A Look at the Rise in Insurance Fraud in New York City and What is Being Done to Identify and Combat it

(January 2025) - In New York City, the rising rates of staged accidents and insurance fraud schemes have led to significant financial losses for insurers and increased insurance premiums for those seeking to obtain coverage. A few examples of some of the different types of fraudulent claims that have recently been in the spotlight in New York City include a staged accident, which was captured on the “dash cam” of the intended target of the fraud and later went viral across the internet, and several high-profile RICO lawsuits against well-known doctors and personal injury attorneys who are accused of orchestrating complex networks where professionals collaborate to stage accidents, submit false claims, and profit from insurance payouts.

The staged accident that was captured on an innocent motorist’s dash cam occurred this past October 2024, in Queens. At that time an innocent motorist was traveling in the left lane of the Belt Parkway when another driver intentionally cut her off, stopped their vehicle in front of the motorist while still in the roadway (which forced the motorist to come to a complete stop as well) and then put the car in reverse before suddenly slamming into the front of her vehicle in an attempt to stage a rear-end type of accident. Thankfully for the innocent motorist, her dash cam clearly captured the entire series of events, including when multiple fraudsters existed their vehicle and attempted to feign injuries and make it seem like their vehicle had just been struck from the rear by the motorist’s vehicle. The footage later went viral and was viewed tens of millions of times across multiple social media and news outlets, eventually leading to a police investigation and the subsequent arrest of one of the perpetrators, who was charged with staging a motor vehicle accident, criminal mischief, reckless endangerment, conspiracy and insurance fraud.

The attempted staged accident underlined the value of using a dash cam to mitigate risk as a motorist in New York City. In this regard, dash cam footage obtained from vehicles operated by our clients and their drivers has been particularly useful in defending against personal injury and property damage claims arising out of motor vehicle accidents.

Dash cams capture real-time video of the road, documenting every moment of the drive, and in staged accidents such as the one on the Belt Parkway, this footage can be instrumental in proving the absence of negligence on the part of our client. Without the dash cam footage in this particular example it would have been the innocent motorist’s word against those of at least four other people about the circumstances surrounding the accident. The number of alleged “witnesses,” paired with the type of vehicle damage that would typically be associated with a rear-end accident, would have likely painted an unfavorable liability picture for an otherwise entirely innocent motorist.

We also often see the benefits of dash cams in disputing “phantom passenger” claims where fraudsters claim that additional passengers were present in their vehicle during an accident to inflate the number of potential injury claims. Additionally, the visible presence of a dash cam can actually deter fraudulent behavior before it occurs or stop such behavior from going further if a potential fraudster is able to see that their actions are being recorded. This type of deterrence benefit is also seen in the Belt Parkway accident example as one of the attempted fraudsters approaches the motorist’s vehicle after the collision, observes the dash cam in the vehicle, visibly reacts to its presence and then appears to turn to the other fraudsters from his vehicle to inform them that there was a dash cam recording the entire series of events. The fraudsters eventually get back into their vehicle and flee the scene of the accident before the arrival of police.

While dash cams have proven to be very valuable in the fight against fraudulent claims arising out of staged motor vehicle accidents, the issue of insurance fraud extends beyond individual scammers to organized schemes involving medical and legal professionals. In recent years, including as recently as this past month, several RICO (Racketeer Influenced and Corrupt Organizations Act) lawsuits have been filed in New York against doctors and personal injury lawyers accused of orchestrating fraudulent activities. These cases have revealed complex networks where professionals collaborate to stage accidents, submit false claims, and profit from insurance payouts.

In March 2024, a lawsuit was filed naming several doctors and New York personal injury attorneys alleging violations of the RICO Act for operating a scheme where the plaintiff’s lawyers would coach workers on how to stage accidents in order to then seek treatment through Workers' Compensation and obtain windfall judgments in personal injury suits. The lawyers would also refer their clients to several well-known doctors who would then provide the plaintiffs with fictitious diagnoses and/or exaggerated claims of injuries or unnecessary surgery, according to the suit.

A new RICO suit was filed in the U.S. District Court for the Eastern District of New York against a prominent New York City personal injury law firm and numerous doctors in and around the New York City area, which alleges that from at least 2018 to the present - with a marked escalation since 2020 - the defendants orchestrated a widespread fraud scheme by unlawfully grooming and recruiting construction workers into staging and perpetuating fake construction accidents and/or transforming legitimate minor or localized injuries into lucrative full-body claims. The suit further alleges that the doctors involved in the scheme would provide or allege to have provided medically unnecessary and excessive healthcare services to the plaintiffs while using the fraudulent diagnoses and medical services to inflate the settlement values of lawsuits. Further, this suit also alleges that there may even be some common elements between this particular scheme and the scheme in a prior RICO action in which criminal convictions were handed down and affirmed by the U.S. Court of Appeals for the Second Circuit, specifically with regard to the possibility that poor and homeless people may have been recruited by the attorneys to fake accidents around the New York City area and then seek unnecessary medical treatment, sometimes even including surgeries. The attorneys would then file a lawsuit against the property owner for these fraudulent damages and the proceeds from the lawsuits, which often were settled out, would then be divided among the co-conspirators with the poor and homeless recruits receiving a relatively small portion. 

In conclusion, defending against staged accidents and fraudulent insurance claims has become an exponentially growing challenge in New York City’s complex legal and insurance landscape. Fighting back against fraud and defending against these claims requires vigilance, preparation, and a proactive approach. By staying informed about common schemes, thoroughly documenting incidents contemporaneously to their occurrence, and working closely with independent experts, we approach each claim individually with the goal of significantly reducing the risk that our clients will fall victim to fraud.

Authors:

Adam Schwartzstein, Partner and Vice-Chair of Transportation Practice

Daniel Rocco, Partner