Bill to extend good-faith duty to all self-insured employers and third-party administrators draws stark pro/con testimony

The Labor & Workplace Standards Committee on March 18 heard Senate Bill 54-63, which would extend a statutory duty of good faith and fair dealing to all self-insured employers and their third-party administrators (TPAs) for workers' compensation claims and retain the bill's penalties and decertification mechanisms.

Staff told the committee that self-insured employers either administer claims themselves or use TPAs and that an employer must meet requirements and maintain certification with the Department of Labor & Industries (L&I) to self-insure. The committee was briefed that effective July 1, 2024, Washington established the duty of good faith and fair dealing for certain self-insured municipal employers and some private-sector firefighter employers, and the bill before the committee would extend that duty to all self-insured employers and TPAs, including applicable penalties of one to 52 times the average weekly wage depending on severity and possible decertification for repeated violations.

Senator Emily Alvarado, the bill's sponsor, told the committee the workers' compensation system should help injured workers heal and return to work, and she cited court decisions and repeated complaints that self-insured employers and TPAs sometimes delay care, deny treatment and create administrative hurdles. "Injured workers really just want to get better and get back to work," Senator Alvarado said, adding that the bill is a "simple fix" that creates consistent expectations across private and public self-insurance.

In pro testimony, injured workers and labor groups recounted long delays and claims denials. Rhondi Thorpe, a Spokane-based workers' compensation attorney with 23 years of experience, gave examples of delayed authorizations for brain-injury treatment and home health aides after major surgery; she said repeated denials were "systemic and invasive." April Frazier, an injured hospice chaplain, said it took a year and an attorney to get a single treatment authorized and that a coworker waited three years for surgery.

Opponents including the Washington Self Insurers Association, Association of Washington Businesses and the Associated General Contractors told the committee they already manage claims in good faith and that the bill's standards are vague and could increase litigation, administration costs and penalties. Christine Brewer of the Washington Self Insurers Association said self-insured employers cover about 1 million workers and administer nearly $1 billion in benefits; she said the bill would impose vague legal standards and excessive penalties and cited the L&I fiscal note projecting $10 million per biennium in legal and administrative costs.

Proponents said the measure addresses a two-tiered system in which some workers lack the same good-faith protections available to insured claimants and municipal self-insured workers since 2023. Supporters pointed to low counts of penalty requests under the municipal extension as evidence that enforcement is limited but meaningful.

Why it matters: The bill would extend a legal obligation and penalty framework to a broad set of employers and TPAs handling workplace injury claims. Proponents say it will curb repeated denials and delays; opponents say it will create uncertainty, higher costs and more litigation.

Committee action: The committee took pro and con testimony and did not act on the bill at the March 18 hearing.