INSURANCE FRAUD AND WORKERS’ COMPENSATION

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According to South Carolina’s Attorney General Alan Wilson, insurance fraud in South Carolina is the highest it has been in history, as his division has received more than 1200 fraud complaints in 2013. According to Wilson, a 74% majority of fraud complaints were automobile claims while 4% were for workers’ compensation cases. Workers’ compensation is a benefit to eligible employees, and fraud hurts the employer and the system, and is against the law.

Misrepresentation is Fraud

According to Wilson, 1 out of 3 Americans do not take issue with padding or inflating insurance claims to make up for insurance premiums paid in years when there were no claims. However, fraudulent claims raise insurance premiums and costs the U.S. more than $85 million per year. Since state government runs most workers’ compensation programs, tax dollars are used to benefit injured employees. However, fraudulent and misrepresentative claims result in millions of dollars of loss every year.

Workers’ compensation fraud can occur when an employee fabricates a workplace injury or the extent of an injury, or when the employee continues to collect workers’ compensation payments after an injury has healed. Filing workers’ compensation claims out of malice or in bad faith may also constitute misrepresentation or fraud.

Under South Carolina law, there is a mandatory reporting act that requires any person, insurer, or authorized agency to report a person suspected or known to have filed a fraudulent claim or made misrepresentations on a claim to Wilson’s office, the South Carolina Attorney General’s Insurance Fraud division. Wilson’s office has an Insurance Fraud Complaint Form on the website and a number: 1-888-95-FRAUD.

Under Title 42 Chapter 5 of South Carolina’s Code of Laws, employers participating in the workers’ compensation program must have insurance or proof of ability to pay out claims. Under Article 5 of Title 38, those who report insurance fraud may be granted immunity and violators may have to pay restitution to victims of insurance fraud. Payment of fraudulent workers’ compensation claims affects the insurance premiums of employers and may also lead to criminal charges.

There are several penalties for those found guilty of insurance fraud. First-time offenders are fined no more than $5,000. Second-time offenders receive a fine between $5,000 and $10,000. For third and subsequent offenses, fines are between $10,000 and $15,000. These fines are paid out to the current director of the Insurance Fraud Division. The court may also award court costs and reasonable attorneys’ fees to the Insurance Fraud Division director.  If the director makes a request, the Attorney General might assign one or two deputy attorneys general to assist the department in any civil court proceedings against the offender.  And all revenues generated from imposing fines and enforcing the law can be used to fund other initiatives to combat insurance fraud.

Insurance fraud—including for workers’ compensation claims—are serious charges that can jeopardize a person’s relationship, not just with their boss, but with the law. If an employer or an employee suspects a person of committing insurance fraud, it would be wise to report it to the Attorney General or consult with a workers compensation attorney.

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