Second Circuit Narrows Insurers’ Ability to Deny No‑Fault Claims Based on Provider Misconduct

This dispute centered on GEICO’s attempt to recover millions of dollars in New York no-fault reimbursements from acupuncture and chiropractic clinics that allegedly engaged in illegal "kickback" schemes to procure patients. The Second Circuit vacated a lower court's ruling in favor of the insurer, determining that a provider’s violation of New York’s professional misconduct or anti-kickback statutes does not automatically render them "ineligible" for reimbursement under the no-fault regulatory framework. The court clarified that unless the misconduct involves a "licensing" failure—specifically where a non-physician exercises actual ownership or control over the professional corporation—the services rendered remain reimbursable. For insurance carriers, this decision serves as a warning that proving "unethical behavior" or "illegal referrals" is no longer a shortcut to denying PIP or no-fault claims. Carriers must now meet a higher evidentiary burden by proving "de facto" illegal corporate structure or control to justify non-payment. Practically, carriers should pivot their litigation strategies to focus on documenting the lack of medical necessity or the fraudulent nature of the services themselves, rather than relying solely on the provider’s underlying professional misconduct.