On the merits, when may a no-fault insurer withhold payment because unlicensed persons own or control the provider (Mallela)?

A decision decides this question when it rules whether a billing provider is ineligible for reimbursement under 11 NYCRR 65-3.16 (a) (12) because of how it is owned, controlled or formed: a licensed owner who is a mere nominee, unlicensed persons who are de facto owners, exercise substantial control or take the profits (for example through inflated leases or management fees), or an entity not lawfully formed or owned to practice the profession it bills for (Business Corporation Law art 15, Limited Liability Company Law art 12, Education Law § 6507 [4] [c]). It also covers legal rulings on what the defense requires and how far it reaches on the merits: that no fraud or fraudulent intent is required, the burden of proof, and that conduct short of ceding control (fee-splitting, kickbacks, other professional misconduct, technical filing lapses, billing fraud) is not a ground for it. Procedural rulings about the defense (whether it is precluded by an untimely denial or waived, may be pleaded or added by amendment, may be investigated through discovery, depositions, an EUO or claim verification, reaches bills for pre-April 2002 services, or may be heard by an arbitrator) are not this question: they belong to the topic fraudulent-incorporation-procedure.

Settled statewide by the Court of Appeals. The rule is set by three Court of Appeals decisions in the database. Mallela (2005, certified question): carriers may withhold payment from providers that are ineligible under 65-3.16 (a) (12) because nonphysicians own or control them, looking beyond the licensing documents for a willful and material failure to abide by licensing law; technical violations do not suffice. Carothers (2019): no common-law fraud or fraudulent intent is required; a material breach of the rule that the corporation be controlled by licensed professionals is enough, and the ultimate inquiry is control. Mayzenberg (2025, certified question, 6-1): professional misconduct short of ceding control to an unlicensed party (there, paying for referrals) is not a ground under the regulation. Lower courts therefore differ only in applying the rule to the evidence. Questions the Court of Appeals has not decided: the burden of proof (clear and convincing evidence was charged in Carothers and applied by some arbitrators and trial courts; the First Department and the Appellate Term have declined to decide between that and a preponderance). Before Carothers some trial courts required fraud-like conduct (e.g. 4522, 2017). Procedural questions (preclusion, waiver, discovery, verification, pre-April 2002 reach) are on the topic fraudulent-incorporation-procedure.

Leading authorities · Authority map · Decisions by court · Plain-text version (Markdown)

Leading authorities

State Farm Mut. Auto. Ins. Co. v Mallela (2005 NY Slip Op 02416) Court of Appeals, 2005Fraudulently incorporated providers are ineligible; insurers may look behind licensing papersUnder 11 NYCRR 65-3.16 (a) (12), a medical corporation fraudulently incorporated so that nonphysicians own or control it is not entitled to no-fault reimbursement even if licensed practitioners rendered proper care; carriers may look behind licensing documents, but only behavior tantamount to fraud, not technical violations, gives good cause to withhold. No fraud or unjust-enrichment claim lies for payments made before the regulation's April 4, 2002 effective date.
We hold that on the strength of this regulation, carriers may look beyond the face of licensing documents to identify willful and material failure to abide by state and local law.
Andrew Carothers, M.D., P.C. v Progressive Ins. Co. (2019 NY Slip Op 04643) Court of Appeals, 2019No fraud or intent required; control by unlicensed persons sufficesMallela does not require common-law fraud, fraudulent intent or conduct 'tantamount to fraud'; a jury finding that the professional corporation was in material breach of the requirement that it be controlled by licensed professionals is enough to make it ineligible. Control by nonprofessionals is distinct from mere fee-splitting. Admission of nonparties' Fifth Amendment invocations was at most harmless error.
Today we clarify that Mallela does not require a finding of fraud for the insurer to withhold payments to a medical service corporation improperly controlled by nonphysicians.
Later history: No later history found. It affirmed Carothers v Progressive (4566, App Div 2d Dept 2017), which affirmed the Appellate Term (6490, 2013).
Government Employees Ins. Co. v Mayzenberg (2025 NY Slip Op 06527) Court of Appeals, 2025Misconduct short of ceding control (referral payments) is not a groundAnswering a Second Circuit certified question, the Court deferred to DFS's reading of 65-3.16 (a) (12) as reaching only foundational licensing requirements: an insurer may not deny claims because a properly licensed provider paid for patient referrals or committed other professional misconduct that falls short of ceding control to an unlicensed party. It did not decide when a kickback scheme amounts to such a cession of control, as that argument was not raised.
an insurer may not deny a provider’s claim for reimbursement based on alleged professional misconduct that falls short of ceding control of a professional services corporation to an unlicensed party
One Beacon Ins. Group, LLC v Midland Med. Care, P.C. (2008 NY Slip Op 06813) Appellate Division, Second Department, 2008Second Department: PCs must be owned and controlled by licenseesA professional corporation actually controlled by a management company owned by unlicensed individuals is ineligible; the insurer's evidence of such control raised a triable issue defeating the physician owner's summary judgment motion.
State law mandates that professional service corporations be owned and controlled only by licensed professionals (see Business Corporation Law § 1503 [a]; §§ 1507, 1508), and that licensed professionals render the services provided by such corporations
Later history: Also an anchor of fraudulent-incorporation-procedure for its holding that Mallela discovery needs no 'good cause'.
Nationwide Affinity Ins. Co. of Am. v Acuhealth Acupuncture, P.C. (2017 NY Slip Op 08007) Appellate Division, Second Department, 2017Second Department: what proof shows control; guilty plea alone insufficientReversing a declaration for the insurers, the court held that a nonphysician's guilty plea to a general mail and health care fraud information, and forfeitable funds in the providers' accounts, did not show prima facie that he exercised dominion and control over the providers, shared their profits and losses, or had a significant role in managing them.
this evidence did not demonstrate, prima facie, that Anikeyev exercised dominion and control over the defendants and their assets and shared the risks, expenses, and interest in their profits and losses, or that he had a significant role in the guidance, management, and direction of their business
Matter of Allstate Prop. & Cas. Ins. Co. v New Way Massage Therapy P.C. (2015 NY Slip Op 09184) Appellate Division, First Department, 2015First Department: fee-sharing arrangement is not a no-fault defenseA fee-sharing arrangement, whether or not it is unprofessional conduct, is not a defense to a no-fault claim (contrasting Mallela's fraudulent incorporation); it is a matter for the state licensing board, so the master arbitrator's award for the provider was confirmed.
Whether or not the fee-sharing arrangement at issue constitutes unprofessional conduct (see 8 NYCRR 29.1 [b] [4]), it does not constitute a defense to a no-fault action
Later history: Leave to appeal denied, 28 NY3d 909 (2016), as noted in Carothers (3315), which distinguished it because control, not mere fee-splitting, was found there.
Matter of Medical Socy. of State of N.Y. v Serio 100 NY2d 854Upheld the 2001-2002 no-fault regulations, including 11 NYCRR 65-3.16 (a) (12), as within the Superintendent's authority; relied on in Mallela (footnote 3).Not in our database.
State Farm Mut. Auto. Ins. Co. v Mallela 372 F3d 500Certified the question answered in Mallela (10202).Not in our database.
Government Empls. Ins. Co. v Mayzenberg 121 F4th 404Certified the question answered in Mayzenberg (12932).Not in our database.
Business Corporation Law §§ 1503, 1507, 1508; Limited Liability Company Law §§ 1203, 1207; Education Law § 6507 (4) (c) statutesThe ownership, control and formation requirements whose willful and material breach makes a provider ineligible.Not in our database.

Authority map

Each circle is a decision on this question, placed by court and date; its colour is the position it took. Lines are citations between them. Select a circle (or find a decision by name) to see its links and summary. The same decisions are listed by court below the map.

Provider held ineligible: unlicensed ownership/control or improper formation provedEvidence of unlicensed ownership/control enough to proceed, but not resolvedInsurer's proof of unlicensed ownership/control insufficientAlleged conduct legally cannot support the ineligibility defenseRing: rules on the question, but another ground decided the caseContrasted, distinguished or limitedDeclined to follow, questioned, overruled or reversedCited Show ordinary citations

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How the rule was applied, by court

Court	Defense established	Triable issue	Defense not established	Not a Mallela ground	Total
Court of Appeals	1	0	0	1	2
Appellate Division, First Department	0	0	3	2	5
Appellate Division, Second Department	3	2	3	0	8
Appellate Term, First Department	1	2	1	1	5
Appellate Term, Second Department	7	9	6	4	26
Trial courts in the First Department	2	1	0	1	4
Trial courts in the Second Department	7	8	4	4	23
Trial courts in the Fourth Department	1	0	0	0	1

Decisions (74)

Every decision in our database that rules on this question: highest court first, then by department, newest first. 44 turn on it; the others rule on it alongside a different main ground (marked "also decides"). The one-sentence summaries describe what each court said on this question.

Court of Appeals (2 decisions)

Government Employees Ins. Co. v Mayzenberg (2025 NY Slip Op 06527) Leading case Court of Appeals, November 24, 2025Alleged conduct legally cannot support the ineligibility defenseHeld, deferring to DFS's rational reading of 65-3.16 (a) (12) as limited to foundational licensing requirements, that an insurer may not deny claims because a licensed provider paid for patient referrals or committed other misconduct short of ceding control.
Andrew Carothers, M.D., P.C. v Progressive Ins. Co. (2019 NY Slip Op 04643) Leading case Court of Appeals, June 11, 2019Provider held ineligible: unlicensed ownership/control or improper formation provedUpheld the jury finding that nonphysicians controlled the provider and took its profits, holding that ineligibility requires no common-law fraud or fraudulent intent, only a willful, material breach of the licensed-control requirement, which differs from mere fee-splitting.

Appellate Division, First Department (5 decisions)

Matter of Country-Wide Ins. Co. v TC Acupuncture, P.C. (2021 NY Slip Op 01120) Appellate Division, First Department, February 18, 2021Insurer's proof of unlicensed ownership/control insufficient (also decides)Reinstated the master arbitrator's award for the provider on the insurer's fraudulent incorporation defense, because applying an allegedly wrong burden of proof is an error of law that is not a ground for vacatur under CPLR 7511 (b).
Matter of Country-Wide Ins. Co. v Bay Needle Acupuncture, P.C. (2018 NY Slip Op 08238) Appellate Division, First Department, December 4, 2018Alleged conduct legally cannot support the ineligibility defenseHeld the insurer's defense, based on an alleged de facto owner's guilty plea to billing for more time than patients spent with the acupuncturist, was billing fraud rather than a Mallela defense and so was precludable by untimeliness.
Matter of Country-Wide Ins. Co. v Bay Needle Care Acupuncture, P.C. (2018 NY Slip Op 03929) Appellate Division, First Department, June 5, 2018Insurer's proof of unlicensed ownership/control insufficient (also decides)Left standing an arbitration award rejecting the insurer's defense because the insurer presented no evidence of fraudulent incorporation, so the award survived under either a clear-and-convincing or preponderance standard.
Country-Wide Ins. Co. v Valdan Acupuncture, P.C. (2017 NY Slip Op 04068) Appellate Division, First Department, May 23, 2017Insurer's proof of unlicensed ownership/control insufficient (also decides)Left standing an award rejecting the defense because the insurer's evidence, a guilty plea by the owner's husband that never mentioned the provider, sought to hold the owner responsible merely by association.
Matter of Allstate Prop. & Cas. Ins. Co. v New Way Massage Therapy P.C. (2015 NY Slip Op 09184) Leading case Appellate Division, First Department, December 10, 2015Alleged conduct legally cannot support the ineligibility defenseHeld that a fee-sharing arrangement, even if unprofessional conduct, was not a defense to a no-fault claim, unlike fraudulent incorporation, but a matter for the licensing board, so the master arbitrator's award was confirmed.

Appellate Division, Second Department (8 decisions)

Matter of V.S. Care Acupuncture, P.C. v Country-Wide Ins. Co. (2019 NY Slip Op 07265) Appellate Division, Second Department, October 9, 2019Insurer's proof of unlicensed ownership/control insufficient (also decides)Held the master arbitrator had no rational basis to find legal error in the arbitrator's rejection of the fraudulent incorporation defense for failure of proof, so the original award for the provider was confirmed.
Matter of V.S. Care Acupuncture, P.C. v Country-Wide Ins. Co. (2019 NY Slip Op 07264) Appellate Division, Second Department, October 9, 2019Provider held ineligible: unlicensed ownership/control or improper formation proved (also decides)Held that the master arbitrator's affirmance of the award finding the provider fraudulently incorporated had evidentiary support and was rational, so it was confirmed and the provider's petition denied.
Matter of Bay Needle Care Acupuncture v Country-Wide Ins. Co. (2019 NY Slip Op 07249) Appellate Division, Second Department, October 9, 2019Insurer's proof of unlicensed ownership/control insufficient (also decides)Held the master arbitrator exceeded his power by reweighing the evidence of fraudulent incorporation, so the arbitrator's award rejecting the defense for lack of credible evidence was confirmed.
Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co. (2019 NY Slip Op 07246) Appellate Division, Second Department, October 9, 2019Provider held ineligible: unlicensed ownership/control or improper formation proved (also decides)Confirmed a master arbitrator's award upholding a finding that the provider was fraudulently incorporated, because the insurer's evidence gave the award evidentiary support and a rational basis, even if the arbitrator erred on the law.
Nationwide Affinity Ins. Co. of Am. v Acuhealth Acupuncture, P.C. (2017 NY Slip Op 08007) Leading case Appellate Division, Second Department, November 15, 2017Insurer's proof of unlicensed ownership/control insufficientReversed summary judgment for the insurers because a nonphysician's guilty plea to a general fraud information, and forfeitable funds in the providers' accounts, did not show he owned, controlled or shared the providers' profits.
Carothers v Progressive Ins. Co. (2017 NY Slip Op 02614) Appellate Division, Second Department, April 5, 2017Provider held ineligible: unlicensed ownership/control or improper formation provedUpheld the verdict that nonphysicians were de facto owners who controlled the provider and funneled its profits through inflated leases, holding the defense requires no common-law fraud or fraudulent intent at incorporation.
Liberty Mut. Ins. Co. v Raia Med. Health, P.C. (2016 NY Slip Op 04916) Appellate Division, Second Department, June 22, 2016Evidence of unlicensed ownership/control enough to proceed, but not resolved (also decides)Upheld a preliminary injunction because the owner's admission he lacked radiology competence and an investigator's showing that the PC reincarnated a nonphysician-controlled predecessor established likely success on the ineligibility claim.
One Beacon Ins. Group, LLC v Midland Med. Care, P.C. (2008 NY Slip Op 06813) Leading case Appellate Division, Second Department, September 9, 2008Evidence of unlicensed ownership/control enough to proceed, but not resolvedDenied the physician owner summary judgment because the insurer's evidence raised an issue of fact whether a management company owned by unlicensed persons actually controlled the professional corporation, and allowed financial discovery without a showing of good cause.

Appellate Term, First Department (5 decisions)

Physical Performance Testing of NY v New York Cent. Mut. Fire Ins. Co. (2013 NY Slip Op 50581(U)) Appellate Term, First Department, April 11, 2013Provider held ineligible: unlicensed ownership/control or improper formation provedAffirmed summary judgment for the insurer because the billing entity was not a medical professional corporation or licensed provider, so under the licensing requirements its services were not reimbursable.
Bronx Multi Med. Care, P.C. v Kemper Cas. Ins. Co. (2008 NY Slip Op 51928(U)) Appellate Term, First Department, September 24, 2008Insurer's proof of unlicensed ownership/control insufficient (also decides)Held the insurer submitted no competent evidentiary proof supporting its fraudulent incorporation defense, so the defense did not defeat the provider's summary judgment motion.
Devonshire Surgical Facility v GEICO (2007 NY Slip Op 51308(U)) Appellate Term, First Department, July 2, 2007Evidence of unlicensed ownership/control enough to proceed, but not resolvedHeld the insurer's documentary submissions raised issues of fact whether the surgical facility complied with state licensing requirements under 65-3.16 (a) (12), so its partial summary judgment should have been denied.
Healthmakers Med. Group, P.C. v Travelers Indem. Co. (2006 NY Slip Op 52118(U)) Appellate Term, First Department, November 9, 2006Alleged conduct legally cannot support the ineligibility defenseAffirmed denial of the insurer's summary judgment, holding that a duly formed medical PC owned by a licensed physician may bill for licensed nonphysician employees; this is not an unauthorized business, and there was no proof of fraudulent licensing.
Pueblo Med. Treatment, P.C. v State Farm Mut. Ins. Co. (2006 NY Slip Op 51553(U)) Appellate Term, First Department, August 10, 2006Evidence of unlicensed ownership/control enough to proceed, but not resolved (also decides)Held the insurer's documentary submissions raised issues of fact on whether the provider was a fraudulently licensed corporation but were insufficient for judgment as a matter of law, and allowed related discovery.

Appellate Term, Second Department (26 decisions)

BR Clinton Chiropractic, P.C. v GEICO Ins. Co. (2020 NY Slip Op 20291) Appellate Term, Second Department, October 30, 2020Alleged conduct legally cannot support the ineligibility defenseHeld that the sole shareholder's later license revocation, and the corporation's failure to make him sever ties or repurchase his shares under BCL 1509-1510, did not bar the still-existing corporation from recovering for services rendered before revocation.
First Care Chiropractic of NJ, P.C. v Mvaic (2015 NY Slip Op 50677(U)) Appellate Term, Second Department, May 1, 2015Insurer's proof of unlicensed ownership/control insufficientHeld the insurer not entitled to dismissal because a foreign professional corporation may practice in New York, and the insurer failed to allege and prove the provider violated any foreign-PC requirement rendering it ineligible.
Andrew Carothers, M.D., P.C. v Progressive Ins. Co. (2013 NY Slip Op 23232) Appellate Term, Second Department, July 5, 2013Provider held ineligible: unlicensed ownership/control or improper formation provedUpheld the jury verdict that the provider was ineligible because unlicensed persons controlled it through hiring, management, billing, manipulated accounts and excessive rentals, holding the defense requires no fraud or fraudulent intent at incorporation.
A.B. Med. Servs., PLLC v National Grange Mut. Ins. Co. (2012 NY Slip Op 50154(U)) Appellate Term, Second Department, January 24, 2012Alleged conduct legally cannot support the ineligibility defenseHeld that the later suspension or revocation of the owner's medical license did not bar the PLLC from winding up its affairs and recovering for services rendered before the revocation.
Belt Parkway Imaging, P.C. v State Wide Ins. Co. (2010 NY Slip Op 52229(U)) Appellate Term, Second Department, December 20, 2010Insurer's proof of unlicensed ownership/control insufficientAffirmed judgment after trial for the providers because the record was devoid of facts showing any indicia of ownership or control by anyone other than their licensed professional, even under a preponderance standard.
Quality Med. Healthcare of NY, P.C. v NY Cent. Mut. Fire Ins. Co. (2010 NY Slip Op 20493) Appellate Term, Second Department, December 3, 2010Evidence of unlicensed ownership/control enough to proceed, but not resolved (also decides)Held the insurer's evidence raised a triable issue whether the provider's sole shareholder was certified to practice acupuncture when the billed services were rendered, so the trial could not be limited to the fee defense.
Astoria Wellness Med., P.C. v Progressive Northeastern Ins. Co. (2010 NY Slip Op 51333(U)) Appellate Term, Second Department, July 22, 2010Provider held ineligible: unlicensed ownership/control or improper formation provedHeld the provider ineligible for reimbursement because the professional corporation billing for acupuncture was solely owned by a doctor neither licensed nor certified to perform acupuncture, even though an employed licensed acupuncturist rendered the services.
Kipor Medicine, P.C. v GEICO (2010 NY Slip Op 51247(U)) Appellate Term, Second Department, July 16, 2010Alleged conduct legally cannot support the ineligibility defense (also decides)Denied leave to amend the answer because revocation of the provider's certificate of incorporation after its sole shareholder surrendered his license did not bar recovery for earlier services and was not akin to fraudulent incorporation.

Show all 26 decisions

Quality Med. Care, P.C. v New York Cent. Mut. Fire Ins. Co. (2010 NY Slip Op 50262(U)) Appellate Term, Second Department, February 19, 2010Provider held ineligible: unlicensed ownership/control or improper formation provedHeld a professional corporation solely owned by a physician not certified in acupuncture was ineligible for reimbursement for acupuncture by its employed licensed acupuncturist, as its formation violated Business Corporation Law requirements.
Bath Med. Supply, Inc. v Allstate Indem. Co. (2010 NY Slip Op 20059) Appellate Term, Second Department, February 19, 2010Insurer's proof of unlicensed ownership/control insufficient (also decides)Held an ineligibility defense was not precluded by the untimely denials, but the insurer offered no factual basis that the provider was improperly incorporated or unlicensed, so summary judgment for the provider was granted without further discovery.
A.B. Med. Servs., PLLC v Travelers Indem. Co. (2009 NY Slip Op 29510) Appellate Term, Second Department, December 9, 2009Alleged conduct legally cannot support the ineligibility defenseHeld that the suspension of the sole member's license after the services, which dissolved the professional LLC, did not bar the action, because the disqualified member could wind up its affairs and prosecute suits in its name.
Astoria Advanced Med., P.C. v Allstate Ins. Co. (2009 NY Slip Op 51729(U)) Appellate Term, Second Department, July 29, 2009Evidence of unlicensed ownership/control enough to proceed, but not resolved (also decides)Found the insurer raised an issue of fact as to the provider's Mallela eligibility, where its attorney was also its sole owner, and therefore upheld disqualifying him as counsel since he would likely be a key witness.
Great Wall Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 51571(U)) Appellate Term, Second Department, July 14, 2009Evidence of unlicensed ownership/control enough to proceed, but not resolved (also decides)Held the insurer made a prima facie showing of a potentially meritorious defense that the provider was ineligible for reimbursement, supporting vacatur of the default judgment.
Uptodate Med. Servs., P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 29164) Appellate Term, Second Department, April 20, 2009Provider held ineligible: unlicensed ownership/control or improper formation proved (also decides)Dismissed the complaint because an arbitrator's earlier finding, in a claim for a different assignor, that the provider was fraudulently incorporated and ineligible precluded relitigation; the provider did not show it lacked a full and fair opportunity to litigate.
Uptodate Med. Serv., P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 50046(U)) Appellate Term, Second Department, January 9, 2009Provider held ineligible: unlicensed ownership/control or improper formation proved (also decides)Dismissed the provider's action because a prior arbitration award finding it an ineligible, fraudulently incorporated professional corporation precluded relitigation, and the provider did not show it lacked a full and fair opportunity to litigate.
Midwood Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (2008 NY Slip Op 51551(U)) Appellate Term, Second Department, July 10, 2008Evidence of unlicensed ownership/control enough to proceed, but not resolved (also decides)Vacated the insurer's default because its special investigator's affidavit raised issues as to who really operated and controlled the provider, establishing a meritorious defense.
Multiquest, P.L.L.C. v Allstate Ins. Co. (2008 NY Slip Op 51531(U)) Appellate Term, Second Department, July 10, 2008Provider held ineligible: unlicensed ownership/control or improper formation provedGranted the insurer summary judgment because the provider performed psychological services in violation of Limited Liability Company Law §§ 1203 and 1207, holding 65-3.16 (a) (12) bars reimbursement even for services rendered before April 4, 2002.
S & B Neurocare, P.C. v GEICO Ins. Co. (2008 NY Slip Op 51450(U)) Appellate Term, Second Department, July 8, 2008Insurer's proof of unlicensed ownership/control insufficientDenied the insurer summary judgment because its claim that the provider's owner was not properly licensed as a New York physician was not established as a matter of law; alternative discovery was denied as untimely without a supporting affidavit.
Nagle Med. Plaza, P.C. v Allstate Ins. Co. (2008 NY Slip Op 50349(U)) Appellate Term, Second Department, February 26, 2008Insurer's proof of unlicensed ownership/control insufficientHeld the owner's EUO testimony, though showing ignorance of everyday operations, was inadequate to establish as a matter of law that a non-physician business manager was the true owner, so the insurer's summary judgment motion failed.
Multiquest, P.L.L.C. v Allstate Ins. Co. (2007 NY Slip Op 27366) Appellate Term, Second Department, September 12, 2007Provider held ineligible: unlicensed ownership/control or improper formation provedHeld the PLLC ineligible because its listed licensed psychologist was never a real member, violating the LLC Law's licensing requirements; the defense reached pre-2002 services and was neither waived nor precluded.
VA Acutherapy Acupuncture, P.C. v State Farm Ins. Co. (2007 NY Slip Op 51217(U)) Appellate Term, Second Department, June 15, 2007Evidence of unlicensed ownership/control enough to proceed, but not resolved (also decides)Held the insurer's opposition sufficient to raise an issue of fact as to whether the provider was fraudulently incorporated and so ineligible for reimbursement, defeating its summary judgment motion.
Boston Post Rd. Med. Imaging, P.C. v Progressive Ins. Co. (2007 NY Slip Op 51173(U)) Appellate Term, Second Department, June 7, 2007Evidence of unlicensed ownership/control enough to proceed, but not resolved (also decides)Held the insurer not entitled to summary judgment on ineligibility because the unsigned EUO transcript and allegations of profits channeled to related management and leasing companies left questions of fact about ownership and control.
Crossbay Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (2007 NY Slip Op 27135) Appellate Term, Second Department, March 28, 2007Evidence of unlicensed ownership/control enough to proceed, but not resolvedHeld the fraudulent-licensing defense nonwaivable and the insurer's opposition sufficient to raise issues as to who really operated and controlled the provider, so summary judgment was denied pending discovery.
Midwood Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (2007 NY Slip Op 50052(U)) Appellate Term, Second Department, January 8, 2007Evidence of unlicensed ownership/control enough to proceed, but not resolvedHeld the fraudulent-licensing defense nonwaivable and not subject to the 30-day preclusion rule, and that the insurer's papers raised issues as to who really controlled the provider, so summary judgment awaited discovery.
First Help Acupuncture P.C. v State Farm Ins. Co. (2006 NY Slip Op 51043(U)) Appellate Term, Second Department, May 30, 2006Evidence of unlicensed ownership/control enough to proceed, but not resolvedHeld the insurer's special investigator's report raised a triable issue whether the provider was fraudulently incorporated, a nonwaivable defense not subject to the 30-day preclusion rule, so the provider's summary judgment was denied.
A.B. Med. Servs. PLLC v Prudential Prop. & Cas. Ins. Co. (2006 NY Slip Op 50504(U)) Appellate Term, Second Department, March 27, 2006Insurer's proof of unlicensed ownership/control insufficient (also decides)Held the insurer's bare, conclusory assertion that the provider was not formed or operated in accordance with the Business Corporation Law raised no triable issue against the provider's unrebutted proof of a duly registered corporate presence.

Trial courts in the First Department (4 decisions)

Harvey Family Chiro PT & Acup, PLLC v Ameriprise Ins. Co. (2020 NY Slip Op 20136) Civil Court of the City of New York, Bronx County, June 15, 2020Evidence of unlicensed ownership/control enough to proceed, but not resolvedDenied the insurer's Mallela motion: fee splitting among licensed owners alone was not a licensing violation, but the chiropractor's 97% ownership raised a fact issue on control over services outside his license.
Devonshire Surgical Facility v AIU Ins. Co. (2007 NY Slip Op 51034(U)) Civil Court of the City of New York, New York County, May 21, 2007Alleged conduct legally cannot support the ineligibility defense (also decides)Held that a later license revocation for conduct in 1998 did not make the PC fraudulently incorporated, that billing fraud is precludable provider fraud, and that an unincorporated provider falls outside Mallela, so no discovery was warranted.
Devonshire Surgical Facility v Prudential Prop. & Cas. Co. (2006 NY Slip Op 52057(U)) Civil Court of the City of New York, New York County, October 25, 2006Provider held ineligible: unlicensed ownership/control or improper formation provedGranted the insurer leave to amend and partial summary judgment as to the surgical facility, because certified state records showed it was not incorporated or registered as required and it offered no proof of lawful formation; the regulation's 2002 effective date did not bar the defense.
Better Health Med. PLLC v Empire/Allcity Ins. Co. (2006 NY Slip Op 50571(U)) Civil Court of the City of New York, New York County, March 31, 2006Provider held ineligible: unlicensed ownership/control or improper formation proved (also decides)Upheld as rational an arbitration award denying the claim of a dissolved provider, based on adverse inferences about its relationship with a management group and dissolution through a criminal plea.

Trial courts in the Second Department (23 decisions)

Island Life Chiropractic Pain Care PLLC v Amica Mut. Ins. Co. (2019 NY Slip Op 51589(U)) Civil Court of the City of New York, Kings County, May 17, 2019Evidence of unlicensed ownership/control enough to proceed, but not resolvedHeld the improper-incorporation defense nonwaivable despite no denial on that ground, and that a prior court's finding that the provider was not properly incorporated raised material issues of fact on its corporate status.
Professional Chiropractic Care, P.C. v 21st Century Ins. Co. (2017 NY Slip Op 27380) District Court of Suffolk County, Third District, November 27, 2017Alleged conduct legally cannot support the ineligibility defenseHeld that a New York professional corporation's failure to obtain a New Jersey certificate of authority was a technical violation, not a licensing defect under 65-3.16 (a) (12) or fraud amounting to good cause to withhold payment.
Shirom Acupuncture, P.C. v Country-wide Ins. Co. (2017 NY Slip Op 51412(U)) District Court of Suffolk County, Third District, October 16, 2017Insurer's proof of unlicensed ownership/control insufficient (also decides)Vacated a master arbitrator's remand for consideration of the Mallela defense, holding the arbitrator's award for the provider rational and supported by the record, since an arbitrator need not state the basis for its award.
Matter of New Century Acupuncture P.C. v Country Wide Ins. Co. (2015 NY Slip Op 50919(U)) District Court of Suffolk County, Third District, June 18, 2015Provider held ineligible: unlicensed ownership/control or improper formation provedConfirmed an award finding the provider ineligible because of ownership and control violations, rejecting the argument that the defense required clear and convincing proof rather than a preponderance.
H & H Chiropractic Servs., P.C. v Metropolitan Prop. & Cas. Ins. Co. (2015 NY Slip Op 25132) Civil Court of the City of New York, Queens County, April 24, 2015Alleged conduct legally cannot support the ineligibility defenseHeld that paying the billing company a percentage of collections, as impermissible fee-splitting standing alone, was not a licensing violation or no-fault defense, absent fraudulent filings or non-physician control; it was for the licensing board.
AR Med. Rehabilitation, P.C. v GEICO Gen. Ins. Co. (2013 NY Slip Op 50510(U)) Civil Court of the City of New York, Kings County, March 27, 2013Insurer's proof of unlicensed ownership/control insufficient (also decides)Denied the insurer's pretrial motion to dismiss on the ground that lay persons controlled the provider, because the federal, criminal and disciplinary rulings it submitted made no finding that the provider was unlawfully formed or controlled.
Alev Med. Supply, Inc. v Progressive Ins. Co. (2010 NY Slip Op 50813(U)) Nassau District Court, First District, May 3, 2010Alleged conduct legally cannot support the ineligibility defense (also decides)Held a Mallela defense inapplicable to a medical supply business corporation, whose owner need not be licensed, and unpleaded in any event, so discovery demands on Mallela matters were palpably improper.
Matter of Andrew Carothers, M.D., P.C. v Insurance Cos. Represented by Bruno Gerbino & Soriano, LLP (2009 NY Slip Op 29413) Civil Court of the City of New York, Richmond County, October 14, 2009Provider held ineligible: unlicensed ownership/control or improper formation provedUpheld a jury verdict that the provider was fraudulently incorporated because unlicensed persons owned and controlled it and its nominal owner did not practice through it, holding no common-law fraud elements and no time-of-incorporation limit were required.

Show all 23 decisions

Autoone Ins. Co. v Manhattan Hgts. Med., P.C. (2009 NY Slip Op 51663(U)) Supreme Court, Queens County, July 31, 2009Evidence of unlicensed ownership/control enough to proceed, but not resolved (also decides)Granted insurers a preliminary injunction against the providers' pending suits and arbitrations, finding investigator affidavits and deposition transcripts showed prima facie that the licensed physicians did not truly own and operate the providers.
Utica Natl. Ins. Group v Luban (2008 NY Slip Op 52610(U)) Supreme Court, Queens County, November 24, 2008Provider held ineligible: unlicensed ownership/control or improper formation provedGranted the insurer summary judgment recouping post-April 2002 payments because the nominal owner's consent orders established that unlicensed persons controlled the corporations, holding intent to defraud at incorporation immaterial.
Manhattan Med. Imaging, P.C. v State Farm Mut. Auto. Ins. Co. (2008 NY Slip Op 51844(U)) Civil Court of the City of New York, Richmond County, September 4, 2008Evidence of unlicensed ownership/control enough to proceed, but not resolvedHeld the defense not precludable despite late denials, Fair Price notwithstanding, and found incorporation records and testimony that a non-physician co-owned the provider raised an issue of fact on unlicensed control.
One Beacon Ins. Group, LLC v Halima (2008 NY Slip Op 52715(U)) Supreme Court, Suffolk County, July 15, 2008Evidence of unlicensed ownership/control enough to proceed, but not resolved (also decides)Granted a preliminary injunction staying no-fault proceedings and payments, unconditionally against defaulters and against appearing defendants unless they proved licensed ownership, finding likely success because a cooperating physician's affidavit showed laypersons controlled the clinics.
A.B. Med. Servs. PLLC v Travelers Indem. Co. (2008 NY Slip Op 28185) District Court of Nassau County, Third District, May 19, 2008Insurer's proof of unlicensed ownership/control insufficientDenied the insurer's cross motion, holding that the sole member's license suspension after formation did not make the properly formed PLLC fraudulently formed under Mallela. Because of the suspension, it still found the PLLC must dissolve and lacked authority to maintain the action.
Multiquest, P.L.L.C. v Allstate Ins. Co. (2007 NY Slip Op 51776(U)) Nassau District Court, September 20, 2007Provider held ineligible: unlicensed ownership/control or improper formation provedGranted the insurer summary judgment because unrebutted evidence showed the PLLC was formed with a sham psychologist member and remained owned by non-psychologists on the service dates, barring reimbursement even for pre-April 2002 services.
St. Paul Travelers Ins. Co. v Nandi (2007 NY Slip Op 51154(U)) Supreme Court, Queens County, May 25, 2007Evidence of unlicensed ownership/control enough to proceed, but not resolved (also decides)Found the insurer's depositions, nominee owners' affidavits and documents showed a likelihood of success that at least some provider corporations were fraudulently incorporated or not authorized to perform acupuncture, supporting a preliminary injunction against their collection suits.
Citywide Social Work & Psychological Servs., P.L.L.C. v State Farm Mut. Auto. Ins. Co. (2006 NY Slip Op 51831(U)) Suffolk District Court, September 26, 2006Evidence of unlicensed ownership/control enough to proceed, but not resolvedHeld the ownership-based ineligibility defense not precluded by the untimely denial and found the investigator's affidavit and documents that the PLLC was owned by laypersons raised a triable issue, so the provider's summary judgment was denied.
Montgomery Med., P.C. v State Farm Ins. Co. (2006 NY Slip Op 51116(U)) Nassau District Court, June 13, 2006Evidence of unlicensed ownership/control enough to proceed, but not resolvedHeld the owner's certified deposition testimony that a non-physician management company received a fixed monthly fee, supplied staff and equipment and handled billing raised a fact issue on fraudulent incorporation, defeating the provider's summary judgment, though insufficient for the insurer's.
Montgomery Med., P.C. v State Farm Ins. Co. (2006 NY Slip Op 51003(U)) Nassau District Court, May 31, 2006Evidence of unlicensed ownership/control enough to proceed, but not resolvedHeld the owner's EUO testimony that a non-physician management company paid a fixed $40,000-plus monthly fee supplied staff and equipment, and that he knew little of billing or practice, raised a fact question on fraudulent incorporation precluding summary judgment for the provider.
A.T. Med., P.C. v State Farm Mut. Ins. Co. (2005 NY Slip Op 25461) Civil Court of the City of New York, Queens County, September 14, 2005Provider held ineligible: unlicensed ownership/control or improper formation provedGranted the insurer summary judgment because the provider shared up to 65% of its revenue with a nonphysician-owned company, and held 65-3.16 (a) (12) clarifies prior law, so it bars unpaid claims for pre-April 2002 services.
Multiquest, PLLC v Allstate Ins. Co. (2005 NY Slip Op 25356) Civil Court, Queens County, August 30, 2005Provider held ineligible: unlicensed ownership/control or improper formation provedHeld the provider ineligible because uncontroverted evidence showed its articles falsely listed a psychologist as owner, applying 65-3.16 (a) (12) to pre-2002 claims and treating licensing as a coverage condition surviving an untimely denial.
RDK Med. P.C. v General Assur. Co. (2005 NY Slip Op 51281(U)) Civil Court of the City of New York, Kings County, August 12, 2005Insurer's proof of unlicensed ownership/control insufficient (also decides)Held that nothing in the arbitration record supported a finding that the provider was an ineligible fraudulently incorporated enterprise, so the master arbitration award could not be upheld on that basis.
563 Grand Med., P.C. v Allstate Ins. Co. (2005 NY Slip Op 50127(U)) Civil Court, Kings County, February 8, 2005Provider held ineligible: unlicensed ownership/control or improper formation provedHeld a professional corporation whose sole owner was a physician not licensed or certified in acupuncture could not bill for acupuncture, because such a corporation must be owned by persons licensed to practice acupuncture.
CKC Chiropractic v Republic W. Ins. Co. (2004 NY Slip Op 24351) Civil Court of the City of New York, Kings County, September 23, 2004Alleged conduct legally cannot support the ineligibility defenseHeld that a provider registered and licensed when it rendered the services remains eligible for reimbursement under 65-3.16 (a) (12) even though its registration later lapsed, so the insurer's ineligibility defense failed as a matter of law.

Trial courts in the Fourth Department (1 decision)

Proscan Radiology of Buffalo v Progressive Cas. Ins. Co. (2006 NY Slip Op 51242(U)) City Court of Buffalo, June 27, 2006Provider held ineligible: unlicensed ownership/control or improper formation provedHeld the billing entity, shown by state records not to be licensed to practice medicine in New York, was ineligible for reimbursement under 65-3.16 (a) (12), a defense not waived by omission from the denial.

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