On March 14^th, 2010 a federal judge entered a default judgment for the amount of $2,264,690.68 against 86 workers’ compensation claimants in a Racketeer Influenced and Corrupt Organizations Act (RICO) action filed by the New Jersey employer.

After being laid off due to a plant closing, all 86 former employees filed for workers’ compensation benefits and were represented by the same law firm. All employees claimed similarly vague injuries after having a medical examination. The company then served a RICO lawsuit against the employees. None of the employees responded to the complaint and, as a result, the default judgment was entered.

The Plaintiffs’ attorneys were also sued but opted to settle out of court for an undisclosed amount.

My Two Cents:

This is the first RICO case arising out of the workers’ compensation context to result in a judgment. Since it was a default judgment, none of the defenses raised in currently pending RICO cases against employers were raised. Therefore, it still remains to be seen whether RICO lawsuits arising out of workers’ compensation cases will ever make their way to a jury.

Two More Cents:

This case is interesting because it shows the 2 sides of the RICO coin. Up until now, the focus has been on RICO claims against employers, insurers, third party administrators, and doctors. We now see that the RICO statute can be used just as effectively in the other direction. The most notable difference is that an employer, insurer, administration company, or doctor can either afford to defend themselves or has insurance to defend them in a RICO claim. It is doubtful, however, that claimant employees will have the financial resources to pay for a defense in a federal RICO lawsuit. This may have been the reason for the 86 default judgments.

On November 17, 2009, Attorney General, Troy King, successfully convicted employee, Robert Burrows, on 3 counts of workers’ compensation fraud in the Circuit Court for Shelby County, Alabama. The employee could face up to 30 years in prison for misrepresenting the extent and duration of his injury. The fraudulent misrepresentations lead to the disbursement of more than $2,000.00 in benefits. Sentencing is set to take place on January 4, 2010.

Congratulations to the employer, the insurer, and Attorney General Troy King on another successful fraud prosecution. For those of you who suspect workers’ compensation fraud, you can contact the Workers’ Compensation Fraud Hotline at 1-800-923-2533. 

My Two Cents:  If you suspect fraud but do not have enough evidence for the Attorney General to take the case, you can still sue the claimant in civil court to recover all benefits paid as the result of fraud. The burden of proof is lower in civil court so your chances of prevailing are higher. An employer can also file a counter-claim for fraud if the claimant sues for workers’ compensation benefits.

The National Conference of Insurance Legislators (NCOIL) will consider a working draft of the Employee Misclassification Workers' Compensation Coverage Model Act, as sponsored by Rep. Charles Curtiss (TN) when it meets on July 10^th at the 2009 NCOIL Summer Meeting. The model attempts to address workers' compensation issues caused by employee misclassification and independent contractor status. It presumes the employment status of an injured worker unless he/she can meet a nine-point test to be exempt from coverage requirements as an independent contractor. It also requires construction industry independent contractors with any employees to carry coverage. Much of the model is based on the Florida statute, with the exception of the independent contractor definition, which uses a Wisconsin nine-point test to establish independent contractor status. The model includes language addressing a number of the ongoing issues surrounding the definitions of "employer", "employee" and "independent contractor" that are also addressed by taxing agencies such as the IRS, Unemployment Insurance, and the Federal Labor Standards Act, and regulated by Secretaries of State and Departments of Commerce among others. If adopted by NCOIL, this model would likely begin to serve as a reference for state workers’ compensation "reform" proposals.

In a recent article in the Insurance Journal, it was noted that the economic downturn has resulted in a rise in workers’ compensation fraud. According to a senior special agent for the National Insurance Crime Bureau, people stay out longer on claims and multiple body parts are reported in the same claim. This of course increases treatments and costs. Employees are litigating rather than settling which requires more testing and lab work. In addition, employees are now choosing to expand the claim. For example, a toe injury leads to sleep therapy, which leads to sexual dysfunction. Acording to the NICB, there has also been a significant trend in medical identity theft and provider fraud. To read the full article, visit: http://www.insurancejournal.com/news/national/2009/04/14/99585.htm.

On February 12, 2009, Mike Fish was a guest on the on the Workers' Comp Matters internet radio show.  The host, Attorney Alan S. Pierce, and Fish discussed issues related to workers' compensation fraud.  To access this program, just click on the following link.  

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The Alabama legislature recently established and implemented a controlled substance database for the entire state of Alabama. The purpose of this database is to monitor the prescribing and dispensing of controlled substances under the Alabama Uniform Controlled Substances Act. Pharmacies, licensed physicians, dentists, podiatrists, optometrists, or veterinarians who dispense Class II, Class III, Class IV, and Class V controlled substances are subject to the reporting requirements of the Controlled Substances Prescription Database. The information contained in the database includes: