Self-Insured Employers.
Under the state's workers' compensation laws, employers must either insure through the State Fund administered by the Department of Labor and Industries (Department) or, if qualified and certified by the Department, may self-insure. Self-insurance is a program in which the employer, the self-insurer, provides any and all appropriate benefits to the injured worker. Self-insurers manage some aspects of injured worker claims, including closing certain types of claims. Self-insurers must maintain records of all payments of compensation and provide to the Department all information the self-insurer has relating to a disputed claim. Self-insurers may contract with a third-party administrator (TPA) to administer claims. Third-party administrators must be licensed by the Department, and claims administrators must maintain certification through the Department.
Penalties.
Employers are subject to penalties for violations of various workers' compensation requirements, including: (1) unreasonably delaying or failing to pay benefits by a self-insurer; (2) failing to pay premiums; (3) misrepresenting the amount of payroll or employee hours; (4) failing to keep, file, or provide adequate records and reports; or (5) failing to comply with any other applicable workers' compensation laws or rules. The amounts of penalties are adjusted every three years based on changes in the Consumer Price Index.
Penalty amounts vary, but include:
Decertification.
The Department must decertify a self-insurer in certain instances. This includes, for example, if the self-insurer intentionally or repeatedly induces employees to fail to report injuries, induces claimants to treat injuries in the course of employment as off-the-job injuries, persuades claimants to accept less than the compensation due, or unreasonably makes it necessary for claimants to resort to proceedings against the employer to obtain compensation.
Duty of Good Faith and Fair Dealing.
All self-insured municipal employers, self-insured private sector firefighter employers, and their TPAs have a duty of good faith and fair dealing to workers. A "municipal employer" includes any county, city, town, port district, water-sewer district, school district, metropolitan park district, fire district, public hospital district, regional fire protection service authority, education service district, or such other units of local government. A "private sector firefighter employer" includes any private sector employer that employs over 50 firefighters, including supervisors, on a full-time, fully compensated basis as a firefighter of the employer's fire department, only with respect to their firefighters.
A self-insured municipal employer, self-insured private sector firefighter employer, or its TPA violates the duty if it coerces a worker to accept less than the compensation due to him or her, or otherwise fails to act in good faith or fair dealing regarding its obligations. The Department must adopt rules establishing additional applications of the duty of good faith and fair dealing as well as criteria for determining appropriate penalties for violations.
The Department must investigate each alleged violation of the duty of good faith and fair dealing upon the filing of a written complaint or upon its own motion. After receiving notice, the applicable employer or the TPA may file a written response within 10 working days. If the employer or the TPA fails to file a timely response, the Department must issue an order based on available information. The Department must issue an order determining whether a violation has occurred within 30 calendar days of receipt of a complete complaint or its own motion.'
The duty of good faith and fair dealing applies to all claims regardless of the date of injury.
Penalties.
If the duty has been violated, the applicable employer must be ordered to pay a penalty of one to 52 times the average weekly wage at the time of the order, depending upon the severity of the violation, which accrues for the benefit of the worker. In addition, if a self-insured municipal employer, self-insured private sector firefighter employer, or its TPA violates the duty of good faith and fair dealing, the Department may impose the following penalties:
Decertification.
The grounds upon which the Department must decertify a self-insured employer is expanded to include circumstances where a self-insured municipal employer violates the duty of good faith and fair dealing three times within a three-year period, excluding violations constituting errors or delays that are inadvertent or minor. The Department may delay decertification while a self-insured municipal employer has an enforceable contract with a licensed TPA that may not be legally terminated; however, the self-insured municipal employer may not renew or extend the contract.
(In support) Self-insured employers and TPAs are incentivized to keep their costs low, hurting workers in the process. There are many instances where firefighters and other first responders have made claims for presumptive occupational diseases, including lung cancer and other similar diagnoses, as well as post-traumatic stress disorder, where the self-insured employer or the TPA made objections, delayed the process, and sought to deny otherwise legitimate claims. Many workers are forced to hire attorneys. They typically prevail in their claims, but the process can take many years and their benefits are reduced due to attorneys' costs. This is all done to cut costs. This is incredibly unfair to persons who have risked their lives in the interest of public service. It is a disgrace to the entire system. The bill establishes a duty of good faith and fair dealing on the part of self-insured employers and TPAs, including penalties. This will deter frivolous and unfair conduct, and it will allow workers to recoup some of their losses.
(Opposed) Self-insured employers and TPAs are already heavily regulated by the Department. For any claim, a final determination cannot be made without the Department's approval. Employees of self-insured employers have all the same rights as other workers, and it is not necessary to hire an attorney for workers' compensation claims or appeals. The concerns of the proponents have already been heard and addressed. In 2019, the state passed Substitute House Bill (SHB) 2409, which was highly controversial. The original version of SHB 2409 included a provision similar to this bill; however, it was removed. Instead, SHB 2409 created a new regulatory structure for TPAs, requiring licensing and certification and establishing a dispute-resolution process. Self-insured employers and TPAs accepted this oversight with the understanding that the Legislature would not impose a duty of good faith and fair dealing. It is unfair to come back and do it now. It is unclear what the bill aims to accomplish. Self-insured employers and TPAs need to be able to review claims, and sometimes they make mistakes. The Department can already intervene when there are problems. This bill only serves to help lawyers, and the workers and employers will lose.
(Other) There are technical issues with the bill, particularly with the timelines that are out of sync with current law. The Department is still in the process of implementing SHB 2409, and its employees are still getting trained on its requirements. This bill should be amended with a delayed effective date in order to allow the Department time to conduct rulemaking and conduct implementation. The duty of good faith and fair dealing is an insurance concept, and it will be new for workers' compensation. It will take time for the Department to make adjustments for this to work properly.