May 23, 2017

Country-Wide Ins. Co. v Valdan Acupuncture, P.C. (2017 NY Slip Op 04068)

https://www.beynensonlaw.com/case-law/country-wide-ins-co-v-valdan-acupuncture-p-c-2017-ny-slip-op04068/

Court: Appellate Division, First Department
Decided: May 23, 2017
Citation: 2017 NY Slip Op 04068 · 150 AD3d 560
Posture: Article 75 petition
Outcome: Provider prevailed
Later treatment: Declined to follow in 1 later decision (see Cited by)
Issues: CPLR article 75 (arbitration awards) Fraudulent incorporation (Mallela) Interest and attorney fees
Legal questions: Fraudulent incorporation (Mallela) (see the maps)

Cite as

Country-Wide Ins. Co. v Valdan Acupuncture, P.C., 150 AD3d 560 (1st Dept 2017)

Posture, outcome, issues and treatment by other decisions are Beynenson Law’s classification. Treatment labels are assigned by a language model reading the citing decision; negative and appeal-history labels are checked by a second reader.

Summary

Editorial summary by Beynenson Law, not part of the court’s decision.

The insurer failed to establish grounds to vacate an award rejecting its fraudulent incorporation defense. The Appellate Division, First Department, affirmed judgment for the provider under CPLR 7511 (b) and (c). Assuming without deciding that the defense could not be precluded, it upheld the master arbitrator's confirmation of the award under Mallela and 11 NYCRR 65-3.16 (a) (12). Submissions concerning the owner's spouse's guilty plea never mentioned the provider; a later arbitration apparently relied on different documents. No default occurred, and detailed law office failure excused any brief opposition delay. Appellate attorney fees were awarded under 11 NYCRR 65-4.10 (j) (4), calculated at 20% of benefits under 11 NYCRR 65-4.6 (b).

Reported in New York Official Reports at Country-Wide Ins. Co. v Valdan Acupuncture, P.C. (2017 NY Slip Op 04068)

Country-Wide Ins. Co. v Valdan Acupuncture, P.C.

2017 NY Slip Op 04068 [150 AD3d 560]

May 23, 2017

Appellate Division, First Department

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

As corrected through Wednesday, June 28, 2017

[*1]

In the Matter of Country-Wide Ins. Co., Appellant,
v
Valdan Acupuncture, P.C., as Assignee of Latonya Frazier, Respondent.

Jaffe & Koumourdas, LLP, New York (Jean H. Kang of counsel), for appellant.

Gary Tsirelman, P.C., Brooklyn (Stefan Belinfanti of counsel), for respondent.

Judgment, Supreme Court, New York County (Geoffrey D. Wright, J.), entered on or about April 7, 2016, in respondent’s favor, unanimously affirmed, with costs.

Petitioner failed to establish any of the grounds for vacating an arbitration award (CPLR 7511 [b], [c]; see generally Azrielant v Azrielant, 301 AD2d 269, 275 [1st Dept 2002], lv denied 99 NY2d 509 [2003]).

Pursuant to Insurance Department Regulations (11 NYCRR) § 65-3.16 (a) (12), “insurance carriers may withhold payment for medical services provided by fraudulently incorporated enterprises to which patients have assigned their claims” (State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, 319 [2005]). Assuming without deciding that an insurer’s defense of fraudulent incorporation cannot be precluded (see AVA Acupuncture, P.C. v AutoOne Ins. Co., 28 Misc 3d 134[A], 2010 NY Slip Op 51350[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2010]; Bath Med. Supply, Inc. v Allstate Indem. Co., 27 Misc 3d 92, 95 [App Term, 2d Dept, 9th & 10th Jud Dists 2010]), we conclude that the master arbitrator properly confirmed the award of the arbitrator, who reviewed petitioner’s submissions relating to the plea of guilty to no-fault insurance fraud by a man married to the owner of respondent, found that respondent was not mentioned once in the “hundreds of pages” submitted, and rejected petitioner’s attempt to hold the owner “responsible by association.” Petitioner’s reliance on a subsequent arbitration (in 2014) is also misplaced; among other things, the later arbitration appears to have relied on documentation that was not submitted to the arbitrator in this case.

Contrary to petitioner’s contention, there was no default in this case. In any event, any delay in opposing the petition to vacate the arbitration award was short and quickly corrected, and the explanation given for it—law office failure—was detailed and specific, and, in view of the strong public policy favoring resolution of litigation on the merits, constituted “good cause” for the delay (see Lamar v City of New York, 68 AD3d 449 [1st Dept 2009]).

Respondent is entitled to attorneys’ fees for this appeal (11 NYCRR 65-4.10 [j] [4]), calculated, in accordance with 11 NYCRR 65-4.6 (b), as 20% of the no-fault benefits awarded. Concur—Acosta, P.J., Renwick, Mazzarelli, Andrias and Manzanet-Daniels, JJ.

Legal questions

A question of no-fault law this decision rules on, from our Legal Questions pages. Bars count the decisions on the question by year and court, coloured by category; circles are this decision and the decisions on the question it cites or that cite it. Point at a bar or circle for details. The categories and summaries are Beynenson Law’s classification, made by a language model and checked by a second reading.

Fraudulent incorporation (Mallela)

Open the full map

On the merits, when may a no-fault insurer withhold payment because unlicensed persons own or control the provider (Mallela)?

This decision: Insurer's proof of unlicensed ownership/control insufficient (rules on the question, but another ground decided the case)

Left standing an award rejecting the defense because the insurer's evidence, a guilty plea by the owner's husband that never mentioned the provider, sought to hold the owner responsible merely by association.

Defense establishedTriable issueDefense not establishedNot a Mallela groundThis decisionCites it or cited by itCited or followedDeclined to follow, questioned, overruled or reversed

Of the 17 decisions on this question in the First Department courts and the Court of Appeals, 4 (this one included) are in the same category. One decision in other departments that cites or is cited by this one is on the full map.

Cited in this decision

State Farm Mut. Auto. Ins. Co. v Mallela (2005 NY Slip Op 02416)Fraudulently incorporated medical providers are ineligible for no-fault reimbursement under 11 NYCRR 65-3.16 (a) (12).
AVA Acupuncture, P.C. v AutoOne Ins. Co. (2010 NY Slip Op 51350(U))The insurer justified corporate financial discovery on fraudulent incorporation, but failed to justify the owner's personal tax and banking records.
Bath Med. Supply, Inc. v Allstate Indem. Co. (2010 NY Slip Op 20059)The insurer failed to justify discovery or preserve fraudulent-billing and EUO nonappearance defenses through proof of timely denials.

Cited by

A label shows how the later decision treated this one.

Matter of Country-Wide Ins. Co. v Bay Needle Care Acupuncture, P.C. (2018 NY Slip Op 03929) Declined to followThe insurer's Mallela challenge failed because it presented no evidence that the provider was fraudulently incorporated.

Similar decisions

Matter of Country-Wide Ins. Co. v Bay Needle Acupuncture, P.C. (2018 NY Slip Op 08238)The insurer's billing-fraud evidence did not establish a Mallela defense exempt from the 30-day denial deadline.
Matter of Country-Wide Ins. Co. v TC Acupuncture, P.C. (2021 NY Slip Op 01120)An alleged error in the burden of proof for a fraudulent incorporation defense does not alone warrant vacatur of an arbitration award.
Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co. (2019 NY Slip Op 07245)An arbitrator acts within discretionary authority by refusing to consider late submissions.
Country-Wide Ins. Co. v TC Acupuncture, P.C. (2018 NY Slip Op 50786(U))The providers' fraud-based vacatur motions were denied because their arguments could have been asserted before judgment.
Matter of V.S. Care Acupuncture, P.C. v Country-Wide Ins. Co. (2019 NY Slip Op 07264)The provider failed to establish grounds to vacate a master award upholding denial of benefits for fraudulent incorporation.