On January 9, 2025, the Superior Court of New Jersey, Appellate Division issued an opinion in the matter of Allstate v. Carteret Comprehensive Medical Care, No. A-0778-23 (Super. Ct. App. Div. Jan. 9, 2025). In doing so, the Appellate Division rejected a previous decision of the United States Court of Appeals for the Third Circuit and its interpretation of New Jersey Law, stating, “That decision is not binding on us.” Ultimately, the Appellate Division held that insurance fraud claims brought under the New Jersey Insurance Fraud Prevention Act (“IFPA”) and the New Jersey Anti-Racketeering Act (“RICO”) are not subject to personal injury protection (“PIP”) arbitration under the Automobile Insurance Cost Reduction Act (“AICRA”).
By way of background, in March 2023, Allstate Insurance Company and five related companies (collectively, “Allstate”), filed a nine-count insurance fraud complaint against over 30 defendants, including several medical practices and the owners of those practices, among others. Allstate claimed that, from 2008 through 2022, the defendants conspired to obtain over $1.7 million in PIP medical benefits through the submission of over 800 fraudulent and misleading medical claims. Allstate asserted that defendants’ actions violated the IFPA and RICO. In response, three groups of defendants separately moved to dismiss the complaint and to compel arbitration. After a review of the matter, the trial court entered orders granting the defendants’ requests to compel all claims to arbitration under the AICRA. The trial court held that the AICRA’s language required arbitration of all disputes relating to the recovery of PIP benefits and that any party to the dispute may invoke arbitration.
Taking issue with the trial court’s ruling, Allstate appealed the orders. On appeal, Allstate argued that if the courts choose to interpret the AICRA as a way to compel insurance fraud claims to arbitration, then it would be depriving the insurer of the right to a jury trial under both the IFPA and RICO. Contrastingly, the defendants argued that Allstate’s claims are subject to PIP arbitration under the AICRA and that the trial court properly dismissed the complaint for lack of subject matter jurisdiction. The defendants bolstered this argument by bringing forward the Third Circuit’s recent opinion in GEICO v. Mount Prospect Chiropractic Center, 98 F.4th 463 (3d Cir. 2024), asserting that it supports the notion that claims brought under the IFPA and RICO are subject to arbitration.
Disagreeing with the trial court’s ruling, the Appellate Division insisted that to properly analyze the issue presented, it must attempt to discern the New Jersey Legislature’s intent when enacting the IFPA, RICO, and the arbitration process established under the AICRA for the resolution of PIP disputes. The Appellate Division looked to the New Jersey Supreme Court’s decision in Allstate N.J. Ins. Co. v. Lajara, 222 N.J. 129 (2015), where it held that private parties in actions brought under the IFPA have a right to a jury trial “because it provides legal relief in the form of compensatory and punitive damages….” Similarly, the Appellate Division noted that RICO provides any individual’s business or property damaged in violation of RICO may sue in any proper court to recover treble damages, cost of suit, and reasonable attorneys’ fees.
While the Appellate Division recognized that the AICRA established an arbitration system to promptly resolve matters regarding the amount or legitimacy of PIP claims, it held that complex insurance fraud cases brought under the IFPA and RICO do not fall under the AICRA’s umbrella. Further, the Appellate Division acknowledged that in GEICO v. Mount Prospect Chiropractic Center, P.A., the Third Circuit reached a different conclusion by holding that the claims under the IFPA are, in fact, arbitrable under the AICRA. However, the Appellate Division explained that not only was the decision in GEICO v. Mount Prospect Chiropractic Center, P.A. not binding, but it also was an incorrect interpretation of New Jersey law. The Appellate Division explained, “We disagree with the Third Circuit’s analysis because it did not, in our view, fully consider the legislative goals of AICRA and the [IFPA].”
In light of the above, the only question left is what does this mean for insurance fraud claims moving forward. With the Appellate Division reversing the trial court’s ruling that claims brought under the IFPA and RICO can be handled through the swift arbitration process provided under the AICRA rather than a jury trial before the Superior Court, it can be deduced that significant changes regarding the litigation process for insurance fraud matters are on the way. It is worth noting that the defendants may file a petition for certification in the New Jersey Supreme Court challenging this ruling. If that comes to fruition, it is fair to say that the case is not complete and more is yet to come.
By: Lauren M. Greenwald, Associate at Brown & Connery, LLP