Under Section 435, workers' compensation judges have the authority to award penalties against insurance carriers when a violation of the law is committed. Therefore, when an obvious work injury is denied by a claims adjuster, a penalty petition should be filed based on the adjuster's failure to properly investigate the claim and the adjuster's file and log notes should be subpoenaed immediately.

Deter bad faith behavior

The sole purpose of imposing penalties in these situations is to deter bad and illegal behavior and failing to sanction insurance carriers when claims are wrongfully denied will not stop these practices from being performed again in the future. In fact, in 1996, the penalty provision of the act was amended by Act 57 and the penalty limit of 20% was increased to 50% in an effort to deter bad faith behavior.

While defense attorneys typically object to a request to depose claims adjusters in an effort to shield them from being questioned about their investigation (or lack thereof), injured workers and their attorneys are entitled to cross-examine adjusters when a penalty petition is pending in this context.

Under Pennsylvania Rule of Evidence 611(b), “A party witness in a civil case may be cross-examined by an adverse party on any matter relevant to any issue in the case, including credibility, unless the court, in the interests of justice, limits the cross-examination with respect to matters not testified to on direct examination.”

Burden of proof

When a penalty petition is filed, the burden of proving that a violation of the act occurred obviously lies with the injured worker. Therefore, when the defense fails to make the claims adjuster available to be questioned regarding their investigation, the Rules of Evidence are not being followed and it prejudices claimants' attorneys from fully establishing their case.

In this instance where the defense refuses to produce the claims adjuster, who is a witness in the litigation and in its reach and control, the injured worker is entitled to seek an adverse inference from the court, as in Wood v. Workers' Compensation Appeal Board (County Care Private Nursing), 915 A.2d 181, 187 (Pa. Cmwlth 2007).

Illegal & unethical behavior

In some instances, the adjuster's file and log notes clearly reveal that an investigation was performed and compensability was established, but then a denial was issued regardless. Other times, the documents received in discovery show that the claims adjuster simply failed to perform any investigation at all before denying the claim outright.

This type of illegal and unethical behavior was recently exposed when California's insurance commissioner launched an investigation into Aetna after one of its former medical directors conceded under oath that he never reviewed patients' records in determining whether to approve medical care. Drash, Wayne. CNN. “California launches investigation following stunning admission by Aetna medical director.”

Moreover, only in instances where there is uncertainty surrounding the compensability of a particular claim, the act allows insurance carriers to issue a “temporary” acceptance of an injury, which is called a notice of temporary compensation payable (NTCP), in order to further investigate the claim for an additional 90 days without truly accepting liability of the claim at that time. However, if the NTCP is not properly stopped during the 90 day period, this temporary acceptance automatically converts as a matter of law into a full acceptance of the claim.

Violation of law

It's important to note that the NTCP was not created to give insurance carriers additional time in order to create a strategy as to how to handle a claim. In fact, the duty to investigate under the act “naturally includes the duty to perform a reasonable investigation in good faith,” and therefore, it is also a violation of the law where the claims adjuster issues an NTCP when there is no doubt an injury occurred at work and is fully compensable, as in Gumm v. Workers' Compensation Appeal Board (J. Allan Steel), 942 A.2d 222 (Pa. Cmwlth. 2008).

It's imperative for insurance carriers to perform thorough investigations before making determinations regarding the compensability of each and every claim. If the claims adjuster fails to do so, injured workers' and their families could be left with no income or medical coverage for an entire year throughout the litigation process.

The time is now to stop this common trend and begin investigating the adjusters' investigation of workers' compensation claims.

Related: Lives reclaimed: Understanding the hurdles faced by injured workers

Andrew F. Ruder ([email protected]) is an associate with Pond Lehocky Stern Giordano and concentrates his practice in the area of workers' compensation litigation.