Liberty Mutual is targeting an alleged $2 million no-fault insurance fraud ring, seeking to claw back payouts and block over $1 million in pending claims.
In a federal complaint filed September 29, 2025, Liberty Mutual Insurance Company and its affiliates accuse a network of physical therapy clinics and individuals of orchestrating a scheme to defraud the insurer and the New York automobile insurance industry. The lawsuit, lodged in the Eastern District of New York, alleges that the defendants submitted more than $2,000,000 in fraudulent no-fault insurance charges for healthcare services that were medically unnecessary, illusory, or otherwise non-reimbursable.
At the center of the allegations is a web of professional corporations and individual therapists, who, according to Liberty Mutual, served as “nominal” or “paper” owners to mask the true control and operation of the clinics by unlicensed individuals and entities. The complaint details how these nominal owners allegedly allowed their names and credentials to be used, while the actual control and profits flowed to management companies and unlicensed operators.
The scheme, Liberty Mutual alleges, relied on billing for services including computerized range of motion and muscle strength testing, functional capacity tests, and activity limitation measurement tests. The insurer asserts these services were often medically unnecessary, duplicative, or not eligible for reimbursement under New York’s no-fault insurance laws. In many cases, the complaint alleges, services were provided by independent contractors rather than employees, which, under state law, makes them ineligible for reimbursement.
The complaint describes an operation spanning more than forty clinic locations in the New York metropolitan area, with the defendants allegedly billing Liberty Mutual alone for more than $2,000,000 from 2019 to the present. The insurer claims it has already paid out more than $863,000 and now seeks to recover those funds and obtain a declaration that it is not obligated to pay more than $1,000,000 in pending claims.
Central to the case are New York’s licensing requirements for healthcare providers and the rules governing no-fault insurance reimbursements. The complaint references state regulations, including 11 N.Y.C.R.R. § 65-3.16(a)(12), which bars reimbursement to providers who fail to meet licensing requirements, and cites legal precedents such as State Farm Mut. Auto. Ins. Co. v. Mallela, 4 N.Y.3d 313 (2005), and Andrew Carothers, M.D., P.C. v. Progressive Ins. Co., 33 N.Y.3d 389 (2019), which hold that providers not in compliance with licensing requirements are ineligible to collect no-fault benefits.
Liberty Mutual also alleges that the defendants unbundled charges that should have been billed under a single code and submitted claims without preparing the required written interpretive reports. According to the complaint, these tactics were used to inflate charges and maximize payouts.
The complaint further alleges that the defendants entered into financially incentivized referral arrangements, allowing them to access a steady stream of patients at various clinics. The clinics, Liberty Mutual claims, did not engage in legitimate marketing or advertising, instead relying on these arrangements to maintain patient volume.
While the complaint lays out a detailed narrative, these are allegations, not proven facts. The case is in its early stages, with litigation ongoing and no findings yet made by the court.
For the insurance industry, the outcome of this case could have significant implications for fraud detection, claims management, and compliance with state laws. The scale of the alleged scheme, the sums involved, and the complexity of the operation make this a case closely watched by insurers, claims professionals, and compliance officers.
