[*1]

Supreme Court, Appellate Term, Second Department, 9th and 10th Judicial Districts, December 18, 2012

APPEARANCES OF COUNSEL

Joseph Henig, P.C., Bellmore (Mark A. Green of counsel), for appellant. Rossillo & Licata, P.C., Westbury (John J. Rossillo of counsel), for respondent.

{**38 Misc 3d at 42} OPINION OF THE COURT

Memorandum.

Ordered that the order, insofar as appealed from, is affirmed, without costs.

In this action by a provider to recover assigned first-party no-fault benefits, we find that the District Court properly denied plaintiff’s motion for summary judgment on the ground that plaintiff had not demonstrated its prima facie entitlement to judgment as a matter of law (see New York Hosp. Med. Ctr. of Queens v Statewide Ins. Co., 33 Misc 3d 130[A], 2011 NY Slip Op 51863[U] [App Term, 2d Dept, 9th & 10th Jud Dists 2011]).

A plaintiff seeking to recover for no-fault benefits must submit proof of the fact and the amount of the loss sustained, i.e., that health care services or supplies were provided and the amount thereof (see Insurance Law § 5106 [a]; Ave T MPC Corp. v Auto One Ins. Co., 32 Misc 3d 128[A], 2011 NY Slip Op 51292[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2011]; King’s Med. Supply, Inc. v Hereford Ins. Co., 5 Misc 3d 55 [App Term, 2d Dept, 9th & 10th Jud Dists 2004]). In this case, plaintiff submitted an NF-5, UB-04 and DRG master output report in support of its motion for summary judgment. However, in order for such documents to constitute prima facie proof of the fact and the amount of the loss sustained, plaintiff would have had to demonstrate that such documents were admissible, pursuant to CPLR 4518 (a), as proof of the acts, transactions, occurrences and/or events recorded therein (see Viviane Etienne Med. Care, P.C. v Country-Wide Ins. Co., 31 Misc 3d 21 [App{**38 Misc 3d at 43} Term, 2d Dept, 2d, 11th & 13th Jud Dists 2011]; see generally Matter of Carothers v GEICO Indem. Co., 79 AD3d 864 [2010]; Art of Healing Medicine, P.C. v Travelers Home & Mar. Ins. Co., 55 AD3d 644 [2008]). Plaintiff failed to do so.

Plaintiff’s argument that hospitals should not be held to the same standards of proof as other healthcare providers, because hospitals are required to use a different claim form (an NF-4 or NF-5 rather than an NF-3), is without merit. The NF-3 (verification of treatment by [*2]attending physician or other provider of health service), NF-4 (verification of hospital treatment) and NF-5 (hospital facility form) are all prescribed by the no-fault regulations (Insurance Department Regulations [11 NYCRR] Appendix 13), and one is not inherently more reliable than the others. The fact that a certain form was used to submit a claim to an insurer is irrelevant to the question of whether the health care provider demonstrated to the court that it is entitled to recover no-fault benefits.

We recognize that CPLR 4518 (b) allows hospital records to be used as prima facie proof of the facts contained in those records. However, CPLR 4518 (b) does not apply to “any action instituted by or on behalf of a hospital to recover payment . . . for services rendered by or in such hospital.” Even assuming, without deciding, that a hospital’s records could be used by the plaintiff hospital in an assigned first-party no-fault case, pursuant to CPLR 4518 (b), under the theory that the hospital is suing as the assignee of a patient seeking to recover benefits from an insurance company, and not on its own behalf, such documents must, in any event, “bear[ ] a certification by the head of the hospital or by a responsible employee in the controller’s or accounting office that the bill is correct, that each of the items was necessarily supplied and that the amount charged is reasonable.” No such certification was provided here, nor did plaintiff submit an affidavit of a hospital employee attesting to the truth of any of the contents of the records submitted by plaintiff. Instead, the only sworn statements submitted by plaintiff were made by plaintiff’s attorney and by an employee of a third-party billing company, neither of whom claimed any knowledge as to the truth of the contents of the records.

Finally, we note that the cases cited by plaintiff (e.g. Hospital for Joint Diseases v Travelers Prop. Cas. Ins. Co., 34 AD3d 532 [2006]), for the proposition that hospitals are not required to submit proof of the fact and the amount of the loss sustained to the court in order to demonstrate their entitlement to no-fault{**38 Misc 3d at 44} benefits, do not impact our decision in this case. In those cases, there is no indication that the defendants had ever objected to the plaintiffs’ prima facie showing on the ground that those plaintiffs had failed to submit such proof. Thus, plaintiff has not demonstrated that any appellate court in New York has been presented with the question of whether a plaintiff hospital is required to offer proof of the fact and the amount of the loss sustained in order to recover no-fault benefits in court and, upon considering that question, held that the hospital is not required to offer such proof. The Appellate Division has specifically held, twice, that a health care provider has not demonstrated its entitlement to recover no-fault benefits after finding that the provider’s claim forms were inadmissible pursuant to CPLR 4518 (a) (see Matter of Carothers, 79 AD3d 864; Art of Healing Medicine, P.C., 55 AD3d 644), and plaintiff has not provided a compelling reason to distinguish the instant case from those cases.

Accordingly, the order, insofar as appealed from, is affirmed.

We decline defendant’s request to search the record and award it summary judgment dismissing the complaint.

Molia, J.P., Iannacci and LaSalle, JJ., concur.

Supreme Court, Kings County

21836/11

Plaintiff Attorney: Lester Herzog, 1729 E. 15th Street, Brooklyn, NY 11229

Defendant Attorney: Smith Mezure Director Wilkins Young & Yagerman, PC, 111 John Street, New York, NY 10038

David Schmidt, J.

The following papers numbered 1 to 11 read on these motions:

Papers Numbered

Notice of Motion/Order to Show Cause/

Petition/Cross Motion and

Affidavits (Affirmations) Annexed1-2, 3-4, 5-6

Opposing Affidavits (Affirmations)7-9

Reply Affidavits (Affirmations)10-11

Affidavit (Affirmation)

Other Papers

Upon the foregoing papers in this action seeking supplementary uninsured/underinsured motorist (SUM) coverage under a policy of insurance issued by defendant Geico General Insurance Company (Geico or defendant), plaintiffs Sarah H. Orman and Gidon Orman (plaintiffs) move, pursuant to CPLR 3211 (b), to dismiss four of Geico’s affirmative defenses. By order to show cause, Geico moves to vacate plaintiffs’ note of issue and [*2]certificate of readiness, and to strike this matter from the trial calendar. Geico separately cross-moves, pursuant to CPLR 3211 (a) (7),

to dismiss plaintiffs’ second cause of action alleging that it breached its implied covenant of good faith and fair dealing.

Background

Plaintiff Sarah Orman (plaintiff) was involved in a car accident which took place on October 23, 2007 in Woodmere, New York. While plaintiff was making a left turn, plaintiffs’ vehicle was struck in the rear by the vehicle owned and operated by Maximino Luna. According to the police report and the deposition testimony of plaintiff in the underlying action (Orman v Luna, Index No. 12108/09), Mr. Luna attempted to stop before the collision but was unable to do so. At the time of the accident, Mr. Luna had an Allstate automobile insurance policy with limits of $25,000 per person and $50,000 per accident. Plaintiffs held a policy with Geico which included SUM coverage with $50,000/$100,000 policy limits. It is not disputed that plaintiff is a “covered person” under the terms of the policy.

In August, 2008, Geico was awarded 100% in arbitration and plaintiffs’ deductible of $500 was refunded to them.

In October, 2009, plaintiffs sent Geico a formal notice of their intention to make a claim, with accompanying correspondence. Geico acknowledged receipt of the claim by letter dated November 5, 2009, and advised plaintiffs to notify it if they received a policy limit settlement offer from Allstate that was less than their “UIM” limit. Plaintiffs’ counsel advised Geico, by letter dated November 13, 2009, that Allstate had not yet tendered its policy and that the underlying action was being litigated, although it had not been placed on the trial calender.

On October 6, 2010, plaintiff was deposed in the underlying action.

In March, 2011, Allstate advised plaintiffs’ counsel that it was offering the $25,000 policy limits for settlement of the bodily injury claim for plaintiff as a result of the accident.

By letter dated June 20, 2011, plaintiffs’ counsel advised Geico that Allstate had tendered its policy of $25,000. In addition, counsel attached a copy of Allstate’s tender, a copy of the declaration pages of the policy and an affidavit of “no excess” coverage, signed by Mr. Luna. Counsel also requested Geico’s permission, in writing, to accept Allstate’s tender.

By letter dated June 21, 2011, plaintiffs’ counsel provided Geico with a package of medicals, photos and other documents, and again requested Geico’s permission to accept Allstate’s tender.

By letter dated June 23, 2011, Geico advised plaintiffs’ counsel that “you have GEICO’s permission to settle your client’s Bodily Injury claim with the adverse tort carrier, Allstate, insurer of Maximino Luna.” Geico also advised plaintiffs’ counsel that in order to evaluate an underinsured motorist bodily injury claim, it required “medical specials” documenting plaintiff’s injuries and a written authorization to obtain a copy of plaintiff’s no-fault file.

By letter dated June 25, 2011, Allstate advised plaintiff and her attorney that a settlement check was issued to plaintiff in the amount of $25,000.

On August 30, 2011, referring to his August 15, 2011 conversation with Geico’s claims examiner, plaintiffs’ counsel advised Geico that plaintiffs would not accept anything less than [*3]the full $25,000 SUM coverage limits; that as of that date, Geico had not contacted him; and that he was in the process of drafting pleadings to commence a direct action against Geico. Counsel also stated that plaintiffs would be including a cause of action for bad faith, “in view of the fact that Geico refused to pay $25,000, where the economic damages alone, exceed one million dollars – without even considering the personal injuries and pain and suffering.”

By letter dated September 15, 2011, Geico advised plaintiffs’ counsel that plaintiffs’ SUM policy limit was $50,000/$100,000; that it was “always willing to negotiate any claim in good faith;” and that, based upon alleged economic damages, it requested all medical authorizations, MRI films, the no-fault file and employment records so that it could properly evaluate plaintiffs’ claim. Geico further stated that it would contact counsel upon completion of its review.

By letter dated September 26, 2011, plaintiffs’ counsel again advised Geico that plaintiffs would not accept anything less than the full $25,000 SUM coverage limits, and that in response, “[the claims examiner] … stated that Geico, at present, is unwilling to tender same.” Plaintiffs’ counsel further stated that in view of the above, he enclosed six authorizations and informed Geico that an action against Geico had been commenced.^[FN1]

On that same date, (September 26, 2011) plaintiff commenced this action, alleging a cause of action for breach of contract, a cause of action alleging bad faith, and a cause of action for loss of consortioum. As relevant here, the second cause of action states:

“That defendant’s refusal and/or neglect to pay its policy limits when requested to do so, was not made in good faith in view of all relevant circumstances.

That in refusing and/or neglecting to pay its policy limits, defendants considered only its own interests, without also taking into consideration the interests of its insured.

That the defendant’s refusal and/or neglect to pay plaintiff amounted to gross disregard for its insured’s interests; by failing to place the interests of its insured on equal footing with its own interests.”

Plaintiffs’ seek $100,000 in damages each for the first and second causes of action, and unspecified damages for the third cause of action.

On October 25, 2011, Geico answered the complaint and asserted various affirmative defenses including, as relevant here, that plaintiff did not sustain serious injury or non-economic loss under Insurance Law §§ 5102 and 5014.

Subsequently, plaintiffs move to dismiss four of Geico’s affirmative defenses, plaintiff cross-moved to dismiss Geico’s serious injury affirmative defense, and Geico moved to vacate the note of issue and certificate of readiness. [*4]

Discussion

Plaintiffs move, pursuant to CPLR 3211 (b), to dismiss four of defendant’s affirmative defenses. “A party may move for judgment dismissing one or more defenses, on the ground that a defense is not stated or has no merit” (Mazzei v Kyriacou, 98 AD3d 1088, 1088-1089 [2012], quoting CPLR 3211 [b]). “When moving to dismiss or strike an affirmative defense, the plaintiff bears the burden of demonstrating that the affirmative defense is without merit as a matter of law” (id., [internal quotation marks and citations omitted]). “In reviewing a motion to dismiss an affirmative defense, the court must liberally construe the pleadings in favor of the party asserting the defense and give that party the benefit of every reasonable inference” (id., [internal quotation marks and citations omitted]). “However, where affirmative defenses merely plead conclusions of law without any supporting facts,’ the affirmative defenses should be dismissed pursuant to CPLR 3211 (b)” (Bank of Am., N.A. v 414 Midland Ave. Assoc., LLC, 78 AD3d 746, 750 [2010], quoting Fireman’s Fund Ins. Co. v Farrell, 57 AD3d 721, 723 [2008]).

Here, with respect to defendant’s second affirmative defense, plaintiffs have established that they obtained personal jurisdiction over defendant through documentary evidence. In this regard, plaintiffs have annexed the proof of service, a fee receipt and an acknowledgment from the New York State Insurance Department, confirming that defendant was served with the plaintiffs’ summons and verified complaint on September 27, 2011 pursuant to Insurance Law § 1212. Further, defendant does not oppose this branch of plaintiffs’ motion.

With respect to defendant’s seventh affirmative defense – that plaintiffs’ failed to properly notify defendant of their intent to make an “UM/UIM claim” – as indicated above, plaintiffs sent a Notice of Intention to Make Claim and accompanying correspondence to defendant by letter dated November 30, 2009. Thus, plaintiffs have sustained their burden of demonstrating that this defense is without merit as a matter law because it does not apply under the factual circumstances of this case (Tenore v Kantrowitz, Goldhamer & Graifman, P.C., 76 AD3d 556, 557-558 [2010]). Moreover, defendant does not oppose this branch of plaintiffs’ motion.

Based upon the foregoing, these branches of plaintiffs’ motion to dismiss defendant’s second and seventh affirmative defenses are granted.

As to that branch of plaintiffs’ motion to dismiss defendant’s sixth affirmative defense – asserting that plaintiffs failed to meet conditions precedent to warrant “UM/UIM” benefits – plaintiffs argue that defendant fails to elaborate which conditions precedent they failed to meet. In particular, plaintiffs contend that they fulfilled the three condition precedents necessary to receive UIM/SUM benefits, namely: (1) they sent defendant a Notice of Intention to Make a Claim, (2) defendant admitted exhaustion of Mr. Luna’s policy limits, and (3) that in its June 23, 2011 letter, defendant granted plaintiffs permission to settle with Allstate for its policy limits, set forth two requirements to pursue the underinsured claim, and never stated that plaintiffs failed to meet any conditions precedent.

In opposition to this branch of plaintiffs’ motion, defendant argues that it did not admit [*5]that Mr. Luna’s policy limits were exhausted, but only conceded that Allstate tendered an insurance policy with limits of $25,000 to the plaintiffs.^[FN2] Specifically, defendant argues that there “may have been other applicable insurance policies that plaintiff did not attempt to reach,” and essentially argues that the “affidavit of excess” signed by Mr. Luna is incompetent because it does not reference the accident date and makes “sweeping statements with nothing to support the claims.” Further, defendant asserts that it should be given the opportunity “to explore whether Mr. Luna had other applicable insurance at the time of the accident [and that] [] [i]f so, plaintiff would have failed to meet a pre-condition of bringing this supplementary underinsured motorist claim.”

As plaintiffs’ state in their reply, defendant’s contention that Mr. Luna may have additional coverage is speculative. Moreover, defendant does not dispute that it had the opportunity to determine whether Mr. Luna had any applicable insurance at the time of the accident. Further, defendant has failed to demonstrate that Mr. Luna’s sworn affidavit of excess is incompetent. As noted above, Mr. Luna affirmed that he was not covered under another applicable insurance policy. Although his affidavit does not contain the date of the accident, it contains his policy number, which corresponds to the policy number on the copy of his policy/declaration pages showing the coverages that were on the policy at the time of loss of “10[-]23[-]2007,” as affirmed by an Allstate Claim Support representative in a notarized statement (Plaintiff’s Notice of Motion, Exh. G).

In addition, Mr. Luna’s affidavit was provided to defendant by plaintiffs’ counsel on June 20, 2011 – before defendant gave plaintiffs permission to settle plaintiff’s bodily injury claim with Allstate – which contains the name of the underlying action as well as the claim number for the accident. Finally, as noted immediately above, defendant gave plaintiffs permission to settle with Allstate, and the record does not indicate that defendant advised plaintiffs at any time that it failed to comply with any conditions precedent. Where, as here, an affirmative defense merely pleads conclusions of law without any supporting facts, it should be dismissed.Based on the foregoing, this branch of plaintiffs’ motion to dismiss defendant’s sixth affirmative defense is granted.

Plaintiffs also move to dismiss defendant’s third affirmative defense that plaintiffs did not sustain a serious injury under Insurance Law § 5102 or sustain economic loss under Insurance Law § 5104. Plaintiffs argue that the serious injury threshold does not apply in this action for two reasons. First, plaintiffs contend that is not an action “against another covered person,” since Geico, the defendant, does not qualify as a “covered person” under Insurance Law § 5012 (j). In this regard, section j of Insurance Law § 5102, entitled “Definitions,” provides that:

” Covered person’ means any pedestrian injured through the use or operation of, or any owner, operator or occupant of, a motor vehicle which has in effect the financial security required by article six or eight of the vehicle and traffic law or which is referred to in subdivision two of section three hundred twenty-one of such law; or any other person entitled to first party benefits.” [*6]

Second, plaintiffs assert that this is not an action for “personal injuries” to which the “serious injury” threshold requirement applies under Insurance Law § 5104 (a); rather it is a breach of contract action in which the serious injury threshold is not applicable. Stated otherwise, plaintiff argues that she is not alleging that defendant was negligent in the use or operation of a motor vehicle; rather she contends that this action relates strictly to defendant’s contractual liability based on its “SUM/UIM endorsements.” In this regard, Insurance Law § 5104 (a), entitled “Causes of action for personal injury,” provides, in pertinent part, that:

“(a) Notwithstanding any other law, in any action by or on behalf of a covered person against another covered person for personal injuries arising out of negligence in the use or operation of a motor vehicle in this state, there shall be no right of recovery for non-economic loss, except in the case of a serious injury, or for basic economic loss…” (emphasis added).

Despite the foregoing arguments, plaintiffs concede that “[f]or the sake of full disclosure . . . in Raffellini (v State Farm Mutual Automobile Insurance, 9 NY3d 196 [2007]), the Court of Appeals sided with the Fourth Department (against the Second Department) and found that the serious injury’ [no] [f]ault threshold does apply in the SUM/UIM context.” Nevertheless, plaintiffs go on to state that Raffellini “was strictly predicated on the proper interpretation of two implicitly contradictory provisions of Insurance Law § 3420, that the court “did not consider [their] legal arguments predicated on §§ 5102 and 5104,” and “[t]herefore, notwithstanding the holding in Raffellini, the courts are not foreclosed from considering the same issue on alternate grounds.”

Plaintiffs also contend that even assuming that they are required to demonstrate that they sustained serious injury in order to obtain their SUM coverage, they have already done so do by demonstrating that they sustained over a million dollars in economic damages,^[FN3] and that plaintiff has a “medically determined injury or impairment” which prevented her from “performing substantially all of the material acts that constituted her usual and customary daily activities for not less than ninety days during the one hundred eighty days immediately following the accident.”

This branch of the plaintiffs’ motion must be denied. In Raffellini (9 NY3d at 205), the Court of Appeals held that in an action by an insured against its insurer for supplementary uninsured/underinsured motorist coverage, the plaintiff must prove that he or she sustained a serious injury. The court held that Insurance Law § 3420 (f) (2), which “addresses additional optional personal injury coverage that can be purchased by a policyholder [i.e. SUM coverage],” is an extension of Insurance Law § 3420 (f) (1), the statute which “mandates that insurers provide uninsured motorist coverage in every New York motor vehicle liability policy,” and which conditions payment of mandatory uninsured motorist benefits on a finding that the insured suffered a serious injury as defined in Insurance Law § 5102 (d) (emphasis added) (id. at 200). Thus, the court ruled that the serious injury exclusion of Insurance Law § 3420 (f) (1) applies to supplementary benefits (Insurance Law [*7]§ 3420 [f] [2]), and that therefore an insured must prove serious injury in order to receive supplementary benefits (id. at 204).

Plaintiffs nevertheless argue that the Court of Appeals in Raffellini did not consider their arguments under Insurance Law § 5104 and 5012 (j), and thus may consider them now. This argument must be rejected. As an initial matter, these arguments were raised before the Supreme Court and the Appellate Division, Second Department. Although these courts granted plaintiffs’ motion to strike the insurance company’s serious injury defense, in part, on these grounds, the Court of Appeals came to the opposite conclusion based upon the same facts.

Moreover, the claim that the Court of Appeals did not consider plaintiffs’ arguments under Insurance Law §§ 5104 (a) and 5102 (d) must be rejected since the court relied upon Insurance Law § 5104 in coming to its conclusion. Specifically, the court was unpersuaded that the placement of the serious injury exclusion in Insurance Law § 3420 (f) (1) but not in 3420 (f) (2) reflected a “legislative determination to restrict the serious injury exclusion to mandatory benefits.” In this regard, the court held that:

“such a distinction would not be consistent with the policy underlying supplementary benefits, which are designed to give insureds the same level of protection that would have been available to others under the policy if the insureds were the tortfeasors who caused personal injuries. When an insured injures someone in a motor vehicle accident, the injured party is subject to the serious injury requirement in the No-Fault Law and cannot sue for noneconomic loss unless the serious injury threshold is met (see Insurance Law § 5104 [a]). Since the purpose of supplementary coverage is to extend to the insured the same level of coverage provided to an injured third party under the policy, the insured must also meet the serious injury requirement before entitlement to supplementary benefits. If this were not the case, the insured would receive coverage more comprehensive than that available to a third party injured by the insured (emphasis added).

It is evident from the facts of this case that the application of the serious injury exclusion is consistent with the policy supporting supplementary benefits. Here, plaintiff received payment for his basic economic loss through no-fault benefits. When he sued the negligent party who caused the collision, he was seeking recovery for noneconomic loss. Having obtained the $ 25,000 limit of coverage from the negligent driver’s insurer, he then sought additional noneconomic loss damages under the SUM endorsement to his State Farm insurance policy. Since a third party injured as a result of plaintiff’s negligence would have had to demonstrate serious injury to obtain noneconomic loss damages under plaintiff’s policy, it follows that plaintiff himself must prove serious injury to recover under his SUM endorsement—as Regulation 35-D requires. State Farm is therefore entitled to pursue its serious injury defense” (Raffellini, 9 NY3d at 205).

In any event, based upon the precedent of Raffellini, this court may not entertain plaintiffs’ arguments since, as indicated above, the Court of Appeals has conclusively held that an insurer is entitled to pursue a serious injury defense when sued by its insured for supplementary underinsured motorist benefits. Accordingly, this branch of plaintiffs’ motion [*8]to dismiss defendant’s third affirmative defense is denied.

Cross Motion of Defendant

Defendant cross-moves to dismiss plaintiffs’ second cause of action alleging a breach of the implied covenant of good faith and fair dealing. Defendant argues that plaintiffs cannot recover damages premised upon this cause of action because they have not pled and cannot prove the necessary allegations for bad faith. Defendant also contends that this cause of action seeks punitive damages, which are not available because breach of the implied covenant of good faith and fair dealing is not an independent tort, and because plaintiffs have not alleged that its conduct was egregious and that it was directed toward the public generally (New York Univ. v Cont’l Ins. Co., 87 NY2d 308, 316 [1995]).

In opposition, plaintiffs argue that although this state has not explicitly recognized a bad faith cause of action against a SUM insurer by its insured, the law with respect to SUM coverage is evolving in this state; that defendant has incorrectly characterized this cause of action as one solely for punitive damages so that it could argue that such a claim is not actionable; and that their complaint explicitly alleges “bad faith” as a separate cause of action.

In reply, defendant argues that plaintiffs rely upon the very case law that it had already distinguished in its cross motion; that, contrary to plaintiffs’ claim, it has cited a case which has rejected the application of general principles relating to a bad faith claim in a SUM context (Grinshpun v Travelers Cas. Co. of Conn., 23 Misc 3d 1111A, 2009 NY Slip Op 50706[U] [2009]); and that plaintiffs have conceded that they are seeking punitive damages because their counsel asserts that it is necessary to warn insurance carriers of the potential for “severe consequences” if they do not immediately tender their full SUM coverage upon request.

“In determining a motion to dismiss a cause of action pursuant to CPLR 3211 (a) (7) . . . the pleading is afforded a liberal construction, the facts alleged are accepted as true, and the proponent of the pleading is accorded the benefit of every favorable inference” (J & D Evans Constr. Corp. v Iannucci, 84 AD3d 1171, 1171 [2011]). However, “bare legal conclusions as well as factual claims flatly contradicted by the record are not entitled to any such consideration” (Lutz v Caracappa, 35 AD3d 673, 674 [2006]). Moreover, “[i]f the facts as alleged do not fit within any cognizable legal theory, the cause of action must be dismissed” (Meltzer v Meltzer, 41 AD3d 558, 558 [2007]).

“Implicit in every contract is a covenant of good faith and fair dealing” (Elmhurst Dairy, Inc. v Bartlett Dairy, Inc., 97 AD3d 781, 784 [2012]). “This covenant embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract” (511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 153 [2002] [internal quotation marks and citations omitted]). Further, “[w]hile the duties of good faith and fair dealing do not imply obligations inconsistent with other terms of the contractual relationship, they do encompass any promises which a reasonable person in the position of the promisee would be justified in understanding were included” (id.).

“[C]onsequential damages resulting from a breach of the covenant of good faith and fair dealing may be asserted in an insurance contract context, so long as the damages were [*9] “within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting'”‘(Panasia Estates, Inc. v Hudson Ins. Co., 10 NY3d 200, 203 [2008], quoting Bi-Econony Mkt., Inc. v Harleysville Ins. Co. of N.Y, 10 NY3d 187, 192 [2008], quoting Kenford Co. v County of Erie, 73 NY2d 312, 319 [1989]; see also Stein, LLC v Lawyers Tit. Ins. Corp.,AD3d, 2012 NY Slip Op 7291, *2 [2d Dept 2012]; Hoffman v Unionmutual Stock Life Ins. Co. of NY, 51 AD3d 633, 634 [2d Dept 2008]; Meegan v Progressive Ins. Co., 43 AD3d 182, 186-187 [4th Dept 2007]; Acquista v NY Life Ins. Co., 285 AD2d 73, 80 [1st Dept 2001]; TADCO Constr. Corp. v Allstate Ins. Co., 2011 NY Slip Op 33621[U], *5 [2011]). “Courts also look at what liability the defendant fairly may be supposed to have assumed consciously, or to have warranted the plaintiff reasonably to suppose that it assumed, when the contract was made…'” (TADCO Constr. Corp., 2011 NY Slip Op 33621 [U], *5, quoting Kenford Co., Inc., 73 NY2d at 319). In addition, “[t]he nature, purpose and particular circumstances of the contract are some of the factors to be considered in determining what was in the reasonable contemplation of the parties at the time of the execution of the contract” (id., citing Rose Lee Mfg., Inc. v Chemical Bank, 186 AD2d 548, 551 [1992]). Finally, “[p]roof of consequential damages cannot be speculative or conjectural” (id., citing Ashland Mgt. Inc. v Janien, 82 NY2d 395, 403 [1993]).

Here, plaintiffs’ second cause of action seeks damages for defendant’s alleged bad faith in refusing to pay its policy limits when requested to do so, which “amounted to gross disregard for [their] . . . interests.” However, the cause of action fails to state a viable claim for breach of the covenant of good faith and fair dealing. As an initial matter, as indicated above, defendant’s assertion of a serious injury defense does not constitute bad fath. In any event, plaintiffs fail to allege that the damages they allegedly sustained were contemplated by the parties “as the probable result of a breach at the time of or prior to contracting” (Panasia Estates, Inc., 10 NY3d at 203 [internal quotation marks omitted]), nor does the record reflect that such consequential damages were reasonably contemplated by the parties (see Third Equities Corp. v Commonwealth Land Tit. Ins. Co., 2010 NY Slip Op 33462 [U], *15 [2010]). In addition, plaintiffs do not make this claim in their verified bill of particulars nor do they make this argument in opposition to defendant’s cross motion.

Further, extra-contractual damages have been awarded in cases involving insurance contracts different than the type of insurance contract involved here. For example, Bi-Economy involved a policy that included business interruption insurance which was designed to ensure that the insured had the financial support necessary to sustain its business operation in the event disaster occurred. The court held that plaintiff was entitled to extra contractual damages as a result of the defendant’s bad faith handling of plaintiff’s claim (failing to promptly adjust and pay the loss, resulting in the collapse of the business), because “the very purpose of business interruption coverage would have made [the insurer] aware that if it breached its obligations under the contract to investigate in good faith and pay covered claims it would have to respond in damages to [the insured] for the loss of its business as a result of the breach” (Bi-Economy, 10 NY3d at 195). Similarly, PanasiaEstates, Inc. involved a commercial property insurance policy covering damage to property while undergoing renovation. Rain had entered into the insured’s building resulting in extensive damage, the insurer did not investigate until several weeks later, and then denied the claim [*10]three months afterward. The court held that the insured’s claim for consequential damages based upon the insurer’s alleged failure to promptly investigate the claim was viable because such a claim could be asserted in an insurance context so long as the damages were contemplated by the parties as a probable result of the breach when they entered into the contract (see also Rodriguez v Allstate Ins. Co., 33 Misc 3d 827, 831 [Sup Ct, Kings County, 2011] [plaintiff-insured’s claim for consequential damages, namely car payments she made on a car that she was unable to use but for the defendant insurer’s alleged breach of contract, was a foreseeable consequenceof defendant’s alleged breach of contract];Carden v Allstate Ins. Co., 30 Misc 3d 479, 482 [2010] [under “Deluxe Homeowner’s Policy,” plaintiffs submitted evidence in admissible form that they suffered damages due to the delay in reconstruction of house because of defendant’s bad faith delay in settling their claim – after fire to house and damage to roof, mold developed, and plaintiffs were forced to remain out of dwelling and incur living expenses]; Handy & Harman v American International Group, Inc., 2008 NY Slip Op 32366 [U], *11 [2008] [plaintiff insured sufficiently alleged a claim for consequential damages for breach of the covenant of good faith based on insurer’s alleged failure to fully investigate its claims where purpose of environmental pollution liability policy was to “protect [the insured] from the calamity of unforseen and monumental environmental clean-up costs, and avert risk with regard to such costs and liabilities”]). Thus, in light of the nature of the contract involved here – an automobile liability insurance policy -it cannot reasonably be argued that plaintiffs contemplated receiving consequential damages as a result of defendant’s breach of its implied covenant of good faith and fair dealing

Finally, plaintiffs do not allege that they suffered any damages as a consequence of defendant’s alleged bad faith refusal to pay their claims (Grinshpun, 2009 NY Slip Op 50706[U],*4). In this regard, plaintiffs do not claim that defendant’s refusal to pay them their SUM benefits required them to incur any extra-contractual damages or prevented them from paying for needed medical and/or other living expenses. Thus, this cause of action merely alleges a denial of benefits promised under a policy of insurance (cf. Acquista, 285 AD2d at 80). As such, it is duplicative of plaintiffs’ first cause of action for breach of contract (see Jackson v AXA Equitable Life Ins. Co., 2011 NY Slip Op 32461[U], *3 [2011] [plaintiff’s third cause of action for breach of the covenant of good faith and fair dealing under a disability insurance policy duplicates plaintiff’s breach of contract claim; both claims arise from a dispute over the policy’s obligations and defendants’ satisfaction of them];Authelet v Nationwide Mutual Insurance Company, 2008 NY Slip Op 32929 [U], *3-4 [2008] [the plaintiff-insured’s cause of action alleging breach of the implied covenant of good faith and fair dealing under a homeowner’s policy pled the same conduct which was the predicate of breach of contract cause of action, i.e. the insurer’s failure to pay the full amount of the insured’s claim, and thus was duplicative of insured’s breach of contract claim]). Based upon the foregoing, plaintiffs’ second cause of action fails to state a claim for breach of the implied covenant of good faith and fair dealing. Accordingly, defendant’s motion to dismiss this cause of action is granted.

Defendant moves by order to show cause to vacate the note of issue and certificate of [*11]readiness and to strike this matter from the trial calendar. In support of its motion, defendant argues, among other things, that this action is in its inception, that only preliminary documentary discovery has been exchanged, that there have been no depositions, court conferences, or an independent medical examination of the plaintiff; and that further discovery with respect to plaintiffs’ claim for lost wages is required.

In opposition, plaintiffs assert, among other things, that discovery has already been conducted in the underlying action by Allstate and that additional discovery would be redundant.

In view of the court’s determination denying plaintiffs’ motion to dismiss defendant’s serious injury affirmative defense – requiring further discovery of plaintiffs’ injuries (alleged to be both continuing and permanent) – and in light of the fact that further discovery is required to address the issues set forth by defendant above, the court grants defendant’s motion only to the extent of directing that discovery will continue and that defendant will be permitted to move for summary judgment within 60 days after discovery is complete.

In sum, plaintiffs’ motion to dismiss defendant’s second, sixth, and seventh affirmative defenses is granted, and the motion is otherwise denied. Defendant’s cross motion to dismiss plaintiffs’ second cause of action is granted. Defendant’s application to vacate the note of issue and certificate of readiness is granted only to the extent of directing discovery to continue and to permit defendant to move for summary judgment within 60 days after discovery is complete.

This constitutes the decision and order of the court.

E N T E R

J. S. C.

Footnotes

Footnote 1:Plaintiffs’ counsel represents that “[a]ccording to the GEICO adjustor, there was a determination’ made by the carrier that the claim did not meet the No Fault threshold, and that the claim was probably not even worth $ 25G, and that ALLSTATE had overpaid” (Aff. in Opposition to Defendant’s Cross Motion to Dismiss Plaintiffs’ Second Cause of Action, ¶ 7).

Footnote 2:As indicated above, defendant advised plaintiffs’ counsel that plaintiffs “have GEICO’s permission to settle your client’s Bodily Injury claim with the adverse tort carrier.”

Footnote 3:Plaintiffs have annexed an “Analysis of Economic Loss” prepared by Leonard R. Freifelder, Ph.D., dated January 11, 2010, indicating that plaintiff’s total loss of earnings for the rest of her work life expectancy is $1,095,454 (Plaintiffs’ Notice of Motion, Exh. F).

[*1]

Supreme Court, Appellate Term, Second Department, 2d, 11th and 13th Judicial Districts, October 16, 2012

APPEARANCES OF COUNSEL

Methfessel & Werbel, New York City (Frank J. Kennan of counsel), for appellant. Law Offices of Damin J. Toell, P.C., Brooklyn (Damin J. Toell of counsel), for respondent.

{**37 Misc 3d at 68} OPINION OF THE COURT

Memorandum.

Ordered that the order is affirmed, without costs.

In this action to recover assigned first-party no-fault benefits for dental services provided to plaintiff’s assignor as a result of injuries sustained in an automobile accident, the record indicates that, subsequent to the assignment of benefits from plaintiff’s assignor to plaintiff and the provision of dental services by plaintiff to its assignor, defendant Preferred Mutual Insurance Company commenced a declaratory judgment action in Supreme Court, New York County, against plaintiff’s assignor based upon his alleged misrepresentation of his residence when applying for insurance. By order dated October 25, 2004, the Supreme Court granted Preferred’s motion for summary judgment in the declaratory judgment action, and declared that Preferred was “not obligated to provide no-fault benefits or defend any claims for bodily injury or property damage on [its] policy issued to [Oba Connor, plaintiff’s assignor].” Several years later, plaintiff commenced the instant no-fault action, and Preferred moved for summary judgment dismissing the complaint, contending that this action was barred by virtue of the Supreme Court’s order. The Civil Court denied defendant’s motion.

Plaintiff herein was neither named nor served in the declaratory judgment action nor, at the time, was it in privity with its assignor, who was a named party in that action, as the assignment of benefits had been executed before the declaratory judgment action had been commenced, and plaintiff otherwise had no full and fair opportunity to appear and defend its interests in that proceeding. Consequently, the instant action is not subject to dismissal by virtue of the order in the declaratory judgment action (see Gramatan Home Invs. Corp. v Lopez, 46 NY2d 481 [1979]; Magic Recovery Med. & Surgical Supply Inc. v State Farm Mut. Auto. Ins. Co., 27 Misc 3d 67 [App Term, 2d Dept,{**37 Misc 3d at 69} 2d, 11th & 13th Jud Dists 2010]). As a result, Preferred’s [*2]motion for summary judgment was properly denied.

Accordingly, the order of the Civil Court is affirmed.

Weston, J.P., Rios and Solomon, JJ., concur.

[*1]

Supreme Court, Appellate Term, Second Department, 2d, 11th and 13th Judicial Districts, October 16, 2012

APPEARANCES OF COUNSEL

Rubin, Fiorella & Friedman LLP, New York City (Jason W. Moussourakis and Joseph R. Federici of counsel), for appellant. Law Offices of Bruce Newborough, P.C., Brooklyn (Damin J. Toell of counsel), for respondent.

{**38 Misc 3d at 2} OPINION OF THE COURT

Memorandum.

Ordered that the order is reversed, with $10 costs, and defendant’s motion for summary judgment dismissing the complaint is granted.

EBM Medical Health Care, P.C. commenced this action to recover assigned first-party no-fault benefits for medical services provided to its assignor as a result of injuries sustained in an automobile accident. While this no-fault action was pending, Republic Western Insurance commenced a declaratory judgment action in Supreme Court, New York County, against EBM, alleging that EBM was not properly licensed under Business{**38 Misc 3d at 3} Corporation Law §§ 1507 and 1508 and Education Law § 6507 (4) (c), and therefore was not eligible to recover no-fault benefits. A judgment was entered, on default, in the declaratory judgment action, declaring “that EBM Medical Health Care, P.C. is not properly licensed under Business Corporation Law 1507 and 1508 and Education Law 6507 (4) (c)” and that Republic had no duty to pay no-fault benefits to EBM “arising out of any current or future proceeding.” After the judgment in the declaratory judgment action had been entered, Republic moved in this no-fault action for summary judgment dismissing EBM’s complaint, contending that this action was barred by virtue of the declaratory judgment. The Civil Court denied Republic’s motion, finding, among other things, that Republic had not established that the term “current” proceeding, as used in the declaratory judgment, applied to the instant action.

Based upon the declaratory judgment, the instant action is barred under the doctrine of res judicata (see Ava Acupuncture, P.C. v NY Cent. Mut. Fire Ins. Co., 34 Misc 3d 149[A], 2012 NY Slip Op 50233[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2012]; SZ Med., P.C. v Erie Ins. Co., 24 Misc 3d 126[A], 2009 NY Slip Op 51221[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2009]). To hold otherwise could result in a judgment in the instant action which would destroy or impair rights established by the judgment of the Supreme Court in the declaratory judgment action (see Schuylkill Fuel Corp. v Nieberg Realty Corp., 250 NY 304, 306-307 [1929]). [*2]Contrary to EBM’s contention, the declaratory judgment is a conclusive final determination, notwithstanding that it was entered on default, since res judicata applies to a judgment taken by default which has not been vacated (see Lazides v P & G Enters., 58 AD3d 607 [2009]; Matter of Allstate Ins. Co. v Williams, 29 AD3d 688 [2006]; Matter of Eagle Ins. Co. v Facey, 272 AD2d 399 [2000]). The instant no-fault action was pending at the time the declaratory judgment was entered, and therefore, pursuant to the unambiguous language used in the judgment, this action falls within the ambit of the declaratory judgment as a “current” proceeding. Accordingly, the order of the Civil Court is reversed and Republic’s motion for summary judgment dismissing the complaint is granted.

Weston, J.P., Rios and Solomon, JJ., concur.

[*1]

Supreme Court, Appellate Term, Second Department, 2d, 11th and 13th Judicial Districts, September 19, 2012

APPEARANCES OF COUNSEL

Bruno, Gerbino & Soriano, LLP, Melville (Charles W. Benton of counsel), for appellant.

{**37 Misc 3d at 91} OPINION OF THE COURT

Memorandum.

Ordered that the order is modified by providing that the branches of plaintiff’s motion seeking summary judgment on the third through ninth causes of action are denied; as so modified, the order is affirmed, without costs.{**37 Misc 3d at 92}

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff moved for summary judgment and defendant cross-moved to compel plaintiff to produce Gracia Mayard, M.D., and Richard Berardi, D.O., for depositions regarding “treatment” and plaintiff’s “billing practices.” In opposition to plaintiff’s motion, defendant proffered the defense that Drs. Mayard and Berardi had failed to appear for examinations under oath (EUOs). The Civil Court granted plaintiff’s motion and denied defendant’s cross motion, finding, among other things, that defendant had failed to raise a triable issue of fact in opposition to plaintiff’s motion for summary judgment because it had violated Insurance Department Regulations (11 NYCRR) § 65-3.5 (e) by [*2]scheduling the EUOs outside the county in which plaintiff is located, and that defendant had “failed to establish a wilful noncompliance with the EUO request.”

Since defendant raises no issue on appeal with regard to plaintiff’s establishment of a prima facie case, we do not pass upon the propriety of the Civil Court’s determination with respect thereto. Furthermore, we find that the defenses upon which defendant bases its request for the depositions of Dr. Mayard and Dr. Berardi, regarding “treatment” and plaintiff’s “billing practices,” are precluded (see Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d 556 [2008]; Delta Diagnostic Radiology, P.C. v Republic W. Ins. Co., 15 Misc 3d 33 [App Term, 2d Dept, 2d & 11th Jud Dists 2007]). Accordingly, defendant is not entitled to the denial of plaintiff’s motion pursuant to CPLR 3212 (f) or to have its cross motion to compel the depositions granted (see ARCO Med. N.Y., P.C. v Lancer Ins. Co., 34 Misc 3d 134[A], 2011 NY Slip Op 52382[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2011]; A.B. Med. Servs. PLLC v Utica Mut. Ins. Co., 11 Misc 3d 71, 73 [App Term, 2d Dept, 2d & 11th Jud Dists 2006]).

Turning to plaintiff’s motion for summary judgment, we find that the branches of the motion seeking summary judgment on the first two causes of action were properly granted. Defendant admits that it received plaintiff’s claims comprising those causes of action on December 26, 2006 and December 29, 2006, respectively, and it is undisputed that the claims were not paid or denied within 30 days of their receipt. Nor does defendant claim that the EUOs of Drs. Mayard and Berardi were requested, or pending, during that time. We note that defendant’s January 15, 2007 letter purporting to delay payment of the claims is insufficient to toll the 30-day statutory time period{**37 Misc 3d at 93} within which a claim must be paid or denied (see Points of Health Acupuncture, P.C. v Lancer Ins. Co., 28 Misc 3d 133[A], 2010 NY Slip Op 51338[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2010]). Accordingly, defendant failed to demonstrate that these two claims had been timely denied and therefore it has not established that its defense, that plaintiff failed to comply with a condition precedent to coverage, is not precluded as to these two causes of action (see Westchester Med. Ctr. v Lincoln Gen. Ins. Co., 60 AD3d 1045, 1046 [2009]; cf. Unitrin Advantage Ins. Co. v Bayshore Physical Therapy, PLLC, 82 AD3d 559 [1st Dept 2011]).

However, defendant did raise a triable issue of fact with respect to the third through ninth causes of action by demonstrating that the time to pay or deny the claims comprising those causes of action had been tolled by the timely issuance of EUO scheduling letters, that the doctors had failed to appear for either of two properly scheduled EUOs, and that the claims had been timely denied on April 10, 2007 (see ARCO Med. N.Y., P.C., 2011 NY Slip Op 52382[U]).

We note that there is no merit to the reasons given by the Civil Court in finding that defendant had not raised a triable issue of fact in response to plaintiff’s motion for summary judgment. First, there is nothing in the no-fault regulations prohibiting an insurer from scheduling an EUO outside the county in which the applicant is located (cf. CPLR 3110 [regarding where a deposition shall be taken]). Insurance Department Regulations (11 NYCRR) § 65-3.5 (e) requires only that “[a]ll examinations under oath and medical examinations requested by the insurer shall be held at a place and time reasonably convenient to the applicant,” and the Civil Court did not make a finding that the location chosen for the subject EUOs was not reasonably convenient to the applicant. Furthermore, appearance at an EUO is a [*3]condition precedent to coverage (see Insurance Department Regulations [11 NYCRR] § 65-1.1; Stephen Fogel Psychological, P.C. v Progressive Cas. Ins. Co., 35 AD3d 720 [2006]; W & Z Acupuncture, P.C. v Amex Assur. Co., 24 Misc 3d 142[A], 2009 NY Slip Op 51732[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2009]), and there is no requirement that defendant establish willful noncompliance with an EUO request.

In light of the foregoing, the order is modified by providing that the branches of plaintiff’s motion seeking summary judgment on the third through ninth causes of action are denied.

Pesce, P.J., Weston and Rios, JJ., concur.

[*1]

Supreme Court, Appellate Term, Second Department, 2d, 11th and 13th Judicial Districts, July 12, 2012

APPEARANCES OF COUNSEL

Law Offices of Karen C. Dodson, New York City (Michael L. Rappaport of counsel), for appellant. Law Office of Ilona Finkelshteyn, Brooklyn (Emilia Rutigliano and Jonathan R. Vitarelli of counsel), for respondent.

{**37 Misc 3d at 20} OPINION OF THE COURT

Memorandum.

Ordered that the judgment is reversed, without costs, and the matter is remitted to the Civil Court for a new trial.

In this action by a provider to recover assigned first-party no-fault benefits, the Civil Court, by order entered April 28, 2008, limited the trial to the issue of the medical necessity of the supplies provided. At the nonjury trial, defendant proffered the testimony of Dr. Susan Corcoran, the physician who had prepared the peer review report upon which the denial of the claim at issue had been based. Dr. Corcoran testified that she had obtained the facts of the case from, among other things, the claim form, the medical records (which she listed in her report), and the police accident report. The claim form was admitted into evidence without objection, but [*2]the court sustained plaintiff’s objections to the admission into evidence of other documents, including the medical records. While Dr. Corcoran testified that she could conclude that certain items, such as the cervical pillow or the lumbar cushion, were not medically necessary based solely upon the information contained in the claim form—because she had never seen such equipment used to treat an injury of any sort—she ultimately did not attempt to proffer any testimony which would have required her to refer to documents which the court had previously held were inadmissible.

Defendant’s employee, Jemma Keating, testified as to, among other things, defendant’s practices and procedures when it receives medical documentation concerning an eligible injured person. When defendant sought, for the second time, to admit the medical documentation into evidence, the Civil Court again sustained plaintiff’s objection. The court then granted plaintiff’s motion for judgment in the entire amount sought in the complaint. A judgment was subsequently entered, from which defendant appeals.{**37 Misc 3d at 21}

The question before the court is whether defendant was entitled to have the medical records submitted to it by plaintiff (or plaintiff’s assignor or other medical professionals who had provided services or supplies to plaintiff’s assignor) admitted into evidence so as to enable Dr. Corcoran to testify regarding her expert opinion that the medical supplies at issue were not medically necessary—an opinion she reached after reviewing this medical documentation. We conclude, for the reasons set forth below, that the medical documentation should have been admitted into evidence and, thus, we reverse the judgment and remit the matter to the Civil Court for a new trial to afford defendant an opportunity to establish its defense of lack of medical necessity.

The basis for this action is plaintiff’s claim that it provided medically necessary supplies to its assignor for injuries arising from a covered accident, and that it was not paid for these supplies. In a no-fault case, submission of a properly completed claim form is all that is needed to establish, prima facie, that the supplies at issue were medically necessary (see West Tremont Med. Diagnostic, P.C. v GEICO Ins. Co., 13 Misc 3d 131[A], 2006 NY Slip Op 51871[U] [App Term, 2d Dept, 2d & 11th Jud Dists 2006]; Amaze Med. Supply v Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U] [App Term, 2d Dept, 2d & 11th Jud Dists 2003]), and, upon a demonstration that the claim form is admissible pursuant to the business records exception to the hearsay rule (CPLR 4518), the claim form will constitute sufficient prima facie evidence of the fact and the amount of the loss sustained (see Ave T MPC Corp. v Auto One Ins. Co., 32 Misc 3d 128[A], 2011 NY Slip Op 51292[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2011]). Here, in limiting the trial to the issue of the medical necessity of the supplies provided, the Civil Court implicitly found that plaintiff had established these elements. In other words, plaintiff, as the assignee of benefits under a no-fault insurance policy, demonstrated its entitlement, in the first instance, to recover payment for providing medical supplies to its assignor, without having to proffer any specific testimony or proof as to the facts underlying its claim, including the injury sustained or the treatment rendered by the prescribing physician, or to affirmatively demonstrate that the supplies{**37 Misc 3d at 22} were medically necessary. The burden then shifted to defendant to establish a lack of medical necessity.^[FN*] [*3]

However, recognizing that it would be impossible for an expert witness to proffer an opinion regarding the medical necessity of the supplies at issue without discussing the facts underlying the claim, plaintiff argues that defendant must now prove those facts itself before being allowed to present its defense that, based upon the information provided to it regarding the injury sustained and the treatment rendered, it had correctly denied the claim on the ground that the supplies were not medically necessary. We reject plaintiff’s argument.

A no-fault insurer cannot know with certainty, merely based upon reviewing medical records, what injuries a patient sustained or how he was treated—it can only act on what it has been told. The insurer is, however, permitted to deny a no-fault claim based upon a peer review report which opines that there was a lack of medical necessity for the services or supplies provided (see Insurance Department Regulations [11 NYCRR] § 65-3.8 [b] [4]). It follows that an insurer is entitled, or even expected, to rely on the documents submitted to it by the eligible injured person (and such person’s assignees, who stand in the shoes of the assignor [see Zeldin v Interboro Mut. Indem. Ins. Co., 44 AD3d 652 (2007)]), when determining whether to pay a claim or to deny it on the ground that the services or supplies provided lacked medical necessity.

However, in denying a claim for a lack of medical necessity based upon a peer review report, an insurer is not seeking to establish the truth of the facts set forth in the medical documentation submitted to it. Instead, as this court has previously explained, the insurer is merely stating that, assuming the facts set forth in the medical documentation are true, it is not required to pay for the services or supplies at issue because they were not medically necessary to treat the alleged injury (see Alrof, Inc. v Progressive Ins. Co., 34 Misc 3d 29 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2011]; Urban Radiology, P.C. v Tri-State Consumer Ins. Co., 27 Misc 3d 140[A], 2010 NY Slip Op 50987[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2010]). Thus, we reiterate that, in this context, the medical records are not being used for a hearsay purpose, but rather only to demonstrate that the information contained therein had been{**37 Misc 3d at 23} conveyed to defendant (see Quiroa v Ferenczi, 77 AD3d 901, 901 [2010]; Gelpi v 37th Ave. Realty Corp., 281 AD2d 392 [2001]; Urban Radiology, P.C., 27 Misc 3d 140[A], 2010 NY Slip Op 50987[U] [2010]). Here, there was testimony sufficient to establish that the medical documentation reviewed by Dr. Corcoran had in fact been submitted to defendant by plaintiff, plaintiff’s assignor, or other medical professionals who had provided no-fault benefits to plaintiff’s assignor. Accordingly, it was error to sustain plaintiff’s objection to the admissibility of the records.

We note that the holdings in Hambsch v New York City Tr. Auth. (63 NY2d 723 [1984]) and Wagman v Bradshaw (292 AD2d 84 [2002]), where the plaintiffs’ expert witnesses sought to rely on out-of-court medical records in order to prove the fact of the plaintiffs’ injuries, are not relevant to the instant case, since defendant is not relying on the medical documentation at issue to prove the fact of plaintiff’s assignor’s injuries.

In view of the foregoing, the judgment is reversed and the matter is remitted to the Civil Court for a new trial. [*4]

Pesce, P.J., Rios and Aliotta, JJ., concur.

Footnotes

Footnote *: Assuming the insurer is successful in satisfying its burden, it is ultimately plaintiff who must prove, by a preponderance of the evidence, that the services or supplies were medically necessary.

Supreme Court, Nassau County

12683-11

Law Offices of Bryan M. Rothenberg, Attorneys for Plaintiff.

Gary Tsirelman, Esq., Attorney for Defendant All Boro Psychological Services, P.C.

Montfort, Healy, McGuire & Salley, LLP, Attorneys for Defendant Roxanne Chowdry.

The Rybak Firm, PLLC, Attorneys for Defendants Amega, Inc., Healing Art Acupuncture, P.C., J.C. Healing Touch Rehab PT, P.C., North East Empire Medical, P.C., SS Medical Care, P.C., True Align Chiropractic Care, P.C., and ZG Chiropractic Care, P.C.

Steven M. Jaeger, J.

The following papers read on this motion:

Order to Show Cause and AffirmationX

Notice of Cross Motion and AffirmationX

AffidavitX

Opposition to Defendant’s Cross MotionX

Affirmation in OppositionX

Affirmation in SupportX

Reply in SupportX [*2]

ReplyX

Order to show cause pursuant to CPLR 6301 and 2201 by the plaintiff 21st Century Advantage Insurance Company for an order, inter alia, staying and enjoining all presently pending and future lawsuits and arbitrations instituted as against the plaintiff for (1) the recovery of no-fault benefits; and/or (2) reimbursement for

health care services rendered pursuant to stated automobile insurance polices previously issued by the plaintiff.

Cross motion pursuant by codefendant All Boro Psychological Services, P.C., for an order: (1) dismissing the plaintiff’s complaint to CPLR 3211[a][4]; or alternatively, (2) severing the claims asserted against it pursuant to CPLR 603 and 1002[c]; and/or (3) extending its time to serve an answer to the verified complaint pursuant to CPLR 3012[d] and 2004.

In August of 2011, the plaintiff 21st Century Advantage Insurance Company [“the plaintiff”], commenced the within insurance fraud action as against various no-fault, health care providers and individual defendant-policyholders. The verified complaint alleges in substance that during a ten-month period between June of 2009 and January of 2010, certain individual defendants engaged in a fraudulent scheme to illegally procure approximately ten automobile insurance policies (Cmplt., ¶¶ 5-7; 142; 161, 181, 195).

More specifically, the plaintiff contends, inter alia, that: the named individual defendants and others, applied for the subject policies by telephone or over the internet by using common telephone and facsimile numbers; that the applicants used invalid bank accounts and bogus credit cards to do so; and that thereafter — mostly within 60 days of the policy issuance dates and before non-payment-based cancellation notices could become effective — the fraudulently insured vehicles were involved in “staged,” side-swipe or rear-end type accidents, for which false claims were filed (Keane Aff., ¶¶ 4-8; 10-11; Mirabella Aff., ¶¶ 9-11).

The verified complaint further alleges that after the allegedly false claims were filed, the plaintiff requested information from its insureds and others, and also scheduled examinations under oath [“EUO”], as authorized by the policies (Cmplt., ¶¶ 154-159; 192-195, 249-250, 280). The defendants, however, either failed to appear for the EUOs or testified in an evasive, suspicious and inconsistent manner with respect to the policy application process and the occurrence of the subject accidents (Keane Aff., ¶¶ 9-10; Cmplt., ¶¶ 153-155; 172-[*3]173; 194; 203-204, 229; 280).

With respect to one policy transaction in particular, the complaint avers that the “unlisted” driver who was actually operating the insured’s vehicle during the accident (which occurred nine days after the policy was issued), appeared for an EUO and testified that: inter alia, he was offered money by the named insured to become involved in an accident; that specifically, he was instructed to rear-end another vehicle; and that he was then told by the named insured to apply for no- fault therapy benefits after the accident occurred (Cmplt., ¶¶ 203-204).

The plaintiff asserts that in sum, and based on its investigation, none of the individual defendants provided evidence demonstrating that the policy applications and ensuing accidents were bona fide — as opposed to intentionally staged, sham incidents designed to defraud the plaintiff (Keane Aff., ¶¶ 11-12).

The plaintiff’s verified complaint sets forth five causes of action and demands, among other things, declaratory relief rescinding and/or voiding the policies (Cmplt., ¶¶ 325- 361).

In light of its assertion that the subject policies were fraudulently obtained and void, the plaintiff thereafter declined to reimburse certain health care providers who supplied no-fault medical services to the insured defendants (Cmplt., ¶¶ 56-140). As a result, approximately 100 of those health care providers later commenced no-fault reimbursement actions against the plaintiff in the New York City Civil Court (Mirabella Reply Aff., ¶ 6).

In December of 2011, the plaintiff moved by order to show cause (with temporary restraining order) to enjoin the prosecution and/or commencement of all actions and arbitrations — pending or to be commenced in the future — arising out of the issuance of the subject policies (OSC, ¶¶ [a]-[c]).

Upon receipt of the plaintiff’s papers, the Court signed the proposed temporary restraining order contained therein, which effectively stayed all current and future actions and/or arbitrations pending the return date of the plaintiff’s main application (Jaeger, J.).

Codefendant All Boro Psychological Services, P.C [“All Boro”] has opposed the plaintiff’s application and also cross moved for stated relief, including dismissal of the plaintiff’s complaint pursuant to CPLR 3211[a][4] based on a Civil Court reimbursement action it commenced against the plaintiff. Alternatively, All Boro has requested a severance (CPLR 603; 1002[c]), and if that relief is denied, All Boro has sought leave to file a late answer to the verified complaint (see, CPLR 2004; 3012[b]).

With respect to its CPLR 3211[a][4] dismissal claim (“another action [*4]pending”), All Boro asserts that in June of 2011 a few months before the plaintiff commenced this action — it instituted its own no-fault, reimbursement action against the plaintiff in the New York City Civil Court (Chin Aff., ¶¶ 2—6; Exh., “3”). The All Boro Civil Court complaint alleges in sum, that All Boro provided covered, no-fault medical services to one of the individual defendants in this action, “Shameeka Moore” (Chin Aff., ¶¶ 2—6; Exh., “3”). According to All Boro’s Civil Court complaint, despite due demand, the plaintiff has declined to pay the sum of $1181.73 — the amount allegedly now due and owing for the health care services it rendered.

A number of additional, non-moving providers have also opposed the plaintiff’s motion, i.e., codefendants Amega, Inc., Healing Art Acupuncture, P.C.; J.C. Healing Touch Rehab PT, P.C.; North East Empire Medical, P.C.; SS Medical Care, P.C.; True Align Chiropractic Care, P.C.; True Align Chiropractic Care P.C., and ZG Chiropractic Care, P.C — and also Roxana Chowdhry (a non-insured alleged accident victim).

The plaintiff’s order to show cause is now before the Court for review and resolution. The order to show cause should be granted. All Boro’s cross motion is granted to the limited extent indicated below.

Preliminarily, although the plaintiff cites to, inter alia, CPLR 2201 as authority for its application, CPLR 2201 applies to stays issued in matters pending before the motion Court (e.g., Peluso v Red Rose Rest., Inc., 78 AD3d 802, 803; St. Paul Travelers Ins. Co. v. Nandi, ___Misc.3d___, 2007 WL 1662050, at 8 [Supreme Court, Queens County 2007]; Siegel, New York Practice, § 256, at 435-436 [4th ed] see, New York Cent. Mut. Ins. Co. v. McGee, ___Misc.3d ___, 2009 WL 4068474, at 6 [Supreme Court, Kings County 2009], modified on different grounds, 87 AD3d 622 see also, Autoone Ins. Co. v. Manhattan Heights Medical, P.C., ___Misc.3d.___, 2009 WL 2357009, at 2-3 [Supreme Court, Queens County 2009]). Here, the plaintiff’s order to show cause demands relief enjoining actions and arbitrations pending in a variety of different forums. Accordingly, the motion is properly viewed as one for a preliminary injunction — to which the requirements prescribed by Article 63 are therefore applicable (St. Paul Travelers Ins. Co. v. Nandi, supra see also, Mercury Cas. Co. v. Inger Grant Lynbrook Adv Acupuncture, supra, 2011 WL 4874666 [Supreme Court, Nassau County 2011]; New York Cent. Mut. Ins. Co. v. McGee, supra cf., Urban Radiology, P.C. v. GEICO Ins. Co., ___Misc.3d.___, 2010 WL 3463018, at 2-3 [New York City Civil Court 2010]).

With respect to those requirements, “[a] party seeking the drastic remedy of [*5]a preliminary injunction has the burden of demonstrating, by clear and convincing evidence, (1) a likelihood of ultimate success on the merits, (2) the prospect of irreparable injury if the provisional relief is withheld, and (3) a balancing of the equities in the movant’s favor” (Perpignan v. Persaud, 91 AD3d 622, 623 see also, Nobu Next Door, LLC v. Fine Arts Housing, Inc., 4 NY3d 839, 840 [2005]; Aetna Ins. Co. v. Capasso, 75 NY2d 860, 862 [1990]; Doe v. Axelrod, 73 NY2d 748, 750 [1988]). However, conclusive proof is not required (Arcamone-Makinano v. Britton Property, Inc., 83 AD3d 623; 624; Ying Fung Moy v Hohi Umeki, 10 AD3d 604, 605), and the mere existence of an issue of fact will not itself be

grounds for the denial of the motion (see, CPLR 6312[c]; Reichman v. Reichman, 88 AD3d 680, 681; Ruiz v Meloney, 26 AD3d 485, 487).

“The decision to grant or deny a preliminary injunction lies within the sound discretion of the Supreme Court” (91-54 Gold Road, LLC v. Cross-Deegan Realty Corp., 93 AD3d 649).

With these principles in mind, and in the exercise of its discretion, the Court agrees that the plaintiff has established its entitlement to the injunctive relief sought. It is settled that “[a] deliberate collision caused in furtherance of an insurance fraud scheme is not a covered accident” (State Farm Mut. Auto. Ins. Co. v. Laguerre, 305 AD2d 490, 491 see, Matter of Liberty Mut. Ins. Co. v Goddard, 29 AD3d 698, 699; Eagle Ins. Co. v. Davis, 22 AD3d 846, 847; Matter of Metro Med. Diagnostics v Eagle Ins. Co., 293 AD2d 751, 752).

At bar, the plaintiff’s submissions include the affidavit of its Special Investigator, Sandra Keane, who was involved in the investigation, and the plaintiff’s 361 paragraph, complaint (verified by Ms. Keane), which provides a highly fact-specific, case-by case description of, inter alia, the manner in which the policies were acquired; the insured defendants’ alleged non-cooperation, and other relevant transactional facts depicting the allegedly suspicions and questionable nature of the applications made and the accidents which later occurred (see, Autoone Ins. Co. v. Manhattan Heights Medical, P.C., supra, 2009 WL 2357009, at 2-3 cf., Felsen v. Stop & Shop Supermarket Co., LLC, 83 AD3d 656, 657). These non-conclusory factual assertions are sufficient to prima facie establish a likelihood of success on the merits of the plaintiff’s fraud-based claims, i.e., that the policies were fraudulently acquired and therefore subject to rescission (Autoone Ins. Co. v. Manhattan Heights Medical, P.C., supra; St. Paul Travelers Ins. Co. v. Nandi, supra, 2007 WL 1662050, at 8).

The plaintiff has additionally demonstrated that the requested injunctive [*6]relief will serve to minimize repetitive litigation and arbitrations in which the same, potentially dispositive defenses and claims relating to the disputed policies will be raised (Autoone Ins. Co. v. Manhattan Heights Medical, P.C., supra). Similarly, and, “in view of the multiplicity of lawsuits and the possible inconsistent outcomes in the absence of an injunction, [the] plaintiff has established the elements of irreparable injury and the balancing of the equities in its favor” (St. Paul Travelers Ins. Co. v. Nandi, supra, 2007 WL 1662050, at 8).

Contrary to the plaintiff’s contentions, however, “[t]he Second Department has repeatedly emphasized that CPLR 6312[b] clearly and unequivocally requires the party seeking an injunction to give an undertaking'”(Schneck v. Schneck,___, Misc 3d.___, 2008 WL 5192626, at 6 [Supreme Court, Nassau County 2008], quoting from, Glorious Temple Church of God in Christ v. Dean Holding Corp., 35 AD3d 806, 807; 6312[b] see also, 91-54 Gold Road, LLC v. Cross-Deegan Realty Corp., supra, 93 AD3d 649, 650; Putter v. Singer, 73 AD3d 1147, 1149; Buckley v. Ritchie Knop, Inc., 40 AD3d 794, 796; Massapequa Water Dist. v. New York SMSA Ltd. Partnership, ___ Misc 3d.___, 2008 WL 779259 at 9 [Supreme Court, Nassau County, 2008])(Mirabella [Opp] Aff., ¶ 16).

Therefore, and as a condition to the granting of the above-referenced injunctive relief, the plaintiff shall file an undertaking as directedbelow in accord with the dictates of CPLR 6312(b)(Schneck v. Schneck, supra, 2008 WL 5192626, see also, Massapequa Water Dist. v. New York SMSA Ltd. Partnership, supra, 2008 WL 779259 at 9 [Supreme Court, Nassau County, 2008]; Buckley v. Ritchie Knop, Inc., supra).

Turning to All Boro’s cross motion, that branch the motion which is to dismiss the complaint based on the Civil Court reimbursement action should be denied (CPLR 3211[a][4]). In the exercise of its broad discretion pursuant to CPLR 3211[a][4](see, Clark v. Clark, 93 AD3d 812, 815), the Court agrees that dismissal of the subject action based on the pending, Civil Court matter is unwarranted, since, inter alia, the two actions lack the requisite degree of identity

in terms of the issues presented and the relief sought (Clark v. Clark, supra, at 815; Goldman v A & E Club Props., LLC, 89 AD3d 681, 683).

All Boro’s alternative demand for relief — denominated as a request for a severance — appears to be miscast (CPLR 603, 1002[c]). In substance, a severance is a discretionary measure which is “sparingly” exercised so as to minimize prejudice where, inter alia, common factual and legal issues are lacking and/or where a single trial of differing claims would negatively effect a substantial right [*7](Herskovitz v Klein, 91 AD3d 598, 599; New York Cent. Mut. Ins. Co. v. McGee, supra, 87 AD3d at 624; Bentoria Holdings, Inc. v Travelers Indem. Co., 84 AD3d 1135, 1137; Cole v Mraz, 77 AD3d 526, 528; Quiroz v Beitia, 68 AD3d 957, 960 see generally, Shanley v Callanan Indus., 54 NY2d 52, 57 [1981]).

Here, however, All Boro is apparently making the opposite claim; namely, that common legal and factual issues do, in fact, exist (see, Chin Reply Aff., ¶¶ 1-4). Where commonality exists, courts have denied severance requests, reasoning “that the interests of judicial economy and consistency of verdicts will be served by having a single trial” (Herskovitz v Klein, supra; Golden Eagle Capital Corp. v Paramount Mgt. Corp., 88 AD3d 646, 648; Quiroz v Beitia, supra, 68 AD3d 957, 960). Alternatively, to the extent that All Boro is arguing that its Civil Court action should be exempted from the subject injunction (Chin Reply Aff., ¶¶ 1-2), that result would be inconsistent with the Court’s granting of that remedy and could reintroduce the potential for conflicting results which the injunction was, in part, designed to minimize (cf., St. Paul Travelers Ins. Co. v. Nandi, supra, 2007 WL 1662050, at 8).

Lastly, that branch of the All Boro’s cross motion which is for leave to file a late answer, in the form annexed to its motion papers, is granted as unopposed (Chin Reply Aff., Exh., “1”).

The Court has considered the parties’ remaining contentions and concludes that they do not support an award of relief beyond that granted above.

Accordingly, it is,

ORDERED that the plaintiff’s motion for a preliminary injunction is granted to the extent that terms of the temporary restraining order previously approved by the Court shall be continued during the pendency of the subject action, and it is further,

ORDERED that the plaintiff shall post an undertaking in the sum of $50,000.00 pursuant to CPLR 6312(b) within twenty (20) days of the date of this Order, and if such undertaking is not posted, the order to show cause is denied, and it is further,

ORDERED that the cross motion pursuant by codefendant All Boro Psychological Services, P.C., is granted to the limited extent that its application to serve the proposed answer annexed to its moving papers is granted, and the cross motion is otherwise denied.

The foregoing constitutes the decision and order of the Court.

Dated: May 24, 2012 [*8]

________________________________________

STEVEN M. JAEGER, A.J.S.C.

[*1]

Supreme Court, Appellate Term, Second Department, 2d, 11th and 13th Judicial Districts, April 27, 2012

APPEARANCES OF COUNSEL

Law Offices of Alden Banniettis, Brooklyn (Jeff Henle of counsel), for appellant-respondent. Law Offices of Daniel J. Tucker, New York City (Netanel BenChaim of counsel), for respondent-appellant.

{**36 Misc 3d at 27} OPINION OF THE COURT

Memorandum.

Ordered that the order is modified by providing that the branch of plaintiff’s motion seeking a final order of preclusion is granted; as so modified, the order is affirmed, without costs.{**36 Misc 3d at 28}

In this action by a provider to recover assigned first-party no-fault benefits, the parties entered into a “so-ordered” stipulation in which defendant agreed to serve responses to plaintiff’s interrogatories within 60 days of the date of the “so-ordered” stipulation or be precluded from offering evidence at trial. After defendant failed to serve its responses by the specified date, in fact serving them more than one year later than required, plaintiff moved for a final order of preclusion and, upon preclusion, for summary judgment, and defendant cross-moved for summary judgment dismissing the complaint. The Civil Court denied plaintiff’s motion, finding that plaintiff had not been prejudiced by the late service of the responses, and denied defendant’s cross motion, on the ground that there were issues of fact precluding summary judgment. Both parties appeal.

The “so-ordered” stipulation functioned as a conditional order of preclusion, which became absolute upon defendant’s failure to timely and sufficiently comply therewith (see Panagiotou v Samaritan Vil., Inc., 66 AD3d 979 [2009]; Blumenthal Chiropractic, P.C. v Praetorian Ins., 34 Misc 3d 135[A], 2011 NY Slip Op 52386[U] [App Term, 2d, 11th & 13th Jud Dists 2011]; Colonia Med., P.C. v Liberty Mut. Fire Ins. Co., 34 Misc 3d 127[A], 2011 NY Slip Op 52283[U] [App Term, 2d, 11th & 13th Jud Dists 2011]). Nevertheless, plaintiff moved for a final order of preclusion. Although it was unnecessary for plaintiff to make such further application to the court, in doing so, plaintiff authorized the court to revisit the issue of preclusion and to consider defendant’s opposition thereto. In order to avoid the adverse impact of the stipulation, defendant was required to demonstrate a reasonable excuse for the failure to timely comply with the stipulation, as well as the existence of a potentially meritorious defense to [*2]the action (see Kirkland v Fayne, 78 AD3d 660 [2010]). While defendant may have demonstrated a potentially meritorious defense to the action, it failed to demonstrate any excuse for its failure to timely comply with the stipulation. The Civil Court denied plaintiff’s motion for preclusion and, upon preclusion, for summary judgment, thereby, in effect, vacating the final order of preclusion, which had become absolute. In our opinion, this was an improvident exercise of discretion since defendant did not offer any excuse for its 13-month delay in complying with the stipulation. Accordingly, the branch of plaintiff’s motion seeking a final order of preclusion should have been granted.

A defendant’s preclusion from introducing evidence at trial does not automatically entitle a plaintiff to summary judgment{**36 Misc 3d at 29} or relieve the plaintiff of the burden of proving its case (see Mendoza v Highpoint Assoc., IX, LLC, 83 AD3d 1 [2011]). In the instant case, plaintiff’s moving papers failed to establish a prima facie entitlement to summary judgment (see CPLR 4518; Insurance Law § 5106 [a]; Westchester Med. Ctr. v Nationwide Mut. Ins. Co., 78 AD3d 1168 [2010]; Ave T MPC Corp. v Auto One Ins. Co., 32 Misc 3d 128[A], 2011 NY Slip Op 51292[U] [App Term, 2d, 11th & 13th Jud Dists 2011]; Dan Med., P.C. v New York Cent. Mut. Fire Ins. Co., 14 Misc 3d 44 [App Term, 2d & 11th Jud Dists 2006]). Accordingly, the Civil Court properly denied the branch of plaintiff’s motion seeking summary judgment.

On appeal, defendant argues that it was not precluded from offering evidence in support of its cross motion for summary judgment because the so-ordered stipulation barred it only from offering evidence “at trial.” However, to allow defendant to use evidence in support of its cross motion which it is barred from introducing at trial “would perversely undermine the point of the order by allowing defendant to benefit from the shortcut of summary judgment by use of the same evidence that otherwise would have been barred at trial” (Mendoza, 83 AD3d at 9). Accordingly, defendant’s cross motion for summary judgment, which sought to establish that the equipment provided by plaintiff was not medically necessary, was properly denied, albeit on grounds other than those set forth by the Civil Court.

Pesce, P.J., Weston and Rios, JJ., concur.

Supreme Court, Nassau County

1411/12

Economou & Economou, Attorney for Petitioner, 485 Underhill Boulevard, Syosset, NY 11791

Brian Rothenberg, Attorney for Respondent, 100 Duffy Avenue, Hicksville, NY 11801

Robert A. Bruno, J.

Upon the foregoing papers, it is ordered that this motion is decided as follows:

Petitioner requests an Order pursuant to Article 75 and CPLR §3102( c), compelling disclosure and discovery to aid in arbitration; and, pursuant to Article 75 and CPLR §2201(b) staying any and all proceedings present, and staying the filing of any new proceedings which seek reimbursement of no-fault benefits pursuant to Article 51 (Comprehensive Motor Vehicle Insurance Reparations Act) and 11 NYCRR 65 (Regulations Implementing the Comprehensive Motor Vehicle Insurance Reparations Act) pending the compliance with such order. Respondent opposes said application.

In a proceeding pursuant to CPLR Article 75, to, inter alia, stay arbitration of certain No-Fault proceedings, the petitioning insurance carriers move pursuant to CPLR 3102[c] for an order: (1) compelling disclosure and discovery in aid of arbitration from the defendant Kissena Medical Imaging, P.C.; and/or (2) staying certain pending arbitrations commenced by Kissena Medical Imaging, P.C., and temporarily enjoining and/or staying it from commencing any further No-Fault arbitration proceedings for reimbursement of benefits as against the petitioners.

The petitioner insurance companies — over 40 in total — have commenced the within proceeding to stay certain pending and/or anticipated no-fault arbitrations and/or “any and all proceedings” which have been, or will be, instituted by the respondent No-Fault provider/medical corporation, Kissena Medical Imaging, P.C. [“Kissena”](Pet., ¶¶ 4-5; 19-20; Exh., “A”). The petition also demands stated disclosure in aid of the foregoing arbitration proceedings, four of which — the petitioners claim — are currently pending (Pet., ¶¶ 19-20).

According to the petitioning carriers, Kissena has billed them for radiological services it has provided to injured no-fault claimants, from whom Kissena received benefit assignments (Caio Aff., ¶¶ 6-7). The carriers have declined, however, to pay the Kissena bills, arguing in sum that Kissena is an illegally constituted and/or fraudulently incorporated medical service corporation in violation of applicable no-fault rules and regulations (see generally, State Farm Mut. Auto. Ins. Co. v. Mallela, 4 NY3d 313, 320-321 [2005]; One Beacon Ins. Group, LLC v. Midland Medical Care, P.C., 54 AD3d 738, 740).

More specifically, the relief sought by the petitioners is based on allegations that: (1) Kissena [*2]has been fraudulently incorporated by “paper” owner, Lawrence N. Diamond, M.D; (2) it “appears” that Kissena is secretly owned and controlled by a non-physician in violation of New York law; and (3) that Kissena has billed the plaintiffs for services performed by independent contractors, not by Kissena employees, also in violation stated No-Fault rules and regulations (Pet., ¶¶ 4-7, 9-12, 15-16, 18). In response, Kissena has commenced certain arbitration proceedings under the No-Fault law to recover payment for the services it has rendered.

Significantly, apart from the four arbitrations identified in an attachment to the petition (Exh., “A”), the petition does not allege that the remaining carriers have actually received specifically identified claims or arbitration demands from Kissena; nor does it identify precisely what arbitrations — pending or otherwise — are imminent with respect to the extensive list of carriers whose names have been included in the caption.

The disclosure sought in connection with the application is extensive and requests, inter alia: the production of Kissena’s owner, Lawrence N. Diamond, M.D., for a deposition; the identity of all billing and management companies and/or agents for Kissena; all written agreements and contracts, including those between Kissena and any billing and/or management agents; all written agreements between Diamond personally and any of Kissena’s billing or management companies or agents; all contracts between Diamond and Kissena; all financial statements of Kissena, including all banks records for accounts maintained by Kissena; all federal and state tax documentation, including all filings and returns for both for Kissena and Diamond personally; all corporate documents/leases for premises where the clinic may be located; and as well as all equipment leases, documents of incorporation and all filings made with the Secretary of State (Pet., ¶ 32).

Upon submission of the petitioners’ order to show cause, this Court struck the temporary restraining order contained therein. The foregoing temporary restraining order would have broadly stayed “any and all” pending proceedings and enjoined Kissena from commencing any additional arbitration matters as against all of the named petitioners (Order to Show Cause, 2nd and 3rd decretal paragraphs).

The petitioners’ underlying application for injunctive relief and discovery in aid of arbitration is now before the Court. The application should be denied.

It is settled that petitioner seeking disclosure in aid of an arbitration pursuant to CPLR 3102[c] must affirmatively demonstrate that “extraordinary circumstances” exist, “such that this relief would be absolutely necessary for the protection of its rights” (see, Progressive Specialty Ins. Co. v. Alexis, 90 AD3d 933, 834; Travelers Indem. Co. v. United Diagnostic Imaging, P.C., 73 AD3d 791, 792 see also, De Sapio v. Kohlmeyer, 35 NY2d 402, 406 [1974]; Hendler & Murray v. Lambert, 147 AD2d 442, 443 cf., Government Employees Ins. Co. v. Morris, 83 AD3d 709; Kissena Medical Imaging, P.C., 25 Misc 3d 1214(A), 901 NYS2d 911, 2009 WL 3337597 [Supreme Court, Nassau County 2009]). Indeed, disclosure devices are to be “sparingly used in arbitration proceedings'” (De Sapio v. Kohlmeyer, supra, 35 NY2d 402, 406; Travelers Indem. Co. v. United Diagnostic Imaging, P.C., supra, 73 AD3d at 792; Matter of Flood, 157 AD2d 780, 781).

With these principles in mind, the Court agrees that the petitioners have not sustained their [*3]burden of demonstrating that extraordinary circumstances exist (Travelers Indem. Co. v. United Diagnostic Imaging, P.C., supra).

Significantly, in opposition to the motion, Kissena has persuasively argued, among other things, that: (1) it has been duly incorporated by a physician licensed to practice medicine in the State of New York; (2) the affidavits submitted by the carriers’ investigators (who are apparently employees of one particular carrier), are inconclusive and lacking in the requisite factual detail; and (3) only two arbitration proceedings (with amounts in issue of $2,670.40 and $878.67) are actually now pending before an arbitrator, which claims have been denied on medical necessity grounds (Caio Aff., ¶¶ 31, 41-45, 48, 50, 52). The record also supports Kissena’s assertions that many of the document demands are excessively broad and unlimited in their temporal scope (cf., Accent Collections, Inc. v. Cappelli Enterprises, Inc., 84 AD3d 1283). The petitioners have not submitted reply papers in which they have responded to, or otherwise materially disputed, the foregoing assertions.

Lastly, there is no dispute that the petitioners possess the right to request that the involved arbitrators direct Kissena to produce materials relating to, inter alia, Kissena’s corporate structure(Travelers Indem. Co. v. United Diagnostic Imaging, P.C., supra, 73 AD3d at 791-792). Nor does the evidence indicate “that if a disclosure directive is made during those proceedings, the requested disclosure will, at that point, be unavailable” (Travelers Indem. Co. v. United Diagnostic Imaging, P.C., supra). Surprisingly, during oral argument when this Court struck petitioner’s application for a temporary restraining order, petitioner’s admitted they did not bother seeking the discovery they are requesting herein, in the arbitrary proceeding they request this Court to stay.

Under these circumstances, and upon the exercise of its broad discretion, the Court agrees that the petitioners’ submissions do not establish the existence of extraordinary circumstances warranting the requested, discovery in aid of arbitration.

The Court has considered the petitioners’ remaining contentions and concludes that they are lacking in merit.

According, it is,

ORDERED petitioners’ order to show cause pursuant to CPLR 3102[c], for an order, inter alia, granting a stay and stated discovery in aid of arbitration, is denied.

All matters not decided herein are DENIED.

This constitutes the decision and order of this Court.

Dated: April 23, 2012

Mineola, New YorkE N T E R: [*4]

______________________________

Hon. Robert A. Bruno, J.S.C.

[*1]

Supreme Court, Appellate Term, First Department, April 13, 2012

APPEARANCES OF COUNSEL

Jaffe & Koumourdas, LLP, New York City (Ariel S. Lichterman of counsel), for appellant. Gina Gleicher and Leon Kucherovsky, New York City, for respondent.

{**35 Misc 3d at 67} OPINION OF THE COURT

Per Curiam.

Order entered April 9, 2010, modified by granting defendant’s motion to the extent of reducing the amount of the judgment entered against it to the aggregate sum of $1,251; as modified, order affirmed, without costs.

The parties agree that the underlying no-fault first-party action was validly settled, but join issue as to the intended amount of the settlement. The facts leading up to the settlement are undisputed and may be briefly stated as follows: Plaintiff, through counsel, drafted and presented a proposed settlement agreement, dated October 21, 2008, which set forth all material terms of the settlement and provided, in paragraph 4, that “[t]his case is not settled unless this stipulation is signed by a representative of defendant and faxed back to [plaintiff’s attorney].” Upon receipt of plaintiff’s proposal, defense counsel made and initialed several handwritten changes to paragraph 2 of the document—addressing the consequences of a payment default on defendant’s part—with the changes designed to extend the time allotted to defendant to comply with the agreement’s payment terms and, more importantly here, to reduce defendant’s payment obligations in the event it failed to comply. So far as shown, plaintiff voiced no objection to the modifications proposed by defendant nor took any other action in the case for a full six months after defense counsel marked up and returned the stipulation, until March 2009, when plaintiff entered judgment in accordance with the original terms of the stipulation favorable to it.

Given the particular facts and circumstances of this case, and since plaintiff itself acknowledges that the parties’ correspondence yielded an enforceable settlement agreement, we conclude that plaintiff, through “acquiescent conduct” (Eldor Contr. Corp. v County of Nassau, 272 AD2d 509, 509 [2000])—including its election to forgo any further litigation activity on its no-fault claim—accepted and is bound by the stipulation’s revised terms (see Minelli Constr. Co., Inc. v Volmar Constr., Inc., 82 AD3d 720, 722 [2011]). Accordingly, the amount of the consent [*2]judgment issued below must be reduced to the stipulated principal sum of $950, together with the stipulated attorney’s fees ($196) and costs ($105) due plaintiff.

We note finally that the judgment at issue “is not a default judgment as that term is used in pleading and practice, and [the{**35 Misc 3d at 68} motion court’s] application of law relating to vacating default judgments was erroneous” (Furgang v Epstein, 106 AD2d 609, 610 [1984]).

Torres, J.P., Shulman and Hunter, Jr., JJ., concur.