Workers Compensation Claim Fraud!

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1 Handling & Reporting Suspected Workers Compensation Claim Fraud! Presenters: George Hickler, SCLA CIFI Director Special Investigation Unit Everest National Ins. Co. Bill Randall, Vice President Investigation Solutions, Inc. Hosted by: Steve Thompson, ARM, COSS Aspen Risk Management Group, Inc.

Co. George.hickler@everestre.com Bill Randall, Vice President Investigation Solutions, Inc.

2 The information presented in this material has been developed from sources believed to be reliable. It is presented for informational purposes only and should not be constructed as legal, professional or business advice. Everest National Insurance Company and its affiliates accepts no responsibility for the accuracy or completeness of this material. It makes no representations or warranties of any kind herein and disclaims all such representations and warranties. Neither Everest National Insurance Company or its affiliates will be liable for any damages alleged to be caused by the information contained herein. It recommends you consult with legal counsel and/or other professional persons before applying this material. This information is solely for illustrative purposes and does not constitute a contract. Only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions.

Everest National Insurance Company and its affiliates accepts no responsibility for the accuracy or completeness of this material.

3 OBJECTIVES! * AWARENESS OF W/C FRAUD * FRAUD DETECTION & DETERRENCE MEASURES * KNOWLEDGE OF THE RED-FLAG INDICATORS * THE CLAIM VS. SIU INVESTIGATIONS * STATUTORY IMMUNITY AND REPORTING * INSURED DO S AND DON TS PROTECTION THROUGH DETECTION

4 WORKERS COMPENSATION COVERAGE Employer-Employee relationship; and Injury that is work-related or industrial AOE (Arising out of employment); and COE (In the course of employment)

5 FRAUD DETECTION IS EVERYONES BUSINESS! Insurance fraud costs U.S. insurers as much as $120 billion every year. Second only to income tax evasion as the leading economic crime in America! Does not adhere to any societal, economic or geographic bounds. Consumers and insurers both pay the price for insurance fraud. As a result, this has undermined many people s confidence in the workers compensation system. The number one weapon to effectively combat the insurance fraud problem is increasing awareness and knowledge.

Does not adhere to any societal, economic or geographic bounds. Consumers and insurers both pay the price for insurance fraud.

6 WE ARE NOT ALONE! Organizations Fighting Insurance Fraud Insurance Services Office (ISO) National Insurance Crime Bureau (NICB) Coalition Against Insurance Fraud (CAIF) Insurance Committee for Arson Control (ICAC) National Healthcare Anti-Fraud Association (NHCAA) International Association of Special Investigation Units (IASIU) National Society of Professional Insurance Investigators (NSPII) California Department of Insurance Fraud Division.

Coalition Against Insurance Fraud (CAIF) Insurance Committee for Arson Control (ICAC) National Healthcare

7 THE COST OF FIGHTING FRAUD! Local D.A s Receive $32 Million in Grants to Prosecute W/C Fraud Monterey $600,000 Kern $715,000 Fresno $1,122,000 Alameda $1,425,916 Riverside $1,488,786 San Bernardino $2,206,339 Santa Clara $2,452,358 Orange $3,588,116 San Diego $4,527,303 Los Angeles $5,937,916 TOTAL $31,774,392

Kern $715,000 Fresno $1,122,000 Alameda $1,425,916 Riverside $1,488,786 San

8 FRAUD! IT ALL STARTS WITH A LIE!

9 Fraud Defined. Misrepresentations made must be material to the case. The false information must have been presented intentionally. False information must have been presented to prove, validate, affirm or deny a claim for injury or loss payment or to obtain insurance coverage. The information must have been presented willfully. The false information presented would have altered, changed or modified the manner the claim was handled, investigated, evaluated or settled.

False information must have been presented to prove, validate, affirm or deny a claim for injury or loss payment or

10 Identifying Claimant Fraud: Know the TWO primary types of claimant fraud Compensability Did the incident happen? AOE/COE? Is it the proximate cause of the injury? Malingering Delay in RTW Understand claimant s motivations Identify and document evidence of fraud

Is it the proximate cause of the injury?

11 Compensability-Motivations Injured elsewhere Not injured Time off work Avoid personnel action Pending strike Wage garnishment

12 Malingering-Motivations Time Off Work Employed Other job Prior job Not Employed School Child Care Non-work injury treatment Lazy

13 RED FLAGS INDICATORS OF APPLICANT FRAUD Applicant s Circumstances of Injury * Unwitnessed accident * Accident occurs Monday morning * Details of accident are vague or contradictory * Accident inconsistent with employees duties * Delay in reporting (days weeks months) * Rumors circulate that accident is not legitimate * Employee is new on the job * Employee is disgruntled * Facing firing or layoff * Difficult to reach uncooperative * Protests about RTW

duties * Delay in reporting (days weeks months) * Rumors circulate that accident is not legitimate * Employee is

14 SIU INVESTIGATION What we ll do! DATA-MINING ISO -Choicepoint CPLink - AutoTrak Liaison: Law Enforcement NICB - FLDFS - NICB - SIU s FIELD INVESTIGATION Police Officer - witnesses Scene investigation Vehicle inspection Other I.A. invest. Court Testimony SIU SIU D/C MANDATED REPORTING NICB - IFB Law Enforcement

- FLDFS - NICB - SIU s FIELD INVESTIGATION Police Officer - witnesses Scene

15 STATUTORY FRAUD REPORTING MANDATES 22 states have anti-fraud plan requirements 44 states have mandatory reporting of suspicious claims One requires evidence [WI] recent TX change Three have voluntary reporting NE, ND, UT recent change WV Three have nothing at all MS, VT, and WY 14 states require annual reports 12 states require an SIU 27 states have Fraud Warning requirements

have voluntary reporting NE, ND, UT recent change WV Three have nothing at all MS, VT, and WY

16 CA. W/C Mandatory Reporting DUTY TO REPORT: CIC (b)(1) & (d) When an insurer knows or reasonably believes a fraudulent act was committed, shall report suspected fraud to CDI & the District Attorney s Office. RELEASE OF INFO : CIC (a). Must release information to authorized agency. REPORT within a reasonable time but not to exceed 60 days from the date of notice. IMMUNITY: CIC Not subject to civil liability for good faith reporting.

fraud to CDI & the District Attorney s Office. RELEASE OF INFO : CIC 1877.3 (a).

17 Key Elements: False or Fraudulent Claims P.C. 550 (a) & (b) - Wobbler Knowingly present false written or oral statements for the payment of a claim. Conceal or knowingly omit facts that may affect claim benefits. Misdemeanor: Up to 1 yr CJ; or Felony: 2, 3, or 5yrs SP and/ or $50,000 fine or double the value of fraud and restitution

18 Perjury - P.C. 118 Felony ( 2, 3, or 4 years) Att. Perjury - P.C. 664/118 Felony (1 yr, 18 mos. or 2 yrs) Applicant takes the oath to testify or declare truthfully And testifies as true a MATERIAL fact That he or she knows to be false REQUIRES: Certified Deposition by CSR Deposition Signed vs. Unsigned by Applicant EXAMPLES: Applicant denies prior injury to same body part Applicant denies being able to perform specific physical activities Applicant denies working (same duties) while receiving TTD

knows to be false REQUIRES: Certified Deposition by CSR Deposition Signed vs.

19 Fraud Reporting Immunity C.I.C No insurer, or the employees or agents of any insurer, shall be subject to civil liability for libel, slander, or an other relevant tort cause of action... PROVIDED: The investigation was conducted in good-faith There was no malice a forethought No willful misrepresentation was made No intentional exclusions of relevant information No violation of local, state or federal Privacy laws

slander, or an other relevant tort cause of action.

20 Fraud Reporting Immunity (Continued) California Labor Code Section Any insurer, self-insured employer, thirdparty administrator, workers' compensation administrative law judge, audit unit, attorney, or other person that believes that a fraudulent claim has been made by any person or entity providing medical care, as described in Section 4600, shall report the apparent fraudulent claim in the manner prescribed by subdivision (a). AND No insurer, self-insured employer, third-party administrator, audit unit, attorney, or. other person that reports any apparent fraudulent claim under this section shall be subject to any civil liability in a cause of action of any kind when acts in good faith, without malice, and reasonably believes that the action taken was warranted by the known facts, obtained by reasonable efforts. HOWEVER..let us do our job and here s why! (our mandated duty, our resources to investigate, our exposure $$$$$$$)

in the manner prescribed by subdivision (a). AND No insurer, self-insured employer, third-party administrator, audit unit, attorney, or.

21 DO S and DON T S of Suspected Fraud! Above All Resist the Anger Factor DON T become your own field investigator. DON T have a defeated attitude. Remember, we are in this together. DON T make accusations, but rather ask good questions. DON T make it a witch-hunt.

22 DO S and DON T S of Suspected Fraud! Remember Resist the Anger Factor DO conduct a timely and thorough investigation. DO document all circumstances of the reported injury. DO report the claim AND your suspicions as soon as possible. DO keep your eyes and ears open. Be aware of the workplace grapevine! DO immediately provide updates of information to Everest/ACM.

23 Your Most Controllable Factors Your best prevention is to have a PLAN. Employ Good Hiring Practices. Ensure your management team understands workers compensation. Create and enforce strong safety procedures. Require the prompt reporting of ALL injuries, no matter how minor. Post W/C claim procedures throughout the workplace. Encourage employees to report suspicious injuries by others. Know the Red Flag Indicators of worker s compensation fraud! IMMEDIATELY Report All Cases of Suspected Fraud To ACM/Everest. Create a zero-tolerance policy for fraud. Have an established practice for investigating injuries.

24 For More Information Visit our web site at: To Report Fraud- us at Call EVEREST SIU at (908) Direct Dial THE MORE EYES AND EARS WE HAVE, THE GREATER OUR CHANCES OF STOPPING INSURANCE CRIME!

Workers Compensation Fraud

Workers Compensation Fraud Martin Gonzalez Chief Investigator CA Department of Insurance Fraud Division 5999 E. Slauson Ave. Commerce, CA 90040 (323) 278-5000 1 State of California Department of Insurance