Workers’ Compensation Insurance Fraud

While on workers’ compensation, medical bills are covered, and in many cases these employees are eligible to receive a portion of their wages while recuperating or as compensation for permanent disability. The opportunity to get paid without the need to work can be tempting, as demonstrated by the high rate of workers’ compensation insurance fraud in California.

workers compensation fraud - san pedro criminal defense attorney don hammond
workers compensation fraud - san pedro criminal defense attorney don hammond

Likewise, the prospect of increased workers’ compensation insurance rates has led some employers to utilize unlawful means to discourage injured employees from filing claims, or getting their legitimate claims for medical and wage payments denied.

Workers’ compensation insurance fraud is addressed by California Insurance Code section 1871.4 and California Penal Code sections 549 and 550.

Examples of workers’ compensation fraud range from employees who fake or exaggerate injuries, to employers who conspire with medical professionals to keep injured employees from receiving workers’ compensation benefits.

While on workers’ compensation, medical bills are covered, and in many cases these employees are eligible to receive a portion of their wages while recuperating or as compensation for permanent disability. The opportunity to get paid without the need to work can be tempting, as demonstrated by the high rate of workers’ compensation insurance fraud in California.

Likewise, the prospect of increased workers’ compensation insurance rates has led some employers to utilize unlawful means to discourage injured employees from filing claims, or getting their legitimate claims for medical and wage payments denied.

Workers’ compensation insurance fraud is addressed by California Insurance Code section 1871.4 and California Penal Code sections 549 and 550, but 1871.4 IC is the primary statute.

Elements of the crime of workers’ compensation fraud

1871.4 IC

In order to obtain a conviction for violating 1871.4 IC, the prosecution must prove the defendant committed one of the following acts:

  1. Knowingly made a false or fraudulent material statement of representation specifically to obtain or deny workers’ compensation benefits.
  2. Knowingly presented a false or fraudulent material statement—either verbally or in writing—supporting or opposing a workers’ compensation claim.
  3. Knowingly conspired with or aided and abetted someone else to commit workers’ compensation fraud.
  4. Knowingly made a false or fraudulent statement intended to discourage an injured employee from filing a claim.

549 PC

The majority of 549 PC cases involve medical providers who receive some sort of monetary reward — a kickback, bribe, etc. — that is in direct opposition to the purpose of the workers’ compensation system. To secure a conviction under 549 PC, the prosecution must prove the defendant committed one or more of the following acts:

  1. Knowingly made a false or fraudulent material statement specifically to obtain or deny workers’ compensation benefits.
  2. Knowingly made a false or fraudulent statement about benefit eligibility with the specific intent to discourage an injured employee from filing a claim.
  3. Knowingly conspired with or aided and abetted someone else to commit workers’ compensation fraud.
  4. Submitted multiple claims for the same injury for workers’ compensation benefit payments.
  5. Submitted a claim for a workers’ compensation healthcare benefit that was not used.
  6. Knowingly solicited, accepted, or referred business from someone who intends to commit workers’ compensation fraud.

550 PC

To obtain a conviction under 550 PC, the prosecution must prove the defendant committed at least one of the following acts:

  1. Knowingly made a false or fraudulent claim for payment of a workers’ compensation insurance health benefit.
  2. Submitted a claim for a workers’ compensation healthcare benefit that was not used.
  3. Submitting multiple claims for the same injury for payment of workers’ compensation benefits.

Criminal penalties for workers’ compensation fraud

Most types of workers’ compensation insurance fraud are considered wobblers, which means they can be charged as either misdemeanors or felonies.

1871.4 IC

Potential sanctions for a misdemeanor conviction under 1871.4 IC are as follows:

  • Up to one year in county jail.
  • A fine of $150,000 or twice the fraud amount, whichever is greater.
  • Restitution.
  • Probation.

A felony conviction carries the same fine, restitution, and probation penalties; however, the period of incarceration increases from two to five years. Most workers’ compensation fraud defendants convicted of felonies will serve their time in county jail instead of state prison under California’s realignment plan that was designed to reduce chronic prison overcrowding.

550 PC

The criminal sanctions for a conviction under 550 PC are the same as for 1871.4 IC except the fine decreases to $10,000 for misdemeanors and $50,000 for felonies. If the total amount of the fraud is less than or equal to $950, the charge will be a misdemeanor, subject to up to six months in county jail and a fine not to exceed $1,000.

549 PC

Under this statute, a first offense is treated as a misdemeanor while additional offenses are charged as felonies. Misdemeanor criminal penalties include up to one year in county jail and a fine; either $50,000 or double the amount of fraud, whichever is greater. Potential felony penalties include 16 months to three years in county jail and a fine; either $50,000 or twice the fraud amount, whichever is greater.

Legal defenses

A conviction for worker’s compensation fraud carries substantial penalties, including large fines and jail time. Anyone accused of this crime should obtain legal advice from a qualified attorney which is appropriate for their unique circumstances. A common defense strategy for workers’ compensation insurance fraud centers on an argument that the defendant did not know or act with fraudulent intent, and hinges on challenging the prosecution’s evidence of the alleged crime.