Appeal from an order of the Civil Court of the City of New York, Queens County (Larry Love, J.), entered April 18, 2013. The order denied plaintiff’s motion for summary judgment and granted defendant’s cross motion for summary judgment dismissing the complaint.

ORDERED that the order is modified by providing that defendant’s cross motion for summary judgment dismissing the complaint is denied; as so modified, the order is affirmed, without costs.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff appeals from an order of the Civil Court which denied plaintiff’s motion for summary judgment and granted defendant’s cross motion for summary judgment dismissing the complaint.

Plaintiff correctly argues that defendant’s cross motion should have been denied. In support of a claim that plaintiff’s assignor had failed to appear for independent medical examinations (IMEs), defendant submitted an affirmation from the doctor who was to perform the IMEs. The doctor failed to demonstrate by personal knowledge (see Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 35 AD3d 720 [2006]), or by any other appropriate means (see e.g. Quality Psychological Servs., P.C. v Interboro Mut. Indem. Ins. Co., 36 Misc 3d 146[A], 2012 NY Slip Op 51628[U] [App Term, 2d, 11th & 13th Jud Dists 2012]), the nonappearance of plaintiff’s assignor for both of the IMEs. Therefore defendant failed to establish its entitlement as a matter of law to summary judgment dismissing the complaint (see Stephen Fogel Psychological, P.C., 35 AD3d 720; Bright Med. Supply Co. v IDS Prop. & Cas. Ins. Co., 40 Misc 3d 130[A], 2013 NY Slip Op 51123[U] [App Term, 2d, 11th & 13th Jud Dists 2013]; Quality Health Prods. v Hertz Claim Mgt. Corp., 36 Misc 3d 154[A], 2012 NY Slip Op 51722[U] [App Term, 2d, 11th & 13th Jud Dists 2012]).

However, contrary to plaintiff’s contention, plaintiff failed to demonstrate its prima facie entitlement to summary judgment, as the affidavit submitted by plaintiff in support of its motion failed to establish that the claim at issue had not been timely denied (see Viviane Etienne Med. Care, P.C. v Country-Wide Ins. Co., 25 NY3d 498 [2015]) or that defendant had issued a timely denial of claim that was conclusory, vague or without merit as a matter of law (see Westchester Med. Ctr. v Nationwide Mut. Ins. Co., 78 AD3d 1168 [2010]; Ave T MPC Corp. v Auto One Ins. [*2]Co., 32 Misc 3d 128[A], 2011 NY Slip Op 51292[U] [App Term, 2d, 11th & 13th Jud Dists 2011]).

Accordingly, the order is modified by providing that defendant’s cross motion for summary judgment dismissing the complaint is denied.

Pesce, P.J., Aliotta and Solomon, JJ., concur.

Appeal from an order of the Civil Court of the City of New York, Queens County (Maureen A. Healy, J.), entered March 14, 2013. The order, insofar as appealed from as limited by the brief, denied the branch of plaintiff’s motion seeking summary judgment on its third cause of action and granted the branch of defendant’s cross motion seeking summary judgment dismissing the third cause of action.

ORDERED that the order, insofar as appealed from, is modified by providing that the branch of defendant’s cross motion seeking summary judgment dismissing the third cause of action is denied; as so modified, the order is affirmed, without costs.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved for summary judgment and defendant cross-moved for summary judgment dismissing the complaint. By order entered March 14, 2013, insofar as appealed from as limited by the brief, the Civil Court denied the branch of plaintiff’s motion seeking summary judgment on the third cause of action and granted the branch of defendant’s cross motion seeking summary judgment dismissing the third cause of action.

Plaintiff correctly argues that the branch of defendant’s cross motion seeking summary judgment dismissing the third cause of action should have been denied. In support of a claim that plaintiff’s assignor had failed to appear for independent medical examinations (IMEs), defendant submitted affidavits and an affirmation from the medical professionals who were to perform the IMEs which stated in a conclusory manner that plaintiff’s assignor had failed to appear at the duly scheduled IMEs. These affidavits and affirmation were insufficient to establish defendant’s entitlement to summary judgment (see Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 35 AD3d 720 [2006]; Alrof, Inc. v Safeco Natl. Ins. Co., 39 Misc 3d 130[A], 2013 NY Slip Op 50458[U] [App Term, 2d, 11th & 13th Jud Dists 2013]). Consequently, the branch of defendant’s cross motion seeking summary judgment dismissing the third cause of action should have been denied.

Plaintiff’s contention that it was entitled to summary judgment upon its third cause of action lacks merit. Plaintiff’s moving papers failed to establish either that defendant had failed to pay or deny the claim within the requisite 30-day period (see Viviane Etienne Med. Care, P.C. v Country-Wide Ins. Co., 25 NY3d 498 [2015]), or that defendant had issued a timely denial of [*2]claim that was conclusory, vague or without merit as a matter of law (see Westchester Med. Ctr. v Nationwide Mut. Ins. Co., 78 AD3d 1168 [2010]; Ave T MPC Corp. v Auto One Ins. Co., 32 Misc 3d 128[A], 2011 NY Slip Op 51292[U] [App Term, 2d, 11th & 13th Jud Dists 2011]). Thus, plaintiff did not establish its prima facie entitlement to summary judgment. As a result, the branch of plaintiff’s motion seeking summary judgment upon its third cause of action was properly denied.

Accordingly, the order, insofar as appealed from, is modified by providing that the branch of defendant’s cross motion seeking summary judgment dismissing the third cause of action is denied.

Pesce, P.J., Aliotta and Solomon, JJ., concur.

Decided on October 27, 2015

Decided on October 26, 2015

SUPREME COURT, APPELLATE TERM, SECOND DEPARTMENT, 2d, 11th and 13th JUDICIAL DISTRICTS

[*1]

Civil Court of the City of New York, Kings County, October 22, 2015

APPEARANCES OF COUNSEL

Gary Tsirelman, P.C., Brooklyn, for plaintiff.

Law Offices of Deirdre J. Tobin & Associates, Garden City, for defendant.

In 2004, plaintiff Downtown Acupuncture, a medical services provider, filed this action to recover assigned first-party no-fault benefits for acupuncture services in the amount of $914.33 from defendant State Wide Insurance Co. Citing to a declaratory{**50 Misc 3d at 463} judgment by Supreme Court, Nassau County involving a different insurance company—State Farm Mutual Ins. Co.—that found the instant plaintiff and other acupuncture professional corporations (PCs) to be unlawfully incorporated, defendant argued [*2]that plaintiff was collaterally estopped from arguing that it was eligible to recover assigned no-fault benefits in the instant matter and moved to dismiss the complaint with prejudice. It is salient to note that defendant State Wide did not move to amend its answer to include collateral estoppel as an affirmative defense or raise at any time the defense of fraudulent incorporation. This action therefore raises the issue of whether under this set of facts, a defendant insurance company, which was not a party to a previous declaratory judgment action, may proactively invoke collateral estoppel to bar a plaintiff medical provider, which was a party to the previous action, from recovering no-fault benefits due to the finding of fraudulent incorporation.

In March 2010, State Farm brought an action in Supreme Court, Nassau County for a declaratory judgment (State Farm Mut. Ins. Co. v Anikeyeva, Sup Ct, Nassau County, Jaeger, J., index No. 4399/2010 [declaratory judgment]) that alleged that the instant plaintiff Downtown, as well as a number of other acupuncture PCs, were not owned and controlled by licensed acupuncturists, as required by New York law and regulations, and that the services provided therein were performed by independent contractors, also in violation of the state regulations. Specifically, the complaint alleged that in 2004, defendant received no-fault claims from a number of corporations owned by one Valentina Anikeyeva, a licensed acupuncturist. State Farm’s investigation revealed that Valentina formed professional corporations for her husband, Andrey, who was not licensed in New York State to operate, own, and control the acupuncture businesses and that Andrey, in turn, hired independent contractors to perform acupuncture services at the PC defendants’ offices. State Farm sought declaratory judgment that it need not reimburse the PC defendants for assigned claims submitted under the no-fault law.

At some point the parties in the declaratory judgment action entered into a stipulation, so-ordered on November 20, 2012, which granted plaintiff’s motion to compel discovery and conditionally struck defendant PCs’ answer unless they fully complied with all of the discovery demands. In relevant part, Justice Jaeger directed that “[PC defendants’] answer is conditionally stricken unless Defendants fully comply with all{**50 Misc 3d at 464} of [State Farm’s] discovery demands by [January 7, 2013].” Plaintiff State Farm subsequently moved for a default judgment based upon the PCs noncompliance with discovery.

By decision dated April 29, 2013 (2013 NY Slip Op 34010[U] [2013]), Justice Jaeger granted State Farm’s motion to strike the defendants’ answer resulting in the nonappearance of the defendants and entitling plaintiff to a judgment of default. In so ruling, the court found that the PC defendants’ pattern of noncompliant behavior was “willful and contumacious.” (2013 NY Slip Op 34010[U], *11.) He also noted that defendants had stipulated to the consequences of their conduct and “proffered no adequate excuse for their noncompliance [with discovery]” (2013 NY Slip Op 34010[U], *13). Moreover, the defendants attempted to avoid the consequences of the conditional order by serving responses about a month late which were “evasive, unresponsive and consisting mostly of objections.” (Id.)

Despite defendants’ default, Justice Jaeger noted that the court still had to reach the legal conclusion that plaintiff’s now undisputed factual allegations established a prima facie case. (2013 NY Slip Op 34010[U], *14, citing to Walley v Leatherstocking Healthcare, LLC, 79 AD3d 1236 [3d Dept 2010].) After reviewing the voluminous record (see id. at *6 n 2) Justice Jaeger concluded that plaintiff had established a prima facie case of fraudulent incorporation in that defendants had violated both Business Corporation Law §§ 1507 and 1508 and 11 NYCRR 65-3.16 and 65-3.11 (a):

“In sum, the overwhelming evidence indicates that the P.C. defendants were not owned [*3]and controlled by a licensed acupuncturist, therefore rendering them ineligible to receive reimbursement, and to collect payment on outstanding claims. Additionally, a billing provider which utilizes an independent contractor to provide the services in question, is not a ‘provider’ of the services in question and is not entitled to recover direct payment of assigned no-fault benefits from the defendant insurer.” (2013 NY Slip Op 34010[U], *18.)

Furthermore, on May 31, 2013, Justice Jaeger signed an order granting judgment to State Farm by default against all PC defendants, including Downtown. The order stated that “[the PC defendants] are unlawfully incorporated and are not entitled to collect No-Fault Benefits for any charges which they{**50 Misc 3d at 465} have submitted to State Farm” and that “State Farm is not obligated to pay the PC defendant” or their assignors for any health benefits provided. The order also decreed that “the PC defendants are not entitled to collect, and State Farm is not obligated to pay, No-Fault benefits for any charges that the PC defendants submitted to State Farm as such professional health services were provided by independent contractors or other non-employees of the PC defendants.” (Defendants’ exhibit A2.) The order with notice of entry was apparently served upon Gary Tsirelman, P.C., the attorney for then defendants Anikeyeva and Downtown and current attorney for plaintiffs herein. The Second Department affirmed this decision finding that defendants had failed to demonstrate reasonable excuse for their default in complying with the terms of the conditional order and a meritorious defense to the complaint. (State Farm Mut. Auto. Ins. Co. v Anikeyeva, 130 AD3d 1007, 1008 [2015].)

Before the instant trial began in late 2014, the defendant moved to have the case dismissed based on the doctrine of collateral estoppel. Defendant argued that Justice Jaeger’s order and decision precluded Downtown from arguing that it is eligible to receive no-fault benefits. Although defendant discussed its intention to utilize collateral estoppel in a pretrial conference, it never sought leave to amend its answer. In its brief, Downtown argued that defendant is barred from raising collateral estoppel because of defendant’s failure to amend its answer and the inapplicability of collateral estoppel in this case. Plaintiff also argued that collateral estoppel should not apply because the prior judgment was granted on default.

Collateral Estoppel or Issue Preclusion

It is well settled that a party may invoke the common-law doctrine of collateral estoppel to preclude another party from relitigating in a subsequent proceeding an issue clearly raised in a prior action and decided against that party or those in privity, whether or not the causes of action are the same. (In re Ferrandina, 533 BR 11 [ED NY 2015]; Ryan v New York Tel. Co., 62 NY2d 494, 500 [1984]; Lavian v Bleier, 2010 NY Slip 31542[U] [Sup Ct, NY County 2010]; see Abrahams v Commonwealth Land Tit. Ins. Co., 120 AD3d 1165 [2d Dept 2014].) The issue must have been essential to the decision rendered in the first action and must be the point to be decided in the second action such that “a different judgment in the second would destroy or impair rights or interests established in the{**50 Misc 3d at 466} first.” (Psychology YM P.C. v Travelers Prop. Cas. Ins. Co., 33 Misc 3d 1201[A], 2011 NY Slip Op 51744[U], *2 [2011], citing Ryan at 501.)

Collateral estoppel bars relitigation of an issue when “[1] the identical issue [was] . . . decided in the prior action and [is] decisive [in] the present action, and [2] the party to be precluded from [*4]relitigating the issue . . . had a full and fair opportunity to contest the prior [issue].” (Kaufman v Eli Lilly & Co., 65 NY2d 449, 455 [1985]; see also Evans v Ottimo, 469 F3d 278, 281 [2d Cir 2006]; Gramatan Home Invs. Corp. v Lopez, 46 NY2d 481, 485 [1979].) The proponent of collateral estoppel must demonstrate the identity of the issues whereas the party seeking to defeat its application has the burden of establishing the “absence of a full and fair opportunity to contest the prior determination.” (Buechel v Bain, 97 NY2d 295, 304 [2001]; Kaufman, 65 NY2d at 456; see Jeffreys v Griffin, 1 NY3d 34, 39 [2003]; Morrow v Gallagher, 113 AD3d 827, 828-829 [2d Dept 2014]; Nappy v Nappy, 100 AD3d 843, 845 [2d Dept 2012]; Windowizards, Inc. v S & S Improvements, Inc., 11 Misc 3d 130[A], 2006 NY Slip Op 50310[U], *2-3 [App Term, 2d Dept, 2d & 11th Jud Dists 2006].)

As to the first prong, preclusive effect will only be given where the particular issue was “actually litigated, squarely addressed and specifically decided.” (Crystal Clear Dev., LLC v Devon Architects of N.Y., P.C., 97 AD3d 716, 717-718 [2d Dept 2012].) To satisfy the “actually litigated” prong of this test, it “must have been properly raised by the pleadings or otherwise placed in issue and actually determined in the prior proceeding.” (Evans v Ottimo, 469 F3d at 282, citing D’Arata v New York Cent. Mut. Fire Ins. Co., 76 NY2d 659, 667 [1990]; Matter of Abady, 22 AD3d 71, 81 [1st Dept 2005].) For an identity of issues to exist, the issues presented must involve substantially identical legal theories and causes of action, and have no significant factual differences. (Kaufman, 65 NY2d at 455; see also Restatement [Second] of Judgments § 27, Comment c [1982] [court should consider whether there is substantial overlap between the evidence or argument, whether the new evidence or argument involves application of the same rule of law, whether pretrial preparation and discovery relating to the matter presented in the first action could be reasonably expected to have embraced the matter sought to be presented in the second, and how closely related the claims involved in the two proceedings are].){**50 Misc 3d at 467}

As to the second prong, a determination as to whether a full and fair opportunity was provided requires consideration of the “realities of the prior litigation” including the importance of the claim in the prior litigation, the forum and extent of the litigation, the incentive and initiative to litigate, the competence and expertise of counsel and the forseeability of future litigation. (Psychology YM at 5-6, citing to Ryan at 501; Gilberg v Barbieri, 53 NY2d 285, 292 [1981]; see Focus Radiology, P.C. v New York Cent. Mut. Ins. Co., 24 Misc 3d 126[A], 2009 NY Slip Op 51218[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2009].) An issue is not actually litigated if “there has been a default, a confession of liability, [a failure to provide discovery], a failure to place a matter in issue by proper pleading or even because of a stipulation” (Kaufman at 456-457; Matter of Abady at 83), and therefore a dismissal on these grounds will not usually be on the merits so as to bar a subsequent identical action. (Choicenet Chiropractic, P.C. v Clarendon Ins. Co., 24 Misc 3d 1216[A], 2009 NY Slip Op 51472[U] [Civ Ct, Richmond County 2009].)

A limited exception applies “where the party against whom collateral estoppel is sought to be invoked has appeared in the prior action or proceeding and has, by deliberate action, refused to defend or litigate the charge or allegation that is the subject of the preclusion request.” (Matter of Abady, 22 AD3d at 83-84; see Kalinka v Saint Francis Hosp., 34 AD3d 742, 744 [2d Dept 2006] [res judicata applies where dismissal in prior action was upon the grant of an order of [*5]preclusion after court determined that Kalinka willfully and contumaciously failed to comply with disclosure]; Kanat v Ochsner, 301 AD2d 456, 458 [1st Dept 2003] [collateral estoppel applies to judgment obtained upon default where defendants appeared and answered in prior action and engaged in extensive motion practice caused in large part by their “wilful and contumacious pattern of selective, partial responses to . . . pretrial discovery demands.” They therefore had a full and fair opportunity to fully litigate the underlying merits of the prior action “but affirmatively chose not to by their own failure to comply with court orders”]; Matter of Latimore, 252 AD2d 217 [1st Dept 1999] [collateral estoppel applies where respondent had ample opportunity to contest allegations in prior action yet allowed a default judgment to be entered against her and then failed to persuade the court to vacate said default].) To that end, a judgment issued as a result of preclusion after a party has refused to comply with discovery{**50 Misc 3d at 468} “is in fact a judgment on the merits” and must be given collateral effect. (Lavian v Bleier, 2010 NY Slip 31542[U], *6; see Strange v Montefiore Hosp. & Med. Ctr., 59 NY2d 737 [1983].)

Collateral estoppel may be invoked offensively as a sword in subsequent litigation by a nonparty to the prior litigation, provided that the party seeking to apply collateral estoppel can show that his opponent participated in the prior litigation and had a full opportunity to litigate the action on its merits. (B. R. DeWitt, Inc. v Hall, 19 NY2d 141, 147-148 [1967]; see also Windowizards, 11 Misc 3d 130[A], 2006 NY Slip Op 50310[U], *6 [App Term, 2d Dept, 2d & 11th Jud Dists 2006]; Klein v Gutman, 38 Misc 3d 1211[A], 2012 NY Slip Op 52427[U] [Sup Ct, Kings County 2012]; Uptodate Med. Servs., P.C. v State Farm Mut. Auto. Ins. Co., 23 Misc 3d 42 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2009] [where insurer offensively utilized collateral estoppel based on prior declaratory action finding the provider was fraudulently incorporated].) Again, the proponent of collateral estoppel must show that the decisive issue was necessarily decided in the prior action and the party opposing collateral estoppel must show the absence of a full and fair opportunity to litigate the issue at hand. (Windowizards, 2006 NY Slip Op 50310[U], *4, citing Buechel v Bain, 97 NY2d at 304.)

Discussion

In the instant proceeding, defendant State Wide seeks to use collateral estoppel against Downtown based upon a declaratory judgment, granted on default, that Downtown and other PC defendants were unlawfully incorporated and therefore not entitled to receive no-fault benefits. The predicate for the Supreme Court finding was that the purported owner of Downtown and other acupuncture PCs, Valentina Anikeyeva, did not actually own and control the PCs which were actually owned and controlled by unlicensed acupuncturists, in violation of New York law and regulations, and that the services provided therein were performed by independent contractors also in violation of the state regulations. As set forth above, State Wide may assert this doctrine even though it was not a party to the previous action brought by a different insurance company—State Farm—because Downtown was a party to the prior action.

[1] In the prior proceeding, Downtown Acupuncture and its purported owner had more than a full and fair opportunity to litigate the issue of fraudulent incorporation. Downtown{**50 Misc 3d at 469} submitted answers in the declaratory judgment action, was represented by the same attorney appearing on behalf of Downtown herein, and had ample opportunity to comply with Justice Jaeger’s conditional order [*6]of preclusion. Justice Jaeger found that all of the PCs, including Downtown, had engaged in “willful and contumacious” behavior by failing to comply with plaintiff’s discovery demands and his conditional order of preclusion. He also found that defendants had stipulated to the consequences of their conduct and proffered “no adequate excuse for their noncompliance.” Finally, rather than merely basing his decision on defendants’ default, Justice Jaeger searched the record based upon plaintiff’s “now undisputed factual allegations” and found that plaintiff had legally made out a prima facie case of fraudulent incorporation.

[2] However, at this juncture, defendant State Wide cannot meet the first prong of the test for collateral estoppel—that there is “an identity of issues” between the two cases involving the same legal theories and causes of actions. State Wide never amended its answer to include the defense of unlawful incorporation and thus has not met the threshold of even raising the issue of fraudulent incorporation. As it has not raised the issue, it cannot now argue that there is an identity of issues warranting collateral estoppel. It must first amend its answer.

[3] The defense of fraudulent incorporation, also known as the “Mallela defense,“^[FN*] is a “statutory defense” arising from a claimant’s failure to comply with the Business and Education Laws, as opposed to a policy exclusion or extent of coverage issue provided by a contract of exclusion. (Manhattan Med. Imaging, P.C. v State Farm Mut. Auto. Ins. Co., 20 Misc 3d 1144[A], 2008 NY Slip Op 51844[U] [Civ Ct, Richmond County 2008], citing Eastern Med., P.C. v Allstate Ins. Co., 19 Misc 3d 775 [Dist Ct, Nassau County 2008].) Healthcare service providers are not eligible to receive no-fault benefits if they are incorporated in violation of the applicable New York licensing requirements{**50 Misc 3d at 470} contained in Business Corporation Law §§ 1507, 1508 and Education Law § 6507 (4) (c) (I). (See Liberty Mut. Ins. Co. v Excel Imaging, P.C., 879 F Supp 2d 243, 256 [ED NY 2012]; Concourse Chiropractic, PLLC v State Farm Mut. Ins. Co., 35 Misc 3d 1213[A], 2012 NY Slip Op 50676[U], *4-5 [Dist Ct, Nassau County 2012] [“The factual foundation of a Mallela defense involves proof that persons not licensed to practice the profession for (which) the professional corporation . . . was formed are the actual owner or are actually controlling the operation of the business”]; Multiquest, P.L.L.C. v Allstate Ins. Co., 17 Misc 3d 37, 39 [App Term, 2d Dept, 2d & 11th Jud Dists 2007].) “Nor may a medical services corporation bill for services provided by physicians who are not employees of the corporation, such as independent contractors.” (Liberty Mut. Ins. Co., 879 F Supp 2d at 257; see 11 NYCRR 65-3.11 [a].)

The Mallela defense is not subject to preclusion and hence is non-waivable. (Lexington Acupuncture, P.C. v General Assur. Co., 35 Misc 3d 42, 48 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2012]; see Lexington Acupuncture, P.C. v State Farm Ins. Co., 12 Misc 3d 90, 92 [App Term, 2d Dept, 2d & 11th Jud Dists 2006]; Concourse Chiropractic, PLLC v State Farm Mut. Ins. Co., 35 Misc 3d 1213[A], 2012 NY Slip Op 50676[U], *5 [Dist Ct, Nassau County 2012]; Manhattan Med. Imaging, P.C. v State Farm Mut. Auto. Ins. Co., 20 Misc 3d 1144[A], 2008 NY Slip Op 51844[U] [Civ Ct, Richmond County 2008].) A defendant may plead this defense at any time since the courts have interpreted 11 NYCRR 65-3.16 (a) (12) to bar reimbursement of no-fault benefits without regard to when the services were rendered. (Multiquest, P.L.L.C. v Allstate Ins. Co., 17 Misc 3d 37, 39 [App Term, 2d Dept, 2d & 11th Jud Dists 2007], citing Allstate Ins. Co. v Belt Parkway Imaging, P.C., 33 AD3d 407, 408 [1st Dept 2006]; Urban Radiology, P.C. v GEICO Ins. Co., 28 Misc 3d 1230[A], 2010 NY Slip Op 51554[U], *1 [Civ Ct, Kings County 2010].) A court may even grant a motion for summary judgment on this unpleaded defense where a plaintiff has not asserted any surprise or prejudice. (Multiquest, P.L.L.C. v Allstate Ins. Co., 17 Misc 3d at 39; see also Ingordo v Square Plus Operating Corp., 276 AD2d 528 [2d Dept 2000].) Therefore, even if defendants did not include the Mallela defense in their answer they could raise it before the trial.

However, defendant is two steps removed from asserting collateral estoppel in the instant matter. The proper way to assert a claim of fraudulent incorporation is to plead it as a defense{**50 Misc 3d at 471} to an action to obtain reimbursement of assigned no-fault benefits or to bring a declaratory action seeking judgment that the provider is not eligible to obtain no-fault benefit because it has failed to comply with the licensing requirements of 11 NYCRR 65-3.16 and 65-3.11 (a). (Concourse Chiropractic, PLLC v State Farm Mut. Ins. Co., 35 Misc 3d 1213[A], 2012 NY Slip Op 50676[U], *6 [Dist Ct, Nassau County 2012].) Here, defendant never even sought to amend its answer to include the Mallela defense and must do so prior to even raising collateral estoppel as an affirmative defense.

Similarly, collateral estoppel is an affirmative defense that should generally be pleaded in the answer or a pre-answer motion to dismiss. (CPLR 3018, 3211 [a] [5]; see also Surlak v Surlak, 95 AD2d 371, 383 [2d Dept 1983].) While the courts have considerable discretion to permit amendment of pleadings in the absence of a showing of prejudice (CPLR 3025 [b]; see also Aurora Loan Servs., LLC v Dimura, 104 AD3d 796, 796 [2d Dept 2013]; Worthen-Caldwell v Special Touch Home Care Servs., Inc., 78 AD3d 822, 823 [2d Dept 2010]), the proponent seeking to amend the pleadings must make a formal motion. (See Laundry v Bolton, 43 Misc 3d 1205[A], 2014 NY Slip Op 50498[U] [Sup Ct, Kings County 2014]; Fernandez v The New Happy Nail, Inc., 2014 WL 8735152 [Sup Ct, Queens County 2014]; CPLR 3025 [b].)

This court cannot even entertain defendant’s request for collateral estoppel until it seeks to amend its answer to raise Mallela as a defense and hence create an apparent identity of issues between the declaratory judgment action and the instant matter. In the same motion to amend it can also assert collateral estoppel. After defendant formally moves to amend, plaintiff will be afforded the opportunity to argue how it would be prejudiced by such a motion. The court is quite dubious that plaintiff will be able to show any prejudice or surprise since the Appellate Term noted as early as 2012 that “[t]here exists a rich history of litigation, involving a multitude of cases before the Appellate Term, in which health care facilities allegedly owned by Ms. Anikeyeva have been asked to supply Mallela discovery.” (Lexington Acupuncture, P.C., 35 Misc 3d at 49 [Golia, J. concurring].) However, sometimes form over substance does matter and plaintiff must be afforded the opportunity to argue prejudice or disclaim the apparent identity of issues.

Footnotes

Footnote *:In State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005]), the Court of Appeals held that professional corporations that are improperly incorporated or licensed are ineligible to recover no-fault benefits and that insurance carriers may withhold payment for medical services provided by fraudulently incorporated enterprises to which patients have assigned their claims. At issue in Mallela was the prohibition of “nonphysicians . . . owning or controlling medical service[s] corporations.” (Id. at 321; see Lexington Acupuncture, P.C. v General Assur. Co., 35 Misc 3d 42, 45 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2012].)

Defendant appeals from an order the Civil Court of the City of New York, New York County (Jose A. Padilla, Jr., J.), entered February 11, 2015, which denied its motion for summary judgment dismissing the complaint.

Per Curiam.

Order (Jose A. Padilla, Jr., J.), entered February 11, 2015, reversed, with $10 costs, motion granted and complaint dismissed. The Clerk is directed to enter judgment accordingly.

The defendant-insurer made a prima facie showing of entitlement to summary judgment dismissing the action for first-party no-fault benefits by establishing that it properly mailed the notices for chiropractic/acupuncture independent medical examinations (IMEs) to plaintiff’s assignor and that the assignor failed to appear (see American Tr. Ins. Co. v Lucas, 111 AD3d 423 [2013]; American Tr. Ins. Co. v Solorzano, 108 AD3d 449 [2013]). Contrary to plaintiff’s specific contention, defendant was entitled to request the IMEs prior to its receipt of plaintiff’s claim forms (see 11 NYCRR 65-1.1 [an insurer has a right to request IMEs “when, and as often as [it] may reasonably require”]; Steven Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 35 AD3d 720, 721 [2006] [an insurer is entitled to request IMEs “before . . . or after the claim form is submitted” (emphasis supplied)]; see also Inwood Hill Med., P.C. v General Assur. Co., 10 Misc 3d 18, 19-20 [2005]). Moreover, defendant submitted competent evidence of the assignor’s nonappearance, in the form of the sworn affidavits of the scheduled examining chiropractors/ acupuncturists and an employee of defendant’s third-party IME scheduler, setting forth facts sufficient to demonstrate the affiants’ personal knowledge of the assignor’s repeated failures to appear for the IMEs and the office practices and policies when an assignor fails to appear for a scheduled IME (see American Tr. Ins. Co. v Lucas, 111 AD3d at 424).

In opposition to defendant’s prima facie showing, plaintiff did not specifically deny the assignor’s nonappearance or otherwise raise a triable issue with respect thereto, or as to the mailing or reasonableness of the underlying notices (see Unitrin Advantage Ins. Co. v Bayshore Physical Therapy, PLLC, 82 AD3d 559, 560 [2011], lv denied 17 NY3d 705 [2011]; see also Badio v Liberty Mut. Fire Ins. Co., 12 AD3d 229 [2004]; Abuhamra v New York Mut. [*2]Underwriters, 170 AD2d 1003 [1991]).

In view of our determination, we reach no other issue.

THIS CONSTITUTES THE DECISION AND ORDER OF THE COURT.

Decided on October 20, 2015

[*1]

Supreme Court, Appellate Term, Second Department, 2d, 11th and 13th Judicial Districts, October 19, 2015

APPEARANCES OF COUNSEL

The Law Office of Robyn M. Brilliant, P.C., New York City (Robyn M. Brilliant of counsel), for appellant.

Ordered that the order is modified by providing that the branch of defendant’s motion seeking attorney’s fees is granted; as so modified, the order is affirmed, without costs, and the matter is remitted to the Civil Court for a determination of the reasonable amount of attorney’s fees incurred by defendant up to the date of discontinuance.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff’s oral application for a discontinuance without prejudice was granted by the Civil Court on February 6, 2013. Thereafter, defendant moved to vacate the February 6, 2013 order, or, in the alternative, to modify the prior order by providing that the discontinuance was with prejudice, and for attorney’s fees and sanctions. By order dated January 7, 2014, the Civil Court denied the branch of defendant’s motion seeking to vacate or modify the February 6, 2013 order and implicitly denied the branches of defendant’s motion seeking attorney’s fees and sanctions.

Generally, courts are reluctant to compel a party to litigate (see DuBray v Warner Bros. Records, 236 AD2d 312, 314 [1997]), and it is well settled that courts have the discretion to grant a motion for discontinuance, without prejudice, if no{**50 Misc 3d at 53} special circumstances exist, such as prejudice to a substantial right of the defendant or other improper consequences (see Tucker v Tucker, 55 NY2d 378, 383 [1982]; GMAC Mtge., LLC v Bisceglie, 109 AD3d 874, 876 [2013]; Wells Fargo Bank, N.A. v Fisch, 103 AD3d 622, 622 [2013]; Mathias v Daily News, 301 AD2d 503, 504 [2003]; Valladares v Valladares, 80 AD2d 244, 257-258 [1981], mod on other grounds sub nom. Tucker v Tucker, 55 NY2d 378 [1982]). “Unlike a motion for change of venue which involves the affirmative selection of another forum, a court in granting discontinuance merely makes it possible for the action to be brought elsewhere” (Urbonowicz v Yarinsky, 290 AD2d 922, 923 [2002] [citations omitted]). However, motions for discontinuance should not be used to enable plaintiffs to “do indirectly what they are not permitted to do directly” (Katz v Austin, 271 App Div 217, 218 [1946]; see also DuBray v Warner Bros. Records, 236 AD2d at 314).

[1] In support of the branch of its motion seeking to vacate or modify the February 6, 2013 order, defendant did not provide any information regarding the arguments that had been made before the Civil Court in support of, and in opposition to, plaintiff’s oral application. Despite the fact that plaintiff subsequently commenced an action against defendant in the Civil Court, Bronx County, to recover the same no-fault benefits as sought herein, defendant’s argument—that plaintiff sought the discontinuance because it did not have a witness to provide testimony establishing its billing and wanted to commence an action in the Civil Court, Bronx County, where a witness allegedly is not required to establish billing—is not supported by the record, which indicates that a trial had yet to commence in the case at bar. The record does not establish that plaintiff expressed its intention to discontinue the Queens County action in order to commence an action in Bronx County (cf. DuBray v Warner Bros. Records, 236 AD2d at 314). Consequently, defendant did not establish that plaintiff indirectly sought to do what it was not permitted to do directly, i.e., change venue, when it moved for discontinuance.

[2] Notwithstanding the foregoing, inasmuch as it is uncontroverted that defendant had defended the instant action for three years during which time it had made numerous motions, engaged in discovery practice, and repeatedly appeared in court, defendant is entitled to recover the reasonable attorney’s fees it incurred in its defense of the instant action up to the date of discontinuance, in order to eliminate any possible{**50 Misc 3d at 54} prejudice attributable to the discontinuance (see Carter v Howland Hook Hous. Co., Inc., 19 AD3d 146, 146-147 [2005]). We pass on no other issue.

Accordingly, the order is modified by providing that the branch of defendant’s motion seeking attorney’s fees is granted; as so modified, the order is affirmed, and the matter is remitted to the Civil Court for a determination of the reasonable amount of attorney’s fees incurred by defendant up to the date of discontinuance.

Pesce, P.J., Aliotta and Solomon, JJ., concur.

Decided on October 8, 2015

Plaintiff, as limited by its brief, appeals from so much of an order of the Civil Court of the City of New York, Bronx County (Joseph E. Capella, J.), entered March 19, 2014, as granted defendant’s motion for partial summary judgment.

Per Curiam.

Order (Joseph E. Capella, J.), entered March 19, 2014, insofar as appealed from, affirmed, with $10 costs.

We sustain the grant of defendant’s motion for partial summary judgment. Inasmuch as the health services underlying plaintiff’s no-fault claim were rendered in New Jersey, defendant may properly rely upon the New Jersey fee schedule to establish the “prevailing fee” within the meaning of 11 NYCRR 68.6 (see Surgicare Surgical Associates v National Interstate Ins. Co., appeal numbered 15-175, decided herewith). Plaintiff’s objections to the sufficiency of defendant’s proof pertaining to the calculation of the fees under the New Jersey fee schedule are premature, inasmuch as Civil Court made no determination as to the amount reimbursable under that fee schedule. We have considered and rejected plaintiff’s remaining arguments.

THIS CONSTITUTES THE DECISION AND ORDER OF THE COURT.

[*1]

Supreme Court, Appellate Term, First Department, October 8, 2015

Surgicare Surgical v National Interstate Ins. Co., 46 Misc 3d 736, affirmed.

APPEARANCES OF COUNSEL

The Law Office of Cohen & Jaffe, LLP, Lake Success (Aaron J. Perretta of counsel), for appellant.

Bruce Somerstein & Associates, P.C., New York City (Donald J. Kavanagh, Jr. of counsel), for respondent.

Order, entered November 17, 2014, affirmed, with $10 costs.

This first-party no-fault action arises from health services rendered by plaintiff provider at its New Jersey location. Plaintiff billed $10,800 for the services (associated with arthroscopic knee surgery), but defendant insurer paid only $5,996.67 on the claim, an amount in accordance with the New Jersey fee schedule. In this action, plaintiff, in effect, seeks the ($4,803.33) difference between the amount charged and payment made by defendant pursuant to the aforementioned fee schedule.

Insurance Department Regulations (11 NYCRR) § 68.6 provides that where a health service reimbursable under Insurance Law § 5102 (a) (1) “is performed outside New York State, the permissible charge for such service shall be the prevailing fee in the geographic location of the provider” (emphasis added). We agree, essentially for reasons stated by Civil Court (46 Misc 3d 736 [2014]), that where a reimbursable health care service is performed outside the State of New York in a jurisdiction that has enacted a medical fee schedule prescribing the permissible charge for the service rendered, an insurer may properly rely on such fee schedule to establish the “prevailing fee” within the meaning of 11 NYCRR 68.6, and demonstrate compliance therewith by payment in accordance with that fee schedule.

Significantly, the Superintendent of Insurance issued an opinion letter stating that the reimbursement amount under section 68.6 “is determined by the permissible cost” in the out-of-state location (Guatemala) (see Ops Gen Counsel NY Ins{**50 Misc 3d at 87} Dept No. 03-04-03 [Apr. 2003]). The Superintendent’s interpretation is entitled to deference, since it is neither irrational nor unreasonable, nor counter to the clear wording of a statutory provision (see LMK Psychological Servs., P.C. v State Farm Mut. Auto. Ins. Co., 12 NY3d 217, 223 [2009]). Indeed, the Superintendent’s reliance upon the “permissible cost” in the foreign jurisdiction is consistent with [*2]the legislative purpose underlying Insurance Law § 5108 and implementing regulations—to “significantly reduce the amount paid by insurers for medical services, and thereby help contain the no-fault premium” (Goldberg v Corcoran, 153 AD2d 113, 118 [1989], appeal dismissed 75 NY2d 945 [1990]).

Applying section 68.6 as interpreted by the Superintendent, the “prevailing fee in the geographic location of a provider” is the “permissible” reimbursement rate authorized in the foreign jurisdiction. Here, the permissible rate authorized in New Jersey for the services rendered by plaintiff is set forth in New Jersey’s no-fault statute and applicable fee schedule. Allowing plaintiff to bill at a rate significantly higher than the permissible charges in the New Jersey fee schedule would undermine the purpose of Insurance Law § 5108, and thwart the core objectives of the No-Fault Law—”to provide a tightly timed process of claim, disputation and payment” (Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 319 [2007] [citation omitted]), to “reduce the burden on the courts and to provide substantial premium savings to New York motorists” (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 860 [2003]).

Contrary to plaintiff’s claim, the omission of the term “fee schedule” from the regulation does not indicate that its exclusion was intended. Construed within the context of the regulation, whose scope and application broadly extends to all geographic locations outside the State of New York, the legislature’s use of the comprehensive term “prevailing fee,” rather than the less inclusive term “fee schedule,” comports with common sense and the reality that the different jurisdictions have not unanimously adopted a no-fault regime, and/or uniformly based the permissible reimbursement charge upon a medical fee schedule.

We note that since the services here were rendered after April 1, 2013, the defense of excessive fees is not subject to preclusion (see 11 NYCRR 65-3.8 [g] [eff Apr. 1, 2013]).{**50 Misc 3d at 88}

Plaintiff’s remaining contentions are unpreserved or without merit.

Shulman, J.P., Hunter, Jr., and Ling-Cohan, JJ., concur.