N.Y. No Fault Injury Costs Up 56% Amid Lax Laws, Says I.I.I.

Robert Hartwig, the I.I.I. president said the insurance industry, the New York State Insurance Department's Frauds Bureau, the National Insurance Crime Bureau and law enforcement agencies continue to investigate suspicious claims vigorously, yet loopholes in the no-fault system make it particularly vulnerable to fraud and abuse by a "no-fault industry" of corrupt medical professionals, attorneys, and street-level criminals who work on their behalf.

Mr. Hartwig, according to some advanced text of remarks scheduled for delivery to the New York Insurance Association's annual meeting in Latham, NY, said, "In less than five years, New York's auto insurers have seen an extraordinary 56 percent increase in the average cost of no-fault claims, to a great extent the result of abuse and, sometimes, outright fraud in the system."

"The costs of fraud and abuse of the state's no-fault system ultimately are borne by New York's honest policyholders. New York's no-fault claim costs are now the second highest in the country and are 111 percent higher than the U.S. average of $4, 152," Mr. Hartwig noted.

Ellen Melchionni, president of the NYIA, said in a statement that, "State lawmakers need to make no-fault auto insurance reform a high priority when they reconvene in Albany for their 2010 session. There are external forces which drive up the cost of auto insurance in this state which can and must be contained."

The New York State Insurance Department's Frauds Bureau, in its 2008 annual report, said no-fault fraud reports had increased 22 percent since 2006, after the number of these same reports fell 35 percent between 2003 and 2006, Mr. Hartwig observed.

That same report said the Frauds Bureau has significantly expanded its number of no-fault investigations.

Mr. Hartwig said that several proposals have been advanced to combat New York's growing no-fault crisis, including Instituting medical protocols/utilization reviews, implementing medical treatment guidelines for specific auto accident-related injuries so as to reduce instances of over-treatment and/or unnecessary treatments.

He noted that New York's no-fault system is one of the few in the United States allowing for insurer payment of medical treatment providers while requiring neither mandatory protocols nor utilization reviews.

In his view, "This virtual blank check drives up system costs dramatically because the PIP payment ceiling is a very generous $50,000."

I.I.I. suggested a requirement that auto injury claim disputes be resolved via arbitration.

It called for implementing an arbitration system to eliminate trial costs for all parties while also expediting claims resolution, mentioning that despite the fact that no-fault systems were created to avert courtroom battles, no-fault cases in New York, are clogging the judicial system's calendar- especially in New York City.

I.I.I. said the city courts are so inundated with no-fault cases today that they are currently setting trial dates for 2011.

The Institute said the process for adjudicating no-fault claims should be streamlined by permitting parties with no-fault disputes involving less than $5,000 to submit proof based on a sworn affidavit from doctors.

Under today's system, I.I.I. said doctors must appear personally in court, time which could be better spent treating their patients.

Another I.I.I. recommended improvement is implementation of fair burden of proof requirements.

In order to establish a right to no-fault benefits, I.I.I. said plaintiffs should be required to produce a witness with personal knowledge of the facts alleged in the plaintiff's complaint and there should be no presumption of medical necessity based on documents submitted by non-medical plaintiffs and/or witnesses who do not have personal knowledge of the facts of the case.

New York's medical treatment providers it was noted are currently required only to submit proof that a bill was received by the auto insurer to establish entitlement to receive amounts billed–irrespective of suspicions of fraud or abuse.

But, I.I.I. said the burden of the auto insurers is much higher. They are required to produce in court both a witness to testify under oath that the claim was handled in accordance with regulations and a medical expert to testify on the "lack of medical necessity."

Additionally, I.I.I. called for tougher penalties for "runners" who receive payoffs for facilitating a fraudulent insurance transaction, usually by acting as a go-between for dishonest policyholders and unscrupulous medical treatment providers and/or attorneys. The crime is currently a misdemeanor but, if upgraded to a felony, could provide an added deterrent, said I.I.I.