Allstate Insurance Company recently filed two federal lawsuits under the Racketeer Influenced and Corrupt Organizations Act (RICO), exposing how systemic fraud has driven New York auto insurance premiums to surge. These lawsuits target coordinated “medical mill” schemes and highlight the urgent need for Governor Kathy Hochul’s insurance reform plan to protect honest policyholders and prevent premiums from continuing to skyrocket.
The cases, Allstate Insurance Company et al v. FocalSupply Inc. and Allstate Insurance Company et al v. Peoples Choice Medical Supplies Inc., were filed this week in the U.S. District Court for the Eastern District of New York. The lawsuits accuse 10 durable medical equipment (DME) companies and nine individuals of organized fraud using New York’s no-fault insurance system through “medical mills.”
According to court documents, the alleged schemes include:
- Coordinated Kickback Networks: Defendants set up shell DME companies and partnered with metropolitan clinics, which issued “one-size-fits-all” prescriptions to nearly all patients, regardless of actual medical need.
- Systemic Price Fraud: To circumvent 2023 regulatory caps, defendants allegedly disguised equipment rentals as sales. In one instance, a device with a legal monthly rental cap of $300 was charged at $1,800—a 500% increase.
- Anonymous “Knockoff” Devices: Defendants allegedly purchased cheap, unbranded hardware and intentionally omitted brand and model details on claim forms to prevent adjusters from noticing overbilling.
- High-Frequency Claims: In the two separate RICO suits, Allstate has confirmed over $1 million in paid losses and an additional $1.1 million in pending fraudulent claims.
- Extensive Use of Expensive Technology: The schemes involved various costly and unnecessary treatment devices, including EMTT devices, cryotherapy machines, Triad 3LT phototherapy units, PEMF devices, and ultrasound machines.
“These lawsuits are a textbook example of the ‘fraud tax’ every New York driver pays,” said José Bayona, spokesperson for the Citizens for Affordable Rates (CAR). “When fraud rings treat the no-fault insurance system as a personal ATM, charging $1,800 for a $300 device, they’re not just stealing from insurance companies—they’re taking money directly out of the pockets of hardworking New Yorkers who are already struggling with high monthly premiums. Governor Hochul’s reform plan is a crucial step in stopping these organized attacks on affordability.”
Bayona added, “The governor’s reform plan tackles these schemes at every stage—from recordkeeping, billing, and oversight to enforcement—giving New Yorkers real relief from premiums rather than relying on delayed enforcement after the fact.”
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Citizens for Affordable Rates is an alliance of citizens, advocates, and organizations committed to addressing the root causes of high auto insurance costs in New York. Through advocacy, education, and policy reform, CAR works to create an affordable and reliable insurance system for all New Yorkers. For more information, visit www.citizensforaffordablerates.com.
