Allstate Sues Michigan Medical Billing Company

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December 28, 2009 Monday 03:48 PM EST

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Allstate Sues Michigan Medical Billing Company

Chad Hemenway

DETROIT

Allstate Corp. is suing a Michigan medical billing company and others for allegedly taking part in a "scheme" to commit insurance fraud that cost the insurers more than $680,000.

The lawsuit, filed in U.S. District Court in the Eastern District of Michigan, was filed under the Racketeer Influenced and Corrupt Organizations Act and also alleges insurance fraud, conspiracy and unjust enrichment. According to court documents, Allstate claims Global Medical Billing Inc. used police and hospital records to solicit people involved in car accidents -- particularly people eligible for benefits under Michigan's no-fault automobile insurance law -- and send them to clinics and other medical providers.

Among the allegations of insurance fraud are "solicitation of no-fault insurance beneficiaries, representing that services were for treatment of bodily injury sustained in motor vehicle accidents, billing for services that have not been performed, prescribing and/or ordering unnecessary services, treatment and testing all in an effort to financially gain and induce insurance companies to pay for these services," the lawsuits states.

The medical providers also arranged transportation to the medical facilities, Allstate alleges. Some of the providers are identified in the lawsuit by Allstate as "sham corporations." Allstate said that although it may have appeared each had a different name and tax identification number, they were not independent entities. The defendants "used these entities to accomplish their common purpose of increasing insurance billings and fraudulently billing for insurance compensable services."

According to a recently released report from the National Association of Insurance Commissioners, Michigan has the 12th-highest combined average auto insurance premium, at $1,056 annually (2007 data).

Allstate Insurance Group currently has a Best's Financial Strength Rating of A+ (Superior).

On Dec. 28 shares of Allstate Corp. (NYSE: ALL) stock were selling at $30.26, up 0.10% from the previous close.

The top five writers of private passenger auto insurance in Michigan in 2008, according to BestLink, were: State Farm Group, with 18.6% market share; Auto Club Group, with 16.0%; Auto-Owners Insurance Group, with 9.5%; Progressive Insurance Group, with 8.6%; and Hanover Insurance Group Property and Casualty Cos., with 7.8%.

(By Chad Hemenway, associate editor, BestWeek: Chad.Hemenway@ambest.com)

December 29, 2009

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