State Farm Mut. Auto. Ins. Co. v Farescal

[*1] State Farm Mut. Auto. Ins. Co. v Farescal 2009 NY Slip Op 50937(U) [23 Misc 3d 1125(A)] Decided on May 13, 2009 Supreme Court, Queens County Weiss, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through May 29, 2009; it will not be published in the printed Official Reports.

Decided on May 13, 2009
Supreme Court, Queens County

State Farm Mutual Automobile Insurance Company, Plaintiff,

against

Manuel Farescal, M.D., All Family Medical, P.C., Universal Medical, P.C., Adnan Munawar, Painpro Medical, P.C. and P. Clifford Lobrutto, Defendants.



230912008

Allan B. Weiss, J.

Upon the foregoing papers it is ordered that the motion is determined as follows:

Plaintiff, a provider of automobile insurance policies which include coverage under the Comprehensive Automobile Insurance Reparations Act (the No-Fault Law) (presently codified in article 51 of the Insurance Law), commenced this action to recover damages for common-law fraud and unjust enrichment, and for a judgment declaring that the plaintiff has no obligation to pay no-fault claims submitted by the professional corporation defendants as assignees of policyholders. Plaintiff alleges, among other things, that defendant professional services corporations were fraudulently incorporated in the name of defendant Manuel Farescal, M.D., a physician, while, in fact, the professional corporations were owned, operated, and controlled by defendants Adnan Munawar and P. Clifford LoBrutto, unlicensed persons, in violation of applicable statutes and regulations. Plaintiff also alleges defendant professional corporations are not, and were not, entitled to receive such payments because they are not owned and controlled solely by a licensed medical physician and the services provided were not rendered by employees but, rather, by independent contractors in violation of state law (see State Farm Mut. Auto. Ins. Co. v Robert Mallela, 4 NY3d 313 [2005]; One Beacon Ins. Group, LLC v Midland Medical Care, P.C., 54 AD3d 738 [2008]).

In the third cause of action of the complaint, plaintiff alleges that defendants All Family and [*2]Universal billed it under the No-Fault Law for professional health services provided by independent contractors having no employment relationship with the respective defendants, and in the fourth cause of action, plaintiff alleges that defendant Painpro likewise billed it under the No-Fault Law for professional health services provided by independent contractors having no employment relationship with defendant Painpro. Plaintiff also alleges that these defendant professional corporations are not legally entitled to collect payment for no-fault benefits for professional health services not actually provided by an employee of defendants All Family, Universal and Painpro, respectively. Plaintiff further alleges that it is entitled to a declaration that it is not obligated to pay defendants All Family, Universal and Painpro no-fault benefits for charges submitted to it where professional health services were rendered by independent contractors.

The Farescal defendants and defendant P. Clifford LoBrutto each served an answer denying the material allegations of the complaint, and asserting various affirmative defenses.

It is well established that the proponent of a summary judgment motion "must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact," (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; Zuckerman v City of New York, 49 NY2d 557 [1980]).

To the extent the Farescal defendants move for partial summary judgment declaring that six opinion letters authored by the Insurance Department are irrational and not entitled to deference, the Farescal defendants have failed to assert any counterclaim for such affirmative relief.

Furthermore, a ruling, in the context of this case, that the opinion letters are irrational and not entitled to deference would constitute an advisory opinion. A state court lacks subject matter jurisdiction in cases when no justiciable controversy is presented (see Matter of New York State Inspection, Security & Law Enforcement Employees, Dist. Council 82, AFSCME, AFL-CIO v Cuomo, 64 NY2d 233, 241, n 3 [1984]; Morrison v Budget Rent A Car Systems, Inc., 230 AD2d 253, 258-259 [1997]). It is well settled law that "[t]he courts of New York do not issue advisory opinions for the fundamental reason that in this State [t]he giving of such opinions is not the exercise of the judicial function' (Matter of State Indus. Commn., 224 NY 13, 16 [1918]) . . .," (Cuomo v Long Island Light Co., 71 NY2d 349, 354 [1988]).

Any ruling by the court herein regarding the opinion letters would not be dispositive of a cause of action asserted by plaintiff (see New York Pub. Interest Research Group v Carey, 42 NY2d 527, 531 [1977]; State Farm Fire & Cas. Co. v LiMauro, 103 AD2d 514, 517-518 [1984], affd 65 NY2d 369 [1985]; see generally Joint Queensview Housing Enterprise, Inc. v Grayson, 179 AD2d 434 [1992] [advisory opinion letters did not constitute final determinations of tax liability by city for purposes of article 78 proceeding, and cooperatives were not aggrieved by advisory opinion letters so as to make controversy ripe for judicial determination]; see also Matter of New York State Assn. of Life Underwriters v New York State Banking Dept., 190 AD2d 338 [1993], affd 83 NY2d 353 [1994] [article 78 proceeding to annul opinion letters and to declare that the sale of annuities is not an "incidental power" contemplated by Banking Law § 96(1)]; cf. Medical Society of State v Serio, 100 NY2d 854 [*3][2003] [article 78 proceeding to annul regulation altering no-fault system]). Nothing about the opinion letters themselves constitutes a final determination by the State regarding the propriety of plaintiff's actions, and the Farescal defendants are not aggrieved by their issuance. Rather, the question of whether plaintiff properly may withhold payments of no-fault benefits to defendants All Family, Universal and Painpro in instances where professional health services were rendered by independent contractors, as opposed to their employees, is one of law, which must be decided based upon interpretation of statute and regulation, and case law.

"In matters of statutory and regulatory interpretation, legislative intent is the great and controlling principle, and the proper judicial function is to discern and apply the will of the [enactors]' (Matter of ATM One v Landaverde, 2 NY3d 472, 476-477 [2004], quoting Mowczan v Bacon, 92 NY2d 281, 285 [1998] [internal quotation marks omitted]). Legislative intent may be discerned from the face of a statute, but an apparent lack of ambiguity is rarely, if ever, conclusive . . . . Generally, inquiry must be made of the spirit and purpose of the legislation, which requires examination of the statutory context of the provision as well as its legislative history' (Matter of Sutka v Conners, 73 NY2d 395, 403 [1989]; see Matter of ATM One v Landaverde, 2 NY3d at 477; Mowczan v Bacon, 92 NY2d at 285). Moreover, regulations . . . should be construed to avoid objectionable results' (Matter of ATM One v Landaverde, 2 NY3d at 477)" East Acupuncture, P.C. v Allstate Ins. Co., AD3d , 873 NYS2d 335 [2009]). Such interpretation may also be informed by opinion letters regarding the interpretation of applicable regulations, issued by the agency which promulgated them, so long as the interpretation comports with the statute and is not irrational or unreasonable (see generally LMK Psychological Services, P.C. v State Farm Mut. Auto. Ins. Co., 12 NY3d 217 [2009]; Matter of Council of City of NY v. Public Service Comm., 99 NY2d 64, 74 [2002]; 90 NY2d 545, 551-552 [1997]). Thus, that branch of the motion by the Farescal defendants for partial summary judgment declaring the six opinion letters authored by the Insurance Department to be irrational and not entitled to deference is denied.

The Farescal defendants seek partial summary judgment dismissing the third and fourth causes of action on the ground they fail to state a claim. The Farescal defendants assert an insurer may not deny payment for no-fault benefits on the ground that the professional health services billed to plaintiff were performed by independent contractors. The Farescal defendants, therefore, argue plaintiff cannot obtain a judgment declaring that defendants All Family, Universal and Painpro are not entitled to collect no-fault benefits for charges submitted to it when such professional health services were rendered by independent contractors. The court notes that the Farescal defendants make no factual argument that the professional health services billed to plaintiff were performed by their employees, or that they exercised a particular level of control over the independent contractors. Their motion raises purely legal arguments regarding the propriety of plaintiff's withholding of payments to the professional corporations based upon the rendering of services by independent contractors.

CPLR 3001, in relevant part, provides: "The supreme court may render a declaratory judgment having the effect of a final judgment as to the rights and other legal relations of the parties to a justiciable controversy whether or not further relief is or could be claimed." "An action is [*4]justiciable when the controversy presented touches the legal relations of the parties having adverse interests from which harm is presently flowing or could flow in the future in the absence of a court determination of the parties' rights" (Initiative For Competitive Energy v Long Is. Power Auth., 178 Misc 2d 979, 989 [1998]). "The controversy must be capable of disposition and be presented in an adversarial context with a set of concrete facts" (Goodwill Adv. Co. v State Liq. Auth., 14 AD2d 658 [1961]). The complaint herein demonstrates the existence of a controversy between the parties regarding plaintiff's withholding of payments to defendant professional corporations to the extent the services were rendered by independent contractors, and the practical need for its resolution.

The No-Fault Law, which supplants common-law tort actions for most victims of automobile accidents with a system of no-fault insurance, has as its primary aims to ensure prompt compensation for losses incurred by accident victims without regard to fault or negligence, to reduce the burden on the courts and to provide substantial premium savings to New York motorists (see Medical Society of State v Serio, 100 NY2d 854, 860 [2003]). The Superintendent has promulgated regulations implementing the No-Fault Law, currently contained in 11 NYCRR Part 65. Section 65-3.11(a) of that part (formerly section 65.15[j][1]), in relevant part, provides, "An insurer shall pay benefits for any element of loss, . . ., directly to the applicant or . . . upon assignment by the applicant . . ., shall pay benefits directly to providers of health care services . . . ."

11 NYCRR 65-3.11(a) and its precursor, 11 NYCRR 65-3.15(j)(1), have been interpreted to mean that a medical provider cannot recover assigned no-fault benefits if services were provided by an independent contractor rather than by it or its employees (see Health & Endurance Medical, P.C. v Liberty Mut. Ins. Co., 19 Misc 3d 137[A], 2008 NY Slip Op 50864(U) [NY Sup App Term, 2d and 11th Jud Dists (2008)]). In Health & Endurance, a provider sought to recover assigned first-party no-fault benefits for services which were not rendered by it or its employees, but rather by a treating provider who was an independent contractor. The Appellate Term held that the plaintiff was not a "provider" of the medical services rendered within the meaning of Insurance Department Regulations (11 NYCRR) § 65-3.11[a]), and, therefore, was not entitled to recover "direct payment" of assigned no-fault benefits from the defendant insurer. Such holding is consistent with the holdings in A.M. Medical Services, P.C. v Progressive Cas. Ins. Co., (22 Misc 3d 70, 2008 NY Slip Op 28528, [App Term, 2d, 11th and 13th Jud Dists (2008)]); Health & Endurance Med. P.C. v State Farm Mut. Auto. Ins. Co., (12 Misc 3d 134[A], 2006 NY Slip Op 51191[U] [App Term, 2d and 11th Jud Dists 2006]); Craig Antell, D.O., P.C. v New York Cent. Mut. Fire Ins. Co., (11 Misc 3d 137[A], 2006 NY Slip Op 50521[U] [App Term, 1st Dept 2006]); Rockaway Blvd. Medical P.C. v Progressive Ins., (9 Misc 3d 52, 2005 NY Slip Op 25278 [App Term, 2d Dept 2005]); A.B. Med. Servs. PLLC v Liberty Mut. Ins. Co., (9 Misc 3d 36 [App Term, 2d and 11th Jud Dists 2005]); A.B. Med. Servs. PLLC v New York Cent. Mut. Fire Ins. Co., (8 Misc 3d 132[A], 2005 NY Slip Op 51111[U] [App Term, 2d and 11th Jud Dists 2005]). These opinions of the Appellate Term are persuasive authority, and the court is convinced of their reasoning. Under such circumstances, the third and fourth causes of action asserted by plaintiff state viable claims for declaratory relief. [*5]

That branch of the motion by the Farescal defendants for summary judgment dismissing the third and fourth causes of action asserted against them is denied.

Dated: May 13, 2009

J.S.C.