Investigating IRBs

It is important for adjusters to determine whether or not a claimant has been scamming Revenue Canada when considering the claimant’s entitlement to income replacement benefits (IRBs), according to Donna Ford, an investigator with Northwood & Associates.

“If a person is trying to cheat an insurer with respect to an IRB claim, you

can almost be sure, based on my experience, that they are also trying to cheat [Revenue Canada],” Ford told delegates at the Annual Toronto Fraud Forum on Sept. 29.

Section 4(5) of the Statutory Accident Benefits Schedule (SABS) has been added in the new regulations, which became effective Sept. 1, 2010. This section codifies the serious consequences of a claimant’s failure to pay income tax, Ford said.

If a person fails to pay income tax, according to section 4(5), “the person’s income before an accident shall be determined for the purposes of this part without reference to any income the person has failed to report contrary to that act or legislation.”

If adjusters have any questions about the legitimacy of an IRB claim, they should ask for the income tax returns with enclosures and notices of assessment.

“An honest claimant won’t have any problem giving you that information,” Ford said.

Forms must be filled out entirely

Ford also suggests that adjusters read both part 8 of OCF-1 (Application for Accident Benefits) and OCF-2 (Employer’s Confirmation Form) carefully to determine whether the applicant has failed to fill out any of the important information or aspects of the income replacement benefit claim. If part 8 of the OCF-1 states that income information will be provided at a later date instead of being filled out, then the form is not complete and this information must be requested. It is important to determine whether the insured was “employed at the time of the accident,” according to section 5 of the new SABS, Ford said. “If not, then you can’t start the IRBs and your enquiry continues,” Ford said. “You have to figure out if the person wasn’t employed at the time of the accident, was he employed for at least 26 during the 52 weeks prior to the accident or receiving EI (Employment Insurance) at the time of the accident or self employed.” Next, examine whether the OCF-2 is legitimate and accurate — examine it carefully: What is included and what is left out, Ford cautioned. If there is information missing, adjusters should be making enquiries as to why and fill in any voids. “It’s so important to emphasize not starting IRBs until those questions are answered to your satisfaction and you feel that you are dealing with a legitimate employment situation that your company legitimately has to pay IRBs on,” Ford said.

Tax returns are a great way to determine someone’s income — and whether they were employed by a company or self-employed. People hide income and tax returns for a reason: Get to the bottom of why a claimant might be doing so in each individual instance.

Start digging

There is information an adjuster can gather quite quickly, which can aid in the investigation process, including a web search for a business phone number (often people will provide cell phone numbers as contacts), a business address, a corporation, partnership or sole proprietorship search to determine whether any of the claimant’s relatives are officers or directors, etc. By phoning the business number, versus the cell phone contact, if the person is employed by a company, an adjuster can speak with human resources to verify that the claimant was actually an employee, when the first day and last day worked were and whether the insured was a full time or part time employee or a contract or subcontract employee. The employer or human resources can also dis- close whether the claimant was paid by cash or direct deposit, are pay stubs provided and do they show deductions for taxes or benefits, and how frequently the insured is paid. “I am amazed when I get that information from the employer and then I ask the same information from the claimant, how often there are serious differences in the answers to those questions,” Ford said.

The best way, however, to get information is not through a quick call, but an actual visit to the place of employment. When you go in, you can review an employee file, including the TD1 Form which will indicate taxes withheld, (hopefully) cancelled or cashed cheques (check both front and back if possible to see when they were cashed), notice of termination (if there isn’t one, why?), punch cards or time cards if applicable, the company’s cheque disbursement journal, benefits policies, application forms, etc. When an adjuster goes right to the workplace, there exists also the opportunity to speak with other employees who might either confirm or clarify the claimant’s employment or job function. If the claimant has a physical job, determine the percentage of time the insured spent doing activities. What percentage of time is spent sitting, standing, bending, carrying or lifting; and how much weight are they lifting or carrying?

Consider other options

Sometimes employers won’t make the time an adjuster might require. For these instances, Ford suggests creating a form in-house, which includes questions and checklists that can be read-through and answered quickly. The employer can sign off at the end, or the adjuster can send a confirmation letter setting out the information provided.

Surveillance is always an option, as well, especially in the event an adjuster has a gut feeling the claimant is still working despite saying they are not. At the same time, an often under-used, yet critical, form is the OCF-13 (Declaration of Post-Accident Income and Benefits). Ford recommends using this form, which is signed by the claimant, and press the insured to have it returned within the 14-day timeframe. “Supposing you do surveillance and you find that the claimant is working during the period of surveillance and the OCF-13 comes back and indicates post-accident income, consider if you have enough evidence to deny the IRBs,” Ford said. They can be denied under section 53 of the SABS — a very important section, according to Ford, in that if an adjuster feels they have enough evidence to prove that the insured willfully misrepresented the facts concerning the IRB, then the IRBs can be denied.

“Review all the documentation carefully, looking for consistencies and inconsistencies,” Ford said. “If you cannot reconcile that it was a legitimate IRB claim then I suggest you set out the discrepancies and issues in a letter or EOB (Explanation of Benefits) and ask for income tax returns and a statutory declaration pursuant to section 33(1)(2), where the discrepancies are explained.” This request for a statutory declaration should be in addition to the full statement that you will obtain from the insured on all issues, Ford added. If the request is refused, then proceed with Examination Under Oath.