May the insurer raise and investigate a Mallela (fraudulent incorporation) defense, or is it precluded, waived or denied discovery?

A decision decides this question when it rules on whether the insurer may pursue a Mallela ground (ineligibility under 11 NYCRR 65-3.16 [a] [12] because of who owns, controls or formed the provider) in the case before it, without deciding whether the provider is in fact ineligible: whether the defense is precluded by an untimely or absent denial or waived by not pleading it; whether leave to amend the answer to add it is granted; whether discovery, depositions, subpoenas, EUO questions or claim-verification requests aimed at ownership, control and finances are allowed, and on what showing (good cause, founded belief, case-specific or detailed allegations, good-faith basis); whether the provider's failure to object or to comply with such demands leads to an order to produce, a CPLR 3212 (f) denial or dismissal; whether collateral estoppel or a prior ruling bars or does not bar the defense; whether an arbitrator may refuse to hear it; whether it reaches bills for services before April 4, 2002; and whether an insurer's declaratory or recoupment claim on this ground may proceed.

Settled at the Appellate Division, no conflicting department. The Court of Appeals has not decided the procedural questions. Mallela (2005) said, without it being the question certified, that carriers may delay payment to investigate only for good cause and, in the licensing context, must show behavior tantamount to fraud; Carothers (2019) later held fraud is not required for the defense itself. The settled rules come from the Second Department: the defense is not precluded by an untimely denial (Acuhealth, 4564 [2017], reviewing a master arbitrator; the Appellate Term since 2006: 9782, 9748, 9624, 9256, 16609, 4294) and is not waived by failing to plead it (16609, 7508, 6988); discovery in a declaratory action needs no 'good cause' (One Beacon, 8832 [2008]); in collection actions the Appellate Term allows Mallela discovery on 'sufficient allegations' or 'detailed and specific reasons' (16609, 8586, 8468), not on conclusory ones (7508), and treats unchallenged demands as not palpably improper because the defense is not precludable (4294, 17491, 3559); and since 2025 it holds that ownership and finance documents may be requested as claim verification (Burke, 11424 and the series 11422-11647). Limits: an arbitrator may still refuse a late-submitted Mallela defense (Acuhealth, 3299 [2019]). The First Department has only assumed non-preclusion (Valdan, 4556 [2017]) and held a billing-fraud defense labelled Mallela precludable (Bay Needle, 3808 [2018]); its Appellate Term requires good cause or case-specific allegations before discovery (9516 [2006], 6820 [2012]). The threshold for discovery is worded differently across courts (good cause, founded belief, good-faith or reasonable basis, case-specific allegations), but no appellate court in either department allows Mallela discovery on mere suspicion. Trial courts split on verification-stage demands before 2025 (against: 7954, 7188, 6928, 7064, 6856, 6824, 4520; 11259 [2024, First Department trial court] still treats EUO document demands as pre-action discovery; for: 2159, 3267, 2161).

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, 2005Carriers may investigate licensing, but delay payment only for good causeCarriers may look beyond licensing documents to withhold payment from fraudulently incorporated providers; the regulations allow them to delay payment to investigate only for good cause, which in the licensing context requires behavior tantamount to fraud, not technical violations. No fraud or unjust-enrichment claim lies for payments made before April 4, 2002.
demand that carriers delay the payment of claims to pursue investigations solely for good cause (see 11 NYCRR 65-3.2 [c]). In the licensing context, carriers will be unable to show “good cause” unless they can demonstrate behavior tantamount to fraud.
Later history: Carothers (3315, 2019) clarified that Mallela does not require a finding of fraud for the defense itself. Lower courts disagree whether the good-cause passage governs litigation discovery (no: One Beacon, 8832; 16106) or only claim verification.
Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co. (2017 NY Slip Op 02785) Appellate Division, Second Department, 2017Second Department: Mallela defense not precluded by untimely denialA master arbitrator correctly held that an arbitrator erred in treating the carrier's fraudulent incorporation (Mallela) defense as precluded because it was not raised in a timely denial; the master arbitrator's award was reinstated.
the master arbitrator correctly found that the arbitrator had erroneously held that the carrier’s claim of fraudulent incorporation (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, 322 [2005]), was precluded because it was not raised in a timely denial
Later history: Followed by the Appellate Term (4294, 17491, 3559). In a separate Acuhealth proceeding (3299, 2019) the Second Department held an arbitrator may refuse to consider a late-submitted Mallela defense. The First Department has only assumed non-preclusion (4556, 2017).
One Beacon Ins. Group, LLC v Midland Med. Care, P.C. (2008 NY Slip Op 06813) Appellate Division, Second Department, 2008Second Department: no good cause needed for Mallela discoveryIn an insurer's declaratory action, financial discovery on the fraudulent-incorporation claims was properly ordered; the insurer did not have to show 'good cause' under Mallela because the documents were material and necessary under CPLR 3101 (a).
The Supreme Court properly granted that branch of the plaintiffs’ cross motion which was for disclosure of certain financial documents. Contrary to the appellants’ contention, the plaintiffs were not required to make a showing of “good cause” for such disclosure
Later history: Also an anchor of fraudulent-incorporation for its ownership/control holding (triable issue).
Lexington Acupuncture, P.C. v General Assur. Co. (2012 NY Slip Op 22047) Appellate Term, Second Department, 2012Discovery allowed on sufficient allegations; defense non-waivable even unpleadedAlthough the insurer never pleaded or moved to add a Mallela defense, its allegations (investigator affidavits tying the owner to insurance-fraud figures) were sufficient to compel financial discovery and the owner's deposition; a Mallela defense is nonwaivable and may be asserted at any time notwithstanding the absence of a timely denial.
Where, as here, an insurer requests discovery concerning a Mallela defense, the request should be granted as long as there are sufficient allegations supporting such a defense
Later history: Cited by the Appellate Division in Acuhealth (4564, 2017).
Pomona Med. Diagnostic P.C. v Adirondack Ins. Co. (2012 NY Slip Op 51165(U)) Appellate Term, First Department, 2012First Department: no Mallela discovery without case-specific allegationsAn order compelling discovery was reversed: the insurer set forth no case-specific allegations supporting its fraudulent-incorporation defense and could not use pretrial discovery as a fishing expedition on mere suspicions.
Nor has defendant set forth any case-specific allegations in support of its defense that plaintiff was fraudulently incorporated so as to justify discovery on this issue
Later history: Followed by trial courts (2573, 3267, 6284) and quoted by the Appellate Term in 15793 (2026).
Burke 2 Physical Therapy, P.C. v State Farm Mut. Auto. Ins. Co. (2025 NY Slip Op 50195(U)) Appellate Term, Second Department, 2025Mallela documents may be requested as claim verificationThe insurer properly requested management agreements, W-2 forms, bank records and leases during claim verification to determine whether the provider was ineligible under the licensing rules; otherwise insurers would have to pay and sue for recoupment or wait for litigation and risk interest and fees. The provider's objection that the requests were nullities was no reasonable justification, so the complaint was dismissed.
it was not improper for defendant to seek, during the claim verification stage, information—such as management agreements, W-2 forms, business-related bank records and lease agreements—for the purpose of determining whether plaintiff was ineligible to collect no-fault benefits due to a failure to meet licensing requirements
Later history: Decided with Burke 11422 and 11426 (2025) and followed in 11479, 11622, 11637, 11647 and trial decisions 11498 (2025) and 15736 (2026).
Central Gen. Hosp. v Chubb Group of Ins. Cos. 90 NY2d 195Lack-of-coverage exception to preclusion; the Appellate Term relied on it in holding the Mallela defense not precluded (9782).Not in our database.
Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co. 90 NY2d 274The 30-day preclusion rule the Mallela defense is held to escape.Not in our database.
11 NYCRR 65-3.2 (c), 65-3.5 (b), (o) regulationsGood-reason requirement for verification and the verification procedure under which Mallela documents are requested (Mallela; Burke).Not in our database.
CPLR 3101 (a), 3025 (b), 3122 (a), 3212 (f), 3126 statutesMaterial-and-necessary discovery, leave to amend, time to object to demands, premature summary judgment, and sanctions for refusing disclosure: the provisions most Mallela procedure decisions apply.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.

Insurer may raise or investigate the Mallela defense hereInsurer may not pursue or investigate the Mallela defense hereRing: 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 may be pursued	Defense barred	Total
Court of Appeals	1	0	1
Appellate Division, First Department	5	1	6
Appellate Division, Second Department	6	1	7
Appellate Term, First Department	1	2	3
Appellate Term, Second Department	69	3	72
Trial courts in the First Department	10	4	14
Trial courts in the Second Department	36	19	55
Trial courts in the Third Department	0	1	1

Decisions (159)

Every decision in our database that rules on this question: highest court first, then by department, newest first. 46 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 (1 decision)

State Farm Mut. Auto. Ins. Co. v Mallela (2005 NY Slip Op 02416) Leading case Court of Appeals, March 29, 2005Insurer may raise or investigate the Mallela defense hereHeld that medical corporations fraudulently incorporated so nonphysicians own or control them are ineligible for reimbursement and carriers may look behind licensing documents, though only conduct tantamount to fraud, not technical violations, justifies withholding.

Appellate Division, First Department (6 decisions)

Matter of Country-Wide Ins. Co. v Bay Needle Acupuncture, P.C. (2018 NY Slip Op 08238) Appellate Division, First Department, December 4, 2018Insurer may not pursue or investigate the Mallela defense here (also decides)Left standing the arbitrator's refusal to accept untimely opposition papers asserting the defense, because a billing-fraud guilty plea by the alleged de facto owner supported only a services-not-rendered defense, not a non-precludable Mallela defense.
Country-Wide Ins. Co. v Gotham Med., P.C. (2017 NY Slip Op 07538) Appellate Division, First Department, October 26, 2017Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer could question the principal at an EUO about compliance with his license-monitoring order, because unmonitored practice would be unauthorized and an unlicensed provider is ineligible for reimbursement.
Uptown Healthcare Mgt. Inc. v Allstate Ins. Co. (2014 NY Slip Op 03594) Appellate Division, First Department, May 15, 2014Insurer may raise or investigate the Mallela defense hereDismissed the providers' suit challenging the insurer's investigation into whether they were fraudulently licensed and ineligible for reimbursement, holding the insurer plainly had the right to investigate that question.
Matter of Countrywide Ins. Co. v DHD Med., P.C. (2011 NY Slip Op 05864) Appellate Division, First Department, July 7, 2011Insurer may raise or investigate the Mallela defense hereRefused to stay arbitration on the ground that the provider was fraudulently incorporated, holding that the defense is for the arbitrator to decide in the arbitration, not a basis for a court to bar arbitration.
Allstate Ins. Co. v Belt Parkway Imaging, P.C. (2010 NY Slip Op 08783) Appellate Division, First Department, November 30, 2010Insurer may raise or investigate the Mallela defense hereHeld that Insurance Law § 5109 did not overrule Mallela or reserve action against fraudulently incorporated providers to the Superintendent, so insurers may still pursue such claims; the providers' partial summary judgment was denied.
Allstate Ins. Co. v Belt Parkway Imaging, P.C. (2006 NY Slip Op 07279) Appellate Division, First Department, October 12, 2006Insurer may raise or investigate the Mallela defense hereHeld the ineligibility regulation bars payment of unpaid bills for services rendered before April 4, 2002, applying it retroactively as remedial anti-fraud regulation, so the insurers' corporate-form defenses survived; recoupment of pre-2002 payments was barred.

Appellate Division, Second Department (7 decisions)

State Farm Mut. Auto. Ins. Co. v Anikeyeva (2021 NY Slip Op 04728) Appellate Division, Second Department, August 18, 2021Insurer may raise or investigate the Mallela defense hereAffirmed a preliminary injunction barring enforcement of an earlier collection judgment, holding the insurer's attack on it fell within the larger-fraudulent-scheme exception to the collateral-attack bar given the owner's federal guilty plea for running unlawfully owned clinics.
Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co. (2019 NY Slip Op 07246) Appellate Division, Second Department, October 9, 2019Insurer may raise or investigate the Mallela defense here (also decides)Held that a prior unexplained order vacating a different master arbitrator's award had no collateral estoppel effect, because it did not show the same issue was necessarily decided, so the award sustaining the fraudulent-incorporation defense stood.
Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co. (2019 NY Slip Op 07245) Appellate Division, Second Department, October 9, 2019Insurer may not pursue or investigate the Mallela defense here (also decides)Held the arbitrator properly refused to consider the late-submitted fraudulent incorporation defense, and the master arbitrator exceeded his power by deciding that defense de novo, so the award for the provider was confirmed.
Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co. (2017 NY Slip Op 02785) Leading case Appellate Division, Second Department, April 12, 2017Insurer may raise or investigate the Mallela defense hereHeld the arbitrator erred in treating the insurer's fraudulent incorporation defense as precluded for lack of a timely denial, so the master arbitrator's vacatur for refusing to consider the defense was reinstated.
Liberty Mut. Ins. Co. v Raia Med. Health, P.C. (2016 NY Slip Op 04916) Appellate Division, Second Department, June 22, 2016Insurer may raise or investigate the Mallela defense here (also decides)Upheld a preliminary injunction staying the provider's suits and arbitrations and the denial of arbitration, letting the insurer's declaratory action on unlicensed control proceed, because it showed likely success and irreparable harm from many proceedings.
State Farm Mut. Auto. Ins. Co. v Anikeyeva (2011 NY Slip Op 08580) Appellate Division, Second Department, November 22, 2011Insurer may raise or investigate the Mallela defense hereHeld the insurer's cause of action seeking a declaration that the acupuncture corporations were unlawfully incorporated and ineligible for no-fault benefits stated a justiciable controversy, so dismissal under CPLR 3211 (a) (7) was properly denied.
One Beacon Ins. Group, LLC v Midland Med. Care, P.C. (2008 NY Slip Op 06813) Leading case Appellate Division, Second Department, September 9, 2008Insurer may raise or investigate the Mallela defense hereHeld financial-document discovery on the insurer's fraudulent-incorporation claims properly ordered because the insurer need not show good cause; the documents were material and necessary to prosecuting the action.

Appellate Term, First Department (3 decisions)

Pomona Med. Diagnostic P.C. v Adirondack Ins. Co. (2012 NY Slip Op 51165(U)) Leading case Appellate Term, First Department, June 25, 2012Insurer may not pursue or investigate the Mallela defense here (also decides)Denied the insurer's motion to compel discovery on fraudulent incorporation because it set forth no case-specific allegations supporting the defense and could not use discovery as a fishing expedition on mere suspicions.
Pueblo Med. Treatment, P.C. v State Farm Mut. Ins. Co. (2006 NY Slip Op 51553(U)) Appellate Term, First Department, August 10, 2006Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer entitled to discovery relevant to its fraudulent-licensing and independent-contractor defenses, directing the provider to answer specified interrogatories and document demands and to produce its physician for deposition.
Statewide Med. Acupuncture, P.C. v Travelers Ins. Co. (2006 NY Slip Op 51515(U)) Appellate Term, First Department, August 2, 2006Insurer may not pursue or investigate the Mallela defense here (also decides)Held the insurer not entitled to disclosure on a fraudulent-incorporation defense because it failed to meet the threshold requirement of good cause.

Appellate Term, Second Department (72 decisions)

Burke 2 Physical Therapy, P.C. v State Farm Mut. Auto. Ins. Co. (2025 NY Slip Op 51152(U)) Appellate Term, Second Department, June 20, 2025Insurer may raise or investigate the Mallela defense here (also decides)Held it was not improper for the insurer to seek management agreements, W-2 forms, bank records and leases during claim verification to determine whether the provider was ineligible under licensing requirements.
Burke Physical Therapy, P.C. v State Farm Mut. Auto. Ins. Co. (2025 NY Slip Op 50845(U)) Appellate Term, Second Department, May 16, 2025Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer properly sought management agreements, W-2 forms, bank records and leases during claim verification to determine whether the provider was ineligible for failure to meet licensing requirements.
Burke Physical Therapy, P.C. v State Farm Mut. Auto. Ins. Co. (2025 NY Slip Op 50836(U)) Appellate Term, Second Department, May 16, 2025Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer properly sought management agreements, W-2 forms, bank records and leases during verification to determine whether the provider was ineligible for failing licensing requirements, supporting dismissal for unanswered verification.
Burke 2 Physical Therapy, P.C. v State Farm Mut. Auto. Ins. Co. (2025 NY Slip Op 50306(U)) Appellate Term, Second Department, March 7, 2025Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer's verification requests for management agreements, W-2 forms, bank records and leases, sent to determine whether the provider failed licensing requirements, were not improper.
Burke Physical Therapy, P.C. v State Farm Mut. Auto. Ins. Co. (2025 NY Slip Op 50194(U)) Appellate Term, Second Department, February 14, 2025Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer could properly request management agreements, W-2 forms, bank records and leases during claim verification to determine whether the provider was ineligible for failing licensing requirements.
Burke 2 Physical Therapy, P.C. v State Farm Mut. Auto. Ins. Co. (2025 NY Slip Op 50195(U)) Leading case Appellate Term, Second Department, February 14, 2025Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer properly sought management agreements, W-2 forms, bank records and leases during claim verification to determine whether the provider was ineligible for failing licensing requirements, rather than waiting for litigation discovery.
Burke Physical Therapy, P.C. v State Farm Mut. Auto. Ins. Co. (2025 NY Slip Op 50196(U)) Appellate Term, Second Department, February 14, 2025Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer could properly request management agreements, W-2 forms, bank records and leases at the verification stage to determine whether the provider was ineligible for failure to meet licensing requirements.
Queens-Roosevelt Med. Rehabilitation, P.C. v Response Ins. Co. (2019 NY Slip Op 50608(U)) Appellate Term, Second Department, March 8, 2019Insurer may raise or investigate the Mallela defense here (also decides)Held that deposition questions about the owner's involvement and time at other medical corporations were material to whether he was the provider's bona fide owner and operator, so refusing to answer them warranted striking the complaint.

Show all 72 decisions

Parisien v 21st Century Ins. Co. (2018 NY Slip Op 51081(U)) Appellate Term, Second Department, July 6, 2018Insurer may raise or investigate the Mallela defense here (also decides)Held that discovery of management agreements, W-2s, bank records, leases and the provider's deposition was proper because the licensing-ineligibility defense is not precludable and the provider had not timely objected to the demands.
J.K.M. Med. Care, P.C. v USAA Gen. Indem. Co. (2018 NY Slip Op 50818(U)) Appellate Term, Second Department, June 1, 2018Insurer may raise or investigate the Mallela defense hereCompelled the provider to answer discovery on the Mallela defense because it had not timely objected, and the demands were not palpably improper since the defense is not precludable.
K.O. Med., P.C. v USAA Cas. Ins. Co. (2017 NY Slip Op 51089(U)) Appellate Term, Second Department, August 18, 2017Insurer may raise or investigate the Mallela defense hereHeld the defense need not be preserved in a timely denial and is not subject to the preclusion rule, so discovery demands relevant to it were not palpably improper and were properly compelled.
Clinton Place Med., P.C. v USAA Cas. Ins. Co. (2017 NY Slip Op 51012(U)) Appellate Term, Second Department, August 11, 2017Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer's demands for tax forms, bank records, management and rental agreements and an examination of the provider's owner were not palpably improper, rendering the provider's summary judgment motion premature.
Jamhil Med., P.C. v Allstate Ins. Co. (2014 NY Slip Op 51028(U)) Appellate Term, Second Department, July 1, 2014Insurer may raise or investigate the Mallela defense here (also decides)Upheld dismissal for the provider's willful failure to produce its owner and employee for depositions ordered on the insurer's licensing-ineligibility defense, which the insurer had supported with detailed and specific reasons.
All Boro Psychological Servs., P.C. v Allstate Ins. Co. (2014 NY Slip Op 50870(U)) Appellate Term, Second Department, May 22, 2014Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer entitled to Mallela discovery and depositions of the provider's owner and another individual because the demands were material and necessary, and earlier stipulations of licensing compliance in unrelated actions had no collateral estoppel effect.
Jamaica Dedicated Med. Care, P.C. v Allstate Ins. Co. (2013 NY Slip Op 51745(U)) Appellate Term, Second Department, October 15, 2013Insurer may raise or investigate the Mallela defense here (also decides)Upheld vacating the notice of trial and compelling discovery and the owner's deposition on the licensing-ineligibility defense, which was not precluded, because the insurer gave specific and detailed reasons for the discovery.
All Boro Psychological Servs., P.C. v Allstate Ins. Co. (2013 NY Slip Op 51124(U)) Appellate Term, Second Department, July 5, 2013Insurer may raise or investigate the Mallela defense hereHeld the provider must answer Mallela discovery and produce its owner and another individual for depositions because the fraudulent-incorporation defense is not precluded, so the demands were not palpably improper, and prior compliance stipulations had no estoppel effect.
Andrew Carothers, M.D., P.C. v Progressive Ins. Co. (2013 NY Slip Op 23232) Appellate Term, Second Department, July 5, 2013Insurer may raise or investigate the Mallela defense here (also decides)Held the ineligibility defense was not barred by res judicata from prior actions the provider won, because the claims differed and the defense was never actually litigated and determined in those actions.
Sigma Psychological, P.C. v Chubb Indem. Ins. Co. (2013 NY Slip Op 51107(U)) Appellate Term, Second Department, July 1, 2013Insurer may raise or investigate the Mallela defense here (also decides)Upheld dismissal for willful refusal to provide disclosure the insurer sought on its fraudulent-incorporation defense, which it supported with detailed and specific reasons, after a so-ordered stipulation and two court orders.
All Boro Psychological Servs., P.C. v Allstate Ins. Co. (2013 NY Slip Op 23043) Appellate Term, Second Department, February 8, 2013Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer gave detailed, specific reasons to believe the provider was ineligible under licensing laws, a defense not subject to preclusion, so it was entitled to financial-record discovery and an EBT, and summary judgment was properly denied under CPLR 3212 (f).
All Boro Psychological Servs., P.C. v Allstate Ins. Co. (2012 NY Slip Op 51775(U)) Appellate Term, Second Department, September 6, 2012Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer properly substantiated its fraudulent incorporation allegations to warrant disclosure, so compelling discovery and denying the provider's summary judgment motion was not an improvident exercise of discretion.
Medical Polis, P.C. v Progressive Ins. Co. (2012 NY Slip Op 50864(U)) Appellate Term, Second Department, May 11, 2012Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer could seek Mallela discovery and the owner's deposition despite not pleading the defense, because its moving papers sufficiently alleged licensing noncompliance, so the provider's summary judgment and protective-order motion were properly denied.
All Boro Psychological Services, P.C. v Auto One Ins. Co. (2012 NY Slip Op 50777(U)) Appellate Term, Second Department, April 27, 2012Insurer may raise or investigate the Mallela defense here (also decides)Held that the insurer gave detailed, specific reasons for believing the provider violated licensing laws, a defense not precluded, so it was entitled to the provider's tax, lease, management-agreement and distribution records.
VE Med. Care, P.C. v Auto One Ins. Co. (2012 NY Slip Op 50571(U)) Appellate Term, Second Department, April 2, 2012Insurer may raise or investigate the Mallela defense here (also decides)Upheld leave to amend the answer to add a fraudulent incorporation defense, which was not palpably insufficient, and compelled disclosure of tax documents because the insurer gave detailed, specific reasons to believe the provider failed licensing requirements.
Medical Polis, P.C. v Progressive Specialty Ins. Co. (2012 NY Slip Op 50342(U)) Appellate Term, Second Department, February 21, 2012Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer could obtain disclosure and an EBT of the owner on fraudulent incorporation although it never pleaded the defense, because the defense is nonwaivable and its investigator's affidavit made sufficient specific allegations.
Astoria Wellness Med., P.C. v Autoone Ins. Co. (2012 NY Slip Op 50340(U)) Appellate Term, Second Department, February 21, 2012Insurer may raise or investigate the Mallela defense here (also decides)Upheld leave to amend the answer to add the licensing-ineligibility defense absent prejudice or surprise, while striking the disclosure directive only because no supplemental demands had yet been served.
Lexington Acupuncture, P.C. v General Assur. Co. (2012 NY Slip Op 22047) Leading case Appellate Term, Second Department, February 21, 2012Insurer may raise or investigate the Mallela defense hereUpheld discovery of the provider's financial records and its owner's deposition because the insurer made sufficient allegations of fraudulent incorporation, and the Mallela defense is nonwaivable even though it was never pleaded.
Q-B Jewish Med. Rehabilitation, P.C. v Allstate Ins. Co. (2012 NY Slip Op 50152(U)) Appellate Term, Second Department, January 24, 2012Insurer may raise or investigate the Mallela defense here (also decides)Upheld compelled production of tax returns and W-2/1099 forms because the insurer gave detailed, specific reasons to believe the provider was ineligible under licensing laws, a defense that is not precluded.
Allstate Social Work & Psychological Svcs., PLLC v Auto One Ins. Co. (2011 NY Slip Op 52362(U)) Appellate Term, Second Department, December 23, 2011Insurer may raise or investigate the Mallela defense here (also decides)Recognized the insurer's detailed reasons for a non-precludable licensing-ineligibility defense, but denied the motion to compel supplemental demands as premature because the provider had not yet had a chance to respond.
Allstate Social Work & Psychological Servs., P.L.L.C. v Autoone Ins. Co. (2011 NY Slip Op 52295(U)) Appellate Term, Second Department, December 19, 2011Insurer may raise or investigate the Mallela defense here (also decides)Held demands for management agreements, leases and landlord identities were not palpably improper because the Mallela licensing defense is not precludable, so the provider, having failed to timely object, had to produce them (limited to 2002-2005).
Q-B Jewish Med. Rehabilitation, P.C. v Allstate Ins. Co. (2011 NY Slip Op 21390) Appellate Term, Second Department, October 28, 2011Insurer may raise or investigate the Mallela defense here (also decides)Compelled production of bank records, tax returns, payroll filings and W-2/1099 forms and an EBT of the owner because the insurer gave detailed reasons to suspect licensing ineligibility, a defense that is not precluded.
Queens Brooklyn Med. Rehab, P.C. v Allstate Ins. Co. (2011 NY Slip Op 52010(U)) Appellate Term, Second Department, October 27, 2011Insurer may raise or investigate the Mallela defense here (also decides)Upheld compelled disclosure of the provider's tax documents because the insurer gave detailed, specific reasons to believe the provider failed licensing requirements, establishing special circumstances.
Q-B Jewish Med. Rehabilitation, P.C. v Allstate Ins. Co. (2011 NY Slip Op 51551(U)) Appellate Term, Second Department, August 10, 2011Insurer may raise or investigate the Mallela defense here (also decides)Compelled production of bank records, tax returns, payroll filings and W-2/1099 forms and an EBT of the owner because the insurer gave detailed reasons to suspect licensing ineligibility, a defense that is not precluded.
Radiology Today, P.C. v GEICO Gen. Ins. Co. (2011 NY Slip Op 21161) Appellate Term, Second Department, April 26, 2011Insurer may raise or investigate the Mallela defense here (also decides)Held the Mallela defense was not waived or precluded by an untimely denial, need not be pleaded with particularity, and was shown potentially meritorious, so discovery was proper and dismissal for noncompliance was affirmed.
62-41 Woodhaven Med., P.C. v Adirondack Ins. Exch. (2011 NY Slip Op 50026(U)) Appellate Term, Second Department, January 10, 2011Insurer may raise or investigate the Mallela defense here (also decides)Upheld a conditional order compelling production of corporate and employee tax records because the insurer gave detailed, specific reasons to believe the provider failed licensing requirements, establishing special circumstances.
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, 2010Insurer may raise or investigate the Mallela defense here (also decides)Held the CPLR 3212 (g) order limiting trial to fee excessiveness had no basis, since neither the prima facie case nor the absence of other viable defenses was incontrovertible and the insurer raised a triable issue on the owner's acupuncture license, so the defense could be tried.
RLC Med., P.C. v Allstate Ins. Co. (2010 NY Slip Op 51962(U)) Appellate Term, Second Department, November 12, 2010Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer entitled to depose the provider's owner on its fraudulent incorporation defense and denied the provider summary judgment as premature because the facts needed to oppose were within the provider's possession.
AVA Acupuncture, P.C. v AutoOne Ins. Co. (2010 NY Slip Op 51350(U)) Appellate Term, Second Department, July 29, 2010Insurer may raise or investigate the Mallela defense here (also decides)Compelled the provider to produce financial records, management agreements and its corporate tax returns because the insurer gave detailed reasons to believe the provider was fraudulently incorporated, a defense not subject to preclusion.
Points of Health Acupuncture, P.C. v Lancer Ins. Co. (2010 NY Slip Op 51338(U)) Appellate Term, Second Department, July 22, 2010Insurer may raise or investigate the Mallela defense here (also decides)Held the fraudulent-incorporation defense non-precluded and made the provider's summary judgment motion premature under CPLR 3212 (f), compelling the provider to answer discovery on it because the facts were in the provider's possession.
Kipor Medicine, P.C. v GEICO (2010 NY Slip Op 51247(U)) Appellate Term, Second Department, July 16, 2010Insurer may not pursue or investigate the Mallela defense hereDenied leave to amend the answer to add an ineligibility defense based on revocation of incorporation after the owner surrendered his license, because nothing showed merit or facts akin to fraudulent incorporation; the owner's deposition was also denied.
Five Boro Psychological Servs., P.C. v AutoOne Ins. Co. (2010 NY Slip Op 20131) Appellate Term, Second Department, April 9, 2010Insurer may raise or investigate the Mallela defense here (also decides)Upheld discovery and depositions on the fraudulent incorporation defense, denying the provider summary judgment, and held the Civil Court may hear a Mallela defense because it does not amount to a declaratory judgment.
RLC Med., P.C. v Allstate Ins. Co. (2010 NY Slip Op 50642(U)) Appellate Term, Second Department, April 8, 2010Insurer may raise or investigate the Mallela defense here (also decides)Compelled discovery and the owner's deposition on the fraudulent incorporation defense, since the provider did not challenge the demands and the facts were in its possession, and denied the provider summary judgment pending that discovery.
B.Y., M.D., P.C. v Lancer Ins. Co. (2010 NY Slip Op 50493(U)) Appellate Term, Second Department, March 19, 2010Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer's demands seeking discovery for its fraudulent incorporation defense not palpably improper because that defense is not precluded, and compelled the provider to produce the documents and interrogatory answers.
Bath Med. Supply, Inc. v Allstate Indem. Co. (2010 NY Slip Op 20059) Appellate Term, Second Department, February 19, 2010Insurer may not pursue or investigate the Mallela defense here (also decides)Held the licensing-based ineligibility defense was not precluded by the lack of timely denials, but refused CPLR 3212 (f) discovery on it because the insurer offered no factual basis and licensing status was publicly documented.
New York First Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 52217(U)) Appellate Term, Second Department, October 23, 2009Insurer may raise or investigate the Mallela defense hereAllowed the insurer to amend its answer to add a fraudulent incorporation defense, holding it need not be raised in a timely denial, and compelled the owner's deposition on the provider's corporate structure.
Sharma Med. Servs., P.C. v Progressive Cas. Ins. Co. (2009 NY Slip Op 51591(U)) Appellate Term, Second Department, July 20, 2009Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer entitled to depose the provider's owner because it set forth detailed and specific reasons for believing the provider was a fraudulently incorporated professional corporation, and denied the provider a protective order.
Great Wall Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 51571(U)) Appellate Term, Second Department, July 14, 2009Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer entitled to vacate its default and serve a late answer because it showed a reasonable excuse and a potentially meritorious defense that the provider was ineligible for reimbursement.
Sweetwater Chiropractic, P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 51570(U)) Appellate Term, Second Department, July 14, 2009Insurer may raise or investigate the Mallela defense hereHeld the insurer properly allowed to amend its answer to plead that the provider was a fraudulently incorporated professional corporation lacking standing, since the defense was not palpably insufficient and caused no prejudice, and compelled related discovery.
New Era Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 51396(U)) Appellate Term, Second Department, June 29, 2009Insurer may raise or investigate the Mallela defense here (also decides)Held discovery of management and premises agreements, corporate tax returns and the owner's deposition proper because the fraudulent incorporation defense is not precluded, but denied the owner's personal tax returns absent a strong showing of need.
Uptodate Med. Servs., P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 29164) Appellate Term, Second Department, April 20, 2009Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer should have been granted leave to amend its answer to plead collateral estoppel based on a prior arbitration finding of fraudulent incorporation, because the provider showed no prejudice or surprise and the defense had merit.
RLC Med., P.C. v Allstate Prop. & Cas. Ins. Co. (2009 NY Slip Op 52691(U)) Appellate Term, Second Department, March 19, 2009Insurer may raise or investigate the Mallela defense here (also decides)Held summary judgment on one provider's claims properly denied under CPLR 3212(f) because facts needed for the fraudulent incorporation defense were in the provider's possession and it had not answered the insurer's discovery demands.
Uptodate Med. Serv., P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 50046(U)) Appellate Term, Second Department, January 9, 2009Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer should have been granted leave to amend its answer to plead collateral estoppel based on a prior arbitration finding of fraudulent incorporation, since the provider showed no prejudice and the defense was not palpably insufficient.
Midwood Acupuncture, P.C. v State Farm Fire & Cas. Co. (2008 NY Slip Op 52468(U)) Appellate Term, Second Department, December 5, 2008Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer entitled to discovery of incorporation documents, shareholder names, corporate tax returns and the owner's deposition because it gave detailed, specific reasons to believe the provider was fraudulently incorporated, a defense not subject to preclusion.
Corona Hgts. Med., P.C. v State Farm Mut. Auto. Ins. Co. (2008 NY Slip Op 52185(U)) Appellate Term, Second Department, November 5, 2008Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer entitled to documents on incorporation, management and shareholder licenses and to an EBT because it gave detailed reasons for believing the provider fraudulently incorporated, a defense not subject to preclusion.
First Aid Occupational Therapy, PLLC v State Farm Mut. Auto. Ins. Co. (2008 NY Slip Op 51963(U)) Appellate Term, Second Department, September 29, 2008Insurer may raise or investigate the Mallela defense here (also decides)Upheld vacatur of the notice of trial and an order compelling discovery and an EBT on fraudulent incorporation, holding the insurer was not precluded from raising that defense.
Andrew Carothers, M.D., P.C. v GEICO Indem. Co. (2008 NY Slip Op 51756(U)) Appellate Term, Second Department, August 19, 2008Insurer may raise or investigate the Mallela defense hereHeld the insurer should have been allowed to amend its answer to plead that the provider was fraudulently organized, because Mallela's good-cause showing does not apply to leave to amend, and ordered the owner deposed on corporate structure.
Midborough Acupuncture, P.C. v State Farm Ins. Co. (2008 NY Slip Op 28291) Appellate Term, Second Department, July 30, 2008Insurer may raise or investigate the Mallela defense here (also decides)Compelled the certificate of incorporation, ownership interrogatories and corporate tax information because the insurer gave detailed, specific reasons to suspect fraudulent incorporation, a non-precludable defense; the owner's deposition was refused only for improper location.
Multiquest, P.L.L.C. v Allstate Ins. Co. (2008 NY Slip Op 51531(U)) Appellate Term, Second Department, July 10, 2008Insurer may raise or investigate the Mallela defense hereHeld that 11 NYCRR 65-3.16 (a) (12) applies retroactively, so the ineligibility defense reached unpaid claims for psychological services rendered in 1999, reversing the ruling that the regulation was inapplicable to pre-April 2002 services.
Great Wall Acupuncture v State Farm Mut. Auto. Ins. Co. (2008 NY Slip Op 51529(U)) Appellate Term, Second Department, July 10, 2008Insurer may raise or investigate the Mallela defense here (also decides)Compelled the certificate of incorporation, ownership interrogatories, corporate tax information and the owner's deposition because the insurer gave detailed, specific reasons to suspect fraudulent incorporation, a non-precludable defense, but denied the owner's personal tax returns.
S & B Neurocare, P.C. v GEICO Ins. Co. (2008 NY Slip Op 51450(U)) Appellate Term, Second Department, July 8, 2008Insurer may not pursue or investigate the Mallela defense here (also decides)Upheld denial of the insurer's alternative request for discovery on its fraudulent incorporation defense because it submitted no affidavit specifying facts entitling it to pretrial proceedings almost a year after the notice of trial.
Lexington Acupuncture, P.C. v State Farm Ins. Co. (2007 NY Slip Op 51758(U)) Appellate Term, Second Department, September 14, 2007Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer's papers showed the provider may be ineligible for reimbursement because of how it was incorporated, so discovery on that defense was material and necessary, and struck the complaint for willful noncompliance.
PDG Psychological, P.C. v State Farm Mut. Ins. Co. (2007 NY Slip Op 51757(U)) Appellate Term, Second Department, September 14, 2007Insurer may raise or investigate the Mallela defense hereHeld the provider's summary judgment motion properly denied because the insurer asserted the provider may be improperly licensed and the facts needed to establish that defense were in the provider's possession and undisclosed.
AVA Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (2007 NY Slip Op 51756(U)) Appellate Term, Second Department, September 14, 2007Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer's papers showed the provider may be ineligible for reimbursement because of how it was incorporated, so discovery on that defense was material and necessary, and struck the complaint for willful noncompliance.
Multiquest, P.L.L.C. v Allstate Ins. Co. (2007 NY Slip Op 27366) Appellate Term, Second Department, September 12, 2007Insurer may raise or investigate the Mallela defense here (also decides)Reversed the finding that the defense was waived, holding it neither waived by omission from the denial nor precluded by untimeliness, properly pleaded in the amended answer, and available for 1999 services before the regulation took effect.
Crossbay Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (2007 NY Slip Op 27135) Appellate Term, Second Department, March 28, 2007Insurer may raise or investigate the Mallela defense hereHeld the fraudulent-licensing defense nonwaivable and found the insurer's papers raised issues about who actually operated and controlled the provider, so the provider's summary judgment was denied under CPLR 3212 (f) pending discovery, and interrogatories and depositions were compelled.
First Help Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (2007 NY Slip Op 50354(U)) Appellate Term, Second Department, February 14, 2007Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer could properly seek discovery on whether the provider was fraudulently incorporated, and dismissed the complaint because the principal refused to answer questions about ownership, operation and control.
Midwood Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (2007 NY Slip Op 50052(U)) Appellate Term, Second Department, January 8, 2007Insurer may raise or investigate the Mallela defense hereHeld the fraudulent-licensing defense nonwaivable and not subject to preclusion, found the insurer's papers raised issues about who controlled the provider, and denied the provider's summary judgment as premature pending discovery on incorporation.
Midborough Acupuncture P.C. v State Farm Ins. Co. (2006 NY Slip Op 26360) Appellate Term, Second Department, July 26, 2006Insurer may raise or investigate the Mallela defense hereHeld the ineligibility defense was not precluded by the untimely denial and that discovery on ownership, control and licensing was material and necessary, so the provider's summary judgment was premature.
Metroscan Imaging, P.C. v GEICO Ins. Co. (2006 NY Slip Op 26319) Appellate Term, Second Department, July 26, 2006Insurer may raise or investigate the Mallela defense hereHeld that a fraudulently incorporated medical corporation may not recover for services rendered before the regulation's effective date, because the regulation codified the common-law bar on unlicensed providers' recovery.
Lexington Acupuncture, P.C. v State Farm Ins. Co. (2006 NY Slip Op 26251) Appellate Term, Second Department, June 7, 2006Insurer may raise or investigate the Mallela defense hereHeld the ineligibility defense is not subject to preclusion and discovery into ownership, control and licensing was material and necessary, so the provider's motion was premature and discovery compelled.
First Help Acupuncture P.C. v State Farm Ins. Co. (2006 NY Slip Op 51043(U)) Appellate Term, Second Department, May 30, 2006Insurer may raise or investigate the Mallela defense here (also decides)Held the defense that the provider is fraudulently licensed and ineligible for reimbursement is nonwaivable and not subject to the 30-day preclusion rule.
A.B. Med. Servs. PLLC v Prudential Prop. & Cas. Ins. Co. (2006 NY Slip Op 50504(U)) Appellate Term, Second Department, March 27, 2006Insurer may raise or investigate the Mallela defense here (also decides)Treated the insurer's defense that the provider was not formed under Business Corporation Law article 15 as surviving the preclusion of untimely denials, then weighed it on the merits.
A.B. Med. Servs. PLLC v Utica Mut. Ins. Co. (2006 NY Slip Op 26068) Appellate Term, Second Department, February 17, 2006Insurer may raise or investigate the Mallela defense hereHeld a defense based on allegedly fraudulent corporate licensure is not precluded by an untimely denial, so discovery on the providers' corporate structure and licensing was proper and their summary judgment motion had to be denied.

Trial courts in the First Department (14 decisions)

Kim v State Farm Ins. Co. (2024 NY Slip Op 51364(U)) Civil Court of the City of New York, New York County, June 10, 2024Insurer may not pursue or investigate the Mallela defense here (also decides)Agreed with the provider's objection that the EUO document demands for ownership, incorporation and management records were improper pre-action discovery aimed at a Mallela defense, beyond the scope of a no-fault EUO.
Okslen Acupuncture, PC v State Farm Mut. Auto. Ins. Co. (2021 NY Slip Op 50652(U)) Civil Court of the City of New York, Bronx County, July 9, 2021Insurer may raise or investigate the Mallela defense here (also decides)Held that corporate, tax, financial and lease records and an owner deposition were material and necessary to the insurer's fraudulent incorporation defense, which the investigator's affidavit supported, and conditionally struck the complaint for noncompliance.
Alsaad Med., P.C. v State Farm Mut. Auto. Ins. Co. (2021 NY Slip Op50532(U)) Civil Court of the City of New York, Bronx County, June 8, 2021Insurer may raise or investigate the Mallela defense here (also decides)Held the EUO notices could properly demand documents evidencing ownership of the professional corporation, since they would help the insurer determine whether the provider was fraudulently incorporated and ineligible for reimbursement.
BS Kings County Med., P.C. v State Farm Mut. Auto Ins. Co. (2020 NY Slip Op 20200) Civil Court of the City of New York, Bronx County, August 7, 2020Insurer may raise or investigate the Mallela defense here (also decides)Held the Mallela defense was not precludable despite a fee-schedule denial and that the investigator's case-specific allegations of lay-designed billing patterns warranted compelled interrogatory answers, document demands and a deposition on ownership and control.
HKP Physical Therapy, P.C. v Government Empls. Ins. Co. (2019 NY Slip Op 29381) Civil Court of the City of New York, New York County, December 2, 2019Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer showed good cause under Mallela and Carothers to seek sale, licensing, payroll and purchase records by verification, given the former owner's continued role and control of accounts and possible kickback and licensing violations bearing on eligibility.
Country-Wide Ins. Co. v Gotham Med., P.C. (2015 NY Slip Op25387) Supreme Court, New York County, November 20, 2015Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer could properly question the owner at the EUO about his license and probation because a professional corporation must be owned and controlled by a licensed professional.
Cambridge Med., P.C. v Adirondack Ins. Exch. (2009 NY Slip Op 51305(U)) Civil Court of the City of New York, New York County, June 29, 2009Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer had a good-faith basis, from the nominal owner's EUO testimony suggesting a non-physician manager controlled the practice, to depose her and obtain ownership and operation documents; good cause under the regulations was not required.
AA Acupuncture Serv., P.C. v State Farm Mut. Auto. Ins. Co. (2008 NY Slip Op 51066(U)) Civil Court of the City of New York, New York County, May 30, 2008Insurer may raise or investigate the Mallela defense here (also decides)Compelled the deposition of one plaintiff's owner and treating physician on corporate structure because uncontradicted evidence suggested fraudulent incorporation, but refused depositions for the acupuncture plaintiff absent any such allegations.

Show all 14 decisions

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, 2007Insurer may not pursue or investigate the Mallela defense hereAdhered to the denial of ownership and corporate-structure discovery because the insurer showed no good cause: a later license revocation for 1998 conduct did not show fraudulent incorporation in 2001, and an unincorporated partnership was outside the rule.
Devonshire Surgical Facility v GEICO (2006 NY Slip Op 52450(U)) Civil Court of the City of New York, New York County, December 1, 2006Insurer may not pursue or investigate the Mallela defense here (also decides)Held the insurer showed no good cause for discovery into corporate status because the principal's later license revocation for billing fraud did not suggest fraudulent incorporation and a licensed physician undisputedly owned the providers.
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, 2006Insurer may raise or investigate the Mallela defense here (also decides)Granted the insurer leave to amend its answer to add the unlicensed-provider defense, finding state certifications supported a well-founded belief of a management arrangement with nonlicensed persons, and rejected the argument that the regulation postdated the claims.
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, 2006Insurer may raise or investigate the Mallela defense here (also decides)Upheld arbitrators who considered the insurer's fraud and ineligibility defense despite an untimely denial and services from before April 2002, holding this was neither irrational nor incorrect as a matter of law.
Allstate Ins. Co. v Belt Parkway Imaging, P.C. (2006 NY Slip Op 26024) Supreme Court, New York County, January 25, 2006Insurer may raise or investigate the Mallela defense hereHeld that insurers may withhold payment on unpaid claims for services before April 4, 2002 from improperly incorporated providers, because the regulation clarified existing law, and reinstated fraud and unjust-enrichment claims for payments made after that date.
Statewide Med. Acupuncture Servs., PC v Travelers Ins. Co. (2005 NY Slip Op 51773(U)) Civil Court of the City of New York, Bronx County, October 6, 2005Insurer may not pursue or investigate the Mallela defense here (also decides)Held that although fraudulent incorporation is not precluded by an untimely denial, the insurer's investigator affidavit was hearsay and speculation showing no good cause or behavior tantamount to fraud, so depositions of the owner and acupuncturists were denied.

Trial courts in the Second Department (55 decisions)

Burke 2 Physical Therapy, P.C. v State Farm Mut. Auto. Ins. Co. PIP/BI Claims (2026 NY Slip Op 26164) Civil Court of the City of New York, Kings County, September 24, 2026Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer could seek licensing and control information at the verification stage, and that the limit on denying for professional misconduct short of ceding control does not apply before the investigation is complete.
First Stop P.T., P.C. v GEICO Ins. Co. (2025 NY Slip Op 50947(U)) Civil Court of the City of New York, Richmond County, March 26, 2025Insurer may raise or investigate the Mallela defense here (also decides)Recognized the insurer may delay payment to investigate unlicensed or fraudulent licensing through timely verification, holding the provider responsible for the still-outstanding June items (practitioner licensing and relationship documents, leases and management agreements) but not for untimely new demands.
Burke Physical Therapy, P.C. v State Farm Mut. Auto. Ins. Co. PIP/BI Claims (2025 NY Slip Op 50376(U)) Civil Court of the City of New York, Kings County, March 24, 2025Insurer may raise or investigate the Mallela defense here (also decides)Followed appellate authority that the insurer could properly seek management agreements, W-2s, bank records and leases during claim verification to assess eligibility under the licensing rules, rejecting the provider's view that such requests were nullities.
Renelique v Foremost Signature Ins. Co. (2023 NY Slip Op 51226(U)) Civil Court of the City of New York, Queens County, November 20, 2023Insurer may raise or investigate the Mallela defense here (also decides)Held the provider-ineligibility (fraudulent incorporation) defense was not subject to preclusion and, given the default declaration of fraudulent incorporation, defeated the provider's summary judgment motion, leaving the defense for trial.
Jiang Acupuncture PC v State Farm Ins. Co. (2023 NY Slip Op 50961(U)) Civil Court of the City of New York, Queens County, September 11, 2023Insurer may raise or investigate the Mallela defense hereHeld the licensing-ineligibility defense not precluded by the untimely denial and, with requested tax returns and bank records still outstanding, left it open, though the insurer's good-cause proof was hearsay insufficient for summary judgment.
Burke Physical Therapy, PC v State Farm Mut. Auto. Ins. Co. (2021 NY Slip Op 50624(U)) Civil Court of the City of New York, Kings County, June 30, 2021Insurer may raise or investigate the Mallela defense here (also decides)Refused to dismiss the insurer's fraudulent incorporation defense, holding it non-precludable so that the insurer could assert it at any time, including in its answer, even if it was not in the denial.
Burke 2 Physical Therapy, P.C. v State Farm Mut. Auto. Ins. Co. PIP/BI Claims (2021 NY Slip Op 50523(U)) Civil Court of the City of New York, Kings County, June 8, 2021Insurer may raise or investigate the Mallela defense here (also decides)Upheld verification requests for tax returns, bank records and location documents prompted by the owner's EUO, rejecting the provider's late objection that they were improper discovery rather than claim verification.
Apazidis, M.D., P.C. v State Farm Mut. Auto. Ins. Co. (2021 NY Slip Op 50498(U)) Civil Court of the City of New York, Queens County, May 26, 2021Insurer may raise or investigate the Mallela defense hereHeld the licensing-ineligibility defense not precluded by the untimely denials and left open while requested tax returns and bank records were outstanding, though the insurer's hearsay investigator affidavit could not support summary judgment.

Show all 55 decisions

Arthur Ave. Med. Servs., PC v GEICO Ins. Co. (2021 NY Slip Op 21108) Civil Court of the City of New York, Kings County, April 20, 2021Insurer may not pursue or investigate the Mallela defense hereDenied the insurer summary judgment on its post-EUO demands for leases, bank, tax and corporate records, holding that the propriety of such Mallela verification requests is reviewable and possibly unreasonable, and that the record did not show what remained outstanding.
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, 2019Insurer may raise or investigate the Mallela defense here (also decides)Held that the insurer could rely on the provider's improper incorporation to defeat the provider's summary judgment motion despite having issued no denial on that ground, because the defense is nonwaivable and may be asserted at any time.
Pro-Align Chiropractic, P.C. v Travelers Prop. Cas. Ins. Co. (2017 NY Slip Op 27415) District Court of Suffolk County, Third District, December 19, 2017Insurer may not pursue or investigate the Mallela defense here (also decides)Held the insurer could not delay payment with Mallela-type verification demands for leases and employment records because it offered no sworn, non-conclusory showing of good reasons or good cause for them.
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 may not pursue or investigate the Mallela defense here (also decides)Vacated the master arbitrator's remand for consideration of the Mallela defense, reinstating the arbitrator's award that declared other issues moot, because arbitrators need not explain awards and the unsupported Mallela contentions left the award rational.
Total Chiropractic, P.C. v USAA Cas. Ins. Co. (2017 NY Slip Op 50977(U)) District Court of Suffolk County, Fourth District, July 24, 2017Insurer may raise or investigate the Mallela defense here (also decides)Compelled production of management agreements, leases, tax returns and bank records because the defense is not precludable or waivable, need not be pleaded with particularity, and the investigator's affidavit gave a good-faith basis for it.
Harden St. Med., P.C. v Charter Oak Fire Ins. Co. (2017 NY Slip Op 50675(U)) District Court of Suffolk County, Third District, May 11, 2017Insurer may raise or investigate the Mallela defense here (also decides)Denied the provider's motion to quash the insurer's subpoena for its bank records, holding the financial records material and necessary to determine whether unlicensed persons owned or controlled the provider and so whether it was ineligible.
Downtown Acupuncture PC v State Wide Ins. Co. (2015 NY Slip Op25371) Civil Court of the City of New York, Kings County, October 22, 2015Insurer may raise or investigate the Mallela defense hereHeld the Mallela defense non-precludable, non-waivable and assertable at any time, even before trial, but required the insurer to formally move to amend its answer to plead it before relying on the prior unlawful-incorporation finding.
Jamaica Wellness Med., P.C. v USAA Cas. Ins. Co. (2015 NY Slip Op 25313) Civil Court of the City of New York, Kings County, September 11, 2015Insurer may raise or investigate the Mallela defense here (also decides)Quashed the insurer's bank subpoena seeking Mallela evidence only for lack of the required nonparty notice, but denied a protective order and allowed re-service, finding the subpoena not unduly prejudicial.
Acuhealth Acupuncture, PC v Country-Wide Ins. Co. (2015 NY Slip Op 51256(U)) Supreme Court, Kings County, July 24, 2015Insurer may raise or investigate the Mallela defense here (also decides)Confirmed an award dismissing the claim without prejudice so the insurer could subpoena and examine the provider's purported owner about whether an unlicensed person owned and controlled it.
Huntington Regional Chiropractic, P.C. v Allstate Ins. Co. (2013 NY Slip Op 23201) District Court of Nassau County, First District, June 18, 2013Insurer may raise or investigate the Mallela defense here (also decides)Held that Mallela discovery requires a reasonable basis and, unable to decide from the papers, ordered the provider's bank resolutions, management agreements, tax returns and leases produced for in camera inspection.
Nexray Med. Imaging PC v Allstate Ins. Co. (2013 NY Slip Op 50910(U)) District Court of Nassau County, First District, June 6, 2013Insurer may not pursue or investigate the Mallela defense here (also decides)Granted a protective order limiting the insurer's bank subpoena to signature cards, because the owner had testified fully at an EUO and produced financial documents, so broader bank discovery on mere suspicion was a fishing expedition.
Back to Back Chiropractor, P.C. v State Farm Mut. Auto. Ins. Co. (2012 NY Slip Op 51088(U)) District Court of Suffolk County, Third District, June 15, 2012Insurer may not pursue or investigate the Mallela defense here (also decides)Held the EUO demand for tax returns, ledgers and ownership documents palpably improper because the regulations do not let insurers demand corporate structure or financial documents, though the provider's failure to object still defeated its claim.
Island Chiropractic Testing, P.C. v Nationwide Ins. Co. (2012 NY Slip Op 51001(U)) District Court of Suffolk County, Third District, June 6, 2012Insurer may not pursue or investigate the Mallela defense here (also decides)Held that demanding share-transfer and lease documents through claim verification was improper and did not toll, as the insurer showed no good faith basis or good cause; such material belongs in post-joinder discovery or a declaratory action.
Park Ave. Med. Care, P.C. v Government Empls. Ins. Co. (2012 NY Slip Op 51032(U)) District Court of Suffolk County, Second District, June 5, 2012Insurer may raise or investigate the Mallela defense here (also decides)Compelled discovery responses and the owner's deposition because the provider did not timely object, the fraudulent incorporation defense is non-waivable, failure to plead it with particularity does not bar related disclosure, and the owner's federal indictment supported it.
Victory Med. Diagnostics, P.C. v Nationwide Prop. & Cas. Ins. Co. (2012 NY Slip Op 22149) District Court of Nassau County, First District, June 4, 2012Insurer may not pursue or investigate the Mallela defense here (also decides)Held the insurer could not obtain Mallela ownership material through verification without articulating a good-faith factual basis, finding its stated reasons unsupported, though the nonprecludable defense remained available in litigation with good cause.
21st Century Advantage Ins. Co. v Kissena Med. Imaging, P.C. (2012 NY Slip Op 50732(U)) Supreme Court, Nassau County, April 23, 2012Insurer may not pursue or investigate the Mallela defense hereDenied the insurers' CPLR 3102 (c) petition for ownership, control and financial disclosure in aid of arbitration on fraudulent-incorporation grounds, because investigator affidavits were inconclusive and lacked factual detail, demands were overbroad, and no extraordinary circumstances were shown.
Concourse Chiropractic, PLLC v State Farm Mut. Ins. Co. (2012 NY Slip Op 50676(U)) District Court of Nassau County, First District, April 16, 2012Insurer may not pursue or investigate the Mallela defense here (also decides)Held the insurer could not demand Mallela ownership and control documents through an EUO or claim verification, even with a founded belief; it had to plead the defense and show a basis for discovery or seek a declaratory judgment.
Brownsville Advance Med., P.C. v Country-Wide Ins. Co. (2011 NY Slip Op 52255(U)) District Court of Nassau County, First District, December 19, 2011Insurer may not pursue or investigate the Mallela defense here (also decides)Held that information relating to a Mallela defense concerns the claimant rather than the claim and cannot be demanded through claim verification, particularly where already provided or publicly available and no reason for the demand was given.
Urban Radiology, P.C. v GEICO Ins. Co. (2010 NY Slip Op 51554(U)) Civil Court of the City of New York, Kings County, August 23, 2010Insurer may not pursue or investigate the Mallela defense here (also decides)Refused a stay to explore fraudulent incorporation because the insurer's speculation that the listed owner might not be the true owner showed no good-faith basis, and denied amendment and discovery without prejudice to renewal in individual cases.
Dynamic Med. Imaging, P.C. v State Farm Mut. Auto. Ins. Co. (2010 NY Slip Op 20285) District Court of Nassau County, First District, July 15, 2010Insurer may not pursue or investigate the Mallela defense here (also decides)Held the insurer could not use an EUO demand to obtain corporate ownership and financial documents for a potential Mallela defense, which must be pleaded and litigated through proper discovery or a declaratory action.
Alev Med. Supply, Inc. v Progressive Ins. Co. (2010 NY Slip Op 50813(U)) Nassau District Court, First District, May 3, 2010Insurer may not pursue or investigate the Mallela defense here (also decides)Held interrogatories aimed at Mallela issues palpably improper because the insurer had not pleaded a Mallela defense and that defense does not apply to a medical supply business corporation whose owner needs no license.
Autoone Ins. Co. v Manhattan Hgts. Med., P.C. (2009 NY Slip Op 51663(U)) Supreme Court, Queens County, July 31, 2009Insurer may raise or investigate the Mallela defense here (also decides)Granted insurers a preliminary injunction staying the providers' pending suits and arbitrations so the fraudulent-incorporation declaratory claims could be decided in one action, finding a prima facie showing and favorable equities.
Autoone Ins. Co. v Manhattan Hgts. Med., P.C. (2009 NY Slip Op 51662(U)) Supreme Court, Queens County, July 31, 2009Insurer may raise or investigate the Mallela defense hereHeld the insurers' complaint adequately stated fraud, unjust enrichment and declaratory claims that the provider corporations were secretly owned by unlicensed managers, but barred recovery of payments made before the regulation's April 4, 2002 effective date.
AIU Ins. Co. v Deajess Med. Imaging, P.C. (2009 NY Slip Op 29079) Supreme Court, Nassau County, February 10, 2009Insurer may raise or investigate the Mallela defense hereHeld that providers controlled by an unlicensed person are ineligible whether or not the doctor intended to cede control at formation, that the defense reaches pending pre-April 2002 claims, and that fraud claims on later payments are viable; control was left for determination.
Lenox Neuropsychiatry Med., P.C. v State Farm Ins. Co. (2009 NY Slip Op 50178(U)) Civil Court of the City of New York, Richmond County, January 29, 2009Insurer may not pursue or investigate the Mallela defense here (also decides)Held the insurer's attenuated web of billing-company links and an unrelated affidavit failed to articulate a founded belief of control by an unlicensed person, so extensive ownership discovery was denied apart from a limited deposition of the owner.
Utica Natl. Ins. Group v Luban (2008 NY Slip Op 52610(U)) Supreme Court, Queens County, November 24, 2008Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer could pursue recoupment of no-fault payments made after April 4, 2002 to providers ineligible under the licensing rule, reasoning that Mallela and the regulation allow recovery of money already paid to ineligible recipients.
Bay Plaza Chiropractic, P.C. v State Farm Mut. Auto. Ins. Co. (2008 NY Slip Op 51925(U)) Civil Court of the City of New York, Richmond County, September 22, 2008Insurer may raise or investigate the Mallela defense here (also decides)Compelled corporate-structure discovery and a deposition of the nominal owner because the insurer's investigator affidavit showed a founded belief of lay control, the defense being non-precludable and discovery requiring no good cause, but denied the owner's personal tax returns.
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, 2008Insurer may raise or investigate the Mallela defense here (also decides)Held the fraudulent incorporation defense nonwaivable and not subject to the 30-day preclusion rule despite the untimely denial, since Fair Price did not alter that rule, and directed the provider to answer the insurer's discovery requests.
One Beacon Ins. Group, LLC v Halima (2008 NY Slip Op 52715(U)) Supreme Court, Suffolk County, July 15, 2008Insurer may raise or investigate the Mallela defense hereHeld the insurer's declaratory judgment, fraud and unjust enrichment claims against allegedly layperson-controlled professional corporations stated causes of action, as Mallela permits recovery of payments made after April 2002 and the fraud was pleaded with enough detail.
Eastern Med., P.C. v Allstate Ins. Co. (2008 NY Slip Op 28109) District Court of Nassau County, First District, March 26, 2008Insurer may raise or investigate the Mallela defense hereHeld the insurer could amend its answer to add the defense and obtain discovery on ownership and management, because the defense is statutory, not precluded by an untimely denial, and Fair Price did not change that.
Cambridge Med., P.C. v Nationwide Prop. & Cas. Ins. Co. (2008 NY Slip Op 50629(U)) Civil Court of the City of New York, Richmond County, March 21, 2008Insurer may not pursue or investigate the Mallela defense here (also decides)Held that Mallela's good-cause requirement governs verification requests, so corporate-ownership requests asserting no conduct suggesting fraudulent incorporation need not be answered, though limited discovery of the provider's owners was ordered.
Multiquest, P.L.L.C. v Allstate Ins. Co. (2007 NY Slip Op 51776(U)) Nassau District Court, September 20, 2007Insurer may raise or investigate the Mallela defense here (also decides)Held that the licensing-eligibility regulation barred payment to a fraudulently formed provider even though the unpaid services were rendered before the regulation took effect in April 2002, so the defense applied to these October 2001 to January 2002 services.
St. Paul Travelers Ins. Co. v Nandi (2007 NY Slip Op 51154(U)) Supreme Court, Queens County, May 25, 2007Insurer may raise or investigate the Mallela defense hereHeld that the insurer's declaratory judgment and fraud and unjust-enrichment claims on fraudulent incorporation stated causes of action and could proceed, rejecting a prior ruling's preclusive effect, though recoupment was limited to payments made after April 2002.
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, 2006Insurer may raise or investigate the Mallela defense here (also decides)Held the fraudulent-licensure defense not precluded despite the untimely denial and found summary judgment premature because discovery into the provider's corporate ownership and licensing was germane to its eligibility.
Matter of Andrew Carothers, M.D., P.C. v Insurance Cos. Represented by Bruno, Gerbino & Soriano LLP (2006 NY Slip Op 26372) Civil Court of the City of New York, Richmond County, September 21, 2006Insurer may raise or investigate the Mallela defense hereHeld insurers need not show good cause or behavior tantamount to fraud for discovery on fraudulent incorporation, since the regulatory good-cause requirement governs claim verification, not CPLR discovery; the complete, non-precludable defense made the owner's EBT material and necessary.
Montgomery Med., P.C. v State Farm Ins. Co. (2006 NY Slip Op 51116(U)) Nassau District Court, June 13, 2006Insurer may raise or investigate the Mallela defense here (also decides)Held the insurer could raise fraudulent incorporation despite its untimely denials because proper licensing is a coverage-type condition precedent that is not precluded, leaving the issue for trial.
Montgomery Med., P.C. v State Farm Ins. Co. (2006 NY Slip Op 51003(U)) Nassau District Court, May 31, 2006Insurer may raise or investigate the Mallela defense here (also decides)Held that, despite its untimely denials, the insurer was not precluded from raising fraudulent incorporation because proper licensing is a condition precedent to payment that survives preclusion, so the defense remained open.
SK Med. Servs., P.C. v New York Cent. Mut. Fire Ins. Co. (2006 NY Slip Op 50721(U)) Civil Court of the City of New York, Richmond County, April 5, 2006Insurer may raise or investigate the Mallela defense hereHeld the insurer could assert the fraudulent incorporation defense despite an untimely denial and was entitled to discovery on corporate structure and licensing, so the provider's summary judgment motion was premature.
Multiquest, P.L.L.C. v Allstate Ins. Co. (2005 NY Slip Op 52071(U)) Civil Court of the City of New York, Queens County, December 20, 2005Insurer may not pursue or investigate the Mallela defense hereHeld the fraudulent-incorporation ineligibility rule does not apply retroactively to services rendered in 1999, before the regulation's April 4, 2002 effective date, and denied the insurer's summary judgment motion on that defense.
Multiquest PLLC v Allstate Ins. Co. (2005 NY Slip Op 52209(U)) Civil Court, Queens County, December 19, 2005Insurer may not pursue or investigate the Mallela defense here (also decides)Held that although the insurer showed no issue of fact on fraudulent incorporation, 65-3.16 (a) (12) did not apply retroactively to 1999 services, so summary judgment on that ground was denied.
Multiquest, P.L.L.C. v Allstate Ins. Co. (2005 NY Slip Op 52069(U)) Civil Court, Queens County, December 19, 2005Insurer may not pursue or investigate the Mallela defense hereHeld the defense unavailable because 65-3.16 (a) (12) does not apply retroactively to a 1998 claim, although the record showed the PLLC was formed with false articles naming a psychologist who was never a member.
Multiquest, PLLC v Allstate Ins. Co. (2005 NY Slip Op 25512) Civil Court of the City of New York, Queens County, December 1, 2005Insurer may not pursue or investigate the Mallela defense hereHeld the ineligibility regulation not retroactive, so the fraudulent-organization defense was unavailable for treatment in December 1999, before April 4, 2002, despite evidence the listed licensed member's name was used without consent.
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, 2005Insurer may raise or investigate the Mallela defense hereHeld that the licensing-eligibility rule reaches unpaid claims for services before its April 2002 effective date because the amendment clarified the existing regulation, so the insurer could rely on the defense and the complaint was dismissed.
Multiquest, PLLC v Allstate Ins. Co. (2005 NY Slip Op 25356) Civil Court, Queens County, August 30, 2005Insurer may raise or investigate the Mallela defense hereHeld that the licensing-eligibility rule applies to claims for services before April 4, 2002, and that the insurer's untimely denial did not preclude the defense because proper licensing is a condition precedent to coverage.
Metroscan Imaging P.C. v GEICO Ins. Co. (2005 NY Slip Op 25228) Civil Court of the City of New York, Queens County, June 8, 2005Insurer may raise or investigate the Mallela defense hereHeld the fraudulent-incorporation defense applied even to claims predating the April 2002 regulation and was not precluded, granted leave to amend answers, and set a framed-issue hearing on whether the providers were fraudulently incorporated.
Metro Med. Diagnostics, P.C. v Allstate Ins. Co. (2005 NY Slip Op 50327(U)) Civil Court, Kings County, February 17, 2005Insurer may raise or investigate the Mallela defense here (also decides)Held that the insurer's challenge to the corporation's standing based on its licensing and its principal's suspended license required further discovery, and extended discovery on the licensing of the provider and its principals.
563 Grand Med., P.C. v Allstate Ins. Co. (2005 NY Slip Op 50127(U)) Civil Court, Kings County, February 8, 2005Insurer may raise or investigate the Mallela defense here (also decides)Upheld arbitrators who raised on their own the provider's ineligibility as a professional corporation owned by a physician not licensed in acupuncture, holding that a provider's standing under licensing rules is always an appropriate field of inquiry.

Trial courts in the Third Department (1 decision)

New York Cent. Mut. Fire Ins. Co. v 563 Grand Med., P.C. (2004 NY Slip Op 50979(U)) Supreme Court, Otsego County, August 23, 2004Insurer may not pursue or investigate the Mallela defense hereHeld the insurer could not recoup payments already made for acupuncture billed by medical corporations, assuming the corporate-structure violation, because no private right of action exists for a Business Corporation Law § 1503 violation.

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