Combating Fraud

1. 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.

2. 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

3. Goals of the Presentation • General Liability • Main focus of discussion • Workers’ Compensation • Employee

4. 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

5. 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

6. Types of Fraud • Liability Fraud • Slip & Fall • The Yank Down • The Chew & Sue • Auto Fraud • Swoop & Squat • Drive Down • Real accident, fake liability

7. 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

8. Types of Fraud • Hard Fraud vs. Soft Fraud • Attorney fraud • Willing to represent fraudulent claimants • Medical Provider Fraud • Sympathetic providers cooperating with fraudulent claimants

9. Step By Step Process of Creating an Action Plan fundamentals

10. 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 ?

11. Areas of Risk • Employees • Customers • Vendors • Products • Stepladders & Chainsaws • Feather Pillows

12. 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?

13. 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?

14. 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

15. Step By Step Process of Creating an Action Plan Goals for your company

16. Main Goals • Zero Tolerance • Referrals to Law Enforcement • Internal Investigations • Decreased Premium

17. Step By Step Process of Creating an Action Plan Investigation process

18. 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

19. Step By Step Process of Creating an Action Plan General Fraud Indicators

20. 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

21. Fraud Indicators for Type of Business • Newly Hired Employee • Difficulty Verifying Basic Information • Vague Accident Details • Late Reporting of Accident • Exaggerated Injuries

22. Step By Step Process of Creating an Action Plan Best Practices

23. 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

24. 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

25. 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

26. 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

27. 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?

28. How Can My Company Prevent Losses From Occurring? PREVENTION

29. 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

30. 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

31. 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?

32. What Can My Company Do to Investigate a Suspicious Claim to Facilitate the Carrier’s Response? When a claim occurs

33. 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

34. 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

35. 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?

36. What Type of Resources Does My Carrier Have, and How Does My Company Benefit? When a claim occurs

37. 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?

38. Awareness and Preparation are Key for Fraud Prevention Recap

39. Prepare for Claims by Having • Best Practices in Place and Being Followed • Ready Documentation Available • Good Communication With Carrier • Engaged Operation

40. Questions?