Work comp: Penalties -- Late first payment

Late first payment of benefits

• Statutes violated -- Minnesota Statues 176.221, subd. 1

• Applicable rules -- Minnesota Rules Part 5220.2770 and 5220.2790

• Assessment statutes -- Minnesota Statutes 176.221, subd. 3 and 176.225, subd. 5

• Penalty payable to -- Assigned Risk Safety Account (ARSA); employee

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

Determination

The information used to determine if a penalty will be assessed includes:

• the first day of disability;

• the date the employer received notice of the injury or disability, whichever is later;

• the date of first payment of temporary total disability; and

• whether the employer is continuing to pay the employee full wages per Minnesota Statutes 176.221 Subd. 9.

The first payment of temporary total disability must be issued by the 14th day after the first day of disability or the date the employer received notice, whichever is later. If the payment is late and the claim has not previously been denied, a penalty may be assessed. A penalty is not assessed if there is a proper wage continuation plan by the employer.

Calculation

When penalty amounts are assessed for late first-payment of temporary total disability, two penalty amounts are calculated. One is payable to the employee and the other is payable to the Assigned Risk Safety Account.

Payable to the employee per Minnesota Statutes 176.225, subd. 5

The amount of the penalty payable to the employee is 25 percent of the benefits found to be delayed. The amount of benefits found to be delayed is the amount of benefits paid up to a date two weeks before the date the first payment was made.

Payable to the ARSA per Minnesota Statutes 176.221

The amount payable to the ARSA is based on:

• the number of days the payment was made late; and

• the amount of benefits due to the date of the first payment.

The total benefits paid to the date of the first payment is multiplied by a set percentage, determined by the number of days the first payment is late. The amount of this penalty is subject to a maximum set by statute and rule.

How to avoid a penalty

When the insurer receives the FROI form from the employer in a timely manner, it is up to them to make payment or deny the claim in a timely manner (by filing a Notice of Primary Liability Determination (NOPLD) form showing the first action on the claim). They need to be sure to provide all dates and information requested on the form and to be certain the information being supplied is accurate.

Penalty may be unavoidable

The insurer may not always be able to avoid this penalty. If the employer is late in filing the claim, there is a good chance the first payment will also be late. While Minnesota Statutes 176.221, subd. 6, requires this penalty be assessed against the insurer, it also provides for recovery of penalty costs in situations where the late first payment is caused by the employer's late filing of the claim.