CIGNA Obtains $14,371,384.95 Verdict Against Fraudulent Health Care Provider
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Because police, prosecutors and government insurance fraud investigators are rarely willing to arrest or prosecute insurance fraud perpetrators, it is necessary for insurers to be proactive and sue those who attempt or succeed in defrauding insurers.
IN Connecticut General Life Insurance Company and CIGNA Health And Life Insurance Company v. Mike Ogbebor and Stafford Renal LLC, no. 3:21-cv-00954 (JAM), United States District Court, D. Connecticut (September 6, 2022) CIGNA successfully sued a fraudulent supplier and obtained a default judgment of nearly $15 million against the corporate defendants and its alter ego individual.
Stafford Renal LLC (Stafford) and its owner Mike Ogbebor, received insurance payments from the plaintiffs, Connecticut General Life Insurance Company and Cigna Health and Life Insurance Company (collectively, “Cigna”), for dialysis that Stafford claims they administered to two Cigna plans members. Cigna argued that Stafford was not licensed to provide, and in fact did not provide, these dialysis treatments.
After Cigna filed its complaint, Ogbebor filed an answer on behalf of both defendants. The trial judge struck this answer with respect to Stafford because, as a non-lawyer, Ogbebor could not represent a corporation like Stafford in court. Cigna then moved for a default entry against Stafford, which was granted based on Stafford’s failure to appear or answer.
As for Ogbebor, he has failed to object or otherwise respond to Cigna’s discovery requests. Ogbebor also failed to respond to a request to compel discovery, despite the court’s discovery order warning him that such failure could result in sanctions including default judgment. Cigna is now seeking default judgment against both Stafford and Ogbebor.
Because Stafford has failed to respond entirely and Ogbebor has responded but willfully failed to comply with its discovery obligations, the court accepted the allegations in Cigna’s complaint as true with respect to both defendants. Given these facts, Stafford and Ogbebor are liable to Cigna for submitting fictitious claims on behalf of an unlicensed provider.
Ogbebor incorporated Stafford as a limited liability company organized under Texas law and served as its owner, principal and manager. Stafford considered itself an end-stage renal disease (ESRD) treatment facility. But Stafford did not have an ESRD license. In fact, Ogbebor was associated with another company known as Stafford Dialysis Renal, Inc., which operated a licensed ESRD facility. However, that license expired in November 2016.
In 2017, Ogbebor submitted bills to Cigna for ESRD treatments allegedly provided by Stafford. Cigna learned that Stafford did not have an ESRD license. Stafford was therefore operating in violation of Texas licensing requirements.
Despite his unlicensed status, Stafford submitted and received claims totaling $4,790,461.65 from Cigna for alleged ESRD services to two Cigna members. When Cigna asked Stafford and Ogbebor to show proof of proper licensing, they failed to do so. Cigna then reduced or denied payment for other claims filed by Stafford.
The defendants also allegedly manufactured a majority of the treatments they sought and received reimbursement from Cigna. Further, although Stafford allegedly provided services to a plan member nearly every day from April 2018 to June 2020, Cigna learned from the member and confirmed with Medicare that she did not begin treatment until January 2019.
When a defendant defaults, it thereby admits all well-pleaded factual allegations contained in the complaint. The district court found that default judgment is the appropriate sanction in this case and that any lesser sanction would be meaningless in light of Ogbebor’s willful and total refusal to cooperate with this litigation since he was first served in February 2022 with a request for discovery concerning information in his litigation. holding that is material to the settlement of Cigna’s claim against him.
Cigna sought a declaratory judgment against Stafford, stating that it has no obligation to honor any claims submitted by Stafford for ESRD services. Because Stafford was not licensed to provide any of the alleged ESRD services it provided to Cigna, it has no legal or contractual right to reimbursement, payment or other consideration from Cigna.
The complaint alleged that the defendants misrepresented to Cigna that Stafford was licensed to provide ESRD treatments when they submitted claims for reimbursement for those services. When they filed these claims, the defendants knew that Stafford lacked the required license and that most of the claims were fictitious. Because Cigna’s fraudulent misrepresentation claim was adequately alleged to support default judgment, its claim was granted.
PROFITABLE ERROR REPRESENTATIONN
The trial court concluded that Cigna’s allegations are sufficient to support a default judgment for negligent misrepresentation.
The Connecticut Unfair Trade Practices Act prohibits any person from engaging in “unfair methods of competition and unfair or deceptive acts or practices in the conduct of trade or commerce.” Conn. General Stat § 42-110b. “Any person who suffers any provable loss of money or property, real or personal, as a result of the use or employment of a method, act or practice prohibited under [CUTPA]may bring an action … to recover actual damages.”
Ogbebor is understood to have admitted that he personally directed Stafford’s fraudulent conduct. Therefore, the complaint asserts a CUTPA claim against both defendants to support a motion for default judgment.
The Connecticut Health Insurance Fraud Act punishes intentional fraud or deceit in connection with a claim for benefits under a health insurance policy. An insurer aggrieved by an act of insurance fraud has a private right of action against the perpetrator of such fraud to recover any damages arising. Cigna’s allegations are sufficient to support a default judgment.
A medical provider’s covert failure to comply with licensing requirements constitutes fraud against the insurer. Defendants falsely represented to Cigna that Stafford was licensed to provide ESRD services by submitting claims for such services, they induced Cigna to issue payments for those claims. These claims were fraudulent because the defendants knew that Stafford was not authorized to perform the services for which they sought reimbursement from Cigna, and in most cases had not performed those services at all. The trial court concluded that Cigna’s civil theft claim is sufficiently alleged to support default judgment.
PIERCE THE CORPORATE VEIL
Under Texas law, it is appropriate to hold an individual owner or manager of a corporation liable for the acts of the corporation (1) where a corporation is organized and operated as another utility or business conduit; and (2) there is such unity between corporation and individual that the separateness of the corporation has ceased and to hold only the corporation liable would result in injustice. The trial court found that Ogbebor formed Stafford to further his scheme to commit insurance fraud. Consequently, the court allowed Cigna to pierce the corporate veil and hold Ogbebor liable for Stafford’s conduct as well as his own.
Cigna’s estimated damages are based on payments for dialysis allegedly provided to a plan member totaling $763,592.27, plus payments for medication for the same member totaling $4,017,025.89. Cigna is seeking an additional $9,843.49 in payments based on alleged ESRD treatments, both dialysis and medication, to a second plan member. Those figures are corroborated by a detailed spreadsheet Cigna filed with its complaint, and they add up to $4,790,461.65. The district court awarded that amount in actual damages. Additionally, because Cigna has adequately stated a civil theft claim under Conn. General Stat. § 52-564, the court applied treble damages totaling $14,371,384.95.
Judgment was entered against Mike Ogbebor and Stafford Renal LLC in the joint and several amount of $14,371,384.95, and a declaratory judgment releasing the plaintiffs from all liability to pay any past or future claims filed by Stafford Renal LLC.
Although Cigna will have a hard time finding out about this ruling, its action, and that of the district court, should serve as a deterrent to others who attempt fraud. If Ogbebor has any of the money he fraudulently obtained, Cigna must aggressively seek to enforce the judgment and obtain assets the fraudster still has. Other insurers should follow Cigna’s lead and work to extract profits from insurance fraud.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his practice to serving as an insurance consultant specializing in insurance coverage, insurance claims management, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims attorney and more than 54 years in the insurance industry. He can be reached at http://www.zalma.com and email@example.com. Subscribe and receive videos limited to Excellence in Claims Handling subscribers at locals.com https://zalmaoninsurance.locals.com/subscribe.Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.
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