August 21, 2020

American Tr. Ins. Co. v Martinez (2020 NY Slip Op 50930(U))


The court considered whether American Transit Insurance Company (American Transit) was obligated to pay no-fault insurance benefits to medical providers for treating Jeremy Martinez. The main issue was whether a default judgment against Martinez, who had assigned his right to collect benefits to the medical providers, would preclude the medical providers from claiming benefits. The court held that the default judgment against Martinez did not prevent the medical providers from asserting a claim to no-fault benefits. Additionally, the court considered whether Martinez's failure to appear for scheduled independent medical examinations (IMEs) would defeat coverage under the no-fault policy and foreclose the medical providers' claim to benefits. The court held that American Transit had not demonstrated compliance with procedural and timeliness requirements for scheduling IMEs, and therefore, American Transit was not entitled to summary judgment against the medical providers.

Reported in New York Official Reports at American Tr. Ins. Co. v Martinez (2020 NY Slip Op 50930(U))

American Transit Insurance Company, Plaintiff,




Larkin Farrell LLC, New York, NY (William Larkin of counsel), for plaintiff.

Law Offices of Gary Tsirelman P.C., Brooklyn, NY (Jung Pryjma of counsel), for defendant Wellmart RX Inc.

Gerald Lebovits, J.

This motion concerns the potential obligation to pay no-fault insurance benefits of plaintiff American Transit Insurance Company. Defendant Jeremy Martinez was in a vehicle that was involved in a collision. The vehicle was covered by a no-fault insurance policy issued by American Transit. Martinez assigned the right to collect no-fault benefits under that policy to various treating medical providers, including defendant Wellmart RX Inc. Wellmart applied for no-fault benefits, which American Transit denied.

American Transit brought this action for a declaratory judgment that it is not required to pay no-fault benefits to Martinez or to the other defendants (all medical-provider assignees of Martinez). Wellmart was the only defendant that appeared in the action. American Transit moved for default judgment under CPLR 3215 against Martinez and several of the other non-appearing defendants.

This court granted the default-judgment motion without opposition. The court issued a declaration that Martinez and the non-appearing providers “are not entitled to no-fault benefits as a result of a motor vehicle accident involving Jeremy Martinez . . . due to Jeremy Martinez’s failure to appear for duly scheduled independent medical examinations.” (NYSCEF No. 34 at 1-2 [capitalization omitted].) The court also severed and continued the action as against the remaining defendants, including Wellmart. (See id. at 2.)

American Transit now moves for summary judgment under CPLR 3212 against Wellmart. The motion is denied.


The Effect of This Court’s Prior Default-Judgment Order

American Transit argues that because Wellmart is Martinez’s assignee, Wellmart’s claim for benefits is derivative of Martinez’s rights under the no-fault policy—and thus that the default judgment against Martinez ousted Wellmart’s right to claim benefits. This court disagrees. Decades ago, the Appellate Division held that when an assignment of no-fault benefits is made prior to the institution of legal action, a decision on default against the assignor does not bar the assignee from asserting a claim to no-fault benefits. (See Lakeside Hosp. v Government Empls. Ins. Co., 70 AD2d 658, 658 [2d Dept 1979], citing Gramatan Home Inv. Corp. v Lopez, 46 NY2d 481, 486-487 [1979].)

To be sure, in Lakeland Hospital the court noted that the assignee was not a party to the prior arbitration. Here, as American Transit points out, Wellmart is a party defendant. But although Wellmart is a party to this action, it was not a party to the prior motion. To the contrary, American Transit’s motion papers expressly stated that “[n]o relief is sought at this time with respect to” Wellmart. (NYSCEF No. 20 at 1.) This court’s prior order in this action, although it “awarded a default judgment to [American Transit] against [Wellmart’s] assignor . . . did not declare the rights of [American Transit] as against [Wellmart].” The default-judgment order thus does not have preclusive effect on the current summary-judgment motion. (Jamaica Wellness Medical, P.C. v Mercury Casualty Co., 2018 NY Slip Op 51128[U], at *2 (App Term 2d Dept 2018]; accord Ultimate Health Prods., Inc. v Ameriprise Auto & Home, 57 Misc 3d 9, 11 [App Term 2d Dept 2017].)

American Transit argues that the grant of default judgment against Martinez had the effect of declaring that the no-fault policy was void, leaving Martinez without any claim to benefits that he could [*2]have assigned to Wellmart in the first place. But the judgment that American Transit requested from this court, and which this court entered, did not reach so far. As noted above, the default judgment merely declared that Wellmart (and the other non-appearing defendants) are not entitled to benefits, without going on to declare that the no-fault policy itself was void. (See NYSCEF No. 34 at 1-2.) In any event, in Lakeland Hospital, the arbitration decision entered on the assignor’s default sustained the insurer’s argument that the assignor had no claim to benefits as a result of her no-fault policy having been canceled outright prior to the occurrence—and thus prior to any assignment—for nonpayment of premiums. (See 70 AD2d at 658.) The Second Department nonetheless held that this prior arbitration decision did not preclude the assignee from claiming a right to benefits. (See id.)

American Transit thus is not entitled to summary judgment against Wellmart based merely on this court’s prior default-judgment order against Martinez.

Whether American Transit is Entitled to Summary Judgment on the Merits

Alternatively, American Transit argues that Martinez’s failure to appear for scheduled independent medical examinations (IMEs) defeats coverage under the no-fault policy, and thus forecloses Wellmart’s claim to benefits. This court is not persuaded.

A no-fault insurer seeking a declaration of no coverage due to asserted violations of the terms of the policy must first demonstrate that it complied with each of the procedural and timeliness requirements of 11 NYCRR § 65-3.5, governing the handling of no-fault claims. (See American Transit Ins. Co. v Longevity Med. Supply, Inc., 131 AD3d 841, 841 [1st Dept 2015].) One such requirement is that if the insurer requests additional verification of a no-fault claim in the form of an IME, the IME must be scheduled to occur “within 30 calendar days from the date of receipt of the prescribed verification forms.” (11 NYCRR § 65-3.5 [d].) American Transit has not shown that it satisfied this 30-calendar-day timeframe. The documents submitted by American Transit show at most that the first IME was scheduled to be held 26 days after the date of the scheduling notice. (See NYSCEF No. 41 at 17.) Those documents do not reflect when American Transit received the prescribed verification form, as required to determine whether the IME’s scheduled date satisfied the 30-day requirement.[FN1] Given this failure of proof, American Transit has not satisfied its initial prima facie burden at summary judgment. (See Longevity Medical Supply, 131 AD3d at 841.)[FN2]

American Transit argues that these deadlines apply only to “medical examinations that are necessary to determine if [a] particular claim should be paid,” as opposed to “being scheduled for a more broad reason, ie to determine, generally, if the claimant needs future treatment.” (NYSCEF No. 47 at 12-13.) Even assuming for the sake of argument that this interpretive argument is correct, it does not avail American Transit here.

The record evidence on this motion reflects only that American Transit received Martinez’s NF-2 benefits application on October 2, 2017 (see NYSCEF No. 41 at 11-14 [mailroom stamp and date/time footer]), and prepared an IME scheduling notice 10 days later, on October 12, 2017 (see id. at 17). That short time period itself suggests a connection between Martinez’s initial benefits claim and the scheduling of an IME. More fundamentally, there is no record evidence indicating any other purpose for holding the [*3]IME that could even potentially take that IME out of the scheduling framework of 11 NYCRR § 65-3.5 (b) through (d).

Accordingly, for the foregoing reasons it is hereby

ORDERED that American Transit’s motion under CPLR 3212 for summary judgment in its favor as to defendant Wellmart is denied.



Footnote 1:American Transit has provided the NF-2 claim form provided by Martinez, which contains markings indicating that American Transit received the form on October 2, 2017, 36 days before the IME date. (See NYSCEF No. 41 at 11-14 [mailroom stamp and date/time footer].) But it has not provided the NF-3 verification form.

Footnote 2:In arguing that it could deny no-fault coverage due to Martinez’s failure to appear for IMEs even if those IMEs were not timely scheduled (see NYSCEF No. 54 at 5-10), American Transit does not mention the First Department’s decision in Longevity Medical Supply.