N.Y. Workers’ Comp: Proving Fraud

Best practices and reasonable expectation when litigating WCL 114-a

September 18, 2023 Photo

WCL 114-a provides the New York Workers’ Compensation Board with the authority to disqualify a claimant from receipt of lost time benefits “[i]f for the purpose of obtaining compensation pursuant to section fifteen of this chapter, or for the purpose of influencing any determination regarding any such payment, a claimant knowingly makes a false statement or representation as to a material fact.”

Section 15 is specific to lost-wage replacement. Unfortunately, there is no statutory provision for suspending medical treatment—including medications with a successful proving of 114-a— which is why additional steps must be taken in litigation.

What constitutes a “false statement or representation as to a material fact”? To prove a violation of WCL 114-a, you must first prove a misrepresentation of material fact. A material misrepresentation can be based upon an omission of a relevant fact or an exaggeration of symptoms to a physician who is determining the claimant's degree of disability, such as an independent medical examiner (IME).

A claimant can be disqualified if they affirmatively deny, or fail to report, engaging in employment activities, even where they have not yet realized a profit from such activities. This can apply to a startup business, a family business, or volunteering.

Proving that the claimant is being paid is not dispositive for a violation of WCL 114-a in a Workers’ Compensation setting. The relevant issue is work capacity, which the board reviews for material misrepresentation. For this same reason, passive income is often not considered a violation.

Consequences of a Fraud Violation

The board will typically break down the 114-a finding into the time period a carrier can definitively prove, as correlated to the false statement or omission. This is the mandatory penalty period. If this is the only period found, the carrier can recoup the period paid once the claimant re-establishes entitlement—just as they would any overpayment—with board permission. This distinction is why your counsel will nearly always recommend getting more surveillance, even if what has been obtained looks promising.

The board has the power to implement a discretionary penalty, which includes up to all benefits for the lifetime of the claim. This is based purely on an egregiousness standard and has been found to apply in instances where the misrepresentation was severe in scope or duration; or the claimant’s testimony was disingenuous, false, or self-serving.

The board cannot take medical benefits based on 114-a, but it can be based on medical necessity and causal relationship.

Ongoing Medical Treatment

Under the statutory language of 114-a, New York has limited its reach to indemnity benefits only. This seems inherently unfair based on the amount of expenses tied up in administering a claim and paying for treatment. While judges will express that 114-a does not allow them to suspend medical benefits, the medical aspect of the claim can—and should—be addressed in litigation.

IME cover letters should be tailored to not only ask the IME if the surveillance material modifies their opinion on degree of disability or work capacity, but also if it modifies their opinions on treatment needs—and whether the claimant has reached maximum medical improvement—as well as whether ongoing treatment is causally related.

This same line of questioning should be asked of the doctors during their testimony, after they have reviewed the surveillance material. While this is usually harder for them to admit than admitting the claimant’s activities were inconsistent, their responses can be extremely helpful, and there is no downside to asking questions.

What Constitutes Proof?

Video Surveillance. Video surveillance is the most common form of proof used in fraud cases, as it can directly demonstrate misrepresentation. The upside of using video surveillance is that the time period can be definitively asserted by the investigator who conducted the surveillance. Video surveillance must be disclosed before the claimant testifies, or it is considered precluded.

Once you disclose surveillance, it is difficult to obtain more, as the claimant is now aware of the investigator’s presence. For this reason, we do not recommend obtaining surveillance in the weeks and days leading up to a hearing. Should the video obtained during that period show inconsistent behavior, a decision must be made as to whether you want to disclose its existence in litigation before you are ready to do so. 

Social Media. Still common and successfully used is social media. It is a wonderful tool in conducting surveillance because it does not fall under the disclosure rule—as it is not investigator-generated or discreetly obtained, but user-generated. This means as much social medical information can be gathered as you feel is necessary. Furthermore, the case law on social media posts, coupled with the plain language of WCL 118, means we are not required to show chain of custody.

The issues that often arise with the use of social media are authentication and dating the source material. Just because an activity was posted or discussed on a social media forum on a particular day does not necessarily mean that the video or activity occurred that day. I often recommend that my clients not limit their social medial sweep to the claimant. Spouses, parents, and friends can be an excellent source of material, and can often help date the source material through cross-references.

Another benefit of social media is that we often receive information and tips from anonymous sources. Some of the most successful 114-a claims I have litigated have come from social media accounts originally generated by users other than the claimant.

Knowing When Not to Raise 114-a

Part of litigating fraud is knowing when and when not to raise 114-a. The first question you should ask is whether you have a generous doctor or a questionable claimant. We have all seen the reports giving full strength, full range of motion, and a flare-up after intensive yard work, opining 100-percent disability. This is not fraud, as the activities were disclosed.

However, just because the surveillance material may not give rise to a 114-a claim does not mean that it was not money well spent. The surveillance material can be used in degree of disability litigation, loss of wage-earning capacity litigation, labor market trials, and even SLU determinations. 

A successful outcome can happen with no litigation at all, just by stating three words on the record: “I have video.” Often, the next call we get from opposing counsel is a request to halt all present litigation so we can come to a settlement.

The best results are obtained when the carrier/TPA, investigator, employer, and defense counsel are all in sync and coordinate together how to proceed and approach a 114-a claim.

About The Authors
Nathan J. Milner

Nathan J. Milner is a partner at Goldberg Segalla. nmilner@goldbergsegalla.com

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