I. Papers The following papers were read on Defendant’s motion for summary judgment seeking dismissal of Plaintiff’s complaint and Plaintiff’s cross-motion for summary judgment seeking judgment on its claims against Defendant: Papers Numbered Defendant’s Notice of Motion and Affirmation in Support dated September 18, 2019 (“Motion”) and file stamped by the court on September 27, 2019. 1 Plaintiff’s Amended Notice of Cross-Motion seeking summary judgment and Amended Affirmation in Support and Opposition dated as of July 29, 2020 (“Cross-Motion”) and electronically filed with the court on November 18, 2020. 2 Defendant’s Affirmation in Opposition to Cross-Motion dated as of August 4, 2020 (“Opposition to Cross-Motion”) and electronically filed with the court on August 5, 2020. 3 II. Background In a summons and complaint filed February 21, 2019, Plaintiff sued Defendant insurance company to recover a total of $5,477.97 in unpaid first party No-Fault benefits for medical services provided to Plaintiff’s assignor Cortes from July 2, 2018 to July 30, 2018 resulting from an automobile accident on May 23, 2018, plus attorneys’ fees and statutory interest (see Motion, Aff. of Schwarzenberg, Ex. F). The First cause of action was for recovery of a bill for services provided on July 30, 2018 (“First Bill”) in the amount of $10.00. The Third cause of action was for recovery of a $4,796.10 bill for services provided on July 13, 2018 (“Second Bill”). The Fifth cause of action was for recovery of a $513.18 bill for services provided on July 13, 2018 (“Third Bill”). The Seventh cause of action was for recovery of a $148.69 bill for services provided on July 2, 2018 (“Fourth Bill”). The Ninth cause of action was for recovery of a $10.00 bill for services provided on July 16, 2018 (“Fifth Bill”). The Second, Fourth, Sixth, Eighth, and Tenth causes of action sought recovery of attorneys’ fees for each of the separate bills. Defendant moved for summary judgment dismissing the complaint on the ground that Plaintiff failed to provide additional documentary verification within one-hundred twenty (120) days (11 NYCRR §65-3.8[b][3]). Plaintiff cross-moved for summary judgment on its claims against Defendant. Both parties orally argued the motions before this Court on April 19, 2021. III. Discussion and Decision CPLR 3212 provides that “a motion for summary judgment shall be supported by affidavit, by a copy of the pleadings and by other available proof, such as depositions and written admissions” (CPLR 3212[b]). “Mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient” (Zuckerman v. City of New York, 49 NY2d 557, 562 [1980]). “A defendant moving for summary judgment [seeking an order dismissing plaintiff's complaint] has the initial burden of coming forward with admissible evidence, such as affidavits by persons having knowledge of the facts, reciting the material facts and showing that the cause of action has no merit” (GTF Mktg. v. Colonial Aluminum Sales, 66 NY2d 965, 967 [1985]; Anghel v. Ruskin Moscou Faltischek, P.C., 190 AD3d 906, 907 [2d Dept 2021], see Jacobsen v. New York City Health & Hosps. Corp., 22 N.Y.3d 824, 833 [2014]). A motion for summary judgment “shall be granted if, upon all the papers and proof submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party” (CPLR 3212[b]; Zuckerman v. City of New York, at 562, see GTF Mktg. v. Colonial Aluminum Sales, 66 NY2d at 968). Insurers must pay or deny No-Fault benefit claims “within thirty (30) calendar days after receipt of the proof of the claim” (Viviane Etienne Med. Care, P.C. v. Country-Wide Ins. Co., 25 NY3d 498, 501 [2015]; Fair Price Med. Supply Corp. v. Travelers Indem. Co., 10 NY3d 556, 563 [2008]; Hospital for Joint Diseases v. Travelers Prop. Cas. Ins. Co., 9 NY3d 312, 317 [2007]; see Insurance Law §5106[a]; 11 NYCRR §65-3.8[c]; Presbyterian Hosp. in City of N.Y. v. Maryland Cas. Co., 90 NY2d 274, 278 [1997]). “New York Law prohibits unlicensed individuals from organizing a professional service corporation for profit or exercising control over such entities” (Andrew Carothers, M.D., P.C. v. Progressive Ins. Co., 33 NY3d 389, 404 [2019], see Business Corporation Law §§1507; 1508; Nationwide Affinity Ins. Co. of Am. v. Acuhealth Acupuncture, P.C., 155 AD3d 885, 886 [2d Dept 2017]; Liberty Mut. Ins. Co. v. Raia Med. Health, P.C., 140 AD3d 1029, 1031 [2d Dept 2016]; One Beacon Ins. Group, LLC v. Midland Med. Care, P.C., 54 AD3d 738, 740 [2d Dept 2008]). “A provider of health care services is not eligible for reimbursement under section 5102(a)(1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such service in New York…” (11 NYCRR §65-3.16[a][12]; Nationwide Affinity Ins. Co. of Am. v. Acuhealth Acupuncture, P.C., 155 AD3d at 886; Liberty Mut. Ins. Co. v. Raia Med. Health, P.C., 140 AD3d at 1031; One Beacon Ins. Group, LLC v. Midland Med. Care, P.C., 54 AD3d at 740). In the No Fault context, corporate practices evincing a willful, material noncompliance with licensing and incorporation statutes may establish a medical provider’s ineligibility to receive reimbursement (Andrew Carothers, M.D., P.C. v. Progressive Ins. Co., 33 NY3d at 405, see State Farm v. Mallela, 4 NY3d 313, 321 [2005]; Radiology Today, P.C. v. GEICO Gen. Ins. Co., 32 Misc 3d 4, 7 [App Term 2d Dept 2011]). The elements of common law fraud need not be shown (Andrew Carothers, M.D., P.C. v. Progressive Ins. Co., 33 NY3d at 405) if noncompliance with the above described licensing requirement is established through admissible evidence. Failure to establish timely payment or denial of the claim precludes the insurer from offering evidence of its defense to non-payment (Viviane Etienne Med. Care, P.C. v. Country-Wide Ins. Co., 25 NY3d at 506; Fair Price Med. Supply Corp. v. Travelers Indem. Co., 10 NY3d at 563; Hospital for Joint Diseases v. Travelers Prop. Cas. Ins. Co., 9 NY3d at 318; Presbyterian Hosp. in City of N.Y. v. Maryland Cas. Co., 90 NY2d at 281-86). However, the defense that a health care provider is ineligible to receive No Fault insurance benefit payments is not subject to preclusion (All Boro Psychological Servs., P.C. v. Auto One Ins. Co., 35 Misc 3d 136[A], 2012 NY Slip Op 50777[U] *2 [App Term 2d Dept 2012]; Radiology Today, P.C. v. GEICO Gen. Ins. Co., 32 Misc d at 6; Midborough Acupuncture P.C. v. State Farm Ins. Co., 13 Misc 3d 58, 59 [App Term 2d Dept 2006]; A.B. Med. Servs. PLLC v. Utica Mut. Ins. Co., 11 Misc 3d 71 [App Term 2006]). In the instant matter, Defendant received Plaintiff’s Second Bill, Third Bill, and Fourth Bill on August 20, 2018, and the Fifth Bill on August 27, 2018, and denied the claims based on these bills on January 16, 2019. (see Motion, Schwarzenberg Aff. Ex. E). Defendant received the First Bill on September 11, 2018 and denied the claim based on this bill on January 28, 2019 (Id.). Defendant denied the claims for Plaintiff’s failure to provide requested verification. While Defendant denied Plaintiff’s claims well after the thirty (30) days required for timely payment or denial, Defendant may delay payment pending an investigation of Plaintiff’s alleged noncompliance with licensing and incorporation statutes, but only upon showing good cause to pursue the investigation (Andrew Carothers, M.D., P.C. v. Progressive Ins. Co., 33 NY3d at 405; State Farm v. Mallela, 4 NY3d at 322). A. Defendant’s Requests for Verification “An applicant from whom verification is requested shall, within 120 calendar days from the date of the initial request for verification, submit all such verification under the applicant’s control or possession or written proof providing reasonable justification for the failure to comply” (11 NYCRR §65-3.5[o]). In the instant matter and in a letter dated September 6, 2018, Defendant acknowledged receiving the Second Bill, Third Bill, Fourth Bill, and Fifth Bill and mailed to Plaintiff a request (“August Verification Request”) for additional verification (see Motion, Schwarzenberg Aff. Ex. A). Here, Plaintiff had one-hundred twenty (120) days to provide Defendant with requested verification under Plaintiff’s control or possession or a written explanation supporting Plaintiff’s failure to comply. In the August Verification Request, Defendant requested leases for twenty-four (24) different “office and practice locations,” an employment contract between Plaintiff and Shamalov PA, contracts for billing agreements covering the dates of service in the claims, account records for Chase Bank checking, savings, debit card, and Visa card from January 1, 2017 to date, Dr. Apazidis’ and Mr. Shamalov’s intake sheets and patient notes for each claim, W-2 forms issued by Plaintiff to Dr. Apazidis and Mr. Shamalov, and Plaintiff’s 2017 corporate tax return (see id.). In a letter dated September 26, 2018, Defendant acknowledged receiving the First Bill and mailed to Plaintiff a request (“September Verification Request”) (collectively with the August Verification Request, the “Verification Request”) for additional verification requesting the same documents as in the August Verification Request (see Motion Schwarzenberg Aff. Ex. C). Plaintiff was required to provide the verification requested in the August Verification Request by January 4, 2019, and the verification requested in the September Verification Request by January 24, 2019. In two (2) letters dated October 11 and November 2, 2018, Defendant made follow up requests for the documents (see Motion, Schwarzenberg Aff. Ex. B and D). The parties did not dispute that Plaintiff subsequently provided all the documents Defendant requested except for Plaintiff’s corporate tax returns for 2017, and account records for Chase Bank checking, savings, debit card, and Visa card. B. Good Cause for Requested Verification Defendant argued that Plaintiff’s 2017 corporate tax returns and account records for Chase Bank checking, savings, debit card, and Visa card were necessary to verify the medical necessity of the billed services, and whether the ownership, control, and operation of Plaintiff complied with New York State licensing requirements. Plaintiff countered that Defendant failed to respond to Plaintiff’s objections to the Verification Request, show good cause for the remaining documents requested, or substantiate the necessity of the request. The Court notes that both Plaintiff’s and Defendant’s supporting documents indicate that Plaintiff in the instant matter had various claims resulting from different assignors, including Plaintiff assignor in the matter before this Court, pending with the Defendant. Contrary to Plaintiff’s contention, tax returns and bank statements were probative on whether a medical service provider complied with licensing laws (see All Boro Psychological Servs., P.C. v. Auto One Ins. Co., 2012 NY Slip Op 50777[U] *1-2; Q-B Jewish Med. Rehabilitation, P.C. v. Allstate Ins. Co., 33 Misc 3d 64, 66 [App Term 2d Dept 2011], see Dore v. Allstate Indem. Co., 264 AD2d 804, 804-05 [2d Dept 1999]). While mere allegations of fraud would be sufficient to sustain a motion to compel discovery of evidence of noncompliance with licensing laws (see Lexington Acupuncture, P.C. v. General Assur. Co., 35 Misc 3d 42, 43 [App Term 2d Dept 2012]; Medical Polis, P.C. v. Progressive Specialty Ins. Co., 34 Misc 3d 153[A], 2012 NY Slip Op 50342[U] *2 [App Term 2d Dept 2012]), here, Defendant sought summary judgment, which requires admissible evidence (see Nationwide Affinity Ins. Co. of Am. v. Acuhealth Acupuncture, P.C., 155 AD3ed at 886; One Beacon Ins. Group, LLC v. Midland Med. Care, P.C., 54 AD3d at 740; Vista Surgical Supplies, Inc. v. Utica Mut. Ins. Co., 22 Misc 3d 142[A], 2009 NY Slip Op 50493[U] *2 [App Term 2d Dept 2009]; Oleg Barshay, P.C. v. State Farm Ins. Co., 14 Misc 3d 74, 78 [App Term 2d Dept 2006]). In our instant matter, Defendant failed to support its good cause with admissible evidence for investigating Plaintiff’s alleged noncompliance with the licensing statutes in a summary proceeding as explained below. Defendant presented an affidavit sworn July 24, 2019, in which Huddle, an investigator in Defendant’s Special Investigative Unit, detailed Defendant’s investigation of Plaintiff, as part of an alleged broader scheme of non-compliance with licensing laws, leading to the Verification Request at issue. In her affidavit, Huddle quoted Dr. Apazidis’ testimony at an examination under oath (“EUO”) to demonstrate Dr. Apazidis’ lack of knowledge of Plaintiff’s business operations, non-physician Shamalov’s unusually greater role in those operations, and inconsistencies with the documents Plaintiff provided in response to Defendant’s Verification Request regarding Shamalov’s bonus, the principal location of Plaintiff’s business, and the existence of a written contract between Plaintiff and the company retained to handle medical billing. Since Defendant failed to present the transcript of Dr. Apazidis’ EUO to support its motion, Huddle’s account of Dr. Apazidis’ EUO testimony is hearsay (see Alleviation Med. Servs., P.C. v. Allstate Ins. Co., 191 AD3d 934, 935 [2d Dept 2021]; Wells Fargo Bank, N.A. v. Sesey, 183 AD3d 780, 783 [2d Dept 2020]; Jamaica Dedicated Med. Care, P.C. v. Praetorian Ins. Co., 47 Misc 3d 147[A], 2015 NY Slip Op 50756[U] *1 [App Term 2d Dept 2015]). Huddle also quoted an affirmation of Dr. Apazidis dated April 2, 2019, to illustrate an inconsistency between Dr. Apazidis’ claim that the business of Plaintiff was still growing so he could not pay himself his full salary and his testimony that Shamalov was paid $300,000.00 per year. Again, Defendant did not present Dr. Apazidis’ affirmation, which rendered Huddle’s assertion hearsay (Alleviation Med. Servs., P.C. v. Allstate Ins. Co., 191 AD3d at 935, see United Specialty Ins. v. Columbia Cas. Co., 186 AD3d 650, 651 [2d Dept 2020]; Wells Fargo Bank, N.A. v. Sesey, 183 AD3d at 783). In Defendant’s Opposition to Cross-Motion, Defendant noted that the EUO transcripts were “unimportant, since the claim which is the subject of the motion for summary judgment was not the subject of the EUO, and plaintiff [did] not dispute any of the statements made in the Huddle affidavit” (Opposition to Cross-Motion, Schwarzenberg Aff. at 12). Here, the fact remains, however, that Defendant relied on the truth of Dr. Apazidis’ EUO testimony and his affirmation to establish good cause for requesting verification from Plaintiff which in the context of a summary judgment motion requires admissible evidence. Since Defendant failed to demonstrate its prima facie entitlement to a judgment as a matter of law, the court must deny Defendant’s motion for summary judgment (Pullman v. Silverman, 28 NY3d 1060, 1063 [2016]; United Specialty Ins. v. Columbia Cas. Co., 186 AD3d at 651-52; Matter of Long Is. Power Auth. Hurricane Sandy Litig., 165 AD3d 1138, 1140 [2d Dept 2018]; Nationwide Affinity Ins. Co. of Am. v. Acuhealth Acupuncture, P.C., 155 AD3d at 887). That Plaintiff did not dispute any of Huddle’s statements is irrelevant given that it is Defendant’s burden in the first instance to demonstrate its entitlement to a summary judgment. C. Requirement that Insurer Advise Before Denial “[A]n insurer may issue a denial if, more than 120 calendar days after the initial request for verification, the applicant has not submitted all such verification under the applicant’s control or possession or written proof providing reasonable justification for the failure to comply, provided that the verification request so advised the applicant as required in section 65-3.5(o) of this Subpart” (11 NYCRR §65-3.8[b][3]) (emphasis added). In pertinent part, 11 NYCRR §65-3.5[o] provides that the “insurer shall advise the applicant in the verification request that the insurer may deny the claim if the applicant does not provide within 120 calendar days from the date of the initial request either all such verification under the applicant’s control or possession or written proof providing reasonable justification for the failure to comply.” Thus Defendant’s denial of Plaintiff’s claims for failing to provide requested verification was contingent upon Defendant advising Plaintiff of the consequences for noncompliance. Here, Defendant’s Verification Request and Defendant’s follow up request letters dated October 11 and November 2, 2018 all advised that: …pursuant to 11 NYCRR 65-3.5(o), State Farm may deny the claim if NY Chiro and Rehab, P.C. does not provide within 120 calendar days from the date of this initial verification request all of the documents identified above under NY Chiro and Rehab, P.C.’s control or possession or written proof providing reasonable justification for the failure to comply… (Motion, Schwarzenberg Aff. Ex. A, B, C and D). The Court notes that Plaintiff in the instant matter is Apazidis, M.D., P.C., not NY Chiro and Rehab, P.C.. Since Defendant’s letters advised that Defendant would deny Plaintiff’s claims if “NY Chiro and Rehab, P.C.” failed to comply with the verification request for documents under the control or in possession of “NY Chiro and Rehab, P.C.,” Defendant failed to comply with the requirement in 11 NYCRR §65-3.5[o] that notices requesting verification advise Plaintiff that failure to provide the requested verification under its control within 120 days would allow Defendant to deny the claims. Given that “NY Chiro and Rehab P.C.” appears in the advisory of all four (4) separate letters, reference to that entity is less likely to be a typographical error (see Galetta v. Galetta, 21 NY3d 186, 196 [2013]). Alleged typographical errors in correspondence have been given legal effect (see Iannucci v. 70 Washington Partners, LLC, 51 AD3d 869, 870-71 [2d Dept 2008]). It is noted that Plaintiff presented a letter dated October 31, 2018, in which Plaintiff’s counsel advised Defendant that it did not represent NY Chiro and Rehab, to which Defendant referred in its letters (see Cross-Motion, Aff. of Justin Rosenbaum Ex. A). Plaintiff’s counsel, however, did not suggest any confusion by Plaintiff from Defendant’s reference to NY Chiro and Rehab in Defendant’s verification request letters addressed to Plaintiff. Here, even if Defendant’s letters furnished Plaintiff with constructive notice that Plaintiff’s claims would be denied if Plaintiff failed to provide requested verification within 120 days, which Defendant did not argue, that would have not satisfied the requirement pursuant to 11 NYCRR §65 that Defendant must advise Plaintiff of the consequences. Defendant’s motion for summary judgment dismissing Plaintiff’s complaint is denied. D. Plaintiff’s Cross-Motion Regarding the Cross-Motion, Plaintiff bore the burden to show it submitted the statutory claim forms indicating the fact and amount of the loss sustained and “that payment of no-fault benefits was overdue” (Viviane Etienne Med. Care, P.C. v. Country-Wide Ins. Co., 25 NY3d at 501; New York Hosp. Med. Ctr. of Queens v. QBE Ins. Corp., 114 AD3d 648, 648 [2d Dept 2014]; NYU-Hospital for Joint Diseases v. Esurance Ins. Co., 84 AD3d 1190, 1191 [2d Dept 2011]; Fair Price Med. Supply Corp. v. ELRAC Inc., 12 Misc 3d 119, 120 [App Term 2d Dept 2006]). Here, Defendant’s denial of claim forms dated January 16 and 28, 2019, acknowledging receipt of Plaintiff’s claims in August 2018 constituted prima facie evidence that Defendant received Plaintiff’s claims and that the denial was overdue (see Lopes v. Liberty Mut. Ins. Co., 24 Misc 3d 127[A], 2009 NY Slip Op 51279[U] *2 [App Term 2d Dept 2009]). However, an ineligibility of receiving No Fault insurance benefit due to non-compliance with licensing statutes defeats such prima facie showing. Based on foregoing discussion, Defendant had identified the existence of evidence in Plaintiff’s exclusive control which raised the issue of Plaintiff’ ineligibility to receive No Fault benefit payments. Because the remaining requested verification, i.e., Plaintiff’s 2017 corporate tax return and various financial statements, are still outstanding, factual issues exist as to Plaintiff’ eligibility to receive No Fault benefit payments. Since Defendant’s defense of Plaintiff’s ineligibility to receive No Fault benefit payments is not precluded by Defendant’s untimely denial of Plaintiff’s claims and Plaintiff still has not provided the requested verification, this Court also must deny Plaintiff’s Cross-Motion (CPLR 3212[f]; RLC Med., P.C. v. Allstate Ins. Co., 29 Misc 3d 134[A], 2010 NY Slip Op 51962[U] *1 [App Term 2d Dept 2010]; Points of Health Acupuncture, P.C. v. Lancer Ins. Co., 28 Misc 3d 133[A], 2010 NY Slip Op 51338[U] *3 [App Term 2d Dept 2010]; Five Boro Psychological Servs., P.C. v. AutoOne Ins. Co., 27 Misc 3d 89, 90 [App Term 2d Dept 2010]). IV. Order Accordingly, it is ORDERED that Defendant’s Motion for summary judgment is denied, and it is further ORDERED that Plaintiff’s Cross-Motion for summary judgement is denied. This constitutes the DECISION and ORDER of the Court. Dated: May 26, 2021
