Self-Insured Employers.
Workers who, in the course of employment, are injured or disabled from an occupational disease are entitled to workers' compensation benefits, which may include medical, temporary time-loss, vocational rehabilitation benefits, and permanent disability benefits. The Department of Labor and Industries (L&I) administers the state's workers' compensation system. Employers in Washington must obtain coverage either through the industrial insurance fund administered by the Department of Labor and Industries (L&I) or by qualifying to self-insure.
Self-insurance is a program in which the employer covers all costs associated with an on-the-job injury or occupational disease. Self-insured employers administer their own claims and maintain a long-term obligation to pay benefits during the lifetime of their claims. Self-insured employers must meet certain requirements and maintain certification through L&I. Self-insured employers may contract with a third-party administrator (TPA) to administer claims. L&I licenses TPAs and certifies claims administrators.
Duty of Good Faith and Fair Dealing.
Effective July 1, 2024, the state established a specific duty of good faith and fair dealing in certain instances. 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. L&I must investigate each alleged violation of the duty of good faith and fair dealing, and issue an order determining whether a violation has occurred within 30 calendar days. If the duty has been violated, the applicable employer must be ordered to pay a penalty of 1 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, L&I may impose the following penalties:
L&I must decertify a self-insured municipal employer if it 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.
Delaying Decertification.
L&I 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.
Duty of Good Faith and Fair Dealing.
The duty of good faith and fair dealing is extended to all self-insured employers and TPAs, including its requirements and applicable penalties. L&I must decertify a self-insured employer when L&I finds it has violated the duty of good faith and fair dealing three times in a three-year period. The requirements in the bill apply to all claims regardless of the date of injury.
Delaying Decertification.
L&I may delay this decertification of a self-insured employer while it 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.