[*1]

Supreme Court, Appellate Term, Second Department, April 20, 2009

APPEARANCES OF COUNSEL

Rivkin Radler LLP, Uniondale (Evan H. Krinick, Cheryl F. Korman, Stuart M. Bodoff and Melissa M. Murphy of counsel), for appellant.

{**23 Misc 3d at 43} OPINION OF THE COURT

Memorandum.

Order, insofar as appealed from, reversed without costs, defendant’s cross motion for leave to amend its answer and, upon such amendment, for summary judgment dismissing the complaint granted, and complaint dismissed.

In this action by a provider to recover assigned first-party no-fault benefits for services rendered, plaintiff moved for summary judgment. Defendant cross-moved for leave to amend its answer to assert the affirmative defense of collateral estoppel, and, upon such amendment, for summary judgment dismissing the complaint. The Civil Court denied plaintiff’s motion and defendant’s cross motion. Defendant appeals from so much of the order as denied its cross motion.

Generally, leave to amend a pleading pursuant to CPLR 3025 (b) should be granted where there is no significant prejudice or surprise to the opposing party and where the proof submitted in support of the motion indicates that the cause of action or defense to be{**23 Misc 3d at 44} asserted in the amendment may have merit (see Edenwald Contr. Co. v City of New York, 60 NY2d 957, 959 [1983]; Ingrami v Rovner, 45 AD3d 806, 808 [2007]). The court must examine the merits of the cause of action or defense to be asserted in the proposed amendment since leave to amend should not be granted where the cause of action or defense to be asserted is totally without merit or is palpably insufficient as a matter of law (see Ingrami, 45 AD3d at 808; Hill v 2016 Realty Assoc., 42 AD3d 432, 433 [2007]). [*2]

Defendant sought leave to amend its answer in order to interpose the affirmative defense of collateral estoppel because there was a prior arbitration proceeding between the parties in which plaintiff had sought to recover assigned first-party no-fault benefits for services rendered to a different assignor. In said proceeding, the arbitrator determined that plaintiff was ineligible to receive reimbursement of no-fault benefits because it was a fraudulently incorporated professional service corporation (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, 322 [2005]). Inasmuch as plaintiff failed to demonstrate that prejudice or surprise would result from allowing the proposed amendment (see McCaskey, Davies & Assoc. v New York City Health & Hosps. Corp., 59 NY2d 755 [1983]), and the proposed affirmative defense was neither devoid of merit nor palpably insufficient as a matter of law (see Ingrami, 45 AD3d at 808; Hill, 42 AD3d at 433), defendant should have been granted leave to amend its answer (see Ingrami, 45 AD3d at 808 [a defendant who has failed to assert a defense set forth in CPLR 3211 (a) (5) both in a motion to dismiss and an answer (see CPLR 3211 [e]) may nonetheless be granted leave to amend the answer to assert such defense under appropriate circumstances]).

“The two elements that must be satisfied to invoke the doctrine of collateral estoppel are that (1) the identical issue was decided in the prior action and is decisive in the present action, and (2) the party to be precluded from relitigating the issue had a full and fair opportunity to contest the prior issue (see Kaufman v Lilly & Co. [65 NY2d 449,] at 455)” (Luscher v Arrua, 21 AD3d 1005, 1007 [2005]; see D’Arata v New York Cent. Mut. Fire Ins. Co., 76 NY2d 659 [1990]).

“The burden is on the party attempting to defeat the application of collateral estoppel to establish the absence of a full and fair opportunity to litigate” (D’Arata, 76 NY2d at 664; see also Kaufman, 65 NY2d at 456).

Collateral estoppel effect can, under appropriate circumstances, be given to arbitration awards (see Matter of American Ins. Co. [Messinger—Aetna Cas. & Sur. Co.], 43 NY2d 184 [1977]). Where a plaintiff has freely elected to proceed to arbitration with the assistance of counsel despite the availability{**23 Misc 3d at 45} of an alternate judicial forum and has had the opportunity to employ procedures substantially similar to those utilized in a court of law, it may be found that the plaintiff has had a full and fair opportunity to litigate the issue determined in the arbitration proceeding (Clemens v Apple, 65 NY2d 746 [1985]).

In the instant matter, defendant established that the issue of whether plaintiff was ineligible to receive reimbursement of no-fault benefits because it was a fraudulently incorporated professional service corporation (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d at 322) was identical to the issue previously decided by the arbitrator. In opposition to defendant’s cross motion, plaintiff failed to address the branch of the cross motion which sought summary judgment dismissing the complaint on the ground of collateral estoppel. Therefore, plaintiff failed to establish that it did not receive a full and fair opportunity to litigate in the arbitration proceeding. Thus, the branch of defendant’s cross motion seeking summary judgment should have been granted (see Uptodate Med. Serv., P.C. v State Farm Mut. Auto. Ins. Co., 22 Misc 3d 128[A], 2009 NY Slip Op 50046[U] [App Term, 2d, 11th & 13th Jud Dists 2009]).

Accordingly, the order, insofar as appealed from, is reversed, defendant’s cross motion for leave to amend its answer, and, upon such amendment, for summary judgment dismissing the complaint is granted, and the complaint is dismissed.

Pesce, P.J., Weston Patterson and Golia, JJ., concur.

Supreme Court, Nassau County

018936/08

For the Plaintiff

Joseph Henig, P.C.

1598 Bellmore Avenue

Bellmore, New York 11710

(516) 785-3116

Randy Sue Marber, J.

The Defendant, by Order to Show Cause, moves for an order 1) vacating the judgment granted on default and entered by the clerk on December 12, 2008; 2) extending the Defendant’s time to answer the Plaintiff’s complaint; and 3) compelling the Plaintiff to accept the Defendant’s answer. The Plaintiff opposes the Order to Show Cause.

The Plaintiff, WESTCHESTER MEDICAL CENTER seeks to recover $345,472.88 for medical services provided to its assignor, Jamel Harris. The complaint in this action alleges that the Defendant insured the Plaintiff’s assignor under an automobile liability policy which contained a New York no-fault endorsement. On or about April 12, 2008, the Plaintiff’s assignor, Jamel Harris, was injured when he hit a tree while driving a 2005 Ford. The Plaintiff alleges that Jamel Harris, as the insured, was a covered person under the automobile policy issued by the Defendant and was entitled to reimbursement from the Defendant for health services rendered by the Plaintiff. The Plaintiff claims that the no-fault benefits for health services provided were duly assigned to the Plaintiff. The Plaintiff claims the Defendant is responsible for the payment of the assignor’s health services rendered to him in the amount of $330,925.85, plus interest.

On or about October 27, 2008, the Plaintiff served the Summons and Complaint in this matter upon the Defendant by serving the New York State Insurance Department in Albany. The Defendant alleges that The Insurance Department then sent the Summons and Complaint to [*2]Allstate’s agent, C.T. Corp., by regular mail, on October 28, 2008 and it was received by C.T. Corp. on November 3, 2008. Subsequently, the Defendant’s counsel alleges, C.T. Corp. sent the Summons and Complaint to Allstate’s offices in Hauppauge, New York, by overnight mail.

In an affidavit sworn to on January 23, 2009, Charles Jaekle, a Front Line Performance Leader employed by the Defendant, alleges that the Summons and Complaint in this action was then misindexed by an employee who “did not realize the time sensitive nature of the documents”. As a result, the Summons and Complaint was not received by the appropriate office to prepare responsive pleadings until January 5, 2009.

The default judgment had already been entered on December 12, 2008. The Defendant claims that the delay in answering the Summons and Complaint was not willful or deliberate nor was it extensive and the Defendant acted quickly to fix the situation once it was discovered.

The Plaintiff’s counsel opposes the motion and argues that the Defendant fails to provide a reasonable excuse for the default. The Plaintiff’s counsel argues that the Defendant has failed to substantiate its allegations and that same are “vague and unsubstantiated” explanations which do not rise to the level of reasonable excuse. The Plaintiff’s counsel cites Stoltz v. Playquest Theater Company, 257 AD2d 758, 683 NYS2d 339 (3d Dept. 1999) to support his argument that the Defendant’s failure to understand the need to respond in a timely fashion to the summons and complaint did not constitute excusable neglect. Such reliance is misguided as the facts in the Stoltz matter are distinguishable from the facts in the instant case. In Stoltz, the defendant sought legal advise upon being served with the summons and chose not to respond. Additionally, the Defendant in Stoltz did not attempt to vacate the default until collection proceedings were undertaken more than a year after entry of the default and the defendant ceased operations and vacated its business premises.

The Plaintiff’s counsel further relies on Harcztark v. Drive Variety, Inc., 21 AD3d 876, 800 NYS2d 613 (2d Dept. 2005), specifically stating in his Affirmation, dated February 17, 2009, that the Court refused to vacate a default of two months based upon “insurance company delay”. He further cites Harcztark quoting the Appellate Court as ruling, “This excuse has been rejected in this court time and again”. The Plaintiff’s counsel has misrepresented the ruling of the majority in the Harcztark matter. The Court in Harcztark rejected the premise that delay by an insurance company may never constitute all or part of a reasonable excuse by and insured for a default. The Court went on to say that determining whether there is a reasonable excuse for a default is a discretionary, sui generis determination to be made by the court based on all relevant factors, including the extent of the delay, whether there has been prejudice to the opposing party, whether there has been willfulness, and the strong public policy in favor of resolving cases on the merits. (id at 877).

In order to vacate a default, the defaulting party must demonstrate that they had a reasonable excuse for the delay, that they have provided a meritorious defense, that the default was not willful, and that the plaintiff will not be prejudiced. Lichtman v. Sears, Roebuck & Co., 236 AD2d 373, 653 NYS2d 25 (2d Dept. 1997). A default by a defendant should be vacated where there is “minimal prejudice caused by the defendant’s short delay in answering, as well as the public policy in favor of resolving the cases on the merits.” Classie v. Stratton Oakmont, Inc., 236 AD2d 505, 653 NYS2d 377 (2d Dep’t 1997). Furthermore, “it is within the sound discretion of the Court to determine whether the proffered excuse and the statement of the merits are sufficient.” Navarro v. A. Trenkman Estate, Inc., 279 AD2d 257 719 NYS2d 34 (1st Dept. 2001) citing Mediavilla v. Gurman, 272 AD2d 146, 707 NYS2d 432 (1st Dept. 2001). The court also has discretion to consider whether the defendant acted promptly in curing the default without delay or prejudice to the [*3]plaintiff. Statewide Ins. Co. v. Bradham, 301 AD2d 606, 753 NYS2d 861, (2d Dept. 2003) citing Matter of Statewide Ins. Co. v. Bradham, 301 AD2d 606, 753 NYS2d 861 (2d Dept. 2003).

The Plaintiff’s counsel argues that the Defendant has failed to submit an affidavit of merit which demonstrates a meritorious defense to the action. Plaintiff’s counsel argues that the Defendant’s attorney does not have personal knowledge of the facts and the submission of her affirmation alone is insufficient to vacate a default judgment. In response to this argument, the Defendant’s counsel points out that an attorney’s affirmation can be submitted in lieu of an affidavit of merit if all the material allegations of the pleading are within the attorney’s personal knowledge. Additionally, the Defendant’s attorney further points out that her affirmation is supported by the affidavit of Charles Jaekle, who has personal knowledge of the facts. The Defendant’s attorney also alleges that she has personal knowledge that the Plaintiff’s assignor is not covered under the subject insurance policy based on the subject insurance policy itself.

In support of the requirement that there be a meritorious defense, the Defendant argues that the Plaintiff’s assignor was not covered by the Defendant’s insurance policy and that there exists no contractual relationship between the Plaintiff and the Defendant and that the Defendant has no obligation to pay the Plaintiff’s claims. The Defendant’s attorney asserts that the vehicle the Plaintiff’s assignor was driving on the date of the accident, a 2005 Ford, was not a covered vehicle under the subject policy. The Defendant’s attorney asserts that the subject policy covers a 1999 Nissan Maxima and a 1997 Acura. Additionally, the Defendant’s attorney asserts that the insurance policy issued to the Plaintiff’s assignor’s grandmother, Esther Harris, lists her address as 36 Peter Way, Kiamesha, New York whereas the police report for the accident involving Jamel Harris lists his address as 1120 Clay Avenue, Apt. 4A, Bronx, New York. As such, the Defendant’s attorney asserts that the Plaintiff’s assignor did not reside in the insured’s household and is not an “eligible injured person” under the policy.

The Plaintiff’s attorney argues that the defense to the action that the Defendant raises is precluded due to Allstate’s failure to have issued a Denial of Claim. In response to this argument, the Defendant’s attorney asserts that the insurer’s failure to timely disclaim coverage does not preclude it from later denying liability on the ground that the insurance agreement itself does not cover the particular automobile or person. In support of this proposition, the Defendant’s counsel cites Zappone v. Home Ins. Co., 55 NY2d 131, 138 (1982). Additionally, the Defendant’s counsel points out that at no time did the Defendant ever admit that it provided coverage for the subject vehicle. The affirmation submitted by the Defendant’s counsel, dated January 26, 2009, in support of the Order to Show Cause specifically states in paragraphs 14 and 15 that the Plaintiff’s assignor drove a 2005 Ford and that the policy insured a 1999 Nissan Maxima and a 1997 Acura. The Defendant’s counsel argues that the Plaintiff has failed to put forth any evidence to show that the Plaintiff’s assignor was an eligible injured person covered under the subject policy.

This Court, in its discretion, accepts the Defendant’s explanation for the delay incurred in answering the Summons and Complaint in this matter as an excusable delay. Additionally, the Defendant has provided a meritorious defense and sufficient evidence that the default was not willful. The delay was short and the Plaintiff will not be prejudiced by allowing the Defendant to interpose an answer.

Accordingly, the Defendant’s motion to vacate the default judgment is GRANTED. The Defendant’s proposed answer is deemed served and the preliminary conference in this matter shall be held on April 21, 2009 at 9:30 a.m. at the courthouse lower level.

This decision constitutes the order of the court. [*4]

DATED:Mineola, New York

March 25, 2009

______________________________

Hon. Randy Sue Marber, J.S.C.

[*1]

Supreme Court, Nassau County, March 23, 2009

APPEARANCES OF COUNSEL

Picciano & Scahill, P.C., Westbury (Jason Tenenbaum of counsel), for Interboro Mutual Indemnity Insurance Company. New York Liquidation Bureau, New York City (James E. d’Auguste, Andrew J. Lorin and Judy H. Kim of counsel), for Superintendent of Insurance of the State of New York. Ariel Aminov, PLLC, Forest Hills, for Grand Central Medical, P.C.

{**24 Misc 3d at 1003} OPINION OF THE COURT

Edward W. McCarty, III, J. [*2]

{**24 Misc 3d at 1004}Motion by order to show cause by Interboro Insurance Company for: (1) an order pursuant to CPLR 2221 (a) (1) and (e) granting leave to renew the order of this court, dated February 1, 2007, and upon renewal, modifying said order by: (a) adding a tenth decretal paragraph decreeing: “No-fault interest shall not apply to claims that were submitted to Interboro Mutual Indemnity Insurance Company and to the New York State Liquidation Bureau as Rehabilitator prior to February 1, 2007, the date Interboro Mutual Indemnity Insurance Company exited rehabilitation”; (b) adding an eleventh decretal paragraph decreeing: “The failure to transmit timely or valid denials, as set forth in Insurance Law [§ ] 5106 (a) and 11 NYCRR 65-3.8 shall not apply to claims received or adjusted between April 4 [sic], 2004 and February 1, 2007″; and (c) adding a twelfth decretal paragraph decreeing: “All actions or arbitrations brought against Interboro Mutual Indemnity Insurance Company during the period of rehabilitation, commencing from April 4 [sic], 2004 and terminating on February 1, 2007 shall be dismissed as violating the stay order that was in effect prior to Interboro Mutual Indemnity Insurance Company’s exiting rehabilitation”; (2) an order compelling Grand Central Medical, P.C. to be named as a necessary party for the limited purpose of contesting the issue raised herein as to whether a no-fault penalty rate interest should be assessed against claims adjusted prior to Interboro Mutual Indemnity Insurance Company’s exiting rehabilitation; and (3) such other and further relief as this court deems just and proper, is granted, to the extent set forth herein.

On April 6, 2004, Interboro Mutual Indemnity Insurance Company was placed in rehabilitation and the New York State Superintendent of Insurance was appointed as rehabilitator, pursuant to article 74 of the Insurance Law. A plan of rehabilitation was adopted and approved by this court in an order dated February 1, 2007 and the rehabilitation terminated with the emergence of Interboro Insurance Company. The plan of rehabilitation approved by this court provided for certain payments to creditors during the claims administration period in full satisfaction of their claims. No provision for the payment of interest to any claimant was included in the plan of rehabilitation.

In 2007, subsequent to Interboro’s emergence from rehabilitation, Grand Central commenced an action in Civil Court, Queens County, against Interboro to recover no-fault medical payments. The payments at issue were due in 1999. Denials were not timely made, and, as a result, Grand Central seeks{**24 Misc 3d at 1005} interest from the time payments were due in 1999, pursuant to Insurance Law § 5106 (a).

Payment of no-fault interest to Grand Central for the period preceding and during the rehabilitation period would be inconsistent with the terms of the plan of rehabilitation, the policies and practice of the Superintendent of Insurance, and the purpose of Insurance Law § 5106 (a) in prohibiting any reward to a dilatory insurance company.

This application was properly brought to modify this court’s February 1, 2007 order, to clarify that interest is not available on claims due before or during the rehabilitation period. [*3]Moreover, Grand Central was properly made a party hereto for the limited purpose of clarifying this issue.

So much of Interboro’s motion as seeks to add a decretal paragraph that no-fault interest shall not apply to claims submitted to Interboro prior to February 1, 2007 is granted.

So much of Interboro’s motion as seeks to add a decretal paragraph that the failure to transmit denials shall not apply to claims received or adjusted during the rehabilitation period is also granted.

It should be noted that Interboro has withdrawn so much of its motion as seeks to dismiss all actions or arbitrations brought against it during the rehabilitation period.

Submit amended order, with notice of settlement.

Supreme Court, Nassau County

15212/08

TO:Joseph Henig, PC

Attorneys for Plaintiffs

1598 Bellmore Avnue

Bellmore, NY 11710

Jaffe & Koumourdas, LLP

Attorneys for Defendant

40 Wall Street, 12th Floor

New York, NY 10005

William R. LaMarca, J.

Relief Requested

Plaintiffs, THE NEW YORK HOSPITAL MEDICAL CENTER OF QUEENS a/a/o TOPAZ CASTRO (hereinafter referred to as “NYU QUEENS”), and ST. VINCENT’S HOSPITAL & MEDICAL CENTER a/a/o RONNY MUNOZ (hereinafter referred to as “ST. VINCENT’S”), move for an order, pursuant to CPLR §3212, granting them summary judgment on the first and second cause of action against defendant, COUNTRYWIDE INSURANCE COMPANY (hereinafter referred to as “COUNTRYWIDE”), on the ground that COUNTRYWIDE has failed to make timely payment on the claims submitted under the subject policy of insurance and that plaintiffs are entitled to interest and attorneys fees because of the delay in payment. COUNTRYWIDE opposes the motion and cross-moves for summary judgment dismissing the complaint on the ground that the claims are premature and that plaintiffs fail to state a cause of action. The motion and cross-motion are determined as follows:

This matter arises out of the alleged failure of COUNTRYWIDE to pay two (2) separate no-fault billings and counsel for plaintiffs states that the actions are joined pursuant to CPLR §1002(a) as the claims arise out of a uniform contract of insurance and involve the interpretation of the same no-fault provisions of the Insurance Law, citing [*2]Hempstead General Hospital v Liberty Mutual Insurance Company, 134 AD2d 569, 521 NYS2d 469 (2nd Dept. 1987).

The Statute

11 NYCRR, Part 65, the regulations implementing the Comprehensive Motor Vehicle Insurance Reparations Act, commonly referred to as the No-Fault Law, provides that “No- Fault Benefits are overdue if not paid within 30 calendar days after the insurer receives proof of Claim…”. (11 NYCRR 65-3.8[a][1]). Within thirty (30) days of receiving a claim, the insurer is required to either pay or deny the claim in whole or in part (see, Insurance Law §5106[a]; 11 NYCRR 65-3.8 [c]). However, this thirty (30) day period may be extended by a timely demand by the insurance company for further verification of a claim (see, 11 NYCRR 65-3.5). Within 10 business days after receipt of the completed application for no fault benefits, the insurer must forward, to the parties required to complete them, the prescribed verification forms it will require prior to payment of the initial claim (see, 11 NYCRR 65-3.5[a]). If the demanded verification is not received within thirty (30) days, the insurance company must follow up within ten (10) calendar days of the claimant’s failure to respond, either by telephone call or mail (see, 11 NYCRR § 65-3.6[b]); New York Hospital Medical Center of Queens v State Farm Mutual Automobile Insurance Company, 293 AD2d 588, 741 NYS2d 86 [2nd Dept. 2002]). As a complete proof of claim is a prerequisite to receiving no-fault benefits, a claim need not be paid or denied until all demanded verification is provided (see, 11 NYCRR 65-3.5[c]; Montefiore Medical Center v New York Central Mutual Fire Insurance Company, 9 AD3d 354, 780 NYS2d 161 (2nd Dept. 2004); New York & Presbyterian Hospital v American Transit Insurance Co., 287 AD2d 699, 733 NYS2d 80 (2nd Dept. 2001); Hospital for Joint Diseases v Elrac, Inc., 11 AD3d 432, 783 NYS2d 612 (2nd Dept. 2004). Statutory interest and attorneys fees may be directed If payment is not timely made on a completed claim. See, Insurance Law § 5106(a), 11 NYCRR §65-3.9 and §3.10.

In viewing motions for summary judgment, it is well settled that summary judgment is a drastic remedy which may only be granted where there is no clear triable issue of fact (see, Andre v Pomeroy, 35 NY2d 361, 362 NYS2d 131, 320 NE2d 853 [C.A. 1974]; Mosheyev v Pilevsky, 283 AD2d 469, 725 NYS2d 206 [2nd Dept. 2001]. Indeed, “[e]ven the color of a triable issue, forecloses the remedy” Rudnitsky v Robbins, 191 AD2d 488, 594 NYS2d 354 [2nd Dept. 1993]). Moreover “[i]t is axiomatic that summary judgment requires issue finding rather than issue-determination and that resolution of issues of credibility is not appropriate” (Greco v Posillico, 290 AD2d 532, 736 NYS2d 418 [2nd Dept. 2002]; Judice v DeAngelo, 272 AD2d 583, 709 NYS2d 817 [2nd Dept. 2000]; see also S.J. Capelin Associates, Inc. v Globe Mfg. Corp., 34 NY2d 338, 357 NYS2d 478, 313 NE2d 776 [C.A.1974]). Further, on a motion for summary judgment, the submissions of the opposing party’s pleadings must be accepted as true (see Glover v City of New York, 298 AD2d 428, 748 NYS2d 393 [2nd Dept. 2002]). As is often stated, the facts must be viewed in a light most favorable to the non-moving party. (See, Mosheyev v Pilevsky, supra ). The burden on the moving party for summary judgment is to demonstrate a prima facie entitlement to judgment as a matter of law by tendering sufficient evidence to demonstrate the absence of any material issue of fact (Ayotte v Gervasio, 81 NY2d 1062, 601 NYS2d 463, 619 NE2d 400 [C.A.1993]; Winegrad v New York University Medical Center, 64 NY2d 851, 487 [*3]NYS2d 316, 476 NE2d 642 [C.A. 1985]; Drago v King, 283 AD2d 603, 725 NYS2d 859 [2nd Dept. 2001]). If the initial burden is met, the burden then shifts to the non-moving party to come forward with evidence to demonstrate the existence of a material issue of fact requiring a trial. (CPLR§ 3212, subd [b]; see also GTF Marketing, Inc. v Colonial Aluminum Sales, Inc., 66 NY2d 965, 498 NYS2d 786, 489 NE2d 755 [C.A. 1985]; Zuckerman v City of New York, 49 NY2d 557, 427 NYS2d 595, 404 NE2d 718 [C.A. 1980]). The non-moving party must lay bare all of the facts at its disposal regarding the issues raised in the motion. (Mgrditchian v Donato, 141 AD2d 513, 529 NYS2d 134 [2nd Dept. 1988]).

First Cause of Action: TOPAZ CASTRO

Plaintiff, NYU QUEENS, is the assignee for health services rendered to TOPAZ CASTRO during the period from March 3, 2008 through March 5, 2008, arising out of an automobile accident that occurred on March 3, 2008. Plaintiff claims that it billed COUNTRYWIDE with a Hospital Facility Form (Form NF-5) and a UB-92 on April 17, 2008, in the sum of $4,188.25, by Certified Mail, Return Receipt requested, which was received by COUNTRYWIDE on April 18, 2008. It is plaintiff’s position that COUNTRYWIDE failed to pay or issue a Denial of Claim Form within a period of thirty (30) days and, therefore, it is entitled to summary judgment together with interest and attorney”s fees as a matter of law.

In support of its motion to dismiss, COUNTRYWIDE, although acknowledging that it received the bill on April 18, 2008, states that the moving papers are insufficient to establish plaintiff’s prima facie right to summary judgment because the affidavits in support are submitted by a billing accounts representative of Hospital Receivables Systems, Inc.,

a person without knowledge of the facts and, therefore, does not satisfy the business records exception to the hearsay rule and, moreover, the action is premature as there are outstanding verification requests which plaintiff has failed to provide. It appears that, on May 15, 2008, COUNTRYWIDE issued verification requests that sought the completed NF-2, question #

20, on the revised form, the NF-5 on the revised form, signed, no stamps, and the assignment of benefits on the revised form, which were requested again on June 14, 2008 A review of the submitted forms reveals that where the patient’s signature is required, the forms say “ON FILE”. It is COUNTRYWIDE’s position that the claim was not overdue when the action was commenced and, thus, it is premature and should be dismissed. In reply, counsel for plaintiff points out that the 2003 NF-5 Form that it utilized was substantially the same as the 2004 NF-5 Form and that 11 NYCRR 65-3.5(f) provides that “[a]n insurer must accept proof of claim submitted on a form other than a prescribed form it contains substantially the same information as the prescribed form”. Additionally counsel for plaintiff states that 11 NYCRR 65-3.5(g) allows the hospital to bill with a “NYS Form NF-5” without qualification. Finally, plaintiff states that a copy of the signed assignment of benefits was faxed to COUNTRYWIDE on May 29, 2008, and this action was commenced on August 18, 2008, when the claim was overdue and unpaid.

After a careful reading of the submissions herein, it is the judgment of the Court that NYU QUEENS established its prima facie entitlement to judgment as a matter of law by submitting an affidavit from the third-party biller who asserted that he billed COUNTRYWIDE for the subject medical treatment, and that defendant either failed to pay [*4]the entire claim or to issue a Denial of Claim Form. New York Presbyterian Hospital v Allstate Insurance Company, 30 AD3d 492, 819 NYS2d 268 (2nd Dept. 2006). The Court credits the statement of the billing account representative for NYU QUEENS that he has personal knowledge of the patient account and personal knowledge of the certified mailing (Freeport Medical P.C. v Utica National Insurance Company, 20 Misc 3d 132A, 867 NYS2d 16 [App. Term, Second Dept. 2008]), and further finds that the 2003 Forms contain substantially the same information as the 2004 Forms. Moreover, the hospital facility forms submitted on behalf of the patient indicated that the signature of the patient/assignor was “on file” and COUNTRYWIDE’s objection to the completeness of the form and request for verification is untimely. Accordingly, defendant has waived said defense. Hospital for Joint Diseases v Allstate Insurance Company, 21 AD3d 348, 800 NYS2d 190 (2nd Dept. 2005). The Court finds that a completed claim was not paid within thirty (30) days of presentation, and is “overdue” within the meaning of the Insurance Law requiring an award of interest and attorney fees on the claim from the date the claim was first presented. Hempstead General Hospital v Insurance Company of North America, 208 AD2d 501, 617 NYS2d 478 (2nd Dept. 1994). Attorney’s fees are limited to 20% of the amount of first party benefits, plus interest thereon, subject to a maximum fee of $850. See, 11 NYCRR §65-4.6(e). Interest shall be assessed at the rate of 2% per month. See, Insurance Law § 5106 (a); Smithtown General Hospital v State Farm Mutual Auto Insurance Co., 207 AD2d 338, 615 NYS2d 426 (2nd Dept. 1994).

Second Cause of Action: RONNY MUNOZ

Plaintiff, ST. VINCENT’S, is the assignee for health services rendered to RONNY MUNOZ, during the period from April 29, 2008 through May 1, 2008, arising out of an automobile accident that occurred on April 29, 2008. Plaintiff claims that it billed COUNTRYWIDE with a Hospital Facility Form (Form NF-5) and a UB-92 on June 12, 2008, in the sum of $10,508.72, by Certified Mail, Return Receipt requested, which was received by COUNTRYWIDE on June 16, 2008. It is plaintiff’s position that COUNTRYWIDE failed to pay or issue a Denial of Claim Form within a period of thirty (30) days and, therefore, it is entitled to summary judgment together with interest and attorney”s fees as a matter of law.

In support of its motion to dismiss, COUNTRYWIDE, although acknowledging that it received the bill on June 16, 2008, states that the moving papers are insufficient to establish plaintiff’s prima facie right to summary judgment because the affidavits in support are submitted by a billing accounts representative of Hospital Receivables Systems, Inc.,

a person without knowledge of the facts and, therefore, does not satisfy the business records exception to the hearsay rule and, moreover, the action is premature as there are outstanding verification requests which plaintiff has failed to provide. COUNTRYWIDE claims that, on July 16, 2008, it sent a verification request for the NF-5 on the revised form, the assignment of benefits on the revised form and the “in linear calculation sheet”. It is claimed that, when the plaintiff failed to respond, on August 15, 2008, is issued a second verification request. A review of the submitted forms reveals that where the patient’s signature is required, the forms say “ON FILE”. It is COUNTRYWIDE’s position that the claim was not overdue when the action was commenced and, thus, is premature and should be dismissed. In reply, counsel for plaintiff points out that the 2003 NF-5 Form [*5]that it utilized was substantially the same as the 2004 NF-5 Form and that 11 NYCRR 65-3.5(f) provides that “[a]n insurer must accept proof of claim submitted on a form other than a prescribed form it contains substantially the same information as the prescribed form”. Additionally counsel for plaintiff states that 11 NYCRR 65-3.5(g) allows the hospital to bill with a “NYS Form NF-5” without qualification. Moreover, counsel for plaintiff argues that COUNTRYWIDE’s verification requests are defective because the verification requests are untimely. Counsel contends that although the bill was received on June 16, 2008, COUNTRYWIDE’s verification requests are dated July 16, 2008 and August 15, 2008, respectively, and are both beyond the statutory deadlines. 11 NYCRR §63-3.5(b), §65-3.6(b).

After a careful reading of the submissions herein, it is the judgment of the Court that ST. VINCENT’S established its prima facie entitlement to judgment as a matter of law by submitting an affidavit from the third-party biller who asserted that he billed COUNTRYWIDE for the subject medical treatment, and that defendant either failed to pay the entire claim or to issue a Denial of Claim Form. New York Presbyterian Hospital v Allstate Insurance Company, 30 AD3d 492, 819 NYS2d 268 (2nd Dept. 2006). The Court credits the statement of the billing account representative for ST. VINCENT’S that he has personal knowledge of the patient account and personal knowledge of the certified mailing (Freeport Medical P.C. v Utica National Insurance Company, 20 Misc 3d 132A, 867 NYS2d 16 [App. Term, Second Dept. 2008]), and further finds that the 2003 Forms contain substantially the same information as the 2004 Forms. Moreover, the hospital facility forms submitted on behalf of the patient indicated that the signature of the patient/assignor was “on file” and COUNTRYWIDE’s objection to the completeness of the form and request for verification is untimely. Accordingly, defendant has waived said defense. Hospital for Joint Diseases v Allstate Insurance Company, 21 AD3d 348, 800 NYS2d 190 (2nd Dept. 2005). The Court finds that a completed claim was not paid within thirty (30) days of presentation, and is “overdue” within the meaning of the Insurance Law requiring an award of interest and attorney fees on the claim from the date the claim was first presented. Hempstead General Hospital v Insurance Company of North America, 208 AD2d 501, 617 NYS2d 478 (2nd Dept. 1994). Attorney’s fees are limited to 20% of the amount of first party benefits, plus interest thereon, subject to a maximum fee of $850. See, 11 NYCRR §65-4.6(e). Interest shall be assessed at the rate of 2% per month. See, Insurance Law § 5106 (a); Smithtown General Hospital v State Farm Mutual Auto Insurance Co., 207 AD2d 338, 615 NYS2d 426 (2nd Dept. 1994).

Conclusion

Based on the foregoing, it is hereby

ORDERED, that plaintiff’s motion for summary judgment on the first and second causes of action is granted; and it is further

ORDERED, that defendant’s cross-motion for summary judgment on the first and second causes of action is denied.

All further requested relief not specifically granted is denied.

This constitutes the decision and order of the Court. Settle Judgment on Notice.

Dated: March 17, 2009 [*6]

_________________________

WILLIAM R. LaMARCA, J.S.C.

nyhospaaocastro,stvincentsaaomunoz,#

1,#

2/sumjudg

[*1]

Supreme Court, Appellate Term, Second Department, March 10, 2009

APPEARANCES OF COUNSEL

Amos Weinberg, Great Neck, for appellant. Cascone & Kluepfel, LLP, Garden City (Joseph A. Potenza of counsel), for respondent.

{**25 Misc 3d at 49} OPINION OF THE COURT

Memorandum.

Order, insofar as appealed from, affirmed without costs.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved for summary judgment. Defendant opposed the motion and moved for summary judgment dismissing the complaint, arguing that a conflict of law analysis required the application of New Jersey law, pursuant to which plaintiff’s complaint should be dismissed on the ground that the supplies provided were not medically necessary. By order dated March 13, 2008, the District Court denied both motions. The instant appeal by plaintiff ensued.

There is no dispute that a conflict exists between New York law and New Jersey law with respect to the issues raised herein. New York law requires a claim for no-fault benefits to be timely and properly denied on a prescribed NF-10 denial of claim form (see Nyack Hosp. v State Farm Mut. Auto. Ins. Co., 11 AD3d 664 [2004]; Mount Sinai Hosp. v Triboro Coach, 263 AD2d 11 [1999]), does not permit insurer’s delay letters, which request no verification, to toll the statutory period in which a claim must be paid or denied (see Nyack Hosp. v Encompass Ins. Co., 23 AD3d 535 [2005]; Ocean Diagnostic Imaging P.C. v Citiwide Auto Leasing Inc., 8 Misc 3d 138[A], 2005 NY Slip Op 51314[U] [App Term, 2d & 11th Jud Dists 2005]), and provides that the defenses of lack of medical necessity and provider fraud are precluded if not timely and properly asserted (see Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d 556 [2008]; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282 [1997]; [*2]Melbourne Med., P.C. v Utica Mut. Ins. Co., 4 Misc 3d 92 [App Term, 2d & 11th Jud Dists 2004]). New Jersey law, on the other hand, permits the defense of lack of medical necessity to be raised at any time (see Kowaleski v Allstate Ins. Co., 238 NJ Super 210, 218, 569 A2d 815, 819 [1990]).

A conflict of law relating to an insurance policy must be resolved by applying the conflict of law rules relevant to contracts (see Zurich Ins. Co. v Shearson Lehman Hutton, 84 NY2d 309, 319 [1994]; Matter of Allstate Ins. Co. [Stolarz—New Jersey Mfrs. Ins. Co.], 81 NY2d 219, 226 [1993]). The Court of Appeals has adopted a “center of gravity” or “grouping of contacts” approach (Auten v Auten, 308 NY 155, 160 [1954]), which gives controlling effect to the law of the state that has “the most significant relationship to the transaction and the{**25 Misc 3d at 50} parties” (Restatement [Second] of Conflict of Laws § 188 [1]). In addition to the traditional determinative factor of the place of contracting, which should be given “heavy weight” in a grouping of contacts analysis (see Haag v Barnes, 9 NY2d 554, 560 [1961]), the places of negotiation and performance, the location of the subject matter of the contract, and the domicile or place of business of the contracting parties are also to be considered (see Zurich Ins. Co., 84 NY2d at 319; Restatement [Second] of Conflict of Laws § 188 [2]). The accident herein occurred in New York. The relevant insurance policy was negotiated and entered into in New Jersey by the insureds who lived in New Jersey, for a vehicle which was garaged and registered in New Jersey. The assignor, who was driving the insureds’ vehicle at the time of the accident, also resided in New Jersey.

While “strong governmental interests . . . [may] be considered” (Matter of Allstate Ins. Co. [Stolarz—New Jersey Mfrs. Ins. Co.], 81 NY2d at 226), we find that governmental policy is not an overriding factor under the circumstances presented herein (see e.g. Matter of Eagle Ins. Co. v Singletary, 279 AD2d 56 [2000]). Therefore, upon the application of a “center of gravity” or “grouping of contacts” analysis, we find that the dispositive factors weigh in New Jersey’s favor and, therefore, its law should control (see e.g. Scotland v Allstate Ins. Co., 35 AD3d 584 [2006]; Matter of Eagle Ins. Co. v Singletary, 279 AD2d at 56). Consequently, since defendant is not precluded from raising the defense of lack of medical necessity under New Jersey law, defendant raised a triable issue of fact. Accordingly, the District Court’s order, insofar as appealed from, is affirmed.

Tanenbaum, J.P., Molia and LaCava, JJ., concur.

[*1]

Supreme Court, Nassau County, February 10, 2009

APPEARANCES OF COUNSEL

Stern & Montana, LLP, New York City (Robert A. Stern, Sandra P. Burgos and James A. McKenney of counsel), for AIU Insurance Company and others, plaintiffs, and Allstate Insurance Company and another, declaratory judgment defendants. Edward K. Blodnick & Associates, P.C., Garden City (Edward K. Blodnick of counsel), for Deajess Medical Imaging, P.C. and others, defendants/declaratory jugment plaintiffs. Rivkin Radler, LLP, Uniondale (Michael P. Versichelli of counsel), for State Farm Insurance Company. Short & Billy, P.C., New York City (Skip Short and Ioanna Zevgaras of counsel), for GEICO Insurance Company and another. Katten Muchin Rosenman LLP, New York City (Jay Shapiro of counsel), for Travelers Indemnity Company. Bruno, Gerbino & Soriano, LLP, Melville (Kevin W. O’Leary of counsel), for MetLife Auto and Home Insurance Company and another. Curtis, Vasile, Devine, Merrick (Roy W. Vasile of counsel), for Lancer Insurance Company. Martyn Toher & Martyn, Mineola (David C. Smith of counsel), for Liberty Mutual Fire Insurance Company and others. DeMartini & Yi, Williston Park (Arthur J. DeMartini of counsel), for Lumbermens Mutual Casualty Ins. Co. and others. Epstein, Rayhill & Frankini, Woodbury (Elsa Rodriguez Preston of counsel), for Nationwide Insurance Company. Law Offices of Cohen & Jaffe, LLP, Lake Success (Villard S. Bastien of counsel), for Citiwide Auto Leasing, Inc. Jaffe & Nohavicka, New York City (Paul Koumourdas and Ian T. Williamson of counsel), for Country Wide Insurance Company and another. Law Offices of Moira A. Doherty, Uniondale, for Clarendon Insurance Company. McDonnell & Adels, P.C., Garden City (Patrick McDonnell and John E. McCormack of counsel), for AutoOne Insurance Company and others. [*2]

{**24 Misc 3d at 164} OPINION OF THE COURT

Stephen A. Bucaria, J.

This motion, by defendant (in the initial action) Dr. Robert Schepp and related parties (as plaintiffs in the declaratory judgment action), for summary judgment is granted in part and denied in part.

This is an action for a declaratory judgment that the defendant health care providers are ineligible for no-fault reimbursement because of failure to comply with state licensing requirements. In addition to declaratory relief, plaintiffs seek to recover previously paid no-fault claims, asserting causes of action for fraud and unjust enrichment.

Dr. Robert Schepp is a radiologist whose practice is devoted primarily to patients injured in automobile accidents. He practices through a group of professional service corporations which have submitted a large number of no-fault claims to the plaintiff insurance companies. The insurers have paid many of these claims but have denied many others on the ground that the professional corporations are ineligible for no-fault reimbursement. The insurers assert that the professional corporations are in violation of state licensing requirements because they are controlled by an individual not licensed to practice medicine. The insurers further argue that the corporations are ineligible for reimbursement because the radiology services were performed by independent contractors. Finally, the insurers argue that the corporations lack standing because they assigned the no-fault claims to finance companies pursuant to accounts [*3]receivable financing agreements.

Prior to this declaratory judgment action, the corporations had commenced a large number of civil court actions and demanded a large number of arbitrations, seeking to recover no-fault claims. Some of the actions and arbitrations have been resolved, but many are still pending. Pursuant to a series of{**24 Misc 3d at 165} orders dated January 19, February 2, and March 27, 2006, the court stayed 344 actions and 44 proceedings to stay arbitration and consolidated them with the present declaratory judgment action.

The Schepp parties move for partial summary judgment, asserting that a professional corporation is ineligible for no-fault reimbursement only if the professional who formed the corporation intended to turn control over to an unlicensed individual. They additionally request partial summary judgment as to their standing and independent contractor defenses. Finally, they request partial summary judgment on the grounds that the insurers are raising a “collateral attack” on judgments and arbitration awards previously rendered in the Schepp parties’ favor. Before proceeding to the merits of the parties’ claims, the court will consider whether declaratory relief is appropriate. While declaratory judgment is discretionary, it is not an extraordinary remedy (Church of St. Paul & St. Andrew v Barwick, 67 NY2d 510, 518 [1986]; Matter of Morgenthau v Erlbaum, 59 NY2d 143, 147 [1983]). Declaratory judgment may be an appropriate vehicle for settling disputes as to contract rights and obligations, where a mandatory mechanism is not provided in the agreement (Kalisch-Jarcho, Inc. v City of New York, 72 NY2d 727, 731-732 [1988]). Although the claimant has the option of submitting a no-fault dispute to arbitration, declaratory judgment may be an appropriate vehicle for settling disputes concerning no-fault benefits (see Bennett v State Farm Ins. Co., 147 AD2d 779 [3d Dept 1989]).

Declaratory judgment is not an exception to the principle of res judicata and does not permit a trial court to review another court’s judgment (Goldstein v Massachusetts Mut. Life Ins. Co., 32 AD3d 821 [2d Dept 2006]). Therefore, the concern that the court will “undo thousands of no fault claims” is misplaced. “[D]eclaratory judgment does not entail coercive relief, but only provides a declaration of rights between parties that, it is hoped, will forestall later litigation” (Morgenthau, 59 NY2d at 148). Thus, declaratory relief by this court will not, of itself, result in the vacating of any other court’s judgment. To the extent that this court’s decision is inconsistent with any previously granted arbitration award, it is not intended to provide grounds for vacatur (see CPLR 7511 [a]). To the extent that the court’s decision is inconsistent with the judgment of any other [*4]court, whether to grant relief from that judgment is within the discretion of that court (see Ruggiero v Long Is. R.R., 161 AD2d 622{**24 Misc 3d at 166} [2d Dept 1990]). The court notes that plaintiffs are not requesting this court to take any action with respect to any judgment or arbitration award. Furthermore, the insurers themselves have requested declaratory relief in one of the consolidated declaratory judgment actions. Because of the large number of actions and arbitrations involving the common question of the Schepp entities’ eligibility for no-fault reimbursement, the court concludes that declaratory relief is appropriate.

Pursuant to Insurance Law § 5103, every automobile insurance policy must provide for payment of so-called “no fault,” or “first party benefits,” to occupants of a covered vehicle who sustain loss through the use or operation of the vehicle. Section 5102 (b) of the Insurance Law defines “[f]irst party benefits” as payment to reimburse the injured person for “basic economic loss,” less certain deductions. Under Insurance Law § 5102 (a), “basic economic loss” means necessary medical expenses and lost earnings up to $50,000. Thus, in accordance with the statutory scheme, expenses for necessary x-rays and MRIs are ordinarily reimbursable no-fault benefits.

However, Insurance Department Regulations (11 NYCRR) § 65-3.16 (a) (12) provides

“A provider of health care services is not eligible for reimbursement under § 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 . . . any other state in which such service is performed.”

If the health care provider is a professional service corporation, section 1507 of the Business Corporation Law requires that any individual who holds shares in the professional corporation be licensed to practice the profession. Section 1508 of the Business Corporation Law provides that an individual must be licensed to be a director or officer of a professional service corporation. The insurers assert that Dr. Schepp’s professional corporations fail to meet state licensing requirements because they are owned and controlled by management companies, which are controlled by an unlicensed individual. [*5]

In State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313, 319 [2005]), known to the no-fault bar as “Mallela III,” the Court of Appeals held that an insurer may withhold payment for medical services provided by “fraudulently incorporated” enterprises to which patients have assigned their no-fault claims. In Mallela III, unlicensed individuals paid physicians to use their{**24 Misc 3d at 167} names on certificates of incorporation and other documents filed with the Department of State to establish medical service corporations (4 NY3d at 319). Once the medical service corporations were established under the cover of the nominal physician-owners, the nonphysicians actually operated the companies (id.). The nonphysicians caused the corporations to hire management companies owned by the nonphysicians, which billed the medical corporations at inflated rates for routine services (id. at 319-320). Thus, the corporations’ profits did not go to the nominal owners but were channeled to the nonphysicians who owned the management companies. The court held that although the patients received appropriate care from licensed professionals, the insurers could withhold payment for no-fault benefits.

In moving for partial summary judgment, the Schepp parties argue that a professional service corporation is ineligible for no-fault reimbursement only if it was “fraudulently incorporated.” Movants construe this term as meaning that the professional corporation was formed by a licensed professional who intended to turn control of the corporation over to an unlicensed party. They assert that Dr. Schepp’s professional corporations were not fraudulently incorporated because Dr. Schepp intended to retain control when he formed the professional corporations.

In Mallela III, the question of whether an “unlawfully incorporated” medical corporation was eligible for no-fault law reimbursement had been certified to the Court of Appeals by the United States Court of Appeals for the Second Circuit (State Farm Mut. Auto. Ins. Co. v Mallela, 372 F3d 500, 501 [2d Cir 2004]). In certifying this question, the Second Circuit noted our state’s longstanding concern that the “corporate practice of medicine” would create ethical conflicts and undermine the quality of care afforded to patients (372 F3d at 503). Additionally, the court noted that the corporate practice of medicine was associated with more traditional forms of fraud, such as billing for services not provided, billing for services that were medically unnecessary, and billing for services at the wrong rate (id. at 504, 507).

In answering the certified question, our Court of Appeals stated that the fraud was “in the corporate form rather than in the quality of care provided” (Mallela III, 4 NY3d at 320). The Court indicated that mere failure to observe corporate formalities would not render the provider ineligible (id. at 322). However, “willful and material failure to abide [*6]by state and local law,” conduct tantamount to fraud, would render the{**24 Misc 3d at 168} provider ineligible for no-fault reimbursement (id. at 321). The Court further stated that if a medical service corporation is “fraudulently licensed,” it is not entitled to be reimbursed for no-fault benefits (Mallela, 4 NY3d at 321, 322). Thus, the Court of Appeals intimated that a medical service corporation will be ineligible for no-fault reimbursement if it is in violation of licensing requirements, regardless of whether the doctor intended to yield control to unlicensed parties at the time he formed the corporation.

Moreover, 11 NYCRR 65-3.16 (a) (12) renders a health care provider ineligible for reimbursement if it fails to meet “any applicable” licensing requirement. The regulation does not render a provider ineligible only when it fails to meet licensing requirements at the time of its incorporation. In view of the fraudulent practices associated with the corporate practice of medicine, a regulation prohibiting reimbursement to unlicensed providers is eminently reasonable. Thus, if the Schepp entities are under the control of an unlicensed individual, the insurers will be entitled to a declaration that they may deny defendants no-fault reimbursement, regardless of whether defendants were “fraudulently incorporated.” The declaratory judgment plaintiffs’ motion for partial summary judgment on the ground that the professional corporations were not fraudulently incorporated is denied.

In Mallela III, the Court of Appeals stated that “no cause of action for fraud or unjust enrichment [will] lie for any payments made by the carriers before [the] regulation’s effective date of April 4, 2002” (4 NY3d at 322). Thus, insurers may not recover no-fault claims paid prior to April 4, 2002 on the ground that the provider was ineligible for reimbursement at the time the claim was submitted. Nevertheless, Mallela III left open the question of whether insurers may deny claims submitted prior to April 4, 2002 on the ground that the provider subsequently became ineligible for no-fault reimbursement. Movants argue that the insurers may not deny such claims on the ground of current ineligibility and may not predicate a cause of action for fraud on claims submitted prior to March 29, 2005, the date of the Mallela III decision.

Movants stress that, prior to Mallela III, 11 NYCRR 65-3.16 had not been interpreted as entitling insurers to deny no-fault reimbursement to health care providers who were not in compliance with licensing requirements. Indeed, in certifying the question to our Court of Appeals, the Second Circuit noted that New{**24 Misc 3d at 169} York law was unclear and no “controlling precedent” governed the case (372 F3d at 507). [*7]

Subsequently, in Allstate Ins. Co. v Belt Parkway Imaging, P.C. (33 AD3d 407, 408 [1st Dept 2006]), the Appellate Division held that insurers could deny claims for services performed prior to April 4, 2002 because the “clear import” of the regulation was that unlicensed providers were no longer eligible for reimbursement as of the regulation’s effective date. The court reasoned that “[a]meliorative or remedial legislation” should be given retroactive effect to effectuate its “beneficial purpose,” and similar effect should be given to an ameliorative or remedial regulation (id. at 408). The court noted that the purpose of 11 NYCRR 65-3.16 was “to combat fraud,” and the regulation’s notice of adoption urged that the public receive “the benefits of reduced fraud and abuse . . . at the earliest possible moment” (33 AD3d at 409). The court ruled that section 65-3.16 did not “impair[ ] vested rights” and noted that Mallela itself involved “pre-April 4, 2002 claims” (33 AD3d at 409, 408). Thus, the insurers will be entitled to a further declaration that they may deny no-fault claims for services performed prior to April 4, 2002, if they establish that the Schepp entities are currently ineligible for no-fault reimbursement. Defendants’ motion for partial summary judgment is granted as to claims paid prior to April 4, 2002 but denied as to pre-April 4, 2002 claims which are still pending.

Movants argue that a cause of action for fraud, based upon a no-fault claim submitted prior to the date of Mallela III, is legally insufficient. The essential elements of a cause of action for fraud are a representation of a material existing fact, falsity, scienter, deception, and injury (New York Univ. v Continental Ins. Co., 87 NY2d 308 [1995]). The movants argue that their ineligibility for no-fault reimbursement was not an “existing fact” before Mallela III was decided. Thus, they argue that the insurers may not assert a cause of action for fraud based on pre-Mallela III claims.

The eligibility of a professional corporation for no-fault reimbursement is a mixed question of fact and law which “turns on the combined consideration of factual and legal factors” (Matter of Fisher [Levine], 36 NY2d 146, 150 [1975]). Nevertheless, a representation as to the corporation’s eligibility for no-fault reimbursement may provide the basis for a fraud cause of action. The Court of Appeals has stated that it is an “over-simple dichotomy” to distinguish between law and fact for the{**24 Misc 3d at 170} purposes of an action in deceit (National Conversion Corp. v Cedar Bldg. Corp., 23 NY2d 621, 627 [1969]). “[A] statement as to the law, like a statement as to anything else, may be intended and understood either as one of fact or one of opinion only, according to the circumstances of the case” (id. at 628, quoting Prosser, Torts, at 741 [3d ed]). Indeed, a false opinion of the law, if represented as a “sincere opinion,” may, as any other opinion, give rise to a fraud claim if it is reasonably relied upon by the other party (id.). A misrepresentation as to the law is more likely to induce [*8]reasonable reliance where it is made by one possessing superior knowledge as to the subject of the representation (Lukowsky v Shalit, 110 AD2d 563, 567 [1st Dept 1985]). Since a misrepresentation as to the law may give rise to an action for fraud, so may a misrepresentation as to a mixed question of fact and law, such as eligibility for no-fault reimbursement.

Prior to Mallela III, Dr. Schepp may not have known that his professional corporations were ineligible for no-fault reimbursement. However, in submitting no-fault claims, the Schepp entities impliedly represented that they{**24 Misc 3d at 171} were wholly owned by licensed physicians. They clearly had superior knowledge as to the licensing status of the individual in control of the professional corporations. If a representation as to licensing status was false, the insurers suffered damages by paying the claims in reliance upon the representation, even though the legal effect of the falsity had not yet been determined. In Allstate Ins. (supra), the Appellate Division affirmed the dismissal of the insurer’s cause of action for fraud based upon payments made prior to April 4, 2002. The court’s failure to dismiss a fraud claim as to payments made prior to the date of Mallela III confirms the viability of a fraud cause of action. The motion for partial summary judgment is denied as to claims submitted subsequent to April 4, 2002 but prior to the date of the Mallela III decision.

The movants argue that the insurers’ fraud causes of action have not been stated in sufficient detail pursuant to CPLR 3016 (b). The purpose of this pleading requirement is to inform a defendant of the incidents which form the basis of the action (Pludeman v Northern Leasing Sys., Inc., 10 NY3d 486, 491 [2008]). Where it is impossible to state the circumstances constituting the fraud in detail, CPLR 3016 (b) should not be so strictly interpreted as to prevent plaintiff from asserting an otherwise valid cause of action (id.). As noted above, in submitting no-fault claims, the Schepp entities impliedly represented that they were wholly owned by licensed physicians. While the extent to which they relied upon that representation may vary with the circumstances of the individual claim, the insurers have alleged sufficient detail to comply with CPLR 3016 (b)’s pleading requirement.

11 NYCRR 65-3.11 (a) provides, “An insurer shall pay benefits for any element of loss . . . directly to the applicant or . . . upon assignment by the applicant . . . shall pay benefits directly to providers of health care services.” According to the insurers, the Department of Insurance has issued an opinion letter to the effect that a health care provider is not permitted to seek reimbursement for services provided by an independent contractor (see NY Ins Dept op letter, Feb. 21, 2001). The movants do not dispute [*9]the insurers’ interpretation of the opinion letter but claim that, as a matter of law, the radiology technicians who performed the services were employees of the professional corporations.

On a motion for summary judgment, it is the proponent’s burden to make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact (JMD Holding Corp. v Congress Fin. Corp., 4 NY3d 373, 384 [2005]). Failure to make such a prima facie showing requires denial of the motion, regardless of the sufficiency of the opposing papers (id.). However, if this showing is made, the burden shifts to the party opposing the summary judgment motion to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]).

The Schepp entities submit the affidavit of Dr. Schepp which states that all of the MRI technicians worked under his supervision and control. Dr. Schepp further states that while the technicians worked for different corporations, they were paid by Robert Scott Schepp, M.D., P.C., they received W-2 tax forms, and their salary expenses were apportioned among the various corporations. The court concludes that the Schepp entities have established, prima facie, that the MRI technicians were employees, and the burden shifts to the insurers to come forward with evidence showing that the technicians were independent contractors.

In opposition to the motion, the insurers have submitted considerable evidence indicating that Dr. Schepp may have yielded control of the professional corporations to a management{**24 Misc 3d at 172} company. However, they have submitted no evidence that the MRI technicians were not employees of the professional corporations. The court concludes that the Schepp entities are entitled to a declaration that the professional corporations are not ineligible for no-fault reimbursement by reason of utilizing MRI technicians who were not employees. The motion for partial summary judgment is granted as to the independent contractor defense.

The insurers argue that the professional corporations lack standing because they assigned their no-fault claims to finance companies pursuant to accounts receivable financing agreements. The movants respond that they purported to assign only the proceeds because a medical provider is not permitted to assign a no-fault claim. [*10]

An unequivocal and complete assignment extinguishes the assignor’s rights against the obligor and leaves the assignor without standing to sue the obligor upon the assigned claim (Aaron Ferer & Sons Ltd. v Chase Manhattan Bank, N.A., 731 F2d 112, 125 [2d Cir 1984]). However, implicit in any assignment for security is a reservation to the assignor of a right to pursue the claim if the assignee chooses not to do so (Fifty States Mgt. Corp. v Pioneer Auto Parks, 44 AD2d 887 [4th Dept 1974]). Where no-fault claims are factored, it is particularly appropriate for the assignor to retain standing because the assignee is not permitted to seek no-fault arbitration (Insurance Law § 5106 [b]; Insurance Department Regulations [11 NYCRR] § 65-4.2 [b]).

Article 9 of the Uniform Commercial Code, governing secured transactions, ordinarily applies to a sale of accounts intended as a financing arrangement (UCC 9-109 [a] [3]). Pursuant to UCC 9-406 (a), an account debtor may discharge its obligation by paying the assignor, until the account debtor has received notice of the assignment. Thus, a no-fault insurer who pays the health care provider is not exposed to the risk of double-paying a factored claim. The court concludes that the Schepp entities are entitled to a declaration that the professional corporations are not ineligible for no-fault reimbursement by reason of having assigned the claims pursuant to an accounts receivable financing agreement. The motion for partial summary judgment is granted as to insurers’ defense of lack of standing.

The Schepp entities’ motion for summary judgment is granted and denied to the extent indicated above. The court will defer granting a declaratory judgment in accordance with this decision{**24 Misc 3d at 173} pending resolution of whether the professional corporations are controlled by an individual not licensed to practice medicine.

Supreme Court, Ulster County

05-0420

Appearances:

Basch & Keegan, LLP

Attorneys For Plaintiff

Maureen A. Keegan, Esq., of counsel

307 Clinton Avenue

P.O. Box 4235

Kingston, New York 12402

Jacobson & Schwartz Law Offices

Attorneys for Defendant

Kevin R. Glynn, Esq., of counsel

510 Merrick Road

P.O. Box 46

Rockville Centre, New York 11571

Henry F. Zwack, J.

This is an action brought by plaintiff Brian Gokey (plaintiff) to recover unpaid no-fault insurance benefits from defendants Allstate Insurance Company (Allstate) and Blue Ridge Insurance Company a/k/a General Casualty of Wisconsin (Blue Ridge). The action arises out of an automobile accident that occurred in March 2003. Shortly before this case was to be tried, Allstate settled with plaintiff for fifty thousand dollars ($50,000.00), most of which was applied to outstanding unpaid medical bills.

The case against Blue Ridge was tried before the Court in a single day on October 29, 2008. Three witnesses testified on plaintiff’s behalf: Dr. Robert Roth, plaintiff’s primary care physician, who treated plaintiff for injuries sustained in the accident; plaintiff himself; and Kathy Murphy, a legal secretary at plaintiff’s counsel’s firm who mailed numerous documents relating to plaintiff’s disability to both defendants. Blue Ridge presented no evidence.

In addition to the testimony of the three witnesses, the Court also received a number of documents into evidence on consent of both parties. The Court finds the testimony adduced to be credible and also credits the information contained in the various trial exhibits. Based upon this evidence, the Court makes the following Findings of Fact and Conclusions of Law:

FINDINGS OF FACT

Plaintiff, currently forty-four (44) years old, had been self-employed at his house painting business since 1995. By the end of 2002 the business was quite successful, employing up to nine or ten people during the busy season and owning a number of vehicles and other pieces of equipment.

Shortly after 1:00 p.m. on March 8, 2003, plaintiff was riding in the passenger seat of a vehicle being driven by a friend. While stopped at an intersection in Kingston, another vehicle collided with the rear of the car in which plaintiff was riding. Plaintiff was propelled sharply forward and felt intense pain in his lower back.

Plaintiff was transported to a nearby hospital. He was examined, prescribed pain medication, and directed to his primary care physician for followup care. Plaintiff complied with these recommendations.

It was ultimately determined that plaintiff had suffered the herniation of two lumbar discs in the accident. His doctors first attempted to treat plaintiff’s intense pain with conservative treatment options such as physical therapy and medication. When these attempts proved to be futile, plaintiff underwent a double spinal fusion operation on several lower vertebrae. Even this operation was ultimately not successful in alleviating plaintiff’s pain. He now has difficulty walking, standing or sitting for prolonged periods. Plaintiff’s sleep is also frequently interrupted by pain.

From the time of the accident, plaintiff has been unable to return to his work. He is unable to perform the demanding physical tasks required of a house painter, and has even found it difficult to visit job sites to supervise other workers. His business having [*2]failed, plaintiff has since relocated to Florida and is unemployed.

In May 2003 plaintiff submitted the two-page “Application for Motor Vehicle No-Faults Benefits” (New York State Form NF-2) to Blue Ridge, the “excess” insurer for no-fault benefits (Allstate being the primary carrier).^[FN1] In that document plaintiff asserted that his average weekly earnings were one thousand dollars ($1,000.00). Following the submission of this claim, both Allstate and Blue Ridge began paying plaintiff’s medical bills and lost wages, which were paid out at three thousand eight hundred dollars ($3,800.00) per month. Regularly and repeatedly, plaintiff forwarded through his counsel’s office copies of notes from his treating physicians verifying that he was not fit to return to work.

In mid-November 2003 payments to plaintiff ceased. The reason given by Blue Ridge at page 1 of its three-page “Denial of Claim Form NF-10,” admitted into evidence as part of Plaintiff’s Exhibit 4, was “per independent medical examination as of 11/17/03.”^[FN2] This litigation ensued.

The Court also finds as a matter of fact that plaintiff was unable to return to work for the entire three-year period encompassed by this lawsuit. Indeed, based upon the testimony adduced at the trial, it appears that plaintiff remains disabled up to the present time.

Finally, the Court finds that plaintiff was entitled to receive three thousand eight [*3]hundred dollars ($3,800.00) per month in lost wages for the period of twenty-eight and one-half months following the cessation of benefit payments by defendants.^[FN3] Thus, the total principal balance of unpaid payments ($3,800.00 times 28.5 months) is one hundred eight thousand three hundred dollars ($108,300.00).

CONCLUSIONS OF LAW

Contrary to the contentions of Blue Ridge, plaintiff has proven that he submitted a claim for lost wages and other benefits available to him under his no-fault coverage. A copy of the official form NF-2, fully executed and signed by plaintiff shortly after the accident, is one of the documents admitted into evidence at trial. Accordingly, this Court concludes that plaintiff did properly submit an acceptable claim form that apprized Blue Ridge of his seeking the no-fault benefits, including lost wages, to which he was entitled.

In addition to the principal balance of one hundred eight thousand three hundred dollars ($108,300.00), plaintiff is entitled to interest. Plaintiff offers authority to suggest that he is entitled to compound interest, while Blue Ridge argues that the interest should not be compounded. Former 11 NYCRR § 65.15(h)(1) did provide for two percent per month in compound interest for unpaid no-fault benefits; this regulation was superseded, however, effective April 5, 2002 (well before the accrual of any part of plaintiff’s claim). Under the new regulatory scheme, 11 NYCRR § 65-3.9(a) provides for “interest at a rate of two percent per month, calculated on a pro-rata basis using a 30-day month.” This is interpreted by the Court of Appeals as a simple interest calculation (Medical Society of State v Serio, 100 NY2d 854, 871 [2003]).

Blue Ridge argues that any interest cannot be applied before the date on which Allstate settled its claim with plaintiff. This position is without support. The Court of Appeals has held that “benefits are overdue if not paid by the insurer within 30 days after submission of proof of loss” (Id. at 871, citing 11 NYCRR § 65-3.9[a]). Plaintiff submitted his proof of loss, i.e., his form NF-2, well before Blue Ridge ceased making the payments due. Accordingly, plaintiff is entitled to two percent per month interest on each missed payment, calculated from thirty days after it was due until the present time.

Appended to this Decision and Order is a schedule prepared by the Court which details the calculation of interest and principal payments due plaintiff. It contains vertical columns for the date each payment was due, the principal amount of the payment, the interest due on that individual payment, and the subtotal of principal and interest on each payment. Thus, reading horizontally across the first row, one can see that in November 2003 plaintiff was due a payment of one thousand nine hundred dollars ($1,900.00); that two percent per month interest for the sixty-two (62) months between the end of November 2003 and the end of January 2009 on this amount equals two thousand three hundred fifty-six dollars ($2,356.00); and that the total due on this payment in principal [*4]and interest is four thousand two hundred fifty-six dollars ($4,256.00). Similarly, the second row shows a payment of three thousand eight hundred dollars ($3,800.00) due for December of 2003, with sixty-one (61) months of interest added; the third row, another $3,800.00 payment, this for January 2004, with sixty (60) months of interest added, and so on. Based on this computation, the total interest accrued for all missed payments as of the end of January 2009 is one hundred three thousand four hundred thirty-six dollars ($103,436.00). Together with the principal due of one hundred eight thousand three hundred dollars ($108,300.00), plaintiff is owed in toto the sum of two hundred eleven thousand seven hundred thirty-six dollars ($211,736.00).

COUNSEL FEES

Plaintiff is entitled to recover twenty percent (20%) of the total amount of his claim for unpaid no-fault benefits up to a maximum of eight hundred fifty dollars ($850.00) (11 NYCRR § 65-4.6[e]). This is assessed on a per-claim basis (LMK Psychological Services, PC v State Farm Mutual Auto Ins. Co., 46 AD3d 1290 [3d Dept 2008]). Thus, plaintiff is entitled to $850.00 in counsel fees.

Plaintiff’s counsel points out that, under exceptional circumstances, a court may award fees in excess of the statutory maximum. Under the circumstances of this case, however, where the application of statutory interest should act as both a sufficient deterrent against dilatory tactics in futuro and as a substantial gain for this plaintiff, it would be an improvident exercise of the Court’s discretion to award additional counsel fees.

Finally, Blue Ridge argues that the settlement between plaintiff and Allstate was in violation of the priority of payments rules set forth in 11 NYCRR § 65-3.15, as it was applied to certain medical bills that accrued subsequent to the accrual of plaintiff’s right to some of the lost wages payments. Blue Ridge argues that this settlement inures to its disadvantage as the excess carrier, as the primary carrier Allstate may have been liable to make a portion of the lost wages payments now chargeable to Blue Ridge. Inasmuch as the merits of this particular dispute involve the relative rights of Blue Ridge and Allstate, any adjustment that might be due to Blue Ridge cannot be charged to plaintiff. Blue Ridge remains, of course, free to pursue any remedy it may have over against Allstate.

Accordingly, it is

ORDERED, that plaintiff’s counsel shall submit, on notice of settlement, a final Judgment consistent with the terms of this Decision and Order.

Dated:January21, 2009

Troy, New York

________________________________________ [*5]

Henry F. Zwack

Acting Supreme Court Justice

Footnotes

Footnote 1: The position taken by Blue Ridge throughout this case has been that plaintiff had failed to file the appropriate claim form and that therefore Blue Ridge was under no duty to pay on plaintiff’s claim. A careful review of the documents admitted as Plaintiff’s Exhibit 4 in Evidence discloses, however, that not only had plaintiff in fact submitted a fully executed and signed “Form NF-2,” but a copy of that form was faxed from the offices of “General Casualty” (the name by which Blue Ridge is also known, per the caption of this case) in May 2004 to its counsel, who ultimately provided it to plaintiff’s counsel as part of discovery. While counsel for Blue Ridge may be technically correct in his contention that the proper form to have been submitted by a self-employed claimant was a “Form NF-7,” even his post-trial Memorandum of Law (at [unnumbered] p 6) incorrectly asserts, “During the course of this trial Plaintiff offered no evidence at all of any form being submitted to Defendant, whether it be an NF-2 Application for No-Fault benefits or the required NF-7, Verification of Self-Employment Income form.”

Footnote 2: At this juncture, the Court takes judicial notice of prior proceedings related to this case. In the litigation brought by plaintiff against the driver and owner of the vehicle that had struck him, it was determined that plaintiff had failed to submit to an IME on two separate occasions. Accepting his proffered excuses and his stated intent to submit to such an examination as genuine, the Appellate Division, Third Department reversed the Order of Supreme Court (Kavanagh, J.) dismissing the complaint (Gokey v DeCicco, 24 AD3d 860 [2005]). It thus appears that circumstances surrounding plaintiff’s IME, and not the failure to submit paperwork, may lay at the heart of defendants’ decision to discontinue plaintiff’s benefits.

Footnote 3: All but a few hundred dollars of the settlement with Allstate was applied toward outstanding medical bills and nothing was applied toward lost wages.

Supreme Court, Queens County

15958 2007

Charles J. Markey, J.

This motion is determined as follows:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[*1]

Supreme Court, Appellate Term, Second Department, January 9, 2009

APPEARANCES OF COUNSEL

Rivkin Radler LLP, Uniondale (Evan H. Krinick, Cheryl F. Korman, Stuart M. Bodoff and Melissa M. Murphy of counsel), for appellant. Law Office of Cohen & Jaffe, LLP, Lake Success (Aaron J. Perretta of counsel), for respondent.

{**23 Misc 3d at 6} OPINION OF THE COURT

Memorandum.

Judgment reversed without costs, order dated June 28, 2007 vacated, plaintiff’s motion for summary judgment denied and defendant’s cross motion for summary judgment dismissing the complaint granted.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved for summary judgment. Defendant cross-moved for summary judgment dismissing the complaint on the ground of lack of{**23 Misc 3d at 7} medical necessity. The Civil Court granted plaintiff’s motion for summary judgment and denied defendant’s cross motion for summary judgment dismissing the complaint. The instant appeal by defendant ensued. A judgment was subsequently entered (see CPLR 5501 [c]).

Since defendant raises no issue on appeal with respect to plaintiff’s establishment of its prima facie case, we do not pass on the propriety of the Civil Court’s implicit determination with respect thereto.

The Civil Court held that defendant failed to establish that its denial of claim forms were timely mailed because the notary public’s jurat, on the affidavits of mailing executed by defendant’s claims support services supervisor and the president of the courier service utilized by defendant, did not indicate the year in which the affidavits were signed. However, this technical [*2]defect is of the type which a court should disregard since it does not prejudice a substantial right of a party, particularly, where as here, plaintiff raised no objection thereto (see CPLR 2001; Matter of Goffredo v City of New York, 33 AD3d 346 [2006]; Matter of Liberty Mut. Ins. Co. v Bohl, 262 AD2d 645 [1999]; Supreme Automotive Mfg. Corp. v Continental Cas. Co., 97 AD2d 700 [1983]). Accordingly, the affidavits submitted by defendant were sufficient to establish that its denial of claim forms, which denied plaintiff’s claims on the ground of lack of medical necessity, were timely mailed in accordance with defendant’s standard office practice and procedure designed to ensure that items are properly addressed and mailed (see Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679 [2001]; Delta Diagnostic Radiology, P.C. v Chubb Group of Ins., 17 Misc 3d 16 [App Term, 2d & 11th Jud Dists 2007]).

The papers submitted by defendant in support of its cross motion, including the affirmed peer review report, established prima facie that there was no medical necessity for the supplies provided by plaintiff, which proof was unrebutted. As a result, defendant’s cross motion for summary judgment dismissing the complaint should have been granted (see Delta Diagnostic Radiology, P.C. v American Tr. Ins. Co., 18 Misc 3d 128[A], 2007 NY Slip Op 52455[U] [App Term, 2d & 11th Jud Dists 2007]; A. Khodadadi Radiology, P.C. v N.Y. Cent. Mut. Fire Ins. Co., 16 Misc 3d 131[A], 2007 NY Slip Op 51342[U] [App Term, 2d & 11th Jud Dists 2007]).

Plaintiff’s remaining contentions either lack merit or are improperly raised for the first time on appeal.

Accordingly, the judgment is reversed, the order dated June 28, 2007 is vacated, plaintiff’s motion for summary judgment is denied, and defendant’s cross motion for summary judgment dismissing the complaint is granted.

Pesce, P.J., Golia and Rios, JJ., concur.

Supreme Court, Kings County

5647/06

Plaintiff Attorney:Lawrence N. Rogak, LLC

Defendant Attorney:Brooke Lombardi, Esq.

Subin Associates LLP

Yvonne Lewis, J.

Counsel for Long Island Insurance Company has petitioned this court for a tripartite order to restore this action to the active calendar on the grounds that it was ministerially marked disposed by clerical error, amend the petition to include the affirmative defenses of fraud and lack of capacity to contract (renewal policies) since the insured is deceased, and grant it summary judgment on the basis of newly discovered evidence heretofore concealed by the respondent; to wit, the respondent, the pedestrian victim of a hit and run on November 16, 2005, intentionally failed to disclose (to the petitioner/insurer) that his father, who died on July 10, 2001, was the named insured under the insurance policy through which he asserts his claims for no-fault and uninsured motorist benefits and continued to renew bi-annually despite his passing. In addition, the petitioner notes that the subject policy itself provides, in salient part, that it may not be assigned without its written consent; that upon the death of the named insured, coverage will be provided for the legal representative (a role which the respondent has not established for himself herein) only with respect to the legal representative’s responsibility to maintain or use the covered vehicle; and, that the coverage will extend only until the end of the policy period, in this instance April 28, 2002. The petitioner notes further that Couch on Insurance, 3d Ed., §29:13 clearly provides that there is no contract to renew in the absence of a clear intent to that effect; that

“. . .because contract requires mutual assent of parties and meeting of minds, no contract can be formed between insurer and decedent (citing, Von Hillman v. colonial Penn Ins. Co., 19 Kan. App.2d 375, 869 P2d 248[1994]); and, that “a representative of a deceased insured’s estate has no authority to renew the policy in the insured’s behalf without informing the insurer of the insured’s death.”

As further evidence of the respondent’s duplicity, the petitioner notes that in December 2006, he cashed a partial premium refund with the “obviously” forged signature of his father, and that in an examination under oath conducted on May 16, 2008, the respondent testified that his [*2]father (who died on July 10, 2001) was the policyholder, furnished his father’s current address, and advised that he never owned a car and that he drove his father’s.

Counsel for petitioner furnished a supplemental affirmation in support of his request for summary judgement on the basis of the October 10, 2008 Appellate Division, Fourth Department case of Geico Ins. Co. v. Battaglia, 2008 NY Slip Op 07736, which held that the subject Insurance Company had “. . .established as a matter of law that its policy, as renewed, was void ab initio based on the material misrepresentation with respect to the [insured’s] status, i.e., that [the insured] was deceased” (referencing, Matter of Mercury Ins. Group v. Ocana, 46 AD3d 561). Counsel also notes that his initial October 11, 2007 motion to stay the arbitration had been denied without prejudice for his inadvertence in not having included a complete copy of the subject policy in his moving papers.

In opposition, counsel for Israel Greenfield, the respondent herein, asserts that the motion to restore should be denied inasmuch as the court repeatedly set motion schedules for petitioner to file orders to show cause on the ground of the insured’s undisclosed death, failed to adhere to the same, and instead filed the instant motion for summary judgment on the same ground. In addition, counsel argues that the request to amend the petition must also be denied as untimely inasmuch as CPLR §3024( c) clearly provides that a motion to correct pleadings shall be served within twenty days after service of the challenged pleading. Furthermore, counsel urges this court to deny the petitioner’s motions for a permanent stay of arbitration and for summary judgment as moot given that an arbitration hearing was held on September 10, 2008, the petitioner had a full and fair opportunity to participate therein, and the plain fact that an arbitrator’s award may not be vacated unless it is found that the arbitrator’s award lacked a rational basis (citing, Matter of Prudential Pro. & Cas. Ins. Co. v. Carleton, 145 AD2d 492 [2d Dept., 1988]). So too, CPLR Rule 3211 provides for dismissal of an action on the ground that an arbitration award has been rendered.

Respondent additionally argues that the petitioner’s allegation of fraud and lack of capacity to have renewed the subject insurance policy does not meet the separate standards for a stay of arbitration which requires a prima facie showing of non-coverage and summary judgment that necessitates a demonstration as to the absence of material issues of fact. To the contrary, the respondent maintains that though his father was the named insured he is nonetheless covered under the subject policy as a listed driver and hence an additional named insured on which basis he continued to renew the said policy rather than the imputed intent to wilfully conceal, deceive, misrepresent, or mislead that the petitioner alleges. The respondent also argues that his unfamiliarity with the terms of the policy and any requirement to disclose his father’s death is attributable solely to the fact that he was merely an additional insured and not a party to the initial contract; hence, a mistake or oversight, not fraud.

The petitioner has also moved this court, pursuant to CPLR 7511, for an order to vacate the arbitration award in the matter sub judice on the ground that there was no valid agreement to arbitrate. In fact, the petitioner asserts that the American Arbitration Association proceeded with its scheduled arbitration on September 10, 2008 despite having been advised that a request for a permanent stay of arbitration had been made to this court. In addition, the renewed policy under which the petitioner sought no-fault and uninsured motorists benefits was void ab initio (prior to the date of the subject accident) due to the policyholder’s unreported death. The petitioner also [*3]notes that its request for a temporary restraining order to stay the mentioned arbitration was denied by this court, following which on October 15, 2008, the respondent (son of the decedent policyholder) was awarded $100,000.00.

In opposition, the respondent asserts that none of the CPLR 7511 grounds for vacatur of an arbitration award has been met by the respondent who participated in the process by submitting discovery materials in connection therewith; to wit, respondent has not established that his rights were prejudiced by corruption, fraud, or misconduct in procuring the award; partiality of the arbitrator; the arbitrator exceeded his powers; the arbitrator failed to make a final and definite award; or a procedural failure that was not waived. In addition, the respondent contends that petitioner’s failure to have moved for a stay of arbitration prior to its conduct renders the present motion therefor untimely (citing, Bevona v. Valencia, 191 AD2d 192, 594 NYS2d 223 [1st Dept., 1993]) as does his participation in said proceeding via the discovery materials submitted and reviewed by the arbitrator who also gave the petitioner thirty days post arbitration to submit documentation in support of its contentions which identically undergird its motions for summary judgment and to vacate. Furthermore, the respondent notes that the purported affidavit in support of the petitioner’s motion to vacate is fatally defective in that its president’s signature is absent therefrom. In any event, the respondent argues that the failure to have apprised the insurer of the insured’s death in no way increased the former’s risk such that it can be said that the policy would not have been renewed in the respondent’s name. In this vein, the respondent asserts that cancellation of an automobile insurance policy may be prospective only, even if the application is deceptive or fraudulent (citing, Aetna Cas. & Surety Co. v. O’Connor, 8 NY2d 359; Matter of Liberty Mutual Ins. Co. v. McClellan, 127 AD2d 767; Middlesex Ins. Co. v. Carrero, 103 AD2d 694; and Teeter v. allstate Ins. Co., 9 AD2d 176, Aff’d 9 NY2d 655), and argues that “an insurer should not be permitted to raise fraud, which should have been discoverable upon a reasonable inquiry, as a basis for denying coverage to innocent third parties injured in an accident” (citing New Hampshire Indemnity Co. v. Flores, 2002 NY Slip Op 40024 [1]).

In addition to opposing the petitioner’s motion to vacate, the respondent has moved, pursuant to CPLR §7510, to confirm the above mentioned arbitration award decided on October 20, 2008. In support of that request, the respondent reasserts the fact that no stay had been in effect on September 10, 2008 when the arbitration was held, and that the petitioner’s request for a temporary restraining order on October 3, 2008 was denied. In addition to remaking its arguments in opposition to vacatur, the respondent notes that CPLR §7510 makes it clear that the court shall confirm such an award within one year after its delivery unless the same is vacated or modified upon a ground specified in CPLR §7511, none of which has been met by the petitioner, as discussed above.

In response, the petitioner reasserted its arguments in support of vacatur to the effect that the instant renewed insurance policy under which the arbitration was conducted was void ab initio as a result of the respondent having concealed the fact that his father, the policyholder, had died a little over four years prior to the subject accident.

This court agrees with the petitioner’s assertion that “because contract requires mutual assent of parties and meeting of minds, no contract can be formed between insurer and decedent (citing, Couch on Insurance, 3d Ed., §29:13 and Von Hillman v. colonial Penn Ins. Co., 19 Kan. [*4]App.2d 375, 869 P2d 248[1994]). It must also be conceded, as asserted by the respondent, that a stay of arbitration requires a prima facie showing of non-coverage and summary judgment necessitates a demonstration as to the absence of material issues of fact.

It is the respondent’s position that although his father was the named insured he is nonetheless covered under the subject policy as a listed driver and hence an additional named insured on which basis he continued to renew his father’s policy rather than the imputed intent to wilfully conceal, deceive, misrepresent, or mislead that the petitioner alleges. That the respondent was holding himself out as his father and had a fraudulent intent in renewing his father’s policy is made clear by his answers to the examination under oath wherein he identified his father as the insured, furnished his then deceased father’s current residential address, etc. and his earlier cashing of a refund check made out to his then deceased father.

In the Matter of Fireman’s Fund Insurance Company v. Freda, 156 AD2d 364, 548 NYS2d 319, the Appellate Division, Second Department, made it clear that the insurer waived any right to assert grounds not raised as a basis for denying coverage in its original letter of disclaimer in its petition to stay arbitration (citing, Insurance law §3420[d]; General Acc. Ins. Group v.Cirucci, 46 NY2d 862, 414 NYS2d 512). In said case the insurer had initially only asserted that the injured person was not a covered person and had not raised claims of untimely notice, failure to promptly send copies of legal papers, and settlement without its consent which were therefore deemed waived. The court went on to add, [h]owever, the first ground, that [the injured party] was not a “covered person,” constitutes a potentially valid basis for the denial of liability because Fireman’s Fund made no contract of insurance with the person injured in the accident (citing, United Serv. Auto. Assn. v. Meier, 89 AD2d 998, 454 NYS2d 319). Consequently, Fireman’s Fund was not required by Insurance law §3420(d) to give timely written notice of its first asserted ground for disclaiming coverage (citing, Zappone v. Home Ins. Co., 55 NY2d 131, 447 NYS2d 911; Matter of Aetna Cas. & Sur. Co. v. Facciponti, 133 AD2d 60, 519 NYS2d 3). The court thereupon remitted the matter for an evidentiary hearing to determine if in fact the injured party had been a resident of the household of the policyholder on the date of the accident as a condition precedent to arbitration.

In the instant case, there is no issue to be decided by evidentiary hearing since, assuming arguendo, that the respondent had effectively renewed the insurance policy herein, the plain fact is that he could not by any stretch of the imagination, much less contractual definition, logic, or common sense have been a resident of the decedent’s household since that is legally and factually impossible.

The issue of a stay of arbitration has been rendered moot since it was held and a decision rendered. However, an arbitrator’s award may be vacated on the grounds specified in CPLR 7511(b); to wit, (i)corruption, fraud, or misconduct in procuring the award; or (ii) partiality of an arbitrator appointed as a neutral, except where the award was by confession; or (iii) an arbitrator, or agency, or person making the award exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made; or (iv) failure to follow the procedure of this article, unless the party applying to vacate the award continued with the arbitration with notice of the defect and without objection. In the matter sub judice, this court finds that the arbitrator did exceed his power in having made an award in an instance where no coverage existed. Put another way, the arbitrator in order to have arrived at his decision was [*5]necessarily required to make a finding that the respondent was a “covered person;” i.e., a member of the insured’s household which in this instance would have called for him to “absurdly” find that the respondent was resident of a Ghost’s household. Consequently, this court hereby vacates the arbitrator’s October 20, 2008 ruling, above referenced, on the basis of irrationality and grants summary judgment to the petitioner on the issue of non-coverage inasmuch as it has been irrefutably established that the respondent was not a covered person. The petitioner and respondent’s respective motions to confirm said award and to amend are accordingly denied as moot. This constitutes the decision and order of this Court.

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