Appellate Court Upholds Insurers’ Defense Verdict Involving Approx. $20 Million In Pending Claims

July 5, 2013 | Appeals

The Appellate Term, Second Department, has upheld the trial verdict and judgment in favor of 53 NY automobile insurers and self-insurers in Andrew Carothers, M.D., P.C. v. Progressive Insurance Co.  Rivkin Radler partner Barry I. Levy successfully argued the appeal before the Appellate Term, with the rest of Rivkin Radler’s team – partners Evan H. Krinick, Michael A. Sirignano, Cheryl F. Korman, and Stuart M. Bodoff– working on the appeal as co-lead counsel with attorneys John E. McCormack of John E. McCormack, P.C., Craig Freiberg of Freiberg & Peck, LLP and Vincent Gerbino of Bruno Gerbino & Soriano, LLP.  The Appellate Term’s decision preserves a 2008 jury verdict in favor of some 53 insurers, which expunged approximately $20 million in pending claims against these members of the New York automobile insurance industry.   

This original jury trial, Andrew Carothers, M.D., P.C., Plaintiff  v Insurance Companies, nearly 5 years ago, resulted in a unanimous defense verdict, in the first significant trial verdict addressing the “Corporate Practice of Medicine Prohibition” principles established in the landmark decision of State Farm v Mallela, in which Rivkin Radler partner Evan H. Krinick argued on behalf of State Farm in the Court of Appeals. In Carothers, a major victory for the New York automobile insurance industry, the Appellate Term affirmed the core jury finding, from the original jury trial, that the medical professional corporation was ineligible to collect first-party no-fault benefits.

In the 2-1 decision (attached), Judges Rios and Aliotta, writing for the majority, found compelling evidence that Carothers M.D., P.C. was “fraudulently incorporated,” i.e, that Dr. Carothers was not the true owner of the professional corporation.  The Appellate Term ruled that that this type of fraud in the corporate form does not require a finding of fraudulent intent.  The Appellate Term also concluded that the Civil Court’s instructions to assist the jury in determining the ownership, co-ownership, or control of Carothers M.D. P.C. by non-physicians Hillel Sher and Irina Vayman were proper and, further, that the reading into evidence of the “testimony” by Sher and Vayman invoking the Fifth Amendment was not reversible error.  The dissent disagreed on this issue.

Barry I. Levy, of Rivkin Radler, called the Appellate Term decision another significant step in the fight against no-fault insurance fraud.  “We are glad that the Appellate Term majority recognized the substantial evidence presented at trial of fraud in the corporate form, perpetrated by Carothers, Sher, and Vayman, and that fraudulently incorporated medical providers like Carothers M.D. PC cannot be permitted to abuse the no-fault system.” 

By emphasizing the requirement that healthcare providers be “lawfully incorporated,” managed and licensed, this decision should help cut down on insurance fraud to the benefit of insurers and policyholders alike. 

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Andrew Carothers, M.D., P.C. v Progressive Insurance Company, et. al.

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