Senate Targets Auto Fraud

Senate Targets Auto Fraud

ALBANY, N.Y.—The New York State Senate passed legislation to crack down on auto insurance fraud which has led to injuries, even death, for innocent victims and costs hundreds of millions of dollars a year in higher premiums when New Yorkers already pay some of the highest auto insurance rates in the country.

The Senate passed three bills that would significantly cut down on auto insurance scams by increasing penalties for those who commit or assist in the fraud and by giving more flexibility to insurance companies to prevent criminals from getting policies and continuing to commit auto fraud.

“Auto fraud is a very serious problem that costs lives and costs New Yorkers millions of dollars,” said Senate Republican Conference Leader Dean Skelos (R, C, INassau). “The Senate has been passing bills to combat auto insurance fraud for more than a decade, yet, the Assembly has not acted on them while the problem has only grown worse. It’s time the Assembly pass these bills so they can be signed into law and consumers can save money by not having to pay the exorbitant rates that are caused by fraud.”

The first piece of legislation would make it a crime to stage a motor vehicle accident with intent to commit insurance fraud. If a staged motor vehicle accident results in serious injury or death, the person who staged the accident could face a maximum of up to 25 years in prison. The bill is sponsored by Senator James Seward (R, C, IOneonta) (S. 3547), Chairman of the Senate Insurance Committee.

“On March 22, 2003, Alice Ross, a 71 year old grandmother, was killed as the result of a staged auto accident. These ‘accidents’ are arranged and intentionally committed by criminals who then file fraudulent insurance claims for fake crash injuries and rob insurance companies and their policyholders,” said Senator Seward.

“While the economic cost of such activity is staggering with no-fault insurance fraud estimated to cost insurance companies and their policyholders $1 billion per year, staged accidents also pose a serious public safety risk, as is demonstrated by the untimely death of Alice Ross,” continued Senator Seward. “Women and elderly drivers are in particular danger because they are often targeted for these accidents because they are less likely to be confrontational after an accident, thereby making it easier for criminals to engage in this activity.”

“This bill would impose tough penalties on those who stage accidents, thereby deterring individuals from engaging in this dangerous crime. Not only would this help to contain no-fault fraud and reduce insurance premiums, but it will make us all safer,” explained Senator Seward. “New York State drivers should not have to drive down the road wondering whether someone might purposely drive into them for the purpose of engaging in insurance fraud,” said Senator Seward.

According to the National Insurance Crime Bureau (NICB), insurers across the country reported a 102% increase in suspected cases of staged auto accidents between 2008 and 2011.

The second piece of legislation passed by the Senate would make it illegal to act as a “runner” who steers accident victims toward crooked doctors who bill Medicaid for unnecessary medical treatments. Runners are key members of auto fraud rings. Under this bill, runners and their associates could face up to seven years in prison. The bill is sponsored by Senator Dean Skelos (R, C, I-Nassau) (S. 3033) and Assemblyman Gary Pretlow (D, WFWestchester) (A .4597).

“A ‘runner’ is a person who is paid for each patient they send to a fraudulent provider. This can be a very rich incentive for them. The providers commit insurance fraud by recruiting patients who do not need treatment or were not in a car accident, exaggerating illnesses, or, as is all too common, staging accidents,” said Senator Skelos. “Without the runners, the patient supply for fraudulent clinics would dry up, and New York residents could save tens if not hundreds of millions of dollars.” “Other states have for many years criminalized acting as a runner or soliciting or employing a runner to procure patients or clients. It is long overdue in New York, a state with one of the highest average car insurance rates in the nation,” said Assemblyman Pretlow.

“This legislation is patterned on the New Jersey runner law and on the federal Medicare-Medicaid Anti-Kickback Act, both of which make it a crime intentionally to pay for patient referrals,” said Assemblyman Pretlow. “Such a measure is crucial in New York as a way to prevent fraudulent activity by drying up the supply of patients for clinics and other providers whose entire purpose is to bill no-fault insurance carriers without regard to the legitimacy of any particular claim. The use of runners is unfortunately common in the New York metropolitan area.”

The third piece of legislation passed by the Senate to combat auto insurance fraud allows insurance companies to retroactively cancel policies taken out by people who commit auto fraud on newly issued private passenger and automobile insurance policies. The bill is sponsored by Senator Martin Golden (R, C, I-Kings) (S. 1959) and Assemblyman Carl Heastie (D, WFBronx) (A. 3774).

“These criminals often take out policies and pay for them with bad checks or stolen credit cards just before they stage accidents. Under current law, insurance companies cannot cancel the policy and policyholders wind up paying for it through higher premiums. This bill would take that burden off honest consumers,” said Senator Golden.

“Auto insurance fraud is costing New Yorkers millions of dollars, and it’s time that fair and honest members of our community stop paying for the crimes of others,” said Senator Golden. “This legislation will give insurance companies the right to revoke insurance policies for those who try to game the system.”

“Automobile no-fault states have higher average premiums than tort states. One of the reasons for this is that fraud tends to be more prevalent in no-fault systems, as the rules under which they are implemented make it relatively easy for bad actors to submit fraudulent claims,” said Senator Golden. “Additionally, an accident can create a multiplicity of lawsuits, since providers and collection attorneys may initiate a lawsuit for each and every bill. New York’s generous no-fault benefits, with minimal oversight, provide huge incentives for unbundling of services and supplies.”

“Staged accidents are one type of fraudulent claim that is becoming more and more prevalent in New York,” said Senator Golden. “In many cases, actors procure a policy by submitting a bad payment (either using a nonexistent bank account or stolen credit card information). Most states allow the retroactive cancellation of a policy in the case of a reversed payment to prevent this type of activity. New York, however, does not permit retroactive cancellations; rather cancellations are currently only prospective in nature. That turns into a gold mine where no-fault is involved. The time between when the policy is ‘purchased’ and when it is cancelled provides ample opportunity for no-fault fraud.”

“This bill allows for retroactive cancellation in New York of newly issued automobile insurance policies to prevent this type of fraud. This would bring New York in line with the other large no-fault states,” said Assemblyman Heastie. “In fact, only seven other states (AZ, CO, ME, MD, NC, and SD) do not allow for retroactive cancellation. Innocent victims of uninsured drivers (i.e. mandatory uninsured motorist coverage), would be covered under their own policy or the Motor Vehicle Accident Indemnification Corporation,” said Assemblyman Heastie.

“The proposal would allow retroactive cancellation of the automobile policy, in the first thirty days, where the payment is made with insufficient funds or the identity used to procure the policy turns out to be fraudulent,” said Heastie. “The automobile insurers would be allowed to cancel a policy retroactively in these cases.” “By permitting retroactive cancellations, New York would join the great majority of other states, and would remove many of the incentives for staged accidents,” said Assemblyman Heastie.

Last year, the longest-running auto insurance rip-off scam in history was busted by federal and New York City authorities. Three dozen people, including doctors, lawyers, and patients coached to fake injuries, are accused of stealing more than $279 million in accident benefits over five years. The ring allegedly exploited the State’s “no-fault” auto insurance law as their own giant state-sponsored ATM machine. In New York, vehicles registered in the State are required to carry insurance that lets drivers and passengers obtain up to $50,000 for accident injuries, regardless of fault.