Carnegie Hill Orthopedic Servs. P.C. v GEICO Ins. Co. (2008 NY Slip Op 50639(U))

Supreme Court, Nassau County

3442/02

TO: Stillman & Stillman

By: Christopher McCollum, Esq.

Attorney for Plaintiffs

2622 East Tremont Avenue

Bronx, NY 10461

Julie A. Linwood, Esq.

McDonnell & Adels, P.C.

Attorneys for Defendants

401 Franklin Avenue

Garden City, NY 11530Howard Stern, Esq.

Werner, Zaroff, Stern, Ashkenazcz, LLP

Attorney for counterclaim

360 Merrick Road, 2nd Floor

Lynbrook, NY 11563

Daniel Palmieri, J.

The motion by plaintiffs for partial summary judgment pursuant to CPLR 3212 as to the 5th and 24th causes of action in the complaint (Hernandez and Leyva) is granted. Entry of judgment shall await resolution of all claims and counterclaims asserted by the parties hereto.

The motion by plaintiffs on the counterclaim (improperly denominated as a cross motion) for partial summary judgment pursuant to CPLR 3212 dismissing defendant’s counterclaim to the extent interposed against plaintiffs 5th and 24th causes of action in the complaint is denied.

The cross motion by defendant Geico for an order pursuant to CPLR 3126 striking plaintiffs’ pleadings, or in the alternative for partial summary judgment pursuant to CPLR 3212 summarily dismissing those portions of the complaint that request interest, is denied, without prejudice to requesting a negative inference charge from the trial court with regard to documents demanded but stated no longer to be in possession of the plaintiffs, and without prejudice to the service of a further demand consistent with this decision and order.

The background of this action is set forth in this Court’s prior order dated October 10, [*2]2006. In short, the principal of plaintiff Carnegie Hill Orthopedic Services, P.C. (“Carnegie”) and the owner of Devonshire Surgical Facility (“Devonshire”) is Dr. Allen Chamberlin, a physician whose license to practice medicine was revoked based on evidence of the performance of unnecessary procedures and filing reports with false diagnoses. See Matter of Chamberlin v New York State Bd. For Professional Med. Conduct, 34 AD3d 1097 (3rd Dept. 2006). Geico alleges that Dr. Chamberlin carried out an extensive and pervasive practice of fraud which included fabricating injuries, falsifying medical records to justify surgery billed for but not performed, and performance of procedures/surgeries which risked harm to patients. Nevertheless, the plaintiffs contend that pursuant to applicable Department of Insurance regulations they were entitled to be paid or to have their claims denied within the 30 days after proof of their claims were suppled to the defendant, and because neither occurred they are now entitled to be paid, with interest and attorneys’ fees.

Plaintiffs now move for partial summary judgment on two of their fifty-three claims for unpaid No-Fault first-party insurance benefits.

Summary judgment is the procedural equivalent of a trial. S.J. Capelin Assoc. Inc. v Globe Mfg. Corp., 34 NY2d 338, 341 (1974). The function of the court in deciding a motion for summary judgment is to determine if triable issues of face exist. Matter of Suffolk Cty Dept of Social Services v James M., 83 NY2d 178, 182 (1994). The proponent must make a prima facie showing of entitlement to judgment as a matter of law. Guiffrida v Citibank Corp., 100 NY2d 72, 82 (2003); Alvarez v Prospect Hosp., 68 NY2d 320, 324 (1986). Once a prima facie case has been made, the party opposing the motion must come forward with proof in evidentiary form establishing the existence of triable issues of fact or an acceptable excuse for its failure to do so. Zuckerman v City of New York, 49 NY2d 557, 562 (1980).

In an action for no-fault payments the plaintiff makes a prima facie showing of entitlement to judgment by submitting evidentiary proof that the prescribed statutory billing forms had been mailed and received, and that payment of the No-Fault benefits was overdue. Insurance Law 5106(a); Westchester Medical Center v AIG, Inc., 36 AD3d 900 (2nd Dept. 2007). On this motion plaintiffs argue that they have presented a prima facie case for payment of no-fault benefits for services rendered to John Hernandez in 2000 in the amount of $15,802 and services rendered to Helio Leyva in 1998 in the amount of $15,801. They have submitted the requisite billing forms, certified mail receipts, signed return receipt cards, and an affidavit from Martha Chamberlin stating that she personally mailed the claims. There is no dispute that Geico failed to pay or deny the claims within 30 days. On this record the Court finds that plaintiffs have presented a prima facie case.

In opposition Geico relies upon its affirmative defenses, including lack of proximate cause, and its counterclaim of fraud, which this Court permitted Geico to assert by way of its order of October 10, 2006.

Specifically with regard to the claims at issue here, Geico submits a properly affirmed report of Dr. Craig Levitz who reviewed the records of the No-Fault plaintiffs in this case and opines, in pertinent part, as follows: [*3]

… Dr. Chamberlin persistently billed for procedures that he clearly did not perform, billed for non-reimbursable procedures, made up lavish and fraudulent explanations of these procedures in records and reports, performed surgery that was not indicated and maintained inadequate records. In addition it is my opinion that the nature of this fraud was so pervasive that it would be impossible for the Geico Insurance Company to detect the fraud within 30 days.

A review of 23 cases demonstrates a disturbing pattern. In every case Dr. Chamberlin operated within a week of the patients initial visit and in some cases, the same day on patients whose main physical exam complaint is pain. He failed to document any clinical indications of a more significant problem prior to surgery and each of these patients has a relatively normal MRI. In every case he finds the same exact pathology that requires the same exact treatment… He then billed Geico for procedures that were not indicated, to correct pathology that was not present, and delivered fraudulent explanations of these procedures.

….

In review of the specific claims against [sic] patient Hernandez…It is my opinion that in patient Hernandez there was nothing wrong with this knee, there is no evidence Dr. Chamberlin did anything nor discussed any of this with his patient. If he did surgery it was not indicated…

…

In examining the case of patient Leyva the same pattern of fraud that was documented by the office of professional conduct is seen as well. He once again begins with a normal patient with no documented finding, proceeds directly to surgery, performs his standard 5 procedures that he does on every patient and then is once again not satisfied with collecting payment for unindicated surgeries for pathology without documentation, but then fraudulently bills for these services… in patient Levya there was nothing wrong with his knee, there is no evidence Dr. Chamberlin did anything nor discussed any of this with his patient. If he did surgery it was not indicated.

Geico argues that the surgeries performed on John Hernandez and Helio Levya were not injuries sustained in or causally related to the accident, and therefore plaintiffs’ claims fall outside the scope of coverage of the underlying policies.

Pursuant to Insurance Law 5106(a), no-fault benefits are overdue if not paid by the insurer within 30 days after submission of proof of loss. See also, 11 NYCRR 65-3.8, formerly 11 NYCRR 65.15(g)(3). The insurer is precluded from asserting any defenses to payment when it fails to deny the claim within the required 30-day period. Presbyterian Hosp. in the City of New York v Maryland Casualty Co., 90 NY2d 274, 278 (1997). A narrow exception to this preclusion rule is recognized for situations where the insurer raises a defense of lack of coverage. Central General Hosp. v Chubb Group of Ins. Cos., 90 NY2d [*4]195, 198 (1997). The issue presented by this case is whether Geico’s defense and counterclaim of fraud is precluded by the 30-day rule, or whether the defense and counterclaim fall within the narrow exception for lack of coverage.

The defense of fraud based upon “staged accidents” or intentional collisions are considered defenses premised on lack of coverage, and have been found not subject to the rigorous 30-day rule because there was, in fact, no “accident.” See, Matter of Allstate Ins. Co v Massre, 14 AD3d 610 (2nd Dept. 2005); State Farm Mutual Automobile Ins. Co. v Laguerre, 305 AD2d 490 (2nd Dept. 2003); Metro Medical Diagnostics, P.C. v Eagle Ins. Co., 293 AD2d 751 (2nd Dept. 2002); see also, VA Acutherapy Acupuncture, P.C. v State Farm Ins. Co., 16 Misc 3d 126(A)(App Term, 2nd & 11th Jud Dists 2007) and Vista Surgical Supplies Inc v State Farm Ins. Co., 14 Misc 3d 135(A)(App Term, 2nd & 11th Jud Dists 2007).

However, cases of fraud based upon fraudulent billing or excessive treatment are considered claims of “provider fraud” and can be precluded by the 30-day rule. Careplus Medical Supply Inc v State-Wide Ins. Co., 11 Misc 3d 29 (App Term, 2nd & 11th Jud Dists 2005); MGM Psychiatry Care PC v Utica Mutual Ins. Co., 12 Misc 3d 137(A) (App Term, 2nd & 11th Jud Dists 2006).

The key distinction is that in the first circumstance the insurance carrier demonstrated that an issue existed as to whether there was any coverage at all, whereas in the second the courts were presented with an exclusion under the policy, which does not mean that there was no contractual obligation in the first instance. In the latter, the 30-day rule still applies. Fair Price Supply Corp. v Travelers Indemnity Co., 9 Misc 3d 76 (App Term, 2nd Dept. 2005), affd 42 AD3d 277 (2nd Dept. 2007), lv granted 2007 Slip Op 78445 (2d Dept. Sept. 19, 2007)

In Fair Price the insurer was billed for various medical supplies, but the insured denied ever receiving any medical supplies as a result of injuries he sustained in the accident.

Nevertheless, the Appellate Term stated that one of the tradeoffs of No-Fault reform is that an insurer’s ability to resist “ill-founded, illegitimate and fraudulent claims” submitted by providers of medical services or medical equipment is limited to the “strict short-leashed contestable period,” of 30 days. See Presbyterian Hosp in City of New York at 285. It noted that the insurer is not without remedy; it could pay the claim and then bring an action to recover the benefits paid under a theory of fraud or unjust enrichment. 9 Misc 3d at 79-80. The Appellate Term directed payment of the subject no-fault claim.

In affirming the Appellate Term, Presiding Justice Prudenti summarized the Appellate Division’s view as follows: “Contrary to the defendant’s [insurer’s] contention, the alleged fraud in this case, no matter how egregious, was not related to the existence of coverage in the first instance. The plaintiff’s alleged failure to furnish services or supplies has no bearing on whether coverage for such services or supplies existed in [plaintiff’s assignor’s] insurance policy. Thus, enforcing the preclusion rule in this case does not have the effect of creating coverage that did not otherwise exist.” Fair Price, supra , 42 AD3d at 284.

The undersigned is of course bound by the law as established by the Appellate [*5]Division, Second Department. The fact that here the alleged fraud has to do with medical services either not provided or provided without justification, and not with supplies, is a distinction without a difference. Indeed, as noted in the above-quoted section of her opinion, Justice Prudenti places services on the same footing as supplies. In short, so long as there is no question that insurance existed-the case here-a defense to such payment based upon an exclusion from coverage, no matter how strong that defense might be, does not free the insurer from the 30-day rule. As no issue of fact exists with regard to the defendant’s failure to meet this requirement, summary judgment must be granted on the two claims at issue. Indeed, cases involving claims of other recipients of treatment or services from Dr. Chamberlin and these same plaintiffs have been construed as cases of “provider fraud,” wherein the insured’s failure to comply with the 30-day rule precluded consideration of the alleged fraud. Devonshire Surgical Facility v Geico, 16 Misc 3d 130(A), (App Term, 1st Dept. 2007); Devonshire Surgical Facility v Geico, 14 Misc 3d 1208(A) (Civ Ct., NYCty, 2006).^[FN1]

It may be that the type of fraud allegedly committed here could not reasonably be detected by a simple question put to the assignor, as was the suggestion made by the Appellate Division in Fair Price, at 285: “We find it doubtful that an insurer… will often need to do more than… simply ask the insured whether he or she received the medical supplies in question.” Nevertheless, and as indicated above, the legal concept and factual scenario underlying the Appellate Division’s determination cannot be distinguished from the matter before this Court in a meaningful way.

The Court notes, but must reject, the defendant’s contention that because a counterclaim in fraud exists that might be of equal or greater value than what the plaintiff stands to recover on these claims, it should deny summary judgment. A denial on this ground is appropriate where the claims are so intertwined that they cannot be separately analyzed. However, here they can be, because the requirements of Department of Insurance regulations clearly have been viewed as an obligation separate and distinct from any other obligation that may be imposed on the parties by other law. Cf., Yoi-Lee Realty v 177th Street Realty Assocs., 208 AD2d 185 (1st Dept. 1995).

The foregoing, however, also means that the counterclaims asserted by the defendant to recover moneys already paid in connection with any of the allegedly fraudulent claims can be separately pursued. On this record, and especially in view of Dr. Levitz’s affirmation, defendant has raised a triable issue of fact as to fraud in connection with the claims presented. The theories of recovery based on these allegations sound in fraud and unjust [*6]enrichment, and are attacked by the plaintiffs are being without support under New York common law. However, the Appellate Term endorsed both such theories in Fair Price, and its determination was affirmed by the Appellate Division without any comment on this suggested remedy. For this reason summary judgment dismissing the counterclaims is denied.

The Court now turns to defendant’s motion to dismiss the complaint for failure to comply with the following five court orders: (1) order dated November 17, 2005, by Judge Brennan directing responses to questions; (2) a preliminary conference order dated February 9, 2006 by Judge Brennan; (3) this Court’s order dated October 10, 2006, directing plaintiffs to provide answers and supporting documentation to certain interrogatories; (4) this Court’s conference order dated November 2, 2006, incorporating its prior decision of October 10, 2006; and (5) this Court’s further conference order dated February 8, 2007 wherein this Court directed that the parties continue to comply with the order of October 10, 2006.

Striking a pleading in inappropriate absent a clear showing that the failure to comply with discovery demands is wilful, contumacious or in bad faith Conciatori v Port Authority of New York and New Jersey, __AD3d__, 846 NYS2d 659 (2nd Dept. 2007); Negro v St. Charles Hosp and Rehabilitation Center, 44 AD3d 727 (2nd Dept. 2007). Defendant has made no such showing.

The major point of dispute concerns production of fifty-two “special reports” of range of motion, neurological testing, and muscle power testing, all with alleged abnormal findings. These “special reports” were used to justify the surgery billed by the plaintiffs. Dr. Chamberlin testified that the medical files originally did contain such “special reports” and he does not know the present location of the reports (for example see Chamberlin transcript at pp. 152-158, 208-209, 233-234, 264-265, 290-292, 316-317, 332-333). Under these circumstances striking of plaintiffs’ pleading is not warranted, and further discovery orders would be unproductive. The missing evidence does not prevent defendants from proving their defenses and counterclaims based upon the remaining medical records and the testimony of their expert, but it appears that it may seek a negative inference charge at trial. Yechieli v Glissen Chemical Co., Inc., 40 AD3d 988 (2nd Dept. 2007); EW Howell Co., Inc. v SAF LaSala Corp., 36 AD3d 653 (2nd Dept. 2007); see Mylonas v Town of Brookhaven, 305 AD2d 561 (2nd Dept. 2003). That, however, is a matter to be placed before the trial court.

Defendant further complains that it served a Demand for Discovery and Inspection dated April 13, 2007, which requested the production of 20 items, and that plaintiffs have failed to provide the requested documentation. A review of the April 2007 demand reveals that it seeks, inter alia, documents related to Dr. Chamberlin’s taxes and his personal bankruptcy proceeding.

Tax returns and other financial information are generally not discoverable in the absence of a strong showing that the information is indispensable to the claim and cannot be obtained from other sources. Benfeld v Fleming Properties, LLC, 44 AD3d 599 (2nd Dept. 2007); Chang v SDI International Inc., 15 AD3d 520 (2nd Dept. 2005); Latture v Smith, 304 AD2d 534 (2nd Dept. 2003). Defendant’s argument that it needs such documents to establish [*7]a motive for fraud by Dr. Chamberlin, namely that he need to recoup more than $6,000,000 he lost from 1985-1993 ( see Chamberlin v Commissioner of Internal Revenue, 14 Fed Appx. 69 (2d Cir. 2001) is untenable. This action concerns No-Fault claims, and the existence and discoverability of fraud in connection with those claims. The defrauding party’s need to defraud is immaterial, and requests directed to such motivational questions are thus outside the scope of permissible inquiry. Where, as here, discovery requests are numerous and some are improper, the Court need not prune the requests Chang v SDI International Inc. Consequently, defendant’s Demand for Discovery and Inspection dated April 13, 2007, cannot form the basis for relief based on either CPLR 3126 or CPLR 3212, and to the extent it has not been answered need not be. This ruling is without prejudice to service of any further proper demand within 20 days of the date of this order.

This shall constitute the Decision and Order of this Court.

E N T E R

DATED: January 29, 2008

_____________________________

Hon. Daniel Palmieri

Acting Supreme Court Justice

TO:Stillman & Stillman

By: Christopher McCollum, Esq.

Attorney for Plaintiffs

2622 East Tremont Avenue

Bronx, NY 10461

Julie A. Linwood, Esq.

McDonnell & Adels, P.C.

Attorneys for Defendants

401 Franklin Avenue

Garden City, NY 11530

Howard Stern, Esq.

Werner, Zaroff, Stern, Ashkenazcz, LLP

Attorney for counterclaim

360 Merrick Road, 2nd Floor

Lynbrook, NY 11563

Footnotes

Footnote 1: It should be noted that these cases do not collaterally estop defendant from litigating the instant action, as collateral estoppel does not apply to a prior determination involving solely a question of law. Sterling National Bank as Assignee of NorVergence, Inc. v Eastern Shipping Worldwide, Inc., 35 AD3d 222, 223 (1st Dept. 2006); Avon Development Enterprises Corp v Samnick, 286 AD2d 581 (1st Dept. 2001). Here that question of law is the application of the 30-day rule, or the exception thereto.