—[*1]

In an action to recover no-fault benefits under an insurance contract, the defendant appeals from an order of the Supreme Court, Nassau County (Bucaria, J.), dated March 17, 2005, which granted the motion of the plaintiff New York and Presbyterian Hospital, as assignee of Yaakov Elman, for summary judgment on the first cause of action and denied its cross motion for summary judgment dismissing that cause of action.

Ordered that the order is reversed, on the law, with costs, the motion is denied, the cross motion is granted, and the first cause of action is dismissed.

The Supreme Court should have denied the motion of the plaintiff New York and Presbyterian Hospital, as assignee of Yaakov Elman (hereinafter the hospital), for summary judgment on the first cause of action to recover no-fault benefits under an insurance contract its assignee had with the defendant Allstate Insurance Company (hereinafter the insurer). The hospital failed to establish its entitlement to judgment as a matter of law (see CPLR 3212; Alvarez v Prospect Hosp., 68 NY2d 320-327).

The Supreme Court should have granted the insurer’s cross motion for summary judgment dismissing the first cause of action. The insurer made a prima facie showing, through the affidavits of its claims representatives, the “denial of claim” forms sent to the hospital and to Mount Sinai Hospital (the healthcare provider whose claim exhausted the policy limits), and its payment [*2]log listing all payments made to other healthcare providers under the subject policy, that it had exhausted the policy’s coverage limits before it became obligated to pay the hospital’s claim and that such payments were made in compliance with 11 NYCRR 65-3.15 (see Nyack Hosp. v General Motors Acceptance Corp., 27 AD3d 96 [2005]). In opposition, the hospital failed to raise a triable issue of fact.

The hospital’s remaining contentions are without merit. Adams, J.P., Skelos, Fisher and Lunn, JJ., concur.

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 (Erica L. Prager, J.), entered December 14, 2004. The order denied plaintiff’s motion for summary judgment.

Order affirmed without costs.

In this action to recover $8,388.13 in first-party no-fault benefits for health care services provided plaintiff’s assignor, plaintiff moved for summary judgment. The court below denied the motion and we affirm. Defendant denied receiving the instant claims and plaintiff’s only proof that it submitted its claims was the provider’s statement that “[e]ach of the claims for payment were [sic] timely submitted in the ordinary course of business to [defendant].” Such an assertion failed to prove a standard office practice or procedure designed to ensure that items are properly addressed and mailed (see Residential Holding Corp. v Scottsdale Ins. Co., 286 AD2d 679, 680 [2001]). Although plaintiff proved a claim denial form used by defendant which denied “all” of plaintiff’s claims, the form admitted receipt of no specific claim and cannot be construed to concede that defendant received the specific claims herein at issue.

Rudolph, P.J., Tanenbaum and Lippman, JJ., concur.
Decision Date: April 7, 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 (Dolores L. Waltrous, J.), entered March 4, 2005. The order denied plaintiffs’ motion for summary judgment.

Appeal insofar as taken by plaintiff Square Synagogue Transportation Inc. dismissed.

Order, insofar as appealed from, reversed without costs, motion by plaintiffs A.B. Medical Services PLLC, D.A.V. Chiropractic P.C. and Lvov Acupuncture P.C. for summary judgment granted, and matter remanded to the court below for a calculation of statutory interest and an assessment of attorney’s fees.

This action to recover $7,762.98 in assigned first-party no-fault benefits arises from a July 19, 2002 motor vehicle accident which has resulted in two related appeals involving different assignors, which have already been decided by this court: A. B. Med. Servs. PLLC v Utica Mut. Ins. Co. (10 Misc 3d 50 [App Term, 2d & 11th Jud Dists 2005]) and Ocean Diagnostic Imaging, P.C. v Utica Mut. Ins. Co. (9 Misc 3d 138[A], 2005 NY Slip Op 51747[U] [App Term, 2d & 11th Jud Dists]).

In the instant case, plaintiffs A.B. Medical Services PLLC, D.A.V. Chiropractic P.C. and Lvov Acupuncture P.C., all providers of health care services, established their prima facie entitlement to summary judgment by proof that they submitted statutory claim forms, setting forth the fact and amounts of the losses sustained, and that payment of no-fault benefits was [*2]overdue (see Insurance Law § 5106 [a]; Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742 [2004]; Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U] [App Term, 2d & 11th Jud Dists]). The burden then shifted to defendant to create a triable issue of fact (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]).

Defendant’s December 4, 2002 claim denial was untimely as to all claims with the exception of plaintiff A.B. Medical Services PLLC’s claims for $67.60 and $33.70, and plaintiff Lvov Acupuncture P.C.’s claim for $85. Since the instant claim denial form lacked almost all of the information required for a properly executed form, including the critical information as to the amounts and dates of the claims, and the dates the claims were received, it was tantamount to no denial at all (Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564, 565 [2005] [“(A) denial of a claim form issued by (an insurer). . . even if timely, (is) fatally defective (if) it omit(s) numerous items of requested information and thus (is) incomplete”]; see also 11 NYCRR 65-3.4 [c] [11]; Nyack Hosp. v State Farm Mut. Auto. Ins. Co., 11 AD3d 664, 665 [2004] [the insurer’s “denial of claim, while timely, was nonetheless fatally defective in that it failed to include a number of basic items called for in the prescribed form”]; Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 226 AD2d 613, 614 [1996] [preclusion sanction properly imposed where the insurer “fail(ed) to establish that it issued to the (claimant) a properly completed Denial of Claim Form within the (prescribed) 30-day period”]).

Defendant also failed to establish its defense that the incident was staged as part of a scheme to defraud. The proof offered in the instant case was virtually identical to that offered in the cases of A.B. Med. Servs. PLLC v Utica Mut. Ins. Co. (10 Misc 3d 50, supra) and Ocean Diagnostic Imaging, P.C. v Utica Mut. Ins. Co. (9 Misc 3d 138[A], 2005 NY Slip Op 51747[U], supra) and, as we noted in those cases, none of the proof offered was sufficient to establish said defense: the investigators’ reports and the statements of the operators of the vehicles involved in the accident were unsworn; defense counsel’s affirmation contained allegations which were not based upon personal knowledge; statements in the affidavit of defendant’s employee regarding “material misrepresentations” in the presentation of the claims were conclusory; and neither the affirmation nor the affidavit sufficed as a proper basis for the admission of the unsworn investigative reports.

Thus, notwithstanding the fact that defendant was not precluded from asserting the defense that the incident was in furtherance of an insurance fraud scheme (see Matter of Metro Med. Diagnostics v Eagle Ins. Co., 293 AD2d 751 [2002]), its submissions were insufficient to demonstrate that the defense was based upon a “founded belief that the alleged injur[ies] do[] not arise out of an insured incident” (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1999]). Accordingly, defendant failed to demonstrate the existence of a triable issue of fact as to whether there was a lack of coverage (see Zuckerman v City of New York, 49 NY2d 557 [1980]).

We note that plaintiff Square Synagogue Transportation Inc. properly concedes in the brief that it is not entitled to the relief sought in the motion below and withdraws its claims (A.B. Med. Servs. PLLC v Utica Mut. Ins. Co., 10 Misc 3d 50, supra).

Accordingly, the order, insofar as appealed from, is reversed, the motion for summary judgment by plaintiffs A.B. Medical Services PLLC, D.A.V. Chiropractic P.C. and Lvov Acupuncture P.C. is granted, and the matter is remanded to the court below for a calculation of [*3]statutory interest and an assessment of attorney’s fees pursuant to Insurance Law § 5106 (a) and the regulations promulgated thereunder.

Pesce, P.J., Weston Patterson and Rios, JJ., concur.
Decision Date: April 6, 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 (Delores J. Thomas, J.), entered April 12, 2005, deemed (see CPLR 5501 [c]) an appeal from a judgment entered pursuant thereto on May 6, 2005. The judgment awarded plaintiff the sum of $1,091. The appeal brings up for review the order, entered April 12, 2005, which granted plaintiff’s motion for summary judgment.

Judgment affirmed without costs.

In this action to recover first-party no-fault benefits for medical services rendered to its assignor, plaintiff health care provider established a prima facie entitlement to summary judgment by proof that it submitted the statutory claim form, setting forth the fact and the amount of the loss sustained, and that payment of no-fault benefits was overdue (see Insurance Law § 5106 [a]; Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742 [2004]; Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U] [App Term, 2d & 11th Jud Dists]). The defendant’s denial of claim form indicates that the claim was denied beyond 30 days of its receipt by defendant (11 NYCRR 65-3.8 [c]).

In opposition to plaintiff’s motion, defendant argued, inter alia, that it issued a proper and timely denial based on the assignor’s failure to attend examinations under oath (EUOs). The revised insurance regulations, effective on April 5, 2002, which are applicable herein, include EUOs in the Mandatory Personal Injury Protection Endorsement, providing that an eligible injured person submit to EUOs “as may reasonably be required” (11 NYCRR 65-1.1 [d]). However, in order to assert the defense of failure to appear, “the insurer must include the revised prescribed endorsement with new or renewal policies issued on or after April 5, 2002, and the [*2]claim rules are to be governed by the policy endorsement in effect” (S & M Supply v State Farm Mut. Auto. Ins. Co., 4 Misc 3d 130[A], 2004 NY Slip Op 50693[U] [App [*3]
Term, 9th & 10th Jud Dists]; see also Star Med. Servs. P.C. v Eagle Ins. Co., 6 Misc 3d 56 [App Term, 2d & 11th Jud Dists 2004]; Capio Med., P.C. v Progressive Cas. Ins. Co., 7 Misc 3d 129[A], 2005 NY Slip Op 50526[U] [App Term, 2d & 11th Jud Dists]). In the instant case, defendant’s submissions failed to establish that the insurance policy contained an endorsement authorizing EUOs. Accordingly, any post-claim EUO request by defendant cannot toll the 30-day period within which it was required to pay or deny the claim (see Capio Med., P.C. v Progressive Cas. Ins. Co., 7 Misc 3d 129[A], 2005 NY Slip Op 50526[U], supra; S&M Supply Inc. v Lancer Ins. Co., 4 Misc 3d 131[A], 2004 NY Slip Op 50695[U] [App Term, 9th & 10th Jud Dists]). In any event, defendant has failed to prove mailing of the EUO notices, since there was no allegation by one with personal knowledge that the EUO notices were mailed, no description of standard office mailing procedure so as to give rise to the presumption of mailing (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]), and no sufficient allegation that it complied with the follow-up requirements with regard to any post-claim EUO notice (see 11 NYCRR 65-3.6 [b]). Further, the purported post-claim EUO notice dated July 15, 2002, for which there was no admissible proof of mailing, does not [*4]
constitute proper notice of EUOs, as it merely indicates a delay in the processing of the claim (see Melbourne Med., P.C. v Utica Mut. Ins. Co., 4 Misc 3d 92 [App Term, 2d & 11th Jud Dists 2004]).

Having failed to establish a timely denial of the claim, defendant is precluded from raising most defenses (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282 [1997]), including its defenses of nonconformity with the Worker’s Compensation fee schedules (see New York Hosp. Med. Ctr. of Queens v Country-Wide Ins. Co., 295 AD2d 583, 586 [2002]; Capio Med., P.C. v Progressive Cas. Ins. Co., 7 Misc 3d 129[A], 2005 NY Slip Op 50526[U], supra; Triboro Chiropractic & Acupuncture v New York Cent. Mut. Fire Ins. Co., 6 Misc 3d 132[A], 2005 NY Slip Op 50110[U] [App Term, 2d & 11th Jud Dists]) and lack of medical necessity (see Amaze Med. Supply v Allstate Ins. Co., 2 Misc 3d 134[A], 2004 NY Slip Op 50211[U] [App Term, 2d & 11th Jud Dists]). The court below properly determined that defendant’s failure to seek verification of the assignment and to allege any deficiency in the assignment in a timely denial of claim form, in any event, constitutes a waiver of any defenses with respect thereto (see New York Hosp. Med. Ctr. of Queens v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640 [2004]; Presbyterian Hosp. in City of N. Y. v Aetna [*5]
Cas. & Sur. Co., 233 AD2d 433 [1996]; Park Health Ctr. v Eveready Ins. Co., 2001 NY Slip Op 40665[U] [App Term, 2d & 11th Jud Dists]). Accordingly, plaintiff’s motion for summary judgment was properly granted.

Defendant has failed to preserve its remaining contention for appellate review, and its submissions in support thereof involve matters dehors the record which are not reviewable for the first time on appeal.

Pesce, P.J., Weston Patterson and Rios, JJ., concur.
Decision Date: April 6, 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 (Eileen Nadelson, J.), entered January 14, 2005. The order granted defendant’s motion to vacate the default judgment.

Order affirmed without costs.

In this action to recover assigned first-party no-fault benefits, a default judgment was entered and defendant moved to vacate same. Upon a review of the record, we [*2]
find no basis upon which to disturb the lower court’s finding that defendant established both a reasonable excuse for its default and a meritorious defense to the action
(see Titan Realty Corp. v Schlem, 283 AD2d 568 [2001]; Matter of Gambardella v Ortov Light., 278 AD2d 494 [2000]). Accordingly, the lower court’s order granting defendant’s motion to vacate the default judgment should be affirmed.

Pesce, P.J., Weston Patterson and Rios, JJ., concur.
Decision Date: April 6, 2006

Civil Court of the City of New York, Richmond County

6195/2005

Peter P. Sweeney, J.

Upon the foregoing papers the within motion and cross-motion are decided as follows:

Plaintiff commenced this action pursuant to Insurance Law § 5101 et seq. to recover $3,673.07 in assigned first-party no-fault benefits, as well as statutory interest and attorney’s fees, for medical services provided to its assignor. Defendant now moves for an order inter alia striking plaintiff ‘s complaint due to its failure to provide discovery. Plaintiff cross-moves for summary judgment.

In support of its motion to strike plaintiff’s complaint, defendant demonstrated that the plaintiff has not complied with various discovery demands which were served on June 22, 2005. The demands included interrogatories, a notice of examination before trial, a request for expert disclosure, a demand for party statements and a notice for discovery and inspection. Several of the demands sought information regarding plaintiff’s corporate structure and licensing status, and others sought information concerning whether the physicians who treated plaintiff’s assignor were plaintiff’s employees or independent contractors.

Plaintiff opposed the motion and cross-moved for summary judgment. The papers [*2]submitted by the plaintiff established 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. Plaintiff correctly asserts that its submissions established its prima facie entitlement to summary judgment ( 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]). Plaintiff maintains that to withstand the cross-motion, it was incumbent upon the defendant to submit competent proof raising a triable issue of fact (Alvarez v. Prospect Park Hospital, 68 NY2d 320 [1986]) and that pending a determination of the cross-motion, defendant’s motion to strike the complaint should be stayed pursuant to CPLR 3212, which in pertinent part, provides: “Service of a notice of motion under CPLR 3211, 3212, or section 3213 stays disclosure until a determination of the motion unless the court orders otherwise.” Significantly, there is no indication in either defendant’s or plaintiff’s papers that plaintiff raised timely objections to defendant’s interrogatories in accordance with CPLR 3133 or timely objections to defendant’s other various demands pursuant to CPLR 3122.

In opposition to plaintiff’s cross-motion for summary judgment, defendant maintained that there are triable issue of fact as to whether the injuries for which plaintiff’s assignor received treatment were causally related to the motor vehicle accident underlying the claims. Defendant asserted this defense in its denial of claim dated August 6, 2003 wherein defendant acknowledged having received the claims on May 5, 2005. Defendant’s denial was therefore untimely as a matter of law. Although defendant’s untimely denial did not preclude the defendant from raising this defense (see, Central Gen. Hosp. v. Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1997]; Mount Sinai Hosp. v. Triboro Coach, 263 AD2d 11, 18-19 [1999] ), for the reasons set forth below, the court need not address whether defendant’s submissions raised a triable issue of fact.

Discussion:

In State Farm Mut. Auto. Ins. Co. v. Mallela, 4 NY3d 313, 319 [2005], the Court of Appeals held that an insurer may withhold payment of a first-party no-fault claim “for medical services provided by fraudulently incorporated enterprises to which patients have assigned their claims.” In so holding the Court noted that Business Corporation Law § 1507 provides, “A professional service corporation may issue shares only to individuals who are authorized by law to practice in this state a profession which such corporation is authorized to practice. . .” (id. at 319 n. 1) and that pursuant to 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. . .” (id. at n. 2). The Court concluded that a medical corporation that is owned or controlled by non-physicians violates these provisions and therefore can not recover assigned first-party no-fault benefits (id. at 320).

Although the Mallela court did not squarely address the issue of whether an insurer ‘s untimely denial of a claim precludes it from asserting the defense that a plaintiff medical corporation was a fraudulently incorporated, in A.B. Medical Services PLLC v. Utica Mut. Ins. Co., 2006 NY Slip Op. 26068[App. Term, 2nd & 11th Jud. Dists.] the court held that an insurer may assert the defense even though it was not asserted in a timely denial of claim. The court in A.B. Medical Services PLLC v. Utica Mut. Ins. Co., supra., further held that where an insured [*3]served demands for discovery seeking information concerning whether the plaintiff medical corporation was a fraudulently licensed (i.e. – information regarding corporate structure and licensing status), which were not palpably improper or privileged and which were not objected to in accordance with CPLR 3122, the insurer was entitled to the discovery (id.) and that until such discovery was provided, a motion for summary judgment made by the plaintiff should be denied as premature pursuant to CPLR 3212(f) (id.). Finally, the court held that the insurer’s discovery demands, to the extent they seek information regarding defenses that the insurer was precluded from raising due to its failure to timely deny the claim, were palpably improper, and that the plaintiff did not have to comply with such demands regardless of whether they were timely objected to (id.).

In accordance with A.B. Medical Services PLLC v. Utica Mut. Ins. Co., supra., this Court finds that defendant is entitled to compliance with its various discovery demands to the extent they seek information regarding plaintiff’s corporate structure and licensing status, and that until such discovery is provided, plaintiff’s cross-motion for summary must be denied as premature.The court further finds that the holding in A.B. Medical Services PLLC v. Utica Mut. Ins. Co. necessarily requires that plaintiff provide responses to defendant’s discovery demands to the extent they seek information regarding other defenses that the defendant is not precluded from raising due to the untimely denial of the claim. These defenses include the defense that a billing provider is ineligible to recover assigned first-party benefits for treatment performed by an independent contractor (see Rockaway Blvd. Medical P.C. v. Progressive Ins., 9 Misc 3d 52 [App. Term, 2d & 11th Jud. Dists. 2005]; A.B. Medical Services PLLC v. New York Cent. Mut. Fire Ins. Co., 8 Misc 3d 132(A), 801 N.Y.S.2d 776 [App. Term, 2d & 11th Jud. Dists. 2005]) and any defense to coverage, including but not limited to the defense that the injuries for which treatment was provided were not causally related to the accident (see Central Gen. Hosp. v. Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1997]; Mount Sinai Hosp. v. Triboro Coach, 263 AD2d 11, 18-19 [1999]) and the defense that the collision underlying the claim was a staged event in furtherance of an insurance fraud scheme (see Central Gen. Hosp., 90 NY2d at 199; Matter of Metro Med. Diagnostics v. Eagle Ins. Co., 293 AD2d 751 [2002]; A .B. Med. Servs. v. CNA Ins. Co., 2 Misc 3d 138[A], 2004 NY Slip Op 50265[U] [App Term, 2d & 11th Jud. Dists.]. There is no logical reason to distinguish an insurer’s entitlement to discovery regarding these non-waivable defenses and the type of defenses recognized in Mallela.

Finally, defendant’s interrogatories and other demands, to the extent that they seek information regarding the defenses defendant is now precluded from raising due to its untimely denial of claim, must be stricken.

Accordingly, it is hereby

ORDERED that plaintiff’s cross-motion for summary judgment is DENIED without prejudice to renewal upon completion of discovery; it is further

ORDERED that defendant’s motion to strike plaintiff’s complaint is granted unless within 60 days of service of this order with notice of entry, plaintiff complies with defendant’s discovery demands to the extent they seek information regarding those defenses that defendant is not precluded from raising due to its untimely denial of claim; it is further

ORDERED defendant’s discovery demands to the extent they seek information regarding defenses defendant is precluded from raising due to its untimely denial of the claim are hereby [*4]stricken; and it is further

ORDERED that if within 15 days of the date of this order, the parties do not agree in writing as to what discovery must be provided pursuant to this order, the parties are directed to contact the undersigned at (718) 390-5429 to arrange for a discovery conference.

This constitutes the decision and order of the court.

Dated: April 5, 2006 ________________________________

PETER P. SWEENEY

Civil Court Judge

—[*1]

In an action to recover no-fault insurance benefits under certain insurance contracts, the plaintiffs appeal from an order of the Supreme Court, Nassau County (Dunne, J.), dated August 18, 2005, which granted the defendant’s motion to vacate a judgment entered April 1, 2005, upon its failure to appear or answer, awarding the plaintiffs the principal sum of $28,060.13, and for an extension of time to answer pursuant to CPLR 3012 (d), and granted the defendant’s separate motion to quash an information subpoena.

Ordered that the order is affirmed, with costs.

The Supreme Court providently exercised its discretion in granting the defendant’s motion to vacate its default in answering and for an extension of time to answer pursuant to CPLR 3012 (d). The defendant demonstrated both a reasonable excuse for its brief delay in serving an answer, and potentially meritorious defenses. Furthermore, there is a strong public policy in favor of resolving cases on the merits, and the default was not willful, nor was there a showing of prejudice to the plaintiffs (see Harcztark v Drive Variety, Inc., 21 AD3d 876 [2005]; Bunch v Dollar Budget, Inc., 12 AD3d 391 [2004]; Orwell Bldg. Corp. v Bessaha, 5 AD3d 573 [2004]; Sippin v Gallardo, 287 AD2d 703 [2001]).

The defendant’s motion to quash the information subpoena was properly granted (see CPLR 2304). Florio, J.P., Santucci, Mastro and Rivera, JJ., concur.

Civil Court of the City of New York, New York County

119841/05

Delores J. Thomas, J.

The above captioned matter is before this Court on petitioner’s petition to vacate a No-Fault Master Arbitration Award pursuant to CPLR § 7511. Respondent submitted a Reply to Petition but the respondent was not present at oral argument therefore the reply was not considered and the decision herein is rendered on default.

Petitioner, a provider of medical services, seeks to recover first party no-fault benefits for medical services provided to its assignor. Petitioner submitted bills totaling $1,764.62 and partial payments were made in the amount of $849.84. When petitioner’s assignor did not receive reimbursement from respondent for the balance of the bill(s) which totaled $914.78 for the medical services provided, petitioner filed a Request for Arbitration. An arbitrator designated by the American Arbitration Association (“AAA”) issued a decision dated May 31, 2004 where the arbitrator found that:

“the applicant has no status to present this claim, as it no longer is

a Corporation registered with the New York State Department,

Division of Corporation. An unlicensed facility may not present

a claim for no-fault benefits. The denial by the respondent is

sustained. The claim is denied in its entirety.” [*2]

Petitioner requested a review by a Master Arbitrator who in a decision dated September 23, 2004 rendered a Master Arbitration Award upholding the lower Arbitration Award. The Master Arbitration Award was mailed to Petitioner on or about September 27, 2004 and less than ninety days have elapsed since Petitioner’s receipt of the Master Arbitration Award.

The issue before this court is whether the Master Arbitrator’s decision was arbitrary and capricious, irrational or having no plausible basis or whether the arbitrator’s award was unsupported by the evidence in his holding that the petitioner could not present a claim for no-fault benefits.

Judicial review of an arbitration award is limited by statute, specifically, CPLR § 7511 (Matter of Petrofsky v. Allstate Ins Co, 54 NY2d 207 [1981]; Matter of Bamoun v. Nationwide Mut. Ins. Co., 75 AD2d 812 [2nd Dept 1980]; aff’d 52 NY2d 957 [1981]). However, in the case of compulsory arbitration, the award may be vacated where the arbitrator’s determination is without rational basis ( Caso v. Coffy, 41 NY2d 153, 158 [1976] the decision is arbitrary and capricious (Id; see generally Petrofsky v Allstate, supra); or if the determination disregards applicable law or is based on an error of law (Brunner v. Allstate Ins. Co., 79 AD2d 491 [4th Dept 1981]).

Courts have held that the Master Arbitrator’s authority to review the award of the lower arbitration is derived from Section 675 of the Insurance Law (Petrofsky v. Allstate, supra at 208). A Master Arbitrator therefore in addition to the grounds set forth in CPLR Article 75 is also authorized to review the award on the grounds set forth in11 N.Y.C.R.R. 65.17 as promulgated by the Superintendent of Insurance.

The role of the Master Arbitrator is to review the determination of the lower arbitrator to assure that the arbitrator reached his decision in a rational manner; and, that the decision was not arbitrary and capricious, or incorrect as a matter of law (Petrofsky v. Allstate Insurance Co., supra). The Master Arbitrator while possessing broader powers of review than the Court, is however like the courts precluded from reviewing factual or procedural errors ((Petrofsky v. Allstate, supra).

In the instant case, the Master Arbitrator found that:

Although the rule stated by the lower arbitrator is overbroad and

would not apply to a corporation dissolved for legitimate personal

or business reasons, I conclude that it applies in the circumstances

of these cases.”

The Master Arbitrator went on to say that:

respondent alleged that the dissolution resulted from governmental

action or pressure predicated on applicant’s fraudulent, unethical and

improper practices. Applicant’s principal refused to comply with

directives that he testify and the arbitrator was within his power in

drawing adverse inference because of such refusal. I find that it would

be contrary to public policy to award benefits to an entity dissolved

and unlicensed as a result of its fraudulent and improper practices in

presenting claims for services. [*3]

Petitioner argues that it is entitled to payment as it submitted a proper proof of claim(s) and that the respondent’s denial of the claim was untimely. In addition, petitioner argues that the lower arbitrator allowed respondent to raise issues at the hearing which were irrelevant to the claim and such issues were precluded because they were not raised in a timely denial. Petitioner further argues that the subsequent status of a corporation has no bearing on such corporation’s ability to collect payment for services which were rendered while such corporation was active.

Defendant argues that the insurance company was entitled to withhold payment for medical services provided by a fraudulently incorporated medical corporation and cites to State Farm Mut. Auto Ins. Co., v. Mallela, 4 NY3d 313 [2005](“Mallela III“) where the Court of Appeals held:

“The Superintendent’s regulation allowing carriers to withhold

reimbursement from fraudulently licensed medical corporations

governs this case. We hold that on the strength of this regulation,

carriers may look beyond the face of licensing documents to identify

willful and material failure to abide by state and local law.

Defendant further argues it submitted sufficient evidence to support the arbitrator’s denial by presenting a certificate from the New York State Department of State, Division of Corporations showing that petitioner was dissolved; that the corporation was dissolved as part of a plea in a criminal matter; and, that the doctor who was served with a subpoena and was to testify as to the relationship between petitioner and a management group refused to appear upon the advice of his attorney.

Before the Court can decide on the whether to vacate the arbitrator and Master’s Arbitration’s award, this Court must first review the question as to whether section § 65-3.16(a)(12) should be applied prospectively only or retroactively. In this case, the services were provided on January 19, 2000. The stated reasons for denial as listed in the June 20, 2000 NF-10 are:

Diagnostic tests denied based upon AAEM recommendations

regarding reasonable numbers of studies to arrive at diagnosis.

Diagnostic tests have been over utilized & therefore were

unnecessary & did not assist in rendering any diagnosis.

Fees not in accordance to fee schedule. EMG supplies are included

in charge of the EMG test.

It is well settled that an insurer must either pay or deny a claim for first party no fault benefits within 30 days after receiving proof of the claim (see, Insurance Law § 5106[a]; 11 NYCRR § 65.15[g][3] now 11 NYCRR § 65-3.5[a]). Failure to timely deny the claim renders the no-fault benefits overdue, and the insurer is precluded from raising any defenses, other than lack of coverage (see, Presbyterian Hosp. v. Maryland Cas. Co., 90 NY2d 274 [1997]). It is clear that the NF-10 on its face shows that the claim was not timely denied ^[FN1] and it does not list [*4]fraud of any kind as the reason for denial. It is also clear that the Court of Appeals said in its holding in Mallela III, that an insurer may deny payment to a fraudulently incorporated provider. The Court of Appeals in Mallela III, however, failed to address the issue of whether § 65-3.16(a)(12) should apply retroactively to payments not yet paid by the insurance carrier.^[FN2] The lower courts have split in their decisions. Several courts have held that public policy concerns warrant denials of payment to fraudulent licensed medical providers and Mallela III should be applied retroactively (see, A.T. Med., P.C. v. State Farm Mut. Ins. Co. 10 Misc 3d 568, 2005 NY Slip Op. 25461 [Civ. Ct, Queens Co., 2005]; Multiquest, PLLC v. Allstate Ins. Co., 9 Misc 3d 1031, 2005 NY Slip Op. 25356 [Civ. Ct, Queens Co. 2005]; Metroscan Imaging PC v. Geico Ins. Co. 8 Misc 3d 829 [Civ. Ct, Queens Co. 2005]). Others courts have held that if the Court of Appeals wanted to apply the Mallela III decision retroactively, it would have said so. In addition, these courts have further held that unless the law or a review of the legislative history specifically state or indicate the law is retroactive in nature, the law is prospective only; therefore those courts have allowed fraudulently licensed providers to collect payments for services rendered prior to enactment of § 65-3.16(a)(12) (see, Multiquest P.L.L.C. v Allstate Ins. Co, 10 Misc 3d 1061[A], 2005 NY Slip Op. 52071[U] [Civ. Ct. Queens Co., 2005]); Multiquest PLLC v. Allstate Ins. Co., 10 Misc 3d 877, 2005 NY Slip Op. 25512 [Civ. Ct., Queens Co, 2005]. There is much debate as to whether a fraudulently licensed medical provider who provided services before April 5, 2002, is entitled to payment and the lower court’s have ruled inconsistently. The Court of Appeals has yet to rule on this issue. It is not this Court’s function nor within this court’s jurisdiction in the instant matter to settle this debate and rule one way or the other as any ruling from this court would simply be another voice in the debate. The review, in this case, is limited to whether the arbitrator or Master Arbitrator’s decisions was arbitrary or capricious or incorrect as a matter of law.

This Court finds that the determination by the arbitrator that fraud may be an issue in the processing of this claim does not constitute an arbitrary or capricious ruling nor is it incorrect as a matter of law. The decision is rationally reasoned based on the facts of this case.

In this case, the arbitrator took a negative inference from several facts that: (1) the applicant, despite the service of a subpoena, did not appear; (2) the corporation was no longer active; (3) such dissolution may have been the result of a plea bargain based upon fraudulent, criminal activity; and (4) the applicant’s representative did not present any information that contradicted respondent’s allegations.

A view of the arbitration award from both the lower and Master Arbitrator shows that there is no basis to vacate the award. Both arbitrators determined that the claim was rejected based upon an allegation of fraud. The issue regarding the relationship of the medical facility and its management group plus the negative inferences surrounding the applicant was a rational basis for denial of this claim. This holding and thus the arbitrator’s award was based upon the resolution of factual and legal determinations reached after reviewing the evidence submitted; such a determination may not be set aside by this Court even were the Court to disagree with [*5]those findings. The Master Arbitrator’s award therefore was neither arbitrary, capricious, irrational or without a substantial or plausible basis. Also, based upon the ruling in Mallela III and lower court cases, the decision is not incorrect as a matter of law.

Accordingly, petitioner’s petition seeking to vacate the Arbitration Award is hereby dismissed. This decision is rendered on default.

This constitutes the decision and order of the Court.

DATED: March 31, 2006

Brooklyn, New York

DELORES J. THOMAS

Judge Civil Court

Footnotes

Footnote 1: There is no allegation that defendant asked for addition verification of information pursuant to 11 NYCRR §65-3.5.

Footnote 2: The Court of Appeals in State Farm Mut. Auto Ins. Co., v. Mallela, 4 NY3d 313,322 [2005] did hold that no cause of action for fraud of unjust enrichment would lie for any payments made by the carriers before that regulation’s effective date of April 4, 2002.