Category: Daily News

Plaintiff California Healthcare & Rehabilitation Center and more than 20 similar California based skilled nursing facilities operate subacute units. Subacute units provide services to patients requiring less intensive services than those provided in an acute care hospital but more intensive than those provided to general patients in skilled nursing facilities. In addition to the general subacute services provided, plaintiffs also provide ancillary services including physical therapy, speech therapy, occupational therapy, and certain medical supplies.

Plaintiffs participate in Medicare and Medi-Cal programs and have received payments from both. Under California Code of regulations, title 22, sections 51005 and 50761, Medi-Cal is mandated to be the payor of last resort, meaning a facility has to seek reimbursement from other coverage, including Medicare, before seeking reimbursement from Medi-Cal.

“Medi-Cal has a different payment process than Medicare does. Medi-Cal generally pays an all-inclusive, facility-specific, per-diem rate to [skilled nursing facilities]. The per-diem rates are calculated based on actual costs that the facility reported to the Department. Medicare, on the other hand, pays facilities on a per-item basis. If [a skilled nursing facility] patient has both Medi-Cal and Medicare, and Medi-Cal makes a payment on a per-diem basis and Medicare makes a payment on a per-item basis, there may be double payment for the same ancillary services.

Plaintiffs filed a petition for traditional writ of mandate pursuant to Code of Civil Procedure section 1085 and a complaint for declaratory relief pursuant to section 1060, alleging the State Department of Health Care Services and Michelle Baass (in her capacity as Director of DHS) violated a ministerial duty and adopted a regulation in violation of the Administrative Procedure Act (Gov. Code, § 11340 et seq.) by utilizing an overpayment formula based on the amount Medicare paid plaintiffs for ancillary services instead of on the amount Medi-Cal overpaid for those services.

The trial court sustained the Department’s demurrer without leave to amend, finding plaintiffs’ claim was not cognizable in a traditional writ of mandate proceeding and, alternatively, that plaintiffs failed to state a claim the Department violated a ministerial duty or adopted an underground regulation. Separately, the trial court denied plaintiffs’ motion to compel discovery of various documents the Department utilizes while training its employees because it found the documents were privileged.

The Court of Appeal reversed the judgment of dismissal and affirmed the trial court’s order denying plaintiffs’ motion to compel in the published case of Cal. Healthcare & Rehabilitation Center v. Baass – C098043 (March 2025).

Plaintiffs’ petition alleges the Department uses an overpayment formula it adopted contrary to law and in contravention of its ministerial duties and requests a declaration stating so, as well as an injunction against the Department from utilizing the overpayment formula in the future.

State agencies must adopt regulations following the procedures established in the Administrative Procedure Act. These procedures, among other things, require state agencies to provide the public with notice of proposed regulations (Gov. Code, §§ 11346.4, 11346.5), give interested parties an opportunity to comment on proposed regulations (Gov. Code, § 11346.8), and respond in writing to submitted written comments (Gov. Code, §§ 11346.8, 11346.9). Regulations wrongly adopted outside these procedures are known as underground regulations and are void. (Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 572-573 (Tidewater); see Cal. Code Regs., tit. 1, § 250, subd. (a)(1).)

Determining whether the Department’s purported overpayment formula is lawful and complies with its ministerial duties is an issue reserved for traditional writ of mandate proceedings that review the propriety of quasi-legislative acts and ministerial determinations. (See California Water Impact Network v. Newhall County Water Dist. (2008) 161 Cal.App.4th 1464 at p. 1483.) Accordingly, plaintiffs’ petition is cognizable under section 1085.

Plaintiffs argue the petition sufficiently provides they did not need to exhaust their administrative remedies, as well as states a claim under sections 1085 and 1060 because the Department’s use of the overpayment formula violated a ministerial duty and constituted an underground regulation.

The Court of Appeal agreed that plaintiffs had no administrative remedies to exhaust and that they stated a claim the overpayment formula constitutes an underground regulation.

On January 13, 2017, an automobile accident occurred between Dennis Perez, who was insured by Farmers Direct Property and Casualty Insurance Company and Victor Montez. Charged for driving under the influence and causing bodily injury to another Perez pleaded nolo contendere and served two years in jail. The Montezes alleged Perez’s “legal intoxication” caused the accident and the resulting “severe injuries” to Victor Montez, but Perez claimed that he unexpectedly hit a puddle, causing his vehicle to hydroplane into oncoming traffic.

On March 10, 2017, Victor Montez sent Farmers Direct a handwritten settlement demand letter, to indicate that he sought to settle for the full Policy amount, inquire whether Perez was “doing anything or going anywhere for his job” at the time of the accident, and determine if Perez had “any other insurance policies . . . .” As of May 18, 2017, Farmers Direct told the Montezes that it could not reach Perez “to obtain an affidavit of no other insurance . . . .” However it did offer to settle for the $25,000 policy limit.

Nearly a year later, the Montezes filed their underlying tort action against Perez in state court on May 10, 2018. Farmers Direct appointed counsel to defend Perez in the lawsuit. Perez’s appointed counsel subsequently asserted several defenses, but Perez was uncooperative with his own defense by failing to communicate with his counsel, who eventually retained a private investigator to locate Perez.

On June 15, 2021, the state court allowed Farmers Direct to intervene on behalf of Perez in the underlying tort action after previously denying its request. Farmers Direct incurred over $100,000 in defense fees, to intervene on behalf of Perez ahead of trial in the underlying tort action.

On November 9, 2021, Farmers Direct filed its declaratory judgment action in the federal district court, seeking a declaration that Perez breached the Policy’s provision relating to duties after loss (“Cooperation Clause”), and, in turn, that Farmers Direct no longer has a duty to defend or indemnify Perez in the underlying tort action.

On February 23, 2022, the federal district court entered Judgment, declaring that Farmers Direct: owes no continuing duty to defend and owes no duty to indemnify Perez in connection with the underlying [tort] action . . . because Perez’s breach of the Policy’s Cooperation Clause excuses further performance by Farmers Direct.

During trial of the underlying tort action in state court, Farmers Direct was not able to effectively raise liability defenses, including the theory that Perez hydroplaned after hitting a puddle, because of Perez’s lack of cooperation. On July 28, 2023, the state court entered a tort judgment against Perez of $8,862,730.00 in damages, $881,014.41 in costs and fees, and $3,205,151.67 in prejudgment interest were entered against Perez on November 9, 2023. On August 23, 2023, Farmers Direct paid the $25,000 Policy limit in partial satisfaction of the judgment.

On September 1, 2023, the Montezes filed a motion in Farmers Direct’s declaratory judgment action in federal court to intervene and to vacate the Judgment finding Farmers Direct owes no duty to indemnify Perez on several grounds, including that the Judgment “is void because the [district] [c]ourt lacked subject matter jurisdiction.” The district court agreed with the Montezes in its October 6, 2023 Order vacating the Judgment for lack of subject matter jurisdiction because the amount in controversy was the Policy’s $25,000 face amount, which was less than the over $75,000 statutory minimum.

The 9th Circuit Court of Appeals reversed in the published case of Farmers Direct Property and Casualty Insurance Company v Montez – 23-3320 (March 2025) The 9th Circuit held that the district court erred when it decided that the value of the declaratory judgment action.

In its federal Complaint for Declarative relief Farmers Direct alleged that the Montezes, as the “underlying plaintiffs now contend they are entitled to hundreds of millions of dollars in damages and further contend that Farmers Direct is liable for such damages notwithstanding its Policy limits.” The Montezes’ state court demand served as the basis for Farmers Direct’s claim that the amount-in-controversy requirement was satisfied in federal court, and a federal plaintiff’s “claim in excess of the requisite amount, made in good faith in the complaint, satisfies the jurisdictional requirement.”

The Montezes concede that in their underlying tort action against Perez they “alleged they were seeking for hundreds of millions in damages.” The Montezes cannot now dispute Farmers Direct’s “assumption that the value of . . . their underlying tort claims against” Perez was greater than $75,000, given that they once sought hundreds of millions in damages.

“The judgment was not void because there was at least an “arguable basis” that the amount in controversy was satisfied by considering either the potential excess liability of the underlying tort claim or Farmer Direct’s anticipated future defense fees and costs, or both.”

Health insurer claim denial rates have been a significant concern in recent years. In 2024, Experian Health reported that 38% of healthcare providers experienced claim denials for at least one in ten claims, with some organizations seeing denial rates of more than 15%. The denial rates for insurers of qualified health plans (QHPs) sold on HealthCare.govwere also notable, with 19% of in-network claims and 37% of out-of-network claims being denied, resulting in an average denial rate of 20% for all claims.

The variation in denial rates among insurers is substantial. For instance, UnitedHealthcare denied nearly one-third of claims, making it the company with the highest denial rate among those offering plans on Affordable Care Act exchanges. Common reasons for claim denials include missing or inaccurate data, lack of prior authorization, and excluded services.

Despite the high denial rates, consumers rarely appeal denied claims. In fact, fewer than 1% of denied claims were appealed, and insurers upheld 56% of those appeals. These statistics highlight the ongoing challenges faced by healthcare providers and patients in dealing with claim denials.

The government has taken several steps to address the issue of health insurer claim denial rates. Here are some key actions:

– – Transparency Requirements: The Affordable Care Act (ACA) mandates that insurers report transparency data for all non-grandfathered health plans sold on and off the Marketplace, including fully-insured and self-insured employer group health plans. This data is available to federal and state insurance regulators and the public.
– – Data Analysis and Reporting: The Centers for Medicare and Medicaid Services (CMS) analyze and release data on claims denials and appeals for non-group qualified health plans (QHPs) offered on HealthCare.gov.This data helps identify patterns and areas for improvement.
– – Policy Recommendations: The ERISA Advisory Council (EAC), a body appointed by the Secretary of Labor, has made 12 policy recommendations to improve the claims denial and appeals process. These recommendations aim to address dubious denial processes and make the appeals process less difficult for consumers.
– – Consumer Protection: The government continues to monitor and enforce regulations to protect consumers from unfair claim denials. This includes ensuring that insurers comply with transparency requirements and addressing any violations.

And now in California Assembly Bill 682, proposed new legislation authored and introduced by Assemblymember Liz Ortega of Hayward, would mandate public reporting on the denials of insurance claims for California’s patients.

The new bill seeks to mandate collection and public reporting of health insurance claims denial information for each health plan regulated by the California Department of Managed Health Care (DMHC) and the California Department of Insurance (CDI).

The information collected and reported would include the number of claims denied, the costs of denied claims, whether or not artificial intelligence was used in the decision, and — significantly — reasoning for denying claims, such as a lack of prior authorization or an out-of-network provider.

California Nurses Association (CNA) and its more than 100,000 members across California today shared their support for Assembly Bill 682 in its press release.

Pedro Susano Herrera Marquez (Herrera) was injured on December 31, 2019, while operating a power press while working for Research Metal Industries, Inc. (RMI). The injury occurred when a power press ram used for stamping metal parts unexpectedly stroked downward while Herrera’s hand was beneath it. Herrera received workers’ compensation benefits for this injury.

According to a California Occupational Safety and Health Administration (Cal-OSHA) summary prepared after the accident occurred, “At the completion of [the press] stamping a piece of metal, the ram of the punch press returned to the up position. As [Herrera] went to remove the piece of stamped metal from the punch press’s tooling the punch press ram began its next cycle and came down onto [Herrera]’s left hand.” “The malfunctioning of [the press’s] air control valve did not allow the punch press[’]s ram to lock in position after its upright stroke.”

In December 2020, Herrera sued RMI as well as Doe defendants. Herrera asserted a single cause of action against RMI for negligence pursuant to Labor Code section 4558 alleging that RMI failed to repair, maintain, or retrofit the power press and “removed the point of operation guard from the subject power press, rendering the safeguarding mechanism dysfunctional or unavailable for use.”

Federal Press manufactured the subject press, a Federal Press No. 10, in or about 1967. RMI purchased the press at auction in or about 2010. A Federal Press catalog obtained by Herrera after the accident depicted the company’s model No. 10 as having a two-button operator control mounted directly on the machine. At the time of Herrera’s injury, the subject press did not have such an original mounted two-button control. Rather, the press was equipped with a two-button control on a movable pedestal. Generally, two-button controls keep the operator’s hands out of the area where the ram strikes the item being shaped.

RMI had a third party install the two-handed control system. The two-button control was mounted on a movable pedestal that could be “moved out” “about three feet” away from the press.

RMI moved for summary judgment which the trial court granted. It found that because RMI submitted evidence that a functional two-button control was in use at the time of Herrera’s injury, RMI shifted the burden to Herrera to demonstrate a triable issue. Herrera attempted to do so by arguing that the two-button control did not comply with the manufacturer’s design or state and federal regulations and that the solenoid air valve did not comply with point of operation guarding requirements.

The Court of Appeal affirmed (although for a different reason than that relied upon by the trial court) in the unpublished case of Herrera Marquez v. Research Metal Industries -B329641 (February 2025).

Labor Code section 4558 provides that an injured employee may sue his employer in tort when the injury “is proximately caused by the employer’s knowing removal of, or knowing failure to install, a point of operation guard on a power press.” This narrow exception limits tort liability to cases where “the manufacturer designed, installed, required, or otherwise provided by specification for the attachment of the guards and conveyed knowledge of the same to the employer.”

RMI argued Herrera could not adduce evidence that “the manufacturer designed, installed, required, or otherwise provided by specification for the attachment of [the] guards and conveyed knowledge of [the] same to [RMI]” as required under subdivision (c) of section 4558. Herrera argued RMI had failed to shift the burden to him to demonstrate a triable issue. “The parties (like the trial court did) focus on whether RMI’s independent installation of a two-button control means RMI failed to install or removed a point of operation guard.”

However, under section 4558, “the culpable conduct is the employer’s ignoring of the manufacturer’s safety directive.” (Aguilera v. Henry Soss & Co. (1996) 42 Cal.App.4th 1724, 1730; see Award Metals, Inc. v. Superior Court (1991) 228 Cal.App.3d 1128, 1134 [“From the plain language of section 4558, it is clear that an exception . . . only arises for a power press injury where the employer has been expressly informed by the manufacturer that a point of operation guard is required”].)

“Here, the summary judgment record shows that when RMI purchased the subject press at auction approximately 45 years after Federal Press had manufactured it, the press did not include a two-button hand control. Nor did RMI receive a Federal Press manual or other documentation at the time of purchase.

Thus, RMI made a prima facie showing that Federal Press did not convey any information to RMI concerning a point of operation guard. This shifted the burden to Herrera to demonstrate a triable issue of fact as to what Federal Press conveyed to RMI. He failed to do so.

Accordingly, Herrera failed to carry his burden to demonstrate a triable issue that Federal Press ‘designed, installed, required, or otherwise provided by specification for the attachment of the guards and conveyed knowledge of the same to [RMI].’ (§ 4558, subd. (c).) As this is dispositive, we need not consider Herrera”

The Labor Commissioner’s Office (LCO), which operates under the Department of Industrial Relations (DIR), has taken enforcement action totaling more than $1.1 million against Buena Park restaurant Food Source LLC for wage theft violations and failure to comply with paid sick leave requirements.

The total includes $532,561 in citations, issued to compensate 73 affected workers for multiple wage theft violations. These violations include unpaid wages, failure to pay overtime, unpaid contract wages, liquidated damages, and incomplete wage statements.

Additionally, the LCO filed a lawsuit for $575,803, seeking unpaid wages, damages, and penalties for the employer’s failure to comply with paid sick leave laws. The lawsuit also addresses violations such as denying workers access to paid sick leave, failing to document sick leave availability on pay stubs, leaving workers uninformed about their legal rights, and not providing supplemental paid sick leave during the COVID-19 pandemic.

In total, these violations impacted at least 90 workers at the restaurant.

Background on Paid Sick Leave

Under California’s Healthy Workplace, Healthy Families Act of 2014, employees who work at least 30 days in a year are entitled to paid sick leave, accruing one hour for every 30 hours worked. Employees can begin using their sick leave after 90 days of employment, with employers allowed to limit usage to 40 hours (five days) per year. Paid sick leave can be used for personal or family health care needs, including preventive care. Accrued balances may carry over, up to a cap of 80 hours (ten days). Certain employees, such as those covered by collective bargaining agreements, may be exempt. Refer to our FAQs regarding sick leave for additional information.

About the Labor Commissioner’s Office

DIR’s Division of Labor Standards Enforcement (California Labor Commissioner’s Office) combats wage theft and unfair competition by investigating allegations of illegal and unfair business practices. More information about wage theft is available at www.wagetheftisacrime.com.

The Labor Commissioner’s Office is urging current and former employees of Food Source LLC to come forward to support ongoing legal actions and to ensure they receive compensation. Workers who believe they were denied paid sick leave or other wages are encouraged to contact the confidential Paid Sick Leave Hotline at 855-526-7775. Employees can also reach out to the Labor Commissioner’s Office for questions or assistance with filing a wage claim at 833-LCO-INFO (833-526-4636) between the hours of 8:00 a.m. to 5:00 p.m. Monday through Friday.

The LCO in 2020 launched an interdisciplinary outreach campaign, “Reaching Every Californian.” The campaign amplifies basic protections and builds pathways to affected populations, so workers and employers understand legal protections and obligations, as well as the Labor Commissioner’s enforcement procedures.

California Labor Commissioner Lilia García-Brower said “Employees should not be forced to choose between their health and earning a livelihood. My office is committed to ensuring workers are properly paid for their labor and receive all the benefits they earn and rightfully deserve.”