Country-Wide Ins. Co. v Sun Orthopedic Surgery PC

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Country-Wide Ins. Co. v Sun Orthopedic Surgery PC 2016 NY Slip Op 32345(U) November 21, 2016 Supreme Court, New York County Docket Number: 654031/2016 Judge: Carol R. Edmead Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [* 1] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: IAS PART 35 -------------------..::..--------:--------------------------------------X Country-Wide Insurance Company, Petitioner, Index No. 654031/2016 -against- DECISION & ORDER Sun Orthopedic Surgery PC a/a/o Katie Wang, Defendant. :i ; ' -------------------------------------------------------------------X CAROL R. EDMEAD, J.S.C.: MEMORANDUM DECISION In this Article 75 action, Petitioner Country-Wide Insurance Company (the "Insurer") moves pursuant to CPLR 751'l(b)(l)(i) and (iii) to vacate a'no-fault arbitration award issued by a lower arbitrator and affirmed ~y a master arbitrator in favor of Respondent Sun Orthopedic Surgery PC a/a/o Katie Wang·(the ''.Medical Provider"; "Wang"). 1 For the reasons set forth below, the Court denies the Petition and confirms the awards. Background Facts Katie Wang, the Medical Provider's assignee, was injured in a motor vehicle accident on I May 15, 2011, and sought treatment from the Medical Provider thereafter for injuries to her left '- shoulder. Wang appeared for an independent medical exam: (IME) on July 14, 2011, which resulted in the Insurer determining that no further treatment was necessary and issuing a general ; denial of all benefits effective July 24, 2011 (Respondent Exh C). Subsequent to that denial, Wang sought further treatment from the Medical Provider, including surgery. Because the Medical Provider did not submit claims for that additional treatment until March 13, 2015, / 1 To the extent that the Notice of Petition iAvokes both provisions, but the substantive Petition addresses only subsection (iii), the Court addresses only the latter. 2 of 8 [* 2] . ' " .J ~ ,, nearly four years after th.e supject accident, Insurer denied the claims as untimely on their face pursuant to 11NYCRR65-i'.1, which directs that written proof of claim shall be submitted no -, later than 45 days after servit'bs areirendered. 2 . !., The parties proceeded; to arbitration before Lower Arbitrator Rhonda Barry, Esq. (the "Lower Arbitrator"), who ruled in favor of the Medical Provider (Insurer Exh A, the "Lower Award"). In relevant part, Ldtver Arbitrator found that the Insurer's 2011."disclaimer of '' 1:' ' : coverage excused [the Medic~l Provider] from further compliance with conditions precedent . 4 . ,· ·l'J h 1 regarding time limitations fo submissions medical proofs bf loss,'' including the 45-day period. II! Master Arbitrator Victor J~ Hershdorfer (the "Master Arbitrator") confirmed the award on appeal ' , r' ., (Insurer Exh D, the "Master Award"), finding that. the Lower Award was not arbitrary, , ~~ ~. capricious, or incorrect as a 14atter bf law. The Insurer now petiti:ons, pursuant to CPLR 751 l(b)(l)(iii), to vacate both awards on the grounds that the Lower Arbitratbr exceeded her power 1Jy issuing an irrational and arbitrary " . ' and capricious award unsupp6rted by the evidence, and that the Master Arbitrator erred in . ,1 ·i. Ii affirming the award. ' ~} . In support of its Petiti~n, the Insurer argues that the.Awards were improper because: first, • ~' .. if ; ' .~1 ' \ \ the Medical Provider.did riotprove'medical necessity for t~e services ren&red; and second, the Medical Provider did not submit itsclaims within the applicable 45-dayperiod under the ' •! - ~ .: insurance policy, or provide areasonable justification for the delay. In opposition, the M~dical provider argues that the Petition is procedurally defective " because it was not initiated properly under the CPLR through personal service. Substantively, 2 The bills were first submitted {erlbneously) to Oxford Insurance, Wang's personal insilrer, which subsequently denied the claims on February 9, 2Pl5 wh~n it learned that the Insurer insured the vehicle in which Wang had been traveling. It is unclear when those Claims were originally submitted though, in any event, :• ... the Medical Provider] waited nearly four years to receive· ~ocumentation from Oxford that its daim had been rejected" (Lower Award at 3). 2 3 of 8 [* 3] the Medical Provider contends that the Lower and Master Awards were not arbitrary or capricious by arguing: first, that the Medical Provider made a prima facie case of entitlement to the benefits sought merely by filing a proof of claim that remains unrebutted by the Insurer; and second, that the Insurer's de~ial of,benefits absolved the Medical Provider from having to comply with the insurance policy's terms, including the 45-day claims submission period. The Medical Provider also requests attorneys' fees. In reply, the Insurer ~gues: first, that the Petition was served properly via personal service upon the Secretary of State~ the Medical Provider's registered agent; and second, that the ; Medical Provider has not demonstrated medical necessity for its claims. •·· Discussion Procedural Arguments ., Contrary to the Insurer's argument, service of the Petition upon counsel for the Medical· i Provider did not, by itself, confer jurisdiction. While CPLR 2103 allows papers to be served upon a party via that party's attorney, it allows such service only in a "pending action." Because review of an arbitration award is a "first application arising out of an arbitrable controversy," it must be commenced via the filing 'of initiating pleadings-·'in the case of this special proceeding, a petition (CPLR 304; Eagle' Ins. Co. v. Republic W Ins. Co., 21 Misc:3d 112l(A) [Sup Ct, Nassau County 2008], citingStar Boxing, Inc. v. DaimlerChrysler Motors Corp., 17 AD3d 372, .; 792 NYS2d 564 [2d Dept 2005]; accord Vento v All. Holding Companies, Ltd, 139 AD3d 530, 530, 33 NYS3d 13 [1st Dept 2016] ). Pursuant to CPLR 403[c], a notice of petition must be served in the same manner as a summons-service upon a party's attorney alone is not sufficient. Nevertheless, jurisdiction over the Medical Provider was, as argued by the Insurer, conferred via personal service upon the Secretary of State, the Provider's registered agent under 3 4 of 8 [* 4] Business Corporation Law (B,CL) 306. The Medical Provider has not disputed the validity of ' such service, and has acknowledged the Provider's status as a properly incorporated New York State medical corporation subject to the BCL (Affirm in Opp ~ 3; NYSCEF26; CPLR 31 l[a][l], " citing BCL 306). Thus, though service of the Petition by r6gular mail alone was not sufficient to confer jurisdiction, personal service of the Petition upon the Medical Provider's registered agent was proper. Substantive Arguments Generally, an arbitrator will only be deemed to have "exceeded" his or her power within the meaning of CPLR 7511 (b)(1 )(iii) under three circumstances: (1) the arbitrator has clearly exceeded a specifically enumerated limitation on his authority, (2) the decision is irrational, or (3) the award violates a strong pu~lic policy (Alexander, Practice Commentaries, CPLR 7511 :5, citing Kowaleski v. New York Stat~ Dep't. of Correctional Services, 2010, 16 NY3d 85, 90, 917 NYS2d 82, 85, 942 NE2d 291, 294 [2010]; Falzone v New York Central Mut. Fire Ins. Co., :) 2010, 15 NY3d 530, 534, 91.4 NYS2d 67, 68, 939 NE2d 1197, 1199 [2010] ). However, where, as ~ere, the parties are required by statute to arbitrate their dispute, due process requires "closer judicial scrutiny of the arbitrator's determination" (Mot~r Vehicle Accident Indemnification Corp. v. Aetna Casualty & Surety Co., 89 NY2d 214, 223, 652 NYS2d 584, 674 NE2d 1349 [1996]j Cigna Property & Casualty v Liberty Mut. Ins. Co., 12 AD3d 198, 783 NYS2d 810 [1st Dept 2004] ). This "more exacting standard" applies to both issues of fact I and law, provides that an award "must have evidentiary support and cannot be arbitrary and capricious" (City School District ~fthe City of NY v McGraham, 17 NY3d 917, 918, 934 NYS2d 768, 770, 958 NE2d, 897, S98 [2011] ). Notably, an arbitrator's decision may be upheld even where it is incorrect asia matter of law (MVAIC v Aetna, 89 NY2d at 224 [because multiple 4 5 of 8 [* 5] authorities had reasonably disagreed on the relevant issue, the arbitrator's decision was not "arbitrary or capricious or unsupported by any reasonable hypothesis"] ). As discussed by the Lower' Arbitrator, the no-fault regulations (and therefore the applicable insurance policy):provide that written proofs of claim must be submitted by medical providers within 45 days or, if submitted after that time, must be accompanied by a reasonable justification for the delay (Lower Award at 2-3, citing 11 NYCRR 65-1.1 and 11 NYCRR 65I ' 3 .3 [e] ). The Lower Arbitrator found that the Medical Provider's justification - that proofs of claim were submitted to the ,.wrong insurer - was not "reasonable" within the meaning of the H1 regulations (Lower Award at 3, citing Schoenberg v NYC. Transit Auth., 39 Misc3d 128(A), ' 971 NYS2d 74 [App Term 2d Dept 2013] ). Nevertheless, the Lower Arbitrator held that the Insurer's general denial constituted a complete repudiation of liability under its policy, which in tum excused the Medical Provider from compliance with conditions precedent to said policy, including the 45-day claim submission period (Lower Award at 3-4, citing State Farn-J Ins. Co. v Domotor, 266 AD2d 219, 220 [2d Dept 1999] ). "The insurance carrier must stand or fall upon the defense upon which it based its refusal to pay ... because no treatment was necessary" (id.). The Lower Arbitrator considered the Insurer's submission of a September 2, 2004 opinion letter issued by the t:Jew York State Insurance Department, which came to the opposite conclusion as Domotor; and found that the letter was "contrary to appellate law and the legal I premise that the no-fault regulations must be strictly construed" (Lower Award at 4). Based on this analysis, the Lower Arbitrator found that, after the Insurer's general denial, the Medical Provider had no obligation to comply with the 45-day claim submission deadline, and that the Insurer's denial on that basis' was improper because the Provider had established a prima facie 5 6 of 8 [* 6] ' entitlement to payment via submission of its claims. On appeal, the Master Arbitrator found that the Lower Award was not arbitrary, capricious, or incorrect as a matter of law (Insurer Exh D). The Court finds no basis to disturb either A ward b'ecause they are supported by the record and precedent. The· Lower A ward considered the relevant regulations and precedent and, based on Domotor's holding, rejected the Insurer's argument to the contrary. The Insurer's reliance here upon JR. Dugo, D.C. v Allstate Ins. Co. (26 Misc 3d 1215(A) [Civ Ct, Richmond County 2010]) is misplaced.because that case is non-precedential and, more importantly, distinguishable. 3 Though the Dugo.court did find that "no presumption of medical necessity attache[d] to the services rendered by the [medical provider]," the court did so only .because the provider failed to submit any proof of clai~, timely or not (Dugo at *2). 4 Implicit in that holding, and the reason it is distinguishable from the situation here, is that the submission of a claim - even an untimely claim, where the delay has been forgiven by the Insurer's policy repudiation - creates a presumption of medical necessity. Other cases state this p~inciple explicitly (see Presutto v Travelers Ins. Co., 17 Mis<c 3d 1121 (A) [Civ Ct NY County 2007], citing Dermatossian v NYC. Transit Auth., 67 NY2d 219; 224, 501 NYS2d 784, 787 [1986] ["A claimant to receive payment need only file a proof ofdaim ... and the insurers are obligated to honor it promptly or suffer the 0 statutory penalties ... "]; accord Amaze Med. Supply Inc. v Eagle Ins. Co., 2 Misc 3d 128(A) [App Term 2d Dept 2003] ). To the extent that a claim with supporting documentation was eventually Notably, like the Lower and Ma~ter Awards, the Dugo court cited favorably to Domitor, agreeing that an insurer's unequivocal repudiation of liabilitY meant that the insurer "could not insist upon adherence to the terms of its policy," including the 45-day claim submission requirement (Dugo, citing Domotor, 266 AD2d at 220 and Mtr. Of Arbitration between NY. Medica/Health v. NYC Transit Auth., 2009 NY Slip Op 51526U, 24 Misc3d 1219A [Civil \ Ct, Kings County 2009] ). 4 Indeed, the Dugo Court found that even the failure to submit any claim did not foreclose a medical provider from subsequently proving medical necessity at trial (Dugo at *2). 3 6 7 of 8 [* 7] submitted, and to the extent that the medical necessity of the claim remains substantively unrebutted, there is no basis to disturb the Lower and Master awards' findings. I Finally, with respect to the Medical Provider's request for fees, the" general rule is that ' attorneys' fees and disbursements are incidents oflitigation and the prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties or by . ,•· statute or court rule (A.G. Ship Maintenance Corp. v Lezak, 69 NY2d 1, 5 [1986] ). To the extent that the Medical Provider does not cite any such provisions to justify additional attorneys' fees above what was already' granted by the Lower and Master Arbitrators, the Court confirms those amounts, but declines to award anything further. Conclusion Based on the foregoing, it is hereby ORDERED that the Petition of Country-Wide Insurance Company is denied in its entirety, and the awards of the Lower and Master Arbitrator are confirmed; and it is further ORDERED that the application of Respondent Sun Orthopedic Surgery for fees is denied; and it is further ORDERED that the Clerk may enter judgment accordingly, upon presentation of a proposed judgment consistent with this opinion; and it is further ORDERED that Respondent shall, within 20 days of entry, serve a copy of this Order > I with notice of entry upon all parties. I ' This constitutes the decision and order of the Court. ~r{_PLV Dated: November 21, 2016 Hon. Carol R. Edmead, J.S.C. 7 8 of 8 HON. CAROL R. EDMEAD J.S.C.

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