Insurance Fraud Criminals Must Pay Damages to the Insurer Victim

Jury Trial Required to Obtain Judgment for Violation of the New Jersey Insurance Frauds Protection Act

The most effective deterrent to insurance fraud is to force the perpetrators to pay damages to the victims, the insurers. Allstate Insurance sued many doctors and chiropractors for violation of the New Jersey Insurance Frauds Protection Act that allows the victim to sue for damages. Allstate did so and obtained a judgment in excess of $4 Million in a court trial.

In Allstate Insurance Company, Allstate Indemnity Company, Allstate New Jersey Insurance Company v. Northfield Medical Center, Pc; Robban Ariel Sica, M.D.; Scott David, D.O.; J. Scott Neuner, D.C.; JSM Management Company, Inc.; Tilton Chiropractic Center, PC; Tilton Chiropractic Centers, South Division, PC; Arnold Bacarro, M.D.; Pankaj Anand Agrawal, M.D. a/k/a “Pankaj Anand”; Alan Carr, D.O.; Vorrie Macom, M.D.; Alonso V. Correa, M.D.; Alonso V. Correa, M.D., PC; Correa Medical Diagnostics, PC; and Medical Innovations, Inc., and Daniel H. Dahan, D.C.; Practice Perfect; and Medical Neurological Diagnostics, Inc., and Robert P. Borsody, Esq., and American Arbitration Association, Docket No. A-0964-12T4, Superior Court of New Jersey Appellate Division (March 11, 2019) the New Jersey Appellate Division was faced with a seven year old case that, because of a Supreme Court decision, needed more rulings.

The Supreme Court reversed a prior decision, concluding that Allstate had established that defendants had actual knowledge that their medical practice model violated regulatory requirements contrary to the Insurance Fraud Prevention Act (IFPA), Allstate Ins. Co. v. Northfield Med. Ctr., PC, 228 N.J. 596, 624-27 (2017). The Court therefore remanded the matter in order that the appellate court consider issues not previously addressed. Defendants, Daniel Dahan, a California chiropractor, and two of his companies, Practice Perfect and Medical Neurological Diagnostics, Inc. (MNDI) (collectively Dahan), as well as Robert Borsody, Esq., a lecturer for Practice Perfect, were found liable under IFPA for significant damages after a bench trial completed in 2012.

In the 1990s, Dahan marketed lectures advancing a corporate structure that would enable chiropractors to create and own multi-disciplinary medical practices. Medical practices owned by non-physicians are prohibited in New Jersey. John Scott Neuner, a New Jersey chiropractor, set up a medical practice following Dahan’s model. After an investigation, Allstate rejected Neuner’s invoices for payment of patient medical treatment on the basis of the allegedly unlawful management structure of the medical practice. Allstate also sought to be reimbursed for payments previously made. Allstate prevailed on its claims in the trial court, and was awarded nearly $4 million in damages—twelve years of counsel fees—which under IFPA’s terms had been trebled. Neuner settled early in the litigation, leaving only Dahan and Borsody responsible.

Post-remand, Dahan sought by way of motion to have the matter returned to the Law Division for a jury trial in accordance with Allstate New Jersey Ins. Co. v. Lajara, 222 N.J. 129, 134 (2015) (holding a jury trial is constitutionally required for “claims seeking compensatory and punitive damages under the IFPA.”).


The Court’s discussion regarding the constitutional necessity of a jury trial in IFPA matters compels the retrial of this case, which was in the “pipeline” at the time of the decision. When a new rule of law is created, courts may grant limited retroactivity, applying it to cases where the parties have not exhausted all avenues of direct review.

Given that the right to a jury trial has been held to be constitutionally required, it cannot be said that either side “reasonably relied” on the outcome of the bench trial. Retroactive application of the right to a jury trial will advance the purposes of the Supreme Court’s decision, and a jury trial would neither prejudice the result nor adversely affect the administration of justice.

Dahan argumed that the alleged inadmissibility of a videotape of a 1995 Borsody lecture are all highly fact-sensitive, best left to the trial court’s exercise of discretion as to the admission of evidence.

Dahan also contends that the trial court erred in dismissing the crossclaim against Borsody. The appellate court saw no error in the dismissal, and no basis for it to survive either in the relevant law or the facts available on this record. The judge did not err in deciding the matter by way of summary judgment, as opposed to rendering a decision at the close of the trial. The simple fact is there’s no basis upon which the Court could find that there’s a relationship. A cause of action for indemnity arises when the event fixing liability occurs.

The right to indemnification may accrue after trial has not been held to bar a New Jersey trial court from ruling on its legal basis prior to trial. Clearly, the court concluded that Borsody created a manipulated corporate model, presented at Practice Perfect seminars, which superficially complied with applicable regulations while in actuality enabling chiropractors to own medical practices. However, nowhere in the decision did the court impute liability to Dahan based on Borsody’s presentations. Rather, the court held Dahan liable for his own role in advancing the model and in encouraging Neuner to use it.

It is settled that a party who has been at fault, as Dahan was held to be, may not ordinarily be granted indemnity.It would be inequitable to permit an active wrongdoer in the absence of a contractual understanding between the parties to obtain indemnity from another wrongdoer and thus escape any responsibility.

Finally, Dahan failed to establish a legal relationship with Borsody such that indemnity is available. Generally, a third party may recover indemnification from an employer where there is a special relationship, such as principal and agent, bailor and bailee and lessor and lessee. If anything, Dahan, not Borsody, was the employer. Moreover, in a trial brief, Dahan has argued that Borsody was not his agent and, therefore, Dahan could not be held vicariously liable for what Borsody had said in his lectures.

Commercial speech receives a limited form of First Amendment protection so long as it concerns a lawful activity and is not misleading or fraudulent. The First Amendment does not protect commercial speech that furthers unlawful activities as did the speech about which Allstate complained. Dahan’s seminars and materials are not entitled to First Amendment protection under the commercial speech doctrine.

Finally, Dahan challenges the trial court’s decision not to sanction Allstate for fees it paid Grossman. The payment did not violate the Rules of Professional Conduct, and in any event, was not included in the overall damage award.

Grossman met with Neuner, and spoke to Dahan about whether a medical doctor could be the sole owner of a medical corporation while not participating in the practice. At Dahan’s suggestion, Grossman spoke to Borsody, researched the law, and provided legal advice to Neuner. The amount paid by Allstate to Grossman was the latter’s standard hourly rate. He submitted an invoice for seventeen billable hours in preparation for his testimony, and also billed for his appearance.

The decision whether to sanction an attorney is within the discretion of the trial court. A lawyer is not permitted to offer an inducement to a witness that is prohibited by law. In general, however, a party subpoenaing a witness is required to reimburse the witness for the out-of-pocket expenses and loss of pay in attending the taking of a deposition.

The payments to Grossman were for his time in preparing for, attending, and testifying at trial—essentially reimbursement for Grossman’s loss of billable hours. It was not an improper inducement to obtain his testimony. The court did not abuse its discretion in refusing to sanction Allstate’s attorneys. In addition, the trial court rejected Allstate’s request to include the payment in the damages award.


Allstate should be commended for its ability to stick to this case over the years of various trials and appeals. They will try the case again, this time before a jury, and should obtain a judgment in excess of the $4 million plus counsel fees it took to get the judgment. Hopefully, it will then be in a position to collect on the judgment and deter further criminal conduct against insurers in the state of New jersey. My only issue with this case is why the New Jersey Department of Insurance has not criminally charged those accused and proved to be fraudsters.

© 2019 – 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 and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 51 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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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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