Thought Leadership

In a significant win for insurers' Special Investigation Units, the New Jersey Supreme Court clarified that statutory insurance fraud and racketeering claims may proceed in court rather than through PIP arbitration. At issue was whether insurance fraud claims brought under New Jersey's Insurance Fraud Prevention Act (IFPA) and the state's Anti-Racketeering Act (NJ RICO) are subject to mandatory arbitration under the Automobile Insurance Cost Reduction Act’s (AICRA) PIP dispute-resolution framework. Allstate had sued a network of medical practices, physicians, and related corporate entities, alleging a scheme to extract more than $1.7 million in PIP benefits through fraudulent and misleading billing. The trial court dismissed Allstate's complaint and compelled arbitration, reading AICRA's arbitration clause — which covers "any dispute regarding the recovery of... benefits" under PIP coverage, N.J.S.A. 39:6A-5.1(a) — as sweeping in fraud and racketeering claims along with routine benefit disputes.

The Supreme Court affirmed the Appellate Division's reversal, adopting Judge Gilson's opinion below (480 N.J. Super. 566 (App. Div. 2025)) as its own reasoning. The Court held that IFPA and RICO claims fall outside the scope of AICRA's PIP arbitration mechanism because that "streamlined and specialized" process cannot grant the relief those statutes contemplate — treble damages, injunctive relief, broad discovery, and joinder of third parties — and because arbitrators lack authority to award compensatory or treble damages to an insurer. The Court also rejected the argument that Allstate's own Decision Point Review Plans independently compel arbitration, finding those plan provisions no broader than AICRA's own arbitration clause. Notably, the Court expressly disagreed with the Third Circuit's contrary holding in GEICO v. Mt. Prospect Chiropractic Center, 98 F.4th 463 (3d Cir. 2024), concluding it is not bound by that federal interpretation of New Jersey law. Insurers retain the right to pursue IFPA and RICO claims in the Law Division, with a jury trial.

For SIU units and NJ insurance carriers, this decision is a significant win: it forecloses defense clinics' primary procedural tool for shunting fraud investigations into limited-scope PIP arbitration, where treble damages, RICO relief, and meaningful discovery were never realistically available. Carriers building cases against fraudulently structured clinics, straw-owned practices, or coordinated billing networks can now proceed with confidence that a well-pleaded IFPA/RICO complaint stays in the Law Division rather than being diverted to arbitration on a motion to compel. Practically, this strengthens SIU's leverage in settlement negotiations, preserves civil discovery tools (subpoenas, depositions, joinder of related corporate entities) critical to unwinding complex ownership and referral schemes, and resolves the split with the Third Circuit in favor of NJ insurers — at least as a matter of state law. Expect increased reliance on IFPA civil actions, rather than PIP arbitration demands, as SIU's primary enforcement vehicle going forward.