New York judge dismisses one Tradesman RICO suit, with leave to amend

By Isha Marathe

June 26 - (The Insurer) - MGA Tradesman and its affiliate Roosevelt Road Re are working on filing an amended complaint after a New York district court judge dismissed a Racketeer Influenced and Corrupt Organizations Act (RICO) lawsuit filed by the parties against law firm Subin.

The plaintiffs said the ruling last week to dismiss the RICO case was "procedural" and based on "standing rather than the merits of the case".

The plaintiffs have until July 21 to file a second amended complaint. If they do not, then the judge will enter a judgment dismissing the RICO counts with prejudice, the June 19 motion said.

In the lawsuit against Subin, which was first filed in March 2024, Tradesman and Roosevelt Road Re said that the law firm was engaged in a scheme where so-called runners, "under the direction of and in coordination with defendants", recruited construction workers to stage fake accidents at construction sites.

The runners then allegedly "referred and/or transported" these construction worker claimants to Subin, which represented them in the lawsuits against parties involved with the construction projects, and earned a percentage of the ultimate judgment or settlement in these cases, the complaint said.

One of these runners, Jorge Arturo Gonzalez Lupi, is a named defendant in the lawsuit against Subin. The RICO claims against Lupi were also dismissed in last week's motion.

The plaintiffs said that Subin then inflated the value of these claimants’ cases by referring them for unnecessary medical procedures, and obtained money through fraudulent judgments, settlements and workers’ compensation payments.

The alleged scheme caused plaintiffs injury because Roosevelt Road Re, a reinsurer, needed to pay out on bogus claims covered by primary insurers, and Tradesman, as claim administrator, managed payments for these claims and was required to perform investigative and support work to process them, the complaint said.

DISMISSAL

U.S. Eastern District Judge Hector Gonzalez said both Roosevelt Road Re and Tradesman failed to show that they were the intended target of the scheme, a requirement to prove violation under RICO.

"Tradesman complains that it was required to spend money administering and investigating bogus claims … But, by Tradesman’s own account, it is in the business of sorting the wheat from the chaff in that way, and its insurer and reinsurer customers presumably pay it for that work," Gonzalez said.

"Thus, it is notable that Tradesman never alleges that the excess costs of investigating fraudulent claims exceeded the money it made from processing them."

He went on to say that Roosevelt's claims "also falter", because the reinsurer's injury – absorbing the financial impact from payments made by insurers – is "derivative of an injury to a third party", and thus does not meet the criteria for a RICO violation.

"Roosevelt fails to explain how its injury – a contractually required payment to a primary insurer – was directly caused by the fraud, rather than, for example, the construction employer’s decision to seek coverage or the primary insurer’s decision to settle the claim," Gonzalez said.

The dismissed lawsuit is one of several filed on behalf of insurers by law firm Willis Group, and is similar to at least one other suit filed by the plaintiffs, against a doctor, John Hajjar. A motion to dismiss is currently pending in Hajjar's case.

Subin's and Hajjar's attorneys did not respond to a request for comment.

TRADESMAN

In a statement responding to the dismissal, Tradesman said that the court's decision was based on standing rather than the merits of the case, opening the door for the MGA to amend and expand its legal approach.

"This ruling gives us an opportunity to broaden our scope, strengthen our legal position, and realign the case to ensure the strongest possible recovery for our insureds and carrier partners," said Tradesman CEO Dan Hickey.

Tradesman and Roosevelt Road Re are now exploring several new options and expect to file an amended complaint before the court-imposed deadline of July 21.

"This litigation campaign is unprecedented, and we remain confident in both the strategy and the outcome," Hickey said.

In March 2024, Program Manager reported that Tradesman and Roosevelt Road Re had filed a RICO lawsuit to recover funds from 46 individuals and companies following an investigation into largely New York-based construction accidents they claim were staged and resulted in unnecessary medical treatments.

In that complaint, Roosevelt said it had progressively incurred general liability claim adjustment expenses rising from $14,020,890 in 2018 to $36,362,147 in 2019, and then $58,694,694 in 2020, $91,334,395 in 2021, and $142,127,559 in 2022.

In January, Roosevelt Road Re, Tradesman and Ionian Re sued Liakas Law and dozens of others over an alleged fraud scheme involving construction workers staging construction accidents and collecting workers’ compensation benefits, The Insurer reported.