Prevent and Deter Workplace Injury Scams
Thirty-two-year-old Bob, an HVAC service technician employed
by XYZ Heating & Cooling for the past six years, lumbers into the office of company owner John Doe. He is holding his back and grimacing in obvious pain.
"What happened to you?" John asks with concern.
"I had just finished up that Johnson repair and was loading
my tools into the van when I slipped and wrenched my back. Damn, it hurts." Bob
attempts to stretch sideways and gasps.
John tells Bob to go home and take it easy. Bob does just
that. He subsequently sees a doctor, files a workers' compensation claim and
"takes it easy" for over three months! One of his recent Facebook posts
mentions he had been mountain biking one weekend.
Phony injuries on the job come in many varieties, the most
stereotypical being the fake back injury. While workers' compensation insurance
protects employees who are hurt on the job — paying their medical expenses,
lost wages and other expenses while the worker recuperates — small business
owners bear a huge financial onus for fraudulent injury claims, estimated to be
20-30 percent of all injuries on the job — or about one out of four. While combating
this fraud is not cheap, allowing it to prevail can be even more expensive:
they force premiums higher and can drain business profits.
As an employer, you must be vigilant in your efforts to
protect your company from the few employees who do commit injury fraud.
Otherwise, it will cost you in increased insurance premiums, increased workers'
compensation premiums, legal fees, liability settlements and more.
So what can you do to protect yourself against injury
fraud? And what should you do if you suspect an employee of faking an injury?
Here are nine steps small business owners can take to protect themselves
against fraudulent injury claims.
1. Have a safety plan in
Preventing fraud starts with having a safety plan in place
and enforcing that plan. When employees know there is a written process in
place for reporting injuries, they are less likely to "try and pull a fast
Your company safety plan should include job descriptions,
job duties and safety hazards. It should outline what steps to take in the
event of an injury. It should be displayed in a common room, as well as in
company vehicles, and should be signed-off on, every 3-6 months to ensure
compliancy. And it should be enforced 100 percent of the time. You should work
with your insurer or hire a professional insurance defense investigator to
implement a safety-management program that can eliminate as many safety
problems as possible.
A well-written safety plan can accomplish several things:
employees know what they should and shouldn't do
the employer with a written policy
can be written off as misconduct and not be covered under workers' compensation
2. Communicate zero
tolerance for injury fraud
Building strong teamwork among your employees about injury
fraud, and making sure they understand it won't be tolerated, goes a long way
toward preventing fraudulent claims. Communicate that your company has zero
tolerance for injury fraud and that violators will be prosecuted to the full
extent of the law. Be sure to publicize your workers' compensation policy to
all new hires, and current employees, and provide them with updates at least
once each year. But don't go overboard or take too harsh of an approach: if you
treat all injury claims with suspicion, you run the risk of alienating the
majority of your workers, who are honest.
3. Provide and promote a
safe work environment
One of the easiest ways to prevent fraudulent injury claims
is to provide a safe and comfortable workplace. Assure your employees that
safety — and their well-being — are top priorities. If an employee expresses
concerns about unsafe working conditions, address them immediately. Your
company workplace stands a better chance of remaining injury-free if your
employees feel appreciated and know you care about good working conditions and
— more importantly — their health.
A good way to promote a safe work environment is to track
and display the number of days that elapse without an incident. Celebrate
milestones by putting on a company pizza party or taking employees out to
lunch. Giving an incentive to be safe may seem like an unnecessary expense, but
it is less expensive than the cost of a workplace injury. It can also dissuade
employees from allowing co-workers to file fraudulent claims.
4. Carefully screen all job
Another good way to combat fraud is through careful
screening of all job applicants. Conduct background checks on all candidates
prior to hiring. Carefully verify all references and background information. Be
wary of criminal records and any individual with a history of injury claims.
Being diligent early on in the hiring process ensures you have a more ethical
workforce and can save you headaches down the road.
5. Abide by your state
workers' compensation laws
While the most common forms of injury fraud are those
perpetrated by workers, employers can be guilty of fraud as well. Unscrupulous
companies may underreport payroll or misclassify employees to reduce insurance
premiums, deduct premium dollars from employees' wages and/or knowingly fail to
have necessary workers' compensation coverage.
The workers' compensation system is administered on a
state-by-state basis, and requirements for employers vary from state to state.
The differences can be incredible; knowing what insurance requirements your
state sets out for you is essential for protecting yourself as a small-business
owner. Some states never require worker's compensation insurance, some always
require it and, for some, whether it is required depends on the number of
employees your business has. Additionally, even if your state does require you
to carry worker's compensation insurance, states have many exemptions.
Make sure you understand your state requisites, have
adequate coverage and are not violating your state's workers' compensation
6. Recognize "red flags"
According to the Coalition Against Insurance Fraud, the
most common forms of workers' compensation fraud by workers are:
- Remote injury. Workers get injured away from work, but say
they were hurt on the job so that their workers comp policy will cover the
- Inflating injuries. A worker has a fairly minor job injury,
but lies about the magnitude of the injury in order to collect more workers
comp money and stay away from work longer.
- Faking injuries. Workers fabricate an injury that never took
place, and claim it for workers compensation benefits.
- Old injury. A worker with an old injury that never quite
healed claims it as a recent work injury in order to get medical care covered.
- Lingering. A worker stays home by pretending the disability
is ongoing when it is actually healed.
Knowing the common warning signals of suspicious claims
will help you identify workplace injury scams. For example, the most commonly
faked injuries are ones to the muscles of the back and neck. Monday morning
injuries are another common red flag. These are often an injury an employee
sustained over the previous weekend and reported as work-related so it is
covered by workers' compensation. Other common red flags include injuries with
no witnesses, new employees reporting injuries and injuries reported by
employees with poor attendance or a history of disciplinary action.
Even if a claim displays several "red flags" that does not
prove fraud. However, if the claim raises more than one of these, the company
owner should consider bringing in a fraud investigator to delve deeper into the
claim. The more fraudulent claims you identify and deny, the lower your overall
cost will be for workers compensation insurance.
You can obtain a list of fraud indicators from your workers
comp insurer. (See list provided from the Workers Comp Resource Center.)
Have an injury notification process in place
All injuries should be handled according to a company
notification policy. When an injury occurs, supervisors and your HR department
should be notified. Other best practices and procedures include:
eye witness accounts for accidents that result in medical care
pictures of the accident scene
the use of safety equipment such as hard hats, gloves, goggles, safety
the history of any employee who reports an injury, even if there's no evidence
written accounts of what did and did not happen
A critical step in some states is the timing of the
notification of an injury. Some states allow employers and insurance carriers
only a few days or weeks to make a determination of liability — in other words:
to accept or deny the claim.
At this point, the employer should assess their safety
plan, then assess the injury and look for red flags. If red flags are present,
it is a judgment call on the part of the employer whether or not to attempt to
mitigate the claim by having an investigation conducted.
8. Communicate with the
Even if you do not suspect fraud, it is important to keep
the line of communication with an injured employee open. Afterall, you hired
this person. They rely on you for their livelihood. Check on their status. Ask
them how they are doing. Let them know you are thinking about them and that
their job is available upon their return. Maintaining a solid employer/employee
relationship is a psychological advantage you need to pursue.
The exception to this is if the injured party has retained
an attorney and you receive a letter of representation requesting that all
communication be directed through the attorney's office. In that case, you are
legally prevented form contacting them directly.
9. Take a proactive role
once an injury claim has been filed
Once an injury claim has been filed, whether or not you
suspect fraud, you can — and should — take a proactive role in attempting to
prevent fraud. In addition to everything else we've discussed, the following
steps will dissuade an otherwise honest employee from the temptation of fraud.
with your insurance adjuster
in with the employee
- Hire an
You Suspect Fraud — What Do You Do Now?
Despite all the precautions he took, XYZ Heating &
Cooling Owner John Doe suspects Bob may have filed a fraudulent claim for his
back injury. At the very least, he believes Bob is "milking" his injury. Now
Uncovering injury fraud can be tricky due to the subjective
nature of many claims. Injuries that have visible effects, such as contusions
or lacerations, can't be faked. When employees do fake an injury, the most
common ones are injuries to the muscles of the back and neck. These false
claims often go undetected and are only uncovered when the employee is caught
doing yard work, engaging in recreational activities or holding down a
different job while collecting workers' comp benefits.
If you do suspect fraud, it is never a good practice to
contact or confront the employee yourself. It is better to remain secretive,
report the possible fraud to the proper authorities and then fight it legally.
When you suspect a fraudulent claim — and you have evidence
or witnesses to back up your suspicion — the first step you should take is to
immediately notify your insurance carrier. In most states, the insurance
carrier has the right to dispute all claims and absorbs the costs of hiring
legal representation and an insurance investigator, if deemed necessary. The
investigator's primary function is to gather facts and report to the attorneys
and insurance adjusters so they can decide whether or not to take further
The rising costs of insurance premiums due to fraudulent
claims is the biggest reason employers are taking a hands-on approach to
combating fraud. Having a risk management plan in place and having an expert
help you develop that plan will reduce your exposure to risk and keep your operating
Greg Smith is the former editor of HVACR Business magazine.
He has been involved in B2B publishing for more than 30 years as an editor and marketing specialist, with more than a decade of experience covering the mechanical systems market.