Case Law Update – May 11, 2016
Navigating Recent Amendments to the Wisconsin Worker’s Compensation Act
Installment 5 of 5
The Wisconsin Worker’s Compensation Act has been substantially amended in favor of employers and insurers.
This is the final installment of a five-part series aimed at exploring the predicted consequences of some of the key changes to the Worker’s Compensation Act. This format allows us to dive deep into the new statutory changes, so you’ll have a fuller understanding of your new rights under the law.
For the fifth installment we’ll look at the expansion of Wis. Stats. § 102.125. These new expansions impose additional requirements for reporting fraudulent claims or criminal activity. We’ll review these expansions and answer some questions about what they entail.
Apportionment of Prior Disability
Effective March 2, 2016, Wis. Stat. §102.125 was expanded to impose additional requirements on the Department of Workforce Development with regard to the reporting of fraudulent claims or criminal activity, and referral of the same for criminal prosecution.
What did the law used to say?
Prior to the recent amendment, Wis. Stat. §102.125 read, in part, as follows:
“If an insurer or self-insured employer has evidence that a claim is false or fraudulent in violation of s. 943.395 and if the insurer or selfinsured employer is satisfied that reporting the claim to the department will not impede its ability to defend the claim, the insurer or self-insured employer shall report the claim to the department. The department may require an insurer or self-insured employer to investigate an allegedly false or fraudulent claim and may provide the insurer or self-insured employer with any records of the department relating to that claim. An insurer or self-insured employer that investigates a claim under this section shall report on the results of that investigation to the department. If based on the investigation the department has a reasonable basis to believe that a violation of s. 943.395 has occurred, the department shall refer the results of the investigation to the district attorney of the county in which the alleged violation occurred for prosecution.”
Under the previous version of the statute, insurers and self-insured employers had been required to report to the Department of Workforce Development cases in which they had evidence of a false or fraudulent claim. The Department of Workforce Development could then have required insurers or self-insured employers to investigate any such claims, and report on the results of their investigations to the Department of Workforce Development.
What stayed the same with the recent amendment?
The new Wis. Stat. §102.125 retains in subsection (1) much of the same language from the previous version of the statute, now reading as follows:
“(1) Fraudulent claims reporting and investigation. If an insurer or self-insured employer has evidence that a claim is false or fraudulent in violation of §943.395 and if the insurer or self-insured employer is satisfied that reporting the claim to the department will not impede its ability to defend the claim, the insurer or self-insured employer shall report the claim to the department. The department may require an insurer or self-insured employer to investigate an allegedly false or fraudulent claim and may provide the insurer or self-insured employer with any records of the department relating to that claim. An insurer or self-insured employer that investigates a claim under this subsection shall report on the results of that investigation to the department.”
Thus, insurers and self-insured employers are still required to report to the Department of Workforce Development cases in which they have evidence of a false or fraudulent claim, provided that the insurer or self-insured employer is convinced that reporting the claim will not impede its ability to defend the claim. The Department of Workforce Development may still require insurers or selfinsured employers to investigate any such claims reported to the Department of Workforce Development. Insurers and self-insured employers that investigate claims under this subsection are still to report on the results of their investigations to the Department of Workforce Development.
What did the recent amendment change?
As part of the recent amendment, a new Wis. Stat. §102.125(2) has been created to read as follows:
“(2) Assistance by department of justice. The department of workforce development may request the department of justice to assist the department of workforce development in an investigation under sub. (1) or in the investigation of any other suspected fraudulent activity on the part of an employer, employee, insurer, health care provider, or other person related to worker’s compensation.”
Furthermore, Wis. Stat. §102.125(3) now reads as follows:
“(3) Prosecution. If based on an investigation under sub. (1) or (2) the department has a reasonable basis to believe that a violation of s. 943.20, 943.38, 943.39, 943.392, 943.395, 943.40, or any other criminal law has occurred, the department shall refer the results of the investigation to the department of justice or to the district attorney of the county in which the alleged violation occurred for prosecution.”
Thus, the Department of Workforce Development now has the ability to request that the Department of Justice assist in investigating suspected fraudulent activity on the part of any person or entity related to worker’s compensation, and has the authority to refer the results of any such investigation to the Department of Justice or local district attorney for prosecution. It is worth noting that the language of the new subsection (2) exposes employers, employees, insurers, health care providers, and any “other person related to worker’s compensation” to potential investigation and even potential prosecution. That said, it is unclear how any investigation into an employer or insurer would be initiated, and for instance, whether an employee could request such an investigation.
Is insurance fraud still the only crime that the Department of Workforce Development can refer for possible prosecution?
No. While the previous version of this statute limited the Department of Workforce Development to referring for prosecution only those cases that involved potential insurance fraud as defined by Wis. Stat. § 943.395, the amended statute now also requires the Department of Workforce Development to refer for prosecution any case in which the Department of Workforce Development has a reasonable basis to believe that any violation of criminal law has occurred.
The statute specifically lists, but is not limited to, the following criminal violations that could be referred by the Department of Workforce Development for prosecution:
- “Theft” as defined by Wis. Stat. §943.20;
- “Forgery” as defined by Wis. Stat. §943.38;
- “Fraudulent writings” as defined by Wis. Stat. §943.39;
- “Fraudulent data alteration” as defined by Wis. Stat. §943.392;
- “Fraudulent insurance and employee benefit program claims” as defined by Wis. Stat. §943.395; and
- “Fraudulent destruction of certain writings” as defined by Wis. Stat. §943.40;
However, it is worth noting the standard that the Department of Workforce Development is to apply in determining whether to refer a matter for criminal prosecution. After reviewing the results of an investigation conducted by an insurer, selfinsured employer, or the Department of Justice, the Department of Workforce Development must refer cases for prosecution only if the Department of Workforce Development is satisfied that there is a “reasonable basis to believe that a violation” of criminal law “has occurred.”
What constitutes a “reasonable basis” to believe that fraud or a crime has occurred?
The decision of the Labor and Industry Review Commission in the case of Bryan Dale Nelson A/K/A Lavern Nelson or Laverne A. Nelson, Jr. v. Wisely Motor Freight and Aetna Casualty and Surety Company (LIRC November 25, 1996) gives some guidance in this regard by at least providing an example of a case in which an administrative law judge referred a matter for possible prosecution.
As the caption of the case implies, the Labor and Industry Review Commission found that the applicant, Bryan Dale Nelson, also known as Lavern Nelson or Laverne A. Nelson, Jr., “consistently and deliberately used a false name and identity in dealings involving social security, driver’s license, business employment, medical insurance, worker’s compensation and circuit court matters.” After a hearing, the administrative law judge dismissed the applicant’s claim with prejudice, and forwarded a copy of the decision to the division administrator for potential action under Wis. Stat. §102.125, regarding fraudulent claims, noting a “prolonged, consistent pattern of misrepresentation” on the part of the applicant. The evidence at hearing revealed that the applicant, who alleged that he sustained an unwitnessed left arm and neck injury, had numerous prior criminal convictions, and that the applicant had, ever since his convictions, been selectively and fraudulently using the identity and Social Security number of his brother who had died in infancy. The Labor and Industry Review Commission adopted the decision of the administrative law judge as its own in affirming the dismissal of the applicant’s claim.
While the revised statute requires that the Department of Workforce Development determine that there is a “reasonable basis to believe” that fraud or criminal activity has occurred before recommending prosecution to the Department of Justice or local district attorney, it is worth noting that the prosecutor may still decline to bring criminal charges if he or she believes that the violation could not be proven to the higher standard of “beyond a reasonable doubt” that applies in criminal actions.
Conclusion
It is worth remembering that an insurer or self-insured employer is not required to report suspected fraudulent activity to the Department of Workforce Development if reporting would “impede its ability to defend the claim.” As such, insurers and self-insured employers might still want to consider refraining from reporting suspected fraudulent activity prior to a hearing in an effort to avoid disclosing evidence before hearing. Of course, each case is unique, and we invite you to contact any of our attorneys if you have any questions regarding the investigation or disclosure of suspected fraudulent activity.
Reid Rayome
Reid is an associate at Aplin & Ringsmuth, LLC, working in the Wausau, Wisconsin office. He primarily practices in the area of worker’s compensation defense, representing employers and insurance carriers. He earned his Bachelor of Arts in philosophy from the University of Wisconsin-Madison and his Juris Doctor from the University of Wisconsin Law School.
Reid and his wife, Ashley, live in Wausau, where they are active in their community and church. Reid serves on the boards of directors for the Wausau Conservatory of Music, Wausau Festival of Arts, and Samoset Council of the Boy Scouts of America.