Racketeering Lawsuit Alleges Construction Accident Insurance Fraud: Unpacking the Complexities and Protecting Your Rights
Construction sites, while vital for building our infrastructure, can also be hazardous environments. Accidents happen, and workers’ compensation insurance is in place to protect those injured on the job. However, a disturbing trend is emerging: racketeering lawsuits alleging widespread construction accident insurance fraud. These lawsuits claim that some individuals and organizations are exploiting the system for financial gain, staging accidents, and submitting fraudulent claims. Understanding the complexities of these allegations is crucial for both construction workers and employers.
The Rise of Racketeering Lawsuits in Construction
In recent years, there has been an increase in racketeering lawsuits targeting alleged insurance fraud in the construction industry. These lawsuits often invoke the Racketeer Influenced and Corrupt Organizations Act (RICO), a federal law designed to combat organized crime. RICO allows prosecutors to target entire enterprises engaged in illegal activities, rather than just individual actors.
A recent case highlights this trend. A New York specialty insurance managing underwriter for contractors and construction risks sued a New York City personal injury law firm and dozens of medical providers, alleging a wide-ranging scheme to defraud insurers through staged construction accidents and fraudulent medical treatments. The lawsuit alleges that the defendants recruited construction workers, many of whom were undocumented, to stage or exaggerate workplace injuries. These workers were then referred to complicit clinics for unnecessary medical procedures to inflate insurance claims.
Tradesman Program Managers filed a 162-page federal Racketeer Influenced and Corrupt Organizations Act (RICO) action in the Eastern District of New York targeting the law firm of William Schwitzer & Associates, P.C. and its principals William Schwitzer and Giovani Merlino, along with physicians, chiropractors, and other medical providers who allegedly conspired to recruit construction workers to stage or exaggerate workplace injuries.
These types of lawsuits are not isolated incidents. Several similar cases have emerged, particularly in New York, raising concerns about the potential for widespread fraud within the construction industry.
How the Alleged Schemes Work
The alleged schemes often involve a network of individuals and entities working together to defraud insurance companies. Here’s a breakdown of how these schemes typically operate:
- Recruitment of Claimants: “Runners” and complicit attorneys target construction workers, often offering financial incentives to participate in staged accidents. These workers may be vulnerable or desperate for money.
- Staging the Accident: Workers are placed at targeted construction sites and purposefully stage an “accident,” often without witnesses. They then feign injury and report the incident to a supervisor.
- Medical Referrals and Inflated Treatment: Claimants are referred to participating medical providers who inflate injuries and provide unnecessary or excessive treatments. These providers create fraudulent medical documentation to justify higher settlement values.
- Filing Fraudulent Claims: The attorneys then file workers’ compensation and personal injury claims, seeking reimbursement for medical expenses, indemnity payments, and settlement demands.
The Role of New York Labor Law
New York’s unique Labor Law, particularly sections 240 and 241, plays a significant role in these alleged schemes. These laws, often called “scaffold laws,” hold project owners and contractors 100% liable when a worker sustains a fall-related injury. This strict liability standard makes construction companies prime targets for personal injury litigation, even if the worker is partially responsible for the accident.
Critics argue that these laws incentivize fraudulent claims and drive up construction costs. The Empire State Chapter of the Associated Builders and Contractors performed an analysis that revealed that about 4% of the cost of a $100 million project in New York would go toward workers’ compensation, general liability, and excess insurance in 2010. In 2020, that cost was approximately 8.5% of that $100,000 project, and by 2023-2024, it had jumped again to close to 12.5%.
The Impact of Construction Accident Insurance Fraud
Construction accident insurance fraud has far-reaching consequences:
- Increased Insurance Premiums: Fraudulent claims drive up insurance premiums for contractors, making it more expensive to do business.
- Higher Construction Costs: Increased insurance costs are passed on to consumers in the form of higher prices for construction projects.
- Financial Losses for Insurers: Insurance companies suffer significant financial losses due to fraudulent payouts.
- Undermining the System: Fraudulent claims undermine the integrity of the workers’ compensation system, making it more difficult for legitimate accident victims to receive the benefits they deserve.
- Threat to Jobs: The alleged fraud increases the cost of rent, homeownership, and insurance and threatens jobs.
What Can Be Done?
Combating construction accident insurance fraud requires a multi-pronged approach:
- Increased Scrutiny: Insurers and law enforcement agencies must increase scrutiny of workers’ compensation claims, particularly those involving unwitnessed accidents or questionable medical treatments.
- Surveillance Technology: Construction sites and property owners should invest in security and surveillance cameras to deter staged accidents and capture evidence of fraudulent activity.
- Legislative Reform: Some argue that reforming New York’s Labor Law to incorporate a negligence standard would reduce the incentive for fraudulent claims.
- Employee Education: Construction workers should be educated about the dangers of participating in fraudulent schemes and encouraged to report suspicious activity.
- Strong Internal Controls: A strong internal control system is critical to preventing fraud. Common examples include background checks, segregation of duties, dual authorization of sizable payments, and management review of major processes.
Legal Options for Injured Construction Workers
If you’ve been injured in a construction accident, it’s essential to protect your rights and ensure you receive the compensation you deserve. Here are some steps you can take:
- Report the Accident: Report the accident to your supervisor and seek medical attention immediately.
- Document Everything: Keep detailed records of the accident, your injuries, medical treatment, and lost wages.
- Consult with an Attorney: Contact a construction accident attorney to discuss your legal options. An attorney can help you navigate the workers’ compensation system, file a personal injury lawsuit if necessary, and protect your rights.
The Role of a Construction Accident Attorney
A construction accident attorney can provide invaluable assistance to injured workers:
- Investigating the Accident: An attorney can investigate the accident to determine the cause and identify all responsible parties.
- Navigating the Legal System: An attorney can guide you through the complex legal system and ensure you meet all deadlines and requirements.
- Negotiating with Insurance Companies: An attorney can negotiate with insurance companies to obtain a fair settlement for your injuries.
- Representing You in Court: If a settlement cannot be reached, an attorney can represent you in court and fight for your rights.
Conclusion
Racketeering lawsuits alleging construction accident insurance fraud highlight a serious problem within the industry. These schemes not only drive up costs and undermine the system but also exploit vulnerable workers. By understanding the complexities of these allegations and taking proactive steps to protect their rights, construction workers and employers can help combat fraud and ensure a fair and safe working environment.
If you have been injured in a construction accident, consulting with an experienced attorney is crucial to protect your rights and navigate the legal process.