Defendants Claimed Their Fraud Was Obvious so Insurer was not Damaged


GEICO Proactively Fights Fraud by Suing Providers for Damages

When health care providers admit that they defrauded an insurer but claimed they were not liable because the fraud was so obvious the insurer could not prove the reliance element of common law fraud, their defense and appeal is contumacious. In Government Employees Insurance Co., GEICO Indemnity Company, GEICO Casualty Company, GEICO General Insurance Company v. Quality Diagnostic Health Care, Inc., et al., Jorge E. Martinez, Luis Anibal Queral, M.D., Moulton Keane, M.D., Ivelis Garcia, Michel Viera, LMT, No. 21-10297, United States Court of Appeals, Eleventh Circuit (November 5, 2021) the Eleventh Circuit refused to buy the ridiculous defense that it was GEICO’s fault that they successfully defrauded GEICO.


Th appeal arose from claims – submitted by Defendants to GEICO – for reimbursement under the Florida Motor Vehicle No-Fault Law, Fla. Stat. §§ 627.730-627.7405. Florida’s No-Fault Law requires automobile insurance policies to include personal-injury protection (“PIP”) coverage to provide persons injured in automobile accidents with benefits for medical treatment. Pursuant to a valid assignment of PIP benefits by the insured, the healthcare provider may submit claims directly to the insurance company to receive payment for medical services rendered.

In Florida an insurance company is not required to pay a claim for reimbursement under certain circumstances, including to a “person who knowingly submits a false or misleading statement relating to the claim or charges,” “[f]or any treatment or service that is up-coded, ” or for charges that do “not substantially meet the applicable” statutory requirements. Florida’s No-Fault Law also prohibits reimbursement for services – including physical therapy services – performed by massage therapists.

GEICO contended that the Defendants were involved in fraudulent billing practices through Quality Diagnostic Health Care, Inc. (“Quality”), a Florida health care clinic that purported to provide patient examinations and physical therapy services to patients injured in car accidents. GEICO says Defendants submitted or caused to be submitted fraudulent insurance claims that were nonreimbursable under Florida’s No-Fault Law.

GEICO sought to recover insurance payments already made to Quality (about $145,000) and sought a declaration that GEICO owed no legal obligation to pay the remaining outstanding claims submitted by Quality (about $79,000). In pertinent part, GEICO asserted against Defendants claims for declaratory judgment, common law fraud, unjust enrichment, and for violation of the Florida’s Deceptive and Unfair Trade Practices Act (“FDUTPA”).

The district court granted GEICO’s motion for summary judgment. The district court found to be undisputed these facts:

  1. Defendants submitted bills to GEICO that inflated falsely the level of service provided during initial and follow-up patient examinations and, thus, were upcoded;
  2. all physical therapy services billed to GEICO had been performed by an unsupervised massage therapist not licensed to practice physical therapy (Defendant Viera); and
  3. the bills submitted to GEICO represented falsely that physical therapy services had been provided by or under the direct supervision of a licensed physician (Defendant Keane).

In the light of these facts, the district court determined that none of Quality’s bills to GEICO were eligible for reimbursement under Florida’s No-Fault Law. Given Defendants’ knowing false representations the district court also granted summary judgment on GEICO’s claims for common law fraud and for violation of FDUTPA.


Under Florida law, a plaintiff asserting a claim for fraud must show:

  • a false statement of fact;
  • known by the person making the statement to be false at the time it was made;
  • made for the purpose of inducing another to act in reliance thereon;
  • action by the other person in reliance on the correctness of the statement; and
  • resulting damage to the other person. [Gandy v. Trans World Comput. Tech. Grp., 787 So.2d 116, 118 (Fla. Dist. Ct. App. 2001)].

Much to the surprise of the trial court and GEICO, the defendants admitted the claims billed to GEICO inflated falsely the level of service provided and, thus, were upcoded and represented falsely that the physical therapy services had been provided by or under the direct supervision of a licensed physician.

Regardless of the admission of fraud, the defendants contended that GEICO could not show justifiable reliance because GEICO knew or should have known that Defendants’ claims misrepresented the nature and extent of the patient examinations. According to Defendants, the billing deficiencies were “obvious” from the underlying treatment records and accident reports (to which GEICO had access) and, thus, GEICO was on notice that Defendants’ representations on their invoices for reimbursement were false.

The district court properly rejected these arguments. Under Florida law, a person “may rely on the truth of a representation, even though its falsity could have been ascertained had he made an investigation, unless he knows the representation to be false or its falsity is obvious to him.” [Besett v. Basnett, 389 So.2d 995, 998 (Fla. 1980)]

A falsity is “obvious” when “a mere cursory glance would have disclosed the falsity of the representation” or when a “cursory examination or investigation” would make “patent” the falsity. In the insurance context, we have said that – absent “some circumstance which directs attention to them” – information somewhere in an insurer’s records is insufficient to put an insurer on notice of the falsity of representations made to it. See Schrader v. Prudential Ins. Co., 280 F.2d 355, 362 (5th Cir. 1960) that explained that an “insurer is entitled to rely on the representations of an insured, without checking all its files to determine if the insured is committing a fraud.”

The Eleventh Circuit was unable to determine that the falsity of Defendants’ misrepresentations were “obvious”. The falsity was not readily observable upon a cursory examination. GEICO was entitled to rely on Defendants’ misrepresentations made in their invoices for reimbursement, even if a more thorough investigation of the full treatment records and accident reports might have uncovered the falsity of Defendants’ statements.


To state a claim for unjust enrichment under Florida law, a plaintiff must prove three elements:

  • the plaintiff has conferred a benefit on the defendant;
  • the defendant voluntarily accepted and retained that benefit; and
  • the circumstances are such that it would be inequitable for the defendants to retain it without paying the value thereof.

A cause of action for unjust enrichment exists when an entity accepts and retains benefits that it is not legally entitled to receive in the first place.  GEICO paid Defendants over $145,000 as reimbursement for patient examinations and for physical therapy services purportedly rendered by Quality. That Defendants’ claims – as submitted – were non-reimbursable under Florida’s No-Fault Law is undisputed. Because Defendants had no legal entitlement to the reimbursement payments, the district court committed no error in granting GEICO summary judgment on its claim for unjust enrichment.

To establish a claim for violation of the FDUTPA, a plaintiff must show “(1) a deceptive act or unfair trade practice; (2) causation; and (3) actual damages.” [See Dolphin LLC v. WCI Cmtys., Inc., 715 F.3d 1243, 1250 (11th Cir. 2013).] The district court concluded that GEICO was entitled to summary judgment because Defendants admittedly engaged in “deceptive acts” or “unfair trade practices” when they upcoded charges and represented falsely that Dr. Keane performed or directly supervised the physical therapy services and (2) a causal connection existed between Defendants’ deceptive acts and GEICO’s payment of the PIP claims.


It takes a great deal of unmitigated gall to appeal an adverse judgment after admitting that the conduct that resulted in a summary judgment in favor of GEICO was contumacious since they admitted that they had defrauded GEICO and raised the silly argument that GEICO should not have paid the fraudulent billing since they were obviously fraudulent. I can only wonder why the defendants or their lawyers were not sanctioned for bringing such a frivolous appeal.

© 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 54 years in the insurance business.

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He is available at and 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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