June 27, 2006

Proscan Radiology of Buffalo v Progressive Cas. Ins. Co. (2006 NY Slip Op 51242(U))


The case involved a commercial claim brought by Proscan Radiology of Buffalo, Proscan Imaging, Buffalo, & Dr. Gurmeet Dhillon against Progressive Casualty Insurance Company. It began in the small claims part of the City Court of Buffalo and was adjourned at the consent of both parties. The main issue decided was the amount of payment owed by Progressive Casualty Insurance Company to the claimants. The court considered the evidence presented by both parties and ultimately held that Progressive Casualty Insurance Company was required to make a payment of $2,297.74 to the claimants.

Reported in New York Official Reports at Proscan Radiology of Buffalo v Progressive Cas. Ins. Co. (2006 NY Slip Op 51242(U))

Proscan Radiology of Buffalo v Progressive Cas. Ins. Co. (2006 NY Slip Op 51242(U)) [*1]
Proscan Radiology of Buffalo v Progressive Cas. Ins. Co.
2006 NY Slip Op 51242(U) [12 Misc 3d 1176(A)]
Decided on June 27, 2006
City Court Of Buffalo
Nowak, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.
Decided on June 27, 2006

City Court of Buffalo

Proscan Radiology of Buffalo, Proscan Imaging, Buffalo, & Dr. Gurmeet Dhillon, Claimants,


Progressive Casualty Insurance Company, Defendant.


David W. Polak, Esq.

Attorney for Claimants

1220 Liberty Building

424 Main Street

Buffalo, New York 14202

Phyliss A. Hafner, Esq.

Attorney for Defendant

3332 Walden Avenue, Suite 100A

Depew, New York 14043

Henry J. Nowak, J.

Background & Jurisdiction

This matter began as a commercial claim before a hearing officer in the small claims part of this court, pursuant to local rule. The first hearing date was adjourned at the consent of both parties, apparently so that defendant Progressive Casualty Insurance Company [hereinafter “Progressive”] could bring a formal written motion for summary judgment. At the next date, Progressive attempted [*2]to argue its formal written motion but was prevented from doing so by the hearing officer. Because both parties were represented by counsel and motion practice is generally discouraged in small claims court, the hearing officer questioned whether the matter should be transferred out of small claims to a regular part of the court pursuant to 22 NYCRR 210.41-a (d). As a result, the hearing officer sent the matter to a judge in the special term part who agreed to hear the matter as a judge sitting in the small claims part.

Claimant Proscan Radiology of Buffalo [hereinafter “Proscan Radiology”] was the original claimant. At oral argument, in response to defendant’s motion to dismiss for lack of standing, counsel for Proscan Radiology moved to amend the caption by adding Proscan Imaging, Buffalo [hereinafter “Proscan Imaging”] and Dr. Gurmeet Dhillon, as additional claimants bringing the same claim. Over defendant’s objection, this court granted the motion to amend, pursuant to UCCA §1804-A (“the court shall conduct hearings upon small claims in such manner as to do substantial justice between the parties according to the rules of substantive law and shall not be bound by statutory provisions or rules of practice, procedure, pleading and/or evidence”).

The claim is based on the assignment of first party no-fault benefits from an insured of Progressive’s to claimants, who provided medical services (3 MRI scans) to the insured. Progressive denied payment of the claim based on a peer review report claiming that the MRI tests were premature and not medically necessary at the time that they were performed, and that the fees requested were in excess of the fee schedule.

In addition to those defenses, Progressive also asserts that Proscan Radiology has no standing to sue because it is not the assignee named in the original no-fault assignment. Progressive also moves to dismiss the newly added claim by Dr. Dhillon for the same reason. Progressive moves to dismiss the claim by Proscan Imaging (who it claimed to be the named assignee) because it is not licensed to practice medicine in New York and therefore cannot be eligible for reimbursement pursuant to 11 NYCRR 65-3.16, as interpreted by the Court of Appeals in State Farm v Mallela, 4 NY3d 313 (2005).

Both parties are seeking summary judgment at this time. While pre-trial motion practice is generally discouraged in small claims court (Weiner v Tel Aviv, 141 Misc 2d 339 [1988]), it is allowed by 22 NYCRR 210.41-a (l). This court agreed to hear this motion because it appears that this issue will recur repeatedly in small claims proceedings unless the court makes and publishes a ruling.

In making this decision, the court is mindful of the of the goals and intentions of the legislature in enacting the commercial small claims parts in city courts; namely, to provide commercial entities and small businessmen, who have relatively simple and small monetary claims, with a forum that is convenient, simple and quick. The court is also aware of the primary purpose underlying the no fault law; namely, to assure prompt payment of first-party benefits without regard to fault and without expense to those making claims as a result of motor vehicle accidents. To implement this legislative aim of curtailing delay and reducing expense in the adjustment of such claims, the regulations are written to encourage prompt payment of claims, to discourage investigation by insurers, and to penalize delays (Dermatossian v New York City Transit Authority, 67 NY2d 219, 225 [1986]).

Under both the Uniform City Court Act and the No-Fault Law, the claimants here are entitled to have their claim decided quickly and inexpensively. Therefore this court will not transfer these [*3]matters to a regular part of the court (despite the fact that both sides are represented by counsel), absent a compelling reason to do so; which is not present in this case.

While UCCA 1804-A provides that the hearing of this matter will not be bound by the statutory provisions or rules of practice and procedure, 22 NYCRR 210.41-a (l) calls for no such relaxation during motion practice. Furthermore, because both sides are represented by counsel who are engaged in formal motion practice, this court will require that their submissions comply with the normal rules associated with formal motion practice (see Zuckerman v City of New York, 49 NY2d 557 [1980]; Miller v County of Nassau, 2003 WL 22462114, 2003 NY Slip Op 51307 [2003]; Buell v Dolan, 2003 WL 22462177, 2003 NY Slip Op 51328 [2003]; Nuckle v Huyck, 2002 WL 484315, 2002 Slip Op 40041 [2002], Spiegel v Continental Airlines, 11 Misc 3d 145 [A] [2006]; Jackson v Deer Park Ventures, 9 Misc 3d 1123 [A] [2005]). This court is not bound in the making of this decision by the holdings of any arbitrators (Hobby v CNA Insurance, 267 AD2d 1084 [4th Dept 1999]).

Decision on the Merits

A.Claimants’ Prima Facie Case

A claimant is not required to submit a physician’s affidavit to establish medical necessity as part of its prima facie case, since medical necessity is established in the first instance by proof of submission of the claim form (All County Open MRI v Travelers Insurance, 11 Misc 3d 131 [a] [2006]). To recover first-party no-fault benefits for medical services provided to its assignor, a claimant establishes a prima facie entitlement to summary judgment by proof that it submitted a valid assignment of benefits, a claim setting forth the fact and the amount of the loss sustained, and that payment of no-fault benefits was overdue (Mary Immaculate Hospital v Allstate, 5 AD3d 742, 742-743 [2d Dept 2004]).

Courts have declined to distinguish a proper proof of claim under the insurance regulations from the quantum of proof necessary to prevail on a motion for summary judgment in an ensuing action on the claim. Once the claimant has established a prima facie case, the burden shifts to the defendant to come forward with admissible evidence refuting the claimant’s evidence and demonstrating the existence of a material issue of fact (King’s Medical Supply v Country-Wide Ins, 5 Misc 3d 767, 770 [2004]; Alvarez v Prospect Hospital, 68 NY2d 320, 324 [1986]).

In support of its motion, Progressive submitted the following documents:

1) a New York Motor Vehicle No-Fault Insurance Law Assignment of Benefits Form (NYS FORM NF-AOB) listing “ProScan” as the assignee, and Proscan Imaging as the provider of the services;
2) a copy of the Health Insurance claim form, (Form CMS-1500) dated 12/16/04, submitted by the Claimants seeking payment for 3 MRIs: code No.72141 (cervical spine); $1,100.00, code #72146 (thoracic spine); $1,20.00 and code #72148 (lumbar spine); $1,100.00, which listed Dr. Dhillon as the physician/supplier of the services, Proscan Radiology as the facility where the services were rendered and Proscan Imaging as the physician/supplier’s billing name; and
3) NF-10 Denial of Claim Form, listing Dr. Dhillon and Proscan Imaging as assignees, the amount of the claims as $3,400.00, the date of treatment as 12/07/04, [*4]date of bill as 12/16/05, date bill received by insurer as 1/3/05. The denial was based on fees not in accordance to fee schedules and lack of medical necessity based on a peer review. The denial was dated 3/18/05 and signed by Daniel R. Mack as adjuster and representative of insurer.

While the CMS-1500 form is not the statutorily required NF-3 claim form, it has been deemed its functional equivalent (Rockaway Boulevard Medical v Progressive, 9 Misc 3d 52 [2005]).

In this case, the NF-10 denial form, which is admissible as an admission by Progressive, is sufficient to establish prima facie entitlement to summary judgment by claimants Dr. Dhillon and Proscan Imaging , i.e. that the assignment and claim were transmitted, that defendant received them, and that defendant failed to pay or deny the claim within 30 days of receipt [King’s Medical Supply v Country-Wide Insurance, 5 Misc 3d 767, 770 [2004]).

B.Defendant’s Medical Necessity Defense

While Progressive did submit copies of verification requests dated 1/14/05, as well as an affidavit of Georgia Pape stating that she was the adjuster on this claim, it failed to submit proof in evidentiary form (such as an affidavit of mailing) that the follow up verifications were in fact ever sent in order for the denial to be timely (Nyack Hospital v Metropolitan Property & Casualty, 16 AD3d 564 [2d Dept 2005]).

Here, the denial of claim was dated March 18, 2005, well beyond the 30 days to pay or deny the claim. Progressive’s assertion that it timely denied the claim lacks merit because the record does not contain an affidavit from a person with personal knowledge stating either that the March 18, 2005 denial of claim form was mailed, or setting forth a sufficiently detailed description of standard office mailing procedure so as to give rise to the presumption of mailing (A.B. Medical Services v Utica Mutual, 11 Misc 3d 71, 72 [2006]). The proof submitted amounts to unsubstantiated hearsay

(Boai Zhong Yi Acupuncture v New York Central Mutual, 8 Misc 3d 1011[A] [2005]).

Mr. Pape claims to have personal knowledge of requests for verification and that the denial was timely, but provides not proof of the same; especially as to how he knows when, if ever, that Daniel R. Mack, the adjuster named on the Denial of Claim Form, mailed the documents in question (see Hospital for Joint Diseases v Nationwide Mutual Ins, 284 AD2d 374, 375 [2d Dept 2001]; Careplus Medical Supply v Travelers, 7 Misc 3d 133 [A] [2005]).

Here, the defendant has failed to offer proof in admissible form that it sought verification of the claim, or that it timely denied the claim (Summit Psychological v General Assurance, 9 Misc 3d 8, 9-10 [2005]; Delta Diagnostic v Geico, 10 Misc 3d 145 [A] [2006]). An insurer who fails to pay or deny the claim, or seek verification of the particulars of the claim-within the applicable time periods, is thereafter precluded from raising any defenses to the claim, other than lack of coverage or fraud (Metropolitan Radiological v State Farm, 7 Misc 3d 675 677 [2005]; King’s Medical Supply v Country-Wide Ins, 5 Misc 3d 767, 771 [2004]; Presbyterian Hospital v Maryland Casualty Co., 90 NY2d 274 [1997]).

Therefore, Progressive is barred from denying the claims by Dr. Dhillon and Proscan Imaging based on lack of medical necessity (King’s Medical Supply v Country-Wide Ins, 5 Misc 3d 767, 771 [2004]).

However, even if Progressive could proceed on the lack of medical necessity defense, it [*5]would fail because the peer review report that it relied upon, and the subsequent affidavit provided by the chiropractor, did not provide an appropriate rationale for lack of medical necessity or explain how the MRI tests could be medically unnecessary when they did in fact yield positive findings (Nir v Allstate, 7 Misc 3d 544, 548 [2005]).

While the MRI results were provided by way of a sur-reply affidavit, such affidavits can be considered by the court where, as here, Progressive had an opportunity to reply to that submission and took advantage of that opportunity by offering further submissions of its own (Hoffman v Kessler, 28 AD3d 718 [2d Dept 2006]; Hayden v County of Nassau, 16 AD3d 415 [2d Dept 2005]),

Such scant factual basis and medical rationale will not sustain defendant’s burden of proof. Nir v Allstate, 7 Misc 3d 544, 548 [2005]). This court will not second guess a doctor who decides that a medical test is necessary for his diagnosis and treatment when the only support for the denial is a peer review performed by a doctor who did not examine the patient; especially in light of positive findings (Alliance Medical Office PC v Allstate, 196 Misc 2d 268, 270 [2003]; Nir v Allstate, 7 Misc 3d 544, 548 [2005]). Putting weight on the treating physician’s prescription serves the reasonable expectations of the insured. An insured expects coverage for treatment recommended by a physician because he trusts that the physician has recommended a reasonable treatment consistent with good medical practice; the insured’s expectations can best be fulfilled by construing the policy liberally, so that uncertainties about the reasonableness of treatment will be resolved in favor of coverage (Oceanside Medical Healthcare v Progressive, 2002 WL 1013008, 2002 Slip Op 50188 [U] [2002]).

C.The Defense that Claimants Lacked Standing

Next, Progressive has alleged that Proscan Radiology and Dr. Dhillon cannot seek payment under the assignment because they were not listed as the assignee of the benefits in this matter.

If Progressive had any concerns about who the proper claimant was or who held the valid assignment of the benefits it had to raise that objection in its original denial of claim (which it did not do) or it would be deemed waived (Rockaway Boulevard Medical v Progressive, 9 Misc 3d 52 [2005]). Since Dr. Dhillon and Proscan Imaging were listed on the initial claim form, and Progressive did not question the validity of the request for reimbursement based on the assignment in its denial, it is precluded from raising that issue now as a defense (Summit Psychological PC v General Assur Co, 9 Misc 3d 8, 11 [2005]).

Progressive is correct, however, that Proscan Radiology has never put forth any proof that it has ever submitted any claim in this matter. Therefore, its claim is dismissed.

D. The Defense that Claimant is Not Licensed to Practice Medicine

Progressive is also correct that a business entity that is not licensed to practice medicine in New York cannot be eligible for reimbursement pursuant to 11 NYCRR 65-3.16(a)(12), as interpreted by the Court of Appeals in State Farm v Mallela, 4 NY3d 313 (2005). Additionally, such a defense is not waived by failing to state it in the original denial of claim (AB Medical Services v Utica Mutual, 11 Misc 3d 71, 72 [2006]; SK Medical Services, 11 Misc 3d 1086 [A] [2006]; Metroscan Imaging v Geico, 8 Misc 3d 829, 834-835 [2005]).

In support of its claim that Proscan Imaging is not entitled to payment on this claim because it is not licensed to practice medicine in New York State, and therefore in violation of 11 NYCRR 65-3.16(a)(12), Progressive attached uncertified copies of search results from (1) the New York State Department of State, Division of Corporations, Entity Information website, which can be found [*6]at http://appsext5.dos.state.ny.us/corp_public/corpsearch.entity_search_entry, and (2) the New York State, Education Department, Office of the Professions, On-Line Business Entities Verification website; which can be found at http://www.op.nysed.gov/opsearches.htm,

This court will take judicial notice of the records kept and maintained by the State of New York and other states on their official government websites and will accept that information as an exception to the hearsay rule under CPLR Rule 4518(a), the business records exception and State Technology Law § 306 (see Miriam Osborn Memorial Home Assc v City of Rye, 9 Misc 3d 1019 [2005]; Citibank NA v Martin, 11 Misc 3d 219 [2005]; Cali v East Coast Aviation, 178 FSupp2d 276, 287 [EDNY 2001]).

Here, since Progressive has met their initial burden in showing that Proscan Imaging is not licensed to practice medicine in New York State, a prerequisite to perform and seek reimbursement for diagnostic services under the no-fault law under 11 NYCRR 65-3.16(a)(12), and Proscan Imaging having offered no proof in response on the issue, this court must dismiss its claim.

To be clear, this is not the type of matter that was decided by the Court of Appeals in State Farm v Mallela, 4 NY3d 313 (2005). There is no allegation of fraud. This is more of the nature of a “technical” violation described by the court in Mallela, but the importance of licensed professionals performing these tests is not lost on the court.

It should be noted that (1) the New York State Department of State, Division of Corporations’ Entity Information website; (2) the State of Ohio’s Secretary of State, Corporate Database Search (http://www.sos.state.oh.us/); and (3) the New York State, Education Department, Office of the Professions’ On-Line Business Entities Verification website all show that all of the principals in Proscan Radiology and Proscan Imaging, including Dr. Dhillon, are licensed to practice medicine in New York State.

Under this type of fact pattern, fairness would seem to dictate that Proscan Imaging simply be allowed 60 days to apply, pay the required fees and be issued a license in order for it to maintain its claim, much like unauthorized foreign corporations seeking to maintain an action in New York once their corporate status is discovered in the middle of litigation (McIntosh v Ball, 247 AD2d 103, 105-106 [3d Dept 1998]). However, that type of remedy need not be addressed in this case since Dr. Dhillon has met his burden for summary judgment in this matter.

E.Defendant’s Claim of Nonconformity with the Worker’s Compensation Fee Schedules

Finally, Progressive has alleged that the fees requested for the services performed are beyond those allowed by statute. Normally, the charges for such services are limited by the fee schedules established by the chairman of the workers’ compensation board for industrial accidents, except where the insurer or arbitrator determine that usual procedures or unique circumstances justify the excess charge (Insurance Law § 5108 [a]).

The court will also take judicial notice that according to the controlling Official New York State Workers’ Compensation Medical Fees Schedule, effective October 1, 2003; the allowable fees for the date of service in the 14221 zip code were: # 72141 (cervical spine): $707.11; code # 72146 (thoracic spine): $771.31; and code #72148 (lumbar spine): $733.04; which are lower than the amounts being claimed here.

However, having failed to establish a timely denial of the claim, Progressive is precluded from raising its defense of nonconformity with the Worker’s Compensation fee schedules (Ultra Diagnostics v Liberty Mutual, 9 Misc 3d 97, 98 [2005], Rigid Medical of Flatbush v New York [*7]Central, 11 Misc 3d 139 [A] [2006]).

Pursuant to rule, since the fees sought are beyond the applicable fee schedule, and no unique circumstances have been claimed, Dr. Dhillon is not entitled to attorneys fees on his claim (11 NYCRR 65-4.6 [i]; Matter of the Medical Society of New York v Superintendent of Ins, 100 NY2d 854, 871 [2003]).


Therefore, it is hereby ordered that Dr. Dhillon is entitled to recovery of unpaid no-fault benefits for services he provided to the Progressive’s insured, and his motion for summary judgment is granted in the sum of $3,400.00, with statutory interest from February 2, 2005. Interest shall be calculated by the clerk of the court at the statutory rate of 2% per month; plus normal small claims costs and disbursements, if any. It is further ordered that Progressive’s motion for summary judgment is granted as to Proscan Imaging and Proscan Radiology.

This decision constitutes the order of this Court.

Hon. Henry J. Nowak

Buffalo City Court Judge

Dated:June 27, 2006