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Gallagher Acquires Atlas General Insurance Services in California

Arthur J. Gallagher & Co., announced the acquisition of San Diego-based Atlas General Holdings, LLC, dba Atlas General Insurance Services.

Terms of the transaction were not disclosed.

Atlas General Insurance Services began in 2009, with a niche focus on California workers’ compensation. The company has grown strategically over the past seven years, becoming a national enterprise across numerous territories and diversifying its portfolio of product offerings. Atlas now offers a broad commercial products line, as well as a division dedicated to specialty property needs.

While Atlas’ workers’ comp coverage has grown to include a wide range of industries through their exclusive partnership with Falls Lake Insurance Companies, the company is also focused on growing through the cultivation of its commercial division. Atlas remains dedicated to strengthening its diverse product offerings through the creation of exclusive programs with carrier partners while maintaining excellent service standards.

Mike Mathews, Charles Lasher and their associates will remain in their current location under the direction of Joel Cavaness, president of Risk Placement Services, Inc., Gallagher’s U.S.-based wholesale brokerage division.

Mike Mathews is responsible for the development and national distribution of the Workers’ Compensation Division. Prior to Atlas, Mathews led program development and distribution at Arrowhead General Insurance Agency in the Workers’ Compensation Division. He has over twenty years of industry experience with a multi-line underwriting background from Ohio Casualty and Liberty Mutual. Mathews also served as Marsh’s Workers’ Compensation Practice Leader for ten years.

Charles Lasher is responsible for the development and oversight of Atlas General’s commercial division. Charles came to Atlas in 2015 and has built products, managed programs, and national distribution for the commercial division. Charles has over 15 years of experience in the insurance industry working with MGA’s focused on program business. Charles is a graduate from California State University Fullerton.

Atlas is a highly-regarded program administrator that brings RPS deep market expertise, a complementary book of business and a best-in-class workers comp platform,” said J. Patrick Gallagher, Jr., Chairman, President and CEO of Gallagher. “We are delighted to welcome Mike, Charles and their associates to our growing global team.”

Arthur J. Gallagher & Co., a global insurance brokerage, risk management and consulting services firm, is headquartered in Rolling Meadows, Illinois. The company has operations in 49 countries and offers client-service capabilities in more than 150 countries around the world through a network of correspondent brokers and consultants.

Lowe’s Faces Class Action for Sick Pay Miscalculation

Last November, a putative class action was filed in Solano County Superior Court by Maria Johnson, on behalf of herself and other similarly situated current and former employees of Lowe’s Home Centers, LLC, and as a proxy for the State of California.

She began working for Lowe’s in 2015 and worked California, until her employment as a delivery coordinator ended in October of 2020.

This class and representative action challenges alleged systemic employment practices resulting in violations of the California Labor Code against individuals who worked for Defendants. The Complaint addresses Defendants’ violations of Labor Code sections 201-202, 204,226,233, and 246, and seeks penalties, damages, and other relief pursuant to, among other provisions, Labor Code sections 203,210,218,218.5, 218.6, 248.5, and 2698 et seq., and the Unfair Competition Law, codified in the Business and Professions Code.

Maria Johnson alleges four causes of action; (1) Unpaid Sick Pay (including derivative penalties for such unpaid sick pay, including waiting time penalties); (2) Inaccurate Itemized Wage Statements; (3) Unfair or Unlawful Business Practices; and (4) Violations of the California Labor Code §§ 2698, et seq.

With respect to the first cause of action, plaintiffs allege that “As a matter of policy and practice, Defendants pay Plaintiff and the Sick Pay Class for sick time at the incorrect rate of pay. Defendants pay Plaintiff and the Sick Pay Class at the base hourly rate of pay, as opposed to the regular rate of pay, which would take into account all non-discretionary remuneration in addition to their base hourly wages, including for example incentives or bonuses, or the rate resulting from dividing the employees’ total wages, not including overtime premium pay, by the employees’ total hours worked in the full pay periods of the prior 90 days of employment, as required by Section 246. This results in underpayments of sick pay wages to Plaintiff and the Sick Pay Class.

They support this claim by saying “The California Supreme Court has explained that “[c]ourts have recognized that ‘wages’ also include those benefits to which an employee is entitled as a part of his or her compensation, including money, room, board, clothing, vacation pay, and sick pay.” Murphy v. Kenneth Cole Prods., Inc., 40 Cal. 4th 109 4, 1103 (2007) ( emphasis added).”

According to Lowe’s data, there were approximately 18,799 full-time, non-exempt individuals employed by Lowe’s in California who were paid sick pay wages at any time during the period of November 23, 2017 to December 21, 2020.

On January 15, 2021 Lowe’s provided Notice that it had filed documents to remove the case to the United States District Court for the Eastern District of California. In this regard they allege “Removal of a class action is proper if: (1) there are at least 100 members in the putative class; (2) there is minimal diversity between the parties, such that at least one class member is a citizen of a state different from any defendant; and (3) the aggregate amount in controversy exceeds $5 million, exclusive of interest and costs.”

Lowe’s maintains that this action was improperly filed in state court because “Plaintiff agreed to binding individual arbitration of the claims she has asserted in this action. Lowe’s also intends to oppose class certification on multiple grounds, including that (a) Plaintiff must arbitrate her claims against Lowe’s individually pursuant to the binding and enforceable arbitration agreement and class action waiver executed by Plaintiff, and (b) class treatment is inappropriate under these circumstances in part because there are many material differences between the named Plaintiff and the putative class members Plaintiff seeks to represent, as well as amongst the putative class members.”

Lowe’s avers, for the purposes of meeting the jurisdictional requirements for removal only, that if Plaintiff were to prevail on every claim and allegation in her Complaint on behalf of the putative class, the requested monetary recovery would exceed $5 million.

DWC Reviews IBR Performance of 2018-2019

In September 2012, Governor Brown signed into legislation Senate Bill (SB) 863. This reform of the workers’ compensation system in California included Independent Bill Review (IBR), which went into effect January 1, 2013. IBR is an efficient, non-judicial process for resolving medical treatment and medical-legal billing disputes in which the medical provider disagrees with the amount paid by a claims administrator on a properly documented bill after a second review.

The DWC just posted a progress report on the department’s Independent Bill Review program.

The 2020 Independent Bill Review (IBR) Report: Analysis of 2018-2019 Application Filings summarizes the activity of an essential component of Senate Bill 863, providing an evaluation of the program during the previous two calendar years. The report accounts for all applications filed to dispute payments not resolved through Second Bill Review during this time period.

Maximus Federal Services, the IBRO, provides the DWC with data extracted from its proprietary software. This data corresponds with information in the Final Determination Letters (FDLs) that are received by the filing parties. Anonymized copies of FDLs for cases decided in the current year are available on the DWC website within thirty days of their issuance

In 2018 and 2019, a similar number of IBR applications was received by the IBRO: 1,692 and 1,644, respectively. These are the first two years since the first year of the program in which application filings fell below 2,000. Each quarter in the two calendar years had a steady pace of IBR filings, ranging from 353 to 483 per quarter.

In 2018, one in three applicants was a provider based in the San Francisco Bay Area (34.9%), and one in four (26.6%) practiced in Los Angeles County. In 2019, nearly half the applications (48.7%) were from Bay Area providers, and applications from Los Angeles fell 25% from the previous year.

Approximately one in four IBR applications is determined to be ineligible for review. Ineligibility factors include untimely requests, requests made prior to completion of a second review, and requests made without payment of the required fee.

Among the filings that received a review and a case determination in 2018, 47% were overturned, meaning the IBRO determined that additional reimbursement is warranted. In 2019, 59.1% of the case determinations were overturned.

Overturned IBR case decisions for applications filed in 2018 and 2019 resulted in reimbursement to the providers totaling $3,823,402. This amount includes the repayment of the filing fees for these cases. The filing fee remains set at $195.

The report is posted on the DIR website.

Supreme Court Rules Dynamax Decision Applies Retroactively

At the request of the United States Court of Appeals for the Ninth Circuit, the California Supreme Court agreed to decide the following question of California law: Does this court’s decision in Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903 (Dynamex) apply retroactively?

In Dynamex, the Supreme Court was faced with a question of first impression: What standard applies under California law in determining whether workers should be classified as employees or independent contractors for purposes of the obligations imposed by California’s wage orders?

It held that such a worker can properly be found to be “an independent contractor to whom a wage order does not apply only if the hiring entity establishes: (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.”

This is now referred to as the A-B-C test.

Defendant argued that an exception to the general retroactivity principle should be applied here because, prior to Dynamex, businesses could not reasonably have anticipated that the ABC test would govern at the time when they classified workers as independent contractors rather than employees.

In answer to the question posed by the Ninth Circuit, the Supreme Court concluded in Gerardo Vazquez v Jan-Pro Franchising International, Inc.,that it’s decision in Dynamex applies retroactively to all nonfinal cases that predate the effective date of the Dynamex decision.

Employers were clearly on notice well before the Dynamex decision that, for purposes of the obligations imposed by a wage order, a worker’s status as an employee or independent contractor might well depend on the suffer or permit to work prong of an applicable wage order – and that the law was not settled in this area.

Former Firefighter to Serve 90 Days and Pay $130K for Comp Fraud

The Ventura County District Attorney’s office announced that former Ventura County firefighter, 34 year old Perry Adam Lieber, of Santa Barbara, was sentenced to 90 days in jail and 24 months of felony probation after pleading guilty to felony workers’ compensation fraud in violation of Insurance Code section 1871.4(a).

Lieber admitted as part of his guilty plea, that he made false material statements for the purpose of obtaining disability and other benefits to which he was not entitled during a prior workers’ compensation claim with the Ventura County Fire Department. Victim agencies York Risk Services and the County of Ventura sustained losses in excess of $186,082.

Chief Mark Lorenzen of the Ventura County Fire Department said Lieber resigned from the agency last March. According to a report in the Ventura County Star at the time of his arrest, the Chief said the department was not surprised by the charges the DA’s office has brought against Mr. Lieber. “We were aware of a number of irregularities during the last portion of his career. We brought those to the attention of the county risk management unit.”

In addition to the jail sentence, Lieber was immediately ordered to pay $100,000 in victim restitution and $30,000 in fines.

The court also ordered multiple financial accounts controlled by Lieber that were previously frozen by the court be liquidated to satisfy its order.

A hearing relating to additional restitution still owed to the victim agencies is scheduled for March 4, 2021, at 9:00 a.m. in courtroom 26 of the Ventura County Superior Court.

January 11, 2021 – News Podcast


Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: Unapproved Comp Policy Arbitration “Side Agreements” Unenforceable. PhRMA Loses Challenge to California Drug Transparency Law. Ohio AG Claims OptumRX Knowingly Overcharged State. Irvine Diagnostic Lab Pays $358K to Resolve False Claim Charges. Union Head to Serve 12 Years for Stealing Health Plan Funds. DWC Allows Walk-Through Documents at Local Offices. Workplace Deaths (Non-Pandemic) Rose 2% in 2019. L.A. and San Francisco Order $5/hr “Hero Pay” for Grocery Workers. Cal-SARA – a New Non-Profit – Seeks Staffing Agency Reform. SCIF Says Happy New Year With $39M Dividend.

Public Hearing Set for Adoption of COVID-19 Treatment Guideline

The Division of Workers’ Compensation (DWC) has issued a notice of conference call public hearing for a proposed evidence-based update to the Medical Treatment Utilization Schedule (MTUS), which can be found at California Code of Regulations, title 8, section 9792.24.7.

The conference call public hearing is scheduled for Thursday, February 18, at 10 a.m. and members of the public may attend by calling 866-390-1828 and using access code 5497535#. Members of the public may review and comment on the proposed updates. Written comments must be submitted no later than February 18. Please see the proposed regulation page for direction for submitting written comments.

The proposed evidence-based update to the MTUS incorporate by reference the latest published guideline from American College of Occupational and Environmental Medicine (ACOEM) for the following:

Coronavirus (COVID-19) Guideline (ACOEM December 14, 2020)

The 99 page guideline contains an analysis of the effectiveness of COVID-19 treatment using the following:

— Hydroxychloroquine and Chloroquine.
— Azithromycin.
— Favipiravir.
— lopinavir-ritonavir.
— Remdesivir.
— low-Molecular-Weight Heparin.
— IL-6 Receptor Antagonists (Tocilizumab, Sarilumab, and Siltuximab).
— Baricitinib.
— Casirivimab plus lmdevimab.
— Bamlanivimab.
— Convalescent COVID-19 Antibodies.
— Glucocorticosteroids.
— Interferon Beta-lb.
— Ribavirin.
— Zinc.
— Vitamin D.

The proposed evidence-based update to the MTUS regulations are exempt from Labor Code sections 5307.3 and 5307.4 and the rulemaking provisions of the Administrative Procedure Act. However, DWC is required under Labor Code section 5307.27 to have a 30-day public comment period, hold a public hearing, respond to all the comments received during the public comment period and publish the order adopting the update online.

Man Arrested for $3.5M N95 Mask Fraud with Bay Area victims

Federal prosecutors for the Northern District of California filed an indictment charging defendant Rodney L. Stevenson II with wire fraud, mail fraud, and money laundering for his operation of an e-commerce site that claimed to have N95 masks for sale during the current COVID-19 epidemic.

Stevenson operated EM General, a company created in September 2019, which purported to sell N95 masks with N99 filters. At the onset of the COVID-19 pandemic in February 2020, EM General and its website, controlled by Stevenson, advertised that it had N95 masks “in stock” and available for shipping.

EM General sold many of these masks for as much as $24.95 each. Also according to the indictment, to bolster the legitimacy of EM General, Stevenson created a professional-looking website that included the names, backstories, and stock photographs of a group of fake EM General executives.

It also falsely described how long the company had been in business, its sales volume, and its reputation. Stevenson also used fictitious names in emails to customers.

The indictment alleges that, as the pandemic worsened and demand for N95 masks increased dramatically, EM General’s sales skyrocketed. EM General’s total sales from approximately on or about February 11, 2020, to approximately on or about March 8, 2020, were approximately $3,500,000 involving over 25,000 customers, the vast majority of which were sales of N95 masks that were never delivered to customers. This amount included over $900,000 in sales on February 28, 2020, alone.

Bay Area residents thought they were buying much needed N95 masks from EM General, but according to the criminal complaint Stevenson had no intention of delivering masks. “What’s described in the complaint is a consumer nightmare of fake web pages and false promises,” said US Attorney for the Northern District of California, David Anderson.

Stevenson and EM General delivered almost none of the masks. Instead, when customers complained and asked for refunds, Stevenson, at times communicating with Gmail accounts he created under the names of fake identities, generally refused to refund customers and instead offered a series of lies to fraudulently prolong his scheme while he continued selling masks.

These lies included that EM General could not offer refunds because it had already paid for the customer’s order from a manufacturer, that products would ship soon, and that customers would receive tracking orders soon. For a small number of customers, Stevenson eventually fraudulently substituted masks that did not meet the standards set by the National Institutes of Occupational Safety and Health for N95 or N99 masks, meaning that they did not filter out 95 or 99 percent of particulate matter from the air.

Stevenson is charged with nine counts of wire fraud, in violation of 21 U.S.C. § 1343; one count of mail fraud, in violation of 18 U.S.C. § 1341; five count of laundering of monetary instruments, in violation of 18 U.S.C. § 1956(a)(1)(A)(i); and one count of money laundering, in violation of 18 U.S.C. § 1957.

CWCI Report Shows COVID Comp Claims Tripled Prior Months

A California Workers’ Compensation Institute analysis of claims reported to the state Division of Workers’ Compensation as of January 11 shows that the number of COVID-19 claims in the California workers’ compensation system more than tripled between October and November, then jumped another 64.2% to a record 23,483 claims in December. A new projection shows that the December total could climb to 37,573 cases once claims that are yet to be filed or still under investigation are added to the tally.

The latest figures show that after falling to a 6-month low in September, monthly COVID-19 claim counts began trending up in October as the fall wave of coronavirus cases hit the state.

Although not all November and December claims have been reported, the initial data from those months shows that as of the January 11, the DWC had recorded 14,298 COVID-19 claims with November injury dates, and a record 23,483 COVID-19 claims from December.

That year-end surge pushed the number of COVID-19 claims reported to the DWC for accident year (AY) 2020 to 93,470, which is 15.7% of all 2020 claims reported to the state, though with the recent spike, that proportion rose to 28.7% of all work injury claims reported for November and 47.4% of all claims reported for December.

The AY 2020 COVID-19 claim count includes 464 death claims — up 21.7% from the 381 death claims reported as of December 28 — which means COVID-19 death claims accounted for nearly half (48.0%) of the 966 work-related death claims recorded by the state for AY 2020.

Additional year-end claims continue to be filed, and CWCI’s projected COVID-19 claim count based on historical claim development that accounts for delays in COVID-19 claim reporting estimates that ultimately there will be 16,872 claims from November, and 37,573 claims from December, far surpassing the previous monthly record of 15,537 COVID-19 claims projected for July.

With hundreds of thousands of California jobs lost during the pandemic, and many workers in the state continuing to work remotely, DWC has recorded only 594,840 work injury claims for AY 2020, down 13.5% from 667,942 claims for AY 2019, despite the addition of the 93,470 COVID-19 claims.

However, the year-over-year decline in claim volume is only 6.5% if CWCI’s updated projection of the ultimate claim count for AY 2020 is used.

Other recent results show that health care workers’ share of the COVID-19 claims has declined from 44.7% in the first quarter of 2020 to 28.8% in the fourth quarter; males and younger workers continue to account for a growing share of the COVID-19 claims; and COVID-19 claim denial rates hit a 6-month high of 36.9% in October, though the denial data on claims from the last two months of 2020 is too green to be reliable.

Denial rates vary significantly by industry, with October claim denial rates ranging from 12.8% for utility workers to 66.8% for transportation workers. Many COVID-19 claims are denied because the claimants do not test positive for the virus.

The latest results on California workers’ comp COVID-19 claims are from the January 11 update to CWCI’s COVID-19/Non-COVID-19 Interactive Claim App, which integrates data from CWCI, DWC, and the Bureau of Labor and Statistics to provide information on California work injury claims from comparable periods of 2019 and 2020. The app is updated biweekly and is available to the public here.

Camarillo Insurance Brokers Face $687K Premium Fraud Charges

Licensed insurance agents Robert Farmer, 65, of Camarillo, and Marion Urcan, 67, of Agoura Hills, were arraigned  in Los Angeles County Superior Court on multiple counts of grand theft after allegedly accepting over $687,000 in insurance premium payments from business owners and misappropriating the money for their personal use.

Farmer and Urcan, doing business as Centerpointe Insurance Services Limited in Camarillo, accepted insurance premium payments from two towing companies in the Los Angeles area.

On June 20, 2019, the California Department of Insurance received a complaint from the owner of one of the towing companies that alleged Centerpointe Insurance Services Limited accepted two checks totaling $391,000 for the company’s commercial auto insurance policy, but Farmer and Urcan did not forward these premium payments to the insurance company.

On December 20, 2019, the Department received a complaint from the other towing company that alleged Centerpointe embezzled a $50,000 down payment made toward the renewal of the towing company’s commercial auto insurance policy.

An investigation by the Department of Insurance revealed Farmer and Urcan accepted over $687,000 in total from the two towing companies but never sent the payments to an insurance company to secure liability insurance for either business owner, leaving them vulnerable to catastrophic loss.

The Department of Insurance is taking the appropriate administrative action against the licensees. Anyone who has been victimized or knows someone who has been victimized by either Farmer or Urcan, please call 661-253-7500.

They are scheduled to return to court on March 5, 2021. This case is being prosecuted by the Los Angeles County District Attorney’s Office.