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Auto no-fault fraud investigation underscores importance of reform

The recent sentencing of an Ogemaw County man to pay back nearly $775,000 to two auto insurance companies after fraudulently claiming he couldn’t walk following a car accident underscores the importance of recent auto no-fault reforms, according to the Insurance Alliance of Michigan.

One of the key pieces to the auto no-fault reforms passed in 2019 was the creation of a fraud bureau to crack down on fraudulent auto insurance claims.

“I want to thank the Michigan Department of Insurance and Financial Services and the Ogemaw County Sheriff’s Office for their diligent work on this investigation,” said Erin McDonough, executive director of the Insurance Alliance of Michigan. “Michigan’s broken, outdated auto no-fault system has been rife with fraud for decades. Thanks to reforms passed by the Legislature, the state finally has the tools and resources to crack down on these bad actors who are defrauding the system and driving up costs for everyone.”

According to a release from Department of Insurance and Financial Services (DIFS) , Darrell Lee Hardenburgh of West Branch was injured in an auto accident and claimed to be wheelchair bound. The Ogemaw County Sheriff’s Office began an investigation after his insurance company reported alleged fraudulent activity, including receiving attendant care and medical equipment that may not have been necessary. Hastings Mutual Insurance Company also filed an insurance fraud complaint with DIFS. Through a joint investigation, it was determined Hardenburgh could in fact walk.

As part of his sentence, which included 90 days in jail for stealing a backhoe, Hardenburgh was ordered to pay $746,529 in restitution to Hastings Mutual Insurance Company and $28,339 to The Hanover Insurance Group. He was also ordered to turn over all medical equipment used in the scheme.

“This sentencing should send a strong message to those looking to game Michigan’s auto no-fault system: You will get caught and you will be punished,” McDonough said. “The efforts of DIFS’ fraud bureau are further proof that reforms to Michigan’s auto no-fault law are working.”

Auto no-fault reforms are also resulting in lower premiums for drivers across the state and more drivers are getting auto insurance for the first time — or for the first time in several years — because it’s more affordable. More than 25 new companies are also poised to enter Michigan’s auto insurance market, which will further drive down costs.

The final piece of the no-fault reform puzzle, a medical fee schedule, will take effect on July 2. The fee schedule will rein in overcharging by medical providers, which is one of the biggest contributors to Michigan’s highest-in-the-nation auto insurance premiums.

The lower rates drivers are currently paying are based on anticipated savings from the medical fee schedule. The Michigan Catastrophic Claims Association (MCCA), which reduced its yearly per-vehicle fee by 60% over the last two years, also based its reduction on the upcoming fee schedule.

“When you put it all together it’s clear that auto no-fault reforms are working and the Legislature should stay the course on reform,” McDonough said.

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