Midwood Acupuncture, P.C. v State Farm Mut. Auto. Ins. Co. (2007 NY Slip Op 50052(U))

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE TERM: 2nd and 11th JUDICIAL DISTRICTS

Appeal from an order of the Civil Court of the City of New York, Kings County (Eileen Nadelson, J.), entered October 4, 2005. The order denied defendant’s motion to sever the causes of action and granted plaintiff’s cross motion for summary judgment.

Order modified by denying plaintiff’s cross motion for summary judgment without prejudice to renewal upon the completion of discovery; as so modified, affirmed without costs.

Plaintiff commenced this action to recover first-party no-fault benefits as the assignee of five assignors. The claims arose out of four separate accidents, and defendant moved to sever the claims into separate actions pursuant to CPLR 603. Plaintiff cross-moved for summary judgment. By order entered October 3, 2005, the court below granted plaintiff’s cross motion and denied defendant’s motion as moot.

In State Farm Mut. Auto Ins. Co. v Mallela (4 NY3d 313 [2005]), the Court of Appeals held that fraudulently incorporated medical corporations were not entitled to reimbursement of no-fault benefits. The Court noted that 11 NYCRR 65-3.16 (a) (12), which states that “[a] provider of health care services is not eligible for reimbursement under section 5102 (a) (1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement,” specifically “excluded from the meaning of basic economic loss’ payments made to unlicensed or fraudulently licensed providers, thus rendering them ineligible for reimbursement” (Mallela, 4 NY3d at 320). The defense that a provider is fraudulently licensed and hence ineligible for reimbursement of no-fault benefits under 11 NYCRR 65-3.16 (a) (12) is a nonwaivable defense and is therefore not subject to the 30-day preclusion rule (see First Help Acupuncture P.C. v State Farm Ins. Co., 12 Misc 3d 130[A], 2006 NY Slip Op 51043[U] [App [*2]Term, 2d & 11th Jud Dists]; see also Allstate Ins. Co. v Belt Parkway Imaging,
P.C., ___ AD3d ___, 2006 NY Slip Op 07279 [1st Dept]; Metroscan Imaging P.C. v GEICO Ins. Co., 13 Misc 3d 35 [App Term, 2d & 11th Jud Dists 2006]). Defendant’s opposition papers suffice to raise issues as to who really operated and controlled plaintiff (see Lexington Acupuncture, P.C. v State Farm Ins. Co., 12 Misc 3d 90 [App Term, 2d & 11th Jud Dists 2006]). Consequently, so much of defendant’s discovery requests as seek information regarding whether plaintiff was fraudulently incorporated are material and necessary (see CPLR 3101). Accordingly, plaintiff’s cross motion for summary judgment was premature pending the completion of discovery (see CPLR 3212 [f]; Lexington Acupuncture, P.C. v State Farm Ins. Co., 12 Misc 3d 90, supra) since the opposition papers set forth that facts essential to justify opposition may exist but cannot be stated (see CPLR 3212 [f]). In view of the foregoing, the court below should have denied said cross motion without prejudice to renewal upon the completion of discovery.

Defendant’s answer asserts, inter alia, that plaintiff was fraudulently incorporated, thereby indicating that the five claims are likely to raise common issues of law or fact (cf. Radiology Resource Network, P.C. v Fireman’s Fund Ins. Co., 12 AD3d 185 [2004]). Since defendant did not otherwise show prejudice to a substantial right, it was not an improvident exercise of discretion for the court below to deny defendant’s motion to sever (see e.g. McCrimmon v County of Nassau, 302 AD2d 372 [2003]).

Pesce, P.J., Golia and Belen, JJ., concur.
Decision Date: January 8, 2007