Civil Court of the City of New York, Kings County

4490/06

Noach Dear, J.

Plaintiff All-Boro Medical Supplies, Inc. commenced this action to recover assigned first-party no-fault benefits in the amount of $822.00 for medical supplies that it provided to its assignor, Ramel King, who was purportedly injured in an automobile accident on January 30, 2005.

On February 13, 2008, the parties agreed to a trial based on stipulated facts. While there are no questions of facts requiring resolution, the matter presents an interesting question of law; whether plaintiff’s failure to submit a prescribed NF-3 claim form in response to defendant’s requests for additional verification of the claim tolled the 30 day period in which defendant had to pay or deny the claim? For the following reasons, the court answers this question in the affirmative.

Underlying Facts:

Following the accident, plaintiff provided Mr. King with various assistive medical equipment which included a heating lamp with infrared element, a massager for reduction of muscle spasm and a TENS unit. On February 16, 2005, Mr. King assigned his rights to collect first-party no-fault benefits for the equipment to the plaintiff. On May 6, 2005, Edward Shapiro, Esq., plaintiff’s counsel, submitted a claim for the first-party no-fault benefits to defendant. After receiving the claim, defendant served upon the plaintiff a request for additional verification of the claim demanding that plaintiff submit a prescribed NF-3 claim form. When plaintiff failed to comply with the request, defendant made a follow-up request. The parties have stipulated that the initial and follow-up request were made in accordance with protocols for requesting additional verification set forth in the no-fault regulations.

While plaintiff has not yet provided defendant with a NF-3 claim form, plaintiff submitted other materials as proof of claim, including letters of medical necessity from Alex Khait, D.C. and Alexander Rozenberg, M.D., which indicate that Mr. King was diagnosed as suffering from unspecified neuralgia, radiculitis and lumbosacral and cervical injuries as a result of the accident.

COMMENTS:

It is well settled that 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 (Insurance Law § 5106(a); 11 NYCRR 65-3.5; see also Presbyterian Hosp. in City of NY v. Maryland Cas. Co., 90 NY2d 274, 278, 660 NYS2d 536, 683 NE2d 1 [19970 ). An insurer’s failure to pay a no-fault claim within 30-day renders no-fault benefits overdue ( see Insurance Law § 5106[a]; 11 NYCRR 65-3.8[a][1] ).

The 30-day period may be extended if the insurer demands additional verification of the claim ( see 11 NYCRR 65.15[d][1],[e]; New York & Presbyt. Hosp. v. Allstate Ins. Co., 30 AD3d 492, 493, 819 NYS2d 268 [2nd Dep’t 2006]; New York & Presbyt. Hosp. v. Progressive Cas. Ins. Co., 5 AD3d 568, 569, 774 NYS2d 72 [2nd Dep’t 2004] ). If requested verification is not supplied to the insurer within 30 days from the insurer’s initial request, the insurer is required to issue a follow- up request in accordance with 11 NYCRR 65.15 [e][2] ( see New York Hosp. Med. Ctr. of Queens v. Country-Wide Ins. Co., 295 AD2d 583, 584, 744 NYS2d 201 [2nd Dep’t 2002] ). Parenthetically, “[a] claim need not be paid or denied until all demanded verification is provided” ( New York & Presbyt. Hosp. v. Progressive Cas. Ins. Co., supra at 570, 774 NYS2d 72, see Insurance Law § 5106[a]; 11 NYCRR 65-3.5[c], 65-3.8[a][1]; New York Hosp. Med. Ctr. of Queens v. Country-Wide Ins. Co., supra at 584, 744 NYS2d 201; Westchester County Med. Ctr. v. New York Cent. Mut. Fire Ins. Co., 262 AD2d 553, 554, 692 NYS2d 665 [2nd Dep’t 1999] ). Further, when a medical provider fails to provide properly requested verification of a claim, the 30-day period in which to pay or deny the claim does not begin to run, and any claim for payment by the provider is premature (New York & Presbyt. Hosp. v. Progressive Cas. Ins. Co., supra at 570, 774 NYS2d 72).

The parties have stipulated that plaintiff submitted the claim on May 6, 2005 and that defendant’s requests for a prescribed NF-3 claim form were made in accordance with the protocols for requesting additional verification of a claim. The parties have also stipulated that to date, plaintiff has not provided a prescribed NF-3 claim form which is also know as a verification of treatment by attending physician or other provider of health service form. The required contents of this form is contained in Appendix 13 of the Ch. III, Subch. B, Pt. 65 of Insurance Department Regulations.

Plaintiff maintained at trial that defendant was required to “accept proof of claim submitted on a form other than a prescribed form if it contains substantially the same information as the prescribed form” (Insurance Department Regulation 11 N.Y.C.R.R. § 65-3.5[f] ). Plaintiff further maintained that the various materials it provided to the defendant in connection with the claim met this requirement. Plaintiff argued that since defendant did not pay or deny the claim within 30 days of receipt of these materials, no-fault benefits are overdue.

Defendant maintained that 11 N.Y.C.R.R. § 65-3.5[f] gave it the unconditional right to request the submission of a prescribed NF-3 claim from as additional verification of the claim and that since plaintiff has yet to provide one, the 30 day period in which it has to pay or deny the claim continues to be tolled.

The question of law presented turns on how 11 N.Y.C.R.R. § 65-3.5(f) should be interpreted. 11 N.Y.C.R.R. § 65-3.5(f) provides:

An insurer must accept proof of claim submitted on a form other than a prescribed form if it contains substantially the same information as the prescribed form. An insurer, however, may require the submission of the prescribed application for motor vehicle no-fault benefits, the [*3]prescribed verification of treatment by attending physician or other provider of health service, and the prescribed hospital facility form.

“[T]he starting point in any case of interpretation must always be the language itself, giving effect to the plain meaning thereof” (Majewski v. Broadalbin-Perth Cent. School Dist., 91 NY2d 577, 583, 673 NYS2d 966, 696 NE2d 978 [1998] ). Further, “meaning and effect should be given to all language of a statute * * *. Words are not to be rejected as superfluous where it is practicable to give each a distinct and separate meaning” (Cohen v. Lord, Day & Lord , 75 NY2d 95, 100, 551 NYS2d 157, 550 NE2d 410 [1989] ; see also, McKinney’s Cons. Laws of NY, Book 1, Statutes § 231, at 390). “Generally, the same canons of construction are applicable to legislation and administrative regulations” (Garzilli v. Mills, 250 AD2d 131, 137, 681 NYS2d 176, 179 [3rd Dep’t 1998] ).

Applying these principles, 11 N.Y.C.R.R. § 65-3.5(f) should be interpreted as giving insurers the right to request the submission of one of the prescribed forms referred to in the regulation as additional verification of a claim, even where materials were submitted as proof of claim that contained substantially the same information that a prescribed form requires. This interpretation gives meaning and effect to all the language in 11 N.Y.C.R.R. § 65-3.5(f). If the court were to adapt plaintiff’s urged construction, the court would in effect be rejecting as superfluous the entire second sentence of 11 N.Y.C.R.R. § 65-3.5(f) which unequivocally states that insurers may require the submission of a prescribed form. Further, it is not impracticable to give the first and second sentence of the regulation distinct and separate meanings. The first sentence can be viewed as controlling what insurers must accept as proof of claim but not as a limitation on what they may seek as additional verification of a claim. The second statement can be viewed clear direction that a request for a prescribed form is a valid request for additional verification.

This result also comports with those reported cases which have addressed an insurer’s entitlement to the submission of a prescribed no-fault forms as additional verification of a claim (see First Help Acupuncture, P.C. v. Progressive Northeastern Ins. Co.,15 Misc 3d 144(A), 2007 NY Slip Op. 51167(U) [App Term, 2d & 11th Jud Dists] (proof of insurer’s timely denial of claim on the ground that on the ground “a prescribed authorization or assignment of benefits was not submitted and/or was not properly executed” raised triable issue of fact as to plaintiff’s entitlement to summary judgment); Metroscan Medical Diagnostics, P.C. v. Progressive Casualty Insurance Co., 15 Misc 3d 126 (A), 2007 NY Slip Op. 50500 (U) [App. Term, 9th & 10th Jud Dists] (30 day period tolled where plaintiff’s failed to provide assignment of benefits in the form required by the No Fault regulations]; see also Doshi Diagnostic Imaging Services v. Progressive Insurance Co., 12 Misc 3d 144 (A), 2006 NY Slip Op. 51430 (U) [App. Term, 9th & 10thth Jud Dists] ).

Based on the preceding analysis, this Court determines that defendant has demonstrated that the 30 day period in which it had to pay or deny the claim was tolled by its request for a prescribed NF-3 form. Hence, plaintiff has failed to establish that payment of no-fault benefits is overdue.

Accordingly, it is hereby

ORDERED that judgment be entered in defendant’s favor dismissing the claim as premature (New York Hospital Medical Center of Queens v. Country-wide Insurance Co., 295 [*4]AD2d 583 [2d Dept., 2002] ).

This constitutes the Decision and Order of the Court.

Dated: April 11, 2008_____________________________

Noach Dear

Civil Court Judge

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, Queens County (Diane A. Lebedeff, J.), entered July 18, 2006, deemed from a judgment entered August 22, 2006 (see CPLR 5501 [c]). The judgment, entered pursuant to the July 18, 2006 order granting plaintiff’s motion for summary judgment, awarded plaintiff the principal sum of $2,476.52.

Judgment reversed without costs, order granting plaintiff’s motion for summary judgment vacated and plaintiff’s motion for summary judgment denied.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff’s motion for summary judgment was supported by an affirmation from plaintiff’s counsel, an affirmation by plaintiff’s billing manager, and various documents annexed thereto. The affirmation executed by plaintiff’s billing manager stated in a conclusory manner that the documents attached to plaintiff’s motion papers were plaintiff’s business records. In opposition, defendant argued, inter alia, that the affirmation by plaintiff’s billing manager failed to lay a proper foundation for the documents annexed to plaintiff’s moving papers and that, as a result, plaintiff failed to establish a prima facie case. The court granted plaintiff’s motion for summary judgment and this appeal by defendant ensued.

On appeal, defendant reiterates its argument that plaintiff did not make a prima facie showing because plaintiff failed to establish the admissibility of the claim forms annexed to its moving papers. We agree. Inasmuch as the affirmation submitted by plaintiff’s billing manager was insufficient to establish that she possessed personal knowledge of plaintiff’s office practices and procedures so as to lay a foundation for the admission, as business records, of the documents [*2]annexed to plaintiff’s moving papers, plaintiff failed to make a prima facie showing of its entitlement to summary judgment (see Dan Med., P.C. v New York Cent. Mut. Fire Ins. Co., 14 Misc 3d 44 [App Term, 2d & 11th Jud Dists 2006]). The fact that copies of documents were stored in compliance with a document retention policy is not sufficient to establish that the documents were business records in the absence of a showing as to how and when the documents were generated (see CPLR 4518). Accordingly, the judgment is reversed, the order granting plaintiff’s motion for summary judgment is vacated and plaintiff’s motion for summary judgment is denied.

In light of the foregoing, we do not address defendant’s remaining contentions.

Weston Patterson, J.P., Golia and Rios, JJ., concur.
Decision Date: April 8, 2008

—[*1] Karen C. Dodson (Carol R. Finocchio, New York, N.Y. [Lisa M. Comeau] of counsel), for appellant.

Alden Banniettis, Brooklyn, N.Y. (Jeff Henle of counsel), for respondent.

In an action to recover assigned first-party no-fault benefits under an insurance contract, the defendant appeals, by permission, from an order of the Appellate Term of the Supreme Court for the Second and Eleventh Judicial Districts, dated December 15, 2006 [14 Misc 2d 128(A), 2006 NY Slip Op 52502(U)], which reversed so much of an order of the Civil Court of the City of New York, Kings County (Sweeney, J.), dated September 14, 2005, as denied the plaintiff’s motion for summary judgment on the complaint, and thereupon granted the plaintiff’s motion.

Ordered that the order is affirmed, with costs.

The plaintiff established, prima facie, its entitlement to judgment as a matter of law (see Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). Contrary to the defendant’s contention, the Appellate Term properly determined that the peer review reports submitted in opposition to the plaintiff’s motion for summary judgment on the complaint were inadmissible since they contained computerized, affixed, or stamped facsimiles of the physician’s signature. These reports failed to comply with CPLR 2106, since they were not subscribed and affirmed, but merely contained facsimiles of the physician’s signature without any indication as to who placed them on the reports, nor are there any indicia that the facsimiles were properly authorized (see Dowling v Mosey, 32 AD3d 1190, 1191 [2006]; Security Pac. Natl. Trust Co. v Cuevas, 176 Misc 2d 846 [1998]; Sandymark Realty Corp. v Creswell, 67 Misc 2d 630 [1971]; Macri v St. Agnes Cemetery, 44 Misc 2d 702 [1965]). Thus, the [*2]reports did not constitute competent evidence sufficient to defeat the plaintiff’s motion (see generally Burgos v Vargas, 33 AD3d 579 [2006]; Bourgeois v North Shore Univ. Hosp. at Forest Hills, 290 AD2d 525 [2002]; Doumanis v Conzo, 265 AD2d 296 [1999]; MZ Dental, P.C. v Progressive Northeastern Ins. Co., 6 Misc 3d 649 [2004]). Accordingly, the Appellate Term properly granted the plaintiff’s motion for summary judgment on the complaint based on the defendant’s failure to raise a triable issue of fact in opposition to the plaintiff’s prima facie showing on the motion. Lifson, J.P., Florio, Eng and Chambers, JJ., concur.

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 (Dolores L. Waltrous, J.), entered June 22, 2006. The order granted defendant’s motion for summary judgment dismissing the complaint and denied plaintiff’s cross motion for summary judgment.

Order affirmed without costs.

In this action by a provider to recover assigned first-party no-fault benefits, defendant moved for summary judgment dismissing the complaint on the ground of res judicata. Defendant argued that plaintiff had previously commenced an identical action, which was dismissed pursuant to CPLR 3126 (3) for plaintiff’s failure to comply with a so-ordered discovery stipulation. Plaintiff cross-moved for summary judgment. The court below granted defendant’s motion and denied plaintiff’s cross motion. The instant appeal by plaintiff ensued.

Although the court’s order dismissing the prior action did not specifically state that the dismissal of the action was with prejudice or on the merits, since the so-ordered discovery stipulation provided for preclusion, the dismissal was with prejudice and, as a result, plaintiff was barred from commencing a second action (see Maitland v Trojan Elec. & Mach. Co., 65 NY2d 614 [1985]; Lipin v Bender, 216 AD2d 131 [1995]). Accordingly, the court below properly granted defendant’s motion for summary judgment dismissing the complaint based on [*2]the doctrine of res judicata.
Weston Patterson, J.P., Golia and Rios, JJ., concur.
Decision Date: April 3, 2008

[*1]

Supreme Court, Appellate Term, Second Department, April 3, 2008

APPEARANCES OF COUNSEL

Law Office of Alden Banniettis, Brooklyn (Jeff Henle of counsel), for appellant. Gullo & Associates, Brooklyn (Gina M. DiGaudio of counsel), for respondent.

{**20 Misc 3d at 33} OPINION OF THE COURT

Memorandum.

Order reversed without costs and defendant’s motion to amend the judgment denied.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff was awarded partial summary judgment in the sum of $5,855.82. A judgment was subsequently entered in the principal sum of $5,855.82. Defendant moved, inter alia, to amend the judgment by reducing the amount of attorney’s fees awarded to plaintiff, claiming that plaintiff’s recovery of attorney’s fees was limited to 20% of the total amount of first-party no-fault benefits awarded for services provided to the assignor, subject to the statutory maximum of $850 in attorney’s fees for the entire action, regardless of the number of claims in dispute. The court below granted defendant’s motion, relying upon an opinion letter issued by the New York State Department of Insurance on October 8, 2003, which stated that attorney’s fees are to be calculated based upon the aggregate amount of payment resolved in favor of an applicant for benefits in a single action (see Ops Gen Counsel NY Ins Dept No. 03-10-04 [Oct. 2003]), and directed the clerk to enter judgment with a maximum of $850 in attorney’s fees. This instant appeal by plaintiff ensued.

In an action to recover first-party no-fault benefits, if a valid claim or portion thereof is overdue, reasonable attorney’s fees may be recovered “for services necessarily performed in connection with securing payment of the overdue claim, subject to limitations promulgated by the superintendent [of insurance]” (Insurance Law § 5106 [a]). Insurance Department Regulations (11 NYCRR) § 65-4.6 (e) provides that attorney’s fees are limited to “20 percent of the amount of first-party benefits, plus interest thereon, awarded by the . . . court, subject to a maximum fee of $850.” In Smithtown Gen. Hosp. v State Farm Mut. Auto. Ins. Co. (207 AD2d 338, 339 [1994]), the Appellate Division, Second Department, interpreted Insurance Department Regulations (11 NYCRR) § 65.17 (b) (6) (v), the attorney’s fees provision which was the predecessor of Insurance Department Regulations (11 NYCRR) § 65-4.6 (e), as requiring that the $850 limitation be applied to each claim rather than to the entire action.

Subsequent to entry of the order appealed from, the Appellate Division, Third Department, in LMK Psychological Servs., P.C. v{**20 Misc 3d at 34} State Farm Mut. Auto. Ins. Co. (46 AD3d 1290 [2007]), held that counsel fees should be awarded on a “per claim” basis rather than a “per action” basis. In reaching this conclusion, the court noted that the October 8, 2003 opinion letter, which stated that counsel fees should be calculated on a “per action” basis, should not be accorded deference since it was not an appropriate interpretation of the rules regarding attorney’s fees and, in fact, conflicted with the language of the controlling statute. The court further stated that said interpretation “undermines the goal of the no-fault law to fully compensate a claimant for economic loss resulting from the wrongful denial of a claim and wastes judicial assets by encouraging the commencement of multiple actions in order to recover the maximum available counsel fees” (id. at 1292 [citation omitted]).

As this court is bound by principles of stare decisis to follow precedents set by the Appellate Division of another department until the Court of Appeals or the Appellate Division, Second Department, pronounces a contrary rule (see Mountain View Coach Lines v Storms, 102 AD2d 663 [1984]), the decision of the Appellate Division, Third Department, is controlling on this issue. We note that the Appellate Division, Second Department, in Smithtown Gen. Hosp. v State Farm Mut. Auto. Ins. Co. (207 AD2d 338 [1994], supra), in interpreting the predecessor attorney’s fees provision, held that the amount of attorney’s fees should be determined in a similar manner. Therefore, based on the foregoing analysis, attorney’s fees are to be calculated on a “per claim” basis. Accordingly, the order of the court below is reversed and defendant’s motion to revise the amount of attorney’s fees on the judgment is denied.

Golia, J.P. (concurring in the result only, in the following memorandum). I am constrained to agree with the ultimate decision reached by the majority. I wish to note, however, that I do not agree with certain propositions of law set forth in cases cited therein which are inconsistent with my expressed position and generally contrary to my views.

Pesce and Rios, JJ., concur; Golia, J.P., concurs in a separate memorandum.

—[*1] Thomas Torto, New York (Jason Levine of counsel), for appellant.

Gary Tsirelman, Brooklyn, for respondent.

Judgment, Supreme Court, New York County (Helen E. Freedman, J.), entered January 30, 2007, awarding defendant the principal sum of $12,638.96, and bringing up for review an order, same court and Justice, entered May 25, 2006, which granted defendant’s motion for summary judgment on its claim for first-party no-fault insurance benefits, and an order, same court and Justice, entered May 30, 2006, which in effect granted plaintiff’s motion for reargument and, upon reargument, adhered to its prior determination, unanimously reversed, on the law, without costs, the judgment vacated, and defendant’s motion for summary judgment denied. Appeal from the order entered May 30, 2006 unanimously dismissed, without costs, as subsumed in the appeal from the judgment.

Defendant medical provider established prima facie its entitlement to judgment as a matter of law by demonstrating that the necessary billing documents were mailed to and received by plaintiff insurer and that payment of the no-fault benefits was overdue (see Insurance Law § 5106 [a]; 11 NYCRR 65-3.8 [a] [1]; New York & Presbyt. Hosp. v Countrywide Ins. Co., 44 AD3d 729, 730 [2007]). However, in opposition to the motion, plaintiff raised a triable issue of fact whether the claimed benefits were properly denied for lack of medical justification. Plaintiff was not required to set forth the medical rationale in the prescribed denial of claim form (see A.B. Med. Servs., PLLC v Liberty Mut. Ins. Co., 39 AD3d 779 [2007]). Nor is a nurse’s review denying no-fault claims for lack of medical necessity per se invalid (see Channel Chiropractic, P.C. v Country-Wide Ins. Co., 38 AD3d 294, 295 [2007]). [*2]

Plaintiff waived its objection to defendant’s standing (see Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 320 [2007]). Concur—Saxe, J.P., Sweeny, McGuire and Acosta, JJ.

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd and 11th JUDICIAL DISTRICTS

Appeal from a judgment of the Civil Court of the City of New York, Queens County (Charles John Markey, J.), entered September 20, 2006. The judgment, after a nonjury trial, awarded plaintiff the principal sum of $5,250.45.

Judgment affirmed without costs.

In this action by a provider to recover assigned first-party no-fault benefits, the matter proceeded to trial solely with respect to plaintiff’s claims with regard to assignor Ganiyu Salawu. At trial, the parties stipulated that plaintiff proved its prima facie case, that defendant timely and properly denied plaintiff’s claims and that no payments were made on the claims. The parties also stipulated that the sole issue at trial was whether
the assignor’s alleged injuries were causally related to the motor vehicle accident. Defendant called the assignor and a biomechanics expert as witnesses. Plaintiff did not call any witnesses. The court awarded judgment to plaintiff, and this appeal by defendant ensued.

“A decision rendered by a court after a nonjury trial should not be disturbed on appeal unless it is clear that its conclusions could not have been reached under any fair interpretation of the evidence” (Ardmar Realty Co. v Building Inspector of Vil. of Tuckahoe, 5 AD3d 517, 518 [2004]). Having stipulated to plaintiff’s prima facie case, defendant had the burden to proffer evidence in admissible form demonstrating that the assignor’s alleged injuries were not causally related to the accident (see Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1997]; Mount Sinai Hosp. v Triboro Coach, 263 AD2d 11, 18 [1999]). Defendant failed to meet this burden.

A fair reading of the assignor’s testimony supports a conclusion that prior to the accident, the assignor was wearing a seat belt which was not working properly. Defendant’s expert [*2]testified that, based upon his investigation, and his review of the documents, “only an unrestrained occupant” could have made contact with the windshield. However, in his report, which was admitted into evidence, the expert concluded that any injuries sustained by plaintiff’s assignor were “causally attributed directly” to the improper use of the seat belt. In view of the conflicting inferences that could be drawn from the assignor’s testimony and the expert’s testimony and, indeed, the ambiguous statements by defendant’s expert, we find no basis to disturb the court’s determination accepting the assignor’s testimony and finding in favor of plaintiff. Defendant’s remaining contentions are either unpreserved for appellate review or without merit.

Weston Patterson, J.P. and Rios, J., concur.
Decision Date: March 27, 2008

[*1]

District Court of Nassau County, First District, March 26, 2008

APPEARANCES OF COUNSEL

Friedman, Harfenist, Langer & Kraut, Lake Success, for plaintiff. Law Offices of Robert P. Macchia, Mineola, for defendant.

{**19 Misc 3d at 775} OPINION OF THE COURT

Anthony W. Paradiso, J.

{**19 Misc 3d at 776}Plaintiff moves pursuant to CPLR 2221 (d) and (e) to reargue and renew the prior order of this court dated May 23, 2007. The defendant opposes the motion. For the reasons that follow, the motion is granted. Upon reconsideration, the court adheres to its original determination.

In moving to reargue pursuant to CPLR 2221 (d), the plaintiff asserts that the court overlooked or misapprehended matters of law and fact in granting the relief requested by the defendant. Specifically, the plaintiff argues that Allstate’s motion was, in essence, one to strike the notice of trial which was not supported by the requisite affidavit detailing the need for additional discovery required by section 212.17 (d) of the Uniform Civil Rules for the District Courts (22 NYCRR 212.17 [d]). Plaintiff insists that Allstate did not demonstrate the unexpected or unanticipated circumstances that necessitated the late discovery. In this regard, plaintiff points out that counsel for the defendant examined plaintiff’s principal, Dr. Robert Hard, on five different occasions during the period from October 2004 through July 2005, and waited until August 2007 to make its motion to amend, consolidate and compel additional discovery.

The court is not persuaded by the plaintiff’s arguments. “A note of issue should be vacated when it is based upon a certificate of readiness that contains erroneous facts, such as that discovery has been completed” (Drapaniotis v 36-08 33rd St. Corp., 288 AD2d 254 [2d Dept 2001]). Such a misstatement renders a notice of trial “a nullity” (see Gregory v Ford Motor Credit Co., 298 AD2d 496, 497 [2d Dept 2002]). Here, a review of the transcripts of Dr. Hard’s examination under oath (EUO) reveals that defendant’s counsel requested the documents sought in the motion under review on numerous occasions during the course of the examination. The documents requested included plaintiff’s agreement with Bayside Management Inc. (at 70), corporate tax returns (at 51, 148), facility leases (at 215), and banking records (at 314). Counsel [*2]for the defendant renewed his demand for these documents on numerous occasions during the course of Dr. Hard’s examination (at 177, 266, 363). Despite these outstanding demands, the plaintiff filed its notice of trial on August 18, 2005, just one month after the last demand for the documents, and six months after the Court of Appeals decided State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005]), which clearly rendered the material sought relevant to Allstate’s defense of fraudulent incorporation (see Midwood Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co., 14{**19 Misc 3d at 777} Misc 3d 131[A], 2007 NY Slip Op 50052[U] [App Term, 2d Dept 2007]).

The plaintiff is mistaken, if not disingenuous, in its position that the defendant never requested these items in writing. The EUO notice sent to Dr. Hard on May 26, 2004 specifically required him to produce all documents relating to the plaintiff’s ownership, corporate structure, and affiliation with any consulting, management, billing or collection entities, as well as tax returns, banking documents, and leases. Indeed, plaintiff’s attorney acknowledged this very fact in his affirmation in opposition to the original motion, which included the EUO notice and document request as exhibit C.

Accordingly, the court did not overlook or misapprehend any matters of fact or law when it, in effect, struck the plaintiff’s notice of trial, allowed the defendant to amend its answer to assert a Mallela defense, and compelled the production of outstanding discovery relevant to that defense. Contrary to plaintiff’s assertion, the moving affirmation of Allstate’s attorney on the original motion set forth sufficient allegations of fraud in the corporate form to justify the amendment and compel the discovery (see Bromer Med., P.C. v Chubb Indem. Ins. Co., 18 Misc 3d 138[A], 2008 NY Slip Op 50298[U] [App Term, 1st Dept 2008]).

The court is also convinced that it did not overlook or misapprehend any matters of fact or law in allowing the consolidation of all pending no-fault cases involving the same parties. A motion for consolidation is addressed to the sound discretion of the court, and absent substantial prejudice to the opposing party, is proper where there are common questions of law and fact (see RCN Constr. Corp. v Fleet Bank, N.A., 34 AD3d 776 [2d Dept 2006]). Here, it is evident that all of the no-fault matters pending between Eastern Medical and Allstate are subject to the same Mallela defense of fraudulent incorporation. If proven, the applicable law would require a dismissal of all pending actions.

Consolidation for the purpose of entertaining the Mallela defense certainly serves the interests of judicial economy and efficiency. Be that as it may, if Allstate is unable to prove its Mallela defense, then the court agrees with plaintiff that the consolidation of the pending no-fault actions becomes untenable as each is driven by unique facts arising from separate and distinct circumstances. Accordingly, the court takes this opportunity to clarify that the consolidation of the pending no-fault matters is for the sole purpose of determining the merits{**19 Misc 3d at 778} of Allstate’s Mallela defense, and is without prejudice to a subsequent motion to sever the cases should that defense fail.

In moving to renew pursuant to CPLR 2221 (e), the plaintiff asserts that there has been a change in the law that would change the prior determination. Specifically, the plaintiff argues that the Appellate Division’s recent decision in Fair Price Med. Supply Corp. v Travelers Indem. Co. (42 AD3d 277 [2d Dept 2007]), “radically reshaped the landscape of fraud based defenses,” such that Allstate’s Mallela defense is untimely and therefore unavailable. The court concludes that the plaintiff is mistaken in its application of Fair Price to the facts at hand. [*3]

In Mallela, the Court of Appeals held that a medical provider is not entitled to recover first-party no-fault benefits under Insurance Department Regulations (11 NYCRR) § 65-3.16 (a) (12) if it is fraudulently incorporated. As in the present case, the insurer in Mallela alleged that the medical provider, while nominally owned by a physician, was actually operated by nonphysicians in violation of New York’s licensing statutes. The Mallela court declared the regulation valid and held that “carriers may look beyond the face of licensing documents to identify willful and material failure to abide by state and local law[s]” (Mallela, 4 NY3d at 321).

On June 12, 2007, the Appellate Division, Second Department, decided Fair Price Med. Supply Corp. v Travelers Indem. Co. (42 AD3d 277 [2007]). That action involved an insurer’s attempt to deny a fraudulent claim for medical supplies almost two years after the 30-day pay or deny period mandated by Insurance Law § 5106 (a) had expired. The court found the fraud defense untimely.

In reaching this conclusion, the Appellate Division relied upon Court of Appeals precedents in Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co. (90 NY2d 274 [1997]) and Central Gen. Hosp. v Chubb Group of Ins. Cos. (90 NY2d 195 [1997]) to draw a distinction between defenses based on a lack of insurance coverage in the first instance and those based on policy exclusions. Acknowledging that the preclusion rule cannot be applied so as to create coverage where none otherwise exists, the court held that the fraud alleged in Fair Price did not go to the issue of coverage and thus required a timely denial. Summarizing the applicable law, the Appellate Division explained: “In determining whether compliance with the 30-day rule is required, the pertinent inquiry is whether the asserted defense is based on a lack of coverage. The kind of fraud scheme{**19 Misc 3d at 779} involved—and whether there is any fraud scheme at all—is irrelevant” (Fair Price, 42 AD3d at 285).

Relying on the above pronouncement, the plaintiff asserts that Allstate’s allegations of fraud in the corporate form, even if true, should have been asserted in a timely denial. Since they were not, plaintiff insists that Allstate is precluded from raising such a fraud defense at this time. The problem with this argument is that it assumes the Court of Appeals was ignorant of its own precedent in Presbyterian and Central Gen. when it decided Mallela, and that the Fair Price court chose to somehow abrogate Mallela in its decision. The court rejects these unsupported assumptions.

It is evident that the appellate courts in Presbyterian, Central Gen. and Fair Price were dealing in large measure with contract interpretation—the extent to which policies of insurance covered certain situations, and the extent to which the insurers’ obligations under those policies were subject to applicable laws and regulations. In contrast, the Mallela court was not dealing with contract interpretation, or the interplay between policies of insurance and applicable laws and regulations. Rather, Mallela dealt strictly with statutory interpretation.

The question certified to the Court of Appeals in Mallela was whether insurance carriers may withhold payment for medical services provided by fraudulently incorporated enterprises to which patients have assigned their claims. The Mallela court was simply faced with the task of determining whether a rule promulgated by the Superintendent of Insurance (11 NYCRR 65-3.16 [a] [12]) was valid. The rule excluded payments made to fraudulently licensed providers from the meaning of “basic economic loss” as set forth in Insurance Law § 5102. Acknowledging that the rule set up a conflict between the prompt payment goals of the no-fault law on [*4]the one hand, and the antifraud goals embodied in the State’s licensing statutes on the other, the court unhesitatingly pronounced that the regulation was valid, and that “[w]here, as here, the Superintendent has properly crafted a rule within the scope of his authority, that rule has the force of law and represents the policy choice of this State” (Mallela, 4 NY3d at 321).

Significantly, in Mallela there was no contention that the medical services in question were unnecessary or improperly rendered, or that the insureds were otherwise ineligible for coverage. There was no suggestion that the payments were not otherwise required under the terms of the policies. The court{**19 Misc 3d at 780} specifically noted as much. Even so, the Mallela court did not qualify the insurer’s right to deny payment to the fraudulently incorporated provider by requiring a timely denial. In this regard, it is instructive that the Mallela court quoted a relevant passage from its earlier decision in Matter of Medical Socy. of State of N.Y. v Serio (100 NY2d 854, 866 [2003]), which provided that the challenged regulations “create not a new category of exclusion, but rather merely a condition precedent with which all claimants must comply in order to receive benefits under the statute” (Mallela, 4 NY3d at 321 n 3 [emphasis added]).

This court is convinced that Fair Price did nothing to diminish an insurer’s right to assert a Mallela defense in appropriate circumstances, even after the 30-day pay or deny period of Insurance Law § 5106 (a) has expired. Such a defense is not predicated on a policy exclusion or the extent of coverage provided by a contract of insurance. Nor does it arise from the operation of an insurance policy within the context of the no-fault laws and regulations. A Mallela defense is not a policy-based defense at all, but rather a statutory defense that arises from a claimant’s failure to comply with applicable sections of the Business Corporation Law, Limited Liability Company Law and/or Education Law. It is a defense based on the claimant’s failure to satisfy a condition precedent to payment. It is not concerned with fraudulent acts that trigger policy exclusions or implicate policy coverage.

Thus, in Metroscan Imaging, P.C. v GEICO Ins. Co. (13 Misc 3d 35 [App Term, 2d Dept 2006]), the Appellate Term affirmed an order of the Civil Court which consolidated multiple no-fault actions and allowed the insurer to assert a Mallela defense in each. The court held that medical providers who fail to meet applicable licensing requirements are not entitled to no-fault reimbursement “since their authority to render professional services was obtained through fraudulent means” and possession of such authority is “a prerequisite to reimbursement” (id. at 38).

Likewise, in Midwood Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (14 Misc 3d 131[A], 2007 NY Slip Op 50052[U] [App Term, 2d Dept 2007]), the Appellate Term reversed that portion of a Civil Court order which granted summary judgment to a medical provider, concluding that the insurer was entitled to discovery on the relevant issue of whether the medical provider was fraudulently incorporated (see Midwood at *1). Significantly, the court determined that a fraudulent incorporation{**19 Misc 3d at 781} defense “is a nonwaivable defense and is therefore not subject to the 30-day preclusion rule” (id.). The court affirmed the lower court’s refusal to sever the unrelated actions, concluding that the fraudulent incorporation defense was “likely to raise common issues of law or fact” in all five claims (id. at *2).

The undersigned cited the Metroscan Imaging and Midwood Acupuncture decisions in support of the court’s prior order, and continues to believe that these cases control the matter under review. Significantly, at least one Appellate Term decision after Fair Price concluded that [*5]a Mallela defense “is not waived by the failure to assert it in a denial of claim form, nor is it precluded as a result of an untimely denial” (Multiquest, P.L.L.C. v Allstate Ins. Co., 17 Misc 3d 37, 39 [App Term, 2d Dept 2007] [citations omitted]).

Accordingly, upon review of its decision dated May 23, 2007, the court adheres to its original determination.

APPELLATE TERM OF THE SUPREME COURT, FIRST DEPARTMENT

Defendant appeals from an order of the Civil Court of the City of New York, Bronx County (Ben R. Barbato, J.), dated March 21, 2007, which denied its motion for summary judgment.

Per Curiam.

Order (Ben R. Barbato, J.), dated March 21, 2007, affirmed, without costs.

Defendant’s motion for summary judgment dismissing this action for no-fault first party benefits on the ground that the underlying medical services were performed by an independent contractor was properly denied. In opposition to the motion, the plaintiff provider submitted the treating physician’s affidavit stating that he is the plaintiff’s president and sole shareholder, not an independent contractor, and that the box for “Independent Contractor” on the NF-3 claim form had been marked erroneously. In these circumstances, the record presents issues of fact as to whether the services were performed by plaintiff through its officer rather than an independent contractor.
THIS CONSTITUTES THE DECISION AND ORDER OF THE COURT.
I concurI concurI concur
Decision Date: March 24, 2008

Civil Court of the City of New York, Richmond County

025762/06

Counsel for Plaintiff:

Colleen Terry, Esq.

Baker, Sanders Barshay, Grossman, Fass, Muhlstock

& Neuwirth

150 Herricks Road

Mineola, NY 11501

516-741-4799

Counsel for Defendant:

Lindsay Alexander, Esq.

Epstein & McDonald

One Whitehall Street, 13th Floor

New York, NY 10004-2109

212-248-9100

Katherine A. Levine, J.

Defendant Nationwide Property and Casualty (“defendant”) moves to dismiss plaintiff Cambridge Medical, P.C. A/A/O Richard Edwards ( “plaintiff”) complaint for failure to comply with defendant’s Demand for a Verified Bill of Particulars and Combined Demand Request pursuant to C.P.L.R § 3126. Defendant alleges that because plaintiff failed to respond to it’s discovery request, defendant would be severely prejudiced at trial. In the alternative, defendant requests that the court grant summary judgment because the institution of the lawsuit is premature as plaintiff failed to comply with its verification requests.

In its verification requests, defendant’s claims department asked for certain information: the certificate of incorporation, the SS4 (application of federal employer identification program), the IRS acknowledgment letter approving TIN and the completed W-9 form, the name, address, license, certification, etc. for each person connected with the treatment or testing of the assignor in the instant claim, and sale of shares of ownership. Although defendant does not so state, the aforementioned requests appear to give rise to a defense of fraudulent incorporation in violation of the truth seeking opportunity set forth in 11 N.Y.C.R.R. sec.65.3.16(a)(12).

In its Demand for a Verified Bill of Particulars, counsel for defendant seeks a plethora of documents including items which appear to be similar to those requested in the verification requests: the names, addresses and birth dates of all directors, officers, shareholders, employees and owners listed on the stock certificate for plaintiff’s facility at time services were rendered (1-5).

Plaintiff asserts that it provided discovery that was proper and that defendant is not entitled to further discovery since it is merely engaging in a fishing expedition that is prohibited by State Farm Insurance Co. v. Mallela, 4 NY3d 313 (2005) and the regulations. Plaintiff also argues that under the No-Fault Law, the need for disclosure “must be substantiated by the [*2]reasons for the denial contained in the NF-10 and not simply predicated upon a plethora of unreserved affirmative defenses inserted in the answer as an afterthought.” See Metropolitan Radiological Imaging v. State Farm Mutual Auto Ins. Co., 2005 Slip Op 25063 (NY Civil Ct. 2006). Finally, plaintiff asserts that the verification forms were not timely mailed and that the affidavits of mailing were inadmissible.

In Mallela, the Court of Appeals held that insurers may withhold payment for medical services provided by fraudulently licensed medical service corporations to whom patients, who are covered by no-fault insurance, have assigned their claims. Insurance Law §5102 requires no-fault carriers to reimburse patients or their medical provider assignees for “basic economic loss.” In order to combat incidences of fraud, the Superintendent of Insurance promulgated 11 N.Y.C.R.R. 65-3.16(a)(12), which excludes from the definition of basic economic loss payments made to unlicensed or fraudulently licensed providers, thus rendering them ineligible for reimbursement. 4 NY3d at 320. After finding this regulation valid, the Court held that carriers “may look beyond the face of licensing documents to identify wilful and material failure to abide by state and local law.” Id at 321. Addressing the defendants’ contention that the insurance companies would turn this “investigatory privilege into a vehicle for delay and recalcitrance,” the Court stated:

“The regulatory scheme …. does not permit abuse of the truth-seeking opportunity that 11 N.Y.C.R.R. sec. 65-3.16(a)(12) authorizes. Indeed, the Superintendent’s regulations themselves provide for agency oversight of carriers, and demand that carriers delay the payment of claims to pursue investigations solely for good cause. (See N.Y.C.R.R. sec 65-3.2(c). In the licensing context, carriers will be unable to show “good cause” unless they can demonstrate behavior tantamount to fraud. Technical violations will not do…We expect and the Legislature surely intended, vigorous enforcement by the Superintendent against any carrier that uses the licensing requirement regulation to withhold or obstruct reimbursement to non-fraudulently incorporated health care providers. “

4 NY3d at 322.

The issue presented by these motions is therefore whether the language contained in Mallela 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. Mallela does not squarely address this issue.

This court follows the reasoning of Judge Sweeney in Carothers v. Insurance Companies et al, 13 Misc 3d 970 (Civil Ct., Richmond Co. 2006) and adopts that court’s finding that “good cause” is not a mandatory requisite to ordering discovery. In Carothers, supra , Judge Sweeney first noted that the regulation interpreted by the Mallela court – 11 NYCRR 65-3.2

(c) – “demands that the carriers delay payment of claims to pursue investigations solely for good cause.” Insurers are prohibited from demanding “verification of facts unless there are good reasons to do so” and are required to request verification of facts “as expeditiously as [*3]possible.” Judge Sweeney then found that the “investigations the Court was discussing in Mallela are those 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.

However, Judge Sweeney then noted that the entire discussion of good cause in Mallela was non-binding dicta since the only question that the Mallela court agreed to answer upon certification was whether “a medical corporation that was fraudulently incorporated” was entitled to be reimbursed by insurers for medical services rendered by licensed medical practitioners” Id at 973 citing 4 NY3d at 320.

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”.^[FN1] Judge Sweeney found that the guiding principle behind article 31 of the CPLR was 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. 13 Misc 3d at 973 citing Allen v Crowell-Collier Publ. Co., 21 NY2d 403, 406 (1968). See also, Midwood Acupuncture P.C. v. State Farm Mutual, 14 Misc 3d 131A, 836 NYS2d 486 ( App. Term, 2d Dept. 2007); Midborough Acupuncture P.C. v. State Farm Ins. Co., 13 Misc 3d 58 (App. Term, 2d Dept. 2006) (both applying the material and necessary standard).

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. Id at 975. See Lexington Acupuncture, P.C. v. State Farm Insurance Co., 12 Misc 3d 90, 820 NYS2d 385 ( App. Term, 2d Dept. 2006); A.B. Medical Services PLLC v. Prudential Propr. & Cas. Co., 11 Misc 3d 137[A], 816 NYS2d 693 (App. Term 2d & 11th Jud. Dists. 2006). See also, Midborough Acupuncture PC v. State Farm Ins Co. Supra 13 Misc 3d at 58 (defendant’s papers establish that defendant’s discovery requests concerning whether plaintiff was fraudulently incorporated are material and necessary).

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 consideration the “intrusiveness of the discovery device and the merits, or lack thereof, of the claim” 13 Misc 3d at 974 citing Greater NY Mutual Ins. Co. v. Lancer Ins. Co., 203 AD2d 515, 517 (2d Dept. 1994). Since the amounts in dispute in most no- fault claims are small, the court should not “hesitate to exercise its protective powers under CPLR §313(a) so as to curtail discovery where it may become an unreasonable annoyance and tend[s] to harass and overburden the other party”, Conrad v. Park, 204 AD2d 1011, 1012 ( 1994), or “to prevent the proverbial [*4]fishing expedition” Id citing Auerbach v. Klein, 30 AD3d 451, 452 (2d Dept. 2006); Lattire v. Smith, 304 AD2d 534, 536 (2d Dept. 2003). 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.

This court is not convinced that different standards should govern the verification requests made by an insurance company during its investigatory stage, as opposed to discovery requests made by counsel for an insurance company during litigation for Mallela type documents. As set forth above, the scope of verification requests was not at issue in Mallela. Application of a higher standard for verification requests does not make sense since an insurance company should be able to ascertain as expeditiously as possible whether a medical provider is fraudulently incorporated under the No- Fault Law. However, since the Court of Appeals did find that the regulations preclude insurance carriers from delaying payment of claims unless they can show “good cause,” which demands a demonstration of behavior tantamount to fraud, this court must abide by the distinction.

The verification request for corporate documents does not contain any assertion that plaintiff Cambridge Medical engaged in any behavior that would cause one to suspect that it has been fraudulently incorporated. (See Exhibit C annexed to motion). As such, plaintiff need not further respond to the verification requests and this court denies the motion for summary judgment.

Defendant also fails to offer any justification for its request for Mallela type documents in its subsequent discovery requests. Its answer is void of any affirmative defense that defendant has reason to believe that the plaintiff may be fraudulently incorporated. However, in light of the broad latitude afforded to the courts in this department to grant Mallela type discovery requests, this court, upon conducting a balancing test, directs that plaintiff produce: the names, addresses and birth dates of all directors, officers, shareholders and owners listed on the stock certificate for plaintiff’s facility at the times services were rendered. Pursuant to CPLR §3103 (a) , this court issues a protective order limiting discovery to the aforementioned items, as the remainder of the bill of particulars ask for information that is either within the defendant’s knowledge or is unduly burdensome, irrelevant or immaterial.

For the above reasons, defendant’s motions to dismiss and/or summary judgment are denied. Given this ruling, this court need not consider plaintiff’s allegations with regard to the admissibility of the verification forms. It does appear, however, that the affidavit of mailing does allege personal knowledge of the mailing procedures and hence comports with the instructions set forth in Delta Diagnostic Radiology, P.C. a/a/o Lidaine Philogene v. Chubb Group of Insurance,17Misc 3d 16 (2007)..

This constitutes the decision and order of the court.

Dated: March 21, 2008___________________________

Staten Island, NYHON. KATHERINE A. LEVINE

Judge, Civil Court

Appearances

Counsel for Plaintiff:

Colleen Terry, Esq.

Baker, Sanders Barshay, Grossman, Fass, Muhlstock

& Neuwirth

150 Herricks Road

Mineola, NY 11501

516-741-4799

Counsel for Defendant:

Lindsay Alexander, Esq.

Epstein & McDonald

One Whitehall Street, 13th Floor

New York, NY 10004-2109

212-248-9100

Footnotes

Footnote 1:In a footnote Judge Sweeney noted that although a showing of good cause is not a mandatory prerequisite to discovery, good cause is a factor that “might be considered” in determining the permissible scope of discovery