Insurer Sues 45 People in Auto-Accident Scam

Allstate Insurance Co. on Monday said it is suing 45 doctors, lawyers and others in the largest auto-insurance fraud case in its history and was seeking $107 million in statutory damages and attorneys’ fees.

Allstate, which served papers to defendants throughout the Los Angeles area, seeks $107 million under a 1993 state law that allows for damages three times actual losses, in addition to a $10,000 fine for each false claim.

In the lawsuit filed in Los Angeles County Superior Court, the Northbrook, Ill.-based Allstate alleged that the defendants had schemed to defraud the company’s policyholders of millions of dollars.

“Unscrupulous lawyers and medical professionals played an instrumental role in this auto-insurance fraud ring,” said Edward Moran, assistant vice president for Allstate’s Special Investigative Unit.

No criminal charges have yet been filed in the case, company officials said. That decision rests in the hands of the state attorney general and the Los Angeles district attorney, who are being kept apprised of the civil suit, which was filed in October and kept under seal until Monday.

It was not immediately known if criminal charges will be filed.

At a time when prosecutors and criminal courts are swamped, a civil suit provides “another tool to fight this horrendous problem,” said Michael Powell, a vice president with the National Insurance Crime Bureau in Glendora. One county’s accidents alone are “very difficult for law enforcement officers and prosecutors to take on.”

For Allstate, which covers more U.S. cars than any insurer except policyholder-owned State Farm Mutual Automobile Insurance Co., the California suit is the second in a three-year effort to trim costs by bringing participants in auto-insurance fraud rings to justice.

Claims for treatments of whiplash and other hard-to-diagnose injuries suffered in fake wrecks added about $250 to the average U.S. driver’s premiums in 1995, the most recent year for which figures are available, and the cost is probably climbing, said the Coalition Against Insurance Fraud in Washington.

Allstate in June sued a Passaic, N.J., group for $75 million. Such civil suits carry a lower burden of proof and are therefore easier to win than criminal cases.

Allstate, the largest publicly traded U.S. property and casualty insurer, plans to “relentlessly pursue” fraud elsewhere in California and in other states, said Edward Moran, head of its 600-member special investigations unit. “Allstate is totally committed to driving the profit out of insurance fraud,” he said. He declined to provide details on other possible suits.

Allstate’s California suit is believed to be the largest automobile-insurance fraud action ever, covering 326 separate claimants in a total of 99 accidents dating back to 1992, the company said. Eight “cappers” allegedly planned the accidents, which were either staged or forced upon unwitting drivers.

Among tactics used were the “drive-down,” where a driver at an intersection waves a car on, then instead of waiting, drives ahead and causes a collision.

To be sure, some of the fraudulent claims in such cases are based on nothing more than forged documents or carefully staged accidents with already damaged cars.

Still, the most common approach, called “swoop-and-squat,” can be lethal. In it, a victim’s car is corralled in a highway’s far-right lane by an accomplice car in the middle, then a third car swings in front from the far left lane, slams on its brakes in front of the victim and forces an accident.

Last year, that tactic caused the death of a family of three in Los Angeles, said Michael Diegel, a spokesman for the Coalition Against Insurance Fraud. “Oftentimes, it just gets out of hand and sets up a chain collision,” he said.

Allstate also hopes that fines and damages resulting from its California suit will deter professionals from taking part in such scams, the company’s Moran said. Falsified claims depend on medical certification of injuries for which claimants are paid.

“Usually, they’re subjective complaints, soft tissue injuries,” Moran said. Patients say they aren’t able to move a shoulder, for example, “but there’s no objective medical test showing there’s any injury.”