Nassau Dist Ct, First District

10218/09

Amos Weinberg, Esq. – Plaintiff

John E. McCormack, Esq. – Defendant

Fred J. Hirsh, J.

Defendant Progressive Insurance Company (“Progressive”) moves for an order compelling Valadimir Alexsandrovich (“Alexsandrovich”) to appear for a deposition and answer questions concerning Bener Wholesale (“Bener”) and to provide actual documented costs of material supplied, alternatively for an order dismissing this action on the grounds plaintiff has wilfully refused to comply with defendant’s discovery demands or alternatively an order precluding plaintiff from producing evidence at trial as a result of its wilful failure to comply with defendant’s discovery demands.

BACKGROUND

This action raises issues about the extent to which a defendant can obtain discovery on defenses a defendant may be precluded from raising at a trial of an action for seeking payment of first party no-fault benefits.

Alev Medical Supply, Inc. (“Alev”) is in the business providing medical equipment and supplies. Alev commenced this action seeking to obtain payment of first party no-fault benefits for medical supplies it provided to Jason Bailey (“Bailey”).

Defendant served a discovery demand dated May 19, 2009. The demand seeks, inter alia, information regarding the amounts paid by Alev to the supplier of the medical equipment for the equipment furnished to Bailey.

Defendant also served a demand for interrogatories and a demand to take a deposition of a representative of Alev.

Progressive asserts its has conducted an investigation and believes Alev is part of a scheme involving an entity known as Bener Wholesale, Inc. (“Bener”) devised to defraud insurance companies.

Progressive claims that Bener does not really exist. Progressive asserts Bener was formed to generate invoices for medical supplies and equipment so Alev and other providers of medical equipment could bill no-fault and other insurance carriers.

Progressive seeks discovery primarily on its assertion that Bener does not exist [*2]and has not been selling medical equipment to Alev.

Progressive has sent an investigator to the addresses listed on invoices it has obtained through verification and has discovered Bener does not maintain any offices or other facilities at those locations.

Progressive does not indicate whether it has ever sent an investigator to the address Bener listed in its Certificate of Incorporation as the address to which the Secretary of State should mail process made upon the Secretary of State as statutory agent for process for Bener.

Progressive is essentially raising defenses of fraud and bills not in accordance with the no-fault payment schedule.

DISCUSSION

The No-Fault Law provides the provider of medical services and/or supplies shall be paid the amount “…the charges permissible under the schedules prepared and established by the chairman of the workers’ compensation board for industrial accidents.” Insurance Law §5108(a). A provider of medical equipment is permitted to charge a no-fault insurance carrier 150% of the documented cost of the equipment to the provider. 11 NYCRR 68 Part E (b)(1).

Translated into this action, Alev would be permitted to bill Progressive and Progressive would be would required to pay Alev 150% of the amount Alev paid to Bener or any other wholesale supplier of medical equipment for the equipment it provided to Bailey. Therefore, the amount Alev paid to Bener or any other medical supplier would appear at first glance to be relevant to this action.

However, this is an action to obtain payment of first party no-fault benefits. Unless a no-fault carrier seeks verification [11 NYCRR 3.5], a no-fault insurance carrier has 30 days from the date of receipt of the claim to pay or deny a claim in whole or in part. 11 NYCRR 65-3.8. A no-fault insurance carrier who fails to deny a claim within 30 days of receipt is precluded from asserting most defenses to the claim. A no-fault insurance carrier is also precluded from asserting at the trial of an action any precludable defense not asserted in a timely denial. Fair Price Medical Supply Corp. v. Travelers Indemnity Co., 10 NY3d 556 (2008); and Hospital for Joint Diseases v. Travelers Property Casualty Ins. Co., 9 NY3d 312 (2007); and Presbyterian Hosp. in City of NY v. Maryland Cas. Co., 90 NY2d 274, rearg. denied 90 NY2d 937 (1997).^[FN1] Fraud and charges not in accordance with the worker’s compensation fee schedule are [*3]defenses the carrier is precluded from asserting unless raised in a timely served denial. Fair Price Medical Supply Corp. v. Travelers Indemnity Co., supra; New York Hosp. Medical Center of Queens v. Country-Wide Ins. Co., 295 AD2d 583 (2nd Dept. 2002); Davydov v. Progressive Ins. Co., 25 Misc 3d 19 (App. Term 2nd & 11th Jud. Dist. 2009); and Lincoln General Ins. Co. v. Alev Medical Supply Inc., 25 Misc 3d 1019 (Dist. Ct. Nassau Co. 2009).

If Progressive did not deny the claim submitted by Alev on the grounds of fraud or charges not in accordance with the no-fault schedule in a timely denial, Progressive is precluded from raising those defenses at trial.

The no-fault regulations provide an insurance carrier with the ability to investigate a claim prior to paying or denying the claim by demanding written verification [11 NYCRR 65 – 3.5] and/or an examination under oath [11 NYCRR 65-1.1]. The insurance carrier’s time to pay or deny a claim is extended by making a timely demand for verification. Infinity Health Products, Ltd. v. Eveready Ins. Co., 67 AD3d 862 (2nd Dept. 2009). A claim does not have to be paid or denied until the insurance carrier has been provided with all timely demanded verification. Mount Sinai Hosp. v. Chubb Group of Insurance Companies, 43 AD3d 899 (2nd Dept. 2007); and New York & Presbyterian Hosp. v. Progressive Cas. Ins. Co., 5 AD3d 569 (2nd Dept. 2004).

The entire purpose of the verification process is to provide the insurance carrier with the opportunity to seek additional information and time to review a claim before the carrier is required to pay or deny the claim. Fair Price Medical Supply Corp. v. Travelers Indemnity Co., supra.

CPLR 3101(a) provides for full disclosure by a party to an action of “… all matter material and necessary in the prosecution or defense of an action regardless of the burden of proof.”

Material demanded in discovery is “material and relevant” for the purposes of CPLR 3101(a) if the demanded matter, “…will assist preparation for trial by sharpening the issues and reducing delay and prolixity. The test is one of usefulness and reason.” Allen v. Crowell-Collier Publishing Co., 21 NY2d 403, 406 (1968). The demanded material must be produced if it can be used as evidence in chief, for rebuttal or for cross-examination. Allen v. Crowell-Collier Publishing Co., Id.; and Wind v. Eli Lilly & Co., 164 AD2d 885 (2nd Dept. 1990).

The party demanding discovery has the burden of establishing the production of the demanded material will lead to the discovery of evidence relevant to the action. Crazytown Furniture, Inc. v. Brooklyn Union Gas Co., 150 AD2d 420 (2nd Dept. 1989); Carp v. Marcus, 116 AD2d 854 (3rd Dept., 1986); and Herbst v. Bruhn, 106 AD2d 546 (2nd Dept., 1984).

To determine whether Progressive is permitted discovery on the issue of fraud or billing in excess of the amount permitted by the no-fault law and regulation, the court must know whether the claim was timely denied and the basis for the denial. If the claim made by Alev was not denied on the grounds of fraud or billing in excess of the amount permitted by the no-fault law and regulations, Progressive is precluded from raising those defenses at trial. Discovery cannot be obtained regarding matters that will not be in issue at trial. Since the defendant has not provided the court with copies of either the claims or the denials, the court cannot determine on the present record [*4]whether the material defendant seeks is subject to discovery.

Furthermore, the court believes Progressive is seeking discovery that cannot be obtained in the manner demanded. Progressive is seeking discovery from a party regarding a non-party. Bener is not a party to this action.

CPLR 3101(a)(4) permits a party to an action to obtain disclosure from a non- party “…upon notice stating the circumstances or reasons such disclosure is sought or required.”CPLR 3120 permits a party to an action to obtain discovery of documents from a non-party upon service of a notice to produce and a subpoena duces tecum.

The party seeking a deposition of a non-party must demonstrate special circumstances. Brooklyn Floor Maintenance Co. v. Providence Washington Ins. Co., 296 AD2d 520 (2nd Dept. 2002); and CPLR 3101(a)(4).

The motion specifically seeks the deposition of Valadimir Alexsandrovich to answer questions regarding Bener. The court cannot order a person who has not been subpoenaed to appear and give testimony regarding a non-party. If Progressive wants to obtain discovery from Bener, it must do so through subpoena.

Finally, the court notes many of the questions posed in the interrogatories relate to a Malella defense.^[FN2] CPLR 3018(b) requires a party to plead all matters that would likely take an adverse party by surprise or that would not appear on the face of the pleading. A Malella defense must be plead as an affirmative defense. New York First Acupuncture P.C. v. State Farm Mut. Auto. Ins. Co., 25 Misc 3d 134(A) (App Term2nd, 11th & 13th Jud. Dists. 2009). The answer does not plead a Malella defense in its answer.

Malella does not apply to the claim asserted in this action. The principle underlying Malella is that only a licensed professional can be officer, shareholder or director of a professional corporation, a partner in a professional limited liability partnership or a manager of a professional limited liability company. The “fraudulent incorporation” element of Malella is that a non-professional has the actual ownership or controlling interest in such a business entity that only a licensed professional can own.

Alev is the provider of medical supplies. Defendant has failed to establish that the owner of a medical supply company must have a license. In fact, it would appear to the contrary since Alev is a domestic, business corporation.

Thus, to the extent defendant seeks material that cannot be in issue in this litigation, the discover demands are palpably improper. Saratoga Harness Racing, Inc. v. Roemer, 274 AD2d 887 (3rd Dept. 2000); and Titleserv, Inc. v. Zenobio, 210 AD2d 314 (2nd Dept. 2000); and Grossman v. Lacoff, 168 AD2d 484 (2nd Dept.,1990).

The no-fault law is designed to insure prompt payment of claims of medical claims arising from automobile accidents. Medical Society of the State of New York v. Serio, 100 NY2d 854, 860 (2003). See, Fair Price Medical Supply Corp. v. Travelers Indemnity Co., supra; and Hospital for Joint Disease v. Travelers Property Casualty Ins. Co., supra.

Permitting a defendant to conduct discovery on defenses it is precluded from raising at [*5]trial would defeat this goal.

Therefore, defendant’s motion is denied with leave to renew upon proper papers including a copy of the claim and a copy of the denial.

SO ORDERED:

Hon. Fred J. Hirsh

District Court Judge

Dated: May 3, 2010

Footnotes

Footnote 1:There are four defenses a carrier can raise that are not subject to the preclusion rule: (1) fraudulent incorporation, [State Farm Mutual Ins. Co. v. Malella, 4 NY3d 313 (2005)], (2) lack of coverage, [Central General Hosp. v. Chubb Group of Ins. Cos., 90 NY2d 195 (1997)], (3) staged accident [Central General Hosp. v. Chubb Group of Ins. Cos., supra; Allstate Ins. Co. v. Massre, 14 AD3d 610 (2nd Dept. 2005); and V.S. Medical Services P.C. v. Allstate Ins. Co., 11 Misc 3d 334 (Civil Ct. Kings Co. 2006)] and (4) exhaustion of coverage [Hospital for Joint Disease v. Hertz Corp., 22 AD3d 724 (2nd Dept.2005); and Hospital for Joint Disease v. State Farm Mut. Auto. Ins. Co., 8 AD3d 533 (2nd Dept. 2004)].

Footnote 2:The names of the shareholders and owners in a management company and the services provided by the management company are Mallela issues.

Nassau Dist Ct

C572/07

REPRESENTATION:

Law Office of Amos Weinberg, 49 Somerset Drive South, Great Neck, NY 10020-1821, Attorney for Plaintiff

Law Office of Teresa M. Spina, 88 Froehlich Farm Blvd., Suite 202, Woodbury, NY 11797

Robert A. Bruno, J.

The motion by plaintiff pursuant to CPLR §3212 for summary judgment for the relief demanded in the complaint is denied. As to the claims for $604.24 for services rendered on May 16, 2006, and all claims from June 1, 2006 onward (the last six claims), summary judgment is granted to the defendant and the complaint is dismissed as to those claims.

This is an action by plaintiff, a former medical services provider, to recover no-fault benefits from the defendant arising out of an automobile accident on April 16, 2006 in which plaintiff’s assignor, one David Ruiz, was allegedly injured. Plaintiff seeks summary judgment regarding $182.37 – $114.33 for services rendered on April 21, 2006; $268.18 – 215.26 for services rendered on April 25-28, 2006; $154.30 – $114.33 for services rendered on May 16, 2006; $407.17 – $114.33 for services rendered on April 28, 2006; $604.24 for services May 16, 2006; $407.17 – $114.33 for services rendered on May 26, 2006; $1,546.20 for services rendered on June 28, 2006; $1,573.24 for services rendered on June 28, 2006; $188.16 for services rendered on June 1-30, 2006; $71.06 for services rendered on July 7, 2006; $407.17 for services rendered on June 30, 2006; and $188.16 for services rendered on July 6-31, 2006.

It is well settled that summary judgment is a drastic remedy which should not be granted where there is any doubt about the existence of a triable issue of fact (Bhatti v. Roche, 140 AD2d 660). It is nevertheless an appropriate tool to weed out meritless claims and defenses(Lewis v. Desmond, 187 AD2d 797; Gray v. Bankers Trust Co. of Albany, N. A., 82 AD2d 168). Generally speaking, to obtain summary judgment, it is necessary that the movant establish its claim or defense by the tender of evidentiary proof in admissible form sufficient to warrant the court, as a matter of law, in directing judgment in its favor (CPLR §3212[b]). The burden then shifts to the non-moving party. To defeat the motion for summary judgment, the opposing party must come forward with evidence in admissible form to demonstrate the existence of a material issue of fact requiring a trial (CPLR §3212, subd [b]) (see also GTF Marketing, Inc. v. Colonial Aluminum Sales, Inc., 66 NY2d 965; Zuckerman v. City of New York, 49 NY2d 557). [*2]However, a movant’s failure to make such a prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers (Alvarez v. Prospect Hospital, 68 NY2d 32).

A no-fault claim is overdue if it is not paid or denied within thirty [30] days of receipt (see Insurance Law §5106[a]; 11 NYCRR 65-3.8[a][1] & [c]) unless, within fifteen [15] business days of receipt of the claim, the insurer requests additional verification (see 11 NYCRR 65-3.5[b]). In addition, it is well settled that an insurer is not obligated to pay or deny a claim until it has received verification of all relevant information requested (see 11 NYCRR 65-3.8[b][3];. Central Suffolk Hosp. v. New York Central mutual Fire Insurance Company, 24 AD3d 492; Hospital for Joint Diseases v. State Farm Mutual Automobile Insurance Company, 8 AD3d 533; St. Vincent’s Hospital of Richmond v. American Transit Insurance Company, 299 AD2d 338).

The Court finds that the plaintiff has failed to make out a prima facie case for judgment as to the first six dates of service listed above. To the extent that the Safir affidavit is silent as to the date the various claims herein were mailed to the defendant, defendant’s denial of claim forms (annexed to the Safir affidavit as Exhibits B) indicate the dates on which the claims were received, and adequately establish that plaintiff sent, and that defendant received, these claims (see Ultra Diagnostics Imaging v Liberty Mutual Ins. Co., 9 Misc 3d 97, 98 [App Term, 2d Dept 2005]). These same documents however also demonstrate that each of the first six claims was partially paid and partially denied, except for the fifth claim for $604.24 for services rendered on May 16, 2006, which was fully denied based upon a peer review, within thirty (30) days of their receipt. The affidavits in opposition of Megan Wolfe and Cindy Herdter, Geico claims representatives, dated August 21, 2007, confirm these facts.

As to the timely partial denials based upon a dispute as to the proper fee schedule, the first, second, third, fourth, and sixth above listed claims, a question of fact exists as to the proper fee to be charged and paid. Accordingly, summary judgment is denied as to these claims.

The plaintiff has failed to reply with medical evidence regarding the fifth claim, denied in full based upon a peer review report, and summary judgment is therefore granted to the defendant as to that claim.

As to the last six claims submitted for the period June 1, 2006 and thereafter (claims 7-12), the evidence demonstrates that timely first and second requests for verification were mailed to the plaintiff and received. These were never fully responded to. In addition, and for the reasons set forth below, defendant has demonstrated its right to summary judgment as to these claims.

11 NYCRR 65-3.8(f) provides:

An insurer shall be entitled to receive proper proof of claim and a failure to observe any of the time frames specified in this section shall not prevent an insurer from requiring proper proof of claim. [*3]

The proof of claim to which the defendant is entitled includes any requested EUO. (11 NYCRR 65-3.8[a][1]). Even a late request for additional verification is not invalid, but merely shortens the time within which the claim must be denied once the requested verification is received and the toll created by the verification request is lifted (Nyack Hosp. v. General Motors Acceptance Corp., 27 AD3d 96). An insurer is under no obligation to deny a claim before the requested verification is received (Central Suffolk Hosp. v. New York Cent. Mutual Fire Insurance Company, 24 AD3d 492), and its time to pay or deny a claim does not begin to run again until its receipt of the requested verification (Nyack Hospital v. Progressive Casualty Insurance Company, 296 AD2d 482).

As to the last six claims for services which are the subject of this summary judgment motion, the above mentioned affidavits of Megan Wolfe and Cindy Herdter, sworn to on August 21, 2007, and attached to the moving papers together with other documents, including the denials issued herein, also satisfy the business record exception to the hearsay rule and establishes that timely verification requests and delay letters were mailed to plaintiff and received by it which tolled the running of the thirty day period in which an insurer must normally pay or deny a claim (11 NYCRR 65-3.8[a][1]), and that timely requests for an Examination Under Oath (EUO) were made as to each of the last six claims herein. The provider was first requested to appear at the offices of counsel for the defendant in Woodbury, New York on October 4, 2006 to be examined with respect to 21 separate patients, including Mr. Ruiz.

On September 28, 2006, Dr. Braver wrote to counsel for the defendant, allegedly agreeing to appear for an EUO, but with conditions, including that the appearance be adjourned to a Friday and that the examination be conducted in Brooklyn. He further demanded that he be provided a list of questions, that he be paid an attendance fee of $1,400 per day, and that he testify on 21 separate days, a separate day for each patient. He did not object to the date, other than it was not a Friday, and did not appear on October 4, 2006. On October 3, 2006 the defendant wrote to plaintiff setting forth, as per plaintiff’s request, a new date, Friday, October 20, 2006, and agreeing to hold the examination in Brooklyn, but requesting that the one day examination cover each of the patients with pending claims. On October 10, 2006, the plaintiff again wrote to the defendant’s counsel, insisting that he be paid $1,400 per day and that he testify as to no more than one patient per day. He did not appear on October 20, 2006. Finally, on December 12, 2006, counsel for the defendant wrote to the plaintiff requesting that he select a single convenient date in January, 2007 on which to testify as to each pending claim. On January 10, 2007, plaintiff allegedly wrote to the defendant, allegedly agreeing to appear for the requested EUO, but still refusing to appear for a global examination. Defendant claims not to have received this letter, and on February 21 and 22, 2007, defendant denied each of these six claims, citing the doctor’s conviction and license suspension, and his failure to submit to an EUO.

The no-fault claimant is required to cooperate in good faith with the insurer in the investigation of its claim (Dilon Medical Supply Corp. v. Travelers Ins. Co., 7 Misc 3d 927). This the plaintiff has utterly failed to do. While on the surface appearing to agree to appear for an EUO, the plaintiff imposed such an absurd condition, namely that he be paid $1,400.00 twenty-one (21) separate times to appear on twenty-one (21) separate days, for an examination which defendant was prepared to complete in a single day. This would have necessitated the [*4]defendant spending $29,400.00 to obtain the verification information to which it was legally entitled. Nothing in the regulations permit the imposition of such a condition upon an insurer and the Court finds that Dr. Braver’s conduct was nothing more than an arrogant and transparent attempt to deprive the defendant of the information to which it was entitled. Such conduct constituted a refusal to provide appropriate verification information and accordingly the defendant’s time within which to pay or deny the claim never ran out (Nyack Hospital v. Progressive Casualty Insurance Company, supra ; Westchester Medical Center v. Mercury Cas. Co., —- NYS2d ——, 2008 WL 2939450 June 27, 2008). The last six claims were therefore not overdue and plaintiff’s action is premature as to them. Accordingly, the Court concludes that defendant is entitled to summary judgment as a matter of law and the complaint is dismissed as to the last six claims listed above.

Were the court not dismissing these six claims on that basis, plaintiff’s motion would nevertheless be denied. Defendant also alleges, and plaintiff does not deny, that discovery is not complete in that it served various disclosure demands upon the plaintiff together with its answer to the complaint, which demands have never been responded to. This court agrees with the holding in Ostia Medical, PC. v. Government Employees Ins. Co., 1 Misc 3d 907(A) wherein that court held:

“…there is no discovery prohibition if litigation is chosen by a medical provider to recover no-fault benefits. Once again, the Court must state that the plaintiff elected to proceed by way of litigation in the Nassau County District Court and thus, it must comply with the discovery procedures set forth in the CPLR and the UDCA (see, UDCA §1101[a]; CPLR §3101; see also Albatros Medical P.C. v. GEICO, supra ).”

In order to defeat a motion for summary judgment on the ground that discovery is not complete, the movant must show that further discovery may raise triable issues of fact(LMK Psychological Services, P.C. v. Liberty Mut. Ins., 30 AD3d 727). Although not necessary to the determination of the plaintiff’s motion, defendant here has met that burden. The plaintiff has not yet been fully examined concerning his refusal to submit to an EUO. In addition, the affidavit submitted in support of plaintiff’s motion, regarding the plaintiff’s billing and mailing procedures, is provided by the very same person who plaintiff alleged, as part of his defense at his license suspension hearing, was responsible for the billing “errors” for which he was prosecuted. This would obviously be fertile ground for examination as well. Therefore, if the Court were not granting the defendant summary judgment, it would nevertheless deny plaintiff’s motion pursuant to CPLR §3212(f), grant the defendant’s motion pursuant to CPLR §3126, and dismiss the action unless plaintiff provided all outstanding discovery and submitted to an examination before trial within 30 days of the date of this decision.

Accordingly, the fifth and the last six claims herein (claims 7-12) are dismissed. Summary judgment is denied as to the first, second, third, fourth, and sixth claims herein.

The foregoing constitutes the decision and order of the Court.

SO ORDERED: [*5]

__________________________________

DISTRICT COURT JUDGE

Dated: November 24, 2008

cc: Law Office of Amos Weinberg

Law Office of Teresa M. Spina

Nassau Dist Ct

CIV 033/2008

cc:Amos Weinberg, Esq.

49 Somerset Drive South

Great Neck, New York 11020-1821

Jaffe & Koumourdas LLP

40 Wall Street, 12th Floor

New York, New York 10005

Robert A. Bruno, J.

Plaintiffs move for an order, pursuant to CPLR 3212, granting summary judgment in their favor in this action to recover fees for medical treatments provided under the no-fault law to their assignor Robert Aronov. Defendant opposes this motion and Plaintiffs have served a reply.

Plaintiffs’ assignor was allegedly involved in a motor vehicle accident on March 1, 2007. Plaintiffs submitted claims to Defendant, for which the complaint states $8,150.24 has not been paid. All claims, except for one for an examination on August 6, 2007 for which the Plaintiffs maintain no denial was ever received, were denied on the basis of the assignor’s failure to appear at an independent medical examination. Plaintiffs further contend that $4,301.45 of the claims were late.

On a motion for summary judgment, the court must determine if a triable issue of fact exists (Figueroa v. Gallagher, 20 AD3d 385 [2d Dept 2005]). A motion for summary judgment “should not be granted where the facts are in dispute, where conflicting inferences may be drawn from the evidence, or where there are issues of credibility” (Baker v. DJ Stapleton, Inc., 43 AD3d 839 [2d Dept 2007] citing Scott v. Long Island Power Authority, 294 AD2d 348 [2d Dept 2002]). To establish a prima facie case for summary judgment in a no-fault action, Plaintiff must show that the claim forms were timely and properly submitted and that Defendant has either failed to pay or failed to properly deny the claim within the statutory time frame (11 NYCRR §65-3.8[c]; Westchester Medical Center v. AIG, Inc., 36 AD3d 900 [2d Dept 2007]).

Plaintiffs claim that they have established their prima facie case for summary judgment by showing that the claim forms were timely and properly submitted and that Defendant has either failed to pay or failed to properly deny the claim within the statutory time frame (11 NYCRR §65-3.8[c]; Westchester Medical Center v. AIG, Inc., 36 AD3d 900 [2d Dept 2007]).

However, in order to lay a proper evidentiary foundation for the forms, bills and related documents necessary to establish Plaintiffs prima facie case, a supporting affidavit must establish [*2]that the tendered documents are a part of Plaintiff’s business records (CPLR 4518[a]; North Acupuncture, PC v. State Farm Ins. Co., 14 Misc 3d 130[A] [App Term, 2nd and 11th Jud Dists 2006]). Pursuant to CPLR 4518, to overcome the hearsay objection to a business records, four fundamental elements must be satisfied: (1) the record must be one which is made in the regular course of the business; (2) it must be the regular course of business to make such records; (3) the record must have been made at the time of the act or occurrence recorded or within a reasonable time thereafter; and (4) the person who made the record must have had actual knowledge of the event, records or must have received his or her information from someone within the business who had actual knowledge and was under a “business duty” to report the event to the maker of record (see generally Dan Medical P.C. v. New York Central mutual Fire Ins. Co., 14 Misc 3d 44 [App Term, 2nd and 11th Jud Dists 2006] citing William Conover, Inc. v. Waldorf, 251 AD2d 727 [3rd Dept 1998]).

In support of their motion, Plaintiffs have submitted the affidavit of Janet Safir, the medical biller and billing manager for each of the three plaintiff providers.

The Court finds that the affidavit of Janet Safir, sworn to on November 21, 2007, fails to satisfy the business record exception to the hearsay rule, although Ms. Safir states that she personally mailed various documents to Defendant in the ordinary course of business. The affidavit on its face fails to lay any foundation for any of the documents attached to Plaintiffs’ motion. It fails to provide any specific information regarding to who is her actual employer. Although Plaintiffs have offered defendant’s denials as acknowledgment of receipt of the bills provided, Plaintiffs have failed to lay a sufficient evidentiary foundation in satisfaction of CPLR 4518. Despite Ms. Safir’s purported personal knowledge of the manner in which Plaintiffs’ records are ordinarily kept, her affidavit fails to demonstrate what the manner consisted of and whether the records were recorded at the time the services were provided to its assignor or within a reasonable time thereafter, where the document was created, if it was created in the ordinary course of business and whether it is the regular course of the business to prepare said documents. Further, Ms. Safir fails to demonstrate that the procedures ordinarily implemented by Plaintiffs’ offices were the procedures implemented on the date the services were rendered to Plaintiffs’ assignor.

Since the affidavit of Plaintiffs’ biller was insufficient to lay a foundation for the admission, as business records, of the documents annexed to Plaintiff’s moving papers, Plaintiffs have failed to establish a prima facie showing of their entitlement to summary judgment. Accordingly, Plaintiff’s motion is denied.

This constitutes the decision and order of the Court.

So Ordered:

District Court Judge

Dated: JUNE 30, 2008

Nassau Dist Ct

13481/06

Attorneys for Plaintiff: Friedman, Harfenist, Langer & Kraut

Attorneys for Defendant: Rubin, Fiorella & Friedman, LLP

Andrew M. Engel, J.

This is an action to recover no-fault first party benefits allegedly provided by the Plaintiff, to its assignor, on March 13, 2002 for injuries allegedly sustained in a motor vehicle accident on February 11, 2002. It is not disputed that at the time of the alleged accident the Plaintiff’s assignor was occupying a motor vehicle he had rented from “U-Haul.”^[FN1]

The action was commenced by the filing of a Summons and Complaint on April 17, 2006. The Plaintiff alleges, inter alia, that it provided health care services to its assignor on March 13, 2002; that it submitted a bill for those services to the Defendant (hereinafter referred to as “Republic Western”) subsequent to March 13, 2002; and that the bill remains unpaid. Issue was joined by the service of Republic Western’s Answer on or about June 1, 2007. Although the Republic Western’s Answer was more than one year overdue, the Plaintiff never moved for the entry of a default judgment and accepted the late service of Republic Western’s Answer. Republic Western’s Answer contains thirty-five (35) separate affirmative defenses. Many of these affirmative defenses are boilerplate and have no application to this action. They have no business being included in the Republic Western’s Answer. Nevertheless, Republic Western’s thirty-fifth (35th) affirmative defense alleges that the action is barred by the applicable statute of limitations. Based thereon, Republic Western now moves for an order, pursuant to CPLR § 3211(a)(5), dismissing the Complaint. The Plaintiff opposes the motion.

Republic Western avers that it does not have the NF-3 claim form filed with it by the Plaintiff, although Republic Western does not deny its receipt. Using the date of service of March 13, 2002, and giving the Plaintiff the benefit of all one-hundred eighty (180) days it then had to [*2]file its claim, plus the maximum of thirty (30) days Republic Western had to pay or deny this claim, Republic Western correctly asserts that the Plaintiff’s cause of action ripened no later than October 9, 2002.

Republic Western alleges that it and U-Haul are wholly owned subsidiaries of a Nevada corporation known as AMERCO. According to Republic Western, it “provides U-Haul with loss adjusting and claims handling through regional [sic] across North America[,]” (Puckett Affidavit 8/20/07, ¶ 7) and further alleges that it “does not issue a policy of insurance to the driver but rather covers U-haul for all claims against the self-insured.” (Puckett Affidavit 8/20/07, ¶ 9) Republic Western explains that “[w]hen a customer rents a U-Haul vehicle in New York State, Republic Western will insure the vehicle.” (Puckett Affidavit 8/20/07, ¶ 9) Based thereon, Republic Western declares that it is “the self-insurer for U-Haul” (Puckett Affidavit 8/20/07, ¶ 7) and that its obligations to pay no-fault first party benefits is imposed by statute or regulation. In this respect, Republic Western suggest that it is in the same position as the Motor Vehicle Accident Indemnification Corporation (hereinafter referred to as “MVAIC”), and is entitled to the application of the three (3) year statute of limitations provided in CPLR § 214(2).

Applying this three (3) year statute of limitations, Republic Western argues that the latest date by which the Plaintiff could commence this action, and still be timely, was October 19, 2005. According to Republic Western, having been commenced on April 17, 2006, the Plaintiff’s action is time barred and must be dismissed.

The Plaintiff argues, in the first instance, that Republic Western has failed to demonstrate that it is a “self-insured.” The Plaintiff suggests that the status of Republic Western and U-Haul as wholly owned subsidiaries of AMERCO does not confer self-insured status upon Republic Western. The Plaintiff further points to Republic Western’s acknowledgment that it “will insurer” and “covers” (Puckett Affidavit 8/20/07, ¶ 9) U-Haul vehicles. The Plaintiff further suggests that there is no legal basis upon which, and it is impossible for, Republic Western to be a “self-insurer” for another.

The Plaintiff alternatively argues, that even if Republic Western is found to be a self-insured, its obligations to pay for no-fault first party benefits is “firmly rooted in contract.” (Armao Affirmation 10/11/07, ¶ 12) Plaintiff argues that unlike MVAIC, whose obligations are strictly imposed by statute, Republic Western voluntarily chose to be a self-insured, obligating itself to provide no-fault first party benefits by virtue of Insurance Law § 5103 and the rental agreement between Plaintiff’s assignor and U-Haul. Under all of these circumstances, according to the Plaintiff, it is entitled to the application of the six (6) year statute of limitations provided for by CPLR § 213(2); and, Republic Western cannot receive the benefit of a shorter statute of limitations merely because it does not issue a written insurance policy.

In reply, contradicting its earlier statements, Republic Western alleges that “U-Haul provides the funding for losses regarding its vehicles – including the no fault benefits in question.” (Federici Affirmation 11/26/07, ¶ 4) Re-emphasizing its relationship with U-Haul and AMERCO, Republic Western notes that no insurance is sought from outside companies and that the three (3) corporations should collectively be viewed as a single self-insured entity. Republic Western posits that the question before the court is “whether the liability [to pay first party benefits] would not exist but for a statute.”[emphasis in original] (Federici Affirmation 11/26/07, ¶ 6) Republic Western answers this question by arguing that unlike “[t]raditional [*3]automobile insurance companies” (Federici Affirmation 11/26/07, ¶ 6) which issue policies of insurance, Republic Western is self-insured and “do[es] not issue policies containing the no-fault endorsement, and would not owe no-fault benefits but for Regualtion 68.”(Federici Affirmation 11/26/07, ¶ 6) This court does not agree.

Although claiming to be self-insured, Republic Western has failed to offer any competent proof supporting this claim. In fact, Republic Western’s proof appears to be to the contrary. At the outset, it is noted that Republic Western’s Answer fails to deny, and therefor admits, the allegation contained in paragraph “1” of the Plaintiff’s Complaint, which alleges: “Defendant is an insurance company licensed to do business in the State of New York.” The court also agrees with the Plaintiff that there is neither legal authority for, nor any logic to, Republic Western’s claim that it is actually the “self-insurer” of a separate legal entity.

Similarly, the business relationship among the corporate entities, Republic Western, U-Haul and AMERCO, does not establish Republic Western as a self-insured. In fact, the affidavit of Sharon Puckett, Republic Western’s claims representative and the AMERCO 10Q report upon which Republic Western relies, do more to establish Republic Western as an insurer than a self-insurer. As previously noted, Ms. Puckett advises this court that “[w]hen a customer rents a U-Haul vehicle in New York State, Republic Western will insure the vehicle.” (Puckett Affidavit 8/20/07, ¶ 9) She similarly advises that Republic Western “covers U-Haul.” (Puckett Affidavit 8/20/07, ¶ 9) Verifying that Ms. Puckett’s use of the words “insure” and “covers” were not used in error, the AMERCO 10Q report submitted by Republic Western advises that “Rep West is focused on providing and administering property and casualty insurance to U-Haul, its customers, its independent dealers and affiliate.”(Amerco 10Q Report, p. 51); “Rep West also underwrites components of the Safemove, Safetow and Safestor protection packages to U-Haul customers. We continue to focus on increasing the penetration of these products. The business plan for Rep West includes offering property and casualty products in other U-Haul related programs.” (Amerco 10Q Report, p. 53); “Premiums at Rep West increased $0.6 million due to increases in U-Haul related business.”(Amerco 10Q Report, p. 59); and, “Premium revenues [for Republic Western] were $5.4 million and $4.8 million for the quarters ended March 31, 2006 and 2005, respectively. U-Haul related premiums were $4.5 million and $3.9 million for the quarters ended March 31, 2005 and 2004, respectively.”(Amerco 10Q Report, p. 67)

That Republic Western’s claim to be a self-insurer is erroneous at best, and less than forthright at worst, is evidenced by the representations made by Republic Western in other litigation involving its status as an insurer. In Republic Western Insurance Company v. State, 985 S.W.2d 698, (Tex.App.-Austin1999) Republic Western and U-Haul brought an action seeking a declaration that they were not engaging in the unauthorized business of insurance. The State of Texas sought injunctive relief, restraining such insurance activities. In finding against Republic Western and U-Haul the Texas Court of Appeals noted, “U-Haul offers its rental customers three “Safe Protection” insurance packages” and “solicit[s] rental customers to purchase insurance and collect[s] premiums for Republic Western[.]” Regarding Republic Western’s activities, the court observed, “Republic Western … assist[s] U-Haul in the solicitation and effectuation of insurance, in the dissemination of coverage and rate information, and in the delivery of insurance contracts.”

Like the matter sub judice, NYC Medical and Neurodiagnostic, P.C. v. Republic Western Ins. Co., 8 Misc 3d 33, 798 NYS2d 309 (App. Term 2nd & 11th Dists. 2004) was an action [*4]involving a claim for no-fault first party benefits, where the court noted, ” “Plaintiff’s assignor was a passenger in a U-Haul vehicle insured by [Republic Western], an Arizona corporation.” In that action, Republic Western’s “New York claims manager submitted an affidavit in which he averred that [Republic Western] was an Arizona corporation … , that [Republic Western] was the sole insurer for U-Haul, Inc., an Arizona corporation, and that the policy was written and sold in Arizona.”

After reviewing, inter alia, an insurance policy between U-Haul and Amerco and an insurance identification card, the court found “A business automobile insurance policy had been issued by [Republic Western], an Arizona corporation, to its named insured, Amerco, also an Arizona corporation, indicating that there was a New York specific endorsement providing no-fault coverage. The Arizona Automobile Insurance Card for the vehicle showed that [Republic Western] was its insurer and that the insured was Amerco et al, including U-Haul.'”

Diagnostic Rehab. Medicine Service. v. Republic Western Ins., Co., 2003 WL 22888389 (Civ.Ct. Kings Co. 2003) consolidated six (6) actions to recover no-fault first party benefits. Once again, Republic Western’s New York Claims Manager represented to the court “that Republic Western is an Arizona corporation and is the sole insurer for U-HAUL INC., an Arizona Corporation.'” Quoting from NYC Medical and Neurodiagnostic, P.C. v. Republic Western Ins. Co., supra ., and consistent with some of the representations made by Republic Western in the present matter, the court found, ” At least one equipment rental contract delivered to a renter from a U-Haul facility in the city of New York stated under the heading liability insurance’ that U-Haul customers are insured by a business auto policy, providing limits up to the minimum financial responsibility law of the state where the accident occurs[;]'” and, even more to the point, ” Under the terms of the insurance policy issued to U-Haul, [Republic Western] has agreed to provide no-fault benefits to any person injured in U-Haul’s vehicles ….”

Based upon all of the foregoing, even if this court were to accept Republic Western’s underlying premise, that self-insurers are to be held to the three (3) year statute of limitations provided for by CPLR § 214(2), Republic Western has failed to adequately demonstrate that it is a self-insurer. For this reason alone Republic Western’s motion should be denied. This failure of proof notwithstanding, it is the opinion of this court that even as a self-insurer, Republic Western would be bound by the six (6) year statute of limitations provided for by CPLR § 213(2).

Accepting for the sake of argument that Republic Western has adequately demonstrated its status as a self-insurer, Republic Western relies upon two (2) lower court decisions, one reported, Alleviation Supplies Inc. v. Enterprise Rent A Car, 12 Misc 3d 787, 819 NYS2d 404 (Civ. Ct. Richmond Co. 2006) and one unreported, AL Medical & Surgical Supplies, Inc. v. Republic Western Insurance Company, Index No. 48145/06, (Civ. Ct. Bronx Co. 2007), to support its statute of limitations argument. Recognizing the application of a six (6) year statute of limitations in actions seeking to recover no-fault first party benefits owed under a policy of insurance, the court in Alleviation Supplies Inc. v. Enterprise Rent A Car, supra . held, “there is not logical reason to view an action against a self-insurer as a breach of contract action, in that the self-insurer’s liability derives solely from statute and regulations promulgated pursuant to statute.” The court in AL Medical & Surgical Supplies, Inc. v. Republic Western Insurance Company, supra . reached the same conclusion. This court respectfully disagrees. This court is not bound by either of the decisions relied upon by Republic Western; and, for the reasons set [*5]forth at length below, respectfully declines to follow them.

As indicated at the outset of this decision, the Plaintiff seeks the recovery of no-fault first party benefits for medical services allegedly provided to its assignor who was allegedly injured while occupying a vehicle he had leased from U-Haul. There is likewise no dispute that there was a contract between the Plaintiff’s assignor, as lessee and U-Haul, as owner/lessor. As will be discussed, by virtue of this rental agreement the self-insured owner/lessor stands in the same shoes as a third-party insurer with regard to its obligations to provide no-fault first party benefits. Liability is not imposed simply by virtue of the owner/lessors’ status as a self-insurer, but “because of the terms of self-insurance that it agreed to in its rental agreement ….” Guercio v. Hertz Corporation, 40 NY2d 680, 389 NYS2d 568 (1976) Contrary to the argument of Republic Western, self-insurers are not analogous to MVAIC.

As noted in Motor Vehicle Accident Indemnification Corporation v. Aetna Casualty & Surety Company, 89 NY2d 214, 652 NYS2d 584 (1996), “MVAIC itself is a statutory creation ….” If not for Insurance Law, Article 52 MVAIC would not exist. As Insurance Law § 5201 makes clear, MVAIC was created by the legislature due to its belief that:

the motor vehicle financial security act in the vehicle and traffic law, … , fails to accomplish its full purpose of securing innocent victims of motor vehicle accidents recompense for the injury and financial loss inflicted upon them, in that the act makes no provision for the payment of loss on account of injury to or death of persons who, through no fault of their own, were involved in motor vehicle accidents caused by: [uninsured vehicles, unidentified vehicles which leave the scene, stolen vehicles, vehicles operated without the owners permission, insured motor vehicles where the insurer disclaims coverage and unregistered vehicles.]

In contrast, self-insurers, while statutorily permitted to exist, are not created by statute. Self-insured vehicle owners/lessors, in an effort to comply with the Motor Vehicle Financial Security Act, voluntarily assume the obligations imposed upon all insurers by assuring payment of benefits and judgments which may be due thereunder. See: ELRAC, Inc. v. Ward, 96 NY2d 58, 724 NYS2d 692 (2001); Nassau Insurance Company v. Guarascio, 82 AD2d 505, 442 NYS2d 83 (2nd Dept. 1981) “By electing to be self-insured, [they] stand[] in the same position as any other insurer under the No-Fault Law (citation omitted).” Matter of State Insurance Fund (State), 212 AD2d 98, 628 NYS2d 985 (4th Dept. 1995); See also: McKenna v. Nassau County, 61 NY2d 739, 472 NYS2d 913 (1984) A review of the statutory and regulatory enactments obligating motor vehicle owners to maintain automobile insurance demonstrates that these obligations imposed upon self-insurers are no different than the obligations and policy endorsements imposed upon insurance companies, and should be treated the same.

The maintenance of motor vehicle insurance is compulsory in New York State. VTL Article 6, known as the Motor Vehicle Financial Security Act, provides:

The legislature is concerned over the rising toll of motor vehicle accidents and the suffering and loss thereby inflicted. The legislature determines that it is a matter of grave concern that motorists shall be financially able to respond in damages for their negligent acts, so that innocent victims of motor vehicle accidents may be recompensed for the injury and financial loss inflicted upon them. The legislature finds and declares that the public interest can best be served in satisfying the insurance requirements of this article by private enterprise operating in a competitive market to provide proof [*6]of financial security through the methods prescribed herein.

“Both statute and public policy require that motorists be insured against the risks of automobile travel(citations omitted).”General Accident Insurance Group v. Cirucci, 46 NY2d 862, 414 NYS2d 512 (1979) Simply stated, “[t]he whole object of compulsory automobile insurance is to assure the protection of members of the public, who are innocent victims of motor vehicle accidents, by providing compensation for and protection from tortious wrongs committed against them.”

While VTL § 321 provides that Article 6 “shall not apply to any motor vehicle for the operation of which security is required to be furnished under section three hundred seventy of this chapter,” e.g. lessors, VTL § 370(1) mandates that “Every person, firm, association or corporation engaged in the business of carrying or transporting passengers for hire … except … owned and operated by a municipality, … shall file with the commissioner of motor vehicles … a corporate surety bond or a policy of insurance, … conditioned for the payment of a minimum sum, hereinafter called minimum liability, …” These same obligations are placed upon those engaged in the business of renting or leasing vehicles to be operated upon the public roadways by virtue of VTL § 370(3). See: ELRAC, Inc. v. Ward, supra .; Allstate Insurance Company v. Shaw, 52 NY2d 818, 436 NYS2d 873 (1980)

In lieu of providing a surety bond or policy of insurance, an entity “engaged in the business of renting or leasing motor vehicles, having registered in this state more than twenty-five motor vehicles subject to the provisions of this section and who qualifies …, may file a certificate of self-insurance.” VTL § 370(3); ELRAC, Inc. v. Ward, supra . An out of state self-insurer, who does not meet this criteria may, nevertheless, provide proof of qualifications “under self-insurance provisions of the laws of the jurisdiction of such non-resident.” VTL § 311(3); Purex Industries,

Inc./Baron Blakesley Div. v. Nationwide Mutual Ins. Co., 110 AD2d 67, 493 NYS2d 176 (2nd Dept. 1985)^[FN2] Whether coverage is provided by a surety bond, a policy of insurance or a self-insurer, the coverage extends to one operating the vehicle with the vehicle owner’s permission. ELRAC, Inc. v. Ward, supra .; Insurance Law § 3420(e); Insurance Law § 5103

While rental vehicles are excluded from Article 6 of the Vehicle and Traffic Law, Section 321(2) thereof nevertheless provides, “that any motor vehicle exempted in subdivision one of this section from the provisions of any portions of this article shall be subject to the provisions of article fifty-one of the insurance law.”Article 51 of the Insurance Law, known as the “Comprehensive Motor Vehicle Reparations Act,” is colloquially known as “the no-fault law.”

Insurance Law § 5103(a) provides, in pertinent part:

Every owner’s policy of liability insurance issued on a motor vehicle in satisfaction of the requirements of article six or eight of the vehicle and traffic law shall also provide for; every owner who maintains another form of financial security on a motor vehicle in satisfaction of the requirements of such articles shall be liable for; and every owner of a motor vehicle required to be subject to the provisions of this article by subdivision two of section three hundred twenty-one of the vehicle and traffic law shall be liable for; the payment of first party benefits to: (1) Persons, other [*7]than occupants of another motor vehicle or a motorcycle, for loss arising out of the use or operation in this state of such motor vehicle.

As can be seen, no-fault coverage is part and parcel of the liability coverage provided, whether by surety bond, policy of insurance or self-insurance. Presbyterian Hospital in the City of New York v. Maryland Casualty Company, 90 NY2d 274, 660 NYS2d 536 (1997); Keith v. Liberty Mutual Fire Insurance Company, 118 AD2d 151, 503 NYS2d 441 (2nd Dept.1986)

Further imposing these obligations on all forms of motor vehicle financial security, Insurance Law § 5103(d) provides “Insurance policy forms for insurance to satisfy the requirements of subsection (a) hereof shall be subject to approval pursuant to article twenty-three of this chapter. Minimum benefit standards for such policies and for self-insurers, and rights of subrogation, examination and other such matters, shall be established by regulation pursuant to section three hundred one of this chapter.”

Similarly, Insurance Department Regulation 68, codified at 11 N.Y.C.R.R. part 65, implements the no-fault law. Medical Society of the State of New York v. Serio, 100 NY2d 854, 768 NYS2d 423 (2003) Among its provisions, relevant herein, Regulation 68 provides, “Every owner’s policy of liability insurance issued in satisfaction of the minimum requirements of article 6 or 8 of the Vehicle and Traffic Law and article 51 of the Insurance Law shall contain provisions providing minimum first-party benefits ….” 11 N.Y.C.R.R. § 65-1.1(a) Self-insurer is defined by 11 N.Y.C.R.R. § 65-2.1 as “any person, firm, association or corporation that: (1) maintains a form of financial security other than an owner’s automobile insurance policy in satisfaction of article 6 or 8 of the New York Vehicle and Traffic Law; or (2) is subject to article 51 of the New York Insurance Law as provided for in section 321 of the New York Vehicle and Traffic Law.” 11 N.Y.C.R.R. § 65-2.2 provides, “In accordance with the provisions of article 51 of the New York Insurance Law and this Part, a self-insurer shall pay first-party benefits to reimburse for basic economic loss sustained by an eligible injured person on account of personal injuries caused by an accident arising out of the use or operation of a motor vehicle within the United States of America, its territories or possessions, or Canada.” 11 N.Y.C.R.R. § 65-2.2(j) (3) defines an eligible injured person, in pertinent part, as “any other person who sustains personal injury arising out of the use or operation of the self-insured motor vehicle in the State of New York while not occupying another motor vehicle.” The rules for the settlement of claims for first party benefits shall apply to insurers and self-insurers alike. 11 N.Y.C.R.R. § 65-3.1

As is apparent from the foregoing, to suggest that motor vehicle owners/lessors, who choose to operate as self-insurers, should benefit from the shorter statute of limitations provided by CPLR § 214(2), for “liability … created or imposed by statute except as provided in sections 213 and 215”, because they do not physically issue a policy of insurance or a no-fault endorsement, overlooks the fact that the very same obligations are imposed upon insurance companies by mandating that their policies contain such endorsements. Insurance Law § 5103(a); 11 N.Y.C.R.R. § 65-1.1(a) Moreover, Insurance Law § 5103(h) provides that “Any policy of insurance obtained to satisfy the financial security requirements of article six or eight of the vehicle and traffic law which does not contain provisions complying with the requirements of this article [Article 51], shall be construed as if such provisions were embodied therein.”

As recently recognized in Mandarino v. Travelers Property Casualty Ins. Co., 37 AD3d 775, [*8]831 NYS2d 452 (2nd Dept. 2007), “the inclusion of terms in an insurance contract, which might be mandated by various statutes or regulations, does not necessarily alter the fundamentally contractual nature of the dispute between the insured (or is or her assignee), on the one hand, and his or her no fault’ insurer on the other hand.” In such circumstance, this liability is no less created or imposed upon one issuing a policy of insurance than it is upon a self-insurer who contracts for the leasing of its vehicle, which carries with it the assurance of its financial ability to satisfy the Motor Vehicle Financial Security Act and to pay judgments and claims. See: Guercio v. Hertz Corporation, supra .; ELRAC, Inc. v. Ward, supra .; Nassau Insurance Company v. Guarascio, supra . The court can see no logical reason why an insurer who contracts for the mandated coverage should be subjected to a six (6) year statute of limitations, while a self-insured owner/lessor who contracts for the lease of its vehicle, may limit its liability to those actions commenced within three (3) years of their accrual. The logical extension of such a holding would be to encourage insurance companies to refrain from issuing policies of insurance or excluding no-fault endorsements therefrom, allowing them to argue that their obligations are imposed by statute alone, reducing their exposure, in contravention of the statutory and regulatory scheme.

This, in fact, was the same position recently taken by the Appellate Division, Second Department in ELRAC, Inc. v. Suero, 38 AD3d 544, 831 NYS2d 475 (2nd Dept. 2007). While that case involved a proceeding to recover “uninsured motorist” benefits from the self-insured rental company, rather than no-fault first party benefits, the statutory and regulatory schemes enacting and implementing the two (2) endorsements are the same; and, the court’s reasoning for applying a six (6) year statute of limitations, as opposed to a three (3) year statute of limitations, to a self-insurer is indistinguishable.

In the same way that Insurance Law § 5103(a) requires the inclusion of no-fault first party benefits in all forms of motor vehicle financial security, Insurance Law § 3420(f)(1) requires the inclusion of “uninsured motorist” coverage. Just as Insurance Law § 5103(h) will read a no-fault endorsement into a policy of insurance which has omitted same, so too will Insurance Law § 3420(f) (1) read in an “uninsured motorist” endorsement which has been omitted. “Uninsured motorist” coverage, like no-fault coverage, will apply regardless of whether liability coverage is provided by a surety bond, an insurance policy or a self-insurer. VTL § 321(2); VTL § 370; Manhattan and Bronx Surface Transit Operating Authority v. Evans, 95 AD2d 470, 467 NYS2d 387 (2nd Dept.1983); New York City Transit Authority v. Thom, 52 NY2d 1032, 438 NYS2d 504 (1981); The right to obtain such mandated coverage “from a self-insurer is no less than the corresponding right under a policy issued by an insurer (citations omitted).” Application of Country-Wide Insurance Company, 96 AD2d 471, 464 NYS2d 786 (1st Dept.1983) aff’d 62 NY2d 748, 476 NYS2d 831 (1984)

Given the statutory and regulatory provisions providing for the inclusion of “uninsured motorist” coverage in all forms of motor vehicle financial security, it has been well recognized that “[a]lthough the endorsement is required by the Insurance Law, the obligation of the insurance company is contractual rather than statutory in nature.” State Farm Mutual Automobile Insurance Company v. Basile, 48 AD2d 868, 368 NYS2d 584 (2nd Dept. 1975); In re St. Paul Fire & Marine Insurance Company (Vanguard Systems Resources, Inc., 152 AD2d 497, 544 NYS2d 133 (1st Dept.1989); Manhattan and Bronx Surface Transit Operating Authority v. Evans, supra . Applying this same reasoning in ELRAC, Inc. v. Suero, supra ., the court held that a self-insured car rental [*9]company will be subject to the six (6) year statute of limitations, noting, “From an injured claimant’s perspective, [t]he right to obtain uninsured motorist protection from a self-insurer is no less than the corresponding right under a policy issued by an insurer’ (Matter of Country-Wide Ins. Co. [Manning], 96 AD2d 471, 472, 464 NYS2d 786, affd. 62 NY2d 748, 476 NYS2d 831, 465 NE2d 370; see Matter of Allstate Ins. Co. v. Shaw, 52 NY2d 818, 820, 436 NYS2d 873, 418 NE2d 388).” For all of the reasons set forth hereinabove, this court can see no logical reason why the same is not true for no-fault benefits provided by a self-insured rental company.

Accordingly, it is the holding of this court that a claim for no fault first party benefits against a self-insured motor vehicle rental company will be subject to the six (6) year statute of limitation provided by CPLR § 213(2); and, the motion of Republic Western to dismiss this action as untimely is denied.

This constitutes the decision and order of this court.

Dated: Hempstead, New York

January 3, 2008

___________________________

ANDREW M. ENGEL

J.D.C.

Footnotes

Footnote 1: Defendant identifies the leasing company as “U-Haul International, Inc.”

Footnote 2: Republic Western has not offered any proof of having done so herein.

Nassau Dist Ct

31712/05

Attorneys for Plaintiff: Belesi & Conroy, P.C.

Attorneys for Defendant: Bruno, Gerbino & Soriano, LLP

Andrew M. Engel, J.

The Plaintiff commenced this action to recover no-fault first party benefits for medical services allegedly provided to its assignor on various dated between October 31, 2001 and January 8, 2002, in the total sum of $1,574.35.00, which has not been paid. Issue was joined on or about October 11, 2005. Among the Defendant’s twenty-two affirmative defenses, the Defendant alleges that the treatment in question was performed by an unlicensed psychologist; that at the time the services in question were rendered the Plaintiff’s organizational structure was defective, as it did not have a psychologist as an owner; that the Plaintiff limited liability company was fraudulently formed; and that the psychologists who preformed the subject services were not employees of the Plaintiff, but independent contractors. The Defendant now moves for summary judgment based upon these affirmative defenses. The Plaintiff opposes the motion.

Summary judgment is a drastic remedy, Sillman v. Twentieth Century-Fox Film Corporation, 3 NY2d 395, 165 NYS2d 498 (1957), which should not be granted where there is any doubt as to the existence of a triable issue of fact. Rotuba Extruders, Inc. v. Ceppos, 46 NY2d 223, 413 NYS2d 141 (1978) To prevail, the movant must first make a showing of entitlement to judgment, as a matter of law, Bank of New York v. Granat, 197 AD2d 653, 602 NYS2d 942 (2nd Dept. 1993), tendering evidentiary proof in admissible form. Friends of Animals, Inc. v. Associate Fur Manufacturers, Inc., 46 NY2d 1065, 416 NYS2d 790 (1979). It is only thereafter incumbent upon the party opposing summary judgment to “demonstrate by admissible evidence the existence of a factual issue requiring a trial of the action or tender an acceptable excuse for his failure so to do.” Zuckerman v. City of New York, 49 NY2d 557, 427 NYS2d 595 (1980). A movant’s failure to make such a showing, regardless of the sufficiency of opposing papers, mandates the denial of a summary judgment motion. Winegrad v. New York University [*2]Medical Center, 64 NY2d 851, 487 NYS2d 316 (1985)

The Defendant alleges that the Plaintiff was originally formed in July of 1998 as a Professional Service Limited Liability Company, in the name of “Multiquest Psychological & Acupuncture Services, PLLC.” In support thereof, the Defendant submits a certified copy of the Plaintiff’s Articles of Organization dated July 13, 1998. The Defendant further alleges, and the Plaintiff’s Articles of Organization confirm, that there were only two individuals listed as the “original members and the original managers of the Company,” Yeugeny Gorbatov and Kathryn Clark.

In further support of its motion, the Defendant submits the transcript of an examination under oath of Katheryn Clark, dated April 26, 2004, which has been signed and sworn to by Ms. Clark. In pertinent part, Ms. Clark testified that she was never a member or manager of the Plaintiff; that she never gave anyone permission to use her name as a member or manager of the Plaintiff; that she never had an ownership interest in the Plaintiff; and that the use of her name was a sham. Ms. Clark also testified that, while she did perform work for the Plaintiff, she did so as an independent contractor.

Corroborating Ms. Clark’s testimony is the testimony offered by one Joseph Indelicato, Ph.D., given on September 28, 2005 at an examination before trial conducted in a action pending in Bronx County entitled Multiquest, PLLC a/s/o Raymond Blackwell v. Allstate Insurance Company. In his signed and sworn transcript Dr. Indelicato testified that the inclusion of Ms. Clark as a member or manager of the Plaintiff was “by accident.” (Indelicato Transcript 9/28/05, p. 174 l. 5) and that

Mr. Indelicato further testified that he took over as an owner of the Plaintiff in September 2001; and, at that time there were only two members of the Plaintiff, Yevgeny Gorbatov and someone named Kateriana Chizhova. Neither of these individuals was a psychologist. According to Dr. Indelicato he purchased his interest in the Plaintiff either from Mr. Gorbatov or from an Oleg Nemtsov; he was not sure. The only document ever proffered by the Plaintiff supporting this claim, however, is the face page of a certificate dated September 6, 2001, purporting to show that Joseph Indelicato is the owner of ninety-nine shares of “Multiquest Psychological & Acupuncture Services, PLLC.” The Plaintiff has offered nothing, however, to show that “the said Limited Liability Company has caused this Certificate to be signed by its duly authorized Member(s)/Manager(s) and to be sealed with the Seal of the Limited Liability Company,” as represented on the face of the certificate. Moreover, Mr. Indelicato himself testified that either he was the only one to sign the certificate or it may have been signed by someone else, but he does not know for sure.

Contradicting Mr. Indelicato’s unsupported testimony is a Certificate of Amendment of the Plaintiff’s Articles of Organization dated June 30, 2001, and filed with the Department of State on September 26, 2001, after Dr. Indelicato’s alleged purchase of an interest in the Plaintiff. The Certificate of Amendment indicates that “The Articles of Organization of the Limited Liability Company were filed with the Secretary of State of New York under the original name Multiquest Psychological & Acupuncture Services, PLLC’ on the 14th day of July, 1998[;]” and are amended to change the name of the company to “Psychological and Social Work Services, PLLC.” No where does the Certificate of Amendment indicate that there has been any change in the members and/or managers of the Plaintiff. Confirming this fact is the consent to this filing [*3]issued by the State Education Department, dated September 24, 2001, which lists the only members and managers of the Plaintiff as Yekaterina Chizhova, who is not a psychologis and Kathryn L. Clark, who was erroneously listed as an owner of the Plaintiff.

In opposition to the Defendant’s motion, the Plaintiff relies exclusively upon the affirmation of counsel, which is of no probative value on this motion. Zuckerman v. City of New York, supra .; Heifets v. Lefkowitz, 271 AD2d 490, 706 NYS2d 438 (2nd Dept. 2000); Warrington v. Ryder Truck Rental, Inc., 35 AD3d 455, 826 NYS2d 152 (2nd Dept. 2006) Nevertheless, based upon the evidence produced by the Defendant, the Plaintiff argues that genuine issues of material fact exist concerning the lawful formation of the Plaintiff and whether or not the specific services in question were performed by an employee of the Plaintiff or by an independent contractor. With regard to the former argument, the Plaintiff suggests that the testimony of Kathryn Clark “is inadmissible because it is likely that her testimony is biased.” (Kallos Affirmation 8/10/87, ¶ 4) With regard to the latter argument, counsel erroneously argues that the services in question were provided by a Dr. Desh D. Sachdev and that the Defendant “makes no specific allegations that Dr. Sachdev is not an employee of Multiquest, but rather, an independent contractor.” (Kallos Affirmation 8/10/87, ¶ 14) The Plaintiff further argues that whether or not the services in question were provided by an independent contractor, the Plaintiff may still properly recover for the services billed.

INDEPENDENT CONTRACTORS

Insurance Department Regulation, 11 N.Y.C.R.R. § 65-3.11(a) provides, in pertinent part, “An insurer shall pay benefits for any element of loss, other than death benefits, directly to providers of health care services as covered under section five thousand one hundred two (a) (1) of the Insurance Law ….” Contrary to the Plaintiff’s argument, this regulation mandates that payments be made “directly to the providers of health care services” and not to companies which secure independent contractors to perform such services. The Plaintiff’s reliance upon New Way Medical Care, P.C. v. Liberty Mutual Insurance Co., 12/23/04, NYLJ 17 (Col. 1) is misplaced. As is apparent from the numerous appellate decisions on the issue, the holding of New Way Medical Care, P.C. v. Liberty Mutual Insurance Co., id. has been overruled sub silentio.

In A.B. Medical Services PLLC v. Liberty Mutual Insuarnce Co., 9 Misc 3d 36, 801 NYS2d 690 (App.Term 2nd & 11th Dists. 2005) the court noted, “Pursuant to 11 NYCRR 65.15(j)(1) [now 11 N.Y.C.R.R. § 65-3.11(a)], a provider’s entitlement to seek recovery of no-fault benefits directly from the insurer is contingent upon an assignment of such benefits, and the assignment must be made to the providers of services.'” In recognition thereof, the court held that a billing provider, which utilizes an independent contractor to provide the services in question, is not a “provider” of the services in question “and is hence not entitled to recover direct payment’ of assigned no-fault benefits from the defendant insurer.”

Similarly, in V.S. Medical Services P.C. v. Allstate Insurance Co., 14 Misc 3d 130(A), 836 NYS2d 490 (App.Term 2nd & 11th Jud. Dists 2007) the court explicitly held:

Where a billing provider seeks to recover no-fault benefits for services which were not rendered by it or its employees, but rather by a treating provider who is an independent contractor, it is not a “provider” of the medical services rendered within the meaning of 11 NYCRR 65-3.11(a) and is therefore not entitled to recover “direct payment” of assigned no-fault benefits from the defendant insurer

[*4]See also: Rockaway Boulevard Medical P.C. v. Progressive Insurance, 9 Misc 3d 52, 802 NYS2d 302 (App.Term 2nd & 11th Dists. 2005); Metroscan Imaging, P.C. v. Geico Insurance Company, 13 Misc 3d 35, 823 NYS2d 818 (App.Term 2nd and 11th Judicial Districts 2006)

Turning to the facts of the case before this court, there is no support in the record for the Plaintiff’s proposition that the services in question were provided by Dr. Sachdev, who the Defendant fails to discuss. The bills submitted by the Plaintiff indicate that the services in question were provided by Joseph Indelicato, Ph.D. Moreover, the Plaintiff’s Response to Demand for Interrogatories dated December 6, 2005, which are verified by Dr. Indelicato, advise that “Treatment was provided by JOSEPH INDELICATO, Ph.D.” (Plaintiff’s Response to Demand for Interrogatories 12/6/05, ¶ 5) Nevertheless, genuine questions of fact exist concerning Dr. Indelicato’s status with the Plaintiff, i.e. employee vs. independent contractor, on the dates of service here in issue.

On the one hand, the Defendant has submitted testimony from Dr. Indelicato confirming that at one time he performed services for the Plaintiff as an independent contractor. This is corroborated by 1099 Miscellaneous Income Tax reporting forms issued by the Plaintiff to Dr. Indelicato in 2001 for “Nonemployee compensation.” On the other hand, the Defendant submitted testimony from Dr. Indelicato to the effect that sometime before September 2001the independent contractors who performed psychology services for the Plaintiff either became employees of the Plaintiff or ceased performing services for the Plaintiff. This is corroborated by employee W-2 tax reporting forms issued by the Plaintiff in 2001, including one issued to Dr. Indelicato, which the Defendant has submitted. The Defendant has offered nothing other than this conflicting evidence concerning Dr. Indelicato’s employment status with the Plaintiff between October 2001 and January 2002, when the services here in question were rendered.

Recognizing that the court’s function on this summary judgment motion is issue finding, not issue determination, Sillman v. Twentieth Century-Fox Film Corporation, supra .; Ferrante v. American Lung Association, 90 NY2d 623, 665 NYS2d 25 (1997); Miele v. American Tobacco Co., 2 AD3d 799, 770 NYS2d 386 (2nd Dept. 2003), the Defendant’s motion cannot be granted based upon this issue. There remains, however, the question of the propriety of the Plaintiff’s formation.

FRAUDULENT FORMATION

Implementing Insurance Law §§ 5101, et seq., 11 N.Y.C.R.R. § 65-3.16(a)(12) provides:

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 necessary to perform such service in New York or meet any applicable licensing requirement necessary to perform such service in any other state in which such service is performed.

BCL § 1507 provides:

A professional service corporation may issue shares only to individuals who are authorized by law to practice in this state a profession which such corporation is authorized to practice and who are or have been engaged in the practice of such profession in such corporation or a predecessor entity, or who will engage in the practice of such profession in such corporation within thirty days of the date such shares are issued. [*5]

BCL § 1508 further provides that, “No individual may be a director or officer of a professional service corporation unless he is authorized by law to practice in this state a profession which such corporation is authorized to practice and is either a shareholder of such corporation or engaged in the practice of his profession in such corporation.” Limited Liability Company Law §§ 1203 and 1207 are to the same effect.In State Farm Mutual Automobile Insurance Co. v. Mallela, 4 NY3d 313, 794 NYS2d 700 (2005) the Court of Appeals was ask to determine “whether a medical corporation that was fraudulently incorporated under NY Business Corporation Law §§ 1507, 1508 and NY Education Law § 6507(4)(c) [is] entitled to be reimbursed by insurers, under New York Insurance Law §§ 5101, et seq., and its implementing regulations, for medical services rendered by licensed medical practitioners'” on the corporation’s behalf. The court unequivocally answered that question in the negative.

It has since been held that 11 N.Y.C.R.R. § 65-3.16(a)(12) applies to fraudulently formed limited liability companies as well as to fraudulently formed corporations. Multiquest, P.L.L.C. v. Allstate Insurance Company, __ Misc 3d __, __ NYS2d __, 2007 NY Slip Op. 27366,

2007 WL 2682879 (App. Term 2nd and 11th Judicial Districts 2007) It has also been held that this regulation bars payment to a fraudulently formed entity, regardless of whether the unpaid services in question were performed before or after the date on which the regulation took effect [April 2, 2002]. Multiquest, P.L.L.C. v. Allstate Insurance Company, supra ., Metroscan Imaging, P.C. v. Geico Insurance Company, 13 Misc 3d 35, 823 NYS2d 818 (App. Term 2nd and 11th Judicial Districts 2006) The proper licensing of the “provider,” here the limited liability company, has been held to be a condition precedent to payment. Valley Physical Medicine and Rehabilitation P.C. v. New York Central Mutual, 193 Misc 2d 675, 753 NYS2d 289 (App. Term 2nd Dept. 2002); Metroscan Imaging, P.C. v. Geico Insurance Company, supra .; Multiquest, PLLC v. Allstate Insurance Company, 9 Misc 3d 1031, 805 NYS2d 255 (Civ.Ct. Queens Co. 2005)

Like a number of courts which have reviewed the formation of this Plaintiff, See: Multiquest, P.L.L.C. v. Allstate Insurance Company, __ Misc 3d __, __ NYS2d __, 2007 NY Slip Op. 27366, 2007 WL 2682879 (App. Term 2nd and 11th Judicial Districts 2007) [defendant proved that “plaintiff performed psychological services in violation of Limited Liability Company Law sections 1203 and 1207.”]; Multiquest, PLLC v. Allstate Insurance Company, 9 Misc 3d 1031, 805 NYS2d 255 (Civ.Ct. Queens Co. 2005) [“the plaintiff has failed to proffer sufficient evidence to rebut defendant’s allegations that the medical provider was fraudulently incorporated”]; Multiquest, P.L.L.C. v. Allstate Insurance Company, 10 Misc 3d 1061(A), 814 NYS2d 563 (Civ.Ct. Queens Co. 2005)^[FN1] [“at the time it provided psychological services to its assignor and filed its claim in 1998, plaintiff was in violation of the licensing requirements for PLLCs and was fraudulently organized, having filed false articles of organization representing that Clark was an original owner and/or manager, when, in fact, she was neither.”]; Multiquest PLLC v. Allstate Insurance Company, 10 [*6]Misc 3d 1069(A), 814 NYS2d 563 (Civ.Ct. Queens Co. 2005)^[FN2] [“defendant has demonstrated that there is no issue of fact as to plaintiff’s fraudulent incorporation and plaintiff has failed to raise an issue of fact in that regard”], it is the opinion of this court that the Plaintiff has failed to rebut the substantial evidence proffered by the Defendant of the Plaintiff’s fraudulent formation.^[FN3]

The fact that the dates of service in the matter sub judice were subsequent to the dates of service in the above cited “Multiquest” cases is irrelevant. As in Multiquest, P.L.L.C. v. Allstate Insurance Company, __ Misc 3d __, __ NYS2d __, 2007 NY Slip Op. 27366, 2007 WL 2682879 (App. Term 2nd and 11th Judicial Districts 2007), “[t]here is no dispute that plaintiff’s articles of organization stated that the company was to provide, inter alia, psychological services and listed a licensed psychologist [Katheryn Clark] as the provider of those services. However, the named psychologist testified under oath that she was never an owner or member of plaintiff and that she never received a stock certificate or any compensation based on an ownership interest.” As previously indicated hereinabove, while Joseph Indelicato, Ph.D. baldly testified that he purchased an interest in the Plaintiff prior to the dates of service herein, neither Dr. Indelicato nor the Plaintiff has offered any proof to that effect. Moreover, as similarly reported by the Appellate Term, “Defendant also proved that plaintiff’s ownership has changed since its initial organization, and while certain other health services were variously added and dropped, the same psychologist [Katheryn Clark], and no other, continued to be listed as a member and manager of plaintiff.” The Plaintiff has simply failed to offer any evidence to rebut the substantial evidence presented by the Defendant demonstrating that the Plaintiff remained fraudulently organized on the dates of service in issue. Dr. Indelicato’s bald, unsupported and inconsistent testimony, at best, does nothing more than raise a shadowy semblance of an issue of fact, which is insufficient to defeat this summary judgment motion. Orange County-Poughkeepsie Limited Partnership v. Bonte, 37 AD3d 684, 830 NYS2d 571 (2nd Dept. 2007);110 Sand Co. v. Nassau Land Improvement Co., Inc., 7 AD3d 497, 775 NYS2d 578 (2nd Dept. 2004); Spodek v. Park Property Development Associates; 263 AD2d 478, 693 NYS2d 199 (2nd Dept.1999)

Accordingly, the Defendant’s motion is granted and the Complaint is dismissed.

This constitutes the decision and order of this court.

Dated: Hempstead, New York

September 20, 2007 [*7]

___________________________

ANDREW M. ENGEL

J.D.C.

Footnotes

Footnote 1: Judge Kerrigan’s holding that 11 N.Y.C.R.R. § 65-3.16(a)(12) is not to be applied retroactively was recently overruled in Multiquest, P.L.L.C. v. Allstate Insurance Company, __ Misc 3d __, __ NYS2d __, 2007 NY Slip Op. 27366, 2007 WL 2682879 (App. Term 2nd and 11th Judicial Districts 2007).

Footnote 2: Judge Pineda-Kirwan’s refusal to apply 11 N.Y.C.R.R. § 65-3.16(a)(12) retroactively was recently overruled in Multiquest, P.L.L.C. v. Allstate Insurance Company, __ Misc 3d __, __ NYS2d __, 2007 NY Slip Op. 27366, 2007 WL 2682879 (App. Term 2nd and 11th Judicial Districts 2007)

Footnote 3: If properly raised by the Defendant, the doctrine of collateral estoppel should have prevented the Plaintiff’s repeated re-litigation of this issue. Ryan v. New York Telephone Co., 62 NY2d 494, 478 NYS2d 823 (1984); Capital Telephone Co., Inc. v. Pattersonville Telephone Co., Inc., 56 NY2d 11, 451 NYS2d 11 (1982); Choi v. State, 74 NY2d 933, 550 NYS2d 267 (1989)

Nassau Dist Ct

11579/04

Attorneys for plaintiff: La Sorsa & Beneventano

Attorneys for defendant: McDonnell & Adels, PC

Andrew M. Engel, J.

The Plaintiff commenced this action to recover no-fault first party benefits for medical services allegedly provided to its assignor on February 28, 2003 and on March 3, 2003, in the total sum of $240.00, which has not been paid. The action was commenced on or about May 12, 2004. Issue was joined on or about June 7, 2004. The Plaintiff now moves for summary judgment. The Defendant opposes that motion and cross-moves for summary judgment as well. The Plaintiff opposes the cross-motion.

Summary judgment is a drastic remedy, Sillman v. Twentieth Century-Fox Film Corporation, 3 NY2d 395, 165 NYS2d 498 (1957), which should not be granted where there is any doubt as to the existence of a triable issue of fact. Rotuba Extruders, Inc. v. Ceppos, 46 NY2d 223, 413 NYS2d 141 (1978) To prevail, the movant must first make a showing of entitlement to judgment, as a matter of law, Bank of New York v. Granat, 197 AD2d 653, 602 NYS2d 942 (2nd Dept. 1993), tendering evidentiary proof in admissible form. Friends of Animals, Inc. v. Associate Fur Manufacturers, Inc., 46 NY2d 1065, 416 NYS2d 790 (1979). It is only thereafter incumbent upon the party opposing summary judgment to “demonstrate by admissible evidence the existence of a factual issue requiring a trial of the action or tender an acceptable excuse for his failure so to do.” Zuckerman v. City of New York, 49 NY2d 557, 427 NYS2d 595 (1980). A movant’s failure to make such a showing, regardless of the sufficiency of opposing papers, mandates the denial of a summary judgment motion. Winegrad v. New York University Medical Center, 64 NY2d 851, 487 NYS2d 316 (1985)

Relying upon the affidavit of Gary Lombardo, an employee of the Plaintiff, and the Office Manager of the Plaintiff’s billing agent, Triborough Healthcare Management, Inc., the Plaintiff alleges that it timely submitted its claim for the services in question to the Defendant and that the [*2]Defendant failed to timely pay or deny this claim. The Defendant admits receipt of the Plaintiff’s claim on March 24, 2003, thereby curing any defect in the Plaintiff’s proof of mailing. Prestige Medical & Surgical Supply Inc. v. Clarendon National Insurance Company, 13 Misc 3d 127(A), 824 NYS2d 758 (App. Term 2nd and 11th Jud. Dists. 2006); Magnezit Medical Care, P.C. v. New York Central Mutual Fire Ins. Co., 12 Misc 3d 144(A), 824 NYS2d 763 (App. Term 2nd and 11th Jud. Dists. 2006), but alleges that the claim was denied due to the Plaintiff’s assignor’s failure to cooperate, and a founded belief that the alleged accident of February 13, 2003 was a staged and intentional act, raising a defense of lack of coverage. The affirmation of counsel, who does not have any personal knowledge of the matter, is without probative value, Wehringer v. Helmsley-Spear, Inc., 91 AD2d 585, 457 NYS2d 78 (1st Dept. 1982) aff’d 59 NY2d 688, 463 NYS2d 417 (1983); McDermott v. South Farmingdale Water District, 167 AD2d 517, 562 NYS2d 191 (2nd Dept. 1990); Di Sabato v. Soffes, 9 AD2d 297, 193 NYS2d 184 (1st Dept. 1959) and cannot supplement Mr. Lombardo’s affidavit.

Relying on the affidavit of Scott Herman, an investigator with the Defendant’s Special Investigative Unit, the Defendant alleges that it had a founded belief that the accident of February 13, 2003 was a staged event. The Defendant bases this defense on Mr. Herman’s belief that this loss occurred shortly after the State Farm policy was issued, that the Plaintiff’s assignor allegedly had numerous prior claims, that there were allegedly multiple individuals claiming injuries in the vehicle insured by the Defendant, that the driver of the vehicle insured by the Defendant had allegedly been involved numerous prior accidents, that there was allegedly a question of whether or not the driver of the vehicle insured by the Defendant had permission to drive the vehicle, that one of the passengers of the vehicle insured by the Defendant allegedly provided a false social security number, and that there were allegedly a number of inconsistencies in the testimony given by the Defendant’s insured and some of the occupants of the insured vehicle their examinations under oath. The Defendant further alleges that the Plaintiff’s assignor failed to appear for two scheduled examinations under oath. As was true for the Plaintiff’s counsel’s affirmation, defense counsel’s affirmation is of no probative value herein.

At the outset it is noted that neither the papers submitted in support of the Plaintiff’s motion, nor the papers submitted in support of the Defendant’s cross-motion are in admissible form sufficient to support either motion for summary judgment. Simply annexing documents to the moving papers, without a proper evidentiary foundation is inadequate. Higen Associates v. Serge Elevator Co., Inc., 190 AD2d 712, 593 NYS2d 319 (2nd Dept. 1993) To succeed on their respective motions the parties must lay a proper business record foundation for the documents upon which they rely, by someone with sufficient personal knowledge of the party’s office practices and procedures. Fortune Medical, P.C. v. Allstate Insurance Co., 14 Misc 3d 136, 836 NYS2d 492 (App. Term 9th & 10 Jud. Dists. 2007); Ontario Medical, P.C. v. Sea Side Medical, P.C., 15 Misc 3d 129, 2007 WL 926349 (App. Term 9th & 10 Jud. Dists. 2007); V.S. Medical Services, P.C. v. One Beacon Insurance, 14 Misc 3d 142, 836 NYS2d 504 (App. Term 2nd & 11th Jud. Dists. 2006)

As concerns the Plaintiff’s motion,”[t]o the extent defendant issued denial of claim forms (NF-10)or admitted receipt of plaintiff’s claim forms, such admissions did not concede the facts asserted in the claim forms and it remained plaintiff’s burden to proffer such evidence in admissible form, which it failed to do (see, Midborough Acupuncture, P.C. v. New York Cent. [*3]Mut. Fire Ins. Co., 13 Misc 3d 132 (A), 2006 N.Y.Slip Op. 51879(U), supra ).” Dan Medical, P.C. v. New York Central Mutual Fire Insurance Company, 14 Misc 3d 44, 829 NYS2d 404 (App. Term 2nd & 11th Jud. Dists. 2006); See also: Fortune Medical, P.C. v. Allstate Insurance Co., supra . Similarly, the opinion of the Defendant’s investigator is not based upon his personal knowledge, but is purportedly based upon his review of certain documents allegedly contained in the Defendant’s files, some of which are simply annexed to the Defendant’s motion papers without establishing any evidentiary foundation others of which are omitted altogether.

Neither the statement of Mr. Lombardo, on behalf of the Plaintiff, that the records relied upon are “maintained by Triborough on behalf of KOI Medical Acupuncture, PC in the ordinary course of business,” (Lombardo Affidavit 2/20/07, ¶ 9) nor the statement of Mr. Hermann, on behalf of the Defendant, that he made his “affidavit upon [his] personal knowledge and full review of files and records maintained by State Farm in its ordinary course of business” (Hermann Affidavit 5/1/07, ¶1) establish a business record exception to the hearsay rule, rendering these documents inadmissible.

As noted in People v. Kennedy,68 NY2d 569, 510 NYS2d 853 (1986), “The essence of the business record exception to the hearsay rule is that records systematically made for the conduct of a business as a business are inherently highly trustworthy because they are routine reflections of day-to-day operations and because the entrant’s obligation is to have them truthful and accurate for purposes of the conduct of the enterprise (citation omitted).” See also: People v. Guidice, 83 NY2d 630, 634 NE2d 951 (1994) CPLR § 4518(a) sets forth the exception:

Any writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence or event, shall be admissible in evidence in proof of that act, transaction, occurrence or event, if the judge finds that it was made in the regular course of any business and that it was the regular course of such business to make it, at the time of the act, transaction, occurrence or event, or within a reasonable time thereafter.

As can be seen, the proponent of the offered evidence must establish three general elements, by someone familiar with the habits and customary practices and procedures for the making of the documents, before they will be accepted in admissible form: (1) that the documents were made in the regular course of business; (2) that it was the regular course of the subject business to make the documents; and, (3) that the documents were made contemporaneous with, or within a reasonable time after, the act, transaction, occurrence or event recorded.^[FN1] People v. Kennedy, supra .; People v. Cratsley, 86 NY2d 81, 629 NYS2d 992 (1995). The parties herein, at best, have only made a feigned attempt to satisfy these elements.

While the Defendant is correct in asserting that its attempts to submit the transcripts of the examinations under oath are not barred by the hearsay rule, because the Defendant is not offering the statements contained therein for their truth, Spensieri v. Lasky, 94 NY2d 231, 701 NYS2d 689 (1999); Nucci v. Proper, 95 NY2d 597, 721 NYS2d 593 (2001); Winant v. Carras, 208 AD2d 618, 617 NYS2d 487 (2nd Dept. 1994) lv. den. 85 NY2d 812, 631 NYS2d 288 (1995) [*4]but for the exact opposite reason, to show their falsity and fraud, Stern v. Waldbaum, Inc., 234 AD2d 534, 651 NYS2d 187 (2nd Dept. 1996); DeLuca v. Ricci, 194 AD2d 457, 599 NYS2d 267 (1st Dept. 1993); Dawson v. Raimon Realty Corporation, 303 AD2d 708, 758 NYS2d 100 (2nd Dept. 2003), the transcripts, nevertheless, are not properly before this court. These transcripts are neither signed nor verified, Krupp v. Aetna Life & Casualty Co., 103 AD2d 252, 479 NYS2d 992 (2nd Dept.1984); Tancos v. Centaur Insurance Company, 133 AD2d 622, 519 NYS2d 730 (2nd Dept.1987); and, the Defendant offers no explanation as to why. McDonald v. Mauss, 38 AD3d 727, 832 NYS2d 291 (2nd Dept. 2007) Additionally, the Plaintiff has not demonstrated any formal requirements for the taking of these individuals’ alleged testimony sufficient to assure their accuracy. Complete Orthopedic Supplies, Inc. v. State Farm Insurance Company, __ Misc 3d __, 838 NYS2d 861 (Civ.Ct. Queens Co. 2007) Notably absent from the transcripts submitted are certifications as to the transcripts’ accuracy, executed by the Notary Public who purportedly took the testimony. cf. Morchik v. Trinity School, 257 AD2d 534, 684 NYS2d 534 (1st Dept.1999); Cox v. Jeffers, 222 AD2d 395, 634 NYS2d 519 (2nd Dept. 1995) Without such certification, the Plaintiff is asking the court to rely on transcripts which may be inaccurate. Jacobs v. Herrera, 4 Misc 3d 1018(A), 798 NYS2d 345 (Dist.Ct. Nassau Co. 2004)

If for no other reason, the parties’ failure to support their respective summary judgment motions with proof in admissible form mandates the denial of the motion and the cross-motion. Even if, however, the papers of one or both of the parties were to be deemed presented in admissible form, these motions would still have to be denied.

Contrary to the Plaintiff’s argument, the Defendant’s lack of coverage defense, based upon the Defendant’s alleged founded belief that the alleged accident in this matter was staged, is not waived by the failure to issue a denial or the issuance of an untimely denial. Central General Hospital v. chubb Group of Insurance Companies, 90 NY2d 195, 659 NYS2d 246 (1997); Metro Medical Diagnostics, P.C. v. Eagle Insurance Company, 293 AD2d 751, 741 NYS2d 284 (2nd Dept. 2002); Fair Price Medical Supply Corp. v. Travelers Indemnity Company, 42 AD3d 277, 837 NYS2d 350 (2nd Dept. 2007); Executive MRI Imaging, P.C. v. New York Central Mut. Fire Insurance Company, 13 Misc 3d 140, 831 NYS2d 359 (App. Term 2nd & 11th Jud Dist. 2006)

Moreover, assuming, for the sake of argument, the submission of documentation in evidentiary form, while the Defendant’s failure to deny or pay the Plaintiff’s timely claim satisfies the Plaintiff’s prima facia case, 11 N.Y.C.R.R. § 65-3.8(a)(1) and (c); Presbyterian Hospital in the City of New York v. Maryland Casualty Company, 90 NY2d 274, 660 NYS2d 536 (1997); Nyack Hospital v. State Farm Mutual Automobile Insurance Company, 11 AD3d 664, 784 NYS2d 136 (2nd Dept. 2004); Westchester Medical Center v. AIG, Inc., 36 AD3d 900, 829 NYS2d 180 (2nd Dept. 2007), which carries with it a ” presumption of [coverage] which attaches to the claim form'”, A.B. Medical Services, PLLC v. State Farm Mutual Automobile Insurance Company, 7 Misc 3d 822, 795 NYS2d 843 (Civ. Ct. Kings Co. 2005) quoting Stephen Fogel Psychological, P.C. v. Progressive Casualty Insurance Company, 7 Misc 3d 720, 827 NYS2d 217 (App. Term 2nd & 11th Jud. Dists. 2004), aff’d as mod. 35 AD3d 720, 827 NYS2d 217 (2nd Dept. 2006); see also: V.S. Medical Services, P.C. v. Allstate Insurance Company, 11 Misc 3d 334, 811 NYS2d 886 (Civ. Ct. Kings Co. 2006),placing the burden of going forward on the Defendant, See: Mount Sinai Hospital. v. Triboro Coach Inc., 263 AD2d 11, 699 NYS2d 77 (2nd [*5]Dept.1999); New York Message Therapy, P.C. v. State Farm Mutual Insurance Company, 14 Misc 3d 1231, 836 NYS2d 494 (Civ. Ct. Kings Co. 2006); Inwood Hill Medical P.C. v. Allstate Insurance Company, 3 Misc 3d 1110, 787 NYS2d 678 (Civ.Ct. NY Co. 2004), as will be discussed below, assuming the Defendant’s proof was in admissible form, the Defendant has raised questions of fact as to whether or not this was a staged accident sufficient to defeat the Plaintiff’s summary judgment motion. See: A.M. Medical Services, P.C. v. Nationwide Mutual Insurance Company, 12 Misc 3d 143, 824 NYS2d 760 (App. Term 2nd & 11th Dists. 2006); Amaze Medical Supply Inc. v. Lumbermens Mutual Casualty Company, 10 Misc 3d 127, 809 NYS2d 480 (App. Term 2nd & 11th Jud. Dists. 2005)

Similarly, even if the documentation submitted were in evidentiary form, the Defendant’s claims of failure to cooperate and lack of coverage cannot be determined as a matter of law, based upon the facts presented to the court.

Effective on April 5, 2002, the revised insurance regulations mandated the inclusion of examinations under oath in the personal injury protection endorsement of all policies issued thereafter, providing that an eligible injured person submit to examinations under oath “as may reasonably be required … by the Company” 11 NYCRR 65-1.1(d). Rigid Medical of Flatbush, P.C. v. New York Central Mutual Fire Insurance Company, 11 Misc 3d 139(A), 816 NYS2d 700 (App. Term 2nd & 11th Jud. Dists. 2006) Before an insurer may assert the defense of failure to appear, however, “the insurer must include the revised prescribed endorsement with new or renewal policies issued on or after April 5, 2002, and the claim rules are to be governed by the policy endorsement in effect.” S & M Supply v. State Farm Mutual Automobile Insurance Company, 4 Misc 3d 130(A), 791 NYS2d 873 (App. Term, 9th & 10th Jud. Dists. 2004);Capio Medical, P.C. v. Progressive Casualty Insurance Company, 7 Misc 3d 129(A), 801 NYS2d 231 (App. Term 2d & 11th Jud. Dists. 2005). Having failed to establish that the insurance policy herein contained an endorsement authorizing examinations under oath, the Plaintiff’s assignor’s alleged failure to appear for such an examination cannot serve as grounds for the denial of Plaintiff’s claim. A.B. Medical Services PLLC v. Allstate Insurance Company, 11 Misc 3d 135(A), 816 NYS2d 693 (App. Term 2nd & 11th Jud. Dists. 2006); Star Medical Services P.C. v. Eagle Insurance Company, 6 Misc 3d 56, 791 NYS2d 266 (App. Term 2nd & 11th Jud. Dists. 2004)

Additionally, like “independent” medical examinations, to successfully deny a claim based upon the Plaintiff’s assignor’s failure to attend an examination under oath, the insurer must establish, inter alia, proper mailing of the request for the examination by someone with knowledge. Stephen Fogel Psychological, P.C. v. Progressive Casualty Insurance Company, 35 AD3d 720, 827 NYS2d 217 (2nd Dept. 2006); Radiology Today, P.C. v. Citiwide Auto Leasing Inc., 15 Misc 3d 92, 838 NYS2d 336 (App. Term 2nd & 11th Jud. Dists. 2007) Neither Defendant’s counsel nor Mr. Hermann, the Defendant’s investigator, indicate that they have any personal knowledge of the alleged mailing of two notices for an examination under oath to the Plaintiff’s assignor; nor do they describe a “standard office practice or procedure designed to ensure that items are properly addressed and mailed” which would give rise to a presumption of receipt by the Plaintiff’s assignor. Residential Holding Corp. v. Scottsdale Insurance Company, 286 AD2d 679, 729 NYS2d 776 (2nd Dept. 2001); Hospital for Joint Diseases v. Nationwide Mutual Insurance Company, 284 AD2d 374, 726 NYS2d 443 (2nd Dept. 2001) That these notices [*6]were allegedly mailed by certified mail, return receipt requested, does not cure the deficiencies in the Defendant’s proof, as there is no proof that these notices were, in fact, mailed in such fashion. Nowhere on the letters is the mailing receipt number indicated; and, the purported mailing receipt fails to indicate what item was mailed and the address to which it was allegedly sent. Similarly, the mailing receipt does not contain a postmark or any other marking from the United States Postal Service. Moreover, although not submitted with the letters, both defense counsel and Mr. Hermann indicate that return receipt postcards were not signed by the Plaintiff’s assignor, but “by an unknown individual ….” (Hermann Affidavit 5/1/07, ¶ 6 and Linwood Affirmation, 4/19/07, ¶ 9) See: New York and Presbyterian Hospital v. Allstate Insurance Company, 29 AD3d 547, 814 NYS2d 687 (2nd Dept. 2006); Compare: Westchester Medical Center v. Liberty Mutual Insurance Company, 40 AD3d 981, 837 NYS2d 210 (2nd Dept. 2007) [the certified receipts contained a postmark and the documents’ identification numbers; and, the return receipt card, bearing the same information, was signed by a representative of the recipient]

As for the Defendant’s lack of coverage claim, while the Defendant’s papers raise a number of questions which may reasonably be interpreted as demonstrating that the accident in question either never took place or was staged, the Defendant’s papers are, at times, in conflict with themselves and raise more genuine issues of material fact than they resolve.

By way of example, both defense counsel and Mr. Hermann, in describing this allegedly fraudulent accident aver, “The alleged incident in issue occurred on February 13, 2003 at the intersection of Coney Island Avenue and Avenue H in Brooklyn, New York … According to the police report, the adverse vehicle was traveling northbound on Coney Island Avenue when he slowed down to avoid hitting a double parked car and was rear-ended by the insured vehicle.” [italics in original] (Hermann Affidavit 5/1/07, ¶ 3 and Linwood Affirmation, 4/19/07, ¶ 5) The police report which the Defendant submits, however, indicates that the subject accident occurred on Williamsbridge Road one hundred and fifty feet north of Morris Park Avenue in Bronx County, and that the insured vehicle was allegedly struck on the side by the adverse vehicle which was exiting a Blockbuster parking lot. Similarly, among the number of inconsistencies in the testimony purportedly provided by the insured, the driver and some of the other passengers of the insured vehicle is the claim that the insured, who was not in the vehicle at the time of the accident, testified that he picked up his vehicle at approximately 9:30 p.m. on the night of the accident, while “the police report lists the accident as occurring after 10:00 p.m.” (Hermann Affidavit 5/1/07, ¶ 7j and Linwood Affirmation, 4/19/07, ¶ 11j) The accident report submitted by the Defendant, however, indicates that the accident occurred at 2050 military time, or 8:50 p.m., making it possible for the insured to have picked up his vehicle at 9:30 p.m., as he apparently claims.

As previously indicated, if they were in admissible form, the documentation submitted by the Defendant “demonstrate[d] to the court that it had a founded belief’ that the alleged accident was intentionally caused in order to survive a summary judgment motion by the plaintiff-provider … However, defendant-insurer’s founded belief [is] not enough to obtain judgment on its own.” Universal Open MRI of the Bronx, P.C. v. State Farm Mut. Auto Ins., 12 Misc 3d 1151, 819 NYS2d 852 (Civ. Ct. Kings Co. 2006) The papers presented by the Defendants raise a number of factual issues which are subject to the inferences to be drawn from the evidence presented, many of which involve an assessment of credibility, and all of which must be reserved for the trier of [*7]facts. St. Luke’s Roosevelt Hospital v. Allstate Insurance Company; 303 AD2d 743, 757 NYS2d 457 (2nd Dept. 2003); Kolivas v. Kirchoff, 14 AD3d 493, 787 NYS2d 392 (2nd Dept. 2005); Scott v. Long Island Power Authority, 294 AD2d 348, 741 NYS2d 708 (2nd Dept. 2002); Lacagnino v. Gonzalez, 306 AD2d 250, 760 NYS2d 533 (2nd Dept. 2003); Ocean Diagnostic Imaging P.C. v. State Farm Mutual Automobile Insurance Company, 9 Misc 3d 73, 803 NYS2d 333 (App. Term 2005)

Accordingly, for all of the foregoing reasons, the Plaintiff’s motion and the Defendant’s cross-motion are denied.

This constitutes the decision and order of this court.

Dated: Hempstead, New York

September 10, 2007

___________________________

ANDREW M. ENGEL

J.D.C.

Footnotes

Footnote 1: Other evidentiary issues may still arise affecting admissibility, such as an attempt at admitting photocopies or electronic reproductions, see CPLR § 4539, or the presence of statements made by individuals who had not business duty to impart such information. Johnson v. Lutz, 253 NY 124, 170 N.Y.S. 517 (1930)

Nassau Dist Ct

01211/03

APPEARANCES:

Jason Tenenbaum, Esq.

Picciano & Scahill, P.C.

For Defendants

900 Merchants Concourse

Wesbury, NY 11559

W. Matthew Iler, Esq.

Israel, Israel & Purdy, LLP

For Plaintiff

11 Grace Avenue, Suite 111

Great Neck, NY 11021

Howard S. Miller, J.

In this relatively minor no-fault action, Defendant moves (by ordinary notice of motion dated March 26, 2007) for an order staying Plaintiff’s enforcement of a judgment based on non-compliance with a stipulation of settlement. The stipulation required Defendant to pay Plaintiff the sum of $2,633.37 within thirty days of its execution. In the event of default, the stipulation further provided for Plaintiff’s entry of judgment for the full amount demanded in the complaint. The amount demanded in the complaint, with statutory interest and attorneys’ fees, was $5,101.72.

Defendant admittedly failed to make payment within thirty days, and allegedly attempted to make payment a few days later. On Plaintiff’s application under the stipulation, the Clerk entered judgment on February 26, 2007, for $5,211.72, which also included costs. Defendant now argues that entry of judgment for the full amount of the complaint constitutes an unconscionable penalty for a few days’ delay, and that Plaintiff’s remedy is limited to a few days of statutory interest on the settlement amount. The Court disagrees.

To begin, Defendant has invoked the wrong procedure. Once a judgment has been entered, relief from that judgment is available only under CPLR 5015, with motions to be made by order to show cause. Defendant utilized an ordinary notice of motion. For that reason alone, the motion must be denied.

In addition to its procedural defect, however, the motion must also be denied on its merits. Defendant’s motion papers contain extensive citation to a proposition with which the Court agrees. “Penalty” clauses in contracts are unenforceable. All of the cases Defendant cites in support of that proposition are off the main point. The real question here is whether a stipulation of settlement in a judicial action, on the advice of counsel, is subject to the same rules as an ordinary contract. The Court believes that it is not.

Analysis begins with the proposition that a party may always consent to the entry of judgment as a way of terminating a litigation, for any reason. The consideration is the termination of the litigation. It is not considered a “penalty.” A party may simply conclude that the merits of its defense (or lack thereof) do not warrant the time and expense of further litigation. The courts encourage parties to stipulate the entry of judgment in such circumstances to avoid a waste of judicial time on defenses that are frivolous or essentially useless. When parties are represented by counsel, there is no need for a public policy concern of one party taking unfair advantage of another.

A stipulation of settlement such as the one at bar is merely a variant of a [*2]judgment on consent. The defendant consents to entry of judgment for the full amount of the complaint, subject to a condition subsequent that payment of a reduced sum within a time certain will satisfy the obligation. Timely satisfaction of the condition is the bargained-for consideration for the reduced sum.

Defendant’s argument turns the stipulation inside out. Correctly construed, a stipulation of settlement such as the one at bar is not a contract substituting a new obligation to pay a reduced sum, with a penalty clause attached for failure to comply. That is clear from the fact that this action continues until the settlement is concluded. If the parties had intended the stipulation to constitute a new obligation, they should have provided for discontinuance of this action upon execution of the stipulation.

The Court considers that ABCO Refrigeration Supply Corp. v Designs by Keiser Corp., 239 AD2d 165, 657 NYS2d 638 (1st Dept 1997), is directly on point in this matter. As here, that case involved a stipulation in an ongoing action where the proposed judgment was essentially for the amount demanded in the complaint, the parties expressed no intent that the original contract would be supplanted, and there was no fraud, collusion, mistake or accident alleged. The First Department held that such stipulations in such cases are “favored.”

To the contrary, Defendant cites two Second Department holdings, Quaker Oats Company v Reilly, 274 AD2d 565, 711 NYS2d 498 (2nd Dept 2000), and Zervakis v Kyreakedes, 257 AD2d 619, 684 NYS2d 291 (2nd Dept 1999). In Quaker Oats, the Second Department contrasted its holding with ABCO, supra , for the obvious reason that Quaker Oats did not involve a stipulation in an ongoing judicial action. For that reason, the Quaker Oats stipulation was governed by the usual rules about penalty clauses in contracts, and the Quaker Oats case is thus distinguishable from the one at bar.

The Zervakis case, supra , is somewhat more problematic in that it did involve an ongoing judicial action. In that action, the plaintiff sought to enter judgment for $100,000, minus amounts paid, when the defendant timely paid $36,000 out of the agreed $40,000 settlement, but withheld the $4,000 balance until a dispute had been adjudicated. It is clear from the Second Department’s opinion that the Court focused on the gross disparity between the unpaid amount and the amount of the proposed judgment. Apparently the Second Department found that disparity unconscionable. The Second Department’s opinion does not disclose the relationship between the $100,000 figure and the amount demanded in the complaint. [*3]

It may be that Zervakis is distinguishable from ABCO on the ground that the proposed Zervakis judgment was for more than the amount in the complaint, or perhaps Zervakis should be considered sui generis. Even if Zervakis is on point and represents good law ^[FN1] in this Department, however, the Court finds Zervakis to be distinguishable from the case at bar because there is no such gross disparity here. The difference between the settlement amount and the proposed judgment is only $2,578. Regardless of the percentages involved, that amount does not shock the conscience of the Court, particularly in view of the fact that a substantial portion of that $2,578 has probably already been spent on the attorneys’ fees required for this motion.

The motion is denied. There is no stay in effect against enforcement of the judgment.

So Ordered.

Footnotes

Footnote 1:Which, if true, is something that this Court would respectfully urge the Second Department to reconsider, given the potential for abuse that it invites, with a consequent disincentive for plaintiffs to agree to settlements. Plaintiffs usually agree to settlements in reduced amounts because they think they are guaranteed an end to litigation. If the settlement is merely a prelude to further litigation with a smaller payout at the end, what is the point, from a plaintiff’s point of view, in agreeing to the settlement? That is particularly true in cases as small as this one.

Nassau Dist Ct

34247/06

Attorneys for Plaintiff: Joseph Henig, PC

Attorneys for Defendant: Carman, Callahan & Ingham, LLP

Andrew M. Engel, J.

The Plaintiff commenced this action to recover no-fault first party benefits for medical services provided to its assignor between March 28, 2005 and April 1, 2005, inclusive, following a motor vehicle accident of March 28, 2005. The action was commenced on or about September 12, 2006; and, issue was joined on or about October 19, 2006. The Plaintiff now moves for summary judgment pursuant to CPLR § 3212. The Defendant opposes the motion and cross-moves for the same relief. The Plaintiff opposes the cross-motion.

Summary judgment is a drastic remedy, Sillman v. Twentieth Century-Fox Film Corporation, 3 NY2d 395, 165 NYS2d 498 (1957), which should not be granted where there is any doubt as to the existence of a triable issue of fact. Rotuba Extruders, Inc. v. Ceppos, 46 NY2d 223, 413 NYS2d 141 (1978) The court’s function in determining such a motion is issue finding, not issue determination. Sillman v. Twentieth Century-Fox Film Corporation, supra . To prevail, the movant must first make a showing of entitlement to judgment, as a matter of law, Bank of New York v. Granat, 197 AD2d 653, 602 NYS2d 942 (2nd Dept. 1993), tendering evidentiary proof in admissible form. Friends of Animals, Inc. v. Associate Fur Manufacturers, Inc., 46 NY2d 1065, 416 NYS2d 790 (1979).

To make out a prima facie case, the Plaintiff must establish the proper submission [*2]of its claim and the carrier’s failure to either pay or issue a valid denial within thirty (30) days of receipt thereof. 11 N.Y.C.R.R. § 65-3.8(a)(1) and (c); Presbyterian Hospital in the City of New York v. Maryland Casualty Company, 90 NY2d 274, 660 NYS2d 536 (1997); Nyack Hospital v. State Farm Mutual Automobile Insurance Company, 11 AD3d 664, 784 NYS2d 136 (2nd Dept. 2004); Westchester Medical Center v. AIG, Inc., 36 AD3d 900, 829 NYS2d 180 (2nd Dept. 2007).

The Plaintiff’s Hospital Biller and Account Representative alleges that she billed the Defendant, for the services in question, on June 29, 2005, in the amount of $12,734.17 by certified mail return receipt requested. The Plaintiff submits the return receipt card which specifically identifies the no-fault bill of its assignor and indicates that the Defendant received and signed for the bill on July 1, 2005. The Plaintiff further alleges that the Defendant neither paid nor denied the claim within thirty (30) days of its receipt.

In opposition to the Plaintiff’s motion and in support of its cross-motion, the Defendant submits the affidavit of Mariann Yuengling, its Claims Specialist for the No-Fault Department. Ms. Yuengling admits the Defendant’s receipt of the Plaintiff’s bill, in the sum of $12,734.17, on July 1, 2005. Similarly, the Defendant does not dispute that it has not paid this claim. Based thereon, the Plaintiff has established a prima facie right to the entry of a judgment, as a matter of law. To successfully defeat the Plaintiff’s motion, it is now incumbent upon the Defendant to “demonstrate by admissible evidence the existence of a factual issue requiring a trial of the action or tender an acceptable excuse for [its] failure so to do.” Zuckerman v. City of New York, 49 NY2d 557, 427 NYS2d 595 (1980).

Ms. Yuengling, on the Defendant’s behalf, alleges that the Defendant did issue a denial to the Plaintiff’s claim within thirty (30) days of its receipt, based upon the untimeliness of the Plaintiff’s claim. Specifically, Ms. Yuengling alleges that the Plaintiff’s claim here in question, for the services rendered between March 28, 2005 and April 1, 2005, was dated June 29, 2005, far in excess of the forty-five (45) days now required by Insurance Department Regulations 11 N.Y.C.R.R. §§ 65-1.1 and 65-2.4 and that a denial based thereon was mailed to the Plaintiff on July 19, 2005. The Defendant argues, based thereon, that the Plaintiff’s motion must be denied and that the Defendant’s cross-motion must be granted.

During oral argument on this motion, both sides conceded that the determination of these motions will depend upon the sufficiency of the Defendant’s proof of mailing of its denial. Counsel for the Plaintiff conceded that if the Defendant’s proof of mailing is sufficient, the Plaintiff’s motion would have to be denied and the Defendant’s cross-motion granted. Conversely, counsel for the Defendant conceded that if the Defendant’s proof of mailing is insufficient the Plaintiff’s motion would have to be granted and the cross-motion denied.

The Defendant’s proof of mailing consists of Ms. Yuengling’s statement that she is [*3]“thoroughly familiar with LIBERTY MUTUAL INSURANCE COMPANY’S mailing practices and procedures through personal training and experience in document production and mailroom operation and through [her] personal observation of the execution of said mailing practices and procedures[,]” (Yuengling Affidavit 3/14/07, ¶ 12) along with her description of those mailing practices and procedures, as follows:

13…. the no-fault documents mailed from DTS [Doc Tech Services] are initially created in the Liberty Mutual No-Fault Claims department. At the start of the business day, the DTS staff downloads all documents which were electronically forwarded from the No-Fault Claims department for printing and mailing the prior business day. Any documents forwarded on a Saturday are downloaded on the following Monday. Documents forwarded to the DTS department on the day before a holiday are downloaded on the following business day.

14.Once the documents are downloaded, a member of the DTS staff verifies that the documents are properly addressed to all parties, including parties to be carbon copied on the correspondence. The documents are then printed with extra carbon copies, if warranted, folded and inserted into envelopes containing windows which display the address of the intended recipient. The envelopes are then weighed and the proper postage is affixed. The envelopes are then placed in designated bins for pickup by the United States Postal Service, an employee of which appears at this office for pickup at 2:00 p.m. and 6:00 p.m. every business day.

15.Based on the foregoing, no-fault claims correspondence, including but not limited to requests for additional verification (delay letters) and no-fault denial of claim forms issued by Liberty Mutual in the regular course of its business are properly mailed to the intended recipient the first business day after the date which appears on the document itself.(Yuengling Affidavit 3/14/07, ¶¶ 13-15)

The “procedure” Ms. Yuengling describes is not “proof of actual mailing or proof of a standard office practice or procedure designed to ensure that items are properly addressed and mailed,”Residential Holding Corp. v. Scottsdale Insurance Company, 286 AD2d 679, 729 NYS2d 776 (2nd Dept. 2001) Amaze Medical Supply Inc. v. Allstate Insurance Company, 3 Misc 3d 133(A), 787 NYS2d 675 (App. Term 2nd and 11th Jud. Dists. 2004), sufficient to raise a presumption of receipt of the denial by the Plaintiff. Stripped of all of its excess verbiage, the procedure Ms. Yuengling describes consists of nothing more than someone from Doc Tech Services folding the denial of claim form, placing it in an envelope, affixing postage thereto and placing the envelope in bins in the mail room for the United States Postal Service. There is, apparently, no record kept of the items mailed and/or no certificate of mailing against which the preparation and mailing of these denials are checked. Moreover, having “failed to specify either that it was [her] duty [*4]… to ensure compliance with said office procedure or that [she] had actual knowledge that said procedures were complied with” in this case, Contemp. Med. Diag. & Treatment, P.C. v. Government Employees Insuarnce, 6 Misc 3d 137(A), 800 NYS2d 344 (App. Term 2nd and 11th Jud. Dists. 2005), Ms. Yeungling’s affidavit “failed to make the requisite showing to establish that a proper denial was sent. (citations omitted).” Hospital for Joint Diseases v. Nationwide Mutual Insurance Company, 284 AD2d 374, 726 NYS2d 443 (2nd Dept. 2001); Andrew Carothers, M.D., P.C. v. Progressive Insuarnce Company, 14 Misc 3d 1210(A), 2006 WL 3843584 (Civ. Ct. Kings Co. 2006).

Accordingly, the Plaintiff’s motion for summary judgment is granted and the Defendant’s cross-motion for summary judgment is denied. The Plaintiff is entitled to the entry of a judgment in the principle sum of $12,734.17, plus interest from July 29, 2005, 11 N.Y.C.R.R. § 65-3.9; Smithtown General Hospital v. State Farm Mutual Automobile Insurance Company, 207 AD2d 338, 615 NYS2d 426 (2nd Dept. 1994); Hempstead General Hospital v. Insurance Company of North America, 208 AD2d 501, 617 NYS2d 478 (2nd Dept. 1994), along with statutory attorneys’ fees, costs and disbursements of this action.

This constitutes the decision and order of this court.

Dated: Hempstead, New York

June 21, 2007

___________________________

ANDREW M. ENGEL

J.D.C.

Nassau Dist Ct

33512/02

Attorneys for

Plaintiff: Harold Solomon, Esq

Defendant: Ronald Lemberger, Esq.

Andrew M. Engel, J.

This action was commenced on or about September 12, 2002 seeking to recover no-fault first party benefits, in the sum of $2,625.23, for medical services allegedly provided by the Plaintiff to his Assignor. Issue was joined on or about September 30, 2002.

On February 21, 2006, following the filing of a Notice of Trial by the Plaintiff, the parties participated in a mandatory arbitration pursuant to the Rules of the Chief Judge, 22 N.Y.C.R.R. Part 28. That proceeding resulted in an award in the Plaintiff’s favor, against the Defendant, in the sum of $3,150.23, inclusive of attorney’s fees, together with interest from September 12, 2002. The arbitration award was signed and dated by the Commissioner of Arbitration and forwarded to the Clerk of the Court on March 3, 2006.

Based thereon, on August 18, 2006, a judgment was entered against the Defendant in the total sum of $6,293.74. On October 30, 2006 the Plaintiff served, by mail, a copy of this judgment upon the Defendant, along with a Notice of Entry and a copy of the arbitration award.

On November 30, 2006 the Defendant attempted to file a demand for a trial de novo. This demand was rejected by the Clerk of the Court on December 1, 2006 as untimely. The Defendant now moves for an order compelling the acceptance of its demand and staying all efforts to enforce the judgment entered herein. The Plaintiff opposes the motion.

The Defendant alleges that the service of the judgment and the arbitration award by the Plaintiff, on October 30, 2006, was “the first and only notice by plaintiff of the award, [and] defendant timely filed its demand for trial de novo.” (Meade Affirmation 12/27/06, ¶ 3) The Defendant does not indicate when, if at all, it was served with notice of the filing of the arbitration award by the Commissioner of Arbitration. [*2]

The Defendant argues that the Clerk’s rejection of its Demand for a Trial De Novo violates its right to a trial by jury. According to the Defendant, measuring its time within which to file a demand for a trial de novo from service of notice of filing of the award by the Commissioner of Arbitration, rather than from service by a party, is in direct conflict with the Civil Practice Law and Rules and inconsistent with the Rules of the Chief Judge themselves, rendering these rules unconstitutional. The Defendant is mistaken.

The Rules of the Chief Judge, 22 N.Y.C.R.R. Part 28, authorized by CPLR § 3405, establish the procedures to be followed for the disposition of civil suits, for a sum of money only, by arbitration.

In pertinent part, these rules provide:

Section 28.11 Award. (a) The award shall be signed by the panel of arbitrators or at least a majority of them. The chairperson shall file a report and the award with the commissioner within 20 days after the hearing, and mail or deliver copies thereof to the parties or their counsel. The commissioner shall mark his files accordingly, file the original with the clerk of the court where the action was commenced or, if the action was transferred, the court to which it was transferred, and notify the parties of such filing.

Section 28.12 Trial de novo.

(a) Demand may be made by any party not in default for a trial de novo in the court where the action was commenced or, if the action was transferred, the court to which it was transferred, with or without a jury. Any party who is not in default, within 30 days after service upon such party of the notice of filing of the award with the appropriate court clerk, or if service is by mail, within 35 days of such service, may file with the clerk of the court where the award was filed and serve upon all adverse parties a demand for a trial de novo.

In challenging the constitutionality of these rules, the Defendant bears a heavy burden and must overcome a strong presumption of constitutionality by proof beyond a reasonable doubt. See: Hotel Dorset Company v. Trust for Cultural Resouces of City of New York, 46 NY2d 358, 413 NYS2d 357 (1978); Local Government Assistance Corporation v. Sales Tax Asset Receivable Corporation, 2 NY3d 524, 780 NYS2d 507 (2004).

Contrary to the Defendant’s argument, that the Rules of the Chief Judge deprive it of its constitutional right to a trial by jury, the authorizing statute, CPLR § 3405, specifically provides, “Such rules must permit a jury trial de novo upon demand by any party following the determination of the arbitrators ….” It is this very provision which has been determined to save the mandatory arbitration provisions from constitutional infirmity. Nuro Transportation v. Judges of the Civil Court of the City of New York for the County of Queens, 95 AD2d 779, 463 NYS2d 264 (2nd Dept. 1983); Penney v. Elmira Professional Communications, Inc., 131 AD2d 938, 516 NYS2d 533 (3rd Dept. 1987)

The Defendant’s argument, that the notice provisions of 22 N.Y.C.R.R. §§ 28.11 and [*3]28.12, which permit the Commissioner of Arbitration to serve the notice of filing of the award, as the trigger for the time within which a demand for a trial de novo must be served, are in contravention of the service and/or notice provisions of the Civil Practice Law and Rules is similarly without merit. A conflict between the CPLR and the Rules of the Chief Judge simply does not exist. The disclosure provisions of CPLR Article 31, which require such demands to be served by a party; or the provisions of CPLR § 2220, which address the filing and service of orders; or the provisions of CPLR §§ 2221 and 5513, which measure the time within which a motion to reargue or renew may be made or a notice of appeal may be filed from the service of the order in question by a party, upon which the Defendant relies, have nothing whatsoever to do with the Rules of the Chief Judge for mandatory arbitration.

Plump v. Harth, 52 Misc 2d 787, 276 NYS2d 929 (Dist. Ct. Nassau Co. 1966), upon which the Defendant relies, provides a good comparison. In Plump, there existed a direct conflict between the provisions of CPLR § 3216 and then Rule 14 of the Rules of the Nassau County District Court. The former required notice be given to a plaintiff, demanding that a note of issue be filed or face dismissal; the later provided for an automatic dismissal, without notice. In contrast, the CPLR provisions upon which the Defendant relies herein are neither in direct nor indirect conflict with the arbitration provisions, which are specifically authorized by CPLR § 3405. Moreover, the CPLR provisions upon which the Defendant relies are statutes of general applicability, whereas CPLR § 3405 is one of limited application, limited to mandatory arbitration proceedings, and takes precedence over the general statutes upon which the Defendant relies. Seminerio Associates Inc. v. Brownstone Solutions, Inc., 165 Misc 2d 646, 629 NYS2d 615 (Civ. Ct. NY Co. 1995)

The Defendant’s additional argument that the arbitration rules are internally inconsistent, forbidding the arbitrator from being a witness at a trial de novo, 22 N.Y.C.R.R.§ 28.12(d), is also without merit. Contrary to the Defendant’s representation, the arbitrator has no responsibility for the service of the notice of filing of the award. The rule provides that such service shall be performed by the commissioner. 22 N.Y.C.R.R.§ 28.11(a) There is no reason for the arbitrator to be called as a witness on such an issue. Moreover, 22 N.Y.C.R.R.§ 28.12(d) only proscribes the calling of the arbitrator as a witness “at the trial de novo.”

The court notes that an earlier version of 22 N.Y.C.R.R.§ 28.12 was subject to constitutional challenge due to the fact that a party’s time to file for a trial de novo began to run upon the filing of the award with the appropriate clerk, without notice of such filing being provided to the parties. See: Perry v. Aamco Transmissions, 126 Misc 2d 545, 481 NYS2d 1007 (City Ct. Rochester, 1984) Those due process impediments, however, were cured by the amendment to Section 28.12, adopted by the Chief Judge on April 24, 1985, providing for service of notice of filing of the award and for a parties’ time to demand a trial de novo to run from such service. Greenberg v. Brooks Woolen Co., 141 Misc 2d 770, 534 NYS2d 106 (Civ. Ct. NY Co. 1988); Gordon v. Siben & Siben, 146 Misc 2d 553, 558 NYS2d 439 (App. Term 9th and 10th Jud. Dists. 1990) Accordingly, the court finds the Defendant’s due process arguments to be wholly without merit.

The above notwithstanding, the question remains, whether the Defendant’s demand for a trial de novo herein was timely. The Commissioner of Arbitration being authorized, by rule, to serve the notice of filing of the award, such service may be made by the Commissioner or by a party. Greenberg v. Brooks Woolen Co., supra . To be timely, where service is made by mail, the demand for a trial de novo must be served and filed within thirty-five (35) days thereof. 22 N.Y.C.R.R.§ 28.12(a)

While the Plaintiff, in opposing the motion, indicates that he received a copy of the [*4]arbitrator’s decision in the mail “no later than August 15, 2006” (Solomon Affirmation 2/6/07), and assumes that same was mailed to the Defendant, there is nothing in this record which indicates that the Commissioner of Arbitration ever mailed a notice of filing of the award to the Defendant. The arbitration award indicates that the award was filed on March 3, 2006. There is no indication, however, either on the face of the award, the Notice of Filing of Award or anywhere in the records of the Commissioner or the court to indicate if and/or when the notice of filing was served upon the parties. In the absence of an affidavit of service, demonstrating that the Defendant was served pursuant to 22 N.Y.C.R.R.§ 28.11(a), Liberty Queens Medical, P.C. v. Travelers Indemnity Company, 194 Misc 2d 628, 756 NYS2d 407 (Dist. Ct. Nassau Co. 2003), or, at that very least, certified documents sufficient to establish service by the Commissioner, Gordon v. Siben & Siben, supra ., the Defendant’s time to serve and file a demand for a trial de novo did not begin to run until service was made by the Plaintiff on October 30, 2006.

Such service having been made by mail, the Defendant had until December 4, 2006 to file its demand. Under the circumstances, the Defendant’s attempted filing on November 30, 2006 was timely and should have been accepted by the clerk. For this reason, the Defendant’s motion is granted; and, it is hereby

ORDERED, that the Defendant shall file and serve a copy of this order, with a copy of its demand for a trial de novo within thirty (30) days of the service of this order with Notice of Entry; and, it is further

ORDERED, that upon filing its demand for a trial de novo the Defendant shall pay to the court clerk the amount of the fees payable to the arbitrator, pursuant to 22 N.Y.C.R.R.§ 28.12(c).

All other matters not decided herein are hereby denied

This constitutes the decision and order of this court.

Dated: Hempstead, New York

March 23, 2007

___________________________

ANDREW M. ENGEL

J.D.C.

Nassau District Court

1422/04

Scott Fairgrieve, J.

The defendant’s motion, by way of order to show cause, for an order pursuant to CPLR 5015(a)(1) vacating the court’s decision and order dated May 9, 2005 granting plaintiff’s unopposed motion for summary judgment, which was thereafter served with Notice of Entry on May 18, 2005, and the default judgment entered thereupon on August 30, 2005, is denied.

Plaintiff brought this action to recover $912.00 for medical services rendered to the defendant’s insured pursuant to New York State’s No-fault law. Defendant claimed that plaintiff is not entitled to payment because its assignor failed to appear for two IMEs. Plaintiff alleges that this fact is irrelevant because the services at issue were rendered before the date of the first scheduled IME. For the reasons set forth below, the Court need not reach this issue.

With respect to CPLR 5015(1), it is well settled that, as a matter of general policy, disposition of cases should be had by a determination on the merits of the action and not by way of a default. (Benadon v. Antonio, 10 AD2d 40) After entry of a default judgment, however, to obtain vacatur of a judgment pursuant to this provision, defendant must demonstrate that the default is excusable and, in addition, allege facts showing a meritorious defense to the underlying action. (Schiller v. Sun Rock Bldg. Corp., 260 AD2d 566; Quis v. Bolden, 298 AD2d 375; Wall v. Bennett, 33 AD2d 827) It is also well settled that conclusory allegations and denials are insufficient to demonstrate a meritorious defense. (St. Luke’s Roosevelt Hosp. v. Blue Ridge Ins. Co., 21 AD3d 946; Rapaport v. Rapaport, 150 AD2d 353; Maines Paper and Food Service Inc. v. Farmington Foods, 233 AD2d 595; Stow Mfg. Co. v. F & K Supply Inc., 232 AD2d 958) [*2]

In the instant matter, plaintiff served its motion for summary judgment upon counsel for the defendant on or about January 6, 2005. On the return date, February 18, 2005, the matter was adjourned by defendant to March 15, 2005 for defendant’s opposition. On that date, the motion was again adjourned to April 15, 2005 for defendant’s opposition. On April 15, 2005, the defendant’s application for yet another adjournment to submit opposition papers was denied and the motion was submitted without opposition. On May 9, 2005, the Court issued its decision and order granting plaintiff summary judgment for the relief demanded in the complaint. On April 10, 2006, nearly one year later, defendant brought the instant motion by way of order to show cause, seeking to vacate the default judgment and for summary judgment dismissing the complaint. The motion to vacate the judgment resulting from the defendant’s default in opposing the motion for summary judgment is untimely.

As held by the Court in Achampong v. Weigelt, 240 AD2d 247:

In this case, the prior default motion was contested by defendants, who, thereafter, neither appealed nor moved for reargument/renewal within the statutory 30 day period pursuant to CPLR 5513. We have previously noted: Where, as here, a party appears and contests an application for entry of a default judgment, CPLR 5511, prohibiting an appeal from an order or judgment entered upon default, is inapplicable, and the judgment predicated upon the party’s default is therefore appealable (Marrocco v. Marrocco, 90 AD2d 989, 456 NYS2d 906). The IAS Court therefore properly determined that the appellant’s prior failure to take a timely appeal from entry of the contested judgment was fatal to the subsequent vacatur motion (Pergamon Press v. Tietze, 81 AD2d 831, 438 NYS2d 831). (Spatz v. Bajramoski, 214 AD2d 436, 624 NYS2d 606).”

In other words, defendant’s remedy in response to the Court’s May 9, 2005 decision and order was to appeal or to renew or reargue within the statutory 30 day period. Where defendant has appeared, it may not sit back for nearly a year and then move to vacate the decision and order pursuant to CPLR §5015(a)(1) as if it had never appeared in the action. This issue has also been addressed by Professor David Siegel. In Siegel, Supplementary Practice Commentaries, McKinney’s Cons.Laws of NY, Book 7B, CPLR 5015, C5015:3 1998 Cumulative Supplementary Pamphlet, at page 268 he writes in relevant part:

Suppose, however, that D contested the default judgment, as where P gave notice of the application for it or D otherwise got wind of it and showed up to resist the application, or where the default was for something the defendant neglected to do in the case after duly appearing, e.g., failing to serve an answer to an amended complaint, failing to particularize defenses, failing to make required disclosure, etc. Suppose further that D’s resistance to P’s default application does not succeed and that P gets the default judgment. Does D in that situation get the year in which to move to vacate the default judgment? Achampong v. Weigelt, 240 AD2d 247, 658 NYS2d 606 (1st Dep’t, June 12, 1997), holds that D does not. In this situation D must appeal the contested default judgment or move to reargue or [*3]renew within the usual 30 days after being served with notice of entry of the judgment.

Accordingly, the motion to vacate the Court’s decision and order of May 9, 2005, and the judgment entered thereupon, is denied.

So Ordered:

DISTRICT COURT JUDGE

Dated:July 12, 2006

CC:Carman, Callahan & Ingham, LLP

Israel, Israel & Purdy, LLP