[*1]

Civil Court of the City of New York, Queens County, February 25, 2013

APPEARANCES OF COUNSEL

Israel, Israel & Purdy, LLP, Great Neck (Justin Skaferowsky of counsel), for plaintiff. Peter C. Merani, P.C., New York City (William Larkin of counsel), for defendant.

{**40 Misc 3d at 350} OPINION OF THE COURT

Carmen R. Velasquez, J.

This is an action by the plaintiff to recover statutory interest and attorney fees on no-fault insurance claims that were overdue when they were paid by the defendant. The plaintiff has submitted proof that, on the dates indicated, the following four claims were mailed to the defendant:

1. March 10, 2009—$71.49 for services rendered to Ana Oneal [*2]

2. June 11, 2009—$1,392.52 for services rendered to Salvadore Rivera

3. June 25, 2009—$107.64 for services rendered to Salvadore Rivera

4. June 25, 2009—$186.80 for services rendered to Salvadore Rivera.

The claims were each paid as follows:

claim 1 was paid by draft dated June 1, 2009 for $71.49

claim 2 was paid by draft dated July 29, 2009 for $1,392.52

claim 3 was paid by draft dated August 16, 2009 for $107.64

claim 4 was paid by draft dated August 10, 2009 for $103.95.

“Pursuant to Insurance Law § 5106 (a) and 11 NYCRR 65-3.5, insurers are required either to pay or deny a claim for no-fault automobile insurance benefits within 30 days from the date the applicant supplies proof of claim” (New York & Presbyt. Hosp. v Allstate Ins. Co., 30 AD3d 492, 493 [2006], citing Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 278 [1997], rearg denied 90 NY2d 937 [1997]; also see New York & Presbyt. Hosp. v Travelers Prop. Cas. Ins. Co., 37 AD3d 683 [2007]). Based on the proof submitted by the plaintiff on this motion, the claims in this action were paid more than 30 days after they were mailed and received by the defendant. Therefore, the payments of the no-fault benefits made by the defendant were overdue (NYU-Hospital for Joint Diseases v Esurance Ins. Co., 84 AD3d 1190, 1191 [2011], citing St. Vincent’s Hosp. of Richmond v Government Empls. Ins. Co., 50 AD3d 1123 [2008]; Westchester Med. Ctr. v State Farm Mut. Auto. Ins. Co., 44 AD3d 750, 752 [2007]; Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564 [2005]).

“An insurer’s failure to pay or deny a claim within 30 days carries substantial consequences. By statute, overdue payments earn monthly interest at a rate of two percent and entitle a claimant to reasonable{**40 Misc 3d at 351} attorneys’ fees incurred in securing payment of a valid claim (see Insurance Law § 5106 [a])” (Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 317-318 [2007]; Presbyterian Hosp. v Maryland Cas. Co., 90 NY2d at 278).

Insurance Law § 5106 (a) provides as follows:

“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.”

11 NYCRR 65-3.9 (a), applicable to interest on overdue payments, provides as follows:

“All overdue mandatory and additional personal injury protection benefits due an applicant or assignee shall bear interest at a rate of two percent per month, calculated on a pro-rata basis using a 30-day month. When payment is made on an overdue claim, any interest calculated to be due in an amount exceeding $5 shall be paid to the applicant or the applicant’s assignee without demand therefor.”

11 NYCRR 65-3.10 (a), applicable to attorney fees, provides as follows:

“An applicant or an assignee shall be entitled to recover their attorney’s fees, for services necessarily performed in connection with securing payment, if a valid claim or portion thereof was denied or overdue. If such a claim was initially denied and subsequently paid by the insurer, the attorney’s fee shall be $80. If such a claim was overdue but not denied, the attorney’s fee shall be equal to 20 percent of the amount of the first-party benefits and any additional first-party benefits plus interest payable pursuant to section 65-3.9 of this Subpart, subject to a{**40 Misc 3d at 352} maximum fee of $60.”

The overdue interest on plaintiff’s claims for $71.49, $107.64, $103.95 was less than five dollars and was not paid by the defendant. The overdue interest on the claim for $1,392.52, which exceeded five dollars, was also not paid. Demands for payment of the overdue interest and attorney fees were mailed to the defendant shortly after the claim payments were received, as indicated in plaintiff’s opposing papers. This action to recover the overdue interest and attorney fees was then commenced by the filing of the summons and complaint on November 5, 2009 and personal service upon the defendant on November 10, 2009.^[FN*]

Defendant’s claim that overdue interest is to be calculated on a 30-day-month basis, and not on a daily basis, has no merit. The Court of Appeals in Presbyterian Hosp. v Maryland Cas. Co. (90 NY2d at 278) stated that

“[p]ursuant to both the Insurance Law and the regulations promulgated by the Superintendent of Insurance, an insurer is required to either pay or deny a claim for no-fault automobile insurance benefits within 30 days from the date an applicant supplies proof of claim (see, Insurance Law § 5106 [a]; 11 NYCRR 65.15 [g] [3]). Failure to pay benefits within the 30-day requirement renders benefits ‘overdue,’ and all overdue payments bear interest at a rate of 2% per month (Insurance Law § 5106 [a]; 11 NYCRR 65.15 [h]). Additionally, a claimant is entitled to recover attorney’s fees where a ‘valid claim or portion’ was denied or overdue (Insurance Law § 5106 [a]; 11 NYCRR 65.15 [i]).”

This language makes it clear that overdue interest applies to “all overdue payments.” Moreover, the instruction in 11 NYCRR 65-3.9 (a) that interest is to be “calculated on a pro-rata basis using a 30-day month” explains the manner of determining the daily rate of interest based on a monthly interest rate of two percent per month, rather than restricting collection to a monthly amount. The statute, [*3]regulations and case law confirm that overdue interest is a payment to be imposed on a daily basis, with attorney fees, when a claim for no-fault benefits is{**40 Misc 3d at 353} not paid within 30 days of submission of the claim (see New York & Presbyt. Hosp. v Allstate Ins. Co., 30 AD3d at 494; Hempstead Gen. Hosp. v Insurance Co. of N. Am., 208 AD2d 501 [1994]; Corona Hgts. Med., P.C. v Liberty Mut. Ins. Co., 32 Misc 3d 8 [2011]).

On this motion and cross motion, as well as other motions that are pending, the issue is whether the plaintiff is entitled to recover overdue interest when it does not exceed the sum of five dollars indicated in 11 NYCRR 65-3.9 (a). The defendant contends that the regulation limits overdue interest to an amount exceeding five dollars that is to be paid, without demand, upon payment of the overdue claim. The plaintiff claims that the regulation does not preclude the applicant from demanding overdue interest below five dollars. There are prior orders in Civil Court, Queens County, that have decided this issue in cases involving different parties. These orders, some of which are signed by this court, have held that collection of overdue interest of less than five dollars is not precluded by regulation 11 NYCRR 65-3.9 (a).

According to the Governor’s Memorandum approving the no-fault system, its primary aims “were to ensure prompt compensation for losses incurred by accident victims without regard to fault or negligence, to reduce the burden on the courts and to provide substantial premium savings to New York motorists” (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 860 [2003]). The Superintendent of Insurance was given the responsibility for administering the Insurance Law “with the power to fill in the interstices in the legislative product by prescribing rules and regulations consistent with the enabling legislation” (Matter of Nicholas v Kahn, 47 NY2d 24, 31 [1979]). As a result, the Court of Appeals has long held that the Superintendent’s “interpretation, if not irrational or unreasonable, will be upheld in deference to his special competence and expertise with respect to the insurance industry, unless it runs counter to the clear wording of a statutory provision” (LMK Psychological Servs., P.C. v State Farm Mut. Auto. Ins. Co., 12 NY3d 217, 223 [2009], citing Matter of New York Pub. Interest Research Group v New York State Dept. of Ins., 66 NY2d 444, 448 [1985]). However, “courts are not required to embrace a regulatory construction that conflicts with the plain meaning of the promulgated language” (Matter of Visiting Nurse Serv. of N.Y. Home Care v New York State Dept. of Health, 5 NY3d 499, 506 [2005], citing 427 W. 51st St. Owners Corp. v Div. of Hous.{**40 Misc 3d at 354} & Community Renewal, 3 NY3d 337, 342 [2004]; also see Kurcsics v Merchants Mut. Ins. Co. 49 NY2d 451, 459 [1980]; East Acupuncture, P.C. v Allstate Ins. Co., 61 AD3d 202, 209 [2009]). Legislative intent is the great and controlling principle in statutory construction and the proper judicial function is to discern and apply the will of the legislature (Mowczan v Bacon, 92 NY2d 281, 285 [1998]; Matter of Scotto v Dinkins, 85 NY2d 209, 214 [1995]; Matter of Sutka v Conners, 73 NY2d 395, 403 [1989]).

“The interest which accrues on overdue no-fault benefits at a rate of two percent per month is a statutory penalty designed to encourage prompt adjustments of claims and inflict a punitive economic sanction on those insurers who do not comply” (East Acupuncture, P.C. v Allstate Ins. Co., 61 AD3d at 210 [citations omitted]). The construction of 11 NYCRR 65-3.9 (a), that is advocated by the defendant, would preclude overdue interest of less than five dollars. This would conflict with the statutory language of Insurance Law § 5106 (a) which imposes interest on “[a]ll overdue payments.” The change would also tend to increase the delay in compensating low cost medical benefits that accumulate minimal overdue interest. Such a construction of the statute [*4]conflicts with its primary aims and violates the legislative intent.

The legislature was entitled to enact a limitation on the overdue interest in Insurance Law § 5601 (a), as it did by expressly eliminating interest of “less then two dollars” in Insurance Law § 3224-a (c) (1). However, the legislature did not exempt the overdue interest of less than five dollars, that is sought by the defendant. The Superintendent of Insurance also did not preclude the collection of overdue interest that is less than five dollars, if it is demanded. This court will not now prevent the collection of such interest.

Accordingly, the plaintiff’s motion for summary judgment is granted and the plaintiff is awarded judgment, pursuant to Insurance Law § 5106 (a), for the overdue interest and attorney fees alleged in the complaint. The defendant’s cross motion to dismiss the action is denied.

Footnotes

Footnote *: The defendant’s answer in this action was interposed by the office of Robert P. Tusa. However, Peter C. Merani, whose office submitted the cross motion and reply affidavit on this motion, is listed on the court records as the attorney for the defendant in this action. Therefore, it is appropriate for the court to consider these papers, despite plaintiff’s claim that Peter C. Merani is not the defendant’s attorney of record.

[*1]

Civil Court of the City New York, Queens County, October 6, 2011

APPEARANCES OF COUNSEL

Lewin, Goodman & Baglio, LLP, Melville (Brendan Kearns of counsel), for plaintiff. Rossillo & Licata, P.C., Westbury (Susan Schenck of counsel), for defendant.

{**34 Misc 3d at 377} OPINION OF THE COURT

Carmen R. Velasquez, J.

A bench trial was held before this court on August 19, 2011 in this action by the plaintiff to recover no-fault benefits for chiropractic services provided to Dana Schepanski. At the trial, Dr. Daniel Sposta, D.C., testified on behalf of the defendant and the plaintiff, Dr. John Kraft, D.C., testified on his own behalf. The parties also stipulated to the admission of the peer review report and underlying medical documents. After reviewing and assessing all of the evidence, including the testimony of the witnesses and the exhibits introduced by the parties, the court renders the following decision:

Plaintiff, Dr. John Kraft, D.C., as assignee of Dana Schepanski, seeks payment for chiropractic services, consisting of manipulation under anesthesia of the spine and hips, provided on July 28, 2009. At trial the parties stipulated to plaintiff’s prima facie case of no-fault entitlement and to the timeliness and propriety of defendant’s denial of the claims that are the basis of this action. The parties further stipulated that the sole issue to be determined by this court was the medical necessity of the chiropractic manipulation under anesthesia (MUA) performed by plaintiff.

Plaintiff’s assignor, Dana Schepanski, had been involved in a motor vehicle accident on October 28, 2008, which left her with headaches, neck pain radiating to the shoulders and lower back pain radiating to the left buttocks and hip region. After several months of chiropractic care, physical therapy and pain medication, assignor’s progress had plateaued. Medical progress notes dated from November 2008 to January 2009 consistently denoted her functional status as no greater than fair with continuing pain, spasms and tightness. On January 28, 2009, plaintiff, as co-surgeon, performed five manipulations of the assignor’s spine and hip joints while she was under anesthesia. On March 27, 2009, defendant, State Farm Mutual Automobile Ins. Co., denied payment of all services rendered by plaintiff on January 28, 2009.

Although the parties stipulated that the only issue before this court was the medical necessity of the disputed services, the defendant, both at trial and in the explanation of review, contended that an MUA performed on the hip joint is outside the scope of chiropractic service. Also raised, tangentially, was the frequently encountered contention that a chiropractor is not authorized to perform MUA procedures.{**34 Misc 3d at 378}

[*2]Whether manipulation under anesthesia is a procedure exceeding the scope of lawful chiropractic service is not an issue of first impression for this court. In an unpublished decision, dated July 23, 2010, this court found that chiropractors were authorized to perform manipulations of the spine under anesthesia and awarded judgment to the chiropractor who performed the manipulations and to the chiropractor who assisted him (Lezamiz v Nationwide Mut. Ins. Co., index No. CV-021277/08; Palumbo v Nationwide Mut. Ins. Co., index No. CV-035624/08). The New York State Workers’ Compensation Board, which supplies the fee structure by which the procedures at issue are to be compensated, has also consistently authorized chiropractors to perform manipulations under anesthesia (Employer: Solomon Schecter Day School, 2006 WL 3889159, 2006 NY Wrk Comp LEXIS 11146 [WCB No. 2040 8277]; Employer: Eckerd Drugs, 2008 WL 922458, 2008 NY Wrk Comp LEXIS 2647 [WCB No. 4060 1307]; Employer: Aramak, 2009 WL 456874, 2009 NY Wrk Comp 535411 [WCB No. 0053 5411]; see also John Giugliano, DC, P.C. v Merchants Mut. Ins. Co., 29 Misc 3d 367 [Civ Ct, Kings County 2010]).

The relevant statute, Education Law § 6551 (1), provides that

“The practice of the profession of chiropractic is defined as detecting and correcting by manual or mechanical means structural imbalance, distortion, or subluxations in the human body for the purpose of removing nerve interference and the effects thereof, where such interference is the result of or related to distortion, misalignment or subluxation of or in the vertebral column.”

In light of its unambiguous language, the statute must be given its literal meaning (see Matter of Encore Coll. Bookstores v Auxiliary Serv. Corp. of State Univ. of N.Y. at Farmingdale, 87 NY2d 410, 418 [1995]; Roth v Michelson, 55 NY2d 278, 283 [1982]). Nothing in the language of this statute, which defines chiropractic practice, suggests that lawful manipulations performed by chiropractors on conscious patients become unlawful once those patients are sedated. However, another subdivision of the Education Law provides that the holder of a chiropractic license is not permitted “to prescribe, administer, dispense or use in his practice drugs or medicines.” (Education Law § 6551 [3].) Nevertheless, as the State Education Department has acknowledged in a letter dated September 18, 2007, the Education Law does not prohibit a chiropractor from{**34 Misc 3d at 379} performing spinal manipulations on patients who are under anesthesia, although the chiropractor cannot administer the anesthesia. Therefore, manipulation under anesthesia is within the lawful scope of chiropractic services provided that, as in this case, the anesthesia utilized for the procedure is administered by a licensed professional and not by the chiropractor.

Defendant’s claim that Education Law § 6551 (1) does not permit the holder of a chiropractic license to treat a hip joint lacks merit. The statute limits the purpose of chiropractic treatment but not its scope. It allows treatment of the “human body,” without qualifying the term “human body” so as to preclude treatment of a particular part thereof. The only requirement is that the purpose of treatment be the removal of nerve interference and its effects resulting from or related to “distortion, misalignment or subluxation of or in the vertebral column.” Thus chiropractors licensed in the State of New York may treat any part of the human body, including the hip joint, provided that treatment is for the purpose stated in Education Law § 6551 (1). In fact, the New York State Workers’ Compensation Board has specifically authorized a chiropractor to perform manipulation of the bilateral hip areas under anesthesia, when the stated purpose was to break up fibrous adhesions and [*3]scar tissue that had formed on and around the claimant’s spinal column (Employer: Aramak, 2009 WL 456874, 2009 NY Wrk Comp 535411).

The defendant does not contend and has introduced no evidence that the MUA of the hip joints conducted on plaintiff’s assignor was for a purpose other than alleviating nerve interference related to the vertebral column. The medical records of plaintiff’s assignor indicate she had back pain, which radiated to the hip area, and the diagnosis codes in the explanation of review include closed dislocation of the sacrum. The sacrum is the segment of the vertebral column that articulates the hip bone on either side (Stedman’s Medical Dictionary [26th ed], sacrum at 1566). Therefore, based on the trial evidence, the court finds that the MUA of the hip joints performed by the plaintiff was related to the vertebral column and within the scope of lawful chiropractic practice as defined in the Education Law.

In support of the lack of medical necessity defense, defendant’s witness, Dr. Sposta, testified that plaintiff failed to meet three requirements: (1) chiropractic patients must seek a second opinion before undergoing an MUA procedure; (2) a chiropractor co-surgeon prior to performing an MUA must review the{**34 Misc 3d at 380} patient’s medical records; (3) pursuant to protocols established by the National Academy of MUA Physicians (NAMUA), MUA is only appropriate where conventional manipulation could not be performed due to pain, apprehension, muscle contraction or muscle splinting.

Dr. Sposta cited no authority to support his contention that a second opinion is necessary before an MUA procedure is performed on a chiropractic patient. As Dr. Kraft testified, the New York State Workers’ Compensation Board medical treatment guidelines contain no such requirement. As for plaintiff’s alleged failure to personally review the patient’s medical records prior to the MUA, even if established it would be insufficient, on its own, to rebut the presumption of medical necessity. Finally, while there is no evidence that plaintiff’s assignor was incapable of withstanding conventional manipulation, NAMUA protocol does not limit the availability of the MUA procedure to this criteria. As per NAMUA, patients whose conditions justify MUA include those “whereby manipulation of the spine or other articulations is the treatment of choice, however, due to the extent of the injury mechanism, conservative manipulation has been minimally effective in 2-6 weeks of care and a greater degree of movement of the affected joint(s) is needed.” (NAMUA National Guidelines http://www.namuap.org/mcms/mua/content.cfm?pulldata=scmscontent.cfm & entity_id=8&content_id=180 [accessed Sept. 15, 2011].) The assignor’s treatment prior to the MUA in this case well exceeded such minimum. Her medical records reveal that she was not a surgical candidate and had received several months of conservative care with little to no improvement, thereby justifying the MUA procedures performed by plaintiff.

The court finds that the plaintiff, as a licensed chiropractor, was authorized to perform the disputed manipulations under anesthesia and that the defendant has failed to rebut the presumption of medical necessity of these procedures by a fair preponderance of the credible evidence. Accordingly, verdict in favor of the plaintiff, Dr. John Kraft, D.C., in the amount of $1,594.10 (the agreed disputed amount) with statutory interest, attorney fees, costs and disbursements.

Supreme Court, Queens County

13330/09

Janice A. Taylor, J.

This is an action seeking disability benefits for the plaintiff under an insurance policy between himself and the defendant. In his complaint, plaintiff asserts that he was injured on December 14, 2005 when he was involved in a motor vehicle accident on Van Siclen Street at or near its intersection with Avenue S in the County of Kings, City and State of New York. At the time of the accident, plaintiff worked as a driver for Fed Ex Home Delivery (“Fed Ex”). Plaintiff first applied for disability benefits from the defendant under his no-fault policy. In October, 2006, plaintiff was deemed totally disabled by Fed Ex’ physicians. Following the expiration of this no-fault benefits, plaintiff applied for payment from the defendant under his secondary disability policy. It is uncontested that defendant denied [*2]plaintiff’s claim for disability benefits. This action was commenced on May 21, 2009 by the filing of a summons and complaint.

By order dated January 10, 2011, this court denied defendant’s motion for summary judgment due to defendant’s failure to include a signed certification, pursuant to Court Rule 130-1.1(a) with its motion. Defendant Protective Insurance Company (“Protective”) now moves, pursuant to CPLR §2221, for leave to renew its prior motion for summary judgment. As the movant has now included the required certification, the instant motion to renew is granted.

Upon renewal, this court will first consider defendant Protective’s motion seeking an order, pursuant to CPLR §3025, for leave to amend its answer to include the affirmative defense of statute of limitations. It is well-settled that “a party may amend [its] pleading * * * at any time by leave of court” and that “[l]eave shall be freely given upon such terms as may be just.” (CPLR §3025 [b]; Fahey v. County of Ontario, 44 NY2d 934, 935 [1978]; Hempstead Concrete Corp. v. Elite Assocs., 203 AD2d 521, 523[2d Dept. 1994]). Allowing such an amendment is committed “almost entirely to the court’s discretion to be determined on a sui generis basis.” (See, Leitner v. Jasa Hous. Mgmt. Servs. for the Aged, Inc., 6 AD3d 667 [2d Dept. 2004]; Zeide v. National Cas. Co., 187 AD2d 576 [2d Dept. 1992]; Corsale v. Pantry Pride Supermarkets, 197 AD2d 659, 660 [2d Dept. 1993]; Hickey v. Hudson, 182 AD2d 801, 802 [2d Dept. 1992]). Where, as here, the opposing party fails to make a showing of operative prejudice; i.e., prejudice attributable to the mere omission to plead the defense in the original answer, the amendment may be allowed “during or even after trial” (Murray v. City of New York, 43 NY2d 400, 405 [1977], citing Dittmar Explosives v. A.E. Ottaviano, Inc., 20 NY2d 498, 502 [1967]; see, Breco Envtl. Contrs., Inc. v. Town of Smithtown, 307 AD2d 330 [2d Dept. 2003]; Grall v. Ba Mar, Inc., 233 AD2d 368 [2d Dept. 1996]). As the plaintiff has failed to prove, or to even assert, that he would be prejudiced by the proposed amendment, defendant Protective’s motion, pursuant to CPLR §3025, is granted. The supplemental summons and amended complaint annexed to the instant motion is deemed timely served.

Upon amendment of its answer and the inclusion of the affirmative defense of statute of limitations, defendant Protective now moves, pursuant to CPLR §3212, for an order granting summary judgment and dismissing the complaint. It is well-settled that the proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case (See,Zuckerman v. City of New York, 49 NY2d 557, 562 [1980]; Sillman v. Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 [1957]). Failure to make such a showing necessitates denial of the motion.

CPLR §3212(b) requires that for a court to grant summary judgment it must determine if the movant’s papers justify holding, as a matter of law, “that the cause of action or defense has no merit.” The evidence submitted in support of the movant must be viewed in the light most favorable to the non-movant (see, Grivas v. Grivas, 113 AD2d 264, 269 [2d Dept. 1985]; Airco Alloys Division, Airco Inc. v. Niagara Mohawk Power Corp., 76 [*3]AD2d 68 [4th Dept. 1980]; Parvi v. Kingston, 41 NY2d 553, 557 [1977].

Defendant Protective asserts that the instant complaint must be dismissed based on documentary evidence, pursuant to CPLR §3211(a)(1),(5), because the plaintiff has failed to commence this action within the contractual time period. A complaint which is facially sufficient may be dismissed if there exists documentary evidence which conclusively contradicts the claims (See, Smuckler v. Mercy College, et al, 244 AD2d 349 [2d Dept. 1997]). In support of its motion, defendant Protective submits, inter alia, the pleadings, the prior motion and responsive papers, a certified copy of the subject insurance policy, its proposed amended answer and a copy of the Note of Issue filed on April 5, 2010.

A review of the subject insurance policy reveals that, paragraph 11 of the General Provisions states:

“Written proof of loss must be furnished to us within ninety (90) days after the date of loss for which claim is made.”

Paragraph 13 thereof states:

“No lawsuit may be brought to recover on the Group Master Policy within sixty (60) days after written proof of loss has been given as required by this policy. No such lawsuit may be brought after two (2) years from the time written proof of loss is required to be given.

The movant asserts that, pursuant to the subject insurance policy, plaintiff was required to submit written proof of loss by March 14, 2006 and to commence a lawsuit by March 14, 2008. As aforestated, this action was commenced on May 21, 2009, more than fourteen (14) months after the expiration of the contractual time period.

In opposition to the instant motion, plaintiff does not dispute that the contractual time-period is two years, ninety days from the date of his accident, nor does plaintiff dispute that he failed to commence this action within the contractual time period. Instead, plaintiff asserts that the statute of limitations provision of the subject insurance policy is unconscionable and must be voided by this court.

It is well-settled that the determination of whether a contract, or a provision thereof, is unconscionable is a matter of law reserved for the court (See, Wilson Trading Corp. V. David Ferguson, Ltd., 23 NY2d 398 [1968]). For a court to determine that a contract, or a contractual provision, is unconscionable, a court must determine that the agreement is so one-sided that it “shocks the conscience such that no person in his or her right mind would make it on the one hand, and no honest and fair person would accept it on the other” (Kojovic v. Goldman, 35 AD3d 65, 823 N.Y.S.2d 35 [1st Dept. 2006] citing Christian v. Christian, 42 NY2d 63, 365 N.E.2d 849, 396 N.Y.S.2d 817 [1977]). [*4]

A finding of unconscionability usually requires both a showing that the contract was procedurally and substantively unconscionable when made (emphasis added) (See, Gillman v. Chase Manhattan Bank, N.A., 73 NY2d 1, 534 N.E.2d 824, 537 N.Y.S.2d 787 [1988]). A contract is procedurally unconscionable when one of the parties lacked a meaningful choice in its execution. Misrepresentation of facts, high pressure sales tactics and unequal bargaining position have each been found to be examples of elements of a procedurally unconscionable contract (See, Matter of Friedman, 64 AD2d 70, 407 N.Y.S.2d 999 [2nd Dept 1978]). A contract is substantively unconscionable when the terms of the contract are unreasonably favorable to the other party (Gillman, supra). Examples of elements of substantive unconscionability include contracts that contain inflated prices, unfair disclaimers of warranty and termination clauses (See, Matter of Friedman, supra). While a determination of unconscionability generally requires a court to find elements of both procedural and substantive unconscionability, a contract, or provision thereof, that is deemed to be outrageous on grounds of substantive unconscionability alone can also be stricken by the court (See, Gillman, supra; State of New York v. Wolowitz, 96 AD2d 47[1983]).

In ruling whether a contract is procedurally unconscionable, a court may consider several factors such as the professional experience of the parties, the level of negotiations that occurred during the formation of the contract and the equality of the bargaining positions of the parties (See, Industralease Automated and Scientific Equipment Corporation v. R.M.E. Enterprises, Inc., et al, 58 Ad2d 482 [2d Dept. 1977]). In the instant action, it is uncontested that plaintiff is neither an attorney nor an experienced insurance professional; and that the subject insurance policy was a part of a pre-negotiated package of benefits he received through his employment with Fed Ex. Neither party asserts that plaintiff actually signed the subject insurance policy and affirmatively agreed to its terms.

In considering plaintiff’s allegation of procedural unconscionability of the terms of the subject policy, this court must take into account plaintiff’s lack of bargaining power in the formation of the agreement, whether each party had a reasonable opportunity to understand the terms of the contract (See, Gillman, supra). It is clear that plaintiff is neither a legal nor an insurance professional and that he had no opportunity to negotiate any of the terms of the subject policy. Thus, this court finds that, due to the overwhelmingly unequal bargaining power of the parties in the formation of the contract, the disputed contractual statute of limitations contained within the subject policy is procedurally unconscionable.

This court must also determine if the contractual statute of limitations is substantively unconscionable. In actions for breach of contract, the cause of action accrues, and the statute of limitations begins, from the time of the breach (See, McCoy v. Feinman, 99 NY2d 295 [2002]; Fourth Ocean Putnam Corp. v. Interstate Wrecking Company, 66 NY2d 38 [1985]; John J. Kasner & Co. v. City of New York, 46 NY2d 544 [1979]; Mainline Electric Corp. v. East Quogue Union Free School District, 46 AD3d 859 [2d Dept. 2007]; Henry Boeckmann, Jr. and Associates v. Board of Education, Hempstead [*5]Union Free School District No. 1. et al., 207 Ad2d 773 [2d Dept. 1994]).

Pursuant to the terms of subject policy, the defendant had no obligation to pay under plaintiff’s secondary disability policy until after the March 1, 2008 expiration of the three-year no-fault benefit period. Until plaintiff actually demanded payment from the defendant and said demand was refused, plaintiff had no cause of action against the defendant for breach of contract. However, the terms of the subject policy require plaintiff to commence an action within two years, ninety days of the underlying accident, before the expiration of the no-fault benefit period. Thus, contrary to established New York law, the subject insurance policy requires plaintiff’s contractual statute of limitations to begin to run before he had an enforceable cause of action (See, McCoy, supra; Fourth Ocean Putnam Corp., supra; Mainline Electric Corp., supra).

An examination of the facts as alleged by the parties reveals that, after the expiration of his no-fault benefits, plaintiff had less than two weeks to demand payment from the defendant, for that demand to be refused and for the plaintiff to commence an action for breach of contract. Following a demand from the plaintiff, it was the defendant who controlled when it would pay, or refuse to pay under this disability policy. Thus, the subject insurance policy gave defendant the opportunity to delay its refusal to pay until after the expiration of the contractual statute of limitations. Additionally, if, by the March 14, 2008 expiration of the contractual statute of limitations, plaintiff had not yet demanded payment and said demand had not yet been rejected by the defendant, plaintiff’s contractual time to commence a lawsuit would have expired before the defendant ever breached its contractual obligations. Moreover, even if the refusal to pay were ultimately determined to be a breach of contract, the terms of the contractual statute of limitations would have eliminated the possibility that the defendant could be sued for the breach. Thus, this court finds that the disputed contractual statute of limitations is so unreasonably favorable to the defendant that said provision is substantively unconscionable.

In Day Op of North Nassau, Inc. d/b/a Ambulatory Surgery of North Nassau v. Viola, the Supreme Court of New York, Nassau County found that a contractual term was unconscionable where it allowed a defendant to benefit from its own breach (See, Day Op of North Nassau, Inc. d/b/a Ambulatory Surgery of North Nassau v. Viola, 2007 NY Slip Op. 51542U [Supreme Court, Nassau County, 2007]). Citing definitions and examples of unconscionability set forth in Gillman v. Chase Manhattan Bank, N.A. and State of New York v. Wolowitz, the Honorable Ira B. Warshawsky, J.S.C. ruled that a term of a shareholders’ agreement which eliminated the shareholder’s right to contest the forced sale of her shares, even if the sale resulted from the wrongful breach of contract by the corporation, was oppressive, unjust and unconscionable (See, Day Op of North Nassau, Inc. d/b/a Ambulatory Surgery of North Nassau, supra; Gillman v. Chase Manhattan Bank, N.A., supra, State of New York v. Wolowitz, supra). While the decision of the Supreme Court, Nassau County is not binding on the undersigned, this court similarly finds that, pursuant to the rules of law set forth by both the New York Court of Appeals and the Supreme Court, Appellate Divisions, the contractual statute of limitations of the subject [*6]insurance policy is both procedurally and substantively unconscionable. Where a contract, or a provision thereof, has been deemed unconscionable, it may be voided by this court (See, generally, King v. Fox, 7 NY3d 181 [2006]). Thus, the contractual statute of limitations will not be enforced by this court. Accordingly, that portion of the defendant’s motion which seeks summary judgment and dismissal of the complaint, pursuant to CPLR §3212, §3211(a)(1),(5) is denied.

Defendant also moves, pursuant to CPLR §3212, §3211(a)(7), for summary judgment and dismissal of the complaint for plaintiff’s failure to state a cause of action. A motion to dismiss made pursuant to CPLR §3211(a)(7), can only be granted if, from the pleadings’ four corners, factual allegations are not discerned which manifest any cause of action cognizable at law. In furtherance of this task, the court liberally construes the complaint, accepts as true the facts alleged in the complaint and any submissions in opposition to the dismissal motion, and accords the plaintiff the benefit of every possible favorable inference (See, 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 NY2d 144 [2002]).

In support of its motion, defendant asserts that the complaint must be dismissed because plaintiff does not yet have a ripe cause of action. Paragraph four of the General Provisions of the subject policy states:

Subrogation: We shall be subrogated to any and all rights of recovery which and Covered Person may have or acquire against any party or the insurer of any party for benefits paid or payable under the Group Master Policy. Any Covered Person who receives benefits from us for any accidental injury or death therefrom shall be deemed to have assigned their right of recovery for such benefits to us and agree to do what is necessary to secure such recovery, including execution of all appropriate papers to cause repayment to us. If the third party pays a Covered Person as a result of judgment, arbitration, compromise settlement or other arrangement for injuries sustained by the Covered Person for which benefits were paid under the Group Master Policy, the Covered Person agrees to repay us for all benefits paid. Cost of collection including attorney’s fees and court costs shall be shared pro rata between the Covered Person and us.

In addition, if benefits are payable to a Covered Person under the Group Master Policy after a third party pays the Covered Person, we will take credit for all amounts received by the Covered Person, less amounts paid to us, against all future payments under the Group Master Policy. No amount shall be owed by us until the amount of benefits we would have paid on behalf of or to the Covered Person exceeds the amount received by the Covered Person from a third party.

In support of its motion, defendant asserts that plaintiff has been adjudicated to be partially disabled. The maximum amount of payment under the policy is $750.00 per month. It is uncontested that plaintiff commenced and settled a lawsuit related to this action, in March 2008, with a third-party for the sum of $21,436.00. Under the subrogation [*7]clause of the subject policy, defendant asserts it will take plaintiff 36 months, at $750.00 per month, to run off the credit from the settlement before the defendant must pay plaintiff’s disability claims. In opposition, plaintiff asserts that he was deemed to be totally disabled by a physician employed by Fed Ex Delivery and that his settlement was for pain and suffering, not for the lost wages that he claims under this policy. Thus, plaintiff asserts that the subrogation clause does not apply and that his action is ripe.

Thus, when this court accepts as true plaintiff’s version of the facts, as required by CPLR §3211(a)(7), it is clear that plaintiff has properly alleged a cognizable cause of action. Accordingly, defendant’s motion to dismiss for plaintiff’s failure to state a cause of action is denied.

Dated: June 29, 2011

JANICE A. TAYLOR, J.S.C.

Civil Court of the City of New York, Queens County

086674/10

The petitioner was represented by Jonathon H. Kaufman, Esq. of Serpe, Andree & Kaufman, 149 Main Street, Huntington NY. The respondent was represented by Stacey Gorny, Esq. of Lewis Johns Avallone Aviles, LLP, 425 Broad Hollow Road, suite 400, Melville, NY.

Genine D. Edwards, J.

Petitioner seeks to vacate an arbitration award rendered following mandatory arbitration

because the arbitrator allegedly disregarded applicable law. Respondent opposes the application

and contends that the arbitrator’s decision was neither arbitrary nor capricious.

William Salas, petitioner’s insured, drove a loaner vehicle, while his own vehicle was being repaired at a car dealership. Salas’ vehicle was insured by petitioner and the loaner vehicle was insured by respondent. While driving the loaner vehicle, Salas struck a pedestrian. Petitioner paid no-fault benefits to the pedestrian. Thereafter, it submitted a claim to arbitration and sought reimbursement from respondent for expenses and medical benefits paid to the pedestrian.

Salas signed a loaner/rental agreement before he took control of the loaner vehicle. [*2]Paragraph 6 of the agreement stated, in pertinent part:

You are responsible for all damage or loss You cause to others. You agree to provide auto liability, collision and comprehensive insurance covering You, Us and the Vehicle. Your personal auto insurance coverage is primary (emphasis added). If you have no auto liability insurance in effect on the date of loss, or if We are required by law to provide liability insurance, We provide auto liability insurance (the Policy”) that is secondary to any other valid and collectible insurance, whether primary, secondary, excess or contingent . . . .”

Notice of Petition, Exhibit C. Based upon paragraph 6 of the agreement, the arbitrator determined that petitioner failed to prove its prima facie case. Thus, petitioner was deemed primarily responsible for no-fault payments and was not entitled to reimbursement for expenses and medical benefits paid to the pedestrian.

In the instant application, petitioner equates a loaner vehicle to a rental vehicle and asserts that as between a no-fault insurer of a rental vehicle and a no-fault insurer of a non-owner renter, the primary source of coverage for no-fault benefits is the no-fault insurer of the rental vehicle. In opposition, respondent contends that the award should stand because the arbitrator’s decision was neither arbitrary nor capricious. It contends that the arbitrator based its decision upon credible evidence, namely paragraph 6 of the loaner/rental agreement.

“Courts are reluctant to disturb the decisions of arbitrators lest the value of this method of resolving controversies be undermined.” Matter of Goldfinger v. Lisker, 68 NY2d 225, 508 NYS2d 159 (1986). Where arbitration is pursuant to a voluntary agreement of the parties, the award will be upheld unless it violates strong public policy, is totally irrational, or exceeds a specifically enumerated limitation of the arbitrator’s power. See Motor Vehicle Acc. Indemnification Corp. v. Aetna Cas. & Sur. Co., 89 NY2d 214, 652 NYS2d 584 (1996) (Where arbitration is pursuant to voluntary agreement of parties, the arbitrator’s determination on issues of law, such as application of statute of limitations as well as on issues of fact, is conclusive, in absence of proof of fraud, corruption, or other misconduct.); Teamsters Local 814 Welfare, Pension and Annuity Funds v. County Van Lines, Inc.,56 AD3d 567, 867 NYS2d 190 (2 Dept. 2008). In the case of mandatory arbitration, as is the case here, due process imposes closer judicial scrutiny on the arbitrator’s determination. RDK Medical P.C. v. General Assur. Co., 8 Misc 3d 1025(A), 806 NYS2d 448 (Civ. Ct. Kings County 2005). Therefore, “[a]n arbitration award in a mandatory arbitration proceeding will be upheld if it is supported by the evidence and is not arbitrary and capricious.” State Farm Mut. Auto. Ins. Co. v. City of Yonkers, 21 AD3d 1110, 801 NYS2d 624 (2d Dept. 2005). See also Kemper Ins. Co. v. Westport Ins. Co., 9 AD3d 431, 779 NYS2d 788 (2d Dept. 2004); State Farm Mut. Auto. Ins. Co. v. American Transit Ins. Co., 26 Misc 3d 127(A), 906 NYS2d 783 (2d, 11th & 13th Jud. Dists. 2009). This is a priority of payment claim. In order to determine the priority of payment, all relevant policies should be reviewed and considered. Petitioner never produced its policy. Thus, [*3]the arbitrator properly relied upon the respondent’s policy to determine that petitioner was primarily responsible to make no-fault payments to the pedestrian. In addition, this Court is unpersuaded by petitioner’s assertion that a loaner vehicle is akin to a rental vehicle and thus, respondent is primary for no-fault coverage. See M.N. Dental Diagnostics, P.C. v. Government Employees Ins. Co., 24 Misc 3d 43, 884 NYS2d 549 (App. Term. 1st Dept. 2009). It has been held that a loaner vehicle is a “temporary substitute vehicle”, which ordinarily is covered under the insured’s policy. See Lancer Ins. Co. v. Republic Franklin Ins. Co., 304 AD2d 794, 759 NYS2d 734 (2d Dept. 2003); ELRAC, Inc. v. Mehlinger, 258 AD2d 500, 684 NYS2d 625 (2d Dept. 1999).

The application to vacate the arbitration award is denied. Thus, the award is confirmed.

This constitutes the decision and order of the Court.

Date: December 6, 2010 _____________________________

Genine D. Edwards

Judge of Civil Court [*4]

Supreme Court, Queens County

25257/08

For the Plaintiffs: John E. McCormack, P.C., 41 Hilton Ave., Hempstead, NY 11550

For Defendants Bronx Park Medical, P.C., Inwood Hill Medical P.C., Dr. Noel Worrell Howell, Alexander Freed, Innessa Drabkin, Silver Pines Management Corp., Integra CBA Co., Inc., PKH Corp., and Michael Mazur: Lifshutz & Lifshutz, P.C., by Gary Burgoon, 501 Fifth Ave., suite 506, NY, NY 10017

For Defendant Healthbay Medical, P.C.: George T. Lewis, Jr., P.C., 485 Underhill Blvd., suite 101, Syosset, NY 11791

For Defendants Jean D. Miller, D.O., Jean Miller, D.O., P.C., and Acadian Medical P.C.: Kern Augustine Conroy & Schoppman, P.C., by Douglas M. Nadjari, Esq., 1325 Franklin Ave., Garden City, NY 11530

For Defendants Josh Vainer and SVG MGMT., Inc.: Matthew J. Conroy & Associates, P.C., by Matthew J. Conroy and Maria Campese Diglio, Esqs., 350 Old Country Road, suite 106, Garden City, NY 11530

For Defendants Simon Pevzner, ASPG MGNT., Inc., Veritas Management Corp., Group Square I.S. Ltd., Kritek, Inc., Strob, Inc., and Lokh Corp.: Schlam Stone Dolan, LLP, by Thomas A. Kissane and Samuel L. Butt, Esqs., 26 Broadway, NY, NY 10004

Other Defendants are either Pro Se and/or have not appeared.

Charles J. Markey, J.

The plaintiffs have moved for a preliminary injunction, inter alia, prohibiting defendant Pueblo Medical Treatment, PC, defendant Nagle Medical Plaza, PC, defendant Kingsbridge Community Medical, PC, defendant Inwood Hill Medical, PC, defendant Bronx Park Medical, PC, and defendant Healthbay Medical, PC from the further prosecution of pending lawsuits and arbitration proceedings brought by them against the plaintiffs to recover No Fault first-party medical benefits.

The complaint alleges that the plaintiffs are domestic and foreign insurance companies that issue automobile policies in New York State providing benefits payable pursuant to the Comprehensive Automobile Insurance Reparations Act (the No-Fault Law) presently codified in article 51 of the Insurance Law. The plaintiffs are required by law to pay an insured’s No-Fault benefits directly to a health care provider who has been assigned his right to benefits covering medically necessary treatments and tests. Some of the defendants, termed “the Management Defendants,” are the true owners of certain medical facilities also named in the complaint and termed “the provider defendants.” Some of the defendants, termed “the licensed defendants,” hold or did hold medical licenses and fronted as the owners of the provider defendants. The licensed defendants “essentially sold the use of their names and licenses to “the Management Defendants.”

There are three groups of defendants each comprised of some of the licensed defendants, provider defendants, and management defendants:
(1) The Pevzner management group allegedly using the licenses of Dr. Miller, Dr. Mukendi, and Dr. Kadianakis (Group 1),
(2) the Kargman management group allegedly using the licenses of Dr. Garcia, Dr. Iroku, Dr. Richie, and Dr. Chiarmonte (Group 2), and
(3) the Drabkin/Freed management group allegedly using the licenses of Dr. Howell and Dr. Iroku (Group 3).

The following chart sets forth the three groups of defendants: [*2]

Group 1

Group 2

Group 3

The defendants have allegedly defrauded the plaintiff insurers by submitting bills pursuant to New York State’s No-Fault Law for medical services rendered by corporations not truly owned by holders of medical licenses. On or about October 15, 2008, the plaintiffs (over 20 insurance companies) began this lawsuit asserting six causes of action, the first for common-law fraud, the second for unjust enrichment, the third for a declaratory judgment concerning fraudulent incorporation, the fourth for declaratory judgment concerning illegal fee splitting, the fifth for reimbursement based on Public Health Law § 238-a, and the sixth for a declaratory judgment concerning medical services allegedly rendered by independent contractors.

In order to obtain a preliminary injunction, the plaintiffs had to show (1) a likelihood of ultimate success on the merits, (2) irreparable injury if provisional relief is withheld, and (3) a weight of the equities in their favor (see, Aetna Insurance Co. v. Capasso, 75 NY2d 860 [1990]; McNeil v. [*3]Mohammed, 32 AD3d 829 [2nd Dept. 2006]). The plaintiffs successfully carried this burden (see, St. Paul Travelers Ins. Co. v Nandi, 2007 WL 1662050, 2007 NY Slip Op 51154[U] [Sup Ct Queens County, Dollard, J.] [in action involving alleged fraudulently incorporated medical providers, preliminary injunction granted prohibiting defendants from prosecuting pending lawsuits and commencing future lawsuits against No Fault insurer]).

In regard to the first requirement, the plaintiffs established a likelihood of ultimate success on the merits by making a prima facie showing that they can prove their causes of action based on fraudulent incorporation (see, McNeil v Mohammed, 32 AD3d 829, supra ; Trimboli v Irwin, 18 AD3d 866 [2nd Dept. 2005]; Four Times Square Associates, L.L.C. v Cigna Investments, Inc., 306 AD2d 4 [1st Dept. 2003]). The verified complaint, the affidavit of James Beadle (an investigator for plaintiff Autoone Insurance Company), and the deposition and examination transcripts from other cases show prima facie that certain of the licensed defendants did not truly own and operate the provider defendants against whom injunctive relief is sought. “State law mandates that professional service corporations be owned and controlled only by licensed professionals (see, Business Corporation Law §§ 1503[a]; 1507, 1508), and that licensed professionals render the services provided by such corporations (see, Business Corporation Law § 1504[a])” (One Beacon Ins. Group, LLC v Midland Medical Care, P.C., 54 AD3d 738, 740 [2nd Dept. 2008]).

In State Farm Mut. Auto. Ins. Co. v Mallela, (4 NY3d 313 [2005]), an action for, inter alia, a declaratory judgment brought by an insurer against defendants allegedly operating the same type of scheme allegedly involved in the case at bar, the Court of Appeals held that, on the basis of 11 NYCRR 65-3.16(a)(12), insurers may deny no-fault payments to fraudulently incorporated health care providers to which patients have assigned their claims. In regard to the requirement of irreparable injury, the plaintiffs adequately demonstrated that equitable relief is a more efficient remedy than monetary damages (see, People by Abrams v Anderson, 137 AD2d 259 [4th Dept. 1988]; Poling Transp. Corp. v A & P Tanker Corp., 84 AD2d 796 [2nd Dept. 1981]).

The plaintiffs have shown that the issuance of a preliminary injunction is necessary to prevent the repetitive litigation and arbitration of numerous No Fault claims for reimbursement by medical providers where the insurers raise the same defense of fraudulent incorporation. In regard to the weight of the equities (see, Reuschenberg v Town of Huntington, 16 AD3d 568 [2nd Dept. 2005]; Credit Index, L.L.C. v Riskwise Intern. L.L.C., 282 AD2d 246 [1st Dept. 2001]; McLaughlin, Piven, Vogel, Inc. v W.J. Nolan & Co., Inc., 114 AD2d 165 [2nd Dept.], appeal denied, 67 NY2d 606 [1986]; Metropolitan Package Store Ass’n, Inc. v Koch, 80 AD2d 940 [3rd Dept. 1981]; Nassau Roofing & Sheet Metal Co., Inc. v Facilities Development Corp., 70 AD2d 1021 [3rd Dept], appeal dismissed, 48 NY2d 654 [1979]; 67A NY Jur2d, “Injunctions,” § 31), the issuance of a preliminary injunction will not unduly cause hardship to any of the defendants, but, to the contrary, all parties will benefit from having the issue of fraudulent incorporation determined in one action.

Accordingly, the plaintiffs’ motion for a preliminary injunction is granted. The parties may submit affidavits concerning the proper amount of the undertaking at the time of the settlement of the order to be entered hereon (see, NSA, Inc. V. L.I.C. Food Court, Inc., 2009 WL 1904683, 2009 NY Slip Op 51411 [U] [Sup Ct Queens County 2009] [decision by the undersigned]; Chiu Cheuk Chan v. 28-42, LLC, 2009 WL 129893, 2009 NY Slip Op 50080 [U] [Sup Ct Queens County 2009] [decision by the undersigned]; Nand Land LAL v. Shiri Guru Ravidas Sabha of New York Inc., 2008 NY Slip Op 51720[U] [Sup Ct Queens County 2008]; Daily Bread Café Inc. v. City Lights at Queens [*4]Landing Inc., 2007 WL 3375899, 2007 NY Slip Op 52158 [Sup Ct Queens County 2007]; Molyneux-Petraglia v. Northbridge Capital Mgmt. Inc., 2007 WL 1203597, 2007 NY Slip Op 50845[U] [Sup Ct NY County 2007]; Citadel Mgt. Inc. v. Hertzog, 182 Misc 2d 902, 906 [Sup Ct Queens County 1999]; Connor v. Cuomo, 161 Misc 2d 889, 897 [Sup Ct Kings County 1994]; Jewelry Realty Corp. v. 55 West 47 Co., 90 Misc 2d 407, 408 [Sup Ct NY County 1977].)

Settle order.

___Hon. Charles J. MarkeyJustice, Supreme Court, Queens County

Appearances:

Supreme Court, Queens County

25257 2008

For the Plaintiffs:

John E. McCormack, P.C., 41 Hilton Ave., Hempstead, NY 11550

For Defendants Bronx Park Medical, P.C., Inwood Hill Medical P.C., Dr. Noel Worrell Howell, Alexander Freed, Innessa Drabkin, Silver Pines Management Corp., Integra CBA Co., Inc., PKH Corp., and Michael Mazur: Lifshutz & Lifshutz, P.C., by Gary Burgoon, 501 Fifth Ave., suite 506, NY, NY 10017

For Defendant Healthbay Medical, P.C.: George T. Lewis, Jr., P.C., 485 Underhill Blvd., suite 101, Syosset, NY 11791

For Defendants Jean D. Miller, D.O., Jean Miller, D.O., P.C., and Acadian Medical P.C.: Kern Augustine Conroy & Schoppman, P.C., by Douglas M. Nadjari, Esq., 1325 Franklin Ave., Garden City, NY 11530

For Defendants Josh Vainer and SVG MGMT., Inc.: Matthew J. Conroy & Associates, P.C., by Matthew J. Conroy and Maria Campese Diglio, Esqs., 350 Old Country Road, suite 106, Garden City, NY 11530

For Defendants Simon Pevzner, ASPG MGNT., Inc., Veritas Management Corp., Group Square I.S. Ltd., Kritek, Inc., Strob, Inc., and Lokh Corp.: Schlam Stone Dolan, LLP, by Thomas A. Kissane and Samuel L. Butt, Esqs., 26 Broadway, NY, NY 10004

Other Defendants are either Pro Se and/or have not appeared.

Charles J. Markey, J.

Defendant Jean D. Miller, D.O., defendant Jean D. Miller, D.O., P.C., and defendant Acadian Medical, P.C. (collectively “the Miller defendants”) have moved for, inter alia, an order pursuant to CPLR 3211(a)(7) dismissing the complaint against them. Defendant Simon Pevzner, defendant ASPG Mgnt Inc., defendant Veritas Management Corp., defendant Group Square I.S. Ltd., defendant Kritek, Inc., defendant Strob, Inc., and defendant Lokh Corp., (collectively “the Pevzner defendants”) have moved for, inter alia, an order pursuant to CPLR 3211(a)(7) [*2]dismissing the complaint against them. Defendant Josh Vainer and defendant SVG Mgmt, Inc. (collectively “the Vainer defendants”) have moved for an order dismissing the complaint against them pursuant to CPLR 3211(a)(7).

The complaint alleges the following: The plaintiffs are domestic and foreign insurance companies which issue automobile policies in New York State providing benefits payable pursuant to the Comprehensive Automobile Insurance Reparations Act (the No-Fault Law) presently codified in article 51 of the Insurance Law. The plaintiffs are required by law to pay an insured’s No-Fault benefits directly to a health care provider who has been assigned his right to benefits covering medically necessary treatments and tests. Some of the defendants, termed “the Management Defendants,” are the true owners of certain medical facilities also named in the complaint and termed “the Provider Defendants.” Some of the defendants, termed “the Licensed Defendants,” hold or did hold medical licenses and fronted as the owners of the provider defendants. The licensed defendants “essentially sold the use of their names and licenses to the Management Defendants.”

There are three groups of defendants each comprised of some of the licensed defendants, provider defendants, and management defendants:
(1) The Pevzner management group allegedly using the licenses of Dr. Miller, Dr. Mukendi, and Dr. Kadianakis (Group 1),
(2) the Kargman management group allegedly using the licenses of Dr. Garcia, Dr. Iroku, Dr. Richie, and Dr. Chiarmonte (Group 2), and
(3) the Drabkin/Freed management group allegedly using the licenses of Dr. Howell and Dr. Iroku (Group 3).

The following chart sets forth the three groups of defendants:

Group 1

Group 2

Group 3

The defendants have allegedly defrauded the plaintiff insurers by submitting bills pursuant to New York State’s No-Fault Law for medical services rendered by corporations not truly owned by holders of medical licenses. On or about October 15, 2008, the plaintiffs, over 20 insurance companies, began this lawsuit asserting six causes of action, the first for common law fraud, the second for unjust enrichment, the third for a declaratory judgment concerning fraudulent incorporation, the fourth for declaratory judgment concerning illegal fee splitting, the fifth for reimbursement based on Public Health Law § 238-a, and the sixth for a declaratory judgment concerning medical services allegedly rendered by independent contractors.

“State law mandates that professional service corporations be owned and controlled only by licensed professionals (see, Business Corporation Law §§ 1503[a], 1507, & 1508), and that licensed professionals render the services provided by such corporations (see, Business Corporation Law § 1504[a])” (One Beacon Ins. Group, LLC v Midland Medical Care, P.C., 54 AD3d 738, 740 [2nd Dept. 2008]).

Business Corporation Law section 1503(a) provides in relevant part: “Notwithstanding any other provision of law, one or more individuals duly authorized by law to render the same professional service within the state may organize, or cause to be organized, a professional service corporation for pecuniary profit under this article for the purpose of rendering the same professional service” (see, One Beacon Ins. Group, LLC v Midland Medical Care, P.C., 54 AD3d 738, supra).

Business Corporation Law section 1507 provides in relevant part: “A professional service corporation may issue shares only to individuals who are authorized by law to practice in this state a profession which such corporation is authorized to practice” (see, Sangiorgio v Sangiorgio, 173 Misc 2d 625 [Sup. Ct. Richmond County 1997]). State licensing requirements prohibit non-physicians from owning or controlling medical service corporations (see, State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005]).

Insurance Law § 5102 et seq. requires no-fault insurers to reimburse patients or their medical provider assignees for “basic economic loss.” However, pursuant to state regulation (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 necessary to perform such service in New York or meet any applicable licensing requirement necessary to perform such service in any other state in which such service is performed.” (see, State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, [*4]supra).

In State Farm Mut. Auto. Ins. Co. v Mallela (id.), an action for, inter alia, a declaratory judgment brought by an insurer against defendants allegedly operating the same type of scheme allegedly involved in the case at bar, the New York Court of Appeals held that, on the basis of 11 NYCRR 65-3.16(a)(12), insurers may deny no-fault payments to fraudulently incorporated health care providers to which patients have assigned their claims. In One Beacon Ins. Group, LLC v Midland Medical Care, P.C. (54 AD3d at 738, supra), another action similar to the case at bar, the insurers sought damages for common-law fraud and unjust enrichment and a declaration that they had no obligation to pay no-fault claims submitted by fraudulent professional corporations. The Appellate Division, Second Department, affirmed the denial of a motion for summary judgment by a defendant physician and a defendant corporation, finding that material issues of fact existed as to whether the physician’s professional corporation was actually controlled by a management company owned by unlicensed individuals in violation of state law.

That branch of the motion by the Pevzner defendants seeking an order, pursuant to CPLR 3013, dismissing the complaint against them is denied. The complaint adequately provides “the court and parties notice of the transactions, occurrences, or series of transactions or occurrences, intended to be proved and the material elements of each cause of action.” (see, CPLR 3013; Stavisky v Koo, 54 AD3d 432 [2nd Dept. 2008]; Trinity Products, Inc. v Burgess Steel LLC, 18 AD3d 318 [1st Dept. 2005]). The complaint makes factual, not merely conclusory, allegations. (see, Serio v Rhulen, 24 AD3d 1092). The defendants may obtain greater specificity by serving a demand for a bill of particulars or by utilizing the many disclosure devices available under CPLR article 31 (see, Serio v Rhulen, id.; Pernet v Peabody Engineering Corp., 20 AD2d 781 [1st Dept. 1964]).

That branch of the motion by the Pevzner defendants, pursuant to CPLR 3016(b), seeking dismissal of the first cause of action asserted against them, for common law fraud, is denied. Although fraud must be pleaded in “detail” (see, CPLR 3016[b]; 1205-15 First Ave. Associates, LLC v McDonough, 7 AD3d 363 [1st Dept. 1964]), “the standard is simply whether the allegations are set forth in sufficient detail to clearly inform a defendant with respect to the incidents complained of” (Caprer v Nussbaum, 36 AD3d 176, 202 [2nd Dept. 2006], quoting Lanzi v Brooks, 43 NY2d 778, 780 [1977]). The complaint in the case at bar meets that standard (see, PDK Labs, Inc. v Krape, 277 AD2d 211 [2nd Dept. 2000]). The complaint makes factual, not merely conclusory, allegations. Just recently, the New York Court of Appeals, in Sargiss v Magarelli (12 NY3d 527 [2009], modifying 50 AD3d 1117 [2nd Dept. 2008]) stated that, while “the basic facts” of the fraud allegedly perpetrated need to be sufficiently stated, they need not be elaborated in exquisite detail or accompanied by “unassailable” proof of pinpoint precision.

Those branches of the motions by the Miller defendants, the Pevzner defendants, and the Vainer defendants seeking dismissal of the first cause of action asserted against them, pursuant to CPLR 3211(a)(7), are granted to the extent that the first cause of action seeks damages accruing before April 4, 2002. The Court notes initially that, as the plaintiffs concede, no cause of action for fraud by No-Fault insurers based on 11 NYCRR 65-3.16(a)(12) can be stated to recover payments made before April 4, 2002, the effective date of the regulation (see, State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, supra; Allstate Ins. Co. v Belt Parkway Imaging, P.C., 33 AD3d 407 [1st Dept. 2006]; Metroscan Imaging, P.C. v Geico Ins. Co., 13 Misc 3d 35 [App. [*5]T. 2nd Dept. 2006]; St. Paul Travelers Ins. Co. v Nandi, 2007 WL 1662050, 2007 NY Slip Op. 51154[U] [Sup. Ct., Queens County 2007] [Dollard, J.]). Otherwise, the first cause of action sufficiently states a claim for fraud (see, One Beacon Ins. Group, LLC v Midland Medical Care, P.C., 54 AD3d 738, supra; St. Paul Travelers Ins. Co. v Nandi, 2007 WL 1662050, supra] [action by no-fault insurer against alleged fraudulently incorporated medical corporations]).

In determining a motion brought pursuant to CPLR 3211(a)(7), the court “must afford the complaint a liberal construction, accept as true the allegations contained therein, accord the plaintiff the benefit of every favorable inference and determine only whether the facts alleged fit within any cognizable legal theory” (1455 Washington Ave. Assoc. v Rose & Kiernan, 260 AD2d 770, 770-771 [3rd Dept. 1999]; Esposito-Hilder v SFX Broadcasting Inc., 236 AD2d 186 [3rd Dept. 1997]).

In order to state a cause of action for fraud, a plaintiff must allege that:

(1) that the defendant made material representations that were false or concealed a material existing fact,

(2) the defendant knew the representations were false and made them with the intent to deceive the plaintiff,

(3) the plaintiff was deceived,

(4) that the plaintiff justifiably relied on the defendant’s representations, and

(5) that the plaintiff was injured as a result of the defendant’s representations (see, Lama Holding Co. v Smith Barney, 88 NY2d 413 [1996]; New York Univ. v Continental Ins. Co., 87 NY2d 308 [1995]; Watson v Pascal, 27 AD3d 459 [2nd Dept. 2006]; Cerabono v Price, 7 AD3d 479 [2nd Dept. 2004], appeal denied, 4 NY3d 704 [2005]; New York City Transit Authority v Morris J. Eisen, P.C., 276 AD2d 78 [1st Dept. 2000]; American Home Assur. Co. v Gemma Const. Co., Inc., 275 AD2d 616 [1st Dept. 2005]; Swersky v Dreyer & Traub, 219 AD2d 321 [1st Dept. 1996], appeal withdrawn, 89 NY2d 983 [1997]).

In the case at bar, the plaintiffs have adequately alleged that the defendants with the requisite intent and scienter concealed material facts and made material misrepresentations concerning the provider defendants’ status as legal professional service corporations and in reliance on the material misrepresentations and concealments the plaintiffs made “substantial payments” to the provider defendants (see, St. Paul Travelers Ins. Co. v Nandi, 2007 WL 1662050, supra). A medical corporation fraudulently incorporated under Business Corporation Law section 1507, moreover, has no right to reimbursement by insurers under the No-Fault Law and its implementing regulations for medical services rendered (see, State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, supra). The complaint adequately alleges fraud in the incorporation and operation of the Provider Defendants with the complicity of the Management Defendants and Licensed Defendants.

That branch of the motion by the Pevzner defendants requesting dismissal of the plaintiffs’ first cause of action to the extent that it seeks punitive damages is granted (see, St. Paul Travelers Ins. Co. v Nandi, 2007 WL 1662050, supra) Punitive damages will not be awarded unless the fraud “is aimed at the public generally, is gross, and involves high moral culpability.” (Kelly v Defoe Corp., 223 AD2d 529 [2nd Dept. 1996]; see, Ross v Louise Wise Services, Inc., 8 NY3d 478, 489-490 [2007] [punitive damages were not available in a claim of adoption fraud or concealment claim in light of lack of malicious and vindictive intent], [*6]modifying 28 AD3d 272 [1st Dept. 2006]; Crispino v Greenpoint Mtge. Corp., 2 AD3d 478 [2nd Dept. 2003]). In the case at bar, the alleged tortfeasors directed their conduct at No-Fault insurers, not the public generally.

Those branches of the motions by the Miller defendants, the Pevzner defendants, and the Vainer defendants seeking, pursuant to CPLR 3211(a)(7), dismissal of the second cause of action, for unjust enrichment, are granted to the extent that the second cause of action seeks damages accruing before April 4, 2002. The plaintiffs cannot successfully state a cause of action for unjust enrichment based on 11 NYCRR 65-3.16(a)(12) to recover payments made before April 4, 2002, the effective date of the regulation (see, State Farm Mut. Auto. Ins. Co. v Mallela,4 NY3d 313, supra; Allstate Ins. Co. v Belt Parkway Imaging, P.C., 33 AD3d 407, supra; St. Paul Travelers Ins. Co. v Nandi, 2007 WL 1662050, supra). Otherwise, the complaint adequately states a cause of action for unjust enrichment (see, One Beacon Ins. Group, LLC v Midland Medical Care, P.C., 54 AD3d 738, supra; St. Paul Travelers Ins. Co. v Nandi, 2007 WL 1662050, supra). “A cause of action for unjust enrichment arises when one party possesses money or obtains a benefit that in equity and good conscience they should not have obtained or possessed because it rightfully belongs to another” (Mente v Wenzel, 178 AD2d 705, 706 [3rd Dept. 1991], appeal denied in part & dismissed in part, 82 NY2d 843 [1993]; see, Strong v Strong, 277 AD2d 533 [3rd Dept. 2000]). The plaintiffs, in the case at bar, have adequately alleged that the defendants fraudulently obtained no-fault payments from them which they were not obligated to pay under the No-Fault Law and its implementing regulations.

That branch of the motion by the Pevzner defendants requesting dismissal of the first and second causes of action to the extent that they seek damages for payments made before April 4, 2002 is granted. No cause of action for fraud or unjust enrichment lies to recover payments made by the carriers before April 4, 2002, the effective date of 11 NYCRR 65-3.16(a)(12) (see, State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, supra; Allstate Ins. Co. v Belt Parkway Imaging, P.C., 33 AD3d 407, supra; St. Paul Travelers Ins. Co. v Nandi, 2007 WL 1662050, supra.)

Those branches of the motions by the Miller defendants, the Pevzner defendants, and the Vainer defendants seeking, pursuant to CPLR 3211(a)(7), dismissal of the third cause of action for a declaratory judgment concerning alleged fraudulent incorporation, are denied (see, One Beacon Ins. Group, LLC v Midland Medical Care, P.C., 54 AD3d 738, supra; St. Paul Travelers Ins. Co. v Nandi, 2007 WL 1662050, supra). The plaintiffs allege that the provider defendants have not withdrawn outstanding claims for payment and, on some claims, have begun suit or arbitration even as the plaintiffs continue to deny an obligation to make payment because of alleged fraudulent incorporation. This action, which seeks a judgment declaring that the plaintiffs are “under no obligation to pay any of the no-fault claims of the Provider Defendants, past, present, or future,” presents a justiciable controversy appropriate for declaratory relief (see, Buller v Goldberg, 40 AD3d 333 [1st Dept. 2007]; Long Island Lighting Co. v Allianz Underwriters Ins. Co., 35 AD3d 253 [1st Dept. 2006], appeal dismissed, 9 NY3d 10003 [2007], cited with approval in Liberty Mut. Ins. Co. v. Lone Star Industries, Inc., 290 Conn. 767, 814-816, 967 A.2d 1, 31-32 [2009]).

Those branches of the motions by the Miller defendants, the Pevzner defendants, and the Vainer defendants, pursuant to CPLR 3211(a)(7), seeking dismissal of the fourth cause of action, [*7]for a declaratory judgment concerning alleged illegal fee-splitting, are denied. A licensed physician is generally prohibited from sharing fees with non-physicians (see, Education Law § 6530[19]; 8 NYCRR 29.1[b][4]; A.T. Medical, P.C. v State Farm Mut. Ins. Co., 10 Misc 3d 568 [NYC Civ. Ct. Queens County 2005] [Culley, J.] [improperly licensed provider]). The plaintiffs have adequately alleged that the licensed defendants have engaged in unlawful fee-splitting with the management defendants.

Those branches of the motions by the Miller defendants, the Pevzner defendants, and the Vainer defendants seeking, pursuant to CPLR 3211(a)(7), dismissal of the fifth cause of action, for reimbursement, are granted. Public Health Law section 238-a(1)(a), “Prohibition of financial arrangements and referrals,” provides: “A practitioner authorized to order clinical laboratory services, pharmacy services, radiation therapy services, physical therapy services or x-ray or imaging services may not make a referral for such services to a health care provider authorized to provide such services where such practitioner or immediate family member of such practitioner has a financial relationship with such health care provider” (see, Ozone Park Medical Diagnostic Associates v Allstate Ins. Co., 180 Misc 2d 105 [App. T. 2nd Dept. 1999]; Stand-Up MRI of the Bronx v General Assur. Ins., 10 Misc 3d 551 [Dist. Ct. Suffolk County 2005]). The statute, in essence, prohibits a medical doctor from ordering specified medical services from an entity in which he or an immediate family member has a financial interest. The plaintiffs cannot successfully invoke the statute against “management defendants [who] control the referral of patients to the medical providers.”

Those branches of the motions by the Miller defendants, the Pevzner defendants, and the Vainer defendants requesting, pursuant to CPLR 3211(a)(7), dismissal of the sixth cause of action, for a declaratory judgment regarding the medical services provided by allegedly independent contractors, are denied. The complaint alleges that “the persons who provided health care services for some or all of the Provider Defendants were not employees of the Provider Defendants, but were independent contractors.” “[W]here a billing provider seeks to recover no-fault benefits for services which were not rendered by it or its employees, but rather by a treating provider who is an independent contractor, it is not a provider’ of the medical services rendered within the meaning of 11 NYCRR 65.15(j)(1) [now 11 NYCRR 65-3.11(a)] and is, therefore, not entitled to recover direct payment’ of assigned no-fault benefits from the defendant insurer” (Rockaway Blvd. Medical P.C. v Progressive Ins., 9 Misc 3d 52, 54 [App. T. 2nd Dept. 2005]). The complaint adequately states a cause of action for a judgment declaring that the plaintiff insurers have no obligation to pay for services billed by the provider defendants, but rendered by independent contractors.

Those branches of the motions by the Miller defendants and Pevzner defendants seeking, pursuant to CPLR 3024, that the plaintiffs serve a more definite statement are denied. The complaint is sufficiently specific for the defendants to frame a response (see, CPLR 3024[a]; Della Villa v Constantino, 246 AD2d 867 [3rd Dept. 1998]; Mirage Rest., Inc. v Majestic Chevrolet, Inc., 75 AD2d 808 [2nd Dept. 1980]).

That branch of the motion by the Miller defendants seeking severance of mis-joined parties and discontinuing the claims against them is granted to the extent that the court orders the severance of the causes of action against each group of defendants denominated herein as Group 1, Group 2, and Group 3. The causes of action asserted against Group 1 shall continue [*8]under this index number. Two separate index numbers shall be purchased for Group 2 and Group 3, and two separate actions shall be maintained against Group 2 and Group 3.

CPLR 1002, “Permissive joinder of parties,” allows the combination of parties as plaintiffs or defendants subject to the conditions that (1) the claims must arise from “the same transaction, occurrence, or series of transactions or occurrences,” and (2) a common question of law or fact is presented (see, Stewart Tenants Corp. v Square Industries, Inc., 269 AD2d 246 [1st Dept. 2000]). It is true that CPLR 1002 and its predecessor under the Civil Practice Act have been given an expansive application (see, Akely v Kinnicutt, 238 NY 466 [1924]; Hempstead General Hosp. v Liberty Mut. Ins. Co., 134 AD2d 569 [2nd Dept. 1987]; Alexander, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR 1002; 3 Weinstein-Korn-Miller, NY Civ Prac ¶ 1002.05). One text even states that: “If there is a rational connection between the parties and causes of action, CPLR 1002 is satisfied” (3 Weinstein-Korn-Miller, NY Civ Prac ¶ 1002.05).

However, in the case at bar, each group of defendants operated separately from the other groups, and the plaintiffs did not demonstrate that there is a logical connection between the activities of each that suffices to meet the “same transaction . . . or series of transactions” requirement (see, Mount Sinai Hosp. v Motor Vehicle Accident Indemnification Corp., 291 AD2d 536, 536 [2nd Dept. 2002] [“The Supreme Court providently exercised its discretion in severing the remaining five causes of action, asserting claims on behalf of five unrelated assignees, involved in accidents on five different dates, with no common contract of insurance and no relation or similarity to each other, other than the fact that the no-fault benefits were not paid”]).

The Court notes that combining the multitude of claims by the numerous plaintiffs against three different groups of defendants is likely to cause juror confusion (see, Poole v Allstate Ins. Co., 20 AD3d 518 [3rd Dept. 2005] [severance required in action brought against insurer by assignee of 47 no-fault claims to recover unpaid no-fault benefits for medical services he allegedly provided to 47 different patients]; Radiology Resource Network, P.C. v Fireman’s Fund Ins. Co., 12 AD3d 185 [1st Dept. 2004] [insurer’s motion to sever claims into separate actions properly granted in action brought by medical services provider against insurer to recover on 68 claims for no-fault insurance benefits that provider had been assigned by 68 assignors]; Andrew Carothers, M.D., P.C. v GEICO Indem. Co., 14 Misc 3d 92 [App. T. 2nd Dept. 2007]). Finally, although “[m]isjoinder of parties is not a ground for dismissal of an action,” (CPLR 1003), the Court has the authority to order severances (see, CPLR 1002 & 1003).

In sum, upon the foregoing papers, the following branches of the motions are granted in whole or in part:

1. Those branches of the motions by the Miller defendants, the Pevzner defendants, and the Vainer defendants requesting dismissal of the first cause of action asserted against them pursuant to CPLR 3211(a)(7) are granted to the extent that the first cause of action seeks damages accruing before April 4, 2002;

2. That branch of the motion by the Pevzner defendants seeking dismissal of the plaintiffs’ first cause of action to the extent that it seeks punitive damages is granted;

3. Those branches of the motions by the Miller defendants, the Pevzner defendants, and [*9]the Vainer defendants, pursuant to CPLR 3211(a)(7), seeking dismissal of the second cause of action are granted to the extent that the second cause of action seeks damages accruing before April 4, 2002;

4. That branch of the motion by the Pevzner defendants, requesting dismissal of the first and second causes of action to the extent that they seek damages for payments made before April 4, 2002 is granted;

5. Those branches of the motions by the Miller defendants, the Pevzner defendants, and the Vainer defendants, pursuant to CPLR 3211(a)(7), seeking dismissal of the fifth cause of action are granted; and, finally,

6. That branch of the motion by the Miller defendants seeking severance of mis-joined parties and discontinuing the claims against them is granted to the extent that the Court orders the severance of the causes of action against each group of defendants denominated above as Group 1, Group 2, and Group 3. The causes of action asserted against Group 1 shall continue under this index number. Two separate index numbers shall be purchased for Group 2 and Group 3, and two separate actions shall be maintained against Group 2 and Group 3, i.e., a separate action and index number for Group 2 and separate ones for Group 3.

The plaintiffs are directed to serve separate amended complaints within 40 days of the service of a copy of this order, bearing the date stamp of receipt by the Clerk, with notice of entry.

The remaining branches of the motions are all denied.

The foregoing constitutes the decision and order of the Court.

Hon. Charles J. MarkeyJustice, Supreme Court, Queens County

Dated: July 31, 2009

Long Island City, New York

Appearances:

For the Plaintiffs:

John E. McCormack, P.C., 41 Hilton Ave., Hempstead, NY 11550

For Defendants Bronx Park Medical, P.C., Inwood Hill Medical P.C., Dr. Noel Worrell Howell, Alexander Freed, Innessa Drabkin, Silver Pines Management Corp., Integra CBA Co., Inc., PKH Corp., and Michael Mazur: Lifshutz & Lifshutz, P.C., by Gary Burgoon, 501 Fifth Ave., suite 506, NY, NY 10017

For Defendant Healthbay Medical, P.C.: George T. Lewis, Jr., P.C., 485 Underhill Blvd., suite 101, Syosset, NY 11791

For Defendants Jean D. Miller, D.O., Jean Miller, D.O., P.C., and Acadian Medical P.C.: Kern [*10]Augustine Conroy & Schoppman, P.C., by Douglas M. Nadjari, Esq., 1325 Franklin Ave., Garden City, NY 11530

For Defendants Josh Vainer and SVG MGMT., Inc.: Matthew J. Conroy & Associates, P.C., by Matthew J. Conroy and Maria Campese Diglio, Esqs., 350 Old Country Road, suite 106, Garden City, NY 11530

For Defendants Simon Pevzner, ASPG MGNT., Inc., Veritas Management Corp., Group Square I.S. Ltd., Kritek, Inc., Strob, Inc., and Lokh Corp.: Schlam Stone Dolan, LLP, by Thomas A. Kissane and Samuel L. Butt, Esqs., 26 Broadway, NY, NY 10004

Other Defendants are either Pro Se and/or have not appeared.

[*1]

Civil Court of the City of New York, Queens County, July 27, 2009

APPEARANCES OF COUNSEL

Baker, Sanders, Barshay, Grossman, Fass, Muhlstock & Neuwirth, Mineola (Melissa A. Pirillo of counsel), for plaintiff. Law Office of Teresa M. Spina, Woodbury (John Dupuy of counsel), for defendant.

{**25 Misc 3d at 546} OPINION OF THE COURT

William A. Viscovich, J. [*2]

Due to the similarity of the factual background and legal issues to be determined in these matters, the two cases herein were consolidated for trial purposes before this court. After a pretrial conference, the parties stipulated on the record as follows as to both cases:

1. Plaintiff has established its prima facie case as a matter of law;

2. Defendant has issued timely verification requests to the plaintiff’s attorney;

3. The plaintiff’s attorney responded to those verification requests with identical “compliance letters” in each case.

Also, while not stipulated to on the record, the following facts are undisputed. In the first action (Isabel Graulan), plaintiff submitted one bill totaling $676.98 for supplies rendered to the claimant for date of service August 15, 2007. Along with the bill was a letter from plaintiff’s counsel requesting that any and all verification requests be directed to their office. Defendant timely received this bill on or about August 15, 2007. Thereafter, defendant timely requested from plaintiff’s attorney additional verification on August 24, 2007, with a follow-up request on September 24, 2007, both seeking a narrative report of the patient’s initial consultation from the prescribing/referring physician (specifically, naming one Dr. Goldman).{**25 Misc 3d at 547}

Likewise, in the second action (Cesare Iori), plaintiff timely submitted a bill totaling $372.98 for supplies rendered to the claimant for date of services July 17, 2007 (again with a letter from plaintiff’s attorney requesting that any and all verification requests be directed to their office), which defendant timely received on or about July 25, 2007. Thereafter, defendant timely requested additional verification on August 14, 2007, with a follow-up request made on September 18, 2007 seeking a manufacturer’s invoice documenting the cost of the medical equipment or supplies and proof of payment for the medical equipment or supplies.

In both cases, the plaintiff’s attorney responded to the verification requests after the follow-up letter had been sent. These self-titled “compliance letters” read, in part, as follows:

“Please be advised that the bills, medical reports, assignment of benefits and proof of claim were previously provided with the initial submission of the claim for the above-referenced patient. Be further advised that this response constitutes full compliance with any purported requests and constitutes the provider’s submission of all relevant documents in the provider’s possession. Any further requests should be directed to the party that possesses such other information. Therefore any further requests to this provider are deemed unnecessary and in violation of 11 NYCRR § 65-3.2 (c)” (emphasis added).

A review of the transcript of the proceeding reveals some confusion as to the exact nature of the issues to be decided. Nonetheless, based upon the transcript and the briefs submitted by the parties, the court has determined that the following issues control its decision in these matters:

1. Were defendant’s verification requests proper;

2. If so, were plaintiff’s responses to the defendant’s verification requests sufficient; and [*3]

3. If not, was defendant obligated to respond further to plaintiff in some form to communicate its position that the response was insufficient or could it remain silent?

Discussion of Law

Defendant’s Verification Requests Were Proper

An insurance carrier is permitted to request additional information from a claimant through a proper and timely verification{**25 Misc 3d at 548} request. (See generally 11 NYCRR 65-3.5 [b].) While the materials an insurer may request are not unlimited (see generally 11 NYCRR 65-3.5 [b]), the Insurance Law and regulations clearly outline an insurer’s right to request and receive information necessary to the processing of a provider’s claim for no-fault benefits. Furthermore, “[t]he insurer is entitled to receive all items necessary to verify the claim.” (See 11 NYCRR 65-3.5 [c].) As such, the issue for this court to determine is whether the verification requests in each of these cases were in some way inappropriate or otherwise beyond the scope of a proper verification request.

In the Graulan matter, the insurer requested “a narrative report of the patient’s initial consultation from the prescribing/referring physician (Dr. Goldman).” In the Iori matter, the insurer requested a “manufacturers invoice documenting the cost of the medical equipment or supplies” and “proof of payment for the medical equipment or supplies.” In both cases, the court finds that said requests were reasonable and in accordance with the statutory and regulatory framework of New York State’s no-fault insurance statutes and regulations.

As such, the court must now address the issue of the sufficiency of plaintiff’s responses to the defendant’s verification requests.

In the Graulan Matter, Plaintiff’s Response to Defendant’s Verification Request was Sufficient

In the Graulan matter, the defendant’s reasonable verification request was for “a narrative report of the patient’s initial consultation from the prescribing/referring physician (Dr. Goldman).” The plaintiff’s response, while pro forma, did clearly state that “further requests should be directed to the party that possesses such other information.” In this matter, that party seems to be one Dr. Goldman, who was likely known to the insurer, as evidenced by the doctor’s name being placed on the verification request.

Pursuant to 11 NYCRR 65-3.2 (e) and (f), an insurer is under a duty to “[c]learly inform the applicant” of its position and must “[r]espond promptly . . . to all communications from . . . attorneys,” including responses to verification requests. Indeed, an insurer is required to respond to a response to a verification request, regardless of whether it feels the response is sufficient. (See All Health Med. Care v Government Empls. Ins. Co., 2 Misc 3d 907 [Civ Ct, Queens County 2004, Agate, J.]; Lenox Hill Radiology, P.C. v Allstate Ins. Co., Civ Ct, NY County, 2008,{**25 Misc 3d at 549} Moulton, J., index No. 076/08; Media Neurology, P.C. v Countrywide Ins. Co., 21 Misc 3d 1101[A], 2008 NY Slip Op 51902[U] [Civ Ct, Kings County 2008, Ash, J.].) [*4]

At the very least, given that the response to the verification request was somewhat on point, the defendant should have responded to the verification response as being insufficient. More importantly, however, defendant should have forwarded a verification request to Dr. Goldman, or if it could not locate Dr. Goldman, the defendant should have requested that plaintiff provide contact information for him. Either way, had no response been forthcoming from either Dr. Goldman or plaintiff, this action would be premature and the court would be inclined to dismiss it as such due to the plaintiff’s failure to provide a legitimate verification response.

Given the defendant’s failure to take action on plaintiff’s marginally acceptable verification response, the court finds in favor of the plaintiff in the amount of $676.98 plus statutory interest, attorneys fees and costs and disbursements.

In the Iori Matter, Plaintiff’s Response to Defendant’s Verification Request was Insufficient and as Such Defendant was Not Obligated to Respond Further to Plaintiff in Some Form to Communicate Its Position the Response was Insufficient

Unlike the previous matter, the court finds that plaintiff’s response to the defendant’s request for verification was insufficient. As previously decided herein, the defendant’s verification request for a “manufacturers invoice documenting the cost of the medical equipment or supplies” and “proof of payment for the medical equipment or supplies” was eminently reasonable.

While plaintiff’s response in this matter was identical to the response in the previous matter, it was, at best, vague, disingenuous and totally lacking in any guidance that the defendant could find useful in obtaining the requested information. It contained neither the information requested nor alternative information sufficient to allow the defendant to expedite either payment or denial of the claim. Nor was there any indication, as in Graulan, that defendant might know whom to contact other than the plaintiff.

Here it should be pointed out that the requested items, unlike in the previous case, were likely in the control of, or at least accessible to the plaintiff. This court finds it extremely difficult to believe that plaintiff, with the assistance of counsel, who was basically acting as its billing agent (see Lenox Hill Radiology &{**25 Misc 3d at 550} MIA P.C. v Global Liberty Ins., 20 Misc 3d 434 [Civ Ct, NY County 2008, Bluth, J.], could not obtain either a manufacturer’s invoice or a proof of payment for the items provided. In that case, involving the same plaintiff’s firm, it seems that the response to the verification request therein was identical to the responses contained herein.

Courts have endorsed not only the legal obligation to respond to verification requests, but have distinctly addressed the contractual and professional obligation to likewise respond. In the case of Dilon Med. Supply Corp. v Travelers Ins. Co. (7 Misc 3d 927 [Civ Ct, Kings County 2005]), the court stated that “when a claimant submits bills to an insurer for payment, the claimant, who stands in the shoes of his assignor, must deal in good faith and cooperate with the insurer if it wants to get paid” (id. at 930). The court further outlined a good faith duty with [*5]respect to responses to verification requests, noting that “even if the claimant believes it cannot or need not comply with the insurer’s request, the claimant still has a duty to communicate with the insurer regarding the request” (id. at 931).

While in that case, unlike here, there was no response whatsoever to defendant’s verification request, the plaintiff’s response herein hardly constitutes good faith and is made more unacceptable by the language contained therein that it constituted “full compliance with . . . purported [verification] requests” and that “any further requests to this provider are deemed unnecessary and in violation of 11 NYCRR § 65-3.2 (c).”

As Judge Bluth stated in Lenox Hill Radiology & MIA PC v Government Empls. Ins. Co. (NYLJ, Aug. 27, 2008, at 27, cols 1, 2 [index No. 39CVN 2008]),

“[J]ust because plaintiff’s attorney labeled the letters ‘Verification Compliance’ does not make it so. The label is meaningless; in no way can any literate person possibly construe that letter as complying with the verification request. No verification was supplied. Those letters, which completely ignored defendant’s bona fide requests . . . specifically informed defendant that plaintiff would not be providing whatever information may have been requested. Plaintiff’s attorneys’ self-serving and threatening . . . letters did not call for a response—in fact, by specifically putting the defendant on notice that nothing else would be forthcoming{**25 Misc 3d at 551} and that any further request would be ‘unnecessary and in violation of 11 NYCRR § 65-3.2(c)’—plaintiff’s attorneys instructed defendant not to respond. Moreover, 11 NYCRR § 65-3.2 (f) only requires the insurer to respond when a response is indicated and here, no response was indicated” (emphasis added).

While the court is reluctant to impose this limitation on plaintiffs, given that the history and purpose of New York State’s enactment of the No-Fault Law is to ensure the prompt and expeditious payment of claims (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 284 [1997]), there is a somewhat competing policy concern that an insurer “is entitled to receive all items necessary to verify the claim” (see 11 NYCRR 65-3.5 [c]). Allowing the document submitted by plaintiff to qualify in this matter as a legitimate verification response could encourage no-fault plaintiffs to simply ignore verification requests based upon their own interpretation of what constitutes a valid response. As in this particular matter, they would then be able to provide nonresponsive “verifications” on their own terms, thus enabling them to move matters prematurely into litigation without a full prior vetting of the matter as anticipated by the no-fault statutes.

As such, the complaint in the matter of Custom Orthotics, LTD., as assignee of Cesare Iori v Government Empls. Ins. Co. is dismissed as premature.

Civil Court of the City of New York, Queens County

88511/08

Cheree A. Buggs, J.

Defendant Global Liberty Insurance Company of New York (“defendant”) filed a motion for summary judgment pursuant to Civil Practice Law and Rules (CPLR) § 3212 and § 3211 [a] [7] on grounds that No-Fault Insurance does not cover a claim submitted by plaintiff Corona Comprehensive Medical Care (“plaintiff”). Plaintiff, the assignee of medical benefits of the operator of a for-hire vehicle, filed a $1,333.24 claim for no-fault insurance benefits for medical services provided to the vehicle operator for injuries arising from an automobile accident. Defendant’s contention is that the for-hire vehicle operator was working when the accident occurred on March 20, 2007, and therefore the plaintiff’s claim is payable through Workers’ Compensation Insurance from the New York Black Car Operators’ Injury Compensation Fund and not under the No Fault Insurance Law. Plaintiff opposes the defendant’s motion on several grounds, chief among them are that defendant’s claim is not a lack of coverage defense, and therefore, must be raised in a timely denial; that the defendant failed to show that a timely denial was mailed, or that such denial was mailed in duplicate; and lastly, that the existence of workers’ compensation coverage does not prevent a person from recovering no-fault benefits.

Background

It is undisputed that on March 20, 2007, the plaintiff’s assignor, Maria Cruz Martinezwasinvolved in a vehicular accident. Defendant alleges that the assignor was about to join the livery vehicle passenger pickup line on Broad Street off of Pearl Street in Lower Manhattan when the accident occurred. Plaintiff provided medical services to Ms. Martinez (the nature of which are not specified in any of the papers herein), and as assignee of Ms. Martinez, submitted a claim to the defendant for payment. Defendant insurance company alleges that although a timely denial was not required, a timely denial of claim form (“NF-10”) was issued on June 12, 2007.

[*2]DiscussionThe movant on a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, proffering sufficient evidence to eliminate all material issues of fact from the case (see Winegrad v New York Univ. Med.Ctr., 64 NY2d 851 [1985]).

In support of its motion, defendant has offered the sworn affidavits of Mahmoud Ragab, its Vice President of Underwriting and of Dwight Geddes, its Fault Claims Manager. Mr. Geddes attested that the defendant is a licensed insurance carrier for three categories of vehicles for hire, e.g.,”black car,” luxury and car service vehicles, and is not licensed to insure private vehicles. According to both affidavits, the assignor was a member of Corporate Transportation Group, LTD, CTG/Optimum Car and Limo dispatch, which is a member of the New York Black Car Operators Injury Compensation Fund as required by the New York City Taxi and Limousine Commission and Executive Law § 160-cc, et seq. The affidavits indicate that the plaintiff’s assignor’s license plate number was “T484693C,” and that the “T” and “C” on a New York license plate indicate a for-hire vehicle under the New York City Taxi and Limousine Commission. According to Mr. Ragab’s affidavit, black car operators must be affiliated with a dispatch or base, and the base must provide Workers’ Compensation Insurance if a driver is injured while working.

The New York Black Car Operators’ Injury Compensation Fund is a not-for-profit corporation, which was created by statute in order to ensure that black car operators who are injured while performing duties on behalf of central dispatch facilities receive workers’ compensation benefits. The central dispatch facilities are required to be members of the fund as a condition to obtaining or retaining their licenses (See NY Exec Law § 160-dd, et seq.). Pursuant to NY Executive Law § 160-cc [1], a ” [b]lack car operator’ means the registered owner of a for-hire vehicle, or a driver designated by such registered owner to operate the registered owner’s for-hire vehicle as the registered owner’s authorized designee, whose injury arose out of and in the course of providing covered services to a central dispatch facility that is a registered member of the New York black car operators’ injury compensation fund, inc.” According to Executive Law § 160-cc [4] ” covered services’ means, with respect to dispatches from or by a central dispatch facility located in the state, all dispatches from such central dispatch facility regardless of where the pick-up or discharge occurs, and, with respect to dispatches from or by a central dispatch facility located outside the state, all dispatches involving a pick-up in the state, regardless of where the discharge occurs.”

Defendant alleges that because the vehicle operator was involved in a motor vehicle accident while on duty, plaintiff is entitled to be reimbursed under Workers’ Compensation Insurance from the New York Black Car Operators’ Injury Compensation Fund, and not under the no-fault law. Insurance Law §§5102 [b] and [b][2] state “first party benefits” are payments meant to “reimburse a person for basic economic loss on account of personal injury arising out of the use or operation of a motor vehicle less amounts recovered or recoverable on account of such injury under state or federal laws providing social security disability benefits, or workers’ compensation benefits…” Pursuant to Insurance Law § 5102 [b][2], workers’ compensation benefits “serve as an offset against first-party benefits payable under no-fault as compensation for basic economic loss” (see also Arvatz v Empire Mutual Ins. Co., 171 AD2d 262, 268 [1991]). It is solely within the jurisdiction of the Workers’ Compensation Board to determine whether claimed injuries occurred while in the course of one’s employment (see Liss v Trans Auto Sys., 68 NY2d 15 [1986]; O’Rourke v Long, 41 NY2d 219 [1976]; O’Hurley-Pitts v Diocese of Rockville Centre, 57 AD3d 633 [2008]; [*3]Mattaldi v Beth Israel Med. Ctr., 297 AD2d 234, 235 [2002]). Workers’ Compensation Law § 142 [7] states that “[w]here there has been a motor vehicle accident which caused personal injury and there is a dispute as to whether the injury occurred in the course of employment, the Workers’ Compensation Board shall … hold an expedited hearing … whether the accident occurred within the course of employment”. (See also Jing Huo Lac v American Transit Ins. Co., 19 Misc 3d 1146[A], 2008 NY Slip Op 51177 [U] [Civ Ct, Richmond County 2008].)

Further, the defendant alleges that even if the plaintiff’s claim was not timely denied, the absence of such timely denial would not bar the defense of lack of coverage based upon the Workers’ Compensation Law, and there would be no need for the defendant insurer to issue a timely denial (see Hosp. For Joint Diseases v Travelers Prop. Cas. Ins., 9 NY3d 312, 318 [2007]; Central Gen. Hosp. v Chubb Group of Ins. Co., 90 NY2d 195 [1997]).

However, defendant’s contention that there was a valid lack of coverage defense to the plaintiff’s claim based upon workers’ compensation being the “primary” provider of benefits in the instant matter is misplaced, since the Second Department has held to the contrary. An argument of workers’ compensation being primary is not deemed to be a lack of coverage defense, but rather, a statutory offset subject to preclusion if not timely raised (see Westchester Med. Ctr. v Lincoln Gen. Ins. Co., 60 AD3d 1045 [2009]).

In accordance with Insurance Law and regulations, an insurer has thirty days from the receipt

of a claim to either pay or deny the claim (see Insurance Law §5106 [a];11 NYCRR 65-3.8 [c]). Inasmuch as defendant’s principal focus in the matter herein is the workers’ compensation issue, with a presumption that such issue constitutes a lack of coverage defense, it failed to submit admissible proof that the denial was actually mailed. Although defendant contends that it issued a timely denial, it has not proffered an affidavit from an employee with either actual knowledge of the mailing of the NF-10 denial of claim form or from an employee familiar with standard office practices and procedures, which would be sufficient to establish mailing (see New York & Presbyterian Hosp. v Allstate ins. Co., 30 AD3d 492 [2006], Ying Eastern Acupuncture v Global Liberty Ins., 20 Misc 3d 144 [A], 2008 NY Slip Op 51863 [U] [App Term, 2d & 11th Jud Dists 2008]; cf. St. Vincent’s Hosp. v Geico, 50 AD3d 1123, 1124 [2008]; Midisland Med., PLLC v Allstate Ins. Co., 20 Misc 3d 144 [A], 2008 NY Slip Op 51861 [U] [App Term, 2d & 11th Jud Dists 2008].) In his affidavit, defendant’s claims manager, Mr. Geddes attested to the receipt of mail/claims and processing of claims, but failed to attest to when the denial was mailed or what the standard office practices are regarding actual mailing. Therefore, defendant has not presented evidence that the workers’ compensation defense was preserved in a timely denial.

Although in the case at bar, the defendant has proffered some admissible evidence regarding the workers’ compensation defense, in the absence of proof of the defendant’s mailing of a timely denial based upon this defense, the Court cannot address whether there is “potential merit” of its claim that the plaintiff’s assignor, Ms. Martinez, was acting within the course of her employment at the time of the accident (see A. B. Med. Servs., PLLC v American Transit Ins. Co., 8 Misc 3d 127 [A], 2005 NY Slip Op 50959 [U] [App Term 2d & 11th Jud Dist 2005]; Lenox Hill Radiology, P.C. v American Transit Ins. Co., 18 Misc 3d 1136 [A], 2008 NY Slip Op 50330 [U] [Civ Ct, New York County 2008]).

Based upon the foregoing, the Court finds that the defendant has failed to meet the required prima facie showing of entitlement to judgment as a matter of law to support its summary judgment [*4]motion. Consequently, defendant’s motion for summary judgment is denied in its entirety.

This constitutes the decision and order of this Court.

____________________________________________________________________

Date““““““Hon. Chereé A. Buggs

Judge, Civil Court

Supreme Court, Queens County

230912008

Allan B. Weiss, J.

Upon the foregoing papers it is ordered that the motion is determined as follows:

Plaintiff, a provider of automobile insurance policies which include coverage under the Comprehensive Automobile Insurance Reparations Act (the No-Fault Law) (presently codified in article 51 of the Insurance Law), commenced this action to recover damages for common-law fraud and unjust enrichment, and for a judgment declaring that the plaintiff has no obligation to pay no-fault claims submitted by the professional corporation defendants as assignees of policyholders. Plaintiff alleges, among other things, that defendant professional services corporations were fraudulently incorporated in the name of defendant Manuel Farescal, M.D., a physician, while, in fact, the professional corporations were owned, operated, and controlled by defendants Adnan Munawar and P. Clifford LoBrutto, unlicensed persons, in violation of applicable statutes and regulations. Plaintiff also alleges defendant professional corporations are not, and were not, entitled to receive such payments because they are not owned and controlled solely by a licensed medical physician and the services provided were not rendered by employees but, rather, by independent contractors in violation of state law (see State Farm Mut. Auto. Ins. Co. v Robert Mallela, 4 NY3d 313 [2005]; One Beacon Ins. Group, LLC v Midland Medical Care, P.C., 54 AD3d 738 [2008]).

In the third cause of action of the complaint, plaintiff alleges that defendants All Family and [*2]Universal billed it under the No-Fault Law for professional health services provided by independent contractors having no employment relationship with the respective defendants, and in the fourth cause of action, plaintiff alleges that defendant Painpro likewise billed it under the No-Fault Law for professional health services provided by independent contractors having no employment relationship with defendant Painpro. Plaintiff also alleges that these defendant professional corporations are not legally entitled to collect payment for no-fault benefits for professional health services not actually provided by an employee of defendants All Family, Universal and Painpro, respectively. Plaintiff further alleges that it is entitled to a declaration that it is not obligated to pay defendants All Family, Universal and Painpro no-fault benefits for charges submitted to it where professional health services were rendered by independent contractors.

The Farescal defendants and defendant P. Clifford LoBrutto each served an answer denying the material allegations of the complaint, and asserting various affirmative defenses.

It is well established that the proponent of a summary judgment motion “must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact,” (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; Zuckerman v City of New York, 49 NY2d 557 [1980]).

To the extent the Farescal defendants move for partial summary judgment declaring that six opinion letters authored by the Insurance Department are irrational and not entitled to deference, the Farescal defendants have failed to assert any counterclaim for such affirmative relief.

Furthermore, a ruling, in the context of this case, that the opinion letters are irrational and not entitled to deference would constitute an advisory opinion. A state court lacks subject matter jurisdiction in cases when no justiciable controversy is presented (see Matter of New York State Inspection, Security & Law Enforcement Employees, Dist. Council 82, AFSCME, AFL-CIO v Cuomo, 64 NY2d 233, 241, n 3 [1984]; Morrison v Budget Rent A Car Systems, Inc., 230 AD2d 253, 258-259 [1997]). It is well settled law that “[t]he courts of New York do not issue advisory opinions for the fundamental reason that in this State [t]he giving of such opinions is not the exercise of the judicial function’ (Matter of State Indus. Commn., 224 NY 13, 16 [1918]) . . .,” (Cuomo v Long Island Light Co., 71 NY2d 349, 354 [1988]).

Any ruling by the court herein regarding the opinion letters would not be dispositive of a cause of action asserted by plaintiff (see New York Pub. Interest Research Group v Carey, 42 NY2d 527, 531 [1977]; State Farm Fire & Cas. Co. v LiMauro, 103 AD2d 514, 517-518 [1984], affd 65 NY2d 369 [1985]; see generally Joint Queensview Housing Enterprise, Inc. v Grayson, 179 AD2d 434 [1992] [advisory opinion letters did not constitute final determinations of tax liability by city for purposes of article 78 proceeding, and cooperatives were not aggrieved by advisory opinion letters so as to make controversy ripe for judicial determination]; see also Matter of New York State Assn. of Life Underwriters v New York State Banking Dept., 190 AD2d 338 [1993], affd 83 NY2d 353 [1994] [article 78 proceeding to annul opinion letters and to declare that the sale of annuities is not an “incidental power” contemplated by Banking Law § 96(1)]; cf. Medical Society of State v Serio, 100 NY2d 854 [*3][2003] [article 78 proceeding to annul regulation altering no-fault system]). Nothing about the opinion letters themselves constitutes a final determination by the State regarding the propriety of plaintiff’s actions, and the Farescal defendants are not aggrieved by their issuance. Rather, the question of whether plaintiff properly may withhold payments of no-fault benefits to defendants All Family, Universal and Painpro in instances where professional health services were rendered by independent contractors, as opposed to their employees, is one of law, which must be decided based upon interpretation of statute and regulation, and case law.

“In matters of statutory and regulatory interpretation, legislative intent is the great and controlling principle, and the proper judicial function is to discern and apply the will of the [enactors]’ (Matter of ATM One v Landaverde, 2 NY3d 472, 476-477 [2004], quoting Mowczan v Bacon, 92 NY2d 281, 285 [1998] [internal quotation marks omitted]). Legislative intent may be discerned from the face of a statute, but an apparent lack of ambiguity is rarely, if ever, conclusive . . . . Generally, inquiry must be made of the spirit and purpose of the legislation, which requires examination of the statutory context of the provision as well as its legislative history’ (Matter of Sutka v Conners, 73 NY2d 395, 403 [1989]; see Matter of ATM One v Landaverde, 2 NY3d at 477; Mowczan v Bacon, 92 NY2d at 285). Moreover, regulations . . . should be construed to avoid objectionable results’ (Matter of ATM One v Landaverde, 2 NY3d at 477)” East Acupuncture, P.C. v Allstate Ins. Co., AD3d , 873 NYS2d 335 [2009]). Such interpretation may also be informed by opinion letters regarding the interpretation of applicable regulations, issued by the agency which promulgated them, so long as the interpretation comports with the statute and is not irrational or unreasonable (see generally LMK Psychological Services, P.C. v State Farm Mut. Auto. Ins. Co., 12 NY3d 217 [2009]; Matter of Council of City of NY v. Public Service Comm., 99 NY2d 64, 74 [2002]; 90 NY2d 545, 551-552 [1997]). Thus, that branch of the motion by the Farescal defendants for partial summary judgment declaring the six opinion letters authored by the Insurance Department to be irrational and not entitled to deference is denied.

The Farescal defendants seek partial summary judgment dismissing the third and fourth causes of action on the ground they fail to state a claim. The Farescal defendants assert an insurer may not deny payment for no-fault benefits on the ground that the professional health services billed to plaintiff were performed by independent contractors. The Farescal defendants, therefore, argue plaintiff cannot obtain a judgment declaring that defendants All Family, Universal and Painpro are not entitled to collect no-fault benefits for charges submitted to it when such professional health services were rendered by independent contractors. The court notes that the Farescal defendants make no factual argument that the professional health services billed to plaintiff were performed by their employees, or that they exercised a particular level of control over the independent contractors. Their motion raises purely legal arguments regarding the propriety of plaintiff’s withholding of payments to the professional corporations based upon the rendering of services by independent contractors.

CPLR 3001, in relevant part, provides: “The supreme court may render a declaratory judgment having the effect of a final judgment as to the rights and other legal relations of the parties to a justiciable controversy whether or not further relief is or could be claimed.” “An action is [*4]justiciable when the controversy presented touches the legal relations of the parties having adverse interests from which harm is presently flowing or could flow in the future in the absence of a court determination of the parties’ rights” (Initiative For Competitive Energy v Long Is. Power Auth., 178 Misc 2d 979, 989 [1998]). “The controversy must be capable of disposition and be presented in an adversarial context with a set of concrete facts” (Goodwill Adv. Co. v State Liq. Auth., 14 AD2d 658 [1961]). The complaint herein demonstrates the existence of a controversy between the parties regarding plaintiff’s withholding of payments to defendant professional corporations to the extent the services were rendered by independent contractors, and the practical need for its resolution.

The No-Fault Law, which supplants common-law tort actions for most victims of automobile accidents with a system of no-fault insurance, has as its primary aims to ensure prompt compensation for losses incurred by accident victims without regard to fault or negligence, to reduce the burden on the courts and to provide substantial premium savings to New York motorists (see Medical Society of State v Serio, 100 NY2d 854, 860 [2003]). The Superintendent has promulgated regulations implementing the No-Fault Law, currently contained in 11 NYCRR Part 65. Section 65-3.11(a) of that part (formerly section 65.15[j][1]), in relevant part, provides, “An insurer shall pay benefits for any element of loss, . . ., directly to the applicant or . . . upon assignment by the applicant . . ., shall pay benefits directly to providers of health care services . . . .”

11 NYCRR 65-3.11(a) and its precursor, 11 NYCRR 65-3.15(j)(1), have been interpreted to mean that a medical provider cannot recover assigned no-fault benefits if services were provided by an independent contractor rather than by it or its employees (see Health & Endurance Medical, P.C. v Liberty Mut. Ins. Co., 19 Misc 3d 137[A], 2008 NY Slip Op 50864(U) [NY Sup App Term, 2d and 11th Jud Dists (2008)]). In Health & Endurance, a provider sought to recover assigned first-party no-fault benefits for services which were not rendered by it or its employees, but rather by a treating provider who was an independent contractor. The Appellate Term held that the plaintiff was not a “provider” of the medical services rendered within the meaning of Insurance Department Regulations (11 NYCRR) § 65-3.11[a]), and, therefore, was not entitled to recover “direct payment” of assigned no-fault benefits from the defendant insurer. Such holding is consistent with the holdings in A.M. Medical Services, P.C. v Progressive Cas. Ins. Co., (22 Misc 3d 70, 2008 NY Slip Op 28528, [App Term, 2d, 11th and 13th Jud Dists (2008)]); Health & Endurance Med. P.C. v State Farm Mut. Auto. Ins. Co., (12 Misc 3d 134[A], 2006 NY Slip Op 51191[U] [App Term, 2d and 11th Jud Dists 2006]); Craig Antell, D.O., P.C. v New York Cent. Mut. Fire Ins. Co., (11 Misc 3d 137[A], 2006 NY Slip Op 50521[U] [App Term, 1st Dept 2006]); Rockaway Blvd. Medical P.C. v Progressive Ins., (9 Misc 3d 52, 2005 NY Slip Op 25278 [App Term, 2d Dept 2005]); A.B. Med. Servs. PLLC v Liberty Mut. Ins. Co., (9 Misc 3d 36 [App Term, 2d and 11th Jud Dists 2005]); A.B. Med. Servs. PLLC v New York Cent. Mut. Fire Ins. Co., (8 Misc 3d 132[A], 2005 NY Slip Op 51111[U] [App Term, 2d and 11th Jud Dists 2005]). These opinions of the Appellate Term are persuasive authority, and the court is convinced of their reasoning. Under such circumstances, the third and fourth causes of action asserted by plaintiff state viable claims for declaratory relief. [*5]

That branch of the motion by the Farescal defendants for summary judgment dismissing the third and fourth causes of action asserted against them is denied.

Dated: May 13, 2009

J.S.C.

Supreme Court, Queens County

15958 2007

Charles J. Markey, J.

This motion is determined as follows:

This Court’s order of June 27, 2008, is recalled and the following is substituted in its place:

The Court’s records reveal that defendant Rosillo & Licata, P.C. (sued herein as Rosillo & Licata) originally moved on October 29, 2007, to dismiss the complaint and that the motion was adjourned to November 8, 2007, at which time the motion was granted as plaintiff’s counsel stated that he had no opposition to the motion to dismiss. Clearly, there was a misunderstanding as to the status of said motion, as the parties had entered into a stipulation dated November 7, 2007, whereby they adjourned said motion on consent until December 3, 2007, and agreed that plaintiff’s opposition papers were to be received by opposing counsel on or before November 19, 2007, and the defendant’s reply was to be served on or before November 30, 2007. Although the stipulation was filed with the court on November 8, 2007, pursuant to the parties’ agreement, the court was unaware of the stipulation at the time the motion calendar was called.

In view of the fact that the court was not timely apprised of the parties’ November 7, 2007 stipulation, and as it is preferable to determine the motion to dismiss on the merits, the order of November 8, 2007, is hereby vacated, and the prior motion shall now be determined on the merits.

Defendant Rosillo & Licata, in its prior motion seeks an order dismissing the complaint on the grounds of documentary [*2]evidence and failure to state a cause of action, pursuant to CPLR 3211(a)(1)and (7).

On December 7, 2003, Justice Paitou (or Paitoo) was in the process of removing an item from the trunk of his vehicle when he was struck by a motor vehicle operated by Bakary Sow. Mr. Paitou sustained serious injuries, including the amputation of his right leg.

Defendant Rosillo & Licata, P.C. was retained by Mr. Paitou with respect to his claim for personal injuries against Mr. Sow’s insurer, American Transit Insurance Company (“American Transit”). The court notes that although plaintiff in its complaint alleges that the accident occurred on December 9, 2003, the documentary evidence submitted herein indicates that the accident occurred on December 7, 2003. The court also notes that the documentary evidence submitted herein identifies the injured individual as Justice Paitoo. However, for the purposes of this motion the court will use the spelling of Paitou as set forth in the complaint and the affidavit of Mr. Licata.

Joseph Licata, Jr., states in his affidavit that Mr. Paitou informed him that he was self-employed and not working in the course of his employment at the time of the accident, and that his client so “affirmed” his employment status in his application for No-Fault benefits. Mr. Licata states that during the time Mr. Paitou’s claim against Mr. Sow’s insurer was pending, he was not informed or made aware that Paitou had applied for Worker’s Compensation benefits, and he relied upon Mr. Paitou’s statements concerning his employment. Mr. Licata states that during the course of his negotiations with American Transit, medical reports and records were exchanged regarding Mr. Paitou’s injuries and that no claim was made for economic damages or loss of income. He further states that although his law firm inquired as to the existence of any applicable excess insurance, American Transit informed him that no such coverage existed. Rosillo & Licata also hired an investigator regarding Mr. Sow and it was determined that Sow did not have any personal assets.

On July 1, 2004, Rosillo & Licata settled Mr. Paitou’s claim against Mr. Sow for $100,000.00, the full amount of the policy maintained by American Transit, and executed a general release. Mr. Paitou received $67,000.00 and Rosillo & Licata received attorney’s fees of $33,000.00, equaling one-third of the settlement.

Marcus Francis, a claims representative for Hereford Insurance Company (Hereford), in a letter dated July 15, 2004 and addressed [*3]to Rosillo & Licata, stated that Hereford is the insurer for Norman Hacking Corp. for Worker’s Compensation insurance, and asserted a continuing lien against any recovery for injuries or damages arising out of an occurrence on December 7, 2003. This letter identifies the employer as Norman Hacking Corp. and the claimant as Justice Paitou. Mr. Licata states in his affidavit that he received Mr. Francis’ letter in August 2004, and that in his conversations with Mr. Francis he informed him that Mr. Paitou’s claim against Mr. Sow had been settled; that Mr. Paitou had received payment; and that as the claim was for serious injury, the lien should be waived, as it amounted to non-economic injury. He stated that he did not hear from Hereford again until it commenced this action on June 22, 2007.

In the within action, Hereford seeks to recover the full amount of a statutory lien, in the sum of $198,926.00, pursuant to Worker’s Compensation Law section 29. Hereford alleges in its complaint that it issued a Worker’s Compensation Insurance policy to Sofi Hacking Corporation (“Sofi”); that on December 9 [sic], 2003, Justice Paitou was an employee of Sofi and that he sustained personal injuries during the course of his employment while removing an object from the trunk of his vehicle when he was struck by a vehicle driven by Bakary Sow.

Plaintiff alleges that Sofi filed a C-2 “Employer’s Report of Injury/Illness” dated December 17, 2003 with the Worker’s Compensation Board; that the claim was assigned an index number; that at a Worker’s Compensation Board hearing held on February 25, 2005, it was determined that Mr. Paitou had a work related injury to his right leg and that his average weekly wage for the year worked prior to his work related injury was $250.00; that the Board directed the claimant to “produce proof of consent to settle third party action and closing statement from third party action”; and that no further action was taken by the Worker’s Compensation Board. It is alleged that Hereford paid medical and indemnity benefits to Mr. Paitou or his medical providers, totaling $296,904.88. Hereford further alleges in its complaint that Mr. Paitou, through his counsel Rosillo & Licata commenced a third-party personal injury action in the Supreme Court.

The documentary evidence submitted herein includes a form entitled “Employer’s Report of Work-Related Accident/Occupational Disease” which was filed with the Worker’s Compensation Board identifies Mr. Paitou’s employer as Norman Hacking Corp., states that the nature of the business is a medallion taxi lease, and states that injured person (Mr. Paitou) is a “TAXI DRIVER SELF CONTRACTOR.” The Worker’s Compensation Board’s notice of decision, identifies the claimant as Justice Paitoo, his employer as Sofi [*4]Hacking Corp., and the carrier as Hereford Insurance Company.

A health insurance claim form which states that services were rendered at Lincoln Hospital lists the “insurance plan name or program name” as HEREFORD INS CO (WC/NO FAULT),” but does not include the name of an employer. Other medical charges generated by New York Presbyterian Hospital lists the insured as Justice Paitoo, the “group name” as “SOFFIES CAB CO,” and the payer as “Hereford Insurance Co.”

The Worker’s Compensation Board issued a notice of decision, filed on March 3, 2005, which states as follows:

“At the Worker’s Compensation hearing held on 2/25/05 involving the claim of Justice Paitoo at the Yonkers hearing location, Judge Gail Watson made the following decision, findings and directions:”

“DECISION: The claimant Justice Paitoo had a work related injury to his right leg. The claimant’s average weekly wage for the year worked before this work related injury or occupational disease is determined to be $250.00 per week per C-8 without prejudice.”

“Claimant to produce proof of consent to settle third party action and closing statement from third party action.”

“No further action pending same. No further action is planned by the Board at this time.”

This decision identified Mr. Paitou’s employer as Sofi Hacking Corp., and the compensation carrier as Hereford.

A second Notice of Decision filed on June 20, 2005 states that a Worker’s Compensation hearing was held on June 14, 2005, and that Mr. Paitou was directed to “produce proof of settlement with consent and closing statement for 3rd party action. No further action is planned by the Board at this time.”

A third Notice of Decision filed on July 27, 2005 states that at the hearing held on July 21, 2005, “Claimant did not appear to pursue the claim. Claimant has not yet produced proof of consent to settle his 3rd party action. No further action is planned by the Board at this time.”

There is no evidence that the Worker’s Compensation Board awarded Mr. Paitou benefits arising out of the December 7, 2003 accident. Therefore, Hereford’s claimed lien only pertains to the settlement paid by the insurance carrier who insured the vehicle operated by Mr. Sow. Although Hereford alleges in its complaint [*5]that a third-party action was commenced in the Supreme Court, no evidence has been submitted which establishes that an action was ever commenced by Rosillo & Licata, or any other law firm or attorney, on behalf of Mr. Paitou pertaining to the December 7, 2003 accident. It therefore appears that Mr. Paitou’s claim against the insurer of Mr. Sow’s vehicle, American Transit, was settled without the commencement of an action, for the sum of $100,000.00, the full value of that insurance policy. It is undisputed that Mr. Paitou received $67,000.00 and that Rosillo & Licata received a legal fee equal to $33,000.00, which represented one-third of the settlement.

Contrary to Rosillo & Licata’s claim herein, Hereford’s complaint does not assert a cause of action for negligence as regards this defendant. Rather, plaintiff seeks to enforce a statutory lien against both Rosillo & Licata and Mr. Paitou, pursuant to Worker’s Compensation section 29. Worker’s Compensation Law section 29(1) provides that a workers’ compensation carrier is entitled to be reimbursed for all indemnity and medical benefits paid up to the date of the third party action recovery, whether that recovery is by way of settlement or judgment, “after deduction of the reasonable and necessary expenditures, including attorney’s fees, incurred in effecting such recovery.” Plaintiff thus may not seek to enforce a lien pursuant to Worker’s Compensation Law section 29 against Rosillo & Licata based upon the settlement of the claim and the payment of said law firm’s attorney’s fees.

The Court makes no determination at this time as to the amount of the lien plaintiff may seek against Mr. Paitou, as neither plaintiff nor Mr. Paitou have made a cross motion seeking such relief. The court further notes that as counsel for Rosillo & Licata does not represent Mr. Paitou in this action, counsel may not assert any arguments on his behalf.

In view of the foregoing, defendant’s motion to dismiss the complaint is granted, and the complaint is dismissed with prejudice as to both the moving defendant Rosillo & Licata and Justice Paitou.

Dated: January 13, 2009J.S.C.