FAIR PRICE MEDICAL SUPPLY CORP v. ELRAC INC (2006)

Appeal from an order of the Civil Court of the City of New York, Kings County (Arlene Bluth, J.), entered April 21, 2005.   The order denied plaintiff's motion for summary judgment and granted defendants' cross motion to compel discovery to the extent of ordering plaintiff to submit to an examination before trial and produce the records and documents requested in defendants' notice to take deposition.

Order affirmed without costs.

Plaintiff commenced this action to recover assigned first-party no-fault benefits for medical supplies furnished to its assignor.   Plaintiff moved for summary judgment and defendants cross-moved to compel plaintiff to produce outstanding discovery and to appear for an examination before trial, or to strike plaintiff's complaint and dismiss the action for plaintiff's failure to provide discovery.   By order entered April 21, 2005, from which the plaintiff now appeals, the court below denied plaintiff's motion and granted defendants' cross motion to the extent of ordering a representative of plaintiff to appear for a deposition and to produce the records and documents requested in defendants' notice to take deposition.

 To establish a prima facie entitlement to summary judgment, plaintiff was required to demonstrate that it submitted the statutory claim forms, setting forth the fact and the amounts of the losses sustained, and that payment of no-fault benefits was overdue (see Insurance Law § 5106[a];  Mary Immaculate Hosp. v. Allstate Ins. Co., 5 A.D.3d 742, 774 N.Y.S.2d 564 [2004];  Amaze Med. Supply v. Eagle Ins. Co., 2 Misc.3d 128(A), 2003 N.Y. Slip Op. 51701[U], 2003 WL 23310886 [App. Term, 2d & 11th Jud. Dists.] ).   While the affidavit submitted by plaintiff was insufficient to establish the mailing of the appended claim forms to defendants, said deficiency was cured by defendant's acknowledgment of receipt on its denial of claim form (see A.B. Med. Servs. v. New York Cent. Mut. Fire Ins. Co., 3 Misc.3d 136(A), 2004 N.Y. Slip Op. 50507[U], 2004 WL 1302031 [App. Term, 2d & 11th Jud. Dists.] ).   Thus, plaintiff established a prima facie case entitling it to summary judgment and the burden shifted to defendant to demonstrate the existence of a triable issue of fact (see Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324, 508 N.Y.S.2d 923, 501 N.E.2d 572 [1986] ).

 In opposition to plaintiff's motion, defendants asserted that “there was a fraudulent scheme in the happening of the accident,” a defense which survives preclusion (see Matter of Metro Med. Diagnostics v. Eagle Ins. Co., 293 A.D.2d 751, 741 N.Y.S.2d 284 [2002] ).   We find that defendants' papers sufficiently demonstrate defendants' “founded belief that the alleged injur[ies] do[ ] not arise out of an insured incident” (Central Gen. Hosp. v. Chubb Group of Ins. Cos., 90 N.Y.2d 195, 199, 659 N.Y.S.2d 246, 681 N.E.2d 413 [1997] ).   Consequently, plaintiff's motion for summary judgment was properly denied (see Zuckerman v. City of New York, 49 N.Y.2d 557, 427 N.Y.S.2d 595, 404 N.E.2d 718 [1980] ).

With respect to defendants' cross motion to compel discovery, we similarly find no basis to disturb the order of the court below.   In addition to defendants' entitlement to seek discovery as to the above mentioned fraud defense, defendants interposed a second defense for which they seek discovery.   Said defense alleged an improper self-referral in violation of the Public Health Law (§ 238-d) based upon defendants having determined that the assignor in the instant case was 1 of 40 people injured in multiple accidents who were all treated by the same chiropractor who prescribed virtually the same medical equipment to each injured person and that each injured person “coincidentally” obtained such medical equipment from plaintiff who then sought to recover from defendants.  Public Health Law § 238-d and the regulations promulgated thereunder by the New York State Department of Health prohibit, among other things, a referral by a health care provider to certain enumerated types of entities, including a medical supply house such as plaintiff herein, if the health care provider or such provider's immediate family has a financial interest in the entity, unless the health care provider adequately discloses the financial interest to his or her patient (see Public Health Law § 238-d [1];  10 NYCRR 34-1.2[f], [g];  34-1.5).   Indeed, if a health care provider makes a prohibited referral, the health care provider could be subject to civil and criminal penalties (see Public Health Law §§ 12, 12-b;  see generally Public Health Law § 238-a).

 In A.B. Med. Servs. PLLC v. Utica Mut. Ins. Co., 11 Misc.3d 71, 813 N.Y.S.2d 845 [App. Term, 2d & 11th Jud. Dists. 2006], we held that a defense based upon the fraudulent incorporation of a medical provider (State Farm Mut. Auto. Ins. Co. v. Mallela, 4 N.Y.3d 313, 794 N.Y.S.2d 700, 827 N.E.2d 758 [2005] ) is not precluded even if it was not interposed in a timely denial.   So too, in the instant case, we hold that where a health care provider, who potentially faces civil and criminal penalties for an improper self-referral, seeks to recover assigned no-fault benefits arising from that referral through an entity in which he has an interest (see Public Health Law §§ 12, 12-b, 238-d [1];  10 NYCRR part 34;  Central Gen. Hosp. v. Chubb Group of Ins. Cos., 90 N.Y.2d 195, 659 N.Y.S.2d 246, 681 N.E.2d 413, supra;  see also Public Health Law § 238-a;  State Farm Mut. Auto. Ins. Co. v. Mallela, 4 N.Y.3d 313, 794 N.Y.S.2d 700, 827 N.E.2d 758, supra;  Presbyterian Hosp. in City of N.Y. v. Maryland Cas. Co., 90 N.Y.2d 274, 660 N.Y.S.2d 536, 683 N.E.2d 1 [1997];  Ozone Park Med. Diagnostic Assocs. v. Allstate Ins. Co., 180 Misc.2d 105, 689 N.Y.S.2d 616 [App. Term, 9th & 10th Jud. Dists. 1999] ), such a defense is not precluded even if it was not interposed in a timely denial.   Accordingly, defendants are entitled to discovery of matters relevant to its defense of a prohibited self-referral (see generally A.B. Med. Servs. PLLC v. Utica Mut. Ins. Co., 11 Misc.3d 71, 813 N.Y.S.2d 845, supra ).   We note that the record is bereft of any indication that plaintiff timely objected to said discovery demands and the information sought to be obtained by defendants was neither privileged under CPLR 3101 nor palpably improper (see Fausto v. City of New York, 17 A.D.3d 520, 522, 793 N.Y.S.2d 165 [2005];  see Marino v. County of Nassau, 16 A.D.3d 628, 791 N.Y.S.2d 438 [2005];  Garcia v. Jomber Realty, 264 A.D.2d 809, 695 N.Y.S.2d 607 [1999];  see generally Allen v. Crowell-Collier Pub. Co., 21 N.Y.2d 403, 288 N.Y.S.2d 449, 235 N.E.2d 430 [1968];  Shutt v. Pooley, 43 A.D.2d 59, 349 N.Y.S.2d 839 [1973] ).

While I agree with the ultimate disposition in the decision reached by the majority, I wish to emphasize that I disagree with certain propositions of law set forth in cases cited therein dealing with plaintiff's prima facie case which are inconsistent with my prior expressed positions and generally contrary to my views.

RIOS and BELEN, JJ., concur. GOLIA, J.P., concurs in a separate memorandum.