Preparing False Medical Reports to Defraud Insurers is not Protected Activities
Strategic Lawsuits Against Public Participation (SLAPP suits) are meritless lawsuits designed to punish parties for constitutionally protected activities (free speech or the right to petition). A defendant can seek to strike a SLAPP suit by filing an anti-SLAPP motion. (Code Civ. Proc., § 425.16.) The defendant must first show the lawsuit arises from its protected activities; if so, the plaintiff can defeat the anti-SLAPP motion by showing its lawsuit has merit.
In The People ex rel. Allstate Insurance Company et al., Plaintiffs and Respondents v. Sonny Rubin, M.D., et al., G059446, California Court of Appeals, Fourth District, Third Division (June 28, 2021) Allstate Insurance Company et al. (Allstate) filed a complaint on behalf of itself and the People (qui tam) against Dr. Sonny Rubin and related medical providers (Rubin). Allstate generally alleged Rubin prepared fraudulent patient medical reports and billing statements in support of insurance claims. Rubin filed an anti-SLAPP motion, arguing the preparation and submission of its medical reports and bills were protected litigation activities.
The trial court denied Rubin’s motion because Rubin failed to show its medical reports and bills were prepared outside of its usual course of business in anticipation of litigation that was under serious consideration.
Dr. Sonny Rubin is a physician who controls two medical companies (Sonny Rubin, M.D., Inc., and Coastal Spine and Orthopedic Specialists, Inc.). A portion of Rubin’s practice involves “lien patients” involved in automobile accidents who are referred by attorneys. Lien patients have signed a “medical lien” authorizing their attorney “to pay directly to [Rubin] such sums as may be due and owing… and to withhold such sums from any settlement, judgment, or verdict as may be necessary to pay for” the patient’s treatment (this case only involves lien patients). After providing medical treatment for lien patients, Rubin prepares medical narrative reports, operative reports, and billing statements to be used in support of claims for insurance benefits under policies of insurance issue by Allstate.
Allstate sued on behalf of itself and the People of the State of California (qui tam). The complaint pleaded two causes of action: insurance fraud and unfair competition. Allstate generally alleged Rubin violated the law by: “Presenting or causing to be presented false or fraudulent claims for the payment of a loss of injury under a contract of insurance[.]” (Ins. Code, §1871.7; Pen. Code, §§ 549, 550.) Allstate specifically alleged Rubin recommended unnecessary medical treatments, falsely represented it had treated injuries, engaged in deceptive billing practices, and prepared false invoices for insurance claims. According to Allstate, Rubin “engaged in a conspiracy, scheme, or plan to prepare and present false, fraudulent, and/or misleading narrative reports, operative reports, and billing statements… in support of, or in connection with” claims against Allstate and other insurers.
Rubin filed an anti-SLAPP motion. Rubin argued in its motion to strike that “preparing and providing to the patient’s attorney the necessary documents supporting the medical services provided on a lien, falls within the definition of pre-litigation activities” under the anti-SLAPP statute.
Allstate argued the submission of insurance claims, even where litigation ultimately arises, does not constitute protected conduct under the anti-SLAPP statute. Allstate filed a declaration from a claims investigator that provided:
From 2012 through the present, Plaintiffs received a minimum of 639 claims for payment under contracts of insurance in which services were provided by [Rubin]. Rubin’s billing statements, narrative reports, operative reports, and other medical records were submitted to Allstate to support payment of those claims. This number is conservative, as Plaintiffs continue to receive claims associated with Dr. Rubin.
The trial court ruled that Rubin failed to establish that Allstate’s claims arise from protected activity.
Under the anti-SLAPP statute, a defendant ordinarily has the burden of establishing a plaintiff’s claims arise from its protected activity; if the defendant met its burden, the burden shifts to the plaintiff to establish its claims have merit.
An act in furtherance of a person’s right of petition includes:
- any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law, and
- any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body.
Pre-litigation communications may constitute protected activity, but only if those communications are related to litigation that is contemplated in good faith and under serious consideration. Litigation is not under serious consideration if it is only a “possibility.”
The submission of claims to an insurer for payment in the regular course of business prior to the commencement of litigation is not an act “in furtherance of the right of petition” within the meaning of the anti-SLAPP statute. The filing of purportedly false insurance claims is also generally not protected right-to-petition activity under the anti-SLAPP statute.
The possibility of litigation in the event of nonperformance is not enough to conclude the claim is made in anticipation of litigation contemplated in good faith and under serious consideration. An insurance claim cannot be transformed from a simple claim for payment submitted in the usual course of business into protected pre-litigation conduct solely on the basis of the subjective intent of the attorney submitting the claim.
That the patients have retained attorneys to pursue their claims is of no moment. Even communications directly from attorneys were unprotected if they were attempts to resolve claims without filing suit.
The Court concluded that the documents were prepared in the regular course of business and therefore are not protected activity. A review of Rubin’s claims about billing further supports this conclusion that its written reports were prepared in the regular course of business. The purpose of a bill is to recover payment owed. Rubin’s bills might eventually become evidence of damages in personal injury litigation, and Rubin may expect that payment will come from the proceeds of that litigation. However, the bills themselves are an accounting of services rendered for which Rubin expects payment. The form medical lien states that “payment for medical services rendered by said Doctor is not contingent upon any settlement, judgment, or verdict.” The patient is responsible for the bill no matter what happens-whether he litigates his case, settles it, or chooses to abandon his claim entirely. The invoices were, therefore, documents prepared in the regular course of business to secure payment for services rendered.
Rubin has failed to establish that Allstate’s claims arise from Rubin’s protected right-to-petition activity. Neither Rubin’s declaration, nor the medical lien form, support Rubin’s contention that his alleged conduct qualified as protected third party litigation activity under the anti-SLAPP statute as a matter of law.
Costs on appeal are awarded to Allstate
Insurance companies like Allstate, frustrated by the failure of state prosecutors to charge fraud perpetrators with the crime of insurance fraud, are becoming proactive by suing the fraudsters in qui tam lawsuits to take the profit out of the crime. Dr. Rubin attempted to avoid the qui tam action with an Anti-SLAPP motion only to find his lien agreement turned his involvement into regular business activities not protected by the Anti-SLAPP laws. Insurance Fraud is a very profitable business for the perpetrators and, as a result, they have funds to fight attempts to reduce or deter their attempts at fraud. Allstate refused to be deterred and should be commended for being proactive against insurance fraud.
© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business.
He is available at http://www.zalma.com and firstname.lastname@example.org. Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
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