Washington Legislature Considers Bills to Drastically Increase Penalties and Impose Standard of Care on Self Insured Employer’s/TPAs
As part of the current session, the Washington State legislature is considering bills in the House and Senate which impose a duty of good faith and fair dealing on self-insured employer and their administrators. Both bills include unprecedented penalties for violations of the duty they create.
Amends to RCW 51.14 to include a new section imposing a “duty of good faith and read dealing to workers” on all self-insured employers and their third party administrators. This duty would apply to all claims regardless of the date of injury.
The bill defines a violation of this duty as the wrongful inducement of a worker to “accept less than the compensation due under this title….” or otherwise failing to act in good faith. Depending on the severity of a violation, an employer could be assessed a penalty up to ten times the state’s average weekly wage. If passed, the bill also requires the Department to enact rules for how the duty should be applied and the criteria for assessing penalties associated with alleged violations.
Amends RCW 51.14 to include a new section imposing a “duty of good faith and read dealing to workers” on self-insured municipal employers and their third party administrators. The senate bill is largely similar to the house bill with three notable exceptions. Unlike the house bill, the duty would only apply to violations occurring on or after July 1, 2024. Depending on the severity of a violation, an employer could be assessed a penalty up to 52 times the state’s average weekly wage The senate’s version also amends RCW 51.14.080 to allow for decertification of a municipal employer’s self-insured status if they are found to have violated the duty of good faith and fair dealing three times within a three-year period will result in decertification of self-insured status.
Each bill creates an ambiguous standard of care employers for which violations could result in outrageously high/unprecedented penalties. The bills do enable the Department to provide further clarification regarding the application of the standard through additional rulemaking. However, they also give the Department a discretion to craft these rules based on its “own experience.”
Depending on the nature of the rules eventually produced by the Department, penalties could be frequent and costly. As a result, the general cost of processing claims will increase as litigation over Department decisions assessing egregious penalties for violations is likely to ensue. The senate bills “three strike” rule will have a similar effect on municipal employers hoping to avoid the prospect of decertification.
The bills also neglect to address new problems or issues existing within the workers’ compensation system. The Department already has a robust audit system in place to address complaints and an employer’s self-insured status. Likewise, Department rules addressing IME disputes or assessing penalties for unreasonable delay/refusal to pay benefits provide vehicles for injured workers to address issues they may perceive when it comes to the handling of their claim.
Have concerns about these bills? We encourage you to contact your state legislator. You can locate contact information for your legislator here.
If you have questions about this or any other bills working their way through the legislature, please feel free to contact me at or 503-595-6110.