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Fraudulent AI claims inundating class action lawsuits

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Fraudulent AI claims are inundating class action lawsuits and raising the costs for all parties involved, according to multiple legal trade publications. 

A recent class-action settlement involving Altria over Juul products has become a recent example of how fraudulent AI claims are creating chaos in the courtroom. 

Last month during a settlement hearing, plaintiff attorneys told a judge they had received 14.4 million claims in the case, about five times what was expected, according to a article.

“The innovation appears to be endless,” says Dena Sharp, co-lead plaintiffs counsel said at the hearing. “It’s likely a combination of a relatively small number of bad actors using the force multipliers of AI and everything the internet has to offer.”

Sharp estimated 20% or 2 million of the claims to be valid, according to the article. 

The lawsuit alleges Juul used deceptive marketing behavior regarding the amount of nicotine inside pre-filled pods. 

The judge agreed on the $45.5 million settlement along with giving attorneys more time to investigate the fraudulent claims before sending payments to claimants, the article says. 

According to the article, lawyers from both sides of the litigation spent between $8.55 million and $9.66 million addressing fraudulent claims for the recent settlement and an unrelated settlement with Juul Labs late last year. 

The trade publication also reported on issues with fraudulent claims filed in a Chicco KidFit booster lawsuit last year. The suit claimed Artsana USA falsely marketed the booster seats as safe for kids less than 30 pounds. 

The company sold about 875,000 of the booster seat but more than double the amount of claims were filed in the case, says. It was estimated 99% of the claims were fraudulent. 

PropertyCasualty360 published a commentary on the issue earlier this week written by Bryan Heller, co-founder and chief product officer of ClaimScore. The startup also announced Wednesday $3 million in seed funding for an AI real-time claim validation software. 

Heller says in his commentary that the consequences of AI fraudulent claims is far-reaching. 

“It strains the resources allocated for the settlement, delaying payouts to legitimate claimants,” the commentary says. “Additionally, it dilutes the overall settlement fund, potentially reducing the compensation that each legitimate claimant receives.”

The commentary also explores the cost to both legal parties faced with fraudulent claims. 

“Validating millions of claims against a backdrop of fraudulent submissions is a mammoth task,” the article says. “This process requires significant legal resources, driving up costs for both plaintiffs and defendants. Plaintiffs face longer wait times for their rightful compensation, while defendants are burdened with mounting legal fees and the uncertainty of a protracted settlement.”

Heller said the legal system needs a multi-pronged approach to combatting fraudulent claims that includes: 

Early AI-powered intervention that catches claims at the start of a claims period. 

Continual monitoring of claim detection systems to ensure the methodology is staying ahead of adapting tactics used by fraudsters. 

Collaboration between claims administrators, law firms and technology partners 

Transparency throughout the claims process including details of why a claim has been determined legitimate or fraudulent. 


Photo courtesy of deepblue4you/iStock

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