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

Appeal from an order of the Civil Court of the City of New York, Kings County (Dawn Jimenez Salta, J.), entered March 10, 2010, deemed from a judgment of the same court entered May 25, 2010 (see CPLR 5501 [c]). The judgment, entered pursuant to the March 10, 2010 order granting defendant’s motion for summary judgment dismissing the complaint and denying plaintiff’s cross motion for summary judgment, dismissed the complaint.

ORDERED that the judgment is affirmed, with $10 costs. [*2]

In this action by a provider to recover assigned first-party no-fault benefits, the Civil Court, by order entered March 10, 2010, granted defendant’s motion for summary judgment dismissing the complaint and denied plaintiff’s cross motion for summary judgment. A judgment was subsequently entered, from which the appeal is deemed to have been taken (see CPLR 5501 [c]).

In support of its motion, defendant submitted affidavits from the president of the company retained by defendant to schedule independent medical examinations (IMEs). The affidavits established that the IME scheduling letters had been timely mailed pursuant to the company’s standard office practices and procedures (see St. Vincent’s Hosp. of Richmond v Government Empls. Ins. Co., 50 AD3d 1123 [2008]; Delta Diagnostic Radiology, P.C. v Chubb Group of Ins., 17 Misc 3d 16 [App Term, 2d & 11th Jud Dists 2007]). Defendant also submitted affirmations from the orthopedist who was to perform the IMEs, which established that plaintiff’s assignors had failed to appear for the duly scheduled IMEs (see Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 35 AD3d 720 [2006]). In addition, an affidavit executed by defendant’s claims examiner demonstrated that the denial of claim forms, which denied plaintiff’s claims based on plaintiff’s assignors’ nonappearance at the IMEs, had been timely mailed (see St. Vincent’s Hosp. of Richmond, 50 AD3d 1123; Delta Diagnostic Radiology, P.C., 17 Misc 3d 16). Since the appearance of an assignor at a duly scheduled IME is a condition precedent to the insurer’s liability on the policy (see Insurance Department Regulations [11 NYCRR] § 65-1.1; Stephen Fogel Psychological, P.C., 35 AD3d at 722), defendant’s motion for summary judgment dismissing the complaint was properly granted. Accordingly, the judgment is affirmed.

Pesce, P.J., Weston and Rios, JJ., concur.
Decision Date: April 25, 2012

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

Appeal from an order of the Civil Court of the City of New York, Queens County (Jodi Orlow, J.), entered May 17, 2010, deemed from a judgment of the same court entered June 14, 2010 (see CPLR 5501 [c]). The judgment, entered pursuant to the May 17, 2010 order denying plaintiff’s motion for summary judgment and granting defendant’s cross motion for summary judgment, dismissed the complaint.

ORDERED that the judgment is affirmed, with $10 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 its motion for summary judgment and granted defendant’s cross motion for summary judgment dismissing the complaint. A judgment was subsequently entered, from which the appeal is deemed to have been taken (see CPLR 5501 [c]).

Contrary to plaintiff’s contention, the affirmed peer review reports annexed to defendant’s cross motion each set forth a factual basis and medical rationale for the doctors’ determination that there was a lack of medical necessity for the services rendered to plaintiff’s assignors. As plaintiff’s remaining contentions either lack merit or are academic, the judgment is affirmed (see Delta Diagnostic Radiology, P.C. v Integon Natl. Ins. Co., 24 Misc 3d 136[A], 2009 NY Slip Op 51502[U] [App Term, 2d, 11th & 13th Jud Dists 2009]; Delta Diagnostic Radiology, P.C. v American Tr. Ins. Co., 18 Misc 3d 128[A], 2007 NY Slip Op 52455[U] [App Term, 2d & 11th Jud Dists 2007]; A. Khodadadi Radiology, P.C. v NY Cent. Mut. Fire Ins. Co., 16 Misc 3d 131[A], 2007 NY Slip Op 51342[U] [App Term, 2d & 11th Jud Dists 2007]).

Pesce, P.J., Rios and Aliotta, JJ., concur.
Decision Date: April 25, 2012

Supreme Court, Nassau County

1411/12

Economou & Economou, Attorney for Petitioner, 485 Underhill Boulevard, Syosset, NY 11791

Brian Rothenberg, Attorney for Respondent, 100 Duffy Avenue, Hicksville, NY 11801

Robert A. Bruno, J.

Upon the foregoing papers, it is ordered that this motion is decided as follows:

Petitioner requests an Order pursuant to Article 75 and CPLR §3102( c), compelling disclosure and discovery to aid in arbitration; and, pursuant to Article 75 and CPLR §2201(b) staying any and all proceedings present, and staying the filing of any new proceedings which seek reimbursement of no-fault benefits pursuant to Article 51 (Comprehensive Motor Vehicle Insurance Reparations Act) and 11 NYCRR 65 (Regulations Implementing the Comprehensive Motor Vehicle Insurance Reparations Act) pending the compliance with such order. Respondent opposes said application.

In a proceeding pursuant to CPLR Article 75, to, inter alia, stay arbitration of certain No-Fault proceedings, the petitioning insurance carriers move pursuant to CPLR 3102[c] for an order: (1) compelling disclosure and discovery in aid of arbitration from the defendant Kissena Medical Imaging, P.C.; and/or (2) staying certain pending arbitrations commenced by Kissena Medical Imaging, P.C., and temporarily enjoining and/or staying it from commencing any further No-Fault arbitration proceedings for reimbursement of benefits as against the petitioners.

The petitioner insurance companies — over 40 in total — have commenced the within proceeding to stay certain pending and/or anticipated no-fault arbitrations and/or “any and all proceedings” which have been, or will be, instituted by the respondent No-Fault provider/medical corporation, Kissena Medical Imaging, P.C. [“Kissena”](Pet., ¶¶ 4-5; 19-20; Exh., “A”). The petition also demands stated disclosure in aid of the foregoing arbitration proceedings, four of which — the petitioners claim — are currently pending (Pet., ¶¶ 19-20).

According to the petitioning carriers, Kissena has billed them for radiological services it has provided to injured no-fault claimants, from whom Kissena received benefit assignments (Caio Aff., ¶¶ 6-7). The carriers have declined, however, to pay the Kissena bills, arguing in sum that Kissena is an illegally constituted and/or fraudulently incorporated medical service corporation in violation of applicable no-fault rules and regulations (see generally, State Farm Mut. Auto. Ins. Co. v. Mallela, 4 NY3d 313, 320-321 [2005]; One Beacon Ins. Group, LLC v. Midland Medical Care, P.C., 54 AD3d 738, 740).

More specifically, the relief sought by the petitioners is based on allegations that: (1) Kissena [*2]has been fraudulently incorporated by “paper” owner, Lawrence N. Diamond, M.D; (2) it “appears” that Kissena is secretly owned and controlled by a non-physician in violation of New York law; and (3) that Kissena has billed the plaintiffs for services performed by independent contractors, not by Kissena employees, also in violation stated No-Fault rules and regulations (Pet., ¶¶ 4-7, 9-12, 15-16, 18). In response, Kissena has commenced certain arbitration proceedings under the No-Fault law to recover payment for the services it has rendered.

Significantly, apart from the four arbitrations identified in an attachment to the petition (Exh., “A”), the petition does not allege that the remaining carriers have actually received specifically identified claims or arbitration demands from Kissena; nor does it identify precisely what arbitrations — pending or otherwise — are imminent with respect to the extensive list of carriers whose names have been included in the caption.

The disclosure sought in connection with the application is extensive and requests, inter alia: the production of Kissena’s owner, Lawrence N. Diamond, M.D., for a deposition; the identity of all billing and management companies and/or agents for Kissena; all written agreements and contracts, including those between Kissena and any billing and/or management agents; all written agreements between Diamond personally and any of Kissena’s billing or management companies or agents; all contracts between Diamond and Kissena; all financial statements of Kissena, including all banks records for accounts maintained by Kissena; all federal and state tax documentation, including all filings and returns for both for Kissena and Diamond personally; all corporate documents/leases for premises where the clinic may be located; and as well as all equipment leases, documents of incorporation and all filings made with the Secretary of State (Pet., ¶ 32).

Upon submission of the petitioners’ order to show cause, this Court struck the temporary restraining order contained therein. The foregoing temporary restraining order would have broadly stayed “any and all” pending proceedings and enjoined Kissena from commencing any additional arbitration matters as against all of the named petitioners (Order to Show Cause, 2nd and 3rd decretal paragraphs).

The petitioners’ underlying application for injunctive relief and discovery in aid of arbitration is now before the Court. The application should be denied.

It is settled that petitioner seeking disclosure in aid of an arbitration pursuant to CPLR 3102[c] must affirmatively demonstrate that “extraordinary circumstances” exist, “such that this relief would be absolutely necessary for the protection of its rights” (see, Progressive Specialty Ins. Co. v. Alexis, 90 AD3d 933, 834; Travelers Indem. Co. v. United Diagnostic Imaging, P.C., 73 AD3d 791, 792 see also, De Sapio v. Kohlmeyer, 35 NY2d 402, 406 [1974]; Hendler & Murray v. Lambert, 147 AD2d 442, 443 cf., Government Employees Ins. Co. v. Morris, 83 AD3d 709; Kissena Medical Imaging, P.C., 25 Misc 3d 1214(A), 901 NYS2d 911, 2009 WL 3337597 [Supreme Court, Nassau County 2009]). Indeed, disclosure devices are to be “sparingly used in arbitration proceedings'” (De Sapio v. Kohlmeyer, supra, 35 NY2d 402, 406; Travelers Indem. Co. v. United Diagnostic Imaging, P.C., supra, 73 AD3d at 792; Matter of Flood, 157 AD2d 780, 781).

With these principles in mind, the Court agrees that the petitioners have not sustained their [*3]burden of demonstrating that extraordinary circumstances exist (Travelers Indem. Co. v. United Diagnostic Imaging, P.C., supra).

Significantly, in opposition to the motion, Kissena has persuasively argued, among other things, that: (1) it has been duly incorporated by a physician licensed to practice medicine in the State of New York; (2) the affidavits submitted by the carriers’ investigators (who are apparently employees of one particular carrier), are inconclusive and lacking in the requisite factual detail; and (3) only two arbitration proceedings (with amounts in issue of $2,670.40 and $878.67) are actually now pending before an arbitrator, which claims have been denied on medical necessity grounds (Caio Aff., ¶¶ 31, 41-45, 48, 50, 52). The record also supports Kissena’s assertions that many of the document demands are excessively broad and unlimited in their temporal scope (cf., Accent Collections, Inc. v. Cappelli Enterprises, Inc., 84 AD3d 1283). The petitioners have not submitted reply papers in which they have responded to, or otherwise materially disputed, the foregoing assertions.

Lastly, there is no dispute that the petitioners possess the right to request that the involved arbitrators direct Kissena to produce materials relating to, inter alia, Kissena’s corporate structure(Travelers Indem. Co. v. United Diagnostic Imaging, P.C., supra, 73 AD3d at 791-792). Nor does the evidence indicate “that if a disclosure directive is made during those proceedings, the requested disclosure will, at that point, be unavailable” (Travelers Indem. Co. v. United Diagnostic Imaging, P.C., supra). Surprisingly, during oral argument when this Court struck petitioner’s application for a temporary restraining order, petitioner’s admitted they did not bother seeking the discovery they are requesting herein, in the arbitrary proceeding they request this Court to stay.

Under these circumstances, and upon the exercise of its broad discretion, the Court agrees that the petitioners’ submissions do not establish the existence of extraordinary circumstances warranting the requested, discovery in aid of arbitration.

The Court has considered the petitioners’ remaining contentions and concludes that they are lacking in merit.

According, it is,

ORDERED petitioners’ order to show cause pursuant to CPLR 3102[c], for an order, inter alia, granting a stay and stated discovery in aid of arbitration, is denied.

All matters not decided herein are DENIED.

This constitutes the decision and order of this Court.

Dated: April 23, 2012

Mineola, New YorkE N T E R: [*4]

______________________________

Hon. Robert A. Bruno, J.S.C.

—[*1] Joseph Henig, P.C., Bellmore, N.Y., for appellant.

Bruno, Gerbino & Soriano, LLP, Melville, N.Y. (Mitchell L. Kaufman of counsel), for respondent.

In an action to recover no-fault medical payments under a policy of automobile insurance, the plaintiff appeals from so much of an order of the Supreme Court, Nassau County (Marber, J.), entered September 12, 2011, as denied its motion for summary judgment on the complaint.

Ordered that the order is affirmed insofar as appealed from, with costs.

The plaintiff demonstrated its prima facie entitlement to judgment as a matter of law on its complaint to recover no-fault payments, by submitting evidence that the prescribed statutory billing form had been mailed and received by the defendant insurer, which failed to either pay or deny the claim within the requisite 30-day period (see Insurance Law § 5106 [a]; 11 NYCRR 65-3.5; NYU-Hosp. for Joint Diseases v American Intl. Group, Inc., 89 AD3d 702 [2011]; Mount Sinai Hosp. v Country Wide Ins. Co., 85 AD3d 1136 [2011]; Mount Sinai Hosp. v Government Empls. Ins. Co., 85 AD3d 1135 [2011]; New York & Presbyt. Hosp. v Selective Ins. Co. of Am., 43 AD3d 1019 [2007]). In opposition to the motion, however, the defendant established that it had made a timely request for additional verification and that it timely denied the claim within 30 days of receipt of the requested information (see 11 NYCRR 65-3.8 [a] [1]; 65-3.5 [b]; 65-3.6 [b]; Westchester Med. Ctr. v American Tr. Ins. Co., 60 AD3d 848, 849 [2009]; New York Univ. Hosp. Rusk Inst. v Government Empls. Ins. Co., 39 AD3d 832 [2007]; New York & Presbyt. Hosp. v Allstate Ins. Co., 31 AD3d 512, 513 [2006]; see generally Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 317 [2007]).

The parties’ remaining contentions are without merit.

Accordingly, the Supreme Court properly denied the plaintiff’s motion for summary judgment on the complaint. Skelos, J.P., Dillon, Eng and Austin, JJ., concur.

District Court of Nassau County, First District

CV-019332-11

Marcotte & Associates, P.C.

McDonnell & Adels, PLLC

Fred J. Hirsh, J.

The following named papers numbered 1 – 6

submitted on this motion on February 14, 2012 Papers NumberedNotice of Motion and Affidavits Annexed1-2

Notice of Motion and Affidavits Annexed3-4

Affirmation in Opposition to Defendant’s Motion5

Replying Affidavits6

Defendant moves for summary judgment. Plaintiff moves to compel discovery.^[FN1]

BACKGROUND

Concourse Chiropractic, PLLC (“Concourse”) sues as assignee of Odalis Guzman (“Guzman”) seeking to recover first party no-fault benefits for chiropractic treatment it provided to Guzman.

Concourse submitted bills for treatment it provided to Guzman for the period 8/5/09 to 8/13/09 in the sum of $150, 9/2/09 in the sum of $33.70, 9/23/09 in the sum fo $33.70 and 11/18/09 in the sum of $33.70. Defendant State Farm Mutual Insurance Company (“State Farm”) acknowledges timely receipt of these bills.

Concourse also submitted bills for the treatment rendered to Guzman for the period 11/13/08 to 12/18/08 in the sum of $425.44. State Farm asserts it paid these bills in full with applicable interest and attorney’s fees on August 22, 2011.

State Farm’s special investigation unit (“SIU”) has been investigating the operation of Concourse since 2006. Concourse is owned by Mitchell Zeren, D.C. (“Zeren”). Concourse operates out of 2676 Grand Concourse, Bronx, New York.

State Farm has commenced a civil RICO action against CPT Medical Services, P.C. (“CPTMS”) and its owner Dr. Huseyin Tuncel and other medical providers who State Farm [*2]claims are regularly prescribing and performing unnecessary Current Perception Threshold testing (“CPT testing”). During discovery in the civil RICO action, State Farm learned that Zeren was a practitioner who was referring patients to CPTMS for CPT testing. The record before this Court does not reflect how often or how many times Zeren referred patients to CPTMS for CPT testing. The record also does not reflect whether State Farm denied payment for those tests and if it did, whether actions were brought to recover payment of no-fault benefits for these tests and the outcome of those actions.

The record also does not reflect whether Concourse referred Guzman for CPT testing.

Zeren is also listed as the owner of MZJR Chiropractic Care, P.C. which he co-owns with Jeffrey Rauch, D.C., Mitchell Zeren, P.C., Zeren Chiropractic, P.C. and Zeren Family Chiropractic, all of which are located at 2676 Grand Concourse in The Bronx.

Zeren has also submitted bills to State Farm for treatment provided at Kingsbridge Chiropractic.

Vista Medical and Rehab, P.C. (“Vista”), Blue Sky Acupuncture. P.C. (“Blue Sky”) and Complete Medical Care Services of NY also submit bills with a billing and treatment address of 2676 Grand Concourse in The Bronx.

State Farm claims it receives bills from Concourse that reflect Concourse is providing treatment to patients three to four times a week. These same patients are also receiving physical therapy treatment from Vista and acupuncture from Blue Sky at the same time. The progress notes submitted by Concourse, Vista and Blue Sky do not reflect the concurrent care regimens.

Bills submitted by Concourse, Vista and Blue Sky use not only the same address but also use the same telephone number. This telephone number is also listed as the telephone number for Zeren Chiropractic, Kingsbridge Chiropractic and Complete Medical Care.

Vista is owned by Abiola Olawale Familusi, M.D. (“Dr. Familusi”). Dr. Familusi is associated with Multiviz Health Management Corp. (“Multiviz”). The New York State Department of State records indicate Belle Solomon (“Solomon”) is the CEO of Multiviz. Solomon does not hold any professional licenses.

Concourse, Vista and Blue Sky have previously used Multiviz address as its billing address. The claims in question in this action do not use Multiviz address as a billing address. The claims use Concourse’s Grand Concourse address as the billing address.

State Farm asserts Concourse use of Multiviz address as a billing address, the existence of a protocol scheme involving Concourse, Vista and Blue Sky and other information obtained in the civil RICO action raise concerns about the operation of these entities and suggest that someone other than the licensed professional listed as the owners are actually controlling the operation of these entities.

Despite these concerns, Concourse and the other Zeren related practices do not appear to be defendants in the civil RICO action.

Based upon this factual backdrop, State Farm sent a letter to Concourse dated October 1, 2009 acknowledging receipt of its claim for treatment provided to Guzman during the period August 5 through August 13, 2009 and requesting the Concourse appear for an Examination Under Oath (“EUO”) at the offices of McDonnell & Adels on October 27, 2009 at 10 a.m. In addition to appearing at the EUO, the letter requested Concourse [*3]produce at least seven days prior to the EUO the documents relating to the ownership of the PLLC, the general ledger and tax returns of Concourse for the past 12 months, a list of individuals who provided and/or supervised the health care treatment for which payment was requested identifying the professional license held by that individual and the relationship of that individual to Concourse (e.g., whether the person was an employee or independent contractor), documents relating to entities that rent space and/or equipment to or from Concourse and a completed and signed NF-3 and an assignment of benefits forms that included the 2004 updated fraud language.

Concourse did not respond this EUO letter, did not provide the documentary material requested in the EUO letter and did not appear for the EUO.

Upon receipt of the claim for the services rendered on September 2, 2009, State Farm send a letter dated October 13, 2009 advising Concourse it would not pay this claim until Concourse produced the material requested in the October 1, 2009 letter and appeared for the EUO requested by the October 1, 2009 letter.

By letter dated November 2, 2009, State Farm notified Concourse that Concourse had failed to appear for an EUO. The letter further acknowledges the receipt of the claim for the services provided on September 23, 2009 and advised Concourse it would not pay these claims until Concourse appeared for an EUO and produced the requested documents.

The letter advised Concourse the EUO to appear for an EUO on November 16, 2009 at 10 a.m. at the Garden City offices of McDonnell & Adels.

Both the October 1, 2009 letter and November 2, letter advise Concourse that if the date, time and location is inconvenient, Concourse is to contact State Farm to reschedule the EUO at for a date, time and location that was convenient for Concourse. Both letters also advise Concourse that the person appearing for the EUO will be reimbursed for lost earnings and reasonable transportation expenses.

Concourse did not respond to this letter in any way and did not appear for the EUO scheduled for November 16, 2009. As a result, on November 18, 2009, State Farm issued a denial of the aforementioned claims. State Farm also denied a claim submitted by Concourse for treatment provided to Guzman on November 18, 2009 on the grounds Concourse had failed to appear for an EUO.

Concourse motion is a standard motion to compel discovery. Concourse served a demand for interrogatories and a demand for expert information upon State Farm. State Farm has not responded to these demands. Concourse seeks an order striking State Farm’s answer because it has not responded to the discovery demands or alternatively for an order directing State Farm to respond. Concourse does not assert any of the information it demanded by way of discovery is necessary to oppose State Farm’s motion for summary judgment. See, CPLR 3212(f).

DISCUSSION

Plaintiff’s argument that defendant has failed to prove mailing is without merit. All of the cases cited by plaintiff on the issue of mailing were decided prior to St. Vincent’s Hosp. of Richmond v. Government Employees Ins. Co., 50 AD3d 1123 (2nd Dept. 2008). St. Vincent’s established a carrier could prove mailing by either by providing actual proof of mailing or the existence of an office practice and procedure designed to ensure timely and proper mailing of notices. [*4]

In order to overcome the presumption of mailing, plaintiff must establish the person making the affidavit attesting to the mailing or the carrier’s practices and procedures regarding mailing was not employed by the carrier when the notice was mailed and cannot establish the procedures described in the affidavit were in place when the notice was mailed, the carrier did not provide proof in admissible form establish actual mailing of the notice or any other evidence of its standard office practices and procedures for mailing denials and/or notices at the pertinent time. South Nassau Orthopedic Surgery and Sports Medicine, P.C. v. Auto One Ins. Co., 32 Misc 3d 129(A) (App.Term 2nd, 11th & 13th Jud. Dists.); Friendly Physicians, P.C. v. Geico Ins. Co., 29 Misc 3d 128(A) (App.Term 2nd, 11th 7 13th Jud. Dists. 2010);and Points of Health Acupuncture, P.C. v. Geico Ins. Co., 25 Misc 3d 140(A) (App.Term 2md, 11th & 13th Jud. Dists. 2009). In all other cases where mailing has been contested, the Appellate Courts have found proof of mailing to be satisfactory. The Appellate Term has found proof of mailing sufficient even when confronted with an affidavit from plaintiff’s medical biller specifically denying receipt of a verification request. Pomona Medical Diagnostic, P.C. v. Travelers Ins. Co., 31 Misc 3d 127(A) (App.Term, 2nd, 11th & 13th Jud. Dists. 2011).

Therefore, the proof submitted is sufficient to establish the EUO requests were mailed to Concourse.

The case raises again the issue of whether an insurer can demand as part of its EUO request material that would constitute discovery that could be obtained in a properly raised Mallela defense [See, State Farm Mutual Ins. Co. v. Mallela,4 NY3d 313 (2005)] and whether an insurer can request documents be produced seven days prior to a scheduled EUO.

State Farm has established it has a factual basis and a founded belief that Concourse may be subject to a Mallela defense. However, the no-fault regulations do not contain any provisions that permit an insurer to demand production of documents in connection with the an EUO. The regulations do not contain any provisions that require a party to produce such material at least 7 days in advance of the EUO.

Verification is permitted to “verify the claim”. 11 NYCRR 65-3.5(c).

A Mallela defense has nothing to do with the claim. A Mallela defense relates to the status of the claimant and the claimant’s eligibility to obtain payment of no-fault benefits.

While the Court of Appeals uses the language of fraud to describe a Mallela defense, Mallelahas nothing to do with common law fraud. Common law fraud involves “misrepresentation of a material existing fact, falsity, scienter, deception and injury.” Channel Master Corp. v. Aluminum Limited Sales, Inc., 4 NY2d 403, 407 (1958). In reality, Mallela is akin to a piercing the corporate veil. TNS Holdings, Inc. v. MKI Securities, Inc., 92 NY2d 335 (1998) and Matter of Morris v. New York State Dept. of Taxation & Finance, 82 NY2d 339 (1993). Mallela is based upon Business Corporation Law §§1507 and 1508 and Education Law §6507(c)(i) that prohibit anyone who is not licensed to practice the profession for which the professional corporation was formed from having an ownership or controlling interest in a professional corporation.

The factual foundation of a Mallela defenseinvolves proof that persons not licensed to practice the profession for with the professional corporation, limited liability company or limited liability partnership was formed are the actual owner or are actually controlling the [*5]operation of the business. The licensed individual has done little more than permit his or her license to be used as a basis to form the business. The licensed professional turned the operation of the corporation over to the non-professionals by signing management agreements that provided for excessive fees for routine office or practice management services, office and equipment leases that provided for excessive lease payments and in all other respects turn the operation of the professional corporation to the non-professionals. Andrew Carothers, M.D., P.C. v. Insurance Companies Represented by Bruno, Gerbino & Soriano, LLP, 26 Misc 3d 448 (Civil Ct. Richmond Co. 2009).^[FN2]

The court notes that although this has been dubbed a “Mallela defense” the Court of Appeals decision was a result of a action brought by State Farm seeking a declaratory judgment that it was not obligated to pay no-fault claims submitted by Dr. Mallela because his professional corporation was actually controlled by persons not licensed to practice medicine.

The court notes that in dicta in Mallela the Court of Appeals anticipated carriers would delay payment of claims only to pursue investigations for good cause, that the Insurance Department would investigate possible abuses by the carriers and carriers would be able to demonstrate “good cause” only upon a demonstration of conduct tantamount to fraud. The court further notes that Court of Appeals apparently believed that if insurers had good cause to believe a medical provider was “fraudulently incorporated” the insurer would commence a declaratory judgment action seeking to a judgment that the medical provider is not eligible to receive no-fault payments. The court believes that the Court of Appeals did not anticipate an insurer would demand for an EUO and extensive corporate records in connection with a matter in which the carrier has already paid the provider $450 in no fault benefits and the existing dispute involves an unpaid claim for no-fault benefits of $251.

The court notes State Farm paid the no-fault benefits to Concourse after Concourse defaulted in appearing for an EUO. Thus, State Farm paid Concourse no-fault benefits for treatment provided to Guzman even though it had an absolute defense to that claim. See, Unitrin Advantage Ins. Co. v. Bayshore Physical Therapy, P.C., 82 AD3d 559 (1st Dept. 2011) – a carrier can deny all no-fault claims retroactive to the date of the accident if a claimant fails to appear for an EUO.

The demand for information in this case is virtually identical to the demand this Court found impermissible and improper in Dynamic Medical Imaging, P.C. v. State Farm Mutual Automobile Ins. Co., 29 Misc 3d 278 (Dist. Ct. Nassau Co. 2010). See, also, Brownsville Advance Medical, P.C. v. Country Wide Ins. Co., 33 Misc 3d 1236(A) (Dist. Ct. [*6]Nassau Co. 2011) – Mallela type material cannot be obtained as verification of the claim.^[FN3]

Requesting an provider to produce voluminous corporate records in order to obtain payment of a no-fault claim is an abuse of the EUO and the entire verification process.

A Mallela defense is non-precludable and can be raised at any time. Lexington Acupuncture, P.C. v. General Assurance Co., -Misc.3d-, 2012 WL 661685 (App.Term 2nd, 11th & 13th Jud. Dists. 2012). The appropriate way to obtain Mallela material is to properly plead it as a defense to an action to obtain payment of no-fault benefits and establish a reasonable basis for requesting the material [Midborough Acupuncture, P.C. v. State Farm Ins. Co., 21 Misc 3d 10 (App.Term 2nd & 11th Jud. Dists. 2008)] or to bring a declaratory judgment action seeking a judgment declaring the provider is not eligible to obtain no-fault benefits because the licensed professional is a front for a professional corporation that is actually owned and controlled by non-professionals. Such a procedure would also have the advantage by having the parties obtain a full and final disposition of the insurer’s assertion the provider is ineligible to obtain payment of no-fault benefits.

The only explanation this court can find for this repeated and repetitive use of a request for an EUO and Mallela verification is the insurer’s hope that the provider will not response thus providing the insurer with an absolute defense to an action that is otherwise indefensible.

For the foregoing reasons, the court finds defendant’s EUO notice palpably improper. Defendant’s motion for summary judgment is denied.

Defendant’s motion for summary judgment stayed discovery. CPLR 3214. Defendant did not oppose plaintiff’s motion to compel discovery. Defendant should now be given the opportunity to oppose plaintiff’s discovery motion.

Therefore, plaintiff’s motion to strike defendant’s answer for failing to respond to plaintiff’s discovery demands is restored to the motion calendar of Civil Part 3, for May 14, 2012 at 9:30 a.m.

SO ORDERED:

Hon. Fred J. Hirsh

District Court Judge

Dated: April 16, 2012

cc:Marcotte & Associates, P.C.

McDonnell & Adels, PLLC

Footnotes

Footnote 1:Defendant has also moved to compel discovery. Defendant has withdrawn its motion to compel discovery and requested the court consider the papers submitted in support of its motion to compel discovery as its opposition to plaintiff’s cross-motion to compel discovery.

Footnote 2:The proof at trial in Carothers established the professional corporation was paying monthly lease fees to lease equipment in excess of the cost to purchase equipment. The licensed professional was not a signatory to the corporation bank account. The non-licensed individuals regularly withdrew significant sums of money from the corporate bank account to pay personal expenses. Dr. Carothers was receiving a fixed salary not dependent upon the income of the corporation and had almost no input on the operation of the business. The proof further established Dr. Carothers had limited participation in the medical activity of the professional corporation.

Footnote 3:The practical experience this court having heard and decided cases involving first party no-fault claims for over 3 ½ years is contrary to the expectation of the Court of Appeals when it decided Mallela. State Farm sent the same EUO request to Dynamic Medical in what appeared to be every claim Dynamic filed with State Farm. Over 50 motions identical to the one this Court decided in Dynamic Medical v. State Farm, supra were stayed by this Court pending the Appellate Term hearing and determinating the appeal State Farm took from this Court’s order. This does not include similar motions that were made, heard and decided in the three other civil parts of this Court. The actions were resolved prior to the Appellate Term hearing and deciding the appeal.

In Brownsville, supra, Country Wide repeatedly requested the same information by way of verification from Brownsville even though Brownsville had previously provided the information and even though much of the information Country Wide was requesting could have been obtained or confirmed in a matter of minutes through free, publically accessible web-site data bases maintained by the New York State Department of State and the New York State Department of Education.

[*1]

Supreme Court, Appellate Term, First Department, April 13, 2012

APPEARANCES OF COUNSEL

Jaffe & Koumourdas, LLP, New York City (Ariel S. Lichterman of counsel), for appellant. Gina Gleicher and Leon Kucherovsky, New York City, for respondent.

{**35 Misc 3d at 67} OPINION OF THE COURT

Per Curiam.

Order entered April 9, 2010, modified by granting defendant’s motion to the extent of reducing the amount of the judgment entered against it to the aggregate sum of $1,251; as modified, order affirmed, without costs.

The parties agree that the underlying no-fault first-party action was validly settled, but join issue as to the intended amount of the settlement. The facts leading up to the settlement are undisputed and may be briefly stated as follows: Plaintiff, through counsel, drafted and presented a proposed settlement agreement, dated October 21, 2008, which set forth all material terms of the settlement and provided, in paragraph 4, that “[t]his case is not settled unless this stipulation is signed by a representative of defendant and faxed back to [plaintiff’s attorney].” Upon receipt of plaintiff’s proposal, defense counsel made and initialed several handwritten changes to paragraph 2 of the document—addressing the consequences of a payment default on defendant’s part—with the changes designed to extend the time allotted to defendant to comply with the agreement’s payment terms and, more importantly here, to reduce defendant’s payment obligations in the event it failed to comply. So far as shown, plaintiff voiced no objection to the modifications proposed by defendant nor took any other action in the case for a full six months after defense counsel marked up and returned the stipulation, until March 2009, when plaintiff entered judgment in accordance with the original terms of the stipulation favorable to it.

Given the particular facts and circumstances of this case, and since plaintiff itself acknowledges that the parties’ correspondence yielded an enforceable settlement agreement, we conclude that plaintiff, through “acquiescent conduct” (Eldor Contr. Corp. v County of Nassau, 272 AD2d 509, 509 [2000])—including its election to forgo any further litigation activity on its no-fault claim—accepted and is bound by the stipulation’s revised terms (see Minelli Constr. Co., Inc. v Volmar Constr., Inc., 82 AD3d 720, 722 [2011]). Accordingly, the amount of the consent [*2]judgment issued below must be reduced to the stipulated principal sum of $950, together with the stipulated attorney’s fees ($196) and costs ($105) due plaintiff.

We note finally that the judgment at issue “is not a default judgment as that term is used in pleading and practice, and [the{**35 Misc 3d at 68} motion court’s] application of law relating to vacating default judgments was erroneous” (Furgang v Epstein, 106 AD2d 609, 610 [1984]).

Torres, J.P., Shulman and Hunter, Jr., JJ., concur.

District Court of Nassau County, First District

CV-043934-09

Friedman, Harfenist, Kraut & Perlstein

Short & Billy, P.C.

Fred J. Hirsh, J.

The following named papers numbered 1 – 4

submitted on this motion on February 17, 2012 Papers NumberedNotice of Motion and Affidavits Annexed1-2

Order to Show Cause and Affidavits Annexed

Affirmation in Opposition3

Replying Affidavits4

The only issue in this motion for summary judgment is what must a no-fault insurer prove to establish it has an objective basis and an objective justification for requesting an Examination Under Oath (“EUO”) when the insurer suspects the incident was a staged accident.

BACKGROUND

Dykwan Gallop (“Gallop”) and several other people claim to have sustained injuries in a motor vehicle accident that occurred on January 11, 2009 at approximately 11 p.m. in front of 295 Gates Avenue, Brooklyn, New York.

A 1994 Jeep owned by Sephida Artis (“Artis”) and operated by Dion Williams (“Williams”) was pulling out of a parking space when it collided with a 1996 Lexus owned by Jason Anderson (“Anderson”) and operated by Gallop.

Both vehicles were insured by Geico.

Kevin Quarles (Quarles”) was a passenger in the vehicle operated by Williams. Geronimo Wilbert (“Wilbert”) and Lauren Lazare (“Lazare”) were passengers in the vehicle operated by Gallop. [*2]

Because both vehicles were insured by Geico, Geico referred this matter to its Special Investigations Unit (“SIU”) to investigate the possibility that this was a staged accident.

Geico’s SIU investigator attempted to interview the operators and owners of both vehicles and the passengers in both vehicles. He was able to interview only Williams and Lazare.

Lazare’s statement to Geico’s SIU investigator reflects she was a passenger in the front seat of the vehicle being operated by a person she knew as Quan (Gallop). She believed the vehicle was owned by Quan’s cousin. Quan was driving her home when the accident occurred. Wilbert was a passenger in the back seat. She told the SIU investigator she did not actual see the other vehicle before the accident because she was looking at her cell phone and speaking with Wilbert vehicle when the impact occurred. She described the impact between the vehicles as minor. The impact to the vehicle in which she was a passenger was on the passenger side. She told the SIU investigator she did not know the driver or passenger in the other vehicle.

Since the vehicle in which she was a passenger was operational after the accident, Quan drove her home.

Because she had pain in her low back and knee after the accident, she went to see Dr. Boris Kleyman at Flatlands Medical P.C. ( Flatlands”). She received acupuncture, physical therapy and chiropractic treatment for about 4 weeks. She refused neuro-diagnostic testing. He stated she saw Quan and Geronimo treating at Flatlands.

The SIU investigator’s interview with Williams revealed Williams had borrowed the vehicle from a friend. He ran some errands for his parents and met Quarles at the location of the accident. After speaking with Quarles for a few minutes, he began to pull out of the parking space. He stated he looked back to his left two times before he began to pull out of the parking space. As he was pulling out of the parking space, the vehicle he was operating collided with dark colored Lexus.

Williams claims he did not know the operator or any of the passengers in the other vehicle. He told the SIU investigator the Jeep he was operating was not operational after the accident. He took car service home from the scene.

Williams received treatment for the injuries he sustained in the accident at Holistic Health Care on Ocean Avenue and Avenue I in Brooklyn.

The SIU investigator was unable to arrange to interview any of the other parties. He could never contact the owners of either vehicle.

The SIU investigator’s report reflects he went to the address listed as Anderson’s residence on one occasion at approximately 1:25 p.m. on a Wednesday. The premises were a 4 story apartment building. There were no names on the door bells on the exterior of the building and no names on mail boxes in the foyer. The SIU investigator could not gain access to the building to speak with any of the residents of the building to confirm whether Anderson resided in the building. The SIU investigator’s notes reflect he did not make any additional attempts to locate or contact Anderson.

The SIU investigator attempted to call Artis but was unable to reach her. His first call was unanswered and the phone did not have voice mail. When he called a second time, the telephone number was no longer in service.

The SIU investigator made one trip to the address listed as Artis residence address [*3]at 1 p.m. on a Wednesday. The building was a four story apartment building. No names were listed on the mailboxes or door bells of the building. He gained access to the building and knocked on the door of the apartment in which was listed as Artis apartment in Geico’s records. No one answered. He left a letter requesting Artis contact him. Artis did not respond to this letter. He was unable to speak with anyone in the building to confirm whether Artis resided in the building. He made no other attempts to contact Artis or to confirm she actually resided at that location.

The SIU investigator went to Wilbert’s home and met his mother and sister. He left them his business card and asked them to have Wilbert call him. Wilbert never called. The SIU investigator called Wilbert. They made an appointment to meet for an interview on March 12, 2009 at 11 a.m. at Wilbert’s girlfriend’s apartment. Wilbert called the SIU investigator about an hour before the scheduled meeting and cancelled the appointment because he had to attend a funeral. They agreed to meet on March 16, 2009 at 11 a.m. at Wilbert’s mother’s apartment. The SIU investigator called to confirm the appointment about a half an hour before the meeting was to take place. The SIU investigator was advised by Wilbert’s mother Wilbert was not there and was not expected. The SIU investigator asked Wilbert’s mother to have Wilbert call him. Wilbert never called. The SIU investigator made no further attempts to contact or interview Wilbert.

At one point, Gallop was represented by the Law Offices of Barry Richard Feldman (“Feldman”). Geico’s SIU investigator attempted to arrange an interview with Gallop through Feldman. Feldman’s office scheduled an interview of Gallop for March 3, 2009 at Feldman’s office. The interview was cancelled due to an illness in Feldman’s family. On March 11, 2009, the SIU investigator called Feldman’s office to schedule another appointment to interview Gallop. Feldman’s office told Geico’s investigator Gallop had terminated treatment and Feldman’s office was discontinuing its representation of Gallop.

After the SIU investigator was advised by Feldman’s office that Feldman was no longer representing Gallop, the SIU investigator made one trip to Gallop’s residence on a

Monday at about noon in an attempt to interview Gallop. Gallop was not home. The SIU investigator left his card with Gallop’s sister and requested that she give the card to Gallop. He asked Gallop’s sister to ask Gallop to call him. Gallop never called. The SIU investigator made no further attempts to contact Gallop to arrange an interview.

Serge Petroff, Esq. initially represented Quarles. Geico’s investigator had arranged to interview Quarles at Petroff’s office on March 12, 2009. Quarles did not appear for the scheduled interview.

Because Geico’s investigator was unable to interview Gallop, Quarles, Wilbert and Artis and/or Anderson, he recommended Geico conduct EUO’s of Gallop, Quarles, Wilbert, Artis and Anderson.

The record does not reflect whether Geico sent EUO demands to Quarles, Wilbert, Artis and/or Anderson and if it did, whether any of these individuals appeared for the EUO. Transcripts of their EUO’s, if they were held, are not attached to the papers.

The Law Offices of Teresa M. Spina sent a letter dated April 15, 2009 by certified mail, return receipt requested to Feldman and Gallop requesting he appear for an EUO on May 8, 2009 at the offices of a court reporting service located on Court Street in Brooklyn. Gallop did not appear for the EUO. The letter was sent to Feldman even though Geico’s SIU investigator’s notes indicate he was advised by Feldman’s office on March 11, 2009, [*4]Feldman was terminating his representation of Gallop.

The Law Offices of Teresa M. Spina sent a follow-up EUO letter dated May 15, 2009 by certified mail, return receipt requested to Feldman and Gallop requesting Gallop appear for an EUO on May 27, 2009 at the offices of a court reporting service located on Court Street in Brooklyn. Gallop did not appear for this EUO.

Although the EUO letters indicated they were mailed to Gallop and Feldman by certified mail, return receipt requested, Geico did not attach the green return receipt cards reflecting whether the EUO letters mailed to Gallop or Feldman were delivered or the original envelopes containing notations the Postal Service attempted delivery and delivery was refused, delivery was attempted and the letter was unclaimed or the letter was returned as undeliverable as addressed.

Geico denied all of the claims submitted by Tarnoff Chiropractic, P.C. on the grounds Gallop failed to appear for an EUO.

Plaintiff sued to recover the unpaid no-fault benefits. Defendant answered and now moves for summary judgment dismissing the action on the grounds it timely denied the claim on the grounds Gallop failed to appear of an EUO.

DISCUSSION

The purpose of the no-fault law and regulations [Insurance Law §5101, et. seq and 11 NYCRR Part 65] is to insure prompt payment of medical claims for medical treatment provide to people injured in automobile vehicle accidents regardless of fault. Fair Price Medical Supply Corp. v. Travelers Indemnity Co., 10 NY3d 556 (2008); Hospital for Joint Diseases v. Travelers Property Casualty Ins. Co., 9 NY3d 312 (2007); and Presbyterian Hosp. in City of NY v. Maryland Cas. Co., 90 NY2d 274, rearg. denied 90 NY2d 937 (1997).

To meet this purpose, the no-fault regulations provide that insurers should not treat applicants for no-fault benefits as adversaries and should not demand verification unless there is a good reason to do so. 11 NYCRR 65-3.2(b)(c).

Claims must be paid or denied in whole or in part within 30 calendar days of receipt or receipt of properly and timely requested verification. 11 NYCRR 65-3.8(a).Insurers are precluded from asserting at the trial of an action to obtain payment of first party no-fault benefits any precludable defense not asserted in a timely denial. Fair Price Medical Supply Corp. v. Travelers Indemnity Co., supra; and Hospital for Joint Diseases v. Travelers Property Casualty Ins. Co., supra; and Presbyterian Hosp. in City of NY v. Maryland Cas. Co., supra.

Despite this stated purpose, the Civil Court in the City of New York and the civil parts Nassau County District Court are inundated with action being brought to recover first party no-fault benefits.^[FN1]

The requirement that insurers promptly pay claims often provides an insurer with an insufficient amount of time to investigate the claim to determine whether medical treatment [*5]in question is medically necessary, whether the claim is fraudulent, whether the provider was properly licensed and formed, whether the injury or treatment is related to the accident, whether the incident in question was a staged accident.

Insurers who need additional time to investigate the validity of a claim can extend their time to pay or deny a claim by timely requesting verification of a claim. Nyack Hosp. v. General Motors Acceptance Corp., 8 NY3d 294 (2007); Hospital for Joint Disease v. New York Central Mutual Fire Ins. Co., 44 AD3d 903 (2nd Dept. 2007); and 11 NYCRR 65-3.5. A claim does not have to be paid or denied until all timely and properly requested verification has been received. St. Barnabas Hosp. v. American Transit Ins. Co., 57 AD3d 517 (2nd Dept. 2008); and New York & Presbyterian Hosp. v. Allstate Ins. Co., 31 AD3d 512 (2nd Dept. 2006).

An EUO is a hybrid between a condition precedent to coverage and verification. Case law treats appearance at an EUO is a condition precedent to coverage. Richmond Radiology, P.C. v. American Transit Ins. Co., 33 Misc 3d 135(A) (App.Term 2nd, 11th & 13th Jud. Dists. 2011); LDE Medical Services, P.C. v. Encompass Ins., 29 Misc 3d 130(A) (App.Term 2nd, 11th & 13th Jud. Dists. 2010); Crotona Heights Medical, P.C. v Farm Family Cas. Ins. Co., 27 Misc 3d 134(a) (App.Term 2nd, 11th & 13th Jud. Dists. 2010); and 11 NYCRR 65-1.1. If a person fails to appear for a properly requested EUO, the insurer may deny a claim retroactive to the date of loss even if the carrier does not issue a timely denial. Unitrin Advantage Ins. Co. v. Bayshore Physical Therapy, P.C., 82 AD3d 559 (1st Dept. 2011).

Most of the provisions of the no-fault regulations relating to EUO’s are contained in the provisions of the no-fault regulations relating to verification. See, 11 NYCRR 65-3.5. When an insurer demands an EUO “…the verification is deemed to have been received by the insurer on the day the examination was performed.” 11 NYCRR 65-3.8(a)(1). Stated differently, an insurer that conducts an EUO has 30 days from the date the EUO is conducted to pay or deny the claim.

An insurer does not have an unfettered right to request as EUO. An insurer must have an objective basis and an objective justification for requesting an EUO. 11 NYCRR 65-3-5(e).

The stated reason for wanting to conduct an EUO of Gallop was to investigate whether this was a staged accident.

In order to obtain summary judgment on the grounds Gallop defaulted in appearing for an EUO, Geico must substantiate its basis for requesting the EUO. Crescent Radiology, P.C. v. American Transit Ins. Co., 31 Misc 3d 134(A) (App.Term 9th & 10th Jud. Dists. 2011). To substantiate its basis for requesting an EUO where the stated reason for conducting is the incident might be a staged accident, the insurer must demonstrate some fact exists or the insurer has founded belief the incident was staged accident. Webster Diagnostic Medicine, P.C. v. State Farm Ins. Co., 15 Misc 3d 97 (App. Term 9th & 10th Jud. Dists 2007); and Ocean Acupuncture, P.C. v. State Farm Mutual Automobile Ins. Co., 23 Misc 3d 1104(A) (Civil Ct. NY Co. 2009). Defendant must demonstrate more than unsubstantiated hypothesis or supposition that the incident was a staged accident. Webster Diagnostic Medicine, P.C. v. State Farm Ins. Co., supra; and Manhattan Medical Imaging, P.C. v. State Farm Mutual Automobile Ins. Co., 20 Misc 3d 1144(A) (Civil Ct. Richmond Co. 2008). [*6]

In determining whether the Geico had a factual basis or a founded belief the incident involved a staged accident, the court must consider factors such as whether their were multiple accidents involving the same vehicle or vehicles shortly after the policy was issued; whether the policy was cancelled for failure to pay premiums shortly after the accident occurred; were the parties involved in a “ring” that stages accidents to defraud insurers; was the claim reported by an attorney rather than the claimant; did the same claimants make multiple no-fault claims for similar injuries arising from different accidents; the age and condition of the vehicles involved in the accident; the manner in which the accidents occurred; the damage to the vehicles involved in the accident; was the damage to the vehicles consistent with the speed and directions of the vehicles; did statements taken from those involved in the accident contain significant inconsistent or significant differences or do they contain only minor inconsistencies; were the parties uncooperative in the investigation of the matter; did all the claimants receive the same or similar medical treatment for the same injuries from the same medical provider or providers; the lapse in time between the date of the accident and the date the claimant first seeks treatment; are the injuries for which treatment was obtained consistent with the type of incident and the speed and directions of the vehicles at the time of impact; was the treatment excessive taking into account the nature and extent of the injuries. See, Webster Diagnostic Medicine, P.C. v. State Farm Ins. Co., supra; Comprehensive Mental v. Allstate Ins. Co., 14 Misc 3d 130(A) (App. Term 9th & 10th Jud Dists. 2007); A.B. Med. Servs. PLLC v. State Farm Mut. Auto. Ins. Co., 12 Misc 3d 129(A) (App.Term 2nd & 11th Jud. Dists. 2006); A.B. Med. Servs., PLLC v. Eagle Ins. Co., 3 Misc 3d 8 (App Term 2nd Dept. 2003); Manhattan Medical Imaging, P.C. v. State Farm Mutual Automobile Ins. Co., supra; JSI Expert Service v. Liberty Mutual Ins. Co., 7 Misc 3d 1009(A) (Civil Ct. Kings Co. 2005); and A.B. Medical Services PLLC v. State Farm Mutual Auto. Ins. Co., 7 Misc 3d 822 (Civil Ct. Kings Co. 2005). In determining whether there is factual basis or founded belief the incident was a staged accident, the court must consider the existence and/or non-existence of each factor and the weight to be given each factor.

None of these factors other than the unsworn statement of Lazare that she observed Gallop and Wilbert receiving treatment at Flatlands is present in this case and the difficulty SIU investigator encountered in attempting to interview Gallop, Wilbert, Artis, Anderson and Quarles are present in this case.

There is a question of whether the SIU investigator made a good faith effort to locate and interview Anderson or Artis.

He did not have a telephone number for Anderson. He made one trip to Anderson’s residence mid-day on a weekday and was unable to confirm whether Anderson resided at that address.^[FN2] He made no further attempt to locate or contact Anderson.

He made one telephone call to Artis and could not reach her. When he called a [*7]second time, the telephone was disconnected. He made one trip to her residence mid-day on a weekday in an effort to locate her. He could not confirm whether she actually resided as that location.

The SIU investigator made no effort to ascertain whether Anderson or Artis were employed.

The reasons Geico found this incident suspicious was because of the location of the accident, the age of vehicles and the fact it involved two vehicles that were insured by Geico.

Since Geico one of the largest if not the largest automobile insurer in the State of New York [ See, New York State Department of Financial Services 2011 Annual Ranking of Automobile Insurance Complaints], accidents involving two vehicles insured by Geico must occur with some degree of frequency.

Contrary to directive contained in the no-fault regulations [11 NYCRR 65-3.2(b)], Geico appears to have treated this matter as an adversarial situation from the time they received this claim. The SIU investigator’s report states the only basis for referring this matter for investigation as a staged accident was because it involved two Geico insureds.

All no-fault claims in connection with this accident would have been submitted to Geico. Despite this, Geico offers no evidence that anyone other than Gallop received treatment from Tarnoff Chiropractic, P.C. or that any of the people involved in this accident actually received treatment from the same medical providers. Williams and Lazare received treatment from different medical providers at different facilities in different neighborhoods of Brooklyn.^[FN3]

Geico offers no evidence that Gallop received treatment that was inconsistent with the type of injuries one would have sustained in a this type of accident or that the treatment was excessive.

The statements the SIU investigator took from Williams and Lazare are consistent regarding the manner in which the accident occurred.

The SIU investigator’s opinion Williams was a poor witness is not a basis for concluding this was a staged accident. This opinion was premised upon Williams inability to identify the owner of the vehicle he was operating or to provide the SIU investigator with the name and address of his employer.^[FN4] Williams description of the accident is consistent with the description of the accident provided by Lazare and is consistent with the description of the accident contained in the police report.

Geico provided no proof regarding when the policies were issued to Artis or Anderson, when those policies were cancelled or the reasons for their termination or whether any other no-fault claims were made on those policies. [*8]

Geico provided no proof that either of these vehicles had ever been involved in any other accidents. The SIU report indicates Artis had two prior claims with other insurance companies. The report states both claims involved property damage only. No personal injury claims were filed in connection with either claim. The report does not indicate whether these claims involved the same vehicle that was involved in this incident.

The SIU report states Anderson had no prior claims with Geico or any other insurance company.

The unfound belief that this accident involves a staged accident appears to be based upon what could be characterized as insurance racial profiling. The accident occurred in the Bedford-Stuyvesant section of Brooklyn. Anderson, Gallop and Artis residence address are in Bedford-Stuyvesant. Quarles, Lazare and Wilbert residence addresses are in Brownsville. Williams residence address is in Canarsie. The court takes judicial notice that these are sections of Brooklyn which the population is overwhelmingly if not almost exclusively minority. Both vehicles involved in the accident were old. Williams was operating a 1994 Jeep, Gallop was operating a 1996 Lexus. One questions whether Geico would have undertaken a similar investigation had a similar accident involving two Geico insureds occurred in a different neighborhood involving newer models of the same vehicles.The SIU investigator’s own report states based upon his investigation he was unable to determine if this was a staged accident.

The court also questions the need to conduct an EUO in cases such as this where the defense the insurance company is investigating is non-precludable. Central General Hosp. v. Chubb Group of Ins. Cos., 90 NY2d 195 (1997)]; and Allstate Ins. Co. v. Massre, 14 AD3d 610 (2nd Dept. 2005).

EUO’s would have been of little value in preparing a staged accident defense. The testimony taken at the EUO would not have been admissible in evidence at trial. JSI Expert Services v. Liberty Mutual Ins. Co., supra. The action was commenced even though Tarnoff knew the claim had been denied on the grounds Gallop had failed to appear for an EUO.

Taking all of these factors into account, the court finds Geico had an unfounded hypothesis and suspicion that this was a staged accident. Therefore, the request for an EUO was improper. Since the request for an EUO was improper, it cannot serve as a basis for summary judgment.

The court also notes Geico has failed to establish whether the EUO notices mailed to Gallop by certified mail return receipt requested were delivered, returned as undeliverable as addressed or returned as unclaimed. One of the reasons to use certified mail is to confirm delivery or attempted delivery of the item. If the person to whom a letter is mailed is mailed by certified mail, return receipt requested and is delivered, the person sending the mail will receive the green return receipt by return mail. If delivery is attempted and no one is available to sign for the letter, a slip will be left by the letter carrier advising the individual to whom the letter is addressed to contact the post office to pick up the letter or to make arrangements for having the letter delivered on another date. If the person does respond to the notice left by the letter carrier, the Postal Service will make several attempts to delivery the letter. If the letter is not claimed by the addressee, the letter is returned to the sender with a notation, delivery attempted, unclaimed. The envelope will have a stamp indicated the dates delivery was attempted. See, Temple B’nai Shalom of [*9]Great Neck v. Village of Great Neck Estates, 32 AD3d 391 (2nd Dept. 2006); lv. dnd. 8 NY3d 813 (2007); cert. dnd. – U.S. -, 128 S.Ct. 1241 (2008). If the addressee does not reside at the address to which the letter is addressed, it will either be forwarded to the addressee at his or her new address provided one is on file with the Postal Service or returned to the sender with a notation, undeliverable as addressed.

While St. Vincent’s Hosp. of Richmond v. Government Employees Ins. Co., 50 AD3d 1123 (2nd Dept. 2008) established an insurer can prove mailing by establishing it has a practice and procedure in place designed to ensure timely and proper mailing, when an item is mailed by certified mail, the insurer has or should have actual proof of mailing and actual proof of delivery or proof the reason the mail was not delivered or received by the addressee. When such proof is available, it should be provided to the court as proof of actual mailing. See generally, “Return to Sender? Presumption of Receipt in Certified Mail Cases” by Michael C. Rosenberger and Jason Moroff, NYLJ 3/4/10, p.4 col. 1;

see generally, Harner v. County of Tioga, 5 NY3d 136 (2005); and L & J Plumbing & Heating Co., Inc. v. Gateway Demolition Corp., 176 Misc 2d 277 (Sup.Ct. Queens Co. 1998).

For the foregoing reasons, defendant’s motion for summary judgment is denied. `

SO ORDERED:

Hon. Fred J. Hirsh

District Court Judge

Dated: April 12, 2012

Footnotes

Footnote 1:Over 50% of the cases that appeared on the calendar in Civil Part 3 of the District Court Nassau County in the past month involve actions to recover first party no-fault benefits. Over 40% of the civil appeals decided by the Appellate Term, Second Department in 2012 involve actions commenced to recover first party no-fault benefits.

Footnote 2:The court notes that in the SIU investigator’s report he makes reference to the person he was attempting to located and interview as Jason Alexander. The SIU investigator would have trouble locating Jason Alexander at that location since the person he was attempting to locate and interview was Jason Anderson. Jason Alexander is an actor who played the character George Costanza on Seinfeld.

Footnote 3:Tarnoff Chiropractic, P.C.’s office is located in the Brownsville section of Brooklyn. Holistic Health Care, where Williams received treatment, is located in the Midwood section of Brooklyn. Flatlands Medical, Dr. Kleyman, where Lazare received treatment, is located in the Flatlands section of Brooklyn.

Footnote 4:Williams told Geico’s SIU investigator he borrowed the vehicle earlier on the day of the accident from John Williams and not Artis.

SUPREME COURT, APPELLATE TERM, SECOND DEPARTMENT, 9th and 10th JUDICIAL DISTRICTS

Appeal from an order of the District Court of Suffolk County, Third District (C. Stephen Hackeling, J.), dated May 12, 2011. The order denied plaintiff’s motion to vacate an order of the same court dated March 4, 2011 granting defendant Robert J. Young’s oral application to open his default and for leave to serve and file an answer.

ORDERED that the order is reversed, without costs, plaintiff’s motion to vacate the March 4, 2011 order granting defendant Robert J. Young’s oral application to open his default and for leave to serve and file an answer is granted, and defendant Robert J. Young’s oral application is denied without prejudice to renewal upon proper motion papers.

On April 8, 2009, plaintiff’s insured’s motor vehicle was hit in the rear by a motor vehicle allegedly owned and operated by defendants. As a result of the accident, plaintiff paid its insured $2,000 in excess no-fault benefits. Thereafter, plaintiff commenced this subrogation action against defendants. Upon defendants’ default in answering or appearing, an inquest was scheduled. Defendant Robert J. Young appeared at the inquest and orally sought to open his default and to serve and file an answer. By order dated March 4, 2011, the District Court granted the oral application, and defendant Robert J. Young filed a verified answer in which he stated that he was the “wrong person.” Thereafter, plaintiff moved to vacate the March 4, 2011 order or, in the alternative, for summary judgment. Plaintiff’s unopposed motion was denied by the District Court by order dated May 12, 2011, from which plaintiff appeals.

In order to open his default pursuant to CPLR 5501 (a) (1), defendant Robert J. Young was required to establish a reasonable excuse for his default in answering as well as the existence of a meritorious defense to the action (see Eugene Di Lorenzo, Inc. v A.C. Dutton Lbr. Co., 67 NY2d 138 [1986]), and such application should have been supported by motion papers on notice to plaintiff (see CPLR 2214). Consequently, the District Court should not have entertained defendant Robert J. Young’s oral application to open his default and to serve and file an answer. [*2]Accordingly, the May 12, 2011 order is reversed, plaintiff’s motion to vacate the March 4, 2011 order is granted, and defendant Robert J. Young’s oral application is denied without prejudice to renewal upon proper motion papers.
Molia, J.P., Nicolai and LaCava, JJ., concur.
Decision Date: April 10, 2012

SUPREME COURT, APPELLATE TERM, SECOND DEPARTMENT, 9th and 10th JUDICIAL DISTRICTS

Appeal from an order of the District Court of Nassau County, First District (Andrea Phoenix, J.), dated February 24, 2011. 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, the District Court properly denied plaintiff’s motion for summary judgment on the ground
that plaintiff had not demonstrated its prima facie entitlement to judgment as a matter of law (see New York Hosp. Med. Ctr. of Queens v Statewide Ins. Co., 33 Misc 3d 130[A], 2011 NY Slip Op 51863[U] [App Term, 9th & 10th Jud Dists 2011]).

However, the District Court should have denied defendant’s cross motion for summary judgment dismissing the complaint as well. Defendant failed to submit any evidence from which the circumstances of the accident could be ascertained, and its proof was therefore insufficient to demonstrate that plaintiff’s assignor’s alleged intoxicated condition was a proximate cause of the accident (see Insurance Law § 5103 [b] [2]; Insurance Department Regulations [11 NYCRR] § 65-3.14 [b] [1]; Westchester Med. Ctr. v Government Empls. Ins. Co., 77 AD3d 737 [2010]; Lynch v Progressive Ins. Co., 12 AD3d 570 [2004]).

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

Molia, J.P., Nicolai and LaCava, JJ., concur.
Decision Date: April 10, 2012

SUPREME COURT, APPELLATE TERM, SECOND DEPARTMENT, 9th and 10th JUDICIAL DISTRICTS

Appeal from an order of the District Court of Nassau County, Third District (Andrea Phoenix, J.), dated November 24, 2010. The order denied plaintiff’s motion for summary judgment.

ORDERED that the order is reversed, without costs, plaintiff’s motion for summary judgment is granted, and the matter is remitted to the Civil Court for a calculation of statutory interest and an assessment of attorney’s fees.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff appeals from an order denying its motion for summary judgment.

A no-fault provider establishes its prima facie entitlement to summary judgment by proof of the submission to the defendant of a claim form, proof of the fact and the amount of the loss sustained, and proof that the defendant either failed to pay or deny the claim within the requisite 30-day period or issued a timely denial of claim that was conclusory, vague or without merit as a matter of law (see Insurance Law § 5106 [a]; Westchester Med. Ctr. v Nationwide Mut. Ins. Co., 78 AD3d 1168 [2010]; see also New York & Presbyt. Hosp. v Allstate Ins. Co., 31 AD3d 512 [2006]). The affidavit by plaintiff’s billing manager was sufficient to establish that the claim forms annexed to the motion papers were admissible pursuant to CPLR 4518 (see Art of Healing Medicine, P.C., 55 AD3d 644 [2008]; Fortune Med., P.C. v Travelers Home & Mar. Ins. Co., 14 Misc 3d 136[A], 2007 NY Slip Op 50243[U] [App Term, 9th & 10th Jud Dists 2007]), that the claim forms had been mailed to defendant within 45 days of the date services were rendered (see St. Vincent’s Hosp. of Richmond v Government Empls. Ins. Co., 50 AD3d 1123 [2008]; Delta Diagnostic Radiology, P.C. v Chubb Group of Ins., 17 Misc 3d 16 [App Term, 2d & 11th Jud Dists 2007]), and that the basis for defendant’s denials, i.e., that “written proof of claim was provided more than 45 days after the date these services were rendered” was “without merit as a matter of law.” Contrary to defendant’s contention, it is not the date of defendant’s receipt of a claim form which determines whether the submission of a claim form is untimely, but rather the date of plaintiff’s submission of the claim form (see Insurance Department Regulations [11 NYCRR] § 65 – 1.1 [“the eligible injured person or that person’s assignee . . . shall submit written [*2]proof of claim to the Company . . . in no event later than 45 days after the date services are rendered”]; see also SZ Med. P.C. v Country-Wide Ins. Co.,12 Misc 3d 52 [App Term, 2d & 11th Jud Dists 2006]; Ops Gen Counsel NY Ins Dept No. 04-02-12 [Feb. 2004]).

As plaintiff established its prima facie entitlement to summary judgment (see Westchester Med. Ctr., 78 AD3d 1168), the burden shifted to defendant to raise a triable issue of fact (see Zuckerman v City of New York, 49 NY2d 557 [1980]). Since defendant failed to do so, plaintiff should have been awarded summary judgment. Accordingly, the order is reversed, plaintiff’s motion for summary judgment is granted and the matter is remitted to the Civil Court for a calculation of statutory interest and an assessment of attorney’s fees pursuant to Insurance Law § 5106 (a) and the regulations promulgated thereunder.

Molia, J.P., Nicolai and LaCava, JJ., concur.
Decision Date: April 10, 2012