STATE OF CALIFORNIA DAVE JONES, INSURANCE COMMISSIONER ...

1 Workers Compensation INSURANCE SIU Guidelines & Protocols March 2011 STATE OF CALIFORNIA DAVE jones , INSURANCE COMMISSIONER DEPARTMENT OF INSURANCE Rick Plein, Deputy COMMISSIONER Enforcement Branch fraud Division 9342 TECH CENTER DRIVE, SUITE 100 SACRAMENTO, CA 95826 916) 854-5760 (916) 255-3308 FAX March 2011 Dear Insurer: The CALIFORNIA Department of INSURANCE , Enforcement Branch and the Workers Compensation fraud Advisory Committee is pleased to offer insurers and employers the six modules of the Workers Compensation INSURANCE Special Investigations Unit Guidelines and Protocols. Many hours of voluntary efforts by members of the INSURANCE industry, prosecutors, and fraud Division personnel developed this training and educational document to assist you in combating workers compensation INSURANCE fraud . The manual is intended to provide general guidelines for employees assigned with anti- fraud responsibility.

2 It is not intended to change any current reporting requirements. Use of the material is strictly voluntary. The CALIFORNIA Department of INSURANCE offers these Guidelines and Protocols as an educational and training tool. Legal Disclaimer: A documented referral is never required. Failure to submit a documented referral is never the basis upon which the Department declines to pursue an investigation pursuant to the CALIFORNIA INSURANCE Code. Documented referrals are voluntary and merely increase and improve the factual basis upon which determinations to pursue legal actions based on referrals are made. Notably, these decisions are made on a case-by-case basis. Persons submitting referrals should anticipate requests for additional information and such requests may differ amongst the 58 independent District Attorney offices within the STATE of CALIFORNIA .

3 To request a DVD or copy of this manual, please contact: CALIFORNIA Department of INSURANCE Enforcement Branch, fraud Division Attention: Intake Unit 9342 Tech Center Drive, Suite 100 Sacramento, CA 95826 We can only make a difference in the fight against workers compensation INSURANCE fraud by working together. We hope that you find this training manual beneficial to your anti- fraud program. Sincerely, Rick Plein Deputy COMMISSIONER Enforcement Branch CALIFORNIA DEPARTMENT OF INSURANCE Enforcement Branch fraud Division Workers Compensation INSURANCE SIU Guidelines & Protocols March 2011 WORKERS COMPENSATION INSURANCE SPECIAL INVESTIGATIVE UNIT GUIDELINES & PROTOCOLS Legal Disclaimer: A documented referral is never required. Failure to submit a documented referral is never the basis upon which the Department declines to pursue an investigation pursuant to the CALIFORNIA INSURANCE Code.

4 Documented referrals are voluntary and merely increase and improve the factual basis upon which determinations to pursue legal actions based on referrals are made. Notably, these decisions are made on a case-by-case basis. Persons submitting referrals should anticipate requests for additional information and such requests may differ amongst the 58 independent District Attorney offices within the STATE of CALIFORNIA . CALIFORNIA DEPARTMENT OF INSURANCE Enforcement Branch fraud Division Workers Compensation INSURANCE SIU Guidelines & Protocols March 2011 DEDICATION This manual is dedicated to the voluntary efforts of subcommittee members of the Workers Compensation fraud Advisory Committee representing the INSURANCE industry, prosecutors, and staff from the CALIFORNIA Department of INSURANCE . Subcommittee Members: Sam King, Subcommittee Chair Tony Bartolotto Tim Cloney Mickaela Erath Pat Farrell Ed Feldman Donna Gallagher George Griffith Kristie Hutchinson Wendy McBride Harry Ysselstein The WORKERS COMPENSATION INSURANCE SPECIAL INVESTIGATIVE UNIT GUIDELINES & PROTOCOLS manual may be obtained by contacting: CALIFORNIA Department of INSURANCE Enforcement Branch, fraud Division Attention: Intake Unit 9342 Tech Center Drive, Suite 100 Sacramento, CA 95826 CALIFORNIA DEPARTMENT OF INSURANCE Enforcement Branch fraud Division Workers Compensation INSURANCE SIU Guidelines & Protocols March 2011 FOREWORD The WORKERS COMPENSATION INSURANCE SPECIAL INVESTIGATIVE UNIT GUIDELINES & PROTOCOLS manual is intended to provide general guidelines for employees assigned with anti- fraud responsibility.

5 It is not intended to change any current reporting requirements. Use of the material is strictly voluntary. The CALIFORNIA Department of INSURANCE (CDI) offers this informational product as an educational and training tool. Many volunteers from the INSURANCE industry, prosecutors, and CDI fraud Division personnel have participated in organizing and writing the modules to assist you in combating workers compensation fraud . The voluntary time and effort spent will assist you in saving CALIFORNIA consumers untold costs in rising premiums. The six modules of the manual describe step-by-step how to distinguish fraud from abuse, identify statutes that prohibit fraud , and statutes that cover both claims and premium-related fraud . There are several examples of red flags that indicate fraud may be present and expanded text gives the four elements of fraud that must be present to establish a case of fraud .

6 All companies hire outside investigators at one time or another; each company has its own policy of when a suspected fraud case requires the use of an outside investigator. Therefore, a module has been included on the role and responsibilities as well as qualifications and experience required of outside investigators. Extensive legal references are used with many examples such as understanding that an articulable suspicion of illegal activity must be required before a surveillance investigation can be authorized: (See: CALIFORNIA Civil Code Section (f)). The module entitled, The Deposition , describes how to prepare for and conduct a successful deposition. There is a list of the STATE of CALIFORNIA mandates requiring reporting suspicion of fraud as well as an example of what a typical claimant and premium workers compensation documented case referral should include.

7 And the WORKERS COMPENSATION INSURANCE SPECIAL INVESTIGATIVE UNIT GUIDELINES & PROTOCOLS was completed in 2002 and updated in March 2011. These Guidelines may be obtained by contacting the CALIFORNIA Department of INSURANCE at the address shown on the previous page. Thanks to all of the volunteers and staff who have willingly dedicated many hours of writing, editing, and assisting in making this manual a reality. Our special thanks to all contributors! Rick Plein Deputy COMMISSIONER Enforcement Branch Workers Compensation INSURANCE SIU Guidelines & Protocols March 2011 Table of Contents Identifying the Elements of fraud .. 1 Summary .. 1 How are Suspicious Claims Handled? .. 1 How is an Investigation Started? .. 1 Definition: Abuse .. 1 Definition: fraud .. 1 How Is fraud Different From Abuse? .. 1 Examples of Abuse.

8 2 Question: Is it fraud or Abuse? .. 2 What are the Elements of fraud ? .. 2 Where is the Lie? .. 3 Was the Lie Knowingly Made?.. 3 Was the Lie Made to Obtain or Deny Benefits? - Or to Obtain INSURANCE for Less? .. 3 Was the Lie Material? .. 4 Applying the Four Elements .. 4 Look at the Big 4 In Conclusion .. 4 Some red flags of Potential fraud .. 6 red flags : Applicant 6 red flags : Provider fraud .. 6 red flags : Attorney fraud .. 6 red flags : Adjuster fraud .. 6 red flags : Employer 6 The Most Common Workers Compensation red flags .. 7 fraud and the Law .. 10 Summary .. 10 Criminal Statutes Regarding fraud .. 10 CALIFORNIA INSURANCE Code Section .. 10 CALIFORNIA Penal Code Section 550(a) .. 11 CALIFORNIA Penal Code Section 550(b) .. 12 CALIFORNIA Penal Code Section 550(c) .. 12 CALIFORNIA Penal Code Section 550(b)(3) Explained.

9 14 CALIFORNIA INSURANCE Code Sections 11760 and 11880 .. 15 CALIFORNIA INSURANCE Code Section .. 15 Applying the Law: Intent and Materiality .. 15 Is All fraud Prosecutable? .. 16 More Information .. 16 Hiring Outside Investigators .. 19 Summary .. 19 Why Hire An Outside Investigator? .. 19 What Does the Outside Investigator Do? .. 19 Before the Investigation Begins .. 19 Roles and Responsibilities .. 19 Qualifications and Experience .. 20 Report Writing Standards .. 21 General Investigative Guidelines .. 21 In Conclusion .. 21 The Deposition .. 22 Summary .. 22 What is a Deposition? .. 22 When is a Deposition Necessary? .. 22 How do fraud Depositions Differ? .. 22 Who Conducts the Deposition? .. 23 Scheduling the Deposition .. 23 Workers Compensation INSURANCE SIU Guidelines & Protocols March 2011 Using an Interpreter .. 23 Preparing for the Deposition: Strategy.

10 24 Preparing for the Deposition: Reviewing Documentation .. 24 Registering Emotions in a Deposition .. 24 Beginning the Deposition: Admonitions .. 25 Admonitions Regarding Perjury .. 25 CALIFORNIA Penal Code Section 118(a): Perjury .. 25 More Admonitions .. 25 Beginning the Factual Questions .. 26 Identification and Background Information .. 26 Facts About the Occurrence .. 27 Facts About the Injury .. 27 Facts About the Disability .. 27 Facts About Claims History .. 27 Facts About Documents .. 28 Difficult Deponent Situations .. 28 When is the Deposition Complete? .. 28 Tips to Getting a Signed Deposition .. 29 Some Deposition Do s .. 29 Some Deposition Don ts .. 29 Follow-up .. 30 Reporting fraud .. 31 Summary .. 31 When Does fraud Have to be Reported? .. 31 Terms to 31 What Exactly Must be Done? .. 31 Anything Else that Should be Done? .. 32 Step 1: Identifying the Fraudulent Claim.