It is John J. McGee again.

New York Cent. Mut. Ins. Co. v McGee,  2011 NY Slip Op 06253 (2d Dept. 2011)

Point one: A Malella defense (or cause of action) against different providers, despite different contracts of insurance, should be consolidated.

“The Supreme Court improvidently exercised its discretion in, sua sponte, severing the action as to the 12 PCs, and, in effect, permitting the action to continue only against Dr. McGee and 3 of the 12 PCs. “Although it is within a trial court’s discretion to grant a severance, this discretion should be exercised sparingly” (Shanley v Callanan Indus., 54 NY2d 52, 57; see Curreri v Heritage Prop. Inv. Trust, Inc., 48 AD3d 505, 507; Lelekakis v Kamamis, 41 AD3d 662, 666). Severance is inappropriate where the claims against the defendants involve common factual and legal issues, and the interests of judicial economy and consistency of verdicts will be served by having a single trial (see Bentoria Holdings, Inc. v Travelers Indem. Co., 84 AD3d 1135; Curreri v Heritage Prop. Inv. Trust, Inc., 48 AD3d at 507-508; Lelekakis v Kamamis, 41 AD3d at 666; Naylor v Knoll Farms of Suffolk County, Inc., 31 AD3d 726, 727). Here, the complaint alleged the existence of a common scheme to fraudulently incorporate the PCs through the use of Dr. McGee’s professional license, which, if established, would render all of the PCs ineligible to recover no-fault benefits (see State Farm Mut. Auto. Ins. Co. v Mallela, 4 NY3d 313, 319-322). The common factual and legal issues presented as to whether the 12 PCs were fraudulently incorporated predominate the action and, thus, the interests of judicial economy and consistency of verdicts would be not be served by requiring the plaintiff to commence multiple actions. To the contrary, such fragmentation would increase litigation and place “an unnecessary burden on court facilities” (Shanley v Callanan Indus., 54 NY2d at 57), by requiring four separate trials instead of one.”

Point two:

Med-pay only comes into play when Basic PIP is exhausted.  I admittedly always thought that Med-pay was also triggered when Basic-PIP was denied based upon a violation of a condition precedent to coverage.

“The counterclaims are predicated on the defendants’ allegation that they are entitled to reimbursement for medical services provided under the medical payments coverage provisions of the subject insurance policies rather than the no-fault coverage provisions. However, medical payments coverage is excess coverage over mandatory no-fault coverage (see 11 NYCRR 65-1.1), and the defendants have failed to allege or otherwise demonstrate that the payments they seek exceed the no-fault threshold of $50,000 for basic economic loss of an eligible injured person for a single accident.”

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Legal Update (February 2026): Since this 2011 decision, New York’s no-fault insurance regulations cited in 11 NYCRR 65-1 have undergone multiple amendments, particularly regarding coverage provisions and procedural requirements. Additionally, case law developments over the past 15 years may have refined the standards for severance in insurance coverage disputes and Malella defense consolidation. Practitioners should verify current regulatory provisions and recent appellate decisions when addressing similar severance and consolidation issues.