NEW YORK – The indictment of a man who allegedly used New York’s no-fault insurance rules to bilk tens of millions of dollars from insurance providers helps show what is causing the state’s high auto-insurance premiums.
“No-fault insurance fraud schemes raise costs for everyone and reduce benefits to consumers, an unnecessary burden we all unfortunately share,” U.S. Attorney Jay Clayton said Wednesday when announcing charges against Zhan Petrosyants, an associate of former NYC mayor Eric Adams.
Fraud in the system has been a talking point for Gov. Kathy Hochul, who says staged car wrecks are a driving force behind the highest insurance rates in the country. She has introduced a plan to limit damages drivers who are found to be “mostly” at fault can win in court and to give insurers more time to investigate claims.
New York drivers pay for no-fault insurance, which lets them and others to obtain benefits of up to $50,000 for injuries in accidents. Petrosyants and conspirators submitted fraudulent claims, Clayton said, for medical services that were unnecessary or never performed.
Physicians and psychologists were among those recruited to submit the fraudulent claims, it is alleged. Funding companies affiliated with a law firm provided a “veneer of legitimacy” to the scheme, with Petrosyants receiving referral fees from a funder, Clayton’s office said.
“Gov. Hochul’s auto insurance proposals target schemes like the one alleged in Petrosyants’ indictment that use corrupt doctors, lawyers, and financiers to game the system and defraud New Yorkers,” said Tom Stebbins, executive director of the Lawsuit Reform Alliance of New York.
“By cracking down on fraud and out-of-control lawsuit abuse, the Governor’s proposals will put an end to fraudulent jackpot payouts that increase costs for the rest of us. The legislature must fight to reform New York’s broken insurance system, rather than siding with Adams’s sleazy pals and allowing fraudulent claims to continue driving up everyday costs.”
Polling shows voters support lawsuit reform that would lower their auto-insurance premiums. The group Protecting American Consumers Together pushed a television ad campaign aimed at “billboard lawyers” who corrupt the legal system at the expense of all New Yorkers.
LRANY has noted that fraud rings target immigrants and others with financial problems to stage crashes, to the detriment of lawful New York drivers whose premiums have risen to about $4,000 annually.
Gov. Hochul also hopes to target doctors who drive up the value of claims with phony diagnoses and unnecessary medical procedures – something lawyers and doctors are accused of conspiring to do in workplace-injury lawsuits in New York.
Hochul said insurers reported more than 38,000 incidents of suspected auto-insurance fraud in 2023, which helped tack an extra $300 onto everyone’s yearly premium.
Her plan will give insurers more than just the current 30 days to investigate and will change a law that allows individuals committing crimes like impaired driving to receive big payouts. To do so, she plans a cap on non-economic damages in those instances.
She’d also follow the lead of other states like Connecticut and New Jersey that permit recovery of damages only if the plaintiff is not primarily at fault. The term “serious injury” also needs to be more clearly defined, as its application is currently inconsistent in courts, she says.
“Car insurance rates are just too damn high, especially at a time when families are feeling squeezed by the cost of living,” Hochul said.
The ride-share company Uber has filed multiple racketeering lawsuits around the country, including in New York, that allege personal injury lawyers are sending clients to meet with doctors willing to perform invasive surgeries in order to increase the value of the claim.
