244 Cal. App. 4th 1184
Cal. Ct. App.2016Background
- GEICO (relator) brought a qui tam action alleging chiropractor Dr. Janice Cruz submitted fraudulent insurance claims (upcoding and false billings) and paid unlawful referral fees disguised as percentage rent to a co-defendant provider.
- GEICO served discovery; after initial denials and objections it served supplemental interrogatory responses in January 2014 that gave limited factual detail and stated discovery was ongoing.
- After a subsequent supplemental (June) response and additional evidence (including an expert declaration, leases, billing records, marketing materials, and deposition excerpts), Cruz moved to bind GEICO to the January responses and then moved for summary judgment.
- The trial court bound GEICO to the January responses, excluded GEICO’s later evidence as "fruit of the poisonous tree," and granted Cruz summary judgment, finding GEICO had no admissible evidence of upcoding, fraud, or actual referrals/damages.
- On appeal the Court of Appeal reversed: it held the trial court abused its discretion in binding GEICO to the January responses and excluding later evidence; it found triable issues of fact on GEICO’s statutory claim (Insurance Code §1871.7 / Penal Code §550 violations) and directed denial of summary adjudication on the statutory claim while granting summary adjudication on GEICO’s common-law claims.
Issues
| Issue | Plaintiff's Argument (GEICO) | Defendant's Argument (Cruz) | Held |
|---|---|---|---|
| Whether trial court properly bound GEICO to its January interrogatory responses under CCP §2030.310 | GEICO's January responses were initial answers and later supplementation was permitted; binding was inappropriate because Cruz wasn't substantially prejudiced and any prejudice was curable | Cruz argued she relied on GEICO's representation that January responses were complete, was prejudiced, and binding was appropriate | Reversed: court abused discretion—Cruz failed to show substantial, incurable prejudice; binding was improper |
| Whether the trial court properly excluded GEICO's later evidence in opposition to summary judgment | GEICO submitted expert opinion, leases, billing/marketing records, and deposition excerpts that raised triable issues of fact | Cruz argued later evidence was barred by the binding order and lacked foundation/relevance | Exclusion was error; the later evidence was relevant and the expert had adequate foundation |
| Whether GEICO presented triable issues on statutory insurance-fraud claims (Pen. Code §550 / Ins. Code §1871.7) | Expert and documentary evidence showed upcoding, false billing (e.g., new-patient coding for returning patients, X-ray overbilling), and a rent scheme that could conceal referral fees—raising intent and falsity issues | Cruz argued coding choices were reasonable, charges were at or below customary rates, and GEICO suffered no damages so the statutory claim fails | Reversed: triable issues exist on statutory claim; intent and falsity are factual matters for a jury; damages not required to establish statutory violation |
| Whether lack of proven damages defeats the statutory fraud claim | GEICO: damage is not an element of Penal Code §550 or Ins. Code §1871.7—presenting a false claim with intent suffices | Cruz: because she billed correct monetary amounts and lacked financial gain, GEICO cannot show harm so summary judgment appropriate | Court held damages not required for liability under state statute; lack of damages may bear on intent but is a jury issue |
Key Cases Cited
- Wilson v. Superior Court, 227 Cal.App.4th 579 (2014) (discusses scope and purpose of Ins. Code §1871.7 and that intent to procure referrals is actionable even without proof referrals occurred)
- Weitzman v. Allstate Ins. Co., 107 Cal.App.4th 534 (2003) (context on insurers bringing fraud actions under Ins. Code §1871.7)
- Union Bank v. Superior Court, 31 Cal.App.4th 573 (1995) (discusses use of discovery responses in support of summary judgment)
- Aguilar v. Atlantic Richfield Co., 25 Cal.4th 826 (2001) (standard and burdens for summary judgment motions)
- People v. Cohen, 12 Cal.App.3d 298 (1970) (holding a false claim violation is complete when false claim or writing is presented with intent, regardless of whether loss occurred)
- Kifle-Thompson v. Board of Chiropractic Examiners, 208 Cal.App.4th 518 (2012) (uses expert testimony to define "upcoding" and addresses upcoding evidence in the chiropractic context)