Fraudulent workers' compensation claims are increasingly becoming a more common issue in the construction industry.
Attorneys and insurance brokers believe they are seeing more false claims of contractors getting hurt, and they say it has to do with the state of the economy.
Christina Denning, partner at Higgs Fletcher & Mack, said since there is a higher turnover in employees now than before, they want to be guaranteed some money in return.
“If someone feels they are about to get cut from a job, one way to ensure they get some compensation back is they feel they need to file a claim,” Denning said, adding that she believes if the economy was in a better place and if there was more construction work for contractors, “they wouldn’t otherwise do this.”
Martha Villalpando is a broker with 13 years of experience at Target Financial and Insurance Services, which offers coverage for construction contractors and companies. She said rates are at their highest in the last two years, and believes the reason is because there is less work for contractors than compared to a few years ago.
“That’s what I’m thinking,” Villalpando said, when asked if she thinks there are more fraudulent claims from contractors now. “I am seeing more and more claims being submitted in the first few days a worker was on the job. I hear more stories about this too now, and I don’t know if it’s coincident or it’s an effect of the economy.”
Villalpando said this leads to higher rates for construction firms because they are the ones affected by the claims of injured workers they hired for a project.
“Sometimes clients don’t even know that their rate has gone up until it’s time to renew the policy,” Villalpando said. She said the best way for firms and contractors to protect themselves is to call their insurance companies if they sense any kind of false claim might be filed.
“Sometimes we can stop the fraudulent claim if it's caught fast enough,” Villalpando said. “It’s up to your carrier to investigate as well, if they feel something suspicious is going on.”
Typically a contractor wants to keep their Experience Modification Rate (EMR) below 1.0, since this is considered the industry average when it comes to measuring how much an insurance company is going to charge a contractor based on past injury claims and the future chances of an injury and a claim being filed again. The Workers’ Compensation Insurance Rating Bureau of California is the governing body that sets the EMR.
Denning said this leads to attorneys trying to help firms and contractors lower their EMR because of false claims. This action is up to the Workers’ Compensation Insurance Rating Bureau of California.
“It’s really hard,” Denning said. “They look at your background to see your history. Things can be done, but it’s a process in terms of challenging an injury."