Superior Oxygen & Ortho Supplies, Ltd. v Auto One Ins. Co.

[*1] Superior Oxygen & Ortho Supplies, Ltd. v Auto One Ins. Co. 2012 NY Slip Op 50348(U) Decided on February 21, 2012 Appellate Term, Second Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on February 21, 2012
SUPREME COURT OF THE STATE OF NEW YORK
APPELLATE TERM: 2nd, 11th and 13th JUDICIAL DISTRICTS
PRESENT: : GOLIA, J.P., WESTON and RIOS, JJ
. x

Superior Oxygen & Ortho Supplies, Ltd. as Assignee of DENIS CHERVYAKOV, ALLAH McQUEEN and VIKTOR KOMAROV, Appellant,

against

Auto One Ins. Co., Respondent. x

Appeal from an order of the Civil Court of the City of New York, Kings County (Wavny Toussaint, J.), entered July 15, 2010. The order denied plaintiff's motion for summary judgment and granted defendant's cross motion for summary judgment dismissing the complaint.

ORDERED that the order is reversed, without costs, plaintiff's motion for summary judgment is granted, defendant's cross motion for summary judgment dismissing the complaint is denied and the matter is remitted to the Civil Court for the calculation of statutory interest and an assessment of attorney's fees.

In this action by a provider to recover assigned first-party no-fault benefits, plaintiff appeals from an order which denied its motion for summary judgment and granted defendant's cross motion for summary judgment dismissing the complaint.

Plaintiff established its prima facie entitlement to summary judgment by proof of the submission to defendant of the claim forms, proof of the fact and the amount of the loss sustained, and proof that defendant had failed to pay or deny the claims within the requisite 30-day period (see Insurance Law § 5106 [a]; Westchester Med. Ctr. v Nationwide Mut. Ins. Co., 78 AD3d 1168 [2010]; Ave T MPC Corp. v Auto One Ins. Co., 32 Misc 3d 128[A], 2011 NY Slip Op 51292[U] [App Term, 2d, 11th & 13th Jud Dists 2011]). Consequently, the burden shifted to defendant to raise a triable issue of fact (see Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]).

In opposition to plaintiff's motion and in support of its own cross motion for summary judgment, defendant failed to establish that the examination under oath (EUO) scheduling letters had been timely mailed (see St. Vincent's Hosp. of Richmond v Government Empls. Ins. Co., 50 AD3d 1123 [2008]) and that the 30-day claim determination period (see Insurance Department Regulations [11 NYCRR] § 65-3.8) had been tolled. As a result, defendant failed to establish that its denial of claim forms were timely and, thus, that it is not precluded from raising the failure of plaintiff's assignors to appear at the EUOs as a defense (see Presbyterian Hosp. in City of NY v Maryland Cas. Co., 90 NY2d 274, 282 [1997]; Infinity Health Prods., Ltd. v Progressive [*2]Ins. Co., 28 Misc 3d 133[A], 2010 NY Slip Op 51334[U] [App Term, 2d, 11th & 13th Jud Dists 2010]). Accordingly, the order is reversed, plaintiff's motion for summary judgment is granted, defendant's cross motion for summary judgment dismissing the complaint is denied and the matter is remitted to the Civil Court for the calculation of statutory interest and an assessment of attorney's fees pursuant to Insurance Law § 5106 (a) and the regulations promulgated thereunder.

Weston and Rios, JJ., concur.

Golia, J.P., dissents in a separate memorandum.

Golia, J., dissents and votes to affirm the order in the following memorandum:

I disagree with the majority's favoring of form over function and consequently find that the letters sent by the insurer qualify as verification requests, and thus tolled the 30-day time limit for denial of plaintiff's claim. Further, I find that the insurer established that these same letters were sent to plaintiff in a timely fashion.

This Appellate Term has previously held that " an insurer may not rely on a letter, even if denominated a verification request, that merely informs a claimant that a decision on the claim is delayed pending an investigation, and without specifying a particular form of verification and the person or entity from whom the verification is sought, to toll the 30-day claim determination period'" (Ocean Diagnostic Imaging P.C. v Citywide Auto Leasing Inc., 8 Misc 3d 138[A], 2005 NY Slip Op 51314[U], *1 [App Term, 2d & 11th Jud Dists 2005], quoting Melbourne Med. P.C. v Utica Mut. Ins. Co., 4 Misc 3d 92, 94 [App Term, 2d & 11th Jud Dists 2004]). I understand the holdings in Ocean Diagnostic Imaging P.C. and Melbourne Med. P.C. to place a greater value on function than form (see Prestige Med. & Surgical Supply, Inc. v Clarendon Natl. Ins. Co., 13 Misc 3d 127[A], 2006 NY Slip Op 51672[U], *3 [App Term, 2d & 11th Jud Dists 2006] [Golia, J., concurring] ["(Ocean Diagnostic Imaging P.C.) held that even if a document is labeled a verification request, it will not serve to toll the 30-day period if it merely informs that the claim is delayed pending an investigation but fails to specify the particular information sought"]). Hence, just as the documents in Ocean Diagnostic Imaging P.C. were deemed not to qualify as verification requests despite being labeled as such, the documents in the present matter conversely do qualify as verification requests despite their being labeled otherwise.

Here, despite the document being labeled a "delay letter," it informed plaintiff of both the delay and the "particular information sought." The insurer's letters explicitly state that information necessary for the investigation remains outstanding, namely "[a] statement from our policyholder and/or one of the parties involved in this loss." Additionally, these letters specifically note that "[a]s soon as we receive the requested information and our investigation is complete, we will be happy to give further consideration to your claim." These letters contain the very characteristics we identified in Ocean Diagnostic Imaging P.C. as necessary components of a verification request and inform plaintiff of what is required to facilitate the processing of the claim. The fact that these letters have been labeled as "delay letters" is subservient to the fact that the content and purpose of these letters is identical to a verification request.

Insurance Department Regulations (11 NYCRR) § 65-3.5 (b), addresses the manner in which additional verification may be requested by an insurer. Therein, it is stated: "Subsequent to the receipt of one or more of the completed verification forms, any [*3]additional verification required by the insurer to establish proof of claim shall be requested within 15 business days of receipt of the prescribed verification forms. Any requests by an insurer for additional verification need not be made on any prescribed or particular form."
In the present matter, the insurer sent numerous letters. These letters informed plaintiff that the claims were still subject to receipt of requested information by the insurer. The reason given for the continued investigation was that the insurer had not yet obtained statements from the policyholder(s) (i.e., the assignors). The letters concluded by informing plaintiff that, once the "requested information" (emphasis added) was received, the investigation would subsequently conclude and the insurer would issue a decision on the claim.

Plaintiff did supply defendant with the initial verification forms (NYS Form N-3), and a copy of those forms were attached to plaintiff's motion submitted below. Hence, any other verification required by defendant subsequent to the receipt of the initial verification would fall under the governance of Insurance Department Regulations (11 NYCRR) § 65-3.5 (b) as "additional verification." Such "additional verification need not be made on any prescribed or particular form" (Insurance Department Regulations [11 NYCRR] § 65-3.5 [b] [emphasis added]). Thus, not only may an insurer request such verification simply by sending a letter, it would appear even a verbal request would suffice under the wording of section 65-3.5 (b).

Insurance Department Regulations (11 NYCRR) § 65-3.5 (b) provides that if an insurer has not received the additional verification sought within 30 days of the "original request, the insurer shall" make a second request within 10 days. None of the letters sent by the insurer is this case fell outside this 40-day window. The insurer first received the bills from plaintiff on September 9, 2002 (the first Chervyakov claim), September 26, 2002 (the second Chervyakov claim), August 26, 2002 (the first Komarov claim) and September 5 (the second Komarov claim). The letters sent by the insurer concerning the Chervyakov claims were dated September 6, October 7, and October 29. The letters addressing the Komarov claims were dated September 6, September 19, October 7 and October 21.

Indeed, the insurer submitted the affidavit of Marie Murad, a Senior Claims Examiner for defendant, attesting to the fact that these letters were mailed on the dates listed above. Ms. Murad also testified in the affidavit to the fact that the insurer had made efforts to obtain statements from the assignors, however these efforts "proved futile." As there exists no prescribed form in which additional verification requests must be made, the efforts engaged in by the insurer to obtain needed statements from the allegedly injured parties is more than sufficient to qualify as verification requests.

Finally, when these efforts to obtain statements failed to produce any cooperation, the insurer retained a law firm to conduct examinations under oath ("EUOs") of the assignors. The first EUO scheduling letter was mailed to both assignors on October 28, 2002. Neither assignor appeared for the EUO scheduled as a result of the first letter. A second scheduling letter was mailed to both assignors on November 11, 2002, and again neither assignor appeared for the scheduled EUO. These letters were sent not only to the assignors, but the assignors' attorney as well. The record is devoid of any evidence that the assignors or their attorney made any response [*4]to these scheduling letters or attempted to participate in these duly scheduled EUOs. Indeed, the record includes transcripts from both attempted EUOs. Therein, the insurer's attorney states that having appeared at the duly scheduled time and place to conduct the EUOs, both the assignors and their attorney had failed to appear.

As an assignor's participation in a reasonably scheduled EUO is a condition precedent for payment of a claim, the insurer was within its rights to deny the claim on that basis. Furthermore, because of the insurer's diligent efforts to obtain statements from the assignors, as chronicled by the many letters discussed above, the 30-day deadline for a denial had been properly tolled. Thus, the insurer's denial was timely and proper, and consequently there exists more than enough evidence to defeat plaintiff's motion for summary judgment as well as give credence to defendant's cross motion for summary judgment.
Decision Date: February 21, 2012