When we think of workers’ compensation fraud (the “F” word), most of us on the defense side automatically begin thinking of Applicant fraud, and many of us have seen it firsthand. We also hear and read about medical provider fraud in the workers’ compensation system, by perpetrators ranging from suppliers of durable medical equipment and prescription medications to doctors. However, there are many other elements of fraud that employers, claims adjusters, and attorneys should all be aware of to ensure that we are compliant with the law.

Defense attorneys routinely give an admonition to Applicants at the beginning of their deposition, “The Insurance Code and in conjunction the Labor Code provide that any person who makes or causes to be made any knowingly false or fraudulent material statement or material representation for the purpose of obtaining worker’s compensation benefits or payments is guilty of a felony,” but it is also a felony when the misrepresentation is made by the employer, insurance company, or defense attorney for the purpose of denying workers’ compensation benefits. An employer, claims adjuster, or attorney that attempts to discourage an employee from filing a workers’ compensation claim can also be subject to a criminal conviction under Penal Code section 550, punishable by both imprisonment and monetary fines.

Some examples of employer fraud are:

• Failure to notify the insurance company of an employee’s claim
• Paying for an injured employee’s medical treatment so that they will not file a claim
• Advising an employee that their injury is not covered by workers’ compensation
• Taking adverse action against an injured employee/claimant to send a message to other employees
• Making false statements about the injury in order to deny or decrease benefits

Actions more common than the above, and creating a larger negative impact on California workers’ compensation insurance as a whole, include:

• Failure to purchase and carry workers’ compensation insurance
• Misclassifying employees as independent contractors
• Misreporting payroll information including the number of employees, their job titles, and/or wages to reduce premiums

A mere charge of insurance fraud can take a substantial toll on a business, its operations, and the employees. However, with knowledge on how to avoid such circumstances and how to handle disputes when they arise, costly consequences can be prevented.