Negligent Claims Handling Can Be Evidence Of Bad Faith

These days one must be careful in how you adjust a workers’ compensation file.  The appellate court in a number of recent rulings has determined the carrier or third party administrator adjusting the file can be liable for a ton of bad faith in poor claims handling, as well as, possible breach of contract.

This case involved an employer that was not satisfied with the claims handling they were receiving. They alleged that the carrier engaged in bad faith claims handling resulting in paying higher premiums and not receiving proper dividends.

The Court indicated that the employer might have a cause of action for negligent claims handling as evidence of bad faith and breach of contract actions.

The Court looked to their previous case Security Officers Service Inc VSCIF to conclude that you can breach the implied covenant of good faith and fair dealing You must conduct your claim resolution with good faith.

The case and its predecessors bring to the forefront that one has a responsibility and a duty to properly adjust and handle claims. This commences from the initial claim of injury all the way to case closure.  Employers are looking at how effectively the injury claim is handled and disposed of. Issues will not only be whether the disposition was fair to the applicant, but also whether the claim was handled properly.

The Court is indicating that in the future causes of action the) may take into consideration the evidence of negligent claims handling This will be pertinent when it effects the employers premium in the future and any dividend policy.  Competent performance by the adjuster at a reasonable cost is to be expected of the adjuster. The Court, therefore concluded, that a workers* compensation policy of insurance requires that the conduct of defending, investigating, reserving and settling claims be done in good faith.

The previous decisions have also indicated that these type of actions may be entitled to punitive damages if the employer is meritorious.

With the advent of the employers bill of rights, the employer is going to have greater access to material in the claims file. Although the concepts in the employers bill of rights have not been the subject of judicial review, they become extremely important: If the employer wished to vehemently fight a specific claim one must take great credence in the employers wishes. The employer not only has the legislative bill of rights, but may also have both contract and tort causes of action. In doing discovery in those causes of action they can second guess your claims handling.

Proper claims handling should be a plan. Systematic review on a timely basis is a necessity for every file.  Proper investigation, denial if needed, and prompt payment will be closely scrutinized in the future.

Case: Tricor V. SCIF

Harvey Brown
3501 Jamboree Rd. Suite 602
Newport Beach, CA 92660

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