[*1]

Supreme Court, Appellate Term, Second Department, June 7, 2006

APPEARANCES OF COUNSEL

McDonnell & Adels, P.C., Garden City (Todd M. Hellman of counsel), for appellant. Gary Tsirelman, P.C., Brooklyn (Darya Klein of counsel), for respondent.

{**12 Misc 3d at 91} OPINION OF THE COURT

Memorandum.

Order reversed without costs, plaintiff’s motion for summary judgment denied and defendant’s cross motion to dismiss the complaint or, in the alternative, compel responses to its discovery demands granted to the extent of directing that plaintiff shall respond to those discovery demands which seek information regarding whether plaintiff was fraudulently incorporated, within 30 days of the date of the order entered hereon, or within such other reasonable period as the parties stipulate to in writing.

In this action to recover $1,400 in first-party no-fault benefits for health care services rendered to its assignor, plaintiff established a prima facie entitlement to summary judgment by proof that it submitted claims, setting forth the fact and the amounts of the losses 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]; Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U] [App Term, 2d & 11th Jud Dists 2003]). Contrary to defendant’s contention, plaintiff’s affidavit was sufficient to establish that it mailed the claims to defendant, and its remaining contentions have no merit. The burden then shifted to defendant to show a [*2]triable issue of fact (see Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]).

In February 2003 defendant conducted a preclaim independent medical examination of plaintiff’s assignor after which defendant’s examiner determined that the assignor needed no more acupuncture as of that date. Defendant subsequently denied each claim, by denials dated March, April and May 2003, based on a February report finding the lack of medical necessity. Defendant annexed an unsworn copy of said report to its opposition papers which is in inadmissible form and is, therefore, insufficient to warrant denial of plaintiff’s motion for summary judgment (see A.B. Med. Servs. PLLC v Electric Ins. Co., 7 Misc{**12 Misc 3d at 92} 3d 130[A], 2005 NY Slip Op 50542[U] [App Term, 2d & 11th Jud Dists 2005]). Moreover, defendant’s June 2003 general denial of claim form is fatally defective since numerous portions thereof are blank/incomplete (see e.g. Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564 [2005]). Accordingly, defendant is precluded from raising most defenses (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282 [1997]). Nevertheless, the defense that plaintiff, a provider of health care services, is not eligible for reimbursement of no-fault benefits (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005]) is not subject to preclusion (see A.B. Med. Servs. PLLC v Prudential Prop. & Cas. Ins. Co., 11 Misc 3d 137[A], 2006 NY Slip Op 50504[U] [App Term, 2d & 11th Jud Dists 2006]). Moreover, summary judgment should be denied where the opposition papers set forth that facts essential to justify opposition may exist but cannot then be stated (see CPLR 3212 [f]).

In Mallela (4 NY3d 313 [2005], supra), the Court of Appeals found that insurers may withhold payment of first-party no-fault benefits provided by fraudulently licensed medical service corporations to which patients have assigned their claims. Consequently, we find that discovery requests seeking corporate information to determine whether the owners of a medical service corporation are improperly licensed are germane to the question of whether said corporation is eligible for reimbursement. Pursuant to 11 NYCRR 65-3.16 (a) (12),

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

The Education Law provides that only persons licensed or certified can practice acupuncture in the State of New York (see Education Law § 8212). The Business Corporation Law provides that each shareholder, director or officer of the corporation must be licensed to practice the profession for which the corporation was organized (see Business Corporation Law § 1503 [b]; § 1507).

We find that defendant’s papers establish that so much of defendant’s discovery requests as seek information regarding{**12 Misc 3d at 93} whether plaintiff was fraudulently incorporated are material and necessary (see CPLR 3101) and, thus, said papers set forth that facts essential to justify opposition may exist but cannot now be stated. Consequently, plaintiff’s motion for summary judgment is premature pending the completion of discovery (see CPLR 3212 [f]). It is noted that plaintiff did not oppose the cross motion in the court below. Accordingly, plaintiff’s motion for summary judgment is denied and defendant’s cross motion is granted to the extent of compelling plaintiff to respond to defendant’s discovery demands which seek information regarding the ownership, control and licensing of plaintiff corporation, within 30 days of the date of the order entered hereon. [*3]

Golia, J.P. (concurring with the result only): While I agree with the ultimate disposition in the decision reached by the majority, I wish to emphasize that I am constrained to agree with certain propositions of law set forth in cases cited therein which are inconsistent with my prior expressed positions and generally contrary to my views.

Rios and Belen, JJ., concur; Golia, J.P., concurs in a separate memorandum.

[*1]

Supreme Court, Appellate Term, Second Department, May 17, 2006

APPEARANCES OF COUNSEL

Amos Weinberg, Great Neck, for appellants. Jaffe & Nohavicka, New York City, and Thomas Torto and Kathleen C. Waterman, New York City, for respondent.

{**12 Misc 3d at 53} OPINION OF THE COURT

Memorandum.

Order reversed without costs, plaintiffs’ motion for summary judgment granted as to plaintiff SZ Medical P.C.’s claims for $182.37 and $532.42, plaintiff JH Chiropractic P.C.’s claims for $168.50 and $256.94, and New Wave Oriental Acupuncture P.C.’s claim for $660.56 and its two claims for $700, and matter remanded to the court below for a calculation of statutory interest and an assessment of attorney’s fees.

In this action to recover first-party no-fault benefits for medical treatment provided to their assignor, plaintiffs SZ Medical P.C., JH Chiropractic P.C., and New Wave Oriental Acupuncture P.C. established their prima facie entitlement to summary judgment by proof that they submitted claims, setting forth the fact and amounts of the losses 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]). The burden then shifted to defendant to establish triable issues of material fact (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]).

We note at the outset that in its claim denial form, defendant considered SZ Medical P.C.’s claim for $473.20 as a claim for $532.42, the correct total of the charges for the various treatments set forth in the claim form, and we so modify the amount sought (A.B. Med. Servs. PLLC v Allstate Ins. Co., 8 Misc 3d 137[A], 2005 NY Slip Op 51270[U] [App Term, 2d &{**12 Misc 3d at 54} 11th Jud Dists 2005]). As [*2]to JH Chiropractic P.C.’s claim for $256.94, defendant proved no denial, nor did it assert any ground to excuse its failure to pay or deny the claim within the statutory time (Insurance Law § 5106 [a]), and JH Chiropractic P.C. is therefore entitled to summary judgment thereon. Although defendant proved timely denials of plaintiffs’ remaining claims, insofar as they were based on the defense of lack of medical necessity of the services rendered, they were factually insufficient, conclusory and vague, and thus without merit as a matter of law (Amaze Med. Supply v Allstate Ins. Co., 3 Misc 3d 43, 44 [App Term, 2d & 11th Jud Dists 2004]; see also Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564, 565 [2005]). Defendant denied SZ Medical P.C.’s claim for $532.42 following a “medical review” which determined that the provider had failed to prove the treatment’s medical necessity. The denial form also stated that, on the basis of an independent medical examination (IME), the eligible injured person required no further treatment. Defendant denied JH Chiropractic P.C.’s claim for $168.50 and both of New Wave Oriental Acupuncture P.C.’s claims for $700 as lacking medical necessity, also on the basis of a “medical review” (or “medical audit”). No IME report was attached to the claim denial forms nor did said forms include sufficient factual assertions derived from the report or a medical rationale based thereon to establish the defense of lack of medical necessity in the absence of the report (e.g. Ocean Diagnostic Imaging P.C. v Lumbermens Mut. Cas. Co., 7 Misc 3d 135[A], 2005 NY Slip Op 50743[U] [App Term, 2d & 11th Jud Dists 2005]).

Although plaintiffs, in their moving papers, attached a copy of an unsworn nurse’s peer review report to copies of certain of defendant’s claim denial forms, said report did not assert sufficient facts and a medical rationale based thereon to establish a lack of medical necessity (Chi-Ti Acupuncture, P.C. v Hartford Acc. & Indem. Co., 10 Misc 3d 146[A], 2006 NY Slip Op 50148[U] [App Term, 2d & 11th Jud Dists 2006]). We note, in any event, that a nurse’s unsworn peer review report is inadmissible and therefore of no probative value (Dombrowski v Moore, 299 AD2d 949, 951 [2002]), and defendant offered no excuse for its failure to submit the report in admissible form (Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065, 1068 [1979]). Moreover, a nurse is a mere lay informant for purposes of medical diagnosis and treatment, and is not competent to render medical opinions (Dombrowski v Moore, 299 AD2d at 951){**12 Misc 3d at 55} absent an accounting of his or her training, observations or experience sufficient to establish such competence (Medwide Med. Supply Inc. v Country-Wide Ins. Co., 8 Misc 3d 131[A], 2005 NY Slip Op 51078[U] [App Term, 2d & 11th Jud Dists 2005]; Jamil M. Abraham M.D. P.C. v Country-Wide Ins. Co., 3 Misc 3d 130[A], 2004 NY Slip Op 50388[U] [App Term, 2d & 11th Jud Dists 2004]; see People v Morehouse, 5 AD3d 925, 928 [2004]; People v Munroe, 307 AD2d 588, 591 [2003]).

Defendant’s denial of JH Chiropractic P.C.’s claim for $168.50 as untimely is without merit. Defendant acknowledged receipt of the claim on the 45th day from the date the first treatment listed therein was rendered thereby necessarily conceding that it was timely submitted, i.e., mailed (see 11 NYCRR 65-1.1 [claims must be submitted within “45 days after the date (the) services (were) rendered”]; NY State Ins Dept Informal Op No. 03-06-30 [June 30, 2003] [“the 45 day period for mailing of a written proof of claim . . . begins the day after the services are rendered”]). With respect to SZ Medical P.C.’s claim for $182.37, and New Wave Oriental Acupuncture P.C.’s claim for $660.56, plaintiffs do not dispute that they failed to submit their claims in the requisite time. However, 11 NYCRR 65-1.1 provides that: “The . . . time limitations for the submission of proof of claim shall apply unless the eligible injured person [or that person’s representative] submits written proof providing [*3]clear and reasonable justification for the failure to comply with such time limitation.” Further, 11 NYCRR 65-3.3 (e) provides:

“When an insurer denies a claim based upon the failure to provide timely written notice of claim or timely submission of proof of claim by the applicant, such denial must advise the applicant that late notice will be excused where the applicant can provide reasonable justification of the failure to give timely notice.” (Emphasis added.)

Defendant points to no portion of its claim denial forms which contain the required advisement, nor does it allege that it communicated said advice in any other manner. Accordingly, defendant waived reliance on the 45-day rule as a basis to deny the claims and plaintiffs should be awarded summary judgment on these claims as well.

Finally, defendant’s challenge to the absence of an authentication of assignor’s signatures on the assignment of benefits forms is also without merit. We have held that the failure to authenticate{**12 Misc 3d at 56} an assignor’s signature cannot be considered an assignment defect “in the absence of any statutory or regulatory requirement for the same” (Amaze Med. Supply Inc. v Lumbermens Mut. Cas. Co., 6 Misc 3d 131[A], 2005 NY Slip Op 50084[U], *2 [App Term, 2d & 11th Jud Dists 2005]). Even if such absence rendered the assignment defective, defendant’s failure to seek verification of the assignment, within 10 days of the claims’ receipt and to allege such deficiency in its claim denial forms, constituted a waiver of any defense with respect thereto (e.g. A.B. Med. Servs. PLLC v Liberty Mut. Ins. Co., 10 Misc 3d 128[A], 2005 NY Slip Op 51902[U] [App Term, 2d & 11th Jud Dists 2005]).

In view of the foregoing, plaintiffs’ motion for summary judgment is granted and the matter is remanded to the court below for the calculation of statutory interest and an assessment of attorney’s fees pursuant to Insurance Law § 5106 (a) and the regulations promulgated thereunder.

Golia, J.P. (concurring with the result only): I am constrained to agree with the ultimate disposition in the decision reached by the majority. I, however, wish to note that I do not agree with certain propositions of law set forth in cases cited therein which are inconsistent with my prior expressed positions and generally contrary to my views.

Rios and Belen, JJ., concur; Golia, J.P., concurs in a separate memorandum.

[*1]

Supreme Court, New York County, April 17, 2006

APPEARANCES OF COUNSEL

Robinson & Cole LLP, New York City (Joseph L. Clasen and Richard J. Guida of counsel), for plaintiff. Krause & Mauser, LLP, New York City (Robert Washuta of counsel), for Kuok Hang Leong, defendant.

OPINION OF THE COURT

Rolando T. Acosta, J.

Introduction

Kuok Hang Leong was struck by a car insured by American Transit Insurance Company, and the insureds neither informed American Transit of the accident nor of Leong’s lawsuit instituted several months later. Leong, however, immediately notified American Transit about the accident,^[FN1] and his attorney informed American Transit that it had been retained to pursue any legal claims. Leong also sought no-fault benefits from American Transit. In response, American Transit assigned a claims adjuster, investigated the claim, and asked Leong to submit to an independent medical exam (IME) on three separate occasions. Notwithstanding the fact that counsel served American Transit with its default judgment motion against the insureds and American could have prevented the default, American Transit instead commenced the instant action and moved for a judgment declaring that it did not have to defend or indemnify the insureds or the victim. According to American Transit, it could disclaim coverage because neither the insureds nor the victim provided timely notice of litigation, and that a showing of prejudice was not required before it could disclaim on this basis. Leong cross-moved to dismiss American Transit’s complaint, arguing that American Transit’s motion was premature and that in any event he had given it timely notice.

The court is thus required to consider the primary issue in these motions for summary judgment, namely, whether the “no-prejudice” rule applies in the facts of this case, and even if it does, whether that requirement was satisfied by counsel’s letter informing American Transit that it had been retained to pursue any potential claims. Given the circumstances of this case, the court finds in favor of the victim. American Transit had timely knowledge of the accident and was well aware of Leong’s counsel’s involvement in the matter. The court will not permit American Transit to manipulate its own notice requirements to deny coverage to a victim.

Background

Plaintiff American Transit issued a car insurance policy on behalf of defendant B.O. Astra Management Corp. with a policy period from March 1, 2004 to March 1, 2005. Although B.O. Astra owned the vehicle, the vehicle was registered to defendant Manuel Lema. On March 19, 2004, defendant Leong was struck by the vehicle driven by defendant Mario Chauca in Queens County. [*2]

Twelve days after the accident, on March 31, 2004, Leong’s counsel provided American Transit with written notice of Leong’s accident and claim. The written notice stated, inter alia, “[p]lease be advised that your insured was involved in a car accident. This letter is to inform you that we have been retained by [Leong] in this matter, and to further inform you of potential claims against your insured.” On that same date, by separate letter, Leong’s counsel sent American Transit a letter and an application for no-fault benefits.

Approximately one month after the accident, on April 22, 2004, American Transit acknowledged in writing that it had received Leong’s correspondence, that it was investigating the claim and that it would contact counsel’s office upon completion of the investigation, that a file had been established, provided the name of the claims adjuster, and requested additional information regarding Leong’s liability theory and injuries.

Since American Transit was also the no-fault carrier on Leong’s first-party benefits claim for, among other expenses, medical bills, it requested that Leong see an orthopedic surgeon for examination five weeks after the accident. The initial request for an IME was followed up with three additional requests.

Four months after the accident, on July 7, 2004, Leong initiated a lawsuit against B.O. Astra, Lema and Chauca in Supreme Court, Queens County (the underlying action). Neither B.O. Astra, Lema nor Chauca informed American Transit of the underlying action. According to American Transit, it did not learn of the underlying action until January 27, 2005, when it received a copy of Leong’s motion for a default judgment against B.O. Astra, Lema and Chauca. On February 4, 2005, American sent notification to all defendants that it was disclaiming coverage for failure to provide timely notice of the commencement of the underlying action. Three and a half months later, on May 20, 2005, American Transit commenced this action seeking a declaration that it does not have a duty to defend or indemnify the defendants. Only Leong answered American Transit’s complaint raising several affirmative defenses, including failure to state a cause of action.

American Transit’s claim is based on language in the policy, which allegedly states that “[i]f any suit is brought against the insured . . . the insured shall immediately forward to the company every summons or other process served upon him . . .  .” A copy of the policy containing this language, however, was not attached to American Transit’s motion papers.

On June 7, 2005, Leong obtained a default judgment against B.O. Astra, Lema and Chauca on the underlying action and an inquest was held on November 22, 2005.

Motions for Summary Judgment

Plaintiff’s motion for summary judgment is denied inasmuch as Leong has not had the opportunity to engage in discovery. (CPLR 3212 [f].) As Leong argued in his moving papers, “American Transit should have to produce its claim file in this matter, its insurance policy setting forth the obligations, rights and duties of American Transit and all documents regarding its investigation into the claim.” (Affirmation in support of cross motion ¶ 22; Baron v Incorporated Vil. of Freeport, 143 AD2d 792, 792-793 [2d Dept 1988] [“(i)t is well established that where facts essential to justify opposition to a motion for summary judgment are exclusively within the knowledge and control of the movant, summary judgment may be denied”].) Since B.O. Astra and Lema defaulted in the underlying action, there is no reason to believe that Leong would have any information about the policy in its possession. Indeed, as noted above, plaintiff did not even attach a copy of the policy to its moving papers in the instant case.

Plaintiff’s motion for summary judgment is also denied because even if it had attached the insurance policy and thereby established the notice of lawsuit requirement, the court finds that under the circumstances of this case, that requirement was satisfied. Therefore, Leong’s cross motion for summary judgment dismissing the complaint against him is granted.

Notice Requirements

An insurer may demand that in addition to receiving timely notice of the accident, that it also receive timely notice of claimant’s commencement of litigation. (American Tr. Ins. Co. v Sartor, 3 NY3d 71 [2004].) “The purpose of such notice is to provide the insurer with a fair and [*3]reasonable opportunity to appear and defend against a claim or exercise its right to settle the matter.” (Id. at 75.) The failure to satisfy this condition precedent “may allow an insurer to disclaim its duty to provide coverage.” (Id. at 76 [emphasis added].)

Unlike failure to give timely notice of claim, which relieves the insurer of its obligation to perform whether or not it can show prejudice (the no-prejudice exception),^[FN2] the notice of law suit requirement is not always governed by the “no-prejudice” rule. (See, e.g., Matter of Brandon [Nationwide Mut. Ins. Co.], 97 NY2d 491, 496-497 [2002] [the insurance policy in this case dealt with Supplementary Uninsured Motorist (SUM) coverage].) As the Court of Appeals noted in Matter of Brandon, the limited “no-prejudice” exception was created in Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp. (31 NY2d 436 [1972]), to allow the insurer to protect itself from fraud by investigating claims soon after the underlying events, to set reserves, and to take an early and active role in settlement discussions. “While immediate notice of legal action may indeed help SUM insurers to protect themselves against fraud, set reserves and monitor and perhaps settle the tort action,” the Court of Appeals held that “the notice of claim requirement served this purpose.” (Matter of Brandon, 97 NY2d at 497.) Likewise, in Rekemeyer v State Farm Mut. Auto. Ins. Co. (4 NY3d 468, 476 [2005]), the Court of Appeals held that where an insured previously gives timely notice of the accident, the carrier must establish that it is prejudiced by a late notice of SUM claim before it may disclaim coverage. Significantly, in Rekemeyer, the Court of Appeals noted that in addition to giving timely notice of the accident, the plaintiff made a claim for no-fault benefits soon thereafter.

“That notice was sufficient to promote the valid policy objective of curbing fraud or collusion. Moreover, the record indicates that State Farm undertook an investigation of the accident. It also required plaintiff to undergo medical exams [on two separate occasions]. Under these circumstances, application of a rule that contravenes general contract principles is not justified.” (Rekemeyer, 4 NY3d at 475-476.)

The issue of whether a primary insurer can rely on the “no-prejudice” exception and disclaim coverage based solely upon a late notice of litigation or whether it must show prejudice was addressed by the Court of Appeals in Argo Corp. v Greater N.Y. Mut. Ins. Co. (4 NY3d 332 [2005]). In Argo, plaintiff did not give notice of claim and gave notice of lawsuit 14 months after the injured party served the complaint upon the Secretary of State, six months after service of the default motion upon plaintiffs, until more than three months after default was entered, and until almost three months after service of the note of issue upon plaintiffs. (Id. at 338.)

“[U]nder the circumstances of this case,” the Court of Appeals held that plaintiff’s late notice was untimely as a matter of law and that the insurer need not show prejudice. (Id. at 336 [emphasis added].) The Court noted that “Brandon did not abrogate the no-prejudice rule and should not be extended to cases where the carrier received unreasonably late notice of claim.” (Id. at 339-340.) It also noted that the facts in Argo “are distinguishable from Brandon where a timely notice of claim was filed, followed by late notice of lawsuit, and distinguishable from Rekemeyer, where an insured gave timely notice of the accident, but late notice of the SUM claim.” (Id. at 340.) It is in this context that the Court of Appeals held that:

“The rationale of the no-prejudice rule is clearly applicable to a late notice of lawsuit under a liability insurance policy. A liability insurer, which has a duty to indemnify and often also to defend, requires timely notice of lawsuit in order to be able to take an active, early role in the litigation process and in any settlement discussions and to set adequate reserves. Late notice of lawsuit in the liability insurance context is so likely to be prejudicial to these concerns as to justify the application of the no-prejudice rule. Argo’s [*4]delay was unreasonable as a matter of law and thus, its failure to timely notify GNY vitiates the contract. GNY was not required to show prejudice before declining coverage for late notice of lawsuit.” (Id.)

In the present case, according to plaintiff, Leong failed to satisfy the notice of lawsuit requirement because plaintiff first learned of the underlying lawsuit on January 27, 2005, when Leong served plaintiff with a copy of his default motion. Since the lawsuit was commenced almost seven months earlier on July 7, 2004, notice of the suit was not timely. Plaintiff further argues that it is irrelevant whether it suffered any prejudice.

In this court’s opinion, even though this case does not deal with SUM insurance, the rationale of Brandon still applies. American Transit was not only given timely notice of claim (as in Brandon), but it was also informed that counsel had been retained. Moreover, American Transit stated that it would investigate the claim and provided counsel with the name of a claims adjuster. Significantly, American Transit was also the no-fault carrier on Leong’s first-party benefits claim and requested that Leong see an orthopedic surgeon for examination five weeks after the accident. The initial request for an IME was followed up with three additional requests. (See, e.g., City of New York v Continental Cas. Co., 27 AD3d 28 [1st Dept 2005] [insurer was given timely notice of occurrence, actively participated in the litigation before City was impleaded, and was served with a copy of the complaint against the city by Consolidated Edison Co. when it was originally served].) Also, unlike Argo, American Transit received notice of the lawsuit before a default judgment had been entered. Furthermore, American Transit could have prevented the default (see, e.g., Halali v Vista Envts., Inc., 8 AD3d 435, 435 [2d Dept 2004] [“(t)he non-party . . . Insurance Company” is an “interested person” under CPLR 5015]), but chose instead to allow the default judgment to be entered unopposed so that it could later avail itself of the “no-prejudice” rule.^[FN3] Accordingly, the “no-prejudice” rule does not apply in this case.

Even if the “no-prejudice” rule were to apply in the facts of this case, this court finds that counsel’s letter to American Transit informing it that counsel had been retained satisfied the notice of lawsuit requirement. That letter, which specifically stated that counsel was informing American of potential claims against it, clearly served the notice requirement’s function, as identified by the Court of Appeals in Argo. Namely, it allowed American Transit the opportunity “to be able to take an active, early role in the litigation process and in any settlement discussions and to set adequate reserves.” (Argo Corp. v Greater N.Y. Mut. Ins. Co., supra, 4 NY3d at 340.) Indeed, [*5]American Transit did just that by immediately investigating the claim, assigning a claims adjuster and asking Leong to submit to an IME. To rule otherwise would reward American Transit for manipulating its alleged ignorance of Leong’s demise in order to avoid honoring its own insurance policy obligations. Moreover, it would turn on its head the legislative policy choice which permits the victim of an accident to notify the insurer when, as here, the insured failed to do so. Accordingly, Leong’s motion for summary judgment dismissing the complaint is granted.

Plaintiff’s Motion for a Default Judgment against B.O. Astra, Lema and Chauca.

Plaintiff’s motion for a default judgment against B.O. Astra, Lema and Chauca is denied even though they failed to appear in this matter inasmuch as American Transit’s duty to indemnify in this case was preserved by Leong. That is, pursuant to Insurance Law § 3420 (a) (3), the injured party in an accident does not have to rely on the insured to provide notice and can instead provide the notice on his own. As the Court of Appeals noted in American Tr. Ins. Co. v Sartor (3 NY3d 71, 79 [2004]),

“[r]ather than being left to the mercy of an insured’s acts of compliance or noncompliance with the terms of the insurance policy, a claimant injured by a vehicle . . . can safeguard the ability to seek enforcement of a judgment against the insurer by exercising the independent notice right provided by the Legislature in Insurance Law § 3420 (a) (3).”

Here, Leong availed himself of Insurance Law § 3420 (a) (3), and gave the proper notices.

Accordingly, based on the foregoing, it hereby ordered that plaintiff’s motion for a default judgment against B.O. Astra, Lema and Chauca is denied; and it is further ordered that plaintiff’s motion for summary judgment against all the defendants is denied; and it is further ordered that defendant Leong’s motion for summary judgment dismissing the complaint against it is granted. >[Portions of opinion omitted for purposes of publication.]

>

Footnotes

Footnote 1: Insurance Law § 3420 (a) (3) permits an injured party to provide notice to the insurance company of the automobile involved in the accident.

Footnote 2: “The no-prejudice” rule is

“a limited exception to two established contract principles: ‘(1) that ordinarily one seeking to escape the obligation to perform under a contract must demonstrate a material breach or prejudice; and (2) that a contractual duty [requiring strict compliance] ordinarily will not be construed as a condition precedent absent clear language showing that the parties intended to make it a condition.’ ” (Rekemeyer v State Farm Mut. Auto. Ins. Co., 4 NY3d 468, 475 [2005], quoting Unigard Sec. Ins. Co. v North Riv. Ins. Co., 79 NY2d 576, 581 [1992].)

Footnote 3: Although on February 1, 2005, American Transit sent Leong a proposed stipulation which stated, inter alia, that it would appear on behalf of the insureds and Leong would withdraw his motion for default judgment (see affidavit of Richard Carroll, dated Oct. 18, 2005, exhibit A), Leong rejected the stipulation on the grounds that it was really “a legal agreement on various legal issues and points.” (Affirmation in further support of Leong’s cross motion, dated Oct. 24, 2005, ¶ 9.) Indeed, American Transit’s proposed stipulation stated in relevant part:

“There has been no timely notification to American Transit . . . that an action was commenced as required by the policy. The Summons and Complaint for this action have never been received by American Transit . . . , neither the plaintiff nor the insured gave timely notice that an action had been initiated.

“Since there was a breach of a policy condition American Transit . . . can disclaim coverage to the insured and the injured party for all claims arising out of this accident and would have no obligation to pay any portion of Judgment rendered against its insured or any costs associated with same.”

Leong, however, stated that he was willing to vacate the default, withdraw the inquest that had been scheduled, and accept an answer by American Transit on behalf of the insureds if they agreed to defend and indemnify their insureds under the limits of the policy. (Affirmation in further support of Leong’s cross motion ¶ 5, exhibit 1.)

[*1]

Supreme Court, Appellate Term, Second Department, April 6, 2006

APPEARANCES OF COUNSEL

Teresa M. Spina, Woodbury (Emilio A. Cacace of counsel), for appellant. Amos Weinberg, Great Neck, for respondent.

{**12 Misc 3d at 31} OPINION OF THE COURT

Memorandum.

Order modified by providing that plaintiff’s motion for summary judgment is granted to the extent of awarding plaintiff partial summary judgment in the sum of $3,971.20 and matter remanded to the court below for the calculation of statutory interest and assessment of attorney’s fees thereon and for all further proceedings on the remaining claim; as so modified, affirmed without costs.

In this action to recover first-party no-fault benefits, plaintiff A.B. Medical Services PLLC established a prima facie entitlement to partial summary judgment in the sum of $3,971.20, by proof that it submitted claims, setting forth the fact and the amounts of the losses 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]; Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U] [App Term, 2d & 11th Jud Dists 2003]). While the court below awarded plaintiff summary judgment in the sum of $4,061.96, in his affirmation in support of plaintiff’s motion, David Safir, plaintiff’s “practice and medical billing manager,” specifically requested summary judgment in the sum of $3,971.20. Plaintiff has failed to make out a prima facie entitlement to a claim for the additional sum of $90.76. [*2]

It is uncontroverted on the record that defendant timely denied A.B. Medical’s claims in the respective sums of $1,972.08 and $1,999.12. However, a timely denial alone does not avoid preclusion where said denial is factually insufficient, conclusory or vague (Amaze Med. Supply v Allstate Ins. Co., 3 Misc 3d 43 [App Term, 2d & 11th Jud Dists 2004]; see also Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564 [2005]; Nyack Hosp. v State Farm Mut. Auto. Ins. Co., 11 AD3d 664 [2004]). The claims were essentially denied for failure to establish medical necessity. Although defendant was not required to attach to its denial of claim forms the peer reviews upon which the denials were purportedly based (see 11 NYCRR 65-3.8 [b] [4]; A.B. Med. Servs. PLLC v Nationwide Mut. Ins. Co., 7 Misc 3d 132[A], 2005 NY Slip Op 50605[U] [App Term, 2d & 11th Jud Dists 2005]), defendant’s denial of claim forms fail to set forth with sufficient particularity the factual basis and medical rationale for its denial based on lack of medical necessity, and it is therefore precluded from asserting said defense (see Amaze Med. Supply v Allstate Ins. Co., 3 Misc 3d 43 [2004], supra). Moreover,{**12 Misc 3d at 32} the peer reviews submitted by defendant in opposition to plaintiff’s motion were unsworn, and therefore in inadmissible form (see A.B. Med. Servs. PLLC v Motor Veh. Acc. Indem. Corp., 6 Misc 3d 131[A], 2005 NY Slip Op 50088[U] [App Term, 2d & 11th Jud Dists 2005]; A.B. Med. Servs. PLLC v Lumbermens Mut. Cas. Co., 4 Misc 3d 86 [App Term, 2d & 11th Jud Dists 2004]). In any event, even assuming said reports’ admissibility and that they set forth a sufficient factual basis and medical rationale for denial of the claims, they cannot remedy the factual insufficiency of defendant’s denials (see Nyack Hosp. v State Farm Mut. Auto. Ins. Co., 11 AD3d 664 [2004], supra).

Golia, J., dissents and votes to reverse the order and deny plaintiff’s motion for summary judgment. As set forth in the majority opinion, it is “uncontroverted on the record that defendant timely denied A.B. Medical’s claims in the respective sums of $1,972.08 and $1,999.12” (at 31). The majority also acknowledges that the regulations do not require defendants to attach a copy of the peer review report to an NF-10 denial of claim form. Nevertheless, my colleagues assert that the denial of claim form failed to state, with the requisite specificity, the reasons the claims were being denied.

What they fail to recognize is that the specific reason for the denial was the “negative” peer review report (see 11 NYCRR 65-3.8 [b] [4]). That is all the specificity that is required under that regulation which states: “If the specific reason for a denial of a no-fault claim . . . is a . . . peer review report . . .” (id.; emphasis added).

To follow the reasoning of the majority would be to require a nonphysician claims examiner to interpret a physician’s peer review report, and then list, with specificity, the medical reasons for the claim’s denial. It seems a tad incongruous for the regulations to permit the NF-10 denial of claim form to be sent without attaching the doctor’s peer review report and then to require a “lay” person to interpret that report and state with “specificity” the doctor’s reasons for finding the treatment medically unnecessary.

In the case at bar, the claimant submits an affidavit stating that it requested a copy of that report but never received same. The defendant submits an affidavit by a person in charge of the file stating that no such request is present in the file. For the purpose of the issues before this court, it doesn’t matter if the request was sent, if the mail was lost, or if the defendant’s affidavit is inaccurate, inasmuch as the regulations do not provide{**12 Misc 3d at 33} for any draconian remedy for defendant’s failure to provide the report in a timely manner. The claim denials were mailed on the 20th and 27th of January 2003, and the request for the peer review was not mailed until July 18, 2003. The underlying action was “commenced” two months later, on September 17, 2003. Apparently, the claimant waited six months to request the reports but waited less than two months to decide to bring this action.

Finally, a question arises as to whether the failure of the defendant to submit a “sworn” copy of the peer review report, in opposition to a claimant’s motion for summary judgment, mandates that the motion be granted. I do not find such a failure to be fatal when opposing a motion for summary judgment, for the reasons stated in my dissent in Ocean Diagnostic Imaging, P.C. v Lancer Ins. Co. (6 Misc 3d 62 [App Term, 2d & 11th Jud Dists 2004]).

Pesce, P.J., and Rios, J., concur; Golia, J., dissents in a separate memorandum.

[*1]

Supreme Court, Appellate Term, Second Department, March 27, 2006

APPEARANCES OF COUNSEL

Amos Weinberg, Great Neck, for appellants.

{**12 Misc 3d at 9} OPINION OF THE COURT

Memorandum.

Order, insofar as appealed from, affirmed without costs.

In this action to recover first-party no-fault benefits for medical services rendered to their assignors, plaintiffs moved for partial summary judgment in the sum of $5,460.79. On appeal, plaintiffs have limited their claim to the sum of $5,427.09. Plaintiffs established a prima facie entitlement to summary judgment by proof that they submitted the claims, setting forth the fact and the amounts of the losses 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]; Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U] [App Term, 2d & 11th Jud Dists 2003]).

In opposition to plaintiffs’ motion, defendant argued that the claims were properly and timely denied on the ground of lack of medical necessity based on peer review reports. For the reasons set forth herein, this defense is unavailing to defendant. We note initially that the record [*2]does not contain denial of claim forms submitted by A.B. Medical Services PLLC in the respective{**12 Misc 3d at 10} sums of $71.40, $218.35 and $71.06. Having failed to pay or deny these claims within the 30-day statutory period (11 NYCRR 65-3.8 [c]), defendant is precluded from raising most defenses with respect to said claims (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282 [1997]).

It is uncontroverted on the record that the remaining claims were timely denied. However, a “timely denial alone does not avoid preclusion where said denial is factually insufficient, conclusory, vague or otherwise involves a defense which has no merit as a matter of law” (Amaze Med. Supply v Allstate Ins. Co., 3 Misc 3d 43, 44 [App Term, 2d & 11th Jud Dists 2004]; see also Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564 [2005]; Nyack Hosp. v State Farm Mut. Auto. Ins. Co., 11 AD3d 664, 665 [2004]). The claims by A.B. Medical in the sum of $1,144.65 ($182.37, $71.06 and $891.22) were denied for lack of medical necessity based on an annexed peer review which failed to state the factual basis and medical rationale for the recommended denial of said claims. A.B. Medical’s claim for $1,573.24 was denied on the ground of lack of medical necessity based on a peer review report which disallowed reimbursement of no-fault benefits due to the lack of sufficient information, including prior medical examinations, which the record indicates were available. In the absence of a showing by defendant that it attempted to procure these reports through verification requests for the purpose of conducting the peer review, defendant is precluded from asserting the defense of lack of medical necessity as to this claim (see 11 NYCRR 65-3.5 [b]; 65-3.6 [b]; A.B. Med. Servs. PLLC v American Mfrs. Mut. Ins. Co., 6 Misc 3d 133[A], 2005 NY Slip Op 50114[U] [App Term, 2d & 11th Jud Dists 2005]; Park Neurological Servs. P.C. v GEICO Ins., 4 Misc 3d 95 [App Term, 9th & 10th Jud Dists 2004]).

The remaining claims were denied for failure to establish medical necessity based on “peer review[s].” Although defendant was not required to attach to its denial of claim forms the peer reviews upon which the denials were purportedly based (see 11 NYCRR 65-3.8 [b] [4]; A.B. Med. Servs. PLLC v Nationwide Mut. Ins. Co., 7 Misc 3d 132[A], 2005 NY Slip Op 50605[U] [App Term, 2d & 11th Jud Dists 2005]), the defendant’s denial of claim forms fail to set forth with sufficient particularity the factual basis and medical rationale for its denials based on lack of medical necessity, and it is therefore precluded from asserting said defense (see Amaze Med. Supply v Allstate Ins. Co., 3 Misc 3d 43 [2004], supra).{**12 Misc 3d at 11}

In opposition to plaintiffs’ motion, defendant also asserted the defense that plaintiffs’ assignor was involved in a fraudulent scheme to procure the subject insurance policy in order to pay reduced insurance premiums, and that, consequently, plaintiffs providers were not eligible to recover assigned no-fault benefits. Vehicle and Traffic Law § 313 provides in pertinent part: “(1) (a) No contract of insurance . . . shall be terminated by cancellation by the insurer until . . . after mailing to the named insured . . . a notice of termination by regular mail . . . .” Vehicle and Traffic Law § 313 “supplants an insurance carrier’s common-law right to cancel a contract of insurance retroactively on the grounds of fraud or misrepresentation, and mandates that the cancellation of a contract pursuant to its provisions may only be effected prospectively” (Matter of Liberty Mut. Ins. Co. v McClellan, 127 AD2d 767, 769 [1987]; see also Matter of Cruz v New Millennium Constr. & Restoration Corp., 17 AD3d 19 [2005]; Matter of Metlife Auto & Home v [*3]Agudelo, 8 AD3d 571 [2004]; Matter of Integon Ins. Co. v Goldson, 300 AD2d 396 [2002]; Matter of Insurance Co. of N. Am. v Kaplun, 274 AD2d 293 [2000]). The statute “places the burden on the insurer to discover any fraud before issuing the policy, or as soon as possible thereafter, and protects innocent third parties who may be injured due to the insured’s negligence” (Matter of Insurance Co. of N. Am. v Kaplun, 274 AD2d at 298). There has been no allegation that defendant effectively cancelled the subject insurance policy pursuant to section 313.

However, case law has made clear that whereas the policy may not be retroactively cancelled, thereby protecting “innocent third parties who may be injured due to the insured’s negligence” (id. at 298), in “an action to recover benefits under a policy, the insurance carrier may assert as an affirmative defense that the insured’s misrepresentations and/or fraud in obtaining the policy precludes any recovery by the insured” (id. at 298-299). The issue presented here is whether, assuming the insurance policy was fraudulently procured, plaintiff health care provider is an “innocent” third party which case law protects and, thus, as assignee of the insured who allegedly perpetrated the fraud, acquires greater rights than had by the assignor. We hold that only innocent third parties who are injured are protected (id. at 298), and not a health care provider who deals with the assignor-insured at its peril in accepting an assignment of the insured’s no-fault benefits. Contrary to plaintiffs’ contention, the defense of fraudulent procurement of an insurance{**12 Misc 3d at 12} policy, which is nonwaivable and hence exempt from the 30-day preclusion rule, may be asserted as against plaintiffs providers in this action seeking to recover assigned no-fault benefits (cf. Matter of Metro Med. Diagnostics v Eagle Ins. Co., 293 AD2d 751, 751-752 [2002]). Upon our review of the record, we find that defendant’s submissions in support of its defense were sufficient to raise issues of fact as to whether the insurance policy was fraudulently procured. Therefore, plaintiffs’ motion for partial summary judgment was properly denied. To the extent that Ocean Diagnostic Imaging P.C. v Commerce Ins. Co. (7 Misc 3d 133[A], 2005 NY Slip Op 50642[U] [App Term, 2d & 11th Jud Dists 2005]) may be inconsistent with the determination herein, the dicta set forth therein should not be followed (see Ocean Diagnostic Imaging, P.C. v Nationwide Mut. Ins. Co., 11 Misc 3d 135[A], 2006 NY Slip Op 50477[U] [2006]).

Golia, J. (concurring with the result only, in the following memorandum): While I agree with the ultimate disposition in the decision reached by the majority, I wish to emphasize that I disagree with certain propositions of law set forth in cases cited therein which are inconsistent with my prior expressed positions and generally contrary to my views.

Pesce, P.J., and Rios, J., concur; Golia, J., concurs in a separate memorandum.

Supreme Court, Nassau County

017608-05

Steven M. Jaeger, J.

Upon the foregoing papers, defendant’s motion pursuant to CPLR §602 severing

plaintiff’s causes of action is denied. The issue raised is whether plaintiff should be permitted to join unrelated assigned claims for no-fault benefits.

The four causes of action in plaintiff’s complaint seek to recover no-fault benefits for each of four unrelated claimants who received treatment by the same medical provider, plaintiff Westchester Medical Center (hereinafter “Medical Center”). The claimants were each covered under a uniform policy of insurance issued by the same insurance company, defendant Liberty Mutual Insurance Company (hereinafter “Liberty”), and each allegedly assigned their right to no-fault benefits to the Medical Center.

The plaintiff further alleges that no-fault billing was mailed to defendant in a timely manner and that the bills remain unpaid. The New York State No-Fault Law, Insurance Law §5106(a) imposes upon insurers a prescribed time frame for settling bodily injury claims covered by a policy of bodily injury liability insurance:

“Payments of first party benefits and additional first party benefits shall be made as the loss if incurred. Such benefits are overdue if not paid within thirty days after the [*2]claimant supplies proof of the fact and amount of loss sustained. If proof is not supplied as to the entire claim, the amount which is supported by proof is overdue if not paid within thirty days after such proof is supplied. All overdue payments shall bear interest at the rate of two percent per month. If a valid claim or portion was overdue, the claimant shall also be entitled to recover his attorney’s reasonable fee, for services necessarily performed in connection with securing payment of the overdue claim, subject to limitations promulgated b the superintendent in regulations.

The defendant argues that since the respective injuries of the claimants were unrelated, the accidents took place on various dates, and each claim submitted by the assignee was handled in a distinct manner, the causes of action should be severed. Defendant further argues that if the causes of action are not severed, it would involve mini-trials as to the individual claims.

While defendant’s Answer alleges numerous affirmative defenses as to procedure under the no-fault statute and, among others, medical necessity and fraudulent conduct, the Answer was verified by counsel and the motion was supported

only by an affirmation of counsel. There was no evidentiary proof nor an affidavit by a person with knowledge of the facts herein.

CPLR §601 encourages and permits joinder with as many claims as one plaintiff might have against one defendant, regardless of whether such claims are unrelated or inconsistent. Collins v. Telcoa Intern. Corp., 283 AD2d 128, 131 (2d Dept. 2001). CPLR §1002(a) states: “Persons who assert any right to relief jointly, severally, or in the alternative arising out of the same transaction or occurrence, or series of transactions or occurrences, may join in one action as plaintiffs if any common question of law or fact would arise.”

The purpose of this policy of liberal joinder is to prevent multiplicity of suits so that the aggrieved party can obtain relief in one action. Saunders v. Saunders, 54 Misc 2d 1081 (Supreme Ct Kings Co. 1967). “It is also intended to reduce the caseload of the courts and its personnel and avoid unnecessary expenditure of time, money and manpower.” Aviyon Medical Rehabilitation v. Allstate Insurance Co., 4 Misc 3d 1011(A), 2004 NY Slip Op 50819(U)(Supreme Ct Kings Co. 2004).

CPLR §603 provides, however, that a court may order severance “in furtherance of convenience or to avoid prejudice.” The decision whether to grant a severance pursuant to CPLR §603 is a matter of judicial discretion, which will not be disturbed on appeal absent an abuse of discretion or prejudice to a substantial right of the party seeking severance. Anderson v. Singh, 305 AD2d 620 (2d Dept. 2003); Finning v. Niagra Mohawk Power Corp., 281 AD2d 844 (3rd Dept. 2001); Aviyon Medical Rehabilitation, supra.

The Appellate Division, Second Department held in the leading case that when “…the claims arise out of a uniform contract of insurance and involve interpretation of the same no-fault provisions of the Insurance Law…” joinder of 29 claims by one assignee-plaintiff was proper under CPLR 1002(a). Hempstead General Hospital v. Liberty Mutual Ins. Co., 134 AD2d 569 (2d Dept. 1987). Defendant Liberty relies on [*3]Mount Sinai Hospital a/a/o Jefferson v. MVIAC, 291 AD2d 53 (2d Dept. 2002), for the proposition that in actions for reimbursement of no-fault benefits with multiple assignees and assignors, the claims must be severed, where there is no common contract of insurance and no other similarity except that no-fault benefits were not paid.

However, Liberty’s reliance on Mount Sinai, supra, is misplaced. It is distinguishable from the instant case because in Mount Sinai both the assignees and assignors were different. While the Appellate Division approved severance as a “provident exercise of discretion”, it modified the order appealed from to join two causes of action on behalf of the same assignor-claimant, citing Hempstead General Hospital. The instant case involves only one assignee-provider and four unrelated assignors-claimants, similar to but less than the 29 in Hempstead General Hospital, supra.

More recently, the Second Department, in Poole v. Allstate Insurance Co., 20 AD3d 518 (2d Dept. 2005), severed 47 unrelated claims brought by one assignee against one insurance company. The Court not only cited Hempstead General Hospital without disapproval, but in its ruling held joinder of 47 claims in a single trial to be an “improvident exercise of discretion” because it was “unwieldy” and potentially confusing to a trier of fact. See also, Radiology Resource Network v. Fireman’s Fund Insurance Co., 12 AD3d 185 (1st Dept. 2004)(68 claims severed); cf, Aviyon Medical Rehabilitation, supra (36 claims appropriately joined).

While there may be support for granting severance in no-fault actions, which Liberty mis-characterizes as controlling on this Court, analysis of the cases suggests that Hempstead General Hospital has never been overruled by the Second Department and that severance remains a matter of judicial discretion based upon a weighing of all the circumstances in a particular case.

For instance, the Appellate Term has cited Radiology and Mount Sinai with approval in granting severance in a number of recent cases. Metro Med v. MVAIC, 6 Misc 3d 136A, 2005 NY Slip Opinion 50238 (U)( App Term 2d Dept. 2005)(3 claims); S.I.A. Med. v. GEICO, 8 Misc 3d 134A, 2005 NY Slip Opinion 51170(U)(App Term 2d Dept. 2005)(11 claims); Berger v. Liberty Mutual, 10 Misc 3d 139A, 2005 NY Slip Opinion 52204(U)(App Term 2d Dept. 2005)(14 claims). While Liberty argues that these decisions are binding on this Court and overrule Hempstead General Hospital, such argument is baseless. As a court of original jurisdiction, this Court is bound by stare decisis to follow determinations of the Appellate Division or the Court of Appeals. Ross Bicycles, Inc v. Citibank, 149 AD2d 330 (1st Dept. 1989); People v Young, 82 Misc 2d 964 (Nassau County Ct 1975).

Not only has the Second Department not overruled Hempstead General Hospital, but even the First Department, in Radiology, supra, reconciled its ruling by explaining that Hempstead General Hospital “…does not stand for the proposition that the granting of a severance motion…is an abuse of judicial discretion.” The standard applied in all of the cited cases remains the appropriate exercise of judicial discretion and the analysis remains focused on the circumstances in each particular case.

Although the facts of each cause of action herein may be different, each involves the same provider, the same insurance company, the same insurance contract, and common questions of the application and interpretation of Insurance Law §5106(a). Defendant has failed to submit any proof or documentary evidence to the contrary. [*4]Conclusory allegations (only made by counsel) that the claimants engaged in fraudulent conduct or that treatment was not medically necessary is an insufficient basis to sever these four actions. Considering all of these factors, the Court finds that the joinder of only four (4) assignors-claimants does not impose an undue burden on defendant nor would it likely create confusion for the trier of fact.

Accordingly, defendant’s motion to sever is denied.

This shall constitute the Decision and Order of the Court.

Dated: March 17, 2006

_____________________________________

STEVEN M. JAEGER, A.J.S.C.

[*1]

Supreme Court, Appellate Term, Second Department, February 17, 2006

APPEARANCES OF COUNSEL

Bruno, Gerbino & Soriano, LLP, Melville (Charles W. Benton of counsel), for appellant. Amos Weinberg, Great Neck, for respondents.

{**11 Misc 3d at 72} OPINION OF THE COURT

Memorandum.

Judgment reversed with $10 costs, order entered August 18, 2004 vacated, plaintiffs’ motion for partial summary judgment denied and defendant’s cross motion granted to the extent of ordering a hearing to determine plaintiffs’ compliance with Rules of the Chief Administrator of the Courts (22 NYCRR) § 130-1.1a and, in the event plaintiffs’ complaint is not stricken following said hearing, compelling plaintiffs to serve, within 30 days after entry of the [*2]posthearing order, responses to defendant’s sixth interrogatory and to produce the documents requested in the eighth, ninth, tenth and eleventh numbered paragraphs of defendant’s notice for discovery and inspection.

In this action to recover first-party no-fault benefits for medical services rendered to its assignor, plaintiffs established their prima facie entitlement to partial summary judgment by proof that they submitted claims, setting forth the fact and the amounts of the losses 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]; Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U] [App Term, 2d & 11th Jud Dists 2003]). Defendant’s assertion that it timely denied the claims lacks merit because the record does not contain an affidavit from a person with personal knowledge either stating that the December 20, 2002 denial of claim form was mailed or setting forth “a sufficiently detailed description of standard office mailing procedure so as to give rise to the presumption of mailing” (S&M Supply Inc. v Progressive Ins. Co., 8 Misc 3d 138[A], 2005 NY Slip Op 51312[U], *2 [App Term, 2d & 11th Jud Dists 2005]). Since defendant failed to pay or deny the claim within the 30-day prescribed period (11 NYCRR 65-3.8 [c]), it is precluded from raising most defenses (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282 [1997]). As a result, the burden shifted to defendant to demonstrate the existence of a material issue of fact (see Zuckerman v City of New York, 49 NY2d 557 [1980]).

However, defendant further claims that pursuant to CPLR 3212 (f), plaintiffs are not entitled to partial summary judgment{**11 Misc 3d at 73} due to their failure to respond to discovery demands served upon them. Indeed, defendant even cross-moved to preclude plaintiffs from offering evidence at trial due to their failure to respond to said discovery demands or, in the alternative, to compel plaintiffs to respond to defendant’s discovery demands. Annexed to said cross motion were copies of various discovery demands defendant served upon plaintiffs which sought discovery of information regarding potential defenses which defendant is precluded from raising. Defendant also sought discovery regarding plaintiffs’ status as professional corporations licensed to practice in New York. Annexed to defendant’s cross motion was a copy of plaintiffs’ response to defendant’s discovery demands which, among other things, stated that plaintiffs would produce the documents requested in defendant’s notice for discovery and inspection. To the extent the discovery demands concerned matters relating to defenses which defendant is precluded from raising, they are palpably improper notwithstanding the fact that plaintiffs did not specifically object thereto (see Fausto v City of New York, 17 AD3d 520 [2005]; Marino v County of Nassau, 16 AD3d 628 [2005]; Garcia v Jomber Realty, 264 AD2d 809 [1999]). However, defendant’s sixth interrogatory and the documents requested in the eighth, ninth, tenth and eleventh numbered paragraphs of defendant’s notice for discovery and inspection sought information regarding the corporate structure and licensing status of plaintiffs.

In State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005]), the Court of Appeals answered a certified question from the United States Court of Appeals for the Second Circuit and held that insurers may withhold payment for first-party no-fault benefits provided by fraudulently licensed medical corporations to which patients have assigned their claims. As noted by the Court of Appeals, Business Corporation Law § 1507 provides: “A professional service corporation may issue shares only to individuals who are authorized by law to practice in this [*3]state a profession which such corporation is authorized to practice” (id. at 319 n 1) and, in addition, pursuant to 11 NYCRR 65-3.16 (a) (12), “[a] provider of health care services is not eligible for reimbursement under section 5102 (a) (1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement” (id. n 2). We hold that a defense based upon plaintiffs’ allegedly fraudulent corporate licensure is not precluded (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005], supra; see generally{**11 Misc 3d at 74} Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195 [1997]). Accordingly, the sixth interrogatory and eighth, ninth, tenth and eleventh numbered paragraphs in defendant’s notice for discovery and inspection sought information to which defendant was entitled pursuant to State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005], supra). Since said items were not palpably improper or privileged, plaintiffs were required, but failed, to challenge the propriety of defendant’s notice for discovery and inspection pursuant to CPLR 3120 within the time prescribed by CPLR 3122. Likewise, plaintiffs failed to object to defendant’s sixth interrogatory. As a result, plaintiffs are obligated to produce the information sought (see Fausto, 17 AD3d 520 [2005], supra; Marino, 16 AD3d 628 [2005], supra; Garcia, 264 AD2d 809 [1999], supra).

In view of the foregoing, plaintiffs’ motion for partial summary judgment should have been denied due to plaintiffs’ failure to respond to said discovery demands (see CPLR 3212 [f]). Moreover, defendant’s cross motion for an order precluding plaintiffs from offering evidence at trial or, in the alternative, compelling plaintiffs to respond to discovery demands should, subject to the outcome of the hearing for which this matter is remanded (see infra), be granted to the extent of requiring plaintiffs to respond to defendant’s sixth interrogatory and to produce the documents requested in the eighth, ninth, tenth and eleventh numbered paragraphs of defendant’s notice for discovery and inspection.

As indicated above, there is a threshold issue that must be resolved by the Civil Court. Defendant, in the court below as well as in this court, raises an issue concerning the genuineness of the signature of plaintiffs’ counsel, Amos Weinberg, on various papers submitted in this action. Although the complaint, plaintiffs’ notice of motion seeking partial summary judgment and the affidavit of service for said motion which were submitted to the Civil Court bore signatures which purported to be that of plaintiffs’ counsel, Mr. Weinberg, and which, at least, appear to have been signed by the same person, it is apparent to this court that the signatures on the notice of entry of the order appealed from and upon the respondents’ brief submitted to this court, also purportedly signed by Mr. Weinberg, are markedly different. Moreover, we are mindful of the fact that Mr. Weinberg previously testified in a hearing before the Civil Court, Queens County, that it was a pattern and practice in his office to have other people, who are not attorneys, sign his name on a{**11 Misc 3d at 75} regular basis to documents which are filed in court (see Park Health Ctr. v Countrywide Ins. Co., 2 Misc 3d 737 [2003]). As a result, under the circumstances of this case, we are of the opinion that the branch of defendant’s cross motion which sought a hearing to determine which documents submitted in this case, if any, Mr. Weinberg signed in compliance with Rules of the Chief Administrator of the Courts (22 NYCRR) § 130-1.1a should be granted.

Golia, J., concurs with the result only in the following memorandum: While I agree with the ultimate disposition in the decision reached by the majority, I wish to emphasize that I disagree with certain propositions of law set forth in cases cited therein which are inconsistent with my prior expressed positions and generally contrary to my views.

Pesce, P.J., and Belen, J., concur; Golia, J., concurs in a separate memorandum.

Supreme Court, Schoharie County

05-0427

FLINK SMITH, LLC

By: JEFFREY D. WAIT, ESQ., of counsel

for Plaintiff

CAPASSO & MASSARONI, LLP

By: JOHN R. SEEBOLD, ESQ., of counsel

for Defendant Wood

HANSON & FISHBEIN

By: MARK O, CHIECO, ESQ., of counsel

for Defendant Progressive

Dan Lamont, J.

In this action for a declaratory judgment, plaintiff New York Central Mutual Fire Insurance Company (“New York Central”) moves this Court for a judgment declaring that defendant Progressive Northeastern Insurance Company (“Progressive”) has an obligation to provide insurance coverage to defendant Charles Young (“Young”) in connection with underlying claims by defendant Amber M. Wood (“Wood”) for money damages for personal injuries allegedly caused to her by defendant Young’s motor vehicle. Defendant Progressive cross-moves this Court for a judgment declaring that Progressive has no obligation to provide insurance coverage to defendant Young based upon his “intentional act” which constitutes an exclusion from coverage under Young’s automobile insurance policy with Progressive. [*2]Defendant Wood does not oppose New York Central’s motion; however, she does oppose Progressive’s cross-motion. Defendant Young has not answered the Complaint or otherwise appeared in this action for a declaratory judgment.

BACKGROUND

New York Central previously brought a proceeding to stay the supplemental uninsured motorist (“SUM”) arbitration between New York Central and Wood (Index No.05-0182). By Interim Decision/Order dated June 30, 2005, this Court adjourned such proceeding to allow New York Central to commence this declaratory judgment action and to obtain personal jurisdiction over all of the necessary parties including Young. The following background facts are substantially taken from such Interim Decision/Order.

On May 29, 2004, respondent Wood was camping with friends in the Town of Berne, County of Albany. Wood was the sole occupant of a certain camping tent. At approximately 6:15 a.m., Young ran over the tent with his automobile and thereby caused serious physical injuries to Wood. Young’s automobile was insured by Progressive. Earlier in the evening, Young’s friend had been beaten up by someone, so Young drove over the tent to “set them straight”. According to Young’s statement recorded by New York Central, Young did not know and had never met Wood before the incident.

On August 19, 2004, in County Court, County of Albany, Young pled guilty to Attempted Assault in the First Degree in violation of Penal Law §§ 110/120.10(3) in return for an agreed upon determinate sentence of imprisonment of no more than 11 years. Assault in the First Degree under Penal Law § 120.10(3) is defined as follows: “A person is guilty of assault in the first degree when under circumstances evincing a depraved indifference to human life, he recklessly engages in conduct which creates a grave risk of death to another person, and thereby causes serious physical injury to another person.” (emphasis supplied) During his plea colloquy, Young stated that he did not know someone was in the tent that he drove over, but that he did know that 6:00 a.m. would be a normal time for someone to be in a camping tent.

On or about July 15, 2004, Progressive disclaimed insurance coverage for the accident based upon Young’s intentional act. Young’s insurance policy included the following language under exclusions from coverage: “6. Bodily injury or property damage caused by the intentional act of an insured person or at the direction of an insured person.”

On the date of the accident, Wood’s motor vehicle was insured by New York Central with uninsured/underinsured motorist coverage in the amount of $50,000. Based upon Progressive’s denial of insurance coverage for Young, Wood on or about March 15, 2005 requested arbitration pursuant to the uninsured/underinsured coverage portion of her policy with New York Central. The arbitration proceeding previously scheduled for May 12, 2005 has been temporarily stayed. New York Central has now brought the instant action for a declaratory judgment.

THE LAW: INTENTIONAL ACT EXCLUSION

“Not every intentional act falls within the parameters of an insurance policy’s intentional acts exclusion since insurable accidental results may flow from intentional causes'” (Carmean v. Royal Indemnity Co., 302 AD2d 670, 671 [3rd Dept. 2003], citing Slayko v. Security Mutual Insurance Co., 98 NY2d 289, 293 [2002]). “[I]n deciding whether a loss is the result of an accident, it must be determined, from the point of view of the insured, whether the loss was unexpected, unusual or unforeseen” (Agoado Realty Corp. v. United Intl. Ins. Co., 95 NY2d 141,145 [2000]). “The critical question is whether the harm that resulted *** could have been other than harm intentionally [*3]caused’ within the meaning of the policy exclusion” (Allstate Ins. Co. v. Mugavero 79 NY2d 153, 159 [1992];see also, Peters v. State Farm Fire and Casualty Co., 306 AD2d 817 [4th Dept. 2003]; aff’d as modified 100 NY2d 634 [2003]). In other words, the issue presented herein is “whether there is any possible factual or legal basis upon which to find that the bodily injuries inflicted upon [Wood] were not expected or intended’ by [Young]” (Smith v. New York Central Mutual Ins. Co., 13 AD3d 686 [3rd Dept. 2004], quoting Pennsylvania Millers Mut. Ins. Co. v. Rigo, 256 AD2d 769, 770 [1998], quoting Home Mut. Ins. Co. v. Lapi, 192 AD2d 927, 928 [3rd Dept. 1993]).

The Appellate Division, Third Department in Progressive Northern Ins. Co. v. Rafferty, 17 AD3d 888 [3rd Dept. 2005], has recently stated the following:

“It is now well settled that there exists a narrow class of cases in which the intentional act exclusion applies regardless of the insured’s subjective intent’ (Slayko v Security Mut. Ins. Co., 98 NY2d 289, 293 [2002]). In such cases, the intentional act exclusion [applies] if the injury [is] inherent in the nature’ of the wrongful act’ (id. at 293, quoting Allstate Ins. Co. v Mugavero, 79 NY2d 153, 161 [1992]). An injury is held to be inherent in the nature’ of an act when the act is so exceptional that cause and effect cannot be separated; that to do the act is necessarily to do the harm which is its consequence; and that since unquestionably the act is intended, so also is the harm’ (Allstate Ins. Co. v Mugavero, supra at 160-161).

“In these type of cases, the theoretical possibility that the insured lacked the subjective intent to cause the harm’ (Pistolesi v Nationwide Mut. Ins. Co., 223 AD2d 94, 97 [1996], lv denied 88 NY2d 816 [1996]) does not preclude a finding that, for the purposes of the policy’s intentional act exclusion, such injuries are as a matter of law intentionally caused’ (Allstate Ins. Co. v Mugavero, supra at 161; see Pennsylvania Millers Mut. Ins. Co. v Rigo, 256 AD2d 769, 771 [1998]; Doyle v Allstate Ins. Co., 255 AD2d 795, 796-797 [1998]).” (at page 889)

DISCUSSION

An insurance company seeking to invoke a policy exclusion must “establish that the exclusion is stated in clear and unmistakable language, is subject to no other reasonable interpretation, and applies to the particular case” (Continental Casualty Company v. Rapid-American Corp., 80 NY2d 640, 652 [1993]). Exclusionary language in an insurance policy must be strictly and narrowly interpreted, and when exclusionary language is ambiguous “it is the insurer’s burden to prove that the construction it advances is not only reasonable, but also that it is the only fair [one]” (Boggs v. Commercial Mutual Insurance Company, 220 AD2d 973, 974 [Third Dept. 1995]). In Pepper v. Allstate Insurance Company (20 AD3d 633 [3rd Dept. 2005]), the Appellate Division, Third Department recently stated: “[W]hen an insurance policy’s meaning is not clear or is subject to different reasonable interpretations, ambiguities must be resolved in the insured’s favor and against the insurer (see Little v. Blue Cross of W. NY, 72 AD2d 200, 203 [1980]; see also Boggs v. Commercial Mut. Ins. Co., 220 AD2d 973, 974 [1995]).” (at page 635)

Since Young has given a couple of statements indicating that he did not intend to injure Wood and that he did not know that anyone was in the tent while knowing that a camping tent is normally occupied at 6:15 in the morning this Court holds and determines that for Progressive’s intentional act policy exclusion to apply, Wood’s injuries must have been “inherent in the nature” [*4]of Young’s wrongful act (Slayko v. Security Mutual Ins. Co., supra, 293; Allstate Ins. Co. v. Mugavero, supra, 161).

In Slayko v. Security Mutual Ins. Co., supra, the Court of Appeals found that a person’s act of pointing a gun at another and pulling the trigger was not inherently harmful for the purpose of an intentional act exclusion because the undisputed facts established that the two parties were friends and that the shooter believed that the gun was not loaded. In this action for a declaratory judgment, the uncontested submissions establish that Young and Wood did not know each other; that they had never met before the incident; and that Young did not know that Wood was in the camping tent. However, Young’s conduct clearly rises to the level of depraved indifference reckless conduct i.e. driving into a tent at 6:15 in the morning when camping tents are normally occupied.

Under the current state of the law, an injury is “inherent in the nature” of an act when the act is so exceptional that “cause and effect cannot be separated; that to do the act is necessarily to do the harm which is its consequence; and that since unquestionably the act is intended, so also is the harm” (Progressive Northern Ins. Co. v. Rafferty, supra; quoting

Allstate Ins. Co. v. Mugavero, supra, 160-161). This Court holds and determines that running over a tent with an automobile does not necessarily cause harm to another person. The intentional act of running over a camping tent can be separated from the injury since the tent could have been unoccupied, or the automobile could have run over a portion of the tent without striking someone inside. Young clearly committed an act of depraved indifference recklessness, but he did not intend to injure Wood.

In Progressive Northern Ins. Co. v. Rafferty, supra, an intentional acts exclusion applied because an individual stepped on the accelerator of his vehicle and injured a person standing two feet in front of him with whom he had been arguing. In Smith v. New York Central Mut. Ins. Co., 13 AD3d 686 [3rd Dept. 2004], the intentional act exclusion applied despite a plea to a crime involving criminal negligence where an individual pursued another individual and struck him in the head with a bat. The facts of the instant action wherein Young did not even know Wood or intend to cause any injury to Wood are clearly distinguishable from these cases.

Accordingly, this Court hereby declares that Progressive’s intentional act exclusion does not apply and that Progressive must defend and provide insurance coverage for Young. For similar reasons, the incident should be and the same is hereby considered an “accident” under the definitions of Young’s insurance policy. This Court holds and determines that a hearing is not necessary to make this determination.

For public policy reasons, this Court does not necessarily embrace the concept of providing liability insurance coverage on behalf of an individual who has clearly committed a criminal act of depraved indifference recklessness. However, the criminal law does establish a clear difference between intentional conduct and depraved indifference reckless conduct although equal in blameworthiness. In fact, “intentional” and “depraved indifference recklessness” are inconsistent culpable mental states because guilt of one necessarily negates guilt of the other (see, CPL § 330.30(5); see also, People v. Payne, 3 NY3d 266 [2005]). Also, Young was clearly intoxicated at the time of the incident, and voluntary intoxication may be a defense to intentional conduct (see, PL § 15.25) but is not a defense to reckless conduct (see, PL § 15.03(3)). This Court should not expand Progressive’s policy exclusions to exclude depraved indifference reckless criminal acts, unless the policy expressly excludes such criminal acts. To do so would be to deny Wood, who was not intentionally injured by Young, the benefit of recovery under both Young’s liability automobile [*5]insurance coverage, and Young’s no-fault automobile insurance coverage.

This Court holds and determines that New York Central’s action for a declaratory judgment declaring that Progressive has an obligation to defend and provide insurance coverage to defendant Young should be and the same is hereby granted with $100.00 costs. This Court further holds and determines that Progressive’s cross motion for a judgment declaring that Progressive has no obligation to defend or provide coverage to defendant Young should be and the same is hereby denied without costs.

This Memorandum shall constitute both the Decision and Order of the Court. All papers, including this DECISION/ORDER, are being returned to the plaintiff’s attorney. The signing of this DECISION/ORDER shall not constitute entry or filing under CPLR § 2220. Legal counsel are not relieved from the applicable provisions of that section respecting filing, entry and notice of entry.

IT IS ADJUDGED and declared that defendant Progressive must defend and provide liability insurance coverage to defendant Young, and must also provide no-fault insurance coverage for Wood.

Dated: Schoharie, New York

January 27, 2006

ENTER

_______________________________________

DAN LAMONT, Acting J.S.C.

cc: Jeffrey D. Wait, Esq.

John R. Seebold, Esq.

Mark O. Chieco, Esq.

Charles Young

Papers considered:

1) Plaintiff’s Notice of Motion dated October 5, 2005.

2) Affidavit of Jeffrey D. Wait, Esq. sworn to October 5, 2005, with exhibits.

3) Plaintiff’s Memorandum of Law dated October 5, 2005.

4) John R. Seebold, Esq.’s letter dated October 6, 2005.

5) Defendant Progressive’s Notice of Cross Motion dated October 25, 2005.

6) Affidavit of Mark O. Chieco, Esq. sworn to October 27, 2005, with exhibit.

7) Affidavit of Gerald Hmura sworn to October 26, 2005, with exhibit.

8) John R. Seebold, Esq.’s letter dated November 10, 2005.

[*1]

Supreme Court, New York County, January 25, 2006

APPEARANCES OF COUNSEL

Cadwalader, Wickersham & Taft, LLP, New York City (William J. Natbony of counsel), and Stern & Montana, LLP, New York City (Robert A. Stern of counsel), for plaintiffs. Morvillo, Abramowitz, Grand, Iason & Silberberg, P.C., New York City (Richard C. Tarlowe and Edward Spiro of counsel), for Herbert Rabiner, M.D. and others, defendants. Warner & Partners, P.C., New York City (Kenneth E. Warner of counsel), for Jay Katz and others, defendants. Alexander Herman, Brooklyn, for Vladimir Shtrakhman, defendant.

OPINION OF THE COURT

Karla Moskowitz, J.

Plaintiffs move for an order: (1) pursuant to CPLR 3025 (b) and 1003, granting them leave to serve a second amended complaint to add the insurers Government Employees Insurance Company, GEICO General Insurance Company, GEICO Indemnity Company and GEICO Casualty Company (collectively GEICO) as plaintiffs, deeming the second amended complaint served upon defendants and directing defendants to answer the second amended complaint; (2) pursuant to CPLR 2221 (e), granting plaintiffs’ motion to renew the court’s March 15, 2004 decision and order (prior decision I) because of a change in law that affects that ruling; and (3) clarifying the court’s December 22, 2004 decision and order (prior decision II) to confirm the reinstatement of plaintiffs’ seventh cause of action (denominated seventh claim for relief) for unjust enrichment.

Plaintiffs are insurance companies that participate in New York’s no-fault automobile insurance program. Plaintiffs claim they owe nothing to defendants because of defendants’ violation of various statutes pertaining to the organization of medical corporations and because of defendants’ fraudulent billing. Plaintiffs seek to recover from defendants payments that [*2]plaintiffs made to them, pursuant to the no-fault insurance program, for medical services that defendants rendered to persons covered under automobile insurance policies that plaintiffs issued. Plaintiffs also seek a declaratory judgment that they have no obligation to pay defendants for claims defendants have submitted, but plaintiffs have not yet paid.

Among the defendants are the”PC defendants,” each of which purport to be a New York medical professional corporation providing diagnostic testing and other patient services. The certificates of incorporation of the PC defendants each state that the owner is defendant Dr. Herbert Rabiner, a New York State licensed physician, but the real owner and principal shareholder is a layperson—defendant Jay Katz.

Plaintiffs allege that, in violation of section 1507 of the Business Corporation Law, Rabiner has sold or lent the use of his name and medical license to Katz to form medical corporations in Rabiner’s name so that Katz could own or control medical practices, profit from them, bill no-fault insurers for medical services and, in so doing, facilitate fraudulent billing practices. Allegedly, once Rabiner fraudulently formed the PC defendants with Katz, he did not have the type of involvement in those entities that a real owner would.

Plaintiffs also allege that the PC defendants regularly submitted no-fault claims to plaintiffs, falsely representing that the PC defendants were valid medical professional corporations. Plaintiffs allege further that they paid substantial amounts of money to the PC defendants based upon their justifiable reliance that the PC defendants comported with applicable statutes and administrative regulations governing the provision of health services. In addition, defendants’ fraudulent conduct encompassed improper multiple billings and the provision of improper, unwarranted or medically unreliable testing.

In prior decision I, I granted motion sequence number 002 and dismissed the complaint against defendants Parkway Magnetic Resonance Imaging, Inc., Metroscan Resonance Imaging, Inc., Katz and Vladimir Shtrakhman. In that same decision I also granted motion sequence number 003 and dismissed the first, second and seventh causes of action, and dismissed the complaint as against Rabiner. I declined to dismiss the eighth cause of action seeking a declaration that plaintiffs have no obligation to pay pending claims, claims they previously denied or any future no-fault claims.

In prior decision II, I granted leave to amend the complaint regarding the billing fraud component of the first cause of action. As amended, the complaint contained sufficient particularity regarding the allegations of billing fraud, including the performance of unnecessary services, as part of an alleged scheme among the PC defendants and other nonparty entities.

The change in law that is the subject of this motion results from State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005] [Mallela III]). That action began with State Farm Mut. Auto. Ins. Co. v Mallela (175 F Supp 2d 401 [ED NY 2001, Sifton, J.] [Mallela I]) that involved similar claims to those presented here. In Mallela I, Judge Sifton concluded that the insurer plaintiff could not recover damages for fraud and misrepresentation, because it had no right of action to enforce the relevant provisions of the Business Corporation Law and because the alleged violations did not relieve the insurer of the obligation to reimburse the insureds or the insureds’ assignees. Judge Sifton found that the Business Corporation Law did not explicitly create a private right of action and that plaintiff did not belong to the class of legislatively intended beneficiaries, so that a right of action would be clearly in furtherance of the legislative [*3]purpose (Mallela I, 175 F Supp 2d at 416). Judge Sifton granted plaintiff leave to amend its complaint to state valid claims describing actionable frauds, but subsequently dismissed the amended complaint with prejudice (State Farm Mut. Auto. Ins. Co. v Mallela, 2002 WL 31946762, 2002 US Dist LEXIS 25187 [ED NY, Nov. 21, 2002]). I followed the reasoning of Judge Sifton in Mallela I when I dismissed plaintiffs’ claims for fraud and unjust enrichment in prior decision I.

The insurance carrier appealed Mallela I to the United States Court of Appeals for the Second Circuit that concluded that the action involved important, determinative and unsettled questions of state law that were likely to recur and important public policy implications (State Farm Mut. Auto. Ins. Co. v Mallela, 372 F3d 500 [2d Cir 2004] [Mallela II]). Thus, in Mallela II, the Second Circuit deemed it appropriate to certify the following question to the New York Court of Appeals:

“Is a medical corporation that was fraudulently incorporated under N.Y. Business Corporation Law §§ 1507, 1508, and N.Y. Education Law § 6507 (4) (c) entitled to be reimbursed by insurers, under New York Insurance Law §§ 5101 et seq. and its implementing regulations, for medical services rendered by licensed medical practitioners?” (Id. at 509.)

In answering the certified question, in Mallela III, the Court of Appeals concluded that these medical corporations could not receive reimbursement, reasoning that Insurance Law § 5101 et seq. requires no-fault carriers to reimburse patients (or their medical provider assignees) for “basic economic loss,” but that in promulgating 11 NYCRR 65-3.16 (a) (12)^[FN*] (eff Apr. 4, 2002), the Superintendent of Insurance excluded from the meaning of “basic economic loss” payments made to unlicensed or fraudulently licensed providers. This renders these entities “not eligible” for reimbursement (4 NY3d at 320). Moreover, the Court of Appeals upheld the Superintendent’s interpretation as not irrational or unreasonable in deference to his special competence and expertise regarding the insurance industry and not counter to the clear wording of the statutory provision (id. at 321). The Court of Appeals held that “on the strength of this regulation, carriers may look beyond the face of licensing documents to identify willful and material failure to abide by state and local law” (id.).

The Court of Appeals also held that, as a matter of law, the insurance carriers could not sue for fraud or unjust enrichment (as opposed to a requirement to reimburse) for any payments that the insurance carriers had already made prior to the regulation’s effective date of April 4, 2002. However, because State Farm’s complaint did not clearly indicate when it had paid defendants, the Court declined to determine whether State Farm had alleged sufficient facts to support its causes of action for fraud or unjust enrichment (id. at 322).

With this background, I now turn to the motion at issue.

I am granting the motion to amend the complaint that seeks to add GEICO as a plaintiff [*4]for the reasons set forth on the record at oral argument on the motion held on December 15, 2005.

I grant the motion for renewal upon the intervening clarification of the law (CPLR 2221 [e] [2]; Roundabout Theatre Co. v Tishman Realty & Constr. Co., 302 AD2d 272 [1st Dept 2003]). As a result of Mallela III, I reinstate plaintiffs’ claims for fraud and unjust enrichment to the extent that plaintiffs made the payments to defendants on or after the regulation’s effective date (Apr. 4, 2002).

Plaintiffs suggest that, in either subsequent separate briefing or through summary judgment motions, the parties should address the issue of whether the fraud and unjust enrichment claims based solely on corporate structure apply to payments made prior to April 4, 2002. I do not find additional briefing or summary judgment motions warranted.

Although I did not dismiss the eighth cause of action for declaratory relief, the parties raised the issue during oral argument concerning whether Mallela III meant that plaintiffs need not reimburse defendants for claims that accrued prior to April 4, 2002 that plaintiffs have not yet paid. (See transcript of oral argument, Dec. 15, 2005, at 30-34.) Although defendants have offered repeatedly to brief this issue, the clarity of the decision of the Court of Appeals in Mallela III renders further briefing unnecessary.

As discussed above, in Malella III, the Court of Appeals held that: (1) the insurance companies could withhold payment for medical services that fraudulently incorporated enterprises provided and to which patients have assigned their claims; (2) the insurance companies could bring actions for fraud and unjust enrichment to recover payments made on or after the regulation’s effective date of April 4, 2002, by implication; and (3) no cause of action for fraud or unjust enrichment would lie for any payments that the insurance carriers made prior to the regulation’s effective date of April 4, 2002. Mallela III left open, however, the issue of whether the insurers could withhold payment (as opposed to recover payments already made) for unpaid claims that accrued prior to April 4, 2002).

Several Civil Court decisions have recently addressed this issue. In Metroscan Imaging P.C. v GEICO Ins. Co. (8 Misc 3d 829 [Civ Ct, Queens County 2005, Siegal, J.]), the court held that insurers could withhold payment for unpaid claims accruing prior to April 4, 2002 because the Court of Appeals held that the “Superintendent’s regulation allowing carriers to withhold reimbursement from fraudulently licensed medical corporations governs this case” (id. at 834, quoting Mallela III at 321; accord Multiquest, PLLC v Allstate Ins. Co., 9 Misc 3d 1031 [Civ Ct, Queens County 2005, Butler, J.] [intent of Mallela III is that regulation is to be applied to claims prior to April 4, 2002]; A.T. Med., P.C. v State Farm Mut. Ins. Co., 10 Misc 3d 568 [Civ Ct, Queens County 2005, Culley, J.] [retroactive application is appropriate where regulatory intent is to remedy widespread abuse and fraud]).

However, several other Civil Court decisions have arrived at a contrary conclusion (see Multiquest, PLLC v Allstate Ins. Co., 10 Misc 3d 877 [Civ Ct, Queens County 2005, Esposito, J.]; Multiquest, P.L.L.C. v Allstate Ins. Co., 10 Misc 3d 1061[A], 2005 NY Slip Op 52069[U] [Civ Ct, Queens County 2005, Kerrigan, J.]; Multiquest, P.L.L.C. v Allstate Ins. Co., 10 Misc 3d 1061[A], 2005 NY Slip Op 52071[U] [Civ Ct, Queens County 2005, Markey, J.]; Multiquest PLLC v Allstate Ins. Co., 10 Misc 3d 1069[A], 2005 NY Slip Op 52209[U] [Civ Ct, Queens County 2005, Pineda-Kirwan, J.]).

This second group of cases holds that insurers cannot withhold payment for unpaid claims [*5]accruing prior to April 4, 2002 because the law disfavors retroactivity. These cases also interpret Mallela III as indirectly answering the retroactivity question by holding that the insurers could not assert a cause of action for unjust enrichment and fraud for claims that matured before the effective date of the regulation.

I agree with the former group of decisions. As Judge Siegal noted in Metroscan (8 Misc 3d 829, 834), Mallela I involved claims that had matured prior to the effective date of the regulation. Hence, the Court of Appeals, in Mallella III, necessarily incorporated claims for reimbursement that matured prior to the effective date of the regulation. Also, a retroactive application is appropriate here because the regulation at issue merely clarified existing law. Further, this holding comports with the policy choice the Court of Appeals made in Mallela III of protecting insurers from fraud as outweighing speedy resolution of claims.

In addition, just because the Court of Appeals precluded the insurers from recouping payments they already made for claims that matured prior to the effective date of the regulation does not mean that the Court of Appeals precluded the insurers from denying reimbursement for unpaid claims whenever those claims occurred. This interpretation comports with the language of the regulation that applies to all unpaid claims regardless of the effective date. The regulation does not address the situation where insurers had paid an illegal entity before April 4, 2002.

Finally, the request for an order clarifying prior decision II, to confirm the reinstatement of plaintiffs’ seventh cause of action for unjust enrichment, is granted. Previously, I dismissed the unjust enrichment claim because, as stated in prior decision I, plaintiffs paid compensation for medical services that licensed practitioners rendered to covered persons under the no-fault laws and because there were insufficient allegations that defendants had been unjustly enriched by receiving compensation for medical services rendered without regard to medical necessity and in excess of those dictated by the patients’ conditions. As stated in prior decision II, however, I found that the amended complaint contained sufficient particularity in its allegations of billing fraud, including the performance of unnecessary services, as part of an alleged scheme among the PC defendants and other nonparty entities. Hence, the unjust enrichment claim contained in the seventh cause of action is viable.

Accordingly, it is ordered that the motion is granted as follows: (1) plaintiffs are granted leave to serve a second amended complaint, and the second amended complaint is deemed served upon defendants, and defendants are directed to answer the second amended complaint within 20 days after service of a copy of this order with notice of entry; (2) plaintiffs’ motion to renew the court’s March 15, 2004 decision and order is granted, and, upon renewal, plaintiffs’ claims of fraud and unjust enrichment based upon a lack of standing to obtain no-fault benefits are reinstated to the extent that plaintiffs made payments to defendants on or after April 4, 2002; and (3) the court’s December 22, 2004 decision and order is clarified to confirm the reinstatement of plaintiffs’ seventh cause of action for unjust enrichment.

Footnotes

Footnote *: The pertinent text of 11 NYCRR 65-3.16 (a) (12) reads as follows: “A provider of health care services is not eligible for reimbursement under section 5102 (a) (1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement . . . .”

[*1]

Supreme Court, New York County, January 17, 2006

APPEARANCES OF COUNSEL

Freiberg & Peck, LLP, New York City (Matthew E. Schaefer of counsel), for petitioner. Werner, Zaroff, Slotnick, Stern & Ashkenazy, Lynbrook (David Forman of counsel), for respondent.

OPINION OF THE COURT

Lottie E. Wilkins, J.

Petitioner moves, pursuant to CPLR 7511 (b) (1) (iii), to vacate the uninsured/underinsured motorist arbitration award rendered against petitioner and in respondent’s favor on February 2, 2005. At issue is whether the arbitral forum had jurisdiction over the petitioner. Respondent opposes and raises several arguments as to why, under these circumstances, both the arbitrator and New York courts have jurisdiction over petitioner.

American Independent Insurance is a Pennsylvania corporation. The company has no offices or bank accounts in New York and does not solicit business in this state. More significantly, petitioner does not write insurance policies for New York vehicles and is not licensed to do so by this State’s Department of Insurance. Nonetheless respondent’s assignor, Cesar Ortega, was apparently injured in an accident that took place in New York and involved a party insured by petitioner. Thereafter, Mr. Ortega received treatment from respondent, Heights Chiropractic Care, P.C., which in turn submitted bills to petitioner for payment. The parties do not seriously dispute that petitioner paid at least some portion of these bills.^[FN*] When petitioner refused to provide further payments on respondent’s bills, respondent commenced an arbitration against petitioner. In an award dated February 2, 2005, arbitrator Ann Lorraine Russo awarded [*2]respondent $235.90 on the remaining disputed bill after a hearing at which petitioner did not appear. Petitioner then commenced this proceeding to vacate the arbitration award.

After reciting its lack of contacts with New York and some cursory factual background, petitioner argues that its amenability to no-fault arbitration in New York is not—and indeed cannot be—greater than the jurisdiction of New York courts over petitioner pursuant to New York’s “long-arm” statute, CPLR 301. Petitioner adverts this court’s attention to a number of decisions where it was determined that the court did not have “long-arm” personal jurisdiction over American Independent Insurance (see e.g., Matter of American Ind. Ins. Co. v McDonald, Sup Ct, Kings County, Nov. 13, 2003, Jackson, J., Index No. 18559/03; Advanced Med. Rehabilitation, PLLC v American Ind. Ins. Co., Civ Ct, Kings County, Apr. 20, 2004, Mendez, J., Index No. 322631/03; Nationwide Ins. Co. v Coler, Sup Ct, Kings County, Jan. 15, 2003, Dabiri, J., Index No. 30044/01; Dillon Med. Supply Corp. v American Ind. Ins. Co., Civ Ct, Kings County, Dec. 17, 2004, Gesmer, J., Index No. 56058/02). There is also at least one Appellate Division decision with a similar holding (see, Matter of Eagle Ins. Co. v Gutierrez-Guzman, 21 AD3d 489 [2d Dept 2005]).

Under New York’s long-arm statute, a foreign corporation “doing business” in New York may be subject to the jurisdiction of the courts. However, the term “doing business” means more than occasional or tangential business activity in the state. For purposes of the long-arm statute, “doing business” means a “continuous and systematic course of conduct” within the state “with a fair measure of permanence and continuity” (Cardone v Jiminy Peak, 245 AD2d 1002, 1003 [3d Dept 1997], quoting Chamberlain v Jiminy Peak, 176 AD2d 1109, 1109 [1991] [internal quotation marks omitted], and Tauza v Susquehanna Coal Co., 220 NY 259, 267 [1917]). The mere solicitation of business in the state will not confer jurisdiction (id.). Similarly, the unilateral act of an out-of-state insured driving into New York, without more, is insufficient to confer personal jurisdiction over the insurer (Matter of Eagle Ins. Co., supra, 21 AD3d at 491). Thus, the fact that petitioner here paid a portion of respondent’s claim does not make petitioner subject to the jurisdiction of the courts because that act, by itself, does not constitute the type of systematic business activity required by law in order to confer jurisdiction on the court.

The weight of legal authority holds that petitioner is not subject to personal jurisdiction under New York’s long-arm statute and, by extension, is not amenable to New York’s no-fault arbitration process. Respondent contends, however, that New York’s long-arm statute is not the only legislative enactment that requires consideration. According to respondent, Insurance Law § 1213 elaborates upon the meaning of “doing business in this state” as that term pertains to out-of-state insurers. Specifically, respondent relies on Insurance Law § 1213 (b) (1) (D), which states that an unauthorized foreign or alien insurer that conducts “any other transaction of business” in this state is subject to the jurisdiction of New York courts.

Insurance Law § 1213 explicitly derogates the common-law definition of “doing business” in order to provide broader jurisdiction over certain out-of-state insurers. However, as the preamble of this section states, the intended beneficiaries of this section are New York residents who “hold policies of insurance issued or delivered in this state by insurers while not authorized to do business in this state, thus presenting to such residents the often insuperable obstacle of resorting to distant forums for the purpose of asserting legal rights under such policies” (Insurance Law § 1213 [a]). It is a well-settled principle of statutory interpretation that statutes in derogation of common law are to be construed narrowly, only to the extent necessary [*3]to accomplish the Legislature’s goals (Sherman v Robinson, 80 NY2d 483 [1992]). Respondents in this proceeding are clearly not in the class of persons who were intended to be the beneficiaries of Insurance Law § 1213. Respondent is not a resident who holds a New York policy issued by an unauthorized foreign insurer. Even as an assignee, respondent does not “stand in the shoes” of such a person. Thus, the expanded jurisdiction afforded by this section of the Insurance Law does not apply under the circumstances.

Respondent’s two remaining arguments in opposition to the petition are largely without merit. Contrary to respondent’s assertion, petitioner was not required to appeal the arbitrator’s decision to a master arbitrator before bringing this proceeding. Petitioner’s challenge to the arbitration is jurisdictional and cannot be waived. There is no requirement that petitioner exhaust all the procedural remedies of a forum that petitioner should not have been in to begin with. Likewise, petitioner’s financial connection to an insurance carrier that is licensed to issue policies in New York does not change petitioner’s status as a foreign corporation under these facts. To hold otherwise would completely ignore basic principles of corporate law.

For the foregoing reasons, the petition should be granted and the arbitration award dated February 2, 2005 against petitioner should be vacated.

Accordingly, it is ordered that the petition is granted and the subject arbitration award against petitioner is hereby vacated.

Footnotes

Footnote *: The parties have provided virtually no factual background as to how or where this accident occurred; however, it appears that another individual, Rolando Acevedo, was also involved and petitioner paid for some of his treatment as well.