In conjunction with preventing workers’ compensation claimant fraud, an employer must also remain alert for the indications of claimant fraud. Sometimes even the best efforts to prevent the theft are thwarted, so vigilance is necessary. This newsletter describes some of the most common “red flags” of claimant fraud. There are many more.

Prior to discussing those indicators, it is important to understand the impact of claimant fraud. Primarily it is financial, and it is the company that ultimately sustains the loss. For example, when an employee is medically restricted from working he is just that – not working. The company is minus one producer. (By the way, this is true whether the claim is valid or fraudulent.) Next, your workers’ compensation insurance premium will eventually rise simply because your loss history contains a claim. And the often unrecognized financial impact on an organization is the diminished employee morale. Nobody likes to work with a thief, especially a successful thief. Another negative impact that claimant fraud has on an organization is that it subtly changes the employer’s opinion of workers’ compensation insurance and anyone who files a claim. This results in the employer being resentful towards the system (the very institution that exists to cover his losses) and towards all employees who file a claim. This is unfortunate because 99% of workers’ compensation claims are valid and what this disillusioned employer is doing is stereotyping honest people as being dishonest.

Red Flag #1 – Injury Reporting: If an employee reports an injury early on the first day back to work after a weekend or vacation, then the claim may be fraudulent. Most likely the injury occurred during his time off. Also, if there is a significant time lag between the when the employee says the injury occurred and when he actually reported the injury, then the claim may be fraudulent. The advantage to late reporting is that the company has limited opportunity to investigate the facts/evidence surrounding the accident; therefore, its validity really can’t be substantiated. Keep in mind that some injuries are slow to manifest pain, so the employee may be telling the truth.

Red Flag #2 – Statements from Coworkers: If other employees report to management that the claimant is not telling the truth, listen to them. Often times the fraudulent claimant will brag about his deed or confide with another employee prior to submitting the fraudulent claim. In addition, the coworkers may even see the fraudulent claimant in the community performing tasks that are inconsistent with his medically restrictive injury (loading groceries into the trunk of his car; cutting his grass with a push mower; performing repairs to his property; going hunting; etc.).

Red Flag #3 – Accident Description: If the “allegedly” injured employee has difficulty recalling the details surrounding his accident, or if those details change with each recounting of the event, then the claim may be fraudulent. It is more difficult to consistently lie than it is to tell the truth.

Red Flag #4 – Employment Status: If the claim is reported by an employee who has limited tenure with the company, or who may be facing layoff, then the claim may be fraudulent. The primary motivation for fraudulent claims is to receive medical work restriction, which then affords the individual the opportunity to unofficially work elsewhere and to increase his income. On the other hand, if an individual is facing imminent furlough then he may do the math and realize that a workers’ compensation claim may be financially more advantageous than unemployment benefits.

Red Flag #5 – Personal Financial Pressures: If the employee who files the claim is experiencing tough financial issues in his personal life, then the claim may be fraudulent. Unfortunately, several individuals experience financial crises and they “cross the line” and resort to desperate measures to survive. Workers’ compensation fraud is one measure. Add to this the fact that many employees do not truly understand the workers’ compensation system. They believe it is an entitlement; therefore, they do not view themselves as a thief if they submit a fraudulent claim. Lastly, many Americans do not have private health insurance, but they do have workers’ compensation insurance. The choice seems clear, even if it is stealing.

Red Flag #6 – Evasive Behavior: If the medically restricted employee avoids contact with the company or otherwise seems evasive, then the claim may be fraudulent. This evasiveness is usually characterized by the employee providing a P. O. Box for his address instead of a physical location. It’s difficult to visit someone at a post office box. And if the employee never answers his phone then you begin to wonder about his whereabouts and his “doings.”

Red Flag #7 – Personal Attitude: If the employee demonstrates a persistently negative or defiant attitude regarding the injury or the claim, then the claim may be fraudulent. Sometimes employees will “settle the score” with an employer by filing a fraudulent workers’ compensation claim. If there have been other integrity issues with this individual during his employment, there may be strong reason to suspect that a suspicious injury is also less than honest.

Red Flag #8 – Personal Ties: If the employee has close ties to others who have defrauded the system or others who may currently be off work for any reason, then the claim may be fraudulent. In the first situation an employee may be influenced by his friends who have been successful in submitting fraudulent claims. In the latter, an employee may be motivated to get off work, regardless of the method, so he can be available when relatives come to town for a visit, or when his spouse is off work. These are often known as “sympathetic claims.”

Red Flag #9 – Legal Expertise: If the claimant demonstrates an unusual knowledge regarding workers’ compensation or retains an attorney soon after filing the claim, then the claim may be fraudulent. Both of these situations are very strong indicators of fraud. Most employers have limited knowledge of the workers’ compensation system so why would an employee be well versed in its intricacies? Furthermore, the system is designed to minimize litigation so what is the true motivation for retaining an attorney so early in the process? Perhaps it could be to “bully or bluff” the employer and insurance company into an early settlement.

Red Flag #10 – Medical Treatment: If an employee fails to attend medically prescribed physical therapy sessions or follow-up evaluations, or even changes doctors just prior to the termination of his medical work restriction, then the claim may be fraudulent. These actions, or inactions, on behalf of the employee/patient represent intent to prolong the medical treatment process in order to prolong the time away from work (temporary disability = pay check without work).

As stated in the March 2008 newsletter, the employer is in the best position to prevent, identify and then control claimant fraud. This is best accomplished by establishing and enforcing company policies, educating employees, investigating accidents, documenting events and reporting this information to your insurance claims adjuster. Workers’ compensation claimant fraud is a significant obstacle to business profit and sometimes even survival.