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Arizona lawmakers tackle ‘bad-faith’ claims for workers’ compensation

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While working security at an Arizona Cardinals game in 2012, Julie Wilson’s supervisors told her to drink a lot of water to stay hydrated.

She got water poisoning.

The over hydration caused an electrolyte imbalance that left Wilson in a coma for four days, she said.

But when she filed a workers’ compensation claim, the insurance company denied it. So after hiring an attorney, Wilson filed a “bad faith” claim against the insurance company. Wilson and the insurance company ended up settling out of court.

To reduce frivolous lawsuits, some Arizona lawmakers want to make it tougher to file such bad-faith claims against insurance companies. But they also want to increase the penalties insurance companies pay when they do act in bad faith.

Under HB 2334, workers would have 60 days after the alleged mistreatment occurred to file a “bad faith” complaint with the Industrial Commission of Arizona.

The commission would decide whether the company should pay a claim, and if so, how much. The bill would increase the maximum civil penalty to $5,000, from $1,000.

The House Committee on Insurance listened to testimony on Wednesday, but members did not vote because both sides said they believe the bill still needs tweaks.

Bill sponsor state Rep. Karen Fann R-Prescott, said she’s looking for a solution to make sure workers are fairly compensated. But at the same time, she wants to “cut down on the stuff that is causing people a lot of time, money and effort.”

The Industrial Commission is a state regulatory agency that deals with employee issues such as health and safety, among other things.

Jeff Gray, a lobbyist representing the Arizona Self Insurers Association, said the commission should handle these bad-faith cases because they are “complicated cases with a unique set of case law, and we believe that their administrative-law judges have the better experience (versus) a superior court judge who might not.”

Gray and other proponents said the bill would keep more people from filing unnecessary lawsuits.

“Since 2012, there has been a 10-fold increase in bad-faith cases,” Gray said during the hearing.

However, personal injury lawyer Richard Langerman said the Arizona Trial Lawyers Association only identified 44 bad-faith lawsuits in the last five years.

“There are nearly 100,000 workers’ compensation claims filed every year in the state of Arizona, and in the last five years, there has been .001 percent of those claims that have resulted in lawsuits,” Langerman said during the hearing.

Opponents also said the bill would make it harder for anyone hurt on the job to sue for money they rightfully deserve.

Langerman said HB 2334 “victimizes Arizona workers for the benefit of out-of-state insurers and third-party administrators.”