Troubled New York Taxi Insurer Sues 180 Providers in Huge No-Fault Fraud Case
New York’s largest taxi insurer that is facing serious financial and regulatory challenges has filed a lawsuit seeking more than $450 million against medical providers it alleges have been part of a huge fraud scheme that takes advantage of the state’s no-fault insurance laws.
Commercial auto insurer and taxi specialist American Transit Insurance Co. (ATIC) is seeking trebled damages, as well as punitive damages, from more than 180 ambulatory surgery centers and related health care entities and individual defendants in the New York and New Jersey area.
The 698-page complaint has been filed under the federal Racketeer Influenced and Corrupt Organizations Act (RICO), which allows recovery of three times compensatory damages, and New York State common law.
ATIC seeks to recover funds it says it paid to providers who are alleged to have unlawfully sought payments for services, including ambulatory surgical centers that the complaint alleges were improperly licensed.
Under New York’s no-fault laws, commercial automobile insurers like ATIC that insure yellow, livery cars, and ride-share vehicles operating in the New York City are required to provide personal medical benefits up to $200,000 per covered person for injuries regardless of fault in an accident. The suit claims the laws can incentivize providers to “over-diagnose, over-treat, and over-bill” to recover the most money for themselves.
“This has put a target on the backs of livery vehicles, and the insurance companies which insure them, for unsavory persons seeking to capitalize on payouts following injuries. In the aggregate, those abusing the No-Fault Law have racked up hundreds of millions in fraudulent payments, destabilized the livery insurance markets in New York City, increased premiums for hard working taxi-cab and livery drivers, and harmed the public,” the complaint states.
The complaint says the defendants, acting in concert with nonparty medical clinics and many health care professionals, executed a “predetermined fraudulent protocol and treatment plan” to bill American Transit in excess of $400 million for medically unnecessary services to covered persons.
According to the complaint, as part of the predetermined protocol, after receiving a standard battery of medical services at the no-fault clinics, claimants were and are ultimately referred for orthopedic and/or pain management evaluations by one of the defendant providers at participating no-fault clinics, resulting in interventional pain management and/or arthroscopic procedures and/or surgeries at one or more of the participating ambulatory surgical centers (ASCs) in New York and New Jersey.
Covered persons are then instructed to return to the same no-fault clinics for post-operative follow-up care. These surgical procedures are performed on an outpatient basis, not requiring an overnight hospital stay. The complaint includes a list of more than 5,800 covered persons who were treated.
The complaint further alleges that the services were rendered as a result of improper kickbacks or patient referrals, services that were not provided as billed or were provided in a manner misrepresenting the services provided, were medically unnecessary, and were provided to maximize reimbursement irrespective of the actual medical condition and needs of patients.
Financial Issues
The fraud suit comes at a time when the insurer, which writes an estimated 60% of all the taxis, livery cabs, black cars and rideshare vehicles in New York City, is under financial pressure and regulatory scrutiny.
Bloomberg has reported that industry analysts and taxi owners became concerned over the future of the company after it posted more than $700 million in net losses in the second quarter. Bloomberg also reported that the company has been working on its problems with regulators at the New York Department of Financial Services (DFS), where regulators are worried that its failure would be devastating to the New York taxi industry and economy.
ATIC has had reserves that are “massively deficient,” and the deterioration has been going on for years, according a letter by DFS, which ordered the insurer to take “immediate action” to cure its insolvency. The state regulator told ATIC executives they should “explore all possible options to obtain funding,” including a potential sale to gain capital.
DFS Letter to American Transit on Insolvency
“If this situation is not resolved, ATIC is at significant risk of failure,” the DFS letter warned. “This would be economically devastating for livery drivers, passengers, health care providers and the New York economy, and would disrupt vital transportation services,” DFS said.
The insurer suggests that the fraud in the no-fault system is partly to blame for its financial woes. It cites a DFS report that no-fault fraud reports accounted for 94% of all healthcare fraud reports received in 2023. ATIC estimates that of the more than 250,000 claims it processes every year, 60-70% are fraudulent.
The insurer claims that “rampant insurance fraud unnecessarily inflates the price of commercial automobile insurance and adversely impacts the financial condition of no-fault insurers by falsely increasing the number and cost of payouts. Such insurance fraud also hurts the general public by overwhelming insurance companies in their claims process and diminishing the amount of coverage available to real injured patients for legitimate medical services.”