BUFFALO, N.Y. (WIVB) – No-fault auto insurance was designed to pay promptly, regardless of who is at fault.
It’s been around since the 1970’s, serving a valuable purpose; speed up the payment of medical treatment and lost wages to people injured in accidents.
But some are taking advantage of a good thing, and costing New Yorkers hundreds of millions of dollars a year because of fraud, according to the insurance industry
“It is more prevalent downstate. There’s a concentration of medical mills downstate, but this problem is creeping upstate. It’s in all the upstate cities including Buffalo,” said Ellen Melchionni, president of the New York Insurance Association.
Melchionni and others say that cost is being passed onto honest people.
“Fraud is a clear contributor to higher premiums,” said Jim Quiggle, director of communications with the Coalition Against Insurance Fraud, based in Washington, D.C.
“Buffalo does have a problem with staged crash rings. No question about it,” he said.
One example involves staged crashes where people are recruited off the street and packed into cars as fake passengers. Investigators say they’ll conduct low-speed crashes, pretend their injured and receive phony or inflated treatment, and then file a claim with the insurance company.
“Tens of thousands of dollars. Millions of dollars are pouring in to these rings. It adds up to hundreds of millions of dollars in fake claims a year in New York,” said Quiggle.
“Your honest drivers who especially live in these areas where fraud is prevalent, they pay in higher premiums,” he added.
Industry officials say New York City is the epicenter of this type of fraud because of its sheer size and mass of people that can be recruited.
“It does affect all the consumers within New York State,” said Kevin Gallagher of the National Insurance Crime Bureau’s northeast office.
The agency investigates suspicious claims referred by insurers across the state.
According to NICB data, the agency received 9,149 total questionable referrals statewide for 2017. No-fault made up 2,062 of those referrals.
“A lot of people have the misconception that the insurance companies have deep pockets, they’re paying for this. It’s getting passed on to all of us through the higher premiums,” Gallagher said.
Erie County, for example, had 315 total referrals to NICB in 2017; 54 involved no-fault claims.
State Senator Chris Jacobs, R- 60th District, thinks the no-fault system is broken.
“This is very serious, very egregious. It’s really happened for a long time. It’s really time for it to be resolved,” said Jacobs.
Legislation that would toughen the law has been introduced in Albany, but Jacobs, a member of the Insurance Committee in the state senate, says there’s no guarantee lawmakers will move on it.
“Does not seem to be any will up in Albany or elsewhere to try to take action and to mitigate this,” he said.
“I think this fraud thing is something that we could deal with, and I don’t think it would necessarily end no-fault at all. I think no-fault could still work. I will say I think we do need to take a look at no-fault because I think there’s problems there in terms of the way it’s designed,” Jacobs added.
New York is among 12 states with no-fault. It’s designed to get people medical and lost wage compensation quickly, regardless of who’s at fault.
The insurer has 30 days to pay the claim on time or pay interest.
Ellen Melchionni says 30 days is not enough time, and she’s pushing for changes to the law.
“We are advocating for a bill that would allow a carrier more than 30 days to investigate a claim if they suspect fraud,” said Melchionni.
She would also like to see a law enacted that would permit insurers to retroactively cancel a policy if it was obtained fraudulently.
“These criminals will steal a credit card. They’ll go online. They’ll purchase insurance, and then within 24 to 48 hours they go out and they load the car up with passengers and they stage an accident,” she added.
According to the National Association of Insurance Commissioners, in 2015, New York State had the second highest average cost for auto insurance in the entire country at $1234.84.
That’s compared to the national average of $889.01 in 2015.
John Comerford, a plaintiff’s attorney with Lipsitz & Ponterio, argues that the vast majority of people filing no-fault claims are not faking injuries in order to game the system.
“Nothing is perfect. But I think it is working and I hope there’s no changes,” Comerford said, referring to the no-fault system.
“This is a contract. You’ve paid for these benefits. And if you’re injured, you’re entitled to the benefits from this policy you paid into,” he explained.
“They want to get up in the morning. Go work really hard. Come home and see their family. They don’t want to sit on a couch and collect no-fault benefits.”
In New York State, each insurance policy carries a minimum of $50,000 in no-fault coverage for each occupant of the vehicle, according to the New York Insurance Association.
While it’s not a huge amount for the honest person who requires multiple surgeries and years of ongoing medical treatment, it could be a significant payday for the faker looking to milk the system.
According to the New York State Department of Financial Services, suspected no-fault fraud accounted for 53 percent of all fraud reports received by the agency’s frauds bureau in 2016.
“We think over the last decade it’s probably cost New Yorkers almost $2 billion,” according to Ellen Melchionni.
Attorney John Comerford believes there’s another side to this issue.
“This to me is really a ruse by the insurance company,” said Comerford.
Comerford has seen issues with no-fault over the years, but says from his vantage point the problem rests with some insurance companies.
For example, he says, insurers have the right to order what’s called an independent medical exam.
“There was a doctor performing independent medical exams in the Buffalo area. He was seeing up to three-thousand claimants a year,” Comerford explained.
“He was rubber stamping that these hardworking men of Western New York, and women, were healthy, period. His only compensation came from the insurance company for his time. He was incentivized to rubber stamp these exams.”
Comerford says in some cases these exams can result in claimants being cut off from receiving treatment and lost wage reimbursements.
“I don’t think these insurance companies who hire doctors like this should have a windfall,” he said. “I think whether it’s the claimant or the insurance company we need transparency,” Comerford said.
“The great majority on both sides I think work in earnest to get it right.”