Fraud is the term used to describe an intentional lie that is made in order to obtain a benefit. Fraud does not occur with great frequency in the Vermont workers' compensation system, but it does occur. When the Department is presented evidence of fraud, the matter is investigated and a penalty may be issued. Legislative reform in 2004 served to bolster the Department's stance on fraud. H.632 Section 16 reinforced the allowable penalties for fraud. This article provides an overview of fraud: what it is, how it may be investigated and the penalties that may be issued.

To file an allegation of fraud fill out the Report of Suspected Workers' Compensation Insurance Fraud.  It can be submitted to either address at the end of this article.

Potential for Fraud

Workers' compensation is a statutory benefit system that imposes costs on employers and insurance carriers and provides monetary and other benefits to employees. With such a cost/benefit system, there exists the potential for an individual to attempt to sway the process. With that recognition, workers' compensation laws and rules are in place to redress fraudulent acts.  See 21 V.S.A. §708 and Workers’ Compensation Rule 45.

Parties to Fraud

Fraud may be committed by any party or interest to a workers' compensation policy or claim. This includes but is not limited to the following: an injured worker; employer; physician, adjuster, insurance agent, vocational counselor or any other individual who has an opportunity to influence a workers' compensation insurance policy or claim.

Fraud Defined

One dictionary describes "fraud" as: "deceit or breach of confidence used to gain unfair or dishonest advantage."[1]  In workers' compensation, the term "fraud" is used to describe intentional lying or false statement made in order to obtain a workers' compensation benefit. There are three elements to fraud:

1)Must be willful; intentional or deliberate; and

2)Involves a misrepresentation or lie; and

3) Made for the purpose of obtaining a benefit.

It is necessary for all three elements to be met in order for action to rise to the level of "fraud".

Fraud Examples

Employer: An employer or agent of an employer intentionally under-reports payroll or misclassifies employee's job descriptions in order to minimize the workers' compensation insurance premium.

Employee: An injured worker performs part-time work while receiving Temporary Total Disability (TTD) benefits. An employer, physician or attorney asks the employee if they are working and they deny it.

Adjuster: An insurance adjuster misinforms a company physician that an injured worker has a prior history of the current medical problem.

Physician: A doctor treats a patient for an injury. The patient has no health insurance coverage. The patient does not indicate work caused the injury but the doctor states in his note that work caused the injury in order to ensure bill payment.

Allegation and Investigation

When the Department is notified of fraud and provided with supporting evidence, the Workers' Compensation Investigator conducts an investigation into the matter. In investigation may include any of the following: collection and review of evidence meeting with parties, witnesses and interests to the claim, reviewing medical, payroll or other information, reviewing surveillance tapes, reviewing other investigative reports and/or gathering or reviewing other information. If investigation confirms that fraudulent activity occurred, an administrative citation is prepared that specifies the fraud violation and the penalty. An individual that is cited for fraud has twenty days to contest the citation and may request a hearing.

Penalties

Workers' compensation laws and rules detail fraud penalties generally and provide specific guidelines concerning fine limits and specific fraudulent acts. For complete rules see Rule 45, Rules for Administrative Citations and Penalties. These penalties can have serious and far-reaching consequences. In summary, fraud can result in the following:

- Monetary fine

- Imprisonment

-Repayment of benefits received

- Forfeiture of future benefits

- Order or injunctive relief

Penalty guidelines allow for a reduction in a penalty in extenuating circumstances. For example, a penalty may be reduced if some or all of the benefit obtained is repaid. There are, however, some acts of fraud for which the penalty may not be reduced: falsification of medical records; false sworn testimony or a false statement made to establish compensability.

Stiffer Penalties

Law passed in 2004 raising the criminal penalties for workers' compensation fraud. The law change provides for a higher monetary fine than what existed previously and now allows for imprisonment. The criminal punishment guidelines specify:

- For fraud involving $10,000.00 or more, fine of not more than $100,000.00 or imprisonment not more than three years, or both.

   - For fraud involving less than $10,000.00, fine of not more than $10,000.00 or imprisonment not more than two years, or both.

Reporting Fraud

The Department of Labor will investigate allegations of fraud that are supported with some objective evidence. A phone call alone reporting an allegation of fraud is not sufficient credible evidence to launch an investigation.

To file an allegation of fraud fill out the Report of Suspected Workers' Compensation Insurance Fraud and submit it to:

[1] Random House Dictionary