State audits find insurers routinely unfair to workers By Mary Fricker Press Democrat staff writer For seven straight years, state auditors found that workers compensation insurers violated workers' rights in about half the claims it audited. Casey L. Young, administrative director of the Division of Workers' Compensation, is getting tired of it. This year, when the 1996 audit was released, Young blasted insurers. ''The statistics in this report paint a troubling picture,'' Young said. ''Auditors are continuing to find the same problems of unacceptably high amounts of unpaid compensation due, late payment of benefits and failure to notify employees of their rights to benefits in a timely manner.'' Young's criticism echoed his comments a year earlier on the 1995 audit, when his auditors found 728 workers were owed $640,000 -- an average of $879 per worker, a month's income for many. ''Finding this much unpaid compensation in just the relatively small proportion of files audited indicates the scope of this problem industry-wide is likely very large,'' Young said. Also troubling, he said, were the frequent late payments, the ''abysmal'' record of insurers in starting vocational rehabilitation, their failure to send timely notices and their record of sending out ''materially inaccurate'' notices. Young said benefit notices are the only way an injured worker gets information about his rights and his claim. ''It seems reasonable to me that injured workers ought to know what's going on,'' Young said. Insurance companies defend their record by saying laws are so complex it's not possible for their claims adjusters to meet every deadline and adhere to every provision 100 percent of the time. They say, for example, they have identified 100 to 150 different notices they're required to send to injured workers. The annual state audits -- which look at Ö of 1 percent of all claim files -- are one way the state oversees how well insurers, including companies that insure themselves, are meeting their obligations to injured workers. Insurers are chosen at random and from consumer complaints. State auditors say they're confident the findings reflect insurer performance in all claims statewide within 5 percent. Most violations are found in claims where a weekly stipend is payable, and they are evenly distributed, not bunched in a few troublesome claims. The auditors, who work for Young, can fine insurers for each violation. Maximum penalties allowed by law range from $25 to $5,000, depending on the violation. In 1996 the average fine in 1996 was $126, not big enough to deter many large insurers from improperly handling claims, according to interviews with claims adjusters published last year by the University of California, Berkeley. ''We're an oversight agency with insufficient tools,'' Young said. Each year, state auditors also comment on the insurers with the worst records. This year, auditors singled out Golden Eagle Insurance Co. of San Diego after finding 788 violations in 362 claim files. That followed a critical report in 1994, when auditors found 435 violations in 368 claims. These violations occurred while Golden Eagle was growing rapidly by offering low premiums. The state seized Golden Eagle in January -- not because it was unfair to workers but because it had not set aside enough reserves. Last year, auditors accused Republic Indemnity Co. of America, the second-largest workers compensation carrier on the North Coast, of ''refusing to comply with known and legally indisputable compensation obligations'' after finding 446 violations in 405 claim files at Republic's San Francisco office. In response, Laurel Thurston, senior counsel for Republic, said, ''We consider the audit to be not only old news but also out of special circumstances that are not part of the normal realm of what goes on in the company.'' In 1994, Georgia Pacific Corp. of Portland, Ore., which is self-insured and has a large mill in Fort Bragg, was mentioned for owing workers the most money, auditors said. Out of 72 workers, 23 had not been paid all that was owed them. The amount owed was $73,506, an average of $3,196 each. ''We took this pretty seriously,'' Georgia Pacific spokesman Dave Odgers said. ''We saw the need to make some changes. We completely restructured our West Coast workers compensation office." ©1997 The Press Democrat