UPDATE: Assembly Committee Fails To Pass SB 335; Bill Loses Support After Punitive Amendments to Key Provisions

On July 13, 2021, the California Assembly Committee on Insurance held its first hearing on SB 335. The bill was amended significantly by the committee, but ultimately failed to garner enough votes to pass, with several committee members opposing the amended bill.

The amendments would maintain the current timeframes for making a liability decision – 45-days for presumptive injuries and 90-days for all other claims. During the delay period, the medical expense cap would remain at $10,000. Lastly, the Committee amended the proposed penalty language affecting presumptive claims. Instead of a penalty equaling 10% of the total award when the insurer unreasonably delays or refuses payment of compensation, the amended bill provides for a penalty of 25% of the unreasonably delayed benefits, up to $25,000. This change is more in line with how the statute currently reads, but with an increase in the cap from $10,000 to $25,000.

Discussion among the committee members focused on the size of the penalty being too punitive, and creating “incentive for litigation,” which they believed would likely result in simply in an increase in taxpayer expenditure. Other committee members felt the changes to timeframes and penalties were unnecessary, as very few presumptive claims are ever unreasonably delayed.

Ultimately, the discussions and amendments to the bill in committee signal that perhaps the legislature is not quite ready to approve massive changes to workers’ compensation decision timeframes and penalties, but we should be wary of further changes to come, as one committee member believes more reforms are likely to be negotiated in the very near future.

TIME IS OF THE ESSENCE: Proposed California Senate Bill Would Shorten Time to Deny All Claims to 45 or 30-Days

July 13, 2021

One of the hallmarks of legislation passed during the pandemic, has been an emphasis on moving claims quickly from the initial investigatory phase to either acceptance or denial of the claim at the administrative level. Presumptively industrial COVID-19 claims were subject to a shortened investigation timeframe: either 45-days or in some cases 30-days, after which time, if no decision had been made, were presumed industrial. A new bill making its way through the legislature would see that shortened timeframe expand to all cases, not just presumptive COVID-19 claims.

On June 1, 2021, Senate Bill (SB) 335 passed in the Senate with a 29-10 vote, and is now before the Committee on Insurance. SB 335 proposes to amend California Labor Code sections 3212.86, 3212.87, 3212.88, 3761, and 5402, as well as to add a Labor Code section 5814.3 to, among other things, shorten the investigatory period for all workers’ compensation claims.

There are a few notable changes proposed by the Bill. SB 335 purports to reduce the window for accepting or denying a claim from 90-days to 45-days for most injuries, and from 90-days to 30-days for presumptive injuries (such as COVID-19, hernia, heart trouble, pneumonia or tuberculosis, among others) for certain law enforcement personnel or first responders.

During the delay period before the claim is accepted or denied, SB 335 would require provision of medical treatment up to $17,000, increased from the current $10,000 cap.

Currently, if payment of compensation is unreasonably delayed or refused, prior to or subsequent to the issuance of an award, the amount delayed may be increased up to 25% or up to $10,000, whichever is less; the WCAB has discretion in ordering these penalties. Under SB 335, for presumptive injuries to law enforcement personnel or first responders, the penalty would change to a 10% increase of the full amount of the order, decision, or award. The purpose of this revision is to eliminate multiple increases being awarded for repeated delays in making ongoing payments. This change would apply retroactively to all dates of injury.

The other changes proposed by the Bill are as follows:

• LC 3212.86: this section applies to an employee with COVID-19-related illnesses. The proposed revision changes the requirements for a COVID-19 “injury” from a two-prong to a three-prong test. The reference to LC 5402 would be removed, and instead, if liability is not rejected within 30- days after the claim form is filed, the injury is presumed compensable.

• LC 3212.87: the only proposed change is the reference to LC 5402 would be removed, and instead, if liability is not rejected within 30- days after the claim form is filed, the injury is presumed compensable.

• LC 3212.88: the reference to LC 5402 would be removed, and the window for rejecting liability is reduced from 45- days to 30- days, triggered by the filing of the claim form. If the claim is not timely denied, it is presumed compensable; the presumption of compensability is rebuttable by evidence discovered subsequent to the 30-day period.

• LC 3761: the first proposed change removes the reference to the 90-day window, and instead, the insurer shall give the employer an opportunity to complete a report of occupational injury or illness within the applicable window for claim delay. There are also some non-substantive wording and punctuation changes proposed.

• LC 5402: the 90-day liability window would change to 45 days. A new subsection would be added to address injuries or illnesses covered in Sections 3212 to 3213.2, wherein if liability is not rejected within 30 days after the filing of the claim form, the injury is presumed compensable. Only evidence discovered subsequent to the 30-day period would be used to rebut the presumption of compensability. The cap for medical treatment expenses during the liability delay window would increase from $10,000 to $17,000.

• LC 5814.3 would be added. Notwithstanding LC 5814, if payment of compensation for injuries or illnesses covered in LC 3212 to 3213.2 is unreasonably delayed or refused, either prior to or after issuance of an award, the full amount of the order, decision, or award, shall be increased by 10%. Multiple increases for repeated delays in providing a series of payments for the same type of benefit will not be awarded, absent special circumstances. The WCAB shall look to the facts in order to determine the delay and reasonableness of the cause. This delay or refusal shall constitute good cause under LC 5803 to rescind, alter, or amend the order, decision, or award for the purpose of making the 10% increase. This amendment would apply retroactively to all injuries. Presumably, the same legal standards for “reasonableness” of a delay under Labor Code 5814 would apply for delays under Labor Code 5814.3, however, the penalties have the chance to be significantly greater than under Labor Code 5814. Practitioners may recall that this proposed section mirrors the way penalties were awarded under Labor Code 5814(e), prior to being amended.

Overall, the proposed changes would put more pressure on employers and insurers to work quickly at the onset of claims by shortening the timeframes for rejecting a claim. While the delay window would be shortened, the liability for medical expenses would increase. It seems that by shortening the window, the actual effect will be a decrease in required medical expenses during the delay period if the claim is ultimately denied. However, by increasing the penalties on delay of medical treatment, increasing the cap for medical treatment obtained during the investigatory period, and decreasing the time window in which to conduct that investigation, it is clear the legislature intends to expedite claims processing, with a priority on first responders and law enforcement, similar to what is currently in place with regard to COVID-19 claims only.

The Assembly had its first reading of SB 335 on June 2, 2021 and the bill was referred to the Committee on Insurance as of June 10, 2021. We will provide further updates as the Bill makes its way through the legislature.