Members of the workers’ compensation claims management team are on the front line when it comes to investigating a claim and making timely payments of benefits. Failure to do so can result in penalties to a workers’ comp program and cause interested clients to lose confidence in the process. Transparency and consistency are key. Now is the time for all claim handlers and their managers to better understand the various rules and requirements in jurisdictions they handle, apply these procedures correctly and make good faith determinations to avoid common pitfalls in the claims process.
Common Errors that Result in Workers’ Comp Penalties
Many rules govern workers’ compensation insurers and third-party administrators. It is important the claims management team understands these rules and make proper determinations.
- Frivolous Denial of Liability: Denials of primary must state why a claim is being denied. This includes stating a factual and legal basis for not paying on a claim or deny specified treatment. This can also include a failure to fully investigate a workers’ compensation claim in a good faith manner or make inaccurate statements following the investigation.
- Nonspecific Denial of Liability: Denials of primary liability must also be specific. The requirements to avoid this type of penalty vary, but generally, denials must be sufficiently specific to convey clearly, without further inquiry, the basis for the denial. Denials based on the premise that the injury did not “arise out of and in the course and scope of employment” must also include additional information supporting this position, so the injured employee knows why a matter is not being paid by the insurance carrier. Avoid excessive “legalese” when denying a matter.
- Late Denial of Liability: Applicable laws generally require a determination to be made promptly. In many instances this is between 10-14 days. When a member of the claim management team receives a reported injury, it is important for them to determine the first day of disability and when the employer received notice of disability. Knowing this information can ensure the claims professional issues the denial promptly.
- Late Filing of First Report of Injury (FROI): The employer plays an important role in completing the FROI. This is important as most state workers’ compensation laws require this form be completed and filed with the industrial commission in a timely manner. Claim handlers must ascertain when the employer receives notice of the injury or disability to determine when the FROI must be filed in a timely manner. An effective claim management team should help train employers on these issues to avoid delay and penalty.
- Late First Payment of Benefits: There are also time requirements for the insurance carrier or administrator must make payment on admitted claims. Important information for the claim handler to know to avoid a penalty for late payments includes: the first day of disability, when the employer received notice of the injury or disability, if the employer is paying the ongoing employee wages, and requirements regarding the payment of wage loss benefits. Coordination and cooperation are
Other Prohibited Claims Practices
Workers’ compensation insurance carriers are also required to operate honestly and ethically. This includes not acting in bad faith.
Insurance carriers that operate fraudulently may be subject to discipline by a state commerce department. When underwriting workers’ compensation insurance policies, it is important carriers, and administrators follow through on contractual promises and provide what is covered under the policy. Failure to do so can result in a carrier not being able to sell insurance in a state or subject to other sanction.
In the same regard, an insurance carrier should avoid bad faith tactics. This includes not dealing fair with parties subject to an insurance contract. This duty is known as the “implied covenant of good faith and fair dealing.”
Members of claim management teams and their insurance carriers have a contractual and ethical obligation to serve their insureds. This is accomplished by following the rules established under a workers’ compensation statute that require good faith claims practices. Failure to do so adds to the costs of a workers’ compensation programs and can jeopardize a carrier’s ability to underwrite workers’ compensation policies.
Author Michael Stack, CEO Amaxx LLC. He is an expert in workers’ compensation cost containment systems and helps employers reduce their workers’ comp costs by 20% to 50%. He works as a consultant to large and mid-market clients, is a co-author of Your Ultimate Guide To Mastering Workers Comp Costs, a comprehensive step-by-step manual of cost containment strategies based on hands-on field experience, and is founder & lead trainer of Amaxx Workers’ Comp Training Center .
Workers’ Comp Roundup Blog: https://blog.reduceyourworkerscomp.com/
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Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker, attorney, or qualified professional.