How "Accident Rings" Cost Insurers and Drive Up Premiums

New York's “no-fault” insurance law was designed to quickly compensate auto accident victims for their legitimate medical expenses and related costs. As the name implies, “no-fault” benefits do not require a showing that any party to the accident was legally liable. New York law requires no-fault insurance carriers to pay claims of up to $50,000 per person.

While the majority of no-fault cases do involve legitimate claims, the system is vulnerable to fraud. For example, on January 5th, New York State Attorney General Eric T. Schneiderman's officeannounced the arrest and prosecution of five individuals accused of trying to defraud the no-fault system. This so-called “accident ring” allegedly staged accidents in order to recover no-fault benefits.

Specifically, prosecutors claim the five defendants staged three accidents in Nassau County between October 2010 and June 2011. In each case, one defendant allegedly rented a U-Haul truck and intentionally struck a second vehicle operated by another defendant. The defendants then filed false police reports and sought medical care for phantom “soft tissue” injuries at a Long Island medical clinic. The clinic subsequently recovered no-fault benefits from insurance carriers—more than $100,000 altogether, according to prosecutors.

The defendants are charged with insurance fraud, grand larceny and falsifying business records, all of which are felonies under New York law. The alleged ringleader of the accident rig faces up to 21 years in prison if convicted on all counts; the other four conspirators face a maximum of seven years in prison. As always, the defendants are innocent until proven guilty in a court of law.

We All Pay for Insurance Fraud

This alleged Nassau County car accident ring is just a drop in the bucket when it comes to insurance fraud. In 2012, the U.S. Department of Justice indicted three dozen individuals who participated in a $275 million no-fault scam. Manhattan U.S. Attorney Preet Bharara described it at the time as “the single largest no-fault insurance fraud case in history,” causing more than $113 million in losses.

More than 30 defendants ultimately pleaded guilty to health care fraud and related charges. Many of the defendants were medical practitioners who actively participated in the scam, billing insurers for medically unnecessary tests in an attempt to collect no-fault benefits. Prosecutorssaid rather than compensating victims of actual auto accidents, the conspirators used their ill-gotten insurance benefits “to finance their own lavish personal lifestyles – including vacations in Mexico and Atlantic City, purchases of luxury items at Louis Vuitton, Chanel, and Saks Fifth Avenue, as well as expensive jewelry and limousines.”

Insurance fraud is not a victimless crime, however. No-fault insurers often pass their losses from fraud onto legitimate customers in the form of higher premiums. That defeats a key purpose of the no-fault system, which is to keep costs down while ensuring victims receive prompt reimbursement for necessary medical care following an accident.

These types of cases also highlight the importance of dealing with qualified, ethical medical professionals. Insurance scams depend on unscrupulous doctors willing to order medically unnecessary tests in order to bilk insurance companies. If you have been in an accident, it's important to ensure you receive and properly document all medical care received. If you have suffered a serious injury that exceeds your no-fault benefits, you may be entitled to seek additional damages against the responsible parties. Contact our office today if you need to speak with a qualified New York accident attorney about your situation.