Falsifying Business Records -- Conviction of PM&R Physician for Submitting Fraudulent Medical Documentation to No-Fault Insurer Affirmed

NO-FAULT – CRIMINAL LAW – FALSIFYING "BUSINESS RECORDS"
People v. Kisina
(Ct. Apps., decided 2/18/2010)

Can a physician can be found guilty of falsifying business records in the first degree (New York Penal Law § 175.10), for submitting fraudulent medical documentation to a no-fault insurance carrier for the purpose of receiving payments for treatments that were unnecessary or unperformed?  Yes, says the New York Court of Appeals.  Records submitted by a health care provider to a no-fault insurer do constitute "business records" for the purpose of this statute.

Tatyana Kisina, a physical medicine and rehabilitation specialist, treated patients at IK Medical P.C., a clinic in Queens, in 2002. The facility reportedly provided comprehensive medical care to persons claiming to have been injured in motor vehicle accidents and billed New York no-fault insurers for its services.  In 2003, the Attorney General investigated the clinic for insurance fraud and other related crimes, and subsequently procured an indictment against Dr. Kisina for engaging in a scheme to defraud in the first degree (Penal Law § 190.65 [1] [b]), two counts of insurance fraud in the third degree (Penal Law § 176.20) and two counts of falsifying business records in the first degree.  The falsifying business records charges were based upon false consultation reports that Dr. Kisina had submitted to State Farm Mutual Automobile Insurance Company, along with verification of treatment forms seeking payment for procedures she purportedly performed on two motor vehicle accident victims.

After trial, a jury found defendant guilty of the two counts of insurance fraud in the third degree and the two counts of falsifying business records in the first degree, acquitting defendant of the scheme to defraud in the first degree charge.  The trial court denied defendant's pre-trial motion to dismiss the falsifying business records counts, stating that "false records resulting from false information submitted to support a fraudulent claim is a sufficient basis for an indictment charging Falsifying Business Records." The Appellate Division affirmed defendant's conviction, and a judge of the Court of Appeals granted defendant leave to appeal to this court. 

On this appeal, defendant argued that the false business records submitted to State Farm fell outside of the purview of Penal Law § 175.10 because:  (1) the statute is not violated when an outsider or third party submits false information to a company to induce it to take action in reliance upon that information; and (2) the medical reports that she submitted to State Farm were not "business records" because they did not reflect the "condition" or "activity" of the recipient enterprise, but rather falsely evidence her activities and the condition of her patients.

In rejecting defendant's arguments and affirming her conviction, the Court of Appeals held:

Falsifying business records in the first degree is committed when a "person," with the requisite intent, makes or causes a false entry in the "business records" of an enterprise (Penal Law §§ 175.05 [1], 175.10). The "person" must act with an "intent to defraud," which includes "an intent to commit another crime or to aid or conceal the commission thereof" (Penal Law § 175.10; see also Donnino, Practice Commentary, McKinney's Cons Laws of NY, Book 39, Penal Law § 175.05, at 65-66). A "business record" is "any writing or article . . . kept or maintained by an enterprise for the purpose of evidencing or reflecting its condition or activity" (Penal Law § 175.00 [2]; cf. CPLR 4518 [admissibility of business records at trial as an exception to the hearsay rule]). 

Regarding defendant's first claim, the Penal Law proscribes no limitation or preconditions on the types of persons who may fall within the ambit of this crime. Nowhere does the Penal Law state that "outsiders" or "third parties" not employed by or agents of the recipient enterprise are immune from prosecution under this statute. Indeed, in People v Bloomfield (6 NY3d 165, 170-172 [2006]), we rejected the "insider/outsider distinction" for the purpose of defining a false business record under the current business record statutes. We sustained a lawyer's conviction for falsifying business records of a bank of which he was not an employee or agent, notwithstanding that he maintained the records in an outside location (cf. People v Cratsley, 86 NY2d 81, 88-91 [1995] [in a rape prosecution, I.Q. tests performed by an "outsider" were properly admitted as a business record of a social service agency pursuant to CPLR 4518]). 

Many other courts have similarly held that a third party's submission of fraudulent records may fall within the scope of the statute (see e.g. People v Myles, 58 AD3d 889, 890-892 [3d Dept 2009] [a consumer of electricity could be guilty of falsifying business records for bypassing the electric meter, causing it to falsely record the amount of electricity used]; People v Johnson, 39 AD3d 338, 339 [1st Dept 2007] [a co-defendant of public assistance applicant could be guilty of falsifying business records of the agency]; People v Smith, 300 AD2d 1145, 1146 [4th Dept 2002] [defendant could be convicted for falsifying the records of the public defender's office for erroneously stating his income]). We agree with the interpretation of these courts, and find that the People's position better comports with the plain language of the statute. The second and most prominent component of defendant's argument is that the records submitted to State Farm do not reflect the "condition" or "activity" of that enterprise as required by Penal Law § 175.00, but rather falsely evidence defendant's own activity and the condition of her patients. Here, the stipulated testimony from the State Farm representative supports the necessary elements of a "business record." The stipulation explains that State Farm was obligated to keep and maintain records submitted by physicians seeking payments for medical services rendered. Further, the stipulation establishes that State Farm's financial condition is affected by these false submissions, as they give rise to liabilities under its policies. 

Defendant seeks support from People v Papatonis (243 AD2d 896, 900 [3d Dept 2009]) in arguing that the false medical reports she submitted do not reflect the "condition" of the receiving enterprise. In that case, the court held that misrepresentations on an employment application, wherein the defendant falsely denied having been convicted of a crime, did not fall within the ambit of the statute (see id. at 900-901). However, the falsifications in the job application did not, as here, relate to any rights or obligations on the part of the recipient agency. Here, by contrast, there exists sufficient evidence establishing that State Farm "kept or maintained" the consultation reports along with the claim forms, and that they evidence or reflect "its condition" — specifically its legal obligation to reimburse medical providers for services. The falsifying business records conviction was, therefore, sustainable under the circumstances presented. 

Court Denies Summary Judgment Motion Based on Insureds' Recorded Statements

AUTO – NON-COOPERATION – FALSE REPORTING – INADMISSIBILITY OF RECORDED STATEMENTS – BUSINESS RECORD EXCEPTION TO HEARSAY RULE
Metropolitan Cas. Ins. Co. v. Shaid
(Sup. Ct., Queens Co., decided 5/21/2009)

On June 8, 2006, a vehicle operated by the underlying plaintiff Justin Marvisi collided with a vehicle insured by Metropolitan operated by Arshad and owned by Shaid. In initially reporting the accident, Shaid advised Metropolitan that he did not know the identity of the person who was driving his vehicle at the time of the accident and that he had dropped off his vehicle at a service station with the keys inside it. It was not until 2008 that Shaid acknowledged that he knew Arshad, the driver, and had given him permission to use the vehicle for personal and non-business related reasons. Both Shaid and Arshad provided recorded statements to an investigator for Metropolitan.

In October 2006, Metropolitan denied liability coverage to Shaid and Arshad based on the policy's exclusion for use of the insured auto in an “auto business.” Marvisi brought a personal injury action against Shaid and Arshad and obtained a default judgment against them. Metropolitan then commenced this action, seeking a declaratory judgment declaring that Shaid and Arshad had breached the policy's cooperation clause.

Metropolitan moved for summary judgment based on the contents of recorded statements obtained from Shaid and Arshad. Queens County Supreme Court Justice Bernice Siegel initially agreed that:

[t]he law is well settled that an insured who falsely informs his insurer as to who was driving the insured vehicle at the time of the accident breaches the cooperation clause of the insurance policy. (Geico v. Fisher, 54 AD2d 1087 [4th Dept 1976].)In this matter, the insurer contends that Shaid knew who was driving his vehicle at the time of the accident and for what purpose, but intentionally misrepresented those facts to Metropolitan.

An insured breaches the condition of cooperation and seriously prejudices the insurer in handling the claims and lawsuits arising out of the accident when making false statements concerning the facts of an accident. (see State Farm Mutual Automobile Ins. Co. v. Brown, 21 AD2d 742 [4th Dept. 2004].) However, even through the insurer may be prejudiced by the lack of cooperation “[t]he lack of prejudice to the insurer is immaterial when there has been a breach of a condition.” (National Grange Mutual Liab. Co. v. Fino, 13 AD2d 10 [3d Dept 1961].)

In spite of these legal principles, however, the court denied Metropolitan's motion for summary judgment, finding that the recorded statements Shaid and Arshad gave to Metropolitan's investigator were not business records that qualified as admissible under the business records exception to the hearsay rule:

Hearsay is a statement made out of court offered for the truth of the fact asserted in the statement. (People v. Romero, 78 NY2d 355 [1991].) A hearsay statement may be received in evidence only if it falls within one of the recognized exceptions to the hearsay rule, and then only if the proponent demonstrates that the evidence is reliable. (Nucci v. Proper, 95 NY2d 597 [2001].)

Plaintiff contends that the statements fall under the business records exception to the hearsay rule. For the purposes of determining whether hearsay is admissible under business records exception, the concern relating to trustworthiness extends to “each participant in the chain producing the business record, from the initial declarant to the final entrant.” (Matter of Leon RR, 48 NY2d 117 [1979].)

The Court of Appeals has ruled that “the statement is inadmissible hearsay if any of the participants in the chain is acting outside the scope of the business duty.” Id. at 122. It is undisputed that the insured was outside the insurers enterprise at the time of the statement.

At issue though, is whether the duty of an insured to cooperate with an insurer is comparable to a business duty during an insurance investigation. (Hochhauser v. Electric Insurance Co., 46 AD3d 174 [2d Dept 2007].) However, “despite potential consequences which may befall an insured who fails to provide accurate and truthful information to, or to cooperate with, an insurer, the insured’s statement to the insurance investigator ... was not made under the circumstances which create a high probability that the statement was truthful.” (Corsi v. Town of Bedford, 58 AD3d 225, 231 [2d Dept 2008], quoting Hochhauser v. Electric Insurance Co., 46 AD3d at 1823.)

The essence of the business records exception to the hearsay rule is that records systematically made for the conduct of business are inherently highly trustworthy because (1) the records are routine reflections of the day to day operations of a business; (2) the entrant is obliged to be truthful and accurate for purposes of conducting the enterprise. (Hochhauser v. Electric Insurance Co., 46 AD3d 174 [2d Dept 2007].)

Here, the insured was outside of the insurer’s enterprise and was not communicating information regarding the accident under the compulsion of any business duty. (see generally, Matter of Leon RR , 48 NY2d 117 [1979].) Accordingly, the statements made by Shaid and Arshad to the insurance investigator do not constitute a business record. Without the benefit of the business record exception, the plaintiffs statements to the investigator are simply impermissible hearsay.

Contrast this decision with Tower Ins. Co. v. Rajaram (Sup.Ct., NY Co., 2008) and Tower Ins. Co. v. Kravtchouk (Sup.Ct., NY Co., 2008) in which New York County Supreme Court Justice Eileen Rakower found signed statements of the insureds to be admissible as evidence on Tower's motions for summary judgment in those cases. In rejecting the defendants' argument that their signed statements were inadmissible hearsay, Justice Rakower ruled: "While hearsay, admissions by a party of any fact material to the issue are always competent evidence against that party."

Did Metropolitan also argue that Shaid's and Arshad's recorded statements constituted party admissions and, thus, were admissible under a separate exception to the hearsay rule? Once the declaratory judgment action was pending, couldn't Metropolitan also have converted the recorded statements into evidentiary form by attaching transcripts to a notice to admit or marking and using the transcripts during party depositions of Shaid and Arshad? This decision does not indicate in what form and under whose sponsoring affidavit the recorded statements were submitted in support of Metropolitan's motion.

A Spate of No-Fault Decisions from the Appellate Term, Second Department

NO-FAULT – NOTARY PUBLIC'S JURAT – TECHNICAL DEFECT – PEER REVIEW – MEDICAL NECESSITY
Complete Orthopedic Supplies, Inc. a/a/o Ana Valencia v. State Farm Mut. Auto. Ins. Co.
(App. Term, 2nd Dept., decided 1/9/2009)

Appeal from a Queens Civil judgment for plaintiff DME provider on its motion for summary judgment.

REVERSED and State Farm's cross motion for summary judgment was granted. The notary public's jurat was missing the year State Farm's affidavits of mailing were signed. The Appellate Term held that this was a "technical defect" that the Civil Court should have disregarded since it did not prejudice a substantial right of a party, and plaintiff had raised no objection to it. State Farm's affirmed peer review report established prima facie that there was no medical necessity for the supplies provided by plaintiff, which proof plaintiff did not rebut. As a result, State Farm's cross motion for summary judgment dismissing the complaint should have been granted.


NO-FAULT – UNTIMELY SUBMISSION OF CLAIMS
Long Is. Multi-Medicine Group, P.C. a/a/o Sumira Lund v. Travelers Ins. Co.
(App. Term, 2nd Dept., decided 1/8/2009)

Appeal from a Queens Civil judgment for plaintiff on its motion for summary judgment.

AFFIRMED. Civil Court had granted plaintiff's motion based on its finding that Travelers waived its defense of claim submission untimeliness, since it failed to advise plaintiff that the claim would be reconsidered upon a showing of impossibility to timely submit the claims. The Appellate Term affirmed the judgment, not on that ground, but because Travelers' opposition motion papers annexed denial of claim forms that did not correspond to the claim forms upon which plaintiff sought summary judgment. As such, the court held that Travelers had failed to establish that it timely denied the subject claims and, as such, failed to raise a triable issue of fact with respect to the claims at issue.


NO-FAULT – ADMISSIBILITY OF BUSINESS RECORDS
Union Physician Healthcare, P.C. a/a/o Christopher Kelly v. Utica Mut. Ins. Co.
(App. Term, 2nd Dept., decided 1/9/2009)

Appeal from a Kings Civil judgment for plaintiff on its motion for summary judgment.

REVERSED and plaintiff's motion denied. The affidavit by plaintiff's officer submitted in support of plaintiff's motion for summary judgment failed to lay a proper foundation for the admission of the documents annexed to plaintiff's moving papers and, as a result, plaintiff failed to establish a prima facie case. The affidavit submitted by plaintiff's officer was insufficient to demonstrate that he possessed personal knowledge of plaintiff's practices and procedures so as to lay a foundation for the admission, as business records, of the documents annexed to plaintiff's moving papers. Accordingly, plaintiff failed to make a prima facie showing of its entitlement to summary judgment (see Art of Healing Medicine, P.C. v Travelers Home & Mar. Ins. Co., 15 Misc 3d 144[A], 2007 NY Slip Op 51161[U] [App Term, 2d & 11th Jud Dists 2007], affd 55 AD3d 644 [2008]; Bath Med. Supply, Inc. v Deerbrook Ins. Co., 14 Misc 3d 135[A], 2007 NY Slip Op 50179[U] [App Term, 2d & 11th Jud Dists 2007]; Dan Med., P.C. v New York Cent. Mut. Fire Ins. Co., 14 Misc 3d 44 [App Term, 2d & 11th Jud Dists 2006]).


NO-FAULT – MVAIC – NOTICE OF CLAIM – INSURANCE LAW § 5208(A)
M.N.M. Med. Health Care, P.C. a/a/o Erick Papillion v. MVAIC
(App. Term, 2nd Dept., decided 1/9/2009)

Appeal from a Queens Civil order denying defendant MVAIC's motion for summary judgment.

REVERSED and MVAIC's motion granted, dismissing the complaint. The filing of a timely affidavit providing MVAIC with notice of intention to file a claim is a condition precedent to the right to apply for payment from MVAIC pursuant to New York Insurance Law § 5208(a). Compliance with the statutory requirement of timely filing a notice of claim must be established in order to demonstrate that the claimant is a "covered person" who is entitled to recover no-fault benefits from MVAIC. MVAIC's submissions in support of its motion for summary judgment made a prima facie showing that plaintiff's assignor failed to timely file a notice of claim. By defaulting on the motion, plaintiff did not demonstrate that its assignor timely filed a notice of claim or sought leave to file a late notice of claim. Thus, MVAIC's motion for summary judgment should have been granted.


NO-FAULT – NOTICE TO ADMIT – PRIMA FACIE CASE SHOWING
All Mental Care Medicine, P.C. a/a/o Augustin Martes v. State Farm Mut. Ins. Co.
(App. Term, 2nd Dept., decided 1/9/2009)

Vista Surgical Supplies, Inc. a/a/o Tyrone Pearson v. State Farm Mut. Ins. Co.
(App. Term, 2nd Dept., decided 1/9/2009)

Judgments for State Farm dismissing the complaints AFFIRMED. An admission that defendant received plaintiff's claim form is not a concession of the facts set forth in said claim form (Bajaj v General Assur. Co., 18 Misc 3d 25, 28 [App Term, 2d & 11th Jud Dists 2007]; Midborough Acupuncture, P.C. v New York Cent. Mut. Fire Ins. Co., 13 Misc 3d 132[A], 2006 NY Slip Op 51879[U] [App Term, 2d & 11th Jud Dists 2006]). By only submitting the notices to admit and producing no witnesses at trial, plaintiffs failed to make a prima facie case for recovery of no-fault benefits.


NO-FAULT – MOTION TO AMEND ANSWER TO ADD AFFIRMATIVE DEFENSES – RES JUDICATA – COLLATERAL ESTOPPEL BASED ON PRIOR ARBITRATION DECISION – FRAUDULENTLY INCORPORATED PC
Uptodate Med. Serv., P.C. a/a/o Jean Alberic v. State Farm Mut. Auto. Ins. Co.
(App. Term, 2nd Dept., decided 1/9/2009)

Appeal from a Queens Civil judgment for plaintiff on its motion for summary judgment.

REVERSED, granting State Farm's motion to amend its answer and, upon such amendment, summary judgment dismissing the complaint. The Civil Court improperly denied State Farm's motion to amend its answer to add the affirmative defenses of res judicata and collateral estoppel. Generally, leave to amend a pleading pursuant to CPLR 3025 (b) should be granted where there is no significant prejudice or surprise to the opposing party and where the proof submitted in support of the motion indicates that the amendment may have merit. State Farm sought to add those affirmative defenses because there was a prior arbitration proceeding between the parties in which plaintiff had sought to recover assigned first-party no-fault benefits for services rendered from August 2003 through January 14, 2004, in which proceeding the arbitrator had determined that plaintiff was ineligible to receive reimbursement of no-fault benefits because it was a fraudulently incorporated professional service corporation. Plaintiff did not demonstrate prejudice or surprise from the proposed amendment.

State Farm established that the issue of whether plaintiff was ineligible to receive reimbursement of no-fault benefits because it was a fraudulently incorporated professional service corporation was identical to the issue previously decided by the arbitrator. In opposition to State Farm's cross motion, plaintiff failed to address the branch of the cross motion which sought summary judgment dismissing the complaint on the ground of collateral estoppel. Therefore, plaintiff failed to establish that it did not receive a full and fair opportunity to litigate in the arbitration proceeding. Thus, the branch of defendant's cross motion seeking summary judgment should have been granted.


NO-FAULT – ADMISSIBILITY OF BUSINESS RECORDS
V.S. Med. Servs., P.C. a/a/o Mohamad Nazir v. Travelers Ins. Co.
(App. Term, 2nd Dept., decided 1/9/2009)

Appeal from a Queens Civil judgment after non jury trial for Travelers dismissing plaintiff's complaint.

AFFIRMED. While plaintiff produced a witness to testify regarding the claim forms plaintiff sought to have admitted into evidence, because said witness did not testify at all as to the generation of such claim forms, they were not admissible as business records (see CPLR 4518). Accordingly, plaintiff failed to establish a prima facie case (see Bajaj v General Assur., 18 Misc 3d 25 [App Term, 2d & 11th Jud Dists 2007]).

You Won, So Why Are You Here?

NO-FAULT – NOTICE TO ADMIT – ADMISSIBILITY OF CLAIM FORM AS BUSINESS RECORD
Peter Connely D.C. a/a/o Mohammad Kifayeh v. Progressive Cas. Ins. Co.
(App. Term, 2nd Dept., decided 12/31/2008)

Progressive moved for a protective order striking plaintiff medical provider's notice to admit.  Kings County NYC Civil denied the motion, but "set forth set forth its opinion as to the use of a notice to admit in a no-fault action (see generally Bajaj v General Assur., 18 Misc 3d 25 [App Term, 2d & 11th Jud Dists 2007] ['to the extent that defendant may have admitted, pursuant to CPLR 3123, the genuineness of the claim denial form, it did not thereby concede the admissibility of the provider's claim form as a business record . . .  Similarly, even had defendant admitted, pursuant to CPLR 3123, the genuineness of the provider's claim form which it received . . . [t]he admission would serve only to acknowledge that this was the claim form that it received'])."

Plaintiff liked the outcome but not the part about the limited use of notices to admit, and appealed.  In DISMISSING the appeal, the Appellate Term, Second Department, stated:

Here, defendant sought a protective order and the court denied its motion, affording plaintiff the full relief sought in opposition (see Atlantic Hudson Realty v Rhodes, 271 AD2d 558 [2000]). "[W]here the successful party has obtained the full relief sought, he has no grounds for appeal or cross appeal. This is so even where that party disagrees with the particular findings, rationale or the opinion supporting the judgment or order below in his favor, or where he failed to prevail on all the issues that had been raised" (Parochial Bus Sys. v Board of Educ. of City of N.Y., 60 NY2d 539, 545 [1983] [internal citations omitted]).

This, of course, is what's known as the sore winner rule of appellate practice.

This Is the Way We Lick the Stamp, Lick the Stamp, Lick the Stamp...

NO-FAULT – ADMISSIBILITY OF BUSINESS RECORDS – LACK OF PERSONAL KNOWLEDGE OF OFFICE PRACTICES & PROCEDURES – PROOF OF MAILING – ATTORNEYS' FEES
Horton Med., P.C. a/a/o Steve Williams v. New York Cent. Mut. Fire Ins. Co.
(App. Term, 2nd Dept., decided 7/30/2008)

In REVERSING the Queens County Civil Court's award of summary judgment to the plaintiff, the Appellate Term, Second Department, majority (Patterson and Rios) held that plaintiff's motion for summary judgment should have been denied because the affirmation submitted by plaintiff's billing manager was insufficient to establish that she possessed personal knowledge of plaintiff's office practices and procedures so as to lay a foundation for the admission, as business records, of the documents annexed to plaintiff's moving papers.

The majority sustained the denial of New York Central's summary judgment cross motion, however, based on its finding that the affidavit executed by defendant's no-fault litigation examiner failed to establish that New York Central timely mailed its verification requests based upon its standard office practice or procedure designed to ensure that items are properly addressed and mailed.

With respect to the issue of attorneys' fees, the majority noted:

Since the issue is not raised, we do not pass on whether the eighth cause of action, seeking attorney's fees, constitutes a separate cause of action for pleading purposes under the No-Fault Law or whether it is merely an element of the damages recoverable on the substantive causes of action (see generally Rocanova v Equitable Life Assur. Socy. of U.S., 83 NY2d 603, 616 [1994]). We note, however, that even were we to find that it is not a separate cause of action for pleading purposes, we would, upon dismissing said "cause of action," deem the complaint amended to demand attorney's fees as part of the damages sought in each of the remaining causes of action (see Bunker v Bunker, 73 AD2d 530 [1979]).

Justice Golia authored a strong dissent to the majority's disapproval of the affidavit of New York Central's mailing procedures:

My disagreement with my colleagues turns, in large part, on the issue of what constitutes sufficient proof of mailing. I find that the affidavit of Ms. Annie Jordan, defendant's no-fault litigation examiner, is more than sufficient to establish that the verification requests were mailed and that the follow-up requests were timely and properly sent in accordance with the protocols set forth in the regulations. Unlike the facts in Hospital for Joint Diseases v Nationwide Mut. Ins. Co. (284 AD2d 374, 375 [2002]), in which the court found that the "employee had no personal knowledge that the . . . form had been mailed . . .," in this case, Ms. Jordan specifically states that "I have personal knowledge that in compliance with that policy and business duty . . . the verification letters were dated and generated, copies of the verification letters were mailed to Horton Medical P.C., 40 Horton Ave., Lynbrook, N.Y. . . . ."

She further stated in her affidavit that:

"It is [defendant's] office practice and [defendant's] claims examiners are under a business duty to mail all verification letters to the address applicant lists on the bills on the same day the verification letters are dated and generated. I have personal knowledge that in compliance with that policy and business duty, on 08/24/05, 09/08/05, 09/14/05, 09/28/05, 09/29/05, 10/11/05. 10/14/05, 11/03/05, 11/16/05, 12/19/05, the dates the verification letters were mailed to [plaintiff at] the address listed on the bills. Copies were also mailed to Plaintiff's assignor. I have personal knowledge that the postal service did not return the verification letters as being undeliverable."

As stated by the Court of Appeals in Nassau Ins. Co. v Murray (46 NY2d 828, 830 [1978]), the real question is whether or not the party has established the following:

"office practice must be geared so as to ensure the likelihood that a notice . . . is always properly addressed and mailed."

To the best of my understanding, the only reason that I can intuit as to why the majority finds this affidavit of mailing procedures to be insufficient is that it does not deconstruct the process itself. That is, it does not state that the office procedure entails affixing the proper postage, placing the envelopes in the care and custody of the U.S. Postal Service, etc.

I do not believe that such a strict catechism is necessary in order to trigger the legal presumption of mailing. Indeed, the plain meaning of the word "mailing" in and of itself denotes a process and not a concept. It is applicable only to the U.S. Postal Service. Black's Law Dictionary (8th ed 2004) defines "mail" as a noun meaning:

"one or more items that have been properly addressed, stamped with postage, and deposited for delivery in the postal system."

"Mail" is also defined as a verb to mean:

"to ensure that a letter, package, etc. is properly addressed, stamped, and placed into a receptacle for mail pickup."

It should not be the province of this Court to require that a party to an action recite all the component parts encompassed by the act of this unique word "mailing" in much the same way that "plebes" at a military academy are required to recite all the component elements of the act of "walking" before taking a walk. For the military to require such strict adherence can make sense. For the courts to do so is unreasonable.

Atten-hut! I can see it now. No-fault insurers forming precision mailing drill teams and competing in statewide competitions, perhaps as entertainment for the state legislators during one of their emergency summer budget sessions. Now that would be demonstrative evidence.

(Billing Manager or Corporate Officer) - (Personal Knowledge) = 0(Summary Judgment)

NO-FAULT – ADMISSIBILITY OF BUSINESS RECORDS – LACK OF PERSONAL KNOWELDGE OF OFFICE PRACTICES & PROCEDURES – NECESSITY OF MEDICAL SUPPLIES

In Vista Surgical Supplies, Inc. a/a/o Anna Vastardis v. American Protection Ins. Co. (App. Term, 2nd Dept., decided 6/12/2008), Infinity Health Prods. a/a/o Cecelia Morgan v. Amex Assur. Co. (App. Term, 2nd Dept., decided 6/12/2008) and Alur Med. Supply, Inc. a/a/o Douglas Gomez v. Country-Wide Ins. Co. (App. Term, 2nd Dept., decided 6/12/2008) , the Appellate Term AFFIRMED the denial and REVERSED the granting of summary judgment to plaintiff medical providers because:

The affidavit submitted by plaintiff's "billing manager and corporate officer" was insufficient to establish that said person possessed personal knowledge of plaintiff's practices and procedures so as to lay a foundation for the admission, as business records, of the documents annexed to plaintiff's moving papers. Accordingly, plaintiff failed to make a prima facie showing of its entitlement to summary judgment (see Bath Med. Supply, Inc. v Deerbrook Ins. Co., 14 Misc 3d 135[A], 2007 NY Slip Op 50179[U] [App Term, 2d & 11th Jud Dists 2007]; Dan Med., P.C. v New York Cent. Mut. Fire Ins. Co., 14 Misc 3d 44 [App Term, 2d & 11th Jud Dists 2006]). Consequently, the judgment is reversed, the order granting plaintiff's motion for summary judgment is vacated and plaintiff's motion for summary judgment is denied. Infinity Health Prods a/a/o Morgan v. Amex Assur. Co.

In Alur Medical Supply, Inc. a/a/o Douglas Gomez v. Country-Wide Ins. Co., the Appellate Term AFFIRMED the denial of Country-Wide's cross motion for summary judgment because the affirmed IME report submitted in support of that cross motion "did not address the necessity for medical supplies and, therefore, did not establish prima facie that the supplies provided by plaintiff were not medically necessary."

In Vista Surgical Supplies, Inc. a/a/o Anna Vastardis v. American Protection Ins. Co., the Appellate Term AFFIRMED the granting of American's cross motion for summary judgment because the affirmed IME report submitted in support of that cross motion "established prima facie that the supplies furnished by plaintiff were not medically necessary and plaintiff did not present any evidence refuting defendant's prima facie showing[.]"

Admissibility of Claim Form Not Established by Attorney Affirmation

NO-FAULT – ADMISSIBILITY OF BUSINESS RECORDS
Struhl a/a/o John Capehart v. Alea N. Am. Ins. Co.
(App. Term, 2nd Dept., decided 5/27/2008)

Kings Civil's grant of summary judgment to plaintiff medical provider REVERSED.

"The affirmation of plaintiff's counsel did not lay a sufficient foundation to establish that what counsel represented to be plaintiff's claim form was admissible under the business records exception to the hearsay rule (see CPLR 4518; Midborough Acupuncture, P.C. v New York Cent. Mut. Fire Ins. Co., 13 Misc 3d 132[A], 2006 NY Slip Op 51879[U] [App Term, 2d & 11th Jud Dists 2006])."

Business Records Inadmissible Without Basis for Alleged Personal Knowledge Set Forth

NO-FAULT – ADMISSIBILITY OF BUSINESS RECORDS
First Aid Occupational Therapy, PLLC a/a/o Israel Alvarvenga & Travis Fox-Ross v. State Farm Fire & Cas. Co.
(App. Term, 2nd Dept., decided 5/272008)

Kings Civil's grant of summary judgment to plaintiff medical provider REVERSED.

The Appellate Term agreed with State Farm on appeal that the affidavit by plaintiff's employee submitted in support of its motion failed to lay a proper foundation for the documents annexed to plaintiff's moving papers and, as a result, plaintiff failed to establish a prima facie case. "The affidavit submitted by plaintiff's employee failed to set forth a basis to support her conclusory assertion that she possessed personal knowledge of plaintiff's practices and procedures so as to lay a foundation for the admission, as business records, of the documents annexed to plaintiff's moving papers."

Provider Fails to Make Prima Facie Showing for Summary Judgment

NO-FAULT – MEDICAL NECESSITY – PRIMA FACIE SHOWING – ADMISSIBILITY OF CLAIM FORMS – SO-ORDERED STIPULATION
Rockaway Med. & Diagnostic, P.C. a/a/o Kareem Bruce v. Utica Mut. Ins. Co.
(App. Term, 2nd Dept., decided 4/30/2008)

Plaintiff medical provider moved for summary judgment on its $1,758.40 in billings, submitting in support of its motion an affirmation from plaintiff's counsel, an affidavit from plaintiff's office services supervisor, and an unaffirmed, undated letter of medical necessity. Defendant Utica Mutual opposed plaintiff's motion based on the asserted inadmissibility of the documents annexed to plaintiff's motion papers and cross-moved for summary judgment based on the plaintiff's assignor's failure to appear for an EUO and plaintiff's asserted breach of a "so-ordered" discovery stipulation (one prepared by counsel and submitted to the judge for a "so ordered" signature).

In REVERSING the lower court's award of summary judgment to the plaintiff, the Appellate Term agreed with Utica Mutual that plaintiff had failed to establish the admissibility of the claim forms annexed to its motion papers:

The affidavit submitted by plaintiff's office services supervisor was insufficient to establish that he possessed personal knowledge of plaintiff's practices and procedures so as to lay a foundation for the admission, as business records, of the documents annexed to plaintiff's moving papers. In any event, plaintiff failed to annex to its motion for summary judgment the claim forms upon which it sought to recover. Accordingly, plaintiff failed to make a prima facie showing of its entitlement to summary judgment.

With respect to Utica Mutual's cross motion, however, the Appellate Term sustained the lower court's denial of that cross motion, holding that Utica Mutual had failed to demonstrate that plaintiff's causes of action were premature (Editor's Note: Utica Mutual apparently must also have asserted an incomplete verification defense). The court also pointed out that plaintiff did not breach the so-ordered discovery stipulation because discovery was stayed during the pendency of plaintiff's summary judgment motion, in accordance with CPLR § 3214(b) and the so-ordered stipulation made no provision for extensions being prohibited without leave of court (Practice Pointer: consider including such a provision in so-ordered discovery stipulations).

The decision says nothing either way about Utica Mutual's defense based on the assignor's failure to appear for an EUO. Don't know what became of that defense or why Utica Mutual apparently argued incomplete verification rather than breach of the EUO condition in support of its cross motion and/or on appeal.

Hearsay, Hearsay -- Medical Billing Company's Claim Forms Ruled Inadmissible

NO-FAULT – BUSINESS RECORD EXCEPTION TO HEARSAY RULE – MEDICAL BILLING COMPANY CLAIM FORMS
Second Med., P.C. a/a/o Marvin Calender v. AutoOne Ins. Co.
(NYC Civil, Kings Co., decided 5/2/2008)

Once a week, someone from Second Medical, PC, would deliver a bunch of patient files to Inga Lev at Maugust, Inc. Maugust served as Second Medical's billing company. Each file contained one or more medical reports, which described the nature of the services that Second Medical purportedly provided to a particular patient, as well as an executed AOB form and information identifying the patient's no-fault insurer. Either Ms. Lev or one of her co-workers would prepare no-fault claim forms based upon the information contained on the documents contained in patient files and mail the claim forms, along with an executed assignment, to the insurers responsible for payment of the no-fault benefits.

At the trial of this action, Ms. Lev testified to the above procedure, that the claim form her company had prepared was mailed to AutoOne, and that payment was not made within 30 days. Ms. Lev gave no testimony, however, concerning the practices and procedures that plaintiff Second Medical had utilized in creating the documents contained in the patient files.

Although AutoOne's NF-10, which acknowledged receipt of the Maugust-generated claim form, was offered and received into evidence, AutoOne objected to the admission of the claim form, arguing that Ms. Lev had failed to lay a proper foundation for its admission as a business record pursuant to CPLR § 4518(a). Relying "primarily" on the Appellate Term, Second Department's September 2006 decision in Pine Hollow Medical, P.C. a/a/o Karen Allen v. Progressive Cas. Ins. Co., another case involving a no-fault medical billing company, plaintiff's counsel argued that since Ms. Lev established plaintiff had a business duty to Maugust to deliver the patient files, and that Maugust routinely relied on the medical reports and other documents contained in the files and fully incorporated them into no-fault claim forms which it created in the regular course of its business, a proper foundation for the admission of the claim form as a business record had been laid.

In sustaining AutoOne's objection and dismissing plaintiff's complaint, Judge Peter Paul Sweeney reviewed the business record hearsay exception rule of CPLR § 4518(a):

Here, Ms. Lev did not demonstrate any familiarity with plaintiff's [Second Medical's] business practices and procedures. Accordingly, she did not establish that the documents contained in Mr. Calender's patient file were business records within the meaning of CPLR 4518[a]. Further, she did not establish the admissibility of the file documents under any other hearsay exception. Since all the documents contained in Mr. Calender's patient file constituted inadmissible hearsay, it necessarily follows that the no-fault claim form, which incorporated these records, is also hearsay.

Judge Sweeney also distinguished the Pine Hollow Medical case by stating:

Plaintiff's reliance on Pine Hollow Medical, P.C. is misplaced. In Pine Hollow Medical, P.C., the court stated that "it is well-settled that where an entity routinely relies upon the business records of another entity in the performance of its own business' . . . , and fully incorporate[s]' said information into records made in the regular course of its business. . . , the subsequent record is admissible notwithstanding that the preparer lacked personal knowledge of the information's accuracy,'" (13 Misc 3d 131(A), 2006 NY Slip Op. 51870 (U) [citations omitted & emphasis added] ). While this is a true statement of law, it was never demonstrated in this case that the documents contained in the patient files which Ms. Lev and her co-workers routinely relied upon and fully incorporated into the no-fault claim forms qualified as business records within the meaning of CPLR 4518[a]. The root of plaintiff's argument appears to be that the term "business records" as used in Pine Hollow Medical, P.C. means any records, including records that may constitute hearsay. The premise of plaintiff's argument is without logic or support and is belied by the cases cited in Pine Hollow Medical, P.C.

The court went on to discuss and distiguish the non-no-fault cases cited and relied upon by the Appellate Term in Pine Hollow Medical, ultimately concluding that "since the documents contained in Mr. Calender's patient file constituted hearsay, the no-fault claim form which was based on the information contained in these documents is also hearsay. Hearsay cannot be transformed into non-hearsay simply because a business routinely relies upon it and integrates it into its own records." As plaintiff submitted no other evidence in admissible form establishing the facts asserted in the Maugust claim form, the court held that it had not made out a prima facie case.

No-fault medical provider suits continue to be won or lost on procedural issues and defenses wholly unrelated to substantive coverage defenses. Expect more litigation on this issue, as both providers and insurers will likely assert this holding in support of objections to the proferred admission of any business records that themselves rely on information from other business records.

Post Script - The question of whether the business record exception to the hearsay rule applies to insurance claim documents has come up before in a non-no-fault context. In Hochhauser v. Electric Ins. Co. (2nd Dept., decided 10/23/2007), the Second Department ruled that since an insured lacks a business duty, as opposed to a contractual duty, to report to his or her insurer in the course of its investigation regarding insurance coverage, neither the insured’s statement nor testimony regarding such a statement is admissible pursuant to the business records exception to the hearsay rule.

Survey of Recent Appellate Term, 2nd Department No-Fault Decisions

NO-FAULT – MEDICAL PROVIDER SUIT – 3-YEAR SOL UNDER CPLR § 214(2)
Boulevard Multispec Med., P.C. v MVAIC
(App. Term, 2nd Dept., decided 4/14/2008)

In Boulevard Multispec Med., P.C. v. MVAIC, the court granted MVAIC's motion for summary judgment, dismissing the provider's suit, based on its finding that the provider had not commenced suit within 3 years of when payment of the bills in question became due. The 3-year SOL of CPLR § 214(2) applied because the provder's action against MVAIC was one "to recover upon a liability, penalty or forfeiture created or imposed by statute" and not based on contract. The court rejected the provider's argument that MVAIC should be equitably estopped from asserting the SOL defense because it had previously taken the position that its verification requests were not untimely. The submission of an untimely verification request did not toll the payment due date and, therefore, the accrual date of the provider's statutory claim against MVAIC. "We disagree with plaintiff's position that its gratuitous compliance with a verification request issued beyond the payment due date, or its apparent willingness now to unilaterally waive the time limit for the sending of a verification request, can render a belated verification request timely and, ultimately, postpone the accrual date of its cause of action. Neither the relevant statute nor the applicable regulations provide for such a waiver." See, also, Kings Highway Diagnostic Imaging, P.C. v. MVAIC (App. Term, 2nd Dept., decided 4/14/2008).

NO-FAULT – MEDICAL PROVIDER SUIT – INDEPENDENT CONTRACTOR – DEFENSE NOT PRECLUDED
Health & Endurance Med., P.C. v. Liberty Mut. Ins. Co.
(App. Term, 2nd Dept., decided 4/14/2008)

In Health & Endurance Med., P.C. v. Liberty Mut. Ins. Co., the court AFFIRMED the lower court's denial of plaintiff's motion and granting of defendant's cross motion for summary judgment. Where a billing provider seeks to recover no-fault benefits for services which were not rendered by it or its employees, but rather by a treating provider who is an independent contractor, it is not a "provider" of the medical services rendered within the meaning of Insurance Department Regulations (11 NYCRR) § 65-3.11 (a) and is therefore not entitled to recover "direct payment" of assigned no-fault benefits from the defendant insurer.

In this case, the claim forms submitted by plaintiff in support of its motion for summary judgment stated that the treating professional was an independent contractor and, in opposition to defendant's cross motion, plaintiff conceded that the services were rendered by an independent contractor. Contrary to plaintiff's contention, that defense is nonwaivable and not subject to the preclusion rule. As a result, the court properly denied plaintiff's motion for summary judgment and granted defendant's cross motion for summary judgment dismissing the complaint.

NO-FAULT – MEDICAL PROVIDER SUIT – BUSINESS RECORDS – DOCUMENT RETENTION POLICY
First Aid Occupational Therapy, PLLC v. New York Cent. Mut. Fire Ins. Co.
(App. Term, 2nd Dept., decided 4/8/2008)

In First Aid Occupational Therapy, PLLC v. New York Cent. Mut. Fire Ins. Co., the court REVERSED the lower court's granting of plaintiff's motion for summary judgment, agreeing with defendant insurer that plaintiff provider had not made a prima facie showing because plaintiff failed to establish the admissibility of the claim forms annexed to its moving papers. " Inasmuch as the affirmation submitted by plaintiff's billing manager was insufficient to establish that she possessed personal knowledge of plaintiff's office practices and procedures so as to lay a foundation for the admission, as business records, of the documents annexed to plaintiff's moving papers, plaintiff failed to make a prima facie showing of its entitlement to summary judgment. The fact that copies of documents were stored in compliance with a document retention policy is not sufficient to establish that the documents were business records in the absence of a showing as to how and when the documents were generated (see CPLR 4518). "

NO-FAULT – MEDICAL PROVIDER SUIT – PRIOR INJUNCTION
A.T. Med., P.C. v. State Farm Ins. Co.
(App. Term, 2nd Dept., decided 4/24/2008)

In A.T. Med., P.C. v. State Farm Ins. Co., the court REVERSED and vacated the lower court's order granting plaintiff's motion for summary judgment. State Farm demonstrated on appeal that in a separate action brought by State Farm against various health care providers including the plaintiff, Nassau County Supreme Court had enjoined the providers from commencing suit against State Farm to recover no-fault benefits during the pendency of that action. State Farm successfully argued that plaintiff's summary judgment motion in this action, therefore, was improperly made, the Appellate Term agreeing that the injunction barred the motion.

NO-FAULT – MEDICAL PROVIDER SUIT – ILLEGIBLE PEER REVIEW REPORTS
Boris Kleyman, P.C. v. Kemper Ins. Co.
(App. Term, 2nd Dept., decided 4/24/2008)

In Boris Kleyman, P.C. v. Kemper Ins. Co., the court REVERSED the lower court's order denying plaintiff provider's motion for summary judgment. The peer review reports submitted by Kemper in support of its defense that the services rendered were not medically necessary were illegible. Thus, the Appellate Term held that Kemper failed to demonstrate the existence of a triable issue of fact as to medical necessity.