- New Jersey’s Supreme Court ruled that Allstate’s fraud and RICO claims against more than 30 medical providers belong in court, not mandatory PIP arbitration.
- Allstate alleges the providers used misleading invoices, kickbacks, illegal self-referrals and racketeering schemes to obtain more than $1.7 mn in PIP payments from 2008 to 2022.
- The ruling preserves Allstate’s right to pursue broader remedies, including treble damages, disgorgement, injunctive relief and attorney fees, which PIP arbitrators lack authority to award.
New Jersey’s Supreme Court has ruled that Allstate Insurance has the right to a jury trial in fraud and conspiracy claims against more than 30 medical providers under the state’s Insurance Fraud Prevention Act and Anti-Racketeering Act.
The court also found that Allstate does not have to arbitrate those claims. The unanimous ruling upheld a January 2025 Appellate Division decision, which said racketeering and tort claims fall outside mandatory arbitration under the Automobile Insurance Cost Reduction Act. The appellate court had reversed a trial court decision. The case now returns to the trial court.
Allstate alleges that the medical providers submitted misleading invoices for more than a decade to obtain over $1.7 mn in personal injury protection payments.
A trial court dismissed the claims in 2023 and ordered arbitration. It reasoned that AICRA requires arbitration for all disputes involving recovery of PIP benefits.
The state high court rejected that view. So did the Appellate Division.
The ruling also pushed back against an April decision by the US Court of Appeals for the Third Circuit. In that case, the federal appeals court found that similar claims in a $10 mn fraud lawsuit filed by GEICO against three chiropractors belonged in arbitration under New Jersey law and arbitration agreements.
The New Jersey Appellate Division said its holding rested on state law, so it was not bound by the Third Circuit. The Supreme Court agreed.
The Appellate Division examined the gap between PIP arbitration and the remedies available under the Fraud Act and RICO. It reviewed relevant sections of the Fraud Act, RICO and AICRA, including AICRA provisions allowing parties to submit disputes over recovery of PIP benefits to dispute resolution.
Those provisions cover benefits arising from the operation, ownership, maintenance or use of an automobile, and they include a list of disputes subject to PIP arbitration.
The court found that PIP arbitration has a narrow purpose. It handles payment disputes over PIP benefits, not complex insurance fraud cases involving multiple defendants, alleged racketeering and wider damages.
The Fraud Act allows recovery of compensatory damages, investigative expenses, costs, attorney fees and treble damages when a pattern of fraud exists. RICO allows private parties to bring civil actions in court for damages and injunctive relief.
PIP arbitrators do not have authority to grant equitable relief. The court also saw serious questions over whether arbitrators have power to order broad discovery, join third parties, or award compensatory damages, treble damages and attorney fees to an insurer.
After comparing the statutes, the appellate court concluded that the Fraud Act, RICO and AICRA fit together when each law is read against its legislative purpose. Fraud Act and RICO claims do not fall inside AICRA’s PIP arbitration system.
The court said AICRA’s current PIP arbitration structure was built for limited disputes over timely PIP benefit payments. It was not built for complex insurance fraud litigation.
The medical providers argued that Allstate’s Decision Point Review Plans gave them arbitration rights. The courts rejected that argument. They found that arbitration provisions in those plans, required under AICRA regulations, go no further than AICRA’s statutory PIP arbitration framework.
The courts also said this reading avoids a constitutional issue raised by Allstate. The insurer argued that forcing Fraud Act and RICO claims into arbitration would violate its jury trial rights.
Allstate filed its nine-count complaint in March 2023 against more than 30 defendants. The defendants include medical practices, owners of those practices, physicians, former physicians and administrators working at or with the practices.
The insurer says the alleged conduct ran from 2008 through 2022. According to Allstate, the defendants conspired to obtain more than $1.7 mn in PIP benefits.
The claims involve alleged kickback schemes, illegal self-referrals, fraud patterns and racketeering activity.
When insureds receive medical treatment after auto accidents, they often assign their PIP benefits to medical providers. Those providers then seek payment from insurers such as Allstate. The insurer says the defendants abused that payment structure through misleading invoices and improper referral arrangements.
Allstate seeks declaratory judgments, including a finding that one defendant medical practice had an illegal structure and was not entitled to receive PIP benefits.
The insurer also seeks disgorgement of more than $1.7 mn paid to the defendants, treble damages, injunctive relief and attorney fees.
After Allstate filed the complaint, three groups of defendants moved separately to dismiss the case and compel arbitration. Other defendants filed answers and requested a jury trial.
