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The California Insurance Fraud Protection Act (IFPA) allows qui tam plaintiffs to file lawsuits on the government’s behalf and seek monetary penalties against perpetrators of insurance fraud. Under the IFPA, a defrauder is assessed penalties for each fraudulent insurance claim it presented to insurers. To prevent duplicative lawsuits, the IFPA contains a “first-to-file rule” that bars parties from filing subsequent actions related to an already pending lawsuit.

State Farm Mutual Automobile Insurance Company filed an IFPA action alleging defendants Sonny Rubin, M.D., Sonny Rubin, M.D., Inc., and Newport Institute of Minimally Invasive Surgery fraudulently billed insurers for various services performed in connection with epidural steroid injections.

However, a month prior Allstate filed a separate IFPA lawsuit against the same defendants, alleging they were perpetrating a fraud on Allstate, also involving epidural steroid injections.

In the State Farm lawsuit, the trial court sustained defendants’ demurrer to State Farm’s complaint under the IFPA’s first-to-file rule, finding it alleges the same fraud as Allstate’s complaint

State Farm appealed, arguing its complaint alleges a distinct fraud. The Court of Appeal agreed that the demurrer was incorrectly sustained, but for another reason in the published case of P. ex rel. State Farm Mutual Automobile Ins. Co. v. Rubin 12/14/21 CA4/3.

In applying the rule, the trial court and both parties only focused on whether the two complaints allege the same fraudulent scheme. But, in this matter of first impression, the Court of Appeal finds the IFPA’s first-to-file rule requires an additional inquiry.

Courts must also review the specific insurer-victims underlying each complaint’s request for penalties. If each complaint seeks penalties for false insurance claims relating to different groups of insurer-victims, the first-to-file rule does not apply.

A subsequent complaint is only barred under the first-to-file rule if the prior complaint alleges the same fraud and seeks penalties arising from the false claims, submitted to the same insurer-victims.

Here, both complaints largely seek penalties relating to separate pools of victims. Allstate’s complaint only seeks IFPA penalties for the false insurance claims that defendants presented to Allstate. State Farm’s broader action seeks penalties for all the false insurance claims that defendants submitted to any insurer. Allstate is the only overlapping victim.

Thus, even if the two complaints allege the same fraud, State Farm is only precluded from pursuing IFPA penalties for the false claims that defendants billed to Allstate. As to the other inquiry, there is partial overlap between the fraudulent schemes alleged in the complaints.

Both complaints allege a common scheme in which defendants presented false claims to insurers pertaining to epidural steroid injections. However, State Farm’s complaint also alleges a distinct scheme involving false charges for magnetic resonance imaging (MRI) interpretations that defendants billed independently from epidural spinal injections.

For the portion of State Farm’s action based on MRI charges billed independently from epidural spinal injections, State Farm may pursue penalties for any false claims that defendants submitted to any insurer, including Allstate.