Allegation: Reporting failures, inflated premiums
Workers’ Compensation Premiums Fraud
Lieff Cabraser represents businesses in a class action lawsuit against one of the nation’s largest insurance companies for its widespread reporting failures which have caused many businesses to pay artificially inflated workers compensation premiums.
When Insurance Companies Fail To Report Reimbursements On Claims Paid, The Premiums Businesses Must Pay For Workers Compensation Increase
The complaint charges that the insurance company regularly failed to account for monies it recovered from third-parties. These monies were reimbursements from third parties at least partially responsible for an injury in the workplace.
State regulations require that the reimbursements be reported. The reimbursements are taken into account when insurers calculate businesses’ workers’ compensation insurance premiums.
Accounting for these third-party payments has the effect of reducing the premiums businesses must pay. Doing the opposite, not crediting the employer for these payments, inflates the business’s premiums, hurting businesses and unjustly enriching the insurance companies.
How Insurance Companies Manipulate Workers Compensation Rates
As an example, if an employee of Company X was injured at a roadside construction site due to a passing driver’s reckless driving, the Company X’s workers compensation insurance carrier will make a payment for the injuries the worker suffered. The workers’ compensation premiums for Company X will then increase due to the accident.
The insurance carrier, however, can pursue a claim against the reckless driver to recover some or all of the money it paid to the worker for the injury. This is called a subrogation claim. Any amount that the insurance carrier receives on the subrogation claim must be reported, and when reported will have the effect of reducing the workers’ compensation premiums for Company X (just as the accident raised their premiums).
Again, when the insurance company fails to account for monies it receives from third parties, the employer’s workers’ compensation premium is artificially inflated. We believe this alleged fraudulent scheme extends across the insurance industry and businesses nationwide have suffered losses.