Category Archives: Case Law

Chiropractors in $2.3 Million PIP Insurance Fraud Scheme will Face RICO Charges

A federal judge ruled that the chiropractors who were allegedly behind a $2.3 million ploy to defraud an insurance company must face charges for violating the Racketeer Influenced and Corrupt Organizations Act (RICO) and Florida’s Deceptive and Unfair Trade Practices.

In July 2012, GEICO Insurance Company filed a lawsuit against two Orlando-based clinics—KJ Chiropractic Center LLC and Wellness Pain & Rehab Inc.—in addition to their two founders and a number of co-conspirators, known as “runners.” These runners helped perpetrate the suspected scam by exploiting willing third-party participants who faked accidents and injuries.

According to an article in Courthouse News Service, U.S. District Judge Charlene Edwards Honeywell said in her order that the fraudulent PIP claims resulted in more than $2.3 million in unwarranted insurance benefits and emerged from:

  • Staged accidents;
  • Real accidents in which claimants received treatment at clinics even though they were not truly injured; and
  • Real accidents in which claimants incurred some injuries, but received treatments that were pre-programmed, unnecessary, excessive and unlawful.

GEICO charged that the defendants advanced their unlawful plot by paying “anyone who referred accident victims to the clinics, offering cash directly to patients who agreed to accept unnecessary chiropractic treatment.” The insurance company also claimed the clinics provided treatment that was not in the best interest of patients because its sole intent was to maximize profits, the article said.

The U.S. District Court for Florida’s Middle District, Orlando Division, adopted Judge David Baker’s full recommendations made in October 2013 to deny the defendants’ motion to dismiss a second amended complaint on all but one count.

Judge Honeywell Edwards said she felt that GEICO adequately supported its argument with “factual allegations to state plausible claims for relief. As such, the court agrees with the Magistrate Judge that GEICO’s claims are sufficiently pled.”

The case is GEICO v. KJ Chiropractic Center LLC et. al., U.S. District Court for the Middle District of Florida, Case No. 6:12-CV-1138-ORL-36-DAB. Click on the link to read the complaint.

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Filed under Case Law, Insurance Fraud

AHCA Revokes License of M&D Mobile Diagnostic

In 2008, M&D Mobile Diagnostic applied for and was issued a Certificate of Exemption to operate a health care clinic in Lake Worth, FL. In 2013, the state Agency for Health Care Administration filed an Administrative Complaint seeking to revoke that certificate and, on January 16, 2014, issued a final order revoking M&D Mobile’s exemption certificate.

In accordance with Florida law, a health care clinic must be licensed if it provides health care services to individuals and then bills third party payers for those services. An exception to the licensing rule exists where health care services are provided by a “licensed health care practitioner,” as defined by statute, and the business is wholly owned by that practitioner. Under those circumstances, the term “clinic” does not apply, and the entity may claim to be exempt from licensure and receive a “Certificate of Exemption” from the state health care administration.

The applicant, Michael Josaphat, based his claim for exemption from licensure on being a licensed health care practitioner, as defined by statute. However, Josaphat’s license is for a Certified Radiologic Technologist license. The Health Care Agency determined that such a license is not one fitting the statutory definition of “licensed health care practitioner,” and therefore does not entitle Josaphat to a Certificate of Exemption. The Agency ordered, therefore, that the certificate be revoked and M&D subject to sanctions.

The case is State of Florida, Agency for Health Care Administration, v. M&D Mobile Diagnostic Imaging, Inc., Case No. 13-544PH, AHCA File No. 2013010999.

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State Farm v. MR Services I, Inc.

In accordance with Florida’s PIP Statute, Plaintiff State Farm informally requested discovery from Defendant MR Services pursuant to Fla. St. § 627.736(6)(b). MR Services informally responded, but only in part, and the responses were deemed inadequate and incomplete. State Farm petitioned the Court for an order permitting discovery.

MR Services argued that it need not fully respond to the discovery requests because State Farm could obtain the discovery it wanted from other cases pending in Broward County. The Court held that, while this may be true, it does not preclude discovery under the provisions of the PIP Statute.

The Court therefore granted the Motion to Allow Discovery and required that MR Services produce all documents and information requested by State Farm.

State Farm is thus entitled to:

  • Take the depositions of Dr. Mark Gans, Gary Howle, and Stacy Howle
  • Issue a third-party subpoena to LinkedIn for account information on subscriber Gary Howle
  • Receive from MR Services complete income tax returns, financial statements, and balance sheets from 2008 through 2012

Click on the link to view the Order in State Farm Mutual Automobile Insurance Co. vs. MR Services, Inc., No. 16-2013-CA-1731-XXXX-MA (Fla. 4th Cir. Ct. 2014).

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3rd DCA Denies Millennium Petition for Writ of Certiorari in Legal Title Dispute

State Farm issued a policy to Hery Alvarez, whose mother, Josefa Alvarez, was in an accident while a passenger in her son’s car. Hery Alvarez and Josefa Alvarez lived in the same household, and Josefa Alvarez sought treatment at Millennium Diagnostic under her son’s PIP policy. She assigned her benefits to Millennium. She did not have vehicle insurance or her own PIP policy.

State Farm denied payment to Millennium. State Farm argued that the mother was the registered owner of a Ford Expedition and therefore should have had PIP through her own policy. She did not have insurance coverage on the Expedition, which was operable. She had leased the vehicle for her daughter, who had bad credit.

In the trial court, Millennium argued that Josefa Alvarez’s daughter, Ana Alvarez, was actually the beneficial owner of the Expedition. The trial court agreed and entered Summary Judgment, finding that the daughter was the beneficial owner of the Expedition. State Farm appealed the decision to the 11th Circuit Court of Appeals.

Florida §627.733, requires that every owner or registrant of a motor vehicle in FL is required to maintain motor vehicle insurance securing PIP benefits. An owner is a person who holds legal title to a motor vehicle. An owner of a registered, operable motor vehicle who fails to have PIP security in effect at the time of an accident shall have no immunity from tort liability, but shall be personally liable. Thus, if Josefa Alvarez is not the legal owner of the vehicle—beneficial ownership having passed to her daughter—she would not be required to have PIP coverage on the Expedition and could seek treatment under her son’s policy.

The trial court found that Ana Alvarez was the beneficial owner of the vehicle. Relying on State Farm v. Hartzog, 917 So. 2d 363, 364-65 (Fla. 1st DCA 2005), the court concluded that the name on the title is not the “litmus test” for determining ownership for insurance purposes. In Hartzog, Barbara Hartzog agreed to purchase a vehicle from Donnie Welch. Welch kept title in his name and maintained the insurance policy on the vehicle. When Hartzog was involved in an accident shortly after the purchase agreement was entered into, the 1st District Appellate Court concluded that Hartzog was the beneficial owner because Welch no longer owned the vehicle, pursuant to the purchase agreement, and Hartzog continued to make payments to Welch. The “overt acts” of Hartzog—having exclusive possession and control of the vehicle—were said to be key factors in determining beneficial ownership of a vehicle.

The appellate court in this case distinguished Hartzog. Here, no purchase agreement existed between Josefa Alvarez and her daughter, Ana Alvarez. In fact, there could not be because the lessor, not Josefa Alvarez, owned the Expedition, and Josefa did not have the right to transfer the title. Additionally, the court found that Josefa’s subjective intent to gift the vehicle to her daughter was insufficient to contradict her legal interest in the vehicle.

Thus concluding that Ana did not have beneficial ownership of the vehicle and that Josefa held legal title, the Appellate Court ordered that summary judgment be reversed, and the case remanded to the trial court. On December 5, 2013, the 3rd DCA denied a petition for writ of certiorari by Millennium.

Millennium Diagnostic v. State Farm, No. 3D13-0423 (3rd DCA 2013).
State Farm v. Millennium Diagnostic, No. 11-102 (Fla. 11th Cir. Ct. App. Div.).

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Filed under Case Law, Fla. Stat. 627.736 (2012)

Court Grants State Farm Motion in Terlep Chiropractic Case

Defendant State Farm’s insured, Mark Kundrat, was allegedly involved in a car accident on July 9, 2009.  Kundrat sought treatment for injuries sustained in the accident from Plaintiff Terlep Chiropractic. On November 22, 2010, Terlep filed a cause of action against State Farm, alleging failure to pay PIP benefits.  As an affirmative defense, State Farm argued that Terlep Chiropractic lacked standing to bring the cause of action.  Terlep argued that a “Financial Policy & Consent Form” signed by Kundrat as a condition of receiving treatment conveyed to Terlep the right to bring any and all causes of action against State Farm.

The document signed by Kundrat, and upon which Terlep relies, contains a paragraph entitled “Assignment of Benefits.”  In that paragraph, Kundrat assigned payment directly to Terlep Chiropractic and agreed that he is financially responsible for charges not covered by the assignment or which the insurer declines to pay.  The court found that this language unambiguously serves only to direct payment by the insurance company to the medical provider and that there is no language conveying any and all rights, including the right to bring any and all causes of action.  Because the language in the instant case does not convey a full assignment of any and all benefits and rights under the policy, the Plaintiff does not have standing to bring this cause of action against Defendant.

Terlep, in turn, argues that State Farm lacks standing to challenge the assignment of benefits because it lacks privity of contract.  The court points out, however, that State Farm is not challenging the contract between Terlep and Kundrat.  Rather, State Farm is raising the issue of the interpretation of the “assignment of benefits” part of the agreement.

Terlep further argues that it has standing to bring the cause of action based on equitable assignment.   The court concludes that the cases upon which Terlep relies for this argument should be distinguished because they involved situations in which the documents contained ambiguities and inconsistencies.  In this case, the document at issue is “clear and unambiguous,” and therefore equitable principles do not apply.

Plaintiff’s final argument is that it is the real party in interest and that entry of final judgment against it would deny it a remedy at law.  The document provides, however, that the insured is financially responsible for any payments not made to Plaintiff, and any cause of action is therefore between Kundrat and State Farm.

The court granted Defendant State Farm’s motion for full and final summary judgment.

The case is Terlep Chiropractic v. State Farm, Circuit Court, 6th Judicial Circuit in and for Pinellas County. Case No. 10-006194-SC. December 5, 2013.

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Filed under Case Law, Fla. Stat. 627.736 (2012)

11th Circuit Court Grants State Farm’s Request to Depose Imaging Center Owner

Petitioner State Farm sought to depose Respondent YH Imaging’s owner, Yamir Hernandez, as well as other individuals who allegedly performed portable x-rays in this case.  Respondent YH sought to have State Farm’s motion for discovery dismissed.

State Farm made their Motion for Discovery pursuant to Florida’s PIP Statute.  That statute provides, in  relevant part, that in “the event of a dispute regarding an insurer’s right to discovery of facts under this section, the insurer may petition a court of competent jurisdiction to enter an order permitting such discovery. The order may be made only on motion for good cause shown  . . . .”  §627.736(6)(c) Fla. Stat. (2013) (emphasis added).

In this case, the Court concluded that State Farm had established, through its motion and supporting affidavit, the necessary good cause to bring the discovery action.  The Court cited favorably two cases  holding that PIP insurers should be able to obtain informal discovery upon simple request and that court-ordered discovery is available upon a showing of good cause.  See Kaminester v. State Farm, 775 So. 2d 981 (Fla. 4th DCA 2000); State Farm v. Goldstein, 798 So. 2d 807 (Fla. 4th DCA 2001).  The Court also found persuasive orders granting similar actions for discovery entered by other judges in the 11th Judicial Circuit.

The Court granted petitioner’s Motion for Discovery and denied Respondent’s Motion to Dismiss.  State Farm was thereby granted leave to conduct the depositions at issue.

The case is State Farm Mutual Automobile Insurance Company, et al. v. YH Imaging, Inc., In Re OM, MM, et al., Circuit Court, 11th Judicial Circuit in and for Miami-Dade County. Case No. 11 28263 CA 05 (24).  December, 3, 2013. Click on the link to read the court order.

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Filed under Case Law, Fla. Stat. 627.736 (2012)

Motion for Rehearing of Florida PIP Injunction is Denied

On November 26, 2013, the First District Court of Appeals dismissed a motion for rehearing on its October ruling to reverse an injunction placed on reforms to Florida’s PIP system. The reforms, contained within HB 119 and signed into law by Gov. Rick Scott in 2012, ban PIP payments to acupuncturists and massage therapists. The reforms also require that claimants seek treatment from a physician or hospital within 14 days of an accident.

A group of acupuncturists, massage therapists, and chiropractors filed for an injunction, which was ultimately granted. The Court of Appeals ruled in October that the injunction should be reversed. It upheld this decision by denying a motion for rehearing on its ruling.

We wrote in September about reservations expressed by a three-judge panel from the 1st District Court of Appeals regarding the challenge made by acupuncturists, massage therapists and chiropractors to key parts of Florida’s 2012 landmark reform of the personal-injury protection (PIP) auto insurance law, in a blog post titled “Judges Question Challenges Brought to Florida’s No Fault Insurance Law.”

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Filed under Case Law, Fla. Stat. 627.736 (2012)

MGA Insurance Granted Summary Judgment in PIP Staged Accident Case

In an August 15, 2013 decision in Miami-Dade County Court, Defendant MGA Insurance Co. was granted Summary Judgment against Plaintiff Febre’s Medical Center on the grounds that no genuine issue of material fact existed, and Defendant was entitled to Final Judgment as a matter of law.

Plaintiff Febre’s Medical Center received reimbursements from Defendant MGA under the Florida PIP statute for treatment rendered at its clinic. Plaintiff rendered this treatment as part of a scheme to defraud Defendant and other insurance companies through the use of “staged accidents.” On June 28, 2013, the owners of Febre’s Medical, Hernandez and Baceiro, entered into factual proffers with the State Attorney’s Office. The proffers acknowledged that they submitted fraudulent insurance claims and were the true owners of Febre’s Medical.

In order for Febre’s Medical’s bills to be compensable under the PIP statutes, Febre’s must substantially comply with all Florida Statutes. F. S. §627.732(11). Under F.S. §627.736(5)(b)(1), an insurer is not required to pay a claim “for any service or treatment that was not lawful at the time rendered.”

In this case, Plaintiff was issued a clinic exemption. In order to receive an AHCA clinic exemption, the facility must be “wholly owned” by one or more physicians. F.S. § 400.9905(f). It was established, however, pursuant to the proffer, that non-physician individuals, Hernandez and Baceiro, were the true owners of Febre’s Medical. Although all the licensing and corporate materials were in the name of either a physician or a chiropractor, Hernandez and Baceiro handled all aspects of the business and retained the bulk of the proceeds. Thus, they were deemed to be the true owners of the clinic. Because, therefore, Febre’s Medical was not “wholly owned by a physician,” as required by the PIP statute, its services were performed in violation of Florida statutes. For this reason, Defendant is not required to pay Febre’s Medical’s claims. F.S. §627.736(5)(b)(1).

Final judgment was entered in favor of Defendant MGA Insurance Company.

The case is Febre’s Medical Center vs. MGA Insurance Co., No. 09-10008 CC 26 (3) (Fla. Miami-Dade Cty. Ct. 2013).

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Filed under Case Law, Insurance Fraud

UAIC v. Atlantic Medical Specialty

Atlantic Medical Specialty (Atlantic) provided treatment to Manuel Floyd, an individual insured by United Auto, following a November 19, 2007 automobile accident. Atlantic subsequently filed a PIP claim with United Auto, demanding payment for medical treatment or services provided to the insured. United Auto failed to pay, and Atlantic filed suit.

In its answer to Atlantic’s complaint, United Auto asserted the affirmative defense that the medical treatment was not lawfully rendered as Atlantic failed to comply with chiropractic record-keeping statutory requirements.  In response, Atlantic filed a motion for summary judgment, asserting that United Auto’s defense had no legal basis. The trial court granted Atlantic’s motion for summary judgment.

The appellate court found that the affirmative defense that the medical treatment was unlawfully rendered was a valid affirmative defense as it was asserted under section 627.736(5)(b)(1)(b) of Florida Statutes.  The court further found that failure to comply with chiropractic record-keeping requirements is a valid legal ground to support such a defense. As such, the striking of the defense by the trial court was erroneous.

The appellate court also found that summary judgment in Atlantic’s favor on the issue of reasonableness, relatedness, and medical necessity, was improperly entered because Atlantic had not met its initial burden of proof to conclusively show the absence of genuine issues of material fact.

The appellate reversed and remanded the case for further proceedings in the trial court.

Click on the link to read the appellate court ruling in United Automobile Insurance Company, Appellant, v. Atlantic Medical Specialty, Inc., A/A/O Manuel F. Floyd, Appellee. Circuit Court, 11th Judicial Circuit (Appellate) in and for Miami-Dade County. Case No. 12-010 AP. L.T. Case No. 09-01233 CC 05. August 29, 2013.

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Filed under Case Law, Fla. Stat. 627.736 (2008)

Mobile X-Rays Lead to Summary Judgment in Milo v. State Farm

Plaintiff Milo Diagnostic Center filed suit against Defendant State Farm to recover PIP benefits for mobile x-rays provided to Pedro Barreto, a State Farm insured. According to Florida PIP Statute Section 627.732(2) (2006), only medically necessary services are covered.  “Medical necessity” is defined as those services that a prudent physician would provide in a manner that is in accordance with generally accepted standards, clinically appropriate, and not primarily for the convenience of the patient or medical provider.

In a motion for summary judgment, State Farm argued against the medical necessity of such mobile x-rays in this case. State Farm presented evidence in the form of a deposition of a Department of Health expert that, pursuant to the Florida Administrative Code, mobile x-ray equipment is only to be used where it is impractical to transfer the patient to a stationary radiographic location. The reason for this caution is that the use of mobile machines results in increased radiation to the patient and inferior quality films. State Farm also relied upon an affidavit of a chiropractic doctor attesting that the use of mobile x-rays on Barreto was not medically necessary.

On November 12, 2013, Judge Jason E. Dimitris granted Defendant State Farm’s Motion for Summary Judgment regarding Medical Necessity. Judge Dimitris expressed the Court’s concern about the increased radiation exposure and poor quality films. Milo did not file a written response, but did appear at oral argument. Judge Dimitris held that since Milo did not produce counter-evidence sufficient to create a genuine issue of fact concerning the medical necessity for the use of mobile x-rays in this case, State Farm’s motion for summary judgment was granted and final judgment in the case was entered.

Click on the link to read the Judge’s order in Milo Diagnostic Center, Inc. vs. State Farm Fire & Casualty Co., No. 07-30146 SP 23 (4) (Fla. Miami-Dade Cty. Ct. 2013).

Contact partner Jessica Z. Martin via email or at 954-462-0330 to discuss any questions about the case.

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Filed under Case Law