Workers’ compensation fraud

Workers’ compensation fraud – Workers’ Comp

Donald T. DeCarlo

Workers’ compensation fraud is a serious offense and is not a victimless crime. Workers’ compensation fraud translates into lower wages, lost jobs, higher premiums and higher prices for products and services. All consumers ultimately pay the price of fraud, and whether that price is three percent or 20 percent, steps should be taken to reduce its impact on the system.

The following details the major types of fraud:

Employee fraud occurs when an employee knowingly, either orally or in writing, lies about, or causes another to lie about, or causes another to lie about a material fact in order to obtain workers’ compensation benefits to which she/he is not entitled.

Employer fraud occurs when the employer knowingly (a) misrepresents the truth in order to avoid, deny or obtain compensation on behalf of employees, (b) knowingly lies about entitlement to benefits to discourage an injured employee from pursuing a legitimate claim, or (c) falsifies policy-related information.

Medical provider fraud occurs when the provider, either in written form or orally, falsifies information regarding the basis of any billing for services or benefits alleged to have been provided.

Attorney fraud occurs when either attorneys or licensed representatives knowingly participate in the misrepresentation of the truth in order to secure an advantage for clients and/or themselves.

Warning Signs of Potential Fraud

The fraudulent act is frequently quite difficult to detect, and oftentimes even more difficult to prosecute. As one might expect, indicators of fraud vary by the type of fraud that is involved. These indicators do not occur in every case, and it is therefore important to be aware of their significance when they do appear. At the same time, the appearance of one or more of these indicators is not proof of fraud. The warning signs or indicators demonstrate the need for additional work or further investigation to determine whether fraud exists.

Some of the signs to be aware of when employees commit fraud:

* The injury is reported on Monday morning shortly after the work shift begins, or is reported weeks or even months after it allegedly occurred.

* The first report of the injury or notice of the loss is received from an attorney representing the worker.

* The worker fails to keep medical appointments, is never home when called, or is always “sleeping and cannot be disturbed.”

Employer fraud is most likely to occur in the purchase of renewal of coverage. Insurers and state regulators should be aware of possible signs of employer fraud that include, but are not limited to, the following:

* Classification codes are not consistent with duties normally associated with the employer’s type of business.

* Small payroll is being reported by a large company or employee leasing organization.

* Frequent additions and changes to the coverage, especially if several businesses appear to be owned or controlled by the same person or group.

Indicators of potential fraud from medical providers and attorneys are combined in this discussion because of the similarity of practices and the potential for coordinated activities between the two groups. Some of these indicators include:

* Bills from a health care provider or attorney that involve an unreasonable number of hours per day.

* Extensive medical treatments for relatively minor or subjective injuries. This often entails unnecessary testing.

* Boilerplate reports coming from the same physician’s office for more than one injured worker.

* Treatment being directed to a separate facility in which the referring physician has a financial interest.

* A relationship between an attorney and a health care provider that appears to be a partnership in the handling of workers’ compensation cases.

Donald T. DeCarlo is a partner in the law firm of Lord, Bissell & Brook in New York. He can be reached via e-mail at

COPYRIGHT 2002 Axon Group

COPYRIGHT 2002 Gale Group