Patient Brokering and Referral Scheme Enjoined

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GEICO Again Acts Proactively Against Insurance Fraud and Takes a Bite Out of Crime

Post 4757

No-Fault auto insurance was touted as a panacea to increasing insurance rates because of auto accident litigation. It failed because it turned into a profit center for dishonest lawyers, heath care providers and patient brokers.

“GEICO,” the victim of many health care frauds sued multiple health care providers, patient brokers, and other fraudsters, alleging RICO violations; common law fraud; aiding and abetting fraud; unjust enrichment; violations of the New Jersey Insurance Fraud Prevention Act; and seeking a declaratory judgment based on an alleged scheme to collect reimbursement on thousands of fraudulent no-fault insurance claims. GEICO moved against the Defendants seeking an order, pending disposition of GEICO’s claims in this action, (1) staying all pending no-fault insurance collection arbitrations and state court collections lawsuits that have been commenced against GEICO by or on behalf of the Gerling Defendants; and (2) enjoining the Gerling Defendants, and anyone acting or purporting to act on their behalf, from commencing any further no-fault insurance collection arbitrations or collections litigation against GEICO.

In Government Employees Insurance Co., GEICO Indemnity Co., GEICO General Insurance Company, and GEICO Casualty Co. v. Michael Gerling, M.D.,  et al and Campiro, Inc., No. 23-CV-7693 (PKC) (MMH), United States District Court, E.D. New York (February 26, 2024) the USDC took a bite out of crime.

BACKGROUND

GEICO is an authorized automobile insurer in New York and New Jersey. GEICO alleges that the Gerling Defendants participated in an unlawful patient brokering and referral scheme wherein the Gerling Defendants provided fraudulent, medically unnecessary services to individuals who claimed that they were involved in automobile accidents and covered by no-fault insurance policies issued by GEICO (the “Insureds”). In turn, the Gerling Defendants submitted or caused to be submitted thousands of fraudulent no-fault insurance charges for reimbursement by GEICO.

According to GEICO, Gerling entered into a patient brokering and referral scheme with defendants. The Campiro Defendants and various personal injury attorneys “would cause patients to be referred to Gerling and NY Orthopedics for surgical procedures,” and the Campiro Defendants would pay Gerling “to perform invasive, expensive, and medically unnecessary surgeries.”

The Complaint provides multiple examples of fraudulent conduct by the Defendants. The examples included billing by the Gerling Defendants for procedures not warranted; billing where the Insureds were “recommended a substantially identical course of medically unnecessary ‘treatment’” for a single accident “despite the fact that they were differently situated; billing for “surgical procedures to Insureds who did not have any serious symptoms secondary to any automobile accident that legitimately would warrant the procedures”; and false multiple representations.

GEICO alleged that the Gerling Defendants’ bills and treatment reports were false and misleading.

GEICO seeks to recover more than $2,200,000 already paid to Defendants under the alleged fraudulent scheme.

DISCUSSION

The Court first considers GEICO’s request with respect to pending and future arbitrations.

Irreparable Harm Absent Injunctive Relief

GEICO has demonstrated that it would face irreparable harm if the Gerling Defendants are permitted to continue pursuing collection arbitrations during the pendency of this lawsuit because those arbitration actions “might eventually be, at best, inconsistent with th[e] Court’s ruling, and at worst, essentially ineffective.

The Court found “that litigating the relatively small number of disputed arbitrations would irreparably harm [GEICO] absent a stay,” through the “risk of inconsistent judgments . . . in addition to money damages [potentially] not being available.” The Court found that GEICO has shown irreparable harm.
Serious Questions Going to the Merits

GEICO has raised serious questions going to the merits. The Court rejected the Gerling Defendants’ patently frivolous objection that GEICO has not provided substantive proof for the Court to consider other than its unverified Complaint. GEICO has provided evidentiary support for its allegations, not just with exhibits attached to the Complaint, but with exhibits attached in support of this motion. By specifically alleging an illicit patient brokering and referral scheme, describing in detail the unnecessary and substantially identical treatments provided to dozens of Insureds, and identifying specific types of billing misrepresentations-with documented examples-GEICO has raised “serious questions going to the merits.”

Balance of the Hardships

Finally, GEICO has demonstrated that the balance of the hardships tips decidedly in its favor. The Court concluded that GEICO has demonstrated that a preliminary injunction staying all pending collection arbitrations and enjoining future collection arbitrations is justified.

Pending and Future Collection Lawsuits

The Court agreed with GEICO that the “fragmentation” of this dispute into approximately 50 or more lawsuits “would nullify GEICO’s efforts to prove fraud at a systemic level, impair a federal declaratory judgment action over which the Court has taken jurisdiction precisely to eliminate such fragmentation, and deprive GEICO of an avenue toward complete relief in any court.

CONCLUSION

Under the circumstances, the Court concluded that it has the statutory authority to stay pending lawsuits and enjoin future lawsuits by the Gerling Defendants against GEICO during the pendency of this litigation, and that it should do so here.

The Court granted GEICO’s request in full and issued an Order (1) staying all pending nofault insurance collection arbitrations and state court collection lawsuits that have been commenced against GEICO by or on behalf of the Gerling Defendants; and (2) enjoining the Gerling Defendants, and anyone acting or purporting to act on their behalf, from commencing any further no-fault insurance collection arbitrations or new no-fault collection lawsuits against GEICO.

The security requirement under Federal Rule of Civil Procedure 65(c) is waived.
ZALMA OPINION

The acts of health care providers who join with criminal entities to create thousands of fraudulent claims under the New York and New Jersey no-fault laws whose purpose to avoid litigation with regard to auto accidents and help reduce auto insurance premiums are being thwarted by fraud perpetrators. The fraudsters litigate with insurers who have no defense to the cause of the injuries. Since the state of New York are unwilling or simply refuse to prosecute the fraudsters GEICO has become proactive and are working to take the profit out of the crime. If the state won’t help and prosecute the fraudsters all insurers must emulate GEICO if they too are victims of fraud.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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