A Guide to Evaluating Workers Compensation Claims

By on January 7, 2017

Workers’ compensation insurance is crucial to caring for employees and protecting businesses from extreme losses when an employee is injured on the job. To help your business save money and prevent fraud, owners and human resources teams must carefully evaluate workers’ compensation claims.

Laws vary from state to state, but generally, work comp insurance covers an employees medical expense in the event they are injured during a work-related function. It may also give compensation for disabilities, indemnity for wages lost or cover rehabilitation costs so the employee can return to the workplace quickly.

The claims process can often be confusing and complicated. When is an injury or illness valid for compensation? How do you report a claim? And how do you determine when a claim is fraudulent, and what do you do about questionable claims? Here are some tips for businesses to evaluate and manage the workers’ compensation claims process.

What is a Valid Worker’ Compensation Claim?

  1. Injury or Illness of a Direct Employee
    Only a direct employee – no independent contractors or third-party vendors – can make a claim for compensation when an injury or illness occurs in the workplace.
  2. Commensurable Incident Occurs in the Course or Scope of Employment
    The employee must be working when the injury occurs or develop an illness as a direct result of working conditions. Claim are valid for incidents which take place at a primary work-site or off-site location mandated by the employer; as well as injuries arising out of transit from one work-site to another.
  3. Result in Inability to Perform Duties and/or Lost Wages
    The injury or illness in question must cause the employee to be impaired in some way and lose wages from not being able to perform their duties. It is also a valid incident if the injury or illness results in impairment but without lost wages, or vice versa.

Claim Management

Some managers or organizations neglect their workers’ comp claims or leave responsibility for active claims management to the injured employee, the insurer, or the health care provider. Others may be suspicious of the validity of all claims, resulting in ignored, legally complicated claims which can lead to lawsuits and settlements.

A Managed Approach

The right way to manage claims requires management attention to seven basic actions:

  • Report and investigate claims promptly
  • Manage your insurance carrier
  • Select appropriate medical care
  • Keep communications open
  • Implement a return-to-work program
  • Focus on the problem claims
  • Manage contested claims

Report and Investigate Claims Promptly

There are statutory limits on the filing of claims by employees – meaning claims must be filed soon after the commensurable incident – but many states include language that says “as soon as practical” or “excusable.” Employers often have stricter requirements for filing in a timely manner. Regardless, all claims should be promptly reported to your insurer. Studies have shown that the cost of a claim tends to diminish the sooner a claim is reported.

Focus on the Problem Claims

Some claims, because of the nature of the injury, need to be monitored carefully:

  • Back injuries
  • Vascular injuries
  • Serious traumatic injuries
  • Some current or pre-existing medical situations introduce an element of uncertainty that requires attention:
  • An unclear medical diagnosis or prognosis
  • Other pre-existing medical problems
  • Alcohol/drug dependency
  • Personal/family problems
  • Some factors involving the reserve or timing of a claim also bear watching:
  • High initial reserves
  • Compensation approaching net earnings
  • Disability near retirement

Suspect and Fraudulent Claims

Not every claim is fraudulent, however, look at each claim for any of the following signs:

  • Filing multiple claims
  • Longer absences than anticipated by the employee
  • Unwillingness, resistance or delay to return to work
  • Unwillingness to be assigned to other, lighter jobs within the company or to complete partial duties
  • Unwillingness to seek independent medical examinations
  • Missing several medical appointments
  • Noe date, time or location of the incident that caused injury is provided
  • Employee does not maintain a record services provided for related medical bills
  • Lack of witnesses to an accident or incident
  • Employee cannot produce specific information about the nature of the injury
  • Employee has a history of short-term employment
  • Questionable activities observed by other employees, managers or through public social media posts

If any of these red flags occur, it by no means makes the claim automatically fraudulent – these are simply guidelines to keep employers proactively evaluating the legitimacy of a workers’ compensation claim. Speak with your insurance agent and risk management teams to develop a thorough workers’ compensation claims evaluation process to ensure your business and employees are receiving the protection they need.

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About Terri A. Kamoto

Senior writer for FSN - Terri is a former financial analyst dedicated to making personal finances, budgeting, investment and insurance advice accessible, up to date and easy to understand. It is hard to find professional advice written in a language someone without a financial background can understand. Terri helps companies synthesize industry lingo and expertise into clear and informative content which builds smarter, financially successful individuals. You can find Terri on !

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