Allstate takes Zynex and its leaders to court over alleged medical equipment fraud
Allstate is taking a bold stand in federal court, accusing Zynex and its executives of orchestrating a $3 million insurance fraud scheme over medical equipment claims.
Filed on September 4, 2025, in the Eastern District of New York, the lawsuit is making waves in the insurance industry. Allstate and several of its affiliates say they were duped by a coordinated effort led by Thomas Sandgaard, Daniel Moorhead, Anna Lucsok, and two companies - Zynex, Inc. and Zynex Medical, Inc. The complaint lays out a story that’s all too familiar for insurers: a web of allegedly false bills and paperwork for durable medical equipment, or DME, that Allstate says was either not provided or not medically necessary.
The insurance giant claims it paid out more than $3,008,633.72 in connection with bodily-injury claims, all based on what it describes as a pattern of misrepresentation and deception. According to the complaint, Sandgaard and his team weren’t just bit players - they allegedly had the power to influence and control, and did influence and control, the companies and, by extension, the alleged fraud itself. Allstate says it relied on the records and bills submitted by Zynex and its affiliates, only to later discover that the records contained misrepresentations and omissions of material fact concerning the legitimacy of the DME and supplies purportedly provided to claimants.
What’s at stake isn’t just the money. Allstate is asking the court for damages, including double and treble damages, plus statutory interest, costs, and attorneys’ fees. It’s also seeking a declaration that it has no obligation to pay the defendants for any of the services at issue in the complaint. The case is built on claims under the federal Racketeer Influenced and Corrupt Organizations Act (RICO), the Colorado Organized Crime Control Act (COCCA), and New York state laws including common law fraud, misrepresentation, and unjust enrichment.
The complaint gives a detailed look at the parties involved. Allstate’s various corporate entities are listed, each authorized to conduct business in the states where they received billing from Zynex Medical. On the other side, Sandgaard is described as a Colorado resident and the beneficial owner of approximately 50% of Zynex’s outstanding stock. He is not a licensed healthcare provider, but is alleged to have participated in the operation and management of the corporate defendants during the relevant period.
For insurance professionals, this case is a reminder of the ongoing challenge of fraud. The details are specific, but the broader theme is one that resonates across the industry: the need for vigilance when it comes to claims involving medical equipment and services. Allstate’s allegations, if proven, could have implications for how insurers evaluate claims and manage relationships with providers and suppliers.
It’s important to note that these are just allegations at this stage. The case is in its early stages, and the defendants have not yet responded to the complaint. No specific insurance policy clauses are discussed in the complaint; the focus is on the alleged conduct and the financial impact.
As the case moves forward, insurance insiders will be watching closely. The outcome could influence not just Allstate, but industry practices around fraud detection and claims management. For now, Allstate’s message is clear: the company is seeking to recover what it claims are improper payments and to prevent further losses from similar schemes.
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