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Workers' Compensation

When is a lie evidence of fraud under the Louisiana Workers’ Compensation Act?

When is a lie evidence of fraud under the Louisiana Workers’ Compensation Act?

False Statements and Misrepresentations May Equal Fraud

Under La. R.S. 23:1208, it is unlawful for any person “for the purpose of obtaining or defeating any benefit or payment under the provisions of [the Workers’ Compensation Act], either for himself or for any other person, to willfully make a false statement or misrepresentation.”  Crafted to discourage abuse of the compensation system, it remains an often challenged, but resilient defense that is available to employers, carriers and employees when faced with an attempt to make material misrepresentations for the receipt or denial of workers’ compensation benefits.  It is available to employees when the carrier or employer makes a material misrepresentation.  However, not every lie uttered by an employee is evidence of fraud.  The provision, while succinct, is very specific as to what rises to the level of actual fraud.

This provision requires the presence of three elements before an employee is found to have violated the statute:  (1) that there is a false statement or representation, (2) that it is willfully made, and (3) that it is made for the purpose of obtaining benefits.

The first element is easiest to satisfy.  The “false statements” must be proven in Court with competent evidence.  The mere belief that an employee lied is not evidence.  Likewise, an employee’s denial of previous medical treatment or a previous accident is in itself insufficient for a finding of fraud.  The employer or carrier must offer actual evidence of the employee’s false statement or misrepresentation.

The next requirement is that the statement be willfully made.  Knowledge is part and parcel of almost every law that seeks to punish bad behavior.  In essence, the employee has to know what he is doing is wrong.  While it is not required that the employee know of the fraud statute before uttering the misrepresentation, it is required that employer prove the misrepresentation of some fact.  The problem with this element is that a single misrepresentation is very rarely sufficient.  Courts may entertain and accept an employee’s arguments that “I didn’t understand the question” or “I misread the form,” and this defense by the employee may be sufficient to limit one or more of the misrepresentations upon which an employer relies.  The more evidence presented to show repeated actions or a calculated effort to deceive only increases an employer’s chances of proving fraud under the statute.

The last and most difficult of these elements is the requirement that the misrepresentation be committed for the purpose of obtaining benefits.  This element prevents every misrepresentation from amounting to fraud.  For example, if an employee denies ever having neck surgery to the doctor treating him for a work-related knee injury, how will that denial further his claim for benefits related to the knee injury?  It is unlikely that the doctor will find the knee injury compensable under the Act solely because the claimant never had neck surgery.

An inconsequential or irrelevant false statement is not fraud.  However, if you change the facts slightly, you have an entirely different situation.  What if the employee was treating with that doctor for an alleged work-related neck injury?  What if the employer’s investigation shows that the employee had a neck surgery two years prior?  If that doctor later opines that the neck complaints are related because the employee never had prior neck complaints, then that might satisfy the requirement that the misrepresentation was made in order to obtain benefits.

Fraud under La. R.S. 23:1208 is a very useful tool to prevent and punish those attempting to abuse a system that was created, in part, to protect employees.  Penalties for terminating benefits are very harsh, and terminating a claim for a weak fraud argument could leave employers exposed to substantial penalties and attorneys’ fees, in addition to potential payment of back due benefits.  Since the result of a statutory fraud finding is the employee’s forfeiture of his right to all workers’ compensation benefits and the potential payment of restitution, courts require that all elements be satisfied before application of this “harsh remedy.”  Once an employer finds a potential misrepresentation, it should investigate the claim further to determine if this is an isolated action or evidence of the employee’s conscious effort to deceive.  The employer must also ask how the misrepresentation could help the employee advance his claim.

When Employer is Allowed to Question Past Medical History

There is another fraud provision under the Act. La. R.S. 23:1208.1 provides that nothing in the Workers’ Compensation Act prohibits an employer from inquiring about previous injuries, disabilities or other medical conditions.  Failure by the employee to answer truthfully shall result in a forfeiture of benefits if the failure to answer relates to the medical condition at issue in a later compensation claim.  Since knowledge of a pre-existing injury is a requirement for recovery under the Second Injury Fund, this provision serves to punish employees who fail to answer truthfully and limit an employer and carrier’s ability to seek recovery under the Second Injury Fund.  However, the questions must be asked in a written form, and the form must contain “a notice advising the employee that his failure to answer truthfully may result in his forfeiture of worker’s compensation benefits under La. R.S. 23:1208.1. Such notice shall be prominently displayed in bold faced block lettering of no less than ten point type.”  This portion of the statute must be followed precisely and any failure to follow these explicit rules in your form will result in the inability to assert the defense.  Also, to ensure that there are no issues arising with respect to the Americans with Disabilities Act, the form must be presented after the offer of hire is made.  Your attorney can provide a form that satisfies these requirements should you require one.

Disputed Claim for Compensation

Finally, asserting the defense of fraud to a compensation claim is the only method by which the employer or carrier can now file a Disputed Claim for Compensation (1008).  Employers do not have to wait for the employee to file a 1008 in order to raise the defense of fraud.

If an employer or carrier follows these rules and prepares its fraud defense ahead of time, it might prevent an employee from taking advantage of the Workers’ Compensation system and allow the employer or carrier to spend more time taking care of employees actually in need of help.

Allen & Gooch is providing this legal update for informational purposes only. This article should not be construed as legal advice or a legal opinion as to any specific facts or circumstances. You should consult your own attorney concerning your particular situation and any specific legal questions you may have.