No-Fault Prima Facie Case Requires a Business Record Foundation for Medical Bills: Carothers v GEICO

The Appellate Division, Second Department has again held that a prima facie case in a no-fault benefits action involves a business record foundation for the entry of the bills into evidence. The decision matters because it goes to the most basic question in every first-party no-fault suit: what, exactly, does a medical provider have to prove to win?

The Decision

Matter of Carothers v GEICO Indem. Co. 2010 NY Slip Op 09256 (2d Dept. 2010)

“The testimony of an employee of the company that handled the plaintiff’s medical billing was insufficient to lay a foundation for the admission of the claim forms under the business records exception of the hearsay rule (see Art of Healing Medicine, P.C. v Travelers Home & Mar. Ins. Co., 55 AD3d 644)…. Since the subject documents were inadmissible, the plaintiff failed to establish its prima facie case, and the Appellate Term properly reversed the judgment in the plaintiff’s favor.”

The Business Records Foundation, Explained

A no-fault claim form is hearsay: it is an out-of-court statement offered to prove the truth of what it asserts — that services were rendered and that a particular amount is owed. To get the bills into evidence, a plaintiff provider must fit them within the business records exception to the hearsay rule, codified at CPLR 4518(a). That requires a witness who can testify that the record was made in the regular course of business, that it was the regular course of that business to make the record, and that it was made at or about the time of the transaction it records.

The recurring problem — and the one that sank the plaintiff in Carothers — arises when the billing is outsourced. A third-party billing company’s employee can usually describe the billing company’s own practices, but the underlying information (what treatment was rendered, to whom, and when) originates with the medical provider. Unless the witness can lay a foundation for the provider’s records — or show that the billing entity incorporated the provider’s records into its own and relied on them in the regular course of its business — the foundation fails. That is the teaching of Art of Healing, which the Second Department reaffirmed here: an outside biller’s say-so, without more, does not authenticate the provider’s claim forms.

The consequence is not a technicality. If the bills are inadmissible, the plaintiff has no proof that the claims were submitted or what they sought, and the prima facie case collapses. In Carothers, that meant reversal of a judgment the plaintiff had already won at trial.

The Inconsistency Problem

You often have to wonder why the courts cannot be consistent on some issues, especially those that impact tens of millions of dollars of claims every year. This prima facie issue is one of them. I recall after Art of Healing was published, the same Appellate Division in numerous Henig Hospital cases found the existence of a prima facie case through merely the submission of a bill. A review of any of Henig’s papers will show less of a foundation than what was probably found in the record in the above Carothers matter.

Maybe there is a separate prima facie rule for hospitals, as opposed to medical providers?

I think the answer to this riddle will some day have to be decided by the Court of Appeals. Yet, what is to stop the Court of Appeals from adopting the majority approach and requiring affirmative proof of medical necessity and causation as part of a prima facie case? I think the Plaintiffs bar is walking on coals when seeking further redress on this issue.

Why This Matters

For medical providers and their counsel. The plaintiff’s prima facie burden in a no-fault action is usually described as proof that the prescribed claim forms were mailed to and received by the insurer, and that payment is overdue. Carothers is a reminder that the proof half of that formulation has teeth: at trial, the bills themselves must come into evidence, and that means a properly grounded business records foundation. Providers that outsource billing should make sure their trial witness can speak to the provider’s record-making practices, not just the biller’s, or be prepared to satisfy the incorporation-and-reliance line of cases.

For insurers and defense counsel. The decision confirms that a foundation objection is not a throwaway. Where the plaintiff’s only trial witness is a third-party biller with no personal knowledge of the provider’s practices, the objection can be case-dispositive — even after a plaintiff’s verdict, as the appellate history here shows.

For everyone watching the doctrine. The post’s larger point still resonates: the prima facie standard in no-fault litigation has not been applied with perfect consistency across categories of plaintiffs, and the tension between the strict business-records approach and the more forgiving bill-submission cases is exactly the kind of issue that invites further appellate clarification. Litigants pressing the issue should think hard about what a definitive answer might look like before asking for one.

Related Resources

• A formulation of a prima facie case — our cluster hub on the prima facie case in New York no-fault litigation
• Fourth Department’s decade-long discussion on prima facie case requirements
• Carothers v. Geico: The No-Fault Business Records Showdown
• Court guidance on the business records exception
• Third-party billing records and Appellate Term’s first application of Carothers
• New York No-Fault Insurance Law
• Browse the firm’s Legal Encyclopedia for doctrinal guides to New York no-fault defenses
• No-fault insurance defense practice