NY Insurance Fraud Scheme: What Happens If Lawyers and Medical Providers Are Involved?

Insurance fraud is a serious issue, costing New Yorkers millions of dollars annually through increased premiums and higher prices for goods and services. While many people might think of staged car accidents or exaggerated claims when they hear “insurance fraud,” the involvement of lawyers and medical providers can significantly complicate these schemes, potentially leading to more extensive and damaging consequences. In fact, the Coalition Against Insurance Fraud estimates that insurance fraud costs Americans over $308 billion a year.

What Constitutes Insurance Fraud in New York?

Insurance fraud in New York involves intentionally deceiving an insurance company to obtain benefits or payments to which one is not entitled. This can take many forms, including:

Submitting false claims: Providing inaccurate or fabricated information on an insurance claim.
Inflating claims: Exaggerating the extent of damages or injuries to receive a larger payout.
Staged accidents: Intentionally causing an accident to file a fraudulent insurance claim.
Billing for services not rendered: A medical provider billing an insurer for services that were never provided to a patient.

The Role of Lawyers and Medical Providers

When lawyers and medical providers become involved, insurance fraud schemes can become more sophisticated and difficult to detect. Their participation can take several forms:

Lawyers:
- Recruiting individuals to stage accidents or file fraudulent claims.
- Coaching clients to exaggerate injuries or provide false statements.
- Conspiring with medical providers to inflate medical bills or provide unnecessary treatments.
Medical Providers:
- Providing false or exaggerated medical diagnoses to support fraudulent claims.
- Billing for services that were not performed or were medically unnecessary.
- Referring patients to other providers for unnecessary treatments or kickbacks.
- Falsifying medical records or reports.

Recent Examples in New York

Several recent cases highlight the involvement of lawyers and medical providers in New York insurance fraud schemes:

Racketeering Lawsuits: In 2025, a New York specialty insurance managing underwriter sued a New York City personal injury law firm and numerous medical providers, alleging a wide-ranging scheme to defraud insurers through staged construction accidents and fraudulent medical treatments. The lawsuit claimed that the firm and medical providers conspired to recruit construction workers to stage or exaggerate workplace injuries.
No-Fault Insurance Fraud: Uber Technologies Inc. filed a racketeering lawsuit against law firms, doctors, and pain-management clinics, alleging they staged fake car accidents and performed unnecessary surgeries to exploit New York’s no-fault insurance policies.
Long Island Conspiracy: A federal lawsuit revealed a scheme involving Long Island residents, a Manhattan law firm, and a network of medical providers who allegedly collected millions in insurance payouts for bogus accident claims. The suit claimed that the law firm instructed individuals to fake injuries and receive unnecessary medical services.
Merchants Mutual Insurance Company Lawsuit: In October 2025, Merchants Mutual Insurance Company accused a prominent New York plaintiff firm, along with doctors and litigation-funding organizations, of operating a coordinated racketeering enterprise to inflate settlements and divert funds from injured clients.

Penalties for Insurance Fraud in NY

New York law classifies insurance fraud in degrees, with penalties varying based on the amount of money fraudulently obtained or attempted.

Insurance Fraud in the Fifth Degree: A class A misdemeanor, punishable by up to one year in jail and a fine of up to $1,000.
Insurance Fraud in the Fourth Degree: A class E felony, punishable by up to four years in prison.
Insurance Fraud in the Third Degree: A class D felony, punishable by up to seven years in prison.
Insurance Fraud in the Second Degree: A class C felony, punishable by up to 15 years in prison.
Insurance Fraud in the First Degree: A class B felony, punishable by up to 25 years in prison.

In addition to imprisonment, those convicted of insurance fraud may also be required to pay restitution to the insurance company and face other penalties, such as probation and a permanent criminal record. Lawyers and medical providers who participate in insurance fraud schemes may also face disciplinary action from their professional licensing boards, potentially leading to suspension or revocation of their licenses.

Ethical Considerations for Attorneys

Attorneys have specific ethical obligations that they must adhere to when representing clients in insurance-related matters. These obligations include:

Confidentiality: Attorneys must maintain the confidentiality of client information and cannot disclose it to the insurance company without the client’s consent.
Loyalty: Attorneys must represent their clients’ best interests and cannot allow the insurance company to direct or regulate their professional judgment.
Candor: Attorneys must be honest and truthful in their dealings with the court, the insurance company, and other parties involved in the case.

A lawyer appointed by an insurance company to represent an insured owes a duty of confidentiality to the insured and may not disclose confidences and secrets of the insured to the insurance company, without the consent of the insured.

Reporting Insurance Fraud

If you suspect insurance fraud, you can report it to the New York State Department of Financial Services (DFS) by:

Phone: Calling the Insurance Fraud Hotline at (888) FRAUDNY or (888) 372-8369.
Online: Using the Report Insurance Fraud submission form on the DFS website.
Mail: Printing, completing, and mailing the Report Fraud Form to the Insurance Frauds Bureau at One State Street, New York, NY 10004.
Fax: Printing, completing, and faxing the Report Fraud Form to (212) 709-3555.

You can also report suspected Medicaid provider fraud to the New York Office of the Medicaid Inspector General (OMIG).

Consequences of Participating in Insurance Fraud

Participating in an insurance fraud scheme can have severe consequences, including criminal charges, imprisonment, fines, and professional disciplinary action. It is essential to be aware of the laws and ethical obligations related to insurance claims and to avoid any activity that could be construed as fraudulent.

If you are facing charges for insurance fraud in New York, it is crucial to seek the advice of an experienced criminal defense attorney. A skilled attorney can help you understand your rights, evaluate the evidence against you, and develop a strong defense strategy.