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I. EASTERN DISTRICT REJECTS INSURERS FRAUD AND UNJUST ENRICHMENT CLAIMS AGAINST MEDICAL PROVIDERS UNDER CURRENT NO-FAULT REGULATIONS In the State of New York, it is a violation of New York’s Business Corporation Law for a non-licensed "physician" or lay person to own or control a professional health service corporation. As such, arbitrators across New York State have routinely held that insurers may deny, or at the very least, seek verification on the issue of a medical practice’s corporate structure when the practice is seeking payment of no-fault benefits. Several state courts have also recently upheld an insurer’s right to investigate a medical provider’s corporate structure to determine eligibility to bill and receive payment for no-fault benefits. However, late last year, in a ruling that directly contradicted those state court decisions and the decisions of the arbitrators in New York, the U.S. District Court, Eastern District of New York (Hon. Charles P. Sifton) ruled that an insurer could not lawfully deny or seek reimbursement for no-fault benefits based solely upon a medical provider’s alleged unlawful corporate structure. In State Farm Mut. Auto Ins. Co. v. Mallela, 175 F. Supp2d 401 (E.D.N.Y., 2001), State Farm sued some 36 different medical practices alleging, inter alia, fraud and unjust enrichment relating to no-fault payments made by State Farm to the medical practices. The allegations raised by State Farm were that the medical practices were illegally structured under New York’s Business Corporation Law in that each was actually owned and controlled by a non-licensed physician or lay person. State Farm further alleged that the actual ownership of each of the medical practices had been deliberately concealed in a scheme whereby a licensed physician would receive compensation from the practice in exchange for permitting the practice to use his or her name for corporate record purposes, when in fact, the practice would be owned and controlled by a non-physician or lay person. In that case, in dismissing State Farm’s claims, Judge Sifton specifically ruled that under the current law, State Farm was not absolved from its duty to pay claims for services that were actually rendered, nor did State Farm have a right to challenge a medical practice based upon the provisions of the Business Corporation Law. Since the decision in Mallela, revisions to New York’s no-fault regulations have been made and implemented. Unlike the prior regulations, the current regulations specifically provide that in order to be eligible for reimbursement, medical providers must meet any applicable New York State or local licensing requirement necessary to perform such service in New York. 11 N.Y.C.R.R. 65-3.16(a)(12). As a result, State Farm amended its complaint against the defendant medical providers prompting the Eastern District to review State Farm’s claims under the newly implemented no-fault regulations. In State Farm Mut. Auto. Ins. Co. v. Mallela, N.Y.L.J. (Dec. 11, 2002), the Eastern District, in affirming its prior order, has now found that current no-fault regulations, and more specifically, the provision of the regulations relating to the proper licensing of a medical provider to be ambiguous. In doing so, Judge Sifton opined that should the current regulations be interpreted as State Farm suggests, they would essentially allow an insurer to delve into all aspects of a medical providers license, including whether the provider has met all preconditions to licensing. This would delay payment for first-party benefits and, according to the court, would go directly against the purpose of New York’s no-fault law in the first instance, namely to provide immediate compensation for basic economic loss, including lost wages and medical expenses, to persons injured in automobile accidents. It remains to be seen what, if any, impact Mallela will have on the apparent uniformity which existed amongst arbitrators and lower courts throughout New York State. II. COURT OF APPEALS AFFIRMS FORESEEABILITY REQUIREMENT IN PREMISES LIABILITY ACTION In Pinero v. Rite Aid of New York, Inc., 2002 N.Y. Slip Op. 04297 (May 28, 2002), the plaintiff, a customer, was injured while attempting to retrieve boxes of macaroni and cheese that were being handed to her by an assistant manager of the store. While handing plaintiff the merchandise she requested, the assistant manager dropped the boxes thereby causing the plaintiff to grab at the boxes as they were falling. In doing so, plaintiff leaned against a wheeled wagon holding merchandise causing it to move. Plaintiff lost her balance and fell, striking her head on some shelving and sustaining injury. Plaintiff then commenced a negligence action against the store to recover for the injuries she sustained. The gravamen of the plaintiff’s complaint was based on the existence of an unsafe condition. The Supreme Court, New York County granted the defendant store’s motion for summary judgment, thereby dismissing the complaint. On appeal, plaintiff contended that her injuries were caused by the negligent actions of the assistant manager. The Appellate Division, First Department, in affirming the Order of the lower court, ruled that the assistant manager’s act of passing the merchandise over the wagon presented a minimal risk of danger and that the danger was unforeseeable as a matter of law. The Court of Appeals has now affirmed the decision of the First Department holding the plaintiff’s accident was not within the reasonably foreseeable risks of the defendant’s alleged negligence. Pinero v. Rite Aid of New York, Inc., 2002 WL 31770463 (Dec. 12, 2002). As such, foreseeability of risk remains an essential element of a negligence cause of action as one can only be considered to have been negligent when the event causing the injury could have been reasonably anticipated. |