Nearly 15 years ago, in State Farm Mutual Automobile Ins. Co. v. Mallela, 4 N.Y.3d 313 (2005), the New York Court of Appeals ruled that an insurer may withhold payment under New York’s no-fault law for medical services provided by a professional medical corporation based on its “willful and material failure to abide by” the state’s licensing and incorporation statutes without needing to show specific instances of billing fraud. Over the years, insurers have relied on that decision to avoid paying claims submitted by medical providers that were secretly owned by non-physicians in violation of New York’s prohibition of the corporate practice of medicine.

The court has just issued a new decision, Andrew Carothers, M.D., P.C. v. Progressive Ins. Co., 2019 N.Y. Slip Op. 04643 (N.Y. June 11, 2019), confirming that it meant what it said in Mallela: No evidence of fraud, fraudulent intent, billing fraud, or fraud of any sort is needed to demonstrate that a health care provider is ineligible for no-fault reimbursement when it is in violation of applicable licensing rules.

Background