| One Beacon Ins. Group, LLC v Midland Med. Care, P.C. |
| 2008 NY Slip Op 06813 [54 AD3d 738] |
| September 9, 2008 |
| Appellate Division, Second Department |
| One Beacon Insurance Group, LLC, et al.,Respondents, v Midland Medical Care, P.C., et al., Defendants, and David Stemerman etal., Appellants. |
—[*1] McDonnell & Adels, P.C., Garden City, N.Y. (Korri Abrams Frampton and Martha Henleyof counsel), for respondents.
In an action, inter alia, to recover damages for common-law fraud and unjust enrichment andfor a judgment declaring that the plaintiffs have no obligation to pay no-fault claims submitted bythe professional corporation defendants, the defendants David Stemerman and Proscan Imaging,P.C., appeal, as limited by their brief, from so much of an order of the Supreme Court, NassauCounty (Murphy, J.), entered August 14, 2007, as denied their motion for summary judgmentdismissing the complaint insofar as asserted against them and granted that branch of theplaintiffs' cross motion which was for discovery of certain financial documents.
Ordered that the order is affirmed insofar as appealed from, with costs.
The plaintiff One Beacon Insurance Group, LLC, and its subsidiaries and affiliates(hereinafter the plaintiffs), are providers of automobile insurance policies which include coverageunder the "no-fault" insurance law (Insurance Law § 5101, et seq.). The plaintiffscommenced this action against numerous professional medical service corporations (hereinafterthe PCs), management companies, and the individuals who owned them, and licensed healthcareprofessionals, alleging that the PCs were fraudulently incorporated in the names of licensedhealthcare professionals while, in fact, the PCs were owned, operated, and controlled byunlicensed persons and their management companies in violation of applicable statutes andregulations. The plaintiffs, inter alia, seek repayment of no-fault claims already paid to the PCsand a judgment declaring that they are not obligated to pay outstanding claims. The defendantsDavid Stemerman and his radiology practice, Proscan Imaging, P.C. (hereinafter Proscan)(hereinafter together the appellants), moved for summary judgment dismissing the complaintinsofar as asserted against them, and the Supreme [*2]Courtdenied their motion, finding the existence a triable issue of fact as to whether Proscan wasfraudulently incorporated.
Applicable provisions of the no-fault law require insurers to reimburse patients or theirmedical provider assignees for "basic economic loss" (Insurance Law § 5102 [a] [1]). Aprovider of healthcare services is not eligible for reimbursement, however, "if the provider failsto meet any applicable New York State or local licensing requirement necessary to perform suchservice in New York" (11 NYCRR 65-3.16 [a] [12]). The Court of Appeals has interpreted 11NYCRR 65-3.16 (a) (12) to allow insurance carriers to withhold reimbursement for no-faultclaims from fraudulently licensed medical corporations and to "look beyond the face of licensingdocuments to identify willful and material failure to abide by state and local law" (State Farm Mut. Auto. Ins. Co. vMallela, 4 NY3d 313, 321 [2005]). State law mandates that professional servicecorporations be owned and controlled only by licensed professionals (see BusinessCorporation Law § 1503 [a]; §§ 1507, 1508), and that licensed professionalsrender the services provided by such corporations (see Business Corporation Law §1504 [a]).
Here, the appellants made a prima facie showing of their entitlement to judgment as a matterof law by submitting evidence that Stemerman, a licensed physician, was the sole shareholder ofProscan, performed or oversaw all medical services provided by Proscan, and was the solesignatory on Proscan's bank account.
However, in opposition to the motion, the plaintiffs submitted sufficient evidentiary proof toraise an issue of fact as to whether Proscan was actually controlled by a management companyowned by unlicensed individuals in violation of the Business Corporation Law (see StateFarm Mut. Auto. Ins. Co. v Mallela, 4 NY3d at 320-321; Montgomery Med., P.C. v StateFarm Ins. Co., 12 Misc 3d 1169[A], 2006 NY Slip Op 51116[U] [2006]; A.T. Med., P.C. v State Farm Mut. Ins.Co., 10 Misc 3d 568, 569 [2005]; cf. A.B. Med. Servs. PLLC v Prudential Prop. &Cas. Ins. Co., 11 Misc 3d 137[A], 2006 NY Slip Op 50504[U] [2006]). Accordingly, theappellants' motion for summary judgment was properly denied with respect to all three causes ofaction, which allege fraudulent incorporation.
The Supreme Court properly granted that branch of the plaintiffs' cross motion which was fordisclosure of certain financial documents. Contrary to the appellants' contention, the plaintiffswere not required to make a showing of "good cause" for such disclosure (State Farm Mut.Auto. Ins. Co. v Mallela, 4 NY3d at 322; see Matter of Andrew Carothers, M.D., P.C. vInsurance Cos. Represented by Bruno, Gerbino & Soriano LLP, 13 Misc 3d 970, 972-973[2006]), as the documents were "material and necessary in the prosecution" of this action(see CPLR 3101 [a]). Spolzino, J.P., Santucci, Eng and Leventhal, JJ., concur.