Insurer Sues 45 People in Auto-Accident Scam
In what is being called one of the biggest civil suits of its kind, Allstate Insurance Co. on Monday sued 45 doctors, lawyers, chiropractors and others for their alleged involvement in staging auto accidents and filing phony insurance claims during a six-year period throughout Southern California.
Allstate, the nation’s second-biggest auto insurer, filed the $107-million lawsuit in Los Angeles County Superior Court under a 1993 state law that allows insurance companies to go after fraud in state court and seek damages three times actual losses, in addition to a $10,000 fine for each false claim.
“California is the hotbed of insurance frauds, and finally we have this offensive weapon for not just defending the insurance companies but also targeting the criminals and suing them,” said Dennis B. Kass, Allstate’s lead attorney.
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.
“This is not a victimless white-collar crime,” said Edward J. Moran, head of Allstate’s investigative unit.
In the suit, Allstate alleges certain “law offices, medical professionals and claimants worked to file fraudulent claims,” by staging collisions. These were done in various ways, Kass said, but in all cases professionals assisted in filing claims and shared the proceeds with accomplices, including “cappers”--those who allegedly planned the accidents, which were either staged or forced upon unwitting drivers, and hired others to help them.
The suit names 19 doctors and other medical professionals, including chiropractors, eight attorneys, 10 office employees, and eight cappers, Kass said.
An attorney for one of the defendants, Beverly Hills-based lawyer Gary A. Laff, called the suit a “personal vendetta” because his client in the past has won cases against Allstate. Attorney Richard Moss said Laff was being targeted because “he is a personal injury lawyer who represents clients of lower economic stature.”
California has long been considered the auto-insurance fraud capital of the world. It has been estimated that out of 26,000 questionable claims filed in the U.S. last year, about 9,000 were filed in California, and 4,000 of those were in Los Angeles alone, according to the Glendora-based National Insurance Crime Bureau, which tracks insurance fraud of all kinds.
Allstate is using a fairly new provision under the state Insurance Fraud Protection Act, which specifically allows insurance companies to sue for fraud. California is the only state in the nation that has such a provision.
The Northbrook, Ill.-based insurer has filed a similar suit in New Jersey using Racketeering Influenced and Corrupt Organizations, or RICO, statutes.
“We have offensive weapons, and we can take this affirmative action against these people who commit these crimes that in the end, end up costing policyholders,” said Kass. “We are trying to encourage other states to adapt a similar one,” he said.
The state Department of Insurance said it was supportive of Allstate’s suit and praised the company for using the state law to go after fraud. However, it was not immediately clear whether state or local regulators would pursue criminal charges in the case.
“The Department of Insurance Fraud Division applauds insurance companies such as Allstate, in taking the initiative in cracking down on staged auto accident rings and other fraud schemes,” state Insurance Commissioner Chuck Quackenbush said in a prepared statement. “We will do everything within our jurisdictional power to support Allstate in our shared goal of bringing these fraud artists to justice.”
A spokeswoman for the Los Angeles district attorney’s office said her office had not seen the case and had no comment.
Moran said the faked accidents typically involved a capper who would recruit individuals to carry out the collisions, said Moran.
One of the accident scenarios --known as the “swoop and squat” approach--involved a vehicle which would drive in front of another and suddenly stop. Last year, three people were arrested for having staged such an accident on the Long Beach Freeway, which resulted in the death of a family of three.
Other schemes involved what was known as the “drive down”--the driver attempts to merge, but instead sideswipes the car. There are also “‘paper accidents” said Powell, when a vehicle owner fabricates an accident on insurance reports.
