SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd and 11th JUDICIAL DISTRICTS

Appeal from an order of the Civil Court of the City of New York, Kings County (Eileen Nadelson, J.), entered September 9, 2005. The order denied plaintiff’s motion for summary judgment.

Order affirmed without costs.

In this action by a provider to recover first-party no-fault benefits, plaintiff moved for summary judgment. The court below denied the motion on the ground that defendant showed that it timely denied the claims. Plaintiff appeals from the denial of its motion for summary judgment.

On appeal, defendant asserts that the affidavit of plaintiff’s corporate officer, submitted in support of the motion, failed to lay a proper foundation for the documents
annexed to plaintiff’s moving papers and that, as a result, plaintiff failed to establish a prima facie case. We agree. The affidavit submitted by plaintiff’s corporate officer was insufficient to establish that said officer possessed personal knowledge of plaintiff’s practices and procedures so as to lay a foundation for the admission, as business records, of the documents annexed to plaintiff’s moving papers. Accordingly, plaintiff failed to make a prima facie showing of its entitlement to summary judgment (see Bath Med. Supply, Inc. v Deerbrook Ins. Co., 14 Misc 3d 135[A], 2007 NY Slip Op 50179[U] [App Term, 2d & 11th Jud Dists]; Dan Med., P.C. v New York Cent. Mut. Fire Ins. Co., 14 Misc 3d 44 [App Term, 2d & 11th Jud Dists 2006]). Consequently, plaintiff’s motion for summary judgment was properly denied.

In light of the foregoing, we need not reach the parties’ remaining contentions.Weston Patterson, J.P., Golia and Belen, JJ., concur.
Decision Date: July 24, 2007

—[*1] McDonnell & Adels, P.C., Garden City, N.Y. (Martha S. Henley of counsel), for appellant.

Joseph Henig, P.C., Bellmore, N.Y., for respondent.

In an action to recover no-fault medical payments, the defendant appeals from an order of the Supreme Court, Nassau County (Lally, J.), dated November 3, 2005, which denied its motion to vacate a clerk’s judgment of the same court entered May 11, 2005, upon its failure to appear or answer, and for leave to serve a late answer.

Ordered that the order is reversed, on the law and in the exercise of discretion, with costs, the motion is granted, the clerk’s judgment is vacated, and the answer annexed to the defendant’s motion papers is deemed served on the plaintiff.

A defendant seeking to vacate a default judgment pursuant to CPLR 5015 (a) (1) must demonstrate a “reasonable excuse for its delay in appearing and answering the complaint and a meritorious defense to the action” (Eugene Di Lorenzo, Inc. v A.C. Dutton Lbr. Co., 67 NY2d 138, 141 [1986]; see New York & Presbyt. Hosp. v American Home Assur. Co., 28 AD3d 442 [2006]). The defendant demonstrated a reasonable excuse for its failure to timely appear and answer the complaint and a potentially meritorious defense. Accordingly, the Supreme Court improvidently exercised its discretion in denying the defendant’s motion to vacate the clerk’s judgment entered upon its failure to appear or answer, and for leave to serve a late answer.[*2]

Motion by the respondent on an appeal from an order of the Supreme Court, Nassau County, dated November 3, 2005, to strike portions of the appellant’s brief on the ground that those portions of the brief refer to matter dehors the record. By decision and order on motion of this Court dated June 30, 2006, the motion was held in abeyance and referred to the panel of Justices hearing the appeal for determination upon the argument or submission thereof.

Upon the papers filed in support of the motion, the papers filed in opposition thereto, and upon the submission of the appeal, it is

Ordered that the motion is denied. Crane, J.P., Spolzino, Florio and Covello, JJ., concur.

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

Epstein, Rayhill, & Frankini, Woodbury, N.Y. (James Frankini of counsel), for respondent.

In an action pursuant to Insurance Law 5106 (a) to recover no-fault benefits allegedly due under insurance contracts issued by the defendant, the plaintiffs appeal from so much of an order of the Supreme Court, Nassau County (Covello, J.), dated May 23, 2005, as denied that branch of their motion which was for summary judgment in favor of the plaintiff St. Vincent’s Hospital & Medical Center on the first cause of action.

Ordered that the order is affirmed insofar as appealed from, with one bill of costs.

The first cause of action allegedly arose out of an automobile accident on November 24, 2002, in which Rizero Delmonico (hereinafter Delmonico), the assignor of the plaintiff St. Vincent’s Hospital & Medical Center (hereinafter St. Vincent’s), was injured. From December 4, 2003, through December 16, 2003, St. Vincent’s allegedly provided medical services to Delmonico relating to the injuries sustained in the accident. At the time of the accident, the defendant, Nationwide Mutual Insurance Company, insured Delmonico under an automobile policy which contained a New York State no-fault endorsement.

On March 5, 2004, St. Vincent’s, as Delmonico’s assignee, sent by certified mail to the defendant, inter alia, a hospital facility form (NYS form N-F 5) for payment of its hospital bill in the principal sum of $42,486.21. The N-F 5 form was received by the defendant on March 8, [*2]2004. In the first cause of action, as is relevant here, St. Vincent’s sought to recover the sum of $42,486.21. The plaintiffs moved for summary judgment thereon arguing that the defendant failed to provide to St. Vincent’s a denial of claim form (NYS form N-F 10) within 30 days as required by Insurance Law 5106 (a) and 11 NYCRR former 65.15 (g). In opposition to St. Vincent’s prima facie demonstration of entitlement to judgment as a matter of law on the first cause of action, the defendant submitted, inter alia, a copy of the N-F 10 form mailed on March 22, 2004, which stated that the denial was based upon the results of an “Independent Medical Exam” (hereinafter IME) but which did not annex a copy of the IME report or otherwise explain the basis for the denial.

The Supreme Court correctly denied that branch of the motion which was for summary judgment in favor of St. Vincent’s on the first cause of action. The Supreme Court correctly concluded that the defendant issued a timely denial of claim on the prescribed N-F 10 form (see Insurance Law § 5106 [a]; 11 NYCRR former 65.15 [g] [3]; 11 NYCRR 65-3.4 [c] [11]; cf. New York & Presbyt. Hosp. v AIU Ins. Co., 20 AD3d 515 [2005]; Bonetti v Integon Natl. Ins. Co., 269 AD2d 413 [2000]), and, accordingly, raised a triable issue of fact on the first cause of action (see Dandrea v Hertz, 23 AD3d 332 [2005]).

We decline to consider the issue of the adequacy of the defendant’s denial of claim, and specifically, St. Vincent’s argument that the N-F 10 form failed to adequately set forth the reason that the no-fault claim was denied. St. Vincent’s raised this issue for the first time in its reply papers, and there is no evidence that the defendant had an opportunity to submit a surreply (see Guarneri v St. John, 18 AD3d 813 [2005]; Matter of Hayden v County of Nassau, 16 AD3d 415 [2005]). Crane, J.P., Rivera, Fisher and Dillon, JJ., concur.

Nassau Dist Ct

01211/03

APPEARANCES:

Jason Tenenbaum, Esq.

Picciano & Scahill, P.C.

For Defendants

900 Merchants Concourse

Wesbury, NY 11559

W. Matthew Iler, Esq.

Israel, Israel & Purdy, LLP

For Plaintiff

11 Grace Avenue, Suite 111

Great Neck, NY 11021

Howard S. Miller, J.

In this relatively minor no-fault action, Defendant moves (by ordinary notice of motion dated March 26, 2007) for an order staying Plaintiff’s enforcement of a judgment based on non-compliance with a stipulation of settlement. The stipulation required Defendant to pay Plaintiff the sum of $2,633.37 within thirty days of its execution. In the event of default, the stipulation further provided for Plaintiff’s entry of judgment for the full amount demanded in the complaint. The amount demanded in the complaint, with statutory interest and attorneys’ fees, was $5,101.72.

Defendant admittedly failed to make payment within thirty days, and allegedly attempted to make payment a few days later. On Plaintiff’s application under the stipulation, the Clerk entered judgment on February 26, 2007, for $5,211.72, which also included costs. Defendant now argues that entry of judgment for the full amount of the complaint constitutes an unconscionable penalty for a few days’ delay, and that Plaintiff’s remedy is limited to a few days of statutory interest on the settlement amount. The Court disagrees.

To begin, Defendant has invoked the wrong procedure. Once a judgment has been entered, relief from that judgment is available only under CPLR 5015, with motions to be made by order to show cause. Defendant utilized an ordinary notice of motion. For that reason alone, the motion must be denied.

In addition to its procedural defect, however, the motion must also be denied on its merits. Defendant’s motion papers contain extensive citation to a proposition with which the Court agrees. “Penalty” clauses in contracts are unenforceable. All of the cases Defendant cites in support of that proposition are off the main point. The real question here is whether a stipulation of settlement in a judicial action, on the advice of counsel, is subject to the same rules as an ordinary contract. The Court believes that it is not.

Analysis begins with the proposition that a party may always consent to the entry of judgment as a way of terminating a litigation, for any reason. The consideration is the termination of the litigation. It is not considered a “penalty.” A party may simply conclude that the merits of its defense (or lack thereof) do not warrant the time and expense of further litigation. The courts encourage parties to stipulate the entry of judgment in such circumstances to avoid a waste of judicial time on defenses that are frivolous or essentially useless. When parties are represented by counsel, there is no need for a public policy concern of one party taking unfair advantage of another.

A stipulation of settlement such as the one at bar is merely a variant of a [*2]judgment on consent. The defendant consents to entry of judgment for the full amount of the complaint, subject to a condition subsequent that payment of a reduced sum within a time certain will satisfy the obligation. Timely satisfaction of the condition is the bargained-for consideration for the reduced sum.

Defendant’s argument turns the stipulation inside out. Correctly construed, a stipulation of settlement such as the one at bar is not a contract substituting a new obligation to pay a reduced sum, with a penalty clause attached for failure to comply. That is clear from the fact that this action continues until the settlement is concluded. If the parties had intended the stipulation to constitute a new obligation, they should have provided for discontinuance of this action upon execution of the stipulation.

The Court considers that ABCO Refrigeration Supply Corp. v Designs by Keiser Corp., 239 AD2d 165, 657 NYS2d 638 (1st Dept 1997), is directly on point in this matter. As here, that case involved a stipulation in an ongoing action where the proposed judgment was essentially for the amount demanded in the complaint, the parties expressed no intent that the original contract would be supplanted, and there was no fraud, collusion, mistake or accident alleged. The First Department held that such stipulations in such cases are “favored.”

To the contrary, Defendant cites two Second Department holdings, Quaker Oats Company v Reilly, 274 AD2d 565, 711 NYS2d 498 (2nd Dept 2000), and Zervakis v Kyreakedes, 257 AD2d 619, 684 NYS2d 291 (2nd Dept 1999). In Quaker Oats, the Second Department contrasted its holding with ABCO, supra , for the obvious reason that Quaker Oats did not involve a stipulation in an ongoing judicial action. For that reason, the Quaker Oats stipulation was governed by the usual rules about penalty clauses in contracts, and the Quaker Oats case is thus distinguishable from the one at bar.

The Zervakis case, supra , is somewhat more problematic in that it did involve an ongoing judicial action. In that action, the plaintiff sought to enter judgment for $100,000, minus amounts paid, when the defendant timely paid $36,000 out of the agreed $40,000 settlement, but withheld the $4,000 balance until a dispute had been adjudicated. It is clear from the Second Department’s opinion that the Court focused on the gross disparity between the unpaid amount and the amount of the proposed judgment. Apparently the Second Department found that disparity unconscionable. The Second Department’s opinion does not disclose the relationship between the $100,000 figure and the amount demanded in the complaint. [*3]

It may be that Zervakis is distinguishable from ABCO on the ground that the proposed Zervakis judgment was for more than the amount in the complaint, or perhaps Zervakis should be considered sui generis. Even if Zervakis is on point and represents good law ^[FN1] in this Department, however, the Court finds Zervakis to be distinguishable from the case at bar because there is no such gross disparity here. The difference between the settlement amount and the proposed judgment is only $2,578. Regardless of the percentages involved, that amount does not shock the conscience of the Court, particularly in view of the fact that a substantial portion of that $2,578 has probably already been spent on the attorneys’ fees required for this motion.

The motion is denied. There is no stay in effect against enforcement of the judgment.

So Ordered.

Footnotes

Footnote 1:Which, if true, is something that this Court would respectfully urge the Second Department to reconsider, given the potential for abuse that it invites, with a consequent disincentive for plaintiffs to agree to settlements. Plaintiffs usually agree to settlements in reduced amounts because they think they are guaranteed an end to litigation. If the settlement is merely a prelude to further litigation with a smaller payout at the end, what is the point, from a plaintiff’s point of view, in agreeing to the settlement? That is particularly true in cases as small as this one.

[*1]

Supreme Court, Appellate Term, Second Department, July 13, 2007

APPEARANCES OF COUNSEL

Freiberg & Peck, LLP, New York City (Yilo J. Kang of counsel), for appellant. Dash & Burns, Jericho (Robert E. Dash of counsel), for respondent.

{**17 Misc 3d at 14} OPINION OF THE COURT

Memorandum.

Order, insofar as appealed from, modified by granting plaintiff’s cross motion to the extent of remanding the matter to the court below for entry of an appropriate amended judgment in accordance with the decision herein; as so modified, affirmed without costs.

In this action by a provider to recover assigned first-party no-fault benefits, the court granted plaintiff’s motion for partial summary judgment and plaintiff was directed to settle the judgment. The judgment entered on August 3, 2004 awarded plaintiff the amount sought plus attorney’s fees and costs. The judgment further stated that if plaintiff did not receive the entire amount of the judgment within five days, plaintiff would also be entitled to receive interest from May 4, 2000, the date of the first denial of claim form at issue. More than five days after the judgment was entered, defendant paid plaintiff the entire amount without including any interest. Plaintiff demanded that defendant also pay interest calculated from May 4, 2000, but defendant asserted that the portion of the judgment providing for interest from May 4, 2000 was improper. Defendant moved, inter alia, for an order modifying the judgment to “reflect the appropriate [*2]monetary award to plaintiff” and to mark the judgment, as modified, satisfied. Plaintiff cross-moved, in effect, for an order modifying the judgment to provide for an award of interest, pursuant to Insurance Law § 5106 (a), from May 4, 2000. The court entered an order which, insofar as appealed from, awarded plaintiff interest pursuant to Insurance Law § 5106 (a) commencing on May 4, 2000.

Insurers are required either to pay or deny a claim for no-fault automobile insurance benefits within 30 days of receiving an applicant’s proof of claim (see 11 NYCRR former 65.15 [g] [3], now 11 NYCRR 65-3.8 [c]; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 278 [1997]). An insurer which fails to timely pay said benefits “is required to pay interest at the rate of two percent per month on the claim for the period commencing 30 days after the claim was presented to the{**17 Misc 3d at 15} defendant for payment until the date the claim was or is paid” (New York & Presbyt. Hosp. v Allstate Ins. Co., 30 AD3d 492, 494 [2006] [citations and internal quotation marks omitted]; see Insurance Law § 5106 [a]). However, pursuant to the Insurance Department regulations, accrual of interest is tolled where the claimant fails to submit the claim to arbitration or commence an action within 30 days after receipt of the denial of claim, and accrual of interest does not resume until either action is taken (see 11 NYCRR former 65.15 [h] [3], now 11 NYCRR 65-3.9 [c]; Massapequa Gen. Hosp. v Travelers Ins. Co., 104 AD2d 638, 640 [1984]; East Acupuncture, P.C. v Allstate Ins. Co., 15 Misc 3d 104 [App Term, 2d & 11th Jud Dists 2007]).

Accordingly, in the present case, because the claims were not paid and the denials were untimely, interest began to accrue 30 days after the dates on which defendant received the claims (Insurance Law § 5106 [a]; East Acupuncture, P.C. v Allstate Ins. Co., 15 Misc 3d 104 [2007], supra). However, since it is undisputed that plaintiff did not commence this action within 30 days after it received the denials issued by defendant with respect to plaintiff’s claims, the accrual of interest was tolled upon plaintiff’s receipt of the denials of claim and interest did not resume accruing until plaintiff commenced the instant action (see 11 NYCRR former 65.15 [h] [3], now 11 NYCRR 65-3.9 [c]; East Acupuncture, P.C. v Allstate Ins. Co., 15 Misc 3d 104 [2007], supra), and it continued to accrue, pursuant to Insurance Law § 5106 (a), until the judgment was entered on August 3, 2004. A review of the record reveals that the unpaid claims of $1,768.41, $420.40 and $407.80, which were the subject of this action, were received by defendant on April 3, 2000, May 19, 2000 and June 12, 2000, respectively, and that the corresponding denial of claim forms were received by plaintiff on May 9, 2000, July 25, 2000 and October 11, 2000.

Plaintiff’s contention, that defendant’s partial payment was an acknowledgment of the validity of the judgment, is without merit. By seeking an order deeming the judgment satisfied, defendant demonstrated that it intended that its payment satisfy the judgment and not be a partial payment.

In light of the foregoing, the matter must be remanded to the court below for entry of an appropriate amended judgment.

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

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd and 11th JUDICIAL DISTRICTS

Appeal from a judgment of the Civil Court of the City of New York, Kings County (Arlene Bluth, J.), entered March 2, 2006. The judgment denied the petition to vacate the master arbitrator’s award and dismissed the proceeding.

Judgment modified by adding thereto a provision confirming the master arbitrator’s award; as so modified, affirmed without costs.

In Matter of Petrofsky (Allstate Ins. Co.) (54 NY2d 207, 211 [1981]), the Court of Appeals examined the scope of a master arbitrator’s powers in reviewing the decision of an arbitrator and stated that the master arbitrator was “limited to reviewing on the
basis of the limited grounds enumerated by article 75 (CPLR 7511; Siegel, New York Practice, § 602, pp 865-866) and to reviewing whether the arbitrator acted in a manner that was arbitrary and capricious, irrational or without a plausible basis.” Moreover, while the regulations broadened the master arbitrator’s review to include questions of law which were not normally reviewable under CPLR article 75, the master arbitrator was “expressly precluded from reviewing factual or procedural errors” (id.).

The Appellate Division, Second Department, in applying Petrofsky, has held that if the arbitrator’s determination is challenged based upon an alleged factual error, the master arbitrator must uphold the determination if it has a rational basis. Similarly, if a master arbitrator determines that the arbitrator incorrectly applied substantive law, that determination may not be set aside unless it is irrational. The master arbitrator’s determination of the law need not be correct; mere errors of law are insufficient to warrant setting aside the master arbitrator’s award, and on questions of substantive law, the determination should be upheld if there is a rational [*2]basis for it (see Matter of Liberty Mut. Ins. Co. v Spine Americare Med., 294 AD2d 574, 576-577 [2002]). The court has recently stated that an award will be upheld where it was “not arbitrary, capricious or irrational (see CPLR 7511 [b] [1] [iii])” and where it has not been shown that the arbitrator acted so impartially or improperly as to prejudice the rights of one of
the parties or the integrity of the arbitration process (Matter of Mounier v American Tr. Ins. Co., 36 AD3d 617 [2007]).

Upon a review of the record, we find that there was a rational basis for the determination of the master arbitrator upholding the arbitrator’s award which denied petitioner’s claims for first-party no-fault benefits. Accordingly, the court below properly denied the petition to vacate the master arbitrator’s award. However, upon denying the petition, the court was required, pursuant to CPLR 7511 (e), to confirm the award (see Matter of Exclusive Med. & Diagnostic v Government Empls. Ins. Co., 306 AD2d 476 [2003]).

We further note that the record reveals that the petition was timely filed (CPLR
7511 [a]).

Weston Patterson, J.P., Golia and Belen, JJ., concur.
Decision Date: July 12, 2007