Key Takeaway
Court ruling shows lack of evidence for Mallela defense in no-fault insurance case involving professional corporation ownership and control requirements.
Nationwide Affinity Ins. Co. of Am. v Acuhealth Acupuncture, P.C., 2017 NY Slip Op 08007 (2d Dept. 2017)
(1) “However, “ provider of health care services is not eligible for reimbursement under section 5102(a)(1) of the Insurance Law if the provider fails to meet any applicable New York State or local licensing requirement necessary to perform such service in New York” (11 NYCRR 65-3.16). “State law mandates that professional service corporations be owned and controlled only by licensed professionals” (One Beacon Ins. Group, LLC v Midland Med. Care, P.C., 54 AD3d 738, 740; see Business Corporation Law §§ 1503; 1507, 1508). Thus, an insurance carrier may withhold payment for medical services provided by a professional corporation which has been “fraudulently incorporated” to allow nonphysicians to share in its ownership and control”
(2) “Thus, this evidence did not demonstrate, prima facie, that Anikeyev exercised dominion and control over the defendants and their assets and shared the risks, expenses, and interest in their profits and losses, or that he had a significant role in the guidance, management, and direction of their business (see Andrew Carothers, M.D., P.C. v Progressive Ins. Co., 150 AD3d at 201). Moreover, even assuming, as the plaintiffs do, that the presence of the forfeited funds in the defendants’ bank accounts demonstrated some level of control by Anikeyev over the bank accounts, such control could not, on its own, support a finding that he owned and controlled the defendants ”
It is interesting that the regulation (65-3.16) is limited to the situation where the medical provider is “controlled” by an ineligible professional. The evidence, which various arbitrators, master arbitrators and the First Department have ruled upon, does not conclusively support this showing.
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- Interesting Mallela case from the Appellate Term, Second Department
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- Mallela Violations as Legal Malpractice Defense Strategy – Long Island & NYC
Legal Update (February 2026): Since this 2017 post, 11 NYCRR Part 65 has undergone several amendments, particularly regarding provider licensing requirements under section 65-3.16 and professional corporation ownership standards. Practitioners should verify current regulatory provisions and recent appellate decisions interpreting Insurance Law § 5102(a)(1) licensing requirements, as enforcement standards and documentation requirements may have evolved.
