No-Fault Auto Insurance Fraud Scheme Exposed in New Jersey
Zhan Petrosyants has been charged with orchestrating a no-fault auto insurance fraud scheme, reportedly involving fraudulent medical claims totaling tens of millions of dollars. The Edgewater, New Jersey resident faces charges including healthcare fraud, wire fraud, aggravated identity theft, and money laundering conspiracy.
Federal authorities contend that from 2018 to 2023, Petrosyants and his associates filed illegitimate no-fault medical claims to insurers. The indictment reveals these claims were for services either not rendered, excessive, or not medically necessary. Additionally, the claims were often submitted under medical corporations not legally operated by licensed professionals, breaching state regulatory compliance requirements.
Petrosyants allegedly enlisted individuals to impersonate licensed medical professionals, facilitating the fraudulent claims. Prosecutors argue that if insurers had detected these discrepancies, numerous claims would have been denied. This highlights significant challenges in the insurance industry concerning compliance enforcement and risk management.
The scheme reportedly allowed Petrosyants to secure a portion of the claimed amounts through financial deals with funding companies, some linked to law firms. These arrangements provided rapid financial advances, presenting a veneer of legitimacy. Petrosyants also allegedly received referral fees and kickbacks from partners, with proceeds laundered through shell corporations to a Manhattan jewelry business.
In New York, the no-fault insurance system mandates motorists have coverage up to $50,000 for accident-related injuries, regardless of fault. This system facilitates quick reimbursements for medical services, potentially circumventing litigation. The law allows patients to assign reimbursement rights to entities such as medical clinics, which can be prone to exploitation as this case illustrates.
U.S. Attorney Jay Clayton remarked that such fraudulent activities inflate costs across the insurance sector, affecting policyholders broadly. This arrest underscores efforts to mitigate fraud that burdens both the insurance markets and consumers.
The arrest coincides with New York legislators examining Governor Kathy Hochul's proposed auto insurance reforms, targeting no-fault fraud reduction. James Freedland of Citizens for Affordable Rates underscored the need for legislative measures due to fraud's detrimental impact on insurance costs. Hochul’s reforms aim to curb staged accident schemes, redefine serious injury thresholds, and propose insurer discounts for adopting safe-driving tech, alongside limiting profits to benefit policyholders. The New York State Trial Lawyers Association, opposing these reforms, argues they may advantage insurance carriers by curtailing consumer rights and potential legal damages.