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The Rogak Report: 04 Jan 2006 ** No-Fault - Licensing Issues **

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  • Lawrence Rogak
    MALELLA DOES NOT APPLY RETROACTIVELY, SAYS THIS COURT; FAULTY LICENSING NO BAR TO NO-FAULT RECOVERY Multiquest PLLC v. Allstate Ins. Co., NYLJ 01/04/06
    Message 1 of 1 , Jan 4, 2006
      "MALELLA" DOES NOT APPLY RETROACTIVELY, SAYS THIS COURT; FAULTY
      LICENSING NO BAR TO NO-FAULT RECOVERY

      Multiquest PLLC v. Allstate Ins. Co., NYLJ 01/04/06 (Civil Court,
      Queens County) (MARKEY, j)

      The question in these 12 consolidated no-fault suits was: should the
      decision of the New York Court of Appeals in State Farm v. Mallela, 4
      NY3d 313 [2005] [also known in the no fault bar as "Mallela III"] be
      applied retroactively? That case denied no fault benefits to
      plaintiff providers that were organized fraudulently.

      In this particular action, medical services were provided to Maria
      Mercedes during 1999, prior to the adoption of 11 NYCRR 65-3.16(a)
      (12) [effective April 4, 2002]. That regulation hinges reimbursement
      for services based on compliance and adherence with licensing
      requirements.

      The Court stated, "It is a tribute to all the Judges of the Civil
      Court, Queens County, that although they have reached different
      conclusions on the issue, their opinions this year have been on the
      leading edge, setting the contours of the debate. The highly
      articulate, cogent, and well-written opinion of Judge Anna Culley in
      A.T. Medical, P.C. v. State Farm Mut. Ins. Co. (___Misc 3d ____, 2005
      WL 2837509, 2005 NY Slip Op 254610) reasons that public policy
      concerns warrant denial of claims made by corporate malefactors who
      organize their enterprises in violation of existing law (accord,
      Metroscan Imaging, P.C. v. Geico, 8 Misc 3d 829 [Bernice Siegal, J.];
      Multiquest , PLLC v. Allstate Ins. Co., ___Misc 3d ____, 2005 WL
      2085966, 2005 NY Slip Op 25356 [Dennis Butler, J.]). Judges Culley,
      Siegal, and Butler of this Court thus hold that Mallela III should be
      applied retroactively."

      "In contrast, my colleague, Judge Joseph Esposito, in Multiquest,
      PLLC v. Allstate Insurance Co. (____ Misc 3d ___, 2005 WL 3274885,
      2005 NY Slip Op 25512), in his characteristic penetrating and tight
      analysis, concluded that Mallela III should not be applied
      retroactively, especially since only a regulation is involved."

      "The two differing views of my colleagues both deserve attention by
      students of the issue because of the fine arguments made therein. In
      the final analysis, the undersigned agrees with Judge Esposito's
      recent decision that Mallela III should not be applied retroactively."

      "In addition to all of the reasons stated by Judge Esposito, this
      Court believes that if the Court of Appeals had wanted to provide a
      rule of retroactivity, it was fully informed of the issue at the oral
      argument of Mallela III and could have determined the issue in its
      opinion. Of course, many reasons may play into why a court does not
      discuss a certain argument. Sometimes in the hope of winning
      unanimity or a majority, compromises are made in forging judicial
      consensus. Other times, an appellate court will want to see how lower
      courts treat an issue, thereby benefiting from their thoughts, and to
      see, by experience, whether any division has, indeed, occurred among
      lower courts."

      "In the present case, this Court believes that the Court of Appeals
      was aware of the fact that, if a rule of retroactivity were to be
      announced, insurers would be filing motions in thousands of no fault
      cases, seeking to recapture payments already made. The Court of
      Appeals probably thought of this possibility and decided not to
      stimulate such unbridled litigation to already congested motion
      calendars in the no fault parts."1

      "Second, to apply a rule of retroactivity, in the present
      circumstance, should not be done lightly. Despite the method of
      questionable, improper, and even unethical incorporation of a
      plaintiff provider, services were allegedly furnished, consistent
      with the public policy of this State, in the expectation that a claim
      would be filed and that payment would be made expeditiously."

      "For a court to adopt a rule of retroactivity, under the facts of the
      particular circumstances, would be tantamount to imposing a rule
      alienating a property right. The rights of plaintiff health care
      providers that provided services in the expectation of filing a claim
      under a statutory system for the quick, expeditious handling and
      processing of claims would be subverted. As shown, resort to public
      policy principles can be a two-edged sword."

      "This Court holds that Mallela III should not be applied
      retroactively."

      1. The Court noted that adjournments of routine motions in the
      specially created No Fault Parts already require waits of almost a
      year.

      Larry Rogak
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