Claims adjusters look for the presence of red flags in workers’ compensation (WC) claims to determine whether or not a claim is legitimate. Red flags consist of particular conditions or behaviors commonly found in fraudulent claims. While the primary responsibility of recognizing red flags lies with both employers and claims adjusters. Private investigators should at least be familiar with them. Seeing one or two red flags does not necessarily indicate fraud however it should, at the very least, alert the adjuster to the possibility of fraud. The fact is workers do get injured on the job. According to Jody Ball in The Bible on Worker’s Comp Investigations, “While most insurance claims are legitimate, fraud is wide-spread, involving approximately 30% of all claims.” Of those that aren’t, some are outright intentional fraud while others consist of exaggerated claims or malingering. Claimants who malinger are those who more than likely began with a legitimate claim and injury but have since recovered. However, they continue to pretend they are incapacitated to avoid having to return to work.
Upon receiving a new WC assignment investigators should discuss with the adjuster the specific red flags that were observed. Being aware of the particular red flags that led an adjuster to consider fraud as a possibility will help investigators conduct a more cost-effective and successful investigation. For example, if the adjuster states that the claimant’s home address on file appears to be a family or friends address the investigator will know that the first step will be to research and locate the claimant’s current residence.
Let’s take a look at the top 40 most common red flags associated with WC claims. We will consider what these red flags mean and what adjusters and investigators can do about them.
- There are no witnesses to the injury or the only witnesses are the claimant’s “close” co-workers Yet another reason to advise employers to install security cameras in the workplace. John J. Fay in The Encyclopedia of Security Management states that cameras can be used to “…identify unsafe practices…” and “…to prevent accidents…” In fact, the installation of cameras can decrease the number of fraudulent WC claims.
- The claimant and witness statements offer conflicting information Do the statements seem rehearsed or even identical? Do they both contain the same misspelled words? Perhaps it’s not a coincidence.
- The report of the injury is not timely Both adjusters and investigators should advise employers to have clear and specific guidelines for reporting work-related injuries. Supervisors should be trained to bring accidents to the attention of management immediately.
- The accident report, statements and other documents contain numerous cross-outs, white out, erasures or are incomplete
- The claimant cannot recall specific details about the accident Along with a selective memory loss many claimants change details of their statement after inconsistencies have been pointed out. Employers and adjusters should continue to question them on specifics to arrive at what actually happened.
- The injured worker is a new employee David Wylie with Texas Mutual Insurance Company stated in Fraud No Small Matter for Small Business, “Statistically the newer the employee is, the more likely the claim is fraudulent, especially if other red flags appear.”
- The claimant has a poor attendance record at work Poor attendance records have a funny way of becoming WC claims. Advise employers to have a clear and specific attendance policy.
- The claimant has a history of discipline issues Along with poor attendance, employees who have discipline problems can become disgruntled employees. A disgruntled employee, as Wylie pointed out “…has a motive to fabricate the claim.”
- The accident occurs immediately before or after a vacation Employees can become disgruntled when their request for vacation is denied. Many claimants view time off for a WC injury as a “vacation.”
- The accident occurs immediately prior to an employee’s retirement Often the employee will take an early retirement and may even be moving out of the city or state. If the employer or adjuster knows the claimant is moving this information should be relayed to the investigator immediately. I recently had a similar case. The claimant took an early retirement but not before filing a WC claim. Of course I was there the day the moving truck arrived. Although the claimant had hired professional movers I was able to videotape him loading his own truck with personal belongings. Needless to say, his physical activities that day were well outside the scope of his alleged injury.
- The employee is injured prior to a strike, company layoff, termination or the employer closing or relocating the business
- The employee is injured after giving notice Nothing says thank you more than an employee who leaves the job and is “injured” during his last few days. This often happens with employees performing seasonal or temporary work.
- The employee is injured after receiving a disciplinary action, demotion, being passed over for promotion or being placed on probation The common denominator is that the claimant is disgruntled. Again, disgruntled employees are more likely to file fraudulent WC claims.
- The claimant has problems with workplace relationships
- The claimant leaves the country for medical treatment I once had a clinic in Nuevo Laredo, Mexico billing an adjuster for medical treatment the claimant was supposedly undergoing. I was able to provide evidence that the claimant was shopping and running errands in Laredo at the same time the clinic says he was being treated in Mexico.
- The claimant has a history of reporting subjective claims or has more than one claim at a time
- The claimant’s job history reflects a series of jobs held for relatively short periods of time This alone, should alert employers to potential problems. Advise employers to put an end to fraudulent WC claims before they get a chance to start through careful hiring practices. Investigators can conduct background investigations and verify references and help employers avoid costly hiring mistakes.
- The claimant’s alleged injury relates to a pre-existing health problem
- The claimant is involved in hobbies or sports Claimants injured playing sports over the weekend often attempt to blame it on a work-related injury early Monday morning. When adjusters have claimants that are active in sports this information should be passed on to the investigator.
- The claimant is involved in home improvement or auto repair activities
- The claimant has a part-time job that is labor intensive, i.e. building outdoor decks, installing tile, etc. Many claimants view WC as a vacation of sorts and an opportunity to get some real work accomplished.
- The injury occurs on a Friday but is not reported until the following Monday, or the injury happens early Monday morning or at the beginning of a weekly shift Probably one of the most common red flags. This could indicate the claimant was injured over the weekend.
- The incident report and the medical evaluation offer conflicting information
- The claimant refuses or delays treatment to diagnose the injury
- The claimant won’t come to the telephone, is sleeping and can’t be disturbed or is never home Again, one of the most common red flags. Begin surveillance early at this claimant’s address. More than likely he is very active.
- The claimant misses physical therapy, occupational therapy or other medical appointments
- The claimant provides a telephone number but doesn’t live at the address associated with it A variation of this is the “message phone,” where the message taker is evasive or ambiguous when asked about the claimant. Investigators should ask adjusters for every telephone number associated with the claimant. Reverse the telephone numbers for the actual addresses.
- The claimant provides his friends, parents or other family members address or a hotel or post office box In other words the claimant is hiding. Check proprietary databases and follow him from an appointment or when he picks up his WC check from his employer.
- The claimant’s family doesn’t know anything about the claim or they are extremely helpful to the point of the information sounding rehearsed
- The claimant is going through a divorce
- The claimant is going through a child custody battle
- The claimant is having financial difficulties A fraudulent WC claim may be the least of your worries. This type of claimant is prone to stealing from his employer.
- Tips or anonymous information from co-workers, relatives or neighbors suggest that the claimant’s injuries are exaggerated or not legitimate Yet another reason to suggest to clients that the investigator perform an activity check or neighborhood canvass or survey. I once had a liability case where the claimants (a mother and daughter) had been involved in an automobile accident with a truck from a large utility company. In discussing the accident with a neighbor the mother remarked that she was going to take the utility company for every penny. Unbeknownst to the mother, the neighbor did not care much for her or her daughter. The neighbor telephoned the utility company and advised them that the daughter was on her high school volleyball team and that her mother was her biggest fan. At the next game I sat in the bleachers and videotaped the daughter’s very physical volleyball game and her mother jumping up and down and cheering from the opposite bleacher.
- The claimant’s lifestyle is incompatible with his known income These types of claimants have their fingers in all kinds of pies and are usually very active. Surveillance is a must.
- The claimant’s family members are on workers’ comp or have a history of claims or lawsuits A family that “claims” together stays together. Use discretion when conducting surveillance and especially when making neighborhood inquiries.
- The claimant’s injuries are subjective This involves soft-tissue injuries, phantom pain, emotional injuries, etc. This is very common and difficult to prove otherwise. The best course of action is surveillance of an active claimant over several days.
- The claimant changes physicians frequently This occurs when the physician releases the claimant to return to work or when his diagnoses is at odds with the claimant’s assertions.
- The claimant is healthy, tanned or sunburned The claimant is obviously involved in outside activities. People are creatures of habit. Men begin shaving on the same side of their face every morning. Regardless of how careful claimants with exaggerated or fraudulent claims are, they eventually will go back to their routines.
- The claimant and other workers from the same employer use the same attorney, doctor, chiropractor or clinic I once had a case where 10 claimants from the same company were all being treated by the same clinic. This is a definite red flag. Many of these clinics are set up to do nothing more than make money. I cannot tell you how many times I have conducted surveillance on different claimants for different clients and found them all going to the same doctor or the same chiropractor. Use caution when conducting surveillance at these locations. These people do not want anything disrupting their cash cow.
- The claimant is familiar with claims-handling procedures or workers’ comp rules. At the very least this could indicate that the claimant has filed a previous claim. It also means the claimant may be expecting surveillance. Use discretion and be careful.
When it comes to fraudulent WC claims, claimants use a myriad of methods to exaggerate and file false claims. These claims end up costing money and a loss of productivity for the employer which, unfortunately is passed on to the consumer. When it comes to WC fraud, everyone pays. Investigators, adjusters and employers working together can not only recognize and react to the red flags that point to fraudulent WC claims but also conduct comprehensive investigations that reduce the number of false or exaggerated claims.
Scott B. Fulmer, Security and Investigation Professional, President and CEO
Scott B. Fulmer Investigations, Texas License #A13390
8111 Mainland Drive, Suite 104
San Antonio, Texas 78240 USA
Scott B. Fulmer is an experienced and results-oriented security and investigations professional, state licensed private investigator, certified Texas process server and president and CEO at Scott B. Fulmer Investigations based in San Antonio, TX. He has over 20 years experience in handling complex investigations at the state and federal level, and public sector including workers’ compensation and insurance liability fraud, covert video surveillance and national security background investigations. A combat veteran of the Persian Gulf War and an exciting and lively public speaker and presenter available to speak to your group or organization. He resides in the Texas Hill Country with his wife and three children.
- Ball, Jody, The Bible on Worker’s Comp Investigations. 1997, Thomas Investigative Publications, Austin.
- Fay, John J., Encyclopedia of Security Management. 1993, Butterworth-Heinemannn, Boston.
- Wylie, David. Fraud No Small Matter For Small Business. 2010 http://sbinformation.about.com