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, Queens County (Valerie Brathwaite Nelson, J.), entered December 27, 2004. The order denied plaintiff’s motion for summary judgment and granted defendant’s cross motion for summary judgment dismissing the complaint.

Order modified by providing that defendant’s cross motion for summary judgment is denied, plaintiff’s motion for summary judgment is granted to the extent of awarding it partial summary judgment in the sum of $2,133, and matter remanded to the court below for a calculation of statutory interest and an assessment of attorney’s fees thereon and for all further proceedings on the remaining portion of the claim; as so modified, affirmed without costs.

Plaintiff commenced this action to recover assigned first-party no-fault benefits for medical supplies furnished to its assignor. Plaintiff moved for summary judgment and defendant cross-moved for summary judgment dismissing the complaint. By order entered December 27, 2004, the court below denied plaintiff’s motion and granted defendant’s cross motion for summary judgment dismissing the complaint.

In an action to recover first-party no-fault benefits for medical supplies furnished to its assignor, a provider establishes a prima facie entitlement to summary judgment by proof that it submitted the statutory claim forms, setting forth the fact and the amounts of the losses sustained, and that payment of no-fault benefits was overdue (see Insurance Law § 5106 [a]; Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742 [2004]; Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U] [App Term, 2d & 11th Jud Dists]). While the affidavit submitted by plaintiff is insufficient to establish the mailing of the appended claim [*2]forms to defendant, the deficiency in plaintiff’s moving papers concerning proof of its submission of the claims was cured by defendant’s denial of claim forms which adequately established that plaintiff sent, and that defendant received, the claim forms at issue (see Careplus Med. Supply Inc. v State-Wide Ins. Co., 11 Misc 3d 29 [App Term, 2d & 11th Jud Dists 2005]; A.B. Med. Servs. PLLC v Prudential Prop. & Cas. Ins. Co., 7 Misc 3d 14 [App Term, 2d & 11th Jud Dists 2005]). Thus, plaintiff established a prima facie case entitling it to summary judgment. However, we find that since the prescription for plaintiff’s assignor did not mention a “TENS accessory kit,” for which plaintiff seeks $110 in its claim for the sum of $1,172, plaintiff failed to establish its prima facie entitlement to summary judgment therefor (see Adam’s Med. Supplies v Windsor Group Ins. Co., 3 Misc 3d 126[A], 2004 NY Slip Op 50310[U] [App Term, 2d & 11th Jud Dists]). The burden then shifted to defendant to establish a triable issue of fact with respect to the $1,071 claim and the $1,062 balance of its $1,172 claim (see Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]).

Defendant asserted that the aforementioned claims were timely denied based on a peer review which after it requested certain verification from plaintiff concluded that the supplies allegedly provided were not medically necessary. However, since defendant acknowledged in both denial of claim forms that it received final verification from plaintiff on July 18, 2003 and both denial of claim forms were dated August 26, 2003, defendant failed to timely deny plaintiff’s claim within the statutorily prescribed 30-day period (11 NYCRR 65-3.8 [c]). Accordingly, defendant’s untimely denials of the claims precluded defenses to the action, with exceptions not herein relevant, and warranted the granting of summary judgment in plaintiff’s favor (see Insurance Law § 5106 [a]; 11 NYCRR 65-3.8 [c]; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282 [1997]).

In view of the foregoing, defendant’s cross motion for summary judgment is denied, plaintiff’s motion for summary judgment is granted to the extent of awarding it partial summary judgment in the sum of $2,133, and matter remanded to the court below for a calculation of statutory interest and an assessment of attorney’s fees thereon pursuant to Insurance Law § 5106 (a) and the regulations promulgated thereunder and for all further proceedings on the remaining portion of the claim.

Rios and Belen, JJ., concur.

Golia, J.P., concurs in a separate memorandum.

Golia, J.P., concurs with the result only, in the following memorandum:

I am constrained to agree with the ultimate disposition in the decision reached by the majority. I, however, wish to note that I do not agree with certain propositions of law set forth in cases cited therein which are inconsistent with my prior expressed positions and generally contrary to my views. [*3]
Decision Date: June 15, 2006

Nassau District Court

28583/04

Randy Sue Marber, J.

Plaintiff moves for an order pursuant to CPLR §3212 awarding the plaintiff summary judgment for $7,567.55, the amount demanded in the complaint, on the grounds that defendant failed to pay or deny its claims within thirty days, and that defendant is precluded from offering any evidence at time of trial in accordance with an April 21, 2005 stipulation. Defendant opposes the motion and cross-moves for summary judgment on the ground that plaintiff failed to rebut defendant’s proof that services were not medically necessary, plaintiff’s failure to cooperate and where the services rendered constitute concurrent care, which cross-motion plaintiff opposes. Defendant also raises the issue of fraud.

Plaintiffs’ assignor, Dian Pringle, allegedly was involved in a motor vehicle accident on March 8, 2004. On multiple dates from March 9, 2004 through July 30, 2004 plaintiff rendered acupuncture “health services” to its assignor in the total amount of $7,567.55. All of said claims were timely submitted and defendant has acknowledged receipt of same. By certified letters dated March 26, 2003[sic] and April 26, 2004, defendant requested that Ahmed Erfan Halima, M.D. as owner of plaintiff, submit to an examination under oath with regard to the submitted claims. An Examination Under Oath of Dr. Ahmed Halima was eventually conducted on July 23, 2004. Plaintiff’s claims were subsequently all denied on September 16, 2004 for the stated reasons:

Your records and testimony indicate that you consistently provide (a) physical therapy and chiropractic services to patients who are receiving services for the [*2]same conditions during the same periods at the same location, without regard to the medical necessity of the services; and (b) diagnostic tests such as electrodiagnostic tests, range of motion test and Current Perception Threshold tests that are of no diagnostic value and/or are not medically necessary. Therefore, your claims are denied for two reasons. First you have materially misrepresented that your services were rendered because they were medically necessary, when in fact they were not. Second your services constitute concurrent care, and you have failed to establish which specialty is most relevant to any patient’s diagnosis.

While concurrent care is not permitted under the Workers Compensation Law, contrary to defendant’s contention listed in its Denial of Claim form, case law has considered it under the No-Fault Law (see, Universal Acupuncture Pain Servs PC v. Lumbermens Mut. Cas. Co., 195 Misc 2d 352, 195 Misc 2d 352, 758 NYS2d 795 [Civ Ct Queens County].

The Court has reviewed defendant’s forty-two (42) Denial of Claim forms, all dated September 14, 2004 containing the above reason for denial, and ascertain that each form contains March 26, 2004 as the “date final verification requested” and July 23, 2004 as the “date final verification received”. It does not appear that defendant renewed its request for an EUO as “additional verification” on receipt of each of the 42 claims from plaintiff. Further, to be timely, the Denial of Claim form had to have been issued within 30 days of the holding of the EUO. As stated by the Appellate Term, 9th and 10th Districts in the case of S&M Supply Inc. v. State Farm, 4 Misc 3d 130A, 791 NYS2d 873,

EUOs are also subject to the same 30-day scheduling period required of independent medical examinations (11 NYCRR 65-3.5[d]), and to virtually identical scheduling and reimbursement conditions imposed on medical examinations (11 NYCRR 65-3.5[e]). Similarly, where an EUO, as a medical examination, has been requested as verification, it is deemed to have been received by the insurer on the day the examination was performed (11 NYCRR 65-3.8[a][1]).

Therefore, defendant’s denials of plaintiff’s claims on September 14, 2004, 53 days after the EUO was conducted on July 23, 2004, were not timely. By its failure to timely issue its Denial of Claim forms, defendant is precluded from proving lack of medical necessity of the services, as well as concurrent care, the reasons given in its Denials.

Plaintiff instituted the within lawsuit by service of a summons and complaint upon defendant on November 17, 2004. Defendant interposed its Answer on December 16, 2004. Plaintiff annexed to its moving papers, an affidavit of service by mail which states that on January 31, 2005, plaintiff served defendant with its Demand for a Verified Bill of Particulars as to the Affirmative Defenses, plaintiff’s Demand for Experts and Notice for Discovery and Inspection.

Plaintiff asserts that on April 21, 2005, the parties entered into a stipulation, which was [*3]not “so ordered” wherein it was agreed that defendant would respond to plaintiff’s written interrogatories and Demand for Discovery and Inspection within 60 days of the date of the stipulation, and in the event of defendant’s failure to respond to plaintiff’s demands, Judgment will be entered against defendant upon the filing of an affidavit of non-compliance. The stipulation likewise states: “Furthermore, plaintiff agrees to fully respond to defendant’s discovery demands or same‘ will be precluded.”(emphasis added) Defendant failed to so respond within said 60 days and plaintiff brought the within motion. Copies of plaintiff’s Demands are annexed to its moving papers. No affidavit of service of, or copy of purported written interrogatories is annexed. Said affidavit of service also includes that it served plaintiff’s Response to Defendant’s Demand for Bill of Particulars, Response to Notice for Discovery & Inspection, Response to Demand for Expert Discovery and Response to Demand for Proof of Filing, Index Number. Copies of said Responses are not included. Defendant, however, has raised no objection with regard to its receipt of same.

As stated by the Court of Appeals in In re Petition of New York L.& W.R.R. Co., 98 NY 447, 453 (1885), which case is still cited today:

Parties by their stipulations may in many ways make the law for any legal proceeding to which they are parties, which not only binds them, but which the courts are bound to enforce. They may stipulate away statutory, and even constitutional rights. They may stipulate for shorter limitations of time for bringing actions for the breach of contracts than are prescribed by the statutes, such limitations being frequently found in insurance policies. They may stipulate that the decision of a court shall be final, and thus waive the right of appeal; and all such stipulations not unreasonable, not against good morals, or sound public policy, have been and will be enforced.

(See also, Morse v. Morse Dry Dock & Repair Co., 249 AD 764, 291 NYS 995 [2nd Dept 1936]; Tepper v. Tannenbaum, 83 AD2d 541, 441 NYS2d 470 [1st Dept 1981]; Celtic Medical P.C. v. Liberty Mutual Insurance Co. 11 Misc 3d 1092[A], 2006 NY Slip Op 50825U, [Nassau Dist Ct, 2006]).

The stipulation in this case is not an unreasonable one. Nothing contained therein contravenes good morals or sound public policy. Accordingly, that portion of plaintiff’s motion seeking an order precluding defendant from offering any evidence is granted only with regard to information demanded in its discovery notices not previously provided by defendant, or already in plaintiff’s possession.

The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering evidence to demonstrate the absence of any material issues of fact. Failure to make such prima facie showing requires denial of the motion, regardless of the sufficiency of the opposing papers (Alvarez v. Prospect Hospital, 68 NY2d 320 [1986]; Winegrad v. New York University Medical Center, 64 NY2d 851 [1985]) and even in the absence of opposing papers. A motion for summary judgment shall be supported by an “affidavit [*4]by a person having personal knowledge of the facts”, shall recite all the material facts and it shall show that there is no defense to the cause of action or that the defenses have no merit (CPLR §3212[b]). Once the moving party meets his burden, the burden then shifts to the non-moving party to allege such evidentiary facts that raise a genuine and material controversy as to the issue(s) before the Court. Where the opposing party fails to meet his burden and the Court finds no triable issues, the motion will be granted (Iandoli v. Lange, 35 AD2d 793 [1st Dept 1970]). Where the Court determines that a triable issue of fact exists, denial of the motion is the proper course of action (Moskowitz v. Garlock, 23 AD2d 943 [3d Dept 1965])

Plaintiff bases its lawsuit on the ground that it timely submitted its claim forms to defendant which neither paid nor denied them within thirty days in accordance with the Rules and Regulations governing the payment of no-fault benefits (see Insurance Law §5106[a]; Mary Immaculate Hosp. v. Allstate Ins. Co., 5 AD3d 742, 774 NYS2d 564 [2004]; A.B. Med. Servs. PLLC v. Lumbermens Mut. Cas. Co., 4 Misc 3d 86, 781 NYS2d 818 [App Term, 2d & 11th Jud Dists 2004]; Amaze Med. Supply v. Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U] [App Term, 2d & 11th Jud Dists]). The Court finds that plaintiff has established its prima facie case.

In addition to the reasons for denial set forth in its Denial of Claim forms as indicated above, in its opposition papers, defendant raises for the first time that the proof of claim forms submitted by plaintiff are improper. Having failed to include this reason in a timely denial of the claim, however, defendant is precluded from raising this defense (see Presbyterian Hosp. in City of NY v. Maryland Cas. Co., 90 NY2d 274, 282, 683 NE2d 1, 660 NYS2d 536 [1997]).

Lastly, defendant also raises questions as to whether plaintiff is fraudulently incorporated in violation of Business Corporation Law §1507 and whether the actual profits from the practice are channeled to the non-physician management company to which it pays a set fee of $40,000 to $43,000 a month. Defendant bases its fraud defense upon the unsigned but duly certified deposition of the plaintiff’s owner, Dr. Ahmed Halima. An unsigned but certified deposition transcript of a party can be used by the opposing party as an admission in support of a summary judgment motion (Newell Co. v Rice, 236 AD2d 843, 844, lv denied 90 NY2d 807). Dr. Halima testified that the management company provides two administrative support persons as well as a receptionist, a technician and two billing persons; it owns the EMG and NCV testing machine as well as CPT testing equipment. The management company is also on the lease for the premises. His testimony indicates that he does not know who prepares the bills or what form is used for billing, and that he knew little about what is actually being performed at his facility. It is well settled that despite an untimely denial, an insurer is not precluded from raising the issue of coverage such as a breach of a condition precedent of the terms of the insurance contract (Presbyterian Hosp. in the City of New York v. Maryland Cas. Co., 90 NY2d 274, 683 NE2d 1, 660 NYS2d 536. [*5]

In addition, the Court notes that proper licensing of a medical provider is a condition precedent to payment (Valley Physical Med. and Rehab v. NY Central Mutual Ins., 193 Misc 2d 675, 753 NYS2d 289 (App. Term 2nd Dept 2002). The Court of Appeals has ruled that under New York State’s No-Fault Insurance Laws, insurance carriers may withhold payment for medical services provided by fraudulently incorporated enterprises (State Farm Automobile Ins. Co. v. Robert Mallela, 4 NY3d 313, 827 NE2d 758, 794 NYS2d 700). The Mallela III Court followed the Superintendent of Insurance’s promulgation prohibiting the reimbursement of benefits on behalf of unlicensed or fraudulently licensed providers (11 NYCRR 65-3.16[a][12]) (effective April 4, 2002). Accordingly, Mallela III ruled that medical providers fraudulently incorporated are therefore not entitled to reimbursement. While defendant has failed to provide sufficient proof of fraudulent incorporation to award it summary judgment, the question of the fraudulent incorporation raises questions of fact which would preclude summary judgment to the plaintiff.

Accordingly, both plaintiff’s motion and defendant’s cross-motion for summary judgment are denied and that portion of plaintiff’s motion seeking an order precluding defendant from offering any evidence is granted only with regard to information demanded in its discovery notices not previously provided by defendant, or already in plaintiff’s possession.

So Ordered:

DISTRICT COURT JUDGE

Dated:June 13, 2006

CC: Belesi & Conroy, P.C.

Melli, Guerin & Wall, P.C.

Decided on June 13, 2006

SUPREME COURT OF THE STATE OF NEW YORK

Joseph Henig, P.C., Bellmore, N.Y. (Mark Green of counsel), for
appellants.
McDonnell & Adels, P.C., Garden City, N.Y. (Martha S.
Henley of counsel), for respondent.

In an action to recover no-fault medical payments, the plaintiffs appeal from so much of an order of the Supreme Court, Nassau County (McCarty III, J.), dated February 18, 2005, as denied that branch of their motion which was for summary judgment on the second cause of action, granted that branch of the defendant’s cross motion which was for summary judgment dismissing the third cause of action, and, upon granting that branch of their motion which was for summary judgment on the fourth cause of action, awarded interest only until the date of the determination and provided that the fourth cause of action “shall not bear interest until entry of the judgment disposing of the action.”

ORDERED that the order is modified, on the law, by (1) deleting the provision thereof denying that branch of the plaintiffs’ motion which was for summary judgment on the second cause of action and substituting therefor a provision granting that branch of the motion, and (2) deleting the provisions thereof which, upon granting that branch of the plaintiffs’ motion which was for summary judgment on the fourth cause of action, awarded interest only until the date of the Supreme Court’s determination, and provided that the fourth cause of action shall not bear interest until entry of the judgment disposing of the action, and substituting therefor a provision awarding interest on the fourth cause of action for the period commencing 30 days after each claim was [*2]presented to the defendant until the date the claim was paid; as so modified, the order is affirmed insofar as appealed from, with costs to the plaintiffs, and the matter is remitted to the Supreme Court, Nassau County, for further proceedings in accordance herewith.

Pursuant to Insurance Law § 5106(a) and 11 NYCRR 65-3.5, insurers are required either to pay or deny a claim for no-fault automobile insurance benefits within 30 days from the date the applicant supplies proof of claim (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 278). Failure to comply with the 30-day limit results in the claim becoming overdue, which could result in the waiver of the insurer’s defenses (id.). The one exception to this rule is if the insurer requests medical verification (see Presbyterian Hosp. in City of N.Y. v Aetna Cas. & Sur. Co., 233 AD2d 431, 432).

The Supreme Court properly granted that branch of the defendant’s motion which was for summary judgment dismissing the third cause of action. The defendant established its prima facie entitlement to judgment as a matter of law on the third cause of action by submitting an affidavit of one of its claims representatives, which demonstrated that the defendant requested medical verification of the plaintiffs’ claim within 30 days of receiving notice of the claim, and that it never received such verification. The plaintiffs failed to raise a triable issue of fact in opposition (see Zuckerman v City of New York, 49 NY2d 557, 562).

However, the Supreme Court erred in denying that branch of the plaintiffs’ motion which was for summary judgment on the second cause of action. The plaintiffs established their prima facie entitlement to judgment as a matter of law on the second cause of action by submitting a hospital bill with a signed certified mail receipt and by submitting the affidavit of a third-party biller, who testified that he billed the defendant for the subject medical treatment, and that “[t]he defendant failed to either pay the entire claim or to issue a Denial of Claim Form.”

In opposition, the defendant produced a denial of claim form dated within 30 days from their receipt of the plaintiff’s claim. However, the defendant failed to supply any evidence that this form had been timely transmitted to the plaintiff, and therefore failed to raise a triable issue of fact (see Zuckerman v City of New York, supra).

The Supreme Court further erred in awarding interest on the fourth cause of action only until the date of the determination, instead of the date the claim was paid. An insurer, such as the defendant, that is held liable for failure to pay no-fault insurance benefits is required to pay interest at the rate of 2% per month on the claim for “the period commencing 30 days after the claim was presented to the defendant for payment until the date the claim was or is paid” (Hempstead Gen. Hosp. v Insurance Co. of N. Am., 208 AD2d 501; see Insurance Law § 5106[a]). Accordingly, the matter is remitted to the Supreme Court, Nassau County, for calculation of the interest accrued on the second and fourth causes of action for the period commencing 30 days after each claim was presented to the defendant until the date the claim was paid, and for the entry of an appropriate judgment.
ADAMS, J.P., SANTUCCI, LUNN and DILLON, JJ., concur.

ENTER:

James Edward Pelzer

Clerk of the Court

[*1]

Argued April 27, 2006; decided June 13, 2006

Matter of New York Cent. Mut. Fire Ins. Co. v Aguirre, 20 AD3d 538, reversed.

APPEARANCES OF COUNSEL

Mitchell Dranow, Mineola, for appellants.

Cullen and Dykman LLP, Brooklyn (Joseph Miller, Jeffrey C. Fegan and Jean-Pierre van Lent of counsel), for respondent.

{**7 NY3d at 773} OPINION OF THE COURT

Memorandum.

The order of the Appellate Division should be reversed, with costs, and the petition to stay arbitration dismissed.

Jorge Aguirre and Rosa and Amanda Alzate were allegedly injured on August 4, 2002 while sitting in a car owned by F.A. Rodriguez, which was parked on Northern Boulevard in [*2]Queens, New York. Their injuries occurred when another car was struck and pushed into the rear bumper of the Rodriguez vehicle by a car operated by an unidentified hit-and-run driver.

New York Central Mutual Fire Insurance Company had issued an automobile insurance policy to Rodriguez, which included Supplementary Uninsured/Underinsured Motorists (SUM) coverage with bodily injury limits of $25,000 per person and $50,000 per accident. The policy’s SUM endorsement set forth several conditions, including the following:

“Notice and Proof of Claim. As soon as practicable, the insured or other person making claim shall give us written notice of claim under this SUM coverage.

“As soon as practicable after our written request, the insured or other person making claim shall give us written proof of claim, under oath if required, including full particulars of the nature and extent of injuries, treatment, and other details we need to determine the SUM amount payable.

“The insured and every other person making claim hereunder shall, as may reasonably be required, submit to examinations under oath by any person we name and subscribe the same. Proof of claim shall be made upon forms we furnish unless we fail to furnish such forms within 15 days after receiving notice of claim” (emphasis added).

On August 15, 2002, an attorney representing Aguirre and the Alzates sent a letter to the attention of New York Central Mutual’s “No-Fault Department” to make a claim under Rodriguez’s policy’s SUM provisions. He enclosed claimants’ completed and subscribed New York State applications for no-fault insurance benefits. On September 3, 2002, the insurer sent a letter acknowledging the three claims. This{**7 NY3d at 774} letter directed the attorney’s attention to and quoted the above-described “Notice and Proof of Claim” condition, and advised him as follows:

“New York Central Mutual is currently investigating the facts and circumstances of the [claimed] loss. We require the immediate completion and return of the enclosed Notice of Intention to Make Claim forms.

“Your failure to cooperate will jeopardize any rights which you may have under this policy for us to make Supplementary Uninsured Motorists payments” (emphasis added).[*3]

Claimants never filled out and returned the proof-of-claim forms, which asked for information about the accident and claimants’ injuries. In May 2003, however, they served a request for uninsured motorist arbitration on New York Central Mutual, which responded on June 19, 2003 with a proceeding in Supreme Court to stay arbitration. Supreme Court granted the insurer’s petition because of claimants’ failure to return the completed forms, concluding that this [*4]was a “condition precedent under the policy” for which timely disclaimer was not required. The Appellate Division affirmed on the same basis, and we granted leave to appeal. We now reverse.

As an initial matter, the policy’s requirement to fill out and return a proof-of-claim form is an exclusion or a condition of coverage, as the insurer concedes. This case is not analogous to Zappone v Home Ins. Co. (55 NY2d 131 [1982]), where there was no coverage under the contract of insurance. Accordingly, the outcome of this appeal turns on whether New York Central Mutual disclaimed liability or denied coverage “as soon as reasonably possible” within the meaning of Insurance Law § 3420 (d).

An “insurer’s failure to provide notice as soon as is reasonably possible precludes effective disclaimer, even [where] the policyholder’s own notice of the incident to its insurer is untimely” (First Fin. Ins. Co. v Jetco Contr. Corp., 1 NY3d 64, 67 [2003]). The “timeliness of an insurer’s disclaimer is measured from the point in time when the insurer first learns of the grounds for disclaimer of liability or denial of coverage” (id. at 68-69 [internal quotation marks omitted]). When “the basis for denying coverage was or should have been readily apparent before the onset of the delay [of disclaimer],” the insurer’s explanation is insufficient as a matter of law (id. at 69).{**7 NY3d at 775}

In Jetco, we held that an insurer’s unexcused 48-day delay in notifying an insured of denial of coverage was unreasonable as a matter of law. Here, the delay was significantly longer. New York Central Mutual sent claimants a letter on September 3, 2002, directing their “immediate completion and return” of the notice-of-claim forms. The word “immediate” denotes New York Central Mutual’s expectation of receipt of the completed forms right away, or without substantial loss or interval of time after they were sent. Thus, the insurer became aware of its basis for denying coverage—that claimants had not completed and returned properly filled-out proof-of-claim forms—at a point in time significantly before June 19, 2003, when it petitioned to stay arbitration. That completed forms were never returned or that the letter did not set a precise deadline for their return does not extend the insurer’s time to disclaim or deny coverage, or excuse its delay in doing so.^[FN*] [*5]

R.S. Smith, J. (dissenting). Claimants were required under the policy to send a notice to the insurance company “[a]s soon as practicable.” The Court today holds, in substance, that this requirement was nullified because the insurance company did not, as soon as possible after as soon as practicable, send claimants a notice that they had failed to send a notice. The Catch-22 quality of this holding is [*6]too much for me, and I dissent.

Insurance Law § 3420 (d) requires an insurance company to give written notice of a disclaimer of coverage “as soon as is reasonably possible.” I would hold that, where the disclaimer is based on a claimant’s failure to submit a document in timely fashion, and there is no fixed deadline for the claimant’s submission, the time to disclaim does not start running at least until the belated submission arrives. To hold otherwise, it seems to me, places an unreasonable and unnecessary burden on the insurance company.

New York Central Mutual acted reasonably here. It demanded, as was its right, a proof of claim (or “Notice of Intention to {**7 NY3d at 776}Make Claim”) form, and then waited to see when and if claimants sent the form in. New York Central Mutual no doubt assumed, quite appropriately, that until the form arrived it was in no position to judge whether the claimants had submitted the form “as soon as practicable.” The insurance company could also reasonably assume that, if it never received the form, it could forget about the claim.

The form was never submitted. This was not an insignificant oversight; a proof of claim form enables an insurance company to investigate a claim and to decide whether it is legitimate or not. To permit claimants who have never submitted proof of their claim to recover is to open the door to claims that are spurious or fraudulent. Under today’s holding, however, insurance companies cannot use the failure to submit proof of claim as a defense unless they [*7]themselves do what the claimant is supposed to do—send a notice before too much time has gone by. I do not think it makes sense to impose this requirement on insurance companies, and I do not think the statute requires it.

Chief Judge Kaye and Judges G.B. Smith, Ciparick, Rosenblatt and Graffeo concur in memorandum; Judge R.S. Smith dissents in an opinion in which Judge Read concurs.

Order reversed, etc.

Footnotes

Footnote *: The dissent complains that there is a Catch-22 quality to the majority’s position. But there is also a certain circularity to the insurer’s argument that it could not disclaim as soon as reasonably possible until after it received the filled out proof-of-claim forms because it could not evaluate whether claimants had timely provided the facts until the forms were reviewed and still does not know if the facts claimants might have provided would have been timely or not, because claimants never returned the forms. The simple answer to this conundrum, of course, is for the insurer to set a deadline for return of a proof-of-claim form. And, of course, if the insurer suspects fraud in this case, it can still fight the claim in the arbitration on this basis.

[*1]

Civil Court of the City of New York, Richmond County, June 9, 2006

APPEARANCES OF COUNSEL

Sanders, Grossman, Fass & Muhlstock P.C., Mineola, for plaintiff. Bruno, Gerbino & Soriano LLP, Melville, for defendant.

OPINION OF THE COURT

Peter P. Sweeney, J.

In this action to recover assigned first-party no-fault benefits, the issue presented is whether the testimony of the peer expert called by defendant at trial to establish its defense of lack of medical necessity should have been precluded on the ground that he did not prepare the peer review reports upon which defendant relied in denying the claims. The court holds that since the peer review expert, whose identity had been disclosed to plaintiff prior to trial, was limited to testifying to the facts and opinions contained in the peer review reports defendant relied upon in denying the claims, there was no basis to preclude his testimony.

Facts

Plaintiff SK Medical Services, P.C. commenced this action to recover first-party no-fault benefits for medical services provided to three assignors, Mamia Kashia, Zaza Kacharava and Malkhaz Gvaladze. All three assignors were allegedly injured on December 27, 2002, in the same motor vehicle accident. Each assignor appeared at plaintiff’s facility on January 21, 2003 for a “neurodiagnostic consultation” by Dr. Larisa Tsaur. On the same day, Dr. Tsaur performed essentially identical electrodiagnostic testing on each assignor. The tests included nerve conduction velocity studies and electromyography studies.

Plaintiff submitted four bills to defendant, one in the amount of $3,673.07 for services provided to Mamia Kashia, another in the same amount for services provided to Zaza Kacharava and two bills totaling $3,976.66 for services provided to Malkhaz Gvaladze. Along with each bill, plaintiff submitted a copy of the neurodiagnostic consultation report of Dr. Tsaur.

Upon receipt of the bills, defendant retained Dr. Joseph C. Cole to do a peer review for each submission. Dr. Cole prepared three peer review reports, one for each assignor, and recommended that defendant pay only for the neurodiagnostic consultations. He concluded that the extensive electrodiagnostic testing of plaintiff’s assignors, performed less than a month following the accident, was not medically necessary in light of Dr. Tsaur’s clinical findings.

In accordance with Dr. Cole’s recommendations, defendant paid plaintiff for the [*2]neurodiagnostic consultations and denied the remainder of the bills asserting lack of medical necessity as a defense. Each of defendant’s denials included a copy of the peer review report upon which it was based.

The trial of this action took place on March 2, 2006. At the outset of the trial, the parties stipulated that defendant received the NF-3 claim forms (the bills), which included Dr. Tsaur’s neurodiagnostic consultation reports, and that defendant timely denied the claims on the ground of lack of medical necessity based on Dr. Cole’s peer review reports. The NF-3 claim forms, the neurodiagnostic consultation reports and each of defendant’s denials, which included Dr. Cole’s peer review reports, were stipulated into evidence.

At the time of trial, Dr. Cole was not available to testify. To establish its defense of lack of medical necessity, defendant called Peter Gastaldi, D.C. Plaintiff objected and moved to preclude him from testifying. Plaintiff’s counsel maintained that since defendant’s denials of claim were based on Dr. Cole’s peer reviews, defendant was limited to calling Dr. Cole to establish lack of medical necessity. Plaintiff’s counsel further maintained that since defendant never exchanged a copy of Dr. Gastaldi’s peer review report or properly responded to plaintiff’s demand for expert disclosure, Dr. Gastaldi should be precluded from testifying.

Plaintiff’s demand for expert information required defendant to provide

“(a) the name and address of each and every person [defendant] expect[ed] to call as an expert witness at the time of trial of this action; (b) the subject matter on which each expert is expected to testify; (c) the substance of the facts and opinions on which each expert is to testify; (d) the qualifications of each expert; and (e) a summary of the grounds for each expert’s opinion.”

In response, defendant provided Dr. Gastaldi’s name and address but the only information provided as to the particulars of his expected testimony was that he would “be relied upon at trial to provide testimony as to the findings of a lack of medical necessity as set forth in the denial.”

Defendant’s counsel represented that Dr. Gastaldi never prepared a peer review report and that he would testify to the same facts and opinions as set forth in Dr. Cole’s reports. Defendant therefore maintained that plaintiff had no legitimate argument that it would be prejudiced if Dr. Gastaldi were allowed to testify.

The court reserved decision on the motion and permitted Dr. Gastaldi to testify. The court precluded him, however, from testifying to facts or opinions that were not set forth in Dr. Cole’s reports. The court agreed to strike his testimony if plaintiff’s motion were granted.

Discussion

After careful consideration, the court finds that there was no legitimate basis to preclude Dr. Gastaldi from testifying. Each of defendant’s denials of claim, which asserted lack of medical necessity as a defense, was timely issued (Insurance Law § 5106 [a]; 11 NYCRR 65-3.8 [c]), contained the information called for in the prescribed denial of claim form (see 11 NYCRR 65-3.4 [c] [11]; Nyack Hosp. v State Farm Mut. Auto. Ins. Co., 11 AD3d 664, 664 [2d Dept 2004]), and, with the inclusion of the peer review report upon which it was based, “promptly apprise[d] the claimant[s] with a high degree of specificity of the ground . . . on which [it was] predicated” (General Acc. Ins. Group v Cirucci, 46 NY2d 862, 864 [1979]; see also, Nyack Hosp., 11 AD3d at 664 [2d Dept 2004]; Keith v Liberty Mut. Fire Ins. Co., 118 AD2d 151, 153 [2d Dept 1986]). Defendant therefore preserved its right to defend the claims at trial on the [*3]ground of lack of medical necessity for the reasons stated in Dr. Cole’s peer review reports.

While it is true that an insurer may not, after repudiating liability, assert new grounds for its refusal to pay a claim (Han-Ki Lee v American Tr. Ins. Co., 304 AD2d 713, 714 [2003]; Lentini Bros. Moving & Stor. Co. v New York Prop. Ins. Underwriting Assn., 53 NY2d 835, 836 [1981]) and must “stand or fall upon the defense upon which it based its refusal to pay” (Beckley v Otsego County Farmers Coop. Fire Ins. Co., 3 AD2d 190, 194 [1957]; see also, King v State Farm Mut. Auto. Ins. Co., 218 AD2d 863, 865 [1995]), permitting Dr. Gastaldi to testify did not violate these principles since Dr. Gastaldi was not permitted to assert any new ground justifying defendant’s refusal to pay the claims. Contrary to plaintiff’s contention, there is no requirement in the no-fault regulations, or under common law, requiring an insurer to exchange a copy of the report of a peer review expert it intends to call at trial. Although 11 NYCRR 65-3.8 (b) (4) requires an insurer upon written demand to provide an applicant, the applicant’s attorney or the applicant’s treating physician with a copy of a peer review report upon which its denial is based, nothing contained in this regulation, nor in any other regulation promulgated under the No-Fault Law, suggests that an insurer is limited to calling the peer expert whose report was exchanged as its expert witness at trial. No plausible argument has been put forth why this court should impose such a limitation. If an insurer wishes to elicit expert testimony at trial to establish the factual basis of a properly asserted defense, it must simply comply with the rules pertaining to expert disclosure.

In this case, contrary to plaintiff’s assertion, defendant sufficiently complied with plaintiff’s demand for expert disclosure. In its response, defendant identified Dr. Gastaldi as a potential expert and indicated that he would “be relied upon at trial to provide testimony as to the findings of a lack of medical necessity as set forth in the denial[s].” As stated above, each of defendant’s denials included the report of Dr. Cole upon which it was based, and Dr. Gastaldi was limited to testifying to the facts and opinions contained therein. Accordingly, defendant’s expert disclosure sufficiently set forth “the substance of the facts and opinions on which” the expert was expected to testify (CPLR 3101 [d] [1] [i]; see, Barrowman v Niagara Mohawk Power Corp., 252 AD2d 946, 946-947 [1998], lv denied 92 NY2d 817 [1998]) and “demonstrable prejudice or surprise” to the plaintiff had not been shown (Rook v 60 Key Ctr., 239 AD2d 926, 927 [1997]).

For all of the above reasons, plaintiff’s motion to preclude is denied.

The court finds Dr. Gastaldi to be a credible witness. His testimony did not go beyond the facts and opinions contained in Dr. Cole’s reports. He gave persuasive testimony that the extensive testing performed on each of plaintiff’s assignors on January 21, 2003 was not medically necessary in light of Dr. Tsaur’s clinical findings. The court credits his testimony in all respects. No witnesses were called by the plaintiff to rebut his testimony. The court therefore finds that defendant established by a preponderance of the credible evidence that the testing at issue was not medically necessary.

Accordingly, it is hereby ordered that judgment be entered in favor of the defendant dismissing the complaint.

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 9th and 10th JUDICIAL DISTRICTS

Appeal from an order of the District Court of Nassau County, Third District (Sharon Commissiong, J.), entered June 17, 2005. The order denied plaintiff’s motion for summary judgment and awarded defendant $50 in costs.

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

In this action to recover first-party no-fault benefits for medical services rendered to its assignor, plaintiff provider moved for summary judgment. The court below found that plaintiff demonstrated its entitlement to judgment as a matter of law but denied the motion on the ground that defendant raised triable issues of fact. The instant appeal by plaintiff ensued.

Upon a review of the record, we find that defendant failed to establish that it timely denied plaintiff’s claims based on the assignor’s failure to attend independent medical examinations, since it did not show that the statutory time period within which it had to pay or deny the claims was tolled by timely verification and follow-up requests. The affidavit by defendant’s claims representative did not demonstrate that defendant mailed verification requests. The affiant did not assert personal knowledge of actual mailing or of facts creating a presumption of same (see A.B. Med. Servs. PLLC v Prudential Prop & Cas Ins. Co., 11 Misc 3d 137[A], 2006 NY Slip Op 50504 [App Term, 2d & 11th Jud Dists]; Modern Psychiatric Servs. P.C. v Progressive Ins. Co., 10 Misc 3d 145[A], 2006 NY Slip Op 50143[U] [App Term, 9th & 10th Jud Dists]). Since defendant’s denial was untimely, it is precluded from interposing the defenses raised in this case (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282 [1997]). Accordingly, plaintiff’s motion for summary judgment is granted and the matter is remanded to the court below for the calculation of statutory interest and an assessment of [*2]attorney’s fees pursuant to Insurance Law § 5106 (a) and the regulations promulgated thereunder.

Rudolph, P.J., Angiolillo and Lippman, JJ., concur.
Decision Date: June 8, 2006

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 9th and 10th JUDICIAL DISTRICTS

Appeal from an order of the District Court of Nassau County, First District (Scott Fairgrieve, J.), dated September 30, 2004. The order denied plaintiff’s motion for summary judgment.

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

In this action to recover first-party no-fault benefits for medical services rendered to its assignor, defendant timely denied the claims on the ground of lack of medical necessity. A timely denial alone, however, does not avoid preclusion where said denial is factually insufficient, conclusory or vague, and an insurer seeking to deny benefits based on lack of medical necessity must set forth with sufficient particularity the factual basis and medical rationale underlying that determination (see A. B. Med. Servs. PLLC v Liberty Mut. Ins. Co., 10 Misc 3d 128[A], 2005 NY Slip Op 51902[U] [App Term, 2d & 11th Jud Dists]; Amaze Med. Supply v Allstate Ins. Co., 3 Misc 3d 43, 44 [App Term, 2d & 11th Jud Dists 2004]). In the instant case, the conclusions of the peer review upon which the denial was based were not supported by a sufficient factual foundation and medical rationale to warrant rejection of the claims and, accordingly, were insufficient to support a defense of lack of medical necessity (see Park Neurological Servs. P.C. v GEICO Ins., 4 Misc 3d 95 [App Term, 9th & 10th Jud Dists 2004]; see also A.B. Med. Servs. PLLC v American Mfrs. Mut. Ins. Co., 6 Misc 3d 133[A], 2005 NY Slip Op 50114[U] [App Term, 2d & 11th Jud Dists]; cf. Amaze Med. Supply Inc. v [*2]Travelers Prop. Cas. Corp., 7 Misc 3d 128[A], 2005 NY Slip Op 50452[U] [App Term, 2d & 11th Jud Dists]). Under the circumstances, defendant has failed to raise a triable issue of fact.

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

Rudolph, P.J., Tanenbaum and Lippman, JJ., concur.
Decision Date: June 8, 2006

—[*1]

Spain, J. Appeal from an order of the Supreme Court (McNamara, J.), entered June 1, 2005 in Albany County, which, inter alia, partially granted plaintiff’s motion for summary judgment.

Plaintiffs commenced this action as the assignees of the no-fault insurance claim rights of 15 individuals to whom plaintiffs provided psychological treatment following automobile accidents. Asserting that defendant had failed to timely deny coverage or seek verification of the insurance claims, plaintiffs moved for summary judgment. Defendant cross-moved for sanctions pursuant to 22 NYCRR part 130 and for severance of the claims. Supreme Court granted summary judgment with respect to the third, a portion of the seventh, tenth, eleventh and thirteenth causes of action and otherwise denied plaintiffs’ motion. The court denied defendant’s cross motion for sanctions and severance. On defendant’s appeal, we affirm.

“[A]n insurer is required to either pay or deny a claim for no-fault automobile insurance benefits within 30 days from the date an applicant supplies proof of claim” (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 278 [1997]; see Insurance Law § 5106 [a]; 11 NYCRR former 65.15 [g]; 65-3.8; LaHendro v Travelers Ins. Co., 220 AD2d 971, 972 [1995]). A plaintiff may obtain summary judgment on a cause of action to recover first-party no-fault benefits by “submitting evidentiary proof that the prescribed statutory billing forms had been [*2]mailed and received, and that payment of no-fault benefits was overdue” (Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742, 742-743 [2004]; see Insurance Law § 5106 [a]).

Defendant asserts that plaintiffs failed to provide adequate proof that the claim forms were properly mailed and, thus, did not establish a prima facie case of entitlement to benefits. Plaintiffs supplied direct proof of actual mailing by producing signed and stamped mailing certificates (see Badio v Liberty Mut. Fire Ins. Co., 12 AD3d 229, 230 [2004]). In addition, plaintiffs’ officer, Jonathan Kogen, provided an affidavit stating—based on his review of plaintiffs’ business records and his own personal knowledge—that plaintiffs mailed the claim forms to defendant and that none were returned as undeliverable. This “proof of proper mailing gives rise to a presumption that the item was received by the addressee” (Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679, 680 [2001]). Defendant has not submitted proof to rebut this presumption; indeed, defendant does not deny receipt of the claims and, in fact, its papers in opposition include evidence that claims were received on dates which correspond to those in the mailing receipts produced by plaintiffs. Accordingly, we hold that plaintiffs met their prima facie burden of proof with regard to mailing of the claim forms.

Defendant also asserts that plaintiffs failed to establish a valid assignment of benefits because the assignor’s signature on the assignment forms was not properly authenticated. Upon receipt of the allegedly defective assignments, defendant had 10 days to request verification (see 11 NYCRR 65-3.5 [a]; former 65.15 [d]). “[F]ailure to object to the adequacy of . . . claim forms within 10 days of receipt constitute[s] a waiver of any defenses based thereon, including the alleged lack of a valid assignment of benefits” (Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564, 565 [2005], lv denied 5 NY3d 713 [2005]; see Nyack Hosp. v Encompass Ins. Co., 23 AD3d 535, 535-536 [2005]; Hospital for Joint Diseases v Allstate Ins. Co., 21 AD3d 348, 348-349 [2005]; but see Siegel v Progressive Cas. Ins. Co., 6 Misc 3d 888 [2004]). Inasmuch as defendant failed to request verification of the assignments at issue within the 10-day period proscribed by regulation, its objection to the assignments was waived.

Next, we are unpersuaded by defendant’s arguments that summary judgment was premature because discovery was incomplete. In opposition to the prima facie case established by plaintiffs, defendant “did not make the required showing that ‘further discovery may raise a triable issue of fact’ ” (Williams v General Elec. Co., 8 AD3d 866, 867 [2004], quoting Mitchell v Atlas Copco N. Am., 307 AD2d 635, 636 [2003]; see Herba v Chichester, 301 AD2d 822, 823 [2003]). Indeed, it is undisputed that defendant did not send timely delay notices or claim denials; thus, defendant is precluded from raising any defense to payment of the claims unless such denial is based on lack of coverage (see Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1997]; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., supra at 282). Defendant’s remaining argument in opposition to summary judgment—that plaintiffs committed fraud by misrepresenting Kogen as a “treating doctor” although he did not personally provide or supervise the psychological services rendered by plaintiffs, and that such fraud falls within the narrow “lack of coverage” exception, obviating the need for a timely denial—has been rejected by this Court (see Valley Psychological v Liberty Mut. Ins. Co., 30 AD3d 718 [2006] [decided herewith]).

Defendant asserts that Supreme Court abused its discretion in failing to sanction plaintiffs for asserting frivolous causes of action because several of the claims asserted had been paid or settled. Sanctions pursuant to 22 NYCRR part 130 should be awarded for taking legal actions which are completely without merit in law, are undertaken primarily to delay the [*3]resolution of the litigation or assert false material statements of fact (see 22 NYCRR 130-1.1 [c]; Ireland v GEICO Corp., 2 AD3d 917, 919 [2003]; Mountain Lion Baseball v Gaiman, 263 AD2d 636, 639 [1999]). That level of misconduct has not been established here. The record reveals that plaintiffs voluntarily withdrew one of the allegedly frivolous claims and the others were not dismissed because Supreme Court found issues of fact existed as to whether payment had been made or a settlement had been reached. Under these circumstances and absent proof of actual payment or settlement, we find no basis to interfere with Supreme Court’s sound discretion (see Northern Adirondack Cent. School Dist. v La Plante Co., 229 AD2d 764, 766 [1996]; Golden v Barker, 223 AD2d 769, 770 [1996]).

Finally, we discern no abuse of discretion in Supreme Court’s decision not to sever the claims (see CPLR 603; State Farm Fire & Cas. Co. v Dayco Prods., Inc., 19 AD3d 923, 924-926 [2005]; Hempstead Gen. Hosp. v Liberty Mut. Ins. Co., 134 AD2d 569, 570 [1987]).

Cardona, P.J., Carpinello, Mugglin and Lahtinen, JJ., concur. Ordered that the order is affirmed, with costs.

—[*1]

Kane, J. Appeal from an order of the County Court of Albany County (Breslin, J.), entered May 16, 2005, which affirmed an order of the City Court of the City of Albany dismissing the claim.

Plaintiff alleges that it provided psychological testing and psychotherapy to a woman after her involvement in a motor vehicle accident. It is undisputed that the woman was injured in an accident involving a vehicle insured by defendant, thus invoking coverage by defendant. As assignee of the woman’s no-fault insurance claims, plaintiff submitted to defendant two bills for services rendered. Defendant denied both claims, but those denials were issued more than 30 days after the claims were received. Plaintiff filed a commercial claim in Albany City Court seeking payment. At trial, defendant asserted a defense of provider fraud, alleging that plaintiff submitted fraudulent bills because its principal licensed psychologist did not provide active and personal supervision over the employees providing services to plaintiff’s assignor as required by workers’ compensation schedules.^[FN*] City Court determined that defendant’s assertion of a fraud [*2]defense was not precluded by its untimely denial, then dismissed the claim based on the fraud defense (195 Misc 2d 540 [2002]). Upon plaintiff’s appeal, County Court affirmed. Plaintiff now appeals to this Court.

Because defendant’s untimely denial precluded it from asserting the defense raised here, plaintiff was entitled to judgment in its favor. While our review of this City Court claim is limited to whether “substantial justice has . . . been done between the parties according to the rules and principles of substantive law” (UCCA 1807; see Sten v Desrocher, 8 AD3d 915, 915 [2004]), the misapplication of substantive law in this case mandates a reversal. The law requires an insurer to accept or deny a claim for no-fault benefits within 30 days after the claimant provides proof of the claim (see Insurance Law § 5106 [a]; 11 NYCRR former 65.15 [g]; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 278 [1997]). An insurer that fails to deny a claim within the 30-day period is precluded from raising most defenses (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., supra at 282; Loudermilk v Allstate Ins. Co., 178 AD2d 897, 898 [1991]; Ultra Diagnostics Imaging v Liberty Mut. Ins. Co., 9 Misc 3d 97, 98 [2005]). Untimely disclaimers, however, do not preclude an insurer from denying liability “on a strict lack of coverage ground” (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 198 [1997]).

Defendant successfully argued in City Court and County Court that its fraud defense asserted a lack of coverage thereby rendering its untimely denials irrelevant. We disagree. In contrast to fraudulent conduct such as staging an automobile accident, which results in no coverage at all—thus not requiring a timely denial—coverage is not extinguished by allegations, or even proof, that a medical services provider unilaterally schemed to defraud the insurer by providing unnecessary or excessive treatment—thus requiring a timely denial to avoid preclusion of the defense (see Ultra Diagnostics Imaging v Liberty Mut. Ins. Co., supra at 99-100; Fair Price Med. Supply Corp. v Travelers Indem. Co., 9 Misc 3d 76, 78-79 [2005]; Melbourne Med., P.C. v Utica Mut. Ins. Co., 4 Misc 3d 92, 94 [2004]). In fact, the Court of Appeals expressly noted that the fraud exception from preclusion for untimely denials does not apply to a defense that the provider’s treatment was excessive, as that defense does “not ordinarily implicate a coverage matter” (Central Gen. Hosp. v Chubb Group of Ins. Cos., supra at 199, 202). Because the defense raised here was analogous to an argument that the treatment was excessive or unnecessary, it does not implicate coverage and therefore required a timely denial. Since defendant’s fraud defense was precluded, substantial justice was not meted out according to the substantive law, requiring reversal and remittal for City Court to determine the amount of judgment to be entered in plaintiff’s favor (see UCCA 1807).

Crew III, J.P., Peters, Carpinello and Lahtinen, JJ., concur. Ordered that the order is reversed, on the law, with costs, and matter remitted to the City Court of the City of Albany for further proceedings not inconsistent with this Court’s decision.

Footnotes

Footnote *: Medical providers must comply with workers’ compensation payment schedules to qualify for payment under the no-fault law (see Insurance Law § 5108; 11 NYCRR 68.1)

Supreme Court, Nassau County

005513/05

Law Office of Kenneth M. Mollins, P.C.

Franklin, Gringer & Cohen, P.C.

Attorneys for Plaintiff Long Island Radiology

425 Broad Hollow Road, Suite 215

Melville, NY 11747

Sonnenschein, Nath & Rosenthal, LLP

Attorneys for Defendant Allstate

1221 Avenue of the Americas

New York, NY 10020

and –

Steve Levy, Esq.

Attorney for Defendant Allstate

8000 Sears Tower

Chicago, IL 60606

Rivkin Radler, LLP

Attorneys for Defendant State Farm

EAB Plaza

Uniondale, NY 11556

O’Melveny & Myers, LLP

Attorneys for Defendant GEICO

Times Square Tower

7 Times Square

New York, NY 10036

Stern & Montana, LLP

Attorneys for Defendant American Transit

Trinity Centre — 115 Broadway

New York, NY 10006

Short & Billy, P.C.

Attorneys for Defendant Progressive

217 Broadway, Suite 300

New York, NY 10007

and-

Conrad O’Brien Gellman & Rohn, P.C.

Attorneys for Defendant Progressive

1515 Market Street, 16th Floor

Philadelphia, PA 19102-1916

Cozen & O’Connor

Attorneys for Defendant One Beacon

1900 Market Street

Philadelphia, PA 19103

Thomas P. Phelan, J.

Motion by defendants, and cross-motion by plaintiff, for summary judgment on the issue of whether no-fault insurers may raise lack of medical necessity as a basis to deny claims for reimbursement to radiologists seeking payment for MRI tests provided to no-fault patients pursuant to prescriptions, is determined as follows.

Plaintiff’s further request for class certification pursuant to CPLR 901 and 902 and related relief is denied as premature. [*2]

By order dated November 29, 2005, this Court granted defendants’ motion dismissing the complaint for failure to comply with CPLR 3013. The cross-motion by plaintiff for an order directing that the proposed amended complaint be deemed served in place and stead of the original complaint was granted. The largely undisputed fact pattern underlying this case is as follows.

Plaintiff is a radiology office that performs MRI testing for persons involved in motor vehicle accidents and allegedly eligible for no-fault benefits. MRI testing is done pursuant to a prescription issued by the injured person’s independent treating physician. For payment plaintiff receives an assignment of no-fault benefits from the injured person, and submits claims directly to one of the defendants. Defendants deny numerous claims for payment on the ground of an alleged “lack of medical necessity.”

On this motion defendants argue that in the context of the no-fault statute and the regulations thereunder, “medical necessity” is a prerequisite for payment. They conclude therefore, that they have every right to deny plaintiffs’ claims on the ground of “lack of medical necessity.” This Court agrees with defendants’ argument, but not their conclusion.

The no-fault statute embodied in Insurance Law §5102(a)(1) defines the “basic economic loss” for which the statute was designed to provide payment as “All necessary expenses incurred for: (I) medical, hospital, . . . surgical, nursing, dental, ambulance, x-ray, prescription drug and prosthetic services . . .” Like the no-fault law, the regulations promulgated thereunder expressly state that basic economic loss comprises medical expenses which are “necessary” [11 NYCRR 65-1.1].

The purpose of the no-fault law was to “remove the vast majority of claims arising from vehicular accidents from the sphere of common-law tort litigation, and to establish a quick, sure and efficient system for obtaining compensation for economic loss suffered as a result of such accidents” [Walton v Lumbermens Mut. Cas. Co., 88 NY2d 211, 214(1996) citing L 1973, ch13; Governor’s Mem. approving L 1073, ch 13, 1973 NY Legis Ann at 298].

Overall, the no-fault law is a compromise: prompt payment for basic economic loss to injured persons regardless of fault, in exchange for a significant limitation on litigation [Pommells v Perez, 4 NY3d 566, 570-71 (2005); see also Oberly v Bangs Ambulance Inc., 96 NY2d 295, 298 (2001)(No fault legislation was adopted to assure prompt and full compensation for economic loss, and non-economic loss for serious injury)].

To implement the legislative aim of curtailing delay and reducing expense, the regulations are written to encourage prompt payment of claims, to discourage investigation by insurers, and to penalize delays [Dermatossian v New York City Transit Authority, 67 NY2d 219, 225(1986)].

The court system is inundated with no-fault claims litigation [Vladimir Zlatnick, [*3]M.D.,P.C. v Geico, 2 Misc 3d 347(Civ Ct, Queens Cty, 2003); Ostia Medical P.C. v Geico, 1 Misc 3d 907(A)(Dist. Ct, Nassau Cty, 2003); see Karen B. Rothenberg and Jennifer R. Rapaport, No-Fault: The Litigation Epidemic, N.Y.L.J., 1/5/2004, p.4, col. 4]. As one court has noted, neither insureds nor insurers benefit from uncertainties engendered by scores of judges retrospectively attempting to exercise medical/professional judgment in these no-fault cases [Citywide Social Work & Psy. Serv., PLLC, v Travelers Indemnity Co., 3 Misc 3d 608 (Civ Ct., Kings Cty, 2004)].

One of the primary defenses litigated by the insurers is the alleged “lack of medical necessity.” The various plaintiffs in such cases present a prima facie case by proof of submitted claims (setting forth the fact and amounts of the losses sustained) and overdue payments [All County Open MRI & Diagn. Radiology P.C. v Travelers Ins. Co., 11 Misc 3d 131(A)(N.Y.Sup.App. Term 2006); Delta Diagnostic Radiology, P.C. v Progressive Cas. Ins. Co., 11 Misc 3d 136 (A)(N.Y.Sup.App. Term 2006); A.B. Medical Services PLLC v Liberty Mut. Ins. Co., 10 Misc 3d 128 (A) (N.Y.Sup. App. Term 2005)].

The burden then shifts to the insurer, who must prove that its denial was timely and that the medical services or supplies in question were not medically necessary [Nir v Allstate Ins. Co., 7 Misc 3d 544, 546 (Civ Ct., Kings Cty., 2005); Healing Hands Chiropractic, PC v Nationwide Assurance Co., 5 Misc 3d 975(Civ Ct., N.Y.Cty, 2004)]. To withstand summary judgment, the insurer’s proof must set forth a sufficiently detailed factual basis and medical rationale for the claim’s rejection [Nir at 546; AB. Medical Services PLLC ; Amaze Medical Supply Inc. v Eagle Ins. Co., 2 Misc 3d 128(A)(N.Y.Sup, App. Term, 2003)].

Most of the cases do not address the legal issue of the availability of the “lack of medical necessity” defense where the medical supplier or diagnostic tester is not the treating physician, but instead complies with the instructions found in a prescription from the treating physician. As noted in this Court’s earlier decision, only two courts squarely consider the issue, and they reach different conclusions.

In West Tremont Medical Diagnostics v Geico, [8 Misc 3d 423, 427 (Civ. Ct., Richmond Cty, 2005)], the Court noted in dicta, that this defense should not be available to insurers in connection with claims made by diagnostic centers. There, the Court expressly held, after trial, that the defendant insurer had failed to meet its burden of proof on the defense of lack of medical necessity.

The court’s broader reasoning was expressed as follows:

There is nothing in the No-Fault statute that indicates that the treating physician needs to get pre-approval testing before referring the patient for MRI’s or any other diagnostic modalities. Therefore, to deny First Party benefits, on the basis of lack of medical necessity, to the diagnostic center that does not come to a diagnosis based upon a physical examination of the patient can be found to be in derogation of the purpose [*4]and intent of the Insurance No-Fault Benefits statute which is expedient payment of benefits to automobile victims. . . . Therefore, in a matter, such as the instant case, wherein the usual and customary medical procedure was utilized by the examining physician in referring a patient involved in a motor vehicle accident for radiological tests after a physical examination, and the patient assigned her rights to the diagnostic radiological establishment for reimbursement of No-Fault benefits, the affirmative defense of lack of medical necessity should not be available as the diagnostic center does not make an independent medical evaluation of the patient and the denial of benefits to the diagnostic establishment is in derogation of the intent of the Insurance Law §5106.

This Court understands that West Tremont is being appealed to the Appellate Term, and the record herein includes the amicus brief (annexed to defendants’ reply papers) filed by the Attorney General’s office on that appeal.

By contrast, in Precision Diagnostic Imaging P.C. v Travelers Ins. Co.[8 Misc 3d 435 (Civ.Ct.,NYCty, 2005)], the Court found the no-fault statute clearly and unambiguously mandates that “claimants may only be reimbursed for necessary’ medical services.”Therefore, the Court reasoned that there was no need to look to the legislative purpose or history of the statute, expressly rejected the dicta in West Tremont, and concluded that “the defense of medical necessity is available against all medical providers” (Precision Diagnostic at 439). The Court further noted that “to permit medical providers to receive reimbursement even when the insurer has proven that the service was not medically necessary would encourage fraud, rather than combat it (Id.). As defendant in Precision Diagnostic had provided prima facie evidence that the test was not medically necessary and plaintiff failed to submit in opposition evidentiary proof in admissible form, defendant was awarded summary judgment dismissing plaintiff’s claim.

This Court acknowledges that to require insurers to make reimbursements without regard to medical necessity would inflate costs and encourage fraud. In view of the plain language of the no-fault statute and the regulations thereunder, this Court agrees with defendants that “lack of medical necessity” is a defense which must be available to insurers in no-fault cases. However the inquiry does not end here. A remaining and critical issue presented is: against whom may the defense be raised?

On this issue, the statute and the regulations are silent. Troubling is the fact that radiologists perform tests that are prescribed by others. In Omega Diagnostic Imaging, P.C. v State Farm Mut. Auto Ins. Co. [8 Misc 3d 715 (Civ. Ct., Kings Cty, 2005)], the insurer challenged a prescription by a chiropractor for an MRI of the injured party’s knee . While not couched in terms of the availability of the “lack of medical necessity defense,” the Court in Omega Diagnostic expressed concerns similar to those of plaintiff herein. The Omega Diagnostic Court considered “whether there is a legal duty imposed on the medical supplier or provider to investigate the authority of the author of the prescriptions it fills in order to receive [*5]first party no-fault benefits for the services it provides.” The Court found no legal authority on point, and concluded that it was not unreasonable for plaintiff therein to perform the MRI prescribed by the licensed chiropractor therein.

It is this Court’s opinion that the results in West Tremont and Omega Diagnostic comport with the underlying intent of the no-fault statute, that claims be processed quickly and efficiently, and that economic losses be fully compensated. As noted in West Tremont, there is no statutory or regulatory pre-approval requirement for radiology tests requested by treating physicians in no-fault cases. Furthermore it makes no sense to argue “lack of medical necessity” against radiologists, because they do not assess medical necessity. Radiologists neither examine the no-fault patient, nor render a pre-test diagnosis. Any diagnostic opinion is based on the radiological test. To require radiologists to render a pre-test diagnosis would cause significant delay in treating the injured.

As suggested in Omega Diagnostic, a radiologist should not be required to investigate every prescription for radiology tests in order to receive no-fault payments for tests admittedly performed.

Overall, this Court finds, that where a prescription for a radiology test has been provided by a treating physician or licensed medical provider in a no-fault case, the prescription should render a challenge on the grounds of “lack of medical necessity” unavailable against the radiologist. The prescription establishes medical necessity for the purposes of the radiologist.

The insurers’ recourse should lie against the treating physician or medical provider. An insurer who can prove that a radiology test is unnecessary or duplicative, should be able to challenge through subrogation the treating physician or medical provider who prescribed the test [see generally Pavone v Aetna Cas.& Sur. Co., 91 Misc 2d 658 (Sup Ct., Monroe Cty, 1977).

Based on the foregoing, defendants’ motion for summary judgment is denied, and that branch of plaintiff’s cross-motion for summary judgment is granted.

Plaintiff additionally cross-moves for class certification pursuant to CPLR 901 and 902, identifying the proposed class as:

all radiologists and radiology practices that have been denied no-fault benefits in the last six (6) years for MRI’s performed where said denial is based on lack of medical necessity, peer review or any other denial however worded based on the tests’ lack of medical necessity. (Mollins affirmation in support of cross-motion, par. 9.)

“In determining whether to grant class certification, plaintiffs must satisfy five prerequisites under CPLR 901(a) by competent evidence in admissible form (citations omitted)” [Feder v Staten Island Hosp., 304 AD2d 470 (1st Dept. 2003); see, Hazelhurst v [*6]Brita Products Co., 295 AD2d 240, 241(1st Dept. 2002)]. Specifically, the prerequisites are:

1. the class is so numerous that joinder of all members, whether otherwise required or permitted is impracticable;

2. there are questions of law or fact common to the class which predominate over any questions affecting only the individual members;

3. the claims or defenses of the representative parties are typical of the claims or defenses of the class;

4. the representative parties will fairly and adequately protect the interests of the class; and

5. a class action is superior to other available methods for the fair and efficient adjudication of the controversy.

[CPLR 901(a); Small v Lorillard Tobacco Co. Inc., 94 NY2d 43, 54 (1999)]. The prerequisites of CPLR 901(a) are to be liberally construed [Wilder v May Dept. Stores Co., 23 AD3d 646 ( 2nd Dept. 2005); Tosner v Town of Hempstead, 12 AD3d 589( 2nd Dept. 2004)].

In addition, the Court must also consider the five factors set forth in CPLR 902, which are:

1. the interest of members of the class in individually controlling the prosecution or defense of separate actions;

2. the impracticability or inefficiency of prosecuting or defending separate actions;

3. the extent and nature of any litigation concerning the controversy already commenced by or against members of the class;

4. the desirability or undesirability of concentrating the litigation of the claim in the particular forum; and

5. the difficulties likely to be encountered in the management of a class action.

The decision whether to certify a class action is vested in the sound discretion of the trial court (Small at 52; Wilder at 649), and any error should be resolved in favor of allowing the class action [Wilder at 649; Kidd v Delta Funding Corp., 289 AD2d 203 ( 2nd Dept 2001)]. Class certification must be based upon a proper factual record [Klein v Robert’s American Gourmet Food, Inc., 28 AD3d 63 (2nd Dept. 2006)]. [*7]

In this case the Court agrees with defendants that some discovery is needed before certification can be resolved [see Dougherty v North Fork Bank, 301 AD2d 491 (2nd Dept. 2003); Negrin v Norwest Mortgage, Inc., 293 AD2d 726 (2nd Dept. 2002)]. As to the very first prerequisite of numerosity, plaintiffs state “the number of denials in New York State for MRI’s based on lack of medical necessity from all of these Defendants probably exceeds a few hundred thousand” (Mollins affirmation in support of cross-motion, par. 17). The evidentiary basis for this statement is not identified. Similarly, the factual basis for plaintiff’s assertion that it will adequately protect the interests of the class is not provided, and the record contains little information regarding plaintiffs’ attorney’s qualifications to represent a class.

Based on the foregoing, that branch of plaintiff’s cross-motion which seeks class certification is denied without prejudice to renewal.

The parties are reminded that a certification conference is scheduled to be held before the undersigned on June 16, 2006 at 10:30 A.M.

This decision constitutes the order of the court.

Dated: JUNE 7, 2006 THOMAS P. PHELAN

J.S.C.

APPEARANCES OF COUNSEL