Key Takeaway
Appellate Term analyzes Mallela defense discovery standards, ruling preponderance of evidence sufficient for no-fault insurance licensing fraud claims in New York.
Radiology Today, P.C. v GEICO Gen. Ins. Co., 2011 NY Slip Op 21161 (App. Term 2d Dept. 2011)
Holding #1: “Plaintiff contends that the discovery order was improper because, in the answer and in support of its motion to compel discovery, defendant failed to “state[] in detail” the “circumstances constituting the wrong,” citing CPLR 3016 (b). There is no requirement that a defense predicated upon the failure to comply with “New York State or local licensing requirement” (Insurance Department Regulations 65-3.16 ) be pleaded with particularity pursuant to CPLR 3016 (b) (see generally V.S. Med. Servs., P.C. v Allstate Ins. Co., 25 Misc 3d 39 ). In addition, while mere conclusory allegations are never sufficient to obtain discovery with respect to a Mallela-based defense, defendant’s motion papers were sufficient to demonstrate that a Mallela-based defense [*3]was potentially meritorious.”
Holding #2: “The defense that plaintiff is ineligible to receive no-fault benefits because it failed to comply with state or local licensing requirements “is not waived by the failure to assert it in a denial of claim form … nor is it precluded as a result of an untimely denial” (Multiquest, P.L.L.C. v Allstate Ins. Co., 17 Misc 3d 37, 39 ). No-fault benefits may not be paid to medical service corporations which submit “materially false filings with state regulators” (Mallela, 4 NY3d at 321)”
So we all got the answer we have waited for: Mallela based “fraud” need only be proved through a preponderance of the evidence. As a corollary, the evidence needed to obtain Mallela based discovery is sufficiently less than what could possibly be sought under a clear and convincing fraud standard. This is quite interesting to say the least.
Also, the Appellate Term seems to hold that a PHL 238 violation standard separate and apart from a true “Mallela” violation. The door has opened that much further. The better question, however, is why the heck can’t all of this information be obtained in EUO-verification, under penalty of the policy being void ab initio…
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- Why does a Malella defense survive an untimely disclaimer, while a workers compensation defense doesn’t?
- Professional Service LLC Dissolution in NY: When Medical Licenses Are Suspended
Legal Update (February 2026): Since this 2011 post, Insurance Department Regulation 65 has undergone several amendments, and there have been significant developments in Mallela-based licensing defense jurisprudence through subsequent appellate decisions. The procedural requirements for asserting licensing defenses and discovery standards may have evolved since the Radiology Today decision. Practitioners should verify current provisions of Regulation 65-3.16 and review recent case law interpreting Mallela defense pleading and discovery requirements.
