In re Bergamo Medical, P.C.

17 Misc. 3d 182
CourtNew York Supreme Court
DecidedJuly 26, 2007
StatusPublished

This text of 17 Misc. 3d 182 (In re Bergamo Medical, P.C.) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Bergamo Medical, P.C., 17 Misc. 3d 182 (N.Y. Super. Ct. 2007).

Opinion

OPINION OF THE COURT

Raymond Guzman, J.

The five petitioners aver that they are medical professional corporations duly organized and incorporated in New York State under article 15 of the Business Corporation Law. By order to show cause and verified petition, filed on March 13, 2007, they move under CPLR 2304 for an order quashing or modifying six grand jury subpoenas duces tecum, dated November 28, 2006, issued by the New York State Attorney General (AG) on behalf of the Kings County Grand Jury.

The petitioners assert that they have complied with the subpoenas, except with respect to materials which the petitioners claim are protected from disclosure under the State’s physician-patient privilege (codified at CPLR 4504). The AG agreed to adjourn compliance with the subpoenas, which were originally returnable on December 12, 2006, pending resolution of the petitioners’ instant application.

In their initial papers, the petitioners also sought an order under CPL 610.25, requiring the AG to return certain records seized on November 28, 2006, during the execution of search warrants1 at medical offices located at 21 West 39th Street, Manhattan, and at 401 76th Street, Nos. 1A and 1H, Brooklyn.

The petitioners’ papers were referred to this court on April 3, 2007. On May 1, 2007, the AG filed a verified answer and memorandum of law opposing the petitioners’ application. On May 23, 2007, the petitioners filed a reply affirmation and memorandum of law in support of their application to quash or modify the subpoenas, but withdrew without prejudice their request for related relief under CPL 610.25. This court declined the parties’ joint offer to present oral arguments.

This court has reviewed the papers filed by both parties, including the exhibits appended thereto, and for the reasons set forth below, denies the petitioners’ application to quash or modify the subject subpoenas duces tecum, except to the extent the petitioners make the showing as provided herein.

[184]*184Background

The subject subpoenas were issued as part of the AG’s investigation into the activities of several medical clinics which specialize in treating motor vehicle accident claimants under New York State’s statutory “no-fault” (or personal injury protection) insurance system, codified under article 51 of the Insurance Law.

The No-Fault Law, which took effect in 1974, requires the owner of a vehicle registered in New York to carry insurance to cover “economic losses” (medical and other injury-related expenses) sustained by the occupant(s) of such vehicle, and/or by any pedestrian(s), injured as a result of the use or operation of such vehicle, up to a maximum of $50,000 per person, without regard to fault; recourse through the courts is neither necessary nor permitted, except to recover actual economic losses if they exceed no-fault benefits, and/or to seek compensation for noneconomic losses (pain and suffering) if the injury suffered meets the statutory definition of “serious.”2 (See Insurance Law § 5104.) The injured party may assign the right to claim payment for medical expenses to the medical service provider.

The Legislature’s purpose in enacting the No-Fault Law was threefold: “to ensure prompt compensation for losses incurred by accident victims without regard to fault or negligence, to reduce the burden on the courts and to provide substantial [auto insurance] premium savings to New York motorists” (Matter of Medical Socy. of State of N.Y. v Serio, 100 NY2d 854, 860 [2003], citing Governor’s Mem approving L 1973, ch 13, 1973 McKinney’s Session Laws of NY, at 2335; see also, e.g., Pommells v Perez, 4 NY3d 566, 570-571 [2005]).

In operation, however, the no-fault system proved increasingly vulnerable to fraud. As the Court of Appeals recognized in [185]*185Medical Socy. of State of N.Y. v Serio (100 NY2d at 861), and reiterated in Pommells v Perez (4 NY3d at 571),

“[rjeports of no-fault fraud rose from 489 cases in 1992 to 9,191 in 2000 . . . account[ing] for three quarters of the 16,902 reports of automobile-related fraud received by the [New York State] Insurance Department’s Frauds Bureau in 2000, and more than 55% of the 22,247 reports involving all types of insurance fraud.”

The Court noted that such fraud is perpetrated at the expense of New York motorists, citing one estimate calculating that “the combined effect of no-fault insurance fraud has been an increase of over $100 per year in annual insurance premium costs for the average New York motorist” (Medical Socy. of State of N.Y. v Serio, 100 NY2d at 861).

As the Court also noted, the problem became such that in 1999, an office was established within the Insurance Department to focus exclusively on no-fault fraud (id.). The State launched other administrative antifraud initiatives as well. In 1998, the Superintendent of Insurance promulgated regulations requiring insurers, inter alia, to develop and implement “Fraud Prevention Plans”; establish full-time “Special Investigation Units” to investigate suspected fraud; and submit fraud data and reports on the results of their antifraud activities to the Insurance Department. (See 11 NYCRR 86.6.) In 2001, the Governor appointed the AG as Special Prosecutor to coordinate the investigation and prosecution of auto insurance fraud in cooperation with the Insurance Department, local district attorneys, and other state agencies. (See Executive Order [Pataki] No. 109 [9 NYCRR 5.109].)

In its instant papers, the AG describes a “typical” no-fault auto insurance fraud scheme as one in which “steerers” solicit auto accident victims, or individuals willing to pose as accident victims, to seek treatment at corrupt no-fault medical clinics, in return for a fee; the clinics then submit claims to insurance companies for providing such patients with medical services which may have been unnecessary, and/or performed by unlicensed practitioners, and/or not performed at all. The clinics may also instruct patients to seek treatment for at least three months, even when unwarranted, in order to establish their alleged injuries as “serious” under the no-fault statutory definition (see n 2, herein), and may refer patients to attorneys, in return for a fee, to pursue fraudulent lawsuits for alleged economic losses in excess of $50,000, and/or for noneconomic losses due to alleged “pain and suffering.”

[186]*186The AG avers that the investigation in connection with the case at bar has to date revealed that a man named Jacob Kagan owns six no-fault medical clinics in contravention of state law prohibiting a person who is not a licensed physician or medical provider from owning a medical clinic (Business Corporation Law §§ 1507, 1508), and that he disguises his ownership by controlling the clinics through management companies; one such company, Mirka United, Inc., is allegedly the leaseholder to the premises3 subject to the search warrants executed by the AG on November 28, 2006 (referenced supra). The AG alleges that Mr.

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Bluebook (online)
17 Misc. 3d 182, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-bergamo-medical-pc-nysupct-2007.