When a workers compensation insurer in Montana receives a new injury claim, it can take its time to investigate the claim. It does so by issuing a "reservation of rights" letter. Montana allows these delays in investigating by statute. These statutes allow the insurer to start benefits (medical and temporary total disability) before accepting or denying the claim, while it is still doing its investigation. The kicker: these statutes also allow the insurer to terminate and even recoup those benefits later on if the benefits turn out not to have been legally payable.
One of the statutes says:
An insurer may, after notice to the claimant ... pay benefits within 30 days of...the filing of a claim without payments being construed an admission of liability ...
Another statute forbids the insurer from paying benefits under a reservation of rights for more than 90 days unless it gets either written consent from the claimant or approval from the Montana Department of Labor to continue benefits.
Insurers often send out reservation of rights letters declaring that they want more than thirty days to investigate liability. But sometimes benefits are initiated and then the insurer drags its feet and ignores the 90-day consent deadline and fails to consult with the claimant. When a late denial is made, claimants can lose income and medical coverage they have been relying on for weeks or months to pay bills or get medical care. Wage replacement (TTD) payments may be cut off, devastating people who are off work. Claimant can lose their jobs and be left with no money to put food on the table. Evidence of the injury accident can get lost, witnesses depart. Then, after all that, insurers can sometimes make the case for the claimant to reimburse benefits paid out.
In Haag v. Montana State Fund in1995, the Montana Supreme Court noted that Montana's reservation of rights statutes require action on a claim within the first thirty days. The court held in Haag that an insurer must act on a claim for compensation within thirty days, either by accepting or denying the claim or by beginning benefits with a reservation of rights letter. If it does not do this, the claim is deemed accepted as a matter of law.
Not liking this interpretation of its statutes, the Montana legislature overturned Haag by declaring that an insurer that violates the 30-day rule on a claim is not thereby forced to accept it. But the legislature stopped short of applying the same exemption when a reservation of rights letter goes out. Under a reservation of rights, consent from the claimant or department of labor must be obtained at the end of 90 days. The legislature left that law on the books.
But in 2012 the Workers Compensation Court allowed an insurer who violated the 90-day consent rule to be immune from mandated acceptance of the claim. In Clapham v Twin City Fire Insurance, (WCC 2012), the WCC held that an insurer who violated the 90-day consent time limit was NOT required to admit liability (and accept the claim) but was only required to pay a penalty.
In the Clapham case, the claim was filed at the end of November 2010 for long-term low back occupational disease. The insurer paid benefits under a reservation of rights beginning in January, 2011. TTD wage loss was paid for 90 days, but then the time elapsed. Although some medical benefits were paid, certain treatment recommendations by the doctors were denied, others delayed. The 90 days was up on April 7, and both before and after that date Clapham requested his claim to be accepted and full benefits paid. The insurer never did reject the claim in 2011. It appears that the issue of claim acceptance was still pending when the Court reached its decision in August 2012.
When Mr. Clapham asked the Court to issue an order that Twin City Fire be barred from contesting liability in the claim because it had blown off the 90-day consent deadline, the WCC refused, stating that a statutory penalty was sufficient despite the insurer's blatant violation of the 90-day deadline. Certain medical expenses were ordered to be paid along with the penalty but that was it. The Court said that it would be absurd to punish an insurer for violating the 90 day time when an insurer who simply denies a claim outright cannot be subject to the same sanction.
The decision can be criticized as misinterpreting the statutes. The Clapham court refused to carefully analyze what the legislature did and didn't do when in the amendments that overruled Haag. The court in Clapham allowed the insurer there to use a reservation of rights to extend the claim denial deadline indefinitely without the consent of the claimant. Under Clapham, there is in effect no reservation of rights deadline at all.
In our office we believe the Clapham court did not observe the legislature's cautious approach to the two different statutory time limits. We do not think the statutes can logically be interpreted the way they were in Clapham, and the holding in Clapham on this issue is in error.
The legislature's decision to apply different sanctions for violating the 30-day claim denial deadline and the 90-day consent deadline was wise. You can see why in a case of catastrophic injury or death. If a worker is severely injured and has a long recuperation, or if he/she dies from injury, the Clapham rule, that violating the 90-day consent statute should only result in a penalty, encourages an insurer to leave a reservation of rights on a claim indefinitely. Insurers know of the vulnerability of unsuspecting workers and their families when they string out benefits that could be suddenly cut off and even reclaimed. When they sit on information that they may have learned about a few days or weeks after initiating benefits under a reservation of rights, the cutoff of benefits months later, which may involve tens or hundreds of thousands of dollars, can be as financially devastating as it is unjust.
One of the statutes says:
An insurer may, after notice to the claimant ... pay benefits within 30 days of...the filing of a claim without payments being construed an admission of liability ...
Another statute forbids the insurer from paying benefits under a reservation of rights for more than 90 days unless it gets either written consent from the claimant or approval from the Montana Department of Labor to continue benefits.
Insurers often send out reservation of rights letters declaring that they want more than thirty days to investigate liability. But sometimes benefits are initiated and then the insurer drags its feet and ignores the 90-day consent deadline and fails to consult with the claimant. When a late denial is made, claimants can lose income and medical coverage they have been relying on for weeks or months to pay bills or get medical care. Wage replacement (TTD) payments may be cut off, devastating people who are off work. Claimant can lose their jobs and be left with no money to put food on the table. Evidence of the injury accident can get lost, witnesses depart. Then, after all that, insurers can sometimes make the case for the claimant to reimburse benefits paid out.
In Haag v. Montana State Fund in1995, the Montana Supreme Court noted that Montana's reservation of rights statutes require action on a claim within the first thirty days. The court held in Haag that an insurer must act on a claim for compensation within thirty days, either by accepting or denying the claim or by beginning benefits with a reservation of rights letter. If it does not do this, the claim is deemed accepted as a matter of law.
Not liking this interpretation of its statutes, the Montana legislature overturned Haag by declaring that an insurer that violates the 30-day rule on a claim is not thereby forced to accept it. But the legislature stopped short of applying the same exemption when a reservation of rights letter goes out. Under a reservation of rights, consent from the claimant or department of labor must be obtained at the end of 90 days. The legislature left that law on the books.
But in 2012 the Workers Compensation Court allowed an insurer who violated the 90-day consent rule to be immune from mandated acceptance of the claim. In Clapham v Twin City Fire Insurance, (WCC 2012), the WCC held that an insurer who violated the 90-day consent time limit was NOT required to admit liability (and accept the claim) but was only required to pay a penalty.
In the Clapham case, the claim was filed at the end of November 2010 for long-term low back occupational disease. The insurer paid benefits under a reservation of rights beginning in January, 2011. TTD wage loss was paid for 90 days, but then the time elapsed. Although some medical benefits were paid, certain treatment recommendations by the doctors were denied, others delayed. The 90 days was up on April 7, and both before and after that date Clapham requested his claim to be accepted and full benefits paid. The insurer never did reject the claim in 2011. It appears that the issue of claim acceptance was still pending when the Court reached its decision in August 2012.
When Mr. Clapham asked the Court to issue an order that Twin City Fire be barred from contesting liability in the claim because it had blown off the 90-day consent deadline, the WCC refused, stating that a statutory penalty was sufficient despite the insurer's blatant violation of the 90-day deadline. Certain medical expenses were ordered to be paid along with the penalty but that was it. The Court said that it would be absurd to punish an insurer for violating the 90 day time when an insurer who simply denies a claim outright cannot be subject to the same sanction.
The decision can be criticized as misinterpreting the statutes. The Clapham court refused to carefully analyze what the legislature did and didn't do when in the amendments that overruled Haag. The court in Clapham allowed the insurer there to use a reservation of rights to extend the claim denial deadline indefinitely without the consent of the claimant. Under Clapham, there is in effect no reservation of rights deadline at all.
In our office we believe the Clapham court did not observe the legislature's cautious approach to the two different statutory time limits. We do not think the statutes can logically be interpreted the way they were in Clapham, and the holding in Clapham on this issue is in error.
The legislature's decision to apply different sanctions for violating the 30-day claim denial deadline and the 90-day consent deadline was wise. You can see why in a case of catastrophic injury or death. If a worker is severely injured and has a long recuperation, or if he/she dies from injury, the Clapham rule, that violating the 90-day consent statute should only result in a penalty, encourages an insurer to leave a reservation of rights on a claim indefinitely. Insurers know of the vulnerability of unsuspecting workers and their families when they string out benefits that could be suddenly cut off and even reclaimed. When they sit on information that they may have learned about a few days or weeks after initiating benefits under a reservation of rights, the cutoff of benefits months later, which may involve tens or hundreds of thousands of dollars, can be as financially devastating as it is unjust.