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Combating Fraud Creating an Actionable Battle Plan for Your Company KATE GORDON, ESQ. Burke, Gordon and Conway National Coordinating Counsel Liberty Mutual SIU THOMAS W. WALLER Business Manager Besam US Inc.

Combating Fraud Creating an Actionable Battle Plan for Your Company KATE GORDON, ESQ. Burke, Gordon and Conway National Coordinating Counsel Liberty Mutual

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Combating FraudCreating an Actionable Battle Plan for

Your Company

KATE GORDON, ESQ. Burke, Gordon and ConwayNational Coordinating Counsel Liberty Mutual SIU

THOMAS W. WALLERBusiness ManagerBesam US Inc.

Insurance Fraud Statistics

• >10% or P&C claims are Fraudulent• Fraud 2nd most costly white-collar crime in America– Behind only tax evasion

• 9% Increase in Fraud Referrals from 2009 to 2010– 14% increase from prior year

• Public Tolerance for Fraud is on the Rise– 20% of survey respondents felt it was acceptable to

increase value of a claim

Statistics provided by the National Insurance Crime Bureau Fact Sheet

Goals of the Presentation

• General Liability– Main focus of discussion

• Workers’ Compensation• Employee

Why Insurance Fraud Matters to Your Company

• It is against the Law– Claim Peddling– Cheating the System

• Innocent Lives Placed in Harm’s Way– Staged Accidents

• Leads to Premium Increases for All– $200-300 Added Premium per family per year*

• Diverts Vital Law Enforcement Resources• Affects Business Productivity– Absent Workers* National Insurance Crime Bureau

Types of Fraud

• Medical Provider Fraud– Services Not Rendered– Unnecessary Medical Services

• Workers’ Comp Fraud– Hurt off the Job– Fake Injuries– Malingering•Subjective/Objective Complaints

Types of Fraud• Liability Fraud– Slip & Fall– The Yank Down– The Chew & Sue

• Auto Fraud– Swoop & Squat– Drive Down– Real accident, fake liability

Types of Fraud• Product Liability– Product Shipped & Professionally Installed• But not Maintained

– Statute About to Expire– Need theory• Must be Defective Product

– Experts Retained to Develop Theory for Money• Defective Product• Lack of Warnings• Mechanisms of Product

Types of Fraud

• Hard Fraud vs. Soft Fraud• Attorney fraud– Willing to represent fraudulent claimants

• Medical Provider Fraud– Sympathetic providers cooperating with

fraudulent claimants

FUNDAMENTALS

Step By Step Process of Creating an Action Plan

What Type of Company are you?• Manufacturer• Retailer• Restaurant/Food Industry• Professional Services• Volume & Location of Sites– Does public come & go from your company?– Does your company service the public?– Is your presence local, national or international ?

Areas of Risk

• Employees• Customers• Vendors• Products– Stepladders & Chainsaws– Feather Pillows

Areas of Greatest Concern

• Value of a Claim is two-pronged (legitimate) – Liability Concern– Damages

• Specific Issues for Your Company/Claims– Why are YOU having Claims?

• Imperative Question

– Review of Old Claims to spot Weaknesses• Most Common Types of Claims• Misuse of Products? • A Weak Point in the Distribution Chain? • How Were They Investigated?

– Were They Investigated? (Be honest with yourself)

• Was There a Pattern to the Type of Claim? • Are There Any Strong Indicators That Might Point to Future Risks?

Person(s) Most Responsible

• Who in your Company Should be Charged With Researching These Concerns?– Individual or Team• Risk Managers• Individuals With Most Knowledge

– Does This Resource Exist at Your Company?

Resources Available To You

• Insurance Carriers– Special Investigation Unit (SIU)

• Do They Have One? • How Does it Work?• How Do Referrals Occur?• Once Referred to SIU, What Involvement Does Insured Have?

• Agents & Brokers• Loss Prevention Programs– Who Has Them? – Utilize Their Expertise When Creating Your Own Program

GOALS FOR YOUR COMPANY

Step By Step Process of Creating an Action Plan

Main Goals

• Zero Tolerance• Referrals to Law Enforcement• Internal Investigations• Decreased Premium

INVESTIGATION PROCESS

Step By Step Process of Creating an Action Plan

Investigation Process

• What Information Would be Most Helpful to the Insurance Carrier?

• What is Necessary for a “First Report”– To Report a Claim, you must have• Name of Party Involved• Date of Loss

– Key b/c of different Policy Periods

GENERAL FRAUD INDICATORS

Step By Step Process of Creating an Action Plan

Fraud Indicators for Type of Business

• Un-Witnessed Accident– Not by Employee or Customer

• Uncooperative Claimant• Overly Cooperative Witness– Do-gooder

• Quick Representation by Attorney• Demand for Early Settlement– Before all medical information is received

Fraud Indicators for Type of Business

• Newly Hired Employee• Difficulty Verifying Basic Information• Vague Accident Details• Late Reporting of Accident• Exaggerated Injuries

BEST PRACTICES

Step By Step Process of Creating an Action Plan

Best Practices

• Paramount to an organized, proactive, consistent response to suspected fraud

• If not currently in existence for your organization, they should be developed and followed

Best Practices• Create Procedures or Guidelines– Written rules (too many or not enough)– Followed uniformly throughout company– Establishment of documented procedures

• Assists in potential litigation of cases• Company can testify, “This what we do daily, hourly…”

• Must draw Your Own Middle Ground• Who in your Company is responsible for developing

these procedures or guidelines– Must have working knowledge to ensure practicable

Best Practices

• Who from Your Company is Responsible ensuring compliance with procedures/guidelines?

• Do Front Line/Field Teams know procedures? – They should receive training and follow-up

• Procedure Communication Plan – Ensures employees know how vital procedures are

• Safety Perspective• Fraud Perspective

– Need to instill Best Practices within company culture

Best Practices• Procedures for Inspection & Safety Measures– Have they been reviewed/revised in last 12 months?– Overcome hesitancy to change

• Flag Carrying example

• Solid Safety Procedures Will Prevent Fraudulent Claims

• Consider Rewards/Incentive Programs for Guidelines Compliance

Best Practices

• Has Your Business Focus Changed/Evolved in the Last 5 Years? – If so, your procedures should reflect that change– If not, procedures should be reviewed/revised every 2

years

• Because business is fluid, procedures should be reviewed/revised periodically

• What is your Safety Program going to look like in front of a Jury?

PREVENTION

How Can My Company Prevent Losses From Occurring?

Partnership• Everyone on the Same Page, Working Together– Company – Service Providers– Location Employees

• Must understand what everyone’s roles are in preventing losses– Whether legitimate or fraudulent– Identify who is needed to diminish risk– Identify parties in best position to overcome limitations

• Company & Carrier Work Together

Employee Training

• New Employees– Train employees in areas where fraud is most likely to occur– Train them to monitor for situations– Discuss Fraud indicators specific to your industry

• Current Employees– Make employees part of the team

• Keep them appraised of internal/external fraud risks• Continued communication is critical

– Inform how Fraud in NOT a “Victimless Crime”• Costs everyone money• Increased premiums hit company’s bottom line

• Employee Turn-Over– Impact on Company

Example: Slip & Falls • Many Claims are based on Notice Issues• With Best Practices and Safety Inspections in Place,

Logs Will Help Identify Problem– How long was the material/substance there?– When was area last inspected? By Whom?– Was procedure followed?

• Investigation Questions– Was there opportunity to remedy the situation?– Who from Company is responsible for these matters?

WHEN A CLAIM OCCURS

What Can My Company Do to Investigate a Suspicious Claim to Facilitate the Carrier’s Response?

When a Claim Occurs• Report to the Carrier as Soon as You Learn of

Potential Claim– Follow their directions– They should give you guidance and direction

• Do Not Dispose of Any Materials Related to the Claim– Potential spoliation issues

• Investigation– The earlier and more thorough, the better

• Need More Than Just Suspicion – Need more justification for Carrier

Complete Information, Supply Promptly

• Fraud is a lie; anything that depicts the truth is beneficial– Witnesses

• Were statements taken/transcribed?• Gather witness info on a form

– Names, phone numbers, e-mail and physical addresses

– Video• Surveillance cameras on premises?• Time is of the essence in obtaining video

– Tapes often taped over

– Photos• Take immediate photos of accident scene

– Type of Camera? How are photos preserved?• Photos can be very helpful in defense of claim

• Be Able to Locate Documentation

Carrier’s Special Investigation Unit

• Speak with Carrier before hand about their SIU dept• What Types of Claims Should be Referred to Them?

– How do they operate? – What is referral determination process?– Do I contact Them, or Should the Assigned Claims Handler?

• Red Flags– Young, healthy person has catastrophic injuries from getting hit with a

feather pillow.

• Once in Their Hands, What Does My Company Need To Do? – What Should We Do?

WHEN A CLAIM OCCURS

What Type of Resources Does My Carrier Have, and How Does My Company Benefit?

Carrier Resources

• Ask Questions Like:– What is Their Claims Training Like? – Is SIU Handled Internally or Outsourced? – If Outsourced, how were firms selected?– Does the Internal SIU have Analytics?– Does my Carrier have counsel who specializes in

Fraud?

RECAP

Awareness and Preparation are Key for Fraud Prevention

Prepare for Claims by Having

• Best Practices in Place and Being Followed• Ready Documentation Available• Good Communication With Carrier• Engaged Operation

Questions?