New York's legal and insurance systems have long been fertile ground for exploitation, but recent revelations from a court filing by Tradesman Insurance provides an inside look at how a sophisticated construction accident fraud scheme has allegedly operated. The plaintiffs allege that the defendants- comprised of corrupt runner-claimants, attorneys, medical providers, and litigation funders- are orchestrating a wide-ranging criminal enterprise to stage construction accidents. From these false accidents the defendants file fraudulent claims, and reap millions of dollars in settlements, workers' compensation benefits, and litigation funding. This article explores the details of how this criminal enterprise operates.
Step One: Recruitment of Claimants
The defendants, including "runner" claimants and complicit attorneys, target construction workers, offering financial incentives to participate in staged accidents at pre-meditated, targeted construction sites. The runners are pivotal in recruiting and grooming workers to fake accidents and claim false injuries. Often, the workers are down on their luck or a vulnerable segment of our society desperate for money to make ends meet. In some cases, the runners act as claimants themselves, staging accidents and claiming manufactured injuries of their own.
Step Two: Staging the Accident
Workers are placed at targeted construction sites, and purposefully stage an "accident." The accidents rarely have any witnesses, despite occurring in the middle of busy work environments. The claimant then feigns injury and immediately reports the incident to a supervisor.
From there, claimants call for an ambulance of have someone drive them to the hospital, where diagnostic tests are conducted. Despite claims of significant injuries, they are almost always discharged within hours and promptly retain legal counsel, sometimes even on the same day. All of this at the direction of the runners and others behind the scenes.
Step Three: Filing Claims
The claimants, through the guidance of runners and involved legal professionals, file workers compensation claims. At the same time, personal injury lawsuits are handled by law firm complicit in the scheme. They are engaged in this conduct in hopes of receiving a golden payday based on inflated settlements.
Step 4: Manufacturing Medical Evidence
To bolster their cases, claimants are referred to participating medical providers who inflate injuries and provide unnecessary or excessive treatments. These providers create fraudulent medical documentation to justify higher settlement values. The medical services, though unwarranted, are billed excessively, generating additional financial gains for the scheme's participants.
Claimants are funneled to these providers by the very attorneys representing them, creating a closed-loop system that benefits all participants, except ironically, the claimants themselves who in the end receive only a tiny slice of the financial pie.
Step Five: Inflating Settlement Values
Armed with fraudulent medical evidence and inflated injury claims, the law firms pursue multi-million-dollar settlements. These settlements are supported by questionable diagnoses and excessive medical treatments, to make the claims appear legitimate and increase their overall value.
Step 6: Financing and Profit Distribution
Litigation funding companies provide high-interest loans to the claimants, ostensibly to cover living expenses and medical costs during the litigation process. The loans enrich the defendants, as portions of the proceeds flowed back to the law firms, medical providers, and runners through shell companies.
Step 7: Recycling the Scheme
The claimants, emboldened by their payouts are coerced by continued financial incentives, and are encouraged to recruit others. The criminal enterprise perpetuates itself through a steady influx of new claimants, ensuring a continuous stream of fraudulent cases.
The Broader Impact
This organized fraud has wreaked havoc across New York's insurance, construction, and legal industries. The cost of fraudulent claims has led to skyrocketing insurance premiums, making New York's rates the highest in the nation. Contractors also face escalating deductibles and increased premiums, directly impacting their bottom lines. Fraud induced insurance costs contribute to New York's construction costs being the highest in the region. Hundreds of cases have been tainted, with one law firm withdrawing from over 300 cases after the fraud was uncovered.
Legal Consequences
The defendants face serious allegations, including violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act, common law fraud, unjust enrichment, and more. The court filings describe the scheme as an elaborate "association-in-fact" enterprise involving claimants, runners, law firms, medical providers, and litigation funding companies. As the case progresses, it remains a stark reminder of the vulnerabilities in the system- and the consequences for New Yorkers paying the price.