FOR IMMEDIATE RELEASE
IR #98-16
Wednesday, April 15, 1998

CONTACT:
Rick Rice
(415) 972-8835
Richard Stephens
(415) 975-0721


1997 Annual Report of Audit Activities Issued

SAN FRANCISCO --State auditors issued nearly 10,000 administrative penalty assessments to workers' compensation claims administrators totaling nearly $1,270,000 in 1997, according to a new report issued by the Department of Industrial Relations' Division of Workers' Compensation.

"These numbers continue to be unacceptably high," said DWC Administrative Director Casey L. Young in releasing the report. "Although many claims administrators do an excellent job, overall the statistics in this report show that this industry needs to improve its performance.

"Again this year, we are finding unacceptably high amounts of unpaid compensation due to injured workers, late payment of benefits, and failure to notify employees of their rights to benefits in a timely manner," he said.

Young noted that the average number of penalty citations per audit subject was 239, the average amount per penalty assessment was $136 and the average total in penalty assessments per audit was $32,548.

"All of these figures have risen since last year," he said, noting that the number of penalties assessed increased by 3.3 percent, the dollar amount in penalties increased by nine percent, and the average amount per penalty assessment increased by 5.4 percent. This is in spite of the fact the number of files audited during the year was down about 4,000 from 1996, Young said.

The division's Audit Unit completed 39 audits during the year, 29 of which were randomly selected and ten were "targeted." Targeted audits are based either upon the results of a previous audit or the investigation of complaints received by the DWC. In addition to the audits, 18 investigations of complaints were completed, in which 89 claim files were reviewed.

The number of audits and investigations completed was down from previous years because the audit staff was involved in several lengthy ongoing investigations into claims handling practices at certain claims adjusting locations during the year. The results of those investigations will not be reported until they are complete, expected sometime during 1998, Young said.

According to the report, a record amount in penalties for one audit was assessed in 1997, when Legion Insurance Company was assessed 1, 168 penalties totaling $158,940. The non-random audit resulted from a complaint investigation conducted in 1996 and disclosed $22,355 in unpaid compensation in 23 claims.

On the other hand, some 1997 audits showed excellent results, the report says. Auditors found little or no unpaid compensation due after reviewing a number of files at some adjusting locations. In other cases, a follow-up audit after an earlier audit showed the amount of compensation due had declined dramatically.

In 1997, auditors found unpaid compensation due to employees in about 16 percent of the indemnity and complaint files audited, up from 12.7 percent in 1996. In those files where there was unpaid compensation due, the average amount was $894, up from $819 in 1996.

Again in 1997, failure to provide proper benefit notices to injured workers or sending them late was the most common type of violation, accounting for over 48 percent of penalties assessed and about one third of the penalty amounts.

"Benefit notice violations are important because they keep injured workers informed of the status of their claim," said Young. "Failure to provide these notices increases the chances of unnecessary litigation." The full audit report will be available on-line from the Division of Workers' Compensation home page, accessible from the DIR website.

# # #