Insurance providers and construction industry leaders are raising alarms over what they describe as an unprecedented surge in fraudulent worker injury claims across New York City. According to court filings and an investigative report by ABC News, many workers may be faking injuries to secure workers' compensation benefits and lucrative liability insurance settlements.

However, worker advocacy groups and legal representatives argue that the claims of widespread fraud are exaggerated. They contend that the legal system has safeguards in place to identify and dismiss fraudulent cases before they result in unwarranted payouts.

ABC News quoted Don Orlando, an executive with Tradesman Program Managers, a firm specializing in underwriting and managing insurance programs for contractors. Orlando stated that he has observed "evidence of a widespread conspiracy" to stage accidents and exaggerate injuries. He noted that an increasing number of these incidents have been exposed by surveillance footage, and he urged construction site managers and property owners to invest in security cameras as a preventative measure.

Despite efforts to detect fraud, some insurers have fallen victim to the schemes. In one notable case reported by ABC, an insurance provider paid over $3 million to a worker despite medical assessments indicating that he had not sustained any real injuries. Additionally, legal documents show that a single Bronx apartment building has been the focal point of at least 30 injury claims—all involving workers employed by the same company. The director of the Coalition Against Insurance Fraud highlighted this as a strong indication of coordinated deception.

In response to the growing concerns, Tradesman Program Managers and two reinsurance firms have initiated legal action against numerous individuals and entities, including workers, attorneys, and medical professionals allegedly involved in orchestrating fraudulent claims.

According to the lawsuit, “Defendants … orchestrated a widespread fraud scheme to defraud Plaintiffs and others by (i) unlawfully grooming and recruiting construction workers into staging and perpetuating fake construction accidents that occurred in New York and/or transforming legitimate minor or localized injuries into lucrative full-body claims; (ii) preparing and collecting documentation as well as submitting, filing, prosecuting and asserting fraudulent workers’ compensation claims and personal injury lawsuits on behalf of such construction workers; (iii) providing or alleging to have provided medically unnecessary and excessive healthcare services to such construction workers; (iv) providing monies directly or indirectly to Defendants and to Claimants to fund the fraud scheme; and/or (v) using the fraudulent diagnoses and medically unnecessary and excessive healthcare services to inflate settlement value,” the complaint alleges.

The case is expected to reveal further details about how fraud rings allegedly manipulate the system. The defendants have yet to submit an official response to the lawsuit, but legal experts suggest that the outcome could set a significant precedent for how construction-related insurance fraud is handled in New York moving forward.

While industry groups push for stricter regulations and enhanced oversight to curb fraudulent claims, worker advocacy organizations continue to emphasize the importance of preserving fair access to workers’ compensation for those who are genuinely injured on the job.

Originally reported by Insurance Journal.