An Arrowhead General Insurance Agency premium auditor was working on a workers’ compensation policy audit for a construction company. The employer reported having only one employee. Their policy application showed a denial of the use of subcontractors. However, the premium auditor identified two claims filed during the policy year. The employer explained that they had no payroll records for one of the injured employees, as he only worked for them for one day. Since this sounded suspicious, the auditor referred the case to the SIU.
The investigation found that the “one day” employee cut his hand using a machine, requiring emergency surgery. The claim was reported months later by an attorney, not by the employer.
The business owner admitted knowing of the injury on the date of loss and even paying lost wages. After a few weeks, they decided that this was enough and cut him off. The owner also explained that the clamant did not want to file work injury claim, preferring to handle the medical care on his own, without insurance – even more suspicious.
Our investigation showed that the claimant had worked for the insured for many months, not for one day as claimed. We identified and interviewed a co-worker who said he had been there for a year and a half as an unlicensed, cash construction employee. In California, you cannot sub out construction work to someone without their own contractor’s license. They must be an “employee”. Banking records identified another 6 names that were paid through Zelle. One payment even had a notation that they were paying for a medical bill. None of these people were disclosed during the audit.
The claim by the injured worker’s attorney was accepted, paid and closed. Our carrier partner is no longer on the risk; the case was referred to law enforcement.