A Kentucky law revision limiting the solicitation of accident victims within 30 days of a crash has gone into effect but is already being challenged in the state by multiple chiropractic groups that say the law is unconstitutional.
The Kentucky “New Solicitation Statute” makes it illegal to solicit people involved in a motor vehicle accident for medical care purposes. The law also says it is illegal to encourage victims to knowingly file phony and inflated medical claims.
Rep. Jim Gooch, who co-sponsored the legislation, said the bill was part of his effort to address problems with Kentucky’s no-fault law, which he says has been abused since it was enacted in the 1970’s.
Because of the state’s no-fault stance, attorneys or medical providers could take advantage of accident victims by using their personal injury protection (PIP) benefits for fees or unneeded services following an accident, says Gooch. In Kentucky, most consumers carry the minimum of $10,000 in PIP coverage.
“If a provider uses all of the [PIP] money early then the victim doesn’t have any left for loss of wages, etc., and people need those additional dollars for other things than medical bills,” he said.
According to Tim Lynch, director of Government Affairs for the National Insurance Crime Bureau, Kentucky has become a hotbed for this type of accident victim solicitation with the state ranking eighth in the country in 2014 behind more populated states Florida, New York and California for “Questionable Claims” (QC). Louisville ranks eighth for “Suspicious Vehicle Collisions” (SVC) behind Los Angeles, New York, Miami and Las Vegas, and ahead of Philadelphia and Boston.
“Louisville ranks very high and rivals population centers that are larger in terms of the number of accidents per 100,000 in population,” Lynch said. “People swoop up [police] accident reports and start soliciting. It’s all part of a large organized scheme.”
Since Florida’s crackdown on PIP fraud schemes, many of the large rings have moved to other states, including neighboring Kentucky, he said.
“One of our recommendations to deal with this problem was to tighten up legislation and we supplied our data to lawmakers,” he said. “Other states like Connecticut and Texas that have passed laws such as these have seen a measurable improvement.”
Prior Kentucky Law Unconstitutional
Lawmakers’ earlier attempt to deal with this problem, according to Mark Treesh, executive director of the Insurance Information Institute of Kentucky, was to target healthcare providers, attorneys and their “runners” – people who contact accident victims on someone else’s behalf – but that was ruled unconstitutional by a federal judge in June 2014 for being vague and broad.
Judge Charles Simpson stated at the time, “Given the under and over inclusiveness of the statute, the Court is unable to conclude that the statute achieves a reasonable fit between its ends and means.”
“So we crafted this legislation to respond to what the federal judge found in his decision – that our ban was unconstitutionally broad and it restricted free speech,” said Treesh.
The legislation added a section to the law that specifically spells out that healthcare providers – defined in the bill as anyone licensed by the Kentucky Board of Medical Licensure, the Kentucky Board of Chiropractor Examiners, the Kentucky Board of Nursing, the Kentucky Board of Physical Therapy, the Kentucky Board of Occupational Therapy, and the Kentucky Board for Massage Therapy – cannot contact motor vehicle accident victims within the first 30 days of a crash.
The revised law also states “intermediaries” – defined in the bill as an individual including but not limited to a telemarketer, agent, employee or contractor who solicits on behalf of a healthcare provider for the provision of reparation benefits – also cannot have contact with victims.
Those who worked on the law say the 30 day “cooling off” period is important because accident victims can be vulnerable during this time frame and insurance fraud investigators are better able to differentiate between legitimate and fraudulent claims activity after 30 days.
Gov. Steve Beshear signed the bill into law on March 23 and it took effect in June. It was a coordinated effort among Kentucky lawmakers, the Insurance Information Institute of Kentucky, the Coalition Against Insurance Fraud, the National Insurance Crime Bureau, and insurers in the state like State Farm.
New Lawsuit, Same Argument
Now, the same parties that challenged the law two years ago – multiple health groups including Chiropractors United for Research and Education, and Commerce Chiropractic and Rehab, as well as individual chiropractors – are challenging the revised law on the same grounds – that it violates the First Amendment and the Fourteenth Amendment of Equal Protection and Due Process clauses.
“On its face and as applied, the New Solicitation Statute and Solicitation Regulations deny Plaintiffs, anyone acting on their behalf, or anyone with which they contract, their right to write and speak freely and fully as guaranteed by First and Fourteenth Amendments,” the lawsuit states.
According to the 24-page filing in the Louisville Division of the United States District Court-Western District of Kentucky, the plaintiffs also take issue with the new law not banning insurers from contacting accident victims during the first 30 days.
“Insurance companies routinely solicit accident victims within the first 30 days of an accident and often times do so within hours of the accident, offering quick settlements to supposedly compensate them for their injuries and assist with medical bills,” the filing states. “Many accident victims, however, are completely unaware of PIP benefits and the fact that they are available regardless of the fault in an accident and they cannot be required to sign a release in order to obtain these benefits (and thus treat their injuries at no-out-of-pocket cost).”
Howard Goldblatt, director of Government Affairs for the Coalition Against Insurance Fraud in Washington D.C., says this assertion in the lawsuit really has no credibility to it.
“We scratch our head at that argument because it’s not that insurers are soliciting – the insurers are contacting their insureds to help resolve a claim,” he said. “That is not soliciting.”
Treesh agrees and is hopeful that the plaintiffs who are pinning their hopes on this argument will not be successful.
“Since we did a specific ban on certain providers we didn’t need to include an exception for insurance companies,” he said. “We don’t think [the plaintiffs] are reading the judge’s opinion very well. We only included some so we didn’t need to exclude anyone else. It was a very targeted means of banning solicitation.”
Other states that have PIP fraud laws challenged on constitutional grounds, such as Texas, have had their laws upheld, said Goldblatt.
“We think the Kentucky courts are an outlier because there are a number of states that have similar laws and similar rules and it is only in Kentucky that it has been overturned,” he said.
NICB’s Lynch said it is unfortunate a lawsuit against fighting the fraud problem has now come up in Kentucky twice, especially when the state has had such a problem with suspicious/questionable claims.
“This legislation was written to alleviate a court challenge and here it is being challenged, but that doesn’t mean it will be overturned,” he said.
Treesh says he’s not surprised the same groups are challenging the revised law.
“There is a lot of money to be made in soliciting people and getting them to [their office] for treatment, and so on. This lawsuit really shows how much money there is in this practice,” he says.
Kentucky Attorney General Jack Conway will defend the case on behalf of the state, but his office told Insurance Journal that a brief has not yet been filed.
Rep. Gooch, a former insurance agency owner, hopes this time the court will realize the importance of a law like this one.
“This bill is really for the consumer. When people abuse the system they are really hurting the insureds,” he said.
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