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10 Warning Signs of Workers' Compensation Fraud

10 Warning Signs of Workers' Compensation Fraud
Workers' compensation fraud can hurt businesses and their employees. / Credit: Shutterstock

Nearly every state requires businesses to provide workers' compensation insurance in the event that an employee is injured on the job. As with most mandatory legal requirements, there are always going to be individuals who try to get around this and cheat the system. Both businesses and employees can become involved in the serious issue of workers' compensation fraud.

"Not only is workers' compensation fraud illegal, it can strain operations as well as lead to higher insurance-related costs for honest businesses," said Ranney Pageler, vice president of the fraud investigations department for business insurance carrier Employers. "It ultimately hurts honest workers by undermining the perceived validity of all claims."

There are two types of workers' compensation fraud: premium fraud, which is when a business attempts to misrepresent its workers' compensation coverage to lower its insurance costs; and claimant fraud, when an employee falsely claims to have suffered a work-related injury to gain workers' comp benefits. Pageler listed the following 10 "red flags" that claimant fraud may be occurring. If a workers' compensation claim fits several of these scenarios, it may be time to launch an investigation. [What is Workers' Compensation Insurance?]

  1. Monday morning injury reports. The alleged injury occurs first thing on Monday morning, or the injury occurs late on Friday afternoon but is not reported until Monday.
  2. Employment change. The reported accident occurs immediately before or after a strike, job termination, layoff, end of a big project, or the conclusion of seasonal work.
  3. Suspicious providers. An employee's medical providers or legal consultants have a history of handling suspicious claims, or the same doctors and lawyers are used by groups of claimants.
  4. No witnesses. There are no witnesses to the accident and the employee's own description does not logically support the cause of the injury.
  5. Conflicting descriptions. The employee's description of the accident conflicts with the medical history or injury report.
  6. History of claims. The claimant has a history of a number of suspicious or litigated claims.
  7. Treatment is refused. The claimant refuses a diagnostic procedure to confirm the nature or extent of an injury.
  8. Late reporting. The employee delays reporting the claim without a reasonable explanation.
  9. Claimant is hard to reach. The allegedly disabled claimant is hard to reach at home and does not respond promptly to messages.
  10. Frequent information changes. The claimant has a history of changing physicians, addresses or jobs.

"Business owners should clearly and continuously convey to all employees a commitment to workplace safety as well as a zero tolerance of workers' compensation fraud," Pageler told Business News Daily. "Ask your insurance carrier for anti-fraud materials such as posters or payroll stuffers, and educate employees about the adverse impact that fraud can have on each of them and their individual positions." 

Originally published on Business News Daily.

Nicole Fallon

Nicole received her Bachelor's degree in Media, Culture and Communication from New York University. She began freelancing for Business News Daily in 2010 and joined the team as a staff writer three years later. Nicole served as the site's managing editor until January 2018, and briefly ran Business.com's copy and production team. Follow her on Twitter.