June 6, 2022

New Processing Obligations for Oregon Insurers/Administrators

A case decided by the Oregon Workers’ Compensation Board on May 17, 2022, Luis F. Nava, 74 Van Natta 372 (2022), imposes new obligations on insurers and claims administrators to affirmatively evaluate whether it is appropriate to expand a claim acceptance to include additional conditions even without a worker having initiated a new/omitted condition claim request.  This is a significant change in insurers/administrators’ processing obligations that is likely to lead to an increase in penalty-related litigation in the near term.  The following is a summary of the case and how the Board arrived at interpreting the law to impose these new obligations.

Following a March 13, 2017, injury, Claimant’s attending physician diagnosed a left knee sprain, left knee contusion, chest wall contusion, and a left knee lateral meniscus tear.  The meniscal tear was confirmed by an MRI taken two days after the injury.  On March 29, 2017, SAIF accepted the claim for a knee sprain and chest wall contusion.  Claimant underwent a meniscectomy procedure on July 31, 2017, to address the meniscus tear.  On December 11, 2017, SAIF issued an Updated Notice of Acceptance at Closure, again listing the accepted conditions as including the sprain and chest wall contusion.  The Notice of Closure did not provide a permanent impairment award.  Between July 31, 2017, and claim closure, SAIF did not seek further information from a medical provider about the tear or its relationship to the work injury, despite multiple references to the tear in the medical record.

On March 27, 2018, Claimant filed an aggravation claim.  His attending physician related the aggravation to the meniscus tear and to other knee conditions not accepted under the claim.  On May 24, 2018, a SAIF-arranged independent medical examiner, Dr. Staver, diagnosed a traumatic meniscal tear related to the work injury that was confirmed by an MRI.  Because Claimant’s worsening was not attributed to the accepted knee sprain, SAIF denied the aggravation claim.

Claimant later obtained an attorney who requested acceptance of the meniscus tear as a new/omitted medical condition.  SAIF, without further investigation, accepted the tear.  Shortly thereafter, SAIF re-closed the claim with an award of two percent impairment.  Through the reconsideration process, this impairment award was increased to seven percent.

Following issuance of the Order on Reconsideration, Claimant then requested a Hearing, raising penalty issues for unreasonable claims processing.  He argued that under ORS 656.262(6)(b)(F), SAIF had a duty to modify the initial acceptance to include the tear before Claimant ever requested such modification, and that, due to the unreasonable delay in doing so, SAIF was subject to penalty under ORS 656.262(11)(a).

In analyzing Claimant’s request, the Board noted that ORS 656.262(6)(b)(F) states that a carrier “shall” modify its acceptance “from time to time” when “medical or other information changes a previously issued notice of acceptance.”  For the first time, the Board held that this statute creates an affirmative claim processing obligation on carriers to modify a notice of acceptance regardless of whether a claimant files a new/omitted condition claim.  The Board noted whether modification is necessary is contingent on the presence of unrebutted “medical” or “other information” which changes the previously issued acceptance.  While “from time to time” remains undefined, the Board suggested such modification may be appropriate at claim closure or “upon receipt of unrebutted medical evidence establishing compensability of a condition after the initial acceptance.”

Because the issue of an affirmative duty under ORS 656.262(6)(b)(F) had not been clarified by caselaw prior to this holding, the Board held SAIF had a legitimate doubt as to its claims processing obligations.  Therefore, the Board declined to award a penalty under ORS 656.262(11)(a).  But the Board specifically cautioned that a failure to modify an acceptance moving forward could be subject to such a penalty.

Since the Board found SAIF had a legitimate doubt as to its claim processing obligations based on the prior uncertainty in the law, the Board did not go on to formally evaluate whether SAIF’s actions would have been considered reasonable had the law been clear.  But the Board noted that a pre-closure report from the attending physician diagnosed the meniscal tear and unequivocally attributed it to the work injury.  SAIF did not seek clarification of the attending physician’s opinion, nor did it arrange a pre-closure independent medical examination to address the tear.  Following closure, multiple chart notes referred to the tear as being caused by the work injury.  Also, the independent medical examiner specifically attributed the meniscus tear to the injury in processing the aggravation claim.  Finally, the Board observed that SAIF promptly accepted the tear without further investigation once Claimant submitted the new/omitted condition request and re-closed the claim with the appropriate impairment.  (In other words, the Board felt SAIF had all the information it needed to accept and process the meniscus tear before the new/omitted condition claim was ever filed.)

Based on the Board’s holding and this new interpretation of the law, the failure to modify claim acceptance to include the addition of a condition for which there is unrebutted medical evidence supporting it is compensably related to an injury runs afoul of ORS 656.262(6)(b)(F) and could subject that carrier to an ORS 656.262(11)(a) penalty.  To avoid such a penalty exposure, it would behoove the claim processor to review, investigate, and obtain clarification regarding any referenced condition and whether the medical evidence supports that such a condition is compensably related to a work injury.  This investigation of clarification may entail arranging for an independent medical examination, a records review, or a telephone conference with the medical provider(s).  One way to think about how to process these conditions is to consider them as if a claimant had actually submitted a new/omitted condition request.  If there is a good faith basis to issue a partial denial, then the condition likely does not need to be accepted under ORS 656.262(6)(b)(F).  On the other hand, if there is no good faith basis to deny the condition, then the previously issued acceptance should be modified to include the condition.  It is no longer acceptable to wait for a claimant to file a new/omitted condition.

If you are an employer or administrator and have questions or need assistance, please contact the lawyers at Cummins, Goodman, Denley & Vickers, P.C. at (503) 476-8200.

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