Assignments and business records – a deadly combination

The Fourth Department in Palisades Collection, LLC v Kedik, 2009 NY Slip Op 08259 (4th Dept. 2009) discussed standing and the business record rule, all in one decision.  Interestingly, the failure to get the assignment of benefits into evidence proved fatal to the Plaintiff Assignee’s prima facie case.  I think Judge Billings 5 years ago wrote a similar decision in the no-fault realm, prior to the Appellate Division and Court of Appeals’ decisions, which held that technical standing is not part of a plaintiff’s prima facie case.

For those who venture outside no-fault and deal with assigned actions, here is how the Fourth Division evaluates these issues:

“Plaintiff, as the alleged assignee of Discover Bank (Discover), commenced this action for breach of contract and account stated seeking to recover the balance owed on a credit card issued to defendant. Supreme Court denied in part plaintiff’s motion for partial summary judgment dismissing seven of the affirmative defenses, reserved decision in part, and ordered plaintiff to provide evidence that it had standing. Following plaintiff’s further submissions, the court concluded that plaintiff failed to provide admissible evidence of its standing and sua sponte granted defendant summary judgment dismissing the complaint. We affirm.

To establish standing to sue, plaintiff was required to submit admissible evidence that Discover assigned its interest in defendant’s debt to plaintiff (see generally Rockland Lease Funding Corp. v Waste Mgt. of N.Y., 245 AD2d 779). Here, plaintiff submitted an affidavit from its agent with exhibits, including a printed copy of several pages from an electronic spreadsheet listing defendant’s Discover account as one of the accounts sold to plaintiff. Contrary to the contention of plaintiff, the court properly determined that it failed to establish a proper foundation for the admission of the spreadsheet under the business record exception to the hearsay rule (see generally Speirs v Not Fade Away Tie Dye Co., 236 AD2d 531).

A business record is admissible if “it was made in the regular course of any business and . . . it was the regular course of such business to make it, at the time of the act, transaction, occurrence or event, or within a reasonable time thereafter” (CPLR 4518 [a]; see generally People v Kennedy, 68 NY2d 569, 579-580). “A proper foundation for the admission of a [*2]business record must be provided by someone with personal knowledge of the maker’s business practices and procedures” (West Val. Fire Dist. No. 1 v Village of Springville, 294 AD2d 949, 950). Although plaintiff’s agent averred that the spreadsheet was kept in the regular course of business and that the entries therein were made in the regular course of business, the agent did not establish that he was familiar with plaintiff’s business practices or procedures, and he further failed to establish when, how, or by whom the electronic spreadsheet submitted in paper form was made (see CPLR 4518 [a]; West Val. Fire Dist. No. 1, 294 AD2d at 950). Furthermore, although an electronic record “shall be admissible in a tangible exhibit that is a true and accurate representation of such electronic record” (id.), plaintiff’s agent failed to establish that the printed electronic spreadsheet submitted to the court was a true and accurate representation of the electronic record kept by plaintiff.”

Why does a Malella defense surive an untimely disclaimer, while a workers compensation defense doesn’t?

In New York First Acupuncture, P.C. v. State Farm Mut. Auto Ins. Co., 2009 NY Slip Op 52217(u), the Appellate Term in the context of an improper incorporation defense stated again that:

“Plaintiff’s contention, that the defense of fraudulent incorporation must be asserted in a timely denial of claim form, is without merit (Multiquest, P.L.L.C. v Allstate Ins. Co., 17 Misc 3d 37, 38-39 [App Term, 2d & 11th Jud Dists 2007]).”

What is interesting, and I have stated this before, is that it seems illogical that a Workers Compensation defense requires a timely disclaimer in order to be preserved (Westchester Med. Ctr. v Lincoln Gen. Ins. Co., 60 AD3d 1045 (2d Dept. 2009), while a Mallela styled defense is exempt from the timely disclaimer requirement of Ins. Law 5106(a).  Both of these defenses do not implicate coverage.  Rather, these defenses are based upon whether a party has standing to prosecute an action.  Compare 11 NYCRR 65-3.16(a)(12), with, 11 NYCRR 65-3.16 (a)(9).

A little consistency would be nice.

Why does a Malella defense surive an untimely disclaimer, while a workers compensation defense doesn't?

In New York First Acupuncture, P.C. v. State Farm Mut. Auto Ins. Co., 2009 NY Slip Op 52217(u), the Appellate Term in the context of an improper incorporation defense stated again that:

“Plaintiff’s contention, that the defense of fraudulent incorporation must be asserted in a timely denial of claim form, is without merit (Multiquest, P.L.L.C. v Allstate Ins. Co., 17 Misc 3d 37, 38-39 [App Term, 2d & 11th Jud Dists 2007]).”

What is interesting, and I have stated this before, is that it seems illogical that a Workers Compensation defense requires a timely disclaimer in order to be preserved (Westchester Med. Ctr. v Lincoln Gen. Ins. Co., 60 AD3d 1045 (2d Dept. 2009), while a Mallela styled defense is exempt from the timely disclaimer requirement of Ins. Law 5106(a).  Both of these defenses do not implicate coverage.  Rather, these defenses are based upon whether a party has standing to prosecute an action.  Compare 11 NYCRR 65-3.16(a)(12), with, 11 NYCRR 65-3.16 (a)(9).

A little consistency would be nice.

Standing – the Defense Applied Outside the No-Fault Arena

Wells Fargo Bank, N.A. v Marchione, 2009 NY Slip Op 07624 (2d Dept. 2009)

There seems to be an air of schizophrenia when the word “standing” finds its way in the Appellate Division reporter.  As I reported earlier, outside of the realm of no-fault practice, the “defense” of standing must be preserved through an affirmative defense in the answer or through a pre-answer motion.

In the newest Opinion and Order on this issue, the Appellate Division discusses the contours of the standing issue in the context of a foreclosure case.  The first line of Wells Fargo represents the issue, the holding and the rule of law, as set forth herein:  “The issue presented on this appeal is whether an assignee of a note and mortgage has standing to commence a foreclosure action prior to the date of the execution of the assignment. We hold that an assignee in such a case has no standing.”

Compare the holding in Wells Fargo to the issue of standing in the realm of no-fault litigation.  In no-fault practice, the failure to issue proper and timely additional verification requests, during the claims stage, will waive the standing defense.  As we all know, had this fact pattern occurred in the context of no-fault litigation, then the complaint would not have been dismissed.  This is true even if the affirmative defense of lack of standing is preserved in the answer.

While this case represents nothing new or earth shattering, it is just another example at how a uniform concept is interpreted in a less than uniform fashion.

Standing. All rise.

Davydov v Progressive Ins. Co.
2009 NY Slip Op 29299 (App. Term 2d Dept. 2009)

The concept of standing has numerous meanings. In Civil Procedure, it refers to the existence of a case or controversy, which is a precondition to allowing a Court to hear a case. In Criminal Procedure, it addresses the ability to contest a Fourth Amendment search and seizure violation. As a matter of common law and statutory law, it involves the ability of a party to prosecute an action, even though there is a case or controversy. I would be remiss if I did not include the statement that in English parlance, standing means to be on one’s feet in an upright, vertical position. If you were playing Password and someone said, in that funny opposite like voice “sitting”, the answer would be “standing”.

In regards to the common law notion of standing, there appears to have developed two different types of standing issues. The first is a statute or a regulation vesting or stripping a party of so-called standing. For instance, 65-3.16, the regulation that Malella is predicated upon, states that improperly formed corporations, and most likely their assignors in a direct first-party suit, do not have standing to prosecute overdue no-fault healthcare-expense bills. This “standing” rule also involves corporations prosecuting actions on behalf of independent contractors; and I would argue that 65-3.19 strips a health care provider’s ability to prosecute bills where a worker’s compensation carrier is deemed “primary”. But see, Westchester Med. Ctr. v Lincoln Gen. Ins. Co., 60 AD3d 1045 (2d Dept. 2009).

As to an example of a statute that vests standing, where it would not otherwise exist, one should look to GBL 349. Prior to the amendments promulgated years ago, the attorney General was the only official who could prosecute a GBL 349 (consumer fraud) claim.

The second notion of standing represents so-called technical standing. The Courts have over the last decade deemed technical standing issues, mainly as to valid assignments, to fall within this category. As to technical standing issues, the deficiencies in the assignment forms in the no-fault scenario are deemed waived if not properly addressed during the claim stage, and in non no-fault actions, the defect is waived if not properly pleaded in an answer or a pre-answer motion. See, e.g., Wells Fargo ]Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 241-243 (2d Dept. 2008)

Judge Golia’s dissent is only too logical. On a blank slate, it is correct. The type of technical defect in this matter, i.e., an assignment that assigns a claim to another entity should be a bar to a prima facie case in any type of action. This is a true standing issue, although deemed technical in nature. This statement would not hold true for issues such as missing signatures and other hyper-technical issues, where the intent to assign a claim to the proper entity may be inferred from the document. The issue of true standing should never be waivable since it addresses the fundamental right to access the courts. But the Appellate Courts have seemed to reject untimely challenges to technical defects, involving the nature of true standing.

I lastly wonder why Davydov, M.D., was not impleaded in a third-party contribution action in this case. This would most likely address the issue of proper standing and would protect the carrier from a subsequent action that Davidof M.D., could possibly bring against the carrier.

Workers Compensation defense

I would be remiss if I did not thank Dave Barshay for the citation to this blog in his article. I also must thank David Gottlieb for posting Mr. Barshay’s citation to this article on his blog. While I am not sure it is really critical that you read this blog, despite what Mr. Gottlieb says to the contrary, I thank him for the compliment nonetheless. Now that the peremptory “thank yous” are out of the way, now onto the cases.

A.B. Med. Servs., PLLC v American Tr. Ins. Co., 2009 NY Slip Op 29271 (App. Term 2d Dept. 2009)

A.B. Med. Servs., PLLC v American Tr. Ins. Co., 2009 NY Slip Op 51262(U)(App. Term 2d Dept. 2009)

A.B. Med. Servs., PLLC v American Tr. Ins. Co., 2009 NY Slip Op 51263(U)(App. Term 2d Dept. 2009)

Inwood Hill Med., P.C. v Metropolitan Prop. & Cas. Ins. Co. 2009 NY Slip Op 51264(U)(App. Term 2d Dept. 2009)

The day after the no-fault wrap up, the Appellate Term, Second Department issued a slue of opinions regarding the Workers Compensation defense, which was consistent with what Mr. Barshay’s article stated. Again, I discussed this issue on a previous blog post.

However, when the issue is phrased in light of the “exceptional” circumstance of non-coverage, as recently opined upon by the Court of Appeals in Fair Price, the Workers Compensation defense is waivbale.

However, when this issue is evaluated through the prism of “standing”, the Appellate Division’s conclusion may not be correct. As the law stands right now, a service rendered by an independent contractor or an improperly formed medical corporation is not subject to the “preclusion” sanction, through the failure to timely or properly deny a claim. This is because an independent contractor and an improperly formed corporation lacks standing to prosecute a no-fault claim. It thus follows that based upon 65-3.19, the Workers Compensation defense, in relation to a claim for medical benefits, should not be subject to the 30-day pay or deny rule. This follows from the simple conclusion that an injured person and his or her assignee lack standing to prosecute such a first-party no-fault claim for medical benefits.

The above standing analysis in no way applies to wage benefits, since the regulations explicitly state that no-fault wage coverage is secondary to Workers Compensation wage coverage.

It is a two way street

In reading the Westchester Med. Ctr. v Lincoln Gen. Ins. Co., 2009 NY Slip Op 02589 (2d Dept. 2009) case that involved the validity of a denial based upon workers compensation primacy, it appeared (at first blush) that the providers obtained a true victory against the carriers. Whereas compensation is somewhat consistent with managed health care, no-fault is the exact opposite. Furthermore, the scope of medical services compensated under no-fault is far greater than the services reimbursed under Workers Compensation. One only needs to ask a certain bunch of attorneys who are fighting this exact issue in the context of whether a Licensed Massage Therapist may receive compensation under no-fault for rendered services inasmuch as the same services are not compensable under Workers Compensation. This same battle arises in the realm of acupuncture that an L.AC performs and services a chiropractor renders outside the chiropractor fee schedule.

But, does this also mean that “priority of coverage” issues may also be subject to the 30-day pay or deny rule? Let me rephrase this statement. Does this mean that a primacy of coverage defense may be adjudicated in court or arbitration against a Claimant, because another insurance carrier might be primary?

Here are two examples. 1) John Doe, a Geico insured, is involved in a motor vehicle accident while occupying an Elrac rental vehicle in New York. Or, 2) John Doe, while in a Elrac vehicle is in an accident in Montana.

Under scenerio “1”, Elrac is primary. Under scerio “2”, Geico is primary. Simply put, the rule in New york is that coverage follows the vehicle, except that when the accident occurs outside NEw York, it follows the person.

Medical provider submits bills to Geico under scenerio #1 and Elrac in scenerio #2. Both of the carriers the bills were submitted to are not the first in line under a priority of payment analysis. Geico in example #1 and Elrac in example #2 timely denies the bills. Now what?

Under conventional wisdom, issues involving primacy of payment must be adjudicated in 5105 mandatory arbitration. See, 65-3.12; SZ Medical, P.C. v. Lancer Ins. Co., 7 Misc.3d 8 (App. Term 2d Dept. 2005). In other words, the secondary carrier must adjust the claim in the normal and ordinary course of business and then seek reimbursement against the primary carrier through intercompany arbitration. The SOL would be three years from the payment, so it cannot be said that the carrier should be too unhappy with this result. Motor Vehicle Acc. Indemnification Corp. v. Aetna Cas. & Sur. Co. 89 N.Y.2d 214 (1997).

Under the current system, money from the secondary insurer would have to be paid out on the front end, but may be recovered on the back end.

Now, because of the Westchester Case, it appears that priority of payment issues may be raised and defended at any time through a timely denial. Thus, next time I receive a denial when there is a primary of payment issue, maybe I actually have a defense? So, you can say this is the other side of the two-way street…

Be careful what you wish for.

The Workers Comp Mess

Westchester Med. Ctr. v Lincoln Gen. Ins. Co.
2009 NY Slip Op 02589 (2d Dept. 2009)
http://www.courts.state.ny.us/reporter/3dseries/2009/2009_02589.htm

This case has a few issues. The first issue can be resolved relatively easily. Factually, the carrier apparently failed to indicate to the provider the specific person from whom verification was sought. This defect rendered the EUO scheduling letters and the ensuing denials improper. The cases the Westchester court cited explain this principle quite well. To explain for those unfamiliar with this concept, a delay letter has to say what you are delaying for and who you are seeking the information from. The letters have to be highly specific, lest you wish to be subject to Presbyterian preclusion.

The better issue is the Workers Comp issue. The Court, for the first time that I can remember, is apparently holding that a Workers Comp denial must be timely. The Court fails to consider Workers Comp as a coverage issue. This is problematic, because I believe the law is clear.

In O’Hurley-Pitts v. Diocese of Rockville Centre 57 A.D.3d 633 (2d Dept. 2008), the Court held as follows:

“The Court of Appeals has held that the Workers’ Compensation Board “has primary jurisdiction over the issue of the availability of [workers’ compensation] coverage,” and if a plaintiff fails to litigate that issue before the Board, “the court should not express an opinion as to the availability of compensation but remit the matter to the Board,” since “[t]he compensation claim is a jurisdictional predicate to the civil action” (Liss v Trans Auto Sys., 68 NY2d 15, 21 [1986]; see Botwinick v Ogden, 59 NY2d 909 [1983]; O’Rourke v Long, 41 NY2d 219 [1976]). Accordingly, in considering the defendants’ motion, the Supreme Court should not have entertained their contention that the plaintiff was barred from recovery pursuant to Workers’ Compensation Law § 11. The case must be referred to the Workers’ Compensation Board for a determination as to whether the plaintiff has a valid cause of action for damages or whether he is relegated to benefits under the Workers’ Compensation Law”

The Regulation states the following:

11 NYCRR Sec. 65-3.9(a)(9): “Pursuant to section 5102(b)(2) of the Insurance Law, when the applicant is entitled to workers’ compensation benefits due to the same accident, the workers’ compensation carrier shall be the sole source of reimbursement for medical expenses.

I believe the Appellate Division messed up. I just hope a good record was preserved.

Estoppel through Box #16

Some practioners called Box #16 the trap box. Hit independent contractor and you are dead. I always said wait a second. Just resubmit the bill, give a justification and you should get around the 45-day rule. However, do not make the mistake too often or the 45-day rule may become absolute. I also have said that on certain fee code issues, i.e., the “BR” codes, the same rule applies. Resubmit with the pertinent documentation and you should be alright.

Yet, there was always a displeasure I has towards Box #16 issues when the Claimant decided to fight the independent contractor issue through affidavit. The reason, as the Appellate Term said, was that all other defenses would be waived.

A.M. Med. Servs., P.C. v Progressive Cas. Ins. Co.
2008 NYSlipOp 28528 (App. Term 2d Dept. 2008)

“In the case at bar, the claim forms at issue state that the treating professionals were independent contractors. Contrary to plaintiff’s contention, the allegation that said treating professionals were actually employees, and that the claim forms contain misinformation, is irrelevant. Plaintiff did not submit bills that entitled it to payment, and correction of the defect involved herein should not be permitted once litigation has been commenced”

The Court then said something which I found fasciniating and I think can be used in a litany of situations:

“An insurer should be able to rely on the assertions in the claim form, and, in keeping with the aim of “provid[ing] substantial premium savings to New York motorists” (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 860 [2003]), should be able to handle a claim for services rendered by an independent contractor accordingly without engaging in further consideration of the claim. An insurer is not obliged to issue a denial in order to assert the non-precludable, independent contractor defense. Consequently, if a provider were to be permitted to demonstrate during litigation that the claim form was incorrect and services were, in fact, rendered by an employee, not only would the insurer, which exercised its option not to expend further efforts to defend a facially meritless claim, have lost its opportunity to conduct meaningful claims verification, but also its decision not to issue a denial would result in its preclusion from introducing most defenses”