“Operation Sledgehammer” may sound like the devious plan of a James Bond villain, but it’s actually the most recent example of why our auto insurance premiums in South Florida are astronomical.
Many South Floridians shrug their shoulders when asked why they pay so much for car insurance. The answer is simple. As a 20-year insurance fraud lawyer, who defends insurers and insureds against fraudulent insurance claims, I’m often amazed by how unaware people are of staged automobile accidents and their direct effect on rising insurance rates.
Last month, the FBI and other agencies completed a three-year investigation into a local auto accident fraud ring (named Operation Sledgehammer because participants would sometimes take a sledgehammer to their vehicle before participating in a staged accident) that culminated in nearly 100 arrests and is reported to have cost insurance companies more than $20 million in fraudulent claims. In large part, those costs are passed down to consumers.
The Insurance Information Institute estimates such fraud could cost Floridians as much as $1 billion this year – making Florida one of the top five states in the nation for fake auto insurance claims. A key reason is that our consumer-friendly Personal Injury Protection (PIP) coverage provides up to $10,000 in medical expenses and lost wages for each occupant of a vehicle in an accident. So, the modus operandi for auto insurance crime rings is to pile a bunch of people in a car (including children and the elderly to make it seem more legitimate), stage a minor, single or multiple-car accident and establish or work with a bogus clinic to file false claims. Unless the insurance company suspects fraud, it will typically pay the claims. A growing number of unscrupulous individuals have come to view this as easy money and a lucrative venture.
Unfortunately, South Florida is the epicenter of the state’s PIP fraud. According to the Florida Division of Insurance Fraud, Miami-Dade County accounts for a mind-boggling 39% of all PIP fraud referrals in the state, with Broward and Palm Beach adding an additional 16%. It’s not surprising Miami-Dade County also has some of the highest auto insurance premiums in the country.
Recent legislation attempts to reform auto accident fraud in Florida, but catching and prosecuting the leaders of these organized crime rings is difficult. The state’s Division of Insurance Fraud has detectives and prosecutors dedicated to reining in these mob-like groups, but they’re tight-knit organizations with substantial backing. Leaders assimilate into our community and recruit runners to organize and execute accidents and clinic paperwork. This allows them to create layers between themselves and the actual accident participants, minimizing the chance they will be linked to the crimes.
Therefore, the various government and law enforcement agencies rely on the public’s help through anonymous consumer tips. Reporting this type of activity could result in a reward of up to $25,000 if the information leads to an arrest or conviction.
By becoming more aware of auto insurance and how it works, we may be able to recognize fraudulent activity and alert authorities. As the fraud decreases, so will insurance rates. And everyone benefits.
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