Insurance keeps modern economies running. It offers financial stability, spreads risk, and allows people and businesses to recover from setbacks. But fraud undermines that trust – and in recent years, insurers have faced an increasing number of schemes built around staged accidents and inflated medical bills.
This article looks at one such case and the legal challenge of using the Racketeer Influenced and Corrupt Organizations (RICO) Act to fight insurance fraud. A federal court in New York recently dismissed a RICO lawsuit brought by two insurers, ruling that they were not the “intended victims” of the alleged fraud. The decision raises a serious question: if insurers pay the price for fake claims, why can’t they pursue RICO cases in federal court?
We’ll unpack what happened, why the ruling matters, and what it may mean for future efforts by insurers to use RICO against fraudulent injury networks.
On July 19, 2024, Roosevelt Road Re Ltd., a Bermuda-based reinsurer, and Tradesman Program Managers, a New York-based claims manager, filed a civil lawsuit under RICO and for common-law fraud. The suit named Subin Associates LLP, a well-known New York personal injury law firm, its principals Herbert and Eric Subin, and a “runner” accused of recruiting clients for staged construction accidents.
The complaint claimed that, starting in 2018, the defendants created a large-scale fraud scheme. “Runners,” allegedly working under the firm’s direction, recruited construction workers to stage fake job-site accidents and then file lawsuits or workers’ compensation claims. The workers were allegedly sent to doctors who produced exaggerated or false medical reports to inflate payouts.
The Subin Firm was said to earn contingency fees on the settlements and also benefit from referral arrangements with other lawyers and medical providers. By early 2024, after media reports and complaints from reinsurers, the firm began withdrawing from hundreds of cases.
RICO, passed in 1970 to take on organized crime, allows civil suits for damages caused by “a pattern of racketeering activity.” But federal courts have long limited who can bring such suits – and how directly the harm must flow from the wrongdoing.
Under RICO, plaintiffs must show that their injury was caused “by reason of” the illegal conduct. That means not only proving cause and effect, but also showing a direct connection. Over the years, the Supreme Court has narrowed this rule in several cases, including Holmes v. Securities Investor Protection Corp. (1992), Anza v. Ideal Steel Supply Co. (2006), and Hemi Group v. City of New York (2010).
In Anza, a business accused a competitor of avoiding sales tax to gain a pricing edge. The court said the real victim was the state, which lost tax revenue, not the competitor. In Hemi, New York City sued a cigarette seller for not reporting sales data that could have helped collect taxes. Again, the Court found the link too indirect.
In Roosevelt Road, the judge relied on that same logic. Tradesman, which provides claim services to insurers, was found not to be an “intended target” of the alleged fraud. The fraud was directed at construction companies and their insurers – not at Tradesman. The firm’s costs in investigating claims were seen as a side effect, not a direct injury under RICO.
Roosevelt, as a reinsurer, faced an even bigger hurdle. Because its payments came after insurers had already paid claims, its harm was “several steps removed” from the alleged fraud. The court noted that only when fraud is aimed directly at insurers – for example, through fake medical bills — can RICO claims survive.
The case highlights how difficult it is for insurers to meet RICO’s strict causation rules. Even if they pay inflated settlements because of fraud, that alone doesn’t prove they were the target of the scheme.
Costs tied to investigating or defending claims rarely count as RICO injuries unless the insurer itself was sued as part of the fraud. Losses that result indirectly – through higher payouts or reinsurer reimbursements – are usually considered too remote.
That narrow view leaves insurers in a difficult position: financially burdened by fraud but often unable to meet the legal standard needed to pursue RICO cases.
There are signs that some insurers are pushing back. On Aug. 26, 2025, Allstate Insurance Company and its subsidiaries filed a new RICO lawsuit in federal court in New York. The case alleges a scheme involving fraudulent billing for medical equipment tied to no-fault insurance claims.
According to Allstate, certain medical clinics instructed doctors to prescribe the same equipment for nearly every patient – regardless of need – and suppliers then submitted inflated bills. If the case succeeds, it could help insurers show that they are indeed the direct victims of such organized fraud.
The Roosevelt Road decision shows how hard it is for insurers to use RICO to fight widespread fraud. Courts continue to interpret “proximate cause” narrowly, often excluding insurers even when they ultimately pay for the misconduct.
But as fraud schemes grow more coordinated and costly, the line between “indirect” and “intended” victims may become harder to defend. Future rulings – like the one Allstate now seeks – could shift that balance, opening the door for insurers to use RICO as a stronger tool against systemic abuse.
