Allstate Files $6.3 Million Suit over New York PIP Insurance Claims

Allstate Insurance announced this week it has filed a lawsuit seeking to recover $6.3 million from 83 individuals and companies in the New York area who it says filed claims for personal injury protection (PIP) benefits that included bogus bills for medical equipment, supplies and orthotic devices.

Sign in front of Allstate corporate headquartersThe insurer says its investigators found that dozens of people associated with durable medical equipment retail and wholesale companies conspired in “separate but parallel schemes” to submit misleading bills and supporting documents to Allstate, which unknowingly paid out on the claims.

The complaint alleges that the defendants violated both common law and provisions of the Racketeer Influenced and Corrupt Organizations Act, commonly referred to as RICO. A copy of the lawsuit was not available, but Allstate officials say it identifies 30 durable medical equipment retailers and 25 owners of those companies, as well as 18 wholesalers and 10 individuals associated with them.

Allstate says the lawsuit—the company’s seventh this year to allege unscrupulous billing and other dubious claims activity—highlights how vulnerable the state’s no-fault auto insurance system is to abuse.

“The no-fault system is being exploited, and responsible citizens are the victims,” Allstate spokeswoman Krista Conte said in a news release. “We need lawmakers to enact meaningful … reform that puts the citizens of New York first.”

Allstate joins a growing list of insurers and industry experts calling for changes to New York’s no-fault system. The Empire State is one of a dozen nationwide with such systems, which provide for the payment of injury claims by a policyholder’s insurer and restrict lawsuits for noneconomic damages such as emotional suffering.

New York’s system was set up in the 1970s to limit accident lawsuits and slow the rise of 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 PIP policies, and lets policyholders whose costs are greater than those limits to go to court.

But critics say that dishonest claimants, lawyers and providers of medical care and equipment are taking advantage of the system to file bogus claims for as much of that $50,000 as possible.

Industry experts say the higher costs imposed on insurers by such activity forces them to increase policy rates for customers in order to keep making a profit, making low cost car insurance increasingly difficult to find for law-abiding consumers.

According to the National Association of Insurance Commissioners, New Yorkers paid more than $1,044 to insure a private vehicle in 2008, making the state the fifth-costliest nationwide for coverage.

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

About Matthew Morisset
Matthew Morisset is a proud alumnus of the University of Redlands, where he obtained a degree in English Literature. Utilizing his passion for analysis and writing, Matthew looks for important trends in the auto insurance industry and their implications for consumers and the market as a whole.

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