Supreme Court, New York County

105012/07

For the Petitioners:Agnes Neiger, Esq.

Jones Jones O’Connell LLP

45 Main Street, Suite 1101

Brooklyn, New York 11201

For the Respondents:

Patrice Soberano, Esq.

Short & Bill, P.C.

217 Broadway, Suite 300

New York, New York 10007

Marcy L. Kahn, J.

By notice of petition and petition dated April 4, 2007 and the exhibits annexed thereto, petitioner Chubb Insurance Company (“petitioner” or “Chubb”), moved for an order pursuant to CPLR §7511(b)(1)(iii) vacating the amended award of the arbitrator, dated January 17, 2007, in the arbitration proceeding between petitioner and respondent, GEICO Insurance Company (“respondent” or “GEICO”) on the ground that the arbitrator exceeded her powers, and sought to reinstate the original award issued by the arbitrator on November 3, 2006. Respondent submitted no opposition to the petition. By decision and order dated July 21, 2007, this court granted the petition on default, vacated the amended award and reinstated the original award. Respondent now moves to vacate the default judgment and, upon vacation, to reinstate the amended award. For the reasons stated, respondent’s motion is denied. [*2]

I. FACTUAL AND PROCEDURAL BACKGROUND

On January 22, 2003, Chenille Bonner (“Bonner”), a New York City Transit Authority (“NYCTA”) bus driver, was on duty in her bus when it became involved in a three-vehicle accident. As the NYCTA workers’ compensation insurer, Chubb paid $42,065.56 in benefits to and on behalf of Bonner as a result of the accident. (Pet. Exh. B).

In accordance with Insurance Law §5105, Chubb filed an inter-company arbitration demand against GEICO and Statewide Insurance Company (“Statewide”), the insurers of the other two vehicles,^[FN1] seeking reimbursement of the first-party benefits it had paid to its insured. As one of the vehicles involved in the accident was a NYCTA bus weighing in excess of 6500 pounds unloaded and constituting a vehicle for hire (see Pet. Exh. A), the jurisdictional requirements of §5105(a) were satisfied. The case was then submitted to arbitration with Arbitration Forums Inc. (“AFI”) pursuant to §5105(b) and 11 NYCRR §65.10 of the no-fault regulations on September 19, 2005. (Pet. Exh. C).

On October 31, 2006, the arbitration was held before the AFI arbitrator, Sabrina Owens (“Owens” or the “arbitrator”). On November 3, 2006, Owens issued her decision in the matter under AFI Docket No. I068-07725-05-00 (the “original award”), finding each of the respondents to be fifty per cent liable, and awarding Chubb a total of $42,065.56. (Pet. Exh. D).

Thereafter, by letter to the arbitrator dated November 22, 2006, respondent GEICO requested that the award against it be vacated due to an “incorrect application of New York regulations regarding PIP loss transfer requirements . . . .” (Pet. Exh. E). In essence, GEICO argued that because GEICO also provided motor vehicle insurance coverage for the NYCTA bus, it was “united in interest” with Chubb and recovery by Chubb against it was barred.

On January 17, 2007, the arbitrator issued an amended decision and award (the “amended award”), in which she determined that Statewide bore fifty per cent of the liability and that GEICO bore no liability in the case. (Pet. Exh. F). The amended award reduced Chubb’s recovery to $21,032.78.

Thereafter, petitioner commenced a proceeding to vacate the amended award and reinstate the original award, arguing that the arbitrator exceeded vacating the original award and her powers in issuing the amended award. As proof of service on the Superintendent of Insurance was provided by petitioner and respondent submitted no opposition to the petition, this court issued a decision and order dated July 20, 2007 (“Chubb I“), granting the petition on default but also addressing the merits [*3]of the petition.^[FN2]

Petitioner served respondent with notice of entry of the judgment on or about September 4, 2007. On May 9, 2008, GEICO filed the instant motion to vacate the default judgment in Chubb I. Chubb has opposed the motion. GEICO thereafter furnished a reply affirmation.

II.PARTIES’ CONTENTIONS

On this motion, GEICO claims that this court’s decision in Chubb I should be vacated on the ground of excusable default, as its failure to appear in the Article 75 proceeding was reasonable and it has a meritorious defense to the proceeding. Proffering the representation of its claims representative, Simon King (“King”), GEICO maintains that its failure to appear in the Article 75 proceeding was reasonable and should be excused, because its files do not reflect that it was ever served with process or received any notice of the proceeding until after the entry of judgment against it on September 4, 2007. (Aff. of Merit of Simon King, sworn Apr. 23, 2008 [the “King affidavit”], at ¶11).

GEICO states that it has a meritorious defense, arguing that the original award was so irrational as to require vacation. Specifically, GEICO argues that Chubb, Bonner’s worker’s compensation carrier, was aligned in interest with GEICO, which provided no-fault motor vehicle coverage for Bonner’s NYCTA bus, as well as for one of the other vehicles involved in the accident. It argues that to permit a worker’s compensation carrier to recover from the no-fault insurer of the same person would improperly eliminate the worker’s compensation offset for no-fault insurers mandated by Insurance Law §5102(b)(2). It also argues that there should have been no consideration of negligence through intercompany loss transfer pursuant to Insurance Law §5105(a) because of Chubb’s status as a worker’s compensation carrier, and that Chubb is the sole source of Bonner’s medical benefits under 11 NYCRR §65-3.16(a)(9). Contending that the arbitrator recognized her own error and, accordingly, amended her award appropriately, GEICO argues that the amended award should be reinstated.

Chubb responds that GEICO has failed to establish either a reasonable excuse for its default or a meritorious defense to the petition. Chubb contends that GEICO cannot furnish a reasonable excuse for its default because the statement by King is conclusory and unsupported by specific factual allegations. It proffers an affidavit of service upon the office of the Superintendent of the New York State Insurance Department (“NYSID”) as the duly appointed representative of GEICO and the [*4]acknowledgment of such service and delivery to GEICO by that office on April 16, 2007. (Affirm. of Agnes Neiger, Esquire in Opp.[“Neiger Aff.”], dated July 10, 2008, Exh. D). Chubb further maintains that GEICO’s defense, namely, that the original award is irrational and should be vacated, does not address the issue before this court in Chubb I, that being whether the arbitrator exceeded her authority in issuing the amended award.

Chubb also argues that GEICO’s request to the arbitrator for modification of the original award failed to comply with the requirements of CPLR §7509, as GEICO submitted its request more than twenty days after the original award was issued. Chubb reiterates that because the amendment of the award did not fall within the statutory parameters specified in CPLR §§7509 and 7511(c), the arbitrator exceeded her authority in amending the original award in response to the request, rendering GEICO’s position unmeritorious.

III.DISCUSSION

It is settled law that “[a] party seeking to vacate a default must demonstrate both a reasonable excuse for [that party’s] nonappearance and a meritorious defense to the action.” (Eugene Di Lorenzo, Inc. v. A.C. Dutton Lumber Co., 67 NY2d 138, 141 [1986]; Central City Brokerage Corp. v. Acosta, 49 AD3d 455 [1st Dept. 2008]. On this motion, GEICO has failed to establish either a reasonable excuse or a meritorious defense.

A. Reasonable Excuse

GEICO’s assertion that it was not properly served with the petition is belied by both the affidavit of service sworn on April 13, 2007 and the affidavit of acknowledgment of service dated April 16, 2007. The affidavit of service attests to the fact that on April 13, 2007, GEICO was served by personal delivery with a true copy of the notice of petition and petition to Dora Lewis of the NYSID and that Ms. Lewis was a duly appointed representative of GEICO for the purpose of receiving service of process.^[FN3] (Neiger Aff., Exh. D). The affidavit of acknowledgment of service reveals that on April 16, 2007, Salavatore Castiglione, Assistant Deputy Superintendent and Chief of NYSID, acknowledged that the notice of petition was served upon him on April 13, 2007 and that he notified GEICO of service by forwarding the acknowledgment and a copy of the notice of petition to Mr. Robert M. Miller of GEICO at its address in Woodbury, New York on April 16, 2007. (Id.) GEICO presents no facts contradicting this evidence, or demonstrating that it had a new address for the forwarding of service of process and had [*5]failed through inadvertence to notify the Superintendent of Insurance of that fact. Further, there are no facts before this court demonstrating that the notice of petition was ever returned undelivered to the Insurance Department. Although GEICO does claim that a copy of the notice of petition could not be located in its files, no facts have been presented to this court supporting GEICO’s claim that it was never served on the company.

Thus, the record establishes that service of the notice or petition and petition was effected pursuant to Insurance Law §1212(b).^[FN4] GEICO has failed to provide a sworn factual basis to controvert these allegations. As GEICO has not shown that it was not properly served with the petition in this proceeding, GEICO does not have a reasonable excuse for its failure to appear in this proceeding prior to filing the instant motion.

B. Meritorious Defense

GEICO’s claim of a meritorious defense in this proceeding is equally unavailing. In Chubb I, the issue before the court was whether the arbitrator exceeded her powers in issuing the amended award, which Chubb sought to vacate pursuant to CPLR §§ 7509 and 7511(b)(1). (See Chubb I, section II, at 3). On this motion, rather than addressing that issue, GEICO challenges the rationality of the original award. These misdirected arguments do not constitute a meritorious defense to Chubb’s petition.

Although, as GEICO contends, New York courts have been liberal in vacating default judgments in light of the strong public policy favoring the resolution of cases on their merits (Reply Affirm. of Patrice Soberano, Esquire dated July 25, 2008 in Support of Resp. Mot., at ¶14; see Aliksanyan v. Sundman, 98 AD2d 607 [1st Dept. 1983]; Balint v. Marine Midland Bank, 112 AD2d 1023 [2d Dept. 1985]), in most of the cases relied upon by GEICO, the motion to vacate the default judgment was filed promptly upon receipt of the notice of entry of the default judgment by the prevailing party. (See, e.g., Glass v. Janbach Properties, 73 AD2d 106, 108 [2d Dept. 1980][motion to vacate filed eight days after receipt of notice of entry of default judgment]). Here, by contrast the motion to vacate the default [*6]was filed some eight months after service of the notice of entry of the judgment. Moreover, in Chubb I this court did address the merits of this proceeding, rather than merely granting a default judgment based upon GEICO’s failure to respond to the petition. (See Chubb I, section III at 4-8).

GEICO proffers no factual or legal basis for this court to vacate its judgment in Chubb I. Instead, GEICO argues that the arbitrator made an error of law in issuing the original award in contravention of both a governing statute and a regulation. Specifically, GEICO maintains that the original award, which permitted Chubb, the workers’ compensation carrier for Bonner, to recover from GEICO, the no-fault insurer for the same party, violates the statutory scheme set forth in Insurance Law §5102(b)(2). Under that scheme, first-party benefits paid by a no-fault insurer to reimburse a person for basic economic loss on account of personal injury are to be offset by any amounts recovered on account of workers’ compensation benefits, rather than the reverse. (See Ins. Law §5102[b][2]; Arvatz v. Empire Mut. Ins. Co., 171 AD2d 262 [1st Dept. 1991][“. . . Insurance Law §5102(b)(2) provides that workers’ compensation benefits serve as an offset against first-party benefits payable under no-fault as compensation for basic economic loss'”]; New York Cent. Mut. Fire Ins. Co. v. Tower Ins. Co. of New York, Index No. 100446/07, [Sup. Ct. NY Co. July 6, 2007][vacating arbitrators’ award of medical expenses from no-fault insurer to workers’ compensation carrier as contrary to Insurance Law §5102(b)]). GEICO further asserts that the original award does not comply with 11 NYCRR § 65-3.16(a)(9), which provides:

(p)ursuant to section 5102(b)(2) of the Insurance Law, when the applicant is entitled to workers’ compensation benefits due to the same accident, the workers’ compensation carrier shall be the sole source of reimbursement for medical expenses.

(11 NYCRR §65-3.16[a][9]; see also New York Cent. Mut. Fire Ins. Co. v. Tower Ins. Co. of New York, supra [“because the compensation carrier is solely responsible for the medical expenses, it turns the law on its head to allow the carrier to recover from the no-fault insurer”]). Assuming, without deciding, the correctness of GEICO’s statement of the law and its application to the circumstances presented here,^[FN5] GEICO had a remedy, which was to make a successful motion in this court to vacate the original award pursuant to CPLR §7511, but, for [*7]reasons still unexplained, failed to do so. Rather, GEICO sought to have the arbitrator modify her award. In doing so, GEICO sought its remedy in an inappropriate manner. Should a party to an arbitration proceeding seek to vacate or modify an award, the appropriate means to do so is by way of CPLR article 75 procedure. (See Caso v. Coffey, 41 NY2d 153, 157 [1976][a requirement that arbitrators be prepared to defend their awards would “discourage qualified and competent persons from serving as arbitrators”]).

Chubb subsequently brought its petition seeking to vacate the amended award. Despite having been properly served with the petition by personal service on the Superintendent of Insurance, GEICO failed to respond. Having been presented no contentions on the merits by GEICO, this court considered Chubb’s argument that the arbitrator exceeded her authority and determined that the arbitrator had done so. (See CPLR §7511[b][1][iii]; Matter of the Board of Educ. of the Dover Union Free School Dist. v. Dover-Wingdale Teachers’ Ass’n, 61 NY2d 913,915 [1984] [arbitration award may be vacated where the award is “in excess of a specifically enumerated limitation upon arbitral authority”]). Thus, this court decided the issue on the merits in favor of Chubb. (See Chubb I at 4-8).

Further, GEICO’s motion, which effectively seeks an order from this court confirming the amended award, is untimely, as it has been approximately one year and eight months, long after the expiration of the one-year statutory time period, since the delivery of the amended award to GEICO. (CPLR §7510).

As GEICO proffers neither a reasonable excuse for its nonappearance in this proceeding prior to the filing of the instant motion, nor a meritorious defense to the petition, the motion to vacate the default judgment must be denied.

IV.CONCLUSION

For the foregoing reasons, respondent’s motion to vacate the default judgment of this court dated July 20, 2007 is denied.

The foregoing constitutes the decision and order of this court.

ENTER:

______________________

Marcy L. Kahn, J.S.C.

Dated:New York, New York

September 29, 2008

Footnotes

Footnote 1:In addition to the NYCTA bus, GEICO insured a third-party vehicle involved in the accident.

Footnote 2:See Chubb I, section III, at 4-8.

Footnote 3: CPLR §317 is not applicable here, since the agent for

service of process was personally served.

Footnote 4:Insurance Law §1212(b) provides:

Service of process upon any such insurer in any proceeding in any court of competent jurisdiction may be made by serving the superintendent, or any salaried employee of the department whom the superintendent designates for such purpose, all of whom shall have authority to accept such service pursuant to any such power of attorney.

Footnote 5:The instant situation is complicated by the fact thatGEICO is the no-fault insurer of both the workers’compensation vehicle and one of the third-parties’ vehicles.

[*1]

Supreme Court, New York County, September 17, 2008

APPEARANCES OF COUNSEL

William H. Saltzman, New York City, for petitioner. Law Office of Eric N. Wolpin, New York City (Helen Cohen of counsel), for respondent.

{**21 Misc 3d at 792} OPINION OF THE COURT

Paul G. Feinman, J.

In this CPLR article 75 proceeding, petitioner seeks to vacate an arbitration award, and respondent cross-petitions to confirm the arbitration award. For the reasons which follow, the petition is denied, and the cross petition is granted.

Petitioner is a health care provider that treated its assignor, Ricky Barry, for injuries received in an automobile accident on July 8, 2003. Respondent insured Barry and was obligated under the policy to provide him with first-party benefits, in accordance with New York’s No-Fault Law (Insurance Law art 51). Petitioner sought reimbursement from respondent which first denied it on November 12, 2003, and again for different charges on December 2, 2003 (petitioner’s exhibit 3). Petitioner filed for arbitration pursuant to the Insurance Law and enabling regulations on August 8, 2006.

By arbitration decision of November 2, 2006, petitioner was awarded the sum of $2,376.76 plus interest from August 8, 2006, pursuant to Insurance Department Regulations (11 NYCRR) § 65-3.9 (c) (petitioner’s exhibit 1, arbitration award at 4).

Petitioner appealed the portion of the award concerning interest to a master arbitrator, arguing then, as now, that section 65-3.9 (c) is contrary to Insurance Law § 5106 (a). That section of the Insurance Law provides in pertinent part that payments of first-party benefits are to be made as the loss is incurred, and are “overdue” if not paid within 30 days after proof of the injury and the amount of loss sustained has been presented. By contrast, 11 NYCRR 65-3.9 (c) states, in pertinent part, that where an applicant does not request arbitration or institute a lawsuit within 30 days after receiving the form denying the claim, interest will be computed from the actual date that arbitration or a lawsuit is commenced.

By determination dated March 11, 2007, the master arbitrator affirmed the findings of the arbitrator but remanded the computation of interest (petitioner’s exhibit 2 at 2). On remand the arbitrator analyzed the regulation and relevant case law and determined that the regulation is “lawful rule-making” and not contrary to Insurance Law § 5106 (a), and that the accrual of interest was rationally found to have commenced with the filing by petitioner for arbitration on August 8, 2006, rather than the November 2003 date when petitioner received respondent’s first denial of payment (petitioner’s exhibit 4, arbitrator’s award{**21 Misc 3d at 793} on remand at 3-6). The arbitrator also awarded attorney’s fees to petitioner in accordance with Insurance Department Regulations § 65-4.6 (b) and (e) (petitioner’s exhibit 4, arbitrator’s award on remand at 7). Petitioner appealed this determination to a master arbitrator. The master arbitrator affirmed the award in its entirety on December 24, 2007 (petitioner’s exhibit 5 at 12, 4).

The petition seeks judicial review and vacatur of the master arbitrator’s award on the ground that the provision of section 65-3.9 (c), abating the accrual of interest until the commencement of arbitration or litigation, is contrary to Insurance Law § 5106 (a).^[FN1] It seeks a finding that its interest began accruing as of 30 days after the date of receipt by respondent of petitioner’s bills. It also seeks statutory attorney’s fees pursuant to 11 NYCRR 65-4.10 (j) (4), reasonable attorney’s fees for work undertaken for the master arbitration proceedings, pursuant to section 65-4.10 (j) (2) (i), the costs of the filing fees for the two master arbitration proceedings, and costs and disbursements, as well as the filing fee incurred in this proceeding.

Respondent cross-petitions to confirm the master arbitrator’s award and to oppose an award of attorney’s fees.

Judicial review of arbitration awards is extremely limited (Wien & Malkin LLP v Helmsley-Spear, Inc., 6 NY3d 471, 479 [2006], citing Paperworkers v Misco, Inc., 484 US 29 [1987]). CPLR 7511 (b) sets forth the four grounds, none of which are pertinent, on which a petitioner generally can seek to vacate an award. However, where as here, a party seeks vacatur based on a challenge to a state regulation, it is required to establish that the regulation ” ‘is so lacking in reason for its promulgation that it is essentially arbitrary’ ” (Ostrer v Schenck, 41 NY2d 782, 786 [1977], quoting Matter of Marburg v Cole, 286 NY 202, 212 [1941]). Petitioner challenges the validity of 11 NYCRR 65-3.9, one of the regulations promulgated under the authority of the Superintendent of Insurance, as authorized by [*2]the Legislature through Insurance Law § 301, to implement the No-Fault Law (11 NYCRR part 65).

“The cornerstone of administrative law is derived from the principle that the Legislature may declare its will, and after fixing{**21 Misc 3d at 794} a primary standard, endow administrative agencies with the power to fill in the interstices in the legislative product by prescribing rules and regulations consistent with the enabling legislation” (Matter of Nicholas v Kahn, 47 NY2d 24, 31 [1979]). When interpreting a statute, it is fundamental that the court will attempt to effectuate the legislative intent, and where the statutory language is clear and unambiguous, it should be construed so that the plain meaning of the words is effectuated (Patrolmen’s Benevolent Assn. of City of N.Y. v City of New York, 41 NY2d 205, 208 [1976]). The starting point is the language itself (Matter of Rizzo v New York State Div. of Hous. & Community Renewal, 6 NY3d 104, 112 [2005]). Here, the particular no-fault statute at issue states in relevant part,

“Payments of first party benefits and additional first party benefits shall be made as the loss is incurred. Such benefits are overdue if not paid within thirty days after the claimant supplies proof of the fact and amount of loss sustained. . . . All overdue payments shall bear interest at the rate of two percent per month.” (Insurance Law § 5106 [a] [emphasis added].)

The regulation challenged by petitioner states, in pertinent part,

“(a) All overdue mandatory and additional personal injury protection benefits due an applicant or assignee shall bear interest at a rate of two percent per month, . . .

“(c) If an applicant does not request arbitration or institute a lawsuit within 30 days after the receipt of a denial of claim form or payment of benefits calculated pursuant to Insurance Department regulations, interest shall not accumulate on the disputed claim or element of claim until such action is taken. . . .

“(d) If an applicant has submitted a dispute to arbitration or the courts, interest shall accumulate, unless the applicant unreasonably delays the arbitration or court proceeding.” (11 NYCRR 65-3.9 [emphases added].)

Petitioner points to the two clauses in Insurance Law § 5106 (a) stating that benefits are “overdue” if not paid within 30 days after proof of the injury and loss is supplied, and that “overdue” payments bear interest at the rate of 2% per month, and argues that the statutory language does not include any{**21 Misc 3d at 795} abeyance for either the payment of a loss where an insurer wrongly denies a claimant’s claim or in the accrual of interest. Petitioner thus argues that 11 NYCRR 65-3.9 (c), which provides for possible abeyance in the accrual of interest until the applicant seeks arbitration or files a lawsuit to contest the failure to pay, is in derogation of the statute’s clear language.

It is recognized that the superintendent has a “special competence and expertise with respect to the insurance industry” (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 864 [2003] [internal quotation marks omitted]), and has accordingly been vested “with broad power to interpret, clarify, and implement the legislative policy” (Ostrer v Schenck, 41 [*3]NY2d at 785, quoting Breen v Cunard Lines S. S. Co., 33 NY2d 508, 511 [1974]), although the regulations must be consistent with statutory provisions (Ostrer v Schenck at 785-786). A rule or regulation properly crafted within the scope of the superintendent’s authority has the force of law and “represents the policy choice of this State” (State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, 321 [2005]).

The interpretation of a statute by the agency charged with its enforcement will generally be given “great weight and judicial deference, so long as the interpretation is neither irrational, unreasonable nor inconsistent with the governing statute.” (Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 62 NY2d 539, 545 [1984] [citation omitted].) A regulation will not be found valid “if it contravenes the will of the Legislature, as expressed in the statute” (State Div. of Human Rights v Genesee Hosp., 50 NY2d 113, 118 [1980]). The court will scrutinize the regulation or rule for “genuine reasonableness and rationality in the specific context” (Kuppersmith v Dowling, 93 NY2d 90, 96 [1999]; Nunez v Giuliani, 91 NY2d 935, 938 [1998]). A regulation will be upheld if it has a rational basis and is not unreasonable, arbitrary, capricious, or contrary to the statute under which it was promulgated (Kuppersmith v Dowling, 93 NY2d 90, 96 [1999]).

New York’s No-Fault Law is designed in part to ensure that accident victims receive “prompt compensation for losses” (Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d 556, 562 [2008]). However, as fully discussed in Matter of Medical Socy. of State of N.Y. v Serio (100 NY2d at 861-863) over the years of implementation of the No-Fault Law, the superintendent has had to focus on no-fault fraud and abuse, and the regulations have been revised in an attempt to close windows of{**21 Misc 3d at 796} opportunity for the parties to take advantage of each other’s positions, and as well to better effectuate the legislative intent of providing prompt compensation “as the loss is incurred” pursuant to Insurance Law § 5106 (a).^[FN2] In upholding the revisions to the regulations, the Court in Medical Socy. noted that the new circumscribed time frames prescribed for filing notices and proofs of claims were based on the determination of the superintendent that much of the abuse was associated with the lengthy time frames within which claims could be presented to insurers (100 NY2d at 862). For example, it is now required that the accident victim file a notice of claim with the insurer no later than 30 days after an accident (11 NYCRR 65-1.1). Proof of loss due to medical treatment must be provided within 45 days and proof of work loss must be provided from as soon as reasonably practicable up to 90 days (§§ 65-1.1, 65-2.4 [c]). After an insurer has received proper verification establishing proof of claim, it has 30 days to pay or deny the claim, unless further verification is sought (§ 65-3.8 [c]). Furthermore, the courts have held that even though the common law did not preclude defenses and neither the Insurance Law nor the regulations provided for preclusion, [*4]an insurer will be precluded from asserting any defenses when it does not pay or deny a claim within the 30-day period (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 281-282 [1997], rearg denied 90 NY2d 937 [1997]), except when the defense is lack of coverage (Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 318 [2007]).

Employing the methodology used in Medical Socy., and examining both the statute and the regulation at issue, the court finds petitioner’s arguments concerning the illegality of the regulation to be unpersuasive when analyzed within the entire framework of the No-Fault Law and the implementing{**21 Misc 3d at 797} regulations, all of which seek fairness and promptness in the resolution of auto accident injury claims. Petitioner argues that where a claim has been timely denied but is ultimately found meritorious by an arbitrator or court, the payment will be “overdue” and interest should accrue from the time of the denial. It argues, in essence, that it should be understood that the Insurance Law includes an additional penalty to be assessed against an insurer that denies a claim and is later found to have improperly done so. Notably, Insurance Law § 5106 (a) only addresses payments by insurers, including overdue payments, and includes a provision for an interest penalty where payments are overdue. However, an insurer is also allowed to timely deny a request for reimbursement (see Presbyterian Hosp., 90 NY2d 274 [1997]), and 11 NYCRR 65-3.9 (c), was enacted to address those instances. The regulation provides that where the insurer timely denies, then the applicant is to seek redress within 30 days, after which interest will accrue. As noted in East Acupuncture, P.C. v Allstate Ins. Co., “[t]he interest provision, presently at 24% per annum, is punitive in nature . . . and designed to inflict an economic sanction or penalty on those insurers who do not comply” with the No-Fault time frames (15 Misc 3d 104, 108 [App Term, 2d Dept 2007] [citations and internal quotation marks omitted]).^[FN3]

The regulation contains, in addition to an economic sanction against recalcitrant insurers, a built-in protection against potential delay by providing that where an applicant chooses not to timely press forward to seek redress for a denial, there will be no interest penalty assessed against the insurer until such time as the applicant chooses a remedy. This is in keeping with the intent of the No-Fault Law as a whole because it seeks to encourage the parties moving forward toward a quick resolution, while not economically favoring one side or the other.

The Court of Appeals has implicitly upheld the regulation in its decision, Presbyterian Hosp. (90 NY2d at 278 [“(p)ursuant to both the Insurance Law and the regulations promulgated by the Superintendent of Insurance, an insurer is required to either pay or deny a claim for no-fault automobile insurance benefits within 30 days from the date an applicant supplies proof of claim (see, Insurance Law § 5106 [a]; Insurance Regulation 65.15 [g] [3]). Failure to pay benefits within the 30-day requirement{**21 Misc 3d at 798} renders benefits ‘overdue’ “]). Therefore, it cannot be found that the Legislature intended that insurers be penalized for timely denying a claim, even where such denial is later found improper.

The agency’s interpretation of one of its promulgated regulations “is entitled to deference” (Matter of 427 W. 51st St. Owners Corp. v Division of Hous. & Community Renewal, 3 NY3d 337, 342 [2004] [internal quotation marks omitted]). Here, the agency’s promulgation of the regulation is rationally based and is consistent with the no-fault statute and the other enabling regulations. The petition to vacate the master arbitrator’s award which affirmed the previous arbitrators’ awards is therefore denied, except to the extent that the issue of attorney’s fees as fixed by the court pursuant to 11 NYCRR 65-4.10 (j) (4) is severed and referred to a special referee to hear and determine.

The cross motion to confirm the arbitration award is accordingly granted.

Footnotes

Footnote 1: Petitioner notified the Office of the Attorney General of the State of New York of its challenge to the statute by letter dated March 3, 2008, and the Attorney General’s Office has advised that it will not intervene in the instant matter (cross petition exhibit E, letter of Mar. 20, 2008, Office of Attorney General to Goodman).

Footnote 2:

“[T]he Superintendent appears to be well aware of the interplay of no-fault deadlines and fraud. A few years ago he reduced the regulatory time frames for automobile accident victims or their assignees to claim and prove entitlement to no-fault benefits—a measure applauded by insurers—in part because ‘the most common example of . . . fraud . . . consisted of exploiting the time lag between the alleged loss and the deadline for submitting proof of the loss, coupled with the reality that insurers are given only 30 days to review and investigate claims before paying them without risk of penalties for denying or delaying a claim.’ ” (Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d at 565 n 2, quoting Medical Socy., 100 NY2d at 861.)

Footnote 3: The punitive nature of the interest penalty is seen also in subdivision (b) of 11 NYCRR 65-3.9, which provides that an insurer may not “suggest or require, as a condition to settlement” that the interest be waived.

[*1]

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

APPEARANCES OF COUNSEL

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

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

Arlene P. Bluth, J.

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

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

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

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

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

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

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

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

Supreme Court, New York County

602584/06

Attorneys for Plaintiff Alcon Builders Group, Inc.

Finger & Finger

158 Grand Street

White Plains, New York 10601

(914) 949-0308

By: Daniel S. Finger, Esq.

Attorneys for Defendant National Union Fire Insurance Company of Pittsburgh, PA

Sedgwick, Detert, Moran & Arnold

125 Broad Street, 39th Floor

New York, New York 10004

(212) 422-0202

By: Lawrence Klein, Esq.

Attorneys for Defendant/Third-Party Plaintiff U.S. Underwriters Insurance Company

Miranda Sokoloff Sambursky Slone Verveniotis LLP

240 Mineola Boulevard

Mineola, New York 11501

(516) 741-7676

By: Steven Verveniotis, Esq. and Todd M. Hellman, Esq.

Attorneys for Third Party Defendant Moklam Enterprises, Inc.

Dwyer & Brennan, Esq.

7 Dey Street, Suite 1401

New York, New York 10007

(212) 571-4067

By: Gerald Dwyer, Esq.

Attorneys for Third Party Defendant Andrzej Konieczny

Perecman & Fanning, PLLC

250 West 57th Street, Suite 401

New York, New York 10107

(212) 977-7033

By: Mariusz Sniarowski, Esq.

Helen E. Freedman, J.

This is an insurance declaratory judgment action arising out of a worker’s accident at a Manhattan construction site. Defendant/third-party plaintiff U.S. Underwriters Insurance Company (“Underwriters”) moves for summary judgment (CPLR 3212) dismissing the complaint and declaring that it does not have a duty to defend or indemnify plaintiff Alcon Builders Group, Inc. (“Alcon”) in connection with a personal injury action entitled Andrzej Konieczny v Moklam Enterprises, Inc., Alcon Building Group, Inc. Rockstar Games, Inc. and Take 2 Interactive, Inc., (New York County Index No. 111640/05)(the “Konieczny Action”).^[FN1] [*2]Alcon cross-moves for summary judgment declaring that Underwriters and defendant National Union Fire Insurance Company of Pittsburgh, PA (“National Union”) must defend and indemnify it in the Konieczny Action. National Union cross-moves to dismiss the complaint.

Facts/Background

The following facts are taken from the pleading, affidavits and documentary evidence submitted with the motion papers, and are undisputed except as otherwise indicated. In the underlying Konieczny Action, Andrzej Konieczny (“Konieczny”) alleges that on March 30, 2004, he was injured while working at a construction site at 622 Broadway, New York, New York, in a building was owned by third-party defendant Moklam. Konieczny was an employee of Michael Schondorf, Inc., (“Schondorf”), an electrical subcontractor retained by Alcon. Alcon was the general contractor at the site, having been retained to build an audio post production suite by non-party Janson Design Group LLC.

Underwriters issued Alcon a commercial general liability policy, CL 305375A (the “Primary Policy”), effective June 17, 2003 to June 17, 2004, with a $1,000,000 per occurrence limit. The main body of the Primary Policy set forth various exclusions, lettered “A” through “O” with subparts. Additional exclusions were contained in the separate endorsement pages supplementing the policy, including one entitled “Exclusion of Injury to Employees, Contractors and Employees of Contractors.” That section provided, in pertinent part, as follows:

This policy does not apply to:

* * *

(ii) “Bodily injury” to any contractor or any

“employee” of any contractor arising out ofor in the course of the rendering orperforming services of any kind or naturewhatsoever by such contractor or “employee”of such contractor for which any insured maybecome liable in any capacity . . . .

Alcon also obtained a commercial umbrella policy, No. EBU 7288966 (the “Umbrella Policy”) from National Union, a subsidiary of American International Group, Inc. (“AIG”). The Umbrella Policy was effective April 3, 2003 to April 3, 2004 and had a $4,000,000 per occurrence limit. The coverage was excess to the “Insured’s Retained Limited,” which was defined as “[t]he total of the applicable limits of the underlying polices listed in the Schedule of Underlying Insurance and the applicable limits of any other underlying insurance providing coverage to the Insured.” The Umbrella Policy also provided that National Union would undertake the duty to defend when “[d]amages are sought for Bodily Injury . . . covered by this policy but not covered by any underlying insurance listed in the Schedule of Underlying Insurance or any other underlying insurance providing coverage to the Insured.”

The Schedule of Underlying Insurance indicated that there was a general liability policy and an employer’s liability policy in effect. However, the schedule did not provide specific information about the policies, other than their dollar liability limits. In the space provided to identify the insurer, policy number and policy period, only dates appeared. The significance of [*3]the dates is not clear. If they were intended to indicate a policy period, it would be a period of zero years — 12/31/99 to 12/31/99.

The main body of the Umbrella Policy set forth a variety of coverage exclusions, lettered “A” through “T” with subparts. The exclusions included Alcon’s obligations under various laws (workers compensation, unemployment and disability benefits, ERISA, no-fault, uninsured and underinsured motorist) and damages to property owned, rented, occupied or used by Alcon. Also excluded was coverage for bodily injury or property damage caused or arising out of specified circumstances, e.g., use of watercraft, pollution, war. However, in at least three instances (injuries caused by fellow employees, watercraft and

intoxication), the relevant exclusion was qualified by the following language:

[I]f insurance for such Bodily Injury or Property Damage is provided by a policy listed in the Schedule of Underlying Insurance:

1. This exclusion shall not apply; and

2. The insurance provided by our policy

will not be broader than the insurance

coverage provided by the policy listed

in the Schedule of Underlying Insurance.

Numerous additional exclusions were set forth in the separate endorsements annexed to the Umbrella Policy. However, neither the body of the Umbrella Policy nor the endorsements contained an exclusion for bodily injury to a contractor’s employee.

The record indicates that the Umbrella Policy was procured through an application completed by a broker with the Brooks Insurance Agency, Inc. (“Brooks”). The application was completed electronically through an “e-Excess broker-interfacing underwriting platform” maintained by AIG Small Business (“AIGSB”), a member company of AIG. The application identified Underwriters as the underlying carrier, and in response to the question whether the Primary Policy was an “ISO Form with no manuscripted endorsements,” the broker responded “yes.” In response to the question whether there were “[a]ny exclusionary Endorsements attached to GL policy,” the broker answered “no.”

The Konieczny Action was commenced on by filing on August 19, 2005. The pleadings were served on the New York Secretary of State on September 6, 2005, which forwarded them to Alcon on September 13, 2005. The pleadings were provided to Underwriters by Alcon’s broker on September 14, 2005, and to National Union on September 15, 2005.

By letter dated September 15, 2005, Underwriters disclaimed coverage on the ground that Konieczny was the employee of a contractor and thus subject to the policy exclusion for such employees. Underwriters also disclaimed on the ground that Alcon failed to give notice of the accident until more than a year after its occurrence. After seeking additional information about the claim, National Union issued a disclaimer letter on March 3, 2006. In it, National Union cited late notice of the claim and asserted that it was also investigating whether it was entitled to rescind the policy based upon Alcon’s alleged misrepresentations regarding the existence of endorsements and exclusions in the Primary Policy. This action followed. [*4]

Discussion

For the following reasons, Underwriters’ motion is granted in its entirety and plaintiff’s motion cross motion as against Underwriters’ is denied. Plaintiff’s and National Union’s cross motions regarding the Umbrella Policy are both denied without prejudice to renewal following discovery on the issues of notice and the existence of other primary coverage.

Underwriters’ Motion for Summary Judgment

Underwriters’ motion for a declaration that it has no duty

to defend or indemnify Alcon under the Primary Policy is granted in its entirety. Although there may be questions of fact regarding whether Underwriters’ received timely notice of the claim (see discussion below in connection with the Umbrella Policy), coverage is defeated by the exclusion for bodily injury to contractors and their employees. The relevant language of Underwriters’ policy has repeatedly been held to be clear, unambiguous and enforceable (see, U.S. Underwriters Ins. Co. v 614 Constr. Corp., 142 F Supp 2d 491, 494-95 [SD NY 2001]; U.S. Underwriters Ins. Co. v Roka LLC, 2000 WL 1473607, at *4 [SD NY 2000]; U.S. Underwriters Ins. Co. v Zabar, 1999 WL 441472, at *3 [ED NY 1999]; U.S. Underwriters Ins. Co. v Beckford, 1998 WL 23754, at *3-4 [ED NY 1998]). Plaintiff’s argument that Konieczny does not fall within the exclusion because he was the employee of a “subcontractor” rather than a “contractor” has also been considered, and rejected, by the courts (see, Beckford, 1998 WL 23754, at 4 [“it is clear that the term contractor’ is a generic one, encompassing both general contractors and subcontractors; U.S. Underwriters Ins. Co. v Congregation Kollel Tisereth, Tzvi, 2004 WL 2191051, at *7 (ED NY 2004)]).

Without reference to this clear line of authority, Alcon attempts to distinguish this case on the ground that the Primary Policy itself gives separate, independent meanings to the terms “contractor” and subcontractor.” However, the only example provided by plaintiff is the policy’s use of the word “subcontractor” in an endorsement, where it appears in the heading of an amendment to an exclusion (“DAMAGE TO WORK PERFORMED BY SUBCONTRACTORS ON YOUR BEHALF”). The example only further weakens plaintiff’s argument, as the effect of the amendment is to remove a paragraph containing a reference to “subcontactors” from the main body of the policy.

Accordingly, Underwriters has no obligation to defend or indemnify Alcon in the Konieczny Action. Pursuant to the parties’ stipulation, the court will also issue a similar declaration regarding Underwriters’ obligations to Moklam.

Alcon’s and National Union’s Cross Motions For Summary Judgment

The cross motions of Alcon and National Union for summary judgment on the Umbrella Policy are both denied without prejudice. Although National Union’s attempt to disclaim on the ground that it was misled as to the nature of the primary coverage must be rejected, the record is not sufficiently developed to support a determination on whether the excess insurer received timely notice of the claim.

With regard to the misrepresentation defense, “[t]o establish materiality as a matter of law, the insurer must present documentation concerning its underwriting practices, such as underwriting manuals, bulletins, or rules pertaining to similar risks, which show that it would not have issued the same policy if the correct information had been disclosed in the application” (Roudneva v Bankers Life Ins. Co. of NY,

35 AD3d 580 [2d Dept 2006]); see, Insurance Law § 3105[c]).In arguing that Alcon [*5]made a material misrepresentation regarding the scope of the Underwriters’ policy, National Union

points out that the e-Excess application incorrectly denied that the Underwriters’ policy was supplemented by manuscripted or exclusionary endorsements. To explain the materiality of this alleged misrepresentation, National Union has submitted an affidavit from an AIGSB assistant vice president, Patricia S. Fargis (“Fargis”), who asserts that it was the practice of AIGSB’s Excess Casualty Division to “match” all exclusions and endorsements in the underlying policies. Thus, Fargis claims that if the application had correctly admitted that the underlying policy contained exclusions and endorsements, it would have been referred to an AIGSB underwriter for review to insure that the Umbrella Policy contained identical ones, including the exclusion for bodily injury to contractors and employees. Fargis states that because no endorsements were indicated, no underwriter review was triggered and the policy was simply issued by an administrative employee, Sara Chazin (“Chazin”).

The Fargis affidavit is problematic in a number of regards. For example, it admits that “AIGSB did not maintain any written guidelines regarding its practice of matching all exclusions and endorsements.” Furthermore, Fargis’ assertion as to whether and how Chazin processed the application is made upon information and belief, and Chazin identified as an “underwriter” rather than an administrative employee on the “Underwriting Checklist” supplied by National Union. There is also some question as to whether the Brooks agency was acting as agent for the insurer or the insured, and thus whether the alleged misrepresentations are chargeable to Alcon at all.

These issues need not be further explored, however, because information gleaned from the policies themselves belie National Union’s claim that the terms of the Primary Policy were material to its decision to insure or that it acted in reliance on any misrepresentations. First, it is undisputed that the Umbrella Policy was issued in April 2003, several months before the Primary Policy was issued. National Union’s policy thus could not have been issued in reliance upon anything contained in or annexed to the later-issued Primary Policy.

Second, the Schedule of Underlying Insurance in the Umbrella Policy does not meaningfully identify any underlying policy. Even if it is assumed that a predecessor policy to the Primary Policy was in effect when the Umbrella Policy was issued in April 2003 (and that the alleged misrepresentations were made in connection with the predecessor policy), that predecessor policy was not identified in the Schedule either. As noted, the Schedule merely refers to a “general liability” policy with a 12/31/99 to 12/31/99 term. Accordingly, the Umbrella Policy confirms that National Union did not issue it in reliance upon the terms of any underlying policy.

Third, Fargis’ claim that National Union’s had a mandatory “matching” policy with respect to exclusions and endorsements is refuted by a comparison of the Primary and Umbrella Policies. The multi-part exclusions set forth in the main body of the Primary Policy are not identical to those in the Umbrella Policy. Moreover, some of the exclusions the Umbrella Policy provided that they would be applicable if underlying policy provided coverage, while other exclusions applied regardless of underlying coverage. The Umbrella Policy was also supplemented by a series of endorsements containing exclusions not found in the Primary Policy.

Finally, the Umbrella Policy specifically anticipated that circumstances might exist where National Union’s coverage obligations would be broader that the underlying insurer. As [*6]noted, National Union obligated itself to defend bodily injury claims which were “covered by this policy but not covered by any underlying insurance.” While excess insurers do often issue policies which “follow form” and adopt only the language of the underlying policy (see, Matter of the Liquidation of Midland Insurance Co., ___ NYS2d ___, 2008 WL 1989667 [Sup Ct NY Co 2008]; Appleman on Insurance 2d § 145.1 at 6 [2003]), the Umbrella Policy at issue is not such a policy. Indeed, no effort was made by National Union to even examine the underlying policy, with or without endorsements.

Notwithstanding that the Umbrella Policy may provide coverage to plaintiff, the timeliness of plaintiff’s notice to National Union must first be resolved. That determination cannot be made on the present record. Although the nearly eighteen-month delay between the accident and notice to National Union would ordinarily defeat coverage (see, Those Certain Underwriters at Lloyds, London v Gray, 49 AD3d 1 [1st Dept 2007]; Deso v London & Lancashire Indem. Co. of Am., 3 NY2d 127 [1957]), such a lapse may be excused where the insured lacked knowledge of the accident (see, White by White v City of NY, 81 NY2d 955, 957 [1993]; Security Mut. Ins. Co. of New York v Acker-Fitzsimons,

31 NY2d 436, 441 [1972]). Here, plaintiff alleges that it was not aware of the accident until it was served with the complaint, an assertion supported by an affidavit from a corporate officer who states that he questioned plaintiff’s employees upon receipt of the pleadings and determined that no one was aware of the incident. Defendant is, of course, entitled to investigate the lack of knowledge claim by deposing plaintiff’s officers, employees and the injured worker, and seeking whatever documentary or other evidence may exist regarding the accident and whether it was reported. Accordingly, the motions of Alcon and National Union for declarations regarding the coverage issue are denied without prejudice pending the completion of such discovery.

Accordingly, it is

ORDERED, that the motion of defendant U.S. Underwriters Insurance Company for summary judgment is granted in its entirety, and it is further

ADJUDGED and DECLARED that defendant U.S. Underwriters Insurance Company is not obligated to defend or indemnity plaintiff Alcon Builders Group, Inc. or third-party defendant Moklam Enterprises, Inc. in the action entitled Andrzej Konieczny v. Moklam Enterprises, Inc., Alcon Building Group, Inc. Rockstar Games, Inc. and Take 2 Interactive, Inc.,(New York County Index No. 111640/05) and it is further

ORDERED, that the cross motions of plaintiff and defendant National Union National Union Fire Insurance Company of Pittsburgh, PA for summary judgment are denied without prejudice to renewal upon completion of discovery on the issue of timely notice of claim to the National Union, and it is further

ORDERED, that the Clerk shall enter judgment accordingly.

Dated: July 1, 2008

ENTER:

Helen E. Freedman, J.S.C.

Appearances

Attorneys for Plaintiff Alcon Builders Group, Inc.

Finger & Finger

158 Grand Street

White Plains, New York 10601

(914) 949-0308

By: Daniel S. Finger, Esq.

Attorneys for Defendant National Union Fire Insurance Company of Pittsburgh, PA

Sedgwick, Detert, Moran & Arnold

125 Broad Street, 39th Floor

New York, New York 10004

(212) 422-0202

By: Lawrence Klein, Esq.

Attorneys for Defendant/Third-Party Plaintiff U.S. Underwriters Insurance Company

Miranda Sokoloff Sambursky Slone Verveniotis LLP

240 Mineola Boulevard

Mineola, New York 11501

(516) 741-7676

By: Steven Verveniotis, Esq. and Todd M. Hellman, Esq.

Attorneys for Third Party Defendant Moklam Enterprises, Inc.

Dwyer & Brennan, Esq.

7 Dey Street, Suite 1401

New York, New York 10007

(212) 571-4067

By: Gerald Dwyer, Esq.

Attorneys for Third Party Defendant Andrzej Konieczny

Perecman & Fanning, PLLC

250 West 57th Street, Suite 401

New York, New York 10107 [*7]

(212) 977-7033

By: Mariusz Sniarowski, Esq.

Footnotes

Footnote 1: That branch of Underwriters’ motion which sought a declaration that it was not obligated to defend or indemnify third party defendant Moklam Enterprises, Inc. in the Konieczny Acton was resolved by stipulation dated October 8, 2007, in which Moklam agreed that it was not covered and stated that it did not oppose the declaration.

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

2765/08

For plaintiffs:

Edward Shapiro. P.C.

Wantagh, NY

For defendant:

McDonnell and Adels, P.C.

Garden City, NY

Arlene P. Bluth, J.

Upon the foregoing cited papers and after argument, defendant moves for summary judgment pursuant to CPLR §3212 dismissing the complaint or, in the alternative, for an order pursuant to CPLR 3124 compelling plaintiffs to respond to its discovery demands on Mallella issues. For the following reasons, the branch of the motion for summary judgment is denied and the branch of the motion compelling discovery is granted to the extent set forth below.

In this action, plaintiffs seek to recover first-party No-Fault benefits in the amount of $3,937.33, plus statutory, interest, costs, and attorneys’ fees, for medical services allegedly rendered to their assignor, Marie Boucicaut, following an alleged automobile [*2]accident on April 4, 2003.

Summary Judgment

Defendant contends that the underlying incident was an intentionally caused loss which is not covered by defendant’s insurance policy and seeks summary judgment dismissing the complaint. In support thereof, defendant submits the affidavit of Christopher Howard, an investigator in its Special Investigation Unit who was personally involved in the investigation. Mr. Howard sets forth detailed results of his investigation, all of which certainly tend to show that the underlying incident was staged, and thus not covered by the policy. In opposition, the plaintiff has failed to contradict any of Mr. Howard’s sworn statements or any of the voluminous documents annexed thereto.

Although there are many cases where a court has found that the investigator’s affidavit either is or is not sufficient to defeat a plaintiff’s motion for summary judgment, defendant has failed to cite a single case where summary judgment was granted to a defendant based upon a lack of coverage/staged accident defense supported by an investigator’s affidavit. From the uncontradicted, overwhelming circumstantial evidence in this record, this Court believes that if there were cases where summary judgment could be granted to the defendant, this would be one of those cases; the only evidence more convincing than the circumstantial evidence presented here would be if the driver and passengers admitted under oath that they fabricated their stories and withdrew their claims with prejudice. Unfortunately, this Court is constrained to deny defendant’s motion for summary judgment because it appears that summary judgment is simply unavailable to a defendant denying a claim on the grounds that it involved a staged accident.

Indeed, even when the defendant’s testimony is sufficient to convince the Appellate Term that the defendant’s refusal to pay the claim was based upon its founded belief that the injuries did not arise out of an insured incident, such a finding is only sufficient to create an issue of fact; it is not a basis for granting summary judgment. The Appellate Term, Second Department has spoken on this point in A.M. Medical Services, P.C. v. Nationwide Mut. Ins. Co., 12 Misc 3d 143(A), 824 NYS2d 760 (App Term 2d Dept 2006). There, even though the evidence was compelling in defendant’s favor, that is, the driver and passenger admitted under oath that they faked the accident and withdrew their claims with prejudice, the Appellate Term reversed the trial court’s grant of summary judgment to the defendant.

In A.M. Medical Services, the EUO transcripts showed that when the assignor and [*3]driver were confronted with suspicious facts about their multiple “accidents,” they withdrew their claims with prejudice. The Appellate Term held:

[N]evertheless, the foregoing facts were sufficient to demonstrate that defendant’s refusal to pay the claim was based upon a “founded belief that the alleged injur[ies] do[ ] not arise out of an insured incident” (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1997]; GPM Chiropractic, P.C. v State Farm Mut. Ins. Co., 7 Misc 3d 138[A], 2005 NY Slip Op 50861[U] [App Term, 2d & 11th Jud Dists] ). This presented an issue of fact as to whether there was a lack of coverage. Consequently, plaintiff’s motion for summary judgment was properly denied and defendant’s cross motion for summary judgment should have been denied.

Even when the court found the defendant’s evidence convincing and that it was absolutely right to deny the claim based upon a founded belief of a staged accident, the Appellate Term still reversed trial court’s grant of summary judgment on those grounds.

But the Appellate Term’s decision does not stop there. The Court sua sponte ordered a sanctions hearing against the plaintiff’s attorney, and criticized him for pursuing an appeal frivolously:

Despite being advised of [the evidence of withdrawals], and being provided with background information which led to the “withdrawals,” plaintiff’s counsel submitted a reply affirmation wherein he continued to seek summary judgment in favor of his client, After having been unsuccessful [below], and despite being faced with the facts which clearly support a founded belief of fraud, plaintiff’s counsel took an appeal…

Therefore, the Appellate Term refused to affirm summary judgment even though it clearly thought that the plaintiff should not have pursued its claim when faced with the same evidence. If the Appellate Term thought the evidence of a staged accident was strong enough to consider sanctions against the plaintiff’s attorney for pursuing the claim but still refused to grant summary judgment to the defendant, then the only explanation is that there is a per se rule against summary judgment dismissing a claim based on staged accident. Absent a contrary decision in this Department, this Court, following A.M. Medical Services, denies defendant’s motion for summary judgment. Mountain View Coach Lines v Storms, 102 AD2d 663, 664, 476 NYS2d 918 (2d Dept 1984); People v Brisotti, 169 Misc 2d 672, 673, 652 NYS2d 206, 207 (App Term 1st Dept 1966); 545 West Co. v Schachter, 16 Misc 3d 431, 837 NYS2d 549 (Civ Ct, NY Cty, 2007).

Compelling Discovery

Defendant also seeks the alternative relief, pursuant to CPLR 3124, of an order compelling plaintiffs to respond to defendant’s discovery demands. Nowhere in the seven pages of opposition does plaintiff oppose this relief, nor have either of the plaintiffs ever moved for a protective order. The outstanding discovery includes a notice to take the depositions of Deepak Sachdev, M.D., Stella Ilyaev, M.D., Sanford Yu, L.Ac. and Karen Cinquemandi, D.C. Defendant has set forth uncontradicted documentary evidence that Dr. Sachdev is listed the owner of close to a dozen medical facilities, and has also annexed documents showing that he been arrested for selling prescriptions from one of his facilities in the Bronx as part of a multi-million dollar medicaid fraud ring. (His case is currently pending). The defendant has annexed proof that Dr. Sachdev is also listed on at least two of the bills sued upon herein as the employee of plaintiff Right Care Medical who actually performed the medical services for the assignor.

Plaintiff chose to bring this action, and civil litigants are obligated to abide by the CPLR. According to the CPLR, the defendant has the right to depose the plaintiff. Here, Dr. Sachdev, as the owner of the facility and the practitioner who actually rendered the services, must appear for his deposition. Furthermore, he must bring with him to the deposition the documents he may need to refer to in answering the questions relating to plaintiff’s corporate structure; if he does not bring the documents and he cannot answer the questions, then defendant may bring on a motion for further relief. In addition to the plethora of uncontradicted reasons submitted by the defendant tending to show that plaintiffs may be fraudulently incorporated and thus not entitled to insurance payment, the Court notes that Dr. Sachdev may be unaware of his corporation’s billing practices inasmuch as the bills annexed to the defendant’s motion show the each NF3 for services allegedly provided by Dr. Sachdev state that Dr. Sachdev is a “nerologist;” he is no more a “nerologist” than his counsel is an “attor-knee.” A person who worked so hard to become a neurologist would know how to spell it.

Accordingly, defendant’s motion to compel discovery is granted to the extent of ordering the deposition of Deepak Sachdev, M.D. on or before August 1, 2008 at the offices of defendant’s attorneys. The Court is allowing the deposition outside New York City because it appears that Dr. Sachdev resides in Franklin Square, Nassau County, where defendant’s offices are located. If Dr. Sachdev shows proof (which proof must be shown before July 1, 2008) that he does not reside in Nassau County, then the deposition will be held at the Courthouse, 111 Centre Street, New York, New York on or before August 1, 2008 or at another location within New York City, agreeable to the parties. If Dr. Sachdev fails to appear for the Court-ordered deposition, then the plaintiff Right Care [*4]Medical, P.C. will be precluded from offering any evidence at the trial or upon a motion for summary judgment.

With respect to plaintiff AA Acupuncture Services, P.C., defendant has not shown that Dr. Sachdev is involved in that professional corporation and has not submitted any bills relating thereto. Although the documents annexed to defendant’s papers show that Mr. Yu is a principal in AA Acupuncture Service, P.C., there are no allegations that his corporation may be fraudulently incorporated, nor are there bills to show he performed any of the services billed for herein. In addition, there are no specifics alleged regarding the other two individuals listed in the deposition notice, Stella Ilyaev, M.D. and Karen Cinquemandi, D.C. Accordingly, this Court does not have a basis to order any other depositions at this time.

This is the Decision and Order of the Court.

Dated: May 30, 2008

New York, New York

Arlene P. Bluth

Judge, Civil Court

[*1]

Civil Court of the City of New York, New York County, May 21, 2008

APPEARANCES OF COUNSEL

Barry & Associates, LLC, Plainview, for defendant. Baker, Sanders, Barshy, Grossman, Fass, Muhlstock & Neuwirth, Mineola, for plaintiff.

{**20 Misc 3d at 434} OPINION OF THE COURT

Arlene P. Bluth, J.

{**20 Misc 3d at 435}Defendant’s motion for summary judgment is granted and the complaint is dismissed.

Plaintiff commenced the instant action to recover first-party no-fault benefits in the amount of $2,670.39, plus statutory interest, costs and attorneys’ fees, for three MRI studies it allegedly conducted for its assignor, Nila Sokol. Two were allegedly performed on June 7, 2007 for which plaintiff billed defendant $879.72 and $912, and a third on June 12, 2007 for $878.67.

Plaintiff’s attorneys submitted each bill to defendant with a form cover letter on the attorneys’ letterhead. In that letter, the attorneys introduce themselves and state no less than three times that defendant was to deal with the attorneys from then on. (“Accordingly, please forward all future correspondence to our attention . . . Please make this payment payable to the above-referenced provider, C/O this office . . . All correspondence including payment, EOB’s, verification requests, etc. must be mailed directly to this office. Failure to do so may result in unnecessary litigation.”) The clear import of this repetitive direction—to be followed under threat of “unnecessary litigation”—is that plaintiff’s attorneys are its agents for all purposes related to the bill, and defendant must deal directly with plaintiff’s attorneys. In addition, the end of the letter contains the representation that any enclosed bills, forms, “doctor’s reports, notes and narratives were prepared solely by the above-referenced provider.” Clearly, then, the plaintiff did not submit any documents from the referring physician; there was no MRI referral form or prescription submitted with any of the bills.

The defendant’s claims examiner, Cinnamon Houston, states that defendant received the first bill (for $879.72) on June 26, 2007 and timely sent a verification request on July 10, 2007. That request was sent directly to the plaintiff’s attorneys and requested two items: a letter of medical necessity from the referring physician and a claim form with a valid provider’s signature. There can be no dispute that plaintiff’s attorneys received this request because they responded thereto by letter dated July 17, 2007. Their response, even though titled “Verification Compliance,” completely ignored the bona fide request. Instead, it said, in essence, “whatever we gave you was good enough and this provider is not giving you anything else. If you need something from someone else, go ask them. Now pay the bill.” In addition, the attorneys state: “Any further requests to this provider are deemed unnecessary and in violation{**20 Misc 3d at 436} of 11 NYCRR 65-3.2 (c).” This section states an insurer should “not demand verification of facts unless there are good reasons to do so.” (Id.) Nevertheless, Ms. Houston sent a follow-up request to plaintiff’s attorneys on August 13, 2007.

Defendant received the second bill (for $912) with the same form cover letter on June 27, 2007, and it sent a request for verification, seeking the same information as sought for the other MRI taken the same date, to plaintiff’s attorneys on July 10, 2007. There can be no dispute that plaintiff’s attorneys received this request, because they responded thereto by letter dated July 17, 2007. Their response was the same form letter referred to above, and Ms. Houston sent a follow-up request on August 10, 2007.

When defendant received the third bill, Ms. Houston timely sent a verification request. This time, plaintiff’s attorneys did not send a response and Ms. Houston sent a follow-up request on August 10, 2007.

In order to prevail on its motion for summary judgment, the movant must make a prima facie showing of entitlement to judgment as a matter of law, through admissible evidence, eliminating all material issues of fact. (Alvarez v Prospect Hosp., 68 NY2d 320 [1986].) Once the movant demonstrates entitlement to judgment, the burden shifts to the opponent to rebut that prima facie showing. (Bethlehem Steel Corp. v Solow, 51 NY2d 870, 872 [1980].) In opposing such a motion, the party must lay bare its evidentiary proof. Conclusory allegations are insufficient to defeat the motion; the opponent must produce evidentiary proof in admissible form sufficient to require a trial of material questions of fact. (Zuckerman v City of New York, 49 NY2d 557, 562 [1980].)

In deciding the motion, the court must draw all reasonable inferences in favor of the nonmoving party and must not decide credibility issues. (Dauman Displays v Masturzo, 168 AD2d 204 [1st Dept 1990], lv dismissed 77 NY2d 939 [1991].) As summary judgment is a drastic remedy which deprives a party of being heard, it should not be granted where there is any doubt as to the existence of a triable issue of fact (Chemical Bank v West 95th St. Dev. Corp., 161 AD2d 218 [1st Dept 1990]), or where the issue is even arguable or debatable (Stone v Goodson, 8 NY2d 8 [1960]).

The court finds Ms. Houston’s affidavit explaining preparation of the verification requests and the mailing procedures with respect to all of the verification requests (the initial three{**20 Misc 3d at 437} and the follow-up requests) sufficient to prove timely and proper mailings. Ms. Houston stated that she personally prepared each mailing, put each in the envelope, checked that it was properly addressed, and put it in her outgoing mail bin. She also stated that the regular office practice is that the mail person comes by at approximately 3:45 p.m. each afternoon, collects and stamps the mail, and then delivers it to the post office that day.

Although plaintiff’s opposition correctly notes that Ms. Houston did not swear that it was her duty to ensure compliance with defendant’s mailing procedures and that she did not herself drop it in the mailbox, it is enough that “the defendant submitted admissible evidence in the form of an affidavit of an employee with knowledge of the defendant’s standard office practices or procedures designed to ensure that items were properly addressed and mailed” (St. Vincent’s Hosp. of Richmond v Government Empls. Ins. Co., 50 AD3d 1123, 1124 [2d Dept 2008], citing New York & Presbyt. Hosp. v Allstate Ins. Co., 29 AD3d 547 [2d Dept 2006], Hospital for Joint Diseases v Nationwide Mut. Ins. Co., 284 AD2d 374 [2d Dept 2001], Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679 [2d Dept 2001], and Delta Diagnostic Radiology, P.C. v Chubb Group of Ins., 17 Misc 3d 16 [App Term, 2d Dept 2007]). Ms. Houston’s detailed affidavit fulfills this requirement.

The verification requests were sent to the plaintiff’s law firm. A letter properly mailed is presumed to have been received. (News Syndicate Co. v Gatti Paper Stock Corp., 256 NY 211 [1931].) Although an associate of that law firm submitted an affirmation in opposition to this motion, no attempt to rebut the presumption was made; conspicuously absent from that affirmation is a simple denial of receipt of the requests for verification. In opposing a motion for summary judgment, the nonmoving party must lay bare all of the facts at its disposal regarding the issues raised in the motion. (Zuckerman v City of New York, 49 NY2d 557, 562 [1980].) It is no excuse that the opponent could have submitted such evidence but did not because the opponent believed that the movant’s papers were insufficient. (Mgrditchian v Donato, 141 AD2d 513 [2d Dept 1988].) The affirmant in opposition was in the position to, but did not even attempt to, rebut the presumption that plaintiff’s law firm received the requests for verification shortly after Ms. Houston stated that they were mailed. Therefore, there is no question of fact as to proper mailing of the verification requests.

Having determined that defendant proved its timely and proper mailing of the requests for verification, the court turns{**20 Misc 3d at 438} to the other bases for plaintiff’s opposition. Plaintiff claims that defendant failed to present a “good reason” why further verification was necessary; this court disagrees. This court does not believe that it is unreasonable to ask for a letter of medical necessity before a carrier pays more than $2,500 for three MRIs conducted during the course of one week, approximately six weeks after an alleged accident. Defendant is not required to provide a blank checkbook to plaintiff. Rather, defendant is entitled to find out whether and why each MRI was prescribed; in other words, the carrier is entitled to inquire as to the medical necessity before it pays the bills.

Plaintiff also claims defendant violated 11 NYCRR 65-3.6 (b), which provides:

“(b) Verification requests. At a minimum, if any requested verification[ ] has not been supplied to the insurer 30 calendar days after the original request, the insurer shall, within 10 calendar days, follow up with the party from whom the verification was requested, either by telephone call, properly documented in the file, or by mail. At the same time the insurer shall 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.”

Plaintiff argues that because defendant did not send the follow-up verification requests both to it and to its attorneys, the requests are defective. This argument lacks merit.

Because the attorney’s cover letter clearly put defendant on notice that the law firm was the agent for the medical provider for all purposes with respect to the bill submitted, sending the verification request to the attorneys was the same as sending the request to the principal. As recently stated in Bauer v CS-Graces, LLC (48 AD3d 922, 924 [3d Dept 2008]): “The law is well settled that, unless obtained confidentially, ‘ “knowledge acquired by an agent acting within the scope of his [or her] agency is imputed to his [or her] principal and the latter is bound by such knowledge” ‘ (Skiff-Murray v Murray, 17 AD3d 807, 809-810 [2005], quoting Center v Hampton Affiliates, 66 NY2d 782, 784 [1985]; see Farr v Newman, 14 NY2d 183, 187 [1964]).”

Accordingly, defendant’s notice to the law firm-agent was notice to the principal-provider as a matter of law. Under the circumstances{**20 Misc 3d at 439} presented here, there was no need for the insurer to send another copy to the principal.

In addition, in interpreting 11 NYCRR 65-3.6 (b), courts have found that the additional notification to the applicant and its attorney is required when the verification is requested from a third party, not when, as here, the verification is requested from the applicant. “Where verification is sought from a party other than the applicant, the applicant is entitled to be timely informed of the nature of the verification sought and from whom it is requested when, after an initial verification request remains unsatisfied, a follow-up request is necessary” (Doshi Diagnostic Imaging Servs. v State Farm Ins. Co., 16 Misc 3d 42, 44 [App Term, 2d Dept 2007]). This court notes that this very plaintiff advanced the same arguments—that the second verification request was defective because the insurer did not send an additional notification to the attorney’s client-principal—in Lenox Hill Radiology & MIA, P.C. (Dejesus) v Progressive Cas. Ins. (Civ Ct, NY County, 2008, index No. 31019/07); there, albeit after trial, Judge Jeffrey Oing also found the argument to be without merit.

Because plaintiff failed to respond to defendant’s valid and proper verification requests, the 30-day period within which defendant had to either pay or deny the claim did not begin to run. Therefore, plaintiff’s claims for no-fault benefits are not overdue, this action is premature and must be dismissed. (See Hospital for Joint Diseases v State Farm Mut. Auto. Ins. Co., 8 AD3d 533, 534-535 [2d Dept 2004]; St. Vincent’s Hosp. of Richmond v American Tr. Ins. Co., 299 AD2d 338, 340 [2d Dept 2002].)

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

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

015066/2007

The appearances of counsel are:

Joaquin J. Lopez, Esq.

Attorney for plaintiff

(516) 741-4799

William R. Larkin, Esq.

Attorney for defendant

(212) 629-9690

Anil C. Singh, J.

Plaintiff medical provider issued bills to defendant insurance company seeking reimbursement under the No-Fault Law for services rendered to plaintiff’s assignor, Ali Sardar, who was allegedly injured in an automobile accident. The claim was denied, and plaintiff seeks recovery on these bills.

Defendant moves for moves for summary judgment dismissing the complaint without prejudice on the ground that the assignor is a taxicab driver who was injured while driving a taxicab. Accordingly, there is an issue as to whether Worker’s Compensation benefits are available which must be determined before the Workers’ Compensation Board.

Plaintiff opposes the motion and cross-moves for summary judgment. It urges that the elements of the prima facia case are not in dispute. Defendant admits that it received plaintiff’s claim and did not make payment pursuant to the thirty-day rule. It opposes the motion, arguing that defendant has failed to submit evidence that the assignor was employed at the time of the accident.

Defendant relies on two documents in support of its position that Mr. Sardar was [*2]employed at the time of the accident. The first is the application for no-fault benefits (the “NF-2”) filled out on behalf of Mr. Sardar. The application is signed by Mr. Sardar. Question 16 states as follows: “At the time of your accident were you in the course of your employment.” This question is answered “Yes.”

The second document is the MV-104 police accident report filled out by Officer Balloin describing what occurred at the time of the accident. The report states that the Sardar vehicle is a taxi.

Plaintiff urges that neither document is admissible. Defendant has failed to lay a foundation establishing that the NF-2, which was prepared by another entity, is a business record of defendant. Further, the information contained in the police report is inadmissable hearsay.

I disagree. CPLR 4518 is an exception to the hearsay rule and allows records to come into evidence provided it can be established that the writing was made in the regular course of business; it was the regular course of business to make the writing; and the writing was made at or about the time of the transaction. The rule is premised on the notion that routinely gathered information will be trustworthy and that the maker is under an obligation to record accurate information (People v. Kennedy, 68 NY2d 569 [1986]).

Records of third parties may be received in evidence when a company relies on those records in conducting its business (People v. Di Salvo, 284 AD2d 547 [2d Dept. 2001]). Records of third parties have been admitted where there is a business duty to give and record accurate information (Pencom Sys. v. Shapiro, 237 AD2d 144 [1st Dept. 1997]); see also People v. McKissick, 281 AD2d 212 [1st Dept. 2001]).

The NF-2 satisfies the requirements of reliability. The person completing the NF-2 has a duty to fill out the application accurately. Clearly, defendant insurance company must be able to rely on the information contained in the NF-2 in order to process the application for no-fault benefits.

The court may consider a police accident report “under the business record exception to the hearsay rule to the extent that it was based upon the personal observations of the police officer present at the scene and under a business duty to make it” (Westchester Med. Ctr. v. State Farm Mut. Auto. Ins. Co., 44 AD3d 750, 753 [2d Dept. 2007]. The first line on the police accident report asks for the following information: “Not investigated at Scene”; and “Accident Reconstruction.” Neither box was checked. Accordingly, Police Officer Balloin’s notation that the Sardar vehicle was a “taxi” is necessarily based on his observation at the scene of the accident.

The next issue is whether defendant has submitted sufficient evidence that Mr. Sardar was employed at the time of the accident. Worker’s Compensation is primary and, where the issue of its coverage arises, it must be presented first to the Worker’s Compensation Board (Arvatz v. Empire Mut. Ins. Co., 171 AD2d 262, 268 [1st Dept. 1991]; see also Mattaldi v. Beth Israel Med. Ctr., 297 AD2d 234 [1st Dept. 2002]) (threshold question whether plaintiff was employed must be determined by the Workers’ Compensation Board). As the Court of Appeals explained:

Where the availability of workmen’s compensation hinges upon the resolution of questions of fact or upon mixed questions of fact and law, the plaintiff may not choose the courts as the forum for the resolution of such questions. The Legislature has placed the responsibility for these [*3]determinations with the Workmen’s Compensation Board and there it must remain. (O’Rourke v. Long, 41 NY2d 219, 228 [1976]).

Therefore, in this action defendant must show only that there is “potential merit” to its claim that Mr. Sardar was employed at the time of the accident so as to trigger a determination by the Workers’ Compensation Board (A.B. Med. Servs. PLLC v. American Tr. Ins. Co., 8 Misc 3d 127(A) [App. Term 2d Dept]).

The statement in the NF-2 that Mr. Sardar was employed at the time of the accident and the observation of the police officer that the vehicle was a taxi is sufficient for defendant to meet its burden. Plaintiff fails to tender any evidence as to Mr. Sardar’s employment status.

For these reasons, defendant’s motion for summary judgment is granted, and the complaint is dismissed without prejudice. Plaintiff’s cross-motion for summary judgment is denied as moot.

The clerk is directed to enter judgment accordingly.

The foregoing constitutes the decision and order of the court.

Date: February 25, 2008_____________________________

New York, New YorkAnil C. Singh

[*1]

Civil Court of the City of New York, New York County, February 20, 2008

APPEARANCES OF COUNSEL

William Larkin for defendant. Shayna E. Sacks for plaintiff.

{**19 Misc 3d at 358} OPINION OF THE COURT

Anil C. Singh, J.

{**19 Misc 3d at 359}This is an action to recover first-party no-fault benefits under an automobile insurance policy. Defendant moves for summary judgment dismissing the complaint, contending that the lawsuit is premature because plaintiff did not comply with defendant’s demands for verification and, as such, proof of claim has not been submitted to the carrier. In the alternative, defendant moves for partial summary judgment, requesting that the court issue an order: (a) establishing that the verification at issue was requested on February 21, 2007 and April 6, 2007, and (b) shifting to plaintiff the burden to establish that proper and timely verification requests were complied with. Plaintiff opposes and cross-moves for summary judgment, contending that: (a) defendant admits to plaintiff’s prima facie case, and (b) defendant did not comply with proper verification procedures.

Plaintiff commenced this action in April 2007 alleging that defendant insurer had not paid or denied its $878.67 claim within 30 days as required by Insurance Law § 5106 (a) and 11 NYCRR 65-3.8 (a) (1), and seeking this amount plus statutory interest and attorneys’ fees.

Defendant exhibits the sworn affidavit of Edward Baillie, who is employed by defendant as a no-fault examiner. Mr. Baillie contends that he received a bill in the amount of $878.67 for services rendered to plaintiff’s assignor on January 8, 2007. Mr. Baillie does not state the date on which defendant received the bill from plaintiff. According to Mr. Baillie, he sent a verification request to the plaintiff for the initial report of the referring physician and a letter of medical necessity of the referring physician on February 21, 2007 and a follow-up request for the documents on April 6, 2007. Mr. Baillie contends that defendant never received a response to either request. He contends that he personally printed the requests for additional verification and the envelopes for mailing them, and that the verification requests were then collected by defendant’s mailroom unit.

Luis Campbell, the mailroom supervisor, states in a sworn affidavit that he has personal knowledge of defendant’s mailing procedures. Based on his familiarity with those procedures, he contends that the verification request was mailed on February 21, 2007 and the follow-up request was mailed on April 6, 2007.

Based upon the facts alleged in the affidavits, defendant raises two arguments to justify dismissing the case. The first argument is that no-fault benefits are not overdue because plaintiff did not provide the requested verification. Defendant cites 11 NYCRR 65-3.8 (a) (1), which states: “No-fault benefits are overdue{**19 Misc 3d at 360} if not paid within 30 calendar days after the insurer receives proof of claim, which shall include verification of all relevant information requested pursuant to section 65-3.5 of this subpart.” Defendant also cites 11 NYCRR 65-3.8 (f), which provides: “An insurer shall be entitled to receive proper proof of claim and a failure to observe any of the time frames specified in this section shall not prevent an insurer from requiring proper proof of claim.”

Defendant contends that it requested verification in the form of the initial report of the referring physician and a letter of medical necessity. It is undisputed that plaintiff failed to provide the documents requested. Moreover, defendant contends that it has no obligation to pay or deny the claim until verification is received, regardless of whether verification was requested in a timely manner. Thus, the claim must be dismissed on the basis of plaintiff’s failure to provide proof of claim.

Defendant’s second argument is that plaintiff’s cause of action for breach of contract is premature. According to defendant, plaintiff failed to comply with defendant’s demands for verification of the claim. As a result, proof of claim has allegedly not been submitted to the carrier, and the carrier has no obligation to act under the insurance policy. Without an obligation to act under the policy, there cannot be a breach.

Plaintiff responds with three arguments. First, plaintiff contends that defendant has the burden to prove that the verification requests were mailed timely but defendant has not met its burden. The affidavits of Edward Baillie and Luis Campbell do not state when defendant received the bill from plaintiff. Because the affidavits fail to state when the bill was received, it is impossible to determine whether the verification requests were sent timely.

Second, plaintiff contends that defendant was required to mail a copy of the verification requests to the patient/assignor pursuant to 11 NYCRR former 65.15 (e) (2) (now 65-3.6 [b]). However, defendant’s affidavits fail to state to whom the verification requests were sent.

Third, plaintiff contends that defendant admits to plaintiff’s prima facie case and did not comply with proper verification procedures. As a result, plaintiff is entitled to summary judgment.

It is imperative in ruling upon no-fault insurance matters not to lose sight of the fundamental goal of the regulatory scheme,{**19 Misc 3d at 361} which is “designed to promote prompt payment of legitimate claims” (Nyack Hosp. v General Motors Acceptance Corp., 8 NY3d 294, 300 [2007]). As the Court of Appeals noted in Medical Socy. of State of N.Y. v Serio (100 NY2d 854, 867 [2003]), the Superintendent of Insurance, in adopting revised Regulation 68 (repealing and replacing 11 NYCRR part 65), determined that these regulations were “the most effective means of advancing the legislative intent of providing prompt payment of [no-fault] benefits as the loss is incurred, while reducing rampant abuse.” Accordingly, this court’s duty is to interpret and apply the no-fault regulations in a consistent manner leading to the prompt payment of valid, documented claims.

In the instant matter, defendant suggests that an insurer is entitled to receive verification of a claim even if the request for such verification is untimely. We decline to adopt defendant’s proposed interpretation of 11 NYCRR 65-3.8 (f) because it conflicts with the basic purpose of the regulatory scheme. Rather, we interpret the language of section 65-3.8 (f) to mean only that an insurer must, within 30 calendar days after the insurer receives the initial proof of claim, either: (a) pay the claim; (b) deny the claim; or (c) make a timely request for verification. Under 11 NYCRR 65-3.8 (c), the insurer is required to either pay or deny the claim in whole or in part within 30 calendar days after proof of claim is received. In other words, section 65-3.8 (f) means simply that the 30-day rule to pay or deny a claim does not preclude an insurer from making a proper—and timely—request for verification of a claim.

We decline to adopt the defendant’s interpretation of the regulations because the suggested interpretation would render the clearly delineated time frames specified in the statute virtually meaningless. Furthermore, the proposed interpretation could lead to significant delays in the processing of claims for no-fault benefits. Such a result would clearly be at odds with the basic purpose of the regulatory scheme. Therefore, we find defendant’s contentions to be without merit.

The regulations set mandatory deadlines for verification of claims. The claims procedure for additional verification requests is set forth at 11 NYCRR 65-3.5 (b). It provides in pertinent part: “Subsequent to the receipt of one or more of the completed verification forms, any additional verification required by the insurer to establish proof of claim shall be requested within 15 business days of receipt of the prescribed verification forms.” The follow-up requirements are set forth at 11 NYCRR 65-3.6 (b), which states in part:{**19 Misc 3d at 362}

“Verification requests. At a minimum, if any requested verifications has [sic] not been supplied to the insurer 30 calendar days after the original request, the insurer shall, within 10 calendar days, follow up with the party from whom the verification was requested, either by telephone call, properly documented in the file, or by mail.”

The fact that the regulations contain specific deadlines implies that an untimely [*2]verification request does not toll the 30-day period to pay or deny a claim. In fact, the case law clearly supports such a conclusion.

“Upon receipt of a no-fault claim, the regulations shift the burden to the carrier to obtain further verification or deny or pay the claim” (Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 319 [2007]). It is well settled that an insurer is not obligated to pay or deny a claim until it has received verification of all relevant information requested (Central Suffolk Hosp. v New York Cent. Mut. Fire Ins. Co., 24 AD3d 492, 493 [2d Dept 2005]; Hospital for Joint Diseases v State Farm Mut. Auto. Ins. Co., 8 AD3d 533, 535 [2d Dept 2004]).

Under 11 NYCRR 65-3.5 (a), a “timely” demand for additional verification is one made within 10 days from receipt of a completed application. The case law acknowledges that a demand for verification must be timely and, further, that a claim may be dismissed for failure to respond to a timely request. (See for example St. Vincent’s Hosp. of Richmond v American Tr. Ins. Co., 299 AD2d 338 [2d Dept 2002] [hospital failed to respond to insurer’s timely verification requests]; see also Mount Sinai Hosp. v Chubb Group of Ins. Cos., 43 AD3d 889 [2d Dept 2007] [undisputed that defendant’s requests for additional information were timely].)

In the instant matter, there is sharp disagreement regarding the timeliness of the verification request. To resolve the dispute, we must look to the affidavits furnished by the defendant.

The affidavits establish the date on which the verification request was sent. However, neither affidavit states the date when defendant received the bill from plaintiff. Without this crucial piece of information, the court is unable to determine whether the verification request was timely. Accordingly, defendant has failed to make out a prima facie case for summary judgment in its favor.

We turn now to plaintiff’s cross motion for summary judgment. It is well settled that a plaintiff makes a prima facie{**19 Misc 3d at 363} showing of entitlement to summary judgment by submitting evidentiary proof that the prescribed statutory billing forms were mailed and received, and that payment of no-fault benefits was overdue (Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564, 564 [2d Dept 2005]). The court may, in its discretion, rely on defendant’s documentary submissions establishing defendant’s receipt of plaintiff’s claims (Devonshire Surgical Facility v GEICO, 16 Misc 3d 130[A], 2007 NY Slip Op 51308[U] [App Term, 1st Dept 2007]). Here, the affidavit of defendant’s employee, claims examiner Edward Baillie, establishes that defendant received plaintiff’s claim and, further, that defendant failed to pay or deny the claim within the statutory 30-day time frame. Furthermore, said affidavit fails to demonstrate that defendant requested verification in a timely manner. Accordingly, the defendant has not shown a triable issue of fact regarding whether payment of no-fault benefits was overdue.

For the above reasons, defendant’s motion for summary judgment is hereby denied, and plaintiff’s cross motion for summary judgment is granted.

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

74577 CVN 2006

Plaintiff represented by: Baker, Sanders, Barshay, Grossman, Fass, Muhlstock & Neuwirth, by Shayna E. Sacks, Esq., 150 Herricks Road, Mineola, NY 11501, Tel: 516-741-4799.

Defendant represented by: Law Offices of Karen C. Dodson, by Jerry Marti, Esq., 485 Lexington Avenue, 7th Floor, New York, NY 10017, Tel: 917-778-6509.

Shlomo S. Hagler, J.

In these two actions to recover first-party no-fault benefits, defendant Travelers Insurance Company (“Travelers” or “defendant”) makes two virtually identical motions for orders pursuant to CPLR § 3212 granting it summary judgment dismissing the complaints. Plaintiff Ray Presutto, L.M.T., P.C. (“Presutto” or “plaintiff”) opposes the motions. Both motions are consolidated herein for disposition.

Background

Miguel A. Villatoro (“Villatoro” or “assignor”) allegedly suffered personal injuries as a result of a motor vehicle accident on September 2, 2002. Villatoro allegedly assigned to Presutto his right to recover benefits from Travelers for health care services rendered to him. Presutto allegedly provided treatment to Villatoro for the periods of May 1, 2003 through May 28, 2003 ($61.60), May 27, 2003 through June 12, 2003 ($61.60), and June 28, 2003 through July 3, 2002 ($61.60).

Presutto allegedly mailed Travelers claim forms or bills in the aggregated amount of $184.80. At Travelers’ request, on January 29, 2003, Dr. Lawrence B. Miller, D.O., a board certified orthopedic surgeon, conducted an Independent Medical Examination (IME”) of Villatoro. Dr. Miller conducted various objective tests on Villatoro and concluded in his affirmed report dated January 29, 2003, that “orthopedic treatment is not indicated or warranted at this time, including physiotherapy or any other type of rehabilitative therapy/treatment. Furthermore, diagnostic testing, [*2]surgical intervention , household help, durable medical equipment or special transportation services are not medically necessary.” (Exhibit “C” to the Motions.) On August 18, 2003, Travelers denied all claims based on Dr. Miller’s IME and report dated January 29, 2003. (Exhibit “D” to the Motions.)

As a result of defendant failing to pay first-part no-fault benefits, plaintiff commenced these two actions by service and filing of a summons and complaint. (Exhibit”A” to the Motions.) Defendant interposed answers to the complaints. (Exhibit “A” to the Motions.)

Summary Judgment

The movant has the initial burden of proving entitlement to summary judgment. Winegrad v N.Y.U. Medical Center, 64 NY2d 851, 487 NYS2d 316 (1985). Once such proof has been offered , in order to defend the summary judgment motion, the opposing party must “show facts sufficient to require a trial of any issue of fact.” CPLR § 3212; Zuckerman v City of New York, 49 NY2d 557, 427 NYS2d 595 (1980); Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065, 416 NYS2d 790 (1970); Friedman v Chemical Construction Corp., 43 NY2d 260, 401 NYS2d 176 (1977); and Spearmon v Times Square Stores Corp., 96 AD2d 552, 465 NYS2d 230 (2d Dept 1983). “It is incumbent upon a [party] who opposes a motion for summary judgment to assemble, lay bare and reveal his proofs, in order to show that the matters set up in [its pleading] are real and are capable of being established upon a trial.” Spearmon v Times Square Stores Corp., 96 AD2d at 553, 465 NYS2d at 232 (quoting DiSabato v Soffes, 9 AD2d 297, 301, 193 NYS2d 184, 189 [1st Dept 1959]). If the opposing party fails to submit evidentiary facts to controvert the facts set forth in the movant’s papers, the movant’s facts may be deemed admitted and summary judgment granted since no triable issue of fact exists. Kuehne & Nagel, Inc. F. W. Baiden, 36 NY2d 539, 369 NYS2d 667 (1975).

Proof of Mailing

There are three distinct methods to demonstrate proof of mailing. The first and simplest method is to provide an affidavit from an individual with personal knowledge of the actual mailing. The second is where an acknowledgment by the adverse party that it received the subject document serves as an admission. A.B. Medical Services a/a/o German v New York Central Mutual Fire Ins. Co., 3 Misc 3d 136(A), 787 NYS2d 675(Table) (App Term, 2d & 11th Jud Dists 2004); Fair Price Medical Supply Corp. a/a/o Graham v Elrac Inc., 12 Misc 3d 119, 820 NYS2d 679 (App Term, 2d & 11th Jud Dists 2006). The third and most common method is where the party provides proof of a standard office procedure, which ensures that documents are properly addressed and mailed. Pardo v Central Cooperative Insurance Company, 223 AD2d 832, 636 NYS2d 184 (3d Dept 1996). The first and second methods are straight-forward. However, the third method is vexing as there is a dearth of authority that addresses the specific requirements to adequately set forth a standard office practice and procedure.

The courts discuss the sufficiency of proof of mailing in several contexts. These include cancellation notices sent by insurers to insureds, and denials of claims or requests for verification by insurers to healthcare providers. The standard of proof necessary to establish that a proper mailing was executed appears to be the same for each of these circumstances. See, e.g., Contemp. Med. Diag. & Treatment, P.C., a/a/o Boone and Villafane v Government Employees Ins. Co., 6 Misc 3d 137(A), 899 NYS2d 344 (App Term, 2d & 11th Jud Dists 2005) (holding that standard of proof [*3]for mailing of verification requests are the same as for denial of claims, as per Hospital for Joint Diseases v Nationwide Mutual Ins. Co., 284 AD2d 374, 726 NYS2d 443 [2d Dept 2001], and insurance cancellation notices, as per Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679, 729 NYS2d 776 [2d Dept 2001]). “Generally, proof of proper mailing gives rise to a presumption that the item was received by the addressee.” Residential Holding Corp., 286 AD2d at 680, 729 NYS2d at 778. However, “in order for the presumption [of mailing] to arise, office practice must be geared so as to ensure the likelihood that a notice . . . is always properly addressed and mailed.” Nassau Ins. Co. v. Murray, 46 NY2d 828, 830, 414 NYS2d 117, 118 (1978).

To establish proof of mailing, an affidavit should detail standard office policies and procedures regarding the processing of claims and it must also contain a statement of the affiant’s personal knowledge that those policies and procedures have been followed in the instant case. See Contemp. Med. Diag. & Treatment, P.C., a/a/o Boone and Villafane v Government Employees Ins. Co., supra . However, in Delta Diagnostic Radiology, P.C. a/a/o Philogene v Chubb Group of Ins., 17 Misc 3d 16, 18 (App Term 2d & 11th Jud Dists, 2007), the Appellate Term clarified its prior ruling in Contemp. Med. Diag. & Treatment, P.C., supra , as follows:

We note that our prior holding in Contemp. Med. Diag. & Treatment, P.C. v. Government Empls. Ins. Co., 6 Misc 3d 137(A), 2005 NY Slip Op. 50254[U], 2005 WL 494360 [App. Term, 2d & 11th Jud. Dists.] should not be interpreted as requiring that an affidavit of mailing must state either that it was the affiant’s duty to ensure compliance with the insurer’s standard office practice or procedure with regard to mailing or that the affiant possessed personal knowledge of such compliance. Rather, as the Appellate Division has repeatedly noted, it is sufficient for the affiant to set forth that he or she possessed personal knowledge that the mailing occurred or describe the standard office practice or procedure used to ensure that items were properly addressed and mailed (see e.g. New York & Presbyt. Hosp. V. Allstate Ins. Co., 29 AD3d 547, 814 NYS2d, 687 [2006]; Residential Holding Corp. v. Scottsdale Ins. Co., 286 AD2d 679, 729 NYS2d 776, supra ; Hospital for Joint Diseases v. Nationwide Mut. Ins. Co., 284 AD2d 374, 726 N.Y.S. 443 [2001]).

(Emphasis Added).

Furthermore, there should be “testimony about office procedures relating to the delivery of mail to the post office, whether a practice existed of comparing the names on the mailing list with the names and addresses on the envelopes for accuracy, or whether anyone routinely checked that the total number of envelopes matched the number of names on the mailing list.” Matter of Lumbermens Mutual Casualty Co. (Collins), 135 AD2d 373, 375, 521 NYS2d 432, 434 (1st Dept 1987). By inference, the affiant should state the following necessary details to show office practice and procedure including: (1) whether anyone complied a list of intended recipients; (2) whether anyone checked that a corresponding envelope containing a verification request or a denial of claim form was properly addressed for each recipient; and (3) whether anyone established a procedure for affixing the appropriate postage and delivering the mail to the post office. The failure to properly allege some of the above details have resulted in courts holding that the showing was insufficient because the affiant’s affidavit was conclusory. New York and Presbyterian Hospital, a/a/o Udland v Allstate Ins. Co., 29 AD3d 547, 814 NYS2d 687 (2d Dept 2006).

While plaintiff challenges the adequacy of the proof of mailings, defendant’s director of [*4]operations at its centralized mail facility located in Norcross, Georgia (“Data Service Center”), Stephen H. Howard, has provided a sufficient description of Travelers’ standard office practice or procedure used to ensure the denials were properly addressed and mailed as detailed below:

7.For the Court’s present purposes, the operation commences when a TRAVELERS employee completes an NF-10 denial, a verification request, or a delay letter from his or her desk top computer terminal, and executes the send and archive option provided. That action will cause the document to be electronically transmitted to the Data Service Center in Norcross. Following that transmission, and on that date, the document is printed. It is then mailed as indicated below.

8.Any document electronically forwarded is batched, printed, and then mailed on the day after it is transmitted. In other words, documents which are electronically transmitted are accumulated, processed and produced in the same out put job. An out put job number is assigned and utilized for tracking purposes, as further described hereafter.

9.Once transmitted, the documents are electronically batched and printed. When the documents are printed, they contain encoded information which identifies the particular batch they were processed in. The documents are electronically counted so that the numbers can be justified against the expected number of documents which are to be contained in any particular batch. When the numbers are reconciled, a notation is made on a tracking sheet for the batch. This tracking sheet is utilized at each stage of the mailing process, further described below, so as to ensure that the mailing, in fact, occurs.

10.Once printed and batched, the documents are placed into a machine designed to fold the documents and insert them into a window envelope where the address of the recipient is shown. The envelope is sealed, completing this part of the process. The machine counts the number of documents and envelopes processed. When the batch has been completed, the actual number is justified against the expected number, and the tracking sheet is documented. The control therefore establishes that all mail in a particular batch has gone through this step in the process. As a further control, a visual inspection is performed to ensure that the address of the recipient appears visible in the envelope window.

11.Once the above step is completed, the batch is brought to another machine. This machine weighs the envelope and places the appropriate amount of postage in accordance with size and weight. This machine also performs an electrical count of the items to be mailed, and the number is justified, against the expected count. The tracking sheet is duly noted for that batch of mail.

12.The mailings in any particular batch are then brought to a sorting machine. The sorting machine separates the individual envelopes in accordance with U.S. Postal guidelines, based upon zip code, for the purposes of facilitating proper and efficient mailings. The pieces going through this aspect of the process are again counted for the purposes of a final justification of the numbers. The sorted and justified mail is then placed into sealed containers and then placed into U.S. Postal Services designated containers. The containers are then delivered to a secure loading [*5]facility where they are picked up by U.S. Postal employees.

13.The final sorting area described above, as well as all other stations, are visually inspected throughout the day to be certain that no mail escaped the vigorous justification processes.

14.The Court is further advised that if at any point during the above described justification processes there is an indication of a missing piece of mail, the process is traced backward until the individual piece of mail is found. In the event a missing piece of mail is not found, an investigation takes place which includes a review of each piece of mail in the entire batch to determine if the particular missing mail can be identified, reprinted, and the batch then processed to completion. In the event identification of the missing piece of mail cannot be made with certainty, the entire batch will be reprinted and reprocessed in accordance with the procedures previously described.

15.Given the above, I can state with a reasonable degree of certainty that the documents described in the accompanying affidavit of Kelly A. Stotz, which had been mailed through the Norcross Data Service Center, were in fact processed in accordance with the procedures described above, and mailed to the identified recipient on the day after the date which appears on the denial and/or delay later.

(Affidavit of Stephen Howard in support of the Motions, sworn to on July 12, 2001, at ¶¶ 7-15).

Medical Necessity

Courts have held that plaintiffs need not demonstrate medical necessity as part of their prima facie case. Dermatossian v New York City Transit Authority, 67 NY2d 219, 224, 501 NYS2d 784, 787 (1986) (“A claimant to receive payment need only file a proof of claim’ . . . and the insurers are obligated to honor it promptly or suffer the statutory penalties . . .”); A.B. Medical Services PPLC a/a/o Sokol v Geico Ins., 2 Misc 3d 26, 27, 773 NYS2d 773, 774 (App Term 2d Dept 2003) (“We have rejected arguments that no-fault benefits claimant is obligated to prove the treatment’s medical necessity, at the claim stage or in support of its motion for summary judgment in a subsequent action on the claim . . .” [citations omitted]). The insurer may raise the defense that a claimed procedure was not medically necessary with a timely denial pursuant to the 30-day rule. Presbyterian Hospital in the City of New York v Maryland Casualty Co., 90 NY2d 274, 282, 660 NYS2d 536, 539-540 (1997). If there is an untimely disclaimer or denial in derogation of the 30-day rule, the insurer’s lack of medical necessity defense is precluded. Id.; Amaze Medical Supply Inc. a/a/o Darlington v Allstate Ins. Co., 2 Misc 3d 134(A), 784 NYS2d 918 (Table) (App Term 2d & 11th Jud Dists 2004).

Furthermore, in support of, or in opposition to, a summary judgment motion or at trial, the defense that the claim was not medically necessary must be supported by sufficient factual evidence or proof and it cannot simply be conclusory. Amaze Medical Supply Inc. a/a/o Bermudez v Eagle Ins. Co., 2 Misc 3d 128(A), 784 NYS2d 918 (Table) (App Term 2d & 11th Jud Dists, December 24, 2003). For instance, a recent Appellate Term decision citing Amaze Medical Supply Inc. a/a/o Bermudez v Eagle Ins. Co., held that where the defendant’s peer review report was sufficient to establish that the services were not medically necessary and the plaintiff failed to come forward with [*6]proof creating an issue of fact requiring a trial, the defendant was entitled to summary judgment dismissing the complaint. Boai Zhong Yi Acupuncture Services, P.C. a/a/o Pistsov v Progressive Casualty Ins. Co., NYLJ, June 6, 2007, p. 30, col. 2 (App Term 2d & 11th Jud Dists). See also Alvarez v Prospect Hospital, 68 NY2d 320, 508 NYS2d 923 (1986).

In this case, Dr. Miller’s orthopedic evaluation and affirmed peer review report on January 29, 2003, based on objective testing, were sufficient to demonstrate that plaintiff’s services rendered to Villatoro were not medically necessary. In response to Dr. Miller’s specifically detailed affirmed peer review report, plaintiff merely submits a terse affidavit from Ray Presutto, a licensed massage therapist, averring that “my office rendered reasonable and necessary medical services to plaintiff’s assignor(s) that were casually related and resulting from said accident.” (Affidavit of Ray Presutto in opposition to the Motions, sworn to on September 18, 2007.) This allegation is conclusory and insufficient as proof in admissible form to create a triable issue of fact requiring a trial as per Boai Zhong Yi Acupuncture Services, P.C. v. Progressive Co., supra .

Conclusion

Both of defendant’s motions for summary judgment dismissing the complaints are granted. The clerk is directed to enter a judgment dismissing both complaints.

The foregoing constitutes the decision and order of this Court. Courtesy copies of this decision and order have been mailed to counsel for the parties.

Dated:New York, New York

October 29, 2007Hon. Shlomo S. Hagler, J.C.C.

Supreme Court, New York County

114851/06

Marylin G. Diamond, J.

Background

On or around March 3, 2006, defendants Francisco Martinez and Miguel Sanchez were involved in an automobile accident while occupants of a vehicle owned by nonparty Rafael Grullon. At the time of the accident, Grullon was insured by plaintiff Unitrin Advantage Insurance Company. Sanchez and Martinez were eligible to claim no-fault benefits under the Grullon policy. On or around March 13, 2006, April 10, 2006 and May 15, 2006, defendant Dr. Jean Miller, an osteopathic specialist, referred Sanchez and Martinez to defendant Andrew Carothers, M.D., P.C. (“Carothers”) for MRI’s. Sanchez and Martinez later appeared at Carothers for an MRI and assigned their claims for no-fault benefits over to Carothers. Carothers subsequently submitted claims for payment for the MRI’s to Unitrin.

Between May 8, 2006 and August 21, 2006, Unitrin informed Carothers, in eight separate articles of correspondence, that a determination on its claims had been delayed because it wished to conduct an examination under oath (“EUO”) of Dr. Carothers in order to determine whether the treatment was medically necessary. However, on June 29, 2006, in the absence of an EUO, Unitrin denied Carothers’ claim for the March 17, 2006 MRI of Sanchez’s knee on the ground that the MRI was not medically necessary. Unitrin did not deny Carothers’ claim for Sanchez’s April 28, 2006 MRI or render any determination regarding the claim for Martinez’s MRI’s.

On July 21, 2006, Unitrin’s counsel sent a demand for an EUO to Carothers regarding both the Sanchez and Martinez claims. On August 9, 2006, Dr. Carothers offered to appear for an EUO, [*2]provided that Unitrin reimburse him for his lost wages and transportation costs. It does not appear that Unitrin ever formally responded to this demand. Rather, it scheduled an EUO on two separate dates. Dr. Carothers failed to appear for either of the EUO’s. On September 12, 2006, Unitrin notified Carothers that it was denying all claims submitted for payment by Carothers for Martinez’s MRI’s on the ground that they were not medically necessary.

On or around August 9, 2006, Carothers and Sanchez commenced an action against Kemper Insurance Company, an affiliate of Unitrin, in the Civil Court, Kings County seeking payment on the same claim for Sanchez’s MRI’s which Unitrin seeks to preclude in this action. Unitrin commenced this action on or around October 11, 2006 against Carothers, Martinez, Sanchez and a number of other medical providers who allegedly treated Sanchez and Martinez and had their no-fault benefits assigned to them. The complaint alleges that the defendant medical providers are not entitled to no-fault benefits because, by not appearing for an EUO, they failed to comply with Unitrin’s request for pertinent information to assist in determining the amount due on the respective claims.

In motion sequence number 001, Carothers moves to dismiss the complaint, pursuant to CPLR 1001, 1003 and 3211(a)(1),(4) ),(7) and (10), on the grounds of (1) documentary evidence, (2) prior pending action, (3) failure to state a cause of action and (4) absence of a necessary party. Plaintiff has cross-moved to amend the complaint. In motion sequence number 002, plaintiff moves for a default judgment against defendants Jean Miller, Five Boro Psychological Services, P.C., JOV Acupuncture, P.C., Espalda Chiropractic, P.C., Parkway Supplies, Inc., Presbyterian Hospital, Physician Services Organization, Inc., Francisco Martinez and Miguel Sanchez.

Discussion

A. Carothers’ Motion to Dismiss – In this action, Unitrin contends that it is not obligated to pay any of the current or future no-fault claims submitted by Carothers for the reimbursement of medical services because Dr. Carothers failed to appear for two scheduled EUO’s. On its motion to dismiss the complaint as against it, Carothers argues that this is an insufficient basis to disclaim coverage. The court agrees.

The relationship between an insurance company, insured and medical providers regarding the submission and payment of claims for no-fault benefits is governed by Insurance Law § 5100 et seq., and the accompanying regulations, see 11 NYCRR § 65 et seq. Pursuant to 11 NYCRR § 65-3.11, insureds or eligible injured persons may assign their rights to no-fault insurance payments to providers of medical and health care services, which may then submit a claim for payment of the medical services directly to the insurance company. The insurer must, within 30 days after proof of a claim is received, either pay or deny the claim, in whole or in part. See 11 NYCRR §65-3.8. However, if an EUO is reasonably required and if the policy so permits, the insurer may demand that the injured person or the injured person’s assignee or representative submit to such an examination in order to establish the claim. See 11 NYCRR §§ 65-1.1[d], 65-3.5.

Carothers does not dispute that recovery under a policy can be precluded upon a willful [*3]failure to submit to an EUO. However, Carothers argues that its failure to appear for two EUO’s cannot by itself constitute a willful failure to submit to an EUO resulting in a material breach of the policy. The court agrees. In order to establish willful failure constituting a material breach of the policy, plaintiff must show that the defendant’s attitude “was one of willful and avowed obstruction,” involving a “pattern of noncooperation for which no reasonable excuse is offered.” Ingarra v. General Acc./PG Ins. Co. Of NY, 273 AD2d 766, 767-68 (3rd Dept. 2003). See also Levy v. Chubb Ins., 240 AD2d 336, 337 (1st Dept.1997); Argento v. Aetna Cas. & Sur. Co., 184 AD2d 487, 488 (2nd Dept. 1992); New York Craniofacial Care v. Lumbermen’s Mut. Cas. Co., 3 Misc 3d 322, 326-27 (Queens Co Civ Ct 2004). The insurer’s burden of proving willfulness is a heavy one. See Levy v. Chubb Ins., 240 AD2d at 337. Here, Unitrin’s complaint is devoid of any allegations which would establish that Dr. Carothers’ failure to appear for the two EUO’s was willful, persistent or demonstrative of a pattern of noncooperation. See New York Craniofacial Care v. Lumbermen’s Mut. Cas. Co., 3 Misc 3d at 327. Indeed, Dr. Carothers did not object to appearing for an EUO, but sought payment for lost wages and transportation expenses, payment to which he was entitled under 11 NYCRR §65-3.5(e). Although Unitrin claims that the amount demanded by Dr. Carothers was unreasonable, there is no indication that it ever attempted to negotiate with Carothers over the request for reimbursement. Instead, it simply commenced this declaratory judgment action. Based on such facts, Unitrin is unable to show that Dr. Carothers willfully failed to appear for the EUO’s.

Plaintiff’s cause of action is also deficient because the complaint fails to allege facts indicating that an EUO was reasonably required. Indeed, the complaint fails to allege that, as required under 11 NYCRR § 65-3.5(e), Unitrin utilized any objective standards in determining that the demanded EUO’s were required to establish proof of the claim. Moreover, the record is devoid of any reasonable justification or explanation for Unitrin’s demands.

Finally, in view of this court’s determination that the complaint should be dismissed as against Carothers, it need not address the defendant’s argument that dismissal is appropriate because of a prior pending action between the parties. The court notes, however, that this action and the Civil Court action arise out of same transactions and/or actionable wrongs and the carrier is not precluded from asserting noncooperation as a defense in the other action.

B. Plaintiff’s Cross-Motion for Leave to Amend – As already noted, Unitrin has cross-moved to amend the complaint so as to add the words “willfully and intentionally” to paragraphs 31, 32, 33 and 34 of the complaint. Presumably, Untrin seeks to add these words in order to allege that Carothers willfully and intentionally failed to appear at the two EUO’s and therefore materially breached the policy. Although leave to amend a complaint shall be freely granted, it is well settled that permission should be denied where the proposed amendment is palpably without merit. See Berger v. Water Commissioners of the Town of Waterford, 296 AD2d 649 (3rd Dept. 2002). Since, as previously discussed, plaintiff cannot establish as a matter of law that Carothers willfully failed to cooperate with its request for an EUO, the cross-motion to amend the complaint must be denied.

C. Plaintiff’s Motion for a Default Judgment – In motion sequence number 002, plaintiff [*4]moves for a default judgment against defendants Jean Miller, Five Boro Psychological Services, P.C., JOV Acupuncture, P.C., Espalda Chiropractic, P.C., Parkway Supplies, Inc., Presbyterian Hospital, Physician Services Organization, Inc., Francisco Martinez and Miguel Sanchez on the ground that they have failed to answer the complaint or otherwise appear. Untrin also seeks a declaratory judgment that it has no present or future obligations to furnish no-fault benefits “under claim number 331AZ403544.” This is the same claim number under which Carothers seeks to obtain payment in the Civil Court Action for its MRI services to Martinez and Sanchez.

The only party opposing the plaintiff’s default motion is Carothers, which argues that the motion should be denied because the relief requested clearly affects the rights of other parties not alleged to be in default. Carothers argues that the relief requested by Unitrin could affect Carothers’ ability to collect on its claim for reimbursement of no-fault benefits. Carothers also argues that plaintiff should not be granted a default judgment in a declaratory judgment action based on the default and on the unverified complaint alone since plaintiff has not established its right to a declaratory judgment.

It is well settled that the decision to grant a declaratory judgment on default is a discretionary one and the court should deny it where the declaratory relief requested clearly affects the rights of other parties not alleged to be in default. See CPLR 3001; Merchants Insurance Company of New Hampshire, Inc. v. Long Island Pet Cemetery, 206 AD2d 827 (4th Dept. 1994). Here, the relief requested by Unitrin could adversely affect both nonparty Grullon, who would be denied insurance coverage for any no-fault claims made by Martinez and Sanchez, and Carothers, who stands in the shoes of Sanchez and Martinez and could be precluded from obtaining benefits under the policy if Sanchez and Martinez were denied no-fault benefits under Grullon’s policy.

Indeed, the court is persuaded that the complaint should be dismissed as against the defaulting parties. On a motion for a default judgment, it is incumbent upon the court to assess the merits of the complaint since a plaintiff who fails to make a prima facie showing of a right to judgment is not entitled to a default judgment even if the motion is unopposed. See Martocci v Bowaskie Ice House, 31 AD3d 1021 (3rd Dept 2006). See also Carnegie Hall Corp. v City Univ. of NY, 286 AD2d 214, 215 (1st Dept 2001); Matter of Dyno v. Rose, 260 AD2d 694 (3rd Dept 1999); Joosten v Gale, 129 AD2d 531 (1st Dept 1987). As the court has already determined, the complaint fails to allege facts indicating that there was a material breach of the policy in that the defendants wilfully failed to submit to a reasonably required EUO. Under the circumstances, it is clear that the complaint fails to state a cause of action against not only Carothers, but against any of the defendants. The complaint as against these other defendants must therefore also be dismissed.

Accordingly, in motion sequence number 001, Carothers’ motion to dismiss is granted, the plaintiff’s cross-motion for leave to amend is denied and the complaint is hereby dismissed as against Carothers. In motion sequence number 002, the plaintiff’s motion for a default judgment is denied and the complaint is hereby dismissed in its entirety as against the remaining defendants.

The Clerk Shall Enter Judgment Herein [*5]

Dated:8-20-07MARYLIN G. DIAMOND, J.S.C.

Check one:[X] FINAL DISPOSITION[] NON-FINAL DISPOSITION