Bruce Friedman, a Partner with Gallo Vitucci Klar LLP and Andrea Silk, also with Gallo Vitucci Klar LLP gave a two-part presentation at the July 2025 Summer Membership Meeting. The first was a case study of an active pending arbitration in which the audience was encouraged to act as jurors. The case presented a complicated fact pattern involving a claims made policy covering medical incidents. The second part was an update on various RICO actions filed in New York alleging a wide-ranging scheme to defraud insurers through staged accidents and fraudulent medical treatments. Replays of both presentations are available to members through the AIRROC On Demand platform.
The case study involved a policy issue to an operator of a nationwide network of behavioral health facilities by a captive insurer. One of the treatment facilities operated a foster care program in which some of the children placed were sexual abused by a foster family. Some of the issues discussed and questions raised by the complex and thorny fact pattern was whether the policy notice provision was satisfied, whether a sexual misconduct exclusion barred the claims or whether they could be coved as medical incidents, application of a retroactive date in a reinsurance certificate, reformation of contract and whether the reinsurance disputes could be resolved by the unexpressed mutual intention of the parties. The audience was encouraged to share their thoughts and they did not disappoint as they actively participated and contribute throughout the session.
Some of the key takeaways from the RICO update:
- Since the first RICO suit was filed in New York in 2024, there has been a rapid expansion of similar suits with 28 major RICO cases pending in New York with well over 1,000 defendants alleged to be complicit in an organized criminal network of law firms, medical providers, litigation funding companies, runners and claimants. Other jurisdictions, such as Louisiana and California have followed suit with criminal and civil RICO actions alleging analogous conduct.
- Defense counsel in the underlying cases have rallied together to share case information and created a fraud database of flagged cases involving any of the alleged bad actors.
- As a result of the RICO actions, many of the doctors and medical facilities are retiring, losing licenses, closing and reopening under new names, removed from Workers Comp directories and not showing up to testify. Less then 2% of cases have been discontinued and there has been a drastic slowing of discovery. Plaintiffs law firms are losing attorneys, with cases languishing, being dismissed or not being pursued. Plaintiffs, many who are illegal immigrants, are not appearing for depositions.
- A recent procedural ruling by a federal court dismissed one of the insurance carrier’s (Tradesman) RICO complaints, without prejudice, based on standing rather than the merits of the case. The court found that the carrier must have been the intended target of the RICO violation. The suit will likely be refilled as subrogees of the named insured.
