Bus and Motor Coach Library

Fraudulent Injury Claims – On the Rise!  

Author Mr. Brian Leck, General Counsel for the Toronto Transit Commission (2001)

Fraudulent injury claims have become a source of great concern to the bus industry. As an issue, it is organized under the Three “F” Words.

The first "F" word, is the term Fraud. It is a core problem in transit and insurance related claims. It involves a simple notion: Lie and take advantage to get money from someone else.
Fraud is a problem for all ages and all cultures.   The child says, "Mom, my tummy aches, I can't go to school".  The adult says, "My head aches, my neck aches, my back aches, I can't go to work". In some respects, it is more important to know who is sick - the person and the circumstances - than what the sickness is.

Fraud has been around a long time and is becoming increasingly popular and prevalent. The insurance industry estimates that many billions of dollars in direct payments are made for insurance fraud in North America each year, and, conservatively, that much again is additionally spent for related costs, such as ambulance, hospital, medical and claims administration expenses.

The second "F" word is fault, or more appropriately the absence of fault, as in "no-fault". 
There was a time when any claim, fraudulent or not, had to be attached to an allegation of fault in some way.  Fault implied responsibility for wrongdoing.  People would say, "It's your fault", meaning it's your responsibility.  "You did some wrong - you right the wrong."          

Unfortunately today, in the area of motor vehicle claims, most jurisdictions are legislating away the idea of fault.  We are then left with the following scenario:

XY Transit Company or YZ Bus lines, although the accident may not be your fault, even despite an impeccable safety record, you are still held responsible by the courts to pay those claimants who say they were injured by or on one of your vehicles.

Under the no-fault system, transit companies have become particularly vulnerable to fraudulent claimants.
This leads to the third "F" word - Frustration.

A fraudster can choose the time, place and manner of the "incident" which gives rise to a claim.  The levels of compensation, however, are not often up for negotiation, but are mandated by legislation and are to be paid within strict time limits.  Pay now and dispute later is the governing principle relating to some benefits.

Disability Claims: (The Three "L" Words)
One of the interesting things about suspect personal injury claims is that they involve primarily subjective complaints - lots of subjective complaints. This is the first "L". The fraudster says, "No one can know or verify my pain, I hurt, I ache, I'm depressed, in fact I can hardly move, let alone try to work.  And it is all a result of that transit accident." 

The second "L" - lots of medical and treatment reports.  These are easy to generate.  For example, a claimant could attend a physician today and say, "Doctor, I fell on the ABC Transit bus last week and banged my head on a pole.  I've had severe headaches all week and continue to have severe headaches." 

The doctor will complete a medical form and a report with some fancy medical jargon to the effect that "the patient suffers from post-traumatic headache syndrome, consequent to a motor vehicle accident seven days previous". 

The doctor may add a diagnosis of chronic pain syndrome, fibromalagia, and various psychiatric disorders including depression and post-traumatic stress disorder.

The fact is that the claimant may not have been involved in any accident last week, and did not have headaches as alleged. There is no way for the doctor to know. This medical report, prepared solely on the basis of subjective complaints, is often seen as validating the alleged injury.

Finally, and typically, the claimant continues on with the third "L" - lots of treatments - chiropractic, physiotherapy, massage and any other type currently in vogue. This is also supposed to legitimize the claim.  The claimant must be seriously injured and suffering, since he or she is proceeding to obtain all these treatments.  This is a cash cow for treatment facilities.

For a fraudster, this whole process may look pretty easy.  Indeed, some in the industry may be familiar with the expression, "easy money". 

For an insurance or transit company though, this situation can lead to serious financial difficulties.              Indeed, that is what happened in Philadelphia some 10 years ago.  SEPTA, the South East Pennsylvania Transit Association, was in severe financial straits, arising in part from a staggering increase in questionable injury claims. 

However within four years, SEPTA cut their total claims in half, from in excess of 15,000 per year to less than 8,000 claims per year, with dramatically reduced financial liabilities. 

What did SEPTA do that was so effective?  The answer to this lies in one word - Deterrence!  Deterrence has three components - the three "P's", the three "I's" and the three "S's".

The Three "P's"

The first "P" stands for prosecutions.  It is important for potential fraudsters to know that if they get caught, they may face criminal charges. 

Unfortunately, some people regard insurance fraud as socially acceptable, like cheating the income tax department.  However, with the threat or potential of criminal charges, putting forward a fabricated claim becomes much more precarious.  It is no longer "easy money".  In addition to legal fees, fraudsters may face financial penalties, jail time and a criminal record.

Laying criminal charges in just a few select cases, and publicizing them, is one of the most under-utilized weapons available to insurance and transit companies.

For example, where a so-called "disabled" claimant is captured on videotape playing a vigorous sport such as hockey, or doing heavy construction work all day, charges should be considered.  This can be done in one of two ways.  First, the evidence could be packaged and provided to police, with a request that the police investigate and, if warranted, lay charges. Alternatively, the transit company might attempt to lay a private complaint.  In many jurisdictions this involves attending before a Justice of the Peace and presenting evidence to show that there are reasonable and probable grounds that a fraud or attempted fraud has been committed.

In Philadelphia, a fraudulent claims campaign was organized involving the police and the Prosecuting Attorneys.  A number of charges were laid and convictions attained.

An effective advertising campaign followed, promoting the fact that fraudulent claimants were successfully being convicted and punished by incarceration and/or substantial fines. Following this campaign, claims against SEPTA dropped dramatically.

For about nine months, the Toronto Transit Commission Legal & Claims Department worked closely with the police in investigating an apparent fraud ring operating in the Toronto area.  After an extensive investigation, a number of charges were laid against claimants, doctors, and other treating professionals. 
Very shortly after these charges were laid, a number of claims were dropped. It seems a number of claimants suddenly experienced miraculous cures and recoveries without ever visiting Lourdes. 

The second "P" stands for Police.  Whether charges are laid or not, there is a deterrent value in the mere involvement and presence of the police during an accident investigation or otherwise.

Shortly following an August 11, 1995 subway accident, the TTC Legal & Claims Department worked with the police and established a police hotline for reporting claims. The hotline was well publicized.  The TTC also directed claimants to notify and to report to the police.  Not surprisingly, a number of people, despite their call to the TTC, failed to notify the police.  Needless to say, each of these claims was marked as suspicious, and all of them were ultimately dropped.  GO Transit (Toronto), with respect to a collision involving two trains in the late 1990's, used a similar approach with success.

The third "P" is for philosophy - defence philosophy.  In a nutshell, the defence philosophy represents the coherent, consistent philosophy of the entire Legal & Claims Department.

As a basic principle, each case must involve a proper and detailed analysis and assessment of the claim on the merits.  Except in extraordinary situations, a decision to settle a claim should not be based on "economics" or "mere possibilities".  There will always be cost and risk factors in proceeding through litigation.  The focus should be on the nature and strength of the evidence, a determination of what probably happened, and an assessment of what an adjudicator would likely find after a hearing. 
Claimants need to know there will not be an automatic "out-of-court settlement" at mediation or in settlement discussions in every case; that the transit company is not prepared to pay claims just to close files.  Rather, claimants must understand that the claim will be carefully and thoroughly scrutinized and, if appropriate based on the merits, the claim will be fully defended.

With this general defence philosophy in mind, how does a transit company effectively resist fraudulent claims in individual cases?

Part of this answer is the three "S's" of deterrent strategy.

The Three "S's"

The first of the three "S's" stands for speedy investigations, including the taking of detailed statements.  This is critical.

Abraham Lincoln once said, "A lie is up, dressed, and half-way down the street before the truth has a chance to put its pants on".  If you don't move quickly, you will never catch up to the lie.
Accident cases are unlike any other types of cases. In a matrimonial case, or in a commercial case, there is usually a historical relationship between the parties, one that has gone on for years.  In a motor vehicle accident case, the parties have generally never met.  If the transit company knows nothing about the claimant, this creates a huge opportunity for abuse. 

One needs to focus on just one aspect of speedy investigations - statements.
A key way to give the truth a chance to catch up is to obtain detailed statements early on.  These statements can be used to pin witnesses down on details of an incident and alleged injuries, and can be used later to attack credibility in any legal proceeding.                

Further, if done quickly, information can be obtained directly from a claimant often before a lawyer is retained - a lawyer who may object to many or most questions.

The Toronto Transit Commission (TTC) successfully used a large number of adjusters and obtained statements very shortly after the August 11, 1995 subway crash.  As a result of inconsistencies and inaccuracies in these statements, many claims were dropped.  Many of the inaccuracies were gross and fundamental, whereas others were small but many in numbers.

For example, some claimants said that they were on one of the trains in the collision, going in a northbound direction.  The trains actually involved in the collision were going in the other direction - southbound. Other statements contained inaccuracies about lighting on the trains, the evacuation process and other details at the scene.  These minor inconsistencies helped create a mounting wave of loss of credibility for many of the claimants. 

Several claimants dropped their claims at mediations or examinations for discovery when confronted with false information in their statements.  Although there is no hard evidence as to why many of the claims were dropped, over one-third of the claims advanced in the class action against the TTC were ultimately dropped without any payment being made.  We know that a number of these though were dropped directly as a result of conflicting evidence given in earlier statements.

The second "S" is for surveillance. There are two basic theories of surveillance, (1) the BINGO theory, and (2) the CHESS theory.

Based on the BINGO theory, when a claim comes in, the adjuster quickly responds by sending out an investigator to follow the claimant for several days.  The claimant has maintained that he or she is disabled, and portrays himself as disabled in some doctor's office. 

An investigator makes the effort to capture on video a claimant engaged in an activity which would appear to be inconsistent with the disability.  When this happens, the adjuster says, "BINGO", and that is usually the end of the claim. 

Some of these surveillance videos can be quite amusing.  The TTC has caught individuals playing sports, moving furniture, engaging in strenuous exercise and other sorts of other physical activities, around the time various doctors have certified that these individuals were totally disabled. 

Often times a claim is made regarding head, neck and shoulder pain as the basis for the ongoing disability, and often surveillance of an individual can be obtained carrying out everyday activities such as grocery shopping, and carrying grocery bags to the car, going to the local gym.  Such surveillance can sometimes be of mixed value, but oftentimes a claim can be quickly undermined.

The BINGO theory is fine as long as you win, but you can also lose in BINGO.  The way you lose in BINGO surveillance is that an investigator goes out to observe the claimant. However, in this scenario, the investigator never observes the claimant leaving his or her home, or does observe the claimant but at that time the claimant is not participating in any significant or regular activity, and in fact seems to be moving about very slowly.  The difficulty is that this evidence is producible and can be brought out at trial or arbitration. 

In fact, many claimants' lawyers consider using this as part of their own case. For example, if an adjuster has made many attempts to "catch" a claimant doing some activity all without success, the claimant's lawyer may stand up at trial and say "the defense spent thousands and thousands of dollars and sent investigators out on six separate occasions, but not once did they find my client engaged in any significant, strenuous activity".  The surveillance then comes back to bite you. 

Now perhaps you have a legitimate claim, but don't assume that you necessarily have a legitimate claim.  Sometimes when you lose at BINGO surveillance, the game is fixed.  You should know that sometimes lawyers and others may advise claimants to be aware that the transit company or insurance company may hire investigators - so "be careful, beware". Claimants may be advised by a variety of people to in effect "lie low".  Further, in some areas, there may be in effect constellations of claimants, claimants with insurance company claims, transit company claims, or workers' compensation claims, who live in the same areas and who communicate with each other - and often keep a lookout for each other.  As well, a claimant may at some point simply become aware or suspicious that he or she is being followed. 

In the face of the above, the best advice is to still use surveillance, but not in a routine and totally predictable way.  Surveillance should be used in a creative and strategic way if at all possible. Most people are creatures of habit and sooner or later will fall back into their old ways - whether it involves shopping, golf or some other activity.

As a very simple example, a good time in some cases to conduct surveillance is after a period of dormancy or inactivity on a file - a time when the transit company has been "lying low".  The claimant, in his own mind, may then have temporarily put aside his claim, having not heard from any lawyers, paralegals or doctors.  There are a variety of other, different, and much more sophisticated ways to play the game.

The third "S" is for staffing.  We believe that generally there are significant benefits with in-house legal and claims staffing.  One of the major benefits is that an in-house group is able to develop specialized knowledge of the transit company's vehicles, procedures, personnel, security arrangements, safety standards, claims trends, and so forth. 

This alone can result in much greater efficiency, insight, and effectiveness than can be obtained by using various outside services. 

A second major advantage is the perceived costs of in-house versus outside legal or adjusting personnel.  A common pitch made to insurers to settle cases is the potential high legal costs involved in defending a claim through to trial. When outside counsel is involved, the hourly rates are often well in excess of $300.00 per hour.  This cost, plus other "support" costs when placed on a ledger sheet and multiplied out over the length of full litigation can be significant. This fact alone can be a strong point utilized by claimant's counsel to push for a substantial settlement, particularly if the claimant has little or no assets, and is thus "costs proof", or judgment proof.

Although there is a cost for in-house adjusters and lawyers, the argument with respect to costs is seldom made or pursued, with them, and to the extent that it is, it is generally pushed aside very quickly.  It is the TTC's objective to communicate the view to outside claimants and their lawyers that we intend to defend claims on the merits, that defense costs are not a deterrent, and we are just as happy to work on one file as another.  This tends to focus discussion on the merits of the claim.                                      

Finally, with respect staffing, it is important to ensure that there are adequate resources to fight claims.  If this is not provided, there may be a tendency to quickly settle cases at excessive amounts in order to close files.  In the short term, this many generate some minor savings on a staff budget sheet, but this will be more than offset by the substantial increase in the payouts of claims over future years.  It is important to commit adequate resources to the fight against fraud.

The Three "I's"

The final grouping of considerations relates to the three "I's".

The first "I" is for information technology, which is becoming increasingly valuable in assessing, analysing and managing claims.  On or about October of 1999, through discussions amongst insurance adjusters utilizing an in-house computer system, the TTC Legal & Claims Department became aware of a pattern of suspicious slip and falls occurring in the rear areas of TTC buses. 

A similar constellation of legal representatives, treating doctors and rehabilitation clinics appeared in claim after claim.  Each of the incidents involved a similar pattern of falls, with one witness always present to "corroborate" the incident. 

An extensive investigation ensued in consultation with the police.  In the end, 31 individuals were charged.  Although the information technology alone may not prove a claim to be fraudulent, it can certainly raise red flags and highlight suspicious patterns.

The second "I" represents information gathering, and this is an ongoing process.

It is important to note that fraudulent claims come in many shapes and sizes.  Understanding some of the distinctions involved in fraudulent claims may be of assistance in determining the kind of background information, which needs to be developed in order to properly resist, a particular claim.

First, there is the classic fake accident and fake injury.  We might call these claimants "conspirators".  This could involve a staged fall at the back of a bus with a completely spurious injury claim. 

A second situation is what might be called the "opportunist".  This is a person who happens to be involved in a real accident, but who then either fakes an injury or grossly exaggerates what is truly a minimal injury.

A third scenario is often more difficult to detect, and is the person who comes to say, "this is too good to be true".  This claimant is the one who is involved in a real accident and initially suffered a real, disabling injury.  However, as human beings are sometimes prone to do, this person gradually gets better over time. 
However, this same person has also become very comfortable with the "nice" weekly benefit check and does not wish to give it up.  He or she doesn't want the tap turned off, and continues doing what is necessary to maintain the posture of disability to ensure the continuing payments.  Further, this claimant comes to realize that the longer and more severe the "disability", the more likely there will be a larger, ultimate settlement at the end of the day.

Finally, there are the individuals who most loudly proclaim "you ruined my life".  These are individuals who in fact had serious pre-existing health problems, physical problems or psychological problems or both.  They become involved in a very minor accident, an accident that is truly a "non-event". However, these people then attempt to pass on or attribute all of their symptoms and problems to the accident.  The accident for them is a "compensable event".  If you were to meet them, you might well believe that they have significant health problems.  Indeed they do.  But these serious health problems were simply not caused by the relatively minor incident involving a transit company vehicle.

Because of the variety of claims, information gathering is an extremely important element.  One important area is medical information.  Now all serious health problems, particularly psychological and emotional problems are not always reported to doctors, and this can make defending these claims more difficult. Still, as a routine matter, the adjuster or lawyer for the transit company should obtain the clinical notes and records of the family doctor for at least several years prior to the accident.  If there is a government registry (such as OHIP in Ontario), then these computerized records should be obtained for a period of a number of years prior to the accident. 

A "new family doctor", one who does a lot of motor vehicle injury work, suddenly taking over the medical care for an individual, can be a red flag that there may have been some pre-existing problems. These valuable records can assist in creating severe credibility problems for a claimant.  For example, if a claimant attested in a statement or at an examination for discovery that they had perfect health before an accident, and a doctor's clinical notes show severe back pain right up to the time of the accident, the entire claim becomes suspect.

The third and final "I" stands for independent medical examination.  Family doctors and treating doctors generally are not in a position and do not perform the function of objectively and forensically, assessing a patient.  As a treating doctor, the doctor effectively assumes that they are being told the truth by the patient, and that the behaviors displayed to them are bona fide.  The treating doctor's diagnosis is based on this assumption.

An independent medical examination is designed to be an objective, forensic assessment of the alleged injuries.  Part of the examination involves not the assumption, but rather the testing, of the veracity of the complaints.  The examining doctor will review all of the medical records, conduct an interview and conduct various medical tests and procedures. 

As a simple matter, the doctors may formally ask a patient under examination to rotate the head - at which point the patient groans and can barely move.                      

However, the doctor may also have observed this same patient in the waiting room fully and easily turning his head back and forth, or fully turning and extending his head when distracted, such as when another area (e.g. the knee) is examined. 

Independent medical examinations are not fool proof, and these doctors can also be misled. However, appropriate use of independent medical examinations can help undermine many questionable claims.

Personal injury fraud is a serious and insidious problem.  It is a real financial burden for transit companies, and society as a whole. It is my hope that some of the ideas raised and discussed in this article will assist transit and insurance managers, adjusters and lawyers to better fight the good fight in reducing fraudulent injury claims.