Court strikes back at sham medical clinics in New York

By James Quiggle & Matthew Smith
June 12, 2019
Auto insurers can stop payments to clinics when they suspect fraud

WASHINGTON, June 12, 2019 — A major state court dealt a heavy blow to the fraudulent practice of installing doctors as sham clinic owners to make false injury claims against auto insurers, the Coalition Against Insurance Fraud says.

Insurers can stop payments to illegal medical clinics in New York when they reasonably suspect fraud or when clear violations of state laws such as professional licensing requirements are present, the state’s highest court ruled this week in the nationally significant case of Carothers vs. Progressive Insurance.

“This important decision will help stem costly payouts for bogus auto claims that are driving up auto premiums for honest consumers. It strikes at the heart of sham medical clinics practicing unauthorized medicine at the expense of consumers,” says Matthew Smith, the Coalition’s director of government affairs.

The decision from America’s 4th-largest court jurisdiction also could influence courts in other states to uphold similar laws in their states. It also provides strong evidence to support passing laws banning the illicit practice of corporate medicine in other states.

Fraud rings are covertly installing doctors as sham owners of no-fault clinics secretly run by laymen in clear violation of New York anti-fraud strictures. This subterfuge lets dishonest clinics illegally operate and steal hundreds of millions of dollars a year in false injury claims that help make auto premiums in New York among the highest in the U.S.

Carothers upholds a lower-court decision confirming New York insurers can stop paying clinics so the insurers can better investigate when they suspect bogus medical claims.

Letting laymen secretly run medical clinics “would undermine the longstanding public policies in New York of combatting fraud … and preventing the corporate practice of medicine,” the Coalition wrote in an amicus “friend-of the court” brief urging the state’s highest court to support the fight against illegal corporate medicine in New York.

“The decision protects honest consumers, empowers insurers to better fight auto scams, and sends an unmistakable warning that fraudsters running sham medical practices face a swift path to justice and jail,” Smith adds.

Matthew Smith, director of government affairs, 202-393-7332;
James Quiggle, director of communications, 202-393-7331

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