Civil Court, Kings County

95623/04

Delores J. Thomas, J.

In this action brought by a health care provider to recover no-fault benefits as assignee of Alex Zubaty, plaintiff moves for an order granting summary judgment against defendant in the sum of $540.00 plus statutory interest together with statutory attorney’s fees.

The No-Fault Law provides for payments for medical supplies provided to a person injured as a result of an accident arising out of the use or operation of a motor vehicle. To recover first-party benefits, a claimant must demonstrate a prima facie entitlement to summary judgment by setting forth proof that it submitted a claim, the fact and amount of losses sustained and that payment of benefits is overdue (see Insurance Law § 5106 [a]; Mary Immaculate Hosp. v. Allstate Ins. Co., 5 AD3d 742 [2d Dept 2004]).

It is undisputed that defendant did not pay or deny the claim within the required 30-[*2]day period. Plaintiff contends there was no extension of the time period through verification requests. Although defendant requested an examination under oath (EUO), unless defendant can establish that the policy in effect entitled defendant to conduct an EUO and that it made a timely and proper verification request, tolling does not occur. Policies issued on or after April 5, 2002 must contain the revised prescribed endorsement to entitle the insurer to conduct an EUO (see, SZ Medical P.C. v. State Farm Mutual Auto Ins. Co., 9 Misc 3d 139 [A], 2005 NY Slip Op 51842 [U] [App Term, 1st Dept 2005]). Here, defendant has not demonstrated any basis to toll the 30-day period.

An untimely denial precludes defendant from interposing most defenses including the defense of lack of medical necessity (Amaze Med. Supply Inc. v. Eagle Ins. Co., 2 Misc 3d 139 [A], 2004 NY Slip Op 050279 [U] [App Term, 2d & 11th Jud Dists 2004]). However, defendant is not precluded from asserting the defense that the injuries do not arise out of a covered accident or a defense premised on staged accident fraud (see, Central Gen. Hosp. v. Chubb Group of Ins. Cos., 90 NY2d 195 [1997]; Metro Med. Diagnostics v. Eagle Ins. Co., 293 AD2d 751 [2nd Dept 2002]). However, to withstand a motion for summary judgment, defendant must raise a triable issue of fact (Alvarez v. Prospect Park Hospital, 68 NY2d 320 [1986]).

The denial of claim form (Exhibit A, annexed to Notice of Motion) states: “All no fault benefits denied based in part on A) the EUO; B) failure to establish proof of claim; C) failure to establish that the injuries arose out of the use and operation of the insured vehicle; and D) the treatment was not causally related to the claimed injuries.” In addition, in support of its fraud defense defendant submits the affidavit of Jeffrey Billington, claims adjuster in the no-fault department of defendant insurer. Billington does not state that he is a special insurance investigator or that he is trained in fraud detection. He asserts that plaintiff received aggressive medical treatment for a “relatively minor collision” as a basis for the EUO and to support a fraud claim. Billington concludes there is a “discernable pattern of circumstances and conduct consistent with staging of an accident.” He refers to the fact that the assignor sought treatment six days after the accident from a provider other than his personal doctor, that he was referred to get an MRI on an initial visit and that he was involved in a prior accident (four years ago) which was settled by the same attorney now representing plaintiff.

The insurer has the burden to come forward with proof in admissible form to establish the basis for its belief that there is no coverage (see, Mount Sinai Hospital v. Triboro Coach Inc., 263 AD2d 11 [2d Dept 1999]). An insurer’s “founded belief” that an accident was staged cannot be based upon unsubstantiated hypotheses and supposition (see, A.B. Medical Services v. Eagle Ins. Co., 3 Misc 3d 8 [App Term, 2d Dept 2003]). The statements made by defendant’s counsel in the affirmation in opposition, that the injuries did not arise from the accident and/or that the accident was staged, are not based on personal knowledge and are of no probative value. In addition, the Court finds the assertions made by the claims representative are insufficient to support his finding of a pattern of circumstances and conduct which constitutes fraud. Defendant’s belief that treatments were unduly “aggressive” or unnecessary might have been addressed through a defense of lack of medical necessity if there had been a timely denial. Defendant has not submitted any proof specific to the circumstances of the accident to support a “founded belief” that the accident was staged.

Accordingly, plaintiff’s motion for summary judgment is granted. The clerk is directed to enter judgment in favor of plaintiff in the sum of $540.00 together with statutory interest and attorney’s fees. [*3]

This constitutes the decision and order of the Court.

DATED: December 30, 2005

Brooklyn, New York

DELORES J. THOMAS

Judge Civil Court

—[*1]

In an action to recover no-fault medical payments under an insurance contract, the plaintiffs appeal from so much of an order of the Supreme Court, Nassau County (Cozzens, J.), April 6, 2005, as denied those branches of their motion which were for summary judgment on the first and second causes of action and granted the defendant’s cross motion for summary judgment dismissing those causes of action.

Ordered that the order is modified, on the law, by deleting the provision thereof granting that branch of the cross motion which was for summary judgment dismissing the second cause of action, and substituting therefor a provision denying that branch of the cross motion; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements, and the second cause of action is reinstated.

The Supreme Court correctly granted the branch of the defendant insurer’s cross motion which was for summary judgment dismissing the first cause of action, asserted on behalf of the plaintiff St. Vincent’s Hospital & Medical Center (hereinafter St. Vincent’s), as the defendant established that St. Vincent’s failed to submit its claim within 45 days after rendition of medical services (see 11 NYCRR 65-1.1). St. Vincent’s legal and factual arguments in opposition are without merit.

The court erred, however, in granting the branch of the defendant insurer’s cross [*2]motion which was for summary judgment dismissing the second cause of action, asserted on behalf of the plaintiff Brooklyn Hospital Center. Numerous questions of fact exist as to how this claim was processed in 2002 and again in 2004, whether it should be paid by a workers’ compensation carrier, and even the correct amount thereof. As such, neither party demonstrated its prima facie entitlement to judgment as a matter of law on the second cause of action.

The parties’ remaining contentions are without merit. Adams, J.P., S. Miller, Ritter and Lifson, JJ., concur.

Civil Court of the City of New York, Kings County

095837/04

Delores J. Thomas, J.

Petitioner, a medical services provider seeks to vacate a master arbitration award pursuant to CPLR § 7511.

Petitioner alleges that the lower arbitrator denied its claim in a decision rendered on or about March 29, 2004. Thereafter, petitioner sought to have that determination reviewed and in a decision dated June 17, 2004, the Master Arbitrator denied the request for review on the basis that the appeal was untimely. Specifically, the Master Arbitrator found that petitioner’s Notice of Appeal was postmarked April 20, 2004 (evidenced by the post mark on the envelope sent to defendant enclosing petitioner’s April 13, 2004 Notice of Intent to Appeal the lower arbitrator’s decision) and stamped received by the American Arbitration Association (“AAA”) on April 26, 2004. The Arbitrator found that as the lower award was mailed to the parties on March 29, 2004, both the April 20th mailing and the April 26th receipt date by AAA were past the twenty one (21) calendar days time frame in which the appeal had to be filed (11 N.Y.C.R.R.§ 65-4.10 [d] [2]).

Attached to the Notice of Petition is an affirmation from petitioner’s legal counsel. Counsel argues that the Notice of Appeal was timely “deposited” on April 19, 2004 and that the case should be determined on the merits. The remainder of petitioner’s counsel’s affirmation concerns the standard for reviewing arbitration awards, the necessary prima facie showing for health benefit claims and the effect of late or unsubstantiated denials by insurance carrier.

Respondent opposes the Notice of Petition and seeks its denial on several basis. First, the [*2]papers are defective in that there is no petition in support of the Notice of Petition; second, petitioner has failed to set forth valid grounds under CPLR § 7511 to review and vacate the decision; third, petitioner accepted partial payments rendered by the lower arbitrator (i.e. accord and satisfaction); and fourth, petitioner has not exhausted its administrative remedies and offers no excuse as to why it filed a late intent to appeal. In the alternative, respondent argues that in the event the lower arbitrator’s award can be reviewed, there is no basis to disturb it as the finding of facts was neither arbitrary or capricious and was supported by the weight of the evidence.

Regulations promulgated under New York State Insurance law require any request for review of an arbitration award by a Master Arbitrator be made “within 21 calendar days of the mailing of the appealable award” (11 N.Y.C.R.R. §65.-4.10[d][2]. The regulations provide that: “[t]he parties shall accept as delivery of the [arbitrator’s] award the placing of the award or a true copy thereof in the mail, addressed to the parties or their designated representatives at their last known address, or by any other form of service permitted by law. The AAA shall note on such award or transmittal letter thereof the date of mailing and keep a record of same” (11 N.Y.C.R.R.§ 65.17[b][5][xix]; see also, Calandro v. Home Insurance Co., 199 AD2d 262 [2d Dept 1993]).

Undeniably, the Master Arbitrator must initially determine if a request for review was timely made (see, Calandro v. Home Insurance Co., supra; Custen v. General Accident Fire and Life Ins. Co., 126 AD2d 256 [2d Dept. 1987]; Better Health Medical, P.C. v. M.V.A.I.C., 6 Misc 3d 1021 [A][Civ. Ct., Kings Co., 2005]; see also, Berent v. Erie County, 86 AD2d 764 [4th Dept. 1982]) and, if it was not timely, the Master Arbitrator must deny the request for review (Id.).

Since the Master Arbitrator clearly has the authority to deny the request to review upon the ground that it is untimely, in such a case “the Master Arbitrator shall in lieu of rendering an award, deny the request for review” (see, Berent v. Erie County, supra). Therefore, a precondition to judicial review pursuant to CPLR Article 75 is review of a no-fault arbitrator’s award by a Master Arbitrator (see, Ins. Law 5106[c]; Custen v. General Accident Fire and Life Ins. Co., supra). Furthermore, the Courts have recognized that the failure of a party to a “no-fault” arbitration to timely appeal to a Master Arbitrator constitutes a failure to exhaust his or her administrative remedies thereby precluding that party from obtaining judicial review of the arbitrator’s award (Custen v. General Accident Fire and Life Ins. Co., supra).

In the instant case, prior to issuing his decision, the Master Arbitrator via letter dated May 11, 2004 (Affirmation In Opposition, Exhibit E) gave petitioner an opportunity to submit a legal basis for extending the time requirements set forth in 11 N.Y.C.R.R. § 65-4.10(d)(2). Petitioner’s response was a letter dated May 26, 2004 (Affirmation In Opposition, Exhibit F) in which petitioner set forth no legal basis for extending the time or made any allegation that the request to review/appeal was mailed other than the date indicated by the post mark on the envelop submitted to the Master Arbitrator. Instead, petitioner argued a lack of authentication as to the date the lower arbitration decision was dated. More specifically, petitioner responded, “…there is no evidence to suggest that the Appellant in this case did not comply with the applicable no-fault regulations.”

Based upon the May 26, 2004 response, petitioner never averred as it does now to the Court that the request to review was “deposited” for mailing on April 19, 2004 instead of the April 20, 2004 postmark on the envelope in which the request was mailed to defendant, [*3]therefore, even assuming that this bare self serving assertion was sufficient to raise a question of mailing, this Court could not consider it as evidence because the allegation was not raised before the Master Arbitrator (see generally, Calandro v. Home Ins. Co, supra; Berent v. Country of Erie, supra).

The Court finds that petitioner has failed to demonstrate a ground pursuant to CPLR

§ 7511 to vacate the Master Arbitrator’s decision. The Court further finds that the Master Arbitrator’s determination that petitioner failed to timely appeal the lower arbitration award was not arbitrary or capricious nor a violation of petitioner’s due process rights. As petitioner failed to exhaust administrative remedies by timely appealing to the Master Arbitrator, the Court may not consider whether the lower arbitrator’s award was incorrect as a matter of law (Calandro v. Home Ins. Co., supra; Better Health Medical, P.C. v. M.V.A.I.C., supra).

Accordingly, the petition to vacate the Master Arbitrator’s award is dismissed. Notably as pointed out by respondent the Notice of Petition must be accompanied by a Petition and any supporting affidavits /affirmation’s (see CPLR § 403); however, even assuming petitioner had complied with the statutory requirements, the petition based upon the facts asserted herein would be denied for the reasons stated above; therefore the Court resolves this matter on its stated reasons and need not further address the other arguments raised by respondent.

This constitutes the decision and order of the Court.

DATED: December 22, 2005

Brooklyn, New York

DELORES J. THOMAS

Judge Civil Court

Civil Court of the City of New York, Queens County

128116/2004

For Plaintiff: Belesi & Conroy, P.C., by Wayne H. Wink, Jr., Maria Campese Diglio, Kathleen Ann Marshall, Esqs., 1225 Franklin Avenue, suite 400, Garden City, New York 11530

For Defendant: Bruno, Gerbino & Soriano, LLP, by James K. Hogan, Jeffrey S. Siegel, Vincent F. Gerbino, Oko Acquaye, Esqs., 445 Broad Hollow Road, suite 220, Melville, New York 11747

Charles J. Markey, J.

Before this Court are 12 actions seeking no fault first class benefits, involving motions for summary judgment involving plaintiff Multiquest, P.L.L.C. , and assorted cross-motions, all raising principally the same issue: should the decision of the New York Court of Appeals in State Farm v. Mallela, 4 NY3d 313 [2005] [also known in the no fault bar as “Mallela III“] be applied prospectively or retroactively. That case denied no fault benefits to plaintiff providers that were organized fraudulently. This Court has invited briefing, and, in addition to the papers on the various motions and cross motions in the 12 Multiquest actions, studied the various memoranda of law submitted by both counsel, meant to be read in all 12 actions.

In this particular action involving Multiquest, surrounding services provided to Maria Mercedes during 1999, prior to the adoption of 11 NYCRR 65-3.16(a)(12) [effective April 4, 2002]. That regulation hinges reimbursement for services based on compliance and adherence with licensing requirements.

It is a tribute to all the Judges of the Civil Court, Queens County, that although they have reached different conclusions on the issue, their opinions this year have been on the leading edge, setting the contours of the debate. The highly articulate, cogent, and well-written opinion of Judge Anna Culley in A.T. Medical, P.C. v. State Farm Mut. Ins. Co. (___Misc 3d ____, 2005 WL 2837509, 2005 NY Slip Op 254610) reasons that public policy concerns warrant denial of claims made by corporate malefactors who organize their enterprises in violation of existing law (accord, Metroscan Imaging, P.C. v. Geico, 8 Misc 3d 829 [Bernice Siegal, J.]; Multiquest , PLLC v. Allstate Ins. Co., ___Misc 3d ____, 2005 WL 2085966, 2005 NY Slip Op 25356 [Dennis Butler, J.]). Judges Culley, Siegal, and Butler of this Court thus hold that Mallela III should be applied retroactively.

In contrast, my colleague, Judge Joseph Esposito, in Multiquest, PLLC v. Allstate Insurance Co. (____ Misc 3d ___, 2005 WL 3274885, 2005 NY Slip Op 25512), in his characteristic penetrating and tight analysis, concluded that Mallela III should not be applied [*2]retroactively, especially since only a regulation is involved.

The two differing views of my colleagues both deserve attention by students of the issue because of the fine arguments made therein. In the final analysis, the undersigned agrees with Judge Esposito’s recent decision that Mallela III should not be applied retroactively.

In addition to all of the reasons stated by Judge Esposito, this Court believes that if the Court of Appeals had wanted to provide a rule of retroactivity, it was fully informed of the issue at the oral argument of Mallela III and could have determined the issue in its opinion. Of course, many reasons may play into why a court does not discuss a certain argument. Sometimes in the hope of winning unanimity or a majority, compromises are made in forging judicial consensus. Other times, an appellate court will want to see how lower courts treat an issue, thereby benefiting from their thoughts, and to see, by experience, whether any division has, indeed, occurred among lower courts.

In the present case, this Court believes that the Court of Appeals was aware of the fact that, if a rule of retroactivity were to be announced, insurers would be filing motions in thousands of no fault cases, seeking to recapture payments already made. The Court of Appeals probably thought of this possibility and decided not to stimulate such unbridled litigation to already congested motion calendars in the no fault parts.^[FN1]

Second, to apply a rule of retroactivity, in the present circumstance, should not be done lightly. Despite the method of questionable, improper, and even unethical incorporation of a plaintiff provider, services were allegedly furnished, consistent with the public policy of this State, in the expectation that a claim would be filed and that payment would be made expeditiously. Thus, as the undersigned noted in Metropolitan Radiological Imaging, P.C. v. State Farm Mut. Auto. Ins. Co. (7 Misc 3d 675, 677 [NYC Civ Ct Queens County 2005]): “The “No Fault Law” replaced the common law right to seek tort recovery with a statutory system designed to provide a quick, sure and efficient system for obtaining compensation for economic loss suffered as a result of [automobile] accidents’ (Walton v. Lumbermens Mut. Cas. Co., 88 NY2d 211, 214 [1996]).”

For a court to adopt a rule of retroactivity, under the facts of the particular circumstances, would be tantamount to imposing a rule alienating a property right. The rights of plaintiff health care providers that provided services in the expectation of filing a claim under a statutory system for the quick, expeditious handling and processing of claims would be subverted. As shown, resort to public policy principles can be a two-edged sword.

This Court holds that Mallela III should not be applied retroactively. The defendant’s motion for summary judgment is, in all respects, DENIED.

The foregoing constitutes the decision, order, and opinion of the Court.

______________________________[*3]Hon. Charles J. Markey

Judge, Civil Court, Queens County

Dated: Jamaica, New York

December 20, 2005

Footnotes

Footnote 1: In Socrates Psychological Servs., P.C. v. Progressive Cas. Ins. Co. (7 Misc 3d 642, 645 n.1 [NYC Civ Ct Queens County 2005], the undersigned noted that adjournments of routine motions in the specially created No Fault Parts already require waits of almost a year!

Civil Court, Queens County

119638/04

Diccia T. Pineda-Kirwan, J.

Upon the foregoing cited papers, and after conference, it is ordered that plaintiff’s motion for an order, pursuant to CPLR 3212, granting summary judgment is denied and defendant’s cross motion for an order, pursuant to CPLR 3212, granting summary judgment is granted and the complaint is dismissed.

Inasmuch as the adjourned date of the motion was ten months after the original return date, and inasmuch as there had been an intervening order amending defendant’s answer, on consent of the parties, all papers were accepted and the parties were permitted to submit supplemental papers briefing the remaining issues for the Court.

In order to succeed on a motion for summary judgment, the movant must tender admissible evidentiary proof demonstrating the absence of any genuine issues of material fact for trial. (CPLR 3212; Winegrad v New York University Medical Center, 64 NY2d 851 [1985].) Civil Practice Law and Rules 3212 (b) provides that a motion for summary judgment shall be supported by an affidavit by a person “having knowledge of the facts; it shall recite all the material facts; and it shall show that there is no defense to the cause of action or that the … defense has no merit.” The affirmation of an attorney, even one without personal knowledge of the facts, may serve as the vehicle for the submission of acceptable attachments which provide [*2]evidentiary proof in admissible form. (See Zuckerman v New York, 49 NY2d 557 [1980].) An attorney’s affirmation could also be accepted with respect to admissions of a party made in the attorney’s presence. (Id.) Once a prima facie showing of entitlement to judgment as a matter of law is made, the burden shifts to the nonmovant to produce evidentiary proof sufficient to establish the existence of material issues of fact which require a trial of the action. (Alvarez v Prospect Hospital, 68 NY2d 320 [1986].)

According to the annexed complaint, this is an action brought pursuant to Insurance Law 5101 et seq and the regulations of the New York State Insurance Department (11 NYCRR 65.10 et seq), to recover the cost of health care services rendered by plaintiff to its assignor, Herbert Paige, for dates of treatment in May and June 1999.

Defendant’s answer contains sixteen affirmative defenses and, by Court Order dated September 9, 2005, and on consent of the parties, the answer was amended to add two more affirmative defenses: fraud in the incorporation and that the services were provided by an independent contractor and not by plaintiff or its employee such that plaintiff is not entitled to receive direct payment from defendant.

In support of the motion, plaintiff submits an affidavit of Joseph Indelicato, Ph.D., plaintiff’s owner, in which he does not attest to personal knowledge of this claim but states that he is “fully familiar with all the policies, practices and procedures” of plaintiff. This statement, however, is insufficient to lay a foundation for the exhibits attached to the moving papers. (CPLR 4518; ; People v Kennedy, 68 NY2d 569 [1986].) Significantly, plaintiff fails to establish the mailing of its claim to defendant, a necessary element of its prima facie case. (See Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742 [2d Dept 2004; Residential Holding Corp v Scottsdale Insurance Co, 286 AD2d 679 [2d Dept 2001].)

Plaintiff has failed to tender evidence, by proof in admissible form, to establish the cause of action sufficient to warrant summary judgment. (See Zuckerman v City of New York, 49 NY2d 557 [1980].) Accordingly, as the burden does not shift to defendant on plaintiff’s prima facie case, the motion is denied without regard to the opposition. (See Winegrad v NYU Med Center, 64 NY2d 851 [1985].)

Defendant, as cross movant, argues that it is entitled to summary judgment as a matter of law on several grounds: (1) at the time services were rendered to its assignor, plaintiff’s corporate structure was defective as it did not have a psychologist as an owner and under Business Corporation Law, all professional service corporations that are licensed to practice medicine must be owned and controlled only by licensed physicians, (See BCL 1507 and 1508), (2) services were rendered by independent contractors and not an employee of plaintiff, (3) plaintiff’s billing is fraudulent, and (4) the assignment of benefits form is defective.

In support of its cross motion, defendant submits a certified examination under oath of Kathryn Clark, Psy. D., signed by the witness, in which she states that at no time did she give her consent to plaintiff to use her name as a member of the corporation as the designated [*3]psychologist of the corporation and that plaintiff did so without her knowledge and consent. Further, the witness states that she began working for plaintiff as an independent contractor towards the end of 1998 until 2000, but that she may have done very little work for plaintiff in 2001. The witness stated that she had never been an employee of plaintiff. Defendant annexes copies of Department of Treasury – IRS Form 1099 for the years 1998-2000, listing plaintiff as the “PAYER” and Dr. Clark as the “RECIPIENT,” and which provide information for each of those years in Box 7 of the form, entitled “nonemployee compensation.”

In further support of its cross motion, defendant submits plaintiff’s responses to discovery notices which include, inter alia: (1) two bills from plaintiff regarding its assignor, addressed to defendant, and which include, under plaintiff’s letterhead and type written”Kathryn L. Clark, PhD/NY Lic No.012553-1/Tax ID # 11-3450114,” (2) a “Letter of Medical Necessity Regarding Psychological Testing” and a “Psychological Assessment,” both on plaintiff’s letterhead and signed

by Kathryn L. Clark, Psy.D. regarding plaintiff’s assignor, Herbert Paige, and (3) the filing receipt from the New York State Secretary of State for “Multiquest Psychological & Acupuncture Services, PLLC” indicating that the articles of organization were filed on July 14, 1998. While plaintiff’s discovery responses do not include said articles of incorporation, a certificate of amendment of the articles of organization dated September 28, 2001 and signed by Joseph Indelicato, are included as well as a Department of the Treasury-IRS Form W9, again signed by Joseph Indelicato indicating that plaintiff’s tax payer identification number is 11-3450114, the same tax number indicated on plaintiff’ s bills for Kathryn Clark.

Defendant submits the original articles of organization, missing from plaintiff’s response, naming Kathryn Clark as an original member and manager of plaintiff corporation. In its reply papers, defendant annexes a March 2000 amendment to plaintiff’s articles of organization amending plaintiff’s name to “Multiquest Psychological, Acupuncture, Massage Therapy & Social Work Services, PLLC” and which indicates that Kathryn L. Clark is licensed to practice psychology.

The affidavit of Mike Bruno, submitted in support of the cross motion was not considered as it was executed out of state and fails include the required certificate of conformity. (CPLR 2309[c]; Real Property Law 299-a[1].) The two Opinion Letters issued by the Department of Insurance on the issue of independent contractors, also annexed to the motion, are, according to their own terms, informal and not binding on any court. (See State Farm Mut Auto Ins Co v Mallela, 372 F3d 500 [2d Cir 2004].)

Defendant argues that it is entitled to summary judgment on the basis that plaintiff was fraudulently incorporated at the time of treatment and thus not entitled to reimbursement. Plaintiff opposes the cross motion arguing that the regulations in effect at the time services were rendered did not bar payment on that basis.

Since 1973, when the New York State Legislature passed the Comprehensive Motor Vehicle Insurance Reparations Act (“No-Fault Law”), replacing common law tort [*4]remedies for the majority of injuries associated with automobile accidents the legislative purpose has been to protect the “right of an injured party to prompt and full compensation” (See L 1973, ch 13; Ins Law 5101 et seq; Gurnee v Aetna Life & Cas Co, 55 NY2d 184, 193, [1982] cert den 459 US 837 [1982].) The goal was to create a simple, efficient system that would provide prompt compensation to accident victims without regard to fault, and in that way reduce costs for both courts and insureds. (See NY Medical Soc’y v Serio, 100 NY2d 854 [2003].) The legislation, however, was considered a compromise: “prompt payment for basic economic loss to injured persons regardless of fault, in exchange for a limitation on litigation to cases involving serious injury.” (Pommels v Perez, 4 NY3d 566 [2005] citing Montgomery v Daniels, 38 NY2d 41 [1975]). This “tradeoff” allowed insurers to contest fraudulent claims but only within “a strict, short-leashed contestable period and process designed to avoid prejudice and red-tape dilatory practices.” (Presbyterian Hosp v Maryland Cas Co, 90 NY2d 274, 285 [1997].)

The issue of insurance fraud, however, has undermined the goal of No-Fault Law and recent Court of Appeals decisions involving No-Fault Law have directly addressed it. (See Pommells v Perez, 4 NY3d 566 [2005] “[Abuse . . . abounds]”; State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 “rapidly growing incidences of fraud in the no-fault regime”]; Med Soc’y v Serio, 100 NY2d 854 [2003]) [“suspected automobile insurance fraud increased by 275%”].) Thus, the salutary purpose of No-Fault law has been hampered considerably by the rise in illegitimate and fraudulent claims.

For the past thirty years, the responsibility of administering the No-Fault Law has belonged to the Superintendent of Insurance who has the broad power to interpret, clarify, and implement the legislative policy through the promulgation of the “Regulations Implementing The Comprehensive Motor Vehicle Insurance reparations Act” also known as Regulation 68 and codified at 11 NYCRR part 65. (See Insurance Law 301 and 5101 et seq; Med. Soc’y v Serio, 100 NY2d 854 supra; Ostrer v Schenck, 41 NY2d 782 [1977]). The Superintendent’s “interpretation, if not irrational or unreasonable, will be upheld in deference to his special competence and expertise with respect to the insurance industry, unless it runs counter to the clear wording of a statutory provision.” (See Matter of Medical Malpractice Ins Assn v Superintendent of Ins of State of NY, 72 NY2d 753 [1988]; Matter of NYPIRG, Inc v New York State Dept of Ins, 66 NY2d 444 [1985]. The Superintendent of Insurance must, however, follow the State Administrative Procedure Act’s requisite procedures for promulgating regulations, otherwise the regulations will be struck down as unconstitutional. (SAPA 202; Medical Soc’y of NY, Inc v Levin, 185 Misc 2d 536 [Sup Ct NY County] affd 280 AD2d 309 [1st Dept 2002].).

In an effort to combat the widespread abuse in no fault insurance claims, in 1999, the Superintendent proposed an amended Regulation 68, with an effective date of February 1, 2000. (See Med Socy v Serio, 100 NY2d 854, supra.) The amended rule pertinent to this action provided: “[a] provider of health care services is not eligible for reimbursement under section 5102 [a][1] of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such service in New York.” (11 NYCRR 65-[*5]3.16[a][12].) As above stated, under Business Corporation Law, all professional service corporations that are licensed to practice medicine must be owned and controlled only by licensed physicians. (See BCL 1507 and 1508.)

Prior to the effective date for the Amended Regulation 68, in January 2000, the Superintendent of Insurance issued two Opinion Letters, both of which addressed the requirement that providers who are given an assignment by an eligible injured person and become the claimant for purposes of reimbursement must be properly licensed to perform services, so as not to engage in the corporate practice of medicine. Again, those Opinion Letters have no binding effect. (State Farm Mut Auto Ins Co v Mallela, 372 F3d 500 [2d Cir 2004].) On June 9, 2000, the amended regulations were struck down for failure to substantially comply with the State Administrative Procedure Act. (Matter of the Medical Society of the State of New York, Inc. v Levin, 280 AD2d 309, supra.) Thus, as of the date of that decision, the additional licensing requirement in the regulation still had no force and effect. While an appeal from that decision was pending, the Superintendent again revised Regulation 68 which was later approved by the Court of Appeals. (Med Socy v Serio, 100 NY2d 854, supra.)

In 2005, on the same issue of a provider’s licensing status, by certified question from the United States Court of Appeals for the Second Circuit, in 2005 the Court of Appeals answered the following question affirmatively: “Whether, under our “no-fault” insurance laws (see Insurance Law §§ 5101, et seq. and implementing regulations), insurance carriers may withhold payment for medical services provided by fraudulently incorporated enterprises to which patients have assigned their claims.” (See State Farm Mut Auto Ins Co v Mallela, 4 NY3d 313, supra.) By so doing, the Court held that 11NYCRR 65-3.16[a][12] which requires compliance with New York State licensing laws in order to be reimbursed, was valid, had the force of law, and was to be enforced as written. In the decision, the Court noted in two instances that the effective date of the regulation was April 4, 2002. (State Farm Mut Auto Ins Co v Mallela, 4 NY3d 313, 320 and 322, supra.) What the Court did not expressly do was to give 11NYCRR 65-3.16[a][12] retroactivity.

Generally, retroactivity will be applied only where the language of the law expressly allows for such an application. (See Kaye v Whalen, 44 NY2d 754 [1978].) Had the Court given the rule retroactivity, it would have rewritten the Regulation, sidestepped the required procedures of the State Administrative Procedure Act and it would have made “an abrupt shift in controlling decisional law.” (See SAPA 201 and 202; Gurnee v Aetna Life & Casualty Co., 55 NY2d 184, supra.; Medical Soc’y of NY, Inc. v Levin 280 AD2d 309, supra.)

At the time plaintiff’s assignor was treated in 1999, the amended Regulation 68 had not yet taken effect and the regulation that was then in effect provided only that “upon assignment by the applicant . . ., [an insurer] shall pay the providers of services . . . directly.” (11 NYCRR 65.15[j][1].) Although defendant has demonstrated that there is no issue of fact as to [*6]plaintiff’s fraudulent incorporation and plaintiff has failed to raise an issue of fact in that regard, as the rule then in effect contained no further requirement as to licensing, that part of the motion seeking summary judgment based on the retroactivity of the amended regulation is denied. While mindful of the extent that fraud has undermined the policy of No-Fault Law, as above cited in detail, and notwithstanding an undesirable result, nevertheless, the regulation should not be applied retroactively.

Defendant’s next basis for arguing that it is entitled to summary judgment as a matter of law is that the treating provider was in fact an independent contractor and thus plaintiff is not entitled to reimbursement.

In opposition to the cross motion, plaintiff argues that defendant’s allegations are vague and unsubstantiated and that no distinction should be made between an independent contractor and an employee of plaintiff. In its reply, defendant submits an affirmation from its attorney, James K, Hogan, in which he states that in another matter pending in Civil Court, Bronx County, on September 28, 2005, he conducted the deposition of plaintiff’s current owner, Joseph Indelicato, Ph.D., during which deposition Dr. Indelicato admitted under oath that all psychologists employed by Multiquest were employed as independent contractors until 2002.

A billing provider seeking to recover no-fault benefits for services which were not rendered by it or its employees, but by a provider who is an independent contractor, is not a “provider” of the medical services rendered within the meaning of the applicable insurance regulations and is therefore not entitled to recover direct payment of assigned no-fault benefits from the defendant insurer. (AB Med Servs PLLC v New York Cent Mut Fire Ins Co, 7 Misc 3d 1018A, 2005 NY Slip Op 50662U [App Term 2d & 11th Jud Dists].) A provider’s entitlement to recovery of no-fault benefits directly from the insurer is contingent upon an assignment of such benefits, and the assignment must be made to the “providers of services.” (See Rockaway Blvd Med PC v Progressive Ins, 2005 NY Slip Op 25278 [App Term 2d & 11th Jud Dists].) (See Rockaway Blvd Med PC v Progressive Ins, 2005 NY Slip Op 25278 [App Term 2d & 11th Jud Dists].) A defense that the plaintiff in an assigned first-party no-fault action may not maintain the action because it is not a “provider” within the meaning of the insurance regulations “is non-waivable and not subject to the preclusion rule.” (Id. at 2)

In light of the above, defendant has demonstrated, through proof in admissible form, including the EUO transcript, the IRS forms and plaintiff’s owner’s admission, that there is no issue of fact that the treating provider Kathryn Clark who rendered services to plaintiff’s assignor was an independent contractor such that plaintiff may not recover no-fault benefits. In opposition, plaintiff’s evidence fails to raise an issue of fact in this regard notwithstanding the additional opportunity it was given to do so.

In view of the foregoing, the motion is denied and the cross motion dismissing the complaint is granted. As defendant’s cross motion is granted, its remaining arguments will not be [*7]addressed.

The Clerk shall enter judgment accordingly.

This constitutes the decision and order of the Court.

Dated:December 19, 2005___________________________

DICCIA T. PINEDA-KIRWAN

Judge, Civil Court

Civil Court, Queens County

96837/04

Kevin J. Kerrigan, J.

Defendant’s motion for summary judgment dismissing the complaint is denied. Plaintiff’s cross-motion for summary judgment is also denied.

Plaintiff commenced the underlying action pursuant to the Comprehensive Motor Vehicle Reparations Act (Insurance Law §5101, et seq) (the “no-fault” law) seeking payment of its bills for treatment of its assignor for psychological injuries allegedly sustained by her in an automobile accident on May 17, 1998. The psychological services for which plaintiff is seeking payment were performed on July 30, 1998. Plaintiff argues that it is entitled to reimbursement from defendant because it timely submitted a completed proof of claim for no-fault benefits, which defendant neither paid nor denied within 30 days.

An insurer must either pay or deny a claim for first-party no-fault benefits within 30 days after receiving proof of the claim (see Insurance Law §5106 (a); 11 NYCRR §65.15 (g) (3), now 11 NYCRR 65-3.5 [a]). Failure to deny timely renders no-fault benefits overdue, and the insurer is precluded from raising any defenses, other than lack of coverage, to its obligation to pay (see Presbyterian Hosp. v. Maryland Cas. Co., 90 NY2d 274 [1997]; NY Hosp. Med. Center of Queens v. Country-Wide Ins. Co., 295 AD2d 583 [2nd Dept 2002]).

It is undisputed that defendant did not issue a denial of claim (NF-10 form). Defendant [*2]argues that it was not required to issue a denial of claim because the corporate structure of plaintiff was defective in that it did not have a psychologist as an “owner,” the treating psychologist was an independent contractor, its billing was fraudulent and the assignment of benefits form was defective. Therefore, according to defendant, there is no coverage under the insurance policy.

Defendant argues, first and foremost, that plaintiff is not entitled to reimbursement under the no-fault law, notwithstanding defendant’s failure to issue a timely denial of plaintiff’s claim, because plaintiff did not have a psychologist as an “owner” at the time it billed for psychological services and was, thus, defectively, or fraudulently, organized. The arguments that defendant proffers in its motion to establish the relevance of plaintiff’s improper organizational structure to the no-fault law are entirely inapposite.

Defendant argues that plaintiff’s failure to have a psychologist as an “owner” of the “corporation” at the time it provided psychological services to its assignor herein was a violation of §1504 (a) of the Business Corporation Law (“BCL”), which requires a professional service corporation (“PC”) to provide professional services only through individuals authorized to render such services. This violation, reasons defendant, also constituted non-compliance with the provisions of the New York State Workers’ Compensation Fee Schedule for Psychological Services (the “Fee Schedule”) adopted by the no-fault regulations and, therefore, the services provided by plaintiff at the time it did not have a psychologist as an “owner” were not covered under the no-fault law.

In the first instance, BCL §1504 (a) does not concern the organizational structure of a PC. Moreover, plaintiff is not a PC but a professional limited liability company (PLLC) and, thus, all references to the BCL are inapposite.

The Fee Schedule was incorporated into the no-fault law (see Insurance Law §5108; 11 NYCRR §68.0). However, the Fee Schedule has no requirements concerning the corporate or organizational structure of a PC or PLLC. It merely provides, in relevant part, “[P]sychological services will be rendered by or under the active supervision of an authorized psychologist” (see 12 NYCRR Appendix C-7). Defendant offers no proof to establish that the psychological services provided to plaintiff’s assignor were not rendered by a psychologist but, rather, by unlicensed “assistants,” as it alleges. Moreover a defense asserting a violation of the Fee Schedule is precluded since it was not raised in a timely denial of claim (see, e.g. Park Health Center v. Prudential Property & Cas. Ins. Co., 2001 NY Slip Op 40650 [U] [2nd & 11th Jud Dists]).

Thus, defendant, in its motion, cites no provision of the Insurance Law or its implementing regulations relating to the membership requirements of a PLLC. The relevant line of argument bearing upon the issue of whether plaintiff may collect no-fault benefits if it is improperly organized is introduced by plaintiff in its cross-motion (perhaps in anticipation of the Court raising the issue sua sponte). Plaintiff informs the Court of 11 NYCRR §65-3.16 (a) (12), which is the only provision of the no-fault law that keys the right to reimbursement under no-fault to the lawful licensing of the health care provider. That section states:

A provider of health care service is not eligible for reimbursement under section 5102 (a) (1) of the Insurance Law if the provider fails to meet any applicable New York State or [*3]local licensing requirement necessary to perform such service in New York or meet any applicable licensing requirement necessary to perform such service in any other state in which such service is performed.

The Court of Appeals has recently held that, on the basis of this section of the insurance regulations, an insurer may deny payment to a fraudulently incorporated health care provider (see State Farm Mutual Auto. Ins. v. Mallela, 4 NY3d 313 [2005]) (hereinafter referred to as “Mallela III”).

Plaintiff contends that §65-3.16 (a) (12) and the holding in Mallela III do not contemplate the fact pattern of the present case and that even if they did, the claim herein antedates the regulation and, thus, is not subject to it. Furthermore, argues plaintiff, defendant is precluded from raising the regulation as a defense because defendant failed to assert it in a timely denial of claim. Defendant, in its reply, argues that §65-3.16 (a) (12) need not be raised in a timely denial of claim and that on the basis of that section and Mallela III, it is not obligated to reimburse plaintiff for the claims it submitted.

Plaintiff contends that there was no fraud to bring this case within the scope of §65-3.16 (a) (12), as interpreted by the Court of Appeals in Mallela III, because a licensed acupuncturist was an owner and that he acted upon the advice of his attorney that it was legal to practice multiple specialties as long as one of the owners was licensed in one of the specialties. This argument overlooks the uncontroverted facts presented herein that plaintiff was, in fact, in violation of licensing requirements and that it filed false articles of organization by listing therein a licensed individual who was not part of its company.

Pursuant to Limited Liability Company Law §1203 (a), “[O]ne or more professionals each of whom is authorized by law to render a professional service within the state, or one or more professionals, at least one of whom is authorized by law to render a professional service within the state, may form . . . a professional service limited liability company . . . for the purpose of rendering the professional service or services as such professionals are authorized to practice” (emphasis added). Thus, a PLLC may not be formed to render psychological services unless a member thereof is a licensed psychologist. The licensed psychologist who was listed in plaintiff’s articles of organization had no ownership interest, managerial position or employee status with plaintiff.

It is undisputed that plaintiff was formed as a PLLC in 1998 for the purpose of engaging in the business of providing psychological and acupuncture services. Plaintiff also admits that it provided psychological services predominantly, if not exclusively. The articles of organization list Yuegeny Gorbatov and Kathryn Clark as the “original members and the original managers” of the PLLC (see Exhibit “D” to motion). It is also undisputed that of these two individuals, only Clark is a licensed psychologist. However, in her examination under oath (see Exhibit “F” to motion), she states that she was, in fact, never a member of plaintiff, that she never consented to be designated as such on plaintiff’s organization documents and that she was unaware, until it was brought to her attention by defendant, that she was named in plaintiff’s articles of organization. Additionally, she asserts that her only affiliation with plaintiff was as an independent contractor hired by plaintiff to perform psychological services, and was not even an [*4]employee of the company (see EUO transcript at 6, lines 18-21).

Plaintiff’s only explanation of Clark’s EUO testimony is through an inadmissible hearsay affidavit by an individual with no personal knowledge stating that Gorbatov “thought” that Clark was listed only as a manager and not an owner.Thus, at the time it provided psychological services to its assignor and filed its claim in 1998, plaintiff was in violation of the licensing requirements for PLLCs and was fraudulently organized, having filed false articles of organization representing that Clark was an original owner and/or manager, when, in fact, she was neither.

Nevertheless, this Court must agree with plaintiff that §65-3.16 (a) (12) does not apply retroactively to bar recovery of the instant no-fault claim that accrued prior to the effective date of the regulation.

Section 65-3.16 (a) (12) was added as part of the latest revision of the insurance regulations, which became effective April 5, 2002 (see 11 NYCRR §§65-1, et. seq., hereinafter referred to as the “new regulations”), replacing the regulations that had been effective until that date (see 11 NYCRR §§65.1, et. seq.). It is a well-settled principle that legislative rules and revisions of administrative regulations apply prospectively unless their language mandates otherwise (see, e.g. Good Samaritan Hosp. v. Axelrod, 150 AD2d 775 [2nd Dept 1989]). If the new regulations could be construed as applying retroactively to claims antedating their promulgation, then the establishment of an effective date would be meaningless. Indeed, it has been held that the insurance regulations have no retroactive application (see Colonial Life Ins. Co. of America v. Curiale, 205 AD2d 58, 62 [3rd Dept 1994] [“Our review of the regulations reveals that they were not retroactive since they were not made effective as of a date prior to their promulgation”]).

The question of whether §65-3.16 (a) (12) applies retroactively was posed by the Second Circuit in State Farm Mutual Auto. Ins. Co. v. Mallela (372 F 3d 500 [2nd Circuit 2004]) (“Mallela II“) as it considered the central issue presented to it on appeal from the Eastern District (2002 WL 31946762 [E.D.NY]) ( “Mallela I“) of whether a health care provider that is fraudulently incorporated is entitled to reimbursement under no-fault for services rendered by licensed practitioners. This main question was certified to and answered in the negative by the Court of Appeals in Mallela III. But in answering this question, it also addressed the subsidiary issue of retroactivity which was raised by the Mallela II Court.

Proceeding from the standpoint that a cause of action for fraud and unjust enrichment can be maintained against a fraudulently incorporated provider that accepts payments from an insurer in derogation of §65-3.16 (a) (12), the Court of Appeals stated:

Because we rest our holding on the Superintendent’s amended regulation declaring fraudulently licensed corporations ineligible for reimbursement, no cause of action for fraud or unjust enrichment would lie for any payments made by the carriers before that regulation’s effective date of April 4, 2002^[FN1]. State Farm’s complaint does not clearly indicate, one way or the other, whether [*5]it has paid money to defendants after the amended regulation took effect. We therefore answer only the certified question and decline to consider whether State Farm has alleged sufficient facts to support causes of action for fraud or unjust enrichment (Mallela III, 4 NY3d at 322).

Plaintiff, in the Mallela case, sought a judgment declaring that it was not required under no-fault to reimburse a fraudulently incorporated provider and a judgment for restitution for fraud and unjust enrichment seeking recovery of sums already paid to the provider. In answering the certified question, the Court of Appeals made it clear that its holding that the an insurer may deny payment to a fraudulently incorporated provider is based solely on §65-3.16 (a) (12) of the new regulations. Therefore, a cause of action for fraud and unjust enrichment deriving from that section of the new regulations would not lie for payments made upon claims prior to the effective date of that section. In other words, the regulation does not apply retroactively to create a cause of action for fraud or unjust enrichment.

The Court of Appeals answered the retroactivity question in the abstract and did not decide whether the insurer had, in fact, made out a cause of action for fraud or unjust enrichment, since the record was devoid as to whether any claims were paid after the regulation’s effective date.

Thus, this Court finds that Mallela III supports the principle that §65-3.16 (a) (12) does not apply retroactively to claims accruing prior to its effective date of April 5, 2002. Indeed, it has recently been held that this section of the regulations has no retroactive application (see, Multiquest, PLLC v. Allstate Ins. Co. (Jeune), __Misc 3d__, 2005 NY Slip Op 25512 [Civil Court, Queens County, December 1, 2005]). Since the claim in the instant action arose in 1998, §65-3.16 (a) (12) does not apply to this case and, therefore, the defense of defective, or fraudulent, organization is not available to defendant as a basis to deny the instant claim.

This Court does not read the following statement in Mallela III as contradicting the above analysis: “The Superintendent’s regulation allowing carriers to withhold reimbursement from fraudulently licensed medical corporations governs this case” (Mallela III, 4 NY3d at 321). This language has occasioned a contrary interpretation (see Metroscan Imaging P.C. v. GEICO, 8 Misc 3d 829 [Civil Court, Queens County 2005]). However, this Court is of the opinion that Mallela III is merely saying here that §65-3.16 (a) (12) applies to that case’s fact pattern forming the question that was certified, which is whether payment may be withheld from a fraudulently incorporated provider, not that the cause of action was a pre-April 5, 2002 claim and the regulation applies retroactively to bar that claim.

The insurer in Mallela had also argued that the regulation must be viewed as retroactive in effect because it is merely a clarification and not a new rule. The promulgation of §65-3.16 (a) (12) was accompanied by an explanatory notice stating that the section was “added to clarify that a health care provider must be properly licensed to be eligible for reimbursement under no-fault” (NY Reg, May 19, 2001, at 19). Therefore, argued the insurer, the Superintendent of Insurance, in promulgating §65-3.16 (a) (12), was merely articulating a mandate that was “always” in effect (see Mallela II, 372 F 3d at 509). This Court finds said argument unpersuasive. The Superintendent of Insurance is empowered to implement the no-fault law by promulgating [*6]regulations that interpret and clarify the legislative policy (see Ostrer v. Schenck, 41 NY2d 782 [1977]; Insurance Law §301). Hence, every section of the regulations issued by the Superintendent may be considered essentially interpretative or clarifying. The Superintendent’s notice explaining the reason for the addition of §65-3.16 (a) (12) is not to be taken as a pronouncement that the effective date of the regulations is to be ignored with respect to this section.

In light of the determination by this Court that §65-3.16 (a) (12) has no retroactive application and, hence, does not apply to this case, the issue of whether that section is subject to the preclusion rule is academic. However, this Court notes that the holding in Mallela III is dispositive of this issue as well.

Lack of coverage is a defense that survives an untimely denial of claim (see Central General Hosp. V. Chubb Group of Ins. Cos., 90 NY2d 195 [1997]; Presbyterian Hosp. v. Maryland Cas. Co., supra). Plaintiff urges that §65-3.16 (a) (12) does not preclude coverage but merely creates a statutory condition precedent to an insurer’s entitlement to payment, and, therefore, a defense based upon §65-3.16 (a) (12) is subject to the 30-day rule.

An injured party (or his assignor) may only be reimbursed under the no-fault law for “basic economic loss” (see Insurance Law §5102, et seq). The Court of Appeals found that the Superintendent of Insurance, by promulgating §65-3.16 (a) (12), interpreted this statute and “excluded from the meaning of basic economic loss’ payments made to unlicensed or fraudulently licensed providers, thus rendering them ineligible for reimbursement” (Mallela III, 4 NY3d at 320). Thus, the expenses incurred from services rendered by a provider who fails to meet licensing requirements are no longer covered and are, thus, outside the orbit of the no-fault law and its time requirements.

The Mallela III Court does not contradict its holding in Servido v. Superintendent of Insurance (53 NY2d 1041 [1981], revg on dissenting op 77 AD2d 70, 76-86 [1st Dept 1980]) wherein it concluded that the Superintendent’s authority does not extend to creating any new exclusion by regulation. The Superintendent, in promulgating §65-3.16 (a) (12), did not impermissibly add any new category of exclusion to an enumerated list of exclusions circumscribed in the Insurance Law. Rather, the Superintendent interpreted the term “professional health services” in Insurance Law §5102 (a) as no longer encompassing those rendered by health care providers who are in violation of licensing requirements. Therefore, holds the Mallela III Court, this regulation was within the scope of the Superintendent’s authority to promulgate and is, accordingly, valid.

In addition, by holding in Mallela III that §65-3.16 (a) (12) does not apply retroactively to support a cause of action for fraud or unjust enrichment for payments made prior to April 4, 2002, and by stating that it would not reach the question of whether plaintiff had shown sufficient facts to support such a cause of action absent any indication that any payments were made after April 4, 2002, the Court of Appeals is implicitly recognizing the viability of a cause of action for fraud and unjust enrichment pursuant to §65-3.16 (a) (12). Such acknowledgment presupposes the inapplicability of the 30-day rule. Since an insurer who has paid a claim has obviously not denied it, a cause of action for fraud or unjust enrichment could never arise if §65-3.16 (a) (12) were subject to preclusion.

Thus, it is clear that §65-3.16 (a) (12) is not subject to preclusion but may be raised even [*7]if not included in a timely denial of claim.

Defendant also argues that the subject psychological services were provided by an independent contractor and, therefore, plaintiff was not entitled to recover no-fault benefits. Plaintiff denies that any services to its assignor were rendered by an independent contractor and contends that even were they so provided, that defense was waived as it was not raised in a timely denial of claim. Plaintiff, citing the Chubb rule that the only defense that survives an untimely denial of claim is one asserting lack of coverage, argues that the independent contractor defense was waived since it does not relate to a lack of coverage under the policy of insurance. Plaintiff’s argument is without merit.

A billing provider may not recover no-fault benefits for services performed by an independent contractor, since the services billed were not rendered by it or its employees and, therefore, it is not a “provider” of health care services within the meaning of 11 NYCRR 65.15 (j) (1) (now 11 NYCRR 65-3.11 [a]) (see Rockaway Boulevard Medical P.C. v. Progressive Ins., 9 Misc 3d 52 [App Term 2nd & 11th Jud Dists 2005]). Such defense is non-waivable and is not subject to the preclusion rule (id).

Nevertheless, defendant fails to submit any proof that the services provided to plaintiff’s assignor were by an independent contractor. Although Clark, in her EUO, states that she worked as an independent contractor, she does not state that she rendered any services to plaintiff’s assignor herein. Therefore, on this record, defendant has not conclusively established that the treating provider was not an employee of plaintiff but an independent contractor.

Defendant also argues that there was no coverage under the insurance policy because the billing was fraudulent. This argument also lacks merit.

Lack of coverage is a defense “premised on the fact or founded belief that the alleged injury does not arise out of an insured incident” (Chubb, supra at 199). Defendant does not deny that plaintiff’s claim arose out of a legitimate motor vehicle accident. A defense of fraud in billing is not preserved if untimely raised in a proper denial of claim (see Chubb, supra; Melbourne Medical P.C. v. Utica Mutual Ins. Co., 4 Misc 3d 92 [App Term 2nd & 11th Jud Dists 2004]). Defendant’s appeal to the insurance policy that contains a provision declaring that there is no coverage under the policy if the insured conceals, misrepresents or makes any false statements of fact is unavailing. The mandatory no-fault endorsement is an “internally complete and distinct part of the insurance policy [that] . . . cannot be qualified by . . . conditions . . . of the liability portions of the policy” (Melbourne Medical P.C. v. Utica Mutual Ins. Co., supra, quoting Utica Mutual Ins. Co. v. Timms, 293 AD2d 669, 670 [2nd Dept 2002]). An insurer may not alter the mechanism of the no-fault law by adding contrary provisions in its contract of insurance. Since defendant has not issued a denial of claim, its defense asserting fraudulent billing is precluded.

Finally, defendant contends that it is entitled to summary judgment on the ground that the assignment of benefits form is defective. Defendant’s argument is without merit. For the reasons heretofore stated, a defense premised upon a defect in the assignment of benefits form is waived if not preserved in a timely denial of claim.

Plaintiff’s cross-motion for summary judgment is also denied. Plaintiff has failed to establish that it mailed a completed proof of claim to defendant. The affidavit of service of Joseph Indelicato, dated October 12, 2005, is insufficient to establish that the bill was mailed, in that it fails to describe the office procedure for the mailing of bills or the method of mailing. [*8]Thus, plaintiff has failed to establish a prima facie entitlement to summary judgment.

Accordingly, the motion and cross-motion must be denied.

Dated: December 19, 2005___________________________

KEVIN J. KERRIGAN, J.C.C.

Footnotes

Footnote 1:The effective date is actually April 5, 2002. The new regulations were originally filed on August 2, 2001, setting an effective date of September 1, 2001. However, their effectiveness was stayed pending legal challenge. The stay was overruled on April 4, 2002 and the new regulations became effective on April 5, 2002 (see NYCRR T. 11, Ch III, Subch. B, Pt. 65, Refs & Annos).

Civil Court of the City of New York, Kings County

119832/05

Eric Gil, Esq. of Gary Tsirelman, PC, 4022 18th Avenue, Brooklyn, NY 11218, appeared for petitioners.

Sandy Jainauth-Barone, Esq. of Chesney & Murphy, LLP, 2305 Grand Avenue, Baldwin, NY 11510, appeared for the respondent.

Delores J. Thomas, J.

Petitioner, a provider of medical goods seeks to recover first party no-fault benefits for medical equipment provided to its assignor. Petitioner filed a request for Arbitration. An arbitrator designated by the American Arbitration Association (“AAA”) issued a decision April 12, 2004 with the date of mailing shown as April 26, 2004 whereby the claim was denied without prejudice pending a determination of the issue of employment by the Worker’s Compensation Board.

At issue before the Arbitrator was petitioner’s claim for reimbursement for medical supplies provided to treat its assignor for injuries sustained in an automobile accident on March 4, 2001. At the hearing, respondent, after failing to deny the claim or to make timely evidentiary submission, raised the question as to whether the assignor was working at the time of the accident. Respondent also sought to submit a police accident report. Both parties were given the opportunity to make a post-hearing submission in regards to whether good cause existed to permit respondent’s late submission. Respondent made the submission but petitioner did not.

Upon reviewing the documents submitted by petitioner in support of its claims and those submitted by respondent, the arbitrator determined that the workers’ compensation defense was a [*2]well recognized exception to the rule precluding defenses if not raised in a timely denial of claim. The arbitrator further determined that the evidence presented “at least minimal proof of the indicia of employment (citing Arvatz v. Empire Mutual Ins. Co., 171 AD2d 262 [1st Dept. , 1991] which held that upon proper showing, Worker’s Compensation Board and not arbitration is the proper forum for deciding the issue of whether the insured was injured in the course of employment).

Petitioner, thereafter filed a timely request for review by a Master Arbitrator alleging that the lower arbitrator’s decision was arbitrary, capricious, irrational and without a plausible basis.

In a decision dated September 20, 2004 and showing a mailing date of September 30, 2004, the Master Arbitrator upheld the lower arbitration decision finding that the arbitrator had a sufficient basis to deny the claim pending a determination of the employment issue by the Worker’s Compensation Board. The Master Arbitrator therefore determined that the lower decision had a rational basis and was neither arbitrary or capricious nor incorrect as a matter of law. The lower arbitration decision was affirmed.

Petitioner argues that the lower arbitrator erred in allowing respondent to raise at the hearing the defense that the assignor was working at the time of the accident where petitioner had established its prima facie case, i.e. proper submission of its bills and respondent had failed to timely deny the bills. Petitioner argues respondent was therefore precluded from raising that defense at the hearing.

In its Affirmation in Opposition and Notice o Motion to Dismiss the Petition, respondent argues that its defense that the assignor was injured while engaged in employment is a denial of coverage defense and therefore not precluded by the fact that it failed to timely deny the claim. Respondent further asserts that as issues of employment must first be decided by the Worker’s Compensation Board, the lower arbitrator acted properly in determining that it had presented sufficient proof to require that the claim be denied pending a determination of the issue by the Worker’s Compensation Board. Respondent further argues that the Master Arbitrator’s award affirming this decision was based upon a proper exercise of discretion and was grounded on a rational application of the law and the decision was neither arbitrary or capricious.

Judicial review of a Master Arbitrator’s award “is restricted, by the terms of the statute, to the grounds for review set forth in article seventy five’ of the CPLR, specifically § 7511 (Petrofsky v. Allstate Insurance Company, 54 NY2d 207 [1981]).

Section 7511 (6) sets forth the following grounds for vacating an award:

(i)corruption, fraud or misconduct in procuring the award; or

(ii)partiality of an arbitrator appointed as a neutral; except where the award was by conversion; or

(iii)an arbitrator, or agency or person making the award exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made; or

(iv)failure to follow the procedures of this article, unless the party applying to vacate the award continued with the arbitration with notice of the defect [*3]and without objection.

In cases of compulsory arbitration, such as no-fault claims, the court has held that CPLR Article 75 includes review of whether the award is supported by evidence or other basis in reason (Mount St. Mary’s Hosp. of Niagara Falls v. Catherwood, 26 NY2d 493, 508 [1970]); arbitrary and capricious (Caso v. Coffy, 41 NY2d 153, 158 [1976]) ; and whether the decision was rational or had a plausible basis (Caso v. Coffy, supra ).

Unlike the court, a Master Arbitrator in reviewing the award rendered by the lower arbitrator is not limited to the grounds set forth in CPLR § 7511 but may look to rules promulgated by the Superintendent of Insurance in 11 N.Y.C.R.R. 65.17 and developed by case law (see, Petrofsky v. Allstate Ins. Co., supra ; Mount St. Mary’s Hosp. of Niagara Falls v. Catherwood, supra ,; Caso v. Coffy, supra ,).

The role of the Master Arbitrator is to review the determination of the lower arbitrator to assure that the arbitrator reached his decision in a rational manner; and, that the decision was not arbitrary and capricious, or incorrect as a matter of law (Petrofsky v. Allstate Insurance Co., supra ).

A view of the arbitration award from both the lower and Master Arbitrator shows that there is no basis to vacate the award. Both arbitrators determined that the workers compensation defense was not precluded by respondent’s failure to timely deny the claim. This holding and thus the arbitrator’s award was based upon the resolution of factual and legal determinations reached after reviewing the evidence submitted; such a determination may not be set aside by this Court even were the court to disagree with those findings. The Master Arbitrator’s award therefore was neither arbitrary, capricious, irrational or without a substantial or plausible basis.

Accordingly, the petition is dismissed. Respondent’s motion to dismiss the petition is granted to that extent only.

This constitutes the decision and order of the Court.

DATED: December 16, 2005

Brooklyn, New York

DELORES J. THOMAS

Judge Civil Court

[*1]

Supreme Court, Appellate Term, Second Department, December 15, 2005

APPEARANCES OF COUNSEL

Amos Weinberg, Great Neck, for appellant. Ronald I. Lemberger, Hempstead (Wesley R. Mead of counsel), for respondent.

{**11 Misc 3d at 30} OPINION OF THE COURT

Memorandum.

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

In this action to recover first-party no-fault benefits for medical supplies furnished to its assignor, plaintiff established a prima facie entitlement to summary judgment by proof that it submitted the claims, setting forth the fact and the amounts of the losses sustained, and that payment of no-fault benefits was overdue (see Insurance Law § 5106 [a]; Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742 [2004]; A.B. Med. Servs. PLLC v Lumbermens Mut. Cas. Co., 4 Misc 3d 86 [App Term, 2d & 11th Jud Dists 2004]; Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U] [App Term, 2d & 11th Jud Dists 2003]; Damadian MRI in Elmhurst v Liberty Mut. Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51700[U] [App Term, 9th & 10th Jud Dists 2003]). The record discloses that the defendant submitted a properly completed denial of claim form dated September 25, 2003 covering all the claims involved in the lawsuit. Contrary to the determination of the court below, said September 25, 2003 denial of claim form, which was attached to plaintiff’s moving papers, and is identical to the denial of claim form dated September 25, 2003, included by defendant as part of its papers in opposition to [*2]plaintiff’s motion, adequately established that plaintiff sent, and that defendant received, the claims (see Capio Med., P.C. v Progressive Cas. Ins. Co., 7 Misc 3d 129[A], 2005 NY Slip Op 50526[U] [App Term, 2d & 11th Jud Dists 2005]; A.B. Med. Servs. v New York Cent. Mut. Fire Ins. Co., 3 Misc 3d 136[A], 2004 NY Slip Op 50507[U] [App Term, 2d & 11th Jud Dists 2004]; cf. SZ Med. P.C. v State-Wide Ins. Co., 6 Misc 3d 132[A], 2005 NY Slip Op 50103[U] [App Term, 2d & 11th Jud Dists 2005]).

Defendant’s reliance on SZ Med. P.C. v State-Wide Ins. Co. (6 Misc 3d 132[A], 2005 NY Slip Op 50103[U] [2005], supra) is misplaced. In SZ Med. P.C., plaintiffs’ billing manager stated that she submitted the 15 annexed claim forms without specifying when they were sent, and relied on defendant’s letter which acknowledged receipt of claims but did not specify which of the claims were received. On those facts, this court held:

“In the absence of any evidence as to when plaintiffs{**11 Misc 3d at 31} submitted their claim forms to defendant, and in the absence of any specification in defendant’s letters of February 13, 2002 as to which claims it had received prior thereto, plaintiffs were unable to establish whether payments as to all, or even any, of the claims being sued upon were overdue” (2005 NY Slip Op 50103[U], at *2).

In the instant case, unlike in SZ Med. P.C., defendant submitted the exact same denial of claim form dated September 25, 2003 relied upon by plaintiff, without stating any objection thereto, or denying receipt of said bills, thereby effectively conceding receipt of the same.

Defendant’s September 25, 2003 denial of claim form indicates that defendant’s denial of plaintiff’s claims was not timely made within the 30-day statutory period within which it was required to pay or deny the claims (11 NYCRR 65-3.8 [c]). We note that the record also contains denial of claim forms dated January 27, 2003 and January 28, 2003. However, they are fatally defective and of no import since these forms omitted numerous items of requested information, and were thus incomplete (Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564 [2005]; Nyack Hosp. v State Farm Mut. Auto. Ins. Co., 11 AD3d 664 [2004]). Furthermore, defendant’s documentary submissions are insufficient to establish proper mailing either of said denial of claim forms or the independent medical examination notices upon which the denials were based (see Hospital for Joint Diseases v Nationwide Mut. Ins. Co., 284 AD2d 374 [2001]; Contemp. Med. Diag. & Treatment, P.C. v Government Empls. Ins. Co., 6 Misc 3d 137[A], 2005 NY Slip Op 50254[U] [App Term, 2d & 11th Jud Dists 2005]). Accordingly, defendant is precluded from raising most defenses (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282 [1997]), including its defense of excessive or unnecessary treatment (see Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1997]; Mount Sinai Hosp. v Triboro Coach, 263 AD2d 11 [1999]). Defendant has failed to submit proof in admissible form in support of its defense of fraud and/or misrepresentation (see A.B. Med. Servs. PLLC v State-Wide Ins. Co., 7 Misc 3d 136[A], 2005 NY Slip Op 50785[U] [App Term, 2d & 11th Jud Dists 2005]). In any event, the unsworn investigative reports indicate that defendant’s claim of fraud is, in essence, premised on fraudulent billing or excessive medical treatment, forms of “provider fraud” which are defenses subject to the 30-day preclusion remedy (Fair Price Med. Supply Corp. v Travelers Indem. Co., 9 Misc 3d 76 [App{**11 Misc 3d at 32} Term, 2d & 11th Jud Dists 2005]; see Central Gen. Hosp., 90 NY2d at 199; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d at 285; Melbourne Med., P.C. v Utica Mut. Ins. Co., 4 [*3]Misc 3d 92 [App Term, 2d & 11th Jud Dists 2004]; cf. State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005]).

Accordingly, summary judgment is granted in favor of plaintiff and the matter remanded to the court below for the calculation of statutory interest and an assessment of attorney’s fees pursuant to Insurance Law § 5106 (a) and the regulations promulgated thereunder.

Pesce, P.J., Weston Patterson and Belen, JJ., concur.

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 9th and 10th JUDICIAL DISTRICTS

Appeal and cross appeal from an order of the District Court of Nassau County, First District (Norman Janowitz, J.), entered December 23, 2004. The order denied plaintiff’s motion for summary judgment and denied defendant’s cross motion for summary judgment.

Order insofar as appealed from by plaintiff unanimously reversed without costs, plaintiff’s motion for summary judgment granted in the principal sum of $2,983 and matter remanded to the court below for a calculation of statutory interest and an assessment of attorney’s fees. [*2]

Cross appeal by defendant unanimously dismissed.

In this action to recover first-party no-fault benefits for medical supplies provided to its assignor, plaintiff established its prima facie entitlement to summary judgment by showing that it submitted completed proofs of claims, setting forth the fact and the amount of the loss sustained, and that payments of no-fault benefits were overdue (see Insurance Law § 5106 [a]; Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742 [2004]; Damadian MRI In Elmhurst v Liberty Mut. Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51700[U] [App Term, 9th & 10th Jud Dists]). The burden then shifted to defendant to demonstrate a triable issue of fact (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]).

The timely denials containing the unaffirmed but factually specific peer review report constituted a sufficient assertion of a defense of lack of medical necessity. However, in opposition to a motion for summary judgment defendant was required to submit proof in admissible form to rebut plaintiff’s prima facie showing. Since the report [*3]
was not in admissible form, plaintiff’s motion should have been granted (A.B. Med. Servs. v New York Cent. Mut. Fire Ins. Co., 3 Misc 3d 136[A], 2004 NY Slip Op 50507[U] [App Term, 2d & 11th Jud Dists]).

We note that, in accordance with the brief submitted by defendant, its cross appeal is dismissed.
Decision Date: December 12, 2005

—[*1]

In an action to recover no-fault medical payments under insurance contracts, the plaintiffs appeal from so much of an order of the Supreme Court, Nassau County (Phelan, J.), dated January 20, 2004, as denied that branch of their motion which was for summary judgment on the first cause of action, and the defendant cross-appeals from so much of the same order as denied its cross motion for summary judgment dismissing the complaint.

Ordered that the order is affirmed insofar as appealed from; and it is further,

Ordered that the order is reversed insofar as cross-appealed from, on the law, the cross motion is granted, and the complaint is dismissed; and it is further,

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

The Supreme Court improperly denied that branch of the defendant’s cross motion which was for summary judgment dismissing the first cause of action to recover payments for medical services provided by Central Suffolk Hospital. “An insurer is not obligated to pay or deny a claim until it has received verification of all relevant information requested (see 11 NYCRR 65.15 [g] [1] [i]; [2] [iii])” (St. Vincent’s Hosp. of Richmond v American Tr. Ins. Co., 299 AD2d 338, [*2]340 [2002]). Here, in the proof offered in response to the defendant’s prima facie showing of entitlement to summary judgment, the plaintiff Central Suffolk Hospital, as assignee of Renard Legette, admitted receiving the defendant’s initial request for verification of the claim, yet failed to state what response, if any, was made. Pursuant to 11 NYCRR 65-3.8 (a) (1) and (b) (3), on the undisputed facts presented, the defendant was entitled to summary judgment dismissing the plaintiffs’ first cause of action (see Hospital for Joint Diseases v State Farm Mut. Auto. Ins. Co., 8 AD3d 533 [2004]).

The Supreme Court also improperly denied the branch of the defendant’s cross motion which was for summary judgment dismissing the second cause of action to recover for medical services provided by White Plains Hospital Center (hereinafter White Plains). As noted by the Supreme Court, the principal amount of the claim, $733.91, has been paid, leaving only the portion of the second cause of action seeking interest and an award of an attorney’s fee. Although White Plains maintained before the Supreme Court that it did not receive either of the requests for verification which the defendant asserted were sent by mail on May 21, 2003, and June 23, 2003, White Plains provided the verification of claim to the defendant on July 14, 2003. In view of this circumstance, the assertion that the claim underlying the second cause of action was not paid in a timely way, which is the predicate for the plaintiffs’ claim for interest and an award of an attorney’s fee, is without basis under 11 NYCRR 65-3.8. Adams, J.P., Krausman, Rivera and Lifson, JJ., concur.