NEW LAWSUITS EXPOSE HOW MASSIVE FRAUD RINGS JACK UP NEW YORK CAR INSURANCE RATES
Cases Underscore Urgent Need to Pass Gov. Hochul’s Auto Insurance Reforms
NEW YORK – Two new federal RICO lawsuits filed by Allstate expose systemic fraud inflating New York’s auto insurance premiums. The lawsuits, targeting coordinated “medical mill” schemes, highlight the urgent need to pass Governor Kathy Hochul’s insurance reform package to protect honest policyholders from skyrocketing rates.
Filed this week in the US District Court for the Eastern District of New York, the lawsuits charge that 10 durable medical equipment (DME) companies and 9 individuals orchestrated a “medical mill” to exploit the state’s No-Fault insurance system.
According to the court filings, the racketeering involved:
- Coordinated Kickback Networks: Defendants established shell DME companies to facilitate fraudulent billing in partnership with metropolitan clinics that issued “one-size-fits-all” prescriptions to nearly every patient, regardless of actual medical need.
- Systemic Price Gouging: To bypass 2023 regulatory caps, defendants allegedly disguised equipment rentals as sales. In one instance, a device with a legal monthly rental limit of $300 was billed at $1,800 – representing a 500% markup over the allowable rate.
- Anonymous “Knockoff” Equipment: The lawsuits claim defendants sourced cheap, unbranded hardware while intentionally omitting make and model details from claim forms to prevent adjusters from flagging the inflated charges.
- High-Volume Claims: Across two separate RICO actions, Allstate identifies over $1 million in already paid losses and an additional $1.1 million in fraudulent claims currently pending.
- Broad Exploitation of Expensive Technology: The schemes spanned a wide array of expensive unnecessary treatments, including EMTT devices, cryotherapy units, Triad 3LT light therapy, PEMF devices, and ultrasound devices.
“These lawsuits are a textbook example of the ‘fraud tax’ every New York driver is paying,” said CAR spokesperson James Freedland. “When fraud rings treat the No-Fault system like a personal ATM – billing $1,800 for a $300 device – they’re not just stealing from insurers. They’re taking money directly from the pockets of hardworking New Yorkers struggling to pay monthly premiums. Governor Hochul’s reforms are the missing link needed to stop this organized assault on affordability.”
“The Governor’s reforms attack every stage of these kinds of schemes – from documentation and billing to oversight and enforcement – so that New Yorkers see real relief in their premiums rather than just delayed enforcement after the fact,” Freedland added.
