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Penalties, Penalties, Penalties!

New York and New Jersey workers’ compensation claims can turn on deadlines and handling. This month, we look at how two new cases showing how strict deadline compliance is necessary in New York to avoid draconian penalties; we also explore a very recent New Jersey decision on bad faith actions.

New Jersey: penalties for carrier’s actions.

For failing to follow the order of a Judge or failure to provide benefits under the Act, the Judge of Compensation can:

  • Impose costs and simple interest on any monies due.
  • An additional money penalty up to 25 percent;
  • Fine the parties or their attorneys up to $5,000 for unreasonable delay or continued noncompliance;
  • Close proofs;
  • Suppress defenses;
  • Exclude evidence or witnesses;
  • Allow a reasonable counsel fee to a prevailing party, where supported by an affidavit of services.

These penalties are bad enough, but the law also allows for a petitioner to seek civil damages for ‘bad faith’ actions of the employer, the compensation carrier, or its representative.

The general rule in New Jersey allows no direct action available to an injured employee against the employer, or against the employer’s insurer when the insurer does what is required under the Workers’ Compensation Act and the carrier’s insurance policy. Under normal circumstances, injured employees must pursue their exclusive remedies in the Division of Workers’ Compensation, even when an employer, acting through its insurer, does not furnish necessary medical treatment when requested to do so by an employee.

This ‘general rule’ is known as the exclusivity provision and it is enshrined in the New Jersey Workers’ Compensation Act at N.J.S.A. 34:15-8.

We recently wrote about the Davis v. OneBeacon case, where a ‘bad faith’ action was permitted when an employer selected an authorized doctor and then refused to offer the treatment recommended by that doctor. In the wake of this decision it was clear that ‘bad faith’ civil claims are not limited to a situation where a party ignores a court order – a claimant was allowed to make a ‘bad faith’ civil claim when an insurer refused to authorize treatment recommended by their own selected doctor.

In a new decision (published February 1, 2011) the New Jersey Appellate Court reviewed an admitted case where the insurer paid $567,000 in medical and indemnity benefits to the claimant. Scattered medical bills remained outstanding, and the petitioner’s attorney filed a motion to enforce the prior orders in the case and requiring the insurer to pay the outstanding bills. The Judge of Compensation ordered the carrier to pay the bills (enforcing his own prior order) and awarded the petititoner’s attorney a $2,000 counsel fee. Petitioner’s attorney demanded that the judge of compensation sanction and fine the workers’ compensation insurer. The Judge of Compensation declined to do so.

Petitioner then brought a civil claim in Superior Court, alleging that he had suffered “pain and suffering” due to the workers’ compensation carrier’s wanton refusal to abide by the orders of the compensation judge and sought compensatory and punitive damages, plus costs, interest, and attorney’s fees.

The Superior Court dismissed the complaint. The Superior Court Judge found that plaintiff was not precluded from returning to the compensation court to seek sanctions and penalties against the insurer, and, if a new Superior Court action is thereafter necessary for enforcement, such action would not be precluded. The Appellate Court agreed with this result, and affirmed the dismissal of the bad faith claim.

The petitioner now can return to the workers’ compensation court and seek the maximum penalties against the insurer available under the New Jersey Administrative Code (N.J.A.C. 12:235-3.16). In addition to the penalties described above and upon a finding by the judge of contempt, the petitioner or the judge may file a motion with the Superior Court for contempt action.

New York: Defenses suppressed for late filing; Appellate Panels affirm.

There are many reasons to deny a workers’ compensation case in New York (see my chapter on Defenses). Two recent cases demonstrate the danger of failing to file ALL the appropriate forms when you are denying a New York Workers’ Compensation claim by filing a Notice of Controversy (“C-7”).

When a C-7 is filed, controverting a case for lack of notice, lack of employment, wrong carrier, or other jurisdictional or substantive reasons, the case will be set down for an expedited hearing within 30 days. The Act also requires that a “Pre-Hearing Conference Statement” (PH-16.2) must be filed 10 days before the Expeditied hearing. See 12 NYCRR 300.38(f)(4).

In many cases, the carrier files a C-7 after initial investigation reveals that the claimant did not work for the company, or where either notice or the accident itself is in dispute. Our recommendation: file a Pre Hearing Conference statement at the same time – to avoid the potential for failing to file the Statement (Form PH-16.2) within the 10 days. There is just too much that can go wrong – late notice of the hearing date, no notice at all, etc! If you have enough information to justify a denial, go ahead and file the PH-16.2 at the same time.

Better, have your outside counsel handle the process! It seems that common practice is to have the carrier file a C-7, then refer the claim to outside counsel. This introduces delay and a possible dropped deadline into a time-sensitive process.

Two recent cases (both decided in March 3, 2011) show what can happen when the Pre-hearing Statement is not timely filed the carrier/employer loses the right to assert defenses!

In Smith v Albany County Sheriff’s Dep’t, the Appellate Division ruled that because the the carrier submitted an untimely prehearing conference statement the employer waived all defenses to the claim and, upon review of claimant’s medical records, established an occupational injury. In a similar case (Quagliata v Starbucks Coffee) also decided the same day, the Appellate Panel ruled that stripping the carrier of its defenses for failing to file the Pre Hearing Conference Statement on time was “not unreasonable, arbitrary, capricious or contrary to the statute under which it [is] promulgated.”

Best practices: be wary of the requirement that the Pre-Hearing Conference Statement be filed ten days prior to the expedited hearing – implement a plan to make sure this is done timely or risk a suppression of defenses!

Have any questions about this article? Contact Greg Lois.

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