Bulletin 00-4
October 13, 2000

DWC Assesses First $100,000 Civil Penalty Against a Claims Administrator

  The Division of Workers' Compensation has assessed a civil penalty of $100,000 against Crawford & Company, a third-party claims administrator.   This is the second civil penalty assessed by DWC under State Labor Code Sections 129 and 129.5, and the first for the maximum amount provided by law.

 In a stipulation and order, the company has agreed to pay the penalty and other monies owed and implement a series of corrective measures to bring its claims handling practices in compliance with the requirements of the Labor Code and Title 8, California Code of Regulations.

 The penalty was assessed after an investigation by the DWC Audit Unit found that the company, as a general business practice, did not pay the required 10 percent increases and interest when uncontested bills for medical treatment or medical-legal evaluation services were paid late.

 The company had earlier taken the position that it was not required to pay the increases or interest unless ordered to by a Workers' Compensation Judge.  However, the DWC Administrative Director, in a 1997 ruling, found that the ten percent increase plus interest were self-executing.  The company contended that the finding was not properly communicated to its various adjusting locations/business units, and therefore they were inadvertently unaware of it.

 In the stipulation, Crawford agreed to pay the $100,000 civil penalty and acknowledged that the Audit Unit would also assess administrative penalties when the final audit report is issued.  The company also agreed to pay all required ten percent increases and interest still due.  In addition, they will establish a training coordinator position which will be in charge of organizing the training of all of the company's workers' compensation claims handlers in California regarding the state's workers' compensation laws and regulations.

 "We're happy to have been able to resolve this issue in a timely and expeditious manner," said Richard Gannon, Administrative Director of the Division of Workers' Compensation.  "This resolution benefits all sides.  It will help the company ensure that its claims handling practices meet statutory and regulatory requirements and avoid potentially lengthy and costly litigation."