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Fighting Fraudulent Workmans' Comp Claims

Workers’ compensation fraud happens when “a person knowingly lies to obtain some benefit or advantage to which they are not otherwise entitled.” Fraud can be perpetrated by the employer, injured worker, medical provider or attorney. This article will focus on fraud by the injured worker. An injured worker either inflates the extent of the injury or fabricates the injury altogether.

The California Department of Insurance Workers’ Compensation Fraud Division made 269 arrests and referred 280 suspected fraud submissions to prosecuting authorities in fiscal year 2009-10 for all fraud types. Potential losses amounted to $1,150,136,727.

Red Flags - Fraud Indicators

A potentially fraudulent injury may have one or more characteristics not usually associated with a legitimate injury. Common red flags include:

  • Incident causing injury is unwitnessed.
  • Monday morning report of a Friday injury.
  • Delayed reporting - days or weeks later.
  • First notification of injury is from a doctor or attorney.
  • Injured worker has another job - dual employment.
  • Claim occurs in conjunction with a personnel action (termination/layoff, disciplinary action, demotion or being passed over for promotion).

When an employee resigns or is terminated, an exit interview is strongly encouraged. At this interview, ask the person if they have sustained a work related injury that has not been reported. If they say they have you’ll need to report it like a normal claim. If the employee says they haven’t been injured, ask them to sign and date a statement that indicates they have not sustained a work related injury. This is a strong deterrent to post termination claims.

Incident Investigation

The act of investigating an incident is another effective fraud deterrent. Employees are less likely to file a fraudulent injury when company management conscientiously investigates incidents to prevent recurrence and verifies incident facts. The investigation, when performed soon after the injury, can identify one or more of the following red flags:

  • Employee’s account of incident changes as it is retold.
  • Employee claims they “forgot” to report an important aspect of the incident.
  • The initial incident description and body parts injured differs from the physicians first report of injury.
  • Employee fails to report the injury in a timely manner.
  • At the accident scene there is a lack of physical evidence to support the injury.
  • Alleged injuries appear to be physically impossible.
  • The mechanism of the incident is inconsistent with the employee’s alleged injury.

If you suspect fraud, it’s critical that you handle the claim as you would a legitimate injury. Provide the employee with the required form (DWC-1), get medical treatment for the employee,then report the injury and your suspicions to Preferred Employers. Don’t wait to report! By California statute, Preferred has 90 days after you or a manager/supervisor have knowledge of the injury to make a determination to accept or deny the claim. Late notification of the injury reduces the time Preferred may need to conduct a thorough investigation.

Let us know IMMEDIATELY if you learn that an injured worker is working on their own or at another job, participating in athletic activities or “bragging” about how he or she is getting paid to not work.

Workplace Video

If you have video cameras in your business, we suggest maintaining video archives for 6 months. Late reporting of an injury is a red flag for potential fraud. Video of the alleged incident and injury can be irrefutable evidence to determine validity of the claim.

Hiring Procedures

When an employer is the victim of a fraudulent claim, often they will say there were signs or “gut feelings” they didn’t pay attention to, and hired the person anyway. Here are some red flags to watch for when considering an applicant.

  • Call the person’s most recent employer. Ask if the applicant would be rehired. This is an easy and effective method to screen applicants.
  • Does the applicant use a P.O. Box address, they have no permanent address and moves frequently. From past claims, they may be aware of sub rosa activities.
  • Check the person’s social security number in the federal governments e-verify system.
  • If your business has job descriptions that includes physical demands, provide it to the applicant and ask if they are physically capable of performing the job. Prompt and timely communication with the claims examiner is paramount to stopping a fraudulent claim. Never think the information is inconsequential, it may be the piece to a puzzle that can stop fraud in its tracks.

Contact us to learn more about Workers Comp Insurance.