In this case (and its companion case, Mitchell v. UPS), the Law Court was asked to rule on the validity of Board Rule Chapter 1(1), commonly referred to as the 14-day rule. Under that rule, an employer who fails to pay or controvert a claim for incapacity benefits within 14 days of receipt of the claim violates the rule. The employer then must pay incapacity benefits from the date of incapacity through the date the violation is cured (by paying accrued benefits and filing a Notice of Controversy).
The employer argued that the rule conflicts with Section 205 of the Workers’ Compensation Act which provides a $50.00 per day penalty for claims not disputed or paid within 44 days. The employer also argued that when, as here, the employee presents his initial claim by way of petition, no response is required under Section 307(3) of the Act. Finally, the employer argued that the rule is contrary to the intent of the Act by forcing employers to immediately dispute claims rather than risking a rule violation, creating more litigation and delaying payment of valid claims.
The Law Court concluded that the Workers’ Compensation Board enjoys broad rule-making authority and that the 14-day rule does not directly conflict with the language of the Act. The Court found that the rule encourages employers to quickly pay or controvert a claim, resulting in faster disposition. However, the Court did not respond to the employer’s argument that no response to a petition is required under Section 307(3).
The Court also ruled that when a 14-day violation has been established, the employee is due benefits not from the date of his petition, but from the date of incapacity. Enforcement of the 14-day violation under these circumstances may have a huge financial impact on insurers and employers.
As a result of this decision, a safer route for insurers when the facts and initial investigation may not support compensability is to file Notices of Controversy to avoid a 14-day rule violation, then complete their investigation of the claim and decide whether or not to pay benefits.