Five Insurers File Multi-Million Dollar Civil Suit Against Group of Chiropractic Clinics, Chiropractors and One Lay Person in Alleged Twin Cities Fraud Scam
Progressive, Allstate, Encompass, Mutual Service Insurance Companies and Western National File Civil No-Fault Fraud Case
MINNEAPOLIS, Minnesota — August 21, 2002 —Progressive, Allstate, Encompass Insurance (through underwriting company Continental Insurance Company), the Mutual Service Insurance Companies (MSI) and Western National Mutual Insurance Group today filed a civil lawsuit with Hennepin County District Court against five chiropractic clinics, their alleged "owners" and four chiropractors. The suit alleges that the defendants organized a scheme to steer accident victims to their clinics in order to defraud the auto insurance companies by billing for unnecessary treatments or for services not performed. The plaintiffs are seeking damages in excess of $3 million.
"It's estimated that insurance fraud costs each Minnesota household $1,000 a year, primarily in the form of increased insurance premiums," said Pat McCann, Minnesota special investigations unit (SIU) manager for Progressive. "We may be competitors, but our companies have worked together in this fraud-fighting effort because we have an obligation to our customers to help keep the costs of auto insurance down."
Named in the suit are five area chiropractic clinics, including Saint Paul Spinal Health Center, Inc., Midwest Family Chiropractic Group, P.A., South Metro Spinal Rehabilitation, Inc., Eastside Chiropractic and Rehabilitation, Inc., Northeast Spinal Rehabilitation, Inc. Also named in the suit are the clinics' alleged "owners," Howard Pindyck and chiropractor Phillip Bruno. The remaining defendants include chiropractors Michael Czichray, Leonard Evangelist, Mark Soli and Russell Anderson.
Based on a two-year investigation by the insurers, the suit alleges that the clinics, led by Pindyck, obtained motor vehicle accident reports and solicited the victims by phone to come to the clinics for treatment. "Runners" or "cappers" would then transport the solicited victims to and from the clinics and were paid for each victim they delivered.
The clinics allegedly developed a routine course of extensive and medically-unnecessary treatments for victims, regardless of their actual injuries, racking up thousands in bogus billing to the insurance companies. In addition, the plaintiffs allege that the clinics billed for treatments that were never provided or were provided by a lay person and billed as chiropractic services.
"We joined this collaborative investigation because we were not only concerned for the injured people treated by these clinics, which allegedly provided excessive and unnecessary treatments, but also for all consumers who ultimately pay the price for insurance fraud through higher insurance rates," said Edward Moran, assistant vice president, Allstate.
"This case illustrates the need for further reform to Minnesota's no-fault insurance system," said Bruce Raines, SIU coordinator for MSI. "While we are encouraged by recent legislation that will assist us in the battle against fraud, more must be done to reduce the incidence of fraud in Minnesota."
Under Minnesota's no-fault insurance system, each driver's auto insurance coverage pays for his or her own medical expenses, no matter who caused the accident. No-fault laws are meant to pay auto accident victims faster by avoiding the delays and expense of lawsuits, reduce the volume of lawsuits by eliminating minor injury cases from the court system and minimize overall motor vehicle insurance costs.
However, provisions under the current no-fault system are contributing to fraudulent activity and costing Minnesotans hundreds of millions of dollars each year. One provision requires insurance companies to deny or pay claims within 30 days, leaving inadequate time to investigate suspicious claims. In addition, the law guarantees injured parties up to $20,000 in medical care, which invites unscrupulous medical providers to inflate their bills to take advantage of this medical cost limit.
Minnesota was one of only a handful of states without a state level insurance fraud investigative unit. In April of this year, a state law was passed that will launch an insurance fraud prevention unit within the Minnesota Commerce Department in July 2003. The new law also made acting as a "runner" or "capper" illegal as of August 1, 2002.
"According to the National Insurance Crime Bureau, insurance fraud is the second most costly white-collar crime in America — only tax evasion is more costly," said Nancy Jacobson, SIU manager, Western National Insurance. "We hope this lawsuit sends a message loud and clear that insurance fraud does not pay in Minnesota."
About the Plaintiffs
The Progressive group of insurance companies, in business since 1937, ranks fourth in the nation for auto insurance and provides drivers with competitive rates and 24/7 service. The companies offer insurance by phone at 1-800-PROGRESSIVE, online at progressive.com and through more than 30,000 independent insurance agencies. This suit was filed by Progressive Casualty, Progressive Classic, Progressive Northern, Progressive Northwestern and Progressive Specialty Insurance Companies. The Progressive Corporation, the holding company, has headquarters in Mayfield Village, Ohio and is publicly traded at NYSE: PGR. More information can be found at progressive.com.
The Allstate Corporation (NYSE: ALL) is the nation's largest publicly held personal lines insurer. Widely known through the "You're In Good Hands With Allstate® " slogan, Allstate provides insurance products to more than 14 million households and has approximately 13,000 exclusive agents in the U.S. and Canada. Customers can access Allstate products and services through Allstate agents, or in select states at allstate.com and 1-800-Allstate. Encompass SM Insurance and Deerbrook® Insurance brand property and casualty products are sold exclusively through independent agents. Allstate Financial Group includes the businesses that provide life insurance, retirement and investment products, through Allstate agents, workplace marketing, independent agents, banks and securities firms.
Encompass Insurance is a division of Allstate Insurance Co., which is the exclusive administrator of personal automobile and home insurance policies issued by the insurance affiliates of CNA Financial Corporation. Formerly CNA Personal Insurance, Encompass was launched in September 2000 as an insurance brand with more than 20 years of relationships established with independent agents and their customers. Encompass, as part of the Ivantage Group of The Allstate Corporation (NYSE: ALL), is a brand devoted exclusively to independent agents, selling automobile, homeowner and related insurance to 1.2 million customers through a network of more than 3,700 independent insurance agents. Encompass maintains a web site at www.encompassinsurance.com.
Founded in 1934, Mutual Service Insurance Companies (MSI) is a Minnesota-based insurance and financial services organization that provides personal insurance and risk management solution to approximately 100,000 households in Minnesota, Wisconsin, Iowa, North Dakota and California through its dedicated network of nearly 250 exclusive agents. For more information on MSI products or services or to located the agent closest to you, call MSI toll-free at 1-800-345-2436 (651-631-7000) or log on to www.msi-insurance.com.
Western National Mutual Insurance Group, consisting of Western National Mutual Insurance Company (headquartered in Edina, MN) and Western National Assurance Company (headquartered in Seattle, WA) is the sixth largest writer of private passenger automobile coverage in Minnesota. They market other personal and commercial insurance through independent insurance agencies in Minnesota, Wisconsin, South Dakota, Washington, and Oregon. More information is available at the company Web site at www.wnins.com.
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