August 18, 2017

K.O. Med., P.C. v USAA Cas. Ins. Co. (2017 NY Slip Op 51089(U))

https://www.beynensonlaw.com/case-law/k-o-med-p-c-v-usaa-cas-ins-co-2017-ny-slip-op-51089u/

Court: Appellate Term, Second Department
Decided: August 18, 2017
Citation: 2017 NY Slip Op 51089(U)
Posture: Other motion
Outcome: Insurer prevailed
Issues: Fraudulent incorporation (Mallela) Timeliness and preclusion Discovery and procedure
Legal questions: Mallela defense: preclusion and discovery (see the maps)

Cite as

K.O. Med., P.C. v USAA Cas. Ins. Co., 2017 NY Slip Op 51089(U) (App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2017)

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Summary

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

A Mallela defense need not be preserved in a timely denial of claim. The provider challenged an order striking its notice of trial and compelling verified responses and documents relevant to that defense, arguing that the insurer's failure to prove timely denials made the discovery demands improper. Although first raised on appeal, the preclusion question was reviewable as a legal issue apparent on the record that could not have been avoided if timely raised; the insurer had also addressed it below. The Appellate Term, Second Department, rejected the preclusion argument and affirmed the order, insofar as appealed from, leaving the insurer's discovery relief intact.

Reported in New York Official Reports at K.O. Med., P.C. v USAA Cas. Ins. Co. (2017 NY Slip Op 51089(U))

SUPREME COURT, APPELLATE TERM, SECOND DEPARTMENT, 2d, 11th and 13th JUDICIAL DISTRICTS

K.O. Medical, P.C., as Assignee of McIntosh Crystal, Appellant,
against
USAA Casualty Insurance Company, Respondent.

Law Offices of Melissa Betancourt, P.C., (Melissa Betancourt, Esq.), for appellant. McDonnell, Adels & Klestzick, PLLC (Linda A. Mule, Esq.), for respondent.

Appeal from an order of the Civil Court of the City of New York, Kings County (Theresa M. Ciccotto, J.), entered June 1, 2015. The order, insofar as appealed from, granted a motion by defendant to the extent of striking the notice of trial and compelling plaintiff to provide responses to specified discovery demands.

ORDERED that the order, insofar as appealed from, is affirmed, with $25 costs.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff appeals from so much of an order as granted a motion by defendant to the extent of striking the notice of trial and compelling plaintiff to “provide verified responses and documents responsive to defendant’s demands for” discovery relevant to a defense interposed pursuant to State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313 [2005]).

Plaintiff’s sole argument on appeal is that the “Mallela defense” is subject to the preclusion rule (see Presbyterian Hosp. in City of NY v Maryland Cas. Co., 90 NY2d 274 [1997]) and, since defendant did not prove that it had issued timely denials, defendant did not demonstrate that the discovery demands at issue are not palpably improper (see All Boro Psychological Servs., P.C. v Allstate Ins. Co., 39 Misc 3d 9 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2013]). Although this argument is raised for the first time on appeal, it is reviewable by this court since the threshold issue of whether a “Mallela defense” is subject to the [*2]preclusion rule is “one of law appearing on the face of the record and it could not have been avoided had it been raised at the proper juncture” (Navillus Tile, Inc. v George A. Fuller Co., Inc., 83 AD3d 919, 920 [2011]; see also Olim Realty v Lanaj Home Furnishings, 65 AD3d 1318, 1320 [2009]). In any event, defendant addressed this argument in its reply submission to the Civil Court as if it had been raised.

Contrary to plaintiff’s argument, a “Mallela defense” need not be preserved in a timely denial (see Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co., 149 AD3d 828 [2017]; All Boro Psychological Servs., P.C., 39 Misc 3d 9; First Help Acupuncture P.C. v State Farm Ins. Co., 12 Misc 3d 130[A], 2006 NY Slip Op 51043[U] [App Term, 2d Dept, 2d & 11th Jud Dists 2006]).

Accordingly, the order, insofar as appealed from, is affirmed.

WESTON, J.P., ALIOTTA and ELLIOT, JJ., concur.

ENTER:
Paul Kenny
Chief Clerk
Decision Date: August 18, 2017

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.

Mallela defense: preclusion and discovery

Open the full map

May the insurer raise and investigate a Mallela (fraudulent incorporation) defense, or is it precluded, waived or denied discovery?

This decision: Insurer may raise or investigate the Mallela defense here

Held the defense need not be preserved in a timely denial and is not subject to the preclusion rule, so discovery demands relevant to it were not palpably improper and were properly compelled.

Defense may be pursuedDefense barredThis decisionCites it or cited by itCited or followed

Of the 136 decisions on this question in the Second Department courts and the Court of Appeals, 112 (this one included) are in the same category.

Cited in this decision

A label shows how this decision treated the case it cites.

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).
All Boro Psychological Servs., P.C. v Allstate Ins. Co. (2013 NY Slip Op 23043) FollowedThe insurer established a basis for Mallela discovery, defeating the provider's summary judgment motion.
Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co. (2017 NY Slip Op 02785) FollowedAn insurer's fraudulent incorporation defense is not precluded by failure to raise it in a timely denial.
First Help Acupuncture P.C. v State Farm Ins. Co. (2006 NY Slip Op 51043(U)) FollowedFraudulent licensing under 11 NYCRR 65-3.16 (a) (12) is a nonwaivable defense outside the 30-day preclusion rule.

Similar decisions

J.K.M. Med. Care, P.C. v USAA Gen. Indem. Co. (2018 NY Slip Op 50818(U))A provider that fails to timely object to discovery demands must respond unless the demands are privileged or palpably improper.
Medical Polis, P.C. v Progressive Specialty Ins. Co. (2012 NY Slip Op 50342(U))An insurer may obtain discovery on an unpleaded Mallela defense when sufficient allegations of fraudulent incorporation support the request.
Clinton Place Med., P.C. v USAA Cas. Ins. Co. (2017 NY Slip Op 51012(U))A provider that fails to object timely to discovery demands must respond except as to privileged or palpably improper matters.
All Boro Psychological Services, P.C. v Auto One Ins. Co. (2012 NY Slip Op 50777(U))A provider that misses discovery objection deadlines must respond except as to privileged or palpably improper demands.
Five Boro Psychological Servs., P.C. v AutoOne Ins. Co. (2010 NY Slip Op 20131)The provider's summary judgment motion was denied because unproduced discovery could support the insurer's Mallela defense.