Josephson v Oxford Health Ins., Inc.

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Josephson v Oxford Health Ins., Inc. 2011 NY Slip Op 32914(U) October 26, 2011 Supreme Court, Nassau County Docket Number: 0443/07 Judge: Stephen A. Bucaria Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] SHORT FORM ORDER SUPREME COURT - STATE OF NEW YORK Present: HON. STEPHEN A. BUCARI . Justice TRI/lAS, PART NASSAU COUNTY JORDAN S. JOSEPHSON and JORDAN S. JOSEPHSON, M. , P. INDEX No. 0443/07 Plaintiffs MOTION DATE: Sept. 9, 2011 Motion Sequence # 001 -against- OXFORD HEALTH INSURNCE , INC. OXFORD HEALTH PLANS (NY), INC. and OXFORD HEALTH PLANS LLC Defendants. The following papers read on this motion: Notice of Motion........ ...... ......................... X Affirmation/Affidavit in Opposition......... XX Reply Affirmation..................................... X. Memorandum of Law................................ XX Reply Memorandum of Law...................... X is Motion by defendants for an order pursuant to CPLR 3211 dismissing the complaint denied in part. ranted in part and the plaintiffs Jordan S. Josephson , and Jordan S. Josephson , Inc. , Oxford , P. C. (Dr. Johnson) allege that the defendants Oxford Health Insurance ) failed to reimburse the Health Plans (NY), Inc. , and Oxford Health Plans , LLC (" Oxford" plaintiffs for medically necessary services that Dr. Josephson provided to defendants subscribers suffering from chronic sinus disease. In the within action , [* 2] JOSEPHSON v OXFORD HEALTH INSURANCE , INC., et al Index no. 0443/07 Dr. Josephson commenced this action on January 9 , 2007 , with the filing of a summons with notice. On or about June 1 , 2007 , Dr. Josephson served a verified complaint. On June 26 2007 , Oxford removed the action from this court to the United States District Court for the Eastern District ofN ew York, contending ERISA pre-emption. Dr. Josephson then moved in the Eastern District for remand back to this court. By opinion and order dated March 11 2008 , Judge Feuerstein granted Dr. Josephson s motion and remanded the case back to this Court. Rather than serve an answer to the complaint , defendants move to dismiss. Dr. Josephson is a ear , nose and throat physician with a specialty in functional endoscopic sinus surgery. " He is an " out-of-network" provider , i.e. , he has not entered into a contract with Oxford to provide covered healthcare services to its members pursuant to an agreed upon fee schedule. As an out-of-network provider , Dr. Josephson is not entitled to be paid directly by Oxford for any covered services he provided to its members. Rather , the members are obligated to pay his fees in full. Those members whose health plans provide benefits for services obtained from out-of-network providers can then seek reimbursement from Oxford for a portion of Dr. Josephson s biled charges. Members whose plans provide benefits for out-of-network services must first satisfy an annual deductible amount. Thereafter , depending upon the specific terms of the members ' respective plans , Oxford and the member typically each pay a portion of the provider s biled charge , depending on the usual , customary and reasonable charge (" UCR" ) for those services in that specific geographic area. The UCR typically is defined as the provider s biled charge or the amount . Oxford determines to be the reasonable charge , whichever is less , for a paricular covered service in the geographic area in which it was performed. While the portion of the UCR paid by the member and Oxford depends on the specific terms of each member s plan , under many plans Oxford pays 80% of the UCR, and the member pays the remaining 20% , as well as any difference between the reasonable charge (as determined by Oxford) and Dr. Josephson biled charge for that service. Oxford commenced an against Dr. Josephson in Supreme Court , New York County. Josephson. M.D. index no 502899/04 (the Oxford Action). In the Oxford Action, Justice Scapula found as a matter of law that Dr. Josephson , as an out-of-network provider , has no express contract with Oxford. Dr. Josephson s Oxford patients execute an assignment pursuant to which they assign to him their rights under their policies to receive reimbursement from Oxford. According to the assignment , Dr. Josephson was assigned only his patients ' right to receive reimbursement Oxford Health Insurance Inc. v Jordan S. [* 3] JOSEPHSON v OXFORD HEALTH INSURANCE, INC., et al Index no. 0443/07 from Oxford for his services. (Decision and Order Oxford Health Ins. v Josephson Index no. 602899/04 , Sup Ct New York County, July 23 2010 , pg. 8- 9 annexed as Exhibit 9 to the Oxford Action). In the present action , Dr. Johnson alleges that " staring in or around January 1, 1995 he provided services to members for which he is entitled to obtain benefits from Oxford pursuant to such assignments. " Dr. Josephson alleges that " staring in or about J aruary 200 1 Oxford breached its obligations under these contracts by issuing final determinations to Dr. Josephson stating the appropriate payment on numerous claims submitted by Dr. Josephson to Oxford for "medically necessary services " that Dr. Josephson provided to Oxford rate " and that members was ' Oxford further breached its obligations under these contracts by deliberately avoiding and systematically denying reimbursement to Dr. Josephson for medically necessary services provided to Oxford subscribers without explanation. " (Complaint" 38- 39). Finally, he alleges that " staring in or about January 1997 , Oxford undertook a deliberate , malicious and anti-competitive campaign to induce Oxford members to stop seeking treatment from Dr. Josephson and to refuse to pay any co- payment , co- insurance , or out-of-pocket expense. , 40. amount Oxford members were obligated to pay Dr. Josephson. VCR $0' or some other amount far below the appropriate Id. As the assignee of his patients , Dr. Josephson holds contract rights , pursuant to which he can seek reimbursement from Oxford. Dr. Josephson s allegations that these contract right have been breached by Oxford form the basis of the breach of contract claim set forth in the first cause of action of the complaint. In the second cause of action , Dr. Josephson alleges breach of implied- in- fact contracts. In the third cause of action , Dr. Josephson alleges breach ofthe implied covenant of good faith and fair dealing. In the fourth cause of action , Dr. Josephson asserts a claim for unjust enrichment. In addition , Dr. Josephson asserts claims for tortious interference ( fifth cause of action), fraudulent misrepresentation (sixth cause of action), and failure to 3224-a-(seventh cause of action). comply with the "Prompt Pay Law " Insurance Law On amotion to dismiss pursuant to CLR3211(a)(7), the court must accept as true , the facts " alleged in the complaint and submissions in opposition to the motion , and accord plaintiffs the benefit of every possible favorable inference " determining only "whether the facts as alleged fit within any cognizable legal theory Sokolo(f v Harriman Estates People ex rei. Cuomo v Conventrv First LLC Development Corp. 96 NY2d 409 Polonetskv v Better Homes Depot 97 NY2d 46, 54). , 414; 13 NY3d 108; see [* 4] JOSEPHSON v OXFORD HEALTH INSURACE , INC. , et al Index no. 0443/07 In assessing a motion under CLR 3211(a)(7), a court may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint " and ifthe court does so, the criterion is whether the proponent of the pleading has a cause of action , not whether he has stated one (Leon v Martinez 84 NY2d 83 , 88; see also Uzzle v Nunzie Court Homeowners Ass n. Inc. 55 AD3d 723). On this motion to dismiss for failure to state a cause of action , the court must give plaintiffthe benefit ofthe favorable inference that Oxford failed to pay usual , customary, and reasonable charges for the medical services provided by Dr. Josephson. Accordingly, defendants ' motion to dismiss the first cause of action for failure to state a cause of action is denied. second cause of action alleges the breach of an implied- in- fact contract whereby Dr. Josephson agreed to provide healthcare services to Oxford' s members in exchange for rate. The existence of a valid contract covering the same subject matter precludes recovery under an Oxford paying Dr. Josephson for those covered healthcare services at the implied in fact contract theory: Superior O(fcers CounciLHealth VCR Welfare Fu.nd v Clark-Fitzpatrick Inc. v LIRR 70 NY2d Empire Health Choice Assurance 382. Dr. Josephson acknowledges that his claims against Oxford are based on allegedly valid assignments he received from the insureds oftheir rights to benefits from Oxford for services he rendered. (Complaint" 28 , 36 , 37; Dr. Josephson Affidavit " 28- 30; see also the Oxford Action). Accordingly, defendants ' motion to dismiss the second cause of action breach of an implied- in- fact contract eranted 85 AD3d 680; , for failure to state a cause of action is In the third cause of action , plaintiff alleges that Oxford breached the implied covenant of good faith and fair dealing implied in the contract by undertaking a deliberate , malicious and anti-competitive campaign to induce Oxford members to stop seeking treatment from Dr. Josephson and to refuse to pay any co-payment , co- insurance , or out-of-pocket expense amount Oxford members were obligated to pay to Dr. Josephson. Where a claim for breach of the implied covenant of good faith and fair dealing is duplicative or intrinsically tied to damage allegedly resulting from a breach of an express contract, it cannot be maintained. Canstar v J.A. Jones Constr. Co. Deer Park Enters.. LLC vAil Svs.. Inc. 212 AD2d 452. 57 AD3d711; Dr. Josephson s claims alleging breach of contract and breach of the implied covenant of good faith and fair dealing are both based on the assertion that Oxford failed to properly reimburse him pursuant to the terms of the members ' contracts with Oxford for covered [* 5] JOSEPHSON v OXFORD HEALTH INSURANCE, INC., et al Index no. 0443/07 services he allegedly provided to them. In its July 23 2010 ruling on the parties ' summary judgment motions , the court in the Oxford Action held that the issue of whether the debridement procedures performed by Dr. Josephson were medically necessary was an issue prima facie of fact to be decided by the trier of fact case on that issue. Defendants ' argue that although this cour should give Dr. Josephson the benefit of every possible inference on a motion to dismiss , this court is not required to do so where Dr. Josephson s assertion already has been rejected by the court in the Oxford Action. , and that Dr. Josephson did not make a To the extent Dr. Josephson obtained assignments of benefits from the members , his remedy against Oxford lies solely in breach of contract. Indeed , Dr. Josephson admitted as much in the Oxford Action , stating that " (t)his dispute is governed by the obligations of the parties created by the assignment of benefits. (Dr. Josephson s summary judgment brief in the Oxford Action). Defendants ' motion to dismiss the third cause of action , breach ofimplied ~ranted covenant of good faith and fair dealing, for failure to state a cause of action is In the fourth cause of action the plaintiffs allege that Oxford was unjustly enriched at rate for providing medically necessary services to Oxford members. Plaintiff cannot recover under a theory of unjust if the services the plaintiff provided were done at the behest llecvcling Contractors Corp. v Town ofBabvlon Kagan v K- Tel Entertainment. Inc.. 172 AD2d 375. The plaintiff must look JLJ Recvcling Contractors Corp. for recovery from the part supra In the within action , Dr. Josephson performed the medical procedures at the request of his patients - not Oxford. The Second Department has rejected unjust enrichment claims Kierell v Hvtra Health Plans Long Island. Inc. 29 AD3d (dismissing made by a non-participating doctor who sought reimbursement from a defendant health insurer for services he provided to its insureds , holding that because the expense of the plaintiff by not paying at the full enrichment or VCR quantum meruit of someone other than the defendant. 302 AD2d 430; who requested the services. under similar facts. the claim for quantum meruit Pekler v lJealth Ins. Plan of the services were performed at the request of the insureds); 67 AD3d 75 8 (holding that because the complaint alleged that medical services quantum meruit were performed by plaintiff doctors at the request of their patients , a claim in could not be asserted against the patients ' insurer). The quasi-contract claim is also See precluded by the existence of a valid agreement , to wit , the assignment of benefits. , 85 Welfare Fund v Empire Health Choice Ass.. Inc Superior O(fcers Council Health Greater N. AD3d 680. Accordingly, defendants ' motion to dismiss the fourth cause of action for unjust enrichment for failure to state a cause of action is ~ranted In the fifth cause of action , Dr. Josephson alleges that Oxford maliciously, intentionally and without justification interfered with his right to receive the assignment of ," [* 6] JOSEPHSON v OXFORD HEALTH INSURANCE, INC. , et al Index no. 0443/07 benefits from the member patients. An action for tortious interference with contractual relations requires proof of the existence of a valid contract between plaintiff and a third par, the defendant's knowledge of that contract , the defendant's intentional procurement of a breach ofthat contract by the third par without justification , an actual breach of the contract Kaminski v United Parcel Serv. 120 AD2d 409 , citing Israel v Wood Dolson Co. 1 NY2d 116 , 120. Oxford had a legitimate business purpose in investigating Dr. Johnson. The questionnaires sent by Oxford to its members , which Dr. Josephson concedes were sent to inquire about the patients ' treatment and biling experiences (Dr. Josephson Affidavit' 34), were justified as part of Oxford' s statutory duty to investigate suspected insurance fraud 405 , 409 , as were its follow-up communications Blue Shield 251 AD2d 322. Dr. Josephson s failure to allege that Oxford' s conduct was unjustified is fatal to his Fifth Cause Wolf v National Counsel offoung 264 AD2d 416. Dr. Josephson fails to allege sufficient facts either in his complaint or his affidavit to show that the alleged interference by Oxford was for the sole purose of Trachtman v Empire Blue Shield, supra (affirming dismissal of tortious interference claim where healthcare provider failed to allege sufficient facts to plead that the alleged interference by health plan was for the sole purpose of harming him rather than merely incidental to the lawful purpose of obtaining the sought after information " in connection with a fraud EDP Hosp. Computer Svs. v Bronx-Lebanon Hosp. Ctr. 212 AD2d 570. Because Oxford was acting in furtherance of its statutorily-mandated duty to detect and investigate potential insurance fraud , its actions were justified as a matter oflaw , and cannot Trachtman and Wolf. supra Plaintiff cites Amaranth LLC v JPMorgan 71 AD3d 40 for the proposition that Oxford' s alleged false statements to the patients sustain a tortious interference claim. However Amaranth. supra there was aD. underlying tort of defamation. In the within action there is no independent tort oflibel or slander to support a claim for tortious interference. Defendants motion to dismiss the fift cause of action for tortious interference for failure to state a cause and damages caused by the breach. see with its members. of Action. See Ins. Law Trachtman v Empire Blue Cross See harming him. See Blue Cross investigation); support a claim for tortious interference. , in of action is eranted Dr. Josephson s sixth cause of action alleges that Oxford represented to him that it would reimburse him for the services he provided to Oxford' s Members at the full UCR rate that he relied on those alieged representations , and that ihe representations were false. Dr. Josephson is alleging nothing more than Oxford' s purported failure to pay to him , as an assignee under the members ' contracts with Oxford , benefits purportedly due to them for his services. (Claims based upon a failure to perform under a contract do not state a claim for New York University v Con tin ental Ins. Co. 87 NY2d 308). Dr. Josephson s claim fraud. [* 7] JOSEPHSON v OXFORD HEALTH INSURANCE, INC., et al Index no. 0443/07 for fraud relates directly to the contractual obligations between the parties created by the assignment of benefits that Dr. Josephson received from the Oxford patients treated by him. Moreover , the complaint fails to allege with any degree of specificity that Oxford made representations that were false , knew the representations were false and made with the intent See to deceive the plaintiff , or that the plaintiff justifiably relied on the representations. Giurdanella v Giurdanella 226 AD2d 342. This court' s determination on the issue of fraud de novo is made and is in harmony with Judge Lehrer s dismissal of Dr. Josephson counterclaim alleging fraud against Oxford in the Oxford Action , (Order dated June 3 2005). Defendants ' motion to dismiss the sixth cause of action for fraud for failure to state a cause ranted of action is The seventh cause of action alleges that Oxford failed to compensate Dr. Josephson for medically necessary services that Dr. Josephson provided to Oxford members within 45 3224-a ("the Prompt days of the receipt of the bils or claims as required by Pay Law ). These claims are subject to the three-year statute oflimitations set forth in CLR 214(2). Any claims that accrued prior to Januar 9 , 2004 would be time barred. However plaintiff alleges that defendants failed to promptly pay claims which became due after that date. Defendants ' motion to dismiss the seventh cause of action , violation ofInsurance Law denied ~ 3224-a Insurance Law , for statute of limitations is The elements required to state a claim for punitive damages as an additional and when the claim arises from a breach of contract are that the defendant's conduct must be actionable as an independent tort; the tortious conduct must be of an egregious nature; the egregious conduct must be directed to the plaintiff; and it must be part Rocanova v Equitable Life Assurance Societv 83 NY2d 603. Where a lawsuit has its genesis in the contractual relationship between the parties , the threshold task for the court considering defendant' s motion to dismiss a cause of action for punitive damages is to identify a tort independent of the contract. Where a part is seeking to enforce a contract (such as Dr. Josephson s rights pursuant to be the assignment in the within action), a tort claim wil not Somer v Federal Signal Corp. 179 NY2d 540. Generally, punitive damages are recoverable only where the breach of contract also involves a fraud evincing a high degree of moral turpitude , demonstrating such wanton dishonesty as to imply a criminal indifference to civil obligations , and where the conduct was aimed at the Rocanova v Equitable Life Assurance Society supra. at p. 612. Taken in a light most favorable to the plaintiff, the complaint does not show that the defendants ' conduct constituted an independent tort , that it ,rose to the level of egregiousness exemplar remedy of a pattern directed at the public generally. lie. public generally. [* 8] JOSEPHSON v OXFORD HEALTH INSURANCE, INC. , et al Index no. 0443/07 or that the alleged conduct was part of a pattern directed at the public generally. Defendants motion to dismiss plaintiffs ' claim for punitive damages for failure to state a cause of action is ~ranted Plaintiffs request for leave to amend the complaint is governed by CLR 3025(a)(b). Although pled under a variety of theories , the underlying gravamen of Dr. Josephson second , third, fourt, fifth and six causes of action is breach of contract. To summarize , the dismissed . The action wil proceed second , third, fourth as to the first cause of action - breach of the contract of assignent , and the seventh cause , fifth and sixth causes of action are of action -violation of "the Prompt Pay Law " (Insurance Law ~ 3224-a) subject to the three- year statute of limitations set forth in CLR 214(2). The parties have been litigating the issues since 2004 in the parallel Oxford Action in Supreme Court , New York County and since 2007 in this court , as well as in the United States District court for the Eastern District of New York. Thus , all counsel and their respective parties are familar with the outstanding issues and would not be prejudiced by an eranted , upon . amendment. Plaintiffs request for leave to , submission of a proposed pleading. serve an amended complaint is Defendants shall serve a verified answer within twenty days of the date of this order or within 20 days after the date an amended complaint is served. A Preliminary Conference is scheduled for December 6 , 2011 at 9:30 a. m. in Chambers ofthe undersigned. Please be advised that counsel appearing for the Preliminary shall be fully versed in the factual background and their client's schedule for the firm deposition dates. Conference purpose of setting This decision is the order of the Court. Dated OCT 26 2011 d;L eNTERED OCT ' 31 2011 NAUAU COUNTY COUN CLIM" OFFICE

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