Index No. 654090/2020

Correia, Conway & Stiefeld, White Plains, NY (Richard Ahrens of counsel), for plaintiff.

Law Office of Gregory A. Goodman, P.C., Jericho, NY (Gregory Goodman of counsel), for defendant NYC Axis Chiropractic PC.

Gerald Lebovits, J.

In this no-fault insurance coverage action, plaintiffs Liberty Mutual Insurance Company and American States Insurance Company (together, Liberty Mutual) move for default judgment against the eligible injured person, defendant Edwine Brutus; and against non-appearing defendants I Am Supplies Inc., MZY Acupuncture PC, Nexray Medical Imaging PC, Sedation Vacation Perioperative Medicine PLLC and Way to Rehab PT PC, all medical-provider assignees of Brutus.

Appearing defendant NYC Axis Chiropractic PC cross-moves for summary judgment against Liberty Mutual. NYC Axis also cross-moves for sanctions, on the ground that Liberty Mutual erroneously named it in the initial default judgment motion and then failed to withdraw the motion quickly enough as against NYC Axis.

Liberty Mutual’s unopposed motion for default judgment is granted. The branch of NYC Axis’s cross-motion seeking sanctions is denied. The branch of NYC Axis’s cross-motion for summary judgment is granted in part and denied in part.

DISCUSSION

I. Liberty Mutual’s Default-Judgment Motion

To obtain default judgment under CPLR 3215, a movant must establish proper service on the subjects of the motion, defaults by those parties, and the facts constituting movant’s claim. Here, Liberty Mutual has established proper service and defaults. Additionally, Liberty Mutual has established, through affidavits and supporting documentation, the facts constituting its claim.

In particular, Liberty Mutual has shown that it timely asked Brutus to appear for an examination under oath (EUO) about whether he had been truthful and accurate on his application for insurance (see NYSCEF No. 24 [EUO scheduling letters]). Liberty Mutual has also demonstrated that Brutus appeared for his EUO but failed to respond fully to timely served post-EUO document requests. (See NYSCEF No. 27 [EUO transcript]; NYSCEF No. 28 [post-[*2]EUO document requests].) Liberty Mutual has provided an affidavit from one of its investigators representing that her investigation, coupled with Brutus’s EUO testimony, indicated he lived at a different address from the one he had used on his application. (NYSCEF No. 23.) And Liberty Mutual has provided an affidavit from one of its underwriters representing that had Brutus provided his true home address on the insurance application, the premium would have been almost double what he was charged. (NYSCEF No. 29.)

These facts, taken together, suffice to establish a prima facie case that Brutus committed a material misrepresentation in applying for insurance from Liberty Mutual. (See Starr Indem. & Liab. Co. v Monte Carlo, LLC, 190 AD3d 441, 441-442 [1st Dept 2021] [“A misrepresentation in an insurance application is material . . . if, had the true facts been known, either the insurer would not have issued the policy or would have charged a higher premium.”]; cf. Dyno v Rose, 260 AD2d 694, 698 [3d Dept 1999] [noting that the “affidavit of facts” supporting a default-judgment motion for default judgment must “establish a prima facie case” for relief].) This material misrepresentation, in turn, is a proper basis to deny claims for benefits brought by Brutus or his assignees. (See Matter of Insurance Co. of N. Am. v Kaplun, 274 AD2d 293, 298-299 [2d Dept 2000].)

Liberty Mutual’s motion for default judgment is granted.

II. NYC Axis’s Cross-Motion

A. The Branch of the Cross-Motion Seeking Sanctions

Liberty Mutual’s default-judgment motion initially sought judgment against NYC Axis, in addition to the other defendants named in the motion. (See NYSCEF No. 14 at 2 [notice of motion].) The attorney affirmation submitted in support of the motion stated that NYC Axis was in default because it did not timely answer. (See NYSCEF No. 15 at 4 ¶ 18.) But although NYC Axis’s answer was untimely, Liberty Mutual did not reject that answer when it was filed, thereby waiving Liberty Mutual’s right to act on the default. (See U.S. Bank N.A. v Lopez, 192 AD3d 849, 850 [2d Dept 2021].)

Liberty Mutual filed its motion on Friday, December 3, 2021. (NYSCEF No. 14.) The motion was returnable on January 4, 2022; it required under CPLR 2214 (b) that opposition papers be filed by December 28, 2021. (Id. at 1-2.) On Saturday, December 4, NYC Axis filed a letter to demand that Liberty Mutual withdraw its motion as against NYC Axis within five days or face a sanctions motion. (NYSCEF No. 37.) On Thursday, December 9, NYC Axis filed this cross-motion for summary judgment under CPLR 3212 and for sanctions under 22 NYCRR 130-1.1. (NYSCEF No. 39 [notice of cross-motion].) On December 16—less than two weeks after the motion was filed—Liberty Mutual withdrew the motion as against NYC Axis, conceding that seeking judgment against NYC Axis was an error. (NYSCEF No. 48.)

NYC Axis argues at length on reply that it should be awarded sanctions against Liberty [*3]Mutual anyway. (See NYSCEF No. 53 at 3-8.) This argument is groundless. Liberty Mutual did not, as NYC Axis asserts, act with “obstinacy” in “refus[ing] to withdraw its motion” (id. at ¶¶ 19, 25)—it merely did not withdraw the motion as rapidly as NYC Axis would have preferred. Additionally, given the timing, NYC Axis was not, as it suggests, “compelled . . . to seek judicial intervention to protect [its] client’s rights” against Liberty Mutual’s motion (id. at ¶ 14). Instead, NYC Axis chose to resort to motion practice only four business days after Liberty Mutual filed its default-judgment motion, and nearly three weeks before NYC Axis’s opposition papers would have been due. No basis for § 130-1.1 sanctions against Liberty Mutual exists on these facts.

NYC Axis also cross-moves for summary judgment on the merits, contending that it is entitled to payment on 10 bills for treatment (plus attorney fees) because Liberty Mutual did not timely deny them, and because the assertedly untimely denials were improper in any event.

The cross-motion is granted in part and denied in part. This court concludes that Liberty Mutual was required to pay or deny these 10 bills within 30 days of receiving the necessary verification. (See subsection II.B.1, infra.) Eight of the 10 bills were undisputedly denied. With respect to those eight bills, NYC Axis has not shown as a matter of law that the bills were untimely denied, or that the denials were substantively improper (See paragraph II.B.2.a, infra). With respect to the remaining two bills, NYC Axis has shown that Liberty Mutual failed to timely deny one of them, for $26.41. (See paragraph II.B.2.b, infra.) NYC Axis is thus entitled to summary judgment only on that one bill. It is not entitled to attorney fees as the prevailing party.

NYC Axis argues that it is entitled as a matter of law to payment on the treatment bills it submitted to Liberty Mutual because those bills were not denied (or paid) within 30 days after Liberty Mutual received proof of NYC Axis’s claim, as required by 11 NYCRR 65-3.8 (a) and (c). The first issue this court must address, therefore, is whether the timeliness requirements of § 65-3.8 governed Liberty Mutual’s denial of these bills to begin with.

A no-fault insurer “that fails to deny a claim within the 30—day period is generally precluded from asserting a defense against payment of the claim.” (Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d 556, 563 [2008] [internal quotation marks omitted].) A narrow but important exception to this preclusion rule exists where the ground for denying the claim (or the defense to a later claim for payment) is a lack of coverage: If “the insurance policy does not contemplate coverage in the first instance . . . requiring payment of a claim upon failure [*4]to timely disclaim” would improperly “create coverage where it never existed.”^[FN1] (Id. [internal quotation marks omitted].)

The ground for Liberty Mutual’s denial of NYC Axis’s claims is that Brutus, NYC Axis’s assignor, made material misrepresentations in his application for no-fault insurance. Such material misrepresentations ordinarily will “void[] the policy ab initio,” thereby retroactively eliminating coverage altogether. (Starr Indem., 190 AD3d at 442.) A different rule applies, however, in the specific context of automotive insurance, including no-fault.

In that context, Vehicle and Traffic Law (VTL) § 313 is understood to “supplant an insurance carrier’s common-law right to cancel a contract of insurance retroactively on the grounds of fraud or misrepresentation,” mandating instead “that the cancellation of a contract pursuant to its provisions may only be effected prospectively.” (Liberty Mut. Ins. Co. v McClellan, 127 AD2d 767, 769 [2d Dept 1987].) This rule derives from the principle that “compulsory automobile liability insurance is not the concern solely of the insured and . . . insurer,” but “exists also for the protection of the public.” (Id. at 769-770.) Preventing an auto insurer from retroactively canceling a policy “protects innocent third parties who may be injured due to the insured’s negligence” and might otherwise struggle to obtain compensation for their injuries—contrary to the core purpose of compulsory auto insurance. (Kaplun, 274 AD2d at 298.)

Courts applying this rule against rescission have stressed that the rule does not leave an auto insurer “without means of redress” should it conclude that a policy was fraudulently obtained. (Id.) An insurer may argue that “the insured’s misrepresentations and/or fraud in obtaining the policy precludes any recovery by the insured.” (Id. at 298-299.) For that matter, the insurer may raise the same argument with respect to a claim under the policy by an insured’s medical provider assignees, which stand in the insured’s shoes and “deal[] with the assignor-insured at [their] peril in accepting an assignment of the insured’s no-fault benefits.” (AB Med. Servs. PLLC v. Commercial Mut. Ins. Co., 12 Misc 3d 8, 11 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists]; accord Central Radiology Services v. Commerce Ins Co., 2011 NY Slip Op 50948[U], at *2 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists May 23, 2011] [holding that when the insurer established that the insured-assignor was ineligible for coverage for having misrepresented his state of residence in obtaining insurance, the provider-assignee, standing in the insured’s shoes, could not recover from the insurer either].)

That an insurer may raise the insured’s material misrepresentations as a ground for denying claims by the insured or the insured’s assignees presents the question whether the insurer may do so outside 30-day regulatory window for paying or denying the claims set by 11 NYCRR 65-3.8. This is permissible only if denying a claim on material-misrepresentation grounds—but without rescinding the policy outright—is, in substance, raising a lack-of-coverage defense to the claim, rendering untimely-denial preclusion inapplicable.

There are strong arguments that a material-misrepresentations denial should be treated as being based on a lack-of-coverage defense. In raising the insured’s material misrepresentations as a ground for denial, the insurer is contending that the insured (or its assignee) is claiming the benefit of coverage that the insured should not have at the price it paid. This is the same basic contention that underlies an insurer’s argument that it should be permitted to vitiate coverage by rescinding a policy as fraudulently obtained. True, particular policy considerations in the automotive-insurance context foreclose outright rescission. Those considerations, though, are particular to the interests of third parties (and the public at large); they do not affect the relationship between insurer and insured, nor the arguments against denying the insured the benefit of a fraudulently obtained policy.

Put differently, a material-misrepresentation defense is not based on a breach of a policy condition, does not challenge the validity of the claimed charges, and does not call into doubt the right of an assignee to bring the claim. Thus, without speaking in coverage-related terms, it is difficult to explain why the material-misrepresentation defense should defeat a claim for a non-excluded loss within the scope of the policy. (See Fair Price Med. Supply, 10 NY3d at 565 [explaining that the preclusion analysis “entails a judgment” whether “the defense [is] more like a ‘normal’ exception from coverage (e.g., a policy exclusion), or a lack of coverage in the first instance (i.e., a defense ‘implicating a coverage matter'”] [alteration omitted].^[FN2] )

Nonetheless, the Appellate Division, Second Department, has held, without elaborating, that an insurer is precluded from denying a claim on the basis of a material misrepresentation if the denial does not comply with the time limits set by 11 NYCRR 65-3.8. (See Westchester Med. Ctr. v GMAC Ins. Co. Online, Inc., 80 AD3d 603, 604-605 [2d Dept 2011].) Liberty Mutual has provided no contrary precedents of the Appellate Division, First Department, and this court’s research has not uncovered any. This court is therefore bound by the Second Department’s decision in GMAC Insurance Company Online. (See D’Alessandro v Carro, 123 AD3d 1, 6 [1st Dept 2014].) The timeliness requirements of § 65-3.8 apply to Liberty Mutual’s denial here of [*5]NYC Axis’s bills.

Because the pay-or-deny deadlines of 11 NYCRR 65-3.8 apply here, this court must go on to determine whether Liberty Mutual met that deadline with respect to the 10 treatment bills at issue on NYC Axis’s cross-motion for summary judgment.

It is undisputed that eight of the 10 bills were denied by Liberty Mutual. NYC Axis argues that those eight denials were untimely. Liberty Mutual contends that the denials were timely, taking into account the tolling effect of Liberty Mutual’s verification requests to Brutus. This court agrees with Liberty Mutual about these bills. NYC Axis also argues that Liberty Mutual has not provided sufficient support for its proffered material-misrepresentation ground for denying the first eight bills. This court finds NYC Axis’s argument unpersuasive.

As for the two remaining bills, NYC Axis contends that those bills were never denied at all. Liberty Mutual argues both that they were denied, and that the denials were timely. This court agrees with Liberty Mutual about one of the bills, and with NYC Axis about the other.

Title 11 NYCRR 65-3.8 (a) (1) provides that “[n]o-fault benefits are overdue if not paid within 30 calendar days after the insurer receives proof of claim, which shall include verification of all of the relevant information requested pursuant to [11 NYCRR] 65-3.5.” Section 65-3.8 (c) provides that “[w]ithin 30 calendar days after proof of claim is received, the insurer shall either pay or deny the claim in whole or in part.” Timely verification requests may therefore toll the insurer’s deadline to pay or deny a treatment bill submitted by a medical-provider-assignee. (See Hospital for Joint Diseases v New York Cent. Mut. Fire Ins. Co., 44 AD3d 903, 903-904 [2d Dept 2007].) For purposes of that deadline, a denial is deemed to have been made when mailed by the insurer, not when received by the provider. (See Westchester Med. Ctr. v A Cent. Ins. Co., 114 AD3d 937, 937 [2d Dept 2014].)

Liberty Mutual first asked Brutus for garaging-related verification information in the beginning of August 2019, and its verification efforts continued through October 2019—thereby encompassing the period in which NYC Axis submitted the bills at issue. (See NYSCEF No. 24 at 1 [EUO scheduling letters]; NYSCEF No. 57 at 1 [verification correspondence from Brutus to Liberty Mutual]; NYSCEF No. 40 at 11 [NYC Axis affirmation in support of cross-motion, charting all the relevant dates for each bill at issue.)

As a result, the question is whether Liberty Mutual’s verification requests to Party A (injured-assignor Brutus) between August and October 2019 tolled the time for it to pay or deny the bills submitted by Party B (provider-assignee NYC Axis) during that period. NYC Axis [*6]argues that verification requests to A may not toll the time to pay or deny B’s claims (see NYSCEF No. 40 at ¶¶ 38, 47); Liberty Mutual argues that they may do so (see NYSCEF No. 49 at ¶¶ 35-37). This court has not been provided with, and has not itself found, Appellate Division precedent discussing this particular question. Considering the matter for itself, this court agrees with Liberty Mutual.

Liberty Mutual’s verification requests to Brutus were aimed at uncovering whether he had materially misrepresented facts in his insurance application—a ground for denying Brutus’s claims that would apply equally to claims submitted by NYC Axis as Brutus’s assignee.^[FN3] (See Long Is. Radiology v Allstate Ins. Co., 36 AD3d 763, 765 [2d Dept 2007] [explaining that because an “assignee stands in the shoes of an assignor . . . and thus acquires no greater rights than its assignor,” a lack-of-medical-necessity defense to a claim that may be raised by the insurer against the assignor is also available against provider assignees] [internal quotation marks omitted]; accord American States Ins. Co. v Huff 119 AD3d 478, 479 [1st Dept 2014] [same, in context of EUO-nonappearance defense].) Because Liberty Mutual’s verification requests to Brutus also related to whether Liberty Mutual could (or could not) deny NYC Axis’s claims, the requests tolled Liberty Mutual’s deadline to respond to NYC Axis’s claims under § 65-3.8. The alternative rule, under which Liberty Mutual would have to pay NYC Axis’s claims even as Liberty Mutual was formally seeking information that might support denial of those claims, makes little sense.

NYC Axis also argues that Liberty Mutuals’ pay-or-deny deadline for NYC Axis’s bills was not tolled by letters Liberty Mutual sent to NYC Axis advising that its decisions on those bills would be delayed due to the need to verify the claims. (See NYSCEF No. 40 at ¶¶ 36-39.) True, but irrelevant. The letters advising of Liberty Mutual’s verification efforts may not have tolled the time to pay or deny—but the verification efforts themselves did under § 65-3.8.

Liberty Mutual sent four verification requests to Brutus. The initial EUO request, sent on August 2, 2019, was made before Liberty Mutual received any bills for treatment, making it proper under Mapfre Ins. Co. of NY v Manoo (140 AD3d 468, 469 [1st Dept 2016]). (See NYSCEF No. 24 [EUO requests]; NYSCEF Nos. 25-26 [provider bills].) The EUO was adjourned, and a later EUO scheduled, by letter sent on August 13. (NYSCEF No. 24 at 12.) The EUO was held on September 5 (see NYSCEF No. 27 at 4 [EUO transcript]); and Liberty Mutual sent Brutus a post-EUO document request four days later on September 9. (See NYSCEF No. 28 at 1.) After Brutus failed to respond, Liberty Mutual sent a follow-up request within 40 calendar days of the initial document request, as required by 11 NYCRR 65-3.6 (b).

Liberty Mutual’s counsel has represented, in correspondence with the court (copied to all [*7]parties), that Liberty Mutual received Brutus’s response to the follow-up document request (dated October 23, 2019) on November 1, 2019. (NYSCEF No. 57 [document response]; NYSCEF No. 58 [representation about timing of receipt].) Liberty Mutual’s motion papers indicate (albeit without saying expressly) that it did not then request further supplementation from Brutus of that document response. (See NYSCEF No. 15 at ¶ 29 [affirmation in support of default judgment].) As a result, under 11 NYCRR 65-3.8 (a) (1) and (c), Liberty Mutual had 30 calendar days from November 1 to pay or deny NYC Axis’s claims. The 30th day of that period fell on a Sunday, so Liberty Mutual’s deadline to mail the denials was December 2, 2019. (See General Construction Law § 25-a.)

Liberty Mutual has not provided denial-by-denial proof of when it mailed each denial to NYC Axis. But as NYC Axis itself acknowledges, the denial letters are dated either November 21, 2019, or November 22, 2019—at least 10 days prior to the denial deadline. (See NYSCEF No. 40 at 11.) Liberty Mutual has also submitted a detailed affidavit of one of its claims managers, representing that Liberty Mutual’s mailing procedures ensure that claim-denial letters are mailed out no later than the next business day after the date on the letter. (See NYSCEF No. 33 at ¶¶ 7, 11-13.) If the denial letters here were mailed consistent with this procedure—and NYC Axis has not provided reason to believe otherwise—the denials were timely. At a minimum, on this record NYC Axis has not shown as a matter of law that the denials were untimely.

In the alternative, NYC Axis asserts that Liberty Mutual has not adequately supported the material-misrepresentation justification on which these denials relied. (See NYSCEF No. 40 at 13-14.) This assertion misconstrues the governing legal standard. NYC Axis is correct that Liberty Mutual’s showing (affidavits from an underwriter and an investigator) would be insufficient to establish materiality as a matter of law on a motion by Liberty Mutual for summary judgment. But Liberty Mutual has not moved for summary judgment—NYC Axis has. Liberty Mutual’s evidence is sufficient at least to raise a dispute of fact about materiality. (See Carpinone v Mutual of Omaha Ins. Co., 265 AD2d 752, 754 [3d Dept 1999] [explaining that the “materiality of an applicant’s misrepresentation is ordinarily a factual question unless the insurer proffers clear and substantially uncontradicted evidence concerning materiality”].)

The remaining two bills pertain to treatment rendered on July 8, 2019, and August 13, 2019. (See id.) NYC Axis asserts that Liberty Mutual never denied two bills. (See id.) Liberty Mutual contends that it sent denials of the bills (see NYSCEF No. 49 at ¶ 31), providing a supplemental affidavit from its claims manager to that effect. (See NYSCEF No. 52 at ¶¶ 8-10.)

A denial of the bill for the July 8 treatment does appear in the record, explaining that the bill was denied because a peer review concluded that the services billed for were not medically necessary. (See NYSCEF No. 30 at 266-275.) But this court has not found a denial of the bill for treatment on August 13 (or, for that matter, a delay letter pertaining to that bill) in Liberty Mutual’s voluminous motion papers. Therefore, NYC Axis is entitled to summary judgment [*8]solely with respect to the August 13 bill—a $26.41 invoice for a follow-up outpatient visit (NYSCEF No. 26 at 15-17).

NYC Axis contends that it should also be entitled to attorney fees incurred in defending this action. This court disagrees. To be sure, an insured that prevails in a declaratory-judgment coverage action brought against it by the insurer may recover attorney fees. (See U.S. Underwriters Ins. co. v City Club Hotel, LLC, 3 NY3d 592, 597-598 [2004].) And it is immaterial that NYC Axis is an assignee of the insured: As assignee NYC Axis stands in the shoes of the assignor.^[FN4] The court is not persuaded, though, that NYC Axis is, in fact, the prevailing party.

To be a prevailing party for attorney-fee purposes, one must “prevail on the central claims advanced, and receive substantial relief in consequence thereof.” (Sykes v RFD Third Ave. I Assoc., LLC, 39 AD3d 279, 279 [1st Dept 2007].) The dispute between Liberty Mutual and NYC Axis on this motion involves 10 bills. This court has concluded that NYC Axis is entitled to payment on only one of those 10—and for an amount, $26.41, that is a miniscule fraction of the total sum sought by NYC Axis. That is not substantial relief.

Accordingly, for the foregoing reasons it is

ORDERED that Liberty Mutual’s motion for default judgment against the nonappearing defendants named in the motion is granted, and Liberty Mutual is directed to settle order with respect to judgment against those defendants; and it is further

ORDERED that the branch of NYC Axis’s cross-motion seeking sanctions against Liberty Mutual is denied; and it is further

ORDERED that the branch of NYC Axis’s cross-motion seeking summary judgment on the question whether NYC Axis is entitled to payment on ten bills for treatment rendered to the alleged injured person, defendant Brutus, is granted only to the extent that this court declares that NYC Axis is entitled to payment from Liberty Mutual in the amount of $26.41 for treatment rendered to Brutus on August 13, 2019, and otherwise denied; and it is further

ORDERED that the branch of NYC Axis’s cross-motion seeking summary judgment on its claim for attorney fees arising from its defense of this action is denied.

Footnotes

Footnote 1:In the Appellate Division, First Department, this exception is most frequently invoked with respect to claim-denials based on the alleged injured person’s having failed twice to appear for examinations under oath (EUOs) or independent medical examinations (IMEs). (See e.g. Unitrin Advantage Ins. Co. v Bayshore Physical Therapy, PLLC, 82 AD3d 559, 560 [1st Dept 2011] [holding that an injured person’s “failure to appear for IMEs” properly requested “by the insurer . . . is a breach of a condition precedent to coverage under the no-fault policy, and therefore fits squarely within the [lack-of-coverage] exception to the preclusion doctrine”]; Allstate Ins. Co. v Pierre, 123 AD3d 618, 618 [1st Dept 2014] [same, with respect to EUOs].)

Footnote 2:Compare e.g. Bayshore Physical Therapy, 82 AD3d at 560 (holding that denial of a claim based on the injured person’s failure to appear for a properly requested IME is not subject to untimeliness preclusion because that failure breached a condition precedent to the injured person’s coverage under the policy), with Nationwide Affinity Ins. Co. of Am. v Jamaica Wellness Med., P.C., 167 AD3d 192, 196-197 (4th Dept 2018) (holding instead that denial of a claim for failure to appear at an IME is subject to untimeliness preclusion because that failure breached only a condition precedent to payment under the policy for a covered loss, not a condition precedent to the existence of coverage itself).

Footnote 3:This scenario thus differs from one in which the verification sought by an insurer from Provider-Assignee C (information going, for example, to the validity of C’s billing for treatments it provided to Injured-Assignor A) would not affect whether Provider-Assignee D was entitled to payment for different treatments that D provided to A. In that circumstance, the insurer’s verification requests to C would not toll the insurer’s time to pay or deny D’s bills.

Footnote 4:Because Brutus, the injured assignor in this case, is the insured under the underlying no-fault policy, this case is not controlled by Fiduciary Ins. Co. of Am. v Medical Diagnostic Servs., P.C. (150 AD3d 498, 498-499 [1st Dept 2017]) and Hertz Vehs., LLC v Cepeda (156 AD3d 440, 441 [1st Dept 2017]). In those cases, the injured assignors were merely passengers in an insured vehicle, rather than being the insureds themselves. As a result, the insurers there did not owe the injured assignors (or their medical-provider assignees) a duty to defend—or a corollary duty under City Club Hotel to pay attorney fees arising from an unsuccessful declaratory-judgment coverage action brought by the insurers. Not so here.

Decided on August 15, 2022

Supreme Court, New York County

[*1]

Supreme Court, Appellate Term, Second Department, 2d, 11th and 13th Judicial Districts, August 12, 2022

APPEARANCES OF COUNSEL

The Rybak Firm, PLLC (Damin J. Toell and Richard Rozhik of counsel) for appellant.

Abrams, Cohen & Associates, P.C. (Frank Piccininni of counsel) for respondent.

Ordered that the order is affirmed, with $25 costs.

In this action by a provider to recover assigned first-party no-fault benefits from the alleged insurer of its assignor, defendant failed to appear or answer the complaint, and a default judgment was entered on July 26, 2018. On September 6, 2018, defendant served an answer and, in November 2018, it moved to vacate the default judgment. Plaintiff appeals from an order of the Civil Court entered October 21, 2019, granting defendant’s motion, finding that defendant had demonstrated a reasonable excuse for its default and a meritorious defense.

In its moving papers, defendant explained that its default had been due to its own failure to forward the complaint to its attorneys. However, it asserted that it had not ignored the matter, but rather had informed plaintiff several months prior to the commencement of the action that it was not the insurance carrier for plaintiff’s assignor—an assertion which plaintiff has never contradicted. Upon receiving notice of the default judgment, defendant requested that the action [*2]be “withdrawn.” Defendant thereafter referred the matter to its counsel, which promptly served an answer and then moved to vacate the default judgment.

A defendant seeking to vacate a default judgment pursuant to CPLR 5015 (a) (1) must demonstrate a reasonable excuse for the default and a potentially meritorious defense to the action (see Eugene Di Lorenzo, Inc. v A.C. Dutton Lbr. Co., 67 NY2d 138, 141 [1986]). The determination of what constitutes a reasonable{**76 Misc 3d at 16} excuse for a default generally lies within the sound discretion of the motion court (see Nationstar Mtge., LLC v Ramnarine, 172 AD3d 886, 886 [2019]). Here, in light of the absence of an evident pattern of neglect and counsel’s prompt actions, upon entering the case, in seeking to vacate the default (see Barajas v Toll Bros., 247 AD2d 242, 242-243 [1998]), the meritorious defense of lack of coverage, which plaintiff has never disputed, plaintiff’s failure to claim any prejudice by reason of the brief delay involved (see New York Univ. Hosp. Tisch Inst. v Merchants Mut. Ins. Co., 15 AD3d 554, 555 [2005]; see also Matter of A&F Scaccia Realty Corp. v New York City Dept. of Envtl. Protection, 200 AD3d 875, 878 [2021]; Allstate Ins. Co. v North Shore Univ. Hosp., 163 AD3d 745, 746 [2018]), and the public policy favoring the resolution of cases on the merits (see Allstate Ins. Co. v North Shore Univ. Hosp., 163 AD3d at 746; Westchester Med. Ctr. v Hartford Cas. Ins. Co., 58 AD3d 832, 833 [2009]; Legion Ins. Co. v James, 27 Misc 3d 128[A], 2010 NY Slip Op 50593[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2010]), we conclude that the Civil Court providently exercised its discretion in granting defendant’s motion.

Accordingly, the order is affirmed.

Weston, J. (dissenting and voting to reverse the order and deny defendant’s motion to vacate the default judgment in the following memorandum).

When defendant was served with a summons and complaint on May 29, 2018, it elected not to forward the matter to its attorney to serve and file an answer because it believed that plaintiff’s claim is meritless. Defendant did not answer until September 6, 2018, approximately six weeks after a default judgment had been entered on July 26, 2018, and more than three months after service. A party may not choose when to answer and, given the lengthy delay in answering, it is clear that defendant’s default was intentional and, therefore, inexcusable (see Fok v Insurance Co. of N. Am., 151 AD2d 722, 722 [1989]). Since defendant failed to establish a reasonable excuse for its default in answering the complaint, defendant’s motion should have been denied without the need to consider whether defendant demonstrated the existence of a potentially meritorious defense (see Nationstar Mtge., LLC v Ramnarine, 172 AD3d 886, 887 [2019]; New Century Mtge. Corp. v Adeyan-Ju, 139 AD3d 683, 684 [2016]).

Accordingly, I vote to reverse the order and deny defendant’s motion to vacate the default judgment.{**76 Misc 3d at 17}

Aliotta, P.J., and Buggs, J., concur; Weston, J., dissents in a separate memorandum.

[*1]

Supreme Court, Appellate Term, Second Department, 2d, 11th and 13th Judicial Districts, July 22, 2022

APPEARANCES OF COUNSEL

The Rybak Firm, PLLC (Damin J. Toell and Richard Rozhik of counsel) for appellant.

Gullo & Associates, LLC (Kristina O’Shea of counsel) for respondent.

Ordered that the order is affirmed, with $25 costs.

Jules Francois Parisien, M.D., commenced this action against Kemper Insurance Company to recover assigned first-party no-fault benefits for medical services provided to his assignor, Jeremy Jagdeo, as a result of injuries Jagdeo allegedly sustained in an automobile accident on June 17, 2013. In its answer to the complaint, dated April 21, 2016, defendant identified itself as Unitrin Advantage Insurance Company (Unitrin). Before Parisien commenced this action, a declaratory judgment action had been commenced in Supreme Court, New York County, by Unitrin against Parisien, eight other providers, and the assignor herein, Jagdeo, alleging that Jagdeo had breached the terms of the insurance policy in question by failing to appear for duly scheduled independent medical examinations. Parisien appeared and interposed an answer in the declaratory judgment action. In an order entered September{**76 Misc 3d at 20} 11, 2017, the Supreme Court, upon granting an unopposed motion by Unitrin for summary judgment, declared [*2]that Parisien and five other providers were “not entitled to no-fault coverage for the motor vehicle accident that occurred on June 17, 2013 involving Jeremy Jagdeo.”

Plaintiff moved in the Civil Court for summary judgment, and defendant cross-moved for, in effect, summary judgment dismissing the complaint on the ground that the instant action is barred by virtue of the order in the declaratory judgment action. By order entered August 10, 2021, the Civil Court denied plaintiff’s motion and granted defendant’s cross motion.

Collateral estoppel, or issue preclusion, precludes a party from relitigating an issue where “the issue in the second action is identical to an issue which was raised, necessarily decided and material in the first action, and the plaintiff had a full and fair opportunity to litigate the issue in the earlier action” (Parker v Blauvelt Volunteer Fire Co., 93 NY2d 343, 349 [1999]; see D’Arata v New York Cent. Mut. Fire Ins. Co., 76 NY2d 659 [1990]; Manko v Gabay, 175 AD3d 484 [2019]). While “[a]n issue is not actually litigated if, for example, there has been a default” (Kaufman v Eli Lilly & Co., 65 NY2d 449, 456-457 [1985]), “ ’collateral estoppel may be properly applied to default judgments where the party against whom preclusion is sought appears in the prior action, yet willfully and deliberately refuses to participate in those litigation proceedings, or abandons them, despite a full and fair opportunity to do so’ ” (Miller v Falco, 170 AD3d 707, 709 [2019], quoting Matter of Abady, 22 AD3d 71, 85 [2005]). The party seeking to rely on collateral estoppel has the burden of establishing that the issue actually litigated and determined in the prior action is identical to the issue on which preclusion is sought (see Forcino v Miele, 122 AD2d 191, 193 [1986]; Triboro Quality Med. Supply, Inc. v State Farm Mut. Auto. Ins. Co., 36 Misc 3d 131[A], 2012 NY Slip Op 51289[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2012]). The party attempting to defeat the application of collateral estoppel has the burden of establishing the absence of a full and fair opportunity to litigate (see D’Arata, 76 NY2d at 664; Uptodate Med. Servs., P.C. v State Farm Mut. Auto. Ins. Co., 23 Misc 3d 42, 44 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2009]).

Here, defendant established that the issue of whether plaintiff was entitled to receive no-fault benefits in connection with the June 17, 2013 accident involving Jagdeo was identical{**76 Misc 3d at 21} to the issue previously decided in the declaratory judgment action. The order in the declaratory judgment action indicates that Jagdeo was not entitled to receive no-fault benefits without regard to who the provider might be. Although plaintiff herein did not submit opposition to the motion giving rise to the order in the declaratory judgment action, he did appear and answer the complaint in that action. Therefore, plaintiff failed to establish that he did not receive a full and fair opportunity to litigate in the declaratory judgment action (see Reid v Reid, 198 AD3d 993, 994 [2021]; Miller, 170 AD3d at 709; David v State of New York, 157 AD3d 764, 765-766 [2018]; Matter of Abady, 22 AD3d at 85). Thus, defendant was entitled to summary judgment dismissing the complaint on the ground of collateral estoppel.

We reject plaintiff’s argument that defendant was required to establish privity between itself and Unitrin in order for the Civil Court complaint to be dismissed based upon the order in the declaratory judgment action. Privity between the party seeking to invoke the doctrine and a party to the prior action is an element of res judicata (see Matter of Hunter, 4 NY3d 260, 269[*3][2005]; Schuylkill Fuel Corp. v Nieberg Realty Corp., 250 NY 304 [1929]), not collateral estoppel (see B. R. DeWitt, Inc. v Hall, 19 NY2d 141, 147-148 [1967]; Windowizards, Inc. v S & S Improvements, Inc., 11 Misc 3d 128[A], 2006 NY Slip Op 50310[U] [App Term, 2d Dept, 2d & 11th Jud Dists 2006]). We note that the Civil Court, in granting defendant’s cross motion, did not specifically rely on res judicata.

We further note that, while defendant failed to raise the affirmative defense of collateral estoppel in its April 21, 2016 answer, defendant had no basis to assert that defense before September 11, 2017, when the order in the declaratory judgment action was entered (see Metro Health Prods., Inc. v Nationwide Ins., 52 Misc 3d 138[A], 2016 NY Slip Op 51122[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2016]; Renelique v State-Wide Ins. Co., 50 Misc 3d 137[A], 2016 NY Slip Op 50096[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2016]). While the better practice would have been for defendant to move to amend its answer after September 11, 2017, we deem defendant’s answer amended to assert the affirmative defense of collateral estoppel (see Barrett v Kasco Constr. Co., 84 AD2d 555, 556 [1981], affd 56 NY2d 830 [1982]; Active Chiropractic, P.C. v Allstate Ins., 58 Misc 3d 156[A], 2018 NY Slip Op 50201[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2018]). {**76 Misc 3d at 22}In any event, “an unpleaded defense may serve as the basis for granting summary judgment in the absence of surprise or prejudice to the opposing party” (Sullivan v American Airlines, Inc., 80 AD3d 600, 602 [2011]; see Renelique, 2016 NY Slip Op 50096[U]).

Accordingly, the order is affirmed.

Weston, J.P., Golia and Buggs, JJ., concur.

Index No. 160339/2020

Goldberg, Miller & Rubin, P.C., New York, NY (Harlan R. Schreiber and Lindsay A. Padover of counsel), for plaintiff.

Samandarov & Associates, P.C., Floral Park, NY (David M. Gottlieb of counsel), for defendant Quality Ortho Complete Joint Care, P.C.

In this no-fault insurance coverage action, plaintiff, Unitrin Safeguard Insurance Company, moves for default judgment under CPLR 3215 against no-fault claimants Oscar Galeas and Jairo Ruales. Unitrin also moves for default judgment against a number of medical providers who are benefits assignees of Galeas and Ruales (or assignees of two other defendants, no-fault claimants Milton Parra and Daniel Espinoza).^[FN1] Answering defendant Quality Ortho Complete Joint Care, P.C., cross-moves to dismiss under CPLR 3215 (c) and CPLR 3211 (a) (4).

Unitrin’s motion for default judgment is granted without opposition. Quality Ortho’s cross-motion to dismiss Unitrin’s claims against it is granted only to the extent of directing consolidation of this action with the parallel action brought by Unitrin against Quality Ortho.

With respect to Unitrin’s default-judgment motion, Unitrin has sufficiently established service on the defendants that are the subject of its motion, and those defendants’ defaults. And the affidavit of Unitrin’s no-fault claims representative (as supported by the accompanying police report) shows that Unitrin had a founded belief that the claimants’ injuries (and ensuing benefits claims for medical treatment) did not arise from a covered collision. (See NYSCEF Nos. 52-53.) Unitrin is therefore entitled to default judgment against these defendants.

Quality Ortho’s cross-motion to dismiss is based on two independent grounds. Quality Ortho contends first that Unitrin’s action must be dismissed as against it under CPLR 3215 (c) because Unitrin failed to take proceedings for the entry of default judgment against other defendants within one year of those defendants’ defaults. But it is undisputed that Quality Ortho timely answered.^[FN2] This court sees no basis on which Quality Ortho—as opposed to a different, defaulting defendant—may even seek dismissal under CPLR 3215 of Unitrin’s claims against it.^[FN3] Nor does Quality Ortho supply any authority for the proposition that a plaintiff’s failure to seek default judgment within a year against a defaulting defendant requires dismissal of the plaintiff’s claims as against a different, answering defendant. In any event, this court concludes that given the numerous defendants in the action, Unitrin’s active prosecution of its claims against some of the defendants, and its active settlement negotiations with other defendants, Unitrin has established good cause for its brief delay in bringing this motion for default judgment. (See NYSCEF No. 51 at &para 32.) The court declines to dismiss Unitrin’s claims against Quality Ortho on this ground.

Quality Ortho also argues that Unitrin’s claims against it must be dismissed under CPLR 3211 (a) (4). Quality Ortho contends that Unitrin’s claims here impermissibly duplicate claims asserted in a de novo challenge to an arbitration award, also pending in Supreme Court, New [*2]York County.^[FN4] This court is unpersuaded that Unitrin’s claims against Quality Ortho in this action should be dismissed. Unitrin filed this action 10 months before the parallel de novo action, seeking broader relief against more parties; and this action has progressed materially farther (including through the assignment of the undersigned pursuant to Unitrin’s RJI). Dismissal of Unitrin’s claims against Quality Ortho here would be inappropriate under the first-in-time rule that generally governs motions to dismiss under CPLR 311 (a) (4).^[FN5] (See National Union Fire Ins. Co. of Pittsburgh, Pa. v Jordache Enters., 205 AD2d 341, 343 [1st Dept 1994].)

At the same time, it is undisputed that the two actions each feature Unitrin as the plaintiff and Quality Ortho as a defendant and involve closely overlapping questions of fact and law, such that leaving the two actions to run along separate, parallel tracks could lead to needless duplication of judicial effort and inconsistent results. This court holds that the de novo action, Index No. 158403/2021, should be consolidated into this action under CPLR 3211 (a) (4) and CPLR 602.^[FN6]

Settle Order.

Footnotes

Footnote 1:Unitrin represents that defendants Parra and Espinoza have not yet been located for purposes of service. (See NYSCEF No. 51 at 2 n 1.)

Footnote 2:Indeed, Unitrin acknowledges this timely answer in explaining why its motion does not seek default judgment against Quality Ortho. (See NYSCEF No. 51 at 2 n 1.)

Footnote 3:To be clear, Quality Ortho may, under the language of CPLR 2215, cross-move against Unitrin although it was not a subject of Unitrin’s initial motion. This court holds only that Quality Ortho may not cross-move to dismiss under CPLR 3215 (c) when it did not default.

Footnote 4:See Unitrin Safeguard Insurance Company v Quality Orthopedics & Complete Joint Care, PC, Index No. 158403/2021 (Sup Ct, NY County).

Footnote 5:Quality Ortho has not moved to dismiss under CPLR 3211 (a) (4) in the parallel de novo action.

Footnote 6:This court may properly order consolidation sua sponte in the exercise of its authority under CPLR 3211 (a) (4) to “make such order as justice requires.” Thus, for example, in John J. Campagna, Jr., Inc. v Dune Alpin Farm Assocs. (81 AD2d 633, 634 [2d Dept 1981]), the Appellate Division, Second Department held that the motion court properly applied the first-in-time rule in denying dismissal under CPLR 3211 (a) (4). But the Second Department went on to hold that “to best serve the interests of judicial economy while still preserving the rights of the parties, the [motion] court should have sua sponte ordered consolidation of these actions,” and itself directed consolidation on appeal. (Id.)

[*1]

Supreme Court, Appellate Term, Second Department, 2d, 11th and 13th Judicial Districts, May 13, 2022

New Generation Wellness Chiropractic P.C. v Country-Wide Ins. Co., 66 Misc 3d 1207(A), 2020 NY Slip Op 50017(U), reversed.

APPEARANCES OF COUNSEL

Glinkenhouse Queen (Alan S. Queen of counsel) for appellant.

The Law Office of Thomas Torto (Jason Levine of counsel) for respondent.

Ordered that the order, insofar as appealed from, is reversed, with $30 costs, the branch of plaintiff’s motion seeking to recalculate, from a simple rate to a compound rate, an award of statutory no-fault interest in a judgment entered December 12, 2017, is granted, and defendant’s cross motion to vacate the judgment and dismiss the complaint is denied.

In or about July 2002, plaintiff commenced this action to recover assigned first-party no-fault benefits for services it rendered in August through October 2000 to its assignor who was injured in a motor vehicle accident on August 20, 2000. Defendant appeared and answered. On July 29, 2009, the State of New York dissolved plaintiff by proclamation. A settlement letter was drafted, which was signed by plaintiff’s attorney on August 12, 2009, which stated that the parties agreed that the action would be discontinued after defendant paid plaintiff{**75 Misc 3d at 56} $621, which sum was inclusive of attorney’s fees, costs and interest. The third paragraph of the letter referenced the provisions of CPLR 5003-a, while a sentence following that paragraph stated, “Please mail your settlement check promptly according to CPLR 5003 [sic, presumably CPLR 5003-a].” On August 13, 2009, defendant’s attorney signed the letter after modifying it by striking out its third paragraph and by adding handwritten language, to wit, “Payment to issue within 90 days with 14 days prior written notice to deft attorneys; judgment to issue in settled amount.” The sentence requesting prompt payment in accordance with the CPLR was not stricken. It is uncontroverted that defendant did not pay the amount set forth in the settlement. [*2]In May 2017, plaintiff sought to enter a judgment and submitted, among other things, a copy of the modified settlement letter and an ex parte proposed judgment to the clerk of the Civil Court. On December 12, 2017, a judgment was entered awarding plaintiff, insofar as is relevant to this appeal, $1,151.90 in interest accruing from August 12, 2009.

In January 2018, plaintiff moved to, among other things, recalculate the interest awarded in the judgment on the ground that it had erroneously been calculated at a simple rate instead of at a compound rate as allowed by Insurance Department Regulations (11 NYCRR) former § 65.15 (h). Defendant opposed the motion and cross-moved for “an Order . . . vacating the judgment . . . in favor of plaintiff and dismissing this action upon the grounds that the Secretary of State dissolved plaintiff and annulled its authority on July 29, 2009 and it has not been reinstated.” Plaintiff opposed the cross motion, to which defendant replied.

By order entered January 3, 2020, the Civil Court denied plaintiff’s motion and granted defendant’s cross motion. The court vacated the judgment pursuant to CPLR 5015 and dismissed the complaint pursuant to CPLR 1017 and 1021 “due to the failure to substitute the Plaintiff as a party within a reasonable time after Plaintiff dissolved” (New Generation Wellness Chiropractic P.C. v Country-Wide Ins. Co., 66 Misc 3d 1207[A], 2020 NY Slip Op 50017[U], *6 [2020]). The court noted that the “record lacks any indication that the seven-year gap [between the August 2009 settlement letter and when plaintiff sought to enter judgment in May 2017] constitutes a reasonable time for Plaintiff to wind up its affairs” (2020 NY Slip Op 50017[U], *9). The Civil Court also found that the settlement{**75 Misc 3d at 57} “included a notice requirement” and that the judgment was “also properly vacated pursuant to CPLR 5015(a)(4) because Plaintiff failed to provide notice prior to entry” (id. at *4, *5). Plaintiff’s motion was denied as moot.

On appeal, plaintiff contends that the branch of its motion seeking to recalculate the statutory no-fault interest should have been granted and that defendant’s cross motion should have been denied, arguing, among other things, that the Civil Court improperly vacated the judgment pursuant to CPLR 5015; that Business Corporation Law §§ 1005 and 1006 control in the case at bar, not CPLR 1017 and 1021; and that the Civil Court improperly determined that plaintiff was not in the process of winding up its business affairs.

Contrary to the determination of the Civil Court, substitution was not required here under CPLR 1017 and 1021. Pursuant to Business Corporation Law §§ 1005 and 1006, following its dissolution, plaintiff was allowed to enter judgment and make its motion as part of the winding up of its business affairs. To the extent that Business Corporation Law §§ 1005 and 1006 can be deemed to be inconsistent with CPLR 1017 and 1021, the Business Corporation Law provisions govern (see CPLR 101). Business Corporation Law § 1005 (a) (2) “defines ‘winding up’ as the performance of acts directed toward the liquidation of the corporation, including the collection and sale of corporate assets” (Matter of 172 E. 122 St. Tenants Assn. v Schwarz, 73 NY2d 340, 349 [1989]). Business Corporation Law § 1006 includes, as part of “winding up,” the right of a dissolved corporation to participate in actions and proceedings, whether judicial, administrative, arbitrative or otherwise, in its corporate name (Business Corporation Law § 1006 [a] [4]). Since Business Corporation Law § 1006 does not include any time limit for winding up the dissolved corporation’s affairs, it is proper for courts to imply a reasonable period of time (see e.g. Spiegelberg v Gomez, 44 NY2d 920, 921 [1978]).

As the party moving for vacatur of a judgment and dismissal of the complaint on the [*3]ground that plaintiff lacked the capacity to enter judgment or to move to recalculate interest, defendant had the burden of demonstrating, prima facie, that plaintiff was not still winding up its affairs (see e.g. Greater Bright Light Home Care Servs., Inc. v Jeffries-El, 151 AD3d 818 [2017]; Singer v Riskin, 137 AD3d 999, 1000 [2016]; Brooklyn Elec. Supply Co., Inc. v Jasne & Florio, LLP, 84 AD3d 997 [2011]; Brach v Levine, 36 Misc 3d 1213[A], 2012 NY Slip Op{**75 Misc 3d at 58}51312[U] [Sup Ct, Kings County 2012]). A review of defendant’s initial moving papers shows that it did not argue that plaintiff was not winding up its affairs. For the first time in reply, defendant argued that plaintiff had offered no explanation for its failure to move for entry of a judgment within a reasonable time following defendant’s failure to pay the settlement and that “upon information and belief,” plaintiff has not been engaged in active business operations since 2000. Since all the averments defendant made in support of its motion, both in its initial moving papers and in reply, were insufficient to show that plaintiff was not winding up its business affairs between the time of the August 2009 settlement letter and the time when plaintiff sought to enter judgment in May 2017, defendant failed to show that plaintiff lacked capacity. We note that numerous cases have held that a substantial number of years was not an unreasonable amount of time for a corporation to wind up its affairs (see Lamarche Food Prods. Corp. v 438 Union, LLC, 178 AD3d 910 [2019] [24 years between dissolution and action giving rise to lawsuit]; Greater Bright Light Home Care Servs., Inc. v Jeffries-El, 151 AD3d at 821 [11 years between dissolution and the motion to dismiss cross claims]; Moran Enters., Inc. v Hurst, 66 AD3d 972 [2009] [seven years between dissolution and the commencement of the lawsuit]; cf. Lance Intl., Inc. v First Natl. City Bank, 86 AD3d 479, 480 [2011]). Consequently, defendant did not demonstrate that its cross motion should be granted on the ground that plaintiff is not winding up its affairs.

As acknowledged by the Civil Court (see New Generation Wellness Chiropractic P.C. v Country-Wide Ins. Co., 2020 NY Slip Op 50017[U], *3), defendant did not argue in its cross motion that the settlement letter, as modified, required plaintiff to “provide notice prior to entry” of the judgment (id. at *4) or that the judgment should be vacated on the ground that plaintiff failed to provide such notice. Contrary to the Civil Court’s order, this was not, under the circumstances presented, a proper alternative basis upon which to grant defendant’s cross motion.

Plaintiff properly argues that the statutory no-fault interest awarded in the judgment from August 12, 2009, to the judgment date, December 12, 2017, should be recalculated from a simple rate to a compound rate (see Health Value Med., P.C. v Country Wide Ins. Co., 66 Misc 3d 127[A], 2019 NY Slip Op 52036[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2019]). {**75 Misc 3d at 59}Defendant had the opportunity to pay the settlement amount without the accrual of additional interest (see CPLR 5003-a [a]). Its failure to do so (either within the statutory time frame or the 90 days enumerated by modified letter, a determination which we need not make) allowed plaintiff to enter a judgment for that amount “together with costs and lawful disbursements, and interest” (CPLR 5003-a [e]). Contrary to defendant’s argument in its respondent’s brief, nine percent pursuant to CPLR 5004 is not the correct rate of interest because “Insurance Law § 5106 (a) and former 11 NYCRR 65.15 (h), which were specific directives, supersede the interest provisions contained in CPLR 5004, the more general statute” (Matter of B.Z. Chiropractic, P.C. v Allstate Ins. Co., 197 AD3d 144, 156 [2021]). The calculation of interest on the claims at issue is governed by the former no-fault regulations providing for compound interest (see Health Value [*4]Med., P.C. v Country Wide Ins. Co., 2019 NY Slip Op 52036[U]; Belt Parkway Imaging, P.C. v State Wide Ins. Co., 30 Misc 3d 127[A], 2010 NY Slip Op 52229[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2010]).

Accordingly, the order, insofar as appealed from, is reversed, the branch of plaintiff’s motion seeking to recalculate, from a simple rate to a compound rate, an award of statutory no-fault interest in a judgment entered December 12, 2017, is granted and defendant’s cross motion to vacate the judgment and dismiss the complaint is denied.

Aliotta, P.J., Weston and Toussaint, JJ., concur.

Index No. 652582/2019

Larkin Farrell LLC, New York, NY (William Larkin of counsel), for plaintiff.

The Rybak Firm, PLLC, Brooklyn, NY (Oleg Rybak of counsel), for defendants Columbus Imaging Center, LLC and Metro Pain Specialists, P.C.

The following e-filed documents, listed by NYSCEF document number (Motion 003) 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85 were read on this motion for SUMMARY JUDGMENT.

This motion concerns the potential obligation to pay no-fault insurance benefits of plaintiff American Transit Insurance Company. Defendant Jose Marte Lopez was in a vehicle that was involved in a collision. The vehicle was covered by a no-fault insurance policy issued by American Transit. Lopez assigned the right to collect no-fault benefits under that policy to [*2]various treating medical providers. American Transit denied those providers’ applications for no-fault benefits.

American Transit brought this action for a declaratory judgment that it is not required to pay no-fault benefits to Lopez or to Lopez’s medical-provider assignees (the other defendants here). Lopez and a number of the medical-provider defendants did not appear. This court previously granted default judgment against those defendants, without opposition, on March 25, 2021. (See NYSCEF No. 60 [granting motion and directing American Transit to settle order]; NYSCEF No. 64 [granting judgment].) American Transit now moves for summary judgment against the remaining answering defendants.^[FN1] The motion is denied.

American Transit premises its claim for declaratory judgment on Lopez’s failure twice to appear for independent medical examinations (IMEs) scheduled under the terms of the underlying no-fault insurance policy. But a no-fault insurer seeking a declaration of no coverage due to the claimant’s failure to appear for an IME required under the no-fault policy must first demonstrate that it complied with the procedural and timeliness requirements of 11 NYCRR § 65-3.5, governing the handling of no-fault claims. (See American Transit Ins. Co. v. Longevity Med. Supply, Inc., 131 AD3d 841, 841 [1st Dept 2015].) If an insurer receives NF-3 verification forms from treating providers and then wishes to request additional verification of the no-fault claim in the form of an IME, that IME must be (i) requested within 15 business days of the receipt of an NF-3 form, and (ii) scheduled to be held within 30 calendar days of receipt of the NF-3 form. (See 11 NYCRR 65-3.5 [b], [d]; American Transit Ins. Co. v Acosta, 2022 NY Slip Op 01097 [1st Dept Feb. 17, 2022].)

American Transit has concededly not provided copies of NF-3 verification forms submitted by the remaining medical-provider defendants.^[FN2] American Transit therefore cannot show that it timely requested the IME at issue—as needed to obtain its requested declaratory judgment. (See Acosta, 2022 NY Slip Op 01097, at *1 [reversing grant of summary judgment to American Transit; accord American Transit v Alcantara, 2022 NY Slip Op 01871, at *1 [1st Dept Mar. 17, 2022] [same].)

American Transit advances several arguments for why it is nonetheless entitled to summary judgment. (See NYSCEF No. 85 at 1-15.) But this court has repeatedly rejected these same arguments before when made on behalf of American Transit by the same attorney who makes them here. (See American Transit Ins. Co. v Romero-Richiez, 2020 NY Slip Op 51181[U] [Sup Ct, NY County Oct. 9, 2020]; American Transit Ins. Co. v Martinez, 2020 NY Slip Op 50930[U] [Sup Ct, NY County Aug. 21, 2020]; American Transit Ins. Co. v Wildex, 2020 NY Slip Op 50929[U] [Sup Ct, NY County Aug. 21, 2020]; accord American Transit Ins. Co. v Rodriguez, 2020 WL 7692216 [Sup Ct, NY County Dec. 23, 2020]; American Transit Ins. Co. v Johnson, 2020 WL 7692201 [Sup Ct, NY County Dec. 23, 2020]; American Transit Ins. Co. v City Wide Health Facility Inc., 2020 WL 6440760 [Sup Ct, NY County Oct. 14, 2020]; American Transit Ins. Co. v Reynoso, 2020 WL 5524771 [Sup Ct, NY County Sept. 11, 2020]; [*3]American Transit Ins. Co. v. Schenck, 2020 WL 5290820 [Sup Ct, NY County Sept. 2, 2020]; American Transit Ins. Co. v Fermin, 2020 WL 5105760 [Sup Ct., NY County Aug. 27, 2020].)

American Transit’s papers on this motion do not even acknowledge these numerous prior decisions, much less put forward reasons why they might be mistaken. That counsel evidently does not agree with this court’s prior decisions and reasoning does not explain counsel’s choice to ignore them altogether. Nor, in any event, can American Transit’s position on this motion be reconciled with the recent decisions of the Appellate Division, First Department, in Acosta and Alcantara.^[FN3]

Accordingly, for the foregoing reasons, American Transit’s motion for summary judgment is denied.

Footnotes

Footnote 1:American Transit previously settled with answering defendant Longevity Medical Supply, Inc. (See NYSCEF No. 61.)

Footnote 2:Nor does American Transit contend that it requested the IME before receiving any NF-3 verification forms from those defendants. Had it done so, the 15-day and 30-day deadlines would not apply. (See Mapfre Ins. Co. of NY v Manoo, 140 AD3d 468, 469-470 [1st Dept 2016].)

Footnote 3:American Transit’s counsel here also represented it in the trial court in Acosta and Alcantara—i.e., he obtained the grants of summary judgment that the First Department reversed in those cases. (American Transit did not file a brief on appeal in either case.) Although defendants’ opposition papers on this motion cite the First Department decision in Acosta as an additional reason for denying American Transit’s motion (see NYSCEF No. 75 at 4), American Transit’s reply does not address Acosta’s implications for this motion. Instead, the reply cites only the trial-court ruling in Acosta, without acknowledging its reversal. (See NYSCEF No. 85 at 11.) (The First Department decided Alcantara on March 17, 2022, after this motion was fully submitted.)

Index No. 150343/2021

The Law Office of Daniel J. Tucker, Brooklyn, NY (Fotini Lambrianidis of counsel), for plaintiff.

The Tadchiev Law Firm, P.C., Fresh Meadows, NY (Simon B. Landsberg of counsel), for defendants Global Surgery Center LLC and Safe Anesthesia and Pain LLC.

This motion concerns the potential obligation to pay no-fault insurance benefits of plaintiff American Transit Insurance Company. Defendant Erika Rivera was in a vehicle that was involved in a collision. The vehicle was covered by a no-fault insurance policy issued by American Transit. Rivera assigned the right to collect no-fault benefits under that policy to various treating medical providers. American Transit denied those providers’ applications for no-fault benefits.

American Transit brought this action for a declaratory judgment that it is not required to pay no-fault benefits to Rivera or to Rivera’s medical-provider assignees. Only Rivera and defendants Global Surgery Center LLC and Safe Anesthesia and Pain LLC answered.^[FN1]

American Transit now moves for default judgment under CPLR 3215 against the various defaulting defendants, and moves for summary judgment under CPLR 3212 against Global Surgery Center LLC and Safe Anesthesia and Pain LLC. The motion is denied.

DISCUSSION

A no-fault insurer seeking a declaration of no coverage due to asserted violations of the terms of the policy must first demonstrate that it complied with each of the procedural and timeliness requirements of 11 NYCRR § 65-3.5, governing the handling of no-fault claims. (See American Transit Ins. Co. v Longevity Med. Supply, Inc., 131 AD3d 841, 841 [1st Dept 2015].)

Under these regulations, a no-fault insurer’s request for additional verification in the form of an independent medical examination (IME) must be made within 15 business days of receiving claimant’s verification forms. (See 11 NYCRR § 65-3.5 [b].) The IME must be held within 30 calendar days from receipt of the verification forms. (See id. § 65-3.5 [d].) If the claimant does not appear for the IME, the insurer must send a letter rescheduling the IME within 10 calendar days of the nonappearance. (See 11 NYCRR 65-3.6 [b].)

American Transit has not established that it satisfied these timeframes, as required to establish the facts constituting its claim under CPLR 3215 and to establish prima facie its entitlement to judgment as a matter of law under CPLR 3212.

American Transit has submitted on this motion Rivera’s NF-2 benefits application, dated October 29, 2019. (See NYSCEF No. 19.) American Transit has not, however, submitted any NF-3 verification forms. American Transit thus cannot establish that the first IME here was timely requested or timely scheduled under § 65-3.5. Indeed, the record as it stands casts considerable doubt on the timeliness of the IME: American Transit’s first request, sent on February 13, 2020, scheduled an IME for March 3, 2020—fully 126 calendar days after the date of the NF-2 application. (See NYSCEF No. 17 at ¶ 3; NYSCEF No. 20 at 7.)

American Transit’s papers also reflect that it did not timely reschedule the IME. The IME first scheduled in the February 13, 2020, request letter was rescheduled several times due to the COVID-19 pandemic, and ultimately postponed to June 23, 2020. Rivera did not appear for the June 23 IME date. American Transit did not, however, then reschedule the IME again within 10 days. Its papers reflect instead that it sent a follow-up letter on July 14, 2020—21 calendar days after Rivera failed to appear, not 10. (See NYSCEF No. 17 at ¶ 8; NYSCEF No. 20 at 2.)

American Transit’s motion papers suffer from additional defects. American Transit’s proof that Rivera did not appear for the June 23, 2020, IME date, or the rescheduled August 4, 2020, IME date, is a boilerplate affidavit from its IME physician.^[FN2] But that affidavit is not signed. (See NYSCEF No. 17 at 4.) Moreover, the notary’s stamp states that the notary is “Qualified in Suffolk County” while the top of the affidavit reflects that it was prepared in the “County of Nassa [sic].”^[FN3] (Id.) This document is not competent evidence of Rivera’s asserted failure to appear for IMEs.

Minor delays in requesting additional verification (or following-up on verification requests) may constitute “a technical defect excusable under 11 NYCRR 65-3.5 (p).” (Kemper Independence Ins. Co. v. Cornerstone Chiropractic, P.C., 185 AD3d 468, 469 [1st Dept 2020] [internal quotation marks omitted]). But American Transit’s outright failure to establish when it first requested an IME relative to when it received provider bills or other verification forms, coupled with the absence of a competent affidavit to establish Rivera’s failure to appear at the rescheduled IMEs, far exceeds the “nonsubstantive technical or immaterial defect or omission” that § 65-3.5 (p) excuses. (See American Transit Ins. Co. v Foster, 2019 NY Slip Op 30746[U], at *4 [Sup Ct, NY County Mar. 26, 2019] [holding substantial and repeated delays in seeking verification not excusable under § 65-3.5 [p]].)

Further, Global Surgery and Safe Anesthesia represent in opposition to summary judgment that American Transit has not yet responded to their discovery requests, rendering the summary judgment motion against them premature under CPLR 3212 (f). (See NYSCEF No. 28 at 14-16.) American Transit has not controverted that representation.

American Transit has thus failed to establish either that it is entitled to default judgment against the defaulting defendants under CPLR 3215, or that it is entitled to summary judgment against the answering defendants under CPLR 3212. It is somewhat doubtful that plaintiff can make out the necessary showings. But this court elects to afford American Transit one more opportunity to do so, rather than dismiss the action outright at this time.

Accordingly, for the foregoing reasons it is

ORDERED that the branch of American Transit’s motion under CPLR 3215 seeking default judgment against the defaulting defendants is denied; and it is further

ORDERED that the branch of American Transit’s motion under CPLR 3212 seeking summary judgment against Global Surgery and Safe Anesthesia is denied; and it is further

ORDERED that American Transit shall, within 30 days of entry of this order, respond to the discovery requests served by Global Surgery and Safe Anesthesia on September 24, 2021 [*2](see NYSCEF No. 11); and it is further

ORDERED that if American Transit does not serve a renewed motion for default judgment and for summary judgment within 60 days of entry of this order, the action will be administratively dismissed; and it is further

ORDERED that Global Surgery and Safe Anesthesia shall serve a copy of this order with notice of its entry on all parties.

Footnotes

Footnote 1:American Transit settled with Rivera and two of her treating providers. (See NYSCEF Nos. 3, 6, 8.)

Footnote 2:The affidavit appears to be a generic form document in which the names of the examining physician and the claimant, and the address of the physician’s office, are filled in using a word-processing macro or the equivalent. (See NYSCEF No. 17 at 4.) It states that on the two IME dates at issue, “Erika Rivera never checked in, never had his/her file pulled, [and] was never examined.” (Id. at 4 ¶ 6.)

Footnote 3:It is also unclear why a physician with an office in Manhattan, referred by a company with an office in Nassau County to conduct an examination on behalf of a company that is located in Brooklyn and is represented by counsel located in Brooklyn, would be executing an affidavit before a Suffolk County notary. (See generally NYSCEF Nos. 17, 20; see also NYSCEF No. 16 at 11.)

Decided on January 10, 2022

Supreme Court, New York County

[*1]

Supreme Court, Appellate Term, Second Department, 2d, 11th and 13th Judicial Districts, December 17, 2021

APPEARANCES OF COUNSEL

Law Offices of Buratti, Rothenberg & Burns (Kenneth F. Popper of counsel) for appellant.

Goldman Law Offices (Anna Goldman of counsel) for respondent.

Ordered that the order, insofar as appealed from, is reversed, with $30 costs, and the matter is remitted to the Civil Court for a new determination, following a traverse hearing, of the branches of defendant’s motion seeking to, in effect, vacate the order entered April 20, 2017, granting plaintiff’s motion to enter a default judgment and, upon such vacatur, to dismiss the complaint.

In this action by a provider to recover assigned first-party no-fault benefits, defendant did not appear or answer the complaint. By order entered April 20, 2017, the Civil Court (Susan Quirk, J.) granted, on default, plaintiff’s motion to enter a default judgment. In September 2017, defendant moved to, among other things, in effect, vacate the April 20, 2017 order, alleging that it had not received plaintiff’s motion, and, upon such vacatur, to dismiss the complaint for lack of personal jurisdiction. Plaintiff opposed the motion. As limited by its brief, defendant appeals from so much of an order entered July 12, 2019, as denied the foregoing branches of defendant’s motion.

“It is axiomatic that the failure to serve process in an action leaves the court without [*2]personal jurisdiction over the defendant, and all subsequent proceedings are thereby rendered null and void” (Emigrant Mtge. Co., Inc. v Westervelt, 105 AD3d 896, 897 [2013] [internal quotation marks omitted]). Lack of personal jurisdiction, and thus the question of whether there ever was a default, is a “threshold issue” (McSpedon v Levine, 158 AD3d 618, 620 [2018]). Here, defendant submitted a detailed affidavit by the claims clerk alleged to have received service of process, which affidavit was sufficient to rebut the{**74 Misc 3d at 43} process server’s affidavit and raise an issue of fact necessitating a traverse hearing (see Cautious Care Med., P.C. v 21st Century Ins. Co., 72 Misc 3d 140[A], 2021 NY Slip Op 50785[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2021]).

We note that, while CPLR 3215 (c) requires a plaintiff which seeks to enter a default judgment more than one year after the default to show sufficient cause why the complaint should not be dismissed, on the record before us, there is no basis to find that plaintiff herein failed to make such a showing. Plaintiff’s motion papers are not included in the record and defendant did not raise this argument in the Civil Court.

Accordingly, the order, insofar as appealed from, is reversed and the matter is remitted to the Civil Court for a new determination, following a traverse hearing, of the branches of defendant’s motion seeking to, in effect, vacate the order entered April 20, 2017, granting plaintiff’s motion to enter a default judgment and, upon such vacatur, to dismiss the complaint.

Weston, J. (concurring in part and dissenting in part, and voting to reverse the order, insofar as appealed from, and grant the branches of defendant’s motion seeking to vacate the order entered April 20, 2017, and to dismiss the complaint as abandoned). On or about December 10, 2010, plaintiff, a provider, commenced this action seeking to recover assigned first-party no-fault benefits. Seven years later, plaintiff moved for the entry of a default judgment, which motion was granted. Plaintiff alleged that defendant was served on or about December 16, 2010, by leaving a copy of the summons and complaint with an authorized agent for the corporation. The April 20, 2017 order granting the entry of a default judgment makes no mention that any excuse for the delay was offered or that good cause was shown.

In September 2017, defendant moved to vacate the April 20, 2017 order on the grounds that defendant was not personally served. An affidavit from the person allegedly served denying service was attached to the papers. Further, pursuant to CPLR 5015 (a) (1), defendant asserted that the lack of service provided a reasonable excuse for the default and submitted a meritorious defense to the action.

It is well settled that “[w]hen a plaintiff fails to seek leave to enter a default judgment within one year after the default has occurred, the action is deemed abandoned” (Solano v Castro, 72 AD3d 932, 932-933 [2d Dept 2010]; see CPLR 3215 [c]; Perricone v City of New York, 62 NY2d 661, 663 [1984];{**74 Misc 3d at 44} Staples v Jeff Hunt Devs., Inc., 56 AD3d 459 [2d Dept 2008]; Mattera v Capric, 54 AD3d 827 [2d Dept 2008]; Kay Waterproofing Corp. v Ray Realty Fulton, Inc., 23 AD3d 624, 625 [2d Dept 2005]; Monzon v Sony Motor, 115 AD2d 714 [2d Dept 1985]). The procedure for obtaining a default judgment is plainly set forth in CPLR 3215 (c). CPLR 3215 (c) provides

“[i]f the plaintiff fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned, without costs, upon its own initiative or on motion, unless sufficient cause is shown why the [*3]complaint should not be dismissed” (see Pipinias v J. Sackaris & Sons, Inc., 116 AD3d 749, 750 [2d Dept 2014]; see also Baruch v Nassau County, 134 AD3d 658, 659 [2d Dept 2015]).

“The language of CPLR 3215 (c) is not, in the first instance, discretionary, but mandatory, inasmuch as courts ‘shall’ dismiss claims (CPLR 3215 [c]) for which default judgments are not sought within the requisite one-year period, as those claims are then deemed abandoned” (Giglio v NTIMP, Inc., 86 AD3d 301, 307-308 [2d Dept 2011]; see Bank of N.Y. v Kushnir, 150 AD3d 946 [2d Dept 2017]; Butindaro v Grinberg, 57 AD3d 932 [2d Dept 2008]; County of Nassau v Chmela, 45 AD3d 722 [2d Dept 2007]). It is not necessary that a motion to dismiss be made, since the statute provides the court with the authority not to enter judgment on an abandoned complaint. The court on its own initiative should dismiss the complaint in the absence of compliance with the statute (see U.S. Bank, N.A. v Laulicht, 176 AD3d 892, 893 [2d Dept 2019]; Ibrahim v Nablus Sweets Corp., 161 AD3d 961, 963 [2d Dept 2018]).

Here, it is undisputed that plaintiff failed to seek entry of a judgment within one year of the alleged default. There is no explanation for this failure in the record. The court below should not have entered judgment in favor of plaintiff, but rather should have dismissed the complaint as abandoned. Inasmuch as defendant now seeks to vacate the order granting entry of a default judgment, the mandatory language of CPLR 3215 (c) requires the dismissal of the complaint.

Moreover, the authority for this court to dismiss the complaint is plain. Pursuant to CPLR 3215 (c), the court upon its own initiative can dismiss an action which has been deemed abandoned. In Perricone v City of New York (62 NY2d at 663), the Court noted:{**74 Misc 3d at 45}

“Having failed to comply with the statutory requirements, plaintiff’s complaint was dismissed by the Appellate Division and we find no legal error in that decision. (See Chin v Hooker, 95 AD2d 790; Winkelman v H & S Beer & Soda Discounts, 91 AD2d 660.)

“Plaintiff’s argument that the city waived its right to move for dismissal of the complaint is unpersuasive inasmuch as the Appellate Division exercised its authority under CPLR 3215 (subd [c]) and dismissed the complaint on its own initiative. Nor can plaintiff be heard to complain that he had no notice that the Appellate Division intended to act pursuant to the statute and, therefore, had no opportunity to demonstrate sufficient cause why the complaint should not be dismissed. Plaintiff was aware for more than ten years that the city had not answered, yet failed to move for a default judgment.”

Under the circumstances presented here, the seven-year delay in proceeding to enter judgment after the default should not be excused. The motion for the entry of a default judgment should have been denied (see Shinn v City of New York, 65 AD3d 621, 622-623 [2d Dept 2009]; Butindaro v Grinberg, 57 AD3d at 933; Staples v Jeff Hunt Devs., Inc., 56 AD3d at 460; Mattera v Capric, 54 AD3d at 828). A traverse hearing would not resolve the underlying delay by plaintiff in seeking a default judgment and the consequences of CPLR 3215 (c) thereto. Accordingly, defendant’s motion to vacate the April 20, 2017 order should be granted and the complaint dismissed.

Toussaint, J.P., and Elliot, J., concur; Weston, J., concurs in part and dissents in part in a separate memorandum.