California Code of Regulations › Title 8 - Industrial Relations › Division 1 - Department of Industrial Relations › Chapter 4.5 - Division of Workers' Compensation › Subchapter 1.5 - Injuries on or After January 1, 1990 › Article 3 - Auditing › Section 10106 - Random and Non-Random Audit Subject Selection; Complaint/Information Investigation

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) In its discretion, the Audit Unit may
					 treat an affiliated group of insurers at a single adjusting location as
					 individual insurers, or may combine all or any of them as a single insurer
					 audit subject. In its discretion, the Audit Unit may treat parent and
					 subsidiary self-insured employers at a single adjusting location as individual
					 self-insureds, or may combine all or any of them as a single self-insured audit
					 subject.
(b) The final selection of
					 audit subjects shall be within the discretion of the Audit Unit. The Audit Unit
					 may investigate information or complaints instead of, or in addition to,
					 conducting an audit. Investigations and/or audits may be conducted if
					 complaints or information indicate the possible existence of claims handling
					 practices which would be assessed as a civil penalty under Labor Code Section
					 129.5(d).
(c) The Audit Unit shall select at least half
					 of its audit subjects at random from any available listing of adjusting
					 locations of workers' compensation insurers, self-insured employers,
					 self-insured joint powers authorities, legally uninsured employers, and
					 third-party administrators. If, after the results of an audit become final,
					 none of the criteria qualifying an audit subject for a return non-random audit
					 pursuant to subsection (f) of this section exist, the audit subject shall be
					 removed from the pool of potential random audit subject selection for three
					 years. However, eligibility under this subsection for removal from the pool for
					 random audit subject selection shall not bar the non-random selection of the
					 audit subject pursuant to this section or Labor Code Section
					 129(b).
(d) In order to establish priorities for
					 audits pursuant to Labor Code §
											129(b),
					 the Audit Unit shall review and compile complaints and information that
					 indicate a claims administrator is failing to meet its obligations under
					 Divisions 1 or 4 of the Labor Code or regulations of the administrative
					 director.
(1) The information and complaints
					 shall be tracked and compiled into a list of Claims Administrators Identified
					 for Potential Non-Random Investigation as follows:
(i) Complaints or information available to
					 the Audit Unit which indicate possible violations of the kind which, if found
					 on audit, would be subject to the assessment of administrative penalties or
					 issuance of notices of compensation due shall be retained in potential audit
					 subject files by claims adjusting locations. Factual information and complaints
					 shall be weighted on the basis of apparent severity of the alleged violation,
					 using the assessment categories set forth in the subsections (a) through (d) of
					 §
													10111 and §
													10111.1 to set a point value.
An alleged violation that would fall within subsection
						(a) is given one point, an alleged violation that would fall within subsection
						(b) is given five points, an alleged violation that would fall within
						subsection (c) is given ten points, and an alleged violation that would fall
						within subsection (d) is given fifty points. When multiple violations are
						alleged in one complaint, each potential violation is given the appropriate
						point(s).
Points assigned for violations which are evidenced by
						decisions or findings rendered by the WCAB or Rehabilitation Unit shall be
						multiplied by ten.
(ii)
					 Periodically, the audit unit shall review and analyze the complaint and
					 information data in order to establish a list of Claims Administrators
					 Identified for Potential Non-Random Investigation. The total number of points
					 assigned to a claims administrator at an adjusting location shall be compared
					 to the total number of claims reported at that claims adjusting location as
					 indicated on the Annual Report of Inventory or the Self Insurer's Annual
					 Report. The claims administrators shall be ranked on the list of Claims
					 Administrators Identified for Potential Non-Random Investigation on the basis
					 of the ratio of weighted complaints to case load size at each adjusting
					 location. It is within the discretion of the Audit Unit to determine when new
					 lists shall be established.