California Insurance Commissioner Poizner Announces $6.3 Million In Restitution Ordered In Workers’ Compensation Fraud Case

Chatsworth, California Company Allegedly Underreported Payroll; Pleads No Contest to Fraud

Sacramento, CA (CompNewsNetwork) - California Insurance Commissioner Steve Poizner announced that last week Cover All, Inc., a 15-year old flooring and carpet installation company headquartered Chatsworth, pled no contest to one count of insurance fraud in Los Angeles County Superior Court. On June 2, 2006, the corporation was placed on five years probation and ordered to pay $6.3 million restitution to the victim, State Compensation Insurance Fund (SCIF).

The case was referred to the California Department of Insurance's Fraud Division (CDI) by SCIF and prosecuted by the Los Angeles County District Attorney's Office.

"Fraud is a major cost-driver in California's workers' comp system and simply cannot be tolerated in any shape or form," stated Commissioner Poizner.  "Businesses are hurt, injured workers suffer, and consumers pay more because workers' compensation insurance rates are artificially raised by people cheating the system."

On September 1, 2001, Cover All obtained a workers' compensation insurance policy from SCIF, which routinely conducts audits of its policyholders. In this case, the audit revealed that the payroll reported to SCIF was significantly lower than that reported to the state's Employment Development Department. The investigation alleges that Zeev and Irit Golan were responsible for preparing the fraudulent monthly payroll reports provided to SCIF, and that those reports were reviewed and approved by Leshem. It was also alleged that Leshem and Zeev Golan provided to SCIF fraudulent payroll documents during the routine audit.

CDI's investigation determined that from September 1, 2001 to April 16, 2005, Cover-All underreported $26.9 million in payroll to SCIF, which resulted in a premium loss of $7.6 million.

Fighting fraud is one of Commissioner Poizner's top priorities.  After meeting with his Advisory Task Force on Insurance Fraud, Blue Ribbon Review Committee last month, Commissioner Poizner announced the implementation of five actions to help reduce fraudulent insurance claims, including the creation of a fusion center for fraud investigations so law enforcement can share information more efficiently and quickly to identify emerging trends and crime patterns.

Additional steps include:

Better training for the companies' special investigation units on the recognition, documentation, and reporting of suspected insurance fraud claims;
Recognizing insurance companies that go beyond compliance for their greater commitment to fighting fraud;

Increasing the outreach efforts of CDI about the consequences of fraud, how the public can recognize it and report it; and

Adopting more aggressive recruiting and retention practices, including pay upgrades, so that CDI can recruit and retain qualified investigators.

The Task Force was created by Commissioner Poizner to bring together public and private sector experts to develop innovative methods combating insurance fraud. The inaugural Task Force meeting was held in May 2007.

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