It has been almost exactly five years since the New York Court of Appeals issued its decision in State Farm Mutual Auto. Ins. Co. v. Mallela,1 establishing that a violation of a licensing requirement by a medical provider renders the provider ineligible to be reimbursed by an insurance company for no fault2 claims that have been assigned to the provider by an individual allegedly involved in an automobile accident. The Court’s ruling in Mallela (the authors’ firm represented the insurance carrier in this case) recognized that one such kind of licensing violation is the lack of ownership and/or control over a medical professional corporation by a licensed medical doctor, and it made it clear that insurance carriers may look beyond the face of the medical professional corporation’s licensing documents to identify a failure to abide by state law in this regard.
Mallela was a watershed decision—it already has been cited in more than 100 other opinions—and has provided great support for insurance company efforts to reduce fraudulent no fault claims. Because of the ruling’s great practical significance, however, both medical providers and insurance companies continue to litigate numerous issues left open by Mallela. None of these has yet reached the New York Court of Appeals. As discussed below, however, there is a great deal of appellate authority on a variety of these subjects. This column is the first installment of a two-part series discussing Mallela issues.
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