Posts Tagged ‘workers compensation fraud’

A proliferation of premium fraud?

Friday, February 18th, 2005

You know that workers comp is a problem when the so-called mainstream media begin to take note. Normally, workers comp is a topic relegated to the trade journals or the deepest nooks and crannies of the business pages in the daily news. Contrast this with the early 1990s, when headlines screamed about runaway costs and story after story included tales of employers closing shop or moving operations from one state to another due to the burdens of workers compensation.
This month, Forbes features a story about current workers comp woes, and it is interesting to note that this story entitled Workers Con deals primarily with the proliferation of premium fraud.
The story cites a number of examples: a FL PEO that pocketed $600 million in premium leaving employers and their employees uncovered; a California janitorial firm that underreported the number of employees by several hundred; a Texas janitorial firm that played a shell game by switching employees between a number of companies; an Illinois temp service that misclassified warehouse workers as clerical workers, and a California PEO that hid more than a million dollars in wages by calling them “partnership distributions.”
Is employer fraud actually more widespread in reaction to rising costs, or are state regulators just taking a harder look now that reforms have wrung the fat out of other aspects of the system? Hard to say for sure since fraud statistics – both on the employer and the employee side – are often difficult to quantify and generally rather squishy at best. The Forbes article says yes, if the rising number of suits filed by state and private insurers is an indicator.
One thing is for sure – fraud schemes hurt us all: the injured employee is often left without recourse or forced to bring suit to pay for medical care; the honest employer pays higher premiums as insurer costs “trickle down.” In addition, fradulent employers often enjoy an unfair competitive edge. By illegally evafing a cost of business tht can be substantial, fraud perpetrators can offer lower prices in competitve or bidding situations.
Employers that hire contract workers through a third party, such as through a temp agency, or a leasing company, and employers who purchase workers comp packaged in a bundle of other services, such as in a PEO, need to be particularly alert to the issue of coverage lest they find themselves holding the bag. The California Department of Industrial Relations offers an employer tip sheet on ensuring the legitimacy of workers comp coverage. It is worth kicking the tires before cementing any arrangements: check business licenses and verify coverage with a local insurance authority.
Related:
Florida uninsured employer jailed for fraud after two deaths

West Virginia is cracking down on deadbeat employers


Ohio getting tough on premium compliance


Insurer insolvencies, guaranty funds, and joint and several liabilities between temp staffing agencies & contracting employers

Florida shuts down uninsured employer after two worker deaths

Thursday, August 5th, 2004

A few weeks ago, there was a horrific Florida construction accident that claimed the lives of two workers and injured several others. While laying concrete on the third floor of a new condominium complex, the roof collapsed. News reports of the accident were anguishing – many workers barely jumped to their safety, with others trapped by debris and hardening concrete, coworkers scrabbling frantically to save them. One man was trapped in concrete to his waist but managed to extricate himself before it hardened.
The following is an excerpt from a Florida Sun-Sentinel story after the accident:
“After the awful screeching of the collapsing luxury townhouse building, the first sounds Arturo Ruiz Gil heard were his co-workers’ cries for help.
The 20-year-old construction worker had just fallen 30 feet from the top of the building onto a wet concrete surface. Pushing aside the rubble, he managed to crawl out with his brother, Andres Ruiz Gil, and uncle, Valentin Ruiz, before the concrete hardened.
“We kneeled down, all three of us, and prayed to God and to the Virgin of Guadalupe to help us and help the ones who were trapped,” Andres Ruiz Gil, 19, said.
Two workers were killed and five were injured late Thursday afternoon when the third floor of the building under construction collapsed west of Hobe Sound. Another six construction workers at the Tranquility complex escaped injury, including a 13-year-old West Palm Beach boy.”

In the aftermath of the accident, the owner of Mac’s Construction and Concrete, the subcontracting company where the workers were employed, expressed regret calling the accident a “freak accident.”
Almost immediately, some unusual things were apparent. One of the workers who narrowly escaped injury was a 13 year-old boy, a potential violation of child labor laws. The subcontractor had a history of OSHA citations and fines. And more recently, it was learned that the subcontractor did not have workers compensation coverage for his employees as is mandated by law.
The state of Florida has recently been cracking down on just such employer fraud, and they stepped in slapping a stop work order on the construction subcontractor. (This linked story in Insurance Journal also has an interesting discussion from readers.) Under the law, the offending employer could be liable for fines of 1.5 times the amount of the coverage avoided a day in damages. Other fines and charges could be brought depending on the accident investigation. For example, most states are extremely strict in enforcing child labor laws.
This is a sad and terrible story for so many reasons. Rarely are fatal work accidents freak events – most could be prevented with adherence to safety rules and OSHA standards. It also echoes a shameful story we’ve addressed here before – the heightened vulnerability of Mexican workers whose on-the-job death rate is two to four times higher than other workers.
Related posts
Ohio Getting Tough on Premium Coverage
Dying at Work – Part I and Part II
Modern Day Slavery
More on immigrant workers
When Workers Die
Workers Comp and the Station Nightclub