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"Fraud in the air"



POL has previously discussed the role of doctors and lawyers in no-fault insurance fraud. Bruce Cranner of Frilot LLC writes us with news of an interesting lawsuit where an insurance company is fighting back:

GEICO is getting very serious about pervasive and well documented no-fault insurance fraud in New York. In a $1.8 million lawsuit filed in the Eastern District of New York on June 11 GEICO seeks compensatory and punitive damages damages under RICO and New York common law against medical professional companies operating an imaging center on Long Island. Among the defendants are members of the plaintiff's bar and a law firm, which certainly takes a claim for simple medical billing fraud and turns it into a strong indictment alleging true litigation racketeering. In summary, GEICO claims that two physicians, two medical professional corporations, a non-physician (and the medical professional corporations) and (OH!) two lawyers and Long Island Law firm engaged in a scheme to submit false or fraudulent claims for radiology services to GEICO associated with no-fault claims. In my view, the inclusion of lawyers on the defense side of the v. is very, very important. GEICO claims this will be the first of many such suits. Other insurance industry powerhouses are, allegedly, poised to follow the Geico Gekko into the warfare of fraud litigation too. Various estimates suggest that pervasive no-fault fraud in New York is costing policy holders big money; as much as 20% by some reports. The problem is a well documented disaster. But, is no-fault the real issue? Is this a case where the system is broken and truly needs to be fixed? Or, is there something else going on here?
On April 21, 2010 in Queens, New York the National Insurance Crime Bureau (NICB) and the New York Insurance Association (NYIA) hosed a 'No-Fault Fraud Summit' to address the ongoing no-fault fraud crisis, which is apparently greater in the New York City metropolitan area than anywhere else. The speakers included the Queens County DA and New York Insurance Commissioner James Wrynn. The take home message; if no-fault insurance fraud in New York is not dramatically reduced premiums will continue to rise. Recent New York decisions were blamed. New laws, in some cases responding to adverse jurisprudence, are being suggested. Vigilant enforcement is urged. But, is the system the problem? Most fraudulent no-fault insurance suits or claims involve small amounts for medical damages which are--in many cases--too small for insurance companies to effectively investigate or fight individually. The economics of the litigation system, combined with the natural and laudable tendency of judges and juries to give the benefit of the doubt to plaintiffs and medical providers who seek recovery of medical bills arguably associated with an auto accident, make fighting the kind of fraud too expensive deal with on a case by case basis. And, they should not need to do so; no-fault schemes, by their very nature, depend on the honesty of claimants and the integrity of health care providers to deliver on the laudable promise (made by no-fault advocates) of reduced cost and prompt claims payment. The fact that the quantity of litigation over no-fault claims has risen dramatically during the last few years suggests that something about the system may be very nearly broken. Government action and enforcement certainly has a role here. But, real lasting change must be delivered by the courts and by lawyers doing, as they are sworn to do, their best for the benefit of their clients and also to insure the fairness and integrity of the system. The attitude and ethics of the lawyers who bring such claims (and defend them), and the Judges who preside over these cases, is the key to solving the problem. So, when and if lawyers are cast in judgment in the GEICO fraud case, after discovery and a trial, the first step toward a lasting solution will have been taken. Even if the Gekko never wins a dime--the first battle will thus be won.

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Rafael Mangual
Project Manager,
Legal Policy
rmangual@manhattan-institute.org

Katherine Lazarski
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.