Trial de novos and exhausting administrative remedies

AutoOne Ins. Co. v Eastern Is. Med. Care, P.C., 2016 NY Slip Op 05354 (2d Dept. 2016)

This case is interesting on a few levels since it addresses what could be categorized as unresolved issues involving provisions of the no-fault law that have not had much exercise in recent years.  Ironically, since the nature of the practice is more arbitration based, I am now more involved with appeals of trial de novo rulings and Article 75 rulings at the Supreme Court and the Appellate Division.  The nice part about this trend is that the carrier gets to chose the venue and I am not stuck in Civil Court.  This means the papers are read, “the briefing schedule” does not exist and real orders are generated.  Civility in practice.

This case it upon the issue of what happens when you file a master arbitration brief and chose not submit one.  Why would this happen?  Simply put, the award is in excess of $5,000 and there is no way to vacate the award through the arbitration system.  The question asked is why bother submitting a brief.  After this case, I have taken the position to put in a pro forma brief, whatever that is.  The Supreme Court did not rule on this issue but it was a large part of Defendant’s argument for dismissing the declaratory judgment action/trial de novo and seeking confirmation of the master arbitral award.

(1) The Court correctly held that: “the insurance regulations specifically provide that a master arbitration will proceed even if a party fails to appear or submit materials and that the master arbitrator must make a determination on the merits, not in favor of an appearing party solely on the default of the other party (see 11 NYCRR 65-4.10[d][8]). Thus, the plaintiff’s failure to file a brief with the master arbitrator was not determinative of whether it satisfied a condition precedent or exhausted its administrative remedies”

Secondly, how much time does an insurance carrier have to commence a trial de novo following a master arbitration award?  Supreme Court said that one only has 35-days to commence a trial de novo, relying on the uniform court rule.  The Court in applying 65-4.10(h)(2) said that the 90-day period to vacate an arbitration award would apply to this situation.

(2) “As this arbitration dispute was originally submitted to the American Arbitration Association (hereinafter AAA) and was not court-ordered, the 35-day timetable applied by the court pursuant to 28 NYCRR 28.12 was not applicable (see 22 NYCRR 28.2). Instead, the plaintiff had 90 days from the date the master arbitrator’s award was mailed to it to commence this action (seeInsurance Law § 5106[c]; CPLR 7511; 11 NYCRR 65-4.10[h][2]; see also Matter of Slater v Eagle Ins. Co., 294 AD2d at 369), and the plaintiff did so. Thus, the court erred in granting the defendant’s cross motion to confirm the award of the master arbitrator on the ground that this action was not timely commenced and in denying that branch of the plaintiff’s motion which was pursuant to CPLR 3211(b) to dismiss the third affirmative defense, which alleged that the action was not timely commenced.”

Now the case is remanded for a determination in the merits of Plaintiff’s motion for summary judgment.

Framed Issue hearing on Ins Law 5107

Matter of American Ind. Ins. Co. v Nova Acupuncture, P.C., 2016 NY Slip Op 02357 (2d Dept. 2016)

(1) “Section 5107 of article 51, entitled “Coverage for non-resident motorists,” provides, in pertinent part, that: “(a) Every insurer authorized to transact or transacting business in this state, or controlling or controlled by or under common control by or with such an insurer, which sells a policy providing motor vehicle liability insurance coverage or any similar coverage in any state or Canadian province, shall include in each such policy coverage to satisfy the financial security requirements of article six or eight of the vehicle and traffic law and to provide for the payment of first party benefits pursuant to subsection (a) of section five thousand one hundred three of this article when a motor vehicle covered by such policy is used or operated in this state” (emphasis added).”

(2) “The enabling regulation to Insurance Law § 5107 provides, in relevant part, that: “(b) The automobile insurance policies which are sold in any other state or Canadian province by an unauthorized insurer which is controlled by, or controlling, or under common control of, an authorized insurer shall be deemed to satisfy the financial security requirements of article 6 or 8 of the New York Vehicle and Traffic Law, and shall be deemed to provide for the payment of first-party benefits pursuant to section 5103 of the New York Insurance Law when the insured motor vehicle is used or operated in this State (11 NYCRR 65-1.8[b][emphasis added]).”

(3) “Section 5106 of the Insurance Law, entitled “Fair Claims Settlement,” provides, in pertinent part, that: “(b) Every insurer shall provide a claimant with the option of submitting any dispute involving the insurer’s liability to pay first party 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” (emphasis added).”

(4) “Contrary to AIIC’s contention, the fact that the subject policies do not contain any agreement to arbitrate disputes involving the payment of first-party benefits does not preclude the respondents from exercising their option to arbitrate the underlying dispute in this proceeding.”

(5) “Insurance Law § 5106(b) mandates every insurer to provide a claimant with the option to arbitrate disputes concerning first-party benefits. Indeed, the obligation to arbitrate is not found in the policies but is imposed upon the policies by the No-Fault Law”

(6) “Although the respondents allege that AIIC falls within that criteria, there is insufficient evidence in the record to make such a determination. Therefore, the matter must be remitted to the Supreme Court, Kings County, for a hearing on the issue of whether AIIC controls, is controlled by, or is under common [*2]control by or with an authorized insurer and, thereafter, for a new determination of the petition.”

This should be compared to: Hereford Ins. Co. v. Am. Indep. Ins., 136 A.D.3d 551 (1st Dept. 2016)

“Respondent, a Pennsylvania corporation that had insured the offending vehicle, has no contacts with New York, and the offending vehicle was neither registered in New York nor owned by a New York resident”





An article 75 that went nowhere

Acuhealth Acupuncture, P.C. v New York City Tr. Auth., 2016 NY Slip Op 50297(U)(Sup Ct. Kings Co. 2016)


(1) The arbitration

“The arbitrator found that the partial denials for dates of service 07/07/10-8/7/10; 10/07/10-10/14/10; and 11/04/10-11/18/10 “were late on their face”. And there was no specific denial for services on 01/01/11-1/19/11.

The arbitrator further found that Acuhealth “sustained its burden of demonstrating a prima facie showing of entitlement to reimbursement for the acupuncture service”. However, at the time that Acuhealth’s last bill was received on February 7, 2011, the policy was exhausted. The arbitrator stated that the “Applicant may not recover any of the outstanding fees since any such award would exceed my authority”. In making this determination, the arbitrator relied, in part, on Matter of Brijmohan v. State Farm Ins. Co., (92 NY2d 821, 699 N.E.2d 414, 677 N.Y.S.2d 55 [1998]) and Matter of State Farm Ins. Co. v. Credle (228 AD2d 191, 643 N.Y.S.2d 97 [1 Dept., 1996]).”

(2) The master arbitration

“The master arbitrators’ award states that “Applicant seeks vacatur of the award as being arbitrary and capricious and incorrect as a matter of law because it did not take into consideration the proper priority of payment” (Notice of Petition, Exhibit 3, Master Arbitration Award). The master arbitrator [*3]award stated that,

In the award of the lower arbitrator, it is clearly explained that an arbitration award made in excess of the contractual limits of an insurance policy would be in excess of the arbitrator’s authority. After consideration of the briefs of both parties, it is determined that the lower arbitrator has set forth a rational basis for the award as issued. The lower arbitrator correctly refused to exceed the authority granted by statute and case law and denied the claim. The request for the vacaur [sic] of the award is denied and the award is sustained as written.”

(3) Supreme Court

“At issue here is the interplay of the priority of lien regulation and the arbitrators authority to direct payment in excess of the no fault policy.”  The Court recognized that under priority of payment, the billing should have been paid since the policy exhausted after the billing was received and the denials were untimely.

This is what is telling: “This Court appreciates the petitioner’s valid argument, however, the standard of review of an arbitration award is limited. Acuhealth failed to demonstrate, by clear and convincing evidence, the existence of any of the statutory grounds for vacating the master arbitrator’s award”…”The standard herein is quite different. Petitioner has not presented any appellate authority permitting the arbitrator to exceed a specific enumerated limitation on the arbitrators power by rendering an award in excess of the policy limits. The master arbitrator in confirming the lower arbitration award had evidentiary support and a rational basis, and was not arbitrary, capricious, irrational or without a plausible basis”

This the risk of arbitration.  We saw a similar situation where the Appellate Division, Third Department ignored binding Appellate principle in Patient Care because the matter involved arbitration.  At the end of the day, the Courts in the Second Department will not get involved with no-fault arbitration matters.  It is my thought that abdicating the gatekeeper role allows rogue arbitrators and lazy master arbitrators to get away with illegal decisions.  With the death of Norma Dachs, we are left with “rubber stamp” master arbitrators and no checks and balances on the lower arbitrators.


“reasonable hypothesis” standard under Ins Law 5105

Technology Ins. Co. v Countrywide Ins. Co., 2016 NY Slip Op 00058 (1st Dept. 2016)

“The arbitration award is supported by the “reasonable hypothesis,” drawn from petitioner’s unrefuted evidence and the reasonable inferences arising therefrom, that the vehicle insured by petitioner was used principally for the transportation of persons for hire, and therefore satisfied the threshold requirements of Insurance Law § 5105(a)(see Matter of Motor Veh. Acc. Indem. Corp. v Aetna Cas. & Sur. Co., 89 NY2d 214, 224 [1996]; Matter of Tri State Consumer Ins. Co. v High Point Prop. & Cas. Co., 127 AD3d 980 [2d Dept 2015]).”

“Respondent’s contention that the award was procured by arbitrator misconduct, i.e., the failure to hold petitioner to its threshold burden of showing that the minimum requirements of Insurance Law § 5105(a) were met, is undermined by the record.”


Medical provider cannot demand that fraud and RICO matter be heard in arbitration

Allstate Ins. Co. v. Mun, — F.3d —-, 2014 WL 1776007 (2d Cir. 2014)

Allstate Insurance Company seeks recovery of payments to Dr. David Mun and Nara Rehab Medical, P.C. (collectively, “Defendants”) on the ground that they engaged in insurance fraud. The United States District Court for the Eastern District of New York (Amon, C.J.) denied Defendants’ motion to compel arbitration. On appeal, Defendants argue that the New York Insurance Law and the contract provision required by that law grant them the right to arbitrate Allstate’s claims.

We conclude that the operative statute, regulation, and contract provision do not provide a right to arbitration in this context. Accordingly, we affirm.


New York’s no-fault insurance regime requires that an insurer pay up to $50,000 to cover necessary health expenses for each “covered person” under a “policy of liability insurance issued on a motor vehicle.” N.Y. Ins. Law §§ 5101–5109 (McKinney 2014). Covered persons may assign their no-fault benefit rights to qualified health care providers, who then seek payment directly from the insurer. See N.Y. Comp.Codes R. & Regs. tit. 11, § 65–3.11(a) (2014).

Defendants billed Allstate about $500,000 for “Electrodiagnostic Testing” purportedly performed on covered persons between October 2007 and October 2011. Because Allstate is generally required to process each no-fault claim within 30 days of submission, or then be barred from asserting defenses in any subsequent suit or arbitration, see N.Y. Ins. Law § 5106(a); Hosp. for Joint Diseases v. Travelers Prop. Cas. Ins. Co., 879 N.E.2d 1291,1294–95 (N.Y.2007), Allstate relied on Defendants’ documentation and reimbursed the claims promptly.

In August 2012, Allstate filed suit against Defendants, alleging that they had fraudulently billed Allstate for testing that was fabricated or of no diagnostic value, and seeking recovery under theories of common law fraud and unjust enrichment, and under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), see 18 U.S.C. § 1964(c).

Defendants moved to compel Allstate to arbitrate pursuant to the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq. ; the New York Insurance Law; and the arbitration provision included in Allstate policies. In April 2013, Chief Judge Amon denied the motion, citing the consensus view in the United States District Court for the Eastern District of New York that medical providers have a right to arbitrate as-yet unpaid claims, but not claims that were timely paid.FN1 See Allstate Ins. Co. v. Mun, No. 12 Civ. 3791(CBA)(RLM), 2013 WL 1405939, at *1–2 (E.D.N.Y. Apr. 8, 2013).

FN1. See Gov’t Emps. Ins. Co. v. Five Boro Psychological Servs., P .C., 939 F.Supp.2d 208,211 (E.D.N.Y.2013) (Gleeson, J.); Allstate Ins. Co. v. Elzanaty, 929 F.Supp.2d 199,207,211–13 (E .D.N.Y.2013) (Spatt, J.); Gov’t Emps. Ins. Co. v. Grand Med. Supply, Inc., No. 11 Civ. 5339(BMC), 2012 WL 2577577, at *5–7 (E.D .N.Y. July 4, 2012) (Cogan, J.); Liberty Mut. Ins. Co. v. Excel Imaging, P.C., 879 F.Supp.2d 243, 262–64 (E.D.N.Y.2012) (Weinstein, J.); Allstate Ins. Co. v. Khaimov, No. 11 Civ. 2391(JG)(JMA), 2012 WL 664771, at *3–4 (E.D.N.Y. Feb. 29, 2012) (Gleeson, J.); Allstate Ins. Co. v. Lyons, 843 F.Supp.2d 358,376–81 (E.D.N.Y.2012) (Gleeson, J.); see also Minute Entry, Allstate Ins. Co. v. Yadgarov, No. 11 Civ. 6187(PKC)(VMS) (E.D.N .Y. Sept. 10, 2013) (Chen, J.); Minute Entry, State Farm Mut. Auto. Ins. Co. v. Giovanelli, No. 12 Civ. 3398(NGG)(VMS) (E.D.N.Y. Sept. 21, 2012) (Garaufis, J.).


“We review de novo a district court’s denial of a motion to compel arbitration.” Harrington v. Atl. Sounding Co., 602 F.3d 113, 119 (2d Cir.2010).


Section 5106 of the New York Insurance Law provides, in relevant part:

(a) Payments of first party benefits and additional first party benefits shall be made as the loss is incurred. Such benefits are overdue if not paid within thirty days after the claimant supplies proof of the fact and amount of loss sustained….

*2 (b) Every insurer shall provide a claimant with the option of submitting any dispute involving the insurer’s liability to pay first party 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. Such simplified procedures shall include an expedited eligibility hearing option, when required, to designate the insurer for first party benefits….

N.Y. Ins. Law § 5106(a)-(b) (emphases added). “First party benefits” are defined as “payments to reimburse a person for basic economic loss on account of personal injury arising out of the use or operation of a motor vehicle.” Id. § 5102(b).

A regulation implementing § 5106(b) requires that a “policy of liability insurance issued” on a motor vehicle include the following provision:

Arbitration. In the event any person making a claim for firstparty benefits and the Company do not agree regarding any matter relating to the claim, such person shall have the option of submitting such disagreement to arbitration pursuant to procedures promulgated or approved by the Superintendent of Financial Services.

N.Y. Comp.Codes R. & Regs. tit. 11, § 65–1.1(a), (d) (emphases added).

The Allstate policies here included this provision, in substance. But even if an insurance contract omits the required wording, the contract is “construed as if such provisions were embodied therein.” N.Y. Ins. Law § 5103(h). Defendants therefore may elect arbitration if either the Allstate policy provision or § 5106(b) provides them that right.


The FAA establishes that “[a] written provision in any … contract … to settle by arbitration a controversy thereafter arising out of such contract … shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Any “ambiguities as to the scope of the arbitration clause” are resolved in favor of arbitration. See, e.g., Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62 (1995) (quoting Volt Info. Scis., Inc. v. Bd. of Trs., 489 U.S. 468, 476 (1989)). Nonetheless, “[w]e have applied the presumption favoring arbitration … only where it reflects … a judicial conclusion that arbitration of a particular dispute is what the parties intended because their express agreement to arbitrate was validly formed and … is legally enforceable and best construed to encompass the dispute.” Granite Rock Co. v. Int’l Bhd. of Teamsters,130 S.Ct. 2847, 2859–60 (2010) (emphases added). Defendants rely on citations to the FAA; but the real question is: do Allstate’s policies, which implement requirements imposed by New York law and which must be construed to satisfy those requirements, grant Defendants the right to arbitrate Allstate’s fraud claims? Cf. Perry v. Thomas, 482 U.S. 483, 492 n.9 (1987) (“A court may not, then, in assessing the rights of litigants to enforce an arbitration agreement, construe that agreement in a manner different from that in which it otherwise construes nonarbitration agreements under state law.”).


The arbitration provision in the Allstate policies appears quite broad. It contemplates arbitration if the claimant and insurance company “do not agree regarding any matter relating to the claim.” N.Y. Comp.Codes R. & Regs. tit. 11, § 65–1.1(d); see J.A. 146–47. But it is not as broad as it may seem.

An arbitrable dispute is one between the insurance company and a “person making a claim for first-party benefits.” N.Y. Comp.Codes R. & Regs. tit. 11, § 65–1.1(d). Defendants are no longer “making a claim.” They made a claim; they made many claims. And those claims were promptly paid by Allstate. Allstate’s fraud suit therefore does not raise a dispute between it and a person “ making a claim for first-party benefits.” The arbitration provision does not apply.



Because the Allstate policies are construed to conform to § 5106(b), see N.Y. Ins. Law § 5103(h), we must also decide whether arbitration under these circumstances is required by statute.

Like the policy wording, § 5106(b) appears broad. It provides a right to arbitrate “ any dispute involving the insurer’s liability to pay first party benefits.” N.Y. Ins. Law § 5106(b) (emphasis added).

Critically, however, § 5106(b) provides such an arbitration right only to a “claimant” embroiled in a “dispute involving the insurer’s liability to pay first party benefits.” Id. “Claimant” is not defined in the statute but necessarily references “a person who claims something” FN2—here, “first party benefits.”

FN2. See, e.g., Merriam–Webster Online Dictionary, http:// (last visited May 5, 2014).



Defendants were “claimants” for “first party benefits” when they submitted their claims. If Allstate had disputed those claims without paying them promptly, disputes contemplated by the statute would have arisen. But Allstate paid Defendants’ claims in full. Now, years later, when Allstate seeks recovery for losses caused by Defendants’ alleged fraud, Defendants are no longer “claimants” asserting a right to first party benefits, and there is no “dispute involving the insurer’s liability to pay first party benefits.” This dispute involves the medical provider’s liability to the insurer, under a fraud theory, for what the provider already recovered in the claims process.

Section 5106(b)’s reference to § 5106(a) is telling. Subsection (b) provides an arbitration right only in a “dispute involving the insurer’s liability to pay first party benefits, … the amount thereof or any other matter which may arise pursuant to subsection (a) of this section.” N.Y. Ins. Law § 5106(b) (emphasis added). The limitation to “matter[s] which may arise pursuant to subsection (a)” modifies all of the antecedents,FN3 and therefore limits the scope of arbitration to matters arising under subsection (a). Subsection (a), in turn, requires that payments of first party benefits “be made as the loss is incurred” and that those payments become “overdue if not paid within thirty days after the claimant supplies proof of the fact and amount of loss sustained.” Id. § 5106(a). Section 5106(b)’s arbitration right therefore applies only to disputes arising from the insurer’s non-payment during the initial 30–day claims process, not to insurer fraud suits brought later.

FN3. “Under the rule of the last antecedent, a limiting clause or phrase should ordinarily be read as modifying only the noun or phrase that it immediately follows.” Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C.V., 651 F.3d 329, 335 (2d Cir.2011) (internal quotation marks and alterations omitted). The rule, however, “is not an absolute and can assuredly be overcome by other indicia of meaning.” Barnhart v. Thomas, 540 U.S. 20, 26 (2003). Given the central focus of the § 5106(a) claims process (“the amount” of insurer liability for first party benefits) and the purpose and structure of the no-fault system, see infra, it is clear enough in context that § 5106(b) contemplates only a dispute arising in the § 5106(a) process.


*4 The linkage between the 30–day reimbursement process in subsection (a) and the arbitration right in subsection (b) is a feature, not a bug. Section 5106 creates a no-fault “[f]air claims settlement” procedure. See id. § 5106. Subsection (a) defines when insurance companies must pay claims; subsection (b) makes arbitration available for disputes stemming from those claims. They work together to “create a simple, efficient system that … provide[s] prompt compensation to accident victims without regard to fault, and in that way reduce[s] costs for both courts and insureds.” State Farm Mut. Auto. Ins. Co. v. Mallela, 372 F.3d 500, 502 (2d Cir.2004). “The primary aims of [the no-fault] system were to ensure prompt compensation for losses incurred by accident victims without regard to fault or negligence, to reduce the burden on the courts and to provide substantial premium savings to New York motorists.” Med. Soc’y v. Serio, 800 N.E.2d 728, 731 (N.Y.2003) (citation omitted).


New York’s arbitration process for no-fault coverage is an expedited, simplified affair meant to work as quickly and efficiently as possible. See N.Y. Comp.Codes R. & Regs. tit. 11, § 65–4.5 (setting out “[s]pecial expedited arbitration” procedures). Discovery is limited or non-existent. See id. Complex fraud and RICO claims, maturing years after the initial claimants were fully reimbursed, cannot be shoehorned into this system.

Allowing the providers to elect arbitration in these actions would also undercut anti-fraud measures that the New York legislature encouraged. The state requires insurers to file plans “for the detection, investigation and prevention of fraudulent insurance activities.” N.Y. Ins. Law § 409(a). These plans must provide for the “coordination with other units of an insurer for the investigation and initiation of civil actions ” to recover amounts paid in medical provider frauds. Id. § 409(c)(4) (emphasis added).

Our reading of § 5106 allows insurers to actively combat fraud without impairing the system of prompt insurer reimbursement. In an informal letter opinion, the New York Insurance Department agrees, and contemplates “actions” ( i.e., court proceedings) to recover money paid on fraudulent claims FN4:

FN4. Though courts ordinarily grant little deference to informal letter opinions on questions of “pure statutory reading and analysis,” In re Union Indem. Ins. Co., 699 N.E.2d 852, 856 (N .Y.1998), recent state decisions have favorably cited and quoted this particular opinion, see Lincoln Gen. Ins. Co. v. Alev Med. Supply, Inc., 917 N.Y.S.2d 810, 811 (App. Term.2d Dep’t 2011). Regardless of the deference due, we agree with the Insurance Department’s interpretation of the statute.

The purpose of N.Y. Ins. Law § 5106 and its implementing regulation is simply to provide for the prompt payment of covered No–Fault expenses due a claimant….

The New York No–Fault reparations law … is in no way intended and should not serve as a bar to subsequent actions by an insurer for the recovery of fraudulently obtained benefits from a claimant, where such action is authorized under the auspices of any other statute or under common law. There is nothing in the legislative history or case law interpretations of the statute or in Insurance Department regulations, opinions or interpretations of the statute that supports the argument that the statute bars such actions.

The payment of fraudulently obtained No–Fault benefits, without available recourse, serves to undermine and damage the integrity of the No–Fault system, which was created as a social reparations system for the benefit of consumers. To conclude that the No–Fault statute bars the availability of other legal remedies, where the payment of benefits were secured through fraudulent means, renders the public as [sic] the ultimate victim of such fraud, in the form of higher premiums based upon the resultant increased costs arising from the fraudulent actions. The Legislative enactment of … Section 409 … clearly evinces the important public policy interest in the prevention of insurance fraud for the protection of consumers in New York.


Letter from Lawrence Fuchsberg, Supervising Attorney, N.Y. Ins. Dep’t, to Francis J. Serbaroll, Cadwalader, Wickersham & Taft, Appellee’s Br. at ADD–1–2 (Nov. 29, 2000) (emphases added) (citations omitted).


Defendants rely on state court cases that are inapposite or of dubious value. One case rules that waiver of a substantive right under a contract does not also waive a right to arbitrate under the same contract, a point with no bearing on this appeal. See Riese v. Local 32B–32J, Serv. Emps. Int’l Union, No. 74–11,1986 WL 84814, at *1–2 (Sup.Ct.N.Y.Cnty. Oct. 15, 1986). Others, such as Nyack Hospital v. Government Employees Insurance Co., 526 N.Y.S.2d 614, 615 (App. Div.2d Dep’t 1988), involve only the initial claims process, not a later recovery action. And a Short Form Order that Defendants attach to their reply brief is based entirely on an unspecified “applicable automobile insurance contract” and provides almost no relevant analysis because the insurer’s arguments were rejected as untimely. See Short Form Order, Am. Transit Ins. Co. v. Elzanaty, Index No. 601543/13 (N.Y. Sup.Ct. Nassau Cnty. Oct. 9, 2013) (Appellant’s Reply Br. at Addendum B). Defendants are left to rely on a Civil Court opinion from 1983, which is distinguishable, incompatible with more recent precedent, and issued by a court of limited jurisdiction. See Country–Wide Ins. Co. v. Frolich, 465 N.Y.S.2d 446 (Civ.Ct. Kings Cnty.1983).FN5


FN5. Frolich interpreted a substantively identical predecessor of § 5106(b) to grant a medical provider the right to arbitrate an insurer’s suit to recover a mistaken overpayment. Id. at 447–48. As Judge Gleeson has observed, however, an overpayment claim is distinguishable because fraud claims “do not contest entitlement to benefits under the terms of the no-fault law itself but seek to recover money through an independent right of action.” Lyons, 843 F.Supp.2d at 379 n.10 (citing Ryder Truck Lines, Inc. v. Maiorano, 376 N.E.2d 1311, 1314 (N.Y.1978)). And in any event, more recent and more reasoned state precedent is to the contrary. Specifically, a 2001 New York Supreme Court decision, relying on § 5106’s text, the Insurance Department’s view, and the New York legislature’s encouragement of insurer fraud-based civil actions, holds that § 5106(b) does not apply if “the insurer has already paid … benefits and discovers fraud on the part of a health care provider, who has submitted fraudulent claims.” Progressive Ne. Ins. Co. v. Advanced Diagnostic & Treatment Med., P.C., Index No. 601112/00, slip op. at 15–16 (Sup.Ct.N.Y.Cnty. July 25, 2001) (Appellee’s Br. at ADD–17–18).

The weight of New York authority holds that the 30–day process in § 5106(a) does not constrain later insurer actions seeking recovery for fraud. See Lincoln Gen. Ins. Co., 917 N.Y.S.2d at 811 (“[W]here, as here, an insurer timely pays a claim within the 30–day claim determination period, the insurer is not foreclosed from affirmatively commencing an action to recover the amounts paid on the claim when the insurer later discovers that the claim is fraudulent.” (citations omitted)); Fair Price Med. Supply Corp. v.. Travelers Indem. Co., 803 N.Y.S.2d 337,340 (App. Term 2d Dep’t 2005) (“[A]n insurer precluded from defending a claim based on provider fraud is not without remedy; after paying such a claim, the insurer, for example, may have an action to recover benefits paid under a theory of fraud or unjust enrichment ….”), aff’d, 837 N.Y.S.2d 350 (App. Div.2d Dep’t 2007), aff’d, 890 N.E.2d 233 (N.Y.2008); Carnegie Hill Orthopedic Servs. P.C. v. GEICO Ins. Co., 19 Misc.3d 1111(A), at *5–6 (N.Y. Sup.Ct. Nassau Cnty.2008) (allowing insurer to bring fraud counterclaim outside 30–7 day period).

New York courts hold that insurer fraud suits may be pressed long after the 30–day period for processing claims. And as § 5106(b) provides, the right to demand arbitration exists only during and within that process. It follows that Defendants have no right to elect arbitration of Allstate’s fraud claims under § 5106.


Waiver of right to arbitrate

Willer v Kleinman, 2014 NY Slip Op 01164 (2d Dept. 2014)

You agree to arbitrate or are a forced participant in an arbitration.  Assuming there is no other way to wiggle out of being subjected to AAA jurisdiction, you proceed to file a complaint.  Your adversary answers your complaint and pleads counterclaims that bear on the merits of the arbitration.  Are you out of the woods?  Precedent suggests that you are.

“However, the defendants, by their conduct in this lawsuit, waived arbitration. As this Court explained in Reynolds & Reynolds Co., Automotive Sys. Div. v Goldsmith Motor Corp. (251 AD2d 312, 313),”[t]here is no inflexible or mechanical rule as to what constitutes a waiver of the right to arbitrate. Rather, determination of the issue depends on the facts and circumstances of each particular case . . . Among the factors to be considered are the extent of the party’s participation in litigation and conduct inconsistent with the assertion of a right to arbitrate, the delay in seeking arbitration, and whether the other party has been prejudiced” (citations omitted).

While a party who commences an action waives arbitration, the same cannot be said for a defendant (see De Sapio v Kohlmeyer, 35 NY2d 402, 405). A defendant who submits an answer, or submits a pre-answer motion to dismiss the action, does not waive arbitration, especially if the arbitrability of the controversy is asserted as a ground to dismiss the action (see Flynn v Labor Ready, 6 AD3d 492; Spatz v Ridge Lea Assoc., 309 AD2d 1248; Ruttura & Sons Constr. Co. v Petrocelli Constr., 257 AD2d 614). However, in the instant case, the defendants asserted counterclaims related to issues in the main action, against both plaintiffs, including Nadia Willer, who is united in interest with Justin Willer, but is not a party to any arbitration agreement (see Dembitzer v Chera, 305 AD2d 531, 532). Further, the defendants sought and obtained discovery (see De Sapio v Kohlmeyer, 35 NY2d 402, 405).

Trial De Novo granted and declaration of non-coverage granted

Allstate Ins. Co. v. Phelps Memorial Hospital, 2013 NY Slip Op 33590(U)(Sup. Ct. Nassau Co. 2013)

“This Court conducted a non-jury trial on matter on November 7, 2013, and
reserved decision. The plaintiffs expert credibly testified the treatment rendered to Jorge  Caniero was neither caused by the November 18, 2010 motor vehicle accident nor was  there any exacerbation of a pre-existing condition caused by that same accident. The  Court finds Jorge Caniero was admitted to Phelps Memorial Hospital on suspicion he  experienced a stroke which was not related to the November 18, 20 I 0 motor vehicle  accident. The Court also finds the treatment rendered by the defendant was related to the  diagnosis of acute CVA hypertension, diabetes, mellitus, coronary artery disease and  hyperlipidemia. These conditions were not causally related to the November 18, 2010  motor vehicle accident.

“The plaintiff proffered medical facts by its expert which were sufficient to show the medical condition  for which Jorge Caniero was treated was not related to the November 18, 2010 motor vehicle accident nor was there any exacerbation of a pre-existing condition caused by that same accident”

This is an interesting order as it is one of the few times a lack of causation defense has actually been successful.  It seems to help that Defendant did not put on a case?  If you look at the history of this matter, Defendant made a motion to dismiss the action as time barred, presumably because the Trial de-novo/declaratory judgment action was not commenced within the 90-day period set forth in Article 75 of the CPLR.  This motion was denied.

I suspect Defendant’s motion should have probably been granted.  The simple reason is that assuming the demand for trial de-novo occurs more than 6-years after the claim became overdue, while the original arbitration was commenced timely, then the trial de novo would be time barred.  I am not sure that makes sense and is in accord with the meaning of Ins. Law 5106(c).

How come there have been no new master arbitration decisions posted on AAA’s website since October 15, 2013?

Dear AAA,

Insofar as 60-70 percent of most defense firms’ inventories involve AAA arbitration matters, it is important for us (well me at least) to follow master decisions and keep a log of interesting ones.  I started logging decisions of interest (I rarely share those on here) in late 2012.  However, for some reason, AAA stopped posting these decisions as of October 14, 2013.  I sent an email to AAA on their customer feedback form late last week, but have not gotten a response.  I checked today and again there have not been any new decisions.

Could someone at AAA who reads this please look into this issue.  For me, these decisions are invaluable in preparing proper master briefs, arguing certain threshold matters before AAA and deciding potential Article 75 candidates.



An arbitrator’s order is not binding where the provider was not named in the underlying arbitration

Queens Arthroscopy & Sports Medicine v Unitrin Direct Ins. Co, 2013 NY Slip Op 52021(U)(App. Term 2d Dept. 2013)

“On March 23, 2011, plaintiff moved in this action for summary judgment, and the following day, the arbitrator issued a decision, which stated that, based upon the credible evidence before him, either defendant or Arch Insurance Company [*2]would be the source of first-party no-fault benefits. The arbitrator directed Arch Insurance Company to commence processing plaintiff’s claims, because that insurer had received notice of the claims first.”

“”However, plaintiff was not named in the arbitration and was not in privity with its assignor, who was a named party in that proceeding, as the assignment of benefits had been executed before the arbitration proceeding had been commenced, and plaintiff otherwise had no full and fair opportunity to appear and defend its interests in that proceeding. Consequently, the instant action is not subject to dismissal by virtue of the decision in the arbitration hearing”

There is no way to compel a medical provider to participate in an arbitration that it does not file.  Perhaps, Defendant should have filed a declaratory judgment and named everybody in it?

Motion to compel arbitration denied

Interboro v. Boris Kleyman, Index #: 152395/10 (Supreme Ct. NY Co. 2013)


In this particular matter, Plaintiff moved to reargue the prior order of Supreme Court, dismissing the matters against certain Defendants on the basis the a provider has the unilateral choice to chose to arbitrate its bills.

As can be seen, the Court realized that the weight of judicial authority holds that an insurance carrier has the right, in the first instance, to litigate coverage issues in a Supreme Court action.  Thus, leave to reargue was granted and, upon reargument, the motion to dismiss was denied en toto.

It should be noted that the initial opinion was published.  Hopefully, this opinion will in turn be published.

**CORRECTION** Opinion was published today, 11/7/13

I will say that Justice Kern, to her credit, will reverse herself on reargument when presented with persuasive authority to do same.