Three AmTrust-owned insurance carriers say a New York personal injury operation turned garden-variety slip-and-fall claims into high-dollar lawsuits through a tightly controlled pipeline of lawyers and medical providers. In a federal racketeering complaint filed Tuesday in the Eastern District of New York, the insurers accuse attorneys, clinics and surgeons of using referral chains and aggressive medical procedures to blow up claim values. The suit describes the setup as an “assembly line” that moved people from street-level recruiters to law firms, then to clinics, surgeons and, finally, to settlements.
Who sued and where
According to Insurance Business, the plaintiffs are Wesco Insurance Company, Technology Insurance Company and Associated Industries Insurance Company, all owned by AmTrust Financial Services. They filed the complaint on June 2 in the Eastern District of New York. The carriers say they focus on small- and mid-market liability policies and that New York’s duty-to-defend rule forced them to start spending on legal defense as soon as the underlying lawsuits were filed.
RICO gives insurers a large remedy
The insurers are leaning on the civil side of the Racketeer Influenced and Corrupt Organizations Act, better known as RICO, which offers private parties some heavy-hitting remedies such as treble damages, injunctions and recovery of attorneys’ fees. Cornell Law School notes that 18 U.S.C. § 1964 authorizes a civil RICO action and the recovery of threefold damages and costs of suit, a tool the carriers say they need to confront what their complaint characterizes as an entrenched enterprise.
What the complaint alleges
According to Insurance Business, the complaint outlines an alleged coordinated operation in which “runners” first recruited claimants, law firms then filed lawsuits, so-called gatekeeper clinics generated templated treatment records, radiology providers produced supportive imaging reports and surgeons followed up with invasive procedures aimed at driving up case value.
The filing highlights four claimants. In one example, a patient underwent a two-level cervical fusion. The implants alone were billed at $182,111.02, and total charges for the surgery reached $216,185.50. Across the four matters, the complaint cites settlements of $865,000, $1,250,000 and $512,000, while a fourth case is still active.
The insurers also allege that a podiatrist performed an unnecessary ankle arthroscopy despite lacking standard or advanced ankle privileges, and that a neurosurgeon carried out what the complaint says was a knowingly unnecessary fusion on the same claimant. These are allegations only. As Insurance Business notes, the defendants have not yet filed a response.
Echoes of other cases
As reported by Insurance Journal, the AmTrust suit lands in the middle of a growing wave of racketeering cases in which insurers and other payors accuse law firms and medical providers of working in lockstep to inflate claims.
A March briefing summarized at Best Law Firms describes the recurring warning signs that insurers say point to broader, litigation-driven schemes. Among them: shared office addresses, overlapping referral patterns, cookie-cutter medical records and quick escalation from conservative care to surgery.
What’s next
The AmTrust carriers are seeking actual damages, treble damages under RICO, attorneys’ fees and costs. If the case survives early motions, it is likely to move quickly into discovery focused on referral networks, billing practices and any related litigation-funding arrangements. How the Eastern District of New York handles the sufficiency of the pleadings and the scope of discovery could influence how aggressively insurers turn to civil RICO against similar networks in the future.
