[*1]

Civil Court of the City of New York, Queens County, December 13, 2006

APPEARANCES OF COUNSEL

Baker, Sanders, Barshay, Grossman, Fass, Muhlstock & Neuwirth, Mineola (Joaquin J. Lopez of counsel), for plaintiff. Melli, Guerin & Melli, P.C., New York City (Kevin Addor of counsel), for defendant.

OPINION OF THE COURT

Bernice D. Siegal, J.

Plaintiff, a health care provider, commenced the within action to recover reimbursement from defendant insurer for services rendered to plaintiff’s assignors including Victoria Orlando,^[FN1] pursuant to New York State’s No-Fault Insurance Law. At trial, the parties stipulated to the following facts:

Plaintiff had mailed and defendant had received eight separate bills, together with an assignment of benefits, as per the following: a claim in the amount of $235.90 for services from February 17, 2004 to March 11, 2004, mailed on March 30, 2004; a claim in the amount of $67.40 for services from April 7, 2004 to April 15, 2004, mailed on May 10, 2004; a claim in the amount of $33.70 for services on April 20, 2004, mailed on June 1, 2004; a claim in the amount of $101.10 for services from May 4, 2004 to May 26, 2004, mailed on June 17, 2004; a claim in the amount of $122.13 for services from November 24, 2003 to November 26, 2003, mailed on December 24, 2003; a claim in the amount of $202.20 for services from December 3, 2003 to December 18, 2003, mailed on January 13, 2004; a claim in the amount of $235.90 for services from December 22, 2003 to January 14, 2004, mailed on February 12, 2004; and a claim for $202.20 for services from January 20, 2004 to February 5, 2004, mailed on March 10, 2004—the total sum of the above eight claims being $1,200.53.

It was further stipulated that the defendant had failed to deny any of the claims and that the claims remain unpaid. After the stipulation was duly noted for the record, both sides rested. However, despite the acquiescence by defendant as to the principal amounts due and owing, two issues of law were presented, along with a third asserted by defendant in its posttrial memorandum of law: (1) what are the statutory attorney’s fees due plaintiff; (2) what is the statutory interest due plaintiff; and (3) when does the statutory interest accrue.

The relevant provisions governing interest, under the relevant no-fault regulations, are 11 NYCRR 65-3.8 (a) (1) and 65-3.9 (a) and (c).

11 NYCRR 65-3.8 (a), as is pertinent hereto, provides that “(1) No-fault benefits are overdue if not paid within 30 calendar days after the insurer receives proof of claim . . .  .”

Section 65-3.9 (a) provides as follows:

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

Section 65-3.9 (c) provides, as is relevant hereto, that “[i]f an applicant does not request arbitration or institute a lawsuit within 30 days after the receipt of a denial of claim form . . . , interest shall not accumulate on the disputed claim . . . until such action is taken.”

The relevant provisions governing attorney’s fees, under the relevant regulations, are the following.

11 NYCRR 65-3.10, which provides, in pertinent part, as follows:

“(a) A applicant or an assignee shall be entitled to recover their attorney’s fees, for services necessarily performed in connection with securing payment, if a valid claim or portion thereof was denied or overdue. . . . If such a claim was overdue but not denied, the attorney’s fee shall be equal to 20 percent of the amount of the first-party benefits and any additional first-party benefits plus interest payable pursuant to section 65-3.9 of this subpart, subject to a maximum fee of $60.”

However, pursuant to Insurance Law § 5106 (a), such attorney’s fees are “subject to limitations promulgated by the superintendent [of the New York State Department of Insurance].” The regulation setting forth those limitations is 11 NYCRR 65-4.6 which, as is relevant to the matter at bar, provides that:

“(c) Except as provided in subdivisions (a) and (b) of this section [those sections dealing with claims that were neither denied nor overdue or which were resolved prior to arbitration], the minimum attorney’s fee payable pursuant to this subpart shall be $60 . . .

“(e) . . . the attorney’s fee shall be limited as follows: 20 percent of the amount of first-party benefits, plus interest thereon, awarded by the . . . court, subject to a maximum fee of $850.”

The dispute between the parties is not so much as to the applicability of the foregoing provisions, but rather the manner in which they are to be applied: the plaintiff provider contending that the statutory interest and attorney’s fees awarded should be based upon each individual claim as submitted through an NF-3 proof of claim; the defendant insurer arguing that the measure of the statutory interest and attorney’s fees be determined by the aggregate of bills which are the subject of the within no-fault action and that interest should be calculated from the date of the commencement of the arbitration or lawsuit. [*2]

Proceeding backwards from the third issue presented—when does the interest accrue—the court acknowledges case law wrestling with the interpretation of 11 NYCRR 65.15 (h) (3) (the predecessor to section 65-3.9 [c]), such as the meaning of “applicant” vis-à-vis an “assignee” provider and whether a distinction should be made between timely denials and late denials (see Tsai Chao v Country-Wide Ins. Co., 11 Misc 3d 1090[A], 2006 NY Slip Op 50794[U] [Nassau Dist Ct 2006]; East Acupuncture, P.C. v Allstate Ins. Co., 8 Misc 3d 849 [Civ Ct, Kings County 2005]). However, the patently clear and unambiguous language in section 65-3.9 (c) referring to “the receipt of a denial of claim form” as a key element in determining the date of accrual thereunder shows the defendant’s argument to be wholly disingenuous, especially in view of the fact that defendant had stipulated at trial that there were no denials. Clearly, then, the defendant’s contention on this issue is totally without merit and whatever interest accruing in this case is to be calculated, pursuant to 11 NYCRR 65-3.8, from 30 days after receipt of the particular claim.

With respect to the other issues presented, the court notes that the language of the aforementioned provisions refer to “claim” in the singular. However, the question remains whether a “claim” refers to each bill submitted or, as argued by the defendant, to the aggregate of the bills for which a provider seeks reimbursement through a single court action.^[FN2]

With respect to interest, the clear implication found in appellate case law in the Second Department is that statutory no-fault interest is payable as per each claim as per each particular NF-3 submitted for payment (see New York & Presbyt. Hosp. v Allstate Ins. Co., 30 AD3d 492 [2d Dept 2006]; Smithtown Gen. Hosp. v State Farm Mut. Auto. Ins. Co., 207 AD2d 338 [2d Dept 1994]). Furthermore, this court finds such interpretation to be the most logical and reasonable, especially where, as here, the plaintiff’s complaint seeks to recover upon several different claims, each of which has a different date upon which interest begins to accrue (i.e., 30 days from receipt of the particular NF-3).

The case law, however, regarding the manner in which the attorney’s fees provisions are to be applied appears less clearly settled. The Appellate Division in Smithtown Gen. Hosp. v State Farm (supra), in reversing a decision regarding attorney’s fees, held that the lower court “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” (207 AD2d at 339). Following the Smithtown case insofar as awarding attorney’s fees for each claim set forth in separate causes of action, as opposed to the entire action, are the decisions in Willis Acupuncture, P.C. v Government Empls. Ins. Co. (6 Misc 3d 1002[A], 2004 NY Slip Op 51702[U] [Civ Ct, Kings County 2004]) and 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]).

On the other hand, the court notes a recent decision holding contra to Smithtown—Marigliano v New York Cent. Mut. Fire Ins. Co. (13 Misc 3d 1079 [Civ Ct, Richmond County 2006]), citing an October 8, 2003 opinion letter issued by the New York State Department of Insurance (which opinion letter was also cited by the defendant in its memorandum). The court found such opinion not inconsistent with the Smithtown decision which dealt with multiple claims of several assignors, rather than of one assignor, as is the case herein and in Marigliano. The opinion letter states that

“[the] total amount [of attorney’s fees] is derived from the total amount of individual bills disputed in . . . a court action . . . , regardless of whether one bill or multiple bills are presented as part of a total claim for benefits, based upon the health services rendered by a provider to the same eligible insured” (Ops Gen Counsel NY Ins Dept No. 03-10-04 [2003]).

Courts have recognized opinions of governmental agencies responsible for the administration of a statute, such as opinion letters from the New York State Department of Insurance, to be entitled to great deference

“[w]here the interpretation of a statute or its application involves knowledge and understanding of underlying operational practices or entails an evaluation of factual data and inferences to be drawn therefrom . . . [unless] the question is one of pure statutory reading and analysis, dependent only on accurate apprehension of legislative intent [in which case] there is little basis to rely on any special competence or expertise of the administrative agency and its interpretative regulations are therefore to be accorded much less weight.” (Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451, 459 [1980]; see also Matter of KSLM-Columbus Apts., Inc. v New York State Div. of Hous. & Community Renewal, 5 NY3d 303 [2005]; Matter of New York Life Ins. Co. v State Tax Commn., 80 AD2d 675 [3d Dept 1981].)

The same principle has similarly been applied to an agency’s interpretation of its own regulations (see Matter of Howard v Wyman, 28 NY2d 434 [1971]; Matter of Visiting Nurse Serv. of N.Y. Home Care v New York State Dept. of Health, 5 NY3d 499 [2005]; Matter of 427 W. 51st St. Owners Corp. v Division of Hous. & Community Renewal, 3 NY3d 337 [2004]; Ocean Diagnostic Imaging P.C. v State Farm Mut. Auto. Ins. Co., 9 Misc 3d 73 [App Term, 2d & 11th Jud Dists 2005]). However, “[A]lthough the interpretation of regulations made by the agency responsible for their administration is generally to be accorded deference, an agency is not thereby freed of the obligation to read those regulations reasonably and rationally” (Matter of Mutual Redevelopment Houses v New York City Water Bd., 279 AD2d 300, 301 [1st Dept 2001]; see also Howard v Wyman, supra; Kurcsics v Merchants Mut., supra; KSLM-Columbus Apts. v New York State Div. of Hous. & Community Renewal, supra; 427 W. 51st St. Owners Corp., supra).

Notwithstanding the Marigliano court’s well-written decision in support of the October 8, 2003 opinion letter, this court respectfully disagrees and finds the opinion letter unpersuasive for several reasons.

Firstly, the court finds that, upon reading the opinion letter in question, there is nothing contained therein indicative of the Insurance Department’s involvement in issuing such opinion of “knowledge and understanding of underlying operational practices or [entailing] an evaluation of factual data and inferences to be drawn therefrom . . . [or reliance] on any special competence or expertise” rather than being a matter of “pure statutory reading and analysis, [which in the latter instance is] to be accorded much less weight” (Kurcsics, supra at 459).

Secondly, whether or not involving a matter reliant upon the agency’s expertise, the court finds the interpretation offered by the defendant herein, as well as by the Superintendent in the opinion letter and by the court in Marigliano, to be unreasonable. In the letter in question, the [*3]term “total,” a word not found in section 65-4.6 (e), is inserted as a qualifier of the term “first-party benefits” without any clear and apparent explanation for doing so, aside from creating a basis for the Department’s interpretation. Perhaps the most compelling argument against the supposed “reasonableness” of such interpretation, making the awarding of statutory attorney’s fees applicable to the aggregate of claims in a no-fault action, whether or not pertaining to only one or more than one assignor, is that it runs counter to a bedrock principle of the No-Fault Law itself, i.e., Insurance Law article 51, the Comprehensive Motor Vehicle Insurance Reparations Act, specifically, in Insurance Law § 5106 (a): “Payments of first party benefits and additional first party benefits shall be made as the loss is incurred” (emphasis added). As the Court of Appeals has expressed it, “the goals of the speedy payment objective of the No-Fault Law . . . a driving force behind . . . the no-fault . . . insurance laws, focus on avoiding prejudice to insureds by providing for prompt payment or disclaimers of claims.” (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 284 [1997]; see also Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854 [2003]; Dermatossian v New York City Tr. Auth., 67 NY2d 219 [1986].)

The interpretation sought by the Superintendent also would force a provider to wait until all treatment is concluded before billing an insurance company—an interpretation plainly running afoul of other insurance regulations. As was also said by the court in A.M. Med. Servs. (supra at 25, col 1),

“such standard [proffered by the defendant herein and the Department of Insurance] not only flies in the face of the regulatory policy of promoting prompt payment of claims, but also provides carriers with a disincentive to settlement, and encourages the undesirable effect of increasing the existing tsunami that is pending no-fault litigation in this county.”

Moreover, there is the unambiguous, explicit language of the Appellate Division in the Smithtown decision. (See Visiting Nurse Serv. of N.Y., supra at 506; Oberly v Bangs Ambulance, 96 NY2d 295 [2001].) This court cannot ignore the plain fact that the statutory “proof of claim” form refers to an NF-3 (or functional equivalent) which, while often enumerating a number of medical services provided over more than one date, relates to a single bill, there also often being more than one NF-3 upon which a no-fault complaint seeks recovery. The court also finds significant the fact that, despite years of opportunity to advocate the amending of the no-fault regulations set forth above to either clarify or redefine the term “claim” as it relates to the application of interest and attorney’s fees, the Insurance Department has failed to do so, while a number of no-fault provisions have been amended (e.g., 11 NYCRR 65-3.10^[FN3] and 65-4.6^[FN4]— the very subject of the opinion letter—have, together, been amended several times since 2001). [*4]

Therefore, this court, following Smithtown and its progeny, finds that the statutory attorney’s fees shall be awarded as per each NF-3 herein, rather than upon the total principal awarded by the court.

Accordingly, judgment is awarded to plaintiff provider in the principal aggregate amount of $1,200.53, with interest accruing on each of the eight claims at the rate of 2% per month in accordance with section 65-3.9 (a), each said amount of interest accruing 30 days from the date of submission of each such claim.

Plaintiff shall further be awarded attorney’s fees as to each NF-3 herein pertaining to assignor Victoria Orlando, equal to 20% of the amount set forth in each such NF-3 plus interest, provided that each such fee is not less than the statutory minimum of $60 nor in excess of the statutory maximum of $850.

Footnotes

Footnote 1: Prior to trial, the claims with respect to all assignors other than Victoria Orlando had been settled between the parties.

Footnote 2: It is worth noting that the defendant argues in favor of aggregating the claims without any justification except it would have to pay more for interest and attorney’s fees, but the court notes that the bills themselves represent, with the exception of one NF-3, bills for services rendered over a period of a month and, nothing to the contrary in defendant’s memorandum, appear to be a reasonable and rational billing practice.

Footnote 3: Section filed Aug. 2, 2001; amendment filed Jan. 17, 2003, eff Feb. 5, 2003 (amended [a]).

Footnote 4: Section filed Aug. 2, 2001; amendments filed Apr. 11, 2002 as emergency measure; July 9, 2002 as emergency measure; Oct. 4, 2002 as emergency measure; Nov. 27, 2002 as emergency measure; Jan. 17, 2003 as emergency measure; Jan. 17, 2003, eff. Feb. 5, 2003 (amended [b], [e]).

Civil Court of the City of New York, Queens County

000013/2005

Thomas D. Raffaele, J.

After a bench trial, which was held before this Court on November 20, 2006, the Court finds as follows:

In this action, plaintiff provider-assignee seeks recovery of first-party no-fault benefits for medical services provided to assignor Krzysztof Wielgosz. The parties stipulated to the fact that the plaintiff had established its prima facie case, and that the insurer had timely denied the bills in question, with the only issue remaining for trial being the insurer’s defense of lack of medical necessity. The insurer, rather than presenting the live testimony of its peer-review expert, neurologist Daniel J. Feuer, M.D., submitted for the Court’s consideration the transcript of his deposition for admission pursuant to CPLR §3117(a)(4). Said deposition was noticed approximately three months following the filing of a notice of trial in this matter. Defense counsel conceded that he did not move to strike the notice of trial prior to noticing the deposition. Plaintiff’s providing physician, Dr. Deepika Bajaj, provided live rebuttal testimony at the trial.

IDefendant was not authorized to take the deposition of its expert after the notice of trialwas filed.

Initially, the Court finds that defendant Progressive, absent a court order issued following a motion demonstrating “unusual or unanticipated conditions,” was not entitled to notice or to conduct a pretrial examination of their expert peer-review witness. The Uniform Civil Rules for the New York City Civil Court (22 NYCRR §208.17) provide that: [*2]

(c) Within 20 days after service of such notice of trial, any party may move to strike the action from the calendar or to keep it from being placed thereon. The affidavit in support of the application must specify the reason the action is not entitled to be on the calendar.

(d) After any action has been placed on the trial calendar pursuant to this rule, no pretrial examination or other preliminary proceedings may be had, except that if some unusual or unanticipated conditions subsequently develop which make it necessary that further pretrial examination or further preliminary proceedings be had, and if without them the moving party would be unduly prejudiced, the court may make an order granting permission to conduct such examination or proceedings and prescribing the time therefor. Such an order may be made only upon motion on notice showing in detail, by affidavit, the facts claimed to entitle the moving party to relief under this subdivision.

Defendant conceded on the record that no such application was ever made. Where a moving party demonstrates that “unusual or unanticipated conditions” have developed after the filing of a notice of trial which make it necessary that further pretrial examinations or proceedings be conducted in order to prevent undue prejudice to the movant, the trial court may, in its discretion, grant permission to conduct such additional discovery (see 22 NYCRR 208.17 [d]; see generally 22 NYCRR 202.21). Appellate courts have held that “unusual or unanticipated conditions” contemplates a condition which is “not in the control of the party seeking further discovery and . . . [causes] actual rather than potential prejudice” to third-party defendant (Audiovox Corp. v Benyamini, 265 AD2d 135, 140 [2d Dept. 2000]), such as where a plaintiff suddenly is required to undergo surgery after the notice of trial is filed, (see e.g. David v Guardian Life Ins. Co. of Am., 2005 NY Slip Op 25332, 2 [App. Term, Second Dept. 2005]) . In the case at bar, defendant has known that the deposed witness was expected to be called at trial since September of 2005, when the physician conducted his peer review on defendant’s behalf. Defendant failed to conduct a deposition of the doctor during the pretrial disclosure process. A notice of trial was filed on March 6, 2006. No motion to strike the notice of trial was ever made. The defendant noticed and conducted the peer review doctor’s examination before trial on June 5, 2006, three months after the notice of trial was filed. Plaintiff’s counsel by timely letter advised defense counsel that he objected to the post-notice of trial deposition. Clearly, the defendant failed to comply with the procedures set forth under 22 NYCRR 208.17[d]), nor did defendant show that any “unusual or unanticipated conditions” developed so as to justify further pretrial disclosure after the filing of the notice of trial (see Parker Chapin Flattau & Klimpl, LLP v Bamira, 2005 NY Slip Op 51208U, 2 [App. Term 1st Dept. 2005]).

II.Defendant’s expert’s opinion was based on documents not in evidence and thereforeinadmissible.

Defendant nonetheless claims that the late deposition testimony may be used pursuant to CPLR §3117(a)(4).

CPLR §3117(a)(4) provides that:

the deposition of a person authorized to practice medicine may be used by any [*3]party without the necessity of showing unavailability or special circumstances, subject to the right of any party to move pursuant to section 3103 to prevent abuse.

However, even if the transcript itself is admissible pursuant to the above CPLR section, the contents thereof are subject to further scrutiny on the ground of the competence of the expert’s testimony, or lack thereof. In the case at bar, even assuming, arguendo, that there were conditions justifying the taking of the deposition of defendant’s expert subsequent to the filing of the notice of trial, the Court finds that the opinions expressed in the deposition were based upon documents which were not introduced into evidence at the deposition. Moreover, there was no evidence in the record of their reliability based upon the familiarity of the deposed witness with the procedures for the keeping of such records. Therefore, to admit the opinions at trial would be violative of the Second Department’s rule in Wagman v Bradshaw, 292 AD2d 84 [2d Dept. 2002]).

In Wagman, the Second Department held that:

It is well settled that, to be admissible, opinion evidence must be based on 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 material 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 accompanied by evidence establishing its reliability.

(Wagman v Bradshaw, supra at 86-87 [2d Dept. 2002]).

In Astrel v Yarborough, 2006 NY Slip Op 5302, 1 [2d Dept. NY App. Div. 2006], the Second Department recently reaffirmed this rule, holding that “[g]iven the absence of evidence as to the reliability of those out-of-court medical records, the Supreme Court providently exercised its discretion in granting the defendant’s motion” [to preclude the physician’s testimony] (see DeLuca v Ding Ju Liu, 297 AD2d 307 [2d Dept. 2002]).

The Second Department, in Jemmott v Lazofsky, (5 AD3d 558, 560 [2d Dept. 2004]), held that a trial court erred in (a) admitting two MRI reports of the plaintiff’s knee and permitting a doctor to offer redirect testimony regarding their contents, since the reports were prepared by other health care professionals who did not testify at the trial and the MRI film was not admitted into evidence and (b) permitting the plaintiff’s attorney to cross-examine the defendant’s medical expert witness regarding an MRI film of the plaintiff’s back and the accompanying MRI report, as neither the MRI film nor the report were admitted into evidence, and directed a new trial on the issue of damages (see also D’Esposito v Kepler, 14 AD3d 509, 510 [2d Dept. 2005]); Wierzbicki v Mathew, 8 AD3d 476, 477 [2d Dept. 2004]; see also Sunnyside Plus v Allstate Ins. Co., 2005 NY Slip Op 25110 [Civil Ct. Queens Co., 2005, Dunbar, J.]).

In the matter before this Court, the deposition transcript of the peer-review physician indicates that neurologist Daniel J. Feuer, M.D. relied upon the following records:

[A] report of EMG testing of the upper extremeties by Dr. Bajaj dated 8/11/05, an EMG of the lower extremeties by Dr. Bajaj dated 8/11/05, a chronic pain assessment report dated 8/3/05, a report of MRI of the left knee dated 8/1/05, psychological evaluation dated 7/27/05 and a report of consultation of Dr. Cohen [*4]dated 8/8/05. (See transcript, p. 10, lines 3-9).

Dr. Feuer’s opinion was based upon a lack of documentation of “any consistent radicular or neuropathic complaints referable to the upper extremities which would support the necessity for this testing,” (see transcript p. 13, lines 12-15), along with “inconsistent findings reported in this case” (see transcript, p. 14, lines 9-10). The records referenced were not certified or authenticated (see CPLR §§4518, 3122-a). The EMG and MRI studies were not authenticated at the deposition or at trial using the expedited method provided by CPLR §4532-a, nor were all of the records utilized by the peer-review physician authenticated by Dr. Bajaj at trial. There was no testimony from the peer-review doctor or anyone else as to the reliability of such out-of-court records. As a result, Dr. Feuer’s opinion was based partly if not totally upon records which were not in evidence, and their reliability was not established. Thus, under Wagman and its progeny, it would be error for this Court to consider expert opinion based upon these records.

III.Strong policy reasons militate against permitting a trial by pretrial examination alone.

While not dispositive on this trial, the Court is constrained to discuss the following policy considerations:

The purpose of a trial is a search for the truth rather than an exercise in gamesmanship or a contest of strategies (see Finn v Morgan, 46 AD2d 229, 234 [2d Dept. 1974]; Ward v Kovacs, 55 AD2d 391 [2d Dept. 1977]). The court has a judicial responsibility to formulate rules of procedure to protect the integrity of the truth-finding process. A practice which hinders the search for truth is not one which ought to function under the broad imprimatur of the courts.

A deposition contains no more than testimonial evidence of the party-deponent and is merely the vehicle by which this evidence comes before the trier of fact. CPLR. §3117 confers upon the deposition no special qualities rendering its use immune to ordinary rules of trial practice. Thus, the discretionary power to control the use of live witnesses applies with equal force to control the use of a deposition. (See Feldsberg v Nitschke, 49 NY2d 636 [1980] leave denied 50 NY2d 1059 [1980]).

A trial court sitting as a trier of fact has discretion to require live testimony, rather than a transcript which is handed up for the Court’s later perusal, particularly where, as here: (a) the defendant’s entire case relies upon the testimony of a peer-review expert who will opine as to the medical necessity of the service at issue, and (b) where the expert’s opinion is entirely based upon his review of some records provided to him by an insurance carrier or its intermediary vendor.It is of great value to the court sitting as the trier of fact to observe the demeanor of the witnesses during their testimony in order to assess their credibility. Depriving the court of the opportunity to view the witness’ demeanor during testimony is a serious departure from accepted court standards, and should not be entertained lightly. Likewise, it is the cornerstone of the court’s search for truth that all testimony be subjected to the rigors of cross-examination. Neither the physician’s testimony at the deposition, which plaintiff’s counsel objected and did not appear for, nor the testimony at trial, where the defendant decided not to have the doctor appear for, was subjected to cross-examination. These venerable devices, intended to promote the ends of justice for litigants appearing before the Court, cannot function as intended when parties rely principally, if not exclusively, upon an out-of-court perusal of a transcript of a deposition.

Further adding to the repugnancy of the process is the fact that these depositions are taken after a notice of trial was filed. Plaintiff’s counsel must then choose whether to attend an [*5]unsanctioned deposition and delay the disposition of the case, or risk a waiver of his right to challenge the use of such deposition at trial. Given the legion of no-fault cases in Queens County, the Court cannot countenance additional delays through the use of a procedure which contravenes the Uniform Rules for the New York City Civil Court, strains judicial resources, and delays the administration of justice.

To permit this practice to proliferate would be tantamount to encouraging the defendants to submit a second summary judgment motion where the first has already been considered, and to capriciously label it a “trial.” Indeed, such a “trial” fails to put the defendants to their burden of proof by presenting live testimony in support of its defense.

IV.The deposition of Dr. Feuer does not satisfy the defendant’s burden of demonstrating a lack of medical necessity.

Even were this Court to consider Dr. Feuer’s deposition in support of the defendant’s medical-necessity defense, it would not, in any event, sustain the defendant’s burden of proof in this regard.

As a general proposition, the court sitting as trier of fact is free to assess and reject even uncontradicted expert opinion, (see West Tremont Med. Diagnostic, P.C. v GEICO Ins. Co., 2006 NY Slip Op 51871U, 2 [App. Term 2d Dept. 2006]; 58A NY Jur. 2d, Evidence and Witnesses §676). The insurer bears both the burden of production and the burden of persuasion with respect to medical necessity of the treatment or testing for which payment is sought. (See Kings Medical Supply, Inc. v Country-Wide Ins. Co., 5 Misc 3d 767 [Civ. Ct. Kings County 2004]; Nir v Allstate Ins. Co., 2005 NY Slip Op 25090, 2 [Civ. Ct. Kings Co. 2005]). In the trial context, few decisions clarify defendant’s burden of proof, or what evidence may be sufficient to establish that the services were medically unnecessary. Trial courts have held that, at a minimum, defendant must establish a factual basis and medical rationale for the lack of medical necessity of plaintiff’s services (see A.B. Med. Servs. P.L.L.C. v NY Cent. Mut. Fire Ins. Co., 2005 NY Slip Op 50662U, 2 [Civil Ct. Kings Co. 2005]; A.R. Med. Art, P.C. v State Farm Mut. Auto. Ins. Co., 2006 NY Slip Op 50260U, 2 [Civil Ct. Kings Co. 2006] ; Long Is. Radiology v Allstate Ins. Co., 2006 NY Slip Op 51090U, 3 [Sup. Ct. Nassau Co., 2006]; Citywide Social Work & Psy. Serv. P.L.L.C. v Travelers Indemnity Co., 3 Misc 3d 608 [Civil Ct. Kings Co. 2004]; Inwood Hill Medical P.C. v Allstate Ins. Co., 3 Misc 3d 1110[A] [Civil Ct. Kings Co. 2004]). If defendant at trial provides an insufficient factual basis or medical rationale for its peer review report at trial, the court may afford the peer review report minimal weight, and defendant may fail to sustain its burden of proof. A peer review report’s medical rationale is insufficient if it is unsupported by or controverted by evidence of medical standards. A peer review report’s factual basis may be insufficient if it fails to provide specifics of the claim, is conclusory, or otherwise lacks a basis in the facts of the claim (see e.g Amaze Medical Supply v Allstate Ins. Co., 3 Misc 3d 43, 2004 NY Slip Op 24119 [App. Term 2d Dept. 2004]). For example, a defendant may not establish lack of medical necessity if the only reason for the denial was that the peer review doctor did not have enough information in the claim file upon which a determination could be made (see Park Neurological Servs. v Geico Ins., 4 Misc 3d 95, 2004 NY Slip Op 24210 [App Term, 2d Dept. 2004]). Hence, a peer review may be insufficient if it is based upon merely a lack of evidence which was available, but inexplicably not supplied to the peer-review doctor by the insurance company. One court has held that a peer review report may [*6]be insufficient if the peer review doctor merely reviewed records, rather than examined the insured patient, in preparing the peer review report (see Alliance Medical Office, P.C. v Allstate Ins. Co., supra; see also Fifth Avenue Pain Control Center v Allstate Ins. Co., supra.). For example, the medical rationale may be insufficient if not supported by evidence of the “generally accepted medical/professional practice” (Citywide Social Work & Psy. Serv. P.L.L.C. v Travelers Indemnity Co., supra at 608 ). “Generally accepted practice is that range of practice that the profession will follow in the diagnosis and treatment of patients in light of the standards and values that define its calling” (Citywide Social Work & Psy. Serv. P.L.L.C. v Travelers Indemnity Co., supra at 616). Alternatively, if the plaintiff offers evidence that its medical services were consistent with generally accepted medical practice, the defendant’s peer review report may be afforded less weight and defendant may fail to sustain its burden of proof at trial (see Elm Medical P.C. v American Home Assurance Co., 2003 NY Misc. LEXIS 1337, 2003 NY Slip Op. 51357U [Civil Ct. Kings Co. 2003] [Defendant peer review doctor’s conclusion that the electrodiagnostic testing was not “properly documented” did not contradict plaintiff’s testimony of medical necessity and defendant failed to carry its burden]).

Instructive in this context is Nir v Allstate Ins. Co., (2005 NY Slip Op 25090, 3 [Civil Ct. Kings Co. 2005]), in which defendant’s doctor recommended denial of plaintiff’s claim because, in his opinion, the diagnostic testing performed by plaintiff Dr. Nir was done prematurely. During testimony, the peer review doctor cited only a review of Dr. Nir’s medical reports as the basis for his peer review report. He did not physically examine the patient before writing the peer review report. He cited no medical authority, standard, or generally accepted medical practice as a medical rationale for his findings. Finally, defendant was not able to explain how the tests could be medically unnecessary when the tests did in fact yield positive findings of nerve damage. Such scant factual basis and medical rationale was held not to sustain defendant’s burden of proof.

This court finds that, even if admissible, the opinion by the defendant’s peer-review physician contained in the deposition transcript on the issue of lack of medical necessity is lacking in a factual basis, unsupported by cogent medical rationale as to generally accepted medical/professional practice, wholly conclusory, and based almost entirely upon his review of records which were not in evidence. By failing to appear in court, the Court is foreclosed from determining whether there were records available which were not provided to the peer-review doctor which would have been relevant to his review. When compounded by the court’s inability to observe the doctor’s demeanor and the lack of cross-examination, an opinion of this qualitative nature is essentially of little value to the court in rendering a just decision. Despite the fact that Dr. Feuer claims to have reviewed Dr. Bajaj’ records of examinations on both 7/21/05 and 8/11/05, he selectively fails to mention that, contrary to his testimony, Dr. Bajaj did in fact find consistent radicular or neuropathic complaints in the upper extremities. On rebuttal during trial, Dr. Bajaj, who did appear before the Court, testified as to her findings of weakness and spasms on the left upper extremity indicating a denervation and nerve damage related to the C6-C7 region, thereby efficaciously rebutting and contravening Dr. Feuer’s deposition testimony.Based upon all of the foregoing, the Court renders judgment after trial in the full amount prayed for by the plaintiff, along with statutory interest, costs and attorneys’ fees. The Clerk of the Court is directed herein to enter judgment accordingly.

This constitutes the opinion, decision, and order of the Court. [*7]

___________________________

Hon. Thomas D. Raffaele

Judge, Civil Court

Civil Court, Queens County

650959/03

Timothy J. Dufficy, J.

A non-jury trial was held on November 4, 2005. The issue before the court is whether plaintiff’s claim for no-fault benefits should be denied as untimely, since it was filed beyond the 90-day period.

Plaintiff contends it was impossible to submit the claim to the correct insurance company because the driver (the insured) supplied the wrong carrier to the police and by the time plaintiff realized this error the 90-day period to properly file had run.

Defendant contends that although plaintiff timely filed a claim for no-fault benefits within the 90-day period, plaintiff filed with the wrong carrier, therefore it did not receive notice until after the 90-day period had run. Defendant contends the plaintiff must be barred from enforcing the claim due to late notice. Defendant further contends that plaintiff did not prove it was impossible to timely file the claim with the defendant’s insurance carrier Country-Wide Ins. Co.

STIPULATION OF FACTS

Defendant stipulated to plaintiff’s prima facie case and plaintiff stipulated to defendant’s timely mailing of the denial of the claim. At the time of the trial, the court directed that briefs be submitted to the court and it was stipulated that any exhibits attached to the briefs would be admitted into evidence so long as it was exchanged in the course of discovery. In addition an un-redacted copy of the Country-Wide Ins. Co. file was submitted to the court for in-camera review (hereinafter referred to as Bates file).

The following facts are undisputed:

1) an accident took place on October 27, 1998. Osiris Torres, a bicyclist was involved in an auto accident with Stephen Kempisty the insured and owner operator under a valid Country-Wide insurance policy.

2) the New York City Police accident report in evidence shows that the insurance company code was 385 (All-City Insurance Company).

3) Plaintiff filed a timely claim dated December 12, 1998 with All-City Insurance Company.

4) the claim was denied on April 20, l999 by All-City Insurance Company. The denial [*2]states the policy was not in force on the date of the accident and the policy was cancelled on January 7, 1997.

5) Plaintiff then filed a claim with MVAIC shortly after the All-City Insurance denied the claim. On May 20, 1999 MVAIC denied the claim. The basis of the denial by MVAIC was that there was available insurance and that Merchant and Businessmen/Country was then the current insurance company for Stephen Kempisty. When the matter was reported to MVAIC it generated notice to Countrywide on notice dated February 19, 1999 (Bates file Page number 305). The court finds pursuant to the documents submitted to the court in-camera, that All-City was named on the accident report and at that time and all relevant times remained on New York State Department of Motor Vehicles computer as the carrier of record as far as the three digit code is concerned (computer printouts pages, Bates file pages 313,314) submitted in-camera to the court which indicates valid insurance from All City from November 18,1997 to July 6,1999.

6) a claim was filed with Country-Wide on July 30, 1999 explaining why the late claim was submitted indicating such circumstances outside claimants control.

7) the court notes that the MVAIC claim was denied on May 20, 1999, upon learning the correct carrier, plaintiff filed a claim on July 30, 1999, well within 90-days of the MVAIC denial.

On August 12, 1999, County-Wide Insurance Company issued a denial of claim. The reason set forth for this denial was as follows:

“As per regulation 68 of the New York State No-Fault Insurance Law:

In the event of an accident, written notice setting forth details sufficient to identify the eligible insured person along with reasonable obtainable information

regarding the time, place & circumstances of the accident shall be

given to the company or the company’s authorized agents as soon as

practicable, but in no event more than 90 days after the date of accident

pursuant to the above all No-fault benefits are denied.”

ISSUES

The two issues before the Court are: (1) Whether the plaintiffs can maintain an action for No-Fault insurance benefits against the insurer, absent notice to the insurer within 90-days after the date of accident and (2) Whether the subsequent denials issued by the defendant insurance company were proper?

APPLICABLE LAW

The No-Fault regulation in effect at the time of accident which gave rise to the claim was 11 NYCRR65.11(m)(2). This regulation provided in pertinent part that a notice of claim to the insurer must be filed within 90-days of the accident. Late filings were permitted upon “written proof that it was impossible to comply with such limitation due to the specific circumstances beyond the claimant’s control.”

CONCLUSIONS OF LAW

It is well settled that delay on the part of an injured party to give notice may be excused, upon a showing of diligence, where he had difficulty ascertaining the identity of the insured or insurer (see Subia v. Cosmopolitan Mutual Ins. Co., 80 Misc 2d 1090[1975]). Here the court [*3]has substantial evidence before it that the injured party exercised utmost diligence in pursuing the claim by first presenting its claim to All-City Insurance, then to MVIAC, and upon learning that insurance was available, further researching the claim until ultimately establishing Country Wide Ins. Co. as the responsible insurer. Timely notice requirement will not be applied as strictly against the injured party as it would be against the insured. See, Hartford Accident & Indemnity Co. V. CNA Insurance Companies, Sued Herein as CNA Insurance, et al, 99 AD2d 310 [1984]. Therefore, the claim is deemed timely.

The court also notes that it has limited equity jurisdiction pursuant to NY City Civ Ct Act sec. 213 and sec. 905 (e.g. Kuchen v. Daimler Chrysler, 9 Misc 3d 45 [Sup. Ct. App. Term 2nd &11th J.D. Dists.2005]). Thus, the doctrine of equitable estoppel would apply to the fact pattern at hand. Equitable estoppel is the principle by which a party is absolutely precluded both at law and equity from denying or asserting the contrary of any material fact, which by his words or conduct affirmative or negative, intentionally or through culpable negligence, he has induced others or another, who was excusably ignorant of the true facts and who had the right to rely upon such words or conduct, to believe and act upon them thereby, as a consequence reasonably to be anticipated, changing his position in such a way that he would suffer injury if such denial or contrary assertion were allowed. The doctrine prohibits a person upon principles of honesty and fair and open dealing, from asserting rights the enforcement of which would, through his omissions or commission, cause fraud or injustice to be committed (75 NY Jur 2d, Limitations and Laches § 40). It is the holding of the court that the doctrine of equitable estoppel is appropriate in the case at bar. Plaintiff demonstrated he relied on the information provided on the police report by Country Wide’s insured. A claim for no fault benefits was sent to the carrier plaintiff’s had notice of, All-City, diligently within the 90-day period. Plaintiff then acted appropriately and diligently by reporting the claim to MVIAC. By the time the plaintiff received the correct information, the strict 90-day rule has passed. To hold the plaintiff in violation of the 90-day rule would be injustice especially since defendant Country-Wide was aware of a possible claim as early as February 19,1999 (Bates file page 305).

Defendant has not shown how it was prejudiced by the allowance of the filing of such late claim when it was aware of such claim prior to the filing of plaintiffs’ claim. The facts of this specific case clearly document that compliance with the deadline to file a claim within 90 days was impossible due to specific circumstances beyond the claimant’s control ( In the Matter of Medical Society of the State of New York et al v. Gregory Sergio as Superintendent of Insurance of the State of New York et al 100 NY2d 854[2003]; Mantor v General Accident Insurance et.al, 129AD2d 998 [4th dept 1987]; Persaud v Rahman et. al. ,262 AD2d 542 [ 2nd Dept 1999] and Hackensack University Medical Center, et. al v New York City Transit Authority 10 AD2d 675 [2nd Dept 2004])

Accordingly, the court having found that the plaintiff timely notified the defendant of its claim, grants judgment in favor of plaintiff on the first cause of action in the amount of $3,669.03 plus statutory interest, costs and attorney fees.

Judgment is also granted in favor of plaintiff on the second cause of action in the amount of $2,919.24 plus statutory interest, costs, and attorney fees.

_____________________________

TIMOTHY J. DUFFICY, J.C.C. [*4]

Dated: May 23, 2006

Civil Court of the City of New York, Queens County

108007-02

Howard G. Lane, J.

Plaintiff commenced this action to recover first-party no-fault benefits for medical services rendered to its assignors Sandra Dorsett and Sharon Little, pursuant to New York’s No-Fault Insurance Law § 5101 et. seq., as well as statutory interest and attorney’s fees. Thereafter, plaintiff moved for summary judgment on its claims in the amount of $3,177.54, on the ground that defendant failed to pay or to deny its claims within the statutory 30-day period as required by Insurance Law section 5106 (a).

PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT

Plaintiff maintains that it is entitled to summary judgment because the defendant failed to pay or deny the claims within thirty (30) days of receipt as required by the Insurance Law § 5106 (a). Plaintiff proved that it submitted a timely and proper notice of claim pursuant to the No-Fault statute for medical treatment rendered, which defendant acknowledged receiving, denying and not paying. (See, Capio Medical, P.C. ex rel. Berger v. Progressive Cas. Ins. Co., 7 Misc 3d 129(A), 2005 NY Slip Op 50526(U) [App Term 2nd and 11 th Jud. Dist.]; Park Health Center v. Prudential Insurance Co., 2001 WL 1803364 [App Term 2nd and 11th Jud. Dist. 2001]). The burden then shifted to defendant to show the existence of a triable issue of fact. See, Alvarez v. Prospect Hosp. 68 NY2d 320, 324 (1986).

DEFENDANT’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

Defendant maintains that it issued timely denials to plaintiff’s claim and in its opposition papers asserts the defense of lack of medical necessity. It is well settled that for an insurer’s denial of claim form to be deemed timely, the insurer must prove that it generated the denial of claim within thirty (30) days of receipt of plaintiff’s proof of claim and that it also mailed the denial to the claimant within the same time period. (See A.B. Medical Services, PLLC v. GEICO Ins. Co., 2 Misc 3d 26, [App Term, 2nd & 11 Jud Dists. 2003]). [*2]

Defendant submits denial of claims form that indicate that the bill was being denied due to a lack of medical necessity. The denials for the bills are timely on their face. In support of its motion defendant submits copies of the denials and purported proof of mailing of its denials (S & M Supply, Inc. v. Geico Ins. Co., 2003 NY Slip Op 51192[U] [2d & 11th Jud Dists 2003]). Specifically, defendant proffers the affidavit of Ms. Joan Rolfe, a claims representative employed by the defendant, and the affidavit of Matt Olmstead, an employee of defendant who is employed as a Senior Operations Staff Analyst at Southwest Output Processing Center.

The two affidavits submitted by defendant do not establish mailing because neither Ms. Rolfe nor Mr. Olmstead state in their affidavits that they had personal knowledge that the denial of claim was actually sent to plaintiff (Presbyterian Hosp. v. Maryland Casualty Ins. Co., 226 AD2d 613 [2d Dept 1996]); nor does either affidavit create a presumption of mailing because neither sufficiently describes the standard operating procedures defendant uses to ensure that its denials and requests for verification are mailed (S & M Supply, Inc. v. GEICO Ins. Co., 3 Misc 3d 136A [2d & 11th Jud Dists 2004]). Although the affidavits provide information on the preparation and mailing of the denial of claims, they do not include sufficient factual information describing how defendant’s regular office practices and procedures for mailing denials are “geared as to ensure the likelihood that [the denial of claim] is always properly addressed and mailed.” Clark v. Columbian Mutual Life Ins. Co., 221 AD2d 227, 228 (1st Dept 1995), quoting Nassau Ins. Co. v. Murray, 46 NY2d 828, 830 (1978).

Specifically, defendant failed to state sufficiently, or describe with particularity the regular office practices and procedures defendant uses to ensure that denials are properly and timely mailed, including, but not limited to the following: (1) whether the NF-10’s generated by computer by the claims representative are compared with the NF-10’s that “[come] into the Southwest Output Processing Center’s job queue;” (2) the specific date that the denial was actually mailed to plaintiff; (3) whether the envelope contained the NF-10’s and that the envelope was correctly addressed; (4) whether any computer printout or record was generated and reviewed which listed the claimants who were allegedly mailed NF-10’s on the date or dates that defendant alleges it mailed the NF-10’s; and (5) whether it was the duty of the claims representative or Senior Operations Staff Analyst to ensure compliance with said office practices and procedures or whether the claims representative or Senior Operations Staff Analyst had actual knowledge that said practices and procedures were complied with. (See, Contemp. Med. Diag & Treatment, P.C. v. GEICO Ins. Co., 6 Misc 3d 137(A), 2005 NY Slip Op 50254 [U] [2d & 11th Jud Dists 2005]).

The court finds the assertions of Ms. Rolfe and Mr. Olmstead conclusory and such assertions fail to specify either that it was the duty of either one of them to ensure compliance with said office procedures or that either one had actual knowledge that said procedures were complied with. (See, Contemp. Med. Diag & Treatment, P.C. v. GEICO Ins. Co., 6 Misc 3d 137(A), 2005 NY Slip Op 50254[U] [2d & 11th Jud Dists [*3]2005]). As defendant’s papers in opposition to plaintiff’s motion for summary judgment do not contain an affidavit of someone with personal knowledge that its denial was actually mailed, or describe the standard office practices or procedures used to ensure that such denials were properly addressed and mailed (see Residential Holding Corp. v. Scottsdale Ins. Co., 286 AD2d [2d Dept 2001]), defendant failed to establish by competent evidence that it timely mailed its denials, and therefore, defendant is precluded from offering all of its defenses in the instant matter.

Accordingly, plaintiff’s motion for summary judgment is granted. Judgment shall be awarded in favor of plaintiff in the amount of $3,177.54, together with statutory interest and attorneys fees.

_____________________

3/15/06 HOWARD G. LANE

DateJudge of the Civil Court

[*1]

Civil Court of the City of New York, Queens County, March 9, 2006

APPEARANCES OF COUNSEL

Baker, Sanders, Barshay, Grossman, Fass, Muhlstock & Neuwirth, Mineola (David Barshay of counsel), for plaintiff. Peter X. Dodge, P.C., Uniondale, for defendant.

OPINION OF THE COURT

Bernice D. Siegal, J.

Background

The plaintiff, a health care provider, brought the within action, by service of a summons and complaint upon defendant insurer on August 16, 2002 to recover for services rendered under no-fault, to Albert Mullakandov, Alik Mullakandov and Djabrail Moukhtarov, relating to injuries allegedly arising out of a motor vehicle accident in which Albert and Alik were passengers in an automobile owned and operated by policyholder Djabrail and occurring on October 12, 2001.

Trial of this action was commenced in this part on December 6, 2005 and was continued through December 8, 2005, with the parties stipulating, with respect to plaintiff’s case, as to the submission by plaintiff to defendant of the underlying NF-3 proofs of claim, the execution of the assignments of benefits from Albert and Alik to plaintiff on November 12, 2001 and December 3, 2001; and as to defendant, the timely issuance by defendant of its NF-10 denials. After plaintiff rested and in the course of defendant’s case-in-chief, defendant sought to introduce into evidence certified transcripts of the examinations under oath (EUOs) of Albert and Alik taken on November 5, 2002. Plaintiff’s counsel objected to their admission and the trial was adjourned to December 22, 2005 for the submission of legal memoranda and for oral argument before the court.

On the latter date, plaintiff’s counsel argued, regarding the admission into evidence of the EUOs, that the assignors/deponents were nonparties and that the requirements for the admissibility of nonparty depositions, as provided by CPLR 3117 (a) (3), have not been met in this case and further, in any event, under long-standing case law (the “New York rule”), the declarations of an assignor, whether made before or after the assignment, are inadmissible as against the assignee. Defense counsel, in response, argued that the plaintiff, as assignee, is bound by the statements of its assignors, that the EUO transcripts, properly certified, are akin to certified examination before trial (EBT) transcripts and may be used at trial and in the same manner as provided under CPLR 3117. The court [*2]reserved decision thereon and further adjourned the case for trial.

The primary issue, therefore, presented to this court for its adjudication in the matter at bar is: Whether defendant is precluded, by operation of either the “New York rule” or the provisions of CPLR 3117 governing the admissibility of nonparty depositions.

Findings of Law

At the outset, as the EUOs of the two particular above-mentioned nonpolicyholder/assignors were taken in November 2002, after both the execution of the assignments in November and December of the preceding year and also three months after the institution of the within action, the court’s application of any and all relevant statutory and/or case law are necessarily limited to the facts of this case.

The so-called “New York rule” is a venerable doctrine, its antecedents going back to the middle of the nineteenth century, to wit, Paige v Cagwin (7 Hill 361 [NY Sup Ct 1843]), and long before the advent of our State’s no-fault insurance statutes and regulations. One of the very few decisions directly on point is the recent one of Judge Baily-Schiffman in JSI Expert Serv. v Liberty Mut. Ins. Co. (7 Misc 3d 1009[A], 2005 NY Slip Op 50513[U], *3-4 [Civ Ct, Kings County 2005]), wherein she discussed the New York rule and its application to the admissibility of the EUOs of plaintiff’s assignors, quoting Prince, Richardson on Evidence § 8-242 (Farrell 11th ed) as follows:

” ‘In New York declarations of a vendor or assignor of a chattel or chose in action, whether made before or after the transfer, are inadmissible to affect the claim or title of a subsequent transferee for value’ . . .

“This rule stems from the decision in Paige v Cagwin . . . Except where the statements were made by the real party in interest, such as a decedent, the New York doctrine will apply and the statements of the former . . . assignor will not be admissible to affect . . . the claim of the subsequent . . . assignee.” (See also Prince, Richardson on Evidence § 8-243 [Farrell 11th ed].)

Pursuant to this doctrine, Judge Baily-Schiffman reversed her previous trial ruling permitting the admission of testimony as to the assignors’ EUO statements (which defendant insurer had sought to introduce as admissions probative of its affirmative defense that the underlying accident was “staged”), and ordered that such testimony be stricken.

As stated in Richardson § 8-243 (at 550-551), the doctrine first enunciated in Paige (supra) “is inapplicable when the admissions of a former owner of personal property are offered [*3]against a person who claims through representation, such as an executor, administrator, heir or trustee in bankruptcy. The former owner’s admissions are receivable against such a person.” In the case at bar, the court finds that plaintiff assignee has not brought the action in the capacity as the representative of the aforementioned assignors (e.g., as executor, administrator or other such capacity referred to in section 8-243). Thus, the above exception to the New York rule is not applicable here.

Plaintiff has also cited several cases in support of its contention that an assignor is a nonparty rather than a real party-in-interest, among them Inwood Hill Med., P.C. v General Assur. Co. (10 Misc 3d 18 [App Term, 1st Dept 2005]), and the court finds that the assignors cannot be considered as real parties-in-interest.

Defendant countered with authority the court finds inapposite to the case at bar. In Dlugosz v Exchange Mut. Ins. Co. (176 AD2d 1011, 1012 [3d Dept 1991]), the transcripts of the EUOs of the plaintiff and her husband were held to be admissible as containing “statements of a party to the lawsuit and as extrajudicial admissions of a party.” However, the court finds significant that the deponent husband was also an extra insured under the subject policy and, therefore, it is clear to this court that he was a party united in interest. Another action which this court finds distinguishable involves a homeowner’s insurance policy in which defendant insurer asserted an arson defense (Kamenov v Northern Assur. Co. of Am., 259 AD2d 958 [4th Dept 1999]). There, the Court held that the trial court had erred in precluding the admission into evidence of portions of the EUO testimony of plaintiff’s husband as to the insurance claim. However, in that matter, the husband was also found to be the plaintiff’s agent. Therefore, unlike the case law relied upon by the defense, the court finds that the assignors herein are neither in privity with plaintiff, nor otherwise real parties-in-interest. Nor can the plaintiff assignee here be found in any manner to have brought the instant action in a representative capacity.

Nonetheless, this court is also cognizant of the long-established principle, asserted by defendant herein, that an “assignee stands in the shoes of the assignor and takes the assignment subject to any preexisting liabilities” (Arena Constr. Co. v Sackaris & Sons, 282 AD2d 489, 489 [2d Dept 2001]). That general principle remains alive and well today in no-fault actions, albeit modified and refined by the limited nature of no-fault claims assignments and by operation of New York State’s Insurance Law and no-fault regulations promulgated thereunder. (See A & S Med. v Allstate Ins. Co., 196 Misc 2d 322 [App Term, 1st Dept 2003], affd 15 AD3d 170 [1st Dept 2005].) Further, a thorough reading of the “forefather” of the New York rule (Paige v Cagwin, supra) reveals that the rationale for the court’s decision was primarily an evidentiary determination that the proffered evidence in that case—out-of-court statements made by a third party offered against the plaintiff endorsee of a promissory note—was inadmissible hearsay. Specifically, the court there stated:

“[T]he note . . . is subject to the same defence in the hands of the endorsee as when it was in the hands of the endorser; but it by no means follows that the mere declarations of such endorser can affect the rights of the endorsee. The means of proving a defence may be affected, but the right to make it is not impaired. [*4]The defence still exists; but it must be established by testimony and not by mere declarations.” (7 Hill at 379-380.)

This court finds it also significant that Paige v Cagwin, though finding such statement to be inadmissible hearsay as it was proffered by a third party, does not preclude a defense, so long as it may be proven by other than inadmissible out-of-court declarations. Therefore, as applicable to no-fault actions, while it is well established that the statements made by an assignor (though a nonparty) in an EUO may be offered by a defendant insurer against a provider/assignee to prove a lack of coverage defense (see Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195 [1997]) in opposition to a summary judgment motion^[FN*] despite being hearsay (see Bond v Giebel, 14 AD3d 849 [3d Dept 2005]; Kwi Bong Yi v JNJ Supply Corp., 274 AD2d 453 [2d Dept 2000]), EUO statements are nonetheless hearsay. As such, such statements are inadmissible at trial unless, for example, they are used for impeachment purposes upon cross-examination in the event such declarant/assignor testifies.

However, even assuming arguendo that this court would have held that the “New York rule” does not apply to the case at bar, the court finds, for the reasons discussed below, that the result must be the same. The applicable no-fault regulations provide that “upon request by the Company [i.e., the insurer], the eligible injured person or that person’s assignee or representative shall: . . . as may reasonably be required submit to examinations under oath by any person named by the Company and subscribe same” (11 NYCRR 65-1.1 [d] [Conditions] [Proof of Claim. Medical, Work Loss, and Other Necessary Expenses]).

However, the no-fault regulations offer little, if any, guidance pursuing a defense through litigation. As was stated by our state Court of Appeals, “If more harmony and clarity are to be achieved, we earnestly invite the Legislature to study and remedy the Rube-Goldberg-like maze” (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 286 [1997]). The experience in the trial courts attempting to reconcile the rules of evidence and civil practice with regulations promulgated which are more suited to arbitration should now be a sufficient signal to the Legislature that some action on its part is required. This is particularly true given the avalanche of no-fault litigation threatening to crush the court system, which is the exact opposite of the purposes of New York’s No-Fault Insurance Law, to wit: “to remove the vast [*5]majority of claims arising from vehicular accidents from the sphere of common-law tort litigation, and to establish a quick, sure and efficient system for obtaining compensation for economic loss suffered as a result of such accidents” (Walton v Lumbermens Mut. Cas. Co., 88 NY2d 211, 214 [1996]), while “still allow[ing] carriers to contest ill-founded, illegitimate and fraudulent claims, but within a strict, short-leashed contestable period and process designed to avoid prejudice and red-tape dilatory practices” (Presbyterian Hosp. v Maryland Cas., supra at 285).

Moreover, it is not insignificant that in the instant case the EUOs were requested and held after the within action had been commenced. The use of EUOs is a device utilized for verification of proof of claim, in accordance with the regulations in effect as of April 5, 2002, such verification to be requested in accordance with strict guidelines (11 NYCRR subpart 65-3). It is noteworthy, however, that compliance with a request for an EUO was not mandated under the regulations in effect during the claim process herein. Additionally, the provisions in effect under the “new” regulations, with respect to the use of EUOs, lack the protections found in article 31 of the CPLR governing the use of EBTs (e.g., subpoena of a nonparty witness with such subpoena served upon the adversary—CPLR 3106 [b]). It is clear to the court that defendant’s use of EUOs was improper, as it could not be considered as a device for verification of proof of claim, as permitted under the regulations not yet in effect when the underlying claim arose; and, secondly, even if viewed as allowable under 11 NYCRR 65-1.1 (d), as the kind of “red-tape dilatory” practice referred to in Presbyterian (supra at 285), in light of its use some three years after the submission of the underlying claims. As the defendant here chose to forgo the use of EBTs and rather opted (and improperly so) to utilize EUOs, it appears that a conscious effort was made to circumvent the CPLR.

Therefore, although an EUO can be used as a shield by an insurer against payment of a no-fault claim where an assignor has failed to comply with a properly noticed EUO request, given the strictures of New York rules of evidence, this court reaches the opposite conclusion when seeking to admit an EUO transcript into evidence at trial.

Accordingly, the court finds that the defendant is precluded from introducing into evidence at trial and to the extent set forth above the EUO testimony of the assignors, Albert Mullakandov and Alik Mullakandov, as against the plaintiff.

Footnotes

Footnote *: The court finds, parenthetically, that such EUO transcripts may be admissible in opposition to a motion for summary judgment (see A.B. Med. Servs. PLLC v Prudential Prop. & Cas. Ins. Co., 7 Misc 3d 14 [App Term, 2d Dept 2005]; see also Chin v Ademaj, 188 AD2d 579 [2d Dept 1992]; Ratut v Singh, 186 Misc 2d 350 [Civ Ct, Kings County 2000]).

Civil Court of the City of New York, Queens County

128116/2004

For Plaintiff: Belesi & Conroy, P.C., by Wayne H. Wink, Jr., Maria Campese Diglio, Kathleen Ann Marshall, Esqs., 1225 Franklin Avenue, suite 400, Garden City, New York 11530

For Defendant: Bruno, Gerbino & Soriano, LLP, by James K. Hogan, Jeffrey S. Siegel, Vincent F. Gerbino, Oko Acquaye, Esqs., 445 Broad Hollow Road, suite 220, Melville, New York 11747

Charles J. Markey, J.

Before this Court are 12 actions seeking no fault first class benefits, involving motions for summary judgment involving plaintiff Multiquest, P.L.L.C. , and assorted cross-motions, all raising principally the same issue: should the decision of the New York Court of Appeals in State Farm v. Mallela, 4 NY3d 313 [2005] [also known in the no fault bar as “Mallela III“] be applied prospectively or retroactively. That case denied no fault benefits to plaintiff providers that were organized fraudulently. This Court has invited briefing, and, in addition to the papers on the various motions and cross motions in the 12 Multiquest actions, studied the various memoranda of law submitted by both counsel, meant to be read in all 12 actions.

In this particular action involving Multiquest, surrounding services provided to Maria Mercedes during 1999, prior to the adoption of 11 NYCRR 65-3.16(a)(12) [effective April 4, 2002]. That regulation hinges reimbursement for services based on compliance and adherence with licensing requirements.

It is a tribute to all the Judges of the Civil Court, Queens County, that although they have reached different conclusions on the issue, their opinions this year have been on the leading edge, setting the contours of the debate. The highly articulate, cogent, and well-written opinion of Judge Anna Culley in A.T. Medical, P.C. v. State Farm Mut. Ins. Co. (___Misc 3d ____, 2005 WL 2837509, 2005 NY Slip Op 254610) reasons that public policy concerns warrant denial of claims made by corporate malefactors who organize their enterprises in violation of existing law (accord, Metroscan Imaging, P.C. v. Geico, 8 Misc 3d 829 [Bernice Siegal, J.]; Multiquest , PLLC v. Allstate Ins. Co., ___Misc 3d ____, 2005 WL 2085966, 2005 NY Slip Op 25356 [Dennis Butler, J.]). Judges Culley, Siegal, and Butler of this Court thus hold that Mallela III should be applied retroactively.

In contrast, my colleague, Judge Joseph Esposito, in Multiquest, PLLC v. Allstate Insurance Co. (____ Misc 3d ___, 2005 WL 3274885, 2005 NY Slip Op 25512), in his characteristic penetrating and tight analysis, concluded that Mallela III should not be applied [*2]retroactively, especially since only a regulation is involved.

The two differing views of my colleagues both deserve attention by students of the issue because of the fine arguments made therein. In the final analysis, the undersigned agrees with Judge Esposito’s recent decision that Mallela III should not be applied retroactively.

In addition to all of the reasons stated by Judge Esposito, this Court believes that if the Court of Appeals had wanted to provide a rule of retroactivity, it was fully informed of the issue at the oral argument of Mallela III and could have determined the issue in its opinion. Of course, many reasons may play into why a court does not discuss a certain argument. Sometimes in the hope of winning unanimity or a majority, compromises are made in forging judicial consensus. Other times, an appellate court will want to see how lower courts treat an issue, thereby benefiting from their thoughts, and to see, by experience, whether any division has, indeed, occurred among lower courts.

In the present case, this Court believes that the Court of Appeals was aware of the fact that, if a rule of retroactivity were to be announced, insurers would be filing motions in thousands of no fault cases, seeking to recapture payments already made. The Court of Appeals probably thought of this possibility and decided not to stimulate such unbridled litigation to already congested motion calendars in the no fault parts.^[FN1]

Second, to apply a rule of retroactivity, in the present circumstance, should not be done lightly. Despite the method of questionable, improper, and even unethical incorporation of a plaintiff provider, services were allegedly furnished, consistent with the public policy of this State, in the expectation that a claim would be filed and that payment would be made expeditiously. Thus, as the undersigned noted in Metropolitan Radiological Imaging, P.C. v. State Farm Mut. Auto. Ins. Co. (7 Misc 3d 675, 677 [NYC Civ Ct Queens County 2005]): “The “No Fault Law” replaced the common law right to seek tort recovery with a statutory system designed to provide a quick, sure and efficient system for obtaining compensation for economic loss suffered as a result of [automobile] accidents’ (Walton v. Lumbermens Mut. Cas. Co., 88 NY2d 211, 214 [1996]).”

For a court to adopt a rule of retroactivity, under the facts of the particular circumstances, would be tantamount to imposing a rule alienating a property right. The rights of plaintiff health care providers that provided services in the expectation of filing a claim under a statutory system for the quick, expeditious handling and processing of claims would be subverted. As shown, resort to public policy principles can be a two-edged sword.

This Court holds that Mallela III should not be applied retroactively. The defendant’s motion for summary judgment is, in all respects, DENIED.

The foregoing constitutes the decision, order, and opinion of the Court.

______________________________[*3]Hon. Charles J. Markey

Judge, Civil Court, Queens County

Dated: Jamaica, New York

December 20, 2005

Footnotes

Footnote 1: In Socrates Psychological Servs., P.C. v. Progressive Cas. Ins. Co. (7 Misc 3d 642, 645 n.1 [NYC Civ Ct Queens County 2005], the undersigned noted that adjournments of routine motions in the specially created No Fault Parts already require waits of almost a year!

Civil Court, Queens County

119638/04

Diccia T. Pineda-Kirwan, J.

Upon the foregoing cited papers, and after conference, it is ordered that plaintiff’s motion for an order, pursuant to CPLR 3212, granting summary judgment is denied and defendant’s cross motion for an order, pursuant to CPLR 3212, granting summary judgment is granted and the complaint is dismissed.

Inasmuch as the adjourned date of the motion was ten months after the original return date, and inasmuch as there had been an intervening order amending defendant’s answer, on consent of the parties, all papers were accepted and the parties were permitted to submit supplemental papers briefing the remaining issues for the Court.

In order to succeed on a motion for summary judgment, the movant must tender admissible evidentiary proof demonstrating the absence of any genuine issues of material fact for trial. (CPLR 3212; Winegrad v New York University Medical Center, 64 NY2d 851 [1985].) Civil Practice Law and Rules 3212 (b) provides that a motion for summary judgment shall be supported by an affidavit by a person “having knowledge of the facts; it shall recite all the material facts; and it shall show that there is no defense to the cause of action or that the … defense has no merit.” The affirmation of an attorney, even one without personal knowledge of the facts, may serve as the vehicle for the submission of acceptable attachments which provide [*2]evidentiary proof in admissible form. (See Zuckerman v New York, 49 NY2d 557 [1980].) An attorney’s affirmation could also be accepted with respect to admissions of a party made in the attorney’s presence. (Id.) Once a prima facie showing of entitlement to judgment as a matter of law is made, the burden shifts to the nonmovant to produce evidentiary proof sufficient to establish the existence of material issues of fact which require a trial of the action. (Alvarez v Prospect Hospital, 68 NY2d 320 [1986].)

According to the annexed complaint, this is an action brought pursuant to Insurance Law 5101 et seq and the regulations of the New York State Insurance Department (11 NYCRR 65.10 et seq), to recover the cost of health care services rendered by plaintiff to its assignor, Herbert Paige, for dates of treatment in May and June 1999.

Defendant’s answer contains sixteen affirmative defenses and, by Court Order dated September 9, 2005, and on consent of the parties, the answer was amended to add two more affirmative defenses: fraud in the incorporation and that the services were provided by an independent contractor and not by plaintiff or its employee such that plaintiff is not entitled to receive direct payment from defendant.

In support of the motion, plaintiff submits an affidavit of Joseph Indelicato, Ph.D., plaintiff’s owner, in which he does not attest to personal knowledge of this claim but states that he is “fully familiar with all the policies, practices and procedures” of plaintiff. This statement, however, is insufficient to lay a foundation for the exhibits attached to the moving papers. (CPLR 4518; ; People v Kennedy, 68 NY2d 569 [1986].) Significantly, plaintiff fails to establish the mailing of its claim to defendant, a necessary element of its prima facie case. (See Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742 [2d Dept 2004; Residential Holding Corp v Scottsdale Insurance Co, 286 AD2d 679 [2d Dept 2001].)

Plaintiff has failed to tender evidence, by proof in admissible form, to establish the cause of action sufficient to warrant summary judgment. (See Zuckerman v City of New York, 49 NY2d 557 [1980].) Accordingly, as the burden does not shift to defendant on plaintiff’s prima facie case, the motion is denied without regard to the opposition. (See Winegrad v NYU Med Center, 64 NY2d 851 [1985].)

Defendant, as cross movant, argues that it is entitled to summary judgment as a matter of law on several grounds: (1) at the time services were rendered to its assignor, plaintiff’s corporate structure was defective as it did not have a psychologist as an owner and under Business Corporation Law, all professional service corporations that are licensed to practice medicine must be owned and controlled only by licensed physicians, (See BCL 1507 and 1508), (2) services were rendered by independent contractors and not an employee of plaintiff, (3) plaintiff’s billing is fraudulent, and (4) the assignment of benefits form is defective.

In support of its cross motion, defendant submits a certified examination under oath of Kathryn Clark, Psy. D., signed by the witness, in which she states that at no time did she give her consent to plaintiff to use her name as a member of the corporation as the designated [*3]psychologist of the corporation and that plaintiff did so without her knowledge and consent. Further, the witness states that she began working for plaintiff as an independent contractor towards the end of 1998 until 2000, but that she may have done very little work for plaintiff in 2001. The witness stated that she had never been an employee of plaintiff. Defendant annexes copies of Department of Treasury – IRS Form 1099 for the years 1998-2000, listing plaintiff as the “PAYER” and Dr. Clark as the “RECIPIENT,” and which provide information for each of those years in Box 7 of the form, entitled “nonemployee compensation.”

In further support of its cross motion, defendant submits plaintiff’s responses to discovery notices which include, inter alia: (1) two bills from plaintiff regarding its assignor, addressed to defendant, and which include, under plaintiff’s letterhead and type written”Kathryn L. Clark, PhD/NY Lic No.012553-1/Tax ID # 11-3450114,” (2) a “Letter of Medical Necessity Regarding Psychological Testing” and a “Psychological Assessment,” both on plaintiff’s letterhead and signed

by Kathryn L. Clark, Psy.D. regarding plaintiff’s assignor, Herbert Paige, and (3) the filing receipt from the New York State Secretary of State for “Multiquest Psychological & Acupuncture Services, PLLC” indicating that the articles of organization were filed on July 14, 1998. While plaintiff’s discovery responses do not include said articles of incorporation, a certificate of amendment of the articles of organization dated September 28, 2001 and signed by Joseph Indelicato, are included as well as a Department of the Treasury-IRS Form W9, again signed by Joseph Indelicato indicating that plaintiff’s tax payer identification number is 11-3450114, the same tax number indicated on plaintiff’ s bills for Kathryn Clark.

Defendant submits the original articles of organization, missing from plaintiff’s response, naming Kathryn Clark as an original member and manager of plaintiff corporation. In its reply papers, defendant annexes a March 2000 amendment to plaintiff’s articles of organization amending plaintiff’s name to “Multiquest Psychological, Acupuncture, Massage Therapy & Social Work Services, PLLC” and which indicates that Kathryn L. Clark is licensed to practice psychology.

The affidavit of Mike Bruno, submitted in support of the cross motion was not considered as it was executed out of state and fails include the required certificate of conformity. (CPLR 2309[c]; Real Property Law 299-a[1].) The two Opinion Letters issued by the Department of Insurance on the issue of independent contractors, also annexed to the motion, are, according to their own terms, informal and not binding on any court. (See State Farm Mut Auto Ins Co v Mallela, 372 F3d 500 [2d Cir 2004].)

Defendant argues that it is entitled to summary judgment on the basis that plaintiff was fraudulently incorporated at the time of treatment and thus not entitled to reimbursement. Plaintiff opposes the cross motion arguing that the regulations in effect at the time services were rendered did not bar payment on that basis.

Since 1973, when the New York State Legislature passed the Comprehensive Motor Vehicle Insurance Reparations Act (“No-Fault Law”), replacing common law tort [*4]remedies for the majority of injuries associated with automobile accidents the legislative purpose has been to protect the “right of an injured party to prompt and full compensation” (See L 1973, ch 13; Ins Law 5101 et seq; Gurnee v Aetna Life & Cas Co, 55 NY2d 184, 193, [1982] cert den 459 US 837 [1982].) The goal was to create a simple, efficient system that would provide prompt compensation to accident victims without regard to fault, and in that way reduce costs for both courts and insureds. (See NY Medical Soc’y v Serio, 100 NY2d 854 [2003].) The legislation, however, was considered a compromise: “prompt payment for basic economic loss to injured persons regardless of fault, in exchange for a limitation on litigation to cases involving serious injury.” (Pommels v Perez, 4 NY3d 566 [2005] citing Montgomery v Daniels, 38 NY2d 41 [1975]). This “tradeoff” allowed insurers to contest fraudulent claims but only within “a strict, short-leashed contestable period and process designed to avoid prejudice and red-tape dilatory practices.” (Presbyterian Hosp v Maryland Cas Co, 90 NY2d 274, 285 [1997].)

The issue of insurance fraud, however, has undermined the goal of No-Fault Law and recent Court of Appeals decisions involving No-Fault Law have directly addressed it. (See Pommells v Perez, 4 NY3d 566 [2005] “[Abuse . . . abounds]”; State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 “rapidly growing incidences of fraud in the no-fault regime”]; Med Soc’y v Serio, 100 NY2d 854 [2003]) [“suspected automobile insurance fraud increased by 275%”].) Thus, the salutary purpose of No-Fault law has been hampered considerably by the rise in illegitimate and fraudulent claims.

For the past thirty years, the responsibility of administering the No-Fault Law has belonged to the Superintendent of Insurance who has the broad power to interpret, clarify, and implement the legislative policy through the promulgation of the “Regulations Implementing The Comprehensive Motor Vehicle Insurance reparations Act” also known as Regulation 68 and codified at 11 NYCRR part 65. (See Insurance Law 301 and 5101 et seq; Med. Soc’y v Serio, 100 NY2d 854 supra; Ostrer v Schenck, 41 NY2d 782 [1977]). The Superintendent’s “interpretation, if not irrational or unreasonable, will be upheld in deference to his special competence and expertise with respect to the insurance industry, unless it runs counter to the clear wording of a statutory provision.” (See Matter of Medical Malpractice Ins Assn v Superintendent of Ins of State of NY, 72 NY2d 753 [1988]; Matter of NYPIRG, Inc v New York State Dept of Ins, 66 NY2d 444 [1985]. The Superintendent of Insurance must, however, follow the State Administrative Procedure Act’s requisite procedures for promulgating regulations, otherwise the regulations will be struck down as unconstitutional. (SAPA 202; Medical Soc’y of NY, Inc v Levin, 185 Misc 2d 536 [Sup Ct NY County] affd 280 AD2d 309 [1st Dept 2002].).

In an effort to combat the widespread abuse in no fault insurance claims, in 1999, the Superintendent proposed an amended Regulation 68, with an effective date of February 1, 2000. (See Med Socy v Serio, 100 NY2d 854, supra.) The amended rule pertinent to this action provided: “[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-[*5]3.16[a][12].) As above stated, under Business Corporation Law, all professional service corporations that are licensed to practice medicine must be owned and controlled only by licensed physicians. (See BCL 1507 and 1508.)

Prior to the effective date for the Amended Regulation 68, in January 2000, the Superintendent of Insurance issued two Opinion Letters, both of which addressed the requirement that providers who are given an assignment by an eligible injured person and become the claimant for purposes of reimbursement must be properly licensed to perform services, so as not to engage in the corporate practice of medicine. Again, those Opinion Letters have no binding effect. (State Farm Mut Auto Ins Co v Mallela, 372 F3d 500 [2d Cir 2004].) On June 9, 2000, the amended regulations were struck down for failure to substantially comply with the State Administrative Procedure Act. (Matter of the Medical Society of the State of New York, Inc. v Levin, 280 AD2d 309, supra.) Thus, as of the date of that decision, the additional licensing requirement in the regulation still had no force and effect. While an appeal from that decision was pending, the Superintendent again revised Regulation 68 which was later approved by the Court of Appeals. (Med Socy v Serio, 100 NY2d 854, supra.)

In 2005, on the same issue of a provider’s licensing status, by certified question from the United States Court of Appeals for the Second Circuit, in 2005 the Court of Appeals answered the following question affirmatively: “Whether, under our “no-fault” insurance laws (see Insurance Law §§ 5101, et seq. and implementing regulations), insurance carriers may withhold payment for medical services provided by fraudulently incorporated enterprises to which patients have assigned their claims.” (See State Farm Mut Auto Ins Co v Mallela, 4 NY3d 313, supra.) By so doing, the Court held that 11NYCRR 65-3.16[a][12] which requires compliance with New York State licensing laws in order to be reimbursed, was valid, had the force of law, and was to be enforced as written. In the decision, the Court noted in two instances that the effective date of the regulation was April 4, 2002. (State Farm Mut Auto Ins Co v Mallela, 4 NY3d 313, 320 and 322, supra.) What the Court did not expressly do was to give 11NYCRR 65-3.16[a][12] retroactivity.

Generally, retroactivity will be applied only where the language of the law expressly allows for such an application. (See Kaye v Whalen, 44 NY2d 754 [1978].) Had the Court given the rule retroactivity, it would have rewritten the Regulation, sidestepped the required procedures of the State Administrative Procedure Act and it would have made “an abrupt shift in controlling decisional law.” (See SAPA 201 and 202; Gurnee v Aetna Life & Casualty Co., 55 NY2d 184, supra.; Medical Soc’y of NY, Inc. v Levin 280 AD2d 309, supra.)

At the time plaintiff’s assignor was treated in 1999, the amended Regulation 68 had not yet taken effect and the regulation that was then in effect provided only that “upon assignment by the applicant . . ., [an insurer] shall pay the providers of services . . . directly.” (11 NYCRR 65.15[j][1].) Although defendant has demonstrated that there is no issue of fact as to [*6]plaintiff’s fraudulent incorporation and plaintiff has failed to raise an issue of fact in that regard, as the rule then in effect contained no further requirement as to licensing, that part of the motion seeking summary judgment based on the retroactivity of the amended regulation is denied. While mindful of the extent that fraud has undermined the policy of No-Fault Law, as above cited in detail, and notwithstanding an undesirable result, nevertheless, the regulation should not be applied retroactively.

Defendant’s next basis for arguing that it is entitled to summary judgment as a matter of law is that the treating provider was in fact an independent contractor and thus plaintiff is not entitled to reimbursement.

In opposition to the cross motion, plaintiff argues that defendant’s allegations are vague and unsubstantiated and that no distinction should be made between an independent contractor and an employee of plaintiff. In its reply, defendant submits an affirmation from its attorney, James K, Hogan, in which he states that in another matter pending in Civil Court, Bronx County, on September 28, 2005, he conducted the deposition of plaintiff’s current owner, Joseph Indelicato, Ph.D., during which deposition Dr. Indelicato admitted under oath that all psychologists employed by Multiquest were employed as independent contractors until 2002.

A billing provider seeking to recover no-fault benefits for services which were not rendered by it or its employees, but by a provider who is an independent contractor, is not a “provider” of the medical services rendered within the meaning of the applicable insurance regulations and is therefore not entitled to recover direct payment of assigned no-fault benefits from the defendant insurer. (AB Med Servs PLLC v New York Cent Mut Fire Ins Co, 7 Misc 3d 1018A, 2005 NY Slip Op 50662U [App Term 2d & 11th Jud Dists].) A provider’s entitlement to recovery of no-fault benefits directly from the insurer is contingent upon an assignment of such benefits, and the assignment must be made to the “providers of services.” (See Rockaway Blvd Med PC v Progressive Ins, 2005 NY Slip Op 25278 [App Term 2d & 11th Jud Dists].) (See Rockaway Blvd Med PC v Progressive Ins, 2005 NY Slip Op 25278 [App Term 2d & 11th Jud Dists].) A defense that the plaintiff in an assigned first-party no-fault action may not maintain the action because it is not a “provider” within the meaning of the insurance regulations “is non-waivable and not subject to the preclusion rule.” (Id. at 2)

In light of the above, defendant has demonstrated, through proof in admissible form, including the EUO transcript, the IRS forms and plaintiff’s owner’s admission, that there is no issue of fact that the treating provider Kathryn Clark who rendered services to plaintiff’s assignor was an independent contractor such that plaintiff may not recover no-fault benefits. In opposition, plaintiff’s evidence fails to raise an issue of fact in this regard notwithstanding the additional opportunity it was given to do so.

In view of the foregoing, the motion is denied and the cross motion dismissing the complaint is granted. As defendant’s cross motion is granted, its remaining arguments will not be [*7]addressed.

The Clerk shall enter judgment accordingly.

This constitutes the decision and order of the Court.

Dated:December 19, 2005___________________________

DICCIA T. PINEDA-KIRWAN

Judge, Civil Court

Civil Court, Queens County

96837/04

Kevin J. Kerrigan, J.

Defendant’s motion for summary judgment dismissing the complaint is denied. Plaintiff’s cross-motion for summary judgment is also denied.

Plaintiff commenced the underlying action pursuant to the Comprehensive Motor Vehicle Reparations Act (Insurance Law §5101, et seq) (the “no-fault” law) seeking payment of its bills for treatment of its assignor for psychological injuries allegedly sustained by her in an automobile accident on May 17, 1998. The psychological services for which plaintiff is seeking payment were performed on July 30, 1998. Plaintiff argues that it is entitled to reimbursement from defendant because it timely submitted a completed proof of claim for no-fault benefits, which defendant neither paid nor denied within 30 days.

An insurer must either pay or deny a claim for first-party no-fault benefits within 30 days after receiving proof of the claim (see Insurance Law §5106 (a); 11 NYCRR §65.15 (g) (3), now 11 NYCRR 65-3.5 [a]). Failure to deny timely renders no-fault benefits overdue, and the insurer is precluded from raising any defenses, other than lack of coverage, to its obligation to pay (see Presbyterian Hosp. v. Maryland Cas. Co., 90 NY2d 274 [1997]; NY Hosp. Med. Center of Queens v. Country-Wide Ins. Co., 295 AD2d 583 [2nd Dept 2002]).

It is undisputed that defendant did not issue a denial of claim (NF-10 form). Defendant [*2]argues that it was not required to issue a denial of claim because the corporate structure of plaintiff was defective in that it did not have a psychologist as an “owner,” the treating psychologist was an independent contractor, its billing was fraudulent and the assignment of benefits form was defective. Therefore, according to defendant, there is no coverage under the insurance policy.

Defendant argues, first and foremost, that plaintiff is not entitled to reimbursement under the no-fault law, notwithstanding defendant’s failure to issue a timely denial of plaintiff’s claim, because plaintiff did not have a psychologist as an “owner” at the time it billed for psychological services and was, thus, defectively, or fraudulently, organized. The arguments that defendant proffers in its motion to establish the relevance of plaintiff’s improper organizational structure to the no-fault law are entirely inapposite.

Defendant argues that plaintiff’s failure to have a psychologist as an “owner” of the “corporation” at the time it provided psychological services to its assignor herein was a violation of §1504 (a) of the Business Corporation Law (“BCL”), which requires a professional service corporation (“PC”) to provide professional services only through individuals authorized to render such services. This violation, reasons defendant, also constituted non-compliance with the provisions of the New York State Workers’ Compensation Fee Schedule for Psychological Services (the “Fee Schedule”) adopted by the no-fault regulations and, therefore, the services provided by plaintiff at the time it did not have a psychologist as an “owner” were not covered under the no-fault law.

In the first instance, BCL §1504 (a) does not concern the organizational structure of a PC. Moreover, plaintiff is not a PC but a professional limited liability company (PLLC) and, thus, all references to the BCL are inapposite.

The Fee Schedule was incorporated into the no-fault law (see Insurance Law §5108; 11 NYCRR §68.0). However, the Fee Schedule has no requirements concerning the corporate or organizational structure of a PC or PLLC. It merely provides, in relevant part, “[P]sychological services will be rendered by or under the active supervision of an authorized psychologist” (see 12 NYCRR Appendix C-7). Defendant offers no proof to establish that the psychological services provided to plaintiff’s assignor were not rendered by a psychologist but, rather, by unlicensed “assistants,” as it alleges. Moreover a defense asserting a violation of the Fee Schedule is precluded since it was not raised in a timely denial of claim (see, e.g. Park Health Center v. Prudential Property & Cas. Ins. Co., 2001 NY Slip Op 40650 [U] [2nd & 11th Jud Dists]).

Thus, defendant, in its motion, cites no provision of the Insurance Law or its implementing regulations relating to the membership requirements of a PLLC. The relevant line of argument bearing upon the issue of whether plaintiff may collect no-fault benefits if it is improperly organized is introduced by plaintiff in its cross-motion (perhaps in anticipation of the Court raising the issue sua sponte). Plaintiff informs the Court of 11 NYCRR §65-3.16 (a) (12), which is the only provision of the no-fault law that keys the right to reimbursement under no-fault to the lawful licensing of the health care provider. That section states:

A provider of health care service 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 [*3]local licensing requirement necessary to perform such service in New York or meet any applicable licensing requirement necessary to perform such service in any other state in which such service is performed.

The Court of Appeals has recently held that, on the basis of this section of the insurance regulations, an insurer may deny payment to a fraudulently incorporated health care provider (see State Farm Mutual Auto. Ins. v. Mallela, 4 NY3d 313 [2005]) (hereinafter referred to as “Mallela III”).

Plaintiff contends that §65-3.16 (a) (12) and the holding in Mallela III do not contemplate the fact pattern of the present case and that even if they did, the claim herein antedates the regulation and, thus, is not subject to it. Furthermore, argues plaintiff, defendant is precluded from raising the regulation as a defense because defendant failed to assert it in a timely denial of claim. Defendant, in its reply, argues that §65-3.16 (a) (12) need not be raised in a timely denial of claim and that on the basis of that section and Mallela III, it is not obligated to reimburse plaintiff for the claims it submitted.

Plaintiff contends that there was no fraud to bring this case within the scope of §65-3.16 (a) (12), as interpreted by the Court of Appeals in Mallela III, because a licensed acupuncturist was an owner and that he acted upon the advice of his attorney that it was legal to practice multiple specialties as long as one of the owners was licensed in one of the specialties. This argument overlooks the uncontroverted facts presented herein that plaintiff was, in fact, in violation of licensing requirements and that it filed false articles of organization by listing therein a licensed individual who was not part of its company.

Pursuant to Limited Liability Company Law §1203 (a), “[O]ne or more professionals each of whom is authorized by law to render a professional service within the state, or one or more professionals, at least one of whom is authorized by law to render a professional service within the state, may form . . . a professional service limited liability company . . . for the purpose of rendering the professional service or services as such professionals are authorized to practice” (emphasis added). Thus, a PLLC may not be formed to render psychological services unless a member thereof is a licensed psychologist. The licensed psychologist who was listed in plaintiff’s articles of organization had no ownership interest, managerial position or employee status with plaintiff.

It is undisputed that plaintiff was formed as a PLLC in 1998 for the purpose of engaging in the business of providing psychological and acupuncture services. Plaintiff also admits that it provided psychological services predominantly, if not exclusively. The articles of organization list Yuegeny Gorbatov and Kathryn Clark as the “original members and the original managers” of the PLLC (see Exhibit “D” to motion). It is also undisputed that of these two individuals, only Clark is a licensed psychologist. However, in her examination under oath (see Exhibit “F” to motion), she states that she was, in fact, never a member of plaintiff, that she never consented to be designated as such on plaintiff’s organization documents and that she was unaware, until it was brought to her attention by defendant, that she was named in plaintiff’s articles of organization. Additionally, she asserts that her only affiliation with plaintiff was as an independent contractor hired by plaintiff to perform psychological services, and was not even an [*4]employee of the company (see EUO transcript at 6, lines 18-21).

Plaintiff’s only explanation of Clark’s EUO testimony is through an inadmissible hearsay affidavit by an individual with no personal knowledge stating that Gorbatov “thought” that Clark was listed only as a manager and not an owner.Thus, at the time it provided psychological services to its assignor and filed its claim in 1998, plaintiff was in violation of the licensing requirements for PLLCs and was fraudulently organized, having filed false articles of organization representing that Clark was an original owner and/or manager, when, in fact, she was neither.

Nevertheless, this Court must agree with plaintiff that §65-3.16 (a) (12) does not apply retroactively to bar recovery of the instant no-fault claim that accrued prior to the effective date of the regulation.

Section 65-3.16 (a) (12) was added as part of the latest revision of the insurance regulations, which became effective April 5, 2002 (see 11 NYCRR §§65-1, et. seq., hereinafter referred to as the “new regulations”), replacing the regulations that had been effective until that date (see 11 NYCRR §§65.1, et. seq.). It is a well-settled principle that legislative rules and revisions of administrative regulations apply prospectively unless their language mandates otherwise (see, e.g. Good Samaritan Hosp. v. Axelrod, 150 AD2d 775 [2nd Dept 1989]). If the new regulations could be construed as applying retroactively to claims antedating their promulgation, then the establishment of an effective date would be meaningless. Indeed, it has been held that the insurance regulations have no retroactive application (see Colonial Life Ins. Co. of America v. Curiale, 205 AD2d 58, 62 [3rd Dept 1994] [“Our review of the regulations reveals that they were not retroactive since they were not made effective as of a date prior to their promulgation”]).

The question of whether §65-3.16 (a) (12) applies retroactively was posed by the Second Circuit in State Farm Mutual Auto. Ins. Co. v. Mallela (372 F 3d 500 [2nd Circuit 2004]) (“Mallela II“) as it considered the central issue presented to it on appeal from the Eastern District (2002 WL 31946762 [E.D.NY]) ( “Mallela I“) of whether a health care provider that is fraudulently incorporated is entitled to reimbursement under no-fault for services rendered by licensed practitioners. This main question was certified to and answered in the negative by the Court of Appeals in Mallela III. But in answering this question, it also addressed the subsidiary issue of retroactivity which was raised by the Mallela II Court.

Proceeding from the standpoint that a cause of action for fraud and unjust enrichment can be maintained against a fraudulently incorporated provider that accepts payments from an insurer in derogation of §65-3.16 (a) (12), the Court of Appeals stated:

Because we rest our holding on the Superintendent’s amended regulation declaring fraudulently licensed corporations ineligible for reimbursement, no cause of action for fraud or unjust enrichment would lie for any payments made by the carriers before that regulation’s effective date of April 4, 2002^[FN1]. State Farm’s complaint does not clearly indicate, one way or the other, whether [*5]it has paid money to defendants after the amended regulation took effect. We therefore answer only the certified question and decline to consider whether State Farm has alleged sufficient facts to support causes of action for fraud or unjust enrichment (Mallela III, 4 NY3d at 322).

Plaintiff, in the Mallela case, sought a judgment declaring that it was not required under no-fault to reimburse a fraudulently incorporated provider and a judgment for restitution for fraud and unjust enrichment seeking recovery of sums already paid to the provider. In answering the certified question, the Court of Appeals made it clear that its holding that the an insurer may deny payment to a fraudulently incorporated provider is based solely on §65-3.16 (a) (12) of the new regulations. Therefore, a cause of action for fraud and unjust enrichment deriving from that section of the new regulations would not lie for payments made upon claims prior to the effective date of that section. In other words, the regulation does not apply retroactively to create a cause of action for fraud or unjust enrichment.

The Court of Appeals answered the retroactivity question in the abstract and did not decide whether the insurer had, in fact, made out a cause of action for fraud or unjust enrichment, since the record was devoid as to whether any claims were paid after the regulation’s effective date.

Thus, this Court finds that Mallela III supports the principle that §65-3.16 (a) (12) does not apply retroactively to claims accruing prior to its effective date of April 5, 2002. Indeed, it has recently been held that this section of the regulations has no retroactive application (see, Multiquest, PLLC v. Allstate Ins. Co. (Jeune), __Misc 3d__, 2005 NY Slip Op 25512 [Civil Court, Queens County, December 1, 2005]). Since the claim in the instant action arose in 1998, §65-3.16 (a) (12) does not apply to this case and, therefore, the defense of defective, or fraudulent, organization is not available to defendant as a basis to deny the instant claim.

This Court does not read the following statement in Mallela III as contradicting the above analysis: “The Superintendent’s regulation allowing carriers to withhold reimbursement from fraudulently licensed medical corporations governs this case” (Mallela III, 4 NY3d at 321). This language has occasioned a contrary interpretation (see Metroscan Imaging P.C. v. GEICO, 8 Misc 3d 829 [Civil Court, Queens County 2005]). However, this Court is of the opinion that Mallela III is merely saying here that §65-3.16 (a) (12) applies to that case’s fact pattern forming the question that was certified, which is whether payment may be withheld from a fraudulently incorporated provider, not that the cause of action was a pre-April 5, 2002 claim and the regulation applies retroactively to bar that claim.

The insurer in Mallela had also argued that the regulation must be viewed as retroactive in effect because it is merely a clarification and not a new rule. The promulgation of §65-3.16 (a) (12) was accompanied by an explanatory notice stating that the section was “added to clarify that a health care provider must be properly licensed to be eligible for reimbursement under no-fault” (NY Reg, May 19, 2001, at 19). Therefore, argued the insurer, the Superintendent of Insurance, in promulgating §65-3.16 (a) (12), was merely articulating a mandate that was “always” in effect (see Mallela II, 372 F 3d at 509). This Court finds said argument unpersuasive. The Superintendent of Insurance is empowered to implement the no-fault law by promulgating [*6]regulations that interpret and clarify the legislative policy (see Ostrer v. Schenck, 41 NY2d 782 [1977]; Insurance Law §301). Hence, every section of the regulations issued by the Superintendent may be considered essentially interpretative or clarifying. The Superintendent’s notice explaining the reason for the addition of §65-3.16 (a) (12) is not to be taken as a pronouncement that the effective date of the regulations is to be ignored with respect to this section.

In light of the determination by this Court that §65-3.16 (a) (12) has no retroactive application and, hence, does not apply to this case, the issue of whether that section is subject to the preclusion rule is academic. However, this Court notes that the holding in Mallela III is dispositive of this issue as well.

Lack of coverage is a defense that survives an untimely denial of claim (see Central General Hosp. V. Chubb Group of Ins. Cos., 90 NY2d 195 [1997]; Presbyterian Hosp. v. Maryland Cas. Co., supra). Plaintiff urges that §65-3.16 (a) (12) does not preclude coverage but merely creates a statutory condition precedent to an insurer’s entitlement to payment, and, therefore, a defense based upon §65-3.16 (a) (12) is subject to the 30-day rule.

An injured party (or his assignor) may only be reimbursed under the no-fault law for “basic economic loss” (see Insurance Law §5102, et seq). The Court of Appeals found that the Superintendent of Insurance, by promulgating §65-3.16 (a) (12), interpreted this statute and “excluded from the meaning of basic economic loss’ payments made to unlicensed or fraudulently licensed providers, thus rendering them ineligible for reimbursement” (Mallela III, 4 NY3d at 320). Thus, the expenses incurred from services rendered by a provider who fails to meet licensing requirements are no longer covered and are, thus, outside the orbit of the no-fault law and its time requirements.

The Mallela III Court does not contradict its holding in Servido v. Superintendent of Insurance (53 NY2d 1041 [1981], revg on dissenting op 77 AD2d 70, 76-86 [1st Dept 1980]) wherein it concluded that the Superintendent’s authority does not extend to creating any new exclusion by regulation. The Superintendent, in promulgating §65-3.16 (a) (12), did not impermissibly add any new category of exclusion to an enumerated list of exclusions circumscribed in the Insurance Law. Rather, the Superintendent interpreted the term “professional health services” in Insurance Law §5102 (a) as no longer encompassing those rendered by health care providers who are in violation of licensing requirements. Therefore, holds the Mallela III Court, this regulation was within the scope of the Superintendent’s authority to promulgate and is, accordingly, valid.

In addition, by holding in Mallela III that §65-3.16 (a) (12) does not apply retroactively to support a cause of action for fraud or unjust enrichment for payments made prior to April 4, 2002, and by stating that it would not reach the question of whether plaintiff had shown sufficient facts to support such a cause of action absent any indication that any payments were made after April 4, 2002, the Court of Appeals is implicitly recognizing the viability of a cause of action for fraud and unjust enrichment pursuant to §65-3.16 (a) (12). Such acknowledgment presupposes the inapplicability of the 30-day rule. Since an insurer who has paid a claim has obviously not denied it, a cause of action for fraud or unjust enrichment could never arise if §65-3.16 (a) (12) were subject to preclusion.

Thus, it is clear that §65-3.16 (a) (12) is not subject to preclusion but may be raised even [*7]if not included in a timely denial of claim.

Defendant also argues that the subject psychological services were provided by an independent contractor and, therefore, plaintiff was not entitled to recover no-fault benefits. Plaintiff denies that any services to its assignor were rendered by an independent contractor and contends that even were they so provided, that defense was waived as it was not raised in a timely denial of claim. Plaintiff, citing the Chubb rule that the only defense that survives an untimely denial of claim is one asserting lack of coverage, argues that the independent contractor defense was waived since it does not relate to a lack of coverage under the policy of insurance. Plaintiff’s argument is without merit.

A billing provider may not recover no-fault benefits for services performed by an independent contractor, since the services billed were not rendered by it or its employees and, therefore, it is not a “provider” of health care services within the meaning of 11 NYCRR 65.15 (j) (1) (now 11 NYCRR 65-3.11 [a]) (see Rockaway Boulevard Medical P.C. v. Progressive Ins., 9 Misc 3d 52 [App Term 2nd & 11th Jud Dists 2005]). Such defense is non-waivable and is not subject to the preclusion rule (id).

Nevertheless, defendant fails to submit any proof that the services provided to plaintiff’s assignor were by an independent contractor. Although Clark, in her EUO, states that she worked as an independent contractor, she does not state that she rendered any services to plaintiff’s assignor herein. Therefore, on this record, defendant has not conclusively established that the treating provider was not an employee of plaintiff but an independent contractor.

Defendant also argues that there was no coverage under the insurance policy because the billing was fraudulent. This argument also lacks merit.

Lack of coverage is a defense “premised on the fact or founded belief that the alleged injury does not arise out of an insured incident” (Chubb, supra at 199). Defendant does not deny that plaintiff’s claim arose out of a legitimate motor vehicle accident. A defense of fraud in billing is not preserved if untimely raised in a proper denial of claim (see Chubb, supra; Melbourne Medical P.C. v. Utica Mutual Ins. Co., 4 Misc 3d 92 [App Term 2nd & 11th Jud Dists 2004]). Defendant’s appeal to the insurance policy that contains a provision declaring that there is no coverage under the policy if the insured conceals, misrepresents or makes any false statements of fact is unavailing. The mandatory no-fault endorsement is an “internally complete and distinct part of the insurance policy [that] . . . cannot be qualified by . . . conditions . . . of the liability portions of the policy” (Melbourne Medical P.C. v. Utica Mutual Ins. Co., supra, quoting Utica Mutual Ins. Co. v. Timms, 293 AD2d 669, 670 [2nd Dept 2002]). An insurer may not alter the mechanism of the no-fault law by adding contrary provisions in its contract of insurance. Since defendant has not issued a denial of claim, its defense asserting fraudulent billing is precluded.

Finally, defendant contends that it is entitled to summary judgment on the ground that the assignment of benefits form is defective. Defendant’s argument is without merit. For the reasons heretofore stated, a defense premised upon a defect in the assignment of benefits form is waived if not preserved in a timely denial of claim.

Plaintiff’s cross-motion for summary judgment is also denied. Plaintiff has failed to establish that it mailed a completed proof of claim to defendant. The affidavit of service of Joseph Indelicato, dated October 12, 2005, is insufficient to establish that the bill was mailed, in that it fails to describe the office procedure for the mailing of bills or the method of mailing. [*8]Thus, plaintiff has failed to establish a prima facie entitlement to summary judgment.

Accordingly, the motion and cross-motion must be denied.

Dated: December 19, 2005___________________________

KEVIN J. KERRIGAN, J.C.C.

Footnotes

Footnote 1:The effective date is actually April 5, 2002. The new regulations were originally filed on August 2, 2001, setting an effective date of September 1, 2001. However, their effectiveness was stayed pending legal challenge. The stay was overruled on April 4, 2002 and the new regulations became effective on April 5, 2002 (see NYCRR T. 11, Ch III, Subch. B, Pt. 65, Refs & Annos).

[*1]

Civil Court of the City of New York, Queens County, December 1, 2005

APPEARANCES OF COUNSEL

Bruno, Gerbino & Soriano, LLP, Melville (James K. Hogan of counsel), for defendant. Belesi, Donovan & Conroy, P.C., Garden City (Wayne H. Wink, Jr., of counsel), for plaintiff.

OPINION OF THE COURT

Joseph J. Esposito, J.

Ordered that upon the foregoing cited papers and after conference, defendant’s motion for summary judgment is denied.

This action was commenced by plaintiff to recover overdue no-fault payments under the provisions of Insurance Law § 5101 et seq., and its implementing regulations. The services that are the subject of this action were provided by plaintiff to its assignor on December 7, 1999 and December 16, 1999.

Defendant moves for summary judgment dismissing plaintiff’s action. The primary basis for such relief asserted by defendant, and the only one for which defendant has submitted any admissible evidentiary support, is the allegation that the plaintiff, Multiquest, PLLC, was fraudulently organized at the time the services were rendered to the assignor and it is therefore not entitled to recover on this claim for no-fault benefits. Defendant’s evidence in support consists of a copy of Multiquest’s articles of organization listing Yeugeny Gorbatov and Kathryn Clark, a licensed psychologist, as “original members and original managers,” as well as other corporate documents and a copy of a certified transcript of the April 26, 2004 examination under oath of Kathryn Clark. Ms. Clark states in her testimony that she was never an owner or member of Multiquest and that her name was used [*2]without her knowledge or consent.

Though not specified by the defendant’s attorney’s affirmation in support of this motion, defendant’s primary argument appears to rely on 11 NYCRR 65-3.16 (a) (12) (eff Apr. 4, 2002) which states:

“A provider of health care services is not eligible for reimbursement under section 5102(a)(1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such service in New York or meet any applicable licensing requirement necessary to perform such service in any other state in which such service is performed.”

In State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005] [Mallela III]), the New York Court of Appeals was presented with the following certified question from the United States Court of Appeals for the Second Circuit.

“Is a medical corporation that was fraudulently incorporated under N.Y. Business Corporation Law §§ 1507, 1508, and N.Y. Education Law § 6507 (4) (c) entitled to be reimbursed by insurers, under New York Insurance Law §§ 5101 et seq. and its implementing regulations, for medical services rendered by licensed medical practitioners?” (State Farm Mut. Auto. Ins. Co. v Mallela, 372 F3d 500, 510 [2004] [Mallela II].)

The Court of Appeals, relying on 11 NYCRR 65-3.16 (a) (12), answered the certified question in the negative, stating, “The Superintendent’s regulation allowing carriers to withhold reimbursement from fraudulently licensed medical corporations governs this case. We hold that on the strength of this regulation, carriers may look beyond the face of licensing documents to identify willful and material failure to abide by state and local law.” (Id. at 321.)

The Court of Appeals however left unanswered the question of whether 11 NYCRR 65-3.16 (a) (12) is applicable to claims accruing prior to the effective date of this section. The Mallela III decision addresses this issue only to the extent of stating that “[b]ecause we rest our holding on the Superintendent’s amended regulation declaring fraudulently licensed corporations ineligible for reimbursement, no cause of action for fraud or unjust enrichment would lie for any payments made by the carriers before that regulation’s effective date of April 4, 2002.” (Id. at 322.) This statement by the Court of Appeals addresses only whether an insurer would have a cause of action to recover payments already made to the illegally incorporated medical provider, but leaves open the question of whether the section is applicable to unpaid claims that accrued prior to April 4, 2002.

It is this court’s determination that 11 NYCRR 65-3.16 (a) (12) is not retroactively applicable to any claim for treatment provided prior to April 4, 2002. The Mallela II court discusses but does not decide this issue. (See State Farm v Mallela, 372 F3d 500, 508 [2004].) “Retroactivity is not favored in the law. Thus . . . administrative rules will not be construed to have retroactive effect unless their language requires this result.” (Matter of Good Samaritan Hosp. v Axelrod, 150 AD2d 775, 777 [2d Dept 1989], quoting Bowen v Georgetown Univ. Hospital, 488 US 204, 208 [1988].) “There is a presumption that legislative rules are to be applied only prospectively.” (Matter of Linsley v Gallman, 38 AD2d 367, 369 [3d Dept 1972].) Based on the holdings in Good Samaritan and Linsley, and in the absence of any language in 11 NYCRR 65-3.16 (a) (12) suggesting that it should be given retroactive effect, this defense is unavailable for any claim arising from treatment provided prior to April 4, 2002.

The other defenses raised by defendant’s motion papers, specifically allegations of excessive billing [*3]and defects in the assignment of benefits form are unavailable to the defendant as defendant has failed to show that these defenses were properly preserved in a timely denial of the claim (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274 [1997]) and do not fall within the Chubb exceptions to the 30-day rule (see Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195 [1997]).

The court also notes that the defendant’s motion papers are defective in that they do not include a complete copy of the pleadings as required by CPLR 3212 (b). There is no copy of the summons and complaint included within defendant’s moving papers.

Civil Court of the City of New York, Queens County

086471/04

Howard G. Lane, J.

Plaintiff commenced this action to recover first-party no-fault benefits for medical services rendered to its assignor Katina Johnson pursuant to New York’s No-Fault Insurance Law § 5101 et. seq., as well as statutory interest and attorney’s fees. Thereafter, defendant moved for summary judgment on the ground that plaintiff’s claims for No-Fault benefits is not overdue and that this action is premature. Plaintiff cross-moved for summary judgment on its claims in the amount of $759.00, on the ground that defendant failed to pay or to deny its claims within the statutory 30-day period as required by Insurance Law section 5106 [a].

SUMMARY JUDGMENT STANDARD

The rule governing summary judgment requires the proponent of a summary judgment motion to make a prima facie showing of entitlement to judgment as a matter of law, tendering admissible evidence to eliminate any material issues of fact from the case (Winegrad v. New York University Medical Center, 64 NY2d 851 [1985]; Alvarez v. Prospect Hospital, 68 NY2d 320 [1986]; Tortorello v. Carlin, 260 AD2d 201 [1st Dept 1999]). Failure to make such showing requires denial of the motion, regardless of the sufficiency of the opposing papers (Matter of Redemption Church of Christ v. Williams, 84 AD2d 648; Greenberg v. Manlon Realty, 43 AD2d 968).

If the moving party satisfies those standards, the burden shifts to the opponent to rebut that prima facie showing by presenting evidence in admissible form establishing the existence of triable issues of fact (see, CPLR §3212, subd [b]; Zuckerman v. City of New York, 49 NY2d 557 [1980]; Davenport v. County of Nassau, 279 AD2d 497 [2d Dept 2001]; Pagano v. Kingsbury, 182 AD2d 268 [2d Dept 1992]; Kaufman v. Silver, 90 NY2d 204 [1997]). It is well settled that summary judgment should be denied if there is any doubt as to the existence of a triable issue of fact (Freese v. Schwartz, 203 AD2d 513 [2d Dept 1994]).

When deciding a motion for summary judgment, the court must review the [*2]evidence in the light most favorable to the non-moving party, and must give that party all of the reasonable inferences that can be drawn from the evidence (Louniakov v. M.R.O.D. Realty Corp., 282 AD2d 657 [2d Dept 2001]; SSBSS Realty Corp. v. Public Service Mut. Ins. Co., 253 AD2d 583[1st Dept 1998]).

DEFENDANT’S MOTION AND PLAINTIFF’S CROSS-MOTION FOR SUMMARY JUDGMENT.

Pursuant to both the Insurance Law and the regulations promulgated by the Superintendent of Insurance, within thirty [30] days after a claimant submits proof of the facts and the amount of loss sustained, an insurer is required to either pay or deny a claim for insurance coverage of medical expenses arising from a motor vehicle accident (see, 11 NYCRR §65.15 [g] [3]; Central Gen. Hosp. v. Chubb Group of Ins. Co., 90 NY2d 195 [1997]; Mount Sinai Hosp., v. Triboro Coach, 263 AD2d 11 [2d Dept 1999]; New York Hosp. Med. Center of Queens v. Country-Wide Ins. Co., 295 AD2d 583 [2d Dept 2002]).

The only exception to the 30 day rule is where an insurer’s untimely denial is based upon the defense of lack of coverage, or where a medical condition for which the patient was treated, was not “related to the accident”. Chubb, supra. To withstand a motion based on this defense, the insurer has the burden to come forward with proof in admissible form to establish “the fact” or the evidentiary foundation for its belief that the patient’s treatment was unrelated to the accident (Metro Med. Diagnostics, P.C., v. Eagle Ins. Co., 293 AD2d 751 [2d Dept 2002]).

Within 10 business days after receipt of the completed no-fault application (NF-2), the insurer must forward verification forms for healthcare or hospital treatment (NF-3, NF4 or NF-5) to the injured party or that party’s assignee. After receipt of the completed verification of healthcare or hospital treatment form, the insurer may seek “additional verification” or further proof of claim from the injured party or that party’s assignee within 15 business days thereof. 11 NYCRR §65-3.5(b). Hence, the 30 day period may be extended by a request for verification. See, New York Hosp. Med. Ctr. of Queens v. Country-Wide Ins. Co.,supra; Presbyterian Hosp. in the City of New York v. Maryland Cas. Co., 90 NY2d 279 [1997]).

If the requested verification has not been supplied to the insurer within 30 calendar days, after the original request, the insurer shall issue within 10 calendar days of the insured’s failure to respond a follow-up request “either by telephone call, properly documented in the file, or by mail.” See 11 NYCRR §65-3.6(b), now 15 days per 11 NYCRR §65-3.5 [b]; S&M Supply v. Allstate Insurance Co., 2003 NY Slip Op 51191 [U] [App Term, 2d & 11th Jud Dists]. “An insurer shall not issue a denial of claim form . . . prior to its receipt of verification of all of the relevant information requested . . . “(New York Hosp. Med. Ctr. Of Queens v. Country-Wide Ins. Co., supra at 585. Glassman D.C., PC v. State Farm Mut. Auto. Ins. Co., 192 Misc 2d 264 [App Term, 2nd & 11 Jud [*3]Dists 2002]).

A legally valid basis for denying a first party benefit claim would be the provider’s assignor failing to comply with an insurer’s requests for verification. See generally, Lopedote v. General Assurance Company, 2004 NY Slip Op 50593[U] [Kings Co. Civil Ct. 2004]. However, any party required to provide verification information must be afforded adequate and proper notice of the request. See generally, Star Medical Services, P.C. v. Allstate Ins. Co., 5 Misc 3d 785 [Kings Co. Civil Ct. 2004].

Failure to pay or deny a claim within the 30-day period requirement, absent a request for additional verification, renders benefits “overdue,” and precludes the insurer from disclaiming liability based on a breach of a policy condition or a statutory exclusion defense (Presbyterian Hosp. in City of New York v. Maryland Cas. Co., 90 NY2d 274 [1997]). All overdue payments bear interest at a rate of 2% per month, and the claimant is entitled to recover attorney’s fees where a “valid claim or portion” was denied or overdue [see, Insurance Law §5106 [a]; Presbyterian Hosp. in the City of New York, supra.

Plaintiff maintains that it is entitled to summary judgment because the defendant failed to pay or deny its claims within 30 days of receipt as required by the Insurance Law §5106 (a). Plaintiff asserts that it submitted to defendant proofs of claims for medical supplies which defendant admits to receiving, that defendant did not request additional verification and that the claim is overdue and owing.

Plaintiff proved that it submitted a timely and proper notice of claim pursuant to the No-Fault statute for medical supplies provided, which defendant acknowledged receiving, and not paying. See, Capio Medical, P.C. ex rel. Berger v. Progressive Cas. Ins. Co., 7 Misc 3d 129(A), 2005 NY Slip Op 50526(U) (App Term, 2nd and 11 th Jud Dists); Park Health Center v. Prudential Prop. and Cas. Ins. Co., 2001 WL 1803364 (App Term 2nd and 11th Jud Dist 2001). The burden then shifted to defendant to show the existence of a triable issue of fact. See, Alvarez v. Prospect Hosp., supra. Defendant asserts that it received the bills at issue on August 20, 2002, “printed” and then mailed a request for additional verification on August 30, 2002, and after receiving no response from plaintiff, followed up with a second written request on September 30, 2002. Plaintiff did not admit to receiving the request for verification. Defendant asserts that the requests for verification were timely sent to plaintiff and establish defendant’s right to a tolling of the 30-day period by its verification requests.

In support of its motion defendant submits copies of the alleged verification request addressed to plaintiff, and proof of mailing of its request for verification (S & M Supply, Inc. v. GEICO, 2003 NY Slip Op 51192[U] [App Term, 2d & 11th Jud Dists 2003]). Specifically, defendant proffers the affidavit of Linda Phillips, a litigation representative employed by defendant who avers in her affidavit in support of defendant’s motion for summary judgment that “[w]ith respect to the mailing of the . . . [*4]verification requests, my office mailed same in accordance with its normal practice and procedure, followed in the regular course of my office’s business. . .” She further avers that “[s]uch request includes the specific claim information and bears the date that it is printed. It is then placed in a bin for the daily 1:15 p.m. collection by my office’s internal mail room personnel. The same day, a mail room employee prepares a post paid envelope bearing the same address of the entity that submitted the claim and seals the verification request in the envelope. Also the same day, a carrier from United States Post Office collects, with the mail, the envelope containing the verification request form at 3:30 P.M.” Additionally, she avers that “any verification request form that is placed in the bin for mail room collection after 1:15 p.m. is collected during the next business day’s internal mail collection.”

The court finds the assertions of defendant’s litigation examiner conclusory and such assertions fail to specify either that it was the duty of the litigation examiner to ensure compliance with said office procedures or that the litigation examiner had actual knowledge that said procedures were complied with. (See, Contemp. Med. Diag. & Treatment, P.C. v. GEICO, 6 Misc 3d 137(A), 2005 NY Slip Op 50254[U] [App Term, 2d & 11th Jud Dists 2005]). See also, Amaze Medical Supply v. State Farm Automobile Ins. Co., 8 Misc 3d 139(A), 2005 NY Slip Op 51315(U) [2d and 11th Jud Dists 2005]). As defendant’s papers in support of the motion for summary judgment do not contain an affidavit of someone with personal knowledge that its verification requests were actually mailed, or describing the standard office practices or procedures it used to ensure that such requests were properly addressed and mailed (see, Residential Holding Corp. v. Scottsdale Ins. Co., 286 AD2d 679 [2d Dept 2001]), defendant failed to establish by competent evidence that it timely mailed its verification requests, and therefore, the 30-day period within which it was required to pay or deny the claim was not tolled (see, S&M Supply Inc. Co. V. Lancer Ins. Co., 4 Misc 3d 131[A], 2004 NY Slip Op 50695[U] [App Term, 2d & 11th Jud Dists 2004]).

Accordingly, defendant’s motion for summary judgment is denied. Plaintiff’s cross-motion for summary judgment is granted and judgment shall be awarded in favor of plaintiff in the amount of $759.00, together with statutory interest and attorneys fees.

The foregoing constitutes the decision and order of this Court.

Dated, October 24, 2005________________________________

Howard G. Lane

Judge, Civil Court