Arbitration and No Fault Fraud Claims
Barry Zalma
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This case is about the relationship between New Jersey healthcare providers and the insurance companies that pay those providers for treating patients for injuries arising from automobile accidents.
In GEICO In v. Caring Pain Management PC a/k/A Careon Pain Management, Jinghui Xie, M.D., First Care Chiropractice Center, L.L.C., and Konstantine Fotiou, D.C., No. 2:22-cv-05017(BRM)(JSA), United States District Court, D. New Jersey (May 31, 2023) the insurer attempted to defeat fraudulent claims under the New Jersey no-fault law.
BACKGROUND
Multiple GEICO insurers (the "Plaintiffs) alleged a series of fraudulent schemes, including unlawful compensation in exchange for patient referrals, misrepresentation of the nature, extent, and results of patient examinations, and false representation regarding compliance with pertinent healthcare laws.
MOTION TO DISMISS
In deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), a district court is required to accept as true all factual allegations in the complaint and draw all inferences from the facts alleged in the light most favorable to the non-moving party.
DECISION
The Insurance Fraud Prevention Act (“IFPA”), which was enacted roughly a decade after the No-Fault Law, provides that an “insurance company damaged as the result of a violation of any provision of this act may sue therefor in any court of competent jurisdiction.” In part, the New Jersey Legislature enacted the IFPA to address rising insurance rates resulting from widespread fraud with the clear objective to confront aggressively the problem of insurance fraud in New Jersey by facilitating the detection of insurance fraud and eliminating the occurrence of such fraud through the development of fraud prevention programs.
A person or practitioner violates the IFPA by presenting or preparing false or misleading statements in connection with an insurance claim, or by failing to disclose the occurrence of an event that affects an individual's entitlement to insurance benefits or the amount of benefits
THE COMMON LAW FRAUD, UNJUST ENRICHMENT, AND RICO CLAIMS
The No-Fault Law's language, legislative intent and application cover Plaintiffs' claims for common law fraud, unjust enrichment and RICO. The plain language of the No-Fault statute provides that “[a]ny dispute regarding the recovery of . . . benefits provided under personal injury protection coverage . . . arising out of the operation, ownership, maintenance or use of an automobile may be submitted to dispute resolution on the initiative of any party to the dispute.” (emphasis added)
Plaintiffs' claims involve:
1 a dispute by [Plaintiffs]
2 involving Defendants' recovery of PIP Benefits that
3 one party wishes to send to arbitration.
Consequently, Plaintiffs' common law fraud, unjust enrichment, and RICO claims fall within the statute's arbitration provision. Having reviewed the No-Fault Law's language, legislative intent, application, and arbitrable claims with Plaintiffs' claims for common law fraud, RICO and unjust enrichment, the USDC found there was nothing preventing an arbitrator from hearing the claims.
New Jersey IFPA Claim
The plain meaning of the New Jersey Insurance Fraud Prevention Act (IFPA) requires insurers' claims for damages under the IFPA be judicially resolved. Although the statute states that insurers “may sue in any court of competent jurisdiction,” arbitration does not constitute a court of competent jurisdiction.
To the extent the IFPA may seem to contradict the No-Fault Law, state legislatures are presumed aware of prior enactments, including the pre-existing No-Fault Law. The state legislature could have provided a carve out for PIP Benefits disputes in the IFPA but did not.
The USDC concluded that to avoid duplicative findings, the Court, in its discretion, declined to separately entertain the IFPA claim under the Declaratory Judgment Act. To the extent Plaintiffs seek a declaration that Defendants violated RICO, committed common law fraud, or are liable for unjust enrichment, an arbitrator shall decide that issue.
ZALMA OPINION
Clearly, the health care providers who were accused by GEICO of fraud felt that they had a better chance of success with an arbitrator rather than a federal judge. The judge found the statutes allowed for arbitration and sent the fraud to an arbitrator. I would like to be that arbitrator and hope the parties get an arbitrator who dislikes insurance fraud as much as I do, and find they would have done better with a federal judge. GEICO should be honored for working to defeat fraud by attempting to take the profit out of the fraud.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
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Post number 5320
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In Hassan Fayad v. Liberty Mutual Insurance Company, et al., No. 2:25-cv-10930, United States District Court, E.D. Michigan, Southern Division (March 24, 2026) Plaintiff Hassan Fayad, the owner of several businesses providing transportation, diagnostics, testing, and therapy services, regularly billed insurance companies for these services, was arrested and tried for fraud, convicted, had the conviction overruled and sued the insurers and prosecutors he found responsible.
FACTUAL BACKGROUND
By January 2020, Liberty Mutual, Progressive, Allstate, and Esurance suspected fraudulent activity and filed a complaint with the Michigan Department of Attorney General (MDAG). The insurers alleged that Fayad and others billed Michigan auto insurance policies for profit without actually providing medically ...
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FACTUAL BACKGROUND
Chubb and Mohave Transportation Insurance Company jointly issued an insurance policy covering Nova First, Globex, and Sadovyh, with EMA Risk Services acting as a third-party administrator.
Beth Mayhew sued Nova First, Globex, and Sadovyh for negligence in Missouri state court, and following a jury trial, a nuclear judgment was awarded to the Mayhews totaling ...
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In Integris Insurance Company v. Narendra B. Tohan, No. AC 47222, Court of Appeals of Connecticut (April 7, 2026) Integris Insurance Company, a medical professional liability insurer, initiated a declaratory action to determine its duty to defend and indemnify Narendra B. Tohan, a physician licensed in Connecticut, in a separate negligence action alleging medical misconduct.
FACTUAL BACKGROUND
In 2019, Kayla Suprynowicz and Reilly Flaherty (civil action plaintiffs), who were strangers for most of their lives, discovered through a genetic testing company that they are half siblings.
INSURANCE POLICY
The policy defines “Professional Services” in relevant part as “any professional medical services within the ...
ZIFL – Volume 30, Issue 7 – April 1, 2026
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
Post number 5314
Posted on April 1, 2026 by Barry Zalma
Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ This issue contains the following articles about insurance fraud:
No One is Above the Law – Not Even a Police Officer
Police Officer Convicted for Fraud in Reporting an Accident Affirmed
Police Officer Should never Lie about Results of Chase
In State Of Ohio v. Anthony Holmes, No. 115123, 2026-Ohio-736, Court of Appeals of Ohio, Eighth District, Cuyahoga (March 5, 2026) a police officer appealed criminal conviction as a result of lies about a high speed chase.
Read the following article and the full issue of ZIFL at https://zalma.com/blog/wp-content/uploads/2026/03/ZIFL-04-01-2026-1.pdf...
ZIFL – Volume 30, Issue 7 – April 1, 2026
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
Post number 5314
Posted on April 1, 2026 by Barry Zalma
Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ This issue contains the following articles about insurance fraud:
No One is Above the Law – Not Even a Police Officer
Police Officer Convicted for Fraud in Reporting an Accident Affirmed
Police Officer Should never Lie about Results of Chase
In State Of Ohio v. Anthony Holmes, No. 115123, 2026-Ohio-736, Court of Appeals of Ohio, Eighth District, Cuyahoga (March 5, 2026) a police officer appealed criminal conviction as a result of lies about a high speed chase.
Read the following article and the full issue of ZIFL at https://zalma.com/blog/wp-content/uploads/2026/03/ZIFL-04-01-2026-1.pdf...
Posted on March 30, 2026 by Barry Zalma
Insurance Fraud, a Way to Reduce Violent Crime
Post number 5313
A Fictionalized True Crime Story of Insurance Fraud from an Expert who explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story helps to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime.
She Taught Her Customers The Swoop And Squat:
Recently the California Insurance Department’s Fraud Division arrested a young woman in Los Angeles County for operating an insurance fraud school. She advertised her classes in the “Penny Saver” an advertising sheet distributed free to the public and a print version of Facebook, X Craig’s list. She had operated for several years teaching methods of committing automobile insurance fraud. Only after a police officer enrolled in one of her classes was she arrested.
Her defense ...
