Key Takeaway
Court denies preliminary injunction in Liberty Mutual fraud case, finding insufficient evidence of fraudulent incorporation despite gaps in EUO testimony.
Liberty Mut. Ins. Co. v Branch Med., P.C., 2016 NY Slip Op 31706(U)(Sup. Ct. NY Co. 2016)
(1) In connection with one such claim, at an examination under oath (EUO) held on March 31, 2014, Nicholas testified that he and his brother, Scott, solely owned and controlled Branch, that their compensation was tied to company profits, and that defendant Mark Levitan served as Branch’s “administrative executive,” overseeing company staff, marketing, bookkeeping, and internal HIPAA procedures, with online access to Branch’s bank account. He was not a physician. When questioned further about Levitan, Nicholas was instructed by counsel not to answer questions about Levitan’s compensation relative to his and Scott’s, nor whether Levitan had been involved in any business owned by Nicholas before Branch.
(2) “Nothing in Nicholas’s testimony evidences fraud, nor do the unanswered verification requests. Moreover, the requests were improper. (See Is. Chiropractic Testing, P. C. v Nationwide Ins. Co., 35 Misc 3d 1235, 2012 NY Slip Op 51001, *2 ”
(3) “Even if the alleged gaps in Nicholas’s testimony support an inference that Levitan earned more than him and Scott, it is consistent with Levitan, as staff, earning a salary, whereas Nicholas and Scott, as owners/shareholders, earned compensation based on the corporation’s profits. And even if Levitan was affiliated with a prior business owned by Nicholas, it proves nothing absent evidence he owned or controlled it.”
(4) Plaintiffs’ remaining allegations are unsubstantiated and based on speculation, and to the extent that plaintiffs rely on Springer’s EUO, they fail to provide or point to the pertinent portions of his testimony. Plaintiffs thus fail to establish, by clear and convincing evidence, the likelihood of success on the merits of their claim that Branch and Windsor were fraudulently incorporated and ineligible to receive no-fault benefits”
This one is interesting. I never liked the whole directing not to answer thing. The questions were relevant regarding compensation of the administrator of the practice. Ultimately, the amount of his compensation relative to his bona-fide verifiable job duties would lead to legitimate verification requests for financial documents. The Court got that wrong, simple.
As to the Court applying District Court decisions disallowing verification of financial documentation, the regulations prefer that these document exchanges take place pre-suit. Remember the case where Supreme Court was reversed when the Court granted discovery in the form of financials during arbitration? The Court cited 65-3.5 and 65-3.6.
I think the decision is wrong and should be appealed. Unless, I am missing something?
By the way, I do not disagree that a practice manager could or maybe should make more than the principals. But, the insurance carrier should have been entitled to ask more questions at the EUO and, only if the answers to the questions raise legitimate concerns, should further documentary discovery be required.
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Legal Update (February 2026): Since this 2016 decision, New York’s no-fault regulations under sections 65-3.5 and 65-3.6 have undergone multiple amendments affecting verification procedures and examination under oath protocols. Additionally, fee schedule updates and procedural modifications to declaratory judgment actions in no-fault disputes may impact the analytical framework discussed in this case. Practitioners should verify current regulatory provisions and recent decisional law when addressing similar verification and EUO issues.
