Tag: 2020 News

Workers’ compensation premium fraud can range from misclassifying a few workers into safer jobs than what they actually perform, falsely reporting employees as independent contractors, or setting up dummy companies to “hide” employees to keep payroll, and in turn, workers’ compensation premiums artificially low.

In yet another case of alleged premium fraud, Felipe Saurez Barocio, 63, of Atwater, owner of Agriculture Services, Inc., and his daughter, Angelita Barocio-Negrete, 33, of Merced, were arraigned on multiple felony counts of insurance fraud. Prosecutors say the company allegedly underreported employee payroll by $11 million in order to fraudulently reduce the business’s premium for workers’ compensation insurance by over $2.5 million.

The California Department of Insurance said that the alleged fraud potentially left employed farm workers without insurance coverage and at financial risk.

State Compensation Insurance Fund filed a suspected fraudulent claim with the California Department of Insurance alleging potential insurance fraud last October.

SCIF reported that Barocio, as owner of a farm labor contracting business, allegedly under reported employee payroll in order to reduce the proper rate of insurance premiums owed to SCIF.

An investigation by the California Department of Insurance revealed that between 2015 and 2019, Barocio and his daughter, who worked as the office manager, provided SCIF with fabricated quarterly employee payroll reports.

The Department discovered a missing $11 million in payroll when they compared the quarterly reports submitted to SCIF to the quarterly reports submitted to the Employment Development Department.

This underreporting of employee payroll resulted in a total loss of $2,582,142 in insurance premiums.

Barocio and his daughter, Barocio-Negrete, will return to court on October 27, 2020. The Merced County District Attorney’s Office is prosecuting this case.

“When businesses illegally underreport payroll and employees they create an unfair advantage that places legitimate businesses at a competitive disadvantage,” said Insurance Commissioner Ricardo Lara.

“We all pay the price for insurance fraud through increased costs for services and higher premiums.”

Cal/OSHA has issued citations to frozen food manufacturer Overhill Farms Inc. and its temporary employment agency Jobsource North America Inc. with over $200,000 in proposed penalties to each employer for failing to protect hundreds of employees from COVID-19 at two plants in Vernon.

The employers did not take any steps to install barriers or implement procedures to have employees work at least six feet away from each other and they did not investigate any of their employees’ COVID-19 infections, including more than 20 illnesses and, in the case of Overhill Farms, one death.

According to a report in the Los Angeles times, the move followed the first fines announced for coronavirus safety violations last week. Cal/OSHA cited 11 employers in industries that included food processing, retail, agriculture, meatpacking and healthcare, and proposed penalties ranging from $2,025 to $51,190.

On April 28, Cal/OSHA opened inspections with Overhill Farms and Jobsource after receiving complaints of hazards related to COVID-19. The inspections included visits to two facilities in Vernon where Overhill Farms employees and workers from Jobsource manufacture a variety of frozen foods.

Cal/OSHA said it found hundreds of employees were exposed to serious illness from COVID-19 due to the lack of physical distancing procedures among workers including where they clock in and out of their shift, at the cart where they put on gloves and coats, in the break room, on the conveyor line and during packing operations.

At the larger of the two facilities Cal/OSHA said it identified 330 employees of Overhill Farms and 60 employees of Jobsource were exposed to the virus from the lack of physical distancing. At the smaller facility, Cal/OSHA found 80 Overhill Farms workers and 40 employees of Jobsource did packing operations, worked in the marinating area and processed raw poultry without any distancing procedures or protective barriers in place.

Other violations that put workers at risk of exposure to COVID-19 include the failure by both employers to train employees on the hazards presented by the virus and failure to investigate any of the more than 20 COVID-19 illnesses and one death Cal/OSHA uncovered amongst their employees.

The employers did not adequately communicate the COVID-19 hazards to their workforce, and Overhill did not report a COVID-19 fatality to Cal/OSHA.

The COVID-19 related violations cited at both plants include $222,075 in proposed penalties to Overhill Farms and $214,080 in proposed penalties to Jobsource, with an additional $14,450 in proposed penalties for Overhill Farms for non-COVID related violations.

Cal/OSHA also issued citations to both employers from inspections of two accidents in February, after one worker at each of the two facilities was injured when their hands got caught in unguarded conveyor parts. These accident inspections resulted in citations with $103,780 in proposed penalties to Overhill Farms, including for repeat violations due to a similar accident in 2016, and $29,700 in proposed penalties to Jobsource.

Overhill Farms said that it would contest the agency’s “erroneous” allegations, adding that Cal/OSHA has falsely claimed that the company failed to install Plexiglas dividers.

“The health and safety of our employees is our first priority,” the company said in a statement. “Overhill Farms has not only taken steps in line with the constantly evolving federal, state and local guidance, we have gone above and beyond those recommendations as we developed our employee safety procedures.”

Officials with Jobsource said they also planned to dispute the citations.

“We take the health and safety of all of our team members very seriously and we believe that we have not done anything that would endanger anyone in our community,” the company said in a statement.

According to a story in the Hollywood Reporter, pandemic-related delays on Ben Affleck’s latest film Hypnotic have sparked a lawsuit against an insurance company that’s refusing to extend the term of coverage without a COVID-19 exception even though the original policy didn’t have one.

Hoosegow Productions is suing Chubb National Insurance Company for breach of contract and fraud, among other claims, and is asking a California federal judge for a declaration that Hoosegow is entitled to have the policy’s expiration date extended “in accord with Chubb National’s custom and practice and Chubb National’s express and implied representations” and that the insurer’s assertion it has no obligation to extend the coverage and can instead offer a renewal policy containing a COVID-19 exclusion is incorrect.

The film was set to begin principal photography in April, but like countless other Hollywood productions, it was postponed because of the pandemic. Hoosegow reached out to Chubb about an extension and claims it was ignored for two months before the company said the “global Chubb position” was to deny the extension request.

The production company purchased a Film Producers Risk policy for Hypnotic and argues the insurer’s long-established policy is that if a production is delayed or disrupted the policy period is extended until the production is completed. But, when Hypnotic was delayed because of the pandemic Hoosegow says Chubb refused to extend the policy and instead offered to “renew” it with more limited coverage.

“Specifically, Chubb National said that the policy would be ‘renewed’ only with the addition of an exclusion applicable to losses relating to COVID-19, thereby depriving Hoosegow of coverage that it had purchased and that was promised under the existing policy,” states the complaint, which is posted in full below.

The policy includes $58 million of production media coverage per occurrence, $58 million of media perils coverage per occurrence and $58 million of declared person coverage per occurrence, according to the complaint. It also provides that Chubb will pay for actual production losses incurred because of the “inability of an essential element or other declared person” to complete their duties, in this case, Affleck and director Robert Rodriguez. According to Hoosegow, the policy term is Oct. 28, 2019, through Oct. 28, 2020, but the end date is merely a formality and the parties understood that coverage would be extended if filming went beyond that date.

“The Policy does not include a virus exclusion, pandemic exclusion, COVID-19 exclusion, or any other similar exclusion,” states the complaint. Hoosegow argues that it’s custom and practice to extend the expiration date “without any material change or reduction in coverage” and that it was explicitly assured of such in writing by the company’s underwriter.

Hoosegow alleges that Chubb is engaging in a “coordinated scheme to wrongfully withhold policy benefits” from its customers across the entertainment industry in an effort to save itself millions of dollars.

A Chubb spokesperson on Thursday sent The Hollywood Reporter this statement: “As a matter of policy Chubb does not comment on pending legal matters.”

Citing “a strong suspicion of recent fraud,” the state’s Employment Development Department is actively investigating reports of suspicious mailings regarding unemployment benefits that people all over the state have received.

The agency noted that between January and June, 60% of notices requiring additional documents were responded to by legitimate claimants.

But in July, the response rate plunged to 15% and in August, 9%. That indicated “a strong suspicion of recent fraud that will go unpaid since the EDD will not receive the necessary documents on these claims to prove identity,” the agency said in a news release.

According to the EDD “Fraud attempts have increased during the pandemic, and individuals are exploiting the very efforts of California to issue unemployment benefit payments as quickly as possible to workers impacted by COVID-19. The EDD’s investigation team is working closely with local, state, and federal partners to expose, stop, and hold offenders accountable. While specific details cannot be shared at this time at the risk of jeopardizing investigations, recent schemes have triggered multiple mail items with different names sent to addresses throughout the state.”

One of the scams pointed out by the EDD involve debit cards. “Non-claimants may receive debit cards that have to be activated by the individual named on the card with personal identifying information before benefits can be accessed. The card items can be returned to EDD or Bank of America and will be destroyed.”

A large number of the mail items are notices requiring additional identifying documents be provided to the EDD before the claim can be paid. Such notices are part of EDD’s preventative Identity Verification process.

However, “While 60% of such notices requiring additional documents were responded to by legitimate claimants in January through June of this year, the response rate dropped significantly to 15% in July and 9% in August – indicating a strong suspicion of recent fraud that will go unpaid since the EDD will not receive the necessary documents on these claims to prove identity.”

It also issued this warning: “Californians should be aware to not provide the multiple mail items they may have received to people who may show up at their door claiming to be collecting materials for EDD. EDD representatives will not come to your home.”

The EDD has information posted on its website encouraging people who do receive such mail or see other suspicious activity to report it to EDD right away. It also has information about how to return the multiple mail items to the EDD.

The problems California residents have found with possible fraud are not unique to the state. The FBI in July reported a “spike in fraudulent unemployment insurance claims complaints related to the ongoing COVID-19 pandemic involving the use of stolen personally identifiable information.”

It said people from “several states have been victimized by criminal actors impersonating the victims and using the victims’ stolen identities to submit fraudulent unemployment insurance claims online.”

As an increasing number of workers with injuries are receiving physical therapy, a new study from the Workers Compensation Research Institute finds that for workers with low back pain only injuries, early initiation of PT is associated with lower utilization and costs of medical services and shorter duration of temporary disability.

“This is a comprehensive study that shows a strong association between PT timing and outcomes for workers with low back pain,” said WCRI President and CEO John Ruser. “While the study cannot conclude that early PT causes better outcomes, it does suggest that the potential benefits of early PT should be considered when planning care for these injuries.”

The study ─The Timing of Physical Therapy for Low Back Pain: Does It Matter in Workers’ Compensation? ─ focuses on claims with LBP-only injuries, recognizing that PT is often used as first-line treatment for LBP and other musculoskeletal injuries before considering opioid prescriptions and invasive procedures. Controlling for a rich set of factors that might influence both PT timing and outcomes, the study finds the following:

— Later timing of PT initiation is associated with longer TD duration. On average, the number of TD weeks per claim was 58 percent longer for those with PT initiated more than 30 days post injury and 24 percent longer for those with PT starting 15 to 30 days post injury, compared with claims with PT within 3 days post injury.
— Workers whose PT treatment started more than 30 days post injury were 46 and 47 percent more likely to receive opioid prescriptions and MRI, respectively, compared with those who had PT treatment initiated within 3 days of injury. The differences between PT after 30 days post injury and PT within 3 days post injury were 29 percent for pain management injections and 89 percent for low back surgeries.
— The average payment for all medical services received during the first year of treatment was lower for workers with early PT compared with those with late PT. For example, the average medical cost per claim for workers who had PT more than 30 days post injury was 24 percent higher than for those who had PT within 3 days post injury.
— Among claims with PT treatment starting more than 30 days post injury, the percentage with attorney involvement was considerably higher (27 percent compared with 13 – 15 percent among those in the early PT groups) and workers received initial medical care much later (on average 18 days compared with 2 – 3 days in the early PT groups).

This study is based on nearly 26,000 LBP-only claims with more than seven days of lost time from 27 states, with injuries from October 1, 2015, through March 31, 2017, and detailed medical transactions up through March 31, 2018. The 27 states are Arkansas, California, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Wisconsin.

The study was authored by Dongchun Wang, Kathryn Mueller, and Randy Lea.