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Workers Comp Bad Faith – Adjusters Look Back Over Their Shoulders?


Workers Comp Bad Faith – The Rarely Discussed Possibility

For many years, Workers Comp bad faith remains one of those rarely-discussed topics due to many factors.   The subject rears its ugly head for what seems approximately twice per year.   The worn-out catchphrase is “sent a chill over the industry.”

picture workers comp bad faith dragon
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The reason I published this article originated with me reading an article this week containing that very phrase.     My good friend Kevin Quinley was interviewed for the article.   The article covered an automobile adjuster’s handling of a claim in Washington.  See the  Keodalah Decision

The workers compensation claimant bar has been pursuing bad claims handling as a tort for over 50 years.   Yes, there have been some successes in this area.

Workers Comp Board Jurisdiction

The Workers Comp Board or Industrial Commission usually retains the authority over claims handling issues.   If one looks at the current Appellate Court cases, the judge usually remands the case back to the lower court – usually the Appeals level within the respective workers compensation board or commission.

Approximately 20 years ago, an adjuster was found to have altered claims forms after obtaining signatures from the employer and employee.   The changes to the forms occurred due to the adjuster wanting the claims agreement forms to be approved by the workers compensation commission.   The adjuster even admitted altering the agreement forms.   What happened to the case?   The Court of Appeals remanded the case back to the Full Commission as they were deemed to have jurisdiction.

Exclusive Remedy

Exclusive remedy has always kept most claims issues within the board or commission’s authority.   If one cannot sue their employer can they also not sue their adjuster?

Exclusive remedy is one of the underpinnings of how Workers Compensation insurance survives to this day.   Exclusive remedy means that an injured claimant cannot sue his employer as a liability matter.  Likewise, the employer cannot sue the employee for contributory negligence.

Structured Environment Element In Avoiding Workers Comp Bad Faith

Workers comp, overall, operates in a very structured environment.   For example, making an offer to settle on a property or auto liability claim has many unknowns as to value.  Offering too low (low balling) can be a path to a bad faith claim.

Workers comp bad faith remains a very structured environment. All the variables are pre-calculated from the Average Weekly Wage to a fee-schedule medical bill.

The great unknown of Workers Compensation barely exists from the way a First Report of Injury is filed to the settlement approval process.

Starve Them Out

The iciest my veins had ever felt reviewing a claim that I had taken over from a terminated adjuster was this phrase:

I am going to sit on this one and starve them out to get a quick, cheap settlement.   Oh, yes that was documented in the file and could not be removed by anyone.

The file was not yet settled – back TTD and medical bill payments were inked that day along with a fine for late payment.  That, to me, remains my crowning example of going down the path towards a massive bad faith claim.

Bottom Line

Even though the above passages point to a safe harbor while handling workers comp claims, no adjuster should ever think they are immune to a workers comp bad faith action against them.

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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