[*1]

Supreme Court, Appellate Term, Second Department, December 31, 2008

APPEARANCES OF COUNSEL

Law Office of Alden Banniettis, Brooklyn (Jeff Henle of counsel), for appellant. Freiberg & Peck, LLP, New York City (Yilo J. Kang of counsel), for respondent.

{**22 Misc 3d at 71} OPINION OF THE COURT

Memorandum.

Judgment affirmed without costs.

In this action by a provider to recover assigned first-party no-fault benefits, defendant moved, in effect, for summary judgment dismissing the complaint. In support of its motion, defendant submitted the two claim forms that are the subject of this action, which indicate that the billed-for services were rendered by independent contractors. Plaintiff’s opposition to defendant’s motion was based upon oral decisions set forth in trial transcripts, in three unrelated actions against another insurance company, in which the court found that plaintiff’s treating providers were employees. The court granted defendant’s motion, finding that plaintiff submitted claim forms that stated that the billed-for services were rendered by an independent contractor and implicitly holding that plaintiff was bound by the claim forms it submitted. Plaintiff appeals, arguing that an insurer may not be awarded summary judgment based upon the defense that the billed-for services were rendered by an independent contractor. Plaintiff argues further that the oral decisions by other judges of the same court contained in the trial transcripts are evidence that the treating providers were employees, thereby rebutting the information contained in plaintiff’s own claim forms and raising a triable issue of fact.

Contrary to plaintiff’s contention, the fact that health care services sued for by a professional corporation were rendered by an independent contractor is a proper basis upon [*2]which to award a no-fault defendant summary judgment dismissing the complaint made against it (see Health & Endurance Med., P.C. v Liberty Mut. Ins. Co., 19 Misc 3d 137[A], 2008 NY Slip Op 50864[U] [App Term, 2d & 11th Jud Dists 2008]). While plaintiff claims that Matter of Health & Endurance Med., P.C. v Deerbrook Ins. Co. (44 AD3d 857 [2007]) stands for the proposition that a plaintiff may recover even if services were rendered by an independent contractor, such an interpretation lacks merit.

A provider demonstrates its entitlement to collect assigned first-party no-fault benefits by proving the submission of its statutory claim forms, setting forth the fact and the amount of the loss sustained, and that payment of no-fault benefits was overdue (see Insurance Law § 5106 [a]; Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742 [2004]). Payment is overdue “if not paid within thirty days after the claimant supplies proof of{**22 Misc 3d at 72} the fact and amount of loss sustained” (Insurance Law § 5106 [a]). A claim form seeking reimbursement for services rendered by an independent contractor does not supply proof of a loss, because

“where a billing provider seeks to recover no-fault benefits for services which were not rendered by it or its employees, but rather by a treating provider who is an independent contractor, it is not a ‘provider’ of the medical services rendered within the meaning of [11 NYCRR 65-3.11 (a)] and is therefore not entitled to recover ‘direct payment’ of assigned no-fault benefits from the defendant insurer” (Rockaway Blvd. Med. P.C. v Progressive Ins., 9 Misc 3d 52, 54 [App Term, 2d & 11th Jud Dists 2005]).

In the case at bar, the claim forms at issue state that the treating professionals were independent contractors. Contrary to plaintiff’s contention, the allegation that said treating professionals were actually employees, and that the claim forms contain misinformation, is irrelevant. Plaintiff did not submit bills that entitled it to payment, and correction of the defect involved herein should not be permitted once litigation has been commenced (see generally Mount Sinai Hosp. v Chubb Group of Ins. Cos., 43 AD3d 889 [2007] [litigation that was commenced prior to payment becoming overdue was premature and the cause of action was dismissed]). The independent contractor defense is nonprecludable (see Rockaway Blvd. Med. P.C., 9 Misc 3d at 54). An insurer should be able to rely on the assertions in the claim form, and, in keeping with the aim of “provid[ing] substantial premium savings to New York motorists” (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 860 [2003]), should be able to handle a claim for services rendered by an independent contractor accordingly without engaging in further consideration of the claim. An insurer is not obliged to issue a denial in order to assert the nonprecludable, independent contractor defense. Consequently, if a provider were to be permitted to demonstrate during litigation that the claim form was incorrect and services were, in fact, rendered by an employee, not only would the insurer, which exercised its option not to expend further efforts to defend a facially meritless claim, have lost its opportunity to conduct meaningful claims verification, but also its decision not to issue a denial would result in its preclusion from introducing most defenses (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274 [1997]). Moreover, upon a court’s finding that services were rendered by{**22 Misc 3d at 73} an employee, and not an independent contractor as stated on the claim form prepared by the provider, an award of interest beginning to accrue 30 days after the submission of the claim form, as mandated by the no-fault regulations (see Insurance Department Regulations [11 NYCRR] § 65-3.8 [a] [1]; § 65-3.9 [a]; East Acupuncture, P.C. v Allstate Ins. Co., 15 Misc 3d 104 [App Term, 2d & 11th Jud Dists 2007]), would be inequitable. Furthermore, an insurer might have [*3]timely paid a claim, had the claim form prepared by the provider not stated that the services were rendered by an independent contractor, thereby avoiding the need to retain counsel to defend an action that might have been avoided. If the provider is allowed to amend the claim form, on the other hand, plaintiff would be entitled to recover its attorney’s fees from defendant for unnecessary litigation (see Insurance Department Regulations [11 NYCRR] § 65-3.10 [a]).

In view of the foregoing, the Civil Court properly granted defendant’s motion to dismiss the complaint (but see Atlantis Med., DC v Liberty Mut. Ins. Co., 19 Misc 3d 131[A], 2008 NY Slip Op 50584[U] [App Term, 1st Dept 2008]).

We note that, under appropriate circumstances, a provider who has submitted a claim form that improperly designates the treating provider as an independent contractor could, upon realizing its mistake, submit a new claim form with the proper designation along with “written proof providing clear and reasonable justification for the failure” to submit the claim within 45 days of the rendering of services (see Insurance Department Regulations [11 NYCRR] § 65-1.1 [Proof of Claim]). We do not pass upon whether the circumstances presented in this case would constitute “reasonable justification” for plaintiff’s failure to timely submit a proper claim.

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

[*1]

Supreme Court, Appellate Term, Second Department, December 3, 2008

APPEARANCES OF COUNSEL

Law Office of Alden Banniettis, Brooklyn (Benjamin Sharav of counsel), for appellant. Nicolini, Paradise, Ferretti & Sabella, Mineola (Mitchell S. Lustig of counsel), for respondent.

{**22 Misc 3d at 44} OPINION OF THE COURT

Memorandum.

Judgment affirmed without costs.

In this action by a provider to recover assigned first-party no-fault benefits, defendant moved, pursuant to CPLR 3216, to dismiss the complaint based upon plaintiff’s failure to prosecute the action. Plaintiff opposed the motion, contending that defendant’s 90-day demand was defective and therefore a nullity because it did not contain “a caption setting forth the name of the court, the venue . . . and the index number of the action” (CPLR 2101 [c]). The court below granted the motion to dismiss, and this appeal by plaintiff ensued.

Once a 90-day demand is received by a plaintiff, the plaintiff must either comply with the demand by filing a note of issue or a notice of trial within 90 days (CPLR 3216 [c]), or must move before the default date either to vacate the demand or to extend the 90-day period pursuant to CPLR 2004 (see Felix v County of Nassau, 52 AD3d 653 [2008]; Katina, Inc. v Town of Hempstead, 13 AD3d 343 [2004]; Rubin v Baglio, 234 AD2d 534 [1996]). Since plaintiff failed to do either of these, it was required, in opposition to the motion to dismiss, to establish a justifiable excuse for its delay in properly responding to the 90-day demand and the existence of a meritorious cause of action (see Baczkowski v Collins Constr. Co., 89 NY2d 499 [1997]; Felix, 52 AD3d 653; Taylor v Gari, 287 AD2d 557 [2001]).

Plaintiff argues that the absence of a caption setting forth the name of the court, the venue and the index number in the 90-day demand rendered it a nullity, as it was not in compliance with CPLR 2101 (c). However, the demand set forth the name of the case, including the name of the assignor, as well as the date of the loss. Consequently, in our opinion, the omissions were merely defects in form to which plaintiff’s counsel could have objected by returning the demand to defendant within two days of its receipt, specifying the nature of the defect (CPLR 2101 [f]). Plaintiff’s failure to do so waived any objection to the defect (see Deygoo v Eastern Abstract Corp., 204 AD2d 596 [1994]). In addition to its failure to offer any reasonable excuse{**22 Misc 3d at 45} for the delay, plaintiff also failed to show that it had a meritorious cause of action. Accordingly, the judgment dismissing the complaint is affirmed.

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

Supreme Court, Nassau County

014141/08

TO:Joseph Henig, P.C.

By: Marc Henig, Esq.

Attorney for Plaintiff

1598 Bellmore Avenue

P.O. Box 1144Bellmore, NY 11710

McDonnell & Adels, P.C.

Attorneys for Defendant

401 Franklin Avenue

Garden City, NY 11530

Daniel R. Palmieri, J.

These are plaintiff’s motion and defendant’s cross motion both for summary judgment pursuant to CPLR §3212. The motions are denied.

Plaintiff provided first-party no-fault benefits to a person covered by a policy of insurance issued by defendant.

Plaintiff treated the insured between September 11, 2007 and October 4, 2007 and billed on November 2, 2007. Defendant did not pay or deny the bill because it claims that it had reasonable cause to believe that the accidents and later treatment by plaintiff were the result of intoxication and thus excluded from coverage. Ins. Law §5103(b)(2), 11 NYCRR 6-3.8(g). The regulation provides that “if an insurer has reason to believe that the applicant was operating a motor vehicle while intoxicated or impaired and such intoxication or impairment was a contributing cause of the automobile accident, the insurer shall be entitled to all available information relating to the applicant’s condition at the time of the accident. The statute provides that an insurer may exclude from coverage a person who is injured as a result of operating a motor vehicle while intoxicated or impaired within the meaning of the VTL §1192.

Summary judgment is the procedural equivalent of a trial. S.J. Capelin Assoc. Inc. v Globe Mfg. Corp., 34 NY2d 338, 341 (1974). The function of the court in deciding a [*2]motion for summary judgment is to determine if triable issues of fact exist. Matter of Suffolk Cty Dept of Social Services v James M., 83 NY2d 178, 182 (1994). The proponent must make a prima facie showing of entitlement to judgment as a matter of law. Guiffrida v Citibank Corp., 100 NY2d 72, 82 (2003); Alvarez v Prospect Hosp., 68 NY2d 320, 324 (1986). Once a prima facie case has been made, the party opposing the motion must come forward with proof in evidentiary form establishing the existence of triable issues of fact or an acceptable excuse for its failure to do so. Zuckerman v City of New York, 49 NY2d 557, 562 (1980).

In an action for no-fault payments the plaintiff makes a prima facie showing of entitlement to judgment by submitting evidentiary proof that the prescribed statutory billing forms had been mailed and received, and that payment of the No-Fault benefits was overdue. Insurance Law 5106(a); Westchester Medical Center v AIG, Inc., 36 AD3d 900 (2nd Dept. 2007). On this motion plaintiff argues that it has presented a prima facie case for payment of no-fault benefits for services rendered. Plaintiff has submitted the requisite billing forms, certified mail receipts, signed return receipt cards, and an affidavit from a billing person stating that she/he personally mailed the claims. There is no dispute that defendant failed to pay or deny the claims within 30 days. On this record the Court finds that plaintiff has presented a prima facie case.

In opposition defendant relies upon its affirmative defense that the incident which caused the injuries were excluded from coverage because the injured party was intoxicated and injured as a result of such condition.

Pursuant to Insurance Law 5106(a), no-fault benefits are overdue if not paid by the insurer within 30 days after submission of proof of loss. See also, 11 NYCRR 65-3.8. The insurer is precluded from asserting any defenses to payment when it fails to deny the claim within the required 30-day period. Presbyterian Hosp. in the City of New York v Maryland Casualty Co., 90 NY2d 274, 278 (1997). A narrow exception to this preclusion rule is recognized for situations where the insurer raises a defense of lack of coverage. Central General Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 198 (1997). However, intoxication has been held to constitute an exclusion from coverage rather than no coverage thus requiring an insurer to deny or pay the claim or make avail of the regulations which address the exclusion and extend the time within which to pay or deny the claim. Presbyterian Hospital in the City of New York v. Maryland Casualty Co., 90 NY2d 274 (1997).

A variation of the requirement that an insurer must either deny or pay a claim exists with respect to persons injured when believed to have been operating their vehicle while intoxicated. If an insurer has reason to believe that alcohol consumption was a contributing factor in causing the accident, the insurer is entitled to all available information relating to the applicant’s condition at the time of the accident 22 NYCRR §65-3.8(g) and proof of claim shall not be completed until information, which has been requested pursuant to subdivision 65-8.5(a) or (b), has been furnished to the insurer by the applicant or the authorized [*3]representative. Regulation §65-3.5(c) provides that an insurer is entitled to receive all items necessary to verify the claim directly from the parties from whom such verification is requested. This latter section does not confine or require the insurer to seek information solely from the provider but rather contemplates that verification information may be sought from any source.

In sum, intoxication may operate as an exclusion from coverage rather than as a non-covered event , thus requiring either timely payment or denial or in lieu thereof, timely requests for verification. A provider establishes a prima facie case for summary judgment by showing proper billing, mailing and lack of payment but an insurer may demonstrate the existence of triable factual issues by showing that it made timely requests for verification regarding alleged intoxication that were not answered. Westchester Med. v. Allstate Ins. Co., 53 AD3d 481 (2d Dept. 2008); Westchester Med. v. State Farm Mut. Auto., 44 AD3d 750 (2d Dept. 2007).

The insurer has raised questions of fact sufficient to deny summary judgment to plaintiff by showing that it had reason to believe that intoxication was a contributing cause of the accident causing injury and made timely requests for verification (including follow-up requests) from plaintiff and the police.

The incident was a one car accident, the driver was charged with driving while intoxicated and the affirmed supporting deposition of the laboratory technician contains information that the blood alcohol level was 0.19%, a level sufficient to fall within the scope of the statute.

A dispute over whether a toxicology report was ever sent has been held to create a question of fact so as to bar summary judgment, Westchester Medical Center v. Allstate Insurance Company, supra; Westchester Medical Center v. progressive Casualty Insurance Co., 51 AD3d 1012 (2d Dept. 2008); cf Nyack Hospital v. State Farm Mut. Ins. Co., 19 AD3d 569 (2d Dept. 2005).

There is no factual dispute here as to plaintiff’s compliance with the request for verification as to the possible intoxication condition of the insured. Plaintiff does not refute defendant’s numerous requests for toxicology results or deny its response that defendant should obtain such results from the police authorities. Thus, there is no issue of fact as to plaintiff’s noncompliance. See, Central Suffolk Hospital v. New York Cent. Mut. Fire Ins. Co., 24 AD3d 492 (2d Dept. 2005).

In Westchester Medical Center v. Progressive Casualty Insurance Company, 43 AD2d 1039 (2d Dept. 2007), and in Central Suffolk Hosp. v. New York Cent. Mut. Fire Ins. Co., supra, the court granted summary judgment in favor of a defendant against a plaintiff because there was no issue of fact as to the hospital’s failure to provide verification as to intoxication.

With respect to defendant’s cross motion, it has not been established as a matter of law that the injured person was intoxicated and that the intoxication contributed to the injury causing accident. Defendant’s evidence is sufficient to raise questions of fact as to whether [*4]the exclusion for intoxication is applicable. Notably absent here are any specifics as to how the acident was caused by plaintiff’s intoxication. See Westchester Medical Center v. Progressive Casualty Insurance Company, 51 AD3d 1014 (2d Dept. 2008); Lynch v. Progressive Ins. Co., 12 AD3d 570 (2d Dept. 2004).

Although plaintiff does not dispute the request for verification and its inability to provide such information, plaintiff contends that the denial of claim is lacking in specificity, there by rendering defendant’s ultimate denial as ineffective. See General Acc. Ins. Group v. Circucci, 46 NY2d 862 ( 1979 ); Todaro v. Geico Gen. Ins. Co., 46 AD3d 1086 (3rd Dept. 2007); Olympic Chiropractic, P.C., v. American Transit Ins. Co., 14 Misc 3d 129(A). (App. Term 2d and 11th Judicial Districts 2007). The denial of claim form dated October 21, 2008 which is not attached, addressed or disputed by plaintiff, specifies by reference to regulation and the insured as to intoxication or impairment and thus provides enough detail as the reason for the denial. Plaintiff’s contention that it had no way of knowing the basis for denial is based solely on a subsequent denial of claim and fails to take into account requests for verification followed by the first denial. See St. Vincent’s Hosp. Of Richmond v. Government Employees Ins. Co., 50 AD3d 1123 (2d Dept. 2008).

Based on the foregoing, questions of fact exist as to whether the insured was intoxicated and whether such condition contributed to causing the injury, necessitating denial of both plaintiff’s motions and defendant’s cross motions for summary judgment.

All parties shall appear at a Preliminary Conference at the Supreme Courthouse, 100 Supreme Court Drive, Mineola, NY, lower level, on December 18, 2008 , at 9:30 a.m. No adjournments of this conference will be permitted absent the permission of or Order of this Court. All parties are forewarned that failure to attend the conference may result in Judgment by Default, the dismissal of pleadings (see 22 NYCRR 202.27) or monetary sanctions (22 NYCRR 130-2.1 et seq.).

Based on the foregoing, summary judgment is denied to both plaintiff and defendant as to the Second and Third Causes of Action.

This shall constitute the Decision and Order of this Court.

E N T E R

DATED: December 1, 2008

_____________________________

HON. DANIEL PALMIERI

Acting Supreme Court Justice

TO:Joseph Henig, P.C.

By: Marc Henig, Esq.

Attorney for Plaintiff

1598 Bellmore Avenue

P.O. Box 1144

Bellmore, NY 11710 [*5]

McDonnell & Adels, P.C.

Attorneys for Defendant

401 Franklin Avenue

Garden City, NY 11530

Supreme Court, Queens County

13672/07

Orin R. Kitzes, J.

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

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

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

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

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

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

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

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

Provisions of the no-fault law require insurers to reimburse patients or their medical provider assignees for “basic economic loss” (Insurance Law § 5102[a][1]). A provider of healthcare services is not eligible for reimbursement, however, “if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such service in New York” (11 NYCRR 65-3.16[a][12]). The Court of Appeals has interpreted 11 NYCRR 65-3.16(a)(12) to allow insurance carriers to withhold reimbursement for no-fault claims from fraudulently licensed medical corporations and to “look beyond the face of licensing documents to identify willful and material failure to abide by state and local law” State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 (2005.) State law mandates that professional service corporations be owned and controlled only by licensed professionals (see Business Corporation Law §§ 1503[a]; 1507, 1508), and that licensed professionals render the services provided by such corporations (see Business Corporation Law § 1504[a]).

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

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

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

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

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

Orin R. Kitzes, J.S.C.

Supreme Court, Nassau County

12410/2008

COUNSEL FOR PETITIONER

Ruffo, Tabora, Mainello & McKay, P.C.

3000 Marcus Avenue – 1W6

Lake Success, New York 11042

COUNSEL FOR RESPONDENT

Rubin, Fiorella & Friedman, LLP

292 Madison Avenue, 11th Floor

New York, New York 10017

Leonard B. Austin, J.

Petitioner seeks a judgment pursuant to CPLR 7510 confirming the arbitration award of Arbitration Forums, Inc., dated December 30, 2007.

Respondent, Republic Western Insurance Co., moves for an order pursuant to CPLR 304, 403(b) [*2]and 3211(a)(8) dismissing the petition for want of personal jurisdiction.

BACKGROUND

The insured of Petitioner Eagle Insurance Company (“Eagle”), was involved in a motor vehicle accident with a vehicle insured by Respondent, Republic Western Insurance Co. (“Republic Western”), on January 30, 2001. Republic Western’s insured allegedly rear-ended Eagle’s insured, whose vehicle had three passengers.

On or about April 1, 2003, Eagle served Republic Western with a Notice to Arbitrate the four individuals’ claims with Arbitration Forums, Inc. (“AFI”) pursuant to Insurance Law § 5105. After a lengthy investigation, on October 24, 2007, Republic Western denied coverage for Eagle’s claim on the grounds that the accident was staged.

On October 25, 2007, Republic Western submitted its contention to AFI that the loss was staged and was accordingly not covered. Republic Western argued that AFI lacked jurisdiction since coverage was contested and that Eagle’s claim must be dismissed. Republic Western explained that, through its investigation, it had determined that the loss involved individuals who were part of a criminal ring that staged accidents with U-Haul and other vehicles for the purpose of defrauding insurance companies. It maintained that Tara Pizzingrillo, the lessee and driver of the U-Haul vehicle in the

underlying claim, was arrested in connection with staging accidents and that she was indicted for being part of a scheme to defraud numerous insurance carriers by submitting fraudulent claims and intentionally colliding into automobiles.

A no-fault hearing was held on December 18, 2007. Republic Western asserted its objection to jurisdiction again at the hearing. By decision, dated December 30, 2007, the Arbitrator rejected Republic Western’s challenge to jurisdiction and found Republic Western 100% liable for Eagle’s no-fault payments to the injured parties. The Arbitrator denied Republic Western’s affirmative defense of no coverage because “indictments list other accidents, not his loss;” “U-Haul driver was indicted for fraud;” and, Eagle’s insured was “an innocent party.” By letter, dated January 22, 2008, Republic Western’s counsel requested that AFI reconsider whether it had jurisdiction over the matter under 11 NYCRR 65-4.11(a)(6).

On or about December 30, 2007, Republic Western filed a Petition in Supreme Court, New York County seeking to vacate the arbitration award. However, that action was discontinued by stipulation without prejudice on account of a stay of actions against Eagle issued by the Superior Court of New Jersey on January 29, 2007. That stay was given comity by this Court by order dated June 15, 2007. (In the Matter of Eagle Insurance Company in Rehabilitation, Newark Insurance Company in Rehabilitation, GSA Insurance Company in Rehabilitation, and NCIC Insurance Company in

Rehabilitation [Order dated June 15, 2007, Index No. 3202/07 (Supreme Court Nassau County)]).

Eagle commenced this proceeding to confirm the arbitrator’s award on July 7, 2008.

Republic Western maintains that personal jurisdiction has not been obtained; that the award is invalid because it is not signed (CPLR 7507); and that the Arbitrator exceeded his authority in determining that this was a covered event (see, 11 NYCRR 65-4.11[a][6]). [*3]

DISCUSSION

Review of an arbitration award is accomplished by way of a special proceeding. CPLR 7502(a); Scott v. Allstate Ins. Co., 45 AD3d 690 (2nd Dept. 2007). “A special proceeding is commenced by the filing of a petition (CPLR 304).” Star Boxing Inc. v. Daimler Chrysler Motors Corp., 17 AD3d 372 (2nd Dept. 2005). See also, Scott v. Allstate Ins. Co., supra; and Queens Community Medical Centers v. Eveready Ins. Co., 7 Misc 3d 1010(A) (Civ. Ct. Kings Co. 2005). “Thereafter, the petitioner must serve the respondent with a notice of petition, the petition and supporting affidavits (CPLR 403[b]).” Star Boxing, Inc. v. Daimsler Chrysler Motors Corp., supra. See also, Scott v Allstate Ins. Co., supra; Queens Community Medical Centers v. Eveready Ins. Co., supra. “Pursuant to CPLR 403(c), a notice of petition shall be served in the same

manner as a summons in an action.” Star Boxing, Inc. v. Daimsler Chrysler Motors Corp., supra. See also, Scott v. Allstate Ins. Co., supra; Queens Community Medical Center v. Eveready Ins. Co., supra. Neither service on a party’s attorney nor service by regular mail alone is sufficient. CPLR 308, et seq. The petition must be served in accordance with CPLR 308. Application of County Wide Ins. Co., 114 AD2d 754 (1st Dept. 1985). See also, Hehl V. Government Employees Ins. Co., 203 AD2d 572 (2nd Dept. 1994).

Republic Western did not waive its jurisdictional objection by procuring an adjournment of the return date of the Petition. Parrotta v. Wolgin, 245 AD2d 872 (3rd Dept. 1997), citing McLaughlin, Practice Commentaries, McKinney’s Cons. Laws of NY, Book 7B, CPLR C320:2 at 492; CPLR 320(b); Becker v. Lesnick, 96 Misc 2d 819, 821-822 (Sup. Ct. NY Co. 1978). See also, Pendergast v. St. Mary’s Hospital, 156 AD2d 436 (2nd Dept.1985). The petition in this proceeding was served on Republic Western and its attorney by regular mail. Since Eagle Insurance Co. failed to serve the petition properly, this Court lacks jurisdiction and this proceeding must be dismissed. Star Boxing, Inc. v. Daimsler Chrysler Motors Corp., supra; and Queens Community Medical Center v. Eveready Ins. Co., supra.

In view of the foregoing, the parties’ remaining contentions need not be reached.

Accordingly, it is,

ORDERED, that Respondent Republic Western’s motion to dismiss the Petition pursuant to CPLR 3211(a)(8) is granted and the Petition is hereby dismissed.

This constitutes the decision and Order of the Court.

Dated: Mineola, NY_____________________________

October 24, 2008Hon. LEONARD B. AUSTIN, J.S.C.

X X X

Supreme Court, Nassau County

8566/08

Anthony C. Donofrio, PLLC

Attorney for Petitioner

5518 Merrick Road

Massapequa, NY 11758

Short & Billy, PC

Attorneys for Respondent

217 Broadway, Suite 300

New York, NY 10007

William R. LaMarca, J.

Requested Relief

Complainant, JOSEPH MILLS (hereinafter referred to as “Dr. MILLS”), petitions the Court for an order, pursuant to 11 NYCRR §65-4.10(h), granting him a trial, de novo, with respect to a decision of an Arbitrator that upheld the denial of no-fault benefits to MILLS by respondent, GOVERNMENT EMPLOYEES INSURANCE CO. (hereinafter referred to as “GEICO”). GEICO opposes the petition on procedural as well as substantive grounds. The petition is determined as follows:

Background

In the underlying arbitration dispute, MILLS sought arbitration seeking payment of lost earnings under the no-fault provisions of his policy with GEICO which had coverage of $100,000.00 for lost earnings. Following MILLS’ claim, GEICO paid the amount of $13,950.48, but denied him further benefits, and in the arbitration, Dr, MILLS sought payment for the balance of the amount which he had not received.

In his petition, Dr. MILLS, claims that, prior to December 6, 2002, he was a full time treating chiropractor that treated patients at two (2) locations: Chiropractic Low Back Pain in Huntington, New York, and Nassau Chiropractic Pain Management in Valley Stream, New York. He states that, on September 4, 2002, he was involved in a motor vehicle accident on Route 108 in Cold Spring Harbor, New York where he sustained serious injuries to his spine. He contends that, from September 4, 2002 to December 6, 2002, he continued to treat patients at his facilities in a limited capacity until he was no longer [*2]physically able to do so on December 6, 2002, and that he hired part-time chiropractors to treat patients because of his diminished capabilities. On December 7, 2002, the date that Dr. MILLS claimed complete disability, he hired a full time chiropractor to take over his share of the work at the various facilities. He asserts that he has undergone serious spinal surgery, including the fusion of vertebrae in his spine with bone grafted from his hip and is presently receiving Social Security Disability benefits for being totally disabled since December 6, 2002.

Dr. MILLS states that, based upon a medical examination that concluded that no further treatment was necessary, GEICO denied his claim on March 9, 2003 and, thereafter, he underwent further surgery. He states that he submitted proof to GEICO of his additional surgery on September 9, 2003, as well as proof that he was receiving Social Security Disability Benefits, but after another medical examination GEICO again denied his claim, on July 13, 2004. Thereafter, the matter was heard by Arbitrator Laura A. Yantsos, Esq., who concluded in a nine (9) page decision, dated August 9, 2007, that Dr. MILLS had not suffered any loss of earnings and was not entitled to the balance of the policy. Said decision by Arbitrator Yantsos, was appealed by Dr. MILLS and upheld by Master Arbitrator Donald T. DeCarlo, by decision dated January 8, 2008. It is from the Master Arbitrator’s decision that Dr. MILLS seeks a trial de novo under11 NYCRR §65-4.10(h). It is Dr. MILLS position that the decision of Arbitrator Yantsos is completely arbitrary and abusive and that she exceeded her power and abused her discretion. He claims that the Arbitrator demanded documents far in excess of what was necessary or regular and required twenty (26) hours of appearance time and demonstrated that she had no understanding of the no-fault law.

The Arbitration Decision reflects an exhaustive and comprehensive analysis of the facts and documentary evidence presented, that included IRS records, business records, a Social Security claim and other related documents. Dr. MILLS claim was for lost earnings which is defined in Insurance Law §5102(2) as “[l]oss of earnings from work which the person would have performed had he not been injured, and reasonable and necessary expenses incurred by such person in obtaining services in lieu of those that he would have performed for income . . .”. The Arbitrator found that Dr. MILLS was acting, before and after the accident, first and foremost, as a manager and owner of medical corporations and practices and of the buildings in which the practices were located, and that he was not disabled from performing his duties as a manager/owner. As part of the evidence considered was a letter submitted by Dr. MILLS, written to “Scott” and prepared in conjunction with his Social Security Disability hearing, which indicated that he had gone on disability for more that a year in 1995, some seven (7) years prior to the subject accident, when he had injured his back and learned that he could not return to work on a full time basis and started doing medical management, that he ran his own medical management company for the last several years and did almost no treating, that he managed the medical practice of another doctor, and that he could not work as a chiropractor because he could not do repetitive bending. Moreover, the Arbitrator found that the two (2) practices opened by Dr. MILLS just a few months before the accident envisioned his role to be that of a medical manager, that he did not work exclusively as a treating chiropractor, that his tax returns did not accurately reflect legitimate business expenses and his deductions were grossly inflated and untraceable, and that real estate [*3]taxes imposed on the businesses were in fact for expenses of buildings owned by Dr. MILLS in his personal capacity. Indeed, after consideration of the credible evidence presented, the Arbitrator found that Dr. MILLS did not sustain a loss of earnings but, on the contrary, received greater income than he did prior to the accident.

In opposition to the petition, counsel for GEICO points out the following:

1. That the Court lacks personal jurisdiction over the respondent because the notice and petition were not properly served. 22 NYCRR §65-4.10(h) directs, as follows:

(h) Appeal from master arbitrators award:

(1) A decision of a master arbitrator is final and binding, except f for:

(I) court review pursuant to an Article 75 proceeding, or

(Ii) if the award of the master arbitrator is $5,000 or greater, exclusive of interest and attorneys fees, either party may in lieu of an Article 75 proceeding, institute a court action to adjudicate the dispute de novo. (emphasis supplied).

As the award of the master arbitrator was for $0 dollars, the instant action must be commenced as a special proceeding (CPLR §7502), which requires that a party file a petition (CPLR §304) and that the notice must be served in the same manner as a summons (CPLR §403[c]). It is clear that the petition was not served upon the defendant corporation, pursuant to CPLR §311(a) as complainant served the notice and petition, by mail, upon counsel for GEICO, which is insufficient service.

2. That complainant is not entitled to a trial de novo as a pre-requisite for a de novo action is an award of a master arbitrator in the amount of $5,000 or greater. There can be no de novo review if there is no monetary award. Harlev v United Servs. Auto Assn., 191 AD2d 768, 594 NYS2d 405 (3d Dept. 1993), General Accident Fire & Life Insurance Co. v Avlonitis, 156 AD2d 424, 548 NYS2d 543 (2nd Dept. 1989).

3. That the complainant is barred from seeking relief under CPLR Article 75 because CPLR §7511 with respect to vacating or modifying an arbitration award requires the application to be made within ninety (90) days of delivery to him. In the case at bar, the decision of the Master Arbitrator was mailed on January 8, 2008 and the instant application was filed on May 9, 2008. The ninety (90) day period had expired and claimant is not entitled to Article 75 relief.

4. That the decision of Arbitrator Yantsos has a factual and rational basis. As discussed above, the decision reflects an exhaustive and comprehensive analysis of the facts and documentary evidence presented.

5. That the decision of Arbitrator Yantsos is not capricious, arbitrary or irrational. The record demonstrates that Dr. MILLS claim that “working full time as a treating chiropractor was the primary source of his income and how he made his likelihood” was contrary to the record. Rather the record shows that he was a chiropractor/businessman, who worked in medical management for which he was not disabled.

6. That the decision of Master Arbitrator DeCarlo is proper and should be confirmed. Master Arbitrator DeCarlo found that “the Master Arbitrator is not a fact finder, and if the evidence is sufficient to support an Arbitrator’s decision, it is not the role of the Master Arbitrator to vacate or modify”. He concluded that “the decision of the Arbitrator on its face [*4]supports an affirmation of the decision below and I therefore, rule in favor of Respondent in this matter”. Counsel for GEICO cites Matter of Petrofsky v Allstate Insurance Co., 54 NY2d 207, 445 NYS2d 77, 429 NE2d 755 (C.A. 1981).

The Law

The Court of Appeals has outlined the scope of review by a master arbitrator in the Matter of Petrofsky v Allstate Insurance Company, supra , and Smith and Firemen’s Fund Insurance Company, 55 NY2d 224, 448 NYS2d 444, 433 NE2d 509 (C.A. 1982). In Petrofsky, the Court of Appeals vacated a master arbitrator’s determination which set aside the original arbitration award and found that the master arbitrator erred by engaging in an extensive review of the facts. In Smith, the Court of Appeals upheld the master arbitrator because he based his decision on a matter of law and there was no indication that the master arbitrator exceeded his statutory power by weighing the evidence or resolving issues such as the credibility of the witnesses:

An arbitration award may be reviewed for whether it has a rational basis. The rational basis standard was developed by the Court of Appeals in a series of four (4) cases: Garcia v Federal Insurance Company, 46 NY2d 1040, 416 NYS2d 544, 389 NE2d 1066 ( C.A. 1979), Furstenberg v Aetna Casualty & Surety Co., 49 NY2d 757, 426 NYS2d 465, 403 NE2d 170 (C.A. 1980), Cohn v Royal Globe Insurance Company, 49 NY2d 942, 428 NYS2d 88, 406 NE2d 739 (C.A. 1980) and Levine v Zurich American Insurance, 49 NY2d 907, 428 NYS2d 193, 405 NE2d 675 (C.A. 1980).

CPLR § 7511(b) sets forth the four narrow grounds upon which an arbitration award may be vacated. These four grounds are 1) corruption, fraud, or misconduct in procuring the award; 2) partiality of an arbitrator appointed as a neutral; 3) that an arbitrator or agency making the award exceeded his power or so imperfectly executed it that a final definite award was not made; and 4) procedural defects, unless the party failed to notice the defect and failed to object to same. See also, Matra Building Corp v Alan Kucker, et al., 2 AD3d 732, 770 NYS2d 367 (2nd Dept. 2002). An arbitration award cannot be vacated even if the Court concludes that the arbitrators interpretation of an agreement misconstrues or disregards its plain meaning or misapplies substantive law unless the award is violative of a strong public policy, is totally irrational, or exceeds enumerated limitations of the arbitrators powers. Matra Building Corp. v Alan Kucker, et al., supra . The scope of review is extremely limited, as the goal of arbitration is to reach a final and definite resolution of the parties’ dispute without resorting to the judicial process, and the party commencing the action bears a heavy burden of proof. Indeed, an arbitration award will be confirmed if there is even a barely colorable justification for the outcome. Huntington Hospital v Huntington Hospital Nurses Association, 302 F. Supp. 2d 34 (EDNY, 2004).

. . . [I]n order to achieve arbitration’s dual purpose of an equitable result and expediency, the arbitrator’s award should be given great deference. Finality is the key. Accordingly, CPLR 7501 expressly forbids judicial review of the parties’ disputes. Therefore, failure to establish a statutory ground for vacatur under CPLR 7511 requires confirmation of the award (Matter of Granite Worsted Mills[Cowen] 25 NY2d 451, 255 NE2d 168, 306 NYS2d 934). Moreover, in New York there is a strong public policy favoring [*5]arbitration, consequently an award is not subject to vacatur “unless the court concludes that it is totally irrational or violative of a strong public policy” and thus in excess of the arbitrators powers (Hacket v. Milbank, Tweed, Hadley & McCloy, 86 NY2d 146, 630 NYS2d 274, 654 NE2d 95; Maross Constr. V. Central NY Regional Transp. Auth. 66 NY2d 341, 497 NYS2d 321, 488 NE2d 67).

Brown and Williamson Tobacco Corp. v. Chesley, 194 Misc 2d 540, 749 NYS2d 842 (NY County, 2002).

ConclusionAfter a careful reading of the submissions herein, the Court credits the analysis of GEICO’s counsel and finds that service of the petition was improper, that complainant is not entitled to a de novo trial, that a demand for relief under Article 75 is untimely, and that, even if juricdiction had been established and the application was timely, the awards of the Arbitrator and Master Arbitrator have a sound basis in the record and are not irrational, capricious or an abuse of discretion. It is the finding of the Court that the arbitration process afforded the complainant due process and is supported by adequate evidence in the record and is not totally irrational. See, Gulf Stream Coach v DiSanto, 173 Misc 2d 242, 661 NYS2d 498 (Sup. Lawrence Co. 1997); Ianotti v Safari Motor Coaches, 255 AD2d 848, 638 NYS2d 839 (3rd Dept 1996).Based on the totality of the evidence presented, the Court finds that there clearly was a rational basis for the arbitral decision and that the arbitrator acted within her powers.

Therefore, as CPLR § 7511(e) directs that once the Court denies a motion to vacate an award it shall confirm the arbitration award, the Arbitration Award is affirmed. GEICO is directed to settle judgment, on notice.

All further requested relief not specifically granted is denied.

This constitutes the decision and order of the Court.

Dated: October 1, 2008

_________________________

WILLIAM R. LaMARCA, J.S.C.

TO:

mills-geico,#

01/art75

Supreme Court, New York County

105012/07

For the Petitioners:Agnes Neiger, Esq.

Jones Jones O’Connell LLP

45 Main Street, Suite 1101

Brooklyn, New York 11201

For the Respondents:

Patrice Soberano, Esq.

Short & Bill, P.C.

217 Broadway, Suite 300

New York, New York 10007

Marcy L. Kahn, J.

By notice of petition and petition dated April 4, 2007 and the exhibits annexed thereto, petitioner Chubb Insurance Company (“petitioner” or “Chubb”), moved for an order pursuant to CPLR §7511(b)(1)(iii) vacating the amended award of the arbitrator, dated January 17, 2007, in the arbitration proceeding between petitioner and respondent, GEICO Insurance Company (“respondent” or “GEICO”) on the ground that the arbitrator exceeded her powers, and sought to reinstate the original award issued by the arbitrator on November 3, 2006. Respondent submitted no opposition to the petition. By decision and order dated July 21, 2007, this court granted the petition on default, vacated the amended award and reinstated the original award. Respondent now moves to vacate the default judgment and, upon vacation, to reinstate the amended award. For the reasons stated, respondent’s motion is denied. [*2]

I. FACTUAL AND PROCEDURAL BACKGROUND

On January 22, 2003, Chenille Bonner (“Bonner”), a New York City Transit Authority (“NYCTA”) bus driver, was on duty in her bus when it became involved in a three-vehicle accident. As the NYCTA workers’ compensation insurer, Chubb paid $42,065.56 in benefits to and on behalf of Bonner as a result of the accident. (Pet. Exh. B).

In accordance with Insurance Law §5105, Chubb filed an inter-company arbitration demand against GEICO and Statewide Insurance Company (“Statewide”), the insurers of the other two vehicles,^[FN1] seeking reimbursement of the first-party benefits it had paid to its insured. As one of the vehicles involved in the accident was a NYCTA bus weighing in excess of 6500 pounds unloaded and constituting a vehicle for hire (see Pet. Exh. A), the jurisdictional requirements of §5105(a) were satisfied. The case was then submitted to arbitration with Arbitration Forums Inc. (“AFI”) pursuant to §5105(b) and 11 NYCRR §65.10 of the no-fault regulations on September 19, 2005. (Pet. Exh. C).

On October 31, 2006, the arbitration was held before the AFI arbitrator, Sabrina Owens (“Owens” or the “arbitrator”). On November 3, 2006, Owens issued her decision in the matter under AFI Docket No. I068-07725-05-00 (the “original award”), finding each of the respondents to be fifty per cent liable, and awarding Chubb a total of $42,065.56. (Pet. Exh. D).

Thereafter, by letter to the arbitrator dated November 22, 2006, respondent GEICO requested that the award against it be vacated due to an “incorrect application of New York regulations regarding PIP loss transfer requirements . . . .” (Pet. Exh. E). In essence, GEICO argued that because GEICO also provided motor vehicle insurance coverage for the NYCTA bus, it was “united in interest” with Chubb and recovery by Chubb against it was barred.

On January 17, 2007, the arbitrator issued an amended decision and award (the “amended award”), in which she determined that Statewide bore fifty per cent of the liability and that GEICO bore no liability in the case. (Pet. Exh. F). The amended award reduced Chubb’s recovery to $21,032.78.

Thereafter, petitioner commenced a proceeding to vacate the amended award and reinstate the original award, arguing that the arbitrator exceeded vacating the original award and her powers in issuing the amended award. As proof of service on the Superintendent of Insurance was provided by petitioner and respondent submitted no opposition to the petition, this court issued a decision and order dated July 20, 2007 (“Chubb I“), granting the petition on default but also addressing the merits [*3]of the petition.^[FN2]

Petitioner served respondent with notice of entry of the judgment on or about September 4, 2007. On May 9, 2008, GEICO filed the instant motion to vacate the default judgment in Chubb I. Chubb has opposed the motion. GEICO thereafter furnished a reply affirmation.

II.PARTIES’ CONTENTIONS

On this motion, GEICO claims that this court’s decision in Chubb I should be vacated on the ground of excusable default, as its failure to appear in the Article 75 proceeding was reasonable and it has a meritorious defense to the proceeding. Proffering the representation of its claims representative, Simon King (“King”), GEICO maintains that its failure to appear in the Article 75 proceeding was reasonable and should be excused, because its files do not reflect that it was ever served with process or received any notice of the proceeding until after the entry of judgment against it on September 4, 2007. (Aff. of Merit of Simon King, sworn Apr. 23, 2008 [the “King affidavit”], at ¶11).

GEICO states that it has a meritorious defense, arguing that the original award was so irrational as to require vacation. Specifically, GEICO argues that Chubb, Bonner’s worker’s compensation carrier, was aligned in interest with GEICO, which provided no-fault motor vehicle coverage for Bonner’s NYCTA bus, as well as for one of the other vehicles involved in the accident. It argues that to permit a worker’s compensation carrier to recover from the no-fault insurer of the same person would improperly eliminate the worker’s compensation offset for no-fault insurers mandated by Insurance Law §5102(b)(2). It also argues that there should have been no consideration of negligence through intercompany loss transfer pursuant to Insurance Law §5105(a) because of Chubb’s status as a worker’s compensation carrier, and that Chubb is the sole source of Bonner’s medical benefits under 11 NYCRR §65-3.16(a)(9). Contending that the arbitrator recognized her own error and, accordingly, amended her award appropriately, GEICO argues that the amended award should be reinstated.

Chubb responds that GEICO has failed to establish either a reasonable excuse for its default or a meritorious defense to the petition. Chubb contends that GEICO cannot furnish a reasonable excuse for its default because the statement by King is conclusory and unsupported by specific factual allegations. It proffers an affidavit of service upon the office of the Superintendent of the New York State Insurance Department (“NYSID”) as the duly appointed representative of GEICO and the [*4]acknowledgment of such service and delivery to GEICO by that office on April 16, 2007. (Affirm. of Agnes Neiger, Esquire in Opp.[“Neiger Aff.”], dated July 10, 2008, Exh. D). Chubb further maintains that GEICO’s defense, namely, that the original award is irrational and should be vacated, does not address the issue before this court in Chubb I, that being whether the arbitrator exceeded her authority in issuing the amended award.

Chubb also argues that GEICO’s request to the arbitrator for modification of the original award failed to comply with the requirements of CPLR §7509, as GEICO submitted its request more than twenty days after the original award was issued. Chubb reiterates that because the amendment of the award did not fall within the statutory parameters specified in CPLR §§7509 and 7511(c), the arbitrator exceeded her authority in amending the original award in response to the request, rendering GEICO’s position unmeritorious.

III.DISCUSSION

It is settled law that “[a] party seeking to vacate a default must demonstrate both a reasonable excuse for [that party’s] nonappearance and a meritorious defense to the action.” (Eugene Di Lorenzo, Inc. v. A.C. Dutton Lumber Co., 67 NY2d 138, 141 [1986]; Central City Brokerage Corp. v. Acosta, 49 AD3d 455 [1st Dept. 2008]. On this motion, GEICO has failed to establish either a reasonable excuse or a meritorious defense.

A. Reasonable Excuse

GEICO’s assertion that it was not properly served with the petition is belied by both the affidavit of service sworn on April 13, 2007 and the affidavit of acknowledgment of service dated April 16, 2007. The affidavit of service attests to the fact that on April 13, 2007, GEICO was served by personal delivery with a true copy of the notice of petition and petition to Dora Lewis of the NYSID and that Ms. Lewis was a duly appointed representative of GEICO for the purpose of receiving service of process.^[FN3] (Neiger Aff., Exh. D). The affidavit of acknowledgment of service reveals that on April 16, 2007, Salavatore Castiglione, Assistant Deputy Superintendent and Chief of NYSID, acknowledged that the notice of petition was served upon him on April 13, 2007 and that he notified GEICO of service by forwarding the acknowledgment and a copy of the notice of petition to Mr. Robert M. Miller of GEICO at its address in Woodbury, New York on April 16, 2007. (Id.) GEICO presents no facts contradicting this evidence, or demonstrating that it had a new address for the forwarding of service of process and had [*5]failed through inadvertence to notify the Superintendent of Insurance of that fact. Further, there are no facts before this court demonstrating that the notice of petition was ever returned undelivered to the Insurance Department. Although GEICO does claim that a copy of the notice of petition could not be located in its files, no facts have been presented to this court supporting GEICO’s claim that it was never served on the company.

Thus, the record establishes that service of the notice or petition and petition was effected pursuant to Insurance Law §1212(b).^[FN4] GEICO has failed to provide a sworn factual basis to controvert these allegations. As GEICO has not shown that it was not properly served with the petition in this proceeding, GEICO does not have a reasonable excuse for its failure to appear in this proceeding prior to filing the instant motion.

B. Meritorious Defense

GEICO’s claim of a meritorious defense in this proceeding is equally unavailing. In Chubb I, the issue before the court was whether the arbitrator exceeded her powers in issuing the amended award, which Chubb sought to vacate pursuant to CPLR §§ 7509 and 7511(b)(1). (See Chubb I, section II, at 3). On this motion, rather than addressing that issue, GEICO challenges the rationality of the original award. These misdirected arguments do not constitute a meritorious defense to Chubb’s petition.

Although, as GEICO contends, New York courts have been liberal in vacating default judgments in light of the strong public policy favoring the resolution of cases on their merits (Reply Affirm. of Patrice Soberano, Esquire dated July 25, 2008 in Support of Resp. Mot., at ¶14; see Aliksanyan v. Sundman, 98 AD2d 607 [1st Dept. 1983]; Balint v. Marine Midland Bank, 112 AD2d 1023 [2d Dept. 1985]), in most of the cases relied upon by GEICO, the motion to vacate the default judgment was filed promptly upon receipt of the notice of entry of the default judgment by the prevailing party. (See, e.g., Glass v. Janbach Properties, 73 AD2d 106, 108 [2d Dept. 1980][motion to vacate filed eight days after receipt of notice of entry of default judgment]). Here, by contrast the motion to vacate the default [*6]was filed some eight months after service of the notice of entry of the judgment. Moreover, in Chubb I this court did address the merits of this proceeding, rather than merely granting a default judgment based upon GEICO’s failure to respond to the petition. (See Chubb I, section III at 4-8).

GEICO proffers no factual or legal basis for this court to vacate its judgment in Chubb I. Instead, GEICO argues that the arbitrator made an error of law in issuing the original award in contravention of both a governing statute and a regulation. Specifically, GEICO maintains that the original award, which permitted Chubb, the workers’ compensation carrier for Bonner, to recover from GEICO, the no-fault insurer for the same party, violates the statutory scheme set forth in Insurance Law §5102(b)(2). Under that scheme, first-party benefits paid by a no-fault insurer to reimburse a person for basic economic loss on account of personal injury are to be offset by any amounts recovered on account of workers’ compensation benefits, rather than the reverse. (See Ins. Law §5102[b][2]; Arvatz v. Empire Mut. Ins. Co., 171 AD2d 262 [1st Dept. 1991][“. . . Insurance Law §5102(b)(2) provides that workers’ compensation benefits serve as an offset against first-party benefits payable under no-fault as compensation for basic economic loss'”]; New York Cent. Mut. Fire Ins. Co. v. Tower Ins. Co. of New York, Index No. 100446/07, [Sup. Ct. NY Co. July 6, 2007][vacating arbitrators’ award of medical expenses from no-fault insurer to workers’ compensation carrier as contrary to Insurance Law §5102(b)]). GEICO further asserts that the original award does not comply with 11 NYCRR § 65-3.16(a)(9), which provides:

(p)ursuant to section 5102(b)(2) of the Insurance Law, when the applicant is entitled to workers’ compensation benefits due to the same accident, the workers’ compensation carrier shall be the sole source of reimbursement for medical expenses.

(11 NYCRR §65-3.16[a][9]; see also New York Cent. Mut. Fire Ins. Co. v. Tower Ins. Co. of New York, supra [“because the compensation carrier is solely responsible for the medical expenses, it turns the law on its head to allow the carrier to recover from the no-fault insurer”]). Assuming, without deciding, the correctness of GEICO’s statement of the law and its application to the circumstances presented here,^[FN5] GEICO had a remedy, which was to make a successful motion in this court to vacate the original award pursuant to CPLR §7511, but, for [*7]reasons still unexplained, failed to do so. Rather, GEICO sought to have the arbitrator modify her award. In doing so, GEICO sought its remedy in an inappropriate manner. Should a party to an arbitration proceeding seek to vacate or modify an award, the appropriate means to do so is by way of CPLR article 75 procedure. (See Caso v. Coffey, 41 NY2d 153, 157 [1976][a requirement that arbitrators be prepared to defend their awards would “discourage qualified and competent persons from serving as arbitrators”]).

Chubb subsequently brought its petition seeking to vacate the amended award. Despite having been properly served with the petition by personal service on the Superintendent of Insurance, GEICO failed to respond. Having been presented no contentions on the merits by GEICO, this court considered Chubb’s argument that the arbitrator exceeded her authority and determined that the arbitrator had done so. (See CPLR §7511[b][1][iii]; Matter of the Board of Educ. of the Dover Union Free School Dist. v. Dover-Wingdale Teachers’ Ass’n, 61 NY2d 913,915 [1984] [arbitration award may be vacated where the award is “in excess of a specifically enumerated limitation upon arbitral authority”]). Thus, this court decided the issue on the merits in favor of Chubb. (See Chubb I at 4-8).

Further, GEICO’s motion, which effectively seeks an order from this court confirming the amended award, is untimely, as it has been approximately one year and eight months, long after the expiration of the one-year statutory time period, since the delivery of the amended award to GEICO. (CPLR §7510).

As GEICO proffers neither a reasonable excuse for its nonappearance in this proceeding prior to the filing of the instant motion, nor a meritorious defense to the petition, the motion to vacate the default judgment must be denied.

IV.CONCLUSION

For the foregoing reasons, respondent’s motion to vacate the default judgment of this court dated July 20, 2007 is denied.

The foregoing constitutes the decision and order of this court.

ENTER:

______________________

Marcy L. Kahn, J.S.C.

Dated:New York, New York

September 29, 2008

Footnotes

Footnote 1:In addition to the NYCTA bus, GEICO insured a third-party vehicle involved in the accident.

Footnote 2:See Chubb I, section III, at 4-8.

Footnote 3: CPLR §317 is not applicable here, since the agent for

service of process was personally served.

Footnote 4:Insurance Law §1212(b) provides:

Service of process upon any such insurer in any proceeding in any court of competent jurisdiction may be made by serving the superintendent, or any salaried employee of the department whom the superintendent designates for such purpose, all of whom shall have authority to accept such service pursuant to any such power of attorney.

Footnote 5:The instant situation is complicated by the fact thatGEICO is the no-fault insurer of both the workers’compensation vehicle and one of the third-parties’ vehicles.

[*1]

Supreme Court, New York County, September 17, 2008

APPEARANCES OF COUNSEL

William H. Saltzman, New York City, for petitioner. Law Office of Eric N. Wolpin, New York City (Helen Cohen of counsel), for respondent.

{**21 Misc 3d at 792} OPINION OF THE COURT

Paul G. Feinman, J.

In this CPLR article 75 proceeding, petitioner seeks to vacate an arbitration award, and respondent cross-petitions to confirm the arbitration award. For the reasons which follow, the petition is denied, and the cross petition is granted.

Petitioner is a health care provider that treated its assignor, Ricky Barry, for injuries received in an automobile accident on July 8, 2003. Respondent insured Barry and was obligated under the policy to provide him with first-party benefits, in accordance with New York’s No-Fault Law (Insurance Law art 51). Petitioner sought reimbursement from respondent which first denied it on November 12, 2003, and again for different charges on December 2, 2003 (petitioner’s exhibit 3). Petitioner filed for arbitration pursuant to the Insurance Law and enabling regulations on August 8, 2006.

By arbitration decision of November 2, 2006, petitioner was awarded the sum of $2,376.76 plus interest from August 8, 2006, pursuant to Insurance Department Regulations (11 NYCRR) § 65-3.9 (c) (petitioner’s exhibit 1, arbitration award at 4).

Petitioner appealed the portion of the award concerning interest to a master arbitrator, arguing then, as now, that section 65-3.9 (c) is contrary to Insurance Law § 5106 (a). That section of the Insurance Law provides in pertinent part that payments of first-party benefits are to be made as the loss is incurred, and are “overdue” if not paid within 30 days after proof of the injury and the amount of loss sustained has been presented. By contrast, 11 NYCRR 65-3.9 (c) states, in pertinent part, that where an applicant does not request arbitration or institute a lawsuit within 30 days after receiving the form denying the claim, interest will be computed from the actual date that arbitration or a lawsuit is commenced.

By determination dated March 11, 2007, the master arbitrator affirmed the findings of the arbitrator but remanded the computation of interest (petitioner’s exhibit 2 at 2). On remand the arbitrator analyzed the regulation and relevant case law and determined that the regulation is “lawful rule-making” and not contrary to Insurance Law § 5106 (a), and that the accrual of interest was rationally found to have commenced with the filing by petitioner for arbitration on August 8, 2006, rather than the November 2003 date when petitioner received respondent’s first denial of payment (petitioner’s exhibit 4, arbitrator’s award{**21 Misc 3d at 793} on remand at 3-6). The arbitrator also awarded attorney’s fees to petitioner in accordance with Insurance Department Regulations § 65-4.6 (b) and (e) (petitioner’s exhibit 4, arbitrator’s award on remand at 7). Petitioner appealed this determination to a master arbitrator. The master arbitrator affirmed the award in its entirety on December 24, 2007 (petitioner’s exhibit 5 at 12, 4).

The petition seeks judicial review and vacatur of the master arbitrator’s award on the ground that the provision of section 65-3.9 (c), abating the accrual of interest until the commencement of arbitration or litigation, is contrary to Insurance Law § 5106 (a).^[FN1] It seeks a finding that its interest began accruing as of 30 days after the date of receipt by respondent of petitioner’s bills. It also seeks statutory attorney’s fees pursuant to 11 NYCRR 65-4.10 (j) (4), reasonable attorney’s fees for work undertaken for the master arbitration proceedings, pursuant to section 65-4.10 (j) (2) (i), the costs of the filing fees for the two master arbitration proceedings, and costs and disbursements, as well as the filing fee incurred in this proceeding.

Respondent cross-petitions to confirm the master arbitrator’s award and to oppose an award of attorney’s fees.

Judicial review of arbitration awards is extremely limited (Wien & Malkin LLP v Helmsley-Spear, Inc., 6 NY3d 471, 479 [2006], citing Paperworkers v Misco, Inc., 484 US 29 [1987]). CPLR 7511 (b) sets forth the four grounds, none of which are pertinent, on which a petitioner generally can seek to vacate an award. However, where as here, a party seeks vacatur based on a challenge to a state regulation, it is required to establish that the regulation ” ‘is so lacking in reason for its promulgation that it is essentially arbitrary’ ” (Ostrer v Schenck, 41 NY2d 782, 786 [1977], quoting Matter of Marburg v Cole, 286 NY 202, 212 [1941]). Petitioner challenges the validity of 11 NYCRR 65-3.9, one of the regulations promulgated under the authority of the Superintendent of Insurance, as authorized by [*2]the Legislature through Insurance Law § 301, to implement the No-Fault Law (11 NYCRR part 65).

“The cornerstone of administrative law is derived from the principle that the Legislature may declare its will, and after fixing{**21 Misc 3d at 794} a primary standard, endow administrative agencies with the power to fill in the interstices in the legislative product by prescribing rules and regulations consistent with the enabling legislation” (Matter of Nicholas v Kahn, 47 NY2d 24, 31 [1979]). When interpreting a statute, it is fundamental that the court will attempt to effectuate the legislative intent, and where the statutory language is clear and unambiguous, it should be construed so that the plain meaning of the words is effectuated (Patrolmen’s Benevolent Assn. of City of N.Y. v City of New York, 41 NY2d 205, 208 [1976]). The starting point is the language itself (Matter of Rizzo v New York State Div. of Hous. & Community Renewal, 6 NY3d 104, 112 [2005]). Here, the particular no-fault statute at issue states in relevant part,

“Payments of first party benefits and additional first party benefits shall be made as the loss is incurred. Such benefits are overdue if not paid within thirty days after the claimant supplies proof of the fact and amount of loss sustained. . . . All overdue payments shall bear interest at the rate of two percent per month.” (Insurance Law § 5106 [a] [emphasis added].)

The regulation challenged by petitioner states, in pertinent part,

“(a) All overdue mandatory and additional personal injury protection benefits due an applicant or assignee shall bear interest at a rate of two percent per month, . . .

“(c) If an applicant does not request arbitration or institute a lawsuit within 30 days after the receipt of a denial of claim form or payment of benefits calculated pursuant to Insurance Department regulations, interest shall not accumulate on the disputed claim or element of claim until such action is taken. . . .

“(d) If an applicant has submitted a dispute to arbitration or the courts, interest shall accumulate, unless the applicant unreasonably delays the arbitration or court proceeding.” (11 NYCRR 65-3.9 [emphases added].)

Petitioner points to the two clauses in Insurance Law § 5106 (a) stating that benefits are “overdue” if not paid within 30 days after proof of the injury and loss is supplied, and that “overdue” payments bear interest at the rate of 2% per month, and argues that the statutory language does not include any{**21 Misc 3d at 795} abeyance for either the payment of a loss where an insurer wrongly denies a claimant’s claim or in the accrual of interest. Petitioner thus argues that 11 NYCRR 65-3.9 (c), which provides for possible abeyance in the accrual of interest until the applicant seeks arbitration or files a lawsuit to contest the failure to pay, is in derogation of the statute’s clear language.

It is recognized that the superintendent has a “special competence and expertise with respect to the insurance industry” (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 864 [2003] [internal quotation marks omitted]), and has accordingly been vested “with broad power to interpret, clarify, and implement the legislative policy” (Ostrer v Schenck, 41 [*3]NY2d at 785, quoting Breen v Cunard Lines S. S. Co., 33 NY2d 508, 511 [1974]), although the regulations must be consistent with statutory provisions (Ostrer v Schenck at 785-786). A rule or regulation properly crafted within the scope of the superintendent’s authority has the force of law and “represents the policy choice of this State” (State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, 321 [2005]).

The interpretation of a statute by the agency charged with its enforcement will generally be given “great weight and judicial deference, so long as the interpretation is neither irrational, unreasonable nor inconsistent with the governing statute.” (Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 62 NY2d 539, 545 [1984] [citation omitted].) A regulation will not be found valid “if it contravenes the will of the Legislature, as expressed in the statute” (State Div. of Human Rights v Genesee Hosp., 50 NY2d 113, 118 [1980]). The court will scrutinize the regulation or rule for “genuine reasonableness and rationality in the specific context” (Kuppersmith v Dowling, 93 NY2d 90, 96 [1999]; Nunez v Giuliani, 91 NY2d 935, 938 [1998]). A regulation will be upheld if it has a rational basis and is not unreasonable, arbitrary, capricious, or contrary to the statute under which it was promulgated (Kuppersmith v Dowling, 93 NY2d 90, 96 [1999]).

New York’s No-Fault Law is designed in part to ensure that accident victims receive “prompt compensation for losses” (Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d 556, 562 [2008]). However, as fully discussed in Matter of Medical Socy. of State of N.Y. v Serio (100 NY2d at 861-863) over the years of implementation of the No-Fault Law, the superintendent has had to focus on no-fault fraud and abuse, and the regulations have been revised in an attempt to close windows of{**21 Misc 3d at 796} opportunity for the parties to take advantage of each other’s positions, and as well to better effectuate the legislative intent of providing prompt compensation “as the loss is incurred” pursuant to Insurance Law § 5106 (a).^[FN2] In upholding the revisions to the regulations, the Court in Medical Socy. noted that the new circumscribed time frames prescribed for filing notices and proofs of claims were based on the determination of the superintendent that much of the abuse was associated with the lengthy time frames within which claims could be presented to insurers (100 NY2d at 862). For example, it is now required that the accident victim file a notice of claim with the insurer no later than 30 days after an accident (11 NYCRR 65-1.1). Proof of loss due to medical treatment must be provided within 45 days and proof of work loss must be provided from as soon as reasonably practicable up to 90 days (§§ 65-1.1, 65-2.4 [c]). After an insurer has received proper verification establishing proof of claim, it has 30 days to pay or deny the claim, unless further verification is sought (§ 65-3.8 [c]). Furthermore, the courts have held that even though the common law did not preclude defenses and neither the Insurance Law nor the regulations provided for preclusion, [*4]an insurer will be precluded from asserting any defenses when it does not pay or deny a claim within the 30-day period (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 281-282 [1997], rearg denied 90 NY2d 937 [1997]), except when the defense is lack of coverage (Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 318 [2007]).

Employing the methodology used in Medical Socy., and examining both the statute and the regulation at issue, the court finds petitioner’s arguments concerning the illegality of the regulation to be unpersuasive when analyzed within the entire framework of the No-Fault Law and the implementing{**21 Misc 3d at 797} regulations, all of which seek fairness and promptness in the resolution of auto accident injury claims. Petitioner argues that where a claim has been timely denied but is ultimately found meritorious by an arbitrator or court, the payment will be “overdue” and interest should accrue from the time of the denial. It argues, in essence, that it should be understood that the Insurance Law includes an additional penalty to be assessed against an insurer that denies a claim and is later found to have improperly done so. Notably, Insurance Law § 5106 (a) only addresses payments by insurers, including overdue payments, and includes a provision for an interest penalty where payments are overdue. However, an insurer is also allowed to timely deny a request for reimbursement (see Presbyterian Hosp., 90 NY2d 274 [1997]), and 11 NYCRR 65-3.9 (c), was enacted to address those instances. The regulation provides that where the insurer timely denies, then the applicant is to seek redress within 30 days, after which interest will accrue. As noted in East Acupuncture, P.C. v Allstate Ins. Co., “[t]he interest provision, presently at 24% per annum, is punitive in nature . . . and designed to inflict an economic sanction or penalty on those insurers who do not comply” with the No-Fault time frames (15 Misc 3d 104, 108 [App Term, 2d Dept 2007] [citations and internal quotation marks omitted]).^[FN3]

The regulation contains, in addition to an economic sanction against recalcitrant insurers, a built-in protection against potential delay by providing that where an applicant chooses not to timely press forward to seek redress for a denial, there will be no interest penalty assessed against the insurer until such time as the applicant chooses a remedy. This is in keeping with the intent of the No-Fault Law as a whole because it seeks to encourage the parties moving forward toward a quick resolution, while not economically favoring one side or the other.

The Court of Appeals has implicitly upheld the regulation in its decision, Presbyterian Hosp. (90 NY2d at 278 [“(p)ursuant to both the Insurance Law and the regulations promulgated by the Superintendent of Insurance, an insurer is required to either pay or deny a claim for no-fault automobile insurance benefits within 30 days from the date an applicant supplies proof of claim (see, Insurance Law § 5106 [a]; Insurance Regulation 65.15 [g] [3]). Failure to pay benefits within the 30-day requirement{**21 Misc 3d at 798} renders benefits ‘overdue’ “]). Therefore, it cannot be found that the Legislature intended that insurers be penalized for timely denying a claim, even where such denial is later found improper.

The agency’s interpretation of one of its promulgated regulations “is entitled to deference” (Matter of 427 W. 51st St. Owners Corp. v Division of Hous. & Community Renewal, 3 NY3d 337, 342 [2004] [internal quotation marks omitted]). Here, the agency’s promulgation of the regulation is rationally based and is consistent with the no-fault statute and the other enabling regulations. The petition to vacate the master arbitrator’s award which affirmed the previous arbitrators’ awards is therefore denied, except to the extent that the issue of attorney’s fees as fixed by the court pursuant to 11 NYCRR 65-4.10 (j) (4) is severed and referred to a special referee to hear and determine.

The cross motion to confirm the arbitration award is accordingly granted.

Footnotes

Footnote 1: Petitioner notified the Office of the Attorney General of the State of New York of its challenge to the statute by letter dated March 3, 2008, and the Attorney General’s Office has advised that it will not intervene in the instant matter (cross petition exhibit E, letter of Mar. 20, 2008, Office of Attorney General to Goodman).

Footnote 2:

“[T]he Superintendent appears to be well aware of the interplay of no-fault deadlines and fraud. A few years ago he reduced the regulatory time frames for automobile accident victims or their assignees to claim and prove entitlement to no-fault benefits—a measure applauded by insurers—in part because ‘the most common example of . . . fraud . . . consisted of exploiting the time lag between the alleged loss and the deadline for submitting proof of the loss, coupled with the reality that insurers are given only 30 days to review and investigate claims before paying them without risk of penalties for denying or delaying a claim.’ ” (Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d at 565 n 2, quoting Medical Socy., 100 NY2d at 861.)

Footnote 3: The punitive nature of the interest penalty is seen also in subdivision (b) of 11 NYCRR 65-3.9, which provides that an insurer may not “suggest or require, as a condition to settlement” that the interest be waived.

[*1]

Supreme Court, Appellate Term, Second Department, September 10, 2008

APPEARANCES OF COUNSEL

Law Office of Alden Banniettis, Brooklyn (Jeff Henle of counsel), for appellant. Law Office of Karen C. Dodson, Melville (Janine Gentile of counsel), for respondent.

{**21 Misc 3d at 472} OPINION OF THE COURT

Memorandum.

Order affirmed without costs.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved, pursuant to CCA 1201, for leave to serve a subpoena on defendant outside the City of New York compelling the production of an employee of defendant to testify at the trial. The lower court found that plaintiff did not offer a valid reason to allow service of a subpoena outside the jurisdiction. Plaintiff appeals from the order denying its motion.

In an action pending in the Civil Court of the City of New York, a subpoena may not be served outside the City of New York and the adjoining counties unless the Civil Court, upon a motion establishing to the satisfaction of the court that the interests of justice would be served thereby, permits service of such a subpoena (see CCA 1201). Inasmuch as plaintiff’s moving papers failed to establish that the interests of justice would be served by permitting plaintiff to serve, outside the City of New York and the adjoining counties, a subpoena which would require defendant’s employee to appear at trial, and, in addition, did not set forth the location at which plaintiff sought to serve the subpoena, plaintiff’s motion was properly denied.

To the extent that plaintiff argues that defendant’s response to its notice to admit was improper, the court below properly noted that plaintiff’s remedy lies in the procedure set forth in CPLR 3123 (c).

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

[*1]

Supreme Court, Appellate Term, Second Department, September 10, 2008

APPEARANCES OF COUNSEL

Law Office of Alden Banniettis, Brooklyn (Benjamin Sharav of counsel), for appellant.

{**21 Misc 3d at 50} 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 cross-moved for summary judgment dismissing the complaint, asserting, inter alia, that plaintiff failed to establish its prima facie entitlement to summary judgment and that the complaint should be dismissed because the assignor failed to appear at scheduled examinations under oath (EUOs). By order entered August 10, 2007, the court below denied plaintiff’s motion and granted defendant’s cross motion, finding that plaintiff did not comply with defendant’s verification requests. As limited by its brief, plaintiff appeals from so much of the order as granted defendant’s cross motion for summary judgment dismissing the complaint. Plaintiff contends, inter alia, that defendant did not comply with the EUO scheduling regulations since the initial EUO was not scheduled within 30 days of defendant’s receipt of plaintiff’s claim.

It is uncontroverted that the accident occurred on April 3, 2005, and defendant issued a denial form, dated September 7, 2005, which stated, inter alia, that defendant received the claim on May 18, 2005, and that it was being denied because the assignor failed to attend scheduled EUOs.

In 1974, Department of Insurance Regulation 68 (11 NYCRR part 65), implementing New York’s No-Fault Law, was first promulgated. Effective April 5, 2002, Regulation 68 was revised, and the pertinent part of the revised Regulation 68-C (Insurance Department Regulations [11 NYCRR] § 65-3.5 [d]) stated that if “the additional verification required by the insurer is an examination under oath or a medical examination, the insurer shall schedule the examination to be held within 30 calendar days from the date of receipt of the prescribed verification forms” (emphasis added). However, on April 11, 2002, the Insurance Department promulgated an emergency first amendment to the revised Regulation 68, effective April 5, 2003, which deleted the phrase “an examination under oath or” from Regulation 68-C{**21 Misc 3d at 51} (Insurance Department Regulations [11 NYCRR] § 65-3.5 [d]). Although there were subsequent amendments to Regulation 68-C in 2004 and 2007, the deleted language was never reinstated. The Insurance Department’s decision to delete the foregoing phrase and its subsequent decision not to reinstate such deleted language is a clear indication that such phrase’s “exclusion was intended” (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 285 [1997]; cf. S & M Supply v State Farm Mut. Auto. Ins. Co., 4 Misc 3d 130[A], 2004 NY Slip Op 50693[U] [App Term, 9th & 10th Jud Dists 2004] [decided under the April 5, 2002 regulation]; contra All-Boro Med. Supplies, Inc. v Progressive Northeastern Ins. Co., 20 Misc 3d 554 [Civ Ct, Kings County 2008]; All-Boro Med. Supplies, Inc. v Progressive Northeastern Ins. Co., 17 Misc 3d 950 [Civ Ct, Kings County 2007]).

Notwithstanding the foregoing, insurers may not employ red tape dilatory practices and schedule EUOs in an unreasonable manner. The Insurance Department Regulations require that verification proceed “as expeditiously as possible” (Insurance Department Regulations [11 NYCRR] § 65-3.2 [c]; see also State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005]; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d at 285; Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 35 AD3d 720, 722 [2006]).

A review of the record indicates that defendant demonstrated that the insurance policy in effect when the EUOs were sought contained an endorsement authorizing such verification (cf. Capio Med., P.C. v Progressive Cas. Ins. Co., 7 Misc 3d 129[A], 2005 NY Slip Op 50526[U] [App Term, 2d & 11th Jud Dists 2005]; Star Med. Servs. P.C. v Eagle Ins. Co., 6 Misc 3d 56 [App Term, 2d & 11th Jud Dists 2004]). Defendant established that the EUO scheduling letters were timely mailed, on May 25, 2005 and July 5, 2005 (see Insurance Department Regulations [11 NYCRR] § 65-3.5 [b]; § 65-3.6 [b]), by setting forth the standard office practices or procedures used to ensure that such 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 date selected for the initial EUO, June 27, 2005, was not unreasonable, and defendant established that the assignor failed to appear at the scheduled EUOs (see Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 35 AD3d at 722). Plaintiff’s remaining{**21 Misc 3d at 52} contentions are either improperly raised for the first time on appeal or lack merit.

Accordingly, the court below properly granted defendant summary judgment dismissing the action as premature inasmuch as plaintiff’s claims were not overdue (see Central Suffolk Hosp. v New York Cent. Mut. Fire Ins. Co., 24 AD3d 492 [2005]).

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