What Happened
Over the past year, a number of lawsuits have been filed in New York’s federal courts against medical providers, personal injury law firms, funding companies, and their affiliates. Insurance and reinsurance companies brought most of these suits, claiming that the defendants were engaged in organized schemes to fake or exaggerate construction-site accidents, create false medical records, and file inflated workers’ compensation claims and injury lawsuits. Many of these cases have already been dismissed, with several appeals pending.
One of those appeals was decided by the U.S. Court of Appeals for the Second Circuit on July 22, 2026 in Roosevelt Road Re, Ltd. v. Subin. The Second Circuit agreed with the lower court and found that the Plaintiffs were too far removed from the alleged fraud to recover damages.
These suits were filed under a federal law, the Racketeer Influenced and Corrupt Organizations Act (RICO), which was originally aimed at organized crime but now has been used by insurance companies to bring sweeping lawsuits against large groups of defendants. The reason is simple – RICO lets someone who is harmed by an alleged pattern of illegal activity sue for triple their claimed losses. That “treble damages” feature makes RICO a powerful and attractive tool for companies that believe they ultimately paid for someone else’s fraud. But, as the Second Circuit explained in Subin, RICO does not let everyone who claims to feel the downstream effects of an alleged fraud scheme bring a lawsuit—the entity suing must have been harmed in a direct way.
What the Court Decided
Agreeing that the lawsuit should be dismissed, the appeals court found that Plaintiffs (Roosevelt Road Re, Ltd., a reinsurance company, and Tradesman Program Managers, LLC, a management company that provides services to insurers and reinsurers) sit several steps removed from the people directly involved in the alleged accidents and claims. According to the Plaintiffs, the alleged scheme forced them to reimburse other insurers at higher rates and to spend significant resources handling and investigating illegitimate claims.
The court explained that RICO only allows a lawsuit when there is a direct relationship between the wrongdoing and the harm. Here, the insurance companies paid money because they sat at the end of a chain: they covered another insurance company, which in turn covered its customers (i.e., the employers, owners, and contractors) who were the real targets of the false claims. The court described this kind of “daisy chain” causation as too indirect, or “too remote,” to support a RICO case, because the Plaintiffs’ losses were really just a knock-on effect of harm to other parties. The court also pointed out that the more indirect an injury is, the harder it becomes to separate losses caused by the alleged fraud from losses caused by ordinary business factors. Even the Plaintiffs’ argument that a later side agreement had put them in the shoes of the primary insurer did not save the case, because their harm was still too far down the chain.
Why It Matters
For medical providers, imaging centers, physician practices, and pharmacies, this makes it significantly harder for insurers and reinsurers to use RICO—and its threat of triple damages—to chase losses that reached them only indirectly, through several layers of coverage. That reduces the risk of being pulled into sprawling, expensive federal lawsuits over alleged referral or documentation schemes.
Garfunkel Wild’s RICO Defense Group is comprised of a team of litigators with specialized experience in handling RICO cases during all stages of litigation, from requests for verification, including requests for examinations under oath, through trial, appeals, and/or settlement.
Should you have any questions regarding the above, please contact the authors, the Garfunkel Wild attorney with whom you regularly work, or contact us at [email protected].