Allstate is going after alleged no-fault fraud rings in New York with twin federal RICO lawsuits.
The insurer filed two separate actions on February 19, 2026, in the US District Court for the Eastern District of New York, accusing ten durable medical equipment companies and nine individuals of running separate but similar schemes to exploit the state's No-fault auto insurance system. No final determination has been made in either case.
The allegations paint a familiar but troubling picture for the industry. According to the filings, the defendants formed DME supply companies for the alleged purpose of defrauding insurers, then entered into kickback arrangements with No-fault medical clinics across the New York metropolitan area. Those clinics, the suits claim, churned out identical prescriptions for expensive rental equipment to virtually every patient who walked through the door, regardless of what their injuries actually required.
In the first case, 26-CV-987, Allstate names FocalSupply Inc., KEF Supply Inc., Medrite Equipment Inc., Pelle Supply Inc., Rupes Supply Inc., Scarlet Supply Inc., and Yasmed Inc., along with six individual operators, alleging they submitted fraudulent claims for EMTT devices, cryotherapy units, and ultrasound devices starting in April 2023. Allstate says it was defrauded of more than $975,000, with another $533,000 in unpaid claims still in the pipeline.
The second case, 26-CV-988, targets People's Choice Medical Supplies Inc., Rosa Lynn Supply Inc., and Willis Equipment Corporation, together with three individual operators, for a scheme allegedly launched in July 2024 involving Triad 3LT light therapy devices, PEMF devices, and cold therapy units. Allstate puts its losses at more than $81,000, with over $621,000 in unpaid claims outstanding.
What makes these cases particularly instructive for insurers is the billing mechanics at the heart of both suits. Under New York regulations effective June 1, 2023, the maximum permissible monthly rental charge for non-fee-schedule DME is capped at one-tenth of the provider's acquisition cost. The defendants allegedly blew past those limits by disguising rentals as outright sales. A PEMF device acquired for roughly $3,000, for example, should have carried a maximum monthly rental charge of $300. Instead, the defendants allegedly billed $1,800 per device.
The filings also allege that the defendants sourced cheap knockoff equipment from wholesale suppliers and deliberately left make, model, and manufacturer details off their claim forms, making it harder for adjusters to flag inflated charges.
Allstate is pursuing claims under the federal RICO statute, along with common law fraud and unjust enrichment, and is asking the court to declare it has no obligation to pay any pending or future claims from the defendants. Treble damages and punitive damages are on the table.
For insurers navigating New York's No-fault landscape, these cases are a pointed reminder that DME fraud remains one of the system's most persistent vulnerabilities, and that carriers are increasingly willing to deploy heavy litigation tools to fight back.
