State Farm Insurance on Trial for Inflammatory Accusations Against Chiropractor

PA – A Pennsylvania chiropractor can proceed with a claim that State Farm Insurance defamed him in an attempt to ruin his business, a federal judge ruled. Peter Schatzberg, who has a doctorate in chiropractic, says State Farm arbitrarily began characterizing all soft-tissue injury claims as fraudulent, as part of its practice to treat “the entire chiropractic industry as fraudulent as well.”
“If a claimant is a minority, an immigrant, or from a poor urban area, State Farm automatically looks on their claims as potentially fraudulent,” according to the complaint Schatzberg filed in 2010.
The lawsuit claimed that State Farm defamed Schatzberg in letters to his office and to his attorney, accusing him of “professional impropriety,” merely because he is a chiropractor who treats soft-tissue injuries.
State Farm falsely accused Schatzberg of having engaged in fraudulent business activity, created a false perception in the community that he engaged in professional impropriety, and engaged in a pattern of racketeering activity, according to the complaint. Through its Advancing Claims Excellence program, the insurer systematically paid significantly less than the legally required amount for treatment that Schatzberg provided to individuals insured by State farm insured, he said.
That program allegedly operated with help from a special investigations unit and outside counsel. Schatzberg claimed that Doug Babin, one of the adjusters with State Farm’s special investigations unit, called current and former employees of the chiropractic practice, identified himself as a “fraud investigator,” and asked about Schatzberg’s billing practices in an “aggressive tone.”
State Farm fired back that Schatzberg had failed to adequately state a claim, and said the entire case should be dismissed for lack of federal jurisdiction. But U.S. District Judge Gene E.K. Pratter said the allegations about Babin could support the defamation claim.
“While the court appreciates State Farm’s argument that Mr. Babin’s statements were made in the course of satisfying State farm’s statutory mandate that, as a motor vehicle insurer, it maintain a motor vehicle insurance antifraud plan, based on the facts alleged, Mr. Babin’s statements, coupled with his allegedly ‘aggressive tone,’ could lead one to believe … that State Farm possessed facts or information that Dr. Schatzberg was engaging in or had engaged in fraudulent billing practices or criminal conduct,” the decision states.
The letters sent to Schatzberg and his attorneys also support defamation allegations, Pratter found, despite noting that one of the implicated letter was just “barely” defamatory. Schatzberg did fail, however, to substantiate his claims of false light or invasion of privacy. The complaint makes no mention of a claim that State Farm published any of its investigators’ alleged statements in a newspaper, periodical or other sort of publicly circulated medium, according to the decision. 

“Rather Dr. Schatzberg’s claim centers on two primary contentions: (1) State farm spread false information about Dr. Schatzberg to particular individuals in the medical and legal communities via letter and phone call, and (2) State Farm deployed [ ] Goldberg in litigation for the purpose of sending a false message to the legal community that Dr. Schatzberg was engaged in wrongdoing,” Pratter wrote. “Neither of these actions on the part of State Farm constitutes publicity for the purpose of a false light invasion of privacy action.”
Schatzberg’s RICO claim also failed to meet the bar, and Pratter refused to exercise supplemental jurisdiction over the state-law claims. 

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