Judge OKs State Farm's lawsuit alleging chiropractic practice filed over 100 fraudulent claims
State Farm alleges the fraud scheme operated for more than a decade.
A fraud case alleging that a Maryland chiropractic practice submitted hundreds of false insurance claims to State Farm over the course of more than a decade has been cleared to proceed by a federal judge.
U.S. District Judge Catherine C. Blake of the District of Maryland denied Carefree Land Chiropractic’s motion for summary judgment against State Farm’s claims that the practice provided “protocol treatment” to its patients by documenting the same ailments, treatment plans and results for patients from 2006-2016.
State Farm identified potential problems related to nonindividualized treatment, including “vague” medical records suggesting the same treatment plans from patient to patient, the memorandum filing said.
The insurer began investigating Carefree in 2012 when it was flagged for billing above the state average. Its investigation stalled until July 2015 when the National Insurance Crime Bureau notified State Farm of Carefree’s “alleged improprieties.”
Carefree argued that State Farm’s claims are barred by the three-year statute of limitations, but the court disagreed and denied the motion based on Maryland’s discovery rule which tolls the statute of limitations “until a plaintiff gains knowledge sufficient to prompt a reasonable person to inquire further.”
State Farm filed its original complaint in May 2018, alleging Carefree had defrauded the insurer with submissions of claims that were inflated by protocol treatment. The complaint was initially dismissed before State Farm filed an amended complaint in September 2019.
The court agreed with State Farm that the insurer’s claims are timely based on its 2015 investigation into the chiropractic practice; Blake also said the effective date for State Farm’s claims for statute of limitations is May 2018, when its initial complaint was filed.
While Carefree argued that the statute of limitations should have been measured for compliance based on when the amended complaint was filed in September 2019, the court disagreed and said the information that triggered the investigation did not “unquestionably compel” State Farm to pursue additional investigations related to the claims.
“It is certainly arguable that State Farm should have taken a closer look at all possible types of fraud, especially considering the rumblings of protocol treatment that permeated its inquiries into Carefree, but a reasonable finder of fact could conclude that State Farm conducted a diligent inquiry based on the evidence in 2013 and understandably failed to discover evidence of the fraud that it alleges in this case,” Blake wrote.
When reached for comment regarding the case, attorney Andrew P. Baratta, who is representing Carefree, told Law.com, “We are greatly heartened by the Court’s finding of ‘undeniably significant evidence’ which demonstrates the illegitimacy of State Farm’s fraud lawsuit. It was only State Farm’s denial under oath of the obvious implications of this evidence that saved it from summary judgment, as the credibility of witnesses can only be determined by a jury. We are very much looking forward to this determination being made.”
Charles Joseph Lanzalotti, Edward J. Bradley Jr. and James T. Moughan of Bennett, Bricklin & Saltzburg in Philadelphia, are representing State Farm. Counsel did not return a request for comment.
Steven A. Allen, Andrew P. Baratta and Jonathan Ilsong Ahn are representing Carefree.
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