February 1, 2018

Breeze Acupuncture, P.C. v Allstate Ins. Co. (2018 NY Slip Op 50138(U))


Facts: This is an action for the payment of no-fault insurance benefits for medical treatment. The plaintiff seeks payment of medical treatment expenses for injuries sustained in a motor vehicle accident, as per the insurance policy requirements. Upon trial, the court issued a decision directing a judgment in favor of the plaintiff, which was executed and entered. Issues: The defendant moved to modify the judgment and reduce the amount to zero, claiming that Lessie had exhausted the relevant policy. The defendant argued that they were aware of this fact prior to the judgment but failed to raise it at trial. Holding: The court denied the defendant's motion, citing that an insurer is not obligated to pay a claim when the policy limits have been exhausted. The court stated that even when a judgment is issued requiring the insurer to pay medical expenses under the no-fault provisions of its insurance policy, if the insurer has exhausted the amount for which it is liable under the policy, the judgment cannot be enforced. Therefore, based on these grounds, the defendant's motion was denied.

Reported in New York Official Reports at Breeze Acupuncture, P.C. v Allstate Ins. Co. (2018 NY Slip Op 50138(U))

Breeze Acupuncture, P.C. A/A/O Lessie Benjamin, Plaintiff(s),


Allstate Insurance Company, Defendant(s).


Counsel for Plaintiff: Leon Kucherovsky, Esq.

Counsel for Defendant: Peter C. Merani, PC

Fidel E. Gomez, J.

In this action for the payment of first-party benefits – no fault payments for medical treatments – defendant moves seeking an order pursuant to, inter alia, CPLR § 5019(a), modifying this Court’s Judgment, entered November 5, 2015. Saliently, defendant avers that the Judgment should be modified and the amount therein reduced to zero on grounds that defendant’s insured exhausted no-fault the limits of the relevant policy. Plaintiff opposes the instant motion asserting that defendant’s failure to raise the instant defense issue at the time this case was tried – despite being aware of the same – precludes application of the same.

For the reasons that follow hereinafter, defendant’s motion is denied.

The instant action is for the payment of no-fault insurance benefits for medical treatment. The complaint and exhibits appended thereto allege, in relevant part, the following: On September 2, 2009, LESSIE BENJAMIN (Benjamin) sought medical treatment from plaintiff for injuries sustained in a motor vehicle accident occurring on August 4, 2009. Lessie was covered by an insurance policy issued by defendant, which pursuant to Article 51 of the Insurance Law, required payment of health related expenses and whose benefits Lessie assigned to plaintiff. The treatments provided by defendant to Lessie totaled $2,272.66, were covered by defendants’s policy, were billed to defendant, but were nevertheless not paid. Based on the foregoing, plaintiff seeks payment of the aforementioned sums pursuant to the Comprehensive Motor Vehicle Insurance Reparations Act [FN1] (11 NYCRR 65-3.1 et seq.).

On May 15, 2015 after a trial, this Court (Franco, J.) issued a decision finding that based on the relevant fee schedule, of the sums sought by plaintiff, it was entitled to $588 plus costs and interest. The Court directed a judgment, and the same was entered on November 5, 2015. [*2]On January 14, 2016, plaintiff executed the judgment upon defendant’s assets.

Defendant’s motion seeking, inter alia, modification of the judgment pursuant to CPLR § 5019(a) – reducing the amount of the judgment to zero on grounds that Lessie has exhausted the relevant policy – is denied. Significantly, as will be discussed below, while defendant’s liability for any medical claims under the no-fault portion of its policy is generally limited to $50,000, here, it is alleged and unrebutted that defendant was aware that it had exhausted its policy prior to the entry of the relevant judgment but failed to raise the issue at trial.

It is well settled that [a]n insurer is not required to pay a claim where the policy limits have been exhausted” (Hosp. for Joint Diseases v State Farm Mut. Auto. Ins. Co., 8 AD3d 533, 534 [2d Dept 2004]). Stated differently, where an insurer has paid the full monetary limits set forth in the relevant policy, its duties under the contract of insurance cease (id. at 534; Hosp. for Joint Diseases v State Farm Mut. Auto. Ins. Co., 8 AD3d 533, 534 [2d Dept 2004]; Presbyt. Hosp. in City of New York v Liberty Mut. Ins. Co., 216 AD2d 448, 448 [2d Dept 1995]; Presbyt. Hosp. in the City of New York v Gen. Acc. Ins. Co. of Am., 229 AD2d 479, 480 [2d Dept 1996]).

Indeed, in the context of actions seeking the payment of medical expenses under the no-fault portions of an insurance policy, the foregoing is no less true. Thus, even when a judgment is issued against an insurer requiring it to pay for medical expenses incurred by its insured under the no-fault provisions of its insurance policy, if the insurer has exhausted the amount for which it is liable under the policy, the judgment can generally not be enforced (St. Barnabas Hosp. v Country Wide Ins. Co., 79 AD3d 732, 733 [2d Dept 2010]; Hosp. for Joint Diseases v Hertz Corp., 22 AD3d 724, 725 [2d Dept 2005]; Countrywide Ins. Co. v Sawh, 272 AD2d 245, 245 [1st Dept 2000] [“The arbitrators exceeded their authority in directing the payment of the $2,250 at issue, as the award was in excess of the $50,000 limit of the subject insurance policy. When an insurer has paid the full monetary limits set forth in the policy, its duties under the contract of insurance cease” (internal citation and quotation marks omitted).]; Presbyt. Hosp. in the City of New York, 229 AD2d at 480 [2d Dept 1996]; Presbyt. Hosp. in City of New York, 216 AD2d at 448; Allstate Prop. and Cas. Ins. Co. v Northeast Anesthesia and Pain Mgt., 51 Misc 3d 149(A), *1 [App Term 2016]; Harmonic Physical Therapy, P.C. v Praetorian Ins. Co., 47 Misc 3d 137(A), *1 [App Term 2015]; Allstate Ins. Co. v Demoura, 30 Misc 3d 145(A), *1 [App Term 2011]). Thus, when an insured establishes that it has exhausted the no-fault limits under its policy because it paid all amounts allowed under the policy to medical providers, it is generally not liable for any other amounts (Hosp. for Joint Diseases at 725 [“The evidence submitted in support of the motion established, among other things, that the defendants’ payments to other health providers and the defendants’ payment of the plaintiff’s initial claim totaled $23,744.21, and that the defendants forwarded to the plaintiff the remaining amount they were obligated to pay under the policy, namely, $26,255.79, which resulted in the $50,000 policy limit being exhausted. The Supreme Court granted the defendants’ motion, finding that the defendants’ payment satisfied the judgment and exhausted the policy limit, and that the information subpoena was rendered academic.”]; Countrywide Ins. Co. at 245;Harmonic Physical Therapy, P.C. at *1).

The foregoing defense, however, may be waived. With regard to when an insured is required to interpose the defense of policy exhaustion to prevent the payment of outstanding claims, the case law appears to be clear. Indeed, the appellate authority on this issue as well as trial court precedent establishes that defendant’s failure to raise the issue – when known – constitutes waiver. In Mount Sinai Hosp. v Dust Tr., Inc. (104 AD3d 823, 825 [2d Dept 2013]), defendant sought to modify a judgment issued against it after plaintiff was granted summary judgment on the issue of whether defendant – an insurer – owed plaintiff – a medical provider – money under a no-fault policy for medical services rendered to defendant’s insured (id. at 824). The court held that insofar as defendant failed to assert that it had exhausted the no-fault limits of its policy in opposition to plaintiff’s motion for summary judgment, only raising it after it sought to modify the judgment, such modification was barred (id. at 825 [“The issue of partial exhaustion of the defendant’s coverage was raised for the first time after the judgment was [*3]entered, even though the plaintiff had previously moved for summary judgment on the complaint, seeking a certain amount of benefits . . . The failure to present such reasonable justification by itself requires denial of the defendant’s motion.”]). Clearly, then, the holding in Mount Sinai Hosp., which deems the defense of policy exhaustion waived when known and not raised in relation to summary judgment also requires waiver when the defense is known prior to trial and not raised. While the appellate courts in the First Department have yet to address this issue, one case in this very Court has decided the issue – on identical facts – in a plaintiff’s favor.

In Big Apple Ortho Medical Supply, Inc. V Allstate Insurance Company (NYLJ 1202756440119, *1 [Civil Ct, Bronx County 2016]), the court declined to modify the judgment issued against an insurer for the payment of no-fault benefits on grounds that the defense of policy exhaustion was raised for the first time in a post judgment motion (id. at *2-3). Significantly, the court there concluded that defendant could have raised the defense at trial but failed to do so (id.). Other trial courts have also declined to modify a judgment requiring the payment of no-fault benefits when the defense is raised after judgment is rendered but could have been raised prior thereto (Ortho Passive Motion Inc. v Allstate Ins. Co. 55 Misc 3d 794, 797 [NY Dist Ct 2017]). In Ortho Passive Motion Inc., the court denied defendant’s post judgment motion to modify and reduce the same to zero on grounds that the exhaustion of the policy’s no-fault limits precluded payment on the judgment (id. at 795). The Court denied the application, concluding that defendant was aware of the fact that it could not satisfy the judgment at the time the case was tried and in failing to raise it, could not be accorded the relief sought (id. at 895).

The dearth of dispositive appellate authority in this department is, of course clear, and any argument to the contrary is unavailing. Indeed, in neither Harmonic Physical Therapy, P.C., (47 Misc 3d 137[A]) nor Demoura (30 Misc 3d 145[A]), did the Appellate Term, First Department have occasion to address the issue at bar – whether failing to raise the defense of policy exhaustion prior to judgment, when the same was known at the time of trial – bars the applicability of the defense. At best, the court in Demoura held that “[a] defense that the coverage limits of the policy have been exhausted may be asserted by an insurer despite its failure to issue a denial of the claim within the 30-day period” (id. at 145). This of course does not avail a defendant since it is one thing to fail to raise a defense prior to the initiation of an action, without having such failure constitute waiver, and quite another to raise the same after a judgment in an action has been issued. Especially when the defendant had prior knowledge that its policy had been exhausted.

Here, in support of its motion defendant submits the policy issued to Lessie, which indicates at Page 12, under the section titled “Limits of Liability” that

[t]he limit of our liability for Medical Expense Benefits as stated on the Policy Declarations, is the maximum we will pay per any one insured person for any motor vehicle accident.

Notably, the policy declarations submitted by defendant fail to indicate the limits of any no-fault benefits under the policy. Defendant also submits a host of documents – checks – indicating that it paid in excess of $50,000 for medical services on behalf of Lessie, its insured. According to the checks, all payments were made prior to 2011.

Based on the foregoing, defendant’s motion must be denied. First, defendant fails to establish that the policy at issue in fact limits no-fault benefits to $50,000. As noted above, the policy declaration documents submitted are bereft of any indication that the policy had a no-fault benefit, let alone the limits thereof.[FN2]

Notwithstanding the foregoing, defendant’s motion must be denied for a more substantive reason. On this record, the assertion that when this case was tried in 2015, defendant was aware [*4]that its policy had been exhausted and nevertheless failed to raise such defense remains unrebutted. This is fatal.

As discussed above, when a defendant knows it has exhausted its policy and fails to raise it concomitantly with notice of the same, any motion seeking to modify a judgment based on that defense must be denied. (Mount Sinai Hosp. at 825;Ortho Passive Motion Inc. at 895; Big Apple Ortho Medical Supply, Inc. at *2-3). Here, plaintiff asserts that defendant had exhausted its policy prior to the time the case was tried such that defendant should have raised the same during the trial. This assertion remains unrebutted and it is, in fact, borne out by defendant’s own evidence – the checks purporting all payments made on behalf of Lessie – which indicate no payments beyond 2011 – four years prior to trial. Thus, since defendant’s position is that the checks submitted establish exhaustion of the policy, it is bound by the dates therein, which establish exhaustion prior to trial.

Accordingly, the record establishes that defendant knew and could have raised the foregoing defense, nevertheless failed to raise its exhaustion defense at trial or prior thereto; raising it for the first time after judgment was entered and with the instant motion. Defendant is, thus, barred from availing itself of this defense and its motion must be denied (Mount Sinai Hosp. at 825;Ortho Passive Motion Inc. at 895; Big Apple Ortho Medical Supply, Inc. at *2-3).

Defendant’s reliance on Hosp. for Joint Diseases is misplaced and unavailing. While it is true that in that case defendant was allowed to avail itself of the exhaustion defense after a judgment had been entered, the court only so held insofar as “the defendants were not previously afforded a full and fair opportunity to contest that issue” prior to the entry of judgment (id. at 725-726). Here, of course, defendant was aware of its exhaustion defense at the time of trial, could have raised and litigated the same, but did not. Nor does St. Barnabas Hosp., avail defendant. Significantly, while the court in that case did allow the defendant to modify the judgment on grounds of policy exhaustion, it did so by rejecting the plaintiff’s contention on appeal – that defendant was collaterally estopped from raising the defense because such issue was not raised in connection opposition to plaintiff’s motion for summary judgment (id. at 733). Indeed the Court noted that

[c]ontrary to the plaintiff’s contention, since the only issues decided in connection with the motion for summary judgment on its cause of action to recover no-fault medical payments were the questions of whether the defendant had failed to pay or deny the relevant claim within the statutory time frame, and whether the defendant had received verification of that claim, the defendant is not collaterally estopped from seeking to modify the amount of the judgment that was in satisfaction of the plaintiff’s claim, based upon the contention that the policy limits have been partially exhausted (id. at 733.) That court’s holding is, thus, limited to its facts and indeed appropriate since the doctrine of collateral estoppel, a narrower species of the doctrine of res judicata, prevents a party from re-litigating an issue when the issue was previously litigated and decided against the party or his/her privies (Ryan v New York Telephone Company, 62 NY2d 494, 500 [1984]; see Buechel v Bain, 97 NY2d 295, 303-304 [2001]; David v Biondo, 92 NY2d 318, 322 [1998]; Gramartan Home Investors Corp. v Lopez, 46 NY2d 481, 485 [1979]; Lumbermens Mutual Casualty Company v 606 Restaurant, Inc., 31 AD3d 334, 334 [1st Dept 2006]; Zimmerman v Tower Insurance Company of New York, 13 AD3d 137, 139 [1st Dept 2004]; Mulverhill v State of New York, 257 AD2d 735, 737-738 [3d Dept 1999]; Tamily v General Contracting Corporation, 210 AD2d 564, 567 [3d Dept 1994]). In order to invoke the preclusive effects of collateral estoppel it must be demonstrated that the issue being raised is identical to an issue previously litigated and decided, that the issue is decisive in the present action, was also decisive and resolved in the prior action, that the party against whom the doctrine is being asserted had a full and fair opportunity to contest and litigate the issue in the prior action, or that his privies had such an opportunity (Buechel at 303-304; David at 322; Ryan at 500; Gramartan Home Investors Corp. at 485; Lumbermens Mutual Casualty Company at 334; Zimmerman at 139; Mulverhill at 737-738; Tamily at 567; Browing Avenue Realty Corp. v Rubin, 207 AD2d 263, 266 [1st Dept 1994]; [*5]Color by Pergament, Inc. v O’Henry’s Film Works, Inc., 278 AD2d 92, 93 [1st Dept 2000]; Comi v Breslin & Breslin, 257 AD2d 754, 757 [3d Dept 1999]).

Thus, St. Barnabas Hosp., does not stand for the proposition – as urged – that a defendant cannot waive and can, therefore, raise the defense of exhaustion at any time. Rather, in that case, the court merely held that collateral estoppel did not preclude defendant from raising the issue after judgment was entered because the same had not been raised and litigated on plaintiff’s motion for summary judgment; the foregoing being essential elements of collateral estoppel. It is hereby

ORDERED that all stays be hereby lifted. It is further

ORDERED that plaintiff serve a copy of this Decision and Order with Notice of Entry upon all parties within thirty days (30) hereof.

This constitutes this Court’s decision and Order.

Dated: February 1, 2018



Footnote 1: 11 NYCRR 65-3.1 states that “[t]he following are rules for the settlement of claims for first-party and additional first-party benefits on account of injuries arising out of the use or operation of a motor vehicle, a motorcycle or an all-terrain vehicle. These rules shall apply to insurers and self-insurers, and the term insurer, as used in this section, shall include both insurers and self-insurers as those terms are defined in this Part and article 51 of the Insurance Law, the Motor Vehicle Accident Indemnification Corporation (MVAIC), pursuant to section 5221(b) of the Insurance Law and any company or corporation providing insurance pursuant to section 5103(g) of the Insurance Law, for the items of basic economic loss specified in section 5102(a) of the Insurance Law.”

Footnote 2: Defendant’s failure is not fatal since the Insurance Law mandates that all automobile insurance polices in this state provide no-fault coverage for medical expenses incurred by an occupant in a motor vehicle accident in the sum of $50,000 (see, Insurance Law § 5102[a][1], § 5103[a][1]).