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Workers’ Compensation Daily News for August 8th, 2020

  • AbbVie Resolves CDI Insurance Fraud Act Claim for $24M
    on August 7, 2020 at 10:31 AM

    The California Department of Insurance announced a settlement agreement with AbbVie Inc. to resolve a lawsuit alleging violations of the California Insurance Frauds Prevention Act involving the marketing of blockbuster prescription drug HUMIRA.

    AbbVie agreed to reform its HUMIRA marketing practices in California, including disclosing that registered nurses employed as "Ambassadors" to interact with patients about HUMIRA are actually paid by the company, not a medical provider, and reforming how HUMIRA is marketed to health care providers.

    In addition, as provided for in the Act, AbbVie has also paid a combined $24 million to the State of California and the whistleblower who brought the case to the Department’s attention.

    In October 2016, the Department began an investigation into AbbVie after recieving a whistleblower case filed by a registered nurse who was employed as an AbbVie Ambassador in Florida.

    After its investigation, the Department intervened in that case and filed a Superseding Complaint alleging that whistleblower violated California’s Insurance Frauds Prevention Act. Among other things, the Department alleged that AbbVie violated the Act by unlawfully providing free and valuable professional goods and services to physicians to induce and reward AbbVie prescriptions.

    The Department alleged that Nurse Ambassadors interfered with the flow of doctor-patient communications and did not directly answer questions pertaining to AbbVie marketing activities constituted kickbacks in violation of the Act, including, for example, the provision of meals and drinks to providers outside the context of speakers programs.

    While AbbVie continues to deny the allegations, as a part of the settlement, AbbVie agreed to reforms, including:

    -- Ambassadors will disclose to patients that they are provided by AbbVie and do not work under the direction of the patient’s health care provider.
    -- The company will implement a policy modification prohibiting HUMIRA sales representatives from inviting HUMIRA prescribing health care providers to offsite business meals, except as part of the AbbVie speaker programs.
    -- AbbVie will provide patients with the U.S. FDA-approved HUMIRA medication guide and Ambassadors will direct patients to the medication guide and their health care provider regarding side effects and safety risk.
    -- The company will provide guidance and training that Ambassadors shall not have patient-specific discussions with providers who prescribe AbbVie.
    -- AbbVie employees will be prohibited from describing Ambassadors to health care providers as "extensions of their offices" and from providing to providers any contact information for Ambassadors who interact with HUMIRA patients.
    -- AbbVie employees and Ambassadors will not actively participate in conversations between patients and insurance companies.

    The complete list of AbbVie's business practice reforms can be found in the settlement.

  • Liberty Mutual Reports $320M Q2 Loss from COVID-19
    on August 7, 2020 at 10:30 AM

    Liberty Mutual Holdings Co. reported a $320 million net loss in the second quarter of 2020 compared with a $397 million profit in the same period last year largely due to event cancellation losses from COVID-19, natural catastrophes and civil unrest, the insurer reported Thursday.

    The net loss was the result of significant impacts from the COVID-19 pandemic and consequent economic downturn as well as above average catastrophe losses, said David H. Long, Liberty Mutual Chairman and Chief Executive Officer.

    "The largest driver of the COVID-19 impact was event cancellation product line, which contributed approximately 9 points," said Dennis Langwell, executive vice president and president of Liberty’s global risk solutions segment, on the earnings call. He attributed about $100 million to property-related losses and expected litigation costs and about $260 million to contingent lines event cancellation.

    Incurred losses for COVID-19 amounted to $529 million in the quarter, with roughly half of these losses related to event cancellation. Based on our size and industry footprint, these losses fall within its expectations for an event of this magnitude.

    The insurer has "seen some losses come in but not a lot" for coronavirus-related workers compensation losses, Mr. Langwell said.

    "But this isn’t over - we don’t know how workers compensation will play out for additional exposures in subsequent periods," he said. "We expect the impact of COVID-19 coupled with the low interest rate environment - to be a catalyst for more meaningful rate increase in workers compensation going forward."

    Mr. Langwell said the insurer applied exclusions for pandemics to event cancelation policies beginning in January 2020 and estimates that it could see about $50 million related to additional event cancelations in 2021.

    Catastrophe losses of $878 million were up $384 million from the prior year quarter and resulted primarily from a high frequency of severe storm activity and include $147 million of losses related to civil unrest.

    On the investment side, realized gains from the sale of fixed maturities were more than offset by losses in its partnership portfolio, which are booked on a quarter lag. Liberty Mutual’s investment income declined to $144 million in the second quarter from $1.37 billion in the same quarter in 2019, according to the insurer’s financial analysis.

    Liberty Mutual reported revenue of $10.17 billion for the second quarter, a 5.7% dip in from the same quarter 2019.

    In the global retail markets segment, which includes personal and small U.S. business lines, net written premium declined 5.7% in the second quarter 2020 to $6.86 million, but the combined ratio held almost steady at 98.9%.

  • Indictments Say 10 ChiroMed Operatives Ran "Sham" Clinics
    on August 6, 2020 at 12:34 PM

    Law enforcement authorities arrested four defendants charged in two federal grand jury indictments alleging a narcotics trafficking ring that sold illegal opioid prescriptions for cash through a series of sham medical clinics.

    Those charged in the indictments include Dr. John Michael Korzelius, 68, a.k.a. "Dr. K," of Camarillo, who worked at a Santa Ana pain management clinic where he allegedly wrote medically unnecessary prescriptions to "patients" who paid cash. Over the course of two years, Korzelius and other medical professionals working under his guidance, prescribed approximately 439,090 pills of 30mg oxycodone - the highest dose of short-acting oxycodone available, and the dose most popular for the drug-abusing population, according to court documents.

    The charges in this matter are the result of an investigation by agents with the DEA and IRS Criminal Investigation into ChiroMed, which operated a group of chiropractic, medical and wellness clinics in Los Angeles, Orange and San Bernardino counties. Korzelius, along with other medical professionals, including physician’s assistants, allegedly met with fraudulent patients and provided them with unnecessary prescriptions for drugs, including oxycodone.

    ChiroMed operated clinics across Southern California, including Santa Ana, Fontana, Westwood, Long Beach, Huntington Park, Wilmington, Redondo Beach, and Inglewood.

    The two grand jury indictments charge 10 defendants with a variety of narcotics-related offenses, including conspiracy to distribute controlled substances, possession with intent to distribute oxycodone, distribution of fentanyl, and money laundering.

    Along with Korzelius, the indictments charge:

    -- Justin Douglas Cozart, 42, of Woodland Hills, who operated and supervised the ChiroMed medical clinics;
    -- Damoon Joe Navarchi, 33, of Woodland Hills, who assisted Cozart in operating the clinics;
    -- Xavier Muduki Mabale, 42, of Anaheim, who is accused of recruiting sham patients to obtain fraudulent oxycodone prescriptions from the medical clinics;
    -- Mayra Barrios, 37, of Yorba Linda, who allegedly oversaw the day-to-day management of the medical clinics, including the issuance of fraudulent oxycodone prescriptions to sham patients;
    -- Harrison Maruje Mureithi, 42, of Norco, who allegedly coordinated the purchase, collection, packaging, and shipment of oxycodone to buyers on the East Coast;
    -- Duncan Muthoni Wanjohi, 23, of Anaheim, who allegedly assisted Mureithi in the buying and shipping of narcotics;
    -- Pierre Delva, Jr., 33, a.k.a. "ig Head," of Medford, Massachusetts, who allegedly provided financing to Mureithi to purchase bulk quantities of oxycodone; and
    -- Louise W. Mureithi, 69, of Anaheim, Harrison Mureithi’s mother, who allegedly received packages of cash sent to her son for oxycodone;
    -- Majid Nojavan, 42, of Laguna Niguel, charged in a spinoff case from the primary investigation, who allegedly advertised oxycodone for sale on Craigslist, sold fentanyl to an undercover police officer, and escorted the undercover police office to an Inglewood medical clinic to obtain a fraudulent oxycodone prescription.

    As a result of a two-year investigation into the fraudulent medical clinics, DEA agents seized 20,737 oxycodone pills, and $177,610 in cash. Law enforcement intercepted a mailed parcel contained a teddy bear stuffed with two bags of oxycodone pills.

    If convicted of the charges, the defendants each would face a statutory maximum sentences of at least 20 years in federal prison.

  • DOL Accuses Uber and Lyft of Wage Theft
    on August 6, 2020 at 12:34 PM

    The Labor Commissioner’s Office has filed separate lawsuits against transportation companies Uber and Lyft for committing wage theft by misclassifying employees as independent contractors. Uber and Lyft have misclassified their drivers, which has deprived these workers of a host of legal protections in violation of California labor law, the lawsuits say.

    The goal of the lawsuits is to enforce California labor laws and to ensure that drivers are not misclassified as independent contractors.

    In 2018, the California Supreme Court’s Dynamex ruling established the "ABC test" for determining whether a worker is an employee under various California labor laws. Assembly Bill 5, which went into effect on January 1, 2020, extended the ABC test to additional California labor laws. Under the ABC test, workers are considered employees unless they are free from control from the hiring entity, perform work outside of the hiring entity’s usual business, and engage in an independently established trade or occupation.

    The lawsuits seek to recover amounts owed to all of Uber’s and Lyft’s drivers, including the nearly 5,000 drivers who have filed claims for owed wages with the Labor Commissioner’s Office. Moreover, the lawsuits seek recovery for a wider range of statutory violations and damages than those asserted in individual wage claims and other lawsuits.

    The lawsuits allege that by misclassifying workers, Uber and Lyft failed to meet their obligations as employers as required by California labor law - including to pay drivers at least minimum wage for all hours worked, to pay overtime compensation, to provide paid rest periods, to reimburse drivers for the cost of all equipment and supplies needed to perform their work and for work-related personal vehicle mileage. The suits also allege the companies failed to provide paid sick leave, to provide accurate itemized wage deduction statements, to timely pay all wages owed during and upon separation of employment, and to provide notice of employment-related information required by law.

    The lawsuits, filed in Alameda County Superior Court, ask the court to order Uber and Lyft to stop misclassifying their employees and provide the protections available to all employees under the Labor Code. The suits also seek the recovery of unpaid wages, penalties and interest as well as civil penalties and any costs and reasonable attorneys’ fees incurred by the Labor Commissioner’s Office.  

    The Labor Commissioner’s Office estimates that Uber and Lyft each employ more than 100,000 drivers. Amounts collected by the Labor Commissioner for unpaid wages, liquidated damages owed to workers, penalties owed to workers, and reimbursement of business expenses owed to workers, will be distributed to all drivers who worked for Uber or Lyft during the time period covered by this lawsuit, not just to those drivers who filed individual claims with the Labor Commissioner.

  • Floyd Skeren Firm Outlines COVID-19 Defense Strategies
    on August 5, 2020 at 10:51 AM

    The CWCI COVID-19 tracking tool (see story below) reports a stunning 14,470 California workers' compensation claims filed so far this year. Some estimates show that the State will have twice that number in a few short months.

    The Floyd Skeren Manukian Langevin, LLP - workers' compensation and employment law firm - was asked about how the firm is responding to the pandemic and these claims from the employer's point of view.

    Partner Amanda Manukian pointed out the importance of her firm remaining fully operational during the pandemic shutdown. A few months ago, officials arrived at the office building in Pasadena where her branch office is located, and ordered the entire building to be closed within two hours.

    Fortunately, she reported that as one of the tenants of the building, she easily complied with this time constraint, and her office was fully functional at home by the next day. Prior to the pandemic Floyd Skeren had installed advanced case management technology across all offices statewide. The technology, along with gigabit fiber internet connections between offices supported a seamless transition for the entire firm to stay-at-home work when required.

    All of the firm's staff and attorneys have been fully functional and productive, with essentially no disruption of work flow.

    Bernadette O'brien, the firms employment law partner, has held webinars for the firms employment law clients every few weeks. She says that new COVID-19 regulations, both state and federal, are rapidly evolving day by day in response to pandemic. The webinar is updated regularly. and virtually provided for several hundred employers who attend this program for up-to-the-minute compliance guidance.

    John Floyd, the firms founding partner, has organized a COVID-19 workers' compensation defense team within his firm. All COVID-19 claims will be handled only by members of this team.

    Mr. Floyd has several physicians doing forensic research for his team, identifying and obtaining the medical studies published every few days about the disease. The studies are reviewed, cataloged and circulated to his team.

    This science is evolving, and will be used as a standard to review the medical evidence in these claims. The catalog of studies include many topics, such as the effectiveness of various protective gear, the incubation window between symptoms and infection to help identify the best time frame for the infection to have occurred, and other risk factors other than work for purposes of apportionment.

    The COVID team has also done considerable legal research on the validity of Governor Newsom's Executive Order N-62-20 which created a temporary presumption of industrial causation for some of the workers' who file COVID-19 claims. The team is now filing briefs in COVID claims across the state, requesting a finding that N-62-20 is unlawful, and invalid as it exceeds the Governor's authority under the California Emergency Services Act.

    The brief then argues in the alternative, that if N-620-20 is found to be a valid exercise of emergency authority, then the costs of the presumption claims should be paid by the State of California, as it would constitute a "taking" for which the California Emergency Services Act requires compensation to be paid by the State to the employer for these claims.

    Mr. Floyd concluded by saying that if anyone is interested in more details about how the COVID-19 defense team is responding to these claims, they may contact him by phone or email.

  • CWCI Tracking Tool Reports 14.470 COVID-19 Claims So Far
    on August 5, 2020 at 10:51 AM

    The California Workers’ Compensation Institute (CWCI) has released an online application to support interactive analyses and comparisons of COVID-19 and Non-COVID-19 claims. The application is available to the general public.
    The new tool features integrated data from CWCI, the Bureau of Labor and Statistics and the California Division of Workers’ Compensation, with detailed information on almost 600,000 reported claims for the first six months of accident years 2019 and 2020 - including 14,470 COVID-19 claims from accident year 2020. The application offers four areas of analysis that will let the user explore and analyze:

    -- COVID-19 claim counts by month with the ability to segment and filter results by industry, region, injured worker demographics and injury characteristics
    -- The declining volume of all reported workers compensation claims by industry and region
    -- Denial rates for COVID-19 and non-COVID-19 claims by month.

    -- The application provides detailed data on a dozen metrics, including claim volume and incidence, claimant demographics (gender and age), region, injury description (nature and cause of injury), payer type (insured vs. self-insured), and denial rates, In addition, users can also access claims data from the first half of AY 2019 in order to view and compare pre- and post-pandemic claims experience.

    CWCI plans on regular refreshes of the application to keep it current as well as expanding the features and functions as additional data on claim type and average and system-wide cost become available.

  • Healthcare Workers at High COVID-19 Risk Despite PPP
    on August 4, 2020 at 10:12 AM

    Even with proper PPE (personal protective equipment), frontline healthcare workers battling the coronavirus day in and day out are still at a three times higher risk of testing positive for COVID-19 in comparison to the general population. That’s the main conclusion drawn from a recent study conducted at King’s College London and Harvard University, and then published in Lancet Public Health..

    Predictably, healthcare workers treating patients without adequate PPE are at a greater risk of coronavirus infection. Not as predictable, however, was the finding that BAME (Black, Asian, and minority ethnic) healthcare workers are at even greater risk of contracting the coronavirus while wearing proper PPE than their white counterparts.

    According to researchers’ calculations, BAME frontline workers are at least five times more likely to test coronavirus positive than the non-Hispanic, white general population.

    "The findings of our study have tremendous impact for healthcare workers and hospitals. The data is clear in revealing that there is still an elevated risk of SARS-CoV-2 infection despite availability of PPE," explains senior study author Sebastien Ourselin, a professor at King’s College London, in a release. "In particular we note that that the BAME community experience elevated risk of infection and in some cases lack access to adequate PPE, or frequently reuse equipment."

    The research team analyzed a huge dataset of both American and British adults (2,035,395 individuals in general and 99,795 frontline healthcare workers). For every 100,000 healthcare workers, 2,747 tested positive for coronavirus. Meanwhile, for every 100,000 members of a general community, only 242 tests came back as COVID-19 positive.

    Also, while just over 20% of healthcare workers reported feeling at least one coronavirus symptom (fatigue, loss of smell, loss of taste, etc), only 14.4% of the general population said the same.

    This study indicates that PPE, while certainly important, is only a portion of the answer when it comes to protecting doctors and nurses. Besides just making sure healthcare workers have proper access to PPE, the authors say it may be time to start considering additional protection strategies.

    Also, equally as important as providing PPE is making sure it is used correctly and properly cleaned before reuse. It’s probably a good idea for frontline workers to avoid reuse of PPE altogether, researchers say.

    "The work is important in the context of the widely reported higher death rates amongst healthcare workers from BAME backgrounds. Hopefully a better understanding of the factors contributing to these disparities will inform efforts to better protect workers," says joint first study author Dr. Mark Graham.

  • Coventry Workers' Comp Services Sale Closes
    on August 4, 2020 at 10:11 AM

    Mitchell International owned Genex Services LLC, a provider of cost containment technology, clinical services, and disability management, announced it has finalized its acquisition of Coventry Workers’ Comp Services from CVS Health.

    Coventry Workers’ Comp Services is a provider of care and cost management programs for workers’ compensation and auto insurance carriers, third-party administrators, and self-insured employers.

    Coventry Workers’ Comp Services was formerly a division of Aetna, a CVS Health company.

    The acquisition adds Coventry’s leading PPO network to Mitchell | Genex’s continuum of care and cost containment offerings for the workers’ compensation and auto industry.

    Based in Downers Grove, IL, Coventry Workers’ Comp Services has been a full-service managed care organization for more than 35 years. Coventry Workers’ Comp Services will continue to be led by Art Lynch, President and CEO, and operate under its brand.

    "The future brings new challenges and opportunities to our markets, and we’re proud to join the Mitchell | Genex team in enhancing and developing new strategies to help clients meet the evolving demands of our industry," said Lynch.

    The financial terms of the transaction are not being disclosed.

  • San Jose Cop Faces $18M Payroll Fraud Charges
    on August 3, 2020 at 10:09 AM

    The Santa Clara County District Attorney’s Office has charged a San Jose police officer with using his private security company to commit insurance fraud, tax evasion, wage theft, and about $18 million in money laundering.

    Robert Foster, 47, the Morgan Hill owner of Atlas Private Security, self-surrendered and will be arraigned on November 30th, at the Hall of Justice in San Jose on felony charges. Foster’s wife and eight other company employees are being charged with four counts of felony conspiracy to commit insurance fraud, unemployment insurance fraud, money laundering, and wage theft, and 39 additional felonies, including extortion and a white-collar crime enhancement. They face prison time, if convicted.

    The officer and his co-defendants allegedly reduced insurance premiums and taxes by reporting false and inaccurate payroll, underreporting headcount, paying employees off-the-books, and underreporting employee injuries. In one case, an employee was allegedly threatened with deportation if she continued to speak attorneys about her rights under worker’s compensation laws after suffering a workplace injury.

    The six-month investigation was spearheaded by the Santa Clara County District Attorney’s Office Bureau of Investigation in close collaboration with the California Department of Insurance, Employment Development Department, California Department of Justice Bureau of Medical Fraud and Elder Abuse and United States Department of Labor.

    The probe showed that Foster allegedly hid approximately $8.09 million in payroll over three years, avoided approximately $578,716.56 in tax liability and $560,293.15 in insurance premiums.

    To carry on their fraud scheme, the Atlas officials allegedly laundered approximately $18.20 million. The co-conspirators used and traded on Foster’s position as an active-duty San Jose Police Officer and self-described expert in lie detection to further their business interests. Yet, Foster allegedly failed to disclose to SJPD that he owned and operated Atlas or that such ownership could result in ethical conflicts.

    The arrest comes just days after District Attorney Jeff Rosen announced a series of social justice reforms that included creating a Workers Exploitation Task Force that will investigate cases such as this one.

    "This Office will root out and prosecute anyone - whether they wear a badge or not - taking criminal advantage of workers," District Attorney Rosen said. "Our new task force will protect and heal the victims of labor trafficking, wage theft and illegal exploitation and raise awareness about how these insidious crimes are attacks on our communities of color."

  • Claimant Convicted for Forging Medical Reports
    on August 3, 2020 at 10:09 AM

    Marlene Cavalcanti, 40, pleaded guilty to two felony counts of insurance fraud and identity theft after falsifying documents to receive an additional $10,590 on her workers’ compensation claim.

    Cavalcanti, employed as an executive assistant, reportedly fell at work and sustained injuries. As a result of her subsequent workers’ compensation claim, Cavalcanti received more than $42,000 in total temporary disability payments in addition to her medical treatment.

    An investigation by the Department of Insurance revealed after being placed on disability, Cavalcanti ceased medical treatment and began working for another company. During this time, she submitted multiple fictitious doctors reports in an attempt to continue to receive disability payments from the workers’ compensation insurance company.

    When confronted by detectives, Cavalcanti ultimately admitted to the fraudulent documents and forged doctors’ signatures.

    During the investigation, department detectives discovered Cavalcanti attempted to file a new workers’ compensation claim at a different insurance company with her new employer.

    The new workers’ compensation claim dates and injuries were similar and overlapped with her initial claim. The investigation by detectives prevented payment on this subsequent fraudulent claim and the insurance company incurred no loss.

    "The Marin County District Attorney’s Office will continue to partner with the California Department of Insurance to investigate and prosecute workers’ compensation fraud in every form. Whether it is claimant fraud as in the case of Ms. Cavalcanti, which drive up premiums for employers, or businesses who seek to gain an unfair advantage by underinsuring their employees, workers’ compensation fraud remains a priority for our office," said Deputy District Attorney Sean Kensinger.

    Cavalcanti is expected back in court September 9, 2020 for sentencing. The Marin County District Attorney’s Office prosecuted this case.

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