Author Archives: Mark J. Rose, Esq.

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

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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Filed under Uncategorized

Florida has Highest Rates of Fraud and Claim Buildup Among PIP Claims, Says IRC

Between $5.6 billion and $7.7 billion in excess payments for auto injury claims were paid out in the United States in 2012, according to the Insurance Research Council (IRC). The organization released a new study revealing these excess payments were the result of claim buildup (inflating legitimate claims) and fraud. Under the five main private passenger auto injury coverages, this dollar amount represented between 13 percent and 17 percent of all total payments, the IRC said.

Researchers determined that 21 percent of bodily injury (BI) and 18 percent of personal injury protection (PIP) claims closed with payment “had the appearance of fraud and/or buildup in 2012.” The most common type of abuse they detected was claim buildup—accounting for 15 percent of dollars paid for BI and PIP claims that year.

They also found that fraud and claim buildup seemed to be more pervasive in no-fault insurance states. States with the highest rates of fraud and claim buildup among PIP claims included:

  • Florida (31 percent)
  • New York (24 percent)
  • Massachusetts (22 percent)
  • Minnesota (22 percent)

Claims with the appearance of fraud and/or buildup were also more likely than other claims to involve chiropractic treatment, physical therapy, alternative medicine, and the use of pain killer medications.

“The costs associated with auto injury claim abuse make auto insurance more expensive for everyone,” said Elizabeth Sprinkel, senior vice president of the IRC. “Efforts to lower insurance costs must include measures aimed at reducing the amount of fraud and buildup in the system.”

Ongoing IRC research into the causes of growing auto injury claim severity prompted the study, Fraud and Buildup in Auto Injury Insurance Claims. The research is based on more than 35,000 auto injury claims closed with payment under the five principal private passenger coverages. Twelve insurers, representing 52 percent of the private passenger auto insurance market in the United States, participated in the study.

The report also details several claim handling techniques used by insurers to identify and investigate claim abuse, including independent medical exams, peer medical reviews, and special investigative units. However, the additional costs associated with these efforts to fight fraud and claim buildup are not included in the IRC estimates of excess payments, the IRC reported.

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Filed under Insurance Fraud

Driving in Florida May Be Hazardous to Your Wallet, New Study Finds

You don’t want to have a car accident in Florida, according to a new study released by WalletHub last week. Their numbers ranked states on how ‘safe’ it is for drivers’ finances after an accident. The study placed Florida dead last among 50 states and the District of Columbia—which means driving in the Sunshine State can be risky to your wallet.

In producing the rankings, WalletHub looked at whether drivers had insurance and whether that insurance would be enough to cover the damages in the event of a car accident. They found significant differences between states. Specifically, the study took into account available car liability insurance to protect others, other forms of required insurance to protect drivers, and the percentage of uninsured drivers in each state.

When those three factors come together, Florida holds the dubious distinction of being the “worst state to get into a car crash,” WalletHub says. Here’s why:

  1. Insurance requirements in Florida are lower than in most other states. Florida drivers are only required to carry minimum liability coverage of $10,000 per person. The amount goes up to a $20,000 minimum for accidents involving multiple parties. By comparison, Maine and Alaska—the states ranked highest—both require $50,000 in coverage up to two people and $25,000 in property damage insurance, according to WalletHub.
  2. A high percentage of Florida drivers are uninsured. According to the study, 23.8 percent of drivers carry no auto insurance. Florida is only surpassed by Oklahoma, which has 25.9 percent uninsured drivers on the road. The best state where drivers have coverage is Massachusetts—only 3.9 percent of their drivers are uninsured
  3. Florida does not require additional forms of insurance coverage to protect drivers. Although Florida does require personal injury protection (PIP) coverage, the state does not require medical payment coverage or uninsured motorist coverage for bodily injuries or personal damage.

What can Florida drivers do? Experts recommend spending a few extra dollars to add uninsured/underinsured motorist coverage to your auto insurance policy to offer protection.

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Filed under Insurance Fraud

Appellate Court Rules that Two Providers Not “Prevailing Insureds”

A trial court ruling awarding attorney’s fees to two medical treatment providers was reversed by the Appellate Division of the Eleventh Judicial Circuit in and for Miami-Dade County in an opinion filed January 9, 2015. The court concluded that the providers did not constitute “prevailing insureds” and therefore were not entitled to the statutory award of attorney’s fees.

Fritznel Leconte was allegedly injured in an automobile accident on July 22, 2006, while insured by a PIP insurance policy issued by United Automobile Insurance Co. He received treatment from two providers—A Rehab Associates and Med Plus Centers—and assigned his PIP claims to them. The cases were tried separately and consolidated on appeal.

In response to a pre-suit statutory Demand Letter, United determined it was responsible only for the cost of the pre-IME (Independent Medical Exam) treatments and offered A Rehab $595.20 and Med Plus $1,324.80. At trial, verdicts were returned in favor of the providers for the exact amounts offered earlier by United.

The providers filed motions for attorney’s fees as “prevailing insureds” pursuant to Florida Statutes section 627.428. That statute grants an insured the right to recover attorney’s fees when the insured obtains a judgment or decree against the insurer, i.e., is a “prevailing insured.” The question before the court was whether an insured is a “prevailing insured” when it obtains a judgment no better than the amount offered by the insurer pre-suit.

The court held that the “prevailing insured” referred to in the statute is “one who has obtained a judgment greater than any offer of settlement tendered by the insurer.” Put another way, “insureds who rejects settlement offers that would make them whole cannot seek attorney’s fees under section 627.428.”

In this case, the judgments received were not greater than the amount offered by the insurer prior to the suit, so the insureds do not qualify as “prevailing insureds” and are not entitled to attorney’s fees pursuant to section 627.428.

United Automobile Ins. Co. v. A Rehab Assoc. and United Automobile Ins. Co. v. Med Plus Centers, Case Nos. 12-413 AP, 13-148 AP, 12-381 AP, 13-147 AP (Fla. 11th Cir. January 9, 2015).

Click on the link to access the court ruling.

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Filed under Case Law, Fla. Stat. 627.736 (2008)

Staged Accident Organizer Arrested in Orlando

A 41-year old from Orlando, who was at the center of an alleged staged vehicle accident which occurred in 2013, was recently apprehended by the Florida Division of Insurance Fraud (DIF).

Jean Severe was arrested in November for organizing the fake crash.  According to DIF, participants were sent to Florida Chiro & Rehab Center for unnecessary medical treatment of their bogus injuries.  The scheme resulted in more than $6,000 in false claims filed with insurers Allstate and GEICO.

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Filed under Insurance Fraud

DIF Arrests Miami-Dade Staged Accident Organizer

Ismael Govea Morales was detained and arrested in Miami-Dade County for organizing two staged accidents, the Division of Insurance Fraud (DIF) reported. He was booked at the county jail in Miami in November.

DIF’s investigation found that the 49-year old recruited participants for two staged accidents occurring in June and August of 2012. Participants in the scheme were referred to clinics in Miami including Beyond Care Corp, Med Life Medical Services, Union Medical Center, Cedar Valley Medical Group, Intensive Therapy and MS Medical Rehab Corp.

The clinics then billed six different insurance carriers—Geico, Kingsway Amigo, Progressive, State Farm, United Auto, and York Services—totaling more than $167,000 in fraudulent charges as a result.

In addition, 76-year old Manuel Alvarez, one of the participants in the June 2012 fake crash, was arrested in November.

This isn’t the first time Govea has been involved in a fraudulent scheme. In January 2013, DIF arrested him on charges of insurance fraud, grand theft, money laundering, organized scheme to defraud, and making false entries on books of corporation.

At that time, Govea was charged with a total of 363 counts for his role in a sophisticated insurance fraud scheme that involved a clinic in Hialeah. Unbeknownst to the true owners of this clinic, Prudential Diagnostic Center, Govea added his name as an officer to the corporation in 2011. The clinic incorporated in 2008, but later closed in 2009.

Govea used Prudential Diagnostic Center as the conduit for defrauding insurance carriers of more than $726,000 in fraudulent billings, according to DIF. He opened a mail drop to collect insurance checks, and between January and June of 2011, Govea allegedly used the corporation to submit billings to 27 different insurance carriers for MRI services that never took place, resulting in nearly $440,000 in payments.

At first, Govea cashed about $44,000 worth of checks through a bank account he opened under the corporation name, but later switched to a check cashing store in Coral Gables to cash the vast majority of the checks.

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Filed under Insurance Fraud