The High Cost of Auto Insurance Fraud

Auto insurance fraud hits drivers’ wallets hard, not only with the apparent increase in premiums, but also indirectly, through higher costs that are eventually passed down to consumers. A recent story on Fox Business reported about the heavy toll this type of fraud takes on many Americans.

According to the National Insurance Crime Bureau’s (NICB) 2013 report, 78,024 suspected cases of auto insurance fraud were reported nationwide in 2012, an increase of 12.7% from 2011 to 2012. Those numbers helped to raise a three-year total—from 2010 through 2012—to more than 209,000 questionable claims (QCs).

Out of all the types of insurance fraud, auto insurance makes up the largest piece of the fraud pie, the NICB says. There were 4.5 times more questionable auto insurance claims than homeowners’ personal property QC’s (17,183), and almost 17.5 times more than the third highest category—workers’ compensation, including employers’ liability.

Industry studies have estimated that almost a quarter of the bodily injury claims related to auto accidents are false.  In addition, there is almost a 10 percent fraud rate for property and casualty claims made against auto insurance.

This adds up to about $200-$300 per year in extra costs on each auto insurance premium.  But, these are just considered the direct costs.  As far as indirect costs, the Texas Department of Insurance estimates that they add up to about $1,000 per family each year.  These costs are the portion of inflated expenses that businesses have to pay to insurers as a result fraudulent crime. This portion translates into increased costs of goods and services that are passed along to consumers.

In addition, hard fraud, or when the insurable event is fabricated outright or a staged accident, appears to be on the rise and feeds into auxiliary hazards of auto insurance fraud.  Because staged car crashes often exploit people who happen to be in the wrong place at the wrong time, these victims unintentionally become involved in the accidents or in the subsequent series of events, which can have severe consequences such as injury or even death.

According to the Fox News story, there have been numerous incidents where staged accidents have spiraled out of control, resulting in critical injuries and fatalities.  Although the instigators of these types of accidents have been prosecuted, it does not end the motivation to engage in auto insurance fraud.

Overall, the Coalition Against Insurance Fraud estimates that the total cost of fraudulent claims is in the range of $80 billion annually. The group has found that claims tend to rise during difficult economic times, which was evident during the recent recession.

The NICB has a toll free hotline to report fraud anonymously for further investigation.  The number is 1-800-835-6422 or 1-800-TEL-NICB.

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Filed under Fla. Stat. 627.736 (2012), Insurance Fraud

Dangerous Driving Habits Revealed in AAA Study

Even though most drivers support safe driving habits, many do not put them into practice, a recent study by the AAA Foundation for Traffic Safety found. The Foundation’s research points to a “culture of indifference” among drivers who place a high value on safe travel, but also admit to engaging in behaviors they consider unsafe, such as speeding and impaired driving.

The 2014 Traffic Safety Culture Index reports the results of a study in which drivers were surveyed about their drinking and driving habits, texting and cell phone usage, speeding and driving through red lights, and drowsy driving. The following is an overview of the results.

Drinking, Drugs and Driving

The message about the dangers of drinking and driving has been sinking in, as 66 percent of those drivers surveyed view the practice as a very serious threat to personal safety. In addition:

  • 97% consider it unacceptable to drive when someone has had too much to drink
  • 80% believe that anyone convicted of driving while intoxicated more than once should have an alcohol interlock ignition device to prevent them from starting the car if they have been drinking
  • 73% think alcohol interlock ignition devices should be installed in all new cars
  • 63% favored lowering the blood alcohol level from .08 to .05 g/dl

Even so, one in eight drivers still reported driving in the past 12 months while their blood alcohol level might have been at or over the legal limit, and 19 percent said they did so in the past month.

As far as drug use, almost half of those surveyed believe it is a much larger problem than it was three years ago.

  • 56% view using illegal drugs as a serious threat
  • 28% see prescription drug use an issue
  • Over 90% agreed that it was unacceptable for a driver to “drive one hour after using marijuana”
  • 85% supported laws that would make it “illegal to drive with a certain amount of marijuana in one’s system”

Texting and Cell Phone Usage

When it comes to cell phone use, drivers rate certain behaviors more risky than others. The study found:

  • 69% reported talking on a cell phone while driving in the past 30 days
  • 33% said they “talk on their cell phone while driving fairly often or regularly”
  • Over 50% say the habit is dangerous
  • 66% say the habit is unacceptable

However, 65% of drivers consider it acceptable to use hands-free phones, while only 33% view it as unacceptable.

In terms of texting, 78% of drivers believe that texting and emailing while driving are dangerous.

  • 89% of drivers support laws against texting, typing and emailing while driving
  • 68% strongly support such a law

However:

  • 36% admit to reading a text message or email while driving in the last 30 days
  • 9% admit that they do it fairly regularly
  • 27% like to multi-task and admit to driving and typing a text or email at the same time over the past 30 days
  • Less than 50% support the federal government regulating “non-driving-related in-vehicle technologies” for being considered a distraction.

Age definitely has an impact on how distracted driving is perceived. Drivers over the age of 60 are the least likely to engage in these types of activities, while drivers aged 25-39 are most likely to talk on the phone, text and email, and view these activities as acceptable. Younger drivers, ages 16-18, also believe it’s acceptable to text, email and use the internet while driving.

Speeding, Red Lights and Drowsy Driving

A behind-the-wheel feeling of apathy toward speeding, running red lights and drowsy driving is also apparent in drivers, according to results from the study.

While 76% consider it unacceptable to drive more than 15 mph over the speed limit and 30% view speeding on the highway as a serious threat to their safety, 46% said they have driven 15 mph or more over the speed limit in the past 30 days and 14% said they do it fairly regularly. In addition, 95% consider driving 10 mph over the speed limit in a school zone unacceptable, but only 44% view speeding on residential streets as a very serious threat.

In terms of how drivers handle red lights, 94% consider it unacceptable to drive through a red light in cases where they could have stopped, but 33% admit to running a red in the past 30 days and 2% do it regularly.

As far as driving while sleep deprived, 96% consider it unacceptable to drive when they are so tired that they have trouble keeping their eyes open, but 29% reported that they had driven while struggling to stay awake in the past 30 days, 20% said they had done this more than once, and 2% do it on a regular basis.

Click on the link to read more about the AAA 2014 Traffic Safety Culture Index.

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Court Order Issued in PIP Case Alleging Exorbitant Hospital Fees

On February 20, 2015, Judge James S. Moody, Jr., of the U.S. District Court, Middle District of Florida, issued a ruling in the case Herrera, et al. v. JFK Medical Center, et al. That suit, brought in 2014 by four Florida drivers, alleges that the defendant hospitals are exhausting Personal Injury Protection (PIP) benefits by grossly overcharging for services—at up to 65 times what Medicare pays. The lawsuit names JFK Medical Center in Atlantis, Memorial Hospital Jacksonville, North Florida Regional Medical Center in Gainesville, and HCA Holdings, Inc. as defendants.

The plaintiffs, injured in separate motor vehicle accidents, received emergency radiological services at the named HCA-operated defendant hospitals. The services were covered by the plaintiffs’ PIP insurance. The plaintiffs allege that they were charged an “exorbitant” rate for these services, thereby prematurely exhausting their PIP benefits and leaving them with medical expenses in excess of what they would otherwise have to pay.

Plaintiffs allege causes of action for violation of the Florida Deceptive Unfair Trade Practices Act (“FDUTPA”), breach of contract, and breach of the implied covenant of good faith and fair dealing. Plaintiffs sought to have the case certified as a class action.

At a February 17, 2015 hearing, the defendants made motions to dismiss the plaintiffs’ complaint and motions to strike the class allegations. Judge Moody granted the motions in part and denied them in part, as discussed below.

First, HCA argued in its motion to dismiss that, since it is the ultimate parent company of the hospitals, it has no direct liability for the hospitals’ actions. The court, however, held that plaintiffs’ had sufficiently pled a cause of action when they pled that HCA is directly involved in setting and enforcing hospital guidelines and that the hospitals acted as agents of HCA.

Second, the defendants argued that plaintiffs FDUTPA claims fail because plaintiffs cannot allege that HCA was engaged in “trade or commerce” as required by the statute. Recognizing that other courts have held that the types of allegations the plaintiffs are making support a FDUTPA claim, the court held that plaintiffs may proceed to attempt to prove their case.

Third, plaintiffs allege breach of contract based on incorporation of the PIP statute into plaintiffs’ contracts with the hospitals. Because the PIP statute requires that only “reasonable” amounts may be charged, plaintiffs allege that defendants breached the contracts by charging unreasonable rates. The court concluded that plaintiffs may incorporate the PIP statute’s reasonable requirement into the contracts and therefore proceed with the breach of contract claim.

Third, in Count III of their amended complaint, plaintiffs allege that the defendant hospitals breached their duty of good faith and fair dealing by charging them unreasonable rates for medical services. Because plaintiffs failed to allege that an express term of the contract had been breached, the court granted the defendants’ motion to dismiss for failure to state a claim.

Finally, defendants moved to strike the class allegations because individual issues predominate. The court agreed that, given the nature of the claims and individual factual inquiries required, the individualized issues are predominant and the suit cannot proceed as a class action. As a result of that ruling, only one of the plaintiffs—Marisela Herrera—may proceed with the action. The remaining plaintiffs were dismissed without prejudiced to file separate, individual actions.

Click on the link to view the court order in Marisela Herrera et al., v. JFK Medical Center Limited Partnership, et al., Case No. 8:14-cv-2327-T-30TBM in U.S. District Court for the Middle District of Florida.

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Filed under Case Law, Fla. Stat. 627.736 (2012)

Orlando Clinic Operators Arrested in PIP Fraud Scheme

Dr. Lherisson Domond, a Coconut Creek physician, fronted ownership of the Unity Pain and Injury Center clinic for most of 2012 in exchange for monthly payments of $1,500, according to the Florida Department of Financial Services.

Domond admitted that he agreed to be paid for the use of him name as owner of the unlicensed medical clinic. Further investigation revealed that Nesly Loute of Naples and Pierre Alex Herisse of Orlando actually managed the clinic’s operations.

In investigating Unity Pain and Injury Center, the Division of Insurance Fraud discovered that the clinic illegally provided medical treatment and physical therapy to individuals involved in automobile accidents. The clinic then billed the treatments to various insurance companies under the PIP coverage of patient insurance policies.

The three individuals face felony charges for fraud, operating an unlicensed clinic, and grand theft, all of which carry sentences of up to 30 years.

The Division of Insurance Fraud reports that it has made 249 PIP arrests since July 1, 2014.

Click on the link to read the news announcement about the Unity Pain and Injury Center.

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Filed under Insurance Fraud, Licensing

Florida Hit-and-Run Accidents Jump in 2014

One out of four crashes in Florida now involves a hit-and-run driver, according to statistics recently released by the Florida Department of Highway Safety and Motor Vehicles (DHSMV).

Florida hit-and-run crashes increased by seven percent from 2013 to 2014, reaching a new high of more than 80,000 accidents. The three South Florida counties of Miami-Dade, Broward, and Palm Beach collectively represent 40 percent of the statewide totals, according to the department.

The severity of hit-and-run accidents also appears to be increasing, with a 23 percent increase in hit-and-run fatalities in 2014 over 2013. Pedestrians are particularly at risk. Almost 50 percent of the 2014 hit-and-run fatalities were pedestrians, representing a jump of 17 percent over 2013.

An infographic published as DHSMV as part of Florida’s driver education campaign, “Hit & Run: Bad2Worse,” appears below.

Florida Hit & Run Accident Statistics 2014.

It is a first-degree felony to leave the scene of an accident when a fatality is involved, and a felony of the third degree when an accident results in an injury, according to law enforcement personnel. Leaving the scene of an accident involving property damage is a second-degree misdemeanor.

The Aaron Cohen Life Protection Act, which became law in Florida last year, imposes a mandatory minimum prison sentence of four years for a driver convicted of leaving the scene of a crash resulting in the death of a person.

Click on the link for more information on Florida hit-and-run accidents from the Florida Department of Highway Safety and Motor Vehicles.

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Hialeah Police Crack Down on Drivers with Fake Insurance Cards

On February 12, 2015, authorities in Hialeah, Hialeah Gardens, and Medley clamped down on drivers carrying fake insurance cards, according to a news report on CBS Miami.

Officers stopped randomly-selected cars and asked drivers for their license, registration, and proof of insurance. Police then contacted the insurance companies to verify coverage. If the card turned out to be fraudulent, the driver was arrested.

Two drivers were arrested for carrying fake insurance cards, while 27 other arrests were made for various traffic violations.

According to the National Insurance Crime Bureau, the use of fake insurance cards has become a national epidemic.  “If you have a printer and you have a computer, you can download a fake insurance card and it looks real,” said Hialeah Police spokesman Carl Zogby.

The use of fake or fraudulent insurance cards affects legal Florida drivers when an uninsured driver is involved in a motor vehicle accident, according to the report. The costs incurred in these accidents are eventually passed on to legal drivers in the form of higher insurance rates.

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Filed under Fla. Stat. 627.736 (2012), Insurance Fraud

Drugged Drivers Increase as Drunk Driving Drops

Although the nationwide effort to raise awareness about the dangers of drunk driving have been fruitful, two recent studies show that there is a troubling escalation in the use of marijuana and prescription drugs behind the wheel that could jeopardize the progress to make roads safer. The ground-breaking studies were recently released by the National Highway Traffic Safety Administration (NHTSA).

The first study, which is the latest version of NHTSA’s Roadside Survey of Alcohol and Drug Use by Drivers, found that the number of drivers with alcohol in their system has declined by nearly one-third since 2007 and by more than three-quarters since 1973. However, figures also revealed that the number of drivers using marijuana or other illegal drugs jumped to almost one in four drivers who test positive for at least one drug that could affect road safety. According to the data, the number of weekend nighttime drivers with evidence of drugs in their system climbed from 16.3 percent in 2007 to 20 percent in 2014, while the number of drivers with marijuana in their system grew by nearly 50 percent.

The study, which has been conducted five times in the last 40 years, gathers data from anonymous voluntary participants throughout the U.S.

The second NHTSA survey, which is the largest of its kind ever conducted, assessed whether driver use of marijuana is tied to greater risk of crashes.  The study not only found that marijuana users are more likely to be involved in accidents, but revealed that this increased risk may partially be attributed to the demographics of marijuana users—in particular young men—who are more likely to be part of a group that is at higher risk of crashes overall.

The study also found that drivers who had been drinking above the 0.08 percent legal limit had about 4 times the risk of crashing as sober drivers, and those with blood alcohol levels at 0.15 percent or higher had 12 times the risk.

Conducted in Virginia Beach, Va., the study gathered data over a 20-month period from more than 3,000 drivers who were involved in crashes, in addition to a comparison group of 6,000 drivers who did not crash.

Results from the NHTSA surveys are consistent with a June study by Public Health Reports, a recent article in Claims Journal pointed out. This study, which was funded by Public Health Law Research program of the Robert Wood Johnson Foundation, found that the profile of a ‘drugged driver’ has changed considerably since 1993. Not only are more drivers testing positive for prescription drugs, cannabis, and multiple drugs, they are increasingly likely to be older than 50. The study noted almost 60 percent of marijuana-only users were younger than 30 years old, but 39 percent of prescription drug users were 50 years old or older.

“America made drunk driving a national issue and while there is no victory as long as a single American dies in an alcohol-related crash, a one-third reduction in alcohol use over just seven years shows how a focused effort and cooperation among the federal government, states and communities, law enforcement, safety advocates and industry can make an enormous difference,” said NHTSA Administrator Mark Rosekind. “At the same time, the latest Roadside Survey raises significant questions about drug use and highway safety. The rising prevalence of marijuana and other drugs is a challenge to everyone who is dedicated to saving lives and reducing crashes.”

A series of additional studies to further understand the risk of drugged driving is being planned by the NHTSA, including the Washington State Roadside Survey, which will assess risk in a state where marijuana has recently been legalized, and a simulator study with the National Institute on Drug Abuse to assess how drivers under the influence of drugs behave behind the wheel.

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Filed under Fla. Stat. 627.736 (2012)