In most states, employers' insurance companies handle the initial claims process for work-related injuries and illnesses. The workers’ compensation system depends on insurers to follow the state’s rules for responding to claims and paying benefits to injured employees. However, it’s an unfortunate fact that some insurance companies do everything they can to avoid paying benefits.
To address this issue, many states allow injured employees to collect penalties from insurance companies when their rights have been violated. The same rules and penalties generally apply to large employers that are approved to be self-insured, meaning that they pay benefits themselves (although they often hire outside claims administrators to handle the claims process).
After you’ve reported your injury and filed a workers’ comp claim, the insurance company has a certain amount of time—usually within 14 to 30 days—to deny the claim or start paying workers’ comp benefits, including medical treatment and temporary disability payments.
If the insurance company hasn’t denied your claim by the deadline but still hasn’t started paying benefits, some states allow you to collect a penalty for late temporary disability benefits (which are typically paid every two weeks). Penalties may also apply whenever you don’t receive a benefit check on the due date. In California, for example, the insurance company should add on 10% to all late payments (Cal. Lab. Code § 4650(d)).
In other states, penalties don’t start until the payments are overdue by a certain amount of time. And there may be different penalties and time limits for paying compensation due under a workers’ comp award or settlement, as opposed to benefits that an insurer is paying voluntarily after accepting a claim. In New York, for instance, late penalties for voluntary installment payments don’t kick in until they’re at least 25 days overdue; at that point, the insurer must add on 20% to the late payment, along with an additional penalty of $300. When an employee has won an award after a hearing or going through the state’s conciliation process, there’s a late penalty if the insurance company doesn’t pay the award within 10 days; the insurer must pay the employee an additional 20% of an award after a hearing or $300 if the award followed conciliation. (N.Y. Workers’ Comp. Law § 25.)
Many states require insurance companies to pay interest on late payments, separate from any penalties.
Some insurance companies deny legitimate workers’ comp claims in order to reduce their costs. If this happens to you, you may not receive the benefits you deserve—or at least not until you’ve gone through the lengthy process of appealing the denial with your state’s workers’ comp agency. Even if the insurer accepts your claim, it may refuse to pay some benefits without a good reason.
To discourage this kind of behavior, many states impose stiff penalties for unreasonable claim denials, refusals to pay, or delayed payments. For example, if insurance companies in Iowa don’t have a reasonable justification for denying a workers’ comp claim, delaying payments, or ending benefits, the injured employees will be awarded an additional 50% of the benefits that were owed (Iowa Code § 86.13). In Massachusetts, when an employee appeals a claim denial and a workers’ comp judge finds that the insurance company didn’t have a good reason for fighting the appeal, the judge will order the insurer to pay the employee twice the amount of benefits owed, as well as the employee’s attorneys’ fees and legal costs (Mass. Gen. Laws Ch. 152, § 14).
Workers’ compensation is a no-fault system, which means that employees with work injuries may receive benefits regardless of whether the employer did anything wrong. Unlike personal injury lawsuits, the employer’s conduct is generally irrelevant to an injured worker’s right to benefits.
However, a few states impose additional penalties on employers when their actions caused injuries. These penalties may be relatively low for simple violations of safety rules, such as a 10% penalty in New Mexico for failing to provide required safety devices (N.M. Stats. 52-1-10). Ohio’s Industrial Commission may award employees an additional 15% to 50% of the maximum legal award if they were injured because their employers violated workplace safety rules (Ohio Const. Art. II, § 35). A few states impose stiff penalties for more serious wrongdoing. For example, when employees in Massachusetts are injured because of their employers’ serious and willful misconduct, they may collect double the amount of compensation that would otherwise be owed under the state’s workers’ comp laws (Mass. Gen. Laws ch. 152, § 28). California's penalty for serious and willful misconduct is 50% more compensation (Cal. Labor Code § 4553).
The penalties described above are the ones commonly paid directly to injured employees. Most states also require insurers to pay penalties and/or interest to doctors or other health care providers if they are late in paying medical bills for work injuries. And employers or insurers may have to pay steep fines to the state workers’ compensation agency when they don’t meet certain legal requirements.
The requirements for collecting a penalty are different depending on where you live and the type of penalty. Some penalties are mandatory and should be automatic (at least in theory), like the late fees in certain states. But before you’re able to collect other penalties—especially those for unreasonable delays or denials—you may have to file a request and go to a hearing. The same is true if the insurance company balks at paying the mandatory penalties.
As with everything else related to workers’ compensation, these proceedings may be complex. And your employer or its insurance company is likely to put up a fight if the penalty will amount to a lot of money. So if you having trouble getting your benefit checks on time and in the correct amount, you’d be wise to speak with an experienced workers’ comp lawyer. (Learn more about when you can handle your own workers’ comp case and when you may need an attorney.)