SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd and 11th JUDICIAL DISTRICTS

Appeal by plaintiff from an order of the Civil Court, Queens County (D. Butler, J.), dated March 10, 2004, which denied his 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 assigned first-party no-fault benefits, plaintiff established a prima facie entitlement to summary judgment by proof that he submitted a claim, setting forth the fact and the amount of the loss 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]). Plaintiff submitted proof in admissible form that the claim was mailed to defendant on October 20, 1997. It is uncontroverted that defendant did not timely pay or deny the claim within the 30-day statutory period subsequent to the receipt of the claim, nor did it seek to extend that time by requesting verification (see 11 NYCRR 65.15 [g] [3]; [d] [1], now 11 NYCRR 65-3.8 [c]; 65-3.5 [a]). Accordingly, contrary to the determination of the court below, defendant is precluded from [*2]raising the defense of intoxication (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274 [1997]).

There is no merit to defendant’s contention that its denial of claim form dated August 7,1997, which preceded its receipt of the claim, may operate as a valid denial of no-fault benefits. The insurance regulations provide that an insurer must either pay or deny the claim “within 30 calendar days after proof of claim is received” (11 NYCRR 65.15 [g] [3], now 11 NYCRR 65-3.8 [c]). Further, “no-fault benefits are overdue if not paid within 30 calendar days after the insurer receives proof of claim which shall include verification of all of the relevant information requested” pursuant to the verification rules (11 NYCRR 65.15 [g] [1] [i], now 11 NYCRR 65-3.8 [a] [1]). The regulations further provide that “an insurer shall not issue a denial of claim form (NYS form NF-10) prior to its receipt of verification of all of the relevant information requested pursuant to section 65-3.5” (11 NYCRR 65-3.8 [b] [3]).

Accordingly, pursuant to the insurance regulations, defendant’s blanket general denial of claim which was issued by the defendant prior to its receipt of the plaintiff’s claim for no-fault benefits does not constitute a valid denial of no-fault benefits for said claim (see A&S Med. v Allstate Ins. Co., 196 Misc 2d 322 [App Term, 1st Dept 2003], affd 15 AD3d 170 [2005] [defendant’s untimely denial of claim cannot be deemed timely on the basis of an earlier blanket disclaimer issued directly to plaintiff’s assignor prior to plaintiff’s rendition of services and submission of claim]; cf. New York Hosp. Med. Ctr. of Queens v Country-Wide Ins. Co., 295 AD2d 583 [2002] [insurer may not issue a denial of claim pending a verification request and plaintiff’s time to respond has not run out]).

The denial of claim form is also fatally defective since it omitted numerous items of requested information, and thus was 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]). [*3]

Accordingly, plaintiff’s motion for summary judgment is granted, 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.
Decision Date: June 27, 2005

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 9th and 10th JUDICIAL DISTRICTS

Appeal by plaintiff from an order of the District Court, Nassau County (S. Jaeger, J.), entered December 15, 2003, which 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 services rendered to its assignor, plaintiff health care provider established a prima facie entitlement to summary judgment by proof that it submitted a claim, setting forth the fact and the
amount of the loss 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]; 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]).

In opposition to plaintiff’s motion, defendant asserted that it has a founded belief that the incident was not an accident but a deliberate event staged in furtherance of a scheme to defraud the insurer (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 201 [1997]; Matter of Metro Med. Diagnostics v Eagle Ins. Co., 293 AD2d 751, 752 [2002]). For the reasons this court [*2]set forth in the case of A.B. Med. Servs. v Eagle Ins. Co. (3 Misc 3d 8 [2003]), which involved the same accident, same assignor and the same showing by defendant in support of its claim of fraud, plaintiff’s motion for summary judgment should be granted.
Decision Date: June 27, 2005

[*1]

Civil Court of the City of New York, Kings County, June 27, 2005

APPEARANCES OF COUNSEL

Gary Tsirelman, P.C., for plaintiff. McDonnell & Adels, P.C., for defendant.

OPINION OF THE COURT

Milagros A. Matos, J.

Plaintiff health care provider East Acupuncture, P.C., as assignee of Arkady Derin, Denis Vassiljev, Stella Martyanova, Leonid Petlakh, Vickran Mohabir, Dora Simcha and Leon Diggs, instituted this action to recover first-party no-fault benefits from defendant Allstate Ins. Co. The patients were injured on January 17, 2001, January 17, 2001, June 21, 2001, April 4, 2001, November 20, 2001, and February 9, 2001. Plaintiff moved for an order pursuant to CPLR 3212 for summary judgment. After [*2]appearing for oral argument on the motion before this court, the parties entered into a stipulation of settlement wherein, inter alia, they agreed to settle the above claims as follows:

On all claims, 80% of the outstanding principle plus;

On claims that have been timely denied, 100% of interest beginning from the date plaintiff’s complaint was filed, and

On claims that have no denials, 90% of interest beginning 30 days after insurer received the claim, and

On claims that have not been timely denied, 100% of interest, beginning either from 30 days after insurer received the claim or the date plaintiff’s complaint was filed, to be determined by the court.

This court is asked to determine at what point interest begins to accrue on an untimely denial and/or improper denial under the no-fault regulations. It is plaintiff’s contention that interest on untimely and/or improper denials received by an assignee/medical provider should begin to accrue 30 days after an insurer receives a proper proof of claim. Defendant argues that interest should not accrue until the no-fault claimant requests arbitration or institutes a lawsuit when that claimant has not done so within 30 days after receipt of the denial.

The former insurance regulations, 11 NYCRR 65.15, apply to claims submitted before April 5, 2002. (See King’s Med. Supply, Inc. v Kemper Auto & Home Ins. Co., 3 Misc 3d 131[A], 2004 NY Slip Op 50401[U] [App Term, 2d & 11th Jud Dists 2004].) With regard to the date that interest accrues on an overdue^[FN*] no-fault claim, the applicable provisions of the former insurance regulations require the same analysis as the new regulations.

11 NYCRR 65.15 (h) (11 NYCRR 65-3.9 under the revised regulations), entitled “Interest on overdue payments,” provides:

“(1) All overdue mandatory personal injury protection benefits due an applicant or assignee shall bear interest at a rate of two percent per month, compounded and calculated on a pro rata basis using a 30-day month. The aforementioned two-percent per-month interest shall also be payable on all overdue additional personal injury protection benefits due an applicant or assignee as a result of an accident occurring on or after January 1, 1982. When payment is made on an overdue claim, any interest calculated to be due in an amount exceeding $5 shall be paid to the applicant or the applicant’s assignee without demand therefor.

“(2) The insurer shall not suggest that the interest due be waived.

“(3) If an applicant does not request arbitration or institute a lawsuit within 30 days after the receipt of a denial of claim form or payment of benefits calculated pursuant to Insurance Department regulations, interest shall not accumulate on the disputed claim or element of claim until such action is taken.”

Under 11 NYCRR 65.15 (h) (3), if “applicant” fails to institute a lawsuit within 30 days after the receipt of a denial of claim form or payment of benefits, interest accrues from the date [*3]plaintiff institutes the lawsuit, not 30 days after the insurer received the proof of claims. In the instant matter, the plaintiff, a medical provider/assignee, did not request arbitration or institute a lawsuit within 30 days after receipt of the denial of claim form. Plaintiff did not file a lawsuit until June 18, 2004, some two years after receipt of defendant’s denial. Nevertheless, plaintiff argues that 11 NYCRR 65.15 (h) (3) does not apply to an assignee, that 11 NYCRR 65.15 (h) (1) should apply to the instant claims, and that plaintiff should be awarded interest from 30 days after the insurer received the proof of claims.

Plaintiff contends that the insurance regulations make a distinction between an “applicant” and an “assignee.” Under 11 NYCRR 65.15 (h) (1), the words “applicant” and “assignee” are both used to describe a beneficiary of statutory interest, yet 11 NYCRR 65.15 (h) (3) uses only the word “applicant.” Plaintiff contends that the Superintendent of Insurance, when promulgating the regulations at issue, specifically and intentionally distinguished between an “applicant” and “assignee.” Under a plain reading of the regulation, plaintiff argues, an “applicant” is meant only to encompass an assignor, the party initially entitled to no-fault benefits before those benefits are assigned. Therefore, it is plaintiff’s contention that since 11 NYCRR 65.15 (h) (3) specifically leaves out the word “assignee,” the limitations on statutory interest imposed by that section do not apply to an assignee such as plaintiff.

Defendant would have this court read the language of 11 NYCRR 65.15 (h) (3) to include an assignee. Defendant argues that an “applicant” and “assignee” are essentially the same entity for the purposes of 11 NYCRR 65.15 (h) (3). Defendant contends that once a claimant for no-fault benefits has knowledge that a denial has been issued, that claimant is under an obligation to initiate the lawsuit should he wish interest to accrue, whether that claimant is an “applicant” or an “assignee.”

Both sides present public policy arguments supporting their positions. Defendant states that the regulation is “clear and unambiguous” and that “common sense dictates that the purpose of the regulation is to preclude a plaintiff from waiting years to submit a claim and then demand interest for those years waited.” It is plaintiff’s position that such precise wording was contemplated and utilized by the Superintendent of Insurance because 11 NYCRR 65.15 (h) (3) would be overly burdensome if applied to a medical provider. Specifically, plaintiff argues that a medical provider/assignee such as the assignee in the instant action, with multiple dates of service to multiple patients/assignors, would be obligated to institute lawsuits after each date of service in order to recover interest.

It is fundamental that a court, in interpreting a statute, should attempt to effectuate the intent of the Legislature, or in this case the Superintendent of Insurance. “Because the statutory text is the clearest indicator of legislative intent, the starting point in any case of interpretation must always be the language itself, giving effect to the plain meaning thereof.” (Matter of Jansen Ct. Homeowners Assn. v City of New York, 17 AD3d 588, 589 [2d Dept 2005].) Furthermore, “the No-Fault Law is in derogation of the common law and so must be strictly construed.” (Presbyterian Hosp. in City of N.Y. v Atlanta Cas. Co., 210 AD2d 210, 211 [2d Dept 1994].)

Under a strict interpretation of the regulation at issue, 11 NYCRR 65.15 (h) (3) does not [*4]apply to assignees. The decision of the Superintendent to omit the word “assignee” within 11 NYCRR 65.15 (h) (3) is a clear indication that the Superintendent intended to exclude assignees from this section’s application. (See McKinney’s Cons Laws of NY, Book 1, Statutes § 74 [“A court cannot by implication supply in a statute a provision which it is reasonable to suppose the Legislature intended intentionally to omit”].) Evidence of the Superintendent’s intention to exclude assignees from 11 NYCRR 65.15 (h) (3) lies in the language of other sections of the regulations. The most relevant, 11 NYCRR 65.15 (h) (1), clearly distinguishes, twice, the entities that may claim interest under this section as either an “applicant” or “the applicant’s assignee.” The Superintendent could have included the word “assignee” in the language of 11 NYCRR 65.15 (h) (3) if it intended to impose the burden of obligating a medical provider/assignee to file a lawsuit within 30 days of receipt of the denial. Further, 11 NYCRR 65.15 (h) (3) under the former regulations and 11 NYCRR 65-3.9 under the revised regulations both omit the word “assignee.” This court cannot assume that the omissions from 11 NYCRR 65.15 (h) (3) and its revised version were merely an oversight by the Superintendent.

Defendant offers no reasonable explanation for the Superintendent’s omission. “It remains a basic principle of statutory construction that a court will not by implication read into a clause of a rule or statute for which . . . no sound reason [can be found].” (Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451, 458 [1980] [internal quotation marks omitted].) This court must defer to the Superintendent’s special competence and expertise with respect to the insurance industry. (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854 [2003].) As plaintiff and defendant both contend in their motion papers, the regulations at issue are clear and unambiguous.

Plaintiff’s motion for summary judgment is granted to the extent that statutory interest on the above-settled claims shall be calculated pursuant to 11 NYCRR 65.15 (h) (1).

Footnotes

Footnote *: 11 NYCRR 65.15 (g) (11 NYCRR 65-3.8 under the new regulations) provides that no-fault benefits are overdue if not paid within 30 calendar days after the insurer receives proof of claim, including verification of all of the relevant information requested.

District Court of Nassau County, First District

31747/03

DASH & BURNS, ESQS., 400 JERICHO TURNPIKE, JERICHO, NY, ATTORNEYS FOR PLAINTIFF; FREIBERG & PECK, LLP, 12 EAST 41ST ST., NEW YORK, NY 10017, ATTORNEYS FOR DEFENDANT

Randy Sue Marber, J.

The plaintiff moves for an order granting summary judgment against the defendant, pursuant to CPLR 3212. The defendant cross-moves for an order (1) changing the venue of this action from Nassau County to Sullivan County, (2) for dismissal of the action based upon improper venue, or, in the alternative, (3) for an order granting summary judgment against the plaintiff. The underlying cause of action seeks a judgment for over due no-fault benefits, statutory interest and attorney’s fees as a result of medical testing services allegedly rendered by the plaintiff to Annette Brown as a result of a motor vehicle accident which occurred on December 4, 2002.

In the cross-motion, the defendant argues that the plaintiff is located in Sullivan County and that the defendant “maintains its main place of business” in Albany, New York. In opposition to the cross-motion, the plaintiff claims that the defendant is precluded from making this request because the motion is untimely. Notwithstanding the arguments set forth in the motions, the Court does not have jurisdiction to transfer actions to different counties. Pursuant to UDCA §306, the only jurisdiction conferred on the Court is to transfer within the different districts within the same county. Accordingly, that branch of the defendant’s motion for a change of venue is denied.

As to the plaintiff’s motion for summary judgment, the plaintiff contends that its claim for no-fault benefits was timely forwarded to the defendant and that the defendant neither paid the claim within the allotted statutory period of thirty (30) days nor extended the time period by requesting [*2]additional verification on the prescribed forms. Thus, the plaintiff contends that the defendant is now precluded from denying coverage and that the plaintiff

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Index No. SP 31747/03

is entitled to summary judgment as no remaining unresolved questions of fact exist. In support of its motion, the plaintiff submitted an incomplete copy of the denial of claim form. As such, the plaintiff cannot properly establish a prima facie case. The moving papers are deficient pursuant to CPLR 3212(b). Further, no proof of mailing has been furnished by the plaintiff.

In opposition to the plaintiff’s motion, and in support of the defendant’s cross-motion for summary judgment, the defendant states that it allegedly received the plaintiff’s claim form on January 10, 2003 and again on January 21, 2003 and that it timely denied the claim by forwarding an NF-10 denial form to the plaintiff on January 24, 2003. (See Affidavit of Christine A. Benda, Esq.).

The apparent sequence of events relative to the submission and handling of this claim is as follows:

1/21/03Bill received by the defendant

1/24/03Denial issued by defendant regarding improper assignment

3/19/03Claim re-submitted by plaintiff with assignment

4/9/03Denial issued by defendant based upon peer review

While the defendant claims that it generated a denial on January 24, 2003, because the plaintiff’s assignor failed to submit a properly executed assignment of benefits, said denial was, according to the exhibits furnished with the cross-motion, in fact, not issued until April 9, 2003. It is only in defendant’s reply papers that a copy of the earlier denial is annexed. This is patently improper on a motion for summary judgment. Notwithstanding that the defendant received a properly executed assignment on March 19, 2003, the defendant has not submitted proof along with its cross-motion that it followed the proper procedure for making a timely valid verification request (see 11 NYCRR 65-5.3).

Defendant’s motion to dismiss for improper venue, is actually seeking to dismiss because of “lack of long arm jurisdiction” pursuant to CPLR 3211(a)(8) and UDCA 404. Nassau County is the proper venue to entertain this motion. The plaintiff commenced this action by serving a summons and complaint upon the defendant by serving the New York State Superintendent of Insurance in Albany, New York. No proof has been provided by the plaintiff showing that the defendant maintains an office in Nassau County. As personal delivery of the summons to the defendant was not effecuated within Nassau County, the defendant must be deemed to be a non-resident of Nassau County. UDCA 404(d).

To properly serve the defendant, the plaintiff must comply with the mandates of Uniform

District Court Article 4 – Summons. UDCA §403 states: [*3]

Service of summons shall be made in the manner prescribed in supreme court practice, including optional method of service by mail authorized by CPLR §312-a, but it shall be made only within the county unless service beyond the county be authorized by law in this act or elsewhere.

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Index No. SP 31747/03

In the case at bar, the plaintiff served the defendant outside Nassau County. To sustain jurisdiction of service outside Nassau County, the criteria of UDCA §404 must be satisfied. UDCA §404 states in part:

(a) Acts which are the basis of jurisdiction. The court may exercise personal jurisdiction over any non-resident of the county, or his executor or administrator, as to a cause of action arising from any of the acts enumerated in this section, in the same manner as if he were a domiciliary of the state and a resident of the county, if, in person or through an agent; he:

1. transacts any business within the city; or

2. commits a tortious act within the city, except as a cause of action for defamation of character arising from the act; or

3. owns, possesses any real property within the city.

As this suit is based in breach of contract, we are only concerned with whether the cause of action arose in Nassau County due to the defendant’s transaction of business in Nassau County.

Pursuant to UDCA 404(a)(1), the District Court may exercise jurisdiction over a non-resident of Nassau County if a person transacts any business within a district of the court and the cause of action arises from that transaction of business (see also, Coffman v. National Union Fire Insurance Company of Pittsburgh, Pa., 60 Misc 2d 81, 302 NYS2d 480 [Dist Ct, Nassau County, 1969]).

Even if the plaintiff could prove that the defendant transacts business in Nassau County, the second requirement to establish long arm jurisdiction is that the act forming the subject matter of the action must arise from the transaction of business in Nassau County.

In support of its motion, defendant maintains that the acts complained of in plaintiff’s complaint neither occurred in Nassau County nor had any connection with the County of Nassau. The accident took place in Sullivan County, the plaintiff’s assignor lives in Sullivan

County and the health services were provided in Sullivan County. Therefore, the defendant argues that the elements necessary for the Court to exercise personal jurisdiction over a non-resident under UDCA 404(a) are not present.

The defendant has established a prima facie case on its cross-motion to dismiss. The burden [*4]is now on the plaintiff to establish that there is a basis for long arm jurisdiction over the defendant. The Court finds that the plaintiff has not demonstrated that the defendant did transact business within Nassau County and that this cause of action arose from the transaction of that business. The accident occurred outside of Nassau County, the treatment occurred outside of Nassau County, and the assignor resided outside of Nassau County.

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Furthermore, the Court notes that for reasons that remain unclear, this County has lately been made the “Court” for disputes over no-fault benefits arising between litigants residing in counties outside this jurisdiction. The only connection that matter has with Nassau County is that the office of the plaintiff’s attorney is in Nassau County.

In view of the above, this Court does not have jurisdiction over the person of the defendant. The defendant’s cross-motion dismissing the plaintiff’s complaint is granted and the plaintiff’s motion for summary judgment is denied. The defendant’s cross-motion for summary judgment is also denied.

Dated: __________

ENTER:

__________________________________

Randy Sue Marber, District Court Judge

cc: Dash & Burns, Esqs.

Freiberg & Peck, LLP

—[*1]

In an action to recover no-fault medical payments, the plaintiff appeals from an order of the Supreme Court, Nassau County (Brandveen, J.), dated September 22, 2004, which denied its motion for summary judgment and granted the defendant’s cross motion for summary judgment dismissing the complaint.

Ordered that the order is affirmed, with costs.

The Supreme Court properly denied the plaintiff’s motion for summary judgment and correctly granted the defendant’s cross motion for summary judgment dismissing the complaint. 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 [d], [g] [1], [7]; St. Vincent’s Hosp. of Richmond v American Tr. Ins. Co., 299 AD2d 338, 340 [2002]). It is undisputed that the plaintiff’s assignor and Good Samaritan Hospital failed to respond to the defendant’s verification requests for the record containing the assignor’s post-accident blood alcohol level. Accordingly, the period within which the defendant was required to respond to the plaintiff’s claim did not begin to run, and any claim for payment was premature (see Hospital for Joint Diseases v State Farm Mut. Auto. Ins. Co., 8 AD3d 533 [2004]; New York & Presbyt. Hosp. v Progressive Cas. Ins. Co., 5 AD3d 568 [2004]; cf. Presbyterian Hosp. in City of N.Y. v Aetna Cas. & Sur. Co., 233 AD2d 431 [1996]). Schmidt, J.P., S. Miller, Santucci and Mastro, JJ., concur.

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd and 11th JUDICIAL DISTRICTS

Appeal by plaintiffs from so much of an order of the Civil Court, Kings County (E. Spodek, J.), entered June 21, 2004, as denied their motion for summary judgment. Cross appeal by defendant from so much of the same order as denied its cross motion for summary judgment.

Order unanimously modified by providing that plaintiffs’ motion for summary judgment is granted and matter remanded to the court below for a calculation of the statutory interest and an assessment of attorney’s fees; as so modified, affirmed without costs.

In this action to recover assigned first-party no-fault benefits for medical services provided their assignor, plaintiffs established their prima facie entitlement to summary judgment by evidentiary proof that they submitted statutory claim forms, setting forth the fact and the amount of the loss 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]). Defendant insurer timely rejected the claims on the sole ground that at the time of the accident, assignor was acting in the course of his employment, mandating that plaintiffs pursue their compensation claim before the Workers’ Compensation Board (Board). Plaintiffs, alleging that the accident was not employment-related, moved for summary judgment, whereupon defendant cross-moved for summary judgment.

In our view, the insurer failed to establish the defense’s “potential merit” so as to warrant Board review of the facts (Lanpont v Savvas Cab Corp., 244 AD2d 208, 210 [1997]; see Alvarez [*2]v Prospect Hosp., 68 NY2d 320, 324 [1986]). As against plaintiffs’ proof, inter alia, assignor’s sworn statement that he was not working when the accident occurred and a sworn statement by his purported employer that assignor “was not
working on December 12, 2001″ (and necessarily, that assignor was not en route to or from work at the time of the incident [Baughman v Merchants Mut. Ins. Co., 213 AD2d 1030 (1995)]), defendant interposed only a claims adjuster’s assertion that defendant had “made the determination that the claimant was eligible for Workers’ Compensation” which in turn was based solely on an employer’s unsworn statement dated 18 months before the accident and a police accident report, offered for the first time in defendant’s reply papers below, which will not be considered by this Court (e.g. Johnston v Continental Broker-Dealer Corp., 287 AD2d 546 [2001]; Azzopardi v American Blower Corp., 192 AD2d 453 [1993]). Thus, defendant’s claim that assignor acted in the course of his employment at the time of the accident was “mere speculation” (Anarumo v Terminal Constr. Corp., 143 AD2d 616, 617 [1988]) and failed to establish any issues of fact regarding Workers’ Compensation coverage that must be resolved by the Board (see Lanpont, 244 AD2d at 210 [“Workers’ Compensation defense” successfully interposed where “(s)ufficient facts appear in the record to demonstrate the (defense’s) potential merit”]). Accordingly, the order below should be modified to grant plaintiffs summary judgment and the matter remanded to the court below for a calculation of the statutory interest and an assessment of attorney’s fees as authorized by Insurance Law § 5106 (a) and the regulations promulgated thereunder.
Decision Date: June 09, 2005

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd and 11th JUDICIAL DISTRICTS

Appeal by plaintiff from an order of the Civil Court, Kings County (E. Nadelson, J.), entered on June 18, 2004, which denied its motion for summary judgment.

Order unanimously affirmed without costs.

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 claims, setting forth the fact and the amount of the loss 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]).

In opposition to plaintiff’s motion, defendant asserted the defense that the alleged injuries were not causally related to the accident (see Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1997]; Mount Sinai Hosp. v Triboro Coach, 263 AD2d 11, 18-19 [1999]). The Accident Reconstruction Analysis report, which was sworn to by the consultant who prepared said report, constituted admissible evidence by an expert in the field in support of defendant’s defense of a lack of causal nexus between the accident and the injuries claimed by plaintiff’s assignor (see Valentine v Grossman, 283 AD2d 571 [2001]), and was sufficient to demonstrate that the defense was based upon a “founded belief that the alleged injur[ies] do[] not arise out of an insured incident” (Central Gen. Hosp., 90 NY2d at 199; Mount Sinai Hosp., 263 AD2d at 18-19; Ocean Diagnostic Imaging P. C. v New York Cent. Mut. Fire Ins. Co., 7 Misc 3d 129[A], 2005 NY Slip Op 50525[U] [App Term, 2d & 11th Jud Dists]; Ocean Diagnostic Imaging P. C. v New York Cent. Mut. Fire Ins. Co., 7 Misc 3d 132[A], 2005 NY Slip Op 50607[U] [App Term, 2d & 11th Jud Dists]). [*2]

Accordingly, since defendant demonstrated the existence of a triable issue of fact as to whether there was a lack of coverage (see Zuckerman v City of New York, 49 NY2d 557 [1980]), plaintiff’s motion for summary judgment was properly denied.
Decision Date: June 09, 2005

[*1]

Civil Court of the City of New York, Queens County, June 8, 2005

APPEARANCES OF COUNSEL

Teresa M. Spina, Woodbury (Louis F. Chisari of counsel), for defendant. Sanders & Grossman, P.C., Mineola (David M. Barshay and Steven Neuwirth of counsel), for plaintiff.

OPINION OF THE COURT

Bernice D. Siegal, J.

The within action to recover unpaid no-fault benefits came before the court by defendant’s order to show cause moving to stay some 60 pending actions, to consolidate the matters for the purposes of amending the answers to include an affirmative defense of fraud in the incorporation of the provider professional corporation and for such other relief as the court deems just, proper and equitable. As this order to show cause was brought on the heels of the Court of Appeals decision in State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005] [hereinafter referred to as Mallela III]), and given the significance of the court’s determination herein, the matter was set down for oral argument to aid in the court’s deliberation. For the reasons set forth below and in light of the Court of Appeals’ recent pronouncements, based upon the most favorable reading of the facts and the documents submitted by defendant (which, for the purposes of this motion, plaintiff does not at this point dispute), the court grants defendant’s prayer for relief to the extent of consolidating the 61 actions with the within matter for the purposes of amending the answer and setting same down for a framed issue hearing on August 2, 2005 as to whether the plaintiff professional corporations were fraudulently incorporated under Business Corporation Law §§ 1507 and 1508 and Education Law § 6507 (4) (c). The defendant shall amend and serve its answer in the form annexed to defendant’s motion papers as exhibit F together with a copy of this decision within 10 days from date of entry of the within order.

The relevant allegations and arguments are as follows:

Metroscan Imaging P.C., the provider in the instant matter, is one of at least four corporations purportedly incorporated by one Herbert Rabiner, M.D. Dr. Rabiner, on behalf of the professional corporations, entered into a management agreement with Metroscan Resonance Imaging, Inc. and Parkway Magnetic Imaging [*2]Resonance Imaging, Inc. (collectively referred to as the Manager) whereby the medical groups pay for the “management and administrative services, the provision and maintenance of space and equipment, the furnishing of supplies and support personnel and other services” for fees (e.g., $32,000,000 for the first year), and further provided other rights, including a right of first refusal by the Manager when a shareholder of the professional corporation sought to sell. Defendant alleges that “Dr. Rabner [sic] sold his medical license to those entities named above to maintain the appearance that the companies were owned by a physician. When in actuality the corporate entities were owned, controlled and operated by non-physicians.” (Affirmation of Louis F. Chisari, Esq., dated Apr. 4, 2005.) Defendants state that these allegations form, in essence, a “founded belief” that the medical professional corporations were fraudulently incorporated and, if the court finds such fraudulent incorporations, the insurer is under no obligation to reimburse the providers pursuant to the recent Court of Appeals decision in Mallela III. Plaintiff argues that fraud in the incorporation is a defense that does not vitiate coverage (see Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195 [1997]) and, in any event, that these claims are not subject to the amended regulations which, concededly, would provide that insurers are not required to reimburse professional corporations that have been fraudulently incorporated (11 NYCRR 65-3.16 [a] [12]).

Analysis and Conclusions

Heretofore, the Court of Appeals has bowed to the express purposes in the now decades old Comprehensive Motor Vehicle Insurance Reparations Law, commonly known as New York’s No-Fault Insurance Law. (Insurance Law § 5101 et seq.) “No-fault reform was enacted to provide prompt uncontested, first-party insurance benefits. That is part of the price paid to eliminate common-law contested suits.” (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 285 [1997] [citation omitted].) Presbyterian and its progeny continue to limit the options of insurers binding them, not inappropriately nor extrajudicially, with strict deadlines and procedures and, if not adhered to, excluding all but a few diehard defenses as to payment (see Central Gen. Hosp. v Chubb Group, supra [the so-called “lack of coverage” defense]). Trial and appellate courts have charted a course with Presbyterian and Chubb as intractable guideposts, refusing to permit insurers to interpose various defenses at the time of litigation, either pursuant to the Presbyterian exclusion or that the defenses must be based solely upon a clearly worded denial (see General Acc. Ins. Group v Cirucci, 46 NY2d 862 [1979]). Thus, unless provided for in a timely denial, payments must be made except when the insurer could establish “a founded belief” that the injuries were not sustained in a covered motor vehicle accident (see Central Gen. Hosp. v Chubb, supra at 199).

In reaction to what the Superintendent of Insurance perceived, and is unfortunately well documented, as a deluge of fraudulent claims, both as to fraud in the accident and as to the care rendered, amended regulations were promulgated placing increased restrictions on claimants and lessening the burden on insurers by broadening the acceptable reasons to deny claims and strengthening insurers’ muscle in investigating claims. The Court of Appeals unanimously held that Regulation 68 (11 NYCRR part 65), although manifestly altering the way claims [*3]are processed, was well within the lawful authority of the Superintendent of Insurance (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854 [2003]). Regulation 68, among other subsequent amendments, incorporated in the endorsement portion of the regulations the right of the insurer to request that the claimant or insured be subject to an examination under oath (11 NYCRR subpart 65-3) and, significantly, Regulation 68-C, promulgated outside of the policy endorsement, provides 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” (11 NYCRR 65-3.16 [a] [12]). In upholding the amended regulations, the Court of Appeals noted:

“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 1700% . . . By one estimate, the combined effect of no-fault insurance fraud has been an increase over $100 per year in annual insurance premium costs for the average New York motorist.” (Serio, supra at 861.)^[FN1]

Prior to the promulgation of these amended regulations and the ensuing decision in Serio, State Farm Mutual Automobile Insurance Company commenced an action in Federal District Court (State Farm Mut. Auto. Ins. Co. v Mallela, 175 F Supp 2d 401 [ED NY 2001] [Mallela I]) seeking a declaratory judgment that it is not required to reimburse providers who have “willfully evaded New York Law prohibiting [nonlicensed providers] from sharing ownership in [professional] corporations” (Mallela III at 319). After dismissal of that action and the promulgation of the new regulations, a second case was commenced—Mallela II. (State Farm Mut. Auto. Ins. Co. v Mallela, 2002 WL 31946762, 2002 US Dist LEXIS 25187 [ED NY 2002].) In Mallela II, on a motion to dismiss, Judge Sifton found that the amended regulations effective April 2002 were “unlike” the old regulations in 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.” (Mallela II, 2002 WL 3194762, *4, 2002 US Dist LEXIS 25187, *14, quoting 11 NYCRR 65-3.16 [a] [12].) Further, the court noted that the Department of Insurance viewed these regulations as a clarification rather than a new requirement. As the no-fault claims arose under the old regulations, Judge Sifton did not disturb an earlier ruling and concluded that “an insurer may not refuse to pay a benefits claim based upon [*4]an allegation that the provider has a true owner . . . who does not possess a license to practice medicine” (Mallela II, 2002 WL 3194672, *11, 2002 US Dist LEXIS 25187, *38). Significantly, the District Court made no distinction as to whether the claims fell under the old regulations or new ones. In finding State Farm’s argument wanting with respect to the amended regulations cited above, Judge Sifton stated: “I am reluctant to undermine the legislative goal of speedy payment in order to permit insurers such as plaintiff to avoid paying licensed medical service providers for medically necessary services provided to insured individuals by licensed physicians.” (Id.)

The Court of Appeals of the State of New York had no such reluctance when responding affirmatively to the certified question posited by the Second Circuit, that is, whether

” ‘a medical corporation that was fraudulently incorporated under N.Y. Business Corporation Law §§ 1507, 1508, and N.Y. Education Law § 6507 (4)(c) [is] entitled to be reimbursed by insurers, under New York Insurance Law §§ 5101 et seq., and its implementing regulations, for medical services rendered by licensed medical practitioners’ . . .

“We accepted the certification and now answer that such corporations are not entitled to reimbursement.” (Mallela III, supra at 320.)

Judge Rosenblatt unequivocally tempered the legislative imperative of a speedy claims process underpinning the earlier Court of Appeals’ pronouncements and Judge Sifton’s dismissal by specifically holding that “on the strength of this regulation, carriers may look beyond the face of licensing documents to identify willful and material failure to abide by state and local law.” (Mallela III, supra at 321.)

Defendant herein argues that Mallela III informs the current litigation, that is, claims made prior to the promulgation of section 65-3.16 (a) (12), irrespective of the reason for the denial or whether such reason is the basis of a timely denial, are nonetheless subject to this policy choice.

The court concurs. The Court of Appeals makes no such distinction, even as the decision has, at its foundation, the new regulation, effective April 4, 2002. Given the procedural posture of the no-fault claims in question in the federal litigation, specifically claims that matured prior to the effective date of the “new” regulations, to read the Mallela III decision as only pertaining to claims maturing post-April 4, 2002 is simply illogical and would negate New York’s highest court’s finding, to wit: “The Superintendent’s regulation allowing carriers to withhold reimbursement from fraudulently licensed medical corporations governs this case.” (Mallella III at 321.)

Contrast the Court of Appeals’ consideration of the second question, that is, “[*5]whether, if the fraudulent corporations were not entitled to reimbursement, [could State Farm] recover money already paid out under theories of fraud or unjust enrichment,” and the Court’s answer to that question: “[N]o cause of action for fraud or unjust enrichment would lie for any payments made by the carriers before that regulation’s effective date” (Mallela III, supra at 322 [emphasis added]).

Again, the court notes that all the claims, which are the subject of the federal litigation, ripened before the effective date of the new regulation, and yet, the only distinction that the Court of Appeals has made is whether payment was made before or after the effective date.^[FN2] Significantly, the Court of Appeals declined to make a specific finding in this matter as the complaint was unclear as to whether State Farm “has paid money to [providers] after the amended regulation took effect.” (Id. [emphasis added].)

Thus, the court finds that 11 NYCRR 65-3.16 (a) (12) applies to the subject actions. “[R]esolution of the critical issues turns on identification and balancing of fundamental components of public policy” (Murphy v American Home Prods. Corp., 58 NY2d 293, 305 n 2 [1983]). In a departure from previous precedent, the Mallela III court placed protection against fraud squarely ahead of speedy resolution of no-fault provider claims. Before Mallela III, the courts in their haste to comply with the “fundamental components” of the legislative imperative behind the no-fault insurance statute failed to identify, let alone balance, competing policy imperatives. The New York Constitution provides that “[t]he protection and promotion of the health of the inhabitants of the state are matters of public concern.” (NY Const, art XVII, § 3.) Illustrative of this important public policy is a decision of the Appellate Division, Third Department, which, in upholding a differential tax code for professional corporations, found that “[p]rofessionals are subject to stricter State supervision and licensing requirements, in order to maintain standards of responsibility for the protection of the public.” (Matter of Manganaro v Tully, 88 AD2d 206, 209 [3d Dept 1982].) Corporations formed specifically to defraud the public and abuse the public trust must not be allowed to reap windfall profits, even in the face of competing compelling public policy.

However, that is not the end of the inquiry as the carriers must “demonstrate behavior tantamount to fraud” (Mallela III at 322) and not merely technical violations (e.g., late filings). Fraud in the incorporation now joins the long-standing Chubb defenses which withstand [*6]exclusion.

The court further holds that the defense is effective only if the insurer initially can show by “fact or founded belief” fraud in the incorporation and, therefore, no reimbursement would be mandated. Defendant herein has articulated a “founded belief” that the health providers, all incorporated by Dr. Rabiner and all subject to a management agreement with nonlicensed professionals, have violated both New York’s Business Corporation Law and Education Law.

Footnotes

Footnote 1: As recently as April 25, 2005, the Court of Appeals chose to use these statistics and their import—abuse of the entire no-fault insurance scheme—in reiterating the tests courts should employ to determine “which [claims] may proceed in court” in personal injury cases arising from motor vehicle accidents under no-fault. (Pommells v Perez, 4 NY3d 566, 571 [2005].)

Footnote 2: Plaintiff herein argues that the court may not impose the new regulations upon claims that arose subject to the “old regulations” (e.g., accidents occurring under a policy that existed prior to April 5, 2002), citing recent decisions on the lack of retroactivity of other “new regulations” such as the requirements of examinations under oath (EUO). That argument is misplaced. The EUO provision is part of the endorsement of the insurance policy (Regulation 68-A) and clearly, when determining the rights and obligations, one must look to the policy endorsement then in effect. (Star Med. Servs. P.C. v Eagle Ins. Co., 6 Misc 3d 56 [App Term, 2d & 11th Jud Dists 2004].) However, the regulation which is the subject of this litigation is not part of the policy endorsement and therefore is not subject to the same restriction.

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd and 11th JUDICIAL DISTRICTS

Appeal by plaintiff from so much of an order of the Civil Court, Kings County (A. O’Shea, J.), entered July 7, 2004, as denied its motion for summary judgment.

Order insofar as appealed from unanimously affirmed without costs.

In this action to recover first-party no-fault benefits for medical services rendered to its assignor, plaintiff health care provider established its prima facie entitlement to summary judgment by proof that it submitted a claim, setting forth the fact and the amount of the loss 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]). While defendant timely denied the claim, it nevertheless had to submit proof in admissible form in opposition to the motion to rebut plaintiff’s prima facie showing (A.B. Med. Servs. PLLC, 4 Misc 3d at 86).
Upon a review of the record, we find that defendant sufficiently rebutted plaintiff’s prima facie showing by raising the preserved triable issue of fact as to whether it was provided with notice of the accident within 90 days as required by the insurance regulations. Accordingly, the court below properly denied plaintiff’s motion for summary judgment (see e.g. Hackensack Univ. Med. Ctr. v New York City Tr. Auth., 10 AD3d 675 [2004]). [*2]
Decision Date: June 03, 2005

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 9th and 10th JUDICIAL DISTRICTS

Appeal by defendant from an order of the District Court, Nassau County (S. Jaeger, J.), entered February 9, 2004, which granted plaintiff’s motion for summary judgment.

Order unanimously reversed without costs and plaintiff’s motion for summary judgment denied.

In this action to recover assigned first-party no-fault benefits, plaintiff health care provider established its prima facie entitlement to summary judgment by proof that it submitted the functional equivalent of a statutory claim form setting forth the fact and amount of the loss 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]). The nature of the fact and amount of loss, that is, the “particulars of the nature and extent of the injuries and treatment received and contemplated” (11 NYCRR 65-1.1) were sufficiently set forth to permit defendant the review to which it was entitled at the claim stage. Thus, the burden shifted to defendant to raise a triable issue of fact (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]).

Absent tolling of the statutory time, defendant’s conceded failure to deny the claim within 30 days of its receipt precluded its defenses with the exception noted below (see Hospital for Joint Diseases v ELRAC, Inc., 11 AD3d 432, 434 [2004]; New York & Presbyt. Hosp. v [*2]Progressive Cas. Ins. Co., 5 AD3d 568, 570 [2004]). First, defendant sought to prove requests for verification via the affidavit of a “litigation specialist” who asserted no basis of personal knowledge of the facts aside from defendant’s records and who offered no proof of mailing (e.g. Hospital for Joint Diseases v Nationwide Mut. Ins. Co., 284 AD2d 374, 375 [2001]). Moreover, the alleged initial and follow-up verification demands, in any event, were ineffective to toll the claim determination period. All post-claim verification requests must be made within prescribed time frames, (11 NYCRR 65-3.5 [a], [b]; 65-3.6 [b]; New York Hosp. Med. Ctr. of Queens v Country-Wide Ins. Co., 295 AD2d 583, 584-585 [2002]). Defendant omitted any proof of its allegedly timely initial verification request and its purported proof of a subsequent, follow-up request, however marked a “second notice,” was therefore of no significance. Defendant’s failure to establish compliance with the verification rules justified the court’s conclusion that the 30-day claim determination period expired.

Whatever the merits of defense counsel’s calculations of the proper fee schedule, the issue is precluded by the untimely denial (see Westchester Med. Ctr. v American Tr. Ins. Co., ___ AD3d ___, 2005 NY Slip Op 03046; 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]; Triboro Chiropractic & Acupuncture 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]). Also precluded are defendant’s challenge to the treatment’s medical necessity, however well-established by a peer review report in admissible form (e.g. A.B. Med. Servs. PLLC v Motor Veh. Acc. Indem. Corp., 6 Misc 3d 131[A], 2005 NY Slip Op 50088[U] [App Term, 2d & 11th Jud Dists]), and the alleged defects in the proof of assignment (New
York Hosp. Med. Ctr. of Queens v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640, 641 [2004]; Capio Med., P.C. v Progressive Cas. Ins. Co., 7 Misc 3d 129[A], 2005 NY Slip Op 50526[U], supra).

However, the preclusion sanction does not apply to a defense that a claim is based on treatment for medical conditions unrelated to a covered traffic incident (Mount Sinai Hosp. v Triboro Coach, 263 AD2d 11, 18-19 [1999]; see Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1997]), and upon our review of the peer review report, submitted below in admissible form, we are persuaded that the report sufficed to create a triable issue as to whether the condition for which the herein medical services were provided arose from a covered insured incident (id.; see also Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U], supra).
Decision Date: June 03, 2005