Colorado: Lawmakers nix bill to restrict comp surveillance

A Colorado Senate committee voted to kill legislation aimed at restricting the use of surveillance by employers and insurers in workers' compensation fraud investigations.

H.B. 1012, sponsored by Rep. Sal Pace, D-Pueblo, would have required employers and insurers to establish a "reasonable basis" before they could use surveillance on employees suspected of engaging in workers' comp fraud. Insurers also would have had to destroy case materials after five years unless the material related to an ongoing investigation. In addition, the bill would have required investigators to disclose to suspects that surveillance was under way, if questioned, which critics of the legislation feared would have created potential hostile confrontations.

Pace said the bill's original intent was to block abusive practices by insurers. In a series of hearings into Pinnacol Assurance, Colorado's state-chartered, but independently run and funded workers' comp insurance firm, individuals testified that the insurer allegedly intimidated claimants through its surveillance practices in an effort to secure settlements. The lawmaker noted that Pinnacol spent $4.7 million on surveillance in 2008, which led to only 10 fraud convictions out of more than 50,000 claims.

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Despite being approved in the Colorado House in early March, the state's Senate Judiciary Committee rejected the bill in a 4-3 vote. Critics of the legislation, including the Coalition Against Insurance Fraud, said the measure would have imposed needless legal burdens and hurdles on insurers and employers in conducting needed investigations of fraud suspects.

"This is a victory against workers' compensation fraud," said Howard Goldblatt, director of government affairs for the coalition. "Preserving the ability to fully investigate suspected schemes will benefit consumers and businesses throughout Colorado. Having to continually determine a reasonable basis before every investigation would've erected burdensome legal barriers that could've impeded an insurer's ability to conduct timely and effective investigations."

Goldblatt said surveillance also is a valuable tool for normal risk management such as determining an injured worker's readiness to return to work. The bill, he said, would have limited this essential cost-saving function designed to assist both the insurer and worker.

Read more at the WORKERSCOMP Forum^TM homepage.

June 10, 2010

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