We thought we would start off the New Year with a case that has important implications for those of us involved in worker’s compensation claims administration. The United States Supreme Court recently declined to review a decision from the 6th Circuit Court of Appeals holding that an employer who allegedly colluded with its doctors and claims administrator to deny workers’ compensation benefits to six employees may be liable under the Racketeer Influenced and Corrupt Organization Act (RICO).

RICO, which many readers will recognize as being applied in matters involving organized crime, allows a court, among other things, to triple the amount of the plaintiff’s damages and attorney’s fees. In Brown v. Cassens Transport Co., the plaintiffs were employees who brought a claim against Cassens Transport, a Michigan company, alleging that Cassens and its workers’ compensation third party administrator deliberately selected Dr. Saul Margules and other doctors, whom plaintiffs allege were “unqualified,” to “give fraudulent medical opinions” that plaintiffs were not disabled and not eligible to receive worker’s compensation benefits. Plaintiffs further alleged that the defendants ignored other medical evidence in denying them benefits. The plaintiff employees also alleged that the defendants “made fraudulent communications amongst themselves and to the plaintiffs by mail and wire,” thereby violating RICO.

The 6th Circuit held that the facts alleged by these employees, if true, would be in violation of the RICO laws, and reinstated the suit, which had been dismissed by the lower District Court. Please note that this does not mean that the Plaintiffs proved their claim or that Defendants are liable to Plaintiffs under RICO, but merely that the allegations of the Complaint were sufficient to allege a RICO claim against the Defendants. The Court also determined that a civil suit brought by the employees under RICO against the employer, third party claim administrator, and any involved doctor would not be preempted by the Michigan Worker’s Disability Compensation Act. The Court was careful to point out that RICO did not supersede the Michigan Act as the state law did not address the fraudulent denial of workers’ compensation benefits, as Plaintiffs had alleged here.

BOTTOM LINE:

The message for those involved in claims handling is quite obvious: coordinated efforts among employers, insurance carriers, TPAs and doctors to orchestrate denials of worker’s compensation benefits are now actionable under the federal RICO Act.

The Court’s full opinion in Cassens can be read here. Thanks to the Illinois Chamber of Commerce for bringing this new case development to our attention.