—[*1] Hurwitz & Fine, P.C., Buffalo (Steven E. Peiper of counsel), for plaintiff-appellant-respondent.

Hogan Willig, PLLC, Amherst (John B. Licata of counsel), for defendant-respondent-appellant.

Appeal and cross appeal from a judgment (denominated order) of the Supreme Court, Erie County (Penny M. Wolfgang, J.), entered December 19, 2006 in a declaratory judgment action. The judgment, among other things, denied defendant’s motion for summary judgment.

It is hereby ordered that the judgment so appealed from is unanimously affirmed without costs.

Memorandum: Plaintiff commenced this action alleging that defendant failed to cooperate with plaintiff, as required by her insurance policy, when she was injured in a motor vehicle accident and that, based on that failure, plaintiff is entitled to a declaration that it has no duty to indemnify defendant or to pay her no-fault insurance benefits with respect to those injuries.

We conclude that Supreme Court properly denied defendant’s motion seeking summary judgment dismissing the complaint and confirming the award of the master arbitrator and properly granted that part of the cross motion of plaintiff seeking a de novo determination of its claim that it has no duty to indemnify defendant for claims arising from the motor vehicle accident, including claims for no-fault benefits. Contrary to the contention of defendant, the action is not barred by the doctrine of res judicata. Although the doctrine of res judicata generally applies with respect to a final arbitration award (see Rembrandt Indus. v Hodges Intl., 46 AD2d 623, 623-624 [1974], affd 38 NY2d 502 [1976]), Insurance Law § 5106 (c) and 11 NYCRR 65-4.10 (h) (1) (ii) expressly provide that either party to a matter submitted to arbitration has the right to a de novo determination of the dispute in the event that the master arbitrator’s award is $5,000 or greater, exclusive of interest and attorney’s fees, and that is the case here (see Matter of Greenberg [Ryder Truck Rental], 70 NY2d 573, 576-577 [1987]; Matter of Capuano v Allstate Ins. Co., 122 AD2d 138, 139 [1986]).

We further conclude that the court properly denied that part of plaintiff’s cross motion for [*2]summary judgment declaring that plaintiff has no duty to indemnify defendant for claims arising from the motor vehicle accident in question, including claims for no-fault benefits. Plaintiff failed to support its motion with evidence provided by an individual with personal knowledge of the facts (see Chiarini v County of Ulster, 9 AD3d 769, 769-770 [2004]), and the documents provided by plaintiff in support of the cross motion do not establish that defendant failed to cooperate with plaintiff, as alleged in the complaint. Thus, plaintiff failed to meet its burden of establishing its entitlement to judgment as a matter of law (see generally Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; New York Cas. Ins. Co. v Kushner, 309 AD2d 1235 [2003]). Present—Scudder, P.J., Martoche, Fahey, Peradotto and Gorski, JJ.

Supreme Court, Nassau County

8566/08

Anthony C. Donofrio, PLLC

Attorney for Petitioner

5518 Merrick Road

Massapequa, NY 11758

Short & Billy, PC

Attorneys for Respondent

217 Broadway, Suite 300

New York, NY 10007

William R. LaMarca, J.

Requested Relief

Complainant, JOSEPH MILLS (hereinafter referred to as “Dr. MILLS”), petitions the Court for an order, pursuant to 11 NYCRR §65-4.10(h), granting him a trial, de novo, with respect to a decision of an Arbitrator that upheld the denial of no-fault benefits to MILLS by respondent, GOVERNMENT EMPLOYEES INSURANCE CO. (hereinafter referred to as “GEICO”). GEICO opposes the petition on procedural as well as substantive grounds. The petition is determined as follows:

Background

In the underlying arbitration dispute, MILLS sought arbitration seeking payment of lost earnings under the no-fault provisions of his policy with GEICO which had coverage of $100,000.00 for lost earnings. Following MILLS’ claim, GEICO paid the amount of $13,950.48, but denied him further benefits, and in the arbitration, Dr, MILLS sought payment for the balance of the amount which he had not received.

In his petition, Dr. MILLS, claims that, prior to December 6, 2002, he was a full time treating chiropractor that treated patients at two (2) locations: Chiropractic Low Back Pain in Huntington, New York, and Nassau Chiropractic Pain Management in Valley Stream, New York. He states that, on September 4, 2002, he was involved in a motor vehicle accident on Route 108 in Cold Spring Harbor, New York where he sustained serious injuries to his spine. He contends that, from September 4, 2002 to December 6, 2002, he continued to treat patients at his facilities in a limited capacity until he was no longer [*2]physically able to do so on December 6, 2002, and that he hired part-time chiropractors to treat patients because of his diminished capabilities. On December 7, 2002, the date that Dr. MILLS claimed complete disability, he hired a full time chiropractor to take over his share of the work at the various facilities. He asserts that he has undergone serious spinal surgery, including the fusion of vertebrae in his spine with bone grafted from his hip and is presently receiving Social Security Disability benefits for being totally disabled since December 6, 2002.

Dr. MILLS states that, based upon a medical examination that concluded that no further treatment was necessary, GEICO denied his claim on March 9, 2003 and, thereafter, he underwent further surgery. He states that he submitted proof to GEICO of his additional surgery on September 9, 2003, as well as proof that he was receiving Social Security Disability Benefits, but after another medical examination GEICO again denied his claim, on July 13, 2004. Thereafter, the matter was heard by Arbitrator Laura A. Yantsos, Esq., who concluded in a nine (9) page decision, dated August 9, 2007, that Dr. MILLS had not suffered any loss of earnings and was not entitled to the balance of the policy. Said decision by Arbitrator Yantsos, was appealed by Dr. MILLS and upheld by Master Arbitrator Donald T. DeCarlo, by decision dated January 8, 2008. It is from the Master Arbitrator’s decision that Dr. MILLS seeks a trial de novo under11 NYCRR §65-4.10(h). It is Dr. MILLS position that the decision of Arbitrator Yantsos is completely arbitrary and abusive and that she exceeded her power and abused her discretion. He claims that the Arbitrator demanded documents far in excess of what was necessary or regular and required twenty (26) hours of appearance time and demonstrated that she had no understanding of the no-fault law.

The Arbitration Decision reflects an exhaustive and comprehensive analysis of the facts and documentary evidence presented, that included IRS records, business records, a Social Security claim and other related documents. Dr. MILLS claim was for lost earnings which is defined in Insurance Law §5102(2) as “[l]oss of earnings from work which the person would have performed had he not been injured, and reasonable and necessary expenses incurred by such person in obtaining services in lieu of those that he would have performed for income . . .”. The Arbitrator found that Dr. MILLS was acting, before and after the accident, first and foremost, as a manager and owner of medical corporations and practices and of the buildings in which the practices were located, and that he was not disabled from performing his duties as a manager/owner. As part of the evidence considered was a letter submitted by Dr. MILLS, written to “Scott” and prepared in conjunction with his Social Security Disability hearing, which indicated that he had gone on disability for more that a year in 1995, some seven (7) years prior to the subject accident, when he had injured his back and learned that he could not return to work on a full time basis and started doing medical management, that he ran his own medical management company for the last several years and did almost no treating, that he managed the medical practice of another doctor, and that he could not work as a chiropractor because he could not do repetitive bending. Moreover, the Arbitrator found that the two (2) practices opened by Dr. MILLS just a few months before the accident envisioned his role to be that of a medical manager, that he did not work exclusively as a treating chiropractor, that his tax returns did not accurately reflect legitimate business expenses and his deductions were grossly inflated and untraceable, and that real estate [*3]taxes imposed on the businesses were in fact for expenses of buildings owned by Dr. MILLS in his personal capacity. Indeed, after consideration of the credible evidence presented, the Arbitrator found that Dr. MILLS did not sustain a loss of earnings but, on the contrary, received greater income than he did prior to the accident.

In opposition to the petition, counsel for GEICO points out the following:

1. That the Court lacks personal jurisdiction over the respondent because the notice and petition were not properly served. 22 NYCRR §65-4.10(h) directs, as follows:

(h) Appeal from master arbitrators award:

(1) A decision of a master arbitrator is final and binding, except f for:

(I) court review pursuant to an Article 75 proceeding, or

(Ii) if the award of the master arbitrator is $5,000 or greater, exclusive of interest and attorneys fees, either party may in lieu of an Article 75 proceeding, institute a court action to adjudicate the dispute de novo. (emphasis supplied).

As the award of the master arbitrator was for $0 dollars, the instant action must be commenced as a special proceeding (CPLR §7502), which requires that a party file a petition (CPLR §304) and that the notice must be served in the same manner as a summons (CPLR §403[c]). It is clear that the petition was not served upon the defendant corporation, pursuant to CPLR §311(a) as complainant served the notice and petition, by mail, upon counsel for GEICO, which is insufficient service.

2. That complainant is not entitled to a trial de novo as a pre-requisite for a de novo action is an award of a master arbitrator in the amount of $5,000 or greater. There can be no de novo review if there is no monetary award. Harlev v United Servs. Auto Assn., 191 AD2d 768, 594 NYS2d 405 (3d Dept. 1993), General Accident Fire & Life Insurance Co. v Avlonitis, 156 AD2d 424, 548 NYS2d 543 (2nd Dept. 1989).

3. That the complainant is barred from seeking relief under CPLR Article 75 because CPLR §7511 with respect to vacating or modifying an arbitration award requires the application to be made within ninety (90) days of delivery to him. In the case at bar, the decision of the Master Arbitrator was mailed on January 8, 2008 and the instant application was filed on May 9, 2008. The ninety (90) day period had expired and claimant is not entitled to Article 75 relief.

4. That the decision of Arbitrator Yantsos has a factual and rational basis. As discussed above, the decision reflects an exhaustive and comprehensive analysis of the facts and documentary evidence presented.

5. That the decision of Arbitrator Yantsos is not capricious, arbitrary or irrational. The record demonstrates that Dr. MILLS claim that “working full time as a treating chiropractor was the primary source of his income and how he made his likelihood” was contrary to the record. Rather the record shows that he was a chiropractor/businessman, who worked in medical management for which he was not disabled.

6. That the decision of Master Arbitrator DeCarlo is proper and should be confirmed. Master Arbitrator DeCarlo found that “the Master Arbitrator is not a fact finder, and if the evidence is sufficient to support an Arbitrator’s decision, it is not the role of the Master Arbitrator to vacate or modify”. He concluded that “the decision of the Arbitrator on its face [*4]supports an affirmation of the decision below and I therefore, rule in favor of Respondent in this matter”. Counsel for GEICO cites Matter of Petrofsky v Allstate Insurance Co., 54 NY2d 207, 445 NYS2d 77, 429 NE2d 755 (C.A. 1981).

The Law

The Court of Appeals has outlined the scope of review by a master arbitrator in the Matter of Petrofsky v Allstate Insurance Company, supra , and Smith and Firemen’s Fund Insurance Company, 55 NY2d 224, 448 NYS2d 444, 433 NE2d 509 (C.A. 1982). In Petrofsky, the Court of Appeals vacated a master arbitrator’s determination which set aside the original arbitration award and found that the master arbitrator erred by engaging in an extensive review of the facts. In Smith, the Court of Appeals upheld the master arbitrator because he based his decision on a matter of law and there was no indication that the master arbitrator exceeded his statutory power by weighing the evidence or resolving issues such as the credibility of the witnesses:

An arbitration award may be reviewed for whether it has a rational basis. The rational basis standard was developed by the Court of Appeals in a series of four (4) cases: Garcia v Federal Insurance Company, 46 NY2d 1040, 416 NYS2d 544, 389 NE2d 1066 ( C.A. 1979), Furstenberg v Aetna Casualty & Surety Co., 49 NY2d 757, 426 NYS2d 465, 403 NE2d 170 (C.A. 1980), Cohn v Royal Globe Insurance Company, 49 NY2d 942, 428 NYS2d 88, 406 NE2d 739 (C.A. 1980) and Levine v Zurich American Insurance, 49 NY2d 907, 428 NYS2d 193, 405 NE2d 675 (C.A. 1980).

CPLR § 7511(b) sets forth the four narrow grounds upon which an arbitration award may be vacated. These four grounds are 1) corruption, fraud, or misconduct in procuring the award; 2) partiality of an arbitrator appointed as a neutral; 3) that an arbitrator or agency making the award exceeded his power or so imperfectly executed it that a final definite award was not made; and 4) procedural defects, unless the party failed to notice the defect and failed to object to same. See also, Matra Building Corp v Alan Kucker, et al., 2 AD3d 732, 770 NYS2d 367 (2nd Dept. 2002). An arbitration award cannot be vacated even if the Court concludes that the arbitrators interpretation of an agreement misconstrues or disregards its plain meaning or misapplies substantive law unless the award is violative of a strong public policy, is totally irrational, or exceeds enumerated limitations of the arbitrators powers. Matra Building Corp. v Alan Kucker, et al., supra . The scope of review is extremely limited, as the goal of arbitration is to reach a final and definite resolution of the parties’ dispute without resorting to the judicial process, and the party commencing the action bears a heavy burden of proof. Indeed, an arbitration award will be confirmed if there is even a barely colorable justification for the outcome. Huntington Hospital v Huntington Hospital Nurses Association, 302 F. Supp. 2d 34 (EDNY, 2004).

. . . [I]n order to achieve arbitration’s dual purpose of an equitable result and expediency, the arbitrator’s award should be given great deference. Finality is the key. Accordingly, CPLR 7501 expressly forbids judicial review of the parties’ disputes. Therefore, failure to establish a statutory ground for vacatur under CPLR 7511 requires confirmation of the award (Matter of Granite Worsted Mills[Cowen] 25 NY2d 451, 255 NE2d 168, 306 NYS2d 934). Moreover, in New York there is a strong public policy favoring [*5]arbitration, consequently an award is not subject to vacatur “unless the court concludes that it is totally irrational or violative of a strong public policy” and thus in excess of the arbitrators powers (Hacket v. Milbank, Tweed, Hadley & McCloy, 86 NY2d 146, 630 NYS2d 274, 654 NE2d 95; Maross Constr. V. Central NY Regional Transp. Auth. 66 NY2d 341, 497 NYS2d 321, 488 NE2d 67).

Brown and Williamson Tobacco Corp. v. Chesley, 194 Misc 2d 540, 749 NYS2d 842 (NY County, 2002).

ConclusionAfter a careful reading of the submissions herein, the Court credits the analysis of GEICO’s counsel and finds that service of the petition was improper, that complainant is not entitled to a de novo trial, that a demand for relief under Article 75 is untimely, and that, even if juricdiction had been established and the application was timely, the awards of the Arbitrator and Master Arbitrator have a sound basis in the record and are not irrational, capricious or an abuse of discretion. It is the finding of the Court that the arbitration process afforded the complainant due process and is supported by adequate evidence in the record and is not totally irrational. See, Gulf Stream Coach v DiSanto, 173 Misc 2d 242, 661 NYS2d 498 (Sup. Lawrence Co. 1997); Ianotti v Safari Motor Coaches, 255 AD2d 848, 638 NYS2d 839 (3rd Dept 1996).Based on the totality of the evidence presented, the Court finds that there clearly was a rational basis for the arbitral decision and that the arbitrator acted within her powers.

Therefore, as CPLR § 7511(e) directs that once the Court denies a motion to vacate an award it shall confirm the arbitration award, the Arbitration Award is affirmed. GEICO is directed to settle judgment, on notice.

All further requested relief not specifically granted is denied.

This constitutes the decision and order of the Court.

Dated: October 1, 2008

_________________________

WILLIAM R. LaMARCA, J.S.C.

TO:

mills-geico,#

01/art75

—[*1] Alden Banniettis, Brooklyn, N.Y. (Jeff Henle of counsel), for appellant.

Teresa M. Spina, Woodbury, N.Y. (Emilio A. Cacace of counsel), for respondent.

In an action to recover no-fault benefits under an insurance contract, the plaintiff appeals, by permission, from an order of the Appellate Term of the Supreme Court for the Second and Eleventh Judicial Districts, dated April 26, 2007, which affirmed an order of the Civil Court of the City of New York, Kings County (Rubin, J.), entered August 8, 2005, which denied its motion for summary judgment on the complaint and granted the defendant’s cross motion for summary judgment dismissing the complaint.

Ordered that the order dated April 26, 2007, is affirmed, with costs.

The Appellate Term properly affirmed the Civil Court order denying the plaintiff’s motion for summary judgment on the complaint and granting the defendant’s cross motion for summary judgment dismissing the complaint. The plaintiff’s evidentiary submissions revealed that the defendant insurance company timely issued denial of claim forms in April and May of 2001, which partially denied payment upon the ground that no fee schedule existed for the treatment provided, and payment could thus be limited to a reasonable and customary fee. Although “[a] timely denial alone does not avoid preclusion where said denial is factually insufficient, conclusory, vague or otherwise involves a defense which has no merit as a matter of law” (Amaze Med. Supply v Allstate Ins. Co., 3 Misc 3d 43, 44 [2004]; see New York Univ. Hosp. Rusk Inst. v Hartford Acc. & Indem. Co., 32 AD3d 458, 460 [2006]; Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564 [2005]; Nyack Hosp. v State Farm Mut. Auto. Ins. Co., 11 AD3d 664 [2004]), here the defendant’s denials of claim were issued on prescribed forms, and were not factually insufficient or vague. Under these circumstances, [*2]the plaintiff failed to establish its prima facie entitlement to judgment as a matter of law (see Westchester Med. Ctr. v Allstate Ins. Co., 45 AD3d 579 [2007]; see also A.B. Med. Servs., PLLC v Liberty Mut. Ins. Co., 39 AD3d 779 [2007]; A.B. Med. Servs., PLLC v GEICO Cas. Ins. Co., 39 AD3d 778 [2007]).

Furthermore, the defendant made a prima facie showing of its entitlement to summary judgment dismissing the complaint by submitting evidentiary proof that no fee schedule for the reimbursement of acupuncture treatments existed in 2001, and that it properly limited payment to “charges permissible for similar procedures under schedules already adopted” (11 NYCRR 68.5 [b]; see Insurance Law § 5108; Ops Gen Counsel NY Ins Dept No. 04-10-03 [Oct. 2004]). In opposition to the cross motion, the plaintiff failed to raise an issue of fact as to whether reimbursement for its acupuncture services was properly limited.

The plaintiff further contends that the defendant failed to offer sufficient evidence in support of the “similar procedure” it chose for comparison to the services offered by the plaintiff in arriving at the rate of reimbursement. This contention, however, is not properly before this Court, as it was not raised in the Civil Court, and was not addressed by the Appellate Term (see Matter of New York City Hous. Auth. v Jackson, 48 AD3d 818, 820 [2008]). Spolzino, J.P., Ritter, Santucci and Carni, JJ., concur.

Supreme Court, New York County

105012/07

For the Petitioners:Agnes Neiger, Esq.

Jones Jones O’Connell LLP

45 Main Street, Suite 1101

Brooklyn, New York 11201

For the Respondents:

Patrice Soberano, Esq.

Short & Bill, P.C.

217 Broadway, Suite 300

New York, New York 10007

Marcy L. Kahn, J.

By notice of petition and petition dated April 4, 2007 and the exhibits annexed thereto, petitioner Chubb Insurance Company (“petitioner” or “Chubb”), moved for an order pursuant to CPLR §7511(b)(1)(iii) vacating the amended award of the arbitrator, dated January 17, 2007, in the arbitration proceeding between petitioner and respondent, GEICO Insurance Company (“respondent” or “GEICO”) on the ground that the arbitrator exceeded her powers, and sought to reinstate the original award issued by the arbitrator on November 3, 2006. Respondent submitted no opposition to the petition. By decision and order dated July 21, 2007, this court granted the petition on default, vacated the amended award and reinstated the original award. Respondent now moves to vacate the default judgment and, upon vacation, to reinstate the amended award. For the reasons stated, respondent’s motion is denied. [*2]

I. FACTUAL AND PROCEDURAL BACKGROUND

On January 22, 2003, Chenille Bonner (“Bonner”), a New York City Transit Authority (“NYCTA”) bus driver, was on duty in her bus when it became involved in a three-vehicle accident. As the NYCTA workers’ compensation insurer, Chubb paid $42,065.56 in benefits to and on behalf of Bonner as a result of the accident. (Pet. Exh. B).

In accordance with Insurance Law §5105, Chubb filed an inter-company arbitration demand against GEICO and Statewide Insurance Company (“Statewide”), the insurers of the other two vehicles,^[FN1] seeking reimbursement of the first-party benefits it had paid to its insured. As one of the vehicles involved in the accident was a NYCTA bus weighing in excess of 6500 pounds unloaded and constituting a vehicle for hire (see Pet. Exh. A), the jurisdictional requirements of §5105(a) were satisfied. The case was then submitted to arbitration with Arbitration Forums Inc. (“AFI”) pursuant to §5105(b) and 11 NYCRR §65.10 of the no-fault regulations on September 19, 2005. (Pet. Exh. C).

On October 31, 2006, the arbitration was held before the AFI arbitrator, Sabrina Owens (“Owens” or the “arbitrator”). On November 3, 2006, Owens issued her decision in the matter under AFI Docket No. I068-07725-05-00 (the “original award”), finding each of the respondents to be fifty per cent liable, and awarding Chubb a total of $42,065.56. (Pet. Exh. D).

Thereafter, by letter to the arbitrator dated November 22, 2006, respondent GEICO requested that the award against it be vacated due to an “incorrect application of New York regulations regarding PIP loss transfer requirements . . . .” (Pet. Exh. E). In essence, GEICO argued that because GEICO also provided motor vehicle insurance coverage for the NYCTA bus, it was “united in interest” with Chubb and recovery by Chubb against it was barred.

On January 17, 2007, the arbitrator issued an amended decision and award (the “amended award”), in which she determined that Statewide bore fifty per cent of the liability and that GEICO bore no liability in the case. (Pet. Exh. F). The amended award reduced Chubb’s recovery to $21,032.78.

Thereafter, petitioner commenced a proceeding to vacate the amended award and reinstate the original award, arguing that the arbitrator exceeded vacating the original award and her powers in issuing the amended award. As proof of service on the Superintendent of Insurance was provided by petitioner and respondent submitted no opposition to the petition, this court issued a decision and order dated July 20, 2007 (“Chubb I“), granting the petition on default but also addressing the merits [*3]of the petition.^[FN2]

Petitioner served respondent with notice of entry of the judgment on or about September 4, 2007. On May 9, 2008, GEICO filed the instant motion to vacate the default judgment in Chubb I. Chubb has opposed the motion. GEICO thereafter furnished a reply affirmation.

II.PARTIES’ CONTENTIONS

On this motion, GEICO claims that this court’s decision in Chubb I should be vacated on the ground of excusable default, as its failure to appear in the Article 75 proceeding was reasonable and it has a meritorious defense to the proceeding. Proffering the representation of its claims representative, Simon King (“King”), GEICO maintains that its failure to appear in the Article 75 proceeding was reasonable and should be excused, because its files do not reflect that it was ever served with process or received any notice of the proceeding until after the entry of judgment against it on September 4, 2007. (Aff. of Merit of Simon King, sworn Apr. 23, 2008 [the “King affidavit”], at ¶11).

GEICO states that it has a meritorious defense, arguing that the original award was so irrational as to require vacation. Specifically, GEICO argues that Chubb, Bonner’s worker’s compensation carrier, was aligned in interest with GEICO, which provided no-fault motor vehicle coverage for Bonner’s NYCTA bus, as well as for one of the other vehicles involved in the accident. It argues that to permit a worker’s compensation carrier to recover from the no-fault insurer of the same person would improperly eliminate the worker’s compensation offset for no-fault insurers mandated by Insurance Law §5102(b)(2). It also argues that there should have been no consideration of negligence through intercompany loss transfer pursuant to Insurance Law §5105(a) because of Chubb’s status as a worker’s compensation carrier, and that Chubb is the sole source of Bonner’s medical benefits under 11 NYCRR §65-3.16(a)(9). Contending that the arbitrator recognized her own error and, accordingly, amended her award appropriately, GEICO argues that the amended award should be reinstated.

Chubb responds that GEICO has failed to establish either a reasonable excuse for its default or a meritorious defense to the petition. Chubb contends that GEICO cannot furnish a reasonable excuse for its default because the statement by King is conclusory and unsupported by specific factual allegations. It proffers an affidavit of service upon the office of the Superintendent of the New York State Insurance Department (“NYSID”) as the duly appointed representative of GEICO and the [*4]acknowledgment of such service and delivery to GEICO by that office on April 16, 2007. (Affirm. of Agnes Neiger, Esquire in Opp.[“Neiger Aff.”], dated July 10, 2008, Exh. D). Chubb further maintains that GEICO’s defense, namely, that the original award is irrational and should be vacated, does not address the issue before this court in Chubb I, that being whether the arbitrator exceeded her authority in issuing the amended award.

Chubb also argues that GEICO’s request to the arbitrator for modification of the original award failed to comply with the requirements of CPLR §7509, as GEICO submitted its request more than twenty days after the original award was issued. Chubb reiterates that because the amendment of the award did not fall within the statutory parameters specified in CPLR §§7509 and 7511(c), the arbitrator exceeded her authority in amending the original award in response to the request, rendering GEICO’s position unmeritorious.

III.DISCUSSION

It is settled law that “[a] party seeking to vacate a default must demonstrate both a reasonable excuse for [that party’s] nonappearance and a meritorious defense to the action.” (Eugene Di Lorenzo, Inc. v. A.C. Dutton Lumber Co., 67 NY2d 138, 141 [1986]; Central City Brokerage Corp. v. Acosta, 49 AD3d 455 [1st Dept. 2008]. On this motion, GEICO has failed to establish either a reasonable excuse or a meritorious defense.

A. Reasonable Excuse

GEICO’s assertion that it was not properly served with the petition is belied by both the affidavit of service sworn on April 13, 2007 and the affidavit of acknowledgment of service dated April 16, 2007. The affidavit of service attests to the fact that on April 13, 2007, GEICO was served by personal delivery with a true copy of the notice of petition and petition to Dora Lewis of the NYSID and that Ms. Lewis was a duly appointed representative of GEICO for the purpose of receiving service of process.^[FN3] (Neiger Aff., Exh. D). The affidavit of acknowledgment of service reveals that on April 16, 2007, Salavatore Castiglione, Assistant Deputy Superintendent and Chief of NYSID, acknowledged that the notice of petition was served upon him on April 13, 2007 and that he notified GEICO of service by forwarding the acknowledgment and a copy of the notice of petition to Mr. Robert M. Miller of GEICO at its address in Woodbury, New York on April 16, 2007. (Id.) GEICO presents no facts contradicting this evidence, or demonstrating that it had a new address for the forwarding of service of process and had [*5]failed through inadvertence to notify the Superintendent of Insurance of that fact. Further, there are no facts before this court demonstrating that the notice of petition was ever returned undelivered to the Insurance Department. Although GEICO does claim that a copy of the notice of petition could not be located in its files, no facts have been presented to this court supporting GEICO’s claim that it was never served on the company.

Thus, the record establishes that service of the notice or petition and petition was effected pursuant to Insurance Law §1212(b).^[FN4] GEICO has failed to provide a sworn factual basis to controvert these allegations. As GEICO has not shown that it was not properly served with the petition in this proceeding, GEICO does not have a reasonable excuse for its failure to appear in this proceeding prior to filing the instant motion.

B. Meritorious Defense

GEICO’s claim of a meritorious defense in this proceeding is equally unavailing. In Chubb I, the issue before the court was whether the arbitrator exceeded her powers in issuing the amended award, which Chubb sought to vacate pursuant to CPLR §§ 7509 and 7511(b)(1). (See Chubb I, section II, at 3). On this motion, rather than addressing that issue, GEICO challenges the rationality of the original award. These misdirected arguments do not constitute a meritorious defense to Chubb’s petition.

Although, as GEICO contends, New York courts have been liberal in vacating default judgments in light of the strong public policy favoring the resolution of cases on their merits (Reply Affirm. of Patrice Soberano, Esquire dated July 25, 2008 in Support of Resp. Mot., at ¶14; see Aliksanyan v. Sundman, 98 AD2d 607 [1st Dept. 1983]; Balint v. Marine Midland Bank, 112 AD2d 1023 [2d Dept. 1985]), in most of the cases relied upon by GEICO, the motion to vacate the default judgment was filed promptly upon receipt of the notice of entry of the default judgment by the prevailing party. (See, e.g., Glass v. Janbach Properties, 73 AD2d 106, 108 [2d Dept. 1980][motion to vacate filed eight days after receipt of notice of entry of default judgment]). Here, by contrast the motion to vacate the default [*6]was filed some eight months after service of the notice of entry of the judgment. Moreover, in Chubb I this court did address the merits of this proceeding, rather than merely granting a default judgment based upon GEICO’s failure to respond to the petition. (See Chubb I, section III at 4-8).

GEICO proffers no factual or legal basis for this court to vacate its judgment in Chubb I. Instead, GEICO argues that the arbitrator made an error of law in issuing the original award in contravention of both a governing statute and a regulation. Specifically, GEICO maintains that the original award, which permitted Chubb, the workers’ compensation carrier for Bonner, to recover from GEICO, the no-fault insurer for the same party, violates the statutory scheme set forth in Insurance Law §5102(b)(2). Under that scheme, first-party benefits paid by a no-fault insurer to reimburse a person for basic economic loss on account of personal injury are to be offset by any amounts recovered on account of workers’ compensation benefits, rather than the reverse. (See Ins. Law §5102[b][2]; Arvatz v. Empire Mut. Ins. Co., 171 AD2d 262 [1st Dept. 1991][“. . . Insurance Law §5102(b)(2) provides that workers’ compensation benefits serve as an offset against first-party benefits payable under no-fault as compensation for basic economic loss'”]; New York Cent. Mut. Fire Ins. Co. v. Tower Ins. Co. of New York, Index No. 100446/07, [Sup. Ct. NY Co. July 6, 2007][vacating arbitrators’ award of medical expenses from no-fault insurer to workers’ compensation carrier as contrary to Insurance Law §5102(b)]). GEICO further asserts that the original award does not comply with 11 NYCRR § 65-3.16(a)(9), which provides:

(p)ursuant to section 5102(b)(2) of the Insurance Law, when the applicant is entitled to workers’ compensation benefits due to the same accident, the workers’ compensation carrier shall be the sole source of reimbursement for medical expenses.

(11 NYCRR §65-3.16[a][9]; see also New York Cent. Mut. Fire Ins. Co. v. Tower Ins. Co. of New York, supra [“because the compensation carrier is solely responsible for the medical expenses, it turns the law on its head to allow the carrier to recover from the no-fault insurer”]). Assuming, without deciding, the correctness of GEICO’s statement of the law and its application to the circumstances presented here,^[FN5] GEICO had a remedy, which was to make a successful motion in this court to vacate the original award pursuant to CPLR §7511, but, for [*7]reasons still unexplained, failed to do so. Rather, GEICO sought to have the arbitrator modify her award. In doing so, GEICO sought its remedy in an inappropriate manner. Should a party to an arbitration proceeding seek to vacate or modify an award, the appropriate means to do so is by way of CPLR article 75 procedure. (See Caso v. Coffey, 41 NY2d 153, 157 [1976][a requirement that arbitrators be prepared to defend their awards would “discourage qualified and competent persons from serving as arbitrators”]).

Chubb subsequently brought its petition seeking to vacate the amended award. Despite having been properly served with the petition by personal service on the Superintendent of Insurance, GEICO failed to respond. Having been presented no contentions on the merits by GEICO, this court considered Chubb’s argument that the arbitrator exceeded her authority and determined that the arbitrator had done so. (See CPLR §7511[b][1][iii]; Matter of the Board of Educ. of the Dover Union Free School Dist. v. Dover-Wingdale Teachers’ Ass’n, 61 NY2d 913,915 [1984] [arbitration award may be vacated where the award is “in excess of a specifically enumerated limitation upon arbitral authority”]). Thus, this court decided the issue on the merits in favor of Chubb. (See Chubb I at 4-8).

Further, GEICO’s motion, which effectively seeks an order from this court confirming the amended award, is untimely, as it has been approximately one year and eight months, long after the expiration of the one-year statutory time period, since the delivery of the amended award to GEICO. (CPLR §7510).

As GEICO proffers neither a reasonable excuse for its nonappearance in this proceeding prior to the filing of the instant motion, nor a meritorious defense to the petition, the motion to vacate the default judgment must be denied.

IV.CONCLUSION

For the foregoing reasons, respondent’s motion to vacate the default judgment of this court dated July 20, 2007 is denied.

The foregoing constitutes the decision and order of this court.

ENTER:

______________________

Marcy L. Kahn, J.S.C.

Dated:New York, New York

September 29, 2008

Footnotes

Footnote 1:In addition to the NYCTA bus, GEICO insured a third-party vehicle involved in the accident.

Footnote 2:See Chubb I, section III, at 4-8.

Footnote 3: CPLR §317 is not applicable here, since the agent for

service of process was personally served.

Footnote 4:Insurance Law §1212(b) provides:

Service of process upon any such insurer in any proceeding in any court of competent jurisdiction may be made by serving the superintendent, or any salaried employee of the department whom the superintendent designates for such purpose, all of whom shall have authority to accept such service pursuant to any such power of attorney.

Footnote 5:The instant situation is complicated by the fact thatGEICO is the no-fault insurer of both the workers’compensation vehicle and one of the third-parties’ vehicles.

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd and 11th JUDICIAL DISTRICTS

Appeal from an order of the Civil Court of the City of New York, Kings County (Margaret A. Pui Yee Chan, J.), entered July 26, 2007. The order granted defendant’s motion to vacate the notice of trial and to direct plaintiff to respond to defendant’s discovery demands and appear for an examination before trial with respect to defendant’s defense based upon plaintiff’s alleged fraudulent incorporation.

Order affirmed without costs.

In this action by a provider to recover assigned first-party no-fault benefits, defendant served a notice of examination before trial and a notice for discovery and inspection. Thereafter, defendant moved to vacate the notice of trial and certificate of readiness filed by plaintiff, asserting that, contrary to plaintiff’s representation, discovery was not complete. The court granted defendant’s motion and directed plaintiff to provide complete and meaningful responses to defendant’s discovery demands with respect to defendant’s defense of fraudulent incorporation and to appear for an examination before trial (EBT) with respect to said defense. This appeal by plaintiff ensued.

Vacatur of the notice of trial and certificate of readiness was properly granted since the certificate of readiness contained the erroneous statement that discovery was completed or waived (see Savino v Lewittes, 160 AD2d 176 [1990]; Ava Acupuncture, P.C. v NY Cent. Mut. Ins. Co., 14 Misc 3d 141[A], 2007 NY Slip Op 50358[U] [App Term, 2d & 11th Jud Dists 2007]; Hillside Neurology Care P.C. v Travelers Ins. Co., 11 Misc 3d 127[A], 2006 NY Slip Op 50234[U] [App Term, 1st Dept 2006]). Moreover, contrary to plaintiff’s contention, defendant is not precluded from raising a defense based upon plaintiff’s allegedly fraudulent incorporation [*2](see Multiquest, P.L.L.C. v Allstate Ins. Co., 17 Misc 3d 37 [App Term, 2d & 11th Jud Dists 2007]). In addition, defendant is entitled to conduct an EBT of plaintiff notwithstanding the fact that defendant also served a demand for discovery and inspection of documents (see Woods v Alexander, 267 AD2d 1060, 1061 [1999]; Iseman v Delmar Med.-Dental Bldg., 113 AD2d 276 [1985]; JMJ Contract Mgt. v Ingersoll-Rand Co., 100 AD2d 291, 293 [1984]).

Defendant’s remaining contentions lack merit. Accordingly, the order is affirmed.

Pesce, P.J., Rios and Steinhardt, JJ., concur.
Decision Date: September 29, 2008

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd and 11th JUDICIAL DISTRICTS

Appeal from an order of the Civil Court of the City of New York, Kings County (Lila Gold, J.), entered April 25, 2006. The order denied plaintiff’s motion for summary judgment.

Order reversed without costs, plaintiff’s motion for summary judgment granted, and matter remanded to the court below for the calculation of statutory interest and attorney’s fees.

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 plaintiffs’ assignors breached the cooperation clause of the insurance policy by failing to attend duly scheduled independent medical examinations (IMEs). The court below denied the motion, holding that an issue of fact remained as to the mailing and receipt of the examination notices. This appeal by plaintiff ensued.

Since defendant raised no issue in the court below or on appeal with respect to plaintiff’s establishment of its prima facie case, we do not pass on the propriety of the implicit determination of the court below with respect thereto.

On appeal, plaintiff contends, inter alia, that defendant failed to create a triable issue of fact by competent proof that the assignors failed to attend the IMEs, and we agree. While defendant denied the claims based upon the assignors’ failures to appear for scheduled IMEs, defendant did not submit evidence in admissible form from anyone with personal knowledge of the assignors’ nonappearances (Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 35 AD3d 720, 721 [2006]; Vista Surgical Supplies, Inc. v Autoone Ins. Co., 20 Misc 3d 133[A], 2008 NY Slip Op 51460[U] [App Term, 2d & 11th Jud Dists 2008]; Vista Surgical Supplies, Inc. v New York Cent. Ins. Co., 14 Misc 3d 135[A], 2007 NY Slip Op 50165[U] [App Term, 2d & 11th Jud Dists 2007]). Accordingly, the order is reversed, plaintiff’s motion for summary [*2]judgment is granted and the matter remanded to the court below for the calculation of
statutory interest and attorney’s fees pursuant to Insurance Law § 5106 (a) and the regulations promulgated thereunder.

Pesce, P.J., Weston Patterson and Rios, JJ., concur.
Decision Date: September 29, 2008

[*1]

Civil Court of the City of New York, Kings County, September 25, 2008

APPEARANCES OF COUNSEL

Israel, Israel & Purdy, Great Neck (Jennifer Raheb of counsel), for plaintiff. Law Office of Teresa Spina, Woodbury (Victoria Thomas of counsel), for defendant.

{**21 Misc 3d at 799} OPINION OF THE COURT

Lila Gold, J.

{**21 Misc 3d at 800}In this action to recover first-party no-fault benefits in the amount of $878.67, for medical services rendered to its assignor, plaintiff and defendant stipulated to the proper and timely claim of the provider, thereby establishing a prima facie entitlement to payment. (Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U] [App Term, 2d & 11th Jud Dists 2003].) The plaintiff and defendant further stipulated that the denial of benefits was timely and that the only issue for trial was medical necessity based on a peer review. The stipulation additionally provided that the peer review and underlying medical records were to be admitted into evidence. Thus, the burden shifted to defendant to prove lack of medical necessity.

Defendant called Dr. Drew Stein, the author of the peer review dated July 6, 2007, who testified that the MRI of the right shoulder was not medically necessary. On cross-examination, Dr. Stein was asked to describe the purpose of a peer review. Dr. Stein’s answer was “to confirm or deny a prognosis.” He then was asked whether an MRI in this particular case was necessary in order to rule out a muscular-skeletal injury vis-à-vis a nerve root injury, to which he answered in the affirmative. In fact, the MRI did show possible nerve impingement.

Dr. Stein, who has been practicing medicine for only four years, was never qualified as an expert by defendant. Nor was his expertise established.

To rebut defendant’s witness, plaintiff called Dr. David Finkelstein who was deemed an expert by the court, without objection, in the field of neurology. Dr. Finkelstein testified that, based on his review of the medical records and the patient’s complaint of pain radiating from the neck to the right shoulder area, an MRI would be helpful to determine which body part should be treated, i.e., the neck or shoulder. He also indicated, from the muscular tests which were performed, there were signs of neurological involvement in that area which an MRI would clarify.

Although it is not the court’s opinion that the services were medically necessary per se, once the plaintiff had established its prima facie case, the burden shifted to the defendant to present sufficient evidence to establish a defense based on the lack of medical necessity. The court finds that Dr. Stein’s testimony was insufficient to establish a defense based on the lack of medical necessity, and, therefore, the burden never shifted back to plaintiff. (West Tremont Med. Diagnostic, P.C. v GEICO Ins. Co., 13 Misc 3d 131[A], 2006 NY Slip Op 51871[U] [App Term, 2d &{**21 Misc 3d at 801} 11th Jud Dists 2006].) Thus, after hearing the evidence, and despite Dr. Finkelstein’s testimony, the court does not need to reach the issue of the sufficiency of plaintiff’s rebuttal. Rather, the court, as trier of the facts, is free to assess and reject the testimony as it sees fit and, therefore, finds that the evidence presented by defendant was insufficient to sustain its burden as to the issue of lack of medical necessity.

Wherefore, judgment is to be entered in favor of plaintiff as against defendant in the sum of $878.67, together with statutory interest and attorneys fees, plus costs and disbursements.

APPELLATE TERM OF THE SUPREME COURT, FIRST DEPARTMENT

Plaintiff appeals from so much of an order of the Civil Court of the City of New York, New York County (Joan M. Kenney, J.), dated August 16, 2007, as denied its motion for summary judgment.

Per Curiam.

Order (Joan M. Kenney, J.), dated August 16, 2007, reversed, with $10 costs, and plaintiff’s motion for summary judgment in the principal sum of $8,054.90 granted. The Clerk is directed to enter judgment accordingly.

In this action to recover first party no-fault benefits, plaintiff made a prima facie showing of entitlement to summary judgment by submitting evidentiary proof that the prescribed statutory billing forms had been mailed and received, and that payment of no-fault benefits was overdue (see Insurance Law § 5106[a]; 11 NYCRR 65-3.8[a][1]; Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742[2004]; Fair Price Med. Supply, Inc. v St. Paul Travelers Ins. Co., 16 Misc 3d 8 [2007]). In opposition, defendant failed to raise triable issues of fact. The unsigned report of defendant’s peer review doctor submitted in support of the defense of lack of medical necessity failed to comply with CPLR 2106, and thus did not constitute admissible evidence (see Vista Surgical Supplies, Inc. v Travelers Ins. Co. 50 AD3d 778 [2008]). Nor did defendant submit competent evidentiary proof in support of its defenses of fraudulent incorporation (see 11 NYCRR 3.16[a][12]; State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 131 [2005]) and nonconformity with the worker’s compensation schedule.

THIS CONSTITUTES THE DECISION AND ORDER OF THE COURT.
I concurI concurI concur
Decision Date: September 24, 2008

Civil Court of the City of New York, Richmond County

21281/07

Katherine A. Levine, J.

Defendant, State Farm Mutual Inc. Co., (“State Farm” or “defendant”) moves to dismiss plaintiff Bay Plaza Chiropractic’s (“Bay Plaza” or “plaintiff”) complaint, with prejudice, pursuant to CPLR 3126, for plaintiff’s failure to appear for an examination before trial (“EBT”) or to provide verified, complete and meaningful responses to defendant’s discovery demands. In the alternative, defendant moves to vacate plaintiffs’s Notice of Trial and compel plaintiff to fully comply with plaintiff’s discovery demands and to then produce plaintiff’s purported owner, Dr. Geraldine McGowan for an EBT. In support of its motion, defendant presents an affirmation from its attorney as well as an affidavit from an investigator in its Special Investigative Unit (“SIU”) and documentary evidence.

Defendant claims that plaintiff may be a fraudulently incorporated facility that is actually owned, operated, and controlled by unlicensed persons. It alleges it first became suspicious about plaintiff when it consistently submitted bills for chiropractic services purportedly rendered to patients who were receiving physical therapy treatments for the same condition, at the same location, and during the same time period. Defendant avers that because the plaintiff s bills are often submitted c/o HIJ Management (“HIJ”), using that entity’s address, and because HIJ management’s owner, Jesse Haber, often submits affidavits of mailing for Bay Plaza as the “biller of Bay Plaza,” in support of its motions for summary judgment, that the plaintiff is actually owned by Jesse Haber in violation of 11 NYCRR § 65.15 and Insurance Law sec. 5108. Defendant then asserts that since payments from insurance companies will not go to the purported owner of plaintiff – Dr. McGowan – but to Haber, there is a “clear issue as to who is actually receiving the plaintiff’s profits, and who is truly controlling the plaintiff’s finances” (Affirmation of Stuart Flamen, Esq., ¶9. )

Defendant further alleges that an EBT of the purported owner McGowan is warranted [*2]since she is listed as the executive not only of Sue Ellen Ginsberg, DO, PC, but of several other facilities connected to improper licensors. For example, defendant claims McGowan is affiliated with several entities owned or formerly owned by one Stanley Sonn who is being sued in federal court by another insurance company. Thus, an EBT is “the only way to uncover who really owns and controls the plaintiff provider” (Flamen affirmation, ¶16).

Defendant surmises that plaintiff can very well be engaging in the “doc-in-the -box” scheme whereby the plaintiff is actually owned and controlled by non-professionals which would negate plaintiff’s standing to collect non-fault benefits. In this scheme, the nominal owner – the physician- does not receive the profits which go to the lay persons who own the management company that actually runs facility (¶¶17). As such, defendant contends that it has set forth a reasonable basis of suspicion for fraud .

Plaintiff responds that it provided responses to the discovery requests and that the remaining requests are patently oppressive and should be stricken. Plaintiff also notes that the courts normally do not allow a secondary disclosure device (such as depositions) unless the first chosen devise does not adequately disclose all evidence material and is necessary to the prosecution or defense of the action. Plaintiff further counters that the discovery demands are not proper because defendant has not shown either “good cause” or a “founded belief” that the plaintiff is fraudulently incorporated and moves for a protective order. Plaintiff also alleges that the defendant’s motion is defective since it failed to submit an affidavit from an investigator with defendant’s Special Investigations Unit (“SIU”) and is based upon an affidavit made without personal knowledge, and thus is based only on conjecture, speculation and exaggeration.

This court has previously addressed the issue of whether the language contained in State Farm Insurance v. Mallela, 4 NY3d 313 (2005) requiring that a defendant insurer show “good cause” by demonstrating behavior on the plaintiff ‘s part ” tantamount to fraud,” applies to

discovery requests and or verification requests. See Cambridge Medical P.C. v. Nationwide Property & Casualty Ins. Co., 2008 NY Slip. Op. 50629U, 19 Misc 3d 1110A, 859 NYS2d 901 (Civil Ct. Richmond Co. 2008). There, this court adopted Judge Sweeney’s reasoning in Carothers v. Insurance Companies et al, 13 Misc 3d 970 (Civil Ct., Richmond Co. 2006) that “good cause” is not a mandatory requisite to ordering discovery, but only applies to”investigations conducted by insurers during the claims process in accordance with their entitlement under the regulatory scheme to seek verification of claims (11 NYCRR part 65) and not those conducted by litigants during the discovery process.” 13 Misc 3d at 972.

Article 31 of the CPLR governs discovery actions before the civil court, and its disclosure provisions simply do not condition discovery upon a showing of “good cause”. The guiding principle behind article 31 of the CPLR is that there should be “full disclosure of all matter material and necessary in the prosecution and defense of an action” (CPLR §3101 (a)). The words “material and necessary” are to be interpreted liberally and the test is “one of usefulness and reason” to assist in the preparation for trial by sharpening the issues. Cambridge Medical. Slip op. At 3 at citing Carothers, supra , 13 Misc 3d at 973. [*3]

Furthermore, since the “defense of fraudulent incorporation is a complete defense to a claim for no-fault benefits, one that is not subject to the rules of preclusion,” it appears that the bar against which to measure whether a defendant has shown that its discovery requests on the issue of fraudulent incorporation are “material and necessary” is quite low. Carothers, supra at 975. See, Lexington Acupuncture P.C., v. State Farm Insurance Co., 12 Misc 3d 90, (App Term 2d Dept. 2006). In fact, in Mallela, the Court of Appeals specifically permitted insurers to “look

beyond the face of licensing documents to identify willful and material failure to abide by state and local law,” 4 NY3d at 321, in assessing whether to withhold reimbursement of no -fault claims to medical corporations they believe to be fraudulently incorporated. See, One Beacon Ins. Co. V. Midland Medical Care, 2008 NY Slip. Op. 06813, 2008 WL 4166851 ( App. Div., 2d Dept. 2008).

This court first finds that defendant has articulated a”founded belief” that plaintiff is actually controlled by a non-licensed professional. Defendant has therefore made allegations sufficient to raise an issue of fact as to whether plaintiff is fraudulently incorporated. See, Tahir v. Progressive Casualty Ins. Co., 12 Misc 3d 657, 664 (Civil Ct., NY Co. 2006)(“fraudulent intent is rarely established by direct proof, but we nevertheless conclude that there are sufficient badges of fraud’ in this case from which such intention can be inferred”) “citing Spires v. Mihou, 13 AD3d 1056,57 (4th Dept. 2007)). In support of its founded belief, and contrary to plaintiff’s allegation, defendant did submit an affidavit from its SIU investigator who had personal knowledge of the investigation. In numerous cases, defendant insurers have been permitted to proceed to trial based upon affidavits of investigators employed by the insurance company’s Special Investigations Unit (“SIU”) who allege personal knowledge of the alleged fraud. See, American Honda Finance Corp. V Progressive Casualty Ins. Co., 290 AD2d 850 (3d Dept. 2002) (“at this preliminary stage of the proceeding, a question of fact is lurking as to whether Perez committed fraud or made other material representations such that policy exclusion would preclude recovery); Northern Medical v. State Farm Mutual Automobile I ns. Co., 2008 NY Slip Op. 50753U, 19 Misc 3d 1117A (Civil Ct., Queens Co., 2008).

It should also be noted that even if defendant had not submitted an affidavit from its SIU investigator, the affirmation from defendant’s attorney, along with the attached documentation, would have been sufficient for this court to order further discovery. Where defendants raise the defense of fraudulent incorporation, the courts have denied motions for summary judgment by plaintiffs, despite the defendant’s failure to present an affidavit based upon personal knowledge, where the opposition papers set forth that facts essential to justify opposition may exist but cannot then be stated.” Midwood Acupuncture P.C. v. State Farm Mutual Auto Ins. , 14 Misc 3d 131A, 836 NYS2d 486 (App. Term, 2d Dept. 2007); Lexington Acupuncture, P.C., v. State Farm Ins. Co., 12 Misc 3d 90, 92 (App. Term, 2d Dept. 2006). The courts have reasoned that plaintiff’s motion for summary judgment are premature pending the completion of discovery. Id.,

However, in the end, “the scope of discovery is not unlimited” and is left to the broad discretion of the trial court, which must assess the request on a case by case basis taking into [*4]consideration the “intrusiveness of the discovery device and the merits, or lack thereof, of the claim” Carothers, supra 13 Misc 3d at 974 citing Greater NY Mutual Ins. Co. v. Lancer Ins. Co., 203 AD2d 515, 517 (2d Dept. 1994). To this end, Judge Sweeney found that the primary tool to be used by the court to control and supervise the scope of discovery was the protective order pursuant to CPLR §3103(a). Id at 974. . See Cambridge Medical, supra .

In light of the above, defendant has shown that it is material and necessary to compel further discovery and to depose Dr. McGowan with regard to the issue of fraudulent incorporation, a defense which is not precluded. As such, the court directs plaintiff to produce Dr. McGowan for an EBT within 30 days after the completion of discovery upon renotice by defendant. The Court also directs plaintiff to comply with all discovery requests that deal with corporate structure or that directly pertain to the issue of fraudulent incorporation including, but not limited to certificates of incorporation, management agreements, and the names of plaintiff’s shareholders and that it specifically answer Interrogatories 6,7,8, 23, 25, 26, and combined demands 4, 5, 9.29, 30.

The court is not convinced, at this juncture, that defendant has made a strong showing that the production of McGowan’s personal income taxes are “indispensable to the claim and cannot be obtained from other sources” and therefore will not order disclosure of McGowan’s personal income taxes. See, Benfeld v. Fleming Properties, 44 AD3d 599,600 (2d Dept. 2007); Altidor v. State-wide Ins. Co., 22 AD3d 435 ( 2d Dept. 2005); Great Wall Acupuncture v. State Farm Mutual Ins. 2008 NY Slip Op. 51529U, 20 Misc 3d 136A (Sup. Ct., App. Term, Sept. Dept. 2008). The court also finds that many of the other interrogatories or combined demands requests information are already in defendant’s possession or that are irrelevant or unduly burdensome. Since this court has repeatedly indicated that the parties are to work out discovery disputes between themselves, it will not at this juncture strike any protective order as to the irrelevant discovery requests.

The court will not dismiss the complaint since plaintiff has responded to some of the discovery requests and has not engaged in conduct that is willful, contumacious or in bad faith, as required by CPLR 3126. See, AVA Acupuncture P.C. v. State Farm Mutual Ins. Co., 16 Misc 3d 138A, (App. Term 2d and 11th Jud. Dist. 2007).

The court directs plaintiff to respond to the applicable defendant’s discovery request within 45 days of this decision and that defendant renotice Dr. McGowan for an EBT within 30 days after it receives plaintiff’s responses to its discovery requests. Plaintiffs must produce Dr. McGowan for the EBT.

The foregoing constitutes the Decision and Order of the Court. [*5]

DATED: September 22, 2008

Hon. Katherine A. Levine

Judge, Civil Court

ASN byon

[*1]

Supreme Court, New York County, September 17, 2008

APPEARANCES OF COUNSEL

William H. Saltzman, New York City, for petitioner. Law Office of Eric N. Wolpin, New York City (Helen Cohen of counsel), for respondent.

{**21 Misc 3d at 792} OPINION OF THE COURT

Paul G. Feinman, J.

In this CPLR article 75 proceeding, petitioner seeks to vacate an arbitration award, and respondent cross-petitions to confirm the arbitration award. For the reasons which follow, the petition is denied, and the cross petition is granted.

Petitioner is a health care provider that treated its assignor, Ricky Barry, for injuries received in an automobile accident on July 8, 2003. Respondent insured Barry and was obligated under the policy to provide him with first-party benefits, in accordance with New York’s No-Fault Law (Insurance Law art 51). Petitioner sought reimbursement from respondent which first denied it on November 12, 2003, and again for different charges on December 2, 2003 (petitioner’s exhibit 3). Petitioner filed for arbitration pursuant to the Insurance Law and enabling regulations on August 8, 2006.

By arbitration decision of November 2, 2006, petitioner was awarded the sum of $2,376.76 plus interest from August 8, 2006, pursuant to Insurance Department Regulations (11 NYCRR) § 65-3.9 (c) (petitioner’s exhibit 1, arbitration award at 4).

Petitioner appealed the portion of the award concerning interest to a master arbitrator, arguing then, as now, that section 65-3.9 (c) is contrary to Insurance Law § 5106 (a). That section of the Insurance Law provides in pertinent part that payments of first-party benefits are to be made as the loss is incurred, and are “overdue” if not paid within 30 days after proof of the injury and the amount of loss sustained has been presented. By contrast, 11 NYCRR 65-3.9 (c) states, in pertinent part, that where an applicant does not request arbitration or institute a lawsuit within 30 days after receiving the form denying the claim, interest will be computed from the actual date that arbitration or a lawsuit is commenced.

By determination dated March 11, 2007, the master arbitrator affirmed the findings of the arbitrator but remanded the computation of interest (petitioner’s exhibit 2 at 2). On remand the arbitrator analyzed the regulation and relevant case law and determined that the regulation is “lawful rule-making” and not contrary to Insurance Law § 5106 (a), and that the accrual of interest was rationally found to have commenced with the filing by petitioner for arbitration on August 8, 2006, rather than the November 2003 date when petitioner received respondent’s first denial of payment (petitioner’s exhibit 4, arbitrator’s award{**21 Misc 3d at 793} on remand at 3-6). The arbitrator also awarded attorney’s fees to petitioner in accordance with Insurance Department Regulations § 65-4.6 (b) and (e) (petitioner’s exhibit 4, arbitrator’s award on remand at 7). Petitioner appealed this determination to a master arbitrator. The master arbitrator affirmed the award in its entirety on December 24, 2007 (petitioner’s exhibit 5 at 12, 4).

The petition seeks judicial review and vacatur of the master arbitrator’s award on the ground that the provision of section 65-3.9 (c), abating the accrual of interest until the commencement of arbitration or litigation, is contrary to Insurance Law § 5106 (a).^[FN1] It seeks a finding that its interest began accruing as of 30 days after the date of receipt by respondent of petitioner’s bills. It also seeks statutory attorney’s fees pursuant to 11 NYCRR 65-4.10 (j) (4), reasonable attorney’s fees for work undertaken for the master arbitration proceedings, pursuant to section 65-4.10 (j) (2) (i), the costs of the filing fees for the two master arbitration proceedings, and costs and disbursements, as well as the filing fee incurred in this proceeding.

Respondent cross-petitions to confirm the master arbitrator’s award and to oppose an award of attorney’s fees.

Judicial review of arbitration awards is extremely limited (Wien & Malkin LLP v Helmsley-Spear, Inc., 6 NY3d 471, 479 [2006], citing Paperworkers v Misco, Inc., 484 US 29 [1987]). CPLR 7511 (b) sets forth the four grounds, none of which are pertinent, on which a petitioner generally can seek to vacate an award. However, where as here, a party seeks vacatur based on a challenge to a state regulation, it is required to establish that the regulation ” ‘is so lacking in reason for its promulgation that it is essentially arbitrary’ ” (Ostrer v Schenck, 41 NY2d 782, 786 [1977], quoting Matter of Marburg v Cole, 286 NY 202, 212 [1941]). Petitioner challenges the validity of 11 NYCRR 65-3.9, one of the regulations promulgated under the authority of the Superintendent of Insurance, as authorized by [*2]the Legislature through Insurance Law § 301, to implement the No-Fault Law (11 NYCRR part 65).

“The cornerstone of administrative law is derived from the principle that the Legislature may declare its will, and after fixing{**21 Misc 3d at 794} a primary standard, endow administrative agencies with the power to fill in the interstices in the legislative product by prescribing rules and regulations consistent with the enabling legislation” (Matter of Nicholas v Kahn, 47 NY2d 24, 31 [1979]). When interpreting a statute, it is fundamental that the court will attempt to effectuate the legislative intent, and where the statutory language is clear and unambiguous, it should be construed so that the plain meaning of the words is effectuated (Patrolmen’s Benevolent Assn. of City of N.Y. v City of New York, 41 NY2d 205, 208 [1976]). The starting point is the language itself (Matter of Rizzo v New York State Div. of Hous. & Community Renewal, 6 NY3d 104, 112 [2005]). Here, the particular no-fault statute at issue states in relevant part,

“Payments of first party benefits and additional first party benefits shall be made as the loss is incurred. Such benefits are overdue if not paid within thirty days after the claimant supplies proof of the fact and amount of loss sustained. . . . All overdue payments shall bear interest at the rate of two percent per month.” (Insurance Law § 5106 [a] [emphasis added].)

The regulation challenged by petitioner states, in pertinent part,

“(a) All overdue mandatory and additional personal injury protection benefits due an applicant or assignee shall bear interest at a rate of two percent per month, . . .

“(c) If an applicant does not request arbitration or institute a lawsuit within 30 days after the receipt of a denial of claim form or payment of benefits calculated pursuant to Insurance Department regulations, interest shall not accumulate on the disputed claim or element of claim until such action is taken. . . .

“(d) If an applicant has submitted a dispute to arbitration or the courts, interest shall accumulate, unless the applicant unreasonably delays the arbitration or court proceeding.” (11 NYCRR 65-3.9 [emphases added].)

Petitioner points to the two clauses in Insurance Law § 5106 (a) stating that benefits are “overdue” if not paid within 30 days after proof of the injury and loss is supplied, and that “overdue” payments bear interest at the rate of 2% per month, and argues that the statutory language does not include any{**21 Misc 3d at 795} abeyance for either the payment of a loss where an insurer wrongly denies a claimant’s claim or in the accrual of interest. Petitioner thus argues that 11 NYCRR 65-3.9 (c), which provides for possible abeyance in the accrual of interest until the applicant seeks arbitration or files a lawsuit to contest the failure to pay, is in derogation of the statute’s clear language.

It is recognized that the superintendent has a “special competence and expertise with respect to the insurance industry” (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 864 [2003] [internal quotation marks omitted]), and has accordingly been vested “with broad power to interpret, clarify, and implement the legislative policy” (Ostrer v Schenck, 41 [*3]NY2d at 785, quoting Breen v Cunard Lines S. S. Co., 33 NY2d 508, 511 [1974]), although the regulations must be consistent with statutory provisions (Ostrer v Schenck at 785-786). A rule or regulation properly crafted within the scope of the superintendent’s authority has the force of law and “represents the policy choice of this State” (State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, 321 [2005]).

The interpretation of a statute by the agency charged with its enforcement will generally be given “great weight and judicial deference, so long as the interpretation is neither irrational, unreasonable nor inconsistent with the governing statute.” (Matter of Trump-Equitable Fifth Ave. Co. v Gliedman, 62 NY2d 539, 545 [1984] [citation omitted].) A regulation will not be found valid “if it contravenes the will of the Legislature, as expressed in the statute” (State Div. of Human Rights v Genesee Hosp., 50 NY2d 113, 118 [1980]). The court will scrutinize the regulation or rule for “genuine reasonableness and rationality in the specific context” (Kuppersmith v Dowling, 93 NY2d 90, 96 [1999]; Nunez v Giuliani, 91 NY2d 935, 938 [1998]). A regulation will be upheld if it has a rational basis and is not unreasonable, arbitrary, capricious, or contrary to the statute under which it was promulgated (Kuppersmith v Dowling, 93 NY2d 90, 96 [1999]).

New York’s No-Fault Law is designed in part to ensure that accident victims receive “prompt compensation for losses” (Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d 556, 562 [2008]). However, as fully discussed in Matter of Medical Socy. of State of N.Y. v Serio (100 NY2d at 861-863) over the years of implementation of the No-Fault Law, the superintendent has had to focus on no-fault fraud and abuse, and the regulations have been revised in an attempt to close windows of{**21 Misc 3d at 796} opportunity for the parties to take advantage of each other’s positions, and as well to better effectuate the legislative intent of providing prompt compensation “as the loss is incurred” pursuant to Insurance Law § 5106 (a).^[FN2] In upholding the revisions to the regulations, the Court in Medical Socy. noted that the new circumscribed time frames prescribed for filing notices and proofs of claims were based on the determination of the superintendent that much of the abuse was associated with the lengthy time frames within which claims could be presented to insurers (100 NY2d at 862). For example, it is now required that the accident victim file a notice of claim with the insurer no later than 30 days after an accident (11 NYCRR 65-1.1). Proof of loss due to medical treatment must be provided within 45 days and proof of work loss must be provided from as soon as reasonably practicable up to 90 days (§§ 65-1.1, 65-2.4 [c]). After an insurer has received proper verification establishing proof of claim, it has 30 days to pay or deny the claim, unless further verification is sought (§ 65-3.8 [c]). Furthermore, the courts have held that even though the common law did not preclude defenses and neither the Insurance Law nor the regulations provided for preclusion, [*4]an insurer will be precluded from asserting any defenses when it does not pay or deny a claim within the 30-day period (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 281-282 [1997], rearg denied 90 NY2d 937 [1997]), except when the defense is lack of coverage (Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 318 [2007]).

Employing the methodology used in Medical Socy., and examining both the statute and the regulation at issue, the court finds petitioner’s arguments concerning the illegality of the regulation to be unpersuasive when analyzed within the entire framework of the No-Fault Law and the implementing{**21 Misc 3d at 797} regulations, all of which seek fairness and promptness in the resolution of auto accident injury claims. Petitioner argues that where a claim has been timely denied but is ultimately found meritorious by an arbitrator or court, the payment will be “overdue” and interest should accrue from the time of the denial. It argues, in essence, that it should be understood that the Insurance Law includes an additional penalty to be assessed against an insurer that denies a claim and is later found to have improperly done so. Notably, Insurance Law § 5106 (a) only addresses payments by insurers, including overdue payments, and includes a provision for an interest penalty where payments are overdue. However, an insurer is also allowed to timely deny a request for reimbursement (see Presbyterian Hosp., 90 NY2d 274 [1997]), and 11 NYCRR 65-3.9 (c), was enacted to address those instances. The regulation provides that where the insurer timely denies, then the applicant is to seek redress within 30 days, after which interest will accrue. As noted in East Acupuncture, P.C. v Allstate Ins. Co., “[t]he interest provision, presently at 24% per annum, is punitive in nature . . . and designed to inflict an economic sanction or penalty on those insurers who do not comply” with the No-Fault time frames (15 Misc 3d 104, 108 [App Term, 2d Dept 2007] [citations and internal quotation marks omitted]).^[FN3]

The regulation contains, in addition to an economic sanction against recalcitrant insurers, a built-in protection against potential delay by providing that where an applicant chooses not to timely press forward to seek redress for a denial, there will be no interest penalty assessed against the insurer until such time as the applicant chooses a remedy. This is in keeping with the intent of the No-Fault Law as a whole because it seeks to encourage the parties moving forward toward a quick resolution, while not economically favoring one side or the other.

The Court of Appeals has implicitly upheld the regulation in its decision, Presbyterian Hosp. (90 NY2d at 278 [“(p)ursuant to both the Insurance Law and the regulations promulgated by the Superintendent of Insurance, an insurer is required to either pay or deny a claim for no-fault automobile insurance benefits within 30 days from the date an applicant supplies proof of claim (see, Insurance Law § 5106 [a]; Insurance Regulation 65.15 [g] [3]). Failure to pay benefits within the 30-day requirement{**21 Misc 3d at 798} renders benefits ‘overdue’ “]). Therefore, it cannot be found that the Legislature intended that insurers be penalized for timely denying a claim, even where such denial is later found improper.

The agency’s interpretation of one of its promulgated regulations “is entitled to deference” (Matter of 427 W. 51st St. Owners Corp. v Division of Hous. & Community Renewal, 3 NY3d 337, 342 [2004] [internal quotation marks omitted]). Here, the agency’s promulgation of the regulation is rationally based and is consistent with the no-fault statute and the other enabling regulations. The petition to vacate the master arbitrator’s award which affirmed the previous arbitrators’ awards is therefore denied, except to the extent that the issue of attorney’s fees as fixed by the court pursuant to 11 NYCRR 65-4.10 (j) (4) is severed and referred to a special referee to hear and determine.

The cross motion to confirm the arbitration award is accordingly granted.

Footnotes

Footnote 1: Petitioner notified the Office of the Attorney General of the State of New York of its challenge to the statute by letter dated March 3, 2008, and the Attorney General’s Office has advised that it will not intervene in the instant matter (cross petition exhibit E, letter of Mar. 20, 2008, Office of Attorney General to Goodman).

Footnote 2:

“[T]he Superintendent appears to be well aware of the interplay of no-fault deadlines and fraud. A few years ago he reduced the regulatory time frames for automobile accident victims or their assignees to claim and prove entitlement to no-fault benefits—a measure applauded by insurers—in part because ‘the most common example of . . . fraud . . . consisted of exploiting the time lag between the alleged loss and the deadline for submitting proof of the loss, coupled with the reality that insurers are given only 30 days to review and investigate claims before paying them without risk of penalties for denying or delaying a claim.’ ” (Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d at 565 n 2, quoting Medical Socy., 100 NY2d at 861.)

Footnote 3: The punitive nature of the interest penalty is seen also in subdivision (b) of 11 NYCRR 65-3.9, which provides that an insurer may not “suggest or require, as a condition to settlement” that the interest be waived.