Workers' compensation fraud undermines the integrity of the insurance system, leading to increased costs for employers and insurers. In California, stringent compensation laws impose severe penalties on individuals and entities engaging in such fraudulent activities.

California Insurance Code 1871.4

California Insurance Code 1871.4 specifically addresses compensation fraud, targeting actions such as:

• Making or causing to be made a false statement or fraudulent claim to obtain or deny compensation benefits.

• Presenting multiple compensation claims for the same injury or illness with intent to defraud.

• Knowingly participating in or assisting in a scheme to commit fraudulent activities within the workers' compensation system.

Penalties for Violations

Violations of 1871.4 are classified as "wobbler" offenses in California, meaning they can be prosecuted as either misdemeanors or felonies, depending on the case specifics and the defendant's criminal history.

Misdemeanor Penalties:

• Imprisonment in county jail for up to one year.

• Fines up to $150,000 or double the value of the fraud, whichever is greater.

• Restitution to victims, covering losses resulting from the fraudulent activities.

Felony Penalties:

• Imprisonment in state prison for two, three, or five years.

• Fines up to $150,000 or double the value of the fraud, whichever is greater.

• Restitution to victims.

Additionally, individuals with prior fraud convictions under 1871.4 or related statutes may face enhanced penalties, including an additional two-year imprisonment for each prior conviction. Criminal charges for compensation fraud can have lasting consequences, affecting future employment and financial stability. Compensation fraud charges can also lead to significant legal fees and prolonged court battles.

Related Statutes and Additional Penalties

Other California statutes also address aspects of compensation fraud:

• Penal Code 550: Addresses making a false claim or fraudulent claim for payment of a loss or injury, encompassing various forms of insurance fraud.

• Penal Code 549: Targets individuals who solicit, accept, or refer business intending to commit fraudulent activities related to compensation benefits.

Convictions under these statutes can result in additional fines, imprisonment, and restitution obligations.

Civil Penalties

Beyond criminal sanctions, individuals convicted of workers' compensation fraud may face civil penalties, including:

• Fines ranging from $4,000 to $10,000 for each fraudulent claim.

• Assessment of up to three times the amount of the medical treatment or medical-legal expenses paid by a compensation insurer due to the fraud.

These civil penalties aim to deter fraudulent activities and compensate for the financial impact on the insurance system. Additionally, fraud cases can impact an employer’s insurance premium, leading to increased costs for businesses. Compensation insurance premiums may also rise significantly for companies found to have engaged in fraudulent activities, placing financial strain on their operations.

Professional and Collateral Consequences

A fraud conviction can lead to collateral consequences such as loss of employment opportunities, reputational damage, and challenges in obtaining future compensation coverage. Additionally, healthcare providers involved in compensation fraud may face disciplinary actions from licensing boards, potentially resulting in suspension or revocation of professional licenses.

California's robust legal framework imposes significant penalties on those who commit workers' compensation fraud, reflecting the state's commitment to maintaining the integrity of its compensation policy. To avoid severe penalties, individuals must ensure compliance with compensation laws and seek proper legal representation when dealing with disputes related to compensation claims. Compensation insurance plays a crucial role in protecting both employers and employees from financial risks associated with workplace injuries.

If you have been a victim of insurance fraud, please contact the proper authorities. If you believe that your insurance certificate is fraudulent, please submit it through our contact form at CheckMyCert.org.