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https://www.businessinsurance.com/investigations-key-as-employers-navigate-rising-psych-comp-claims/

• Workers Comp Coverage, Workplace Safety
• May 5, 2026

PHILADELPHIA — Workers compensation claims for mental injuries are rising due to expanding state laws and shifting workforce demographics, so employers and insurers should be prepared to investigate and understand the unique aspects of a mental health claim, a panel of experts said.

Employers are seeing more exposure as states broaden compensability standards for purely psychological “mental-mental” claims, where no physical injury occurs, said Sandy Avina, Moreno Valley, California-based claims services manager for California Schools JPA.

She was speaking Tuesday during a session at the Risk & Insurance Management Society’s Riskworld conference.

Most states have long allowed “physical-mental” claims, where a physical injury leads to depression, anxiety or other psychological conditions, she said. But more states are now allowing mental-mental claims, including Kentucky, which passed legislation in 2025 permitting them.

“We are seeing more states introduce legislation that allows for mental-mental claims,” Ms. Avina said. “As more states expand to allow this, it expands the exposure for all of us.”

She also pointed to demographic shifts, noting that by 2030, Generation Z – people born between 1995 and 2012 – will make up one-third of the workforce. Younger workers are more comfortable discussing mental health and have higher expectations for how employers respond, she said.

At the same time, distrust of employers is fueling litigation.

“Fifty-nine percent of Americans believe that business leaders are intentionally lying or trying to mislead them,” Ms. Avina said, citing Pew Research. “This really goes hand in hand with why we’re seeing so much litigation in this area.”

Strong documentation is critical, especially in physical-mental claims where psychological symptoms arise after a workplace injury, said Angel Guerra Chagolla, San Jacinto, California-based CEO of Arrowhead Evaluation Services.

“If it’s not in writing, it didn’t happen,” Ms. Guerra Chagolla said, emphasizing the importance of securing early witness statements, personnel files, medical history, and outside investigative support.

She said employers often wait too long to document employee statements, making it harder to establish facts later when a psych claim is added months after the original injury.

Flawed psychological assessments are a major defense issue, said Ronald Heredia, Los Angeles-based director of Good Mood Legal. He urged claims professionals to challenge diagnoses first rather than focusing only on causation, and to better understand the specific criteria for mental ailments, which are strictly outlined in the American Psychiatric Association’s “Diagnostic and Statistical Manual of Mental Disorders,” also known as “the DSM-5.”

“If there’s no diagnosis, or you can discredit or nullify it, then we don’t have to worry about causation, apportionment, treatment or disability,” Mr. Heredia said.

He also warned against telehealth evaluations for psych claims.

“I say, don’t do it. Just say no,” Mr. Heredia said, arguing that doctors miss important behavioral observations and cannot properly administer tests.