New York State Workers’ Compensation Fraud: Stereotypes versus Reality.

The Stereotype

The common image of workers’ compensation fraud most likely looks like this: An employee claims to be totally disabled and therefore cannot work at all yet he or she actively makes improvements to their homes, enjoys recreational sporting activities, engages in yard work, or perhaps takes glorious vacations, all while accepting healthy indemnity benefits for months at a time.

The above scenario may be true in some circumstances, but in truth, New York workers’ compensation fraud may take many forms and result in a myriad of consequences.  New York Workers’ Compensation Law (WCL) section 114(a) governs fraud and describes significant penalties for those who are caught committing fraud such as a permanent ban on their eligibility to receive indemnity benefits and/or a permanency award.

The Law.

WCL § 114(a) directs that a claimant is to be penalized if he or she “knowingly makes a false statement or representation as to a material fact . . . .” The penalty is a forfeiture of all compensation that is directly attributed to the false statement.  Workers’ compensation fraud penalties only apply to indemnity benefits and permanency awards, paid medical benefits are not subject to forfeiture in a fraud determination. See Jacob v. New York City Transit Auth., 26 A.D.3d 631, 809 N.Y.S.2d 618 (App. Div. 2006).

Hiding Prior Injuries

Issues involving fraud often arise in situations in which a claimant has a prior injury.  Severe penalties are levied upon claimants who fail to disclose that he or she had a pre-existing injury to the same body part that is the subject of a current claim. See In the Matter of Losurdo v. Asbestos Free, Inc., 1 N.Y.3d 258 (2003). Following the holding in the Losurdo case it has become the standard industry custom for attorneys representing workers’ compensation insurance carriers or self-insured employees to submit subpoenas for prior medical records in an effort to minimize fraud claims.

Created by statute in 1996, the Office of the Workers’ Compensation Fraud Inspector General’s (WCFIG) mandate is to conduct and supervise investigations of possible workers’ compensation fraud as well as other compensation violations. The WCFIG investigates allegations of fraud that include:

  • Fraud by employers trying to evade paying proper workers’ compensation premiums
  • Fraud by individuals filing for benefits for which they are not entitled
  • Fraud by professionals such as attorneys and physicians who facilitate workers’ compensation fraud
  • Actions by government employees that result in the improper payment of workers’ compensation benefits.

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The New York Handbook

Our webinar series was designed as a complement to our New York Workers’ Compensation Handbook. The Handbook is written in “plain English” and provides a resource for risk managers and claims professionals who need a complete and easy-to-use reference guide for handling New Jersey claims.

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Joseph Melchionne is an associate attorney at Lois LLC where he defends employers and carrier in New York workers’ compensation claims. Joseph can be reached directly at jmelchionne@lois-llc.com or 201-880-7213.