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Challenges And Solutions In Defending Against Fraudulent Workers’ Compensation Claims

Workers in New York have a right to receive medical care and wage replacement benefits for work-related injuries or illnesses that are covered by their employer's insurance. However, businesses also have a right to defend themselves from fraud and unnecessary or exaggerated claims from employees. According to the latest workers' compensation fraud report from the Offices of the Inspector General, the Workers’ Compensation Fraud Inspector General (WCFIG) discovered $2.7 million in fraud in 2024 and made 14 arrests, which was a 30% jump from the previous year. The WCFIG also found that there were 1,436 complaints alleging fraud by claimants, medical providers, or employers.

Employees in New York State can be held personally and criminally liable for engaging in workers’ compensation fraud. The state treats this as a serious offense under both Workers’ Compensation Law (WCL) and the New York Penal Law, with penalties ranging from loss of benefits to fines and imprisonment. Employers who believe they may have been targeted for fraudulent workers' compensation claims may benefit from contacting an experienced New York business litigation and employer defense lawyer like Schwab & Gasparini (315) 422-1333.

Legal Bases For Defending Against Workers' Compensation Fraud

The primary statute addressing employee fraud is the New York Workers’ Compensation Law § 114-a, which states that if a claimant knowingly makes a false statement or representation about a material fact for the purpose of obtaining workers’ compensation benefits, the Workers’ Compensation Board (WCB) shall disqualify that person from receiving any compensation directly attributable to the false statement. Under § 114-a, the WCB can suspend or permanently revoke the worker’s benefits, order repayment (restitution) of any benefits received fraudulently, or impose a discretionary penalty equal to the amount of the false claim, which essentially doubles the loss. For example, if $10,000 in benefits were obtained fraudulently, the WCB could order repayment of that amount plus another $10,000 as a penalty.

Fraudulent workers' compensation claims may also trigger prosecution under the New York Penal Law and be charged as insurance fraud. Depending on the amount involved, this can range from a Class A misdemeanor (fraud under $1,000) to a Class B felony (over $1 million). Under Article 175, claimants may be charged with falsifying records, resulting in fines up to $50,000 or double the amount gained by fraud, whichever is greater. In short, employees who commit workers’ compensation fraud in New York face serious repercussions. They can lose their benefits under WCL § 114-a, be fined or forced to repay benefits, and face criminal prosecution under Penal Law Article 176 for insurance fraud, which carries penalties up to 25 years in prison depending on the scale of the fraud.

What Are Some Of The Best Practices For Defending Against Workers' Compensation Fraud?

Here are the key strategies and tools that can be used to counter fraudulent claims.

• Proactive Monitoring & Auditing – Regular audits of payroll records, employee classifications, wages, timecards, and incident/accident reports are essential, along with ensuring accurate, up-to-date documentation in later defense. Examining the prior claims history of employees to check for potential suspicious patterns, like switching doctors or filing multiple claims. 
• Use of Independent Medical Examinations (IMEs) and Medical Reviews – Requesting IMEs when there is suspicion of exaggeration or misalignment of medical evidence. Medical experts may also be called upon to compare claimed injury vs medical records, diagnostic tests, etc.
• Investigations / Surveillance – Private investigators may perform surveillance (within legal limits) to see whether the claimant’s claimed limitations or disabilities are consistent with observed reality. It may be worth it to verify whether the claimant is working elsewhere while receiving benefits, as that could also suggest fraudulent activity. 
• Improved Reporting, Public Outreach, and Whistleblower Complaints – Encouraging the public, coworkers, and employers to report suspected fraud. The WCFIG’s complaint tools online and by phone also help aggregate tips. 

Employing these strategies and understanding the legal basis for workman’s comp can help businesses protect themselves from fraud. 

Case Studies Of Fraudulent Workers' Compensation Claims In New York

Here are some of the most high-profile examples of workers' compensation fraud in New York State. 

Losurdo v. Asbestos Free (NY Court of Appeals, 2003)

Appellant James Losurdo sought workers' compensation benefits for a knee injury, but denied the existence of a previous knee injury. The employer argued that the original denial was false and thus a basis for disqualification under § 114-a. The court held that § 114-a authorized the WCB to impose a discretionary penalty even in cases where the false statement is not “directly attributable” to the compensation claimed. 

Gallagher – Coaching & Sales While Collecting Benefits

The NYS Inspector General announced in 2025 that it had caught Nicholas Gallagher coaching a boys’ varsity soccer team at St. John the Baptist High School, plus working as a sales representative for Lacrosse Unlimited, all while receiving over $13,000 in workers’ compensation benefits. Gallagher claimed compensation from an alleged back injury at the workplace in 2021 and had informed doctors and the WCB that he was not working as a result of his condition. It was later determined that Gallagher collected $37,000 in unreported income from coaching and another job during the same time period. 

Esposito – Running A Food Truck Business After Claiming An Injury

In the same announcement, the NYS Inspector General disclosed that Antonio Esposito, an ex-National Grid employee, had pleaded guilty in the Suffolk County First District Court to Petit Larceny for fraudulently collecting over $28,000 in benefits. An investigation found that Esposito had reported a back injury to claim workers' compensation, but was then seen actively managing his cheesesteak food truck business with his wife. Esposito was forced to pay restitution and was given a conditional discharge.

How An Experienced Business Litigation & Employer Defense Lawyer Like Schwab & Gasparini Can Help

An experienced lawyer can play a critical role in helping a New York business defend against workers' compensation fraud by combining investigative, procedural, and strategic expertise to protect a company’s finances and legal standing. The skilled New York workman’s comp defense team from Schwab & Gasparini can help employers understand the risks and address potential fraud. Businesses that think they could be being taken advantage of by workers' compensation fraud should look into contacting the firm at (315) 422-1333 to ensure the best possible outcome in a potential legal conflict.

Mon Jan 12 2026, 12:00am