Who Pays for Penalties?

Saturday, November 18, 2006 | 0

By James Moore

Who Pays for Fines and Penalties Incurred by the WC Carrier?

Some state jurisdictions issue fines and penalties if state forms are not filed timely, if lost time benefits are not issued timely, or for frivolous litigation, etc.

Many insurers charge these fines directly to the file as an expense.

These fines and penalties should be paid directly by the insurer or third party administrator if they were charged due to their lack of adherence to the state's rules and regulations. The insurer or third party administrator should cover these costs under their errors and omissions coverage and not charge the costs to the file.

If you are reviewing a workers' compensation (WC) file, look in the expense payouts for payments made directly to a WC Board or a Department of Insurance.

We see this often in our WC file reviews for employers.

James Moore is president of J&L Risk Management Consultants in Raleigh, N.C. This column was reprinted from the International Risk Management Institute's Web site, http://www.irmi.com, with the author's permission.

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