One out of every four insurance fraud claims in the United States is related to workers’ compensation. Every year, U.S. employees report personal injuries that happen outside of the job as workplace-related ones — to the tune of $7 billion, according to the National Insurance Crime Bureau [PDF]. Small businesses, which are often unequipped to handle investigating these claims, are the hardest hit.
How do you protect yourself? In order to prevent or prove workers’ compensation fraud, you first must be able to detect it. Here are five warning signs to watch for:
- Lack of witnesses — While unobserved accidents are certainly possible, an employee who commits workers’ compensation fraud often chooses a moment when nobody else is around as the time of “injury.” If the worker is rarely alone on the job, this can be a red flag.
- Time of injury — If a suspect injury happens on a Monday, the alleged “workplace” accident actually could have occurred over the weekend. It’s especially important for employers to obtain witnesses’ accounts of how the employee was acting immediately prior to the accident. Were there signs of injury before the injury was supposed to have happened? If so, this could point to fraud.
- Motive — Is there a motive for the employee to falsely claim an injury? This is one of the most important questions for employers to consider. If an employee is dissatisfied or foresees an imminent dismissal, either could provide a reason to fake an injury.
- Repeat claims — Some 37 percent of workers who file a workers’ comp claim file a subsequent claim. Although repeat claims can certainly set off fraud alerts, they also should prompt business owners to take an in-depth look at their operations. If the employee’s working conditions haven’t improved after an initial change, another injury is definitely possible, weakening your case if you decide to take legal action.
- Body language and inconsistency — When someone is being dishonest, there are various telltale body language indicators to watch for, such as shifty eyes and long pauses before answering questions. Watch for inconsistencies in an employee’s stories about the accident and document everything. Even if your instincts tell you the person is committing fraud, “instincts” won’t hold up in court if you choose to proceed. You’ll need clear documentation.
If a case of workers’ compensation fraud has been documented, you should report it to your state’s workers’ compensation fraud investigation department. The U.S. Department of Labor has information for each state here.
The easiest way to prevent workers’ compensation claims — fraudulent and otherwise — by providing a safe and comfortable workplace. If an employee expresses concerns about working conditions, take every step possible to address the issues. By stressing to workers that workplace safety is a top priority, you’ll help employees stay injury-free and show them that you care about their well-being.
Update 3/11/2013: Updated statistic on percentage of fraud claims related to workers’ compensation.
The California Department of Insurance states insurance fraud occurs whenever, "someone knowingly lies to obtain some benefit or advantage to which they are not otherwise entitled or someone knowingly denies some benefit that is due and to which someone is entitled". It is important to note that this encompasses more than simply providing false information directly, material omissions are also considered material misrepresentations.
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