Business moves fast and sometimes decisions you make in the heat of the moment can lead to litigation later. Some contractors are even charged with fraud based on evading insurance claims or failing to report claims. Here’s a look at some of the latest construction insurance fraud lawsuits that have made waves in New York, the East Coast and the rest of the United States.
The death of the worker leads to murder and fraud
In 2018, a worker in New York was killed in an excavation when an adjacent masonry wall collapsed and trapped him. According to Equipment World, the owner and operator of WSC Group (the construction company on the project) has been convicted of criminally negligent homicide, fraudulent practices that violated workers’ compensation laws, fourth-degree city tax fraud and related counts. Prior to the incident, work had continued despite warnings about the dangerous conditions. The additional fraud charges stem from lying to the New York State Insurance Fund about the company’s employees and failing to pay taxes between 2015 and 2018. A supervisor has also been convicted of crimes.
Workers Comp Insurance Fraud Results in Charges and Guilty
In January, the Manhattan District Attorney announced an indictment against Oneteam Restoration Inc., the company’s owner and president, and the company’s CPA. The defendants are accused of submitting documented payroll documents claiming a much smaller workforce, thereby underreporting the company’s payroll by more than $16 million and defrauding the New York State Insurance Fund of more than $7 million in workers’ compensation premium payments.
In another case from January, the Manhattan District Attorney announced an indictment against Juan Escobar and his plastering and carpentry business. As above, this case involved defrauding the New York State Insurance Fund of insurance premium payments by underreporting wages. Escobar allegedly cashed more than $26 million in checks to fund the unreported payroll and defrauded the insurance fund of nearly $3 million in insurance premium payments.
In March, the Manhattan District Attorney announced that unlicensed employment broker Salvador Almonte, Jr. had pleaded guilty to insurance fraud. Almonte’s company avoided more than $1 million in insurance premiums and left more than 100 construction workers uninsured by underreporting the size of the companies and lying about the work they performed. Almonte will have to pay $500,000 in restitution and serve five years of probation.
Nuisance claims can burden construction companies in NY
According to Spectrum News, suspicious Scaffold Law damage claims have caused alarm in the industry, with some people claiming that construction companies in New York are being burdened with inconvenience. One construction company owner says he’s seen an increase in injured workers claiming falls over the past three years, and the president of the New York City Special Riggers Association said some larger companies have seen a 200% to 300% increase in suspicious claims . . The suspicious claims usually involve new workers falling from a low height without witnesses. The incidents usually lead to lawsuits under the Scaffold Law. These lawsuits do not go to trial and have a guaranteed payout of thousands of dollars.
Misclassification of employees leads to insurance fraud Guilty basis
The Manhattan District Attorney says the presidents of Dragonetti Brothers Landscaping, Nursery, & Florist Inc. have pleaded guilty to insurance fraud charges. The company is accused of evading more than $1 million in insurance premiums while accepting contracts in New York City for sidewalk and road repairs. The company’s employees were allegedly misclassified for financial gain, putting workers at risk and undermining the public bidding process.
Failure to report damage results in insurance fraud charges
According to KSTP, the owner of Giron Construction LLC — a construction company in Eden Prairie, Minnesota — has been charged with insurance fraud after failing to report a worker injury at a job site. The worker was injured when a nail he was driving bounced back and hit him in the eye. According to court documents, instead of reporting the injury, the owner gave the worker eye drops and instructed him to lie about how the injury happened. The worker later filed a workers’ compensation claim, but the claim was denied and the owner reportedly denied knowing who the worker was.
Man charged with roof fraud
The Insurance Journal says John Sutton — doing business in Florida as Kaizen Construction Group — has been charged with unlicensed contracting, insurance fraud and failure to obtain workers’ compensation. Sutton allegedly had a salesman go door-to-door soliciting Tampa-area homeowners for roof replacements and instructing them on what to say when filing an insurance claim. He convinced some homeowners to sign documents awarding benefits to his roofing company. Sutton and Kaizen Construction may be liable for more than $41,000 in insurance claims and may have exposed hundreds of homeowners in the state.
As these cases illustrate, workplace safety, prompt injury reporting and proactive risk management are essential in the construction industry. Do you need guidance? BNC provides insurance coverage designed for the construction industry. Read more.