Category: Daily News

Aluma Systems Concrete Construction of California entered into an agreement with Nibbi Bros. Inc. to design and supply the materials for wall formwork and deck shoring at Nibbi Bros. Inc. construction project.

The terms of the Contract included an indemnification provision that required Nibbi to defend, indemnify and hold harmless Aluma against any and all claims, actions, expenses, damages, losses and liabilities, including attorneys fees and expenses, for personal injuries rising from or in connection with this contract “except to the extent such claims, actions, expenses, damages, losses and liabilities are caused by the acts or omissions of [Contractor]…”

Subsequently, two lawsuits were filed by Nibbi employees against Aluma alleging that in August 2011, the employees were injured after a shoring system designed by Aluma collapsed. The Employee Lawsuits alleged the collapse was due to Aluma’s negligence. Aluma tendered the Employee Lawsuits to Nibbi for defense and indemnification, but received no response.

Subsequently, Aluma sued Nibbi for indemnification based on a specific provision in the parties’ contract. The trial court sustained Nibbi’s demurrer to Contractor’s complaint without leave to amend, relying on the allegations in the underlying lawsuit that set forth claims only against Aluma and not against Nibbi the employer. Thus they argued that the exception applied since the allegations claim only “acts or omissions” of Aluma.

The Court of Appeal reversed and remanded in the published case of Aluma Systems Concrete Construction v Nibbi Bros. Inc.

The parties agreed that pursuant to Labor Code section 3864, an employer is only liable to indemnify a contractor pursuant to the terms of the contract. They dispute whether the indemnity provision – which applies to claims and damages in connection with the Contract “except to the extent” they are “caused by the acts or omissions of Aluma – applies to the Employee Lawsuits.

Nibbi argues the Employee Lawsuits allege solely Aluma’s negligence and the indemnification provision therefore does not apply. Aluma argues that the provision may apply because Aluma is jointly and severally liable for all economic damages in the Employee Lawsuits, including any attributable to the negligence of Nibbi or others, as long as Aluma’s negligence is partially responsible.

Because the employees were working for Employer at the time of their injuries, they cannot sue Employer for damages but must pursue benefits through the workers’ compensation system. This limitation on Employer’s liability does not extend to third parties, however, and the employees may sue Contractor for damages caused by its negligence.

Here the indemnification provision applies to “claims: and the Employer argues this indicates the allegations of the Employee Lawsuits control the provision’s application. But the provision also requires indemnification for Contractor’s “damages” and “losses.”

The court of appeal concluded that there is “no basis to restrict the damages and losses so indemnified to the allegations of the Employee Lawsuits, rather than to the damages Contractor is ultimately found liable for.”

The Department of Industrial Relations and its Division of Workers’ Compensation reported that $600 million in liens against injured employees’ claims for workers’ compensation benefits have been filed by convicted or criminally indicted parties from 2011 through 2015.

“While California has made great strides in increasing benefits to injured workers, improving appropriate care and reducing employers’ costs, we are pursuing legislation to prohibit criminal and indicted providers from lining their pockets through liens and to address the assignment of liens,” said Christine Baker, DIR Director.

California’s workers’ compensation law allows certain claims for payment of services or benefits provided to or on behalf of injured workers to be filed as a lien against an employer in an employee’s claim for workers’ compensation benefits.  The filing of a lien generates collateral litigation between the lien filer and defendant (insurer or employer) over the validity of the claim and the necessity, extent and value of any services provided.  The parties may then settle on an amount due or adjudicate the dispute in a lien trial before the Workers’ Compensation Appeals Board.

SB 863 (De León), which took effect on January 1, 2013, included a number of provisions to reduce costs by reducing the volume of lien claims and lien claim litigation in the workers’ compensation system, including the reestablishment of lien filing fees to preclude frivolous lien filings, creation of an Independent Bill Review system to remove most billing disputes from litigation, and restrictions on the ability of third parties to collect on assigned lien claims.

Despite these efforts, the 68 businesses comprising the top one percent of lien filers filed more than 273,000 liens totaling $2.5 billion in accounts receivable on adjudicated cases between 2013 and 2015.  Two of the business owners are indicted and three others have pled guilty.  Legislation is underway to stay liens of physicians or providers who are criminally charged with workers’ compensation fraud, medical billing fraud, insurance fraud, and Medicare or Medi-Cal fraud.

Assignments of Accounts Receivables are proving fertile ground for fraud

The assignment of liens by service providers to those who file and collect on liens are, in essence, the buying and selling of injured workers’ treatments and fertile ground for presenting fraudulent claims.  DIR’s review of filing dates indicates that lien claimants tend to wait until after the primary case is settled rather than seeking early resolution of medical necessity.  Even if lien claimants – especially those who bundle and buy or sell accounts receivables – only make pennies on the dollar, returns can still be high.  

DIR say it is leading an effort to identify and address strategies for improved anti-fraud efforts in the workers’ compensation system. DIR and the Department of Insurance convened working groups in June to gather stakeholder input and evidence of fraudulent activity in the system.  At the direction of the Secretary of the California Labor and Workforce Development Agency, DIR will be preparing a report on further recommendations to the Governor and the Legislature by no later than Fall of 2016.

A new study published in the British Medical Journal says that exercise therapy is as effective as surgery for middle aged patients with a common type of knee injury known as meniscal tear (damage to the rubbery discs that cushion the knee joint).

The researchers suggest that supervised exercise therapy should be considered as a treatment option for middle aged patients with this type of knee damage.

According to the story reported in Medical News Today, every year, an estimated two million people worldwide undergo knee arthroscopy (keyhole surgery to relieve pain and improve movement) at a cost of several billion US dollars. Yet current evidence suggests that arthroscopic knee surgery offers little benefit for most patients.

So researchers based in Denmark and Norway carried out a randomized controlled trial to compare exercise therapy alone with arthroscopic surgery alone in middle aged patients with degenerative meniscal tears.

A randomized controlled trial is one of the best ways for determining whether an intervention actually has the desired effect.

They identified 140 adults (average age 50 years) with degenerative meniscal tears, verified by MRI scan, at two public hospitals and two physiotherapy clinics in Norway. Almost all (96%) participants had no definitive x-ray evidence of osteoarthritis.

Half of the patients received a supervised exercise program over 12 weeks (2-3 sessions each week) and half received arthroscopic surgery followed by simple daily exercises to perform at home.

Thigh muscle strength was assessed at three months and patient reported knee function was recorded at two years.

No clinically relevant difference was found between the two groups for outcomes such as pain, function in sport and recreation, and knee related quality of life. At three months, muscle strength had improved in the exercise group. No serious adverse events occurred in either group during the two-year follow-up.

Thirteen (19%) of participants in the exercise group crossed over to surgery during the follow-up period, with no additional benefit.

“Supervised exercise therapy showed positive effects over surgery in improving thigh muscle strength, at least in the short term,” say the authors. “Our results should encourage clinicians and middle aged patients with degenerative meniscal tear and no radiographic evidence of osteoarthritis to consider supervised structured exercise therapy as a treatment option.”

How did this situation – widespread practice without supporting evidence of even moderate quality – come about, ask two experts in a linked editorial? “Essentially, good evidence has been widely ignored,” say Teppo Järvinen at the University of Helsinki and Gordon Guyatt at McMaster University in Canada.

“In a world of increasing awareness of constrained resources and epidemic medical waste, what we should not do is allow the orthopaedic community, hospital administrators, healthcare providers, and funders to ignore the results of rigorous trials and continue widespread use of procedures for which there has never been compelling evidence,” they conclude.

Medical care under the California workers’ compensation system is based upon evidence based medicine.  One would hope that the UR and IMR process has physicians who are aware of the findings of these studies when they make a decision to allow or turn down a request for treatment.

Juan Pablo Beltran filed an Application alleging he sustained an industrial cumulative trauma injury to his head and back due to repetitive heavy work while employed as a laborer by Structural Steel Fabricators. The employer denied applicant’s claim based upon the affirmative defense that applicant did not report the injury prior to his termination for cause.

The parties submitted a walk through Compromise and Release Agreement settling applicant’s claim for $12,500.00, which included his potential entitlement to a Supplemental Job Displacement Benefit voucher. Upon receipt of the Compromise and Release Agreement, the WCJ suspended action on the settlement agreement and set the matter for trial, noting on March 24, 2016, that the parties may not settle or commute the Supplemental Job Displacement Benefit voucher. The WCJ then reset the matter for a status conference after defendant filed a Petition for Removal.

According to the WCJ’s Report and Recommendation on Petition for Reconsideration, the WCJ requested defendant strike the language that applicant was not entitled to a Supplemental Job Displacement Benefit voucher. When defendant would not agree, the WCJ approved the Compromise and Release Agreement with the additional language, “Parties may not settle or commute SJDV per LC §4658.7(g) CCR§10133.31 (h).”

The WCAB granted reconsideration in the panel decision of Juan Pablo Beltran v Structural Steel Fabricators and SCIF.

In 2012 the Legislature passed SB863 which amended the provisions of workers’ compensation law pertaining to Supplemental Job Displacement Benefits, which replaced vocational rehabilitation benefits that were terminated in 2004. A provision was added prohibiting the settlement or commutation of a claim for the Supplemental Job Displacement Benefit voucher. According to the Assembly Floor Analysis, the prohibition on settlement of the Supplemental Job Displacement Benefit voucher was to prevent the “cashing out” of the retraining voucher.

Defendant argues on reconsideration that where there is a good faith dispute as to the compensability of a claim of injury, the parties should be permitted to settle applicant’s entitlement to the Supplemental Job Displacement Benefit voucher, analogizing to the situation which existed with respect to the settlement of vocational rehabilitation benefits that was addressed in Thomas v. Sports Chalet (1977) 42. Cal.Comp.Cases 625 [Appeals Board En Banc].

The prohibition against settlement of the Supplemental Job Displacement Benefit voucher is analogous to the prohibition against settlement of vocational rehabilitation benefits, which Thomas held could be resolved in a Compromise and Release Agreement only when a serious and good faith issue exists, which if resolved against the applicant would defeat all right to compensation.

Here, an injured worker’s entitlement to the Supplemental Job Displacement Benefit voucher is conditioned upon both the acceptance of liability for a claimed industrial injury by the employer and the existence of permanent partial disability, or a determination of these issues after trial. Where an employer denies liability and raises an affirmative defense that could potentially defeat all right to compensation, a prohibition on settlement of the Supplemental Job Displacement Benefit voucher would require a trial to determine injury and the existence of permanent partial disability in every case. The Board in Thomas recognized that this would result in “effectively doing away with settlements,” despite the existence of good faith disputes that could totally bar recovery.

Accordingly, we hold that, as in Thomas, where the trier of fact makes an express finding based upon the record that a serious and good faith issue exists to justify a release, a compromise and release agreement may be: approved by the Board which will relieve the employer from liability for the Supplemental Job Displacement Benefit voucher.

In 2004, Andrew Hernandez, a CHP sergeant in Valencia, slipped and fell while assisting in the pursuit of a suspect who had fled on foot, injuring his low back and cervical spine. Hernandez and the CHP through its adjuster State Compensation Insurance Fund agreed that his injuries were AOE-COE and that he was 35 percent disabled and would need future medical treatment for his low back.

The principal issue in the proceeding before the WCJ concerned payments for temporary total disability. In a February 2013 decision the WCJ found that Hernandez was temporarily totally disabled from July 18, 2011 to November 8, 2011. Although Hernandez received payments equal to the full amount of his salary during that period, a portion of those sums was charged against his accrued annual vacation leave.

Hernandez petitioned in January 2015 for recovery of the full amount he should have received as paid leave-of-absence benefits under section 4800.5, plus penalties for unreasonable delay under section 5814, subdivision (a), and interest.

The WCJ agreed Hernandez was entitled to the relief he had requested; but the Workers’ Compensation Appeals Board in a divided decision after reconsideration, rescinded her ruling, concluding (1) Hernandez’s claim for reimbursement of accrued leave involved employee benefits and was outside the jurisdiction of the Board; (2) the February 1, 2013 award by the WCJ barred Hernandez’s 2015 claim for additional section 4800.5 payments under the doctrine of res judicata; and (3) there was no basis for awarding a penalty because Hernandez had received the full amount of his salary during the period of his temporary disability.

The Court of Appeal in the published opinion of Hernandez v. WCAB disagreed, and annuled the decision of the Board and remand the matter with directions to award Hernandez additional compensation under section 4800.5 in an amount equal to the value of annual leave used during the disputed period of temporary disability and to hear and determine the issue of penalties and interest.

The Board has exclusive jurisdiction over all proceedings for “the recovery of compensation, or concerning any right or liability arising out of or incidental thereto” (§ 5300, subd. (a)), as well as for “the enforcement against the employer or an insurer of any liability for compensation imposed upon the employer by this division in favor of the injured employee, his or her dependents, or any third person.” (§ 5300, subd. (b); see also § 5301 [Board “is vested with full power, authority and jurisdiction to try and determine finally all the matters specified in Section 5300 subject only to the review by the courts as specified in this division:].)

Section 4800.5, subdivision (d), specifically confers Board jurisdiction to award and enforce payment of the benefits provided CHP officers by that provision of the workers’ compensation laws.

On the issue of jurisdiction over the 4800.5 issue the court went on the say that “In light of this clear violation of Hernandez’s rights under the workers’ compensation laws, the argument the Board lacks jurisdiction to provide a remedy borders on sophistry.”

On the issue of the source of benefits the court concluded that “There can be no dispute that section 4800.5 obligated the CHP to pay Hernandez his full salary, in lieu of disability payments, while he was temporarily disabled…”