Supreme Court, Queens County

13672/07

Orin R. Kitzes, J.

The following papers numbered 1 to 11 read on this motion by plaintiff for an order pursuant to CPLR 3212 granting plaintiff partial summary judgment in its favor and against defendants on the first, second, third, fifth, sixth, seventh, eighth, ninth, and tenth causes of action for a money judgment in the amount of sixty one thousand two hundred seventy five dollars and seven cents with interest from the respective reimbursement dates; and cross-motion by defendants for an order pursuant to CPLR 3212 granting defendants ASTORIA MEDICAL SERVICES PC, NORTHERN MEDICAL SERVICES PC., PRECISE MEDICAL DIAGNOSTICS PC, and NY MEDICAL & DIAGNOSTIC PC summary judgment in their favor and dismissing the complaint as against defendants ASTORIA MEDICAL SERVICES PC, NORTHERN MEDICAL SERVICES PC., PRECISE MEDICAL DIAGNOSTICS PC, and NY MEDICAL & DIAGNOSTIC PC; and for an order pursuant to CPLR 3124 directing plaintiff to respond to defendants’ written interrogatories, notice for discovery and inspection, and to produce a witness for deposition.

Upon the foregoing papers it is ordered that the motions are decided as follows:

This action seeks recoupment of payments made by Utica National Insurance Group (“Utica”) to defendant Arthur Luban M.D. (“Luban”) and the defendant professional corporations ostensibly owned by Luban. (the “Defendant Entities”). The payments made by Utica were made pursuant to New York’s No-fault law for treatment and services allegedly provided by Luban and the Defendant Entities to automobile accident victims covered under the No-fault provisions of [*2]Utica automobile liability insurance policies. According to plaintiff, Arthur Luban M.D. and the defendant entities were not eligible to receive the No-fault payments they took from Plaintiff Utica National Insurance Group under section 5102(a)(1) of the Insurance Law, because the Defendants did not meet the New York State licensing requirements of Section 1503(a) of New York Business Corporation Law which requires that only persons licensed to practice medicine may own and control a medical professional corporation. Plaintiff claims that it paid bills and invoices from Providian Medical P.C. in the amount of $29,998.12, from Harbor Medical Diagnostic P.C. in the amount of $2,647, Valiant Medical Services in the amount of $4,321.06, Vital Medical Care in the amount of $23,308.75 and Bay Medical Services in the amount of $1,000. These were entities which operated in Queens and Kings County as professional service corporations ostensibly owned and controlled by Arthur Luban and allegedly established to provide medical goods and services to, among others, New York patients injured in automobile accidents.

Plaintiff has now moved for partial summary judgment to recover the $61,275.07 it paid directly to these entities for medical services, with interest from the respective reimbursement dates. Defendants have opposed this motion. It is axiomatic that the Summary Judgment remedy is drastic and harsh and should be used sparingly. The motion is granted only when a party establishes, on papers alone, that there are no material issues and the facts presented require judgment in its favor. It must also be clear that the other side’s papers do not suggest any issue exists. Moreover, on this motion, the court’s duty is not to resolve issues of fact or determine matters of credibility but merely to determine whether such issues exist. See, Barr v. County of Albany, 50 NY2d 247 (1980); Miceli v. Purex, 84 AD2d 562 (2d Dept. 1981); Bronson v March, 127 AD2d 810 (2d Dept. 1987.) Finally, as stated by the court in Daliendo v Johnson, 147 AD2d 312,317 (2d Dept. 1989), “Where the court entertains any doubt as to whether a triable issue of fact exists, summary judgment should be denied.”

In support of its motion, plaintiff has submitted a series of Consent and Decree Orders defendant Luban, who was registered as the sole owner and shareholder of the Defendant entities, entered into with the New York Department of Health, State Board for Professional Misconduct. In sworn filings, defendant Luban admitted that he did not in fact control the defendant entities which were instead controlled by persons who were not licensed to practice medicine, relegating Luban to the role of owner in name only. The New York Department of Health, State Board for Professional Misconduct concluded, and Luban in his admissions acknowledged, that these facts were all in contravention of Article 15 of the New York Business Corporation Law, including Section 1503(a), which requires that only persons licensed to practice medicine may own and control a medical professional corporation.

Plaintiff has also submitted a copy of the Uni Claims Payment History of Utica National Insurance Group and the Affidavit of Utica SIU Investigator Wendy Tiffin. This evidence show that plaintiff has paid certain of the Luban entities $61,275.07 since the April 4th, 2002 enactment of 11 NYCRR § 65-3.16(a)(12).

Defendants claim that plaintiff’s submissions have not established that any of the Defendant entities was fraudulently incorporated and that consequently, plaintiff’s motion should be denied. Defendants point out that neither plaintiff’s counsel nor Wendy Tiffin, Plaintiff’s Special Investigative Unit Investigator, has any personal knowledge of any relevant facts. [*3]Furthermore, defendants claim that the Consent Agreements and Orders do not support plaintiff’s claims. According to defendants, the Consent Agreements, executed by Dr. Luban as the sole shareholder of the P.C.s, state that the Respondents do not contest the allegations and specifications in the statements of charges. However, the Respondents did not admit anything, in fact, defendants point out that at paragraph E in the Factual Allegations in the Statements of Charges sets forth that persons who were not licensed to practice medicine were instrumental in controlling the Respondents, including, but not limited to, “hiring and supervising professional staff, accessing bank accounts, disbursing funds, and otherwise handling banking and financial affairs.” Defendants claim that these admissions do not rise to the level of control by unlicensed persons that would invalidate payments to Defendant entities.

Defendants also point out that in the matters of the seven entities whose Certificates of Incorporation were revoked on consent, the Consent Agreements And Orders specifically provide: “…that pursuant to Article 10 of the Business Corporation Law, the Respondent will be permitted to wind up all of its affairs, including, but not limited to, collection of outstanding accounts receivable, notwithstanding this revocation…”. According to defendants, this indicates that the State Board for Professional Medical Conduct agreed that these seven (7) P.C.s could continue to collect outstanding receivables. Apparently, arguing that these receivables included money paid by plaintiff. Defendants also claim that plaintiff’s submission of the Uni-Claims Payment History is deficient in that it does not even identify the patients-assignors, nor any other details, i.e., the treating doctor, services performed, nor that payments were made on dates which the defendant entities were in violation of the ownership rules.

Provisions of the no-fault law require insurers to reimburse patients or their medical provider assignees for “basic economic loss” (Insurance Law § 5102[a][1]). A provider of healthcare services is not eligible for reimbursement, however, “if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such service in New York” (11 NYCRR 65-3.16[a][12]). The Court of Appeals has interpreted 11 NYCRR 65-3.16(a)(12) to allow insurance carriers to withhold reimbursement for no-fault claims from fraudulently licensed medical corporations and to “look beyond the face of licensing documents to identify willful and material failure to abide by state and local law” State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 (2005.) 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]).

In State Farm Mut. Auto. Ins. Co. v Mallela, supra, the court found that the complaint did not clearly indicate, one way or the other, whether plaintiff had paid money to defendants after the amended regulation took effect. As such, the Court declined to consider whether State Farm could recover money already paid out under theories of fraud or unjust enrichment. This Court is presented with a complaint that clearly seeks to recover money paid to defendants who had failed to meet the applicable state licensing requirements, which prohibit non-physicians from owning or controlling medical service corporations. This Court finds that, under the reasoning of State Farm Mut. Auto. Ins. Co. v Mallela, supra, and its progeny, [see First Help Acupuncture P.C. v State Farm Ins. Co., 12 Misc 3d 130(A),(2006); see also Allstate Ins. Co. v Belt Parkway Imaging, P.C., 33 AD3d 407 (2006); see generally Metroscan Imaging P.C. v GEICO Ins. Co., [*4]13 Misc 3d 35,(2006.)] and the applicable state regulations, it is appropriate to allow the insurance carrier to recover money already paid out to ineligible recipients.

Here, the evidence presented by the plaintiff established, prima facie, its entitlement to summary judgment on its first, second, third, fifth, sixth, seventh, eighth, ninth, and tenth causes, as those actions relate to defendants Providian Medical P.C., Harbor Medical Diagnostic P.C., Valiant Medical Services, Vital Medical Care, and Bay Medical Services. Plaintiff has established that these defendants violated 11 NYCRR § 65-3.16(a)(12) by receiving money from plaintiff when they were ineligible for reimbursement from plaintiff for No-fault benefits. Plaintiff has failed to show any proof that the other defendants received such payments or controlled defendants Providian Medical P.C., Harbor Medical Diagnostic P.C., Valiant Medical Services, Vital Medical Care, and Bay Medical Services. Consequently only defendants Providian Medical P.C., Harbor Medical Diagnostic P.C., Valiant Medical Services, Vital Medical Care, and Bay Medical Services are obligated in damages to plaintiff for payments of $61,275.07 issued to these defendants subsequent to April 4th, 2002.

Contrary to defendants claim, Dr. Luban signed numerous Consent and Decree Orders, that established he was in violation of New York Education Law Section 6530(12) and of Article 15 of the New York Business Corporation Law, including Section 1503(a), which requires that only persons licensed to practice medicine may own and control a medical professional corporation. Whether Dr. Luban had actual intent to defraud at the time of incorporation is immaterial to the issue of whether the defendants were entitled to reimbursement where non-physicians were in control of and running the entities thus failing meet the state licensing requirements. All that must be established is that Dr. Luban was not in control of the Professional Corporation at the time the services were rendered. The consent decrees establish this lack of control. Furthermore, the references in the consent decrees to defendants’ being able to wind up and collect receivables are not an indication that the entities could collect for medical services. Clearly these entities could have been owed money for other than prohibited work and the decrees afforded the opportunity to collect for such work, while closing down pursuant to the Consent Decrees. Consequently, defendants Providian Medical P.C., Harbor Medical Diagnostic P.C., Valiant Medical Services, Vital Medical Care, and Bay Medical Services. were not entitled to reimbursement for the services rendered and are obligated to repay plaintiff for the amounts paid. Accordingly, the plaintiff’s motion for partial summary judgment is granted to the extent that judgment on its first, second, third, fifth, sixth, seventh, eighth, ninth, and tenth causes in favor of plaintiff and against defendants Providian Medical P.C., Harbor Medical Diagnostic P.C., Valiant Medical Services, Vital Medical Care, and Bay Medical Services is granted. State Farm Mut. Auto. Ins. Co. v Mallela, supra. The action shall proceed on the remaining causes of action.

Based on the above, the branch of the cross-motion by defendants for an order pursuant to CPLR 3212 granting defendants ASTORIA MEDICAL SERVICES PC, NORTHERN MEDICAL SERVICES PC., PRECISE MEDICAL DIAGNOSTICS PC, and NY MEDICAL & DIAGNOSTIC PC summary judgment in their favor and dismissing the complaint as against defendants ASTORIA MEDICAL SERVICES PC, NORTHERN MEDICAL SERVICES PC., PRECISE MEDICAL DIAGNOSTICS PC, and NY MEDICAL & DIAGNOSTIC PC, is granted to the extent that the first, second, third, fifth, [*5]sixth, seventh, eighth, ninth, and tenth causes are dismissed as against these defendants. The branch of the defendants motion seeking discovery is granted. Discovery shall proceed regarding the remaining causes of action. Plaintiff shall respond to defendants’ written interrogatories, notice for discovery and inspection, and to produce a witness for deposition. The court notes that it was not presented with any basis to deny the motion for summary judgment in order for this discovery to be completed. CPLR 3212 (f).

Dated: November 24, 2008…………………………………………..

Orin R. Kitzes, J.S.C.

[*1]

Civil Court of the City of New York, Queens County, August 22, 2008

APPEARANCES OF COUNSEL

Israel Israel & Purdy, LLP, Great Neck (Scott H. Fisher of counsel), for plaintiff. Rossillo & Licata, P.C., Westbury (John J. Rossillo of counsel), for defendant.

{**21 Misc 3d at 437} OPINION OF THE COURT

William A. Viscovich, J.

In this matter, which appears to be a case of first impression, plaintiff provider brought the within action to recover payment under no-fault for medical services, namely, electromyogram testing and nerve conduction velocity testing (hereafter EMG and NCV testing, respectively) performed for Vanessa Garcia, its assignor. At trial, the parties stipulated to the sufficiency of plaintiff’s prima facie case and agreed that the only issue for this court to determine is whether defendant could demonstrate that the tests were not medically necessary.

Defendant’s unique and novel argument, as presented to this court over the course of several days of testimony, is that while the tests as prescribed were, in fact, medically necessary, they were done in a manner so incomplete that the results were useless in terms of the diagnosis and treatment of the patient. As such, defendant argues that they are rendered medically unnecessary as a practical matter and therefore not eligible for reimbursement under the state’s no-fault statutes. Plaintiff counters with three points: first, that the tests were medically necessary; second, that the test results were in fact useful; and third, that the only issue for this court to decide is the medical necessity of the tests as prescribed, the issue of whether or not they were done correctly being irrelevant.

In the instant case, State Farm’s medical expert, Dr. James B. Sarno, determined that a complete bilateral EMG/NCV of the upper and lower extremities was, in fact, medically necessary for the treatment and care of the assignor, Vanessa Garcia, for injuries she sustained in the subject motor vehicle accident. However, Dr. Sarno further determined that the EMG/NCV study as actually administered was so incompletely performed as to be contrary to the accepted standard of care for administering said test when utilizing it to assess “electro-diagnostic evidence of radiculopathy,” thus rendering it medically unnecessary. According to Dr. Sarno, this was particularly so in light of Ms. Garcia’s injuries, the suspicion of radiculopathy in both the upper and lower extremities, her complaints of pain and her nonresponsiveness to a rehabilitation program. The doctor’s position is that the tests, as administered, would have no utilization in determining and evaluating her past and future treatment.

According to Dr. Sarno, the tests were rendered useless due to the plaintiff’s failure to test the muscles in the forearm (other{**21 Misc 3d at 438} than the brachioradialis) and in the hand. As such, plaintiff failed to properly study the C7, C8 and T1 nerve roots, a deviation from the accepted standard of care for administering said test when “assessing evidence of electro-diagnostic radiculopathy.” In fact, Dr. Sarno testified that the impression purportedly obtained from said tests, a bilateral C4 radiculopathy, could not have been obtained to any degree of medical certainty from the incomplete nature of the muscles tested and that it was a deviation from accepted medical protocol to have concluded same from the minimal number of muscles tested.

As for the lower extremity EMG, Dr. Sarno maintained that by failing to test the muscles in the extensor hallus longus, the peronei, the glutei, all muscles in the quadriceps and the paraspinal muscles, the plaintiff deviated from the accepted standard of care for administering said test when assessing evidence of electrodiagnostic radiculopathy. As such, it is defendant’s contention that the subject EMG/NCV studies were found normal in the lower extremities due only to plaintiff’s failure to test the requisite muscles. Had they been done correctly, Dr. Sarno maintains, Ms. Garcia’s diagnosis and treatment plan may have been properly furthered and she could have actually benefitted from her rehabilitation.

Testifying for the plaintiff, Dr. Finkelstein, in sum and substance, agreed with Dr. Sarno that the tests were medically necessary. The disagreement between the two testifying experts, however, lies in Dr. Finkelstein’s belief that the tests as performed were not incomplete and that they were useful for the diagnosis and treatment of the patient. His position was that while the testing may not have been “thorough” it was “not incomplete.” More specifically, Dr. Finkelstein maintained that the tests as done had the benefit of confirming radiculopathies at both the C3-4 and C5-6 levels of the spine and could have an impact on the patient’s treatment.

Both Dr. Sarno and Dr. Finkelstein acknowledge that EMG/NCVs are extremely uncomfortable and painful for the patient. It should be noted that Dr. Sarno maintains that a proper testing regimen in this case required the placing of needles in 48 muscles, while Dr. Finkelstein’s position was that, for this case, the placing of needles in 22 muscles was sufficient, particularly if the patient was having a difficult time dealing with the procedure.{**21 Misc 3d at 439}

Conclusions of Law

New York’s no-fault law mandates that services must be reasonable and necessary in order to be reimbursable, but neither statute nor case law specifically addresses the issue of what constitutes “medical necessity” in the context of no-fault litigation. Given that the legislature, the Appellate Terms and the Appellate Divisions of this state have, it seems, yet to establish a specific definition or set of guidelines upon which this court could rely, they must be derived from lower court decisions. In this context, the two most regularly cited cases appear to be two matters decided in Queens County Civil Court. The first, Medical Expertise v Trumbull Ins. Co. (196 Misc 2d 389 [2003]), was written by Judge Bernice Siegal, and the second, Fifth Ave. Pain Control Ctr. v Allstate Ins. Co. (196 Misc 2d 801 [Civ Ct, Queens County 2003]), was written by Judge Augustus C. Agate when he sat in this court.

In Medical Expertise (supra), Judge Siegal cited with approval a definition of medical necessity provided by the New Jersey Supreme Court, to wit:

“[A] necessary medical expense under the [No-Fault] Act is one incurred for a treatment, procedure, or service ordered by a qualified physician based on the physician’s objectively reasonable belief that it will further the patient’s diagnosis and treatment. The use of the treatment, procedure, or service must be warranted by the circumstances and its medical value must be verified by credible and reliable evidence (Oceanside Med. Healthcare v Progressive Ins., 2002 NY Slip Op 50188[U], *5 [Civ Ct, Kings County, May 9, 2002], quoting Thermographic Diagnostics Inc. v Allstate Ins. Co., 125 NJ 491, 512, 593 A2d 768, 780 [1991].)

“It is not whether or not some ‘positive’ findings may be fashioned from the results of psychological tests, but rather could a psychologist hold an objective and reasonable belief that the tool used will further the patient’s diagnosis and treatment and whether that tool is warranted given the circumstances.” (196 Misc 2d at 395 [internal quotation marks omitted].)

In Fifth Ave. Pain Control Ctr., Judge Agate determined that medical necessity entailed

“treatment or services which are appropriate, suitable, proper and conducive to the end sought by the{**21 Misc 3d at 440} professional health service in consultation with the patient. It means more than merely convenient or useful treatment or services, but treatment or services that are reasonable in light of the patient’s injury, subjective and objective evidence of the patient’s complaints of pain, and the goals of evaluating and treating the patient.” (196 Misc 2d at 807.)

He went on to say that

“for treatment or services to be medically necessary, it must be reasonably determined by the health care professional in consultation with the patient, that the treatment or services are consistent with the patient’s condition, circumstances and the best interest of the patient with regard to the type of treatment or services rendered, the amount of treatment or services rendered, and the duration of the treatment or services rendered.” (Id.)

Judge Agate went further, however, holding that in order to find that treatment or services are not medically necessary “it must be reasonably shown by medical evidence, in consideration of the patient’s condition, circumstances, and the best interest of the patient, that the treatment or services would be ineffective or that the insurer’s preferred health care treatment or lack of treatment would lead to an equally good outcome.” (Id. at 807-808 [emphasis added].)

While the defendant agrees that the testing as prescribed by the plaintiff provider herein was clearly medically necessary, as defined by both Judges Siegal and Agate, its defense of lack of medical necessity is seemingly based on a single word (ineffective) in Judge Agate’s opinion. Defendant argues that the test is inherently unnecessary due to a supposedly improper methodology used in conducting it. Plaintiff counters that, as conducted, the tests were medically necessary and done correctly and that even if they were done incorrectly or incompletely, such failures do not arise, at least in the context of no-fault litigation for provider payment, to the level of being medically unnecessary.

Defendant’s position seeks a retrospective determination of medical necessity but this court can find nothing in the precedents discussed or in the no-fault statute and related regulations that establish such a position. In fact, to the contrary, they seem to require a determination of medical necessity be made prospectively from the standpoint of the insured at the time a treatment or service is rendered, not at a time when its effectiveness or lack thereof can be established retrospectively.{**21 Misc 3d at 441}

This is particularly true when one considers that the expenses sought in no-fault litigation are in reality expenses incurred by the insured, not the provider. A medical provider does not “incur” expenses when it treats an insured. Rather, the provider accepts an assignment of the insured’s benefits, allowing it to step into the shoes of the insured for litigation purposes. In theory, if not reality, the insured, not the provider, is the one seeking reimbursement for expenses already incurred. As such, the no-fault statute was clearly intended to “deliver better protection for the insured and to pay off claims quickly (NY Legis Ann, 1973, p 298)” (Pavone v Aetna Cas. & Sur. Co., 91 Misc 2d 658, 663 [Sup Ct, Monroe County 1977]), and no-fault regulations have been interpreted in favor of the insured’s rights (and through an assignment of benefits, the rights of the provider), especially as they relate toward speedy payment of proper claims on behalf of the insured. (See Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274 [1997].)

To adopt defendant’s position, quite frankly, would be to dramatically and judicially change the very nature of no-fault litigation. It would result in these proceedings all too often delving into issues more related to medical malpractice or professional misconduct litigation, a fact reflected by defendant’s brief, which cites as authority a matter decided before the State Board of Professional Medical Conduct (see Matter of Dobson, 2006 NY Phys Dec LEXIS 411 [2006]). The nature of such litigation would defeat the very purpose of the no-fault statute which is “to permit liberal recovery of moneys actually expended in the treatment of accident-related injuries.” (Vidra v Shoman, 59 AD2d 714, 716 [2d Dept 1977]; see also Presbyterian Hosp. in City of N.Y. v Aetna Cas. & Sur. Co., 233 AD2d 431 [2d Dept 1996].) This is only reinforced by the Court of Appeals findings that the regulations “are written to encourage prompt payment of claims, to discourage investigation by insurers and to penalize delays.” (Dermatossian v New York City Tr. Auth., 67 NY2d 219, 225 [1986].)

Nowhere in the statutory or regulatory scheme are “necessary expenses” defined to exclude charges for services that were duly prescribed, but improperly or inadequately performed. Insurance Law § 5102 (a) (1) defines “basic economic loss” as including, inter alia, “[a]ll necessary expenses incurred.” If either the legislature or the Superintendent of Insurance had intended that the determination regarding medical necessity should be made in hindsight, with regard for whether a procedure{**21 Misc 3d at 442} was properly performed, a statutory or regulatory change could be made to define necessary expenses as including payment for “properly performed medical procedures.” Neither has chosen to do so.

After a reading of the no-fault statutes and regulations, the precedents established by both Judge Siegal and Judge Agate and the testimony, evidence and briefs submitted in this matter, this court holds that even if defendant has demonstrated that a prescribed medical service or procedure may not have been conducted properly, reimbursement is warranted so long as said service or procedure was medically necessary. The issue of proper performance of such service or procedure is best left for other areas of litigation practice and/or, where appropriate, the State Board of Professional Medical Conduct.

The court further finds that the plaintiff in this matter, by stipulation of the parties, has established a prima facie case as to the medical necessity of the services rendered, thus shifting the burden of proof to the defendant to demonstrate, by a preponderance of the evidence, a lack of medical necessity for said services. Based on the testimony of the defendant’s own expert that the procedures in question, as prescribed, were, in fact, medically necessary and the rebuttal testimony of plaintiff’s expert explaining how the tests, as actually performed, could be of benefit to the patient, the defendant has failed to meet that burden.

Therefore, the court finds in favor of the plaintiff in the amount of $2,832.14, plus statutory interest, attorney fees and costs and disbursements.

[*1]

Civil Court of the City of New York, Queens County, June 13, 2008

APPEARANCES OF COUNSEL

Emilia I. Rutigliano, Brooklyn, for plaintiff. Law Office of Karen C. Dodson, Melville (William Angstreich of counsel), for defendant.

{**20 Misc 3d at 782} OPINION OF THE COURT

William A. Viscovich, J.

Plaintiff brought this action to recover no-fault payments totaling the sum of $1,559 for medical supplies provided to the insured/assignor on September 21, 2005 and on October 3, 2005, for treatment of alleged injuries sustained in a motor vehicle accident occurring on September 16, 2005, together with statutory interest, statutory attorneys fees and costs.

A previous decision by Judge Lebedeff of this court, issued on May 9, 2007, had determined that plaintiff had made out its prima facie case, that defendant’s NF-10 denial dated November 16, 2005 was timely issued, that said denial was based upon a peer review and that the only triable issue was as to the medical necessity of the items furnished to the assignor. The parties further stipulated at trial as to the expertise of the peer review doctor, Dr. Susan Corcoran, in internal medicine and to the introduction into evidence of the peer review itself.

Based upon Judge Lebedeff’s previous finding regarding the plaintiff’s prima facie case and the stipulation entered into by the parties, the plaintiff rested, thus shifting to the defendant insurer the burden of rebutting plaintiff’s prima facie case of medical necessity.

The defendant called Dr. Corcoran who testified, in sum and substance, that there was no medical necessity for any of the supplies provided. Of particular relevance in this matter is that while the parties did stipulate to the [*2]admission of the peer review, they did not stipulate to the entrance into evidence of any of the underlying medical records and reports upon which the peer review was based. Nor did the defendant attempt to have them introduced even though they were relied upon by Dr. Corcoran in preparing both the peer review and her testimony.

After Dr. Corcoran’s testimony was completed, the defendant rested. Plaintiff presented no witnesses and also rested. Defendant then moved for a directed verdict of dismissal, arguing that the findings and opinions of Dr. Corcoran in her peer review and in her testimony were sufficient to demonstrate the lack of medical necessity for the supplies provided to the assignor and that they were not rebutted by the plaintiff.

Plaintiff opposed the motion, contending that pursuant to Wagman v Bradshaw (292 AD2d 84 [2d Dept 2002]) Dr. Corcoran’s testimony must be disregarded by this court since it was based upon medical records and reports that were not in evidence{**20 Misc 3d at 783} and for which there was no evidence presented regarding their reliability. (See Hambsch v New York City Tr. Auth., 63 NY2d 723 [1984].) Defendant countered that this court should apply the ruling of the Appellate Term, First Department, in Cross Cont. Med., P.C. v Allstate Ins. Co. (13 Misc 3d 10 [2006]), wherein the court held that a “plaintiff may not be heard to argue that defendant’s expert opinion was not derived from a ‘professional[,] reliable’ source or to otherwise challenge the reliability of its own medical records and reports.” (Id. at 11.)

The court denied defendant’s motion for a directed verdict of dismissal, and reserved decision on the ultimate issue as to the medical necessity, or lack thereof, of the billed-for supplies, pending a determination as to the admissibility of Dr. Corcoran’s testimony.

For the reasons stated herein, the court now finds that the testimony of Dr. Corcoran regarding the various reports not in evidence is admissible. As such, judgment is made in favor of the defendant and the matter is dismissed.

“It is well settled that, to be admissible, opinion evidence must be based upon one of the following: first, personal knowledge of the facts upon which the opinion rests: second, where the expert does not have personal knowledge of the facts upon which the opinion rests, the opinion may be based upon facts and materials in evidence, real or testimonial; third, material not in evidence provided that the out-of-court material is derived from a witness subject to full cross-examination; and fourth, material not in evidence provided the out-of-court material is of the kind accepted by the profession as a basis in forming an opinion and the out-of-court material is accompanied by evidence establishing its reliability.” (Wagman v Bradshaw at 86-87.)

The Court of Appeals has held that an expert witness may testify that he or she relied on out-of-court material provided that it is of a kind generally accepted in the profession as reliable and there is evidence presented establishing the reliability of the out-of-court material referred to by the witness (Hambsch v New York City Tr. Auth., supra).

Clearly in this matter, the first three possible requirements are not relevant, thereby leaving this court to decide if, pursuant to Wagman, the material not in evidence, which was relied upon by defendant’s witness, is accompanied by any evidence establishing its reliability. [*3]Pursuant to Hambsch, the court must{**20 Misc 3d at 784} also determine if the material in question is the kind accepted in the profession and if there has been any evidence presented establishing the reliability of those materials.

As to the Wagman issue, an initial interpretation of the testimony in relation to that case seems to indicate that the defendant offered no evidence as to the reliability of the documents relied upon, therefore requiring the court to disregard the testimony and thereby find in favor of the plaintiff. However, in addition to Cross Cont. Med., P.C. (supra), several recent cases in both the First and Second Departments, including the Appellate Term, First Department, seem to indicate that, at least in the context of no-fault first-party benefits, a plaintiff may not challenge the reliability of its own medical records which were relied upon by the insurer in preparing a peer review report.

First, in Home Care Ortho. Med. Supply, Inc. v American Mfrs. Mut. Ins. Co. (14 Misc 3d 139[A], 2007 NY Slip Op 50302[U] [App Term, 1st Dept 2007]), the Appellate Term, First Department, reversed a judgment in favor of the plaintiff in an action, as in the case here, brought by a medical goods supply company to recover assigned, first-party no-fault benefits. The lower court’s decision was at least partially based on its preclusion of the insurer’s expert’s testimony because it relied, at least in part, on a review of the assignor’s medical records. Following its previous decision in Cross Cont. Med., P.C. (supra), the court held that “[p]laintiff may not be heard to challenge the reliability of the assignors’ medical records and reports, which, in response to defendant’s verification requests, were affirmatively relied upon by plaintiff as proof of claim” (at *1).

Following the decision in Home Care Ortho Med. Supply, Inc. (supra), Judge Peter Sweeney of the Civil Court of the City of New York rejected the plaintiff’s contention that the insured’s experts should have been precluded from basing their professional opinions, in part, on the information obtained from plaintiff’s assignors during independent psychological examinations. Judge Sweeney went further in finding that

“the holding in Home Care Ortho. Med. Supply, Inc. is consistent with the legislative policy reflected in the numerous provisions of the No-Fault Law which provide for the prompt verification and disposition of claims (Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co., 89 NY2d 214, 222 [1996]; Presbyterian Hosp. in City of New York v Maryland Cas. Co., 90{**20 Misc 3d at 785} NY2d 274, 281 [1997]; Dermatossian v New York City Tr. Auth., 67 NY2d 219, 224-225 [1986]; Stephen Fogel Psychological, P.C. v. Progressive Cas. Ins. Co. 827 NYS2d 217, 220 (35 AD3d 720) [2nd Dep’t 2006])” (Primary Psychiatric Health, P.C. v State Farm Mut. Auto Ins. Co., 15 Misc 3d 1111[A], 2007 NY Slip Op 50583[U], *3 [Civ Ct, Kings County 2007]).

Finally, in a very recent case, Andrew Carothers, M.D., P.C. v GEICO Indem. Co. (18 Misc 3d 1147[A], 2008 NY Slip Op 50546[U], *2 [Civ Ct, Kings County 2008]), the court, also citing Cross Cont. Med., P.C. (supra), actually permitted the plaintiff’s medical records, which at least in part formed the basis of its peer review, to be admitted into evidence through its claims examiner as defendant’s business records. That court rejected plaintiff’s argument that their admission was inappropriate since the claims examiner was incompetent to testify as to the reliability of the records as she had testified that they were received by the defendant from the [*4]treating physicians and she had no knowledge of how these doctors created or maintained their records in the regular course of business. While this court may not have extended the business records exception to the hearsay rule to such an extent, the holding is consistent with the holdings in the other cases referred to above.

As for the Hambsch requirement that the material be generally accepted in the profession as reliable and that there be evidence establishing its reliability, the cases referred to above clearly indicate that the plaintiff cannot be heard to challenge the reliability of the particular documents. As for the professional acceptability of these items, Dr. Corcoran testified that they were sufficient to form the basis of a peer review and her expertise was stipulated to by both parties. Without any testimony to the contrary, this court finds that the out-of-court documents relied upon by Dr. Corcoran in preparing her peer review and her testimony are of the type accepted in the profession as reliable.

As such, this court finds that the defendant has presented sufficient evidence to establish a defense based upon a lack of medical necessity, thus shifting the burden to the plaintiff to present its own evidence of medical necessity (see West Tremont Med. Diagnostic, P.C. v GEICO Ins. Co., 13 Misc 3d 131[A], 2006 NY Slip Op 51871[U] [App Term, 2d & 11th Jud Dists 2006]). Plaintiff presented no evidence or testimony in this matter,{**20 Misc 3d at 786} choosing instead to rely upon its argument made above and its cross-examination of Dr. Corcoran. Without more, this court finds that plaintiff has failed to refute defendant’s expert witness testimony and has failed to produce rebuttal evidence to prove the medical necessity of the medical supplies provided to its assignor.

Accordingly, judgment is hereby rendered for the defendant and plaintiff’s complaint is dismissed.

Civil Court of the City of New York, Queens County

37719 QCV2007

Attorneys for plaintiff:

Baker, Sanders, Barshay, Grossman, Fass,

Muhlstock & Neuwirth

150 Herricks Road

Mineola, NY 11501

( By: Todd Muhlstock, Esq.)

Attorneys for defendant:

Nicolini, Paradise, Ferretti & Sabella

114 Old Country Road, Ste. 500

Mineola, NY 11501

( By: Mitchell Lustig, Esq.)

William A. Viscovich, J.

Plaintiff health care provider brought the within No-Fault action against defendant insurer to recover for services rendered on August 15, 2002 to the insured, Jose Rodriguez, as assignor, relating to injuries allegedly arising out of a motor vehicle accident involving a vehicle owned and operated by Rodriguez on July 31, 2002. The parties stipulated as to the timely and proper submission by plaintiff to defendant of the underlying NF-3 proof of claim, that said claim is unpaid and as to the assignment of benefits from Rodriguez to plaintiff. Hence, plaintiff’s prima facie case was proven and the plaintiff rested.While acknowledging that there was no timely denial in this matter, defendant asserted the affirmative defense of lack of coverage, premised on its contention that the alleged loss did not arise out of a covered accident. Instead, the defendant premises its defense upon the argument that the accident in question was a [*2]staged, intentional collision. A staged, deliberate collision is not a covered accident under no-fault (see Liberty Mutual Insurance Company -v- Goddard, 29 AD 3rd 698 [ 2nd Dept. 2006]; Eagle Insurance Company -v- Davis, 22 AD 3rd 846 [ 2nd Dept. 2005]; State Farm Mutual Automobile Insurance Company -v- Laguerre, 305 AD 2nd 490 [ 2nd Dept. 2003]). Moreover, the Appellate Division, Second Department has held that the basic issue in such case is whether the loss arose from a deliberate occurrence outside the scope of coverage. (GEICO -v- Shaulskaya, 302 AD 2nd 522 [ 2nd Dept. 2003]; see also Fair Price Medical Supply v. Travelers Indemnity Company, 42 AD3rd 277 [ 2nd Dept. 2007]. As such, defendant would not be bound by the 30 day rule for issuance of denials normally mandated by Insurance Law § 5106(a) and the applicable No-fault regulations (Central General Hospital -v- Chubb Group of Insurance Companies, 90 NY 2nd 195 [1997]).

In support of its affirmative defense, the defendant called as witnesses both the assignor, Jose Rodriguez, and an investigator in its Special Investigations Unit.

The investigator testified that he had only reviewed this file for the first time a few weeks before the trial and, in fact, was not totally prepared to testify. In sum and substance, his investigation consisted of running a prior claim history on Mr. Rodriguez, but he could not recall the amount of dollars that Mr. Rodriguez had allegedly made claims for in the past. In addition, he testified that he himself had not made the final determination as to the possibility of fraud in this matter but instead a “committee” organized by the defendant had determined that it was not a meritorious claim.

Ironically, it was Mr. Rodriguez’s testimony itself that had the potential to prove that the accident in question had been staged. He not only testified as to the accident itself, but also as to both a previous and subsequent accident in which he was involved, occurring respectively on September 18, 2000 and August 5, 2002.

When defense counsel attempted to question Rodriguez as to the specifics of the treatment received from plaintiff provider following the underlying alleged accident of July 31, 2002, plaintiff objected, citing Fair Price, supra, arguing that evidence of non-treatment could not be used to prove a staged accident. This court reserved its decision on the objection and permitted Mr. Rodriguez to answer this line of questioning subject to a later ruling on the issue, which is the primary subject of this decision, along with other commentary.

Through the use of an official Spanish Court Interpreter, Mr. Rodriguez testified as to the accident, how it happened, where it happened and what he did thereafter, including seeking out medical attention. Perhaps because of the difficulties of translation or because of nervousness, the witness often appeared uncertain and confused about, or unable to recall, the exact date and place of his visits to the plaintiff. Mr. Rodriguez was clear about one thing, however- he never saw a nurse or doctor and never received any medical treatment whatsoever. All he could recall was going to a doctor’s office, having the staff fill out some forms based upon an accident report that he had provided to them and then leaving because he did not think the doctor would help him since he had no money. Mr. Rodriguez was adamant that he received no care or treatment and that all he did was go home and take some Advil.

As to the substance of the plaintiff’s objection to Mr. Rodriguez’s testimony regarding a lack of treatment, the court overrules plaintiff’s objection and allows the [*3]testimony as to non-treatment to be used by the defense. The Fair Price decision, according to the plaintiff, stands for the proposition that in a case where the fraud alleged by the defendant insurer pertains to the lack of services billed for (or more specifically in the Fair Price case- the failure to provide medical supplies billed for), such fraud is “not related to the existence of coverage in the first instance” ( 42 AD 3rd, at 284) and, thus, is not an affirmative Chubb defense.

This court, however, has no intention whatsoever of determining if plaintiff is entitled to recover no-fault benefits based on the extent to which the claimed medical services were actually provided. The court agrees with the plaintiff and recognizes that, pursuant to Fair Price, the extent to which the medical services billed for in this action were actually rendered is not the ultimate issue for the court to decide – to make it so would constitute a total disregard for the unequivocal appellate law that controls this issue. Moreover, as both parties have stipulated to plaintiff’s prima facie case, plaintiff has been deemed to have met its burden as to the medical necessity of the services rendered- which burden defendant has elected neither to rebut by way of any requisite timely denial nor by the specific affirmative defense asserted. As such, this court is bound by same, notwithstanding the assignor’s testimony which is extremely credible as to the possibility that the claimed services were never provided.

Unfortunately, the only issue which this court may address under Fair Price is whether there was a lack of coverage as contended by defendant on the basis that the alleged July 31, 2002 accident was ” staged”. Any testimony by Rodriguez regarding his treatment or lack thereof is being used by the court solely as evidence as to whether the loss in question resulted from an actual “covered” accident or arose from a staged collision. Any evidence that Mr. Rodriguez was not treated as claimed by the plaintiff provider or was treated to a lesser extent than claimed, has relevance only to the extent that common sense dictates that it is less likely that the participants in such a “staged” collision would actually receive treatment than in a true accident. It also follows that the alleged victim of a “staged” accident would be less likely to actually accept the risk of real injury arising from an unnecessary course of treatment (Keep in mind that this court does concede that a real injury may arise from a staged accident, but does not believe this to be the case herein).

Given the weakness of the SIU investigator’s testimony, however, the testimony of Mr. Rodriguez as to a lack of treatment alone is not enough for defendant to meet its burden in rebutting plaintiff’s prima facie case. As one court has noted, ” [W]hile some intentional collisions are the products of insurance fraud schemes, others are not. In all such cases, it is the deliberate, non-accidental character of the incident that makes it ineligible for No-Fault coverage.”(V.S. Medical Services, P.C. -v- Allstate Insurance Company,11 Misc 3rd 334, at 338 [ Civil Court, City of New York, Kings Co. 2006]; see, also Universal Open MRI of the Bronx ,P.C. -v- State Farm Mutual Automobile Insurance, 12 Misc 3rd 1151(A) [ Civil Court, City of New York, Kings Co. 2006]). Therefore, defendant’s burden of proof is a preponderance of the credible evidence, which has not been established.

What distresses the court is that while the defendant was not able to meet its burden of proof as to a “staged accident”, there was credible evidence of provider fraud. While a full trial on that issue may reveal that there was no fraud and that services were [*4]in fact rendered. the holding in Fair Price assures that neither the court nor the defendant are able to delve further into that issue. The end result is that this court is put in the potential position of having to make an award to a possibly unethical provider.

This is exactly the concern expressed by Justice Joseph Golia in his dissent in the Appellate Term rendering of Fair Price Medical Supply Corp. a/a/o Nivelo v. Travelers Indemnity Company, 9 Misc 3rd 76 [ App. Term, 2nd & 11th Jud. Dists. 2005], in which the majority decision was upheld by the Appellate Division in the Fair Price decision that controls herein. Like Justice Golia, this court is “under the firm and unshakable belief that neither the Legislature nor the Insurance Department ever intended for an insurance carrier, or anyone else for that matter, to be forced to pay for medical equipment [or in this case, medical treatment] that was never provided “(Fair Price, supra, dissent at 82). But, alas, that is the potential outcome all but acknowledged by both the Appellate Term and Appellate Division Fair Price holdings.

As such, this court, as constrained by higher authority, regretfully awards judgment to the plaintiff in the sum of $ 899.43, plus statutory interest, statutory attorneys fees, costs and disbursements.

The foregoing constitutes the decision and order of this court.

_____March 19, 2008___________________________________DateWilliam A. Viscovich

Judge, Civil Court

Supreme Court, Queens County

29079/06

Jaime A. Rios, J.

The issue presented in this CPLR 7503 proceeding to stay arbitration is whether the owner of an uninsured motorcycle can recover underinsurance benefits pursuant to an automobile policy issued to a member of his family household, when that policy contains an exclusion for uninsured “motor vehicles” owned by the insured.

The facts which give rise to the controversy involve an accident which occurred on October 4, 2006. On that date, Respondent Francis Lang (Lang) while operating his uninsured motorcycle collided with a car driven by Ming Zheng (Zheng).The Zheng vehicle was insured through GEICO. Following the accident, Lang filed a claim for personal injuries against Zheng. The claim was settled by Zheng’s insurer by the tender of $25,000 representing the full limits of the Zheng policy with GEICO.

Following the settlement, Lang demanded arbitration of a claim for underinsurance benefits pursuant to an automobile policy issued to family members Thomas and Mary Lang (Thomas & Mary) with whom he resided. Thomas & Mary were coincidentally insured through GEICO, who promptly disclaimed coverage based upon an exclusion contained in the Supplementary Uninsured/ Underinsured Motorist (SUM) endorsement of its policy. By correspondence dated November 9, 2006, GEICO advised Lang that it was disclaiming coverage on the basis that Lang “was operating his own motorcycle which was not insured at the time of this loss”.

On November 14, 2006 Lang demanded arbitration of his SUM claim and the subject proceeding ensued. By order of this court (Rios, J.) dated June 4, 2007, the Lang arbitration was stayed pending a hearing on the validity of the GEICO disclaimer which was premised on the exclusion contained in the SUM endorsement. On the hearing date of October 18, 2007, the [*2]parties agreed to the introduction into evidence of a copy of the GEICO automobile policy and stipulated that the court’s adjudication rested upon an interpretation of the applicability of the SUM exclusion to Lang’s motorcycle.

The Exclusions sections of the SUM endorsement of the GEICO policy reads in part: “This SUM coverage does not apply…(2). to bodily injury to an insured incurred while occupying a motor vehicle owned by that insured, if such motor vehicle is not insured for SUM coverage under the policy under which a claim is made, or is not a newly acquired or replacement motor vehicle covered under the terms of this policy.”

Lang argues that the term motor vehicle and motorcycle are defined separately in the “Other Definitions” section of the no-fault (PIP) endorsement of the policy and pursuant to that definition, a motor vehicle does not include a motorcycle.

While the term motor vehicle was not specifically defined in the SUM endorsement of the policy, unlike the language in the PIP endorsement, a motorcycle was not specifically excluded from its definition. Further, the term motor vehicle has been construed to include a motorcycle for purposes of uninsured motorist coverage (see Country-Wide Ins. Co. v Wagoner, 45 NY2d 581 [1978]; Nationwide v Riccadulli, 183 AD2d 111 [1992]). Specifically, the policy exclusion relied upon by GEICO has been held to be unambiguous as it applies to a motorcycle owned and occupied by the insured that is not insured for SUM coverage (see USAA Cas. Ins. Co. v Hughes, 2006 NY Slip Op 9259; Utica Mut. Ins. Co. v Reid, 22 AD3d 127 [2005]; Cohen v Chubb Indem. Ins. Co., 286 AD2d 264 [2001]; Liberty Ins. Co. v Panetta, 187 AD2d 719 [1992]).

It is well settled that the liability, no fault and uninsured motorist portions of a comprehensive automobile insurance policy are discrete and internally complete coverages and should be read that way (see Utica Mut. Ins. Co. v Reid, 22 AD3d 127, supra; Eveready Ins. Co. v Asante, 153 AD2d 890 [1989]). SUM coverage exists separate and apart from the policy to which it is annexed and thus can not be qualified by inapplicable provisions of the PIP portion of the policy (see Knickerbocker Ins. Co. v Faison, 22 NY2d 554 [1968]; Eveready Ins. Co. v Asante, 153 AD2d 890 [1989]; Cohen v Chubb Indem. Ins. Co., 286 AD2d 264 [2001]).

Here, as it is undisputed that Lang, an insured under the GEICO policy, was operating an uninsured motorcycle he owned at the time of the subject occurrence, he is precluded from recovering underinsurance benefits pursuant to the exclusion in GEICO’s SUM endorsement.

Accordingly, GEICO’s petition for a permanent stay of underinsurance arbitration demanded by Lang is granted.

Dated: December 3, 2007________________________

Index No.: 29079/06J.S.C.

Civil Court of the City of New York, Queens County

11430-2004

For the Plaintiff:

The Law Offices of Eva Gaspari PLLC

By Eva Gaspari, Esq.

2300 West 7th Street

Brooklyn, New York 11223

Tel: (718) 266-3009

For the Defendant:

Freiberg & Peck, LLP

By Yilo J. Kang, Esq.

49 West 37th Street, 9th Floor

New York, New York 10018

Tel:(212) 252 -9550

Charles S. Lopresto, J.

The plaintiff’s assignor, Cheryl Brown, was allegedly injured in a motor vehicle accident on January 7, 2003 while driving a vehicle she rented from Budget Rent A Car (hereafter Budget). At the time, Ms. Brown had an insurance policy with Progressive Insurance Company, which covered another vehicle which was not involved in the accident. Ms. Brown received medical equipment for treatment of injuries arising from the motor vehicle accident. The [*2]plaintiff, Ave T MPC, Corp., submitted two separate claims to the defendant, Progressive Insurance Company (hereafter Progressive), for the equipment dispensed on February 6, 2003 and February 22, 2003, in the amounts of $79.99 and $888.00, respectively. The two claims came to a total of $967.99, which, together with interest, costs and attorney fees, reflects the amount sought to be recovered in this case. The plaintiff is now seeking benefits under Ms. Brown’s insurance policy with Progressive for the accident which occurred while she was driving the Budget Rent A Car. Defendant contends that Ms. Brown is not an eligible person for insurance under the policy as she was driving a vehicle other than the vehicle insured by Progressive and thus was not covered.

A trial regarding this matter was held on July 23, 2007. At trial, the parties stipulated that the plaintiff had timely and properly submitted claims for no-fault benefits with respect to the medical equipment at issue to Progressive Insurance Company on behalf of the plaintiff. Given the stipulation of these facts, the plaintiff rested its case. The parties further stipulated that the defendant’s answer would be amended to contain the defense that the event or loss was not covered by the policy of insurance issued by the defendant and the defendant abandoned it’s defense that the claims in dispute had been denied based upon a failure of Ms. Brown to abide by and cooperate in accordance with the terms of the insurance policy. The parties stipulated that the sole issue for the court to determine was if there was a lack of coverage.

The defendant called Tammy Reichel, a senior litigation specialist employed by the defendant, whose responsibilities consisted of reviewing claims which were in litigation. Ms. Reichel testified that Cheryl Brown did have an insurance policy with Progressive Insurance in effect on the date of the accident. The claims presently in dispute had been denied based upon a failure to cooperate as per the terms of the policy. After the claims were received, the defendant repeatedly requested that Ms. Brown cooperate with the coverage investigation and submit to the taking of a recorded statement or otherwise contact the defendant. Various follow up letters were sent to Ms. Brown seeking information with respect to coverage. After receipt of the bills in question from the plaintiff, the defendant advised the plaintiff via a verification request that the benefits were delayed pending the claimant’s cooperation with their requests. After numerous attempts to obtain the recorded statement, the defendant denied the claims in dispute based upon the claimant’s breach of her insurance policy’s cooperation clause for failure to submit to a recorded statement request. While the instant lawsuit was pending, Ms. Reichel testified that the defendant, Progressive, received information from which she identified as an “ISO run” from an ISO computer data base. Ms. Reichel stated that all insurance companies are under a duty to provide information to this data base and she routinely relies upon information obtained from this data base and fully incorporates said information into her records made in the regular course of the defendant’s business. Said information indicated that Budget Rent A Car had received a claim from Ms. Brown for the same accident. Thereafter, a telephone conversation between Allison Saronui of Progressive Insurance Company and Trisha Hopfauf from the Budget Claims Department took place. A fax was sent from Ms. Hopfauf to Ms. Saronui on August 24th, 2007 memorializing this conversation which stated, inter alia, that “Budget was primary for PIP on this loss since this was a NY accident.”. Said fax also contained information acknowledging receipt of a medical bill for Ms. Brown on August 11th, 2003 for services rendered January 10th,2003 to March 13th, 2003, which was denied by Budget on the basis that her claim was untimely. Based upon such information and a police report indicating that the vehicle insured by [*3]the defendant and owned by Ms. Brown was not the vehicle involved in the accident, Ms. Reichel testified that she had a “founded belief” that Progressive was not the carrier liable for the accident and that this accident was not “covered” by the terms of the Progressive policy since the claimant was covered by a policy of insurance other than the one issued by the defendant.

CONCLUSIONS OF LAW

1. Has the defendant established that the loss was not a covered accident?

Generally, an insured who seeks to recover for a loss under an insurance policy has the burden of proving that the loss occurred and that the loss was a covered incident under the terms of the policy. Gongolewski v. Travelers Ins. Co., 252 AD2d 569[2nd Dept 1998], quoting Vasile v. Hartford Acc. & Indem.Co., 213 AD2d 541[ 2nd Dept. 1995]. However, in an action for first-party no fault benefits, which is the case at bar, a provider’s proof of timely submission of a properly completed claim form makes out a prima facie case and there is a presumption of medical necessity. See, Amaze Med. Supply v. Eagle Ins. Co., 2 Misc 3d 128 [ App Term 2d & 11th Jud Dists ]; see also, A.B. Med. Servs. PLLC v. Lumbermens Mut. Cas. Co., 4 Misc 3d 86 [App Term 2d & 11th Jud Dists 2004]. Adopting the Appellate Term’s concept in the related area of medical necessity, it should therefore follow that there is also a presumption of coverage which attaches to the claim form.

In this case, it was stipulated by the parties that the plaintiff had timely and properly submitted claims for no-fault benefits, which established plaintiff’s prima facie case thus establishing a presumption of coverage. A.B.Medical Services, PLLC v. State Farm Mutual Automobile Ins. Company, 7 Misc 3d 822; New York Massage Therapy v. State Farm Mutual Ins. Co. ,14 Misc 3d 1231 (A). Once the plaintiff makes a prima facie showing, the burden of explanation or of “going forward with the case” falls upon the defendant to show a lack of coverage. Mount Sinai Hosp. V. Triboro Coach Inc., 263 AD2d 11. The satisfaction of this burden would permit the defendant to disprove the presumption of coverage. Palmier v. United States Fidelity and Guaranty Company, 135 AD2d 1057 (3rd Dept. 1987).

In the case at bar, the defendant contends that this burden has been satisfied in that it has established that the defendant had a “founded belief” that the loss in question was not covered by the policy of insurance. In Central Gen. Hosp. V. Chubb Group of Ins.Cos., 90 NY2d 195, the Court of Appeals held that ” an insurer… may assert a lack of coverage defense premised on the fact or founded belief that the alleged injury does not arise out of an insured incident”. This case dealt with an insurers failure to reject a claim to recover no-fault benefits within the 30 day period prescribed by statute and regulations and held that the insurer would not be precluded from disclaiming when the defense is lack of coverage. The “fact or founded belief” standard discussed in Chubb, which is often used in “staged accident” cases, is inapplicable in this case. The facts in this case are distinguishable from a “staged accident” case. There has been no contention that the accident did not occur; that it was part of a fraudulent scheme or was an intentional act and thus not a covered incident under the policy. It is uncontroverted that a policy of insurance existed in this case which was issued to Ms. Brown by Progressive. Either the accident in question was covered or it was not. A contracting party to an insurance agreement should not be relieved of it’s duties of performance under the contract because a party “believes” [*4]that performance is not required whether that belief is founded or not if in fact performance is required. In order for the court to determine the issue, it is crucial and essential for the court to know what are the terms of coverage contained within the policy. The defendant did not introduce a copy of the policy of insurance that is in dispute. The defendant merely introduced the declarations page of the claimant’s insurance policy indicating that the car involved in the accident that the claimant was driving was not listed as a car insured by the defendant. In this case the defendant has failed to meet it’s burden to show that the policy of insurance issued to Ms. Brown did not cover the loss at issue. The policy may have contained a clause which covered the use of a rental vehicle as a temporary substitute for the insured’s vehicle while being repaired. See, SZ Medical, PC. V. Lancer Ins. Co.. 7 Misc 3d 86. Absent the actual production of the insurance policy the court can only guess and surmise at the terms and conditions therein. This court is well aware of the exclusions set forth in 11 NYCRR§ 65-1.1, in particular, exclusion C which states PIP coverage does not apply to “the named insured or relative occupying … a motor vehicle other than the insured vehicle”. However, said exclusions do not negate the responsibility of the insurance company to produce said policy at trial. Therefore, it is the holding of this court that the insurance company must introduce the policy at trial in order to demonstrate that the loss in question fell outside the terms of the insured’s policy of coverage in order to satisfy it’s burden.

2. Should have defendant submitted the matter to arbitration?

Notwithstanding the foregoing, the case at bar concerns a priority of payment issue. If a priority of payment issue arises as provided in NYCRR section 65-3.2; it is not considered a coverage question and must be submitted to mandatory arbitration. Section 5105 (b) of the Insurance Law establishes mandatory arbitration procedures promulgated by the Superintendent of Insurance for the resolution of disputes arising between insurers concerning their responsibility for the payment of first- party benefits. See Matter of Pacific Ins. Co. V State Farm Mut. Auto. Ins. Co.,150 AD2d 455[ Second Dept.1989]. In Matter of Pacific, thecourt dealt with issues similar to the facts presented in this case. The court held that ” (t)he Supreme Court erred in ruling that the present issue falls outside the jurisdiction of Insurance Law § 5105 and that it is, therefore not subject to mandatory arbitration, contrary to the clear mandate of 11 NYCRR 65.15 (j) (2), which provides that If a dispute regarding priority of payment arises among insurers who otherwise are liable for the payment of first-party benefits, then the first party to whom notice of claim is given… shall be responsible for payment… Any such dispute shall be resolved in accordance with the arbitration procedures established pursuant to section 5105 of the Insurance Law (section 65.10 of this Part)’. In addition, 11 NYCRR 65.10 (a) (5) provides in pertinent part that any controversy between insurers involving the responsibility or obligation to pay first-party benefits (i.e., priority of payment or sources of payment as provided in section 65.15[j] of this Part) is not considered a coverage question and must be submitted to mandatory arbitration under this section'”. In this case, the defendant refused to pay Ms. Brown’s claims when they were first presented with them. That refusal raised a question as to “priority of payments” between the defendant and Budget, which issue must be determined and submitted to mandatory arbitration pursuant to Insurance Law § 5105 and 11 NYCRR 65.10 (a) (5). The record reveals that Progressive received bills from the plaintiff prior to any claim made with [*5]Budget . This raises a dispute of priority of payments as between insurers which must be submitted for resolution by mandatory arbitration and this

court is without jurisdiction. SZ Medical, P.C v. Lancer Insurance Company, 7 Misc 3d 86. Accordingly, the complaint is dismissed.

____________________________

DATE:_______________Hon Charles S. Lopresto

Supreme Court, Queens County

24107/06

James P. Dollard, J.

In this action for declaratory judgment and to recover damages for fraud and unjust enrichment, plaintiff St. Paul Travelers Insurance Company (Travelers) seeks an order (1) staying all no-fault collection lawsuits presently being prosecuted by defendant Dipak Nandi and co-defendants professional corporations against Travelers, pursuant to CPLR 2201; (2) granting a preliminary injunction enjoining the defendants from commencing future lawsuits against Travelers seeking reimbursement of no-fault benefits for acupuncture services pursuant to Insurance Law § 5101 et. seq. and the regulations promulgated thereunder, pending the determination of this action. Defendants cross-move in opposition and seek an order lifting any previously imposed stays affecting Civil Court lawsuits and dismissing the complaint pursuant to CPLR 3211(a)(4),(5) and (7).

Travelers issues automobile insurance policies and has either compensated, or refused to compensate the professional corporation defendants for acupuncture services rendered to plaintiff’s policyholders, under the state’s No-Fault Insurance laws and regulations.

Travelers alleges in its complaint is that defendants Triborough Medical Diagnostics PC, Sterling Medical Diagnostics PC, Millennium Diagnostics PC and Urban Medical Diagnostics PC are medical professional corporations that were fraudulently incorporated, were never licensed to provide acupuncture services and that all the services that were billed to it were performed by independent contractors. The complaint alleges that defendant Universal Acupuncture Pain Services PC (Universal) is an acupuncture professional corporation that billed Travelers for acupuncture services but was not entitled to payment because it was (a) fraudulently incorporated and (b) all or some of the services that were billed to Travelers were performed by independent contractors. It is alleged that defendants Optimum Medical Services PC and Statewide Medical Services PC are medical professional corporations that billed Travelers for acupuncture services but were not entitled to payment because (a) they were fraudulently incorporated, (b) were never licensed to provide acupuncture services and (c) all or some of the services billed to Travelers were performed by independent contractors.

Travelers alleges that defendants Delta Medical Acupuncture PC, Cosmopolitan Medical Acupuncture Services PC, Rose Medical Acupuncture PC, Continental Medical Acupuncture PC, [*2]Maple Medical Acupuncture PC are medical professional corporations that billed it for acupuncture services but were not entitled to payment because (a) they were never licensed to provide acupuncture services and (b) all or some of the services billed to Travelers were performed by independent contractors.

The complaint alleges that defendants Akita Medical Acupuncture PC, Bonsai Medical Acupuncture PC, Koi Medical Acupuncture PC, Maguro Medical Acupuncture PC and Miso Medical Acupuncture PC are medical professional corporations that billed Travelers for acupuncture services but were not entitled to payment because (a) they were not licensed to provide acupuncture services and (b) all or some of the services that were billed to Travelers were performed by independent contractors.

Travelers alleges that Triborough Healthcare Management Inc. is a management company which was created as a tool for Nandi to exercise control over some of the professional corporations and Universal, and to siphon off insurance proceeds that were paid to the professional corporations.

Defendant Dipak Nandi is a physician licensed to practice medicine in New York, and he was not certified as an acupuncturist until April 24, 2001. It is alleged that Nandi falsely represented to the Department of State and the Department Education that Dr. Robert Mallela, Dr. Swapnadip Lahiri and Dr. William Battaile would be the owners of Triborough; that Drs. Mallela and Lahiri would be the owners of Sterling, Millennium and Urban; that Dongxing Sun a licensed acupuncturist would be the owner of Universal; and that Dr. Hea Rean Lew would be the owner of Stateside; and that in fact all of these PCs were owned and controlled by Nandi. Dr. Mallela, in an affidavit submitted herein, that was provided in connection with a federal court action, admitted the following facts: (1) he had no true ownership interest in or control over Urban Medical, or any of the other three other PCs; (2) he never paid for the shares in Urban Medical or the other PCs he was given, (3) he was paid a fee to allow Nandi to use his name to obtain a certificate of authority from the DOE; (4) he did not manage or supervise the medical practice at Urban Medical or the other PCs, and (5) he never saw or treated patients for Urban Medical or the other PCs. Mr. Sun states in an affidavit submitted herein, which was prepared for another action, that he admittedly did not operate Universal or control the corporation in any way. He states that he “permitted Nandi to handle the affairs of’ Universal and accepted his word for everything,'” and had ” no idea what the business activity’ of Universal was before his dispute erupted with Nandi over ownership and control.”

In the first cause of action for declaratory judgment Travelers seek a declaration that Universal and all of the PCs are not entitled to collect No-Fault benefits for any unpaid charges for acupuncture services that they have submitted to Travelers. In the second cause of action for common law fraud, seeks to recover the sums it paid to the defendants as No-Fault benefits, which totals more than $5 million dollars, as well as punitive damages. In the third cause of action for unjust enrichment, Travelers seeks to recover the sums it paid to the defendants as No-Fault benefits, which totals more than $5 million dollars.

Travelers now seeks an order (1) staying all no-fault collection lawsuits presently being prosecuted by defendant Dipak Nandi and co-defendants professional corporations against Travelers, pursuant to CPLR 2201; and (2) granting a preliminary injunction enjoining the defendants from commencing future lawsuits against Travelers seeking reimbursement of no-fault benefits for acupuncture services pursuant to Insurance Law § 5101 et. seq. and the regulations promulgated thereunder, pending the determination of this action. Defendants cross-move in opposition and seek [*3]an order lifting any previously imposed stays affecting Civil Court lawsuits and dismissing the complaint pursuant to CPLR 3211(a)(4),(5) and (7).

New York permits licensed professionals to incorporate if they are the sole organizers, owners and operators of the corporation. (Business Corporation Law §§ 1503(a),(b), 1508.) To incorporate, the licensed individual(s) must obtain a “certificate … issued by the [DOE] certifying that each of the proposed shareholders, directors and officers is authorized by law to practice a profession which the corporation is being organized to practice.” (Id. at § 1503[b]). The DOE may not issue a certificate of authority to a professional service corporation that does not meet these qualifications. (Education Law § 6507[4][c][i]). Once the PC is formed, shareholders may not transfer their voting power to any person who is not a licensed professional in the field. (See BCL § 1507). New York law prohibits non-physicians from sharing ownership in medical service corporations. (Business Corporation Law §§ 1507, 1508, and Education Law § 6507[4][c].) In order to provide acupuncture services, a professional corporation must be owned, organized and operated by persons who are licensed or certified to practice acupuncture. (See generally New York Business Corporation Law § 1503.) A physician who is licensed to practice medicine in New York need only obtain a certificate in order to practice acupuncture. (See Education Law §§ 8211, 8216[3]; 8 NYCRR § 60.9)

Under New York’s No-Fault system, the insured party is permitted to recover from insurers for “basic economic loss,” including medical expenses, that arise out of the use or operation of an insured vehicle. (Insurance Law § 5102.) The New York State Department of Insurance has stated that medically necessary acupuncture services rendered by a licensed acupuncturist are covered expenses, and are eligible for reimbursement under Insurance Law § 5102 (a)(1). (See Ops Gen Counsel NY Ins Dept 04-01-01.) Insurance Law § 5106(a) and 11 NYCRR § 65-3.8 require insurers to pay or deny a claim within thirty days after the claimant supplies proof of the fact and amount of loss sustained. Under a line of cases commencing with Presbyterian Hospital in the City of New York v Maryland Casualty Company (90 NY2d 274, [1997]) and Cent. Gen. Hosp. v Chubb Group of Ins. Cos. (90 NY2d 195 [1997]), the Court of Appeals has held that the failure of an insurer to comply with the thirty-day rule will result in the insurer being precluded from raising any defense to a claim for payment, other than defenses premised on lack of coverage. Applying Presbyterian Hospital and Central General, the courts have held that claims of fraud based upon fraudulent incorporation or staged accidents are not subject to preclusion. (See Metro Med. Diagnostics, P.C. v Eagle Ins. Co., 293 AD2d 751, [2002]; Midborough Acupuncture P.C. v State Farm Ins. Co., 13 Misc 3d 58, [2006]; A.B. Med. Servs. PLLC v Utica Mut. Ins. Co., 11 Misc 3d 71, 73 [2006]; Montgomery Med. v State Farm Ins., 12 Misc 3d 1169A [2006]; SK Med. Services, P.C. v NY Cent. Mut. Fire Ins. Co., 11 Misc 3d 1086A [2006]).

The regulations governing No-Fault claims presently provide that “[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.” (11 NYCRR § 65-3.16[a][12].) This regulation was initially promulgated to take effect on September 1, 2001, but implementation was stayed by court order until April 4, 2002. Relying on this regulation, the Court of Appeals in State Farm Mut. Auto Ins. Co. v Mallela (4 NY3d 313,[2005]) held that fraudulently incorporated medical corporations were not entitled to reimbursement of no-fault benefits. The Court noted that 11 NYCRR § 65-3.16(a)(12), [*4]specifically “excluded from the meaning of basic economic loss payments made to unlicensed or fraudulently licensed providers, thus rendering them ineligible for reimbursement (Mallela, 4 NY3d at 320). The Court determined that “no cause of action for fraud or unjust enrichment would lie for any payments made by the carriers before … April 4, 2002.” (Id. at 322.) In an action by a medical provider for reimbursement, the defense that a provider is fraudulently licensed is a nonwaivable defense. (See First Help Acupuncture P.C. v State Farm Ins. Co., 12 Misc 3d 129[A] [2006]; see also Allstate Ins. Co. v Belt Parkway Imaging, P.C., 33 AD3d 407 [2006]; see generally Metroscan Imaging P.C. v GEICO Ins. Co., 13 Misc 3d 35 [2006].)

At present there are at least 868 lawsuits pending in the Civil Court of the City of New York, primarily in Bronx and Queens County, in which individual medical providers, named as defendants herein, seek to recover from Travelers assigned first party No-Fault benefits. In addition, Travelers’ has settled some 300 cases involving the named medical providers.

Defendants in their cross motion to dismiss the complaint assert that as there are hundreds of pending actions between the medical providers and Travelers, the within complaint should be dismissed. It is asserted that declaratory judgment is inapplicable and unnecessary, as Travelers has raised the defenses of fraudulent incorporation, failure to comply with licensing requirements and the performance of services by independent contractors in the lower courts, and may continue to do so, and that as any such determination in the lower court would be subject to the doctrine of res judicata and collateral estoppel. Defendants thus assert that these issues should be litigated in the lower court actions.

Travelers, in opposition, asserts that this court is the appropriate forum for the resolution of all common issues of law and fact between itself and the 17 separate professional corporations that are alleged to be owned and controlled by Dipak Nandi. It is asserted if Travelers prevails in this action, then it would have no obligation to pay any of the defendant professional corporations for claims presently pending in the Civil Court or District Court, and that a single determination in this court would resolve hundreds of current actions and foreclose future actions involving these professional corporations. Travelers asserts that declaratory judgment is not available in the lower courts, and that it is in the interest of judicial economy to have the issues determined here, rather than litigating hundreds of claims in the lower courts. In addition it is asserted that a single determination of the matter would avoid the possibility of inconsistent results in the lower courts.

CPLR 3001 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. If the court declines to render such a judgment it shall state its grounds.” An action is 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. 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].) While a court may dismiss a declaratory judgment action in a proper exercise of discretion, the mere existence of other adequate remedies does not mandate dismissal. (See CPLR 3001; Lehigh Portland Cement Co. v New York State Dept. of Envtl. Conservation, 87 NY2d 136, 140 [1995]; Hudson Valley Oil Heat Council, Inc. v Town of Warwick, 7 AD3d 572, 574 [2004].) In addition, “[t]he fact that the court may be required to determine the rights of the parties upon the happening of a future event does not [*5]mean that the declaratory judgment will be merely advisory. In the typical case where the future event is an act contemplated by one of the parties, it is assumed that the parties will act in accordance with the law and thus the court’s determination will have the immediate and practical effect of influencing their conduct…” (New York Pub. Interest Research Group v Carey, 42 NY2d 527, 530-531 [1977].)

The court finds that a justiciable controversy exists here between the parties. Defendants assertion that a fair determination cannot be had simply because there are 17 PC defendants, the issues are complex and varied, will require extensive discovery and perhaps multiple hearings, is rejected. Furthermore, the fact that the PCs have instituted actions against Travelers in the Civil Courts does not warrant the dismissal of this action. An action for declaratory judgment can only be prosecuted in the Supreme Court and a determination here will obviate the need for future litigation between the parties as to claims for unpaid acupuncture services. Contrary to defendants assertions, a determination of the declaratory judgment action would not result in a return to the Civil Courts for a “trial on the merits.” Once a judgment and declaration is entered in the Supreme Court, whether in favor of the plaintiff or the defendant, there will be no need for the lower courts to conduct trials on the claims of fraudulent incorporation, licensure or the status of the acupuncturist. Furthermore, declaratory judgment will be dispositive of future claims by the defendant PCs for unpaid claims for acupuncture services against Traveler. It is in the interests of judicial economy to resolve the controversy in a single action, rather than require the parties and the lower courts to engage in piecemeal and repetitive litigation.

The court further notes that the issues raised by Travelers regarding fraudulent incorporation, lack of licenses, and the use of independent contractors, are also pertinent to the causes of action for fraud and unjust enrichment.

Defendants’ assertion that the issues raised by Travelers pertaining to Universal’s fraudulent incorporation were previously raised and decided by the Civil Court, Bronx County in an action entitled Universal Acupuncture Pain Services, P.C., a/a/o Jose Alpizar v State Farm Insurance Company (Index No. 58595/2003, [Rodriquez,J.]) is misplaced. The court therein found that State Farm had failed to submit evidence in admissible form to sustain its allegations and thus denied the cross motion to dismiss the complaint, or to compel Dr. Nandi’s deposition. Contrary to defendants’ assertions the court therein made no determination on the merits as to whether Universal was fraudulently incorporated. It is noted that Travelers was not a party to that action. However, in several Civil Court, Bronx County actions in which Travelers is a defendant, it has asserted that the medical provider is not entitled to payment and has been granted the right to conduct discovery, including the deposition of Dipak Nandi, pertaining to its defense of fraudulent incorporation. (See Statewide Medical Services, P.C., a/a/o Luis Rodriguez v Travelers Insurance Company,13 Misc 3d 134A [2006]; Maple Med. Acupuncture Servs., P.C. v Travelers Ins. Co., 13 Misc 3d 134A [2006]; Delta Med. Acupuncture Servs., P.C. v Travelers Ins. Co., 13 Misc 3d 134A, [2006]; Continental Med. Acupuncture Servs., P.C. v Travelers Ins. Co., 14 Misc 3d 131A [2007].)

Accepting the plaintiff’s factual allegations as true and according them the benefit of every favorable inference, as required on a motion to dismiss for failure to state a cause of action (see Leon v Martinez, 84 NY2d 83, 87-88 [1994]), the court finds that plaintiff has stated a cause of action for fraud and unjust enrichment. The essential elements of such a cause of action are “representation [*6]of a material existing fact, falsity, scienter, deception and injury.” (Channel Master Corp. v Aluminium Ltd. Sales Corp., 4 NY2d 403, 406-407 [1954].) Here, plaintiff alleges that, in violation of Section 1507 of the Business Corporation Law , Nandi used or bought the use of the names and medical licenses of others to form medical corporations so that he could own or control medical practices, profit from them, bill no-fault insurers for medical services and, in so doing, facilitate fraudulent billing practices. Plaintiff also alleges that Nandi used the name of a licensed acupuncturist in order to form an acupuncture practice which he owned and controlled at a time when he was not certified to practice acupuncture, and formed other PCs which were not licensed to perform acupuncture, and that acupuncture services were performed by independent contractors, and not employees of the PCs. It is alleged that the PC defendants regularly submitted no-fault claims to plaintiffs, falsely representing that the PC defendants were valid medical professional corporations, and that the services provided were provided by their employees. Plaintiff further alleges that it paid substantial amounts of money to the PC defendants based upon their justifiable reliance that the PC defendants comported with applicable statutes and administrative regulations governing the provision of health services.To prevail on a claim of unjust enrichment, “a party must show that (1) the other party was enriched, (2) at that party’s expense, and (3) that it is against equity and good conscience to permit [the other party] to retain what is sought to be recovered’.” (Citibank, N.A. v Walker, 12 AD3d 480, 481, [2004], quoting Paramount Film Distrib. Corp. v State of New York, 30 NY2d 415, 421 [1972], cert denied 41 US 829 [1973].) “Unjust enrichment, however, does not require the performance of any wrongful act by the one enriched.” (Ptachewich v Ptachewich, 96 AD2d 582, [1983].) “Innocent parties may frequently be unjustly enriched.” (Id.; see Simonds v Simonds, 45 NY2d 233, 242 [1978]; Cruz v McAneney, 31 AD3d 54 [2006].) Contrary to defendants’ assertions, plaintiffs are not required to allege the defendants engaged in fraudulent conduct or justifiably relied upon fraudulent statements in order to state a cause of action for unjust enrichment.

In Mallela the Court of Appeals held that no cause of action for fraud or unjust enrichment would lie for payments made to fraudulently incorporated providers before the revised regulations went into effect. By disallowing such claims for payments made before April 4, 2002, the Mallela Court recognized that the law as it existed prior to that date did not recognize claims to recoup payments from entities because they were fraudulently incorporated.

Under the common law of New York, compensation has been denied to unlicensed providers of services for which a regulatory license is required. (See Metroscan Imaging, P.C. v Geico Ins. Co., 13 Misc 3d 35, 38-39 [2006] [citing Spivak v Sachs, 16 NY2d 163 [1965]; Bendell v De Dominicis, 251 NY 305 [1929]; Mavco Realty Corp. v M. Slayton Real Estate, Inc., 12 AD3d 575, [2004]; Price v Close, 302 AD2d 374 [2003]; Gordon v Adenbaum, 171 AD2d 841 [1991].) However, the courts have distinguished between denying an unlicensed entity compensation and permitting the recovery of a fee after it has been paid. The lack of a license does not permit the recovery of a fee from the unlicensed provider after it has been paid. To the extent that Travelers seeks to recover payments that it made to the defendants on the grounds that the acupuncturists were independent contractors and not employees of the PCs, the court finds that no basis exists for carving out such an exception. Although the question certified to the court in Mallela was limited to fraudulent incorporation, prior to Mallela no private right of action existed which permitted an insurer to seek enforcement of the governing statutory provisions and regulations or to recover [*7]damages based upon the breach of the same. Therefore, Travelers’ causes of action for fraud and unjust enrichment to recover no-fault payments, whether based on the fraudulent incorporation, failure to obtain a license to perform acupuncture, or the use of independent contractors to perform the acupuncture services is limited to payments made after April 2, 2004. Travelers may not seek to recover no-fault payments it made the defendants prior to that date. (See Allstate Ins. Co. v Belt Parkway Imaging P.C., 33 AD3d 407 [2006]; Metroscan Imaging, P.C. v Geico Ins. Co., supra).

Finally, contrary to defendants’ assertions, the statute of limitations for the fraud and unjust enrichment causes of action have not expired. The statute of limitations for fraud is the greater of six years from when the cause of action accrued or two years from the time the plaintiff discovers the fraud. (CPLR 213[8].) The statute of limitations for unjust enrichment is six years. (CPLR 213[1].) Prior April 4, 2002 when the revised regulation became effective, an insurer did not have a right to recoup payments made to fraudulently incorporated or improperly licensed medical providers. Since these claims are limited to payments Travelers made on or after April 4, 2002, the commencement of the within action on November 2, 2006 is timely as to all of the defendants. Defendants’ request to dismiss the claims against Mr. Nandi on the grounds of statute of limitations, therefore, is rejected.

Turning now to plaintiff’s motion, CPLR 2201 provides that “[e]xcept where otherwise prescribed by law, the court in which an action is pending may grant a stay of proceedings in a proper case, upon such terms as may be just.” Thus, while this court may issue a stay of an action pending before it in the Supreme Court, it lacks statutory authority to stay actions pending in the Civil Court or District Court. Plaintiff’s motion for a “stay” of the pending lower court actions is in fact one for a preliminary injunction. (See Siegel, NY Prac § 255 [4th ed].) Plaintiff also seeks a preliminary injunction enjoining the defendants from commencing future lawsuits against it for reimbursement of no-fault benefits for acupuncture services pending the determination of this action. A preliminary injunction may issue only if the moving party can demonstrate (1) the likelihood of success on the merits; (2) irreparable injury if the preliminary injunction is not granted, and (3) a balancing of the equities in its favor. (Doe v Axelrod, 73 NY2d 748 [1988]; Preston Corp. v Fabrication Enters., 68 NY2d 397 [1986]; W.T. Grant Co. v Srogi, 52 NY2d 496 [1981].) “Preliminary injunctive relief is a drastic remedy that will not be granted unless a clear right to it is established under the law … and the burden of showing an undisputed right rests upon the movant.” (Zanghi v State of New York, 204 AD2d 313, 314 [1994].) Here, plaintiff has submitted depositions of Mr. Nandi, and other individuals who were involved in the formation of some of the defendant PCs, which were prepared for actions involving some of the same defendants. It is noted that some of the PCs and Nandi were defendants in the Mallela action. Plaintiff has also submitted affidavits, certificate of incorporation and other documentary evidence which supports its claim that at least some of the PCs were fraudulently incorporated or were not authorized to perform acupuncture at the time the PCs were incorporated. In addition, it is undisputed that Travelers made payments to the defendants after April 4, 2002, and it has also withheld payments to the PCs for acupuncture services. Plaintiff’s evidence is sufficient to establish the likelihood of success on the merits of at least a portion of its claims. In addition, in view of the multiplicity of lawsuits and the possible inconsistent outcomes in the absence of an injunction, plaintiff has established the elements of irreparable injury and the balancing of the equities in its favor.

Accordingly, defendants’ cross motion to dismiss the complaint is granted to the extent that [*8]plaintiff’s causes of action to recover damages for fraud and unjust enrichment is limited to payments it made to the defendant on or after April 4, 2002. The request for punitive damages is dismissed. The remainder of defendant’s cross motion is denied. Plaintiff’s motion for a preliminary injunction enjoining all No-Fault collection actions for acupuncture services presently pending between the parties in the New York City Civil Courts and in the Nassau and Suffolk County District Courts, pending the determination of this action, is granted. That branch of plaintiff’s motion which seeks a preliminary injunction enjoining the defendants from commencing future lawsuits against Travelers seeking reimbursement of no-fault benefits for acupuncture services pursuant to Insurance Law § 5101 et. seq. and the regulations promulgated thereunder, pending the determination of this action, is granted. Plaintiffs are directed to post a bond in an amount to be set forth in the order to be entered hereon. The parties are to submit affidavits to the court as to the amount of the bond, along with the proposed order.

Settle order.

J.S.C.

[*1]

[*2]Civil Court of the City of New York, Queens County, May 14, 2007

APPEARANCES OF COUNSEL

Cohen & Jaffe, Lake Success (Richard S. Jaffe and Stefan Belinfanti of counsel), for plaintiff. Shapiro, Beilly, Rosenberg, Aronowitz, Levy & Fox, LLP, New York City (Shelly Hefefz of counsel), for defendant.

OPINION OF THE COURT

Diane A. Lebedeff, J.

Currently, torrents of no-fault litigation deluge New York courts and no-fault requests for accelerated judgment swell our motion calendars.^[FN1] Adding to the turmoil is that no-fault [*3]summary judgment motions pose undeniable difficulties, in large part, because traditional summary judgment formulations give poor guidance for their ready resolution.

Building a more workable approach to no-fault summary judgment motions requires recognition that the bulk of no-fault summary judgment issues are decided on the sufficiency of the papers and arguments of law regarding specific no-fault technicalities, as well as explicit identification of no-fault variations of traditional summary judgment precepts.^[FN2] Using that foundation, construction of a series of relevant inquiries produces the following four-step analysis for no-fault summary judgment motions: (1) a threshold review of the three requisite showings of a no-fault plaintiff’s prima facie case; (2) an assessment of the insurer’s tendered proof of issuance and service of its response, if any; (3) a regulatory compliance review of any properly served insurer response, weighing a response’s timeliness, form and substance; and (4), finally, a search for triable issues of fact in relation to any properly preserved, otherwise precludable defenses, as well as of defenses independent of the response process. This decision concentrates on these four areas of inquiry, with amplification and qualifications footnoted.

This same analysis is adaptable to identification of trial issues in no-fault cases and—by starting with the second step—to insurers’ motions and cross motions for summary judgment. In relation to the case before the court, the plaintiff’s motion and insurer’s cross motion for summary judgment are subjected to the above pattern of analysis and, near the end of this decision, special consideration is given to the fee schedule dispute posed.

Step 1: Plaintiff’s Prima Facie Threshold Review

As a matter of law, a no-fault plaintiff’s summary judgment showing is extremely limited [*4]and is free of the normal summary judgment obligation to rebut defenses.^[FN3] A no-fault plaintiff’s necessary prima facie showing consists of only three scant elements.

First, the claimant must present in its original motion papers the claim and assignment forms it submitted to the insurer (see, A.B. Med. Servs. PLLC v State Farm Mut. Auto. Ins. Co., 7 Misc 3d 127[A], 2005 NY Slip Op 50432[U] [App Term, 2d & 11th Jud Dists 2005] [as to claim form]; see, Inwood Hill Med. P.C. v Allstate Ins. Co., supra, 2004 NY Slip Op 50565[U], *7; T&G Med. Supplies, Inc. v State Farm Mut. Auto. Ins. Co., 7 Misc 3d 1017[A], 2005 NY Slip Op 50636[U] [Civ Ct, NY County 2005]). Second, necessary to a proper evidentiary foundation for the forms and related documents, a supporting affidavit must establish the tendered records are part of plaintiff’s business records (see CPLR 4518 [a]; North Acupuncture, P.C. v State Farm Ins. Co., 14 Misc 3d 130[A], 2006 NY Slip Op 52523[U], *2 [App Term, 2d & 11th Jud Dists 2006]).^[FN4] Third, the no-fault plaintiff must prove that the claim and assignment forms were served upon the insurer.^[FN5] [*5]

The adequacy of plaintiff’s motion is tested by inspecting the plaintiff’s affidavits and exhibits for sufficiency. If these three elements are made out and stand unrefuted, a no-fault plaintiff is entitled to a determination that it has made out its prima facie case.^[FN6]

Step 2: Assessment of Proof of Issuance and Service of Insurer’s

Denial or Unsatisfied Request

Because no-fault plaintiffs’ summary judgment motion papers need not counter pleaded denials and affirmative defenses, insurers bear the entire burden of establishing the existence of cognizable defenses (see generally, Mitchell S. Lustig and Jill Lakin Schatz, Outside Counsel, Summary Judgment Motions: Defending No-Fault Insurer, NYLJ, Oct. 26, 2005, at 4, col 4). This second analytic stage reviews the insurer’s opposition papers to determine whether the insurer makes a threshold showing that it preserved a precludable defense or that unsatisfied verification requests exist.

Just as a plaintiff must do, and by reason of similar case law standards, the insurer must advance copies of all relevant communications, prove the service of each, and establish a [*6]business record foundation (see, Mitchell S. Lustig and Jill Lakin Schatz, Outside Counsel, Proper Proof of Mailing Under NY No-Fault Law, NYLJ, Oct. 2, 2006, at 4, col 4 [as to insurer’s proof of mailing]). If the insurer claims an unsatisfied request is outstanding, the insurer must submit a copy of the original request and a follow-up request, establish issuance and service of the requests, and supply evidence of the failure to respond or cooperate (Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 35 AD3d 720, 721 [2006]; Psychological Practice, P.C. v State Farm Fire & Cas. Co., 16 Misc 3d 12, 13 [App Term, 2d Dept 2007] [general statement of affiant’s “personal knowledge” not sufficient factual support to establish failure to appear for examination]).^[FN7] However, if the insurer issued a denial while a verification request was outstanding, the request is deemed waived and is disregarded (King’s Med. Supply Inc. v Kemper Auto & Home Ins. Co., 7 Misc 3d 128[A], 2005 NY Slip Op 50450[U], *2 [App Term, 2d & 11th Jud Dists 2005]).

Step 3: Regulatory Compliance Review of Timeliness and Form

of No-Fault Insurer’s Denial or Verification Requests

If the defendant does establish that it issued and served a denial or verification requests, each communication must be examined to determine if it serves as a proper defense by conforming in timing, form and substance with the requirements of the “Rube-Goldberg-like maze” of the No-Fault Law and the “thicket” of governing Insurance Department regulations (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., supra, 90 NY2d at 286, 280).^[FN8]

In relation to timeliness, the insurer must provide proof of “when the . . . [denial or] request . . . was mailed” (I & B Surgical Supply v New York Cent. Mut. Fire Ins. Co., 16 Misc 3d 4, 6 [App Term, 2d & 11th Jud Dists 2007]), and show mailing within the appropriate time period (see n 2). Typically, an insurer’s affidavit refers to the date of [*7]printing of the form and describes a procedure which assured a properly addressed envelope containing the form was mailed on that day or the next business day.

As to form and substance of a denial, a “proper denial of claim must include the information called for in the prescribed denial of claim form . . . and must ‘promptly apprise the claimant with a high degree of specificity of the ground or grounds on which the disclaimer is predicated’ ” and cannot be amended after the applicable time period has passed (Nyack Hosp. v State Farm Mut. Auto. Ins. Co., 11 AD3d 664, 664 [2d Dept 2004], quoting General Acc. Ins. Group v Cirucci, 46 NY2d 862, 864 [1979]). A denial is deficient if it is “factually insufficient, conclusory, vague or otherwise involves a defense which has no merit as a matter of law” (id. at 665, quoting Amaze Med. Supply v Allstate Ins. Co., 3 Misc 3d 43, 44 [App Term, 2d Dept 2004]).^[FN9]

In relation to the form of a verification request, it must “request . . . information . . . relative to . . . [the] claim” from the claimant or identify to the claimant the persons or entities asked to provide the information (Mount Sinai Hosp. v Triboro Coach, 263 AD2d 11, 17 [2d Dept 1999]; Nyack Hosp. v Encompass Ins. Co., 23 AD3d 535 [2d Dept 2005] [“delay” letter explaining investigation underway not a verification request]). Belated litigation objections that such requests are unclear are generally rejected (Westchester County Med. Ctr. v New York Cent. Mut. Fire Ins. Co., 262 AD2d 553, 555 [2d Dept 1999] [“Any confusion . . . as to what was being sought should have been addressed by further communication, not inaction”]; Metroscan Med. Diagnostics, P.C. v Progressive Cas. Ins. Co., 15 Misc 3d 126[A], 2007 NY Slip Op 50500[U], *2 [App Term, 9th & 10th Jud Dists] [fact of response showed request sufficiently clear]).

On these issues, the court reaches a straightforward determination of law unless some cognizable question of ambiguity is raised by a litigant (compare Foley Prods. v Singer Corp., 133 AD2d 531 [4th Dept 1987] [where no ambiguity in document, no deferral for factual exploration]). Dismissal on the ground of prematurity follows if proper unsatisfied outstanding verification requests are established. Where a proper and timely denial is found, the court proceeds to the next analytic step.

Step 4: Summary Judgment Evaluation of Properly Cognizable Defenses[*8]

Only at this final stage are typical summary judgment principles applied to those defenses found preserved and unprecluded, as well as to any independent defenses, with recognition that the defendant bears the burden on such defenses for reasons set forth above.^[FN10] Some defenses can be resolved as a matter of law and others on the basis of evidentiary standards appropriate to the nature of the case. In ruling on such motions, when appropriate, courts should preserve judicial resources and not shy away from granting partial relief as to predicate elements where the record does not support a full determination (CPLR 3212 [e], [g]).

The point upon which opposition papers frequently stumble is the failure to present evidentiary material in admissible form (New York & Presbyt. Hosp. v Allstate Ins. Co., 31 AD3d 512, 513 [2d Dept 2006]; CPLR 3212 [b]).^[FN11] However, because summary judgment may be defeated when the opponent raises a “significant doubt” regarding the existence of “a material, triable issue of fact,” an insurer may avail itself of the alternative of an opposition affidavit which[*9]“set[s] forth names of witnesses, the substance of their testimony, how it was known what their testimony would be, and how the witnesses acquired their knowledge” (Phillips v Kantor & Co., 31 NY2d 307, 311-312 [1972]).^[FN12]

With respect to fee schedule disputes, special treatment is appropriate once, as here, the insurer establishes a timely denial objecting that a charge was not a permissible scheduled fee.^[FN13] Where a fee for medical services or goods does not have a fixed value in the applicable fee schedule and no comparable charge is shown, it is typically found that the fee schedule dispute raises a triable issue (see, for example, A.B. Med. Servs., PLLC v American Tr. Ins. Co., 15 Misc 3d 132[A], 2007 NY Slip Op 50680[U] [App Term, 2d & 11th Jud Dists 2007]).

Conclusion and Application

In the captioned matter, plaintiff moves, and the insurer cross-moves, for summary judgment. The plaintiff has made out a prima facie case, with the insurer admitting receipt of the [*10]two subject claims (step 1); denials are shown to have been issued and served (step 2); the denials are proper in timeliness, form and substance, and preserved fee schedule objection (step 3); and the fee schedule disputes pose triable issues of fact (step 4).

As to the cross motion, the insurer does not establish a proper scheduled fee for the goods at issue and does not show a properly comparable fee. Although the insurer does establish that a verification request was unanswered, it presents no argument of law as to why such request should not be held waived by reason of the denial nor urge that the motion is premature because of outstanding discovery related to matters within the exclusive knowledge of the movant (CPLR 3212 [f]; 3101; Lexington Acupuncture, P.C. v State Farm Ins. Co., 12 Misc 3d 90 [App Term, 2d & 11th Jud Dists 2006]).

Based on the foregoing, the motion and cross motion are granted to the extent that it is determined that plaintiff has established its prima facie case and that triable issues of fact exist as to proper scheduled fees, and they are otherwise denied.

Footnotes

Footnote 1: “No-fault” litigation is brought by medical establishments pursuing insurers for payment of assigned economic loss claims of motor vehicle accident victims. Starting in 2002, a majority of no-fault claimants began to choose litigation over arbitration (Robert A. Stern, Take the Money and Run: The Fraud Crisis in New York’s No-Fault System, 75 NY St BJ 35, 35 [Oct. 2003] [“(b)etween 1999 and 2002, arbitrations and court actions reversed places in the volume of cases filed”]), and they continue to do so in increasing numbers. Statistics portray the consequences. In calendar year 2006 alone, the New York City Civil Court had approximately 100,000 new no-fault case filings, of which roughly 70,000 were filed in Queens County Civil Court. In Queens County Civil Court, on a typical 2007 court day, a trial judge may be assigned two to seven no-fault trials and, on the summary judgment no-fault motion calendar, 100 or so motions may appear; considering a larger time frame of the last six months of 2006 in that same court and all types of no-fault motions, a total of almost 11,000 no-fault motions were resolved on the no-fault motion calendars, with more than 3,000 cases marked disposed, primarily by and before this judge.

Footnote 2: The technical issues involve the no-fault system’s “tightly timed process of claim, disputation and payment” (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 281 [1997]; Insurance Law § 5101 et seq.; 11 NYCRR 65-1.1 et seq.; see , last updated Feb. 2, 2007, for Insurance Department Web site links to the No-Fault Law, regulations, forms, opinion letters and frequently asked questions).

The process of claim submission and insurer response, and the computation of time periods, are well summarized elsewhere (see Inwood Hill Med. v Allstate Ins. Co., 3 Misc 3d 1110[A], 2004 NY Slip Op 50565[U], *4-7 [Civ Ct, NY County 2004, Hagler, J.]; see also Metroscan Imaging v American Tr. Ins. Co., NYLJ, Dec. 10, 1999, at 27, col 5 [Civ Ct, NY County 1999, Karen Smith, J.] [addressing “old” regulations in effect prior to Apr. 5, 2002]). Briefly put, once a claim is submitted (11 NYCRR 65-3.11 [b]), payment is subject to the “30 day rule” (11 NYCRR 65-3.8 [a] [1]), with a default of timely payment entitling a claimant to sue for payment of an overdue claim (Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742, 742-743 [2d Dept 2004]). While a failure to issue a timely denial precludes an insurer from subsequent objection to the sufficiency or propriety of the claim form submitted (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., supra, 90 NY2d at 278), a timely denial preserves the stated objections for litigation. Unsatisfied insurer requests support dismissal of claims.

Footnote 3: A no-fault plaintiff’s substantive proof of its claim is the claim form (Insurance Law § 5106 [a] [claim form gives “proof of the fact and amount of loss sustained”]; 11 NYCRR 65-1.1 [d] [Sec I, Conditions, Proof of Claim] [claim form proves “particulars of the nature and extent of the injuries and (health benefits) received and contemplated”]; Dermatossian v New York City Tr. Auth., 67 NY2d 219, 224 [1986] [“to receive payment (a claimant) need only file a ‘proof of claim’ (which) the insurers are obliged to honor”]). The exemption from the normal summary judgment motion requirement that a movant “show that there is no defense to the cause of action” (CPLR 3212 [b]) arises because courts have perceived that the “clear legislative mandate to facilitate the prompt and efficient resolution of first-party no-fault claims” requires that a litigating no-fault claimant be subjected to “[no] greater burden of proof after the action is commenced than was necessary at the claim stage” (Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U], *3 [App Term, 2d & 11th Jud Dists 2003]; see Global Med. Equip., Inc. v Allstate Ins. Co., 15 Misc 3d 131[A], 2007 NY Slip Op 50675[U], *1 [App Term, 2d & 11th Jud Dists 2007] [plaintiff need not show denial untimely]).

Footnote 4: Such an affidavit must show the affiant “possessed sufficient personal knowledge of plaintiff’s office practices and procedures so as to lay a foundation for the admission of the . . . documents as business records” (Dan Med., P.C. v New York Cent. Mut. Fire Ins. Co., 14 Misc 3d 44, 46 [App Term, 2d & 11th Jud Dists 2006] [affiant’s unelaborated description as “corporate officer” insufficient]; Vista Surgical Supplies, Inc. v Allstate Ins. Co., 15 Misc 3d 126[A], 2007 NY Slip Op 50502[U] [App Term, 9th & 10th Jud Dists 2007] [conclusory statement that documents were business records insufficient]; Pine Hollow Med., P.C. v Progressive Cas. Ins. Co., 13 Misc 3d 131[A], 2006 NY Slip Op 51870[U] [App Term, 2d & 11th Jud Dists 2006] [proper proffer by affidavit of employee of billing company]).

Footnote 5: Service of both the no-fault claim and assignment forms is established by an actual affidavit of mailing or by proof of “an office practice and procedure followed . . . in the regular course of . . . business . . . geared so as to ensure the likelihood that [the item] is always properly addressed and mailed” (Nassau Ins. Co. v Murray, 46 NY2d 828, 829-830 [1978]). A post office receipt may supply additional “direct proof of actual mailing” (LMK Psychological Servs., P.C. v Liberty Mut. Ins. Co., 30 AD3d 727, 728 [3d Dept 2006]) provided evidence relates the receipt to an identified mailing (New York & Presbyt. Hosp. v Allstate Ins. Co., 29 AD3d 547, 548 [2d Dept 2006]). A conclusory affidavit of service is insufficient (A.B. Med. Servs. PLLC v Specialty Natl. Ins. Co., 11 Misc 3d 144[A], 2006 NY Slip Op 50810[U], *2 [App Term, 2d & 11th Jud Dists 2006] [finding deficient statement affiant “issued,” “billed out,” and “sent” claims]). A proper showing of mailing gives rise to a presumption of receipt and an insurer asserting it did not receive a claim bears a heavy burden to overcome that presumption (see, for example, Maldonado v Steiner, 10 Misc 3d 128[A], 2005 NY Slip Op 51905[U] [App Term, 2d & 11th Jud Dists 2005]).

A plaintiff may tender an insurer’s denial of claim form as an acknowledgment of receipt as its business record (see Medical Expertise v Trumbull Ins. Co., 196 Misc 2d 389, 390-394 [Civ Ct, Queens County 2003, Siegal, J.]; but see Midborough Acupuncture, P.C. v New York Cent. Mut. Fire Ins. Co., 13 Misc 3d 132[A], 2006 NY Slip Op 51879[U], *2 [App Term, 2d & 11th Jud Dists 2006] [such tender establishes no other element of plaintiff’s prima facie case]).

Footnote 6: Rarely, an estoppel or a triable issue of fact arises from an actual or possible error in a claim or assignment form (see Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U], *4 [App Term, 2d & 11th Jud Dists 2003] [estoppel as to items not prescribed]; Amaze Med. Supply v Eagle Ins. Co., 3 Misc 3d 130[A], 2004 NY Slip Op 50389[U] [App Term, 2d & 11th Jud Dists 2003] [same, items not delivered to assignor]; see generally, Resnick v Levine, 80 AD2d 699 [3d Dept 1981] [as to errors in business ledgers]; see, Damadian MRI in Garden City, P.C. v Windsor Group Ins., 2 Misc 3d 138[A], 2004 NY Slip Op 50266[U], *2 [App Term, 2d & 11th Jud Dists 2004] [“whether plaintiff is the same entity as the one named in the assignment” can be question of fact] [as to assignment]). Dismissal is warranted where the claim form discloses services were performed by an independent contractor, rather than by claimant (see Rockaway Blvd. Med. P.C. v Progressive Ins., 9 Misc 3d 52, 54 [App Term, 2d Dept 2005]).

Footnote 7: These requirements apply to verification requests, as well as requests for appearance at an examination under oath and independent medical examination. A failure to appear for a “preclaim” examination may be viewed as a lack of cooperation which defeats coverage (see Inwood Hill Med., P.C. v General Assur. Co., 10 Misc 3d 18 [App Term, 1st Dept 2005]), but a plaintiff may render the question a triable issue of fact by offering “a valid excuse for . . . [the] nonappearance [or demonstrate] that the . . . requests were unreasonable under the circumstances” (Amaze Med. Supply Inc. v General Assur. Co., 12 Misc 3d 127[A], 2006 NY Slip Op 50910[U], *1-2 [App Term, 2d & 11th Jud Dists 2006]).

Footnote 8: This review follows the pattern of CPLR 3212 (g) in that the court—”by examining the papers” and “interrogating counsel”—reaches a determination of operative legal facts “deemed established for all purposes in the action” which are “not in dispute or are incontrovertible,” often winnowed during oral argument. This process permits the trial court to comply with the mandatory obligation to take judicial notice of state agency regulations (CPLR 4511 [a]) and be alerted to new appellate decisions not covered in papers prepared over as long as a nine-month period (see Socrates Psychological Servs., P.C. v Progressive Cas. Ins. Co., 7 Misc 3d 642, 645 n 1 [Civ Ct, Queens County 2005]).

Footnote 9: Typical denials assert a defective assignment of benefits, belated filing of the claim, a lack of medical necessity (whether for the treatment or inflation in the quantum or cost of treatment), and that a charge exceeds permitted fee schedules. In many instances, a clear statement of the objection is sufficient, and even medical necessity denials need not set out a medical rationale (A.B. Med. Servs., PLLC v GEICO Cas. Ins. Co., 39 AD3d 778 [2d Dept 2007], revg 12 Misc 3d 30 [App Term, 2d & 11th Jud Dists 2006]; A.B. Med. Servs., PLLC v Liberty Mut. Ins. Co., 39 AD3d 779 [2d Dept 2007]; New York Univ. Hosp. Rusk Inst. v Government Empls. Ins. Co., 39 AD3d 832 [2d Dept 2007]). A rejection for untimely filing must “advise claimants of their right to justify late submissions” or be “deemed ineffective” (Radiology Today, P.C. v Citiwide Auto Leasing Inc., 15 Misc 3d 92, 94 [App Term, 2d & 11th Jud Dists 2007]).

Footnote 10: There are roughly three classes of additional independent defenses. First, some center upon arguments “that the alleged injury does not arise out of an insured incident,” often by asserting a “staged accident” or an independent basis for the injury (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1997]; see also 11 NYCRR 65-3.8 [e]; A.B. Med. Servs. PLLC v Commercial Mut. Ins. Co., 12 Misc 3d 8, 11 [App Term, 2d & 11th Jud Dists 2006] [assignee health care provider not an “innocent” third party and may be subject to retroactive cancellation of fraudulently procured policy]). Second, some urge a lack of eligibility to receive no-fault payments under no-fault or other rules applicable to the medical provider, the patient, or the insured (see, for example, State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, 320 [2005] [improper professional corporation]). Third, albeit less commonly seen, traditional defenses exist, such as statutes of limitations, exhaustion of policy benefits, and the like.

Footnote 11: Formal or substantive requirements apply to certain affidavits (Support Billing & Mgt. Co. v Allstate Ins. Co., 15 Misc 3d 126[A], 2007 NY Slip Op 50496[U], *1 [App Term, 2d & 11th Jud Dists 2007] [doctor must affix stamped facsimile signature (citing CPLR 2106)]; Bath Med. Supply, Inc. v Allstate Indem. Co., 13 Misc 3d 142[A], 2006 NY Slip Op 52273[U] [App Term, 2d & 11th Jud Dists 2006] [out-of-state affidavit needs certificate of conformity to comply with CPLR 2309 (c)]; see All County Open MRI & Diagnostic Radiology P.C. v Travelers Ins. Co., 11 Misc 3d 131[A], 2006 NY Slip Op 50318[U], *2 [App Term, 9th & 10th Jud Dists 2006] [“peer review . . . conclud(ing) that there was no medical necessity due to ‘the lack of sufficient information’ upon which the reviewer could make such determination” deficient, absent proof of verification request for such information]). Exhibits should also be in admissible form or their proffer limited to admissible portions (see, as to police reports, Johnson v Lutz, 253 NY 124 [1930]; 58 NY Jur 2d Evidence and Witnesses § 480 [police reports, generally]; § 503 [police report as to cause of accident or injury]). And, even though “admissions by a party of any fact material to the issue are always competent evidence against [that party], wherever, whenever or to whomsoever made” (Reed v McCord, 160 NY 330, 341 [1899]), some formal requirements may be applicable to assure accuracy (see R.M. Newell Co. v Rice, 236 AD2d 843, 844 [4th Dept 1997], lv denied 90 NY2d 807 [1997] [proffer of reporter-certified unsigned deposition transcript]).

Footnote 12: Such showing is distinguished from a simple offer of proof because its proponent should “demonstrate acceptable excuse for [its] failure to meet the requirement of tender in admissible form” (Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; see, Ratut v Singh, 186 Misc 2d 350, 351 [Civ Ct, Kings County 2000], and Vincent C. Alexander, New York Practice, Opposing Summary Judgment With Hearsay, NYLJ, Mar. 15, 2004, at 3, col 1 [discussing cases]; see Ocean Diagnostic Imaging, P.C. v Lancer Ins. Co., 6 Misc 3d 62, 65 [App Term, 2d & 11th Jud Dists 2004, Golia, J., dissenting]). This type of opposition is likely to be tendered when a defense is “that the alleged injury does not arise out of an insured incident” (Central Gen. Hosp. v Chubb Group of Ins. Cos., supra, 90 NY2d at 199), or an insurer urges “badges of fraud” are present (see Tahir v Progressive Cas. Ins. Co., 12 Misc 3d 657, 664 [Civ Ct, NY County 2006, Lebedeff, J.] [collecting cases in dicta]).

Footnote 13: A medical provider must limit its charges to those permitted by approved fee schedules (Insurance Law § 5108 [a]; 11 NYCRR 68.0 [f]), which protects a patient from erosion of available benefits by inflated charges (Ops Gen Counsel NY Ins Dept No. 04-06-11 [June 16, 2004]; see AIU Ins. Co. v Olmecs Med. Supply, Inc., 2005 WL 3710370, *1-4, 2005 US Dist LEXIS 29666, *4-13 [ED NY 2005] [scheme to highly inflate durable medical goods claims]). Fees for services and procedures are governed by the workers’ compensation fee schedule (11 NYCRR 68.1), and durable medical goods fees are governed by the New York Medicaid fee schedule (11 NYCRR part 68, Appendix 17C, part F [a]; , last updated May 1, 2007). An attorney’s affirmation can request judicial notice of a scheduled fee and submit the page of the fee schedule applicable to the fee on the date of service or sale.

If an insurer demonstrates it was correct in its reading of the fee schedules or its identification of comparable procedures, it is entitled to judgment (Forrest Chen Acupuncture Servs., P.C. v GEICO Ins. Co., 15 Misc 3d 137[A], 2007 NY Slip Op 50874[U] [App Term, 2d & 11th Jud Dists 2007]; Great Wall Acupuncture v GEICO Gen. Ins. Co., 16 Misc 3d 23 [App Term, 2d & 11th Jud Dists 2007] [acupuncturist’s fee properly set as equivalent to chiropractor performing acupuncture]), unless the claimant shows “an unusual procedure or unique circumstance justifies the necessity” for a charge above the scheduled fee (11 NYCRR 68.4).

Supreme Court, Queens County

13956 2006

Duane A. Hart, J.

Plaintiff allegedly was injured in a motor vehicle accident in New York on March 17, 2006, while a passenger in a vehicle owned and operated by Silvanous Parchment. Defendant issued an insurance policy in Florida to Parchment, who purportedly was a resident of Florida, for that vehicle, which was registered in Florida. [*2]

On April 13, 2006, plaintiff submitted a claim for no-fault benefits to defendant insurer. On June 15, 2006, defendant insurer denied said claim on the ground that the policy was revoked for material misrepresentation.

In this action by plaintiff, among other things, for judgment declaring her rights under the policy, plaintiff moves for summary judgment determining that she is eligible for no-fault benefits and that defendant’s denial of such benefits was untimely. Defendant cross-moves for summary judgment on the ground that plaintiff’s injuries did not arise from a covered accident.

Defendant cancelled the policy on June 7, 2006, after it discovered Parchment made a material misrepresentation on the insurance application. The material misrepresentation was that Parchment resided and garaged his vehicle in Florida. An investigation by defendant after the subject accident revealed that Parchment resided and garaged his vehicle in New York.

Florida law allows for the retroactive cancellation of an insurance policy, where, as in this case, a material misrepresentation is contained within the insurance application. (See Penaranda v Progressive American Insurance Co., 747 So.2d 953 [Fla. 1999].) New York law does not allow retroactive cancellation. (See Vehicle and Traffic Law § 313; see also Matter of Insurance Co. of North America v Kaplun, 274 AD2d 293 [2000]; Olivio v Government Employees Insurance Co. of Washington, D.C., 46 AD2d 437 [1975].) There is no dispute that there is a conflict between the law of New York and the law of Florida. This conflict of law relating to an insurance policy must be resolved by application of the conflict of law rules relevant to contracts. (See Matter of Integon Insurance Co. v Garcia, 281 AD2d 480 [2001].) The courts apply the “center of gravity” or “grouping of contacts” inquiry to determine which State has the most significant contacts to the dispute. (See Matter of Eagle Insurance Co. v Singletary, 279 AD2d 56 [2000].) Significant contacts in a case involving a contract, in addition to the place of contracting, are the place of negotiation and performance, the location of the subject matter of the contract and the domicile or place of business of the contracting parties. (See Zurich Insurance Co. v Shearson Lehman Hutton, Inc., 84 NY2d 309 [1994]; see also Matter of Integon Insurance Co. v Garcia, supra; Matter of Eagle Insurance Co. v Singletary, supra.)

Applying the grouping of contacts inquiry to the facts here, the State of Florida has the most significant contacts with the parties and the contract. Defendant issued its insurance policy to Parchment in Florida, who purportedly was a resident of Florida, [*3]for a vehicle registered in Florida, which terms incorporated Florida law. The only connection between the policy and New York is that Parchment was driving the vehicle in New York at the time of the accident. Thus, Florida law is controlling under New York’s conflict of law rules. Moreover, Florida’s significant contacts with the subject contract and legitimate governmental interest in protecting its honest policyholders from bearing the burden of paying claims incurred by dishonest policyholders outweighs New York’s governmental interest in protecting innocent third parties from being deprived of insurance coverage, especially since New York statutes provide the means to ensure compensation to persons injured due to the fault of uninsured motorists within the state by requiring New York policyholders to purchase uninsured motorist coverage (see Insurance Law § 3420[f]) and establishing and providing insurance through the Motor Vehicle Accident Indemnification Corp. (See Insurance Law § 5201 et seq.)

Applying Florida law, defendant’s retroactive cancellation of the insurance policy due to Parchment’s material misrepresentation in his application for insurance was valid. Since the subject policy was void ab initio, defendant’s denial of plaintiff’s no-fault claim was proper. In addition, the timeliness of defendant’s denial of plaintiff’s no-fault claim is irrelevant as the denial was based upon lack of coverage. (See Central General Hospital v Chubb Group of Insurance Cos., 90 NY2d 195 [1997].)

Accordingly, it is ORDERED AND ADJUDGED that plaintiff’s motion for summary judgment and attorney’s fees is denied and defendant’s cross motion for summary judgment dismissing plaintiff’s complaint is granted; and it is further

ADJUDGED AND DECLARED that defendant is not obligated to provide “no-fault” coverage to plaintiff.

Dated: April 11, 2007J.S.C.

[*1]

[*2]Civil Court of the City of New York, Queens County, February 23, 2007

APPEARANCES OF COUNSEL

Kenneth F. Nwele, Brooklyn, for Valley Stream Medical & Rehab, P.C., plaintiff. Alden Banniettis, Brooklyn (Damien Semel–DeFeo and Jeff Henle of counsel), for A.M. Medical Services, P.C., plaintiff. Bee Ready Fishbein Hatter & Donovan, LLP, Mineola (Lee–David Weiner of counsel), for Liberty Mutual Insurance Company, defendant. Bruno, Gerbino & Soriano, LLP, Melville (Akwei Oko Acquaye of counsel), for Allstate Insurance Company, defendant.

OPINION OF THE COURT

Diane A. Lebedeff, J.

Two motions bring up for review the treatment of attorney’s fee awards in court cases seeking payment of no-fault economic loss benefits. Treated together for the purposes of motion disposition, these cases form the basis for an inquiry into the recently disputed question of the proper formula to use for computation of a no-fault attorney’s fee award to a prevailing plaintiff’s [*3]counsel in routine no-fault litigation, as well as an exploration of the situations in which a plaintiff is not entitled to an attorney’s fee award.

The General Attorney’s Fee Rule for a Prevailing No-Fault Plaintiff

It is well established that a prevailing no-fault claimant may claim an award of attorney’s fees (Insurance Law § 5106 [a] [such attorney’s fees are “subject to limitations promulgated by the superintendent (of the NY State Department of Insurance)]”). A number of formulas for such fees may be found in the “thicket” of no-fault Insurance Department regulations (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 280 [1997], rearg denied 90 NY2d 937 [1997]).^[FN1]

There is, however, only a single provision governing an attorney’s fee award in routine court litigation for a no-fault unpaid economic loss claim, which is that such an “attorney’s fee shall be . . . 20 percent of the amount of first-party benefits, plus interest thereon, awarded by the . . . court, subject to a maximum fee of $850” and a “minimum attorney’s fee . . . [of] $60” (11 NYCRR 65-4.6 [e], [c]). Long established appellate authority holds that such fees were to be calculated “per claim,” which means for each separate claim form submitted to an insurer (Smithtown Gen. Hosp. v State Farm Mut. Auto. Ins. Co., 207 AD2d 338, 339 [2d Dept 1994] [trial court “failed to follow the formula” of the regulations and “incorrectly interpreted the $850 ceiling to apply to the entire action, rather than to each claim, and failed to set a minimum fee of $60 per claim”]). This “per claim” calculation was accepted as the proper approach prior to and subsequent to that Second Department decision (see Hempstead Gen. Hosp. v Allstate Ins. Co., 120 Misc 2d 303, 311 [Sup Ct, Nassau County 1983], revd on other grounds 106 AD2d 429 [2d Dept 1984], affd 64 NY2d 958 [1985]; Hempstead Gen. Hosp. v Insurance Co. of N. Am., 208 AD2d 501, 501 [2d Dept 1994] [“per claim”]; St. Clare’s Hosp. v Allstate Ins. Co., 215 AD2d 641, 641 [2d Dept 1995] [fees to be fixed “per claim” and minimum applied to “each such claim”]).^[FN2]

This conclusion has seemingly been drawn into question by an opinion letter issued by [*4]the Office of the General Counsel of the Insurance Department on October 8, 2003. Entitled “No-Fault Attorney Fees for Multiple Provider Bills,” it opines that—specifically in relation to court actions—”the amount of attorney’s fees awarded will be based upon 20% of the total amount of first party benefits awarded” and that “the 20% calculation is based upon benefits awarded from the total number of disputed bills in a court action” (text appears at [accessed Feb. 23, 2007]), which would potentially lower legal fees awards by applying the dollar cap to all combined claims, instead of treating claims separately. The opinion letter represents that its conclusion springs from a plain reading of the regulations and it contains no legal rationale, points to no change in governing case law, and does not rest upon a contemporaneous amendment of the regulatory language.

Three courts recently addressed this 2003 no-fault attorney’s fee opinion letter. In A.M. Med. Servs. P.C. v New York Cent. Mut. Fire Ins. Co. (NYLJ, July 24, 2006, at 25, col 1 [Civ Ct, Queens County 2006, Raffaele, J.]), the court declined to follow the opinion letter and calculated attorney’s fees based upon each claim form, noting that the “total award” basis “flies in the face of existing decisional precedent,” “gives the defendant insurers a windfall by limiting their exposure for litigation fees,” “provides carriers with a disincentive to settlement, and encourages . . . no-fault litigation.” In Alpha Chiropractic P.C. v State Farm Mut. Auto Ins. (14 Misc 3d 673 [Civ Ct, Queens County 2006, Siegal, J.]), the court found the opinion letter unpersuasive, for similar reasons. In Marigliano v New York Cent. Mut. Fire Ins. Co. (13 Misc 3d 1079 [Civ Ct, Richmond County 2006, Sweeney, J.]), the court deferred to the opinion letter on the basis of limited arguments.

This court finds the attorney’s fee opinion letter does not merit departure from settled law for three interrelated reasons. First, it must be recognized that this document is not a regulation adopted in conformity with the State Administrative Procedure Act (State Administrative Procedure Act § 101 et seq.), and facially falls in the class of exempt “interpretive statements and statements of general policy which in themselves have no legal effect but are merely explanatory” (State Administrative Procedure Act § 102 [2] [b] [iv]). Courts often find such opinion letters merit no weight (see State Farm Mut. Auto. Ins. Co. v Mallela, 175 F Supp 2d 401, 418 n 12 [ED NY 2001, Sifton, J.] [declining to follow a Department of Insurance opinion letter and noting that another opinion letter “relied upon by plaintiff, was authored at the instance of lead counsel for the insurers in . . . (a) matter pending in state court, who provided the Department with a five-page exposition of the issues presented”]).

Second, Insurance Department opinion letters which endorse a litigation or arbitration result contrary to existing judicial dictates specifically find little judicial favor. Such dismissive treatment was given to a 2000 Insurance Department opinion letter entitled “No-Fault Burden of Proof,” which was generally recognized to be an administrative attempt to avoid the Court of Appeals preclusion rule announced in Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co. (supra) by requiring a no-fault claimant to prove medical necessity even if the issue were not preserved by a timely denial. That 2000 opinion letter was given so little regard that its rejection was not even discussed in Matter of Pradip Das/N.Y. Med. Rehab v Allstate Ins. Co. (297 AD2d 321 [2d Dept 2002]), although extensively argued therein, which was described at length in Matter of Park Radiology v Allstate Ins. Co. (2 Misc 3d 621 [Civ Ct, Richmond County 2003]) and Preferred Med. Imaging, P.C. v Liberty Mut. Fire Ins. Co. (11 Misc 3d 1059[A], 2006 NY Slip Op 50278[U] [Suffolk Dist Ct 2006]).

Third and most compelling, absent any change in statutory law or regulations, common-[*5]law precedent principles require all lower trial courts view as binding applicable Appellate Division decisions, unless and until there is any conflicting authority (People v Towndrow, 187 AD2d 194, 195 [4th Dept 1993], lv dismissed 81 NY2d 1021 [1993] [“It should hardly need to be stated that trial courts are bound to follow the holdings of the Appellate Division”]; Mountain View Coach Lines v Storms, 102 AD2d 663, 664 [2d Dept 1984, Titone, J.] [“doctrine of stare decisis requires trial courts in this department to follow precedents set by the Appellate Division of another department until the Court of Appeals or this (department) pronounces a contrary rule” which doctrine is “necessary to maintain uniformity and consistency”]). Given stare decisis precepts, this court is not free to depart from settled legal precedent and is barred from according any weight or consequence to the subject opinion letter.

Based on the foregoing, the court determines that the prevailing no-fault claimant’s attorney’s fees herein are to be calculated on a per claim basis under settled principles of law. Accordingly, the court rejects the contrary argument raised in A.M. Med. Servs., P.C. v Allstate Ins. Co. and, because there is no objection to the plaintiff’s mathematical calculation, awards legal fees in the amount requested by the successful plaintiff for the two claim forms at issue.

Exceptions to the General Rule for No-Fault Plaintiff’s Attorney’s Fee

There are also situations in which a no-fault plaintiff is not entitled to an attorney’s fee under the regulations, directly or by construction. No legal fee is available, of course, in cases in which a plaintiff has no valid claim at the outset of the action (11 NYCRR 65-4.6 [a] [“If . . . a court action was commenced by an attorney on behalf of an applicant and the claim or portion thereof was not denied or overdue at the time . . . the action was commenced, no attorney’s fees shall be granted”]). And, in certain defined situations, litigation concerning a no-fault fee schedule dispute might not support an attorney’s fee (11 NYCRR 65-4.6 [i] [“if the charges by a health care provider . . . exceed the limitations contained in the (fee) schedules established pursuant to section 5108 of the Insurance Law, no attorney’s fee shall be payable” unless the litigation “involve(s) interpretation of such schedules or inadvertent miscalculation or error”]).

However, the regulations facially do not address the situation where a plaintiff had a valid claim for unpaid no-fault benefits at the commencement of the litigation but, for reasons independent of the litigation, has no proper claim for no-fault damages at its conclusion. In Valley Stream Med. & Rehab, P.C. v Liberty Mut. Ins. Co., one of the two cases at bar, after service of the summons and complaint, the plaintiff itself subsequently pursued and secured a settlement in arbitration for the same claim through different counsel. Given these facts, plaintiff is unable to demonstrate that even some small part of the original claim remained unpaid (compare Dondysh v Lumbermans Mut. Ins. Co., 168 Misc 2d 121 [App Term, 2d Dept 1996] [some interest remained unpaid]). In short, there is no outstanding obligation on the part of the insurer shown.

As to the regulation, it bases a claimant’s attorney’s fee calculation upon consideration of “the amount of first-party benefits, plus interest thereon, awarded by the . . . court” (11 NYCRR 65-4.6 [e]), and the regulation is interpreted literally (Hempstead General Hosp. v Allstate Ins. Co., supra, 106 AD2d at 431 [modification of judgment because the ” ‘fee upon a fee’ awarded to plaintiff . . . is not authorized by the regulations”]). Here, given that neither benefits nor interest [*6]are due to plaintiff, there is no dollar figure to which the percentage calculation, the dollar maximum, or the dollar minimum attaches and there is no basis upon which legal fees may be awarded.

Accordingly, the court denies the application for legal fees in Valley Stream Med. & Rehab, P.C. v Liberty Mut. Ins. Co. The court does not address whether the client has any obligation to pay an attorney’s fee to its attorney of record, given that such an issue is outside the scope of the instant papers.

Footnotes

Footnote 1: Internet links to the text of the current regulations, the superseded older regulations effective through April 5, 2002, the no-fault statute, various no-fault fee schedules, and Insurance Department circular letters and opinion letters may be found at (accessed Feb. 23, 2007).

The current regulations’ provisions applicable to attorney’s fee awards in court proceedings appear within 11 NYCRR 65-4.6, to be distinguished from numerous other rules applicable in other situations, such as in claims processing and late payment of arbitration awards (11 NYCRR 65-3.10), lien and offset situations (11 NYCRR 65-3.19) and proceedings before a master arbitrator (11 NYCRR 65-4.10 [j]).

Footnote 2: Although the applicable language of the mathematical formula remained unchanged over time, amendments did increase the dollar amount of the maximum figures and changed the context in which the formula appeared. The older regulation is quoted in full in Hempstead General Hosp. v Allstate Ins. Co. (supra, 106 AD2d at 429-430).