Opinion
0105433/2007.
August 22, 2008.
Decision and Order
In this declaratory judgment action, defendants Painless Medical, P.C., Eastern Star Acupuncture, P.C. and Improved Care Chiropractic, P.C. ("moving defendants") move, pursuant to CPLR 3212, for an order granting summary judgment dismissing the complaint against them on the ground that plaintiff Unitrin Advantage Insurance Company ("Unitrin" or "plaintiff") did not properly deny the allegedly assigned No-Fault claims arising from a January 5, 2007 collision (the "underlying accident") involving defendants Ruben Oliver, Ricardo Santos and Marie Mora ("claimants") (motion sequence no. 002).
Unitrin cross-moves for an order: 1) pursuant to CPLR 3212, granting summary judgment on the ground that all claims relating to the underlying accident have been duly denied based on the claimants' failure to appear for depositions and independent medical examinations ("IMEs"); 2) pursuant to CPLR 3025(b) granting plaintiff leave to amend the complaint; and 3) pursuant to CPLR 3212(f) for an order staying or striking the summary judgment motion to the extent that the motion does not address the issues raised in Unitrin's amended complaint (002).
Plaintiff also moves by order to show cause ("OSC") for an order: 1) striking or staying the moving defendants' motion for summary judgment until after the completion of discovery; and 2) compelling moving defendants to respond to discovery and appear for depositions (motion seq. no. 003). Motion sequence numbers 002 and 003 are consolidated for disposition.
For the following reasons, defendants' motion and plaintiff's cross motion are denied. Additionally, the portion of Unitrin's OSC to compel discovery is granted, and the OSC is otherwise denied.
Background
On January 5, 2007, the claimants were involved in an automobile accident. Unitrin, an insurance company, claims the underlying accident was staged.
Unitrin issued a personal automobile insurance policy (the "policy") covering the automobile that the claimants were riding in during the January 5, 2007 collision. The policy was issued to non-party Hector Sanchez, Jr. ("Sanchez") on November 28, 2006. Prior to the underlying accident, on December 16, 2006, Sanchez was allegedly involved in a sideswipe collision (see Affidavit of Phil Cervasio, special investigator for Kemper Independence Insurance Company, dated April 19, 2008, Notice of Cross Motion, ¶ 6). The underlying accident, which occurred three weeks later, was also a sideswipe collision (id., ¶ 7). Sanchez was not in the vehicle on the day of the underlying accident. According to Cervasio, a search of records indicated a previous collision in May, 2006 involving claimants Santos and Oliver (id., ¶ 9). Sanchez's policy was cancelled with the Department of Motor Vehicles on January 20, 2007 (id., ¶ 8).
The policy provides No-Fault benefits pursuant to certain conditions and terms. Specifically, the policy provides "No action shall lie against the Company unless, as a condition precedent thereto, there shall have been full compliance with the terms of this coverage" (Complaint, ¶ 19, Notice of Cross Motion at Exh. A). The policy further states:
Upon request by the Company, the eligible injured person or that person's assignee or representative shall: . . . (b) as may reasonably by [sic] required submit to examinations under oath by any person named by the Company and subscribe the same; . . . and (d) provide any other pertinent information that may assist the Company in determining the amount due and payable.
(id.).
At the scene of the underlying accident, the claimants allegedly refused medical attention. However, they later claimed to have sustained bodily injuries as a result thereof. According to Unitrin, these claims were initially reported by moving defendant Painless Medical, P.C., a medical provider, which had been on an "alert list" of medical facilities submitting excessive and unnecessary No-Fault claims (see Cervasio Aff., ¶ 10). Cervasio avers that he "made several phone calls to Sanchez, Santos, Oliver, and Mora, in attempts to verify the legitimacy of the collisions and the alleged treatment. None of the parties cooperated with [his] attempts for statements" (id., ¶ 11).
In addition, according to Unitrin, it sought verification of the number of claims the claimants submitted, by requesting an examination under oath ("EUO") and an IME of the three individuals in order to confirm the legitimacy of their claims. According to moving defendants, subsequent to forwarding the EUO scheduling letter to the claimants on February 22, 2007, Unitrin forwarded a second letter on March 8, 2007. In addition, moving defendants state that the initial IME letters were mailed to the claimants on February 12, 2007, and the second letter was mailed February 28, 2007. Neither Santos nor Mora appeared for an EUO. In addition, none of the claimants appeared for an IME.
According to Unitrin, it denied all claims submitted by the moving defendants because the claimants all failed to appear for IMEs, and because Oliver made material misrepresentations at his EUO. Unitrin reserved its right to amend its denial pending receipt of additional information concerning the claim.
On April 23, 2007, Unitrin initiated the instant action, seeking a declaration that it owes no duty to pay No-Fault benefits to any of the defendants on the grounds that: (1) defendants Santos and Mora failed to appear for duly scheduled EUOs, and all individual defendants failed to appear for IMEs; and (2) the underlying accident was not an accident and that the alleged treatment submitted by the defendants was not related to the underlying accident.
Discussion
In order to grant summary judgment, there must be no material or triable issues of fact presented (Ayotte v Gervasio, 81 N.Y.2d 1062; Esteva v City of New York, 30 A.D.3d 212 [1st Dept 2006]). The movant must proffer admissible evidence to make a prima facie showing that establishes the cause(s) of action "sufficiently to warrant the court as a matter of law in directing judgment" (CPLR 3212(b); see also Alvarez v Prospect Hosp., 68 N.Y.2d 320, 324; Zuckerman v City of New York, 49 N.Y.2d 557, 562.
Once the moving party has made this showing, the burden shifts to the opposing party to demonstrate "the existence of a factual issue requiring a trial of the action or tender an acceptable excuse for his failure so to do" (Zuckerman, 49 N.Y.2d at 562; see also Sheridan v Bieniewicz, 7 A.D.3d 508 [2d Dept 2004]).
Here, the moving defendants contend that summary judgment should be granted on the ground that Unitrin did not properly deny their allegedly assigned No-Fault claims arising from the underlying accident. Specifically, moving defendants assert that Unitrin: (1) failed to wait thirty days before rescheduling the EUOs, thereby failing to properly toll the thirty-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 thirty 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.
Under the No-Fault law, "an insurer may be precluded from interposing a statutory exclusion defense for failure to deny a claim within 30 days as required by Insurance Law § 5106 (a) and 11 NYCRR 65.15 (g) (3)" (Presbyterian Hosp. in City of New York v Maryland Cas. Co., 90 N.Y.2d 274, 282). "An insurer may extend the 30-day period in which it has to pay or deny a claim by making a request for additional verification of the claim 'within 15 business days of receipt [of one] of the prescribed verification forms'" (Sea Side Med. P.C. v State Farm Mut. Auto Ins. Co., 12 Misc.3d 1127, 1129 [Civ Ct, Richmond County 2006] [citation omitted]; see also New York Hosp. Med. Ctr. of Queens v Country-Wide Ins. Co., 295 A.D.2d 583, 584-585 [2d Dept 2002]; New York Presbyt. Hosp. v American Transit Ins. Co., 287 A.D.2d 699, 700 [2d Dept 2001]). "A claim need not be paid or denied until all demanded verification is provided" (New York Presbyt. Hosp. v Progressive Cas. Ins. Co., 5 A.D.3d 569, 570 [2d Dept 2004], citing 11 NYCRR 65.15 [g] [1] [i]; Westchester County Med. Ctr. v New York Central Mut. Fire Ins. Co., 262 A.D.2d 553 [2d Dept 1999]).
Moving defendants argue that Unitrin's follow-up request for IMEs and EUOs was untimely since it was sent less than 30 days after submitting the initial request, thereby waiving any defense to its denial of claim. Moving defendants rest their entire argument on the case of Sea Side Med., P.C. v. State Farm Mut. Auto Ins. Co., supra. In Sea Side, the court's holding rested on the fact that the defendant insurer did not satisfy the 10-day follow-up requirement under 11 NYCRR 65-3.6 (b), while noting in the factual background section that the plaintiff "correctly point[ed] out that the defendant mailed out the second requests only 28 days after the first requests had been mailed" (id. at 1128-1131). In this case, the issue is whether Unitrin should have waited until thirty days had lapsed before sending its follow-up request, or be precluded from offering the defense. For the following reasons, this court finds that it does not.
"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 Massage 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. Inwood Hill Med., P.C. v General Assurance Co., 10 Misc.3d 18 [App Term, 1st Dept 2005]). 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 Massage Therapy Assoc., 5 Misc.3d at 725-726). As such, the court finds moving defendants' tolling argument without merit.
Likewise, to the extent that moving defendants assert that the denial of Oliver's claims were vague and insufficient, the court finds the argument to be without merit. 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 (see Lumbermens Mut. Cas. Co. v. Inwood Hill Med., P.C., 8 Misc.3d 1014(A), 801 N.Y.S.2d 778 [Supt Ct, NY County 2005]).
However, as the court noted in Lumbermens, an issue remains as to the ramifications of claimants' failure to appear for scheduled EUOs and/or IMEs. "Although failure to appear rebuts the presumption of . . . medical necessity . . . [a] question of fact is raised, and the provider is still entitled to show medical necessity of the treatment at trial" (Lumbermens, 8 Misc.3d 1014(A), citing Millenium Diagnostics, PC v Liberty Mut. Ins. Co., 2001 WL 1803470 [App Term 2nd 11th Jud Dist 2001], aff'd 306 A.D.2d 388 [2d Dept 2003]; SM Supply Inc. v Peerless Ins. Co., 6 Misc.3d 127(A)[App Term 2nd 11th Jud Dist 2001]). Accordingly, based on the foregoing, the motion for summary judgment is denied and plaintiff's cross motion for summary judgment is likewise denied.
Unitrin cross-moves for leave to amend the complaint to assert allegations that the moving defendants improperly sought services of independent contractors, and these defendants are not properly incorporated. It is well settled that leave to amend a complaint should be freely granted absent prejudice to the defendant (see CPLR 3025 [b]; see also Liebowitz v Mount Sinai Hosp., 296 A.D.2d 340, 342 [1st Dept 2002]; Tishman Const. Corp. of New York v City of New York, 280 A.D.2d 374 [1st Dept 2001]). However, because Unitrin failed to attach a copy of the proposed amended complaint, the motion for leave to amend is denied without prejudice (Goldner Trucking Corp. v Stoll Packing Corp., 12 A.D.2d 639 [2d Dept 1960]). Based on the foregoing, plaintiff's applications, as raised in the cross motion (motion seq. 002), and the OSC (motion seq. 003) to stay the moving defendants' motion for summary judgment (to the extent that summary judgment does not address the issues raised in the plaintiff's amended complaint) is denied as moot.
In motion sequence no. 003, Unitrin also seeks to compel the moving defendants to respond to discovery and appear for depositions. The moving defendants did not respond to discovery demands, which Unitrin served on December 22, 2007, nor did they object thereto after the discovery demands were received. Rather, the moving defendants served the instant motion for summary judgment.
According to Unitrin, there are three issues requiring discovery which would preclude the moving defendants from asserting No-Fault claims, to wit: (1) Unitrin's allegedly "founded belief" that the underlying accident was staged; and (2) issues surrounding whether the moving defendants impermissibly sought to collect for the work of independent contractors; and (3) issues concerning whether they are properly incorporated under New York law.
Where it is shown that the vehicles were involved in several collisions within a short time frame after the insurer issued insurance policies for vehicles registered to the insured, the definition of a "founded belief" is satisfied (State Farm Mut. Auto. Ins. Co. v Laguerre, 305 A.D.2d 490 [2d Dept 2003]). As such, Unitrin is entitled to any discovery that the aforementioned defendants have that either supports or rebuts the claim that the underlying accident was staged.
Likewise, Unitrin is entitled to discovery pertaining to its fraudulent incorporation claims (Continental Med. Acupuncture Svcs., P.C. v Travelers Ins. Co., 16 Misc.3d 127(A) [App Term, 1st Dept 2007]). Unitrin is therefore entitled to depose the moving defendants' alleged owners (Golden Gate Acupuncture, P.C. v State Farm Auto. Ins. Co., 19 Misc.3d 132(A) [App Term, 1st Dept 2008];Continental Med. Acupuncture Svcs., P.C. v. Travelers Ins. Co., 13 Misc.3d 132(A) [App Term, 1st Dept 2006]). In light of the above, Unitrin's cross motion to compel discovery is granted in its entirety.
Conclusion
Accordingly, it is
ORDERED that the motion for summary judgment by defendants Painless Medical, P.C., Eastern Star Acupuncture, P.C. and Improved Care Chiropractic, P.C. is denied (motion sequence no. 002); and it is further
ORDERED that the portion of plaintiff's cross motion to amend the complaint is denied without prejudice and the remainder of the cross-motion is denied (002); and it is further
ORDERED that the portion of plaintiff's OSC to stay or strike the motion for summary judgment is denied as moot (motion sequence no. 003); and it is further
ORDERED that the portion of plaintiff's OSC to compel discovery (sequence no. 003) is granted and defendants Painless Medical, P.C., Eastern Star Acupuncture, P.C. and Improved Chiropractic, P.C. are required to respond to the discovery demands served on December 22, 2007, as well as schedule depositions of the owners of Painless Medical, P.C., Eastern Star Acupuncture, P.C. and Improved Chiropractic, P.C. within 30 days of service of this order with notice of entry.
Counsel for the parties are directed to appear for a compliance conference on September 23, 2008 at 9:30 a.m., I.A.S. Part 1, 111 Centre Street, Room 1127B, New York, New York.
The foregoing constitutes this court's Decision and Order. A courtesy copy of this Decision and Order has been sent to counsel for the parties.