The $11,000 Mistake: When “Active Defense” Becomes “Bad Faith

As claims examiners, you expect our defense attorneys to fight hard. You want them to push for the best outcomes, challenge questionable medical findings, and move files toward closure. However, a recent decision by the WCAB, Nguyen v. Pacific Dental Services, LLC, serves as a stark (and expensive) warning: there is a fine line between an aggressive defense and “bad faith” obstruction.

Here is the story of how a strategy of delay backfired, resulting in significant financial penalties not just for the law firm, but for the individual attorney involved.

The Facts: A Pattern of Obstruction

In the Nguyen case, the defense counsel engaged in a series of discovery tactics that the Workers’ Compensation Judge (WCJ) found troublesome. The core issues weren’t just one honest mistake, but a “pattern of actions” that included:

1. Unilateral Cancellations: The defense unilaterally cancelled scheduled medical appointments (such as QME or AME exams) without good cause or a court order.
2. “Advocacy” Letters: Instead of sending neutral, factual cover letters to medical evaluators, the defense sent “advocacy letters”—correspondence designed to sway the doctor’s opinion or misrepresent facts, rather than simply providing records.
3. Dilatory Tactics: The defense engaged in repeated procedural delays that, when viewed together, appeared intended solely to slow down the case.

The Procedural History: The WCAB Steps In

The WCJ looked at the “entirety of the submitted record.” He noted that while any single one of these actions might have been excusable in isolation, the pattern showed an intent to obstruct.

In Nguyen I (June 2024), the WCAB issued a “Notice of Intent” to sanction both the individual attorney, and her firm. The Board wanted to make it clear that attorneys cannot hide behind their firm’s letterhead.

The defendants were given a chance to show “good cause” why they shouldn’t be sanctioned. They failed to provide a sufficient response. Consequently, in Nguyen II (September 8, 2025), the WCAB dropped the hammer.

The Findings & Order: Joint and Several Liability

The court based its findings of “bad faith” and the subsequent sanctions on Labor Code Section 5813 and WCAB Rule 10421, which prohibit frivolous actions or tactics solely intended to cause delay. The Board affirmed that the defense had violated both the labor code and their own rule (part of the CCRs) based on the following:

• Labor Code Section 5813: The primary statute authorizing the Workers’ Compensation Appeals Board (WCAB) to impose sanctions and order payment of reasonable expenses, including attorney’s fees, for bad-faith actions or tactics that are frivolous or intended to cause unnecessary delay.
• WCAB Rule 10421 (Title 8 CCR § 10421): Formerly Rule 10561, this regulation defines “bad faith actions or tactics” and provides a non-exhaustive list of sanctionable behaviors, such as filing meritless pleadings or failing to comply with WCAB rules.

The penalties were two-fold and instructive:

• The Sanction: A relatively small fine of $750 payable to the General Fund.
• The Costs: A massive award of $11,093.75 in attorney’s fees and costs payable to the Applicant’s attorney.

Crucially, the order made the attorney individually liable, jointly and severally with her law firm.

Practical Impact: What This Means for Your Claims Desk?

This case is a critical reminder for claims examiners. While we rely on counsel to handle the legal maneuvering, we ultimately control the file and the checkbook.

Here are three practical takeaways to apply to your daily desk management:

1. “Self-Help” is No Help

Never allow your counsel to unilaterally cancel a QME or AME appointment just because there is a dispute. If you object to an exam, the proper legal route is to file a Petition to Compel or a Petition for a Protective Order. simply cancelling the appointment is considered “self-help” and is a fast track to sanctions.

2. Review the Correspondence

Keep an eye on what is being sent to doctors on your behalf. Letters to QMEs should be administrative and neutral. If your attorney is sending “advocacy letters” arguing the medical science or attacking the applicant’s credibility in the cover letter to the doctor, they are inviting a bad faith claim.

3. Recognize the Price of “Winning” the Battle

In this case, the defense likely thought they were “winning” by delaying the exams and frustrating the applicant. Instead, they handed the applicant an $11,000 check. Always ask yourself: Is this procedural fight worth the potential cost in attorney fees if we lose?

Conclusion

The WCAB explicitly stated in this decision that they do not want to create a “chilling effect” on active defense. You are allowed to fight! But when active defense turns into a strategy of delay and obstruction, the courts will act. Ensure your defense strategy is aggressive, but always ethical.