New Jersey’s high court has ruled that Allstate Insurance has a right to a jury trial for its fraud and conspiracy claims brought against more than 30 medical providers under the state’s Insurance Fraud Prevention Act (IFPA) and the Anti-Racketeering Act (RICO). The court found that Allstate is not required to arbitrate the claims.
The Supreme Court unanimously upheld an Appellate Division ruling from January 2025 that found that such racketeering and tort claims are not subject to mandatory arbitration under the Automobile Insurance Cost Reduction Act (AICRA). The appellate court had reversed a trial court. The case now goes back to the trial court.
Allstate alleges that the medical providers submitted misleading invoices over more than a decade in order to obtain more than $1.7 million in personal injury protection (PIP) payments.
In 2023, the trial court had dismissed the claims and ordered arbitration, reasoning that AICRA’s language requires arbitration of all disputes around the recovery of PIP benefits.
The state high court ruling rejecting the trial court’s reasoning, like the appellate court’s, also rejected an April decision by the U.S. Court of Appeals for the Third Circuit that found that similar claims in a $10 million fraud lawsuit brought by GEICO against three chiropractors were subject to arbitration In New Jersey, per state law and arbitration agreements. The appellate court explained, and the high court agreed, that because it based its holding on New Jersey law, it is not bound by the Third Circuit’s decision.
In its opinion, the Appellate Division probed discrepancies between what PIP arbitration permits and what is called for under the Fraud Act and RICO. The court reviewed the relevant portions of the Fraud Act, RICO, and AICRA, including the AICRA provisions that permit parties to submit to dispute resolution “any dispute regarding the recovery of benefits provided under [PIP] coverage arising out of the operation, ownership, maintenance, or use of an automobile, and that set forth a “not necessarily” exhaustive list of the type of disputes covered by PIP arbitration.
The appeals court opinion addressed the parties’ dispute as to whether the “streamlined and specialized” PIP arbitration process can grant the relief called for in the Fraud Act and RICO and determined it cannot. The court explained that the Fraud Act “allows for the recovery of compensatory damages, investigative expenses, costs, attorneys’ fees, and, where a pattern of fraud is established, treble damages,” while RICO allows “private persons to bring a civil action in ‘court’ to recover damages and to seek injunctive relief.”