Preliminary injunction denied – the analysis is questionableSeptember 16, 2016

Liberty Mut. Ins. Co. v Branch Med., P.C., 2016 NY Slip Op 31706(U)(Sup. Ct. NY Co. 2016)

(1)  In connection with one such claim, at an examination under oath (EUO) held on March 31, 2014, Nicholas testified that he and his brother, Scott, solely owned and controlled Branch, that their compensation was tied to company profits, and that defendant Mark Levitan served as Branch’s “administrative executive,” overseeing company staff, marketing, bookkeeping, and internal HIPAA procedures, with online access to Branch’s bank account. He was not a physician. When questioned further about Levitan, Nicholas was instructed by counsel not to answer questions about Levitan’s compensation relative to his and Scott’s, nor whether Levitan had been involved in any business owned by Nicholas before Branch.

(2) “Nothing in Nicholas’s testimony evidences fraud, nor do the unanswered verification requests. Moreover, the requests were improper. (See Is. Chiropractic Testing, P. C. v Nationwide Ins. Co., 35 Misc 3d 1235[A], 2012 NY Slip Op 51001[U], *2 [Dist Ct, 3d Dist, Suffolk County 2012] [request for documents pertinent to fraudulent incorporation defense inappropriate for verification request]”

(3) “Even if the alleged gaps in Nicholas’s testimony support an inference that Levitan earned more than him and Scott, it is consistent with Levitan, as staff, earning a salary, whereas Nicholas and Scott, as owners/shareholders, earned compensation based on the corporation’s profits. And even if Levitan was affiliated with a prior business owned by Nicholas, it proves nothing absent evidence he owned or controlled it.”

(4) Plaintiffs’ remaining allegations are unsubstantiated and based on speculation, and to the extent that plaintiffs rely on Springer’s EUO, they fail to provide or point to the pertinent portions of his testimony. Plaintiffs thus fail to establish, by clear and convincing evidence, the likelihood of success on the merits of their claim that Branch and Windsor were fraudulently incorporated and ineligible to receive no-fault benefits”

This one is interesting.  I never liked the whole directing not to answer thing.  The questions were relevant regarding compensation of the administrator of the practice.  Ultimately, the amount of his compensation relative to his bona-fide verifiable job duties would lead to legitimate verification requests for financial documents.  The Court got that wrong, simple.

As to the Court applying District Court decisions disallowing verification of financial documentation, the regulations prefer that these document exchanges take place pre-suit.  Remember the case where Supreme Court was reversed when the Court granted discovery in the form of financials during arbitration?  The Court cited 65-3.5 and 65-3.6.

I think the decision is wrong and should be appealed.  Unless, I am missing something?

By the way, I do not disagree that a practice manager could or maybe should make more than the principals.  But, the insurance carrier should have been entitled to ask more questions at the EUO and, only if the answers to the questions raise legitimate concerns, should further documentary discovery be required.


3 Responses

  1. jotaro kujo says:

    I think you did miss something. The failure to provide verification that the carrier is not entitled to ask for cannot be used as an indication of fraud. The Court seemed convinced that the carrier in this case, did not have any indication of fraud on behalf of the provider. Assuming this to be correct, as I do not have the underlying papers, there was no basis to require the provider to answer the questions posed. Even forgetting the financials not being “verifiable” in the claims stage portion of this case, it is still incumbent on the carrier to present a need for documentation it requests. It cannot be that the mere submission of a bill to a carrier allows it to do a forensic accounting of a provider. Thus, the unmistakable conclusion of the court was that you need evidence of wrongdoing to get corporate information at the very least.

    • jtlawadmin says:

      “It cannot be that the mere submission of a bill to a carrier allows it to do a forensic accounting of a provider.” – I totally agree. My point of contention was that the interlocutor was not able to ask about the connection to what might have been the money behind the clinic and that person’s role. Assuming those questions were answered and nothing was presented within those answers that would give a good faith basis to believe that the Education Law was being violated, then the verification would have been palpably improper.

  2. jotaro kujo says:

    Your reply is contradictory. You agree that the submission of the bill does not give rise to an issue of wrongdoing. You also agree that the submission of the bill does not allow the carrier to request verification it does not need (want/hopes to find does not equal need). Without a basis for believing the provider is doing something wrong why was the carrier asking the question? Obvious answer; pre-emptive investigation, in hopes of finding wrongdoing with no basis for the original underlying belief. This is exactly what the Court says is not allowed.

Leave a Reply