Globe Surgical Supply v Allstate Ins. Co. (2011 NY Slip Op 50884(U))

Supreme Court, Nassau County

9018/04

Michele M. Woodard, J.

Papers Read on this Motion:

Plaintiff’s Amended Notice of Motion06

Defendants’ Oppositionxx

Plaintiffs’ Replyxx

Defendant’s Notice of Supplemental Authorityxx

Defendant’s Notice of Motion08

Defendant’s Memorandum of Lawxx

Plaintiff’s Affirmation in Oppositionxx

Plaintiff’s Memorandum of Lawxx

Defendant’s Reply Memorandumxx

Plaintiff’s Reply Memorandum of Lawxx

In motion sequence number six, Plaintiff-Intervenors, Amer-A-Med Products, Inc., [hereinafter Amer-a-Med] and Meditek, Inc. [hereinafter Meditek], move pursuant to CPLR §3211(a)(5), (6), (7) and (10), as well as CPLR §3211(b), for an order dismissing the counterclaims and certain affirmative defenses as are asserted by defendant, Allstate Insurance Company [hereinafter Allstate].

Defendant, Allstate, moves pursuant to CPLR §902, for an order dismissing the plaintiffs’ [*2]class allegations (Sequence No.08).

Factual & Procedural Background

Globe Surgical Supply [hereinafter Globe], is a provider of Durable Medical Equipment [hereinafter DME] (see Bell Affirmation in Support at ¶4). Globe is the former proposed class representative in the underlying putative class action, the substance of which is alleged breach of contract due principally to Allstate’s “illegal reduction of reimbursements made to Globe and putative class members who submitted No-Fault claims” (see Bell Affirmation in Support at ¶4). Said reductions were allegedly in violation of Insurance Law §5101, as well as 11 NYCRR 65.10, the latter of which was the relevant insurance regulation in effect at the time of the purported illegal reductions (id.).

By order dated April 24, 2007, this Court denied an application interposed by Globe, which sought class certification pursuant to Article 9 of the CPLR (id. at ¶5; see also Exh. A). On April 21, 2009, the Appellate Division, Second Department, held that “Globe Surgical Supply, as assignee of Charles Charlotin, met all of the class certification prerequisites in the instant matter except adequacy of representation” (id. at Exh. A). Accordingly, the Appellate Division modified this Court’s decision dated, April 24, 2007, and held that the branch of Globe’s application for class certification “should have been denied without prejudice to renewal” (id.).

Thereafter, Allstate moved for summary judgment dismissing the complaint in response to which Amer-a-Med and Meditek cross-moved for an order granting leave to intervene so as to facilitate a renewal application for class certification (id. at ¶8; see also Exh. F). Simultaneously with their cross-application, Amer-a-Med and Meditek served an Amended Class Action Complaint [hereinafter the Complaint] (id. at ¶8; see also Exh. E). On December 15, 2009, this Court denied Allstate’s application and granted the motion interposed by Amer-a-Med and Meditek, for leave to intervene and ordered that said intervenors be substituted as party plaintiff’s so as to permit renewal of the application for class certification (id. at ¶9; see also Exh. F).

A review of the Complaint indicates that Amer-a-Med and Meditek are each suppliers of DME and provided same to their respective assignors (see Bell Affirmation in Support at Exh. E at ¶¶3, 4, 22). In connection therewith, Amer-a-Med and Meditek each obtained assignments from the assignors and together with same filed various claims with Allstate for reimbursement in relation to the DME provided (id. at ¶¶23-32). The plaintiffs allege that notwithstanding the submission of the requisite documentation, Allstate did not reimburse them for the amounts claimed and rather unilaterally reduced same by adjusting the amounts to conform to the “prevailing rates in the geographic location of the provider” (id.). The plaintiffs further allege that these unilateral reductions undertaken by Allstate are in direct contravention of “Part E of the Twenty-Third Amendment to Regulation No. 83 (11 NYCRR 68)”^[FN1] (id. at ¶¶ 10, 20).

On January 28, 2010, Allstate filed an Answer in response to the within Complaint, the contents of which did not contain any counterclaims (id. at ¶10). Thereafter, on February 16, [*3]2010, Allstate filed an Amended Answer, which contained various affirmative defenses and counterclaims (id. at ¶11; see also Exh. G). The instant applications, respectively interposed by the moving parties herein, thereafter ensued and are determined as set forth hereinafter.

Application by Amer-a-Med and MeditekThe Court initially addresses the application interposed by Amer-a-Med and Meditek, which seeks dismissal of the counterclaims and affirmative defenses interposed by Allstate.

A review of the Amended Answer dated, February 16, 2010, reveals that Allstate has asserted five counterclaims, the first of which sounds in common law fraud, the second and third of which are predicated upon the federal Rackateer Influenced and Corrupt Organizations statute, the fourth of which is predicated upon §349 of the General Business Law, and the fifth of which is for unjust enrichment (see Bell Affirmation in Support at Exh. G).

Fraud

With respect to Allstate’s first counterclaim, sounding in fraud, counsel for the plaintiffs contend, inter alia, that the applicable statute of limitations has expired warranting dismissal thereof (see Plaintiffs’ Memorandum of Law in Support at pp.13-15; see also Plaintiffs’ Reply Memorandum of Law at pp. 4-11).

In order to allege a cause of action sounding in common law fraud, the complaint must allege the following: the defendants made a material representation; the material representation was false; the defendants knew it was false and made it with the intention of deceiving the plaintiff; the plaintiff believed the representation to be true and justifiably acted in reliance thereon; and the plaintiff is damaged as a result thereof (Small v Lorillard Tobacco Co., Inc., 94 NY2d 43 [1999]). “In order to plead a prima facie case of fraud, a plaintiff must allege each of the elements of fraud with particularity and must support each element with an allegation of fact” (Fink v Citizens Mortg. Banking Ltd., 148 AD2d 578 [2d Dept 1989]; CPLR §3016[b]).

A cause of action sounding in fraud must be commenced within the six years following the date upon which the cause of action accrued or within the two years after the time during which the plaintiff could have discovered the fraud withdue diligence (Town of Poughkeepsie v Espie, 41 AD3d 701 [2d Dept 2007]; see also Espie v Murphy, 35 AD3d 346 [2d Dept 2006]). A cause of action which alleges fraud accrues at that point in time when the plaintiff is in possession of knowledge of the facts from which the alleged fraud “could have been discovered with reasonable diligence” (id.; see also Northridge Ltd. Partnership v Spence, 246 AD2d 582 [2d Dept 1998]). The party seeking the benefit of the discovery exception to the six-year statute of limitations bears the burden of demonstrating that the fraud could not have been previously discovered (Siler v Lutheran Social Services of Metropolitan NY, 10 AD3d 646 [2d Dept 2004]; Hillman v City of New York, 263 AD2d 529 [2d Dept 1999]; Lefkowitz v Appelbaum, 258 AD2d 563 [2d Dept 1999]).

In the instant matter, a review of the Amended Answer reveals that Allstate sets forth numerous allegations of fraudulent activity undertaken by the plaintiffs herein, the last of which was on November 7, 2003. Relying upon this date, counsel for the plaintiffs argues that as the within counterclaim was not commenced until February 16, 2010, same is barred by the applicable statute of limitations (see Plaintiffs’ Memorandum of Law at pp. 13-15; see also Plaintiffs’ Reply Memorandum of Law at pp.4-11). [*4]

In opposing this branch of the plaintiffs’ application, counsel for Allstate initially argues that said defendant has sufficiently alleged facts which detail an “ongoing scheme,” which resulted in Allstate remitting payments to the plaintiffs between 1999 through 2008, and accordingly the fraud-based claims are within the applicable statute of limitations (see Allstate’s Memorandum of Law at pp. 10-15; see also Allstate’s Amended Answer at ¶163). Counsel further posits that it was not cognizant of the plaintiffs’ fraudulent scheme until they sought leave to intervene herein, at which time Allstate “was able to piece together facts regarding the ownership and interrelationship between plaintiffs, their owners and other entities and individuals, and the general nature of plaintiffs’ conduct” (see Allstate’s Memorandum of Law at p. 11).

In addition to the foregoing, counsel for Allstate further argues that as the subject counterclaims “arise out of the same transactions that form the basis of the claims asserted in plaintiff’s complaint” interposed in March of 2004, by operation of CPLR §203(f), said counterclaims are deemed timely (id. at p. 15).

In the instant matter, a review of the voluminous allegations contained in Allstate’s Amended Answer indeed demonstrates that the most recent date upon which the plaintiffs engaged in fraudulent conduct was November 7, 2003, clearly more than six years prior to the interposition of the counterclaim sounding in fraud (Town of Poughkeepsie v Espie, 41 AD3d 701 [2d Dept 2007], supra; CPLR §213[8]). Here, while Allstate asserts that it was unaware of the plaintiff’s fraudulent activities until they sought leave to intervene, this Court finds said argument unavailing (id.; Northridge Ltd. Partnership v Spence, 246 AD2d 582 [2d Dept 1998], supra). Allstate itself asserts that since 1999 through 2008, it paid the plaintiffs substantial payments. Accordingly, that Allstate did not detect any indicia of fraudulent conduct on the part of either of the plaintiffs during those ensuing nine years demonstrates, in this Court’s view, that Allstate did not exercise any diligence in attempting to discover the alleged fraud ( Town of Poughkeepsie v Espie, 41 AD3d 701 [2d Dept 2007], supra; see also Espie v Murphy, 35 AD3d 346 [2d Dept 2006], supra).

Finally, with respect to Allstate’s opposition arguments predicated upon CPRL §203[f], said statute provides that “[a] claim asserted in an amended pleading is deemed to have been interposed at the time the claims in the original pleading were interposed, unless the original pleading does not give notice of the transactions, occurrences, or series of transactions or occurrences, to be proved pursuant to the amended pleading.”

Here, Allstate’s original Answer does not contain any counterclaims against either Amer-A- Med, Meditk, or the particular assignors upon which the plaintiffs’ claims are predicated. Thus, the original answer could not have given any notice to the plaintiffs as to the “the transactions, occurrences, or series of transactions or occurrences, to be proved pursuant to the amended pleading (id.; Padua v Falow, 230 AD2d 834 [2d Dept 1996]; In Re David Nelson, M.D., 303 AD2d 499 [2d Dept 2003]).

Based upon the foregoing, Allstate’s counterclaim sounding in common law Fraud is hereby dismissed.

RICO Statute

The defendants’ Second and Third counterclaims are predicated upon violations of 18 USC §1962[c] and 18 USC §1962[d] of the Racketeer Influenced and Corrupt Organizations statute [hereinafter the RICO statute]. The elements which comprise civil RICO claims are “(1) conduct (2) of an enterprise (3) through a pattern * * * (4) of racketeering activity” Podraza v Carriero, 212 AD2d 331 [4th Dept 1995] quoting Sedima, S.P.R.L. v Imrex, Co., 473 US 479 [1985] at 496). The statute of limitations applicable to civil RICO actions is four years (Niagra Mohawk Power Corporation v Freed, 265 AD2d 938 [4th Dept 1999]). Such an action does not accrue “until a plaintiff both knows, or should have known, of the injury to business or property, and that the predicate act causing injury is part of a pattern of racketeering activity” (id. quoting Podraza v Carriero, 212 AD2d 331 [4th Dept 1995], supra). The term enterprise is defined by the statute as “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity” (18 USC §1961[4]). The term “racketeering activity” includes various offenses including, mail fraud, in which Allstate has accused the plaintiffs of having engaged (id.).In support of the instant application, counsel for the plaintiffs sets forth numerous arguments including that the actions predicated upon the RICO statute are barred by the applicable statute of limitations (see Plaintiffs’ Memorandum of Law at pp. 16-17; see also Plaintiffs’ Reply Memorandum of Law at pp. 12-13).

In opposing the application, Allstate asserts that it has sufficiently alleged an ongoing scheme engaged in by the plaintiffs so as to defraud Allstate and that such scheme continued “at least until 2008”, which is well within the statutory period (see Defendant’s Memorandum of Law at pp. 19-23). Allstate additionally argues that whether the RICO claims are timed barred is a factual determination not susceptible to resolution herein (id. at pp.20, 21). To this point, Allstate posits that it could not have discovered the fraudulent scheme until the ensuing investigation, which occurred after the plaintiffs intervened herein (id. at p23).

Having reviewed Allstate’s voluminous Amended Answer, this Court finds that said defendant has sufficiently alleged an ongoing scheme undertaken by the plaintiffs and has raised factual questions vis a vis when it knew or should have known of the purported existence of a pattern of racketeering (Niagra Mohawk Power Corporation v Freed, 265 AD2d 938 [4th Dept 1999], supra; Podraza v Carriero, 212 AD2d 331 [4th Dept 1995], supra). Accordingly, that branch of the plaintiffs’ application which seeks dismissal of the defendant’s counterclaims predicated upon the RICO statute is hereby denied.

General Business Law §349

General Business Law §349 (a) declares as unlawful “[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state.” In order for a plaintiff to establish a prima facie case under the statute, he or she must demonstrate that the challenged act or practice of the defendant was consumer-oriented, that it was misleading in a material way, and that the plaintiff suffered injury as a result of the deceptive act (Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20 [1995]). A cause of action alleging violations of the statute is governed by a three-year statute of limitations (Gaidon v Guardian Life Insurance Company of America, 96 NY2d 201 [2001] ). Such an action accrues “when all of the factual circumstances necessary to establish a right of action have occurred, so that the plaintiff would be entitled to relief” (id.). [*6]

As extrapolated from the Amended Answer, Allstate alleges that the plaintiffs herein engaged in deceptive acts in violation of the statute and that “each separate bill, invoice, letter and report submitted to Allstate [by the plaintiffs] constituted a separate violation” of the statute (see Verified Answer at ¶¶172,173). The defendant further alleges that it “has been damaged by the actions of Meditek and Amer-A-Med in that Allstate has made substantial payments to Meditek totaling $305,000 and to Amer-A-Med totaling $56,229” (id. at ¶177).

In moving for dismissal thereof, counsel for the plaintiff again argues for dismissal on several bases including that said claims are barred by the applicable statute of limitations (see Plaintiffs’ Memorandum of Law at pp. 17; see also Plaintiffs’ Reply Memorandum of Law at p.13 -14).

In the instant matter, while Allstate generally asserts that between 1999 and 2008 it paid the sums of $305,000 and $56,229 to Meditek and Amer-A-Med, respectively a careful review of the factual allegations contained in the Amended Answer indicates that the last bill received by either of these plaintiffs was on November 7, 2003, which is clearly more than three years prior to the commencement of the subject counterclaim (Gaidon v Guardian Life Insurance Company of America, 96 NY2d 201 [2001], supra). Accordingly, the counterclaim is hereby dismissed (id.).

Unjust Enrichment

A cause of action sounding in unjust enrichment is governed by a six-year statute of limitations and accrues “upon the occurrence of the wrongful act giving rise to a duty of restitution” (Congregation Yetev Lev D’Satmar v 26 Adar N.B. Corp., 192 AD2d 501 [2d Dept 1993]; CPLR §213[1]). As noted above, the most recent allegation of wrongdoing undertaken by the plaintiff’s herein was on November 7, 2003 and more than six years prior to the commencement of the subject counterclaim (id.). Accordingly, the counterclaim is hereby dismissed.

Affirmative Defenses

The Court now addresses that branch of the plaintiff’s application which seeks dismissal of Allstate’s affirmative defenses numerically denominated ¶¶53, 54, 55, 61, 62, 63, 76, 77, 78, 81 and 82 (see Bell Affirmation in Support at ¶2).

CPLR §3211(b) provides that a party may move for judgment dismissing one or more defenses on the basis that a defense is not stated or has no merit. When entertaining such an application, “the defendant is entitled to the benefit of every reasonable intendment of the pleading, which is to be liberally construed” (Abney v Lunsford, 254 AD2d 318 [2d Dept 1998]). Where there is any doubt as to the availability of the defense, it should not be dismissed (Warwick v Cruz, 270 AD2d 255 [2d Dept 2000]; Fireman’s Fund Ins. Co. v Farrell, 57 AD3d 721 [2d Dept 2008]).

Within the context of the no fault statutory scheme, upon receipt of the requisite claims forms, an insurance carrier is required to pay or deny the claim within 30 calendar days thereafter (Hospital for Joint Diseases v Travelers Property Cas. Ins. Co., 9 NY3d 312 [2007]; Fair Price Medical Supply Corp. v Travelers Indem. Co., 10 NY3d 556 [2008] ). If an insurance company fails to properly deny a claim within this 30-day period, is it “generally precluded from asserting [*7]a defense against payment of the claim” (Hospital for Joint Diseases v Travelers Property Cas. Ins. Co., 9 NY3d 312 [2007], supra; see also Presbyterian Hosp. in City of New York v Maryland Cas. Co., 90 NY2d 274 [1997] at 283-283). However, the Courts have set forth a narrowly circumscribed exception to the rule of preclusion where the insurance carrier has raised a defense sounding in lack of insurance coverage (Central General Hospital v Chubb Group of Ins. Cos., 90 NY2d 195 [1997]). Under such circumstances, “an insurer who fails to issue a timely disclaimer is not prohibited from later raising the defense because the insurance policy does not contemplate coverage in the first instance, and requiring payment of a claim upon failure to timely disclaim would create coverage where it never existed'”(Hospital for Joint Diseases v Travelers Property Cas. Ins. Co., 9 NY3d 312 [2007], supra at 318 quoting Matter of Worcester Ins. Co., v Bettenhauser, 95 NY2d 185 [2000]).

Informed by the foregoing general legal principles, the Court now turns to the various affirmative defenses alleged by Allstate. In paragraph denominated “53”, Allstate alleges that the “[p]laintiffs and other members of the purported class may be barred, in whole or in part, from recovery to the extent that they failed to provide the DME prescribed to the claimants, yet billed Allstate for that equipment” (see Bell Affirmation in Support at Exh. G).

In Fair Price Medical Supply Corp. v Travelers Indemnity Company, the Appellate Division, Second Department, held that a defense predicated upon a providers failure to furnish the supplies for which it billed is not one grounded in lack of coverage and “is more akin to a claim of overbilling (albeit an extreme form thereof)” (42 AD3d 277 [2d Dept 2007] at 283 affd 10 NY2d 556 [2008]). That Court went on to hold that while a defendant is entitled to challenge such a claim as being fraudulent, it was required to do so within the 30 days following submission of the claim (id. at 286; Globe Surgical Supply v Geico Insurance Company, 59 AD3d 129 [2008]; see also Central General Hospital v Chubb Group of Ins. Cos., 90 NY2d 195 [1997], supra). Here, as Allstate failed to raise the defense within the 30 days following the receipt of the relevant claim forms, it is therefore precluded from asserting same herein (id.). Based upon the foregoing, the affirmative defense as is alleged in paragraph “53”, is hereby dismissed.

In the paragraph denominated “54”, the defendant alleges that the “[p]laintiffs and other members of the purported class may be barred, in whole or in part, from recovery to the extent that they have failed to document their costs as required by Regulation 83, codified at 11 NYCRR §68.3, Appendix 17-C, Part E(b)(1).” Here, in this Court’s view, the substance of Allstate’s defense is that of overbilling in connection to the costs attendant to the DME provided. The courts have held that overbilling is not the equivalent of a defense predicated upon lack of coverage and to preserve such a defense, an insurer must raise same within the 30 days following receipt of the claim (Fair Price Medical Supply Corp. v Travelers Indemnity Company, 10 NY3d 556 [2008] at 564-565; Central General Hospital v Chubb Group of Ins. Cos., 90 NY2d 195 [1997], supra at 199). Thus, as Allstate failed to raise this defense within the 30-day time frame, it is precluded from doing so herein and accordingly this defense is dismissed.

In the paragraph denominated “55”, Allstate claims that the “[p]laintiffs and other members of the purported class may be barred, in whole or in part, from recovery, to the extent alleged assignments to them from the alleged Allstate insureds are invalid or non-existent.” The [*8]Court of Appeals has specifically held that “any defect in [an] assignment * * * simply does not implicate a lack of coverage defense warranting exemption from the exclusion rule” (Hospital for Joint Diseases v Travelers Property Cas. Ins. Co., 9 NY3d 312 [2007], supra at 319). Therefore, as Allstate failed to assert said defense within the statutorily required time frame following the submission of the claims, it is precluded from raising said defense herein and accordingly same is dismissed (id.).

In paragraph “61”, Allstate alleges that “[s]ome or all of plaintiffs’ claims are barred by the doctrine of unclean hands.” Here, said defense is essentially one which alleges fraudulent conduct undertaken by the plaintiffs. While the Court is cognizant that an insurance carrier may indeed challenge suspected fraudulent activity, it must nonetheless do so with in the time period prescribed by the no fault statutory scheme ( Fair Price Medical Supply Corp. v Travelers Indemnity Company, 42 AD3d 277 [2d Dept 2007] at 286). Accordingly, as Allstate failed to allege said defense within the 30 days following receipt of the relevant claims, it is precluded from raising same herein and the defense is dismissed (id; Presbyterian Hosp. In City of New York v Maryland Cas. Co., 90 NY2d 274 [1997]).

In the paragraph denominated “62”, Allstate alleges that “[p]laintiff’s and other members of the purported class may be barred, in whole or in part, from recovery to the extent that the costs do not arise from a bona fide, arm’s-length transaction and for failure to document costs as required by the New York State Insurance Department.” As with the foregoing, the defense alleged herein essentially claims fraudulent conduct on the part of the plaintiffs. However, as noted above, given Allstate’s failure to allege same within the 30 days following receipt of the relevant claim forms, it is precluded from asserting said defense herein (id.). Accordingly, the affirmative defense is hereby dismissed.

In paragraph “63”, Allstate sets forth that the “[p]laintiffs and other members of the purported class may be barred, in whole or in part, from recovery to the extent they have engaged in fraud against defendants, by, inter alia: (1) charging grossly inflated prices for DME they purportedly sold to claimants, often up to three times the price for which the equipment could have been purchased in a bona fide, arm’s-length transaction in the commercial market place, (2) submitting false documentation’ of their costs for DME supplied to Allstate’s insured for the sole purpose of supporting grossly inflated prices charged for DME and collecting fraudulent charges from Allstate, (3) relying on recycled invoices from wholesale supplies to support claims that specific items of DME were purportedly provided to specific claimants, when, in fact, those specific items of DME were not provided to the specific claimant; and (4)staging accidents.”

With respect to those allegations surrounding overbilling and recycling of invoices, same have been held not to constitute a defense predicated upon lack of coverage (Globe Surgical Supply v Geico Insurance Company, 59 AD3d 129 [2008], supra at 142). Accordingly, as Allstate has failed to previously raise same, it is precluded from asserting said defenses herein (id.). With respect to the assertions that various of the accidents were “staged,” such an allegation must be “premised on the fact or founded belief that the alleged injury does not arise out of an insured incident” (see Mount Sinai Hospital v Triboro Coach Inc., 263 AD2d 11 [2d Dept 1999]at 19). The burden is on the insurance carrier to come forth with admissible evidence, which either demonstrates that there is in fact no coverage or evidence which supports the insurer’s [*9]belief that there is no coverage (id.). Here, Allstate has failed to meet this burden (id.). The Court notes that in opposing the plaintiffs’ instant application, counsel for Allstate provides an affidavit from a Mr. D’Amato, who is employed as a claims examiner for the defendant (see Short Affirmation in Opposition at Exh.4 at ¶2). However, the substance of said affidavit does not support the “staging” of accidents but rather chronicles various instances in which the plaintiffs herein purportedly utilized fraudulent invoices (id. at ¶¶7, 10, 14, 16, 17). Accordingly, based upon the foregoing, the affirmative defense as set forth in paragraph “63”, is hereby dismissed.

In paragraph “76”, Allstate alleges that “[t]here is no coverage under the No Fault law for the DME at issue in this matter.” Initially, the Court notes that such a defense is contradicted by the record given that Allstate partially reimbursed the plaintiff for some of the equipment provided (CPLR §3211[b]). Moreover, said defense essentially asserts that the DME provided was excepted from the coverage provided under the no fault statute. However, an exception from coverage is not the equivalent of a lack of coverage, and accordingly as Allstate failed to assert same within the 30 days following the receipt of claim, it is hereby precluded from asserting same herein and the defense is dismissed (Fair Price Medical Supply Corp. v Travelers Indemnity Company, 42 AD3d 277 [2d Dept 2007], supra at 283-284).

In paragraph “77”, Allstate states that “[a]ny benefits available to the plaintiffs and other members of the putative class are expressly conditioned and limited by the terms, conditions, limits and provisions of the insurance policies at issue, which may preclude recovery on such claims.” Here again, the essence of this defense appears to be that certain of the DME provided may be accepted from the insurance polices is issue. However, as noted above, an exception to coverage is not the equivalent to a lack of coverage and thus given Allstate’s failure to assert same within the statutory time frame, it is precluded from raising same herein and the defense is dismissed (id.).

In paragraph “78”, Allstate alleges that “Amer-A-Med and Meditek engaged in misrepresentations and fraud in an effort to conceal the true wholesale cost of the DME they billed to Allstate” and that “Amer-A-Med and Meditek set forth invoices from Impact and Nutekmed, identifying Impact and Nutekmed as the wholesalers, and Amer-A-Med and Meditek, then based their markup upon these invoices.” Allstate further alleged that “Amer-A-Med and Meditek, however, did not engage in arm’s-length transactions with Nutekmed and Impact.” This defense alleges overbilling on the part of the plaintiff’s. However, as noted herein above, overbilling is not equivalent to a defense predicated upon lack of coverage and accordingly as Allstate failed to allege same within the 30 days following the receipt of the claims, the defense is dismissed (Globe Surgical Supply v Geico Insurance Company, 59 AD3d 129 [2008], supra at 142).

Paragraph 81 states the “[p]laintiffs engaged in improper self-referrals and referrals between affiliated entities” Such potential fraudulent action on the part of the plaintiff’s, even if true, is not a defense-based lack of coverage for the subject incidents in which the assignors were involved (Fair Price Medical Supply Corp. v Travelers Indemnity Company, 42 AD3d 277 [2d Dept 2007], supra). According, the failure of Allstate to assert same within the 30 days after receipt of the relevant claims, requires dismissal thereof.

Finally, with respect to paragraph denominated “82”, Allstate alleges that it “specifically [*10]asked plaintiffs for verification by requesting copies of original invoices and/or manufacturer’s invoices.” Here again, said defense goes to issues surrounding overbilling and recycling of invoices, both of which must be asserted within the 30 days following receipt of the relevant claims ( Globe Surgical Supply v Geico Insurance Company, 59 AD3d 129 [2008], supra at 142). Given Allstate’s failure to do so, the defense is dismissed (id.).

Allstate’s Cross-Application

The Court now addresses Allstate’s cross-application for an order pursuant to CPLR §902 dismissing the plaintiffs’ class allegations. In support thereof, counsel contends that as the plaintiffs have failed to move for class certification within the sixty days following Allstate’s service of its responsive pleading, the class allegations must be dismissed (see Zevgaras Affirmation in Support at ¶5;see also Defendant’s Memorandum of Law in Support).

CPLR §902 provides, in relevant part: “within sixty daysafter the time to serve a responsive pleading has expired for all persons named as defendants in an action brought as a class action, the plaintiff shall move for an order to determine whether it is to be so maintained.” In interpreting the statute, the Court of Appeals stated that “[t]he explicit design of Article 9 * * *, is that a determination as to the appropriateness of class action relief shall be promptly made at the outset of the litigation.” (O’Hara v Del Bello, 47 NY2d 363[1979] at 368; Alexander, Practice Commentaries, McKinney’s Cons Law of NY, Book 7B, CPLR C902:1).

In opposing the application, counsel for Amer-a-Med and Meditek contends that given the status of said plaintiffs as named defendants vis a vis the counterclaims asserted against them by Allstate, their time in which to interpose a responsive pleading has yet to begin as their dismissal applications are still pending (see Bell Affirmation in Opposition at ¶¶10, 11, 12). Counsel further argues that as the plaintiffs time in which to serve an Answer has yet to commence, the sixty-day period for moving for class certification has not yet expired (id.).

In the matter sub judice, the Court finds the argument posited by plaintiffs’ counsel unpersuasive and notes that no legal authority has been provided to support his position. Moreover, the counterclaims interposed by Allstate do not seek class relief and, as such, neither Amer-A-Med nor Meditek are defendants in a class action (CPLR§ 902). Accordingly, pursuant to CPLR §902, the plaintiffs were required to move for class certification within the sixty days following the service of Allstate’s Amended Answer (id.). As they have failed to do so, Allstate’s instant application, which

seeks an order dismissing the plaintiffs’ class allegations, is hereby Granted.

All applications not specifically addressed herein are Denied. It is hereby

ORDERED, that the previously issued stay is hereby vacated. It is further

ORDERED, that the parties are directed to appear for a Compliance Conference on May 10, 2011 at 11:00 a.m.

This constitutes the Decision and Order of the Court.

DATED:April 18, 2011

Mineola, NY 11501 [*11]

ENTER:_______________________________

HON. MICHELE M. WOODARD

J.S.C.

Footnotes

Footnote 1: Former Part E regulated and prescribed the amount of reimbursement to providers of DME and stated the following: “For medical equipment and supplies (e.g. TENS units, soft cervical collars) provided by a physician or medical equipment supplier, the maximum permissible charge is 150 percent of the documented costs of the equipment to the provider.”