'It's the principle' for fraud unit
By Dan Nakaso
Advertiser Staff Writer
Investigators from First Insurance Co. of Hawaii kept an eye on a 55-year-old Maui man and videotaped him carrying a door and repairing a condominium when he was supposed to be disabled from a workplace back injury.
Eugene Tanner • The Honolulu Advertiser
The man had collected workers' compensation insurance for three years until he was fined $30,000 last year and ordered to pay attorneys fees.
Janice Fukuda, head of the Special Investigation Unit for First Insurance Co. of Hawaii, shows a video camera that investigators use. The three-person team investigates 70 cases of workers' compensation fraud each year.
But the case is on appeal and officials from First Insurance say it could stretch out another two to three years. When it's over, any penalties will end up going into the state's special compensation fund, which helps pay legitimate claims.
The Maui workers' compensation case was among 70 conducted every year by First Insurance's three-person Special Investigations Unit — the first insurance company unit of its kind in Hawai'i. But there's plenty of work to go around and First Insurance is among the companies supporting changes by state officials to further crack down on workers' compensation fraud.
The company wants better enforcement, in part, to help control workers' compensation costs for Hawai'i's small businesses.
"Premiums are high enough with work comp," said Stephen Tabussi, First Insurance's vice president of customer solutions. "Anything we can do to kind of lower those, or at least slow the rate of increase, is a positive. And we do have that ... responsibility to our policy holders."
State Insurance Commissioner J.P. Schmidt plans to propose legislation this session that would expand the scope of the state's Motor Vehicle Insurance Fraud Investigative Branch to include all insurance fraud.
The nine-member team would be renamed the Fraud Investigative Unit and Schmidt, for now, doesn't intend to ask for any more money or investigators.
"The best approach is to establish its authority and then receive and prosecute complaints," Schmidt said. "As we see the number of cases that come in, we will have a better idea at that point of the scope of the problem and the necessity, if any, of expanding the fraud unit."
There are no estimates for the cost or number of Hawai'i employees who engage in workers' compensation fraud each year. Mainland estimates suggest that 20 percent to 30 percent of all cases involve fraud, said Janice Fukuda, the head of First Insurance's Special Investigations Unit.
First Insurance created the team in 1995 to put an end to some of the abuse — even though the company won't ever be reimbursed.
"It's the principle," Fukuda said. "There are individuals out there who feel they can get a free ride. The message we want to get across is that they can't get away with it."
It costs First Insurance $700 to $800 per day for every investigation. State and city prosecutors don't tend to take many workers' compensation cases, said Paul Brooke, First Insurance's in-house counsel. So First Insurance turns its evidence over to the state Department of Labor and Industrial Relations, which can impose administrative penalties.
Appeals can lead all the way to the state Supreme Court and cases can drag out for years, Brooke said. Getting accused workers to finally pay penalties can take even longer.
First Insurance's investigative unit is part of the Hawaii Association of Special Investigation Units Inc., the local chapter of the International Association of Special Investigation Units, which is designed to coordinate the insurance industry's effort to combat fraud.
The group has set up an insurance fraud hotline to anonymously report abuse — (888) 98-FRAUD (983-7283). And Fukuda hopes that changes in Hawai'i legislation lead to even better communication, such as a possible statewide database that would keep track of people accused of workers' compensation fraud.
"These names resurface," Fukuda said. "A database can show patterns in individuals. Maybe a person has four other complaints."
Until they're caught, employees can bring in as much as $543 per week in workers' compensation — all tax-free. Some, such as the 55-year-old Maui construction worker, also earn untold extra money working for cash.
And some of those who are never caught, Brooke said, can continue to draw workers' compensation insurance for the rest of their lives.
Reach Dan Nakaso at 525-8085 or dnakaso@honoluluadvertiser.com.
