Plaintiff medical provider sought to vacate a no-fault master arbitration award pursuant to CPLR 7511. Respondent insurer submitted a reply to petition but the respondent was not present at oral argument therefore the reply was not considered and the decision was rendered on default.

Petitioner sought to recover first party no-fault benefits for medical services provided to its assignor. Petitioner submitted bills totaling $1,764.62 and partial payments were made in the amount of $849.84. When petitioners assignor did not receive reimbursement from respondent for the balance of the bills which totaled $914.78 for the medical services provided, petitioner filed a request for arbitration. An arbitrator designated by the American Arbitration Association issued a decision dated May 31, 2004 where the arbitrator found that: the applicant has no status to present this claim, as it no longer is a corporation registered with the New York State Department, Division of Corporation. An unlicensed facility may not present a claim for no-fault benefits. The denial by the respondent is sustained. The claim is denied in its entirety.

Petitioner requested a review by a master arbitrator who in a decision dated September 23, 2004 rendered a master arbitration award upholding the lower arbitration award.

The issue before this court was whether the master arbitrators decision was arbitrary and capricious, irrational or having no plausible basis or whether the arbitrators award was unsupported by the evidence in his holding that the petitioner could not present a claim for no-fault benefits.

In the instant case, the master arbitrator found that Although the rule stated by the lower arbitrator is overbroad and would not apply to a corporation dissolved for legitimate personal or business reasons, I conclude that it applies in the circumstances of these cases.

Petitioner argued that it was entitled to payment as it submitted a proper proof of claim and that the respondents denial of the claim was untimely. In addition, petitioner argues that the arbitrator allowed respondent to raise issues at the hearing which were irrelevant to the claim and such issues were precluded because they were not raised in a timely denial. Petitioner further argued that the subsequent status of a corporation has no bearing on such corporations ability to collect payment for services which were rendered while such corporation was active.

Defendant argued that the insurance company was entitled to withhold payment for medical services provided by a fraudulently incorporated medical corporation and cites to State Farm Mut. Auto Ins. Co., v. Mallela, 4 NY3d 313 [2005](Mallela III) where the Court of Appeals held: The Superintendents regulation allowing carriers to withhold reimbursement from fraudulently licensed medical corporations governs this case. We hold that on the strength of this regulation, carriers may look beyond the face of licensing documents to identify willful and material failure to abide by state and local law.

Case Outlined

In this case, the services were provided on January 19, 2000. The stated reasons for denial as listed in the June 20, 2000 NF-10 were: Diagnostic tests denied based upon AAEM recommendations regarding reasonable numbers of studies to arrive at diagnosis. Diagnostic tests have been over utilized and therefore were unnecessary and did not assist in rendering any diagnosis. Fees not in accordance to fee schedule. EMG supplies are included in charge of the EMG test.

The court ruled, It is clear that the NF-10 on its face shows that the claim was not timely denied and it does not list fraud of any kind as the reason for denial. It is also clear that the Court of Appeals said in its holding in Mallela III that an insurer may deny payment to a fraudulently incorporated provider.

This court finds that the determination by the arbitrator that fraud may be an issue in the processing of this claim does not constitute an arbitrary or capricious ruling nor is it incorrect as a matter of law. The decision is rationally reasoned based on the facts of this case.

A view of the arbitration award from both the lower and master arbitrator shows that there is no basis to vacate the award. Both arbitrators determined that the claim was rejected based upon an allegation of fraud. The issue regarding the relationship of the medical facility and its management group plus the negative inferences surrounding the applicant was a rational basis for denial of this claim. This holding and thus the arbitrators award was based upon the resolution of factual and legal determinations reached after reviewing the evidence submitted; such a determination may not be set aside by this court even were the court to disagree with those findings. The master arbitrators award therefore was neither arbitrary, capricious, irrational or without a substantial or plausible basis. Also, based upon the ruling in Mallela III and lower court cases, the decision is not incorrect as a matter of law.

Comment: An interesting decision. The providers corporation was not dissolved until after the services were rendered, and yet the arbitrators decision to deny the claim based on fraud was held not irrational because of the surrounding circumstances.

Better Health Medical PLLC a/a/o WAHEED ALI MOHAMMAD V. Empire/Allcity Insurance Company, Index no. 119841/05 (Civil Court, New York County) (THOMAS, j)