SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd, 11th and 13th JUDICIAL DISTRICTS

Appeal from an order of the Civil Court of the City of New York, Queens County (Diane A. Lebedeff, J.), entered November 10, 2008. The order granted plaintiff’s motion for summary judgment and implicitly denied defendant’s cross motion for summary judgment dismissing the complaint.

ORDERED that the order is modified by providing that the branch of plaintiff’s motion seeking summary judgment upon its third and fourth causes of action is denied, and defendant’s cross motion for summary judgment is granted to the extent of dismissing said causes of action; 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. After the action was commenced, defendant paid the claims and accrued interest underlying plaintiff’s first and second causes of action. The Civil Court granted plaintiff’s motion for summary judgment, awarding plaintiff attorney’s fees and costs on its first and second causes of action, and judgment upon its third and fourth causes of action. The court implicitly denied defendant’s cross motion for summary judgment. This appeal by defendant ensued.

Contrary to defendant’s contention, the affidavit submitted by plaintiff’s billing manager was sufficient to comply with CPLR 4518 (see Art of Healing Medicine, P.C. v Travelers Home & Mar. Ins. Co., 55 AD3d 644 [2008]; Dan Med., P.C. v New York Cent. Mut. Fire Ins. Co., 14 Misc 3d 44 [App Term, 2d & 11th Jud Dists 2006]). Defendant’s assertion that plaintiff failed to prove submission of its claims to defendant lacks merit.

With respect to plaintiff’s third and fourth causes of action, defendant established that it had timely denied the claims at issue on the ground of lack of medical necessity (see St. Vincent’s [*2]Hosp. of Richmond v Government Empls. Ins. Co., 50 AD3d 1123 [2008]; Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679 [2001]; Delta Diagnostic Radiology, P.C. v Chubb Group of Ins., 17 Misc 3d 16 [App Term, 2d & 11th Jud Dists 2007]). In support of its cross motion for summary judgment, defendant annexed, inter alia, an affirmed peer review report, which set forth a factual basis and medical rationale for the determination that there was a lack of medical necessity for the services rendered, which assertion was unrebutted (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]). Consequently, defendant established its prima facie entitlement to summary judgment with respect to plaintiff’s third and fourth causes of action, and plaintiff failed to raise a triable issue of fact with respect thereto. Accordingly, the branch of plaintiff’s motion seeking summary judgment upon its third and fourth causes of action is denied and defendant’s cross motion for summary judgment dismissing plaintiff’s third and fourth causes of action is granted.

Rios, J.P., Pesce and Golia, JJ., concur.
Decision Date: December 07, 2009

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd, 11th and 13th JUDICIAL DISTRICTS

Appeal from an order of the Civil Court of the City of New York, Kings County (Dolores L. Waltrous, J.), entered April 24, 2008. The order denied defendant’s motion to sever the claim of each assignor into separate actions.

ORDERED that the order is reversed without costs and defendant’s motion to sever the claim of each assignor into separate actions is granted.

Plaintiff commenced this action to recover first-party no-fault benefits as assignee of two individuals. The claims allegedly arose out of two separate accidents. The Civil Court denied defendant’s motion pursuant to CPLR 603 to sever the causes of action into two separate actions.

Defendant’s answer clearly places at issue with respect to each assignor, among other things, the necessity and reasonableness of the particular medical services rendered. The facts relating to each claim are therefore likely to raise few, if any, common issues of fact (see Radiology Resource Network, P.C. v Fireman’s Fund Ins. Co., 12 AD3d 185 [2004]). A severance can be properly based solely upon allegations set forth in the answer, and there is no need to demonstrate prejudice (see Ladim DME, Inc. v GEICO Gen. Ins. Co., 15 Misc 3d 139[A], 2007 NY Slip Op 50997[U] [App Term, 2d & 11th Jud Dists 2007]). Accordingly, defendant’s motion to sever the causes of action should have been granted.

Rios, J.P., Pesce and Golia, JJ., concur.
Decision Date: December 07, 2009

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd, 11th and 13th JUDICIAL DISTRICTS

Appeal from an order of the Civil Court of the City of New York, Queens County (Thomas D. Raffaele, J.), entered August 5, 2008. The order, insofar as appealed from as limited by the brief, denied defendant’s cross motion for summary judgment dismissing plaintiff’s fourth and fifth causes of action.

ORDERED that the order is modified by providing that defendant’s cross motion for summary judgment dismissing plaintiff’s fifth cause of action is granted; as so modified, the order is affirmed without costs.

In this action by a provider to recover assigned first-party no-fault benefits, defendant appeals from so much of an order as implicitly denied its cross motion for summary judgment dismissing the fourth and fifth causes of action. The Civil Court held that an issue of fact exists as to the medical necessity of the services which are the subject of said causes of action.

The affidavits submitted by defendant were sufficient to establish that defendant’s denial of claim form, which denied the claim seeking to recover the sum of $425.44 (plaintiff’s fifth cause of action) on the ground of lack of medical necessity, was timely mailed in accordance with defendant’s standard office practice and procedure (see Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679 [2001]; Delta Diagnostic Radiology, P.C. v Chubb Group of Ins., 17 Misc 3d 16 [App Term, 2d & 11th Jud Dists 2007]). Accordingly, with respect to said claim, defendant was not precluded from asserting its defense of lack of medical necessity.

In support of its cross motion, defendant annexed an affidavit and a peer review report from the chiropractor who performed the peer review, which established a lack of medical necessity with respect to plaintiff’s $425.44 claim. In opposition thereto, plaintiff’s treating [*2]chiropractor submitted an affidavit in which he merely stated that the treatment was medically necessary, without setting forth any facts to support the conclusion. Consequently, plaintiff’s opposition papers failed to raise a triable issue of fact as to medical necessity (see Bronze Acupuncture, P.C. v Mercury Ins. Co., 24 Misc 3d 126[A], 2009 NY Slip Op 51219[U] [App Term, 2d, 11th & 13th Jud Dists 2009]). Accordingly, defendant’s cross motion for summary judgment dismissing plaintiff’s fifth cause of action should have been granted (see Continental Med., P.C. v Mercury Cas. Co., 22 Misc 3d 134[A], 2009 NY Slip Op 50234[U] [App Term, 2d, 11th & 13th Jud Dists 2009]; CPT Med. Servs., P.C. v New York Cent. Mut. Fire Ins. Co., 18 Misc 3d 87 [App Term, 1st Dept 2007]).

With respect to plaintiff’s fourth cause of action seeking to recover the sum of $134.80 for services rendered from April 5 to April 17, 2006, defendant failed to establish that it had timely denied said claim. Accordingly, defendant’s cross motion for summary judgment dismissing plaintiff’s fourth cause of action was properly denied.

Rios, J.P., Pesce and Golia, JJ., concur.
Decision Date: December 01, 2009

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd, 11th and 13th JUDICIAL DISTRICTS

Appeal from an order of the Civil Court of the City of New York, Queens County (Diane A. Lebedeff, J.), dated August 8, 2008. The order, insofar as appealed from as limited by the brief, implicitly denied defendant’s cross motion for summary judgment dismissing plaintiff’s first cause of action.

ORDERED that the order, insofar as appealed from, is reversed without costs, and defendant’s cross motion for summary judgment dismissing plaintiff’s first cause of action is granted.

In this action by a provider to recover assigned first-party no-fault benefits, insofar as relevant to this appeal, plaintiff moved for summary judgment upon its first cause of action and defendant cross-moved for summary judgment dismissing said cause of action. The Civil Court found that there is an issue of fact as to medical necessity and denied the motion and, implicitly, the cross motion. Defendant appeals, contending that its cross motion seeking the dismissal of the first cause of action should have been granted.

The affidavits submitted by defendant in opposition to plaintiff’s motion and in support of its cross motion established that defendant had timely denied the claim at issue on the ground of lack of medical necessity, in accordance with defendant’s standard office practice or procedure used to ensure that the denial of the claim form was properly addressed and mailed (see Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679 [2001]; Delta Diagnostic Radiology, P.C. v Chubb Group of Ins., 17 Misc 3d 16 [App Term, 2d & 11th Jud Dists 2007]). Moreover, defendant annexed to its motion papers the affidavit and peer review report of its chiropractor, that set forth a factual basis and medical rationale for the chiropractor’s determination that there was a lack of medical necessity for the services rendered, which [*2]assertions were unrebutted (see e.g. 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]). Consequently, defendant established its prima facie entitlement to summary judgment with respect to plaintiff’s first cause of action, and plaintiff failed to raise a triable issue of fact with respect thereto. Accordingly, the order, insofar as appealed from, is reversed and defendant’s cross motion for summary judgment dismissing plaintiff’s first cause of action is granted.

Rios, J.P., Pesce and Golia, JJ., concur.
Decision Date: December 01, 2009

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd, 11th and 13th JUDICIAL DISTRICTS

Appeal from an order of the Civil Court of the City of New York, Kings County (Dawn Marie Jimenez, J.), entered July 11, 2008. The order granted plaintiff’s motion for summary judgment.

ORDERED that the order is affirmed without costs.

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

Contrary to defendant’s contention, the affidavit submitted by plaintiff’s supervisor of medical billing in support of the motion was sufficient to establish that the documents annexed to plaintiff’s moving papers were admissible pursuant to CPLR 4518 (see Art of Healing Medicine, P.C. v Travelers Home & Mar. Ins. Co., 55 AD3d 644 [2008]; Dan Med., P.C. v New York Cent. Mut. Fire Ins. Co., 14 Misc 3d 44 [App Term, 2d & 11th Jud Dists 2006]). In addition, as the affidavit executed by defendant’s claim representative stated that she began working for defendant after the denial of claim forms at issue were allegedly mailed by defendant, and defendant did not otherwise establish actual mailing of the denial of claim forms or its standard office practice and procedure for the mailing of denial of claim forms during the pertinent time period, defendant failed to establish that its denial of claim forms were timely mailed (see Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679 [2001]; Delta Diagnostic Radiology, P.C. v Chubb Group of Ins., 17 Misc 3d 16 [App Term, 2d & 11th Jud Dists 2007]). Accordingly, as defendant was precluded from interposing its
defense of lack of medical necessity (see Presbyterian Hosp. in City of NY v Maryland Cas. Co., 90 NY2d 274, 282 [1997]), the Civil Court properly granted plaintiff’s motion for summary judgment. [*2]

Weston, J.P., Rios and Steinhardt, JJ., concur.
Decision Date: December 01, 2009

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd, 11th and 13th JUDICIAL DISTRICTS

Appeal from an order of the Civil Court of the City of New York, Queens County (Rudolph E. Greco, Jr., J.), entered June 25, 2008, deemed from a judgment of the same court entered July 30, 2008 (see CPLR 5501 [c]). The judgment, entered pursuant to the June 25, 2008 order granting plaintiff’s motion for summary judgment, awarded plaintiff the principal sum of $1,791.73.

ORDERED that the judgment is affirmed without costs.

In this action by a provider to recover assigned first-party no-fault benefits, defendant appeals from an order of the Civil Court granting plaintiff’s motion for summary judgment. A judgment was subsequently entered, from which the appeal is deemed to be taken (see CPLR 5501 [c]).

Contrary to defendant’s contention on appeal, the affirmations submitted by plaintiff’s president, a physician, in support of the motion were sufficient to comply with CPLR 4518 (see Art of Healing Medicine, P.C. v Travelers Home & Mar. Ins. Co., 55 AD3d 644 [2008]; Dan Med., P.C. v New York Cent. Mut. Fire Ins. Co., 14 Misc 3d 44 [App Term, 2d & 11th Jud Dists 2006]).

On appeal, defendant characterizes its defense as one based upon fraud and relies solely on A.B. Med. Servs. v State Farm Mut. Auto. Ins. Co. (3 Misc 3d 130[A], 2004 NY Slip Op 50575[U] [App Term, 9th & 10th Jud Dists 2004]), in which the Appellate Term for the Ninth and Tenth Judicial Districts held that the insurer “establish[ed] the existence of a triable issue of fact as to whether there was a lack of coverage because the alleged injuries did not arise from an insured incident (see Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1997]).” In the case at bar, defendant has not alleged that no motor vehicle accident occurred or [*2]that the accident was staged. Rather, defendant contends that it raised a triable issue as to whether the assignor’s daughter was in the car at the time of the accident. However, contrary to defendant’s contention, the assignor’s alleged misrepresentation of the presence of her daughter in the car is irrelevant to the question of whether the assignor’s injuries arose from an insured incident. Accordingly, as defendant failed to demonstrate the existence of a triable issue of fact in opposition to plaintiff’s motion for summary judgment, the judgment is affirmed.Weston, J.P., Rios and Steinhardt, JJ., concur.
Decision Date: December 01, 2009

Supreme Court, Kings County

15550/08

Plaintiff was represented by Jonathan Stein, Esq. of McDonnell & Adels, PLLC. Defendants were represented by Bruce Rosenberg, Esq. of Rosenberg Law, PC.

Jack M. Battaglia, J.

The Complaint of plaintiff New York Central Mutual Insurance Company seeks a declaratory judgment pursuant to CPLR 3001 that it “is under no obligation to pay any insurance claims submitted by” any of the 13 named defendants. The named defendants are John McGee, D.O., and 12 professional corporations, referred to collectively in the Complaint as the “PC Defendants”, each of which is alleged to be a “professional medical testing and treatment corporation . . . owned by Dr. John McGee, a licensed medical doctor” (Complaint, ¶ ¶ 6-17.)

Specifically, Plaintiff seeks a declaration that it

“is not legally obligated to pay any claims, outstanding or otherwise, because of Defendants’ wrongful conduct, which includes, but is not limited to, plaintiff’s assertions that:

(a) the PC DEFENDANTS are not wholly owned, and/or controlled, and/or operated by licensed physicians, as required by New York State statues [sic], regulations, and judicial precedent;

(b) the PC DEFENDANTS submitted bills seeking payment of no-fault benefits for services that were not provided;

( c) the PC DEFENDANTS have failed to provide verification requested by the plaintiffs [sic]; and

(d) the PC DEFENDANTS have failed to attend EUOs as requested by the plaintiffs [sic].” (Complaint, ¶ 13.)

The Complaint does not indicate the total “outstanding” claims or bills, either by number or total amount. There is attached, however, an Exhibit A, that is described as a chart of bills submitted to Plaintiff in 2007 that were “subject to EUO requests,” i.e., examination under oath, and perhaps other requests for bill verification, “totaling no less than $155,000 dollars.” (Id., ¶ ¶ 70-71.) The Exhibit lists 195 bills submitted by four of the 12 named PC Defendants for services purportedly rendered to 13 insureds.

In an Answer and Affirmative Defenses & Counterclaims, Defendants allege 23 “Affirmative Defenses” and 10 “Counterclaims.”

Plaintiff moved initially by Notice of Motion for an order, among other things, pursuant [*2]to CPLR 3211 (a) and (b), dismissing the Affirmative Defenses and Counterclaims. Before that motion was heard, Plaintiff moved by Order to Show Cause for, among other relief, “an immediate stay of all lawsuits and arbitrations pending against [Plaintiff], filed by Defendants.”

The Order to Show Cause, which is dated July 22, 2009 and signed by Hon. Ellen M. Spodek, includes an interim “stay,” specifically “that all no-fault lawsuits and arbitrations including, but not limited to, those set forth in Exhibit A’, annexed hereto, filed by Defendants and pending against Plaintiff, are hereby stayed pending the hearing of this motion.” This Exhibit lists 85 claims totaling $382,871.13, representing services purportedly provided to 38 insureds during the period 2005-2009 by seven of the PC Defendants, only three of which are providers named in the Exhibit A attached to the Complaint.

On the return date for the two motions, this Court refused to extend the “stay” contained in the Order to Show Cause, and the Court sua sponte raised the issue of severance, at least insofar as relief is sought against each of the 12 PC Defendants. (See CPLR 603.) “Because CPLR 603, unlike CPLR 602, does not use the words upon motion,’ it is widely assumed that the court can order a severance or separate trial sua sponte.” (Vincent C. Alexander, Practice Commentaries to CPLR 603 [McKinney’s 2006]; see also Valery A. Berger, M.D. v Liberty Mut. Ins. Co., 10 Misc 3d 139 [A], 2005 NY Slip Op 52204 [U] [App Term, 9th & 10th Jud Dists 2005]; St. Vincent’s Hosp. of Richmond v State Farm Mut. Auto. Ins. Co., 18 Misc 3d 1127 [A], 2007 NY Slip Op 52534 [U], * 3 [Sup Ct, Nassau County 2007].) The parties were requested to submit supplemental memoranda on the issue, which they did.

Generally, “[s]everance is inappropriate where . . . there are common factual and legal issues involved in the . . . causes of action, and the interests of judicial economy and consistency of verdicts will be served by having a single trial.” (See Naylor v Knoll Farms of Suffolk County, Inc., 31 AD3d 726, 727 [2d Dept 2006]; see also Curreri v Heritage Prop. Invt. Trust, Inc., 48 AD3d 505, 507-08 [2d Dept 2008].) Appellate courts in the Second Department have had several occasions to apply these general standards to first-party no-fault claims of the type that are the subject of the instant action, although almost always on a defendant/insurer’s motion to sever.

The Second Department has upheld severance of claims for first-party no-fault benefits where the claims were for services rendered to as few as five insureds. (See Mount Sinai Hosp. v Motor Veh. Acc. Indem. Corp., 291 AD2d 536, 536-37 [2d Dept 2002]; see also Sunshine Imaging Association/wny MRI v Government Employees Ins. Co., 2009 NY Slip Op 6984, * 1- * 2 [4th Dept Oct. 2, 2009] [severance upheld/14 insureds]; compare Hempstead Gen. Hosp., 134 AD2d 569, 569-70 [2d Dept 1987] [denial of severance upheld/29 “claims”].) The Second Department has required severance of no-fault claims for 47 insureds. (See Poole v Allstate Ins. Co., 20 AD3d 518, 519 [2d Dept 2006].) “[I]t was an improvident exercise of discretion to deny the motion to sever, since a single trial of all the claims would prove unwieldy and confuse the trier of fact.” (Id.) [*3]

Appellate Term for the Second and Eleventh Judicial Districts has both upheld and required severance of no-fault claims for as few as three insureds. (See Astoria Quality Med. Supply v State Farm Mut. Auto. Ins. Co., 20 Misc 3d 144, 144 [App Term, 2d & 11th Jud Dists 2008] [severance upheld]; Metro Med. Diagnostics, P.C. v Motor Veh. Acc. Indem. Corp., 6 Misc 3d 136 [A], 2005 NY Slip Op 50238 [U], * 1 [App Term, 2d & 11th Jud Dists 2005] [severance required]; see also Ladim DME, Inc. v GEICO Gen. Ins. Co., 15 Misc 3d 139 [A], 2007 NY Slip Op 50997 [U], * 1- * 2 [App Term, 2d & 11th Jud Dists 2007] [severance required/5 insureds]; Valery A. Berger, M.D. v Liberty Mut. Ins. Co., 2005 NY Slip Op 52204 [U], * 1- * 2 [severance upheld/14 insureds].) “In light of the recent trend in cases involving the severance of no-fault causes of action under similar circumstances, . . . the particular facts herein relating to each claim are likely to raise few, if any, common issues of law or fact, even if the . . . insurance policies are identical.” (Metro Med. Diagnostics, P.C. v Motor Veh. Acc. Indem. Corp., 2005 NY Slip Op 50238 [U], at *1.)

In Civil Court of the City of New York, which has seen most of the first-party no-fault actions that have buried the trial courts of limited jurisdiction, a directive was issued by the Administrative Judge, Hon. Fern A. Fisher, directing the clerk “to reject any no-fault summons and complaint filed in the court which contains either multiple plaintiffs or multiple assigned claims unless an affirmation is filed with the papers signed by the attorney for the plaintiff, . . . outlining the reason for the joinder”; and directing Civil Court judges “to review the reasons for joinder of multiple plaintiffs or assigned claims whenever a case appears before them.” (Directives and Procedures, Severance of No-fault Plaintiffs or Assigned Claims, August 3, 2006.)

Here, again, the list of pending actions and arbitrations names 38 insureds who assigned 85 claims for first-party no-fault benefits to one or more of seven PC Defendants. This Court has little doubt that, were those 85 claims the subject of a single action by the providers against Plaintiff for payment, severance would be required. The only difference here is that Plaintiff is seeking a declaratory judgment that payment need not be made, asserting defenses to payment that it could assert, and undoubtedly has asserted, in the pending proceedings. To the extent, therefore, that Plaintiff’s contentions here as grounds for relief require the same type of individualized factual determinations, as would be required in a provider’s action for payment, severance would be required.

Three of the four grounds for relief asserted by Plaintiff – – that the PC Defendants “submitted bills seeking payment of no-fault benefits for services that were not provided,” “failed to provide verification requested,” and “failed to attend EUOs as requested” – – are defenses routinely asserted in provider actions for payment, and, most importantly, will require determination in accordance with the facts and attendant legal consequences particular to each insured, if not each bill for services. At the least, therefore, unless these grounds for relief are discontinued in this action, there must be severance. Because there are multiple providers as well as multiple insureds, no resulting action should include more than five insureds. [*4]

The remaining ground for relief asserted by Plaintiff, i.e., that the PC Defendants “are not wholly owned, and/or controlled, and/or operated by licensed physicians, as required by New York State statues [sic], regulations, and judicial precedent,” is different, because the focus is on the provider itself, and not the insured or any claim for benefits. As to this ground as to each PC Defendant, therefore, severance might not be required, or even warranted, notwithstanding that the number of insureds would require or justify severance as to other grounds for non-payment. (See Midwood Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co., 14 Misc 3d 131 [A], 2007 NY Slip Op 50052 [U], * 2 [App Term, 2d & 11th Jud Dists 2007].)

This ground, which has come to be known as the “fraudulent incorporation” defense (see id.), is founded on the Court of Appeals opinion in State Farm Mutual Automobile Insurance Co. v Mallela (4 NY3d 313 [2005].) Answering a certified question from the Second Circuit, the Court held that “insurance carriers may withhold payment for medical services provided by fraudulently incorporated enterprises to which patients have assigned their claims.” (Id. at 319.) The Court relied on a regulation of the Superintendent of Insurance stating, “A provider of health care services is not eligible for reimbursement [of first-party no-fault benefits] if the provider fails to meet any applicable New York State licensing requirement.” (See id. at 320-22; 11 NYCRR § 65-3.16 [a] [12].) The Business Corporation Law “prohibit[s] non-physicians from sharing ownership in medical service corporations.” (See id. at 320 [footnote omitted]; Business Corporation Law § 1507.)

“State law mandates that professional service corporations be owned and controlled by licensed professionals . . . , and that licensed professionals render the services provided by such corporations.” (One Beacon Ins. Group, LLC v Midland Med. Care, P.C., 54 AD3d 738, 740 [2d Dept 2008 [citing Business Corporation Law § § 1503 [a], 1504 [a], 1507, 1508].) In an action by insurers of automobile insurance policies alleging that professional medical service corporations “were fraudulently incorporated in the names of licensed healthcare professionals while, in fact, the PCs were owned, operated, and controlled by unlicensed persons and their management companies in violation of applicable statutes and regulations” (see id. at 739], the plaintiffs successfully opposed a motion for summary judgment by a licensed physician and one of the PCs by submitting “sufficient evidentiary proof to raise an issue of fact as to whether [the PC] was actually controlled by a management company owned by unlicensed individuals in violation of the Business Corporation Law” (see id. at 740 [emphasis added].) The physician and PC had made a prima facie showing on their motion with evidence that the physician was the sole shareholder of the PC, “performed or oversaw all medical services provided by” the PC, and was the sole signatory on the PC’s bank account. (See id.)

No appellate court has given further meaning to the “actual control” requirement, or has otherwise elaborated on the concept of “fraudulent incorporation,” in the four-plus years since Mallela was decided. Which is not to say that the courts have not been dealing with issues raised by the decision; as of this writing, Mallela has been cited in approximately 100 published opinions of New York trial and appellate courts, the latter mostly from Appellate Term for the Second and Eleventh Judicial Districts, and in 13 published decisions of federal courts in the [*5]Southern and Eastern Districts. An appellate opinion might recite that an insurer “set forth detailed and specific reasons for believing that plaintiff may be ineligible to recover no-fault benefits as a fraudulently incorporated professional service corporation” (see Sharma Med. Servs., P.C. v Progressive Cas. Ins. Co., 24 Misc 3d 139 [A], 2009 NY Slip Op 51591 [U] [App Term, 2d & 11th Jud Dists 2009]), but not repeat or summarize those reasons for the benefit of trial judges.

Trial judges, nonetheless, struggle with fundamental questions raised by Mallela, such as whether a finding of “fraudulent incorporation” requires a finding of “fraud.” (See Andrew Carothers, M.D., P.C. v Bruno, Gerbino & Soriano, LLP, 2009 NY Slip Op 29413, * 6- * 8 [Civ Ct, Richmond County 2009] [Sweeney, J.].) Several published trial court opinions provide insight into the court’s identification and assessment of various factors, such as the ultimate disposition of the profits of the professional practice, without offering, probably wisely, any standard or threshold, quantitative or qualitative, of “actual control.” (See id. at * 1- * 6; AIU Ins. Co. v Deajess Med. Imaging, P.C., 2009 NY Slip Op 29079, * 3- * 8 [Sup Ct, Nassau County 2009] [Bucaria, J.]; Lenox Neurophychiatry Med., P.C. v State Farm Ins. Co., 22 Misc 3d 1118 [A], 2009 NY Slip Op 50178 [U], * 2- * 4 [Civ Ct, Richmond County 2009] [Levine, J.]; Utica Natl. Ins. Group v Luban, 22 Misc 3d 1107 [A], 2008 NY Slip Op 52610 [U], * 3- * 4 [Sup Ct, Queens County 2008] [Kitzes, J.]; A.B. Med. Servs. PLLC v Travelers Ind. Co., 20 Misc 3d 509, 510-14 [Dist Ct, Nassau County 2008] [Goodsell, J.]; Montgomery Med., P.C. v State Farm Ins. Co., 12 Misc 3d 1169 [A], 2006 NY Slip Op 51116 [U], * 4- * 5 [Dist Ct, Nassau County 2006] [Marber, J.]; Devonshire Surgical Facility v GEICO, 14 Misc 3d 1208 [A], 2006 NY Slip Op 52450 [U], * 2- * 3 [Civ Ct, NY County 2006] [Jaffe, J.]; see also Matter of Total MRI Mgt. LLC v Greenfield Imaging Assoc. Imaging, LLP, 11 Misc 3d 1062 [A], 2006 NY Slip Op 50367 [U], * 7 [Sup Ct, Nassau County 2006] [Austin, J.].)

Without a specific factual context, this Court will not offer more. It is clear from a review of the published opinions, particularly the only one that follows a trial on the issue ( see Andrew Carothers, M.D., P.C. v Bruno, Gerbino & Soriano, LLP, 2009 NY Slip Op 29413), that the inquiry is highly fact-intensive. Here, except for the respective places of business and respective dates of incorporation of the PC Defendants, the Complaint is absent of individualized or particularized allegations; rather, the Complaint speaks conclusorily throughout of the “PC Defendants.” Of substantial importance for the present motions, except for the allegations that each of the PC Defendants is “owned by Dr. John McGee, a licensed medical doctor” (Complaint, ¶ 6-17), there is virtually nothing to connect any one of the PC Defendants to any one or more of the others. Each of the practices operate at a different location, and except for two of the PCs that were incorporated on May 11, 1998, the other 10 were incorporated at different dates from March 1, 2001 through May 2, 2007. (Id.) There is nothing to suggest, moreover, that Dr. McGee’s relationship with each of the PC Defendants is the same, other than that he “owns” each of them.

In an action instituted by over 20 insurance companies against “three groups of defendants each comprised of some licensed defendants, provider defendants, and management [*6]defendants,” in which the insurers seek, in part, “a declaratory judgment concerning fraudulent incorporation,” Supreme Court granted a defense motion to the extent of severing “the causes of action against each group of defendants.” (See Autoone Ins. Co. v Manhattan Hgts. Med., P.C., 24 Misc 3d 1228 [A], 2009 NY Slip Op 51662 [U], * 7- * 8 [Sup Ct, Queens County 2009] [Markey, J.].) The court determined that “each group of defendants operated separately from other groups , . . . [that] the plaintiffs did not demonstrate that there is a logical connection between the activities of each,” and that “combining the multitude of claims by the numerous plaintiffs against three groups of defendants is likely to cause juror confusion.” (See id. at * 8.)

Here, again, there is nothing to link any one of the PC Defendants to any one or more of the others, except for the common ownership by Dr. McGee, which in and of itself does not establish “fraudulent incorporation” (see Great Wall Acupuncture v State Farm Mut. Auto. Ins. Co., 20 Misc 3d 136 [A], 2008 NY Slip Op 51529 [U] [App Term, 2d & 11th Jud Dists 2008] [plaintiff’s owner was sole shareholder of not less than 20 professional service corporations].) The potential for juror confusion remains a factor in a declaratory judgment action (see State Farm Mut. Auto. Ins. Co., 25 AD3d 777, 778-779 [2d Dept 2006].) In the absence of evidence that Dr. McGee’s relationship with two or more of the PC Defendants is the same, there is no possibility of inconsistent verdicts. There should be at least sufficient factual allegations to meet the requirement for permissive joinder that the claims for relief “aris[e] out of the same transaction, occurrence, or series of transactions or occurrences” (see CPLR 1002 [a].)

Indeed, here, there is not sufficient information available for the Court to determine whether the action may continue against more than one of the PC Defendants in a single action. For the present, the Court will allow the action to proceed under this index number against Dr. McGee and three of the PC Defendants, of Plaintiff’s choosing, provided that an amended complaint contain sufficient allegations to permit joinder. If, moreover, in addition to “fraudulent incorporation,” Plaintiff seeks relief on any of the other grounds alleged in the Complaint, the separate action(s) may seek that relief with respect to the claims made by no more than five insureds.

As to Plaintiff’s motion for a “stay,” it must be treated as a motion for preliminary injunction. (See St. Paul Travelers Ins. Co. v Nandi, 15 Misc 3d 1145 [A], 2007 NY Slip Op 51154 [U], * 7 [Sup Ct, Queens County 2007].) “The party seeking a preliminary injunction must demonstrate a probability of success on the merits, danger of irreparable injury in the absence of an injunction and a balance of equities in its favor.” (Nobu Next Door, LLC v Fine Arts Hous., Inc., 4 NY3d 839, 840 [2005].) In actions similar to this one, i.e., seeking a declaration as to “fraudulent incorporation,” trial judges have granted the injunction based upon evidentiary showings by the respective plaintiffs. (See Autoone Ins. Co. v Manhattan Hgts. Med., P.C., 2009 NY Slip Op 51663 [U], at * 3); St. Paul Travelers Ins. Co. v Nandi, 2007 NY Slip Op 51154 [U], at * 7.)

Here, there may be a question as to whether, even as a pleading, the Complaint sufficiently alleges “fraudulent incorporation” (see Autoone Ins. Co. v Manhattan Hgts. Med., [*7]P.C., 2009 NY Slip Op 51662 [U], at * 4; CPLR 3013; CPLR 3016 [b]; CPLR 3211 [a] [7]); and, even if it does, there is no evidentiary support for injunctive relief.

The Court sua sponte orders severance of the causes of action alleged in the Complaint; within sixty (60) days from the date of this Decision and Order, Plaintiff shall serve an amended complaint that complies with this Decision and Order, particularly as to number of defendants and insureds.

Plaintiff’s motions are denied, with leave to renew after joinder of issue on an amended complaint, and otherwise in accordance with this Decision and Order.

November 25, 2009___________________

Jack M. Battaglia

Justice, Supreme Court

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 9th and 10th JUDICIAL DISTRICTS

Appeal from an order of the District Court of Nassau County, Third District (Robert A. Bruno, J.), entered July 7, 2008, deemed an appeal from an amended order of the same court entered October 29, 2008 (see CPLR 5520 [c]). The amended order denied plaintiff’s motion for summary judgment and granted defendant’s cross motion for summary judgment dismissing the complaint.

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

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved for summary judgment. Defendant opposed the motion and cross-moved for summary judgment dismissing the complaint, arguing, inter alia, that there was a lack of coverage because the injuries allegedly sustained by plaintiff’s assignor did not arise out of an insured incident. The District Court denied plaintiff’s motion for summary judgment and granted defendant’s cross motion dismissing the complaint, on the ground that defendant had shown that “[t]his has all the indicia of a staged accident.'” The instant appeal by plaintiff ensued.

Since defendant raised no issue in the District Court with regard to plaintiff’s establishment of a prima facie case, we do not pass upon the propriety of the District Court’s implicit determination with respect thereto (see Insurance Law § 5106 [a]; Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742 [2004]).

Defendant’s cross motion for summary judgment and opposition to plaintiff’s motion for summary judgment were premised upon defendant’s “founded belief” that the alleged injuries of plaintiff’s assignor did not arise out of an insured incident (see Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1997]), but were sustained, if at all, in a staged accident. Upon a review of the record, we find that while defendant demonstrated that it possessed such “founded belief” so as to defeat plaintiff’s motion for summary judgment, it failed to submit sufficient evidence in admissible form, in support of its cross motion, to establish, as a matter of law, that the alleged injuries did not arise from an insured incident so as to warrant dismissal of the complaint. Consequently, neither plaintiff nor defendant is entitled to summary judgment [*2]upon their respective motion and cross motion seeking such relief (see Zuckerman v City of New York, 49 NY2d 557 [1980], and the amended order is modified accordingly.

Molia, J.P., LaCava and Iannacci, JJ., concur.
Decision Date: November 19, 2009

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd, 11th and 13th JUDICIAL DISTRICTS

Appeal from an order of the Civil Court of the City of New York, Kings County (Peter Paul Sweeney, J.), entered May 28, 2008. The order granted defendant’s motion for leave to reargue and, upon reargument, granted defendant’s motion for summary judgment dismissing the complaint.

ORDERED that the order is affirmed without costs.

In this action by a provider to recover assigned first-party no-fault benefits, defendant moved for leave to reargue its prior motion for summary judgment dismissing the complaint. The prior motion, which was predicated on the ground that neither defendant’s insured nor defendant’s insured’s vehicle was involved in the subject accident, had been denied with leave to renew upon proper papers, on the ground that a certificate of conformity was lacking. In support of its reargument motion, defendant submitted the affidavit of its insured, in which the affiant averred that, although she drove the subject vehicle on the day of the alleged accident, at no time on that day did she “strike a pedestrian while driving.” She further stated that even though her vehicle “was stopped at the alleged accident scene along with several other vehicles and pedestrians,” “[a]t no time did [her] vehicle come into contact with Catherine Almanzar on that day.” In opposition to the motion, plaintiff submitted the affirmation of its attorney, in which the attorney argued, inter alia, that defendant’s affidavit was conclusory and did not establish defendant’s prima facie entitlement to judgment as a matter of law and that the “motion should not be heard prior to defense counsel’s adherence to the CPLR disclosure rules.” The Civil Court granted leave to reargue and, upon reargument, awarded defendant summary judgment dismissing the complaint. The instant appeal by plaintiff ensued.

Defendant established its prima facie entitlement to judgment by showing that its insured’s vehicle was not involved in an accident in which plaintiff’s assignor was allegedly injured. Consequently, in order to defeat defendant’s motion for summary judgment dismissing the complaint, plaintiff had to set forth facts sufficient to demonstrate a triable issue of fact (see Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065 [1979]; Mid Atl. Med., P.C. v Harleysville Worcester Ins. Co., 23 Misc 3d 132[A], 2009 NY Slip Op 50736[U] [App Term, 2d, [*2]11th & 13th Jud Dists 2009]). Plaintiff, however, failed to rebut the assertions contained in defendant’s insured’s affidavit. Accordingly, the Civil Court properly granted defendant’s motion for summary judgment dismissing the complaint (see Mid Atl. Med., P.C., 23 Misc 3d 132[A], 2009 NY Slip Op 50736[U]).

Rios, J.P., Pesce and Golia, JJ., concur.
Decision Date: November 19, 2009

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd, 11th and 13th JUDICIAL DISTRICTS

Appeal from a judgment of the Civil Court of the City of New York, Queens County (Leslie J. Purificacion, J.), entered May 9, 2008. The judgment, after a nonjury trial, awarded plaintiff the principal sum of $1,718.40.

ORDERED that the appeal is dismissed.

In this action by a provider to recover assigned first-party no-fault benefits, the matter went to trial on plaintiff’s six claims with respect to, inter alia, the issue of the rate of reimbursement for acupuncture treatments provided by licensed acupuncturists. In its decision after trial, the Civil Court determined that, in accordance with Great Wall Acupuncture v GEICO Gen. Ins. Co. (16 Misc 3d 23 [App Term, 2d & 11th Jud Dists 2007]), it was proper for defendant to use the workers’ compensation fee schedule for acupuncture services performed by chiropractors to determine the amount which plaintiff was entitled to receive for the acupuncture sessions, and that the appropriate rate was $29.30 per session. Defendant had reimbursed plaintiff for two of the claims at the rate of $29.30. The Civil Court determined that plaintiff was also entitled to reimbursement on the remaining claims, two of which defendant had denied on the ground that plaintiff had failed to timely submit the claims, and two of which defendant had denied on the basis of lack of medical necessity. Accordingly, the Civil Court granted judgment to plaintiff in the sum of $322.30. However, judgment was entered on May 9, 2008 in the principal sum of $1,718.40. Plaintiff appeals from the judgment.

Since the judgment awarded plaintiff the full balance which it had requested,
$1,718.40, plaintiff is not aggrieved thereby, and the appeal must be dismissed (see CPLR 5511; Lowery v Lamaute, 40 AD3d 822 [2007]).

Weston, J.P., Rios and Steinhardt, JJ., concur.
Decision Date: November 19, 2009