Inflated Auto-Insurance Claims? Law Firm, Surgeons Deny State Farm Allegations

May 27--One of Central Florida's best-known law firms and a prominent Brevard County surgeon may have had an "across-the-board agreement" in recent years to inflate by millions of dollars the charges for spinal surgeries in auto-accident claims, according to insurance-company allegations that have sprung unexpectedly from a pair of routine personal-injury lawsuits.

Central to the allegations: Orlando-based Morgan & Morgan, which considers itself the nation's largest personal-injury law firm; Dan Newlin, a 10-year Morgan & Morgan lawyer who left the firm late last year to open his own office; Dr. Ara Deukmedjian, president of the Brevard County Medical Society and a volunteer assistant professor of neurosurgery at the University of Central Florida School of Medicine; and State Farm Mutual Automobile Insurance Co., the nation's largest auto insurer.

The two lawsuits, filed by Morgan & Morgan against State Farm auto policies, are each in evidence-gathering phases and months away from possible trials. But they became superheated last fall when a former paralegal at the law firm turned whistle-blower, providing State Farm with ammunition to probe Deukmedjian's billing practices with Morgan & Morgan from 2007 to 2011.

As a result, the insurance company is building a case -- "quite aggressively," a federal judge has observed -- that Deukmedjian was charging "exorbitant amounts" for surgeries performed on auto-accident clients. It alleges that Deukmedjian's bills were then incorporated into lawsuits filed by Morgan & Morgan lawyers as they sought to win payouts from State Farm, but that Deukmedjian then accepted, under a prearranged agreement, significantly less than his original charge, as long as Morgan & Morgan sent more clients to his Deuk Spine Institute.

In a recent court document, State Farm alleges that "Deuk Spine had an enormously profitable financial arrangement with Morgan & Morgan" in which the doctor submitted bills totaling $8.14 million from 2009 to 2011, then received roughly half of what he had charged. According to the insurer, an analysis it conducted of Morgan & Morgan spreadsheets concluded that the "amount actually paid" to Deukmedjian was $4.84 million.

A Morgan & Morgan managing partner denied the "brazen assertions" of State Farm that his law firm had a "cozy" relationship with Deukmedjian.

"It's the complete opposite of what State Farm has said," said Scott Weinstein, the firm's spokesman.

Weinstein said there was no prearranged agreement with Deukmedjian; the surgeon was uncooperative, he said, when the law firm asked him to lower his fees during the customary negotiations to reach settlements on behalf of his patients -- the firm's clients.

Weinstein also said that Newlin, a former deputy sheriff who had generated a high volume of cases for the firm, was the lawyer most involved with the surgeon.

Earlier this month, Newlin denied State Farm's allegation that Morgan & Morgan sent clients to Deukmedjian in exchange for the surgeon agreeing in advance to accept less than the fees incorporated in the firm's lawsuits. He clarified last week that he had little knowledge of how lawsuits played out because his job had been to attract new clients, who were then assigned to other Morgan & Morgan lawyers.

"I didn't review bills, and I didn't handle files," he said.

Deukmedjian's lawyer, Crystal Eiffert of Orlando, also denied that there was a prearranged agreement and said Deuk Spine charges the same for every patient and every procedure.

"There's not selective billing, as some of the portions of State Farm's allegations seem to indicate," Eiffert said. "There was never an agreement to accept a reduced amount of money, unless it was done on a case-by-case basis. If a patient requests a reduced amount because they don't have enough money, then they [Deuk Spine] might take a reduction."

Doctors routinely agree to reduce their medical fees during negotiations to settle cases, based on the circumstances of each lawsuit. But lawyers are not allowed to intentionally overstate medical costs in lawsuits, said Amy Mashburn, a University of Florida legal-ethics professor who is not familiar with the Morgan & Morgan lawsuits. "That's fraud on the court, and it's a breach of the lawyer's professional ethics," Mashburn said.

There have been no allegations of criminal wrongdoing on the part of Deukmedjian, Newlin or Morgan & Morgan, whose founder, John Morgan, is not included as an active figure in the litigation. The two civil suits are focused on the "necessity and reasonableness" of Deukmedjian's charges for treating two car-accident patients, and State Farm has opted to fight those charges by hiring lawyers from three firms.

Neither State Farm nor its lead lawyer would comment.

Ex-paralegal's deposition

The two lawsuits began in 2010 as ordinary legal actions by accident victims. (According to state figures, nearly 40 percent of all motor-vehicle crashes last year resulted in litigation.)

One of the suits was filed in state Circuit Court in Orlando. The second case began in state court in Lake County but was moved at State Farm's request to U.S. District Court in Ocala.

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