Illinois Workers’ Compensation Fraud Investigations


At the 2016 Illinois Self Insurers’ Association 38th Annual Educational Seminar and Membership Meeting, William Blumthal Jr, Deputy Director Investigations from the Illinois Department of Insurance, provided an update on their efforts to combat workers’ compensation insurance fraud.

            First, the definition of fraud is important to understand. It is an intentional act that results in financial gain. This contrasts with abuse, which is the improper use of something that is not intentional. Fraud can be prosecuted, abuse cannot.

Why care about fraud?

            The Coalition Against Insurance Fraud estimates there is approximately $80 billion in insurance fraud every year. Workers’ compensation accounts for about 8% of claims submitted for insurance fraud investigation.

What is considered fraud in Illinois?

            A false claim, as defined by the Illinois statutes, is where someone presents a claim that did not really occur.  A false claim is clearly fraud. If a person exaggerates their symptoms from a known claim, this does not constitute a false claim.  The Illinois statutes also say that intentionally making false statements constitutes fraud, so this is were exaggeration of a known claim could rise to the level of fraud.

            Any false or fraudulent statement can be the basis of a charge so long as it is made in an attempt to gain benefits under the Workers’ Compensation Act.

            Engaging in activities that are beyond the work restrictions provided does not, in itself, constitute fraud. However, false statements that lead to unnecessary work restrictions can be the basis for fraud charges. Keep in mind that silence or failure to disclose something does not necessarily constitute fraud.

            It is also fraud for employers to intentionally prepare a false or counterfeit certificate of insurance as proof of workers’ compensation coverage. This is something that the Department of Insurance investigates frequently and it is a significant problem in the construction and trucking industries with general contractor/subcontractor relationships.

            Employers can also commit fraud by making false or fraudulent statements for the purpose of obtaining lower workers’ compensation rates. This means misclassifying payroll into a class with a lower premium rate. This is also a significant source of fraud that is uncovered.

            In 2011, a fraud provision was added to the workers’ compensation statues applying to medical providers that specifically focuses on billing for medical procedures that were not provided. This does not include billing beyond the fee schedule or improper utilization.

There is also a provision in the Act that makes it fraudulent to intentionally make false statements for the purpose of securing approval for self-insurance. They have never seen this happen.

            The statute of limitations for filing fraud charges is three years from the date of the unlawful conduct.

What do the courts say?

            People vs. Oshana is the only published opinion involving Section 25.5 of the Workers’ Compensation Act and it was decided in February, 2012. The worker suffered a work injury and told physicians he was unable to work in any capacity and the doctor gave restrictions. Video surveillance showed he was working another job. The court ruled that the act of NOT telling his employer that he was working another job was not fraud.  They pointed out that his first employer would not accommodate his work restrictions, but the second employer was, so his action of working the second job was not fraud. The courts also pointed out that the claims adjuster never actually asked the injured worker if he was currently working other jobs.  Essentially, the courts ruled that the claimant had no duty to tell the adjuster he was working another job unless he was specifically asked this question.

            However, the courts did rule that his statements to the physician about his level of activity were intentionally false and misleading and that constituted fraud. The video showed him clearly engaged in activities that he told the physician he was unable to do.

            The courts also suggested that the fraud prosecution should not take place before the claim has fully adjudicated through the workers’ compensation system. Given that such adjudication can take years, this is not practical as it would cause the statute of limitations to lapse.

            The lessons from this case are: First, make sure you ask the right questions to the injured worker. Second, any questions around fraudulent statements about physical activity must be accompanied by corresponding medical reports which clearly demonstrate that the injured worker intentionally made false statements to the physician.

The foregoing was originally published on Safety National's Conference Chronicles Blog and is reproduced here with permission of the author. No further republication is permitted without the author’s consent.

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