By: Sean O’Neil, Associate, Jacksonville

When used effectively, Fla. Stat. 440.20(4), better known as the 120 day “pay and investigate rule,” is a fantastic tool adjusters can employ when confronted with adverse, complex or unknown facts. This article will serve as a guidepost to help the informed adjuster navigate 440.20(4) to arrive at an educated decision on whether to invoke the 120 day rule.

When must the 120 day rule be invoked?

Within 14 days after the initial provision of benefits or the receipt of a petition for benefits, the carrier must either pay the requested benefits or file a response to claimant’s petition. When coupled with the fact that knowledge of a disability by a worker’s supervisor, foreman or company HR department is imputed on the carrier, adjusters are placed under immense pressure to make quick and often uninformed decisions on compensability due to fears of penalties, interest and attorney’s fees.

Fla. Stat. 440.20(4) provides “if a workers’ compensation carrier is uncertain of compensability, it can admit or deny compensability within 120 days after the initial provision of compensation or benefits.” The use of the word “or” makes it clear that the words “compensation” and “benefits” refer to two distinct entities. Osceola Cnty. Sch. Bd. v. Arace, 884 So.2d 1003 (Fla. 1^st DCA 2004). Compensation simply refers to payment of indemnity benefits. What then, constitutes “benefits?” The initial provision of benefits occurs on the date a claimant visits an authorized physician. Id.  Remember, mere authorization of benefits is not enough. The claimant must actually attend his initial authorized visit before a benefit is provided, thereby enabling the 120 day rule to be invoked. 

With this in mind, the carrier must invoke the 120 day rule in writing or lose their ability to assert it at the following times: 1) within 14 days of receipt of claimant’s petition; 2) within 14 days of the initial payment of indemnity benefits; 3) within 14 days of claimant’s first attended authorized treatment.

How to Apply the Rule

Once you decide to invoke the 120 day rule, the process is relatively straight forward.  First, you must invoke the option in writing. A simple, plain statement advising that the carrier has elected this option will suffice. However, the carrier should make sure to delineate whether it is being invoked on overall compensability of the claim or in reference to a particular benefit. Second, the carrier must actually pay the benefits. As stated above, mere authorization is not enough. Finally, the carrier must act within the 120 day window.  If the carrier intends to deny the claim, notice of denial must be sent in writing within 120 days. Should the carrier wish to deem the claim compensable, no action is required. However, it is good policy to accept compensability in writing, as failure to make an unambiguous acceptance could breed unnecessary litigation, thus exposing the carrier to unnecessary exposure.

When to Invoke

Understandably, the 120 day rule is most commonly invoked in high exposure cases such as chemical exposure, catastrophic injuries, and first responder presumption cases. However, carriers should also invoke the rule in cases with lower exposure. For instance, take a scenario where the claimant’s initial treatment is somewhat inexpensive, but his condition could deteriorate should treatment be denied. If you accept initially, absent fraud, you are bound by this decision. Instead, the carrier should invoke the 120 day rule so as to monitor and investigate the claim.

Unless settlement appears imminent, the savvy adjuster should also consider implementing a cost benefit analysis as to whether invoking the 120 day rule, rather than initial acceptance, is more beneficial. There is no obligation for the carrier to actually investigate. Additionally, if payment of benefits was already to occur, why not utilize the extra 120 days available?  In situations involving more than nuisance value exposure, it would be unwise to limit your decision making to 14 days when 120 days is available.

Conclusion

440.20(4) is a handy tool designed to enable prolonged investigation into complex or spurious claims. Like most tools, it is not without flaws. The statute requires strict adherence to the procedural guidelines listed above and often exposes claims adjusters to depositions to ensure compliance. Therefore, when invoking the rule, carriers should calendar the date to ensure they act within the 120 day window. However, carriers should not hesitate to employ this rule, especially in cases where they are inclined to accept compensability.  In these cases, the carrier gains a risk free 106 additional days, at a minimum, to evaluate the claim should they have the resources to comply with the procedural guidelines.