The Duty to Investigate: Applicant’s Attorneys’ New “Gold Mine” in CCR §10109(a)

June 13, 2024

It is well-established that the purpose of the workers’ compensation system is to provide benefits to employees who suffer on-the-job injuries or certain work-related illnesses. To adhere to the purpose of the workers’ compensation system, California Code of Regulations §10109(a) requires a claims administrator to “conduct a reasonable and timely investigation upon receiving notice or knowledge of an injury or claim for a workers’ compensation benefit.” This has been interpreted by courts as a “duty to investigate.” Claims administrators and their attorneys, must investigate the claim in good faith to ensure injured workers are not being denied benefits they are entitled to.

This poses a battle of duties for defense attorneys. As attorneys, we owe a duty to our clients to zealously advocate and act with diligence when representing their interests. This includes recognizing applicable defenses which help limit our client’s exposure and liability. However, we must also ensure injured workers are promptly provided benefits they are due to ensure our clients do not incur penalties for withholding them. Part of advocating for our clients’ interest is advising on delay or denial of a claim when it is appropriate. However, if the topics discussed at the recent CAAA Convention are any indication of future conduct, applicant attorneys have identified CCR §10109(a) as a potential “gold mine” where a claim or entitlement to a benefit has not been adequately investigated by a claims administrator.

Thus, in this current climate, it is crucial to fully comprehend the duty to investigate under CCR §10109(a) and to comply with all the requirements of a good faith investigation.

The First 90 Days

The duty to investigate is traditionally triggered by the filing of a claim form. Once the injured worker files the claim form, the claims administrator has 90 days to perform an investigation and accept or deny the case before the claim is presumed compensable under Labor Code §5402. The claim form is deemed “filed” when the employer receives it. (Spearman v. WCAB, (1997) 63 CCC 110).

Investigating in Good-Faith

California Code of Regulations §10109(b) states, “a reasonable investigation must attempt to obtain the information needed to determine and timely provide each benefit, if any, which may be due the employee.” It is important to note that the duty to investigate is ongoing, and does not end when the case is accepted or denied. An investigation must be performed any time a benefit could be owed, regardless of whether that benefit is demanded. The code also states that the “administrator may not restrict its investigation to preparing objections or defenses to a claim, but must fully and fairly gather the pertinent information, whether that information requires or excuses benefit payment.” These rules apply to both the claims administrator and defense counsel.

Therefore, to properly comply with CCR § 10109 and conduct a good-faith investigation, it is imperative that the claims administrator investigate any time a benefit could be owed. At the inception of the case, the claims administrator can interview supervisors, or any witnesses to the incident. Until the injured worker is represented by legal counsel, they may also be questioned regarding the occurrence of the injury. Questions to ask could include, what body parts are injured, how the injury occurred, where and when the injury occurred, if they have had trouble with that body part in the past, whether the injury involved a third party, and if the injury was caused or contributed to by any faulty device, machine, or tool. The more information the claims administrator can gather, the better prepared the attorney will be for recommending further handling and identifying all applicable defenses.

While the case is being litigated, it is important that the claims administrator and defense counsel engage in open and efficient communication. The duty to investigate is ongoing, even while the case is being litigated, regardless of whether it is accepted or denied. If defense counsel or the claims administrator fail to investigate in a situation where an applicant’s benefits are owed within a reasonable time frame, courts could find a violation of duty under CCR §10109 and impose penalties, sanctions, or both.

For example, in Erhardt v. US Concrete dba Central Concrete Supply Company, Inc., 2022 Cal. Wrk. Comp. P.D. LEXIS 198, applicant’s primary treating physician requested authorization for a left knee surgery. The physician wrote in several progress reports that the applicant was still waiting on authorization for the surgery. The applicant emailed these reports to defense counsel, requesting authorization. The defense counsel argued that the requests for authorization were never sent to the adjuster. However, the Appeals Board panel concluded that defense counsel has a duty to transmit the request for authorizations to the adjuster. In addition, the claims examiner’s receipt of the physician’s report stating that applicant was still waiting for authorization, triggered the claims adjuster’s duty to investigate under CCR §10109(c). Section (c) states, “The duty to investigate requires further investigation if the claims administrator receives later information, not covered in an earlier investigation, which might affect benefits due.”

Failure to Conduct Reasonable Investigation

If an employer fails to investigate or does not investigate in good faith, then a court will likely view this as an unreasonable delay in providing an injured worker benefits he or she may be entitled to. This failure could result in penalties under Labor Code §5814. This section states that if a claims adjuster unreasonably delays workers’ compensation benefits in the form of payments for medical bills, or payments to an injured employee, they will be subject to up to a 25% penalty on the amount of benefits that were not paid up to a certain maximum. There is also a worst-case scenario, where the case can be referred to the Audit Unit of the Department of Workers’ Compensation for potential imposition of an administrative penalty. (Romano v. Kroger Co. 2013 Cal. Wrk. Comp. P.D. LEXIS 125).

As they say, knowledge is power. The more information the claims administrator can investigate at the beginning of a case, the better prepared the attorney will be in identifying applicable defenses without delaying an injured workers’ benefits. However, given that the duty to investigate is ongoing, it is imperative that both the claims examiner and defense counsel continue to fulfill the duty to investigate throughout the entirety of a case. By conducting a thorough investigation and being proactive when red flags are raised, claim administrators and attorneys can comply with CCR §10109(a) and therefore avoid potential penalties and the “gold mine” that applicant attorneys are hoping for.