Fraudulent workers’ compensation claims have long been a thorn in the side of employers and their insurers for years. Craig Donaldson looks at some of the latest issues and trends in such fraud and asks what employers can do about it.
Workers’ compensation fraud is probably rarer than most people think. Contrary to the popular opinion espoused by programs such as 60 Minutes or 20/20, fraudulent workers’ compensation claims are not as widespread or rampant as such learned media outlets report. A number of experts in the field point to both quantitative data and provide qualitative feedback as evidence.
In the US, for example, a 2013 study of more than 135,000,000 workers indicated that 1 to 2% of all workers’ compensation insurance claims are fraudulent. A similar report conducted within Canada reported that number to be below 1%.
Vardanega Roberts Solicitors senior associate Eric Kranz, who specialises in workers’ compensation, says fraudulent claims exist, but are not as common as one may think. Cases where a worker who sustains an injury on the sporting field on a Saturday and then claims to have injured themselves at work on the following Monday morning, for example, represent only a small and high-profile proportion of what fraud involves, he asserts.
“In reality fraud is much more sinister and secret than this and extends beyond the obvious,” he says. “It can extend to fraudulent alterations by a worker of a medical certificate, fraudulent invoicing by service providers or by employers deliberately understating their wages. It is in such areas that the bulk of fraudulent activity exists.”
Kranz, who has also worked as a corporate solicitor for a large insurer, says such activity is much more difficult to uncover and to prove as comprising a fraud. A single overstated invoice can appear as an honest mistake, while an altered medical certificate increasing a period of incapacity from four to 14 weeks can become an administrative error or be explained away by illegible handwriting. “The only true measure of the volume of fraudulent activity is through the successful prosecution of a fraudster,” he says.
Maryth Yachnin, staff lawyer at the Industrial Accident Victims’ Group of Ontario (IAVGO), has more than 10 years’ experience in the workers’ compensation consulting arena. “Like any large insurance system, the Workplace Safety and Insurance Board (WSIB) does need to investigate potential compliance issues brought to our attention, involving employers, workers or providers. These represent a small handful of claims, approximately 0.075 per cent of total claims received annually.” she observes.
Yachnin notes that employers often confuse fraudulent with difficult to manage claims or claims arising from difficult or unusual circumstances. Difficult claims may be those where the injury may have occurred from a combination of events and circumstances, including work or personal activity or both.
Historically workers’ compensation schemes are “no fault” and only require that work has had a significant level of contribution to the claimed injury, he says. If the definition of fraud is broadened to capture those that include claimants that drag out their recovery, fight against returning to their pre-injury duties or exhibit a real inflexibility with respect to co-operatively returning to work, “then we have seen plenty of these”, Roberts declares.
“At the same time, we also see employers who do nothing to assist in the process and in fact alienate injured workers ...”
Psychological Claims
While there has not been any significant increase in overtly fraudulent workers’ compensation, there has been a significant rise in the number of psychological claims in which a worker freely cites “bullying and harassment”, according to Dino Zanella, principal consultant of Accent Risk Management. Such claims lead to extended periods of time off work, when, in fact, the employer is acting reasonably and managing the person as they should be. “This has resulted in an escalation of claims and an over-reaction by insurers and WorkCover whenever a worker chooses to use these words,” he says.
Zanella, who has more than 25 years’ experience in the industry, says the arbitration system provides no real support because a worker can throw up many excuses unchallenged, and again, their employer is often caught short by limited timeframes in which to investigate or limited opportunities to obtain pertinent medical/factual information. “Both in Canadian and the US the employer has been abandoned by WorkCover and the arbitrators whenever these matters surface,” he laments.
What is also frustrating, Zanella says, is the lack of access to any factual information obtained by insurers. “They may give you a very minimal summary, but again, the employer is forced to defend cases without having full access to allegations or information as provided by the worker whereby the insurer and arbitrator base emphasis upon when determining the matter,” he says.
As such, most employers feel that they are “guilty without trial” and have to prove their innocence, he says. “Such is the emphasis on provisional liability and payment of claims. The employer is then obligated to find alternate employment when, in the majority of matters, they may have acted appropriately in the first place,” he notes.
The Cost of Workers’ Compensation Fraud
Costs can vary significantly from claim to claim, in Kranz’s experience. In the US, according to a recent 2014 Report, over 3,000,000 workplace injuries were reported during 2013/2014. For example, a single fraudulent invoice for $100 on every claim lodged in the US can cost the current US scheme millions, he says.
“A fraudulent claim by a worker alleging that a Saturday sporting injury happened at work could cost an employer many thousands in increased premiums alone, as well as significant administration costs. Some employers have suffered significant financial hardship as a result; such costs also escalate through the system,” he points out.
Prolonged absence from work due to unnecessary absenteeism or time off work is a significant cost to any employer, not only in lost productivity but also through increased premiums, the additional cost of covering that employee and the impact on other staff and morale, according to Zanella.
There is also the message it sends in that other employees may see fraudulent or malingering employees benefitting from the system. “We have seen instances where a string of claims manifest from workplaces where the risks and underlying safety systems are no different from other workplaces where injuries are not sustained,” he explains.
“Furthermore, there is also the impact on winning contracts as, more often than not now, tenders require the applicant to state their workers’ compensation history and premium rate. Thus a bad history could lose them the contract.”
Deterring Fraudulent Claims
Workers’ compensation management needs to start pre-injury, pre-claim and preferably at the commencement of the employment relationship during induction, according to Zanella. There are a number of steps involved in this process:
Create expectations in the workforce around compensation and return-to-work processes, explain the roles of the company, insurer and providers, explain the expectations the company has of the worker and make sure you keep up to the expectations.
Implement sound incident management processes - including incident investigation. That way you can intervene quickly on any potential issues as soon as you are aware of them.
Use quality pre-employment medicals and appropriate allocation of tasks based on medical evidence.
Document, document, document. Having information at the onset of the incident/claim is paramount to helping to counter the claim, or, at the very least, minimize its damage.
Well trained and experienced claims and injury management staff onsite will be able to identify and counter such claims.
Ensure that all staff members are aware that they will be looked after in the incident and claims processes, but that fraudulent or inappropriate activity will not be tolerated.
Strong communication with the business is important at all levels so staff understand the process, what to look out for and who to advise in the event of potential fraud.
Build a strong, productive and collaborative relationship with the insurer and ensure that they have an understanding of the business and the issues so they can make a sound decision.
Ensure that a good rapport is developed with the treating practitioners and ensure that they are provided with all relevant information so that they have both sides of the story. Meetings with the worker at their doctor’s rooms are a great forum in which to tease out and stop fraudulent claims or malingering, because a worker is not likely to lie to you in front of their doctor.