Insurance Companies on the Offensive Against Providers Who Provide Treatment in Connection with Automobile Personal Injury Claims

Over the past several years, there has been steady increase in suits by automobile insurance carriers against health care providers who treat individuals in connection with their personal injury claims. Most of these suits allege that the health care providers are fraudulently billing the insurance companies by either billing for services that were not performed or by providing treatment to the patients that is not medically necessary.  With rising insurance costs, this is a litigation trend that is likely to continue in the coming years.

For example, Allstate Insurance Corporation’s filed a $6 million suit targeting allegedly fraudulent Long Island no-fault health care providers. The company says the suit is part of a larger litigation strategy, which it contends will deter fraudulent billing by health care providers and spur changes to New York’s “fraud-riddled” system.  Allstate has accused several health care providers and New York businesses of billing for services that were not performed or medically unnecessary, and of funneling money, in violation of state law, to a proprietor who was not legally allowed to profit from the health services.

In New York, insurers have pushed hard — so far unsuccessfully — for a law making staging accidents to reap no-fault money a felony crime, the ability to retroactively cancel policies involving staged accidents and a law putting the onus on medical care providers to prove that the care they give is medically necessary, among other reform measures.  Critics of such proposals see them as attempts to increase profits even as insurers aggressively target those seeking benefits, under a policy that is supposed to allow for quick payments to address injuries while discouraging damages lawsuits.

Insurers scored a big win in 2005 in State Farm v. Robert Mallela when New York’s highest court ruled insurers “may look beyond the face of licensing documents to identify willful and material failure to abide by state and local law” in their pursuit of allegedly fraudulent care providers. Additionally, in Allstate Insurance v. David Mun, the Second Circuit held that an insurer may file a lawsuit based on allegations of fraud without first submitting the matter to arbitration.  

Other insurers, such as State Farm, Liberty Mutual and Geico, have also filed similar suits against health care providers in many areas of the country.  Providers in Pennsylvania, New Jersey and Delaware have also been sued by State Farm, Allstate and Geico, among other insurance companies.  These cases can be expensive to litigate, and are extremely damaging to the providers’ business. When faced with one of these lawsuits, providers should check their insurance coverage, as some policies may cover some or all of the cost to defend against these lawsuits.