To Allege IFPA Fraud Plaintiff Need only Plead the Defendants Knowledge, Falsity, and Materiality of Insurance Claim
Barry Zalma
Read the full article at https://lnkd.in/g-BXAVRN, see the full video at https://lnkd.in/gv3vdspW and at https://lnkd.in/gDbh7PY4 and at https://zalma.com/blog plus more than 4400 posts.
Stephen J. Conte, D.O. (“Dr. Conte”), and various other health care providers (collectively, the “Defendants”) moved the court to dismiss plaintiffs Aetna, Inc. and Aetna Life Insurance Company's (collectively, the “Plaintiffs”) Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). In Aetna, Inc. et al. v. Open MRI And Imaging Of Rochelle Park, P.A. et al., Civil Action No. 21-20043, United States District Court, D. New Jersey (November 23, 2022) the USDC applied the New Jersey Insurance Frauds Prevention Act (IFPA) to resolve the motions.
BACKGROUND
This case arises out of allegations that Defendants engaged in fraudulent billing schemes to profit from administering to patients COVID-19 rapid tests.
General Practices
Plaintiffs alleged that at the outset of the COVID-19 pandemic, Open MRI and Vestibula, radiology laboratories, with the other defendants, began providing COVID-19 rapid tests to patients at their joint practice location in New Jersey. Plaintiffs asserted that in taking a rapid test at Open MRI or Vestibula, a patient “would have their temperature taken, answer a series of screening questions regarding their symptoms, receive a nasal swab, and shortly thereafter be provided with test results." Plaintiffs contended that the entire interaction would last “no more than a few minutes and involved minimal interaction with a physician.” Defendants allegedly charged their patients $35 for a rapid test, but then “submitted significantly higher charges” to Plaintiffs for reimbursement.
Plaintiffs alleged that to profit from the administration of COVID-19 rapid tests Defendants implemented four fraudulent schemes: 1) billing for COVID-19 tests performed without required licenses and authorizations; 2) billing for specimen handling services not rendered; 3) inflating charges for services provided, a tactic known as “upcoding”; and 4) submitting claims through various businesses to avoid Plaintiff's fraud detection protocols.
Upcoding
In addition to allegedly billing for services not rendered, like specimen handling, Plaintiffs also contend that Defendants “upcoded” their claims that is, Defendants allegedly inflated their bills by submitting claims requesting compensation for more involved medical services than were actually provided when administering a COVID-19 rapid test. Plaintiffs allege that due to this upcoding, Plaintiff overpaid Defendants in excess of $500,000 for claims misrepresenting the services Defendants rendered.
Avoiding Detection by Plaintiffs' Fraud Department
Last among the purported fraudulent schemes, Plaintiffs allege Defendants submitted claims from other defendants, Universal and Integrated, to conceal their improper billing practices.
DEFENDANTS' MOTION TO DISMISS
Defendants challenged the sufficiency of Plaintiffs' Complaint on two grounds. First, as it relates to Plaintiff's fraud-based claims insurance fraud, common law fraud, and negligent misrepresentation Defendants argue that Plaintiffs' allegations are not pleaded with the specificity required by Federal Rule of Civil Procedure 9(b)
Fraud-Based Claims
Under New Jersey law, to establish a common law fraud claim, a plaintiff must demonstrate:
a material misrepresentation of a presently existing or past fact;
knowledge or belief by the defendant of its falsity;
an intention that the other party rely on it;
reasonable reliance thereon by the other party; and
resulting damages.
In contrast to common law fraud and negligent misrepresentation, the Insurance Fraud Prevention Act does not require proof of reliance on the false statement or resultant damages, nor proof of intent to deceive. Instead, to sustain a fraud claim under the Insurance Fraud Prevention Act, a plaintiff must only allege knowledge, falsity, and materiality.
A plaintiff must support its fraud allegations by demonstrating the “who, what, when, where and how of the events at issue. However, a plaintiff need not allege every material detail so long as it pleads the circumstances of the fraud with sufficient particularity to place a defendant on notice of the precise misconduct with which it is charged.
The USDC concluded that Plaintiff adequately alleged its fraud-based claims with the requisite specificity by asserting that Defendants engaged in a series of fraudulent schemes to induce Plaintiffs to pay Defendants for services Defendants were not authorized to render or were not rendered at all. Moreover, Plaintiffs alleged that Defendants submitted these claims knowing that they were false, and further knowing that Plaintiffs would rely on Defendants' representations regarding what services were rendered as being true and accurate.
These allegations establish each element of Plaintiffs' fraud-based claims, and taken together, are sufficiently particular to place Defendants on notice of the conduct giving rise to Plaintiffs' claims, in satisfaction of Rule 9(b)'s heightened pleading standard.
Accordingly, Defendants' motion to dismiss for failure to satisfy Rule 9(b) was denied and the parties will be required to go to trial to either prove the health care provider defendants acted fraudulently or the defendants are able to prove they did not commit fraud.
ZALMA OPINION
Aetna should be commended for recognizing an attempted or actual fraud and acting, proactively, to sue on behalf of the state of New Jersey under the IFPA to punish those they believed had committed fraud and obtain damages for the insurers and the state from those who perpetrated the fraud. Insurance fraud is a crime in the state of New Jersey but may not be a crime the state is willing to pursue. The IFPA allows insurers to act on behalf of the state to deter or defeat insurance fraud. If the allegations prove true the conduct of the health care providers to profit from a pandemic is a clear violation of the Hippocratic oath and is, in my opinion, evil.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.
Go to substack at substack.com/refer/barryzalma Consider subscribing to my publications at substack at substack.com/refer/barryzalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected]
Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://lnkd.in/gfFKUaTf.
Go to substack at https://lnkd.in/gEEnV7Dd Consider subscribing to my publications at substack at https://lnkd.in/gEEnV7Dd
Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected]
Convicted Criminal Seeks to Compel Receiver to Protect his Assets
Post number 5291
See the video at and at and at https://www.zalma.com/blog plus more than 5250 posts.
The Work of a Court Appointed Receiver is Constitutionally Protected
In Simon Semaan et al. v. Robert P. Mosier et al., G064385, California Court of Appeals, Fourth District, Third Division (February 6, 2026) the Court of Appeals applied the California anti-SLAPP statute which protects defendants from meritless lawsuits arising from constitutionally protected activities, including those performed in official capacities. The court also considered the doctrine of quasi-judicial immunity, which shields court-appointed receivers from liability for discretionary acts performed within their official duties.
Facts
In September 2021, the State of California filed felony charges against Simon Semaan, alleging violations of Insurance Code section 11760(a) for making...
When There are Two Different Other Insurance Clauses They Eliminate Each Other and Both Insurers Owe Indemnity Equally
Post number 5289
In Great West Casualty Co. v. Nationwide Agribusiness Insurance Co., and Conserv FS, Inc., and Timothy A. Brennan, as Administrator of the Estate of Pat- rick J. Brennan, deceased, Nos. 24-1258, 24-1259, United States Court of Appeals, Seventh Circuit (February 11, 2026) the USCA was required to resolve a dispute that arose when a tractor-trailer operated by Robert D. Fisher (agent of Deerpass Farms Trucking, LLC-II) was involved in a side-impact collision with an SUV driven by Patrick J. Brennan, resulting in Brennan’s death.
Facts
Deerpass Trucking, an interstate motor carrier, leased the tractor from Deerpass Farms Services, LLC, and hauled cargo for Conserv FS, Inc. under a trailer interchange agreement. The tractor was insured by Great West Casualty Company with a $1 million policy limit, while the trailer was insured by Nationwide Agribusiness Insurance Company with a $2 million ...
Opiod Producer Seeks Indemnity from CGL Insurers
Post number 5288
Read the full article at https://lnkd.in/guNhStN2, see the full video at https://lnkd.in/gYqkk-n3 and at https://lnkd.in/g8U3ehuc, and at https://zalma.com/blog plus more than 5250 posts.
Insurers Exclude Damages Due to Insured’s Products
In Matthew Dundon, As The Trustee Of The Endo General Unsecured Creditors’ Trust v. ACE Property And Casualty Insurance Company, et al., Civil Action No. 24-4221, United States District Court, E.D. Pennsylvania (February 10, 2026) Matthew Dundon, trustee of the Endo General Unsecured Creditors’ Trust, sued multiple commercial general liability (CGL) insurers for coverage of opioid-related litigation involving Endo International PLC a pharmaceutical manufacturer.
KEY FACTS
Beginning as early as 2014, thousands of opioid suits were filed by governments, third parties, and individuals alleging harms tied to opioid manufacturing and marketing.
Bankruptcy & Settlements
Endo filed Chapter 11 in August 2022; before bankruptcy it ...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lost the ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah. Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and wonder how did all these wonderful things come into being. Jews believe the force we call G_d created the entire universe and everything in it. Jews feel G_d is all seeing and knowing and although we can’t see Him, He is everywhere and in everyone.We understand...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
Read the full article at https://www.linkedin.com/pulse/passover-americans-barry-zalma-esq-cfe-5vgkc.
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lostthe ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah.
Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and ...
You Get What You Pay For – Less Coverage Means Lower Premium
Post number 5275
Posted on January 30, 2026 by Barry Zalma
See the video at and at
When Experts for Both Sides Agree That Two Causes Concur to Cause a Wall to Collapse Exclusion Applies
In Lido Hospitality, Inc. v. AIX Specialty Insurance Company, No. 1-24-1465, 2026 IL App (1st) 241465-U, Court of Appeals of Illinois (January 27, 2026) resolved the effect of an anti-concurrent cause exclusion to a loss with more than one cause.
Facts and Background
Lido Hospitality, Inc. operates the Lido Motel in Franklin Park, Illinois. In November 2020, a windstorm caused one of the motel’s brick veneer walls to collapse. At the time, Lido was insured under a policy issued by AIX Specialty Insurance Company which provided coverage for windstorm damage. However, the policy contained an exclusion for any loss or damage directly or indirectly resulting from ...
