Author: WorkCompAcademy

When EJ Distribution Corporation applied for workers’ compensation insurance, the application indicated that EJ’s employees did not travel out of state. The online application prepared by its insurance agent described EJ’s operations as “local hauling” and that EJ’s employees did not travel out of state and did not have a radius of travel greater than 200 miles.  Accordingly Southern Insurance issued a workers’ compensation policy beginning on January 1, 2009.

On April 6, 2009, EJ’s employee, David Berrios-Segovia, injured his back while on a trip to Tennessee and filed a workers’ compensation claim on May 13, 2009.

On June 12, 2009, Southern’s attorneys sent a letter to EJ stating that “Southern is rescinding the policy.” The decision to rescind was based on material misrepresentations or the concealment of material facts by EJ in the application for the policy, specifically that its employees did not travel out of state and that its operations did not exceed a radius of travel of 200 miles.

In light of Southern’s position that the policy was rescinded the Uninsured Employers Benefits Trust Fund (UEBTF) was joined as a defendant in Segovia’s workers’ compensation claim.

The coverage issue  was submitted to mandatory arbitration pursuant to Labor Code section 5275, subdivision (a)(1). Southern called an underwriter as a witness who testified that Southern never insured long-haul trucking in its business division. In addition, the underwriter testified that, had Southern known that EJ traveled outside of 200 miles or out of state, Southern would not have issued the policy. The underwriter, however, confirmed that the policy itself, in fact all workers’ compensation policies, did not contain an exclusion based on location.

The arbitrator found: There was “no retroactive rescission” of the policy; Segovia’s claim for his April 6, 2009 injury was covered by the policy; and the policy was prospectively canceled under Insurance Code section 676.8, subdivision (b)(5) as of June 15, 2009, and not before. The arbitrator dismissed UEBTF as a defendant.  Southern’s Petition for Reconsideration by was denied by the WCAB. But the court of appeal reversed in the unpublished case of Southern Ins. Co. v. Workers’ Compensation Appeals Bd.

The opinion noted that Insurance Code Section 676.8 which is entitled Cancellation and Failure to Renew Certain Property Insurance, is specifically limited to workers’ compensation insurance and it addresses only the cancellation of a policy. It does not even inferentially address rescission. But, Section 650 provides that “[w]henever a right to rescind a contract of insurance is given to the insurer by any provision of this part such right may be exercised at any time previous to the commencement of an action on the contract.” Section 650 applies to workers’ compensation insurance policies.

UEBTF’s contention that rescission is precluded because section 676.8 does not provide for protection of the right to rescind a workers’ compensation insurance policy was rejected. UEBTF also contended that once a workers’ compensation claim has been filed, section 650 precludes rescission. However, the Court of Appeal ruled that the filing of a workers’ compensation claim is not the equivalent of an action on the contract.

The appeals board generally agreed that a workers’ compensation insurance policy can be rescinded under the authority of section 650. However, the appeals board contends, and rightly so, that rescission should not be used for the improper purpose of obtaining impermissible modifications to a workers’ compensation insurance policy. But, the answer to the appeals board’s concern is that if rescission is asserted as a defense to the claim in a workers’ compensation proceeding, the appeals board itself can ensure that the rescission is not used as a subterfuge to evade the laws governing workers’ compensation insurance.

There is also the concern over the injured worker who has filed a workers’ compensation claim but is faced with an insurer who has acted to rescind the policy. The answer here is that the insurer cannot be certain that the rescission will be enforced and that the insurer is therefore well advised to avoid drastic decisions about coverage until the validity of the rescission has been adjudged.

Contrary to the arbitrator’s ruling, a workers’ compensation insurance policy may be rescinded. The conclusion is unavoidable that the issue whether Southern’s rescission was legally effective remains factually open and unresolved.The decision of the appeals board affirming the findings and award of the arbitrator is annulled and the matter is remanded to the appeals board for further proceedings consistent with this opinion.

An accurate estimate of the life expectancy of a workers’ compensation claimant is important for setting reserves, making or accepting offers for compromise and release, and certain other calculations such as commutations for attorney fees, or lump sum payments.

One method of estimating life expectancy is to use a one-size-fits all chart or table based upon historical data. This is the method set by California regulations (§10169. Commutation Tables and Instructions) when a commutation of future benefits is ordered by a WCJ. This table is based on the U.S. Decennial Life Tables for 1989-91, a metric that is outdated by about two and a half decades.

And the calculation of life expectancy is more complex now, than ever.

According to a new study just published in the Journal of the American Medical Association, “inequalities in life expectancy among counties are large and growing, and much of the variation in life expectancy can be explained by differences in socioeconomic and race/ethnicity factors, behavioral and metabolic risk factors, and health care factors.”

And earlier studies have routinely shown that life expectancy in the United States varies geographically, in some cases dramatically. Between 1980 and 2014, life expectancy at birth for both sexes combined in the United States increased by 5.3%. This masks massive variation at the county level; counties in central Colorado, Alaska, and along both coasts experienced much larger increases, while some southern counties in states stretching from Oklahoma to West Virginia saw little, if any, improvement over this same period.

According to a 2010 report by the Los Angeles Times, Los Angeles County residents are living longer than ever, with an average life expectancy of more than 80 years according to public health officials. The average life expectancy in the county was 80.3 years. However Asian and Pacific Islander women had the longest average life expectancy, 86.9 years, while black men had the shortest, 69.4 years, according to the study.

Public health officials in Los Angeles examined life expectancy in 103 cities and unincorporated areas of the county with populations of more than 15,000. They also assessed each of the 15 Los Angeles City Council districts. Of the cities, La Canada Flintridge had the highest life expectancy, 87.8 years, while Compton had the lowest, 75.7 years.

And wait! There’s more!

Life expectancy is viewed differently by the annuity companies that underwrite the Medicare Set Aside Trusts in worker’s compensation cases. This estimate is often referred to as “rated age.” Every life insurance company has different underwriting guidelines that determine what risk class an individual qualifies for. The company will look at an applicant’s personal medical history, smoker status, height/weight profile, results of the medical exam, family medical history (e.g. cancer or heart disease before age 60 in the immediate family), motor vehicle record, and any hazardous activities they may participate in (such as aviation, scuba diving, drag racing, etc).

Thus, a more sophisticated approach to estimating the life expectancy of an injured worker may be a valuable tool for claims administrators as they reserve cases, and propose or reject settlement offers.

The Department of Industrial Relations and its Division of Workers’ Compensation have suspended four more medical providers from participating in California’s workers’ compensation system. DWC Acting Administrative Director George Parisotto issued Orders of Suspension for two providers who had not appealed suspension notices issued in early April.

The complete list including these newly added names are on the DIR website.

Kenneth Johnson, a physician in Ladera Heights, was suspended based on a criminal conviction, his prior suspension from the Medicare program, and the loss of his professional license. Dr. Johnson was found guilty in February 2014 of federal charges for a $20 million scheme to defraud Medicare and Medi-Cal. Johnson pre-signed thousands of blank prescriptions that were used on fraudulent claims for anti-psychotic medications by Manor Medical Imaging in Glendale.

Raymond Severt, an orthopedic surgeon in Santa Rosa, was also suspended based on a criminal conviction related to his qualifications and duties as a service provider and the loss of his professional license. Severt was convicted in Marin Superior Court for attempted lewd acts on a minor under the age of 14, and the Medical Board of California revoked his license following the conviction.

Parisotto also issued Determinations and Orders upholding the suspension of two providers who had appealed their notices.

Philip Sobol, an orthopedic surgeon in Los Angeles, was suspended based on a criminal conviction involving fraud and abuse of the workers’ compensation system. Sobol pled guilty in November 2015 for participating in a kickback scheme at Pacific Hospital of Long Beach, illegally referring thousands of his patients for spinal surgeries. Sobol did not challenge the grounds for suspension, but argued in his appeal that he could not be suspended because his conviction predated the new law and also that DIR was required to use a different procedure to hear his appeal. Workers’ Compensation Administrative Law Judge (WCALJ) William E. Gunn, who heard the appeal, rejected both arguments.

Thomas M. Heric, a physician in Los Angeles, was suspended due to a criminal conviction and prior suspension from the Medicare program. Heric was convicted over a decade ago in Sacramento’s federal District Court for Medicare and Medicaid-related health care fraud, which also resulted in his suspension from those programs by the U.S. Department of Health and Human Services. WCALJ Robert Mays rejected Heric’s argument that his convictions did not fit within a legal definition of fraud or abuse.

AB 1244 (Gray and Daly) requires the DWC Administrative Director to suspend any medical provider, physician or practitioner from participating in the workers’ compensation system in cases in which one or more of the following is true:

– – The provider has been convicted of a crime involving fraud or abuse of the Medi-Cal or Medicare programs or the workers’ compensation system, fraud or abuse of a patient, or related types of misconduct;

– – The provider has been suspended due to fraud or abuse from the Medicare or Medicaid (including Medi-Cal) programs; or

– – The provider’s license or certificate to provide health care has been surrendered or revoked.

There are currently 23 providers suspended from California’s workers’ compensation system. Where the suspension is due to conviction of a covered crime, AB 1244 also provides for the suspended provider’s lien claims to be consolidated in a special lien proceeding and dismissed, unless it can be shown that the liens were unrelated to the criminal conduct.

Both of the providers who appealed their suspension have a significant volume of lien activity in the workers’ compensation system.

Dr. Sobol has nearly 6,000 active workers’ compensation liens with an estimated total claim value of more than $42.7 million.

Dr. Heric presents a different set of circumstances in that he became active in California’s workers’ compensation system after his federal conviction and suspension from the Medicare program. This is one of the scenarios that the Legislature wanted to stop when adopting AB 1244. Heric is currently being prosecuted in Orange County Superior Court for alleged involvement in a medical insurance fraud scheme with Sim Carlisle Hoffman and several associated businesses (People v. Sim Carlisle Hoffman, Better Sleeping Medical Center. Inc., et al., Orange County Superior Court No. 14CF0243). The liens of Hoffman and associated entities (estimated at over 1400 liens, with an aggregate claim value of more than $7 million) are currently stayed pursuant to the lien stay provision in SB 1160 (Mendoza), and would become subject to consolidation following a conviction for the crimes charged. Therefore, any liens filed by or on behalf of Dr. Heric are also subject to the stay provisions of Labor Code Section 4615.

Three men were convicted last Friday in Orange County Superior Court of defrauding over $70 million from workers’ compensation insurance companies in an overbilling scheme.

Jeffrey Edward Campau, 42, and Landen Alan Mirallegro, 41, both from Yorba Linda were convicted of 24 counts of Medical insurance fraud, 24 counts of manufacturing documents in support of a fraudulent claim, 7 counts of referral of clients for compensation.Abraham Khorshad, 65, of Beverly Hills was convicted of 3 counts of medical insurance fraud. All three are subject to sentencing enhancements for aggravated white collar crime over $500,000.

In 2005, Campau, Mirallegro, and Khorshad formed a durable medical equipment (DME) company named Aspen Medical Resources, LLC (Aspen) and National Marketing LLC dba National DME (National).

Between 2005 and 2013, the defendants rented out a DME machine similar in function to an ice pack or heating pad, which provided both hot and cold modalities to alleviate inflammation and/or pain for patients.

The three defendants fraudulently overbilled insurance carriers for this DME by renting out of one machine as two separate hot and cold machines, which were valued at less than $500, for as much as $15,500 to $18,000 per patient.

Campau, Mirallegro, and Khorshad, through their companies Aspen and National, submitted $70 million dollars worth of claims for these hot/cold units to the State Compensation Insurance Fund, Liberty Mutual, AIG (Chartis), Zenith Insurance, Birkshire Hathaway Homestead Companies, County of Orange, County of San Bernardino, County of Riverside, American Claims Management, First Comp Insurance, CNA Insurance, Comp West Insurance, Employers Insurance, Farmers Insurance, State Farm Insurance, Fireman’s Fund, Tristar (City of Los Angeles), Gallagher Basset, Republic Indemnity, Sentry, and Travelers Insurance. They were paid in excess of $10 million dollars for these claims.

If a claim was not paid, the defendants filed a lien at the Workers’ Compensation Appeals Board and aggressively collecting on these fraudulent claims.

The defendants were informed by various workers’ compensation insurance carriers that Aspen was billing for the units incorrectly, but continued to bill the same way and aggressively defended their fraudulent claims, making it more cost-effective for the insurance carriers to pay the fraudulent claims than fight them.

Insurance companies contacted OCDA and the California Department of Insurance, who jointly investigated this case. OCDA seized all assets of the companies, which are now under receivership.

For all remaining victims, charged and uncharged, the defendants also voluntarily agreed to relinquish their ownership interest and agreed to dismiss all remaining liens, valued at $139,752,925.77,for named and unnamed victims, at the Workers’ Compensation Appeals Board for the following entities: Aspen Medical Resources, National Marketing dba National DME, Elite Diagnostic and Regional Imaging Center. They were ordered not collect on or sell to third parties all healthcare claims submitted to workers’ compensation carriers, charged or uncharged, for the above-mentioned entities, the value of which collectively exceeded $47 million dollars.

Senior Deputy District Attorney Shaddi Kamiabipour of the Insurance Fraud Unit prosecuted this case.

A Pleasanton man has been charged with insurance fraud in connection with a medical clinic he allegedly owned illegally, San Mateo County prosecutors said Tuesday. Matthew Skinner, 47, is accused of owning Pacific Occupational Health Clinic at 3 S. Linden Ave. in South San Francisco, which is now closed.

Prosecutors said he was not allowed to own the clinic because he is not a doctor and doctors are required to own at least 51 percent of a medical practice. Prosecutors said the law exists so laypersons are not supervising
and influencing the care of doctors.

“Mr. Skinner asserts his innocence to the charges and looks forward to answering the allegations in court,” Skinner’s attorney Ted Cassman said. “He took great pride in the excellent service that his clinics provided over the years, and he was always committed to patients’ health.”

Skinner allegedly holds no medical license and his mother Paula Skinner allegedly holds only a physical therapist’s license. People who have a medical license considered lower than a doctor’s can own only up to 49 percent of a medical practice, according to prosecutors.

Pacific Occupational Health Clinic, which handled worker’s compensation claims, allegedly illegally employed doctors, prosecutors said. Also, Skinner allegedly took X-rays of patients occasionally, which he was not licensed to do, and allegedly gave instructions to doctors to maximize profits, prosecutors said.

Five insurance companies were alleged victims in the scheme. Those companies were billed a total of $15,226,487.55 between 2010 and 2016 and Pacific Occupational Health Clinic received $4,555,567.28 from the companies. Skinner had been in jail on nearly $12 million bail, but on Monday his bail was reduced to $3 million. He is scheduled to be back in court on Wednesday when he is expected to enter a plea.