Workers’ compensation fraud is far more complicated than most employers realize. Unlike other forms of insurance fraud, workers’ compensation claims operate under rules that often favor accepting the claim first and investigating later.
California is a no-fault workers’ compensation state. This means that if an employee reports an injury that occurred while performing their job duties, the claim is typically accepted regardless of who caused the accident.
This creates several challenges for employers trying to determine whether a claim is legitimate.
First, once a claim is filed, the employee enters a system that often includes workers’ compensation attorneys, medical providers, and claims administrators. These networks frequently work together within the system, which can make it difficult for employers to challenge questionable claims early in the process.
Second, many employers are surprised to learn that suspected workers’ compensation fraud is rarely prosecuted unless strong evidence exists showing clear intent to deceive.
Because of this, simply believing a claim is suspicious is not enough.
Intent to Fraud must be proven.
Proving Workers’ Compensation Fraud
The key element in any workers’ compensation fraud case is intent.
In many cases employers rely on professional surveillance to collection during a workers’ compensation fraud investigation.
Investigators and prosecutors must be able to demonstrate that the claimant knowingly made false statements or deliberately misrepresented their physical condition in order to obtain benefits.
This is why timelines and documented statements become critical.
To establish fraud, investigators often compile evidence from multiple sources including:
• the initial injury report
• medical evaluations and doctor reports
• deposition testimony
• court filings
• Subrosa or surveillance evidence
• employment or activity records
When these records are analyzed together, they may reveal contradictions that demonstrate intentional deception.
For example, if an injured worker is observed lifting heavy objects nine months after their last medical exam, that alone does not necessarily indicate fraud. The person may have legitimately recovered.
However, consider a different scenario.
During a deposition, the claimant states under oath that they are unable to exercise, lift weights, or perform any strenuous activity due to their injury.
If surveillance footage shows that same individual working out at a gym two weeks before the deposition, and then again one week after the deposition, the situation changes dramatically.
Now the evidence shows:
• statements made under oath
• contradictory physical activity
• a clear timeline surrounding the testimony
This type of evidence can demonstrate intent to misrepresent physical limitations and may justify a criminal fraud referral.
Why Many Fraud Cases Are Never Prosecuted
Even when suspicious activity exists, many workers’ compensation claims are never formally prosecuted for fraud.
The reality is that fraud investigations and litigation can be expensive and time-consuming. Employers and insurance carriers often choose to resolve the claim through settlement rather than pursue a criminal case.
Prosecution usually occurs only when investigators uncover clear and compelling evidence that a claimant knowingly lied in order to receive benefits.
Without strong documentation and evidence, district attorneys are unlikely to move forward with charges.
How Employers Can Report Workers’ Compensation Fraud
If an employer believes a workers’ compensation claim may involve fraud, the proper step is to file a report with the California Department of Insurance. Where to file a workers compensation fraud report in California. California Department of insurance-Report fraud page.
Suspected fraud is reported using the Fraud Division Form FD-1 here:
The form requires information about:
• the suspected individual
• the alleged victim (typically the employer or insurance carrier)
• details describing the suspected fraudulent activity
Employers may report situations such as:
• an employee claiming total disability while secretly working elsewhere
• a claimant engaging in physical activities that contradict their stated limitations
• evidence showing the injury may have occurred outside of work
• behavior suggesting exaggeration or misrepresentation of medical conditions
Reports should include as much factual information as possible.
Once submitted, the FD-1 report is reviewed by the Department of Insurance. If the case appears credible, it may be forwarded to the appropriate insurance fraud unit or the local district attorney’s office for investigation.
The Role of Evidence in Workers’ Compensation Fraud Cases
Workers’ compensation fraud cases are rarely built on suspicion alone. Successful cases rely on documented evidence showing contradictions between what a claimant says and what they actually do.
This is why surveillance investigations, medical record reviews, and timeline analysis often play a critical role in determining whether fraud has occurred.
For employers dealing with questionable claims, identifying those inconsistencies early can make the difference between a costly settlement and a properly investigated fraud case.
