MILK: Using the Law to Help You Fight Fraud

Sunday, December 19, 2004 | 0

By Brent Heurter

A myth among employers that must be eliminated, destroyed and dismantled is that employers can do nothing about Insurance Fraud. California's insurance code, like many state fraud provisions, provides one of the best opportunities for the government and the private sector to work together to fight fraud.

But the process starts with you! How serious are you about fighting fraud to the fullest extent of the law? You are the person who has the power to make a difference because you are the person who sets the leadership tone. Let's break this down so that you understand what the law says and what it means. As an example, California insurance fraud law reads ...

Any person who makes or causes to be made any knowingly false or fraudulent material statement or material representation for the purpose of obtaining or denying workers' compensation benefits or payments is guilty of a felony. (1871.4 IC)

If an employee lies in order to obtain any of the benefits below, this constitutes insurance fraud:

1. Medical treatment
2. Temporary disability
3. Permanent disability
4. Death benefits
5. Vocational rehabilitation

The key word in this definition is the word lie. In the absence of a lie, no fraud has occurred, only abuse. And what constitutes abuse? Abuse is any practice that allows the employee to benefit from the worker's compensation system in a way that it was not intended or is contrary to law.

A good adjuster, defense attorney, and/or investigator should always provide the opportunity for the employee to either lie or tell the truth. That's because the truth about the nature and extent of the injury will inevitably reduce the overall financial exposure for the employer.

Here is a simple way to remember how a "lie" is defined. Think of the acronym MILK to remember these key terms:

Materiality: The lie or misrepresentation must be material. In other words, if the truth were to be known, the claim would have been handled differently, and the truth would have an impact on the benefits the injured employee was or would be receiving.

Intent: Insurance Fraud is a specific intent crime. It must be shown that the employee intended to defraud the insurance company and or employer. Very often, actions equal intent.

Lie: There must be evidence of a lie when addressing fraud. This is the element that separates the malingerer/abuser from the insurance fraud suspect.

For example:

* An injured employee may have had recent prior medical problems with the same body part-or, while off work, sustain an additional injury to the same body part-and lie about this history on subsequent medical visits. (Of course the physician, adjuster, employer, or defense attorney must ask the employee about recent or subsequent injuries). Such a lie would have a direct impact on the costs of the claim applied to the employer.
* The employee may be filmed prior to his or her medical visit or deposition and then lie about his or her true physical capabilities. This is where timing is critical. Videotape obtained 1-4 weeks prior to the employees' visit is commonly used for criminal proceedings because it is reasonable that an employee would remember he participated in the type of activity being shown.

Knowledge: Knowledge and intent often go hand in hand. The employee must know that he or she lied and that by lying they will validate or enhance their claim. They must know that they are violating the law.

An employee who has read the information in his or her hiring packet and signed the DWC-1 and Employer Injury Incident Form cannot argue that he or she did not know that a lie violates the law, since fraud language is displayed on all of the noted documents.

Brent Heurter is founder and chief solutions officer of ClearComp (www.clearcomp.com). His most recent publication on fraud is "How to Wipe Out Workers' Comp Fraud In Your Workplace: Your Arsenal of Fraud-Fighting Tools, Strategies, Tips and Techniques." For more information, call 1-888-CLEAR-89.



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