Insurance companies, including workers’ compensation insurers are required to act in good faith when considering a workers’ comp claim. In other words, they are required to investigate the claim and pay the benefits entitled to the injured worker provided the claim is legitimate. The nature and extent of the injury sustained are determined via a medical record analysis and medical review services have a major role to play in reviewing the medical records. The detailed reviews and medical summaries made available lighten the workload of attorneys handling such cases and provide clarity regarding the medical facts. Insurers are said to act in bad faith if they ignore, delude, or make decisions that are opposed to what their investigation reveals. However, just because an insurance company makes a decision the claimant does not agree with, a bad faith lawsuit cannot be filed especially if they followed all the proper procedures and meticulously scrutinized the claim.
Instances of Bad Faith
It is important that insurance companies try and avoid acting in bad faith because these can lead to costly lawsuits and loss of reputation. Unfortunately, insurance bad faith is common and many insurance companies use statistics to arrive at a decision regarding how much to pay the insured under certain circumstances. Bad faith examples include:
- Denying the complete benefits listed in the policy
- Offering less compensation than what is actually due
- Delaying payment to the insured without a proper reason
All insurance contracts include a stated or implied “covenant of good faith and fair dealing.” This signifies that both parties are expected to act fairly and with good faith towards one another as regards the strictures of their contract. The insurer has to fully compensate the insured in a timely and appropriate manner. Failing to do so could result in a violation of the covenant of good faith and fair dealing.
When a workers’ compensation claim is involved, the claims management team must at all times act justly and honestly to avoid bad faith litigation. Apart from litigation costs and loss of reputation, additional costs may include penalties defined by workers’ compensation law, claims for attorney’s fees by the prevailing party, and punitive damages if the action is successful.
Major Reasons for Bad Faith Claims
- When an insurer makes a decision contrary to what the claim investigation reveals.
- Not investigating the claim in a timely and adequate manner.
- Poor claims management: This includes failing to review the claim properly, and failing to communicate with claimants and their attorneys.
- Acting against established claim practices.
- Manipulating or hiding evidence that supports the injured worker’s claim or request for benefits.
- Disregarding statutory timeliness: Workers’ compensation law has set specific timelines for the admission of primary liability, filing of required forms, and payment of claims. Disregarding these requirements or failing to meet them can result in hefty fines, and other unfavorable sanctions.
How to Avoid Bad Faith Insurance
There are certain steps to take to avoid the risk of bad faith workers’ compensation claims.
- Be proactive with regard to the claims investigation: Being proactive and reasonable is very important and complete the investigation on time. Any denials made must be in good faith and should be supported by solid facts.
- Know the statutory deadlines and respond in a timely manner.
- Maintain a good relationship with the employer/insured.
- Pay any due claims promptly: The claims management team must have a clear idea about when a payment is due and to whom, including their correct mailing address and tax ID information.
- Be meticulous with documentation: Complete and accurate claims documentation is vital to prevent issues.
The importance of good faith discussion in workers compensation is highlighted in a bill that was introduced in the Florida House of Representatives on 5th March, 2019.
- This bill would impose mandates on good faith discussions before a workers’ compensation petition can be filed.
- It would also require physicians to provide much more specificity on an injured worker’s treatment plan to insurers.
- Extensive changes are proposed to the medical section of Florida’s workers’ compensation system. Providers are required to specify the amount of each requested benefit as well as the calculation used to determine that amount.
- The bill also allows for a judge of compensation claims to dismiss a petition if it is found that the claimant/claimant’s attorney failed to make a good faith effort to resolve the dispute.
- It requires insurers to provide the total amount of attorney hours and fees paid for petitions.
- The bill ties outpatient surgery, care and hospitalization reimbursement to a percentage of Medicare rates.
The “specificity” requirement is welcomed because it would remove any ambiguity regarding the medical condition of the claimant, enable clear communication, and allow decision makers to determine the right course of action that will benefit the injured worker.
The damages an insurance company may have to pay the insured person for bad faith varies among the states. Depending on the state, the claimant could receive punitive damages also in addition to the actual compensatory damages. Workers’ compensation defense attorneys can help prevent bad faith litigation by providing the right counsel to claims management teams and insurers. As a provider of medical review solutions for workers’ compensation attorneys, we understand that good faith is the basis of the entire workers’ comp system and undermining it can have very serious consequences.
