April 12, 2017

Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co. (2017 NY Slip Op 02785)

https://www.beynensonlaw.com/case-law/matter-of-acuhealth-acupuncture-p-c-v-country-wide-ins-co-2017-ny-slip-op02785/

Court: Appellate Division, Second Department
Decided: April 12, 2017
Citation: 2017 NY Slip Op 02785 · 149 AD3d 828
Posture: Article 75 petition
Outcome: Insurer prevailed
Later treatment: Contrasted (cf., but see) in 1 and followed in 4 later decisions (see Cited by)
Issues: Fraudulent incorporation (Mallela) CPLR article 75 (arbitration awards) Timeliness and preclusion
Legal questions: Mallela defense: preclusion and discovery · Court review of arbitration awards (see the maps)

Cite as

Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co., 149 AD3d 828 (2d 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.

An insurer's fraudulent incorporation defense is not precluded by failure to raise it in a timely denial. The Appellate Division, Second Department, reversed the order granting the provider's CPLR 7511 petition, denied the petition, and reinstated and confirmed the master arbitrator's award vacating an award for acupuncture reimbursement. Although factual review is limited to rationality, 11 NYCRR 65-4.10 (a) (4) permits a master arbitrator to correct substantive legal errors. The arbitrator erroneously refused to consider the insurer's Mallela defense because the insurer had not raised it in a timely denial. The master arbitrator correctly rejected that preclusion ruling, and the resulting vacatur was not irrational.

Reported in New York Official Reports at Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co. (2017 NY Slip Op 02785)

Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co.

2017 NY Slip Op 02785 [149 AD3d 828]

April 12, 2017

Appellate Division, Second Department

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

As corrected through Wednesday, August 23, 2017

[*1]

In the Matter of Acuhealth Acupuncture, P.C., as Assignee of Louis Quadina, Respondent,
v
Country-Wide Ins. Co., Appellant.

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

Gary Tsirelman, P.C., Brooklyn, NY (David M. Gottlieb and Stefan Belinfanti of counsel), for respondent.

In a proceeding pursuant to CPLR 7511 to vacate an award of a master arbitrator dated November 27, 2013, which vacated an arbitration award dated August 28, 2013, awarding the petitioner, inter alia, reimbursements totaling $626.81 for acupuncture treatments, Country-Wide Ins. Co. appeals from an order of the Supreme Court, Kings County (Velasquez, J.), dated December 15, 2014, which granted the petition, vacated the award of the master arbitrator, and reinstated and confirmed the award of the arbitrator.

Ordered that the order is reversed, on the law, with costs, the award of the master arbitrator is reinstated and confirmed, and the petition is denied.

“The power of [a] master arbitrator to review factual and procedural issues is limited to ‘whether the arbitrator acted in a manner that was arbitrary and capricious, irrational or without a plausible basis’ ” (Matter of Liberty Mut. Ins. Co. v Spine Americare Med., 294 AD2d 574, 575 [2002], quoting Matter of Petrofsky [Allstate Ins. Co.], 54 NY2d 207, 211 [1981]). “If the determination of the arbitrator is challenged based upon an alleged factual error, the master arbitrator must uphold the determination if it has a rational basis” (Matter of Liberty Mut. Ins. Co. v Spine Americare Med., 294 AD2d at 575-576). “However, pursuant to 11 NYCRR 65.19 (a) (4) [(now 11 NYCRR 65-4.10 [a] [4])], the review powers of the master arbitrator include the power to determine if the arbitrator’s award was ‘incorrect as a matter of law’ ” (id. at 576, quoting Matter of Smith [Firemen’s Ins. Co.], 55 NY2d 224, 231 [1982]; Matter of Petrofsky [Allstate Ins. Co.], 54 NY2d at 211). “If the master arbitrator vacates the arbitrator’s award based upon an alleged error of ‘a rule of substantive law,’ the determination of the master arbitrator must be upheld unless it is irrational” (Matter of Liberty Mut. Ins. Co. v Spine Americare Med., 294 AD2d at 576, quoting Matter of Smith [Firemen’s Ins. Co.], 55 NY2d at 232). Here, the master arbitrator correctly found that the arbitrator had erroneously held that the carrier’s claim of fraudulent incorporation (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, 322 [2005]), was precluded because it was not raised in a timely denial (see Lexington Acupuncture, P.C. v General Assur. Co., 35 Misc 3d 42, 44 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2012]; Multiquest, P.L.L.C. v Allstate Ins. Co., 17 Misc 3d 37, 38-39 [App Term, 2d Dept, 2d & 11th Jud Dists 2007]). The master arbitrator’s [*2]award setting aside the arbitrator’s award based on that erroneous refusal to consider the claim of fraudulent incorporation was not irrational. Accordingly, the Supreme Court erred in granting the petition to vacate the award of the master arbitrator (cf. Matter of Singh v Allstate Ins. Co., 137 AD3d 1046, 1047 [2016]). Rivera, J.P., Balkin, Barros and Brathwaite Nelson, JJ., concur.

Legal questions (2)

Questions 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 arbitrator erred in treating the insurer's fraudulent incorporation defense as precluded for lack of a timely denial, so the master arbitrator's vacatur for refusing to consider the defense was reinstated.

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. 2 decisions in other departments that cite or are cited by this one are on the full map.

Court review of arbitration awards

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When does a court vacate, modify or confirm a no-fault arbitrator’s or master arbitrator’s award under CPLR article 75?

This decision: No ground for vacatur or modification shown: the award is confirmed or left in place

Reinstated and confirmed the master award, which had set aside the provider's award, because the master arbitrator rationally corrected the arbitrator's legal error in treating the fraudulent-incorporation defense as precluded.

Award standsVacated: irrational/arbitraryVacated: exceeded powerVacated: master oversteppedThis decisionCites it or cited by itCited or followedDistinguished or limited

Of the 119 decisions on this question in the Second Department courts and the Court of Appeals, 92 (this one included) are in the same category. 2 decisions in other departments that cite or are cited by this one are on the full map.

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) FollowedFraudulently incorporated medical providers are ineligible for no-fault reimbursement under 11 NYCRR 65-3.16 (a) (12).
Lexington Acupuncture, P.C. v General Assur. Co. (2012 NY Slip Op 22047) FollowedAn insurer may obtain Mallela discovery on sufficient allegations of fraudulent incorporation despite not pleading that defense.
Multiquest, P.L.L.C. v Allstate Ins. Co. (2007 NY Slip Op 27366) FollowedA professional service limited liability company is ineligible for no-fault reimbursement if it violates licensing requirements.
Matter of Singh v Allstate Ins. Co. (2016 NY Slip Op 01855) Contrasted (cf., but see)The injured claimant's petition to vacate four master arbitration awards denying lost-wage benefits was denied for lack of a vacatur ground.

Cited by (21)

A label shows how the later decision treated this one.

Matter of Progressive Cas. Ins. Co. (Elite Med. Supply of N.Y., LLC) (2018 NY Slip Op 04122) Contrasted (cf., but see)A master arbitrator may vacate a no-fault award for substantive legal error without conducting de novo factual review.
Vitaliti v New York City Tr. Auth. (2023 NY Slip Op 51156(U)) FollowedA master arbitrator's reversal for substantive legal error must be upheld unless irrational, even if legally incorrect.
Advanced Recovery Equip. & Supplies, LLC v Tri-State Consumer Ins. Co. (2023 NY Slip Op 51239(U)) FollowedThe provider's petition to vacate the master arbitrator's award was granted because the award lacked a rational basis.
K.O. Med., P.C. v USAA Cas. Ins. Co. (2017 NY Slip Op 51089(U)) FollowedA Mallela defense need not be preserved in a timely denial of claim.
Parisien v 21st Century Ins. Co. (2018 NY Slip Op 51081(U)) FollowedA provider that fails to timely object to discovery must produce the information unless it is privileged or palpably improper.
American Tr. Ins. Co. v Right Choice Supply, Inc. (2023 NY Slip Op 23039)A no-fault arbitrator need not apply summary judgment rules requiring a provider's medical evidence to specifically rebut an insurer's peer review.
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.
American Tr. Ins. Co. v NextStep Healing, Inc. (2023 NY Slip Op 50521(U))The insurer's EUO and medical necessity challenges failed because they were not preserved at the required arbitration levels.
American Tr. Ins. Co. v U.S. Med Supply Corp. (2023 NY Slip Op 50560(U))A provider invoking collateral estoppel from a prior no-fault award need not prove master arbitrator affirmance or judicial confirmation.
Community Med. Imaging P.C. v American Tr. Ins. Co. (2024 NY Slip Op 50301(U))A no-fault arbitrator may require a mailing affidavit when documentary proof of timely claim submission is inconclusive.

Show all 21 citing decisions

Similar decisions

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.
Matter of Acuhealth Acupuncture, P.C. v New York City Tr. Auth. (2018 NY Slip Op 08641)The master arbitrator's confirmation of an award denying benefits for exhausted policy limits had evidentiary support and a rational basis.
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 Country-Wide Ins. Co. v Bay Needle Care Acupuncture, P.C. (2018 NY Slip Op 03929)The insurer's Mallela challenge failed because it presented no evidence that the provider was fraudulently incorporated.
Country-Wide Ins. Co. v Valdan Acupuncture, P.C. (2017 NY Slip Op 04068)The insurer failed to establish grounds to vacate an award rejecting its fraudulent incorporation defense.