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How to stop No Fault insurance fraud (and lower Detroit’s high auto insurance rates)

Here’s my top 3 things to do: Enforce ‘ambulance chasing’ laws; run out the ‘runners’; and insurers need to start acting on PIP fraud

PIP fraud

Can we talk? Can we have an honest conversation about the escalation of PIP fraud in Michigan?

In my 20 years as an attorney, I’ve never seen things as bad as they are now.

I’ve never seen “case managers” who just sit all day long in Metro Detroit area emergency rooms, and who walk into rooms and steer people who’ve just been injured in car accidents into a network of doctors and lawyers. I’ve never seen the dozen or so attorney solicitation letters that are now sent to people who’ve just been injured in car accidents, by lawyers and “No Fault victim advocates” who download UD-10 police reports off the Internet. And I’ve never seen the escalation of in the costs of medical care from certain doctors and chiropractors in small whiplash and back injury cases by lawyers who are taking one-third to 50% of the medical, and where everything they settle for the actual client is just the gravy.

Insurance companies have missed the boat on this. The insurers have chosen to vilify Michigan’s No Fault laws as a way to massively increase profits. They should instead be focusing on the increasing numbers of personal injury lawyers, doctors, medical providers and transportation companies who are churning small auto accident claims into big medical bills.

Dismantling No Fault isn’t the answer to lower high auto insurance prices in Detroit – or elsewhere in Michigan.

But stopping No Fault fraud in cities like Detroit is!

As I’ve argued many times – including in my blog post yesterday – the evidence shows that No Fault medical benefits are not what’s driving up Michigan auto insurance prices. This includes our system of paying for all necessary medical care for catastrophic injuries caused by motor vehicle crashes.

First, let’s be honest. Insurance companies got greedy and saw a huge potential opportunity to increase their profits by putting proposed caps in place on No Fault’s lifetime guarantee of necessary medical care for accident victims in their quest for No Fault “reform.”  Even though the auto insurance industry insists on repeating that propaganda to support its political efforts to push through these plans, sponsored by certain Republican politicians, the facts don’t support changes to Michigan’s No Fault laws.

What the facts do support is that No Fault fraud may be the – or one of the main – culprits behind Detroit’s high auto insurance prices. And here, the insurance companies talk a good game, but they aren’t doing anything about it.  I’ve written before about how my friends on the insurance side – the defense attorneys and claims adjusters who I spend so much time with as a plaintiff attorney – have told me for years how they have “fraud units” aimed at certain law firms and lawyers in Michigan.

And yet as the years pass, nothing happens.

In his excellent, thought-provoking front page news story on Sunday, “Auto insurance rates put the brakes on Detroit,” the Detroit Free Press’s J.C. Reindl wrote that the “prevailing wisdom” is that “pervasive fraud” – or “outright fraud” – is one of the main factors driving up “Detroit’s auto insurance rates.”

As support, Reindl cites statistics from the National Insurance Crime Bureau and the testimony that a State Farm investigator presented to the Michigan House of Representatives Insurance Committee in May 2013.

Here’s a big opportunity to lower the costs for everyone, to the extent that  “Detroit’s auto insurance rates are largely driven by … pervasive fraud,” but the obvious question is:

What can be done now to stop No Fault insurance fraud in Detroit?

Today, I answer that question. I’m proposing the following three actions for stopping No Fault fraud in Detroit:

  1. Auto insurance companies must step up: They must call out the lawyers and other perpetrators of No Fault fraud, and bring this evidence to  law enforcement and the Attorney General’s office.
  2. The “ambulance chasing” laws prohibiting “direct solicitation” of auto accident victims within 30 days of an accident must be strictly and vigorously enforced (and should be further improved by changing the 30 days to 90 days).
  3. Detroit-based hospitals must be required to run the “runners” out of their emergency rooms, waiting areas and patient rooms.

Call ‘em out, hand ‘em over

The auto insurance industry blames the lawyers and medical perpetrators of No Fault insurance fraud for driving up the cost of auto insurance. This is  criminal behavior.

However, now it’s time for the auto insurance industry to take the next step. Enough talk.

Auto insurance companies must share all of the fraud information they’ve collected with law enforcement so that investigations can be started and, if the facts support it, indictments and arrests can be made.

As the Insurance Institute of Michigan has noted, Michigan auto insurance companies have become very proactive about investigating and rooting out No Fault fraud:

“To combat insurance fraud in Michigan, insurance companies have established Special Investigative Units (SIU) which train insurance personnel to identify suspicious losses that should be given a closer look. The SIUs work with law enforcement and prosecutors to ensure that the people driving up the cost of insurance by taking advantage of the system are caught and punished.”

The specifics of what these “Special Investigative Units” do and learn was the subject of testimony before the House Insurance Committee by an investigator with State Farm’s “Special Investigations operation” in May 2013.

She told the Committee that “the real profits [from No Fault insurance fraud] are being made by organized fraud schemes promoted through unscrupulous medical and service providers.”

The State Farm investigator also made clear the individuals who are involved in these “organized fraud schemes”:

“‘[R]unners’ who show up unannounced at [auto accident victims’] homes”; “letters from random lawyers”; medical and service providers; clinics; non-medical transportation companies; body shops; tow companies; and, even emergency response personnel.

Stop the ‘ambulance chasing’

To stop the No Fault fraud, we need to strictly and vigorously enforce the laws against “ambulance chasing.”

As of January 1, 2014, the law in Michigan prohibits the “direct solicitation” of auto accident victims during the first 30 days after a car accident. (MCL 750.410b).

Before this, lawyers and others were downloading police reports from the Internet within days and sometimes even hours and sending letters to homes, calling people at home, and in some cases, even ringing doorbells.

Similarly, starting on January 1, 2014, Michigan law prohibits any “person” from obtaining an accident report in order to make a “direct solicitation” of a car accident victim within the first 30 days after the accident. (MCL 257.503)

Enforcement of these sound and responsible laws will prevent another fraud-related scenario that State Farm’s investigator described:

“Companies are created solely to purchase thousands of police reports per month to aggressively solicit individuals, even when the individuals indicated they are not injured.”

I’ve been an outspoken critic of attorney solicitation. I do not think 30 days goes far enough. All it has done is start the carpet-bombing of people who’ve been hurt in car accidents on day 31, instead of on day 1.  But at least it’s an improvement. I’d like to see the time period extended from 30 days to 90 days. And the Michigan Attorney Grievance commission needs to act on these solicitations. So far, they’ve inexplicably turned a blind eye to when lawyers are contacting accident victims within the first 30 days, which only makes the problem worse.

Rules without enforcement are just suggestions.

Run out the runners

Want to know a great place to start cleaning up the No Fault fraud in Detroit?

Let’s look at hospitals like Henry Ford and Detroit Receiving.

The administrators of these hospitals need to do something about the “runners” posing as so-called “case managers.”

These people sit around all day long, day after day, in these Detroit hospital emergency rooms. They walk into auto accident victims’ patient rooms and try to become their “nurse case managers.” And then off to the races we go.

All these runners are doing is referring people who’ve just been injured in car accidents to various medical providers and doctors – and at least three lawyers that I know of as well. This is exactly the type of  “organized fraud schemes” described by the State Farm investigator.

No-Fault PIP fraud in Detroit

In his Detroit Free Press article, Reindl outlines the extent of the No-Fault fraud problem in Detroit:

  • “A National Insurance Crime Bureau report found that questionable medical claims in Detroit jumped 124% between 2009 and 2011, and that the city was responsible for one-third of all such claims in the state.”
  • “In testimony last year before a Michigan legislative committee, a State Farm Insurance fraud investigator described how unscrupulous companies have been scouring thousands of police reports for vehicle accidents and referring those involved to certain medical clinics and attorneys, even if the person wasn’t injured.”

Additional statistics from the National Insurance Crime Bureau (NICB) fill in a few more of the details:

  • Medical Questionable Claims in Detroit involving “Personal Injury Protection (PIP)” – which are also known as No Fault medical benefits – increased 114% between 2009 and 2011, according to the NICB’s July 2, 2012, “Michigan Medical Questionable Claims” Report for 2009-2011.
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