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Revised No-Fault Regulation Helps Prevent Insurance Fraud
By: Mark Fenelon, Esq.

On October 21, 2003, the Court of Appeals, in Med. Society of N.Y. v. Serio, No. 107, 2003 N.Y. LEXIS 3314 (N.Y. Oct. 21, 2003), determined whether the Superintendent of Insurance lawfully repealed and replaced 11 NYCRR 65, the time limitations for No-Fault claims. The revised Regulation 68 changes the time limit for filing a notice of claim from 90 to 30 days (11 NYCRR 65- 1.1, 65-2.4 (b)), reduces the time limitation for submission of proof of loss from 180 to 45 days, and proof of work loss from as soon as reasonably practicable to 90 days (11 NYCRR 65-1.1, 65-2.4 (c)). Id at *7. The Court found that the current regulation does not violate the separation of powers, does not exceed the scope of the superintendent's authority to interpret and implement the Insurance Law, and does not improperly delegate rule making authority to private insurers. Id at *1.

Justice Kaye, writing for the Court, explained that the Superintendent changed the regulation because of fraud perpetrated by those taking advantage of the time lag between the alleged loss and the deadline for submitting proof of loss, and by those taking advantage of the short period of 30 days which insurers are given to review and investigate claims before paying them without risk of penalties. Id. at *4. Justice Kaye further explained the Superintendent's rationale, "Specifically, ring leaders (often associated with organized crime) would purchase minimum automobile insurance, perhaps under a fraudulent name, on wrecked or salvaged vehicles, and recruit others to fill up the vehicles and participate in staged accidents." Id. Insurers would receive the notices of claims around 90 days after the staged accident, and just before the 180 day limit for proof of claim, medical mills would submit stacks of false bills for each passenger from the staged accidents. Id. at *5. The insurer's accident investigations were hindered by the wrecked vehicles, and by passengers that were supposedly cured after six months of claimed treatment. Id.

Upholding the new regulation is particularly important in Suffolk County, Long Island. In a recent magazine article, INSURANCE FRAUD, Inside Operation Boris, FORTUNE (Nov. 25, 2003) , Nicholas Stein explained that staged accidents in Suffolk County are costing insurance carriers tens of millions of dollars. The investigators into the No-Fault fraud schemes include the Suffolk County district attorney, Suffolk County detectives and prosecutors, and New York State detectives and investigators from the New York State Insurance Fraud Bureau and the National Insurance Crime Bureau. Id. Their investigation into No-fault fraud has uncovered financiers, management companies, medical practitioners and PCs, support services, runners, and crash dummies, all potentially involved in the fraudulent schemes. Id. Insurance companies have also been aggressive in the fight against No-Fault fraud. Carriers have brought civil actions in both Suffolk and Nassau County and in New York City against participants in fraudulent car accidents. Such civil actions against the participants, criminal investigations into the fraud schemes, and revisions to the time limitations for No-Fault claims are all part of the continuing effort to stop insurance fraud.

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