September 5, 2007

Ave T MPC, Corp. v Progressive Ins. Co. (2007 NY Slip Op 51760(U))


The court considered the fact that the plaintiff's assignor, Cheryl Brown, was involved in a motor vehicle accident while driving a vehicle rented from Budget Rent A Car, while having an insurance policy with Progressive Insurance Company which covered another vehicle. The plaintiff submitted claims to Progressive for medical equipment related to the accident, which were denied based on a failure to cooperate with the insurance policy. The main issue was whether the loss was a covered accident, and whether the matter should have been submitted to arbitration for a priority of payment issue. The court held that the burden of explanation or of "going forward with the case" fell upon the defendant to show a lack of coverage and that the defendant failed to introduce a copy of the insurance policy in question, therefore did not meet its burden. Additionally, the court held that the dispute of priority of payments between insurers must be determined and submitted to mandatory arbitration, and since it was not, the complaint was dismissed.

Reported in New York Official Reports at Ave T MPC, Corp. v Progressive Ins. Co. (2007 NY Slip Op 51760(U))

Ave T MPC, Corp. v Progressive Ins. Co. (2007 NY Slip Op 51760(U)) [*1]
Ave T MPC, Corp. v Progressive Ins. Co.
2007 NY Slip Op 51760(U) [16 Misc 3d 1139(A)]
Decided on September 5, 2007
Civil Court Of The City Of New York, Queens County
Lopresto, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.
Decided on September 5, 2007

Civil Court of the City of New York, Queens County

Ave T MPC, Corp. a/a/o, Cheryl Brown, Plaintiff,


Progressive Insurance Company, Defendant.


For the Plaintiff:

The Law Offices of Eva Gaspari PLLC

By Eva Gaspari, Esq.

2300 West 7th Street

Brooklyn, New York 11223

Tel: (718) 266-3009

For the Defendant:

Freiberg & Peck, LLP

By Yilo J. Kang, Esq.

49 West 37th Street, 9th Floor

New York, New York 10018

Tel:(212) 252 -9550

Charles S. Lopresto, J.

The plaintiff’s assignor, Cheryl Brown, was allegedly injured in a motor vehicle accident on January 7, 2003 while driving a vehicle she rented from Budget Rent A Car (hereafter Budget). At the time, Ms. Brown had an insurance policy with Progressive Insurance Company, which covered another vehicle which was not involved in the accident. Ms. Brown received medical equipment for treatment of injuries arising from the motor vehicle accident. The [*2]plaintiff, Ave T MPC, Corp., submitted two separate claims to the defendant, Progressive Insurance Company (hereafter Progressive), for the equipment dispensed on February 6, 2003 and February 22, 2003, in the amounts of $79.99 and $888.00, respectively. The two claims came to a total of $967.99, which, together with interest, costs and attorney fees, reflects the amount sought to be recovered in this case. The plaintiff is now seeking benefits under Ms. Brown’s insurance policy with Progressive for the accident which occurred while she was driving the Budget Rent A Car. Defendant contends that Ms. Brown is not an eligible person for insurance under the policy as she was driving a vehicle other than the vehicle insured by Progressive and thus was not covered.

A trial regarding this matter was held on July 23, 2007. At trial, the parties stipulated that the plaintiff had timely and properly submitted claims for no-fault benefits with respect to the medical equipment at issue to Progressive Insurance Company on behalf of the plaintiff. Given the stipulation of these facts, the plaintiff rested its case. The parties further stipulated that the defendant’s answer would be amended to contain the defense that the event or loss was not covered by the policy of insurance issued by the defendant and the defendant abandoned it’s defense that the claims in dispute had been denied based upon a failure of Ms. Brown to abide by and cooperate in accordance with the terms of the insurance policy. The parties stipulated that the sole issue for the court to determine was if there was a lack of coverage.

The defendant called Tammy Reichel, a senior litigation specialist employed by the defendant, whose responsibilities consisted of reviewing claims which were in litigation. Ms. Reichel testified that Cheryl Brown did have an insurance policy with Progressive Insurance in effect on the date of the accident. The claims presently in dispute had been denied based upon a failure to cooperate as per the terms of the policy. After the claims were received, the defendant repeatedly requested that Ms. Brown cooperate with the coverage investigation and submit to the taking of a recorded statement or otherwise contact the defendant. Various follow up letters were sent to Ms. Brown seeking information with respect to coverage. After receipt of the bills in question from the plaintiff, the defendant advised the plaintiff via a verification request that the benefits were delayed pending the claimant’s cooperation with their requests. After numerous attempts to obtain the recorded statement, the defendant denied the claims in dispute based upon the claimant’s breach of her insurance policy’s cooperation clause for failure to submit to a recorded statement request. While the instant lawsuit was pending, Ms. Reichel testified that the defendant, Progressive, received information from which she identified as an “ISO run” from an ISO computer data base. Ms. Reichel stated that all insurance companies are under a duty to provide information to this data base and she routinely relies upon information obtained from this data base and fully incorporates said information into her records made in the regular course of the defendant’s business. Said information indicated that Budget Rent A Car had received a claim from Ms. Brown for the same accident. Thereafter, a telephone conversation between Allison Saronui of Progressive Insurance Company and Trisha Hopfauf from the Budget Claims Department took place. A fax was sent from Ms. Hopfauf to Ms. Saronui on August 24th, 2007 memorializing this conversation which stated, inter alia, that “Budget was primary for PIP on this loss since this was a NY accident.”. Said fax also contained information acknowledging receipt of a medical bill for Ms. Brown on August 11th, 2003 for services rendered January 10th,2003 to March 13th, 2003, which was denied by Budget on the basis that her claim was untimely. Based upon such information and a police report indicating that the vehicle insured by [*3]the defendant and owned by Ms. Brown was not the vehicle involved in the accident, Ms. Reichel testified that she had a “founded belief” that Progressive was not the carrier liable for the accident and that this accident was not “covered” by the terms of the Progressive policy since the claimant was covered by a policy of insurance other than the one issued by the defendant.


1. Has the defendant established that the loss was not a covered accident?

Generally, an insured who seeks to recover for a loss under an insurance policy has the burden of proving that the loss occurred and that the loss was a covered incident under the terms of the policy. Gongolewski v. Travelers Ins. Co., 252 AD2d 569[2nd Dept 1998], quoting Vasile v. Hartford Acc. & Indem.Co., 213 AD2d 541[ 2nd Dept. 1995]. However, in an action for first-party no fault benefits, which is the case at bar, a provider’s proof of timely submission of a properly completed claim form makes out a prima facie case and there is a presumption of medical necessity. See, Amaze Med. Supply v. Eagle Ins. Co., 2 Misc 3d 128 [ App Term 2d & 11th Jud Dists ]; see also, A.B. Med. Servs. PLLC v. Lumbermens Mut. Cas. Co., 4 Misc 3d 86 [App Term 2d & 11th Jud Dists 2004]. Adopting the Appellate Term’s concept in the related area of medical necessity, it should therefore follow that there is also a presumption of coverage which attaches to the claim form.

In this case, it was stipulated by the parties that the plaintiff had timely and properly submitted claims for no-fault benefits, which established plaintiff’s prima facie case thus establishing a presumption of coverage. A.B.Medical Services, PLLC v. State Farm Mutual Automobile Ins. Company, 7 Misc 3d 822; New York Massage Therapy v. State Farm Mutual Ins. Co. ,14 Misc 3d 1231 (A). Once the plaintiff makes a prima facie showing, the burden of explanation or of “going forward with the case” falls upon the defendant to show a lack of coverage. Mount Sinai Hosp. V. Triboro Coach Inc., 263 AD2d 11. The satisfaction of this burden would permit the defendant to disprove the presumption of coverage. Palmier v. United States Fidelity and Guaranty Company, 135 AD2d 1057 (3rd Dept. 1987).

In the case at bar, the defendant contends that this burden has been satisfied in that it has established that the defendant had a “founded belief” that the loss in question was not covered by the policy of insurance. In Central Gen. Hosp. V. Chubb Group of Ins.Cos., 90 NY2d 195, the Court of Appeals held that ” an insurer… 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”. This case dealt with an insurers failure to reject a claim to recover no-fault benefits within the 30 day period prescribed by statute and regulations and held that the insurer would not be precluded from disclaiming when the defense is lack of coverage. The “fact or founded belief” standard discussed in Chubb, which is often used in “staged accident” cases, is inapplicable in this case. The facts in this case are distinguishable from a “staged accident” case. There has been no contention that the accident did not occur; that it was part of a fraudulent scheme or was an intentional act and thus not a covered incident under the policy. It is uncontroverted that a policy of insurance existed in this case which was issued to Ms. Brown by Progressive. Either the accident in question was covered or it was not. A contracting party to an insurance agreement should not be relieved of it’s duties of performance under the contract because a party “believes” [*4]that performance is not required whether that belief is founded or not if in fact performance is required. In order for the court to determine the issue, it is crucial and essential for the court to know what are the terms of coverage contained within the policy. The defendant did not introduce a copy of the policy of insurance that is in dispute. The defendant merely introduced the declarations page of the claimant’s insurance policy indicating that the car involved in the accident that the claimant was driving was not listed as a car insured by the defendant. In this case the defendant has failed to meet it’s burden to show that the policy of insurance issued to Ms. Brown did not cover the loss at issue. The policy may have contained a clause which covered the use of a rental vehicle as a temporary substitute for the insured’s vehicle while being repaired. See, SZ Medical, PC. V. Lancer Ins. Co.. 7 Misc 3d 86. Absent the actual production of the insurance policy the court can only guess and surmise at the terms and conditions therein. This court is well aware of the exclusions set forth in 11 NYCRR§ 65-1.1, in particular, exclusion C which states PIP coverage does not apply to “the named insured or relative occupying … a motor vehicle other than the insured vehicle”. However, said exclusions do not negate the responsibility of the insurance company to produce said policy at trial. Therefore, it is the holding of this court that the insurance company must introduce the policy at trial in order to demonstrate that the loss in question fell outside the terms of the insured’s policy of coverage in order to satisfy it’s burden.

2. Should have defendant submitted the matter to arbitration?

Notwithstanding the foregoing, the case at bar concerns a priority of payment issue. If a priority of payment issue arises as provided in NYCRR section 65-3.2; it is not considered a coverage question and must be submitted to mandatory arbitration. Section 5105 (b) of the Insurance Law establishes mandatory arbitration procedures promulgated by the Superintendent of Insurance for the resolution of disputes arising between insurers concerning their responsibility for the payment of first- party benefits. See Matter of Pacific Ins. Co. V State Farm Mut. Auto. Ins. Co.,150 AD2d 455[ Second Dept.1989]. In Matter of Pacific, thecourt dealt with issues similar to the facts presented in this case. The court held that ” (t)he Supreme Court erred in ruling that the present issue falls outside the jurisdiction of Insurance Law § 5105 and that it is, therefore not subject to mandatory arbitration, contrary to the clear mandate of 11 NYCRR 65.15 (j) (2), which provides that If a dispute regarding priority of payment arises among insurers who otherwise are liable for the payment of first-party benefits, then the first party to whom notice of claim is given… shall be responsible for payment… Any such dispute shall be resolved in accordance with the arbitration procedures established pursuant to section 5105 of the Insurance Law (section 65.10 of this Part)’. In addition, 11 NYCRR 65.10 (a) (5) provides in pertinent part that any controversy between insurers involving the responsibility or obligation to pay first-party benefits (i.e., priority of payment or sources of payment as provided in section 65.15[j] of this Part) is not considered a coverage question and must be submitted to mandatory arbitration under this section'”. In this case, the defendant refused to pay Ms. Brown’s claims when they were first presented with them. That refusal raised a question as to “priority of payments” between the defendant and Budget, which issue must be determined and submitted to mandatory arbitration pursuant to Insurance Law § 5105 and 11 NYCRR 65.10 (a) (5). The record reveals that Progressive received bills from the plaintiff prior to any claim made with [*5]Budget . This raises a dispute of priority of payments as between insurers which must be submitted for resolution by mandatory arbitration and this

court is without jurisdiction. SZ Medical, P.C v. Lancer Insurance Company, 7 Misc 3d 86. Accordingly, the complaint is dismissed.


DATE:_______________Hon Charles S. Lopresto