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 (David Goodsell, J.), dated April 17, 2008. The order, insofar as appealed from, denied so much of plaintiff’s motion as sought summary judgment with respect to bills totaling the sum of $9,094.

Order, insofar as appealed from, reversed without costs, so much of plaintiff’s motion as sought summary judgment with respect to bills totaling the sum of $9,094 granted and matter remanded to the District Court for a calculation of statutory interest and an assessment of attorney’s fees due thereon.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved for summary judgment, supporting the motion with an affirmation from plaintiff’s counsel, an affidavit from plaintiff’s president and medical biller, and various documents. In opposition to the motion, defendant argued, inter alia, that summary judgment should be denied as to the bills at issue on this appeal because plaintiff’s attempt to recover upon said bills was premature due to the failure of plaintiff’s assignors to appear for properly noticed independent medical examinations (IMEs). In an order dated April 17, 2008, insofar as appealed from, the District Court denied so much of plaintiff’s motion as sought summary judgment upon said bills, on the ground that defendant had established that the assignors had failed to appear for IMEs.

On appeal, defendant asserts that the affidavit submitted by plaintiff’s president and [*2]medical biller was insufficient to establish that the documents annexed to plaintiff’s motion were admissible as business records. However, this argument is raised for the first time on appeal, and we decline to reach it (see Nyack Hosp. v New York Cent. Mut. Fire Ins. Co., 21 Misc 3d 133[A], 2008 NY Slip Op 52184[U] [App Term, 9th & 10th Jud Dists 2008]; Mary Immaculate Hosp. v New York Cent. Mut. Fire Ins. Co., 21 Misc 3d 130[A], 2008 NY Slip Op 52046[U] [App Term, 9th & 10th Jud Dists 2008]). As a result, we do not pass upon the propriety of the District Court’s determination that plaintiff established its prima facie case (see Insurance Law § 5106 [a]; Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742 [2004]).

Although defendant denied the bills at issue on the ground that plaintiff’s assignors failed to attend scheduled IMEs, the affidavits submitted by defendant were insufficient to establish proper mailing of the IME scheduling letters, which would give rise to a presumption that the items were received by the addressee (see Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679, 680 [2001]; see also Delta Diagnostic Radiology, P.C. v Chubb Group of Ins., 17 Misc 3d 16 [App Term, 2d & 11th Jud Dists 2007]). Moreover, defendant failed to establish that plaintiff’s assignors did not appear for IMEs (see Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 35 AD3d 720, 721 [2006]). As a result, defendant failed to raise a triable issue of fact (see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).

In light of the foregoing, the order, insofar as appealed from, is reversed, so much of plaintiff’s motion as sought summary judgment with respect to bills totaling the sum of $9,094 is granted and the matter is remanded to the District Court for the
calculation of statutory interest and an assessment of attorney’s fees due thereon pursuant to Insurance Law § 5106 (a) and the regulations promulgated thereunder.

The decision and order of this court entered herein on June 2, 2009 are hereby recalled and vacated (see motion decided simultaneously herewith).
Tanenbaum, J.P., and Molia J., concur.

Scheinkman, J., taking no part.
Decision Date: June 29, 2009

APPELLATE TERM OF THE SUPREME COURT, FIRST DEPARTMENT

Plaintiff appeals from an amended order of the Civil Court of the City of New York, New York County (Manuel J. Mendez, J.), entered May 4, 2007, which denied his motion for summary judgment.

Per Curiam.

Order (Manuel J. Mendez, J.), entered May 4, 2007, affirmed, with $10 costs.

Defendant’s NF-10 form, which stated that plaintiff’s no-fault claim was denied based on the results of an independent peer review, sufficiently apprised plaintiff of the factual basis for the denial (see 11 NYCRR 65-3.8[b][4]; New York Univ. Hosp. Rusk Inst. v Government Employees Ins. Co., 39 AD3d 832 [2007]). The initial peer review report relied upon by defendant, as amplified upon defendant’s receipt of additional documentation from plaintiff regarding his claim, set forth sufficient facts to raise a triable issue as to the medical necessity of the health services and diagnostic tests performed by plaintiff.

THIS CONSTITUTES THE DECISION AND ORDER OF THE COURT.
I concur

Decision Date: June 29, 2009

Civil Court of the City of New York, New York County

009158 CVN 08

Jacqueline S. Linder, Esq. (for defendant)

McDonnell & Adels, PLLC

401 Franklin Ave 2nd Fl

Garden City NY 11530

(516) 328-3500

Melissa A. Pirillo, Esq. (for plaintiff)

Baker, Sanders, Barshay, Grossman, Fass, Muhlstock & Neuwirth

150 Herricks Rd

Mineola NY 11501

(516) 741-4799

Anil C. Singh, J.

Hon. Anil C. Singh, J.:

Plaintiff Cambridge Medical, P.C. (“Cambridge Medical”) seeks reimbursement of first party no-fault benefits from defendant insurer. Defendant joined issue and served upon plaintiff its discovery demands, including a deposition notice. Plaintiff failed to comply with the demands. Defendant then moved to compel the testimony of plaintiff’s alleged owner, Eileen S. Debbi, M.D., and to require plaintiff to answer the interrogatories and provide documentation regarding the ownership/operation of the plaintiff. Cambridge Medical opposes the motion and applies for a protective order pursuant to CPLR 3103.

Defendant contends that Dr. Debbi is not the owner of Cambridge Medical. It believes that the real owner is one Mark Levitan, who is a non-physician and the owner of Nissa Management, Inc. Movant supports its application with an examination under oath taken of Dr. [*2]Debbi on March 8, 2007, in an unrelated proceeding. Dr. Debbi was questioned about Cambridge Medical. Adirondack contends that Dr. Debbi refused to respond to most of the questions at the EUO regarding management agreements and lease agreements, although she provided just enough testimony to indicate that she had little control over the daily operations of Cambridge Medical; had no knowledge of the plaintiff’s finances; and that Cambridge Medical was to a large extent controlled by Mark Levitan of Nissa Management, Inc.

Plaintiff opposes, contending that defendant has failed to show good cause for the deposition. It maintains that defendant’s allegation that Cambridge Medical is fraudulently incorporated lacks any support and is based on speculation, conjecture and surmise. Plaintiff maintains that the defendant simply used Dr. Debbi’s EUO testimony and chose portions of the testimony to distort and make it appear that there were issues with plaintiff’s corporation. Accordingly, the deposition is being sought to harass and to delay trial.

Discussion

Plaintiff chose to commence an action in the Civil Court and is bound by Article 31 of the CPLR, which grants as of right discovery in all civil plenary proceedings. Specifically, CPLR 3101(a) provides that there shall be “full disclosure of all matters material and necessary in the prosecution or defense of an action….” The terms “material and necessary” are to be

interpreted liberally to require disclosure upon request, of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity. The test is one of usefulness and reason (Allen v. Crowell-Collier Publishing Co., 21 NY2d 403 (1968).

Once an action is commenced, “any party may take the testimony of any person by deposition upon oral or written questions” [CPLR 3106(a)]. Parties may ask broad questions to ascertain the truth or to bring out relevant evidence that may assist in the prosecution or defense of the action [Seaman v. Wyckoff Heights Medical Center, Inc., 8 Misc 3d 628 (2005)]. Notice on a corporate party may not specify the individual to be examined, as initially the corporation may decide who it will produce [Rufus v. New York State Teachers Association, 42 AD2d 1040 (4th Dept. 1973)]. Employees who have knowledge are subject to being deposed [Ferraro v. New York Telephone Co., 94 AD2d 784 (2nd Dept. 1983); CPLR 3101(a)(1)].

The fact that the action was brought under the no-fault law is irrelevant to the demand for a deposition. The no-fault regulations govern, inter alia, the payment of claims and defenses to reimbursement. The “good cause” standard cited by plaintiff concerns a carrier’s right to delay payment of claims in order to conduct investigations [11 N.Y.C.R.R. 65-3.39(c)]. It does not limit a party’s right to discovery sought in good faith pursuant to Article 31 of the CPLR.

Defendant has a good-faith basis to question Dr. Debbi. The EUO of Dr. Debbi was conducted in 2007. She appeared to know little about the medical operation of Cambridge Medical and the medical personnel who worked at the office. It may well be that plaintiff is correct that there was no management agreement with Nissa Management, Inc., and that Mark Levitan was simply an employee of plaintiff. However, defendant is entitled to question Dr. Debbi under oath to ascertain the ownership status of Cambridge Medical.

Accordingly, the motion by defendant to compel the production of Dr. Debbi for examination before trial and to respond in a complete and meaningful way to defendant’s [*3]discovery demands is granted. Plaintiff shall: 1) provide full and complete answers to the interrogatories and provide documentation to defendant regarding the ownership/operation of the plaintiff within twenty (20) days of the date of this order; and 2) produce Dr. Debbi for deposition within forty-five (45) days of the date of this order.

Plaintiff’s application for a protective order is denied.

The foregoing constitutes the decision and order of the court.

Date:June 29, 2009_________________________

New York, New York

Anil C. Singh

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 21, 2008. The order, insofar as appealed from as limited by the brief, denied so much of plaintiff’s motion as sought summary judgment with respect to plaintiff’s claim for $1,572.26.

Order, insofar as appealed from, affirmed with $10 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. The District Court denied plaintiff’s motion, holding that the affidavit by plaintiff’s biller failed to establish a prima facie case because it did not demonstrate that the documents annexed to plaintiff’s motion were admissible as business records. The court also granted defendant’s cross motion for summary judgment as to plaintiff’s claim for $230.09 and denied defendant’s cross motion for summary judgment as to plaintiff’s claim for $1,572.26. Plaintiff appeals, as limited by its brief, from so much of the order as denied its motion for summary judgment with respect to the claim for $1,572.26.

Plaintiff failed to make a prima facie showing of its entitlement to summary judgment since the affidavit submitted by plaintiff’s billing manager failed to establish that the documents annexed to plaintiff’s moving papers were admissible pursuant to CPLR 4518 (see Alvarez v Prospect Hosp., 68 NY2d 320 [1986]; Art of Healing Medicine, P.C. v Travelers Home & Mar. Ins. Co., 55 AD3d 644 [2008]; Fortune Med., P.C. v Allstate Ins. Co., 14 Misc 3d 136[A], 2007 NY Slip Op 50243[U] [App Term, 9th & 10th Jud Dists 2007]). Plaintiff’s remaining contentions are wholly without merit. Consequently, so much of plaintiff’s motion as sought [*2]summary judgment with respect to the claim for $1,572.26 was properly denied.

We decline defendant’s request to search the record and award it summary judgment dismissing the complaint as to the claim for $1,572.26 (see e.g. New York Univ. Hosp. Rusk Inst. v Government Empls. Ins. Co., 39 AD3d 832 [2007]).

Rudolph, P.J., Molia and Nicolai, JJ., concur.
Decision Date: June 25, 2009

—[*1] Basch & Keegan, L.L.P., Kingston (Eli Basch of counsel), for appellants.

Goldberg Segalla, L.L.P., Albany (Matthew S. Lerner of counsel), for respondent.

Kane, J. Appeal from an order of the Supreme Court (Teresi, J.), entered January 7, 2009 in Greene County, which granted defendant’s motion for summary judgment dismissing the complaint.

After plaintiff Mary Proper (hereinafter plaintiff) was involved in a motor vehicle accident, she applied for no-fault insurance benefits from defendant. Defendant paid for plaintiff’s medical treatment and lost wages. Plaintiff’s medical insurers, Medicare and Blue Cross and Blue Shield (hereinafter BCBS), also allegedly paid for some of her medical treatment. Plaintiffs commenced this action alleging that defendant breached its contract by failing to fully provide no-fault benefits. Defendant moved for summary judgment dismissing the complaint. Supreme Court granted the motion, prompting plaintiffs’ appeal.

Because plaintiffs failed to support their claim with admissible evidence that they suffered damages, Supreme Court properly dismissed the complaint. Failure to prove the essential element of damages is fatal to a cause of action for breach of contract (see Fellion v Darling, 14 AD3d 904, 907 [2005]; Orville v Newski, Inc., 155 AD2d 799, 800 [1989], lv dismissed 75 NY2d 946 [1990]). Here, plaintiff testified at her deposition that she had not personally paid any medical bills. While she asserts that BCBS paid $12,000 in medical bills and [*2]has asserted a lien against her recovery in a separate personal injury action against the driver of the other vehicle, the record does not contain any claim from BCBS to support these assertions. There are no bills or statements of the amount allegedly paid by BCBS or even proof that any such payments were actually made. As plaintiffs bear the burden of proving damages, and cannot meet that burden with pure speculation or bare assertions, the court correctly granted defendant’s motion for summary judgment dismissing the complaint (see Peak v Northway Travel Trailers, Inc., 27 AD3d 927, 929 [2006]; New Horizons Amusement Enters. v Zullo, 301 AD2d 825, 827 [2003]; Seaman v Berman, 239 AD2d 738, 738-739 [1997]; see also Berley Indus. v City of New York, 45 NY2d 683, 687 [1978]).

Peters, J.P., Rose, Lahtinen and Kavanagh, JJ., concur. Ordered that the order is affirmed, with costs.

[*1]

Argued June 3, 2009; decided June 25, 2009

Matter of Central Mut. Ins. Co. (Bemiss), 54 AD3d 499, affirmed.

{**12 NY3d at 651} OPINION OF THE COURT

Read, J.

We are asked in this appeal whether consent-to-settle and subrogation-protection provisions in the supplementary uninsured/underinsured motorists (SUM) endorsement in an automobile liability insurance policy fall by the wayside once an insured has exhausted the available policy limits of a single tortfeasor in a multi-tortfeasor accident. We hold that these provisions remain in force and govern any settlements that the insured may subsequently make with other [*2]tortfeasors.

I.

During the morning rush hour on April 12, 2005, a chain-reaction automobile accident unspooled in the westbound lane of Interstate 90 in the City of Albany when the first car in the ensuing five-vehicle pileup stopped in traffic to avoid becoming entangled in a two-car collision. The vehicle driven by Beverly Bemiss (the third in line in the pileup) was struck twice in the rear—once by the vehicle driven by Kati Kowalczyk, the fourth in line; and again when the automobile driven by John Genski, the fifth in line, rear-ended Kowalczyk’s vehicle, pushing it into the back of Bemiss’s vehicle a second time. As a consequence of this accident, Bemiss seriously injured her right foot and ankle, which required surgery to repair the Achilles tendon.

Kowalczyk was insured for motor vehicle liability under a policy issued by Government Employees Insurance Company (GEICO), with bodily injury liability limits of $25,000; Genski was insured under a policy issued by Progressive Northeastern{**12 NY3d at 652} Insurance Company, also with bodily injury liability limits of $25,000. Central Mutual Insurance Company was Bemiss’s automobile liability insurance carrier. Her single limit policy provided $100,000 per accident for bodily injury and property damage, and a SUM endorsement for $100,000 per accident. The provisions in her SUM endorsement were prescribed by the New York State Department of Insurance (the Department) in Regulation 35-D (11 NYCRR subpart 60-2). And since both Kowalczyk’s and Genski’s bodily injury liability limits were less than Bemiss’s, her SUM coverage was activated or triggered as to each of them (see Matter of Prudential Prop. & Cas. Co. v Szeli, 83 NY2d 681, 685 n 1, 686-688 [1994]). SUM benefits are not payable, however, until the available policy limits of a single tortfeasor have been exhausted by payment or settlement (see S’Dao v National Grange Mut. Ins. Co., 87 NY2d 853, 854-855 [1995]).

By letter dated July 27, 2006, Bemiss’s attorney informed Central that GEICO, Kowalczyk’s insurance carrier, had tendered the policy limits of $25,000. He further advised that Bemiss intended to accept this offer and execute a release on or after August 27, 2006 unless Central advanced this amount to her in return for her cooperation in any lawsuit on her behalf. Central did not respond to the letter. Bemiss also at some point agreed to settle with Genski and his insurer, Progressive, for $2,500—i.e., less than the $25,000 policy limit. Bemiss never notified Central that she intended to settle with Genski, or solicited Central’s consent.

On December 21, 2006, Bemiss executed a single general release in favor of Kowalczyk, GEICO, Genski, and Progressive in consideration of the sum of $27,500—$25,000 from GEICO and $2,500 from Progressive. The release did not preserve Central’s subrogation rights with respect to any payment that might be made to Bemiss under her SUM coverage. Earlier in December (and therefore before exhausting Kowalczyk’s policy), Bemiss served Central with a request for arbitration, seeking $72,500 in SUM benefits.

On January 9, 2007, Central’s attorney wrote to Bemiss’s attorney to ask whether [*3]an action had been filed against Genski. On January 17, 2007, Bemiss’s attorney replied that his client had settled with Genski and his insurance carrier for $2,500, and that Bemiss was seeking $72,500 from Central under the SUM endorsement.{**12 NY3d at 653}

By letter dated January 26, 2007, Central disclaimed liability to Bemiss and denied coverage. Specifically referencing Condition 10 (without waiving any other ground that it might have for disclaimer), Central told Bemiss that she had violated policy conditions by “settl[ing] with both responsible parties [i.e., Kowalczyk and Genski] in this loss, and in signing the release, waived [Central’s] subrogation rights.” Condition 10 allows an insured to collect under SUM coverage in a multiple-tortfeasor accident before exhaustion by settlement or judgment. Specifically, 30 days after having given the insurer notice of a tortfeasor’s offer to settle for the maximum available policy limits, the insured may execute a general release with the tortfeasor and retain SUM eligibility unless, in the meantime, the insurer has agreed to advance the settlement amount in exchange for the insured’s cooperation with its subrogation claim.

In March 2007, Bemiss served Central with another request for arbitration, having withdrawn the December notice after arbitration was temporarily stayed at Central’s behest. She again sought $72,500 in SUM benefits. And Central again successfully moved by order to show cause, entered on March 26, 2007, to stay arbitration temporarily pending disposition of its application for an order permanently staying arbitration and vacating Bemiss’s notice.

Central maintained that Bemiss was not entitled to SUM benefits because she did not protect its subrogation rights, give prior written notice of her intent to settle, or obtain its written consent before settling with Genski/Progressive. In opposition, Bemiss argued that

“[t]he policy . . . reads that when there are multiple tortfeasors, and one of those tortfeasors offers the maximum coverage under its policy, then written notice must be given of the policy tender before execution of a release. The policy [does not contain] any language that requires the insured to provide written notice for a partial tender from a second tortfeasor.”

In May 2007, Supreme Court granted Central’s application and permanently stayed arbitration, reasoning that, under the terms of the SUM endorsement, Central “expressly require[d] that it retain the right to subrogate regardless of the exact nature of the settlement.” Thus, “[e]ven if the Court were to accept [Bemiss’s] argument that once [she] settled for the entire{**12 NY3d at 654} amount of coverage with [GEICO], [she] could settle with Progressive without notice and consent of [Central], this argument does nothing to remedy the fact that [Bemiss] failed to preserve Central’s right to subrogate.” Bemiss appealed.

The Appellate Division, with one Justice dissenting, affirmed. As an initial matter—and contrary to Supreme Court’s assessment—both the majority and the dissenting Justice concluded that Condition 10 in the SUM endorsement “permitted [Bemiss] to settle with the first [*4]tortfeasor [Kowalczyk] without preserving [Central’s] subrogation rights” with respect to Kowalczyk (Matter of Central Mut. Ins. Co. [Bemiss], 54 AD3d 499, 500 [3d Dept 2008]). The majority, however, rejected Bemiss’s additional claim that once she qualified for SUM payments by exhausting Kowalczyk’s policy, she was free to settle with Genski without obtaining Central’s prior written consent or safeguarding its subrogation rights. The dissent disagreed, and we granted Bemiss permission to appeal (11 NY3d 711 [2008]). We now affirm.

II.

To decide this appeal, we must examine the interplay of the consent-to-settle (Condition 10), exhaustion (Condition 9), and subrogation-protection (Condition 13) provisions in the standard SUM endorsement prescribed by Regulation 35-D, which the Department designed to “reduce confusion regarding [SUM] coverage, make it easier to collect benefits and, when disputes arise, make it simpler to resolve those disputes” (NY Reg, Apr. 22, 1992, at 21). To put these provisions in perspective, a bit of history is in order.

Insurance Law § 3420 (f) (2) (A) provides that “[a]s a condition precedent to the obligation of the insurer to pay under the [SUM] insurance coverage, the limits of liability of all bodily injury liability bonds or insurance policies applicable at the time of the accident shall be exhausted by payment of judgments or settlements.” And in S’Dao, we concluded that “the exhaustion requirement of section 3420 (f) (2) relates back to the statute’s reference to ‘another motor vehicle’ and indicates that the proper focus is on the underinsured status of each individual tortfeasor” (87 NY2d at 854). As a result, SUM benefits are payable in a multiple-tortfeasor accident once the insured exhausts the bodily injury liability limits applicable to any single tortfeasor. Our decision in S’Dao reversed the Appellate Division, which had interpreted the statute to require a SUM{**12 NY3d at 655} claimant to exhaust the bodily injury liability limits of the policies held by all tortfeasors—i.e., to exhaust the aggregate limits of liability of all applicable policies. Further, in Weinberg v Transamerica Ins. Co. (62 NY2d 379, 381-382 [1984]), we held that in settling personal injury claims arising out of a motor vehicle accident,

“an insured will be held to have prejudiced the subrogation rights of his insurer unless he establishes by express provision in the release . . . or by necessary implication arising from the circumstances of the execution of the release that the settling parties reserved the rights of the insurer against the third-party tort-feasor or otherwise limited the extent of their settlement to achieve that result.”

As a corollary, an insured who settles with a tortfeasor without his carrier’s written consent forfeits SUM benefits (see State Farm Mut. Auto. Ins. Co. v Taglianetti, 122 AD2d 40 [2d Dept 1986]).

These principles created what commentators referred to as a “Catch-22” for the SUM claimant (see e.g. Dachs and Dachs, Insurance and No-Fault Law, The Underinsured Motorist, NYLJ, Dec. 11, 1990, at [*5]3, col 1). That is, if the insured’s carrier withheld its consent to an offer of a tortfeasor’s full available policy limits in exchange for a general release (which was naturally always demanded), the insured faced unpalatable options: either refuse the offer and litigate the case to judgment in order to exhaust the tortfeasor’s policy and become eligible to receive SUM benefits, or accept the offer and risk losing SUM coverage on account of having prejudiced the carrier’s subrogation rights. The Department set out to eliminate this dilemma when it formulated Regulation 35-D.

To this end, Regulation 35-D, as initially drafted by the Department, mandated the following in the standard SUM endorsement as Conditions 7 and 8:

“7. Exhaustion Required: Except as provided in Condition 8, we will pay under this SUM coverage only after the limits of liability have been used up under all motor vehicle bodily injury liability insurance policies or bonds applicable at the time of the accident in regard to a person that may be legally liable for the bodily injury sustained by the insured.{**12 NY3d at 656}

“8. Release or Advance: In accidents involving the insured and one or more negligent parties, if such insured settles with all such parties for the aggregate limits of the liability coverage of such parties, release may be executed with such parties after thirty calendar days actual written notice to us, unless within this time period we agree to advance such settlement amounts to the insured in return for the cooperation of the insured in our lawsuit on behalf of the insured.

“We shall have a right to the proceeds of any such lawsuit equal to the amount advanced to the insured and any additional amounts paid under this SUM coverage. Any excess above those amounts shall be paid to the insured.

“An insured shall not otherwise settle with any negligent party, without our written consent, such that our rights would be impaired” (see Dachs and Dachs, The Undersinsured Motorist, NYLJ, Dec. 11, 1990, at 3, col 1 [discussing development of Department’s proposed Regulation 35-D; Dachs and Dachs, Insurance and No-Fault Law, SUM Regulation Redux, NYLJ, June 9, 1992, at 3, col 1 [comparing text of proposed and final Regulation 35-D]).

Notice of proposed Regulation 35-D was published in the State Register on September 11, 1991.

In response to comments and criticism, Regulation 35-D was subsequently [*6]amended and another notice was published in the State Register on April 22, 1992.^[FN*] In the amended version, Conditions 7 and 8 of Regulation 35-D were renumbered Conditions 9 and 10, and provided respectively as follows:

“9. Exhaustion Required: Except as provided in Condition 10, we will pay under this SUM coverage only after the limits of liability have been used up under all motor vehicle bodily injury liability{**12 NY3d at 657} insurance policies or bonds applicable at the time of the accident in regard to any one person who may be legally liable for the bodily injury sustained by the insured.

“10. Release or Advance: In accidents involving the insured and one or more negligent parties, if such insured settles with any such party for the available limit of the motor vehicle bodily injury liability coverage of such party, release may be executed with such party after thirty calendar days actual written notice to us, unless within this time period we agree to advance such settlement amounts to the insured in return for the cooperation of the insured in our lawsuit on behalf of the insured.

“We shall have a right to the proceeds of any such lawsuit equal to the amount advanced to the insured and any additional amounts paid under this SUM coverage. Any excess above those amounts shall be paid to the insured.

“An insured shall not otherwise settle with any negligent party, without our written consent, such that our rights would be impaired” (11 NYCRR 60-2.3 [f]).

By changing the reference in Condition 9 (former proposed Condition 7) from “a person that” to “any one person who,” eliminating the reference in Condition 10 (former proposed Condition 8) to “aggregate limits” and substituting the singular “party” for the plural “parties,” the Department unambiguously applied the exhaustion requirement in section 3420 (f) to any single tortfeasor, not to all potential tortfeasors. This is exactly how we subsequently [*7]interpreted the statute in S’Dao.

Urging us to read Conditions 9 and 10 together, Bemiss contends that “where multiple tortfeasors are involved and the insured has permissibly settled with one tortfeasor for his/her policy limits, . . . the insure[r] has no right under Regulation 35-D to be notified of and withhold consent to a settlement with another tortfeasor for less than his/her policy limit” even though Condition 10 mandates that “[a]n insured shall not otherwise settle with any negligent party, without our written consent, such that our rights would be impaired.” In her view, this restriction “is intended to apply to an insured seeking . . . to settle for the policy limits of [the first] tortfeasor . . . The{**12 NY3d at 658} goal is to allow the settlement to be consummated while giving the insurer the opportunity to protect its subrogation right”—i.e., to remedy the “Catch-22.” Bemiss argues that to read Condition 10 as governing an insured’s settlement with a second tortfeasor would “take away” what Condition 9 and our decision in S’Dao give—i.e., the rule that SUM benefits become payable in a multiple-tortfeasor accident after one tortfeasor’s policy has been exhausted.

As already noted, an insured generally may not settle with a tortfeasor without the SUM insurer’s written consent, and may not prejudice the SUM insurer’s subrogation rights. As to the latter point, Condition 13 of the SUM endorsement specifically states as follows:

“13. Subrogation: If we make a payment under this SUM coverage, we have the right to recover the amount of this payment from any person legally responsible for the bodily injury or loss of the person to whom, or for whose benefit, such payment was made to the extent of the payment. The insured or any person acting on behalf of the insured must do whatever is necessary to transfer this right of recovery to us. Except as permitted by Condition 10, such person shall do nothing to prejudice this right” (11 NYCRR 60-2.3 [f] [emphasis added]).

The final sentence of Condition 10—the crux of Bemiss’s argument—specifies that the insured “shall not otherwise settle with any negligent party, without [the SUM carrier’s] written consent, such that [the SUM carrier’s] rights would be impaired” (emphasis added). Looking at both this language and the structure of Condition 10, “otherwise” refers back to the settlement scenario delineated in the first sentence—i.e., an insured’s 30 days’ written notice to the insurer of a tortfeasor’s offer to settle for the maximum available policy limits. And while Bemiss contends that “any negligent party” refers only to the first tortfeasor whose policy is exhausted so as to make SUM benefits payable, this is not readily apparent from the words used or the regulatory history. In the original version of Condition 10 (former Condition 8), “any negligent party” clearly referred to all the tortfeasors in a multiple-tortfeasor accident. When the Department revised the SUM endorsement to make the exhaustion requirement applicable to any single tortfeasor rather than the aggregate limits of the liability coverage of all tortfeasors, it [*8]retained in new Condition 10 the stipulation that{**12 NY3d at 659} the insured could not “otherwise settle with any negligent party” (emphasis added). Bemiss, in effect, asks us to read this provision to mean “otherwise settle with the first party to tender the available limit of his/her motor vehicle bodily injury liability coverage.” Even if Bemiss’s interpretation of “any negligent party” were correct, there is nothing in the SUM endorsement to suggest that the subrogation-protection provisions in Condition 13 become inoperative once an insured has exhausted a single tortfeasor’s policy limits in a multiple-tortfeasor accident.

In short, Condition 10 delineates the sole situation in which an insured may settle with any tortfeasor in exchange for a general release, thus prejudicing the insurer’s subrogation rights, without the carrier’s written consent. Here, Bemiss violated Condition 10 when she settled with Genski for less than the maximum available policy limits without Central’s written consent, such that its subrogation rights were impaired. Moreover, this result is not inconsistent with our decision in S’Dao or Condition 9 of the SUM endorsement. In this case, Bemiss settled with Kowalczyk in compliance with Condition 10, thereby also fulfilling the exhaustion requirement in Condition 9. At that point, she was entitled to make a claim for $75,000 under her SUM coverage and, if Central disagreed, to proceed to arbitration. That is, she did not have to pursue a claim against Genski in order to become eligible to collect up to the remaining limits of her SUM policy. But once having chosen to resolve her claim against Genski, she was not free under the SUM endorsement to compromise Central’s subrogation rights unilaterally.

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Chief Judge Lippman and Judges Ciparick, Graffeo, Smith, Pigott and Jones concur.

Order affirmed, with costs.

Footnotes

Footnote *: Trade associations and insurers brought a CPLR article 78 proceeding to challenge Regulation 35-D, which resulted in a stay of enforcement and a delay in implementation (see Matter of National Assn. of Ind. Insurers v Curiale, 190 AD2d 597 [1st Dept 1993], lv denied 81 NY2d 711 [1993]; see also Dachs and Dachs, Insurance and No-Fault Law, The Latest on Regulation 35-D, NYLJ, Nov. 10, 1992, at 3, col 1; Dachs and Dachs, Insurance and No-Fault Law, Regulation 35-D: A Reality at Last, NYLJ, Sept. 14, 1993, at 3, col 1).

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 (Kathy J. King, J.), entered May 18, 2007, deemed from a judgment of the same court entered September 12, 2007 (see CPLR 5512 [a]; Neuman v Otto, 114 AD2d 791 [1985]). The judgment, entered pursuant to the May 18, 2007 order granting plaintiff’s motion for summary judgment, awarded plaintiff the principal sum of $911.99.

Judgment 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, arguing that it denied plaintiff’s claim on the ground that no coverage existed since the policy benefits had been exhausted. In response, plaintiff argued that defendant failed to timely deny plaintiff’s claim and, in any event, defendant did not present admissible evidence establishing that the policy benefits were exhausted because the affidavit by defendant’s claims representative was executed before a Massachusetts notary public and there was nothing showing that it complied with CPLR 2309 (c). The Civil Court granted plaintiff’s motion for summary judgment, holding that defendant failed to proffer evidence establishing a triable issue of fact. The instant appeal by defendant ensued. A judgment was subsequently entered.

A “defendant’s failure to issue a denial of the claim within 30 days d[oes] not preclude a defense that the coverage limits of the subject policy have been exhausted” (New York & Presbyt. Hosp. v Allstate Ins. Co., 12 AD3d 579, 580 [2005] [internal quotations omitted]; see also Presbyterian Hosp. in City of NY v General Acc. Ins. Co. of Am., 229 AD2d 479, 480 [1996]). However, the affidavit proffered by defendant, in which defendant’s claims representative asserted that the available coverage had been exhausted, was not in admissible [*2]form. Defendant’s affidavit was not in conformity with CPLR 2309 (c), which fact was duly objected to by plaintiff in the Civil Court (see Impulse Chiropractic, P.C. v New York Cent. Mut. Fire Ins. Co., 19 Misc 3d 127[A], 2008 NY Slip Op 50498[U] [App Term, 2d & 11th Jud Dists 2008]; Dan Med., P.C. v New York Cent. Mut. Ins. Co., 17 Misc 3d 130[A], 2007 NY Slip Op 51981[U] [App Term, 2d & 11th Jud Dists 2007]). Moreover, defendant’s attorney’s affirmation was of no probative value since she did not establish that she had personal knowledge that the coverage limits of the policy had been exhausted. Consequently, defendant’s assertion of the exhaustion of available coverage was without any probative value.

Defendant’s remaining contention is unpreserved for appellate review and, in any event, lacks merit (see East Acupuncture, P.C. v Electric Ins. Co., 16 Misc 3d 128[A], 2007 NY Slip Op 51281[U] [App Term, 2d & 11th Jud Dists 2007]; Oleg Barshay, D.C., P.C. v State Farm Ins. Co., 14 Misc 3d 74 [App Term, 2d & 11th Jud Dists 2006]).
Accordingly, the judgment is affirmed.

Pesce, P.J., and Rios, J., concur.

Golia, J., dissents in a separate memorandum.

Golia, J., dissents and votes to reverse the judgment, vacate the order entered May 18, 2007 and deny plaintiff’s motion for summary judgment, in the following memorandum:

The majority decision here places form over substance and does not comport with the entire body of law as rendered by the Court of Appeals.

One of the pre-eminent cases in no-fault law is the Court of Appeals’ decision in Central Gen. Hosp. v Chubb Group of Ins. Cos. (90 NY2d 195 [1997]). The commonly held belief among many who are involved in no-fault law and litigation is that Chubb provides that a defendant will not be precluded from raising the defense of a “staged” accident despite having failed to deny the claim within 30 days. In actuality, however, there was no claim of a “staged” accident in Chubb. The defendant simply asserted that the assignor’s injuries were the result of a work-related accident and were therefore not covered by the automobile insurance policy in question. The Court of Appeals specifically held that despite the fact that the assignor was a covered person who was involved in an otherwise “covered” accident, there was a founded belief that her injuries were due to some other cause and were therefore not covered by the policy of insurance.

Indeed, Chubb relied heavily upon the prior Court of Appeals’ decision of Zappone v Home Ins. Co. (55 NY2d 131 [1982]). There, Mr. Zappone sent notice to the defendant Home Insurance Company that he had been in an automobile accident and was being sued by those injured in that accident. That notice sought coverage by the carrier in excess of the benefits being provided by the primary carrier. Home Insurance failed to disclaim coverage until some 15 months later, which unquestionably exceeded the mandates of subdivision 8 of section 167 of the Insurance Law.

The Court of Appeals was then confronted with applying a statute whose clear effect would result in directing an insurance carrier to provide coverage and reimbursement for which the carrier did not contract. The Court declined to do so and stated that,

“Literal interpretation of the words used will not be [*3]accorded when to do so will occasion great inconvenience, or produce inequality, injustice or absurdity. It is, moreover, always presumed that no unjust or unreasonable result was intended and the statute must be construed consonant with that presumption” (id. at 137 [citations omitted]).

Nevertheless, here the majority gives no weight to defendant’s attorney’s affirmation that effectively placed into issue whether, in accordance with the terms of the insurance contract, the assignor’s benefits had “maxed out”. Indeed, her affirmation refers to and incorporates certain documents pertaining to the fact that this claim is beyond the $8,000 monetary limit for no-fault benefits under the insurance contract at issue.

More specifically, that affirmation states that :
“The bill was denied because the policy benefits of $8,000.00 provided under the Massachusetts policy have been exhausted . . . [A]nnexed hereto as Exhibit B . . . [are] copies of the following:
Application for PIP Benefits indicating accident occurred in Massachusetts; printouts from carrier containing coverage information and portion of insurance policy providing for PIP coverage in the amount of $8,000.00; Payment History showing payout of benefits in the amount of $8,000.00″
These documents, coupled with the uncertified “affidavit” by Ms. Teixera, which was sworn to before a notary of our sister state of Massachusetts, in addition to the affirmation of the moving attorney, should certainly constitute a “founded belief” that this claim is not covered by the policy of insurance (see Weiss v Garfield, 21 AD2d 156 [1964] and the dissent in Ocean Diagnostic Imaging, P.C. v Lancer Ins. Co, 6 Misc 3d 62 [App Term, 2d & 11th Jud Dists 2004]). Indeed, even if it does not reach that level, then the lessons taught by Chubb and Zappone should still have mandated that plaintiff’s motion for summary judgment be denied.
Decision Date: June 23, 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 (Alan L. Lebowitz, J.H.O.), entered October 30, 2007. The order, insofar as appealed from, denied plaintiff’s motion, inter alia, to compel the deposition of defendant and, in effect, granted the branch of defendant’s cross motion seeking a protective order.

Order, insofar as appealed from, reversed without costs, plaintiff’s motion granted to the extent that defendant is ordered to appear for a deposition within 30 days of the order entered hereon and the branch of defendant’s cross motion seeking a protective order denied.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved, inter alia, for an order compelling the deposition of defendant and conditionally striking defendant’s answer or precluding defendant from offering evidence at trial in the event of defendant’s noncompliance. Defendant opposed the motion and cross-moved for an order compelling plaintiff to respond to defendant’s discovery demands and for a protective order. Insofar as is relevant to this appeal, the court denied plaintiff’s motion and, in effect, granted the branch of defendant’s cross motion seeking a protective order. This appeal by plaintiff ensued.

CPLR 3101 (a) provides for full disclosure of all matter “material and necessary in the prosecution or defense of an action, regardless of the burden of proof.” Parties to an action are entitled to reasonable discovery “of any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity” (Allen v Crowell-Collier Publ. Co., 21 NY2d 403, 406 [1968]). In view of the foregoing, the order, insofar as appealed from, is reversed, plaintiff’s motion is granted to the extent of compelling defendant to appear for a deposition, and the branch of defendant’s cross motion seeking a protective order is denied (see Connely v Allstate Ins. Co., 20 Misc 3d 145[A], 2008 NY Slip Op 51874[A] [App [*2]Term, 2d & 11th Jud Dists 2008]).

Pesce, P.J., and Rios, J., concur.

Golia, J., concurs in a separate memorandum.

Golia, J., concurs with the result only, in the following memorandum:

While I agree with the ultimate disposition in the decision reached by the majority, I believe the decision should also note that the deposition of defendant by plaintiff should be held only after plaintiff completes defendant’s interrogatories as previously ordered by the court below.
Decision Date: June 23, 2009

[*1]

Supreme Court, Appellate Term, First Department, June 19, 2009

APPEARANCES OF COUNSEL

Law Offices of Teresa M. Spina & Edward Satran, Woodbury (Edward Satran of counsel), for appellant. Baker, Sanders, Barshay, Grossman, Fass, Muhlstock & Neuwirth, Mineola, for respondent.

{**24 Misc 3d at 44} OPINION OF THE COURT

Per Curiam.

Judgment, entered on or about February 15, 2007, affirmed, with $25 costs.

Plaintiff, a health services provider, commenced this action to recover first-party no-fault benefits for health services rendered to plaintiff’s assignor (Burgos), who was involved in a motor vehicle accident on August 4, 2003. At the time of the accident, Burgos was driving a rental car owned by nonparty Manhattan Ford Lincoln Mercury, Inc. and allegedly insured by nonparty Fidelity and Guaranty Insurance Company. Burgos’ insurer, defendant Government Employees Insurance Company (GEICO), denied plaintiff’s no-fault claim on the ground that no-fault benefits were payable by Fidelity. GEICO stipulated to plaintiff’s prima facie case and raised as its sole defense that it was not obligated to pay plaintiff’s claim since Burgos’ insured vehicle was not involved in the accident and the payment of first-party benefits was the sole responsibility of Fidelity, as Manhattan Ford’s insurer. After trial, the court awarded judgment to plaintiff, holding that GEICO’s objection to payment did not raise an issue of coverage, but rather one of priority of payment, which under Insurance Law § 5105 (b) and applicable regulations must be submitted to arbitration.

Civil Court properly determined that it could not adjudicate the threshold issue raised at trial by GEICO, viz., whether it or Fidelity was primarily responsible for the payment of the first-party benefits sought by plaintiff. Under Insurance Law § 5105 (b), arbitration shall be “utilized to resolve all disputes arising between insurers concerning their responsibility for the payment of first party benefits” (Matter of Pacific Ins. Co. v State Farm Mut. Auto. Ins. Co., 150 AD2d 455, 456 [1989]). GEICO’s argument that its denial of benefits raised an issue of coverage because it was not “otherwise liable” for the payment of first-party benefits (see 11 NYCRR 65-3[*2].12 [b]) is unavailing, since it ignores the endorsements contained in its own insurance policy, which expressly provided Burgos with rental and substitute{**24 Misc 3d at 45} automobile coverage. Where, as here, more than one insurance policy provides coverage for a no-fault claim, the issue becomes one of priority of payment. 11 NYCRR 65-4.11 (a) (6) pertinently provides that “any controversy between insurers involving the responsibility or the obligation to pay first-party benefits (i.e., priority of payment or sources of payment as provided in section 65-3.12 of this Part) is not considered a coverage question and must be submitted to mandatory arbitration under this section.” GEICO, as “the first insurer to whom notice of proof of claim [was] given” (11 NYCRR 65-3.12 [b]), was obligated to pay the no-fault benefits for the health services provided by plaintiff, irrespective of any issues relating to the priority or source of payment. Since GEICO denied payment of plaintiff’s claim on the stated ground that no-fault benefits were payable by Fidelity, its denial raised a question concerning the responsibility or obligation to pay first-party benefits, an inter-company dispute which must be resolved through mandatory arbitration (see Paramount Ins. Co. v Miccio, 169 AD2d 761 [1991]; Pacific Ins. Co. v State Farm, 150 AD2d at 456), not by way of a defense to plaintiff’s plenary no-fault action.

McKeon, P.J., and Heitler, J., concur.

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 (Rhonda E. Fischer, J.), entered June 11, 2008. The order denied plaintiff’s motion for summary judgment.

Order 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, arguing, inter alia, that plaintiff’s supporting affidavit failed to establish that the annexed claim form constituted evidence in admissible form. The District Court denied plaintiff’s motion. Plaintiff appeals and we affirm.

Plaintiff failed to make a prima facie showing of its entitlement to summary judgment since the affidavit submitted by plaintiff’s billing manager failed 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]; Fortune Med., P.C. v Allstate Ins. Co., 14 Misc 3d 136[A], 2007 NY Slip Op 50243[U] [App Term, 9th & 10th Jud Dists 2007]). Consequently, plaintiff’s motion for summary judgment was properly denied. Accordingly, the order is affirmed.

Tanenbaum, J.P., and Molia, J., concur.

Scheinkman, J., taking no part.
Decision Date: June 18, 2009