First Party Claim
Workers’ compensation is a “first-party claim.” That means the injured worker is the direct beneficiary of the insurance policy. The policy was purchased with the primary intent of providing legally required benefits for medical care and lost wages in the event of an accidental injury. Other examples of first party coverages are your health insurance, your homeowner’s insurance, life insurance, long term care insurance,  and certain aspects of auto insurance such as medical payments for your injuries, uninsured and underinsured coverages.

In first party claims, the insurer owes you a duty of good faith and fair dealing. This means that the insurer, and all of its decisions, must give at least equal consideration to your interests and it should not base claim decisions on its own financial interests or profit goals. It must conduct an adequate investigation necessary to make all decisions necessary with regard to your benefits in a reasonable manner. It may not ignore information favorable to paying you benefits nor focus only on ways to deny benefits. It cannot deny or delay benefits in an effort to force the insured to settle for less.

Workers’ compensation is not a third-party claim, although sometimes carriers seem to treat it as such. A third-party claim is a claim against a third party and it generally is based on an allegation of  fault due to negligence or other malfeasance. A typical example of a third-party claim is a claim for damages against someone else after being rear-ended in a motor vehicle accident. Because you are making a claim against the adverse driver, their insurance will provide them a defense and indemnity, under your third-party claim.

Basic Insurance
An insurance policy is the sale of a promise to cover different risks, i.e., injury, lost wages, loss of property, etc. The primary source of income to an insurance company are premiums from the sale of insurance policies. The premium dollars from many policies are pooled together to provide benefits to the persons who suffer the losses insured by the policy.

Basics of Bad Faith
The two principal elements of a bad faith claim are (1) an unreasonable claim decision by the insurance company, and (2) the insurance representative’s knowledge that the decision was unreasonable, or demonstration that the insurance company failed to conduct an investigation adequate to determine whether its decision was reasonable or not.

An insurance contract is not an ordinary commercial bargain. The heart of an insurance policy is the peace of mind knowing that prompt and fair assistance will be there when you are vulnerable. The law implies into every insurance policy an obligation that the insurance carrier will play fairly with the insured, including equal consideration, and honesty. An insurer may be held liable in a first party case when it seeks to gain unfair financial advantage of the insured through conduct that invades the insured’s right to honest and fair treatment. If bad faith has been committed, the carrier’s eventual payment of the claim does not release it from liability for bad faith.

Upon presentation of the claim, an insurance carrier has an obligation to immediately conduct an adequate investigation, act reasonably in evaluating the claim, and act promptly in paying a legitimate claim. It should do nothing that jeopardizes the insured’s security under the policy. It should not force an insured to go through needless adversarial hoops to achieve its rights under the policies. It cannot lowball claims or delay claims hoping that an insured will settle for less. Equal consideration requires more than that.

The Insurance Carrier’s Responsibilities
The carrier’s coverage and benefit obligations arise under the workers’ compensation insurance policy and applicable provisions of the Arizona Workers’ Compensation Act, A.R.S. §23-901 et. seq., the rules and regulations promulgated under the Act (AAC R-20-5-101 through R-20-5-164), and case law interpreting those obligations. You may obtain free copies of the statutes and rules from the Industrial Commission of Arizona. The Act authorizes the insurance carrier to make all decisions with regard to the claim. Only in the event of an injured worker’s disagreement with the claim decision made by the insurance carrier representative will the Industrial Commission become involved. This occurs when the injured worker files a request for hearing, challenging the insurance carrier’s decision, with the Industrial Commission.  Although insurance carriers have the unilateral power to issue notices of claim status and administer benefits, the law recognizes that corresponding to that power is the responsibility to issue notices and administer benefits responsibly.

Robert J. Hommel, PC

9304 East Raintree Drive, Suite 100

Scottsdale, AZ 85260

Office: (480) 778-0123

Toll Free: (800) 571-0015

Fax: (480) 951-5033

The law office of Robert J. Hommel, PC serves clients throughout Arizona, including Apache Junction, Avondale, Casa Grande, Casas Adobes, Catalina Foothills,  Chandler, Flagstaff, Fountain Hills, Gilbert, Glendale, Goodyear, Kingman, Mesa, Paradise Valley, Peoria,  Prescott, Pinetop-Lakeside, Scottsdale, Sedona, Sun City, Surprise, Tempe, Tucson, Yuma, Coconino County, Maricopa County, Mohave County, Navajo County, Pima County, Pinal County, Yavapai County, and Yuma County.