An interesting pilot program is coming into formation for Butte County, California.  This pilot program will require those seeking to perform contract work with the county to prove they have workers’ compensation insurance for their workers.  For now, if approved, the program will apply to roofers and swimming pool builders.

There are presently criminal and civil penalties for not having workers’ compensation insurance or obtaining inadequate workers’ compensation insurance by fraud.  (Picture the agent selling insurance in the office of the employer, being told that there are a total of four employees working for the company when he can clearly see more than that working in the warehouse.)

I, for one, am always in favor of making life easier for businesses and employers.  Enough of California’s companies are being poached by the likes of Arizona, lured away with promises of New York Iced Tea and some of the lowest Workers’ Compensation costs in the country.

But while I am for making the laws easier to understand and cheaper to comply with, I can not abide the fraud some employers engage in to avoid paying Workers’ Compensation costs.  This gives them an unfair advantage when competing with employers who bite the proverbial bullet and follow the law.

Hopefully, this program will be adopted in more counties throughout the state and for more than just roofing and swimming pool work.

Insurance Commissioner Dave Jones announced that approximately $32 million in grants is to go to the various District Attorneys’ Offices in California to help combat California Workers’ Compensation fraud.  You can read the press release here.

Although I generally don’t like the state spending money, especially at times like these, I find myself applauding the efforts to finance the fight against fraud.  I’ve detailed a few instances of insurance fraud before, including cases of applicants defrauding the state and local governments and insurance companies.  It’s never pretty and there are rarely appropriate remedies for the defrauded – just money spent in benefits, investigation and prosecution that will never return to its rightful owner.

However, good does come out of these efforts, chiefly in the form of personal deterrence, preventing the convicted fraudster from collecting more benefits, and general deterrence, in the form of would-be fraudsters being deterred from stealing from insurance companies and self-insured employers.

The law enforcement community is full of brave, hard-working and diligent men and women, both investigators and prosecutors, who work with their hard-working and diligent counterparts amongst the ranks of the adjusters to limit the fraud plaguing California’s Workers’ Compensation insurance industry.

One part of the press release which ended up giving my computer the frowning of a life-time was the following:

“The grant funding is the result of assessments on California employers that are determined annually by the Fraud Assessment Commission.”

If I am the victim of a pick-pocket, or if I come home to find my house burglarized, I should have access to police protection and assistance in investigating and prosecuting the case.  After all – I paid for them with my taxes.  Otherwise, shouldn’t my taxes go down and I can spend the money on private security?  California’s employers are already taxed – again and again, from corporate to payroll to income to who-knows-what-else.

Fraud is a crime that targets an individual business, but the effects are felt everywhere through higher prices, just like with any other form of theft.  It is unfair to levy yet another tax on the employers of California, burdened as they already are.

Perhaps we should consider pay-as-you-go uniformed police and fire departments as well?

In any case, for all your would-be and currently Workers’ Compensation fraudsters out there… Justice is Coming!

Quis custodiet ipsos custodes?

It is an unfortunate fact that insurance companies and self-insured employers often have to lose money to fraud: so-called injured workers who claim more disability than they have sustained.

Because of this fact, the cost of this fraud is passed on to the average consumer, who pays a higher price for goods and services, the higher revenues from which are used to pay for higher insurance premiums.

Private companies are not the only victims, and sometimes the government, sleepy eyed from collecting taxes from private companies (although, not all private companies) and citizens, has its own pockets picked.

It’s not Robin Hood that does this – there are no merry men in green tights involved.

In one recent case, an Oxnard police officer stands accused of workers’ compensation fraud.  Edward Idukas, the law man in question, allegedly claimed he was too injured to work, but then an investigation revealed he was regularly playing baseball while collecting benefits.

In a similar story, Oscar Fuentes III, of Willits, was arrested for alleged insurance fraud after an investigation allegedly revealed that, while receiving workers compensation benefits, he was coaching baseball, performing yard work and other physical activities.  It appears that an investigation was launched after Mr. Fuentes filed a petition to reopen, seeking to raise an in-place award for 45% permanent disability to 100% permanent disability.

Coincidentally, Mr. Fuentes was a manager of the Department of Corrections and Rehabilitation, San Quentin State Prison.

Private employers, public employers and insurance companies do well to hire veteran investigators with a nose for funny business.  The seed money sown in an investigation unit that develops a cooperative relationship with law enforcement reaps not only the small amounts of funds recovered through restitution orders, but also the deterrence effect of prison time.

To the deputy district attorneys, to the private investigators, and to the determined adjusters that won’t have their companies robbed, I say in all sincerity:  good hunting!