Washington State Senate Bill 5463 was recently introduced to expand the duty of “Good Faith and Fair Dealing” to all self-insured and third-party administrators. This bill will have a major impact on employers and administrators. It introduces enhanced penalties and a three-strike rule that could decertify employers from self-insurance.
The bill is currently in the Senate Rules Committee. It must be moved out and voted on by the Senate before March 12, 2025, after which it will be referred to the House.
Background
Washington legislators passed SHB 1521, which took effect on July 1, 2024. Originally intended for all self-insured employers, the bill was amended to apply only to self-insured municipal employers, self-insured private sector firefighter employers and their third-party administrators. Passage of Senate Bill 5463 would make the rules applicable to all self-insured employers and third-party administrators.
Potential impacts of Senate Bill 5463
Penalties
If good faith and fair dealing has been violated, penalties will include:
- One to 52 times the average weekly wage, depending on the severity of the violation
- $3,000 or 75% of the amount due for unreasonable delay or refusal to pay benefits
- $3,000 for failure to comply with a rule or other provision pertaining to workers’ compensation
Decertification
The Department of Labor and Industries will withdraw an employer’s self-insured certification if they violate the duty of good faith and fair dealing three times within a three-year period, excluding minor or inadvertent errors or delays.
What claims will be impacted?
This bill applies to all workers’ compensation claims regardless of the date of injury. If passed, the act will become effective Jan. 1, 2026.
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