Fraud is rampant in many types of businesses, but trucking (and insurance) have always had a higher amount of it than most industries. The Merriam-Webster Dictionary defines fraud as “Deceit, Trickery, the intentional perversion of truth in order to induce another to part with something of value, deceiving or misrepresentation.” Any way you represent it, fraud is a form of theft.
Fraud usually involves some sort of elaborate scheme. Trucking (and in my business, insurance) has always been a target for many elaborate forms of deception. I have followed this for almost 30 years. From major schemes involving millions of dollars, down to the individual hustling premium on non-existent policies, there are always people willing to take the risk for a major (or minor) score.
I receive industry bulletins from both the Oregon and California Departments of Insurance from time to time. Mostly, they contain procedures that involve administrative issues, but the following News Release caught my eye, and I wanted to share it with you. This News Release does not target the trucking industry, but it may have some implication – and it strengthens my continued comment on knowing and trusting your insurance agent. There is no free lunch, and if there is, somewhere, someone is paying for it.
The News Release began with this statement: “Counterfeit workers’ compensation insurance leaves injured workers without benefits.” The News Release then went on to tell about how the California Department of Insurance had arrested Robinson Yang (44), Roland Yang (43), and Sotheany “Teny” Hul (42) of Diamond Bar, California on multiple counts of theft, fraud and forgery. The three suspects are accused of producing and selling hundreds of false certificates of insurance for workers’ compensation insurance. All three were booked between March 22 and April 3, 2013 and are being held pending bail hearings.
“The greed and deception of these individuals is egregious,” said Commissioner Jones. “This illegal activity not only left honest businesses unprotected, but also put the health and recovery of legitimately injured workers in jeopardy.” The suspects facilitated the theft by establishing three payroll service companies – Optima Staffing, United Employer Services (UES) and National Employer Services (NES) – in an effort to provide a legitimate facade for their fraudulent scheme. This information was taken from that News Release and it is public record.
The scheme targeted workers’ compensation. Workers’ comp is a touchy and costly subject in the trucking industry. The law mandates that you provide an employee with this coverage. The consequences for not providing coverage, in the event of a claim or injury, is disastrous, as you (the employer) stand the chance of losing everything that you own. Many try to skirt the issue by treating that person as an independent contractor. Beware! If you do go that way, be sure to have an attorney involved. I cannot tell you how many times I have seen an independent contractor, after being involved in an injury, immediately consider themselves as an employee. Injuries are costly, and without insurance, someone is going to be looked at to cover all of the expenses and lost revenue.
The premium for workers’ compensation is based on a rate for every $100 of payroll paid to your employee. The rates in California, generally, range from $16 to $22, but there are several variables and factors involved in the computation of developing the rate. Consider the following example: using a workers’ comp rate of $20 and a $20,000 payroll. The annual premium would be $4,000. Workers’ comp is considered a high risk coverage and statistics are compiled by both the insurance companies providing the coverage as well as the Workers’ Compensation Insurance Rating Bureau to support this. The majority of companies that offer comp coverage are looking for large premiums, and many of my companies want a minimum premium, usually starting at $25,000. So, where does that leave the small employer? In many instances, the State Compensation Insurance Fund is the only resource for those of you that need to provide this coverage to your employees.
Workers’ Compensation is only a part of the fraud problem associated with the trucking industry. The industry also participates in driver fraud and theft (or the implication in a theft), company fraud, false settlements, non-pay, and record deception, to include insurance fraud in the form of illegitimate claims, just to name a few. Often, this is looked at as “part of business” but it is not – it costs, and someone is going to lose, and, ultimately, the economic system (you and me) will have to pay. If you see fraud happening, don’t look the other way. Please, do something about it! And if you don’t trust your agent or broker, get a new one. Sometimes “following your gut” is the best thing to do – it may even save your business. If you have any questions or comments, I can be contacted through California Plus Insurance Service at (800) 699-7101.