Zalma on Insurance
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Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
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August 22, 2023
Allstate’s Qui Tam Actions Work to Take the Profit Out of Fraud

Man Bites Dog Story – Allstate May Sue on Behalf of State for Insurance Fraud

Barry Zalma
Aug 22, 2023

Read the full article at https://lnkd.in/g9-tKq7a and see the full video at https://lnkd.in/gGr83yhU and at https://lnkd.in/gdc9mPVX and at https://zalma.com/blog plus more than 4550 posts.

Allstate Insurance Company and several of its affiliates (collectively, Allstate) brought qui tam actions on behalf of the State of California alleging insurance fraud under the California Insurance Frauds Prevention Act (IFPA) (Ins. Code, § 1871 et seq.) and the Unfair Competition Law (UCL) (Bus. &Prof. Code, § 17000 et seq.) against three medical corporations, a medical management company and its parent company, four physicians, and Sattar Mir, an individual.

In the People ex rel. Allstate Insurance Company et al. v. Discovery Radiology Physicians, P.C., et al., and v. Onesource Medical Diagnostics, LLC, et al., B315264, California Court of Appeals, Second District, Third Division (August 15, 2023) the operative complaints allege that while the medical corporations hold themselves out as providers of radiology services, they in fact act as radiology “brokers,” sending patients to radiology facilities and radiologists with which the purported medical corporations have contracted.

The trial court found the complaints failed to state causes of action under the IFPA and the UCL because they were not pled with requisite specificity.

FACTUAL BACKGROUND

Allstate’s Fraud Actions; The Initial Demurrers.

Allstate Insurance Company is an insurance company licensed to issue automobile insurance policies in California. In 2020, Allstate filed two qui tam actions alleging insurance fraud in violation of the IFPA and the UCL.

The complaints alleged that the three medical corporations were formed and controlled by Mir, who is not a physician, to broker radiology services. The resulting bills falsely identified the technical and professional services as having been provided by one of the three defendant medical corporations and grossly inflated the fees for the services provided. Allstate alleged it would not have paid the claims for services purportedly rendered by the three professional corporations had it known of the false statements and fraudulent markups.

The trial court sustained the demurrer to the first amended complaints. The trial court entered judgments of dismissal in the Discovery and OneSource actions on August 16, 2021. Allstate timely appealed.

DISCUSSION

This appeal presents four basic issues:

1 Are the business models alleged in the amended complaints unlawful?
2 If the alleged business models are unlawful, do they give rise to causes of action under the IFPA and the UCL?
3 Do the amended complaints plead fraud with sufficient particularity?
4 Does the Discovery action adequately allege delayed discovery to survive demurrer on statute of limitations grounds?

The Court of Appeals answered each question in the affirmative.

ANALYSIS

A nonlicensed individual need not examine a patient or render a medical diagnosis to engage in the unlicensed practice of medicine-to the contrary, a non-physician unlawfully practices medicine if he or she exercises undue control over a medical practice. A non-physician undoubtedly exercises undue control by owning a medical practice but may also exercise such control in a variety of other ways, including by choosing physicians to provide medical services, selecting medical equipment, determining the parameters of physicians’ employment, including case load and compensation, and making billing decisions.

Overview of the IFPA.

The IFPA was enacted to prevent automobile and workers’ compensation insurance fraud in order to, among other things, “significantly reduce the incidence or severity and automobile insurance claim payments and . . . therefore produce a commensurate reduction in automobile insurance premiums.”

A claim need not contain an express misstatement of fact to be actionable under Penal Code section 550 and Insurance Code section 1871.7, subdivision (b). Instead, these sections require only that a person knowingly, and with intent to defraud:

1 present a claim that is false or fraudulent in some respect,
2 present, prepare, or make a statement containing false or misleading information about a material fact, or
3 conceal an event that affects a person’s right or entitlement to insurance benefits.

In other words, “[a]n insurance claim is fraudulent under [Penal Code] section 550 and [Insurance Code] section 1871.7, subdivision (b), when it is characterized in any way by deceit or results from deceit or conduct that is done with an intention to gain unfair or dishonest advantage.”

ANALYSIS.

The present case is a fraud action brought in the name of, and on behalf of, the state of California. Nor does Allstate seek to “avoid paying for” services rendered under an insurance contract, as defendants suggest; Allstate has already paid for those services and seeks through this action to recover a statutory penalty that, if recovered, will be shared by the state. For all of these reasons, the Court of Appeals concluded that the complaints allege claims under the IFPA.

The Operative Complaints State Claims Under The UCL.

The UCL prohibits “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” (§ 17200.)” All parties agree that Allstate’s UCL claims are derivative of its IFPA claims, and thus that the UCL claims rise or fall with the IFPA claims. Because the complaints adequately plead violations of the IFPA, they also adequately plead violations of the UCL.

The Amended Complaints Were Pled With Adequate Specificity.

Because Allstate has not only pled an allegedly fraudulent practice, but also identified each of the allegedly false claims submitted as a result of that practice it has adequately pled its complaint with adequate specificity.

DISPOSITION

The judgments of dismissal were reversed with directions to the trial court to vacate the orders sustaining the demurrers, enter new orders overruling the demurrers, and reinstate the amended complaints. Allstate shall recover its appellate costs.

ZALMA OPINION

The qui tam provision of the IFPA is an effective means of reducing insurance fraud by taking the profit out of the procedure without taking on the need for proof beyond a reasonable doubt in a criminal proceeding. If there is no profit in fraud and because the IFPA can assess serious damages on the perpetrators Allstate, and all the Amici who supported it on this appeal, should be honored in the work to defeat fraud and should be emulated by other insurers who are the victims of fraud providers, whether medical, auto body shops, contractors, roofers, public insurance adjusters and lawyers.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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00:11:41
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September 18, 2026
Expert May Only Testify to What Experience Supports

Insurance Expert May Not Testify to Speculative and Contains Unsupported Conclusions.

Posted on September 18, 2026 by Barry Zalma

See the full video at and at https://rumble.com/v7fmifw-expert-may-only-testify-to-what-experience-supports.html

In Michele A. Over, and The Estate Of Paul R. Over v. State Farm Mutual Automobile Insurance Company, and State Farm Fire And Casualty Company, Civil Action No. 23-cv-02243-PAB-STV, United States District Court, D. Colorado (September 14, 2026) Michele and Paul Over sued State Farm Fire and State Farm Auto over hail-damage and stolen-vehicle claims.

The operative dispute concerned State Farm Auto’s motion to exclude or limit opinions from plaintiffs’ insurance-industry expert, Aaron Castillo. Castillo.

Law

The proponent of expert testimony must establish by a preponderance of the evidence that an expert is qualified and that the opinions are helpful, sufficiently grounded, and reliably derived and applied. Experience-based opinions must explain how the...

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September 17, 2026
Convicted on 29 Tax-Refund-Fraud Counts

150 Months in Prison for Tax Fraud
Post 4846

Posted on September 17, 2026 by Barry Zalma

See the full video at https://lnkd.in/g8rh3JBX and https://lnkd.in/gmkdy-9C, In United States Of America v. Thomas Addaquay, Nos. 25-10609, 25-10611, United States Court of Appeals, Eleventh Circuit (September 9, 2026) the Eleventh Circuit affirmed all challenged convictions, the 150-month aggregate sentence, and the challenged $4,123,474.55 restitution award.

FACTS

In United States Of America v. Thomas Addaquay, United States Of America v. Thomas Addaquay, Nos. 25-10609, 25-10611, United States Court of Appeals, Eleventh Circuit (September 9, 2026) the Eleventh Circuit affirmed all challenged convictions, the 150-month aggregate sentence, and the challenged $4,123,474.55 restitution award.
FACTS

Thomas Addaquay controlled United Consolidated Accounting and Business Services (UC), nominally a check-cashing business.

The government proved a three-stage tax-refund scheme that converted the resulting refund checks into usable funds through ...

00:05:23
September 14, 2026
Court Enforces Fifth Amendment & Refuses to Compel Answers

Major Fraud Perpetrator Asserts Fifth Amendment Privilege to Avoid Prosecution

Post 5489

Posted on September 14, 2026 by Barry Zalma

Fraudster Refuses to Answer Questions About His Alleged Fraud

See the full video at https://lnkd.in/gvicAMDr and at https://lnkd.in/gvicAMDr

In Great American Insurance Co. v. Gemstone Property Management, LLC, et al., No. 23-cv-9100 (LJL), United States District Court, S.D. New York (September 8, 2026) Great American Insurance Company alleged that it was defrauded through a scheme in which Subin Associates, LLP recruited individuals to stage construction-site injuries, arranged unnecessary medical treatment and litigation funding, and pursued fraudulent personal-injury claims.

Luis Manuel Garcia Salcedo, resulted in a $6 million settlement. Non-party Jose Hernandez allegedly worked as an assistant manager at Subin, operated Hernandez Associates, and owned litigation-funding companies that shared office space with Subin and provided services to its clients.

After Great American ...

00:05:14
9 hours ago
District Court has Wide Discretion in Sentencing

Sentence for Stealing from Veterans Administration Reasonably Considers State Insurance Fraud & Arson Convictions

Post 4863

Posted on October 14, 2026 by Barry Zalma

In United States Of America v. Anthony Curtis Brewer, No. 26-10745, United States Court of Appeals, Eleventh Circuit (October 8, 2026) Anthony Curtis Brewer became the fiduciary for an incapacitated recipient of Department of Veterans Affairs survivor benefits and agreed to use her funds solely for her care and support without commingling them with his own.

The VA determined that he misused $67,232.33 and removed him as fiduciary in 2022. Brewer pleaded guilty to theft of more than $1,000 in government property under 18 U.S.C. § 641. At sentencing, the district court attributed $53,567 in loss to him, producing an advisory Guidelines range of 15 to 21 months.

Citing the victim’s vulnerability, Brewer’s attempts to avoid responsibility, and his other fraudulent conduct — including state convictions for arson and insurance fraud — the court ...

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October 13, 2026

Title Insurance Only Insures Real Property

Posted on October 13, 2026 by Barry Zalma

When a Seller Advised it Could Not Obtain Title to the Home Fraud Can’t be Proved

A Manufactured Home is Personal Property Until it Becomes Real Property

Post 4862

In Dale Johnson and Rose Johnson, Husband and Wife v. Stewart Title Guaranty Co., and Lennar Mortgage, LLC; Low Va Rates, LLC; Sandpoint Title Insurance, Inc.; Village Capital & Investment, LLC; and David Cassel, Engineer Agent; and Unknown Does 1-50, inclusively, No. 53126, Court of Appeals of Idaho (October 9, 2026)  Dale and Rose Johnson purchased Idaho real property in 2012 with a manufactured home on it. Their purchase addendum acknowledged that the seller could not obtain title to the home, that evidence of title and an ALTA-7 endorsement might not be available, and that they accepted the home “as is.”

In 2020, after a HELOC application was denied, the Johnsons learned that the home had been wrecked and decertified in 2004 and that its 2006 conversion to real ...

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October 09, 2026
Denial Of Mental Health Diversion And Probation Condition Were Affirmed

Denial Of Mental Health Diversion And Probation Condition Were Affirmed

Posted on October 9, 2026 by Barry Zalma

Post 4860

In The People v. Nicholas Daniel Stiles, A173483, A173646, California Court of Appeals, First District, Second Division (September 29, 2026) Nicholas Daniel Stiles pleaded no contest to one count of insurance fraud arising from his purchase of automobile insurance after a June 2021 collision, and to grand theft arising from an April 2024 incident at a 7-Eleven.

In both cases, the trial court suspended imposition of sentence and placed him on two years’ probation. Before the pleas, Stiles sought mental health diversion in both matters and filed a written motion seeking substitute appointed counsel. The diversion applications were denied, and the court never held a hearing on the motion.

LAW

Penal Code section 1001.36 permits pretrial mental health diversion when a defendant is eligible and suitable and the proposed treatment will meet the defendant’s specialized needs; denial is reviewed for ...

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