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Employer Group Argues Against Additional COVID-19 Presumptions

Stuart Waldman is president of the Valley Industry & Commerce Association (VICA), which works to enhance the economic vitality of the greater San Fernando Valley region by advocating for a better business climate and quality of life.

He just published his views on the workers’ compensation presumptions that he says burdens the COVID-19 recovery in an opinion article published by the Los Angeles Daily News.

He says that the consequences of the governor’s COVID-19 “presumption” for workers is far-reaching and will potentially add billions in new costs to California’s already cost-laden system, especially as employers struggle to bring jobs and public services back online.

Now, he points out that state lawmakers stand ready with several legislative proposals which threaten to burden the relatively modest workers’ compensation system with an outsized responsibility for California’s response to COVID-19, even though the connection to the workplace may be tenuous or even nonexistent.

To be clear, he points out that employers have raised no objection to paying COVID-19 workers’ compensation claims that can be traced to the workplace. In fact, these claims are being paid in cases where there’s a positive test. The objection is that presumptions leave employers virtually defenseless against claims that originated outside the workplace but must be accepted as workers’ compensation claims.

Yet he makes four arguments against adding more presumptions to the current worker’s compensation compensability architecture.

First, there’s no evidence that a COVID-19 presumption is needed. In addition to unprecedented safety measures and expansions of sick leave, all evidence points to employers accepting claims for COVID-19. Early reports suggest workers’ compensation claims are only being denied when COVID-19 tests come back negative.

Second, wholesale presumptions fail to consider whether a worker has any greater risk of COVID-19 sickness. Even if they leave their home, many workers are working with ample social distancing and do not interact with the public. Personal errands for these workers likely come with far greater risk than the workplace.

Third, California’s re-opening from the pandemic is not limited to workplaces. People are easing back into broader socializing and recreation. Presumptions assume that people are merely going to or from work. That is not the current reality. The “industrial causation” standard exists precisely because people have lives outside of work.

Fourth, presumptions lay billions of new costs on employers at the exact moment when they can least afford it. For many employers and most public agencies (cities, counties, schools, and others are also employers), workers’ compensation costs are not an indirect cost paid for through insurance. They are a direct, pay-as-you-go cost that redirects critical dollars away from other business needs or public services.

Experts Unsure About Downturn Comp Claim Frequency

The sudden loss of millions of jobs, restrictions on nonemergency health care and the potential workers compensation claims from pandemic-related illness have experts doubting whether claims will follow the conventional industry pattern of past downturns.

Experts say they are on the lookout for greater frequency, a longer chain on claims because of limited medical services and increased cumulative trauma claims.

According to the story in Business Insurance, Len Herk, executive director and senior economist at the National Council on Compensation Insurance said that “Not all recessions are the same,” “We might see some of the same themes as in past recessions, but – the pandemic recession is really a different animal.”

During recessions employment and payroll reductions typically lead to a drop in workers compensation premium, and injury frequency dips below trends, according to research from Boca Raton, Florida-based NCCI.

Workers compensation economists have a number of theories as to why claim frequency tends to dip during a recession, Mr. Herk said. One theory is that employers typically lay off their newest employees – who are more likely to be injured than longer-tenured workers – and when they are hired back they remain more susceptible to injury, he said.

Another theory is that employers who fear they may be laid off if they file a workers comp claim will be less likely to do so.

However, there is limited evidence on how much each factor contributes to these recession trends, and the data is too aggregated to “clearly distinguish one theory from another,” Mr. Herk said. “There are a lot of good questions about employment fluctuations and workers comp that remain to be carefully addressed in research.”

In the economic downturn spurred by shutdowns to limit the spread of COVID-19, “all bets are off,” said David Bellusci, executive vice president and chief actuary of the Workers Compensation Insurance Ratings Bureau in Oakland, California.

We almost instantly went from close to full employment to perhaps unemployment as high as 25% in a matter of four months,” he said. “Even during the Great Depression, (unemployment) eventually went to 25% but that was over four years. It’s really unprecedented, and exactly how that’s going to impact (workers comp), who knows? We’ve never seen anything like this.”

Nationally, the “relative magnitudes” of other factors will determine whether workers compensation acts differently during this economic downturn, NCCI noted in a quarterly briefing in April.

Some factors that could affect the comp system include whether injured employees who are temporarily laid off defer the reporting of workplace injuries for fear of losing their jobs when stay-at-home orders are lifted, or whether workers who anticipate a permanent job loss “accelerate” their reporting of injuries.

The enhanced unemployment insurance made available to laid-off workers by lawmakers early in the pandemic may also impact claims reporting, since the federal unemployment benefit for many lower-wage workers is higher than full indemnity benefits under workers comp – and generally workers cannot claim both unemployment and workers comp benefits at the same time, according to the NCCI.

ICN Estimates 450K Healthcare Workers Infected With COVID-19

The architecture of the California workers’ compensation system will be changing to favor compensability for health care workers’ who contract COVID-19 from exposure to patients on the job. The number of cases that will follow is difficult to estimate. However, an estimate by an international organization of nurses paints a stunning picture of the size of potential claims.

The International Council of Nurses is part of a global voice that has been speaking for nurses around the world for 120 years. The ICN represents 130 national associations and more than 20 million registered nurses.

ICN claims that more than 600 nurses worldwide are known to have died from COVID-19, which has infected an estimated 450,000 healthcare workers.

The death toll among nurses more than doubled in the past month from 260 on May 6, according to its figures, which are based on data from more than 30 countries.

“In the last two months, we have seen the number of deaths of nurses as a result of coronavirus around the world rise from 100 to now in excess of 600 and we think worldwide the number of healthcare workers who could be infected by the virus is around 450,000,” Howard Catton, chief executive officer of the Geneva-based ICN, told Reuters Television.

These are numbers that keep going up,” he said.

The pandemic’s true cost among health professionals was not known, the association said, renewing its appeal for greater protection for them and systematic collection of reliable data.

On average, 7 percent of all cases of COVID-19, the lung disease caused by the novel coronavirus, are among healthcare workers, which means that nurses and other staff are at great personal risk “and so are the patients they care for”, it said.

Extrapolating from more than 6 million reported cases gave its estimate of some 450,000 infections among healthcare workers.

Infection rates among healthcare workers vary greatly between countries, with fewer than 1% in Singapore and more than 30% in Ireland, it said. Spain and Germany have recorded low numbers of fatalities among healthcare workers despite large outbreaks, it added.

“Why do the rates of deaths among nurses appear higher in some Latin American countries?” it asked, referring to the region that the World Health Organization (WHO) says has emerged as the new epicentre for the pandemic.

“Why are some countries reporting disproportionate deaths among black, Asian and minority ethnic HCWs (healthcare workers)? This is an issue raised directly by the Philippine Nurses Association to ICN, concerning Filipino HCWs in the UK,” it said.

Carriers Sue CVS Health for Fraudulent Overcharges

Six Blue Cross Blue Shield companies filed a lawsuit against CVS Health in the United States District Court for the District of Rhode Island, claiming the retail pharmacy chain has “intentionally engaged” in a fraud scheme for more than a decade to overcharge for prescription drugs by submitting insurance claims for payment at artificially inflated prices.

The plaintiffs include BCBS companies in Alabama, Florida, Minnesota, North Carolina, North Dakota and Missouri. The lawsuit was filed May 27 in a Rhode Island District Court.

The lawsuit goes on to explain that CVS offered hundreds of generic drugs at low, discounted prices through cash discount programs. It then used the discount programs to hide the true prices of drugs from third-party payers, according to the lawsuit.

CVS allegedly intentionally told third-party payers that the prices charged to customers for the generic drugs were much higher, and the payers then reimbursed CVS based on the inflated prices instead of the lower prices CVS offered to the general public, the lawsuit claims.

The BCBS companies said CVS was required by governing contracts to submit the same low price offered to the general public.

The companies also claim CVS knew it was being overpaid for generic drugs and has pocketed billions from the scheme. They are seeking millions of dollars they say they were overcharged.

A CVS spokesperson told Becker’s Hospital Review the discount programs were intended for customers who either didn’t have insurance or chose not to use insurance. None of CVS Pharmacy’s discount programs were “in any way concealed, nor fraudulent,” the spokesperson said.

We did not overcharge plans for prescription drugs, and we will vigorously defend against these baseless allegations, which are completely without merit,” the CVS spokesperson told Becker’s.

WCIRB Predicts Claim Frequency Decline Offsets COVID-19 Costs

California has experienced dramatic drops in employment as the COVID-19 pandemic continues to unfold. About 4.3 million first-time Unemployment Insurance claims were processed in the first ten weeks since the start of the pandemic. This comprises more than 20% of California’s total labor force prior to the pandemic.

The impact of this COVID-19 induced economic downturn on the workers’ compensation system is unclear given the magnitude and suddenness of the employment drop, uncertainty surrounding the economy reopening, trends in post-termination claims and potential future waves of COVID-19 infections.

Patterns of historical impacts of prior economic downturns on the workers’ compensation system may shed light on what we could anticipate in the California workers’ compensation system.

In this study, the WCIRB analyzed historical impacts of economic cycles between 1961 and 2017 on workers’ compensation claim frequency, provided forecasts of claim frequency changes in light of the current economic situation and summarized the potential impact of post-termination and COVID-19 claims on claim frequency. The WCIRB’s findings include:

— While many factors influence claim frequency, between 1961 and 2017, overall claim frequency decreased modestly more during years of economic recession than during years of expansion. The modest decline during economic downturns was partly due to cumulative trauma (CT) claims, which, unlike other claims, often increased during downturns.
— For industry sectors that were hit the hardest during the 2001 recession and the Great Recession, claim frequency tended to fall along with job losses or fall faster during economic downturns compared to economic expansions.
— Based on the post-COVID-19 national unemployment rate for April 2020 of 14.7%,3 the WCIRB’s econometric model projects indemnity claim frequency to decline by 14% in 2020. This estimate accounts for several economic and claims related factors but does not fully reflect recent trends in post-termination claims or the impact of COVID-19 claims.
— Since 2012, about 25 post-termination claims (most are CT claims) have been filed for every 1,000 jobs lost. If only 50% of the rate of post-termination claims is applied to the 4.3 million Californians who have lost jobs, about 54,000 post-termination claims could be filed over the next year, increasing statewide indemnity claim frequency by approximately 25%.
— Many claims with a COVID-19 diagnosis are emerging in the workers’ compensation system. Based on two cost estimates of presumptions of compensability that the WCIRB recently published, the estimated frequency increase from COVID-19 claims ranges from 14% over a four-month period of a rebuttable presumption applied to all workers directed to work outside of home to 42% over an annual period of a conclusive presumption to all essential workers.

Historically in the California workers’ compensation system, indemnity claim frequency often declined during economic downturns at modestly greater rates than in periods of economic expansion. The rate of CT claims, on the other hand, often increased significantly during economic recessions. Non-economic factors also impact claim frequency.

The WCIRB’s econometric frequency model that accounts for both economic and non-economic factors suggests that with the dramatic post-COVID-19 economic slowdown and unprecedented job losses, indemnity claim frequency will drop significantly.

However, the model does not reflect any claims arising from COVID-19 diagnosis nor does it fully reflect recent trends in post-termination CT claims. It is possible and perhaps likely that growth in these types of claims will more than offset the impact of the economic slowdown on claim frequency.

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.

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.