For the Plaintiff: Marshall & Marshall, by Craig B. Marshall, Esq. For the Defendant: Law Office of Gewurz & Zaccaria, PC, by Dayva Zaccaria, Esq.
For the Plaintiff: Marshall & Marshall, by Craig B. Marshall, Esq.
For the Defendant: Law Office of Gewurz & Zaccaria, PC, by Dayva Zaccaria, Esq.
Charles J. Markey, J.
This action presents an interesting issue of conflicts of law concerning a policy of insurance, on the "center of gravity" or "grouping of contacts" analysis, in order to determine whether New York or Florida law governs the resolution of this action, where the owner of a vehicle made a material misrepresentation on her insurance application concerning in which state the vehicle would be garaged, and the driver of the vehicle who sought medical treatment for her injuries in an accident, occurring in Queens County, New York, was a New York resident. Even more interesting is that none of the counsel discussed or briefed the conflict of law issue that is at the heart of this dispute.
Silvia Iturralde ("Iturralde") was injured in an automobile accident on November 3, 2005, while driving a vehicle owned and registered to Gloria Perez ("Perez"), who purportedly was a resident of Bradenton, Manatee County, Florida, for the vehicle that was registered in Florida. Infinity Insurance Co. ("Infinity") issued an insurance policy in Florida to Perez.
Iturralde sought treatment for her physical injuries from defendant Physical Medicine & Rehabilitation of NY, PC ("Physical Med"), located in Queens County, New York. Physical Med made a claim for reimbursement to Infinity.
Infinity issued a denial of claim form, known as a NF-10, alleging that, on the date of the accident, there was no insurance in place. The Infinity policy was revoked for material misrepresentation. Infinity cancelled the policy on January 16, 2006, after it discovered Perez made a material misrepresentation on the insurance application. The material misrepresentation was that Perez resided and garaged her vehicle in Florida. Infinity's investigation revealed that Perez's representation was untrue, and that the vehicle was actually kept, operated, and garaged in New York.
On February 1, 2006, claimant Iturralde provided to plaintiff MVAIC the requested affidavit of claimant's household members over the age of 18 on the date of the accident, of which there were none. Thereafter, on February 10, 2006, claimant Iturralde provided the following requested documents to plaintiff MVAIC: a completed and executed application for no-fault benefits; a copy of a letter from Infinity indicating that the policy of Insurance for Perez was not in effect at the time of the accident; a copy of the police report; and a copy of the Elmhurst Hospital record. On March 10, 2006, plaintiff MVAIC requested information regarding "Non Resident Revocation of the owners [sic] drivers License."
On November 10, 2005, Iturralde assigned her right to reimbursement under the no-fault law to defendant Physical Med, which submitted medical bills to plaintiff MVAIC. Defendant Physical Med thereafter applied for arbitration claiming plaintiff MVAIC did not issue a delay letter, denial, or payment within 30 days of submission. An affidavit of no insurance availability, an NF-2, an MV104, and the Infinity NF-10 were submitted with the application for arbitration.
The Arbitrator found that there was no indication from the evidence submitted that plaintiff MVAIC took any action in response to defendant Physical Med's claims. MVAIC did not pay, deny, or seek further verification. MVAIC also did not act to evaluate defendant Physical Med's right to be reimbursed. The Arbitrator noted that the only defense offered by plaintiff MVAIC was in a letter from MVAIC to the conciliator, stating that the applicant never provided MVAIC with "an affidavit of no insurance from the vehicle owner or Non Resident Revocation of the owners [sic] drivers license."
After conducting a hearing and taking evidence, the Arbitrator found that plaintiff MVAIC was precluded from opposing claimant's prima facie case on its claim for payment since it failed to pay, deny, or seek further verification within the 30-day period. See, Insurance Law § 5106[a]; 11NYCRR 65-3.8[a]; [c]; see also, New York Hosp. Med. Ctr. of Queens v MVAIC, 12 AD3d 429 [2nd Dept. 2004], lv. to appeal denied, 4 NY3d 705 . The Arbitrator awarded the applicant, defendant Physical Med, $7,842.82. This award was affirmed by the Master Arbitrator upon its review.
Since the Master Arbitrator's award exceeded $5,000.00, plaintiff MVAIC had the right, under Insurance Law section 5106(c), to institute a court action to adjudicate this dispute de novo, and MVAIC has exercised that right by bringing this lawsuit. Plaintiff MVAIC commenced the action, pursuant to Insurance Law section 5106(c), for a trial de novo from Master Arbitrator Victor J. Hershdorfer's decision, dated November 17, 2008, affirming the decision of the lower Arbitrator, Martin Schulman, dated July 17, 2008, that granted applicant defendant Physical Med's claim for no-fault insurance benefits in the amount of $7,842.82. In this action, plaintiff MVAIC disputes reimbursement of a claim submitted by defendant Physical Med, a medical or health services provider, pursuant to Article 51 of the New York Insurance Law, the Comprehensive Motor Vehicle Reparations Act, commonly referred to as the "No-Fault Law."
Upon the foregoing papers, plaintiff MVAIC moves and defendant Physical Med cross-moves for summary judgment.
The purpose and objective of Article 51 of the New York Insurance Law is to "assure claimants of expeditious compensation for their injuries through prompt payment of first-party benefits without regard to fault and without expense to them." New York Hosp. Med. Ctr. of Queens v MVAIC,12 AD3d at 430, supra, quoting Dermatossian v New York City Transit Auth., 67 NY2d 219, 225 .
Section 5106 of article 51 is entitled "Fair Claims Settlement" and provides, in pertinent part:
(a) Payments of first party benefits and additional first party benefits shall be made as the loss is incurred. Such benefits are overdue if not paid within thirty days after the claimant supplies proof of the fact and amount of loss sustained. If proof is not supplied as to the entire claim, the amount which is supported by proof is overdue if not paid within thirty days after such proof is supplied. All overdue payments shall bear interest at the rate of two percent per month. If a valid claim or portion was overdue, the claimant shall also be entitled to recover his [or her] attorney's reasonable fee, for services necessarily performed in connection with securing payment of the overdue claim, subject to limitations promulgated by the superintendent in regulations.
Pursuant to the statutory and regulatory framework governing the payment of no-fault benefits, insurance companies are required to either pay or deny a claim for first-party benefits within 30 days of receipt of the claim. See, Insurance Law § 5106[a]; 11 NYCRR 65-3.8[a] & [c]; Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d 556 ; New York Hosp. Med. Ctr. of Queens v MVAIC, 12 AD3d 429, supra. Within 10 business days after receipt of the claim notice, the insurer may send an initial request for verification of the claim. See, 11 NYCRR 65-3.5[a]. After receipt of verification, any additional verification required by the insurer to establish proof of claim shall be requested within 15 business days of receipt. See, 11 NYCRR 65-3.5[b].
The30-day period in which to either pay or deny a claim is extended where the insurer makes a request for additional verification within the requisite 15-day time period. See, Hospital for Joint Diseases v New York Cent. Mut. Fire Ins. Co., 44 AD3d 903 [2nd Dept. 2007]; see also, Montefiore Med. Ctr. v Government Empls. Ins. Co., 34 AD3d 771 [2nd Dept. 2006]; New York & Presbyt. Hosp. v Allstate Ins. Co., 31 AD3d 512 [2nd Dept. 2006]. Thus, a timely additional verification request tolls the insurer's time within which to pay or deny a claim. See, Fair Price Med. Supply Corp. v Travelers Indem. Co., 10 NY3d 556, supra; see also, Hospital for Joint Diseases v New York Cent. Mut. Fire Ins. Co., 44 AD3d 903, supra; New York & Presbyt. Hosp. v Countrywide Ins. Co., 44 AD3d 729 [2nd Dept. 2007].
In the present action, the medical or health services provider, defendant Physical Med, has made a prima facie showing of its entitlement to judgment as a matter of law by submitting evidentiary proof that the prescribed statutory billing forms had been mailed and received, and that payment of no-fault benefits was overdue. See, Insurance Law § 5106[a]; 11 NYCRR 65.15[g]; see also, Mary Immaculate Hosp. v Allstate Ins. Co., 5 AD3d 742 [2nd Dept. 2004]; St. Luke's Roosevelt Hosp. v American Tr. Ins. Co., 1 AD3d 498 [2nd Dept. 2003].
Such showing shifts the burden to the insurer, who, to defeat summary judgment, must submit proof in admissible form raising a triable issue of fact.
Plaintiff MVAIC failed to meet this burden. Plaintiff MVAIC failed to present evidence showing that it took action in response to defendant Physical Med's claims or that it acted to evaluate said claimant's right to reimbursement within the 30-day period. Plaintiff MVAIC's further verification request for "Non-Resident Revocation of the owners [sic] drivers License" was untimely. Moreover, although plaintiff MVAIC is correct that there is an exception to the 30-day deadline for defenses based on lack of coverage (see, Matter of MVAIC v Interboro Med. Care & Diagnostic PC, 73 AD3d 667 [1st Dept. 2010]), plaintiff MVAIC failed to demonstrate a lack of coverage with MVAIC for defendant Physical Med's assignor, Iturralde.
Plaintiff MVAIC, in this action, has taken a shotgun approach. MVAIC challenges the conclusion by the Infinity investigator as to Perez's material misrepresentation or fraud. MVAIC, asserting that defendant Physical Med's assignor, Iturralde, is covered under the Infinity policy, contends that there are unresolved "coverage questions" between MVAIC and Infinity. MVAIC next contends that Infinity's retroactive cancellation of the policy based on Perez's material misrepresentation is prohibited under New York law. MVAIC argues that it is not "fall back" position for health or medical providers. MVAIC's bottom line is that Iturralde is an "innocent party" and, "even if there was fraud on the part of the insured [Perez]," Infinity should not be able to rescind its policy of insurance.
As mentioned at the outset of this memorandum decision, neither party discusses the conflict of law issues that surround this controversy and must determine it.
This dispute poses a conflict of laws between that New York law, prohibiting retroactive cancellation of an insurance contract (see, Vehicle and Traffic Law § 313; see also, Matter of Insurance Co. of North America v Kaplun, 274 AD2d 293 [2nd Dept. 2000]; Olivio v Government Employees Insurance Co. of Washington, D.C., 46 AD2d 437 [2nd Dept. 1975]), and Florida Statutes Annotated, title 37, section 627.409, permitting retroactive cancellation of an insurance contract where there has been a material misrepresentation in the application for insurance concerning where the vehicle will be kept or garaged (see, Penaranda v Progressive Am. Ins. Co., 747 So 2d 953 [Fla 1999]).
First, type of misrepresentation that will constitute grounds for the rescission of a policy of insurance must be material and deceptive designed to induce the insurer to provide a contract of insurance. See, TIG Ins. Co. v Reliable Research Co., 334 F3d 630, 636 [7th Cir. 2003] [Wood, J.] ["(A) misrepresentation standing alone is not enough for rescission: the misrepresentation must either be material or intentionally deceptive"]; Home Ins. Co. of Illinois v Spectrum Info. Tech., Inc., 930 F Supp 825, 835 [EDNY 1996]). As recently observed by the Appellate Division, Second Judicial Department, in Varshavskaya v Metropolitan life Ins. Co., 68 AD3d 855 , lv. to appeal denied, 14 NY3d 710 :
"A misrepresentation is material if the insurer would not have issued the policy had it known the facts misrepresented." 68 AD3d at 856; accord, Barkan v New York Schools Ins. Reciprocal, 65 AD3d 1061, 1064 [2nd Dept. 2009].
Cindy J. Greene, Infinity's claim representative, states, in her properly prepared out-of-state affidavit: "The [Infinity] policy, a Florida policy, would not have been issued to Gloria Perez if she had truthfully reported that the vehicle had been garaged in New York." This Court agrees that the misrepresentation committed by Perez was material and was done deceptively to induce Infinity to issue the policy, when Perez intended her car to be garaged in New York, and not Florida.
The conflict of law issues relating to an insurance policy must be resolved by application of the conflict of law rules relevant to contracts. See, Allstate Ins. Co. v Hague, 449 US 302, 324 n.11 ; Specialty Surfaces Intern., Inc. v Continental Cas. Co., 609 F3d 223 [3rd Cir. 2010]); Matter of Integon Insurance Co. v Garcia, 281 AD2d 480 [2nd Dept. 2001]; Careplus Med. Supply, Inc. v Selective Ins. Co. of America, 25 Misc 3d 48 [App T. 2nd Dept. 2009]; George Blum, Annot., "Conflict of laws in Determination of Coverage Under Automobile Liability Insurance Policy," 110 ALR5th 465 ).
Courts apply the "center of gravity" or "grouping of contacts" inquiry to determine which State has the most significant contacts to a contract dispute. The New York Court of Appeals, in In re Liquidation of Midland Ins. Co., ___ NY3d ____, 2011 WL 1233571, 2011 NY Slip Op 02716 , stated:
It is well-settled that New York has long recognized "the use of center of gravity' or grouping of contacts' as the appropriate analytical approach to choice-of-law questions in contract cases" (Zurich Ins. Co. v Shearson Lehman Hutton, 84 NY2d 309, 317 ; see also, Auten v Auten, 308 NY 155, 160-161 ). "The purpose of grouping of contacts is to establish which State has the most significant relationship to the transaction and the parties' " (Zurich Ins. Co. v Shearson Lehman Hutton, 84 NY2d at 317, quoting Restatement [Second] of Conflict of Laws § 188). In Auten, we held that the "grouping of contacts" theory to choice-of-law disputes "gives [...] the place having the most interest in the problem paramount control over the legal issues arising out of a particular factual context, thus allowing the forum to apply the policy of the jurisdiction most intimately concerned with the outcome of the particular litigation" (308 NY at 161) [internal quotation marks, brackets and citation omitted]).
In re Liquidation of Midland Ins. Co., ___ NY3d at ____, 2011 WL 1233571 ; see, Matter of Eagle Insurance Co. v Singletary, 279 AD2d 56 [2nd Dept. 2000]; accord, In re Payroll Express Corp., 2005 WL 2438444 [Bankr. SDNY 2005]).
Significant contacts in a case involving a contract, in addition to the place of contracting, are the place of negotiation and its performance, the location of the subject matter of the contract, and the domicile or place of business of the contracting parties. See, Zurich Insurance Co. v Shearson Lehman Hutton, Inc., 84 NY2d 309 ; see also, Matter of Integon Insurance Co. v Garcia, 281 AD2d 480, supra; Matter of Eagle Insurance Co. v Singletary, 279 AD2d 56, supra).
Several helpful precedents guide this Court's determination. In Government Employees Insurance Company v Nichols, 8 AD3d 564 [2nd Dept. 2004], the Appellate Division, Second Department ruled that the law of Florida, rather than that of New York, applied, and that a retroactive disclaimer of automobile insurance coverage after an accident was permissible on the ground of the motorist's material misrepresentation. Under New York's conflict of law rules, Florida law governed. Id. at 565-566.
A material misrepresentation concerning in which state a vehicle would be garaged was the focus of the federal court's attention in American Centennial Ins. Co. v Sinkler, 903 F Supp 408 [EDNY 1995] [Weinstein, J.]. In that case, defendant Sinkler misrepresented that his car would be garaged in South Carolina, when actually he garaged it in Brooklyn, New York. Id. at 409-410. Despite New York State's policy of preventing rescission of insurance contracts by insurers, the court determined:
South Carolina has a strong interest in regulating insurance contracts formed within the state covering predominantly in-state risks. It also has an interest in preventing the kind of misrepresentation employed by the insured. In permitting ab initio rescission of insurance contracts, South Carolina holds the insured accountable for material misrepresentations.
Id. at 413-414. The court applied New York State's "Grouping of Contacts" choice of law analysis and held that South Carolina law controls. Id. Application of New York substantive law would undermine South Carolina's rights and interests by placing the burden on that state's insurers to uncover the misrepresentations that New York insurers bear. Id. at 414.
The court further noted that the existence of MVAIC in New York to compensate uninsured third persons injured by uninsured motorists shows that New York State has a lesser interest in enforcing its public policy. The court continued addressing the same arguments made by MVAIC in the case at bar:
While the uninsured motorist provisions are not "intended to be a sop for insurance risks dumped on New York by its neighbors," [quoting Allstate Ins. Co. v Sullam, 76 Misc 2d 87, 102 [Sup Ct Nassau County 1973], South Carolina is surely not to be deemed a "dumper" where it allows rescission based upon a New York motorist's fraud. The New York legislature can apply ample pressure on cheats like Sinkler by using civil sanctions of license and registration revocation or even criminal penalties if its present statutes do not suffice to protect the injured.
American Centennial Ins. Co. v Sinkler, 903 F Supp at 415-416. Accord, Northland Ins. Co. v Imperial Car Sales, Inc., 2009 WL 2143565, slip op. at 4 [EDNY 2009] [Amon, D.J., & Reyes, M.J.] [New York's choice-of-law principles, under a "grouping of contacts" analysis, required application of New Jersey law and New Jersey's "strong public policy toward deterring insurance fraud by allowing retroactive cancellation."]; MZ Med. Care, PC v Selective Ins. Co. of America, 23 Misc 3d 1134[A], 2009 WL 1546947 [NYC Civ Ct Kings County 2009] [same]; Mid Atlantic Med. P.C. v Victoria Select Ins. Co., 13 Misc 3d 1228[A], 2006 WL 3025660 [NYC Civ Ct Kings County 2006] [applying Virginia law where insurance policy required that vehicle be garaged in Virginia], rev'd on other grounds, 20 Misc 3d 143[A], 2008 WL 3865849 [App T 2nd Dept. 2008] [collateral estoppel defense could not be raised in a post-answer motion when not preserved in answer].
In the present case, applying the "grouping of contacts" analysis, the State of Florida has the most significant contacts with the contracting parties and the contract. Infinity issued its insurance policy to Perez in Florida, who purportedly was a resident of Florida, for a vehicle registered in Florida, and the terms of that insurance policy incorporated Florida law. The only connection between the policy and New York is that Iturralde was driving Perez's vehicle in New York at the time of the accident. Thus, Florida law is controlling under New York's conflict of law rules.
In addition, Florida's significant contacts with the subject contract and legitimate governmental interest in protecting its honest policyholders from bearing the burden of paying claims incurred by dishonest policyholders outweighs New York's governmental interest in protecting innocent third parties from being deprived of insurance coverage, especially since New York statutes provide the means to ensure compensation to persons injured as a result of the fault of uninsured motorists within the state by requiring New York policyholders to purchase uninsured motorist coverage (see, Insurance Law § 3420[f]) and establishing and providing insurance through MVAIC (see, Insurance Law § 5201 et seq.; American Centennial Ins. Co. v Sinkler, 903 F Supp at 415-416, supra; see also, Matter of Eagle Insurance Co. v Singletary, 279 AD2d 56, supra).
Applying Florida law, Infinity's retroactive cancellation of the insurance policy as a result of Perez's material misrepresentation in her application for insurance was valid. Since the subject policy was void ab initio, Infinity's denial of Iturralde's no-fault claim was proper. Thus, as there was no coverage with Infinity, plaintiff MVAIC's assertion that defendant Physical Med's assignor, Iturralde, is not a "covered person" with MVAIC is without merit.
Accordingly, the cross motion by defendant Physical Med for summary judgment is granted, and plaintiff MVAIC shall pay defendant Physical Med its no-fault law claim of $7,842.82, plus statutory interest and fees, including attorneys' fees, pursuant to Insurance Law section 5106(a) and its associated regulations.
Plaintiff MVAIC's motion for summary judgment is denied as academic.
As stated in the defendant Physical Med's reply to the cross-motion, the claim submitted to MVAIC is now five and a half years old. Upon submission of appropriate proof, the request by defense counsel for reasonable attorneys fees is granted consistent with the Master Arbitrator's decision.
Settle judgment on notice.
The MVAIC is a statutory creation designed to compensate injured parties or their assignees where they suffer injuries in accidents involving uninsured vehicles. MVAIC v Aetna Cas. & Surety Co., 89 NY2d 214, 221 ; Pinnacle Open MRI, P.C. v republic Western Ins. Co., 18 Misc 3d 626, 632-633 [Dist Ct Nassau County 2008]; Akita Med. Acupuncture, P.C. v MVAIC, 14 Misc 3d 405 [Dist Ct Nassau County 2006].