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

64123/05

For plaintiffs:

Christopher McCollum, Esq.

Law Offices of Christopher McCollum

57 W. 57th St., Suite 502

New York, NY 10019

917-407-5690

For defendant:

Allison B. Frischling, Esq.

Bruno, Gerbino & Soriano, LLP

445 Broad Hollow Road, Suite 220

Melville, NY 11747

631-390-0010

Barbara Jaffe, J.

By notice of motion dated January 25, 2007, defendant moves for an order granting it leave to renew and reargue my decision and order of December 6, 2006 granting summary judgment to plaintiffs on their claims for unpaid no-fault insurance benefits, statutory interest, and attorney fees. For the following reasons, the motion is denied.

I. PRIOR DECISION

In granting plaintiffs summary judgment, I held that they had established, prima facie, that their office manager had personally mailed the pertinent no-fault claim forms to defendant and that defendant had failed to deny plaintiffs’ claims timely. Defendant raised no objection to plaintiffs’ prima facie case.

In holding that defendant had failed to establish good cause for seeking discovery relating [*2]to its defenses and plaintiffs’ corporate structure, I found that: 1) in light of plaintiffs’ counsel’s affirmation that plaintiff Devonshire Surgical Facility (Devonshire) was officially converted from a general partnership into a limited liability corporation and notwithstanding the absence of its name from lists maintained on the websites of the New York State Education Department’s Office of Professions and the New York Department of State Division of Corporations, defendant failed to demonstrate sufficiently that at the time the healthcare services were rendered, Devonshire was fraudulently incorporated; 2) defendant failed to demonstrate sufficiently that the revocation of Allen Chamberlin’s license to practice medicine based on conduct he engaged in during 1998 constitutes good cause to believe that his facility, defendant Carnegie Hill Orthopedic Services (Carnegie Hill), was fraudulently incorporated in 2001 when the services in issue were rendered; 3) because the revocation of Chamberlin’s license was based on his excessive and unnecessary treatments and fraudulent billing for services never provided, which are forms of provider fraud, and absent any indication that defendant had interposed a timely denial based on those defenses, plaintiffs are not precluded from seeking reimbursement; and 4) defendant failed to interpose in its answer any contention that an independent contractor had provided the services at issue and that Chamberlin had violated the prohibition against self-referral.

II. RE-ARGUMENT

A motion for leave to reargue “shall be based upon matters of fact or law allegedly overlooked or misapprehended by the court in determining the prior motion, but shall not include any matters of fact not offered on the prior motion.” (CPLR 2221[d][2]).

A. Defendant’s discovery demands relating to Carnegie Hill’s corporate structure

1. Contentions

Defendant argues that there exists good cause for discovery relating to Carnegie Hill’s corporate structure, again relying solely on the 2005 administrative finding that Chamberlin engaged in fraudulent billing and fraudulent and excessive medical practices in 1998 as evidence that he engaged in those practices in 2001. As Chamberlin’s license was revoked based on conduct he engaged in during 1998, defendant argues, his license must be deemed revoked as of 2001, and if Chamberlin was not authorized to practice medicine in 2001, then Carnegie Hill had issued him shares in violation of Business Corporation Law (BCL) § 1507(a) and was thus fraudulently incorporated in 2001. (Affirmation of Alison B. Frischling, Esq., dated Jan. 25, 2007 [Frischling Aff.]). Defendant thus attempts to avoid preclusion of a defense based on provider fraud by characterizing it as one sounding in fraudulent incorporation.

In opposition, plaintiffs observe that I had rejected the same argument in my December 2006 decision. (Affirmation of Christopher McCollum, Esq., dated Mar. 12, 2007 [McCollum Aff]).

2. Analysis

Pursuant to 11 NYCRR 65-3.16 (a) (12), effective April 4, 2002, unlicensed or fraudulently licensed healthcare providers are ineligible to receive reimbursement for no-fault medical services provided by them. In affirming the dismissal of an insurer’s causes of action for fraud and unjust enrichment, the Court of Appeals held in State Farm Mut. Auto. Ins. Co. v Mallela, that no such causes of action lie for payments made by insurers before April 4, 2002. (4 [*3]NY3d 313, 322 [2005]). The Court also observed that insurers may withhold payment for medical services provided by enterprises incorporated in violation of BCL §§ 1507 and 1508 and Education Law § 6507(4)(c). Pursuant to BCL §1507, a professional service corporation may issue shares only to those individuals who are authorized by law to practice the profession which the corporation is authorized to practice.

Here, it is undisputed that Chamberlin was authorized by law to practice medicine when Carnegie Hill was organized. And, although Chamberlin’s license has now been revoked and he must now disassociate himself from Carnegie Hill (BCL § 1509 [if shareholder of professional service corporation becomes legally disqualified to practice his profession, he must sever all employment with and financial interests in corporation]), absent any indication that the revocation is retroactive or that any of the governing statutes, regulations, or case law requires that lawfully issued shares be invalidated retroactively, there is no basis for finding that Carnegie Hill was fraudulently incorporated when formed merely because Chamberlin’s license was revoked thereafter. (See CKC Chiro. v Republic Western Inc. Co., 5 Misc 3d 492 [Civ Ct, Kings County 2004] [provider may be reimbursed for services rendered when she was properly licensed or registered, even if she subsequently became unlicensed or unregistered]).

I also observe that the conduct underlying the revocation of Chamberlin’s license relates to defenses which, if this action arose in the Second Department, are precluded if not timely denied. (Careplus Med. Supply Inc. v State-Wide Ins. Co., 11 Misc 3d 29 [App Term, 2d & 11th Jud Dists 2005] [fraudulent billing or performance of excessive or unnecessary medical treatment are forms of provider fraud]; Fair Price Med. Supply Corp. v Travelers Indemn. Co., 9 Misc 3d 76 [App Term, 2d Dept 2005] [defense based on fraudulent scheme to obtain no-fault benefits precluded due to untimely denial]; Ocean Diagnostic Imaging, PC v Utica Mutual Ins. Co., 9 Misc 3d 138[A], 2005 NY Slip Op 51745[U], *1 [App Term, 9th & 10th Jud Dists 2005] [alleged irregularities in the treatment and billing process did not support defense that survived preclusion]). Although no appellate court in the First Department has addressed the issue of whether a defense based on services billed but never rendered is subject to preclusion for untimely denial, and a judge in the Eastern District of New York disagrees with the Appellate Term’s decision in Fair Price, 9 Misc 3d 76, that a defense based on services billed but not rendered is subject to preclusion (Allstate Ins. Co. v Valley Physical Med. & Rehab., P.C., 475 F Supp2d 213 [US Dist Ct, EDNY 2007]), here, defendant did not even allege that plaintiffs billed for services that were not rendered.

In any event, evidence that Chamberlin fraudulently or excessively billed or unnecessarily treated patients in 1998 is inadmissible to prove that he engaged in such conduct in 2001. (Prince, Richardson on Evidence § 4-517 [11th Ed Farrell]; see Matter of Brandon, 55 NY2d 206 [1982]; Hand v Stanper Food Corp., 224 AD2d 584 [2d Dept 1996] [evidence that defendant’s principal broke two signs in front of defendant’s premises over five-year period prior to alleged accident, without more, insufficient to support inference that he broke sign at issue]; Kelly v Ryder Truck Rental, Inc., 14 Misc 3d 127[A], 2006 NY Slip Op 52467[U] [App Term 1st Dept 2006] [evidence of prior accident inadmissible to support inference of fraud absent any claim that prior accident was staged]; Maraziti v Weber, 185 Misc 2d 624 [Sup Ct, Dutchess County 2000] [motion in limine granted as to prior findings of Department of Health]). If Carnegie Hill excessively billed for its services or billed for services never rendered, defendant would have had [*4]the means of proving it without relying on inadmissible evidence of a disposition to engage in fraud. Rather, it seeks to rely solely on inadmissible evidence of prior misconduct.

As defendant failed to establish that it properly sought discovery from Carnegie Hill based on a non-precluded defense (A.B. Med. Svces., PLLC v Utica Mut. Ins. Co., 11 Misc 3d 71 [App Term, 2d & 11th Jud Dists 2006]), that it has good cause to believe that Carnegie Hill was fraudulently incorporated, and that Carnegie Hill was required to respond to defendant’s discovery requests on these issues (see A.B. Med. Svces., PLLC, 11 Misc 3d 71 [discovery demands relating to precluded defenses are “palpably improper” and plaintiff healthcare provider need not respond to them]; Devonshire Surgical Facility and Carnegie Hill Orthopedic Services v GEICO, NYLJ, Apr. 7, 2006, at 20, col 1 [Civ Ct, New York County] [defendant may not allege provider fraud if not asserted in denial]), it has failed to demonstrate that I overlooked or misapprehended any matter of fact or law in deciding the prior motion.

B. Defendant’s discovery demands relating to Devonshire’s corporate structure

Defendant claims that discovery relating to Devonshire’s corporate structure is warranted as it may reveal that Devonshire was not a properly licensed entity when the services in issue were rendered. It relies, as it did in its opposition to plaintiff’s motion for summary judgment, on the results of two website searches which do not list Devonshire as a professional medical corporation prior to 2006. (Frischling Aff.). Devonshire denies that defendant’s allegations against it, even if true, constitute a defense of fraudulent incorporation, and claims that a violation of the Business Corporation Law is curable and that Devonshire was and continues to be a properly licensed entity. (McCollum Aff.).

As Devonshire was not incorporated at the time the services in issue were rendered, Mallela, 4 NY3d 313, as well as Allstate Ins. Co. v Belt Parkway Imaging, P.C., 33 AD3d 407 (1st Dept 2006), are inapposite absent any requirement that an entity offering professional services be incorporated. I observe that BCL §1503(a) merely permits one or more individuals authorized by law to render the same professional service to organize a professional service corporation.

I also observe that only business and not for profit corporations, limited partnerships, limited liability companies and limited liability partnerships, as well as other miscellaneous businesses, are listed on the New York Department of State’s Division of Corporation’s website; general partnerships, sole proprietorships, and limited liability partnerships are expressly excluded from it. Consequently, as the absence of Devonshire’s name from the website list prior to 2006 reflects only that Devonshire was not incorporated as a business or not for profit corporation, limited partnership, limited liability company, or limited liability partnership before that time, it is immaterial.

Pursuant to Education Law § 6507(4)(c), the New York State Education Department is required issue a certificate of authority to a qualified professional service organization organized pursuant to BCL § 1503. As Devonshire was not organized pursuant to BCL § 1503, Education Law § 6507(4)(c) is not applicable.

I also find that defendant’s conclusory allegations that an independent contractor provided the services in issue and that Chamberlin violated the prohibition against self-referral form no basis for discovery as defendant did not plead such defenses and did deny the claims based thereon. Defendant has thus failed to demonstrate good cause to assert, nor has it even argued, [*5]that at the time that Devonshire rendered the services at issue, it was owned, operated, controlled or otherwise involved with unlicensed individuals or entities.

Accordingly, plaintiffs were not required to respond to discovery demands on these issues.For all of these reasons, defendant has failed to establish good cause to believe that Devonshire was fraudulently incorporated before May 2006, and absent such good cause, defendant is not entitled to discovery on this issue. Consequently, defendant has failed to establish that I overlooked or misapprehended any matter of fact or law in deciding the prior motion.

C. Triable issues of fact

Defendant also includes in its motion for leave to reargue a claim that there exist triable issues of fact as to whether Devonshire was ever a properly licensed entity and whether Carnegie Hill improperly issued shares to Chamberlin. It argues, without any explanation, that Devonshire’s registration with the Department of State as a “domestic limited liability company” rather than “professional limited liability company” raises a triable issue as to whether it is a licensed provider. (Frischling Aff.).

I first observe that defendant’s opposition to plaintiff’s motion for summary judgment was based solely on plaintiffs’ failure to respond to its discovery demands. Consequently, these new arguments may not be considered. (CPLR 2221[d][1]; Mariani v Dyer, 193 AD2d 456 [1st Dept 1993] [motion to reargue not appropriate vehicle to assert arguments different from those asserted on original motion]). In any event, defendant cites no authority in support of its proposition that licensed health care providers must be registered only as professional limited liability companies.

I thus find that defendant failed to establish that I overlooked or misapprehended any of its evidence or relevant decisions in granting plaintiffs summary judgment on their claims. For all of these reasons, I adhere to my prior decision and deny defendant’s motion to reargue.

III. RENEWAL

A motion for leave to renew “shall be based upon new facts not offered on the prior motion that would change the prior determination or shall demonstrate that there has been a change in the law that would change the prior determination, and shall contain reasonable justification for the failure to present such facts on the prior motion. (CPLR 2221[e][2], [3]).

A. Retroactivity of fraudulent incorporation regulation

In moving to renew, defendant relies on Allstate Ins. Co. v Belt Parkway Imaging, P.C., 33 AD3d 407 (1st Dept 2006), for the proposition that a provider’s prior fraudulent conduct may be used to prove that the provider conducted itself similarly on a subsequent occasion. Counsel maintains that the First Department held that “a providers [sic] fraudulent conduct can be applied retroactively.” (Frischling Aff.). It maintains that the decision constitutes a change in law which would change my prior determination, and that the regulation applies to the period during which plaintiffs rendered the services in issue. It thus argues that as there is reason to believe, based on the subsequent revocation of Chamberlin’s license, that plaintiffs were fraudulently licensed or had engaged in fraudulent conduct when the services were rendered, plaintiffs may not be entitled to reimbursement for those services. (Id.).

The First Department recently applied Mallela to claims for services rendered prior to April 4, 2002, rejecting a provider’s argument that it was entitled to be reimbursed for claims [*6]relating to services rendered prior to the effective date of the regulation, reasoning that “[t]he very word reimbursement,’ used in the regulation, implies that the services had already been provided . . . [and that] it would be illogical to read [Mallela] as applying only to claims submitted on or after April 4, 2002.” (Belt Parkway, 33 AD3d 407). Thus, unlicensed and fraudulently licensed health care providers and those that are incorporated in violation of BCL

§§ 1507 and 1508 and Education Law § 6507(4)(c) are ineligible to be reimbursed even if their services were rendered prior to April 4, 2002.

While the court applied the regulation retroactively, it did not even address the issue raised by defendant, namely, whether a provider’s fraudulent conduct on one occasion may be utilized to prove that it engaged in fraudulent conduct on another occasion. As noted supra (II.A.2.), evidence of prior misconduct is generally inadmissible to prove later alleged misconduct.

Consequently, the decision in Belt Parkway does not change my determination that defendant failed to establish good cause to seek discovery concerning Carnegie Hill’s alleged fraudulent incorporation.

B. Plaintiffs’ prima facie case

Defendant maintains that recent decisions compel the finding that the affidavit supporting plaintiffs’ motion for summary judgment was insufficient to lay a foundation for the admission in evidence of plaintiffs’ business records or demonstrate that the claims were overdue. (Frischling Aff.). Plaintiffs argue that the supporting affidavit was based on their office manager’s personal knowledge of the contents of the mailings and the mailings themselves. (McCollum Aff.). In reply, defendant argues that the affidavit is insufficient as plaintiffs’ office manager fails to set forth her knowledge of plaintiffs’ business practices and procedures or any specifics concerning the claims at issue, such as the date of the accident, dates of service, and amounts in dispute. (Reply Affirmation of Allison B. Frischling, Esq., dated March 29, 2007 [Frischling Reply Aff.]).Here, plaintiffs’ officer manager swore that she had personal knowledge of the documents, that she personally verified that they were contained in the envelopes, that she mailed the envelopes, and that defendant neither paid nor denied the claims within thirty days. She also stated that she has been plaintiffs’ office manager for more than seven years, that one of her responsibilities is the supervision of all billing procedures and mailing of claim forms, and that based on her personal knowledge and review of the file, the claims forms annexed to the motion papers were made by plaintiffs’ employees who had the obligation to make the record in the regular course of business and who had the actual knowledge of the events recorded or received the information from someone within the business who had actual knowledge and was under a business duty to report the events to the maker of the records, and that the documents were made at the time of the transaction or occurrence or a reasonable time thereafter.

In Dan Medical, P.C. v NY Central Mutual Fire Ins. Co., 14 Misc 3d 44 (App Term, 2d Dept 2006), the plaintiff submitted the affidavit of its corporate officer stating that the documents attached to the plaintiff’s motion papers were its business records. The court held that the plaintiff “failed to demonstrate that the officer possessed sufficient personal knowledge of [its] office practices and procedures so as to lay a foundation for the admission of the annexed documents as business records.” (14 Misc 3d at 46).

Here, plaintiffs’ office manager had personal knowledge of plaintiffs’ business practices [*7]and procedures for creating the claims, as well as personal knowledge that the claims were mailed to defendant. Thus, her affidavit satisfies the requirements for admitting in evidence as business records the claims and annexed documents.

Moreover, plaintiffs’ office manager set forth in her affidavit the amounts plaintiffs billed defendant for the services at issue and the date on which she mailed the claims to defendant, and she states that defendant did not pay or timely deny the claims. She also refers to the claim forms and other documents annexed to plaintiffs’ papers which indicate the dates of service and types of services provided by plaintiffs.

In PDG Psych., P.C. v Ntl. Grange Mut. Ins. Co., 14 Misc 3d 136(A), 2007 NY Slip Op 50242(U) (App Term, 2d & 11th Jud Dists 2007), the court held that the plaintiff’s officers’ affidavit was too vague and conclusory to support plaintiffs’ prima facie case as the officer did not identify what services were rendered, when they were rendered, the amounts which were owed or the dates on which the claims were mailed, but only alleged that the bills were accurate and that proof of mailing was available for inspection.

Here, the affidavit references the annexed documents for which a sufficient evidentiary foundation was laid, thereby providing the specific details of the amounts billed, the dates of service and services rendered, and the date the claims were mailed. Consequently, the affidavit was sufficient to satisfy plaintiffs’ prima facie burden.

I thus find that as defendant failed to demonstrate that there has been any change in the law that would change the prior determination, leave to renew is denied.

IV. SHORT SERVICE

In its reply, defendant claims that plaintiffs did not serve their opposition to its motion by March 16, 2007, the date agreed to in the parties’ stipulation dated February 26, 2007. (Frischling Reply Aff.).

While plaintiffs’ affidavit of service of the opposition papers reflects that the papers were served on March 19, 2007, defendant replied on the merits to the papers and alleges no prejudice. I thus find that it waived plaintiffs’ late service. (See Piquette v City of New York, 4 AD3d 402 [2d Dept 2004] [although motion made on insufficient notice, plaintiffs waived objection to it by opposing it on merits]; Adler v Gordon, 243 AD2d 365 [1st Dept 1997] [petitioner waived right to contest late service of motion by opposing it on merits]).

V. CONCLUSION

Accordingly, defendant’s motion for leave to reargue is granted and re-argument is denied, and defendant’s motion for leave to renew is denied. This constitutes the decision and order of the court.

_______________________________

Barbara Jaffe, JCC

DATED:May 21, 2007

New York, New York [*8]

[*1]

Civil Court of the City of New York, New York County, March 12, 2007

APPEARANCES OF COUNSEL

Votto, Cassata & Gullo, LLP, Staten Island (Michelle S. Titone of counsel), for defendant. Sanders, Grossman, Fass & Muhlstock, P.C., Mineola (Michael C. Rosenberger and Shayna Sacks of counsel), for plaintiff.

OPINION OF THE COURT

Shlomo S. Hagler, J.

Defendant New York Central Mutual Fire Insurance Company (NYCM) moves for an order “revising the attorney’s fees on plaintiff’s judgment in the above captioned matter, pursuant to 11 NYCRR 65-3.10 and 65-4.6.” Plaintiff Adam Marigliano, LMT, opposes the motion.

Background

Plaintiff medical provider sought to recover the sum of $1,593.67 in first-party no-fault benefits assigned to him by defendant’s insureds. Defendant denied the claims based on lack of medical necessity, overlapping services, failure to bill services in accordance with the no-fault fee schedule, and lack of causal relationships between the accidents and the injuries alleged. As a result of defendant’s denial and subsequent nonpayment of claims, plaintiff commenced this action in or about August 2005 by the filing and service of the summons and verified complaint. (Exhibit A to defendant’s motion.) Defendant interposed its answer in September 2005. (Id.) Thereafter, plaintiff filed his notice of trial. Defendant then moved for an order to vacate the notice of trial pursuant to 22 NYCRR 202.21 (e) and 208.17 (c), and compelling plaintiff, plaintiff’s assignor, and the treating physician to appear for depositions pursuant to CPLR 3124 and 3125. Plaintiff opposed the motion and cross-moved for an order granting him summary judgment pursuant to CPLR 3212 or, in the alternative, a protective order pursuant to CPLR 3103.

By decision/order dated July 25, 2006 (prior order), this court granted defendant’s motion to vacate the notice of trial and compel depositions of plaintiff and the treating physician only. This court also granted plaintiff partial summary judgment on his third, seventeenth, twenty-seventh and [*2]thirty-first causes of action, each for assignor Jose Contreras in the sum of $69.29 for a total of $277.16, “together with interest at the statutory rate of 2% per month pursuant to 11 NYCRR § 65-3.9 (a) and statutory attorney’s fees pursuant to 11 NYCRR § 65-4.6.” The parties were directed to settle judgment accordingly.^[FN1] (Exhibit B to defendant’s motion.)

Arguments

The gravamen of defendant’s motion is that plaintiff is only entitled to a single attorney’s fee award for the total or aggregate of all four bills and causes of action plaintiff brought on behalf of the same assignor, Jose Contreras. In sharp contrast, plaintiff argues that he is entitled to a separate attorney’s fee award for each of the four claims. In other words, plaintiff seeks payment of attorney’s fees on a “per claim” basis.

Attorney’s Fees

The current statutory authority governing first-party no-fault benefits is codified in the “Comprehensive Motor Vehicle Insurance Reparations Act” under article 51 of the Insurance Law (L 1984, chs 367, 805). This legislation is commonly referred to as the “No-Fault Law” because it provides a plan for compensation of victims of motor vehicle accidents for economic loss without regard to fault or negligence. (Montgomery v Daniels, 38 NY2d 41 [1975]; Oberly v Bangs Ambulance, 96 NY2d 295 [2001].) The general framework for payment of first-party benefits, including attorney’s fees, derives from Insurance Law § 5106 (a). It states as follows:

“(a) 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. If proof is not supplied as to the entire claim, the amount which is supported by proof is overdue if not paid within thirty days after such proof is supplied. All overdue payments shall bear interest at the rate of two percent per month. If a valid claim or portion was overdue, the claimant shall also be entitled to recover his attorney’s reasonable fee, for services necessarily performed in connection with securing payment of the overdue claim, subject to limitations promulgated by the superintendent in regulations.” (Emphasis added.)

Regulation 68, 11 NYCRR Part 65

The Insurance Department is the governmental agency responsible for the administration of article 51 of the Insurance Law. In this capacity, the Superintendent of Insurance, interpreting Insurance Law § 5106, promulgated Regulation 68 and codified it under 11 NYCRR part 65.

Four sections of these regulations—sections 65-4.6, 65-3.10, 65-3.19 and 65-4.10 (j)—form the blueprint or outline for payment of attorney’s fees in first-party benefit actions. However, section 65-4.6 is the only section which applies to awarding attorney’s fees in a court action where the claimant is the prevailing party. The other sections are inapplicable to court actions as they refer to late payment of claims, offsets, arbitration and master arbitration awards. [*3]

Section 65-4.6 sets forth the limitations on attorney’s fees pursuant to Insurance Law § 5106 (a). The relevant portions of this section dealing with court actions are subdivisions (a), (c) and (e) as follows:

“(a) If an arbitration was initiated or a court action was commenced by an attorney on behalf of an applicant and the claim or portion thereof was not denied or overdue at the time the arbitration proceeding was initiated or the action was commenced, no attorney’s fees shall be granted. . . .

“(c) Except as provided in subdivisions (a) and (b) of this section, the minimum attorney’s fee payable pursuant to this subpart shall be $60. . . .

“(e) For all other disputes subject to arbitration, subject to the provisions of subdivisions (a) and (c) of this section, the attorney’s fee shall be limited as follows: 20 percent of the amount of first-party benefits, plus interest thereon, awarded by the arbitrator or court, subject to a maximum fee of $850.”

Nomenclature

The dispute between the parties partially stems from the imprecise nomenclature of terms that health providers, insurers and even courts utilize interchangeably in first-party benefit actions. This is primarily so because the Insurance Department’s regulations interpreting Insurance Law § 5106 (a) do not contain a section defining integral terms. They often misuse the common terms of “bill,” “claim,” and “cause of action.”

A bill should be defined as an account of the provider’s request for payment for treatment/services rendered and/or supplies provided. A “claim” under article 51 of the Insurance Law should be referred to as a “proof of claim”^[FN2] which is submitted as a “Verification of Treatment by Attending Physician or Other Provider of Health Service” (form NF-3), or less commonly, “Verification of Hospital Treatment” (form NF-4), or “Hospital Facility” (form NF-5) or their functional equivalents. Significantly, the forms provide the insurer with the name of the policyholder, name and address of the provider, policy number, date of accident, date of health care service, place of service, description of various treatment/service rendered and charges billed. Each “proof of claim” form may encompass a bill for a single service or treatment rendered or multiple bills for several treatments and/or services rendered on one or more dates.

The legal definition of cause of action is “[a] group of operative facts giving rise to one or more bases for suing; a factual situation that entitles one person to obtain a remedy in court from another person.” (Black’s Law Dictionary 235 [8th ed 2004].) [*4]

Payment of Attorney’s Fees

Claim Versus Cause of Action

One of the latest issues arising in the thicket of first-party no-fault regulations is whether attorney’s fees are awarded based on each “proof of claim” as defined above or computed through the aggregate of all bills, proofs of claim, and causes of action for the same assignor.

A majority of the trial courts which have dealt with this issue have awarded attorney’s fees based on each proof of claim. (See, e.g., Willis Acupuncture, P.C. v Government Empls. Ins. Co., 6 Misc 3d 1002[A], 2004 NY Slip Op 51702[U] [Civ Ct, Kings County 2004, Thomas, J.]; A.M. Med. Servs. P.C. v New York Cent. Mut. Fire Ins. Co., NYLJ, July 24, 2006, at 25, col 1 [Civ Ct, Queens County, Raffaele, J.]; Alpha Chiropractic P.C. v State Farm Mut. Auto Ins. Co., 14 Misc 3d 673 [Civ Ct, Queens County 2006, Siegal, J.]; Valley Stream Med. & Rehab, P.C. v Liberty Mut. Ins. Co., 15 Misc 3d 576 [Civ Ct, Queens County 2007, Lebedeff, J.].)

On the other hand, an informal opinion letter issued by the Office of the General Counsel of the Insurance Department on October 8, 2003 (exhibit C to defendant’s motion), and relied upon by one trial court in Marigliano v New York Cent. Mut. Fire Ins. Co. (13 Misc 3d 1079 [Civ Ct, Richmond County 2006, Sweeney, J.]), endorses the awarding of attorney’s fees based on the aggregate of all bills, proofs of claim, and causes of action for the same assignor.

While there is a plethora of cases in the Second Department on this complex issue, there do not appear to be any reported decisions in the trial and appellate levels of the First Department. Incredibly, this case appears to be one of first impression in the First Department even though the No-Fault Law was enacted more than 30 years ago. A proper review of this issue requires analysis of the legislative intent, statutory construction and historical perspective of Insurance Law § 5106 (a).

Legislative Intent

The noble and stated intent of the No-Fault Law was to create a new and improved insurance reparations system “which . . . assures that every auto accident victim will be compensated for substantially all of his [or her] economic loss, promptly and without regard to fault; [and] will eliminate the vast majority of auto accident negligence suits, thereby freeing our courts for more important tasks.” (Governor’s Mem approving L 1973, ch 13, 1973 McKinney’s Session Laws of NY, at 2335 [emphasis added]; Matter of Granger v Urda, 44 NY2d 91 [1978].)

The Court of Appeals also noted that the avowed purpose of the No-Fault Law was to “guarantee” “prompt and full compensation for economic losses . . . without the necessity of recourse to the courts[;] the Legislature acted reasonably to eliminate much of the wasted expenditures of premium dollars on expenses extraneous to treatment of injury.” (Montgomery v Daniels, 38 NY2d 41, 55 [1975] [emphasis added]; Insurance Law former § 675 [1].)

A lynchpin of the No-Fault Law was the prompt payment of victims’ claims under the so-called “30-day rule” as first-party benefits were “overdue if not paid within thirty days after the [*5]claimant supplies proof of the fact and the amount of loss sustained.” (Montgomery, 38 NY2d at 47, quoting Insurance Law former § 675 [1].)

“The Legislature provided that where an unpaid claim is overdue, as here, a claimant shall recover as part of his award his attorney’s reasonable fee (Insurance Law, § 675, subd 1 [now Insurance Law § 5106 (a)]). It is clear that the Legislature intended that an insurance company not be able to frustrate the operation of the statute [No-Fault Law] by throwing legal obstacles in the path of recovery.” (Matter of Simmons [Government Empls. Ins. Co.], 59 AD2d 468, 473 [2d Dept 1977].)

Thus, the Legislature intended to mandate the insurer’s strict compliance with the “30-day rule” to avoid the claimant resorting to judicial intervention by imposing one of the highest statutory interest rates payable at two percent per month as well as payment of attorney’s fees.

Statutory Construction

When construing a statute, a court “should consider the mischief sought to be remedied . . . and . . . should construe the act in question so as to suppress the evil and advance the remedy.” (McKinney’s Cons Laws of NY, Book 1, Statutes § 95; see also, T.D. v New York State Off. of Mental Health, 228 AD2d 95, 106 [1st Dept 1996]; Lincoln First Bank of Rochester v Rupert, 60 AD2d 193, 197 [4th Dept 1977].)

With this principle in mind, a fair reading of Insurance Law § 5106 (a) provides for payment of attorney’s fees on a “per claim” basis. The statute requires a claimant to supply the insurer with the “proof of the fact and amount of loss sustained.” This is tantamount to the claimant submitting to the insurer a “proof of claim” such as the NF-3, NF-4 or NF-5 forms or their functional equivalents. The statute further states that “[i]f proof is not supplied as to the entire claim, the amount which is supported by proof is overdue if not paid within thirty days after such proof is supplied.” This infers that multiple treatments and services may be consolidated into a single “proof of claim” which is subject to the “30-day rule.” The triggering event which results in payment of interest and attorney’s fees is the insurer’s failure to pay a “valid claim or portion” thereof within 30 days. In other words, there is a cause and effect relationship. The “cause” is the insurer’s failure to timely pay any portion of the substantiated “proof of claim” and the “effect” is the insurer’s required payment of the claim with interest thereon and attorney’s fees. Simply stated, at the time any portion of the “proof of claim” becomes overdue, the insurer is liable to pay attorney’s fees for each overdue item.

As stated above, the legislative intent of the No-Fault Law was to promptly and fully compensate auto accident victims without judicial intervention. When an auto accident victim is forced to resort to litigation due to nonpayment of benefits, it frustrates the legislative intent to remedy “the mischief” and advance the goal of prompt and full compensation and to discourage litigation. Therefore, the payment of the victim’s attorney’s fees should be awarded for each “proof of claim” that becomes overdue.

Historical Perspective

There are at least three Second Department appellate decisions which have held that a claimant is entitled to recover statutory attorney’s fees on a “per claim” basis. (Smithtown Gen. Hosp. v State Farm Mut. Auto. Ins. Co., 207 AD2d 338 [2d Dept 1994]; Hempstead Gen. Hosp. v Insurance Co. of N. Am., 208 AD2d 501 [2d Dept 1994]; St. Clare’s Hosp. v Allstate Ins. Co., 215 AD2d 641 [2d Dept [*6]1995].)

What makes this issue perplexing is the brevity of each of the above appellate decisions which neither explained nor defined its usage of the term “claim.” Even the landmark case of Smithtown Gen. Hosp. v State Farm Mut. Auto Ins. Co. (supra) has been cited by both parties in support of their respective positions. Claimants assert the plain meaning of the term “claim” as actually a “proof of claim” (i.e., NF-3, NF-4, or NF-5). Insurers opine that the Smithtown court’s meaning of “claim” is really referring to 21 different causes of action and assignors. In other words, each cause of action for a different assignor constitutes a “claim.” A review of the Smithtown complaint and the briefs submitted to the Appellate Division indicates that the 21 claims at issue were actually 21 causes of action for 21 different assignors. Unfortunately, there were no two proofs of claim submitted for any one assignor. Therefore, no definitive determination of the issue may reasonably be adduced from the Smithtown holding.

However, there is an earlier Second Department decision in Mid-Island Hosp. v Empire Mut. Ins. Co. (120 AD2d 652 [2d Dept 1986]) which should end the controversy. In Mid-Island Hosp., plaintiffs served a complaint asserting five causes of action for nonpayment of first-party no-fault benefits. The first and second causes of action were brought by one of the plaintiffs, Mid-Island Hospital, on behalf of the same assignor, Mildred Koegel, for separate claims of $2,532 and $422. Plaintiffs argued they were entitled to additional “fees on fees” for prosecuting the action. The insurer took the position that plaintiffs were only entitled to payment of the then statutory minimum payment of $50 per claim for each cause of action and no “fees on fees” were authorized under the applicable statute. The Appellate Division affirmed the trial court’s finding that “plaintiffs were entitled to attorney’s fees of $50 on each of their five causes of action, as each claim was settled prior to commencement of the instant action.” (Id. at 653.) Significantly, the Appellate Division held that plaintiff Mid-Island Hospital was entitled to attorney’s fees of $50 for each of the two claims that it brought on behalf of Ms. Koegel. The Mid-Island Hosp. holding convincingly demonstrates that plaintiffs are entitled to be compensated for attorney’s fees for each proof of claim brought on behalf of the same assignor.

Insurance Department’s Opinion Letter of October 8, 2003

The Insurance Department’s opinion letter of October 8, 2003 is informal and not binding on any court. (State Farm Mut. Auto. Ins. Co. v Mallela, 372 F3d 500, 506 [2d Cir 2004]; Matter of Park Radiology v Allstate Ins. Co., 2 Misc 3d 621, 625 n 2 [Civ Ct, Richmond County 2003, Vitaliano, J.].)

Courts may defer to the government agency charged with the responsibility for administration of the particular statute “[w]here the interpretation of a statute or its application involves knowledge and understanding of underlying operational practices or entails an evaluation of factual data and inferences to be drawn therefrom” (Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451, 459 [1980]). However, where

“the question is one of pure statutory reading and analysis, dependent only on accurate apprehension of legislative intent [as in this case], there is little basis to rely on any special competence or expertise of the administrative agency [the Insurance Department] and its interpretative regulations are therefore to be accorded much less weight. And, of course, if the regulation runs counter to the clear wording of a statutory provision, it should not [*7]be accorded any weight.” (Id.)

Similarly, where the Insurance Department’s interpretations of Insurance Law § 5106 (a) and its regulations are irrational and unreasonable, they will not be upheld. (Id.)

In this case, the Insurance Department’s opinion letter of October 8, 2003 limits the claimant’s recovery to the “total amount of individual bills disputed . . . regardless of whether one bill or multiple bills are presented as part of a total claim for benefits.” (Ops Gen Counsel NY Ins Dept No. 03-10-04 [Oct. 2003].) This is an irrational and unreasonable interpretation of the statutory construction of Insurance Law § 5106 (a), runs contrary to the legislative intent of providing claimants with prompt and full compensation, and ignores the historical perspective of the courts which have, at least, awarded the minimum attorney’s fees for each disputed claim which is resolved in favor of the claimant.

Accordingly, this court rejects the Insurance Department’s informal and nonbinding opinion letter of October 8, 2003, for reasons similar to those of several trial courts that have done so in the past. (Alpha Chiropractic P.C. v State Farm Mut. Auto Ins. Co., supra; Valley Stream Med. & Rehab, P.C. v Liberty Mut. Ins. Co., supra.)

Conclusion

Defendant’s motion to revise the attorney’s fees on the plaintiff’s judgment is denied as defendant failed to provide a copy of said proposed judgment and plaintiff is entitled to a minimum attorney’s fee of $60 for each of the four “claims” he asserted on behalf of his assignor, Jose Contreras. The parties are directed to settle the judgment accordingly.

Footnotes

Footnote 1: Neither party settled the judgment. Moreover, defendant failed to attach a copy of the proposed judgment that it seeks to revise.

Footnote 2: A “proof of claim” would be more accurate and avoid confusion because a “claim” can also be loosely defined as a “cause of action.” (Black’s Law Dictionary 264 [8th ed 2004].)

Supreme Court, New York County

105241/06

Eileen Bransten, J.

Pursuant to CPLR 7502 and 7503, Allstate Insurance Company (“Allstate”) petitions for a Judgment, among other things, staying an arbitration commenced by respondent Sallie Merrick (“Ms. Merrick”).

Background

By Denial of Claim form dated September 27, 1996, Allstate informed Ms. Merrick that “all no-fault claims benefits will be denied effective 10/04/96.” Affirmation in Support (“Supp.”), Ex. B.

Ms. Merrick contends that in April 2002, “within the six-year period of the statute of limitations,” she “properly commenced” an arbitration before the American Arbitration Association (“AAA”), contesting Allstate’s denial of no-fault benefits. Affirmation in Opposition (“Opp.”), at ¶ 3. In May 2002, Ms. Merrick provided additional information responsive to an inquiry from AAA.

On January 9, 2003, after receiving no further communications, a paralegal for Ms. Merrick’s counsel contacted AAA to ascertain a date for arbitration proceedings. The paralegal swears that AAA advised her that “they were unable to locate the file” and that an Arbitration Request Form and check for $40 should be resubmitted. Opp., Ex. C, at ¶ 7. That very day, the paralegal resubmitted the materials. Id.

Again, the paralegal contacted AAA inquiring about the status of Ms. Merrick’s arbitration. She “continued to call every six months and received the same response that [Ms. Merrick] would be hearing by way of a letter indicating the name of the Arbitrator and the date of the arbitration.” Opp., Ex. C, at ¶ 8. After “many calls,” the paralegal was advised to resubmit yet another set of papers. Id., at ¶ 9. On February 17, 2005, Ms. [*2]Merrick’s attorney forwarded the papers to AAA, along with a new check and a letter indicating that “the enclosed request was previously submitted.” Opp., Ex. E. AAA returned the arbitration request because it was incomplete. Opp., Ex. F.

AAA received additional papers on June 8, 2005. Supplemental Affirmation from Allstate (“Allstate Aff.”), Ex. A. On June 15, 2005, AAA confirmed “acceptance of an arbitration request.” Id.

On September 19, 2005, in response to an email from the AAA no-fault conciliator assigned to the matter informing Allstate that there was “no record of receiving a submission from Allstate to date,” a Staff Claim Adjuster explained that the company had “no notice of this arbitration * * * This case has never been assigned we never [received AAA] notice.” Allstate Aff., Ex. A. That very day, the conciliator offered to forward Allstate a copy of the filings and notices. Id.

Subsequently, in a September-26-2005 email to the AAA no-fault conciliator, an Allstate Senior Staff Claim Service Representative noted that the file on the claim was old and stated: “I would suspect that there are some statute of limitations applicable here.” Allstate Aff., Ex. C. (There is no indication that Ms. Merrick’s attorney received a copy of the email.)

On October 19, 2005, counsel for Ms. Merrick and Allstate were informed that an arbitrator had been appointed and that a hearing was scheduled for November 22, 2005. Supplementary Affirmation in Opposition (“Supp. Opp.”), Ex. A. Counsel were advised to “attend promptly with * * * witnesses and be prepared to present * * * proofs.” Id. A few days before the hearing, on November 17, 2005, attorney Peter C. Merani wrote the AAA case manager assigned to Ms. Merrick’s claim, advising that “the above captioned matter has been assigned to our office to appear as counsel to the insurer in the pending No-Fault arbitration. Please note your files accordingly, advise us of all scheduled hearing dates, adjourned dates, direct all correspondences and awards to our offices.” Supp. Opp., Ex. B.

Proceedings were conducted on November 22, 2005. “Briefs were submitted and testimony was taken on that day.” Opp., at ¶ 10. Attorney Sammy Lesman, an associate in the office of Peter C. Merani, Esq., delivered an opening statement and cross-examined Ms. Merrick. Supp. Opp., at ¶ 6. After “oral testimony was declared closed” by the arbitrator, Mr. Lesman requested to respond by producing Allstate’s No-Fault records regarding Ms. Merrick’s claim. Id., at ¶ 7. On November 25, 2005, Mr. Lesman sent “a copy of [Allstate’s] submissions for the No-Fault Matter” to the AAA, requesting that the materials be forwarded to the assigned arbitrator. Allstate’s counsel made no mention of any statute of limitations defense at the hearing or in its post-hearing submissions. Opp., at ¶ 10; Supp. Opp., at ¶ 9.In late February, the Arbitrator requested production of Ms. Merrick’s 1996-1997 tax returns and proof that she did not work following the accident. [*3]Opp., at ¶ 11; Supp. Opp., at ¶ 11. Ms. Merrick’s attorney submitted the materials to AAA and Allstate’s counsel on March 3, 2006. Opp., at ¶’11. On March 10, 2006, Ms. Merrick’s attorney was notified that a further hearing was scheduled for April 18, 2006. Id. He was subsequently advised, however, that the April 18, 2006 hearing was cancelled and “that there would be a decision fairly soon.” Opp., at ¶ 11.

On April 17, 2006, Allstate commenced this proceeding, seeking a Judgment staying Ms. Merrick’s arbitration on the ground that more than six years passed since denial of no-fault benefits. Supp., at ¶ 6. Allstate contends that a “review of the Arbitration Request[] Forms of Sallie Merrick stamped by [AAA] as found on their website adr.org, and in her submission shows that the earliest possible receipt date of her application is February 22, 2005,” which is beyond the statute of limitations. Supp., at ¶ 5. Allstate also requests an Order “staying the enforcement of any judgment” entered in accordance with the arbitration. Order to Show Cause, at 2; Supp., at ¶ 7.

The following day, “an attorney from the Law Offices of Peter C. Merani appeared on behalf of [Allstate] for the hearing on April 18, 2006.” Reply, at ¶ 9. Ms. Merrick’s counsel, believing that the session had been canceled, did not appear. Supp. Opp., at ¶ 12.

On April 19, 2006, Ms. Merrick’s attorney received Allstate’s Verified Petition. Supp. Opp., at ¶ 13. Ms. Merrick strongly opposes Allstate’s application. She urges that she should not be prejudiced simply because her submissions were misfiled once in 2002, and again in 2003. Opp., at ¶ 14. Ms. Merrick points out that the initial April 2002 arbitration request was sent to Allstate’s counsel; thus, Allstate had notice of the dispute and the AAA filing within the statute of limitations.

Analysis

Because Allstate participated in the arbitration proceeding—Allstate’s counsel made an opening statement, cross-examined Ms. Merrick and submitted evidence—it waived its rights to seek a judicial stay. CPLR 7503(b) provides that “a party who has not participated in the arbitration * * * may apply to stay arbitration on the ground that * * * the claim sought to be arbitrated is barred” by the statute of limitations applicable to the same causes of action under New York law. See also, Matter of Civil Service Employees Assn. [County of Erie], 303 AD2d 1050, 1051 (4th Dept. 2003) (“participation in the arbitration constituted a waiver of any right * * * to raise a statute of limitations defense in court or obtain a stay of arbitration on statute of limitations grounds”); Alexander, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR C7503:2 (“participation in the arbitration will constitute a waiver of the right to seek a judicial stay and thus foreclose raising, in court, threshold defenses relating to arbitrability and the statute of limitations. The opponent’s participation in arbitration is deemed inconsistent with his position that the dispute is nonarbitrable”); Siegel, NY Prac. § 592, [*4]at 1043 (4th ed.).

Allstate argues that because Ms. Merrick did not comply with the provisions of CPLR 7503(c), which provides that a “party may serve upon another party a demand for arbitration or notice of intention to arbitrate” that must be served in a particular manner and must set forth specified information, it is still free to seek a stay notwithstanding its participation. Allstate is wrong.

CPLR 7503(c) affords a party desirous of arbitrating a claim with a mechanism to impose a very short and strict 20-day deadline for challenging arbitrability, including raising the argument that arbitration is time barred. Within 20 days of proper service of a valid CPLR 7503(c) notice or demand, a party seeking to avoid arbitration on statute-of-limitations grounds must apply to stay arbitration or suffer the consequences of being precluded from raising the argument in court at any time—before or after the arbitration—regardless of whether the party actually participates in the proceedings. See, CPLR 7503(c); CPLR 7511(b)(2)(iv).

In contrast, when, as here, there has been no CPLR 7503(c) notice or demand to arbitrate, there is no strict 20-day limit for applying to stay arbitration and a party that did not participate in the proceedings retains the right to challenge the award because the arbitrated claim was time barred. CPLR 7503(c), however, does not in any way nullify the rule that a participant in the arbitration cannot subsequently seek a judicial stay based on passage of the statute of limitations.

That Allstate informed the AAA in an informal email that it suspected “there are some statute of limitations” issues, is equally unavailing. To obtain a judicial stay on statute-of-limitations grounds, Allstate was required to commence a special proceeding before participating in the arbitration. It cannot make arguments before the arbitrator, conduct cross-examination and submit evidence—costing all of the parties time and money—and then, for the first time, argue to the Court that the matter should never have gone to arbitration in the first place because the claim is time barred.

Accordingly, it is

ORDERED and ADJUDGED that the petition is denied and the proceeding is dismissed.

This constitutes the Decision, Order and Judgment of the Court.

Dated: New York, New York

August 17, 2006

E N T E R

[*5]

Hon. Eileen Bransten

[*1]

Civil Court of the City of New York, New York County, April 18, 2006

APPEARANCES OF COUNSEL

Werner, Zaroff, Slotnick, Stern & Ashkenazy, LLP, Lynbrook (Suzette Hyde of counsel), for plaintiffs. Carman, Callahan & Ingham, LLP, New York City (Jason Tenenbaum of counsel), for defendants.

OPINION OF THE COURT

Diane A. Lebedeff, J.

These two cases were consolidated for trial and center upon a no-fault health services provider’s claim for compensation for charges for an electrical diagnostic test identified as current perception threshold testing, also known as sensory nerve conduction threshold testing. Contending that compensation must be denied for these no-fault claims, defendant advances two novel arguments: (1) the medical tests are not compensable under Medicare, and (2) the medical tests are so questionable that such testing constitutes “provider fraud.”

CPT and sNCT Testing

To briefly address the nature of current perception threshold testing (CPT) and sensory nerve conduction threshold testing (sNCT), CPT and sNCT procedures assess the function of a tested sensory nerve. The test device is a noninvasive electrodiagnostic test. The tester affixes three pads to designated spots on skin over a nerve pathway and delivers electrical charges on an upward scale until the patient reports feeling a sensation. Such pads may be placed along various nerve pathways on upper or lower limbs or both. The results are recorded on a table format and the device, comparing the readings obtained to an internal database of readings, [*2]delivers a printout of an analysis and a statement reporting whether the patient’s sensory perception is normal or the degree to which perception is elevated or depressed.

The federal Centers for Medicare and Medicaid Services, a division of the federal Department of Health and Human Services, issued a number of statements regarding CPT and sNCT, which have been addressed by counsel and of which the court takes judicial notice. As of October 1, 2002, CPT and sNCT were classified as procedures not compensable under Medicare (68 Fed Reg 44088-03, 44089 [2003] [“The available scientific evidence is not adequate to demonstrate the accuracy of sNCT . . . as compared to nerve conduction studies . . . We conclude that the scientific and medical literature does not demonstrate that the use of sNCT to diagnose sensory neuropathies in Medicare beneficiaries is reasonable and necessary”]). The Centers for Medicare and Medicaid Services also issued an extended analysis, including a literature review, explaining the basis for this policy and found it most significant that CPT and sNCT results have, to date, led to no changes in patient management, albeit such testing might offer a type of testing sensitivity appropriate to patients with sensory neuropathy resulting from diabetes or a genetic disorder known as Fabry’s disease (Decision Mem of Centers for Medicare and Medicaid Services, Electrodiagnostic Sensory Nerve Conduction Threshold, CAG-00106N, Feb. 14, 2002 [reporting experts in neuropathy “were uniformly unaware of a use for sNCT that would alter patient management” and accordingly it could not be found “clinically effective”]).^[FN1] However, the review closed with the observation that “sNCT merits further study and we encourage investigators to conduct well-designed clinical trials to demonstrate the clinical effectiveness of the test” (id.).

Alternative tests which provide substantially similar information to that produced by CPT or sNCT regarding the status of nerves include the much simpler pin prick test and, providing information also on the physical structures which might impinge upon nerves, nerve conduction velocity tests (NCV), electromyography tests (EMG) and magnetic resonance imaging tests (MRI). All of these alternative tests are universally recognized as informative by experts, as stated by defendant’s expert who testified at the trial. It is noted that one no-fault insurer has contended that ordering CPT or sNCT after performing an NCV, EMG or MRI is a fraud on such insurer (see, based on such facts, State Farm Mut. Auto. Ins. Co. v CPT Med. Servs., P.C., 375 F Supp 2d 141 [ED NY 2005, Glasser, J.] [$2.5 million damage claim in complaint asserting CPT or sNCT procedures were done with sole purpose of generating fees, claims raised under Racketeer Influenced and Corrupt Organizations Act (18 USC § 1961 et seq.), as well as fraud and unjust enrichment theories]).

Because of the limited nature of the two defenses advanced, the court is not called upon to rule upon any other potential issues, such as (1) whether a CPT or sNCT may be ordered and/or administered by a chiropractor,^[FN2] (2) whether the person performing the test was not an [*3]employee of the health services provider filing the claim, but was an independent contractor,^[FN3] or (3) that such test is too experimental or novel to be compensable.^[FN4]

No-Fault Insurer’s “Medicare Defense”

The defendant no-fault insurer timely denied the subject claims for CPT or sNCT procedures for identical reasons. Each denial recited the insurer’s position that such testing lacks “scientific and clinical evidence that would deem this service medically necess[ary]” and referred to the determination of the federal Centers for Medicare and Medicaid Services, that such testing was not compensable under Medicare.

The court must reject the insurer’s contention that the programmatic noncompensability under Medicare bars submission of a claim under the no-fault program. To adopt that argument would require judicial rewriting of New York’s no-fault statute to insert a reference to Medicare standards. The no-fault statute references only a single bright line standard for compensable health care services, which encompasses workers’ compensation fee schedules (Insurance Law § 5108 [a] [no-fault charges “shall not exceed the charges permissible under the schedules prepared [*4]and established by the chairman of the workers’ compensation board for industrial accidents, except (to the extent) unusual procedures or unique circumstances justify the excess charge”], [c] [“No provider of health services . . . may demand or request any payment in addition to the (authorized) charges”]).

Given the clarity of the no-fault statute, the statutory language bars a “Medicare defense” (Roth v Michelson, 55 NY2d 278, 283 [1982] [absent ambiguity, statute to be interpreted literally]; McKinney’s Cons Laws of NY, Book 1, Statutes § 92, Comment [the “intention of the Legislature is first to be sought from a literal reading of the act itself”]; 97 NY Jur 2d, Statutes § 102 [2006] [“Determining legislative intent; unambiguous provisions”; “where statutory language is clear and unambiguous, the court must give effect to the plain meaning of the words and apply it in accordance with its express terms”]). If this argument is to be further advanced, it must be presented to the Legislature, the Insurance Department or the Workers’ Compensation Board. A health services provider’s eligibility for compensation under Medicare is not, standing on its own, a cognizable reason to deny payment of a no-fault claim and this argument is rejected.

No-Fault Insurer’s “Fraud Defense” as Applicable to

a Health Services Procedure

The defendant then urges that the use of CPT or sNCT should be barred as constituting “provider fraud.” Defendant contends that “provider fraud” should be treated in the same manner as a defense of noncoverage, which is not waived by a failure to assert it in a timely denial (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 202 [1997]; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 283 [1997]). On this basis, defendant argues that a defense of “fraud” by a health services procedure may be advanced at trial even if not set forth in a timely denial.

At the outset, because of the loose use of the term “fraud” in the no-fault area, care must be taken to distinguish what “fraud” is claimed to be at issue. For example, the “staged accident fraud” defense actually poses an issue of noncoverage because—under both no-fault concepts and typical automobile policy provisions—insurance coverage is limited to an “accident,” and does not necessarily pose an issue of fraud (V.S. Med. Servs., P.C. v Allstate Ins. Co., 11 Misc 3d 334 [Civ Ct, Kings County 2006, Bluth, J.] [with extensive review of case law and rejecting fraud clear; and convincing burden of proof]), and the “provider fraud” of not being a properly licensed health services facility truly poses an issue of not being eligible to receive reimbursement, rather than fraud (State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, 320 [2005]; 11 NYCRR 65-3.16 [a] [12] [“A provider of health care services is not eligible for reimbursement under section 5102 (a) (1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement”]). As these examples illustrate, a “fraud” defense in the no-fault area often actually refers to a challenge to coverage or eligibility for reimbursement.

Here, rather than any independent fraud, present is a defense of “excessive treatment” by a medical provider, which involves questioning the health services provider’s bill. A question of medically inappropriate treatment cannot be readily equated to a coverage issue (Central Gen. Hosp. v Chubb Group, supra, 90 NY2d at 199 [“treatment being deemed excessive by the insurer . . . would not ordinarily implicate a coverage matter”]).

On questions regarding medical necessity in the no-fault area, the issue of appropriateness of treatment is one which must be raised in the course of claims processing. The claim form itself gives rise to a presumption of medical necessity (Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 7 Misc 3d 18, 22 [App Term, 2d Dept 2004] [“presumption of medical necessity . . . attaches to the claim form”]). Any objection to a lack of medical necessity must be stated in a claim denial form, and must be “supported by competent evidence such as an independent medical examination, a peer review or other proof which sets forth a factual basis [*5]and a medical rationale for denying the claim” (Healing Hands Chiropractic, P.C. v Nationwide Assur. Co., 5 Misc 3d 975, 976 [Civ Ct, NY County 2004, Kern, J.] [also involving a claim for CPT compensation]; see also, decisions following trial, Nir v Allstate Ins. Co., 7 Misc 3d 544 [Civ Ct, Kings County 2005, Matos, J.], and CityWide Social Work & Psychological Servs. v Travelers Indem. Co., 3 Misc 3d 608 [Civ Ct, Kings County 2004, Battaglia, J.]). At all stages, the insurer bears the burden of proof on a medical necessity defense (see Healing Hands Chiropractic, P.C. v Nationwide Assur. Co., supra; see also Lumbermens Mut. Cas. Co. v Inwood Hill Med., P.C., 8 Misc 3d 1014[A], 2005 NY Slip Op 51101[U], *6 [Sup Ct, NY County 2005, Ramos, J.] [“failure to appear (for a scheduled examination under oath or independent medical examination) rebuts the presumption of the medical necessity . . . (but) does not require dismissal of the action” on medical necessity grounds]).

It is the conclusion of this court that this challenge to a health services procedure cannot be cloaked as one of fraud. Moreover, even if looking at the record as a whole for those “[b]adges of fraud permitting an inference of fraudulent intent” (Nonas v Romantini, 271 AD2d 292, 292 [1st Dept 2000] [a fraudulent conveyance case]), the fact that CPT or sNCT is not compensable by Medicare is but a single factor and is insufficient without more to establish fraudulent intent (Spires v Mihou, 13 AD3d 1056, 1057 [4th Dept 2004] [“fraudulent intent is rarely established by direct proof, but we nevertheless conclude that there are insufficient ‘badges of fraud’ in this case from which such intent may be inferred”]; compare Brody v Pecoraro, 250 NY 56, 61 [1928 Cardozo, Ch. J.] [“The traditional badges of fraud are spread over the transaction in prodigal profusion”]; see Inwood Hill Med. v Allstate Ins. Co., 3 Misc 3d 1110[A], 2004 NY Slip Op 50565[U] [Civ Ct, NY County 2004, Hagler, J.] [an extended analysis of fraud allegations in the context of a no-fault summary judgment motion]). Most significantly, given that the tendered defense fits suitably within the structure of analysis for the treatment of a medical necessity issue, attempting to cast this attack on a health services bill as exempt from the need for a timely articulated denial appears to be a step which would fly in the face of a clear caution issued by the Court of Appeals (Presbyterian Hosp. v Maryland Cas. Co., supra, 90 NY2d at 285-286 [“The tradeoff of the no-fault reform still allows carriers to contest ill-founded, illegitimate and fraudulent claims, but within a strict, short-leashed contestable period and process designed to avoid prejudice and red-tape dilatory practices. To string out belated and extra bites at the apple is . . . unfounded under the statutes, regulations and policies” and “we discern no justification for penalizing injured parties or their provider assignees by recognizing disincentives against prompt attention and action (to timely claims processing)”]).

Turning to the evidence presented appropriate to medical necessity, the defense expert’s testimony failed to address the medical status of the patients at issue and failed to present any proof of inappropriateness of the testing utilized based upon an individual review of each claim. New York courts insist that no-fault insurers focus on the facts regarding the individual claimant in these cases, whether involving first-party or third-party claims for compensation for medical procedures, because the governing legislation requires a grant of “full compensation for economic loss” (Oberly v Bangs Ambulance, 96 NY2d 295, 298 [2001]; Insurance Law § 5101). No evidence was presented that the bills were inappropriate in amount for the procedures at issue.

Accordingly, in relation to this claim for compensation, this “provider fraud” argument is rejected as a disguised attempt to avoid the strictures regarding claims processing contained in the Comprehensive Motor Vehicle Insurance Reparations Act and is held not to be equivalent to a viable challenge to coverage or eligibility for reimbursement. Rather, it is found proper to consider the subject claims under the standards applicable to a medical necessity issue and—applying a fair preponderance of the credible evidence standard of proof—no cognizable reason to deny or diminish payment has been established by the insurer.

Conclusion

Given the foregoing and the parties having agreed that there were assignments of benefits to plaintiff and that completed copies of proofs of claim were mailed and received by the defendant, but not paid or denied within 30 days of receipt, the plaintiff has established his case (11 NYCRR former 65.15 [g] [3]).

Accordingly, judgment in each case shall issue for the plaintiff. Based upon the court’s experience and observation, the reasonable value of the services of plaintiff’s attorney fees exceeds the amount permitted under Insurance Law § 5106 and it is determined that plaintiff is entitled to attorney fees and statutory interest pursuant to such provision.

Footnotes

Footnote 1: This conclusion was also reached by others. In 1999, an article in the American Association of Electrodiagnostic Medicine’s journal Muscle & Nerve reviewed available literature and concluded that “the information in [health services] publications is insufficient to make conclusions about the usefulness of this form of sensory testing at the present time” (Neurotron, Inc. v American Assn. of Electrodiagnostic Medicine, 189 F Supp 2d 271, 273 [D Md 2001], affd 48 Fed Appx 42 [4th Cir 2002] [dismissing the manufacturer’s product disparagement and Lanham Act claims]). In 1997, the Pennsylvania Blue Shield program issued a statement that CPT had “no proven clinical utility” and was not compensable (Neurotron Inc. v Medical Serv. Assn. of Pennsylvania, Inc., 254 F3d 444, 447 [3d Cir 2001] [dismissing the manufacturer’s product disparagement claim]).

Footnote 2: As to plaintiff’s assignor Ostroviak, the record contained a prescription form for the test issued by a chiropractor; as to both plaintiff’s assignors, the test was administered by a chiropractor. The defendant has advanced no argument that CPT or sNCT is a procedure which the State Board of Regents and the State Board for Chiropractors do not permit a chiropractor to “prescribe” nor an electrical device which a chiropractor may not “utilize” (Education Law § 6551 [3]). As cogently pointed out by Judge Markey in ABC Med. Mgt. v GEICO Gen. Ins. Co. (3 Misc 3d 181, 185 [Civ Ct, Queens County 2003]), a ready answer to such an inquiry may be found in consulting the list of what is permitted, as well as a review of the Workers’ Compensation Law fee schedules incorporated into the no-fault program which lists procedures for which a chiropractor may seek compensation (12 NYCRR 348.2 [a]).

It is noted that a health care services provider performing a procedure at the request of a chiropractor may file a direct claim for no-fault compensation with an insurance company provided the service is one which a chiropractor may prescribe and the service is medically necessary (Omega Diagnostic Imaging, P.C. v State Farm Mut. Auto Ins. Co., 8 Misc 3d 715 [Civ Ct, Kings County 2005, Nadelson, J.]). The insurer here has failed to preserve a “fee schedule” defense for trial purposes, because that defense was not asserted in the subject claim denials (Jamil M. Abraham M.D. P.C. v Country-Wide Ins. Co., 3 Misc 3d 130[A], 2004 NY Slip Op 50388[U], *2 [App Term, 2d & 11th Jud Dists 2004] [“we have held that by virtue of a timely claims denial an insurer is entitled to interpose the (fee schedule) defense” and “establish that . . . charges exceeded that permitted by law by evidentiary proof”]).

Footnote 3: A defense that a health service was not provided by the health services provider or its employees, but by an independent contractor, would bar a suit because the plaintiff then would not be “a ‘provider’ within the meaning of the insurance regulations” and such defense is “nonwaivable and not subject to the preclusion rule” (Rockaway Blvd. Med. P.C. v Progressive Ins., 9 Misc 3d 52, 54 [App Term, 2d Dept 2005]). The chiropractor who administered the tests at issue was called in by plaintiff’s office to conduct the tests and brought his own testing machine, facts generally indicative of independent contractor status, but his statement that he was plaintiff’s employee was not challenged.

Footnote 4: Absent any argument which might spring from policy language or have another basis, objecting to health services as experimental or of dubious value gives no rise to an independently cognizable objection, distinct from a medical necessity argument (12 Couch on Insurance 3d § 171:66 [“Requirement of Reasonable Relation to Treatment Prescribed”; compensable no-fault medical expenses may include “expenses for innovative medical procedures warranted by circumstances” and such “charges should be reviewed on a case-by-case basis because of the unique nature and speculative value of the service rendered. The critical issue here is the value of the service performed in light of the claimant’s condition”]).

[*1]

Supreme Court, New York County, April 17, 2006

APPEARANCES OF COUNSEL

Robinson & Cole LLP, New York City (Joseph L. Clasen and Richard J. Guida of counsel), for plaintiff. Krause & Mauser, LLP, New York City (Robert Washuta of counsel), for Kuok Hang Leong, defendant.

OPINION OF THE COURT

Rolando T. Acosta, J.

Introduction

Kuok Hang Leong was struck by a car insured by American Transit Insurance Company, and the insureds neither informed American Transit of the accident nor of Leong’s lawsuit instituted several months later. Leong, however, immediately notified American Transit about the accident,^[FN1] and his attorney informed American Transit that it had been retained to pursue any legal claims. Leong also sought no-fault benefits from American Transit. In response, American Transit assigned a claims adjuster, investigated the claim, and asked Leong to submit to an independent medical exam (IME) on three separate occasions. Notwithstanding the fact that counsel served American Transit with its default judgment motion against the insureds and American could have prevented the default, American Transit instead commenced the instant action and moved for a judgment declaring that it did not have to defend or indemnify the insureds or the victim. According to American Transit, it could disclaim coverage because neither the insureds nor the victim provided timely notice of litigation, and that a showing of prejudice was not required before it could disclaim on this basis. Leong cross-moved to dismiss American Transit’s complaint, arguing that American Transit’s motion was premature and that in any event he had given it timely notice.

The court is thus required to consider the primary issue in these motions for summary judgment, namely, whether the “no-prejudice” rule applies in the facts of this case, and even if it does, whether that requirement was satisfied by counsel’s letter informing American Transit that it had been retained to pursue any potential claims. Given the circumstances of this case, the court finds in favor of the victim. American Transit had timely knowledge of the accident and was well aware of Leong’s counsel’s involvement in the matter. The court will not permit American Transit to manipulate its own notice requirements to deny coverage to a victim.

Background

Plaintiff American Transit issued a car insurance policy on behalf of defendant B.O. Astra Management Corp. with a policy period from March 1, 2004 to March 1, 2005. Although B.O. Astra owned the vehicle, the vehicle was registered to defendant Manuel Lema. On March 19, 2004, defendant Leong was struck by the vehicle driven by defendant Mario Chauca in Queens County. [*2]

Twelve days after the accident, on March 31, 2004, Leong’s counsel provided American Transit with written notice of Leong’s accident and claim. The written notice stated, inter alia, “[p]lease be advised that your insured was involved in a car accident. This letter is to inform you that we have been retained by [Leong] in this matter, and to further inform you of potential claims against your insured.” On that same date, by separate letter, Leong’s counsel sent American Transit a letter and an application for no-fault benefits.

Approximately one month after the accident, on April 22, 2004, American Transit acknowledged in writing that it had received Leong’s correspondence, that it was investigating the claim and that it would contact counsel’s office upon completion of the investigation, that a file had been established, provided the name of the claims adjuster, and requested additional information regarding Leong’s liability theory and injuries.

Since American Transit was also the no-fault carrier on Leong’s first-party benefits claim for, among other expenses, medical bills, it requested that Leong see an orthopedic surgeon for examination five weeks after the accident. The initial request for an IME was followed up with three additional requests.

Four months after the accident, on July 7, 2004, Leong initiated a lawsuit against B.O. Astra, Lema and Chauca in Supreme Court, Queens County (the underlying action). Neither B.O. Astra, Lema nor Chauca informed American Transit of the underlying action. According to American Transit, it did not learn of the underlying action until January 27, 2005, when it received a copy of Leong’s motion for a default judgment against B.O. Astra, Lema and Chauca. On February 4, 2005, American sent notification to all defendants that it was disclaiming coverage for failure to provide timely notice of the commencement of the underlying action. Three and a half months later, on May 20, 2005, American Transit commenced this action seeking a declaration that it does not have a duty to defend or indemnify the defendants. Only Leong answered American Transit’s complaint raising several affirmative defenses, including failure to state a cause of action.

American Transit’s claim is based on language in the policy, which allegedly states that “[i]f any suit is brought against the insured . . . the insured shall immediately forward to the company every summons or other process served upon him . . .  .” A copy of the policy containing this language, however, was not attached to American Transit’s motion papers.

On June 7, 2005, Leong obtained a default judgment against B.O. Astra, Lema and Chauca on the underlying action and an inquest was held on November 22, 2005.

Motions for Summary Judgment

Plaintiff’s motion for summary judgment is denied inasmuch as Leong has not had the opportunity to engage in discovery. (CPLR 3212 [f].) As Leong argued in his moving papers, “American Transit should have to produce its claim file in this matter, its insurance policy setting forth the obligations, rights and duties of American Transit and all documents regarding its investigation into the claim.” (Affirmation in support of cross motion ¶ 22; Baron v Incorporated Vil. of Freeport, 143 AD2d 792, 792-793 [2d Dept 1988] [“(i)t is well established that where facts essential to justify opposition to a motion for summary judgment are exclusively within the knowledge and control of the movant, summary judgment may be denied”].) Since B.O. Astra and Lema defaulted in the underlying action, there is no reason to believe that Leong would have any information about the policy in its possession. Indeed, as noted above, plaintiff did not even attach a copy of the policy to its moving papers in the instant case.

Plaintiff’s motion for summary judgment is also denied because even if it had attached the insurance policy and thereby established the notice of lawsuit requirement, the court finds that under the circumstances of this case, that requirement was satisfied. Therefore, Leong’s cross motion for summary judgment dismissing the complaint against him is granted.

Notice Requirements

An insurer may demand that in addition to receiving timely notice of the accident, that it also receive timely notice of claimant’s commencement of litigation. (American Tr. Ins. Co. v Sartor, 3 NY3d 71 [2004].) “The purpose of such notice is to provide the insurer with a fair and [*3]reasonable opportunity to appear and defend against a claim or exercise its right to settle the matter.” (Id. at 75.) The failure to satisfy this condition precedent “may allow an insurer to disclaim its duty to provide coverage.” (Id. at 76 [emphasis added].)

Unlike failure to give timely notice of claim, which relieves the insurer of its obligation to perform whether or not it can show prejudice (the no-prejudice exception),^[FN2] the notice of law suit requirement is not always governed by the “no-prejudice” rule. (See, e.g., Matter of Brandon [Nationwide Mut. Ins. Co.], 97 NY2d 491, 496-497 [2002] [the insurance policy in this case dealt with Supplementary Uninsured Motorist (SUM) coverage].) As the Court of Appeals noted in Matter of Brandon, the limited “no-prejudice” exception was created in Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp. (31 NY2d 436 [1972]), to allow the insurer to protect itself from fraud by investigating claims soon after the underlying events, to set reserves, and to take an early and active role in settlement discussions. “While immediate notice of legal action may indeed help SUM insurers to protect themselves against fraud, set reserves and monitor and perhaps settle the tort action,” the Court of Appeals held that “the notice of claim requirement served this purpose.” (Matter of Brandon, 97 NY2d at 497.) Likewise, in Rekemeyer v State Farm Mut. Auto. Ins. Co. (4 NY3d 468, 476 [2005]), the Court of Appeals held that where an insured previously gives timely notice of the accident, the carrier must establish that it is prejudiced by a late notice of SUM claim before it may disclaim coverage. Significantly, in Rekemeyer, the Court of Appeals noted that in addition to giving timely notice of the accident, the plaintiff made a claim for no-fault benefits soon thereafter.

“That notice was sufficient to promote the valid policy objective of curbing fraud or collusion. Moreover, the record indicates that State Farm undertook an investigation of the accident. It also required plaintiff to undergo medical exams [on two separate occasions]. Under these circumstances, application of a rule that contravenes general contract principles is not justified.” (Rekemeyer, 4 NY3d at 475-476.)

The issue of whether a primary insurer can rely on the “no-prejudice” exception and disclaim coverage based solely upon a late notice of litigation or whether it must show prejudice was addressed by the Court of Appeals in Argo Corp. v Greater N.Y. Mut. Ins. Co. (4 NY3d 332 [2005]). In Argo, plaintiff did not give notice of claim and gave notice of lawsuit 14 months after the injured party served the complaint upon the Secretary of State, six months after service of the default motion upon plaintiffs, until more than three months after default was entered, and until almost three months after service of the note of issue upon plaintiffs. (Id. at 338.)

“[U]nder the circumstances of this case,” the Court of Appeals held that plaintiff’s late notice was untimely as a matter of law and that the insurer need not show prejudice. (Id. at 336 [emphasis added].) The Court noted that “Brandon did not abrogate the no-prejudice rule and should not be extended to cases where the carrier received unreasonably late notice of claim.” (Id. at 339-340.) It also noted that the facts in Argo “are distinguishable from Brandon where a timely notice of claim was filed, followed by late notice of lawsuit, and distinguishable from Rekemeyer, where an insured gave timely notice of the accident, but late notice of the SUM claim.” (Id. at 340.) It is in this context that the Court of Appeals held that:

“The rationale of the no-prejudice rule is clearly applicable to a late notice of lawsuit under a liability insurance policy. A liability insurer, which has a duty to indemnify and often also to defend, requires timely notice of lawsuit in order to be able to take an active, early role in the litigation process and in any settlement discussions and to set adequate reserves. Late notice of lawsuit in the liability insurance context is so likely to be prejudicial to these concerns as to justify the application of the no-prejudice rule. Argo’s [*4]delay was unreasonable as a matter of law and thus, its failure to timely notify GNY vitiates the contract. GNY was not required to show prejudice before declining coverage for late notice of lawsuit.” (Id.)

In the present case, according to plaintiff, Leong failed to satisfy the notice of lawsuit requirement because plaintiff first learned of the underlying lawsuit on January 27, 2005, when Leong served plaintiff with a copy of his default motion. Since the lawsuit was commenced almost seven months earlier on July 7, 2004, notice of the suit was not timely. Plaintiff further argues that it is irrelevant whether it suffered any prejudice.

In this court’s opinion, even though this case does not deal with SUM insurance, the rationale of Brandon still applies. American Transit was not only given timely notice of claim (as in Brandon), but it was also informed that counsel had been retained. Moreover, American Transit stated that it would investigate the claim and provided counsel with the name of a claims adjuster. Significantly, American Transit was also the no-fault carrier on Leong’s first-party benefits claim and requested that Leong see an orthopedic surgeon for examination five weeks after the accident. The initial request for an IME was followed up with three additional requests. (See, e.g., City of New York v Continental Cas. Co., 27 AD3d 28 [1st Dept 2005] [insurer was given timely notice of occurrence, actively participated in the litigation before City was impleaded, and was served with a copy of the complaint against the city by Consolidated Edison Co. when it was originally served].) Also, unlike Argo, American Transit received notice of the lawsuit before a default judgment had been entered. Furthermore, American Transit could have prevented the default (see, e.g., Halali v Vista Envts., Inc., 8 AD3d 435, 435 [2d Dept 2004] [“(t)he non-party . . . Insurance Company” is an “interested person” under CPLR 5015]), but chose instead to allow the default judgment to be entered unopposed so that it could later avail itself of the “no-prejudice” rule.^[FN3] Accordingly, the “no-prejudice” rule does not apply in this case.

Even if the “no-prejudice” rule were to apply in the facts of this case, this court finds that counsel’s letter to American Transit informing it that counsel had been retained satisfied the notice of lawsuit requirement. That letter, which specifically stated that counsel was informing American of potential claims against it, clearly served the notice requirement’s function, as identified by the Court of Appeals in Argo. Namely, it allowed American Transit the opportunity “to be able to take an active, early role in the litigation process and in any settlement discussions and to set adequate reserves.” (Argo Corp. v Greater N.Y. Mut. Ins. Co., supra, 4 NY3d at 340.) Indeed, [*5]American Transit did just that by immediately investigating the claim, assigning a claims adjuster and asking Leong to submit to an IME. To rule otherwise would reward American Transit for manipulating its alleged ignorance of Leong’s demise in order to avoid honoring its own insurance policy obligations. Moreover, it would turn on its head the legislative policy choice which permits the victim of an accident to notify the insurer when, as here, the insured failed to do so. Accordingly, Leong’s motion for summary judgment dismissing the complaint is granted.

Plaintiff’s Motion for a Default Judgment against B.O. Astra, Lema and Chauca.

Plaintiff’s motion for a default judgment against B.O. Astra, Lema and Chauca is denied even though they failed to appear in this matter inasmuch as American Transit’s duty to indemnify in this case was preserved by Leong. That is, pursuant to Insurance Law § 3420 (a) (3), the injured party in an accident does not have to rely on the insured to provide notice and can instead provide the notice on his own. As the Court of Appeals noted in American Tr. Ins. Co. v Sartor (3 NY3d 71, 79 [2004]),

“[r]ather than being left to the mercy of an insured’s acts of compliance or noncompliance with the terms of the insurance policy, a claimant injured by a vehicle . . . can safeguard the ability to seek enforcement of a judgment against the insurer by exercising the independent notice right provided by the Legislature in Insurance Law § 3420 (a) (3).”

Here, Leong availed himself of Insurance Law § 3420 (a) (3), and gave the proper notices.

Accordingly, based on the foregoing, it hereby ordered that plaintiff’s motion for a default judgment against B.O. Astra, Lema and Chauca is denied; and it is further ordered that plaintiff’s motion for summary judgment against all the defendants is denied; and it is further ordered that defendant Leong’s motion for summary judgment dismissing the complaint against it is granted. >[Portions of opinion omitted for purposes of publication.]

>

Footnotes

Footnote 1: Insurance Law § 3420 (a) (3) permits an injured party to provide notice to the insurance company of the automobile involved in the accident.

Footnote 2: “The no-prejudice” rule is

“a limited exception to two established contract principles: ‘(1) that ordinarily one seeking to escape the obligation to perform under a contract must demonstrate a material breach or prejudice; and (2) that a contractual duty [requiring strict compliance] ordinarily will not be construed as a condition precedent absent clear language showing that the parties intended to make it a condition.’ ” (Rekemeyer v State Farm Mut. Auto. Ins. Co., 4 NY3d 468, 475 [2005], quoting Unigard Sec. Ins. Co. v North Riv. Ins. Co., 79 NY2d 576, 581 [1992].)

Footnote 3: Although on February 1, 2005, American Transit sent Leong a proposed stipulation which stated, inter alia, that it would appear on behalf of the insureds and Leong would withdraw his motion for default judgment (see affidavit of Richard Carroll, dated Oct. 18, 2005, exhibit A), Leong rejected the stipulation on the grounds that it was really “a legal agreement on various legal issues and points.” (Affirmation in further support of Leong’s cross motion, dated Oct. 24, 2005, ¶ 9.) Indeed, American Transit’s proposed stipulation stated in relevant part:

“There has been no timely notification to American Transit . . . that an action was commenced as required by the policy. The Summons and Complaint for this action have never been received by American Transit . . . , neither the plaintiff nor the insured gave timely notice that an action had been initiated.

“Since there was a breach of a policy condition American Transit . . . can disclaim coverage to the insured and the injured party for all claims arising out of this accident and would have no obligation to pay any portion of Judgment rendered against its insured or any costs associated with same.”

Leong, however, stated that he was willing to vacate the default, withdraw the inquest that had been scheduled, and accept an answer by American Transit on behalf of the insureds if they agreed to defend and indemnify their insureds under the limits of the policy. (Affirmation in further support of Leong’s cross motion ¶ 5, exhibit 1.)

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

119841/05

Delores J. Thomas, J.

The above captioned matter is before this Court on petitioner’s petition to vacate a No-Fault Master Arbitration Award pursuant to CPLR § 7511. Respondent submitted a Reply to Petition but the respondent was not present at oral argument therefore the reply was not considered and the decision herein is rendered on default.

Petitioner, a provider of medical services, seeks to recover first party no-fault benefits for medical services provided to its assignor. Petitioner submitted bills totaling $1,764.62 and partial payments were made in the amount of $849.84. When petitioner’s assignor did not receive reimbursement from respondent for the balance of the bill(s) which totaled $914.78 for the medical services provided, petitioner filed a Request for Arbitration. An arbitrator designated by the American Arbitration Association (“AAA”) issued a decision dated May 31, 2004 where the arbitrator found that:

“the applicant has no status to present this claim, as it no longer is

a Corporation registered with the New York State Department,

Division of Corporation. An unlicensed facility may not present

a claim for no-fault benefits. The denial by the respondent is

sustained. The claim is denied in its entirety.” [*2]

Petitioner requested a review by a Master Arbitrator who in a decision dated September 23, 2004 rendered a Master Arbitration Award upholding the lower Arbitration Award. The Master Arbitration Award was mailed to Petitioner on or about September 27, 2004 and less than ninety days have elapsed since Petitioner’s receipt of the Master Arbitration Award.

The issue before this court is whether the Master Arbitrator’s decision was arbitrary and capricious, irrational or having no plausible basis or whether the arbitrator’s award was unsupported by the evidence in his holding that the petitioner could not present a claim for no-fault benefits.

Judicial review of an arbitration award is limited by statute, specifically, CPLR § 7511 (Matter of Petrofsky v. Allstate Ins Co, 54 NY2d 207 [1981]; Matter of Bamoun v. Nationwide Mut. Ins. Co., 75 AD2d 812 [2nd Dept 1980]; aff’d 52 NY2d 957 [1981]). However, in the case of compulsory arbitration, the award may be vacated where the arbitrator’s determination is without rational basis ( Caso v. Coffy, 41 NY2d 153, 158 [1976] the decision is arbitrary and capricious (Id; see generally Petrofsky v Allstate, supra); or if the determination disregards applicable law or is based on an error of law (Brunner v. Allstate Ins. Co., 79 AD2d 491 [4th Dept 1981]).

Courts have held that the Master Arbitrator’s authority to review the award of the lower arbitration is derived from Section 675 of the Insurance Law (Petrofsky v. Allstate, supra at 208). A Master Arbitrator therefore in addition to the grounds set forth in CPLR Article 75 is also authorized to review the award on the grounds set forth in11 N.Y.C.R.R. 65.17 as promulgated by the Superintendent of Insurance.

The role of the Master Arbitrator is to review the determination of the lower arbitrator to assure that the arbitrator reached his decision in a rational manner; and, that the decision was not arbitrary and capricious, or incorrect as a matter of law (Petrofsky v. Allstate Insurance Co., supra). The Master Arbitrator while possessing broader powers of review than the Court, is however like the courts precluded from reviewing factual or procedural errors ((Petrofsky v. Allstate, supra).

In the instant case, the Master Arbitrator found that:

Although the rule stated by the lower arbitrator is overbroad and

would not apply to a corporation dissolved for legitimate personal

or business reasons, I conclude that it applies in the circumstances

of these cases.”

The Master Arbitrator went on to say that:

respondent alleged that the dissolution resulted from governmental

action or pressure predicated on applicant’s fraudulent, unethical and

improper practices. Applicant’s principal refused to comply with

directives that he testify and the arbitrator was within his power in

drawing adverse inference because of such refusal. I find that it would

be contrary to public policy to award benefits to an entity dissolved

and unlicensed as a result of its fraudulent and improper practices in

presenting claims for services. [*3]

Petitioner argues that it is entitled to payment as it submitted a proper proof of claim(s) and that the respondent’s denial of the claim was untimely. In addition, petitioner argues that the lower arbitrator allowed respondent to raise issues at the hearing which were irrelevant to the claim and such issues were precluded because they were not raised in a timely denial. Petitioner further argues that the subsequent status of a corporation has no bearing on such corporation’s ability to collect payment for services which were rendered while such corporation was active.

Defendant argues that the insurance company was entitled to withhold payment for medical services provided by a fraudulently incorporated medical corporation and cites to State Farm Mut. Auto Ins. Co., v. Mallela, 4 NY3d 313 [2005](“Mallela III“) where the Court of Appeals held:

“The Superintendent’s regulation allowing carriers to withhold

reimbursement from fraudulently licensed medical corporations

governs this case. We hold that on the strength of this regulation,

carriers may look beyond the face of licensing documents to identify

willful and material failure to abide by state and local law.

Defendant further argues it submitted sufficient evidence to support the arbitrator’s denial by presenting a certificate from the New York State Department of State, Division of Corporations showing that petitioner was dissolved; that the corporation was dissolved as part of a plea in a criminal matter; and, that the doctor who was served with a subpoena and was to testify as to the relationship between petitioner and a management group refused to appear upon the advice of his attorney.

Before the Court can decide on the whether to vacate the arbitrator and Master’s Arbitration’s award, this Court must first review the question as to whether section § 65-3.16(a)(12) should be applied prospectively only or retroactively. In this case, the services were provided on January 19, 2000. The stated reasons for denial as listed in the June 20, 2000 NF-10 are:

Diagnostic tests denied based upon AAEM recommendations

regarding reasonable numbers of studies to arrive at diagnosis.

Diagnostic tests have been over utilized & therefore were

unnecessary & did not assist in rendering any diagnosis.

Fees not in accordance to fee schedule. EMG supplies are included

in charge of the EMG test.

It is well settled that an insurer must either pay or deny a claim for first party no fault benefits within 30 days after receiving proof of the claim (see, Insurance Law § 5106[a]; 11 NYCRR § 65.15[g][3] now 11 NYCRR § 65-3.5[a]). Failure to timely deny the claim renders the no-fault benefits overdue, and the insurer is precluded from raising any defenses, other than lack of coverage (see, Presbyterian Hosp. v. Maryland Cas. Co., 90 NY2d 274 [1997]). It is clear that the NF-10 on its face shows that the claim was not timely denied ^[FN1] and it does not list [*4]fraud of any kind as the reason for denial. It is also clear that the Court of Appeals said in its holding in Mallela III, that an insurer may deny payment to a fraudulently incorporated provider. The Court of Appeals in Mallela III, however, failed to address the issue of whether § 65-3.16(a)(12) should apply retroactively to payments not yet paid by the insurance carrier.^[FN2] The lower courts have split in their decisions. Several courts have held that public policy concerns warrant denials of payment to fraudulent licensed medical providers and Mallela III should be applied retroactively (see, A.T. Med., P.C. v. State Farm Mut. Ins. Co. 10 Misc 3d 568, 2005 NY Slip Op. 25461 [Civ. Ct, Queens Co., 2005]; Multiquest, PLLC v. Allstate Ins. Co., 9 Misc 3d 1031, 2005 NY Slip Op. 25356 [Civ. Ct, Queens Co. 2005]; Metroscan Imaging PC v. Geico Ins. Co. 8 Misc 3d 829 [Civ. Ct, Queens Co. 2005]). Others courts have held that if the Court of Appeals wanted to apply the Mallela III decision retroactively, it would have said so. In addition, these courts have further held that unless the law or a review of the legislative history specifically state or indicate the law is retroactive in nature, the law is prospective only; therefore those courts have allowed fraudulently licensed providers to collect payments for services rendered prior to enactment of § 65-3.16(a)(12) (see, Multiquest P.L.L.C. v Allstate Ins. Co, 10 Misc 3d 1061[A], 2005 NY Slip Op. 52071[U] [Civ. Ct. Queens Co., 2005]); Multiquest PLLC v. Allstate Ins. Co., 10 Misc 3d 877, 2005 NY Slip Op. 25512 [Civ. Ct., Queens Co, 2005]. There is much debate as to whether a fraudulently licensed medical provider who provided services before April 5, 2002, is entitled to payment and the lower court’s have ruled inconsistently. The Court of Appeals has yet to rule on this issue. It is not this Court’s function nor within this court’s jurisdiction in the instant matter to settle this debate and rule one way or the other as any ruling from this court would simply be another voice in the debate. The review, in this case, is limited to whether the arbitrator or Master Arbitrator’s decisions was arbitrary or capricious or incorrect as a matter of law.

This Court finds that the determination by the arbitrator that fraud may be an issue in the processing of this claim does not constitute an arbitrary or capricious ruling nor is it incorrect as a matter of law. The decision is rationally reasoned based on the facts of this case.

In this case, the arbitrator took a negative inference from several facts that: (1) the applicant, despite the service of a subpoena, did not appear; (2) the corporation was no longer active; (3) such dissolution may have been the result of a plea bargain based upon fraudulent, criminal activity; and (4) the applicant’s representative did not present any information that contradicted respondent’s allegations.

A view of the arbitration award from both the lower and Master Arbitrator shows that there is no basis to vacate the award. Both arbitrators determined that the claim was rejected based upon an allegation of fraud. The issue regarding the relationship of the medical facility and its management group plus the negative inferences surrounding the applicant was a rational basis for denial of this claim. This holding and thus the arbitrator’s award was based upon the resolution of factual and legal determinations reached after reviewing the evidence submitted; such a determination may not be set aside by this Court even were the Court to disagree with [*5]those findings. The Master Arbitrator’s award therefore was neither arbitrary, capricious, irrational or without a substantial or plausible basis. Also, based upon the ruling in Mallela III and lower court cases, the decision is not incorrect as a matter of law.

Accordingly, petitioner’s petition seeking to vacate the Arbitration Award is hereby dismissed. This decision is rendered on default.

This constitutes the decision and order of the Court.

DATED: March 31, 2006

Brooklyn, New York

DELORES J. THOMAS

Judge Civil Court

Footnotes

Footnote 1: There is no allegation that defendant asked for addition verification of information pursuant to 11 NYCRR §65-3.5.

Footnote 2: The Court of Appeals in State Farm Mut. Auto Ins. Co., v. Mallela, 4 NY3d 313,322 [2005] did hold that no cause of action for fraud of unjust enrichment would lie for any payments made by the carriers before that regulation’s effective date of April 4, 2002.

[*1]

Supreme Court, New York County, January 25, 2006

APPEARANCES OF COUNSEL

Cadwalader, Wickersham & Taft, LLP, New York City (William J. Natbony of counsel), and Stern & Montana, LLP, New York City (Robert A. Stern of counsel), for plaintiffs. Morvillo, Abramowitz, Grand, Iason & Silberberg, P.C., New York City (Richard C. Tarlowe and Edward Spiro of counsel), for Herbert Rabiner, M.D. and others, defendants. Warner & Partners, P.C., New York City (Kenneth E. Warner of counsel), for Jay Katz and others, defendants. Alexander Herman, Brooklyn, for Vladimir Shtrakhman, defendant.

OPINION OF THE COURT

Karla Moskowitz, J.

Plaintiffs move for an order: (1) pursuant to CPLR 3025 (b) and 1003, granting them leave to serve a second amended complaint to add the insurers Government Employees Insurance Company, GEICO General Insurance Company, GEICO Indemnity Company and GEICO Casualty Company (collectively GEICO) as plaintiffs, deeming the second amended complaint served upon defendants and directing defendants to answer the second amended complaint; (2) pursuant to CPLR 2221 (e), granting plaintiffs’ motion to renew the court’s March 15, 2004 decision and order (prior decision I) because of a change in law that affects that ruling; and (3) clarifying the court’s December 22, 2004 decision and order (prior decision II) to confirm the reinstatement of plaintiffs’ seventh cause of action (denominated seventh claim for relief) for unjust enrichment.

Plaintiffs are insurance companies that participate in New York’s no-fault automobile insurance program. Plaintiffs claim they owe nothing to defendants because of defendants’ violation of various statutes pertaining to the organization of medical corporations and because of defendants’ fraudulent billing. Plaintiffs seek to recover from defendants payments that [*2]plaintiffs made to them, pursuant to the no-fault insurance program, for medical services that defendants rendered to persons covered under automobile insurance policies that plaintiffs issued. Plaintiffs also seek a declaratory judgment that they have no obligation to pay defendants for claims defendants have submitted, but plaintiffs have not yet paid.

Among the defendants are the”PC defendants,” each of which purport to be a New York medical professional corporation providing diagnostic testing and other patient services. The certificates of incorporation of the PC defendants each state that the owner is defendant Dr. Herbert Rabiner, a New York State licensed physician, but the real owner and principal shareholder is a layperson—defendant Jay Katz.

Plaintiffs allege that, in violation of section 1507 of the Business Corporation Law, Rabiner has sold or lent the use of his name and medical license to Katz to form medical corporations in Rabiner’s name so that Katz could own or control medical practices, profit from them, bill no-fault insurers for medical services and, in so doing, facilitate fraudulent billing practices. Allegedly, once Rabiner fraudulently formed the PC defendants with Katz, he did not have the type of involvement in those entities that a real owner would.

Plaintiffs also allege that the PC defendants regularly submitted no-fault claims to plaintiffs, falsely representing that the PC defendants were valid medical professional corporations. Plaintiffs allege further that they paid substantial amounts of money to the PC defendants based upon their justifiable reliance that the PC defendants comported with applicable statutes and administrative regulations governing the provision of health services. In addition, defendants’ fraudulent conduct encompassed improper multiple billings and the provision of improper, unwarranted or medically unreliable testing.

In prior decision I, I granted motion sequence number 002 and dismissed the complaint against defendants Parkway Magnetic Resonance Imaging, Inc., Metroscan Resonance Imaging, Inc., Katz and Vladimir Shtrakhman. In that same decision I also granted motion sequence number 003 and dismissed the first, second and seventh causes of action, and dismissed the complaint as against Rabiner. I declined to dismiss the eighth cause of action seeking a declaration that plaintiffs have no obligation to pay pending claims, claims they previously denied or any future no-fault claims.

In prior decision II, I granted leave to amend the complaint regarding the billing fraud component of the first cause of action. As amended, the complaint contained sufficient particularity regarding the allegations of billing fraud, including the performance of unnecessary services, as part of an alleged scheme among the PC defendants and other nonparty entities.

The change in law that is the subject of this motion results from State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005] [Mallela III]). That action began with State Farm Mut. Auto. Ins. Co. v Mallela (175 F Supp 2d 401 [ED NY 2001, Sifton, J.] [Mallela I]) that involved similar claims to those presented here. In Mallela I, Judge Sifton concluded that the insurer plaintiff could not recover damages for fraud and misrepresentation, because it had no right of action to enforce the relevant provisions of the Business Corporation Law and because the alleged violations did not relieve the insurer of the obligation to reimburse the insureds or the insureds’ assignees. Judge Sifton found that the Business Corporation Law did not explicitly create a private right of action and that plaintiff did not belong to the class of legislatively intended beneficiaries, so that a right of action would be clearly in furtherance of the legislative [*3]purpose (Mallela I, 175 F Supp 2d at 416). Judge Sifton granted plaintiff leave to amend its complaint to state valid claims describing actionable frauds, but subsequently dismissed the amended complaint with prejudice (State Farm Mut. Auto. Ins. Co. v Mallela, 2002 WL 31946762, 2002 US Dist LEXIS 25187 [ED NY, Nov. 21, 2002]). I followed the reasoning of Judge Sifton in Mallela I when I dismissed plaintiffs’ claims for fraud and unjust enrichment in prior decision I.

The insurance carrier appealed Mallela I to the United States Court of Appeals for the Second Circuit that concluded that the action involved important, determinative and unsettled questions of state law that were likely to recur and important public policy implications (State Farm Mut. Auto. Ins. Co. v Mallela, 372 F3d 500 [2d Cir 2004] [Mallela II]). Thus, in Mallela II, the Second Circuit deemed it appropriate to certify the following question to the New York Court of Appeals:

“Is a medical corporation that was fraudulently incorporated under N.Y. Business Corporation Law §§ 1507, 1508, and N.Y. Education Law § 6507 (4) (c) entitled to be reimbursed by insurers, under New York Insurance Law §§ 5101 et seq. and its implementing regulations, for medical services rendered by licensed medical practitioners?” (Id. at 509.)

In answering the certified question, in Mallela III, the Court of Appeals concluded that these medical corporations could not receive reimbursement, reasoning that Insurance Law § 5101 et seq. requires no-fault carriers to reimburse patients (or their medical provider assignees) for “basic economic loss,” but that in promulgating 11 NYCRR 65-3.16 (a) (12)^[FN*] (eff Apr. 4, 2002), the Superintendent of Insurance excluded from the meaning of “basic economic loss” payments made to unlicensed or fraudulently licensed providers. This renders these entities “not eligible” for reimbursement (4 NY3d at 320). Moreover, the Court of Appeals upheld the Superintendent’s interpretation as not irrational or unreasonable in deference to his special competence and expertise regarding the insurance industry and not counter to the clear wording of the statutory provision (id. at 321). The Court of Appeals held that “on the strength of this regulation, carriers may look beyond the face of licensing documents to identify willful and material failure to abide by state and local law” (id.).

The Court of Appeals also held that, as a matter of law, the insurance carriers could not sue for fraud or unjust enrichment (as opposed to a requirement to reimburse) for any payments that the insurance carriers had already made prior to the regulation’s effective date of April 4, 2002. However, because State Farm’s complaint did not clearly indicate when it had paid defendants, the Court declined to determine whether State Farm had alleged sufficient facts to support its causes of action for fraud or unjust enrichment (id. at 322).

With this background, I now turn to the motion at issue.

I am granting the motion to amend the complaint that seeks to add GEICO as a plaintiff [*4]for the reasons set forth on the record at oral argument on the motion held on December 15, 2005.

I grant the motion for renewal upon the intervening clarification of the law (CPLR 2221 [e] [2]; Roundabout Theatre Co. v Tishman Realty & Constr. Co., 302 AD2d 272 [1st Dept 2003]). As a result of Mallela III, I reinstate plaintiffs’ claims for fraud and unjust enrichment to the extent that plaintiffs made the payments to defendants on or after the regulation’s effective date (Apr. 4, 2002).

Plaintiffs suggest that, in either subsequent separate briefing or through summary judgment motions, the parties should address the issue of whether the fraud and unjust enrichment claims based solely on corporate structure apply to payments made prior to April 4, 2002. I do not find additional briefing or summary judgment motions warranted.

Although I did not dismiss the eighth cause of action for declaratory relief, the parties raised the issue during oral argument concerning whether Mallela III meant that plaintiffs need not reimburse defendants for claims that accrued prior to April 4, 2002 that plaintiffs have not yet paid. (See transcript of oral argument, Dec. 15, 2005, at 30-34.) Although defendants have offered repeatedly to brief this issue, the clarity of the decision of the Court of Appeals in Mallela III renders further briefing unnecessary.

As discussed above, in Malella III, the Court of Appeals held that: (1) the insurance companies could withhold payment for medical services that fraudulently incorporated enterprises provided and to which patients have assigned their claims; (2) the insurance companies could bring actions for fraud and unjust enrichment to recover payments made on or after the regulation’s effective date of April 4, 2002, by implication; and (3) no cause of action for fraud or unjust enrichment would lie for any payments that the insurance carriers made prior to the regulation’s effective date of April 4, 2002. Mallela III left open, however, the issue of whether the insurers could withhold payment (as opposed to recover payments already made) for unpaid claims that accrued prior to April 4, 2002).

Several Civil Court decisions have recently addressed this issue. In Metroscan Imaging P.C. v GEICO Ins. Co. (8 Misc 3d 829 [Civ Ct, Queens County 2005, Siegal, J.]), the court held that insurers could withhold payment for unpaid claims accruing prior to April 4, 2002 because the Court of Appeals held that the “Superintendent’s regulation allowing carriers to withhold reimbursement from fraudulently licensed medical corporations governs this case” (id. at 834, quoting Mallela III at 321; accord Multiquest, PLLC v Allstate Ins. Co., 9 Misc 3d 1031 [Civ Ct, Queens County 2005, Butler, J.] [intent of Mallela III is that regulation is to be applied to claims prior to April 4, 2002]; A.T. Med., P.C. v State Farm Mut. Ins. Co., 10 Misc 3d 568 [Civ Ct, Queens County 2005, Culley, J.] [retroactive application is appropriate where regulatory intent is to remedy widespread abuse and fraud]).

However, several other Civil Court decisions have arrived at a contrary conclusion (see Multiquest, PLLC v Allstate Ins. Co., 10 Misc 3d 877 [Civ Ct, Queens County 2005, Esposito, J.]; Multiquest, P.L.L.C. v Allstate Ins. Co., 10 Misc 3d 1061[A], 2005 NY Slip Op 52069[U] [Civ Ct, Queens County 2005, Kerrigan, J.]; Multiquest, P.L.L.C. v Allstate Ins. Co., 10 Misc 3d 1061[A], 2005 NY Slip Op 52071[U] [Civ Ct, Queens County 2005, Markey, J.]; Multiquest PLLC v Allstate Ins. Co., 10 Misc 3d 1069[A], 2005 NY Slip Op 52209[U] [Civ Ct, Queens County 2005, Pineda-Kirwan, J.]).

This second group of cases holds that insurers cannot withhold payment for unpaid claims [*5]accruing prior to April 4, 2002 because the law disfavors retroactivity. These cases also interpret Mallela III as indirectly answering the retroactivity question by holding that the insurers could not assert a cause of action for unjust enrichment and fraud for claims that matured before the effective date of the regulation.

I agree with the former group of decisions. As Judge Siegal noted in Metroscan (8 Misc 3d 829, 834), Mallela I involved claims that had matured prior to the effective date of the regulation. Hence, the Court of Appeals, in Mallella III, necessarily incorporated claims for reimbursement that matured prior to the effective date of the regulation. Also, a retroactive application is appropriate here because the regulation at issue merely clarified existing law. Further, this holding comports with the policy choice the Court of Appeals made in Mallela III of protecting insurers from fraud as outweighing speedy resolution of claims.

In addition, just because the Court of Appeals precluded the insurers from recouping payments they already made for claims that matured prior to the effective date of the regulation does not mean that the Court of Appeals precluded the insurers from denying reimbursement for unpaid claims whenever those claims occurred. This interpretation comports with the language of the regulation that applies to all unpaid claims regardless of the effective date. The regulation does not address the situation where insurers had paid an illegal entity before April 4, 2002.

Finally, the request for an order clarifying prior decision II, to confirm the reinstatement of plaintiffs’ seventh cause of action for unjust enrichment, is granted. Previously, I dismissed the unjust enrichment claim because, as stated in prior decision I, plaintiffs paid compensation for medical services that licensed practitioners rendered to covered persons under the no-fault laws and because there were insufficient allegations that defendants had been unjustly enriched by receiving compensation for medical services rendered without regard to medical necessity and in excess of those dictated by the patients’ conditions. As stated in prior decision II, however, I found that the amended complaint contained sufficient particularity in its allegations of billing fraud, including the performance of unnecessary services, as part of an alleged scheme among the PC defendants and other nonparty entities. Hence, the unjust enrichment claim contained in the seventh cause of action is viable.

Accordingly, it is ordered that the motion is granted as follows: (1) plaintiffs are granted leave to serve a second amended complaint, and the second amended complaint is deemed served upon defendants, and defendants are directed to answer the second amended complaint within 20 days after service of a copy of this order with notice of entry; (2) plaintiffs’ motion to renew the court’s March 15, 2004 decision and order is granted, and, upon renewal, plaintiffs’ claims of fraud and unjust enrichment based upon a lack of standing to obtain no-fault benefits are reinstated to the extent that plaintiffs made payments to defendants on or after April 4, 2002; and (3) the court’s December 22, 2004 decision and order is clarified to confirm the reinstatement of plaintiffs’ seventh cause of action for unjust enrichment.

Footnotes

Footnote *: The pertinent text of 11 NYCRR 65-3.16 (a) (12) reads as follows: “A provider of health care services is not eligible for reimbursement under section 5102 (a) (1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement . . . .”

[*1]

Supreme Court, New York County, January 17, 2006

APPEARANCES OF COUNSEL

Freiberg & Peck, LLP, New York City (Matthew E. Schaefer of counsel), for petitioner. Werner, Zaroff, Slotnick, Stern & Ashkenazy, Lynbrook (David Forman of counsel), for respondent.

OPINION OF THE COURT

Lottie E. Wilkins, J.

Petitioner moves, pursuant to CPLR 7511 (b) (1) (iii), to vacate the uninsured/underinsured motorist arbitration award rendered against petitioner and in respondent’s favor on February 2, 2005. At issue is whether the arbitral forum had jurisdiction over the petitioner. Respondent opposes and raises several arguments as to why, under these circumstances, both the arbitrator and New York courts have jurisdiction over petitioner.

American Independent Insurance is a Pennsylvania corporation. The company has no offices or bank accounts in New York and does not solicit business in this state. More significantly, petitioner does not write insurance policies for New York vehicles and is not licensed to do so by this State’s Department of Insurance. Nonetheless respondent’s assignor, Cesar Ortega, was apparently injured in an accident that took place in New York and involved a party insured by petitioner. Thereafter, Mr. Ortega received treatment from respondent, Heights Chiropractic Care, P.C., which in turn submitted bills to petitioner for payment. The parties do not seriously dispute that petitioner paid at least some portion of these bills.^[FN*] When petitioner refused to provide further payments on respondent’s bills, respondent commenced an arbitration against petitioner. In an award dated February 2, 2005, arbitrator Ann Lorraine Russo awarded [*2]respondent $235.90 on the remaining disputed bill after a hearing at which petitioner did not appear. Petitioner then commenced this proceeding to vacate the arbitration award.

After reciting its lack of contacts with New York and some cursory factual background, petitioner argues that its amenability to no-fault arbitration in New York is not—and indeed cannot be—greater than the jurisdiction of New York courts over petitioner pursuant to New York’s “long-arm” statute, CPLR 301. Petitioner adverts this court’s attention to a number of decisions where it was determined that the court did not have “long-arm” personal jurisdiction over American Independent Insurance (see e.g., Matter of American Ind. Ins. Co. v McDonald, Sup Ct, Kings County, Nov. 13, 2003, Jackson, J., Index No. 18559/03; Advanced Med. Rehabilitation, PLLC v American Ind. Ins. Co., Civ Ct, Kings County, Apr. 20, 2004, Mendez, J., Index No. 322631/03; Nationwide Ins. Co. v Coler, Sup Ct, Kings County, Jan. 15, 2003, Dabiri, J., Index No. 30044/01; Dillon Med. Supply Corp. v American Ind. Ins. Co., Civ Ct, Kings County, Dec. 17, 2004, Gesmer, J., Index No. 56058/02). There is also at least one Appellate Division decision with a similar holding (see, Matter of Eagle Ins. Co. v Gutierrez-Guzman, 21 AD3d 489 [2d Dept 2005]).

Under New York’s long-arm statute, a foreign corporation “doing business” in New York may be subject to the jurisdiction of the courts. However, the term “doing business” means more than occasional or tangential business activity in the state. For purposes of the long-arm statute, “doing business” means a “continuous and systematic course of conduct” within the state “with a fair measure of permanence and continuity” (Cardone v Jiminy Peak, 245 AD2d 1002, 1003 [3d Dept 1997], quoting Chamberlain v Jiminy Peak, 176 AD2d 1109, 1109 [1991] [internal quotation marks omitted], and Tauza v Susquehanna Coal Co., 220 NY 259, 267 [1917]). The mere solicitation of business in the state will not confer jurisdiction (id.). Similarly, the unilateral act of an out-of-state insured driving into New York, without more, is insufficient to confer personal jurisdiction over the insurer (Matter of Eagle Ins. Co., supra, 21 AD3d at 491). Thus, the fact that petitioner here paid a portion of respondent’s claim does not make petitioner subject to the jurisdiction of the courts because that act, by itself, does not constitute the type of systematic business activity required by law in order to confer jurisdiction on the court.

The weight of legal authority holds that petitioner is not subject to personal jurisdiction under New York’s long-arm statute and, by extension, is not amenable to New York’s no-fault arbitration process. Respondent contends, however, that New York’s long-arm statute is not the only legislative enactment that requires consideration. According to respondent, Insurance Law § 1213 elaborates upon the meaning of “doing business in this state” as that term pertains to out-of-state insurers. Specifically, respondent relies on Insurance Law § 1213 (b) (1) (D), which states that an unauthorized foreign or alien insurer that conducts “any other transaction of business” in this state is subject to the jurisdiction of New York courts.

Insurance Law § 1213 explicitly derogates the common-law definition of “doing business” in order to provide broader jurisdiction over certain out-of-state insurers. However, as the preamble of this section states, the intended beneficiaries of this section are New York residents who “hold policies of insurance issued or delivered in this state by insurers while not authorized to do business in this state, thus presenting to such residents the often insuperable obstacle of resorting to distant forums for the purpose of asserting legal rights under such policies” (Insurance Law § 1213 [a]). It is a well-settled principle of statutory interpretation that statutes in derogation of common law are to be construed narrowly, only to the extent necessary [*3]to accomplish the Legislature’s goals (Sherman v Robinson, 80 NY2d 483 [1992]). Respondents in this proceeding are clearly not in the class of persons who were intended to be the beneficiaries of Insurance Law § 1213. Respondent is not a resident who holds a New York policy issued by an unauthorized foreign insurer. Even as an assignee, respondent does not “stand in the shoes” of such a person. Thus, the expanded jurisdiction afforded by this section of the Insurance Law does not apply under the circumstances.

Respondent’s two remaining arguments in opposition to the petition are largely without merit. Contrary to respondent’s assertion, petitioner was not required to appeal the arbitrator’s decision to a master arbitrator before bringing this proceeding. Petitioner’s challenge to the arbitration is jurisdictional and cannot be waived. There is no requirement that petitioner exhaust all the procedural remedies of a forum that petitioner should not have been in to begin with. Likewise, petitioner’s financial connection to an insurance carrier that is licensed to issue policies in New York does not change petitioner’s status as a foreign corporation under these facts. To hold otherwise would completely ignore basic principles of corporate law.

For the foregoing reasons, the petition should be granted and the arbitration award dated February 2, 2005 against petitioner should be vacated.

Accordingly, it is ordered that the petition is granted and the subject arbitration award against petitioner is hereby vacated.

Footnotes

Footnote *: The parties have provided virtually no factual background as to how or where this accident occurred; however, it appears that another individual, Rolando Acevedo, was also involved and petitioner paid for some of his treatment as well.

[*1]

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

APPEARANCES OF COUNSEL

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

OPINION OF THE COURT

Manuel J. Mendez, J.

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

Facts

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

Issue

Does the plaintiff have standing to sue?

Law

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

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

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

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

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

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

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

Conclusion

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

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

Footnotes

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

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

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

[*1]

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

APPEARANCES OF COUNSEL

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

OPINION OF THE COURT

Ellen Gesmer, J.

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

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

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

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

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

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

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

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

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

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

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

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