As with other forms of insurance fraud‚ workers’ comp insurance can be compromised by either employers or its employees if false or misleading information is provided to insurance companies.
The most common ways an individual commits insurance fraud is if he or she:
- fakes an injury at work to get paid time off
- exaggerates the severity of a legitimate injury to get additional time off work
with benefits
- claims an injury occurred on the job when it actually took place elsewhere
- takes a new job and lies to the insurance company about being unable to return to work at the previous place of employment‚ or lies by concealing his income from another job
An employer can commit insurance fraud if the organization:
- understates the amount of company payroll to reduce premium payments
- claims employees are independent contractors
- lies about the type of work employees do in order to qualify for and pay
lower premiums
- fails to carry workers’ compensation insurance
EXAMPLES
Here are a few typical scenarios to illustrate some of the different ways workers’ comp insurance fraud can be committed:
Phyllis injured her back while renovating her home’s bathroom, but she claimed a slip and fall at work caused the problem so she could claim workers’ compensation benefits and receive payment of her medical bills and
lost wages.
Tony owned a profitable roofing company. To save money, he told his workers’ compensation insurance company that a number of his staff were clerical workers, a much lower risk and therefore eligible for a lower premium.
Donna operated a restaurant and bar but didn’t purchase workers’ compensation insurance. After an employee was injured in a fight between bar patrons, there was no workers’ compensation insurance to pay the several thousand dollars in medical treatment needed by the employee.
Steve was injured at work and his employer’s workers’ compensation insurance covered his medical bills and lost wages for the time he was unable to work. While still receiving disability payments Steve went to work for another company. He concealed his new job from his old employer. He reported he was still disabled and signed a statement to that effect to his old employer’s workers’ compensation insurance company.
To view a TV spot from the prevention campaign that addresses the issue of workers' comp insurance fraud, click here.
To download a brochure from the prevention campaign that explains the issue of workers' comp insurance fraud, click here.
ACTUAL CASES
In 2008‚ 69% of arrests for workers’ comp insurance fraud were the result of employers’ failure to carry the required insurance. The majority of other fraudulent cases were due to concealment of employment and income while receiving disability benefits The following cases show how this crime is committed – and prosecuted – in real life.
ACCIDENT STAGED WHILE CAMERA ROLLS
Security camera records man faking injury, proving the old adage “a picture’s worth a thousand words."
February 13, 2009
Detectives of the Allegheny County DA’s Insurance Fraud Unit arrested Bryan L. Davis, a 32 year-old McKeesport, PA man charging him with one Count of Workers’ Compensation Insurance Fraud (F3). The Criminal Complaint states that on August 9, 2008 the man filed a workers’ compensation claim with his McKeesport, PA employer, a firm insured by ACE American Insurance Company. The man said that he was unable to work after he was injured when a chair at his desk suddenly collapsed. The man told claim adjusters that someone had put a broken chair at his desk without his knowledge. Detectives found that video recorded by a security camera at the man’s work place showed the man bringing the broken chair to his desk and staging his fall.
WORKPLACE INJURY LIES ARE NOT FUN AND GAMES
Worker injured in arcade during horseplay misrepresents it as an on-the-job accident, now faces insurance fraud and other charges
February 10, 2009
Brandon Stauffer was arrested by special agents of the Attorney General’s Insurance Fraud Section in Berks County. According to the Criminal Complaint, Stauffer filed a workers’ compensation claim with the Travelers Insurance Company stating that he injured the lower left side of his chest while moving a video arcade machine while employed at Pocket Change. Pocket Change is an arcade located at the Park City Mall in Lancaster. It is alleged that Stauffer injured his chest while wrestling at the arcade after the arcade was closed. Brandon Stauffer has been charged with one count of Workers’ Compensation Insurance Fraud (F3) and one count of Criminal Attempt/Theft by Deception (M1).
TWO WRONGS DON’T MAKE A RIGHT
Schuylkill County cable installer uses forgery to cover up lack of workers’ comp coverage
November 24, 2008
According to the Criminal Complaint, Keith McLane created a fraudulent Certificate of
Insurance form which purportedly verified that he had secured workers’ compensation
insurance through the State Workers’ Insurance Fund (SWIF) from January 15, 2006
through January 15, 2007. The Complaint further stated that McLane submitted the
certificate to JWK Engineering, Inc., as proof of insurance coverage per their request before he
was hired to do cable installation work. McLane was arrested and has been charged with one count of Forgery (M1).
CONSEQUENCES
The National Insurance Crime Bureau estimates that worker’s compensation fraud costs providers more than $5 billion a year. A 1997 study found that Pennsylvania ranked second highest in incidence of workers’ compensation fraud‚ at a cost of $180 million a year.
Workers’ compensation insurance provides a “safety net” for workers injured on the job‚ and this is why workers’ comp insurance fraud is such a serious crime. As with all other types of insurance fraud‚ Pennsylvania considers it a felony. Violators can spend up to seven years in prison and spend up to $15‚000 in fines. There are also many other associated expenses such as court costs and legal fees. Plus‚ those found guilty of insurance fraud have the stigmas and limitations of being a convicted felon to carry with them for life.
PREVENTION
Both employees and employers can avoid facing situations where there’s an opportunity for insurance fraud to be committed.
Employees must recognize and follow proper procedures for reporting on–the–job injuries. If receiving workers’ comp benefits due to such an injury‚ they must avoid providing misleading or false information to extend or expand those benefits.
Employers must‚ first of all‚ carry the required workers’ compensation insurance. They‚ too‚ can avoid committing insurance fraud by providing accurate information on employee classifications‚ full–time or independent contractor status‚ and amount of company payroll.
Whether you’re the employee or the employer‚ learning all you can about workers’ compensation insurance fraud will help you avoid costly and
life–changing situations.
To help all Pennsylvanians better understand workers’ comp and other types of insurance fraud‚ the Pennsylvania Insurance Fraud Prevention Authority (IFPA) has embarked on an informative and aggressive statewide public education and prevention campaign.
Click here to learn more about the IFPA Prevention Campaign.