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CLAIMS INVESTIGATION

There is an affirmative duty and a Constitutional mandate to provide workers' compensation benefits. California has an audit unit to "make certain that injured workers, and their dependents in the event of their death, receive promptly and accurately the full measure of compensation to which they are entitled...." Labor Code §129.

A claim is "A request for compensation for an injury arising out of and in the course of employment, whether disputed or not, or notice or knowledge that such an injury has occurred or is alleged to have occurred." 8 CCR §10100.1(f)

The duties of claims administrators are defined by regulations. Among the most important is the duty of good faith:

(a) To comply with the time requirements of the Labor Code and the Administrative Director's regulations, a claims administrator must conduct a reasonable and timely investigation upon receiving notice or knowledge of an injury or claim for a workers' compensation benefit.

(b) A reasonable investigation must attempt to obtain the information needed to determine and timely provide each benefit, if any, which may be due the employee.

     (1) The administrator may not restrict its investigation to preparing objections or defenses to a claim, but must fully and fairly gather the pertinent information, whether that information requires or excuses benefit payment. The investigation must supply the information needed to provide timely benefits and to document for audit the administrator's basis for its claims decisions. The claimant's burden of proof before the Appeal Board does not excuse the administrator's duty to investigate the claim.     

     (2) The claims administrator may not restrict its investigation to the specific benefit claimed if the nature of the claim suggests that other benefits might also be due.     

(c) The duty to investigate requires further investigation if the claims administrator receives later information, not covered in an earlier investigation, which might affect benefits due.

(d) The claims administrator must document in its claim file the investigatory acts undertaken and the information obtained as a result of the investigation. This documentation shall be retained in the claim file and available for audit review.

(e) Insurers, self-insured employers and third-party administrators shall deal fairly and in good faith with all claimants, including lien claimants.

"We first observe that the investigation of claims, when properly performed, is an important function of the insurer in the workmen's compensation scheme. Like safety inspections or the providing of medical care, such nonmedical investigation constitutes a service "inextricably interwoven" with the insurer's status. In our system of compensation, no one else is in a better position, with resources at command, to detect fraudulent, or grossly exaggerated claims for benefits. No other party has the financial motivation for avoiding liability for spurious claims, since the insurer is ordinarily substituted for the employer and assumes his compensation liability. ... The detection of spurious and unfounded claims benefits the workmen's compensation scheme by excluding them from the already heavily burdened administrative process of the Board." Unruh v. Truck Insurance Exchange (1972) 7 Cal. 3d 616.

"Claims investigation" that is legitimate involves Internet searches and observation without violating Civil Code §1708.8. It crosses the line when hacking is involved, or entraping the claimant (such as throwing garbage on their front lawn, then filming them picking it up), or using deceitful practices. In Redner v. WCAB (1971) 5 Cal. 3d 83, the Supreme Court found "Evidence obtained by fraud and deceit in violation of the rights of the applicant, however, is not "best calculated to ascertain the substantial rights of the parties and carry out justly the spirit and provisions" of the workmen's compensation laws. The high purposes of the compensation law should not be perverted by resort to evidence perfidiously procured. We therefore conclude that the board may not rely upon evidence obtained, as in the present case, by deceitful inducement of an applicant to engage in activities which he would not otherwise have undertaken."

See, too, Surveillance

Label Item Links Comments
Labor Code Labor Code §129: "the administrative director shall audit insurers, self-insured employers, and third-party administrators to determine if they have met theirobligations under this code."
LC §129  
  Labor Code §129.5: "The administrative director may assess an administrative penalty against an insurer, self-insured employer, or third-partyadministrator for any of the following...."
LC §129.5  
Regulations/Rules "Claim" defined 8 CCR §10100.1(f)  
  §10101.1 Claim File--Contents 8 CCR §10101.1
  §10109. Duty to Conduct Investigation; Duty of Good Faith 8 CCR §10109
Cases Unruh v. Truck Insurance Exchange (1972) 7 Cal. 3d 616: injured worker can sue insurer for intentional torts: "we are unable to conclude that a compensation insurer remains within its proper role as such, when, as in the instant case, through its agents or others employed by it, such insurer intentionally embarks upon a deceitful course of conduct in its investigations which causes injury to the subject of the investigation. We cannot give our approval to such misconduct which tramples upon the employee's rights, by deeming it no more than the normal behavior of the insurer."

Redner v. WCAB (1971) 5 Cal. 3d 83: "Even if the motion picture evidence had been offered in a timely fashion at the referee's hearing, the referee should have refused to rely upon it ... because the carrier obtained it by fraudulent inducement....the carrier should not profit from its own deceitful conduct."
Unruh v. Truck Ins.











Redner v. WCAB

Forms Complaint instructions and form  Instructions

Form
 
Websites Audit Unit DWC Audit Unit   
Practice Tips Everyone should be aware of prior workers' compensation cases. The adjuster may have access to the "index," but anyone can access the EAMS case search tool.

Also, how often do you receive what is required to be in the claims file under 8 CCR §10101.1?

Consider including in your letter of representation: "This request specifically includes the claim file contents listed in 8 CCR §10101.1. If I do not receive these records within 30 days of this request, I shall subpoena them (see Labor Code §5307.9)."

A sanctions petition may lie when there is a willful failure to comply with the regulatory obligations contained in Regulation §10109 and the denial was “indisputably without merit” as defined in 8 CCR §10561
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