Preventing and Handling Fraudulent Claims

How much does claimant fraud cost employers? Nobody knows for sure, but some people have estimated that as many as 30 percent of all claims involve some fraud. In California, the state's workers' compensation insurance fraud program identified 5.151 suspected fraud cases during Fiscal Year 2012-13. Potential loss amounted to more than $21.2 million.

Preventing Fraud

The first place to fight workers' comp fraud is on the front line — with your employees. They need to believe that the company is committed to a safe, healthy work environment. They need to know they are receiving good training, so they can perform their jobs in a consistently safe manner.

Next, your employees should understand the role of workers' comp insurance and that it represents a significant cost to the company. Employees need to understand that the claims costs are ultimately paid by the company. These expenses affect profits and can contribute to cost-cutting measures, especially in a tough economy.

Finally, let employees know that workers' comp fraud is a felony in California (and most other states), and that you will prosecute any employees who try to defraud the company. Workers' compensation insurers aggressively pursue fraud as well.

Warning Signs of Fraud

Certain signs could indicate that an employee is committing workers' comp fraud. Any one sign may not indicate a problem, but if you see several, you need to investigate. Be aware of employees who:

• Do not have a witness to their injury
• Post termination claims
• Delay reporting the injury
• Have discrepancies in their story
• Are vague on details, and the details change
• Report being injured on a Monday
• Report an injury just prior to a layoff
• Do not return calls
• Cancel doctor's appointments

Handling Suspected Fraud

If you suspect fraud or malingering, contact your claims adjuster with any evidence. He or she will likely contact the claimant's treating physician to get additional information on the claimant's condition and physical limitations. If those inquiries are inconclusive, he or she might bring in an insurance investigator.

If warranted, an investigator may covertly watch the claimant to see if he or she does activities that would be ruled out by the claimed injuries. Any investigation can create privacy concerns if not handled appropriately:

• Use an investigator with experience in handling workers' compensation cases. A licensed professional should know the applicable state and federal privacy laws, which will help you avoid claims you invaded your employee's privacy.

• Be clear what you want the investigation to achieve. For a workers' compensation claim, you would probably want to determine whether an employee is working for pay while supposedly disabled or doing activities that would be proscribed by his/her condition.

• Determine your budget. Surveillance can be time-consuming and expensive. Weigh the costs of the claim with the cost of surveillance.

• Know what an investigator can and cannot do. An investigator can generally make video recordings in a public location, but California prohibits the installation or use of audio or video devices in private places without the permission of the people being recorded.

For more information on handling workers’ compensation claims, please contact the PCOC Insurance Program department of EPIC at (877) 860-7378 or, email us @ ProPest@epicbrokers.com. Also check out: www.pcocinsurance.com.