Insurers are fighting back. A trio of AmTrust carriers has filed a federal racketeering suit against a New York law firm, surgeons, and surgical centers.
The complaint, filed June 2, 2026, in the Eastern District of New York, comes from Wesco Insurance Company, Technology Insurance Company, and Associated Industries Insurance Company, all owned by AmTrust Financial Services. The three cover small and mid-sized businesses - the kind of policyholders who get sued when someone slips on a sidewalk.
That, according to the filing, was the weak point. The complaint alleges a coordinated "Fraud Scheme," its own capitalized term, designed to turn routine accidents into high-value lawsuits and pry settlements from insurers. The defendants, it says, used "standardized referral pipelines, templated medical records, and unnecessary surgical procedures to artificially inflate claim value."
The filing describes an assembly line: "Runners recruited claimants. Attorneys filed lawsuits. Gatekeeper Clinics generated treatment records. Radiology providers manufactured reports supporting surgical indication. Surgeons performed invasive procedures." Litigation funders bankrolled it, the complaint claims, in exchange for repayment from any settlement.
For claims professionals, the alleged mechanism is the real story. The complaint leans on a rule familiar to anyone handling New York liability files: the duty to defend starts the moment a suit is filed, "even where the allegations are false, groundless, or fraudulent." So every lawsuit, the filing says, forced AmTrust to spend from day one - on counsel, investigators, and experts - before the injury could be tested.
Next came what the complaint calls "surgical escalation." Once a claimant had an invasive operation on the record, the filing says, the case value jumped, exposing insurers to "catastrophic verdicts or excess judgments." Under that manufactured pressure, the complaint alleges, insurers settled claims that "would otherwise have little or no value."
The filing details four claimants. In one, a 26-year-old who the complaint says presented at the hospital with "a right knee abrasion" and "expressly denied neck pain" ended up with a two-level cervical spine fusion. The surgery and implants alone were billed at $182,111.02, with total charges of $216,185.50. That case "ultimately settled on February 26, 2024 for $865,000," the complaint says.
A second claimant's suit "was settled for $1,250,000.00 on March 22, 2024," the filing says, with $1,000,000.00 of that charged as damages to Associated Industries. A third "was settled for $512,000 on April 16, 2024." A fourth case is still active.
The complaint also targets the surgical providers. It alleges that both a podiatrist and a neurosurgeon named in the suit furthered "a bribery, extortion, kickback and fraud scheme in violation of 18 U.S.C. § 1952." The podiatrist, the filing says, performed "a knowingly unnecessary ankle arthroscopy" on one claimant despite not maintaining "Standard or Advanced Ankle privileges in the State of New York." The neurosurgeon, it alleges, performed a "knowingly unnecessary cervical spine fusion" on the same claimant.
The suit brings claims under the federal RICO statute, RICO conspiracy, the New Jersey Insurance Fraud Prevention Act, common-law fraud, and aiding and abetting fraud. The carriers want actual damages, treble damages under 18 U.S.C. § 1964(c), attorneys' fees, and costs.
The complaint is frank about why ordinary review missed it. The carriers used "reputable defense firms, investigators, and experts," it says, but HIPAA, attorney-client privilege, and New York's shielding of litigation-financing disclosures kept the alleged scheme hidden. That is the hard part for claims teams: the filing argues the safeguards insurers lean on were exactly what the scheme was built to beat.
These are allegations only. They have not been tested in court, the defendants have not filed a response, and no court has ruled on any of the claims.
