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Chapter 4.5. Division of Workers' Compensation
Subchapter 1.5. Injuries on or After January 1, 1990
Article 1. Audit, General Definitions

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§10100.2. Definitions

The following definitions apply in Articles 1 through 7 of this Subchapter for audits conducted on or after January 1, 2003.

(a) Adjusting Location. The office where claims are administered. Separate underwriting companies, self-administered, self-insured employers, and/or third-party administrators operating at one location shall be combined as one audit subject for the purposes of audits conducted pursuant to Labor Code section 129(b) only if claims are administered under the same local management at that location.

For auditing purposes, any separate office or location whose staff includes local management may be considered a single adjusting location.

(b) Additional claim file. A claim selected for audit in addition to the random sample of claims selected. An additional claim file may include a companion claim file, a file selected for audit because it was incorrectly designated on the claim log, or a claim chosen based on criteria relevant to a target audit but for which no specific complaint has been received.

(c) Administrative Director. The Administrative Director of the Division of Workers' Compensation or the Director's duly authorized representative, designee, or delegee.

(d) Audit. An audit performed under Labor Code sections 129 and 129.5.

(e) Audit Subject. A single adjusting location of a claims administrator which has been selected for audit. If a claims administrator has more than one adjusting location, other locations shall be considered as separate audit subjects for the purposes of implementing Labor Code sections 129(a) and 129(b). However, the Audit Unit at its discretion may combine more than one adjusting location of a claims administrator as a single targeted audit subject, or may designate one insurer, insurer group, or self-insured employer at one or more third-party administrator adjusting locations as a single targeted audit subject.

(f) Audit Unit. The organizational unit within the Division of Workers' Compensation which audits and/or investigates insurers, self-insured employers and third-party administrators pursuant to Labor Code sections 129 and 129.5.

(g) Carve-Out Program.

  (1) An alternative dispute resolution (ADR) system for employees and employers engaged in construction (or other enumerated activities), established pursuant to Labor Code section 3201.5.  


  (2) An alternative dispute resolution (ADR) system for any industry (other than construction), established pursuant to Labor Code section 3201.7.  


(h) Claim. A request for compensation, or record of an occurrence in which compensation reasonably would be expected to be payable for an injury arising out of and in the course of employment.

(i) Claim File. A record in paper or electronic form, or a combination, containing all of the information specified in California Code of Regulations, title 8, section 10101.1 and all documents or entries related to the provision, delay, or denial of benefits.

(j) Claim Log. A handwritten, printed, or electronically maintained listing maintained by the claims administrator listing each work-injury claim as specified in California Code of Regulations, title 8, section 10103.2.

(k) Claims Administrator or Administrator. A self-administered workers' compensation insurer, a self-administered self-insured employer, a self-administered legally uninsured employer, a self-administered joint powers authority, or a third-party claims administrator for an insurer, a self-insured employer, a legally-uninsured employer or a joint powers authority.

(l) Closed Claim. A work-injury claim in which future payment of compensation cannot be reasonably expected to be due.

(m) Companion claim file. A claim file that is related to a claim file selected for random or targeted audit, in that claims were filed by the same injured worker, and the Audit Unit cannot ascertain the extent to which benefits have been paid on the initial claim selected for audit without auditing the related claim file.

(n) Compensation. Every benefit or payment, including vocational rehabilitation, supplemental job displacement benefits, medical treatment, and medical-legal expenses, conferred by Divisions 1 and 4 of the Labor Code on an injured employee or the employee's dependents.

(o) Complaint claim file. A claim file that is selected for audit because the Audit Unit has received information indicating the existence of possible claims handling violations of the kind which, if found, would be subject to the assessment of an administrative penalty, the issuance of a notice of compensation due, or the assessment of a civil penalty.

(p) Date of Knowledge of Injury and Disability. The date the employer had knowledge or reasonably can be expected to have had knowledge, pursuant to Labor Code section 5402, of (1) a worker's injury or claim for injury, and (2) the worker's inability or claimed inability to work because of the injury.

(q) Denied Claim. A claim for which all liability has been denied at any time, even if the claim was accepted before or after the denial. A claim which otherwise meets this definition is a denied claim even if medical treatment is provided and paid pursuant to Labor Code section 5402(c) or medical-legal expenses were paid.

(r) Employee. An employee, or in the case of the employee's death, his or her dependent, as each is defined in Division 4 of the Labor Code, or the employee's or dependent's agent.

(s) First Payment of Permanent Disability Indemnity. (1) The first payment of permanent disability indemnity made to an injured worker for a work injury; or (2) the resumed payment of permanent disability indemnity following any period of one or more days for which no permanent disability indemnity was payable for that work injury; or (3) the resumed payment of permanent disability indemnity following issuance of a lawful notice that permanent disability benefits were ending.

(t) First Payment of Temporary Disability Indemnity. (1) The first payment of temporary disability indemnity made to an injured worker for a work injury; or (2) the resumed payment of temporary disability indemnity following any period of one or more days for which no temporary disability indemnity was payable for that work injury; or (3) the resumed payment of temporary disability indemnity following issuance of a lawful notice that temporary disability benefits were ending.

(u) First Payment of Vocational Rehabilitation Maintenance Allowance. (1) The first payment of Vocational Rehabilitation Maintenance Allowance made to an injured worker for a work injury; or (2) the resumed payment of Vocational Rehabilitation Maintenance Allowance following any period of one or more days for which no Vocational Rehabilitation Maintenance Allowance was payable for that work injury; or (3) the resumed payment of Vocational Rehabilitation Maintenance Allowance following issuance of a lawful notice that Vocational Rehabilitation Maintenance Allowance benefits were ending.

(v) Frequency. The ratio of the number of claim files with one or more of a specific type of violation divided by the number of claim files with exposure for the same specific type of violation selected for audit at the adjusting location.

(w) General Business Practice. For the purposes of Labor Code section 129.5(e), conduct that can be distinguished by a reasonable person from an isolated event. The conduct can include a single practice and/or separate, discrete acts or omissions in the handling of several claims.

(x) Indemnity Claim. A work-injury claim that has resulted in the payment of any of the following benefits: temporary disability indemnity, including temporary partial disability indemity, or salary continuation in lieu of temporary disability indemnity, permanent disability indemnity, death benefits, or vocational rehabilitation maintenance allowance.

(y) Indemnity Payment. Compensation for any of the following benefits: temporary disability indemnity, including temporary partial disability indemnity, or salary continuation in lieu of temporary disability indemnity, permanent disability indemnity, death benefits, or vocational rehabilitation maintenance allowance. An indemnity payment includes any increase made pursuant to Labor Code section 4650(d), and any interest pursuant to Labor Code section 5800.

(z) Insurer. Any company, group, or entity in, or which has been in, the business of transacting workers' compensation insurance for employers subject to the workers' compensation laws of this state. The term insurer includes the State Compensation Insurance Fund.

(aa) Investigation.

  (1) As conducted by a claims administrator, an investigation is the process of examining and evaluating a claim to determine the nature and extent of all legally required benefits, if any, which are due under the claim. Investigation may include formal or informal methods of gathering information relevant to evaluating the claim such as: obtaining employment records; obtaining earnings records; informal or formal interviews of the employee, employer, or witnesses; deposition of parties or witnesses; and, obtaining expert opinion where an issue requires an expert opinion for its resolution, such as obtaining a medical-legal evaluation.  


  (2) As conducted by the Audit Unit, an investigation is the process of reviewing and evaluating, pursuant to California Code of Regulations, title 8, section 10106.5 and/or Government Code sections 11180 through 11191, the extent to which a claims administrator meets its compensation obligations under the California Labor Code or Administrative Director's regulations. An investigation may be conducted concurrently as part of an on-going audit without separate notice issued by the Audit Unit, or may be conducted independently from a specific audit in order to determine if an audit will be conducted, or to determine the nature and extent of business practices for which one or more civil penalties may be assessed pursuant to Labor Code section 129.5(e).  


(bb) Joint Powers Authority. Any county, city, city and county, municipal corporation, public district, public agency, or political subdivision of the state, but not the state itself, included in a pooling arrangement under a joint exercise of powers agreement for the purpose of securing a certificate of consent to self-insure workers' compensation claims under Labor Code section 3700(c).

(cc) Knowingly committed. Acting with knowledge of the facts of the conduct subject to an investigation and/or audit under Labor Code sections 129 and 129.5. A corporation has knowledge of facts any employee receives while acting within the scope of his or her authority. A corporation has knowledge of information contained in its records and of the actions of its employees performed in the course of employment. An employer or insurer has knowledge of information contained in the records of its third party administrator and of the actions of the employees of the third party administrator performed in the scope and course of employment.

(dd) Lawful delay. A delay permitted by law or regulation, and for which the claims administrator has given a proper and timely notice of delay when such a notice is required. Any other delay is an unlawful delay.

(ee) Local Management. Claims personnel, regardless of their job titles, who have supervisory authority at an adjusting location over claims administration.

(ff) Medical-Only Claim. A work-injury claim in which no indemnity benefits have been paid or would reasonably be anticipated or expected to be paid.

(gg) Nontransferable Training Voucher. A document provided to an employee that allows the employee to enroll in education-related training or skills enhancement. The document shall include identifying information for the employee and claims administrator, and specific information regarding the value of the voucher pursuant to Labor Code section 4658.5 and California Code of Regulations, title 8, section 10133.50 et seq.

(hh) Notice of Compensation Due. The Notice of Assessment issued pursuant to Labor Code section 129(c).

(ii) Open Claim. A work-injury claim in which future payment of compensation may be due or for which reserves for the future payment of compensation are maintained.

(jj) Payment Schedule. Either:

  (1) The two-week cycle of indemnity payments due on the day designated with the first payment as required by Labor Code sections 4650(c) or 4702(b), including any lawfully changed payment schedule; or  


  (2) The two-week cycle of payments of vocational rehabilitation maintenance allowance (VRMA) required by California Code of Regulations, title 8, section 10125.1.  


(kk) Performance Standard. Criteria developed from historical audit findings data and used as a basis for judgment of quality, quantity, level, and grade to measure claim adjusting performance in the handling of the workers' compensation benefit areas set forth in California Code of Regulations, title 8, section 10107.1, subdivision (c)(3)(A). The standard rating factors will be calculated annually and based on all final audit findings as published in the Annual DWC Audit Reports over the three calendar years before the year preceding the current audit. The Administrative Director shall determine and publish the performance standards for profile audit reviews and full compliance audits for the following calendar year.

(ll) Random sample. For the purpose of audit or investigation, a random sample is a selection of claim files selected pursuant to California Code of Regulations, title 8, section 10107.1, subdivisions (c)(1), (d)(1) or (e)(1).

(mm) Record of Payment. An accurate written or electronic record of all compensation payments in a claim file, including but not limited to:

  (1) The check number, date the check was issued, name of the payee, amount, and for indemnity payments, including self-imposed increases, penalties, and/or interest, the time period(s) covered by the payment;  


  (2) All dates for which salary continuation as defined by Labor Code section 4650(g) was provided instead of direct indemnity payments; the dates for which salary continuation was authorized; and documentation when applicable that sick leave or other leave credits were restored for any periods for which salary continuation was payable;  


  (3) A copy of each bill received which included as part of the bill a medical progress or work status report; and either a copy of each other bill received or documentation of the contents of that bill showing the date and description of the service provided, provider's name, amount billed, date the claims administrator received the bill, the number of the check providing payment for each bill, including the check number, the date of the check, and the amount paid.  


(nn) Self-insured Employer. An employer, either as an individual employer or as a group of employers, that has been issued a certificate of consent to self-insure as provided by Labor Code section 3700(b) or (c), including a joint powers authority or the State of California as a legally uninsured employer.

(oo) Supplemental Job Displacement Benefit. An educational retraining or skills enhancement allowance for injured employees, with dates of injury on or after January 1, 2004, whose employers are unable to provide work consistent with the requirements of Labor Code sections 4658.5 and California Code of Regulations, title 8, section 10133.50 et seq.

(pp) Third-Party Administrator. An agent under contract to administer the workers' compensation claims of an insurer, a self-insured employer, a legally uninsured employer. or a self-insured joint powers authority. The term third-party administrator includes the State Compensation Insurance Fund for locations that administer claims for legally uninsured and self-insured employers, and also includes Managing General Agents.

(qq) VRMA. Vocational rehabilitation maintenance allowance.

(rr) Workers' Compensation Information System (WCIS). The workers' compensation information system established pursuant to Labor Code sections 138.6 and 138.7.

     Note: Authority cited: Sections 59, 129, 129.5, 133, 138.4 and 5307.3, Labor Code. Reference: Sections 7, 124(a), 129(a), 129(b), 129(c), 129.5(a), 129.5(b), 138.6, 138.7, 139.5, 3700, 3702.1, 4636, 4650(c), 4658.5, 4658.6, 5307.1 and 5402, Labor Code.  

 HISTORY 
   
1. New section filed 12-30-2002; operative 1-1-2003 pursuant to  GovernmentCode section 11343.4 (Register 2003, No. 1).

2. Amendment of section and Note filed 4-20-2009; operative 5-20-2009 (Register 2009, No. 17).

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