Workers’ Compensation Penalty Benefits Explained

June 2014
Doctor examining the back of injured worker

Under Iowa Workers’ Compensation Law, injured employees are entitled to fair treatment and prompt penalty benefits. Furthermore, employers and workers’ compensation insurance carriers are prohibited from delaying, denying, or terminating benefits in the absence of a “reasonable or probable cause or excuse.” Unreasonable and excessively long delays can result in a penalty of up to 50 percent of the amount improperly delayed, withheld, or terminated.

Specifically, Section 86.13(4)(a) of the Iowa Code states:

“If a denial, a delay in payment, or a termination of benefits occurs without reasonable or probable cause or excuse known to the employer or insurance carrier at the time of the denial, delay in payment, or termination of benefits, the workers’ compensation commissioner shall award benefits in addition to those benefits payable under this chapter, or chapter 85, 85A, or 85B, up to fifty percent of the amount of benefits that were denied, delayed, or terminated without reasonable or probable cause or excuse.”

An Example of the Law in Action

For example, in Williams v. KW Products and Hartford Insurance, decided by the Iowa Court of Appeals in 2010, an injured worker was initially given zero impairment by the treating orthopedic surgeon despite a diagnosis of bilateral forearm tendonitis. In the employee’s functional capacity evaluation, the surgeon noted that he had final work restrictions. These entailed a light-medium category below waist level and a light work category above the waist. The employee was laid off six months after he applied for workers’ compensation benefits.

The worker, a machinist, then obtained an Independent Medical Examination in which a second orthopedic surgeon determined the employee had permanent impairment as well as permanent restrictions. Using the Independent Medical Examination as the basis of his opinion, the Deputy Workers’ Compensation Commission found that the employee had suffered a 15 percent loss to his body as a whole. The Commissioner affirmed this finding. With respect to penalty benefits, the Deputy Commissioner, the Commissioner, and the Iowa District Court all found that the employer did not have to pay a penalty because the original surgeon gave the worker zero impairment.

On appeal, however, the Iowa Court of Appeals reversed this finding. The found that the employer has the burden of proving a reasonable cause for delay and can only delay under the following circumstances:

  • The delay is necessary for the insurer to investigate the claim, or
  • The employer has a reasonable basis to contest the employee’s entitlement to benefits

The Court of Appeals determined that the employer in Williams had a duty to engage in additional investigation of the worker’s claim once he obtained a conflicting report from the Independent Medical Examination. Because the employer failed to do so, the court ruled that the employee was entitled to penalty benefits.

Iowa Workers’ Compensation Law

Contact Attorney Ed Keane today at (712) 234-3088 to discuss your workers’ compensation case. And, be sure to read our section on What to Do if You’ve Been Injured at Work.

This website has been prepared by Keane Law Firm for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.