State Farm Mut. Auto. Ins. Co. v Sweetwater Chiropractic, P.C. (2018 NY Slip Op 51177(U))

152175/2015

Plaintiffs: Nicole R. McErlean, Freiberg, Peck & Kang, LLP, 200 Business Park Drive, Suite 202, Armonk, NY 10504

Defendant: David Karp, Fuld & Karp, P.C., 1963 Coney Island Avenue, Brooklyn, NY 11223

In this declaratory judgment action, the plaintiff insurer moves for summary judgment pursuant to CPLR § 3212 against the defendant Sweetwater Chiropractic, P.C., a medical provider, which, as assignee of the thirteen individuals who were allegedly injured in various motor vehicle accidents, sought payment for no-fault benefits under polices issued by the plaintiff. The basis for plaintiffs’ motion is that defendant failed to appear for scheduled examinations under oath (“EUOs”) which was a breach of a condition precedent to coverage under the No-Fault regulations. Defendant cross-moves for an order, pursuant to CPLR § 3126(3), for a default judgment against the plaintiffs on the defendant’s counter-claims and dismissing the plaintiffs’ complaint, or for an order pursuant to CPLR § 3126(1). Alternatively, defendants seek an order compelling the plaintiffs to provide outstanding discovery and submit to an examination before trial by a date certain pursuant to CPLR § 3124. Defendant further moves for an order pursuant to CPLR § 603 severing this action into thirteen separate and individual actions relating to the claims submitted by defendant for each individual eligible injured person. For the reasons stated below, plaintiffs’ motion for summary judgment and defendant’s cross-motion to dismiss are denied. Defendant’s cross-motion to sever the action is [*2]also denied. Defendant’s cross-motion seeking an order compelling discovery is granted.

Thirteen individuals were allegedly injured in various motor vehicle accidents and made claims as eligible injured persons (“EIPs”) for no-fault insurance coverage under plaintiffs’ automobile insurance policies. On the date of each motor vehicle accident, the respective insurance policy was in effect for each claimant. Furthermore, each policy contained a no-fault endorsement which provided that State Farm would reimburse an EIP for the treatment of injuries occurring out of the use or operation of the insured vehicle. The defendant is a health service provider that allegedly treated the EIPs and was assigned the right to collect no-fault reimbursement on behalf of the EIPs. As an assignee, the defendant submitted no-fault billings to State Farm for reimbursement. The policies under which defendant has sought or will seek reimbursement for no-fault benefits from State Farm contain a condition precedent that EIPs or their assignees seeking reimbursement may be required to submit to EUOs.

Plaintiffs assert that defendant breached a condition precedent to No-Fault recovery by failing to appear for duly scheduled EUOs. Plaintiffs allege they duly and timely requested defendant to appear for EUOs in connection with claim reimbursements under New York Administrative Code Sections 65-3.5(b) (“11 NYCRR”) and 65-3.8(a)(1), but defendant failed to appear for every scheduled EUO. In support of this contention, plaintiff submits affidavits from Keith Bertrand (“Bertrand Affidavit”), Brian Rafalski (“Rafalski Affidavit”), and Christopher Howard (“Howard Affidavit”).^[FN1] Accordingly, plaintiffs ask this court to issue a declaration that 1) defendant failed to appear for EUOs, thereby breaching a condition precedent to no-fault coverage and violating the No-Fault regulations; 2) all automobile insurance policies named within the complaint are void back to the inception of each respective policy; and 3) plaintiffs owe no coverage for any and all, past or future, no-fault claims made by the defendant.

In opposition, defendant argues, inter alia: (1) the Howard Affidavit does not establish why the EUOs were requested by the plaintiffs on any of the claims that are the subject of this action; (2) the affidavits of Bertrand and Rafalski do not establish the admissibility of the EUO request letters; and (3) necessary discovery remains outstanding, precluding summary judgment at this stage. With respect to the remaining discovery, defendant argues that it is entitled to discover what correspondence, if any, the plaintiffs or their counsel received in objection to the alleged EUO requests. Defendant submits three letters sent by defendant’s counsel, in response to the EUO requests, seeking to ascertain the basis for the plaintiffs’ requests for the EUOs. Defendant further asserts that plaintiffs are the only ones who know what responsive communications were received. Additionally, defendant points out that plaintiffs have not responded to defendant’s discovery demands dated March 30, 2015.

With regard to defendant’s request to sever the action, it contends that severance is proper because the facts and circumstances for each individual claimant is different. Defendant further points out that a trial of this matter would necessitate testimony regarding the generation and mailing of multiple EUO scheduling letters for each of the thirteen separate and distinct claims.

On a motion for summary judgment, the moving party has the initial burden of establishing its entitlement to judgment as a matter of law with evidence sufficient to eliminate any material issue of fact (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1985]). The facts must be viewed “in the light most favorable to the non-moving party” (Ortiz v Varsity Holdings, LLC, 18 NY3d 335, 339 [2011]). The failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposition papers (Voss v Netherlands Ins. Co., 22 NY3d 728, 734 [2014]). Once the moving party “produces the requisite evidence, the burden then shifts to the non-moving party to establish the existence of material issues of fact which require a trial of the action” (Nomura Asset Capital Corp. v Cadwalader, Wickersham & Taft, LLP, 26 NY3d 40, 49 [2015]). The court’s task in deciding a summary judgment motion is to determine whether there is bonafide issues of fact and not to delve into or resolve issues of credibility (Vega v Restani Constr. Corp, 18 NY3d 499, 505 [2012]). If the court is unsure whether a triable issue of fact exists, or can reasonably conclude that fact is arguable, the motion must be denied (Tronlone v Lac d’Amiante Due Quebec, Ltee, 297 AD2d 528, 528-529 [1st Dept 2002], aff’d 99 NY2d 647 [2003]).

A No-Fault insurer may request that an eligible injured person or that person’s assignee submit to an EUO as may reasonably be required (see 11 NYCRR 65-1.1).^[FN2] A request for an EUO

“must be based upon the application of objective standards so that there is a specific objective justification supporting the use of such examination” (see 11 NYCRR 65-3.5[e])

Appearance at a properly demanded EUO is a condition precedent to an insurer’s liability to pay no-fault benefits (see Unitrin Advantage Ins. Co. v Bayshore Physical Therapy, PLLC, 82 AD3d 559, 560 [1st Dept 2011]). No liability exists on the part of the no-fault insurer unless there has been full compliance with the conditions’ precedent to coverage (see Hertz Vehicles, LLC v Delta Diagnostic Radiology, P.C., 2015 WL 708610, 2015 NY Slip Op 302429 [U], *3 [Sup Ct, NY County, Feb 18, 2015]; 11 NYCRR 65-1.1). The denial of coverage premised on a breach of a condition precedent to coverage voids the no-fault policy ab initio (see Unitrin Advantage Ins. Co. v Bayshore Physical Therapy, PLLC, supra; Mapre Ins. Co. of New York v Manoo, 140 AD3d 468, 469 [1st Dept 2016][“The failure of a person eligible for no-fault benefits to appear for a properly noticed EUO constitutes a breach of a condition precedent vitiating coverage”]).

State Farm, as the proponent of the summary judgment motion, had the initial burden of showing its prima facie entitlement to judgment as a matter of law by submitting evidentiary proof in admissible form from someone with personal knowledge that valid notices of the EUOs [*3]were mailed to the defendant, and that the defendant failed to appear for the EUOs (Bath Ortho Supply Inc. v New York Central Mut. Fire Ins. Co., 2012 NY Slip Op 50271[U], *1 [App Term 1st Dept 2002], citing Unitrin, 82 AD3d at 560; Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 35 AD3d 720, 721-722 [2d Dept 2006]).

This Court rejects defendant’s argument regarding the admissibility of the EUO request letters. While the Bertrand and Rafalski Affidavits when viewed together, explain State Farm’s standard mailing procedure, they do not state whether the EUO request letters at issue here were mailed out in accordance with that procedure. Notwithstanding this, this Court finds the affidavits to be sufficient as the Bertrand Affidavit states that all EUO letters are mailed in the way attested to in his affidavit. As such, the Court considers the EUO request letters not for truth of their contents, but only to show that they were mailed.

At the very least, however, triable issues of fact exist as to whether the EUO requests were reasonably or properly made. In support of its motion, State Farm submits an affidavit from Christopher Howard, an investigator in the plaintiffs’ special investigative unit, attesting to the basis for the EUOs that defendant failed to attend. Plaintiffs allege that the EUOs were properly requested in order to obtain additional verification of no-fault claims submitted for payment by the defendant, on behalf of thirteen eligible persons, whom defendant treated for injuries sustained in different motor vehicle accidents. The Howard Affidavit states in relevant part “State Farm commenced an investigation into Sweetwater for the following reasons: (i) to verify that ownership, control and operation of the professional practice complied with New York State Licensing requirements; and (ii) to verify that the services were medically necessary” (Howard Aff at 1-2). Mr. Howard further attests that he “reviewed a sampling of medical records from Sweetwater, which revealed that chiropractic treatment was being rendered at a high frequency concurrently with acupuncture and physical therapy There also appears to be a pattern of high frequency diagnostic testing which has no effect on the course of treatment” (Howard Aff at 2). The key issue for this Court is the lack of specificity in the affidavit. While Mr. Howard identified indicators for requesting an EUO, he did not set forth any of the facts that State Farm considered in making its determination to request an EUO for the specific claims at issue here. Nor did he provide the timeframe for which State Farm seeks to verify that defendant’s ownership, control, and operation of the professional practice complies with New York licensing requirements. Likewise, the affidavit is equally ambiguous with regard to which services were being questioned as medically necessary. In particular, the affidavit fails to identify which services arising out of which specific injury and which motor vehicle accident. Insofar as Mr. Howard states that he “reviewed a sampling of medical records,” the Court is left to speculate if those medical records were related to the claims at issue in the instant matter.

Contrary to plaintiffs’ contention, defendant’s reliance on American Transit Insurance Co. v Jaga Medical Service, P.C., 128 AD3d 441 (1st Dept 2015), is not misplaced. The Appellate Division, First Department held that that an insurer’s motion for summary judgment should be denied as premature if defendant seeks discovery as to the reason for the EUO request or the “handling of the claim so as to determine whether, inter alia, the EUO’s were timely and properly requested” (Am. Tr. Ins. Co. v Jaga Med. Svcs., P.C., 128 AD3d 441 [1st Dept 2015]). Given the lack of specificity set forth in Howard Affidavit, the Court finds that discovery as to plaintiffs’ reasoning for requesting the EUOs is warranted. Additionally, the Court notes that the EUO objection letters submitted by defendant raises a question of fact with respect to whether the EUO requests were justified or not (see defendant’s exhibit B).

On this record, therefore, State Farm does not make a prima facia showing that an EUO was reasonably required for the verification of the thirteen claims at issue, and thus fails to show that defendant breached the policy.

The Court next turns to defendant’s request to sever this action into thirteen separate and distinct individual actions. CPLR § 603 reads as follows, “[i]n furtherance of convenience or avoid prejudice the court may order a severance of claims, or may order a separate trial of any claim, or on any separate issues.” A court has discretion under CPLR § 603 to order a severance or a separate trial when doing so will avoid confusion, delay or prejudice (McKinney’s Consolidated Annotated, Book 7; CPLR § 603; Utica Mut. Ins. Co. v American Re-Insurance Co., 132 AD3d 1405 [4th Dept 2015]). The granting of a motion to sever generally depends on the absence of common uses of law or fact. “[S]everance may be inappropriate where there are common factual and legal issues involved in two causes of action, and the interests of judicial economy and consistency of verdicts will be served by having a single trial” (Herskovitz v Klein, 91 AD3d 598, 599 [2d Dept 2012]). Least important to the court’s determination is the actual number of assignors involved in the lawsuit. Courts have severed combined no-fault claims with as few as two separate assignors, asserting that, even though there were only two distinct accidents involved, “[t]he facts relating to each claim are [u]nlikely to raise few, if any, common issues of fact” (Georgetown Mind-Body Med., P.C. v State Farm Mutual Automobile Insurance Co., 25 Misc 3d 142 [A], 2009 NY Slip Op 52464[U], * 1 [App Term, 2d, 11th & 13th Jud Dists 2009]; High Definition MRI, P.C. v Mapre Ins. Co. of NY, 148 AD3d 470 [1st Dept 2017] [severance appropriate where the 198 no-fault claims that there the subject of the action were unrelated]; Radiology Res. Network, P.C. v Fireman’s Fund Ins., Co., 12 AD3d 185 [1st Dept 2004] [severance is appropriate where the 68 accidents that were the subject of the action were unrelated]).

Severance of the action is not warranted here as defendant has failed to show how severing this action would further convenience the parties or would prevent prejudice. As the plaintiffs point out, there appears to be only one issue to be determined, namely the validity of denying the claims submitted by the defendant as the assignee of the named claimants for the defendant’s failure to appear for the duly scheduled EUOs. Moreover, beyond pointing out the number of claims, defendant fails to fully articulate the uncommon issues of law and fact that require separate actions. Based on the papers, the Court denies the motion to sever as defendant has not set forth adequate support for why it would be more efficient to adjudicate these claims separately.

Based on the foregoing, it is hereby

ORDERED that the plaintiffs’ motion for summary judgment is denied; and it is further

ORDERED that defendant’s cross-motion pursuant to CPLR §§3126 (3) and 3126(1) is denied; and it is further

ORDERED that defendant’s cross-motion is granted to the extent that plaintiffs shall respond to defendant’s discovery demands dated March 30, 2015 within thirty (30) days of the date of this decision and order is electronically filed; and it is further

ORDERED that defendant’s motion to sever the action into thirteen separate and distinct individual actions is denied; and it is

ORDERED that the parties shall appear in Part 34 of this Court on Thursday, October 4, 2018 at 2:15 p.m. for a preliminary conference.

This constitutes the decision and order of this Court.

Dated: August 6, 2018

ENTER:

_______________________________________

CARMEN VICTORIA ST. GEORGE, J.S.C.

Footnotes

Footnote 1: Plaintiffs also submit affirmations of Edward M. Ryan, Esq., Elizabeth Adels, Esq., Stuart Flamen, Esq., and Patrick J. McDonnell, Esq., attorneys employed by a law firm that represents the plaintiffs. These affirmations are purportedly offered to establish defendant’s non-appearance at the scheduled EUOs.

Footnote 2:Pursuant to 11 NYCRR 65-1.1(d), all minimum benefit insurance polies for motor vehicle personal injuries shall include a Mandatory Personal Injury Protection Endorsement, the form of which is specified in the regulation. The subsection of the Endorsement entitled “Proof of Claim; Medical, Work Loss, and Other Necessary Expenses,” found within the “Conditions” section, states that any “eligible injured person or that person’s assignee or representative shall (b) as may reasonably be required submit to examinations under oath by any person named by the [insurance] Company and subscribe the same” (emphasis added).