Employee Convicted of Fraud Still Eligible for Workers’ Comp

By Joanne Deschenaux October 24, 2017

An employee who was convicted of insurance fraud—after he exaggerated a work-related injury to a doctor who then prescribed opiates—was not barred from recovering workers' compensation benefits because another doctor found that the injury had still resulted in a permanent partial disability, the California Court of Appeal ruled.

Although a worker who is convicted of criminal fraud in attempting to recover workers' compensation benefits is barred from recovering benefits growing out of the fraud, the worker may be awarded benefits if he or she can establish, independent of the fraud, an entitlement to the compensation, the court concluded.

[SHRM members-only how-to guide: How to Administer a Workers' Compensation Claim]

On March 24, 2006, while working at Pearson Ford, the employee accidentally slammed the trunk door of a car on his left hand and crushed one of his fingers. Although no bones in his hand were broken, he was unable to continue working because of continuing pain in his hand and shoulder. He applied for and received workers' compensation benefits.

From 2006 through 2010, the worker was treated and examined by several physicians for severe pain related to his injury.

Between Jan. 11, 2010, and May 5, 2010, the worker was examined three times by a pain specialist, who prescribed several medications, including opiates. On each of his visits to this doctor, the employee wore a sling on his left arm and complained of continuing severe pain and an inability to use his left arm and hand.

Pearson Ford's workers' compensation carrier retained the services of a private investigator, who conducted video surveillance of the employee following each of the three visits to the pain specialist. Following each visit, the worker was observed taking off his sling, using his left hand to get in and out of the car and using his left hand to steer. On one occasion, he was observed stopping at a grocery store and using his left hand to carry a bag of groceries.

After viewing the video surveillance, the district attorney began investigating the employee. In March 2011, the employee was charged with insurance fraud. He pleaded guilty, was placed on summary probation and was required to pay $9,000 in restitution.

On May 31, 2016, a workers' compensation judge (WCJ), relying on another doctor's testimony that the employee suffered a 70 percent permanent disability, awarded him a disability indemnity, a life pension and future medical benefits. Pearson Ford asked the Workers' Compensation Appeal Board (WCAB) to reconsider the WCJ's determination. On July 18, 2016, the WCAB denied Pearson Ford's petition and adopted the WCJ's report and conclusions. Pearson Ford sought review in the appellate court.

Employee Proved Entitlement to Benefits

The California Insurance Code makes it a crime to make any knowingly false material statement or representation to obtain workers' compensation benefits—and anyone convicted is ineligible to receive compensation that was owed "as a result of" the violation.

Previous California cases have noted that the applicable section of the insurance code should not be used as an automatic or broad prohibition on benefits payments that were not directly connected to a worker's fraudulent misrepresentation.

In this case, the court said, the WCJ found that there was substantial medical evidence that did not stem from the employee's fraudulent conduct that the employee had suffered a compensable injury. The doctor who testified before the WCJ saw the surveillance tapes that led to the employee's conviction; nonetheless, based on his later examination, he concluded that the employee was entitled to benefits for a permanent partial disability.

Furthermore, the court held, the $9,000 restitution ordered after the employee's conviction did not prevent any future award of benefits. There was no indication that the criminal court had determined that the employee was ineligible for any further compensation stemming from his injury.

Therefore, the court upheld the WCAB's conclusion that the employee was entitled to disability benefits.

Pearson Ford v. WCAB, Calif. Ct. App., No. D070915 (Oct. 6, 2017).

Professional Pointer: The employee in this case was convicted of exaggerating the extent of his injury. He was entitled to benefits despite this misrepresentation because there was convincing medical evidence that the injury later resulted in a permanent partial disability. This case does not stand for the proposition that an employee who fakes an injury may nonetheless recover benefits.

Joanne Deschenaux, J.D., is a freelance writer based in Annapolis, Md.


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