Am. Transit. Ins. Co. v. Nexray Medical Imaging PC

The following numbered papers were read on this petition and cross-petition: Petition (NYSCEF Doc No. 1) Notice of Petition (NYSCEF Doc No. 2) Exhibit A — Arbitration Award (NYSCEF Doc No. 3) Exhibit B — Master Arbitration Award (NYSCEF Doc No. 4) Exhibit C — Respondent’s Arbitration Request Form and Arbitration Submission (NYSCEF Doc No. 5) Exhibit D — Petitioner’s Arbitration Submission and Master Arbitration Brief (NYSCEF Doc No. 6) Statement of Authorization for Electronic Filing (NYSCEF Doc No. 7) Request for Judicial Intervention (NYSCEF Doc No. 8) Affidavit of Service (NYSCEF Doc No. 9) Statement of Authorization for Electronic Filing (NYSCEF Doc No. 10) Affidavit of Service (NYSCEF Doc No. 11) Statement of Authorization for Electronic Filing (NYSCEF Doc No. 12) Notice of Cross-Petition (NYSCEF Doc No. 13) Cross-Petition (NYSCEF Doc No. 14)¹ DECISION, ORDER and JUDGMENT Issues Presented Should a No-Fault arbitration award be sustained where the insurer denied payment on the ground that there was a fact or founded belief that health services were unrelated to the motor vehicle accident but the insurer failed to submit an explanatory brief, witness statements, medical records, or an expert affidavit to support its defense? Is it the role of a No-Fault hearing arbitrator to peruse a transcript of an examination under oath for the purpose of locating testimony to support such a defense, in the absence of the insurer’s highlighting the specific substantiating testimony? Background Petitioner American Transit Insurance Company (“ATIC”) commenced this CPLR Article 75 proceeding by notice of petition, seeking an order and judgment vacating a No-Fault Insurance master arbitration award of Victor J. D’Ammora, Esq. (dated September 8, 2022), which affirmed the arbitration award of Kihyun Kim, Esq. (dated June 4, 2022) granting Respondent Nexray Medical Imaging PC’s (“Nexray”) claim for No-Fault insurance compensation for health service expenses.^2,3 Arbitrator Kim awarded $878.67 to Nexray as compensation for performing a left knee MRI on Carlos Guzman, its assignor⁴ (“Assignor”), who claimed to have been injured in a motor vehicle accident on September 20, 2019. (NYSCEF Doc Nos. 2, Notice of Petition; 1, Petition.) Respondent Nexray has opposed ATIC’s petition to vacate the master arbitration award and it cross-petitioned for a judgment confirming the master arbitration award and awarding $878.67 as principal, statutory interest, the $40.00 arbitration filing fee, attorney’s fees, and costs and disbursements (NYSCEF Doc No. 13, Notice of Cross-Petition; 14, Cross-Petition). The petition and cross-petition were scheduled for oral argument on May 19, 2023, before this Court. Prior thereto, in accordance with IAS Part 2 Rules, the parties were notified that the matter would be determined on the submissions. The underlying arbitration which is the subject of this proceeding was organized by the American Arbitration Association (“AAA”), which assigned Case No. 17-21-1191-8028⁵ to it. The AAA has been designated by the New York State Department of Financial Services to coordinate the mandatory arbitration provisions of Insurance Law §5106 [b], which provides: Every insurer shall provide a claimant with the option of submitting any dispute involving the insurer’s liability to pay first party ["No-Fault insurance"] benefits, or additional first party benefits, the amount thereof or any other matter which may arise pursuant to subsection (a) of this section to arbitration pursuant to simplified procedures to be promulgated or approved by the superintendent. Insurance Law article 51 provides for the payment of basic economic loss incurred by persons injured in motor vehicle accidents. Included within basic economic loss are first-party benefits for medical and other professional health services.⁶ First-party benefits are more commonly known as “No-Fault benefits.”⁷ In furtherance of the statutory scheme, a comprehensive set of No-Fault Regulations were promulgated by the Superintendent of Insurance (presently Superintendent of Financial Services). They are contained at 11 NYCRR Part 65. Said part is subdivided into five subparts which encompass the following topics: prescribed insurance policy endorsements, rights and liabilities of self-insurers, claims for benefits, arbitration, and unauthorized providers of health services. Part 65 is also known as Insurance Regulation 68. Generally, the claims process for health service bills⁸ for No-Fault compensation begins with the submission by a health service provider of a claim form (usually, but not always, a Form NF-3 verification of treatment by attending physician or other provider of health service).⁹ Besides providing information regarding the injured person, diagnoses, projected treatment, etc., the claim form includes a bill for services performed. The claim form can be submitted directly by the injured person to the No-Fault insurer but over many decades a practice developed by which the health service providers submit the claim forms. As noted in footnote 4, they possess standing to do so by virtue of having received signed assignments of benefits from the injured persons.^10,11 The insurer must either pay or deny the bill within 30 days, or seek additional verification within 15 business days. If it denies payment, it must issue a Form NF-10 denial of claim¹² identifying why the bill was not paid. (See Insurance Law §5106 [a]; 11 NYCRR 65-3.5 [b]; Viviane Etienne Medical Care, P.C. v. Country-Wide Ins. Co., 25 N.Y.3d 498, 505 [2015]; New York & Presbyterian Hospital v. Progressive Casualty Ins. Co., 5 AD3d 568, 569-570 [2d Dept 2004]). The 30-day deadline does not apply to situations where the insurer claims that health services were not related to the subject motor vehicle accident (see Central Gen. Hosp. v. Chubb Group, 90 NY2d 195 [1997]). The record evidence submitted in this Article 75 proceeding revealed that the underlying arbitration involved one Form NF-3 claim form (bill) submitted by Nexray to ATIC for payment. It was in the amount of $878.67 and it covered a left knee MRI of March 6, 2020. This was in accordance with the procedure outlined in the previous paragraph for the submission of claims for No-Fault compensation. After requesting additional verification, and receiving it on June 19, 2020, ATIC issued a Form NF-10 denial of claim on July 13, 2020. The denial of claim asserted: “Based on American Transit’s investigation and EUO [examination under oath] testimony conducted on 6/17/20, American Transit is asserting a lack of coverage, as it has established the ‘fact or founded belief’ that the claimant’s treated condition was unrelated to the motor vehicle accident. The eligible injured person failed to establish that the alleged injuries were causally related to the motor vehicle accident.” (NYSCEF Doc No. 6, ATIC’s Arbitration Submission and Master Arbitration Brief, at 4¹³). A fee defense was also asserted but not pursued in arbitration. Arbitrator Kihyun Kim’s Award The record evidence reveals further that on May 5, 2002, Arbitrator Kihyun Kim conducted a hearing at which Alexander Mun, Esq., from Russell Friedman & Associates LLP, appeared for Nexray, and Helen Cohen, Esq., appeared for ATIC (NYSCEF Doc No. 3, Arbitration Award, at numbered p 1). In his award, Arbitrator Kim stated that the hearing documents were contained in the AAA’s ADR Center¹⁴. ATIC conceded that the fee charged by Nexray was consistent with the applicable fee schedule. (Id. at numbered p 2.) The only issue in the case was “whether [ATIC] established its lack of coverage defense” (id. at numbered p 1). In support of its claim that it established the fact or founded belief that Assignor’s treated condition was unrelated to the subject motor vehicle accident, ATIC’s counsel maintained that Assignor’s EUO “testimony revealed that the accident was a low impact condition, and that the scope and amount of treatment was disproportionate to the nature of the accident. She noted, among other things[,] that the Assignor did not go to the hospital and was not treated at the scene. Counsel further advised that Applicant’s [Nexray] owner has been indicted for his participation in a no fault fraud scheme involving Applicant.” (Id. at numbered p 4.) In terms of evidence, ATIC relied on “a Report of Motor Vehicle Accident — MV104; the Assignor’s NF-2 [application for No-Fault benefits]; the EUO scheduling letters; and the transcript of the Examination Under Oath of the Assignor, dated June 17, 2020″ (id.). Nexray’s counsel argued that ATIC “failed to upload sufficient proof to the record to establish its defense” (id.). Arbitrator Kim reviewed case law pertaining to No-Fault insurers’ defense that a purported accident was not a covered event because there was a fact or founded belief that a condition and/or treatment was not proximately related to it (id. at numbered pp 2-3): Central Gen. Hosp. v. Chubb Group of Ins. Cos., 90 NY2d 195 [1997]: The initial burden is on the insurer to come forward with proof establishing by “fact or founded belief” that the claimed injuries have no nexus to the accident. Mt. Sinai Hosp. v. Triboro Coach Inc., 263 AD2d 11 [2d Dept. 1999]: Causation is presumed since it would not be reasonable to insist that an applicant must prove as a threshold matter that the patient’s condition was caused by the automobile accident; when alleging a lack of coverage defense, the insurer bears the burden of coming forward with admissible evidence of the fact of lack of coverage or of the foundation for its belief that there is no coverage. Kingsbrook Jewish Med. Ctr. v. Allstate Ins. Co., 61 AD3d 13 [2d Dept. 2009]: This defense often involves a fact pattern which calls for the insurer to present evidence by a medical expert who is qualified to render an opinion on causality. A.B. Med. Servs. PLLC v. State Farm Mut. Auto. Ins. Co., 7 Misc 3d 822 [Civ Ct, Kings County 2005]: When arguing fraud as a defense, the insurer bears the burden of presenting sufficient evidence of the fact of fraud or of the foundation for its belief that fraud occurred; besides medical evidence an affidavit by a special investigator can suffice; if the insurer carries its burden then the insured must rebut it or succumb. A.B. Med. Servs. PLLC v. Eagle Ins. Co., 3 Misc 3d 8 [App Term, 2d Dept, 9th & 10th Jud Dists 2002]: An insurer’s founded belief cannot be based upon unsubstantiated hypotheses and suppositions. Applying the law to the evidence presented to him, Arbitrator Kim made the following findings (NYSCEF Doc No. 3, Arbitration Award, at numbered p 4): I find that Respondent failed to establish its lack of coverage/causation defense. I find that there is insufficient credible evidence in the record to support a founded belief that, “the claimant’s treated condition was unrelated to the motor vehicle accident.” Respondent did not upload any explanatory brief, any witness statements, any medical records, any expert affidavit regarding causation, any SIU affidavit discussing Respondent’s investigation or explaining how or why Respondent’s determination was made, or any other actual proof to support and substantiate its defense, other than the EUO transcript of the Assignor, and the MV-104, Report of Motor Vehicle Accident. I have carefully review[ed] the EUO transcript of the Assignor, as well as the EUO transcript of the other claimant/passenger in the linked case, and I find it unclear as to what specific testimony Respondent believes adequately supports its assertions/defense and how Respondent made the leap that the Assignor’s treated condition was unrelated to the motor vehicle accident. While counsel asserted that the accident was not significant and that the asserted injuries were disproportionate to the low impact nature of the accident, I do not[ ] believe that the testimonial evidence alone was sufficient to reach such conclusion, particularly without the presentation of some actual medical evidence and/or expert opinion. With respect to the asserted indictment of Applicant’s owner, Respondent did not present any actual evidence of any indictment nor any evidence that any such indictment related to the subject accident, the claimants and/or claims at issue in this proceeding. If Respondent’s investigation was broader than what was presented herein, then Respondent should have uploaded such supporting evidence to the record herein. In sum, only limited evidence was uploaded to the record and on this record, the evidence submitted to the record in this case does not, in my view, make out a prima facie case in support of Respondent’s asserted defense. Based on the totality of the evidence in the record, Respondent has failed to meet its initial burden and its denial cannot be sustained. Accordingly, Applicant is entitled to reimbursement in the amount of $878.67…. In essence, Arbitrator Kim held that there was a lack of evidence to support ATIC’s position that it established the fact or founded belief that Assignor’s condition and treatment were unrelated to the subject accident. Arbitrator Kim awarded the $878.67 principal billed. He also awarded statutory interest of 2 percent per month, an attorney’s fee, and return of the $40 filing fee (id. at numbered pp 5-6; see 11 NYCRR 65-4.5 [s]). Master Arbitrator Victor J. D’Ammora’s Award ATIC filed for master arbitration to appeal Arbitrator Kim’s award. It argued that the latter’s award was irrational (NYSCEF Doc No. 6, ATIC’s Arbitration Submission and Master Arbitration Brief, at pp 70-79). Master Arbitrator D’Ammora held that while a hearing arbitrator’s award can be reversed if it is incorrect as a matter of law, a master arbitrator exceeds his statutory power by making his own factual determination, reviewing factual and procedural errors committed during the course of the arbitration, weighing the evidence, or resolving credibility issues (NYSCEF Doc No. 4, Master Arbitration Award, at numbered p 2, citing 11 NYCRR 65-4.10 [a] [4]) and Mott v. State Farm Ins. Co., 55 NY2d 224 [1982]). He noted that Arbitrator Kim reached his determination after reviewing the submitted evidence that there was insufficient evidence to sustain a lack of coverage defense. “Arbitrator Kim’s conclusions and findings were in his discretion and interpretation of the evidence. It cannot be regarded as reversible error within this Master Arbitrator’s purview. This Master Arbitrator cannot conduct a de novo review and substitute my interpretation and view of the evidence for that of Arbitrator Kim. In particular, as here, Arbitrator Kim’s determination is rational and supported by the record.” (NYSCEF Doc No. 4, Master Arbitration Award, at numbered p 2.) The award was affirmed along with a $195.00 attorney’s fee (id. at numbered pp 3-4). ATIC’s Petition to Vacate ATIC’s CPLR Article 75 petition to vacate stated that the claim was denied based upon ATIC’s investigation and the EUO testimony — that there was a fact or founded belief that Assignor’s treated condition was unrelated to the motor vehicle accident and that Assignor failed to establish that the alleged injuries were causally related to the accident (NYSCEF Doc No. 1, Petition, 26). “The arbitration decision was arbitrary and capricious, irrational and without a plausible basis” (id. 35), in that “Arbitrator Kihyun Kim failed to follow well settled law” (id. 40). The petition proceeded to argue that ATIC needed only to show a founded belief to support its defense (id. 40), and that circumstantial evidence could support it (id. 47). “[ATIC] offered evidence to establish the ‘founded belief’ of fraud. [Nexray] did not offer any evidence to rebut that showing. The arbitrator ruled for [Nexray] despite the fact that [ATIC] offered evidence of a founded belief and [Nexray] failed to offer any evidence to rebut that showing. In doing so the arbitrator failed to follow well settled law.” The petition concluded by asserting that Arbitrator Kim’s decision was “arbitrary and capricious, without rational basis and incorrect as a matter of law because zero evidence simply cannot outweigh evidence” (id. 49). ATIC was “entitled to a declaration that the arbitration decisions of Kihyun Kim, Esq. and Vic D’Ammora, Esq. in the matter designated AAA number 99-21-1191-8208 have no force or effect” (id. 50). Nexray’s Cross-Petition to Confirm Nexray argued in its cross-petition most significantly that the arbitration awards had to be confirmed if they were supported by evidence or other basis in reason (citing Matter of Petrofksy v. Allstate Ins. Co., 54 NY2d 207 [1981]); rational (citing Matter of Unigard Mut. Ins. Co. v. Hartford Ins. Group, 108 AD2d 917 [2d Dept 1985]); and not inapposite to settled law (citing Matter of Global Liberty Ins. Co. v. Therapeutic Physical Therapy, P.C., 148 AD3d 502 [1st Dept 2017]). ATIC did not meet its burden of establishing that the master arbitration award did not meet this criteria. (See generally NYSCEF Doc No. 14, Cross-Petition