Workers’ compensation is a system of insurance that employers are required to have that provides coverage for medical care, lost wages, rehabilitation and payments for permanent disabilities and death as a result of injuries sustained by employees while in the course and scope of the their employment.
It is a no-fault system where negligence by the employer need not be proved nor can coverage be denied by the worker’s own negligence. Criminal or grossly negligent conduct by the employee could, however, be the basis for denying benefits.
Defrauding the system can be perpetrated by the worker, employer or health care provider. Different state laws apply to workers’ compensation fraud though all involve the defendant having to either
- Falsify documents,
- State various falsehoods or
- Fabricate injuries in order to collect payments or benefits.
Insurance Code 1871.4 is the primary code section pertaining to this type of fraud. Under this code section, workers’ compensation fraud consists of the following elements or acts the prosecutor must prove:
- Knowingly making or causing to be made a false or fraudulent material statement or representation for the benefit of obtaining workers’ compensation benefits
- Knowingly presenting or causing to be presented a false or fraudulent oral or written material statement in support of, or in opposition to, a claim for workers’ compensation benefits
- Knowingly aiding and abetting or conspiring with another person to commit an act of workers’ compensation fraud
- Knowingly making or causing to be made a false or fraudulent statement in regard to an entitlement to benefits with the intent to discourage an injured worker from claiming benefits or pursuing a claim
Element of Making a Representation or Statement
For purposes of this code section, “making a representation or statement” encompasses a wide array of conduct and activities including:
- Billing for services
- Payment for services
- Drafting medical records
- Oral statements
- Written statements
- Diagnostic tests
- Evidence of injury or loss
An example where both a healthcare provider and a worker are criminally liable is where a health care provider submits bills to the workers’ compensation insurer for services not rendered and the injured worker who is being treated aids and abets the fraud by agreeing to go along and not informing the insurance company.
Element of Knowingly Making a Material Statement or Representation
A “material” statement or representation refers to any fact or information that is reasonably relevant and directly significant to any investigation or evaluation of the claim. An example is an injured worker who deliberately fails to mention that his work injury was an aggravation of a pre-existing injury received outside of work.
Element of Knowingly Making a False or Fraudulent Statement
Any oral or written statement you make to an insurer that you know is false and intended to either obtain benefits for yourself or, if you are an employer, designed to deny a worker certain benefits to which he or she would be entitled to is fraud. But there are other acts that constitute “false or fraudulent statements:”
- Not disclosing a pre-existing injury
- Exaggerating or fabricating the extent of an injury
- Claiming that an injury at home occurred at work
- Lying for the benefit of a co-worker
- Secretly working at another job while receiving worker’s comp benefits
- Staging an accident or faking an injury
- Misrepresenting to an insurer about the worker’s job duties
- Misrepresenting to an insurer about the number of employees you have
- Lying or misrepresenting facts to a worker to prevent or discourage a worker from filing a claim
A violation of Insurance Code 1871.4 is a “wobbler” offense, meaning the DA can charge you with either a misdemeanor or felony depending on your criminal history and the extent of the fraud.
As a misdemeanor, you face:
- Up to one year in county jail
- Fine up to $150,000 or double the amount of the fraud, whichever is greater
As a felony, you face:
- Formal probation or non-custodial mandatory supervision
- 2,3 or 5 years in county jail
- Fine up to $150,000 or double the amount of the fraud, whichever is greater
- Reimbursement to the insurer
- Sentencing under California’ Realignment Program
Under realignment AB 109, certain non-violent felony offenders are sentenced to county jail or non-custodial supervision instead of state prison with supervision by county agents instead of by the state. The main significance of serving time in county jail is that your conviction is eligible for expungement.
Civil Penalties for Workers’ Compensation Fraud
California law also imposes civil penalties for offenders who engage in certain conduct intended to defraud a workers’ compensation insurer or by an employer who knowingly gives fraudulent advice to an employee to dissuade then from filing a legitimate claim or to the insurer to prevent payment of any benefits.
The particular conduct that can lead to substantial civil penalties include:
- Willfully misrepresenting any fact in order to obtain workers’ compensation insurance at a lower rate than the proper rate
- Presenting or causing to be presented any knowingly false or fraudulent statement in support of, or in opposition to, any claim for workers’ compensation benefits, for the purpose of either obtaining or denying those benefits
- Knowingly soliciting, receiving, offering, paying, or accepting any unlawful rebate, refund, commission or other compensation for soliciting or referring clients for services covered by workers’ compensation insurance;
- Knowingly operating or participating in a service that, for profit, refers patients to obtain medical or medical-legal services covered by workers’ comp; or
- Knowingly assisting or conspiring with anyone else to do any of the above
An offender may have to pay a fine of at least $4000 and up to $10,000 per each unlawful claim presented. The offender may also have to pay up to three times the amount paid for medical treatment or medical-legal expenses paid by a workers’ compensation insurer as a result of the fraud.
If you committed a fraud against a workers’ compensation insurer and had a prior felony conviction under Insurance Code 1871.4 or PC 549, you face an additional assessment of $4000 for each service connected to the fraud.
Intent is an essential element in proving fraud and often is difficult to prove. The following are common defenses to workers’ compensation fraud under any of the applicable code sections.
Lack of Fraudulent Intent
The DA needs to prove that you had the intent to defraud or that a statement you made was knowingly false. For instance, others may have witnessed you falling a few days before an accident at work injured you and for which you presented a claim. The prior fall was minor and resulted in no injury to you but a witness reports that you fell and were injured. On a claim form, you state you had no prior injuries. Your failing to report the prior incident is now being charged as defrauding the insurer by knowingly making a false statement about a prior injury to the same part of your body. You can assert lack of fraudulent intent because you received no medical attention for the previous fall and never told anyone that you were not injured at all so your failure to report it was not fraudulent.
Also, you may have misinterpreted something on the claim form or in a question posed to you and innocently responded in a way that an investigator mistook for deliberately lying.
Lack of Sufficient Evidence of Fraud
Conflicting diagnoses or medical findings might trigger an allegation of fraud. If you claim emotional distress or an injury like carpal tunnel that is diagnosed by a health care provider but a physician retained by the insurer opines that you are malingering or fabricating your condition, the DA will have a difficult time proving that you are guilty of fraud.
Similarly, if your health care provider is charging the insurer for treatments you did not receive, you may have been entirely unaware of this activity.
What Our Clients Say
You can seek post-conviction relief by obtaining an expungement of your conviction of Insurance Code 1871.4, PC 549 and PC 550 by petitioning the court pursuant to Penal Code 1203.4, California’ statute on expungements. By expunging your conviction, you can state under oath that you have not been convicted of that offense.
Your expunged conviction will also not appear on any pubic record databases so that any landlords or private employers who conduct routine criminal background checks will see no criminal convictions on your record.
Any expungement, however, does not totally erase your conviction record since it government or public agencies and employers do have access to these private databases. The court also can use your expunged conviction to enhance your sentence if you commit a subsequent felony offense.
A conviction under any of the applicable code sections pertaining to workers ‘compensation fraud are wobbler offenses. Even if you are convicted of a felony under Insurance Code 1871.4 or PC 549 or 550, you will likely be sentenced to county jail only, which makes the offense eligible for expungement. This is not true for a felony conviction under Insurance Code 1871.4 where offenders are sentenced to state prison. Serving time in state prison renders any conviction ineligible for this kind of post-conviction relief.
Crimes which may be charged concurrently with workers comp fraud include the following:
These cases commonly involve the crime of perjury, which is simply giving materially false information while under oath and is found under Penal Code 118. If you testify at a deposition or hearing while under oath that you slipped on a tool at work, but evidence surfaces that it happened in a bar while you were drinking and not at work at all, then this statement is certainly relevant and the lie exposes you to a perjury charge. This extends to making any material falsehood on a document that states that you are giving such information while under penalty of perjury.
Health Care Fraud
Health care providers can and do commit workers’ compensation fraud by submitting false claims for payments for services not rendered as well as for double-billing or overcharging. Their illegal conduct comes under Penal Code 550, which also applies to workers who may also file a false claim. The elements of this code section include:
- Knowingly making or causing to make a false or fraudulent claim for payment of a health care benefit by the workers’ compensation insurer
- Knowingly submitting a claim for a health care benefit provided by workers’ compensation that was not used by the claimant
- Knowingly submitting multiple claims for payment of the same workers’ compensation health care benefit with the intent to defraud
Information regarding the criminal case process if charged.