District Court of Nassau County, First District

25241/09

Attorneys:

Plaintiff – Joseph Henig

Defendant – McDonnell & Adels, P.C.

Fred J. Hirsh, J.

The following named papers numbered 1 – 4

submitted on this motion on March 17, 2011

Papers NumberedNotice of Motion and Affidavits Annexed1-2

Order to Show Cause and Affidavits Annexed

Affirmation in Opposition3

Replying Affidavits4

This action raises questions about the proof that must be adduced by a hospital to establish a prima facie entitlement to judgment as a matter of law in an action for first party no-fault benefits.

BACKGROUND

This action combines two unrelated claims for first party no-fault benefits. The only thing these actions have in common is that Allstate Insurance Company (“Allstate”) is the no-fault carrier for both claims.

This action was commenced in Supreme Court Nassau County and was transferred to the District Court pursuant to CPLR 325(d).

A. Lenox Hill Hospital a/a/o of Eduardo Marrero v. Allstate Insurance Company

Eduardo Marrero (“Marrero”) was admitted to and received treatment at Lenox Hill Hospital (“Lenox Hill”) from July 13, 2009 through July 30, 2009. The treatment he received at Lenox Hill is alleged to be for injuries he sustained in a July 12, 2006 motor vehicle accident.

Marrero assigned his rights to receive payment of no-fault benefits for this treatment to Lenox Hill.

Lenox Hill’s third-party biller, Hospital Receivable Systems, Inc. (“HRS”) prepared and mailed the bill for treatment, the no-fault application (“NF-5”), and the assignment [*2]of benefits to Allstate Insurance Company (“Allstate”), the no-fault insurance carrier.

The hospital bill prepared and issued by Lenox Hill is in the sum of $185,332.92.

Attached to the NF-5 is a document on the letterhead of D.R.G. Master, Inc. designated as a “D.R.G. Master Output Report No Fault Version 8.3R” (“DRG”). The DRG, which is not explained, contains calculations to determine the allowable charges under the No-Fault Law (Insurance Law §5108) for the services rendered to Marrero at Lenox Hill. Based upon the calculations contained in the DRG Lenox Hill submitted a claim seeking payment of $54,167.24 for the services rendered to Marrero.

The assignment contains a notation that payment should be mailed to the Lenox Hills’ attorney at the attorney’s office address.

The aforementioned documents were mailed to Allstate by HRS by certified mail, return receipt requested. The certified mail receipt indicates the documents (NF-5, assignment, bill and DRG) were mailed to Allstate of October 8, 2009 and received by Allstate on October 12, 2009.

The affidavit of Pat Thompson (“Thompson”) of HRS addresses only the mailing of the of the documents to Allstate. This affidavit states Thompson is an employee of HRS. The affidavit does not discuss who prepared the NF-5, the hospital bill and/or the DRG, who provided HRS with the information contained in the documents and the relationship between Lenox Hill and HRS other than to state HRS is a Biller and Account Representative for Lenox Hill.

Lenox Hill alleges more than 30 days have elapsed since the bill was received and the bill has not been paid. Therefore, Lenox Hill is entitled to summary judgment.

Allstate asserts summary judgment should be denied because it timely denied this claim by mailing a denial to Lenox Hill dated October 30, 2009. The denial states the claim was denied based upon the Independent Medical Examination (“IME”) of Michael J. Katz, M.D. (“Dr. Katz) performed on 9/27/06. Dr Katz rendered a report dated 9/27/06 that stated Marrero had made a full recovery from the injuries he sustained in the July 12, 2006 motor vehicle accident. Dr. Katz report states Marrero is no longer in need of any medical care or treatment and does not need surgery.

B. Mount Sinai Hospital a/a/o Gregory Bar v. Allstate Insurance Company

Gregory Bar (“Bar”) received treatment for at Mt. Sinai Hospital (“Mt. Sinai”) on September 14-15, 2009 for injuries alleged to have been sustained in a motor vehicle accident of June 20, 2009.

Bar assigned his right to receive payment of no-fault benefits for this treatment to Mt. Sinai.

The bill issued by Mt. Sinai indicates the charges for the treatment as $4990.45.

Mt. Sinai’s third party biller, HRS, prepared and submitted the NF-5 together with a copy of the Mt. Sinai bill and assignment to Allstate for payment. The NF-5 indicates the amount due Mt. Sinai for the treatment or services provided to Bar in accordance with the no-fault schedule is $1515.96. Nothing in the papers explains the difference in the amount stated in the Mt. Sinai bill and the amount claimed to be due on the NF-5.

HRS mailed the NF-5, the assignment and the bill to Allstate on October 5, 2009 by certified mail, return receipt requested. The return receipt indicates the bill was received by Allstate on October 8, 2009. [*3]

The affidavit of Pat Thompson again addresses only the issue of mailing of the claim and other documents. The affidavit does not state who prepared the NF-5, the hospital bill or assignment or where the information contained in these documents was derived. Thompson’s affidavit states HRS is a Biller and Account Representative fo Mt. Sinai.

Mt. Sinai asserts it is entitled to summary judgment because more than 30 days have elapsed since the claim was submitted and claim has not been paid.

Allstate asserts it is not obligated to pay Mt. Sinai’s claim because on October 26, 2009 it sent a verification request to Mt. Sinai. Since Mt. Sinai did not respond to the October 26, 2009 verification request, Allstate sent a second verification request to Mt. Sinai by letter dated November 27, 2009. Allstate asserts Mt. Sinai did not respond to the follow-up verification request either.

DISCUSSION

The party moving for summary judgment must submit evidentiary proof in admissible form sufficient to establish a prima facie entitlement to judgment as a matter of law. Zuckerman v. City of New York, 49 NY2d 557 (1980). If the party moving for summary judgment does not make a prima facie showing of entitlement to judgment as a matter of law, the motion must be denied regardless of the sufficiency of the opposition. Winegrad v. New York University Medical Center, 64 NY2d 851 (1985); Cendant Car Rental Group v. Liberty Mut. Ins. Co., 48 AD3d 397 (2nd Dept. 2008); Widmaier v. Master Products, Mfg, 9 AD3d 362 (2nd Dept., 2004); and Ron v. New York City Housing Auth., 262 AD2d 76 (1st Dept., 1999).

A claim for no-fault benefits must be paid or denied within 30 days of receipt of the claim including all verification. 11 NYCRR 3.8(a).

A hospital makes a prima facie showing of entitlement to judgment as a matter of law by submitting proof the necessary billing forms and documents have been mailed to and received by the no-fault insurer and payment is overdue. New York Hospital Medical Center of Queens v. Country Wide Ins. Co., 82 AD3d 723 (2nd Dept. 2011); Westchester Medical Center v. Countrywide Ins. Co., 45 AD3d 676 (2nd Dept. 2007); and Mary Immaculate Hosp. v. Allstate Ins. Co., 5 AD3d 742 (2nd Dept. 2004).

A medical provider must establish as part of its prima facie case the billing records submitted for payment are business records. Art of Healing Medicine, P.C. v. Travelers Home and Marine Ins. Co., 55 AD2d 644 (2nd Dept. 2008); and Dan Medical, P.C. v. New York Central Mut. Fire Ins. Co., 14 Misc 3d 44 (App. Term 2nd & 11th Jud. Dists. 2006).

All medical providers, other than hospitals, must establish as part of their prima facie proof in an action for first party no-fault benefits the claim forms and bill are business records. See, Viviane Etienne Medical Care, P.C. v. County-Wide Ins. Co., supra – physician’s services; Lenox Hill Radiology v. New York Central Mut. Fire Ins. Co., 20 Misc 3d 851 (Dist. Ct. Nassau Co. 2008) – radiological services; Craigg Total Health Family Health Chiropractic Care, P.C. v. QBE Insurance Corp., 20 Misc 3d 1118(A) (Dist. Ct. Nassau Co. 2008) – chiropractic services; North Acupuncture, P.C. v. State Farm Ins. Co., 14 Misc 3d 130(A) ( App. Term 2nd & 11th Jud. Dists. 2005) – acupuncture treatment; Bayside Rehab. & Physical Therapy, P.C. v. Geico Ins. Co., [*4]24 Misc 3d 542 (Civil Ct. Richmond Co. 2009) – physical therapy treatments; Complete Orthopedic Supplies, Inc. v. State Farm Ins. Co., 16 Misc 3d 996 (Civil Ct. Queens Co. 2007) – durable medical supplies.

The testimony or affidavit of a third party biller is insufficient to lay the foundation necessary to establish the claim form and billing documents are business records. Andrew Carothers, M.D., P.C. v Geico Indemnity Co., 79 AD3d 864 (2nd Dept. 2010: and Viviane Etienne Medical Care, P.C. v. Country-Wide Ins. Co., 31 Misc,3d 21 (App.Term, 2nd, 11th & 13th Jud. Dists. 2011).

The cases regarding hospital and cases regarding all other medical providers have developed on parallel tracks. The cases involving motions for summary judgment relating to hospital admissions do not address or discuss whether the hospital must establish the necessary billing documents ( NF-5, bill, assignment) are business records of the hospital.This Court can find no basis in the no-fault law or regulations why there should be a difference in the proof required of a hospital and the proof required of all other medical providers to establish a prima facie entitlement to judgment as a matter of law. A hospital should as part of its prima facie proof be required to establish the no fault claim, bill and other documentation submitted in connection with a clam to obtain payment of first party no-fault benefits is a business records.

The proof submitted in connection with this case does not establish the bill submitted by either Lenox Hill or Mt. Sinai is a business record of either hospital. William Conover, Inc. v. Waldorf, 251 AD2d 727 (3rd Dept. 1998). The affidavits of Lenox Hill and Mt. Sinai’s third party biller do not even attempt to lay the proper foundation to establish the documents submitted to Allstate were business records of either hospital. Since the plaintiffs have failed to establish a prima facie entitlement to judgment as a matter of law, their motion for summary judgment must be denied.

Allstate’s assertions that it timely denied the Lenox Hill claim and did not have to pay or deny the Mt. Sinai claim because Mt. Sinai did not respond to its request for verification are without merit.

Allstate produced a denial of the Lenox Hill bill dated October 30, 2009 in which it denies the entire claim on the grounds all no-fault benefits for orthopedic treatment had been denied effective 10/16/06 based upon the IME of Dr. Katz.

Except for limited non-precludable defenses, none of which are involved in this action, a no-fault carrier is precluded from raising defenses not asserted in timely served denial. Fair Price Medical Supply Corp. v. Travelers Indemnity Co., 10 NY3d 556 (2008); and Hospital for Joint Diseases v. Travelers Property Casualty Ins. Co., 9 NY3d 312 (2007). Allstate would be precluded from raising the defense the treatment provided to Marrero by Lenox Hill was not medically necessary unless it established the denial was timely mailed. Bath Medical Supply, Inc. v. Allstate Indemnity Co., 13 Misc 3d 142(A) (App. Term 2nd & 11th Jud. Dists. 2006). The no-fault insurer must establish through proof in admissible form either the actual timely, mailing of the denial or it has “…standard office practices and procedures designed to ensure that items were properly addressed and mailed (citations omitted).” St. Vincent’s Hospital of Richmond v. Government Employees. Ins. Co., 50 AD3d 1123 (2nd Dept. 2008).

Allstate did not provide an affidavit or any other proof establishing actual mailing

of the denial to Lenox Hill. The affidavit of Allstate’s Litigation Claims Representative [*5]does not state Allstate’s standard office practices and procedures for preparing, addressing and/or mailing denials.

An insurer does not have to pay or deny a no-fault claim until it has received all timely demanded verification. Hospital for Joint Diseases v. New York Central Mut. Fire Ins. Co., 44 AD3d 903 (2nd Dept. 2007); an 11 NYCRR 65-3.8(c). The insurer has 10 business days from receipt of the claim to request verification. 11 NYCRR 65-3.5(a).

See, SZ Medical, P.C. v. Country-Wide Ins. Co., 12 Misc 3d 52 (App.Term 2nd & 11th Jud. Dists. 2006).

Allstate acknowledged it received the bill from Mt. Sinai on October 8, 2009. It had 10 business days from October 8, 2009 to request verification. The 10th business day after to claim from Mt. Sinai was received was October 23, 2009. The first verification request was dated October 26, 2009, which is more than 10 days from receipt of the claimAdditionally, Allstate fails to submit any evidence establishing it had an office practice or procedure designed to ensure the timely mailing of verification and follow up

verification requests. St. Vincent’s Hospital of Richmond v. Government Employees Ins. Co., supra: and Sound Shore Medical Center v. New York Central Mut. Fire Ins. Co., 30 Misc 3d 131(A) (App. Term, 9th & 10th Jud. Dists. 2011).

While timely denial of the Lenox Hill claim and failure to respond to verification requests regarding the Mt. Sinai claim may be valid defenses to these claims, the affidavits submitted in opposition to plaintiff’s motion to not provide proof in evidentiary form sufficient to establish theses defenses. However, since plaintiffs failed to establish through proof in admissible form a prima facie entitlement to judgment as a matter of law, plaintiff’s motion for summary judgment is denied.

SO ORDERED:

Hon. Fred J. Hirsh

District Court Judge

Dated: May 3, 2011

cc:Law Offices of Joseph Henig, P.C.

McDonnell & Adels, PLLC

—[*1] Joseph Henig, P.C., Bellmore, N.Y., for appellants.

Jaffe & Koumourdas, LLP, New York, N.Y. (Jean H. Kang of counsel), for respondent.

In an action to recover no-fault benefits under a contract of insurance, the plaintiffs appeal, as limited by their brief, from so much of an order of the Supreme Court, Nassau County (Murphy, J.), entered October 1, 2010, as denied the motion of the plaintiff New York Hospital Medical Center of Queens, as assignee of Merna Ishak, for summary judgment on the second cause of action.

Ordered that the appeal by the plaintiff Westchester Medical Center, as assignee of Chris Kang, is dismissed, without costs or disbursements, as that plaintiff is not aggrieved by the portion of the order appealed from (see CPLR 5511); and it is further,

Ordered that the order is affirmed insofar as appealed from by the plaintiff New York Hospital Medical Center of Queens, as assignee of Merna Ishak; and it is further,

Ordered that one bill of costs is awarded to the defendant.

The plaintiff New York Hospital Medical Center of Queens, as assignee of Merna Ishak (hereinafter the plaintiff), established, prima facie, its entitlement to judgment as a matter of law on the second cause of action by demonstrating that the necessary billing forms were mailed to and received by the defendant and that payment of no-fault benefits was overdue (see Insurance Law § 5106 [a]; 11 NYCRR 65-3.8 [a] [1]; Wyckoff Hgts. Med. Ctr. v Country-Wide Ins. Co., 71 AD3d 1009, 1010 [2010], lv granted 15 NY3d 709 [2010]; New York & Presbyt. Hosp. v Countrywide Ins. Co., 44 AD3d 729, 730 [2007]). However, in opposition, the defendant raised a triable issue of fact as to whether the plaintiff fully complied with the defendant’s demand for verification (see St. Barnabas Hosp. v American Tr. Ins. Co., 57 AD3d 517, 518 [2008]; Westchester Med. Ctr. v Allstate Ins. Co., 53 AD3d 481 [2008]; Mount Sinai Hosp. v Allstate Ins. Co., 25 AD3d 673, 674 [2006]). The defendant was not obligated to pay or deny the claim until all demanded verification was provided by the plaintiff (see St. Barnabas Hosp. v American Tr. Ins. Co., 57 AD3d at 518). Accordingly, the Supreme Court properly denied the plaintiff’s motion for summary judgment on the second cause of action. Dillon, J.P., Covello, Eng and Chambers, JJ., concur.

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 (Raul Cruz, J.), entered June 7, 2010, which denied its motion for summary judgment dismissing the complaint.

Per Curiam.

Order (Raul Cruz, J.), entered June 7, 2010, affirmed, with $10 costs.

In this action to recover first-party no-fault medical benefits, defendant’s motion for summary judgment was properly denied since it failed to establish, prima facie, that the notices of the independent medical examinations (IMEs) were properly mailed to the assignor and that he failed to appear for the IMEs (see Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 35 AD3d 720, 721 [2006]; Marina v Praetorian Ins. Co., 28 Misc 3d 132[A], 2010 NY Slip Op 51292[U] [2010]; cf. Inwood Hill Med., P.C. v General Assur. Co., 10 Misc 3d 18, 19-20 [2005]). Given defendant’s failure to meet its burden, denial of its motion was required regardless of the sufficiency of plaintiff’s opposition papers (see Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]).

THIS CONSTITUTES THE DECISION AND ORDER OF THE COURT.
Decision Date: April 28, 2011

SUPREME COURT OF THE STATE OF NEW YORK

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

Appeal from an order of the Civil Court of the City of New York, Queens County (Carmen R. Velasquez, J.), entered February 25, 2010. The order, insofar as appealed from, denied defendant’s cross motion for summary judgment dismissing the complaint.

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

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved for summary judgment and defendant cross-moved for summary judgment dismissing the complaint. The Civil Court found that plaintiff had established its prima facie case, that defendant had demonstrated that it had timely denied plaintiff’s claim and that the sole issue for trial was the medical necessity of the supplies provided to plaintiff’s assignor. Defendant appeals from so much of the order as denied its cross motion for summary judgment dismissing the complaint.

In support of its cross motion, defendant submitted, among other things, medical peer review reports which set forth factual bases and medical rationales for the doctors’ determinations that there was a lack of medical necessity for the medical supplies at issue. Defendant’s showing that such supplies were not medically necessary was not rebutted by plaintiff.

In light of the foregoing, and the Civil Court’s implicit CPLR 3212 (g) finding that defendant had timely denied the claim based on a lack of medical necessity, a finding which plaintiff does not challenge, defendant’s cross motion for summary judgment dismissing the complaint should have been granted (see Delta Diagnostic Radiology, P.C. v Integon Natl. Ins. Co., 24 Misc 3d 136[A], 2009 NY Slip Op 51502[U] [App Term, 2d, 11th & 13th Jud Dists 2009]; Delta Diagnostic Radiology, P.C. v American Tr. Ins. Co., 18 Misc 3d 128[A], 2007 NY Slip Op 52455[U] [App Term, 2d & 11th Jud Dists 2007]; A. Khodadadi Radiology, P.C. v NY Cent. Mut. Fire Ins. Co., 16 Misc 3d 131[A], 2007 NY Slip Op 51342[U] [App Term, 2d & [*2]11th Jud Dists 2007]).
Pesce, P.J., Weston and Golia, JJ., concur.
Decision Date: April 26, 2011

SUPREME COURT OF THE STATE OF NEW YORK

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

Appeal from an order of the Civil Court of the City of New York, Queens County (Carmen R. Velasquez, J.), entered February 25, 2010. The order, insofar as appealed from, denied defendant’s cross motion for summary judgment dismissing the complaint.

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

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved for summary judgment and defendant cross-moved for summary judgment dismissing the complaint. The Civil Court found that plaintiff had established its prima facie case, that defendant had demonstrated that it had timely denied plaintiff’s claim and that the sole issue for trial was the medical necessity of the supplies provided to plaintiff’s assignor. Defendant appeals from so much of the order as denied its cross motion for summary judgment dismissing the complaint.

In support of its cross motion, defendant submitted, among other things, an independent medical examination report which set forth a factual basis and a medical rationale for the doctor’s determination that there was a lack of medical necessity for the medical supplies at issue. Defendant’s showing that such supplies were not medically necessary was not rebutted by plaintiff.

In light of the foregoing, and the Civil Court’s implicit CPLR 3212 (g) finding that defendant had timely denied the claim based on a lack of medical necessity, a finding which plaintiff does not challenge, defendant’s cross motion for summary judgment dismissing the complaint should have been granted (see Delta Diagnostic Radiology, P.C. v Integon Natl. Ins. Co., 24 Misc 3d 136[A], 2009 NY Slip Op 51502[U] [App Term, 2d, 11th & 13th Jud Dists 2009]; Delta Diagnostic Radiology, P.C. v American Tr. Ins. Co., 18 Misc 3d 128[A], 2007 NY Slip Op 52455[U] [App Term, 2d & 11th Jud Dists 2007]; A. Khodadadi Radiology, P.C. v NY [*2]Cent. Mut. Fire Ins. Co., 16 Misc 3d 131[A], 2007 NY Slip Op 51342[U] [App Term, 2d & 11th Jud Dists 2007]).

Pesce, P.J., Weston and Golia, JJ., concur.
Decision Date: April 26, 2011

SUPREME COURT OF THE STATE OF NEW YORK

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

Appeal from an order of the Civil Court of the City of New York, Kings County (Dolores L. Waltrous, J.), entered February 18, 2010. The order granted plaintiff’s motion for the entry of a default judgment unless defendant served and filed an answer within 30 days of the date of the order, and implicitly denied defendant’s cross motion to dismiss the complaint pursuant to CPLR 3215 (c).

ORDERED that the order is reversed, without costs, plaintiff’s motion to enter a default judgment is denied, and defendant’s cross motion to dismiss the complaint is granted.

Plaintiff commenced this action to recover assigned first-party no-fault benefits by the service on October 17, 2006 of a summons with endorsed complaint. Defendant defaulted. Approximately two years and four months later, in February 2009, plaintiff moved for the entry of a default judgment. Defendant opposed the motion on the ground that it was supported by insufficient proof, and cross-moved to dismiss pursuant to CPLR 3215 (c). Plaintiff failed to offer any opposition to defendant’s cross motion. By order entered February 18, 2010, the Civil Court granted plaintiff’s motion to enter a default judgment unless defendant served and filed an answer within 30 days of the date of the order, and implicitly denied defendant’s cross motion to dismiss the complaint pursuant to CPLR 3215 (c).

Where, as here, a plaintiff fails to initiate proceedings for the entry of judgment within one year after the default, the plaintiff is obligated to offer a reasonable excuse for the delay in moving for leave to enter a default judgment, and must demonstrate that the complaint is meritorious, failing which the court, upon its own initiative or on motion, must dismiss the complaint as abandoned (CPLR 3215 [c]; see e.g. County of Nassau v Chmela, 45 AD3d 722 [2007]; Jones v Corely, 35 AD3d 381 [2006]; Kay Waterproofing Corp. v Ray Realty Fulton, Inc., 23 AD3d 624, 625 [2005]). Upon a review of the motion papers, we find that dismissal of [*2]the complaint was required pursuant to CPLR 3215 (c).

Accordingly, the order is reversed, plaintiff’s motion for the entry of a default judgment is denied, and defendant’s cross motion to dismiss the complaint is granted.

Pesce, P.J., Weston and Golia, JJ., concur.
Decision Date: April 26, 2011

[*1]

Supreme Court, Appellate Term, Second Department, April 26, 2011

APPEARANCES OF COUNSEL

G.H. Chen & Associates, P.C., New York City (Graeme H. Chen and David B. O’Connor of counsel), for appellant. John E. McCormack, P.C., Garden City (Erin M. Crowley of counsel), for respondent.

{**32 Misc 3d at 5} OPINION OF THE COURT

Memorandum.

Ordered that the judgment, insofar as appealed from, is affirmed, without costs.

In this action by a health care provider to recover assigned first-party no-fault benefits, defendant sought discovery of documents and information, and to depose Dr. Solomon, a principal of plaintiff, in relation to the propriety of plaintiff’s incorporation and operation (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005]). After serving plaintiff with further discovery demands, defendant moved for an order, among other matters, consolidating this action with 201 other actions pending between the parties, compelling Dr. Solomon to appear for a deposition in relation to the consolidated actions, compelling discovery of the documents and information previously sought and authorizing additional discovery with respect to plaintiff’s contractual relationships with other corporate providers and with certain named individuals. Plaintiff opposed defendant’s motion, arguing that defendant had failed to plead a defense based on fraud, and, in any event, that the discovery demands were overbroad, and cross-moved, pursuant to CPLR 3103, for a protective order “denying defendant’s request for further discovery and/or depositions,” and, alternatively, compelling its own discovery. Plaintiff argued that defendant had produced no proof that plaintiff’s incorporation or operation violated state licensing laws, and that defendant’s failure timely to pay or{**32 Misc 3d at 6} deny the claim forfeited all defenses including those based on plaintiff’s alleged fraudulent incorporation or operation. Defendant opposed the cross motion and argued that plaintiff’s January 5, 2009 stipulation, in an unrelated no-fault benefits recovery action, to produce much of the discovery sought by the defendant therein, should be construed to evidence the absence of merit to plaintiff’s opposition to discovery. In an order entered June 11, 2009, the Civil Court denied plaintiff’s cross motion for a [*2]protective order, in part, because “[plaintiff had] stipulated to the exact relief it now wishes to dispute.” The order further granted defendant’s motion to the extent of consolidating the 202 actions “for the limited purpose of determining . . . issues of plaintiff’s fraudulent incorporation within the meaning of Mallela,” and directing that, within 90 days of the order, plaintiff must produce Dr. Solomon for a deposition “to answer questions concerning plaintiff’s fraudulent incorporation within the meaning of Mallela” and that, within 60 days, plaintiff must

“[p]rovide complete responses to defendant’s discovery demands including but not limited to all factoring agreements or assignment of the disputed bills in question, all federal, state and local income tax returns for Radiology Today, P.C. from 2006 to present, the names and addresses of all persons and entities with financial interest in the plaintiff as defined by Public Health Law § 238 . . . , all employee information as demanded . . . [and] all management agreements and personal tax return[s] of Dr. Robert Solomon from the year 2006 to [the] present.”

The order also stated that plaintiff’s failure to provide the discovery granted would “support motions to dismiss.” Plaintiff declined to comply with the order insofar as it granted defendant’s motion to compel discovery, and, by order dated October 9, 2009, the Civil Court dismissed the 202 consolidated actions. A judgment was entered on November 16, 2009. Plaintiff appeals from so much of the judgment as dismissed the complaint in the case at bar.

The defense that plaintiff is ineligible to receive no-fault benefits because it failed to comply with state or local licensing requirements “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 & 11th Jud Dists 2007] [citations omitted]).{**32 Misc 3d at 7} No-fault benefits may not be paid to medical service corporations which submit “materially false filings with state regulators” (Mallela, 4 NY3d at 321) or, if properly formed under the “facially valid cover of . . . nominal physician-owners” (id. at 319), are operated by nonphysicians (id. at 321). In the latter case, “carriers may look beyond the face of licensing documents to identify willful and material failure to abide by state and local law” (id.), in particular, “New York State or local licensing requirement[s]” (Insurance Department Regulations [11 NYCRR] § 65-3.16 [a] [12]).

Plaintiff contends that the discovery order was improper because, in the answer and in support of its motion to compel discovery, defendant failed to “state[ ] in detail” the “circumstances constituting the wrong,” citing CPLR 3016 (b). There is no requirement that a defense predicated upon the failure to comply with “New York State or local licensing requirement[s]” (Insurance Department Regulations [11 NYCRR] § 65-3.16 [a] [12]) be pleaded with particularity pursuant to CPLR 3016 (b) (see generally V.S. Med. Servs., P.C. v Allstate Ins. Co., 25 Misc 3d 39 [App Term, 2d, 11th & 13th Dists 2009]). In addition, while mere conclusory allegations are never sufficient to obtain discovery with respect to a Mallela-based defense, defendant’s motion papers were sufficient to demonstrate that a Mallela-based defense [*3]was potentially meritorious.

Plaintiff’s motion for a protective order, filed nearly four months after defendant had served its supplemental discovery, was untimely (see CPLR 3122 [a]; Fair Price Med. Supply Corp. v ELRAC Inc., 12 Misc 3d 119, 122 [App Term, 2d & 11th Jud Dists 2006]). The failure of a party to timely challenge the propriety of discovery demands normally “obligate[s] [it] to produce the information sought” (New Era Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co., 24 Misc 3d 134[A], 2009 NY Slip Op 51396[U], *2 [App Term, 9th & 10th Jud Dists 2009]; see Fausto v City of New York, 17 AD3d 520, 522 [2005]), with the exception of items which are palpably improper or privileged (see Fausto, 17 AD3d at 522; Marino v County of Nassau, 16 AD3d 628 [2005]). As most of the discovery demands were not palpably improper or privileged, and in light of plaintiff’s failure to provide any discovery, the judgment, insofar as appealed from, dismissing the complaint in the case at bar is affirmed.

In view of the foregoing, we pass on no other issue.

Golia, J.P., Pesce and Steinhardt, JJ., concur.

SUPREME COURT OF THE STATE OF NEW YORK

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

Appeal from a judgment of the Civil Court of the City of New York, Kings County (Robin S. Garson, J.), entered August 12, 2009. The judgment, entered pursuant to an order of the same court dated June 8, 2009 granting plaintiff’s motion for summary judgment, awarded plaintiff the principal sum of $1,204.50.

ORDERED that the judgment is reversed, without costs, the order dated June 8, 2009 is vacated, and plaintiff’s motion for summary judgment is denied.

In this action by a provider to recover assigned first-party no-fault benefits for medical supplies furnished to its assignors who were allegedly injured in a motor vehicle accident, defendant moved for summary judgment dismissing the complaint on the ground that it had not issued an insurance policy to the person who purportedly owned the vehicle involved in the accident, and that, therefore, there was no coverage. Plaintiff opposed the motion, and the Civil Court (Alice Fisher Rubin, J.), in an order entered September 12, 2007, denied the motion on the ground that triable issues of fact exist. Thereafter, plaintiff moved for summary judgment, and defendant argued in opposition to the motion that the motion should be denied since the September 12, 2007 order had already determined that there were triable issues of fact. Defendant’s opposition papers consisted of essentially the same documentation that had been submitted to the court in support of its own motion for summary judgment, i.e., a police accident report indicating that plaintiff’s assignor, Reuven Hafizov, was the operator of a vehicle registered to Aharon Shimonov and insured by defendant; a copy of an application for no-fault benefits seeking benefits under a purported policy issued to the purported policyholder under a purported policy number; claim denial forms denying the bills received by defendant because defendant’s records indicated that Aharon Shimonov did not have a policy with defendant; and an affidavit of a claims representative stating that a search of defendant’s records revealed that State Farm did not issue an insurance policy to Aharon Shimonov under the purported policy number. In an order dated June 8, 2009, the Civil Court (Robin S. Garson, J.) granted plaintiff’s motion, finding that plaintiff had established its prima facie entitlement to summary judgment and that defendant had failed to raise a triable issue of fact, since it had failed to describe what steps were [*2]undertaken to search its databases in order to determine that there was no policy. A judgment was subsequently entered in favor of plaintiff, from which defendant appeals.

Since defendant raised no issue in the Civil Court or on appeal with respect to plaintiff’s establishment of its prima facie case, we do not pass on the propriety of the Civil Court’s determination with respect thereto. With regard to defendant’s contention that the Civil Court violated the law of the case doctrine, even if this contention is correct, this court is not bound by that doctrine and may consider the motion on its merits (see Meekins v Town of Riverhead, 20 AD3d 399 [2005]).

In our opinion, while defendant’s proof did not establish as a matter of law that there was a lack of coverage (see Hospital for Joint Diseases v Allstate Ins. Co., 21 AD3d 348 [2005]; Vincent Med. Servs., P.C. v New York Cent. Mut. Fire Ins. Co., 21 Misc 3d 142[A], 2008 NY Slip Op 52442[U] [App Term, 2d & 11th Jud Dists 2008]), it was sufficient to raise a triable issue of fact with respect to the existence of coverage (see Hospital for Joint Diseases, 21 AD3d 348). Contrary to the finding of the Civil Court, defendant was not required to describe in detail the steps which it had taken in searching its records in order to demonstrate that there was no coverage in effect at the time of the accident (see Lenox Hill Radiology v Government Empls. Ins. Co., 28 Misc 3d 141[A], 2010 NY Slip Op 51638[U] [App Term, 1st Dept 2010]). 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.

Pesce, P.J., Weston and Rios, JJ., concur.
Decision Date: April 22, 2011

Supreme Court, Nassau County

9018/04

Michele M. Woodard, J.

Papers Read on this Motion:

Plaintiff’s Amended Notice of Motion06

Defendants’ Oppositionxx

Plaintiffs’ Replyxx

Defendant’s Notice of Supplemental Authorityxx

Defendant’s Notice of Motion08

Defendant’s Memorandum of Lawxx

Plaintiff’s Affirmation in Oppositionxx

Plaintiff’s Memorandum of Lawxx

Defendant’s Reply Memorandumxx

Plaintiff’s Reply Memorandum of Lawxx

In motion sequence number six, Plaintiff-Intervenors, Amer-A-Med Products, Inc., [hereinafter Amer-a-Med] and Meditek, Inc. [hereinafter Meditek], move pursuant to CPLR §3211(a)(5), (6), (7) and (10), as well as CPLR §3211(b), for an order dismissing the counterclaims and certain affirmative defenses as are asserted by defendant, Allstate Insurance Company [hereinafter Allstate].

Defendant, Allstate, moves pursuant to CPLR §902, for an order dismissing the plaintiffs’ [*2]class allegations (Sequence No.08).

Factual & Procedural Background

Globe Surgical Supply [hereinafter Globe], is a provider of Durable Medical Equipment [hereinafter DME] (see Bell Affirmation in Support at ¶4). Globe is the former proposed class representative in the underlying putative class action, the substance of which is alleged breach of contract due principally to Allstate’s “illegal reduction of reimbursements made to Globe and putative class members who submitted No-Fault claims” (see Bell Affirmation in Support at ¶4). Said reductions were allegedly in violation of Insurance Law §5101, as well as 11 NYCRR 65.10, the latter of which was the relevant insurance regulation in effect at the time of the purported illegal reductions (id.).

By order dated April 24, 2007, this Court denied an application interposed by Globe, which sought class certification pursuant to Article 9 of the CPLR (id. at ¶5; see also Exh. A). On April 21, 2009, the Appellate Division, Second Department, held that “Globe Surgical Supply, as assignee of Charles Charlotin, met all of the class certification prerequisites in the instant matter except adequacy of representation” (id. at Exh. A). Accordingly, the Appellate Division modified this Court’s decision dated, April 24, 2007, and held that the branch of Globe’s application for class certification “should have been denied without prejudice to renewal” (id.).

Thereafter, Allstate moved for summary judgment dismissing the complaint in response to which Amer-a-Med and Meditek cross-moved for an order granting leave to intervene so as to facilitate a renewal application for class certification (id. at ¶8; see also Exh. F). Simultaneously with their cross-application, Amer-a-Med and Meditek served an Amended Class Action Complaint [hereinafter the Complaint] (id. at ¶8; see also Exh. E). On December 15, 2009, this Court denied Allstate’s application and granted the motion interposed by Amer-a-Med and Meditek, for leave to intervene and ordered that said intervenors be substituted as party plaintiff’s so as to permit renewal of the application for class certification (id. at ¶9; see also Exh. F).

A review of the Complaint indicates that Amer-a-Med and Meditek are each suppliers of DME and provided same to their respective assignors (see Bell Affirmation in Support at Exh. E at ¶¶3, 4, 22). In connection therewith, Amer-a-Med and Meditek each obtained assignments from the assignors and together with same filed various claims with Allstate for reimbursement in relation to the DME provided (id. at ¶¶23-32). The plaintiffs allege that notwithstanding the submission of the requisite documentation, Allstate did not reimburse them for the amounts claimed and rather unilaterally reduced same by adjusting the amounts to conform to the “prevailing rates in the geographic location of the provider” (id.). The plaintiffs further allege that these unilateral reductions undertaken by Allstate are in direct contravention of “Part E of the Twenty-Third Amendment to Regulation No. 83 (11 NYCRR 68)”^[FN1] (id. at ¶¶ 10, 20).

On January 28, 2010, Allstate filed an Answer in response to the within Complaint, the contents of which did not contain any counterclaims (id. at ¶10). Thereafter, on February 16, [*3]2010, Allstate filed an Amended Answer, which contained various affirmative defenses and counterclaims (id. at ¶11; see also Exh. G). The instant applications, respectively interposed by the moving parties herein, thereafter ensued and are determined as set forth hereinafter.

Application by Amer-a-Med and MeditekThe Court initially addresses the application interposed by Amer-a-Med and Meditek, which seeks dismissal of the counterclaims and affirmative defenses interposed by Allstate.

A review of the Amended Answer dated, February 16, 2010, reveals that Allstate has asserted five counterclaims, the first of which sounds in common law fraud, the second and third of which are predicated upon the federal Rackateer Influenced and Corrupt Organizations statute, the fourth of which is predicated upon §349 of the General Business Law, and the fifth of which is for unjust enrichment (see Bell Affirmation in Support at Exh. G).

Fraud

With respect to Allstate’s first counterclaim, sounding in fraud, counsel for the plaintiffs contend, inter alia, that the applicable statute of limitations has expired warranting dismissal thereof (see Plaintiffs’ Memorandum of Law in Support at pp.13-15; see also Plaintiffs’ Reply Memorandum of Law at pp. 4-11).

In order to allege a cause of action sounding in common law fraud, the complaint must allege the following: the defendants made a material representation; the material representation was false; the defendants knew it was false and made it with the intention of deceiving the plaintiff; the plaintiff believed the representation to be true and justifiably acted in reliance thereon; and the plaintiff is damaged as a result thereof (Small v Lorillard Tobacco Co., Inc., 94 NY2d 43 [1999]). “In order to plead a prima facie case of fraud, a plaintiff must allege each of the elements of fraud with particularity and must support each element with an allegation of fact” (Fink v Citizens Mortg. Banking Ltd., 148 AD2d 578 [2d Dept 1989]; CPLR §3016[b]).

A cause of action sounding in fraud must be commenced within the six years following the date upon which the cause of action accrued or within the two years after the time during which the plaintiff could have discovered the fraud withdue diligence (Town of Poughkeepsie v Espie, 41 AD3d 701 [2d Dept 2007]; see also Espie v Murphy, 35 AD3d 346 [2d Dept 2006]). A cause of action which alleges fraud accrues at that point in time when the plaintiff is in possession of knowledge of the facts from which the alleged fraud “could have been discovered with reasonable diligence” (id.; see also Northridge Ltd. Partnership v Spence, 246 AD2d 582 [2d Dept 1998]). The party seeking the benefit of the discovery exception to the six-year statute of limitations bears the burden of demonstrating that the fraud could not have been previously discovered (Siler v Lutheran Social Services of Metropolitan NY, 10 AD3d 646 [2d Dept 2004]; Hillman v City of New York, 263 AD2d 529 [2d Dept 1999]; Lefkowitz v Appelbaum, 258 AD2d 563 [2d Dept 1999]).

In the instant matter, a review of the Amended Answer reveals that Allstate sets forth numerous allegations of fraudulent activity undertaken by the plaintiffs herein, the last of which was on November 7, 2003. Relying upon this date, counsel for the plaintiffs argues that as the within counterclaim was not commenced until February 16, 2010, same is barred by the applicable statute of limitations (see Plaintiffs’ Memorandum of Law at pp. 13-15; see also Plaintiffs’ Reply Memorandum of Law at pp.4-11). [*4]

In opposing this branch of the plaintiffs’ application, counsel for Allstate initially argues that said defendant has sufficiently alleged facts which detail an “ongoing scheme,” which resulted in Allstate remitting payments to the plaintiffs between 1999 through 2008, and accordingly the fraud-based claims are within the applicable statute of limitations (see Allstate’s Memorandum of Law at pp. 10-15; see also Allstate’s Amended Answer at ¶163). Counsel further posits that it was not cognizant of the plaintiffs’ fraudulent scheme until they sought leave to intervene herein, at which time Allstate “was able to piece together facts regarding the ownership and interrelationship between plaintiffs, their owners and other entities and individuals, and the general nature of plaintiffs’ conduct” (see Allstate’s Memorandum of Law at p. 11).

In addition to the foregoing, counsel for Allstate further argues that as the subject counterclaims “arise out of the same transactions that form the basis of the claims asserted in plaintiff’s complaint” interposed in March of 2004, by operation of CPLR §203(f), said counterclaims are deemed timely (id. at p. 15).

In the instant matter, a review of the voluminous allegations contained in Allstate’s Amended Answer indeed demonstrates that the most recent date upon which the plaintiffs engaged in fraudulent conduct was November 7, 2003, clearly more than six years prior to the interposition of the counterclaim sounding in fraud (Town of Poughkeepsie v Espie, 41 AD3d 701 [2d Dept 2007], supra; CPLR §213[8]). Here, while Allstate asserts that it was unaware of the plaintiff’s fraudulent activities until they sought leave to intervene, this Court finds said argument unavailing (id.; Northridge Ltd. Partnership v Spence, 246 AD2d 582 [2d Dept 1998], supra). Allstate itself asserts that since 1999 through 2008, it paid the plaintiffs substantial payments. Accordingly, that Allstate did not detect any indicia of fraudulent conduct on the part of either of the plaintiffs during those ensuing nine years demonstrates, in this Court’s view, that Allstate did not exercise any diligence in attempting to discover the alleged fraud ( Town of Poughkeepsie v Espie, 41 AD3d 701 [2d Dept 2007], supra; see also Espie v Murphy, 35 AD3d 346 [2d Dept 2006], supra).

Finally, with respect to Allstate’s opposition arguments predicated upon CPRL §203[f], said statute provides that “[a] claim asserted in an amended pleading is deemed to have been interposed at the time the claims in the original pleading were interposed, unless the original pleading does not give notice of the transactions, occurrences, or series of transactions or occurrences, to be proved pursuant to the amended pleading.”

Here, Allstate’s original Answer does not contain any counterclaims against either Amer-A- Med, Meditk, or the particular assignors upon which the plaintiffs’ claims are predicated. Thus, the original answer could not have given any notice to the plaintiffs as to the “the transactions, occurrences, or series of transactions or occurrences, to be proved pursuant to the amended pleading (id.; Padua v Falow, 230 AD2d 834 [2d Dept 1996]; In Re David Nelson, M.D., 303 AD2d 499 [2d Dept 2003]).

Based upon the foregoing, Allstate’s counterclaim sounding in common law Fraud is hereby dismissed.

RICO Statute

The defendants’ Second and Third counterclaims are predicated upon violations of 18 USC §1962[c] and 18 USC §1962[d] of the Racketeer Influenced and Corrupt Organizations statute [hereinafter the RICO statute]. The elements which comprise civil RICO claims are “(1) conduct (2) of an enterprise (3) through a pattern * * * (4) of racketeering activity” Podraza v Carriero, 212 AD2d 331 [4th Dept 1995] quoting Sedima, S.P.R.L. v Imrex, Co., 473 US 479 [1985] at 496). The statute of limitations applicable to civil RICO actions is four years (Niagra Mohawk Power Corporation v Freed, 265 AD2d 938 [4th Dept 1999]). Such an action does not accrue “until a plaintiff both knows, or should have known, of the injury to business or property, and that the predicate act causing injury is part of a pattern of racketeering activity” (id. quoting Podraza v Carriero, 212 AD2d 331 [4th Dept 1995], supra). The term enterprise is defined by the statute as “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity” (18 USC §1961[4]). The term “racketeering activity” includes various offenses including, mail fraud, in which Allstate has accused the plaintiffs of having engaged (id.).In support of the instant application, counsel for the plaintiffs sets forth numerous arguments including that the actions predicated upon the RICO statute are barred by the applicable statute of limitations (see Plaintiffs’ Memorandum of Law at pp. 16-17; see also Plaintiffs’ Reply Memorandum of Law at pp. 12-13).

In opposing the application, Allstate asserts that it has sufficiently alleged an ongoing scheme engaged in by the plaintiffs so as to defraud Allstate and that such scheme continued “at least until 2008”, which is well within the statutory period (see Defendant’s Memorandum of Law at pp. 19-23). Allstate additionally argues that whether the RICO claims are timed barred is a factual determination not susceptible to resolution herein (id. at pp.20, 21). To this point, Allstate posits that it could not have discovered the fraudulent scheme until the ensuing investigation, which occurred after the plaintiffs intervened herein (id. at p23).

Having reviewed Allstate’s voluminous Amended Answer, this Court finds that said defendant has sufficiently alleged an ongoing scheme undertaken by the plaintiffs and has raised factual questions vis a vis when it knew or should have known of the purported existence of a pattern of racketeering (Niagra Mohawk Power Corporation v Freed, 265 AD2d 938 [4th Dept 1999], supra; Podraza v Carriero, 212 AD2d 331 [4th Dept 1995], supra). Accordingly, that branch of the plaintiffs’ application which seeks dismissal of the defendant’s counterclaims predicated upon the RICO statute is hereby denied.

General Business Law §349

General Business Law §349 (a) declares as unlawful “[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state.” In order for a plaintiff to establish a prima facie case under the statute, he or she must demonstrate that the challenged act or practice of the defendant was consumer-oriented, that it was misleading in a material way, and that the plaintiff suffered injury as a result of the deceptive act (Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20 [1995]). A cause of action alleging violations of the statute is governed by a three-year statute of limitations (Gaidon v Guardian Life Insurance Company of America, 96 NY2d 201 [2001] ). Such an action accrues “when all of the factual circumstances necessary to establish a right of action have occurred, so that the plaintiff would be entitled to relief” (id.). [*6]

As extrapolated from the Amended Answer, Allstate alleges that the plaintiffs herein engaged in deceptive acts in violation of the statute and that “each separate bill, invoice, letter and report submitted to Allstate [by the plaintiffs] constituted a separate violation” of the statute (see Verified Answer at ¶¶172,173). The defendant further alleges that it “has been damaged by the actions of Meditek and Amer-A-Med in that Allstate has made substantial payments to Meditek totaling $305,000 and to Amer-A-Med totaling $56,229” (id. at ¶177).

In moving for dismissal thereof, counsel for the plaintiff again argues for dismissal on several bases including that said claims are barred by the applicable statute of limitations (see Plaintiffs’ Memorandum of Law at pp. 17; see also Plaintiffs’ Reply Memorandum of Law at p.13 -14).

In the instant matter, while Allstate generally asserts that between 1999 and 2008 it paid the sums of $305,000 and $56,229 to Meditek and Amer-A-Med, respectively a careful review of the factual allegations contained in the Amended Answer indicates that the last bill received by either of these plaintiffs was on November 7, 2003, which is clearly more than three years prior to the commencement of the subject counterclaim (Gaidon v Guardian Life Insurance Company of America, 96 NY2d 201 [2001], supra). Accordingly, the counterclaim is hereby dismissed (id.).

Unjust Enrichment

A cause of action sounding in unjust enrichment is governed by a six-year statute of limitations and accrues “upon the occurrence of the wrongful act giving rise to a duty of restitution” (Congregation Yetev Lev D’Satmar v 26 Adar N.B. Corp., 192 AD2d 501 [2d Dept 1993]; CPLR §213[1]). As noted above, the most recent allegation of wrongdoing undertaken by the plaintiff’s herein was on November 7, 2003 and more than six years prior to the commencement of the subject counterclaim (id.). Accordingly, the counterclaim is hereby dismissed.

Affirmative Defenses

The Court now addresses that branch of the plaintiff’s application which seeks dismissal of Allstate’s affirmative defenses numerically denominated ¶¶53, 54, 55, 61, 62, 63, 76, 77, 78, 81 and 82 (see Bell Affirmation in Support at ¶2).

CPLR §3211(b) provides that a party may move for judgment dismissing one or more defenses on the basis that a defense is not stated or has no merit. When entertaining such an application, “the defendant is entitled to the benefit of every reasonable intendment of the pleading, which is to be liberally construed” (Abney v Lunsford, 254 AD2d 318 [2d Dept 1998]). Where there is any doubt as to the availability of the defense, it should not be dismissed (Warwick v Cruz, 270 AD2d 255 [2d Dept 2000]; Fireman’s Fund Ins. Co. v Farrell, 57 AD3d 721 [2d Dept 2008]).

Within the context of the no fault statutory scheme, upon receipt of the requisite claims forms, an insurance carrier is required to pay or deny the claim within 30 calendar days thereafter (Hospital for Joint Diseases v Travelers Property Cas. Ins. Co., 9 NY3d 312 [2007]; Fair Price Medical Supply Corp. v Travelers Indem. Co., 10 NY3d 556 [2008] ). If an insurance company fails to properly deny a claim within this 30-day period, is it “generally precluded from asserting [*7]a defense against payment of the claim” (Hospital for Joint Diseases v Travelers Property Cas. Ins. Co., 9 NY3d 312 [2007], supra; see also Presbyterian Hosp. in City of New York v Maryland Cas. Co., 90 NY2d 274 [1997] at 283-283). However, the Courts have set forth a narrowly circumscribed exception to the rule of preclusion where the insurance carrier has raised a defense sounding in lack of insurance coverage (Central General Hospital v Chubb Group of Ins. Cos., 90 NY2d 195 [1997]). Under such circumstances, “an insurer who fails to issue a timely disclaimer is not prohibited from later raising the defense because the insurance policy does not contemplate coverage in the first instance, and requiring payment of a claim upon failure to timely disclaim would create coverage where it never existed'”(Hospital for Joint Diseases v Travelers Property Cas. Ins. Co., 9 NY3d 312 [2007], supra at 318 quoting Matter of Worcester Ins. Co., v Bettenhauser, 95 NY2d 185 [2000]).

Informed by the foregoing general legal principles, the Court now turns to the various affirmative defenses alleged by Allstate. In paragraph denominated “53”, Allstate alleges that the “[p]laintiffs and other members of the purported class may be barred, in whole or in part, from recovery to the extent that they failed to provide the DME prescribed to the claimants, yet billed Allstate for that equipment” (see Bell Affirmation in Support at Exh. G).

In Fair Price Medical Supply Corp. v Travelers Indemnity Company, the Appellate Division, Second Department, held that a defense predicated upon a providers failure to furnish the supplies for which it billed is not one grounded in lack of coverage and “is more akin to a claim of overbilling (albeit an extreme form thereof)” (42 AD3d 277 [2d Dept 2007] at 283 affd 10 NY2d 556 [2008]). That Court went on to hold that while a defendant is entitled to challenge such a claim as being fraudulent, it was required to do so within the 30 days following submission of the claim (id. at 286; Globe Surgical Supply v Geico Insurance Company, 59 AD3d 129 [2008]; see also Central General Hospital v Chubb Group of Ins. Cos., 90 NY2d 195 [1997], supra). Here, as Allstate failed to raise the defense within the 30 days following the receipt of the relevant claim forms, it is therefore precluded from asserting same herein (id.). Based upon the foregoing, the affirmative defense as is alleged in paragraph “53”, is hereby dismissed.

In the paragraph denominated “54”, the defendant alleges that the “[p]laintiffs and other members of the purported class may be barred, in whole or in part, from recovery to the extent that they have failed to document their costs as required by Regulation 83, codified at 11 NYCRR §68.3, Appendix 17-C, Part E(b)(1).” Here, in this Court’s view, the substance of Allstate’s defense is that of overbilling in connection to the costs attendant to the DME provided. The courts have held that overbilling is not the equivalent of a defense predicated upon lack of coverage and to preserve such a defense, an insurer must raise same within the 30 days following receipt of the claim (Fair Price Medical Supply Corp. v Travelers Indemnity Company, 10 NY3d 556 [2008] at 564-565; Central General Hospital v Chubb Group of Ins. Cos., 90 NY2d 195 [1997], supra at 199). Thus, as Allstate failed to raise this defense within the 30-day time frame, it is precluded from doing so herein and accordingly this defense is dismissed.

In the paragraph denominated “55”, Allstate claims that the “[p]laintiffs and other members of the purported class may be barred, in whole or in part, from recovery, to the extent alleged assignments to them from the alleged Allstate insureds are invalid or non-existent.” The [*8]Court of Appeals has specifically held that “any defect in [an] assignment * * * simply does not implicate a lack of coverage defense warranting exemption from the exclusion rule” (Hospital for Joint Diseases v Travelers Property Cas. Ins. Co., 9 NY3d 312 [2007], supra at 319). Therefore, as Allstate failed to assert said defense within the statutorily required time frame following the submission of the claims, it is precluded from raising said defense herein and accordingly same is dismissed (id.).

In paragraph “61”, Allstate alleges that “[s]ome or all of plaintiffs’ claims are barred by the doctrine of unclean hands.” Here, said defense is essentially one which alleges fraudulent conduct undertaken by the plaintiffs. While the Court is cognizant that an insurance carrier may indeed challenge suspected fraudulent activity, it must nonetheless do so with in the time period prescribed by the no fault statutory scheme ( Fair Price Medical Supply Corp. v Travelers Indemnity Company, 42 AD3d 277 [2d Dept 2007] at 286). Accordingly, as Allstate failed to allege said defense within the 30 days following receipt of the relevant claims, it is precluded from raising same herein and the defense is dismissed (id; Presbyterian Hosp. In City of New York v Maryland Cas. Co., 90 NY2d 274 [1997]).

In the paragraph denominated “62”, Allstate alleges that “[p]laintiff’s and other members of the purported class may be barred, in whole or in part, from recovery to the extent that the costs do not arise from a bona fide, arm’s-length transaction and for failure to document costs as required by the New York State Insurance Department.” As with the foregoing, the defense alleged herein essentially claims fraudulent conduct on the part of the plaintiffs. However, as noted above, given Allstate’s failure to allege same within the 30 days following receipt of the relevant claim forms, it is precluded from asserting said defense herein (id.). Accordingly, the affirmative defense is hereby dismissed.

In paragraph “63”, Allstate sets forth that the “[p]laintiffs and other members of the purported class may be barred, in whole or in part, from recovery to the extent they have engaged in fraud against defendants, by, inter alia: (1) charging grossly inflated prices for DME they purportedly sold to claimants, often up to three times the price for which the equipment could have been purchased in a bona fide, arm’s-length transaction in the commercial market place, (2) submitting false documentation’ of their costs for DME supplied to Allstate’s insured for the sole purpose of supporting grossly inflated prices charged for DME and collecting fraudulent charges from Allstate, (3) relying on recycled invoices from wholesale supplies to support claims that specific items of DME were purportedly provided to specific claimants, when, in fact, those specific items of DME were not provided to the specific claimant; and (4)staging accidents.”

With respect to those allegations surrounding overbilling and recycling of invoices, same have been held not to constitute a defense predicated upon lack of coverage (Globe Surgical Supply v Geico Insurance Company, 59 AD3d 129 [2008], supra at 142). Accordingly, as Allstate has failed to previously raise same, it is precluded from asserting said defenses herein (id.). With respect to the assertions that various of the accidents were “staged,” such an allegation must be “premised on the fact or founded belief that the alleged injury does not arise out of an insured incident” (see Mount Sinai Hospital v Triboro Coach Inc., 263 AD2d 11 [2d Dept 1999]at 19). The burden is on the insurance carrier to come forth with admissible evidence, which either demonstrates that there is in fact no coverage or evidence which supports the insurer’s [*9]belief that there is no coverage (id.). Here, Allstate has failed to meet this burden (id.). The Court notes that in opposing the plaintiffs’ instant application, counsel for Allstate provides an affidavit from a Mr. D’Amato, who is employed as a claims examiner for the defendant (see Short Affirmation in Opposition at Exh.4 at ¶2). However, the substance of said affidavit does not support the “staging” of accidents but rather chronicles various instances in which the plaintiffs herein purportedly utilized fraudulent invoices (id. at ¶¶7, 10, 14, 16, 17). Accordingly, based upon the foregoing, the affirmative defense as set forth in paragraph “63”, is hereby dismissed.

In paragraph “76”, Allstate alleges that “[t]here is no coverage under the No Fault law for the DME at issue in this matter.” Initially, the Court notes that such a defense is contradicted by the record given that Allstate partially reimbursed the plaintiff for some of the equipment provided (CPLR §3211[b]). Moreover, said defense essentially asserts that the DME provided was excepted from the coverage provided under the no fault statute. However, an exception from coverage is not the equivalent of a lack of coverage, and accordingly as Allstate failed to assert same within the 30 days following the receipt of claim, it is hereby precluded from asserting same herein and the defense is dismissed (Fair Price Medical Supply Corp. v Travelers Indemnity Company, 42 AD3d 277 [2d Dept 2007], supra at 283-284).

In paragraph “77”, Allstate states that “[a]ny benefits available to the plaintiffs and other members of the putative class are expressly conditioned and limited by the terms, conditions, limits and provisions of the insurance policies at issue, which may preclude recovery on such claims.” Here again, the essence of this defense appears to be that certain of the DME provided may be accepted from the insurance polices is issue. However, as noted above, an exception to coverage is not the equivalent to a lack of coverage and thus given Allstate’s failure to assert same within the statutory time frame, it is precluded from raising same herein and the defense is dismissed (id.).

In paragraph “78”, Allstate alleges that “Amer-A-Med and Meditek engaged in misrepresentations and fraud in an effort to conceal the true wholesale cost of the DME they billed to Allstate” and that “Amer-A-Med and Meditek set forth invoices from Impact and Nutekmed, identifying Impact and Nutekmed as the wholesalers, and Amer-A-Med and Meditek, then based their markup upon these invoices.” Allstate further alleged that “Amer-A-Med and Meditek, however, did not engage in arm’s-length transactions with Nutekmed and Impact.” This defense alleges overbilling on the part of the plaintiff’s. However, as noted herein above, overbilling is not equivalent to a defense predicated upon lack of coverage and accordingly as Allstate failed to allege same within the 30 days following the receipt of the claims, the defense is dismissed (Globe Surgical Supply v Geico Insurance Company, 59 AD3d 129 [2008], supra at 142).

Paragraph 81 states the “[p]laintiffs engaged in improper self-referrals and referrals between affiliated entities” Such potential fraudulent action on the part of the plaintiff’s, even if true, is not a defense-based lack of coverage for the subject incidents in which the assignors were involved (Fair Price Medical Supply Corp. v Travelers Indemnity Company, 42 AD3d 277 [2d Dept 2007], supra). According, the failure of Allstate to assert same within the 30 days after receipt of the relevant claims, requires dismissal thereof.

Finally, with respect to paragraph denominated “82”, Allstate alleges that it “specifically [*10]asked plaintiffs for verification by requesting copies of original invoices and/or manufacturer’s invoices.” Here again, said defense goes to issues surrounding overbilling and recycling of invoices, both of which must be asserted within the 30 days following receipt of the relevant claims ( Globe Surgical Supply v Geico Insurance Company, 59 AD3d 129 [2008], supra at 142). Given Allstate’s failure to do so, the defense is dismissed (id.).

Allstate’s Cross-Application

The Court now addresses Allstate’s cross-application for an order pursuant to CPLR §902 dismissing the plaintiffs’ class allegations. In support thereof, counsel contends that as the plaintiffs have failed to move for class certification within the sixty days following Allstate’s service of its responsive pleading, the class allegations must be dismissed (see Zevgaras Affirmation in Support at ¶5;see also Defendant’s Memorandum of Law in Support).

CPLR §902 provides, in relevant part: “within sixty daysafter the time to serve a responsive pleading has expired for all persons named as defendants in an action brought as a class action, the plaintiff shall move for an order to determine whether it is to be so maintained.” In interpreting the statute, the Court of Appeals stated that “[t]he explicit design of Article 9 * * *, is that a determination as to the appropriateness of class action relief shall be promptly made at the outset of the litigation.” (O’Hara v Del Bello, 47 NY2d 363[1979] at 368; Alexander, Practice Commentaries, McKinney’s Cons Law of NY, Book 7B, CPLR C902:1).

In opposing the application, counsel for Amer-a-Med and Meditek contends that given the status of said plaintiffs as named defendants vis a vis the counterclaims asserted against them by Allstate, their time in which to interpose a responsive pleading has yet to begin as their dismissal applications are still pending (see Bell Affirmation in Opposition at ¶¶10, 11, 12). Counsel further argues that as the plaintiffs time in which to serve an Answer has yet to commence, the sixty-day period for moving for class certification has not yet expired (id.).

In the matter sub judice, the Court finds the argument posited by plaintiffs’ counsel unpersuasive and notes that no legal authority has been provided to support his position. Moreover, the counterclaims interposed by Allstate do not seek class relief and, as such, neither Amer-A-Med nor Meditek are defendants in a class action (CPLR§ 902). Accordingly, pursuant to CPLR §902, the plaintiffs were required to move for class certification within the sixty days following the service of Allstate’s Amended Answer (id.). As they have failed to do so, Allstate’s instant application, which

seeks an order dismissing the plaintiffs’ class allegations, is hereby Granted.

All applications not specifically addressed herein are Denied. It is hereby

ORDERED, that the previously issued stay is hereby vacated. It is further

ORDERED, that the parties are directed to appear for a Compliance Conference on May 10, 2011 at 11:00 a.m.

This constitutes the Decision and Order of the Court.

DATED:April 18, 2011

Mineola, NY 11501 [*11]

ENTER:_______________________________

HON. MICHELE M. WOODARD

J.S.C.

Footnotes

Footnote 1: Former Part E regulated and prescribed the amount of reimbursement to providers of DME and stated the following: “For medical equipment and supplies (e.g. TENS units, soft cervical collars) provided by a physician or medical equipment supplier, the maximum permissible charge is 150 percent of the documented costs of the equipment to the provider.”