Workers’ Compensation Board Improperly Ignored Evidence of Fraud

New York Workers’ Compensation Board Abused Its Discretion

After the Workers’ Compensation Board ruled, among other things, that the application of Everest National Insurance Company was required to pay benefits it appealed seeking review of the decision of the Workers’ Compensation Law Judge that its actions were untimely, and from a decision of said Board, filed October 28, 2019, which denied an application by Everest National Insurance Company for reconsideration and/or full Board review. Everest appealed because it was not provided proper notice, was not the insurer and because the allegedly injured worker was perpetrating a fraud.

In the Matter of the Claim of Michel Salinas v. Power Services Solutions LLC et al., and South Side Services Inc. et al. Workers’ Compensation Board, No. 2021-0732, Supreme Court of New York, Third Department (December 23, 2021) the appellate court resolved the dispute.

FACTS

Claimant experienced a work-related accident in 2017, and a Workers’ Compensation Law Judge (hereinafter WCLJ) subsequently established the claim for postconcussive syndrome, major depressive disorder and various other injuries. The identification of claimant’s employer occurred over a series of hearings and through a number of ordered investigations, and the WCLJ ultimately found that claimant was employed by Salvador Almonte, the owner and operator of, among other businesses, Power Services Solutions LLC, and that the accident occurred while claimant was performing work for Kingdom Associates Inc., which had a contract with Power Services.

The workers’ compensation insurer for Kingdom, Starr Indemnity & Liability Company, eventually submitted a certificate of insurance to the WCLJ that indicated that Everest National Insurance Company provided coverage to Power Services at the time of the subject accident. The WCLJ determined that Everest needed to be put on notice, and a copy of that decision was mailed to Everest.

Due to an apparent printing error, Everest’s name and address on the notice of hearing were obscured by a list of the dozens of other interested parties on this claim. Everest failed to appear at that hearing, and the WCLJ ultimately discharged several other would-be employers and carriers, finding that Power Services was the proper employer and that Everest was the proper carrier.

A copy of the February 14, 2019 decision memorializing those findings was also mailed to Everest. That decision, however, continued to caption Kingdom as the employer and Starr as the carrier, reflecting same on the recipient page where Everest was still listed as only an interested party. On March 7, 2019, the Workers’ Compensation Board filed a corrected EC-1 form reflecting that Everest was the proper carrier for the subject claim.

Everest and its third-party administrator appealed to the Board on May 23, 2019, arguing, among other things, that the notice sent to it for the February 11, 2019 hearing was deficient and that it never provided coverage for Power Services. A panel of the Board denied the appeal on the ground that it was untimely, finding that, although the notice issue could possibly excuse Everest’s absence from the February 11, 2019 hearing, no explanation was provided for its delay in appealing the February 14, 2019 decision, which Everest had not denied receiving. Meanwhile, on or around September 5, 2019, Almonte was indicted for his alleged participation in an extensive insurance fraud scheme, which notably involved the creation and issuance of false certificates of insurance. By decision filed October 28, 2019, the full Board denied Everest’s application, and these appeals ensued.

ANALYSIS

A party seeking review of a WCLJ’s decision is required to file an application for review with the Board within 30 days of the filing of the decision. The Board is afforded broad discretion to accept or reject such application as untimely, and, absent an abuse of that discretion, the Board’s determination will not be disturbed

In the view of the appellate court, the Board abused that discretion.

The early stages of this claim were notably protracted, and Everest was brought into the fold a year and a half after the claim was filed, missing the first six hearings and all of the investigations regarding claimant’s actual employer and issues of coverage. Correspondence sent to Everest, including the February 14, 2019 decision, continued to facially reflect that Kingdom and Starr were responsible for this claim.

It is only in the middle of a paragraph on the second page of that decision that Power Services is named as the employer and Everest as its carrier. The Board did not update its own file to reflect the proper carrier until about one month after the February decision, and, although that may have given Everest several days in which to still file a timely appeal, there was no indication, or allegation, in the record before the court that the corrected notice of case assembly was also forwarded to Everest.

It is not difficult to understand why Everest, receiving either defective or facially misleading correspondence from the Board regarding this claim, was not immediately aware that a policy attributed to it – covering an employer with which it had never contracted – was at issue.

Significantly, the proof submitted by Everest in support of its administrative appeal strongly suggests that the certificate of insurance provided to the Board was not authentic, and, based upon the limited record before us, the certificate appears to have been an important, if not the only, factor in the WCLJ’s decision as to Everest. In other words, Everest has brought to the Board’s attention the strong possibility that it has issued a decision based perhaps entirely upon fraudulent documentation.

Although the appellate court was aware that the Board has broad discretion as to this matter and will generally not be considered to have abused that discretion by strictly enforcing its own regulations, the court found that it could discern no rational reason why the Board would decline to investigate when presented with legitimate, presently uncontested evidence that a fraud was perpetrated upon it.

It would seem unlikely that a criminal matter involving allegations of pervasive workers’ compensation insurance fraud was unknown to the Board by the time of its full Board decision or, at the very least, the Board panel decision settling the record for this appeal – issued over a year after Almonte’s highly-publicized indictment.

Under these facts, it is not an adequate answer to say that this kind of determination is usually discretionary and the very purpose of the discretion afforded to the Board is to grant relief in circumstances such as these.

Although Almonte’s criminal charges was not part of the administrative record, it is a matter of public record and need not be ignored. Based upon the foregoing, the appellate court found that the Board abused its discretion in denying Everest’s application for review.

Therefore, the court ordered that the decision filed August 5, 2019 is reversed, without costs, and matter remitted to the Workers’ Compensation Board for further proceedings not inconsistent with this Court’s decision.

ZALMA OPINION

No insurer should be abused by a workers’ compensation appeals board who ignored its own error when holding Everest to provide benefits to Almonte even though it was clear that it was the victim of an insurance fraud, the allegedly injured employee was charged with fraud in a very public manner, and the pleadings presented to the Everest by the Board deceived it into believing it was not involved. The Board’s abuse of discretion required a reversal and allowed the Board to correct its error.


© 2022 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

Subscribe to “Zalma on Insurance” at https://zalmaoninsurance.locals.com/subscribe and “Excellence in Claims Handling” at https://barryzalma.substack.com/welcome.

You can contact Mr. Zalma at https://www.zalma.com, https://www,claimschool.com, zalma@claimschool.com and zalma@zalma.com . Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

You may find interesting the podcast “Zalma On Insurance” at https://anchor.fm/barry-zalma;  you can follow Mr. Zalma on Twitter at; you should  see Barry Zalma’s videos on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; or videos on https://rumble.com/zalma. Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claimslibrary/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/ 

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