New Allstate lawsuits expose how massive fraud rings jack up NY car insurance rates

New Cases Underscore Urgent Need to Pass Gov. Hochul’s Auto Insurance Reforms

New York: Two new federal Racketeer Influenced and Corrupt Organizations Act (RICO) lawsuits filed by Allstate Insurance Company expose systemic fraud inflating New York’s auto insurance premiums. The lawsuits, targeting coordinated “medical mill” schemes, highlight the need to pass Governor Kathy Hochul’s insurance reform package to protect honest policyholders from skyrocketing rates.

Allstate Insurance Company et al v. FocalSupply Inc. and Allstate Insurance Company et al v. Peoples Choice Medical Supplies Inc were 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 $1,800, representing a 500 percent 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 pays,” said CAR spokesperson José Bayona. “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 who struggle 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,” Bayona added.

Links to the cases can be found here and here. 

Citizens for Affordable Rates (CAR) is a coalition of citizens, advocates, and organizations dedicated to tackling the root causes of high auto insurance costs in New York. Through advocacy, education, and policy reform, CAR is committed to building an affordable and dependable system for all New Yorkers. For more information, visit: www.citizensforaffordablerates.com