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(continued)
Population Sample Size
5 or less all
6-10 1 less than total
11-13 2 less than total
14-16 3 less than total
17-18 4 less than total
19-20 5 less than total
21-23 6 less than total
24 17
25-26 18
27-29 19
30-31 20
32-33 21
34-36 22
37-39 23
40-41 24
42-44 25
45-48 26
49-51 27
52-55 28
56-58 29
59-62 30
63-67 31
68-72 32
73-77 33
78-82 34
83-88 35
89-95 36
96-102 37
Population Sample Size
103-110 38
111-119 39
120-128 40
129-139 41
140-151 42
152-164 43
165-179 44
180-197 45
198-217 46
218-241 47
242-269 48
270-304 49
305-346 50
347-399 51
400-468 52
469-562 53
563-696 54
697-905 55
906-1,272 56
1,273-2,091 57
2.092-5,530 58
5,531 + 59


If any of the following criteria are met after auditing the sample size as set forth in this subsection (c)(2), the Audit Unit will proceed to audit the remaining number of randomly selected indemnity files selected for audit pursuant to subsection (c)(1):
(i) The number of randomly selected audited files with violations involving the failure to pay indemnity exceeds 20% of those files in which indemnity is accrued and payable and the average amount of unpaid indemnity exceeds $200.00 per file in which indemnity is accrued and payable;
(ii) The numbers of randomly selected files with violations involving the late first payments of temporary disability indemnity, permanent disability indemnity, vocational rehabilitation maintenance allowance, late subsequent indemnity payments, and late payments of death benefits, as mitigated for frequency under Section 10111.1(e)(3)(i) through (v), exceeds 30% of the files in which those indemnity payments have been made;
(iii) The number of randomly selected audited files with violations involving the failure to issue benefit notices, as assessed under Section 10111.1(a)(7)(ii) of these regulations, exceeds 30% of those files in which there is a requirement to issue those notices.
The determination of whether or not to audit the number of files selected pursuant to subsection (c)(1) of this section shall not be the subject of appeal, and no preliminary report of findings will be issued to the audit subject before the determination is made.
(d) The total numbers of denied files and medical-only files randomly selected for audit will be determined based on the following table:
Population Sample Size
6 or less all
7-10 1 less than total
11-14 2 less than total
15-17 3 less than total
18 14
19-20 15
21 16
22-23 17
24-25 18
26-27 19
28-29 20
30-31 21
32-33 22
Population Sample Size
34-36 23
37-38 24
39-41 25
42-43 26
44-46 27
47-49 28
50-52 29
53-55 30
56-59 31
60-63 32
64-67 33
68-71 34
72-75 35
76-80 36
81-85 37
86-90 38
91-96 39
97-102 40
103-109 41
110-116 42
117-124 43
125-132 44
133-141 45
142-151 46
152-163 47
164-175 48
176-189 49
190-205 50
206-222 51
223-242 52
243-265 53
266-292 54
293-323 55
324-360 56
361-405 57
406-461 58
462-531 59
532-623 60
624-749 61
750-931 62
932-1,217 63
1,218-1,731 64
1,732-2,934 65
2,935-8,990 66
8,991 + 67


(e) In addition to randomly selected indemnity, denied, and medical-only files, the Audit Unit may also select for audit any or all files for which the Division of Workers' Compensation has received complaints within the past three years.
(f) The audit subject shall pay all expenses of an audit of an adjusting location outside the State of California, including per diem, travel expense, and compensated overtime of audit personnel.
(g) The audit subject shall make each of the claim files selected for audit available at the audit site at the time of audit commencement. If claim files are maintained in an electronic or other non-paper storage medium, the claims administrator shall, upon request, provide to the Audit Unit direct computer access to electronic claim files and/or legible printed paper copies of the claim files, including all records of compensation payments.
(h) The Audit Unit shall have discretion to audit files in addition to those identified with the Notice of Audit Commencement. The audit subject shall make each of the additional files selected for audit available at the audit site within 14 days of receipt of written notice identifying the additional files.
(i) The audit subject shall provide the auditor(s) an adequate, safe, and healthful work space during the audit, which allows the auditors a reasonable degree of privacy. If this work space is not provided, the Audit Unit may require the audit subject to deliver the files to the nearest Audit Unit office for completion of the audit.
(j) The Audit Unit may obtain and retain copies of documentation or information from claim files to support the assessment of penalties.
(k) The audit subject shall have the opportunity to discuss preliminary findings and provide additional information at a post-audit conference.
(l) The Audit Unit may at any time request additional information or documentation in order to complete its audit. Such information may include documentation that, as specified by Labor Code Sections 3751(a) and 3752, compensation has not been reduced or affected by any insurance, contribution, or other benefit due to or received by or from the employee. The audit subject shall provide any requested documentation or other information within thirty days from the Audit Unit's request, unless the Audit Unit extends the time for good cause.
(m) The Audit Unit shall issue a report of audit findings which may include, but is not limited to, the following: one or more requests for additional documentation or compliance, Notices of Intention to Issue Notice of Compensation Due, Preliminary Notices of Penalty Assessments, Notices of Compensation Due, or Notices of Penalty Assessments. If any additional requested documentation is not provided within thirty days of receipt of the report, additional audit penalties may be assessed under Section 10111.1(d)(2) of these Regulations.


Note: Authority cited: Sections 59, 129.5, 133 and 5307.3, Labor Code. Reference: Sections 11180, 11180.5, 11181 and 11182, Government Code; and Sections 111, 124, 129, 129.5, 3751 and 3752, Labor Code.





s 10107.1. Notice of Audit; Claim File Selection; Production of Claim Files; Auditing Procedure.
For audits conducted on or after January 1, 2003:
(a) Once a subject has been selected for an audit, the Audit Unit shall serve a Notice of Audit on the claims administrator. The Notice shall inform the administrator of its selection for audit, and may include a request to provide the Audit Unit with a claim log or logs. If the Audit Unit has requested claim logs, the audit subject shall provide two copies of the specified claim log(s) within fourteen days of the date of the receipt of the Notice.
(b) At least 14 days before the audit is scheduled, the Audit Unit shall send the audit subject a Notice of Audit Commencement identifying the claims to be audited. The audit shall commence no less than fourteen days from the date the Notice was sent, unless the audit subject and Audit Unit agrees to earlier commencement.
(c) For profile audit reviews conducted pursuant to Labor Code Section 129(b)(1), the Audit Unit shall randomly select samples of indemnity claims from the most recent three years of the audit subject's claim logs or from the list of claims for those years as reported to the Division of Workers' Compensation pursuant to Labor Code Section 138.6 as part of the Workers' Compensation Information System. If any of the years have been the subject of a previous audit, claims will be randomly selected from the most recent unaudited year(s).
(1) The initial number of indemnity claims randomly selected for audit will be determined based on the following table:
Population Sample Size
5 or less all
6-10 1 less than total
11-13 2 less than total
14-16 3 less than total
17-18 4 less than total
19-20 5 less than total
21-23 6 less than total
24 17
25-26 18
27-29 19
30-31 20
32-33 21
34-36 22
37-39 23
40-41 24
42-44 25
45-48 26
49-51 27
52-55 28
56-58 29
59-62 30
63-67 31
68-72 32
73-77 33
78-82 34
83-88 35
89-95 36
96-102 37
103-110 38
111-119 39
120-128 40
129-139 41
140-151 42
152-164 43
165-179 44
180-197 45
198-217 46
218-241 47
242-269 48
270-304 49
305-346 50
347-399 51
400-468 52
469-562 53
563-696 54
697-905 55
906-1,272 56
1,273-2,091 57
2,092-5,530 58
5,531 + 59


(2) In addition to the randomly selected indemnity claims, the Audit Unit may audit any claims for which it has received a complaint or information indicating a failure to pay indemnity, including any companion claim needed to ascertain the extent to which benefits have been provided.
(3) After reviewing the claims selected pursuant to subsection (1), the Audit Unit shall calculate the audit subject's profile audit review performance rating based on its review of the randomly selected claims. The profile audit review performance rating will be calculated as follows:
(A) The factor for the failure to pay accrued and undisputed indemnity shall be determined by
(i-a) Dividing the number of randomly selected claims with violations involving the failure to pay indemnity by the number of randomly selected claims with accrued and payable indemnity, whether paid or not, to produce a frequency rate.
(i-b) Dividing the total amount of unpaid indemnity in randomly selected claims by the number of randomly selected claims with accrued and payable indemnity, whether paid or not, to produce an average amount of unpaid indemnity per file with the obligation to pay indemnity.
(i-c) Dividing the average amount of unpaid indemnity per randomly selected audited claim with the obligation to pay indemnity for the audit subject by the average amount of unpaid indemnity per randomly selected audited claim for all audit subjects for the three calendar years before the year preceding the year in which the current audit is being conducted, to produce a severity rate.
(i-d) Multiplying the frequency rate by the severity rate by a modifier of 2 to determine the factor for the failure to pay accrued and undisputed indemnity.

(ii) The factor for the late first payment of temporary disability indemnity and issuance of first temporary disability notices shall be determined by dividing the number of randomly selected claims with violations involving the late first payment of temporary disability indemnity, or in claims that involve salary continuation in lieu of first temporary disability payments, the late issuance of the first temporary disability notice by the number of randomly selected claims in which temporary disability payments or first temporary disability notices were issued.
(iii) The factor for the late first payment of permanent disability indemnity, vocational rehabilitation maintenance allowance, and death benefits shall be determined by dividing the numbers of randomly selected claims with violations involving late first payments of those benefits by the numbers of randomly selected claims with payments for those benefits. In calculation of this factor, claims shall be counted for each type of exposure and late first payment.
(iv) The factor for late subsequent indemnity payments shall be determined by dividing the number of randomly selected claims with violations involving late indemnity payments subsequent to first payment by the number of randomly selected claims with subsequent indemnity payments.

(v) The factor for failure to comply with requirements for notices advising injured employees of the process for selecting Agreed Medical Examiners and/or Qualified Medical Examiners, and for failure to comply with the requirements for notices advising injured workers of potential eligibility for vocational rehabilitation pursuant to Labor Code Section 4637 shall be determined by dividing the numbers of randomly selected claims with violations involving the failure to issue the notices by the numbers of randomly selected claims with the requirement to issue the notices. In calculation of this factor, claims shall be counted for each type of exposure and violation.
(vi) The audit subject's profile audit review performance rating will be determined by adding the factors calculated pursuant to subsections (c)(3)(A)(i) through (c)(3)(A)(v).
(B) If the audit subject's profile audit review performance rating meets or exceeds the worst 20% of performance ratings for all final audit reports issued over the three calendar years before the year preceding the current audit, the Audit Unit will issue Notices of Compensation Due pursuant to Section 10110 but will assess no administrative penalties for violations found in the profile audit review.

(C) If the audit subject's profile audit review performance rating fails to meet or exceed the rating of the worst 20% of performance ratings as calculated based on all final audit findings as published in the Annual DWC Audit Reports over the three calendar years before the year preceding the current audit, the Audit Unit will conduct a Full Compliance Audit by randomly selecting and auditing an additional sample of indemnity claims pursuant to subsection (d). Written notification of the Audit Unit's intent to proceed to a Full Compliance Audit, showing the calculation of the profile audit review performance rating, will be provided to the audit subject in time for the timely filing of an objection. The audit subject may dispute whether or not a Full Compliance Audit is merited under this subsection at a post-profile audit review conference. Following the post-profile audit review conference, the Audit Unit may continue with the Full Compliance Audit. The audit subject may appeal the issues pursuant to Section 10115.1 following the issuance of the final audit report. Failure of the audit subject to raise issues related to failing to meet or exceed the profile audit review performance standard during the post-profile audit review conference shall constitute a waiver of appeal on those issues.
(d) If the audit subjects fails to meet or exceed the profile audit review performance standard, the Audit Unit shall conduct a Full Compliance Audit by selecting and auditing an additional sample of indemnity claims.
(1) The total number of indemnity claims randomly selected for audit, including the number audited pursuant to subsection (c)(1), will be determined based on the following table:
Population Sample Size
8 or less all
9-15 1 less than total
16-19 2 less than total
20-23 3 less than total
24-27 4 less than total
28-30 5 less than total
31-33 6 less than total
34-36 7 less than total
37-38 8 less than total
39-41 9 less than total
42 32
43-44 33
45 34
46-47 35
48-49 36
50-51 37
52-53 38
54-55 39
56-57 40
58-59 41
60-61 42
62-63 43
64-65 44
66-67 45
68-70 46
71-72 47
73-74 48
75-77 49
78-79 50
80-82 51
83-84 52
85-87 53
88-89 54
90-92 55
93-95 56
96-98 57
99-101 58
102-104 59
105-107 60
108-110 61
111-114 62
115-117 63
118-120 64
121-124 65
125-128 66
129-131 67
132-135 68
136-139 69
140-143 70
144-148 71
149-152 72
153-156 73
157-161 74
162-166 75
167-171 76
172-176 77
177-181 78
182-187 79
188-192 80
193-198 81
199-204 82
205-210 83
211-217 84
218-223 85
224-230 86
231-238 87
239-245 88
246-253 89
254-261 90
262-270 91
271-279 92
280-288 93
289-298 94
299-308 95
309-319 96
320-330 97
331-342 98
343-354 99
355-367 100
368-381 101
382-396 102
397-411 103
412-427 104
428-444 105
445-463 106
464-482 107
483-503 108
504-525 109
526-549 110
550-575 111
576-603 112
604-633 113
634-665 114
666-700 115
701-739 116
740-781 117
782-827 118
828-879 119
880-936 120
937-1,000 121
1,001-1,072 122
1,073-1,154 123
1,155-1,248 124
1,249-1,356 125
1,357-1,483 126
1,484-1,633 127
1,634-1,814 128
1,815-2,036 129
2,037-2,315 130
2,316-2,677 131
2,678-3,163 132
3,164-3,852 133
3,853-4,904 134
4,905-6,710 135
6,711-10,530 136
10,531-23,993 137
23,994 + 138


(2) In addition to the randomly selected indemnity claims, the Audit Unit may audit any claims for which it has received a complaint or information indicating a failure to pay indemnity or late-paid indemnity, including any companion claim needed to ascertain the extent to which benefits have been provided.
(3) After reviewing the claims selected pursuant to subsection (1), the Audit Unit shall calculate the audit subject's full compliance audit performance rating.
(A) The audit subject's full compliance audit performance rating will be calculated pursuant to subsection (c)(3)(A), except that it shall be based on the review of all claims selected pursuant to subsection (d)(1).
(B) If the audit subject's full compliance audit performance rating meets or exceeds the worst 10% of performance ratings for all final audit reports issued over the three calendar years before the year preceding the current audit, the Audit Unit will issue Notices of Compensation Due pursuant to Section 10110 and will assess administrative penalties only for violations involving unpaid and late paid compensation, pursuant to Labor Code Section 129.5(c)(2).
(e) If the audit subject's full compliance audit performance rating fails to meet or exceed the rating of the worst 10% of performance ratings for all final audit reports issued over the three calendar years before the year preceding the current audit, the Audit Unit will audit all claims selected for audit for all violations, and also randomly select a sample of denied claims. Notification of the Audit Unit's intent to audit a sample of denied claims and assess penalties pursuant to Labor Code Section 129.5(c)(3) will be provided to the audit subject based on findings at a meet and confer audit review conference. At that time the audit subject may dispute whether or not it met or exceeded the Full Compliance Audit performance standard. Following the meet and confer audit review conference, the Audit Unit may continue with the Full Compliance Audit. The audit subject may appeal pursuant to Section 10115.1 following the issuance of the final audit report. Failure of the audit subject to raise issues related to failing to meet or exceed the full compliance audit performance standard during the meet and confer audit review conference shall constitute a waiver of appeal on those issues.
(1) The number of denied claims randomly selected for audit will be based on the following table:

Population Sample Size
6 or less all
7-10 1 less than total
11-14 2 less than total
15-17 3 less than total
18 14
19-20 15
21 16
22-23 17
24-25 18
26-27 19
28-29 20
30-31 21
32-33 22
34-36 23
37-38 24
39-41 25
42-43 26
44-46 27
47-49 28
50-52 29
53-55 30
56-59 31
60-63 32
64-67 33
68-71 34
72-75 35
76-80 36
81-85 37
86-90 38
91-96 39
97-102 40
103-109 41
110-116 42
117-124 43
125-132 44
133-141 45
142-151 46
152-163 47
164-175 48
176-189 49
190-205 50
206-222 51
223-242 52
243-265 53
266-292 54
293-323 55
324-360 56
361-405 57
406-461 58
462-531 59
532-623 60
624-749 61
750-931 62
932-1,217 63
1,218-1,731 64
1,732-2,934 65
2,935-8,990 66
8,991 + 67


(2) In addition to the random samples of indemnity and denied claims and claims for which the Division received complaints or information indicating unpaid or late-paid compensation, the Audit Unit may select for audit any claims for which it received complaints or information over the past three years that indicate the possible existence of any claims handling violations.
(f) Following the conclusion of the audit, the Audit Unit shall issue a report of audit findings which may include, but is not limited to, the following: one or more requests for additional documentation or compliance, Notices of Intention to Issue Notice of Compensation Due, Preliminary Notices of Penalty Assessments, Notices of Compensation Due, or Notices of Penalty Assessments. If any additional requested documentation is not provided within thirty days of receipt of the report, additional audit penalties may be assessed under Section 10111.1(d)(2) of these Regulations.
(g) The audit subject shall pay all expenses of an audit of an adjusting location outside the State of California, including per diem, travel expense, and compensated overtime of audit personnel.
(h) The audit subject shall make each of the claim files selected for audit available at the audit site at the time of audit commencement. If claim files are maintained in an electronic or other non-paper storage medium, the claims administrator shall, upon request, provide to the Audit Unit direct computer access to electronic claim files and/or legible printed paper copies of the claim files, including all records of compensation payments. If a randomly selected indemnity, medical-only, or denied claim has been incorrectly classified as to type by the audit subject, the Audit Unit may randomly select an additional correctly designated claim file for audit, and may also assess penalties as appropriate in the misdesignated claim initially selected. If the audit subject fails to produce a claim selected for audit, the Audit Unit may assess a penalty for failure to produce the claim pursuant to Section 10111.2(b)(3) and may also select for audit another claim of the same type to complete the random sample. If the audit subject has transferred a claim selected for audit to a different adjusting location of the company being audited, the audit subject shall nonetheless produce the claim for audit within five working days of request, unless additional time is agreed upon by both the Audit Unit and the audit subject.
(i) The Audit Unit shall have discretion to audit claims in addition to those identified with the Notice of Audit Commencement. The audit subject shall make each of the additional claims selected for audit available at the audit site as follows:

(1) Open claims and closed claims stored on site within one working day of request;
(2) Closed claims stored off site within five working days of request, unless additional time is agreed upon by both the Audit Unit and the audit subject.
(j) The audit subject shall provide the auditor(s) an adequate, safe, and healthful workspace during the audit, which allows the auditors a reasonable degree of privacy. If this workspace is not provided, the Audit Unit may require the audit subject to deliver the files to the nearest Audit Unit office for completion of the audit.
(k) The Audit Unit may obtain and retain copies of documentation or information from claim files to support the assessment of penalties.
(l) The audit subject shall have the opportunity to discuss preliminary findings and provide additional information at a post-audit conference.
(m) The Audit Unit may at any time request additional information or documentation related to the claims being audited in order to complete its audit. Such information may include documentation that, as specified by Labor Code Sections 3751(a) and 3752, compensation has not been reduced or affected by any insurance, contribution, or other benefit due to or received by or from the employee. The audit subject shall provide any requested documentation or other information within thirty days from the Audit Unit's request, unless the Audit Unit extends the time for good cause.


Note: Authority cited: Sections 59, 129.5, 133 and 5307.3, Labor Code. Reference: Sections 11180, 11180.5, 11181 and 11182, Government Code; and Sections 111, 124, 129, 129.5, 3751 and 3752, Labor Code.





s 10108. Audit Violations -General Rules.
The following general rules apply to audits and audit processes under Labor Code ss 129, 129.5:
(a) If the date or deadline (including any applicable extension) to perform any act falls on a weekend or holiday, the act may be performed on the last business day before or the first business day after the weekend or holiday. A payment date which is changed under this provision shall not change the normal dates for later payments in an existing two-week payment schedule.
(b) For the purpose of imposing audit penalties, if the claims administrator does not record the date it received a document, it shall be deemed received five days after the latest date the sender wrote on the document.
(c) Audit penalties will be based on each claim's status when the claim is audited. If, at the time of the audit, the claims administrator has failed to perform a required act, but remedies the failure prior to the issuance of the audit report, the claims administrator will nonetheless be accountable for the violation as a failure to act and audit findings related to the violation will be based on the failure to perform the act. Unless these regulations specifically provide otherwise, the penalty for an unlawful delay of more than 30 days in performing an act is the same as the penalty for not performing the act. However, the penalty will be mitigated for good faith because the act, though late, was eventually performed. There will be no mitigation for good faith, however, if the act was performed after notification to the audit subject that the claim was selected for audit. In such cases where there is an unlawful delay of more than 30 days in performing an act and the act was performed only after the audit subject was notified that the claim was selected for audit, violations will be calculated as though there was a failure to perform the act rather than late performance of the act. A lawful delay is a delay permitted by law or regulation, and for which the claims administrator has given a proper and timely notice of delay when such a notice is required. Any other delay is an unlawful delay.
(d) Penalties will not be assessed during the period a claims administrator is actively investigating its liability for provision of benefits or payment of compensation, provided that a Notice of Delay has been timely and properly issued in accordance with s9812 or s9813. However, penalties shall still be issued for violations during the period of delay for: failure to object to medical treatment bills in accordance with s9792.5, or failure to object to or pay bills for medical legal expense in accordance with s9794.
(e) Penalties will not be assessed for an act or omission where an injured worker's unreasonable refusal to cooperate in the investigation has prevented the claims administrator from determining its legal obligation to perform the act.
(f) Where a penalty is provided for failure to pay mileage fees related to medical treatment or evaluation, a penalty will be imposed if payment is not made at a rate that is at least the greater of the following: (i) thirty-four cents per mile, or (ii) the minimum rate adopted by the Director of the Department of Personnel Administration pursuant to Section 19820 of the Government Code for non-represented (excluded) employees at Title 2, CCR s599.631(a).
(g) Failure, delay, or refusal to pay compensation benefits or expenses shall be subject to the applicable penalties under s10111 or s10111.1 unless the legal, factual, or medical basis for the failure, refusal, or delay is documented in the claim file.
(h) The Audit Unit will not assess penalties for violations of failure to make payment of indemnity due if the total indemnity is less than ten dollars ($10.00) aggregate per claim.
(i) Nothing in these regulations will bar the assessment of a civil penalty under Labor Code Section 129.5(e), whether or not the audit subject meets or exceeds performance rating standards calculated pursuant to Section 10107.1(c)(3) or (d)(3).
(j) Claims that are randomly selected for audit pursuant to Sections 10107.1(c)(1) and (d)(1) will be considered as randomly selected claims for purposes of determining whether or not an audit subject meets or exceeds performance standards pursuant to Sections 10107.1(c)(3) or (d)(3), whether or not complaints or information indicating claims handling violations in those claims have been received by the Audit Unit. If the Audit Unit cannot ascertain the extent to which benefits have been paid on a claim randomly selected for audit without auditing a companion or master claim to that claim, the Audit Unit may add the companion or master claim to the sample. The companion or master claims will be considered as randomly selected claims for purposes of determining whether or not the audit subject meets or exceeds performance standards pursuant to Sections Section 10107.1(c)(3) and/or (d)(3).
(k) Notwithstanding Section 10111.2(a) and (b), penalties may be assessed for failure to timely submit an accurate Annual Report of Inventory regardless of whether or not an audit has been conducted, or, if an audit was conducted, whether or not the audit subject's performance rating in the key performance areas calculated pursuant to Section 10107(c) warrants the audit of a full sample of indemnity claims pursuant to Section 10107(c)(4), or a return, targeted audit based on performance in those areas pursuant to Section 10106(c)(2).
(l) Notwithstanding penalty amounts established pursuant to Section 10111.2, penalties for late performance of an act may not exceed penalty amounts for the failure to perform an act.
(m) If more than one claims administrator has adjusted a claim file that is being audited or investigated, penalties will be assessed against the audit subject only for violations that occurred subsequent to the date the audit subject began adjusting the claim file, except that the audit subject will be assessed penalties for the failure to pay compensation due if the claim was open when transferred to the audit subject or re-opened subsequent to its transfer and the compensation remained unpaid. The claims administrator is required to correct any failures to issue notices which are still pertinent, to recalculate and correct any improperly calculated payments due to the worker, and to pay any interest and increase due for late paid medical payments.
(n) Successor liability may be imposed on a claims administrator or insurer that has merged with, consolidated, or otherwise continued the business of a corporation or other business entity that is a responsible party and failed to meet its obligations under Divisions 1 and 4 of the Labor Code or regulations of the administrative director. The surviving claims administrator shall assume and be liable for all the liabilities, obligations and penalties of the prior corporation or business entity. Successor liability will be imposed if there has been a substantial continuity of business operations; and/or the new business uses the same or substantially the same work force. In such circumstances, due consideration of the appropriateness of penalties with respect to the history of previous violations pursuant to Labor Code Section 129.5(b)(3) will encompass findings related to the last audit of the predecessor claims administrator applied in conjunction with audit results of the successor claims administrator pursuant to Section 10111.2(c)(4) of these regulations.


Note: Authority cited: Sections 59, 129.5, 133, 138.3, 138.4 and 5307.3, Labor Code. Reference: Sections 124, 129, 129.5, 4600 and 4621, Labor Code; and Sections 7, 9, 10 and 11, Civil Code.





s 10109. Duty to Conduct Investigation; Duty of Good Faith.
(a) To comply with the time requirements of the Labor Code and the Administrative Director's regulations, a claims administrator must conduct a reasonable and timely investigation upon receiving notice or knowledge of an injury or claim for a workers' compensation benefit.
(b) A reasonable investigation must attempt to obtain the information needed to determine and timely provide each benefit, if any, which may be due the employee.

(1) The administrator may not restrict its investigation to preparing objections or defenses to a claim, but must fully and fairly gather the pertinent information, whether that information requires or excuses benefit payment. The investigation must supply the information needed to provide timely benefits and to document for audit the administrator's basis for its claims decisions. The claimant's burden of proof before the Appeal Board does not excuse the administrator's duty to investigate the claim.
(2) The claims administrator may not restrict its investigation to the specific benefit claimed if the nature of the claim suggests that other benefits might also be due.
(c) The duty to investigate requires further investigation if the claims administrator receives later information, not covered in an earlier investigation, which might affect benefits due.
(d) The claims administrator must document in its claim file the investigatory acts undertaken and the information obtained as a result of the investigation.
(e) Insurers, self-insured employers and third-party administrators shall deal fairly and in good faith with all claimants, including lien claimants.


Note: Authority cited: Sections 59, 129.5, 133, 5307.3, Labor Code. Reference: Article 14, Section 4, California Constitution; Sections 124, 129, 133, 4061, 4550, 4600, 4636 through 4638, 4650, 4701 through 4703.5, 5402 and 5814, Labor Code; Ramirez v. WCAB, 10 Cal.App.3d 227, 88 CR 865, 35 CCC 383 (1970); and Section 790.03(h)(3), (5), (13), Insurance Code.





s 10110. Notice of Intention to Issue a Notice of Compensation Due; Notice of Compensation Due; Review by Workers' Compensation Appeals Board.
(a) If as the result of an audit, the Administrative Director determines that compensation is due and unpaid to an employee, (s)he shall serve on the audit subject, personally or by first class mail, a Notice of Intention to Issue a Notice of Compensation Due specifying the amount, reason and period for which compensation is due. If liability for compensation is clear but the amount cannot be determined from information in the claim file, the Administrative Director may direct the claims administrator to gather the necessary additional information.
(b) The audit subject may file an Objection to the Notice of Intention within 14 days of receipt. The Objection shall state in detail the reasons the compensation found due is disputed and may include supporting documentation and legal argument.
(c) The Administrative Director will review any Objection, and may set the matter for an administrative meeting, which may be included as part of a post audit conference. The administrative meeting or the post audit conference may be set on the Administrative Director's own initiative or at the request of the audit subject. After review, the Administrative Director shall either dismiss the Notice of Intention to Issue a Notice of Compensation Due or issue a Notice of Compensation Due.
(d) If no timely Objection is submitted, the Administration Director may issue a Notice of Compensation Due. A Notice of Compensation Due which was issued without a timely Objection shall be final without right of further review unless the Workers' Compensation Appeals Board agrees to hear an appeal after a late Objection.
(e) A Notice of Compensation Due shall specify the amount, reason and period for which compensation is due and shall order payment of the compensation to the employee or dependent. The Notice of Compensation Due shall be served on the insurer, self-insured employer or third-party administrator personally or by certified or registered mail, and a copy shall be sent by first class mail to the affected employee or dependent. The compensation due must be paid within 15 days of receipt of the Notice of Compensation Due unless appealed to the Workers Compensation Appeals Board in accordance with Section 10115 of these Rules and the applicable rules of the Workers' Compensation Appeals Board.


Note: Authority cited: Sections 59, 129.5, 133, 4603.5, 5307.3, Labor Code. Reference: Sections 129, 139.5, 3207, 4453, 4550, 4600, 4621, 4636-4638, 4639, 4653, 4658, 4659, 4660, 4661.5, 4701-4703.5, 4900 and 4902, Labor Code; and Section 10952, Title 8, California Code of Regulations.





s 10111. Schedule of Administrative Penalties for Injuries on or After January 1, 1990, but Before January 1, 1994.
The administrative penalties set forth in subsections (a) through (d) of this section will be imposed for injuries occurring on or after January 1, 1990, but before January 1, 1994, subject to any applicable mitigation or exacerbation under subsection (e) of this section.
(a) A penalty of up to $100 for each violation shall be assessed when there is:
(1) Failure to make full payment of 10% self-imposed increase when temporary disability indemnity or permanent disability indemnity is overdue. The penalty for this violation is:
If the self-imposed increase was not paid or was only partially paid, the audit penalty is based on the amount of the underlying indemnity and is as follows:
$25 if the late-paid indemnity totals not more than 3 days;
$50 if the late-paid indemnity totals more than 3 but not more than 7 days;
$75 if the late-paid indemnity totals more than 7 but not more than 14 days;
$100 if the late paid indemnity totals more than 14 days.
(2) Failure to provide first permanent disability payment when due and/or within 14 days after temporary disability payments are terminated. The penalty for this violation is:
$25 if the first payment was made 1 to 2 days late;
$50 if the first payment was made 3 to 7 days late;

$75 if the first payment was made 8 to 14 days late;
$100 if the first payment was made more than 14 days late.
(3) Failure to respond to a written request for medical treatment of injured worker within 20 days of the date of request. The penalty for this violation is:
$25 for a response made from 1 to 7 days late;
$50 for a response made from 8 to 15 days late;
$75 for a response made from 16 to 34 days late;
$100 for failure to respond for more than 35 days.
(4) Failure to provide, upon request, any transportation costs when due to injured worker for medical care. The penalty for this violation is:
$25 for $10 or less in expense;

$50 for more than $10, to $20, in expense;
$75 for more than $20, to $40, in expense;
$100 for more than $40 in expense.
(5) Failure to document average weekly earnings if temporary disability indemnity is being paid at less than the maximum rate. The penalty for this violation is $100.
(6) Failure to make the first payment of temporary disability indemnity not later than 14 days after the date of the employer's knowledge of injury and disability pursuant to Labor Code Section 4650(a). The penalty for this violation is:
$25 if the first payment was made 1 to 2 days late;
$50 if the first payment was made 3 to 7 days late;
$75 if the first payment was made 8 to 14 days late, and/or if all indemnity then due was not paid but was paid with a subsequent payment;
$100 if the first payment was made more than 14 days late, and/or if all indemnity then due was not paid with the first payment and remains unpaid at the time of audit.
(7) Failure to follow the Rules and Regulations established by the Administrative Director for the purpose of carrying out the workers' compensation provisions in Labor Code Section 3200 through Section 6002. The penalty for this violation is:
[i] For each failure to include in a claim file a copy of the Employee's Claim for Worker's Compensation Benefits, DWC Form 1, showing the date the form was provided to and received from the employee, or documentation of the date the claim form was provided to the employee if the employee did not return the form, the penalty is:
$100 if there were any late indemnity payments, or if notice of acceptance of the claim was not issued within 90 days after the employer's date of knowledge of injury and disability, or if the claim was denied.

[ii] For each failure to issue a notice of benefits as required by Title 8, California Code of Regulations, Division 1, Chapter 4.5, Subchapter 1, Article 8, beginning with Section 9810, or by Title 8, California Code of Regulations, Division 1, Chapter 4.5, Subchapter 1.5, Article 7, beginning with Section 10122, unless penalties apply and are assessed under Section 10111(b)(2) of these regulations, the penalty is $100.
[iii] For each notice of benefits which was not issued timely as provided in Title 8, California Code of Regulations, Division 1, Chapter 4.5, Subchapter 1, Article 8, beginning with Section 9810, or as provided in Title 8, California Code of Regulations, Division 1, Chapter 4.5, Subchapter 1.5, Article 7, beginning with Section 10122, the penalty is:
$25 for each notice of first, resumed, changed or final payment of temporary disability indemnity, wage continuation, death benefits, permanent disability indemnity, or VRMA which was issued from 1 to 7 days late;
$50 for each notice of first, resumed, changed or final payment of temporary disability indemnity, wage continuation, death benefits, permanent disability indemnity, or VRMA which was issued more than 7 days late, and for each delay in decision notice or denial notice which was issued from 1 to 7 days late;

$75 for each delay in decision notice or denial notice which was issued more than 7 days late.
[iv] For each Notice of Benefits required by Title 8, California Code of Regulations, Division 1, Chapter 4.5, Subchapter 1, Article 8, beginning with Section 9810, or by Title 8, California Code of Regulations, Division 1, Chapter 4.5, Subchapter 1.5, Article 7, beginning with Section 10122, which was materially inaccurate or incomplete, except an inaccurate or incomplete denial notice, the penalty is $25. For a materially inaccurate or incomplete denial notice the penalty is $100.
[v] For each failure to include in a claim file, or document attempts to obtain, any of the required contents specified in Section 10101, the penalty is $100.
[vi] For each failure to comply with any regulation of the Administrative Director, not otherwise assessed in these Regulations, the penalty is $100.
(8) Failure to pay or object to all documented Medical-Legal expenses within 60 days of receipt of billing and any required reports as provided for in Labor Code 4622. The penalty for this violation is:
$50 for each bill which was paid more than 60 days from receipt with interest and a 10% increase;
$75 for each bill which was paid more than 60 days from receipt where either interest or a 10% increase was not included;
$100 for each bill which was paid more than 60 days from receipt where neither interest nor a 10% increase was paid;
$100 for each bill which was not paid where no timely objection was sent.
(9) Failure to pay or object to expenses for medical treatment within 60 days of receipt of the bill and any required reports. The penalty for this violation is:
$25 for each bill of $100 or less, excluding interest and penalty;
$50 for each bill of more than $100, but no more than $200, excluding interest and penalty;

$75 for each bill of more than $200, but no more than $300, excluding interest and penalty;
$100 for each bill of more than $300, excluding interest and penalty.
(10) Failure to pay within ten days any indemnity due, which is not specified in subsections (a)(1) through (a)(9). The penalty for this violation is:
$25 for late payment of 3 days of indemnity or less;
$50 for late payment of more than 3 but no more than 7 days of indemnity;
$75 for late payment of more than 7 days of indemnity, or failure to pay 3 days of indemnity or less;
$100 for failure to pay more than 3 days of indemnity.
(b) A penalty of up to $500 for each violation shall be assessed when there is:
(1) Failure to maintain and provide a written claim log as defined in Section 10100(g) to the audit unit commencing July 1, 1990, and thereafter. The claim log shall contain all claims received, whether liability has been accepted, and distinguish between Indemnity and Medical-only claims. The penalty for this violation is:
$25 for each failure to list on a claim log one or more of the following: employee's name; claim number; date of injury;
$25 for each misdesignation of an indemnity file as a medical-only file on the claim log;
$100 for each failure to identify subsidiary self-insured employers on the log;
$100 for each failure to identify the underwriting insurance company of an insurance group;
$100 for each failure to designate a denied claim on the log;
$100 for each claim not listed on the log;
$250 for each failure to provide the claim log to the Audit Unit within 14 days of receipt of a written request if the claim log was provided more than 14 but no more than 30 days from receipt of the request;
$500 for each failure for more than 30 days from receipt of a written request, to provide the claim log to the Audit Unit.
(2) Failure to comply with Labor Code Sections 4636, 4637 and 4644. The penalty for this violation is:
[i] The penalty for each failure to assign a qualified rehabilitation representative immediately after 90 days of aggregate temporary disability indemnity is $100 if the assignment was made or the employee returned to his or her usual and customary occupation more than 10 but not more than 20 days after 90 days of aggregate total disability, and an additional $100 for each additional delay of not more than 10 days, to a maximum penalty of $500.
[ii] The penalty for each failure to issue notice of medical eligibility for vocational rehabilitation services (if not previously issued) within 10 days after knowledge of a physician's opinion that the employee is medically eligible, or for failure to issue notice within 10 days after 366 days of aggregate total temporary disability, is $100 if the notice was issued not more than 10 days late, and an additional $100 for each additional delay of not more than 10 days, to a maximum penalty of $500.
[iii] The penalty for each failure to notify an injured employee of the reasons he or she is not entitled to any, or to any further, vocational rehabilitation services, and the procedure for contesting the determination of non-eligibility, is $100 if notification was issued more than 10 but not more than 20 days after the determination, and an additional $100 for each additional delay of not more than 10 days, to a maximum penalty of $500.
(c) A penalty of up to $1,000 for each violation shall be assessed when there is:
(1) Failure to pay or appeal penalties provided for in the Notice of Compensation Due within 15 days of the date of receipt of the Notice. The penalty for this violation is:
$250 for each assessment paid more than 15 but not more than 30 days after receipt;
$500 for each assessment paid more than 30 but not more than 45 days after receipt;
$1,000 for each assessment not paid within 45 days after receipt.
(2) Failure to comply with or appeal any final order of the Workers' Compensation Appeals Board within 30 days of service. The penalty for this violation is:
$250 for full compliance in more than 30 but not more than 45 days from the date of service, or for any late payment or failure to pay interest due;
$500 for full compliance (other than a late interest payment) in more than 45 but not more than 60 days from the date of service;
$750 for full compliance (other than a late interest payment) in more than 60 but not more than 75 days from the date of service;
$1,000 if there was not full compliance (other than failure to pay interest) within 75 days of the date of service.
(d) A penalty of up to $5,000 for each violation shall be assessed when there is:
(1) Failure to produce, on a second request, a legible paper copy of a claim files within 5 days of written notice by the Administrative Director or his representatives. The penalty for this violation is: (continued)