Fake Falls Scam: 650-Plus Staged on N.Y. Construction Sites, Suit Alleges

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In 2010, about 4% of the cost of a $100 million project in New York would go toward workers’ compensation, general liability, and excess insurance. Today, it has risen to nearly 12.5% or higher and continues to rise, according to an analysis by the Empire State Chapter of the Associated Builders and Contractors.
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A federal lawsuit has been filed by a New York-based insurance company alleging a statewide scheme of staged construction site accidents.

The company, Tradesmen, says it has received what it believes is more than 650 fraudulent workers’ compensation claims in the last four years.

Medical professionals, attorneys, and construction workers are all part of the alleged scam to file false claims that can be in the millions of dollars.

Per the lawsuit filed by Tradesmen Insurance, medical professionals reportedly take advantage of Spanish-speaking immigrant workers to employ them to become involved in the false claims.

Once a staged incident is held, the worker responds to a lawyer before approaching any medical professional. A basic trip and fall incident that may normally cause a bruised knee or similar minor injury may be elevated, at least on paper, to something that leads to a multi-million-dollar permanent disability-style workers' comp claim. 

Filings for the lawsuit include video footage of some of the alleged “falls” that have led to claims being filed.

Before Tradesmen Insurance filed its lawsuit, WABC-TV 7 Eyewitness News in New York conducted an investigative report In November 2023 about allegations of scams involving fake falls on construction sites. 

One construction company even told WABC-TV that it appeared the instigators of the scam were looking up permits and jobsites and then filing claims.

As part of the station’s report, multiple construction companies reported false claims of workers who said they were injured on the job. In some instances, owners indicated that the workers in question were not even on the jobsite where the alleged incident took place.

Company owners also indicated that such incidents had notably increased in the last several years. In some instances, the number of incidents rose from one or two over a few years to at minimum one or two per year. 

According to the industry representatives WABC-TV spoke to, it appears the concept of the scheme is generally based on an outdated New York labor law passed in 1885. Under the law, New York Labor Laws 240 and 241, a property owner or construction employer is fully liable if a worker falls from any height and is injured. Although some appellate judges have denied claims, as written, the law says the worker bears no responsibility.

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Disbursement of all the false claims in recent years has caused insurance premiums for many construction firms in New York to dramatically increase. 

According to an analysis by the Empire State Chapter of the Associated Builders and Contractors in 2010, about 4% of the cost of a $100 million project in New York would go toward workers’ compensation, general liability, and excess insurance.

In 2020, that cost was approximately 8.5% of that $100,000 project and by 2023-2024 it is closer to 12.5% and expected to rise to 13% or 14% by 2025. Comparatively, according to the association’s report, firms pay rates of approximately 2.5% in neighboring states of New Jersey, Connecticut, and Pennsylvania.

To compensate for the rising insurance costs, firms have had to increase general construction costs that are ultimately passed on to building owners, homeowners, and renters.

Concerns surrounding the fraudulent claims have reached the state legislature. A bill has been re-introduced that would make staging a construction-site accident for insurance fraud a felony.

Fraudulent insurance claims have been discussed for nearly 15 years at the state level. Interest in altering the law gained ground following the passage of Alice's Law, which in 2019 created criminal penalties for people who stage car accidents for insurance fraud.