Man Bites Dog Story: Fraudsters Arbitration Attempts Stopped
Post 4921
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In Government Employees Insurance Company, (“GEICO”) v. Didier Demesmin, M.D., et al, No. 23-CV-6191 (ARR) (MMH), United States District Court, E.D. New York (October 23, 2024) GEICO sought to enjoin defendants Manuel A. Mendoza, D.C. and Mendoza Chiropractic Office PC (collectively the “Mendoza Defendants”) from pursuing certain “no-fault” insurance collection arbitrations or initiating new collections proceedings during the pendency of this lawsuit.
BACKGROUND
GEICO provides personal injury protection benefits on a “no-fault” basis, which means that, after an accident, insured drivers and their passengers are entitled to certain benefits for medically necessary healthcare services regardless of who was at fault.
GEICO sued a group of healthcare providers who allegedly carried out an insurance scheme to obtain fraudulent no-fault benefit payments from GEICO. The USDC granted the motion based on its conclusion that (1) GEICO would experience irreparable harm absent a stay, (2) GEICO raised a serious question going to the merits, and (3) the balance of hardships tipped in GEICO’s favor.
Subsequently, GEICO requested leave to file a second amended complaint to add allegations concerning the Mendoza defendants which was granted.
In total, GEICO seeks recovery of more than $5.9 million in wrongfully obtained benefits payments from the three groups of defendants, as well as a declaration that it is not obligated to reimburse defendants for outstanding no-fault claims.
After filing the second amended complaint, GEICO filed the present motion seeking an order staying all pending no-fault benefits arbitrations between GEICO and the Mendoza defendants and enjoining the Mendoza defendants from commencing new collections proceedings during the pendency of this action.
DISCUSSION
GEICO Will Experience Irreparable Harm Absent A Stay.
Irreparable harm is certain and imminent harm for which a monetary award does not adequately compensate. the risk of inconsistent judgments in no-fault insurance disputes can constitute irreparable harm separate and apart from the expenditure of time and money spent on parallel proceedings. As with the parallel proceedings brought by the Demesmin and Khanan defendants, the risk of inconsistent outcomes is great enough to establish irreparable harm.
GEICO established irreparable harm because permitting arbitrations to proceed will subject it to a risk of judgments that may be inconsistent with future judicial rulings.
GEICO Has Shown At Least Some Serious Questions Going To The Merits, And The Balance Of Hardships Tips In Its Favor.
GEICO’s amended complaint details a complex scheme of fraudulent billing and referrals among a network of chiropractic providers. GEICO’s allegations concerning the Mendoza defendants’ role are well developed through numerous examples of charges billed without proper documentation or under suspicious circumstances and a table of more than 45,000 suspect claims.
The balance of hardships also tips in GEICO’s favor because the Mendoza defendants have not established any hardship, beyond a delay in reimbursement. Because the defendants will presumably be entitled to collect interest on their pending claims if they prevail, the delay does not outweigh the risk of inconsistent outcomes faced by GEICO.
A Stay Does Not Violate The Anti-Injunction Act.
The Anti-Injunction Act (“AIA”) prohibits federal courts from enjoining proceedings in state court “except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.” 28 U.S.C. § 2283. The AIA does not, however, limit the court’s authority to enjoin ongoing private arbitration proceedings or the court’s authority to enjoin defendants from initiating future state court proceedings.
GEICO’s motion wass granted and a preliminary injunction was issued:
staying all pending no-fault insurance collection arbitrations that have been commenced against GEICO by or on behalf of the Mendoza defendants, pending the disposition of GEICO’s claims in this action, and
enjoining the Mendoza defendants and anyone acting on their behalf from commencing new no-fault arbitrations and litigations against GEICO pending the disposition of GEICO’s claims in this action.
The USDC, and other courts dealing with No-Fault auto insurance claims, has acted to help insurers defeat attempted insurance fraud – a crime in each state like New Jersey – which became necessary because state prosecutors seemed to ignore the crimes reported to them by insurers like GEICO. It is essential that insurers be proactive against fraud to shame the insurance fraud investigators in each state to do their job and prosecute the fraud perpetrators. Every insurer, faced with such fraud, should emulate GEICO.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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About Barry Zalma
An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
