Allegedly Crooked Docs Can Run But Can’t Hide
Insurance companies are seriously frustrated by discovering fraud only to have the local prosecutors ignore the evidence or fail to prosecute for reasons known only to the prosecutors. As a result, some insurers, like State Farm, have filed civil actions against the people they believe defrauded them, to hurt them worse than a criminal prosecution – a loss of the fruits of their fraud.
In State Farm Mutual Automobile Insurance Company v. Brij Mittal, M.D., Marc Lampa, D.C., Gregory Miller a/k/a/ Gregori Mickilwski, Daily Medical Equipment Distribution Center, Inc., United Wellness Chiropractic, P.C., Jamaica Wellness Medical, P.C., Lida’s Medical Supply, Inc., and David Safir, 16-CV-4948 (FB) (SMG), United States District Court Eastern District Of New York (June 25, 2018) State Farm Mutual Automobile Insurance Company (“plaintiff”) alleges that the defendants engaged in a conspiracy to defraud insurance companies, including plaintiff, by issuing fraudulent bills and medical records.
Defendants tried to stay their depositions because of potential future criminal prosecution and moved the court to stay the depositions to protect them from future prosecution..
A district court has inherent power to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants. The authority to enter a stay is “incidental” to this power.
The party seeking a stay bears the burden of establishing the need for the stay. A stay of a civil case because of a related criminal action generally comes about when courts are concerned with the possibility that a civil case will unduly burden a defendant’s Fifth Amendment right against self-incrimination. To convince a court to stay proceedings require:
- the extent to which the issues in the criminal case overlap with those presented in the civil case;
- the status of the case, including whether the defendants have been indicted;
- the private interests of the plaintiffs in proceeding expeditiously weighed against the prejudice to plaintiffs caused by the delay;
- the private interests of and burden on the defendants;
- the interests of the courts; and
- the public interest.
These factors, rather than providing a rigid metric for determining whether to stay a civil proceeding, can do no more than act as a rough guide for the district court as it exercises its discretion.
The first factor—the extent to which the issues in the criminal case overlap with those presented in the civil case—weighs slightly in favor of moving defendants. Although as of the date of this Order no criminal charges have been brought, the criminal investigation likely overlaps at least to some degree with the issues in this civil case. As moving defendants point out, the search warrant was executed by the AG’s Auto Insurance Fraud Unit, which seized numerous patient files. Accordingly, it seems likely that the criminal investigation and this civil action will overlap.
The second factor, the status of the criminal case, weighs heavily against issuing a stay. The only event in the criminal investigation identified by defendants is the search described above, which took place on July 20, 2017, almost a full year ago. No charges have been brought against the moving defendants, and it is impossible to say whether any will be.
Pre-indictment requests for a stay of civil proceedings are generally denied. “Special circumstances” include government concerns about harm to ongoing investigations, special concerns related to bankruptcy cases, and cases where one defendant was indicted, but another was not. Moving defendants have not presented any evidence of “special circumstances” or other unique concerns that would warrant a pre-indictment stay in this case.
The third factor—the private interests of the plaintiffs in proceeding expeditiously weighed against the prejudice to plaintiffs caused by the delay—also cuts in favor of denying a stay. Plaintiff brought this action in September 2016 and has yet to conduct defendants’ depositions. If a stay were issued, moreover, there is no telling how long it would last; the potential delay could be for years, even before an indictment is returned. Finally, issuing a stay would likely increase the risk to plaintiff that assets that might be available to satisfy a judgment will be moved or depleted in the interim.
The fourth factor, the private interests of and burden on the defendants, tilts slightly in favor of issuing a stay. On the facts presented here, though, the burden defendants face is relatively small. It appears that there has been no activity in the criminal investigation for nearly a year, and there is no reason to think that a criminal prosecution is inevitable.
The fifth factor, the interests of the Court, weighs in favor of denying a stay. This Court has an interest in advancing its docket and avoiding further delay, particularly for an indeterminate amount of time.
Finally, the sixth factor, the public interest, tilts strongly in favor of denying a stay. This is not a small case, or one that will impact only the parties to it; plaintiff alleges that defendants submitted hundreds of thousands of dollars of potentially fraudulent claims; if true, defendants have imposed substantial costs on plaintiff that were undoubtedly passed on to consumers in the form of higher premiums.
Accordingly, moving defendants’ motion to stay their depositions is denied. Should defendants’ circumstances change, and in particular in the event moving defendants are indicted, they may renew their motion for a stay.
The depositions will go forward. The defendants will probably assert their privilege against self-incrimination and refuse to testify. Regardless, the court made an appropriate decision since there was little chance of prosecution since more than a year passed since the search warrant was executed. More insurers, like State Farm, must act proactively against insurance fraud since no insurer can expect that a police agency will actually prosecute insurance fraud.
© 2018 – Barry Zalma
This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
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 50 years in the insurance business. He is available at http://www.zalma.com and email@example.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Books from Full Court Press
Full Court Press continues to publish expert secondary content. This time it’s a new collection of ew insurance law treatises from consultant, expert witness, arbitrator, and mediator Barry Zalma.
Barry Zalma practiced law in California for more than 44 years as an insurance coverage and claims-handling lawyer, and has spent more than 50 years in the insurance business. We welcome his deskbooks as the first published under our Full Court Press imprint. Three titles are available in ePub and MOBI format, as well as on the Fastcase legal research platform.
Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, state appellate courts, and foreign courts that have molded the American insurance law, as well as vital explanatory chapters, historical context, form letters, and more.
California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the United States, and few know more about California insurance law than Barry Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.
Insurance Bad Faith and Punitive Damages Deskbook: Understand the relationship between insurance, the tort of bad faith, and why punitive damages are awarded to punish insurers. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.
An annual subscription to secondary content on the Fastcase platform includes new editions and updates published by the author as they are rolled out, so you can rest assured that your research is up to date. Go to fastcase.com for more detail and how to use the material on-line as part of your legal or insurance research or as stand-alone e-books. Details on the three new e-books are available at https://www.fastcase.com/product-category/fcp/ Subscribers to fastcase.com can search the three books as they do case law.
An annual subscription to secondary content on the Fastcase platform includes new editions and updates published by the author as they are rolled out, so you can rest assured that your research is up to date. Go to fastcase.com for more detail and how to use the material on-line as part of your legal or insurance research or as stand-alone e-books.
Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/
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