California Workers' Compensation Fraud Laws
Insurance Code 1871.4 & Penal Code 549-550

Workers' compensation fraud is California insurance fraud in connection with workers' compensation benefits.

“Workers' compensation” is a system of insurance that provides medical care and payments for lost income to workers who are injured on the job.1 Fraud committed in connection with workers' compensation insurance can lead to harsh criminal penalties.

Acts that are considered workers' compensation fraud in California include:

  • Knowingly making or presenting a false or fraudulent material statement for the purpose of either obtaining or denying workers' compensation benefits;
  • Making a false or fraudulent statement about eligibility for benefits in order to discourage an injured worker from claiming benefits;
  • Knowingly aiding and abetting, or participating in a conspiracy to commit, workers' compensation fraud;2
  • Preparing or submitting multiple claims for payment of a health care benefit covered by workers' compensation insurance, all for the same injury;
  • Submitting a claim for a health care benefit covered by workers' comp that was not actually used;3 and
  • Soliciting, referring or accepting any business from a person, knowing that s/he intends to commit workers' comp fraud.4
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Workers' compensation insurance provides benefits to workers injured on the job.

Examples

Here are some examples of people who could be charged with California workers' compensation fraud:

  • A man claims to have debilitating back pain due to a fall down the stairs at his office and collects workers' comp payments for lost income. In reality his back pain is minor, and he is working a new job under the table while also collecting benefits.
  • An employer lies about the circumstances of an employee's accident at work in order to prevent that employee from getting workers' compensation benefits (which would raise the employer's premium for workers' comp insurance).
  • A doctor specializes in treating patients injured in the workplace and regularly submits bills to workers' comp insurance for treatments that the patients did not actually need or receive.

Penalties

Most forms of workers' compensation fraud are California wobblers. This means that they may be charged as either misdemeanors or felonies in California law.5

The potential felony prison sentence for most forms of workers' compensation fraud is two (2), three (3) or five (5) years. Felony fines can go up to one hundred fifty thousand dollars ($150,000), or twice the amount of the fraud (whichever is greater).6

In most cases, workers' comp fraud as a misdemeanor carries a potential county jail sentence of up to one (1) year.7

Legal defenses

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Both so-called "blue collar" and "white collar" workers can be charged with workers' compensation fraud.

If you are charged with workers' compensation insurance fraud in California, you may be able to get the charges reduced or dismissed by arguing one of the following common legal defenses:

  • You did not act knowingly or with fraudulent intent; and/or
  • There is insufficient evidence to support the charges.

In this article, our California insurance fraud defense attorneys8 explain the following:

1. Legal Definition of Workers' Compensation Fraud in California

1.1. Insurance Code 1871.4
1.2. Penal Code 550 PC
1.3. Penal Code 549 PC

2. Penalties for Workers' Compensation Fraud in California

2.1. Insurance Code 1871.4 penalties
2.2. Penal Code 550 penalties
2.3. Penal Code 549 Penalties
2.4. Workers' compensation fraud and professional discipline in California
2.5. Civil penalties for workers' comp insurance fraud

3. Legal Defenses to Workers' Comp Fraud Charges

4. Related Offenses to Workers' Compensation Fraud

4.1. Grand theft
4.2. Forgery
4.3. Perjury

If, after reading this article, you would like more information, we invite you to contact us at Shouse Law Group.

1. Legal Definition of Workers' Compensation Fraud in California

There are several different California laws that address workers' compensation fraud. These are:

1.1. Insurance Code 1871.4
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Insurance Code 1871.4 is California's main workers' compensation fraud statute.

Insurance Code 1871.4 is California's main workers' comp fraud statute. The legal definition of workers' compensation fraud under this law is doing any of the following:

  1. Making, or causing to be made, a knowingly false or fraudulent material statement or representation for the purpose of obtaining or denying any workers' comp benefits;
  2. Presenting, or causing to be presented, a knowingly false or fraudulent written or oral material statement in support of, or in opposition to, a claim for workers' comp benefits;
  3. Knowingly aiding and abetting or conspiring with anyone else to commit any act of workers' compensation fraud; or
  4. Making or causing to be made a knowingly false or fraudulent statement with regard to entitlement to benefits, with the intent to discourage an injured worker from claiming benefits or pursuing a claim.9

Let's take a better look at some of the terms in this legal definition to get a better sense of their meaning.

Workers' compensation benefits

“Workers' compensation” is a form of private insurance policy that employers are required to pay for in California. If a worker is injured on the job, the insurance company will pay him/her benefits for:

  • Medical care;
  • Temporary disability (that is, payments to make up for lost wages if s/he is unable to work while recovering);
  • Permanent disability (payments to make up for lost wages if s/he is not able to work again after the accident); and/or
  • Death benefits (payments to the worker's spouse, children or other dependents if s/he dies from a work-related injury or illness).10

Workers' compensation is what is known as a “no-fault” system. This means that the injured employee does not have to prove that the injury was someone else's fault in order to receive benefits.11

Example: Betty works as a word processor for a large law firm. The firm provides ergonomic chairs, but Betty refuses to use hers; instead she brings in a folding chair from home and sits on that.

Betty eventually acquires severe carpal tunnel syndrome from all the typing she has to do at work. She ends up needing to take several months off of work, and receive physical therapy, in order to recover.

Betty's injury was arguably her own fault, not her employer's, because she wouldn't use their ergonomic chair.

But her injury is still covered by the employer's workers' compensation insurance policy because it is a “no-fault” system. The insurer pays her benefits for her therapy and lost wages.

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Workers' compensation benefits are paid regardless of who is at fault in an injury.

Statement or representation

A “statement or representation” includes, but is not limited to, the following:

  • An oral or written statement or representation by the claimant;
  • A notice;
  • A proof of injury;
  • A bill for services;
  • Payment for services;
  • Hospital or doctor records;
  • X-ray or test results;
  • Proof of medical-legal expenses; or
  • Any other evidence of loss, injury, expense or payment.12

Example: Catherine works as a cashier in a liquor store. She suffers injuries to her face and neck when she is injured in an attempted robbery.

Catherine receives workers' compensation benefits to cover treatment by Darren, a chiropractor who is a friend of hers. She and Darren realize that they can make a little profit by submitting inflated bills to the workers' comp insurer.

So Darren, with Catherine's knowledge, submits bills for more frequent treatments than she actually receives.

Those bills for services count as “statements” under Insurance Code 1871.4, and both Catherine and Darren are guilty of workers' compensation fraud.

“Material” statement or representation

A statement is considered “material” if it conveys information on subjects that:

  1. Are germane or reasonably relevant to the insurer's investigation of the claim; and
  2. Could bear directly and importantly on the investigation and evaluation of the claim.13

Example: Vern injures his knee in a car accident unrelated to his work. Then he is hit by an electric cart at his workplace, injuring his knee again.

Vern eventually applies for and receives workers' compensation benefits for his injury at work. He does not let the doctors or the insurance company know that he had an earlier, non-work-related injury to his knee.

Information about the prior injury could have supported a reduction or even a denial of benefits, if it turned out that it was partially responsible for Vern's knee problems after his injury at work.

Therefore it was material to the insurer's investigation of the claims—and Vern is guilty of workers' comp fraud for not disclosing the prior injury.14

False or fraudulent

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A false or fraudulent statement is a key element of the crime of workers' compensation fraud.

A false or fraudulent statement is any statement that is untrue, or any statement or concealment of a material fact that is intended to induce a person to act to his/her detriment.15

As the example of Vern above shows, knowing concealment of a material fact is considered a form of false or fraudulent statement or representation.16

There are a variety of forms that false or fraudulent statements can take under workers' compensation law. Applicants for benefits (that is, injured employees) can make a false or fraudulent statement by:

  • Faking an injury;
  • Lying about the extent of an injury;
  • Claiming that a non-work-related injury is work-related;
  • Failing to disclose a prior injury;
  • Denying having filed previous claims;
  • Collecting benefits for the same injury from more than one employer; and
  • Illegally working while receiving workers' comp benefits (“double dipping”).

Example: Henry works for a city water department. After work on Fridays, he and his colleagues go to a nearby basketball court to play basketball.

One day Henry injures his knee during the basketball game. He goes back to the water department yard, reports the injury, and claims it happened to him while he was working. Later he applies for workers' compensation benefits for the injury.

Henry is guilty of workers' compensation insurance fraud for trying to pass off a non-work injury as a work injury.17

Example : Tom seriously injures his back while working as a truck driver. He claims that this injury requires him to walk with a walker and prevents him from performing basic self-care.

His company's workers' comp insurance policy awards him lifelong medical benefits and a substantial sum for an in-home caregiver to help him with daily tasks. His girlfriend serves as the caregiver.

The insurance company develops suspicions about Tom and sends an investigator to follow him. The investigator videotapes Tom living a very active life as a commercial fishermen engaged in strenuous work.

Tom is guilty of workers' comp fraud for lying about the extent of his injuries and “double dipping” (working while collecting benefits).18

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Both employees and employers can commit workers' compensation fraud.

Employers can also commit Insurance Code 1871.4 workers' comp fraud by making false or fraudulent statements or representations. Common forms of workers' compensation fraud by employers include:

  • Lying to their insurance company about the number of employees;
  • Misrepresenting an employee's job duties; and
  • Lying to an employee about the extent of benefits to discourage him/her from submitting a claim.19

Example: Maria is the owner of an appliance store. George, one of her employees, injures himself while moving a heavy appliance.

Maria tells George that he is not covered under her workers' compensation policy because he has only been working for her for a few months. This is untrue, and Maria knows it—but she doesn't want her premiums to go up because of George's application for benefits.

Maria is guilty of workers' compensation fraud under Insurance Code 1871.4.

1.2. Penal Code 550 PC

Penal Code 550 PC describe several forms of California workers' compensation fraud that overlap with California health care fraud. This law makes it a crime to do any of the following:

  • Knowingly make or cause to be made any false or fraudulent claim for payment of a health care benefit covered by workers' comp insurance;
  • Knowingly submit a claim for a health care benefit covered by workers' comp insurance that was not used by the claimant; or
  • Knowingly present multiple claims for payment of the same workers' comp health care benefit, with an intent to defraud.20

This form of workers' compensation fraud can be committed by employees/applicants—but it is also sometimes committed by doctors and other medical professionals who provide treatment covered by workers' compensation insurance.

Example: Eli is a chiropractor who advertises his services to people suffering from chronic pain after on-the-job injuries. He sometimes submits bills to workers' comp insurance companies for treatments that an injured employee did not actually receive.

Eli is guilty of workers' compensation fraud under California Penal Code 550.

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Doctors and medical professionals such as chiropractors are often charged with workers' compensation fraud.

Doctors who are convicted of this and other kinds of workers' compensation fraud may lose their medical license in addition to standard criminal penalties.

1.3. Penal Code 549 PC

Under California Penal Code 549, a business owner or employee can commit workers' compensation fraud by:

  1. Soliciting, accepting or referring any business to or from any person or entity,
  2. With the knowledge that, or with reckless disregard for whether, that person or entity intends to commit workers' comp fraud.21

Often this form of workers' compensation fraud is charged against doctors, chiropractors or other health care providers involved in a scheme of commercial bribery and/or kickbacks that is designed to take advantage of the workers' compensation system.

Example: Kareem owns a company that manufactures a special prescription cream used to treat pain. He pays large kickbacks to a dozen doctors and chiropractors in exchange for them prescribing the cream to their patients, all of whom are receiving workers' compensation benefits.

Due to the technical details of how the ingredients in the cream are reimbursed by insurance, the workers' comp insurance companies end up paying astronomical sums for the cream.

The doctors and chiropractors who participated in Kareem's scheme are guilty under PC 549—because they referred business to Kareem with reckless disregard for whether he was engaging in workers' compensation fraud.22

2. Penalties for Workers' Compensation Fraud in California

2.1. Insurance Code 1871.4 penalties
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Workers' compensation fraud may be charged as either a misdemeanor or a felony.

Workers' compensation fraud under Insurance Code 1871.4 is what is known as a wobbler.23 This is a crime that may be charged as either a misdemeanor or a felony, depending on:

  • The circumstances of the charges; and
  • The defendant's criminal history.

When it is charged as a California misdemeanor, Insurance Code 1871.4 workers' compensation fraud carries the following penalties:

  • Misdemeanor (summary) probation;
  • Up to one (1) year in county jail;
  • A fine of up to one hundred fifty thousand dollars ($150,000) or double the amount of the fraud, whichever is greater; and/or
  • Restitution to any parties who were victims of the fraud.24

When this form of California workers' compensation fraud is charged as a felony, the potential penalties are:

  • Felony (formal) probation;
  • Two (2), three (3) or five (5) years in county jail under California's realignment program;
  • A fine of up to one hundred fifty thousand dollars ($150,000) or double the amount of the fraud, whichever is greater; and/or
  • Restitution to any parties who were the victims of the fraud.25
2.2. Penal Code 550 penalties

Workers' comp fraud in relation to health care benefits under Penal Code 550 is also a wobbler. The potential misdemeanor penalties under this law are:

  • Misdemeanor probation;
  • Up to one (1) year in county jail; and/or
  • A fine of up to ten thousand dollars ($10,000).26

And the felony penalties for this form of workers' compensation fraud include:

  • Felony probation;
  • Two (2), three (3) or five (5) years in county jail; and/or
  • A fine of up to fifty thousand dollars ($50,000) or double the amount of the fraud, whichever is greater.27
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A workers' compensation fraud conviction can lead to substantial criminal and civil fines.

The exception is if the total amount of the fraud is nine hundred fifty dollars ($950) or less (this includes the aggregate of multiple claims over a period of twelve (12) consecutive months).

In that case, PC 550 workers' compensation insurance fraud is always a misdemeanor. The potential penalties are up to six (6) months in county jail, and/or a fine of up to one thousand dollars ($1,000).28

2.3. Penal Code 549 penalties

PC 549 workers' comp fraud—soliciting, accepting or referring business from someone knowing they intend to commit workers' compensation fraud—is a wobbler for the first offense, and a felony for the second and subsequent offenses.29

As a misdemeanor, this offense is punishable by up to one (1) year in county jail, and/or a fine of up to fifty thousand dollars ($50,000) or double the amount of the fraud, whichever is greater.30

As a felony, it carries a potential jail sentence of sixteen (16) months, two (2) years or three (3) years, and a fine of up to fifty thousand dollars ($50,000) or double the amount of the fraud, whichever is greater.31

2.4. Workers' compensation fraud and professional discipline in California

California doctors, nurses and pharmacists who are accused of being involved in workers' compensation fraud naturally need to be concerned about professional discipline.

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Professional discipline is a concern for doctors and other medical professionals accused of workers' compensation fraud.

For California doctors, any criminal conviction for an offense that is “substantially related” to the qualifications, functions, or duties of a physician can trigger professional discipline.32 Many forms of workers' compensation fraud (for example, billing for services not actually rendered) could be deemed to fall into this category.

Nurses can also face nurse discipline and license revocation (in some cases) as a result of a workers' compensation fraud conviction.33

Pharmacists are another class of professionals that need to worry about the effect of a workers' comp fraud charge on their professional license.34

2.5. Civil penalties for workers' comp insurance fraud

California law also provides for hefty civil fines for certain forms of workers' compensation fraud.

These fines apply to parties who do any of the following:

  1. Willfully misrepresent any fact in order to obtain workers' compensation insurance at a lower rate than the proper rate (this form of workers' comp fraud is committed by employers);
  2. Present or cause to be presented any knowingly false or fraudulent statement in support of, or in opposition to, any claim for workers' compensation benefits, for the purpose of either obtaining or denying those benefits;
  3. Knowingly solicit, receive, offer, pay, or accept any unlawful rebate, refund, commission or other compensation for soliciting or referring clients for services covered by workers' compensation insurance;
  4. Knowingly operate or participate in a service that, for profit, refers patients to obtain medical or medical-legal services covered by workers' comp; or
  5. Knowingly assist or conspire with anyone else to do any of the above.35

Any of the above facts will lead to:

  • A civil penalty of at least four thousand dollars ($4,000) and up to ten thousand dollars ($10,000) for each illegal claim for compensation; and
  • An assessment of up to three (3) times the amount of the medical treatment or medical-legal expenses paid by a workers' compensation insurer as a result of the fraud.36
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California law provides for civil fines for certain forms of workers' compensation fraud.

Plus, if you have a prior felony conviction for workers' compensation fraud under Insurance Code 1871.4 or Penal Code 549, you will face anadditional civil penalty of four thousand dollars ($4,000) for each item or service with respect to which the fraud occurred.37

3. Legal Defenses to Workers' Comp Fraud Charges

According to Newport Beach criminal defense attorney Ninaz Saffari38:

“Workers' compensation fraud is one of the fastest-growing types of insurance fraud in the country. As a result, the California Department of Insurance, insurance carries, and district attorneys' offices throughout the state are pouring many resources into uncovering fraudulent claims. Special investigative units often conduct undercover sting and surveillance operations to try to catch workers or employers who may be trying to ‘cheat the system.'”

Of course, this kind of vigilant—and often politically-motivated—law enforcement leads all too often to people being wrongly accused.

If you are charged with California workers' compensation fraud, you and your criminal defense attorney may want to consider the following legal defenses:

You did not act with knowledge or fraudulent intent

You are not guilty of workers' compensation fraud unless you acted with either:

  • Knowledge that a particular statement or behavior was false or fraudulent; or
  • Fraudulent intent.39

Many times a careless mistake on your part will be flagged as potential fraud by an insurance investigator—and reported to the authorities.

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You are only guilty of workers' compensation fraud if you acted with knowledge or fraudulent intent.

But the burden is on the prosecution to prove, beyond a reasonable doubt, that you knew you were submitting a false or fraudulent statement, and did not simply make a mistake.

A skilled criminal defense attorney may be able to cast enough doubt on this assertion to lead to charges being dropped—or a not-guilty verdict in a jury trial.

There is insufficient evidence that you committed workers' compensation fraud

Many workers' comp insurance cases revolve around a complicated set of facts. Often these facts involve highly technical and sometimes conflicting medical diagnoses, doctor's reports, and other evidence that can be difficult for defendants and juries to make sense of.

But prosecutors may not take advantage of this complexity and ambiguity to convict someone unjustly.

It is a good criminal defense attorney's job to find the weaknesses in the prosecution's case—and to help you collect the strongest evidence for your innocence.

4. Related Offenses to Workers' Compensation Fraud

Other California crimes that are frequently charged along with workers' compensation fraud include:

4.1. Grand theft

Like most fraud crimes, workers' compensation fraud frequently overlaps with Penal Code 487 California grand theft.

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Theft by false pretenses is a related offense to workers' compensation fraud.

You commit grand theft when you unlawfully take property that is worth nine hundred fifty dollars ($950) or more.40 Cases of workers' compensation fraud often meet the legal definition of “theft by false pretenses,” a form of grand theft.41

Grand theft is a California wobbler. The maximum misdemeanor sentence is one (1) year in county jail. The potential felony sentence is sixteen (16) months, two (2) years or three (3) years.42

4.2. Forgery

Penal Code 470 PC California forgery is the act of doing any of the following with intent to commit a fraud:

  • Signing someone else's name;
  • Faking a seal or someone else's handwriting;
  • Changing or falsifying a legal document; or
  • Faking, altering or presenting as genuine a false financial document.43

So, for example, if you fake a doctor's signature on a report about an injury and use that report to obtain workers' compensation benefits, you may be charged with both workers' comp fraud and forgery.

Forgery is a wobbler and carries the same potential sentence as grand theft.44

4.3. Perjury

You commit Penal Code 118 PC perjury when you deliberately give false information while under oath.45

You could be charged with both perjury and workers' compensation fraud if you deliberately lie while being deposed, or in a formal declaration, as part of an insurer's investigation into workers' compensation benefits.

Perjury is always a felony and carries a potential sentence of two (2), three (3) or four (4) years.46

Call us for help…
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For questions about California's workers' compensation fraud laws, or to discuss your case confidentially with one of our California criminal defense attorneys, do not hesitate to contact us at Shouse Law Group.

We have local criminal law offices in and around Los Angeles, San Diego, Orange County, Riverside, San Bernardino, Ventura, San Jose, Oakland, the San Francisco Bay area, and several nearby cities.

For more information on Nevada's workers' compensation insurance fraud laws, please see our page on Nevada's workers' compensation insurance fraud laws.

In addition, you may also find helpful information in our related articles on California Insurance Fraud; California Criminal Fraud Laws; California Criminal Conspiracy Laws; Legal Definition of a California Wobbler; Legal Definition of a California Misdemeanor; Legal Definition of a California Felony; Common Legal Defenses to California Crimes; Aiding and Abetting (Accomplice Liability) in California Law; California Robbery Law Penal Code 211 PC; California Health Care Fraud; Losing Your Medical License for a Criminal Conviction in California; Penal Code 641.3 PC Commercial Bribery; Misdemeanor (Summary) Probation in California; Felony (Formal) Probation in California; California's Realignment Program AB 109; Nurse Discipline and License Revocation; Criminal Convictions and Pharmacist Discipline in California; California Criminal Jury Trials; Penal Code 487 California Grand Theft; The California Crime of Theft by False Pretenses Penal Code 532 PC; Penal Code 470 PC California Forgery; and Penal Code 118 PC Perjury.

Additional Resources:

California Department of Industrial Relations, Division of Workers' Compensation

Legal References:


1 See California Department of Industrial Relations, Injured Worker Guidebook, Chapter 1: The Basics of Workers' Compensation.

2 Insurance Code 1871.4 – Unlawful conduct; penalties [workers' compensation fraud]. (“(a) It is unlawful to do any of the following: (1) Make or cause to be made a knowingly false or fraudulent material statement or material representation for the purpose of obtaining or denying any compensation, as defined in Section 3207 of the Labor Code. (2) Present or cause to be presented a knowingly false or fraudulent written or oral material statement in support of, or in opposition to, a claim for compensation for the purpose of obtaining or denying any compensation, as defined in Section 3207 of the Labor Code. (3) Knowingly assist, abet, conspire with, or solicit a person in an unlawful act under this section. (4) Make or cause to be made a knowingly false or fraudulent statement with regard to entitlement to benefits with the intent to discourage an injured worker from claiming benefits or pursuing a claim. For the purposes of this subdivision, “statement” includes, but is not limited to, a notice, proof of injury, bill for services, payment for services, hospital or doctor records, X-ray, test results, medical-legal expense as defined in Section 4620 of the Labor Code, other evidence of loss, injury, or expense, or payment. (5) Make or cause to be made a knowingly false or fraudulent material statement or material representation for the purpose of obtaining or denying any of the benefits or reimbursement provided in the Return-to-Work Program established under Section 139.48 of the Labor Code. (6) Make or cause to be made a knowingly false or fraudulent material statement or material representation for the purpose of discouraging an employer from claiming any of the benefits or reimbursement provided in the Return-to-Work Program established under Section 139.48 of the Labor Code. (b) Every person who violates subdivision (a) shall be punished by imprisonment in a county jail for one year, or pursuant to subdivision (h) of Section 1170 of the Penal Code, for two, three, or five years, or by a fine not exceeding one hundred fifty thousand dollars ($150,000) or double the value of the fraud, whichever is greater, or by both that imprisonment and fine. Restitution shall be ordered, including restitution for any medical evaluation or treatment services obtained or provided. The court shall determine the amount of restitution and the person or persons to whom the restitution shall be paid. A person convicted under this section may be charged the costs of investigation at the discretion of the court. (c) A person who violates subdivision (a) and who has a prior felony conviction of that subdivision, of former Section 556, of former Section 1871.1, or of Section 548 or 550 of the Penal Code, shall receive a two-year enhancement for each prior conviction in addition to the sentence provided in subdivision (b). The existence of any fact that would subject a person to a penalty enhancement shall be alleged in the information or indictment and either admitted by the defendant in open court, or found to be true by the jury trying the issue of guilt or by the court where guilt is established by plea of guilty or nolo contendere or by trial by the court sitting without a jury.”)

See also Labor Code 3207 – Compensation. (““Compensation” means compensation under this division [California workers' compensation law] and includes every benefit or payment conferred by this division upon an injured employee, or in the event of his or her death, upon his or her dependents, without regard to negligence.”)

3 Penal Code 550 PC – False or fraudulent claims or statements [including in connection with workers' compensation insurance]; prohibited acts. (“(a) It is unlawful to do any of the following, or to aid, abet, solicit, or conspire with any person to do any of the following: . . . (6) Knowingly make or cause to be made any false or fraudulent claim for payment of a health care benefit. (7) Knowingly submit a claim for a health care benefit that was not used by, or on behalf of, the claimant. (8) Knowingly present multiple claims for payment of the same health care benefit with an intent to defraud. (9) Knowingly present for payment any undercharges for health care benefits on behalf of a specific claimant unless any known overcharges for health care benefits for that claimant are presented for reconciliation at that same time. (10) For purposes of paragraphs (6) to (9), inclusive, a claim or a claim for payment of a health care benefit also means a claim or claim for payment submitted by or on the behalf of a provider of any workers' compensation health benefits under the Labor Code. (b) It is unlawful to do, or to knowingly assist or conspire with any person to do, any of the following: (1) Present or cause to be presented any written or oral statement as part of, or in support of or opposition to, a claim for payment or other benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any material fact. (2) Prepare or make any written or oral statement that is intended to be presented to any insurer or any insurance claimant in connection with, or in support of or opposition to, any claim or payment or other benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any material fact. (3) Conceal, or knowingly fail to disclose the occurrence of, an event that affects any person's initial or continued right or entitlement to any insurance benefit or payment, or the amount of any benefit or payment to which the person is entitled. . . . (c) . . . (2) Every person who violates paragraph (6), (7), (8), or (9) of subdivision (a) is guilty of a public offense. (A) When the claim or amount at issue exceeds nine hundred fifty dollars ($950), the offense is punishable by imprisonment pursuant to subdivision (h) of Section 1170 for two, three, or five years, or by a fine not exceeding fifty thousand dollars ($50,000) or double the amount of the fraud, whichever is greater, or by both that imprisonment and fine, or by imprisonment in a county jail not to exceed one year, by a fine of not more than ten thousand dollars ($10,000), or by both that imprisonment and fine. (B) When the claim or amount at issue is nine hundred fifty dollars ($950) or less, the offense is punishable by imprisonment in a county jail not to exceed six months, or by a fine of not more than one thousand dollars ($1,000), or by both that imprisonment and fine, unless the aggregate amount of the claims or amount at issue exceeds nine hundred fifty dollars ($950) in any 12-consecutive-month period, in which case the claims or amounts may be charged as in subparagraph (A). (3) Every person who violates paragraph (1), (2), (3), or (4) of subdivision (b) shall be punished by imprisonment pursuant to subdivision (h) of Section 1170 for two, three, or five years, or by a fine not exceeding fifty thousand dollars ($50,000) or double the amount of the fraud, whichever is greater, or by both that imprisonment and fine, or by imprisonment in a county jail not to exceed one year, or by a fine of not more than ten thousand dollars ($10,000), or by both that imprisonment and fine. (4) Restitution shall be ordered for a person convicted of violating this section, including restitution for any medical evaluation or treatment services obtained or provided. The court shall determine the amount of restitution and the person or persons to whom the restitution shall be paid. (d) Notwithstanding any other provision of law, probation shall not be granted to, nor shall the execution or imposition of a sentence be suspended for, any adult person convicted of felony violations of this section who previously has been convicted of felony violations of this section or Section 548, or of Section 1871.4 of the Insurance Code, or former Section 556 of the Insurance Code, or former Section 1871.1 of the Insurance Code as an adult under charges separately brought and tried two or more times. The existence of any fact that would make a person ineligible for probation under this subdivision shall be alleged in the information or indictment, and either admitted by the defendant in an open court, or found to be true by the jury trying the issue of guilt or by the court where guilt is established by plea of guilty or nolo contendere or by trial by the court sitting without a jury. Except when the existence of the fact was not admitted or found to be true or the court finds that a prior felony conviction was invalid, the court shall not strike or dismiss any prior felony convictions alleged in the information or indictment. This subdivision does not prohibit the adjournment of criminal proceedings pursuant to Division 3 (commencing with Section 3000) or Division 6 (commencing with Section 6000) of the Welfare and Institutions Code. (e) Except as otherwise provided in subdivision (f), any person who violates subdivision (a) or (b) and who has a prior felony conviction of an offense set forth in either subdivision (a) or (b), in Section 548, in Section 1871.4 of the Insurance Code, in former Section 556 of the Insurance Code, or in former Section 1871.1 of the Insurance Code shall receive a two-year enhancement for each prior felony conviction in addition to the sentence provided in subdivision (c). The existence of any fact that would subject a person to a penalty enhancement shall be alleged in the information or indictment and either admitted by the defendant in open court, or found to be true by the jury trying the issue of guilt or by the court where guilt is established by plea of guilty or nolo contendere or by trial by the court sitting without a jury. Any person who violates this section shall be subject to appropriate orders of restitution pursuant to Section 13967 of the Government Code.”)

4 Penal Code 549 PC – False or fraudulent claims against insurers; solicitation, acceptance or referral of business; penalties and restitution [form of workers' compensation insurance fraud]. (“Any firm, corporation, partnership, or association, or any person acting in his or her individual capacity, or in his or her capacity as a public or private employee, who solicits, accepts, or refers any business to or from any individual or entity with the knowledge that, or with reckless disregard for whether, the individual or entity for or from whom the solicitation or referral is made, or the individual or entity who is solicited or referred, intends to violate Section 550 of this code or Section 1871.4 of the Insurance Code is guilty of a crime, punishable upon a first conviction by imprisonment in the county jail for not more than one year or by imprisonment pursuant to subdivision (h) of Section 1170 for 16 months, two years, or three years, or by a fine not exceeding fifty thousand dollars ($50,000) or double the amount of the fraud, whichever is greater, or by both that imprisonment and fine. A second or subsequent conviction is punishable by imprisonment pursuant to subdivision (h) of Section 1170 or by that imprisonment and a fine of fifty thousand dollars ($50,000). Restitution shall be ordered, including restitution for any medical evaluation or treatment services obtained or provided. The court shall determine the amount of restitution and the person or persons to whom the restitution shall be paid.”)

5 See endnotes 2-4, above.

6 Same.

7 Same.

8 Our California insurance fraud defense attorneys have local Los Angeles law offices in Beverly Hills, Burbank, Glendale, Lancaster, Long Beach, Los Angeles, Pasadena, Pomona, Torrance, Van Nuys, West Covina, and Whittier. We have additional law offices conveniently located throughout the state in Orange County, San Diego, Riverside, San Bernardino, Ventura, San Jose, Oakland, the San Francisco Bay area, and several nearby cities.

9 Insurance Code 1871.4 – Unlawful conduct; penalties [workers' compensation fraud], endnote 2, above.

10 See Division of Workers' Compensation: Fact Sheet, California Department of Industrial Relations.

11 See “Obtaining Workers' Compensation,” California Governor's Office of Business and Economic Development.

12 Same.

13 People v. Gillard (1997) 57 Cal.App.4th 136, 151-52. (“Materiality of the false statement is an element of the offense described in section 1871.4, subdivision (a)(1) [California's workers' compensation fraud law]. The trial court instructed, without objection, that “A statement or representation is material if it concerns a subject reasonably relevant to the insured's ... investigation of the [insured], and if a reasonable insurer would attach importance to the fact represented.” Gillard contends the instruction should have advised the jury that to be material the false statement must have had a “tendency to influence” the decision of a reasonable insurance company. . . . These cases confirm that materiality of false statements to obtain insurance benefits is met if the statements convey information on subjects which are “germane” or “reasonably relevant” to the insurer's investigation and which could bear directly and importantly on the investigation and evaluation of the bona fides of the claim. The instruction in this case adequately conveyed these concepts.”)

14 Based on the facts of the same.

15 Black's Law Dictionary (9th ed. 2009), fraud. (“1. A knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment. • Fraud is usu. a tort, but in some cases (esp. when the conduct is willful) it may be a crime [such as workers' compensation fraud].”)

16 People v. Gillard, endnote 13, above, at 153. (“Gillard's principal contention is that when a claimant is prosecuted for violating section 1871.4, subdivision (a)(1) based on failure to disclose a prior injury, an essential element of the offense is that the claimant's prior injuries produced a labor-disabling condition which remained extant at the time of his new injury. Absent that evidence, Gillard reasons, a claimant's intentional concealment of those prior injuries cannot be material because they have no effect on the award for the current industrial injury. . . . We reject Gillard's claim.”)

17 Based on the facts of Tensfeldt v. Workers' Comp. Appeals Bd. (1998) 66 Cal.App.4th 116.

18 Based on the facts of People v. Webb (1999) 74 Cal.App.4th 688.

19 Insurance Code 1871.4 – Unlawful conduct; penalties [workers' compensation fraud], endnote 2, above.

20 Penal Code 550 PC – False or fraudulent claims or statements [including in connection with workers' compensation insurance]; prohibited acts, endnote 3, above.

21 Penal Code 549 PC – False or fraudulent claims against insurers; solicitation, acceptance or referral of business; penalties and restitution [form of workers' compensation insurance fraud], endnote 4, above.

22 The facts of this example are based on a real workers' compensation fraud case that was charged in Orange County in 2014. See, e.g., The price of pain: Indictments allege a massive compound cream scam, Southern California Public Radio, Sept. 11, 2014.

23 Insurance Code 1871.4 – Unlawful conduct; penalties [workers' compensation fraud], endnote 2, above.

24 Same.

25 Same.

26 Penal Code 550 PC – False or fraudulent claims or statements [including in connection with workers' compensation insurance]; prohibited acts, endnote 3, above.

27 Same.

28 Same.

29 Penal Code 549 PC – False or fraudulent claims against insurers; solicitation, acceptance or referral of business; penalties and restitution [form of workers' compensation fraud], endnote 4, above.

30 Same.

31 Same.

32 See Business & Professions Code 2236 – Criminal convictions and doctor discipline [may apply to doctors convicted of workers' compensation fraud].

33 See Business & Professions Code 2761 – Criminal convictions and nurse discipline [may apply to nurses convicted of workers' compensation fraud].

34 See Business & Professions Code 4301 – Criminal convictions and pharmacist discipline [may apply to pharmacists convicted of workers' compensation fraud].

35 Labor Code 3820 – Legislative declarations; prohibited acts; penalties [for workers' compensation fraud]. (“(a) In enacting this section, the Legislature declares that there exists a compelling interest in eliminating fraud in the workers' compensation system. The Legislature recognizes that the conduct prohibited by this section is, for the most part, already subject to criminal penalties pursuant to other provisions of law. However, the Legislature finds and declares that the addition of civil money penalties will provide necessary enforcement flexibility. The Legislature, in exercising its plenary authority related to workers' compensation, declares that these sections are both necessary and carefully tailored to combat the fraud and abuse that is rampant in the workers' compensation system. (b) It is unlawful to do any of the following: (1) Willfully misrepresent any fact in order to obtain workers' compensation insurance at less than the proper rate. (2) Present or cause to be presented any knowingly false or fraudulent written or oral material statement in support of, or in opposition to, any claim for compensation for the purpose of obtaining or denying any compensation, as defined in Section 3207. (3) Knowingly solicit, receive, offer, pay, or accept any rebate, refund, commission, preference, patronage, dividend, discount, or other consideration, whether in the form of money or otherwise, as compensation or inducement for soliciting or referring clients or patients to obtain services or benefits pursuant to Division 4 (commencing with Section 3200) unless the payment or receipt of consideration for services other than the referral of clients or patients is lawful pursuant to Section 650 of the Business and Professions Code or expressly permitted by the Rules of Professional Conduct of the State Bar. (4) Knowingly operate or participate in a service that, for profit, refers or recommends clients or patients to obtain medical or medical-legal services or benefits pursuant to Division 4 (commencing with Section 3200). (5) Knowingly assist, abet, solicit, or conspire with any person who engages in an unlawful act under this section. (c) For the purposes of this section, “statement” includes, but is not limited to, any notice, proof of injury, bill for services, payment for services, hospital or doctor records, X-ray, test results, medical-legal expenses as defined in Section 4620, or other evidence of loss, expense, or payment. (d) Any person who violates any provision of this section shall be subject, in addition to any other penalties that may be prescribed by law, to a civil penalty of not less than four thousand dollars ($4,000) nor more than ten thousand dollars ($10,000), plus an assessment of not more than three times the amount of the medical treatment expenses paid pursuant to Article 2 (commencing with Section 4600) and medical-legal expenses paid pursuant to Article 2.5 (commencing with Section 4620) for each claim for compensation submitted in violation of this section. (e) Any person who violates subdivision (b) and who has a prior felony conviction of an offense set forth in Section 1871.1 or 1871.4 of the Insurance Code, or in Section 549 of the Penal Code, shall be subject, in addition to the penalties set forth in subdivision (d), to a civil penalty of four thousand dollars ($4,000) for each item or service with respect to which a violation of subdivision (b) occurred.”)

36 Same.

37 Same.

38 Newport Beach criminal defense attorney Ninaz Saffari is a veteran of the public defender's offices of San Francisco County and Los Angeles. She has conducted dozens of jury trials and juvenile adjudication hearings, defending a variety of California white-collar crimes, including multiple forms of insurance fraud. Thanks to a cosmopolitan background, Ms. Saffari is fluent in Farsi (Persian) and German.

39 See Insurance Code 1871.4 – Unlawful conduct; penalties [workers' compensation fraud], endnote 2, above; Penal Code 550 PC – False or fraudulent claims or statements [including in connection with workers' compensation insurance]; prohibited acts, endnote 3, above.

See also People v. Dieguez (2001) 89 Cal.App.4th 266 (holding that there is no need to prove specific intent to defraud under Insurance Code 1871.4); but see Judicial Council of California Criminal Jury Instructions (“CALCRIM”) 2000 – Insurance Fraud [including workers' compensation fraud]: Fraudulent Claims (Pen. Code, § 550(a)(1), (4)-(7) & (9)) (specifying intent to defraud as an element of insurance fraud under Penal Code 550).

40 Penal Code 487 PC – “Grand theft” defined [may be charged along with workers' compensation fraud]. (“Grand theft is theft committed in any of the following cases: (a) When the money, labor, or real or personal property taken is of a value exceeding nine hundred fifty dollars ($950), except as provided in subdivision (b).”)

41 Penal Code 532 PC – False pretenses; obtaining money, labor or property; punishment; evidence necessary to support conviction [overlaps with many forms of insurance fraud]. (“(a) Every person who knowingly and designedly, by any false or fraudulent representation or pretense, defrauds any other person of money, labor, or property, whether real or personal, or who causes or procures others to report falsely of his or her wealth or mercantile character, and by thus imposing upon any person obtains credit, and thereby fraudulently gets possession of money or property, or obtains the labor or service of another, is punishable in the same manner and to the same extent as for larceny of the money or property so obtained.”)

42 Penal Code 489 PC – Grand theft; punishment. (“Grand theft is punishable as follows: . . . (c) In all other cases, by imprisonment in a county jail not exceeding one year or pursuant to subdivision (h) of Section 1170.”)

43 Penal Code 470 PC – Forgery; signatures or seals; corruption of records [may be charged along with workers' compensation fraud].

44 Penal Code 473 PC – Forgery; punishment. (“(a) Forgery is punishable by imprisonment in a county jail for not more than one year, or by imprisonment pursuant to subdivision (h) of Section 1170.”)

45 Penal Code 118 PC – “Perjury” defined; evidence necessary to support conviction [may be charged along with workers' compensation fraud]. (“(a) Every person who, having taken an oath that he or she will testify, declare, depose, or certify truly before any competent tribunal, officer, or person, in any of the cases in which the oath may by law of the State of California be administered, willfully and contrary to the oath, states as true any material matter which he or she knows to be false, and every person who testifies, declares, deposes, or certifies under penalty of perjury in any of the cases in which the testimony, declarations, depositions, or certification is permitted by law of the State of California under penalty of perjury and willfully states as true any material matter which he or she knows to be false, is guilty of perjury.”)

46 Penal Code 126 PC – Punishment. (“Perjury is punishable by imprisonment pursuant to subdivision (h) of Section 1170 for two, three or four years.”)

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