Failure to reasonably investigate claim might prove costly

In order to receive penalty benefits in Iowa, an employee must first establish that there was a delay in the payment of benefits. The employer then has the opportunity to demonstrate that it had a reasonable excuse for the delay.

Case name: Williams v. KW Products, Inc., et al., No. 0-136/09-1449 (Iowa Ct. App. 04/21/10).

Ruling: The Iowa Court of Appeals reversed a lower court's decision denying the employee's request for penalty benefits and returned the case for reconsideration.

Arrest for assault, drugs not enough to end benefits (11/07/11)
Millwright's physical improvement nixes increase in benefits (03/08/12)
Wrist surgery, scar justify benefits for arm injury (12/22/11)
Doorman gets second chance to prove he is an employee of bar (07/19/12)
Agreement with employment agency exposes county to potential liability (04/08/13)

What it means: In order to receive penalty benefits in Iowa, an employee must first establish that there was a delay in the payment of benefits. The employer then has the opportunity to demonstrate that it had a reasonable excuse for the delay. A delay is reasonable if: 1) it was necessary for the insurer to investigate the claim; or 2) the employer had a reasonable basis to contest the employee's entitlement to benefits.

Summary: A machinist developed tendinitis in his forearms and was later diagnosed with bilateral radial tunnel syndrome. An independent medical examiner rated his impairment as 5 percent of the right arm and 20 percent of the left arm and recommended work restrictions. The employer and its insurance carrier initially admitted that the employee sustained permanent physical impairment from his work injury but later denied such impairment. A deputy workers' compensation commissioner determined that the employee had a 15 percent impairment to the body as a whole but declined to award penalty benefits. The Court of Appeals reversed the denial of penalty benefits, finding that the employer failed to engage in a reasonable investigation of the employee's claim.

The court explained that the existence of the employee's permanent impairment was conclusively established because the employer did not obtain an agency ruling permitting it to withdraw or amend its prior admission. As of the date of its admission, the employer no longer had a reasonable excuse for delaying the commencement of benefits.

The employer argued that it was justified in delaying payment because the employee had received a zero percent impairment rating from a treating physician. The court pointed out that the same physician had given "apparently inconsistent indications" as to whether the employee sustained a loss of function, which should have prompted the employer/insurer to investigate further. Moreover, the fact that the employee was given work restrictions was inconsistent with the finding that he had a zero percent impairment rating. Further investigation was therefore warranted before the employer/insurer denied benefits.

Read more at the WorkersComp Forum homepage.

July 1, 2010

Newsletter Sign-up