#None #Oak Brook #National Insurance Crime Bureau #TPLF #Fraud Risks

NICB Issues Warning on Third-Party Litigation Funding Fraud

The National Insurance Crime Bureau (NICB), in partnership with digital risk intelligence company 4WARN, has revealed alarming insights regarding the rising trend of fraud associated with third-party litigation funding (TPLF). This collaboration has brought to light a troubling connection between TPLF and increased fraudulent activities within the insurance sector, prompting an urgent call for transparency and vigilance across the insurance industry.

In a detailed analysis of nearly 800 insurance companies, NICB discovered that approximately 74%, or 585 companies, were directly targeted by opportunistic marketing campaigns backed by external funders. These tactics not only increase litigation but also inflate insurance premiums, placing an undue burden on policyholders.

Understanding TPLF and Its Impacts

Third-party litigation funding involves investors financing litigants or law firms in exchange for a share of the settlement. While this practice can help plaintiffs pursue rightful claims, it has also created a lucrative environment for fraudsters. In some instances, funders exert significant influence over case selection and litigation strategies, focusing solely on maximizing returns—even when such actions are not in the best interest of genuine claimants.

A particularly egregious example cited by NICB involved a sole funder backing multiple law firms, which collectively targeted a significant number of insurance companies, all while perpetuating dubious claims. This highlights the risk of TPLF facilitating not just excessive litigation, but also cases based on exaggerated or entirely fabricated claims.

The NICB's involvement in significant fraud cases, such as the United States v. Constantine—which revealed a $31 million trip-and-fall scheme connected to TPLF—demonstrates how these networks operate. Unethical lawyers collaborate with complicit medical providers and exploit digital marketing strategies to initiate mass litigation campaigns against insurers.

Growth of Digital Tactics and Fraud

The modern litigious environment has seen a surge in digital manipulation strategies employed by those engaged in TPLF-facilitated fraud. Tactics such as search engine hijacking, brand impersonation through cloned websites, and AI-generated content have all contributed to an increase in fraudulent insurance claims. The assessment conducted by NICB and 4WARN has illustrated a direct correlation between legitimate advertising efforts by law firms and deceptive campaigns aimed at exploiting these channels for unfounded mass litigation.

While legislative efforts to ensure transparency within TPLF operations are underway, NICB stresses that greater reforms are needed. Issues involving funding sources and their impacts on everyday consumers and the insurance industry demand urgent attention from both lawmakers and industry stakeholders.

CED/4WARN's Chief Executive Officer, Todd Kozikowski, commented, "Fraudulent third-party litigation creates a dangerous environment where digital opportunists utilize advanced online tools to mislead potential plaintiffs, making illegitimate activities appear genuine."

Recommendations for the Insurance Sector

To combat the growing threat of TPLF-driven fraud, the NICB has recommended several proactive measures:

• - Enhance Monitoring: Insurance companies should expand their surveillance of digital tactics, focusing on fake websites and brand impersonation.
• - Track Suspicious Activities: Identify patterns in mass litigation that may indicate opportunistic behavior.
• - Support Legislative Reforms: Insurers should advocate for increased transparency within TPLF operations to curb fraud.
• - Share Insight: Insurers are urged to communicate findings related to suspicious claims directly with NICB to bolster collective defense against fraud.

Conclusion

The emerging threat posed by TPLF-facilitated fraud is a multifaceted challenge that requires a concerted response from the insurance industry, lawmakers, and consumers alike. By increasing transparency, enhancing vigilance, and sharing information, stakeholders can work together to mitigate these risks and uphold the integrity of the insurance marketplace. The fight against insurance fraud is ongoing, and vigilance is key to protecting both policyholders and the industry at large.