July 7, 2011

Matter of Countrywide Ins. Co. v DHD Med., P.C. (2011 NY Slip Op 05864)

https://www.beynensonlaw.com/case-law/matter-of-countrywide-ins-co-v-dhd-med-p-c-2011-ny-slip-op-05864/

Court: Appellate Division, First Department
Decided: July 7, 2011
Citation: 2011 NY Slip Op 05864 · 86 AD3d 431
Posture: Other motion
Outcome: Provider prevailed
Later treatment: Contrasted (cf., but see) in 1 later decision (see Cited by)
Issues: Fraudulent incorporation (Mallela) CPLR article 75 (arbitration awards)
Legal questions: Mallela defense: preclusion and discovery (see the maps)

Cite as

Matter of Countrywide Ins. Co. v DHD Med., P.C., 86 AD3d 431 (1st Dept 2011)

Posture, outcome, issues and treatment by other decisions are Beynenson Law’s classification. Treatment labels are assigned by a language model reading the citing decision; negative and appeal-history labels are checked by a second reader.

Summary

Editorial summary by Beynenson Law, not part of the court’s decision.

Fraudulent incorporation is a defense for the no-fault arbitrator to decide, not a ground for judicially barring arbitration. The insurer petitioned to stay arbitration, arguing that the provider's alleged fraudulent incorporation made it ineligible for reimbursement under Mallela and precluded it from demanding arbitration under Insurance Law § 5106 (b) and the policy. The Appellate Division, First Department, rejected that argument because the defense was for the arbitrator. It affirmed the order denying the insurer's petition and granting the provider's cross motion to dismiss the proceeding, permitting arbitration to go forward.

Reported in New York Official Reports at Matter of Countrywide Ins. Co. v DHD Med., P.C. (2011 NY Slip Op 05864)

Matter of Countrywide Ins. Co. v DHD Med., P.C.

2011 NY Slip Op 05864 [86 AD3d 431]

July 7, 2011

Appellate Division, First Department

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

As corrected through Wednesday, August 31, 2011

In the Matter of Countrywide Insurance Company, Appellant,
v
DHD Medical, P.C., Respondent.

—[*1] Thomas Torto, New York, for appellant.

Ruskin Moscou Faltischek, P.C., Uniondale (Matthew F. Didora of counsel), for respondent.

Order, Supreme Court, New York County (Marylin G. Diamond, J.), entered November 30, 2010, which denied the petition to stay arbitration of claims for no-fault insurance benefits and granted respondent’s cross motion to dismiss the proceeding, unanimously affirmed, with costs.

Petitioner argues that respondent is a fraudulently incorporated medical services provider and therefore is not only ineligible for reimbursement of no-fault payments (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005]) but is also precluded from demanding arbitration pursuant to Insurance Law § 5106 (b) (and the no-fault policy issued by petitioner). Contrary to this argument, the defense of fraudulent incorporation is “for the arbitrator and not for the courts” (see Matter of Nassau Ins. Co. v McMorris, 41 NY2d 701, 701 [1977]; Matter of MVAIC v Interboro Med. Care & Diagnostic PC, 73 AD3d 667 [2010]). Indeed, it has been the subject of numerous arbitration proceedings (see e.g. State Farm Mut. Auto. Ins. Co. v Kissena Med. Imaging, P.C., 25 Misc 3d 1214[A], 2009 NY Slip Op 52094[U] [2009]; Uptodate Med. Serv., P.C. v State Farm Mut. Auto. Ins. Co., 22 Misc 3d 128[A], 2009 NY Slip Op 50046[U], *2 [2009]).

We have considered plaintiff’s remaining contentions and find them unavailing. Concur—Andrias, J.P., Sweeny, Renwick, Freedman and Manzanet-Daniels, JJ.

Legal questions

A question of no-fault law this decision rules on, from our Legal Questions pages. Bars count the decisions on the question by year and court, coloured by category; circles are this decision and the decisions on the question it cites or that cite it. Point at a bar or circle for details. The categories and summaries are Beynenson Law’s classification, made by a language model and checked by a second reading.

Mallela defense: preclusion and discovery

Open the full map

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

This decision: Insurer may raise or investigate the Mallela defense here

Refused 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.

Defense may be pursuedDefense barredThis decisionCites it or cited by itCited or followed

Of the 24 decisions on this question in the First Department courts and the Court of Appeals, 17 (this one included) are in the same category. 2 decisions in other departments that cite or are cited by this one are on the full map.

Cited in this decision

A label shows how this decision treated the case it cites.

State Farm Mut. Auto. Ins. Co. v Mallela (2005 NY Slip Op 02416)Fraudulently incorporated medical providers are ineligible for no-fault reimbursement under 11 NYCRR 65-3.16 (a) (12).
Matter of MVAIC v Interboro Med. Care & Diagnostic PC (2010 NY Slip Op 04522) FollowedMVAIC's lack-of-coverage defense is not precluded by failure to pay or deny a no-fault claim within 30 days.
Uptodate Med. Serv., P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 50046(U))The provider's reimbursement claim was barred by a prior arbitration determination that it was fraudulently incorporated.

Cited by

A label shows how the later decision treated this one.

Liberty Mut. Ins. Co. v Raia Med. Health, P.C. (2016 NY Slip Op 04916) Contrasted (cf., but see)The insurers established grounds to enjoin a provider's no-fault proceedings pending a licensing and control challenge.
ENS Med., P.C. v Nationwide Ins. Co. (2026 NY Slip Op 26033)A provider may arbitrate a claim for lost earnings incurred in attending an insurer-demanded EUO. Insurance Law § 5106 (b) encompasses reimbursement disputes arising from claim verification, and 11 NYCRR 65-3.5 (e) requires reimbursement.

Similar decisions

Country-Wide Ins. Co. v Valdan Acupuncture, P.C. (2017 NY Slip Op 04068)The insurer failed to establish grounds to vacate an award rejecting its fraudulent incorporation defense.
Matter of 563 Grand Med., P.C. v Country-Wide Ins. Co. (2026 NY Slip Op 04292)An arbitrator may not raise a standing defense that the insurer failed to assert in the arbitration proceeding.
Matter of Country-Wide Ins. Co. v TC Acupuncture, P.C. (2021 NY Slip Op 01120)An alleged error in the burden of proof for a fraudulent incorporation defense does not alone warrant vacatur of an arbitration award.
Uptodate Med. Servs., P.C. v State Farm Mut. Auto. Ins. Co. (2009 NY Slip Op 29164)The provider was collaterally estopped by a prior arbitration finding of fraudulent incorporation and ineligibility for reimbursement.
Midwood Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (2007 NY Slip Op 50052(U))Fraudulent licensing under 11 NYCRR 65-3.16 (a) (12) is a nonwaivable defense outside the 30-day preclusion rule.