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ARIZONA STATE SENATE
Fifty-Sixth Legislature, First Regular Session
workers' compensation; fraud investigations; adjudications
Purpose
Requires the Industrial Commission of Arizona (ICA) to investigate allegations of fraud made in connection with a workers' compensation claim and refer matters with credible evidence to the Administrative Law Judge (ALJ) Division for adjudication.
Background
The ICA is the state regulatory agency responsible for processing and adjudicating a workers' compensation claim (A.R.S. Title 23, Ch. 6). Any person who knowingly makes a false statement or representation for a workers' compensation claim in order to obtain any compensation, benefit or payment for themself or another person is guilty of a class 6 felony. If the person is a claimant for compensation, the claimant must also forfeit all rights to any further temporary or permanent disability compensation for the claim on which the false statement or representation was made after conviction of the offense (A.R.S. § 23-1028).
Upon request from the Director of the Department of Insurance and Financial Institutions (Director), the Attorney General (AG) may seek and obtain an injunction in a superior court that prohibits a person knowingly making a false statement or representation from engaging in the unlawful fraudulent act. The court may enter any order or judgement that is necessary to: 1) prevent the unlawful fraudulent act; and 2) return any monies, interest or real or personal property that was acquired by the unlawful fraudulent act. An order of restitution may include expenses incurred and paid by an insurer in connection with any medical evaluations or treatment services. The AG, on petition or complaint to the court, may recover from that person, on behalf of the state, a civil penalty of no more than $5,000 for each violation, if the court that finds the person has committed the unlawful fraudulent act. The court may also award the AG costs, including reasonable attorney fees and investigative costs for the services rendered. The Director must forward to the appropriate licensing agency the name of any person who is convicted of, enjoined from or penalized for the unlawful fraudulent act (A.R.S. §§ 20.466.02 and 20.466.04).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Authorizes the ICA to address fraudulent activities, statements or representations made in connection with workers' compensation claims.
2. Requires the ICA to investigate allegations of fraud either on receiving a complaint or on the ICA's own motion.
3. Directs the ICA to adopt rules to establish a process for receiving fraud complaints and conducting fraud investigations.
4. Requires the rules to establish a process:
a) by which the ICA routinely compares claimant annual earnings reported with the Department of Economic Security unemployment insurance information for the purpose of identifying workers' compensation fraud; and
b) of timeliness for receiving and processing fraud complaints.
5. Allows the rules to provide for duties and authorities of fraud investigators, including issuing and serving subpoenas for witnesses and documentary evidence, taking depositions, administering oaths and examining witnesses under oath relevant to the fraud investigation.
6. Requires the ICA to refer a matter to the ALJ Division for a hearing, if an investigation reveals credible evidence of fraudulent activities, statements or representations made in connection with a worker's compensation, benefits or payment claim.
7. Requires the hearing to be conducted as expeditiously as reasonable, but no later than 60 days after the matter was referred.
8. Requires the ALJ to grant relief at any time, even if the prior notice or award granting benefits were final, if the ALJ concludes by a preponderance of the evidence that a person knowingly engaged in fraudulent activities, statements or representations for the purpose of obtaining compensation, benefits or payments.
9. Requires relief to include forfeiture of the right to any future temporary or permanent disability compensation or any other benefits for the claim on which the fraudulent activities, statements or representations were made.
10. Allows any person aggrieved by a decision from the ALJ to request a review of the decision in accordance with the workers' compensation hearing requirements.
11. Requires any hearing and decision relating to investigations of workers' compensation fraud to be conducted in accordance with workers' compensation hearing requirements relating to hearing rights and procedure, ALJ awards and decisions on review.
12. Asserts that the requirement for the ICA to investigate and adjudicate workers' compensation fraud does not limit:
a) the authority of the ICA, the Department of Insurance and Financial Institutions or any other entity to pursue statutorily prescribed legal remedies; or
b) the right of an insurance carrier, a self-insured employer or the ICA's Special Fund to issue a notice affecting the status of a workers' compensation claim at any time, if prior determination of compensability or entitlement to benefits was procured by fraud.
13. Requires any person receiving permanent workers' compensation benefits to report annually, on the anniversary date of the award, to the ICA, in addition to the self-insured employer or insurance carrier, all of the person's earnings for the prior 12-month period.
14. Makes technical changes.
15. Becomes effective on the general effective date.
Prepared by Senate Research
January 30, 2023
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