Nassau District Court

27730/02

Randy Sue Marber, J.

Defendant moves, pursuant to CPLR §3212, for an order granting summary judgment dismissing plaintiff’s complaint for its willful failure to comply with a discovery stipulation. No opposition is submitted by plaintiff.

A review of the moving papers shows that this action was commenced by a summons and complaint in July, 2002 for unpaid medical bills submitted to defendant no-fault carrier on behalf of its assignor in the amount of $3,389.72. An Answer was interposed in August, 2002, together with various discovery demands including a Demand for Verified Bill of Particulars and Combined Demands. Plaintiff failed to respond to defendant’s demands, and on or about June 9, 2005 defendant moved pursuant to CPLR §3126 for an Order of Preclusion against plaintiff. On July 27, 2005 defendant withdrew its motion and plaintiff agreed, in a stipulation, to respond to defendant’s discovery demands within sixty (60) days or be precluded from offering evidence at trial. Plaintiff failed to so respond with said sixty (60) days and defendant brought the within motion.

As stated in Tepper v. Tannenbaum, 83 AD2d 551, 441 NYS2d 470 (1st Dept 1981):

Parties by their stipulations may in many ways make the law for any legal proceedings to which they are parties, which not only binds them, but which the courts are bound to enforce…and all such stipulations not unreasonable, not against good morals or sound public policy, have been and will be enforced (Matter of New York, Lackawanna & Western R.R. Co., 98 NY 447, 453; see, also, Morse v. Morse Dry Dock & Repair Co., 249 AD 764; 2A [*2]Weinstein-Korn-Miller, NY Civ Prac, par 2104.02).

The stipulation in this case is not an unreasonable one. Nothing contained therein contravenes good morals or sound public policy.

A review of the Notice for Discovery and Inspection reveals that defendant sought from plaintiff:

1. A copy of the assignment of benefits executed by the assignor.

2. A copy of the invoices submitted by plaintiff to the defendant for services and/or supplies provided to the assignor.

3. A copy of the letter(s) of medical necessity for the services and/or supplies provided to the assignor.

4. A copy of the medical chart for the assignor.

While a copy of the assignment of benefits executed by plaintiff’s assignor was annexed to plaintiff’s summons and complaint, none of the additional documents demanded were provided. Inasmuch as plaintiff has agreed to be precluded from offering evidence at trial concerning same, without such documents, it will be unable to make out its prima facie case.

The Court finds that the plaintiff has failed to produce evidentiary proof in admissible form sufficient to require a trial of material questions of fact on which it rests its claim.

Accordingly, based on the foregoing and plaintiff’s failure to oppose this motion, defendant’s motion is granted and the within action is dismissed.

So Ordered:

Dated: May 9, 2006DISTRICT COURT JUDGE

CC: Baker, Sanders, Barshay, Grossman,

Fass, Muhlstock & Neuwirth, P.C.

Troy & Troy, P.C.

Nassau Dist Ct

34030/02

Anthony W. Paradiso, J.

Plaintiff moves for summary judgment to recover no-fault benefits. The defendant opposes the motion. For the reasons that follow, the motion is granted.

The plaintiff rendered medical services to the defendant’s insured from August 15, 1997 through December 20, 1997, allegedly relating to an automobile accident that occurred on July 8, 1997. The plaintiff submitted three claims to the defendant for payment of first-party no-fault benefits. Each claim was timely denied. Defendant denied payment for all services rendered prior to September 17, 1997 on the basis that it conducted a medical audit and “there is no support for the medical necessity of this equipment or test/service.” Defendant denied payment for all services rendered after September 17, 1997 based on the insured’s failure to appear for a physical examination originally scheduled for that date.

“While the timely denials defendant submitted in the claim stage constituted sufficient denials based on the defense of lack of medical necessity, defendant must, nevertheless, submit proof in admissible form to rebut plaintiff’s prima facie showing to oppose a motion for summary judgment” (A.B. Medical Services PLLC v Lumbermens Mutual Casualty Co., 4 Misc 3d 86, 87 [App Term, 2d Dept 2004]). Inasmuch as defendant solely submitted the affirmation of its [*2]attorney in opposition to plaintiff’s motion for summary judgment and did not submit a sworn peer review report to support its allegation of lack of medical necessity for the services rendered, it failed to oppose the motion by proof in admissible form and cannot defeat plaintiff’s entitlement to summary judgment on that basis (see id.).

Likewise, the defendant offered no admissible proof that its denials based upon the insured’s failure to comply with a request for a physical examination were predicated upon a properly mailed verification notice (see Summit Psychological, P.C. v General Assurance Company, 9 Misc 3d 8, 9-10 [App Term, 2d Dept 2005]). The affidavit of Saneela Khan did not establish how or when the IME notice was mailed, and therefore no presumption of mailing can be attributed to her averments (see id.).

While the plaintiff is clearly entitled to judgment in the amount of $924.38 for the medical services provided, the court must determine when interest began to accrue on this amount. The accrual date often urged by medical providers seeking no-fault payments is 30 days after an insurer receives a proper proof of claim. In contrast, insurers often point to 11 NYCRR 65-3.9(c) (and its predecessor, 11 NYCRR 65.15[h][3]) to support the argument that interest should not accrue until the no-fault claimant requests arbitration or institutes a lawsuit when that claimant has not done so within 30 days after receipt of the denial. Here, the plaintiff submitted claims on November 5, 1997, December 8, 1997 and January 14, 1998 which were timely denied on November 12, 1997, December 12, 1997 and January 22, 1998, respectively. However, the plaintiff did not commence suit for the recovery of these payments until September 6, 2002, well over four years later.

Judge Milagros A. Matos of the Civil Court, Kings County, grappled with this very issue in East Acupuncture, P.C. v Allstate Ins. Co., 8 Misc 3d 849 (2005). Judge Matos compared the language of 11 NYCRR 65.15(h)(1) (now 11 NYCRR 65-3.9[a]), dealing with the interest rate to be applied to overdue payments due “an applicant or an assignee,” with the language of 11 NYCRR 65.15(h)(3) (now 11 NYCRR 65-3.9[c]), which limits the interest accrual date on such payments where “an applicant” does not request arbitration or institute a lawsuit within 30 days after receipt of the denial of claim. Judge Matos accepted the argument of the plaintiff therein that the Superintendent of Insurance, when promulgating the regulations at issue, specifically and intentionally distinguished between “an applicant” and “an assignee.” According to Judge Matos, “[u]nder a strict interpretation of the regulation at issue, 11 NYCRR 65.15(h)(3) does not apply to assignees” (East Acupuncture at 852). The court found the omission of the word “assignee” to be “a clear indication that the Superintendent intended to exclude assignees from this section’s application” (id.).

Deferring to the Superintendent’s supposed interpretation, the East Acupuncture court would not, by implication, read into the regulation “a limitation for which no sound reason can be found” (id. at 853). As such, Judge Matos concluded that unlike an insured/assignor, a medical provider/assignee was not limited to interest from the date it commenced a belated suit for the recovery of no-fault benefits, but rather could avail itself of the earliest possible interest accrual date.

This court respectfully disagrees with Judge Matos’ conclusion. Although courts will defer to an agency’s interpretation of a statute it is charged with administering where the [*3]application of the statute involves knowledge and understanding of underlying practices or entails an evaluation of factual data and inferences to be drawn therefrom (see Kurcsics v Merchants Mutual Ins. Co., 49 NY2d 451, 459 [1980]), a court must not blindly accept a statutory interpretation that has no reasonable basis in the law (see id. at 458-59; O’Brien v Spitzer, 24 AD3d 9, 14 [2d Dept 2005]). Here, the interpretation accepted by the court in East Acupuncture runs counter to the stated objectives of the statutory no-fault scheme, i.e., prompt compensation for losses incurred by accident victims, reduced burdens on the courts, and lower premiums for motorists (see Medical Society of the State of NY v Serio, 100 NY2d 854, 860 [2003]). As the Court of Appeals observed in Walton v Lumbermens Mutual Casualty Co., 88 NY2d 211, 214 (1996), the no-fault law’s purposes “were 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.” The interpretation attributed to the Superintendent in East Acupuncture encourages delayed suits and thrusts an unjustified financial burden on insurance companies who are forced to pay years worth of punitive interest payments that are eventually reflected in higher insurance premiums (see Kuscsics, 49 NY2d at 457). Since this interpretation frustrates a core and essential objective of the regulations, “that is, to provide a tightly timed process of claim, disputation and payment” (Presbyterian Hospital v Maryland Casualty Co., 90 NY2d 274, 281 [1997]), it should not be accepted (see id.; Kuscsics at 458; see e.g. Crump v Unigard Ins. Co., 100 NY2d 12, 17 [2003]).

Moreover, the Superintendent’s purported distinction between an insured/assignor and a medical provider/assignee with regard to the interest accrual date on a belated suit constitutes an unwarranted abrogation of the common law. It is settled law that an assignee stands in the shoes of the assignor and acquires no greater rights than those possessed by the assignor (see International Ribbon Mills, Ltd. v Arjan Ribbons, Inc., 36 NY2d 121, 126 [1975]). This general principle “remains alive and well today in [n]o-[f]ault actions” (CPT Medical Service, P.C. v Utica Mutual Ins., 2006 NY Slip Op 26098 [Civ Ct, Queens County 2006]; see e.g. A.B. Medical Services PLLC v Commercial Mutual Ins. Co., 2006 NY Slip Op 26118 [App Term, 2d Dept 2006] [health care provider deals with an assignor-insured at its own peril in accepting an assignment of no-fault benefits and acquires no greater rights than an assignor-insured whose recovery is precluded due to fraud]). As the Court of Appeals remarked in Gottlieb v Kenneth D. Laub & Co., 82 NY2d 457, 464 [1993]: “The common law is never abrogated by implication, but on the contrary it must be held no further changed than the clear import of the language used in a statute absolutely requires” (see Statutes §301[a]). It simply cannot be said that Insurance Law § 5106(a), which expresses the legislature’s mandate regarding the fair settlement of no-fault claims, “absolutely requires” the irrational interpretation that would reward a dilatory assignee such as the plaintiff herein with an interest windfall permitted under the East Acupuncture rationale. This is especially so in light of the Superintendent’s duty to promulgate rules intended to “better effectuate the legislative purpose of providing prompt compensation as the loss is incurred'” (Medical Society of the State of NY v Serio, 100 NY2d at 862, quoting Ins. Law § 5106[a]).

Accordingly, the plaintiff shall have judgment in the amount of $924.38 with interest at two percent per month from September 6, 2002 (see 11 NYCRR 65-3.9[a], [c]), as well as [*4]attorneys’ fees calculated in accordance with 11 NYCRR 65-4.6.

So Ordered:

District Court Judge

Dated: May 3, 2006

cc:Sanders, Grossman, Fass & Muhlstock, P.C.

Jaffe & Nohavicka

—[*1]

In an action to recover no-fault medical payments, the plaintiffs appeal from so much of an order of the Supreme Court, Nassau County (Brandveen, J.), dated February 7, 2005, as denied that branch of their motion which was for summary judgment on their second cause of action to recover payments for medical services rendered by the plaintiff New York and Presbyterian Hospital, as assignee of Cindy Garone. Justice Crane has been substituted for former Justice Cozier (see 22 NYCRR 670.1 [c]).

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

The plaintiffs, as the proponent of the summary judgment motion, had the initial burden of showing their prima facie entitlement to judgment as a matter of law by submitting evidentiary proof that the prescribed statutory billing forms were mailed and received, and that payment of no-fault benefits was overdue (see Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564 [2005]). The plaintiffs failed to submit a proper affidavit of service to establish as a matter of law that the subject hospital bill was mailed and received by the defendant.

Generally, “proof that an item was properly mailed gives rise to a rebuttable presumption that the item was received by the addressee” (Matter of Rodriguez v Wing, 251 AD2d 335, 336 [1998] [internal quotation marks omitted]). “The presumption may be created by either proof of actual mailing or proof of a standard office practice or procedure designed to ensure that items are properly addressed and mailed” (Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679, 680 [2001]). Here, no presumption of mailing was created because the affidavit of the plaintiffs’ billing service representative did not state that he actually mailed the particular claim alleged in the second cause of action to the defendant Allstate Insurance Company (hereinafter Allstate) or describe his office’s practice and procedure for mailing no-fault claims to insurers (see Hospital for Joint Diseases v Nationwide Mut. Ins. Co., 284 AD2d 374, 375 [2001]).

Contrary to the plaintiffs’ contentions, the certified mail receipt and the United States Postal Service “Track and Confirm” printout do not prove that the particular claim alleged in the second cause of action was actually received where, as here, there is no evidence that this claim was mailed to Allstate under that certified mail receipt number and no signed certified mail return receipt card has been produced (cf. Matter of State Farm Mut. Auto. Ins. Co. [Kankam], 3 AD3d 418, 419 [2004]). The plaintiffs’ submissions were insufficient to raise a presumption that Allstate received the claim (see Nassau Ins. Co. v Murray, 46 NY2d 828 [1978]).

Accordingly, it is unnecessary to consider the sufficiency of Allstate’s papers in opposition (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]; Mariaca-Olmos v Mizrhy, 226 AD2d 437, 438 [1996]). Schmidt, J.P., Crane, Rivera and Fisher, JJ., concur.

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd and 11th JUDICIAL DISTRICTS

Consolidated appeal from orders of the Civil Court of the City of New York, Kings County (Loren Baily-Schiffman, J.), entered on July 19, 2004 and December 23, 2004. The order entered July 19, 2004 denied defendant’s motion for renewal of plaintiffs’ motion to enter a default judgment and defendant’s cross motion for summary judgment seeking, in effect, to open the default and to compel plaintiffs to accept defendant’s answer. The order entered December 23, 2004, insofar as appealed from, upon [*2]

granting defendant’s motion for reargument, adhered to its prior determination in the order entered July 19, 2004.

Appeal from order entered July 19, 2004 dismissed as superseded.

Order entered December 23, 2004 modified by providing that, upon reargument, so much of defendant’s prior motion as sought renewal and, upon renewal, vacatur of the portion of the order entered February 6, 2004 which had granted plaintiffs’ underlying motion to enter a default judgment and denied defendants’ cross motion is granted, plaintiffs’ underlying motion to enter a default judgment denied, and defendant’s cross motion granted to the extent of permitting defendant to file and serve its answer within 30 days of the date of the order entered hereon; as so modified, affirmed without costs.

In this action to recover assigned first-party no-fault benefits in the sum of $23,022.23, plaintiffs initially moved for an order directing entry of a default judgment upon defendant’s failure to appear and answer. In order to establish entitlement to a default judgment, plaintiffs were required to proffer proof that they submitted the claims to defendant, 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]). Plaintiffs failed to establish the submission of the claim forms to defendant. In his affidavit, plaintiffs’ “practice and billing manager” alleged that he “issued all of the billings,” that he “personally billed out the claim,” and that “[a]ll billing of plaintiff was sent to defendant.” The foregoing allegations in the affidavit are insufficient to demonstrate personal knowledge of the mailing of the claim forms, and do not contain an adequately detailed description of standard office mailing procedure so as to create a presumption of mailing (see Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679, 680 [2001]; A.B. Med. Servs. v State Farm Mut. Auto. Ins. Co., 3 Misc 3d 130[A], 2004 NY Slip Op 50387[U] [App Term, 2d & 11th Jud Dists]). Accordingly, having failed to establish the facts constituting the claim (CPLR 3215 [f]), namely, the submission of the claims to defendant, upon reargument, the motion by defendant for renewal should have been granted and plaintiffs’ underlying motion for leave to enter a default judgment denied.

Moreover, the court erred in adhering to that portion of its earlier order which denied renewal of the underlying cross motion. While generally delay by an insurer will not be acceptable as a reasonable excuse for a default (see A.B. Med. Servs. PLLC v Travelers Prop. Cas. Co., 6 Misc 3d 53 [App Term, 2d & 11th Jud Dists 2004]), that rule is not absolute. “[W]hether there is a reasonable excuse for a default is a discretionary, sui generis determination to be made by the court based on all relevant factors, including the extent of the delay, whether there has been prejudice to the opposing party, whether there has been willfulness, and the strong public policy in favor of resolving cases on the merits . . . [There is] no basis to categorically exclude consideration of a delay by an insurance company in making such a determination” (Harcztark v Drive Variety, Inc., 21 AD3d 876, 876-877 [2005]). In the instant case, there was a sufficient showing to establish a reasonable excuse for the defendant’s default in answering, particularly in light of the initial delay by the office of the Superintendent of Insurance, upon which service was made, in forwarding process to defendant. Moreover, defendant’s submissions in support of its cross motion adequately demonstrated that it had a [*3]meritorious defense.

Weston Patterson, J.P., Golia and Belen, JJ., concur.
Decision Date: April 28, 2006

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 (Sarah L. Krauss, J.), entered December 7, 2004. The order denied plaintiffs’ motion for partial summary judgment seeking to recover the sum of $6,544.71.

Order affirmed without costs.

In this action to recover first-party no-fault benefits for medical services rendered to their assignors, plaintiffs health care providers failed to establish a prima facie entitlement to partial summary judgment by proof that they submitted the claims, setting forth the fact and the amounts of the losses sustained, and that payment of no-fault benefits was overdue (cf. Insurance Law § 5106 [a]; Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742 [2004]; Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U] [App Term, 2d & 11th Jud Dists]). The affidavit of David Safir, wherein he states that he is “the medical billing manager of the plaintiff provider companies,” does not specify for which of the three plaintiffs he is the billing manager, and this court should not assume that he was acting on behalf of all three providers (see R.M. Med. P.C. v Lumbermans Mut. Cas. Co., 7 Misc 3d 138[A], 2005 NY Slip Op 50859[U] [App Term, 2d & 11th Jud Dists]). Indeed, Safir’s vague use of the word “companies” can also be construed to mean any two of the three provider companies. In these circumstances, the affidavit is insufficient to establish plaintiffs’ prima facie entitlement to partial [*2]summary judgment.

Accordingly, we affirm the order of the court below, which denied plaintiffs’ motion for partial summary judgment.

Pesce, P.J., Weston Patterson and Belen, JJ., concur.
Decision Date: April 27, 2006

—[*1]In an action to recover no-fault insurance benefits, the defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Nassau County (Mahon, J.), entered February 14, 2005, as, upon granting the plaintiffs’ motion, in effect, for reargument of their motion for summary judgment which was denied in a prior order dated May 11, 2004, and, in effect, for reargument of the defendant’s cross motion for summary judgment which was granted in the prior order dated May 11, 2004, granted that branch of the plaintiffs’ motion which was for summary judgment on the first cause of action and denied that branch of the defendant’s cross motion which was for summary judgment dismissing that cause of action.

Ordered that the order is reversed insofar as appealed from, on the law, with costs, and upon reargument, that branch of the plaintiffs’ motion which was for summary judgment on their first cause of action is denied and that branch of the defendant’s cross motion which was for summary judgment dismissing the first cause of action is granted, and the first cause of action is dismissed.

The defendant established its entitlement to judgment as a matter of law on the first cause of action on the ground that the policy limits had been exhausted (see New York & Presbyt. Hosp. v Allstate Ins. Co., 12 AD3d 579 [2004]; see also Pantaleone v Viewmore Homes, 225 AD2d 599 [1996]). The plaintiffs failed to raise a triable issue of fact. [*2]

The plaintiffs’ remaining contentions are without merit. Florio, J.P., Santucci, Goldstein and Skelos, JJ., concur.

[*1]

Civil Court of the City of New York, New York County, April 18, 2006

APPEARANCES OF COUNSEL

Werner, Zaroff, Slotnick, Stern & Ashkenazy, LLP, Lynbrook (Suzette Hyde of counsel), for plaintiffs. Carman, Callahan & Ingham, LLP, New York City (Jason Tenenbaum of counsel), for defendants.

OPINION OF THE COURT

Diane A. Lebedeff, J.

These two cases were consolidated for trial and center upon a no-fault health services provider’s claim for compensation for charges for an electrical diagnostic test identified as current perception threshold testing, also known as sensory nerve conduction threshold testing. Contending that compensation must be denied for these no-fault claims, defendant advances two novel arguments: (1) the medical tests are not compensable under Medicare, and (2) the medical tests are so questionable that such testing constitutes “provider fraud.”

CPT and sNCT Testing

To briefly address the nature of current perception threshold testing (CPT) and sensory nerve conduction threshold testing (sNCT), CPT and sNCT procedures assess the function of a tested sensory nerve. The test device is a noninvasive electrodiagnostic test. The tester affixes three pads to designated spots on skin over a nerve pathway and delivers electrical charges on an upward scale until the patient reports feeling a sensation. Such pads may be placed along various nerve pathways on upper or lower limbs or both. The results are recorded on a table format and the device, comparing the readings obtained to an internal database of readings, [*2]delivers a printout of an analysis and a statement reporting whether the patient’s sensory perception is normal or the degree to which perception is elevated or depressed.

The federal Centers for Medicare and Medicaid Services, a division of the federal Department of Health and Human Services, issued a number of statements regarding CPT and sNCT, which have been addressed by counsel and of which the court takes judicial notice. As of October 1, 2002, CPT and sNCT were classified as procedures not compensable under Medicare (68 Fed Reg 44088-03, 44089 [2003] [“The available scientific evidence is not adequate to demonstrate the accuracy of sNCT . . . as compared to nerve conduction studies . . . We conclude that the scientific and medical literature does not demonstrate that the use of sNCT to diagnose sensory neuropathies in Medicare beneficiaries is reasonable and necessary”]). The Centers for Medicare and Medicaid Services also issued an extended analysis, including a literature review, explaining the basis for this policy and found it most significant that CPT and sNCT results have, to date, led to no changes in patient management, albeit such testing might offer a type of testing sensitivity appropriate to patients with sensory neuropathy resulting from diabetes or a genetic disorder known as Fabry’s disease (Decision Mem of Centers for Medicare and Medicaid Services, Electrodiagnostic Sensory Nerve Conduction Threshold, CAG-00106N, Feb. 14, 2002 [reporting experts in neuropathy “were uniformly unaware of a use for sNCT that would alter patient management” and accordingly it could not be found “clinically effective”]).^[FN1] However, the review closed with the observation that “sNCT merits further study and we encourage investigators to conduct well-designed clinical trials to demonstrate the clinical effectiveness of the test” (id.).

Alternative tests which provide substantially similar information to that produced by CPT or sNCT regarding the status of nerves include the much simpler pin prick test and, providing information also on the physical structures which might impinge upon nerves, nerve conduction velocity tests (NCV), electromyography tests (EMG) and magnetic resonance imaging tests (MRI). All of these alternative tests are universally recognized as informative by experts, as stated by defendant’s expert who testified at the trial. It is noted that one no-fault insurer has contended that ordering CPT or sNCT after performing an NCV, EMG or MRI is a fraud on such insurer (see, based on such facts, State Farm Mut. Auto. Ins. Co. v CPT Med. Servs., P.C., 375 F Supp 2d 141 [ED NY 2005, Glasser, J.] [$2.5 million damage claim in complaint asserting CPT or sNCT procedures were done with sole purpose of generating fees, claims raised under Racketeer Influenced and Corrupt Organizations Act (18 USC § 1961 et seq.), as well as fraud and unjust enrichment theories]).

Because of the limited nature of the two defenses advanced, the court is not called upon to rule upon any other potential issues, such as (1) whether a CPT or sNCT may be ordered and/or administered by a chiropractor,^[FN2] (2) whether the person performing the test was not an [*3]employee of the health services provider filing the claim, but was an independent contractor,^[FN3] or (3) that such test is too experimental or novel to be compensable.^[FN4]

No-Fault Insurer’s “Medicare Defense”

The defendant no-fault insurer timely denied the subject claims for CPT or sNCT procedures for identical reasons. Each denial recited the insurer’s position that such testing lacks “scientific and clinical evidence that would deem this service medically necess[ary]” and referred to the determination of the federal Centers for Medicare and Medicaid Services, that such testing was not compensable under Medicare.

The court must reject the insurer’s contention that the programmatic noncompensability under Medicare bars submission of a claim under the no-fault program. To adopt that argument would require judicial rewriting of New York’s no-fault statute to insert a reference to Medicare standards. The no-fault statute references only a single bright line standard for compensable health care services, which encompasses workers’ compensation fee schedules (Insurance Law § 5108 [a] [no-fault charges “shall not exceed the charges permissible under the schedules prepared [*4]and established by the chairman of the workers’ compensation board for industrial accidents, except (to the extent) unusual procedures or unique circumstances justify the excess charge”], [c] [“No provider of health services . . . may demand or request any payment in addition to the (authorized) charges”]).

Given the clarity of the no-fault statute, the statutory language bars a “Medicare defense” (Roth v Michelson, 55 NY2d 278, 283 [1982] [absent ambiguity, statute to be interpreted literally]; McKinney’s Cons Laws of NY, Book 1, Statutes § 92, Comment [the “intention of the Legislature is first to be sought from a literal reading of the act itself”]; 97 NY Jur 2d, Statutes § 102 [2006] [“Determining legislative intent; unambiguous provisions”; “where statutory language is clear and unambiguous, the court must give effect to the plain meaning of the words and apply it in accordance with its express terms”]). If this argument is to be further advanced, it must be presented to the Legislature, the Insurance Department or the Workers’ Compensation Board. A health services provider’s eligibility for compensation under Medicare is not, standing on its own, a cognizable reason to deny payment of a no-fault claim and this argument is rejected.

No-Fault Insurer’s “Fraud Defense” as Applicable to

a Health Services Procedure

The defendant then urges that the use of CPT or sNCT should be barred as constituting “provider fraud.” Defendant contends that “provider fraud” should be treated in the same manner as a defense of noncoverage, which is not waived by a failure to assert it in a timely denial (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 202 [1997]; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 283 [1997]). On this basis, defendant argues that a defense of “fraud” by a health services procedure may be advanced at trial even if not set forth in a timely denial.

At the outset, because of the loose use of the term “fraud” in the no-fault area, care must be taken to distinguish what “fraud” is claimed to be at issue. For example, the “staged accident fraud” defense actually poses an issue of noncoverage because—under both no-fault concepts and typical automobile policy provisions—insurance coverage is limited to an “accident,” and does not necessarily pose an issue of fraud (V.S. Med. Servs., P.C. v Allstate Ins. Co., 11 Misc 3d 334 [Civ Ct, Kings County 2006, Bluth, J.] [with extensive review of case law and rejecting fraud clear; and convincing burden of proof]), and the “provider fraud” of not being a properly licensed health services facility truly poses an issue of not being eligible to receive reimbursement, rather than fraud (State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, 320 [2005]; 11 NYCRR 65-3.16 [a] [12] [“A provider of health care services is not eligible for reimbursement under section 5102 (a) (1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement”]). As these examples illustrate, a “fraud” defense in the no-fault area often actually refers to a challenge to coverage or eligibility for reimbursement.

Here, rather than any independent fraud, present is a defense of “excessive treatment” by a medical provider, which involves questioning the health services provider’s bill. A question of medically inappropriate treatment cannot be readily equated to a coverage issue (Central Gen. Hosp. v Chubb Group, supra, 90 NY2d at 199 [“treatment being deemed excessive by the insurer . . . would not ordinarily implicate a coverage matter”]).

On questions regarding medical necessity in the no-fault area, the issue of appropriateness of treatment is one which must be raised in the course of claims processing. The claim form itself gives rise to a presumption of medical necessity (Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 7 Misc 3d 18, 22 [App Term, 2d Dept 2004] [“presumption of medical necessity . . . attaches to the claim form”]). Any objection to a lack of medical necessity must be stated in a claim denial form, and must be “supported by competent evidence such as an independent medical examination, a peer review or other proof which sets forth a factual basis [*5]and a medical rationale for denying the claim” (Healing Hands Chiropractic, P.C. v Nationwide Assur. Co., 5 Misc 3d 975, 976 [Civ Ct, NY County 2004, Kern, J.] [also involving a claim for CPT compensation]; see also, decisions following trial, Nir v Allstate Ins. Co., 7 Misc 3d 544 [Civ Ct, Kings County 2005, Matos, J.], and CityWide Social Work & Psychological Servs. v Travelers Indem. Co., 3 Misc 3d 608 [Civ Ct, Kings County 2004, Battaglia, J.]). At all stages, the insurer bears the burden of proof on a medical necessity defense (see Healing Hands Chiropractic, P.C. v Nationwide Assur. Co., supra; see also Lumbermens Mut. Cas. Co. v Inwood Hill Med., P.C., 8 Misc 3d 1014[A], 2005 NY Slip Op 51101[U], *6 [Sup Ct, NY County 2005, Ramos, J.] [“failure to appear (for a scheduled examination under oath or independent medical examination) rebuts the presumption of the medical necessity . . . (but) does not require dismissal of the action” on medical necessity grounds]).

It is the conclusion of this court that this challenge to a health services procedure cannot be cloaked as one of fraud. Moreover, even if looking at the record as a whole for those “[b]adges of fraud permitting an inference of fraudulent intent” (Nonas v Romantini, 271 AD2d 292, 292 [1st Dept 2000] [a fraudulent conveyance case]), the fact that CPT or sNCT is not compensable by Medicare is but a single factor and is insufficient without more to establish fraudulent intent (Spires v Mihou, 13 AD3d 1056, 1057 [4th Dept 2004] [“fraudulent intent is rarely established by direct proof, but we nevertheless conclude that there are insufficient ‘badges of fraud’ in this case from which such intent may be inferred”]; compare Brody v Pecoraro, 250 NY 56, 61 [1928 Cardozo, Ch. J.] [“The traditional badges of fraud are spread over the transaction in prodigal profusion”]; see Inwood Hill Med. v Allstate Ins. Co., 3 Misc 3d 1110[A], 2004 NY Slip Op 50565[U] [Civ Ct, NY County 2004, Hagler, J.] [an extended analysis of fraud allegations in the context of a no-fault summary judgment motion]). Most significantly, given that the tendered defense fits suitably within the structure of analysis for the treatment of a medical necessity issue, attempting to cast this attack on a health services bill as exempt from the need for a timely articulated denial appears to be a step which would fly in the face of a clear caution issued by the Court of Appeals (Presbyterian Hosp. v Maryland Cas. Co., supra, 90 NY2d at 285-286 [“The tradeoff of the no-fault reform still allows carriers to contest ill-founded, illegitimate and fraudulent claims, but within a strict, short-leashed contestable period and process designed to avoid prejudice and red-tape dilatory practices. To string out belated and extra bites at the apple is . . . unfounded under the statutes, regulations and policies” and “we discern no justification for penalizing injured parties or their provider assignees by recognizing disincentives against prompt attention and action (to timely claims processing)”]).

Turning to the evidence presented appropriate to medical necessity, the defense expert’s testimony failed to address the medical status of the patients at issue and failed to present any proof of inappropriateness of the testing utilized based upon an individual review of each claim. New York courts insist that no-fault insurers focus on the facts regarding the individual claimant in these cases, whether involving first-party or third-party claims for compensation for medical procedures, because the governing legislation requires a grant of “full compensation for economic loss” (Oberly v Bangs Ambulance, 96 NY2d 295, 298 [2001]; Insurance Law § 5101). No evidence was presented that the bills were inappropriate in amount for the procedures at issue.

Accordingly, in relation to this claim for compensation, this “provider fraud” argument is rejected as a disguised attempt to avoid the strictures regarding claims processing contained in the Comprehensive Motor Vehicle Insurance Reparations Act and is held not to be equivalent to a viable challenge to coverage or eligibility for reimbursement. Rather, it is found proper to consider the subject claims under the standards applicable to a medical necessity issue and—applying a fair preponderance of the credible evidence standard of proof—no cognizable reason to deny or diminish payment has been established by the insurer.

Conclusion

Given the foregoing and the parties having agreed that there were assignments of benefits to plaintiff and that completed copies of proofs of claim were mailed and received by the defendant, but not paid or denied within 30 days of receipt, the plaintiff has established his case (11 NYCRR former 65.15 [g] [3]).

Accordingly, judgment in each case shall issue for the plaintiff. Based upon the court’s experience and observation, the reasonable value of the services of plaintiff’s attorney fees exceeds the amount permitted under Insurance Law § 5106 and it is determined that plaintiff is entitled to attorney fees and statutory interest pursuant to such provision.

Footnotes

Footnote 1: This conclusion was also reached by others. In 1999, an article in the American Association of Electrodiagnostic Medicine’s journal Muscle & Nerve reviewed available literature and concluded that “the information in [health services] publications is insufficient to make conclusions about the usefulness of this form of sensory testing at the present time” (Neurotron, Inc. v American Assn. of Electrodiagnostic Medicine, 189 F Supp 2d 271, 273 [D Md 2001], affd 48 Fed Appx 42 [4th Cir 2002] [dismissing the manufacturer’s product disparagement and Lanham Act claims]). In 1997, the Pennsylvania Blue Shield program issued a statement that CPT had “no proven clinical utility” and was not compensable (Neurotron Inc. v Medical Serv. Assn. of Pennsylvania, Inc., 254 F3d 444, 447 [3d Cir 2001] [dismissing the manufacturer’s product disparagement claim]).

Footnote 2: As to plaintiff’s assignor Ostroviak, the record contained a prescription form for the test issued by a chiropractor; as to both plaintiff’s assignors, the test was administered by a chiropractor. The defendant has advanced no argument that CPT or sNCT is a procedure which the State Board of Regents and the State Board for Chiropractors do not permit a chiropractor to “prescribe” nor an electrical device which a chiropractor may not “utilize” (Education Law § 6551 [3]). As cogently pointed out by Judge Markey in ABC Med. Mgt. v GEICO Gen. Ins. Co. (3 Misc 3d 181, 185 [Civ Ct, Queens County 2003]), a ready answer to such an inquiry may be found in consulting the list of what is permitted, as well as a review of the Workers’ Compensation Law fee schedules incorporated into the no-fault program which lists procedures for which a chiropractor may seek compensation (12 NYCRR 348.2 [a]).

It is noted that a health care services provider performing a procedure at the request of a chiropractor may file a direct claim for no-fault compensation with an insurance company provided the service is one which a chiropractor may prescribe and the service is medically necessary (Omega Diagnostic Imaging, P.C. v State Farm Mut. Auto Ins. Co., 8 Misc 3d 715 [Civ Ct, Kings County 2005, Nadelson, J.]). The insurer here has failed to preserve a “fee schedule” defense for trial purposes, because that defense was not asserted in the subject claim denials (Jamil M. Abraham M.D. P.C. v Country-Wide Ins. Co., 3 Misc 3d 130[A], 2004 NY Slip Op 50388[U], *2 [App Term, 2d & 11th Jud Dists 2004] [“we have held that by virtue of a timely claims denial an insurer is entitled to interpose the (fee schedule) defense” and “establish that . . . charges exceeded that permitted by law by evidentiary proof”]).

Footnote 3: A defense that a health service was not provided by the health services provider or its employees, but by an independent contractor, would bar a suit because the plaintiff then would not be “a ‘provider’ within the meaning of the insurance regulations” and such defense is “nonwaivable and not subject to the preclusion rule” (Rockaway Blvd. Med. P.C. v Progressive Ins., 9 Misc 3d 52, 54 [App Term, 2d Dept 2005]). The chiropractor who administered the tests at issue was called in by plaintiff’s office to conduct the tests and brought his own testing machine, facts generally indicative of independent contractor status, but his statement that he was plaintiff’s employee was not challenged.

Footnote 4: Absent any argument which might spring from policy language or have another basis, objecting to health services as experimental or of dubious value gives no rise to an independently cognizable objection, distinct from a medical necessity argument (12 Couch on Insurance 3d § 171:66 [“Requirement of Reasonable Relation to Treatment Prescribed”; compensable no-fault medical expenses may include “expenses for innovative medical procedures warranted by circumstances” and such “charges should be reviewed on a case-by-case basis because of the unique nature and speculative value of the service rendered. The critical issue here is the value of the service performed in light of the claimant’s condition”]).

[*1]

Supreme Court, New York County, April 17, 2006

APPEARANCES OF COUNSEL

Robinson & Cole LLP, New York City (Joseph L. Clasen and Richard J. Guida of counsel), for plaintiff. Krause & Mauser, LLP, New York City (Robert Washuta of counsel), for Kuok Hang Leong, defendant.

OPINION OF THE COURT

Rolando T. Acosta, J.

Introduction

Kuok Hang Leong was struck by a car insured by American Transit Insurance Company, and the insureds neither informed American Transit of the accident nor of Leong’s lawsuit instituted several months later. Leong, however, immediately notified American Transit about the accident,^[FN1] and his attorney informed American Transit that it had been retained to pursue any legal claims. Leong also sought no-fault benefits from American Transit. In response, American Transit assigned a claims adjuster, investigated the claim, and asked Leong to submit to an independent medical exam (IME) on three separate occasions. Notwithstanding the fact that counsel served American Transit with its default judgment motion against the insureds and American could have prevented the default, American Transit instead commenced the instant action and moved for a judgment declaring that it did not have to defend or indemnify the insureds or the victim. According to American Transit, it could disclaim coverage because neither the insureds nor the victim provided timely notice of litigation, and that a showing of prejudice was not required before it could disclaim on this basis. Leong cross-moved to dismiss American Transit’s complaint, arguing that American Transit’s motion was premature and that in any event he had given it timely notice.

The court is thus required to consider the primary issue in these motions for summary judgment, namely, whether the “no-prejudice” rule applies in the facts of this case, and even if it does, whether that requirement was satisfied by counsel’s letter informing American Transit that it had been retained to pursue any potential claims. Given the circumstances of this case, the court finds in favor of the victim. American Transit had timely knowledge of the accident and was well aware of Leong’s counsel’s involvement in the matter. The court will not permit American Transit to manipulate its own notice requirements to deny coverage to a victim.

Background

Plaintiff American Transit issued a car insurance policy on behalf of defendant B.O. Astra Management Corp. with a policy period from March 1, 2004 to March 1, 2005. Although B.O. Astra owned the vehicle, the vehicle was registered to defendant Manuel Lema. On March 19, 2004, defendant Leong was struck by the vehicle driven by defendant Mario Chauca in Queens County. [*2]

Twelve days after the accident, on March 31, 2004, Leong’s counsel provided American Transit with written notice of Leong’s accident and claim. The written notice stated, inter alia, “[p]lease be advised that your insured was involved in a car accident. This letter is to inform you that we have been retained by [Leong] in this matter, and to further inform you of potential claims against your insured.” On that same date, by separate letter, Leong’s counsel sent American Transit a letter and an application for no-fault benefits.

Approximately one month after the accident, on April 22, 2004, American Transit acknowledged in writing that it had received Leong’s correspondence, that it was investigating the claim and that it would contact counsel’s office upon completion of the investigation, that a file had been established, provided the name of the claims adjuster, and requested additional information regarding Leong’s liability theory and injuries.

Since American Transit was also the no-fault carrier on Leong’s first-party benefits claim for, among other expenses, medical bills, it requested that Leong see an orthopedic surgeon for examination five weeks after the accident. The initial request for an IME was followed up with three additional requests.

Four months after the accident, on July 7, 2004, Leong initiated a lawsuit against B.O. Astra, Lema and Chauca in Supreme Court, Queens County (the underlying action). Neither B.O. Astra, Lema nor Chauca informed American Transit of the underlying action. According to American Transit, it did not learn of the underlying action until January 27, 2005, when it received a copy of Leong’s motion for a default judgment against B.O. Astra, Lema and Chauca. On February 4, 2005, American sent notification to all defendants that it was disclaiming coverage for failure to provide timely notice of the commencement of the underlying action. Three and a half months later, on May 20, 2005, American Transit commenced this action seeking a declaration that it does not have a duty to defend or indemnify the defendants. Only Leong answered American Transit’s complaint raising several affirmative defenses, including failure to state a cause of action.

American Transit’s claim is based on language in the policy, which allegedly states that “[i]f any suit is brought against the insured . . . the insured shall immediately forward to the company every summons or other process served upon him . . .  .” A copy of the policy containing this language, however, was not attached to American Transit’s motion papers.

On June 7, 2005, Leong obtained a default judgment against B.O. Astra, Lema and Chauca on the underlying action and an inquest was held on November 22, 2005.

Motions for Summary Judgment

Plaintiff’s motion for summary judgment is denied inasmuch as Leong has not had the opportunity to engage in discovery. (CPLR 3212 [f].) As Leong argued in his moving papers, “American Transit should have to produce its claim file in this matter, its insurance policy setting forth the obligations, rights and duties of American Transit and all documents regarding its investigation into the claim.” (Affirmation in support of cross motion ¶ 22; Baron v Incorporated Vil. of Freeport, 143 AD2d 792, 792-793 [2d Dept 1988] [“(i)t is well established that where facts essential to justify opposition to a motion for summary judgment are exclusively within the knowledge and control of the movant, summary judgment may be denied”].) Since B.O. Astra and Lema defaulted in the underlying action, there is no reason to believe that Leong would have any information about the policy in its possession. Indeed, as noted above, plaintiff did not even attach a copy of the policy to its moving papers in the instant case.

Plaintiff’s motion for summary judgment is also denied because even if it had attached the insurance policy and thereby established the notice of lawsuit requirement, the court finds that under the circumstances of this case, that requirement was satisfied. Therefore, Leong’s cross motion for summary judgment dismissing the complaint against him is granted.

Notice Requirements

An insurer may demand that in addition to receiving timely notice of the accident, that it also receive timely notice of claimant’s commencement of litigation. (American Tr. Ins. Co. v Sartor, 3 NY3d 71 [2004].) “The purpose of such notice is to provide the insurer with a fair and [*3]reasonable opportunity to appear and defend against a claim or exercise its right to settle the matter.” (Id. at 75.) The failure to satisfy this condition precedent “may allow an insurer to disclaim its duty to provide coverage.” (Id. at 76 [emphasis added].)

Unlike failure to give timely notice of claim, which relieves the insurer of its obligation to perform whether or not it can show prejudice (the no-prejudice exception),^[FN2] the notice of law suit requirement is not always governed by the “no-prejudice” rule. (See, e.g., Matter of Brandon [Nationwide Mut. Ins. Co.], 97 NY2d 491, 496-497 [2002] [the insurance policy in this case dealt with Supplementary Uninsured Motorist (SUM) coverage].) As the Court of Appeals noted in Matter of Brandon, the limited “no-prejudice” exception was created in Security Mut. Ins. Co. of N.Y. v Acker-Fitzsimons Corp. (31 NY2d 436 [1972]), to allow the insurer to protect itself from fraud by investigating claims soon after the underlying events, to set reserves, and to take an early and active role in settlement discussions. “While immediate notice of legal action may indeed help SUM insurers to protect themselves against fraud, set reserves and monitor and perhaps settle the tort action,” the Court of Appeals held that “the notice of claim requirement served this purpose.” (Matter of Brandon, 97 NY2d at 497.) Likewise, in Rekemeyer v State Farm Mut. Auto. Ins. Co. (4 NY3d 468, 476 [2005]), the Court of Appeals held that where an insured previously gives timely notice of the accident, the carrier must establish that it is prejudiced by a late notice of SUM claim before it may disclaim coverage. Significantly, in Rekemeyer, the Court of Appeals noted that in addition to giving timely notice of the accident, the plaintiff made a claim for no-fault benefits soon thereafter.

“That notice was sufficient to promote the valid policy objective of curbing fraud or collusion. Moreover, the record indicates that State Farm undertook an investigation of the accident. It also required plaintiff to undergo medical exams [on two separate occasions]. Under these circumstances, application of a rule that contravenes general contract principles is not justified.” (Rekemeyer, 4 NY3d at 475-476.)

The issue of whether a primary insurer can rely on the “no-prejudice” exception and disclaim coverage based solely upon a late notice of litigation or whether it must show prejudice was addressed by the Court of Appeals in Argo Corp. v Greater N.Y. Mut. Ins. Co. (4 NY3d 332 [2005]). In Argo, plaintiff did not give notice of claim and gave notice of lawsuit 14 months after the injured party served the complaint upon the Secretary of State, six months after service of the default motion upon plaintiffs, until more than three months after default was entered, and until almost three months after service of the note of issue upon plaintiffs. (Id. at 338.)

“[U]nder the circumstances of this case,” the Court of Appeals held that plaintiff’s late notice was untimely as a matter of law and that the insurer need not show prejudice. (Id. at 336 [emphasis added].) The Court noted that “Brandon did not abrogate the no-prejudice rule and should not be extended to cases where the carrier received unreasonably late notice of claim.” (Id. at 339-340.) It also noted that the facts in Argo “are distinguishable from Brandon where a timely notice of claim was filed, followed by late notice of lawsuit, and distinguishable from Rekemeyer, where an insured gave timely notice of the accident, but late notice of the SUM claim.” (Id. at 340.) It is in this context that the Court of Appeals held that:

“The rationale of the no-prejudice rule is clearly applicable to a late notice of lawsuit under a liability insurance policy. A liability insurer, which has a duty to indemnify and often also to defend, requires timely notice of lawsuit in order to be able to take an active, early role in the litigation process and in any settlement discussions and to set adequate reserves. Late notice of lawsuit in the liability insurance context is so likely to be prejudicial to these concerns as to justify the application of the no-prejudice rule. Argo’s [*4]delay was unreasonable as a matter of law and thus, its failure to timely notify GNY vitiates the contract. GNY was not required to show prejudice before declining coverage for late notice of lawsuit.” (Id.)

In the present case, according to plaintiff, Leong failed to satisfy the notice of lawsuit requirement because plaintiff first learned of the underlying lawsuit on January 27, 2005, when Leong served plaintiff with a copy of his default motion. Since the lawsuit was commenced almost seven months earlier on July 7, 2004, notice of the suit was not timely. Plaintiff further argues that it is irrelevant whether it suffered any prejudice.

In this court’s opinion, even though this case does not deal with SUM insurance, the rationale of Brandon still applies. American Transit was not only given timely notice of claim (as in Brandon), but it was also informed that counsel had been retained. Moreover, American Transit stated that it would investigate the claim and provided counsel with the name of a claims adjuster. Significantly, American Transit was also the no-fault carrier on Leong’s first-party benefits claim and requested that Leong see an orthopedic surgeon for examination five weeks after the accident. The initial request for an IME was followed up with three additional requests. (See, e.g., City of New York v Continental Cas. Co., 27 AD3d 28 [1st Dept 2005] [insurer was given timely notice of occurrence, actively participated in the litigation before City was impleaded, and was served with a copy of the complaint against the city by Consolidated Edison Co. when it was originally served].) Also, unlike Argo, American Transit received notice of the lawsuit before a default judgment had been entered. Furthermore, American Transit could have prevented the default (see, e.g., Halali v Vista Envts., Inc., 8 AD3d 435, 435 [2d Dept 2004] [“(t)he non-party . . . Insurance Company” is an “interested person” under CPLR 5015]), but chose instead to allow the default judgment to be entered unopposed so that it could later avail itself of the “no-prejudice” rule.^[FN3] Accordingly, the “no-prejudice” rule does not apply in this case.

Even if the “no-prejudice” rule were to apply in the facts of this case, this court finds that counsel’s letter to American Transit informing it that counsel had been retained satisfied the notice of lawsuit requirement. That letter, which specifically stated that counsel was informing American of potential claims against it, clearly served the notice requirement’s function, as identified by the Court of Appeals in Argo. Namely, it allowed American Transit the opportunity “to be able to take an active, early role in the litigation process and in any settlement discussions and to set adequate reserves.” (Argo Corp. v Greater N.Y. Mut. Ins. Co., supra, 4 NY3d at 340.) Indeed, [*5]American Transit did just that by immediately investigating the claim, assigning a claims adjuster and asking Leong to submit to an IME. To rule otherwise would reward American Transit for manipulating its alleged ignorance of Leong’s demise in order to avoid honoring its own insurance policy obligations. Moreover, it would turn on its head the legislative policy choice which permits the victim of an accident to notify the insurer when, as here, the insured failed to do so. Accordingly, Leong’s motion for summary judgment dismissing the complaint is granted.

Plaintiff’s Motion for a Default Judgment against B.O. Astra, Lema and Chauca.

Plaintiff’s motion for a default judgment against B.O. Astra, Lema and Chauca is denied even though they failed to appear in this matter inasmuch as American Transit’s duty to indemnify in this case was preserved by Leong. That is, pursuant to Insurance Law § 3420 (a) (3), the injured party in an accident does not have to rely on the insured to provide notice and can instead provide the notice on his own. As the Court of Appeals noted in American Tr. Ins. Co. v Sartor (3 NY3d 71, 79 [2004]),

“[r]ather than being left to the mercy of an insured’s acts of compliance or noncompliance with the terms of the insurance policy, a claimant injured by a vehicle . . . can safeguard the ability to seek enforcement of a judgment against the insurer by exercising the independent notice right provided by the Legislature in Insurance Law § 3420 (a) (3).”

Here, Leong availed himself of Insurance Law § 3420 (a) (3), and gave the proper notices.

Accordingly, based on the foregoing, it hereby ordered that plaintiff’s motion for a default judgment against B.O. Astra, Lema and Chauca is denied; and it is further ordered that plaintiff’s motion for summary judgment against all the defendants is denied; and it is further ordered that defendant Leong’s motion for summary judgment dismissing the complaint against it is granted. >[Portions of opinion omitted for purposes of publication.]

>

Footnotes

Footnote 1: Insurance Law § 3420 (a) (3) permits an injured party to provide notice to the insurance company of the automobile involved in the accident.

Footnote 2: “The no-prejudice” rule is

“a limited exception to two established contract principles: ‘(1) that ordinarily one seeking to escape the obligation to perform under a contract must demonstrate a material breach or prejudice; and (2) that a contractual duty [requiring strict compliance] ordinarily will not be construed as a condition precedent absent clear language showing that the parties intended to make it a condition.’ ” (Rekemeyer v State Farm Mut. Auto. Ins. Co., 4 NY3d 468, 475 [2005], quoting Unigard Sec. Ins. Co. v North Riv. Ins. Co., 79 NY2d 576, 581 [1992].)

Footnote 3: Although on February 1, 2005, American Transit sent Leong a proposed stipulation which stated, inter alia, that it would appear on behalf of the insureds and Leong would withdraw his motion for default judgment (see affidavit of Richard Carroll, dated Oct. 18, 2005, exhibit A), Leong rejected the stipulation on the grounds that it was really “a legal agreement on various legal issues and points.” (Affirmation in further support of Leong’s cross motion, dated Oct. 24, 2005, ¶ 9.) Indeed, American Transit’s proposed stipulation stated in relevant part:

“There has been no timely notification to American Transit . . . that an action was commenced as required by the policy. The Summons and Complaint for this action have never been received by American Transit . . . , neither the plaintiff nor the insured gave timely notice that an action had been initiated.

“Since there was a breach of a policy condition American Transit . . . can disclaim coverage to the insured and the injured party for all claims arising out of this accident and would have no obligation to pay any portion of Judgment rendered against its insured or any costs associated with same.”

Leong, however, stated that he was willing to vacate the default, withdraw the inquest that had been scheduled, and accept an answer by American Transit on behalf of the insureds if they agreed to defend and indemnify their insureds under the limits of the policy. (Affirmation in further support of Leong’s cross motion ¶ 5, exhibit 1.)

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 (Dolores L. Waltrous, J.), entered on March 3, 2005. The order granted plaintiff’s motion for summary judgment.

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

In an action to recover assigned first-party no-fault benefits, a plaintiff provider establishes a prima facie entitlement to summary judgment by proof that it submitted the claims, setting forth the fact and the amounts of the losses sustained, and that payment of no-fault benefits was overdue (see Insurance Law § 5106 [a]; Mary [*2]
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]). Any deficiencies in plaintiff’s moving papers concerning proof of its submission of the claims were cured by defendant’s denial of claim forms attached to plaintiff’s moving papers, which adequately established that plaintiff sent, and that defendant received, the claims (see Careplus Med. Supply Inc. v State-Wide Ins. Co., 11 Misc 3d 29 [App Term, 2d & 11th Jud Dists]; Ultra DiagnosticsImaging v Liberty Mut. Ins. Co., 9 Misc 3d 97 [App Term, 9th & 10th 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]).

Defendant’s denials of plaintiff’s claims were not timely made within the 30-day statutory period within which it was required to pay or deny the claims (11 NYCRR 65-3.8 [c]). While an insurer’s timely verification requests and compliance with the follow-up verification requirements may extend the 30-day period (see 11 NYCRR 65-3.5 [b]; 65-3.6 [b]; Hospital for Joint Diseases v ELRAC, Inc., 11 AD3d 432 [2004]), defendant’s contention that its request that plaintiff’s assignor execute and return the transcript of his examination under oath (EUO) tolled the 30-day period is without merit since the insurance regulations in effect at the time the claims were submitted did not even require the claimant to appear for an EUO (see Ocean Diagnostic Imaging P.C. v State
Farm Mut. Auto. Ins. Co., 5 Misc 3d 53 [App Term, 9th & 10th Jud Dists 2004]; Melbourne Med., P.C. v Utica Mut. Ins. Co., 4 Misc 3d 92 [App Term, 2d & 11th Jud Dists 2004]). In any event, even assuming that a request that a claimant execute and return an EUO transcript would constitute a valid basis for tolling the 30-day claim determination period, defendant herein failed to proffer proper proof of having mailed said request (see Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564 [2005]; Hospital for Joint Diseases v Nationwide Mut. Ins. Co., 284 AD2d 374 [2001]). Accordingly, defendant is precluded from raising most defenses (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282 [1997]).

Defendant also opposed the motion on the ground of fraud. To the extent that defendant’s claim of fraud is, in essence, premised on fraudulent billing or excessive medical treatment, these are defenses subject to the 30-day preclusion remedy (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., 90 NY2d at 285; Careplus Med. Supply Inc. v State-Wide Ins. Co., 11 Misc 3d 29, supra; Fair Price Med. Supply Corp. v Travelers Indem. Co., 9 Misc 3d 76 [App Term, 2d & 11th Jud Dists 2005]; Melbourne Med., P. C. v Utica Mut. Ins. Co., 4 Misc 3d 92, supra).

Nevertheless, defendant is not precluded from asserting the defense that the collision was in furtherance of an insurance fraud scheme, despite its untimely denial of
the claims (see Matter of Metro Med. Diagnostics v Eagle Ins. Co., 293 AD2d 751 [2002]). We find that defendant’s submissions were sufficient to demonstrate that defendant’s denial was based upon a “founded belief that the alleged injur[ies] do[ ] not arise out of an insured incident” (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d at 199).

Consequently, plaintiff’s motion for summary judgment should have been denied.

Pesce, P.J., Weston Patterson and Rios, JJ., concur.
Decision Date: April 14, 2006