Employers Bill of Rights

An Article by John Miller September 1998 for CWCE January 1999 Publication

I’m sitting at my desk one day and a school district risk manager calls me. She tells me of this claim they just received, for a physical education teacher who injured his knee. It is a bad injury she tells me. But the strange thing about, she tells me, is he had several just like this against their insurance carrier which was on their risk up until just recently when they went self insured.

My initial response was to suggest she call the former carrier and obtain copies of all the medical report so we can look into the prior claims. She had already done that and they told her they would not reveal anything about the claims, they would not send her copies of anything. Not even the awards or C&Rs, and she assured me she had been turned down flat. Well, this was certainly a time to work her way up the ladder of ever increasing authority, I explained, but she also assured me she had been all the way up to and including the claim manager.

They would not tell her anything except what was in the unit statistical reports sent to the WCIRB and upon which their Experience Modification was based.

This was their insurance company I argued. They had some kind of duty to the employer, I mean it was their insured. Were the claims being handled in secrecy and why? What was the "big deal". Well, I told her, let me call their vice president of claims and get to the bottom of this mystery. And so started a long and treacherous journey into the depths of the policies of one of the largest carriers in California.

Come to find out, this was not the first time they had received a request for information about the claim from an employer. And in fact, I was not the first attorney to call their vice president of claims. He was only glad to refer me to another person, this time their general counsel, for further questions. As you have probably already guessed, this was not his first trip down this path either. However, rules were rules and policies were policies and that was that. No copies of anything, no way, no how and there was not much we could do about it.

By now I was getting annoyed. This was my client’s insurance company. This was their employee with what might be a similar claim to one or ones they had already handled. In fact, as we would discover later, there were medical reports which prohibited this employee from ever running or jumping or climbing or, for that matter, doing just about anything in the area of physical education! But the carrier was not going to let them know about this. No way, no how, rules were rules, policies were policies.

So, we had a board meeting and it was decided we would sue this carrier and make them open their files for our inspection. To Superior Court we would go, and we did go. After some motions and arguing, the Judge ordered this carrier to open their files for our inspection. Their legal team was set up, their claims team was assembled and in I walked at the appointed time to review the files. Well, there were lots of files. And there were many reports that were very important to my client. It was clear to me, the carrier knew or should have known that if this previously injured PE teacher were to go back doing his usual and customary job, he would not last long before he would re-injure one or both of his severely injured knees. Sure enough, when that carrier found out they were "no longer on the risk" this case, and many others, were settled by C&R. The carrier was elated, these rotten old files were closed, off to storage they would go and back to his regular job as a PE teacher this claimant went.

He did not last long, maybe three weeks, and sure enough, boom went his knee.

This was not a good claims handling job, the courts eventually found, and their negligent claims handling required them to reimburse my client for all the costs associated with the new claim.

The seeds of the Employer’s Bill of Rights was born. My partner, and I, began seeing a lot of claims like the one I just told you about. Improper claim handling. Refusal to even discuss the claims with the employer. Rules are rules and policies are policies. So, off to Superior Court we would go and open their claims files would go. While we were already in there, our employer client would ask, how about giving them a report on each claim, an audit. We found more than we wanted for sure. We didn’t even want to be in there looking over work done after it was mostly completed. I mean, who doesn’t make mistakes especially if we are over worked and under paid!

Not too many years later when we were asked to write some laws to help employers, we wrote a whole bunch. One of them is what became Labor Code �3762. This section, entitled Employer’s right to information and documents affecting premium; exceptions, says:

The insurer shall discuss all elements of the claim file that affect the employer’s premium with the employer, and shall supply copies of the documents that affect the premium at the employer’s expense during reasonable business hours. The right provided by this section shall not extend to any document that the insurer is prohibited from disclosing to the employer under the attorney-client privilege, any other applicable privilege, or statutory prohibition upon disclosure, or under Section 1877.4 of the Insurance Code. (Emphasis added)

Now, I am not certain what the Legislature meant by enacting this section but I can tell you what my partner, Rene Folse, meant when he put these words to paper. What an insurance carrier does in claims handling has a direct impact on the premium paid by the employer (more then than now since the open rating system we basically have today). Carriers need to observe this truth and get on the side of the employer, not against it.

A lot of the documents in the claim file affect the premium paid by the insured. Just think of the information and documents that go into determining the reserves. The age of the claimant, severity of the injury, the diagnosis, treatment, investigation performed by the carrier. There are very few documents in a claim file that will not affect the premium since most of them affect reserves. Here are a few that I think we would all agree will probably be important for the employer to see which affect the reserves and therefore the premium. Medical reports and records; deposition reports (testimony portion only); investigation reports; witness statements.

I have had many employers show me letters they have received from claim departments in response to a valid request for information and documents pursuant to the Employer Bill of Rights. Those carriers who seem proud of the work they do are more than accommodating. Others, and I dare say the majority I have seen, have set up new hoops for the employers to jump through all in an effort to keep them out of their claim files. Most have some kind of release, which they say must be signed in order to get any claim file documents. The release says the employer agrees it will keep the documents out of harms way, and will indemnify the carrier in the event the carrier gets sued over the release of the records to the employer or for about any other reason the lawyer for the carrier could think of.

Where does the law say the carrier can levy yet another rule or procedure on the employer to make it even more difficult to get the records? I tell most employers that the release they are required to sign is not a provision of the law, they do not have to sign it but we will have to go back to Superior Court and sue the carrier all over again to get at the files which the Employer’s Bill of Rights was supposed to help streamline.

The employer has a need to know this information. These claims are an important part of the budgeting employers have to do. The level of sophistication of the employers in workers’ compensation matters has increased ten fold in as many years.

Why should the carrier and the employer be enemies? Why doesn’t the carrier want to have an open file policy with the employer (privacy issues notwithstanding)? Rene and I knew the reasons, the files in many cases were not well prepared because the carriers, feeling the pinch of increasing costs and stabilizing premiums (and the threat of the repeal of minimum rates on the horizon) had to cut costs. Where better place to cut them than in the claims department. Even though most examiners can probably only properly handle about 125 open indemnity files, how about loading them up with say 250 or even 450 files! Well, if you do that you probably don’t want anybody looking at the files, especially the employer whose premiums are going to depend on the outcome of the case or the reserves on those files.