Work comp: Penalties -- Frivolous denial

Frivolous denial of liability

• Statutes violated -- Minnesota Statutes 176.221, subd. 1 and 176.225, subd. 1

• Applicable rules -- Minnesota Rules Part 5220.2570; 5220.2770; 5220.2760

• Assessment statutes -- Minnesota Statutes 176.221, subd. 3a; 176.225, subd. 1

• Penalty payable to -- Assigned Risk Safety Account; employee

• Assessed against -- insurance company or self-insured employer

Determination

A frivolous denial under the rules includes one that:

• does not state facts indicating that an investigation has been completed or that a good-faith effort to investigate has been attempted; or

• states a basis that is clearly an inaccurate statement of fact or applicable law.

Calculation

The penalty amount is based on the number of penalties against the insurer for violations in the two-year period prior to the current assessment. The chart below shows the current penalty amounts for each violation.

In addition, a penalty may be assessed under Minnesota Statutes 176.225, subd. 1, payable to the employee, in the amount of up to 30 percent of the benefits found to be delayed.

These penalties may be assessed in addition to penalties for late denials of liability under the provisions of Minnesota Statutes 176.221, subd. 3a and Minnesota Rules Part 5220.2770.

How to avoid a penalty

The easiest way to avoid this penalty is to promptly investigate claims and be familiar with the statutes and rules. Do not deny a claim without conducting an investigation and document your investigation. Inform employers that prompt reporting allows more time to conduct an investigation to make proper determinations regarding acceptance or denial of liability. Remind health care providers that authorizations to release medical information are not necessary for work-related injuries. Be sure to attach to the denial any medical and other documentation used as a basis for the denial.