What Constitutes a Timely Denial Under LC 5402(b)?

Generally, an employer must deny a claim within 90 days to avoid a presumption that it’s compensable. Labor Code 5402(b)(1) states, “If liability is not rejected within 90 days after the date the claim form is filed under Section 5401, the injury shall be presumed compensable under this division.” Once the presumption attaches, it can be rebutted only by evidence that could not have been obtained with the exercise of reasonable diligence within the 90-day period. (SCIF v. WCAB (Welcher) (1995) 60 CCC 717.)

In Rodriguez v. WCAB (1994) 59 CCC 857, however, the Court of Appeal held that an employer is not required to issue a denial letter within the 90-day period to effectively deny the claim. In Rodriguez, the employer sent a denial letter on the 89th day following the filing of a claim form, and the applicant did not receive it until the 96th day. The applicant asserted that the denial letter had to be received within the 90-day period to be a sufficient denial pursuant to LC 5402(b). The Court of Appeal rejected that argument.

It explained, “We think the Legislature is well aware of the distinction between the rejection of a claim and the giving of notice to the claimant that there has been such a rejection. The rejection is the decision by the person or entity to whom the claim has been filed or submitted that the claim will not be honored. Such a rejection does not require any participation on the part of the claimant after the claimant has filed or submitted the claim.” Rodriguez cautioned that it was not suggesting that employers should refrain from notifying employees of the rejection of liability until after the 90-day period has expired. It warned that by failing to notify the employee within that period, an employer might encounter difficulty demonstrating that a claim was timely rejected, and suggested that wise practitioners would take steps to ensure that the employee had such notification. Nevertheless, the court concluded that “[I]t is the rejection which must occur within the 90-day period, not the receipt of notice of that rejection.” Rodriguez further held that LC 5402 does not even require that notice of the rejection must be sent within 90 days.

The WCAB recently revisited the issue of what constitutes a timely denial under LC 5402(b) in the case of Azevedo v. Inverse Solutions, Inc., 2022 Cal. Wrk. Comp. P.D. LEXIS 357. In that case, the applicant served a claim form and application directly on his employer. Two weeks later, the applicant’s supervisor completed a form in response to a request from the Employment Development Department (EDD). In completing that form, the supervisor wrote, “We did not file a claim because employer reported first that he re-injured himself at home and the initial injury occurred 20 years ago at a different employer/location.” At trial, the supervisor testified that when he completed the EDD form, it was his intent to deny the claim. The application was not amended to add the insurer as a defendant until eight months after it was originally filed, and the insurer denied the claim 98 days after the amendment.

The WCAB found that the employer presented evidence that the claim was timely denied. It explained the the primary purpose of LC 5402(b) was to expedite the entire claims process by limiting the time during which investigation by the employer of a claim by an injured worker could be undertaken without being penalized for delay. It explained that “unlike other provisions of the Labor Code, such as statutes of limitations, notice of rejection is not required for a defendant to effectively ‘reject’ the claim within the meaning of the statute.” The WCAB found that the supervisor’s completion of the EDD form indicating that the claim had been denied together with his testimony that he believed that he denied the claim was sufficient to find that the employer rejected the claim within the 90-day period.

So, to effectively deny a claim under LC 5402(b), an employer must prove only that it made the decision to deny the claim within the 90-day period. It does not need to send written notice of the denial within that time period. Nevertheless, it’s the employer’s burden to establish that a claim was timely denied, and that would be established most easily by written documentation of the denial served on the applicant within 90 days. Without a timely denial letter, an employer must come to court with a witness or documentary evidence, or both, to prove that it timely denied the claim. A defendant that does so runs the risk that the trier-of-fact could find the evidence insufficient to establish a timely denial.