According to a report from Insurance Business Magazine, an Orange County, CA woman is facing criminal charges for workers’ compensation fraud and being an uninsured employer. She allegedly defrauded employers out of $1.4 million in workers’ compensation premiums while acting as an unlicensed insurance agent. In this blog post, our Fresno workers’ compensation defense attorney provides an overview of the workers’ compensation fraud scheme and highlights the sanctions associated with being an uninsured employer in California.
The Workers’ Compensation Fraud Scheme: Took Employer Premiums, Issued Fraudulent Certificates
Karyl Lynn Reed, a 57-year-old woman from Orange County, has been arrested and charged with multiple counts of fraud, including embezzlement, theft, and forgery. Prosecutors allege that she acted as an unlicensed insurance agent, defrauding at least three employers out of $1.4 million in workers’ compensation premiums.
Between 2019 and 2021, Ms. Reed collected insurance premiums from her “clients” through two companies she controlled: Envoy Business Partners and Allenn Specialty Group. The employers were informed that they were purchasing workers’ compensation coverage that would fulfill their requirements under California state law.
In reality, the certificates of insurance issued to the employers by Ms. Reed were wholly fraudulent. While the three employers thought they were covered—and paid a collective $1.4 million in premiums—they were not actually covered at all.
Workers’ Compensation Fraud Discovered When an Injured Employee Filed a Claim
The workers’ compensation fraud scheme allegedly orchestrated by Ms. Reed was only discovered when an employee at one of the companies was injured on the job and tried to file a workers’ compensation claim. When the employer tried to help facilitate their worker’s claim, they learned that Ms. Reed never remitted any of the payments that she received to an insurance company. Instead, it appears that the funds in question were embezzled. Ms. Reed was arrested in Texas and extradited to Southern California to face criminal workers’ compensation fraud charges.
Second Issue: Failed to Obtain Workers’ Compensation Coverage for Own Employees
In California, companies and non-profit organizations are required to obtain workers’ compensation coverage for their workers (California Labor Code § 3700). By accepting premiums and handing out false certificates of coverage to employees, Ms. Reed caused three separate companies to be uninsured without their knowledge. In addition, Ms. Reed unlawfully failed to obtain workers’ compensation coverage for her own employee. Uninsured employers can face significant sanctions in California, potentially including civil financial penalties, direct sanctions against the employer, and criminal sanctions for the business owner.
Speak to Our Fresno Workers’ Compensation Defense Lawyer Today
At Yrulegui & Roberts, our Central California workers’ compensation defense law firm represents every client with professionalism, skill, and personal attention. If you have any questions about workers’ compensation fraud or uninsured employer regulations, we are available to help. Call us now or contact us online for your completely confidential case review. Our attorneys represent clients throughout the area, including in Fresno County, Monterey County, Tulare County, and Kings County.