Workers’ Compensation: 5 Warning Signs of Fraud

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

 

About Stephanie Faris

Stephanie is a freelance writer and young adult/middle grade novelist, who also works in information systems. Her first book, 30 Days of No Gossip, will be released by Simon and Schuster in spring 2014. She lives in Nashville with her husband.
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18 comments
Honesty2
Honesty2

I know that a person is falsely claiming an injury at his workplace but injury happen months before.  I feel this is very wrong and this person is working and started a business on the side?  He is telling everyone that his friend is doing the work for him but in reality he does most of it.  I know this hurts honest companies and hurts other hard working employees.  Do I report it and if so how?


Pradeep440
Pradeep440

The Compensation Act prescribes that an employer must provide the necessary compensation benefits for employees who suffer injury or illness or who die as a result or in the performance of their work at the rates prescribed by law.

Wai Yi
Wai Yi

A professional solicitor would be able to tell if it was fraud or not and I'd like to believe they wouldn't support the case if they believed it to be fraud.

eaglematandfloor
eaglematandfloor

I think employers are wise to pay close attention to #5 above. It's helpful not just for spotting fraud, but also for better understanding how honest employees are on a day-to-day basis.

Bikramkumar
Bikramkumar

As a member of the working force, you possess specific statutory rights specifically designed to protect injured employees in the event that you are injured while performing in the course and scope of your employment. Workers' compensation provides limited insurance coverage for injured employees for lost of wages, medical treatment, vocational rehabilitation and retraining, if necessary.

soumyarnjan das
soumyarnjan das

If you were injured while breaking a workplace safety rule or while doing something else that your employer has prohibited (even a criminal act), your injury may still be covered by workers' compensation, depending on the level of your misconduct. This is part of the workers' compensation bargain: Employees do not have the right to sue their employer for work-related injuries, but those injuries are usually covered by workers' compensation, regardless of fault.

macculam
macculam

The National Social Insurance Institute (in Portuguese, Instituto Nacional do Seguro Social – INSS) provides insurance for those who contribute. It is a public institution that aims to recognize and grant rights to its policyholders. The amount transferred by the INSS is used to replace the income of the worker taxpayer, when he or she loses the ability to work, due to sickness, disability, age, death, involuntary unemployment, or even pregnancy and imprisonment. During the first 15 days the worker’s salary is paid by the employer and after that by the INSS, as long as the inability to work lasts. Although the worker's income is guaranteed by the INSS, the employer is still responsible for any loss of working capacity, temporary or permanent, when found negligent or when its economic activity involves risk of accidents or developing labor related diseases.

Laura890
Laura890

That's why pain-and-suffering awards can vary greatly, depending on the facts of the case and the jury. A lack of guidance may also be why jury awards for pain and suffering are frequently modified.

Rajkishor rout
Rajkishor rout

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.

Bob
Bob

One in Four cases are fraudulent? Not even close. Fraud is a problem, but this article completely misreads the data it cites. Over all P/C insurance fraud is 30 Billion, of which WC is 25% - 7.2 Billion. In the scheme of a $100 billion dollar industry, you are looking at more like 7%. Clearly not an author familiar with workers comp.

HollyJames
HollyJames

The things people will do for money! We live in such a sue-happy world these days. I think that having a workers compensation lawyer is always a good idea for the worker and the employer. Lawyers will likely be able to spot if the case is fraudulent. http://www.yormaklaw.ca/

Intuit Payroll
Intuit Payroll

Billy, I'm not sure what cards your are referring to. Please email me at Ask_Intuit@intuit.com so I can get more details.Staci

Ann Higgins
Ann Higgins

Maybe there is a reason why people resort to fraud. Naresh may be right about it.

Dennis Jay
Dennis Jay

Stephanie - I think you misinterpreted the report you cited. It doesn't say one in four comp claims is fraudulent. There really is no evidence of such a claim.

Joshua Bruer
Joshua Bruer

just now. interesting. I wonder why they'd do that..or is it obvious? thanks for this bit of interesting info.

CVM1259
CVM1259

Just a warning here from personal experience this may not do you any good. We had a claim we could prove was fraudulent as the individual worked two additional days then admitted to aggressive personal work over the weekend before claiming the injury. The insurance companies doctor could not find any trace of the injury the other doctor claimed.

 

Now the bad part the insurer chose to settle for a token amount rather than litigate to deny the claim because it was "less costly"  which sounds good in theory except since they settled they had to hold in reserve the entire surgery and possible future injury amounts.

 

Net result the insurer gets off cheaper than fighting, the fraudulent claimant gets a token amount and my unemployment insurance goes up 20% due to the EMOD adjustment over the reserve that will never be paid out per the settlement.

 

The insurance company admits the claim was fraudulent and they merely settled because it was in "THEIR" best interests. Apparently our companies best interests are not a concern and neither is stopping fraud. Glad they were able to protect their bottom line.