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Workers’ Compensation Fraud Billboard in San Diego

During a quick day trip down to San Diego last weekend, I caught this billboard from the San Diego County District Attorney which kind of took me by surprise. Picturing a handcuffed jail inmate it reads “Commit Workers’ Comp Fraud, Get A New Outfit.” In addition, “don’t do it, don’t tolerate it, report it” with a phone number to call right there. As a commercial insurance professional who sees’s businesses affected by this often, it was kind of refreshing to see actually. Here’s the sign:

Work Comp Fraud

Taken straight from the California Department of Insurance:

In California, workers’ compensation insurance is a no-fault system. Injured employees need not prove an injury was someone else’s fault in order to receive workers’ compensation benefits for an on-the-job injury. In addition to medical expenses being covered for injured employees, some injured workers are entitled to recover a portion of lost wages resulting from an injury. Fraudulent workers’ compensation claims can be an enticing target for criminals.

Workers’ compensation insurance fraud occurs in simple and complex schemes that often require difficult and lengthy investigations. Employees may exaggerate or even fabricate injuries. At the other end of the spectrum, white-collar criminals, including doctors and lawyers, entice, pay, and conspire with others to defraud the system by creating false or exaggerated claims, overtreating, and over prescribing harmful and addictive drugs. Insurance companies “pick up the tab,” passing the cost onto policyholders, taxpayers, and the general public.

The Workers’ Compensation Fraud Program was established in 1991. The legislature made workers’ compensation fraud a felony, required insurers to report suspected fraud, and established a mechanism for funding enforcement and prosecution activities. The legislation established the Fraud Assessment Commission to determine the level of assessments to fund investigation and prosecution of workers’ compensation insurance fraud.

Funding for the program comes from California employers who are legally required to be insured or self-insured. The total aggregate assessment for the fiscal year 2015-16 was $58,862,000.

During the fiscal year 2015-16, the Fraud Division identified and reported 5,380 suspected fraud cases; (SFCs) assigned 502 new cases, made 249 arrests and referred 167 cases to prosecuting authorities. Potential loss amounted to $193,354,616.

Workers’ Compensation Fraud Convictions

-JK

The Perils of Using Unlicensed Subcontractors

All employers in the state of California that use employee labor must purchase and maintain Workers’ Compensation insurance. This requirement extends to contracting with and hiring subcontractors.

Here are some steps you can take to better manage your insurance and safety program when it comes to working with subcontractors:

Selecting A Subcontractor

Before a subcontractor begins work, confirm they are licensed and insured. You should only contract with licensed and insured subcontractors. Not having valid Workers Compensation insurance coverage renders a subcontractors license VOID. (Business and Profession Code 7152.2)

  • Verify the subcontractors license: Contact the Contractors State License Board (CSLB). Visit http://www.cslb.ca.gov or call (800) 321-CSLB (2752).
  • Verify the subcontractor is insured: Request a copy of their Certificate of Insurance that demonstrates Workers’ Compensation (WC) and General Liability (GL) insurance us current and active.
  • Read the Certificate of Insurance and confirm the following:
    • Named Insured: Verify the certificate shows the subcontractors company as the named insured.
    • Types of Insurance Coverage: At a minimum they should have WC and GL coverage with limits of liability that adhere to the state minimum.
    • Dates of Coverage: Make sure the policy is active, that the policy has not lapsed, and the dates extend through the end of the project or contract
    •  Confirm Coverage: Call the subcontractor’s agent or the insurance company to confirm information
    • Request Updated Certificates of Insurance: If you work with the same subcontractors from year to year, mark your calendar to request updated certificates annually
  • What if a subcontractor is unlicensed and not insured?
    • “I’m a sole owner and exempt from insurance.” If this owner is working for you, most of the time they become a statutory employee and they would be covered under your Workers’ Compensation insurance policy
    • Also, CA Labor Code 2750.5 presumes that an unlicensed person who performs work requiring a license is an employee and not an independent contractor. Verify licensing and insurance coverage!

What an Uninsured Subcontractor Can Cost You

  • Legal Costs: The CSLB may initiate disciplinary action which may require you to hire legal counsel
  • Increase in Insurance  Premiums: As the uninsured subcontractor may be considered an employee, payments made to the uninsured subcontractor will be identified when your WC policy is audited resulting in additional premium.
  • Claims Experience and Increased Costs: Your WC Insurance will be responsible for any injury to the subcontractor and their employees. Any claims paid under your policy will negatively affect your claims experience and all claims paid will apply to your experience modification factor three years, which can increase your insurance costs.
  • Increase in Employment Taxes: You may be liable to the Employment Development Department for any unpaid contributions and tax withholding’s for the uninsured subcontractors employees
  • Loss of Coverage: Under the California Insurance Code Sections 311 and 359, when an insured has misrepresented or concealed facts that are material to the application for insurance, the underwriter may rescind coverage or cancel the policy. Review your WC policy application, did you say yes or no to the use of subcontractors or sublet of work without certificates of insurance?

If you need loss control information to improve your loss prevention efforts, contact me anytime to discuss.

-JK

3 Key Elements of A Safety Culture

According to OSHA, “Safety cultures consist of shared beliefs, practices, and attitudes that exist at an establishment. Culture is the atmosphere created by those beliefs, attitudes, etc., which shape our behavior.”

Safety culture is the overall organizational attitude, belief, and values associated with safety in the workplace.

See the three key elements of a safety culture from Employers Compensation Insurance Company:

SafetyCulture_v3

Many small and medium-sized businesses fail to invest in safety, when they’re the ones that can benefit the most from it. They have the most to lose in the face of a costly workplace accident. Creating a climate of safety doesn’t have to break the bank and it doesn’t require a large investment of time or a committed safety officer. Contact me today if you need help for your business.

Research is showing that, for every dollar a business invests in preventative measures, they’re seeing a four dollar return on that investment.

-JK

Los Angeles Has Highest Workers’ Comp Claim Costs in California

File this under the No Surprise folder but a new study by the Workers’ Compensation Insurance Rating Bureau show that Los Angeles has the highest workers’ comp claim costs in California.

Among other key findings, “The Los Angeles/Long Beach Area is the most litigious region in California. Medical legal costs are over 2.8 percent of total incurred costs on indemnity claims in the Los Angeles/Long Beach area compared with 2.0 percent statewide.”

“Indemnity claim frequencies in the Los Angeles/Long Beach area were 24.0 percent higher” than the rest of the state of California.

Read more here from the Insurance Journal:

As frustrating as this is, none of it surprises me. Not a week goes by where I don’t see a workers’ comp claim come across my desk for “cumulative trauma” or “repetitive motion” from an attorney after termination of an employee. And as I always say, nobody hurts more from this than the honest business owner trying to get by everyday running an honest business. They’re the ones paying the costs of these claims.

Here’s a map showing the regional differences of indemnity claims as a share of the total claims counts in California:

wcirb-claims-map

-JK

California Insurance Commissioner Awards $34.9M to Fight Workers’ Comp Fraud

Working in the Property & Casualty Insurance industry, I am happy to see the fight against Workers’ Comp Fraud. There are way too many people taking advantage of the Workers Compensation Insurance system in California, particularly Southern California. Honest business owners are stuck paying the high costs which is very much driven by those taking advantage of the system. I see it weekly with the claims coming across my desk. From the individual “claimants” to the attorneys and physicians, I hope you get caught.

-JK

Can I Be Fined for not Carrying Workers Compensation Insurance?

Answer: Yes, you can be fined for not carrying workers’ compensation insurance and more. If the Division of Labor Standards Enforcement (state labor commissioner) determines an employer is operating without workers’ compensation coverage, a stop order will be issued. This order prohibits the use of employee labor until coverage is obtained, and failure to observe it is a misdemeanor punishable by imprisonment in the county jail for up to 60 days, or by a fine of up to $10,000, or both. The Division of Labor Standards Enforcement will also assess a penalty the greater of (1) twice the amount the employer would have paid in workers’ compensation premiums during the period the employer was uninsured, determined according to subdivision (c), or (2) the sum of one thousand five hundred dollars ($1,500) per employee employed during the period the employer was uninsured. [Labor Code section 3722(b)].

frustrated

Additionally, if an injured worker files a workers’ compensation claim that goes before the Workers’ Compensation Appeals Board and a judge finds the employer had not secured insurance as required by law, when the dispute is resolved the uninsured employer may be assessed a penalty of $10,000 per employee on the payroll at the time of injury if the worker’s case was found to be compensable, or $2,000 per employee on the payroll at the time of injury if the worker’s case was non-compensable, up to a maximum of $100,000. [Labor Code Section 3722(d) and (f).]

Finally, as noted in answer to a previous question, failure to secure workers’ compensation insurance is a misdemeanor punishable by imprisonment in the county jail for up to one year, or by a fine of up to ten thousand dollars ($10,000) or by both that imprisonment and fine. (Labor Code Section 3700.5)

If you need help with quotes for workers’ compensation insurance for your business, contact me today. We can market this with numerous carriers to find the best coverage and price.

-JK

OSHA On-site Consultation Program

The Occupational Safety and Health Administration (OSHA) wants to assist small- and medium-sized businesses with their compliance and safety initiatives through their On-Site Consultation Service. This program offers confidential advice in all states across the country, with priority given to high-hazard work-sites. Consultation services are totally separate from enforcement and do not result in penalties or citations.

Using a free consultation service largely funded by OSHA, employers can find out about potential hazards at their work-sites, improve their occupational safety and health management systems and even qualify for a one-year exemption from routine OSHA inspections. The service is delivered by state governments using well-trained professional staff. Most consultations take place on-site, though limited services away from the work-site are also available. This safety and health consultation program is completely separate from the OSHA inspection effort presently in place. No citations are issued or penalties proposed during the consultation appointment.

Your name, your firm’s name and any information that you provide about your workplace, plus any unsafe or unhealthful working conditions that the consultant uncovers, will not be reported routinely to the OSHA inspection staff. Your only obligation will be to commit the organization to correcting serious job safety and health hazards; a commitment which you are expected to make prior to the actual visit, and carry out in a timely manner.

Getting Started
Since consultation is a voluntary activity, your organization must contact OSHA to request it. The consultant will discuss your specific needs with you and set up a visit date based on the priority assigned to your request, your work schedule and the time needed for the consultant to adequately prepare to serve you. OSHA encourages a complete review of your firm’s safety and health situation; however, you may limit the visit to one or more specific problems.

For more information on the OSHA On-Site Consultation Program, visit HERE

Benefits of On-Site Consultation

Knowledge of your workplace hazards and ways to eliminate them can only improve your own operations and the management of your firm. Your organization will get professional advice and assistance on the correction of workplace hazards and benefit from on-site training and assistance provided by the consultant to you and your employees. The consultant can help you establish or strengthen an employee safety and health program, making safety and health activities routine considerations rather than crisis-oriented responses. This program provides incentives and support to smaller, high-hazard employers to develop, implement and continuously improve effective safety and health programs at their worksite(s). The program recognizes employers who have demonstrated exemplary achievements in workplace safety and health by receiving a comprehensive safety and health consultation visit, correcting all workplace safety and health hazards, adopting and implementing effective safety and health management systems and agreeing to request further consultative visits if major changes in working conditions or processes occur that may introduce new hazards.

-JK

 

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