A regional commercial lines carrier is turning to federal racketeering law in a bid to hit back at organized construction-site fraud that it says is warping New York's workers' comp and liability markets.
Merchants Insurance Group, headquartered in Buffalo, New York, has filed a federal civil action under the Racketeer Influenced and Corrupt Organizations Act (RICO) to expose and stop an extensive insurance fraud operation targeting New York's construction industry.
"Insurance fraud has consequences beyond the immediate parties involved. It doesn't just affect insurance companies - it hurts everyone who depends on a fair system,” said Charles Makey, president and CEO of Merchants Insurance Group.
Civil action filed
The lawsuit, filed on Oct. 20, 2025, by the Willis Law Group, alleges that, since at least 2018, groups of individuals have orchestrated schemes involving staged or exaggerated construction site accidents, false injury claims, and unnecessary medical treatments - all designed to increase insurance settlements and profit at the expense of vulnerable workers and business owners.
According to the complaint, participants in the alleged fraud network preyed upon construction workers to take part in staged or exaggerated incidents, turned minor injuries into "full-body" claims, submitted false medical documentation, and billed for medically unnecessary or excessive procedures. Workers were also allegedly coerced into undergoing unnecessary operations, including spinal surgeries, by those organizing the scheme.
By bringing a civil RICO action, Merchants said it is seeking not only to recover its own losses but also to use a statute that allows plaintiffs to pursue treble damages and target the broader enterprise behind coordinated schemes, rather than isolated bad actors.
While RICO has been used in some high-profile no-fault and medical fraud cases, it remains a relatively aggressive tool in the construction and workers’ compensation context, and other carriers will be watching closely to see whether the approach proves effective.
"When false claims are used to line the pockets of a few, it drives up costs for employers and takes resources away from genuinely injured workers," Makey said. "We filed this case to help preserve the integrity and affordability of insurance for consumers throughout New York. It's our responsibility to protect the people who do things the right way."
Fraud costs skyrocket
According to the Coalition Against Insurance Fraud, insurance fraud costs US consumers an estimated $308.6 billion each year, leading to premium increases of $4,000 to $7,000 over a 10-year period for the average American family.
Against that backdrop, New York's dense, high-severity construction market has long been viewed by carriers and brokers as especially vulnerable to staged-accident and medical-billing schemes.
Makey said the case they filed is all about accountability and fairness. "We owe it to the construction workers who risk their safety every day and to the small businesses that play by the rules to make sure the system works for them."
