Insurance Fraud

Sample Insurance Fraud

Insurance fraud hurts the construction industry.

One of the worst areas for insurance fraud is Workers’ Compensation.  Many people submit claims for fictitious injuries while others make claims for injuries that were not suffered on the job.

We have also seen an increase in the number of fraudulent certificates of insurance.

The builders and subcontractors who handle their Workers’ Compensation honestly are paying more because of those who cheat the system.

The good news is that the state Attorney General’s office now has an insurance fraud division.

We have included a copy of section 42-1-415 of the South Carolina Workers’ Compensation law.  Please note it reads: “Knowing and willful failure to notify by certified mail, the higher tier subcontractor, contractor or project owner who originally was provided documentation of Workers’ Compensation coverage, of a lapse in coverage within 5 days of the lapse, is considered fraud and subjects the contractor or subcontractor who represented himself as having Workers’ Compensation insurance to the penalties for fraud provided by law”.

By law, it is the subcontractors’ responsibility to keep their Workers’ Compensation coverage in force.

SECTION 42-1-415. Representation of coverage; reimbursement from Uninsured Employers' Fund.
(A) Notwithstanding any other provision of law, upon the submission of documentation to the commission that a contractor or subcontractor has represented himself to a higher tier subcontractor, contractor, or project owner as having workers' compensation insurance at the time the contractor or subcontractor was engaged to perform work, the higher tier subcontractor, contractor, or project owner must be relieved of any and all liability under this title except as specifically provided in this section. In the event that employer is uninsured, regardless of the number of employees that employer has, the higher tier subcontractor, contractor, project owner, or his insurance carrier shall in the first instance pay all benefits due under this title. The higher tier subcontractor, contractor, project owner, or his insurance carrier may petition the commission to transfer responsibility for continuing compensation and benefits to the Uninsured Employers' Fund. The Uninsured Employers' Fund shall assume responsibility for claims within thirty days of a determination of responsibility made by the commission. The higher tier subcontractor, contractor, or project owner must be reimbursed from the Uninsured Employers' Fund as created by Section 42-7-200 for compensation and medical benefits as may be determined by the commission. Any disputes arising as a result of claims filed under this section must be determined by the commission.
(B) To qualify for reimbursement under this section, the higher tier subcontractor, contractor, or project owner must collect documentation of insurance as provided in subsection (A) on a standard form acceptable to the commission. The documentation must be collected at the time the contractor or subcontractor is engaged to perform work and must be turned over to the commission at the time a claim is filed by the injured employee.
(C) The knowing and willful falsifying of information contained in standard forms submitted pursuant to this section must be considered fraud and subjects the person responsible for filing the false documentation to the penalties for fraud as provided by law. Knowing and willful failure to notify, by certified mail, the higher tier subcontractor, contractor, or project owner who originally was provided documentation of workers' compensation coverage of a lapse in coverage within five days after the lapse is considered fraud and subjects the contractor or subcontractor who represented himself as having workers' compensation insurance to the penalties for fraud provided by law. Additionally, a contractor or subcontractor who knowingly and willfully falsely documents workers' compensation insurance or knowingly and willfully fails to provide notice of lapse in workers' compensation coverage as specified in this section, or any contractor or subcontractor who refuses to reimburse the Uninsured Employers' Fund for a claim paid on its behalf shall suffer the revocation of his license or certificate as a contractor or residential home builder under applicable provisions of Title 40; provided, however, notwithstanding any other provision of law, the license or certificate of a contractor or residential home builder shall be revoked for a period of two years when the contractor or subcontractor knowingly and willfully falsely documents workers' compensation insurance or knowingly or willfully fails to provide notice of lapse in workers' compensation coverage as specified in this section. Upon expiration of the two-year revocation period, or when the license or certificate of any contractor or subcontractor is revoked for refusal to reimburse the Uninsured Employers' Fund for a claim paid on its behalf, the licensing entity of the contractor or subcontractor may reissue the license or certificate of the contractor or residential home builder in the same manner as any other revoked license.

(D) However, nothing in this section shall be construed to abrogate the immunity to tort liability of any subcontractor under this title or any higher tier subcontractor, contractor, or project owner who may be considered a statutory employer as provided by Sections 42-1-400, 42-1-410, 42-1-420, 42-1-430, and 42-1-450