Menu Close

Author: WorkCompAcademy

Court of Appeal Affirms Carriers Right to Rescind Comp Policies

American Home Assurance Company, National Union Fire Insurance Company of Pittsburgh, PA and Illinois National Insurance Company issued workers’ compensation policies to Optima Staffing, Inc. for 2008 and 2009 based in part on Optima’s representation it was a temporary staffing agency that directly hired, trained and supervised employees deployed as temporary workers in various industries and not a professional employer organization, which provided administrative services and procured workers’ compensation insurance on behalf of client employers for employees that Optima did not directly hire, train or supervise.

After defending and indemnifying 175 workers’ compensation claims, the Insurers discovered Optima was operating as a professional employer organization for several temporary staffing agencies and their special employer clients.

The Insurers rescinded the policies and filed this action for declaratory relief to confirm the rescission and for restitution from the temporary staffing agencies and the special employers.

The Insurers appeal from the judgments entered after the trial court sustained without leave to amend the demurrers of several of the temporary staffing agencies and special employers and subsequently granted motions for judgment on the pleadings in favor of the remaining temporary staffing agencies and special employers.

The Court of Appeal reversed the judgments and the orders dismissing the causes of action for declaratory relief and unjust enrichment. in the unpublished case of American Home Assurance Co. v. 99 Cents Only Stores and the matter remanded.

An insurer may rescind an insurance contract when the insured has misrepresented or concealed material information, even unintentionally, in obtaining insurance coverage. When an insurance policy is rescinded, “it is void ab initio, as if it never existed.” Rescission effectively renders the policy totally unenforceable from the outset so that there was never any coverage and no benefits are payable. Rescission applies to all insureds under the contract, including additional insureds, unless the contract provides otherwise.

Defendants contend the Insurers’ rescission claim fails because, by declaring they do not intend to seek reimbursement from the injured workers or to terminate previously agreed-upon benefits, the Insurers are not truly seeking rescission. In response, the Court of Appeal noted “It would be a perversion of equitable principles to prevent an aggrieved party from seeking relief because it did not want to pursue damages or seek restitution from individuals who are least likely to have the resources to mount a defense. ”

Liberty Mutual Says “N Factor” Cuts Claim Costs

By 2019, some insurance experts predict that medical care will make up two-thirds of workers compensation claim costs. Comorbid conditions such as obesity and diabetes, along with growing prescriptions for opioids can further complicate WC claims. When these injuries occur, however, the way a claim is managed, from the day of the injury to the day the claim is closed, can impact whether the injured employee quickly recovers and returns to work or requires treatment for months, even years.

By gaining a thorough understanding of the value nurses deliver, knowing which claims will benefit most from a nurse’s involvement, and learning which skills a nurse really needs to make that involvement count, Liberty Mutual says it can achieve better outcomes. Intuitively, insurance carriers and third-party administrators understand the connection between a nurse’s involvement in a claim and a favorable claim outcome. But Liberty wanted to quantify that impact and calculate the “N Factor.”

It looked at medical billing and claims data for 42,000 claims across four categories. The company was able to leverage a claimant’s behavioral or psychosocial characteristics, which are captured as part of a claim screening function. Nurses record information such as the claimant’s expectations, experience with injuries, and attitudes toward work and rehabilitation, all of which play a role in better outcomes.

The study, “The N Factor: How Nurses Add Value to Workers Compensation Claims,” showed that nurses deliver a number of significant benefits when involved on a claim. Medical and total loss dollars were reduced by double-digit percentages and injured employees returned to work sooner, which contributes to significant cost savings, increased productivity, and improvements in morale.

“When we analyzed a homogeneous set of claims, we saw that a nurse’s involvement made a difference in the claim cost as well as returning the injured employee to work sooner,” the study states. “But that doesn’t mean that involving a nurse in the treatment of every type of claim is going to produce the same results.”

Liberty created a decision-support model to identify claims where a nurse would be beneficial. This model leverages 25 to 30 data variables within its claims system.

Floyd, Skeren and Kelly 5th Annual Conference – Next Week!

Just about one week remains before the Floyd, Skeren and Kelly 5th Annual Southern California Employment Law Conference held at the Disneyland Hotel on June 19. Nearly 400 professionals have registered to attended this conference. This year guest speakers include Steve Jones, Deputy Labor Commissioner from the California Department of Industrial Relations, Phoebe Liu, Senior Staff Counsel IV California Department of Fair Employment and Housing, Andrew Schneiderman, Esq., Councilmember, California Department of Fair Employment and Housing and Derek Li, Senior Trial Attorney with the EEOC.

This full day conference that will offer topics on both Employment Laws and Workers’ Compensation. Some of the topics we will cover are:

1) Mastering California Leave Laws: A Closer Look at Disability Related Leave Laws, Interactive Process, and Accommodation
2) The Latest Information on California’s Paid Sick Leave-Ensure Compliance Before July 1, 2015
3) Preventing Work Comp Fraud in the Workplace
4) Identifying the Key Features of a Successful Interactive Process in Work Comp Cases
5) Understanding and Complying With the New California Family Rights Act Regulations in Effect as of July 1, 2015
6) A Work Comp Case Law and Legislative Update
7) Understanding, Preventing and Responding to Sexual Harassment Claims in the Workplace
8) How to Effectively Manage and Defend Work Comp Claims-Advanced Techniques From the Experts
9) Performance, Discipline and Termination-Best Practices for Avoiding Liability with These Vital HR Actions
10) Work Comp Resignations and Compromise and Release-What are the Legal Implications?
12) Is Your Company Committing Costly Wage and Hour Violations-Important Tips for Ensuring Compliance
13) An Update on the UR and IMR Process
14) Seven Habits of Frequently Sued Employers-Avoid These Costly Mistakes
15) Illegal Drug and Substance Abuse in the Workplace: Key Prevention and Response Strategies
16) Common Employer Mistakes Leading to Work Comp Claims
17) Reviewing Medical Reports and Defending Erroneous Ratings

This event will take place at the Disneyland Hotel, 1150 Magic Way in Anaheim. For further information please visit our event website, or call us at (818) 854-3239. You may also register online.

WCAB Announces Proposed Changes to Rules of Practice

The Workers’ Compensation Appeals Board plans to reorganize and renumber its Rules of Practice and Procedure (Rules) which are found in the California Code of Regulations, title 8, commencing with section 10300.

The organizational structure initially adopted in 1966 no longer accommodates the number and complexity of rules adopted in the modern era. As a result of several comprehensive reforms of the workers’ compensation system since 1966, the Rules are now 50 pages longer than they were in 1966 and cover multiple new procedures. For example, the Rules now include procedures for issuing sanctions, consolidation of cases, and appealing determinations of the Administrative Director. Because the existing organization does not have a logical or natural place for many of these new rules, it is often difficult to locate a particular rule. An additional consequence of the outdated organization of the rules is unnecessary duplication of rules in different articles and multiple rules covering the same or similar subjects.

With this reorganization, the WCAB plans to accomplish the following:

Organize articles to reflect the order of events in a case.
Eliminate duplicative rules.
Break up complex rules.
Simplify and modernize language of rules for clarity.
Create some room between rules so that additional rules can be added in the future without need for decimals.

In general, the WCAB does not plan to change the substance of the vast majority of rules with this reorganization. However, it will propose substantive changes where a rule does not reflect current practice or when it believes substantive changes are necessary.

Prior to engaging in formal rulemaking under Labor Code sections 5307 and 5307.4, and starting with this notice, the WCAB will periodically post in a forum on its website a group of articles and rules for review and comment. You may go to the forum page to offer your comments.

In the next few months, we will post the remainder of the proposed reorganized rules in two additional forums. After we have completed these forums and we have reviewed and considered the comments received, we will issue an Initial Statement of Reasons and a Notice of Public Hearing together with the complete package of reorganized and revised rules.

Mueller to Lead 200 Department of Insurance Sworn Peace Officers

Insurance Commissioner Dave Jones announced that he is appointing George Mueller as Deputy Commissioner of the Enforcement Branch of the California Department of Insurance (CDI). Mueller will lead the department’s law enforcement and criminal investigative functions. The enforcement branch is the largest component of the Department of Insurance and consists of 400 professionals, including over 200 sworn peace officers, who investigate various insurance crimes, including workers’ compensation, auto, homeowner, health, life, annuity, and disability insurance fraud and crimes committed by insurance agents and brokers and those pretending to be agents and brokers.

“I’m pleased to welcome George Mueller to the department,” said Insurance Commissioner Dave Jones. “Chief Mueller brings a wealth of law enforcement leadership experience and expertise that will benefit our enforcement branch, the entire department and the people of California.”

A sworn peace officer, Mueller comes to the department from the Los Angeles County District Attorney’s Office where he most recently served as assistant chief of the Bureau of Investigation. Mueller has served in law enforcement since 1985 where he began his law enforcement career working for the City of Alhambra Police Department as a police officer and then detective.

Appointed assistant chief by the Los Angeles District Attorney in 2009, Mueller also served as a captain, lieutenant, supervising investigator and various other roles in the district attorney’s office. He has extensive experience overseeing complex criminal investigations with emphasis in combating insurance and health care fraud, workers’ compensation fraud, elder abuse and other high impact crimes.

Mueller graduated with honors from the University of Southern California with a bachelor’s degree in public administration and earned his master’s in public administration with a specialization in judicial administration from the same university.

Mueller is also a graduate of the FBI national academy and the Senior Management Institute for Police. He has been a featured instructor and speaker at numerous law enforcement conferences, including the FBI national academy conference and the International Summit on Human Trafficking in Ottawa, Canada. Mueller has also made presentations to representatives from Hong Kong and the Philippines and to the office of the attorney general in Thailand.

Mueller will begin his new assignment with CDI on July 20. Mueller is filling the Deputy Commissioner position left vacant after Eric Weirich retired in December, 2014.

Medical Supply Operators Convicted After Nine Day Trial

A Los Angeles-area woman and man who were responsible for more than $1.8 million in fraudulent Medicare billings – almost entirely for medically unnecessary power wheelchairs – have been found guilty of health care fraud.

Queen Anieze-Smith, 53, of Woodland Hills, and Abdul King Garba, 49, of Van Nuys, each were convicted of five counts of health care fraud. The guilty verdicts concluded a nine-day trial before United States District Judge Dolly M. Gee.

Anieze-Smith and Garba, who operated ITC Medical Supply in Van Nuys, were found guilty of submitting fraudulent claims to the Medicare program. The duo billed Medicare for durable medical equipment – mostly power wheelchairs – for beneficiaries who were often recruited off the street, who were mobile and did not need a power wheelchair, and who could not use the power wheelchairs in their homes. As part of their scheme, Anieze-Smith and Garba’s falsified paperwork required by Medicare and sometimes failed to deliver the power wheelchairs altogether. Anieze-Smith and Garba submitted more than $1.8 million in fraudulent claims to Medicare, and they received nearly $900,000 for those claims.

As a result of the guilty verdicts, Anieze-Smith and Garba each face a statutory maximum sentence of 50 years when they are sentenced by Judge Gee this fall.

The investigation into Anieze-Smith and Garba was conducted by the Federal Bureau of Investigation and U.S. Department of Health and Human Services – Office of the Inspector General.

DWC Revises Proposed QME Regs

Following a public hearing on May 22, 2015 and a review of submitted comments, the Division of Workers’ Compensation (DWC) has made revisions to the Qualified Medical Evaluator (QME) regulations.

Members of the public are invited to present written comments regarding the proposed modifications to dwcrules@dir.ca.gov until 5 p.m. on Saturday, June 20, 2015.

Proposed revisions include the following requirements and clarifications:

1) Initial represented panel requests postmarked after September 3, 2015 will not be accepted or processed by the Medical Unit for initial represented panel requests only. The last day to mail in panel requests will be September 3, 2015.
2) Effective October 1, 2015, all initial panel requests must be submitted electronically.
3) Parties will have ten days from service of the panel list to strike a doctor.
4) Disputes regarding the validity of panel requests must be resolved by a workers’ compensation judge.
5) Disputes regarding the appropriateness of the specialty designated must be resolved by the Medical Director. Either party may appeal the decision with a workers’ compensation judge. • MAA Anesthesiology is added as a specialty listing.
6) QME Form 105 is amended to make a spelling correction and to indicate that the requesting party must select only one specialty.

The notice and text of the regulations can be found on the DWC proposed regulations page.

EDD Launches New $16 Million Website

EDD officials showed off the new website at their downtown Sacramento headquarters Thursday. The site, called UI Online, is being launched a year and a half late and has cost more than expected, but aims to greatly reduce the need to call the agency with questions about claims.

“It’s pretty good,” said Amandeep Kaur, one of a small number of Californians who have been given access to it so far. “It’s simple. It’s fast.”

Kaur told KCRA 3 she got laid off in April from a job at Apple in Elk Grove. She tried a few times to reach EDD by phone, waiting roughly 30 minutes for someone to answer, she said. Then, she was given access to the new website, which also comes in a mobile app. Connecting with EDD has been a breeze ever since, Kaur said.

This is the outcome EDD had hoped for in September 2013, when it launched a new software system its employees could use to process unemployment claims. But the version the public would use was delayed after that software launch failed and crippled much of EDD’s work.

“I think it was well worth the wait to finally roll out a system that all our customers can use,” said Sabrina Reed, EDD’s deputy director for unemployment insurance.

The new site, which cost $16 million, lets customers do most of the work of applying for benefits and makes it easier for the agency to contact people online. Of the 15,000 people given access to it so far, only two people have needed help using it, Reed said.

EDD plans to roll out the new site to 100,000 customers at a time, starting this weekend, until all 400,000 people currently receiving benefits have access.

That’s a fraction of the number of people who were collecting benefits during the height of the recession, roughly 1.5 million, according to EDD. That reduction has helped reduce a backlog of claims the agency processes and helped reduce the backlog of calls.

At one time, people may have called as many as 45 times before someone at EDD answered, said the agency’s spokesperson, Loree Levy. Now, that number is down to three times, Levy said.  

Court Sanctions Injured Worker and/or Lawyer for Frivolous Appeal

While in the course of his employment, plaintiff Marco Lopez was a passenger in a big rig truck driven by his co-worker. The truck was hit by another vehicle and Lopez was injured as a result.

After the accident Lopez, in propria persona, filed a form complaint for negligence against his employer who filed a demurrer to the complaint on the ground workers’ compensation barred a civil action. Lopez did not oppose the demurrer, and the court sustained it on the basis of the exclusive workers’ compensation remedy. (Lab. Code, § 3706.) The court took judicial notice of plaintiff’s workers’ compensation application in which he admitted the accident occurred during the course and scope of his employment. It granted Lopez “conditional leave to amend” if he could properly allege his employer had no workers’ compensation insurance, thereby excepting the case from the workers’ compensation statutory scheme.

Subsequently, an attorney filed an amended complaint on plaintiff’s behalf, alleging the employer negligently hired the driver and, on information and belief, that the employer was self-insured and had “used that position to deny [p]laintiff medical coverage and needed medical treatment.”

The employer again demurred, The court sustained the demurrer without leave to amend based on the exclusivity of workers’ compensation statutes. The dismissal was sustained by the Court of Appeal in the unpublished case of Lopez v The Fishel Co. The court concluded that there “is no question the court properly sustained the demurrer without leave to amend. Plaintiff alleged he was defendant’s employee and was injured while on the job.”

The court took judicial notice of plaintiff’s workers’ compensation claim form and the compromise and release form showing the claim was settled. With few exceptions, the workers’ compensation statutes provide an exclusive remedy for job-related injuries. Thus, absent an exception, a civil action may not be filed against an employer. In sustaining the demurrer to the original complaint, the court granted plaintiff leave to amend if he could plead such an exception, i.e., that defendant had no workers’ compensation insurance. Plaintiff made no such allegation in the amended complaint.

Plaintiff asserts defendant is self-insured, complaining it refused to authorize over $700,000 for his necessary medical treatment. But the compromise and release order shows the claim was fully settled. Any unhappiness with the result cannot be litigated in this forum. Plaintiff’s argument the settlement did not include this lawsuit has no merit. This action itself is improper and in any event could not be included in a settlement of the workers’ compensation claim.

On the issue of sanctions, the Court noted “there was no valid basis for filing the complaint to begin with, much less the appeal. The workers’ compensation body of law makes clear the statutory scheme is exclusive, absent a narrow set of exceptions.” We are aware sanctions should be awarded only in the most egregious cases. But all of the circumstances convince us this is such a case. In addition to the wholly improper form of the brief, the contents are equally deficient. The brief is confusing and unclear. The case contains no unique issues or complicated facts, nor was there an argument that existing law should be extended, modified, or reversed, as might justify filing this appeal. We do not believe a reasonable person would have thought it proper to file it.

“Sanctions are awarded against plaintiff or against his lawyer or against both. We remand to the trial court to determine against whom the sanctions are to be awarded and the amount of sanctions.” Lopez was represented by the Justice Law Center and Lee H. Durst when he filed the appeal.

In an unrelated case, Durst, a California lawyer for 30 years, was accused in a lawsuit of botching his client’s legal claim against the mortgage company, which foreclosed on her San Juan Capistrano home. In 2001 a jury returned a verdict that said the Santa Ana lawyer was to pay $21 million to the woman who claimed that his faulty advice in business dealings left her destitute. State Bar records show no public record of discipline or of administrative actions against Durst.

Two Comp Systems Under Constitutional Attack

Aggressive claimant attorneys have launched constitutional attacks on workers’ compensation reforms in a number of states including California and Florida. The California Court of Appeal has scheduled oral argument in the the case of Frances Stevens v WCAB that challenges the IMR process. Stevens is now set for oral argument on September 30. Another similar constitutional challenge is working its way through the Third District Court of Appeal that recently agreed to hear the case of Ramirez v The State of California Department of Health Care Services.

In Florida, two high-profile workers’ compensation cases still sit on the desk of the Florida Supreme Court – (1) Castellanos v. Next Door Company and (2) Westphal v. City of St. Petersburg – both of which could have a negative impact on the Florida workers’ compensation system. The workers’ compensation system in Florida has continuously come under scrutiny from opponents looking to overhaul the reforms that were put in place in 2003 by Gov. Jeb Bush and the Legislature.

In the Castellanos case the Florida Supreme Court will decide if the 2003 and 2009 Amendments to the Florida attorney fee law are unconstitutional. In 2003, the Legislature amended the law and limited the amount of attorney’s fees. This severely limited the types of cases or claims an attorney could file. The Court will now decide if the law prevents certain cases or claimants the access to courts as allowed under the Constitution. The National Employment Lawyers Association has given its support to a suit asking the Florida Supreme Court to overturn a statutory limitation on prevailing-party attorneys’ fees in workers’ compensation cases, which the group argues violates the separation of powers doctrine and courts’ authority. The formula for calculating attorneys’ fees in a Florida’s workers’ compensation statute awarded the attorney in the Castellanos case $164 in fees for 107 hours of legal work.

In Westphal the Court of Appeal found that the law stipulating a 104-week limit on temporary benefits was unjust since it puts injured workers like Westphal in a no-win situation of being unable to receive temporary benefits while also not being eligible for permanent benefits. The appeals court concluded that the Florida statue that limited an injured worker to no more than 104 weeks of temporary disability benefits even when he is totally disabled was unconstitutional. Striking down the 1994 amendment to Florida’s workers’ compensation law that established the 104-week limit for temporary disability, the court re-established the previously existing 260-week limit. After rehearing the court re-interpreted the law to mean workers could apply for and receive permanent benefits at the end of the 104-week period because they are “deemed to be at maximum medical improvement as a matter of law,” even if they could one day return to work. The Florida Supreme Court decided to hear the case,

According to the Florida Division of Workers’ Compensation, the running list of reforms in 2003 included making changes to “Permanent Total Disability, Permanent Total Supplement, Permanent Partial Benefits, Practice Parameters and Protocols mandatory in medical care, changes to Independent Medical Examinations, Attorney Fee Award structure, Compliance, Exemptions, elimination of Supplemental Benefits,” among others.The slew of changes to the system focused on one important goal: getting an injured worker back to work, and doing so by weeding out fraud in the no-fault system. The focus wasn’t on making the insurers, medical field or attorneys happy, it was on the employer and the employee.

Business groups credit the Florida reforms for helping drive down insurance rates (down more than 50 percent) and welcoming significant cost savings that allow for the purchase of better policies and coverage for employees. Insurers credit the Florida reforms for opening up the marketplace and creating a healthy and competitive environment. The medical community credits the Florida reforms for adequate medical reimbursement and access to care. But what you won’t hear is trial lawyers crediting this “no-fault” system for much of anything.

Stakeholders in both California and Florida are closely watching these cases which should be decided in the coming months.