Signs That an Employee Is Perpetrating Workers Compensation Fraud and What Happens Next


An employee has just filed a Workers Compensation claim due to a work-related injury. The injury is not an obvious one; such as a lower back (lumbar) injury, anxiety or stress, carpal tunnel, etc. Luckily. you have Workers Compensation Insurance that will handle processing all of the paperwork and take care of costs. Additionally, the insurance adjuster or examiner will look for any red flags regarding the claim. If any red flags are hoisted, it is quite possible that a private investigator will be hired to conduct a scene investigation, take statements from the claimant and witnesses, and, in most cases, perform surveillance on the claimant. These investigations may result in discovery of insurance fraud or just a denied claim. Either way, the red flags that were hoisted by the adjuster/examiner resulted in your company not incurring a claim on your record that may result in an increase in premiums.

What can you do as an employer to identify these "red flags" that the insurance adjuster or examiner may have either overlooked or did not have access to?

Since you are the employer and have some type of relationship with your employees, whether it's someone whom you work closely with or someone you barely know, you have access to knowledge that the insurance adjuster/examiner will not. You, your managers, and/or the human resources department are the eyes and ears of your business. While the adjuster or examiner is the expert in determining if any red flags exist, he or she does not have access into your employees' actions before, during, and after the claim was filed. So what are these "red flags" that you or your management team should be looking for?

Red Flags of a Worker's Compensation Claim:

    The employee's actions prior to the claim. Did his or her attitude and/or work performance change? Change in attendance/punctuality? Major change in home or life circumstances? Change in financial situation? Prior claims? New employee? Health insurance? Any of these circumstances or changes are red flags, especially if a combination of these exist.
    The employee's actions during the claim. Did the employee report the injury immediately or was there a delay? If it was delayed, what were the circumstances? A delay in reporting the injury could be a red flag. Sometimes an employee will sustain an injury at home during the weekend and report the injury when they return to work. This in combination with no health insurance, definite red flag.

This is the time to keep an open ear. Co-workers of the employee often converse about what their comrade may be doing while they're off work. They may be going to a gym, an event, moving, working somewhere else, etc. Whatever the case may be, if it is out of the realm of what the employee should be doing, it is an obvious red flag. Also be aware of how long the employee is claiming injury. Has the employee been off of work for more than two weeks without a "light-duty" release? If no red flags have been raised up to this point, this may be the time to do so. Usually, a less-than-obvious injury can be remedied in about two weeks, depending on accessibility of doctors in your area and the possibility of surgery. If the employee has surgery expect them to be out for up to two months. Anything more than two months, red flag. Furthermore, make sure you keep an eye on any social networking sites, especially Facebook. Many times the employee will post information and/or photographs that indicate that their actions are contrary to their injury or restrictions.

So you have identified a red flag or multiple red flags and contacted the Worker's Compensation Insurance adjuster/examiner. What happens next? They will most likely hire a Private Investigator who will conduct an investigation. If they conduct a scene investigation and take statements, you or your management team will be contacted by them. What should you expect? The investigator will take a statement (most likely recorded) from the claimant at the place of employment (if they have returned). This usually takes between 30 minutes up to 2 hours, depending on how complex the injury or case is. The investigator will also take statements from witnesses and supervisors. These usually take between 10 minutes, up to an hour. The investigator may also inspect the scene of the incident and take photographs. Expect the Private Investigator to be present for an hour or two. Please remember, they are there as a third party. The results of the investigation have no bearing on their bottom line or performance status.

If the employee is off of work or on light duty, a surveillance investigation may be in order. You as a business owner or manager will probably not be aware of when the surveillance takes place; however, it is imperative that you keep the adjuster/examiner apprised of any circumstances or developments regarding the employee. For example: Memorial Day Weekend is approaching and an employee states that he/she is going out to the lake with the injured worker. You might want to contact the adjuster/examiner. Any information such as this will help the Private Investigator to determine a different start time than normal, what equipment/clothing to bring, scout events, etc.

Surveillance is usually conducted in eight hour blocks; therefore, anything that may happen during the other 16 hours will not be documented. The eight hour blocks are not finite. If the employee is out and about, the investigator will usually stay on them as long as they are active. A surveillance investigation will usually be performed for two to four days and more depending upon the initial results. Video documentation of the employee is obtained and taken into evidence.

What can you expect after the investigation is completed? Some investigations go on for months and maybe even years. If your employee remains off of work, surveillance may be conducted periodically throughout, depending upon the latest video results. The more video that is taken into evidence the stronger the potential Worker's Compensation Insurance Fraud case will be. If a strong case against the employee is compiled, they may take it to the local District Attorney's office for prosecution.

According to the National Insurance Crime Bureau, Workers Compensation Insurance Fraud costs insurers over 7 billion dollars a year. As an employer, you should be alarmed by this number. This costs businesses and taxpayers tons of money from paying an ever-increasing insurance premium to paying for more regulations. Employers be aware! Report any and all red flags to the Workers Compensation Board, Adjuster, or Examiner.