A.B. MED. v. STATE FARM MUT, N.Y. Misc., Judgment, Law, casemine.com

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Attorney(S)

Amos Weinberg, Great Neck, for appellant. DeSena Sweeney, LLP, Hauppauge ( Lisa M. Dawson of counsel), for respondent.

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Smart Summary

Factual and Procedural Background

This appeal arises from a consolidated order of the District Court of Nassau County entered January 2, 2003, which denied plaintiff A.B. Medical Services PLLC's motions for summary judgment in three related cases seeking to recover assigned first-party no-fault benefits. The plaintiff, as assignee of various claimants, sought to recover no-fault benefits for medical services allegedly provided following automobile accidents. The defendant, State Farm Mutual Automobile Insurance Company, opposed the motions. The appeals were consolidated for disposition by the Supreme Court of the State of New York.

Legal Issues Presented

Whether the plaintiff established a prima facie entitlement to assigned first-party no-fault benefits by submitting completed statutory claim forms under Insurance Law § 5106(a).
Whether the defendant’s failure to timely deny the claims precludes most defenses under Insurance Law § 5106(a) and 11 NYCRR 65.15(d)(1).
Whether the preclusion rule applies to defenses based on allegations that the automobile accidents were staged in furtherance of a scheme to defraud.
Whether the defendant raised triable issues of fact regarding the legitimacy of medical services claimed, including whether services were medically necessary or fraudulently provided.
Whether summary judgment was properly denied as to certain claims due to deficiencies in the foundation supporting the admissibility of claim forms and the identity of the plaintiff parties.

Arguments of the Parties

Appellant's Arguments

Plaintiff contended it was entitled to summary judgment by proving submission of completed statutory claim forms evidencing the fact and amount of loss sustained.
Plaintiff asserted that the claims for assigned first-party no-fault benefits were valid and supported by proper documentation.

Respondent's Arguments

Defendant argued that some of the alleged automobile accidents were staged as part of a fraudulent scheme, which is a defense not subject to preclusion despite late denial.
Defendant presented evidence including examinations under oath and investigator affidavits showing discrepancies in assignors’ accounts and irregularities in insureds’ identities and addresses, raising triable issues of fact about the staged nature of the accidents.
Defendant also challenged the medical services claimed, contending that some were unnecessary or continued after symptoms had abated, suggesting fraudulent provision of services.
Defendant pointed to deficiencies in the affidavits supporting claims, including failure to establish the proper party plaintiff or foundation for admissibility of claim forms in some actions.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Damadian MRI in Elmhurst v. Liberty Mut. Ins. Co., 2 Misc 3d 128(A), 2003 NY Slip Op 51700[U] (App Term, 9th 10th Jud Dists 2003)	Proof of submission of completed statutory claim forms establishes prima facie entitlement to no-fault benefits under Insurance Law § 5106(a).	Used to support that plaintiff established prima facie entitlement to benefits by submitting completed claim forms.
Amaze Med. Supply v. Eagle Ins. Co., 2 Misc 3d 128(A), 2003 NY Slip Op 51701[U] (App Term, 2d 11th Jud Dists 2003)	Same as above; supports proof of claim by submission of statutory forms.	Reinforced the prima facie entitlement standard applied to plaintiff’s submissions.
Presbyterian Hosp. in City of N.Y. v. Maryland Cas. Co., 90 NY2d 274 (1997)	Failure to timely deny claims precludes most defenses; however, defenses based on staged accidents and fraud are excepted from preclusion.	Guided the court in distinguishing defenses subject to preclusion from those based on fraud or staged accidents, which remain triable issues.
Central Gen. Hosp. v. Chubb Group of Ins. Cos., 90 NY2d 195 (1997)	Defenses based on staged accidents as part of fraudulent schemes are not subject to preclusion despite late denial.	Supported defendant’s ability to raise fraud-based defenses despite procedural preclusion rules.
Matter of Metro Med. Diagnostics v. Eagle Ins. Co., 293 AD2d 751 (2002)	Similar to Central Gen. Hosp.; fraud-based defenses concerning staged accidents are excepted from preclusion.	Confirmed triable issues of fact regarding staged accidents raised by defendant.
Matter of Medical Socy. of State of N.Y. v. Serio, 100 NY2d 854 (2003)	Recognizes rampant fraud in no-fault claims, especially by medical providers filing inflated or unnecessary treatment claims; preclusion applies to claims of excessive or unnecessary medical treatment.	Clarified that while staged accident fraud defenses survive preclusion, claims of fraudulent excessive medical treatment are still subject to preclusion sanctions.
A.B. Med. Servs. PLLC v. State Farm Mut. Auto. Ins. Co., 4 Misc 3d 138(A), 2004 NY Slip Op 50903[U] (App Term, 9th 10th Jud Dists 2004)	Affidavits must establish foundation for admissibility of claim forms as to the named plaintiff; failure to do so precludes summary judgment.	Applied to deny summary judgment where affidavits failed to properly identify the plaintiff or establish foundation for claim forms.

Court's Reasoning and Analysis

The court first recognized that plaintiff established a prima facie case for entitlement to assigned first-party no-fault benefits by submitting completed statutory claim forms as required by Insurance Law § 5106(a), supported by precedent. Under Insurance Law § 5106(a) and 11 NYCRR 65.15(d)(1), defendant’s failure to timely deny most claims generally precludes defenses. However, the court distinguished that defenses based on allegations of staged accidents as part of a fraudulent scheme are exempt from this preclusion rule. The defendant presented evidence including examinations under oath and investigator affidavits revealing significant discrepancies and irregularities, raising triable issues of fact about whether the accidents were staged.

The court further considered defendant’s argument that some medical services were unnecessary or fraudulently provided. Citing the Court of Appeals’ recognition of rampant no-fault fraud, the court held that claims based on fraudulent excessive or unnecessary medical treatment remain subject to preclusion sanctions despite allegations of fraud, consistent with precedent emphasizing a strict, short-leashed contestable period to avoid dilatory practices.

Additionally, the court addressed procedural deficiencies in some claims, noting that summary judgment was properly denied where affidavits failed to establish the proper party plaintiff or the foundation for admissibility of claim forms, as required by precedent. Specifically, claims involving Royalton Chiropractic, PC, and claims supported by an affidavit from a practice and billing manager who did not identify the named plaintiff were insufficiently supported.

In view of these analyses, the court concluded that the motions for summary judgment were properly denied.

Holding and Implications

The court unanimously affirmed the order denying plaintiff’s motions for summary judgment without costs.

The direct effect of this decision is that the plaintiff’s motions for summary judgment were properly denied due to triable issues of fact regarding allegations of staged accidents and procedural deficiencies in proof of claims. The court did not establish new precedent but reaffirmed existing legal principles distinguishing between defenses subject to preclusion and those based on fraud, as well as the necessity of proper foundation for claim forms in summary judgment motions.

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A.B. MEDICAL SERVICES PLLC, as Assignee of KANZADA McGREATH, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent. (And Two Other Actions.).

OPINION OF THE COURT

Memorandum.

On the court's own motion, the decision and order of this court entered March 17, 2004 in the above-entitled action is recalled and vacated and the following decision and the order hereon is substituted therefor.

On the court's own motion, appeals consolidated for purposes of disposition.

Order unanimously affirmed without costs.

In these actions to recover $7,393.37 in assigned first-party no-fault benefits provided its assignors, with the exception of the claim for $290.64 in the action appealed under calendar No. 2003-469 N C, the entire claim asserted in the action appealed under calendar No. 2003-470 N C, and the claim for $358.04 in the action appealed under calendar No. 2003-471 N C, plaintiff established its entitlement to the benefits prima facie, by proof that it submitted the completed statutory forms setting forth "the fact and amount of loss sustained" (Insurance Law § 5106 [a]; Damadian MRI in Elmhurst v. Liberty Mut. Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51700[U] [App Term, 9th 10th Jud Dists 2003]; see Amaze Med. Supply v. Eagle Ins. Co., 2 Misc 3d 128[A], 2003 NY Slip Op 51701[U] [App Term, 2d 11th Jud Dists 2003]). Defendant's failure timely to deny any of the claims for which a prima facie case is established (Insurance Law § 5106 [a]; 11 NYCRR 65.15 [d] [1]) precluded most defenses thereto ( Presbyterian Hosp. in City of N.Y. v. Maryland Cas. Co., 90 NY2d 274, 278).

However, the preclusion rule does not apply to a defense based on a claim that the alleged accident was a staged event in furtherance of a scheme to defraud ( Central Gen. Hosp. v. Chubb Group of Ins. Cos., 90 NY2d 195, 201; Matter of Metro Med. Diagnostics v. Eagle Ins. Co., 293 AD2d 751, 752). Defendant's proof in each case included, inter alia, examinations of the assignors under oath and an investigator's affidavit which revealed significant discrepancies in the assignors' accounts of their activities before and after the accident and irregularities with respect to the insured's various identities and addresses. These raise triable issues of fact as to whether the automobile accident was staged. Defendant also argued that the assignors' statements raised substantial questions of fact as to whether certain of the medical services were not medically responsive to the injuries reported by the assignors or continued long after the reported symptoms abated, and whether said services were fraudulently provided. Although the Court of Appeals has recognized that "rampant fraud" against no-fault insurers, estimated in the year 2000 to be at 1,700% of 1992 levels, is committed largely by medical benefits providers filing inflated treatment claims for minor or nonexistent injuries ( Matter of Medical Socy. of State of N.Y. v. Serio, 100 NY2d 854, 861, 864), we are constrained to conclude that fradulent claims for excessive or unnecessary medical treatment are subject to the preclusion sanction even where, as here, the services are alleged to have been fradulently provided ( Presbyterian Hosp. in City of N.Y. v. Maryland Cas. Co., 90 NY2d 274, 285 ["The tradeoff of the no-fault reform still allows carriers to contest ill-founded, illegitimate and fraudulent claims, but within a strict, short-leashed contestable period and process designed to avoid prejudice and red-tape dilatory practices"]; see also Matter of Medical Socy. of State of N.Y. v. Serio, 100 NY2d at 861 ["the most common example of the manner in which . . . fraud [is] perpetrated consist[s] of exploiting the time lag between the alleged loss and the deadline for submitting proof of the loss, coupled with the reality that insurers are given only 30 days to review and investigate claims before paying them without risk of penalties for denying or delaying a claim"]).

We note that even absent the claim of fraud, the court properly denied summary judgment as to the aforementioned claims for $290.64 and $358.04. The alleged provider claimant was Royalton Chiropractic, PC., on whose behalf the assignor had executed assignment of benefits forms. Royalton is not named as a party plaintiff in either action, and in both supporting affidavits, the deponent, on whose authority the claim forms are sought to be proved, states only that she is an officer of "plaintiff," presumably A.B. Medical Services PLLC, the only captioned plaintiff.

The court also properly denied summary judgment as to all claims asserted in the action appealed as No. 2003-470 N C. In an affidavit in support of the motion, Bella Safir alleges merely that she is the "practice and billing manager" and an "officer" of "plaintiff." Ms. Safir does not state for which named plaintiff she is a manager and an officer. Consequently, the affidavit in which Safir states that "plaintiff" provided defendant with complete claim forms is insufficient to establish said fact inasmuch as the affidavit does not lay the necessary foundation for the admissibility of said forms as to any of the named plaintiffs ( see A.B. Med. Servs. PLLC v. State Farm Mut. Auto. Ins. Co., 4 Misc 3d 138[A], 2004 NY Slip Op 50903[U] [App Term, 9th 10th Jud Dists 2004]).

Accordingly, in view of the foregoing, plaintiff's motion for summary judgment was properly denied.

A.B. MED. v. STATE FARM MUT