Recent investigations into construction injury lawsuits in New York City have exposed alarming trends that raise serious questions about the integrity of the legal system. An unsettling pattern has emerged: a high concentration of injury claims from residents of specific apartment buildings and neighborhoods, all linked to a small number of law firms. This phenomenon, coupled with powerful RICO actions brought by Tradesman and the ripple effects, not only suggests the possibility of widespread fraud but also threatens the socio-economic stability of New York's legal and insurance landscape.
The ramifications of the fraudulent lawsuits extend far beyond the courtroom. Insurance carriers are left grappling with inflated costs, which ultimately trickle down to policyholders in the form of higher premiums. Moreover, legitimate claimants may find themselves facing increased scrutiny, as the prevalence of fraud leads to a more rigorous claim assessment process. In cases where workers' compensation (WC) claims are misused to fund fraudulent medical treatments and lost wage claims, the financial burden can be staggering. Instances where WC carriers have disbursed up to $700,000 on staged claims exemplify the severe impact of this fraud on the insurance industry.
Whether it is the suspicious circumstances surrounding these "accidents," the clients' insistence that the alleged hazardous condition never existed, or the fact that even state-of-the-art risk management couldn't prevent the litigation, the red flags are clear. Stakeholders, defense attorneys, and claims professionals all sensed it. Yet, the harsh reality of mounting medical bills, combined with New York's strict liability laws and liberal jurisdictions, continue to fuel this wave of litigation.
The Rise of the Fraudulent Lawsuits
New York Labor Law has always been a prime target for building owners, and those on the receiving end of lawsuits have been alarmed at the increase in frequency and severity. With the proverbial curtain pulled on fraudulent lawsuits, thanks to litigation initiated by Tradesman, heightened awareness is on the radar of the alarming rise in staged and fraudulent claims, particularly within the construction and habitational sectors. Since the pandemic, the number of potentially fabricated or exaggerated claims has sharply increased, driven by a network of players intent on exploiting the system for financial gain. The New York State Trials Lawyers Association, a powerful lobby, has notably declined to comment on the ongoing investigations into these practices, casting further doubt on the integrity of those involved.
In-depth analyses of court filings completed as part of a detailed investigation spearheaded by Kristin Horne of ABC local news in New York uncovered statistics that demand serious attention. It revealed a startling concentration of injury claims originating from specific locales. For instance, a single apartment building on Ellis Avenue in the Bronx, was the source of 30 construction injury claims filed by residents. A two-story home directly across the street accounted for 21 claims. Similar trends were identified elsewhere, with another 12 claims coming from a residence on Haviland Avenue and eight from a building on Morrison Avenue. The concentration of claims from such a limited geographic area raises serious concerns about the legitimacy of these lawsuits and the possibility of coordinated fraud.
The pattern suggests an organized effort to exploit the legal system, casting doubt on the legitimacy of these claims. Further fueling suspicion is the discovery that half of the 62 analyzed lawsuits were handled by just two law firms. This clustering of legal representation points to a potential network of fraudulent activity, driven by the pursuit of financial gain through manipulated injury claims.
The Process of a Fraudulent Accident Claim
Fraudulent accidents in New York can involve a complex web of deception, manipulation, and collusion among various parties. Here’s a breakdown of how such a fraudulent claim may unfold and the typical bad actors involved:
Before the Fall: Staging the Accident
The scheme often begins with the staging of an accident. This can involve individuals deliberately causing or faking an accident that appears legitimate. For example, two or more individuals may collaborate to create a minor collision, ensuring that it looks believable. Often the individual who is being asked or coerced into staging the accident is a vulnerable member of society. These are the individuals who unwittingly become participants, and after that subjected to medical operations and more all to receive a token of the overall settlements achieved.
Who are these individuals?
The orchestrators of the fraud may recruit participants, which can include drivers, passengers, and even bystanders. These individuals may be compensated for their involvement or promised a share of the insurance payout. Some anecdotal evidence suggests that they are paid a lump sum once the fall is successfully accomplished, with the balance being a set lump sum at the case resolution. The remainder of the money goes to the doctors, lawyers, and litigation funders. The real victims in all of this are the participants.
Filing the Claim
After an accident, the involved parties submit insurance claims outlining injuries and damages, often exaggerating or fabricating details to inflate the claim's value. Medical records are manipulated with false diagnoses or inflated treatment costs. What distinguishes this type of litigation is the blatant collusion with medical professionals who administer unnecessary treatments, falsify medical documentation, or inflate billing. These professionals may be part of a broader network profiting from fraudulent claims. This goes beyond "cut-and-sew" procedures that could be caught by a defense-independent medical exam; these are genuine surgeries performed in otherwise healthy individuals. A person in good health is subjected to unnecessary medical procedures, with the healthcare provider falsely asserting that the treatment was essential. The motivation? To drive up medical expenses and, by extension, the settlement or damage award value. At the core of this scheme are lawyers who collaborate with these medical professionals as well as litigation funders. Together, they have cultivated a cottage industry where the development of claims and the litigation process by the plaintiff bar has been meticulously refined over time.
Payout and Distribution
Case disposition means the individual is made whole through the settlement or trial process. However, this is misleading. The bulk of the funds to resolve the claim go to the lawyers, doctors, and litigation funders. The innocent individual subjected to unnecessary medical treatments is left with very little and bears the scars of the deception for life.
The Impact on the Insurance Industry
In response, the industry is applauding the resources committed by Tradesman Insurance and the success they have achieved in taking bold steps to combat the rise in fraudulent claims. Through strategic filings of RICO actions that call out plaintiff lawyers and medical doctors participating in fraudulent schemes, they have had a profound impact in New York. Stakeholders on the ground see the results.
Thanks to the courageous work of Tradesman Insurance, there has been a marked change in the litigation environment for New York. Over the course of recent months, the curtain has been pulled back on the troubling trend within New York's legal and insurance landscape. Alarms have been sounded both in the media and legal filings exposing the prevalence of fraudulent claims that threaten the integrity of both systems. This phenomenon has highlighted significant ethical breaches, organized crime connections, and the alarming withdrawal of numerous lawsuits by legal firms. As the stakes grow higher, it is imperative that legal professionals, insurance companies, and stakeholders unite to combat the pervasive nature of this fraud.
The Impact of RICO on the Fraudulent Filings
Over time, New York's insurance market has significantly contracted, leaving only a few carriers willing to offer policies to building owners. Premiums have surged, and efforts to enact tort reform, particularly around New York's labor law, have faltered. Through strategic RICO (Racketeering Influenced and Corrupt Organizations Act) actions, Tradesman Insurance has exposed the widespread collusion between certain lawyers and doctors. These legal actions have had a profound impact. Buildings proudly display the fact they are insured by Tradesman and are somehow accident free now. Doctors have begun withdrawing from depositions and trials. Defense lawyers are witnessing an impact on the litigation front as well. Recently, one law firm alone withdrew from nearly 300 lawsuits. With potential financial implications estimated between $300 million to over $1 billion, this withdrawal signals a significant shift in the legal landscape and underscores the urgency for accountability.
The use of RICO actions in combatting insurance fraud has been a game-changer. RICO is a formidable legal framework that allows for both civil and criminal penalties against individuals and organizations engaged in a pattern of racketeering activity. This includes a range of criminal acts, such as fraud, drug trafficking, and money laundering. The law empowers plaintiffs to seek treble damages, making it an attractive option for those seeking to hold wrongdoers accountable. In the context of insurance fraud, RICO actions expose the interconnectedness of fraudulent actors—lawyers, medical professionals, and others—while simultaneously sending a clear message that such behavior will not be tolerated.
The application of RICO to insurance fraud effectively dismantles intricate networks of collusion among professionals who exploit vulnerable individuals for financial gain. Tradesman's brave and unprecedented act of filing of multiple RICO actions against doctors and lawyers involved in fraudulent insurance schemes has significantly altered the litigation landscape. These filings not only highlight the seriousness of the allegations but also serve as a powerful tool in raising public awareness about the extent of the fraud.
Game of Chess: Defense Response While RICO Actions Are Pending
Already, we are seeing plaintiff attorneys withdraw from lawsuits with Tradesman's filings instilling fear in both legal and medical professionals entangled in these schemes. This raises the question: how will the plaintiff bar respond? As RICO actions continue to unfold, stakeholders targeted by these fraudulent lawsuits find themselves in a high-stakes game of chess. Mastering the intricacies of the litigation process has become critical, and one emerging defense tactic is opposing motions to withdraw by plaintiff counsel. Defense attorneys argue that such withdrawals must be justified, especially if fraud is suspected. This tactic aims to shed light on the motivations behind the withdrawal, helping to determine whether unethical practices are at play.
However, the effectiveness of this approach has yielded mixed results. Judges often order in-camera hearings, where discussions about the withdrawal take place privately between the judge and the plaintiff's attorney. This lack of transparency can perpetuate the fraudulent narrative and make it more challenging for the defense to prepare an effective counterstrategy.
Collaboration among defense attorneys is now more vital than ever. Unlike the tightly coordinated networks of plaintiff lawyers and medical providers, who often operate as a cohesive unit despite being from different firms, defense attorneys frequently work in silos. This insular approach can hinder their ability to combat fraud effectively. By sharing information and resources across the defense bar, legal professionals can create a united front against fraudulent activities. This collaborative spirit can empower the defense, making it more challenging for fraudulent schemes to thrive.
The Ethical Implications and Societal Responsibilities
The implications of these fraudulent schemes extend far beyond the courtroom. Unsuspecting individuals, often facing significant personal challenges, are lured into participating in fraudulent activities under the pretense of receiving compensation for fictitious injuries. Many find themselves subjected to unnecessary medical procedures that can have lifelong physical repercussions, all for minimal financial gain. These individuals become collateral damage in a system that exploits their vulnerabilities.
Moreover, the actions of a small number of unethical lawyers and doctors tarnish the reputations of their professions. The ethical canons that govern legal and medical practices are violated, casting a shadow over the integrity of both fields. It is imperative that the defense bar recognizes the societal impact of these fraudulent schemes and takes proactive measures to combat them.
Medical professionals are perhaps the most shocking participants in these fraudulent schemes. Consider the gravity of their betrayal considering the Hippocratic Oath: "I will abstain from all intentional wrong-doing and harm." Yet, some doctors, chiropractors, and therapists, engage in falsifying diagnoses, providing unnecessary treatments, and inflating medical bills to bolster fraudulent claims. Imagine doctors performing surgeries on backs, hands, and legs of perfectly healthy individuals to fabricate injuries supposedly sustained from an accident. For those faking more severe injuries, such as falls from heights, the procedures can be even more extreme, aggressive procedures that far exceed standard medical practices.
Lawyers, in turn collaborate with these medical professionals, either actively participating in the fraud or turning a blind eye to the ethical violations. They help file claims supported by manipulated evidence, enabling the continuation of this deceitful enterprise. Notably, these collusive efforts between certain doctors and lawyers have not gone unnoticed; both groups have been targeted in four separate RICO filings by Tradesman seeking to expose and eliminate this fraudulent network.
To address this issue effectively, defense attorneys must work collaboratively with insurance carriers, property owners, and fellow legal professionals. By fostering a culture of information-sharing and cooperation, the defense bar can not only combat fraudulent schemes but also contribute to a healthier insurance market. This approach benefits clients by reducing the likelihood of unsubstantiated settlements and ultimately serves society by diminishing the incentive to target vulnerable individuals. The ongoing RICO actions against those involved in insurance fraud are a pivotal movement in the fight against this pervasive issue. By adopting a collaborative mindset, the defense bar can better navigate the complexities of litigation and make strides toward eradicating these unethical practices. Together, we can uphold the integrity of the legal and medical professions, protect vulnerable individuals from exploitation, and create a more just society.
A Call to Action
Legal professionals, insurers, and the public must join forces to identify and combat this rampant fraud. It is crucial to promote transparency and accountability at all levels, ensuring that fraudulent claims are swiftly identified and prosecuted. Stakeholders should advocate for stricter regulations and policies that protect legitimate claimants while deterring those who seek to exploit the system for personal gain.
Moreover, the legal community should actively engage in discussions about ethics and integrity, fostering an environment where ethical practices are prioritized, and fraudulent activities are condemned. Sharing resources and intelligence among firms can facilitate a collective response to this growing crisis.
This article originally appeared on Wood Smith Henning & Berman LLP. https://www.wshblaw.com/
About the Authors:
Tracy J. Abatemarco is a co-managing partner at Wood Smith Henning & Berman, LLP. tabatemarco@wshblaw.com
Amy J. Curley is a partner at Wood Smith Henning & Berman, LLP. acurley@wshblaw.com