GEICO has filed a civil lawsuit in federal court in New York alleging a coordinated $2.9 million no-fault fraud scheme involving 12 durable medical equipment (DME) companies and 10 individuals. The complaint describes a centralized operation controlled by an unnamed 'secret owner,' with multiple straw owners listed on corporate filings to obscure control and liability. For claims adjusters and SIU teams, this structure reflects a known fraud pattern where control is concealed while entities are rotated to avoid detection thresholds.
The alleged scheme focused on billing for medically unnecessary devices under HCPCS code E1399, a category reserved for miscellaneous DME items that fall outside standard fee schedules. According to the complaint, this code was exploited because reimbursement is tied to acquisition cost, allowing the defendants to inflate pricing through fabricated invoices. The invoices were allegedly issued by entities in Canada and Poland, both tied to residential addresses, raising red flags about legitimacy and supply chain verification. This tactic underscores a key vulnerability in no-fault claims: reliance on documentation that may appear valid but lacks independent verification.
GEICO claims the defendants used a 'quick hit' billing cycle, rapidly submitting claims through one corporate entity before shifting to another. This rotation allowed the operation to continue billing while avoiding sustained scrutiny on any single provider. For adjusters, this reinforces the importance of cross-entity analytics, tracking shared addresses, ownership overlaps, billing patterns, and referral sources rather than evaluating providers in isolation.
The insurer reports paying out more than $1.4 million and is seeking to deny an additional $700,000 in pending claims. The lawsuit includes allegations under RICO, common law fraud, and unjust enrichment, signaling a broader legal strategy aimed at dismantling the network rather than addressing isolated claims. For claims professionals, the case highlights the value of early SIU escalation, coordinated litigation strategies, and proactive denial based on lack of medical necessity and questionable documentation.
This filing serves as a practical reminder that DME fraud remains a persistent exposure in no-fault systems. Adjusters should pay close attention to non-fee-schedule billing, verify supplier legitimacy, scrutinize invoices tied to out-of-country vendors, and watch for patterns of provider rotation. These indicators, when combined, can help identify organized fraud before losses escalate.
