INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Medical muddle
Allstate Insurance Company and several of its affiliates brought actions on behalf of the state of California alleging insurance fraud under the California Insurance Frauds Prevention Act (IFPA) and the Unfair Competition Law (UCL) against three medical corporations, a medical management company and its parent company, four physicians, and Sattar Mir, an individual.
The complaints alleged 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 complaints further alleged that although the medical corporations appear to be owned and controlled by licensed physicians, as state law requires, they are in fact controlled by Mir, who is not a physician, and/or by his medical management company. Finally the complaints alleged that these facts were not disclosed on grossly inflated bills submitted to Allstate under contracts of insurance, and Allstate would not have paid the claims submitted by the medical corporations had it known of the false statements and fraudulent markups.
The trial court found that the complaints failed to state causes of action under the IFPA and the UCL because they were not pled with requisite specificity, the business models alleged were lawful, and one of the actions was time barred. Allstate appealed.
On appeal, Allstate asserted that (1) the complaints lacked the specificity required to plead fraud claims, (2) allegations that the defendants are engaged in the unlawful practice of medicine cannot form the basis for IFPA or UCL claims, and (3) the claims in one of the actions were time barred.
The court reversed the orders sustaining the demurrers and judgments of dismissal. According to the court, the appeal presented 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 one of the actions adequately allege delayed discovery to survive demurrer on statute of limitations grounds? The court concluded that the answer to each of these questions was yes. The court said that the complaints adequately pled causes of action under both statutes.
The People ex rel. Allstate Insurance Company et al. v. Discovery Radiology Physicians, PC, et al. and OneSource Medical Diagnostics, LLC, et al.—Court of Appeal of the State of California, Second Appellate District, Division Three—August 15, 2023—Nos. 20STCV45151 and 20STCV42672.
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