[*1]

Supreme Court, Appellate Term, Second Department, September 17, 2004

APPEARANCES OF COUNSEL

Amos Weinberg, Great Neck, for appellant. Bruno Gerbino & Macchia LLP, Melville, and Rivkin Radler LLP, Uniondale (Evan H. Krinick and Stuart M. Bodoff of counsel), for respondent.

{**5 Misc 3d at 46} OPINION OF THE COURT

Memorandum.

Order insofar as appealed from unanimously affirmed with $10 costs.

Plaintiff, a health care provider, seeking to recover assigned first-party no-fault benefits, established a prima facie entitlement to summary judgment by the submission of a complete proof of claim and the amount of the loss (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 2003]). Defendant failed to deny the claim within the statutory 30-day claim determination period (11 NYCRR 65.15 [g] [3]). Defendant’s requests for examinations under oath did not toll the 30-day period, inasmuch as the insurance regulation in effect at the time plaintiff submitted its claim did not contain a provision requiring a claimant to appear for an examination under oath (see A.B. Med. Servs. PLLC v Lumbermens Mut. Cas. Co., 2003 NY Slip Op 51392[U] [App Term, 2d & 11th Jud Dists 2003]). 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]).

However, an untimely denial does not preclude a defendant from asserting the defense [*2]that the collision was a staged event in furtherance of an insurance fraud scheme (see Matter of Metro Med. Diagnostics v Eagle Ins. Co., 293 AD2d 751 [2002]). The investigator’s affidavit set forth sufficient facts to demonstrate that defendant possessed 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]). As a result, because defendant demonstrated the existence of a triable issue of fact as to whether there was a lack of coverage (see id.), plaintiff’s motion for summary judgment was properly denied.

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

[*1]

Civil Court of the City of New York, Kings County, September 14, 2004

APPEARANCES OF COUNSEL

Amos Weinberg, Great Neck, for plaintiffs. Bruno, Gerbino & Soriano, LLP, Melville, for defendant.

OPINION OF THE COURT

Ann Elizabeth O’Shea, J.

Plaintiffs A.B. Medical Services PLLC and LVOV Acupuncture P.C. instituted this action to recover first-party, no-fault benefits for medical services rendered to their assignor, Danny Arenas, who was injured in an automobile accident on March 7, 2003. Plaintiffs provided medical services to Mr. Arenas between March 24, 2003 and June 5, 2003. Each of the plaintiffs made several claims for payment. Only four of those claims are in issue here, each originating from plaintiff A.B. Medical.

Under the no-fault insurance regulations, an insurer must pay or deny a claim within 30 days after it receives a properly completed proof of claim (11 NYCRR 65-3.8 [c]). While an insurer may request additional information to verify a claim, it must do so within 15 days after receiving the proof of claim (11 NYCRR 65-3.5 [b]), and it must then pay or deny the claim within 30 days after receipt of the requested information (11 NYCRR 65-3.8 [a] [1]; [c]).

In order to establish a prima facie case of entitlement to summary judgment on its claims for first-party, no-fault benefits, a plaintiff medical provider need only provide proof that it submitted and defendant received a properly completed claim form, including a “properly executed” assignment of benefits (11 NYCRR 65-3.11 [b] [2]), and that defendant did not pay or deny the claim within 30 days after its receipt of the proof of claim or of additional information in response to a [*2]timely request for verification (see Insurance Law § 5106 [a]; 11 NYCRR 65-3.8 [c]; New York Hosp. Med. Ctr. v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640 [2d Dept 2004]).

All four claims were denied on the asserted ground that the services provided were not medically necessary. The forms denying three of the four claims in issue were dated more than 30 days after defendant had received complete proofs of claim. One—for $604.24—was received by defendant on April 29, 2003, and the denial form is dated June 3, 2003, 35 days after the claim was received. A claim for $240 and another for $1,972.08 were received by defendant on June 11, 2003; the denial form for each of those is dated July 22, 2003, 41 days after receipt of the claim. The fourth claim, for $360, was received by defendant on April 14, 2003. Although the denial form is dated May 14, 2003, exactly 30 days after receipt of the claim, the envelope in which the denial was mailed is postmarked May 19, 2003, 35 days after receipt of the claim. In that situation, the operative date for determining the timeliness of the denial must be the date on which the denial was mailed, not the date stated on the denial form (accord Damadian MRI in Canarsie v Countrywide Ins. Co., 194 Misc 2d 708 [2003]). To conclude otherwise would undermine the primary goal of the no-fault system, which is the prompt consideration and processing of claims for losses resulting from automobile accidents (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 860 [2003]), permit unwarranted delays in the notification of the denial, or encourage the backdating of denials.

Despite the untimeliness of its denials, defendant contends that the assignment of benefits submitted by plaintiff in conjunction with its proofs of claim is deficient because it is undated and the signature of the purported assignor is unauthenticated. While the no-fault regulations require that a proof of claim include a “properly executed” assignment of benefits (11 NYCRR 65-3.11 [b] [2]), the Appellate Term has rejected the argument that the signature on an assignment of benefits must be authenticated for a plaintiff to meet its prima facie burden on a motion for summary judgment (see Ocean Diagnostic Imaging P.C. v Lumbermens Mut. Cas. Co., 3 Misc 3d 137[A], 2004 NY Slip Op 50510[U] [2004], revg Ocean Diagnostic Imaging P.C. v Lumbermens Mut. Cas. Co., Civ Ct, Kings County, July 7, 2003, Sweeney, J., Index No. 75326/02). There is no principled reason why the absence of a date on an assignment should be treated differently from the absence of an authentication of the signature (but see A.B. Med. Servs. v American Tr. Ins. Co., Civ Ct, Kings County, Apr. 13, 2004, Gesmer, J., Index No. 69587/03). Defendant had the opportunity to object to the form or sufficiency of the assignment and to request the original assignment pursuant to its right to seek verification of the claim at the claims stage of the proceeding (see 11 NYCRR 65-3.5 [a]-[c]; 65-3.11 [c]). Its failure to do so results in a waiver of any defense based upon an asserted infirmity in the assignment (New York Hosp. Med. Ctr. v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640, 641 [2d Dept 2004]; Ocean Diagnostic Imaging P.C. v Lumbermens Mut. Cas. Co., 3 Misc 3d 137[A], 2004 NY Slip Op 50510[U]), or on any other asserted deficiency in the claim (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282 [1997]; Montefiore Med. Ctr. v New York Cent. Mut. Fire Ins. Co., 9 AD3d 354 [2d Dept 2004]; Presbyterian Hosp. v Aetna Cas. & Sur. Co., 233 AD2d 433 [2d Dept 1996]), as well as any defense based upon lack of medical necessity (see e.g. Liberty Queens Med., P.C. v Liberty Mut. Ins. Co., 2002 NY Slip Op 40420[U] [App Term, 2d & 11th Jud Dists, June 27, 2002]).

Having submitted proof that it mailed and defendant received its claim forms demonstrating the amount of the loss sustained and that defendant failed to request verification of the assignments or claims or to pay or deny those claims within the applicable time limits, plaintiff established its prima facie entitlement to summary judgment on each of its claims (see New York Hosp. Med. Ctr. v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640, 641 [2d Dept 2004]). Since defendant is precluded from raising any defense with respect to the sufficiency of the claim forms or the medical necessity of the services provided, there are no issues of fact or law that remain in dispute.

Accordingly, plaintiffs’ motion for partial summary judgment is granted.

Supreme Court, Nassau County

6715/03

Zelda Jonas, J.

Pursuant to the order of this Court dated August 19, 2003, this matter was set down for a framed-issue hearing to determine whether petitioner, Progressive County Mutual Insurance Company (hereinafter referred to as “Progressive”), is entitled to a stay of the uninsured motorist arbitration commenced by the respondents, Diandre McNeil and Tatyana Newbern, under the [*2]uninsured motorist endorsement of the insurance policy and to determine the validity of the disclaimers of coverage forwarded by respondent, State Farm Mutual Automobile Insurance Company (hereinafter referred to as “State Farm”), to its insured, Elicier Delgado, Jr., and the reported operator of the State Farm-insured vehicle, Ernesto Ortiz. State Farm has disclaimed coverage upon the ground that the collision was an intentional, staged event by its insured to defraud State Farm. The respondents, Diandre McNeil and Tatyana Newbern, were in a vehicle that was struck in the rear by the vehicle insured by Elicier Delgado, Jr. and Ernesto Ortiz on February 18, 2002.

Petitioner Progressive claims that the arbitration should be permanently stayed because the offending vehicle is insured by respondent State Farm. Petitioner claims that State Farm’s disclaimer of coverage is defective since the notice of disclaimer was issued in an untimely manner, and the injured parties were never served with the notice of disclaimer as required by Insurance Law §3420 (d). Therefore, petitioner claims that the respondents insured by Progressive cannot seek arbitration under the uninsured motorist endorsement of the insurance policy. In the alternative, petitioner claims that if the Court finds that there is no insurance because of an intentional collision, then the injured parties still cannot receive compensation under the Progressive uninsured motorist endorsement because the endorsement only covers injuries that are caused by accidents.

A bench trial was held on March 4, 2004. The parties stipulated that the rear-end collision occurred between the Delgado vehicle and the McNeil-Newbern vehicle on February 18, 2002. The sole witness to testify is Miss Fink, the investigator for State Farm. The Court credits her testimony as being credible.

Findings Of Fact

Elicier Delgado owned a 1989 Honda which was insured by State Farm on the date of the collision, February 18, 2002. The inception date of the automotive policy was January 18, 2002. The policy was a standard automobile policy under an assigned risk plan, and a premium payment was paid at the time of its inception. On February 3, 2002, Delgado’s vehicle was involved in a rear-end collision in which his vehicle struck the preceding vehicle. On February 18, 2002, Delgado’s vehicle was involved in a second rear-end collision with the respondents, McNeil and Newbern. Again, his vehicle struck the rear of the preceding vehicle, this time the respondents’ vehicle, a 1998 Dodge. There is a discrepancy over the operator of Delgado’s vehicle during the February 18th collision. Mr. Delgado informed the State Farm investigator that he was the operator of the vehicle, while the police report indicates that Ernesto Ortiz was the operator. On March 9, 2002, State Farm canceled Delgado’s insurance policy for nonpayment of the premium. Delgado never made a subsequent payment since his initial premium payment. On June 5, 2002, an investigator visited Delgado’s residence at which time Delgado informed the investigator that his vehicle had been involved in the February 18th accident. On June 6, 2002, an investigator unsuccessfully attempted to get a statement from Ortiz by visiting his home. On September 20, 2002, Delgado was scheduled for an Examination Under Oath (hereinafter referred to as EUO), but he failed to appear. On October 9, 2002, the State Farm conducted EUO’s of two passengers in the Delgado vehicle, Manano Ortiz and Eli Ramos. On October 27, 2002, Delgado was scheduled for a second EUO and once again failed to appear. Miss Fink [*3]testified that on February 5, 2003, State Farm issued letters to Ortiz, Delgado, McNeil, and Newbern to inform them that they were disclaiming coverage as they concluded that the Delgado’s vehicle was involved in an intentional fraud and not an accident.

Conclusions Of Law

Respondent State Farm is correct in asserting that the offending Delgado vehicle is not covered under the automotive policy issued by respondent if the collision was an intentional, staged event and not caused by an accident (Metro Medical Diagnostics, P.C. v. Eagle Insurance Company, 293 A.D.2d 751).

The respondent State Farm has demonstrated that the collision that occurred on February 18, 2002 was one of two accidents that occurred over a short period of time, i.e. two weeks, that were deliberately caused to fraudulently obtain insurance benefits. An insurer asserting a lack of coverage based upon a defense of fraud must come forward with “the facts” or a “foundation for its belief” that the incident was a deliberate, staged event in furtherance of a scheme (Mount Sinai Hospital v. Triboro Coach Inc., 263 A.D.2d 11, at 19, citing Central General Hospital v. Chubb Group of Ins. Cos., 90 N.Y. 2d 195, 199; Inwood Hill Medical P.C. v. Allstate Insurance Company, 2004 WL 1381082). Where it is proven that the vehicles were involved in several collisions within a short period of time after the insurer issued insurance policies for vehicles registered to the insured, that is sufficient to satisfy the definition of “founded belief” (State Farm Mutual Automobile Ins. Co., v. Leguerre, 305 A.D.2d 490; Inwood Hill Medical P.C. v. Allstate Insurance Company, supra, at 10). It has been held that two collisions that occurred in a similar manner, coupled with discrepancies within the statements provided by the insured, constituted a “compelling and persuasive body of circumstantial evidence” that the underlying loss resulted from an intentional collision arranged for the purpose of insurance fraud (National Grange Mutual Insurance Company v. Vitebskaya, 1 Misc3d 774, at 777). The inference to be drawn from the circumstantial evidence must be logically compelling and prove that it was “more likely” or “more reasonable” that the collision was a result of a staged, intentional event rather than caused by an accident. (See, Gayle v. New York, 92 N.Y.2d 936.)

At the framed-issue hearing, respondent State Farm has established sufficient facts through the testimony of their investigator, Miss Fink, that created the reasonable inference of a founded belief that the collision on February 18, 2002 was an intentional, staged event. The State Farm-insured vehicle, a 1989 Honda, was involved in two alleged accidents within a two-week period of time and also within one month after an assigned risk policy of insurance was assigned to State Farm. In each of those incidents, the 1989 Honda allegedly rear ended another car while there were multiple individuals in the 1989 Honda as passengers. After each of these alleged accidents, the multiple individuals in the State Farm-insured vehicle made claims of injuries and no-fault claims. The insurance policy covering the 1989 Honda was cancelled shortly after these two alleged accidents as the State Farm-insured Delgado never made premium payments subsequent to the initial payment made when he procured the assigned risk policy of insurance. Finally, neither the State Farm insured nor the alleged operator of the State Farm-insured vehicle appeared for examinations under oath in connection with the investigation of this claim. Accordingly, the Court finds that State Farm presented compelling and persuasive circumstantial evidence that the collision that occurred on February 18, 2002 was an intentionally staged event. [*4]

Contrary to petitioner’s contention, State Farm was not required by Insurance Law §3420 (d) to issue a notice of disclaimer to the insured and the injured parties because its denial of coverage was based on a lack of coverage for the incident from a deliberate collision caused in furtherance of an insurance fraud scheme which is not a covered accident and, therefore, not an exclusion under the policy (State Farm Automobile Insurance Company v. Laguerre, 305 A.D.2d 490).

Because the injuries sustained by respondents, Diandre McNeil and Tatyana Newbern, were caused by an intentional collision, they also cannot recover from the uninsured motorist endorsement of the Progressive policy which provides only for compensation for injuries sustained by a covered person “caused by an accident.” This language in an insurance policy has been interpreted by the courts to exclude recovery for intentional conduct (McCarthy v. MVAIC, 16 A.D.2d 35, aff’d, 12 N.Y.2d 922; In the Matter of Progressive Northwestern Insurance Company v. Van Dina, 282 A.D.2d 680; In the Matter of Aetna Casualty & Surety Company v. Perry, 220 A.D.2d 497). In particular, it excludes coverage under the uninsured motorist policy endorsement for an intentional collision whether it was motivated by malice or fraud (In the Matter of Government Employees Insurance Company v. Shaulskaya, 302 A.D.2d 522).

The Court finds this can result in an injustice since respondents, McNeil and Newbern, appear to be without any recourse for remuneration of injuries. It is also disturbing given the fact that the line of appellate cases which constitutes precedent binding upon this Court completely overlooks that the uninsured motorist insurance was designed for the protection of the insured victims for which insurers pay an additional premium. Legislative action is necessary in order to remedy this glaring void where innocent victims of intentional collisions are left without any recourse for compensation for their injuries by the insurance industry.

Accordingly, petitioner’s application for a permanent stay of arbitration under the uninsured motorist insurance policy endorsement pursuant to CPLR §7502 is granted in its entirety.

Submit order.

________________________________

J.S.C.

—[*1]

In an action to recover no-fault medical payments, the plaintiffs appeal from an order of the Supreme Court, Nassau County (Cozzens, J.), dated October 1, 2003, which denied their motion for summary judgment.

Ordered that the order is affirmed, without costs or disbursements.

In support of their motion for summary judgment, the plaintiffs submitted evidentiary proof that the defendant insurance company had not responded to their February 19, 2003, and January 15, 2003, claims for no-fault medical benefits within 30 days as required by Insurance Law § 5106 (a) and 11 NYCRR 65.15 (g) (3). In opposition to the motion, the defendant submitted documentary evidence and an affidavit of an employee asserting that the same claims had originally been billed over one year earlier and that timely denial of claim forms had been mailed to the plaintiffs at that time.

The evidence submitted by the plaintiffs satisfied their burden of establishing a prima facie entitlement to judgment as a matter of law (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]). However, the defendant submitted admissible evidence in opposition to the motion, which raised triable issues of fact as to the dates on which the plaintiffs mailed the no-fault claims to the defendant (see New York Hosp. Med. Ctr. of Queens v Country-Wide Ins. Co., 295 AD2d 583, 585 [2002]) and whether the defendant properly denied those claims (see Hospital for Joint Diseases v Nationwide Mut. Ins. Co., 284 AD2d 374, 375 [2001]). Accordingly, the Supreme Court correctly denied the motion for summary judgment. Florio, J.P., S. Miller, Rivera and Lifson, JJ., concur.

District Court of Nassau County, First District

12979/04

Scott Fairgrieve, J.

Plaintiff moves for an order, pursuant to CPLR 3212, granting summary judgment in its favor in this action to recover fees for medical treatment provided under the no-fault law to its assignor, Rachael Charriah. The defendant opposes this motion and the plaintiff has served a reply.

Plaintiff’s assignor was involved in a motor vehicle accident on January 5, 2004. Plaintiff submitted a claim to defendant in the sum of $879.73, no part of which has been paid. The defendant admits receipt of the claim on March 4, 2004 and denial of the entire claim was made on March 22, 2004.

The motion papers have established that the plaintiff submitted its proof of claim and that the defendant issued its denial within thirty days of receipt of the claim. The denial was based upon a lack of medical necessity.

Plaintiff posits that the denial was defective since it was based on the opinion of a nurse. [*2]Therefore, the defendant has not met its burden of proof of demonstrating that the services rendered, an MRI, lacked medical necessity as a nurse is a layman and her testimony may not be used to establish the standard of care in the medical field.

It is the defendant’s position that the file-based review methodology is an entrenched procedure used in many professions to determine the necessity and quality of the services performed. Further, the defendant asserts it would be unreasonable to require the denial of coverage to be based on the ground of medical necessity to be made in the first instance by a peer review doctor exclusively.

As stated in Choicenet Chiropractic v. Allstate Insurance Co., 2003 NY Slip Op 50672U:

“The defense of lack of medical necessity may be asserted on the basis either of peer review or a medical examination as implicitly provided by Insurance Regulation 11 NYCRR 65-3.8(b)(4).”

The Court held in Abraham v. Country-Wide Insurance Company, 3 Misc. 3d 130 (App Term, 2d and 11th Jud Dists 2004):

“As a general rule, for purposes of medical diagnosis and treatment, a nurse is a mere lay informant (e.g. Dombrowski v. Moore, 299 A.D.2d 949, 951, 752 N.Y.S.2d 183 [2002] whose medical opinions and conclusions drawn from the facts are incompetent and inadmissible (Nucci v. Proper, 270 A.D.2d 816, 817, 705 N.Y.S.2d 144 [2000], aff’d 95 N.Y.2d 597, 744 N.E.2d 128, 721 N.Y.S.2d 593 [2001]; People v. Russell, 165 A.D.2d 327, 332, 567 N.Y.S.2d 548 [1991]; see Prince, Richardson on Evidence § 7-101 [Farrell 11th ed]).”

Since the defendant has failed to prove lack of medical necessity through a medical examination or peer review, its denial is ineffective. Therefore, the defendant is precluded from offering a defense of lack of medical necessity despite the timeliness of the denial Amaze Medical Supply, Inc. v. Eagle Insurance Co., 2 Misc. 3d 128A (App Term, 2nd and 11th Jud Dists 2003).

Upon a review of the papers submitted, the Court concludes that the plaintiff has satisfied its burden of demonstrating entitlement to summary judgment. The defendant has failed to come forward with proof to establish the existence of triable issues of fact. Summary judgment, therefore, is granted in favor of the plaintiff.

Let judgment be entered in favor of the plaintiff in the sum of $879.73, plus statutory interest from April 4, 2004, together with statutory attorney’s fees along with costs and disbursements. Attorney’s fees not to exceed $850.00. The other issues raised by the defendant need not be addressed. [*3]

So ordered:

DISTRICT COURT JUDGE

Dated: August 26, 2004

CC:Friedman, Harfenist, Langer & Kraut

Jaffe & Nohavicka

SF/mp

Supreme Court, Otsego County

9744-03

William F. O’Brien, J.

Several motions were presented at the Court’s May 14, 2004, motion term for resolution in this dispute between a no-fault insurance provider and ninety-nine (99) professional medical corporations. A number of defendants move pursuant to CPLR 3211 to dismiss the Complaint for failure to state a cause of action, while other defendants cross-move pursuant to CPLR 3212 for summary judgment dismissing the Complaint. Plaintiff opposes these motions and filed a cross-motion seeking dismissal of defendant Eastern Comprehensive Medical, P.C.’s counterclaim. June 1, 2004, was set as the date for final submissions by the parties on the motions.

FACTUAL BACKGROUND

Plaintiff is a provider of no-fault automobile liability insurance policies in New York State and defendants are professional corporations (hereinafter “PCs”) which were owned and operated by medical doctors. According to the pleadings, from 1998 until mid-2001, defendants rendered treatment to persons covered under no-fault policies issued by plaintiff. The covered insured patients were treated by licensed acupuncturists who were employees of defendant medical corporations. The covered insured patients executed facially-valid assignments of their no-fault benefits to defendant corporations. Defendant corporations submitted bills for the treatment provided by these licensed acupuncturists to plaintiff. Plaintiff paid the bills submitted by defendant corporations.

Plaintiff filed this action on July 10, 2003, alleging that defendants had improperly employed acupuncturists and that, based upon this organizational flaw, were operating illegally and were not entitled to the payments that plaintiffs made during the time period cited in the Complaint. The Complaint demands that defendant corporations refund all payments made by plaintiff for services provided by the licensed acupuncturists. Plaintiffs allege that these payments amount to a total of $1,367,272.00. Defendant Eastern Comprehensive Medical Services, P.C., filed a counterclaim with its Answer alleging that it is owed an additional $10, 581.50.

RELEVANT LAW/ANALYSIS

This case presents two questions which are currently unsettled in New York law: (1) Whether a medical corporation owned and operated by doctors who do not possess a certificate [*2]to practice acupuncture may lawfully employ an acupuncturist and (2) whether a medical corporation which illegally employs a licensed acupuncturist is entitled to reimbursement by insurers for medical services provided to covered persons pursuant to no-fault policies issued by the insurer? There is no precedent directly addressing the first question and, while several lower courts have addressed the second issue, the results are diverging and in need of clarification.^[FN1]

Analysis of these motions begins by examining the claims stated in the Complaint, which lists two causes of action against each named defendant: (1) fraud, alleging that defendants knowingly made false representations to plaintiff to induce plaintiff to pay bills for services which defendants were not authorized to provide; and (2) unjust enrichment, alleging that defendants accepted payments from plaintiff that they knew were illegal and yet still retained the proceeds of said payments. The parties agree that there are no disputed facts present in this case and that the issues here may be settled as matters of law.

Corporate Structure Violations

Before analyzing the causes of action stated in the Complaint it is necessary to review the statutory basis for plaintiff’s theory of recovery. Section 1503(a) of the Business Corporation Law provides that “one or more individuals duly authorized to render the same professional service within the state may organize, or cause to be organized, a professional service corporation for pecuniary profit under this article for the purpose of rendering the same professional service.” Under this statute, only professionals licensed to render the same professional services may organize as a corporation and multi-disciplinary professional practices are disallowed.

Plaintiff contends that defendant PCs have violated this prohibition against multi-disciplinary practices by employing acupuncturists. All of the defendant PCs are organized for the practice of medicine. Acupuncture, according to plaintiff, is a separate discipline that is not subsumed within the practice of medicine. Thus, according to plaintiff, unless at least one shareholder/owner of each of the defendant PCs was certified to practice acupuncture along with being a licensed medical doctor, the defendant PCs could not properly employ an acupuncturist because acupuncture was beyond the scope of the corporation’s expertise.

Plaintiff’s Cause of Action for Fraud

In order to establish a cause of action for fraud, a plaintiff must allege (1) a misrepresentation of a material fact, (2) falsity, (3) scienter (knowledge of the falsity), (4) reliance upon the false statement and (5) injury. See Small v. Lorillard Tobacco Co., 94 NY2d 43, 56 (1999). In addition, the Complaint must state with specificity the acts which constituted the fraud. See Kovach v. Hinchey, 276 AD2d 942 (3d Dept. 2000); CPLR §3016(b).

Defendants contend that the Complaint here does not plead the fraud cause of action with sufficient specificity. The Complaint states that “defendants intentionally and knowingly made false and fraudulent statements of material facts to (plaintiff), namely that each was lawfully [*3]entitled to payment from (plaintiff) for the acupuncture services provided to each said eligible injured person.” It goes on to allege that these “fraudulent and false statements” were made “to induce (plaintiff) to pay for the acupuncture services they were not entitled to claim or receive.” The Complaint recites that defendants “knowingly concealed material facts from (plaintiff), namely that each defendant wrongfully and illegally employed an acupuncturist . . . in order to bill and receive payment for acupuncture services to which they were not entitled.” Finally, the Complaint states that plaintiff justifiably relied upon the misrepresentations of defendant PCs in rendering payment for the acupuncture services performed.

Such allegations contain sufficient detail to place defendants on notice of the acts which are alleged to have constituted the fraud. See Black v. Chittenden, 69 NY2d 665 (1986). Even without further elaboration, defendant PCs would know from these pleadings that plaintiff is alleging that defendant PCs knowingly misled plaintiff to believe they were entitled to be paid for acupuncture services when such payments were, according to plaintiff, illegal and wrongful. Keeping in mind that the statute is not to be interpreted so strictly as to defeat what might otherwise be a valid claim where some knowledge might be peculiarly within the knowledge of the defendant PCs, the present claim is stated in sufficient detail to satisfy CPLR §3016(b)’s specificity requirement. See Oxford Health Plans (N.Y.), Inc. V. Bettercare Health Care Pain Management & Rehab PC, 305 AD2d 223 (1st Dept. 2003).

The theory underlying plaintiff’s fraud claim relies upon the premise that defendants were violating BCL §1503 by employing acupuncturists. Assuming without deciding that plaintiff is correct in this assertion, plaintiff’s claim further asserts that it may recover the payments made to defendant PCs based upon this violation of the Business Corporation Law. Such a right of recovery is not explicit in the statute and defendants contend that no private right of action exists for any purported violation of BCL §1503(a). Several reported and unreported decisions support this position. Allstate Insurance Co. v. Belt Parkway Imaging, P.C., Sup. Ct. New York County, March 19, 2004, Moskowitz, J., Index No. 600509/2003; Oxford Health Plans (N.Y.) Inc. v. Bettercare Health Care Pain Management & Rehab, P.C., supra; State Farm Mut. Auto Insurance Co. v. Malella, 175 F.Supp.2d 401 (E.D.N.Y. 2001), issue certified to Ct. Of Appeals, 372 F.3d 500 (2nd Cir. 2004); Universal Acupuncture Pain Services, P.C. v. State Farm Mut. Auto Insurance Co., 196 F.Supp.2d 378, (S.D.N.Y. 2002).

Plaintiffs, meanwhile, rely upon several unpublished New York State Supreme Court decisions in asserting that a private right of action does exist. See, e.g. State Farm Insurance Co. v. North Bronx Medical, P.C., Sup. Ct. New York County, January 17, 2002, Wetzel, J., Index No. 117539/01; Fordham Med. Pain & Treatment. P.C. v. State Farm, Sup. Ct. New York County, January 4, 2001, Shafer, J., Index No. 600403; Advanced Care of New York, Inc. V. Friscia, Sup. Ct. Kings County, Feb. 22, 2002, Hall, J., Index No. 32528/99; GEICO v. Southern Medical Services, Inc., Sup. Ct. New York County Nov. 5, 1993, Ciparick, J., Index No. 118101/93; Queens Spinal Testing v. GEICO, Civ. Ct., Queens County, April 4, 1997, Gazzara, J., Index No. 5378/95.^[FN2] [*4]

These decisions, to the extent that they address the issue at hand, are neither controlling nor particularly persuasive. They contain minimal analysis of the issue and, most importantly, are factually distinguishable from the present case. For example, State Farm v. North Bronx Medical involved an insurance company which sought to deny payments for no-fault treatments rendered by a medical PC which was owned by a pathologist and purported to offer physical therapy treatment. That court stated that it chose not to follow Malella, making the uncited assertion that Malella was “in conflict with the established law in New York State Courts”. In Fordham Med. Pain & Treatment, P.C. v. State Farm, the plaintiff sought to receive payment from a no-fault insurer for treatment provided. The insurance company denied the payments, alleging it did not have to pay because plaintiff was violating BCL §1503 because plaintiff’s putative owner/sole shareholder was not actually involved in the management of the corporation. The decision stated that the plaintiff’s reliance upon the principle that a party may not use a regulatory violation such as a violation of BCL §1502 as a sword to be misplaced, but then failed to explain why the rule should not be applied.

By contrast, the Universal Acupuncture court made substantial analysis of New York law in concluding that the insurer in that case could not recover under a theory of common law fraud for a violation of BCL §1503 because the statute provides no private right of action for a violation thereof and because the insurer alleged no substantive injury apart from the statutory violation. Universal Acupuncture Pain Services, P.C. v. State Farm, supra at 387. It is noteworthy that the charges in Universal Acupuncture were more malevolent than those levied in the present case; the PC in that case was owned in name only by an acupuncturist who was all the while splitting fees with a physician who was billing the no-fault insurer for acupuncture services provided. Here, the only dishonesty alleged is plaintiff’s contention that defendants knew that a medical corporation could not lawfully employ an acupuncturist unless one of its principals held a certificate in acupuncture, an allegation of dubious merit as discussed below. As such, the lack of a substantive injury to plaintiff directly – not to the covered insured persons or to the public at large – compels adoption of the Universal Acupuncture analysis.

The Malella court engaged in an equally lengthy discussion of New York law on the subject. That case dealt with allegations of shell ownership of medical corporations and insurance companies seeking reimbursement for payments that they purported to be illegal based upon improper licensing of the defendant PCs. The court noted that the insurer in that case had “done no more than pay claims it was required to pay by law” and determined that a private right of action was not available to the insurance companies because they were not intended beneficiaries of BCL §1503 and that a private right of action would not promote the legislative intent of the statute. State Farm Mut. Auto Insurance Co. v. Malella, supra at 416-17.

The analyses set forth in Universal Acupuncture and Malella were recently adopted by the Supreme Court of New York County in Allstate v. Belt Parkway Imaging, P.C., supra. In that case, insurers sought to recover fees paid to medical PC defendants based upon purported [*5]violations of BCL §1503 involving physicians named as owners of corporations which were, in fact, owned by a layperson without a medical license who owned a medical management company. That court extensively analyzed many of the aforementioned decisions and held the plaintiff insurance companies were not among the class of intended beneficiaries of BCL §1503 and could not use a purported violation of the statute offensively in seeking to recover for payments already made.

Such analysis is directly applicable to the facts of the present case. Here, plaintiff seeks to recoup payments made to the defendant PCs based solely upon a purported violation of the BCL. It is noteworthy that while the Complaint infers that defendant PCs “knew” that hiring acupuncturists without having a physician certified to practice acupuncture as a corporate shareholder constituted a violation of the Education Law and BCL, plaintiff cannot point to any controlling authority that decisively states such a rule. In fact, the only violation alleged against defendants here is a potentially open question of law that is best resolved by the regulatory agencies which govern this area but have yet to speak definitively on the issue. There are no allegations of deceptive corporate structure as set forth in nearly every other case dealing with this issue. Plaintiff further concedes that the services for which they were billed were actually performed and that they were performed by licensed acupuncturists. Plaintiff’s sole basis for relief is to use the alleged violation of BCL §1503 as a sword, which goes against settled New York decisional law. As noted by the Malella court, “(t)he violation at issue here is not evil in itself and plaintiff plainly seeks to use the . . . violations as a sword for personal gain in order to recoup payments that it would, but for the alleged violations of the Business Corporations Law, indisputably have been required to pay.” Id. at 419-420.

Since no private right of action exists to recover for a violation of BCL §1503(a), plaintiff’s fraud claim fails to state a cause of action upon which relief may be granted and the cause of action must be dismissed.

Plaintiff’s unjust enrichment claim is similarly unavailing. In order to recover under an unjust enrichment theory, a party must prove (1) the defendants were enriched, (2) at plaintiff’s expense, and (3) that “it is against equity and good conscience to permit . . . defendant(s) to retain what is sought to be recovered”. Lake Minnewaska Mountain Houses, Inc. v. Rekis, 259 AD2d 797 (3d Dept. 1999). While plaintiff’s submissions likely satisfy the first two elements of the claim, it fails to establish how equity and good conscience require the return of fees paid for services rendered by defendants. Plaintiff advances its public policy concerns in support of this claim as well, but they are no more convincing in the equitable forum. The facts remain that defendants rendered services, billed for those services and were paid for the services rendered. Plaintiff does not allege that the bills submitted did not accurately reflect the services provided, they do not allege that the services provided were substandard or insufficient to meet the needs of the covered insured persons and they do not allege that the amounts sought in the bills were inappropriate for the work performed. Plaintiffs received exactly what they paid for – medical services provided by licensed acupuncturists. Allowing plaintiff to disgorge the fees paid for these services would arguably unjustly enrich plaintiff and, despite plaintiff’s stated concern for the public health problems associated with the alleged improper practice of medical doctors employing acupuncturists, public policy mitigates most strongly in favor of proper compensation for services rendered. Furthermore, the practice of forfeiture of payments already rendered is [*6]disfavored by New York courts “particularly where a . . . party seeks to raise illegality as a sword for personal gain rather than a shield for public good.” State Farm Mut. Auto Insurance Co. v. Malella, supra at 419, quoting Lloyd Capital Corp. v. Pat Henchar, Inc., 80 NY2d 124, 128 (1992). Thus, plaintiff has failed to establish the viability of its unjust enrichment cause of action and that claim must also be dismissed.

Plaintiff’s motion for summary judgment dismissing the counterclaim of defendant Eastern Comprehensive Medical Services must be granted. The counterclaim lacks the required specificity to place the Court and parties on notice of the exact nature of the claim. Willis v. Kepner, 109 AD2d 950 (3d Dept. 1985). The counterclaim set forth in defendant Eastern Comprehensive Medical’s Answer states only that acupuncture services were provided to persons who were covered insureds of plaintiff and that “(t)here remains owing and unpaid for the Services the amount of Ten Thousand Five Hundred Eighty-One Dollars and fifty cents ($10,581.50) which is due and owing from Plaintiff to Defendant”. These allegations are not sufficient to sustain any cause of action as they fail to specify, among other things, the time period in which these services were provided, whether plaintiff was ever billed for said services and the alleged reasonable value of the services.

Accordingly, for the reasons set forth, both the motions of the defendants seeking dismissal of the Complaint for failure to state a claim and the motions of the defendants seeking summary judgment dismissing the Complaint are granted, and the Complaint is dismissed as against all defendants. Plaintiff’s motion for summary judgment seeking dismissal of defendant Eastern Comprehensive Medical Services is granted and the counterclaim is dismissed.

This decision shall also constitute the Order of this Court.

Footnote 1: The recent decision of the Second Circuit Court of Appeals in State Farm Insurance v. Mallela, 372 F.3d 500 (2nd Cir. June 18, 2004) certified the following question to the Court of Appeals: “Is a medical corporation that was fraudulently incorporated under N.Y. Business Corporation Law §§ 1507, 1508, and N.Y. Education Law §6507(4)(c) 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?”

Footnote 2: Plaintiff also cites several arbitration decisions in support of this position, including Medical Office of Stony Brook & State Farm Insurance Co., AAA Case No. 17-970-22848-98 (June 2001) and Kew Forest Medical, P.C. & Allstate Insurance Co., AAA Case No. 17-991-1553-1 (March 1, 2002). These decisions have no precedential value as they are not determinations of law, Banc of America Securities v. Knight, NY Slip Op. 24232 (Sup. Ct. New York County, May 19, 2004), and because an arbitrator is not bound by substantive law or rules of evidence. Silverman v. Benmor Coats, Inc., 61 NY2d 299 (1984).

[*1]

District Court of Nassau County, First District, August 23, 2004

APPEARANCES OF COUNSEL

Lawrence N. Rogak, LLC, Oceanside, for defendant. Dash & Burns, Jericho, for plaintiff.

{**5 Misc 3d at 838} OPINION OF THE COURT

Joel K. Asarch, J.

{**5 Misc 3d at 839}The defendant, Lumbermans Mutual Insurance Company, moves pursuant to CPLR 3103 (a) for a protective order denying the plaintiff disclosure of the contents of the defendant’s entire no-fault file with respect to its assignor. The defendant contends that it has provided the plaintiff with NF-10s, payment letters and bills, “both the bills at issue in this lawsuit, and for those services defendant believes to represent overlapping and concurrent care, which was the basis for denial” (affirmation of Steven D. Rhodes, Esq., dated Oct. 31, 2003 [emphasis supplied]). The defendant objects to the plaintiff being able to review the entire contents of its no-fault claims file. The plaintiff, on the other hand, relying in part on prior decisions issued by this court, contends that a review of the entire no-fault file will aid in the prosecution of the action and will permit it to discover those documents that led to the denial of the claim.

In this no-fault action, the plaintiff (a health service provider) seeks a judgment for health services allegedly rendered to Elaine McKeithan (the assignor) as a result of an automobile accident occurring on July 14, 2000. The defendant provided no-fault insurance benefits to Ms. McKeithan at the time of the accident under a policy of insurance. The plaintiff is seeking recovery of no-fault benefits from the defendant insurer in the sum of $2,950.36, together with statutory interest and attorney’s fees, due to medical services provided to the plaintiff’s assignor.

This action was commenced on or about March 14, 2002 by service of a summons and complaint upon the defendant. The defendant answered the complaint on or about April 23, 2002, denying the central allegations in the complaint and raising several affirmative defenses. The court notes that the basis for the denial of claim was that the “fees [were] not in accordance with fee schedules” and that “concurrent care involves overlapping/excessive and/or common services.”

This court stated in Ostia Med., P.C. v Government Empls. Ins. Co. (1 Misc 3d 907[A], 2003 NY Slip Op 51560[U] [Nassau County Dist Ct 2003]):

“A protective order is designed to guard against disclosure abuses. CPLR 3103(a) states, in relevant part, that:

” ‘ . . . The Court may at any time on its own initiative, or on motion of any party or of any person from [*2]whom discovery is sought, make a protective order denying, limiting, conditioning or regulating the use of any disclosure device. Such order shall be designed {**5 Misc 3d at 840}to prevent unreasonable annoyance, expense, embarrassment, disadvantage, or other prejudice to any person or the courts.’

“Thus, pursuant to the CPLR and UDCA, a protective order may be used, no matter what disclosure device is implicated . . .

“The Court can regulate discovery, pursuant to a protective order, by directing the time, order, place and questions to be asked in an EBT, or dictating the disclosure devices to be used or combination thereof, and even by defraying the costs of a party’s participation in the disclosure (see, Church [&] Dwight Co. Inc. v [UDDO] & Associates, Inc., 159 A.D.2d 275, 552 N.Y.S.2d 277 [1st Dept 1990]; Weeks Office Products, Inc. v Chemical Bank, 178 A.D.2d 113, 577 N.Y.S.2d 10 [1st Dept 1991]).

“Moreover, the Court has broad discretion in limiting or regulating the use of disclosure devices (see, Brignola v Pe[i]-Fei Lee, M.D.[,] P.C., 192 A.D.2d 1008, 597 N.Y.S.2d 250 [3d Dept 1993]).”

The arguments raised by the defendant concerning the purported immateriality and irrelevancy of the materials contained in the defendant’s no-fault file have been addressed by this court in CPT Med. Servs., P.C. v Allstate Ins. Co. (NYLJ, July 1, 2003, at 20, col 3). For the reasons stated in that decision, the court rejects this argument of the defendant and need not repeat itself here. (See also Hudson Med. v Allstate Ins. Co., 183 Misc 2d 749 [App Term, 2d Dept 1999].)

However, the defendant has now raised a further argument concerning the release of the entire no-fault file—that to do so would violate the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (42 USC § 1320d; 45 CFR parts 160, 164).

“The modern-day legislative trend is to protect a medical patient’s privacy. Under HIPAA, ‘protected health information’ is broadly defined as any individually-identifiable health information which was created by, among others, a health care provider, and which relates to, inter alia, the past, present, or future physical or mental health or condition of an individual. HIPAA and its supporting regulations, inter alia, established standards and procedures for the collection and disclosure of protected health information to prevent its wrongful disclosure” (Gunn v {**5 Misc 3d at 841}Sound Shore Med. Ctr. of Westchester, 5 AD3d 435, 437 [2d Dept 2004] [citations omitted]).

“HIPAA provides that a party deemed to be a ‘covered entity’ may not use or disclose protected health information except for in treatment, or for payment or health care operations of the individual patient, or to the individual patient, without receiving a proper authorization. A ‘covered entity’ is defined as (1) a health plan, (2) a health care clearinghouse, or (3) a health care provider who transmits any health information in electronic form, as prescribed by the regulation” (Lewis v Clement, 1 Misc 3d 464, 466 [Sup Ct, Monroe County 2003]).

“Except as otherwise provided herein, the standards, requirements, and implementation specifications of this subpart apply to covered entities with respect to protected health information” (45 CFR 164.500 [a]).

The plaintiff argues that the defendant is not a “covered entity” under HIPAA in that automobile medical payment insurance is an excepted benefit (see 42 USC § 300gg-91 [c] [1] [E]), and hence not subject to the requirements of HIPAA. This court respectfully disagrees. The defendant is a “health plan” as defined under 45 CFR 160.103 in that it is “an individual or group plan that provides, or pays the cost of, medical care,” which is defined elsewhere as amounts paid for “the diagnosis, cure, mitigation, treatment, or prevention of disease, or amounts paid for the purpose of affecting any structure or function of the body” (42 USC § 300gg-91 [a] [2] [A]). The New York State Insurance Department, in an opinion letter dated July 8, 2003, indicated that “[a]n insurer that offers health insurance, in addition to either Workers’ Compensation or No-Fault insurance, would, unless [*3]it opts to be a hybrid entity, 45 C.F.R. § 164.103 (2003), be a covered entity.” Thus, the court finds Lumbermans Mutual Insurance Company, a member of the Kemper Insurance Companies and Unitrin, Inc., to be a covered entity. As a result, the release of protected health information must be limited “to the minimum necessary to accomplish the intended purpose of the use, disclosure, or request” (45 CFR 164.502 [b] [1]). While the provider may (and, in fact, must if it wants payment under no-fault) transmit protected health information (see, e.g. 11 NYCRR 65.12), the defendant is more restricted with its disclosure under HIPAA. The form NF-2 does not permit a blanket release of medical information, either to the plaintiff or otherwise.{**5 Misc 3d at 842}

It is apparent to this court that there are two competing principles at work here. On the one hand, a claimant has the right under HIPAA to avoid unnecessary disclosure of his or her protected medical information and condition. To permit the release of medical information on conditions completely unrelated to the no-fault treatment by a provider without the express authorization of the claimant would fly directly in the face of HIPAA. On the other hand, to permit the defendant to be the gatekeeper of all medical information and to permit its release only after further proceedings before an already taxed court would run afoul of the full disclosure premises of CPLR article 31. This is not a situation where a health care provider is receiving protected health information in order to treat the claimant. Rather, the information is being sought to be used by the plaintiff’s attorneys in order to secure payment.

Thus, it is the holding of this court that if the plaintiff presents a valid authorization complying with the HIPAA regulations, to wit, 45 CFR 164.508 (a) (1), the plaintiff is entitled to review the defendant’s no-fault claims file, subject to privileged and protected material as specified in the Ostia and CPT decisions (supra). It is clear to this court that a claimant must be made aware that his or her medical information will be revealed to the plaintiff—something a claimant may or may not want. The core elements of a valid authorization contain the information to be disclosed, the name of the recipient, a description of “each purpose of the requested use or disclosure” and an expiration date, together with statements concerning the signer’s right to revoke the authorization et al. (45 CFR 164.508 [c].) The mere submission of an NF-2 is insufficient to comply with HIPAA. (See 45 CFR 164.508 [a] [1].) The privacy rights of the patient need to be preserved under HIPAA.

However, as the claimant is seeking third-party payment for services rendered, a more limited assignment signed by the claimant will permit the medical provider to obtain from the defendant those items directly bearing on the services rendered and any denial issued. It is clear that by seeking payment of the medical costs, the claimant has placed her condition in controversy with respect to those services rendered by the provider and for which payment is sought (CPLR 3121 [a]). The plaintiff has attached to its complaint an opinion letter by the New York Insurance Department, dated May 11, 1998. The letter reads, in relevant part,

“based on the foregoing definition, as long as the two {**5 Misc 3d at 843}providers are performing two different and distinct treatments it should not be classified as concurrent care. If the insurer and medical provider disagree on what should be classified as concurrent care, and a denial is then issued, the dispute may be brought before an arbitrator or court of competent jurisdiction for final resolution.” (See also Universal Acupuncture Pain Servs. v Lumbermens Mut. Cas. Co., 195 Misc 2d 352 [Civ Ct, Queens County 2003].)

Thus, in the present case, the motion of the defendant is granted in part. As the assignment does not constitute a valid authorization under HIPAA,^[FN*] the plaintiff is entitled to disclosure of all [*4]documents and materials specifically concerning the alleged concurrent treatment only. This case does not involve medical necessity of treatment—rather, concurrent care. The plaintiff is entitled to those documents in this case which concern the issue of concurrent care, whether relied upon by other providers or in peer reviews. Within 30 days of the date of this order, the defendant shall provide the plaintiff, if not already provided, with copies of all documents, independent medical examinations, bills et al. which concern treatment to the claimant’s right shoulder, lower back, cervical or lumbar spine or neck. Such therapies shall include massage, ultrasound, mechanical traction, electric stimulation, hot and cold packs and therapeutic exercises and activities performed by any provider. If the defendant fails to turn over any such documents or materials, it shall be precluded from offering such materials and items at trial, whether through direct use or through the testimony {**5 Misc 3d at 844}of an expert witness who has reviewed such documents in the formulation of his or her opinion.

Based on the foregoing, this court declines in this case to permit the disclosure of protected health information of the entire no-fault file. (See 45 CFR 164.512 [e].)

Footnotes

Footnote *: The assignment reads, in relevant part, that “I hereby instruct and direct the ___ Insurance Company to pay by check made out to . . . mailed directly to . . . or if my current policy prohibits direct payment to doctor, then I hereby also instruct and direct you to make out the check to me and mail it as follows . . . For professional or medical expense benefits allowable and otherwise payable to me under my current insurance policy as payment toward the total charges for professional services rendered.this is a direct assignment of my rights and benefits under the policy . . . I also authorize the release of any information pertinent to my case to any insurance company, adjuster, or attorney involved in this claim.” Further, the application for no-fault benefits provides that “This authorization or photocopy hereof will authorize you to furnish all information you may have regarding my condition while under your observation or treatment, including the history obtained, X-ray and physical findings, diagnosis and prognosis. You are authorized to provide this information in accordance with the new york comprehensive automobile reparations act (no-fault law).” Neither statement complies with 45 CFR 164.508 (c).

Supreme Court, Kings County

37746/03

Francois Rivera, J.

The defendant Allstate Insurance Company moves pursuant to CPLR §603 to sever and dismiss the claims brought by plaintiff Aviyon Medical Rehabilitation, P.C. Plaintiff opposes defendant’s motion.

Plaintiff is a health care provider authorized to practice and render diagnostic services in New York State and maintains an office at 107-13 Jamaica, Richmond Hill in Queens County. Defendant is a foreign corporation, duly authorized to conduct the business of providing automobile liability and no fault insurance to New York State motorists.

On October 9, 2003, plaintiff commenced this action by filing a summons and verified complaint with the Kings County Clerk’ s Office. Defendant answered with a general denial and asserted (28) twenty-eight affirmative defenses. Plaintiff’s verified complaint annexed a list containing the names of (36) thirty-six motor vehicle accident victims, the dates of their accidents, the amount of their unpaid no fault claims, and the corresponding claim numbers assigned to them by the defendant. Plaintiff alleged that all these individuals were injured while covered by an automobile liability insurance policy containing a New York State no-fault endorsement issued by the defendant.

Plaintiff allegedly provided health services to each of these individuals for their accident related injuries and they each assigned to plaintiff the right to receive their no-fault benefits for these services. Plaintiff contended that contrary to the requirements of Insurance Law §5106(a), defendant failed to pay the total amount due on the assigned claims leaving an aggregate unpaid balance in the amount of $105,218.78.

CPLR §603 provide as follows:

Severance and separate trials. In furtherance of convenience or to avoid prejudice the court may order a severance of claims, or may order a separate trial of any claim, or of any separate issue. The court may order the trial of any claim or issue prior to the trial of the others. [*2]

In support of its motion for severance, defendant contends that joinder is improper pursuant to CPLR §1002(a) because the thirty-six (36) joined claims do not arise from a series of transactions or occurrences and do not contain a common question of law or fact. Defendant further alleges that joinder would cause defendant prejudice and lead to jury confusion. Defendant ‘s claim of prejudice is premised on the alleged logistical difficulty of coordinating and preparing a defense for each claim between the various assigned claims representatives spread throughout the state. Defendant also claims a likelihood of jury confusion based solely on the volume of claims.

CPLR §1002(a) provides:

Persons who assert any right to relief jointly, severally, or in the alternative arising out of the same transaction or occurrence, or series of transactions or occurrences, may join in one action as plaintiffs if any common question of law or fact would arise.

Although defendant claims improper joinder, the case at bar has but one party on each side, Aviyon Medical Rehabilitation, P.C. and Allstate Insurance Company. Pursuant to the liberal pleading provisions of CPLR §601(a), a plaintiff in a complaint, or the defendant in an answer setting forth a counterclaim or cross-claim, may join as many claims as he may have against an adverse party. Thus, the plaintiff is free to join in one lawsuit as many claims as it may have against Allstate.

Here, the plaintiff has accumulated thirty-six claims against Allstate and has chosen to join them in a single action. It is well settled that joinder of claims by a plaintiff against a single defendant need not be consistent or even related (Collins v. Telcoa Intern. Corp., 283 A.D.2d 128, 131 [2nd Dept. 2001]; see also Twitchell v. McKay, 78 A.D.2d125, 127 [4th Dept. 1980]). The purpose of this policy of liberal joinder is to prevent multiplicity of suits so that the aggrieved party can obtain complete relief in one action (Saunders v. Saunders, 54 Misc.2d 1081.[Supreme Court, Special Term, Kings County 1967]; See also George Cohen Agency Inc. v. Donald S. Perlman Agency Inc., 69 A.D.2d 725 [2nd Dept. 1979]). It is also intended to reduce the caseload of the courts and its personnel and avoid unnecessary expenditure of time, money and manpower.

However, if joinder of all the claims a plaintiff may have against a defendant would achieve an undesirable result, the court is well within its discretion, and defendant may so move, to sever the claims pursuant to CPLR §603 ( Anderson v. Singh 305 AD 2d 620 [2nd Dept. 2003]; see also Broome County v. Aetna Casualty & Sur. Co. 126 A.D.2d 818 [3rd Dept. 1987]). The decision whether to grant a severance pursuant to CPLR 603 is a matter of judicial discretion which will not be disturbed on appeal absent an abuse of discretion or prejudice to a substantial right of the party seeking severance (Finning v. Niagra Mohawk Power Corp., 281 A.D.2d 844 [3rd Dept. 2001]). In the case of Hempstead General Hospital v. Liberty Mutual 134 A.D.2d 569; [2nd Dept. 1987], a healthcare provider sued an insurance carrier as assignee of twenty-nine (29) claims to recover no-fault benefits allegedly unpaid and past due. All of the assignors had received treatment at the plaintiff facility, were insured by the same defendant insurance company, and were claiming breach of the no-fault provisions of their respective policies. The Appellate Division Second Department upheld the trial court’s discretionary use of joinder in Hempstead finding that there was a common question of law. The court stated that: [*3]

“The Supreme Court did not abuse its discretion in denying the defendant’s request to sever the 29 claims. The joinder of the claims is proper under CPLR 1002(a) since the claims arise out of a uniform contract of insurance and involve the interpretation of the same no-fault provisions of the Insurance Law. While the claims involved relate to separate accidents and individuals, it has been held that multiple transactions by multiple plaintiffs “do not lose their character as a series of transactions because they occurred at different places and times extending through many months” (Akely v. Kinnicutt, 238 NY 466,474). Since the issues herein involve a common question of law, such joinder is proper and severance was appropriately denied” (Hempstead General Hospital v. Liberty Mutual supra, 134 A.D.2d at 570.

Defendant Allstate relies on Mount Sinai Hospital a/a/o Jefferson v. Motor Vehicle Accident Indemnity Corporation, 291 A.D.2d 536 [2nd Dept. 2002], for the proposition that in no fault actions with multiple assignors, the claims must be severed where there are unrelated assignors with no common contract of insurance. While the Appellate Division Second Department in Mount Sinai did indeed make such a determination, it also reversed the lower court ruling which severed the plaintiff’s third and fourth cause of action. The court found that those claims involving one assignee seeking to recover no fault benefits and involved a common question of law. The court found that those claims were properly joined pursuant to CPLR §1002.

The case at bar is virtually indistinguishable from Hempstead, but for the number of claims brought by the plaintiff. Plaintiff herein alleges that each assignor had either purchased or was covered by a contract of automobile liability insurance from the defendant and each of them assigned their rights to receive no fault benefits under that contract to the plaintiff. Thus, defendant’s reliance on the Mount Sinai decision in support of its application for severance is misplaced.

Insurance Law §5106(a) imposes upon insurers a prescribed time frame for settling bodily injury claims covered by a policy of bodily injury liability insurance. It provides in pertinent part:

Payments of first party benefits and additional first party benefits shall be made as the loss is incurred. Such benefits are overdue if not paid within thirty days after the claimant supplies proof of the fact and amount of loss sustained. If proof is not supplied as to the entire claim, the amount which is supported by proof is overdue if not paid within thirty days after such proof is supplied. All overdue payments shall bear interest at the rate of two percent per month. If a valid claim or portion was overdue, the claimant shall also be entitled to recover his attorney`s reasonable fee, for services necessarily performed in connection with securing payment of the overdue claim, subject to limitations promulgated by the superintendent in regulations.

At its core, plaintiff’s cause of action is for a breach of contract contrary to the requirements of Insurance Law §5106(a). Plaintiff’s verified complaint alleges defendant’s breach of the no fault provision of its insurance contract covering each assignor. The alleged facts provide the requisite series of transactions or voluntary course of dealings needed to support the joinder of the claims in a single action.

Defendant argues that if severance is denied, it will fall victim to undue prejudice caused [*4]by the voluminous amount of litigation which accompanies such a high number of claims. The court sees no apparent, logistical difficulties in preparing a defense to these claims such that the defendant would be prejudiced by going forward with the instant proceedings. In this age of sophisticated technology, the defendant should be able to instantly gather any files or documents necessary to the defend the action because these items are within the defendant’s custody and control. Similarly defendant should be able to communicate with or summon at will any employee needed for their defense. Moreover, it is more likely that defendant would suffer greater prejudice defending thirty-six (36) claims in potentially numerous venues when one considers the cost of separate filing fees, pre-trial preparation costs and duplication of effort to resolve a common question of law. Defendant’s allegations of prejudice are unpersuasive. The court finds much more convincing plaintiff’s simple argument that the defendant has ample resources available to muster a defense.

Defendant also argues that failure to sever the claims will lead to jury confusion. Defendant cites Doll v. Castiglione 86 A.D.2d 711 [3rd Dept. 1982] and Bender v. Underwood, 93 A.D.2d 747 [1st Dept. 1983] as authority for this contention. Both cases are distinguishable from the case at bar. In Doll, the plaintiff attempted to join two claims arising from two separate traffic accidents on separate days, months apart against two separate defendants. There was no commonality between the claims apart from the fact they both involved auto collisions and a single plaintiff. In the Bender case, six plaintiffs attempted to join in one action claiming negligence and medical malpractice against a single defendant. However, unlike the case at bar, there was no commonality among the claims other than that each had undergone a similar procedure by the same defendant. While the court acknowledged that some common issues of law or fact were present, it also found that individual issues concerning particular circumstances applicable to each plaintiff predominated so as to preclude the direction of a joint trial. The court went on to state that:

“Although it is claimed that each plaintiff underwent the same implantation process and was allegedly subjected to the same basic type of malpractice, clearly, each treatment was separate and distinct, involving different plaintiffs, each with individual medical histories” (Bender v. Underwood, supra, 93 A.D.2d at 748).

The sole link between the plaintiffs in the Bender case is that they all alleged a similar negligent practice by the same defendant. However, there was no common contract between the defendant and the several plaintiffs, nor was there even evidence that the negligence or the procedures were identical. Furthermore, the central proposition of the case was that severance was proper to avoid prejudice; jury confusion was merely an ancillary concern of the court in issuing its ruling.

This court finds that the analysis of the Appellate Division Second Department in Hempstead , upholding the joinder of twenty nine (29) claims on facts nearly identical to the case at bar, permits the discretionary joinder of plaintiff’s thirty-six (36) claims against the defendant. This court does not find that an additional seven claims will produce the undesirable effect expressed by the defendant.

Defendant also contends that if the court severs plaintiff’s complaints, they would fall below the minimum monetary jurisdictional limit of the Supreme Court and thus warrant dismissal. The New York State Supreme Court is the State’s only court of general jurisdiction, [*5]retaining nearly the entire jurisdiction conferred upon it by the constitution. This encompassing jurisdiction is limited in only two instances; those cases over which Congress has conferred exclusive jurisdiction on the Federal Courts, and actions against the State, which the New York Legislature has declared the exclusive domain of the Court of Claims. Thus no threshold minimum monetary amount exists for subject matter jurisdiction in the Supreme Court as it does in the Federal Courts. Nor is there a maximum monetary limit as is proscribed for the New York City Civil Court. And despite the fact that it is the policy of this State to have a money action brought in the lowest court jurisdiction competent to entertain it, the fact that such a forum exists does not divest the Supreme Court of its original jurisdiction [D. Siegel, New York Practice, 3rd ed. §12 (1999)] This policy is effectuated by certain penalties and incentives delineated in CPLR §8102, which states that a plaintiff is not entitled to costs:

“In an action brought in the Supreme Court in a county within the city of New York which could have been brought, except for the amount claimed, in the civil court of New York, unless he shall recover six thousand dollars or more.” CPLR §8102(1).

A similar restriction regarding disbursement of costs adheres in the Supreme Court outside of the city of New York, but with a substantially lower recovery requirement of five hundred dollars. CPLR §8102(2). In sum, the defendant’s request to dismiss is improper under any circumstances, because this court is not deprived of its subject matter jurisdiction whether the matters remain joined or are severed.

Based on the foregoing, defendant’s motion to sever and dismiss plaintiff’s complaint is denied. This constitutes the decision and order of this court.

Dated: August 2, 2004

_____________________________

J.S.C.

[*1]

Supreme Court, Kings County, July 30, 2004

APPEARANCES OF COUNSEL

Eliot Spitzer, Attorney General (Lewis A. Polishook of counsel), for defendants. Gary Tsirelman for plaintiffs.

{**5 Misc 3d at 953} OPINION OF THE COURT

Gloria Cohen Aronin, J.

In 1973, the New York State Legislature enacted the Comprehensive Motor Vehicle Insurance Reparations Act, the No-Fault Law, which is now codified as article 51 of the Insurance Law. The No-Fault Law provides a plan for compensating victims of automobile accidents for their economic losses without regard to fault or negligence. One of the purposes in enacting the No-Fault Law was to provide rapid payment for economic injury (see, Oberly v Bangs Ambulance, 96 NY2d 295, 296 [2001]).

Section 5106 (b) of the Insurance Law states that claimants injured in automobile accidents [*2]have the option of submitting any dispute involving the insurer’s liability to pay first-party benefits, or additional first-party benefits, the amount thereof, or any other matter concerning first-party benefits to arbitration pursuant to simplified procedures to be promulgated and approved by the Superintendent. Insurance Law § 5106 (c) provides for the appeals process from arbitral decisions.

Relevant Arbitration Regulations:

Pursuant to Insurance Law § 5106, the Commissioner has promulgated regulations governing optional arbitration procedures.

11 NYCRR 65-4.5 (o) (1) provides:

“The arbitrator shall be the judge of the relevance and materiality of the evidence offered, and strict conformity to legal rules of evidence shall not be necessary. The arbitrator may question any witness or party and independently raise any issue that the arbitrator deems relevant to making an award that is consistent with the Insurance Law and department regulations.”

11 NYCRR 65-4.2 (b) (3) provides:

“(i) The applicant shall submit all documents supporting the applicant’s position along with their request for arbitration. All such documents shall also be simultaneously submitted to the respondent. Following this original submission of documents, no additional documents may be submitted by the applicant other than bills or claims for ongoing benefits . . .

“(iv) Any additional written submissions may be made only at the request or with the approval of the arbitrator.”{**5 Misc 3d at 954}

The Complaint:

Plaintiffs are New York corporations that are applicants in arbitration disputes subject to the no-fault arbitration regulations. They commenced this action for a judgment declaring that 11 NYCRR 65-4.5 (o) (1) violates the Due Process Clauses of the United States and New York Constitutions and restraining arbitrators from invoking it at arbitration hearings. Plaintiffs claim that 11 NYCRR 65-4.5 (o) (1) and 65-4.2 (b) (3), taken together, prevent a claimant from submitting additional proof in response to new issues raised by arbitrators, and thus, violate the requirements of procedural due process. Plaintiffs further allege that the provisions of 11 NYCRR 65-4.2 (b) (3) (iv), which give the arbitrator discretion to accept additional written submissions, does not cure the due process violation because it gives the arbitrator discretion as to whether to accept supplemental papers, the approval is almost never granted by some arbitrators and the provision does not guarantee a right to supplemental oral argument. Finally, plaintiffs allege that although they have a right to appeal to a master arbitrator, the master arbitrators are bound by the same unconstitutional regulations.

Defendants currently move to dismiss arguing that plaintiffs cannot prove that the challenged regulation is facially unconstitutional and that plaintiffs lack standing to bring an “as applied” due process challenge because they failed to avail themselves of the procedural remedies available to them.

Due Process Considerations:

The Due Process Clauses of the United States and New York Constitutions require that ” ‘deprivation of life, liberty or property by adjudication be preceded by notice and opportunity for [*3]hearing appropriate to the nature of the case’ ” (Brancato v City of New York, 244 F Supp 2d 239, 242 [SD NY 2003], quoting Mullane v Central Hanover Bank & Trust Co., 339 US 306, 313 [1950]). The procedural safeguards required by due process are flexible and vary with the circumstances and type of proceeding (see, Goss v Lopez, 419 US 565, 578 [1975]; Matter of Vector E. Realty Corp. v Abrams, 89 AD2d 453, 456-457 [1st Dept 1982]).

Arbitration is intended to be a more efficient and less expensive alternative to dispute resolution than a formal court procedure (see, British Ins. Co. of Cayman v Water St. Ins. Co. Ltd., 93 F Supp 2d 506, 516 [SD NY 2000]). To achieve this goal, arbitrators are permitted to provide relief without observing{**5 Misc 3d at 955} all of the rules that the court would be bound to follow (id.). While it is undisputed that arbitrators must give each of the parties to the dispute an adequate opportunity to present its evidence and argument (see, Tempo Shain Corp. v Bertek, Inc., 120 F3d 16, 19 [1997]; Hoteles Condado Beach, La Concha & Convention Ctr. v Union De Tronquistas Local 901, 763 F2d 34, 39 [1st Cir 1985]), arbitrators are not required to hear all the evidence proffered by a party (see, Tempo Shain Corp. v Bertek, Inc., supra at 20). Arbitrators are afforded broad discretion in determining whether “additional evidence is necessary or would simply prolong the proceedings” (id. at 19).

As there is no statutory requirement to the contrary, due process mandates only that plaintiffs be accorded “an opportunity ‘to be heard’ ” (Matter of Scherbyn v Wayne-Finger Lakes Bd. of Coop. Educ. Servs., 77 NY2d 753, 757 [1991]) and to submit evidence supporting their position, and that opportunity is provided (see, Matter of Akshar v Mills, 249 AD2d 786 [3d Dept 1998]; Vector E. Realty, 89 AD2d at 455 [1st Dept 1982]; see also, Yonir Tech., Inc. v Duration Sys. [1992] Ltd., 244 F Supp 2d 195 [SD NY 2002]).

In addition, the no-fault regulations provide further safeguards through the appellate process. Claimants may appeal adverse decisions to master arbitrators and may further seek judicial review of those decisions to ensure that arbitration decisions comport with constitutional requirements of due process (see, Insurance Law § 5106 [c]; 11 NYCRR 65-4.10; see also, Matter of Unigard Mut. Ins. Co. v Hartford Ins. Group, 108 AD2d 917 [2d Dept 1985]; Country-Wide Ins. Co. v Harnett, 426 F Supp 1030 [SD NY 1977]). In fact, two recent arbitral decisions show that procedural safeguards are effective. In Matter of Schuster (Peerless Ins. Co.) (AAA Case No. 17 R 991 31701, Oct. 31, 2003) and Matter of Alpine Med. Servs. P.C. (Allstate Ins. Co.) (AAA Case No. 17 R 991 29054 03, Oct. 30, 2003), the master arbitrators vacated the arbitrator’s decisions on the ground that the arbitrators should have permitted additional evidence for review.

Facial Constitutional Challenge:

A facial challenge requires the court to examine the words of the regulation without reference to the defendant’s conduct. A plaintiff may prevail only if he or she can establish that no set of circumstances exists under which the regulation would be valid (see, People v Stuart, 100 NY2d 412 [2003]; Matter of Wood v Irving, 85 NY2d 238, 244-245 [1995]; People v Bright, 71 NY2d 376, {**5 Misc 3d at 956}382 [1988]; see also, United States v Salerno, 481 US 739, 745 [1987]; Village of Hoffman Estates v Flipside, Hoffman Estates, Inc., 455 US 489, 495 n 5, 497 [1982] [a successful facial challenge means that the law is ” ‘invalid in toto—and therefore incapable of any valid application’ “]; McGowan v Burstein, 71 NY2d 729, 733 [1988]).

Here, 11 NYCRR 65-4.5 (o) (1) and 65-4.2 (b) (3), taken together, authorize the arbitrator to permit supplementation of the claimant’s submissions, they can be constitutionally [*4]applied in tandem and the facial constitutional claim must be dismissed. In fact, plaintiffs admit that there are situations where arbitrators can and do permit supplemental submissions pursuant to the regulations.

As Applied Due Process Challenge:

There is no evidence in the record that plaintiffs sought review before a master arbitrator of the arbitrations in question. Thus, plaintiffs do not have the standing to assert an as applied due process challenge since they did not exhaust their administrative remedies and have shown no exception to this rule (see, Matter of Rodriguez v Coughlin, 219 AD2d 876 [4th Dept 1995]). In any event, plaintiffs do not challenge any specific application of the regulations at issue and thus have no standing to assert an as applied challenge.

Accordingly, the defendants’ motion is granted, and the complaint is dismissed.

Civil Court, Kings County

72088/03

Donald Scott Kurtz, J.

Plaintiff moves, pursuant to CPLR §3212, for an order granting summary judgment on [*2]the ground that no issue of fact exists with respect to the plaintiff’s entitlement to No-Fault benefits for transportation services provided to Rafael Fuentes (hereinafter “the patient”) who was allegedly injured in a motor vehicle accident on May 6, 2001. Plaintiff claims that it provided necessary transportation services to the patient at a total cost of $1,650, of which $700 was paid, leaving a balance of $950.

The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law by tendering sufficient evidence in admissible form to demonstrate the absence of any material issues of fact. Alvarez v. Prospect Hospital, 68 NY2d 320 (1986). In light of such a showing, if the party opposing the motion comes forward with evidence of issues of fact requiring a trial, the motion will be denied. Rebecchi v. Whitmore, 172 AD2d 600 (2d Dept 1991).

In order to establish a prima facie case of entitlement to No-Fault benefits, the plaintiff must submit proof of claim and amount of loss, together with a valid assignment. See Mary Immaculate Hosp. v. Allstate Ins. Co., 5 AD3d 742 (2d Dept 2004); Damadian MRI In Garden City, P.C. v. Windsor Group Ins., 2 Misc 3d 138(A)(App Term, 2d & 11th Jud Dists 2004); Interboro General Hosp. v. Allcity Ins. Co., 149 AD2d 569, appeal dismissed 74 NY2d 792 (1989). In support of its claim, plaintiff submits several invoices addressed to defendant. Those invoices purport to establish that plaintiff provided the patient with transportation services sixty-six times between May 8, 2001 and October 18, 2001, at a rate of $25 per trip. Plaintiff was reimbursed by defendant in the amount of $700, leaving a balance of $950 owing. Plaintiff also submits the affidavit of Leonid Zayets, an employee and/or officer of plaintiff, wherein he states that plaintiff submitted the invoices to defendant together with proper No-Fault verification forms. However, plaintiff fails to attach said forms.

The alleged accident occurred on May 6, 2001. Therefore, this case falls under the No-Fault provisions of 11 NYCRR § 65.15 in effect on that date. Under the applicable regulations, a patient is entitled to up to $25 per day for “other reasonable and necessary expenses incurred as a result of the accident,” including necessary transportation expenses. 11 NYCCR § 65.8(g)(1)(3). Although the current No-Fault regulations allow the assignment of the right to collect payment for health services only, under the older, applicable regulations, a patient may assign the right to collect payment from an insurer to either an attending physician or “other provider of service…” 11 NYCRR 65.15(j)(1). See also, 11 NYCRR 65-3.11(a).

Plaintiff submits a purported assignment which provides as follows:

In consideration of services rendered or to be rendered to the above, named patient, I hereby authorize payment directly to the Transportation provider services of any and all first party no-fault automobile insurance benefits, to which I may be entitled, for services rendered by the provider, but not to exceed the provider’s regular charges for such services.

I further understand that if said sum is not collected I will remain personally liable. [*3]

This language operates only to authorize defendant to make payment directly to plaintiff and in no way assigns to plaintiff the right to sue to collect such payment in the place of the patient. Therefore, it is not a valid assignment, but merely an authorization for direct payment. See also, Rehab Medical Care of New York, P.C. v. Travelers Ins. Co., 188 Misc 2d 176 (App Term, 2d & 11th Jud Dists 2001) (wherein a statement containing the language “I hereby assign to the provider of services and/or his/her assignees so much of my first party No-Fault automobile insurance benefits and rights…” [emphasis added] was held to be an assignment of the right to sue as well as the right to be paid.)

Although the Court need not consider defendant’s remaining arguments in opposition to the motion, the Court notes that defendant argues that plaintiff has failed to prove medical necessity of the transportation services claimed. However, defendant fails to establish that such a defense was raised in a timely denial of the plaintiff’s claims. Absent such a denial, defendant has waived such a defense. See Amaze Medical Supply Inc. v. Eagle Ins. Co., 2 Misc 3d 139(A) (App Term, 2d & 11th Jud Dists 2004); A.B. Medical Services Pllc v. CNA Ins. Co., 1 Misc 3d 137(A) (App Term 1st Dept 2004).

Accordingly, plaintiff has failed to establish a prima facie case of entitlement to judgment as a matter of law. Consequently summary judgment is denied.

The foregoing shall constitute the Decision and Order of the Court.

Dated: July 22, 2004

DONALD SCOTT KURTZ

Judge, Civil Court