The Third Circuit Court of Appeals held in a recent precedential case that the court must compel arbitration between Government Employees Insurance Company (Geico) and several medical practices, which Geico had sued for fraud totaling over $10 million. The cases originated in the District Court for the District of New Jersey, which held in three separate cases that claims under New Jersey’s Insurance Fraud Prevention Act (IFPA) cannot be arbitrated. However, the practices appealed to the Third Circuit, which disagreed with the District Court and held that IFPA does not implicitly prohibit arbitration, and that because the arbitration agreement in Geico’s Precertification and Decision Point Review Plan and assignment of benefits cover the IFPA claims, the court must compel arbitration.

The District Court of New Jersey actions consisted of claims made by Geico that the practices defrauded Geico of more than $10 million by abusing the personal injury protection benefits offered by its auto policies. Geico alleged the practices “filed exaggerated claims for medical services (and sometimes for treatments that were never provided), billed medically unnecessary care, and engaged in illegal kickback schemes.” Geico’s suits against the practices each included a claim under the IFPA, so the practices sought arbitration of Geico’s IFPA claims. Each District Court ruled that IFPA claims cannot be arbitrated.

In its decision, the Third Circuit predicted that the New Jersey Supreme Court would allow arbitration of IFPA claims, and thus held that IFPA claims are arbitrable. The Third Circuit then held that New Jersey’s Insurance Law, N.J. Stat. Ann. § 39:6A-5.1(a), compels arbitration because it is broad and encompassing, does not carve out fraud, and explicitly includes fraud-like claims.

The Third Circuit also held that Geico’s IFPA claims are subject to an arbitration agreement, and must be compelled to arbitration under the Federal Arbitration Act, 9 U.S.C. § 1 et seq. The Third Circuit reasoned that Geico’s Precertification and Decision Point Review Plan (a document required and approved by New Jersey’s Division of Insurance) and Geico’s assignment of benefits form both facially suggest that the practices entered into an arbitration agreement with Geico.

The full text of the opinion issued by the Third Circuit may be accessed here.

[View source.]