Your auto insurance may pay for someone's $10,000 massage therapy

For American motorists, it's the worst scenario to be in -- other than an actual accident. A clunker of a car with a driver and three passengers pulls into your lane right in front of you. Then, suddenly and for no reason, the driver slams on the brakes. Even if you're able to stop in time to avoid a collision, it won't make a difference. 

An old wreck behind you, now visible in your rear-view mirror, and also transporting a driver and three passengers, hits you, ramming your car into the one in front of you and initiating a three-way accident.

No one got hurt in this bumper thumper, or did they? All eight occupants of these two cars emerge and proceed to hold their necks while rolling around on the ground. The police officer who appears on the scene and writes up the accident report is suspicious but is required to record their "injuries," even though none of them appear to speak English. 

Then everyone gets back in their cars. You drive to a repair shop and, if you're lucky, only get an increase in your auto insurance premium.

But unknown to you, that's not all that happens -- particularly if you live in one of the 12 "no-fault" insurance states such as Florida and New York. While you're on your way to have your car repaired, the alleged "victims" of this so-called accident are on their way to either a chiropractor, massage therapist or X-ray clinic for treatments that may cost as much as $10,000, or may, as happens in Michigan, be unlimited.

Welcome to the insurance game of no-fault -- where everyone gets paid for their injuries, even if no one got hurt. No-fault, which is tucked away in many auto insurance policies under the innocuous title of "PIP" (personal injury protection), is a good idea that many people, including most of the Florida legislature, think has gone terribly wrong. After trying in 2012 to cut the no-fault rate crime rate, which went down slightly before rebounding, the state is gearing up again this year for another attempt -- with two competing measures that would ultimately abandon this system.

No-fault has been around since the 1970s, and it once served a very valuable purpose. Under the "at-fault," or tort system, in place in a majority of U.S. jurisdictions, the cause of an accident has to be decided by insurance claims adjusters, lawyers or, worst case, a court of law. In the meantime, those injured in the accident could wait and suffer.

"You could end up limping for the rest of your life," said Lynne McChristian, who teaches about insurance at Florida State University.

No-fault provides a cash cushion allowing victims of a car crash to seek medical help immediately under their own policy. The insurer pays for this treatment up to the amount listed in that PIP box.

Scam artists have found a way to milk this cash cow with "swoop and squat" car crashes like the one described above. And in some instances, they even create fake crashes using only paperwork. The ringleaders, or brokers, organize "spider webs" of chiropractors, massage therapists and fake clinics to provide nonexistent X-rays and fraudulent diagnoses that overwhelm insurers with thousands of claims that are rushed through immediately after the "accident."

Topping the pyramid are sleazy lawyers who ensure that insurance companies don't deny these fraudulent claims. And at the bottom: "crash dummies" who are often illegal immigrants desperately in need money and who vanish before any insurance or police investigator can find them, often to another state to pull off the same scam. 

These immigrants are well coached in faking injuries, but they're paid a pittance to accept the danger inherent in what could be a real, and sometimes fatal, crash.

"Swoop and squat" became famous in 1992 when a black Pontiac Firebird was rear-ended by a car-carrier truck that jackknifed and spilled its load of cars all over I-5 in California's San Fernando Valley. The scam became so infamous that its premise was the subject of an episode of "Law and Order," in which the illegal immigrant died of a real neck injury.

Realizing that no-fault is an incubator for fraud, five states have abandoned it, most recently Colorado in 2003. And equally telling: No state has enacted no-fault legislation in the last two decades. But this hasn't stopped criminals from collecting -- or insurers from paying -- in states where it still exists.

Southern Florida in particular has been a hotbed for these criminals, with nine people arrested in one month alone for staging seven accidents. Across the state, more than 7,000 cases of PIP auto fraud were recorded in 2014-2015, the most recent period with available data.

No-fault fraud is "huge" nationally, according to Howard Goldblatt, director of government affairs for the Coalition Against Insurance Fraud. One "epic crash ring" in New York City, run by Russian immigrants, swindled insurers out of $279 million in a whiplash spree that included unethical doctors and fake MRI clinics.

While it's unclear just how much no-fault fraud costs nationally, the coalition estimates that it could be close to $8 billion, and that 18 percent of PIP cases had "the appearance of fraud."

While insurers unhappily pay these bills, they pass along the cost to those who buy auto insurance, which is required in every state except New Hampshire. "They spread the cost among the honest policyholders," said Goldblatt. Estimates of fraud in some states cost the public as much as $600 per year per policy.

But as Florida is learning, getting rid of no-fault isn't easy. "Powerful interests in the legal and medical profession support keeping no-fault," said Florida State's McChristian. "This has become a legislative volleyball. The legislature is looking for ways to lower insurance costs, while the medical profession is looking for ways to get paid."

But doctors have a point, she said. Florida has a large population of people who are either underinsured or uninsured, including health insurance, due to a finite amount of Medicaid. When these people are hurt in an accident, they can't count on their company's health insurance or Obamacare. The Sunshine State also has one of the lowest thresholds in the nation for what's required in terms of liability, which limits the victim's ability to collect from the person who caused the accident.

Florida is also among the top five states with the largest transient population, said McChristian, as well as a large immigrant population. Many of these people buy short-term insurance when they register a car, but drop it as quickly as possible in the "hope they don't get caught." 

But sometimes they do. The Insurance Research Council, which looked at people who are stopped and ticketed, found that nearly a quarter were uncovered in Florida. Which is a good reason to have PIP under your own policy.

"Dumping no fault is not like turning on a light switch," said Goldblatt. "Unless you have something to replace it with, you're going back to the old system, which needed replacing in the first place." Still, 38 states don't have no-fault, including California, which also has a large immigrant population.

If Florida is successful in negotiating the no-fault maze and getting rid of it or replacing it, other states may follow. Michigan legislators are looking to change their no-fault system, which allows someone who is injured -- or faking it -- to collect benefits for life. Michigan also lacks an anti-fraud agency to protect against "swoop and squat," which is why the problem is so severe in places like Detroit, according to Goldblatt.

New York state legislators in both houses have introduced bills that wouldn't end no-fault, but would keep a closer eye on those who abuse it. "This can no longer take a backseat in New York," said New York Insurance Association President Ellen Melchionni. "It makes our roadways more dangerous, diminishes the quality of health care and places additional financial burdens on New York families."

Many tools to curb this fraud are already available in insurance companies' and law enforcement's computers. Big data can sort through no-fault claims almost instantaneously and pinpoint the ones where hundreds of claims have come in from the same chiropractors, where stolen credit cards or phony bank accounts were used to purchase counterfeit insurance marketed to immigrant communities and where people used out-of-state addresses that were involved in other claims.

One good clue: medical expenses that run right up to the limit of PIP liability policies -- in some instances around $10,000 -- particularly by massage therapists who are treating "soft tissue" injuries.

Insurers said it would also help to see specific laws enacted against "brokers" who recruit for crimes like "swoop and squat" and to make it a crime to set up fake crashes. In addition, every state should have a unit that investigates and quashes these frauds.

But there's also a counter-movement. It sees "no-fault reform" as targeting immigrants and feels that law enforcement has better things to do than help insurers save money. Some even believe these crimes should be treated as "misdemeanors," not felonies.

"If that happens," predicted Goldblatt, "prosecutors will push these cases right off their desks."