American Transit Insurance Co. (ATIC) is taking legal action against what it describes as a widespread scheme of fraudulent claims that cost the company hundreds of millions of dollars each year.
In a lawsuit filed under the federal Racketeer Influenced and Corrupt Organizations (RICO) Act, AM Best reports that the carrier is seeking $450 million in damages, claiming that a network of defendants has been exploiting New York’s no-fault auto insurance laws to inflate medical reimbursements for taxi and for-hire vehicles.
The suit is seeking $150 million in damages, with the potential for treble damages due to the nature of RICO cases.
ATIC claims that over 180 defendants have exploited New York’s no-fault auto insurance laws, which mandate that insurers cover medical expenses up to $200,000 for injuries sustained in accidents involving taxis and for-hire vehicles. The company argues that this system creates an incentive for fraudulent practices, as providers may over-diagnose, over-treat, and over-bill to maximize reimbursements.
The lawsuit targets a range of entities, including ambulatory surgical centers that are alleged to have operated without proper licenses.
ATIC also claims that some medical services were provided in exchange for kickbacks or improper patient referrals. In other instances, services were allegedly not delivered as billed or were misrepresented, with some being medically unnecessary, all aimed at inflating reimbursement amounts.
Supporting its claims of widespread fraud, ATIC references research from the New York Department of Financial Services, which found that 94% of all health care fraud reports in 2023 were related to no-fault insurance. The carrier estimates that between 60% and 70% of the 250,000 claims it receives annually are fraudulent.
“For over 50 years, ATIC has proudly provided affordable commercial automobile insurance to policyholders in New York City and beyond. But 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,” the company said in a statement to AM Best.
The lawsuit is part of ATIC’s effort to meet its obligations under New York insurance law to combat fraud.
AM Best reported in September that the company faced scrutiny after state regulators indicated it was insolvent by approximately $665 million.
ATIC responded by stating, "The company is working tirelessly to address a longstanding issue of statutory solvency amid rampant insurance fraud and escalating costs."
How do you think this lawsuit will affect the insurance industry in New York? Share your thoughts in the comments.
