Recent Appellate Term, Second Department, New York No-Fault Decisions

These eleven Appellate Term, Second Department, New York no-fault decisions were decided on March 10 and posted on March 18, 2010.  Click the case name links to read the full decisions. 

NO-FAULT – CHOICE OF LAW – NEW JERSEY VEHICLE, INSUREDS AND POLICIES
A.B. Med. Servs., PLLC a/a/o Leon Regis v. GEICO Cas. Ins. Co.
(App. Term, 2nd Dept., 9th & 10th Dists., decided 3/10/2010)

Upon the application of a "center of gravity" or "grouping of contacts" analysis, New Jersey law was found to apply to a New York motor vehicle accident that involved a New Jersey registered vehicle, a New Jersey insured, and two New Jersey insurance policies.   Summary judgment to GEICO was properly denied. 

NO-FAULT – JOINT TRIAL
Anthony M. Palumbo, D.C. a/a/o Marc Taly v. Tristate Consumer Co.
(App. Term, 2nd Dept., 2nd, 11th & 13th Dists., decided 3/10/2010)

Queens Civil improperly denied defendant's motion for a joint trial of three providers' separate actions for the same services rendered on the same date at the same location.  Tristate intended to defend all three actions on the ground that the services rendered were not medically necessary, and plaintiff failed to establish that a joint trial would prejudice a substantial right.

NO-FAULT – PROOF OF MAILING – UNANSWERED VERIFICATION REQUESTS
St. Vincent Med. Care, P.C. a/a/o Breyton Squires v. Country-Wide Ins. Co.
(App. Term, 2nd Dept., 2nd, 11th & 13th Dists., decided 3/10/2010)

• Plaintiff established its prima facie entitlement to summary judgment because defendant's claims representative conceded receipt of claims in question and the affidavit of plaintiff's billing manager established that the documents annexed to plaintiff's motion were admissible pursuant to CPLR 4518.  
• The affidavit of defendant's no-fault litigation supervisor sufficiently established the timely mailing of the NF-10 denial of claim forms and verification requests since it described, in detail, based on the affiant's personal knowledge, defendant's standard office practices or procedures used to ensure that said documents were properly mailed. 
• Although defendant sent follow-up verification requests on the 30th day after its initial verification requests, rather than waiting the full 30 days before sending its follow-up requests, plaintiff did not respond to those requests, so defendant was entitled to summary judgment on those claims, pursuant to Infinity Health Prods., Ltd. v Eveready Ins. Co. (67 AD3d 862 [2d Dept 2009]).

NO-FAULT – PROOF OF MAILING – MEDICAL NECESSITY
Right Aid Diagnostic Medicine, P.C. a/a/o Tarshia Harrison v. Geico Ins. Co.
(App. Term, 2nd Dept., 2nd, 11th & 13th Dists., decided 3/10/2010)

• Plaintiff established its prima facie entitlement to summary judgment because defendant's claims representative conceded receipt of claims in question and the affidavit of plaintiff's billing manager established that the documents annexed to plaintiff's motion were admissible pursuant to CPLR 4518.  
• In opposition to plaintiff's summary judgment motion, defendant established that it had timely mailed its denial of claim form, which denied plaintiff's $911.99 claim on the ground of lack of medical necessity, by submitting an affidavit of an employee with knowledge of defendant's standard office practices or procedures designed to ensure that items are properly addressed and mailed.
• Defendant also raised triable issues of fact by submitting a copy of the affirmed peer review report setting forth a factual basis and medical rationale for the conclusion that the MRI was not medically necessary and presenting evidence that it had already paid plaintiff's claim.

NO-FAULT – TIMING OF EUO REQUEST
St. Vincent Med. Care, P.C. a/a/o Omar Morgan v. Travelers Ins. Co.
(App. Term, 2nd Dept., 2nd, 11th & 13th Dists., decided 3/10/2010)

Although an examination under oath (EUO) need not be scheduled to be held within 30 days of the receipt of the claim form, the EUO request letter must be mailed within 30 days of the insurer's receipt of the bills in question.  The mailing of Travelers' EUO scheduling letters 52 days after its receipt of three bills from plaintiff was untimely and did not toll Travelers' time to pay or deny those bills, regardless of plaintiff's nonappearance at the requested EUO.

NO-FAULT – MEDICAL NECESSITY OF MEDICAL SUPPLIES  – AFFIRMED PEER REVIEW REPORT
High Quality Med., P.C. a/a/o Robel Thomay v. Mercury Ins. Co.
(App. Term, 2nd Dept., 2nd, 11th & 13th Dists., decided 3/10/2010)

Queens Civil (Lebedeff) improperly denied Mercury's cross motion for summary judgment.  The affirmation of plaintiff's doctor did not meaningfully refer to, let alone rebut, the conclusions set forth in the affirmed peer review report Mercury submitted in support of its cross motion, which set forth a factual basis and medical rationale for the conclusion that there was a lack of medical necessity for the medical supplies at issue.  

NO-FAULT – UNTIMELY PROOF OF CLAIM – 11 NYCRR § 65-3.3(e) NOTICE  – BILL INITIALLY SUBMITTED TO WRONG INSURER
Prestige Med. & Surgical Supply, Inc. a/a/o Michael Martin v. Chubb Indem. Ins. Co.
(App. Term, 2nd Dept., 2nd, 11th & 13th Dists., decided 3/10/2010)

Kings Civil (Sherman) properly granted defendant's motion for summary judgment.  Defendant's denial of claim form adequately advised plaintiff pursuant to 11 NYCRR § 65-3.3 (e) that its late submission of the claim would be excused if plaintiff provided a reasonable justification for its failure to timely submit the claim within 45 days after the date the supplies at issue had been provided to its assignor.  Plaintiff failed to proffer any explanation as to why it first submitted the claim to another insurance carrier.

NO-FAULT – VACATING DEFAULT JUDGMENT – CPLR 317
Nursing Personnel Homecare a/a/o Evelyn White v. New York Cent. Mut. Fire Ins. Co.
(App. Term, 2nd Dept., 2nd, 11th & 13th Dists., decided 3/10/2010)

Kings Civil (Garson) improvidently exercised its discretion in denying defendant's motion to vacate the default judgment.  Pursuant to CPLR 317, NYCM met its burden of showing that it did not receive actual notice of the summons in time to defend the action.  NYCM submitted an affidavit from one of its no-fault litigation examiners, who had personal knowledge regarding defendant's practices and procedures in retrieving, opening and filing its mail and in maintaining its files on existing claims. In that affidavit, the no-fault litigation examiner stated that defendant had never received the summons, the complaint or the motion for a default judgment.  NYCM also submitted an affidavit from its litigation examiner in which he stated that the assignor had cancelled her insurance policy with defendant prior to the date of the accident and had not subsequently taken out another insurance policy with NYCM.  

NO-FAULT – MEDICAL NECESSITY OF CHIROPRACTIC TREATMENT – QUESTION OF FACT
Co-Op City Chiropractic, P.C. a/a/o Gloria Fagan v. Mercury Ins. Group
(App. Term, 2nd Dept., 2nd, 11th & 13th Dists., decided 3/10/2010)

Queens Civil properly denied defendant's motion for summary judgment.  Although the affidavit and peer review report of defendant's chiropractor set forth a factual basis and medical rationale for the chiropractor's conclusion that there was a lack of medical necessity for the services rendered, the affidavit of plaintiff's treating chiropractor, submitted in opposition to defendant's motion for summary judgment, was sufficient to demonstrate the existence of a triable issue of fact as to the medical necessity of the services rendered.

NO-FAULT – MEDICAL NECESSITY OF MEDICAL SUPPLIES – UNREBUTTED SWORN PEER REVIEW REPORTS
Favorite Health Prods., Inc. a/a/o Jeoniel Michel v. Geico Ins. Co.
(App. Term, 2nd Dept., 2nd, 11th & 13th Dists., decided 3/10/2010)

Queens Civil (Lebedeff) improperly denied defendant's cross motion for summary judgment.  Defendant submitted, among other things, two sworn peer review reports, which set forth a factual basis and medical rationale for the conclusion that there was a lack of medical necessity for the medical supplies at issue.  Defendant's showing that the supplies were not medically necessary was unrebutted by plaintiff.

NO-FAULT – MEDICAL NECESSITY – UNREBUTTED IME REPORT
Advanced Med., P.C. a/a/o Joyce Asiedu v. GEICO Ins. Co.
(App. Term, 2nd Dept., 2nd, 11th & 13th Dists., decided 3/10/2010)

Queens Civil (Lebedeff) improperly denied defendant's cross motion for summary judgment.  Defendant sufficiently established that the denial of claim forms were timely mailed in accordance with defendant's standard office practice or procedure, and submitted an affirmation by the doctor who performed the independent medical examination as well as a copy of the independent medical examination report, establishing, prima facie, that with respect to the services at issue in plaintiff's third and fifth causes of action, there was no medical necessity.  Plaintiff did not rebut that evidence.

Paper or Digital? -- Remote Claims Handler's Lack of Knowledge of Home Office's Procedures Found Inadequate to Vacate Default Judgment for Extracontractual Damages

NO-FAULT – VACATING DEFAULT JUDGMENT – PERSONAL KNOWLEDGE OF OFFICE PROCEDURES
Westchester Med. Ctr. v. Philadelphia Indem. Ins. Co.
(2nd Dept., decided 1/5/2010)

There's nothing particularly surprising about this plaintiff and its counsel taking a default judgment on the earliest possible day against a no-fault insurer defendant.  What is surprising is how this insurer attempted to prove an excusable default and meritorious defense to vacate what was, and still is, an extracontractual award. 

Vacating a default judgment requires proof of (1) a reasonable excuse for the default and (2) a meritorious defense to plaintiff's claim.  In REVERSING Nassau Supreme's order that vacated the plaintiff's $19,325.61-plus default judgment against Philadelphia Indemnity Insurance Company (PIIC), the Second Department found that PICC had failed to demonstrate either.

In an attempt to demonstrate an excusable default, PIIC submitted an affidavit of a senior claims examiner employed in PIIC's Texas office, who averred that there was no record of the plaintiff's summons and complaint in PIIC's computer system.  The Second Department found that affidavit to be inadequate since it:

failed to demonstrate any knowledge of the office procedures employed in the handling of a summons and complaint received at the defendant's Pennsylvania office. Thus, that affidavit was insufficient to show that the failure to timely appear and answer was due to a clerical error which caused the summons and complaint to be overlooked (see Montefiore Med. Ctr. v Auto One Ins. Co., 57 AD3d at 959; New York & Presbyt. Hosp. v Allstate Ins. Co., 29 AD3d 968; Kaperonis v Aetna Cas. & Sur. Co., 254 AD2d 334; cf. Hospital for Joint Diseases v Lincoln Gen. Ins. Co., 55 AD3d 543, 544).

For the same reason, the Second Department held that the Texas senior claims examiner's affidavit was legally insufficient to demonstrate a meritorious defense to payment of plaintiff's $19,325.61 hospital bill:

Furthermore, the defendant failed to set forth facts from an individual with personal knowledge sufficient to demonstrate the existence of a meritorious defense. The affidavit of the plaintiff's biller showed that the Forms N-F5 and UB-92 relating to this matter were mailed on April 23, 2008, and signed for by the defendant on April 28, 2008. At that time, according to the defendant's own records, there were still sufficient funds remaining under the policy to pay this bill (see 11 NYCRR 65-3.15; Nyack Hosp. v General Motors Acceptance Corp., 8 NY3d 294). In response, the defendant offered only the same aforementioned affidavit, which also averred that there was no record of the bill in question in the defendant's computer system. This was insufficient for a similar reason; that is, the affiant failed to show any knowledge of the office procedures employed in the handling of billing forms received at the defendant's Pennsylvania office (see St. Barnabas Hosp. v American Tr. Ins. Co., 57 AD3d 517; New York & Presbyt. Hosp. v Allstate Ins. Co., 29 AD3d at 968; see generally New York Hosp. Med. Ctr. of Queens v Insurance Co. of State of Pa., 16 AD3d 391, 392; Peacock v Kalikow, 239 AD2d 188, 190; cf. St. Vincent's Hosp. of Richmond v Government Empls. Ins. Co., 50 AD3d 1123). Accordingly, the defendant's motion to vacate the judgment entered upon its failure to appear or answer should have been denied.

It gets worse.  Not only is PIIC now facing what sounds like an extracontractual award -- the decision implying that PIIC had paid its policy limit sometime after plaintiff submitted its bill -- but the Second Department remitted the action back to Nassau County Supreme Court for a determination of plaintiff's motion to hold PIIC in contempt, which could bring an additional monetary sanction. 

When seeking to vacate a default judgment, go with the paper and establish, through the affidavit of someone with personal knowledge of that paper and its handling procedures, both the reasonable excuse for the default and meritorious defense to plaintiff's claim. Don't rely on what's in, or not in, the computer.  Real world defaults require real world proof for vacatur. 

SUM Arbitration Award Confirmed -- Inconsistency of Prior No-Fault Arbitration Award Not Given Preclusive Effect

SUM – NO-FAULT – COLLATERAL ESTOPPEL – VACATING ARBITRATION AWARD
Matter of Falzone v. New York Cent. Mut. Fire Ins. Co.
(4th Dept., decided 7/2/2009)

Falzone arbitrated New York Central Mutual's denial of no-fault benefits and won.  She then arbitrated her related SUM claim against NYCM before a different arbitrator and lost on the ground that her injuries were not caused by the accident.  Contending that the second arbitration decision was inconsistent from the first, and that NYCM was collaterally estopped in the SUM arbitration from relitigating the issue of causation with respect to her injuries, Falzone commenced this CPLR article 75 special proceeding to vacate or modify the SUM arbitration award.  Supreme Erie granted petitioner's motion to vacate the SUM award and NYCM appealed.

In a 3-2 split decision, the Fourth Department, Appellate Division, REVERSED the order and confirmed the SUM arbitration award, holding:

The fact that a prior arbitration award is inconsistent with a subsequent award is not an enumerated ground in either subdivision (b) or (c) of CPLR 7511 for vacating or modifying the subsequent award (see Matter of City School Dist. of City of Tonawanda v Tonawanda Educ. Assn., 63 NY2d 846, 848). As the court properly recognized, "[i]t was within the [SUM] arbitrator's authority to determine the preclusive effect of the prior arbitration on the instant arbitration" (Matter of Progressive N. Ins. Co. v Sentry Ins. A Mut. Co., 51 AD3d 800, 801). The court erred in noting, however, that it was unable to determine whether the SUM arbitrator even considered claimant's contention with respect to collateral estoppel. Arbitrators are not required to provide reasons for their decisions (see Matter of Solow Bldg. Co. v Morgan Guar. Trust Co. of N.Y., 6 AD3d 356, 356-357, lv denied 3 NY3d 605, cert denied 543 US 1148; Matter of Guetta [Raxon Fabrics Corp.], 123 AD2d 40, 41), and thus the SUM arbitrator was not required to state that he had considered that contention.

Two justices dissented and voted to affirm the award.  While acknowledging that collateral estoppel "is not a basis on which [Supreme C]ourt may, under CPLR 7511, vacate an arbitration award," the dissent nevertheless noted that

vacatur is permitted where the award 'violates a strong public policy, is irrational or clearly exceeds a specifically enumerated limitation on the arbitrator's power' " (Matter of Mays-Carr [State Farm Ins. Co.], 43 AD3d 1439, 1439, quoting Matter of New York City Tr. Auth. v Transport Workers' Union of Am., Local 100, AFL-CIO, 6 NY3d 332, 336; see generally CPLR 7511 [b] [1] [iii]). In our view, the arbitrator who issued the award with respect to supplemental uninsured motorist (SUM) benefits exceeded his power by disregarding the preclusive effect of a prior arbitration award and instead issuing a different determination with respect to causation, involving the same parties and based upon the same facts (see Matter of American Honda Motor Co. v Dennis, 259 AD2d 613; Motor Veh. Acc. Indem. Corp. v Travelers Ins. Co., 246 AD2d 420, 422).

The dissent further observed that in this matter there were no factual issues regarding whether the no-fault arbitration award should be given preclusive effect.  "The SUM arbitrator was thus barred from relitigating the issue of causation between the identical parties, inasmuch as it was 'actually contested and therefore determined by the [prior] award' ", reasoned the dissent. 

Although some practitioners may regard the majority's decision as standing for the proposition that collateral estoppel no longer attaches to no-fault arbitration awards in the Fourth Department, the majority's ruling is much more narrow than that.  The majority reversed the trial judge and confirmed the award not because they believed collateral estoppel could or did not apply to preclude NYCM from relitigating injury causality, but because they (and the dissent) adhered to the rule that collateral estoppel is not a basis on which Supreme Court may, under CPLR 7511, vacate an arbitration award.

Editor's Note ~~ The New York Court of Appeals AFFIRMED this decision on October 21, 2010.  The Court's 6-1 opinion is here.  

Whether Plaintiff's Assignor Was an "Eligible Injured Person" Is a Coverage Defense Not Subject to Preclusion -- Default Judgment Vacated

NO-FAULT – VACATING DEFAULT JUDGMENT – MERITORIOUS DEFENSE – ELIGIBLE INJURED PERSON
Westchester Med. Ctr. a/a/o Jamel Harris v. Allstate Ins. Co.
(Sup.Ct., Nassau Co., decided 3/25/2009)

Allstate moved to vacate a default judgment entered 15 days after its answer in this medical provider no-fault recovery suit was due.  Allstate contended that the summons and complaint had been "misindexed" by an employee who "did not realize the time sensitive nature of the documents".

Plaintiff opposed the motion on the basis that Allstate had established neither a reasonable excuse for its default nor a meritorious defense to the hospital's claim.  According to Allstate, plaintiff's assignor was not an "eligible injured person" entitled to no-fault coverage benefits because he was not driving either of the two covered autos listed on his grandmother's policy and did not reside with her.  Plaintiff counterargued that Allstate was precluded from raising that defense because it had not issued a denial of claim (NF-10).

In granting Allstate's motion and vacating the default, Nassau County Supreme Court Justice Randy Sue Marber ruled:

The Plaintiff's attorney argues that the defense to the action that the Defendant raises is precluded due to Allstate's failure to have issued a Denial of Claim. In response to this argument, the Defendant's attorney asserts that the insurer's failure to timely disclaim coverage does not preclude it from later denying liability on the ground that the insurance agreement itself does not cover the particular automobile or person. In support of this proposition, the Defendant's counsel cites Zappone v. Home Ins. Co., 55 NY2d 131, 138 (1982). Additionally, the Defendant's counsel points out that at no time did the Defendant ever admit that it provided coverage for the subject vehicle. The affirmation submitted by the Defendant's counsel, dated January 26, 2009, in support of the Order to Show Cause specifically states in paragraphs 14 and 15 that the Plaintiff's assignor drove a 2005 Ford and that the policy insured a 1999 Nissan Maxima and a 1997 Acura. The Defendant's counsel argues that the Plaintiff has failed to put forth any evidence to show that the Plaintiff's assignor was an eligible injured person covered under the subject policy. 

This Court, in its discretion, accepts the Defendant's explanation for the delay incurred in answering the Summons and Complaint in this matter as an excusable delay. Additionally, the Defendant has provided a meritorious defense and sufficient evidence that the default was not willful. The delay was short and the Plaintiff will not be prejudiced by allowing the Defendant to interpose an answer. 

Whether someone qualifies as an "eligible injured person" under the prescribed PIP endorsement is a coverage defense not subject to the 30-day pay or deny preclusion rule.

Three Defaults and You're Out

AUTO – SUBROGATION – VACATING DEFAULT JUDGMENTS
State Farm Mut. Auto. Ins. Co. a/s/o Trimble v. Cyriaque
(App. Term, 2nd Dept., decided 2/24/2009)

State Farm commenced this auto property damage subrogation action against the offending vehicles owner and driver. Upon the defendants' default, State Farm discontinued against the driver, and obtained a $8,384.27 judgment against the other vehicle's owner, defendant Gina Cyriaque in May 2004.

In July of 2005, defendant moved to vacate the default judgment and restore the case to the trial calendar. State Farm stipulated to vacate the judgment, and defendant submitted an answer stating that she had insurance at the time of the accident. Ms. Cyriaque failed to appear on the next court date, however, and the original default judgment was reinstated. She again moved to vacate the default judgment, and the parties again stipulated to vacate the judgment. Ms.Cyriaque again failed to appear on the trial date and the default judgment was reinstated for a second time. Defendant again sought vacatur of the reinstated judgment, and over State Farm's opposition this time, Queens Civil vacated the twice reinstated default judgment.

The Appellate Term REVERSED and reinstated the default judgment, holding:

A party seeking to vacate a default judgment must demonstrate a reasonable excuse for the default and a meritorious defense to the action (see CPLR 5015 [a] [1]; see also Eugene Di Lorenzo, Inc. v A.C. Dutton Lbr. Co., 67 NY2d 138, 141 [1986]; Putney v Pearlman, 203 AD2d 333 [1994]). While the determination of what constitutes a reasonable excuse for a default generally lies within the sound discretion of the motion court (see Grutman v Southgate At Bar Harbor Home Owners' Assn., 207 AD2d 526, 527 [1994]; Bergdorf Goodman Inc. v Hillard, 1 Misc 3d 127[A], 2003 NY Slip Op 51544[U] [App Term, 2d & 11th Jud Dists 2003]), reversal is warranted where the motion court has improvidently exercised its discretion (see Roussodimou v Zafiriadis, 238 AD2d 568 [1997]). Furthermore, where the record demonstrates a pattern of default or neglect, the default should be considered intentional and, therefore, not excusable (see Incorporated Vil. of Hempstead v Jablonsky, 283 AD2d 553 [2001]). In the instant case, defendant's consistent and repeated defaults demonstrated a pattern of neglect, and the default should not be excused. We conclude that it was an improvident exercise of discretion for the Civil Court to have granted defendant's motion to vacate the default judgment.

Pattern of neglect. You think? Must be endemic of defendants to auto subrogation claims in Queens Civil. Two defaults in appearance plus three order to show cause applications did not impress the Appellate Term. Vacatur of default judgment reversed. State Farm Ins. Co. a/s/o Taveras v. German, 2009 NYSlipOp 50335(U) (App. Term, 2nd Dept., decided 2/24/2009).

Second Department Affirms Vacatur of Default Judgment Against No-Fault Insurer

NO-FAULT – VACATING DEFAULT JUDGMENT – REASONABLE EXCUSE
Westchester Med. Ctr. a/a/o Diedre Walsh v. Hartford Cas. Ins. Co.
(2nd Dept., decided 1/27/2009)

Under New York CPLR Rule 5015(a)(1), a party seeking to vacate a default judgment taken against it must demonstrate (1) a reasonable excuse for its delay in appearing and answering, and (2) a meritorious defense to the action.

Plaintiff medical provider sued Hartford for unpaid no-fault billing(s).  Hartford did not timely appear and answer, and plaintiff obtained a default judgment in the principal sum of $16,571.91 against it.  Hartford successfully moved to vacate the default judgment, and plaintiff appealed.

In AFFIRMING Nassau Supreme's vacatur of the default judgment, the Second Department held:

Here, the defendants established that their employee reasonably believed that the action had been discontinued after she advised the plaintiff's counsel's office that no-fault benefits had been exhausted, thereby demonstrating a reasonable excuse for the short period of time in which they failed either to appear or to answer the complaint (see New York Univ. Hosp. Tisch Inst. v Merchants Mut. Ins. Co., 15 AD3d 554, 554-555). In addition, the defendants established that the policy limits had been partially exhausted through the payment of claims for prior services (see 11 NYCRR 65-3.15; Nyack Hosp. v General Motors Acceptance Corp., 8 NY3d 294, 301; Montefiore Med. Ctr. v Government Empls. Ins. Co., 34 AD3d 771, 772; New York & Presbyt. Hosp. v Allstate Ins. Co., 28 AD3d 528, 528-529), thereby demonstrating the existence of a potentially meritorious defense to the action. Finally, the plaintiff did not demonstrate prejudice from the defendants' relatively short delay in appearing and answering, and public policy favors the resolution of cases on the merits (see Verde Elec. Corp. v Federal Ins. Co., 50 AD3d at 673).

The motion court's decision is not available online, and this appellate decision does not explain why it was reasonable for Hartford's representative to believe that this action would be discontinued after advising plaintiff's counsel's office that the assignor's no-fault benefits had been exhausted.  And I'm not sure what "partially exhausted" means exactly, or why it represents a potentially meritorious defense to a provider's no-fault claim, but my uncertainty doesn't matter.  Both the motion and appellate court found that Hartford had established a reasonable excuse (we thought the action would be discontinued) and meritorious defense (no-fault limits were partially exhausted), and plaintiff suffered no prejudice from the short delay in appearing and answering.  Vacatur of the default judgment was, therefore, warranted.