John T. Mather Mem. Hosp. v American Tr. Ins. Co. (2024 NY Slip Op 24009)

Reported in New York Official Reports at John T. Mather Mem. Hosp. v American Tr. Ins. Co. (2024 NY Slip Op 24009)

[*1]
John T. Mather Mem. Hosp. v American Tr. Ins. Co.
2024 NY Slip Op 24009
Decided on January 12, 2024
Supreme Court, Kings County
Maslow, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the printed Official Reports.


Decided on January 12, 2024
Supreme Court, Kings County


John T. Mather Memorial Hospital A/A/O HENRY OJEDA, Petitioner,

against

American Transit Insurance Company, Respondent.




Index No. 528479/2023

Aaron D. Maslow, J.

The following numbered papers were read on this special proceeding: NYSCEF Document Numbers 1-9.

Upon the foregoing papers, the Court having elected to determine the within petition on submission pursuant to 22 NYCRR 202.8-f and IAS Part 2 Rules, Part I (Motions & Special Proceedings), Subpart C (Appearances), Section 6 (Personal Appearances) (“All motions presumptively are to be argued in person unless the Court informs the parties at least two days in advance that it has made a sua sponte determination that a motion will be determined on submission.),”[FN1] and due deliberation having been had thereon,

It is hereby ORDERED and ADJUDGED that the within special proceeding is determined as follows:

In this special proceeding pursuant to CPLR 7502 and 7510, the within petition of Petitioner John T. Mather Memorial Hospital, a medical provider, to confirm a No-Fault Insurance master arbitration award against Respondent American Transit Insurance Company is GRANTED but without an award of an attorney’s fee for services rendered in connection with the petition to confirm. It is noted that Respondent has not appeared to oppose the petition.

The master arbitration award in American Arbitration Association Case No. 99-22-1233-6879 of Master Arbitrator Anne L. Powers, which affirmed the award of Arbitrator Dimitrios Stathopoulos, is confirmed in its entirety.

Petitioner herein is awarded the principal amount ($21,316.95), interest, attorney’s fees, and return of filing fee ($40.00) as determined in the hearing arbitration (see the arbitration award of Arbitrator Stathopoulos, appearing as NYSCEF Doc No. 3). The interest shall accrue from the arbitration filing date (see 11 NYCRR 65-4.5 [s] [3], 65-3.9 [c]; Canarsie Med. Health, P.C. v National Grange Mut. Ins. Co., 21 Misc 3d 791, 797 [Sup Ct, NY County 2008]), at the rate of two percent per month, simple, calculated on a pro-rata basis using a 30-day month (see 11 NYCRR 65-3.9 [a]). The attorney’s fee for the arbitration shall be 20% of the sum of the principal plus interest to payment.

The attorney’s fee for the master arbitration is $130.00 per the award of Master Arbitrator Powers appearing as NYSCEF Doc No. 4.

This Court denies an attorney’s fee to Petitioner herein for prevailing in this special proceeding to confirm the master arbitration award. In seeking an attorney’s fee, Petitioner relies on 11 NYCRR 65-4.10 (j) (4), which provides, “The attorney’s fee for services rendered in connection with a court adjudication of a dispute de novo, as provided in section 5106(c) of the Insurance Law, or in a court appeal from a master arbitration award and any further appeals, shall be fixed by the court adjudicating the matter.” Petitioner’s action of seeking to confirm an [*2]arbitration award is not in the nature of appeal. An “appeal” is an action taken by a party to have a determination reviewed because it was adverse to the party. The master arbitrator’s award was not adverse to Petitioner. Quite the opposite, Petitioner agreed with the determination. The purpose for this Article 75 proceeding is to obtain a judgment so that Petitioner can levy upon Respondent’s assets in order to enforce the award of monetary compensation as determined in the arbitration process. Moreover, this special proceeding is not a de novo dispute. Nothing in the language of 11 NYCRR 65-4.10 (j) (4) provides support for this Court to grant Petitioner an attorney’s fee. The language of the regulation is clear and unambiguous and would not apply to this unopposed Article 75 special proceeding to confirm a master arbitration No-Fault award (see Matter of Medical Socy. of State of NY v Serio, 100 NY2d 854 [2003]; Kurcsics v Merchants Mut. Ins. Co., 49 NY2d 451, 458 [1980]). A court should not read into a regulation a provision which is not present (see Jansen Ct. Homeowners Assn. v City of New York, 17 AD3d 588 [2d Dept 2005]), especially since the No-Fault Law is in derogation of the common law and so must be strictly construed (see Presbyterian Hosp. in City of NY v Atlanata Cas. Co., 210 AD2d 210 [2d Dept 2001]).

Petitioner also cites to Matter of GEICO Ins. Co. v AAAMG Leasing Corp. (148 AD3d 703 [2d Dept 2017]) as support for its request for an attorney’s fee in this special proceeding to confirm the No-Fault master arbitration award. Petitioner emphasizes the following language in said opinion at page 705: “The term ‘court appeal’ applies to a proceeding such as this, taken pursuant to CPLR article 75 to vacate or confirm a master arbitration award (see Matter of Hempstead Gen. Hosp. v National Grange Mut. Ins. Co., 179 AD2d 645 [1992])” (emphasis added). This Court holds that to the extent the Appellate Division included the words “or confirm” it was dicta because in Matter of GEICO Ins. Co. v AAAMG Leasing Corp. at issue was a petition to vacate a master arbitration award. Hence GEICO Ins. Co.’s petition to vacate constituted an appeal from the master arbitration award; not so in the case at bar. Moreover, Matter of Hempstead Gen. Hosp. v National Grange Mut. Ins. Co., cited in Matter of GEICO Ins. Co. v AAAMG Leasing Corp., involved an appeal in the form of an Article 75 special proceeding, to vacate a master arbitration award in favor of the No-Fault insurer. Again, there was an actual appeal, unlike the present sitatuion, where Petitioner John T. Mather Memorial Hospital seeks merely to confirm a master arbtriation award in its favor, and there is not even any opposition from Respondent Americal Transit Insurance Company.

Petitioner claims that Respondent has failed to pay the amount due per the No-Fault insurance arbitration result: “Here, . . . payment was not made and, since the Petition to confirm must be granted, Petitioner is entitled to its hourly attorney fees in this proceeding” (NYSCEF Doc No. 1 ¶ 12 at 3 [emphasis added]). This is a misunderstanding of the No-Fault Insurance Regulations. Said Regulations actually do provide for a remedy in this type of situation. Section 65-3.10 of the No-Fault Insurance Regulations (11 NYCRR 65-3.10) provides in subdivision (b) as follows:

If a dispute is resolved in accordance with any of the optional arbitration procedures contained in this Part, either during the initial review by the Department of Financial Services or by an arbitration award, and if payment is not made by the insurer in accordance with the terms specified in the conciliation letter or arbitration award within 45 days following such resolution, an additional attorney’s fee shall be paid by the insurer when the attorney writes to the insurer in order to receive such overdue payment. The additional attorney’s fee shall be $60 and shall become payable only after written request [*3]from the attorney to the insurer, received by the insurer more than 45 days after mailing of the conciliation letter or arbitration award. Such fee shall not be payable if payment was made by the insurer prior to the attorney’s request for such payment or if an arbitration award is appealed in accordance with the provisions of this Part.

Therefore, once payment is obtained, Petitioner is entitled to $60 for its efforts in securing same. The fee will be payable since Respondent American Transit Insurance Company did not appeal the determination of the master arbitrator, assuming that payment of the awarded amount was not made within 45 days after after mailing of the master arbitration award. While the $60 may not be commensurate with Petitioner’s view of the amount to which it is entitled for enforcement of the arbitratration award, the remedy it seeks pursuant to 11 NYCRR 65-4.10 (j) (4) must be rejected based on the clear language of that regulation. Petitioner is not entitled to hour attorney fees as it has argued.

Respondent herein shall recover from Petitioner herein $200 as costs as well as disbursements allowed by law, to be taxed by the Clerk, since Petitioner has prevailed in having the master arbitration award confirmed (see CPLR 8101, 8201, 8202, 8301; Meehan v Nassau Community College, 242 AD2d 155 [2d Dept 1998]).

E N T E R

___________________________
AARON D. MASLOW
Justice of the Supreme Court of the State of New York
Footnotes


Footnote 1: On December 26, 2023, there was filed as NYSCEF Doc No. 8, an interim order providing as follows:
The Court having elected to determine the within petition on submission pursuant to 22 NYCRR 202.8-f and IAS Part 2 Rules, Part I (Motions & Special Proceedings), Subpart C (Appearances), Section 6 (Personal Appearances) (“All motions presumptively are to be argued in person unless the Court informs the parties at least two days in advance that it has made a sua sponte determination that a motion will be determined on submission.),”
It is hereby ORDERED as follows:
(1) The within petition shall be determined on submission.
(2) If opposition papers have not been filed yet despite the fact that the deadline for same pursuant to the CPLR may have passed, leave to file them by January 3, 2024, 5:00 p.m., is granted.
(3) If reply papers have not been filed yet despite the fact that the deadline for same pursuant to the CPLR may have passed, leave to file them by January 5, 2004, 5:00 p.m., is granted.
(4) Any papers filed past said deadlines shall not be considered.
(5) There shall be no personal appearances on the calendar date noted above.
References to motions in IAS Part 2 Rules “shall be deemed to include special proceedings” (Part I, Subpart A, Section 1).



American Tr. Ins. Co. v Trinity Pain Mgt. of Staten Is., PLLC (2023 NY Slip Op 51337(U))

Reported in New York Official Reports at American Tr. Ins. Co. v Trinity Pain Mgt. of Staten Is., PLLC (2023 NY Slip Op 51337(U))

[*1]
American Tr. Ins. Co. v Trinity Pain Mgt. of Staten Is., PLLC
2023 NY Slip Op 51337(U)
Decided on December 8, 2023
Supreme Court, Kings County
Maslow, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.


Decided on December 8, 2023
Supreme Court, Kings County


American Transit Insurance Company, Petitioner,

against

Trinity Pain Management of Staten Island, PLLC A/A/O Jean Wafo-Kouate, Respondent.




Index No. 525544/2023

Aaron D. Maslow, J.

The following numbered papers were read on this special proceeding:

NYSCEF Document Numbers 1-20.

Upon the foregoing papers, this matter being determined on the submissions of the parties, and due deliberation having been had thereon,

The proper standard of review by a No-Fault insurance master arbitrator is whether the hearing arbitrator’s determination was arbitrary and capricious, irrational, or without a plausible basis, or incorrect as a matter of law; the master arbitrator may not engage in an extensive factual review, which includes weighing the evidence, assessing the credibility of various medical reports, or making independent findings of fact (Matter of Petrofsky (Allstate Ins. Co.), 54 NY2d 207 [1981]).

The standard for Article 75 court scrutiny of a master arbitrator’s review of a hearing arbitrator’s award in terms of whether there was an error of law is whether it was so irrational as to require vacatur (see Matter of Smith (Firemen’s Ins. Co.), 55 NY2d 224, 232 [1982]; Matter of Acuhealth Acupuncture, PC v Country-Wide Ins. Co., 170 AD3d 1168 [2d Dept 2019]; Matter of Acuhealth Acupuncture, P.C. v New York City Transit Authority, 167 AD3d 869 [2d Dept 2018]; Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co., 149 AD3d 828 [2d Dept 2017]). The master arbitrator’s determination of the law need not be correct, and mere errors of law are insufficient to set aside the master arbitrator’s award; on questions of substantive law, the master arbitrator’s determination must be upheld if there is a rational basis for his determination; if the master arbitrator’s errors on a matter of law are irrational, his award may be set aside (see Matter of Liberty Mut. Ins. Co. v Spine Americare Med., P.C., 294 AD2d 574 [2d Dept 2002]).

Judicial review of a master arbitrator’s factual determination in an arbitration appeal is limited to whether the master arbitrator exceeded his or her power, for instance by impermissibly weighing the credibility of a witness, by reviewing the hearing arbitrator’s factual determination, or by reviewing medical reports de novo (see Matter of Allstate Ins. Co. v Keegan (201 AD2d 724 [2d Dept 1994]).

Here, the Master Arbitrator assessed the evidence submitted de novo to him in support of a defense by the No-Fault insurer that the subject policy had exhausted (the grounds for vacatur raised by the No-Fault insurer herein). He found it deficient. “In this case, a review of Modria and the papers submitted by the parties finds only a bare payment ledger. Thus, there was insufficient evidence before the arbitrator to sustain an exhaustion defense,[FN1] and there is likewise insufficient evidence before this master arbitrator.” (NYSCEF Doc No. 4 at 2.) His legal and factual conclusions were neither arbitrary, capricious, irrational, without a plausible basis, or incorrect as a matter of law. As for the No-Fault insurer being compelled to pay above the policy limit, said determination is not incorrect as a matter of law (see Nyack Hospital v. General Motors Acceptance Corp., 8 NY3d 294 [2007]; Quality Health Supply Corp. v. Amica Mutual Ins. Co., 73 Misc 3d 1231[A], 2021 NY Slip Op 51187[U] [Civ Ct, Kings County 2021]; Country-Wide Ins. Co. v. Excel Surgery Ctr., LLC, 2018 NY Slip Op 33351[U] [Sup Ct, NY County 2018]; Country-Wide Ins. Co. v. Excel Surgery Ctr., LLC, 2018 NY Slip Op 33260[U] [Sup Ct, NY County 2018]). As for the No-Fault insurer’s deficient evidence in support of a policy exhaustion defense, the master arbitrator did not exceed his powers (see Alleviation Medical Serv., P.C. v. Allstate Ins. Co., 191 AD3d 934 [2d Dept 2021]); JPF Med. Serv., P.C. v. Nationwide Ins., 69 Misc 3d 127[A], 2020 NY Slip Op 51122[U] [App Term, 2d, 11th & 13th Dists 2020]; Metro Pain Specialist, P.C. v. Hertz Co., 66 Misc 3d 129[A], 2019 NY Slip Op 52047[U] [App Term, 2d, 11th & 13th Dists 2019]; Island Life Chiropractic, P.C. v. Commerce Ins. Co., 56 Misc 3d 129[A], 2017 NY Slip Op 50856[U] [App Term, 2d, 11th & 13th Dists 2017]; Country-Wide Ins. Co. v. CPM Med Supply, Inc., 2022 NY Slip Op 30193[U], *3 [Sup Ct, NY County 2022]; MVAIC v. Metro Pain Specialists, PC, 2020 NY Slip Op 30808[U] [Sup Ct, NY County 2020]; Island Life Chiropractic Pain Care PLLC v. Amica Mut. Ins. Co., 65 Misc 3d 1212[A], 2019 NY Slip Op 51589[U] [Civ Ct, Kings County 2019]; All Healthy Style Med., P.C. v. ELRAC, Inc., 61 Misc 3d 1203[A], 2018 NY Slip Op. 51333[U] [Civ Ct, Kings County 2018]; Westchester Med. Ctr. v. Liberty Mut. Ins. Co., 2010 NY Slip Op 30649[U] [Sup Ct, Nassau County 2010]); cf. Ameriprise Ins. Co. v. Electrodiagnostic & Physical Med., P.C., 2020 NY Slip Op 33246[U] [Sup Ct, NY County 2020].

Furthermore, none of the grounds specified in CPLR 7511 (b) for vacating an arbitration award have been established.

It is hereby ORDERED and ADJUDGED that the within special proceeding is determined as follows:

The within petition of Petitioner herein is DENIED, and the special proceeding is DISMISSED.

The master arbitration award in American Arbitration Association Case No. 99-21-1194-3799 of Master Arbitrator Richard B. Ancowitz, which affirmed the award of Arbitrator Yael Aspir, is confirmed in its entirety.

Respondent herein is awarded the principal amount, interest, attorney’s fees, and return of filing fee as determined in the arbitration (see the arbitration award and the master arbitration award). The interest shall accrue from February 18, 2021, which is the arbitration filing date (see 11 NYCRR 65-4.5 [s] [3], 65-3.9 [c]; Canarsie Med. Health, P.C. v. National Grange Mut. Ins. Co., 21 Misc 3d 791, 797 [Sup Ct, NY County 2008]), at the rate of two percent per month, simple, calculated on a pro-rata basis using a 30-day month (see 11 NYCRR 65-3.9 [a]).

Petitioner herein shall pay Respondent herein an attorney’s fee of $325.00 for work performed by counsel on this Article 75 proceeding, in the absence of evidence from Respondent herein as to the dates and hours during which work was performed (see 11 NYCRR 65-4.10 [j] [4]). Based on a review of Respondent’s opposition papers and presuing that five hours work was performed, this Court applies the $65.00 per hour fee provided for in 11 NYCRR 65-4.10 [j] [2]; see American Tr. Ins. Co. v Nexray Med. Imaging P.C., — Misc 3d —[A], 2023 NY Slip Op 51311[U] [Sup Ct, Kings County 2023]).

Respondent herein shall recover from Petitioner herein the costs and disbursements as allowed by law to be taxed by the Clerk.

E N T E R
AARON D. MASLOW
Justice of the Supreme Court of the State of New York
Footnotes


Footnote 1:None was submitted to the hearing arbitrator.



American Tr. Ins. Co. v Nexray Med. Imaging P.C. (2023 NY Slip Op 51311(U))

Reported in New York Official Reports at American Tr. Ins. Co. v Nexray Med. Imaging P.C. (2023 NY Slip Op 51311(U))

[*1]
American Tr. Ins. Co. v Nexray Med. Imaging P.C.
2023 NY Slip Op 51311(U) [81 Misc 3d 1210(A)]
Decided on December 1, 2023
Supreme Court, Kings County
Maslow, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.


Decided on December 1, 2023
Supreme Court, Kings County


American Transit Insurance Company, Petitioner,

against

Nexray Medical Imaging P.C. D/B/A SOUL RADIOLOGY
A/A/O LOUISE BENFIELD, Respondent.




Index No. 504585/2023

Aaron D. Maslow, J.

The following numbered papers were read on this special proceeding: NYSCEF Document Numbers 1-22.

Upon the foregoing papers and a determination being made on submission,[FN1] the within motion of Respondent to reargue, renew, and resettle the order and judgment dated July 20, 2023 (entered July 26, 2023) is determined as follows.


[*2]INTEREST

Although the order and judgment incorporated by reference the arbitration award and the master arbitration award, which should have sufficed in terms of setting forth a provision for interest, this Court adds the following sentence for purposes of clarification: “The interest shall accrue from August 31, 2020, which is the arbitration filing date (see 11 NYCRR 65-4.5 [s] [3], 65-3.9 [c]; Canarsie Med. Health, P.C. v National Grange Mut. Ins. Co., 21 Misc 3d 791, 797 [Sup Ct, NY County 2008]), at the rate of two percent per month, simple, calculated on a pro-rata basis using a 30-day month (see 11 NYCRR 65-3.9 [a]).”


ATTORNEY’S FEE

Insofar as the motion sought to increase the attorney’s fee to $3,300.00 from the $195.00 awarded by this Court, it is noted that an evidentiary hearing is not necessary (see Webb v Greater NY Auto. Dealers Assn., Inc., 144 AD3d 1134, 1135 [2d Dept 2016] [“defendant is directed to submit an affirmation or affidavit as to the amount of such fees and expenses”]). Nonetheless, a reasonable opportunity to be heard is required and the form of a hearing is dependent upon the nature of the conduct and the circumstances of the case (see Strauss v Strauss, 171 AD3d 596, 597 [1st Dept 2019]; Martinez v Estate of Carney, 129 AD3d 607, 609 [1st Dept 2015]). Affidavits submitted provide an opportunity to be heard (see Martinez, 129 AD3d at 609). Here, Respondent failed to submit an affirmation when it interposed its cross-petition. It is not uncommon that when an attorney’s fee is sought, an affirmation detailing the work performed is submitted along with the substantive papers.

In any event, this Court observes that Attorney Roman Kravchenko submitted an affirmation as NYSCEF Doc No. 18, in which it is asserted that he spent six hours on this matter and a paralegal spent one and a half hours. Attorney Kravchenko seeks to be paid at $500.00 per hour for his work and $200.00 per hour for the paralegal’s.

“In determining what is reasonable compensation for an attorney, the court may consider a number of factors, including, inter alia, the time and labor required, the difficulty of the questions involved, and the skill required to handle the problems presented, the lawyer’s experience, ability, and reputation, the customary fee charged for similar services, and the results obtained (see RMP Capital Corp. v Victory Jet, LLC, 139 AD3d at 839; Diaz v Audi of Am., Inc., 57 AD3d 828, 830 [2008]). The determination of reasonable attorney’s fees is generally left to the discretion of the trial court, which is often in the best position to determine those factors integral to the fixing of a reasonable fee (see RMP Capital Corp. v Victory Jet, LLC, 139 AD3d at 840; Miller Realty Assoc. v Amendola, 51 AD3d at 990).” (Diggs v Oscar De La Renta, LLC, 169 AD3d 1003, 1004-1005 [2d Dept 2019]; accord Matter of Freeman, 34 NY2d 1 [1974]; Lancer Indem. Co. v JKH Realty Group, LLC, 127 AD3d 1035, 1035-1036 [2d Dept 2015].)

There should be evidence as to the amount “charged for similar services by lawyers in the community with like experience and of comparable reputation to those by whom the prevailing party was represented” (Kaygreen Realty Co., LLC v IG Second Generation Partners, L.P., 78 AD3d 1008 [2d Dept 2010], quoting Getty Petroleum Corp. v G.M. Triple S. Corp., 187 AD2d 483, 483-484 [2d Dept 1992]). However, name partners in the New York City suburbs were found to have reasonably charged $415.00 and $410.00 respectively in a case for breach of [*3]a factoring and security agreement, such amounts “reflect[ing] the prevailing hourly rate of attorneys in the community with their experience” (RMP Capital Corp. v Victory Jet, LLC, 139 AD3d 836, 840 [2d Dept 2016], citing Leser v U.S. Bank N.A., 2013 WL 1952306, 2013 US Dist LEXIS 33168 [ED NY, May 10, 2013, No. 09-CV-2362 (KAM/MDG)]). In M.F. v Amida Care, Inc. (75 Misc 3d 1209[A], 2022 NY Slip Op 50426[U] [Sup Ct, Kings County 2022]), in a class action lawsuit, the court reduced the hourly rate of $800.00 for a New York City law firm’s founding partners from $800.00 to $450.00, another partner’s $600.00 rate to $300.00, and associates’ $450.00 rate to $300.00.

With respect to the difficulty of the questions involved and the skill required to handle the problems presented, this Court will not deprecate those who labor in the field of motor vehicle accident No-Fault insurance law — this Court served as a No-Fault insurance arbitrator prior to ascending to the bench — but nonetheless finds that the difficulties encountered and skills necessary to preserve arbitration awards in Article 75 proceedings are not comparable to other areas of the law where attorney’s fees are usually awarded, such as civil rights actions, corporate contract litigation, and class action lawsuits. Much of the cited case law is repetitive in No-Fault Article 75 litigation, and it is volume litigation.[FN2] Here, the context for Attorney Kravchenko’s work was an Article 75 proceeding to vacate a master arbitration award affirming an arbitration award in favor his client in the amount of $1,537.67. By the time the file reached him, the issues had been resolved through the arbitration process. All that remained was for him to argue that the master arbitration award was neither arbitrary, capricious, nor incorrect as a matter of law (see Matter of Smith v Firemen’s Ins. Co., 55 NY2d 224, 232 [1982]; Matter of Acuhealth Acupuncture, PC v Country-Wide Ins. Co., 170 AD3d 1168 [2d Dept 2019]; Matter of Liberty Mut. Ins. Co. v Spine Americare Med., P.C., 294 AD2d 574 [2d Dept 2002]).

As for the underlying issue in the arbitration, the matter was determined by Arbitrator Anne Lorraine Russo on the basis that Petitioner’s peer review from Dr. Peter Chiu regarding left shoulder and left knee MRIs performed on the assignor on November 5, 2019 (injured on October 15, 2019), “did not sufficiently utilize the medical documentation and apply general medical standards and principals to the specific patient and circumstances in this case in support of the denial. . .” (NYSCEF Doc No. 3 at 3). Petitioner had denied payment on the ground of lack of medical necessity. This defense to payment was rejected by Arbitrator Russo, and she was sustained by Master Arbitrator Skelton, who determined that Arbitrator Russo’s award “was neither incorrect as matter of law nor arbitrary and capricious nor so irrational as to warrant vacatur” (NYSCEF Doc No. 4 at 4). Frankly, a health service provider’s retention of an attorney [*4]to preserve factual determinations made by No-Fault insurance arbitrators on mere issues of medical necessity once the case is in the Article 75 posture, does not implicate rocket science. Notably, nowhere did Attorney Kravchenko go into detail in his affirmation accompanying the cross-petition, in order to discuss the peer review and the medical records; there is no analysis of the MRI findings and the assignor’s condition which led to the MRIs being performed. Attorney Kravchenko merely relied upon his usual string of case law. Without a detailed factual analysis of the evidence, this Court ascribes little value to his work.

Assuming that seven and a half hours were spent inside Attorney Kravchenko’s law firm, this Court finds said time and labor excessive and disproportionate, considering that much of the contents of his papers (NYSCEF Doc Nos. 12 and 13), which consumed 11 pages, were boilerplate. This Court has reviewed Attorney Kravchenko’s papers submitted in various other Article 75 proceedings and they cite the usual cases concerning Article 75 review of No-Fault awards. All that changes are some details. This template fashion of submitting respondent papers in Article 75 proceedings is an efficient means of opposing them but there is no legal research needed; it has been done already. It certainly does not warrant charging $500.00 and $200.00 per hour for the respective work of an attorney and a paralegal. Those amounts are disproportionate to the amounts awarded in the above-cited cases where the litigation involved a factoring and security agreement and a class action claim.

While a lawyer’s experience, ability, and reputation are to be considered, this Court finds these factors to be of minimal significance in the overall calculation of fees. Hence, while Attorney Kravchenko appears to have a good reputation considering that he has many clients (evidenced in his recitation of prior fees awarded), these facts are found to be subordinate to the ease and lessened skill required to preserve an arbitration win in an Article 75 proceeding. His nine years of practice are not significant enough in this Court’s view to merit an increase in what was awarded. The comparables he submitted were only for his work, not for others; thus, the evidence is deficient as to similar services by lawyers in the community with like experience and of comparable reputation.

Finally, with respect to the results obtained, this Court finds that to award $450.00 or $500.00 per hour, as Attorney Kravchenko has previously obtained, is disproportionate to the ultimate value of the result achieved here. His client, Respondent, was awarded $1,537.67 in the arbitration process. To award the sought $3,300.00 to preserve $1,537.67 defies economic logic.

The New York No-Fault Insurance Regulations prescribe attorney fees for applicants who prevail in arbitration. Usually the amount is set at 20% of the sum total of the arbitration award plus interest thereon (see 11 NYCRR 65-4.6 [d]). At the time the master arbitrator considers the appeal from the arbitration award, a prevailing applicant will be awarded $65.00 per hour up to $650.00 (see 11 NYCRR 65-4.10 [j] [2]). The Regulations provide for the court to fix an applicant’s attorney’s fee in connection with an appeal from a master arbitration award, i.e., an Article 75 proceeding (see 11 NYCRR 65-4.10 [j] [4]).

Here, Respondent (the applicant in the arbitration) will receive an attorney’s fee of approximately $557.01 for the arbitration, assuming that the principal and interest are paid on [*5]December 31, 2023. This is derived from a series of calculations. One applies a 2%-per-month interest rate on $1,537.67, from August 31, 2020.[FN3] Dividing 1,217 days by 30-day months yields a quotient of 40.56. The product of 40.56 months multiplied by 2% per month is 81.12%. 81.12% of $1,537.67 is $1,247.36. Therefore, Respondent is entitled to approximately $1,247.36 in interest on the $1,537.67 principal. The sum of those two figures is $2,785.03. The 20% arbitration legal fee on $2,785.03 equals $557.01. Respondent was awarded $195.00 as a master arbitration attorney’s fee (see NYSCEF Doc No. 4 at 6). Thus, for services in connection just with arbitration, Respondent will receive approximately $750.00. Considering the prescribed attorney’s fees per the No-Fault Regulations, awarding $3,300.00 for the Article 75 work, as brief as it was and as boilerplate as were the papers, would be an unwarranted windfall.

In awarding $195.00 in the July 20, 2023 order and judgment, this Court applied the $65.00-per-hour attorney’s fee for preparatory services in connection with a master arbitration appeal (see 11 NYCRR 65-4.10 [j] [2]. This Court applied the rationale described more fully hereinabove to what it presumed were three hours of legal work. While Attorney Kravchenko avers that he spent six hours and his paralegal spent one and a half hours, this Court finds that someone as experienced as him, laboring in mundane volume No-Fault Article 75 litigation, could have achieved the same work product in three hours. It is noted that there were no court appearances when this Court issued the July 20, 2023 order and judgment. It is noted in the amendment of the order and judgment that there was no admissible and credible evidence regarding the attorney’s fee submitted with the cross-petition.


CONCLUSION

Accordingly, that part of the within motion of Respondent to reargue, renew, and resettle the order and judgment dated July 20, 2023 is GRANTED, but the determination of July 20, 2023 is adhered to in all respects except that the decretal paragraphs of said order and judgment are amended to read as follows:

It is hereby ORDERED and ADJUDGED that the within special proceeding is determined as follows:
The within petition of Petitioner herein is DENIED, and the special proceeding is DISMISSED.
The cross-petition commenced by Respondent herein is granted.
The master arbitration award in American Arbitration Association Case No. 99-20-1177-2271 of Master Arbitrator James J. Skelton, which affirmed the award of Arbitrator Anne Lorraine Russo, is confirmed in its entirety.
Respondent herein is awarded the principal amount, interest, attorney’s fees, and return of filing fee as determined in the arbitration (see the arbitration award and the master arbitration award). The interest shall accrue from August 31, 2020, which is the arbitration filing date (see 11 NYCRR 65-4.5 [s] [3], 65-3.9 [c]; Canarsie Med. Health, P.C. v National Grange Mut. Ins. Co., 21 Misc 3d 791, 797 [Sup Ct, NY County 2008]), [*6]at the rate of two percent per month, simple, calculated on a pro-rata basis using a 30-day month (see 11 NYCRR 65-3.9 [a]).
Petitioner herein shall pay Respondent herein an attorney’s fee of $195.00 for work performed by counsel on this Article 75 proceeding, in the absence of admissible and credible evidence from Respondent herein as to the dates and hours during which work was performed (see 11 NYCRR 65-4.10 [j] [4]), submitted with the cross-petition.
Respondent herein shall recover from Petitioner herein the costs and disbursements as allowed by law to be taxed by the Clerk.
The awards are neither arbitrary, capricious, nor incorrect as a matter of law (see Matter of American Tr. Ins. Co. v Right Choice Supply, Inc., 78 Misc 3d 890 [2023]).
Footnotes


Footnote 1: Part I, Subpart C, Section 6, of IAS Part 2 Rules provides in pertinent part: “All motions presumptively are to be argued in person unless the Court informs the parties at least two days in advance that it has made a sua sponte determination that a motion will be determined on submission.” The Court notified the parties that the within motion would be determined on submission.

Footnote 2: Attorney Kravchenko cited well-known case law which is frequently cited. The principles of law are certainly not obscure and no legal research was required in order to prepare the affirmation supporting the cross-petition. For example, the following decisions cited in his affirmation (NYSCEF Doc No. 13) show high numbers of citing references on Westlaw: Matter of Liberty Mut. Ins. Co. v Spine Americare Med., 294 AD2d 574 [2d Dept 2002] [123 citing references]; Matter of Petrofsky, 54 NY2d 207 [1981] [1,457 citing references]; Country-Wide Ins. Co. v Zablozki, 257 AD2d 506 [1st Dept 1999] [205 citing references].

Footnote 3: The accrual date of August 31, 2020 is not included (see General Construction Law § 20 [“The day from which any specified period of time is reckoned shall be excluded in making the reckoning.”].



Utica Mut. Ins. Co. v Crystal Curtain Wall Sys. Corp. (2023 NY Slip Op 23362)

Reported in New York Official Reports at Utica Mut. Ins. Co. v Crystal Curtain Wall Sys. Corp. (2023 NY Slip Op 23362)

[*1]
Utica Mut. Ins. Co. v Crystal Curtain Wall Sys. Corp.
2023 NY Slip Op 23362
Decided on November 27, 2023
Supreme Court, New York County
Lebovits, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the printed Official Reports.


Decided on November 27, 2023
Supreme Court, New York County


Utica Mutual Insurance Company and
Utica National Assurance Company, Plaintiffs,

against

Crystal Curtain Wall System Corp. et al., Defendants.




Index No. 652632/2022


Rivkin Radler LLP, Uniondale, NY (M. Paul Gorfinkel and Jay D. Kenigsberg of counsel), for plaintiffs.

Cohen Ziffer Frenchman & McKenna LLP, New York, NY (Keith McKenna and Chelsea Ireland of counsel), for defendants Crystal Curtain Wall System Corporation and Crystal Window and Door Systems, Limited.
Gerald Lebovits, J.

The following e-filed documents, listed by NYSCEF document number (Motion 001) 16, 17, 18, 19, 20, 27, 28, 29, 30, 31, 32, 33, 34, 35, 39, 40, 41, 42, 43, 44, 45, 54, 55, 56, 57, 58 were read on this motion to DISMISS.

This declaratory-judgment action arises from a construction-related property damage action pending in this court. (See Board of Managers of the A Building Condominium v 13th & 14th St. Realty, LLC, Index No. 100061/2011 [Sup Ct, NY County] [Leslie Stroth, J.].) Plaintiffs, Utica Mutual Insurance Company and Utica National Assurance Company (collectively, Utica), issued insurance policies to defendants Crystal Curtain Wall System Corp. and Crystal Window and Door Systems, Ltd. (collectively, the Crystal Entities). Utica does not dispute that it has a duty to defend the Crystal Entities in the underlying action. But it seeks a declaration that it has no duty to indemnify the Crystal Entities for any judgment or settlement reached in that action.[FN1]

The Crystal Entities move to dismiss under CPLR 3211 (a) (2) and (a) (7) or, alternatively, move under CPLR 2201 to stay this action pending the outcome of the underlying [*2]action. The Crystal Entities also seek their attorney fees incurred in defending this action. Utica cross-moves under CPLR 3212 for partial summary judgment. The Crystal Entities’ motion to dismiss is granted. Utica’s cross-motion for summary judgment is denied. The Crystal Entities’ fee request—which implicates an issue of law on which there is little New York appellate precedent—is granted.

BACKGROUND

A. The Underlying Action

The underlying action concerns the construction of two mixed use residential and commercial buildings, one of which, “Building A,” was located at 425 East 13th Street, New York, New York. (NYSCEF Doc No. 1 ¶ 83.) Crystal Window entered into a subcontract with the project’s general contractor (Hudson Meridian Construction Group, LLC) to design and install window and curtain systems as well as various other items, such as terrace doors and a glass parapet for Building A.[FN2] (Id. ¶ 85.) On March 22, 2007, Crystal Window assigned to Crystal Curtain some or all of its rights and obligations under the subcontract. (Id. ¶ 90.) In connection with this project, Utica issued various insurance policies to the Crystal Entities for the period from February 28, 2008, through February 28, 2012. (Id. at 13-15.)

Gordon H. Smith Corp (GHSC) was retained by 13th & 14th Street Realty LLC (13th & 14th), the owner of Building A, as a consultant in connection with the construction of Building A. (Id. ¶ 93.) Allegedly on August 29, 2006, GHSC wrote that it had serious concerns with the curtain wall system’s performance, and in 2007, GHSC reported leaking conditions. (Id. ¶¶ 93, 97.) In 2008, GHSC allegedly made extensive remediation recommendations to fix the curtain wall, with which Crystal Window and Crystal Curtain claim to have complied. (Id. ¶ 98.) In January 2008, unit owners began taking possession of individual units. However, after a significant rainstorm on May 28, 2008, water infiltration during the storm caused property damage in the building including moldy conditions. (Id. ¶¶ 99-100.)

In January 2011, the underlying action was commenced in connection with the alleged construction defects that led to the water damage. The complaint asserted claims against the Crystal Entities for the cost of repair or replacement of the allegedly defective curtain wall, damage to unit owners’ personal property, diminution in value of the unit owners’ units, and delay damages consisting of increasing interest and carrying costs that allegedly resulted from delays in completion of the construction work. (Id. ¶ 106.)

The parties to the underlying action—which includes numerous third-party actions—remain engaged in motion practice.

B. This Action

Utica brought this action in 2022. It seeks various forms of declaratory relief defining the parameters of its duty to indemnify the Crystal Entities in the underlying action. (See id. at ¶ 216 [a]-[m].) The Crystal Entities now move to dismiss under CPLR 3211 (a) (2) on the ground that the scope and parameters of Utica’s indemnification obligations are not yet ripe for determination. And the Crystal Entities request an award of attorney fees, should they prevail in this action. Utica cross-moves for partial summary judgment under CPLR 3212 on its request for a declaration that it has no duty to indemnify the Crystal Entities in connection with the costs of [*3]repair or replacement of the curtain wall. (NYSCEF Doc No. 28.)


DISCUSSION


I. Whether Utica’s Declaratory-Judgment Claim is Subject to Dismissal

CPLR 3001 provides that the court “may render a declaratory judgment having the effect of a final judgment as to the rights and other legal relations of the parties to a justiciable controversy whether or not further relief is or could be claimed.” A declaratory-judgment action “thus requires an actual controversy between genuine disputants with a stake in the outcome, and may not be used as a vehicle for an advisory opinion” (Long Is. Light. Co. v Allianz Underwriters Ins. Co., 35 AD3d 253, 253 [1st Dept 2006] [internal quotation marks omitted]). Absent a ripe, justiciable controversy, this court lacks subject-matter jurisdiction to render a declaratory judgment. The Crystal Entities argue that no justiciable controversy exists here, and therefore that the action should be dismissed under CPLR 3211 (a) (2). This court agrees.

A. Whether Utica’s Declaratory-Judgment Claim Implicates a Justiciable Controversy

An insurance-coverage declaratory-judgment action is “premature”—and therefore subject to dismissal—”where the complaint in the underlying action alleges several grounds of liability, some of which invoke the coverage of the policy, and where the issues of indemnification and coverage hinge on facts which will necessarily be decided in that underlying action.” (Hout v Coffman, 126 AD2d 973, 973 [4th Dept 1987]; accord Allstate Ins. Co. v Santiago, 98 AD2d 608, 608 [1st Dept 1983] [reversing denial of motion to dismiss declaratory-judgment action] [“[T]he policy in this State has been to deny the declaratory judgment where the matter in dispute can be determined in the basic negligence action. . . .”].) If, on the other hand, the coverage question can be resolved as a matter of law in advance of fact-finding in the underlying action, a declaratory-judgment action about the scope of the duty to indemnify may be maintained. (See Brookhaven Mem. Hosp. Med. Ctr. v County of Suffolk, 155 AD2d 404, 406 [2d Dept 1989] [holding that when the policy language at issue is clear, such that “the matter in dispute does not depend upon any fact that may be determined in the underlying action, there is no reason to suspend resolution of this matter until after its adjudication”].)

The question, then, is whether the current record permits this court to determine now either that Utica’s policies do not extend coverage to the Crystal Entities’ claimed losses for which coverage disputes exist, or that exclusions within the policies oust otherwise-applicable coverage for those losses.

The Crystal Entities argue that Utica’s entitlement (or not) to the various sub-declarations requested in the complaint (see NYSCEF No. 1 at ¶ 216) turns on unresolved factual questions with respect to each of those declarations.[FN3] (See NYSCEF No. 17 at 16-19.) Utica effectively concedes that all but one of the requested declarations “depend on facts developed in the Underlying Action,” such that their declaratory-judgment claim is, to that extent, not ripe for resolution. (NYSCEF No. 44 at 3-4; see also id. at 7 [“Utica recognizes that its obligations with respect to other claims cannot be determined now, because they depend on facts to be [*4]determined in the underlying case.”].) The sole declaratory-judgment claim that Utica insists is ripe now for decision is its request for a declaration that “no coverage is available under the Utica policies for the cost of repair or replacement of the curtain wall.” (Id. at 7.) This request is not justiciable.[FN4]

Utica advances three reasons why this court can conclude now that no coverage is available for curtain-wall replacement or repair costs: (i) those costs do not qualify as a covered “occurrence” under the policies; (ii) coverage for the costs is barred by the “your work” policy exclusion; and (iii) coverage for the costs is barred by the “your product” policy exclusion. None of these reasons are persuasive.

With respect to whether the curtain-wall costs are a covered occurrence, Utica relies on a line of Appellate Division cases holding that policies like the ones at issue here “do not insure against faulty workmanship in the work product itself, but rather faulty workmanship in the work product which creates a legal liability by causing bodily injury or property damage to something other than the work product.” (George A. Fuller Co. v United States Fid. & Guar. Co., 200 AD2d 255, 259 [1st Dept. 1994].) Because the glass curtain wall at issue is the Crystal Entities’ own work product, Utica argues, the Crystal Entities do not have coverage for the costs to repair or replace the wall. But this argument begs the crucial question: Whether the damage to the curtain wall necessitating its repair or replacement stemmed from defective design or installation of the wall itself (by the Crystal Entities or their subcontractors), or instead from defective work on other components of the building carried out by other parties. As the Crystal Entities point out (see NYSCEF No. 54 at 24), Utica has not identified evidence that answers that question in advance of fact-finding in the underlying action.

The “your product” exclusion ousts coverage for “‘[p]roperty damage’ to ‘your product’ arising out of it or any part of it.” (NYSCEF No. 3 at 45.) This exclusion does not necessarily oust coverage for the costs of repairing or replacing the curtain wall, for the same reasons just discussed. The record does not (yet) establish whether the damage to the curtain wall requiring its repair/replacement “ar[ose] out of it”—i.e., from defects in the wall itself—or arose instead from defects in other components of the building.

The “your work” exclusion bars coverage for “[p]roperty damage’ to ‘your work’ arising out of it or any part of it”—but not “if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.” (Id.) Again, it is not yet clear how the damage to the curtain wall arose; or what part of the work on the curtain wall was performed by the Crystal Entities themselves, and what part by one or more subcontractors. Absent that information, this court cannot now determine the applicability of the “your work” exclusion.

In short, like the other coverage issues raised by Utica’s declaratory-judgment complaint, whether coverage exists for curtain-wall-related costs depends on further fact-finding. That issue is not ripe for decision now.

Utica asserts that a justiciable controversy nonetheless exists because it needs to assess properly their obligations to accept or reject any possible settlement offer that may be within the limits of plaintiff’s policies. (See NYSCEF No. 44 at 3.) But the relevance of coverage for the costs to repair/replace the curtain wall is contingent: it will arise only if (i) a settlement demand [*5]is made against the Crystal Entities in the underlying action that includes curtain-wall-related costs and is within the limit of the applicable Utica policies; and (ii) the Crystal Entities then demand that Utica pay to settle the claims against them. Utica provides no information on the likelihood of this contingent possibility being realized, nor when that might occur. In these circumstances, a declaratory judgment would be premature. (See Murad v Russo, 74 AD3d 1823, 1824 [4th Dept 2010] [holding that plaintiff’s request for a declaratory judgment about the extent of her entitlement to insurance proceeds is not ripe for adjudication because “although the record establishes that defendant’s insurer was amenable to settling the actions for the limits of the policy in question, it cannot be said with certainty that such settlements would occur”].)

Utica’s declaratory-judgment claims, therefore, are unripe and not justiciable at this time. Utica’s cross-motion for partial summary judgment on its curtain-wall claim is denied.[FN5]

B. Whether Utica’s Declaratory-Judgment Claim Should be Dismissed or Stayed

Utica contends that this court should stay, rather than dismiss, any declaratory-judgment claims that the court concludes are unripe, because the “factual predicate that will be necessary to resolve these other issues may be developed in the underlying case before that case is concluded, and those issues would therefore become ripe for determination in this case.” (NYSCEF No. 44 at 18.) Although a court lacks jurisdiction to issue a declaratory judgment absent a justiciable controversy, a court does have discretion, in appropriate circumstances, to stay an unripe declaratory-judgment action, instead of dismissing it altogether. (See Allstate Ins. Co. v Kemp, 144 AD2d 853, 854 [3d Dept 1988] [affirming order that stayed a premature declaratory-judgment action].) This court concludes, however, that staying Utica’s action would not be appropriate here. The underlying action is complex and slow-moving. It is unclear to this court—and Utica does not attempt to provide clarity—when the factual questions bearing on Utica’s potential duty to indemnify the Crystal Entities will be resolved in that action. This court declines to leave the current action in a holding pattern for an open-ended (and presumably lengthy) period. This action is therefore dismissed without prejudice to its renewal once it is no longer premature.


II. Whether the Crystal Entities are Entitled to Reimbursement from Utica for their Defense Costs Incurred in this Action

The Crystal Entities seek reimbursement of their reasonable attorney fees incurred in defending this declaratory-judgment action. (See NYSCEF No. 16 [notice of motion]; NYSCEF No. 17 at 21-22 [mem. of law].) This attorney-fee request implicates a legal question about the parameters of a prevailing insured’s entitlement to attorney fees from its insurer that New York appellate courts appear not to have considered. For the reasons set forth below, the request is granted.

A. Reasons Why the Crystal Entities Should be Entitled to Reimbursement of Defense Costs

When an insured “is cast in a defensive posture by the legal steps an insurer takes in an effort to free itself from its policy obligations,” and the insured then prevails, it may recover attorney fees “incurred in defending against the insurer’s action.” (U.S. Underwriters Ins. Co. v [*6]City Club Hotel, LLC, 3 NY3d 592, 597-598 [2004].) This principle is not a policy-based “exception to the American rule,” under which each party bears its own litigation costs unless a statute or contract shifts the obligation to pay fees. (Chase Manhattan Bank v Each Individual Underwriter Bound to Lloyd’s Policy No. 790/004A89005, 258 AD2d 1, 5 [1st Dept 1999] [emphasis added].) Rather, it derives from the insurer’s duty as a matter of contract to defend its insured—akin, analytically, to a fee-shifting contractual indemnity provision.[FN6] (See id.)

In this case, Utica’s declaratory-judgment action cast the Crystal Entities in a defensive posture by asserting that Utica need not indemnify them for various increments of their potential obligations under a judgment or settlement in the underlying action. And, for the reasons given above, this court concludes that the Crystal Entities should prevail, because the action is subject to dismissal as premature.

It would appear to follow straightforwardly, therefore, that the Crystal Entities are entitled to attorney fees. Utica claims, however, that the answer is not so simple. As noted at the outset of this decision, Utica did not, and does not, dispute its duty to defend the Crystal Entities in the underlying action. Utica argues that in this unusual scenario, the Crystal Entities’ fee request falls outside the scope of the holding of the Court of Appeals’s decision in City Club Hotel and its forerunner precedents. That is, Utica contends, “[w]hen it is only the duty to indemnify that an insurer has placed at issue,” not also the duty to defend, a prevailing “policyholder is not entitled to attorney fees.” (NYSCEF No. 44 at 17 [emphasis added].)

The parties do not cite, and this court has not found, any decision of the Court of Appeals or the Appellate Division discussing whether a prevailing policyholder is entitled to attorney fees when the insurer has acknowledged a duty to defend but contested the duty to indemnify.[FN7] At [*7]most, in Public Service Mutual Insurance Co. v Jefferson Towers, Inc. (186 AD2d 10, 11 [1st Dept 1992]), the First Department held that the insured was entitled to attorney fees, after the insurer had paid defense costs in the underlying action but challenged, unsuccessfully, its obligation to pay the judgment rendered against the insured in that action. (See Jefferson Towers, Inc. v Public Serv. Mut. Ins. Co., 195 AD2d 311, 312 [1st Dept 1993] [discussing the background of the Court’s decision on the prior appeal].) But the Jefferson Towers Court did not consider whether the insurer’s duty-to-defend/duty-to-indemnify split in that case should affect the insurer’s obligation to pay the insured’s attorney fees. Nor can one tell from the decision whether the insurer even raised an argument on that point.[FN8] (See Jefferson Towers, 186 AD2d at 11.)

Absent binding appellate precedent considering the question, this court concludes for itself that a policyholder is entitled to attorney fees when it prevails in the defense of an action brought by an insurer to challenge only the insurer’s duty to indemnify. New York doctrine in this area rests on the insurer’s duty to defend its insured in “any action arising out of the occurrence, including a defense against an insurer’s declaratory-judgment action.” (City Club Hotel, 3 NY3d at 598 [emphasis added].) This is true when an insurer contests both the duty to defend and to indemnify. (See id.) No logical reason exists why it should be different—why an insurer’s duty to defend its insured should suddenly cease—when the insurer disputes only the duty to indemnify. And the Court of Appeals’s holdings in this area have always been phrased in broad terms that would encompass an insurer’s indemnification-only challenge: They permit recovery by the insured that prevails against “the legal steps an insurer takes in an effort to free itself from its policy obligations,” period—not merely the insurer’s policy obligation to defend. (Id. at 597 [emphasis added].)

B. Utica’s Counter-Arguments

In arguing otherwise, Utica relies on decisions of the U.S. Court of Appeals for the Second Circuit. Those decisions hold, Utica says, that “if the insurer has not placed the duty to defend at issue, the insurer need not reimburse the policyholder’s attorney’s fees, even if the policyholder is successful.” (NYSCEF No. 44 at 17, citing New York Marine & Gen Ins. Co. v Lafarge N. Am., 599 F3d 102 [2d Cir 2010]; Liberty Surplus Ins. Co. v Segal Corp., 420 F3d 65 [2d Cir 2005]; see Employers Mut. Cas. Co. v Key Pharmaceuticals, 75 F3d 815, 824 [2d Cir 1996]).) This court concludes, though, that these Second Circuit decisions misapprehend the governing precedents in this area of the Court of Appeals and the Appellate Division.

In Key Pharmaceuticals, the Second Circuit’s holding rested on its reading of the First [*8]Department’s decision in Aetna Casualty & Surety Co. v Dawson (84 AD2d 708, 709 [1st Dept 1981]), in which the First Department declined to require the insurer to pay attorney fees. The Key Pharmaceuticals court understood Dawson to hold that the a “fundamental” reason for its decision “was that the insurer’s duty to defend was not at issue” in the case. (75 F3d at 824.) Thus, the Second Circuit concluded, the New York doctrine “does no more than carve out a narrow exception to the general rule that litigation costs are not recoverable by a winning litigant” that arises only “when a policyholder has been cast in a defensive posture by its insurer in a dispute over the insurer’s duty to defend,” in particular. (Id., citing Mighty Midgets Inc. v Centennial Ins. Co., 47 NY2d 12, 21-22 [1979].) But Dawson did not rest its holding on the absence of a dispute between insurer and insured over the duty to defend. It held, instead, that in the particular context of the parties’ dispute (which rested on the uninsured-motorist endorsement to an automotive insurance policy), the parties seeking attorney fees were not owed a duty to defend by the insurer. (84 AD2d 708, 709.) Instead, “[w]hat is essentially in dispute here is a contract claim,” not an insurance claim invoking an insurer’s duty to defend. (Id. [emphasis added].) No duty to defend, no defense-based obligation to pay attorney fees incurred in the coverage action.

In Segal, the Second Circuit declined to revisit its decision in Key Pharmaceuticals. The Segal court stated that although the New York Court of Appeals had described its doctrine in “broad language” that permitted an insured to recover fees whenever it is defending an insurer’s “‘effort to free itself from its policy obligations,'” Key Pharmaceuticals had instead glossed the doctrine as applying only when the insured “has been cast in a defensive posture by its insurer in a dispute over the insurer’s duty to defend.” (Segal, 420 F3d at 67, quoting Mighty Midgets, 47 NY2d at 21 [internal quotation marks and emphasis omitted].) The insured in Segal argued that the Court of Appeals’s decision in City Club Hotel had undermined the holding of Key Pharmaceuticals, because the insurer’s declaratory-judgment claims in City Club Hotel contested the duty to indemnify. (Segal, 420 F3d at 68.) The Second Circuit rejected this argument. Because City Club Hotel clearly involved a dispute over both the duty to defend and the duty to indemnify, the award of fees to the insured in that case did not call into question the ruling in Key Pharmaceuticals. (See id.)

Curiously, the Segal Court recognized that the rationale of Mighty Midgets and City Club Hotel “is that an insurer with a duty to defend must provide a defense (or reimburse the insured’s litigation expenses) for any action arising out of the claim or occurrence that triggers the duty to defend, including an action brought by the insurer itself.” (Id. at 69 [emphasis added].) But Segal refused to accept that “any action” means “any action”—that the duty to defend, where one exists, is triggered even when the insurer’s action against the insured challenges only the duty to indemnify. This refusal may have stemmed from the concern expressed by the Second Circuit in Segal that ruling that “attorneys’ fees are due whenever an insurer brings suit to disclaim the duty to indemnify, or whenever an excess insurance policy incorporates a primary policy with a duty to defend,” would “dramatically expand” the “Mighty Midgets exception to the point that it swallows the rule.” (Id. at 70.) But the solution to that problem would be for courts to consider carefully, before awarding fees, whether an insurer bringing the unsuccessful coverage action [*9]has a duty to defend its insured in the particular circumstances of the case.[FN9] It is not to hold instead, as the Second Circuit has done, that where a duty to defend does exist, an insurer need not pay fees if it has unsuccessfully challenged only the duty to indemnify.

Finally, in Lafarge North America, the Second Circuit simply applied its holdings in Key Pharmaceuticals and Segal, without considering those holdings fresh. (See 599 F3d at 128.) The objections raised to those two prior decisions thus apply equally to Lafarge North America.

In short, this court is not persuaded by the Second Circuit decisions applying New York law on which Utica relies, and declines to follow them here.

Accordingly, it is

ORDERED that the branch of the Crystal Entities’ motion seeking dismissal of the complaint is granted, and the action is dismissed, with costs and disbursements as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further

ORDERED that Utica’s cross-motion for partial summary judgment is denied; and it is further

ORDERED that the branch of the Crystal Entities’ motion seeking an award of its reasonable attorney fees incurred in defending this action is granted; and it is further

ORDERED that the Crystal Entities may enter a supplemental judgment for the amount of their reasonable attorney fees, with the amount of those fees to be determined by motion made on notice; and it is further

ORDERED that the Crystal Entities serve a copy of this order with notice of its entry on all parties and on the office of the County Clerk, which shall enter judgment accordingly.

Dated: November 27, 2023
Hon. Gerald Lebovits
J.S.C.
Footnotes


Footnote 1:Plaintiffs have also named as defendants the (many) other parties to the underlying action. But Utica’s only live claims in the action, and on this motion, concern the Crystal Entities.

Footnote 2:Utica originally named Hudson Meridian as a defendant in this action, but later discontinued the claims against it. (See NYSCEF No. 47.)

Footnote 3:The Crystal Entities also contend that several of the requested declarations would serve no purpose, because those declarations concern issues about which the parties do not disagree, such that no justiciable controversy exists that could properly be the subject of a declaratory judgment. (See NYSCEF No. 17 at 14-15.)

Footnote 4:Given this conclusion, the court does not reach the Crystal Entities’ alternative argument that Utica’s declaratory-judgment claims are time-barred.

Footnote 5:Because the court denies Utica’s cross-motion on this ground, the court does not reach the Crystal Entities’ argument that the cross-motion is premature because issue has not yet been joined. (See NYSCEF No. 54 at 20-21.)

Footnote 6:See Mighty Midgets, Inc. v Centennial Ins. Co. (47 NY2d 12, 21-22 [1979] [holding that in light of the American rule, an insured that successfully brings a coverage action against its insurer may not recover attorney fees, although the same insured would be able to recover fees if it successfully defended the insurer’s coverage action]). Thus, in Hertz Vehicles, LLC v Cepeda, the Appellate Division, First Department, rejected a policy-based argument that a medical provider assigned no-fault-insurance benefits by non-policyholder assignors should be able to recover declaratory-judgment attorney fees in the same way as an insured. (156 AD3d 440, 441 [1st Dept 2017].) The Court explained that these attorney fees may be recoverable by an insured because “an insurer’s duty to defend an insured extends to the defense of any action arising out of the occurrence, including a defense against an insurer’s declaratory judgment action.” (Id., quoting City Club Hotel, 3 NY3d at 597-598.) In Cepeda, on the other hand, the assignors had the right to no-fault benefits because they had been passengers in an insured vehicle, not the policyholders for the vehicle themselves; and as a result, the insurer had not owed them, or their assignees, a duty to defend. (See id.; accord Fiduciary Ins. Co. of Am. v Medical Diagnostic Servs., P.C., 150 AD3d 498, 498-499 [1st Dept 2017] [same].)

Footnote 7:The Court of Appeals and Appellate Division decisions cited by the Crystal Entities each involve circumstances in which the duty to defend was contested by the insurer. (See NYSCEF No. 17 at 21-22 [collecting cases]; NYSCEF No. 54 at 29-30 [same].)

Utica cites the Appellate Division decisions in Insurance Co. of Greater NY v Clermont Armory, LLC (84 AD3d 1168, 1170-1171 [2d Dept 2011]) and Medical Diagnostic Services (150 AD3d at 498-499). (See NYSCEF No. 44 at 17.) But in those cases, the Appellate Division denied fees because the insurers in those cases did not owe a duty to defend in the first place (thereby obviating any defense-based obligation to pay fees)—not because the insurers had conceded the duty to defend and disputed only the duty to indemnify, as Utica has done here. (See Clermont Armory, 84 AD3d at 1171; Medical Diagnostic Servs., 150 AD3d at 499.)

Footnote 8:In Reliance Ins. Co. v National Union Fire Ins. Co. of Pittsburgh, Pa. (262 AD2d 64 [1st Dept 1999]), the First Department held that an insurer that had unsuccessfully challenged its obligation to pay the costs of a settlement in the underlying action, but not sought reimbursement of defense costs, was required to pay its insured’s attorney fees in the coverage action. But it is not clear from that decision whether or not that insurer had conceded its duty to defend. Nor, in any event, did the Court discuss the particular question presented here.

Footnote 9:Indeed, the Second Circuit undertook that precise inquiry in Segal, as an alternative basis for its holding. (See 420 F3d at 68-70.) But the Segal court did not then draw the relevant connections between that inquiry and the court’s concerns about how to limit meaningfully the scope of the “Mighty Midgets exception” to the American rule on attorney fees. (See id. at 70.)



American Tr. Ins. Co. v Nexray Med. Imaging PC (2023 NY Slip Op 50953(U))

Reported in New York Official Reports at American Tr. Ins. Co. v Nexray Med. Imaging PC (2023 NY Slip Op 50953(U))



American Transit Insurance Company, Petitioner,

against

Nexray Medical Imaging PC d/b/a Soul Radiology, a/a/o Carlos Colon, Respondent.

Index No. 531377/2022

Larkin Farrell LLC, New York City (Anthony Troise of counsel), for Petitioner.

Roman A. Kravchenko, Garden City, for Respondent.


Aaron D. Maslow, J.

The following numbered papers were read on this petition:

Submitted by Petitioner
NYSCEF Doc No. 1: Petition
NYSCEF Doc No. 2: Notice of Petition
NYSCEF Doc No. 3: Exhibit A — Arbitration Award
NYSCEF Doc No. 4: Exhibit B — Master Arbitration Award
NYSCEF Doc No. 5: Exhibit C — Respondent’s Arbitration Request Form and Arbitration Submission
NYSCEF Doc No. 6: Exhibit D — Petitioner’s Arbitration Submission and Master Arbitration Appeal
NYSCEF Doc No. 7: Statement of Authorization for Electronic Filing
NYSCEF Doc No. 8: Request for Judicial Intervention
NYSCEF Doc No. 9: Proof of Service
NYSCEF Doc No. 10: Statement of Authorization for Electronic Filing
NYSCEF Doc No. 11: Affidavit of Service
NYSCEF Doc No. 12: Statement of Authorization for Electronic Filing

Submitted by Respondent
NYSCEF Doc No. 13: Notice of Cross-Petition
NYSCEF Doc No. 14: Cross-Petition

Submitted by Petitioner
NYSCEF Doc No. 15: Affirmation in Opposition to Cross-Motion and in Reply in Support of Petition
NYSCEF Doc No. 16: Exhibit A — Order & Judgment in Kings Co. Index No. 530086/22

Respondent’s reply affirmation in support of the cross-petition (NYSCEF Doc No. 17) filed on September 7, 2023 (19 days after oral argument while the matter was sub judice, is not considered inasmuch as it was not timely filed and no application to accept it or proffer explaining its untimeliness was submitted to this Court (see CPLR 402, 2214, 3012; 22 NYCRR 202.8, 202.9; Aneke v Parks, 197 AD3d 601 [2d Dept 2021]; Garner v Rosa Coplon Jewish Home & Infirmary, 189 AD3d 2105 [4th Dept 2020]; Evans v Perl, 19 Misc 3d 1119[A], 2008 NY Slip Op 50775[U], *5 n 2 [Sup Ct, NY County 2008]; cf. Wilcox v Newark Valley Cent. School Dist., 107 AD3d 1127 [3d Dept 2013]).

Introduction

Petitioner American Transit Insurance Company (“ATIC”) submitted a notice of petition and petition via an Article 75 proceeding under the CPLR. ATIC requests the Court to vacate the Master Arbitrator’s award in a No-Fault insurance arbitration in favor of the Respondent herein, Nexray Medical Imaging PC (“Nexray”). (See NYSCEF Doc No. 1, Petition; NYSCEF Doc No. 2, Notice of Petition.)


Background

ATIC seeks to vacate the $1,790.67 award rendered by Master Arbitrator A. Jeffrey Grob, Esq., in American Arbitration Association (“AAA”) Case No. 99-20-1166-0711, in favor of Nexray (see NYSCEF Doc No. 1, Petition ¶ 3; NYSCEF Doc No. 2, Notice of Petition at 1). Nexray had performed MRIs (lumbar spine on July 13, 2019, and left shoulder on July 19, 2019) on policyholder Carlos Colon (“Assignor”) to diagnose any injuries resulting from a motor vehicle accident on May 2, 2019 (see NYSCEF Doc No. 5, Nexray’s Arbitration Request Form and Arbitration Submission at 12-15 [Form NF-3 claim form re lumbar spine MRI], 16-19 [Form NF-3 claim form re left shoulder MRI]). ATIC denied payment of the No-Fault insurance medical bills for the said services (see NYSCEF Doc No. 6, ATIC’s Arbitration Submission and Master Arbitration Appeal at 3-4 [Form NF-10 denial of claim re lumbar spine MRI], 5-6 [Form NF-10 denial of claim re left shoulder MRI]).

Nexray initiated arbitration, claiming entitlement to $1,790.67 for the medical care rendered to Assignor (see NYSCEF Doc No. 5, Nexray’s Arbitration Request Form and Arbitration Submission at 1-1422). ATIC submitted its papers in opposition for the arbitration (see NYSCEF Doc No. 6, ATIC’s Arbitration Submission and Master Arbitration Appeal at 1-192).

Bernadette Connor, Esq. was assigned to arbitrate the matter by the AAA. She awarded Nexray the $1,790.67 at issue in its billing. She noted that each of the two bills was denied on several grounds by ATIC: (1) Assignor was eligible for Workers’ Compensation, having been in the course of employment; (2) Assignor failed to appear at scheduled IMEs (independent medical examinations); and (3) lack of medical necessity based on a peer review by Dr. Peter Chiu. Arbitrator Connor reasoned that the Form NF-10 denials of claim were untimely, i.e., past Insurance Law § 5106 (a)’s 30-day deadline based on deficiencies in ATIC’s evidence regarding [*2]seeking additional verification to toll said deadline. With the denials of claim being late, the defenses of Assignor being injured in the course of employment and having missed IMEs were precluded. An IME no-show defense could be maintained even when there is a late denial of claim, she wrote, citing to Unitrin Advantage Ins. Co. v Bayshore Physical Therapy, PLLC (82 AD3d 559 [1st Dept 2011]). However, ATIC failed to prove that Assignor did not attend the IMEs, she found. Besides the principal sum of $1,790.67 as No-Fault medical benefits, Arbitrator O’Connor awarded Nexray interest, attorney’s fees, and return of the arbitration filing fee. (See NYSCEF Doc No. 3, Arbitration Award at 1-6.)

ATIC filed with the AAA for a master arbitrator to review the issues, and Master Arbitrator A. Jeffrey Grob, Esq. upheld Arbitrator Connor’s arbitration award (see NYSCEF Doc No. 1, Petition ¶¶ 3, 83).

After ATIC commenced this Article 75 proceeding, Nexray filed a cross-petition in support of Master Arbitrator Grob’s award (see NYSCEF Doc No. 13, Notice of Cross-Petition; NYSCEF Doc No. 14, Cross-Petition). Nexray sought confirmation of the arbitration award and attorney’s fees, costs, and disbursements with respect to this proceeding.


Petitioner ATIC’s Arguments

Petitioner ATIC argues that the master arbitrator’s award should be vacated as a matter of law. ATIC states the award issued to Nexray by Arbitrator Connor and later upheld by Master Arbitrator Grob is faulty, and relies upon Matter of Petrofsky [Allstate Ins. Co.] (54 NY2d 207 [1977]) for the argument that an arbitration award should be overturned when it is arbitrary and capricious, irrational or without a plausible basis (see NYSCEF Doc No. 1, notice of petition ¶ 34). It cited to various other court decisions ruling on the standard of review of No-Fault arbitration awards (see generally NYSCEF Doc No. 1, Petition).

ATIC asserts the award should be vacated as Nexray’s claims (both bills) were properly denied. ATIC argues that the arbitrator and master arbitrator issued awards that conflicted with well-settled law. The denials of claim were appropriate as ATIC had reason to believe Assignor was working when the accident occurred. As such, Worker’s Compensation became primary. (See NYSCEF Doc No. 1, Petition ¶¶ 42-59.) Furthermore, “The Worker’s Compensation Board has exclusive jurisdiction to determine whether workmen’s [sic] compensation benefits are available to the claimant, and it is inappropriate for the arbitrators to express an opinion. . . .” (id. ¶ 55). The Appellate Term recognizes that the Worker’s Compensation Board must determine workers’ eligibility, and a No-Fault insurer must show evidence of “potential merit” that a Workers’ Compensation defense exists (see id. ¶ 56, citing A.B. Med. Servs. v American Tr. Ins. Co., 8 Misc 3d 127[A], 2005 NY Slip Op 50959[U] [App Term, 2d & 11th Dists 2005]). Here, ATIC argues there were reasons to believe that the claimant was employed when the injury occurred (see NYSCEF Doc No. 1, Petition ¶ 43). “The arbitrator’s decision was arbitrary and capricious, without rational basis and incorrect as a matter of law because the arbitrator ignored Petitioner’s evidence and/or well settled legal precedent in order to justify a determination in favor of Applicant” (NYSCEF Doc No. 1, Petition ¶ 57).

Additionally, ATIC argues that they have met their burden of proving that medical necessity for the MRIs was not present through the peer review conducted by Dr. Peter Chiu, M.D. As such, the burden shifted to Nexray, who had to prove by a preponderance of the evidence that the services were medically necessary and reasonable. ATIC alleges that Nexray failed to meet its burden as it did not rebut the findings and conclusions set forth in Dr. Chiu’s peer review report. Nexray’s failure to refute said findings and conclusions went against well-[*3]settled law which requires a health service provider to affirmatively prove medical necessity. As the fact finder, the arbitrator did not have evidence to weigh when determining if the services were medically necessary; and due to the absence of evidence from Nexray, the arbitrator should have found in ATIC’s favor. ATIC argues that both arbitrators went against well-settled law in favoring Nexray, resulting in an arbitrary and capricious decision, being without rational basis and incorrect. (See id. ¶¶ 60-82.)

Finally, ATIC argued also that it was arbitrary and capricious, irrational, and without plausible basis to reject its defense to the subject bills relying on Assignor’s failure to attend IMEs (see id. ¶¶ 35-41). Arbitrator Connor had found that ATIC “did not provide any evidence to establish that the Assignor failed to appear for the examinations” (id. ¶ 37, citing NYSCEF Doc No. 3, Arbitration Award at 4). Yet there was evidence, maintained ATIC. It was in the form of an affidavit from Tracy Simpson. Although it was hearsay it should have been accepted since strict conformity to the rules of evidence is not necessary in arbitration. (See id. ¶¶ 37-38.)


Respondent Nexray’s Arguments

Here, Respondent Nexray asserts that the arbitration award should be confirmed as “the ‘[s]tandard of review of decisions in mandatory arbitration proceedings is whether the decision lacks rationality” (NYSCEF Doc No. 14, Cross-Petition, citing Unigard Mut. Ins. Co. v Hartford Ins. Group, 108 AD2d 917 [2d Dept 1985]). Referencing an arbitrator acting inapposite to settled law when there is a defense that benefits should come from Workers’ Compensation, Nexray disagrees with the arbitration outcome, as ATIC failed to provide evidence that Assignor was on duty or carrying a passenger at the time of the incident. Also, the denials of claim were late. Therefore, Workers’ Compensation is not an appropriate defense, and ATIC must pay the award. (See NYSCEF Doc No. 14, Cross-Petition ¶¶ 18, 40-45.)

Additionally, it was not within the scope of Nexray’s burden to rebut ATIC’s peer review of Dr. Chiu because the defense was nullified. Nexray mailed bills for dates of service July 13, 2019 and July 19, 2019; these bills were received by ATIC on August 5, 2019 and August 2, 2019 respectively. ATIC failed to respond with its IME requests within the 30-day window thereafter, as mandated per Neptune Med. Care, P.C. v Ameriprise Auto & Home Ins. (48 Misc 3d 139[A], 2015 NY Slip Op 51220[U] [App Term, 2d, 11th & 13th Dists 2015]), thereby nullifying the defense of lack of medical necessity. (See NYSCEF Doc No. 14, Cross-Petition ¶¶ 13-16, 18, 35, 49-51.) Also, there is a presumption of medical necessity that attaches to a claim form. ATIC is mistaken in averring that the evidence proved the MRIs were not medically necessary. (See id. ¶¶ 36-39, 49-51.)

As for the IME no-show defense, it too was nullified by the late issuance of ATIC’s denials of claim, argued Nexray (see id. ¶¶ 48-51). And moreover the arbitrator found that ATIC failed to prove that Assignor failed to appear (see id. ¶¶ 18, 57).

According to Nexray, the arbitrator’s award, followed by the affirmance of the master arbitrator, was rational and based on well-settled law. ATIC failed to meet its burden in this proceeding of proving otherwise.

Should the Court find for Nexray, it asks for a reasonable attorney’s fee to be awarded pursuant to 11 NYCRR 65-4.10 (j) (4).


Discussion

A special proceeding, such as one commenced pursuant to CPLR 7511 to vacate an arbitration award, “is a civil judicial proceeding in which a right can be established or an obligation enforced in summary fashion. Like an action, it ends in a judgment (CPLR 411), but [*4]the procedure is similar to that on a motion (CPLR 403, 409). Speed, economy and efficiency are the hallmarks of this procedure.” (Vincent C. Alexander, Prac Commentaries, McKinney’s Cons Laws of NY, CPLR C401:01.)

In Matter of FIA Card Servs. v Thompson (18 Misc 3d 1146[A], 2008 NY Slip Op 50450[U] [Dist Ct, Nassau County 2008], the court discussed a petitioner’s burden when commencing a special proceeding to confirm an arbitration award. The court’s analysis would likewise apply to special proceedings to vacate an arbitration award. “In evaluating the proof offered by a petitioner in support of the foregoing, it must be kept in mind that ‘the standards governing motions for summary judgment are applicable to special proceedings generally (Matter of Port of New York Auth. [62 Cortlandt St. Realty Co.], 18 NY2d 250, 255, cert denied sub nom. McInnes v. Port of New York Auth., 385 U.S. 1006)[.]’ Brusco v. Braun, 199 AD2d 27, 31 (1st Dept. 1993) aff’d84 NY2d 674 (1994); See also: CPLR 409(b); Friends World College v. Nicklin, 249 AD2d 393 (2nd Dept. 1998); Bahar v. Schwartzreich, 204 AD2d 441 (2nd Dept. 1994). Accordingly, to prevail, a petitioner must submit proof in evidentiary form. Friends of Animals, Inc. v. Associate Fur Manufacturers, Inc., 46 NY2d 1065 (1979)[.] A petitioner’s failure to do so will result in the denial of the petition, regardless of the sufficiency of any papers in opposition. Winegrad v. New York University Medical Center, 64 NY2d 851 (1985); Delgado v. Butt, [48] AD3d [735] (2nd Dept. 2008) Martinez v. 123-16 Liberty Ave. Realty Corp., 47 AD3d 901 (2nd Dept. 2008)[.]” (Matter of FIA Card Servs., 18 Misc 3d 1146[A], 2008 NY Slip Op 50450[U], *5 [parallel citations omitted].)

In the instant Article 75 proceeding, Nexray did not raise an issue as to the sufficiency of ATIC’s papers, i.e., the notice of petition, petition, and supporting exhibits. This Court, however, did at oral argument. Returning to the relief sought in ATIC’s Notice of Petition, this Court notes that ATIC sought an order and judgment “VACATING the arbitration award issued by Arbitrator Bernadette Connor, Esq. and/or Master Arbitrator A. Jeffrey Grob, Esq. under Article 75 of the CPLR” (NYSCEF Doc No. 2, Notice of Petition at 1). That A. Jeffrey Grob was the master arbitrator who issued the master arbitration award sought to be vacated was indicated in ATIC’s petition (see NYSCEF Doc No. 1, Petition ¶¶ 3, 31, 83).

In order to assess ATIC’s arguments in support of the petition herein this Court needed to be presented with a copy of Master Arbitrator Grob’s award. ATIC did not include same as an exhibit. Rather, it included the master arbitration award in Matter of Arbitration of Rutland Med., PC v American Tr. Ins. Co. a/a/o “SC” (AAA Case No. 99-20-1175-4211 [July 25, 2022]), which coincidentally was the subject of this Court’s decision, order, and judgment in American Tr. Ins. Co. v Rutland Med, PC (79 Misc 3d 1236[A], 2023 NY Slip Op 50814[U] [Sup Ct, Kings County 2023]). Clearly the wrong master arbitration award was submitted in ATIC’s papers herein.

“[A]s a general matter, a court should not examine the admissibility of evidence submitted in support of a motion for summary judgment unless the nonmoving party has specifically raised that issue in its opposition to the motion (see Rosenblatt v St. George Health & Racquetball Assoc., LLC, 119 AD3d at 55), for “[w]e are not in the business of blindsiding litigants, who expect us to decide their appeals on rationales advanced by the parties, not arguments their adversaries never made” (Misicki v Caradonna, 12 NY3d 511, 519 [2009]).

ATIC was not blindsided by this Court’s observation at oral argument that it failed to include a copy of Master Arbitrator Grob’s award. During argument, ATIC proceeded to offer its arguments as to why its petition to vacate should be granted, going into the details of the [*5]issues in the arbitration, but, after this Court raised the issue of the wrong master arbitration award being submitted, conceded that it was aware of the error since earlier in the morning. For its part, Nexray was not aware of the error when it submitted its notice of cross-petition and cross-petition.

A court must always review a motion for summary judgment to determine if the movant has made out a prima facie case in the first instance. “A motion for summary judgment shall be supported by affidavit, by a copy of the pleadings and by other available proof, such as depositions and written admissions. The affidavit shall be by a person having knowledge of the facts; it shall recite all the material facts; and it shall show that there is no defense to the cause of action or that the cause of action or defense has no merit.” (CPLR 3212 [b].) The party moving for summary judgment must present a prima facie case of entitlement to judgment as a matter of law, tendering sufficient evidence in admissible form demonstrating the absence of material issues of fact, and the failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposing papers (see CPLR 3212 [b]; Smalls v AJI Industries, Inc., 10 NY3d 733 [2008]; Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). “[I]nconsistencies which appear on the face of plaintiff’s own papers prohibit the granting of summary judgment, despite the inadequacy of the opposing papers” (Bank of NY v McLean, 116 AD2d 546, 547 [2d Dept 1986], citing to Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]).

Article 75 proceedings have evidentiary and substantive requirements similar to summary judgment motions (see Worldwide Asset Purch., LLC v Karafotias, 9 Misc 3d 390, 394 [Civ Ct, Kings County 2005], citing Brusco v Braun, 199 AD2d 27, 31-32 [1st Dept 1993], affd on other grounds 84 NY2d 674 [1994]; accord Matter of Port of NY Auth. (62 Cortlandt St. Realty Co.),18 NY2d 250, 255 [1966], cert denied sub nom. McInnes v Port of NY Auth., 385 US 1006 [1967] [condemnation proceeding]).

Therefore, a court determining an Article 75 special proceeding seeking vacatur of an arbitration award must review it in order to assess whether the petitioner made out a prima facie case in support of the requested relief, just as it would do the same when presented with a summary judgment motion.

Even if ATIC was not aware of its error, this Court, in the absence of Master Arbitrator Grob’s award being in the record, would not be able to determine whether he erred as a matter of law and, if so, whether it was so irrational as to require vacatur (see Matter of Smith [Firemen’s Ins. Co.], 55 NY2d 224, 232 [1982]; Matter of Liberty Mut. Ins. Co. v Spine Americare Med., P.C., 294 AD2d 574 [2d Dept 2002]), or whether he exceeded his powers (see Matter of Allstate Ins. Co. v Keegan, 201 AD2d 724 [2d Dept 1994]).

Failing to attach a copy of the arbitration award in an Article 75 proceeding denudes the petition of a prima facie case (see Amica Mut. Ins. Co. v City of NY, 2019 WL 4274334 [Sup Ct, NY County, Sept. 5, 2019, No. 652663/2019]). “As an initial matter, petitioner fails to attach the arbitration award as an exhibit to its petition, which necessitates denial on that ground alone” (Countrywide Ins. Co. v American Tr. Ins. Co., 2021 WL 939010 [Sup Ct, NY County, Mar. 9, 2021, No. 654011/20]).

This Court denies ATIC’s petition to vacate Master Arbitrator A. Jeffrey Grob’s award as ATIC failed to make a prima facie showing. It failed to attach the master arbitration award as an exhibit to its October 17, 2022 petition, and the master arbitration award which was submitted was inconsistent with ATIC’s notice of petition and petition.


Attorney’s Fee

As mentioned supra at 5, Nexray sought an attorney’s fee in the event it prevailed in having the master arbitration award of A. Jeffrey Grob confirmed.

11 NYCRR 65-4.10 [j] [4] in the New York No-Fault Insurance Regulations provides, “The attorney’s fee for services rendered . . . in a court appeal from a master arbitration award and any further appeals, shall be fixed by the court adjudicating the matter” (see also Global Liberty Ins. Co. of NY v North Shore Family Chiropractic, PC, 178 AD3d 525 [1st Dept 2019]; GEICO Ins. Co. v AAAMG Leasing Corp., 148 AD3d 703 [2d Dept 2017]).

While technically Nexray has prevailed in the within Article 75 proceeding, it did not do so on any ground it advanced. Nexray overlooked ATIC’s error in not submitting Master Arbitrator Grob’s award. Not only that, its boilerplate nature cross-petition — significant components of it have been used in past Article 75 proceedings — misdescribed the arbitration award as being dated March 10, 2022, instead of April 11, 2022 (see NYSCEF Doc No. 14, Cross-Petition ¶ 3; NYSCEF Doc No. 3, Arbitration Award at 6). Nexray referred to the master arbitration award in this case as being dated July 25, 2022, when that was the date of the erroneously submitted master arbitration award in Matter of Arbitration of Rutland Med., PC v American Tr. Ins. Co. a/a/o “SC” (see NYSCEF Doc No. 14, Cross-Petition ¶ 4; NYSCEF Doc No. 4, Master Arbitration Award at 4). The same dates of March 10, 2022 and July 25, 2022 were erroneously set forth respectively for the arbitration award and the master arbitration award, in Nexray’s Notice of Petition (see NYSCEF Doc No. 13, Notice of Petition at 1).

“In determining what is reasonable compensation for an attorney, the court may consider a number of factors, including, inter alia, the time and labor required, the difficulty of the questions involved, and the skill required to handle the problems presented, the lawyer’s experience, ability, and reputation, the customary fee charged for similar services, and the results obtained (see RMP Capital Corp. v Victory Jet, LLC, 139 AD3d at 839; Diaz v Audi of Am., Inc., 57 AD3d 828, 830 [2008]). The determination of reasonable attorney’s fees is generally left to the discretion of the trial court, which is often in the best position to determine those factors integral to the fixing of a reasonable fee (see RMP Capital Corp. v Victory Jet, LLC, 139 AD3d at 840; Miller Realty Assoc. v Amendola, 51 AD3d at 990).” (Diggs v Oscar De La Renta, LLC, 169 AD3d 1003, 1004-1005 [2d Dept 2019]; accord Matter of Freeman, 34 NY2d 1 [1974]; Lancer Indem. Co. v JKH Realty Group, LLC, 127 AD3d 1035, 1035-1036 [2d Dept 2015]).

Nexray’s counsel has not attested to how much time was involved in preparing the papers opposing ATIC’s petition. The issues presented in the petition were neither difficult nor novel. This Court recalls that Nexray’s counsel has dealt with medical necessity on various occasions (e.g. American Tr. Ins. Co. v Rutland Med., PC, 79 Misc 3d 1236[A], 2023 NY Slip Op 50814[U] [Sup Ct, Kings County 2023]). He dealt with a Workers’ Compensation defense too (see American Tr. Ins. Co. v Nexray Med. Imaging PC, 79 Misc 3d 1206[A], 2023 NY Slip Op 50538[U] [Sup Ct, Kings County 2023]. Counsel did not submit anything to elaborate on his experience, ability, and reputation, or to establish the customary fee charged for similar services.

Most significantly, with respect to results obtained, the last factor in determining an attorney’s fee, Nexray’s counsel failed to notice that ATIC did not attach a copy of the master arbitration award of A. Jeffrey Grob, Esq., which was sought to be vacated. Hence, Nexray’s counsel’s work did not provide the basis underpinning the reasoning utilized by this Court in denying the petition.

Even had Nexray not filed a cross-petition, ATIC’s petition would have been denied and the master arbitration award confirmed. Nonetheless it did go through the formality of making a [*6]cross-motion for purposes of confirming Master Arbitrator Grob’s award, so a nominal attorney’s fee of $100.00 is awarded.


Conclusion

Accordingly, it is hereby ORDERED, ADJUDGED, and DECREED that:

(1) ATIC’s petition to vacate the master arbitration award of A. Jeffrey Grob in AAA Case No. 99-20-1166-0711 is denied and this proceeding is dismissed.

(2) Nexray’s cross-petition to confirm said master arbitration award is granted.

(3) Said master arbitration award is confirmed.

(4) Nexray is awarded the principal amount of $1,790.67 as No-Fault insurance medical benefits.

(5) Nexray is awarded simple interest (i.e., not compounded) on the said principal amount at two per cent per month on a pro rate basis using a 30-day month, computed in accordance with the provisions of Insurance Law § 5106 (a) and 11 NYCRR 65-3.9 and 65-4.5 (s) (3).[FN1]

(6) After calculating the sum total of the said principal amount plus the interest thereon, ATIC shall pay Nexray an attorney’s fee equal to 20 percent of that sum total, subject to a maximum fee of $1,360.00, in accordance with Insurance Law § 5106 (a) and 11 NYCRR 65-3.10 and 65-4.5 (s) (2).

(7) ATIC shall pay Nexray the $40.00 arbitration filing fee.

(8) ATIC shall pay Nexray an attorney’s fee in connection with the master arbitration if one was awarded by the master arbitrator.[FN2]

(9) ATIC shall pay Nexray an attorney’s fee of $100.00 for work performed by counsel in this Article 75 proceeding.

(10) Nexray shall recover from ATIC costs and disbursements as allowed by law to be taxed by the Clerk.

Dated: September 8, 2023
HON. AARON D. MASLOW
Justice of the Supreme Court of the State of New York

Footnotes

Footnote 1:“Pursuant to Insurance Law §5106(a), interest accrues on overdue no-fault insurance claims at a rate of 2% per month. A claim is overdue when it is not paid within 30 days after a proper demand is made for its payment [citations omitted].” (LMK Psychological Servs., P.C. v State Farm Mut. Auto. Ins. Co., 12 NY3d 217 [2009].) If an applicant prevails in whole or in part on its claim, the arbitrator shall direct the insurer to “in an award of interest, compute the amount due for each element of first-party benefits in dispute, commencing 30 days after proof of claim therefor was received by the insurer and ending with the date of payment of the award, subject to the provisions of section 65-3.9(c) of this Part (stay of interest)” (11 NYCRR 65-4.5 [s] [3]). “If an applicant does not request arbitration or institute a lawsuit within 30 days after the receipt of a denial of claim form or payment of benefits calculated pursuant to Insurance Department regulations, interest shall not accumulate on the disputed claim or element of claim until such action is taken” (11 NYCRR 65-3.9 [c]). This provision of the No-Fault Regulations applies to untimely-issued denials as well as to timely ones, and results in interest being tolled until arbitration is requested (see LMK Psychological Services, P.C., 12 NY3d 217; see also East Acupuncture, P.C. v Allstate Ins. Co., 61 AD3d 202 [2d Dept 2009]).

In the case at bar, Nexray did not request arbitration within 30 days after receipt of ATIC’s two denials appurtenant to the bills for which compensation was awarded. Hence, there are actually two periods of interest, the first of which commences 30 days from when the insurer received proof of claim and ends on the date it issued its denial, and the second of which commences on the date arbitration was commenced and ends on the date of payment of the claim. (See State Farm Mut. Auto Ins. Co. v Pfeiffer, 95 AD2d 806 [2d Dept 1983].) In calculating interest, the date of accrual in both periods shall be excluded from the calculation (see General Construction Law § 20 [“The day from which any specified period of time is reckoned shall be excluded in making the reckoning.”]). Where a motor vehicle accident occurs after April 5, 2002, interest shall be calculated at the rate of two percent per month, simple, calculated on a pro rata basis using a 30-day month (see 11 NYCRR 65-3.9(a); Gokey v Blue Ridge Ins. Co., 22 Misc 3d 1129[A], 2009 NY Slip Op 50361[U] [Sup Ct, Ulster County 2009]).

The $912.00 claim awarded for date of service July 13, 2019 was denied on September 19, 2019, following ATIC’s receipt of proof of claim on August 5, 2019 (see NYSCEF Doc No. 6, ATIC’s Arbitration Submission and Master Arbitration Appeal at 4). The denial of claim was found late by the arbitrator. Therefore, payment became overdue 30 days after receipt of proof of claim. The 30th day thereafter (“overdue date”) was September 4, 2019. Issuance of the late denial of claim tolled interest until arbitration was commenced on May 22, 2020 (see NYSCEF Doc No. 5, Nexray’s Arbitration Request Form and Arbitration Submission at 1). With respect to this claim, therefore, ATIC shall pay Nexray interest computed from September 4, 2019 to September 19, 2019, but excluding September 4, 2019 from being counted within the period of interest; and from May 22, 2020 to the date of payment of the award, but excluding May 22, 2020 from being counted within the period of interest.

The $878.67 claim awarded for date of service July 19, 2019 was denied on September 19, 2019, following ATIC’s receipt of proof of claim on August 5, 2019 (see NYSCEF Doc No. 6, ATIC’s Arbitration Submission and Master Arbitration Appeal at 6). The denial of claim was found late by the arbitrator. Therefore, payment became overdue 30 days after receipt of proof of claim. The 30th day thereafter (“overdue date”) was September 4, 2019. Issuance of the late denial of claim tolled interest until arbitration was commenced on May 22, 2020 (see NYSCEF Doc No. 5, Nexray’s Arbitration Request Form and Arbitration Submission at 1). With respect to this claim, therefore, ATIC shall pay Nexray interest computed from September 4, 2019 to September 19, 2019, but excluding September 4, 2019 from being counted within the period of interest; and from May 22, 2020 to the date of payment of the award, but excluding May 22, 2020 from being counted within the period of interest.

The interest rate shall be two percent per month, simple (i.e., not compounded), on a pro rata basis using a 30-day month.

Footnote 2:In the absence of Master Arbitrator Grob’s award being submitted, this Court has no information whether he awarded an arbitration appeal attorney’s fee.

American Tr. Ins. Co. v PDA NY Chiropractic, P.C. (2023 NY Slip Op 50938(U))

Reported in New York Official Reports at American Tr. Ins. Co. v PDA NY Chiropractic, P.C. (2023 NY Slip Op 50938(U))



American Transit Insurance Company, Petitioner,

against

PDA NY Chiropractic, P.C., A/A/O Leonidis Rodriguez, Respondent.

Index No.: 504957/2023

Larkin Farrell LLC, New York City, for Petitioner.

Aaron D. Maslow, J.

The following numbered papers (submitted by Petitioner) were read on this petition:

Petition (NYSCEF Doc No. 1)
Notice of Petition (NYSCEF Doc No. 2)
Exhibit A — Arbitration Award (NYSCEF Doc No. 3)
Exhibit B — Master Arbitration Award (NYSCEF Doc No. 4)
Exhibit C — Respondent’s Arbitration Request Form and Arbitration Submission (“PDA’s Arbitration Request Form & Submission”) (NYSCEF Doc No. 5)
Exhibit D — Petitioner’s Arbitration Submission and Master Arbitration Appeal (“ATIC’s Arbitration Submission and Master Arbitration Brief”) (NYSCEF Doc No. 6)
Statement of Authorization for Electronic Filing (NYSCEF Doc No. 7)
Request for Judicial Intervention (NYSCEF Doc No. 8)
Affidavit of Service (NYSCEF Doc No. 9)
Statement of Authorization for Electronic Filing (NYSCEF Doc No. 10)
Affidavit of Service (NYSCEF Doc No. 11)

Issue Presented

Is it incorrect as a matter of law and irrational for a No-Fault insurance master arbitrator [*2]to affirm a hearing arbitrator’s [FN1] award determining that (1) a health service provider met its obligation to submit additional verification requested by the insurer under a standard of “substantial compliance,” (2) an insurer’s seeking sign-in sheets was not reasonable when “medical documentation” was submitted, and (3) an insurer’s seeking information as to whether Workers’ Compensation benefits were available was not necessary when the assignor testified that he was not working and the insurer did not issue denials of claim based on a Workers’ Compensation defense?


Background

Petitioner American Transit Insurance Company (“ATIC”) commenced this CPLR Article 75 proceeding by notice of petition, seeking an order and judgment vacating a No-Fault insurance master arbitration award of Victor J. Hershdorfer, Esq. (dated December 21, 2022), which affirmed the arbitration award of John Kannengieser, Esq. (dated September 26, 2022) granting Respondent PDA NY Chiropractic P.C.’s (“PDA”) claim for No-Fault insurance compensation in the amount of $4,150.27 for chiropractic treatment reflected in a total of eight bills.[FN2] ,[FN3] The services at issue were provided to Leonidis Rodriguez, who claimed to have been injured in a motor vehicle accident on February 2, 2020. He assigned his No-Fault insurance benefits to PDA, and is denoted as “Assignor.”[FN4] (See NYSCEF Doc No. 1, Petition ¶¶ 1-3, 16-[*3]24.)

Respondent PDA did not submit any papers in opposition. The petition came before the undersigned for oral argument on July 20, 2023. At that time, neither party appeared. This Court has considered the petition on the papers submitted (see Buckley v Zoning Bd. of Appeals of City of Geneva, 189 AD3d 2080, 2081 [4th Dept 2020]; Matter of Dandomar Co., LLC v Town of Pleasant Val. Town Bd., 86 AD3d 83 [2d Dept 2011]; Matter of Javarone, 76 Misc 2d 20, 21 [Fulton County Ct 1973] [“special proceeding “may be summarily determined by the court solely on the pleadings and other papers submitted”], affd 49 AD2d 788 [3d Dept 1975]). A court should review an Article 75 petition to vacate an arbitration award even in the absence of opposing papers (see American Tr. Ins. Co. v NextStep Healing, Inc., 79 Misc 3d 1203[A], 2023 NY Slip Op 50521[U] [Sup Ct, Kings County 2023]).

The underlying arbitration which is the subject of this proceeding was organized by the American Arbitration Association (“AAA”), which assigned Case No. 17-21-1198-7980 [FN5] to it. The AAA has been designated by the New York State Department of Financial Services to coordinate the mandatory arbitration provisions of Insurance Law § 5106 (b):

Every insurer shall provide a claimant with the option of submitting any dispute involving the insurer’s liability to pay first party [“No-Fault insurance”] benefits, or additional first party benefits, the amount thereof or any other matter which may arise pursuant to subsection (a) of this section to arbitration pursuant to simplified procedures to be promulgated or approved by the superintendent.

Insurance Law Article 51 provides for the payment of basic economic loss incurred by persons injured in motor vehicle accidents. Included within basic economic loss are first-party benefits for medical and other professional health services.[FN6] First-party benefits are more commonly known as “No-Fault benefits”[FN7] or “personal injury protection (PIP) benefits.”[FN8]

In furtherance of the statutory scheme, a comprehensive set of No-Fault Regulations was promulgated by the Superintendent of Insurance (presently Superintendent of Financial Services). They are contained at 11 NYCRR Part 65. Said part is subdivided into five subparts [*4]which encompass the following topics: prescribed policy endorsements (11 NYCRR Subpart 65-1), rights and liabilities of self-insurers (11 NYCRR Subpart 65-2), claims for personal injury protection benefits (11 NYCRR Subpart 65-3), arbitration (11 NYCRR Subpart 65-4), and unauthorized providers of health services (11 NYCRR Subpart 65-5). Part 65 is also known as Insurance Regulation 68.

Generally, the claims process for health service bills [FN9] for No-Fault insurance compensation begins with the submission by a health service provider of a claim form (usually, but not always, a Form NF-3 verification of treatment by attending physician or other provider of health service).[FN10] Besides providing information regarding the injured person, the accident, the subject insurance policy, the billing health service provider, diagnoses, and projected treatment, the claim form includes a bill for services performed. The claim form can be submitted directly by the injured person to the No-Fault insurer but over many decades a practice developed whereby the health service providers submit the claim forms. As noted in footnote 4, they possess standing to do so by virtue of having received signed assignments of benefits from the injured persons.[FN11] ,[FN12] The insurer must then either pay or deny the bill within 30 days, or seek additional verification within 15 business days. If it denies payment, it must issue a Form NF-10 denial of claim [FN13] explaining why the bill was not paid. (See Insurance Law § 5106 [a]; Viviane Etienne Med. Care, P.C. v Country-Wide Ins. Co., 25 NY3d 498, 505 [2015].)

The record evidence submitted in this Article 75 proceeding revealed that the underlying arbitration involved eight claim forms covering services for a period of February 19, 2020-September 29, 2020, as per the Form AR Arbitration Request Form (see NYSCEF Doc No. 5, PDA’s Arbitration Request Form & Submission at 6).[FN14] The following chart provides pertinent information concerning the eight bills and how Respondent dealt with them:

Dates of Service

Amount

Respondent’s Actions

2/19/20-2/28/20

$285.94

Issued additional verification requests 4/1/20 & 5/6/20, seeking examination under oath (“EUO”) of Assignor, sign-in sheets from dates of service, and letter of medical necessity. Reminder of non-provision of requested additional verification 7/20/20. No denial of claim issued.

3/2/20-3/23/20

$739.84

Issued additional verification requests 4/15/20 & 5/20/20, seeking EUO of Assignor, sign-in sheets from dates of service, and letter of medical necessity. Reminder of non-provision of requested additional verification 5/27/20 & 7/20/20. No denial of claim issued.

4/7/20

$26.41

Denial of claim asserted untimely proof of claim (“45-day rule”).

[*5]5/4/20-5/28/20

$647.36

Issued additional verification requests 6/16/20 & 7/21/20, seeking EUO of Assignor, information from Assignor to determine eligibility for Workers’ Compensation independent livery fund coverage,[FN15] sign-in sheets from dates of service, chiropractic re-evaluation report, and letter of medical necessity. No denial of claim issued.

6/1/20-6/30/20

$1017.28

Issued additional verification requests 7/20/20 & 8/24/20, seeking EUO of Assignor, information from Assignor to determine eligibility for Workers’ Compensation independent livery fund coverage, sign-in sheets from dates of service, chiropractic re-evaluation report, and letter of medical necessity. Reminder of non-provision of requested additional verification 9/24/20. No denial of claim issued.

[*6]7/1/20-7/30/20

$739.84

Issued additional verification requests 8/17/20 & 9/21/20, seeking EUO of Assignor, information from Assignor to determine eligibility for Workers’ Compensation independent livery fund coverage, sign-in sheets from dates of service, chiropractic re-evaluation report, and letter of medical necessity. No denial of claim issued.

8/3/20-8/31/20

$462.40

Denial of claim asserted lack of medical necessity based on Dr. John Iozzio’s independent medical examination (“IME”) report.

9/3/20-9/29/20

$231.20

Denial of claim asserted lack of medical necessity based on Dr. John Iozzio’s IME report.

(See NYSCEF Doc No. 5, PDA’s Arbitration Request Form & Submission at 6, 8-33; NYSCEF Doc No. 6, ATIC’s Arbitration Submission and Master Arbitration Brief at 19-38, 40-43.)

Hearing Arbitrator’s Award

The record evidence reveals further that on August 26, 2022, Arbitrator John Kannengieser, Esq. (“hearing arbitrator”), conducted a hearing at which George T. Lewis Jr., Esq., from George T. Lewis, Jr., P.C., appeared for PDA, and Megan Harris appeared for ATIC (see NYSCEF Doc No. 3, Arbitration Award at numbered p 1).

The American Arbitration Association maintains an online platform for documents filed by parties to No-Fault insurance arbitrations. It is called Modria.[FN16] The submissions for the arbitration at issue are contained in NYSCEF Doc Nos. 5 and 6 submitted by ATIC.

With respect to the bill for date of service April 7, 2020, which was denied on the asserted ground of late proof of claim, the hearing arbitrator found credible PDA’s claim that the [*7]bill was timely mailed (see NYSCEF Doc No. 3, Arbitration Award at numbered p 2). This determination has not been challenged by ATIC.

With respect to the bills for dates of service August 3, 2020-August 31, 2020 and September 3, 2020-September 29, 2020, the hearing arbitrator found that Dr. John Iozzio’s IME report made out a prima facie case of lack of medical necessity for further treatment, but that PDA’s medical records and reports documenting continued pain, reduced range of motion, muscle spasm, and subluxations were sufficiently credible enough to prove medical necessity. Therefore he awarded compensation as billed. (See id. at numbered pp 2-3.)

Finally, with respect to the five remaining bills — covering dates of service February 19, 2020-February 28, 2020; March 2, 2020-March 23, 2020; May 4, 2020-May 28, 2020; June 1, 2020-June 30, 2020; and July 1, 2020-July 30, 2020 — the hearing arbitrator noted that no denials of claim were issued. Rather, ATIC delayed the bills in order to seek additional verification. He took note that an EUO of Assignor was sought, as well as certain medical documentation, information pertaining to livery fund coverage (as potential Workers’ Compensation benefits), and PDA’s dates of service sign-in sheets. (See id. at numbered p 2.)

Responses to the requests for medical documentation were acknowledged by ATIC, wrote the hearing arbitrator. The EUO of Assignor was conducted. Since Assignor “clearly testified” at his EUO that he was not working at the time of the accident, there was no need for the information pertaining to Workers’ Compensation through the livery fund. “[ATIC]’s request for sign-in sheets is not a reasonable request, as medical documentation for each of the [dates of service] at issue has been provided.” (Id.) For the affected five bills pended for additional verification, the amounts billed were awarded, as the hearing arbitrator denied ATIC’s defense that the bill claims were premature in the absence of additional verification being provided (see id.).

Altogether the hearing arbitrator awarded $4,150.27 as No-Fault insurance benefits to PDA. He also awarded interest of 2% per month, an attorney’s fee, and return of the $40.00 filing fee (see id. at numbered pp 4-5; Insurance Law § 5106 [a]; 11 NYCRR 65-4.5 [s]).


Master Arbitrator’s Award

ATIC filed for master arbitration to appeal the hearing arbitrator’s award. It presented two arguments.


(A) Rebutting the IME Report

The first contention on appeal by ATIC was that the hearing arbitrator erred as a matter of law and his award was irrational because when he assessed ATIC’s defense of lack of medical necessity with respect to the two bills denied on that ground, he did not take into account well settled case law concerning the need for a medical claimant to meaningfully rebut and discuss the conclusions of the insurer’s expert (citing Innovative Chiropractic, P.C. v Mercury Ins. Co., 25 Misc 3d 137[A], 2009 NY Slip Op 52321 [2d, 11th & 13th Dists 2009]), and other decisions (see NYSCEF Doc No. 6, ATIC’s Arbitration Submission and Master Arbitration Brief at 138-140).

Master Arbitrator Victor J. Hershdorfer, Esq. (“master arbitrator”) summarized this first issue in dispute as follows: “Was the arbitrator’s determination that the applicant met its burden as to medical necessity irrational and/or incorrect as a matter of law?” (NYSCEF Doc No. 4, Master Arbitration Award at 1.)

The master arbitrator noted that the medical necessity issue was determined in PDA’s favor by the hearing arbitrator. The latter had “found that the IME by Dr. Iozzio shifted the [*8]burden,” and that while PDA “submitted no direct rebuttal to the IME but relied upon medical records and reports,” PDA’s evidence was “sufficient . . . to meet its burden of proving the medical necessity of the health services at issue” (id. at 2).

Having summarized the hearing arbitrator’s analysis, the master arbitrator concluded with his own:

Insurance Law §5102 provides for reimbursement for all medically necessary expenses on account of personal injuries arising out of the use or operation of a motor vehicle.
Unfortunately, neither the statute nor the regulations interpreting the stature define what is “necessary”. That determination is almost ultimately one of fact to be determined by the arbitrator or a court on a case-by-case basis. See opinion of the Office of General Counsel of the Superintendent of Insurance, www.ins.ny.us/rg000111.htm (January 11, 2000).
The role of the master arbitrator is to review the determination of the no-fault arbitrator to be sure that the arbitrator reached a decision in a rational manner and that the decision was not irrational, arbitrary or capricious. Petrofsky v. Allstate Insurance Co., 54 NY2d 207 (1981).
A master arbitrator exceeds his statutory power by making his own factual determination, by reviewing factual and procedural errors committed during the course of the arbitration, by weighing the evidence, or by resolving issues such as the credibility of witnesses. Matter of Allstate Insurance Co. v. Keegan, 201 AD2d 724 (2d Dept., 1994); Mott v. State Farm Insurance Co., 55 NY2d 224 (1982). See also Metro Pain Specialist, P.C., Matter of Country-Wide Ins. Co., 2020 NY Slip Op. 50014 (App. Term, 2nd Dept., 9th, 10th Jud. Dists. 1/2/2020.)
The arbitrator is free to choose between the experts’ testimony and evaluate the evidence. Bilotta v. Chevrolet-Tonawanda Division GMC, 81 AD2d 718 (3d Dept., 1981).
. . .
The determination as to medical necessity is not irrational or incorrect as a matter of law.


(B) ATIC’s Additional Verification Requests

ATIC’s second contention on appeal was that the hearing arbitrator erred as a matter of law in rejecting ATIC’s arguments with respect to the five bills pended for additional verification. In pertinent part, ATIC argued:

The 30 day period under 11 NYCRR § 65-3.3 in which a no-fault insurer must either pay or deny a claim for first party benefits may be extended by the insurer’s timely requests for verification of the claim, and, until the insurer receives verification of the claim, the 30-day period is tolled and the insurer need not pay or deny the claim. See, New York Hosp. v. Country-Wide, 295 AD2d 583, 744 N.Y.S.2d 201 (2d Dep’t 2002); Westchester County Medical Center v. New York Central Mut. Fire Ins. Co., 262 AD2d 553, 692 N.Y.S.2d 665 (2d Dep’t 1999).
. . .
Where a plaintiff has not provided verification of all the relevant information requested by the insurer, a no-fault action will be dismissed as premature. See, Infinity Health Products, Ltd. v Eveready Ins. Co., 67 AD3d 862, 865, 890 N.Y.S.2d 545 (2d Dep’t 2009); New York Hosp. v Country-Wide, supra.
. . .
Since to this day, the Respondent has not received the records it needs to take a position [*9]on the claim, this matter should have been dismissed.
The NFA’s conclusion that since the Applicant stated at his EUO that he was not injured in the course of his employment no response was required, lacks a rational basis. . . .
In any event, the claimant’s self-certified conclusion that he is entitled to PIP and not Workers’ Compensation is obviously not dispositive of the issue.
Accordingly, the order appealed from should be reversed.
(See NYSCEF Doc No. 6, ATIC’s Arbitration Submission and Master Arbitration Brief at 135-137.)

This second issue was summarized by the master arbitrator as follows: “Should the arbitrator’s determination that the applicant had substantially complied with the verification requests be reversed” (NYSCEF Doc No. 4, Master Arbitration Award at 1)?

The master arbitrator’s analysis of the hearing arbitrator’s consideration of the additional verification issue was as follows:

The argument was that the verification sought, if provided, would have allowed the appellant to take a position as to whether the claim was covered by the no-fault policy or by Workers’ Compensation Insurance.
. . .
The arbitrator found that the testimony of the EIP clearly established that he was not working at the time of the accident and that after reviewing the various requests for verification and the responses provided that the applicant has substantially complied with the verification requests and that the claims at issue are overdue.
The arbitrator is the judge of the relevance and materiality of the evidence offered. 11 NYCRR 65-4.5(o)(1).
The question as to whether the applicant’s obligations to provide verification have been met is almost always one of fact. 11 NYCRR §65-3.5(o) requires an applicant to submit “. . . all such verification under the applicant’s control or possession providing reasonable justification for the failure to comply . . .” .
It is then up to the arbitrator to determine whether the applicant has met the test set forth in the regulation.
In this case, the arbitrator found for the applicant.
. . .
The arbitrator’s determination that the applicant had substantially complied with the verification requests is not incorrect as a matter of law.
(NYSCEF Doc No. 4, Master Arbitration Award at 3-4 [emphasis added].)

(c) Master Arbitration Outcome

The master arbitrator affirmed the hearing arbitrator’s award in its entirety.

(NYSCEF Doc No. 4, Master Arbitration Award at 3.)
ATIC’s Petition to Vacate

(A) Introductory Allegations

ATIC’s petition to vacate asserted that “The arbitration decision was arbitrary and capricious, irrational and without a plausible basis” (NYSCEF Doc No. 1, petition ¶ 35), in that “Arbitrator John Kannengieser, Esq. failed to follow well settled law” (id. ¶ 37). “An arbitration award must be vacated by the Master Arbitrator if the decision was incorrect as a matter of law. (id. ¶ 36). It also made reference to the grounds set forth in CPLR 7511 (b) (1) for vacating an arbitration award:

The award shall be vacated on the application of a party who either participated in the arbitration or was served with a notice of intention to arbitrate if the court finds that the rights of that party were prejudiced by:
(i) corruption, fraud or misconduct in procuring the award; or
(ii) partiality of an arbitrator appointed as a neutral, except where the award was by confession; or
(iii) an arbitrator, or agency or person making the award exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made; or
(iv) failure to follow the procedure of this article, unless the party applying to vacate the award continued with the arbitration with notice of the defect and without objection.
(See NYSCEF Doc No. 1, Petition ¶ 33.)

(B) Rebutting the IME Report

The petition argued that the hearing arbitrator “failed to follow well settled law with respect to the medical necessity issue” (id. ¶ 62). Two bills at issue “for dates of service August 3, 2020-September 29, 2020 were properly and timely denied for lack of medical necessity” (id. ¶ 63). ATIC’s evidence submitted to the hearing arbitrator (Dr. Iozzio’s IME report) “clearly satisfied its burden” (id. ¶ 65). Ultimately the health service provider—PDA in this instance—had to prove by a preponderance of the evidence that its services were medically necessary, claimed ATIC; the petition to vacate cited to Dayan v Allstate Ins. Co. (49 Misc 3d 151[A], 2015 NY Slip Op 51751[U] [App Term, 2d Dept, 2d, 11th & 13th Dists 2015]), and Park Slope Med. and Surgical Supply, Inc. v Travelers Ins. Co. (37 Misc 3d 19, 22 n [App Term, 2d Dept, 2d, 11th & 13th Dists 2012]) (see NYSCEF Doc No. 1, Petition ¶ 66). “In order for an applicant to prove that the services were medically necessary, it must meaningfully refer to, or rebut, the conclusions set forth in the peer review,” maintained the petition, which cited to Pan Chiropractic, P.C. v Mercury Ins. Co. (24 Misc 3d 136[A], 2009 NY Slip Op 51495[U] [App Term, 2d Dept, 2d, 11th & 13th Dists 2009]) (NYSCEF Doc No. 1, Petition ¶ 67). PDA failed to offer any rebuttal at all, and certainly did not meaningfully refer to the IME report, as was required by Pan Chiropractic, P.C. and the more than 100 published decisions citing to it, insisted ATIC (see id. ¶ 68).

ATIC reiterated in several paragraphs of its petition that a health service provider seeking No-Fault medical expense compensation must meaningfully refer to and rebut an insurer’s peer reviewer’s and IME doctor’s conclusions (id. ¶¶ 72-76). “This proposition is widely accepted as ‘well settled’ law in the industry” (id. ¶ 76). “In this case the arbitrator also ruled for Respondent [PDA] despite the fact that there was no rebuttal. In doing so the arbitrator failed to follow well settled law. As such, this Court should vacate the arbitration award for the same reasons the Appellate Term reversed the trial courts in Pan Chiropractic, Eastern Star Acupuncture, Jaga Med. Servs., P.C. and High Quality Medical.” (Id. ¶ 79)

“This decision was arbitrary and capricious, without rational basis and incorrect as a matter of law because zero evidence simply cannot outweigh evidence” (id. ¶ 81). The petition concluded by asserting that the hearing arbitrator ignored ATIC’s “evidence and/or well settled legal precedent in order to justify a determination in favor of Applicant [PDA]” (id. ¶ 83).


(C) ATIC’s Additional Verification Requests

With respect to the additional verification issue, ATIC argued that claims “for dates of service February 19, 2020-July 30, 2020 [were] not paid because [ATIC] timely and properly [*10]requested verification and [PDA] failed to comply with [ATIC]’s request”[FN17] (id. ¶ 42). The No-Fault Regulations at 11 NYCRR 65-3.5 (b) and 3.6 (b) permit a health service provider to request additional verification (see id. ¶ 43). ATIC took issue with the hearing arbitrator’s having awarded compensation “despite the fact that [PDA] failed to provide the requested verification” (id. ¶ 49). The hearing arbitrator “even acknowledged that items were not provided, disregarded the request for sign in sheets and failed to apply the well settled law to justify an award in favor of [PDA]” (id.). No-Fault benefits are not payable “until all verification is received pursuant to 11 NYCRR 65-3.8(a)(1)” (id. ¶ 50), and “the 30 days in which to pay or deny the claim is tolled and does not begin to run” (id. ¶ 51). Since PDA did not provide all that was sought its claim was premature (see id.).

ATIC insisted that it

“was not required to pay or deny the claim after its receipt of a partial response. See New Horizon Surgical Ctr., LLC v Travelers Ins. Co., 2019 NY Slip Op 51690(U) (App. Term, 2d Dept., 2019) (holding, ‘Contrary to plaintiff’s contention, defendant was not required to pay or deny plaintiff’s claims upon receipt of a ‘partial response’ to defendant’s verification requests . . .; New York & Presbyt. Hosp. v Progressive Cas. Ins. Co., 5 AD3d 568, 570 [2004] [‘A claim need not be paid or denied until all demanded verification is provided’]).’ (See also, Compas Med., P.C. v Travelers Ins. Co., 2016 NY Slip Op 51441(U), (App. Term, 2d Dept., 2016) (holding, ‘Contrary to plaintiff’s contention, defendant was not required to pay or deny plaintiff’s claims upon receipt of a ‘partial response’ to defendant’s verification requests’).
(Id. ¶ 53.) Moreover, the requested additional verification may be sought from someone other than the health service provider, ATIC citing to several decisions. “The need for sign in sheets is obvious, to confirm that the claimant actually showed up for the alleged services. . . . It is outside the scope of the arbitrator’s authority to simply disregard a timely request.” (Id. ¶ 55.)

Therefore, ATIC’s rights were prejudiced by the arbitrator’s partiality “and the arbitrator exceeded his/her power and failed to make a final and definite award and the decision must be vacated” (id. ¶ 84). The relief sought was vacatur of the arbitration awards that they “have no force or effect” (id. ¶ 85).


No-Fault Insurance Arbitration

When the No-Fault Law was first enacted by the Legislature in Chapter 13 of the Laws of 1973 to take effect February 1, 1974, § 675 of the Insurance Law was added. In subdivision 2 thereof, insurers were required to provide claimants with an arbitration option for disputes involving liability for first-party benefits. This provision was amended in Chapter 892 of the Laws of 1977, when several changes were made to the 1973 version.[FN18] The provision regarding arbitration in § 675 was amended to add the following language:

An award by an arbitrator may be vacated or modified by a master arbitrator in [*11]accordance with simplified procedures to be promulgated or approved by the superintendent [of insurance]. The grounds for vacating or modifying an arbitrator’s decision by a master arbitrator shall not be limited to those grounds for review set forth in article seventy-five of the civil practice law and rules. The decision of a master arbitrator shall be binding except for the grounds for review set forth in article seventy-five of the civil practice law and rules, and provided further that where the amount of such master arbitrator’s award is five thousand dollars or greater, exclusive of interest and attorney’s fees, the insurer or the claimant may institute an action in a court of competent jurisdiction to adjudicate the dispute de novo.[FN19]

The provisions regarding No-Fault insurance arbitration remained in the recodification of the Insurance Law enacted in Chapters 367 and 805 of the Laws of 1984. The arbitration provisions were set forth in § 5106, and subdivisions (b) and (c) now read as follows:

(b) Every insurer shall provide a claimant with the option of submitting any dispute involving the insurer’s liability to pay first party benefits, or additional first party benefits, the amount thereof or any other matter which may arise pursuant to subsection (a) of this section to arbitration pursuant to simplified procedures to be promulgated or approved by the superintendent. Such simplified procedures shall include an expedited eligibility hearing option, when required, to designate the insurer for first party benefits pursuant to subsection (d) of this section. The expedited eligibility hearing option shall be a forum for eligibility disputes only, and shall not include the submission of any particular bill, payment or claim for any specific benefit for adjudication, nor shall it consider any other defense to payment.
(c) An award by an arbitrator shall be binding except where vacated or modified by a master arbitrator in accordance with simplified procedures to be promulgated or approved by the superintendent. The grounds for vacating or modifying an arbitrator’s award by a master arbitrator shall not be limited to those grounds for review set forth in article seventy-five of the civil practice law and rules. The award of a master arbitrator shall be binding except for the grounds for review set forth in article seventy-five of the civil practice law and rules, and provided further that where the amount of such master arbitrator’s award is five thousand dollars or greater, exclusive of interest and attorney’s fees, the insurer or the claimant may institute a court action to adjudicate the dispute de novo.

Insofar as is here relevant, the No-Fault Insurance Regulations promulgated by the [*12]Superintendent of Insurance provided that a master arbitrator may vacate or modify a hearing arbitrator’s award where it “was incorrect as a matter of law (procedural or factual errors committed in the arbitration below are not encompassed within this ground)” (11 NYCRR 65.18 [a] [4]). This regulatory language was carried over into the revised Regulations promulgated in 2002, in 11 NYCRR 65-4.10 (a) (4).[FN20] A master arbitrator may also vacate or modify a hearing arbitrator’s award under certain other grounds also (see 11 NYCRR 65-4.10 [a]).[FN21]


Discussion

(A) Standard of Review

The proper standard of review by a No-Fault insurance master arbitrator is whether the hearing arbitrator’s determination was arbitrary and capricious, irrational, or without a plausible basis, or incorrect as a matter of law; the master arbitrator may not engage in an extensive factual review, which includes weighing the evidence, assessing the credibility of various [*13]medical reports, or making independent findings of fact (Matter of Petrofsky (Allstate Ins. Co.), 54 NY2d 207 [1981]).

The standard for Article 75 court scrutiny of a master arbitrator’s review of a hearing arbitrator’s award in terms of whether there was an error of law is whether it was so irrational as to require vacatur (see Matter of Smith (Firemen’s Ins. Co.), 55 NY2d 224, 232 [1982]; Matter of Acuhealth Acupuncture, PC v Country-Wide Ins. Co., 170 AD3d 1168 [2d Dept 2019]; Matter of Acuhealth Acupuncture, P.C. v New York City Transit Authority, 167 AD3d 869 [2d Dept 2018]; Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co., 149 AD3d 828 [2d Dept 2017]). The master arbitrator’s determination of the law need not be correct, and mere errors of law are insufficient to set aside the master arbitrator’s award; on questions of substantive law, the master arbitrator’s determination must be upheld if there is a rational basis for his determination; if the master arbitrator’s errors on a matter of law are irrational, his award may be set aside (see Matter of Liberty Mut. Ins. Co. v Spine Americare Med., P.C., 294 AD2d 574 [2d Dept 2002]).

Judicial review of a master arbitrator’s factual determination in an arbitration appeal is limited to whether the master arbitrator exceeded his or her power, for instance by impermissibly weighing the credibility of a witness, by reviewing the hearing arbitrator’s factual determination, or by reviewing medical reports de novo (see Matter of Allstate Ins. Co. v Keegan (201 AD2d 724 [2d Dept 1994].

It is important to again state that arbitration of No-Fault compensation claims is compulsory against insurers (see n 19, supra). A health service provider who possesses standing via an assignment of benefits makes the election of whether to litigate its claim in court or in arbitration, which is binding upon the insurer (see Insurance Law § 5106 [b]). Such compulsory arbitration awards are held to higher level of scrutiny (see Matter of Motor Veh. Acc. Indemn. Corp. v Aetna Cas. & Sur. Co., 89 NY2d 214 [1996]; Matter of Smith, 55 NY2d 224; Matter of Petrofsky, 54 NY2d 207; Mount St. Mary’s Hosp. of Niagara Falls v Catherwood, 26 NY2d 493 [1970]; Matter of GEICO Gen. Ins. Co. v Wesco Ins. Co., 211 AD3d 729 [2d Dept 2022]).


(B) Rebutting the IME Report

As noted above, ATIC’s petition to vacate the master arbitrator’s award is predicated on two grounds. The first is that the hearing arbitrator failed to follow well settled law that a health service provider applicant in arbitration must meaningfully refer to, or rebut, the conclusions set forth in the health service provider’s medical expert’s report and, therefore, the master arbitrator’s affirmance was erroneous.

This Court has previously discussed the issue raised by ATIC—whether a health service provider applicant in No-Fault insurance arbitration must submit expert medical opinion evidence which specifically refers to and either discusses or rebuts the insurer’s expert medical opinion evidence. This Court held that it need not, because the case law ATIC relied upon governs summary judgment motions in court, not No-Fault arbitrations. (See American Tr. Ins. Co. v Right Choice Supply, 78 Misc 3d 890 [Sup Ct, Kings County 2023].) Assessment of medical necessity entails a factual review of evidence and this is committed to the arbitrator’s discretion (id.). As this Court wrote,

In part, this Court’s present determination is based on the additional provision in 11 NYCRR 65-4.10 (a) (4) which provides that “procedural or factual errors committed in the arbitration below are not encompassed within this ground.” The reference to “factual errors” conveys impliedly that when it comes to assessing evidence for the purpose of fact-finding, an arbitrator has wider latitude and should not be required to comply with [*14]settled or established law concerning what specific evidence suffices to refute the opposing party’s evidence. This Court also takes into account the general proposition that the admissibility of evidence and the determination of issues of fact are left to the arbitrator’s discretion (see Wien & Malkin LLP v Helmsley-Spear, Inc., 6 NY3d 471, 483 [2006] [“Manifest disregard of the facts is not a permissible ground for vacatur of an award. . . .”]; Central Square Teachers Association v Board of Education of the Central Square Central School District, 52 NY2d 918, 919 [1981] [“The path of analysis, proof and persuasion by which the arbitrator reached this conclusion is beyond judicial scrutiny.”]; Matter of Lipson v Herman, 189 AD3d 440, 441 [1st Dept. 2020] [“error of fact . . . will not result in the vacatur of an arbitrator’s award”]; Matter of Bernstein v On-Line Software International, Inc., 232 AD2d 336, 338 [1st Dept. 1996] [“It is well established, however, that arbitrators are not bound by the rules of evidence and may admit or deny exhibits on an equitable basis.”]). In light of this case law with respect to the admissibility of evidence and the determination of issues of fact in arbitration, 11 NYCRR 65-4.10 (a) (4)’s “matter of law” should be limited in its breadth.
(78 Misc 3d at 909-910.)

Therefore, this Court holds that the hearing arbitrator did not err when he did not require a formal rebuttal from PDA which would have specifically referred to and either discussed or rebutted ATIC’s IME report. It was within the arbitrator’s discretion to find that PDA’s treatment notes finding reduced range of motion, muscle spasm, and subluxations overcame the IME report and proved medical necessity. Further, when the master arbitrator conducted his review, he adhered to Matter of Petrofsky (54 NY2d 207), which restricted it to whether the hearing arbitrator’s determination was arbitrary, capricious, irrational, or without a plausible basis, or incorrect as a matter of law, as the master arbitrator may not engage in an extensive factual review, which includes weighing the evidence, assessing the credibility of various medical reports, or making independent findings of fact.

As an Article 75 court, this Court finds that the master arbitrator correctly affirmed the factual findings as to medical necessity especially because PDA did not have to meaningfully refer to and either discuss or rebut the IME report. Whether services were medically necessary entails a factual determination, the hearing arbitrator assessed the facts appropriately, and the master arbitrator conducted a proper appellate review; this master arbitration review was neither irrational nor erroneous as a matter of law (see Matter of Smith, 55 NY2d 224, 232; Matter of Acuhealth Acupuncture, PC, 170 AD3d 1168; Matter of Acuhealth Acupuncture, P.C., 167 AD3d 869; Matter of Acuhealth Acupuncture, P.C., 149 AD3d 828). This Court sustains this component of the master arbitrator’s award, which concerned bills for dates of service August 3, 2020-August 31, 2020 and September 3, 2020-September 29, 2020.


(C) ATIC’s Additional Verification Requests

This Court concludes otherwise with regard to the additional verification issue, which impacted five bills, the dates of service being February 19, 2020-February 28, 2020; March 2, 2020-March 23, 2020; May 4, 2020-May 28, 2020; June 1, 2020-June 30, 2020; and July 1, 2020-July 30, 2020.


(1) No-Fault Insurance Law Lacks Concept of Substantial Compliance With Verification Requests

This Court again takes cognizance of the hearing arbitrator’s finding that PDA “substantially complied” with ATIC’s additional verification requests — that Assignor’s EUO [*15]testimony that he was not working when the accident occurred and there were no denials premised on a Worker’s Compensation defense obviated the need for livery fund information, and that requesting sign-in sheets was unreasonable because medical documentation for the dates of service was provided.

“Upon receipt of one or more of the prescribed verification forms used to establish proof of claim, . . . an insurer has 15 business days within which to request any additional verification required by the insurer to establish proof of claim (11 NYCRR 65-3.5 [b]). . . . Significantly, an insurance company must pay or deny the claim within 30 calendar days after receipt of the proof of claim (see Insurance Law § 5106 [a]; 11 NYCRR 65-3.8 [c]). If an insurer seeks additional verification, however, the 30-day window is tolled until it receives the relevant information requested (see 11 NYCRR 65-3.8 [a] [1]).” (Viviane Etienne Med. Care, P.C., 25 NY3d 498, 505 [2015] [internal quotation marks and citations omitted].)

The No-Fault program “stresses the justifying of claims” (Nyack Hosp. v General Motors Acceptance Corp., 8 NY3d 294, 300 [2007]). Information sought as additional verification is not necessarily that which can be found on the prescribed verification forms “but any information that the carrier finds necessary to properly review and process the claim” (Westchester Med. Ctr. v Travelers Prop. & Cas. Ins. Co., 2001 NY Slip Op. 50082 [U] *3 [Sup Ct, Nassau County 2001]).

“The insurer is entitled to receive all items necessary to verify the claim directly from the parties from whom such verification was requested” (11 NYCRR 3.5 [c] [emphasis added]). “A claim need not be paid or denied until all demanded verification is provided” (Westchester County Med. Ctr. v New York Cent. Mut. Fire Ins. Co., 262 AD2d 553, 554 [2d Dept 1999] [emphasis added]); accord New York & Presbyt. Hosp. v Progressive Cas. Ins. Co., 5 AD3d 568 [2d Dept 2004]).

Case law has been consistently to the effect that a partial response to an additional verification request is insufficient. For example, in D & R Med. Supply, Inc. v Clarendon Nat. Ins. Co. (22 Misc 3d 1127[A], 2009 NY Slip Op 50306[U] [Civ Ct, Kings County 2009]), the court held that where an insurer issues a verification request seeking from the claimant an invoice, CPT codes, and medical records but only an invoice was provided and the insurer followed this up twice, seeking the CPT codes and medical records, the claimant’s complaint had to be dismissed as the action was commenced prematurely.

It is manifest that an insurer is not required to pay or deny a claim upon receipt of a partial response to a verification request (see Chapa Products Corp. v MVAIC, 66 Misc 3d 16 [App Term, 2d, 11th & 13th Dists 2019]; New Horizon Surgical Ctr., LLC v Travelers Ins. Co., 65 Misc 3d 139[A], 2019 NY Slip Op 51690[U] [App Term, 2d, 11th & 13th Dists 2019]; Compas Med., P.C. v Travelers Ins. Co., 53 Misc 3d 136[A], 2016 NY Slip Op 51441[U] [App Term, 2d, 11th & 13th Dists 2016]).

“Even accepting plaintiff’s assertion that it submitted certain verification documents to defendant, the record establishes that plaintiff did not fully respond to defendant’s requests for additional verification, which were properly mailed to plaintiff’s attorney as authorized by counsel’s prior correspondence to defendant (see St. Vincent’s Hosp. of Richmond v American Tr. Ins. Co., 299 AD2d 338 [2002]; GNK Med. Supply, Inc. v Tri-State Consumer Ins. Co., 37 Misc 3d 138[A], 2012 NY Slip Op 52195[U] [App Term, 1st Dept 2012]). Since verification remained outstanding, the then-applicable thirty-day period to pay or deny the claims did not begin to run, the claims were not overdue, and plaintiff’s action is premature (see St. Vincent [*16]Med. Care, P.C. v Country Wide Ins. Co., 80 AD3d 599, 600 [2011]; Westchester County Med. Ctr. v New York Cent. Mut. Fire Ins. Co., 262 AD2d 553 [1999]).” (Orthoplus Prods., Inc. v Global Liberty Ins. Co. of NY, 64 Misc 3d 128[A], 2019 NY Slip Op 51003[U] *1 [App Term, 1st Dept 2019].)

Therefore, it is contrary to law to hold that a health service provider need only “substantially comply” with additional verification requests. The hearing arbitrator’s determination was contrary to established law — as provided in the No-Fault Regulations at 11 NYCRR 3.5 [c] and in case law recited herein, rendering it arbitrary, capricious, and irrational (see Matter of Petrofsky, 54 NY2d 207). In No-Fault insurance law, there is no concept of “substantial compliance” with an insurer’s additional verification requests; partial compliance simply does not suffice. PDA was required by law to provide the sign-in sheets and ATIC was also entitled to await Assignor’s provision of information as to whether he was eligible for the livery fund’s Workers’ Compensation benefits instead of No-Fault insurance.

When the master arbitrator wrote, “The arbitrator’s determination that the applicant had substantially complied with the verification requests is not incorrect as a matter of law” (NYSCEF Doc No. 4, Master Arbitration Award at 3), this confirmed an erroneous standard of compliance with additional verification requests. This master arbitration finding was erroneous as a matter of law — contrary to the No-Fault Regulations at 11 NYCRR 3.5 [c] and the case law recited herein — and rose to the level of being so irrational as to require vacatur (see Matter of Smith, 55 NY2d 224, 232 (“the courts are limited in their further review of the master arbitrator’s resolution of that error of law, since we generally will not vacate an arbitrator’s award where the error claimed is the incorrect application of a rule of substantive law . . . unless is it so irrational as to require vacatur”); Matter of Acuhealth Acupuncture, PC, 170 AD3d 1168; Matter of Acuhealth Acupuncture, P.C., 167 AD3d 869; Matter of Acuhealth Acupuncture, P.C., 149 AD3d 828; Matter of Health & Endurance Med., P.C. v Deerbrook Ins. Co., 44 AD3d 857 [2d Dept 2007]).[FN22]


(2) An Assignor’s EUO Testimony of Not Working Does Not Vitiate Seeking Livery Fund Information to Determine If Workers’ Compensation Benefits Are Available

The hearing arbitrator excused PDA’s provision of livery fund information because the Assignor “clearly testified that he was not working at the time of this accident” (NYSCEF Doc [*17]No. 3, Arbitration Award at 2). Again, this was arbitrary and capricious.

The livery fund information had been sought by ATIC from Assignor in order to determine whether he was eligible for Workers’ Compensation benefits instead of No-Fault insurance. In seeking additional verification, an insurer is not limited to seeking it from the applicant (see Doshi Diagnostic Imaging Servs. v State Farm Ins. Co., 16 Misc 3d 42 [App Term, 9th & 10th Dists 2007]). “Regulation § 65-3.5(c) provides that an insurer is entitled to receive all items necessary to verify the claim directly from the parties from whom such verification is requested. This latter section does not confine or require the insurer to seek information solely from the provider but rather contemplates that verification information may be sought from any source.” (Westchester Med. Ctr. v One Beacon Ins. Co., 22 Misc 3d 1102[A], 2008 NY Slip Op 52580[U] *2 [Sup Ct, Nassau County 2008]). Verification requests to the injured person will pend bills from a medical provider who treated him (see Liberty Mut. Ins. Co. v Brutus, 76 Misc 3d 1201[A], 2022 NY Slip Op 50799[U] [Sup Ct, NY County 2022]). It was more than appropriate for ATIC, as the No-Fault insurer, to seek information from Assignor to determine his possible eligibility for Workers’ Compensation insurance as an alternative.

Workers’ Compensation benefits are primary to those injured as a result of a motor vehicle accident while in the course of their employment (see Insurance Law § 5102 [b] [2]). It is settled law that the determination of whether someone was injured in the course of employment is more suitably made by the Workers’ Compensation Board (e.g. Arvatz v Empire Mut. Ins. Co., 171 AD2d 262 [1st Dept 1991]; Dunn v American Tr. Ins. Co., 71 AD3d 629 [2d Dept 2010]; LMK Psychological Servs., P.C. v American Tr. Ins. Co., 64 AD3d 752 [2d Dept 2009]).

While a determination by an arbitrator that a No-Fault insurer failed to submit prima facie evidence that one was injured in the course of employment is a factual issue which should not be disturbed by an Article 75 court (see American Tr. Ins. Co. v North Shore Family Chiropractic PC, 78 Misc 3d 1212[A], 2023 NY Slip Op 50208[U] [Sup Ct, Kings County 2023]), here ATIC was not afforded the opportunity to deny PDA’s claims with a course-of-employment defense because the hearing arbitrator would not even permit it to assemble documentation to perform the preliminary inquiry as to Assignor’s status. To accept an injured person’s word without permitting the No-Fault insurer to seek pertinent evidence on the issue was arbitrary and capricious.

The master arbitrator wrote, “The arbitrator found that the testimony of the EIP clearly established that he was not working at the time of the accident. . . .” (NYSCEF Doc No. 4, Master Arbitration Award at 3.) This was incorrect. The hearing arbitrator wrote, “[T]he EIP clearly testified that he was not working at the time of the accident” (NYSCEF Doc No. 3, Arbitration Award at 2). The hearing arbitrator did not make a credibility finding regarding Assignor’s testimony. Testifying does not necessarily equate to establishing.

Moreover, the hearing arbitrator referenced that ATIC had not denied bills based on a Workers’ Compensation defense (see NYSCEF Doc No. 3, Arbitration Award at 2). This is an arbitrary reason to deny ATIC’s request for documents which might establish coverage under Workers’ Compensation. A request for additional verification precedes issuance of a denial of claim — not follows it (see 11 NYCRR 65-3.8 [b] [3] [insurer shall not issue denial of claim prior to receipt of all requested verification]). An insurer is not permitted to issue a denial of claim first and then seek additional verification; doing so puts the cart before the horse.


(3) Medical Documentation is Not a Substitute for Sign-In Sheets

The hearing arbitrator found that “medical documentation” having been provided, it was “unreasonable” to request sign-in sheets (NYSCEF Doc No. 3, Arbitration Award at 2). This Court finds this to be arbitrary and capricious in light of the well established case law holding that all additional verification sought by a No-Fault insurer must be provided; incomplete responses are not acceptable (see supra at 16-18).

A heath service provider may not avoid replying to a No-Fault insurer’s additional verification request seeking a specific form or document by providing something else or answering with an excuse which declines to provide what was sought. For example, a medical report stating that the assignor had signed a “separate, comprehensive Informed Consent Form which has been made a portion of the patient’s chart” does not suffice to comply with an additional verification request for a signed informed consent form from the assignor (see New Horizon Surgical Ctr., L.L.C. v Travelers Ins., 62 Misc 3d 150[A], 2019 NY Slip Op 50281[U] [App Term, 2d, 11th & 13th Dists 2019]).

A medical equipment supplier fails to provide requested additional verification when, in response to a request for an initial report and letter of medical necessity from the referring physician, it merely states that the supplies at issue had been provided pursuant to a doctor’s prescription and does not advise the insurer of the doctor’s name or where he is located (see D & R Medical Supply v American Tr. Ins. Co., 32 Misc 3d 144[A], 2011 NY Slip Op 51727[U] [App Term, 2d, 11th & 13th Dists 2011]). In another instance of a health service provider’s response being insufficient, it was held that a response of “Be further advised that this response constitutes full compliance with any purported requests and constitutes the provider’s submission of all relevant documents in the provider’s possession. Any further requests should be directed to the party that possesses such other information. Therefore any further requests to this provider are deemed unnecessary and in violation of 11 NYCRR §65-3.2 (c),” in response to the insurer’s verification request for a “manufacturers invoice documenting the cost of the medical equipment or supplies” and “proof of payment for the medical equipment or supplies” hardly constitutes good faith; the failure to provide the additional verification warrants dismissal of the claim as premature (see Custom Orthotics, Ltd. v Government Employees Ins. Co., 25 Misc 3d 545 [Civ Ct, Queens County 2009]).

A response by a health service provider to additional verification requests which states that it is an ambulatory surgery facility and, as such, “does not possess all the medical records,” and that the insurer should “request any additional information directly from the treating provider,” constitutes an insufficient response, and the 30-day period to pay or deny the claim has not yet begun to run (see Excel Surgery Ctr., L.L.C. v Fiduciary Ins. Co. of Am., 55 Misc 3d 131[A], 2017 NY Slip Op. 50408[U] [App Term, 2d, 11th & 13th Dists 2017]).

Just as the foregoing cited cases establish that a response from a health service provider other than one furnishing that which was requested is insufficient, so too was “medical documentation”[FN23] in place of sign-in sheets.

If courts have sustained additional verification requests seeking wholesale invoices for furnished medical supplies and equipment (see CPM Med Supply, Inc. v State Farm Fire and [*18]Cas. Ins. Co., 63 Misc 3d 140[A], 2019 NY Slip Op 50576[U] [App Term, 2d, 11th & 13th Dists 2019] [provider’s excuse that fee could be determined without wholesale invoice constitutes failure to comply]); MRI films (see Radiology Today, P.C. v New York Cent. Mut. Fire Ins. Co., 34 Misc 3d 139(A), 2011 NY Slip Op 52452[U] [App Term, 2d, 11th & 13th Dists 2011]; session notes (see Boro Medical & Psych Treatment Servs., P.C. v Country Wide Ins. Co., 2002 NY Slip Op 50538[U] [App Term, 2nd & 11th Dists 2002]); and an assignor’s Social Security number (see Olympic Chiropractic, P.C. v American Tr. Ins. Co., 14 Misc 3d 129[A], 2007 NY Slip Op 50011[U] [App Term, 2d & 11th Dists 2007]), it is certainly reasonable to request sign-in sheets for the dates of service.

Verification of the authenticity of claims is consistent with one of the purposes underlying the adoption of new No-Fault insurance regulations which took effect in 2002 — to rein in fraud in the form of “medical mills [generating] stacks of medical bills for each passenger, detailing treatments and tests that were unnecessary or never performed” (Matter of Medical Socy. of State of NY v Serio, 100 NY2d 854, 861 [2003] [emphasis added]). A No-Fault insurer’s seeking as additional verification copies of No-Fault forms containing signatures helps insure that compensation is not paid for services not performed (see Doshi Diagnostic Imaging Servs. v Progressive Ins. Co., 12 Misc 3d 144[A], 2006 NY Slip Op 51430[U] (App Term, 9th & 10th Dists 2006); DWP Pain Free Med. P.C. v Progressive Northeastern Ins. Co., 14 Misc 3d 800 [Dist Ct, Suffolk County 2006]).

“Plaintiff’s objection to the reasonableness of the request for the MRI films is unavailing. It is readily apparent that copies of any MRI films (or lack of such films) would substantiate whether the billed MRIs were, in fact, actually performed.” (Lenox Hill Radiology & MIA, P.C. v Hereford Ins. Co., 72 Misc 3d 702, 712 [Civ Ct, NY County 2021].) Likewise, seeking PDA’s sign-in sheets is reasonable as their provision would substantiate Assignor’s actually being present for treatment.


(4) Reasonableness of Additional Verification Requests

This Article 75 Court’s determination concerning the subject hearing and master arbitration awards is not to be construed as holding that an additional verification request can never be unreasonable. This Court’s determination must be construed in light of the eminent reasonableness of ATIC having sought provider sign-in sheets and information as to whether Assignor might be eligible for alternative (Workers’ Compensation) benefits.

While there has been case law finding certain additional verification requests unreasonable, usually these holdings concern instances of procedural abuse by No-Fault insurers as compared to the substance of the requests.

For instance, “A provider should not have to repeatedly provide documentation it has already provided unless the insurer can establish a reasonable basis and rational need for demanding this material anew” (Brownsville Advance Med., P.C. v Country-Wide Ins. Co., 33 Misc 3d 1236[A], 2011 NY Slip Op 52255[U] *3 [Dist Ct, Nassau County 2011). Moreover, an applicant provides reasonable justification for the failure to comply with an insurer’s verification requests identical to each of four bills and containing 34 unnumbered and unlettered bullet point demands by showing that its objection letters challenged the requests as “unduly burdensome and abusive” and seeking further clarification, and that the insurer rebuffed the objection letters by stating that it was entitled to each item as a matter of law. “The court notes that if plaintiff wished to respond to specific verification requests, it had no method by which to refer to a specific request, since the voluminous requests were not numbered or lettered or presented in [*19]any cogent way with specificity.” (Pro-Align Chiropractic, P.C. v Travelers Prop. Cas. Ins. Co., 58 Misc 3d 857, 862 [Dist Ct, Suffolk County 2017].)

However, “[J]ust as an insurer must have ‘good cause’ to demand verification, so too must a provider have a ‘reasonable justification’ for refusal to provide a response” (HKP Physical Therapy, P.C. v Government Employees Ins. Co., 67 Misc 3d 282, 300-301 [Sup Ct, NY County 2019], citing 11 NYCRR 65-3.8 [b] [3], [o]). A strong showing of good cause requires an equally compelling justification for withholding any responsive items, and responses categorizing the requests as irrelevant, unduly burdensome, or moot because they were already substantially complied with cannot prevail (see id. at 301).

In the instance of a No-Fault insurance arbitrator finding that an additional verification request was unreasonable, such determination must be assessed at first by a master arbitrator to determine whether the hearing arbitrator reached her decision in a rational manner, i.e., whether it was arbitrary and capricious, irrational, or without a plausible basis, or incorrect as a matter of law (see Matter of Petrofsky, 54 NY2d 207). Then the master arbitrator’s award must be assessed by the Article 75 court in terms of whether there was an error of law which was so irrational as to require vacatur or whether the master arbitrator exceeded her power (see Matter of Smith, 55 NY2d 224, 232; Matter of Acuhealth Acupuncture, PC, 170 AD3d 1168; Matter of Acuhealth Acupuncture, P.C., 167 AD3d 869; Matter of Acuhealth Acupuncture, P.C., 149 AD3d 828; Matter of Health & Endurance Med., P.C., 44 AD3d 857; Matter of Liberty Mut. Ins. Co., 294 AD2d 574; Matter of Allstate Ins. Co. v Keegan (201 AD2d 724 [2d Dept 1994]).

However, even if an arbitrator’s award finds that an additional verification request was unreasonable, such an assessment must be conducted without application of a doctrine of substantial compliance — as was the situation here — because nothing in the No-Fault Regulations or in case law construing such Regulations suggests that such a standard exists.


(5) Instant Claim Was Premature in Terms of Bills Not Denied

An insurer may deny a claim where requested additional verification has not been provided within 120 days of the initial request (see 11 NYCRR 65-3.5 [o], 65-3.8 [b] [3]). Issuance of such a “120-day denial of claim” for failure to provide requested additional verification is optional (see Island Life Chiropractic Pain Care, PLLC v Zipcar, 72 Misc 3d 141[A], 2021 NY Slip Op 50844[U] *2 [App Term, 2d, 11th & 13th Dists 2021]).

If an insurer demonstrates that it did not receive requested verification and no 120-day denial of claim was issued on that basis, and the claimant does not show that the verification had been provided to the insurer prior to the commencement of the action, the 30-day period within which the insurer was required to pay or deny the claim did not begin to run and, thus, the action is premature and should be dismissed without prejudice (see AOM Med. Supply, Inc. v Hereford Ins. Co., 69 Misc 3d 142[A], 2020 NY Slip Op 51366[U] [App Term, 2d, 11th & 13th Dists 2020]; Daily Med. Equip. Distrib. Ctr., Inc. v Interboro Ins. Co., 56 Misc 3d 135[A], 2017 NY Slip Op. 50958[U] [App Term, 2d, 11th & 13th Dists 2017]).

Here, there was no 120-day denial of claim. In the absence of ATIC having received the sign-in sheets and livery fund (possible eligibility for Workers’ Compensation benefits) information, that part of PDA’s claim for payment of pended bills should have been dismissed without prejudice by the hearing arbitrator as being premature. The hearing arbitrator having awarded No-Fault compensation and the award having been affirmed by the master arbitrator, the latter’s award must be vacated insofar as the pended bills are concerned.


Conclusion

ATIC has successfully established herein that insofar as the master arbitration award affirmed the hearing arbitration award with respect to the bills pended for additional verification, it was arbitrary, capricious, and irrational because it contravened well settled law (see 11 NYCRR 65-4.10 [a] [4]). In that respect the master arbitrator “exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made” (CPLR 7511 [b] [1] [iii]; see Matter of Kowaleski (New York State Dept. of Correctional Servs.), 16 NY3d 85 [2010]; Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co., 176 AD3d 799 [2d Dept 2019]; Matter of Global Liberty Ins. Co. v McMahon, 172 AD3d 500 [1st Dept 2019]; Matter of Liberty Mut. Ins. Co., 294 AD2d 574; Allstate Ins. Co. v Natural Healing Acupuncture, P.C., 39 Misc 3d 1217[A], 2013 NY Slip Op 50645[U] [Civ Ct, Kings County 2013]).

On the other hand, ATIC has not successfully established herein that insofar as the master arbitration award affirmed the hearing arbitration award with respect to the bills denied on the basis of Dr. John Iozzio’s IME report (lack of medical necessity), it was arbitrary, capricious, and irrational because it contravened well settled law (see 11 NYCRR 65-4.10 [a] [4]). Contrary to ATIC’s assertions, in that respect none of the grounds it cited from CPLR 7511 [b] [1] for vacating the master arbitration award apply.

Since none of the grounds for modifying an arbitration award pursuant to CPLR 7511 [c][FN24] apply and this Court may not partially confirm and partially vacate the master arbitration award (see Zunzurovski v Jacaranda Club, LLC, 2022 NY Slip Op. 33984[U] [Sup Ct, NY County 2022]), this Court must vacate the master arbitration award (see CPLR 7511 [b] [1] [iii]). A remand is necessary (see CPLR 7511 [d]).

It is hereby ORDERED, ADJUDGED, and DECREED that the master arbitration award of Victor Hershdorfer, Esq., dated December 21, 2022, in AAA Case No. 99-21-1198-7980, is hereby VACATED, and the within arbitration claim of Respondent PDA NY Chiropractic, P.C. is remanded in its entirety to the American Arbitration Association for a rehearing, with the within decision constituting the law of the case (see Allcity Ins. Co. v Eagle Ins. Co., 1 Misc 3d 41 [App Term, 2d & 11th Dists 2003]).

Dated: September 1, 2023
HON. AARON D. MASLOW
Justice of the Supreme Court of the State of New York

Footnotes

Footnote 1:The term “hearing arbitrator,” referring to the arbitrator who initially conducted the hearing, is used to distinguish him from the master arbitrator, who determined the appellate arbitration.

Footnote 2:The notice of petition seeks vacatur of “the arbitration award issued by Arbitrator John Kannengieser, Esq. and/or Master Arbitrator Victor J. Hershdorfer, Esq. under Article 75 of the CPLR” (NYSCEF Doc No. 2, Notice of Petition), but it must be deemed to seek vacatur of just the master arbitration award inasmuch as the latter is the final determination of the arbitration process. The No-Fault Regulations provide that “court review pursuant to an article 75 proceeding” is from the “decision of a master arbitrator” (11 NYCRR 65-4.10 [h] [1] [i]; see also Insurance Law § 5106 [c]). In fact, a party may not appeal from a hearing arbitration award (see Matter of Staten Is. Hosp. v USAA, 103 AD2d 744 [2d Dept 1984]; Matter of Griffith v Home Indem. Co., 84 AD2d 332 [1st Dept 1982]; Matter of Lampasona v Prudential Prop. & Cas. Ins. Co., 111 Misc 2d 623 [Sup Ct, Kings County 1981]). “[T]he Legislature intended the provision of CPLR article 75 to apply only to the review of the awards of master arbitrators (see, Insurance Law § 5106[c])” (Matter of Custen v General Acc. Fire and Life Ins. Co., 126 AD2d 256 [2d Dept 1987]). It follows that if the hearing arbitrator’s award is imperfect, this can affect judicial review of a master arbitration award affirming it.

Footnote 3:Rather than denote the parties here as “Petitioner” and “Respondent” in discussion, the parties’ names are used henceforward. This is to facilitate the reader’s understanding of the facts, arguments, analysis, and determination. This also minimizes confusion because the respondent in the underlying arbitration, ATIC, is not the respondent herein but rather is the petitioner herein. The respondent herein, PDA, was not the respondent in the arbitration, but was the applicant.

Footnote 4:Health service providers obtain standing to pursue No-Fault insurance compensation in arbitration by virtue of having received an assignment of benefits from the respective person claiming to have been injured in a covered motor vehicle accident; such person is often denoted as an “assignor.”

Footnote 5:Paragraph 28 of the petition describes the AAA Case No. as 99-21-1198-7980, which was assigned to the master arbitration appeal (see NYSCEF Doc No. 4, Master Arbitration Award at 1). The original arbitration was assigned AAA Case No. 17-21-1198-7980 (see NYSCEF Doc No. 3, Arbitration Award at numbered p 1).

Footnote 6:This statutory scheme was developed by New York’s legislature in 1973, as part of a tradeoff whereby lawsuits for pain and suffering resulting from personal injuries in motor vehicle accidents were limited to instances of serious injury (see generally Insurance Law art 51; L 1973, ch 13, as amended L 1977, ch 892; John R. Dunne, New York’s No-Fault Automobile Insurance Law A Glimpse of the Past and a Glance at the Future, 50 NY St BJ 284 [June 1978]; J. Benedict, New York Adopts No-Fault: A Summary and Analysis, 37 Albany L Rev 662 [1973]).

Footnote 7:Although Insurance Law Article 51 does not mention the term “No-Fault,” shortly after the post-motor vehicle accident economic loss compensation system was enacted in 1973, the appellation “No-Fault” was adopted in common parlance to describe it.

Footnote 8:The term “personal injury protection benefits” is a creature of the No-Fault Regulations (see 11 NYCRR Subpart 65-3) and does not appear in the statute.

Footnote 9:This Court uses the term “health service bills” instead of “medical bills” because the No-Fault Law provides for reimbursement of “(i) medical, hospital . . . , surgical, nursing, dental, ambulance, x-ray, prescription drug and prosthetic services; (ii) psychiatric, physical therapy . . . and occupational therapy and rehabilitation . . . and (iv) any other professional heath services” (Insurance Law § 5102 [b] [1]). Hence, the No-Fault insurance system encompasses not just “medical” services. In the instant case, the services at issue were chiropractic office visits and treatment.

Footnote 10:The prescribed claim forms are included within 11 NYCRR Part 65 (Regulation 68) Appendix 13. Besides Form NF-3 (verification of treatment by attending physician or other provider of health service), Appendix 13 contains Form NF-4 (verification of hospital treatment) and Form NF-5 (hospital facility form). Not every No-Fault insurance provider uses the prescribed forms; some utilize a HICF (Health Insurance Claim Form) or a UB-04 form more commonly used for inpatient and outpatient claims billed by hospitals, healthcare facilities, and surgical facilities.

Footnote 11:There is a prescribed assignment of benefits form (Form NF-AOB) in 11 NYCRR Part 65 (Regulation 68) Appendix 13.

Footnote 12:The process of submitting a No-Fault claim to the insurer is governed by 11 NYCRR Subpart 65-3, which contains §§ 65-3.1 et seq.

Footnote 13:Form NF-10 is also included within 11 NYCRR Part 65 (Regulation 68) Appendix 13.

Footnote 14:References to page numbers in NYSCEF filings lacking specified page numbers are to the PDF page numbers.

Footnote 15:The information specifically sought from Assignor regarding potential eligibility for Workers’ Compensation independent livery fund coverage as additional verification concerning this bill and the next two was as follows:
(1) “Submit the name of the Base or Car Service at the time of accident.”
(2) “List any smart phone applications or other radio bases the claimant received dispatched calls from.”
(3) “Confirmation the named Base paid into the Livery Fund.”
(4) “If claimant worked during period of treatment, please submit an affidavit of the date returned to work.”
(5) “Please provide us with notarized copy of your social security card.”
(NYSCEF Doc No. 6, ATIC’s Arbitration Submission and Master Arbitration Brief at 24, 27, 29, 31, 33, 35, 37, 40, 42.)

Footnote 16:This is the AAA’s electronic case management and filing platform maintained on the Internet; it is known as “Modria,” which was the name of the company which developed it for the AAA (see Liveblogging #ODR2014: The Developing Field of Online Dispute Resolution, https://civic.mit.edu/index.html%3Fp=1452.html [last accessed Mar. 19, 2023]; Welcome to the Modria Resolution Center for the American Arbitration Association, https://aaa-nynf.modria.com/ [last accessed Mar. 19, 2023]).

Footnote 17:PDA’s bill for date of service April 7, 2020 was denied on the asserted defense of untimely proof of claim and, therefore would not be encompassed within the February 19, 2020-July 30, 2020 period applicable to bills for which additional verification was requested.

Footnote 18:Among the more substantial changes in the 1977 legislation were the adoption of fee schedules to limit health service expenses and modifying the threshold categories for suing for noneconomic loss, i.e., pain and suffering.

Footnote 19:Nothing in the Governor’s Bill Jacket for Chapter 13 of the Laws of 1977 or other contemporary records comments on the provision adopting master arbitration review of hearing arbitrators’ decisions, so it is not known why the master arbitration process was created (see Matter of Bamond v Nationwide Mut. Ins. Co., 75 AD2d 812, 813 [2d Dept 1980], affd 52 NY2d 957 [1981]). This Court speculates that at least one reason was that No-Fault arbitration was compulsory and the Legislature desired to permit a party to an arbitration to seek review of the hearing arbitrator’s award on the basis of an assertion of an error of law, which traditionally was not a basis for review in an Article 75 proceeding (see Mott v State Farm Ins. Co., 77 AD2d 488 [3d Dept 1980], revd sub nom. on other grounds Matter of Smith v Firemen’s Ins. Co., 55 NY2d 224 [1982]).

Footnote 20:Most non-No-Fault insurance arbitration awards cannot be vacated due to an error of law (see Matter of Sprinzen v Nomberg, 46 NY2d 623, 629-630 [1979]). No-Fault insurance arbitrations are different; an error of law can be the basis for reversal — by a master arbitrator.

Footnote 21:11 NYCRR 65-4.10 (a) provides as follows:

Grounds for review. An award by an arbitrator rendered pursuant to section 5106(b) of the Insurance Law and section 65-4.4 or 65-4.5 of this Subpart may be vacated or modified solely by appeal to a master arbitrator, and only upon one or more of the following grounds:

(1) any ground for vacating or modifying an award enumerated in article 75 of the Civil Practice Law and Rules (an article 75 proceeding), except the ground enumerated in CPLR subparagraph 7511(b)(1)(iv) (failure to follow article 75 procedure);

(2) that the award required the insurer to pay amounts in excess of the policy limitations for any element of first-party benefits; provided that, as a condition precedent to review by a master arbitrator, the insurer shall pay all other amounts set forth in the award which will not be the subject of an appeal, as provided for in section 65-4.4 or 65-4.5 of this Subpart;

(3) that the award required the insurer to pay amounts in excess of the policy limitations for any element of additional first-party benefits (when the parties had agreed to arbitrate the dispute under the additional personal injury protection endorsement for an accident which occurred prior to January 1, 1982); provided that, as a condition precedent to review by a master arbitrator, the insurer shall pay all other amounts set forth in the award which will not be the subject of the appeal, as provided for in section 65-4.4 or 65-4.5 of this Subpart;

(4) that an award rendered in an arbitration under section 65-4.4 or 65-4.5 of this Subpart, was incorrect as a matter of law (procedural or factual errors committed in the arbitration below are not encompassed within this ground);

(5) that the attorney’s fee awarded by an arbitrator below was not rendered in accordance with the limitations prescribed in section 65-4.6 of this Subpart; provided that, as a condition precedent to review by a master arbitrator, the insurer shall pay all other amounts set forth in the award which will not be the subject of the appeal, as provided for in section 65-4.4 or 65-4.5 of this Subpart.


Footnote 22:While substantial compliance may be acceptable in other areas of insurance law, it is not always the appropriate standard of compliance; strict compliance is sometimes required (e.g. Argo Corp. v Greater NY Mut. Ins. Co., 4 NY3d 332 [2005] [no notice of claim submitted]; Barile v Kavanaugh, 67 NY2d 392 [1986] [failure to advise insured that insurance must be maintained continuously vitiates cancellation notice]; GEICO Indem. v Roth, 56 AD3d 1244 [2d Dept 2008] [cancellation procedure]; Matter of Rue v Northeast Timber Erectors, 289 AD2d 787 [3d Dept 2001] [attempt to cancel Workers’ Compensation insurance coverage ineffective since carrier failed to establish that it requested return receipt when notice of cancellation sent by certified mail]; Home Indem. Co. v de Martinez, 240 AD2d 580 [2d Dept 1997] [billing notice to policyholder failed to include advices that insured has option of remitting premium payment either through producer or directly to company so subsequent cancellation invalid]; Cohn v Royal Globe Ins. Co., 67 AD2d 993 [2d Dept 1979], affd 49 NY2d 942 [1980] [cancellation notice invalid due to type face smaller than 12 points].)

Footnote 23:The hearing arbitrator did not describe the “medical documentation.” Presumably it was the reports for the dates of service.

Footnote 24:CPLR 7511 (c) provides:

Grounds for modifying. The court shall modify the award if:

1. there was a miscalculation of figures or a mistake in the description of any person, thing or property referred to in the award; or

2. the arbitrators have awarded upon a matter not submitted to them and the award may be corrected without affecting the merits of the decision upon the issues submitted; or

3. the award is imperfect in a matter of form, not affecting the merits of the controversy.

American Tr. Ins. Co. v Rutland Med., PC (2023 NY Slip Op 50814(U))

Reported in New York Official Reports at American Tr. Ins. Co. v Rutland Med., PC (2023 NY Slip Op 50814(U))



American Transit Insurance Company, Petitioner,

against

Rutland Medical, PC, A/A/O SHANIA M PESSOA CRAIG, Respondent.

Index No. 531225/2022

Larkin Farrell LLC, New York City (Anthony R. Troise of counsel), for Petitioner.

Roman A. Kravchenko, Garden City, for Respondent.

Aaron D. Maslow, J.

The following numbered papers were read on this petition:

Petition (NYSCEF Doc No. 1)
Notice of Petition (NYSCEF Doc No. 2)
Exhibit A — Arbitration Award (NYSCEF Doc No. 3)
Exhibit B — Master Arbitration Award (NYSCEF Doc No. 4)
Exhibit C — Respondent’s Arbitration Request Form and Arbitration Submission (NYSCEF Doc No. 5) (“Rutland’s Arbitration Request Form & Submission”)
Exhibit D-1 — Petitioner’s Arbitration Submission and Master Arbitration Appeal (NYSCEF Doc No. 6) (“ATIC’s Arbitration Submission and Master Arbitration Brief”)
Exhibit D-2 — Petitioner’s Arbitration Submission (NYSCEF Doc No. 7)
Exhibit D-3 — Petitioner’s Arbitration Submission (NYSCEF Doc No. 8)
Exhibit D-4 — Petitioner’s Arbitration Submission (NYSCEF Doc No. 9)
Exhibit D-5 — Petitioner’s Arbitration Submission (NYSCEF Doc No. 10)
Exhibit D-6 — Petitioner’s Arbitration Submission (NYSCEF Doc No. 11)
Statement of Authorization for Electronic Filing (NYSCEF Doc No. 12)
Request for Judicial Intervention (NYSCEF Doc No. 13)
Affidavit of Service (NYSCEF Doc No. 14)
Statement of Authorization for Electronic Filing (NYSCEF Doc No. 15)
Affidavit of Service (NYSCEF Doc No. 16)
Statement of Authorization for Electronic Filing (NYSCEF Doc No. 17)
Notice of Cross-Petition (NYSCEF Doc No. 18)
Cross-Petition (NYSCEF Doc No. 19)
Stipulation to Adjourn (NYSCEF Doc No. 20)
Statement of Authorization for Electronic Filing (NYSCEF Doc No. 21)
Affirmation in Opposition to Cross-Petition and Reply in Support of Petition (NYSCEF Doc No. 22)
Reply Affirmation in Support of Cross-Petition (NYSCEF Doc No. 23)

Issue Presented

In a No-Fault insurance master arbitration, where the master arbitrator failed to address the issue of law asserted by the insurer, but the issue of law was previously decided by the court in a different Article 75 proceeding, must the master arbitration award be vacated?


Background

Petitioner American Transit Insurance Company (“ATIC”) commenced this CPLR Article 75 proceeding by notice of petition, seeking an order and judgment vacating a No-Fault insurance master arbitration award of Richard B. Ancowitz, Esq. (dated July 25, 2022), which affirmed the arbitration award of Wendy Bishop, Esq. (dated April 8, 2022) granting Respondent Rutland Medical, PC’s (“Rutland”) claim for No-Fault insurance compensation for range of motion testing, muscle testing, physical performance testing, outcome assessment testing, trigger point injections, and chiropractic treatment reflected in a total of 25 bills.[FN1] , [FN2] Arbitrator Bishop [*2]awarded $2,713.58 to Rutland as compensation.[FN3] The services at issue were provided to Shania M. Pessoa Craig, who claimed to have been injured in a motor vehicle accident on April 18, 2019. She assigned her No-Fault insurance benefits to Rutland, and is denoted as “Assignor.” [FN4] (See NYSCEF Doc No. 1, Petition ¶¶ 2, 16-22; NYSCEF Doc No. 6, ATIC’s Arbitration Submission and Master Arbitration Brief at 145 [FN5] .)

Respondent Rutland has opposed ATIC’s petition to vacate the master arbitration award and it cross-petitioned for a judgment confirming the master arbitration award and awarding $2,713.58 as principal, statutory interest, the $40.00 arbitration filing fee, attorney’s fees, and costs and disbursements (see NYSCEF Doc No. 18, Notice of Cross-Petition; NYSCEF Doc No. 19, Cross-Petition).

The petition and cross-petition came before the undersigned for oral argument on June 23, 2023. At that time, both parties appeared by counsel.

The underlying arbitration which is the subject of this proceeding was organized by the American Arbitration Association (“AAA”), which assigned Case No. 17-20-1175-4211 [FN6] to it. [*3]The AAA has been designated by the New York State Department of Financial Services to coordinate the mandatory arbitration provisions of Insurance Law § 5106 (b), which provides:

Every insurer shall provide a claimant with the option of submitting any dispute involving the insurer’s liability to pay first party [“No-Fault insurance”] benefits, or additional first party benefits, the amount thereof or any other matter which may arise pursuant to subsection (a) of this section to arbitration pursuant to simplified procedures to be promulgated or approved by the superintendent.

Insurance Law Article 51 provides for the payment of basic economic loss incurred by persons injured in motor vehicle accidents. Included within basic economic loss are first-party benefits for medical and other professional health services.[FN7] First-party benefits are more commonly known as “No-Fault benefits.”[FN8]

In furtherance of the statutory scheme, a comprehensive set of No-Fault Regulations was promulgated by the Superintendent of Insurance (presently Superintendent of Financial Services). They are contained at 11 NYCRR Part 65. Said part is subdivided into five subparts which encompass the following topics: prescribed insurance policy endorsements, rights and liabilities of self-insurers, claims for benefits, arbitration, and unauthorized providers of health services. Part 65 is also known as Insurance Regulation 68.

Generally, the claims process for health service bills [FN9] for No-Fault insurance compensation begins with the submission by a health service provider of a claim form (usually, but not always, a Form NF-3 verification of treatment by attending physician or other provider [*4]of health service).[FN10] Besides providing information regarding the injured person, the accident, the subject insurance policy, the billing health service provider, diagnoses, and projected treatment, the claim form includes a bill for services performed. The claim form can be submitted directly by the injured person to the No-Fault insurer but over many decades a practice developed whereby the health service providers submit the claim forms. As noted in footnote 4, they possess standing to do so by virtue of having received signed assignments of benefits from the injured persons.[FN11] , [FN12] The insurer must then either pay or deny the bill within 30 days, or seek additional verification within 15 business days. If it denies payment, it must issue a Form NF-10 denial of claim [FN13] explaining why the bill was not paid. (See Insurance Law § 5106 [a]; Viviane Etienne Med. Care, P.C. v Country-Wide Ins. Co., 25 NY3d 498, 505 [2015].)

The record evidence submitted in this Article 75 proceeding revealed that the underlying arbitration involved 25 claim forms covering services for a period of April 30, 2019-December 16, 2019, as per the Form AR Arbitration Request Form (see NYSCEF Doc No. 5, Rutland’s Arbitration Request Form & Submission at 14). Apparently, one claim form was neither paid nor denied and there is no evidence that it was pended for additional verification. The other claim forms (bills) were timely denied, either on the basis of respective peer reviews from Dr. Peter Chiu, M.D. (dated July 16, 2019; September 23, 2019; and December 6, 2019) or an IME (independent medical examination) report of Dr. Glenn Berman, D.C. Dr. Chiu had opined that the services were not medically necessary. Dr. Berman opined that further chiropractic was not medically necessary. (See NYSCEF Doc No. 3, Arbitration Award at numbered pp 1-2.)


Arbitrator Wendy Bishop’s Award

The record evidence reveals further that on April 7, 2002, Arbitrator Wendy Bishop, Esq., conducted a hearing at which Ryan Woodworth, Esq., from Russell Friedman & Associates LLP, appeared for Rutland, and nobody appeared for ATIC (see id. at numbered p 1).

In her award, Arbitrator Bishop noted that the hearing documents were contained in Modria [FN14] . With respect to the bill for which there was no appurtenant denial of claim, she noted that Rutland provided proof of its mailing and she awarded compensation. (See id. at numbered p 2.) Regarding the denials premised on a peer review of Chiu, she found them insufficient as lacking a standard of care and/or a medical rationale; ATIC therefore failed to satisfy an initial burden of establishing lack of medical necessity (see id.).

With regard to bills denied on the basis of Dr. Berman’s IME report, she found that ATIC did meet its initial burden of establishing lack of medical necessity; Dr. Berman’s conclusion that Assignor’s injuries had resolved was supported by negative range of motion and neurological testing. The burden therefore shifted to Rutland to demonstrate the medical necessity of the respective services. “[Rutland] submits the reports of its clinical examinations of the Assignor performed on July 15, 2019 and August 19, 2019. Range of motion in the Assignor’s cervical spine and lumbar spine was restricted. There were muscle spasms in the areas of the Assignor’s cervical spine and lumbar spine. Applicant has thus rebutted Dr. Berman’s IME report, and demonstrated the medical necessity of further treatment.” (Id. at numbered p 3.)

Arbitrator Bishop awarded $2,713.58 as principal. She also awarded interest of 2% per month, an attorney’s fee, and return of the $40.00 filing fee (see id. at numbered pp 4-5; Insurance Law § 5106 [a]; 11 NYCRR 65-4.5 [s]).


Master Arbitrator Richard Ancowitz’s Award

ATIC filed for master arbitration to appeal Arbitrator Bishop’s award. It presented two arguments. The first was that Rutland was an entity formed by a No-Fault insurance fraud ring, as evidenced by an attached indictment. The second was that Arbitrator Bishop erred as a matter of law and her award was irrational because when she assessed medical necessity, she did not take into account well settled case law concerning the need for a medical claimant to meaningfully rebut and discuss the conclusions of the insurer’s expert (citing Innovative Chiropractic, P.C. v Mercury Ins. Co., 25 Misc 3d 137[A], 2009 NY Slip Op 52321[U] [2d, 11th & 13th Dists 2009]). (See NYSCEF Doc No. 6, ATIC’s Arbitration Submission and Master Arbitration Brief at 148-153.)

Master Arbitrator Ancowitz summarized the issues in dispute as follows: “Did the arbitrator err in finding that respondent’s lack of medical necessity defense was insufficiently stated? Was the award irrational or incorrect as a matter of law?” (NYSCEF Doc No. 4, Master Arbitration Award at 2.)

His findings and conclusions were as follows:

The award indicates that $2,713.58 was in dispute, relating to billing submitted to respondent by applicant for various medical and chiropractic services rendered to the Eligible Injured Person (EIP). The arbitrator rejected respondent’s physical examination and peer review-based defense of lack of medical necessity, and rendered an award for applicant.
Specifically, the arbitrator found that applicant had rebutted respondent’s physical examination report, and also found that respondent’s peer review report failed to adequately support the assertion of lack of medical necessity with a standard of care and/or medical rationale.
Respondent has submitted a brief which contends that the arbitrator erred in rejecting their defense. Respondent further contends in conclusory fashion that the award was irrational and should be vacated. Respondent contends that their proof was sufficient to sustain their defense.
Applicant has submitted a brief which contends that the award was rational and should not be disturbed.
Upon review of the contentions of the respondent, I see no reason to disturb the arbitrator’s weighing of the evidence, and in particular, the arbitrator’s determination that respondent’s peer review report was insufficient to support their lack of medical necessity defense. I also find no error in the arbitrator’s factual determination that applicant had rebutted respondent’s physical examination report.
Clearly, a no-fault arbitrator has wide latitude in deciding whether to credit and how to weigh such evidence. 11 NYCRR 65-4.5 (o)(1). See also, Matter of Bay Needle Acupuncture v. Country-Wide Ins. Co., 176 AD3d 806 (2nd Dept 2019); Matter of Jasser v. Allstate Ins. Co., 77 AD3d 751 (2nd Dept 2010); Allstate Ins. Co. v. Keegan, 201 AD2d 724 (2nd Dept 1994).
As per these cases, the weighing of evidence is generally not the function of a master arbitrator. In any event, in this case I find that the award here clearly was not irrational or otherwise infirm.
The award must be affirmed. Matter of Petrofsky v. Allstate Insurance Co., 54 NY2d 207 (1981).
(Id. at 2-3.)


ATIC’s Petition to Vacate

ATIC’s petition to vacate asserted that “The arbitration decision was arbitrary and capricious, irrational and without a plausible basis” (NYSCEF Doc No. 1, Petition ¶ 35), in that “Arbitrator Wendy Bishop, Esq. failed to follow well settled law” (id. ¶ 37). It also made reference to the grounds set forth in CPLR 7511 (b) (1) for vacating an arbitration award (see id. ¶ 33):

The award shall be vacated on the application of a party who either participated in the arbitration or was served with a notice of intention to arbitrate if the court finds that the [*5]rights of that party were prejudiced by:
(i) corruption, fraud or misconduct in procuring the award; or
(ii) partiality of an arbitrator appointed as a neutral, except where the award was by confession; or
(iii) an arbitrator, or agency or person making the award exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made; or
(iv) failure to follow the procedure of this article, unless the party applying to vacate the award continued with the arbitration with notice of the defect and without objection.

The petition proceeded to argue that the claims at issue were properly and timely denied for lack of medical necessity as per the attached peer review and IME report (see id. ¶ 39). ATIC’s evidence submitted to the hearing arbitrator “clearly satisfied its burden” (id. ¶ 40). Ultimately the medical provider — Rutland in this instance — had to prove by a preponderance of the evidence that its services were medically necessary, claimed ATIC; the petition to vacate cited to Dayan v Allstate Ins. Co. (49 Misc 3d 151[A], 2015 NY Slip Op 51751[U] [App Term, 2d Dept, 2d, 11th & 13th Dists 2015]), and Park Slope Medical and Surgical Supply, Inc. v Travelers Ins. Co. (37 Misc 3d 19, 22 n. [App Term, 2d Dept, 2d, 11th & 13th Dists 2012]) (see id. ¶ 41). “In order for an applicant to prove that the services were medically necessary, it must meaningfully refer to, or rebut, the conclusions set forth in the peer review,” maintained the petition, which cited to Pan Chiropractic, P.C. v Mercury Ins. Co. (24 Misc 3d 136[A], 2009 NY Slip Op 51495[U] [App Term, 2d Dept, 2d, 11th & 13th Dists 2009]) (id. ¶ 42). Rutland failed to offer any rebuttal at all, and certainly did not meaningfully refer to the peer review and the IME report, as was required by Pan Chiropractic, P.C. and the more than 100 published decisions citing to it, insisted ATIC (see id. ¶ 43).

ATIC reiterated in several paragraphs of its petition that a health service provider seeking No-Fault medical expense compensation must meaningfully refer to and rebut an insurer’s peer reviewer’s and IME doctor’s conclusions (see id. ¶¶ 47-51). “This proposition is widely accepted as ‘well settled’ law in the industry” (id. ¶ 51). “In this case the arbitrator also ruled for Respondent [Rutland] despite the fact that there was no rebuttal. In doing so the arbitrator failed to follow well settled law. As such, this Court should vacate the arbitration award for the same reasons the Appellate Term reversed the trial courts in Pan Chiropractic, Eastern Star Acupuncture, Jaga Med. Servs., P.C. and High Quality Medical.” (Id. ¶ 54.)

“This decision was arbitrary and capricious, without rational basis and incorrect as a matter of law because zero evidence simply cannot outweigh evidence” (id. ¶ 57). The petition concluded by asserting that Arbitrator Bishop ignored ATIC’s “evidence and/or well settled legal precedent in order to justify a determination in favor of Applicant [Rutland]” (id. ¶ 58). Therefore, ATIC’s rights were prejudiced by the arbitrator’s partiality “and the arbitrator exceeded his/her power and failed to make a final and definite award and the decision must be vacated” (id. ¶ 59). The relief sought was vacatur of the awards of both Arbitrator Bishop and Master Arbitrator Ancowitz — that they “have no force or effect” (id. ¶ 60).


Rutland’s Cross-Petition to Confirm

Rutland argued in its cross-petition most significantly that the arbitration awards had to be confirmed if they were supported by evidence or other basis in reason (citing Matter of Petrofsky v Allstate Ins. Co., 54 NY2d 207 [1981]); rational (citing Matter of Unigard Mut. Ins. Co. v Hartford Ins. Group, 108 AD2d 917 [2d Dept 1985]); and not inapposite to settled law (citing Matter of Global Liberty Ins. Co. v Therapeutic Physical Therapy, P.C., 148 AD3d 502 [1st Dept 2017]). ATIC did not meet its burden of establishing that the master arbitration award did not meet these criteria. (See NYSCEF Doc No. 19, Cross-Petition.)

Rutland did not submit any calculation of an attorney’s fee for its opposition to the petition and maintenance of the cross-petition.


No-Fault Insurance Arbitration

When the No-Fault Law was first enacted by the Legislature in Chapter 13 of the Laws of 1973 to take effect February 1, 1974, § 675 of the Insurance Law was added. In subdivision 2 thereof, insurers were required to provide claimants with an arbitration option for disputes involving liability for first-party benefits. This provision was amended in Chapter 892 of the Laws of 1977, when several changes were made to the 1973 version.[FN15] The provision regarding arbitration in § 675 was amended to add the following language:

An award by an arbitrator may be vacated or modified by a master arbitrator in accordance with simplified procedures to be promulgated or approved by the superintendent [of insurance]. The grounds for vacating or modifying an arbitrator’s decision by a master arbitrator shall not be limited to those grounds for review set forth in article seventy-five of the civil practice law and rules. The decision of a master arbitrator shall be binding except for the grounds for review set forth in article seventy-five of the civil practice law and rules, and provided further that where the amount of such master arbitrator’s award is five thousand dollars or greater, exclusive of interest and attorney’s fees, the insurer or the claimant may institute an action in a court of competent jurisdiction to adjudicate the dispute de novo.[FN16]

The provisions regarding No-Fault insurance arbitration remained in the recodification of the Insurance Law enacted in Chapters 367 and 805 of the Laws of 1984. The arbitration provisions were set forth in § 5106, and subdivisions (b) and (c) now read as follows:

(b) Every insurer shall provide a claimant with the option of submitting any dispute involving the insurer’s liability to pay first party benefits, or additional first party benefits, the amount thereof or any other matter which may arise pursuant to subsection (a) of this section to arbitration pursuant to simplified procedures to be promulgated or approved by the superintendent. Such simplified procedures shall include an expedited eligibility hearing option, when required, to designate the insurer for first party benefits pursuant to subsection (d) of this section. The expedited eligibility hearing option shall be a forum for eligibility disputes only, and shall not include the submission of any particular bill, payment or claim for any specific benefit for adjudication, nor shall it consider any other defense to payment.
(c) An award by an arbitrator shall be binding except where vacated or modified by a master arbitrator in accordance with simplified procedures to be promulgated or approved by the superintendent. The grounds for vacating or modifying an arbitrator’s award by a master arbitrator shall not be limited to those grounds for review set forth in article seventy-five of the civil practice law and rules. The award of a master arbitrator shall be binding except for the grounds for review set forth in article seventy-five of the civil practice law and rules, and provided further that where the amount of such master arbitrator’s award is five thousand dollars or greater, exclusive of interest and attorney’s fees, the insurer or the claimant may institute a court action to adjudicate the dispute de novo.

Insofar as is here relevant, the No-Fault Insurance Regulations promulgated by the Superintendent of Insurance provided that a master arbitrator may vacate or modify a hearing arbitrator’s award where it “was incorrect as a matter of law (procedural or factual errors committed in the arbitration below are not encompassed within this ground)” (11 NYCRR 65.18 [a] [4]). This regulatory language was carried over into the revised Regulations promulgated in 2002, in 11 NYCRR 65-4.10 (a) (4).[FN17] A master arbitrator may also vacate or modify a hearing [*6]arbitrator’s award under certain other grounds also (see 11 NYCRR 65-4.10 [a]).[FN18]


Discussion

ATIC’s contention in its master arbitration appeal that Rutland was an entity formed by a No-Fault insurance fraud ring has not been pursued in this Article 75 proceeding and, therefore, is not before this Court. Remaining is ATIC’s contention that Arbitrator Bishop failed to follow well settled law that a medical provider applicant in arbitration must meaningfully refer to, or rebut, the conclusions set forth in the peer review and/or IME report and, therefore, Master Arbitrator Ancowitz’s affirmance was erroneous.

The proper standard of review by a No-Fault insurance master arbitrator is whether he or she reached their decision in a rational manner, i.e., whether it was arbitrary and capricious, irrational, or without a plausible basis, or incorrect as a matter of law; the master arbitrator may [*7]not engage in an extensive factual review, which includes weighing the evidence, assessing the credibility of various medical reports, and making independent findings of fact (see Matter of Petrofsky v Allstate Ins. Co., 54 NY2d 207 [1981]).

The standard for Article 75 court scrutiny of a master arbitrator’s review of a hearing arbitrator’s award in terms of whether there was an error of law is whether it is so irrational as to require vacatur (see Matter of Smith v Firemen’s Ins. Co., 55 NY2d 224, 232 [1982]; Matter of Acuhealth Acupuncture, PC v Country-Wide Ins. Co., 170 AD3d 1168 [2d Dept 2019]; Matter of Acuhealth Acupuncture, P.C. v New York City Transit Authority, 167 AD3d 869 [2d Dept 2018]; Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co., 149 AD3d 828 [2d Dept 2017]). The master arbitrator’s determination of the law need not be correct, and mere errors of law are insufficient to set aside the master arbitrator’s award; on questions of substantive law, the master arbitrator’s determination must be upheld if there is a rational basis for his determination; if the master arbitrator’s errors on a matter of law are irrational, his award may be set aside (see Matter of Liberty Mut. Ins. Co. v Spine Americare Med., P.C., 294 AD2d 574 [2d Dept 2002]).

This Court has previously discussed the issue raised by ATIC — whether a medical provider applicant in No-Fault insurance arbitration must submit expert medical opinion evidence which specifically refers to and either discusses or rebuts the insurer’s expert medical opinion evidence. This Court held that it need not, because the case law ATIC relied upon governs summary judgment motions in court, not No-Fault arbitrations. (See American Tr. Ins. Co. v Right Choice Supply, 78 Misc 3d 890 [Sup Ct, Kings County 2023].) Assessment of medical necessity entails a factual review of evidence and this is committed to the arbitrator’s discretion (id.). As this Court wrote,

In part, this Court’s present determination is based on the additional provision in 11 NYCRR 65-4.10 (a) (4) which provides that “procedural or factual errors committed in the arbitration below are not encompassed within this ground.” The reference to “factual errors” conveys impliedly that when it comes to assessing evidence for the purpose of fact-finding, an arbitrator has wider latitude and should not be required to comply with settled or established law concerning what specific evidence suffices to refute the opposing party’s evidence. This Court also takes into account the general proposition that the admissibility of evidence and the determination of issues of fact are left to the arbitrator’s discretion (see Wien & Malkin LLP v Helmsley-Spear, Inc., 6 NY3d 471, 483 [2006] [“Manifest disregard of the facts is not a permissible ground for vacatur of an award. . . .”]; Central Square Teachers Association v Board of Education of the Central Square Central School District, 52 NY2d 918, 919 [1981] [“The path of analysis, proof and persuasion by which the arbitrator reached this conclusion is beyond judicial scrutiny.”]; Matter of Lipson v Herman, 189 AD3d 440, 441 [1st Dept. 2020] [“error of fact . . . will not result in the vacatur of an arbitrator’s award”]; Matter of Bernstein v On-Line Software International, Inc., 232 AD2d 336, 338 [1st Dept. 1996] [“It is well established, however, that arbitrators are not bound by the rules of evidence and may admit or deny exhibits on an equitable basis.”]). In light of this case law with respect to the admissibility of evidence and the determination of issues of fact in arbitration, 11 NYCRR 65-4.10 (a) (4)’s “matter of law” should be limited in its breadth.
(78 Misc 3d at 909-910.)

Therefore, this Court holds that Arbitrator Bishop did not err when she did not require a formal rebuttal from Rutland which would have specifically referred to and either discussed or rebutted ATIC’s peer reviews and IME report. In point of fact, according to Arbitrator Bishop, Dr. Chiu’s peer reviews did not even rise to the level of a prima facie case of lack of medical necessity. It was within the arbitrator’s discretion to find that Dr. Chiu did not adequately support his conclusions. Ergo, the burden of proof did not shift to Rutland to rebut them.

The situation is a bit different with regard to Dr. Berman’s IME report. Arbitrator Bishop held that ATIC did meet its initial burden of proof and the burden of proof then shifted to Rutland to prove medical necessity, which it did with examination report findings. Based on this Court’s decision in American Tr. Ins. Co. v Right Choice Supply, however, a formal rebuttal was not necessary. It was within the arbitrator’s discretion to find that the IME report was overcome by evidence which was not a formal rebuttal (clinical examination results).

This Court notes that Master Arbitrator Ancowitz did not consider the legal issue he was presented with in the master arbitration appeal. In the segment of his award reserved for a summary of the issues, he wrote, “Was the award irrational or incorrect as a matter of law?” (NYSCEF Doc No. 4, Master Arbitration Award at 2). This court’s scrutiny of his master arbitration award reveals that he never discussed the issue posed by ATIC — that Rutland failed to submit a rebuttal meaningfully referring to and either discussing or rebutting ATIC’s medical evidence (peer reviews and IME report). Master Arbitrator Ancowitz found no error in Arbitrator Bishop’s analysis of the factual issue of medical necessity; it was neither arbitrary nor otherwise inform. Yet he did not mention the asserted error of law! In essence, his master arbitration award was incomplete. Despite that, however, this Court is constrained to uphold his award because the ultimate determination affirming Arbitrator Bishop was not irrational (see Matter of Smith, 55 NY2d 224; Matter of Acuhealth Acupuncture, PC, 170 AD3d 1168; Matter of Acuhealth Acupuncture, P.C., 167 AD3d 869; Matter of Acuhealth Acupuncture, P.C., 149 AD3d 828; Matter of Liberty Mut. Ins. Co., 294 AD2d 574). The reason Master Arbitrator Ancowitz’s award was not irrational is because Arbitrator Bishop was not required to apply the case law cited by ATIC regarding meaningfully referring to the insurer’s peer reviews and IME reports, as this Court held in American Tr. Ins. Co. v Right Choice Supply. Even if Master Arbitrator Ancowitz ignored this legal issue, it was academic; Arbitrator Bishop was within her rights to ignore the absence of a formal rebuttal referring to ATIC’s expert evidence.[FN19]

“An arbitration award is indefinite or nonfinal for purposes of CPLR 7511 and subject to vacatur ‘only if it leaves the parties unable to determine their rights and obligations, if it does not resolve the controversy submitted or if it creates a new controversy’ [citations omitted]” (Westchester County Corr. Officers Benevolent Assn., Inc. v Cheverko, 112 AD3d 842 [2d Dept [*8]2013]). While Master Arbitrator Ancowitz did not rule on the asserted error of law, it is inconsequential inasmuch as did not find that there was an error of law. Arbitrator Bishop’s award determined the rights and obligations of the parties and resolved the submitted controversy, and her determination was sustained by Master Arbitrator Ancowitz. There has been a final and definite resolution of the parties’ dispute (see Civil Serv. Empls. Assn. v County of Nassau, 305 AD2d 498 [2d Dept 2003]; Matter of Paul v Insurance Co. of N. Am., 81 AD2d 671 [2d Dept 1981]; cf. Papapietro v Pollack v Kotler, 9 AD3d 419 [2d Dept 2004]; Matter of Teamsters Local Union 693 [Coverall Serv. & Supply Co.], 84 AD2d 609 [3d Dept 1981]).

“This Court has recognized the authority of a court, before which there is a petition to confirm or to vacate an arbitration award, to remand the matter to the arbitration panel when the panel’s award does not dispose of a particular issue raised by the parties or indicate the panel’s intention with respect to it (see, Matter of Ritchie Bldg. Co. [Rosenthal], 9 AD2d 880), or when the award is ambiguous and not sufficiently explicit, since a court may not impose its own interpretation of the award (see, Matter of Jolson [Forest Labs.], 15 AD2d 901). Here, the award is not only ambiguous as to the intent of the panel, but also fails to address and dispose of the issues raised by the parties or to make any specific findings of fact or credibility. Given the diametrically opposed positions of the parties, the award, which apparently denied both sets of claims on the merits, cannot be harmonized or interpreted without speculation as to the panel’s intent.” (Hamilton Partners v Singer, 290 AD2d 316, 316-317 [2d Dept 2002].) Master Arbitrator Ancowitz’s award is not ambiguous. His intent to affirm Arbitrator Bishop is quite manifest. His approval of her analysis is evident. There is nothing to speculate about how the master arbitrator treated the hearing arbitration award. Although he did not explicitly deal with the issue raised by ATIC asserting an error of law, Master Arbitrator Ancowitz was sufficiently explicit to enable this Court to review it without having to speculate about his intent.

Accordingly, this Court rejects ATIC’s contentions in its petition. ATIC’s rights were not prejudiced, the arbitrator was not partial, she did not exceed her powers, her decision was neither arbitrary nor capricious, it had a rational basis, and she did not render a nonfinal award.

None of the CPLR 7511 (b) (1) grounds cited by ATIC for vacating an arbitration award have been proved by ATIC. There was no corruption, fraud or misconduct in the arbitration process. There was no partiality. Neither arbitrator exceeded his or her power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made. There was no failure to follow the procedure of Article 75.


Cross-Petition;
Interest, Attorney’s Fees, Return of Arbitration Filing Fee, Costs, and Disbursements

As mentioned above, Rutland sought in its cross-petition to confirm the arbitration determinations. Having found that no grounds exist to vacate them, the master arbitration award must be confirmed. Rutland is entitled to No-Fault compensation for health services in the principal amount of $2,713.58.

Rutland also sought additional payments in the nature of interest, attorney’s fees, return [*9]of the arbitration filing fee, costs, and disbursements.


Interest:

Where a claim is timely denied, interest at two per cent per month shall begin to accrue as of the date arbitration was requested by the claimant, i.e., the date the AAA received the applicant’s arbitration request, unless arbitration was commenced within 30 days after receipt of the denial, in which event interest shall begin to accrues as of the 30th day after proof of claim was received by the insurer (see Insurance Law § 5106 [a]; 11 NYCRR 65-4.5 [s] [3], 65-3.9 [c]; Canarsie Med. Health, P.C. v National Grange Mut. Ins. Co., 21 Misc 3d 791, 797 [Sup Ct, NY County 2008] [“The regulation provides that where the insurer timely denies, then the applicant is to seek redress within 30 days, after which interest will accrue.”]). The plaintiff health care provider in Canarsie Med. Health, P.C. argued that where a timely issued denial is later found to have been improper, the interest should not be stayed merely because the provider did not seek arbitration within 30 days after having received the denial. The court rejected this argument, finding that the regulation concerning interest was properly promulgated; this includes the provision staying interest until arbitration is commenced, where the claimant does not promptly take such action. Rutland’s arbitration request was received by the AAA on August 14, 2020 (see NYSCEF Doc No. 5, Rutland’s Arbitration Request Form & Submission at 1), which was more than 30 days after ATIC’s last denial of claim. Thus, interest on all of the claims herein accrued from August 14, 2020, not from the 30th day after proof of claim was received by ATIC. The end date for the calculation of the period of interest shall be the date of payment of the claims. In calculating interest, the date of accrual is excluded from the calculation (see General Construction Law § 20 [“The day from which any specified period of time is reckoned shall be excluded in making the reckoning.”]). Where a motor vehicle accident occurred after April 5, 2002, interest is calculated at the rate of two percent per month, simple, on a pro rata basis using a 30-day month (see 11 NYCRR 65-3.9 [a]; Gokey v Blue Ridge Ins. Co., 22 Misc 3d 1129[A], 2009 NY Slip Op 50361[U] [Sup Ct, Ulster County 2009]). CPLR 5004’s nine percent per annum is superseded by Insurance Law § 5106 [a]’s two percent per month (see Pro-Med Med., P.C. v MVAIC (74 Misc 3d 130[A], 2022 NY Slip Op 50135[U] [App Term 2d Dept, 2d, 11th & 13th Dists 2022]).


Attorney’s Fees:

After calculating the sum total of the first-party benefits awarded in this arbitration plus interest thereon, ATIC shall pay Rutland an attorney’s fee equal to 20 percent of that sum total subject to a maximum fee of $1,360.00, as provided for in 11 NYCRR 65-4.6 [d].

Additionally, this Court sustains the $130.00 attorney’s fee for preparatory services in connection with the master arbitration. This is in accordance with 11 NYCRR 65-4.10 [j] [2] [i].

Moreover, pursuant to 11 NYCRR 65-4.10 [j] [4], having successfully prevailed in this Article 75 proceeding, Rutland is entitled to an additional attorney’s fee (see Global Liberty Ins. Co. of NY v Nexray Family Chiropractic, 178 AD3d 525 [1st Dept 2019]; GEICO Ins. Co. v AAAMG Leasing Corp., 148 AD3d 703 [2d Dept 2017]).

Rutland’s counsel did not submit an affirmation specifying details with regard to work performed in this Article 75 special proceeding. It is not known whether an attorney or support staff performed the work. The cross-petition contains mostly boilerplate statements which could apply to most Article 75 proceedings to confirm No-Fault arbitration awards, with a few insertions specific to this particular claim. The same boierplate allegations have been submitted by Rutland’s counsel in past Article 75 proceedings. The cross-petition asserted that Rutland “should be granted leave to serve an afirmation in order to set forth its resonable attroneys’ fees in defending this action” (NYSCEF Doc No. 19, Cross-Petition ¶ 61).

A special proceeding, such as one commenced pursuant to CPLR 7511 to vacate an arbitration award, “is a civil judicial proceeding in which a right can be established or an obligation enforced in summary fashion. Like an action, it ends in a judgment (CPLR 411), but the procedure is similar to that on a motion (CPLR 403, 409). Speed, economy and efficiency are the hallmarks of this procedure.” (Vincent C. Alexander, Prac Commentaries, McKinney’s Cons Laws of NY, CPLR C401:01.) Counsel should have included an affirmation containing details describing the work performed (see Matter of Bay Needle Care Acupuncture, P.C. v Country Wide Ins. Co., 176 AD3d 695 [2d Dept 2019] [claim for hourly fee for prevailing on policy issue not substantiated with any time records]). It behooved counsel to do so considering the expedited nature of special proceedings.

In a Kings County No-Fault insurance case involving an appeal to the Court of Appeals, the court awarded $250.00 per hour but this was in connection with the litigation of a novel or unique issue (see Viviane Etienne Med. Care PC v Country-Wide Ins. Co., 59 Misc 3d 579 [Sup Ct, Kings County 2018]). The issue in the case at bar was neither novel nor unique, especially since the preclusion rule for untimely assertions of lack of medical necessity is established law.

Consdering the factors delineated herein, this Court awards $375.00 for work performed by Rutland’s counsel on this Article 75 proceeding. This Court considered the $70.00 per hour fee for policy issues litigated in arbitration or at the trial level, increased it to $125.00 per hour, and assumed that there was attorney involvement for two hours at the most in preparation of Rutland’s papers. In addition, a $125.00 for a personal appearance in court is awarded. (See 11 NYCRR 65-4.6 [c].)


Return of Arbitration Filing Fee:

ATIC shall also pay Rutland $40.00 as reimbursement for the fee paid to the AAA (see 11 NYCRR 65-4.5 [s] [1]).

Costs and Disbursements:

As the prevailing party in this special proceeding, Rutland shall recover its costs and disbursements, to be taxed by the Clerk.


Other Requested Relief

Any requested relief not expressly addressed herein has nonetheless been considered and is hereby expressly rejected.


Conclusion

Accordingly, it is hereby ORDERED, ADJUDGED, and DECREED that:

(1) ATIC’s petition to vacate the master arbitration award of Richard Ancowitz in AAA Case No. 99-20-1175-4211 is denied and this special proceeding is dismissed.

(2) Rutland’s cross-petition to confirm said master arbitration award is granted.

(3) Said master arbitration award is confirmed in its entirety.

(4) Rutland is awarded the principal amount of $2,713.58 as No-Fault insurance health service benefits, along with simple interest thereon (i.e., not compounded) at two per cent per month on a pro rate basis using a 30-day month, computed from August 14, 2020 to the date of payment of the principal amount, but excluding August 14, 2020 from being counted within the period of interest.

(5) After calculating the sum total of the principal amount of $2,713.58 plus the interest thereon, ATIC shall pay Rutland an attorney’s fee equal to 20 percent of that sum total, subject to a maximum fee of $1,360.00.

(6) ATIC shall pay Rutland an attorney’s fee of $130.00 in connection with the master arbitration.

(7) ATIC shall pay Rutland an attorney’s fee of $375.00 for work performed by counsel on this Article 75 proceeding.

(8) Rutland shall recover from ATIC costs and disbursements as allowed by law to be taxed by the Clerk.

E N T E R
Brooklyn, New York
August 4, 2023
HON. AARON D. MASLOW
Justice of the Supreme Court of the
State of New York

Footnotes

Footnote 1:The notice of petition seeks vacatur of “the arbitration award issued by Arbitrator Wendy Bishop, Esq. and/or Master Arbitrator Richard Ancowitz, Esq. under Article 75 of the CPLR” (NYSCEF Doc No. 2, Notice of Petition at 1), but it must be deemed to seek vacatur of just the master arbitration award inasmuch as the latter is the final determination of the arbitration process. The No-Fault Regulations provide that “court review pursuant to an article 75 proceeding” is from the “decision of a master arbitrator” (11 NYCRR 65-4.10 [h] [1] [i]). In fact, a party may not appeal from a hearing arbitration award (see Matter of Staten Is. Hosp. v USAA, 103 AD2d 744 [2d Dept 1984]; Matter of Griffith v Home Indem. Co., 84 AD2d 332 [1st Dept 1982]; Matter of Lampasona v Prudential Prop. & Cas. Ins. Co., 111 Misc 2d 623 [Sup Ct, Kings County 1981]). “[T]he Legislature intended the provision of CPLR article 75 to apply only to the review of the awards of master arbitrators (see, Insurance Law § 5106[c])” (Matter of Custen v General Acc. Fire and Life Ins. Co., 126 AD2d 256 [2d Dept. 1987]). It follows that if the hearing arbitrator’s award is imperfect, this can affect judicial review of a master arbitration award affirming it.

Footnote 2:Rather than denote the parties here as “Petitioner” and “Respondent” in discussion, the parties’ names are used. This is to facilitate the reader’s understanding of the facts, arguments, analysis, and determination. This also minimizes confusion because the respondent in the underlying arbitration (ATIC) is not the respondent herein but rather is the petitioner herein. The respondent herein, Rutland, was not the respondent in the arbitration, but was the applicant.

Footnote 3:Arbitrator Bishop wrote that the claimed amount in the arbitration request form was $2,713.58, which conflicts with the Form AR Arbitration Request Form (compare NYSCEF Doc No. 3 (Arbitration Award at numbered p 1) with NYSCEF Doc No. 5 (Rutland’s Arbitration Request Form & Submission at 15).

Footnote 4:Health service providers obtain standing to pursue No-Fault insurance compensation in arbitration by virtue of having received an assignment of benefits from the respective person claiming to have been injured in a covered motor vehicle accident; such person is often denoted as an “assignor.”

Footnote 5:References to page numbers in NYSCEF filings lacking specified page numbers are to the PDF page numbers.

Footnote 6:Paragraph 28 of the petition describes the AAA Case No. as 99-20-1175-4211, which was assigned to the master arbitration appeal. The original arbitration was assigned AAA Case No. 17-20-1175-4211 (see NYSCEF Doc No. 3, Arbitration Award at numbered p 1).

Footnote 7:This statutory scheme was developed by New York’s legislature in 1973, as part of a tradeoff whereby lawsuits for pain and suffering resulting from personal injuries in motor vehicle accidents were limited to instances of serious injury (see generally Insurance Law art 51; L 1973, ch 13, as amended L 1977, ch 892; John R. Dunne, New York’s No-Fault Automobile Insurance Law A Glimpse of the Past and a Glance at the Future, 50 NY St BJ 284 [June 1978]; J. Benedict, New York Adopts No-Fault: A Summary and Analysis, 37 Albany L Rev 662 [1973]).

Footnote 8:Although Insurance Law Article 51 does not mention the term “No-Fault,” shortly after the post-motor vehicle accident economic loss compensation system was enacted in 1973, the appellation “No-Fault” was adopted in common parlance to describe it.

Footnote 9:This Court uses the term “health service bills” instead of “medical bills” because the No-Fault Law provides for reimbursement of “(i) medical, hospital . . . , surgical, nursing, dental, ambulance, x-ray, prescription drug and prosthetic services; (ii) psychiatric, physical therapy . . . and occupational therapy and rehabilitation . . . and (iv) any other professional heath services” (Insurance Law § 5102 [b] [1]). Hence, the No-Fault insurance system encompasses not just “medical” services. In the instant case, the services at issue encompassed diagnostic testing, therapeutic injections, and chiropractic.

Footnote 10:The prescribed claim forms are included within 11 NYCRR Part 65 (Regulation 68) Appendix 13. Besides Form NF-3 (verification of treatment by attending physician or other provider of health service), Appendix 13 contains Form NF-4 (verification of hospital treatment) and Form NF-5 (hospital facility form). Not every No-Fault insurance provider uses the prescribed forms; some utilize a HICF (Health Insurance Claim Form) or a UB-04 form more commonly used for inpatient outpatient claims billed by hospitals, healthcare facilities, and surgical facilities.

Footnote 11:There is a prescribed assignment of benefits form (Form NF-AOB) in 11 NYCRR Part 65 (Regulation 68) Appendix 13.

Footnote 12:The process of submitting a No-Fault claim to the insurer is governed by 11 NYCRR Subpart 65-3, which contains §§ 65-3.1 et seq.

Footnote 13:Form NF-10 is also included within 11 NYCRR Part 65 (Regulation 68) Appendix 13.

Footnote 14:This is the AAA’s electronic case management and filing platform maintained on the Internet; it is known as “Modria,” which was the name of the company which developed it for the AAA (see Liveblogging #ODR2014: The Developing Field of Online Dispute Resolution, https://civic.mit.edu/index.html%3 Fp=1452.html [last accessed Mar. 19, 2023]; Welcome to the Modria Resolution Center for the American Arbitration Association, https://aaa-nynf.modria.com/ [last accessed Mar. 19, 2023]).

Footnote 15:Among the more substantial changes in the 1977 legislation were the adoption of fee schedules to limit health service expenses and modifying the threshold categories for suing for noneconomic loss, i.e., pain and suffering.

Footnote 16:Nothing in the Governor’s Bill Jacket for Chapter 13 of the Laws of 1977 or other contemporary records comments on the provision adopting master arbitration review of hearing arbitrators’ decisions, so it is not known why the master arbitration process was created (see Matter of Bamond v Nationwide Mut. Ins. Co., 75 AD2d 812, 813 [2d Dept 1980], affd 52 NY2d 957 [1981]). This Court speculates that at least one reason was that No-Fault arbitration was compulsory and the Legislature desired to permit a party to an arbitration to seek review of the hearing arbitrator’s award on the basis of an assertion of an error of law, which traditionally was not a basis for review in an Article 75 proceeding (see Mott v State Farm Ins. Co., 77 AD2d 488 [3d Dept 1980], revd sub nom. on other grounds Matter of Smith v Firemen’s Ins. Co., 55 NY2d 224 [1982]).

Footnote 17:Most non-No-Fault insurance arbitration awards cannot be vacated due to an error of law (see Matter of Sprinzen v Nomberg, 46 NY2d 623, 629-630 [1979]). No-Fault insurance arbitrations are different; an error of law can be the basis for reversal — by a master arbitrator. In that sense, the master arbitrator’s review is broader than that of a court, since a court will not vacate an arbitration award due to an error of law (see Matter of Petrofsky v Allstate Ins. Co., 54 NY2d 207, 211-212 [1981]; Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co., 176 AD3d 800, 802 [2d Dept 2019]).

Footnote 18:11 NYCRR 65-4.10 (a) provides as follows:

Grounds for review. An award by an arbitrator rendered pursuant to section 5106(b) of the Insurance Law and section 65-4.4 or 65-4.5 of this Subpart may be vacated or modified solely by appeal to a master arbitrator, and only upon one or more of the following grounds:
(1) any ground for vacating or modifying an award enumerated in article 75 of the Civil Practice Law and Rules (an article 75 proceeding), except the ground enumerated in CPLR subparagraph 7511(b)(1)(iv) (failure to follow article 75 procedure);
(2) that the award required the insurer to pay amounts in excess of the policy limitations for any element of first-party benefits; provided that, as a condition precedent to review by a master arbitrator, the insurer shall pay all other amounts set forth in the award which will not be the subject of an appeal, as provided for in section 65-4.4 or 65-4.5 of this Subpart;
(3) that the award required the insurer to pay amounts in excess of the policy limitations for any element of additional first-party benefits (when the parties had agreed to arbitrate the dispute under the additional personal injury protection endorsement for an accident which occurred prior to January 1, 1982); provided that, as a condition precedent to review by a master arbitrator, the insurer shall pay all other amounts set forth in the award which will not be the subject of the appeal, as provided for in section 65-4.4 or 65-4.5 of this Subpart;
(4) that an award rendered in an arbitration under section 65-4.4 or 65-4.5 of this Subpart, was incorrect as a matter of law (procedural or factual errors committed in the arbitration below are not encompassed within this ground);
(5) that the attorney’s fee awarded by an arbitrator below was not rendered in accordance with the limitations prescribed in section 65-4.6 of this Subpart; provided that, as a condition precedent to review by a master arbitrator, the insurer shall pay all other amounts set forth in the award which will not be the subject of the appeal, as provided for in section 65-4.4 or 65-4.5 of this Subpart.

Footnote 19:One bill dealt with by Arbitrator Bishop had no corresponding denial of claim. Her determination with respect to this bill was not referred to in ATIC’s master arbitration appeal or in this Article 75 petition.
State Farm Mut. Auto. Ins. Co. v Garden Med. Care, P.C. (2023 NY Slip Op 50762(U))

Reported in New York Official Reports at State Farm Mut. Auto. Ins. Co. v Garden Med. Care, P.C. (2023 NY Slip Op 50762(U))



State Farm Mutual Automobile Insurance Company and STATE FARM FIRE AND CASUALTY COMPANY, Plaintiffs,

against

Garden Medical Care, P.C., Defendant.

Index No. 651387/2022

Bennett, Bricklin & Saltzburg, LLC, New York, NY (Alex R. Garriga of counsel), for plaintiffs.

No appearance for defendant.

Gerald Lebovits, J.

This is a no-fault insurance coverage action. Plaintiffs, State Farm Mutual Automobile Insurance Company and State Farm Fire & Casualty Company, seek a declaratory judgment that defendant, Garden Medical Care, P.C., has no right to receive payment for hundreds of no-fault claims for medical treatment, totaling approximately $312,000. (See NYSCEF No. 10 at 6 [spreadsheet of claims at issue].) Plaintiffs are contending that defendant’s claims for treatment are foreclosed by defendant’s (asserted) failure or refusal to provide information and documents in response to discovery requests served by plaintiffs following defendant’s examination under oath (EUO).

Plaintiffs now move without opposition for default judgment under CPLR 3215. The motion is denied.

BACKGROUND

Defendant is a medical provider, submitting treatment bills to no-fault insurers like plaintiffs, as the assignee of injured persons eligible for no-fault coverage. Between July and September 2021, defendant submitted hundreds of no-fault bills for treatment provided in [*2]connection with numerous no-fault claims. (See generally NYSCEF No. 10 [claims spreadsheet].) In response to each bill, plaintiffs asked defendant to appear for an EUO. (See id.) Plaintiffs allege that before doing so, they had investigated defendant’s billing and treatment practices and its eligibility to receive no-fault benefits. (See NYSCEF No. 1 at 28 [verified complaint]; see also NYSCEF No. 12 at ¶¶ 4-10 [affidavit of Michael Bodnar, State Farm Special Investigative Unit investigator].)

Defendant’s principal appeared for an EUO in September 2021. (See NYSCEF No. 1 at ¶ 34.) Although the affidavit of plaintiffs’ investigator describes defendant’s EUO testimony (see NYSCEF No. 12 at ¶¶ 12-16), plaintiffs have not provided a copy of the full EUO transcript. Plaintiffs represent that following the EUO, they served demands seeking further information and documents. (See NYSCEF No. 1 at ¶ 35; NYSCEF No. 12 at ¶¶ 17-18.) The demands themselves have not been provided. Plaintiffs further represent that defendant provided some of the requested discovery, objected to some of plaintiffs’ demands, and asserted that some of the requested documents were not in its possession. (NYSCEF No. 1 at ¶ 38; NYSCEF No. 12 at ¶ 19.) Plaintiffs do not provide copies of defendant’s responses and objections.

Plaintiffs contend that they still need more information to evaluate the eligibility of the claims for reimbursement that defendant has refused to provide: financial records from April 1, 2021, to the present, including complete bank records, general ledgers, profit and loss statements, and balance statements; documents reflecting the purchase, sale, or transfer of any ownership or investment interest in defendant, a professional corporation; documents concerning examinations performed and billed by defendant; documents concerning agreements with anyone providing billing and/or management services on behalf of defendant; documents concerning the referral, solicitation, and procurement of patients for the defendant; documents concerning the Extracorporeal Shock Wave Therapy (ESWT) machine device owned by defendant; scheduling documents for individuals who provided services for defendant; and articles or publications that support, among other things, defendant’s use of ESWT to treat patients’ conditions.[FN1] (NYSCEF No. 12 at 20.)

Plaintiffs allege that given defendant’s (asserted) failure to comply sufficiently with plaintiffs’ post-EUO verification requests, plaintiffs timely denied payment on all of the no-fault treatment bills at issue. Plaintiffs then brought this action for a no-coverage declaration with respect to those bills. Plaintiffs now move for default judgment.


DISCUSSION

A plaintiff moving for default judgment must demonstrate proper service, the defendant’s default, and the facts constituting plaintiff’s claim. (See CPLR 3215 [f].) Plaintiffs have shown that it properly served defendant (see NYSCEF No. 4 [affidavit of service]; and defendant has not appeared. But plaintiffs have not provided proof of the facts constituting its claim.

Plaintiffs’ claim rests on defendant’s (putative) failure to respond to post-EUO document demands warranted by defendant’s EUO testimony. But plaintiffs’ motion papers do not attach copies of (i) the EUO transcript; (ii) plaintiffs’ post-EUO demands; (iii) defendant’s responses and objections to those demands; or (iv) defendant’s document production. Absent those materials, this court cannot assess the key question presented by plaintiffs’ motion—whether defendant failed to respond adequately to post-EUO verification requests that plaintiffs were entitled to make. The brief, conclusory statements to that effect in plaintiffs’ complaint and SIU affidavit are not alone sufficient.

Accordingly, it is

ORDERED that plaintiffs’ default-judgment motion is denied; and it is further

ORDERED that if plaintiffs do not bring a renewed default-judgment motion within 30 days of entry of this order, the action will be dismissed; and it is further

ORDERED that plaintiffs serve a copy of this order with notice of its entry on defendant by certified mail, return receipt requested, directed to defendant’s last-known address.

DATE 7/25/2023

Footnotes

Footnote 1: Plaintiffs’ additional verification requests for bank records, documents about billing/management services, and documents relating to the purchase, sale, or transfer of ownership or investment interests appear to be seeking information into so-called Mallela issues—i.e., whether defendant here fails to meet applicable state or local licensing requirements, such that plaintiffs are entitled to withhold no-fault payments. (See State Farm Mut. Auto. Ins. Co. v Mallela (4 NY3d 313, 319 [2005] [construing 11 NYCRR 65-3.16 [12]].) This court need not, and does not, address on this motion whether plaintiffs have established sufficient cause for seeking that information from defendant during the claim-verification process. (See HKP Physical Therapy, P.C. v Government Empls. Ins. Co., 67 Misc 3d 282, 296-301 [Civ Ct, NY County 2019] [discussing threshold showing for seeking Mallela discovery].)

Liberty Mut. Ins. Co. v Anderson (2023 NY Slip Op 50746(U))

Reported in New York Official Reports at Liberty Mut. Ins. Co. v Anderson (2023 NY Slip Op 50746(U))



Liberty Mutual Insurance Company and
LM GENERAL INSURANCE COMPANY, Plaintiffs,

against

Nordigay Anderson, A TO Z SUPPLY SERVICES INC, ADV DIAGNOSTIC INC., ANIGER SUPPLY INC., AZTEC MEDICAL PA, CARESOFT LEASING CORP., CITIMED SURGERY CENTER, LLC, COMMUNITY MEDICAL CARE OF NY, PC, DSH PHYSICAL THERAPY SERVICES PC, GOOD SAMARITAN HOSPITAL MEDICAL CENTER, INNER POINT ACUPUNCTURE PC, LAXMIDHAR DIWAN MD, SCOTT LLOYD PHD, STAR MEDICAL IMAGING PC, and TRI-BOROUGH NY MEDICAL PRACTICE PC, Defendants.

Index No. 650571/2022

Correia, Conway & Stiefeld, White Plains, NY (Melissa D. Broder of counsel), for plaintiffs.

No appearances for defendants.

Gerald Lebovits, J.

This is a no-fault-insurance coverage action. Plaintiffs, Liberty Mutual Insurance Company and LM General Insurance Company (Liberty Mutual), denied the no-fault-benefits claims of the alleged injured person, defendant Nordigay Anderson, and the other defendants, medical-provider-assignees of Anderson’s, on the ground that Anderson had materially misrepresented the insured vehicle’s garaging address and the identity of the vehicle’s operators. Liberty Mutual has brought this action for a judgment declaring, in essence, that it has no duty to pay those claims.

Liberty Mutual now moves without opposition for default judgment under CPLR 3215 against non-answering defendants Anderson, ADV Diagnostic Inc., Aztec Medical PA, Citimed [*2]Surgery Center, LLC, Good Samaritan Hospital Medical Center, and Laxmidhar Diwan MD. The motion is denied.

No-fault benefits claims must be paid or denied “[w]ithin 30 calendar days after proof of claim is received.” (11 NYCRR 65-3.8 [c].) Proof of claim “shall include verification of all of the relevant information requested pursuant to section 65-3.5 of this Subpart,” such as requests that an injured person or medical-provider-assignee appear for an examination under oath (EUO). (Id. § 65-3.8 [a] [1].) an insurer’s failure to deny a claim within that 30-day period will generally preclude the insurer from asserting a defense against payment of the claim. (Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d 556, 563 [2008].)

An exception to this preclusion rule exists where the ground for denying the claim (or defending against a claim to payment) is a lack of coverage in the first instance. (Id.) But the denial of a no-fault claim on the ground that the policyholder made material misrepresentations in obtaining the policy does not come within this preclusion exception. (See Liberty Mutual Ins. Co. v Brutus, 2022 NY Slip Op 50799[U], at *4 [Sup Ct, NY County Aug. 16, 2022], citing Westchester Med. Ctr. v GMAC Ins. Co. Online, Inc., 80 AD3d 603, 604-605 [2d Dept 2011].)

In short, Liberty Mutual may not raise material misrepresentations as a defense to the no-fault claims at issue in this action unless it denied those claims within 30 days after receiving proof of claim.

Liberty Mutual first sought verification from Anderson, in the form of an EUO, by letter dated June 29, 2021. (See NYSCEF No. 25.) Liberty Mutual conducted that EUO on July 12, 2021. (See NYSCEF No. 26 [EUO transcript].) Liberty Mutual later interviewed Anderson’s father (the vehicle operator named on the policy) on August 3, 2021 (see NYSCEF No. 27 [interview transcript]); and issued claim denials two days later, on August 5 (see NYSCEF No. 28.)

Thus, it appears on this record that Liberty Mutual denied the claims at issue within two days after obtaining the additional verification that it sought from Anderson and her father. That chronology, though, does not resolve the crucial question whether the 30-day period to pay or deny ran before Liberty Mutual first sought that verification on June 29. That is, if Liberty Mutual received benefits claims more than 28 calendar days before issuing the EUO request letter on June 29, 2021, the August 5, 2021, denial would be untimely with respect to those claims.[FN1]

Liberty Mutual has not established on this motion that its denials were timely with respect to each of the defendants against whom it seeks default judgment. At most, Liberty Mutual has submitted a delay letter that it sent on June 4, 2021, to defendant Good Samaritan Hospital Medical Center (see NYSCEF No. 24 at 3-4); and Liberty Mutual’s counsel represents in an affirmation that delay letters were also sent “to the medical provider defendants who had submitted NF-3s or bills” as of early June 2021 (NYSCEF No. 13 at ¶ 29). But a delay letter that does not itself request verification from the recipient will not toll the 30-day pay-or-deny period. [*3](Westchester Med. Ctr. v Lincoln Gen. Ins. Co., 60 AD3d 1045, 1046 [2d Dept 2009]; Nyack Hosp. v Encompass Ins. Co., 23 AD3d 535, 536 [2d Dept 2005].)

On this record, therefore, Liberty Mutual has not established the facts constituting its claims against the non-appearing defendants.

Accordingly, it is

ORDERED that Liberty Mutual’s motion for default judgment is denied; and it is further

ORDERED that if Liberty Mutual does not file a renewed default-judgment motion against the defaulting defendants within 30 days of entry of this order, the action will be dismissed as against those defendants; and it is further

ORDERED that Liberty Mutual serve a copy of this order with notice of its entry on all appearing parties by e-filing on NYSCEF; and on all non-appearing parties by certified mail, return receipt requested, directed to their respective last-known addresses.

DATE 7/13/2023

Footnotes

Footnote 1:This calculation adds together the days elapsed before Liberty Mutual sought additional verification of the claim with the two days elapsed after Liberty Mutual obtained that verification upon interviewing Anderson’s father. (See 11 NYCRR 65-3.8 [a] [1] [“In the case of an examination under oath . . . the verification is deemed to have been received by the insurer on the day the examination was performed.”].)

American Tr. Ins. Co. v U.S. Med Supply Corp. (2023 NY Slip Op 50560(U))

Reported in New York Official Reports at American Tr. Ins. Co. v U.S. Med Supply Corp. (2023 NY Slip Op 50560(U))



American Transit Insurance Company, Petitioner,

against

U.S. Med Supply Corp., A/A/O Mahendra Singh, Respondent.

Index No. 502532/2023

Larkin Farrell LLC, New York City (David Fair of counsel), for petitioner.

Aaron D. Maslow, J.

The following numbered papers were read on this petition:

Petition (NYSCEF Doc No. 1)
Notice of Petition (NYSCEF Doc No. 2)
Exhibit A — Arbitration Award (NYSCEF Doc No. 3)
Exhibit B — Master Arbitration Award (NYSCEF Doc No. 4)
Exhibit C — Respondent’s Arbitration Request Form and Arbitration Submission (NYSCEF Doc No. 5)
Exhibit D — Petitioner’s Arbitration Submission and Master Arbitration Brief (NYSCEF Doc No. 6)
Statement of Authorization for Electronic Filing (NYSCEF Doc No. 7)
Request for Judicial Intervention (NYSCEF Doc No. 8)
Email (NYSCEF Doc No. 9)
Affidavit of Service (NYSCEF Doc No. 10)
Statement of Authorization for Electronic Filing (NYSCEF Doc No. 11)

Issue Presented

Must a health service provider seeking No-Fault insurance compensation for providing post-surgery services establish that a prior arbitration award was affirmed by a master arbitrator, confirmed by a court, and not subject to de novo review as a prerequisite to arguing that the award constituted collateral estoppel on the issue of medical necessity for the surgery?


Background

Petitioner American Transit Insurance Company (“ATIC”) commenced this CPLR Article 75 proceeding by notice of petition, seeking an order and judgment vacating a No-Fault insurance master arbitration award of Richard B. Ancowitz, Esq. (dated November 7, 2022), which affirmed the arbitration award of Jan Chow, Esq. (dated July 24, 2022) granting Respondent U.S. Med Supply Corp.’s (“U.S. Med”) claim for No-Fault insurance compensation for post-surgery medical supplies provided or rented.[FN1] , [FN2] Arbitrator Chow awarded $4,000.00 to U.S. Med as compensation for (a) the rental of a non-knee continuous passive motion (“CPM”) exercise device (HCPCS Code E0936, $2,700.00) from October 7, 2020-November 4, 2020; (b) the provision of a synthetic sheepskin pad (HCPCS Code E0188, $100.00) on October 7, 2020; (c) the provision of a fluid circulating cold pad with pump (HCPCS Code E0218, $1,000.00); and (d) an unknown miscellaneous service (HCPCS Code E1399; $200.00). These services were provided to Mahendra Singh, who claimed to have been injured in a motor vehicle accident on June 21, 2019. He assigned his No-Fault insurance benefits to U.S. Med, and is denoted as “Assignor.”[FN3] (NYSCEF Doc No. 2, Notice of Petition; NYSCEF Doc No. 1, Petition ¶¶ 2-3, 16, 23; NYSCEF Doc No. 6, Petitioner’s Arbitration Submission and Master Arbitration Brief at 17.)[FN4]

Respondent U.S. Med has not filed any papers in opposition to ATIC’s petition herein. The petition came before the undersigned for oral argument on June 2, 2023. At that time, ATIC [*2]appeared by counsel.

The underlying arbitration which is the subject of this proceeding was organized by the American Arbitration Association (“AAA”), which assigned Case No. 17-21-1197-7083 [FN5] to it. The AAA has been designated by the New York State Department of Financial Services to coordinate the mandatory arbitration provisions of Insurance Law § 5106 [b], which provides:

Every insurer shall provide a claimant with the option of submitting any dispute involving the insurer’s liability to pay first party [“No-Fault insurance”] benefits, or additional first party benefits, the amount thereof or any other matter which may arise pursuant to subsection (a) of this section to arbitration pursuant to simplified procedures to be promulgated or approved by the superintendent.

Insurance Law Article 51 provides for the payment of basic economic loss incurred by persons injured in motor vehicle accidents. Included within basic economic loss are first-party benefits for medical and other professional health services.[FN6] First-party benefits are more commonly known as “No-Fault benefits.”[FN7]

In furtherance of the statutory scheme, a comprehensive set of No-Fault Regulations were promulgated by the Superintendent of Insurance (presently Superintendent of Financial Services). They are contained at 11 NYCRR Part 65. Said part is subdivided into five subparts which encompass the following topics: prescribed insurance policy endorsements, rights and liabilities of self-insurers, claims for benefits, arbitration, and unauthorized providers of health services. Part 65 is also known as Insurance Regulation 68.

Generally, the claims process for health service bills [FN8] for No-Fault insurance compensation begins with the submission by a health service provider of a claim form (usually, but not always, a Form NF-3 verification of treatment by attending physician or other provider [*3]of health service).[FN9] Besides providing information regarding the injured person, the accident, the subject insurance policy, the billing health service provider, diagnoses, and projected treatment, the claim form includes a bill for services performed. The claim form can be submitted directly by the injured person to the No-Fault insurer but over many decades a practice developed by which the health service providers submit the claim forms. As noted in footnote 3, they possess standing to do so by virtue of having received signed assignments of benefits from the injured persons.[FN10] ,[FN11]

The insurer must then either pay or deny the bill within 30 days, or seek additional verification within 15 business days. If it denies payment, it must issue a Form NF-10 denial of claim [FN12] explaining why the bill was not paid. (See Insurance Law § 5106 [a]; Viviane Etienne Med. Care, P.C. v Country-Wide Ins. Co., 25 NY3d 498, 505 [2015].)

The record evidence submitted in this Article 75 proceeding revealed that the underlying arbitration involved one claim form in the amount of $4,000.00 [FN13] submitted to ATIC for payment. This was in accordance with the procedure for the submission of claims for No-Fault compensation, as summarized above. The Form NF-10 denial of claim by ATIC was timely inasmuch as it was issued within 30 days after the receipt of requested additional verification (see Liberty Queens Med., P.C. v Tri-State Consumer Ins., 188 Misc 2d 835, 839 [Dist Ct, Nassau Co. 2001] [once verification has been received, an insurer has 30 days within which to make a determination on the claim]. The denial of claim was dated December 31, 2020. The denial of claim was predicated on a four-page peer review dated December 28, 2020 (“four-page peer review”), prepared by Dr. Raghava Polavarapu, who opined that the subject supplies were not medically necessary. (NYSCEF Doc No. 6, Petitioner’s Arbitration Submission and Master Arbitration Brief at 4-7, 12-15, 17.)


Arbitrator Jan Chow’s Award

The record evidence reveals further that on July 22, 2002, Arbitrator Jan Chow, Esq., conducted a hearing at which Kevin Griffiths, Esq., from Odierno Law Firm P.C., appeared for U.S. Med, and Michelle Rozenblyum, Esq., appeared for ATIC (NYSCEF Doc No. 3, Arbitration Award, at numbered p 1).

In her award, Arbitrator Chow noted that the subject medical supplies were provided [*4]following right shoulder surgery performed on Assignor on October 6, 2020. The parties stipulated to U.S. Med’s prima facie case and the burden shifted to ATIC to substantiate its defense of lack of medical necessity. Citing to Healing Hands Chiropractic, P.C. v Nationwide Assur. Co. (5 Misc 3d 975 [Civ Ct, NY County 2004]), Arbitrator Chow stated, “In the event an insurer relies on a peer review report to support its lack of medical necessity defense, the peer reviewer’s opinion must set forth a factual basis and medical rationale for denying the claim” (NYSCEF Doc No. 3, Arbitration Award at numbered p 2). She then wrote that the burden of production fell on ATIC as the insurer and, if it was established, the burden shifted to U.S. Med, citing to Bronx Expert Radiology, P.C. v Travelers Ins. Co. (13 Misc 3d 136[A], 2006 NY Slip Op 52116[U] [App Term 1st Dept 2006]) (id.).

Regarding Dr. Polavarapu’s four-page peer review, Arbitrator Chow wrote that he “first asserted that the underlying right shoulder surgery was not medically necessary rendering all derivative services including these post-operative supplies to be not medically necessary. He then discussed the issue of medical necessity regarding the CTU, DVT and shoulder orthosis devices.”[FN14] (Id.)

At the hearing, U.S. Med argued as follows in opposition to Dr. Polavarapu’s four-page peer review, per Arbitrator Chow’s award: “Applicant asserted that collateral estoppel applies to the peer reviewer’s assertion regarding the medical necessity of the underlying right shoulder surgery. He noted that Arbitrator Mitchell Lustig did not uphold this same peer report in Surgicore Surgical Center LLC v. American Transit, AAANo.: 17-21-1194-7180 when addressing the facility fee for this right shoulder surgery. Applicant also argued that the peer report did not address the disputed CPM involved in this case.” (Id.)

Arbitrator Chow determined the issue presented as follows:

After careful consideration and weighing of both parties’ evidence and arguments, the undersigned finds for the Applicant.
Regarding Applicant’s collateral estoppel argument, the doctrine of collateral estoppel precludes a party from re-litigating an issue that was clearly decided in a prior action against that party. This doctrine applies when two requirements are met. The first, that both cases involve identical issues, and second, that the party against whom the estoppel is being asserted had a full and fair opportunity to contest the issue in the prior action. Schwartz v Pub. Adm’r of County of Bronx, 24 NY2d 65 (1969).
In this case, this matter involved the same Respondent and the same issue as the previous case. With both cases involving identical issues and Respondent having had a full and fair opportunity to contest the same issue in the prior action, I find that the doctrine of collateral estoppel applies to the peer reviewer’s contention regarding the medical necessity of the underlying right shoulder surgery.
Furthermore, Applicant correctly noted that the peer report did not address the disputed CPM, water circulating pump and synthetic sheepskin pad. [Dr. Polavarapu] only specifically addressed the CTU, DVT and shoulder orthosis, none of which are involved in this matter.
(Id. at numbered p 3.)

Arbitrator Chow awarded the $4,000.00 principal billed. She also awarded interest of 2% per month, an attorney’s fee, and return of the $40.00 filing fee (id.; see Insurance Law § 5106 [a]; 11 NYCRR 65-4.5 [s]).


Master Arbitrator Richard B. Ancowitz’s Award

ATIC filed for master arbitration to appeal Arbitrator Chow’s award. It challenged the arbitrator’s determination to apply collateral estoppel from the award of another arbitrator. In its master arbitration appeal, ATIC noted that the peer review relied upon by Arbitrator Lustig in finding a lack of medical necessity for the October 6, 2020 right shoulder surgery was not the same peer review upon which ATIC denied payment of the subject medical supplies. (Dr. Raghava Polavarapu also wrote the peer review relied upon by Arbitrator Lustig. It too was dated December 28, 2020, and it was three pages in length (“three-page peer review”)). The surgery was not medically necessary, argued ATIC. Arbitrator Chow’s award was incorrect as a matter of law and irrational, it maintained. (NYSCEF Doc. No. 6, Petitioner’s Arbitration Submission and Master Arbitration Brief at 158-165, 174-176.)

Master Arbitrator Richard B. Ancowitz’s award dated November 7, 2022 noted that Arbitrator Chow rejected ATIC’s defense of lack of medical necessity. While ATIC focused on Arbitrator Chow’s application of collateral estoppel, U.S. Med pointed out that there was not just that issue (as the hearing arbitrator also mentioned that Dr. Polavarapu did not specifically address the supplies at issue in the four-page peer review). (NYSCEF Doc No. 4, Master Arbitration Award.)

Master Arbitrator Ancowitz found as follows:

Upon review of the matter before me, I do not find that the award is incorrect as a matter of law, irrational, or otherwise infirm.
In reviewing the award, I see no infirmity in the arbitrator having not credited respondent’s peer review report. Apparently, both matters evaluated the medical necessity of the same surgery, and the arbitrator’s authority to weigh and consider the evidence is quite broad per applicable regulation. 11 NYCRR 65-4.5 (o)(1).
As is well settled, it is not the function of a master arbitrator to perform a de novo review of the facts, e.g. the evidence before the arbitrator. Matter of Jasser v. Allstate Ins. Co., 77 AD3d 751 (2nd Dept 2010); Allstate Ins. Co. v. Keegan, 201 AD2d 724 (2nd Dept 1994).
I see no basis to disturb the arbitrator’s finding of facts. The award is clearly not irrational and indeed has a plausible basis. See, Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co., 149 AD3d 828 (2nd Dept 2017).
In sum, I see no legal infirmity in the award which would warrant granting the relief sought by respondent.
The award is affirmed.
(Id. at numbered pp 2-3.)

ATIC’s Petition to Vacate

ATIC’s petition to vacate asserted that “The arbitration decision was arbitrary and capricious, irrational and without a plausible basis” (NYSCEF Doc No. 1, petition, ¶ 35), in that “Arbitrator Jan Chow failed to follow well settled law” (id. ¶ 37). The petition proceeded to argue that the claims at issue were properly and timely denied for lack of medical necessity as per the peer review of Dr. Polavarapu (id. ¶ 41).

ATIC asserted that Arbitrator Chow mistakenly relied on collateral estoppel as a matter of law. Citing case law, ATIC maintained that there are four conditions which must be met in order for collateral estoppel to apply and not all were present in the instant case: (1) The issues in both proceedings must be identical. (2) The issue in the prior proceeding must have been actually litigated and decided. (3) There had to have been a full and fair opportunity to litigate in the prior proceeding. (4) The issue previously litigated must have been necessary to support a valid and final judgment on the merits. (Id. ¶ 43.) Arbitrator Chow did not discuss the “4th prong; whether the issue previously litigated was necessary to ‘support a valid and final judgment on the merits’ as required by the Court of Appeals in” Conason v Megan Holding LLC (25 NY3d 1 [2015]), maintained ATIC (id. ¶ 44).

More specifically, ATIC argued that “The underlying decision does not discuss whether the decision [of Arbitrator Mitchell Lustig] relied upon by the Arbitrator was appealed to a Master or whether a de novo action[[FN15] ] or petition to vacate was filed. Applicant did not offer any evidence to establish that the decision that the Arbitrator relied upon was confirmed in Court and, therefore, necessary to ‘support a valid and final judgment on the merits’ as required by the Court of Appeals in the Conason decision. There is no evidence before the arbitrator showing that Respondent filed a Petition to Confirm the award or that the prior award was converted to a judgment. There is also no evidence that the Petitioner did not file a de novo action which would render the prior award a nullity. (see Matter of Greenberg v. Ryder Truck Rental, Inc., 70 NY2d 573 [1987]; see also Allstate Insurance Company v. Matthew Nalbandian, a/a/o Darlene Torchi, 89 AD3d 648).” (Id. ¶ 45.)

The petition concluded by asserting that Arbitrator Chow’s decision was “arbitrary and capricious, without rational basis and incorrect as a matter of law because the arbitrator ignored [ATIC]’s evidence and/or well settled legal precedent in order to justify a determination in favor of [U.S. Med]” (id. ¶ 49). “As a result, [ATIC]’s rights were prejudiced by the partiality of the arbitrator and the arbitrator exceeded his/her power and failed to make a final and definite award and the decision must be vacated” (id. ¶ 50). ATIC was “entitled to a declaration that the arbitration decisions of Jan. Chow, Esq. and Richard B. Ancowitz, Esq. in the matter designated AAA number 99-21-1197-7083 have no force or effect” (id. ¶ 51).


No-Fault Insurance Arbitration

When the No-Fault Law was first enacted by the Legislature in Chapter 13 of the Laws of 1973 to take effect February 1, 1974, § 675 of the Insurance Law was added. In subdivision 2 thereof, insurers were required to provide claimants with an arbitration option for disputes involving liability for first-party benefits. This provision was amended in Chapter 892 of the Laws of 1977, when several changes were made to the 1973 version.[FN16] The provision regarding arbitration in § 675 was amended to add the following language:

An award by an arbitrator may be vacated or modified by a master arbitrator in [*5]accordance with simplified procedures to be promulgated or approved by the superintendent [of insurance]. The grounds for vacating or modifying an arbitrator’s decision by a master arbitrator shall not be limited to those grounds for review set forth in article seventy-five of the civil practice law and rules. The decision of a master arbitrator shall be binding except for the grounds for review set forth in article seventy-five of the civil practice law and rules, and provided further that where the amount of such master arbitrator’s award is five thousand dollars or greater, exclusive of interest and attorney’s fees, the insurer or the claimant may institute an action in a court of competent jurisdiction to adjudicate the dispute de novo.[FN17]

The provisions regarding No-Fault insurance arbitration remained in the recodification of the Insurance Law enacted in Chapters 367 and 805 of the Laws of 1984. The arbitration provisions were set forth in § 5106, and subdivisions (b) and (c) now read as follows:

(b) Every insurer shall provide a claimant with the option of submitting any dispute involving the insurer’s liability to pay first party benefits, or additional first party benefits, the amount thereof or any other matter which may arise pursuant to subsection (a) of this section to arbitration pursuant to simplified procedures to be promulgated or approved by the superintendent. Such simplified procedures shall include an expedited eligibility hearing option, when required, to designate the insurer for first party benefits pursuant to subsection (d) of this section. The expedited eligibility hearing option shall be a forum for eligibility disputes only, and shall not include the submission of any particular bill, payment or claim for any specific benefit for adjudication, nor shall it consider any other defense to payment.
(c) An award by an arbitrator shall be binding except where vacated or modified by a master arbitrator in accordance with simplified procedures to be promulgated or approved by the superintendent. The grounds for vacating or modifying an arbitrator’s award by a master arbitrator shall not be limited to those grounds for review set forth in article seventy-five of the civil practice law and rules. The award of a master arbitrator shall be binding except for the grounds for review set forth in article seventy-five of the civil practice law and rules, and provided further that where the amount of such master arbitrator’s award is five thousand dollars or greater, exclusive of interest and attorney’s fees, the insurer or the claimant may institute a court action to adjudicate the dispute de novo.

Insofar as is here relevant, the No-Fault Insurance Regulations promulgated by the [*6]Superintendent of Insurance provided that a master arbitrator may vacate or modify a hearing arbitrator’s award where it “was incorrect as a matter of law (procedural or factual errors committed in the arbitration below are not encompassed within this ground)” (11 NYCRR 65.18 [a] [4]). This regulatory language was carried over into the revised Regulations promulgated in 2002, in 11 NYCRR 65-4.10 (a) (4).[FN18] A master arbitrator may also vacate or modify a hearing arbitrator’s award under certain other grounds also (see 11 NYCRR 65-4.10 [a]).[FN19]


Discussion

Although U.S. Med has not filed opposition papers to ATIC’s petition, this Court has [*7]previously held that in an Article 75 proceeding to vacate the award of a No-Fault insurance arbitration, where the respondent health service provider failed to submit opposition to the verified petition, the court should review the verified petition to determine whether it makes out a prima facie case in support of the relief requested (see American Tr. Ins. Co. v Ortho City Services Inc., — Misc 3d —[A], 2023 NY Slip Op 50527[U] [Sup Ct, Kings County 2023].

The provision that a master arbitrator may vacate or modify a hearing arbitrator’s award due to an error of law is one of several grounds but is the main gravamen of ATIC’s objection to the arbitration outcome here.[FN20] ATIC contends that Arbitrator Chow failed to adhere to the law on collateral estoppel.

ATIC principally relies on Conason v Megan Holding, LLC (25 NY3d 1 [2015]), for the proposition that a requirement for collateral estoppel to apply is that the previous litigation concluded in a final and valid judgment. ATIC construes “final and valid judgment” to mean that a prerequisite to affording collateral estoppel effect to a No-Fault arbitration award is that it was affirmed by a master arbitrator, confirmed by a court into a judgment, and not subjected to de novo review (NYSCEF Doc. No. 1, petition ¶¶ 42-48).

In Conason, Supreme Court granted summary judgment based in part on a Housing Court determination regarding the base date for determining a stabilized rent amount and finding that there was fraud in the rent amount claimed by the landlord. Supreme Court was affirmed by the Appellate Division. In reviewing the case law regarding collateral estoppel, the Court of Appeals wrote at page 17:

Collateral estoppel comes into play when four conditions are fulfilled:

“(1) the issues in both proceedings are identical, (2) the issue in the prior proceeding was actually litigated and decided, (3) there was a full and fair opportunity to litigate in the prior proceeding, and (4) the issue previously litigated was necessary to support a valid and final judgment on the merits” (Alamo v. McDaniel, 44 AD3d 149, 153 [1st Dept. 2007], citing Ryan v. New York Tel. Co., 62 NY2d 494 [1984], and Gramatan Home Invs. Corp. v. Lopez, 46 NY2d 481 [1979]).[FN21]

The Court of Appeals held that in the case before it, two of the four prerequisites were unmet. First, the issues were not identical. A claimed breach of warranty of habitability was the issue in the Housing Court whereas the issue in the Supreme Court action was evidence of fraud sufficient to render the render the base date unreliable. Further although the Housing Court found fraud on the part of the landlord such a finding was not necessary for its order which awarded the tenants a rent abatement on account of a breach of a warranty of habitability. The focus by the Court of Appeals was on whether the issue was necessary to support a final and valid judgment on the merits; the focus was not on the finality of a judgment, which ATIC is [*8]emphasizing with respect to Arbitrator Mitchell Lustig’s prior award.

In Ryan v New York Tel. Co. (62 NY2d 494 [1984]) [quasi-judicial determination held to constitute collateral estoppel], a case mentioned in Conason, the Court of Appeals wrote:

The doctrine of collateral estoppel, a narrower species of res judicata, precludes a party from relitigating in a subsequent action or preceding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same. (Ripley v Storer, 309 NY 506, 517; see, also, Restatement, Judgments 2d, § 27; 46 Am Jur 2d, Judgments, § 415; 9 Carmody-Wait 2d, NY Prac, Judgments, § 63:205.) We have recently reaffirmed that collateral estoppel allows “the determination of an issue of fact or law raised in a subsequent action by reference to a previous judgment on a different cause of action in which the same issue was necessarily raised and decided.” (Gramatan Home Investors Corp. v Lopez, 46 NY2d 481, 485.) What is controlling is the identity of the issue which has necessarily been decided in the prior action or proceeding.
Of course, the issue must have been material to the first action or proceeding and essential to the decision rendered therein (Silberstein v Silberstein, 218 NY 525, 528; see, also, Hinchey v Sellers, supra.; Ripley v Storer, supra.; Ward v Boyce, 152 NY 191), and it must be the point actually to be determined in the second action or proceeding such that “a different judgment in the second would destroy or impair rights or interests established by the first” (Schuylkill Fuel Corp. v Nieberg Realty Corp., supra, at p 307 [Cardozo, Ch. J.]; see, also, S. T. Grand, Inc. v City of New York, 32 NY2d 300, 304-305).
(62 NY2d at 500-501.)

Matter of Greenberg (Ryder Truck Rental) (70 NY2d 573 [1987]) was cited by ATIC for the proposition that since there was no evidence to show that it (ATIC) sought de novo review in court of Arbitrator Lustig’s award, the findings by Arbitrator Lustig concerning lack of medical necessity could not be asserted against it by U.S. Med. Matter of Greenberg does not so hold. All it held was that Insurance Law § 5106 (c) provided the parties to a No-Fault arbitration with an option of de novo consideration of claim if the master arbitrator’s award was $5,000.00 or greater. As the Court of Appeals noted, the de novo review is statutory and, therefore, an arbitration determination was of course not binding as collateral estoppel. This decision has no applicability to the instant one. A review of Arbitrator Lustig’s award on the AAA’s Modria [FN22] platform for No-Fault arbitration awards (Matter of Arbitration of Surgicore Surgical Center LLC a/a/o Mahendra Singh v American Tr. Ins. Co., AAA Case No. 17-21-1194-7180 [Dec. 3, 2021] [last accessed at https://aaa-nyn f.modria.com/awardsearchcontroller/searchawards on June 4, 2023]) reveals that he awarded $4,890.65, which is less than the threshold amount for a de novo action in court of the claim determined therein. In any event, the issue in Matter of [*9]Greenberg was the collateral effect of the arbitration award in court—not the collateral effect of an arbitration award in a subsequent arbitration.

Confirming the nature of a de novo action in the context of No-Fault insurance claims, the court in Allstate Ins. Co. v Nalbandian (89 AD3d 648 [2d Dept 2011]), cited by ATIC, reaffirmed the principle that a de novo action has no relation to a review of a master arbitration award. Supreme Court improperly considered the arbitration award and did not allow the No-Fault insurer to argue against the claim anew; the Appellate Division reversed. Contrary to ATIC’s position, this case does not stand for the proposition that a claimant must prove that no de novo action was filed as a prerequisite for using an arbitration award as collateral estoppel against the insurer.

A leading case on the preclusive effect of an arbitration award is American Ins. Co. v Messinger (43 NY2d 184 [1977]). The Court of Appeals held that a determination made in a property damage arbitration between two insurance carriers disallowing a disclaimer of coverage is binding between the same carriers in a subsequent personal injury action arising out of the same accident. This decision was controversial because the arbitration whose outcome was binding was quite informal and summary in nature; the two insurers submitted their files to the arbitrators and there was no testimony or oral argument. The arbitrator’s award was brief. The insurers did not treat the arbitration with any real significance (until the award became binding in the subsequent action). While writing that “The consequences of issue preclusion between the same parties are not to be vitiated by lack of enthusiasm or effort on the part of the loser” (43 NY2d at 192), the Court of Appeals emphasized that “Fundamental to our consideration of the present appeal is recognition that in general the doctrines of claim preclusion and issue preclusion between the same parties (more familiarly referred to as res judicata or direct estoppel)[ ] apply as well to awards in arbitration as they do to adjudications in judicial proceedings” (id. at 189-190).

While the parties were identical in American Ins. Co. v Messinger, arbitration awards do have estoppel effect against a No-Fault insurer even if the health service provider is different in the subsequent arbitration (see Country-Wide Ins. Co. v Empire State Ambulatory Surgery Ctr., 2021 NY Slip Op 32194[U] [Sup Ct NY County 2021]). This is consistent with Schwartz v Public Adm’r of County of Bronx (24 NY2d 65, 70 [1969] [not an arbitration case]), where the Court of Appeals noted that the doctrine of mutuality is a dead letter. “Where a full opportunity has been afforded to a party to the prior action and he has failed to prove his freedom from liability, or to establish liability or culpability on the part of another, there is no reason for permitting him to retry these issues” (id., quoting Good Health Dairy Prods. Corp v Emery, 275 NY 14, 18 [1937]). “New York Law has now reached the point where there are but two necessary requirements for the invocation of the doctrine of collateral estoppel. There must be an identity of issue which has necessarily been decided in the prior action and is decisive of the present action, and, second, there must have been a full and fair opportunity to contest the decision now said to be controlling.” (Id. at 71.) This quotation actually confirms all—not just two of the conditions referred to by ATIC in its petition to vacate (see Gramatan Home Investors Corp. v Lopez, 46 NY2d 481 [1979]). That there be a valid and final judgment on the merits, as contended by ATIC, is confirmed in Ryan, 62 NY2d at 499.

Therefore, ATIC is correct that in order for collateral estoppel to apply in arbitration, the issues in both proceedings must be identical, the issue in the prior proceeding must have been actually litigated and decided, there must have been a full and fair opportunity to litigate in the [*10]prior proceeding, and the issue previously litigated must have been necessary to support a valid and final judgment on the merits. But does the proponent of the applicability of collateral estoppel from a No-Fault insurance arbitration award have to establish that the award was affirmed by a master arbitrator, confirmed by a court, and not subject to de novo review, as ATIC contends?

This Court answers the question in the negative. It is well established that if the deadline for appealing a judgment has not passed or that an appeal from a judgment has actually been taken but not yet decided, these factors do not divest a judgment of finality for the purposes of collateral estoppel (see Samhammer v Home Mut. Ins. Co. of Binghamton, 120 AD2d 59 [3d Dept 1986], citing Parkhurst v Berdell, 110 NY 386 [1888] [collateral estoppel applies to final administrative determinations which otherwise would meet criteria to invoke collateral estoppel]). The pendency of an appeal does not affect the use of an order as an estoppel (see Beard v Town of Newburgh, 259 AD2d 613 [2d Dept 1999] [undetermined appeal from criminal judgment not a bar to applicability of determination in arbitration but subsequent reversal of judgment considered by court reviewing arbitration).

Apparently the issue of the preclusive effect of No-Fault arbitration determinations has been sanctioned by appellate courts in New York effect ever since the issuance of the decision in Kilduff v Donna Oil Corp., 74 AD2d 562 [2d Dept 1980]. Whereas an arbitrator’s denial of a part of a claim without prejudice to renewal was not a final determination, that part of the claim which was denied in its entirety was “final” and constituted a bar to a court action (id.). The Court of Appeals considered the issue preclusive effect of a No-Fault arbitration for the first time in Clemens v Apple (65 NY2d 746 [1985]), where it was held that a factual finding made in an arbitration award constituted collateral estoppel in court against the party who commenced the arbitration where that party had a full and fair opportunity to litigate the factual issue determined. The Court cited to Ryan v New York Tel. Co., mentioned above.

It is within the arbitrator’s authority to determine the preclusive effect of a prior arbitration (see Matter of Falzone v. New York Central Mutual Fire Ins. Co., 15 NY3d 530 [2010], affg, 64 AD3d 1149 [4th Dept. 2009]). In that case, a supplementary uninsured/underinsured motorist (SUM) arbitrator failed to accord preclusive effect to a prior award by a No-Fault arbitrator. “In this appeal, we are merely applying this State’s well-established rule that an arbitrator’s rulings, unlike a trial court’s, are largely unreviewable. . . . Thus, if a court makes an error and fails to properly apply collateral estoppel, the issue can be reviewed and corrected on appeal. By contrast, if an arbitrator erred in not applying collateral estoppel, the general limitation on judicial review of arbitral awards precludes a court from disturbing the decision unless the resulting arbitral award violates a strong public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator’s power.” (Id. at 534-535.)

Where an arbitrator has determined that the insurer failed to demonstrate that the injured person breached a condition precedent to coverage by failing to appear for an EUO, the insurer is barred by the doctrine of collateral estoppel from seeking a declaration that it does not have to provide coverage to the injured person on this ground; collateral estoppel is applicable to No-Fault arbitration awards, even if the awards are not judicially confirmed (see Country-Wide Ins. Co. v Ospina, 2019 NY Slip Op. 30444[U] [Sup Ct, NY County 2019]). This decision confirms that if a No-Fault insurance arbitrator decides to apply collateral estoppel to a prior arbitration award the prior award need not have been judicially confirmed into a judgment, contrary to [*11]ATIC’s position herein.

A post-arbitration judicial determination concerning an insurer’s liability is not one of the limited grounds for vacating an arbitration award (see Country-Wide Ins. Co. v Epione Med. P.C., 2020 NY Slip Op. 32945[U] [Sup Ct, NY County 2020] [arbitrator held that insurer was collaterally estopped from submitting evidence not before her in prior arbitration wherein she rejected IME no-show defense; judicial declaratory judgment later held that insurer owed no duty to health care provider].

An argument by a party in No-Fault arbitration that the arbitrator’s application of collateral estoppel to the issue of medical necessity is arbitrary, capricious, and incorrect as a matter of law, since he did not address all of the evidence presented in the arbitration misapprehends the law of collateral estoppel, because its specific purpose is to prevent a party from relitigating issues previously decided against it and necessarily forecloses that party from successive opportunities to present new evidence without justification (see Country-Wide Ins. Co. v Progressive-Hudson Anesthesia LLC, 2021 NY Slip Op. 31587[U] *3 [Sup Ct, NY County 2021]). This decision is very close on point since the first arbitrator determined that surgery was necessary and the second arbitrator applied the decision to the claim for the anesthesia. In the case at bar, the first arbitrator (Lustig) determined that the right shoulder surgery was medically necessary in the context of the claim by the surgical facility, and Arbitrator Chow applied the finding of medical necessity to the claim by the post-surgery medical supply company.

An arbitrator rationally applies the doctrine of collateral estoppel against an insurer with respect to a claim by an ambulatory surgery center where the underlying surgery was previously found medically necessary in another arbitration (see Country-Wide Ins. Co. v Empire State Ambulatory Surgery Ctr., 2021 NY Slip Op 32194[U] [Sup Ct, NY County 2021]).

An arbitrator’s invocation of collateral estoppel on the issue of whether shoulder surgery and related services were medically necessary and causally related to the accident against a No-Fault insurer from a previous arbitration where the insurer had a full and fair opportunity to contest the issue is rational and neither arbitrary, capricious, nor incorrect as a matter of law (see Country-Wide Ins. Co. v Advantage Med Innovations, Inc., 2021 NY Slip Op 30418[U] [Sup Ct, NY County 2021]).

In none of the cases cited above did a court rule that a health service provider seeking to assert collateral estoppel against a No-Fault insurer from a previous arbitration award had to prove that the award was affirmed by a master arbitrator and confirmed in court. An arbitration award can be deemed final even if an appeal is pending (see Beard, 259 AD2d 613; Samhammer, 120 AD2d 59).

“The party seeking to rely on collateral estoppel has the burden of establishing that the issue actually litigated and determined in the prior action is identical to the issue on which preclusion is sought (see Forcino v Miele, 122 AD2d 191, 193 [1986]; Triboro Quality Med. Supply, Inc. v State Farm Mut. Auto. Ins. Co., 36 Misc 3d 131[A], 2012 NY Slip Op 51289[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2012]). The party attempting to defeat the application of collateral estoppel has the burden of establishing the absence of a full and fair opportunity to litigate (see D’Arata, 76 NY2d at 664; Uptodate Med. Servs., P.C. v State Farm Mut. Auto. Ins. Co., 23 Misc 3d 42, 44 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2009]).” (Laga v Unitrin Auto and Home Ins. Co., 76 Misc 3d 131[A], 2022 NY Slip Op 50906[U] *2 [App Term, 2d Dept, 2d, 11th & 13th Dists 2022]). If an insurer against whom collateral estoppel is applied bears the burden of establishing the absence of a full and fair opportunity to [*12]litigate, likewise the burden of proving absence of finality or reversal or vacatur of a prior arbitration award submitted by a health service provider is properly placed on the insurer. ATIC here did not establish that Arbitrator Mitchell Lustig’s award, cited by U.S. Med and relied upon by Arbitrator Chow for the determined fact that the October 6, 2020 shoulder surgery was medically necessary, was reversed or vacated. ATIC has not established that the issue of medical necessity previously decided did support a valid and final judgment on the merits (see Conason, 25 NY3d 1).

With the shoulder surgery being found medically necessary by virtue of Arbitrator Lustig’s prior finding and there being no specific discussion of the supplies at issue in the four-page peer review, Arbitrator Chow properly awarded compensation to U.S. Med for providing the post-surgery supplies to Assignor (see Country-Wide Ins. Co. v Empire State Ambulatory Surgery Ctr., 2021 NY Slip Op 32194[U]; Country-Wide Ins. Co. v Progressive-Hudson Anesthesia LLC, 2021 NY Slip Op. 31587[U]; Country-Wide Ins. Co. v Sedation Vacation Perioperative Medicine PLLC, 2021 NY Slip Op 30512[U] [Sup. Ct, NY County]; cf. Matter of Global Liberty Ins. Co. v Medco Tech, Inc., 170 AD3d 558 [1st Dept 2019] [arbitration award sustaining compensation for derivative services vacated when evidence established surgery not necessary]; New Horizon Surgical Center, L.L.C. v Allstate Ins. Co., 52 Misc 3d 139[A], 2016 NY Slip Op 51124[U] [App Term, 2d Dept, 2d, 11th & 13th Dists 2016] [if medical service not necessary, by extension there is lack of medical necessity for surgical facility fee for the service]).

This Court notes that Arbitrator Chow’s award was dated July 24, 2022 (NYSCEF Doc No. 3, Arbitration Award at numbered p 5). Arbitrator Lustig’s, which she cited, was dated December 3, 2021 (Matter of Arbitration of Surgicore Surgical Center LLC a/a/o Mahendra Singh v American Tr. Ins. Co., at numbered p 7). A review of the AAA’s Modria platform reveals that on February 28, 2022, Master Arbitrator Richard B. Ancowitz affirmed Arbitrator Lustig (see Matter of Arbitration of Surgicore Surgical Center LLC a/a/o Mahendra Singh v American Tr. Ins. Co., AAA Case No. 17-21-1194-7180 [Dec. 3, 2021] [last accessed at https://aaa-nyn f.modria.com/awardsearchcontroller/searchawards on June 4, 2023]). With Arbitrator Lustig’s award being affirmed, there was no impediment to Arbitrator Chow’s adoption of the his factual finding regarding medical necessity. Had Arbitrator Lustig’s award not been the subject of a master arbitrator appeal, reliance on Arbitrator Lustig’s award would still have been appropriate pursuant to the cited case law, as it would have been the final determination at the time. While it would have been better practice for Arbitrator Chow to have ascertained that Arbitrator Lustig was affirmed, this Court holds that the burden of showing that an award was reversed by a master arbitrator or vacated by a court devolves on the No-Fault insurer. Certainly, based on the case law cited above, there is no requirement that an award be confirmed by a court. And Matter of Falzone (15 NY3d 530), affords wide latitude to arbitrators in terms of the application of collateral estoppel.[FN23]

Based on the foregoing analysis, this Court rejects ATIC contention that Arbitrator Chow failed to adhere to the law on collateral estoppel.

Master Arbitrator Ancowitz sustained Arbitrator Chow, finding that her award was not incorrect as a matter of law, was not irrational, and had a plausible basis in terms of factual findings (NYSCEF Doc No. 4, Master Arbitration Award at 2-3). This Court must next determine whether to sustain Master Arbitrator Ancowitz’s review of Arbitrator’s Chow award.

Not only was Master Arbitrator Ancowitz correct in finding no error of law, and that the award was not irrational or otherwise infirm, it bears saying that he accurately stated the law on the review by a No-Fault master arbitrator. He adhered to the precepts of Matter of Petrofsky v Allstate Ins. Co., 54 NY2d 207 [1981] [master arbitrator may not engage in extensive factual review on his own and is limited to determining whether arbitrator was incorrect as matter of law, reached decision in rational manner, and was neither arbitrary nor capricious].

The standard for Article 75 court scrutiny of a No-Fault insurance arbitration is whether the master arbitration award was so irrational as to require vacatur (see Matter of Smith v Firemen’s Ins. Co., 55 NY2d 224, 232 [1982]; Matter of Acuhealth Acupuncture, PC v Country-Wide Ins. Co., 170 AD3d 1168 [2d Dept 2019]; Matter of Acuhealth Acupuncture, P.C. v New York City Transit Authority, 167 AD3d 314 [2d Dept 2018]; Matter of Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co., 149 AD3d 828 [2d Dept 2017]). A master arbitrator’s review of a hearing arbitrator’s award where an error of a rule of substantive law is alleged must be upheld unless it is irrational (see Golden Earth Chiropractic & Acupuncture, PLLC v Global Liberty Ins. Co. of New York, 54 Misc 3d 31 [App Term, 2d Dept, 2d, 11th & 13th Dists 2016]).

This Court finds that in affirming Arbitrator Chow, who properly applied the law of collateral estoppel and did not make arbitrary, capricious, or irrational findings of fact, Arbitrator Ancowitz did not contravene the limitations on his powers. His master award conformed to the permitted standard of review of a hearing arbitrator’s award by a master arbitrator.

Accordingly, this Court rejects ATIC’s contentions in its petition. ATIC’s rights were not prejudiced, the arbitrator was not partial, she did not exceed her powers, and she did not fail to make a final and definite award, as ATIC contended in paragraph 50 of its petition).

Other Requested Relief

Any requested relief not expressly addressed herein has nonetheless been considered and is hereby expressly rejected.


Conclusion

Accordingly, it is hereby ORDERED, ADJUDGED, and DECREED that that ATIC’s petition is denied, this special proceeding is dismissed, and the master arbitration award of Richard B. Ancowitz, Esq., which affirmed the arbitration award of Jan Chow, Esq., in AAA Case No. 99-21-1197-7083 is confirmed in its entirety.


Dated: June 9, 2023
Brooklyn, New York
HON. AARON D. MASLOW
Justice of the Supreme Court of the State of New York

Footnotes

Footnote 1: The notice of petition seeks vacatur of “the arbitration award issued by Arbitrator Jan Chow, Esq. and/or Master Arbitrator Richard B. Ancowitz, Esq. under Article 75 of the CPLR” (NYSCEF Doc No. 2, notice of petition), but it must be deemed to seek vacatur of just the master arbitration award inasmuch as the latter is the final determination of the arbitration process. The No-Fault Regulations provide that “court review pursuant to an article 75 proceeding” is from the “decision of a master arbitrator” (11 NYCRR 65-4.10 [h] [1] [i]). In fact, a party may not appeal from a hearing arbitration award (see Matter of Staten Is. Hosp. v USAA, 103 AD2d 744 [2d Dept 1984]; Matter of Griffith v Home Indem. Co., 84 AD2d 332 [1st Dept 1982]; Matter of Lampasona v Prudential Prop. & Cas. Ins. Co., 111 Misc 2d 623 [Sup Ct, Kings County 1981]). “[T]he Legislature intended the provision of CPLR article 75 to apply only to the review of the awards of master arbitrators (see, Insurance Law § 5106[c])” (Matter of Custen v General Acc. Fire and Life Ins. Co., 126 AD2d 256 [2d Dept. 1987]). Naturally, if the hearing arbitrator’s award is imperfect, this can impact judicial review of a master arbitration award affirming it.

Footnote 2: Rather than denote the parties here as “Petitioner” and “Respondent” in discussion, the parties’ names are used. This is to facilitate the reader’s understanding of the facts, arguments, analysis, and determination. This also minimizes confusion because the respondent in the underlying arbitration (ATIC) is not the respondent herein but rather is the petitioner herein. The respondent herein, U.S. Med, was not the respondent in the arbitration, but was the applicant.

Footnote 3: Health service providers obtain standing to pursue No-Fault insurance compensation in arbitration by virtue of having received an assignment of benefits from the respective person claiming to have been injured in a covered motor vehicle accident; such person is often denoted as an “assignor.”

Footnote 4: References to page numbers in NYSCEF filings lacking specified page numbers are to the PDF page numbers.

Footnote 5: Paragraph 28 of the petition describes the AAA Case No. as 99-21-1197-7083, which was assigned to the master arbitration appeal. The original arbitration was assigned AAA Case No. 17-21-1197-7083.

Footnote 6: This statutory scheme was developed by New York’s legislature in 1973, as part of a tradeoff whereby lawsuits for pain and suffering resulting from personal injuries in motor vehicle accidents were limited to instances of serious injury (see generally Insurance Law art 51; L 1973, ch 13, as amended L 1977, ch 892; John R. Dunne, New York’s No-Fault Automobile Insurance Law—A Glimpse of the Past and a Glance at the Future, 50 NY St BJ 284 [June 1978]; J. Benedict, New York Adopts No-Fault: A Summary and Analysis, 37 Albany L Rev 662 [1973]).

Footnote 7: Although Insurance Law Article 51 does not mention the term “No-Fault,” shortly after the post-motor vehicle accident economic loss compensation system was enacted in 1973, the appellation “No-Fault” was adopted in common parlance to describe it.

Footnote 8: This Court uses the term “health service bills” instead of “medical bills” because the No-Fault Law provides for reimbursement of “(i) medical, hospital . . . , surgical, nursing, dental, ambulance, x-ray, prescription drug and prosthetic services; (ii) psychiatric, physical therapy . . . and occupational therapy and rehabilitation . . . and (iv) any other professional heath services” (Insurance Law § 5102 [b] [1]). Hence, the No-Fault insurance system encompasses not just “medical” services. In the instant case, the services were medical supplies.

Footnote 9: The prescribed claim forms are included within 11 NYCRR Part 65 (Regulation 68) Appendix 13. Besides Form NF-3 (verification of treatment by attending physician or other provider of health service), Appendix 13 contains Form NF-4 (verification of hospital treatment) and Form NF-5 (hospital facility form).

Footnote 10: There is a prescribed assignment of benefits form (Form NF-AOB) in 11 NYCRR Part 65 (Regulation 68) Appendix 13.

Footnote 11: The process of submitting a No-Fault claim to the insurer is governed by 11 NYCRR Subpart 65-3, which contains §§ 65-3.1 et seq.

Footnote 12: Form NF-10 is also included within 11 NYCRR Part 65 (Regulation 68) Appendix 13.

Footnote 13: Although the claim form was a HICF form (health insurance claim form developed by the National Uniform Claim Committee), and not an official No-Fault Form NF-3, ATIC did not seek a Form NF-3 as additional verification and, therefore, it waived any objection in that regard (see 11 NYCRR 65-3.5 [f]; Ortho Prods. & Equip., Inc. v Eveready Ins. Co., 39 Misc 3d 146[A], 2013 NY Slip Op 50856[U] [App Term, 2d Dept, 2d, 11th & 13th Dists 2013]).

Footnote 14: Dr. Polavarapu’s four-page peer review was intended to cover not only the supplies at issue herein but other supplies also prescribed for Assignor (NYSCEF Doc No. 6, Petitioner’s Arbitration Submission and Master Arbitration Brief at 12-15).

Footnote 15: A “de novo action” is one where either party to a No-Fault insurance master arbitration resulting in an award of $5,000.00 or greater commences an action in court seeking a de novo determination of the dispute (see Insurance Law § 5106 [c], quoted infra at 8).

Footnote 16: Among the more substantial changes in the 1977 legislation were the adoption of fee schedules to limit health service expenses and modifying the threshold categories for suing for pain and suffering.

Footnote 17: Nothing in the Governor’s Bill Jacket for Chapter 13 of the Laws of 1977 or other contemporary records comments on the provision adopting master arbitration review of hearing arbitrators’ decisions, so it is not known why the master arbitration process was created (see Matter of Bamond v Nationwide Mut. Ins. Co., 75 AD2d 812, 813 [2d Dept 1980], affd 52 NY2d 957 [1981]). This Court speculates that at least one reason was that No-Fault arbitration was compulsory and the Legislature desired to permit a party to an arbitration to seek review of the hearing arbitrator’s award on the basis of an assertion of an error of law, which traditionally was not a basis for review in an Article 75 proceeding (see Mott v State Farm Ins. Co., 77 AD2d 488 [3d Dept 1980], revd sub nom. on other grounds Matter of Smith v Firemen’s Ins. Co., 55 NY2d 224 [1982]).

Footnote 18: Most non-No-Fault insurance arbitration awards cannot be vacated due to an error of law (see Matter of Sprinzen v Nomberg, 46 NY2d 623, 629-630 [1979]). No-Fault insurance arbitrations are different; an error of law can be the basis for reversal—by a master arbitrator. In that sense, the master arbitrator’s review is broader than that of a court, since a court will not vacate an arbitration award due to an error of law (see Matter of Petrofsky v Allstate Ins. Co., 54 NY2d 207, 211-212 [1981]; Acuhealth Acupuncture, P.C. v Country-Wide Ins. Co., 176 AD3d 800, 802 [2d Dept 2019]).

Footnote 19: 11 NYCRR 65-4.10 (a) provides as follows:

Grounds for review. An award by an arbitrator rendered pursuant to section 5106(b) of the Insurance Law and section 65-4.4 or 65-4.5 of this Subpart may be vacated or modified solely by appeal to a master arbitrator, and only upon one or more of the following grounds:
(1) any ground for vacating or modifying an award enumerated in article 75 of the Civil Practice Law and Rules (an article 75 proceeding), except the ground enumerated in CPLR subparagraph 7511(b)(1)(iv) (failure to follow article 75 procedure);
(2) that the award required the insurer to pay amounts in excess of the policy limitations for any element of first-party benefits; provided that, as a condition precedent to review by a master arbitrator, the insurer shall pay all other amounts set forth in the award which will not be the subject of an appeal, as provided for in section 65-4.4 or 65-4.5 of this Subpart;
(3) that the award required the insurer to pay amounts in excess of the policy limitations for any element of additional first-party benefits (when the parties had agreed to arbitrate the dispute under the additional personal injury protection endorsement for an accident which occurred prior to January 1, 1982); provided that, as a condition precedent to review by a master arbitrator, the insurer shall pay all other amounts set forth in the award which will not be the subject of the appeal, as provided for in section 65-4.4 or 65-4.5 of this Subpart;
(4) that an award rendered in an arbitration under section 65-4.4 or 65-4.5 of this Subpart, was incorrect as a matter of law (procedural or factual errors committed in the arbitration below are not encompassed within this ground);
(5) that the attorney’s fee awarded by an arbitrator below was not rendered in accordance with the limitations prescribed in section 65-4.6 of this Subpart; provided that, as a condition precedent to review by a master arbitrator, the insurer shall pay all other amounts set forth in the award which will not be the subject of the appeal, as provided for in section 65-4.4 or 65-4.5 of this Subpart.

Footnote 20: The provision in 11 NYCRR 65-4.10 (a) (4) that a No-Fault insurance arbitration award may be vacated where it was incorrect as a matter of law refers to substantive issues—not issues of fact (see American Transit Ins. Co. v Right Choice Supply, Inc., 78 Misc 3d 890 [Sup Ct, Kings County 2023]).

Footnote 21: ATIC contends that only the fourth prong of the Conason conditions was missing in the subject arbitration. It concedes the presence of the initial three prongs: identical issue, actually litigated and decided, and full and fair opportunity to litigate in prior proceeding (NYSCEF Doc. No. 1, petition ¶ 44).

Footnote 22: This is the AAA’s electronic case management and filing platform maintained on the Internet; it is known as “Modria,” which was the name of the company which developed it for the AAA (see Liveblogging #ODR2014: The Developing Field of Online Dispute Resolution, https://civic.mit.edu/index.html%3 Fp=1452.html [last accessed Mar. 19, 2023]; Welcome to the Modria Resolution Center for the American Arbitration Association, https://aaa-nynf.modria.com/ [last accessed Mar. 19, 2023]).

Footnote 23: This Court will also go as far as holding that even if a No-Fault hearing arbitrator’s award is reversed on an issue of fact, another hearing arbitrator may rely on its findings. This is due in part to the Court of Appeals’ decision in Matter of Falzone. According to the latter, a prior arbitration decision is not necessarily binding in a subsequent one. Ergo, if a hearing arbitrator finds a colleague’s factual finding compelling and the master arbitrator’s reversal not, the discretion lies within the arbitrator to determine which one to apply. After all, No-Fault arbitration decisions are not controlling precedents on legal issues (see Matter of Garcia v. Federal Ins. Co., 46 NY2d 1040 [1979], and a No-Fault arbitrator has practically unfettered discretion in determining facts (see Matter of Petrofsky v Allstate Ins. Co., 54 NY2d 207 [1981]).