—[*1]

In a proceeding to stay an uninsured motorist arbitration, the petitioner appeals from an order of the Supreme Court, Suffolk County (Mullen, J.), dated December 20, 2004, which denied the petition and dismissed the proceeding.

Ordered that the order is reversed, on the law and as a matter of discretion, with costs to the petitioner payable by Suffolk County Fleet Services, and the matter is remitted to the Supreme Court, Suffolk County, for a framed issue hearing in accordance herewith, and for a new determination of the petition thereafter.

As correctly conceded by the proposed additional respondent, Suffolk County Fleet Services (hereinafter Suffolk), a self-insured municipality is required to provide mandatory uninsured motorist benefits to employees who operate municipal motor vehicles (see Matter of State Farm Mut. Auto. Ins. Co. v Amato, 72 NY2d 288, 293-294 [1988]; Matter of Country-Wide Ins. Co. [Manning], 96 AD2d 471 [1983], affd 62 NY2d 748 [1984]; see also Insurance Law § 3420 [f] [1]). Contrary to Suffolk’s contention, however, a statutory arbitration proceeding to resolve a coverage dispute concerning an uninsured motorist claim is not a claim founded upon a tort, requiring the service of a notice of claim as a condition precedent to the commencement of an action within the meaning of General Municipal Law § 50-e (1) (a) (see County Law § 52; General Municipal Law § 50-i; cf. Matter of City of Syracuse v Utica Mut. Ins. Co., 61 NY2d 691 [1984]; Matter of Manhattan & Bronx Surface Tr. Operating Auth. v Evans, 95 AD2d 470 [1983]). Accordingly, the Supreme Court erred in dismissing the petition for failure to comply with General Municipal Law § 50-e. Although the appellant’s contention that a notice of claim was not a condition precedent is raised for the first time on appeal, we nevertheless reach it as a matter of discretion since it involves a question of law that appears on the face of the record and, if brought to the attention of the Supreme Court, could not have been avoided (see Weiner v MKVII-Westchester, LLC, 292 AD2d 597, 598 [2002]).

Because the court never reached the issue we remit the matter to the Supreme Court, Suffolk County, for a framed issue hearing to determine whether Suffolk received notice given by or on behalf of the injured person as soon as was reasonably practicable (cf. 11 NYCRR 65.11 [m] [2]; Insurance Law § 3420 [a] [3] and [4]; Matter of Metropolitan Prop. & Cas. Ins. Co. v Mancuso, 93 NY2d 487 [1999]; Matter of State Farm Mut. Auto. Ins. Co. [Fuccio], 288 AD2d 46 [2001]).

The appellant’s remaining argument is academic in light of our determination. Florio, J.P., Crane, Fisher and Dillon, JJ., concur.

Civil Court of the City of New York, Bronx County

32861/2005

Julia I. Rodriguez, J.

The actions at issue were commenced by plaintiff/medical providers seeking a money judgment against defendant/insurance carrier for recovery of no-fault medical benefits rendered to its assignor, plus statutory interest and attorneys’ fees. [Insurance Law §5106 et seq; 11 N.Y.C.R.R.R. §65-1.1 et seq.; §65.15[h][1] and §65.17[b][6][v]].

*******

After service of the respective summonses and complaints defendant interposed an Answer alleging numerous affirmative defenses. The defenses relevant to the instant motion(s) included:

(1) Plaintiff has materially misrepresented that a licensed physician was the owner of the plaintiff’s practice with the purpose and intent of inducing Defendant to make payments for medical services which the true owners would not be entitled to receive under the no-fault endorsement of the applicable policies.

(2) The Plaintiff is not a properly licensed facility according to the Business Corporation Law and the Public Health Law, and thus has engaged in the unlawful practice of medicine.

(3) The plaintiff lacks standing to bring the within action as it was controlled, owned, managed and supervised by persons who are not licensed or authorized to own a professional service corporation or authorized to practice medicine in violation of the Business Corporation, Education and Insurance Laws.

(4) Plaintiff is engaged in the unlawful practice of fee splitting in violation of 10 N.Y.C.R.R. §600.9 and the Education Law and Public Law §4500 and therefore is not entitled to recover no-fault benefits.^[FN1]

In accompaniment of each Answer, defendant also served a Demand for Verified Written Interrogatories, a Combined Demand and Notice of Examination Before Trial of the

plaintiff, the agents, servants or employees of said parties having knowledge of the subject matter concerning all of the relevant facts and circumstances in connection with the issues alleged in the plaintiff’s verified complaint.

The Combined Demand sought discovery and inspection of various documents, including but not limited to

the assignment, assignor’s application, bills, copies of all checks and other evidence demonstrating payment received from defendant, complete office notes, all sign-in sheets, plaintiff’s curriculum vitae, plaintiff’s Certificate of Incorporation, and the resume and curriculum vitae of each expert upon whose testimony you will rely upon at the time of trial concerning the subject lawsuit.

Plaintiff’s first response to the Demand for Interrogatories was rejected by defendant as “insufficient and nonresponsive.” Simultaneously with this rejection defendant served a Supplemental Demand for Verified Written Interrogatories and Amended Notice of Examination Before Trial. The amended EBT demand specified two individuals to be deposed: (1) Dr. Dipak Nandi – owner/operator, and (2) Ying-Li – medical provider/acupuncturist.

Thereafter, plaintiffs provided defendant with discovery indicating that Dipak Nandi is a licensed physician and certified acupuncturist, and that he is also sole shareholder in each of the plaintiff/medical corporations. After motion practice to dismiss plaintiffs’ actions for lack of disclosure or to compel plaintiffs to comply with defendant’s discovery demands, said motions were resolved by stipulations which read, in pertinent part:

Plaintiff shall provide responses to defendant’s written discovery demands and supplemental demands pertaining to standing within 60 days, to the extent not already provided: and

Defendant to advise plaintiff in writing within 45 days of receipt of plaintiff’s written discovery responses of a deposition of plaintiff’s alleged owner, Dr. Nandi is required.

Plaintiff reserves the right to move for a protective order regarding Dr. Nandi’s deposition.

********

Before the instant court are nine motions where defendant, Travelers Insurance Company, seeks an order pursuant to §3126 dismissing the actions for plaintiffs’ failure to provide Court-ordered discovery, or in the alternative, for an Order compelling plaintiffs to provide all outstanding discovery and produce Dr. Nandi and Ying-Li to ascertain evidence of the entities’ corporate structure and method of payment and sum of salaries.

The court sua sponte hereby consolidates the motions and respective cross-motions for protective orders in the nine above-reference actions solely for purposes of disposition herewith.

********.

In opposition, plaintiffs present that Dr. Nandi was neither the treating acupuncturist or the individual who submitted the bills in these cases. Plaintiffs submit that they have already provided defendant with incorporation documents, licenses, payroll information and complete responses to defendant’s discovery demands, including plaintiffs’ lease agreements. Plaintiffs contend that the discovery establishes that (1) Dr. Nandi is a licensed medical doctor and that both he and the treating acupuncturists are State-certified; (2) that the plaintiff/medical facilities are lawfully incorporated entities; and (3) that Dr. Nandi owns and operates the plaintiff [*3]corporations and other acupuncture clinics which he is qualified to do under State law.

In its Repl[ies] defendant does not dispute that it has received the relevant corporate documents, medical and acupuncturists’ licenses. However, defendant argues that still outstanding are Dr. Nandi’s and plaintiff/corporations’ tax returns, salary records for Dr. Nandi and his employees, and facility lease agreements between the medical providers and other entities, presumably, management companies. Defendant further argues that the deposition of Dr. Nandi:

. . . is material and necessary to the defense of this action and goes to the heart of the issue in this case, which is whether [the medical providers were] fraudulently incorporated and thus not entitled to no-fault benefits. The information sought is relevant to resolve the issue of whether the ]plaintiffs are] properly licensed to the New York State Business Corporation Law and Education Law as the plaintiff[s] will not be able to collect benefits under the no-fault law if they cannot establish standing [¶8 of Reply].

***********

Before consideration of whether medical providers were fraudulently incorporated and thus not entitled to no-fault benefits, the first issues for the court are whether defendant preserved a defense premised on fraud in any of its denials, and if it did not so, whether the fraud alleged falls within the category of defenses which are not waived by the insurer despite failure to raise it in a timely denial.

It is now settled that an insurer must adhere to a “timely timed process” of denial or waive defenses which are not asserted within 30 days or tolled by the verification process. Presbyterian Hospital in the City of New York v. Maryland Casualty Co., 90 NY2d 274, 660 NYS2d 536, 683 NE2d 1 (1997). [11 N.Y.C.R.R. §§65.15 et seq, 3.5(b)(d)(e), 65-3..6(b), 65-3.8 (a)(1) et seq.] The only exceptions to the 30-day rule to deny or pay the claim are where the insurer’s basis for denying the payment is based on lack of coverage of the policy. Central General Hospital v. Chubb Group of Insurance Companies, 90 NY2d 195, 199, 681 NE2d 413, 659 NYS2d 246 (1997) (a defense premised on the fact or founded belief that the alleged injury does not arise out of an insured incident is a lack of coverage defense which is not precluded by an untimely denial). The seminal language in Chubb reads:

. . . The denial of liability based upon lack of coverage within the insurance agreement . . . is distinguishable from disclaimer attempts based on a breach of a policy condition [cites omitted] . . . Strict compliance with the time requirements of both the statute and regulations may be obviated and the preclusion remedy rendered unavailable when denial of claims is premised on a lack of coverage . . . We would not . . . extend this exceptional exemption to excuse [defendant insurer’s] untimely defense in relation to the treatment being deemed excessive by the insurer. That would not ordinarily implicate a coverage matter and, therefore, failure to comply with the Insurance Law time restriction might properly preclude the insurer from a belated rejection of the billing on that basis.

Central General Hospital v. Chubb Group, supra , 90 NY2d 195 at 199.

In this case, none of the denials issued by defendant prior to commencement of these actions alleged a staged accident or lack of coverage, or any scintilla sounding in fraud. Indeed, [*4]the bulk of the denials herein merely stated:

Per New York State Law Regulation 68, “Upon request by the Company, the eligible injured person or someone on his behalf shall:

(a) execute a written proof of claim under oath;

(b) provide authorization that will enable the Company to obtain medical records; and

(c) provide any other pertinent information, your entire claim No-Fault Benefits is denied.

[sic] DUE TO: FAILURE TO SUBMIT ALL REQUESTED INFORMATION IN A REASONABLE TIME FRAME, LACK OF VERIFICATION AND NON-COOPERATION. THEREFORE, YOUR BILLS [sic] ARE DENIED.^[FN2]

At this juncture of the analysis, defendant is not entitled to depose Dr. Nandi or the treating acupuncturists for the purposes it proposes, because defendant failed to preserve any defense sounding in fee splitting, improper incorporation or licensing in its denial. However, the next inquiry is whether any of these defenses falls within the narrow exception(s) of defenses which are not waived by an untimely denial.

*******

Defendant argues that it is entitled to depose Dr. Nandi because now “carriers may look beyond the face of licensing documents to identify willful and material failure to abide by state and local law.” State Farm Mutual Automobile Co. v. Mallela, et al, 4 NY3d 313, 321, 827 NE2d 758, 794 NYS2d 700 (2005).

Mallela concerned a lawsuit filed by State Farm insurance company in the United States [*5]District Court for the Eastern District of New York seeking a judgment declaring that

it need not reimburse defendants – fraudulently incorporated medical corporations – for assigned claims submitted under no-fault. . . . According to the complaint, the unlicensed defendants paid physicians to use their names on paperwork filed with the State to establish medical service corporations. Once the medical service corporations were established under the facially valid cover of the nominal physician owners, the nonphysicians actually operated the companies. To maintain the appearance that the physicians owned the entities, the nonphysicians caused the corporations to hire management companies (owned by the nonphysicians), which billed the medical corporations inflated rates for routine services. In this manner, the actual profits did not go to the nominal owners but were channeled to the nonphysicians who owned the management companies.

The claim was that the medical providers in Mallela were in violation of §§1504 and 1508 of the Business Corporation Law (BCL). BCL §1504(a) states, in pertinent part, that “no professional service corporation may render professional services except through individuals authorized by law to render such professional services as individuals.” The Superintendent of Insurance had determined that insurance carriers may withhold payment of no-fault claims which had been assigned to those medical providers which were owned or controlled by non-physicians. The Superintendent’s regulation is found in Section 65-3.16(a)(12) of 11 N.Y.C.R.R, which reads:.

Measurement of no-fault benefits. (a) Medical expenses.

(12) 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 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.

One contention by the medical providers in Mallela was that even if they were not in compliance with corporate licensing requirements, they were entitled to payment because all personnel who actually treated the patients rendered their services within the scope of their licensed specialties, and therefore, this extent of licensing compliance was “within the regulatory framework for reimbursement.” 4 NY3d at 321.

The Mallela Court found the Superintendent’s Regulation [§65-3.16(a)(12)] valid and that it was undermined by the claim that the individual practitioners who treated the patients were properly licensed within their fields:

Where, as here, the Superintendent has properly crafted a rule within the scope of his authority, that rule has the force of law and represents the policy choice of this State.

4 NY3d at 321.

Based upon Mallela, this court holds that the defenses of fraudulent incorporation and unlawful fee splitting are proper exceptions to the 30-day rule because said conduct is specifically barred by statute. Mallella, supra (insurance carriers may withhold payment of claims to medical corporations which are in violation of specific statutes concerning [*6]incorporation and fee splitting with non physicians). Concomitantly, these defenses are not waived or precluded by an untimely denial See also Ozone Park Medical Diagnostic Associates v. Allstate Insurance Company, 180 Misc2d 105, 109, 689 NYS2d 616, 618 (A.T. 2d Dep’t 1999) (where the specific wording a statute [Public Health Law §238-a] prohibits a financial relationship between a referring practitioner and the medical provider, then “it logically follows that the 30-day limitation . . . [rule] would not apply if the instant case fell within the ambit of [the statute]”).

However, in this case defendant fails to demonstrate by “fact or founded belief” that the medical corporations were not properly licensed either at their inception or thereafter, that non-physicians are practicing medicine at plaintiffs’ facilities and/or that the physicians billing for services rendered are not properly licensed in their respective fields. Notably, defendant is in receipt of the Certificate(s) of Incorporation, copies of medical licenses and registrations, and copies of lease and management agreements for several of the plaintiffs herein.^[FN3] Significantly, defendant does not dispute the validity of any corporate registrations and/or medical licenses provided by plaintiff(s), or present legal authority prohibiting Dr. Nandi from owning more than one medical facility. There is no submission by an individual with personal knowledge that any investigation has been conducted at the New York State Department of Education and/or Secretary of State, or other source, which contradicts the corporate and licensing data provided by plaintiffs. Rather, via an affidavit by Kathy Aplin, a manager employed by defendant in its Special Investigative Unit, defendant states it is its “contention” that the 10 [ten] professional medical corporations, including plaintiffs herein, allegedly owned by Dr. Dipak Nandi, a licensed acupuncturist, are in fact owned by non-medical personnel. Ms. Aplin states that evidence collected to date indicates that Dr. Nandi’s facilities are managed, controlled and operated by unlicensed individuals who ultimately profit from these medical facilities in direct violation of the Business Corporations Law and Educational Law of the State of New York. However, Ms. Aplin fails to submit “the evidence collected to date” applicable to the actual medical providers named in the captions herein.

In addition, Ms. Aplin offers information which is unrelated to the plaintiffs before the court. For example, Ms. Aplin alleges that Dr. Nandi was not certified to practice acupuncture in January 2001 when Universal Acupuncture was incorporated. The court deems this information irrelevant because Universal Acupuncture is not a named plaintiff herein, it is undisputed that Dr. Nandi obtained certification to practice acupuncture in 2001 after January 2001, and all claims in the various complaints are for services rendered after 2001.

Ms. Aplin attaches numerous lease agreements between parties that are not related to this lawsuit. As to those lease agreements which involve one of the parties named in the actions before the court, those lease agreements expired in either 2001 or 2002; there is no allegation that said agreements were renewed and their relevance to the no-fault claims at issue. [*7]

Ms. Aplin refers to documents obtained from a lawsuit against Dr. Nandi, but fails to identify the date said lawsuit was commenced, the caption and index number, the court in which it appeared, and the disposition, if any.

Ms. Aplin states that Travelers “became concerned” that many of the bills submitted by plaintiffs were for unnecessary treatment which “was motivated by interests other than the best interests of the patients” [¶24]. However, she cites no specific findings of patients being rendered unnecessary treatment, and none of the denials herein stated medical non-necessity as a ground for denial of plaintiffs’ claims. Cf. A.B. Medical Services PLLC v. State Farm Mutual Automobile Insurance Company, 4 Misc 3d 83, 84, 781 NYS2d 822, 823 (9th & 10th Jud. Dists. 2004) (examinations of the assignors under oath revealed significant discrepancies and raised questions of fact as to whether medical services were rendered after symptoms abated).

Clearly, Ms. Aplin’s affidavit is replete with hearsay, conjecture and speculation and, therefore, insufficient to raise an issue of fact as to plaintiffs’ fraudulent corporation or other specific fraudulent conduct.

This court holds that Mallela did not open a valve authorizing full disclosure into corporate licensing matters absent good cause and/or reasonable foundation in no-fault medical provider actions. Significantly, Mallella referred to the role of Superintendent of the Insurance in investigating claims of regulatory breaches, and implied that the insurance carrier would conduct its investigation within the confines of the statutory verification process. Consider, Mallela offered the caveat that the no-fault regulatory scheme

does not permit abuse of the truth-seeking opportunity that 11 N.Y.C.R.R. 65-3.16(a)(12) authorized. Indeed, the Superintendent’s regulations themselves provide for the agency oversight of carriers, and demand that carriers delay the payment of claims to pursue investigations solely for good cause (see 11 N.Y.C.R.R. 65-3.2[c]. In the licensing context, carriers will be unable to show ‘good cause’ unless they can demonstrate behavior tantamount to fraud.”

The Mallella Court cited to and presumed that carriers follow the “practice principles” enunciated in §65-3.2[c]:

Do not demand verification of facts unless there are good reasons to do so. When verification of facts is necessary, it should be done as expeditiously as possible.

Consequently, Mallela did not alter the settled rules that (1) an insurer’s lack of coverage defense must be premised on fact or founded belief [General Hospital v. Chubb Group, supra ,], (2) that an insurer must stand or fall upon those defenses raised in a timely denial preserved with tolling mandates [Presbyterian Hospital v. City of New York, supra ; Inwood Hill Medical P.C. v. Allstate Insurance Company, 3 Misc 3d 1110(A), 787 NYS2d 678, 2004 {3 Misc 3d 1110(A)} WL 1381082 (Div. Ct. NY Co. 2004)], (3) that discovery in no-fault actions is tailored by the grounds asserted in the denial [Metropolitan Radiological Imaging, PC v. State Farm Mutual Automobile Insurance Company, 7 Misc 3d 675, 790 NYS2d 373 {7 Misc 3d 675} (Civ. Ct. [*8]Qns. Co. 2005) ; and (4) Mallella did not define, expand or restrict the meaning of “fraud.”^[FN4]

However, while the Mallela Court did not define fraud, it defined “good cause:”

In the licensing context, carriers will be unable to show “good cause” unless they can demonstrate behavior tantamount to fraud. Technical violations will not do.

4 NY3d at 322. Thus, a new question is what constitutes “behavior tantamount to fraud?” While this court does not venture to offer an example, defendant’s submission in this case lacks a reliable foundation to infer that the medical providers are engaging in behavior that can be described as “tantamount to fraud.” Consequently, defendant does not demonstrate that it is entitled to the depositions it seeks, since it is axiomatic that Article 31 of the CPLR [Civil Practice Law and Rules] is not to be utilized for ‘fishing expeditions.’

It remains that after Mallela the distinction between denials based on lack of coverage and all others, made in Chubb, supra , is still the prevailing law. Fair Price Medical Supply Corp. v. Travelers Indemnity Company, __ Misc 3d __, __ {9 Misc 3d 76} NYS2d. __, 2005 WL 1994132, 2005 NY Slip O. 25343. (A.T. 2d & 11th Jud. Dists. 2005). In Fair Price the Appellate Term first found that the insurer did not deny the claim within 30 days, and then considered whether the insurer’s claim of fraud was precluded by the untimely denial. Specifically, the insurer claimed that it was not required to pay the medical provider’s claim because the eligible injured person, the assignor, stated he never received the medical supplies. The Appellate Term adhered to Chubb, supra , and held in favor of the medical provider, stating that a:

defense based on a provider’s fraudulent scheme to obtain no-fault benefits [was] precluded by defendant’s untimely claim denial. . . . we are bound by the majority’s unequivocal construction [in Chubb] of the No-Fault Law which limits an insurer’s ability to resist ‘ill-founded, illegitimate and fraudulent claims’ submitted by providers of medical services or medical equipment to the ‘strict, short-leasehed contestable period’ set forth in the verification protocols [cites omitted]. The clear implication is that a defense based on a provider’s alleged fraudulent claim for no-fault benefits is precluded by an insurer’s failure effectively to invoke its remedies in the ‘contestable period,’ one of the ‘tradeoff[s] of the no-fault reform’ which the Legislature recognized as the cost of providing ‘prompt uncontested’ first-party insurance benefits.

After Mallela insurance carriers are still required to make a showing that the defense of fraud is well-founded and in good faith. See KC Ocean Diagnostic Imaging PC v. Utica Mutual Insurance Company, __ Misc 3d ___, N.Y.L.J. 7/18/05, p.37, col. 4 (A.T. 2nd & 12th Jud. Dists.) (“defendant [insurer] is not precluded from asserting the defense that the collision was in furtherance of an insurance fraud scheme, despite its untimely denial of the claim” and evidence was sufficient to sustain defense]; cf., Medical Services PLLC, Somun Acupuncture, PC, Square Synogogue Transportation Inc. V. GEICO Casualty Insurance Co., __ Misc 3d __, N.Y.L.J. May 5, 2005, p.31, col.2 (A.T. 2nd & 12th Jud. Dists.) (although defendant/insurer not “precluded from asserting the defense that the collision was in furtherance of an insurance fraud scheme” in an untimely denial, defendant’s evidence “was insufficient to demonstrate that the defense was based upon a “‘founded belief that the alleged injur[ies] did not arise out of an insured incident” [cites omitted]; AB Medical Services PLLC v. Eagle Insurance Co, 3 Misc 3d 8, 9, (A.T. 2nd & 11th Jud. Dists. 2003) (an insurer’s “founded belief” that an accident was staged cannot be based upon “unsubstantiated hypothesis and supposition”).

Cf. Metroscan Imaging PC v. GEICO Insurance Company, 8 Misc 3d 829, 797 NYS2d 737 {8 Misc 3d 829} (Civ. Ct. Qns. Co. 2005), where the court consolidated sixty (60) actions for purposes of permitting amendment of the insurer’s answers to include a defense of fraudulent incorporation, and scheduled a framed hearing on that issue. Apparently, the insurer in Metroscan presented that the doctor and owner of the professional corporations “sold his medical license to [another medical group identified by name] to maintain the appearance that the companies were owned by a physician [also identified] [w]hen in actuality the corporate entities were owned, controlled and operated by non-physicians.” Id. 8 Misc 3d at 831, 797 NYS2d at 739. By contrast, defendant herein does not identify one non-licensed individual who either owns, controls or operates the medical corporations owned by Dr. Nandi, even though defendant has been provided with management agreements and income tax information for certain employees.

For the foregoing reasons, defendant’s motion(s) to dismiss the complaint(s) or, in the alternative, to compel the deposition of Dr. Nandi and Ying Li and/or other treating acupuncturists are denied in their entirety; and plaintiffs’ cross-motion(s) for protective order are granted.

In light of the foregoing, the court declines to address plaintiffs’ further argument that Mallela is limited to claims arising on or after April 4, 2002, deferring that discussion to when that is the pertinent issue before the court. See Multiquest PLLC v. Allstate Insurance Co., __ {9 Misc 3d 76} NYS2d __, 2005 WL 2085966, 2005 NY Slip Op. 25356 (Civ. Ct. NY 2005) (the intent of the Mallela III Court is that payment may be withheld to claims arising prior to April 4, 2002 where the medical providers were incorporated unlawfully).

Dated: Bronx, New York

October 6, 2005

________________________________

Julia I. Rodriguez, Judge of the Civil Ct.

Footnotes

Footnote 1: In the matter of Maple Medical Acupuncture, a/a/o Cathy Mayo, Index 079563/2004, the Verified Answer did not allege any defense related to corporate structure and ownership, licensing or fee splitting.

Footnote 2: In the matter of Maple Medical Acupuncture, a/a/o Cathy Mayo, Index 79563/2004, the first denial dated 5/10/02 reiterates the language noted herein. Inexplicably, there is a subsequent denial dated 7/9/02 which reads: Based on the inconsistencies in the statement obtained from Cathy Mayo, the facts of the loss were not verified. Therefore, your no fault claim is denied. The court notes the both denials omit the date of bill, period of the bill and the date the bill was received by the Insurer. In the matter of Delta Medical Acupuncture, P.C., a/a/o Basilicia Rodriguez, Index 79564/2004 the only denial attached is not dated and merely states: Due to inconsistencies in the statement given, the facts of the loss could not be verified. Therefore, the bill has been denied. In the matter of Delta Medical Acupuncture, a/a/o Kwanza Adams, Index 79565, the denial reads: In accordance with the NYS No-Fault Law, an Independent ACUPUNCTURE [sic] Medical Examination was held on 7/23/01 by Doctor Baron. After completion of exam and review of medical reports submitted, Doctor Baron indicated: THERE WAS NO FURTHER NEED OF ACUPUNCTURE TREATMENT. Therefore, all further ACUPUNCTURE benefits are denied.

Footnote 3: Plaintiff provided defendant with management agreements by Triborough Healthcare Management Corp. a non-party herein, in the matter(s) of : Statewide Medical, a/a/o Raghunandan, Index 32816/05; Continental Medical a/a/o McKenna, Index 77931/04; Continental Medical a/a/o Fernandez, Index 53514/03. Dr. Nandi is the sole owner and shareholder of Triborough Healthcare.

Footnote 4: The fact that Mallela declined to further define fraud was discussed by the court in RDK Medical v. General Assurance, 8 Misc 3d 1025(A), 2005 WL 1936342 at 4 (Civ. Ct. NY Co. 2005), which noted that as of this writing no appellate court has articulated a general “fraud” defense that is not subject to the preclusion rule [cites omitted] . . . the Court of Appeals was given the opportunity to do so in the “fraudulently incorporated enterprises” case [i.e., Mallela], but declined to do so, relying instead on a governing regulation [cites omitted].

Civil Court, Kings County

96502/04

Eileen N. Nadelson, J.

Plaintiff, a medical provider, instituted this action to recover first party No-Fault benefits from Defendant insurer. Plaintiff moved for summary judgment, alleging that Defendant neither paid nor denied the claim within the statutorily mandated thirty-day period after receipt of the claims. Ins. Law sec. 5106; Regulations sec. 65-3.8. Plaintiff further alleged that the Denial of Claim form (NF-10) was defective in that it did not indicate the reason for the denial with specificity as is required by section 65-3.4( c) of the Regulations.

Defendant, in opposition, claimed that the denials were timely and that the grounds for the denial are sufficiently specific to apprise Plaintiff as to the reasons for not paying the claim.

After argument, the court has concluded that the NF-10 form was properly mailed within the statutory time frame. Consequently, the only issue remaining for the court is whether Defendant’s reason for the denial, as stated in its Denial of Claim form, is legally sufficient to forestall Plaintiff’s motion for summary judgment. [*2]

The explanation for Defendant’s denial of the first party benefits, as stated in section 33 of its NF-10, is: “The Claim is Denied Based On An Examination Under Oath.”

In 1979, the New York Court of Appeals established the general guidelines for insurers when denying coverage. According to General Accident insurance Group v. Cirucci, 46 NY2d 862, 414 N.Y.S. 2d 512 (1979):

...the notice of disclaimer must promptly apprise the claimant with a high

degree of specificity of the ground or grounds on which the disclaimer is

predicated. Absent such specific notice, a claimant might have difficulty

assessing whether the insurer will be able to disclaim successfully. This

uncertainty could prejudice the claimant’s ability to ultimately obtain

recovery. In addition, the insurer’s responsibility to furnish notice of the

specific ground on which the disclaimer is based is not unduly burdensome,

the insurer being highly experienced and sophisticated in such matters.

Therefore, a timely denial alone does not avoid preclusion of a provider’s motion for summary judgment where said denial is factually deficient, conclusory, vague or otherwise involves a defense which has no merit as a matter of law. Nyack Hospital v. Metropolitan Property & Casualty Ins. Co., 16 AD3d 564, 791 N.Y.S. 2d 658 (2d Dept. 2005); Nyack Hospital v. State Farm Mut, Auto. Ins. Co., 11 AD3d 664, 784 N.Y.S. 2d 136 (2d Dept. 2004).

The blanket statement of Defendant on its NF-10 is too vague and ambiguous to alert Plaintiff as to the actual grounds for the denial of benefits. Stating that a denial is based on an Examination Under Oath, without indicating what about that examination merits denial of first-party benefits under No-fault law, does not set forth a factual basis on which to mount a meritorious legal defense. Park Neurological Services, P.C. v. Geico Insurance, 4 Misc 3d 95, 782 N.Y.S. 2d 507 (Sup. Ct. App. Term 2004). Therefore, because Defendant’s explanation of its reasons for denying Plaintiff’s claim on its NF-10 form was not stated with a high degree of specificity, it is insufficient to overcome Plaintiff’s summary judgment motion. All-Country Medical & Diagnostic P.C. v. Progressive Casualty Insurance Co., 8 Misc 3d 616, 795 N.Y.S. 2d 434 (Nassau County 2005).

The clerk is ordered to enter judgment in favor of Plaintiff in the amount of $1024.00, plus statutory interest, costs and attorneys’ fees.

Dated: October 3, 2005

__________________________

EILEEN N. NADELSON, J.C.C.

[*1]

Civil Court of the City of New York, Kings County, October 3, 2005

APPEARANCES OF COUNSEL

Amos Weinberg, Great Neck, for plaintiffs. Jaffe & Nohavicka, New York City, for defendant.

OPINION OF THE COURT

Peter P. Sweeney, J.

In this action to recover assigned first-party no-fault benefits, the novel issue presented is whether it is appropriate to grant leave to a plaintiff billing provider to amend a fatally defective proof of claim once the action to recover on the claim has been commenced. For the reasons set forth below, the court concludes such a motion should be denied.

Factual Background

The four plaintiff assignees, A.B. Medical Services PLLC, DAV Chiropractic P.C., Daniel Kim’s Acupuncture P.C. and G.A. Physical Therapy P.C., commenced this action seeking to recover on multiple unpaid claims for assigned first-party no-fault benefits for medical services provided to their mutual assignor, Nelson Vargas.

The matter appeared before the undersigned for trial on June 16, 2005. Prior to the commencement of the trial, the parties entered into a written stipulation of admitted facts. Pursuant to the stipulation, the defendant admitted that it received all the proofs of claim at issue (the NF-3 claim forms). Defendant further admitted that it did not pay the claims in full within 30 days of their receipt and that the only payments it made on the claims were those referenced in plaintiffs’ complaint. Defendant admitted that it never requested verification of the claims following their receipt thereby tolling the 30-day period in which it had to pay or deny the claims.

Although the defendant claims to have issued timely denials of the claims asserting lack of medical necessity as its only defense, pursuant to the stipulation, defendant withdrew the denials and the defenses raised therein.

Defendant’s counsel correctly pointed out that in all of the NF-3s, copies of which were stipulated into evidence, the “treating providers” were identified as “independent contractors” of the plaintiff billing providers. Defendant maintained that, for this reason alone, the entire action must be dismissed. In support of its position, defendant cited A.B. Med. Servs. PLLC v Liberty Mut. Ins. Co. (9 Misc 3d 36[*2][App Term, 2d & 11th Jud Dists 2005]). Therein, the court held that a billing provider is ineligible to recover assigned first-party benefits where the medical services were provided by an independent contractor.

Plaintiffs maintained that defendant waived the independent contractor defense recognized in A.B. Med. Servs. PLLC by failing to timely object to plaintiffs’ claim forms and by failing to assert the defense in a timely denial. Plaintiffs further maintained that the treating providers identified in the NF-3s were actually employees of the plaintiffs and that plaintiffs simply made a mistake by identifying them as independent contractors. Plaintiffs moved at trial for leave to amend the NF-3s to correct the mistake and asked for the opportunity to introduce evidence at trial to establish the treating providers’ correct status.

The court reserved decision on all issues and gave the parties permission to submit memorandums of law supporting their respective positions. The court permitted plaintiffs to offer evidence at trial on the issue of whether the treating providers were independent contractors or employees but ruled that such evidence would be considered only if plaintiffs’ motion to amend the proofs of claim were granted.

After due consideration and having had the opportunity to review the memorandums of law submitted by the parties, the court hereby denies plaintiffs’ motion to amend the NF-3 proof of claim forms and directs that judgment be entered in favor of the defendant dismissing the action on the ground that the proofs of claim identified the treating providers as independent contractors thus rendering the claims fatally defective on their face.

Discussion

In A.B. Med. Servs. PLLC (supra), the court held that 11 NYCRR 65.15 (j) (1) (now 11 NYCRR 65-3.11 [a]) prohibits a billing provider from recovering assigned first-party no-fault benefits where the medical services were performed by an independent contractor. 11 NYCRR 65.15 (j) (1) (now 11 NYCRR 65-3.11 [a]) provides that “[a]n insurer shall pay benefits . . . directly to the applicant or . . . upon assignment by the applicant . . . [to] the providers of services.” The court interpreted the phrase “providers of services” to mean an actual provider of medical services and held that a “billing provider seeking recovery of assigned no-fault benefits for medical services which were not performed by it or its employees, but by an independent contractor identified as the ‘treating provider’ on NF-3 claim forms, is not a ‘provider’ of . . . services . . . and is hence not entitled to recover ‘direct payment’ of assigned no-fault benefits” (9 Misc 3d at 37).

Plaintiffs’ contention that defendant waived the independent contractor defense by failing to timely object to plaintiffs’ claim forms and by failing to assert the defense in a timely denial is well taken. Indeed, it is well established that an insurer’s failure to object to the adequacy of plaintiff’s proof of claim within 10 days of receipt (now 15 business days) “constitutes a waiver of any defenses with respect thereto” (see A.B. Med. Servs. PLLC v Nationwide Mut. Ins. Co., 6 Misc 3d 70, 71 [App Term, 2d & 11th Jud Dists 2004]; Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564 [2d Dept 2005]; New York Hosp. Med. Ctr. of Queens v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640 [2d Dept 2004]). It is also well established that, except for the defense that there is no coverage at all for a claim, “preclusion of the insurance company’s ability to deny the claim is the appropriate remedy where, as here, the insurance company neither denies a claim within 30 days after receiving it nor seeks to extend that time by requesting verification in the prescribed forms” (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 278 [1997] [internal quotation marks deleted]; see also Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195 [1997]).

Notwithstanding these principles, in a case decided on July 7, 2005, the Supreme Court, Appellate Term, held that the independent contractor defense is “nonwaivable and not subject to the preclusion rule” (Rockaway Blvd. Med. P.C. v Progressive Ins., 9 Misc 3d 52, 54 [App Term, 2d & 11th Jud Dists 2005]). The court must therefore conclude that the principles of waiver and preclusion do not apply where the proof of claim, on its face, demonstrates the applicant’s nonentitlement to payment of the claim. Turning to plaintiffs’ motion for leave to amend their proofs of claim, it is the opinion of the court that the motion must be denied. CPLR 3025 (b) provides that “[a] party may amend his pleading . . . at any time by leave of court” (emphasis added). A proof of claim is not a pleading and the court is unaware of any statute or constitutional provision permitting the amendment of a proof of claim by leave of court, especially where an action is pending that is predicated upon the submission of the proof of claim. Unlike the Supreme Court, this court’s equitable jurisdiction is very limited (Parker v Rich, 140 AD2d 177 [1st Dept 1988]) and absent a particular constitutional or statutory empowerment, this court lacks subject matter jurisdiction to grant equitable relief (see Goldstein v Stephens, 118 Misc 2d 614, 615 [App Term, 1st Dept 1983]). The relief plaintiffs are requesting can only be viewed as equitable in nature and, as stated above, the court is unaware of any statute or constitutional provision empowering this court to grant the relief.

Even if it were within the court’s power to grant plaintiffs’ motion, it would decline to do so. The Insurance Law and the regulations promulgated thereunder give an insurer “30 calendar days after proof of claim is received . . . [to] either pay or deny the claim in whole or in part” (11 NYCRR 65-3.8 [c]; Insurance Law § 5106 [a]). Furthermore, within 10 days of receipt of a claim (now 15 business days), an insurer is entitled to request verification of a claim (11 NYCRR 65.15 [d] [1], now 11 NYCRR 65-3.5 [a]). It would be fundamentally unfair to permit the plaintiffs to cure their fatally defective proofs of claim and then allow them to proceed to trial on the amended claims without giving the defendant an opportunity to pay or deny the amended claims within the allotted time period or an opportunity to request further verification of the claims.

For the above reasons, it is hereby ordered that judgment be entered in favor of the defendant dismissing the entire action.

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd and 11th JUDICIAL DISTRICTS

Appeal from an order of the Civil Court of the City of New York, Kings County (Robin S. Garson, J.), entered August 18, 2004. The order, insofar as appealed from, granted plaintiff’s motion for summary judgment in regard to causes of action relating to assignors Romana Hernandez and Jaime Diaz.

Order, insofar as appealed from, unanimously reversed without costs and plaintiff’s motion for summary judgment denied in causes of action relating to Romana Hernandez and Jaime Diaz.

In this action to recover first-party no-fault benefits for medical supplies rendered to their assignors, plaintiff established a prima facie entitlement to summary judgment with regard to the causes of action relating to assignors Romana Hernandez and Jaime Diaz by proof that it submitted 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]; Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U] [App Term, 2d & 11th Jud Dists]). Inasmuch as defendant failed to pay or deny the claims within the 30-day prescribed period (11 NYCRR 65-3.8 [c]), it was precluded from raising most defenses (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282 [1997]).

However, defendant was not precluded from asserting the defense that the various collisions were in furtherance of insurance fraud schemes, despite the untimely denials of the [*2]claims (see Matter of Metro Med. Diagnostics v Eagle Ins. Co., 293 AD2d 751 [2002]). The affidavit of defendant’s claims representative, that the insureds in both cases were involved in intentionally caused collisions, was sufficient to raise a triable issue of fact as to whether the claims of assignors Hernandez and Diaz were [*3]
fraudulent (see A.B. Med. Servs. PLLC v Prudential Prop. & Cas. Ins. Co., 6 Misc 3d 130[A], 2005 NY Slip Op 50076[U] [App Term, 2d & 11th Jud Dists]).
Decision Date: September 30, 2005

—[*1]

In a proceeding pursuant to CPLR article 75 to vacate an arbitration award in favor of the City of Yonkers dated October 20, 2003, in the sum of $49,962.88, the appeal is from an order of the Supreme Court, Westchester County (Barone, J.), entered April 6, 2004, which granted the petition and vacated the award.

Ordered that the order is reversed, on the law, with costs, the petition is denied, the arbitration award is reinstated and confirmed, and the matter is remitted to the Supreme Court, Westchester County, for the entry of an appropriate judgment (see CPLR 7514 [a]).

On October 12, 2000, nonparty Richard Greco, an employee of the appellant City of Yonkers, sustained personal injuries, when, while crossing the street, he was struck by a motor vehicle owned by nonparty Keith Brunson. Brunson’s vehicle was insured by the petitioner, State Farm Mutual Automobile Insurance Company (hereinafter State Farm). Greco was working at the time of the accident.

Greco filed a bodily injury claim with State Farm, Brunson’s insurer, to recover damages for the personal injuries he sustained in the accident. In February 2002 Greco’s claim was settled for $100,000, the policy limit for the Brunson vehicle. Greco executed a standard form release (hereinafter the general release) dated February 1, 2002, in favor of Brunson, inter alia, [*2]releasing him from liability for any and all claims arising out of the accident.

Meanwhile, the City paid Greco workers’ compensation benefits which totaled $49,962.88. Greco did not seek the City’s permission to settle the personal injury action until after he had settled the matter and signed the general release. The City consented to the settlement in April 2002 in a letter (hereinafter the consent letter) in which it reserved its “offset and credit rights against all retroactive, future, current and modified workers’ compensation benefits payable to Richard Greco based upon the net settlement value received” by him.

The City sought mandatory arbitration pursuant to Insurance Law § 5105 against State Farm for recoupment of the workers’ compensation benefits it paid to Greco, commonly referred to as a “loss transfer.” State Farm asserted two affirmative defenses: that the policy limits were exhausted and that the general release executed by Greco extinguished the City’s subrogation rights. It did not assert that the City’s consent to the settlement constituted a waiver of its loss transfer rights. The arbitrator found in favor of the City. State Farm commenced this proceeding to vacate the arbitrator’s award. The Supreme Court granted the petition and vacated the award on the ground, inter alia, that the arbitrator’s award made no mention of the general release. We reverse.

An arbitration award in a mandatory arbitration proceeding will be upheld if it is supported by the evidence and is not arbitrary and capricious (see Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co., 89 NY2d 214, 223 [1996]; Matter of Kemper Ins. Co. v Westport Ins. Co., 9 AD3d 431, 432 [2004]). On review, an award may be found to be rational if any basis for such a conclusion is apparent to the court based upon a reading of the record (see Caso v Coffey, 41 NY2d 153, 158 [1976], citing Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 NY2d 222, 231 [1974]; Dahan v Luchs, 92 AD2d 537, 538 [1983]).

Pursuant to Insurance Law § 5105, an insurer who pays out first-party benefits or workers’ compensation benefits in lieu thereof is afforded the mandatory intercompany arbitral process to recoup payment of those benefits through a loss transfer (see Doherty v Barco Auto Leasing Co., 144 AD2d 424, 426 [1988]). This mandatory arbitration provides the sole remedy for loss transfer (id.). An insurer does not lose its loss transfer rights as part of a personal injury settlement absent an “express waiver” of those rights (Allstate Ins. Co. v Manfredi Motor Tr. Co., 159 AD2d 969 [1990]; see Matter of Kemper Ins. Co. v Westport Ins. Co., supra; Doherty v Barco Auto Leasing Co., supra). In the case at bar, the City did not expressly waive its right to seek recovery of first-party benefits in intercompany arbitration, and the general release executed by its insured did not effect a waiver of its loss transfer rights. Thus, the arbitrator’s determination was supported by the evidence in the record (see Doherty v Barco Auto Leasing Co., supra; Allstate Ins. Co. v Manfredi Motor Tr. Co., supra), and was not arbitrary and capricious (see Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co., supra).

The dissent does not dispute that the general release contains no explicit waiver of the City’s loss transfer rights. According to the dissent, however, the arbitrator failed to consider whether there was an explicit waiver of the right to loss transfer recovery, implying that the City’s consent letter constituted such a waiver. This issue was not before the arbitrator. The issue tendered to the arbitrator, as phrased by State Farm, was whether the general release extinguished the City’s claim, not whether the consent letter constituted an explicit waiver of the right to loss transfer. There is absolutely no evidence in the record to establish that the consent letter was submitted to the [*3]arbitrator for consideration on the issue of waiver. In fact, State Farm, the party who, according to the dissent, benefitted from this document, vigorously denied in the Supreme Court that it was submitted to the arbitrator. State Farm accused the City of submitting the consent letter to the Supreme Court for the first time. It criticized the City for failing to submit an affidavit by an individual with knowledge to establish that the consent letter had in fact been submitted in the arbitration. Thus, we are not, as the dissent states, deciding the issue de novo based upon an assumption of what evidence was before the arbitrator.

Even if the consent letter had been submitted to the arbitrator, it, like the general release, contains no explicit waiver of the City’s loss transfer rights. The mere fact that the City consented to the settlement is insufficient to constitute a waiver of its loss transfer rights. This point is made pellucidly clear by this Court’s holding in Doherty v Barco Auto Leasing Co. (supra). There, the plaintiff Andrew Doherty was involved in an accident while operating his employer’s truck. Liberty Mutual Insurance Company (hereinafter Liberty Mutual) insured Doherty’s employer against both workers’ compensation and automobile liability claims. State Farm Automobile Insurance Company (hereinafter State Farm Automobile) insured the vehicle owned by Barco Auto Leasing Co. Pursuant to its policies of insurance, Liberty Mutual paid Doherty’s workers’ compensation and no-fault benefits. Doherty commenced an action to recover damages for personal injuries. The action was settled with the participation of a supervisor at Liberty Mutual. Doherty stipulated, inter alia, “that there were no outstanding liens against his recovery and that all medical bills were paid to the no-fault and compensation carrier” (Doherty v Barco Auto Leasing Co., supra at 425).

Liberty Mutual thereafter placed into intercompany arbitration the loss transfer claims for no-fault and workers’ compensation benefits paid to Doherty. The arbitrator awarded Liberty Mutual 80% of its claims. State Farm Automobile commenced a CPLR article 75 proceeding to vacate the arbitration awards, and Liberty Mutual cross-moved for an order confirming the awards. The Supreme Court granted State Farm Automobile’s petition on the ground that the stipulation was binding upon Liberty Mutual, and that it had waived any “liens.” This Court reversed, holding that the stipulation of settlement did not expressly refer to Liberty Mutual’s right to loss transfer recovery, but only to outstanding liens (see Doherty v Barco Auto Leasing Co., supra at 425-426). “As a consequence, it [could] not be said that Liberty [Mutual] unequivocally waived its right to loss transfer recovery” (Doherty v Barco Auto Leasing Co., supra at 426, citing Matter of New Hampshire Ins. Co. [Utilities Mut. Ins. Co.], 134 AD2d 670 [1988]). The fact that Liberty Mutual participated in and explicitly consented to the settlement was of no relevance.

In the case at bar, there is evidentiary support in the record for the arbitrator’s award because the general release contains no express waiver of the City’s loss transfer rights (see Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co., supra; Allstate Ins. Co. v Manfredi Motor Tr. Co., supra; Doherty v Barco Auto Leasing Co., supra). The outcome would not have been different even if, as the dissent suggests, the consent letter had been before the arbitrator since it too contains no express waiver of the City’s loss transfer rights.

Finally, the arbitrator complied with the applicable procedural requirements by including a brief statement of the basis for the finding (see 11 NYCRR 65.10 [d] [4] [vii]). The dissent simply disagrees with it.

Accordingly, the Supreme Court should have denied the petition and confirmed the arbitrator’s award in favor of the City (see CPLR 7511 [e]). Crane, J.P., Mastro and Spolzino, JJ., concur.

Goldstein, J., dissents and votes to affirm the order with the following memorandum in which Luciano, J., concurs: The instant case arises out of an accident involving a vehicle insured by the petitioner and Richard Greco, a pedestrian employed by the City of Yonkers who was crossing the street at the time of the accident. Richard Greco claimed and received workers’ compensation benefits. In February 2002 he settled his claim against the petitioner’s insured for $100,000, constituting the policy limits and signed a general release. On April 1, 2002, the City consented to the settlement of $100,000, reserving its “offset and credit rights” against “retroactive, future, current and modified Workers’ Compensation benefits payable to Richard Greco based upon the net settlement value.”

Thereafter, the City sought reimbursement from State Farm Mutual Automobile Insurance Company (hereinafter State Farm) pursuant to Insurance Law § 5105, which permits recoupment of payments of first-party benefits or payments made in lieu of first-party benefits if the requirements of Insurance Law § 5105 (a) are satisfied (see State Farm Mut. Auto. Ins. Co. v Aetna Cas. & Sur. Co., 132 AD2d 930 [1987], affd 71 NY2d 1013 [1988]). Recoupment pursuant to Insurance Law § 5105 is known as a “loss transfer recovery” (Doherty v Barco Auto Leasing Co., 144 AD2d 424, 426 [1988]).

In accordance with Insurance Law § 5105 (b) the controversy was submitted to mandatory arbitration. In the arbitration proceeding, State Farm asserted as affirmative defenses that its policy limits had been exhausted and a general release had been executed by Greco. A copy of the release was submitted with State Farm’s answer.

The arbitrator, after a hearing, awarded the City $49,962.88, stating that the “City of Yonkers proved liability against . . . State Farm for 100%” and “liability & claimed amount not at issue.” The arbitrator further stated that “bodily injury liability limit stretches to accommodate a basic PIP [personal injury protection] subro[gation] or worker’s comp loss transfer.”

State Farm commenced this proceeding to vacate the award. The petition was granted and the parties were directed to submit to a new arbitration hearing before a different arbitrator on the ground that “[t]he Arbitrator issued an incomprehensible two sentence decision which makes no mention of the legal issue of the general release entered into by Mr. Greco in favor of State Farm.”

Where, as here, the parties have submitted to compulsory arbitration, to be upheld, the award must have evidentiary support and cannot be arbitrary or capricious (see Mount St. Mary’s Hosp. of Niagara Falls v Catherwood, 26 NY2d 493 [1970]; Cigna Prop. & Cas. v Liberty Mut. Ins. Co., 12 AD3d 198 [2004]). Further, pursuant to 11 NYCRR 65.10 (d) (4) (vii) (d) the arbitration award must be rendered in a written decision which states a “brief statement of the basis for the finding, such as lack of proof, contributing negligence, apportionment of negligence or other controlling principles of law.”

Greco claimed and received workers’ compensation benefits. As part of the [*4]settlement, a workers’ compensation carrier may explicitly waive its right to a credit or offset pursuant to Workers’ Compensation Law § 29 (4) (see Miszko v Gress, 4 AD3d 575 [2004]) its right to recovery of liens and its right to a loss transfer recovery (see Matter of Kemper Ins. Co. v Westport Ins. Co., 9 AD3d 431, 432 [2004]; Allstate Ins. Co. v Manfredi Motor Tr. Co., 159 AD2d 969 [1990]; Doherty v Barco Auto Leasing Co., supra).

In the instant case, Greco’s employer explicitly consented to the settlement. The issue before the arbitrator was whether there was an explicit waiver of the right to loss transfer recovery. This issue was apparently not considered by the arbitrator. The majority would confirm the award, based upon its own determination that the evidence in the record would permit a finding that there was no explicit waiver.

Since the controversy including State Farm’s affirmative defense “must, as a matter of [law], be arbitrated” (Matter of State Ins. Fund [Country-Wide Ins. Co.], 276 AD2d 432 [2000]), it is not the function of this Court to decide the issues de novo. The arbitrator’s decision did not comply with 11 NYCRR 65.10 since it did not state the basis for the arbitrator’s finding in comprehensible terms. Accordingly, the award was properly vacated as arbitrary and capricious.

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd and 11th JUDICIAL DISTRICTS

Appeal from an order of the Civil Court of the City of New York, Kings County (Manuel J. Mendez, J.), entered September 28, 2004. The order denied plaintiff’s motion for summary judgment.

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 equipment furnished to its assignors, plaintiff established its entitlement to summary judgment by its proof that it submitted the functional equivalent of the statutory claim forms (11
NYCRR 65-3.5 [a], [f]), setting forth the fact and 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]). Defendant’s failure to pay or deny [*2]assignor Figueroa’s claim for $580 and assignor Rivera’s claims for $840 and $1,085 within the statutory 30-day claim determination period (11 NYCRR 65-3.8 [c]), or to prove a tolling of said period precluded the defenses set forth in the claim denial forms (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282 [1997]; Triboro Chiropractic & Acupuncture PLLC v New York Cent. Mut. Fire Ins. Co., 7 Misc 3d 138[A], 2005 NY Slip Op 50856[U] [App Term, 2d & 11th Jud Dists]).

As for the defenses that survive the preclusion sanction, i.e., the alleged absence of an applicable policy and assignors’ fraudulent conduct with respect to the underlying traffic incidents (Matter of Metro Med. Diagnostics v Eagle Ins. Co., 293 AD2d 751 [2002]; Mount Sinai Hosp. v Triboro Coach, 263 AD2d 11, 18-19 [1999]), defendant failed to establish that triable issues exist as to either defense. Defendant’s claim that plaintiff did not prove that its assignors are covered by a policy issued by defendant is without merit as plaintiff’s claim forms established the matter prima facie and defendant offered no proof to the contrary. Further, absent proof sufficient to create a triable issue as to whether any of the traffic accidents were staged with the intent to defraud, defendant failed to prove that the defense was based on “a founded belief that the alleged injur[ies] do[] not arise out of an insured incident” (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1997]).

Defendant based its partial denials of most of the remaining claims on the improper ground that the sums sought for the items of medical equipment exceeded an alleged average of suppliers’ prevailing rates in plaintiff’s geographic location. The insurance regulations governing medical equipment and supplies applicable to the instant action limit a provider’s recovery of medical equipment benefits to 150 percent of cost (11 NYCRR Appendix 17-C, part E [b] [1]). This “applicable fee schedule” constitutes the only limitation on recovery and a defendant’s denial of benefits on the ground that the fees sought exceeded prevailing rates for such equipment in the provider’s geographical location has been rejected as without merit (Amaze Med. Supply v Allstate Ins. Co., 3 Misc 3d 43, 44 [App Term, 2d & 11th Jud Dists 2004]; King’s Med. Supply v Allstate Ins. Co., 2 Misc 3d 127[A], 2003 NY Slip Op 51681[U] [App Term, 9th & 10th Jud Dists]). It is noted that pursuant to the revised Insurance Department regulations regarding durable medical equipment and supplies, effective October 6, 2004 (see Circular Letter No. 8 [2004]; 11 NYCRR Appendix 17-C, part F, eff. October 6, 2004), the current fee schedule for medical equipment sets forth, as an alternative to the 150 percent limit, whichever is less, the “usual and customary price charged to the general public” (11 NYCRR Appendix 17-C, part F [a] [2]).

As to the defense based on defective assignments, defendant’s failure to seek verification of the assignments or to allege any deficiency in the assignments in its claim denial forms “constitutes a waiver of any defenses with respect [to them]” (Ocean Diagnostic Imaging P.C. v Travelers Prop. Cas. Corp., 7 Misc 3d 137[A], 2005 NY Slip Op 50790[U] [App Term, 2d & 11th Jud Dists]; see also New York Hosp. Med. Ctr. of Queens v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640 [2004]; 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]). Defendant’s further claim that plaintiff cannot establish a prima facie case for the delivery of equipment to the assignors because its manager-affiant did not personally supply the equipment or witness the equipments’ “turnover” is also without merit. The affidavit of plaintiff’s officer and billing manager sufficiently “[s]et forth [*3][his] duties so as to support the conclusion that the attached exhibits were sufficiently accurate and trustworthy to merit their admission into evidence pursuant to the business record exception to the hearsay rule (see CPLR 4518 [a]; People v Kennedy, 68 NY2d 569 [1986]), and said exhibits established that the supplies were furnished to the assignor” (King’s Med. Supply, Inc. v Hereford Ins. Co., 5 Misc 3d 55, 56 [App Term, 9th & 10th Jud Dists 2004]; see also Ocean Diagnostic Imaging P.C. v State Farm Mut. Auto. Ins. Co., 4 Misc 3d 141[A], 2004 NY Slip Op 51032[U] [App Term, 9th & 10th Jud Dists]).

We have considered the remaining defenses and find them to be similarly without merit (see Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564, 565 [2005]; New York Hosp. Med. Ctr. of Queens v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640, supra; Careplus Med. Supply Inc. v Travelers Home and Mar. Ins. Co., 7 Misc 3d 133[A], 2005 NY Slip Op 50648[U] [App Term, 2d & 11th Jud Dists]).

Accordingly, plaintiff’s motion for summary judgment is granted and the matter remanded to the court below for a calculation of statutory interest and an assessment of attorney’s fees pursuant to Insurance Law § 5106 (a) and the regulations promulgated thereunder.
Decision Date: September 20, 2005

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd and 11th JUDICIAL DISTRICTS

Appeal from an order of the Civil Court of the City of New York, Kings County (Eileen Nadelson, J.), entered October 8, 2004. The order denied plaintiff’s motion for summary judgment.

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 equipment furnished to its assignors, plaintiff established its entitlement to summary judgment by its proof that it submitted the functional equivalent of the statutory claim forms (11 NYCRR 65-3.5 [a], [f]), setting forth the fact and 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]). Defendant’s claim that plaintiff failed to prove that its assignors are covered by a policy issued by defendant is without merit as plaintiff’s claim forms established the matter prima facie and defendant offered no proof to the contrary. The burden then shifted to [*2]defendant to raise a triable issue of material fact (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). In our view, defendant failed to establish any basis for the motion’s denial.

Defendant based its partial denials of the claims on the improper ground that the sums sought for the items of medical equipment exceeded an alleged average of suppliers’ prevailing rates in plaintiff’s geographic location. The insurance regulations governing medical equipment and supplies applicable to the instant action limit a provider’s recovery of medical equipment benefits to 150 percent of cost (11 NYCRR Appendix 17-C, part E [b] [1]). This “applicable fee schedule” constitutes the only
limitation on recovery and a defendant’s denial of benefits on the ground that the fees sought exceeded prevailing rates for such equipment in the provider’s geographical location has been rejected as without merit (Amaze Med. Supply v Allstate Ins. Co., 3 Misc 3d 43, 44 [App Term, 2d & 11th Jud Dists 2004]; King’s Med. Supply v Allstate Ins. Co., 2 Misc 3d 127[A], 2003 NY Slip Op 51681[U] [App Term, 9th & 10th Jud Dists]). It is noted that pursuant to the revised Insurance Department regulations regarding durable medical equipment and supplies, effective October 6, 2004 (see Circular Letter No. 8 [2004]; 11 NYCRR Appendix 17-C, part F, eff. October 6, 2004), the current fee schedule for medical equipment sets forth, as an alternative to the 150 percent limit, whichever is less, the “usual and customary price charged to the general public” (11 NYCRR Appendix 17-C, part F [a] [2]).

As to the defense based on defective assignments, defendant’s failure to seek verification of the assignments or to allege any deficiency in the assignments in its claim denial forms “constitutes a waiver of any defenses with respect [to them]” (Ocean Diagnostic Imaging P.C. v Travelers Prop. Cas. Corp., 7 Misc 3d 137[A], 2005 NY Slip Op 50790[U] [App Term, 2d & 11th Jud Dists]; see also New York Hosp. Med. Ctr. of
Queens v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640 [2004]; 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]). Defendant’s further claim that plaintiff cannot establish a prima facie case for the delivery of equipment to the assignors because its manager-affiant did not personally supply the equipment or witness the equipments’ “turnover” is also without merit. The affidavit of plaintiff’s officer and billing manager sufficiently “[s]et forth [his] duties so as to support the conclusion that the attached exhibits were sufficiently accurate and trustworthy to merit their admission into evidence pursuant to the business record exception to the hearsay rule (see CPLR 4518 [a]; People v Kennedy, 68 NY2d 569 [1986]), and said exhibits established that the supplies were furnished to the assignor” (King’s Med. Supply, Inc. v Hereford Ins. Co., 5 Misc 3d 55, 56 [App Term, 9th & 10th Jud Dists 2004]; see also Ocean Diagnostic Imaging P.C. v State Farm Mut. Auto. Ins. Co., 4 Misc 3d 141[A], 2004 NY Slip Op 51032[U] [App Term, 9th & 10th Jud Dists]).

We have considered the remaining defenses and find them to be similarly without merit (see Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564, 565 [2005]; New York Hosp. Med. Ctr. of Queens v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640, supra; Careplus Med. Supply Inc. v Travelers Home and Mar. Ins. Co., 7 Misc 3d 133[A], 2005 NY Slip Op 50648[U] [App Term, 2d & 11th Jud Dists]). [*3]

Accordingly, plaintiff’s motion for summary judgment is granted and the matter remanded to the court below for a calculation of statutory interest and an assessment of attorney’s fees pursuant to Insurance Law § 5106 (a) and the regulations promulgated thereunder.
Decision Date: September 20, 2005

[*1]

Supreme Court, Appellate Term, Second Department, September 20, 2005

APPEARANCES OF COUNSEL

Amos Weinberg, Great Neck, for appellant. Troy & Troy, Lake Ronkonkoma (Hariharan Krishnaraj and Leonard Romano of counsel ), for respondent.

{**9 Misc 3d at 98} OPINION OF THE COURT

Memorandum.

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

In this action to recover first-party no-fault benefits for medical services rendered 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]; 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]). Contrary to the determination of the court below, defendant’s denial of claim form, indicating the dates on which the claims were received, 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{**9 Misc 3d at 99} Op 50526[U] [App Term, 2d & 11th [*2]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]). Defendant’s denial of claim forms indicate 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 claim (11 NYCRR 65-3.8 [c]). 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 defenses of nonconformity with the workers’ compensation schedules and excessive billing (see New York Hosp. Med. Ctr. of Queens v Country-Wide Ins. Co., 295 AD2d 583, 586 [2002]; Capio Med., P.C. v Progressive Cas. Ins. Co., 7 Misc 3d 129[A], 2005 NY Slip Op 50526[U] [2005], supra; Triboro Chiropractic & Acupuncture, PLLC v New York Cent. Mut. Fire Ins. Co., 6 Misc 3d 132[A], 2005 NY Slip Op 50110[U] [App Term, 2d & 11th Jud Dists 2005]).

Defendant also denied the claims on the ground that the response submitted by plaintiff’s assignor to defendant’s wage verification request was fraudulent. In support thereof, defendant submitted the affirmation of its attorney and an attached unsworn report of a handwriting expert, who compared the writing in the wage verification form submitted by the plaintiff’s assignor and the wage verification form submitted by another claimant “involved” in the subject accident, and concluded that the forms had been prepared by the same individual, but could not give an opinion regarding the two signatures “because of the lack of similar letters.” Defendant argues that, despite its untimely denial, it is not precluded from asserting its defense of fraud. Defendant’s argument is without merit.

We note at the outset that the documentation submitted by defendant in support of its fraud defense, consisting of the affidavit of its attorney who is without personal knowledge, and the unsworn affidavit of a handwriting expert, does not constitute competent proof in admissible form (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, defendant has failed to establish that its defense of fraud is not subject to the 30-day preclusion remedy.

In Central Gen. Hosp. v Chubb Group of Ins. Cos. (90 NY2d 195, 199 [1997]), the Court of Appeals held that

“despite . . . [an insurer’s] failure to reject a claim within the 30-day period prescribed by Insurance Law § 5106 (a) and 11 NYCRR 65.15 (g) (3) [now 11 NYCRR 65-3.8 (c)], [it] may assert a lack of coverage defense premised on the fact or founded belief that the alleged injury does not arise out of an insured incident.” (Emphasis supplied.)

The Court specifically distinguished the insurer’s defense that the injuries were unrelated to the accident, a defense implicating “no coverage at all” (id. at 202), and hence exempt from the preclusion remedy, from the insurer’s defense of excessive medical treatment, which involves “excusal from payment of some part of no-fault benefits—a matter of degree at best” (id.), and is subject to the preclusion remedy. The lack of coverage defense also applies to a “collision . . . caused in the furtherance of an{**9 Misc 3d at 100} insurance fraud scheme” (see Matter of Metro Med. Diagnostics v Eagle Ins. Co., 293 AD2d 751, 751-752 [2002]) but does not encompass the defense of provider fraud which is precluded by an insurer’s untimely denial (see Melbourne Med., P.C. v Utica Mut. Ins. Co., 4 Misc 3d 92 [App Term, 2d & 11th Jud Dists 2004]).

In the instant case, the defendant’s submissions in support of its defense of fraud fail to establish a lack of coverage defense that may be deemed exempt from the preclusion remedy. [*3]The expert’s conclusions are insufficient to raise an issue of fact as to whether the medical services rendered “do[ ] not arise out of an insured incident” (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d at 199), so as to implicate a lack of coverage issue. Moreover, the acts allegedly constituting the fraudulent conduct are inadequate to demonstrate that the accident was in furtherance of an insurance fraud scheme so as to invoke the lack of coverage defense and exemption from the preclusion remedy (see Matter of Metro Med. Diagnostics v Eagle Ins. Co., 293 AD2d 751 [2002], supra).

Accordingly, summary judgment is granted in favor of plaintiff and the matter is 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.

Rudolph, P.J., Angiolillo and Tanenbaum, JJ., concur.

[*1]

Civil Court of the City of New York, Queens County, September 14, 2005

APPEARANCES OF COUNSEL

Alden Banniettis, Brooklyn, for plaintiff. McDonnell & Adels, P.C., Garden City (John E. McCormack of counsel), for defendant.

OPINION OF THE COURT

Anna Culley, J.

In the case at bar, plaintiff, a medical services provider and assignee of claimant Malik Corbin, brings a motion for summary judgment seeking payment for several claims in the aggregate sum of $6,581.38. These claims arise out of medical services allegedly provided to Corbin as a result of an automobile accident which occurred on December 9, 2001, prior to the effective date of the new regulations (11 NYCRR 65-3.16 [a] [12] [eff Apr. 4, 2002]). In support of its motion, plaintiff submits the affidavit of the corporate officer, Aleksander Tverskoy, M.D., as well as the denial of claim forms (NF-10). The NF-10s are sufficient to adequately establish when the defendant received the bills in question (see 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]). Each of the denials state, in relevant part: “Your claim is denied because you have not provided the verification requested by State Farm’s Special Investigative Unit. If you provide the requested information, State Farm will reconsider its position.”

All of State Farm’s denial of claims are untimely on their face with the exception of one received September 11, 2002 in the amount $1,353.31. The denial is dated September 18, 2002. As has been held by the Appellate Term, Second and Eleventh Judicial Districts, a denial issued before all verification has been provided is not a proper denial, and therefore, defendant insurance carrier has failed to properly deny this claim (11 NYCRR 65-3.8 [b] [3]; see also Shtarkman v Allstate Ins. Co., 8 Misc 3d 129[A], 2005 NY Slip Op [*2]51028[U] [App Term, 2d & 11th Jud Dists 2005]). Accordingly, it appears plaintiff has established its prima facie entitlement to summary judgment as a matter of law.

In this action, defendant cross-moves seeking summary judgment alleging that the plaintiff is not a properly licensed medical corporation as it is not wholly owned by licensed medical doctors. Defendant has demonstrated that plaintiff herein is a professional medical corporation which has shared as much as 65% of its gross revenues with a corporation owned by a nonphysician. Plaintiff does not dispute these facts in its reply papers.

At the time this motion was submitted, the Court of Appeals had ruled on this issue in State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005]). In Mallela, the Court of Appeals answered a certified question from the United States Court of Appeals for the Second Circuit. The Court was asked to determine “whether, under our ‘no-fault’ insurance laws, insurance carriers may withhold payment for medical services provided by fraudulently incorporated enterprises to which patients have assigned their claims” (id. at 319 [citation omitted]). In answering the question in the affirmative, the Court based its holding on the Superintendent’s amended regulation declaring fraudulently licensed corporations ineligible for reimbursement. The Court held further that State Farm was precluded from recouping payments made by the carrier before April 4, 2002, the effective date of the amended regulation. The Court expressly declined to reach the issue of the viability of heretofore unpaid claims arising under the old regulation. This court will now decide this issue.

In Matter of Gleason (Michael Vee, Ltd.) (96 NY2d 117, 122 [2001]), the New York Court of Appeals observed:

“In determining whether a statute should be given retroactive effect, we have recognized two axioms of statutory interpretation. Amendments are presumed to have prospective application unless the Legislature’s preference for retroactivity is explicitly stated or clearly indicated (see, People v Oliver, 1 NY2d 152, 157). However, remedial legislation should be given retroactive effect in order to effectuate its beneficial purpose (see, Majewski v Broadalbin-Perth Cent. School Dist., 91 NY2d 577; Becker v Huss Co., 43 NY2d 527, 540). Other factors in the retroactivity analysis include whether the Legislature has made a specific pronouncement about retroactive effect or conveyed a sense of urgency; whether the statute was designed to rewrite an unintended judicial interpretation; and whether the enactment itself reaffirms a legislative judgment about what the law in question should be (see e.g., Brothers v Florence, 95 NY2d 290, 299; Matter of OnBank & Trust Co., 90 NY2d 725, 730).”

In 1999, in an effort to combat the widespread abuse in no-fault insurance claims, the Superintendent proposed an amended Regulation 68^[FN*] (see Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854[*3][2003]). Further, section 65-3.16 (a) (12) of the regulation states, in relevant part, that “[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.” “In summarizing the new provision, the department provided its opinion that such a result had previously been required, stating that § 65-3.16 (a) (12) of the new regulations had been added ‘to clarify that a health care provider must be properly licensed to be eligible for reimbursement under no-fault.’ ” (Michael Billy, Jr. and Skip Short, Insurance Department Regulations to Stem Fraudulent No-Fault Claims Upheld by Court of Appeals, 76 NY St BJ 40, 41 [Jan. 2004].)

The Insurance Department’s interpretation of the insurance regulations is entitled to great deference (see Matter of Medical Malpractice Ins. Assn. v Superintendent of Ins. of State of N.Y., 72 NY2d 753 [1988], cert denied 490 US 1080 [1989]). This court must follow the agency’s interpretation of a regulation unless irrational, or unreasonable, or the interpretation runs contrary to the clear wording of a statutory provision (see Matter of John Paterno, Inc. v Curiale, 88 NY2d 328 [1996]).

Based on the foregoing, improperly licensed providers are precluded from recovering claims submitted prior to the amendment, as the amendment was the clarification of the existing regulation. A retroactive application is appropriate where the regulatory intent of the Superintendent was explicit to remedy widespread abuse and fraud in the filing of no-fault claims by improperly licensed medical providers. To hold otherwise would nullify existing statutory provisions which prohibit a professional medical corporation from being owned and operated by anyone other than licensed medical doctors (Business Corporation Law § 1503 [b]), and bar licensed physicians from sharing fees with nonphysicians (8 NYCRR 29.1 [b] [4]; Education Law §§ 6511, 6530 [19]). Accordingly, defendant’s cross motion for summary judgment is granted and the complaint is dismissed.

Footnotes

Footnote *: Between 1992 and 2001, reports of suspected automobile insurance fraud increased by 275%, the bulk of the increase occurring in no-fault insurance fraud. Reports of no-fault fraud rose from 489 cases in 1992 to 9,191 in 2000, a rise of more than 1,700%. No-fault fraud accounted for three quarters of the 16,902 reports of automobile-related fraud received by the Insurance Department’s Frauds Bureau in 2000, and more than 55% of the 22,247 reports involving all types of insurance fraud. In 1999, the Superintendent established a No-Fault Unit within the Frauds Bureau to focus specifically on no-fault fraud and abuse. By one estimate, the combined effect of no-fault insurance fraud has been an increase of over $100 per year in annual insurance premium costs for the average New York motorist.