NYSSIU Legal Update 2019-2020 Edition

 LEGAL UPDATE

I have been privileged since incorporating the New York State Chapter of Special Investigation Units (NYSSIU) in 1997 to serve as its Counsel.  Many times I have prepared and presented the NYSSIU Legal Update to members and guests at NYSSIU meetings.  Some of those updates even made it to NYSSIU's website.  

On May 6, 2020, my son Ryan Mura prepared and virtually presented the 2019-2020 edition of the NYSSIU Legal Update.  That edition digests eight no-fault, six property and two criminal law case decisions, as well as providing updates on New York legislative and regulatory developments affecting New York property and casualty insurers. 

You can read that Legal Update here.  Case decisions are hyperlinked within.  Questions can/should be directed to Ryan.

Evidence Insufficient to Establish a Founded Belief of a Staged Incident

NO-FAULT – PROOF OF STAGED INCIDENT – PERSONAL INCOME TAX RETURNS
Vista Surgical Supplies, Inc. a/a/o Jesus Rodriguez v. Utica Mut. Ins. Co.
(App. Term, 2nd Dept., decided 3/17/2009)

In AFFIRMING Kings Civil's award of summary judgment to plaintiff for $612.69, the Appellate Term concluded that the affidavit submitted by Utica Mutual's investigator, the testimony given by plaintiff's assignor and the driver during their examinations under oath, and the unsworn statement of the adverse driver submitted by Utica Mutual in opposition to plaintiff's summary judgment motion were insufficient to establish a founded belief that the alleged injuries did not arise out of a covered accident. 

The court also rejected Utica Mutual's argument that the assignor had failed to provide his personal income tax returns to substantiate his lost wages claim and thus failed to comply with a condition precedent to coverage: 

 We need not determine whether plaintiff's assignor failed to comply with a condition precedent since, in light of the "confidential and private nature" of an individual's income tax returns (see Walter Karl, Inc. v Wood, 161 AD2d 704 [1990]), which contain information far broader than that sought by defendant, defendant failed to make a sufficient showing of special circumstances to warrant their production (see Dore v Allstate Indem. Co., 264 AD2d 804 [1999]), especially given the fact that the information sought could have been obtained through other, more focused, means. 

Maybe someone from Utica Mutual can enlighten us on how the assignor's personal income tax returns were relevant to the assignee's claim.  And what were the "other, more focused, means" available to Utica Mutual to obtain the income tax information?  

Court Weighs Impact of Fair Price Medical Decision on No-Fault Fraud-Related Defenses

NO-FAULT – IMPACT OF FAIR PRICE MEDICAL ON NO-FAULT FRAUD-RELATED DEFENSES – MALLELA DEFENSE – STAGED ACCIDENT DEFENSE
Manhattan Med. Imaging, P.C. a/a/o Jessica Rodriguez v. State Farm Mut. Auto. Ins. Co.
(NYC Civil, Richmond Co., decided 9/4/2008)

I spoke about this case at yesterday's NYSSIU quarterly meeting in Cicero. Kudos to all who made it there in spite of the snow, and welcome new NYSSIU officers and directors.

The decision dates back to September of last year, but its rulings are noteworthy and important to no-fault practitioners. I've had some of this post in draft for some time, and yesterday's discussion motivated me to finish it.

When the New York Court of Appeals issued its decision in Fair Price Medical in June of last year, the New York no-fault community wondered what fraud-related defenses could and would survive beyond 30 days from an insurer's receipt of a bill (even for services or devices that may not actually have been administered or delivered to patients) or requested verification of a claim. If billing fraud for services or devices not actually administered or delivered to patients would be subject to the 30-day pay or deny preclusion rule, what other types of no-fault claimant and provider fraud wouldn't be? The incline on the "coverage defense" slipperly slope had just gotten radically steeper.

Enter Judge Katherine Levine of Richmond County New York City Civil Court, whose prodigious vocabulary and prolific writing on no-fault issues provide ample grist for this blawger's mill. In this case, Judge Levine addressed “the murky issue of what precise evidence a defendant insurer must present in support of its late denial based upon fraud to withstand the granting of summary judgment to a plaintiff medical services provider in a No-Fault case.” Also at issue was whether the Court of Appeals’ Fair Price Medical decision requires an insurer to proffer the defense that a provider is fraudulently incorporated within 30 days or whether that defense remains non-waivable.

On the first issue, Judge Levine reiterated that a staged accident defense is not subject to the 30-day preclusion rule and held that State Farm’s proffer of the assignors’ transcribed recorded statements, although unsworn and unsigned but certified by the transcriber, together with a signed and sworn affidavit of State Farm’s special investigator was sufficient to create a question of fact on whether the claim was fraudulent, precluding summary judgment. State Farm’s special investigator memorialized inconsistencies in the various assignors' statements, including the color and make of the car they were in that was supposedly involved in the accident, different reasons as to why they were all together with the same driver, who was seated in the front of the car at the time of the accident and whether the car was stopped at the point of the accident. Judge Levine commented:

While this court does not believe that defendant presents a strong case of a staged accident, it presents enough inconsistencies to rise above the base level of "unsubstantiated hypothesis and suppositions" so as to permit this defense to go to trial. The court is not troubled that the statements of the assignors were not verified or signed since their transcribed statements were certified by the transcriber. See R.M. Newell Co. v. Rice, 236 AD2d 843, 844 (4th Dept. 1997), (deposition transcripts certified as accurate by transcriber admissible on summary judgment motion even though unsigned). Nor is the court concerned that Fink was not present during the taking of the statements. See, e.g., PDG Psychological, supra, Northern Medical, P.C., supra (trial held despite late denial based upon SIU investigator's finding that there was a staged accident based upon his review of the file for the first time a few weeks before the trial and his running a prior claim history on the assignor).

On Fair Price Medical's impact on the Mallela (fraudulent incorporation) defense, Judge Levine also ruled that the Court of Appeals’ decision does not preclude a no-fault insurer from raising a fraudulent incorporation defense beyond 30 days from receipt of billings or verification, provided the insurer presents a "founded belief" that the corporation is ineligible to obtain no-fault benefits by reason of a fraudulent corporate filing:

Defendant herein alleges that Dr. Brownstein is not the sole owner of Manhattan Medical but rather shares his ownership responsibilities with Sam Stern, a non physician. The attorney's affirmation cites a number of certificates of incorporation which allegedly show a labyrinth of interconnections between plaintiff Manhattan Medical and Universal Diagnostic Imaging, the latter of which is purportedly owned by Stern. Defendant also alleges that Brownstein owns at least five other imaging companies and is allegedly facing civil fraud lawsuits stemming from his ownership of other entities. Also attached is an EBT of the assistant office manager of plaintiff who indicates that Stern is one of the other owners of plaintiff and the testimony of plaintiff's business manager in another where she testified that Stern is a general partner of plaintiff.

The court finds that defendant has articulated a "founded belief" that plaintiff is fraudulently incorporated as it is actually controlled by a non-licensed professional. Defendant has therefore made allegations sufficient to raise an issue of fact as to whether plaintiff is fraudulently incorporated.

Through this morning, Judge Levine's decision in this case has been cited only once -- again by Judge Levine in her New Year's Eve ruling in Yklik, Inc. a/a/o Tammy Agosto v. Allstate Ins. Co. concerning a no-fault insurer's fee schedule defense, a decision with which, by the way, I take a most respectful exception for reasons given in my post on that case.

Operation Direct Hit -- Indictments & Arrests Announced in Major No-Fault Insurance Fraud Scheme

Earlier today the Queens County District Attorney's Office announced that 61 individuals and 2 corporations have been charged with engaging in a widespread, multimillion-dollar no-fault automobile insurance fraud scheme that sought to defraud insurance companies by intentionally staging accidents, submitting false medical and bodily injury claims and arranging for unneeded treatment and costly and unwarranted medical tests. Fifty-four of the individuals are in custody and seven are presently being sought.

District Attorney Richard Brown said, “The defendants – among whom are the operators of a Manhattan medical clinic – are accused of deliberately causing or staging more than 40 automobile accidents with unsuspecting drivers – particularly targeting Asian drivers in the Flushing area of Queens – over the last three years in order to capitalize on New York’s no-fault insurance law. * * * The defendants in this case are charged with bilking insurance carriers out of more than $1.6 million they submitted for allegedly unnecessary medical services for exaggerated or fabricated injuries.”

The charges are the result of a 19-month investigation by the Queens District Attorney’s Organized Crime and Rackets Bureau and the New York Health Care Fraud Task Force – which is composed of agents and detectives from the FBI, the NYPD, and other federal, state and local law enforcement entities, as well as investigators from the insurance industry. The investigation included physical and video surveillance, intelligence information, court-authorized electronic eavesdropping and the interception of hundreds of conversations – some of which occurred as the defendants were allegedly crashing into innocent drivers.

The investigation – dubbed Operation Direct Hit – began in March 2007 when the NYPD uncovered evidence of a specific accident pattern occurring within the confines of the 109th Precinct in Queens County that dated back to 2005. Typically, the “victim” vehicle – often driven by an Asian individual – was intentionally struck while backing out of a driveway or pulling out of a parking lot. The investigation later revealed that Tomas Aquiles, who allegedly coordinated these accidents, specifically targeted Asian American drivers due to his belief that they were bad drivers and that they would be blamed by the police and insurers for the accidents instead of the actual culprits. Some of the Asian American drivers were injured as a result of these accidents and many suffered significant damage to their vehicles. As a result, Aquiles has been charged with multiple violations of New York’s Hate Crime Statute, which enhances an offender’s sentence if convicted.

While most of the accidents were relatively minor, the investigation revealed that the occupants of the cars that caused the accidents all purportedly received extensive medical treatment at the same medical clinic – Bronx Park Medical (also known as Health Bay Medical), located at 100 Dyckman Street in Manhattan.

According to the indictments filed today, Bronx Park Medical was at the epicenter of an insurance fraud ring that operated from about July 23, 2005, to the present. It is alleged that the clinic operators – Inessa Drabkin and Michael Mazur – paid runners – such as Aquiles – up to $2,500 for each person whom they recruited to pose as an injured accident victim. Fake patients, it is alleged, received payment from either a runner or a clinic employee of up to $1,000 for their participation in the scheme.

It is alleged that in order to receive payment, a fake patient had to assign their no-fault benefits to the clinic and undergo a prescribed course of treatment at the clinic – dictated and controlled by non-medical personnel Drabkin and Mazur – in order to ensure that each insurance carrier was billed the maximum amount possible under the no-fault system. The prescribed treatment was also allegedly designed to generate lucrative lawsuits for others who worked with clinic management – such as Yevgeniy Rivkin, who allegedly oversaw the operations of the clinic by determining which medical providers would work at the clinic and deciding which staged and caused accident participants should receive medical treatment, so as to enhance the value of lawsuits. On average, insurance carriers paid up to several thousand dollars for each bodily injury claim.

In addition to the criminal charges, the District Attorney’s Office has filed a civil forfeiture action against six of the main defendants – Yevgeniy Ryvkin, Inessa Drabkin, Michael Mazur, Tomas Aquiles, and corporate defendants Integra CBA Company, Inc., and PKH Corp. – seeking the forfeiture of $1.6 million in illegally obtained proceeds. Approximately $900,000 has been seized to date.

Those indicted and charged are:

Medical Clinic Employees (4)

Inessa “Ina” Drabkin, 53, of 300 East 77th Street in Manhattan
Michael “Mikhail” Mazur, 42, of 66 Willow Lane in Staten Island
Yevgeniy “Gene”Rivkin, 38 , of 3429 Guilder Avenue in Brooklyn
Lucy “Luz” Rodriguez, 39, of 2150 Creston Avenue in the Bronx

Medical Management Companies (2)

Integra CBA Company Inc., is located at 100 Dyckman Street in Manhattan
PKH, Corp., Is located at 300 East 77th Street in Manhattan

Alleged Super Runner (1)

Tomas “Junior” Aquiles, 40, of 137 Vance Street in New Britain, Connecticut (not in custody)

Alleged Sub Runners (7)

Maura Resto-Abad, 48, of 1715 Walton Avenue in the Bronx
Francisco Capellan Amado, 33, of 2663 Heath Avenue in the Bronx
Vicentina Hernandez, 35, of 2065 Davidson Avenue in the Bronx
Lidiana Jones, 40, of 2816 Jerome Avenue in the Bronx
Magnolia Lajara, 30, of 1398 Grand Concourse in the Bronx (not in custody)
Ann Soto, 37, of 2145 Mapes Avenue in the Bronx
Jeremias Vargas (not in custody)

Alleged Accident Participants (45)
(4 other defendants are being sought)

Carmen Acevedo, 50, of 4231 Ely Avenue in the Bronx
Yanina Baez, 28, of 3155 Grand Concourse in the Bronx
Wendy Bonilla, 23, of 2851 Webb Avenue in the Bronx
Yokasta Caba, 36, of 2702 Bainbridge Avenue in the Bronx
Grace Calderon, 19, of 2145 Mapes Avenue in the Bronx
Solange Cheij, 45, of 2786 Jerome Avenue in the Bronx
Carlos Carasquillo, 21, of 2 Arden Street in Manhattan
Diana Castillo, 26, of 2274 Grand Concourse in the Bronx
Carlos Collado, 39, of 1236 Virginia Avenue in the Bronx
Tomas Cueto, 44, of 2120 A Grand Avenue in the Bronx
Denise Espinal, 26, of 275 West 238th Street in the Bronx
Luis Espinal, 28, of 40 Richmond Plaza in the Bronx
Carmen “Flores” DeJesus, 38, of 551 W. 185th Street in Manhattan
Francisco DeJesus, 28, of 110 Post Avenue in Manhattan
Angela Gomez, 53, of 510 West 146th Street in Manhattan
Darleivys Gonzalez, 21, of 15 Featherbed Lane in the Bronx
Diostone Gonzalez, 29, of 2146 Amsterdam Avenue in Manhattan
Fanny Gonzalez, 21, of 2065 Davison Avenue in the Bronx
Nancy Gonzalez, 33, of 1749 Grand Concourse in the Bronx
Odlie Gonzalez, 24, of 2786 Jerome Avenue in the Bronx
Joel E. Guerrero, 18, of 785 East 151st Street in the Bronx
Daisy Guzman, 26, of 570 West 182nd Street in Manhattan
Tinmarsan “Tin” Lantiquadelacruz, of 11 West 172nd Street in the Bronx
Alexis Martinez, 31 or 29, of 3333 West 136th Street in Manhattan
Annie Martinez, 31, of 1545 Rhinelander Avenue in the Bronx
Pablo Martinez, 21, of 1929 Andrews Avenue in Manhattan
Yanehsya Mejia, 22, of 355 East 187th Street in the Bronx
Christina Mendez, 40, of 2326 Loring Place in the Bronx
Carlos Morena, 33, of 129 East 123rd Street in Manhattan
Emmanuel Nueces, 30, of 111 Wadsworth Avenue in Manhattan
Gladys Ortiz, 38,of 1309 Washington Avenue in the Bronx
Carlos Peguero, 29 of 30, of 2789 Kingsbridge Terrace in the Bronx
Yoanny Peralta, 31, of 1365 St. Nicholas Avenue in Manhattan
Joyce Perez, 19, of 860 Riverside Drive in Manhattan
Karen Quinones, 43, of 54 Post Street in Yonkers, NY
Eva Rodriguez,( aka Eva Jazmin), 34, of 327 East 112th Street in Manhattan
Jose Luis Rodrguez (aka Jose Luis Pichardo), 35, of 649 Lenonx Avenue in Manhattan
Luis Rosa, 21, of 2825 Cafin Avenue in the Bronx
Anna Rosario, 23, of 24 Valentine Avenue in the Bronx
Juana Santana, 36, of 611 Academy Street in Manhattan
Kira Santiago, 24, of 229 W. 97th Street in Manhattan
Miguelina Silva, 32, of 90 Caryl Avenue in Yonkers, NY
Maria Soto, 46, of 470-71 Ash Avenue in Queens
Jesus Capellan Ulloa, 41, of 1256 Walton Avenue in the Bronx
Trinidad Valdez, 56, of 15 Featherbed Lane in the Bronx

The Queens DA's press release, which contains more details regarding the investigation, reminds that "[i]t should be noted that an indictment is merely an accusation and that defendants are presumed innocent until proven guilty."

Prejudice Not Required for Late Notice Disclaimer of UM Coverage

UM – STAGED INCIDENT – LATE NOTICE OF UM CLAIM – PREJUDICE SHOWING NOT REQUIRED
Matter of Allstate Insurance Co. v. DeLuca
(Sup. Ct., Nassau Co., decided 9/3/2008)

On April 29, 2002, Barabara DeLuca was involved in a motor vehicle incident with a vehicle owned by Myotte A. Francois and operated by Rome L. Kempbell. On the incident date, State Farm had an auto policy in force for the Francois vehicle.

By letters dated February 11, 2003, State Farm advised Francois, Kempbell, and DeLuca, through her attorney, that it was denying liability coverage because the "loss [was] not an accident." DeLuca then filed an uninsured motorists (UM) coverage claim with her own auto insurer, Allstate, and demanded arbitration, prompting Allstate to commence this special proceeding for a permanent stay.

After conducting a factual hearing, Nassau County Supreme Court Justice R. Bruce Cozzens, Jr. dismissed Allstate's petition against State Farm, finding that State Farm had established through testimony of its field investigator and his link analysis that "when the totality of the State Farm investigation is evaluated, it is determined that this accident conforms to a pattern of fraudulent accident claims."

With liability coverage from State Farm out of the picture, Allstate defended the UM claim based on DeLuca's 28-month late notice of her UM claim. Relying on Rekemeyer v. State Farm Mut. Auto. Ins. Co., 4 NY3d 468 (2005), DeLuca contended that Allstate was required to demonstrate prejudice from her delayed notice of her UM claim in order to disclaim coverage.

Noting that Rekemeyer involved a claim for supplementary uninsured motorists (SUM) or underinsured coverage benefits, Justice Cozzens distinguished Rekemeyer and Brandon v. Nationwide Mut. Ins. Co., 97 NY2d 491 (2002) and held that Allstate was not required to show prejudice from what he found to be DeLuca's unreasonable delay in notifying Allstate of her UM claim after learning of State Farm's disclaimer. Judgment for Allstate permanently staying arbitration of DeLuca's UM claim.

Follow-Up Verification Requests Sent Less Than 30 Days After Original Requests Held to be Timely

NO-FAULT – STAGED ACCIDENT – TIMING OF FOLLOW-UP VERIFICATION REQUESTS – FAILURE TO ATTEND IMEs – FAILURE TO ATTEND EUOs
Unitrin Advantage Ins. Co. v. Painless Medical, P.C.
(Sup. Ct., New York Co., decided 8/22/2008)

If a no-fault insurer does not wait the entire 30-day period to issue a follow-up verification request pursuant to 11 NYCRR § 65-3.6(b), does it "lose" the tolling effect of such verification requests and is it precluded from relying on defenses related to those requests? This court says "no." See, also, Park Slope Med. & Surgical Supply, Inc. v Country-Wide Ins. Co., 19 Misc 3d 1138(A) (NYC Civil Ct., Richmond Co., 2008).

Unitrin issued a personal auto policy to non-party Hector Sanchez, Jr. on November 28, 2006. Sanchez was involved in a sideswipe collision on December 16, 2006. On January 5, 2007, the three claimants, Ruben Oliver, Ricardo Santos and Marie Mora, were involved in another sideswipe collision with the insured vehicle, which Unitrin contended was staged. According to Unitrin's research, Oliver and Santos had been involved in another collision just 8 months earlier, in May 2006. All three claimants refused medical treatment at the scene.

After Unitrin's special investigator was unable to obtain statements from the claimants, Unitrin requested EUOs and IMEs of each claimant in order to confirm the legitimacy of their claims. Unitrin sent its initial EUO scheduling letter on February 22, 2007, and forwarded a second letter on March 8, 2007 , less than 30 days later. The the initial IME letters were mailed to the claimants on February 12, 2007, and the second letters were mailed two weeks later, on February 28, 2007. Neither Santos nor Mora appeared for their EUOs. In addition, none of the claimants appeared for their IMEs. Unitrin then denied all claims based on the claimants' failure to appear for their IMEs, and because Oliver made material misrepresentations at his EUO.

Unitrin commenced this action against the three claimants and their medical providers seeking a declaration that it was not obligated to pay no-fault benefits to the claimants or their assignees because: (1) Santos and Mora failed to appear for EUOs and all three claimants failed to appear for IMEs; and (2) the January 5, 2007 accident was staged and, therefore, that the claimants' treatment was not related to a motor vehicle "accident".

Defendants Painless Medical PC, Eastern Star Acupuncture, PC (Anatoly Yuryev, Chairman/CEO), and Improved Care Chiropractic PC (Gregory Pinsky DC, Chairman/CEO) moved for summary judgment, contending that Unitrin did not properly deny their allegedly assigned no-fault claims because Unitrin: (1) failed to wait 30 days before rescheduling the EUOs, thereby failing to properly toll the 30-day period within which it had to deny moving defendants’ claims; (2) failed to submit proof that requests for IMEs were made, and regardless, failed to toll its time to deny moving defendants’ claims since Unitrin failed to wait 30 days before making a second request for IMEs of the claimants; (3) submitted vague denials with respect to moving defendants’ claims concerning Oliver in that: (a) the denial was not specific; and (b) Unitrin neglected to mark certain boxes reflecting the reason for the denial on the claim form. Unitrin cross-moved for summary judgment and to compel discovery.

New York County Supreme Court Justice Martin Shulman denied both defendants' motion and Unitrin's cross motion for summary judgment. In rejecting the moving defendants' argument that Unitrin improperly issued follow-up verification requests before waiting 30 days, Justice Shulman ruled:

“There is no case law or statutory authority for the proposition that an insurer must wait 30 days before sending its follow-up request, or it will be precluded from offering defenses at trial” (Psych. & Massage Therapy Assoc., PLLC v Progressive Cas. Ins. Co., 5 Misc.3d 723, 725 [Civ Ct, Queens County 2004]).*** There is significant case law which addresses the timeliness of follow-up requests (see New York & Presbyterian Hosp. v. American Tr. Ins. Co., supra [court held that the defendant insurer’s request for additional verification on October 5, 1999 and its follow-up letter, 27 days later on November 1, 1999 were timely]; New York Hosp. Med Ctr. of Queens v State Farm Auto Ins. Co., 293 A.D.2d 588 [2d Dept 2002] [holding insurer timely sent follow-up verification requests exactly 30 days after initial requests]; Pysch. & Massaqe Therapy Assoc., PLLC v. Progressive Cas. Ins. Co., 5 Misc.3d at 725 [holding that “penalizing [insurer] for sending a follow-up request twenty-five days after its initial request is inconsistent with the goals of the No Fault Law”]).

Moreover, Unitrin has proffered sufficient proof that the follow-up requests were properly mailed to claimants (see lnwood Hill Med., P.C. v General Assurance Co., 10 Misc.3d 18 [App Term, 1st Dept 20051). Following the rational in Presbyterian, Unitrin “did not sit on its rights but rather promptly requested additional verification of the claim” (New York & Presbyterian Hosp., supra). Moving defendants seek to penalize Unitrin for being too prompt, which is in direct contravention of the goals of the No Fault law (see Pysch. & Massaqe Therapv Assoc., 5 Misc.3d at 725-726). As such, the court finds moving defendants’ tolling argument without merit.

Justice Shulman also rejected the moving defendants' argument that Unitrin's denial was vague and legally insufficient:

Unitrin specifically noted in the denial of claim form the reasons that the claim was being denied (Denial of Claim Form dated June 8, 2007, Affirmation in Support, Exh. E). Specifically, the denial of claim form states:

This entire no-fault claim was previously denied based on failure to show for scheduled independent medical exams on 03/06/07 and 04/03/07. Treatment rendered is considered overlapping, excessive and/or concurrent care. Therefore, this treatment is denied. This matter has been referred to the Insurance Fraud Bureau. Our review of the medical records submitted, our investigation, and accepted medical practices reveals that the services alleged to have been rendered were not medically necessary. Therefore, your claim is denied for lack of medical necessity. Material misrepresentations were made at the Examination Under Oath which was performed on March 29, 2007.

Where, as here, “the claims were denied based on the claimants’ failure to appear at the scheduled independent medical examinations”, the denial of claim is sufficiently specific to deny the claims assigned by Oliver as a matter of law[.]

Finally, with respect to Unitrin's motion to compel discovery, the court held that Unitrin was entitled to any discovery that either supported or rebutted its claim that the underlying accident was staged, and discovery pertaining to its fraudulent incorporation claims, including depositions of the moving defendants' alleged owners.

*** Although Justice Shulman may not have been aware of it, in a July 2008, 2-1 decision, the Appellate Term, 2nd Department, ruled that a follow-up verification request sent 27 days after the initial request was "premature and without effect", precluding the insurer "from raising most defenses, including its proffered defense of excessive fees". Infinity Health Prods., Ltd. a/a/o Jermaine Thomson v Eveready Ins. Co., 2008 NYSlipOp 28271 (App. Term, 2nd Dept., decided 7/10/2008). The 2-justice majority (Pesce and Steinhardt) read the 2nd Department's decision in New York & Presbyterian Hosp. v. American Tr. Ins. Co. differently than Justice Shulman did in this case, and Justice Golia in his dissent noted:

The majority makes this finding even though the cited Appellate Division case deals with a verification request that was dated October 5, 1999 and a follow-up request that was sent and dated November 1, 1999. Certainly, the first day of November is less than 30 days from the fifth day of October.

Plaintiff argues, in substance, that because the Appellate Division did not specifically state that the letter that was dated 27 days later was actually mailed on the date that was noted, the case cannot be read to say that the follow-up was actually mailed 27 days later.

A review of the file that was submitted to the Appellate Division in New York & Presbyt. Hosp. v American Tr. Ins. Co. indicates that there is contained in that file, among other references, the reply affirmation of the plaintiff. It states, "The defendant's letters of October 5, 1999 and November 1, 1999 were not prescribed verification forms." There is no indication from this or any other document in that file that the letter dated November 1, 1999 was mailed on any date other than November 1, 1999. Nor, according to my review, was this issue raised.

I do not support the theory that the Appellate Division found that the November 1, 1999 letter was, in fact, dated November 1, 1999 but not mailed before November 5, 1999, nor was it mailed after November 14, 1999.

I, however, do believe that the Appellate Division understood exactly what was presented to it when it found that the follow-up request for verification that was sent within 30 days of the first request, specifically 27 days, was, in fact, timely and in all respects proper.

Just like its decision on fees in excess of the workers' compensation fee schedule, the Appellate Term, Second Department's ruling on this issue is incorrect and should eventually be reversed.

No Collateral Estoppel From Prior Default Judgments Against Assignors

NO-FAULT – STAGED EVENT DEFENSE – PRIVITY – COLLATERAL ESTOPPEL – ADMISSIBILITY & USE OF ASSIGNOR EUO TRANSCRIPTS
Rizz Mgt. Inc. a/a/o Jose Fernandez v. State Farm Mut. Auto. Ins. Co.
(Dist. Ct., Nassau Co., decided 6/17/2008)

Just under 9¢ per word. That's the amount of potential recovery the court's carefully reasoned denial of summary judgment to State Farm in this case preserved for the plaintiff.

Rizz sued for $200 in unpaid bills related to services rendered to assignor Fernandez for injuries he allegedly sustained in a January 11, 2002 accident. State Farm moved for summary judgment, arguing: (1) that plaintiff was collaterally estopped from contesting that the January 11, 2002 incident was a staged event based on default judgments State Farm had obtained against assignor Fernandez and others in two prior Supreme Court special proceedings; and (2) that it had submitted sufficient evidence on its motion for the court itself to determine, as a matter of law, that the alleged accident of January 11, 2002 was no accident at all, but a staged event.

In rejecting State Farm's collateral estoppel argument, Nassau County District Court Judge Andrew Engel held that although there was identity of issue -- i.e., whether the alleged accident of January 11, 2002 was a staged event -- that issue was not previously decided against either the plaintiff or one then in privity with the plaintiff, and was not "necessarily decided" in the prior proceedings that concluded with default judgments.

On the privity issue, Judge Engel explained:

"In the assignor-assignee relationship, privity must have arisen after the event out of which the estoppel arises. Hence, an assignee is deemed to be in privity with the assignor where the action against the assignor is commenced before there has been an assignment." (citations omitted). Given the fact that it is the Defendant's burden to demonstrate "that the decisive issue was necessarily decided in the prior action against a party, or one in privity with a party[,]" (citations omitted) before collateral estoppel will apply, it is incumbent upon the Defendant to provide proof of when the assignment herein took place. The Defendant, however, has not done so. Moreover, it would appear from the dates of treatment, February 1, 2002 and April 18, 2002, that if there was in fact an assignment of benefits, it occurred prior to the commencement of the special proceedings upon which the Defendant relies, the petitions for which are dated December 2, 2002.

On the question of whether the staged event issue had been "necessarily decided" in the prior special proceedings, the court ruled:

Even more problematic for the Defendant is the fact that the two determinations upon which it relies were rendered on the default of the respondents therein. Before collateral estoppel will apply, the issue in dispute must have been "actually litigated and determined" in the prior action. (citations omitted). As the Court of Appeals has decisively stated in Kaufman v. Eli Lilly and Company, 65 NY2d 449, 492 NYS2d 584 (1985), "If the issue has not been litigated, there is no identity of issues between the present action and the prior determination. An issue is not actually litigated if, ... there has been a default..." (citations omitted).

The Defendant having failed to demonstrate that the Plaintiff herein was in privity with its assignor in the prior proceedings upon which the Defendant relies, and the prior proceedings having resulted in orders entered on default, they shall not be given preclusive effect in the matter presently before this court.

Turning next to State Farm's evidentiary submissions in support of its motion for summary judgment, the court found numerous deficiencies in State Farm's papers, including: the affidavit of State Farm's investigator "ma[de] it clear" that she lacked personal knowledge and was based on inadmissible hearsay statements and documents for which no proper foundation for admission had been laid; the EUO transcripts of plaintiff's assignor and other occupants of the vehicle in which he was a passenger were "of extremely poor quality and largely illegible"; the EUO transcripts were neither signed nor verified; State Farm had not demonstrated any formal requirements for the taking of the individuals' alleged testimony sufficient to assure their accuracy; and "[n]otably absent" from the EUO transcripts were certifications as to the transcripts' accuracy, executed by the notary public who purportedly took the testimony.

Although Judge Engel found that State Farm's "attempt to submit the transcripts of these examinations is not barred by the hearsay rule, because the Defendant is not offering the statements contained therein for their truth... but for the exact opposite reason, to show their falsity and fraud", he nonetheless seemingly ruled them to be inadmissible because:

it has been recognized that while the transcripts of [assignor] examinations under oath may be admissible to defeat a summary judgment motion, they "are nonetheless hearsay. As such, such statements are inadmissible at trial unless, for example, they are used for impeachment purposes upon cross-examination in the event such declarant/assignor testifies." CPT Medical Service, P.C. v. Utica Mutual Insurance, 12 Misc 3d 237, 811 NYS2d 909 (Civ.Ct. Queens Co. 2006).

In the end, even if the court had found State Farm's papers to be in admissible form, Judge Engel ruled that they "raise[d] a number of factual issues which are subject to the inferences to be drawn from the evidence presented, many of which involve an assessment of credibility, and all of which must be reserved for the trier of facts[.]"

Fo'get About It -- No Summary Judgment for Staged Incident

NO-FAULT – STAGED INCIDENT – DISCOVERY – MALLELA DEFENSES
AA Acupuncture Service, P.C., a/a/o Marie Boucicaut v. State Farm Mut. Auto. Ins. Co.
(NYC Civil, New York Co., decided 5/30/2008)

What??? What??? I've been practicing law for about as long as that muskie from last Friday's post has been alive, and this is the first time that I've seen a "per se" rule against granting summary judgment to a party. Ever. In law school and during the early, formative years of practice, we learned that summary judgment was available when there were no triable issues of material fact and the court could conclude, as a matter of law, that the movant had established either its right of recovery or defense against same.

The world as I knew it -- at least insofar as summary judgment in staged collisions is concerned -- changed yesterday, with the posting of New York County City Civil Court Judge Arlene P. Bluth's decision in this case. I'll explain.

One would think that if the insurer were to present "compelling", "uncontradicted, overwhelming circumstantial evidence" that the incident at issue was staged, the insurer should merit summary judgment, right? Wrong, according to Judge Bluth.

State Farm denied no-fault benefits based on its conclusion that the underlying incident was an intentionally caused loss which was not covered by the subject insurance policy. The assignor's medical provider sued and, in support of its motion for summary judgment, State Farm submitted an affidavit of one of its special investigators who was personally involved in the investigation and set forth detailed results of his investigation, all of which tended to show that the underlying incident was staged, and thus not covered by the policy. In opposition, the plaintiff "failed to contradict any of [the special investigator]'s sworn statements or any of the voluminous documents annexed thereto."

In spite of State Farm's persuasive and uncontroverted submission, the court denied summary judgment to State Farm, holding that "there is a per se rule against summary judgment dismissing a claim based on staged accident. " Judge Bluth based this ruling on two things: (1) the lack of any reported cases affirmatively awarding summary judgment to an insurer based on a staged incident; and (2) the Appellate Term's 2006 decision in A.M. Medical Services, P.C. v. Nationwide Mut. Ins. Co., 12 Misc 3d 143(A), 824 NYS2d 760 (App. Term, 2nd Dept., 2006) in which the appellate court ruled that Nationwide's cross motion for summary judgment should have been denied even though the assignors, when confronted with suspicious facts about their multiple "accidents," withdrew their claims with prejudice. Nonetheless, Judge Bluth concluded:

If the Appellate Term thought the evidence of a staged accident was strong enough to consider sanctions against the plaintiff's attorney for pursuing the claim but still refused to grant summary judgment to the defendant, then the only explanation is that there is a per se rule against summary judgment dismissing a claim based on staged accident. Absent a contrary decision in this Department, this Court, following A.M. Medical Services, denies defendant's motion for summary judgment[.]

Judge Bluth also partially granted NYCM'S motion to compel discovery, holding:

Here, Dr. Sachdev, as the owner of the facility and the practitioner who actually rendered the services, must appear for his deposition. Furthermore, he must bring with him to the deposition the documents he may need to refer to in answering the questions relating to plaintiff's corporate structure; if he does not bring the documents and he cannot answer the questions, then defendant may bring on a motion for further relief. In addition to the plethora of uncontradicted reasons submitted by the defendant tending to show that plaintiffs may be fraudulently incorporated and thus not entitled to insurance payment, the Court notes that Dr. Sachdev may be unaware of his corporation's billing practices inasmuch as the bills annexed to the defendant's motion show the each NF3 for services allegedly provided by Dr. Sachdev state that Dr. Sachdev is a "nerologist;" he is no more a "nerologist" than his counsel is an "attor-knee." A person who worked so hard to become a neurologist would know how to spell it.

See? Spelling counts. Expect an appeal, though. A company that has worked so hard to become a large, successful auto insurer should know when it deserves summary judgment.