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Category: Daily News

Comp Rates Continue to Climb

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Rates and premiums for workers’ compensation insurance are continuing to climb across the US, driven by factors including the prolonged low interest rate environment and rising medical costs. Meanwhile, implementation of the Affordable Care Act (ACA) and the potential expiration of the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) are two other factors that could make a significant impact on the workers’ comp market as 2014 unfolds.

As the U.S. unemployment rate shows modest declines and wages are slowly increasing, it’s no surprise that workers’ compensation premiums are continuing to show growth. A quick look back at the past 8 years tells us that the workers’ compensation market suffered through a 27% decline in premium from 2006 to 2010 before rebounding with growth in the past 3 years, including a 10% increase in 2012 to more than $39 billion according to an annual study by the National Council on Compensation Insurance (NCCI).

Wells Fargo took a look at what to expect through 2014 in the workers’ comp market in its 2014 Insurance Market Outlook, released at the end of January. In addition to concurring with the Marsh report regarding TRIPRA, the report forecasts continued rate increases for the first three quarters of this year, along with continued reduction in the combined loss ratio, resulting from higher prices seen over the past three years. The report includes several other predictions, such as continued movement away from guaranteed cost program structures into higher deductible program structures, either because they are a more appealing alternative or a necessity. One final prediction in the report says the continued use of predictive modeling analysis to improve risk selection, proper retention levels and pricing will result in more conservative underwriting by the insurers.

Health care reform hasn’t made a significant impact on the US workers’ comp market to date, but that isn’t expected to be the case for much longer. The effects could be both beneficial and detrimental. Ruth Estrich, chief strategy officer at Philadelphia-based MedRisk, a workers’ comp-focused managed care company, says the impact could come in a variety of forms. One way would be reduced severity in worker’s comp. If millions of people who were previously uninsured become insured, one would hope that these people will get healthier. For people that have chronic issues (such as asthma), having health insurance that allows them to manage their issues should impact how quickly they heal, become functional and get back in the workplace. Someone who is not getting care for their chronic issues will likely take longer to recover in a workers’ comp situation.

Estrich says another issue the industry is watching is access to primary care physicians (PCPs). “If you think about all of those folks who will start accessing health care through their PCP, we are headed toward a problem with access to primary care,” Estrich says. “People were already predicting that access to primary care will be a problem. It could be a perfect storm.” In worker’s comp, a lot of the treatment and first response in many cases comes via a person’s PCP. Estrich says it is conceivable that many PCPs, who are already in short supply, will elect to stop treating workers’ comp cases, which can be more challenging to deal with. This would obviously be a negative development for the workers’ comp market.

The third issue Estrich sees in the potential for a cost shift. People without health insurance have an incentive to ascribe their injury to a workplace event when it may well have happened away from the job, simply because they would be covered by workers’ comp and not covered if the injury occurs away from work. With more people being covered by health insurance, they would be less likely to claim an injury happened at work.

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Painkiller Addiction Leads to “Lower Cost” Heroin Addiction

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More than 12 million Americans reported using prescription painkillers in 2010 without a prescription or just for the high that they cause. Nearly 3 out of 4 drug overdose deaths are now caused by prescription painkillers. In 2008, some 14,800 deaths were attributed to the pills – more than cocaine and heroin combined. More than 475,000 emergency room visits were directly linked to prescription painkiller misuse or abuse in 2009, roughly double the number of five years earlier.

The global production of oxycodone, marketed as OxyContin in the United States, increased from two tons in 1990 to 135 tons in 2009. More than two-thirds of that supply was manufactured in the US, which, according to the United Nations Office on Drugs and Crime, increases the risk of its subsequent overprescription and diversion into illicit channels. Experts trace the rise of painkiller misuse in the US to 1996. That’s when the pharmaceutical company Purdue Pharma introduced OxyContin, a narcotic and derivative of opium. Andrew Kolodny, chief medical officer of Phoenix House, a national nonprofit treatment agency, describes OxyContin as essentially a “heroin pill.” It was made of oxycodone, a narcotic used to treat pain at the end of life. But the new pill would allow the company to reach a much wider audience.

“[Purdue] wanted a product that would be prescribed for common, moderately painful chronic conditions,” says Dr. Kolodny, who is also president of Physicians for Responsible Opioid Prescribing, an advocacy group. At first, the medical community balked. Using opioids for chronic problems seemed too risky given the nature of the pills’ highly addictive properties. But Purdue Pharma launched an aggressive marketing campaign arguing that it was a compassionate way to treat patients and, because of its extended-release characteristics, would be less prone to abuse. But before long, numerous cases of addiction to the painkillers began to surface. In 2007, Purdue Pharma pleaded guilty in federal court to misleading doctors and the public about OxyContin’s risks and paid a $600 million penalty. Kolodny says that the overprescribing of painkillers has now led to an “epidemic” of addictions, both among pain patients and recreational users.

And once a person becomes addicted to painkillers, it isn’t a long journey to heroin – itself a derivative of morphine developed in the late 1800s as a painkiller. Joseph Gfroerer of SAMHSA co-wrote a recent study that found that, of those who had tried heroin, about 80 percent had previously used painkillers without a prescription. From Los Angeles to Long Island, Chicago to New Orleans, parents and police are struggling with a rise in heroin use in suburban neighborhoods. The rise is being driven by a large supply of cheap heroin in purer concentrations that can be inhaled or smoked, which often removes the stigma associated with injecting it with a needle. But much of the increase among suburban teens, as well as a growing number of adults, has also coincided with a sharp rise in the use of prescription painkiller pills, which medical experts say are essentially identical to heroin. These painkillers, or opioids, are prescribed for things such as sports injuries, dental procedures, or chronic back pain. Yet in a disturbing number of cases, experts say, they are leading to overdependence and often to addiction to the pills themselves, which can then lead to heroin use. Once hooked, users look for doctors who will sell them prescription drugs and, failing that, turn desperately to the street, where the price can be as high as $80 for a single pill. When that becomes too expensive, users often resort to the drug that produces the same kind of high that painkillers do but is far cheaper: heroin.

The latest rise in heroin abuse was made more visible by the recent overdose death of actor Philip Seymour Hoffman. But use of the drug has been growing steadily across many levels of society for at least the past five years. And unlike the heroin surge in the 1970s, the current use of opiates is far more concentrated among suburban and rural whites than among African-American and Latino communities. The heroin that addicts used to shoot up with was 2 or 3 percent pure. Today, the street purity of the drug can be as high as 80 percent. That potency helps explain both the drug’s wider appeal and its new danger. Heroin once had to be injected for users to get the high they were looking to achieve, but it is now concentrated enough that they can smoke or snort it to get a similar effect – methods that make heroin easier for people to use it without feeling like a junkie. The higher purity is also more likely to trigger an overdose for those who do inject it.

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So. Cal Water District Faces Insurance Crisis with JPA

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Central Basin Municipal Water District is a public agency that purchases imported water from the Metropolitan Water District of Southern California and wholesales the imported water to cities, mutual water companies, investor-owned utilities and private companies in southeast Los Angeles County. There are 24 cities in Central Basin’s service area. The company is headquartered in Commerce California. The politically explosive District appears to be within a few days of financial armageddon after the agency was officially put on notice that its public insurance carrier is dropping them as a client.

According to the report by Hews Media Group-Community Newspaper, the Association of California Water Agencies and the Joint Powers Insurance Authority (ACWA-JPIA) officially informed Central Basin officials that their insurance coverage has been discontinued citing the “workings of a dysfunctional Board of Directors.” The District claims it is now “proactively reviewing all its available insurance options and alternative providers, in light of a pending decision by ACWA-JPIA regarding the District’s future relationship with the insurance provider.

During the past year, HMG-CN has published dozens of exclusive investigative reports documenting deep legal problems allegedly caused by Directors Robert Apodaca, James Roybal and Leticia Vasquez that could be the reasons for JPIA dropping the agency. HMG-CN disclosed the details of a sordid sexual harassment complaint lodged by a female employee against Apodaca;The newspaper has learned that the alleged victim in the case could be handed a high seven-figure settlement. Sources also tell HMG-CN that other females may be in the process of coming forward to file additional cases of sexual harassment activities against Apodaca.

HMG-CN also was the first news outlet to confirm and disclose the details of Director Leticia Vasquez’ filing of a highly controversial whistleblower lawsuit against her own agency. Vasquez, who denied she would be filing the lawsuit until it was revealed by HMG-CN, claims to have been “victimized” by many parties, individuals and law firms who have banked millions in questionable contracts with the agency during the past decade. Vasquez’s lawsuit also goes after her top political alley and heavy campaign contributor Ernest “Ernie” Camacho who is the owner of Pacifica Services. It also cited the Calderons, and other companies. Camacho and his company have banked millions in exclusive contracts with Central Basin.

Vasquez staged a bizarre press conference two weeks ago where she demanded that another director, Art Chacon resign his seat after it was learned that he had been involved in one accident while performing district business. The accident is in litigation, JPIA is fighting the fact that Chacon was working despite multiple sources coming forward to HMG-CN saying he was working, and is set for arbitration August of this year.

Former Central Basin District executive Ron Beilke also filed a complaint alleging wrongfully termination, retaliation, and harassment during his short tenure at the agency. Beilke confirmed to HMG-CN that he is plans to file a seven-figure lawsuit and plans to name Roybal, Apodaca and Vasquez individually in the complaint.

Phil Hawkins, who recently took over as President of the Board of Directors after Roybal was removed with the support of Apodaca and Chacon also chimed in on the current insurance crisis. “This District is hanging on by a thread and our General Manager and staff has done amazing things to right this ship. Our General Manager (Perez) just completed the biggest water sale in our District’s history and has aggressively been identifying potential long term recycled water customers, but somehow our Board continues to drag this agency through the mud,” said Hawkins a former state assemblyman from Cerritos. “What I will say to this Board is that the cancellation of our insurance is the ultimate wake-up call. Let’s settle down, let staff do their jobs and try to remember that it’s not about us, it’s about our 2 million customers,” Hawkins continued.

The agency is also being investigated by the Federal Bureau of Investigation, the Los Angeles County District Attorney’s Office, the Internal Revenue Service and the United States Attorney’s Office in connection with a case involving current State Senator Ronald Calderon and former Assemblyman Thomas Calderon.

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Attorney General Says California Leads the Nation in Transnational Organized Crime

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California has long been known as one of the epicenters of insurance fraud, medical fraud, and other organized crimes. And now, according to a new 118 page report by California Attorney General Kamala Harris, California leads all states in the number of computer systems hacked or infected by malware, the number of victims of Internet crimes, the amount of financial losses suffered as a result and the number of victims of identity fraud. The report says the state also is particularly vulnerable to thefts of intellectual property because of its leading role in developing new technologies and mass-media entertainment. The report should serve as a wake up call to any California businesses that maintain data on individuals such as insurance companies that digitize claim files, and third party administrators.

Between 2009 and 2012, the number of intentional breaches of computer networks and databases in the U.S. jumped by 280 percent, with California’s share leading the nation. Many of these breaches have been tied to transnational criminal organizations operating from Russia, Ukraine, Romania, Israel, Egypt, China, and Nigeria, among other places.

The report claims that transnational criminal organizations are increasingly taking advantage of new communications technology and the interconnectedness of the globalized world to further their trafficking activities in California. This creates new challenges for law enforcement. But transnational organized crime in California extends beyond drugs, weapons, and human trafficking. In the 21st century, the problem posed by transnational criminal organizations threatens the security of computer and data networks, the integrity of online bank accounts, and the rights of intellectual property holders. By virtue of its population and knowledge-powered economy, “California is the top target in the nation for this new generation of transnational criminal organizations – originating in significant numbers from Eastern Europe, but also Africa and China – whose purpose is to commit highly profitable hacking, fraud, and digital piracy crimes.”

California’s gross domestic product of $2 trillion, significant foreign trade activity and border with Mexico also makes the state an easy target for international money-laundering schemes, the report says. It estimates that more than $30 billion is laundered through California’s economy each year. Some is filtered through legitimate businesses or by using virtual currencies such as Bitcoin. But the report says backpacks and duffel bags stuffed with cash have been seized more frequently since Mexico began toughening its money-laundering laws in 2010. Seizures of bulk cash increased 40 percent by 2011 in California, which now leads the nation in the number of currency seizures.

Transnational criminal organizations are taking advantage of new communications technologies and social media to facilitate criminal activity, recruit new members, and intimidate or harass their rivals – even from inside prison walls. In 2011, for example, over 15,000 cell phones were seized from inmates in California prisons. The public safety threat posed by Mexico-based drug trafficking organizations has been amplified as cartels have formed alliances with California prison and streetgangs to control trafficking routes, distribute drugs, and kidnap, extort, and kill as necessary to protect their criminal activities. The Mexican Mafia, for example, provides protection for members of numerous cartels both inside and outside prison, and various Hispanic Sureño and Norteño gangs in Southern and Northern California have teamed up with Sinaloa, La Familia Michoacana, The Knights Templar, and other Mexico-based drug trafficking organizations.

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Intoxication is No Defense to Claim Against Uninsured Employer

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Sacramento Lopez was injured while working for Elena Delgadillo and and Jesus Cortez. He sued them in superior court, seeking damages for the injury and also alleging violations of various wage and hour laws. In response to an interrogatory request propounded during discovery, the employer admitted they did not have workers’ compensation insurance covering Lopez’s injury. The employer later reversed course and contended they did have insurance, relying on a workers’ compensation policy purchased for a different employment site, which they argued also covered the employment site where Lopez was injured. Their insurance company denied coverage and the employer filed a separate lawsuit against the insurance company and others (the insurance action), naming Lopez as an indispensable party. The employer voluntarily dismissed with prejudice the insurance action prior to trial in Lopez’s lawsuit.

After a jury verdict in Lopez’s favor, the trial court entered judgment awarding Lopez unpaid wages and penalties for the wage and hour violations, and damages (medical expenses and noneconomic losses) for the workplace injury. The trial court subsequently awarded Lopez attorney fees, including fees for work performed in the insurance action “because that action was closely related with this action and useful to its resolution.” The employer appealed, and the court of appeal sustained the judgment in the unpublished case of Lopez v. Delgadillo.

With respect to the arguments about the exclusive remedy under workers compensation, if an employer has failed to obtain workers’ compensation insurance or permission from the state to self-insure, the employee may bring a civil action for damages. (Labor Code, §§ 3700, 3706.). In this case the employer failed to properly plead and prove that it had proper workers’ compensation insurance.

The employer sought, over Lopez’s objection, to present evidence at trial of Lopez’s drug and alcohol use at the time of his injury. The trial court excluded the evidence as more prejudicial than probative under Evidence Code section 352, and refused appellants’ request for a jury instruction regarding intoxication. The court of appeal agreed with the ruling. In lawsuits seeking damages for workplace injuries when the employer failed to obtain workers’ compensation insurance (§ 3706), “it is presumed that the injury to the employee was a direct result and grew out of the negligence of the employer, and the burden of proof is upon the employer, to rebut the presumption of negligence. It is not a defense to the employer that the employee was guilty of contributory negligence” (§ 3708). After the California Supreme Court replaced contributory negligence with comparative negligence, this statute was construed to preclude a defense of the employee’s comparative negligence. (Logan v. Masters (1981) 120 Cal.App.3d 145, 147-148 [“[c]omparative negligence, like contributory negligence, is unavailable to the employer,” otherwise “uninsured employers would have a potential advantage over insured employers, a result clearly contrary to the Legislature’s intent”].) Accordingly, any evidence of Lopez’s drug and alcohol use to show his negligence was properly excluded.

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Bipartisan Agreement Raises Hopes to Avoid 24% Physician’s Pay Cut

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Hundreds of thousands of doctors who participate in traditional Medicare face a 24 percent pay cut on April 1, as part of a 1990s initiative to restrain federal spending on the government healthcare program, which today serves nearly 50 million elderly and disabled people.

Using language seldom reserved for Congress, the nation’s most powerful lobbies for physicians are heaping praise on rare bipartisan legislation heading to the floors of the U.S. Senate and House of Representatives perhaps within the next month to fix a flaw in how doctors are paid by the federal Medicare health insurance program for the elderly. After years of watching Congress delay, debate and dither on the repeal of Medicare’s “sustainable growth rate,” or SGR, reimbursement formula, a solution has passed three powerful Congressional committees and is headed possibly next month to likely passage.

According to the story in Forbes, the deal, which both the American Medical Association and the American Academy of Family Physicians have called a “bicameral, bipartisan” agreement to repeal SGR would bring an end to stopgap corrections to dramatic cuts in doctor payments from Medicare in what has since been labeled the “doc fix.” At the same time, the legislation heading for Senate and House votes would tie more physician reimbursement to quality and outcomes measures. “Legislators and staff have shown a Herculean effort in crafting this proposal,” Dr. Jeffrey Cain, chair of the American Academy of Family Physicians board said in a letter Monday to Congressional leaders including House Speaker John Boehner and Senate Majority Leader Harry Reid.

Congress has several times for a decade now merely made stopgap corrections to avert drastic payment cuts to Medicare payments under SGR, which was created by the Balanced Budget Act of 1997 in an effort to slow the growth of Medicare spending. Last year alone, Congress averted a fee cut of nearly 27 percent to physician payments. The AMA, family doctor group and other physician lobbies say Congress needs to act before March 31 when the latest stopgap measure that extends “the Medicare payment formula that includes the Sustainable Growth Rate expires,” Cain said. “The looming threat of frequent reductions also stifles innovation in case delivery and hinders the transformation of primary care practices,” Cain said. “Investments in process and quality improvement have proven difficult for most physicians under the current unpredictable payment structure.”

Should the legislation pass, it will increase payments 0.5 percent annually through 2018. Meanwhile, more Medicare payments would be tied to quality measures that include “clinical care, safety, care coordination, patient and caregiver experience and population health.” To get bonus payments, physicians would be compared to their peers and measures would be updated every year by the U.S. Secretary of Health and Human Services.

The move to new payment could also be good news to the health insurance industry with companies like Aetna, UnitedHealth Group, Humana and others seeing greater numbers of seniors flocking to their Medicare Advantage plans that contract with the Medicare program to provide seniors with health benefits. They need doctors to participate if they are going to provide seniors with adequate medical care provider networks.

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Public Service Insurance Exits California Comp Market

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Public Service Insurance Co.’s newly announced exit from California’s workers’ compensation market is not a reflection of the health of the state’s workers’ comp system, according to the California Department of Insurance. The workers’ comp carrier is part of the Magna Carta Cos.

A.M. Best this week downgraded the financial strength rating to B+ (Good) from B++ (Good) and the issuer credit ratings to “bbb-” from “bbb” of Public Service Insurance Co. and its affiliates, Paramount Insurance Co. (New York, NY) and Western Select Insurance Co.(Los Angeles, CA) The companies are collectively referred to as Magna Carta Cos., which operate through an intercompany pooling reinsurance agreement, according to A.M. Best.

The rating downgrades reflect the significant deterioration in Magna Carta Companies’ operating performance during the fourth quarter of 2013, due to a $57 million charge to strengthen reserves. Approximately $31.9 million of the group’s reserve strengthening actions were related to its workers’ compensation line of business. To provide protection against further unexpected adverse reserve development, management plans to implement an ADC, which will cover 100 percent of net losses within the ADC coverage limit. Inclusive of the benefit of the additional reinsurance protection, Magna Carta Companies’ overall risk-adjusted capitalization adequately supports its current obligations and those anticipated by its near-term business plans. While risk-adjusted capitalization is expected to remain at a level that supports the current ratings in the near to midterm, A.M. Best is concerned about the lack of clarity regarding Magna Carta Companies’ risk appetite and business strategy, which has contributed to the below-average underwriting and operating results in recent years. A.M. Best expects management will focus on these critical issues to return the group to profitability in the near term.

According to the story in the Insurance Journal, a call to Magna Carta wasn’t immediately returned, and spokespersons for Magna Carta or Public Service couldn’t be located.

Bryant Henley, assistant chief council for CDI, said the department has been aware of the exit. “We certainly were aware the Public Service Insurance Co. was planning to exit the market,” Henley said. Aside from that Henley declined to comment specifically on Public Service’s exit, but he said that it would have a negligible impact on the state. “The short answer there is that Public Service Insurance Co. was a very small part of the market share of California,” he said. According to CDI, the company wrote less than “One-half of 1 percent” of California’s workers’ comp business. Henley said the exit doesn’t portend any developing problems for California’s workers’ comp carriers. “No, we would not consider this a trend,” he said. “We don’t have a lot of workers’ comp business leaving California. We don’t anticipate it to be a larger trend of things to come.” He added: “the California market, it’s very vibrant and thriving.”

A spokesman for the state’s Workers’ Compensation Insurance Rating Bureau said the bureau wouldn’t offer a comment on the announced exit of the company, and a spokesman for the California Workers’ Compensation Institute also declined comment.

It’s estimated the company wrote less than $29 million in direct premiums amid the state’s $9 billion market.

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DWC Proposes Regulatory Move from ICD-9 to ICD-10

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The Division of Workers’ Compensation (DWC) has posted proposed changes to regulations reflecting transition from ICD-9 to ICD-10 to the online forum where members of the public may review and comment on the proposals.

Work on ICD-10 began in 1983 and was completed in 1992. ICD-10 is the 10th revision of the International Statistical Classification of Diseases and Related Health Problems (ICD), a medical classification list by the World Health Organization (WHO). ICD-10 is already in use in about 25 countries. The United States continues to use ICD-9, the prior edition of ICD. The new code set allows more than 14,400 different codes and permits the tracking of many new diagnoses. The codes can be expanded to over 16,000 codes by using optional sub-classifications. The detail reported by ICD can be further increased, with a simplified multi-axial approach, by using codes meant to be reported in a separate data field.

The deadline for the United States to begin using Clinical Modification ICD-10-CM for diagnosis coding and Procedure Coding System ICD-10-PCS for inpatient hospital procedure coding is currently October 1, 2014. The deadline was previously October 1, 2013. In preparation for this deadline, it is necessary for the DWC to update regulations and forms to refer to ICD-10, rather than ICD-9. Affected regulations are 8 C.C.R. §§ 9702(e), 9770(g) and 9789.16.2(a).

Affected forms are DLSR 5021 (Doctor’s First Report of Injury), PR-2 (Primary Treating Physician’s Progress Report), PR-3 and PR-4 (Primary Treating Physician’s Permanent and Stationary Reports).

The forum can be found online on the DWC forums web page under “current forums.” Comments will be accepted on the forum until 5 p.m. on Friday, March 28, 2014/

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WCAB Panel Rejects Use of Figure 15-19 to Rate Cervical Impairment

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Ron Davis, while employed as a laborer by Walt Disney Company,suffered industrial injury while pulling a heavy file cabinet on 1/3/2008 to the cervical spine, with resulting psyche, sleep disorder, sexual dysfunction and GERD. He was provided industrial benefits and treatment. He underwent cervical spine surgery on 3/11/2008 and 5/19/2009. To resolve disputed medical issues the parties obtained AME orthopedic reports of Dr. Roger Sohn, AME psychiatric reports of Dr. Perry Maloff, PQME internal reports of Dr.Revels Cayton. Also placed in evidence at trial were treating physician reports of Dr. Sam Bakshian and Dr.Dan Nairn.

The psychiatric AME, Dr. Maloff, found 8% whole person impairment for the applicant’s psyche, with 90% apportionment to industrial causes. The internal PQME, Dr. Cayton, found that the applicant’s sexual dysfunction was related to his psyche, with no independent ratable impairment. He found 9% whole person impairment for sleep maintenance insomnia, and 6% whole person impairment for GERO.

The orthopedic AME, Dr. Sohn found the applicant had a work restriction limiting him to light work only, precluding repetitive motions of the cervical spine and he should not do overhead work or keep his neck in a fixed position. Also he found 23 %. whole person impairment using the ROM method of the AMA Guides because of the multi-level cervical disc involvement in this case. He also found under DRE Category IV he would have a 26% WP!, plus 3% for chronic pain producing a 28% WP!. The AME explained why he felt this did not-accurately reflect the applicant’s impairment rating and attempted to apply an Almaraz/Guzman rebuttal rating as follows: “However, I do not think this accurately rates the applicant’s impairment rating. Under AMA guidelines, work activities are not taken into account. This accounts only for activities of daily living. I think to get an accurate rating in this person, work activities certainly must be taken into account in this workers’ compensation setting. Not to do so would lead to an obvious inaccurate rating. This is a gentleman who has virtually no extension of his cervical spine. He has 0% extension and only 40% of normal flexion. He has moderate spasm. He has significant diminution in his ability to lift, as well as his ability to move his neck. All-in-all, in my opinion, the applicant has lost 60% of his capacity for function of the cervical spine. Taking into consideration of Figure 15-19, which provides for 80% whole person impairment for complete loss of cervical spine fusion, the applicant’s whole person impairment is best rated, therefore, at 48 % impairment whole person. Adding 3% for his chronic pain level, the applicant’s whole person impairment is thus rated at 50% whole person. This in my opinion, is a more accurate rating under Almaraz/Guzman, and is far more accurate than the above rating using traditional AMA guidelines.”

The WCJ awarded 62% PD, after apportionment based strictly upon the AMA guides. He did not apply the attempted Almaraz./Guzman analysis by the orthopedic AME Dr. Sohn. The applicant’s Petition for Reconsideration was denied in the panel decision of Davis v Walt Disney Company..

The WCJ reasoned that the AME attempts to rebut the Guides by referring to Figure 15-19 of the Guides, attempting to stay within the four comers of the AMA Guides. However, the AME fails to provide sufficient explanation as to why rating applicant’s WPI using Figure 15-19 is more appropriate than the ROM or DRE method for rating the WPI under the spinal chapter, other than to achieve a desired result because he views the AMA Guides as not considering work functions. The AME’s attempt to rebut the AMA Guides whole person impairment rating of the cervical spine factors of disability by reference to Figure 15-19 to produce a 48% WP! cervical spine disability is not substantial evidence. In the instant case, Dr. Sohn did not utilize any other chapter, table; or method in the AMA Guides. Rather, he referenced Figure 15-19. Figure 15-19 is a pictorial diagram of the side view of the spinal column. There is no rating methodology described therein. Figure 15-19 simply states, “the whole spine divided into regions indicating the maximum whole person impairment represented by a total impairment .of one region of the spine. Lumbar 90%, thoracic 40%, cervical 80%.” The figure is provided ONLY for a discussion of Chapter 15.which explains how to convert whole person impairment into regional spine impairment, NOT VICE-VERSA.”

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Employer Loses Negligence and Bad Faith Case Against State Fund

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Pearson Food Company owns and operates a large food and sundries distribution warehouse in Los Angeles County, employing between 35-40 employees. It was insured by the State Compensation Insurance Fund between 2003 and 2005. At the end of the policy period for 2004 – 2005 an audit of Pearson’s financial records by SCIF revealed that Pearson had under reported its payroll and therefore owed additional insurance premiums to SCIF in the amount of $8,341.61. SC IF ultimately assigned the collection of the unpaid premiums to a third party, Allied Interstate Incorporated. Allied subsequently brought a collection action in the superior court against Pearson on the claim.

Pearson filed the cross-complaint against SCIF. Pearson’s causes of action centered around three workers’ compensations claims that Pearson alleged SCIF failed to fully investigate, had mishandled, over-valued and negligently adjusted in various ways resulting in overpayment and setting improper reserves on those claims. Pearson also claimed that as a result of SCIF’s conduct Pearson was charged higher insurance premiums and was unable to secure less expensive insurance from another insurance company. Pearson’s second amended complaint alleged that SCIF breached the insurance contract, and engaged in bad faith in various ways.

The trial court ordered the matter to reference under Code of Civil Procedure section 639, subdivisions (a)(1)-(3). During the trial before the appointed Referee Pearson presented the testimony of William Wilson, the CEO of Pearson, and Adam Wilson, the Vice President of Pearson. Pearson presented expert testimony of Sam Smith, a claims handling expert, Susan Silberman, an attorney and expert on claims handling and legal support, and Duncan Prince. SCIF’s claim adjuster/employees George Ashkharian, Rosa Rodriguez-Cubero, and Christopher Punzalan also testified. The SCIF employees testified about handling of the claims as to the three claimants, setting medical evaluations, and obtaining medical reports, and the process of determining benefit payments and setting reserves. SCIF presented expert witness William Spiegel, who testified about the proper methods of claims handling for workers compensation claims.

After reviewing the evidence, including the expert testimony presented by both parties, the Referee found that Pearson failed to prove its claims. The Referee found that although certain claims may have warranted additional investigation, that Pearson’s complaints were trivial, and did not result in significant damage or demonstrate a pattern of negligence or bad faith. The statement of decision indicated that: Pearson failed to produced evidence that the employee Herzog was not injured” or that setting a lifetime reserve in that case affected Pearson’s “ex-mod” or future premiums. As to the alleged fabricated claim by employee Aguilar, the Referee concluded that although Pearson suspected fraud, it was never reported to SCIF and the evidence indicated that employee Quinones’s injury occurred and the applicant was telling the truth. The Referee rejected the testimony of Pearson’s experts on the handling of Herzog’s, Aguilar’s and Quinones’s claims. The Referee found Susan Silberman unqualified to give medical testimony and found Mr. Smith’s testimony on reserve amounts lacked foundation and was unpersuasive. The Referee further found Pearson failed to demonstrate SCIF’s conduct damaged Pearson as alleged.

Pearson appealed the decision. The Court of Appeal affirmed in the unpublished case of Pearson Food Co. v. State Compensation Ins. Fund

Pearson claimed on appeal that the judgment must be reversed because: (1) the statement of decision upon which the judgment is based did not resolve its causes of action for breach of contract and quantum meruit; (2) the Referee’s findings did not support a ruling in favor of SCIF on the other causes of action, the Referee applied the improper standard of care in assessing the case and incorrectly shifted the burden of proof onto Pearson; and (3) the trial court erred in denying Pearson a new trial. The Court of Appeal found no merit to any of these arguments.

The statement of decision summarized the evidence presented during the trial with respect to the three cases. Thereafter in the decision, the Referee assessed Pearson’s factual and legal contentions in light of the evidence presented about each case. With respect to the Herzog claim the Referee found that “no evidence was produced that Herzog was not injured” or that “he was playing golf during the time of his treatment.” The Referee further found that SCIF’s adjuster’s setting of reverses was not unjustified or excessive in light of the evidence presented at trial. The Referee also noted that the impact of the reserves on Pearson’s “ex-mod, if calculable was not identified” even though the claim remained “open.” The Referee concluded that “[a]t the end of the day, I am persuaded that Pearson’s dispute on this issue is a quibble that does not support significant damages.”

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