As a human resources professional, you play an important role in detecting potential fraudulent workers' compensation claims. By simply being on the lookout for specific red flags indicating possible fraudulent claims, you can save your company thousands of dollars.
That's not to say that everybody filing a workers' comp claims is looking for a free ride. Around 80 percent of all claims filed are legitimate, by people genuinely hurt and entitled to compensation. Still, some people do take advantage of the system, and you need to be wary of the red flags that can exist in a potentially fraudulent claim.
Red Flags
Some of the more common red flags in a potentially fraudulent claim include:
Claimant filed more than one workers' comp claim in the past or a number of claims within a short period of time.
Claimant took longer absences than anticipated for minor injuries or displayed an unwillingness to return to work on partial duty or other jobs within the company.
Claimant was experiencing financial difficulties and/or domestic problems prior to submission of claim.
The alleged injury occurred prior to or just after a strike, layoff, plant closure, job termination, completion of temporary work, or notice of employer relocation.
A lawyer's letter of representation or letter from medical clinic was the first notice of the claim.
Claimant reported an alleged injury immediately following disciplinary action, notice of probation, demotion, or being passed over for promotion.
There were no witnesses to the accident, or witnesses' version of the accident conflict with the claimant's.
It was an unusual accident or type of injury unusual for claimant's line of work.
Claimant was a new hire or working at a family-owned business.
Claimant has held many jobs for fairly short periods of time.
Claimant uses addresses of friends, family, or post office boxes, has no known permanent address, or moves frequently.
Facts regarding accident are related differently in various medical reports, statements, and employer's first report of injury.
Income from workers' compensation and collateral sources (unemployment, Social Security, long-term disability, etc.) meet or exceed wages after taxes.
New or additional medical problems are attributed to the original injury.
Claimant demands a quick settlement, commitment or decision.
Investigating Red Flags
Investigating these red flags usually requires some sort of video surveillance of the claimant. Third-party administrators often hire private investigators to conduct this kind of investigation. Surveillance typically takes place over a 2- to 3-day period in 8-hour shifts. At a minimum you, as the HR professional, need to provide the investigator with the name, photo, physical description, current address, and injury and its limitations to help positively identify the claimant. Without this information, the likelihood of a successful investigation drops considerably.
Once the investigator positively identifies the claimant, it is a matter of continuing surveillance and documenting his or her behavior and actions. If the claimant is working a second job, going to the gym or behaving in a way not appropriate for his or her condition, the video surveillance and subsequent report will show it, and your company can pursue the fraudulent claim.
It is not that uncommon for video surveillance to reveal an employee who's actually hurt. That's OK, too. If somebody's injured on the job, it's the job of the insurance company to pay that claim. By the same token, it is your job, if you see a red flag, to respond accordingly.
The most helpful thing you can do, besides being on the look out for red flags, is update employee information annually. Keep photos of your employees on file (e.g. ID badge photos, new hire photos). If you're a larger company, you may want to consider a toll-free fraud hotline for employees to report workers' comp abuse anonymously.
The costs associated with fraudulent workers' comp claims and other insurance fraud cases total more than $8 billion per year. By simply increasing your awareness and making a few procedural changes you can greatly reduce the negative impact on your company's bottom line.
Neal Lyons is the chairman and CEO of L&W Investigations, Inc., based in Westborough, Massachusetts. For information on L&W's investigative services and training seminars, go to www.lwinvestigations.com or call 508-616-9370.
