Allstate Files $1.1 Million Suit over NY No-Fault Car Insurance Claims

Allstate Insurance has filed a lawsuit seeking reimbursement of more than $1.1 million from 16 New York State individuals and medical companies it claims were illegally run by people with no medical training and were involved in submitting bogus claims for payment of personal injury protection (PIP) benefits.

A complaint filed in federal district court on Dec. 30 claims that a chiropractor, a layperson and three professional medical corporations that had been incorporated under false pretenses, wrongly identifying a medical doctor as their owner, turned in dishonest bills to Allstate, according to the coverage provider.

Allstate claims the companies were actually owned and “controlled” by individuals with no background in the medical field, rather than by licensed medical professionals, as is required by state law. And the insurer says eight other people and companies conspired to submit dishonest claims for services performed by independent contractors, in violation of New York’s no-fault insurance statutes.

The lawsuit filed last week by Allstate alleges that some referrals for medical services were illegally made by individuals who had a financial interest in the placements. And it contends that two medical companies were identified for incorporation as being owned by a doctor but were actually operated by a man and woman who are not medically trained.

The legal action claims those individuals used two management companies to carry out their ploy and also includes claims of improper self-referral against a woman and a physical therapy business, as well as an accusation of unjust enrichment against another woman and man and their companies.

The lawsuit was the ninth filed in 2011 by Allstate, which has entered a total of 36 legal actions in New York—seeking nearly $199 million in damages—in the past four years.

The company announced in December that it had gone to court seeking recovery of $6.3 million paid out on claims it says were illegally filed by 83 individuals and companies in the New York area involving bills for medical equipment, supplies and orthotic devices.

As in the most recent case, that legal action followed a probe by Allstate investigators.

The insurer is one of many demanding changes to New York’s no-fault system, which critics say is being abused by dishonest claimants, health care providers and attorneys.

The Empire State is one of 12 in the U.S. with no-fault systems, which allow for payment of injury claims by a policyholder’s own insurer and restrict lawsuits for emotional suffering and other noneconomic damages.

New York’s system was established in the 1970s to limit accident lawsuits and slow increases in coverage costs. It allows insured drivers in the state to claim up to $50,000 in medical and other benefits under the no-fault portion of their policies and lets policyholders whose costs exceed those limits seek payment via the courts.

But critics say some unscrupulous claimants are increasingly working the system for as much of that $50,000 as they can get without going to court. And industry experts say the higher costs insurers must pay as a result of such activity force them to raise premiums for all customers in order to stay profitable, making affordable auto insurance increasingly difficult to find for law-abiding consumers.

According to the most recent data from National Association of Insurance Commissioners, New York is the fifth most expensive state in the nation in which to insure a private vehicle, with coverage costing a statewide average of more than $1,044 in 2008.

To read the experiences of current and former Allstate policyholders, readers can find user-submitted Allstate auto insurance reviews online.

About Ben Zitney
Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.

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