New Jersey Law Cracks Down on Insurance Fraud “Runners”

New Jersey has long grappled with the problem of insurance fraud. One common scheme involves using “runners” – people hired by shady clinics, attorneys or others to recruit patients and clients involved in auto accidents or slip-and-fall cases. The runners seek to build lucrative injury claims, often exaggerating injuries or staging accidents entirely.

To combat this, New Jersey enacted Section 2C:21-22.1 of the criminal code in 1997. This section defines the crime of being a runner, or hiring one, and sets forth penalties aimed at curtailing insurance fraud rings.

What the Law Says

The law defines a “runner” as someone who “for a pecuniary benefit, procures or attempts to procure a client, patient or customer at the direction of, request of or in cooperation with a provider whose purpose is to seek to obtain benefits under a contract of insurance or assert a claim against an insured or an insurance company for providing services.”

A provider is defined broadly as “an attorney, health care professional, health care facility, telemarketer, internet site developer or owner, or anyone acting under their direction or on their behalf.”

Acting as a runner, or hiring one, is a third-degree crime punishable by 3-5 years imprisonment and fines up to $15,000. The law bars convicted runners from government contracts for 10 years.

Targeting the Fraud Rings

This law aims to dismantle the financial incentive at the heart of insurance fraud rings. Runners typically get paid per patient or client they recruit, so they have strong motivation to use any means necessary to build claims. This inevitably leads to staging accidents, exaggerating injuries, and driving up insurance costs.

By making the hiring or use of runners a serious crime, New Jersey makes clear these schemes won’t be tolerated. The 10-year debarment from government contracts is especially significant, as it can cripple businesses that rely heavily on such contracts.

Why Runners Persist Anyway

Despite the risks, runners continue operating in the shadows in New Jersey. Why? For one, the potential payouts remain huge compared to the penalties if caught. A single exaggerated injury claim can net hundreds of thousands of dollars.

Runners also exploit legal loopholes. The law targets those paid on a “per head” basis, but some receive flat monthly fees or salaries to recruit for shady operations. Others have no official ties and simply get kickbacks under the table.

Finally, clinics and attorneys often insulate themselves through intermediaries. They rely on “marketers” and “advertisers” to recruit clients, maintaining plausible deniability.

Efforts to Strengthen Enforcement

While Section 2C:21-22.1 put a dent in the problem, policymakers admit insurance fraud remains rampant in the state. Efforts are underway to give the law more teeth:

• Tougher penalties: Legislation proposed in 2022 (S729/A1973) would increase runner crimes to second-degree, carrying 5-10 year prison terms.
• Taxing kickbacks: A bill proposed taxing kickbacks at 50%, reducing the profit motive for runners.
• Regulating intermediaries: Bills would regulate “marketers” and require transparency in their contracts with attorneys and clinics.
• Insurance fraud prosecutors: Some districts added prosecutors exclusively focused on complex insurance fraud crimes.
• Public outreach: Agencies are educating the public on how to spot runner scams.

Defense Strategies if Charged

Those charged under Section 2C:21-22.1 do have some defense options:

• No corrupt intent: It’s not a crime to simply recommend or refer someone to an attorney or clinic, if done in good faith without a kickback scheme.
• Entrapment: This applies if police or investigators induced or persuaded someone to act as a runner who otherwise wouldn’t have.
• Lack of payment: Without documented payment or financial benefit, it’s difficult to prove someone acted “for pecuniary benefit.”
• Misclassification: Marketers, advertisers and others may argue they were improperly classified as “runners.”
• Unfair targeting: Selective prosecution is grounds for dismissal if defendants can show they were unfairly singled out.

The Bottom Line

Section 2C:21-22.1 provides prosecutors with an important tool to combat the chronic problem of insurance fraud in New Jersey. But enhanced enforcement and tighter regulations are still needed to rein in the worst abuses.

Legislators continue working to refine the law to adapt to the evolving schemes runners devise. The ultimate goal remains protecting consumers from the costs and risks posed by insurance scams. With vigilance and cooperation between lawmakers, police and insurers, the battle against fraud rings in New Jersey presses on.