Construction Insurance Litigation Roundup
Business moves fast, and sometimes, decisions you make in the heat of the moment can lead to litigation later on. Some contractors are even accused of fraud based on evasion of insurance requirements or a failure to report injuries. Here’s a look at some of the recent construction insurance fraud litigation that has been making waves in New York, the East Coast, and the rest of the United States.
Worker’s Death Leads to Homicide and Fraud Conviction
In 2018, a New York City worker was killed in an excavation when an adjacent masonry wall collapsed, trapping 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 criminal tax fraud, and related counts. Prior to the incident, work had continued despite warnings about the dangerous conditions. The additional fraud charges stem from lies to the New York State Insurance Fund about the company’s employees as well as a failure to pay taxes between 2015 and 2018. A foreman has also been convicted of criminal mischief.
Workers’ Comp Insurance Fraud Results in Indictments and Guilty Plea
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 filing doctored payroll-related 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 drywall and carpentry companies. Like the above, this case was for defrauding the New York State Insurance Fund out of insurance premium payments by underreporting payroll. Escobar allegedly cashed more than $26 million in checks to fund the unreported payrolls and defrauded the insurance fund out of nearly $3 million in insurance premium payments.
In March, the Manhattan District Attorney announced that unlicensed labor broker Salvador Almonte, Jr. had pleaded guilty to an insurance fraud scheme. Almonte’s companies evaded 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 were performing. Almonte will have to pay $500,000 in restitution and serve five years’ probation.
Nuisance Claims May Be Burdening NY Construction Companies
According to Spectrum News, suspicious Scaffold Law injury claims have caused alarm in the industry, with some people claiming New York construction companies are being burdened with nuisance claims. One construction company owner says he’s seen a spike in injured workers who claim they’ve fallen in the last 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 typically involve new workers who fall from a low height with no witnesses. The incidents usually result in lawsuits under the Scaffold Law. These lawsuits don’t go to trial and have a guaranteed payout of thousands of dollars.
Employee Misclassification Leads to Insurance Fraud Guilty Plea
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 New York City contracts for sidewalk and road repair. The company’s employees were allegedly misclassified for financial gain, which put the workers at risk and undermined the public bidding process.
Failure to Report Injury Results in Insurance Fraud Charge
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’s injury on a job site. The worker was injured when a nail he was hammering bounced back and struck 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 in Roofing Scam
Insurance Journal says John Sutton – who was doing business in Florida as Kaizen Construction Group – has been charged with unlicensed contracting, insurance fraud, and failure to obtain workers’ compensation coverage. Sutton allegedly had a salesman go door to door to solicit homeowners in the Tampa area for roof replacement work and instruct them on what to say when filing an insurance claim. He convinced some homeowners to sign documents assigning benefits to his roofing company. Sutton and Kaizen Construction may be responsible for more than $41,000 in insurance claims and may have victimized hundreds of homeowners in the state.
As these cases illustrate, workplace safety, prompt injury reporting and proactive risk management are all essential in the construction industry. Need guidance? BNC provides insurance coverage designed for the construction industry. Learn more.
