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.

Civil Court of the City of New York, Kings County

143763/06

Sylvia G. Ash, J.

Plaintiff a health care service provider seeks to recover no-fault benefits for supplies furnished to its assignor. Defendant contends that Plaintiff’s claim is premature because Plaintiff failed to comply with an additional verification request. Plaintiff argues that it responded to Defendant’s verification request. Defendant argues that the response failed to fully comply with the request.

There is no dispute that Plaintiff responded to the additional verification request. There is also no dispute that upon receipt, Defendant did not request any further response from Plaintiff. The issue before the Court is whether Defendant was obligated to notify Plaintiff that its response to their additional verification request was insufficient and/or incomplete. In All Health Medical Care, P.C. v. Government Employees Insurance, 2 Misc 3d 907, the Court reasoned that while “… the regulations are silent as to what, if anything, the insurance company must do if it receives insufficient verification, that it is clear that the insurance company must affirmatively act once it receives a response to its verification request.” (see also Westchester County Medical Center v. NY Central Mutual Fire Ins Co., 262 AD2d 553).

In the case at Bar, once Plaintiff submitted its response to Defendant’s additional verification request, it was then incumbent on Defendant to inform Plaintiff that said response was insufficient and/or incomplete. Any confusion or disagreement on the part of the Defendant as to what was being sought should have been addressed by further communication, not inaction (see Westchester County Medical Center v. NY Central Mutual Fire Ins Co., supra). Neither party may ignore communications from the other without risking its chance to prevail in the matter (see All Health Medical Care, P.C. v. Government Employees Insurance Co., supra).

Accordingly, Plaintiff motion is hereby granted, judgment in favor of plaintiff for $2,118.33 plus interest , attorney’s fee, costs and disbursements. [*2]

This constitute the Decision and Order of the Court.

DATED: September 15, 2008______________________________

Sylvia G. Ash, J.C.C.

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 (Alan L. Lebowitz, J.H.O.), entered September 4, 2007. The order denied plaintiff’s motion, inter alia, to compel the deposition of defendant.

Order reversed without costs and plaintiff’s motion granted to the extent that defendant is ordered to appear for a deposition within 30 days of the order entered hereon.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved to compel the deposition of defendant and for a conditional order striking defendant’s answer or precluding defendant from offering evidence at trial in the event
of defendant’s noncompliance. Defendant opposed the motion, which was denied. 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, plaintiff’s motion should have been granted to the extent of compelling defendant to appear for a deposition (see Crossbay Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co., 15 Misc 3d 110 [App Term, 2d & 11th Jud Dists 2007]).

Pesce, P.J., Rios and Steinhardt, JJ., concur. [*2]
Decision Date: September 10, 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 (Alan L. Lebowitz, J.H.O.), entered September 27, 2007. The order denied plaintiff’s motion, inter alia, to compel the deposition of defendant.

Order reversed without costs and plaintiff’s motion granted to the extent that defendant is ordered to appear for a deposition within 30 days of the order entered hereon.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved to compel the deposition of defendant and for a conditional order striking defendant’s answer or precluding defendant from testifying in the event defendant fails
to comply. Defendant failed to oppose said motion. Accordingly, the court should have granted plaintiff’s motion to the extent of compelling defendant to appear for a deposition (see Crossbay Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co., 15 Misc 3d 110 [App Term, 2d & 11th Jud Dists 2007]).

Pesce, P.J., Rios and Steinhardt, JJ., concur.
Decision Date: September 10, 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 (Alan L. Lebowitz, J.H.O.), entered September 27, 2007. The order denied plaintiff’s motion, inter alia, to compel the deposition of defendant.

Order reversed without costs and plaintiff’s motion granted to the extent that defendant is ordered to appear for a deposition within 30 days of the order entered hereon.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved to compel the deposition of defendant and for a conditional order striking defendant’s answer or precluding defendant from testifying in the event defendant fails to comply. Defendant failed to oppose said motion. Accordingly, the court should have granted plaintiff’s motion to the extent of compelling defendant to appear for a deposition (see Crossbay Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co., 15 Misc 3d 110 [App Term, 2d & 11th Jud Dists 2007]).

Pesce, P.J., Rios and Steinhardt, JJ., concur.
Decision Date: September 10, 2008