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Med Management Company Owner Guilty of $3.2 Million Fraud

The former owner of a Los Angeles medical clinic management company pleaded guilty in connection with his role in a scheme to defraud Medicare.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Acting U.S. Attorney Stephanie Yonekura of the Central District of California and Assistant Director in Charge Bill L. Lewis of the FBI’s Los Angeles Field Office made the announcement.

Mihran “Mike” Meguerian, 37, of Glendale, California, pleaded guilty before U.S. District Judge Beverly R. O’Connell in the Central District of California to one count of conspiracy to commit health care fraud.

According to court documents, Meguerian owned Med Serve Management (Med Serve), a medical clinic management company located in Van Nuys, California. Meguerian admitted that from approximately July 2008 through February 2009, he engaged in a conspiracy to commit health care fraud, in part through the operation of Med Serve. Meguerian admitted that he oversaw medical clinics that wrote prescriptions for medically unnecessary power wheelchairs and other durable medical equipment (DME). Meguerian and his co-conspirators then sold the prescriptions to DME supply companies, knowing that the prescriptions were fraudulent. The DME supply companies submitted the fraudulent prescriptions to Medicare in false and fraudulent claims.

From approximately July 2008 through February 2009, DME supply companies submitted approximately $3,367,661 in fraudulent claims to Medicare using fraudulent prescriptions from Meguerian’s clinics, and Medicare paid approximately $1,438,760 for those claims. Meguerian’s sentencing is scheduled for Nov. 17, 2014.

This case was investigated by the FBI and was brought as part of the Medicare Fraud Strike Force, which is supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Central District of California. This case is being prosecuted by Trial Attorneys Fred Medick and Blanca Quintero of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,900 defendants who have collectively billed the Medicare program more than $6 billion. In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

Will Florida Comp Ruling Become a National Trend?

Florida’s workers’ compensation law is unconstitutional, according to a ruling by a Miami-Dade judge on Wednesday, striking a severe blow to a law already under attack. No doubt this case has caught the attention of applicant attorneys nationwide, and the ruling may very well be a precursor to challenges here in California.

The Bradenton Herald reports that Circuit Judge Jorge Cueto declared Florida’s long-disputed workers’ compensation law unconstitutional; adding that after several years where state legislatures diminished medical care and wage-loss benefits for incapacitated workers, the statute now violates “fundamental” rights of employees. The case is based on a government office worker in Miami-Dade County who claims the nearly 80-year-old law forces injured workers into Florida’s legal system, which is so flawed it cannot provide adequate medical care or dollars to supplant lost wages. “The benefits in the act have been so decimated,” says Cueto’s decision, “that it no longer provides a reasonable alternative” to filing suit in civil court.

The ruling comes at a critical time for Florida’s blue-collar and agricultural workers. Lawmakers and business leaders claim that rising workers’ compensation premiums threaten to disrupt economic growth; worker advocates argue the state allows widespread insurance fraud, while responding to high premiums by penalizing workers.

Workers’ comp reform is a years-long controversy, becoming more prominent as worker rights attorneys ask judges as far as the Florida Supreme Court, to strike down;the state law permanently.

Cueto’s ruling centers on an accounting clerk who, on Jan. 27, 2012, tripped in a walkway because a co-worker left boxes around the floor. Elsa Padgett, who had already approached retirement age, fell on her hip, sustaining serious shoulder damage as well. After shoulder replacement surgery, Padgett continued to suffer pain, which eventually forced her to retire.

If the ruling is appealed, Cueto’s order joins a minimum of two other cases challenging the constitutionality of parts of the state workers’ compensation statute.The Florida Supreme Court is already considering an appeal filed by Bradley Westphal, a St. Petersburg firefighter with severe and disabling back injuries incurred in 2009. After temporary wage-loss benefits had expired, Westphal was left with no income. Doctors through his insurance carrier said he could not seek work, and the insurance carrier refused to provide benefits until doctors confirmed he would no longer improve medically.

“This system of redress does not comport with any notion of natural justice, and its result is repugnant to fundamental fairness, because it relegates a severely injured worker to a legal twilight zone of economic and familial ruin,” said the February 2013 opinion from a three-judge Tallahassee appeals court striking down the statute. Later, the full court restored the law, but the case is now before the state’s highest court.

Florida lawmakers amended state law in 1968, making the workers’ comp system the “exclusive” legal remedy when employees are injured on the job. At that time, the law was far more generous, requiring employers to pay all medical bills and considerably better benefits to workers who lost either all or part of their ability to work. However, the Legislature made changes in 1990, 1993 and 2003 removing large portions of injured workers’ benefits. Lawmakers justified the reductions as necessary to keep Florida competitive with other states, to retain or lure business. Since revisions to the law made in 2003, premiums dropped 56 percent.

Attorney General Pam Bondi chose not to intervene directly in Cueto’s case, but her office defended the statute, maintaining, “While some individual workers may be worse off with workers’ compensation in a particular instance, others benefit greatly.”

In his order, Cueto said lawmakers had violated their side of the “trade” with workers – where employees relinquish the right to sue in civil court after an injury, but then get fast, efficient and no-fault justice. Business interests began carving up the safety net in place in 1968, when employers reached the bargain. “The purpose of a workers’ compensation act is not for it to be used as a weapon in an economic civil war,” Cueto concluded. “Its purpose is to provide adequate compensation for on-the-job injuries in place” of a worker’s ability to sue in civil court.

Feds Highlight Fraud Data Mining Strategies

Eleven armed FBI agents crept around a stone-and-glass house here just before dawn. An AR-15 rifle and four other guns were registered to the man in the house. “FBI warrant,” the agents called out, and a man in a T-shirt and shorts emerged. It was no drug lord. The target was a doctor who moonlighted as a movie producer with an Alec Baldwin comedy to his credit. The Justice Department charged the Southern California doctor, Robert A. Glazer, with writing prescriptions and certifications resulting in $33 million of fraudulent Medicare claims. The raid in May capped a year-long investigation by the Medicare Fraud Strike Force, a joint effort by the Justice Department and Department of Health and Human Services.

The story in the Wall Street Journal says that many strike-force investigations, including the Glazer case, start with an agent behind a computer screen, eyeing page after page of Medicare claims data, looking for unusual billing patterns. The Glazer case comes as the strike force increasingly targets physicians. “You need a doctor in all the schemes,” said David A. O’Neil, a deputy assistant attorney general for the criminal division who supervises strike-force prosecutions. He said the team charged 36 doctors with health-care fraud in the 2013 fiscal year, compared with just three in 2007, when many cases dug into fraud involving durable medical equipment such as wheelchairs.

The strike force’s Los Angeles team includes about 20 investigators and prosecutors working out of multiple offices, including a shiny tower in the suburbs near a strip mall dotted with family restaurants and chain stores. Last fiscal year, the strike force’s nine offices charged 350 people with health-care fraud, up from 122 charged when the strike force had just two offices. One agent described dealing with the voluminous number of potential cases as “Whac-A-Mole.”

Dr. Glazer attracted attention from authorities long before this year’s charges. In 1994, he was indicted with six others for an alleged referral scheme between 1986 and 1993. He was accused of paying $73,454 to a marketer during one 3½-year stretch to send him patients, according to California Superior Court documents obtained through a public-records request. Court documents indicate that the case was dismissed after a judge ruled that the prosecution’s witness testimony was inadmissible. Dr. Glazer was never excluded from billing Medicare, but patient complaints over billing prompted CMS several years ago to place him on “prepayment review,” according to people familiar with the situation. That meant any claims made to Medicare were manually reviewed by CMS contractors, a measure intended to prevent improper billing. Dr. Glazer was removed from the review list around 2009, these people said, although it isn’t clear whether CMS decided to take him off or if he appealed to an administrative judge. CMS said it doesn’t comment on administrative actions against individual providers. It is difficult to permanently ban a provider from Medicare. A criminal conviction or a loss of a state medical license can provide grounds to take a provider out of the system, and CMS can revoke billing privileges for reasons such as failing to comply with Medicare rules. Since 2011, CMS has revoked about 20,000 providers. But a provider can eventually appeal or reapply to return to the program.

The strike force began investigating him after sorting through years of his payment claims in the Medicare database, according to people familiar with the investigation. Such database searches look for “the sort of medically impossible or medically unlikely scenario,” said Supervisory Special Agent Robin McIlroy, who oversees the FBI’s part of the strike force. Between 2006 and 2014, Dr. Glazer’s family practice billed Medicare about $2 million, according to an affidavit by FBI Special Agent Janine Li, who was part of the investigation team. Between 2006 and 2014, Dr. Glazer’s family practice billed Medicare about $2 million, according to an affidavit by FBI Special Agent Janine Li, who was part of the investigation team.

When agents cross-referenced his Medicare provider number with other parts of the database – including claims data for home-health agencies, hospice and durable medical equipment – large billing numbers stood out, according to a person familiar with the investigation. “Once you start crunching the data, you start to see everything,” said Mr. Ferry, the special agent-in-charge. In the same eight-year time period, Dr. Glazer’s referrals to home health-care companies resulted in billings to Medicare for $16.5 million, and referrals to medical-equipment companies resulted in billings of about $5.4 million, the FBI’s Ms. Li said in her affidavit. Hospice services added up to about $10 million, according to a person familiar with the case.

Outliers popped up in the data. Using Dr. Glazer’s prescriptions, Medicare paid $2.5 million to one home-health agency down the hall from his office, while a local hospice was the recipient of nearly all his referrals, according to the person familiar with the case. Generally referrals are more spread out between multiple providers, said a person familiar with health-care fraud. The volume of motorized-wheelchair prescriptions in the data stunned the agents—an average of 134 a year, compared with a typical doctor working with elderly people who prescribed as few as one or two, according to the affidavit.

As the investigation progressed, agents in unmarked cars drove to Dr. Glazer’s clinic in Hollywood and watched. Located in a strip mall, along with a Salvadoran fast-food restaurant, a check cashier and a medical-supply company, the office received many elderly patients who spoke English as a second language, said the people familiar with the investigation. The agents interviewed patients drawn from the data, and a common allegation emerged: Dr. Glazer was billing Medicare for patient services sometimes never rendered and farming out patients to other providers, according to the indictment.

WCIRB Suggests 6.7% Average Pure Premium Rate Increase

The WCIRB Governing Committee voted to authorize the WCIRB to submit a January 1, 2015 Advisory Pure Premium Rate Filing to the California Insurance Commissioner.

The Filing will propose advisory pure premium rates that average $2.86 per $100 of payroll, which is $0.29 or 11.4% greater than the corresponding industry average filed pure premium rate of $2.57 as of July 1, 2014, and $0.18 or 6.7% greater than the average January 1, 2014 advisory pure premium rate of $2.68. The proposed average pure premium rate reflects a deterioration of $0.12 or 4.4% from the WCIRB’s indicated January 1, 2014 average pure premium rate reflected in the WCIRB’s amended January 1, 2014 Pure Premium Rate Filing.

Chief Actuary Dave Bellusci cited several factors that are driving this deterioration in the indicated pure premium including:

1) Continued adverse medical loss development
2) More complete recognition of long-term medical paid loss development patterns
3) Continued high levels of indemnity claim frequency
4) Higher than anticipated loss adjustment expense inflation in part attributed to less than projected frictional costs savings resulting from Senate Bill No. 863 (2012)
5) Lower wage growth than the original forecast
6) Increase in indicated experience rating plan off-balance

The Filing reflects statewide loss and loss adjustment expense experience valued as of March 31, 2014; however, Mr. Bellusci advised the Committee that the WCIRB will continue monitoring insurer experience and may amend the Filing once it has analyzed experience valued as of June 30, 2014.

The WCIRB will submit its January 1, 2015 Pure Premium Rate Filing to the California Department of Insurance (CDI) on or around August 18, 2014. The CDI will schedule a public hearing to consider the Filing and once the Notice of Proposed Action and Notice of Public Hearing is issued, the WCIRB will post a copy in the Regulatory Filings section of the website (

Beauty Pageant Contestant Charged With Comp Fraud

Pageant contestants seek the spotlight, but it was the limelight — on the Internet — that proved to be the incriminating evidence against a beauty pageant contestant collecting worker’s compensation for a fractured toe.

Shawna L. Palmer of Riverside started collected workers’ compensation benefits in March after fracturing her toe as a clerk at Stater Bros. Markets, according to a news release from the California Department of Insurance. She told her doctor during multiple visits that she couldn’t put weight on her foot or wear shoes for an extended period of time.

But a YouTube video of the 2014 Miss Toyota Long Beach Grand Prix beauty contest showed otherwise: She was seen walking around in high heels “without any signs of discomfort,” according to the Department of Insurance. “This suspect made the job of our departments’ detectives easier by openly participating in high profile events,” Insurance Commissioner Dave Jones said in a statement.

The news release said 22-year-old Palmer participated in at least two beauty contests while collecting workers’ compensation, even though her doctor had provided her an orthopedic boot, crutches and instructed her not to work.

According to officials, Shawna Lynn Palmer claimed to her employer March 10 that she was unable to continue working due to a foot injury she sustained as a clerk at Stater Bros. During multiple doctors visits, Palmer said she could not place any weight on her foot, could not wear any type of shoe for a period of time and could not move it in any direction. Palmer’s doctor provided her with an orthopedic shoe and crutches, and ordered her to refrain from working, along with elevating her foot whenever possible.

While collecting benefits, Palmer participated in at least two beauty contests, where she was seen walking in high heels without any signs of discomfort. It was the unusual delay back to work, however, that led investigators to look closer into the claim. Palmer was arrested after video evidence revealed her participation in the 2014 Miss Toyota Long Beach Grand Prix beauty contest.

If convicted, Palmer faces up to one year in county jail, three years of probation and must pay $24,000 in restitution.

Convicted Claimant Fakes Robbery – Then Fakes PTSD Claim

The former assistant manager at an East Los Angeles Bank of America branch certainly had nerve. According to the story in the Los Angeles Times, first she pretended to be a victim of armed assailants as she helped to rob the bank where she worked. Then, still playing the victim, she asked the bank to pay for her robbery-induced post-traumatic stress disorder. It was all a sham, according to investigators.

Aurora Barrera, 33, had just been sentenced to nine years in federal prison for her role in the dramatic 2012 robbery when she was arrested last week on the additional charge of filing a fraudulent workers’ compensation claim. Reyes “Ray” Vega, 35, of Bell was also convicted in March of conspiracy to commit bank robbery and bank robbery, with a special allegation of assault by use of a dangerous weapon.

It all started on Sept. 5, 2012, when Barrera walked into her own bank branch wearing what she said was a bomb and persuaded her colleagues to empty the vault and leave the cash outside for her assailants. She claimed they had kidnapped her and held her at gunpoint before strapping explosives to her at her Huntington Park home.

Barrera filed the PTSD claim two days later, and the bank’s insurance company soon began paying out. The company paid her more than $35,000 in disability benefits and covered more than $9,000 in medical bills associated with the alleged workplace injury, according to California Department of Insurance spokeswoman Nancy Kincaid.

But the bomb was later discovered to be a fake – a flashlight wrapped in black electrical tape – and so was the rest of the story, investigators determined. Barrera was an accomplice, not a victim, and at her sentencing last Wednesday she was ordered to turn herself in to authorities in early September. Evidence presented during the four-day trial in Los Angeles federal court showed Vega masterminded the robbery, which netted about $565,000. One of the cooperating witnesses, Richard Menchaca, testified that in a meeting with Vega hours after the heist, it was agreed that Barrera would get $100,000 “because she took the most risks.” The fake bomb was so convincing that after Barrera took the money from the safe a Los Angeles County sheriff’s bomb robot was used to pry the device off the woman.

Barrera’s co-worker at the bank that day saw part of the license plate of the car that took the money away, according to prosecutors. Investigators identified the vehicle as belonging to the father of her then-boyfriend, Vega, and tracked his movements that day to a Day’s Inn. Security video shows the car and Vega meeting with two other men involved in the heist. Subsequent phone records and text messages tied the ring together, according to Asst. U.S. Atty. Justin Rhoades.

On Thursday morning, police knocked on the door of her Downey home to settle one more account, Workers’ Compensation fraud.

“It’s shocking to think that Barrera, a trusted financial institution manager, would be a co-conspirator in a bank robbery and staged kidnapping, and then have the audacity to file a bogus workers’ comp claim for traumatic stress and believe she could get away with it,” Insurance Commissioner Dave Jones said.

Only a fraction of the $565,500 stolen from the bank has been recovered. So in addition to their prison sentences, Barrera and her co-conspirators, including a former boyfriend, have been ordered to pay $557,300 in restitution. “Where’s the money?” U.S. District Judge Manuel L. Real loudly asked Barrera, at the time of her sentencing who stood silently before him and declined to address the court. About $8,000 of the stolen cash has been recovered, Assistant U.S. Attorney Justin Rhoades said.

The prosecutor said Barrera used her knowledge of the bank’s operations “to rob her own company of half-a-million dollars” and obstructed justice by causing law enforcement to “go looking for two black men” instead of the real culprits.Barrera, who could not be reached for comment, faces up to another five years behind bars on the insurance fraud charge.

DWC Posts Annual WCJ Ethics Report

The Division of Workers’ Compensation has posted the 2013 ethics advisory committee’s annual report on its web site. The workers’ compensation ethics advisory committee is a state committee independent from the DWC that is charged with reviewing and monitoring complaints of misconduct filed against workers’ compensation administrative law judges. The ethics advisory committee is required to make a public report each year summarizing activities in the previous calendar year. WCALJs are not subject to review by the California Commission on Judicial Performance, the agency which is responsible for investigating misconduct complaints directed at judges serving on the Supreme, Superior and Appellate courts.The Ethics Advisory Committee is composed of nine members, each appointed by the Administrative Director of the DWC’s for a term of four years. The EAC is assisted in carrying out its functions by an attorney and secretary on the staff of the DWC.

Any person may file a complaint with the EAC. Complaints must be presented in writing and the EAC will accept anonymous complaints. An EAC case is typically opened as a result of receipt by the DWC of a letter from an injured worker, an attorney, or lien claimant who has been a party to a proceeding before a workers’ compensation administrative law judge employed by the DWC and the complaint alleges ethical misconduct by the WCALJ. In 2013, the DWC had authority over 167 active judges in 24 district office locations. The EAC considered a total of 34 of the 37 new complaints it received in the calendar year of 2013, in addition to 3 complaints pending from 2012. Most of the complaints (24) were filed by unrepresented workers. Two each were filed by applicant and defense attorneys.

Of the 33 resolved complaints, the EAC identified one complaint resulting in judicial misconduct. In that case an unrepresented applicant, complained that the judge threatened and harassed the complainant, and the complainant claimed his well-being was in danger. Complainant attached the transcript of the hearing wherein the judge stated, “if you interrupt me one more time, you will deeply regret it. I have been sitting trying to say things, and you have been constantly interrupting me. I am on the bench, and I will suffer no more interruptions.” Complainant alleged that the judge said this in a very loud voice. Following its review of the complaint, the Committee identified an ethical violation of the Code of Judicial Ethics. Based upon that conclusion, the Committee has recommended further action. Appropriate action has taken place.

One of the more interesting situations that were not resolved involves an anonymous complainant who complained that the judge acted unprofessionally during hearings in the courtroom. At a hearing, a brand new attorney, accompanied by a senior member of the firm, was making a first appearance before the judge. When the young attorney was introduced, the judge loudly questioned the young attorney in front of all parties present as to whether or not the attorney had been informed by other members of the bar that the WCALJ is a “real bitch.” Parties in the courtroom were shocked and dismayed by the judge’s unprofessional behavior. The complaint was made anonymously because of the fear of retaliation by the judge. This was one of three complaints filed after the Final EAC meeting of 2013. The outcome of this complaint will no doubt appear in next years report.

WCAB Rules Parties May Stipulate to Use AME Instead of IMR Process

Carolyn Bertrand, while employed during the period of 1989 to March 4, 2002, as a counselor by the County of Orange, permissibly self-insured, sustained an industrial cumulative trauma injury to her low back and neck. The case was resolved by way of Stipulated Findings and Award and Order, dated July 20, 2004, finding applicant sustained 38% permanent disability and need for further medical treatment based upon the opinion of the AME, Dr. Wilson. In “other stipulations,” the parties provided that: “Settlement based upon the report of AME Lynn Wilson. Future medical care to be provided pursuant to his opinion. When practical, Applicant will notify Defendant of need for treatment prior to obtaining same. For any future disputes regarding treatment or permanent disability, the parties will return to the A .M .E.”

Applicant filed a Declaration of Readiness to Proceed to Expedited Hearing on April 22, 2014, citing the issue of her entitlement to medical treatment based upon an untimely UR denial and defendant’s failure to forward all relevant medical evidence. In a pre-trial statement prepared May 14, 2014, the parties delineated the issue as whether the 2013 Labor Code section changes creating the IMR process, or the parties’ stipulations, control the resolution of medical treatment disputes.

The WCJ concluded that the language in the parties’ stipulation means that the UR process in Labor Code section 4610 is not applicable to disputes involving medical treatment, as the UR process was in place at the time the parties entered into their stipulations and they knowingly waived that existing legal right by contractually agreeing to a different process to resolve medical treatment disputes. Further, the WCJ found that the subsequent statutory change creating the IMR process to review a contest of a UR decision, does not nullify the parties’ contractual waiver.

The employer sought reconsideration contending that the WCJ’s order to return to the AME misconstrued the parties’ stipulation, and that the intent of the stipulation was to return to the AME in the event of a dispute after the Utilization Review (UR) process, and not to circumvent UR. Defendant asserts, however, that the new Independent Medical Review (IMR) process supersedes the parties’ stipulation to have the AME resolve treatment disputes.

The WCAB concurred with the WCJ that the parties may contractually waive their right to pursue the statutory review processes in favor of submitting disputes over medical treatment to a specified AME, a request for medical treatment must be submitted to UR before a dispute has arisen. The WCAB thus found in the panel decision of Bertrand v County of Orange that the defendant must submit a request for medical treatment to UR before a dispute may be referred to the AME for resolution.

“The WCJ correctly held that the new !MR process for reviewing a UR denial of medical treatment may be waived by the parties’ stipulation to bypass statutory review in favor of submitting their disputes to the AME. The recent change to IMR as the method of review of medical treatment disputes, as provided in Labor Code section 4610.6, does not supersede the parties’ stipulation as defendant argues. A change in law does not relieve a party from a lawfully entered stipulation. (See Fireman’s Fund Insurance Company v. Workers’ Comp. Appeals. Bd. (Allen) (2010) 181 Cal.App.4th 752 [75 Cal.Comp.Cases 1] [CJGA not entitled to void stipulation to pay 50% of medical treatment award after subsequent appellate decisions clarified law that CJGA had no liability.].)”

“However, the WCJ’s view that the parties’ stipulation necessarily avoids the UR process is not persuasive. While the parties’ stipulation provides that they will refer medical treatment disputes to the AME, it does not specify what process they intended to circumvent by that referral. Jn order to implement the parties’ stipulation to have medical treatment disputes referred to the AME, there must be a dispute between the parties over a specific treatment request. For a dispute to exist there must first be a UR denial, otherwise there would be no dispute to refer to the AME.”

Employers Holdings California Comp Strategy Pays Off

Employers Holdings Inc., the provider of workers’ compensation insurance in the western U.S., stock price rallied after second-quarter earnings beat analysts’ estimates. Officials reported in a conference call that revenues increased 10% and earned premiums increased nearly 8%. The company is at a record high in the number of areas including book value per share, the market value of its portfolio, total number of policies and total in-force premium. Net earned premium was 8% higher than last year’s second quarter, driven by increases in policy count average policy size and net rate. The stock jumped 11 percent and narrowed the decline this year to 33 percent for the Reno, Nevada-based insurer.

Chief Executive Officer Douglas Dirks has been seeking to limit losses in California by raising prices and slowing policy count growth, after higher-than-expected claims in 2013. The sharp increase in open litigated indemnity claims that it experienced in the fourth quarter of 2013 in Southern California, did not continue into the first or the second quarters of this year. While the percentage of litigated indemnity claims in Southern California remained stable in the first two quarters of this year, it has experienced a decline in the number of new claims with legal representation at the outset of the claim. And while the cost of claims in California is higher than elsewhere in the nation, due in large part of litigation, Employer’s average paid cost for open medial and indemnity claim has been significantly lower than the industry average in California. California continues to represent 60% of its total book in terms of in-force premium and 57% of total in-force policies. California policy count increased just 2.7% year-over-year at June 30th, and policy count in all of its states excluding California increased 5.1%.

Court of Appeal Limits Definition of LC 4558 Power Press Exception

O’Neil Watrous suffered serious injuries while operating a Fenn 5F swaging machine in the course and scope of his employment with LeFiell Manufacturing Company. Watrous filed a civil complaint against his employer alleging a violation of Labor Code section 4558, the power press exception to the exclusive remedy of workers’ compensation.

A Fenn 5F swaging machine is used to reduce a larger diameter tube to a smaller diameter. The swaging operation uses a process whereby hammers are actuated within the machine and used against dies that change the shape at the end of the tube. The swaging process compresses the metal so that the end of the tube is smaller in diameter, thicker, and stronger than the rest of the tube. The door had been removed from the Fenn 5F swaging machine that Watrous was operating at the time of the accident. The purpose of the door is for access, and when necessary, to change the dies. The door also functions to hold the dies in place while the power press is in operation. There is an opening in the center of the door to feed the material to be swaged into the bed of the Fenn 5F swaging machine. Instead of the door, a metal pressure plate was held in place by clamps.

Watrous was standing approximately six feet from the Fenn 5F swaging machine at the time of the accident and was removing a tube from the machine following the swaging process. He was injured when a piece of metal hit him in the eye. His 4558 theory was that the tube he was removing from the swaging machine struck the pressure plate assembly, causing the part to be “violently dislodged and launched into [his] eye and occipital lobe.” LeFiell brought its summary judgment motion asserting that the door was not a point of operation guard as a matter of law. Thus, his injury did not fall within the section 4558 exception. The trial court denied the motion and concluded there was a triable issue of fact as to whether a door that was removed from the Fenn 5F swaging machine operated by plaintiff O’Neil Watrous was a point of operation guard. LeFiell filed a petition for writ of mandate challenging an order denying its summary judgment motion. The Court of Appeal reversed in the published opinion of LeFiell v Superior Court.

Section 4558’s exemption from workers’ compensation exclusivity applies, by the statute’s own plain and express terms, only to material-forming machines utilizing a die. Machines using other types of tools to cut material are not within the statute’s application, even if they would meet a regulatory agency’s definition of power press. The Supreme Court in the Rosales decision (22 Cal.4th at p. 286) rejected importing the definition of “power press” promulgated by the Occupational Safety and Health Standards Board (Cal. Code Regs., tit. 8, § 4188, subd. (b)) into section 4558. Section 4558 provides its own definition of ‘power press – a definition that limits the category to machines using dies. Thus the Court of Appeal rejected Watrous’s attempt to import general industry safety regulations into section 4558.

A peremptory writ of mandate issue directing the trial court to vacate its order denying LeFiell’s motion for summary judgment and enter a new and different order granting the summary judgment motion.