New York Supreme Dismisses CPLR Article 78 Mandamus Proceeding Against NYS Insurance Department, NICB, State Farm, AutoOne and General Assurance

NO-FAULT – MANDAMUS RELIEF – CPLR ARTICLE 78
Matter of Okslen Acupuncture P.C. v. Dinallo
(Sup. Ct., New York Co., decided 6/26/2009)

In one man's crusade to invalidate the New York State special investigation units of State Farm, AutoOne and General Assurance Company and otherwise squelch certain investigations of no-fault providers, losses and claims suspected to be fraudulent, this is another battle lost.

Regarded by some as my no-fault nemesis, Brooklyn attorney Ray Zuppa began this campaign in June 2008 by filing a class action "bad faith" action in New York State Supreme Court, New York County, seeking only declaratory relief.  After reading the entire 225-page complaint, I called it "a mess" -- endearing me henceforth to its author -- and predicted its dismissal on motion.  I was only partly correct.

Instead of seeking dismissal of that action in state court, State Farm and two law firm defendants removed it to federal court pursuant to the Class Action Fairness Act of 2005 ("CAFA"), and then all plaintiffs except Okslen Acupuncture P.C.voluntarily discontinued their action against all defendants. Okslen then voluntarily dismissed its action against the two removing law firm defendants, leaving State Farm as the sole removing defendant.  Zuppa then filed a motion on behalf of Okslen to remand the action back to the more familiar environs of state court, which the federal court denied.  Following that decision, Zuppa discontinued the class  action against State Farm reportedly because he was unfamiliar with federal court procedure. 

Bowed but not broken, Zuppa returned to state court and commenced this special proceeding for mandamus relief against the New York State Insurance Department, the National Insurance Crime Bureau (NICB), State Farm, AutoOne and General Assurance Company pursuant to CPLR Article 78, which is entitled "Proceeding Against Body or Officer".  The chest-thumping Zuppa unprophetically self-proclaimed:

Ray Zuppa, the modern day gladiator, is relentless in his pursuit to fight the evil in the world of insurance. His latest advancement is an earthshattering [sic] Article 78 proceeding sure to set the world of No-Fault aflame. Please LexisNexis, skip the nomination process and just give this man the Person of the Year award.

Unrealized seismologic and incendiary predictions aside, in the Article 78 special proceeding the Petitioners asked that the court:

• order the Superintendent of Insurance to "thoroughly audit and investigate the claims practices of [the Carriers]...and take all appropriate action to remedy any and all infirmities, deficiencies and misconduct" and to publish such findings;
• order NICB and certain agents to cease all investigative activities until NICB is licenced under New York General Business Law §70; and 
• order the Carriers "to take all action necessary" to insure that all investigators who are members of Special Investigative Units be qualified under 11 NYCRR 86.6 and to provide a list of all non qualified investigators, and to order State Farm to conduct its investigations in a certain manner and conduct its medical examinations "purely on the application of medical science to the patient being examined and not as a pretext to deny a claim for which the decision to deny has already been made and to document its decisions."

The Superintendent of Insurance moved to dismiss the petition as against him on the grounds that under CPLR Article 78 mandamus may not be used to compel him to take discretionary enforcement action.  Then insurer respondents jointly cross-moved to dismiss the petition as against them pursuant to CPLR Rule 3211(a)(3) on the ground that the petitioners lacked legal capacity to sue them and pursuant to CPLR Rule 3211(a)(7) on the ground that the petition failed to state a cause of action against them.  NICB also cross-moved to dismiss the petition as against it pursuant to CPLR Rule 3211(a)(2) on the ground that the court lacked subject matter jurisdiction over the claim asserted against NICB, and pursuant to CPLR Rule 3211(a)(3) on the ground that petitioners lacked legal capacity to sue and pursuant to CPLR Rule 3211(a)(7), and also on the ground that the petition failed to state a cause of action against NICB.

In GRANTING the respondents' motions to dismiss the petition in its entirety, New York County Supreme Court Justice Lewis Bart Stone ruled:

►  CPLR Article 78 relief was not available against NICB because it is not not a governmental body and no petitioner is a member or employee of NICB or is otherwise subjected by governmental mandate to employment or regulation by NICB;

►  similarly, "the limited exception of the availability of CPLR Article 78 review of decisions of certain non-governmental bodies is wholly unavailable to review Petitioners' claims against the Carriers as the Carriers are business entities and petitioners are not shareholders, or have any special relationship with the Petitioners[;] [t]heir relationship is commercial"; and

►  mandamus relief is not available against the Superintendent for discretionary functions, including the Insurance Department's roles in investigating and auditing insurance companies; "as the Superintendent's power to act against any carriers for its claim settlement practices is at the discretion of the Superintendent, mandamus will not lie."