In this no-fault suit, plaintiffs moved for summary judgment, or alternatively, for an order of preclusion. Defendant cross-moved for dismissal of the claim of plaintiff Dr. Naik on grounds of an EUO default.

“In other contexts, this Court has not hesitated to grant dismissal of no-fault claims where a provider has been guilty of a provable EUO default. See Dynamic Med. Imaging, P.C. v. State Farm Mut. Auto Ins. Co., 2009 NY Slip Op 29478 (Dist Ct. Nassau Co.). However, before such a default may be found, the insurer must establish its specific objective justification supporting the use of such examination. Progressive Northeastern Ins Co. v. Arguelles Med. P.C., 2009 NY Slip Op 32353 (Sup Ct. NY Co.); see also Westchester Med Center v. GEICO, 2009 NY Slip Op 30914 (Sup Ct. Nassau Co.).”

“In this Court’s opinion, defendant’s cross-motion includes adequate proof from an investigator that objectively justified an examination of Dr. Naik under oath. That proof included allegations suggesting that Dr. Naik ‘billed for services he did not render’ and had submitted various ‘questionable’ billings. Since any refusal to pay on such grounds would necessarily have to be asserted in the insurer’s denial, or be forever precluded, see Fair Price Med. Supply Co. v. Travelers Under. Co., 10 NY3d 556 (2008), the insurer certainly had good reason, at the verification stage, to investigate these issues further.” “Nevertheless, it is unclear, from defendant’s moving papers, whether defendant also possessed a ‘specific objective justification’ for its extremely broad requests for extensive documentation relating to the Naik entity’s ownership, licencing, income, expenses, employment practices, and business relationships. In addition to wanting to investigate the particular claims at issue, defendant’s investigator believed that Dr. Naik’s medical practice was a fraudulently incorporated entity. See State Farm Mut. Auto Ins. Co. v. Mallela, 4 NY3d 313 (2005). Defendant’s EUO requests accordingly asked for ‘the following information’: the P.C., at the time of the treatment for which you seek payment, by one or more licensed professionals, including but not limited to a copy of the certificate of incorporation for the P.C., receipts for filing, stock certificates, and the stock ledger for the P.C.

‘(ii)documents relating to the income and expenses of the P.C., including but not limited to tax returns and financial statements for the past two years, and bank statements and general ledgers of the P.C. for the past twelve months.

‘(iii)a list of the individuals who provided and/or supervised the health care service for which you seek payment, identification of the type of professional license each individual holds and any practice specialty of each, and documents (i.e., W-2, 1099, etc) identifying the relationship between the individual and the P.C. (E.g. whether the individual is an employee or independent contractor and how that individual is compensated),

‘(iv)a list of the days of the week and hours that any owner of the P.C. provides or supervises services for the P.C. during the period for which payment is sought for services rendered;

‘(v)all documents, including all schedules, attachments or addenda, related to the relationship between the P.C., and/or any entity or individual that leases equipment or space to or from the P.C., or provides management, consulting, administrative or billing services to the P.C. and any payments made to any person or entity that rendered such services to the P.C.”

“Although an investigation into Mallela issues is sometimes warranted at the verification stage of a claim, the Insurance Superintendent’s regulations allow insurers to delay payments through the pendency of the verification process “solely for good cause.” See Andrew Carothers, MD, PC v. Insurance Companies, 13 Misc 3d 970, 2006 NY Slip Op 26372 (Civ Ct Richmond Co.), quoting Mallela, supra. The verification protocols of 11 NYCRR 65-3.5 should ordinarily be “narrowly construed,” lest they be used to promote improper delays by insurers in making required no-fault payments. Cf. Prime Psych. Serv., P.C. v. ELRAC, 2009 NY Slip Op 52579 (Civ Ct. Richmond Co.). Toward this end, it seems inappropriate to allow insurers to go far beyond the intended scope of the verification rules governing particular claims through far-reaching requests for Mallela documentation.”

“EUOs, in general, are supposed to afford providers an opportunity to establish proof of claim in doubtful cases. See §65-3.5(e). While defenses that might be precluded by Fair Price certainly may be explored, Mallela defenses present a different balance. Since a Mallela defense can be asserted in a no-fault case regardless of whether it formed a basis for the insurer’s denial, see Mulitquest, PLLC v. Allstate Ins, Co., 2007 NY Slip Op 27366 (App Term), the insurer has a less important need, at the verification stage, to engage in a far-reaching exploration of the plaintiff’s corporate structure and business practices. Moreover, it generally may do so only in circumstances where it has a founded belief that the provider is guilty of behavior tantamount to fraud.”

“Consequently, in circumstances such as those presented, it would have been proper for Dr. Naik to have objected, in part, to defendant’s request for such extensive document disclosure in connection with defendant’s verification and EUO requests. Cf. Cambridge Med., P.C. v. Nationwide Prop. & Cas. Ins. Co., 2008 NY Slip Op 50629 (Civ Ct Richmond Co.). But Dr. Naik did not do so. That failure to object shifts the balance back in defendant’s favor.” “Most importantly, Dr. Naik’s opposition to the cross-motion makes no effort to explain his default. He does not deny receipt of the EUO notices. He does not question whether defendant had an objectively reasonable basis for seeking an EUO. And he does not raise any issue respecting the burdensome nature of the request for extensive documentation.”

“Instead, Dr. Naik’s sole contention is that the second EUO request was mailed three days late. The argument is unavailing. It hinges on the assumption that the second EUO request letter ‘should have been mailed within 10 calendar days of the first alleged no-show.’ However, the ten-day period for sending a follow-up notice runs, not from the date of the scheduled first EUO, but from a date ‘30 calendar days after the original request.’ See section 65-3.6(b). In any event, failure to strictly comply with the time-table for making additional verification requests is not necessarily fatal. See Infinity Health Products, Ltd. v. Eveready Ins. Co., 67 AD3d 862 (2d Dept. 2009). Since  plaintiff Naik twice flouted his obligation to submit to an EUO and to provide verification of his claim, it would be inequitable, to say the least, to allow him to belatedly interpose a technical defense to his default.” “In these circumstances, the Court concludes that defendant is entitled to summary judgment dismissing plaintiff Naik’s complaint on grounds of EUO default.”

Comment: Note that despite State Farm’s apparent lack of articulation of a basis for a “founded belief” that Dr. Naik was fraudulently incorporated, his failure to appear for two scheduled EUO dates overcomes the objection as to lack of foundation. In addition, note that the second EUO request is supposed to be mailed 30 [to 40] days after the 1st request, not 10 days after the first no show.