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SIU Spotlight

Exposing the Scam: Fighting Staged Accident Fraud with Tech & Litigation

SIU Spotlight, Issue 2, Vol. 1, March 2025

March 1, 2025

by Michael J. Sweeney

With increasingly sophisticated techniques, organized fraud rings target both commercial trucking fleets and private passenger vehicles in schemes designed to fabricate accidents and exploit the insurance claims process. These fraudulent activities have led to significant financial losses for insurance carriers and businesses, driving up premiums and creating unnecessary litigation. However, recent advancements in technology and legal strategies have given businesses and insurers powerful tools to combat these criminal enterprises.

This article examines common fraud tactics involving fabricated motor vehicle losses, outlines key preventive measures, and explores proactive legal strategies that businesses and insurers can implement to mitigate risk and deter fraudulent claims.

The Mechanics of Staged Accidents
Staged automobile accidents follow a common set of patterns, often orchestrated by multiple vehicles acting in concert to create the illusion of a legitimate collision. These schemes typically include:

  • Forced Merging Collisions: A fraudster vehicle double-parks or obstructs traffic, compelling the insured driver to maneuver around it. At that moment, another vehicle initiates a low-speed collision, making it appear as though the insured driver was at fault. 
  • Sudden Braking Scenarios: A fraudulent actor abruptly stops in front of a truck, forcing a rear-end collision. In some cases, an accomplice vehicle blocks the truck from changing lanes, thereby preventing the driver from avoiding an impact with the claimant vehicle.
  • Phantom Accidents: No actual collision occurs, but claimants submit fabricated police reports and medical documentation alleging significant injuries. In many such instances, an accomplice driver will pose as a “Good Samaritan” who slows in traffic in order to allow the claimant vehicle (with unrelated damages) to pull along side the target vehicle and allege that an accident has occurred. 
  • Multiple Passenger Injury Claims: Fraudulent claims often involve multiple occupants in the claimant vehicle, each alleging injuries that require extensive (and often unnecessary) medical treatment, including surgeries, to inflate the value of their claims.

Leveraging Technology to Prevent Fraud
One of the most effective defenses against staged accidents is the strategic use of technology to document incidents and provide irrefutable evidence of their occurrence. Businesses and insurers should consider implementing the following:

  • Front and Rear-facing Dashboard Cameras (dashcams): Dashcams capture real-time footage of roadway conditions, vehicle movements, and collisions. These devices have dropped dramatically in price in recent years and can provide indispensable video evidence which can immediately refute fraudulent claims by demonstrating how the alleged accident was intentionally caused.
  • Event Data Recorders (EDRs): Also known as vehicle “black boxes,” EDRs track speed, braking, and other driving metrics. EDR data can be used to challenge fraudulent claims by showing that no impact occurred, that an incident was intentionally caused, or that the insured vehicle was not at fault. 
  • Rapid-Response Investigations: In the aftermath of a suspicious accident, investigators should promptly collect available video evidence from nearby traffic cameras and businesses. Likewise, investigators should waste no time in performing background checks of the claimants, which can reveal patterns of prior fraudulent claims, potential connections to known fraud rings through usage of common telephone numbers and addresses, and past criminal convictions.

Legal Strategies to Combat Fraudulent Claims
While technology provides a strong deterrent against fraud, businesses and insurers must also adopt an assertive legal approach to prevent fraudulent claims from resulting in costly settlements. The following strategies can be particularly effective:

  • Declaratory Judgment Actions: If evidence suggests that a claim is fraudulent, businesses and insurers should consider filing a declaratory judgment action seeking a court ruling that no liability exists. This preemptive legal maneuver places the burden on fraudsters to justify their claims and can prevent the case from escalating into protracted litigation. 
  • Counterclaims for Fraud: When a lawsuit based on a fraudulent claim is filed, defendants should consider asserting counterclaims for fraud, misrepresentation, and conspiracy. A well-documented counterclaim can serve as a deterrent, signaling that fraudulent actors will face legal consequences rather than quick settlements. 
  • Vigorous Litigation Defense: Fraudsters often rely on the assumption that insurers will settle rather than incur the costs of litigation. By aggressively defending against fraudulent claims and utilizing video and EDR evidence, businesses and insurers can shift this calculation.

Where appropriate, defense counsel should seek early dismissal of claims based on fraudulent allegations and request sanctions against claimants who engage in bad-faith litigation.

Conclusion
Staged accidents and fraudulent insurance claims pose a substantial threat to insurance carriers, commercial enterprises, and private individuals. However, by leveraging advanced technology, conducting thorough investigations, and taking an aggressive legal approach, the insurance industry can effectively combat these criminal schemes.

*Michael is a shareholder in our Mount Laurel, NJ office and a member of the Insurance Fraud/SIU Practice Group. (856) 675-3614 | MJSweeney@mdwcg.com 


 

SIU Spotlight, Issue 2, Vol. 1, March 2025 is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We would be pleased to provide such legal assistance as you require on these and other subjects when called upon. ATTORNEY ADVERTISING pursuant to New York RPC 7.1 Copyright © 2025 Marshall Dennehey, all rights reserved. No part of this publication may be reprinted without the express written permission of our firm. For reprints or inquiries, or if you wish to be removed from this mailing list, contact tamontemuro@mdwcg.com.

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The Supreme Court of Ohio has clarified that an administrative appeal under Ohio Revised Code Chapter 2506 does not bar a separate action for damages and declaratory relief that could not have been pursued in the administrative appeal. The Ohio Supreme Court considered Sheetz, Inc. v. Centerville (2026-Ohio-3531) as a result of a certified question from the Southern District of Ohio. The question was whether Sheetz, the gas station/convenience store brand, was barred from seeking damages in a separate action since damages were not sought in their administrative appeal. Ultimately, the Ohio Supreme Court ruled that res judicata does not bar a separate action for damages after ruling on an administrative appeal because R.C. Chapter 2506 is limited to judicial review and cannot grant affirmative relief. The case arose after Centerville’s city council rejected a site plan proposed by Sheetz, Inc. that had received unanimous approval from the City’s planning commission. Sheetz filed an administrative appeal pursuant to R.C. 2506 in the Montgomery County Court of Common Pleas, and two months later filed a complaint for damages and declaratory relief under 42 USC § 1983 as a takings action with the city, city council, and other objectors as improper takings and a violation of due process, as well as interference with business and contractual relationship. The city and city council removed the § 1983 action for damages to federal court. Montgomery County Court of Common Pleas reversed the city council’s denial, and allowed the Sheetz project to move forward. Upon that ruling, the federal court issued a show-cause order questioning whether the § 1983 action was barred by the doctrine of res judicata via claim preclusion (which includes all theories of recovery).  Sheetz argued that Ohio courts of common pleas do not have authority to award damages or declaratory relief as party of the R.C. Ch. 2506 appeal, therefore res judicata could not be triggered to apply to the § 1983 action. Additionally, Sheetz moved to certify the issue to the Ohio Supreme Court, citing differing results between the second and sixth districts on this same issue. Centerville approached the question, not from a claim preclusion standpoint, but from the holding in Grava v. Parkman, Twp which states that a final judgment rendered on the merits bars all subsequent action based on the same transaction or occurrence.  In yet another approach, an objector argued that claim preclusion was satisfied because Sheetz could have raised its damages claims in the administrative appeal – Sheetz disagrees. In their analysis, the Supreme Court of Ohio broke down the elements of a claim preclusion analysis: 1) a prior final, valid decision on the merits by a court of competent jurisdiction; (2) a second action involving the same parties, or their privies, as the first; (3) a second action raising claims that were or could have been litigated in the first action; and (4) a second action arising out of the transaction or occurrence that was the subject matter of the previous action. The Court held that R.C. Ch. 2506 does not permit a party to argue damages as R.C. Ch. 2506 limits the common pleas jurisdiction as if it were sitting on appeal, and therefore can only affirm, reverse, vacate, or modify the appealed order, or can remand the case to the administrative body. Further, the Court held that Grava’s conclusion that a final judgment precludes additional litigation for different relief is inapplicable under this fact pattern because it was meant only to apply to those matters in which the plaintiff brings the exact same case twice, but for new relief. The Court found Grava was inapplicable because Sheetz could have requested damages or declaratory relief in the R.C. 2506 appeal. Therefore, Grava would be nothing more than dicta if it even did apply. Going further, the Ohio Supreme Court disavowed Sixth Circuit precedent which, in reliance on Grava and other district court decisions, permitted an owner to seeking relief under 42 U.S.C. § 1983 alongside an administrative appeal. See Moore v Hiram Twp., 988 F.3d 353 (6th Cir.2021). The Ohio Supreme Court found that the Sixth Circuit had disregarded a critical decision in Community Concerned Citizens, Inc. v. Union Twp. Bd. of Zoning Appeals, 1993-Ohio-115, which clearly held that a R.C. Ch. 2506 appeal cannot be combined with a complaint seeking other claims for relief. Id. at ¶ 11. To that end, the Ohio Supreme Court has determined that the decisions Moore relied on (outside of Grava) are no longer good law, and that Moore was wrongly decided. The decision draws a clear procedural boundary: Chapter 2506 provides judicial review of an administrative decision, not a forum for independent claims seeking affirmative relief. Although Grava may place claims arising from a single transaction within the potential scope of claim preclusion, those claims are not barred unless the complete claim-preclusion test is satisfied. Because Sheetz could not have pursued damages or declaratory relief in its Chapter 2506 appeal, the separate action was not precluded. The remaining question for practitioners looking to apply or defend against this exception is when does the statute of limitations begin to run on damages and declaratory relief claims related to an administrative decision on appeal? A takings action in federal court has a 2-year statute of limitations, or as a state claim, 4 years (like the other tortious claims raised therein). Correlating this case with others, an administrative appeal will not likely toll the statute of limitations on claims based on a final decision by a municipal authority. Therefore, practitioners should look for these cases to be brought simultaneously.

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