Penalties

The penalty provisions of the Nebraska Workers’ Compensation Act can be stiff, but with diligent investigation and effective communication, they are easily avoidable. The primary penalties are 50% waiting time penalties on indemnity benefits and attorney’s fees.  The penalties are triggered when an employer and/or insurance carrier fail to pay compensable indemnity or medical expenses within 30 days or failure to pay under an Award or settlement within 30 days.  However, if there is a reasonable controversy regarding the compensability of the benefits owed, then penalties will not be levied.

Penalties on indemnity benefits. The need to pay indemnity benefits (TTD, PPD, etc.) is triggered by receipt of notice that an injured worker is disabled and unable to work or has received an impairment rating upon attaining maximum medical improvement.  An employer/insurer then has 30 days to make payment of the indemnity benefits owed or face a 50% penalty on the accrued benefits.  In addition, if an injured worker needs to retain an attorney to obtain payment, the employer/insurer is liable for any attorney’s fees incurred to obtain payment.

In cases involving unscheduled, body as a whole injuries that result in permanent restrictions, an injured worker may be entitled to PPD benefits based on a loss of earning capacity. Penalties will be owed in such a case if the PPD benefits are not paid within 30 days of receipt of the loss of earning capacity report.  While a reasonable controversy may exist regarding the extent of disability, if it is known that permanent restrictions will result in a loss of earning capacity, the best practice is to start PPD benefits based on an estimated loss of earning capacity while waiting for the loss of earning capacity report.  This avoids a long period without payment of indemnity benefits, especially in cases where liability is not at issue.

Entry of an Award will also trigger the 30-day period for payment of benefits to avoid penalties. If an appeal is taken, then benefits may not be owed, but be sure to confirm what issues are being appealed because some benefits may still be owed.  For instance, if an Award of a 50% loss of earning capacity is being appealed because your position is that it should be 25%, then make sure to pay PPD based on at least the 25% loss of earning capacity being asserted.  Or, if only the medical portion of an Award is appealed, there may still be an obligation to pay the indemnity benefits.  Again, if an attorney needs to do work to get payment after an Award, attorney’s fees can be levied and, in addition, interest will accrue on the amount awarded.

Settlements need to pay within 30 days of becoming final to avoid penalties. If the settlement is achieved through the filing of an Application for Approval of Lump Sum Settlement, the check for payment of the full settlement amount must be issued within 30 days from the date the Order of Approval is entered to avoid the assessment of a 50% penalty on the entire amount due.  Settlements done via a Release of Liability should be paid within 30 days of the filing of the Release of Liability to avoid the potential for an assessment of a penalty.  While the trial courts have questioned whether they can levy a penalty after a Release is filed, the statute indicates they must be paid within 30 days and the best practice is to ensure prompt payment within 30 days of the filing of the Release.  Further, the sooner payment is made after the filing of a Release of Liability, the sooner a Joint Stipulation to Dismiss with Prejudice can be filed and the Order of Dismissal with Prejudice entered to finalize the settlement.

Penalties on Medical Benefits. Payments of medical expenses are due within 30 days of receipt of a compensable medical bill.  However, note that medical providers need to provide the written report accompanying the bill to confirm compensability and failure of the medical facility to provide the medical note may impact the obligation to pay.  Nonetheless, unnecessary delay in working to confirm compensability should be avoided and the work done to secure the medical notes needed to determine compensability should be documented.  The penalty for failure to timely pay a medical bill is the assessment of attorney’s fees for time required to secure payment.  While, on its face, this is not as severe as the 50% penalty that can be levied on late indemnity payments, the penalty can still be steep if there is a need to take a case to trial due to unpaid medical bills that are compensable without a reasonable controversy.

Reasonable Controversy. A reasonable controversy exists when there is a question over whether or not a payment is owed as a result of a work injury.  Obviously, if there is question related to the overall compensability of the claim, for example whether the accident and injury arose out of and in the course of employment, then a reasonable controversy would exist for all benefits claimed.  Additionally, questions over the reasonableness and necessity of medical care or extent of disability can also create reasonable controversy.  To establish a reasonable controversy there must be a set of facts or medical opinion supporting the denial of benefits.  This can be a witness statement, questions related to a pre-existing medical condition, a contrary medical opinion (i.e. IME), or a rebuttal loss of earning capacity.  Note that whether a reasonable controversy exists is determined at the time of trial and not at the time the denial was made.  However, it is always best to secure the necessary evidence supporting a denial as soon as possible and checking with counsel regarding a denial is often advised.

This post is not an exhaustive detail of all penalty situations or instances of when there is a reasonable controversy. Penalties can best be avoided through effective and timely communication between the employer, claims, counsel, the injured worker, and medical providers.  And, specific issues related to whether a reasonable controversy exists or if denial can be entered, should be discussed with counsel to avoid the potential impact of penalties.  If you have such a question, please feel free to contact any one of our attorneys.

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