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Civil Court of the City of New York, Kings County, October 3, 2005

APPEARANCES OF COUNSEL

Amos Weinberg, Great Neck, for plaintiffs. Jaffe & Nohavicka, New York City, for defendant.

OPINION OF THE COURT

Peter P. Sweeney, J.

In this action to recover assigned first-party no-fault benefits, the novel issue presented is whether it is appropriate to grant leave to a plaintiff billing provider to amend a fatally defective proof of claim once the action to recover on the claim has been commenced. For the reasons set forth below, the court concludes such a motion should be denied.

Factual Background

The four plaintiff assignees, A.B. Medical Services PLLC, DAV Chiropractic P.C., Daniel Kim’s Acupuncture P.C. and G.A. Physical Therapy P.C., commenced this action seeking to recover on multiple unpaid claims for assigned first-party no-fault benefits for medical services provided to their mutual assignor, Nelson Vargas.

The matter appeared before the undersigned for trial on June 16, 2005. Prior to the commencement of the trial, the parties entered into a written stipulation of admitted facts. Pursuant to the stipulation, the defendant admitted that it received all the proofs of claim at issue (the NF-3 claim forms). Defendant further admitted that it did not pay the claims in full within 30 days of their receipt and that the only payments it made on the claims were those referenced in plaintiffs’ complaint. Defendant admitted that it never requested verification of the claims following their receipt thereby tolling the 30-day period in which it had to pay or deny the claims.

Although the defendant claims to have issued timely denials of the claims asserting lack of medical necessity as its only defense, pursuant to the stipulation, defendant withdrew the denials and the defenses raised therein.

Defendant’s counsel correctly pointed out that in all of the NF-3s, copies of which were stipulated into evidence, the “treating providers” were identified as “independent contractors” of the plaintiff billing providers. Defendant maintained that, for this reason alone, the entire action must be dismissed. In support of its position, defendant cited A.B. Med. Servs. PLLC v Liberty Mut. Ins. Co. (9 Misc 3d 36[*2][App Term, 2d & 11th Jud Dists 2005]). Therein, the court held that a billing provider is ineligible to recover assigned first-party benefits where the medical services were provided by an independent contractor.

Plaintiffs maintained that defendant waived the independent contractor defense recognized in A.B. Med. Servs. PLLC by failing to timely object to plaintiffs’ claim forms and by failing to assert the defense in a timely denial. Plaintiffs further maintained that the treating providers identified in the NF-3s were actually employees of the plaintiffs and that plaintiffs simply made a mistake by identifying them as independent contractors. Plaintiffs moved at trial for leave to amend the NF-3s to correct the mistake and asked for the opportunity to introduce evidence at trial to establish the treating providers’ correct status.

The court reserved decision on all issues and gave the parties permission to submit memorandums of law supporting their respective positions. The court permitted plaintiffs to offer evidence at trial on the issue of whether the treating providers were independent contractors or employees but ruled that such evidence would be considered only if plaintiffs’ motion to amend the proofs of claim were granted.

After due consideration and having had the opportunity to review the memorandums of law submitted by the parties, the court hereby denies plaintiffs’ motion to amend the NF-3 proof of claim forms and directs that judgment be entered in favor of the defendant dismissing the action on the ground that the proofs of claim identified the treating providers as independent contractors thus rendering the claims fatally defective on their face.

Discussion

In A.B. Med. Servs. PLLC (supra), the court held that 11 NYCRR 65.15 (j) (1) (now 11 NYCRR 65-3.11 [a]) prohibits a billing provider from recovering assigned first-party no-fault benefits where the medical services were performed by an independent contractor. 11 NYCRR 65.15 (j) (1) (now 11 NYCRR 65-3.11 [a]) provides that “[a]n insurer shall pay benefits . . . directly to the applicant or . . . upon assignment by the applicant . . . [to] the providers of services.” The court interpreted the phrase “providers of services” to mean an actual provider of medical services and held that a “billing provider seeking recovery of assigned no-fault benefits for medical services which were not performed by it or its employees, but by an independent contractor identified as the ‘treating provider’ on NF-3 claim forms, is not a ‘provider’ of . . . services . . . and is hence not entitled to recover ‘direct payment’ of assigned no-fault benefits” (9 Misc 3d at 37).

Plaintiffs’ contention that defendant waived the independent contractor defense by failing to timely object to plaintiffs’ claim forms and by failing to assert the defense in a timely denial is well taken. Indeed, it is well established that an insurer’s failure to object to the adequacy of plaintiff’s proof of claim within 10 days of receipt (now 15 business days) “constitutes a waiver of any defenses with respect thereto” (see A.B. Med. Servs. PLLC v Nationwide Mut. Ins. Co., 6 Misc 3d 70, 71 [App Term, 2d & 11th Jud Dists 2004]; Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564 [2d Dept 2005]; New York Hosp. Med. Ctr. of Queens v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640 [2d Dept 2004]). It is also well established that, except for the defense that there is no coverage at all for a claim, “preclusion of the insurance company’s ability to deny the claim is the appropriate remedy where, as here, the insurance company neither denies a claim within 30 days after receiving it nor seeks to extend that time by requesting verification in the prescribed forms” (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 278 [1997] [internal quotation marks deleted]; see also Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195 [1997]).

Notwithstanding these principles, in a case decided on July 7, 2005, the Supreme Court, Appellate Term, held that the independent contractor 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 & 11th Jud Dists 2005]). The court must therefore conclude that the principles of waiver and preclusion do not apply where the proof of claim, on its face, demonstrates the applicant’s nonentitlement to payment of the claim. Turning to plaintiffs’ motion for leave to amend their proofs of claim, it is the opinion of the court that the motion must be denied. CPLR 3025 (b) provides that “[a] party may amend his pleading . . . at any time by leave of court” (emphasis added). A proof of claim is not a pleading and the court is unaware of any statute or constitutional provision permitting the amendment of a proof of claim by leave of court, especially where an action is pending that is predicated upon the submission of the proof of claim. Unlike the Supreme Court, this court’s equitable jurisdiction is very limited (Parker v Rich, 140 AD2d 177 [1st Dept 1988]) and absent a particular constitutional or statutory empowerment, this court lacks subject matter jurisdiction to grant equitable relief (see Goldstein v Stephens, 118 Misc 2d 614, 615 [App Term, 1st Dept 1983]). The relief plaintiffs are requesting can only be viewed as equitable in nature and, as stated above, the court is unaware of any statute or constitutional provision empowering this court to grant the relief.

Even if it were within the court’s power to grant plaintiffs’ motion, it would decline to do so. The Insurance Law and the regulations promulgated thereunder give an insurer “30 calendar days after proof of claim is received . . . [to] either pay or deny the claim in whole or in part” (11 NYCRR 65-3.8 [c]; Insurance Law § 5106 [a]). Furthermore, within 10 days of receipt of a claim (now 15 business days), an insurer is entitled to request verification of a claim (11 NYCRR 65.15 [d] [1], now 11 NYCRR 65-3.5 [a]). It would be fundamentally unfair to permit the plaintiffs to cure their fatally defective proofs of claim and then allow them to proceed to trial on the amended claims without giving the defendant an opportunity to pay or deny the amended claims within the allotted time period or an opportunity to request further verification of the claims.

For the above reasons, it is hereby ordered that judgment be entered in favor of the defendant dismissing the entire action.

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 (Robin S. Garson, J.), entered August 18, 2004. The order, insofar as appealed from, granted plaintiff’s motion for summary judgment in regard to causes of action relating to assignors Romana Hernandez and Jaime Diaz.

Order, insofar as appealed from, unanimously reversed without costs and plaintiff’s motion for summary judgment denied in causes of action relating to Romana Hernandez and Jaime Diaz.

In this action to recover first-party no-fault benefits for medical supplies rendered to their assignors, plaintiff established a prima facie entitlement to summary judgment with regard to the causes of action relating to assignors Romana Hernandez and Jaime Diaz by proof that it submitted 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 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]). Inasmuch as defendant failed to pay or deny the claims within the 30-day prescribed period (11 NYCRR 65-3.8 [c]), it was precluded from raising most defenses (see Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282 [1997]).

However, defendant was not precluded from asserting the defense that the various collisions were in furtherance of insurance fraud schemes, despite the untimely denials of the [*2]claims (see Matter of Metro Med. Diagnostics v Eagle Ins. Co., 293 AD2d 751 [2002]). The affidavit of defendant’s claims representative, that the insureds in both cases were involved in intentionally caused collisions, was sufficient to raise a triable issue of fact as to whether the claims of assignors Hernandez and Diaz were [*3]
fraudulent (see A.B. Med. Servs. PLLC v Prudential Prop. & Cas. Ins. Co., 6 Misc 3d 130[A], 2005 NY Slip Op 50076[U] [App Term, 2d & 11th Jud Dists]).
Decision Date: September 30, 2005

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In a proceeding pursuant to CPLR article 75 to vacate an arbitration award in favor of the City of Yonkers dated October 20, 2003, in the sum of $49,962.88, the appeal is from an order of the Supreme Court, Westchester County (Barone, J.), entered April 6, 2004, which granted the petition and vacated the award.

Ordered that the order is reversed, on the law, with costs, the petition is denied, the arbitration award is reinstated and confirmed, and the matter is remitted to the Supreme Court, Westchester County, for the entry of an appropriate judgment (see CPLR 7514 [a]).

On October 12, 2000, nonparty Richard Greco, an employee of the appellant City of Yonkers, sustained personal injuries, when, while crossing the street, he was struck by a motor vehicle owned by nonparty Keith Brunson. Brunson’s vehicle was insured by the petitioner, State Farm Mutual Automobile Insurance Company (hereinafter State Farm). Greco was working at the time of the accident.

Greco filed a bodily injury claim with State Farm, Brunson’s insurer, to recover damages for the personal injuries he sustained in the accident. In February 2002 Greco’s claim was settled for $100,000, the policy limit for the Brunson vehicle. Greco executed a standard form release (hereinafter the general release) dated February 1, 2002, in favor of Brunson, inter alia, [*2]releasing him from liability for any and all claims arising out of the accident.

Meanwhile, the City paid Greco workers’ compensation benefits which totaled $49,962.88. Greco did not seek the City’s permission to settle the personal injury action until after he had settled the matter and signed the general release. The City consented to the settlement in April 2002 in a letter (hereinafter the consent letter) in which it reserved its “offset and credit rights against all retroactive, future, current and modified workers’ compensation benefits payable to Richard Greco based upon the net settlement value received” by him.

The City sought mandatory arbitration pursuant to Insurance Law § 5105 against State Farm for recoupment of the workers’ compensation benefits it paid to Greco, commonly referred to as a “loss transfer.” State Farm asserted two affirmative defenses: that the policy limits were exhausted and that the general release executed by Greco extinguished the City’s subrogation rights. It did not assert that the City’s consent to the settlement constituted a waiver of its loss transfer rights. The arbitrator found in favor of the City. State Farm commenced this proceeding to vacate the arbitrator’s award. The Supreme Court granted the petition and vacated the award on the ground, inter alia, that the arbitrator’s award made no mention of the general release. We reverse.

An arbitration award in a mandatory arbitration proceeding will be upheld if it is supported by the evidence and is not arbitrary and capricious (see Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co., 89 NY2d 214, 223 [1996]; Matter of Kemper Ins. Co. v Westport Ins. Co., 9 AD3d 431, 432 [2004]). On review, an award may be found to be rational if any basis for such a conclusion is apparent to the court based upon a reading of the record (see Caso v Coffey, 41 NY2d 153, 158 [1976], citing Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 NY2d 222, 231 [1974]; Dahan v Luchs, 92 AD2d 537, 538 [1983]).

Pursuant to Insurance Law § 5105, an insurer who pays out first-party benefits or workers’ compensation benefits in lieu thereof is afforded the mandatory intercompany arbitral process to recoup payment of those benefits through a loss transfer (see Doherty v Barco Auto Leasing Co., 144 AD2d 424, 426 [1988]). This mandatory arbitration provides the sole remedy for loss transfer (id.). An insurer does not lose its loss transfer rights as part of a personal injury settlement absent an “express waiver” of those rights (Allstate Ins. Co. v Manfredi Motor Tr. Co., 159 AD2d 969 [1990]; see Matter of Kemper Ins. Co. v Westport Ins. Co., supra; Doherty v Barco Auto Leasing Co., supra). In the case at bar, the City did not expressly waive its right to seek recovery of first-party benefits in intercompany arbitration, and the general release executed by its insured did not effect a waiver of its loss transfer rights. Thus, the arbitrator’s determination was supported by the evidence in the record (see Doherty v Barco Auto Leasing Co., supra; Allstate Ins. Co. v Manfredi Motor Tr. Co., supra), and was not arbitrary and capricious (see Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co., supra).

The dissent does not dispute that the general release contains no explicit waiver of the City’s loss transfer rights. According to the dissent, however, the arbitrator failed to consider whether there was an explicit waiver of the right to loss transfer recovery, implying that the City’s consent letter constituted such a waiver. This issue was not before the arbitrator. The issue tendered to the arbitrator, as phrased by State Farm, was whether the general release extinguished the City’s claim, not whether the consent letter constituted an explicit waiver of the right to loss transfer. There is absolutely no evidence in the record to establish that the consent letter was submitted to the [*3]arbitrator for consideration on the issue of waiver. In fact, State Farm, the party who, according to the dissent, benefitted from this document, vigorously denied in the Supreme Court that it was submitted to the arbitrator. State Farm accused the City of submitting the consent letter to the Supreme Court for the first time. It criticized the City for failing to submit an affidavit by an individual with knowledge to establish that the consent letter had in fact been submitted in the arbitration. Thus, we are not, as the dissent states, deciding the issue de novo based upon an assumption of what evidence was before the arbitrator.

Even if the consent letter had been submitted to the arbitrator, it, like the general release, contains no explicit waiver of the City’s loss transfer rights. The mere fact that the City consented to the settlement is insufficient to constitute a waiver of its loss transfer rights. This point is made pellucidly clear by this Court’s holding in Doherty v Barco Auto Leasing Co. (supra). There, the plaintiff Andrew Doherty was involved in an accident while operating his employer’s truck. Liberty Mutual Insurance Company (hereinafter Liberty Mutual) insured Doherty’s employer against both workers’ compensation and automobile liability claims. State Farm Automobile Insurance Company (hereinafter State Farm Automobile) insured the vehicle owned by Barco Auto Leasing Co. Pursuant to its policies of insurance, Liberty Mutual paid Doherty’s workers’ compensation and no-fault benefits. Doherty commenced an action to recover damages for personal injuries. The action was settled with the participation of a supervisor at Liberty Mutual. Doherty stipulated, inter alia, “that there were no outstanding liens against his recovery and that all medical bills were paid to the no-fault and compensation carrier” (Doherty v Barco Auto Leasing Co., supra at 425).

Liberty Mutual thereafter placed into intercompany arbitration the loss transfer claims for no-fault and workers’ compensation benefits paid to Doherty. The arbitrator awarded Liberty Mutual 80% of its claims. State Farm Automobile commenced a CPLR article 75 proceeding to vacate the arbitration awards, and Liberty Mutual cross-moved for an order confirming the awards. The Supreme Court granted State Farm Automobile’s petition on the ground that the stipulation was binding upon Liberty Mutual, and that it had waived any “liens.” This Court reversed, holding that the stipulation of settlement did not expressly refer to Liberty Mutual’s right to loss transfer recovery, but only to outstanding liens (see Doherty v Barco Auto Leasing Co., supra at 425-426). “As a consequence, it [could] not be said that Liberty [Mutual] unequivocally waived its right to loss transfer recovery” (Doherty v Barco Auto Leasing Co., supra at 426, citing Matter of New Hampshire Ins. Co. [Utilities Mut. Ins. Co.], 134 AD2d 670 [1988]). The fact that Liberty Mutual participated in and explicitly consented to the settlement was of no relevance.

In the case at bar, there is evidentiary support in the record for the arbitrator’s award because the general release contains no express waiver of the City’s loss transfer rights (see Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co., supra; Allstate Ins. Co. v Manfredi Motor Tr. Co., supra; Doherty v Barco Auto Leasing Co., supra). The outcome would not have been different even if, as the dissent suggests, the consent letter had been before the arbitrator since it too contains no express waiver of the City’s loss transfer rights.

Finally, the arbitrator complied with the applicable procedural requirements by including a brief statement of the basis for the finding (see 11 NYCRR 65.10 [d] [4] [vii]). The dissent simply disagrees with it.

Accordingly, the Supreme Court should have denied the petition and confirmed the arbitrator’s award in favor of the City (see CPLR 7511 [e]). Crane, J.P., Mastro and Spolzino, JJ., concur.

Goldstein, J., dissents and votes to affirm the order with the following memorandum in which Luciano, J., concurs: The instant case arises out of an accident involving a vehicle insured by the petitioner and Richard Greco, a pedestrian employed by the City of Yonkers who was crossing the street at the time of the accident. Richard Greco claimed and received workers’ compensation benefits. In February 2002 he settled his claim against the petitioner’s insured for $100,000, constituting the policy limits and signed a general release. On April 1, 2002, the City consented to the settlement of $100,000, reserving its “offset and credit rights” against “retroactive, future, current and modified Workers’ Compensation benefits payable to Richard Greco based upon the net settlement value.”

Thereafter, the City sought reimbursement from State Farm Mutual Automobile Insurance Company (hereinafter State Farm) pursuant to Insurance Law § 5105, which permits recoupment of payments of first-party benefits or payments made in lieu of first-party benefits if the requirements of Insurance Law § 5105 (a) are satisfied (see State Farm Mut. Auto. Ins. Co. v Aetna Cas. & Sur. Co., 132 AD2d 930 [1987], affd 71 NY2d 1013 [1988]). Recoupment pursuant to Insurance Law § 5105 is known as a “loss transfer recovery” (Doherty v Barco Auto Leasing Co., 144 AD2d 424, 426 [1988]).

In accordance with Insurance Law § 5105 (b) the controversy was submitted to mandatory arbitration. In the arbitration proceeding, State Farm asserted as affirmative defenses that its policy limits had been exhausted and a general release had been executed by Greco. A copy of the release was submitted with State Farm’s answer.

The arbitrator, after a hearing, awarded the City $49,962.88, stating that the “City of Yonkers proved liability against . . . State Farm for 100%” and “liability & claimed amount not at issue.” The arbitrator further stated that “bodily injury liability limit stretches to accommodate a basic PIP [personal injury protection] subro[gation] or worker’s comp loss transfer.”

State Farm commenced this proceeding to vacate the award. The petition was granted and the parties were directed to submit to a new arbitration hearing before a different arbitrator on the ground that “[t]he Arbitrator issued an incomprehensible two sentence decision which makes no mention of the legal issue of the general release entered into by Mr. Greco in favor of State Farm.”

Where, as here, the parties have submitted to compulsory arbitration, to be upheld, the award must have evidentiary support and cannot be arbitrary or capricious (see Mount St. Mary’s Hosp. of Niagara Falls v Catherwood, 26 NY2d 493 [1970]; Cigna Prop. & Cas. v Liberty Mut. Ins. Co., 12 AD3d 198 [2004]). Further, pursuant to 11 NYCRR 65.10 (d) (4) (vii) (d) the arbitration award must be rendered in a written decision which states a “brief statement of the basis for the finding, such as lack of proof, contributing negligence, apportionment of negligence or other controlling principles of law.”

Greco claimed and received workers’ compensation benefits. As part of the [*4]settlement, a workers’ compensation carrier may explicitly waive its right to a credit or offset pursuant to Workers’ Compensation Law § 29 (4) (see Miszko v Gress, 4 AD3d 575 [2004]) its right to recovery of liens and its right to a loss transfer recovery (see Matter of Kemper Ins. Co. v Westport Ins. Co., 9 AD3d 431, 432 [2004]; Allstate Ins. Co. v Manfredi Motor Tr. Co., 159 AD2d 969 [1990]; Doherty v Barco Auto Leasing Co., supra).

In the instant case, Greco’s employer explicitly consented to the settlement. The issue before the arbitrator was whether there was an explicit waiver of the right to loss transfer recovery. This issue was apparently not considered by the arbitrator. The majority would confirm the award, based upon its own determination that the evidence in the record would permit a finding that there was no explicit waiver.

Since the controversy including State Farm’s affirmative defense “must, as a matter of [law], be arbitrated” (Matter of State Ins. Fund [Country-Wide Ins. Co.], 276 AD2d 432 [2000]), it is not the function of this Court to decide the issues de novo. The arbitrator’s decision did not comply with 11 NYCRR 65.10 since it did not state the basis for the arbitrator’s finding in comprehensible terms. Accordingly, the award was properly vacated as arbitrary and capricious.

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 (Manuel J. Mendez, J.), entered September 28, 2004. The order denied plaintiff’s motion for summary judgment.

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

In this action to recover first-party no-fault benefits for medical equipment furnished to its assignors, plaintiff established its entitlement to summary judgment by its proof that it submitted the functional equivalent of the statutory claim forms (11
NYCRR 65-3.5 [a], [f]), setting forth the fact and 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]; A.B. Med. Servs. PLLC v Lumbermens Mut. Cas. Co., 4 Misc 3d 86 [App Term, 2d & 11th Jud Dists 2004]). Defendant’s failure to pay or deny [*2]assignor Figueroa’s claim for $580 and assignor Rivera’s claims for $840 and $1,085 within the statutory 30-day claim determination period (11 NYCRR 65-3.8 [c]), or to prove a tolling of said period precluded the defenses set forth in the claim denial forms (Presbyterian Hosp. in City of N.Y. v Maryland Cas. Co., 90 NY2d 274, 282 [1997]; Triboro Chiropractic & Acupuncture PLLC v New York Cent. Mut. Fire Ins. Co., 7 Misc 3d 138[A], 2005 NY Slip Op 50856[U] [App Term, 2d & 11th Jud Dists]).

As for the defenses that survive the preclusion sanction, i.e., the alleged absence of an applicable policy and assignors’ fraudulent conduct with respect to the underlying traffic incidents (Matter of Metro Med. Diagnostics v Eagle Ins. Co., 293 AD2d 751 [2002]; Mount Sinai Hosp. v Triboro Coach, 263 AD2d 11, 18-19 [1999]), defendant failed to establish that triable issues exist as to either defense. Defendant’s claim that plaintiff did not prove that its assignors are covered by a policy issued by defendant is without merit as plaintiff’s claim forms established the matter prima facie and defendant offered no proof to the contrary. Further, absent proof sufficient to create a triable issue as to whether any of the traffic accidents were staged with the intent to defraud, defendant failed to prove that the defense was based on “a founded belief that the alleged injur[ies] do[] not arise out of an insured incident” (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d 195, 199 [1997]).

Defendant based its partial denials of most of the remaining claims on the improper ground that the sums sought for the items of medical equipment exceeded an alleged average of suppliers’ prevailing rates in plaintiff’s geographic location. The insurance regulations governing medical equipment and supplies applicable to the instant action limit a provider’s recovery of medical equipment benefits to 150 percent of cost (11 NYCRR Appendix 17-C, part E [b] [1]). This “applicable fee schedule” constitutes the only limitation on recovery and a defendant’s denial of benefits on the ground that the fees sought exceeded prevailing rates for such equipment in the provider’s geographical location has been rejected as without merit (Amaze Med. Supply v Allstate Ins. Co., 3 Misc 3d 43, 44 [App Term, 2d & 11th Jud Dists 2004]; King’s Med. Supply v Allstate Ins. Co., 2 Misc 3d 127[A], 2003 NY Slip Op 51681[U] [App Term, 9th & 10th Jud Dists]). It is noted that pursuant to the revised Insurance Department regulations regarding durable medical equipment and supplies, effective October 6, 2004 (see Circular Letter No. 8 [2004]; 11 NYCRR Appendix 17-C, part F, eff. October 6, 2004), the current fee schedule for medical equipment sets forth, as an alternative to the 150 percent limit, whichever is less, the “usual and customary price charged to the general public” (11 NYCRR Appendix 17-C, part F [a] [2]).

As to the defense based on defective assignments, defendant’s failure to seek verification of the assignments or to allege any deficiency in the assignments in its claim denial forms “constitutes a waiver of any defenses with respect [to them]” (Ocean Diagnostic Imaging P.C. v Travelers Prop. Cas. Corp., 7 Misc 3d 137[A], 2005 NY Slip Op 50790[U] [App Term, 2d & 11th Jud Dists]; see also New York Hosp. Med. Ctr. of Queens v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640 [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]). Defendant’s further claim that plaintiff cannot establish a prima facie case for the delivery of equipment to the assignors because its manager-affiant did not personally supply the equipment or witness the equipments’ “turnover” is also without merit. The affidavit of plaintiff’s officer and billing manager sufficiently “[s]et forth [*3][his] duties so as to support the conclusion that the attached exhibits were sufficiently accurate and trustworthy to merit their admission into evidence pursuant to the business record exception to the hearsay rule (see CPLR 4518 [a]; People v Kennedy, 68 NY2d 569 [1986]), and said exhibits established that the supplies were furnished to the assignor” (King’s Med. Supply, Inc. v Hereford Ins. Co., 5 Misc 3d 55, 56 [App Term, 9th & 10th Jud Dists 2004]; see also Ocean Diagnostic Imaging P.C. v State Farm Mut. Auto. Ins. Co., 4 Misc 3d 141[A], 2004 NY Slip Op 51032[U] [App Term, 9th & 10th Jud Dists]).

We have considered the remaining defenses and find them to be similarly without merit (see Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564, 565 [2005]; New York Hosp. Med. Ctr. of Queens v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640, supra; Careplus Med. Supply Inc. v Travelers Home and Mar. Ins. Co., 7 Misc 3d 133[A], 2005 NY Slip Op 50648[U] [App Term, 2d & 11th Jud Dists]).

Accordingly, plaintiff’s motion for summary judgment is granted and the matter remanded to the court below for a calculation of statutory interest and an assessment of attorney’s fees pursuant to Insurance Law § 5106 (a) and the regulations promulgated thereunder.
Decision Date: September 20, 2005

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 October 8, 2004. The order denied plaintiff’s motion for summary judgment.

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

In this action to recover first-party no-fault benefits for medical equipment furnished to its assignors, plaintiff established its entitlement to summary judgment by its proof that it submitted the functional equivalent of the statutory claim forms (11 NYCRR 65-3.5 [a], [f]), setting forth the fact and 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]; A.B. Med. Servs. PLLC v Lumbermens Mut. Cas. Co., 4 Misc 3d 86 [App Term, 2d & 11th Jud Dists 2004]). Defendant’s claim that plaintiff failed to prove that its assignors are covered by a policy issued by defendant is without merit as plaintiff’s claim forms established the matter prima facie and defendant offered no proof to the contrary. The burden then shifted to [*2]defendant to raise a triable issue of material fact (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). In our view, defendant failed to establish any basis for the motion’s denial.

Defendant based its partial denials of the claims on the improper ground that the sums sought for the items of medical equipment exceeded an alleged average of suppliers’ prevailing rates in plaintiff’s geographic location. The insurance regulations governing medical equipment and supplies applicable to the instant action limit a provider’s recovery of medical equipment benefits to 150 percent of cost (11 NYCRR Appendix 17-C, part E [b] [1]). This “applicable fee schedule” constitutes the only
limitation on recovery and a defendant’s denial of benefits on the ground that the fees sought exceeded prevailing rates for such equipment in the provider’s geographical location has been rejected as without merit (Amaze Med. Supply v Allstate Ins. Co., 3 Misc 3d 43, 44 [App Term, 2d & 11th Jud Dists 2004]; King’s Med. Supply v Allstate Ins. Co., 2 Misc 3d 127[A], 2003 NY Slip Op 51681[U] [App Term, 9th & 10th Jud Dists]). It is noted that pursuant to the revised Insurance Department regulations regarding durable medical equipment and supplies, effective October 6, 2004 (see Circular Letter No. 8 [2004]; 11 NYCRR Appendix 17-C, part F, eff. October 6, 2004), the current fee schedule for medical equipment sets forth, as an alternative to the 150 percent limit, whichever is less, the “usual and customary price charged to the general public” (11 NYCRR Appendix 17-C, part F [a] [2]).

As to the defense based on defective assignments, defendant’s failure to seek verification of the assignments or to allege any deficiency in the assignments in its claim denial forms “constitutes a waiver of any defenses with respect [to them]” (Ocean Diagnostic Imaging P.C. v Travelers Prop. Cas. Corp., 7 Misc 3d 137[A], 2005 NY Slip Op 50790[U] [App Term, 2d & 11th Jud Dists]; see also New York Hosp. Med. Ctr. of
Queens v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640 [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]). Defendant’s further claim that plaintiff cannot establish a prima facie case for the delivery of equipment to the assignors because its manager-affiant did not personally supply the equipment or witness the equipments’ “turnover” is also without merit. The affidavit of plaintiff’s officer and billing manager sufficiently “[s]et forth [his] duties so as to support the conclusion that the attached exhibits were sufficiently accurate and trustworthy to merit their admission into evidence pursuant to the business record exception to the hearsay rule (see CPLR 4518 [a]; People v Kennedy, 68 NY2d 569 [1986]), and said exhibits established that the supplies were furnished to the assignor” (King’s Med. Supply, Inc. v Hereford Ins. Co., 5 Misc 3d 55, 56 [App Term, 9th & 10th Jud Dists 2004]; see also Ocean Diagnostic Imaging P.C. v State Farm Mut. Auto. Ins. Co., 4 Misc 3d 141[A], 2004 NY Slip Op 51032[U] [App Term, 9th & 10th Jud Dists]).

We have considered the remaining defenses and find them to be similarly without merit (see Nyack Hosp. v Metropolitan Prop. & Cas. Ins. Co., 16 AD3d 564, 565 [2005]; New York Hosp. Med. Ctr. of Queens v New York Cent. Mut. Fire Ins. Co., 8 AD3d 640, supra; Careplus Med. Supply Inc. v Travelers Home and Mar. Ins. Co., 7 Misc 3d 133[A], 2005 NY Slip Op 50648[U] [App Term, 2d & 11th Jud Dists]). [*3]

Accordingly, plaintiff’s motion for summary judgment is granted and the matter remanded to the court below for a calculation of statutory interest and an assessment of attorney’s fees pursuant to Insurance Law § 5106 (a) and the regulations promulgated thereunder.
Decision Date: September 20, 2005

[*1]

Supreme Court, Appellate Term, Second Department, September 20, 2005

APPEARANCES OF COUNSEL

Amos Weinberg, Great Neck, for appellant. Troy & Troy, Lake Ronkonkoma (Hariharan Krishnaraj and Leonard Romano of counsel ), for respondent.

{**9 Misc 3d at 98} OPINION OF THE COURT

Memorandum.

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

In this action to recover first-party no-fault benefits for medical services rendered to its assignor, plaintiff established 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 Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742 [2004]; A.B. Med. Servs. PLLC v Lumbermens Mut. Cas. Co., 4 Misc 3d 86 [App Term, 2d & 11th Jud Dists 2004]; Damadian MRI in Elmhurst v Liberty Mut. Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51700[U] [App Term, 9th & 10th Jud Dists 2003]). Contrary to the determination of the court below, defendant’s denial of claim form, indicating the dates on which the claims were received, adequately established that plaintiff sent, and that defendant received, the claims (see Capio Med., P.C. v Progressive Cas. Ins. Co., 7 Misc 3d 129[A], 2005 NY Slip{**9 Misc 3d at 99} Op 50526[U] [App Term, 2d & 11th [*2]Jud Dists 2005]; A.B. Med. Servs. v New York Cent. Mut. Fire Ins. Co., 3 Misc 3d 136[A], 2004 NY Slip Op 50507[U] [App Term, 2d & 11th Jud Dists 2004]). Defendant’s denial of claim forms indicate that defendant’s denial of plaintiff’s claims was not timely made within the 30-day statutory period within which it was required to pay or deny the claim (11 NYCRR 65-3.8 [c]). 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]), including its defenses of nonconformity with the workers’ compensation schedules and excessive billing (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] [2005], supra; Triboro Chiropractic & Acupuncture, PLLC 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 2005]).

Defendant also denied the claims on the ground that the response submitted by plaintiff’s assignor to defendant’s wage verification request was fraudulent. In support thereof, defendant submitted the affirmation of its attorney and an attached unsworn report of a handwriting expert, who compared the writing in the wage verification form submitted by the plaintiff’s assignor and the wage verification form submitted by another claimant “involved” in the subject accident, and concluded that the forms had been prepared by the same individual, but could not give an opinion regarding the two signatures “because of the lack of similar letters.” Defendant argues that, despite its untimely denial, it is not precluded from asserting its defense of fraud. Defendant’s argument is without merit.

We note at the outset that the documentation submitted by defendant in support of its fraud defense, consisting of the affidavit of its attorney who is without personal knowledge, and the unsworn affidavit of a handwriting expert, does not constitute competent proof in admissible form (see A.B. Med. Servs. PLLC v State-Wide Ins. Co., 7 Misc 3d 136[A], 2005 NY Slip Op 50785[U] [App Term, 2d & 11th Jud Dists 2005]). In any event, defendant has failed to establish that its defense of fraud is not subject to the 30-day preclusion remedy.

In Central Gen. Hosp. v Chubb Group of Ins. Cos. (90 NY2d 195, 199 [1997]), the Court of Appeals held that

“despite . . . [an insurer’s] failure to reject a claim within the 30-day period prescribed by Insurance Law § 5106 (a) and 11 NYCRR 65.15 (g) (3) [now 11 NYCRR 65-3.8 (c)], [it] may assert a lack of coverage defense premised on the fact or founded belief that the alleged injury does not arise out of an insured incident.” (Emphasis supplied.)

The Court specifically distinguished the insurer’s defense that the injuries were unrelated to the accident, a defense implicating “no coverage at all” (id. at 202), and hence exempt from the preclusion remedy, from the insurer’s defense of excessive medical treatment, which involves “excusal from payment of some part of no-fault benefits—a matter of degree at best” (id.), and is subject to the preclusion remedy. The lack of coverage defense also applies to a “collision . . . caused in the furtherance of an{**9 Misc 3d at 100} insurance fraud scheme” (see Matter of Metro Med. Diagnostics v Eagle Ins. Co., 293 AD2d 751, 751-752 [2002]) but does not encompass the defense of provider fraud which is precluded by an insurer’s untimely denial (see Melbourne Med., P.C. v Utica Mut. Ins. Co., 4 Misc 3d 92 [App Term, 2d & 11th Jud Dists 2004]).

In the instant case, the defendant’s submissions in support of its defense of fraud fail to establish a lack of coverage defense that may be deemed exempt from the preclusion remedy. [*3]The expert’s conclusions are insufficient to raise an issue of fact as to whether the medical services rendered “do[ ] not arise out of an insured incident” (Central Gen. Hosp. v Chubb Group of Ins. Cos., 90 NY2d at 199), so as to implicate a lack of coverage issue. Moreover, the acts allegedly constituting the fraudulent conduct are inadequate to demonstrate that the accident was in furtherance of an insurance fraud scheme so as to invoke the lack of coverage defense and exemption from the preclusion remedy (see Matter of Metro Med. Diagnostics v Eagle Ins. Co., 293 AD2d 751 [2002], supra).

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

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

[*1]

Civil Court of the City of New York, Queens County, September 14, 2005

APPEARANCES OF COUNSEL

Alden Banniettis, Brooklyn, for plaintiff. McDonnell & Adels, P.C., Garden City (John E. McCormack of counsel), for defendant.

OPINION OF THE COURT

Anna Culley, J.

In the case at bar, plaintiff, a medical services provider and assignee of claimant Malik Corbin, brings a motion for summary judgment seeking payment for several claims in the aggregate sum of $6,581.38. These claims arise out of medical services allegedly provided to Corbin as a result of an automobile accident which occurred on December 9, 2001, prior to the effective date of the new regulations (11 NYCRR 65-3.16 [a] [12] [eff Apr. 4, 2002]). In support of its motion, plaintiff submits the affidavit of the corporate officer, Aleksander Tverskoy, M.D., as well as the denial of claim forms (NF-10). The NF-10s are sufficient to adequately establish when the defendant received the bills in question (see A.B. Med. Servs. v New York Cent. Mut. Fire Ins. Co., 3 Misc 3d 136[A], 2004 NY Slip Op 50507[U] [App Term, 2d & 11th Jud Dists 2004]). Each of the denials state, in relevant part: “Your claim is denied because you have not provided the verification requested by State Farm’s Special Investigative Unit. If you provide the requested information, State Farm will reconsider its position.”

All of State Farm’s denial of claims are untimely on their face with the exception of one received September 11, 2002 in the amount $1,353.31. The denial is dated September 18, 2002. As has been held by the Appellate Term, Second and Eleventh Judicial Districts, a denial issued before all verification has been provided is not a proper denial, and therefore, defendant insurance carrier has failed to properly deny this claim (11 NYCRR 65-3.8 [b] [3]; see also Shtarkman v Allstate Ins. Co., 8 Misc 3d 129[A], 2005 NY Slip Op [*2]51028[U] [App Term, 2d & 11th Jud Dists 2005]). Accordingly, it appears plaintiff has established its prima facie entitlement to summary judgment as a matter of law.

In this action, defendant cross-moves seeking summary judgment alleging that the plaintiff is not a properly licensed medical corporation as it is not wholly owned by licensed medical doctors. Defendant has demonstrated that plaintiff herein is a professional medical corporation which has shared as much as 65% of its gross revenues with a corporation owned by a nonphysician. Plaintiff does not dispute these facts in its reply papers.

At the time this motion was submitted, the Court of Appeals had ruled on this issue in State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005]). In Mallela, the Court of Appeals answered a certified question from the United States Court of Appeals for the Second Circuit. The Court was asked to determine “whether, under our ‘no-fault’ insurance laws, insurance carriers may withhold payment for medical services provided by fraudulently incorporated enterprises to which patients have assigned their claims” (id. at 319 [citation omitted]). In answering the question in the affirmative, the Court based its holding on the Superintendent’s amended regulation declaring fraudulently licensed corporations ineligible for reimbursement. The Court held further that State Farm was precluded from recouping payments made by the carrier before April 4, 2002, the effective date of the amended regulation. The Court expressly declined to reach the issue of the viability of heretofore unpaid claims arising under the old regulation. This court will now decide this issue.

In Matter of Gleason (Michael Vee, Ltd.) (96 NY2d 117, 122 [2001]), the New York Court of Appeals observed:

“In determining whether a statute should be given retroactive effect, we have recognized two axioms of statutory interpretation. Amendments are presumed to have prospective application unless the Legislature’s preference for retroactivity is explicitly stated or clearly indicated (see, People v Oliver, 1 NY2d 152, 157). However, remedial legislation should be given retroactive effect in order to effectuate its beneficial purpose (see, Majewski v Broadalbin-Perth Cent. School Dist., 91 NY2d 577; Becker v Huss Co., 43 NY2d 527, 540). Other factors in the retroactivity analysis include whether the Legislature has made a specific pronouncement about retroactive effect or conveyed a sense of urgency; whether the statute was designed to rewrite an unintended judicial interpretation; and whether the enactment itself reaffirms a legislative judgment about what the law in question should be (see e.g., Brothers v Florence, 95 NY2d 290, 299; Matter of OnBank & Trust Co., 90 NY2d 725, 730).”

In 1999, in an effort to combat the widespread abuse in no-fault insurance claims, the Superintendent proposed an amended Regulation 68^[FN*] (see Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854[*3][2003]). Further, section 65-3.16 (a) (12) of the regulation states, in relevant part, that “[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 necessary to perform such service in New York.” “In summarizing the new provision, the department provided its opinion that such a result had previously been required, stating that § 65-3.16 (a) (12) of the new regulations had been added ‘to clarify that a health care provider must be properly licensed to be eligible for reimbursement under no-fault.’ ” (Michael Billy, Jr. and Skip Short, Insurance Department Regulations to Stem Fraudulent No-Fault Claims Upheld by Court of Appeals, 76 NY St BJ 40, 41 [Jan. 2004].)

The Insurance Department’s interpretation of the insurance regulations is entitled to great deference (see Matter of Medical Malpractice Ins. Assn. v Superintendent of Ins. of State of N.Y., 72 NY2d 753 [1988], cert denied 490 US 1080 [1989]). This court must follow the agency’s interpretation of a regulation unless irrational, or unreasonable, or the interpretation runs contrary to the clear wording of a statutory provision (see Matter of John Paterno, Inc. v Curiale, 88 NY2d 328 [1996]).

Based on the foregoing, improperly licensed providers are precluded from recovering claims submitted prior to the amendment, as the amendment was the clarification of the existing regulation. A retroactive application is appropriate where the regulatory intent of the Superintendent was explicit to remedy widespread abuse and fraud in the filing of no-fault claims by improperly licensed medical providers. To hold otherwise would nullify existing statutory provisions which prohibit a professional medical corporation from being owned and operated by anyone other than licensed medical doctors (Business Corporation Law § 1503 [b]), and bar licensed physicians from sharing fees with nonphysicians (8 NYCRR 29.1 [b] [4]; Education Law §§ 6511, 6530 [19]). Accordingly, defendant’s cross motion for summary judgment is granted and the complaint is dismissed.

Footnotes

Footnote *: Between 1992 and 2001, reports of suspected automobile insurance fraud increased by 275%, the bulk of the increase occurring in no-fault insurance fraud. Reports of no-fault fraud rose from 489 cases in 1992 to 9,191 in 2000, a rise of more than 1,700%. No-fault fraud accounted for three quarters of the 16,902 reports of automobile-related fraud received by the Insurance Department’s Frauds Bureau in 2000, and more than 55% of the 22,247 reports involving all types of insurance fraud. In 1999, the Superintendent established a No-Fault Unit within the Frauds Bureau to focus specifically on no-fault fraud and abuse. By one estimate, the combined effect of no-fault insurance fraud has been an increase of over $100 per year in annual insurance premium costs for the average New York motorist.