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:
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.
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.
Here’s a word of advice for you: If you’re a business owner, make sure you’re accurately reporting your payroll on your workers compensation insurance policy. If you are using subcontractors/ independent contractors to perform services for your clients, you must obtain a certificate of insurance from these contractors confirming they carry their own workers compensation insurance coverage. If not, you may be liable for any losses that occur as a result of the services they are performing for your business.
Here’s a friendly reminder that it doesn’t pay to cheat the system:
California insurance commissioner, Dave Jones, announced in a press release on 2/23 the conviction of a California business owner for insurance fraud and perjury. The case involves a $1.6 Million penalty for failure to pay premiums and failure to accurately report payroll.
Ronald J. Haas Sr., 69, has been convicted on 10 counts of insurance fraud for failing to accurately report payroll and for failing to pay insurance premiums to his workers’ compensation insurance carriers. Haas was sentenced to one year in the county jail and restitution to the entities involved, and three years probation.
“Workers’ compensation insurance fraud is an egregious offense and it will be fully investigated by my Department,” said Commissioner Dave Jones. “Those who would seek to cheat a fund to help workers who were legitimately injured will be prosecuted to the fullest extent of the law.”
On January 12, 2007, State Compensation Insurance Fund Special (SCIF) reported a suspected fraudulent claim to the California Department of Insurance Fraud Division for investigation of suspected workers’ compensation insurance premium fraud. The report alleged that Haas, President of R J Haas Construction Corporation, et al., Saratoga, CA, failed to accurately report employee payroll to his workers’ compensation insurance carrier, SCIF. From July 1, 1998 to June 1, 2005, Haas claimed that he had no employees and that sub-contractors did all the work for his company. However, during this period, four workers’ compensation claims were filed by injured employees. Haas reported payroll to SCIF only after an injury was discovered and then payroll reporting stopped shortly thereafter, with the cancellation of his policy. Subsequently, Haas obtained workers compensation insurance policies through First Comp and again reported minimal to no employees.
An investigation by the Silicon Valley Regional Office of the California Department of Insurance, Fraud Division and the California Employment Development Department (EDD) revealed that Haas misrepresented office staff, project superintendents, foremen, and even some of his own family members as subcontractors. A forensic audit was conducted and revealed that Haas owed $594,293.22 in insurance premiums to SCIF, $229,167.71 in insurance premiums to First Comp and $813,328.27 to EDD for failing to accurately report employee payroll for the purpose of determining employment tax liabilities.
On April 29, 2009, Haas was arrested for felony violations of Insurance Code. Haas is eligible to apply for a home electronic monitoring program in lieu of county jail time. At time of sentencing Haas had already paid the full amount of restitution owed to insurance carriers SCIF and First Comp and to EDD.