Bulletin No. 00-03
June 16, 2000


DWC Issues First Civil Penalty

 The Division of Workers' Compensation has, for the first time, assessed a civil penalty against a workers' compensation claims administrator.

The action was taken under Labor Code Section 129.5 (d) after National R.V., Inc., a recreational vehicle manufacturing company in Perris, California, was found to have knowingly violated claims handling statutes and regulations with a frequency to indicate it was a general business practice.

 The company is a self-insured employer that administers the workers' compensation claims filed by its injured workers.  It has agreed to pay a $40,000 civil penalty and to make numerous improvements in its claims handling practices as part of an amicable resolution with the division.

The action resulted from an eight week on-site audit and investigation of the company's claims handling practices following a referral by the Department of Industrial Relations' Office of Self Insurance Plans, which approves employers to become self insurers.

Investigators found that the company systematically was:  improperly calculating average weekly earnings used to determine disability payments to injured workers; not issuing benefit notices to workers informing them of changes in the status of their case; and  failing to pay the interest and penalties resulting from late payment for medical services and evaluations.

According to DWC Administrative Director Richard P. Gannon, the company has cooperated with the division throughout the audit process and had implemented a number of corrective actions prior to notification of the audit as evidence of good faith.  These included:

 o requesting a third-party auditor to review its then current administrative processes;

 o hiring an experienced bilingual claims' administrator;

 o purchasing a more viable administration software program to replace an inadequate previous system;

 o enrolling its workers' compensation assistant in educational courses to expand her knowledge of proper workers' compensation claims handling.

 The stipulated resolution also provides that the DWC audit unit will issue administrative penalties and notices of compensation due in accordance with its findings, and that the auditors will return for a follow-up non-random audit.

 The company faced a potential  civil penalty of up to $100,000, which can be assessed in these types of cases, according to Gannon.  This stipulation and order and the cooperation of the company throughout this process brings this matter to speedy, just and fair conclusion, without the need for potentially lengthy and expensive litigation, he said.  It will benefit all parties concerned.