Workers Compensation Unfair Claims Practices
Tapia v. The Industrial Comm'n, 797 Ariz. Adv. Rep. 52 (App. Div. II, August 16, 2018) (J. Ekerstrom)
SELF-INSURED EMPLOYER ENGAGES IN UNFAIR CLAIMS PRACTICES WHEN IT UNREASONABLY DENIES CLAIM WITHOUT ADEQUATESUPPORTING INFORMATION IN ITS POSSESSION OR AVAILABLE TO IT; SELF-INSURED'S CLAIMS DEPARTMENT CANNOT EXCUSE ITS FAILED INVESTIGATION BY BLAMING BAD COMMUNICATION FROM ANOTHER DEPARMENT WITHIN THE SELF-INSURED COMPANY
Petitioner worked as a housekeeper at Banner University Medical Center [Banner] in the environmental services department. She injured her knee on the job. She filled out an incident report with the help of her supervisor then went to the Banner emergency room for treatment. She missed four days of work per doctor's orders. She filed a workers' compensation claim which self-insured Banner denied on the ground the incident had not been reported to the organization, i.e. a claims form was not submitted with the notice of claim. Petitioner sought review with the Industrial Commission and obtained an award in her favor. She then filed a complaint of bad faith and unfair claim processing practices alleging the initial denial was without a “reasonable basis” and that Banner had failed to “conduct an adequate investigation.” The Industrial Commission denied this second claim. Petitioner then brought this special action seeking to set aside the denial. The Arizona Court of Appeals set aside the award.
Section 23-930(B), A.R.S., states that if an administrative law judge “finds that unfair claim processing . . . has occurred in the handling of a particular claim, it shall award the claimant . . . a benefit penalty.” A self-insured employer commits unfair claim processing when it “[u]nreasonably issues a notice of claim status without adequate supporting information in its possession or available to it.” A self-insured employer may reasonably deny a claim when a lack of adequate supporting information results from no fault of the employer. Ariz. Admin. Code R20-5-163(B)(1).
A.R.S. § 23-1061(M) requires a self-insured employer deny a claim within 21 days or it must immediately compensate the employee. However, this provision only applies where an employee has missed more than seven days work. That said, A.R.S. § 23-1061(F) requires self-insured employers to “promptly report . . . any denial of a claim” which industry standard says is 21 days. This time limit is reasonably considered in determining whether the claims processing was inadequate: based upon the information that Banner had and had available to it within 21 days was the investigation inadequate and the denial unreasonable.
Here the claim was denied because there was no claim form submitted by petitioner with her notice of claim despite the fact that the claim form could have been obtained through a simple request to the Industrial Commission. The adjuster's failure to perform an industry standard three-point investigation, in which an adjuster contacts the injured party, her supervisor, and the treating physician, and by failing to request Tapia's claim form from the Industrial Commission. Banner claimed, in part, that its denial was the result of the environmental services department's failure to send over the claim form. One arm of Banner—the worker's compensation department cannot escape liability by blaming bad communication from another department of Banner—the environmental services department where petitioner worked and completed the claim form. A self-insured employer that internally processes its own claims, is responsible for failures of communication between different departments. “The right hand cannot excuse itself for the failures of the left.”
Here Banner's denial was unreasonable due to a failure to perform a basic investigation and particularly due to Banner's failure to request the information it needed from the Industrial Commission.