FEATURE ARTICLE

The Case of the Disappearing Employee

Sometimes mysteries are less mysterious than they seem, especially when insurance fraud is involved.

Summary — Insurance fraud costs everybody, but EMPLOYERS offers solutions to combat it. This real-life insurance fraud example shows how cases can progress and includes tips on how you can reduce the impact and cost of insurance fraud for your business.

Time to read: 7 minutes

Investigators look for a workers’ compensation insurance fraud suspect.

Several years ago, a handyman was terminated by Madrona Manor, an inn and restaurant in California’s wine country, for numerous violations of company rules and policies. Upon being terminated, the employee stated he had injured his back and shoulder as the result of an injury he sustained earlier while working at the inn. He completed a workers’ compensation insurance claim for benefits, but he declined immediate medical treatment. 

Examples of Insurance Fraud: Call Out Red Flags

The inn owner noted several “red flag” indicators of workers’ compensation fraud when reporting the claim and conveyed the information to the EMPLOYERS claim examiner. The claim examiner notified the EMPLOYERS Fraud Investigations Department, which investigates criminal fraud issues, and continued to handle the administrative issues of the claim. 

“EMPLOYERS listened to our issues with this claim, believed us and pursued it with a satisfying result.”

William Konrad, owner of
Madrona Manor

As a result, a field compensability investigation was conducted as part of EMPLOYERS’s anti-fraud program, which identified several coworkers of the claimant who stated he had told them he was going to file a workers’ compensation claim for a fictitious injury arising out of a fabricated workplace accident. He even offered to pay them to be “phony witnesses” to the accident. They all refused. “EMPLOYERS listened to our issues with this claim, believed us, and pursued it with a satisfying result.” 

Subsequently, a referral for potential workers’ compensation insurance fraud was made to the local district attorney’s office by the EMPLOYERS Fraud Investigations Department. The referral included documentation of the claimant’s misrepresentations, witness statements, and documentary evidence that supported an accusation that workers’ compensation insurance fraud had been committed by this claimant.

Within a few months, district attorney investigators independently substantiated the information contained in the EMPLOYERS referral for suspected workers’ compensation fraud. The county district attorney then generated a seven-count felony complaint, and an arrest warrant was issued. The claimant immediately fled the country and remained at large for more than four years.

During those years, both EMPLOYERS and law enforcement continuously attempted to locate the claimant. Not to do so would have allowed the arrest warrant to go stale, which could have become an impediment to his criminal prosecution, if and when he was eventually located.

The Long, Patient Arm of the Law

Four years later, the claimant was arrested while allegedly committing another crime. Two months after his arrest, he admitted he had never suffered an injury while working at the inn and pled guilty to the workers’ compensation fraud charge. The six-year struggle had resulted in proving that his workers’ compensation claim against the inn had been fraudulent.

The county district attorney generated a seven-count felony complaint and an arrest warrant was issued.

“EMPLOYERS’s pursuit against the false workers’ compensation claim against us, resulting in its subsequent dismissal and the eventual conviction and incarceration of the fraudulent person, was truly outstanding,” said William Konrad, owner of Madrona Manor. “EMPLOYERS listened to our issues with this claim, believed us, and pursued it with a satisfying result. More importantly, employees with dreams of easy money [through workers’ comp fraud] realized that Madrona Manor was no longer an easy mark.”

Three months after the conviction, amended Unit Statistical Report filings were retroactively filed by EMPLOYERS to six years prior, when the fraudulent claim had been filed, to remove the fraudulent claim from the inn’s experience rating.

The inn, as the policyholder, received tens of thousands of dollars in refunded premium from EMPLOYERS and the carriers that had insured them during the years following the filing of the fraudulent claim. None of it would have occurred if not for the policyholder and EMPLOYERS teaming up to fight and win against this fraudulent workers’ compensation claim.

Examples of insurance fraud cases like this show how important it is to work with a carrier like EMPLOYERS, who invests resources in helping you prevent fraud that can make your premiums increase. Take a look at these tips on workers’ compensation insurance fraud prevention below:

Nurse pushing a patient in a wheelchair while he asks not to use the x-ray machine

Lessons in Fraud Prevention

Key steps to keep in mind when you are the victim of workers’ comp fraud.

  1. Speak up!
    If you see any red flags when the employee first reports the claim, make sure to document them, and share them immediately as part of filing the claim with the claim examiner. Red flags might include refusing immediate treatment, declining “light duty” temporary reassignments, and rumors from other employees.
  2. Welcome the Investigators
    EMPLOYERS has a Fraud Investigations Department that runs fraudulent claims through a Field Compensability Investigation, an on-the-ground look at all of the evidence available. If they find a provable claim, they turn over the evidence to local law enforcement and file a complaint.
  3. Stay Involved in the Complaint
    As the policyholder, yours is the primary interest, and if you don’t pursue the complaint aggressively, you may suffer rising policy premiums through “Experience Modification” adjustments the carrier imposes to recoup costs from the claim. EMPLOYERS will help you with this, and will not let go of the complaint until it is adjudicated or no longer pursuable.

New to workers’ compensation insurance? EMPLOYERS has been helping protect small businesses for over 100 years. These workers’ comp explainer resources can help get you started, or if you have questions, connect with a local agent today. If you’re already part of the EMPLOYERS family, current policyholders and agents can log in to EACCESS for account details and more online.