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Workers' Compensation Fraud

The Fraud

There are two basic types of Workers' Compensation fraud:

  1. Employer (sometimes with agents)
  2. Employee (sometimes with providers or attorneys)

Employer fraud, also commonly called premium fraud, are those acts of fraud--including under-reporting payroll, misclassification of employees' duties and experience modification evasion--committed by an employer, for the purpose of reducing premium liability.

You may not discriminate against a worker who has filed previous Workers' Compensation claims. However, when you have several of the following suspect behaviors present or you observe an emerging pattern, don't be afraid to investigate further for possible fraud or to forward your suspicions to the appropriate authority. Here's a list of tips to consider as warning signs of possible fraud.

Tip

Tip

Warning Signs of Employee Workers' Compensation Fraud

The worker

  • the injured worker has an unstable work history; i.e., an employee who often changes jobs
  • the claimant has a history of reporting subjective injuries which may include Workers' Compensation or liability claims
  • the claimant is consistently uncooperative
  • the injured worker has been recently terminated, demoted, or passed over for a promotion
  • the injured worker is in line for early retirement
  • the injured worker is making excessive demands
  • the injured worker calls soon after the injury and presses for a quick settlement of the case
  • the injured worker moves out of state soon after the injury
  • the injured worker changes his or her address to a post office box or receives mail via a friend or relative

The workplace

  • the injured worker's workplace is experiencing labor difficulties
  • the accident occurs just prior to job termination, layoff, after formal discipline of the employee, or near the end of the employee's probationary period

The injury

  • the injured worker was not injured in the presence of witnesses
  • the injury is a subjective one, like stress, emotional trauma, or is hard to prove, like back pain, headache, insomnia, etc.
  • the accident is not promptly reported by the employee to the employer
  • the employers' first notice of the injury is from an attorney or a medical clinic, and not from the injured worker
  • physicians who have examined the injured worker have vastly differing opinions regarding the injured worker's disability
  • there is no sound medical basis for the disability; all physicians' reports indicate a full recovery
  • the injured worker is claiming disability exceeding that which is normally consistent with such an injury
  • the accident occurs late Friday afternoon or shortly after the employee reports to work on Monday
  • the claimant has the accident at an odd time, such as at lunch hour
  • the accident occurs in an area where the injured employee would not normally be
  • the task that caused the accident is not the type that the employee should be involved in; i.e., an office worker who is lifting heavy objects on a loading dock
  • the details of the accident are vague or contradictory

The medical relationship

  • the claimant frequently changes physicians or medical providers
  • the claimant changes physicians when a release for work has been issued
  • a review of medical reports provides information that is inconsistent with the appearance or behavior of an injured person; i.e., a rehabilitation report describes the claimant as being muscular, with callused hands and grease under the fingernails
  • the employer's first report of injury contrasts with the description of the accident set forth in the medical history
  • the injured worker develops a pattern of missing physician's appointments

The claim itself, or the claimant's attorney

  • the injured worker's attorney requests that all checks and correspondence be sent to the attorney's office
  • the claimant's attorney is known for handling suspicious claims
  • the attorney lien or representation letter is dated the day of the reported accident
  • the same doctor/lawyer combination previously known to handle the same kind of injury is handling this claim
  • the claimant is unusually familiar with Workers' Compensation claims-handling procedures and laws
  • the claimant's attorney complains to the carrier's CEO at the home office to press for payment
  • the claimant initially wants to settle with the insurer, but later retains an attorney and files increasingly subjective complaints
  • the claimant's attorney threatens further legal action unless a quick settlement is made
  • there is a high number of applications from a specific firm
  • the claimant's attorney inquires about a settlement or buyout early in the life of the claim
  • the claimant writes unsolicited statements about how much better he/she is, but treatment continues and the claimant doesn't return to work

Outside activities

  • there are tips from fellow employees, friends, or relatives suggesting that the injured worker is either working or is active in sports
  • the injured worker's rehabilitation report shows evidence of other activity
  • the injured worker is in a trade that would make it possible to otherwise work while collecting compensation
  • the injured worker is exaggerating an injury in order to get time off to work on personal interests; i.e., the injured worker is remodeling or building a home concurrently with the injury
  • the injured worker is in a seasonal business that would make it attractive to be "injured" during the off-season; i.e., occupations in fields such as roofing, landscaping, plumbing, farming, masonry, etc.
  • the injured worker leaves different daytime and evening telephone numbers
  • the injured worker is never home when called or is always "sleeping and can't be disturbed" (especially during work hours)
  • return calls to the claimant's residence have strange or unexpected background noises that indicate it may not be a residence
  • the claimant has several other family members also receiving Workers' Compensation benefits or other "social insurance" benefits, such as unemployment

The Flaw

Malingering employees can and will take advantage of a lack of supervision.

The Fix

The tip above sets forth a number of factors that should be kept in mind at all times when dealing with an employee injury. The list highlights a number of common indications that a worker's claim might be fraudulent. Although only a small fraction of workers' compensation claims are fraudulent, the cases that do occur are expensive, cut into your business's productivity, and can send your Workers' Compensation premiums sky-high. By being sensitive to the possibility that any claim might be fraudulent, you reduce your risk that a fraudulent claim, however rare, gets by undetected.

Business Tools

In the Business Tools area is a checklist to help you prepare a Workers' Compensation Claim.