Section R20-5-163. Bad Faith and Unfair Claim Processing Practices

A.      For purposes of A.R.S. § 23-930, an employer, self-insured employer, insurance carrier, or claims processing representa- tive commits “bad faith” if the employer, self-insured employer, insurance carrier, or claims processing representa- tive:

1.        Institutes a proceeding or interposes a defense that is not:

a.        Well-grounded in fact;

b.        Warranted by existing law; or

c.        A good faith argument for the extension, modifica- tion, or reversal of existing law;

2.        Unreasonably delays:

a.        Payment of benefits; or

b.        Authorization for, or receipt of, medical benefits or treatment;

3.        Unreasonably underpays benefits;

4.        Unreasonably terminates benefits;

5.        Intentionally misleads a claimant as to applicable statutes of limitation, benefits, or remedies available to the claim- ant under the Act or under this Article; or

6.        Unreasonably interferes with or obstructs the claimant’s right to choose the claimant’s attending physician, except in cases involving a self-insured employer under A.R.S. § 23-1070.

B.       For purposes of A.R.S. § 23-930, an employer, self-insured employer, insurance carrier, or claims processing representa- tive commits “unfair claim processing practices” if the employer, self-insured employer, insurance carrier, or claims processing representative:

1.        Unreasonably issues a notice of claim status without ade- quate supporting information in its possession or avail- able to it;

2.        Unreasonably fails to acknowledge communications from the Commission, an unrepresented claimant, or a claim- ant’s attorney with respect to a claim;

3.        Fails to act reasonably and promptly upon communica- tions from the Commission, an unrepresented claimant, or a claimant’s attorney with respect to a claim;

4.        Directly advises a claimant not to consult or obtain the services of an attorney; or

5.        Communicates directly, for an improper purpose, with a claimant represented by an attorney.

C.      A person alleging bad faith or unfair claim processing prac- tices (“complainant”) shall file a written complaint with the claims manager of the Commission. The complainant, or the complainant’s authorized representative, shall sign the com- plaint.

D.      The complaint shall describe the specific actions of the employer, self-insured employer, insurance carrier, or claims processing representative, that are alleged to constitute bad faith or unfair claim processing practices. A complaint form is available upon request from the Commission.

E.       Upon receipt of a complaint under this subsection, the claims manager of the Commission shall serve the complaint upon all parties.

F.       If the Commission acts on its own motion under A.R.S. § 23- 930(A), the claims manager shall mail a notice of alleged bad faith or unfair claim processing practices to the claimant or the claimant’s authorized representative and the:

1.        Employer;

2.        Self-insured employer;

3.        Insurance carrier; or

4.        Claims processing representative.

G.      The person or entity named in a complaint or notice served under A.R.S. § 23-930 and this Section shall file with the claims manager a written response to the complaint or notice, within 30 days after service by the Commission of the com- plaint or notice.

H.      The person or entity filing a written response shall serve a copy of the response upon the complainant, or the com- plainant’s authorized representative, if represented.

I.        If the person or entity named in a complaint or notice served under A.R.S. § 23-930 and this Section fails to file a written response, the Commission shall consider the absence of a response a denial of the allegations of the complaint or notice.

J.        Upon receipt of a written response, or upon the expiration of 30 days if no response is filed, the Commission shall enter an award as it deems, in its discretion, appropriate under A.R.S.

§§ 23-930(B) or (C).

Historical Note

Adopted as an emergency effective February 1, 1988, pursuant to A.R.S. § 41-1026, valid for only 90 days (Supp. 88-1). Emergency expired. Amended and readopted as an emergency effective April 29, 1988, pur- suant to A.R.S. § 41-1026, valid for only 90 days (Supp.

88-2). Readopted without change as an emergency effec- tive August 1, 1988, pursuant to A.R.S. § 41-1026, valid for only 90 days (Supp. 88-3). Readopted without change as an emergency effective November 9, 1988, pursuant to

A.R.S. § 41-1026, valid for only 90 days (Supp. 88-4). Emergency expired. Amended and readopted as an emer- gency effective July 11, 1989 (Supp. 89-3). Adopted as a permanent rule effective October 4, 1989 (Supp. 89-4).

R20-5-163 recodified from R4-13-163 (Supp. 95-1). Amended by final rulemaking at 7 A.A.R. 3966 and 7

A.A.R. 4995, effective August 17, 2001 (Supp. 01-3).