New Jersey Supreme Court to Rule on Insurance Fraud Statute

On January 4, 2017, the New Jersey Supreme Court (NJSC) heard oral argument in a case addressing the scope of the New Jersey Insurance Fraud Prevention Act (IFPA). AllState Insurance Company sued a New York lawyer, Borsody, and a California chiropractor, Dahan, who helped a New Jersey chiropractor, Neuner, set up a multidisciplinary medical practice.

Neuner attended a seminar led by Borsody and Dahan that discussed setting up a multidisciplinary medical practice. As the seminar suggested, Neuner set up a management company and a professional corporation. The corporation was owned on paper by physicians licensed in New Jersey, but Neuner had actual control over the practice including hiring and firing physicians.

The trial court ruled that Neuner’s actions violated New Jersey regulations which prohibit a chiropractor’s clinical oversight of a physician. As a result, it ruled that any insurance claims submitted by the practice violated the IFPA. The jury awarded $1.3 million in damages to AllState, which were tripled to $3.9 million under the IFPA. The appeals court then overturned the trial court and ruled that the IFPA was not violated, because Dahan and Borsody were never informed by any New Jersey agency that their model violated New Jersey law. In addition, the model was permissible in other jurisdictions. The NJSC then granted AllState’s request to appeal and recently heard oral argument. More to follow.