Allstate Insurance Company v. Mun et al
Filing
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MEMORANDUM AND ORDER: For the reasons stated above, defendants' motion to compel arbitration is denied. Ordered by Chief Judge Carol Bagley Amon on 4/8/2013. (Fernandez, Erica)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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Allstate Insurance Company,
NOT FOR PUBLICATION
MEMORANDUM & ORDER
12-cv-3791 (CBA) (RLM)
Plaintiffs,
-againstDavid Mun, M.D., Nara Rehab Medical, P.C.,
FILED
Defendants.
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AMON, Chief United States District Judge.
U.S. Df~~ICE
E.D.Ny
* APR 8- 2013
INTRODUCTION
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BROOKLYN OFFICE
Plaintiff Allstate Insurance Company ("Allstate") brings this action for violations of the
civil Racketeer Influenced and Corrupt Organizations ("RICO") statute, 18 U.S.C. §§ 1961 et
seq., common-law fraud, and unjust enrichment against defendants David Mun, M.D. ("Mun")
and Nara Rehab Medical, P.C. ("Nara Rehab"). Allstate seeks to recover monies already paid to
the defendants for allegedly fraudulent no-fault insurance claims. Defendants move to compel
arbitration of the plaintiffs affirmative recovery claims under the Federal Arbitration Act, 9
U.S.C. §§ 1 et seq. ("FAA") and N.Y. Ins. Law§ 5106(b). For the reasons stated below, the defendants' motion to compel arbitration is denied.
BACKGROUND
This is one of several actions recently filed in this District by no-fault insurance carriers
seeking reimbursement of allegedly fraudulent claims already paid to medical providers. This
case requires the Court to consider whether such previously paid claims may be compelled to
arbitration under arbitration provisions in no-fault insurance policies in New York state. This
precise question has already been answered in the negative by multiple courts in this District.
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Allstate alleges that beginning in October 2007, defendants, having been assigned the
rights to the no-fault benefits of Allstate insureds, defrauded Allstate by fraudulently billing for
electrodiagnostic tests that were not performed as billed, were fabricated, or were of no diagnostic value. (Compl.
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1.) Defendants allegedly billed Allstate in excess of $500,000.00 for these
false or unnecessary services. (Id
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2.) Allstate seeks to recover the amount previously paid on
these allegedly false no-fault claims, plus treble and punitive damages. (Id
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182.)
Defendants move to compel arbitration of Allstate's affirmative recovery claims. During
the pre-motion conference before this Court, defendants made clear that they seek only to compel arbitration of no-fault claims that Allstate has already paid. (Tr. at 2.) Allstate opposes this
request, arguing that defendants' motion is unsupported by District precedent.
DISCUSSION
Courts in this District have repeatedly denied motions to compel arbitration by no-fault
insurance companies seeking reimbursement of allegedly fraudulent claims already paid to defendants. See Allstate Ins. Co. v. Lyons, 843 F. Supp. 2d 358, 377-81 (E.D.N.Y. 2012) (Gleeson,
J.) (conducting a detailed examination of the text of N.Y. Ins. Law § 51 06(b), which requires no-
fault insurers to provide claimants with the option to submit certain claims disputes to arbitration, and concluding that the best construction of the statute "excludes from its scope affirmative
suits" by insurance companies to recoup payments already made on allegedly fraudulent no-fault
claims); Allstate Ins. Co. v. Khaimov, No. 11-cv-2391, 2012 WL 664771, at *3-4 (E.D.N.Y. Feb.
29, 2012) (Gleeson, J.) (reiterating the reasoning and conclusion in Lyons with respect to arbitration clauses conforming with § 51 06(b) and further holding that even if the arbitration clause in
Allstate's insurance contracts was narrower in scope than required by § 51 06(b), the language of
the clause "clearly and unambiguously" excludes "affirmative actions brought by Allstate to
claw back those payments on the ground that they were induced by fraud."); Liberty Mutual Ins.
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Co. v. Excel Imaging, P. C., No. 11-cv-5780 (JBW), 2012 WL 2367076, at *11 (E.D.N.Y. June
21, 2012) (adopting the "interpretation oflnsurance Law§ 5106(b) as outlined in Lyons" to hold
that "defendants may not compel plaintiffs to arbitrate claims already paid."); GEICO v. Grand
Med. Supply, Inc., No. 11-cv-5339 (BMC), 2012 WL 2577577, at *5 (E.D.N.Y. July 4, 2012)
(relying on Judge Gleeson's "well-reasoned and persuasive decisions" in Lyons and Khaimov to
conclude that "[n]otwithstanding the FAA's policy in favor of arbitration," there is no "right to
compel arbitration of fraud claims brought by an insurance company after the company has already made payment"); State Farm Mut. Auto. Ins. Co. v. Giovanelli, No. 12-cv-3398, Minute
Entry Order (E.D.N.Y. Sept. 21, 2012) (Garaufis, J.) (same). 1
The Court declines to diverge from the well-reasoned opinions of several courts in this
District that have denied motions to compel arbitration of already paid no-fault claims. 2
CONCLUSION
For the reasons stated above, defendants' motion to compel arbitration is denied.
SO ORDERED.
Dated: April_f__, 2013
Brooklyn, N.Y.
s/Carol Bagley Amon
-Carol Bagleyl ~m~ )
Chief United States istrict Judge
1
Notably, in Giovanelli, defense counsel Blodnick, Fazio & Associates submitted a letter in support of its motion to
compel arbitration that is virtually identical to the letter submitted to this Court by Blodnick on behalf of defendants
Mun and Nara Rehab. Judge Garaufis likewise rejected the arguments therein. Compare No. 12-cv-3398, D.E. # 6
with No. 12-cv-3791, D.E. # 10; Sept. 12,2012 Minute Entry Order.
2
Despite this District's consistent refusal to compel arbitration of allegedly fraudulent no-fault claims already paid,
defendants argue that this Court should instead follow the reasoning of Riese v. Local 32B-32J Serv. Emps. Int 'I
Union, AFL-C/0, a 1986 unreported state-court decision, and Country- Wide Ins. Co. v. Frolich, a 1983 city civil
court case. Riese, No. 74-11, 1986 WL 84814 (N.Y. Oct. 15, 1986); Frolich, 119 Misc.2d 1089 (N.Y. Civ. Ct.
1983). Both of these decades-old cases are inapposite. Riese simply held that waiver of a substantive right under a
contract (outside the no-fault context) did not also waive the clearly established right to arbitrate the issue under the
contract. 1986 WL 84814, at * 1. Frolich granted a motion to compel arbitration where the insurer claimed that nofault payments were made due to the insurer's mistake rather than the claimant's fraud. These distinguishable cases
do nothing to undermine the breadth of case law in this District directly foreclosing defendants' claims.
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