State Farm Mut. Auto. Ins. Co. v. Eclipse Med. Imaging
| Docket Number | 1:23-CV-3124 (OEM) (RML) |
| Decision Date | 02 November 2023 |
| Parties | STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, STATE FARM INDEMNITY COMPANY, STATE FARM GUARANTY INSURANCE COMPANY, and STATE FARM FIRE AND CASUALTY COMPANY Plaintiffs, v. ECLIPSE MEDICAL IMAGING, P.C. Defendant. |
| Court | U.S. District Court — Eastern District of New York |
Plaintiffs State Farm Mutual Automobile Insurance Company, State Farm Indemnity Company, State Farm Guaranty, Insurance Company and State Farm Fire and Casualty Company (collectively “Plaintiffs” or “State Farm”) seek a declaratory judgment that defendant Eclipse Medical Imaging P.C. (“Defendant “or “Eclipse”) has no right to receive payment for any of the claims submitted to State Farm for services billed pursuant to N.Y. Ins. Law § 5101 et seq. (hereinafter New York's “No Fault” insurance laws). See Complaint (“Compl.”), ECF 1, ¶¶ 51-52.
Now before the Court is State Farm's motion to stay all pending arbitrations-of which there are least 211 before the American Arbitration Association (“AAA”)-brought against them by Eclipse for payment. State Farm also seeks a preliminary injunction prospectively barring Eclipse from commencing any new arbitrations before the AAA as well as any new lawsuits against them in state court. Eclipse opposes this motion. For the reasons that follow, State Farm's motion for preliminary injunction and to stay all pending arbitrations is GRANTED.
BACKGROUND[1]
This type of No Fault insurance case, and the relief sought at this procedural posture, has become familiar to courts in this District.[2] As several courts in this District have already provided fulsome reviews of New York's statutory No Fault insurance scheme,[3] the Court will recite only those relevant parts required to resolve the instant motion. See, e.g., State Farm Mut. Auto. Ins. Co. v Parisien, 352 F.Supp.3d 215, 221-22 (E.D.N.Y. 2018); Gov't Emps. Ins. Co. v. Tolmasov, 602 F.Supp.3d 380, 383-84 (E.D.N.Y. 2022).
State Farm is an insurance carrier that underwrites and issues automobile insurance coverage in New York. Compl. ¶¶ 1-2, 6. To have the privilege of conducting such business, New York's statutory No Fault Scheme requires State Farm to provide coverage directly to its insureds for “basic economic loss” of up to $50,000 arising out of motor vehicle injuries, including, inter alia, “necessary” medical expenses. See N.Y. Ins. Law § 5102; State Farm Mut. Auto. Ins. Co. v. Herschel Kotkes, M.D., P.C., No. 22-CV-03611-NRM-RER, 2023 WL 4532460, at *1 (E.D.N.Y. July 13, 2023); Compl. ¶¶ 6-8. The animating policy behind the No Fault scheme was to “create a simple, efficient system that would provide prompt compensation to accident victims without regard to fault, and in that way reduce costs for both courts and insureds.” State Farm Mut. Auto. Ins. Co. v. Mallela, 372 F.3d 500, 502 (2d Cir.) ().
By default, any payment of No Fault benefits goes to the “first party,” i.e., the insured. However, “an insured may also assign his or her benefits ‘directly to providers of health care services' so that the provider may receive direct payment from the insurer” so long as certain preconditions are met. Tolmasov, 602 F.Supp.3d at 383 (quoting 11 N.Y.C.R.R. § 65-3.11(b)). Such is the case here. See Compl. ¶ 9 (). Once a claim for benefits is received, State Farm must verify the claim and then pay or deny the claim within 30 days of verification using the proper form.[4] See N.Y. Ins. Law § 5106(a); 11 N.Y.C.R.R. § 65-3.8(a), (c) (the “30 day rule”); id. at § 65-3.5 (outlining claims procedure); State Farm Mut. Auto. Ins. Co. v. Robert Mallela, 4 N.Y.3d 313, 319 (N.Y. 2005) (citation omitted) (“Regulations require the carriers to make prompt decisions on claims once the provider has furnished adequate factual support”). Here, State Farm denied all of Eclipse's claims that are the subject of this motion. Compl. ¶ 43.
The No Fault scheme contains various provisions that balance both the insurer's interest in avoiding payment on fraudulent or unnecessary claims and the insured's “basic” interest in “prompt and fair payment.” 11 N.Y.C.R.R. § 65-3.2. The No Fault Scheme provides State Farm (and all other automobile insurers in New York) with certain procedural safeguards to assist it in verifying claims for reimbursement. Among other things, State Farm “is entitled to receive all items necessary to verify the claim directly from the parties from whom such verification was requested,” 11 N.Y.C.R.R. § 65-3.5(c), and may conduct an examination under oath (“EOU”) of “any person named” by State Farm. Id. at (e); see id. § 65-1.1(a), (d) ().
The No Fault Scheme also provides medical providers standing in the shoes of the insureds with certain mechanisms to promote prompt payment from insurers like State Farm for necessary services rendered. This includes the choice to “bring a civil collection action in state court to recover overdue No-Fault benefits” or “to seek arbitration [before the AAA] of their claims for No-Fault benefits.”[5] Tolmasov, 602 F.Supp.3d at 383-84. See N.Y. Ins. L. § 5106(b); 11 N.Y.C.R.R. § 65-1.1(a), (d). See also 11 N.Y.C.R.R. § 65-4.5 (outlining arbitration procedure). Eclipse has taken advantage of these mechanisms. At the time of filing of this action Eclipse had filed 96 arbitrations and one state court lawsuit against State Farm seeking payment of bills amounting to over $298,000.00. Affidavit of Valerie Williams (“Williams Aff.”), ECF 12, ¶ 4; Compl. ¶ 50. See Ex. 1 to Williams Aff., ECF 12-1 (); Plaintiffs' Memorandum of Law in Support of Motion for Preliminary Injunction and Stay, ECF 13 (“Plaintiffs' Memo”), at 15 (). However, as of the date of this opinion the Court is aware that Eclipse has filed another 115 arbitrations. See Ex. A to Plaintiffs' Reply Memorandum of Law (“Plaintiffs' Reply”), ECF 231, ¶ 4 (“Eclipse has filed approximately 115 more arbitrations against” State Farm since August 3, 2023). It is these pending arbitration proceedings that State Farm wishes to stay as well as to shield itself from litigating in the future.
In this action, State Farm seeks a declaration that it does not have to pay Eclipse the outstanding $298,000.00 on the grounds that Eclipse failed to satisfactorily verify to State Farm the claims submitted to State Farm pursuant to Eclipse's obligations under the No Fault Scheme. Compl. ¶¶ 1, 46-48; 50-52. State Farm alleges and seeks a court ruling that “[b]ecause Eclipse failed to provide necessary information to properly verify the claims it submitted, Eclipse failed to meet a condition precedent to coverage under the insurance contracts and violated its obligations under the No-Fault Laws, and therefore, the claims are not compensable.” Id. ¶ 1.
State Farm's underlying basis for seeking further verification and the gravamen of its complaint is that Eclipse's owner, Jack Baldassare, M.D. (“Baldassare”), is only nominally the owner of Eclipse. See Compl. ¶¶ 10-15, 24. Instead, State Farm alleges that it is actually Robert Maksumov (“Maks”), an unlicensed layperson and former office manager, who controls and operates Eclipse. See Compl. ¶¶ 25, 29-32, 35. State Farm asserts that Baldassare is merely a “physician straw owner” and Eclipse is actually “secretly own[ed] and controlled” by Maks to “engage in th[e] practice [of] bill[ing] for unnecessary and fraudulent services[.]” Plaintiffs' Memo at 5.
In support of these allegations, State Farm alleges further that: (1) State Farm-prior to seeking additional verification from Eclipse-conducted it own “investigation into the claims submitted by Eclipse” which included “a survey of the records of numerous patients and investigating the appropriateness and legitimacy of the billed for service”;[6] (2) Baldassare and Eclipse have been sued previously by both GEICO and Allstate insurers and the complaints in those actions reference Maks as an alleged fraudulent “straw owner” of radiological operations;[7](3) Baldassare has only “limited involvement in operating” the business, which amounts to reading radiographical studies from home in New Jersey;[8] (4) Eclipse is itself a “mere continuation” of a prior radiological practice, Kensington Radiology Group, P.C. (“Kensington”), which itself was alleged to be a front operated by Maks, who is also as a named defendant alleged the GEICO Action;[9] (5) Baldassare's testified at his EOU in the present action that Maks “informed him there was an empty radiology business” (which was in fact Kensington) and Maks presented Kensington to him as “a turnkey operation with equipment and staff”;[10] (6) that Baldassare further feigned ignorance at the EUO that Eclipse was taking over the Kensington practice as he had admitted to previously working for Kensington;[11] (7) Baldassare paid no start-up costs to begin Eclipse;[12] (8) Baldassare gave inconsistent answers between the EUO and later representations as to whether he signed a lease on behalf of Eclipse.[13]
Additionally State Farm alleges that Eclipse submitted claims and bills to the State Farm “for highly questionable magnetic resonance imaging test (‘MRIs'), computerized tomography tests (‘CTs'), X-rays, and other testing services that were purportedly administered to individuals who were involved in motor vehicle accidents.” Compl. ¶ 3....
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