PC, NEW YORK HEIGHTS MEDICAL PC, PAIN PHYSICIANS NY PLLC, WELLMART RX INC, Defendants.

651486/2019

Larkin Farrell LLC, New York, NY (William Larkin of counsel), for plaintiff.

Law Offices of Gary Tsirelman P.C., Brooklyn, NY (Jung Pryjma of counsel), for defendant Wellmart RX Inc.

Gerald Lebovits, J.

This motion concerns the potential obligation to pay no-fault insurance benefits of plaintiff American Transit Insurance Company. Defendant Jeremy Martinez was in a vehicle that was involved in a collision. The vehicle was covered by a no-fault insurance policy issued by American Transit. Martinez assigned the right to collect no-fault benefits under that policy to various treating medical providers, including defendant Wellmart RX Inc. Wellmart applied for no-fault benefits, which American Transit denied.

American Transit brought this action for a declaratory judgment that it is not required to pay no-fault benefits to Martinez or to the other defendants (all medical-provider assignees of Martinez). Wellmart was the only defendant that appeared in the action. American Transit moved for default judgment under CPLR 3215 against Martinez and several of the other non-appearing defendants.

This court granted the default-judgment motion without opposition. The court issued a declaration that Martinez and the non-appearing providers “are not entitled to no-fault benefits as a result of a motor vehicle accident involving Jeremy Martinez . . . due to Jeremy Martinez’s failure to appear for duly scheduled independent medical examinations.” (NYSCEF No. 34 at 1-2 [capitalization omitted].) The court also severed and continued the action as against the remaining defendants, including Wellmart. (See id. at 2.)

American Transit now moves for summary judgment under CPLR 3212 against Wellmart. The motion is denied.

DISCUSSION

The Effect of This Court’s Prior Default-Judgment Order

American Transit argues that because Wellmart is Martinez’s assignee, Wellmart’s claim for benefits is derivative of Martinez’s rights under the no-fault policy—and thus that the default judgment against Martinez ousted Wellmart’s right to claim benefits. This court disagrees. Decades ago, the Appellate Division held that when an assignment of no-fault benefits is made prior to the institution of legal action, a decision on default against the assignor does not bar the assignee from asserting a claim to no-fault benefits. (See Lakeside Hosp. v Government Empls. Ins. Co., 70 AD2d 658, 658 [2d Dept 1979], citing Gramatan Home Inv. Corp. v Lopez, 46 NY2d 481, 486-487 [1979].)

To be sure, in Lakeland Hospital the court noted that the assignee was not a party to the prior arbitration. Here, as American Transit points out, Wellmart is a party defendant. But although Wellmart is a party to this action, it was not a party to the prior motion. To the contrary, American Transit’s motion papers expressly stated that “[n]o relief is sought at this time with respect to” Wellmart. (NYSCEF No. 20 at 1.) This court’s prior order in this action, although it “awarded a default judgment to [American Transit] against [Wellmart’s] assignor . . . did not declare the rights of [American Transit] as against [Wellmart].” The default-judgment order thus does not have preclusive effect on the current summary-judgment motion. (Jamaica Wellness Medical, P.C. v Mercury Casualty Co., 2018 NY Slip Op 51128[U], at *2 (App Term 2d Dept 2018]; accord Ultimate Health Prods., Inc. v Ameriprise Auto & Home, 57 Misc 3d 9, 11 [App Term 2d Dept 2017].)

American Transit argues that the grant of default judgment against Martinez had the effect of declaring that the no-fault policy was void, leaving Martinez without any claim to benefits that he could [*2]have assigned to Wellmart in the first place. But the judgment that American Transit requested from this court, and which this court entered, did not reach so far. As noted above, the default judgment merely declared that Wellmart (and the other non-appearing defendants) are not entitled to benefits, without going on to declare that the no-fault policy itself was void. (See NYSCEF No. 34 at 1-2.) In any event, in Lakeland Hospital, the arbitration decision entered on the assignor’s default sustained the insurer’s argument that the assignor had no claim to benefits as a result of her no-fault policy having been canceled outright prior to the occurrence—and thus prior to any assignment—for nonpayment of premiums. (See 70 AD2d at 658.) The Second Department nonetheless held that this prior arbitration decision did not preclude the assignee from claiming a right to benefits. (See id.)

American Transit thus is not entitled to summary judgment against Wellmart based merely on this court’s prior default-judgment order against Martinez.

Whether American Transit is Entitled to Summary Judgment on the Merits

Alternatively, American Transit argues that Martinez’s failure to appear for scheduled independent medical examinations (IMEs) defeats coverage under the no-fault policy, and thus forecloses Wellmart’s claim to benefits. This court is not persuaded.

A no-fault insurer seeking a declaration of no coverage due to asserted violations of the terms of the policy must first demonstrate that it complied with each of the procedural and timeliness requirements of 11 NYCRR § 65-3.5, governing the handling of no-fault claims. (See American Transit Ins. Co. v Longevity Med. Supply, Inc., 131 AD3d 841, 841 [1st Dept 2015].) One such requirement is that if the insurer requests additional verification of a no-fault claim in the form of an IME, the IME must be scheduled to occur “within 30 calendar days from the date of receipt of the prescribed verification forms.” (11 NYCRR § 65-3.5 [d].) American Transit has not shown that it satisfied this 30-calendar-day timeframe. The documents submitted by American Transit show at most that the first IME was scheduled to be held 26 days after the date of the scheduling notice. (See NYSCEF No. 41 at 17.) Those documents do not reflect when American Transit received the prescribed verification form, as required to determine whether the IME’s scheduled date satisfied the 30-day requirement.^[FN1] Given this failure of proof, American Transit has not satisfied its initial prima facie burden at summary judgment. (See Longevity Medical Supply, 131 AD3d at 841.)^[FN2]

American Transit argues that these deadlines apply only to “medical examinations that are necessary to determine if [a] particular claim should be paid,” as opposed to “being scheduled for a more broad reason, ie to determine, generally, if the claimant needs future treatment.” (NYSCEF No. 47 at 12-13.) Even assuming for the sake of argument that this interpretive argument is correct, it does not avail American Transit here.

The record evidence on this motion reflects only that American Transit received Martinez’s NF-2 benefits application on October 2, 2017 (see NYSCEF No. 41 at 11-14 [mailroom stamp and date/time footer]), and prepared an IME scheduling notice 10 days later, on October 12, 2017 (see id. at 17). That short time period itself suggests a connection between Martinez’s initial benefits claim and the scheduling of an IME. More fundamentally, there is no record evidence indicating any other purpose for holding the [*3]IME that could even potentially take that IME out of the scheduling framework of 11 NYCRR § 65-3.5 (b) through (d).

Accordingly, for the foregoing reasons it is hereby

ORDERED that American Transit’s motion under CPLR 3212 for summary judgment in its favor as to defendant Wellmart is denied.

8/21/2020

Footnotes

Footnote 1:American Transit has provided the NF-2 claim form provided by Martinez, which contains markings indicating that American Transit received the form on October 2, 2017, 36 days before the IME date. (See NYSCEF No. 41 at 11-14 [mailroom stamp and date/time footer].) But it has not provided the NF-3 verification form.

Footnote 2:In arguing that it could deny no-fault coverage due to Martinez’s failure to appear for IMEs even if those IMEs were not timely scheduled (see NYSCEF No. 54 at 5-10), American Transit does not mention the First Department’s decision in Longevity Medical Supply.