Explainer: Fraud as a Defense in New York Workers’ Compensation Claims.

How does New York define “Fraud”?

Any person who knowingly and intending to defraud the workers’ compensation system by presenting (or assisting in presenting) an application for benefits, which contains a misrepresentation of a material fact. The penalty: Class E Felony charges. In addition to a Class E Felony conviction, the claimant who is convicted loses the right to all past and future compensation benefits. Fraudsters have to return any money they got through their fraud. WCL § 114. This is contrary to the general rule of law that claimants do not have to pay back money fraudulently obtained.

Greg LoisA claimant who applies for workers’ compensation benefits is required to provide accurate records and truthful statements to the WCB, the insurance carrier, and the employer. However, the law does not require the claimant to give a truthful account of their condition to their medical care provider. The prohibition on false representations appears to only apply to false statements made to get a monetary benefit – it does not appear to apply to medical awards or benefits, since the prohibition on lying applies only to WCL § 15 (indemnity awards) and not expressly to § 13 (medical benefits) or § 16 (death benefits).

An employer has the right to report suspected workers’ compensation fraud to the Fraud Inspector General. However, fraud will actually be inspected by the office of the Workers’ Compensation Fraud Inspector General which is actually staffed by WCB employees. The Fraud Inspector does not prosecute cases – rather, it refers cases to local authorities for prosecution.

Surveillance as a Tool to Combat Fraud.

New York Workers’ Compensation Law Section 114-a prohibits the making of false statements to obtain workers’ compensation benefits. In practice, this means statements made inside a court room and statements made to doctors in examining rooms. In the real world, two recent cases show exactly how an employer can demonstrate employee fraud.

Video evidence.

In a recent case, a New York Appellate Court affirmed a disqualification from benefits where video surveillance of the claimant showed him going to and leaving a medical examiner’s office with a leg brace and a cane AND A WALKER. While that portion of video4 showed a severely disabled accident victim, later scenes, in which the claimant is able to move his leg freely, and without a brace, a cane or a walker, showed that he actually had no impairment in his daily activities. Retz v. Surpass Chem. Co., 834 N.Y.S.2d 389 (2007).

The WCB ruled that the claimant had violated WCL § 114(a) and was disqualified from comp benefits. The appellate panel, on review, affirmed that disqualification.

Statements – outside of court.

Video can be persuasive, but even better than video is the claimant’s own words. In another recent case, an employe neglected to reveal a prior, very significant injury that resulted in neck and back injuries when filling out forms to obtain workers’ comp benefits. See Husak v. New York City Transit Authority, 836 N.Y.S.2d 319 (2007). The claimant repeated answered “No” on multiple daily activities questionnaires that asked “Did you have any injuries, illnesses, or limitations before this workers’ comp injury?”

The claimant, who had suffered severe cervical and lumbar injuries just prior to his workers’ comp claim, failed to disclose those injuries. The claimant argued that the questions were ambiguous and that he wasn’t sure exactly what he was being asked. The WCB determined that the claimant knew he was providing false information in connection with his workers’ comp claim and disqualified the claimant from further benefits.

Getting useful surveillance video

Surveillance can be expensive. A single day of surveillance can cost $500-$1,500, depending on the number of investigators used. In order to conserve litigation resources, we suggest the following “best practices” for obtaining useful surveillance:

  • Schedule at least two days of surveillance at a time.
  • Always request that any report generated be directed to counsel.
  • Request that the surveillance vendor assign a different investigator for each day of surveillance conducted.
  • Communicate as much information as possible to the investigator, including a physical description of the claimant, mailing address (use the address the claimant is supplying to medical providers or the address where his checks are being mailed).
  • Try to schedule surveillance to take place on days when the claimant has medical appointments. The investigator will have an easier time locating the claimant, and you will be certain to get the claimant “out and about” on the day of the appointment.
  • Schedule surveillance on days where the weather is good – you will rarely find a claimant going for a stroll in a rainstorm or during the harsh winter months!
  • Take note of the claimant’s residence and surroundings before you expend litigation resources on surveillance. If the claimant lives in a gang-infested area, for example, the drug dealers who control the turf will note the presence of your surveillance team or investigator and often “tip off” the local residents as to the surveillance activity.
  • Never, ever turn over the surveillance report to the court or adversary. The Board lack authority to compel production of surveillance reports where the report was directed to counsel.

Greg Lois is the managing partner of LOIS LLC, a 19-attorney law firm dedicated to defending employers and carriers in New York and New Jersey workers' compensation claims. Greg is the author of a popular series of "Handbooks" on workers' compensation, and is the co-author of the 2016 Lexis-Nexis New Jersey Workers' Compensation Practice Guide. Greg can be reached at 201-880-7213 or glois@lois-llc.com