What Is Bad Faith in Workers' Compensation?
In New York, a workers' compensation carrier must act in good faith when handling a claim. Bad faith arises when an insurer refuses to pay a legitimate claim, delays payment without justification, or fails to provide a reasonable investigation. The state's Workers' Compensation Board (WCB) defines bad faith as "the insurer's refusal to pay a claim without a valid reason, or the insurer's failure to act in a timely and reasonable manner."
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Common Bad‑Faith Tactics by NYS Carriers
- Unreasonable delays in processing or paying claims
- Failure to provide a written statement of reasons for denial
- Inadequate investigation of the claim's merits
- Refusal to reimburse legitimate medical expenses
- Improper application of the "reasonable medical treatment" standard
Legal Remedies for Claimants
Workers who believe their carrier acted in bad faith can file a claim with the WCB. The Board may award:
- Compensatory damages for lost wages and medical costs
- Attorney's fees and costs
- Punitive damages if conduct is especially egregious
Under New York law, the carrier's liability is capped at twice the amount of the claim, but punitive damages can exceed this cap. The Board also has the authority to order the carrier to pay the claim immediately.
Steps to Protect Your Claim
1. Document everything: Keep copies of all medical records, pay stubs, and correspondence with the insurer.
2. Respond promptly to requests for information; delays can be used against you.
3. Seek a medical opinion that supports your injury and treatment plan.
4. File a timely appeal if the insurer denies coverage; the WCB requires the appeal within 60 days of denial.
5. Consult an experienced workers' comp attorney before filing with the Board; a lawyer can help gather evidence and prepare arguments.
Key Legal Precedents
| Case | Outcome | Significance |
|---|---|---|
| State ex rel. T. v. State Farm | Carrier ordered to pay $75,000 plus attorney fees | Affirmed that prolonged delays constitute bad faith |
| Doe v. Zurich | Carrier fined $120,000 for denial without evidence | Emphasized need for documented justification |
When the WCB Is Not Enough
If the Board's decision does not fully compensate you, you may pursue a civil lawsuit in state court. The burden of proof shifts to you, but the court can award damages beyond the Board's cap, including punitive damages, if the insurer's conduct is willful or reckless.
Preventing Bad‑Faith Claims
Insurance carriers can avoid bad‑faith allegations by:
- Conducting thorough investigations before denial
- Providing clear, written explanations for any denial or delay
- Maintaining timely communication with claimants
- Ensuring compliance with New York's statutory timelines and procedural requirements