The following conduct violates the Insurance Code:1

• False or fraudulent statement or material representation for the purpose of obtaining or denying any compensation.
• False or fraudulent written or oral material statements supporting or opposing any claim for compensation.
• Assisting, abetting, conspiring with or soliciting any person in an unlawful act.
• False or fraudulent statements about the entitlement to benefits to discourage an injured employee from claiming benefits or pursuing a claim.
• False or fraudulent material statements or material representation for the purpose of obtaining or denying any of the benefits or reimbursement provided in the Return to Work Program.
• False or fraudulent material statement or material representation for the purpose of discouraging an employer from claiming any of the benefits or reimbursement provided in the Return to Work Program.

The intent of this section of the Insurance Code is to prevent employers from lying, falsifying information or failing to provide information for purposes of obtaining workers’ compensation insurance coverage, defrauding insurance carriers, discouraging or hindering the claim of an injured employee, or otherwise encouraging others to do the same.

These crimes run the gamut from covering up injury reports to improve profit margins or bonuses, to falsifying payroll reports for purposes of lowering workers’ compensation premiums.

These violations can be punished by:

• Imprisonment in county jail for one year.
• Imprisonment in state prison for two, three or five years.
• A fine not exceeding $150,000 or double the value of the fraud, whichever is greater.
• Both imprisonment and fine.

The court may order restitution, including restitution for any medical evaluation or treatment services obtained or provided. You may also be charged with the costs of the investigation and prosecution, at the court’s discretion.

A person with a prior felony conviction receives a two-year enhancement for each prior conviction. These penalties may be in addition to those under any other provision of criminal law that applies or may apply to any transaction.

The Department of Insurance must share information about workers' compensation fraud with other state agencies; in the past, the department had discretion on what information to share. The Fraud Assessment Commission also may issue a second round of grants to prosecutors and is no longer required to hold initially undistributed funds to offset the following year. Finally, EDD is required to release any and all relevant information related to a specific workers' compensation fraud investigation to an authorized agency upon receipt of written request.2

The Labor Commission has access to DWC data including employer-reported injury data and enforcement actions in warehouses; the identity of uninsured employers; employers who are committing workers' compensation fraud or wage theft; or other information relevant to the Labor Commissioner's authority.3

Effective January 1, 2024, insurers are legally required to send the California Department of Insurance a fraud report form and information within 60 days of completion of a Special Investigation Unit investigation that results in a reasonable suspicion or knowledge that fraud may have occurred or might be occurring.

Under this new law, agents and brokers must:

• Complete at least one hour of fraud training to receive or renew a license;
• Report suspected fraudulent applications for coverage to the CDI; and
• Report suspected fraud on an active policy to the insurer.

A bill passed in 2022 that goes into effect January 1, 2024, allows the California Department of Insurance or county district attorneys to meet with insurers or self-insured employers to discuss insurance fraud. Participants cannot be held liable for slander, libel or other causes of action if a Department of Insurance representative is present and advises them of guidelines to comply with antitrust laws.4

Effective January 1, 2024, the Insurance Commissioner is authorized to seek a judgment to enforce an order for restitution and civil penalties for a victim harmed by someone selling insurance without a proper license, including those who illegally collect workers' compensation premiums.5

1. Insurance Code sec. 1871.4