On January 30, 2025, Uber Technologies, Inc. filed a racketeering lawsuit against a group of law firms, doctors and pain-management clinics that it claims staged fake car accidents and performed unnecessary surgeries to take advantage of New York’s lucrative no-fault insurance policies. The case (Uber v. Wingate, 25-cv-522) is pending in the U.S. District Court for the Eastern District of New York, in Brooklyn.
In U.S. federal law, a civil RICO (Racketeer Influenced and Corrupt Organizations Act) claim holds a prominent place in American jurisprudence. Its purpose is to provide legal recourse for individuals or entities harmed by an organization engaged in a pattern of racketeering or corruption. This encompasses a broad spectrum of fraudulent activities, including (but not limited to) bribery, extortion, money laundering, and illegal gambling. Crucially, the RICO Act extends liability beyond the individuals who directly perpetrate illegal acts, to include those who own or manage organizations that are used to facilitate such activities. This has far-reaching implications, enabling victims to hold powerful entities accountable for their involvement in organized crime.
Uber’s complaint alleges since at least 2019, the group of Defendants has conspired “to exploit passengers in purported or actual minor vehicle collisions,” sometimes provided “medically unnecessary” or even “invasive and painful surgeries like spinal fusions” for medical conditions that are “fictitious, exaggerated or that pre-existed.”
Many states have regulations that allow drivers and passengers to get reimbursed for medical costs or lost wages quickly after an accident, regardless of who’s at fault – but in New York City, taxi industry regulators require for-hire vehicle (FHV) owners to carry personal injury coverage of as much as $200,000. This is significantly more than the $50,000 minimum requirement for private vehicles.
Uber’s suit comes as the New York State Department of Financial Services (DFS) struggles with the insolvency of American Transit Insurance Company (ATIC), NYC’s largest insurer of FHVs. ATIC insures about 60% of the city’s roughly 120,000 FHVs. In the second quarter of 2024, ATIC had approximately $700 million in net losses. ATIC blames widespread fraud, similar to what Uber is alleging in its lawsuit. Also, remember that last year, Uber sued ATIC over its handling of claims, saying the insurer’s “unreasonable practices” resulted in 23 lawsuits against Uber and its drivers over crashes, leaving Uber to pay “substantial amounts” to defend itself in court.
ATIC filed its own massive $450 million RICO suit in December, seeking damages from doctors, medical centers, and others for alleged massive no-fault insurance fraud.
ATIC’s insolvency is problematic. DFS, the state’s regulatory agency, is supposed to be the watchdog that looks out for the interests of FHV owners/operators, as well as the riding public. DFS issued a letter dated April 3, 2024, acknowledging that ATIC’s reserves were inadequate as far back as 1979, and its insolvency has only increased since then.
A claims reserve is money an insurance company sets aside to pay policyholders who have filed or are expected to file legitimate claims on their policies. Insurers use the funds to pay out incurred claims that have yet to be settled. Establishing accurate claims reserves allows the insurance company to meet its future financial obligations on behalf of insured individuals. The reserves are considered a company’s liabilities (money that is owed and will be paid in the future). Insolvency is when an insurance company can no longer meet its financial obligations when debts become due. When an insurance company is insolvent, it has no reserves and thus no money to pay out on claims.
DFS has acknowledged that ATIC was insolvent by $39.9 million by the end of 1989. DFS found out that by the end of 1997, ATIC was insolvent by $79.3 million, insolvent by $139.8 million by the end of 2007, and by the end of 2013, ATIC was insolvent by $254.4 million. The report claimed that DFS has repeatedly sought to engage ATIC to get them to address its financial condition. DFS concluded that ATIC has failed, and their financial condition has continued to deteriorate to the point of being in the proverbial hole to the tune of $665 million. DFS also recommended that ATIC recover over $100 million paid to ATIC company officers and certain ATIC affiliate companies owned by ATIC officers.
So, what does all this mean? It means that ATIC has insufficient funds to pay out on its existing claims. The monies that were collected years ago to pay out on claims today are long gone. That means that when an FHV owner/operator pays its current premiums to ATIC, they are using those funds to pay out on claims made from accidents that occurred years ago. In the insurance world, this is a no-no.
Insurance pricing is one of the most complex and critical challenges for the insurance industry. On the one hand, insurers must achieve underwriting profits to ensure their long-term viability. On the other hand, policyholders seek financial protection at a reasonable cost. Striking this balance is essential for creating a fair and sustainable insurance market.
In the FHV industry, ATIC has underpriced risk for decades. That is why their insurance prices are cheaper compared to other FHV insurers. This artificially low cost of insurance allowed ATIC to scoop up over 60% of the FHV insurance market. People love cheap insurance… that is, until their insurer no longer has sufficient funds to pay out on claims incurred.
So, why has DFS allowed this to happen and why don’t they do the inevitable and liquidate ATIC? The fact that DFS may not have a solution is not a reason to let an insurance company that has been insolvent for over 45 years to continue to operate. Kicking the can down the road has not worked so far.
So, why is DFS abrogating its duty to the riding public and the FHV owner/operators who purchased insurance from ATIC to ensure financial protection in the event of an accident and a subsequent lawsuit? There is a problem within DFS. Their actions regarding ATIC have been a little too late. Gov. Kathy Hochul proposed new legislation to make it easier to adjust commercial car insurance rates and allow regulators to slowly phase in increases. This is a band aid, not a long-term solution. My solution was detailed in my column last month in Black Car News. Fortunately, my solution has been progressing well. Considering the current state of affairs, it needs to be given due attention by DFS and the governor.
Undoubtedly, fraud in no-fault insurance is rampant, and New York’s no-fault insurance system needs a massive overhaul. Regardless of the outcome of their respective RICO suits, it is evident that change is needed. Uber and ATIC’s RICO lawsuits will not bring about the necessary change to the no-fault system. Both lawsuits seem to be more of a PR stunt than an attempt to truly bring about long-term change for the betterment of the FHV industry.
If anyone truly desires to bring about the needed change to the FHV insurance dilemma and the issue of abuse of the no-fault system, I implore you to contact me and work with me and my team. I am not interested in lawsuits that will serve no useful purpose nor in garnering attention to myself. I want to bring about change so the FHV industry can survive and thrive.
As always, I will continue to do all I can to bring about change for the betterment of the FHV industry. In the meantime, everyone should put on their seatbelt as we enter a very bumpy ride.
