Newsline No. 13-13  
February 27, 2013  
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Payors must negotiate in good faith with potential lien claimants - filing a lien is not a prerequisite

The Audit Unit of the Division of Workers’ Compensation has received an increasing number of complaints from individuals and entities providing services on a lien basis in workers’ compensation claims. The complainants report that some payors have adopted a policy of refusing to discuss negotiating the provider’s liens until the provider of the services demonstrates it has filed a lien with the WCAB and paid the applicable lien filing or activation fee required by the enactment of SB 863. Such a policy is both unsupported by the plain language of Labor Code sections 4903.05 or 4903.06, and directly contrary to the legislative intent of those sections and existing law.

If a claims administrator has reasonable grounds to contend that nothing is owed, then good faith negotiation does not necessarily require an offer of compromise.  In the absence of a good faith contention that nothing is owed, however, a refusal to negotiate prior to payment of the filing fee would not be in good faith.

Additionally, Title 8, California Code of Regulations, section 10109(e) mandates that “[a]ll Insurers, self-insured employers and third-party administrators shall deal fairly and in good faith with all claimants, including lien claimants”.

Title 8 California Code of Regulations, section 10250(b) requires a moving party state under penalty of perjury that the moving party has made a genuine good faith effort to resolve the dispute before filing the Declaration of Readiness (DOR). Forcing a provider to file a lien and pay the filing or activation fee before the payor will discuss informal resolution of their billing amount prevents the provider from complying with this mandate. Such conduct could expose the payor to the imposition of sanctions, attorney’s fees and costs under Labor Code section 5813. This practice also exposes the payor to audit penalties for violation of Title 8, California Code of Regulations, section 10109(e). As is the Audit Unit’s existing practice, the Audit Unit will review all complaints received about this practice during the next random or targeted audit of any payor about whom such a complaint has been received.

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