After Health Provider Entity's Management is Arrested for Fraud Reporting Suspicion to Beneficiaries is not Defamation
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BrainBuilders, LLC appealed from an order granting summary judgment in favor of defendants Optum, Inc., et al (collectively, defendants) in Brainbuilders, LLC v. Optum, Inc., Optum Services, Inc., et al, No. A-0621-22, Superior Court of New Jersey, Appellate Division (April 19, 2024) resolved claims of defamation.
FACTS
Letters dated July 25, 2017 and August 2017 sent by the Optum entities to BrainBuilders' patients following an investigation into purported fraud by individuals associated with BrainBuilders.
BrainBuilders provides healthcare services to children on the autism spectrum. As an out-of-network or non-participating healthcare provider, BrainBuilders receives reimbursement for claims only if a patient's health insurance plan allowed "out-of-network benefits" or the insurer made a "single case agreement" for the patient's care.
The Optum entities are the health claims administrator for health plans issued or administered by the Oxford entities and UHC entities. The Optum entities do not sell or issue health insurance policies. Rather, they provide support for defendants who issued health insurance policies to individual insureds. The Optum entities also evaluate insurance claims submitted by providers to its affiliated insurers, including BrainBuilders. The Optum entities often investigate whether a provider has requested reimbursement beyond the provider's entitlement, such as by misrepresenting or inflating the services provided.
In June 2017, four individuals related to the management of BrainBuilders were arrested and charged with conspiracy to defraud Medicaid. A criminal complaint, alleging misappropriation of funds, was filed against several individuals affiliated with BrainBuilders. The arrests were reported in the news media and the Optum entities learned of the arrests on July 14, 2017.
Subsequently the Optum entities sent letters to BrainBuilders' patients insured by the Oxford and UHC entities (July 2017 letters). The July 2017 letters explained the Optum entities were suspending payment for services provided by BrainBuilders due to potential insurance fraud and other violations of state and federal law.
BrainBuilders sued defendants asserting the following causes of action:
1 conspiracy;
2 tortious interference with business relations;
3 tortious interference with prospective economic advantage;
4 negligence trade libel;
5 defamation, libel, and slander; and
6 unjust enrichment and
7 quantum meruit.
BrainBuilders alleged the statements in the July and August 2017 letters were false and defamatory. Defendants moved for summary judgment and the motion judge granted defendants' motion and dismissed BrainBuilders' claims with prejudice. Further, around the same time period, the judge noted the Optum entities "separately uncovered evidence suggesting BrainBuilders was engaged in fraud, waste, or abuse." Thus, the judge concluded, "[w]hen read with context, no reasonable person" could interpret the July or August 2017 letters "as fallacious or injurious.
The law of defamation is grounded on the principle that people should be free to enjoy their reputations unimpaired by false and defamatory attacks. To prevail on a defamation claim, a party must demonstrate: (1) the assertion of a false and defamatory statement concerning another; (2) the unprivileged publication of that statement to a third party; and (3) fault amounting at least to negligence by the publisher.
True Statements are not Actionable as Defamation.
Our courts have stated that true statements are absolutely protected under the First Amendment from liability for defamation. The allegedly defamatory statements in the July and August 2017 letters related to BrainBuilders' "potential fraud," potential "violations of state and federal law," and concerns for "quality of care or member safety." It is uncontroverted that several of BrainBuilders' officers were arrested for conspiracy to defraud Medicaid in association with "income they received from BrainBuilders." These individuals were arrested because they potentially committed fraud. Additionally, the arrests raised legitimate concerns regarding the quality of care rendered by BrainBuilders.
Moreover, BrainBuilders claimed it conferred only benefits to the insured members and not defendants. Under these circumstances, the Appellate Division was satisfied BrainBuilders failed to proffer any support for its unjust enrichment and quantum meruit claims.
ZALMA OPINION
It takes a certain amount of unmitigated gall to sue for defamation an entity that reported that the plaintiffs officers were arrested for Medicaid fraud, a major felony. Their officers were arrested - albeit I could find no report on the result of the charges - for insurance fraud, telling their customers about the arrests in good faith is not defamation since the statements were true.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Happy Law Day
ZIFL – Volume 30, Issue 9 – May 1, 2026
Read the full article at https://www.linkedin.com/pulse/zalmas-insurance-fraud-letter-may-1-2026-barry-zalma-esq-cfe-2tywc, see the video at at and at https://zalma.com/blog plus more than 5300 posts.
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
ZIFL – Volume 30, Issue 9 – May 1, 2026
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 and is written by Barry Zalma.
DOJ Creates National Fraud Enforcement Division
Will the Feds Take on Insurance Fraud? Possibly as Part of a National Anti-Fraud Effort
On April 7, 2026, the Acting Attorney General, Todd Blanche, issued a memorandum establishing the Department of Justice National Fraud Enforcement Division (NFED). The memo describes an ambitious, but perhaps redundant, vision for this ...
When Abalone Died As a Result of Multiple Causes The Efficient Proximate Cause Requires Payment
Post number 5345
Read the full article at https://www.linkedin.com/pulse/efficient-proximate-cause-doctrine-saves-claim-barry-zalma-esq-cfe-yndlc, see the video at and at and at https://zalma.com/blog plus more than 5300 posts.
In American Abalone Farms, LLC v. Star Insurance Company et al., H052643, California Court of Appeals, Sixth District (April 27, 2026) the Court of Appeals dealt with an insurance coverage issue that required application of the efficient proximate cause doctrine.
FACTS
American Abalone Farms, LLC ("American Abalone" ) operates an aquaculture farm in Santa Cruz County, California, raising abalone in tanks. In August 2020, the CZU Lightning Complex Fires led to a prolonged power outage and road closures near the farm. As a result, the farm’s water pumps failed, causing the death of most of the ...
Breach of a Specific Condition Precedent Is a Complete Defense
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In United Services Automobile Association and State Farm Mutual Automobile Insurance Company v. Anthony Wenzell, 2026 CO 25 (Colo. Apr. 27, 2026) Anthony Wenzell was rear-ended in a car accident. He had a significant prior 2014 accident that required back surgery.
Wenzell claimed underinsured-motorist (UIM) benefits under three policies: (1) the tortfeasor’s liability policy, (2) his own primary UIM policy with State Farm, and (3) an excess UIM policy issued by USAA (under his brother’s policy, which contained an “other insurance” clause making USAA’s coverage excess over any collectible insurance).
After receiving the claims, both USAA and State Farm repeatedly requested that Wenzell execute comprehensive medical-release authorizations so they could obtain his full medical records and ...
It is Fraud to Make the Same Claim Twice
Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.
Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
Post number 5347
No One is Entitled to be Paid for the Same Loss Twice
In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
PROCEDURAL HISTORY
State Farm filed motion for summary...
It is Fraud to Make the Same Claim Twice
Read the full article at https://www.linkedin.com/pulse/fraud-make-same-claim-twice-barry-zalma-esq-cfe-c4g8c and at https://zalma.com/blog.
Chutzpah: After Being Paid for a New Roof Insured Makes Second Claim For Same Damages
Post number 5347
No One is Entitled to be Paid for the Same Loss Twice
In Mohammed Ali Khalili v. State Farm Lloyds, No. 14-25-00611-CV, Court of Appeals of Texas (April 30, 2026) Khalili maintained a State Farm Lloyds homeowners insurance policy for decades. In 2008 he filed a roof-damage claim; State Farm paid him to replace the entire roof (shingles and gutters). Khalili never replaced the roof and repeated his claim.
BACKGROUND
In 2021 he filed a second roof claim. State Farm’s inspectors found the roof “very old” with extensive non-storm-related damage. The claim was denied because (1) the damage did not exceed the deductible and (2) State Farm had already paid for a full roof replacement.
PROCEDURAL HISTORY
State Farm filed motion for summary...
What Must be Done after Notice of a Claim is Received by the Insurer
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A first party property policy does not insure property: it insures a person, partnership, corporation or other entity against the risk of loss of the property. Before an insured can make a claim for indemnity under a policy of first party property insurance the insured must prove that there was damage to property the risk of loss of which was insured by the policy. The obligation imposed on the insured ...
