Pennsylvania holds the unenviable distinction of being the state with the highest dollar amount of workers compensation fraud at $180 million per year – second only to California. Workers compensation fraud not only negatively affects businesses and their employees. It also affects all of us as consumers when fraud's costs raise prices.

In response to this costly social crime, the Pennsylvania Legislature declared workers compensation fraud to be a felony when it passed Act 44 in 1993. To reflect the seriousness of workers compensation fraud, the Legislature included stiffer criminal penalties for the commission of this crime as part of Act 57, which was passed in 1996. A maximum fine of $50,000 can be imposed and the claimant may be imprisoned for up to seven years.

What is workers compensation fraud? The Workers Compensation Act specifically lists conduct which is considered fraudulent. An individual commits fraud if his or her behavior is calculated to deceive an employer or insurance carrier in order to receive workers compensation benefits. Probably the most common form of workers compensation claims fraud involves people who allege injuries that were not suffered on the job, or those who fake or exaggerate injuries. It is also considered fraud for an employee to misrepresent his or her disability so that they can continue to collect benefits, even though they are physically capable of returning to work. An employee also commits fraud by collecting total disability benefits while working another job and receiving a paycheck.

Proving fraud is not an easy task. Insurance companies, employers and their attorneys must work together in an effort to combat worker's compensation fraud. An early investigation into the initial claim is crucial in order to detect signs of workers compensation fraud. A recorded statement should be immediately obtained and certain questions should be asked which may reveal “red flags” that the claim is fraudulent.

A claims investigator should ask if the claimant has a history of previous work-related injuries or automobile accidents, or if the claimant's alleged accident was unwitnessed or witnessed only by a friend or relative. Did the claimant's alleged accident occur shortly before the beginning or end of the employee's workday, or did the accident occur shortly after the employee was hired, or while the employee was working through a temporary employment agency? A claim may be suspicious if the claimant's accident allegedly occurs on a Friday afternoon but is not reported until the next week, or if the claimant's alleged injury occurs prior to news of a layoff, strike or plant closure. Did the claimant's alleged accident occur close to scheduled vacation time, or was the claimant denied requested time off?

Make a note if the employee delays reporting the alleged incident to a supervisor or reports the incident to co-workers rather than a supervisor. Question the legitimacy of a claim if the claimant provides different descriptions of the injury; if the claimant's family members collect disability or compensation; or if the claimant has undergone a recent change in social status or health care coverage, such as: illness of a spouse, pregnancy, enrollment in college, or transfer of spouse to a new location. In addition, a “red flag” is raised if the employee is close to retirement or the employee has recently been disciplined or has voiced dissatisfaction with his job.

Valuable ongoing inquires can also be made where a claim has been compensable and the claimant is already collecting workers compensation benefits. Act 57 empowers the insurer to require the employee to submit in writing any change in the status of his or her employment, wages or physical condition. The Bureau of Workers Compensation has created a special form for this purpose. The employee must return the form within 30 days or risk his compensation being unilaterally suspended. If a claimant fails to truthfully report a change in employment, wages or physical condition, the claimant may be subject to criminal action. The statements verifying continuing eligibility of benefits may be sent to the claimant every six months.

Another valuable instrument for detecting and combating workers compensation fraud is surveillance investigations. Surveillance has been successful in unveiling workers' compensation fraud and has saved insurance companies millions of dollars.

As an example of what a powerful tool surveillance can be, in one case, an employee alleged an inability to work an accommodating sedentary job offered to her by her pre-injury employer because of unrelenting low back pain. Surveillance by a persistent investigator, however, revealed the “disabled” claimant enjoying a fun-filled day at an amusement park with her young children. Not surprisingly, the workers compensation judge rejected the claimant's testimony that she did not remember riding the amusement park rides because she took so much pain medication.

Another success story which illustrates how surveillance investigation can be used involves an unrepresented claimant. While collecting total disability payments for a low back injury, one claimant bragged to an investigator that he was the “best plumber in the country.” Surveillance of the claimant confirmed his work activities and fraud charges are pending. Please note that the claimant in the latter case was not represented by an attorney when approached by the investigator. This is extremely important since soliciting statements from a represented claimant is prohibited.

Once fraud is suspected, fraud referrals can be made to the local district attorney who has the authority to investigate and institute criminal proceedings for fraud violations. In addition, the Pennsylvania State Attorney General has the authority to institute criminal proceedings for any violation of the Act involving more than one county or nay county of the Commonwealth and another state. Suspected fraud can also be reported to the Insurance Fraud Prevention Authority (IFPA) by calling its tip line at 1-888-565-IFPA.

If you are an employer and suspect an employee has engaged in or is engaging in a fraudulent act, contact your workers compensation insurer or broker. The insurer and its employees, agents, and brokers are protected from being sued for alleging fraudulent conduct on the part of any person so long as the individual has reason to believe that the information supplied is related to the allegation of fraud. The Act provides immunity from civil or criminal liability only to insurers and their agents and not directly to the employer.

Although most claims are legitimate, all claims should be thoroughly investigated for possible fraud and inquires should periodically be made to determine an injured employee's continued entitlement to workers compensation benefits.  In those cases where fraud is suspected, a little sleuthing may be worthwhile.