What is Workers' Compensation Fraud in California?
In California, workers’ compensation fraud is a specialized type of insurance fraud relating to benefits provided to an injured person who is injured while working. In California, like most states, Workers’ Compensation fraud can be charged against the employee obtaining benefits, the employer, the treating medical doctors and the workers’ compensation attorneys.
California Penal Code Section 550. (a) is one of the major statutes used to prosecute workers’ compensation fraud. This section and the various sections that follow, states that “it is unlawful to ... Knowingly present or cause to be presented any false or fraudulent claim for the payment of a loss or injury, including payment of a loss or injury under a contract of insurance.”
There are many ways to present or help to present a false claim under California workers’ compensation fraud statutes. These include:
(1) Knowingly present or cause to be presented any false or fraudulent claim for the payment of a loss or injury, including payment of a loss or injury under a contract of insurance.
(2) Knowingly present multiple claims for the same loss or injury, including presentation of multiple claims to more than one insurer, with an intent to defraud.
(3) Knowingly cause or participate in a vehicular collision, or any other vehicular accident, for the purpose of presenting any false or fraudulent claim.
(4) Knowingly present a false or fraudulent claim for the payments of a loss for theft, destruction, damage, or conversion of a motor vehicle, a motor vehicle part, or contents of a motor vehicle.
(5) Knowingly prepare, make, or subscribe any writing, with the intent to present or use it, or to allow it to be presented, in support of any false or fraudulent claim.
(6) Knowingly make or cause to be made any false or fraudulent claim for payment of a health care benefit.
(7) Knowingly submit a claim for a health care benefit that was not used by, or on behalf of, the claimant.
(8) Knowingly present multiple claims for payment of the same health care benefit with an intent to defraud.
(9) Knowingly present for payment any undercharges for health care benefits on behalf of a specific claimant unless any known overcharges for health care benefits for that claimant are presented for reconciliation at that same time.
Some examples of workers’ compensation fraud charges include:
A construction worker hurts his back while moving large metal beam. He has an MRI which shows a protruding disk. He files his workers’ compensation claim and asserts that carrying the beam caused the disk to protrude. What he did not disclose is that he had this injury following a car accident several years earlier. His claim is considered fraudulent.
Another example is a doctor who gets many referrals of workers’ compensation patients from a workers’ compensation law firm. An insurance company reviews his reports using a sophisticated computer program. They find that over a five year period he consistently finds more serious injuries and assigns a higher injury assessment to patients referred by this firm. This is charged as fraud and as giving a kickback in exchange for more referrals. The attorneys are also charged.
The Osteopathic Medical Board of California devotes an entire page on their website to workers compansation fraud. It defines the following as its categories of fraud.
MEDICAL PROVIDER FRAUD
Billing fraud
Employing individuals to solicit new patients
Unnecessary treatment or self-interested referrals
Failing to report a work injury
CLAIMS ADJUSTER FRAUD
Causing payments to be made to non-existent claimants or medical providers
Referring patients or clients to medical providers or attorneys for compensation
Issuing excessive payments to an attorney or medical provider in return for a kick-back
Backdating documents in an attempt to avoid penalties for delays in benefit payments or altering
documents to support an unjustified denial of a claim
EMPLOYER FRAUD
Premium fraud: when an employer schemes to defraud their workers’ compensation insurer by
paying less for workers’ compensation insurance. Examples include under-reporting payroll,
misclassifying employees’ job descriptions, or paying an employee’s medical provider directly
for medical treatment for a work-related injury
Failing to secure workers’ compensation insurance coverage
ATTORNEY FRAUD
Facilitating claimant, employer, or insurer fraud
Engaging in client solicitation
Receiving a fee for referring clients to a medical provide
California law requires that insurance companies have a Special Investigation Unit (SIU) which reports cases of suspected fraud to the California Department of Insurance’s Fraud Division and district attorneys throughout the state.
The most commonly used fraud statutes under California law for workers’ compensation fraud are:
Insurance Code section 1871.4
Penal Code section 550
Penal Code section 549
Penal Code section 182 (conspiracy)
Enhanced penalties can be alleged under Penal Code section 186.11 which charges an aggravated white collar crime with losses over $ 100,000.00.
A typical charge for a violation of Penal Code section 550 might read like this:On or about and between June 01, 2022 to June 01, 2023, in violation of Section 550(b)(3) of the
Penal Code (INSURANCE FRAUD), a FELONY the WRONGFULLY ACCUSED did, with the intent to defraud, did unlawfully conceal and knowingly fail to disclose, and did knowingly assist with another person to conceal and fail to disclose the occurrence of an event and a fact that affected the initial and continued material right and entitlement of COMPANY to an insurance benefit and payment, and to the amount of a benefit and payment to which COMPANY was entitled, namely: existence of a referral scheme involving workers' compensation insurance claims billed to INSURANCE COMPANY as listed on Grand Jury Exhibit #28A.
A typical charge for a violation of Penal Code section 549 might read like this:
On or about and between June 4, 2022 to June 01, 2023, in violation of Section 549 of the Penal
Code (FALSE AND FRAUDULENT CLAIM), a FELONY, JOHN INNOCENT and RALPH MOREINNOCENT did unlawfully solicit, accept, and refer business to and from IMPORTANT COMPANY PROVIDING SERVICES TO ATTORNEYS TO HELP THEM WITH THEIR CASES with the knowledge that, and with reckless disregard for whether the IMPORTANT COMPANY intended to violate Penal Code section 550 and Insurance Code section 1871.4.
Workers Compensation fraud charges can also be filed in federal court especially when the loss amounts are very high. These can be charged as federal wire fraud, money laundering and as with California law, conspiracy.
Daniel Horowitz has years of experience defending workers' compensation fraud cases in California. For a expert defense with a highly skilled legal team, Call Daniel Horowitz.