Allstate Awarded $6 million for Fraudulent Accident Claims under RICO

Allstate Insurance Company sued a consortium of telemarketing companies, chiropractic clinics, and affiliated law offices spanning several states, contending they had in sought accident victims to make fraudulent claims in violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”). Particularly, Allstate alleged that the defendants used aggressive telemarketing to recruit car accident victims and then groomed them to file false claims. In April 2013, a Texas jury found that the defendants had violated RICO and awarded treble damages of $2,863,779 plus attorney’s fees for Allstate. Allstate also received a $3 million default judgment against several defendants who never appeared. The Fifth Circuit upheld the $6 million verdict for Allstate.

            The scheme aimed to identify persons who had been in vehicle accidents but were not at fault. To identify potential claimants, a telemarketing firm owned by defendant, Michael Plambeck, and managed by defendant, Douglas Freidman, purchased police accident reports and scoured them for not-at-fault victims who met certain criteria, usually low-income individuals without health insurance. The telemarketing firm then called the potential patient and offered them a free spinal exam to determine whether he or she was injured. The patients were then sent to a Plambeck-trained chiropractor for x-rays and treatment. Afterwards, the clinic usually referred to a law firm with substantial ties to Plambeck. The court found that despite the limited involvement of the defendant attorneys, the attorneys still shared in the enterprise’s fraudulent purpose and were therefore subject to RICO liability. Read more here.