By Ezra Amacher
Allstate can move forward in its recovery of $4.7 million it paid to settle fraudulent medical claims with a Houston, Texas medical facility, the 5th U.S. Circuit Court of Appeals said.
The federal appellate court reversed a lower court’s ruling that Allstate’s RICO (Racketeer Influenced and Corrupt Organizations Act) claims failed because the insurer didn’t sufficiently allege that it relied on fraudulent bills when settling the claims. Rather, the Fifth Circuit said Allstate adequately showed it was the victim of a RICO scheme involving more than 600 claimants.
Beginning in 2018, Dr. Akash Bhagat and defendants entered into agreements with personal injury attorneys to refer clients to Memorial Heights Emergency Center under letters of protection guaranteeing payment from future insurance settlements, court proceedings say. Defendants charged car accident patients at emergency billing codes, rates nearly triple those normally charged.
Patients received expensive diagnostic tests, including CT scans, only to be discharged without further treatment, court proceedings say. Memorial Heights would then forward bills to the personal injury attorneys, who then presented the bills to Allstate as part of settlement agreements.
Allstate discovered the scheme and sued the defendants to recover $4.7 million plus treble damages and attorney fees.
A district court dismissed Allstate’s suit, arguing that Allstate did not adequately allege that it relied on the fraudulent bills when settling the claims, and that the insurer did not adequately plead that the fraudulent bills directly or proximately caused injury.
The court held that Allstate was complicit because it knew about the fraud but continued to engage in settlement agreements.
On appeal, a three-judge panel from the Fifth Circuit ruled that the district court erred in dismissing Allstate’s RICO claims.
The appellate court ruled that Allstate satisfied federal and Texas common-law fraud claims by sufficiently alleging the Memorial Heights scheme caused it to pay for fraudulently billed services.
The Fifth Circuit remanded the case for further proceedings consistent with its opinion.
Topics
Texas
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