No-Fault Lines

Will Further Regulations on No-Fault Insurance Cure the Problem?

Benjamin Lawsky of the state’s Department of Financial Services, shown earlier this year launching a mortgage foreclosure initiative. (Source: Department of Financial Services)

Just weeks after New York’s Superintendent of Financial Services, Ben Lawsky, announced a spate of new regulations designed to address no-fault insurance fraud, Allstate Insurance filed a $29.9 million civil suit against a fraud ring of doctors, acupuncturists and runners accused of staging car accidents to take advantage of the state’s no-fault insurance laws.

The suit seemed to focus attention on a problem that lawmakers said has been growing for years, despite attempts to address it through legislation at the state level—and lawmakers on both sides of the aisle are wondering what they can do to stem the tide of fraud estimated to cost consumers in downstate areas hundreds of dollars a month more in car insurance premiums.

A 2011 study by the Insurance Research Council estimated that between $385 and $512 million in excess auto-insurance premium payments annually are directly related to no-fault fraud, said State Sen. Jim Seward, the chair of the Senate Insurance Committee.

“In other words, this is not a victimless crime,” said Seward. “Anyone who purchases auto insurance in New York State is a victim of this fraud.”

Seward and the Senate Republican majority see no-fault fraud as enough of a problem that they’re pushing for the passage of a spate of bills that would criminalize the fraud rings, a more severe step than the series of regulations recently promulgated by Superintendent Lawsky, allowing the state to remove doctors who’ve practiced fraud from the no-fault system, even without criminal conviction.

In the eyes of Senate Republicans, law-enforcement agents and prosecutors need more tools to go after fraud rings, particularly the so-called “runners” who bring doctors, pharmacists and the people who stage accidents together into the schemes. “These bills,” Seward said, “are no-brainers, in my estimation.”

But the Cuomo Administration’s approach so far, through Lawsky’s department, seems heavily based on utilizing existing law to promote regulations that can better police the no-fault system without making changes to the criminal code.

And only one of the bills, which would enable insurers to retroactively cancel insurance plans set up for fraudulent purposes or with false or stolen credit card information, seems remotely likely to pass the Assembly.

Assembly Insurance Committee Chair Joseph Morelle is working on a bill with Assemblymen Carl Heastie and Joe Lentol that would enable retroactive policy cancellation, but it’s a delicate subject, Morelle said.

“We are trying to work on some language that would make people certain that we wouldn’t cut off someone who didn’t intend to defraud but who just gave a check that happened to bounce because they didn’t know how much money was in their checking account,” he said.

“That’s why this stuff gets so difficult to do. It is separating out people who simply make mistakes from people who are trying to defraud insurance companies and the public.”

lnahmias@cityandstateny.com