Motion Court Holds That No-Fault Insurer Had No Right to Demand EUOs of Medical Providers' Purported Owner Prior to April 5, 2002

NO-FAULT – INSURER'S RIGHT TO EUO – COLLATERAL ESTOPPEL – ARBITRATED CLAIMS
Brentwood Pain & Rehabilitation Servs., P.C. v. Progressive Ins. Co.
(Sup. Ct., New York Co., decided 8/19/2009)

Plaintiff medical providers, Brentwood Pain & Rehabilitation Services, P.C. and Hempstead Pain and Medical Services, P.C., sued various Progressive Insurance companies to recover approximately $7 million in no-fault claims for services they allegedly provided to their assignors for injuries sustained in automobile accidents. Plaintiffs claimed that since 1996, they treated Progressive claimants and timely submitted bills for services, and that Progressive refused to pay almost all of the submitted claims from 1996 to April 4, 2002.

It was undisputed that following receipt of the claims from Brentwood or Hempstead, Progressive made various verification requests of the plaintiffs. Included in the requests were demands for examinations under oath (EUOs) of Dr. Brutus for each claim submitted, the names and license numbers of the medical providers providing each service, and handwritten and signed notes by the providers. Brentwood and Hempstead claimed that they complied with essentially all of the requests, except those for Dr. Brutus' EUO. Plaintiffs argued that Progressive had no legal right to request EUOs of plaintiffs as a form of verification prior to April 5, 2002, when revised Regulation 68 went into effect.

Progressive argued that it was entitled to demand EUOs of medical providers prior to the effective date of revised Regulation 68 pursuant to case law and arbitration rulings, which rulings should be given collateral estoppel effect. It also pointed to a statement published by the New York State Insurance Department in the State Register dated May 9,2001, at 23, item 16, which opined that the provision providing for an examination under oath in revised Regulation 68 “clarifies existing authority to require such examination.”

Plaintiffs moved pursuant to CPLR 3212 for an order granting partial summary judgment determining that, as a matter of law, prior to April 5,2002 no-fault insurance carriers had no right to demand EUOs of medical providers. The Progressive defendants opposed and cross-moved for partial summary judgment on various grounds.

After reviewing the court and arbitration decisional law cited by the parties, New York Supreme Court Justice Edward Lehner held that Progressive had no right to demand EUOs of plaintiffs prior to April 5, 2002:

While the court is not bound by the above decisions of the Appellate Term [cited by the plaintiffs in support of their motion], this court believes them to have been correctly decided. Accordingly, plaintiffs’ motion for partial summary judgment is granted to the extent that this court declares that, under the applicable prior regulations (11 NYCRR 65.12 [e]), Progressive had no right to demand EUOs of plaintiffs prior to April 5, 2002.

In rejecting Progressive's argument that collateral estoppel effect should be given to various arbitration decisions that were decided against the plaintiffs, Justice Lehner held:

A review of the issues litigated in the prior arbitration proceedings fails to demonstrate that the issue of whether Progressive was legally entitled to EUOs of plaintiffs as part of its verification requests under the administrative regulation then in effect was raised by the parties or actually or necessarily determined by the arbitrators. Thus, there is no basis to apply collateral estoppel against plaintiffs.

With respect to Progressive's other grounds for partial summary judgment, the court:

► GRANTED that branch of Progressive’s cross motion which sought partial summary judgment dismissing plaintiffs’ duplicate claims, the claims previously denied in arbitration, and the claims that plaintiffs elected to arbitrate and then withdrew;

► GRANTED Progressive's cross motion to the extent that it sought dismissal on statute of limitation grounds any claims with a date prior to June 2, 1998;

► DENIED Progressive’s cross motion for partial summary judgment on plaintiffs’ claims based upon their alleged failure to comply with Progressive's verification requests, finding that issues of fact existed regarding whether plaintiffs reasonably and substantially complied with those requests;

► GRANTED Progressive’s cross motion to dismiss plaintiffs' unjust enrichment claim as unopposed; and

► DEFERRED decision on Progressive's argument that plaintiffs were involved in a myriad of wrongdoing, including illegal fee splitting in violation of New York Public Health Law §§ 238 and 238-a, and thus are not eligible for reimbursement by insurance carriers, reserving such questions to the court's determination of a subsequent motion which was argued on April 20, 2009.