Workers Compensation Fraud In New Jersey – Video Says It All

February 6, 2019 By JL Risk Management Consultants

Workers Compensation Fraud – New Jersey Man Caught on Video

Workers Compensation fraud appears very rarely in the articles on this blog. (Why?) The subject remains one of the most overused and overwritten subjects since I first started in the business in the last part of the 1980s.

workers comp fraud picture french shell game

Wikimedia License – FaceMePLS

The Workers Compensation newswires and blogospheres lit up the scoreboard with a video obtained by CBS News. The video- see the end of the article for link shows a very feeble attempt at workers compensation fraud by an employee.

As you may already know, three types of workers compensation fraud are the most prevalent:

Employer – finding illegal methods to not pay for the company’s workers comp risks
Employee – intentionally filing for benefits not owed
Provider – billing for services not provided to the injured employee

Many years ago, a study was conducted – by a now-defunct carrier – that covered the elements of fraud. Three percent of claims started with an element of workers compensation fraud. As the claim progresses, the likelihood the same claim contains an element of fraud increases to 30%.

An assumption would be that the element of fraud could be from one of the three listed above, and not caused just by the injured employee.

One of the areas that Predictive Analyses made at least a few inroads was in the area of fraud detection at the beginning of a claim. I had seen some success identifying certain factors that pointed towards a claim that could have workers comp fraud.

No big breaking news stories were published on fraud detection using Predictive Analytics. An experienced workers compensation adjuster, to me, can be the best detector of fraud during a claim. Every adjuster (medical only and lot time) possess an innate ability to know when a claim heads off the rails.

One of my pet peeves on workers compensation fraud detection came from a list I was provided by my employer 25 years ago. The list contained a few suggestions as to what claimants might have an ulterior motive in filing a claim.

The list contained – has a PO Box. After having my credit card numbers stolen in the 1990’s out of my residential mailbox and multiple accounts opened using the ill-begotten info, I have used a PO Box for at least 25 years for credit card fraud avoidance.

I do not think there exists one bellwether on whether a claim will have some fraudulent element. One that used to concern me when I was handling a full claims count was injured the first day of beginning a job. My opinion was changed somewhat after learning how much The Learning Curve affected a new employee.

OK, so the link to the video is here. The man in the video has been charged with but not convicted of workers comp fraud.

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Audit Dispute No Explanation Great Way To Alienate Carrier + Agent

May 22, 2013 By JL Risk Management Consultants

Audit Dispute With No Explanation Can Create Bad Vibes

A premium audit dispute with no explanation of why it was disputed can wreck your Workers Comp system.

Picture Of Working Couple Audit Dispute With Accountant

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We are quite often brought into a dispute that an employer has with their insurance carrier’s audit. One caveat to disputing a premium audit is doing so without any documentation other than “the bill increased greatly” or “we are just paying too much for Workers Compensation insurance.”

No carrier, Insurance Commissioner, or Rating Bureau (NCCI, WCIRB, etc.) has ever said to dispute a premium audit without reason was akin to fraud. However, we have noticed the insurance carriers are much more assertive when an audit dispute is undertaken with no reason or premium dispute calculation.

Delaying a premium audit bill payment by using a dispute is slowly becoming a thing of the past with many carriers. I had advised against this numerous times in this blog. A business owner’s or risk manager’s gut feeling that something is wrong with their policy or audit is very often a legitimate concern. No person or business knows your business better than you do overall.

We have not seen any carriers that will just cancel an insured because they have raised a dispute, even if there is no documentation as to the reason. That environment is changing somewhat as carriers have been very patient as they do not want to lose a customer – plain and simple.

However, an unfounded dispute puts the insurance agent in a predicament and can tarnish the relationship between a carrier and their insured employer.

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The old “ducks in a row” adage is very accurate in these cases. Also, any undisputed premiums have to be paid regardless of the dispute. The calculation of the amount of the dispute is critical as the employer is supposed to pay the undisputed premium timely. That rule is in every Workers Comp policy written today.

Timely audit disputes with the reasons for the disagreement along with the proper calculations will go a very long way in proving your case to the insurance carrier.

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Workers Comp Premium Auditor Fraud Is Hard To Detect

March 7, 2013 By JL Risk Management Consultants

Workers Comp Premium Auditor Fraud

Workers Comp premium auditor fraud is very hard to detect. The auditors possess such a high level of fiduciary responsibility as they review millions of dollars in premium every week. This fiduciary responsibility came to light with the recent West Virginia case.

Wikimedia Commons – Nick Youngson

A Brickstreet premium auditor had been charged last month with numerous counts of insurance and coal-related fraud. The auditor allegedly received kickbacks from employment agencies that provided workers for the coal industry.

How does a workers comp insurance carrier avoid this situation? Insurance premium audit fraud is very hard to detect as there is a level of trust that the carrier or auditing company must-have for their auditors.

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The likely way to discover this rare type of fraud would likely be internal auditors better known as “auditing the auditor.” Brickstreet should really not shoulder too much of the blame. It was their employee. However, the only way that this could ever be detected is through an internal audit.

Most insurance carriers have an internal audit department. Almost all of them do not audit workers comp auditors. This may now change somewhat with the recent West Virginia case.

The majority of these audits are performed in person. How can an internal auditor know their field premium audits are accurate without having to re-visit most of the employers? The West Virginia case was even more difficult as the companies in question were employment agencies.

Employment agencies are very difficult companies in which to determine the proper premium as there are so many classification codes. Their E-Mod rating and premium audit sheets can look similar to a novelette.

Workers Comp claim departments are audited by many different entities including their internal audit departments. Premium audit departments may receive the same scrutiny in the near future.

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Workers Compensation And National Insurance Crime Bureau

March 6, 2012 By JL Risk Management Consultants

The National Insurance Crime Bureau

I had not heard of the National Insurance Crime Bureau (NICB) until last week. The organization functions as a repository for questionable claims. The organization seems to be somewhat similar to the Index Bureau.

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This is from the NICB’s website – The National Insurance Crime Bureau is a not-for-profit organization that receives support from approximately 1,000 property/casualty insurance companies. The NICB partners with insurers and law enforcement agencies to facilitate the identification, detection and prosecution of insurance criminals.

The NCIB centers on questionable claims, not all claims. Questionable claims (QCs) are those claims that NICB member insurance companies submit to NICB for closer review and investigation based on one or more indicators of possible fraud.

There are over 1,100 Property and Casualty insurance companies and self-insured organizations that comprise the NICB membership base.

A single incoming QC may contain as many as seven “red flags,” or reasons for further investigation. Each file is categorized according to type, such as property, casualty, commercial, workers’ compensation, vehicle, and miscellaneous.

Hand With Percentage Icon National Insurance Crime Bureau Holding Magnifying Glass

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The areas of possible Workers Compensation fraud that increased the most from 2010 to 2011 on a percentage basis were:

Duplicate Billing – 207%
Inflated Billing – 113%
Material Misrepresentation on Employment App – 67%

The first two are based on questionable activities by medical providers. I found this a little surprising with all of the preferred provider networks and medical bill analysis and review companies that operate in today’s Workers Comp environment. Does this mean that medical providers have become more dishonest in the last two years?

The highest non-medical issue for referral to the NICB was the employee not accurately completing the employment application. Through the years, I have seen this occur often in claims. One of the main things left off of the employment application by the employee is the subject of prior injuries or ability to perform a certain job function.

The %’s above are from certain claims from a set group of insurance carriers or TPA’s. I do not think there was a large enough base to make any type of statistical inferences. The report can be found here. It may be worth a quick read. You will need a PDF reader to open the document.

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Insurance Buyers Swindled In Multinational Scam

March 9, 2011 By JL Risk Management Consultants

Insurance Buyers Beware – All May Not Be As It Seems

A large number of Insurance buyers were recently swindled in scam. While reading a recent issue of Business Insurance, I couldn’t help but read the article on the front page with the headline “Insurance buyers swindled in scam, prosecutors charge. The feds are accusing the defendants of selling bogus liability coverage.”

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Three defendants, who are all named in the article, include an accountant in St. Kitts, West Indies, and brokers in both Texas and Quebec. The indictment was brought in U.S. District Court in Houston and accuses these defendants of issuing policies to nursing homes, apartment complexes and other businesses all across the country, and for providing bogus financial and reinsurance information to policyholders.

One of these policyholders was the operator of a tour boat that capsized killing 20 tourists. Allegedly, the claims were denied for the accident by the backdating of documents to make it appear that there was never coverage placed.

According to the article some of the accused have been arrested. However, there are at least three under indictment who are among the missing and are named in the article along with a plea from the feds for help in locating them.

Picture Hand Holding Board Insurance Buyers Protection Concept

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Besides issuing fake policies, providing worthless Eurobonds, and backdating documents, one member of this group is also alleged to have tried to pressure his daughter into lying to a grand jury investigating the case. Her name had been forged as claims manager and her father wrote her a lengthy note telling her just how to answer the grand jury’s questions.

As a whole, and if convicted, this illustrious group faces statutory maximum sentences of 20 years per count on one count each of conspiracy and money laundering and nine counts of wire fraud. Separately, one of the defendants also faces 20 years on an obstruction of justice charge.

Good luck to the feds! I hope they find them all, try them all and see how it all shakes out.

South Carolina Work Comp Consultant Sentence Upcoming

August 10, 2010 By JL Risk Management Consultants

South Carolina Work Comp Consultant Follow Up

This South Carolina Work Comp consultant article is for an answer to a web comment.

Picture of Judge Gavel South Carolina Work Comp Consultant Convicted

Wikimedia – Chris Potter

We had a few emails sent to us and one comment was left on what happened to the South Carolina Workers Comp consultant’s client in this post. In other words, if the consultant was convicted, did the client know and did he share in the responsibility?

Company head Roy Knight pleaded guilty to his role in the fraud and testified for the government against the South Carolina Work Comp consultant . To date, the company owner has not been sentenced.

Whenever Knight or Kohn is sentenced, it will hit the Workers Comp airwaves quickly. I will let you know the outcomes. They both should be sentenced in the next few months. The consultant was accused of helping business shirk the agreement in the workers compensation policies to provide the premium auditor with true and correct payroll and various other figures.

Trying to artificially fix the numbers before a premium audit is never a good idea in most cases.

South Carolina Workers Comp Consultant Convicted of Fraud -Updated

August 2, 2010 By JL Risk Management Consultants

The South Carolina Workers Comp Consultant

A South Carolina Workers Comp consultant was recently convicted of Fraud. Here are the facts: (Thanks to the Charleston Post Courier – a fine newspaper)

City Seal Of South Carolina Workers Comp Consultant North Carleston

Wikimedia Commons – City of North Charleston

Bob Kohn was a member of the state House of Representatives from North Charleston in 1990 when he became a target in the FBI’s corruption sting of the Legislature. Once confronted, he agreed to cooperate with federal agents in bringing down other lawmakers and was later sentenced to 15 months behind bars.

Prosecutors alleged that starting around 2002, Kohn took part in reporting a company payroll and staff size that was much smaller than it was in reality. By doing so, it would have lowered the company’s insurance premiums by many thousands of dollars. Kohn actually stood over the shoulder of a company secretary and telling her which employees to “peel-off” in an attempt to report the smaller payroll.

In one year, Knight’s payroll size fell from $600,000 to $60,000, Holliday said. For the 2004 year, the company had a payroll of more than $1 million but only reported about $173,000. The overall effect saved Knight’s about $370,000 in premiums over three years.

The fraud allegation came to light after an 18-year-old employee of Knight’s was killed in December 2005 during a below-decks sewer tank accident while he was working on a ship-refit inside Detyens Shipyard. Four others were hospitalized. An insurance company was one of the first to detect an inconsistency in the company’s reporting after Knight’s insurance numbers did not add up.

The conviction means Kohn likely will return to prison, possibly facing as many as three years. The jury at the federal courthouse in Charleston deliberated for about an hour. The sentencing will come at a later date.

What can be learned from this? Check out my next post.

Do Not Ask Us To Do This In Any Workers Comp Situation

July 28, 2010 By JL Risk Management Consultants

A No-Go Workers Comp Situation

This is a Workers Comp Situation J&L Risk Management Consultants tries to avoid as much as possible. We have received a few calls this year asking us to help prepare a company’s books for an upcoming Workers Comp audit. We will not ever and have never suggested or recommended cooking the books for a premium audit.

Graphic Of Gold Coins Workers Comp Situation And Card

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The insurance company premium auditors of today are very adept at finding where payrolls (remuneration) have been paid. A premium auditor usually goes through all the payments that a company has made and will verify what type of vendor and payment was made to another individual or company. Subcontractors have become a hot issue in premium audits.

We have never suggested that a company try to cheat or mislead a carrier on their premiums. This is not our role in helping employers with workers comp premium audits. If after an audit you feel that your company was incorrectly overcharged a premium then that is the best time to contact us.

As you may have seen in various Workers Comp publications, a Workers Compensation Consultant out of South Carolina was charged and convicted of fraud for improperly reporting payrolls for companies. Companion Insurance Company had discovered the underreporting when an employee was severely injured.

If a Workers Comp consultant ever offers to help you misreport any numbers, then you should look elsewhere immediately. There is an old saying that has been around for many years. “You should pay what you owe, but not one cent more.”