The case for reforming New York's flawed “no-fault” auto insurance law gained momentum yesterday when federalauthorities unsealed a substantial indictment implicating 36suspects for a scheme dating back to at least 2007.

On Wednesday, authorities apprehended 35 defendants—includingten doctors and three lawyers—allegedly involved in creatingclinics in and around New York City that habitually billed autoinsurers for treatments that were either medically unnecessary ornever rendered.

According to the indictment, this network of clinics cheatedauto insurers out of more than $275 million while taking fulladvantage of the state's personal injury protection (PIP) system,whereby drivers and passengers can obtain as much as $50,000 inbenefits for accident-related injuries, regardless of fault.

Charges include conspiracies to commit racketeering, healthcarefraud, and money laundering. The indictment reveals that some ofthe defendants received cash kickbacks for patient referrals, whilepatients were coached about which fake injuries to claim.

In the case, U.S. v. Zemlyansky et al, U.S. DistrictCourt, Southern District of New York, No. 12-cr-00171, prosecutorsassert that two defendants, Mikhail Zemlyansky and MichaelDanilovich, directed one of the two primary operating branches,while defendants Yuriy Zayonts and Mikhail Kremerman operated theother.

The whereabouts of the 36th defendant are unknown at thispoint.

This case underscores what Allstate Corp. describes as a statewide “insurance fraudcrisis.” P&C insurers have long bemoaned that the New Yorkauto market is one of the most difficult in the country in which tomake a profit, and with good reason. In a study released last year,the Insurance Research Council (IRC) reported that 20 percent ofno-fault claims in the Big Apple in 2010 had elements of fraud, andas many as one-third of claims appeared to be inflated. Moreover,the Insurance Information Institute (I.I.I.) estimated last yearthat insured drivers in the state annually made more than $200million of excess premium payments because of fraud.