After the DJ

Valdan Acupuncture, P.C. v Nationwide Mut. Fire Ins. Co., 2019 NY Slip Op 51098(U)(App. Term 2d Dept. 2019)

This case answers a question some have properly asked. At what point do the Assignee medical providers not have to be named in the underlying declaratory judgment in order for a declaration of non-coverage to be binding on the that party.

The general rule is the Magic rule, which states that res judicata will not attach to an declaratory judgment when a medical provider is not named in a DJ action. The corollary to this rule is the Astoria v. State Farm rule which says that a fully contested jury trial in a third-party negligence action involving the assignor will be collateral estoppel on the issue of non contact in an assigned first-party action despite the medical provider not having the opportunity to participate in the third-party action.

Now we have the Valdan Acupuncture rule.

” Under the doctrine of res judicata, a final adjudication of a claim on the merits precludes relitigation of that claim and all claims arising out of the same transaction or series of transactions by a party or those in privity with a party” (Ciraldo v JP Morgan Chase Bank, N.A., [*2]140 AD3d 912, 913-914 [2016]; see Matter of Hunter, 4 NY3d 260, 269 [2005]; Schuylkill Fuel Corp. v Nieberg Realty Corp., 250 NY 304, 306-307 [1929]). In the case at bar, as the injured party’s assignment to plaintiff was made on September 21, 2011, after the commencement in August 2011 of the declaratory judgment action, plaintiff is deemed to be in privity with the assignor and “charged with notice that [its] rights to the assignment are subject to the competing claim” (Gramatan Home Invs. Corp. v Lopez, 46 NY2d 481, 487 [1979]). “

And I am unsure if it is irony or serendipity but my good friend Gary T was involved in all three of these cases. I guess he owns all aspects of this issue. Oleg Rybak cannot own every IME/EUO/DJ issue.

Negligent employment

Walden Bailey Chiropractic, P.C. v Geico Cas. Co., 2019 NY Slip Op 05267 (4th Dept. 2009)

I feel as though Mr. Walden Bailey was unhappy with the gecko and went after him with all guns blazing. I just read a story about a guy who died after eating a gecko – apparently salmonella poisoning. Luckily, Mr. Walden did not suffer the same fate and still has his breach of contract action against the gecko

” We agree with defendant, however, that plaintiff failed to allege facts constituting negligent hiring, supervision, or retention sufficient to survive defendant’s motion to dismiss. “An employer may be liable for a claim of negligent hiring or supervision if an employee commits an independent act of negligence outside the scope of employment and the employer was aware of, or reasonably should have foreseen, the employee’s propensity to commit such an act” (Lamb v Stephen M. Baker, O.D., P.C., 152 AD3d 1230, 1231 [4th Dept 2017] [internal quotation marks omitted]). Here, plaintiff’s cause of action for negligent hiring, supervision or retention is based on the factual allegations that defendant’s employees denied or delayed the payment of claims to plaintiff and sent repetitive verification demands, and that defendant was aware of what its employees were doing and continued to employ them. Plaintiff, however, [*2]failed to allege that those acts were committed outside the scope of the employees’ employment. Plaintiff also failed to allege how the employees’ alleged acts of denying claims and sending verification demands constituted acts of negligence. Thus, we conclude that the court erred in denying that part of defendant’s motion seeking to dismiss the 13th cause of action, and we therefore modify the order accordingly. “

My only misgiving here is absent discovery, how can a plaintiff really make an allegation of negligent hiring? Perhaps, the cause of action should have survived pending discovery? The Plaintiff has no way of knowing or finding a way to know why all of these claims were denied or verified. I would compare this to the situation where the EIP or the provider no-shows. Here, the provider attorney has access through subpoena power of the EIP and personal knowledge of what his or her client did or did not do.

Watch out for text degradation

Global Liberty Ins. Co. v Tyrell, 2019 NY Slip Op 03691 (1st Dept. 2019)

This case was the result of the system crunching large pdf’s into smaller files to free up more space on my hard drive. I am not even kidding. We were not even aware of the text degradation until it was raised in opposition. The natural reaction is to put in better copies; but apparently, you need an affidavit explaining that the better copies were the ones sent to the Defendant. New rule here and I will remember. Not even sure that specific argument was raised but practice tip out there – if you wish to clarify you submission in Reply, get an affidavit briefly explaining what happened. Perhaps shame on me here.

Supreme Court accepted the clear letters in reply but found a mailing issue. It is a fair guess that the Appellate Division accepted the mailing and non-appearance issue, but relied on a hyper-technical issue to affirm the lower court’s order. I can live with this.

What was really good though (and I am quite thankful) is the Court found the wrong caption/ no caption argument to lack merit. This argument has picked up steam in Civil Kings, and it is nice to see it has finally died. Well it will not die but it has been judicially found to lack merit. Thus, the App Term and Article 75 courts will likely not find merit in this argument.

Appellate Division hold that Civil Court lacks subject matter over DJ actions

State Farm Fire & Cas. Co. v Jewsbury, 2019 NY Slip Op 01247 (2d Dept. 2019)

This involves the unsuccessful argument that Civil Court actions block Supreme Court declaratory judgment actions. The Appellate Divisions have never ruled in favor of the providers under a CPLR 3211(a)(4) dismissal theory. If that was the holding, I would not really care much about this.

But – we finally have clarity regarding the ability of an insurance carrier to seek declaratory judgment relief in Civil Court. The answer was what we all knew it was after Fresh Acupuncture, but later confused due to Countrywide. A well reasoned decision.

“After State Farm received and failed to pay first-party beneficiary claims submitted by Parisien, Parisien commenced two actions in the Civil Court of the City of New York for payment (see Insurance Law § 5106). While those actions were pending, State Farm commenced this action in the Supreme Court, Kings County. State Farm seeks a judgment declaring that it is not required to pay any claims related to the accident on the policy it issued.”

” The Supreme Court improvidently exercised its discretion in granting that branch of Parisien’s motion which was pursuant to CPLR 3211(a)(4) to dismiss the complaint insofar as asserted against him. A declaratory judgment resolving the issue of State Farm’s obligation to pay any claims on the policy with respect to the accident, and naming all providers who may seek reimbursement under the policy, would further the interest of judicial economy. Indeed, the Civil Court may not issue the declaratory relief State Farm seeks in this action (see Fresh Acupuncture, P.C. v Interboro Ins. Co., 56 Misc 3d 98, 100 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists]; cf. CPLR 3001; Insurance Law § 3420[a][6]; Mazzei v Kyriacou, 139 AD3d 823, 824), and the other providers who may seek no-fault reimbursements relating to that collision are not parties to the two actions pending in the Civil Court. “

Appellate Term, first department gives expansive reading to CCA 212-a

Country-Wide Ins. Co. v Yao Jian Ping, 2019 NY Slip Op 50160(U)(App. Term 1st Dept. 2019)

“This action, seeking a de novo adjudication of a no-fault insurance claim following a master arbitrator’s award in excess of $5,000 (see Insurance Law § 5106[c]), was properly commenced in Civil Court, since the amount in dispute did not exceed $25,000 (see CCA 212-a; Imperium Ins. Co. v Innovative Chiropractic Servs., P.C., 43 Misc 3d 137[A], 2014 NY Slip Op 50697[U] [App Term, 1st Dept 2014]; Brooks v Rivera, 40 Misc 3d 133[A], 2013 NY Slip Op 51191[U] [App Term, 1st Dept 2013]).”

This was clearly a set up to see what the Appellate Division First Department would.

The new-new-new regs are not retroactive

Global Liberty Ins. Co. of N.Y. v Spine Consultation NJ, P.C., 2018 NY Slip Op 08748 (1st Dept. 2018)

Had one of those weeks – I felt like the partner whose affirmation could not prove anything.  This case stemmed from what was probably an oversight on DFS’ part.  Historically, DFS always told us when a change on the regulations would take place.  For the first time that I can recall, a regulation did not contain this language,

There was also case law suggesting this type of circumstance, i.e. a regulation or statute can have retroactive application.  You can read my motions papers – they are online.  My brief parroted, in pertinent part, my motion papers.  But the Court was not ready to give us another Unitrin moment.

“The court correctly denied plaintiff’s motion, interpreting Department of Financial Services Regulations (11 NYCRR) § 68.6(b)(1), amended effective January 23, 2018, to apply prospectively. The regulations do not indicate that they apply retroactively, and the law is settled that retroactivity is not imputed where not expressly stated (Bowen v Georgetown Univ. Hosp., 488 US 204, 208 [1988]; Matter of Rudin Mgt. Co. v Commissioner of Dept. of Consumer Affairs of City of N.Y. , 213 AD2d 185, 185 [1st Dept 1995]).”

Default vacated

Government Employees Ins. Co. v Avenue C Med., P.C., 2018 NY Slip Op 08010 (2d Dept. 2018)

(1) “The defendants Salehin Sayeedus, also known as Salehin Sayeedus Suman, Jose Carmen Ma Donna Gloria, also known as Carmen Maria Donna Jose, and Zhi-Yuan Zhong (hereinafter collectively the defaulting defendants) defaulted in appearing and, in April 2014, the plaintiffs filed a motion for leave to enter a default judgment against the defaulting defendants. The motion was unopposed, and was granted on July 23, 2014. In October 2014, the defaulting defendants moved to vacate their default and to compel acceptance of their late answers, asserting that their default was due to law office failure. In support of their motion, the defaulting defendants submitted affidavits from the defendants’ former and present counsel, in which counsel stated that the failure to serve timely answers on behalf of the [*2]defaulting defendants was due to a miscommunication between the defendants’ former and present counsel, upon the transfer of the defendants’ case to their present counsel, regarding the nature of the representation. The Supreme Court denied the motion, and the defaulting defendants appeal.”

(2) “Here, the defaulting defendants demonstrated a reasonable excuse, based upon law office failure arising from a miscommunication between their former counsel and their present counsel, for their default in answering the complaint or otherwise appearing in the action”

(3) “The defaulting defendants submitted affidavits in support of their motion describing their office services and billing practices, in which they stated, among other things, that their patients were required to sign statements acknowledging the treatments that they had received. The defaulting defendants also averred in the affidavits that they did not bill for services that were not rendered”

Now, Avenue C will get its date in Court.

A declaratory judgment to nowhere

Jamaica Wellness Med., P.C. v Mercury Cas. Co., 2018 NY Slip Op 51128(U)(App. Term 2d Dept. 2018)

Upon a review of the record, we find that, as the March 23, 2016 Supreme Court order in the declaratory judgment action merely awarded a default judgment to Mercury against Jamaica’s assignor, but did not declare the rights of Mercury as against Jamaica (see Hirsch v Lindor Realty Corp., 63 NY2d 878 [1984]; Suburban Bindery Equip. Corp. v Boston Old Colony Ins. Co., 150 AD2d 767 [1989]; Metro Health Prods., Inc. v Nationwide Ins., 48 Misc 3d 85[App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2015]), the Supreme Court order cannot be considered a conclusive final determination of Jamaica’s rights and, thus, can have no preclusive effect on the no-fault action at bar (see Promed Orthocare Supply, Inc. v AIG Advantage Ins. Co., 50 Misc 3d 128[A], 2015 NY Slip Op 51886[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2015]; cf. Vital Meridian Acupuncture, P.C. v Republic W. Ins. Co., 46 Misc 3d 147[A], 2015 NY Slip Op 50222[U] [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2015]; EBM Med. Health Care, P.C. v Republic W. Ins., 38 Misc 3d 1 [App Term, 2d Dept, 2d, 11th & 13th Jud Dists 2012]). Consequently, the Civil Court should not have dismissed the complaint based on the Supreme Court order. In light of the foregoing, we reach no other issue.

This embarrassment speaks for itself.

Where was the reasonable excuse?

Two cases, differing fact patterns and no showing at all of a reasonable excuse.

Right Solution Med. Supply, Inc. v Republic W. Ins. Co., 2018 NY Slip Op 51125(U)(App. Term 2d Dept. 2018)

“In support of its motion, defendant submitted an affidavit by plaintiff’s assignor in which plaintiff’s assignor admitted that the December 21, 2009 accident underlying this no-fault proceeding had been staged, and an order dated April 26, 2013, from the Supreme Court, New York County, in a declaratory judgment action, entered on default, finding that defendant herein had no duty to pay any no-fault benefits to plaintiff herein and its assignor, among others, with respect to this accident. The Civil Court denied defendant’s motion, finding that defendant had failed to establish a reasonable excuse for its failure to proceed at trial.

Defendant’s motion should have been granted, as defendant demonstrated both a reasonable excuse for its failure to proceed at trial and a meritorious defense (see CPLR 5015 [a] [1]; Eugene Di Lorenzo, Inc. v A.C. Dutton Lbr. Co., 67 NY2d 138, 141 [1986]).”

Clearly, the affidavit of the Assignor was powerful tool in opening the default. I wish the Court was more honest and opened the default upon the residual inherent good cause and interest of justice discretion all trial courts and appellate courts have.  That would have been a more honest and better decision.

Allstate Ins. Co. v North Shore Univ. Hosp., 2018 NY Slip Op 05268 (2d Dept. 2018)

(1) “On January 29, 2015, the plaintiff commenced this action pursuant to Insurance Law [*2]§ 5106(c) for a de novo determination of the defendant’s claims for recovery of no-fault benefits. The plaintiff then moved for leave to enter a default judgment because the defendant failed to timely appear or answer the complaint. In an order entered April 21, 2015, the Supreme Court granted the plaintiff’s motion for leave to enter a default judgment. On June 8, 2015, the court entered a default judgment.

In July 2016, the defendant moved pursuant to CPLR 5015(a)(1) to vacate its default, and pursuant to CPLR 2004 and 3012(d) to extend its time to answer the complaint. In an order entered October 19, 2016, the Supreme Court denied the motion, and the defendant appeals”

(2) In July 2016, the defendant moved pursuant to CPLR 5015(a)(1) to vacate its default, and pursuant to CPLR 2004 and 3012(d) to extend its time to answer the complaint. In an order entered October 19, 2016, the Supreme Court denied the motion, and the defendant appeals.

The defendant’s motion was timely made (see CPLR 5015[a][1]; 2103[b][2]). A defendant seeking to vacate a default pursuant to CPLR 5015(a)(1) on the ground of excusable default must demonstrate a reasonable excuse for the default and a potentially meritorious defense to the action (see CPLR 5015[a][1]; Eugene Di Lorenzo, Inc. v A.C. Dutton Lbr. Co., 67 NY2d 138, 141; EMC Mtge. Corp. v Toussaint, 136 AD3d 861, 862; Lane v Smith, 84 AD3d 746, 748). Here, the defendant demonstrated a reasonable excuse for its default and a potentially meritorious defense to the action

When I see 5015(a)(1) and 2103(b)(2) together, I am sensing that the one year period to vacate ran from when the order was mailed on arbitration counsel.  I just cannot tell from this decision, but it definitely opens up the door to vacturs of trial de novo defaults with the presentment of the right facts.


An order granting a declaratory judgment suffices for affirmation in opposition


Healing Art Acupuncture, P.C. v 21st Century Ins. Co., 2018 NY Slip Op 50583(U)(App. Term 2d Dept. 2018)

(1) “The Supreme Court order granting defendant’s motion for summary judgment held that defendant had established its founded belief that there was no coverage for no-fault benefits arising out of the accident at issue because the collision had been a staged incident.”

(2) “Thereafter, based upon the orders in the Supreme Court declaratory judgment action, the Civil Court, by order entered October 16, 2015, denied plaintiff’s motion for summary judgment, finding that defendant has no duty to provide coverage for the accident at issue. Plaintiff appeals from the October 16, 2015 order of the Civil Court.”

(3) “While defendant did not proffer in the Civil Court an affirmation of its counsel or an affidavit in opposition to plaintiff’s motion, and defendant did not annex the Supreme Court orders as exhibits to any opposition papers, a court “may in general take judicial notice of matters [*2]of public record”

(4) “Consequently, in light of the Supreme Court’s orders and declaratory judgment, of which we take judicial notice, we find that the Civil Court properly denied plaintiff’s motion for summary judgment under the doctrines of res judicata and collateral estoppel”

(5) “[a]nd, upon a search of the record, we find that defendant established its entitlement to judgment as a matter of law. In view of the foregoing, we reach no other issue.”

This says it all I think.