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New York Auto Accident Fraud Ring: Not One Of A Kind

The state of New York over the last several years has become a dangerous place to drive for both your personal and financial health. Earlier this month a Long Island resident was arrested and charged with auto insurance

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New York Skyline. Ben Fredericson (xjrlokix), Creative Commons Attribution 2.0 License

fraud after taking advantage of the state’s No-Fault coverage laws involving auto accidents.

The man accused, staged over 30 accidents and then collected on fraudulent insurance claims in the amount $150,000. However he is not alone, as quite a few have used this unique insurance law as a means to steal from insurance companies. In some cases the ill gotten gains reach seven figures and in one extreme case, hundreds of millions of dollars! These illegal practices are the reason insurance premiums in New York are substantially higher than almost every other state in the country.

Before we can understand how criminals commit fraud we’ll first look at the laws governing auto insurance in New York. Just like every state, New York law requires auto owners to carry state minimum liability to cover parties in the event of an accident. If injured by another driver, you have the right to sue for losses due to the injury as well as pain and suffering.

Of course anyone who has been in this position knows that it’s a usually a long process. If you are out of work because of the injury, you’re expenses can add up quickly with no relief in sight. This is where the No-Fault coverage is useful because it pays up to $50,000 for legitimate losses as a result of the accident. Since No-Fault pays out regardless of fault, this money is in the injured person’s pocket quickly and keeps the bills associated with the accident from building up.

You can see the benefits of the No-Fault law in that it pays out faster than a bodily injury claim. It’s intended to

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Image courtesy of Images of Money, flickr creative commons

curb the large amounts of money in auto accidents by giving quick relief without the need of determining fault. Unfortunately, it’s also opened up a window for fraudulent claims by those looking to take advantage of the law.

The man accused in the beginning of the article implemented the more common tactic to exploit the law. The criminal would organize the accidents by putting people in a vehicle (usually an older vehicle in fairly rough shape) and target drivers following too close.

The driver will then slam on his or her brakes to get rear-ended. It is normal for the car that’s hit to have four or

five passengers inside at the time of the accident in order to collect up to $50,000 per person. With how popular this tactic has become, estimates on the amount of money lost to staged accidents and other forms of auto insurance fraud related to No-Fault is extreme. “It is probably somewhere in the neighborhood of hundreds of

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NY auto insurance fraud crackdown. Photo Credit: http://www.nysenate.gov/

millions if not billions of dollars,” according to Dennis Jay of The New York Alliance Against Insurance Fraud.

One Ambitious Auto Fraud Ring Takes the Scam to New Heights

Recently 36 members of what is believed to be the largest auto insurance fraud ring were indicted and charged with scamming over $110 million on No-Fault claims. While the man arrested this month was involved in staging accidents, the large fraud ring here did not. So how did this group manage to collect such a large amount on nearly $275 million of fraudulent No-Fault claims?

According to reports, 10 doctors and 3 lawyers involved in the scam opened over 100 phony medical clinics in areas around New York City. At the bottom of the pyramid were individuals called “runners” who were given between two and three thousand dollars to recruit real accident victims at the scene or in hospitals.

It goes on to say that after getting the patient to their clinics, doctors would pay the patient $500. They would then proceed to schedule unnecessary treatments such as acupuncture and physical therapy as often as five times a week.

Undercover police officers posing as patients discovered that kickbacks were normal in this crime ring. The MRI provider would receive $250 for each unnecessary image produced, the acupuncturist would bill for longer service than provided, and chiropractors would simply have the patients sign their name and leave.

The officers were sent to as many medical appointments as needed to drive the bill close to the $50,000 limits. The clinics would also refer patients to the lawyers involved in the scam for the purpose of filing bogus lawsuits.

The Real Losers – New York Premiums Among Nations Highest

While the insurance companies paid out and lost over $100 million in fraudulent claims, it’ s easy to see who the real victims in this crime are. Insurance premiums in New York have skyrocketed in recent years thanks in large part to the states problem with fraudulent No-Fault claims.

Law abiding citizens are paying through the roof to keep their vehicles insured in response to this illegal activity. As with any insurance field, the insurance company is likely not going to lose. In the short term they have payed out a fortune, but with the rate hikes that have followed, the long term costs fall squarely on the shoulders of New York drivers. This large crime ring has been snuffed out, but new criminals will continue to enter the fray and find new ways to exploit a nearly broken system.

 

Brian Levesque

Brian Levesque

This article was written by Brian Levesque. Brian has unfortunately had his fair share of auto accidents but luckily he has always had proper coverage. He is professional writer for Insurance Land and uses his experiences to help his readers make more informed decisions. To read more of his work, visit his Google+ page!

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