Manhattan Med. Imaging, P.C. v State Farm Mut. Auto. Ins. Co., 2008 NY Slip Op 51844(U) (Civ Ct City NY, Richmond County)
In Eastern Medical P.C. v. Allstate Ins. Co., 19 Misc 3d 775 (Dist. Ct. Nassau Co. 2008), the court rejected [*5]Allstate’s contention that Fair Price had reshaped the analysis of fraud based defenses so as to make a Mallela/ fraudulent incorporation defense untimely if not made within the 30 day denial period. The court first noted that there was no support for the premise behind defendant’s argument: that the Court of Appeals was ignorant of its own precedent when it decided Mallela and that the Fair Price Court chose to somehow abrogate Mallela in its decision. The court then noted that while the Court of Appeals precedent cited in Fair Price [FN2] dealt “with contract interpretation” or “the interplay between policies of insurance and applicable laws and regulations,” the Malella court dealt solely with statutory interpretation, 19 Misc 3d at 779. The Mallela defense was thus not predicated upon a policy exclusion or the extent of coverage provided by a contract of insurance but rather upon a statutory defense arising from a claimant’s failure to comply with applicable sections of the Business Corporation, Limited Liability and Education Laws. Id at 780.
The court then noted that even though there was no contention in Mallela that medical payments were not otherwise required by the policy, the Mallela court did not qualify the insurer’s right to deny payment to the fraudulently incorporated provider by requiring a timely denial. 19 Misc 3d at 780. Rather, the challenged regulation in Mallela did not create a new category of exclusion but rather was “a condition precedent with which all claimants must comply in order to receive benefits.” Id at 780 citing 4 NY3d at 321 n.3. Therefore, Fair Price did not alter, much less address prior precedent that a fraudulent incorporation defense “is a non- waivable defense .and is therefore not subject to the 30-day preclusion rule” ( Midwood Acupuncture P.C. v. State Farm Mutual Auto, 14 Misc 3d 131A, 2007 N.Y Slip Op 50052 U ( App. Ter, 2d Dept. 2007). Id at 781. Nor is such a defense waived by the failure to assert it in a denial of claim form. Multiquest v. Allstate Ins. Co., 17 Misc 3d 37, 39 ( App. Term, 2d Dept. 2007).
There is more to the decision. I’ll post it later. I posted this part because of the discussion in the previous post’s comments.