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Law Firm Class Action Seeks Damages for Court Closures

A Georgia bankruptcy law firm sued its insurer last week seeking business interruption coverage for income it allegedly lost after courtrooms in the state were closed due to the COVID-19 pandemic. The case is Karmel Davis and Associates v. Hartford Financial Services Group, case number 1:20-mi-99999, in the U.S. District Court for the Northern District of Georgia.

In the proposed class-action suit the Douglasville, Georgia-based law firm argues that the coronavirus caused direct physical loss to its own office, triggering business interruption coverage under its policy.

Karmel Davis is seeking to represent a nationwide class of policyholders whose business insurance claims with Hartford were denied, whose insurance policies do not exclude viruses and who experienced business suspension due to civil authority orders during the pandemic.

In the suit, Karmel Davis claimed that Hartford is straining its credibility by stating that it is unaware of the statewide shelter order that implicates the civil authority coverage. The novel coronavirus can create physical damage because it can stay on a property’s surface for days, the firm added.The firm contended that COVID-19 does not trigger the pollution exclusion in the policy because “a virus is not a solid, liquid, gaseous, or thermal irritant or contaminant.”

In addition, the policy covers losses that result from damage to a “dependent property,” which for Karmel Davis includes bankruptcy courts that have closed or reduced services since government-ordered lockdowns began in March, the suit states.

“Plaintiff suffered an actual loss of Business Income due to direct physical loss or physical damage to the Bankruptcy Court (a Dependent Property),” the suit states.

In a statement, Hartford said: “Unfortunately, viruses are generally outside the scope of business interruption coverage due to the absence of any physical damage. These policies do not cover this exposure and, accordingly, premiums were never collected for it.”

Meanwhile, the policyholder in one of the first COVID-19 lawsuits to be ruled on has withdrawn its appeal. According to court papers, Social Life Magazine on Friday withdrew its appeal of a federal district court judge’s ruling that it was not owed coverage for coronavirus-related income losses.

Violence Closes WCAB Offices – Telephonic Hearings Expanded

The following WCAB offices are closed effective Monday, June 1 until further notice due to the impact of violent protests in the area: Fresno, Long Beach, Los Angeles, Oakland, Pomona, Redding, Riverside, San Bernardino, San Diego, San Francisco, San Jose, Santa Ana, Santa Barbara, Santa Rosa, Stockton, and Van Nuys

However, the Division of Workers’ Compensation and Workers’ Compensation Appeals Board continue to improve their operations during the COVID-19 pandemic. The following changes are effective June 8:

Updated Hearing Procedures Starting June 8:

DWC will continue to hear all mandatory settlement conferences, priority conferences, status conferences, case-in-chief trials and expedited hearings telephonically via the individually assigned judges’ conference lines as announced in DWC’s Newslines issued on April 3 and April 28.

Beginning June 8, DWC will hear up to 3 lien conferences per judge per calendar session via the individually assigned judges’ conference lines. Lien conferences in excess of that number will be continued.

All parties scheduled for a hearing should call the conference line for the judge in front of whom the case is set, at the designated time listed on the hearing notice. When prompted, the parties should enter the access code assigned to that line. DWC staff will instruct participants as to the procedure to follow during the call.

All lien trials will be continued during this time. District offices will not hold in-person hearings.

Continuing Filing Procedures:

DWC will not accept walk-in filings, walk-through documents, or in-person requests at this time. DWC will only accept electronic filing via EAMS and JET File, and paper filing by U.S. mail.

DWC will accept limited email filings pursuant to WCAB’s en banc dated April 6 and its Newsline issued on April 23. Email filings are limited to documents that are subject to a statute of limitations that cannot otherwise be efiled, JET filed, or filed by U.S. mail.

DWC has posted additional information to assist parties with filing settlement documents in EAMS. Refer to the district office page for email and other contact information.

DWC will continue to accept an electronic signature on any settlement documents, applications, pleadings, petitions or motions that are sent to the district offices or filed in EAMS. For all e-forms, parties should utilize “S signature” as shown in the E-forms Filing Reference Guide and the JET File Business Rules.

Injured workers who are unable to file utilizing the available options or need assistance may contact DWC’s call center at (909) 383-4522.

The WCAB Commissioners’ office is closed to the public for in-person inquiries and requests until further notice. The Commissioners and staff are working remotely during the closure.

Hollywood Producer Arrested for Paycheck Program Fraud

The recently ousted head of Aviron Pictures, William Sadleir, 66, of Beverly Hills, was arrested on federal fraud charges that allege he applied for $1.7 million in loans under the Paycheck Protection Program (PPP), falsely certified that the money would be used to finance the operations of other Aviron entities, and then used some of the relief funds for his personal expenses.

A criminal complaint that accuses him of fraudulently filing bank loan applications that sought more than $1.7 million dollars in forgivable PPP loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Sadleir allegedly obtained the forgivable loans by falsely representing that the funds would be used to support payroll expenses, when, in fact, Sadleir intended to use and did use a significant portion of the funds for personal and non-business-related expenses.

Sadleir has been charged with wire fraud, bank fraud, making false statements to a financial institution, and making false statements to the Small Business Administration.

Sadleir caused applications for PPP loans to be submitted to JPMorgan Chase on behalf of Aviron Group, LLC; Aviron Licensing, LLC; and Aviron Releasing, LLC dba Regatta. The bank approved the loans, and Sadleir received more than $1.7 million. “[I]mmediately upon receiving the funds a significant amount was diverted to Sadleir’s personal accounts and used for personal expenses,” the complaint alleges.

Sadleir was terminated from Aviron Pictures in late 2019, and people associated with the film production company told investigators that Sadleir currently had no role in Aviron Pictures or the related entities, according to the affidavit, which notes that Aviron Group, Aviron Licensing and Aviron Releasing are not engaged in any ongoing operations.

Authorities have linked Sadleir to the three PPP loan applications made on behalf of the three Aviron entities. All three applications claimed each company had 33 employees and monthly payroll expenses of well over $200,000. On April 30, JPMorgan Chase approved the loan applications, and the next day money was wired to nearly empty JPMorgan Chase bank accounts associated with the three entities.

Within days, nearly $1 million of the PPP loan money was transferred into Sadleir’s personal account at JPMorgan Chase, the affidavit alleges. Investigators have determined that some of this money was used to pay personal expenses, including payments to Sadleir’s and his wife’s American Express cards. One payment allegedly made with PPP loan proceeds – a $40,000 payment on Sadleir’s car loan – was reversed and JPChase Morgan froze the accounts associated with the alleged scheme.

The four charges alleged in the criminal complaint collectively carry a maximum statutory penalty of 82 years in federal prison.

May 25, 2020 – News Podcast


Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: Trial Lawyers Predict COVID-19 Legal Battles “Most Expensive” in History, Encino Opioid Ring Conspiracy Ringleader Sentenced, Secret Service Reports Large-Scale Unemployment Fraud, Palo Alto Cardiologist Indicted, 53 of 58 CA Counties Assess Reopening, California Bar Examination Pass Rate Hits All Time Low, IMR Determination Letters Fall by 11.3%, CA Employers Deploy Contact Tracing Systems, DWC Cancels Educational Conference in Los Angeles.

Court of Appeal Clarifies Hikida Limits on PD Apportionment

Barbara Justice was a workers’ compensation claims adjuster for the County of Santa Clara. She fell at work in 2011 and injured her left knee. She later developed problems in her right knee, which was found to be a compensable consequence of the injury to her left knee. In 2012, Justice had total knee replacement surgery on the right knee. In 2013, she had total knee replacement surgery on her left knee.

The AME testified that a 2012 X-ray of her knees showed “marked osteoarthritis” of the knees. An MRI conducted in 2012, showed that she had suffered a medial and lateral meniscal tear as a result of the fall at work and also revealed significant preexisting degeneration, all of which predated the fall at work: an “old” tear of the anterior cruciate ligament, “marked loss of articular cartilage in the medial compartment,” “moderate loss of articular cartilage in the lateral compartment,” and “moderate loss in the patellofemoral joint.” There was also scar tissue on both knees indicating that Justice had undergone a “significant open procedure” at some point in the past.

The agreed medical examiner thought the permanent disability should be apportioned 50/50,

The workers’ compensation judge then stated that prior to the decision in Hikida v. Workers’ Comp. Appeals Bd. (2017) 12 Cal.App.5th 1249 (Hikida), he would have issued a decision awarding permanent disability with 50% apportionment based upon the AME’s opinion. However, Hikida precluded apportionment in this case because the ratings were based upon having total knee replacements. Since both were the result of medical care, he awarded permanent disability of 48 percent without apportionment.

The WCAB denied reconsideration (except to correct a clerical error). However the Court of Appeal reversed in the Published opinion of County of Santa Clara v WCAB and Barbara Justice.

The Court of Appeal found the case of City of Petaluma v. Workers’ Comp. Appeals Bd. (2018) 29 Cal.App.5th 1175, 1181-1182 to be instructive. In that case, police officer Aaron Lindh was engaged in a canine training exercise when he took blows to the left side of his head . He first suffered severe headaches, and weeks later “suddenly lost most of the vision in his left eye.” The QME said that Lindh had a congenital abnormality that caused poor blood circulation in his left eye. Without the injury, he most likely would have retained a lot of his vision in that eye. But that it was unlikely Lindh would have suffered a vision loss if he had not had the ‘underlying condition.Thus, the examiner apportioned 85 percent of the permanent disability to the preexisting condition, and 15 percent to the industrial injury.

As in Petaluma, the injured worker in the instant case had an extensive preexisting pathology that when combined with an industrial injury, led to permanent disability. The preexisting pathology was well documented. “The workers’ compensation judge and the Board believed that Hikida dictated a different result. Not so.” … “, the Hikida court’s conclusion that there should be no apportionment makes sense only because the medical treatment in Hikida resulted in a new compensable consequential injury, namely CRPS, which was entirely the result of the industrial medical treatment.

Insurance Agent Who Stole .5M in Premiums Faces 9 Felonies

Unlicensed insurance agent Ai Ling Lee, also known as Linda Lee, 60, of Hacienda Heights, was arrested on nine felony counts of grand theft after allegedly stealing approximately half a million dollars in clients’ insurance premium payments and failing to place adequate coverage for her clients’ small businesses.

An investigation by the Department of Insurance found Lee, as owner/operator of Jubilee Insurance Services, allegedly acted as an insurance agent to steal half a million dollars in premium payments even though she was not properly licensed by the department.

Lee accepted premium payments from her clients to place liability, property or workers’ compensation insurance coverage for their small businesses. Lee failed to place insurance coverage or allowed the coverage to lapse for nonpayment leaving her clients’ small businesses, including restaurants, construction companies and biochemical companies at risk.

In order to inflate premium payments and hide her alleged embezzlement, Lee altered declaration pages for several clients. The premium payments collected by Lee were either not remitted to insurance carriers or only partially paid. Lee also allegedly forged clients’ signatures on finance agreements in order to finance some of the insurance premiums without her clients’ knowledge or consent.

Lee was arrested on Friday, May 22, 2020, and is scheduled to appear in court on September 30, 2020. This case is being prosecuted by the White Collar Crime Division of the Los Angeles County District Attorney’s Office.

The Department of Insurance issued a Cease and Desist Order against Lee on August 7, 2018, and revoked her business’, Jubilee Insurance Services, license on December 1, 2018.

People can check the license status of their agent or contact the Department of Insurance at 800-927-4357 if they suspect they are victims of insurance fraud.

May 29 – Floyd Skeren HR Update – Free COVID–19 Webinar

Please join Bernadette M. O’Brien, Esq., SPHR, of Floyd Skeren Manukian Langevin, along with Senior Partners John B. Floyd, Esq. and Amanda A. Manukian, Esq., this Friday for an updated COVID-19 Webinar. The presentation will featuring special guest speakers, Dr. Nachman Brautbar, M.D., medical expert, practicing physician and Managing Partner of Ford & Wallach, Scott Ford Esq., for important updated information on workers’ compensation and COVID-19.

Topics Include:

— An employment law update on issues pertained of COVID-19 provided by Ms. O’Brien;
— Update on the work comp presumption and the impact on California COVID-19 claims;
— Workers’ compensation case scenarios;
— DOL’s enforcement of paid sick leave laws;
— Reopening guidance and requirements;
— Pros and Cons of “Immunity Certificates”; and
— Common questions

Friday, May 29, 2020 from 10:00 am until 12:00 pm (PST).  Webinar is free. Please register online

Contact:  Rebecca.zandovskis@floydskerenlaw.com for assistance.

Bernadette M. O’Brien is a Partner at Floyd Skeren Manukian Langevin, LLP, and an SPHR/SHRM-SCP certified Human Resources Consultant.

Ms. O’Brien is author of the LexisNexis publication Labor and Employment in California: A Guide to Employment Laws, Regulations and Practices, co-author of California Leave Law: A Practical Guide for Employers, and co-author of California Unemployment Insurance and Disability Compensation Programs.

Four More Convicted in $199M Illegal Prescription Drug Conspiracy

Mihran Stepanyan, Artur Stepanyan, Yan German, and Khachig Geuydjian pleaded guilty to crimes stemming from their respective roles in a wide-ranging racketeering conspiracy involving diversion of prescription drugs, money laundering, bank fraud, identity theft, and additional crimes, This leaves one remaining defendant to stand trial for allegations made in a Second Superseding Indictment filed in February of 2016 against 38 defendants.

The crimes committed by these defendants ranged from picking up drugs at a pizza shop to a half-million-dollar tax check fraud scheme. In total, more than $199 million in diverted prescription drug proceeds were laundered through bank accounts established with false identities and shell companies.

The four acknowledged that they were members of a nationwide conspiracy referred to in court documents as the Karapedyan-Stepanyan Enterprise. One key aspect of the criminal activity was a multi-million dollar prescription drug diversion scheme.

Members and associates of the Enterprise procured prescription drugs from unlicensed sources, usually street dealers, and resold the drugs to unknowing customers. The Stepanyans also admitted that they are not licensed to sell drugs, that they procured millions of dollars of drugs through street suppliers and other unlicensed sources, and that the drugs they procured eventually were resold as legitimate products.

Members of the Enterprise conducted the affairs of the organization through a pattern of racketeering and committed crimes throughout California as well as in Minnesota, Ohio, and Puerto Rico. Members and associates of the Enterprise procured and distributed a wide variety of drugs from unlicensed sources for distribution throughout the country.

The drugs included medications used to treat HIV infection, Type-2 diabetes, dementia, and high blood pressure, among other conditions.

Members and associates of the Enterprise also created false and fraudulent paperwork, referred to as pedigrees, to make it appear that those drugs had been purchased from legitimate sources. In addition, they created sham companies and used multiple bank accounts to receive and distribute the proceeds from their fraudulent transactions.

The plea agreements also describe how the Stepanyans, along with other members and associates of the Enterprise, intentionally used the identities of real people to carry out their unlawful objectives.

Geuydjian’s plea agreement describes how he negotiated fraudulent personal and tax checks for the benefit of the Enterprise, and German’s plea agreement describes how he supplied drugs for distribution by the Enterprise and managed aspects of the Enterprise’s money laundering operations.

Stepanyan became a member of the Enterprise as early as January 2010. He admitted that he agreed with his co-conspirators to commit multiple criminal acts involving money laundering, mail fraud, wire fraud, bank fraud, identity theft, and multiple acts involving the distribution of drugs from unlicensed sources to conduct the affairs of the Enterprise. Stepanyan admitted that he controlled several entities through which approximately $199 million of pharmaceutical money flowed between 2010 and 2014.

All four defendants pleading guilty have released on bond pending sentencing. A majority of the defendants in this case have pleaded guilty to various charges.

Uber/Lyft AB-5 Initiative Qualifies for November Ballot

An initiative that would overturn provisions of AB 5 applying to app-based transportation and delivery drivers has qualified for the November ballot in California. The “Protect App-Based Drivers and Services Act” was written in response to last year’s passage of AB 5. If passed by the voters, the initiative would add Chapter 10.5 (commencing with Section 7448) to Division 3 of the Business and Professions Code with approximately 18 pages of new law.

On August 30, 2019, three companies – DoorDash, Lyft, and Uber – each placed $30 million into campaign accounts to fund the ballot initiative campaign. Subsequently Instacart (Maplebear, Inc.) and Postmates Inc. contributed $10 million each to the effort.

Backers of the initiative say it would allow app-based drivers to gain additional income by working a few hours a week on schedules they determine as independent contractors. The official ballot title will be “Changes Employment Classification Rules for App-based Transportation and Delivery Drivers. Initiative Statute.”

The ballot measure would enact labor and wage policies specific to app-based drivers and companies, including a net earnings floor based on 120 percent of the state’s or municipality’s minimum wage and 30 cents per mile; a limit to the hours permitted to work during a 24-hour period; healthcare subsidies; occupational accident insurance; and accidental death insurance. The ballot measure would also require the companies to develop anti-discrimination and sexual harassment policies.

Opponents, led by the California Labor Federation, say passage of the initiative would remove protections for app-based drivers, such as paid sick and family leave, health insurance and workers’ compensation. The Coalition to Protect Riders and Drivers, Sponsored by the California Labor Federation, AFL-CIO contributed $690 thousand to defeat the initiative.

If approved by voters, the initiative would require companies with independent contractor drivers to provide specified alternative benefits, including minimum compensation and health care subsidies based on engaged driving time, vehicle insurance, safety training and sexual harassment policies.

The initiative would also restrict local regulation of app-based drivers, criminalize impersonation of such drivers and require background checks. Interestingly, the last sentence of the proposed law provides that “this Act shall be liberally construed in order to effectuate its purposes.

The initiative needed at least 685,534 projected valid signatures to become eligible by random sampling. It exceeded that threshold Friday, Secretary of State Alex Padilla announced.

Hollywood Spawns New Cottage Industry – COVID-19 Consultants

Along with hair stylists, camera operators and the hundreds of others who make magic happen for TV and film, Hollywood is counting on a new supporting member for future productions: COVID-19 consultants.

According to the report in Reuters, the coronavirus pandemic has prompted producers, movie studios and workers’ unions to seek expert advice on how to safely reopen film and TV sets, which shut down worldwide in mid-March.

In demand are epidemiologists and other public health specialists to provide detailed strategies for dealing with large crews who work in cramped spaces, makeup artists who get face-to-face with stars, and actors who kiss, hug and fight on set.

The shutdown has taken a severe financial toll across the industry, as well as on cities such as Los Angeles that benefit economically from production. Restarting is important to companies, including Netflix Inc, Walt Disney Co and others, which need fresh programming to engage audiences.

While sets remain empty in the United States, productions are ramping back up in South Korea, Australia, Sweden, as well as New Zealand, where James Cameron’s “Avatar 2” is restarting this week.

People who work in the industry expect to see smaller crews, regular testing, hand sanitizer everywhere and the use of computer-generated imagery to create big crowds on screen when work resumes.

Unions representing actors and set employees, including SAG-AFTRA, IATSE and the Directors Guild of America, have hired experts from Harvard and the University of California to help develop guidelines.

All are looking to California Gov. Gavin Newsom, who is taking input from labor and industry representatives and said he is aiming to release protocols for film and TV shoots as early as this week.

Handling the coronavirus is complicated in television because many workers are freelancers, said Dr. Paul Litchfield, an occupational physician, who helped develop guidelines for TV networks in Britain.

“People are moving in and out of your bubble to other productions with other companies,” he said. “So it’s making sure that the guidance is consistent across (TV) companies.”