Eleventh Circuit Upholds Silver Star PIP Fraud Judgment

August 13, 2013

The Silver Star judgment was affirmed by the 11th Circuit Court of Appeals in a ruling dated August 6, 2013.  The case is State Farm Fire & Cas. Co. v. Silver Star Health & Rehab, No. 12-12181.

A central issue was the ownership of Silver Star Health and Rehab. Chiropractic physician Judith Christina McKenzie was the purported owner, while in fact Florida’s Division of Insurance Fraud alleges that non-physicians Jean Ely Colin and Marc Arthur Maxis were the actual owners. Ownership by individuals who are not licensed health care practitioners invalidates the firm’s exemption from licensing requirements of the Florida Health Care Clinic Act.

Silver Star raised four issues in its appeal. Each issue is addressed in turn below.

Issue #1: Silver Star argued that Florida law does not provide State Farm with a judicial remedy for a violation of the licensing requirements of the Health Care Clinic Act.

Ruling: The Court disagreed with Silver Star on this point. It cited Florida Statute 400.9935 (3) which states, “All charges or reimbursement claims made by or on behalf of a clinic that is required to be licensed under this part, but that is not so licensed, or that is otherwise operating in violation of this part, are unlawful charges, and therefore are noncompensable and unenforceable.”

The Court describes unlawful claims as those not being in compliance with all relevant applicable criminal, civil, and administrative requirements.

Issue #2: Silver Star asserted that even if Florida law does provide State Farm with a judicial remedy, a cause of action for unjust enrichment is unavailable because State Farm and Silver Star were in privity of contract.

Ruling: The 11th Circuit agreed with the district court that judicial remedy did apply, and that State Farm was within its rights to seek a declaratory judgment dismissing $86K in payables that remain outstanding. Further, the 11th Circuit ruled that privity of contract did not exist between State Farm and Silver Star.

Issue #3: The district court’s jury instruction on the meaning of “wholly owned” misstated the law.

Ruling: The 11th Circuit disagreed with Silver Star, stating that the court’s jury instructions did not unduly favor any single determinant factor among several used to establish business ownership.

Issue #4: The district court abused its discretion by apportioning costs jointly and severally among the three defendants.

Ruling: Silver Star failed to present any evidence justifying the need for a system of apportionment other than jointly and severally. Further, the 11th Circuit observed that an apparent conspiracy between the three defendants justified the distribution of costs.

Silver Star Defrauded Five Insurance Companies, Florida Division of PIP Fraud Alleges

On a related note, State Farm is not the only entity pursuing legal action against Silver Star Health and Rehab. In March of 2012, the Florida Division of Insurance Fraud issued arrest warrants for alleged owner Judith Christina McKenzie, and the actual non-physician owners Jean Ely Colin and Marc Arthur Maxis. Fraud charges were filed last year by the Orange County State Attorney’s Office. The State’s investigation uncovered fraudulent charges in excess of $500K targeting five admitted Florida insurance carriers.

Click on the link to read the 11th Circuit Court’s ruling in State Farm Fire & Cas. Co. v. Silver Star Health & Rehab, No. 12-12181.