State Farm Sues Accused Staged-Accident Ring Members
State Farm Mutual has filed two lawsuits aimed at recovering more than $4.6 million in claim payments from people and organizations the company says were involved in staged car accidents in Texas.
The lawsuits in federal courts in Dallas and Houston were filed under the Racketeer Influenced and Corrupt Organizations (RICO) law, which permits recovery of three times actual damages. Because of this, and the fact State Farm also seeks reimbursement for legal expenses and punitive damages, actual recovery could exceed $13.8 million.
The suit in Dallas says that between 1993 and 1996, the defendants were responsible for 153 collisions resulting in fraudulent claims that exceeded $2 million.
Typically, such claims involved a sudden stop in front of an innocent victim's car to cause a crash leading to reported injuries by those in the front car and subsequent liability claims against State Farm. Defendants include lawyers and others who operated law offices and clinics; a "capper" who organized some of the crashes; and another person who laundered funds so that intended recipients didn't receive them, according to the suit.
The Houston suit charges that a different group—lawyers, law office operators and employees and healthcare providers—took part in similar activity there between 1992 and 1997 that resulted in 199 staged crashes with fraudulent claims exceeding $2.6 million.
"We're taking this action because of our commitment to fight insurance fraud in every way we can," said Frank Hall, assistant vice president for State Farm. "The National Insurance Crime Bureau has estimated that fraud costs insurance companies at least $20 billion a year and that the average household pays an additional $200 a year in premiums because of it.
"We want to put fraud artists out of business so that our policyholders can be confident their premium dollars pay only for legitimate claims. One way we can help in this effort is to file lawsuits such as this when it's appropriate. Besides the strong possibility of recovering dollars paid for phony claims—which make our customers' premiums higher than they need to be—we hope such actions will serve to deter others who see insurance fraud as a lucrative way to make a living."