Assigned to COM AS PASSED BY COMMITTEE
ARIZONA STATE SENATE
Fifty-Sixth Legislature, First Regular Session
AMENDED
FACT SHEET FOR S.B. 1164
workers' compensation; fraud investigations; adjudications
Purpose
Allows the Industrial Commission of Arizona (ICA) to investigate allegations of fraud
made in connection with a workers' compensation claim and refer matters with credible evidence
to the Administrative Law Judge (ALJ) Division for adjudication.
Background
The ICA is the state regulatory agency responsible for processing and adjudicating a
workers' compensation claim (A.R.S. Title 23, Ch. 6). Any person who knowingly makes a false
statement or representation for a workers' compensation claim in order to obtain any compensation,
benefit or payment for themself or another person is guilty of a class 6 felony. If the person is a
claimant for compensation, the claimant must also forfeit all rights to any further temporary or
permanent disability compensation for the claim on which the false statement or representation
was made after conviction of the offense (A.R.S. § 23-1028).
Upon request from the Director of the Department of Insurance and Financial Institutions
(Director), the Attorney General (AG) may seek and obtain an injunction in a superior court that
prohibits a person knowingly making a false statement or representation from engaging in the
unlawful fraudulent act. The court may enter any order or judgement that is necessary to: 1) prevent
the unlawful fraudulent act; and 2) return any monies, interest or real or personal property that was
acquired by the unlawful fraudulent act. An order of restitution may include expenses incurred and
paid by an insurer in connection with any medical evaluations or treatment services. The AG, on
petition or complaint to the court, may recover from that person, on behalf of the state, a civil
penalty of no more than $5,000 for each violation, if the court that finds the person has committed
the unlawful fraudulent act. The court may also award the AG costs, including reasonable attorney
fees and investigative costs for the services rendered. The Director must forward to the appropriate
licensing agency the name of any person who is convicted of, enjoined from or penalized for the
unlawful fraudulent act (A.R.S. §§ 20.466.02 and 20.466.04).
There is no anticipated fiscal impact to the state General Fund associated with this
legislation.
Provisions
1. Authorizes the ICA to address fraudulent activities, statements or representations made in
connection with workers' compensation claims.
2. Allows the ICA to investigate allegations of fraud either on receiving a complaint or on the
ICA's own motion. FACT SHEET – Amended
S.B. 1164
Page 2
3. Requires any allegation involving an unfair claim processing practice by an employer,
self-insured employer, insurance carrier or claims processing representative to be addressed in
accordance with the unfair claim processing practice statutes.
4. Directs the ICA to adopt rules to establish a process for receiving fraud complaints and
conducting fraud investigations.
5. Requires the rules to establish:
a) a process by which the ICA verifies claimant annual earnings reported with the Department
of Economic Security (DES) unemployment insurance information for the purpose of
identifying workers' compensation fraud;
b) a process of timeliness for receiving and processing fraud complaints; and
c) criteria for determining which allegations of fraud warrant investigation.
6. Allows the rules to provide for duties and authorities of fraud investigators, including issuing
and serving subpoenas for witnesses and documentary evidence, taking depositions,
administering oaths and examining witnesses under oath relevant to the fraud investigation.
7. Requires the ICA to refer a matter to the ALJ Division for a hearing, if an investigation reveals
credible evidence of fraudulent activities, statements or representations made in connection
with a worker's compensation, benefits or payment claim.
8. Requires the ALJ to grant relief at any time, even if the prior notice or award granting benefits
were final, if the ALJ concludes by a preponderance of the evidence that a person knowingly
engaged in fraudulent activities, statements or representations for the purpose of obtaining
compensation, benefits or payments.
9. Requires relief to include forfeiture of the right to any future temporary or permanent disability
compensation or any other benefits for the claim on which the fraudulent activities, statements
or representations were made.
10. Allows any person aggrieved by a decision from the ALJ to request a review of the decision in
accordance with the workers' compensation hearing requirements.
11. Requires any hearing and decision relating to investigations of workers' compensation fraud to
be conducted in accordance with workers' compensation hearing requirements relating to
hearing rights and procedure, ALJ awards and decisions on review.
12. Asserts that the ability for the ICA to investigate and adjudicate workers' compensation fraud
does not limit:
a) the authority of the ICA, the Department of Insurance and Financial Institutions (DIFI) or
any other entity to pursue any remedy in accordance with the unfair claim processing
practice statutes or statutorily prescribed legal remedies; or
b) the right of an insurance carrier, a self-insured employer or the ICA's Special Fund to issue
a notice affecting the status of a workers' compensation claim at any time, if prior
determination of compensability or entitlement to benefits was procured by fraud.
13. Becomes effective on the general effective date.
Amendments Adopted by Committee
1. Allows, rather than requires, the ICA to investigate allegations of fraud. FACT SHEET – Amended
S.B. 1164
Page 3
2. Requires any allegation involving an unfair claim processing practice by an employer, self-
insured employer, insurance carrier or claims processing representative to be addressed in
accordance with the unfair claim processing practice statutes.
3. Requires adopted rules to establish a process by which the ICA verifies, rather than routinely
compares, claimant annual earnings reported with the DES unemployment insurance
information for the purpose of identifying workers' compensation fraud.
4. Adds that adopted rules must establish criteria for determining which allegations of fraud
warrant investigation.
5. Eliminates the requirement for a hearing to be conducted as expeditiously as reasonable, but
no later than 60 days.
6. Asserts that the ability for the ICA to investigate and adjudicate workers' compensation fraud
does not limit the authority of the ICA, DIFI or any other entity to pursue any remedy in
accordance with the unfair claim processing practice statutes.
7. Eliminates the requirement that any person receiving permanent workers' compensation
benefits to annually report to the ICA all of the person's earnings for the prior 12-month
period.
8. Makes technical and conforming changes.
Senate Action
COM 2/15/23 DPA 4-3-0
Prepared by Senate Research
February 17, 2023
JT/sr