The American Transit Insurance Company (ATIC) filed a lawsuit Dec. 17 seeking more than $150 million in compensatory damages (over $450 million in trebled damages), as well as punitive damages, from over 180 defendants in the New York and New Jersey area. The case, filed under the federal Racketeer Influenced and Corrupt Organizations Act (RICO), which allows recovery of three times incurred compensatory damages, and New York State common law, alleges that the defendants, including certain ambulatory surgery centers and related health care entities and individuals, engaged both individually and as part of a conspiracy to submit thousands of fraudulent insurance claims to ATIC. The case is one of the largest insurance fraud RICO actions ever filed in New York State.
The federal court complaint, filed in the Eastern District of New York, alleges that the defendants sought to take advantage of New York’s no-fault auto insurance laws, which require insurance companies to reimburse their policyholders for the cost of necessary and documented medical care up to $50,000 for personal or private passenger vehicles ($200,000 for taxis and for-hire vehicles in New York City) for injuries arising out of an accident regardless of fault. ATIC says these substantial possible no-fault recoveries can incentivize providers with ill intent to over-diagnose, over-treat, and over-bill to recover the most money for themselves.
The complaint further alleges that services were rendered for improper kickbacks or patient referrals, services that were not provided as billed or the services were misrepresented, were medically unnecessary, and were provided to maximize reimbursement, irrespective of the actual medical condition and needs of patients. The suit also alleges some of the surgical centers were improperly licensed.
In March 2024, New York’s Department of Financial Services (DFS), which oversees insurance companies operating in New York State, reported that no-fault fraud reports accounted for 94% of all healthcare fraud reports received in 2023. As estimated by ATIC, of the more than 250,000 claims it processes every year, 60-70% are fraudulent. This 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 hopes this lawsuit, and other continuing efforts to fight fraud on behalf of policyholders, will not only result in appropriate compensation to ATIC for the alleged fraudulent conduct but also serve as a deterrent to others engaged in fraud.
Could Property and Casualty Insurers Cover the Bill?
If successful, the lawsuit could go a long way towards returning financial stability to ATIC. In the meantime, New York is considering asking property and casualty insurers to cover the claims of the insolvent taxi insurer, according to media outlet, Insurance Journal. It is one of several options being considered by the state’s DFS, which is grappling with ATIC’s mounting financial troubles. Normally, DFS would consider drawing from the Public Motor Vehicle Liability Security Fund or the Property Casualty Insurance Security Fund if an admitted insurer in New York is underfunded to meet its claims obligations.
A potential merger of those two funds was discussed in a November meeting of taxi-industry stakeholders and state officials, people familiar with the matter said. Their combined contributions of approx. $300 million (as of March 2023) remain insufficient to pay for all the claims that ATIC can’t cover. Those stood at about $670 million as of the end of September. So, the state is considering levying a one-time assessment on other insurers to help cover the claims, it was reported.
While a taxpayer bailout isn’t likely, consumers could still end up footing some of the bill if insurers pass on the cost of covering for ATIC, according to Matthew W. Daus Esq., a former commissioner at the Taxi & Limousine Commission (TLC). Options to deal with ATIC’s insolvency were discussed at the Nov. meeting that included Adrienne Harris, DFS’s superintendent, Albert Pulido, the state’s deputy secretary for finance and technology, reps from Uber, Lyft, driver groups, the TLC, and the American Property Casualty Insurance Association, as reported by Insurance Journal.
With most insurance policies renewing in February, the state also discussed other options to keep the industry healthy and attractive for carriers going forward, including ways to reduce insurance fraud, according to reports.
While ATIC has said it’s working to restore its longstanding solvency issues, DFS has pushed the company to explore a sale to find capital. At least two firms expressed an interest in taking over some of ATIC’s assets – Marblegate and Inshur. DFS says it has not yet received any credible offers.
TLC Commissioner David Do said the rules “will continue to allow [ATIC] to renew and issue new policies as long as they follow the DFS rules and procedures.” His agency will continue to work with the DFS and state policymakers “to support the long-term stability of the taxi and for-hire insurance market.”
Sources: Insurance Journal, ATIC
