What is Workers' Compensation Premium Fraud?

The California Department of Insurance defines premium(1) fraud as:

  • when an employer schemes to defraud their workers’ compensation insurer by paying less for workers’ compensation insurance. Examples include:
    • under-reporting payroll
    • misclassifying employees’ job descriptions, or
    • paying an employee’s medical provider directly for medical treatment for a work-related injury
  • Failing to obtain workers' compensation coverage for employees is also a form of premium fraud.

Workers' Compensation Fraud Truth or Consequences
(First 15 minutes provides excellent examples of premium fraud)

It is a felony to make a false or fraudulent material statement to obtain or deny any compensation. It is a crime to knowingly assist, conspire with, or solicit any person in an unlawful act of workers’ compensation insurance fraud. It is also a crime to make or cause to be made a knowingly false or fraudulent statement with regard to entitlement to benefits with the intent to discourage an injured worker from claiming benefits or pursuing a claim. Workers’ compensation fraud may be punished by imprisonment in county jail for over one year, or in a state prison for two to five years. A fine may also be imposed not exceeding $150,000, or double the amount of the fraud, whichever is greater. If someone is convicted of workers’ compensation fraud, the court is required to order restitution, including restitution for any medical evaluation or treatment services obtained or provided. A person convicted of workers’ compensation fraud may be charged the costs of the investigation and is ineligible to receive or retain any compensation, where that compensation was owed or received as a result of workers’ compensation fraud.

(1)  https://www.dir.ca.gov/dwc/FraudWarningNotices/Fraud-Warning-Notice.pdf