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October 27, 2006

When Is A Denial Not A Denial?

Answer: In nearly every option available on the “Notice of Workers’ Compensation Denial (LIBC 496)”. As the practice of workers’ compensation has evolved over the last 10-15 years, one cannot help but conclude that the unleveled playing field afforded employers has become more difficult to navigate. With claimant counsel ever more focused on the minutia of bureau regulations and bureau itself issuing bureau documents that are filled with traps for the unwary, it is safe to conclude that this is not your father’s workers’ compensation practice any longer.

For years we have cautioned our clients that the acceptance of a workers’ compensation claim can be akin to the proverbial “wade of gum on the bottom of your shoe”. Once there, the claim is extremely difficult to “scrap off” and generally leads to the payment of a lump sum of benefits that leaves many employers with the feeling that they have been fleeced.

In sounding a word of caution we remind ourselves that we must proceed carefully through the process of considering the voluntary acceptance of a workers’ compensation claim. Unfortunately, the Act does not give us much time within which to carefully consider the condensability of any claim. It is well established in Section 406.1 of the Act that an employer and its insurance carrier or claims administrator has no more than twenty-one days to fully investigate a claim from the time that the employer is given notice of a work injury. By the 21st day the employer must either accept or deny the claim. Twenty-one days. Twenty-one days to fully investigate the condensability of a claim that often times involves pre-existing conditions and hence the need to develop background medical records. Twenty-one days to open lines of communication with the insurance claim administrator or insurance carrier to effectuate the investigation. Twenty-one days to interview witnesses and complete an investigation on a claim whose potential financial ramifications could easily develop to exposure of hundreds of thousands of dollars. Twenty-one days.

While we have all lived with requirement, as claimant counsel have become more adept at opening revenue streams in claims by seeking attorneys’ fees and penalties, employers and their claims representatives have become more acutely aware that this twenty-one day rule must be honored, as well it should. To be sure, the two most utilized bureau forms for addressing this requirement are the Notice of Compensation Payable and its apparent opposite number, the Notice of Denial. For purposes of this article, let us focus on the ladder.

In those cases where it becomes apparent that we cannot adequately address the question of condensability in the meager time frame allotted, the safest bet in the unforgiving world of workers’ compensation is to issue a denial and maintain your diligent investigation to ensure that the contest that you raised by issuing that denial is deemed to be reasonable at the minimum. In issuing the Notice of Denial in a timely fashion, you have complied with the Act and avoided the potential imposition of penalties for failing to do so.

One would think that as they exercise due diligence in thoroughly investigating a claim that once the investigation is complete, if there is substantive evidence to permit a claim to be contested before a workers’ compensation Judge, that they will be able to exercise their right to be heard and have the contested claim adjudicated on the issues raised. Not so fast, for the denial that you have issued may not be a denial at all. To the contrary, by checking boxes 2, 3, 4, and 5 you have infact admitted liability on one level or another. By checking box 6 and adding verbiage of your own, beware! Everything that you state can and will be used against you! Paragraph two notes “the injury was not within the scope of employment.” Hence, you may have a contest as to the scope of employment, but not as to whether or not an injury took place. Paragraph three states “the employee was not employed by the defendant.” Hence, you may have a defense as to whether or not the claimant was an employee, but not necessarily as to whether or not he or she sustained injury. Paragraph four, one of the most overused choices on this document begins with the infamous words, “… although an injury took place, the employee is not disabled as a result of this injury…”. Only disability can be contested with this option. Paragraph five states “the employee did not give notice of his/her injury or disease to the employer within 120 days…”. Thus, the only challenge left to be raised it whether or not notice was given in a timely fashion. Paragraph six, “other good cause..” invites us to make statements that can be construed as admissions.

The moniker assigned to the bureau document, “Notice of Workers’ Compensation Denial”, is misleading. The document is not a denial at all unless box number one is checked. For it is only through utilization of this option that we preserve all options to contest a workers’ compensation claim. The language is simple; “the employee did not suffer a work related injury.” So why is it that employers and their representative seem to shy away from this option? One of the most often cited reasons is the fear of the assessment of “penalties and attorneys’ fees”. To be sure, the timely filing of a Notice of Denial satisfies the requirements of the Act. Penalties can only be ordered when the Act has been violated. Hence, there is no risk of penalty. Attorneys’ fees on the other hand, are issuable when a contest is deemed to be unreasonable. Hence, the inherent risk in issuing a denial is that if challenged, employers will not be able to carry their burden of proof for a reasonable contest. 

What It Means to You

Without the ability to thoroughly investigate a claim, one cannot know whether or not a matter can be reasonably contested and more often then not a thorough investigation cannot be completed within twenty-one days. Therefore, unless an employer and its claims professional are well satisfied that it can can concede the variety of defenses that it would otherwise waive by checking any other option then box number one on a Notice of Workers’ Compensation Denial, then the pure denial afforded by option number one is the only option that will serve the interest of the employer. And why not use it? Requirements of the Act have been satisfied by using it in a timely fashion. Due diligence can run its normal course and the claim can always be accepted in whole or in part, once an investigation is complete. Remember, the wade of gum stuck on the bottom or your shoe that is the accepted workers’ compensation claim is much easier to avoid in the first place then attempt to remove from your shoe. Further, the cost associated with a diligent investigative effort under the pure denial option will more often than not afford a more cost effective means to address a claim then it would cost in total in benefits paid and legal bills incurred in attempting to remove the “wade of gum” at a later date.
 

Sources

Notice of Workers’ Compensation Denial (LIBC 496)