Problems with employees filing fraudulent workers' compensation claims.
The filing of fraudulent claims under workers' compensation insurance is a massive problem. Phony or exaggerated reports of injury on the job represent 20% to 25% of all claims, according to estimates by state agencies and private carriers. As a result, over the past decade the cost of workers' comp insurance in all 50 states has risen by more than 150%.
In California fraud is so entrenched that some workers make a career out of collecting benefits. Danny Lynch, co-owner of Access Systems and Information, a 13-person political-consulting business in Sacramento, saw his business stung by fake claims that had been filed by a pair of college-age employees a few years before Lynch bought the company from its previous owner.
One of the workers had filed a stress-related claim, and the other filed for a leg-and-back injury. "He was supposed to be practically bedridden," recalls Lynch. "We drove by one evening and saw him playing badminton on the lawn." Stopping such abuse requires activism. To adopt the right mind-set, imagine you're paying the claimant out of your own pocket. For specific steps to thwart fraudulent workers' comp claims, see "Detecting Fraud," No. 07921192, July 1992.