Post EUO demands

State Farm Mut. Auto. Ins. Co. v Burke Physical Therapy, P.C, 2022 NY Slip Op 30580(U)(Sup. Ct. Nassau Co. 2022)

This one interested me. The carrier suspects something is amiss or wants to come up with a reason not to pay a claim, i.e., ATIC. A demand is made for the EUO of the provider that takes place. There is nothing about the testimony in and of itself that leads to the conclusion that a provision of the law has been broken.

That said, document demands are forwarded. There are no wholly answered and the 120-day denial is issued.

DJ action is brought based upon failure to respond to verification and Malella basis. Summary Judgment motion is interposed on the verification count of the complaint.

In this Court’s view, only one conclusion can be drawn-that on the precise question at issue here, the law is unsettled. To the extent that the Court finds one position more persuasive than the other, the Court is of the opinion that for purposes of the determination herein, it is of no import. What matters is the reasonableness ofBURKE’sjustification{or refusing to provide the documents sought. In the absence of a clear answer as to whether or not STATE FARM was entitled to obtain the numerous documents sought at the verification stage of the claims, the Court cannot find, as a matter oflaw, thatBURKE’sjustification was unreasonable. Accordingly, the Court cannot find, as a matter oflaw, that BURKE failed to satisfy its obligation µnder 11 NYCRR 65-3.5(0) to offer, within 120 days, “written proof providing reasonable justification for the failure to comply.” The Court thus finds that, on the record presented, STATE FARM has failed to meet its burden to establish a right to disclaim coverage. See TAM Medical Supply Corp. v Tri State Consumers Ins. Co., 57 Misc 3d 133(A) (App Term, 2d Dept., 2d, 1Ith & 13th Jud. Dists. 2017).

It appears that ST A TE FARM may have proceeded to; seek declaratory relief on the basis of an outstanding verification defense, rather than on its potential Malella defense, in Order to expedite judgment, and because summary judgment might be unavailable on the Malella defense, particularly
without the documentation sought. The Court is not incfined to short-circuit the process of determining entitlement to declaratory relief, particularly in view of the potentially broad and far reaching impact of such a determination. To the extent that STATE FARM believes that it has a viable Malella defense, nothing in this decision precludes STATE FARM from seeking discovery in the context of this declaratory judgment action, or proceeding to litigate the central issue underlying this case; that is, whether ST ATE FARM is entitled to disclaim coverage on the basis that BURKE was not in compliance with the applicable licensing and incorporation statutes.

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