In recent years, more and more no-fault1 insurance carriers and health care providers have become parties to an escalating battle over providers' requests to obtain payment from no-fault insurers for care the providers allegedly provided to injured people (so-called "assigned first-party no-fault benefits"). At the heart of the dispute is State Farm Mutual Automobile Ins. v. Mallela2 and its progeny.3 Mallela held that health care providers are not eligible for no-fault reimbursement if the physicians who allegedly own the providers are not the true owners.
A growing aspect of this litigation involves insurance companies seeking—and being granted—discovery to be able to demonstrate that a provider was fraudulently incorporated.4 That is because the factual foundation of a so-called Mallela defense involves proof that someone who is not a medical doctor is the actual owner of the health care provider or actually is controlling the operation of its business. In particular, insurers that raise a Mallela defense assert that the licensed professional has done little more than permit his or her license to be used as a basis to form the business and that the licensed professional has turned the operation of the corporation over to non-professionals by signing management agreements that provide for excessive fees for routine office or practice management services and office and equipment leases that provide for excessive lease payments. This information typically is within the health care provider's possession and not the insurance carrier's, which is why carriers seek to discover the information from the providers.
