GEICO takes a Bite Out of Fraud

No Fault Insurance is a Formula For Insurance Fraud

Barry Zalma

Jan 05, 2024

Transcript

BACKGROUND

GEICO, faced with at least 43 allegedly fraudulent no-fault claims from health care providers, moved for a preliminary injunction to stay all 43 pending no-fault insurance collection arbitrations commenced against GEICO by or on behalf of Defendants.

In New York, an insurer is required to provide certain no-fault insurance benefits (“No-Fault Benefits”) to the individuals that they insure (“Insureds”). No-Fault Benefits cover up to $50,000 of necessary healthcare expenses that result from automobile accidents. These benefits are provided to ensure that injured victims of motor vehicle accidents have an efficient mechanism to pay for and receive the health care services that they need.

Insurers are only given 30 days to review and investigate claims before paying those claims to avoid risk of penalty for denying or delaying a claim.

Operation of the Alleged Scheme

GEICO alleged that in 2021 Defendant Barakat was recruited by the John Doe Defendants to participate in a complex fraudulent insurance scheme to bill GEICO and other New York automobile insurers for medically unnecessary, experimental, and otherwise non-reimbursable services. Based on the arrangement, Barakat would receive a periodic payment in exchange for the use of his name, license, and the tax identification number of the Barakat Practices. Defendants would perform medically unnecessary, high-billing value procedures.

Between February 15,2021 and March 3, 2022, Barakat and the John Doe Defendants used Defendant Patriot Medical to bill GEICO and other New York automobile insurers for an experimental treatment called ESWT. Moreover, Defendants submitted bills seeking more than $106,000,00 from GEICO, spread across 43 No-Fault individual arbitration proceedings pending before the American Arbitration Association (“AAA”) at the time this motion was filed.

Evidence of the Alleged Scheme

In support of its fraud claims, GEICO has submitted a “representative sample” chart, totaling 1,371 entries of allegedly fraudulent no-fault claims submitted by the Barakat Practices. GEICO asserts that it has paid at least $183,000.00 to the Barakat Practices in no-fault claims.

DISCUSSION

The showing of irreparable harm is perhaps the single most important prerequisite for the issuance of a preliminary injunction, and the moving party must show that injury is likely before the other requirements for an injunction are considered. The harm must be shown to be actual and imminent, not remote or speculative.

The USDC noted that Courts in this district have found, in analogous cases, that irreparable harm occurred where an insurer is required to waste time defending numerous no-fault actions when those same proceedings could be resolved globally in a single, pending declaratory judgment action.

There are currently 43 pending arbitrations that run the risk of inconsistent judgments. GEICO has shown that money damages may not be available if the Defendants are to prevail. This is sufficient to establish irreparable harm.

There is no indication that granting the stay will harm the public interest. To the contrary, GEICO asserts that the injunctive relief would serve the public policy against no-fault insurance fraud.

Plaintiffs have alleged irreparable harm absent a stay, that there are serious questions going to the merits of this case, that the balance of hardships tip in their favor, and that a stay would not harm the public interest. The court, therefore, granted Plaintiffs’ motion for a preliminary injunction.

CONCLUSION

For the foregoing reasons, GEICO’s motion to stay all pending no-fault insurance collection arbitrations by or on behalf of Defendants Patriot Medical and JPB Medical waive their obligation to post security were granted.

ZALMA OPINION

GEICO must be honored for its proactive conduct against fraud perpetrators since it appears the state of New York is not concerned about fraud against insurers and will not prosecute the fraudsters. Using RICO not only will allow GEICO to work to defeat the fraudulent claims but will take the profit out of the crime by forcing the fraudsters to pay the insurers for their fraudulent conduct. Other insurers, facing the same fraud, should jump in with GEICO to make the fraud perpetrators understand that they will lose their criminal profits and may find they will pay the insurers more than they stole.