Government Employees Ins. Co. v Mayzenberg (2025 NY Slip Op 06527)

As we held in Mallela and reiterated in Carothers, the integrity of the no-fault system relies on provider control of medical service corporations (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313 [2005]; Andrew Carothers, M.D., P.C. v Progressive Ins. Co., 33 NY3d 389 [2019]). Whether that provider control is disrupted by a fraudulently incorporated medical enterprise in violation of a licensing prerequisite or, as here, a kickback scheme to split fees with third-party non-providers in violation of a professional misconduct rule, is a distinction without a difference. In those prior cases, the Department of Financial Services (DFS) submitted amicus briefs urging that a broad prohibition of schemes that funnel profits to non-providers was essential to the preservation of the integrity and functioning of the no-fault system. In reliance on DFS’s statements in those cases, we explained that the granting of a financial interest to a person or entity that was not a licensed provider was incompatible with the no-fault system, even if all the claims submitted were entirely appropriate. We emphasized that such violations were not harmless technical violations, but important enablers of fraud and abuse that impair a provider’s professional responsibility to its patients. Such schemes have the potential to inflate costs of the no-fault system, which are ultimately paid by all policyholders by way of higher premiums.

As the majority notes, the federal district court found that Igor Mayzenberg, through his variously named acupuncture businesses, “engaged in a scheme to defraud GEICO using unlawful fee-splitting, kickback, and referral arrangements with unlicensed persons in violation of New York law” (2022 WL 5173745 at *5 [EDNY, Aug. 24, 2022, No. 17-cv-2802]). Mr. Mayzenberg paid kickbacks to third-party non-providers totaling approximately $390,000 for referring patients. He then charged GEICO nearly $4,900,000 in no-fault benefits for his companies’ acupuncture services, which GEICO, understandably, refused to pay. Mr. Mayzenberg’s scheme has no functional, practical, or economic difference to the schemes we disapproved—as DFS urged us to do—in Mallela and Carothers. Indeed, giving a non-provider co-ownership in a no-fault provider’s business (a concept we disapproved in our prior cases) is not quite as bad as entering into an agreement with a non-provider to pay the non-provider a share of the value of the referrals made by the non-provider: in the latter case, the non-provider has a strong incentive to steer phony claims to the provider, whereas in our former cases, there was not even an allegation of steering. Thus, in our prior cases we held that an insurer could withhold reimbursement to a provider because of the potential for fraud, whereas here the majority, aided by DFS’s irrational change in position, denies the insurer the right [*6]to withhold payment where there is a finding—one that we must accept—that the scheme’s purpose here was to defraud GEICO. Consistent with our precedent in Mallela and Carothers, and DFS’s prior amicus briefs, 11 NYCRR 65-3.16 (a) (12) must be read to capture a narrowly defined class of grave and willful violations of law that disrupt basic precepts of the no-fault reimbursement system. Mr. Mayzenberg’s conduct, a kickback scheme in violation of Education Law § 6530 (18) and 8 NYCRR 29.1 (b) (3), falls within that class. Accordingly, I dissent.

In 1973, the New York State Legislature enacted the Comprehensive Motor Vehicle Insurance Reparations Act, known colloquially as the no-fault system (see L 1973, ch 13; Insurance Law §§ 5101-5109; 11 NYCRR 65). The purpose of the no-fault system is to displace most of the State’s common law tort regime for injuries arising from automobile accidents in the hopes it would “ensure prompt compensation for losses incurred by accident victims without regard to fault or negligence, to reduce the burden on the courts and to provide substantial premium savings to New York motorist” (Matter of Medical Socy. of State v Serio, 100 NY2d 854, 860 [2003]). In the event of a motor vehicle accident, automobile insurers like GEICO must pay up to $50,000 for an accident victim’s “basic economic loss”, which includes all “necessary expenses incurred for” medical or other professional health services, regardless of the policyholders’ fault or negligence in causing the accident (Insurance Law § 5102 [a]). Accident victims typically assign their no-fault benefits to their medical service providers, who thereafter bill the insurer directly for reimbursement (Mallela, 4 NY3d at 319; 11 NYCRR 65-3.11 [a]—[b]). That system guarantees that an accident victim’s necessary medical expenses will not be delayed pending determination of fault or coverage.

No-fault reimbursements must be paid by insurers “within a strict, short-leashed contestable period and process designed to avoid prejudice and red-tape dilatory practices”, consistent with no-fault’s goal of prompt uncontested payments (Presbyt. Hosp. in the City of New York v Maryland Cas. Co., 90 NY2d 274, 285 [1997]). That requirement helps to ensure that providers who have aided accident victims do not suffer cash flow problems or bear the cost of the time value of money while insurers debate whether to pay. However, the no-fault scheme “allows carriers to contest ill-founded, illegitimate and fraudulent claims” (id.). For example, insurers may request additional verification and investigate claims through various avenues, so long as they do so in accordance with the scheme’s prompt deadlines (see e.g. 11 NYCRR 65-3.5 [a]—[b]). One ground an insurer can raise to investigate the legitimacy of a claim and potentially deny payment is the medical service provider’s eligibility to receive reimbursement. 11 NYCRR 65-3.16 (a) (12) says that “a provider of health care services is not eligible for reimbursement . . . if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such services in New York”. Once an insurer receives sufficient evidence of proof of loss, it must pay or deny the no-fault benefit claim within 30-calendar days, or it will owe interest and reasonable attorney’s fees (Insurance Law § 5106 [a]; 11 NYCRR 65-3.8 [a] [1]).

Fraud followed the enactment of the no-fault system. From “1992 to 2001, reports of suspected automobile insurance fraud increased by 275%, the bulk of the increase occurring in no-fault insurance fraud” (Matter of Medical Socy. of State, 100 NY2d at 861). By 2000, no-fault fraud accounted for “more than 55% of the 22,247 reports involving all types of insurance fraud” (id.). According to DFS, this fraud was most perpetrated through “medical mills” which would “generate stacks of medical bills for each [patient], detailing treatments and tests that were unnecessary or never performed” (id.). As a result, DFS imposed new no-fault regulations in 2001, including 11 NYCRR 65-3.16 (a) (12), to “ensure that the public receives the benefits of reduced fraud and abuse provided by the proposed regulation at the earliest possible moment and to minimize, to the greatest extent, any disruption and confusion in the handling of no-fault claims” ( NY St Reg, May 9, 2001 at 19).

In Mallela, we addressed whether, in light of 11 NYCRR 65-3.16 (a) (12), insurance carriers may withhold reimbursements for medical services that have been assigned by patients to businesses providing [*7]medical care to accident victims where a nonprofessional held an interest in the business, which violates N.Y. Business Corporation Law §§ 1507, 1508, and Education Law § 6507 (4) (c) (see Mallela, 4 NY3d at 319-321). We held insurers do not have to reimburse providers which are partially owned or controlled by nonprofessionals. Our holding did not conflict with the prompt delivery of medical care to the accident victims, who actually received the services, but instead shifted the cost of the services from the insurer to the provider. We observed that the result was vital to effectuate “our State’s prohibition against lay ownership of shares in medical corporations (and the accompanying potential for fraud)” (id. at 321). In our holding we noted that insurers may look beyond the face of licensing documents to identify these “willful and material” failures.

Later, in Carothers, we reiterated our conclusion, stating that “[c]ontrol of medical service corporations by unlicensed individuals leads to higher costs, less effective medical treatment, and mistrust of the no-fault insurance system” (33 NY3d at 404). We further explained that “the common law in New York has long recognized the need to ensure that providers of professional services are not unduly influenced by unlicensed third parties who are free of professional responsibility requirements and may disregard patient care” to focus instead on financial outcomes (id.). In both Mallela and Carothers, we held that splitting no-fault treatment fees with nonphysicians threatened the integrity of the no-fault system and justified an insurers ability to deny reimbursements pursuant to 11 NYCRR 65-3.16 (a) (12) and the policy behind the no-fault system.

Mr. Mayzenberg’s arrangement in this case is the same wolf DFS urged us to forbid in Mallela and Carothers, just in a different set of clothes. In 2001, DFS amended 11 NYCRR 65-3.16 (a) (12) to “clarify that a health care provider must be properly licensed to be eligible for reimbursement under no-fault” (NY St Reg, May 9, 2001 at 19). The amended “regulation was intended to address abuses in the No-Fault system as well as fraud” (id.). DFS’s Mallela amicus brief reiterated that point. DFS (then known as the Superintendent of Insurance) titled a section of its brief “The Superintendent Promulgated Section 65-3.16 (a) (12) to Target Fraud and Abuse” (Brief for Gregory v Serio, the Superintendent of Insurance of the State of New York, amicus curiae, at 16, Mallela, 4 NY3d 313). Within that section, it noted that 11 NYCRR 65-3.16 (a) (12) “was intended to combat No-Fault fraud and abuse perpetrated largely by medical mills, which . . . often are fraudulently formed medical” service corporations (id. at 20). DFS’s explanation notes that fraudulently formed medical service corporations are not the only mechanism by which medical mills abuse the no fault system. Rather, the general takeaway from DFS’s Mallela amicus brief was that the 2001 amendments, including 11 NYCRR 65-3.16 (a) (12), were intended to combat various forms of no-fault abuse.

In Carothers, DFS’s amicus similarly stressed its “critical interest in vindicating the policies underlying [its] regulation” which prevent no-fault abuse and “prioritize quality patient care over profit-seeking” (Brief for New York State DFS, amicus curiae, at 2, Carothers, 33 NY3d 389 [2019]). “By deterring the unlawful structures that enable large-scale fraud, § 65-3.16(a)(12) operates as a tool to thwart prevalent forms of abuse involving bad actors who pay doctors for the use of their licenses to establish corrupt medical clinics and extract massive sums in no-fault insurance reimbursements” (id. at 3). DFS devoted an entire section of its Carothers amicus brief to fee splitting, in which it acknowledged that “the sharing of revenues with unlicensed nonphysicians is no mere technical, harmless violation of law” and that “laws prohibiting professionals from splitting fees are broadly necessary to prevent arrangements that impair the discharge of professional responsibility to clients” (id. at 40). DFS stated that “in the no-fault scheme, improper structures that allocate profits to nonphysicians have proven key facilitators of insidious forms of fraud and abuse” (id.). In sum, DFS argued that “basic logic dictates that eliminating ‘arrangements in which someone other than the physician has a financial incentive for increasing the physician’s revenues’ will ‘reduce opportunities for fraud’ ” (id. at 32). DFS’s repeated statements in Carothers leave no doubt that the [*8]evil “broadly necessary” to combat through the denial of reimbursement where “arrangement” split fees with nonprofessionals.

In the instant case, DFS abandons its prior positions, offering instead an unprincipled and wholly illogical position: if a nonprofessional co-owns a no-fault provider, the insurer does not have to reimburse the provider for any services, even legitimate ones, but if a provider wholly owned by professionals instead enters an agreement to give a portion of the revenues from patients referred to a nonprofessional, the insurer may not withhold reimbursement even if the services were unnecessary and, therefore, fraudulent ^[FN1]. DFS “strongly disagrees” with the district court’s interpretation of 11 NYCRR 65-3.16 (a) (12), but does not quarrel with the proposition that the two cause the same harm in the same way ^[FN2]. Instead of focusing on the underlying purpose of the no-fault system, the specific purpose of 11 NYCRR 65-3.16 (a) (12), or the substance of the positions it articulated in its prior briefs to our Court, DFS contends that allowing insurers to refuse reimbursement in cases such as this would usurp DFS’s authority over professional conduct violations (id. at 20).

The federal district court saw through this subterfuge: fee splitting schemes like those at issue here are on all fours with the fraudulently incorporated enterprises that allowed non-provider ownership in Mallela and Carothers. Although kickback schemes take a different form, they are in substance an alternative mechanism by which to transfer a measure of decisionmaking about treatment from licensed medical providers to other persons unauthorized to make or influence such decisions, leading to fraud on the no-fault system and increased premiums for New York motorists.

The difference in form here renders the abuse more egregious and dangerous than those we eschewed in Mallela and Carothers. In Mallela, we held that although “the actual care that patients received was within the scope of the licenses of those who treated the patient”, we will not tolerate violations of licensing requirements (4 NY2d at 321). Here, we are not evaluating proper care provided by an entity with a co-owner who was not a medical professional—for which this Court allows insurers to deny reimbursements under 11 NYCRR 65-3.16 (a) (12). Rather, we are evaluating a situation in which a wholly-owned nonmedical entity is choosing patients and directing them to Mr. Mayzenberg’s entities in exchange for an allegedly randomly demanded fee, where some of those people did not need his care ^[FN3]. Mr. Mayzenberg [*9]admits he administered acupuncture to patients as long as they were willing to return, revealing he offered some services that were never medically necessary ^[FN4]. Mr. Mayzenberg and his entities, who were the only licensed providers, had nothing to do with the initial selection of who would receive treatment: that was in the hands of unlicensed nonprofessional for-profit entities.

The no-fault system is meant to prevent these fraudulent claims in the first instance. The majority’s decision instead requires insurers to pay for millions of dollars in fraudulent reimbursements and presents them with only prospective, untried and uncertain solutions. That is hardly consistent with the majority’s acknowledgement that a primary aim of the no-fault system is “to provide substantial premium savings to New York motorists” (Matter of Medical Socy. of State, 100 NY2d at 860). DFS’s 2013 amendments to its implementing regulations note that fraud in the no-fault system “costs no-fault insurers tens if not hundreds of millions of dollars, which insurers ultimately pass on to New York consumers in the form of higher automobile insurance premiums” and “threaten[] the affordability of health care and the public’s health, safety, and welfare” (11 NYCRR 65-5.0). By forcing insurers to front millions of dollars in fraudulent reimbursement in the case of fee splitting, rather than preventing payment consistent with larger purpose of the no-fault scheme, the majority’s holding will ensure increased costs to the no-fault system. My interpretation would ensure the opposite result, thereby providing premium savings to New York motorists.

To support its position, the majority argues the term “licensing requirement” in 11 NYCRR 65-3.16 (a) (12) is meant to only include initial statutory prerequisites needed to obtain a license in the first place, and [*10]not those requirements necessary to maintain a license thereafter.^[FN5], ^[FN6] Again, the timing of the fraud (before or after licensing) is a form-over-substance problem. Indeed, in Carothers the violation occurred after the provider properly obtained its license (33 NY3d 389). In other words, there, just as it should here, this Court read the text of 11 NYCRR 65-3.16 (a) (12) to encompass a violation that (i) is necessary to maintain, not merely to obtain, a license and (ii) may, but does not automatically, lead to license revocation. Ultimately, the majority and DFS draw a line that construes 11 NYCRR 65-3.16 (a) (12) to permit certain allegations of funneling profits to non-providers but forbid others. There is no rational basis to separate violations like fee splitting from other “licensing requirements” that duly interfere with provider control of medical service corporations, only semantics.

The majority’s primary contention is that to hold 11 NYCRR 65-3.16 (a) (12) encompasses fee splitting violations would “have the perverse effect of delaying payments and incentivizing litigation, based on an insurer’s unilateral determination that a provider violated any one of the fifty distinct categories of professional misconduct in Education Law § 6530, including relatively minor departures from professional standards” (majority op at 9). That would not be so, unless the majority adopted a rule to make it so.

First, we have already gone through the balancing act of weighing prompt reimbursement with the prohibition of fraud, and held the former did not get in the way of the latter (see Mallela, 4 NY3d at 321). Second, it is not the patient whose reimbursement is delayed while claims of fraudulent fee splitting are investigated (see Matter of Medical Socy. of State, 100 NY2d at 859 [noting one of “(t)he primary aims of this new system w[as] to ensure prompt compensation for losses incurred by accident victims“] [emphasis added]). Patients typically assign their no-fault claims to their medical provider. As a result, it is the provider that would experience any delays, a worry they must face only if legitimately accused of fraud, given all of the additional limiting principles on insurers articulated below.

In addition, both Mallela and Carothers, and the precise certified question posed in this case, include limiting principles that would allow insurers to delay or deny reimbursement only within a narrowly defined set of circumstances. In Mallela, we held that insurers may delay reimbursement “to pursue investigations solely for good cause”, in the effort to identify “willful and material failure[s] to abide by state and local law” that are “tantamount to fraud”, but not for mere “technical violations” (4 NY3d at 321-322). Our decision in Mallela rested in part on DFS’s interpretation, which stated the no-fault system “does not permit abuse of the truth-seeking opportunity that 11 NYCRR 65-3.16 (a) (12) authorizes” (id. at 322). DFS spent four pages in its Mallela amicus brief on a final subsection, titled “The District Court’s Remaining Concerns About Construing Section 11 NYCRR 65-3.16 (a) (12) Broadly are Unfounded” (Brief for the Superintendent of Insurance, amicus curiae, at 28-31, Mallela, 4 NY3d 313). In it, DFS articulated that “allowing an insurer, in certain carefully delineated circumstances and subject to ongoing [DFS] oversight, to look behind a facially valid license to determine whether a provider is lawfully authorized to provide and bill for medical services under New York law creates no slippery slope” (id.). DFS explained that even a broad reading of 11 NYCRR 65-3.16 (a) (12) would not permit technical administrative requirements, such as failure to pay child support or license renewal fees, to have “any bearing on the question [of] whether a provider is ‘lawfully’ authorized to provide and bill for health care service” (id at 30).

Similarly, DFS had a section in its Carothers amicus which argued “Public Policy Counsels Strongly Against Limiting the Scope of § 65-3.16 (a) (12)” (Brief for DFS, amicus curiae, at 35, Carothers, 33 NY3d 389). In our Carothers decision, we reinforced the “willful and material” misconduct language from Mallela, explaining that although misconduct need not approximate fraud to fall under 11 NYCRR 65-3.16 (a) (12), it must be grave, rather than technical (33 NY3d 389, at 405-406). Thus, neither our Court nor DFS had any problem drawing administrable lines previously.

In its current brief, DFS abandons its previous stance and stresses the slippery slope arguments it heretofore disclaimed. For instance, DFS now asserts that, under GEICO’s reading, each of the 50 forms of professional misconduct “presents an opportunity to delay the recovery of no-fault claims” given that there is “no discernable way for an insurer to distinguish a technical violation from a nontechnical violation in the context of professional misconduct” (Brief for DFS, amicus curiae, at 29-31). The inconsistency with its prior position is patent. To allow 11 NYCRR 65-3.16 (a) (12) to encompass fee splitting remains consistent with Mallela and Carothers, which broadly allow for insurers to undertake good cause investigations for fraud, including the ability to look beyond licensing documents, while restricting what level of provider misconduct can justify denial of no-fault reimbursement—that is grave, willful, and material violations of law. It is why, for example, it is easy to distinguish the circumstances of New Way from the circumstances here: paying a billing and collection service is not fee splitting in substance; paying kickbacks for referrals is.

The majority’s similar slippery slope contention—that it is hard to determine the line between a single payment for a referral and a kickback scheme, and that said determination of the extent of unnecessary services is hard to determine a priori—applies with equal force to ownership by nonmedical providers. Under our prior decisions in Mallela and Carothers, we have held an insurer may withhold reimbursement to a medical provider that is partially owned by a nonmedical person or entity, yet we have provided no guidance about whether a 50%, 10%, 1% or .001% ownership interest sets the line, nor have we asked for proof that the fractional ownership interest resulted in the provision of unnecessary medical services. Neither we nor DFS found the majority’s argument persuasive in Mallela or Carothers, and the 180-degree turnaround adopted here is unprincipled.

All the Second Circuit asks us to decide is:

“If an insurer determines a healthcare provider has improperly paid others for patient referrals, in violation of New York Education Law § 6530(18) and 8 N.Y.C.R.R. § 29.1(b)(3), can the insurer deny payment for no-fault benefits on the ground that the provider “fail[ed] to meet” a “necessary” State or local [*11]licensing requirement under 11 N.Y.C.R.R. § 65-3.16(a)(12)?” (121 F4th 404, 422 [2d Cir 2024], certified question accepted, 42 NY3d 1044 [2024]).

Answering in the affirmative would not allow an insurer to deny reimbursement based on “any one of the fifty distinct categories of professional misconduct in Education Law § 6530, including relatively minor departures from professional standards” (majority op at 9). Rather, unless we deliberately sabotaged the answer, it would allow an insurer to deny reimbursement based on exactly one category of professional misconduct in Education Law § 6530—subsection 18—and then only for violations that materially threatened to shift medical decsionmaking control from medical professionals to others. Kickback schemes are not “relatively minor departures from professional standards.”

Even putting aside our carefully limited precedent and the Second Circuit’s narrowly posed question, the costs to investigate violations serve as a real disincentive for insurers to delay reimbursements. Once an insurer receives sufficient evidence of proof of loss, it must pay or deny the no-fault benefit claim within 30 calendar days, or it will owe interest and reasonable attorney’s fees (Insurance Law § 5106 [a]; 11 NYCRR 65-3.8 [a] [1]). Interest is charged monthly at a nonnegligible rate of two percent (11 NYCRR 65-3.9 [a])—which would be so high as to constitute civil usury under New York law (General Obligations Law § 5—501[1]; Banking Law § 14-a [1]) were it not authorized by DFS’s regulation (see also Department of Financial Service, OGC Op No. 10-09-05 [September 14, 2010] [noting that “(i)nterest is tolled from the date of receipt of the denial of claim until arbitration or a lawsuit is filed“] [emphasis added])^[FN7]. Moreover, an insurer “that fails to deny a claim within the 30-day period is generally precluded from asserting a defense against payment of the claim” (Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 318 [2007]). As a result, an insurer would have no incentive to deny or delay reimbursement and bring litigation only when it is highly confident that the provider’s actions clearly fall within the narrow, and egregious, band of conduct.

Despite the majority’s attempts to stoke fear, allowing an insurer to deny reimbursement in these circumstances will not “incentivize[] [insurers] to test the threshold” level of fee splitting sufficiently grave to deny payments (majority op at 11). First, as made clear by the comparison of the circumstances in this case, to that of New Way, beyond the grave, material, and willful nature of the conduct, what matters is the incentive structure a given kickback scheme creates to commit fraud on the no-fault system. Second, this reasoning will deter providers from fee splitting in the first place.

Third, DFS itself, in its amicus brief in Mallela, rejected the majority’s argument that empowering insurers to raise challenges in circumstances where a medical provider has enmeshed non-providers in its operations would harm accident victims, writing:

“Nor is there any merit to the district court’s concern that the Superintendent’s intended reading of Section 65-3.16(a) (12) will delay payment of valid claims. Critically, that provision applies only where health care providers seek reimbursement from insurers after assignment of a claim by an injured person; it does not affect the payment of claims to the injured person herself” (Brief for the Superintendent of Insurance, amicus curiae, at 15, Mallela, 4 NY3d 313).

Curiously, the majority defers to DFS only when DFS says what the majority would like to hear, ignoring what DFS has advised us in the past. Finally, it is the majority’s decision that will result in testing the limits of the no-fault scheme, but not by insurers, by providers. The majority’s decision leaves providers free to test how far they can push the bounds before they “effectively cede[] control of their professional service corporation to unlicensed individuals” to a level of control sufficiently grave to deny payments (majority op at 14).

Lastly, DFS’s concern that allowing insurers to go through the protracted process of litigating an allegedly unreimbursable claim would deprive DFS of its regulatory authority over licensing is a complete red herring. Our decisions in Mallela and Carothers already do that, with DFS’s blessing. Moreover, if DFS (a regulatory authority whose raison d’etre in a broad sense is because its processes are simpler, cheaper and faster than the judicial process) simply moves faster than the courts, no judicial usurpation of DFS’s regulatory supervision would occur. For that same reason, were DFS to act with even at a modest pace in exercising its regulatory authority, the majority’s worry that an insurer will be able to “deny reimbursement based on its unilateral determination that a provider committed professional misconduct” would never transpire (majority op at 7).

The real problem in this case is of DFS’s own making. In the last 11 years, DFS has not placed a single provider on its list of providers deemed unauthorized to receive no-fault payments, and lists only 14 entities ever determined to be unauthorized (Providers De-Authorized From Billing New York’s No-Fault Auto Insurance System, https://www.dfs.ny.gov/apps_and_licensing/property_insurers/nofault/deauthorized_billers). As a frame of reference, in 2024 alone there were 38,846 claims of no-fault fraud lodged with DFS in 2024 (N.Y. Dep’t of Fin. Serv., Investigating and Combating Health Insurance Fraud, at 4, Fig.1 [Mar. 15, 2025]), and, as mentioned above, the dollar volume of no-fault fraud has skyrocketed. Given DFS’s own numbers, it should be of no surprise that DFS itself has proclaimed: “The Department has concluded that reasonable fraud-fighting tools must be available to insurers” (NY St Reg, May 9, 2001 at 23. [discussing 11 NYCRR 65-3.5 [e]). It was GEICO, not DFS, who discovered that Mayzenberg’s $4,900,000 in claimed reimbursements were part of a fraudulent scheme.^[FN8]

Between stimulus and response, there is a space. In that space is the power to choose a response. DFS abdicated its power to choose a response, and insurers and the courts have filled the space.^[FN9] Answering the certified question in the affirmative would not disable DFS from responding by filling that space and displacing the courts.

As should be obvious from the above, DFS is owed no deference here. The majority correctly articulates that “[a]s a general rule, ‘courts must defer to an administrative agency’s rational interpretation of its own regulations in its area of expertise’ ” if that interpretation is neither irrational nor unreasonable (Andryeyeva v New York Health Care, Inc., 33 NY3d 152, 174 [2019], quoting Matter of Peckham v Calogero, 12 NY3d 424, 431 [2009]). But we do not defer when an action “is taken without sound basis in [*12]reason or regard to the facts”—that is, when it is irrational (Peckham, 12 NY3d at 431). DFS’s interpretation of 11 NYCRR 65-3.16 (a) (12) is an ad-hoc response to litigation via an amicus brief that is inconsistent with DFS’s prior amicus briefs in analogous litigation, and DFS fails to present any rational explanation for its change in interpretation.

In Kisor v Wilkie (588 US 558 [2019]) the U.S. Supreme Court articulated additional circumstances, beyond mere rationality, in which a court should decline to defer to an agency’s interpretation of its own regulation. The Court noted that an agency’s interpretation “must reflect ‘fair and considered judgment’ ” and “that a court should decline to defer to a merely ‘convenient litigating position’ or ‘post hoc rationalizatio[n] advanced’ ” (id. at 579). An agency’s interpretation is less reliable when it is spontaneously formed in response to litigation, as opposed to naturally formed through well-reasoned decision making and bureaucratic processes. Although New York State has yet to develop an analogous doctrine, various cases implicitly acknowledge its merit (see e.g. Andryeyeva, 33 NY3d at 193 [Garcia, J., dissenting] [arguing the Court should not defer to an agency’s interpretation that it came to without an “extensive, collaborative process,” and noting that “(r)ather than codify rules through the processes required by statute—mandating public notice, hearings, and comments—(the agency) opts to promulgate revised (rules) “under the guise of interpreting a regulation”]; Blue v New York State Off. of Children and Family Services, 206 AD3d 1126, 1131 [3d Dept 2022] [declining to defer to an agency’s interpretation that ” ‘does not reflect a fair and considered judgment’ “] [quoting Kisor, 588 US at 579]; Arias v City of New York, 182 AD3d 170, 172 [3d Dept 2020] [same]).

DFS’s interpretation of 11 NYCRR 65-3.16 (a) (12) is what Kisor warns against—a post-hoc rationalization made for the purpose of litigation. DFS has no prior publicly stated opinion on this exact issue, and points to no historical decisions nor actions that support its view. In fact, although this litigation has been ongoing since 2018, Mr. Mayzenberg did not argue for deference to DFS until August 2025, because DFS’s interpretation of 11 NYCRR 65-3.16 (a) (12) in these precise circumstances was unknown to the Court, and the parties, until it submitted its amicus brief in this matter in July 2025.

Finally, “[a] decision of an administrative agency which neither adheres to its own prior precedent nor indicates its reason for reaching a different result on essentially the same facts is arbitrary and capricious” (Matter of Charles A. Field Delivery Serv., Inc., 66 NY2d 516, 517 [1985]). Whether in regard to a decision, or an interpretation, inconsistent views are inherently irrational (see Frank Lomangino & Sons, Inc. v City of New York, 980 F Supp 676, 681 [EDNY 1997] [“Inconsistent determinations . . . erode the credibility of agency decisionmaking”]; LL 410 E. 78th St. LLC v Div. of Hous. and Community Renewal, 2025 NY Slip Op 01672, 10 [Ct App Mar. 20, 2025] [Wilson, C.J, dissenting] [reasoning that “because (the agency) cannot even consistently explain what it means . . . it should be no surprise that its decisionmaking is chaotic and irrationally inexplicable”]). The majority erroneously states that DFS has “long interpreted 11 NYCRR 65-3.16 (a) (12) as only encompassing pre-licensing requirements” (majority op at 6), when this view has only just emerged. As articulated in detail above, DFS’s amicus briefs in Mallela and Carothers are replete with statements of its official position that contradict its proffered interpretation of 11 NYCRR 65-3.16 (a) (12). Although DFS once emphasized a broad based 11 NYCRR 65-3.16 (a) (12) to combat fraud in the no-fault system and minimized concerns regarding reimbursement delays, today it stresses the slippery slope arguments it previously derided and attempts to differentiate fraudulent fee splitting schemes on untenable grounds.

To answer the certified question, I would reaffirm that 11 NYCRR 65-3.16 (a) (12) allows insurers to challenge the reimbursability of claims for violations of professional misconduct rules where the substance of the violation is functionally equivalent to the defect in Mallela and Carothers—that is, where the violation allows nonmedical persons to influence medical decisionmaking, such as a kickback scheme in violation of [*13]Education Law § 6530 (18) and 8 NYCRR 29.1 (b) (3). Doing so would not create any slope slipperier that the one we previously laid down, nor impinge on DFS’s authority any more than we have already allowed, with its own blessing. To maintain the integrity of the no-fault system, we must focus the substance of an alleged violation, not its form. Answering in the affirmative would not interfere with the no-fault system’s ability to provide prompt compensation to accident victims, would avoid the injection of fraud-related costs into the system, and would be most consistent with 11 NYCRR 65-3.16 (a) (12)’s intended purpose, to combat widespread fraud and abuse in the no-fault system.

Instead, the majority has deferred to an agency whose new position is flatly inconsistent with its prior positions and the essence of our prior decisions, so as not to interfere with the agency’s discretion to do nothing, even when an insurer could conclusively prove fraud. I would answer the question differently.

Following certification of a question by the United States Court of Appeals for the Second Circuit and acceptance of the question by this Court pursuant to section 500.27 of this Court’s Rules of Practice, and after hearing argument by counsel for the parties and consideration of the briefs and record submitted, certified question answered in accordance with the opinion herein. Opinion by Judge Rivera. Judges Garcia, Singas, Cannataro, Troutman and Halligan concur. Chief Judge Wilson dissents in an opinion.

Decided November 24, 2025