Bulletin 97-8
April 30, 1997

DWC Issues 1996 Annual Report of Audit Activities

The Division of Workers' Compensation's Audit Unit issued 9,030 penalty assessments totaling $1,164,120 to workers' compensation claims administrators during 1996, according to DWC's 1996 Annual Report to the Legislature on its audit activities.

Unpaid compensation due to injured workers that was found in the 55 audits conducted during the year added up to $473,961. The largest amount, $261,733, was for unpaid permanent disability benefits.

"The statistics in this report paint a troubling picture," said DWC Administrative Director Casey L. Young in releasing the report. "Auditors are continuing to find the same problems of unacceptably high amounts of unpaid compensation due, late payment of benefits, and failure to notify employees of their rights to benefits in a timely manner.

"Overall, the workers' compensation claims administration industry has not significantly improved its performance since last year," he said.

Young pointed out that unpaid compensation due was found in one out of eight of the indemnity and complaint files audited, averaging $819 per case. "Statistics in the report also show that over one fifth of all temporary disability cases and over 30 percent of permanent disability cases had late first payments," he said.

The largest total amount of penalties for one audit in the history of the audit program was assessed in 1996, according to the report. The audit subject, Golden Eagle Insurance Company of San Diego, was assessed 788 penalties totaling $116,975. In addition 204 penalties totaling $26,175 was assessed against an affiliated company, Big Bear Markets, which was also audited during the year, bringing the total penalty amount for both companies to $142,250. Big Bear is a self administered, self insured employer whose claims are handled at the same location by the same claims staff.

Comparing 1995 and 1996 statistics for late-paid and unpaid indemnity in undisputed cases, Young noted that the number of indemnity and complaint files audited dropped somewhat, from 6,045 in 1995 to 4,577 in 1996. However the number of penalties assessed for late and unpaid indemnity remained substantially the same, 2,732 in 1995 and 2,739 in 1996, and the amount of penalties rose to $365,645 in 1996 compared to $312,470 in 1995.

Failure to notify injured workers regarding payment or delay of payment of indemnity benefits was found in one out of five files where such a notice was required. The notice was sent late in another 22 percent of the cases.

Other statistics in the report show that, in over 45 percent of vocational rehabilitation cases involving post-1994 injuries, there was either a failure to issue a notice of vocational rehabilitation rights after 90 days of total temporary disability, or the notice was sent late. In nearly one half of all vocational rehabilitation cases, the injured worker was not provided a timely notice of potential eligibility for vocational rehabilitation after medical eligibility was established.

"Benefit notice violations are important because they keep injured workers informed of the status of their claim," Young said. "Failure to provide these notices increases the chances of unnecessary litigation."

The full audit report is available on-line from the Division of Workers' Compensation home page at the Department of Industrial Relation's website: http://www.dir.ca.gov.