Over a four-year period Dr. Mun billed Allstate $500,000 for supposed “electrodiagnostic testing” of auto accident victims. Allstate paid the claims as they came in. About ten months after the last of the alleged tests, Allstate sued the doctor in federal court, alleging that the billing was fraudulent and seeking recovery of its payments on theories of common law fraud, unjust enrichment, and RICO violations.
Dr. Mun moved to arbitrate, citing arbitration provisions in all the auto insurance policies, as well as the Federal Arbitration Act and the New York Insurance Law. The district court denied the motion, and Dr. Mun appealed to the Second Circuit.
Yesterday the Second Circuit unanimously upheld the denial of Dr. Mun’s demand for arbitration, citing the language of the statutes—especially New York’s No-Fault Insurance Law—case law, and public policy and ruling that Dr. Mun was not a “claimant” under the arbitration provisions. He was a claimant from the time he submitted a claim until Allstate paid it, but once he received payment, he was no longer a claimant.
The tone of the opinion indicates that the court was offended at the notion that a physician who had defrauded an insurance company would seek the protection of provisions clearly intended to protect people entitled to insurance coverage for damage and injury caused by automobiles.
As the court put it, giving someone in Dr. Mun’s position the protection of the arbitration provision would “undermine and damage the integrity of the No-Fault system” and victimize the public by causing premiums to go up.