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Employee Death Leads to Alleged $2M Premium Fraud Prosecution

Heigo Kubar, 84, of Fresno, was arraigned on three felony counts of workers’ compensation fraud, after a Central Valley Workers’ Compensation Fraud Task Force investigation discovered he allegedly underreported over $2 million in payroll to illegally save on workers’ compensation insurance for his trucking company. The investigation began after an employee was found deceased in a company owned semi-truck.

Kubar is the former owner of TKJ Trucking. Following an unfortunate incident where a TKJ Trucking employee was found deceased in company owned semi-truck, Kubar’s insurance company became suspicious and began an investigation.

The insurance company found that leading up to the death of this employee, Kubar had classified the employee as a company salesperson, not a truck driver. Twenty-five days after the death, TKJ Trucking amended the employee’s job classification to truck driver.

An investigation, led by the Fresno County District Attorney’s Office, found the deceased employee had been working for TKJ Trucking as a truck driver for approximately 15 years. At the time of their death, the cost to insure a sales person was approximately $1 for every $100 in payroll, but the cost to insure a truck driver was approximately $20 for every $100 in payroll.

An audit by the California Department of Insurance, as part of the task force investigation, revealed that between December 1, 2018 to December 1, 2021, TKJ Trucking had workers’ compensation insurance coverage and reported $875,591 in employee payroll, however, the company actually had $3,233,899 in payroll. Kubar underreported payroll by $2,358,307, resulting in insurance premiums of $480,093 owed to Kubar’s insurance company.

The Central Valley Workers’ Compensation Fraud Task Force is an inter-agency anti-fraud partnership with members from the California Department of Insurance, the Fresno County District Attorney’s Office, the Tulare County District Attorney’s Office, the Kings County District Attorney’s Office, the Kern County District Attorney’s Office, the Merced County District Attorney’s Office, the Madera County District Attorney’s Office, the San Luis Obispo County District Attorney’s Office, the California Employment Development Department, and the California Franchise Tax Board.

This case is being prosecuted by the Fresno County District Attorney’s Office. Kubar is scheduled to appear in court next on August 14, 2024.

Cal/OSHA Proposes to Extend and Modify Temporary Silica Safety Standard

Silicosis is a form of occupational lung disease caused by inhalation of crystalline silica dust. It is marked by inflammation and scarring in the form of nodular lesions in the upper lobes of the lungs. It is a type of pneumoconiosis. Silicosis, particularly the acute form, is characterized by shortness of breath, cough, fever, and cyanosis (bluish skin). It may often be misdiagnosed as pulmonary edema (fluid in the lungs), pneumonia, or tuberculosis.

Silicosis resulted in at least 43,000 deaths globally in 2013, down from at least 50,000 deaths in 1990. Since 2019, over 100 workers in California have developed the deadly disease silicosis from cutting artificial, man-made stone. Artificial stone is commonly used for countertops in new construction projects.

Early recognition of the potential for industrially related came from the granite cutters of Vermont in the early 1900s. Dr. Alice Hamilton, a pioneer in occupational medicine, documented their plight, and by the 1930s, granite workers had secured safety measures like ventilation. However, this progress wasn’t universal.

The Hawk’s Nest Tunnel disaster near Gauley Bridge West Virginia, also in the 1930s, stands as a grim reminder. Workers, primarily immigrants, drilled through a mountain rich in silica with minimal protection. The horrific outcome: over 700 deaths from silicosis.

Following such tragedies, regulations emerged. However, enforcement remained lax, and silicosis re-emerged in the 1970s among sandblasters and oil field workers. More recently, engineered stone countertops have become a new source of concern. Workers fabricating these materials develop silicosis at alarming rates, often young and unaware of the risks.

California’s Division of Occupational Safety and Health (Cal/OSHA) is increasing awareness of the dangers of being exposed to silica dust while working with man-made and natural stone.

Sacramento California’s Division of Occupational Safety and Health (Cal/OSHA) is increasing efforts to address the growing number of silicosis cases among stone workers in California. Man-made stone that is frequently used contains higher concentrations of crystalline silica that can severely scar lung tissue when inhaled.

With cases of silicosis increasing in California, Cal/OSHA has further intensified its enforcement and education efforts. On December 14, 2023, an emergency temporary standard was adopted to enhance existing guidelines for respirable crystalline silica hazards. Since then, Cal/OSHA has closed several stone cutting shops in the state that were not providing proper safety protections for their employees. A public meeting is scheduled on May 16 to consider a revised proposal for readoption of the emergency temporary standard for an additional 90 days in to protect workers from the hazards of silica dust.

DIR and Cal/OSHA recently launched a bilingual public awareness and education campaign that offers employers and workers resources and information about the proper use of safety equipment and safe worksite practices. The campaign website, also provides vital information for workers on workplace safety rights and how to report safety violations.

Cal/OSHA’s workplace safety laws and emergency temporary standard are key components to ensure that workers are safe. Increasing awareness to employers and employees of the dangerous effects of inhaling respirable crystalline silica dust from tasks like grinding, drilling and cutting, can help save lives and avoid incurable health conditions like silicosis, lung cancer and kidney diseases.

According to DIR Director Katie Hagen “the startling uptick in deadly silicosis cases in our state underscores the necessity to protect workers from this fatal disease. Man-made stone products with high silica content, like countertops, can only be fabricated safely with proper safety equipment and practices, such as water systems, safe cleaning of dust and debris and the use of the best respiratory protection available. Failure to follow these life-saving practices can have grave consequences for some of California’s most vulnerable workers. Our department, through Cal/OSHA, is proactively working to educate employers on safe worksite practices, enforcing regulatory standards, and warning workers of its hazards.”

NCCI 2023 Metrics Show Continued Strength of Workers Comp System

The performance of the workers compensation system remains strong according to the 2023 metrics that the National Council on Compensation Insurance (NCCI) released today.

Workers compensation premium increased 1% in 2023. Private carriers produced their 10th consecutive year of underwriting profitability with a Calendar Year 2023 combined ratio of 86. It is the 7th consecutive year with a combined ratio below 90 for the workers compensation insurance market.

“The overall numbers for workers compensation show a financially healthy system,” said Donna Glenn, Chief Actuary, NCCI. “To maintain the health of the system, NCCI continues to look beyond the headline numbers to understand the intricacies of the system and identify risks that may impact our future. We are relentless in our commitment to being The Source You Trust.”

“The workers compensation system has unique features that have differentiated us from other commercial lines in terms of overall performance during the past several years,” said NCCI President and CEO Bill Donnell. “However, there are key questions ahead related to issues such as frequency change and medical cost inflation.”

Key Insights

– – Workers compensation premium increased 1% in 2023.
– – The Calendar Year 2023 combined ratio for workers compensation is 86%, a sign of underwriting profitability for the system.
– – Workers compensation’s Accident Year 2023 combined ratio is 98% with prior years continuing to experience downward reserve development.
– – The workers compensation reserve redundancy grew to $18 billion.
– – Lost-time claim frequency declined by 8% in the past year, which is more than two times the size of the long-term average decline.
– – Severity changes were considered moderate for 2023 with increases of 2% for medical claim severity and 5% for indemnity claim severity.

Related may be downloaded using these links:

– – 2024 State of the Line Report (PDF)
– – 2024 State of the Line Guide (HTML)
– – 2024 State of the Line Insights (PDF)

DWC to Impose Sanctions for EAMS E-Filer User Errors

The Division of Workers’ Compensation (DWC) has announced its plans to address e-filing practices that result in repeated system errors in EAMS, DWC’s electronic case management system. These errors cause significant delays in document processing.

DWC’s planned corrective actions will include, but are not limited to, suspension or removal of e-filing privileges and/or sanctions aimed at users who disregard regulations, e-filing instructions, and document discrepancy notifications.

These corrective actions have become necessary because many users continue to e-file defective batches despite receiving error notifications and receiving ongoing problem-solving training in the system’s unprocessed document queue (UDQ).

The most frequently encountered e-filing errors include:

– – Using incorrect document titles for filing or submitting documents with incorrectly titled attachments.
– – Making duplicate submissions of documents already in FileNet.
– – Repeatedly submitting failed batches to the UDQ.
– – Filing duplicate documents both electronically and by hard-copy (including emailing documents directly to a judge).

DWC will evaluate users who continually violate the EAMS rules and guidelines over the next few months. Users who receive notification of impending suspension or removal of their e-filing privileges will be given an opportunity to first take corrective action.

Information on how to properly file documents may be found on the DWC website.

County DA’s Office Probes Internal Theft of Insurance Fraud Grant Funds

A San Joaquin County District Attorney’s Office investigator is on paid leave amid allegations of fraud.

According to a news release from the district attorney’s office, potential fraud was flagged after an audit of the 2024 Auto Insurance Fraud Grant Application.

The district attorney’s office says the audit found an investigator within the office was allegedly falsifying timesheet information to justify the office’s receipt of grant funds.

The investigator told them they had done it at the ‘urging’ of the prior district attorney’s office administration.

District Attorney Ron Freitas began auditing the Auto Insurance Fraud Grant Program in 2017 and asked the San Joaquin County Auditor’s Office to conduct its own audit, too.

“We pledge to cooperate fully with the California Department of Insurance, the Office of the Attorney General and the San Joaquin County Auditor’s Office, to ascertain any wrongdoing, and return any monies that were fraudulently received by this Office via the Auto Insurance Fraud Grant Program,” said Freitas.

As soon as the alleged fraud was uncovered, we notified the California Department of Insurance, along with the Office of the Attorney General, in order to help correct the wrong that was committed and ensure that our Office is run with the highest ethical standards.”

The Auto Insurance Fraud Grant Program would give money to district attorney’s offices across the state to cover attorney’s fees, investigators, paralegals and other costs as it related to investigating and prosecuting auto insurance fraud.

New Study Shows Diseases Linked to Night Shift Work

Just a few days on a night shift schedule throws off protein rhythms related to blood glucose regulation, energy metabolism and inflammation, processes that can influence the development of chronic metabolic conditions.

The finding, from a study led by scientists at Washington State University and the Pacific Northwest National Laboratory, provides new clues as to why night shift workers are more prone to diabetes, obesity and other metabolic disorders.

“There are processes tied to the master biological clock in our brain that are saying that day is day and night is night and other processes that follow rhythms set elsewhere in the body that say night is day and day is night,” said senior study author Hans Van Dongen, a professor in the Washington State University Elson S. Floyd College of Medicine. “When internal rhythms are dysregulated, you have this enduring stress in your system that we believe has long-term health consequences.”

Though more research is needed, Van Dongen said the study shows that these disrupted rhythms can be seen in as little as three days, which suggests early intervention to prevent diabetes and obesity is possible. Such intervention could also help lower the risk of heart disease and stroke, which is elevated in night shift workers as well.

Published in the Journal of Proteome Research, the study involved a controlled laboratory experiment with volunteers who were put on simulated night or day shift schedules for three days. Following their last shift, participants were kept awake for 24 hours under constant conditions – lighting, temperature, posture and food intake – to measure their internal biological rhythms without interference from outside influences.

Blood samples drawn at regular intervals throughout the 24-hour period were analyzed to identify proteins present in blood-based immune system cells. Some proteins had rhythms closely tied to the master biological clock, which keeps the body on a 24-hour rhythm. The master clock is resilient to altered shift schedules, so these protein rhythms didn’t change much in response to the night shift schedule.

However, most other proteins had rhythms that changed substantially in night shift participants compared to the day shift participants.

Looking more closely at proteins involved in glucose regulation, the researchers observed a nearly complete reversal of glucose rhythms in night shift participants. They also found that processes involved in insulin production and sensitivity, which normally work together to keep glucose levels within a healthy range, were no longer synchronized in night shift participants. The researchers said this effect could be caused by the regulation of insulin trying to undo the glucose changes triggered by the night shift schedule. They said this may be a healthy response in the moment, as altered glucose levels may damage cells and organs, but could be problematic in the long run.

“What we showed is that we can really see a difference in molecular patterns between volunteers with normal schedules and those with schedules that are misaligned with their biological clock,” said Jason McDermott, a computational scientist with PNNL’s Biological Sciences Division.

“The effects of this misalignment had not yet been characterized at this molecular level and in this controlled manner before.” The researchers’ next step will be to study real-world workers to determine whether night shifts cause similar protein changes in long-term shift workers.

CHP Employee and Fourteen Others Charged in Insurance Fraud Ring

The Inland Empire Automobile Insurance Task Force arrested 12 Southern California residents after an investigation found they allegedly conspired together to create fraudulent insurance claims to illegally collect over $350,000. The investigation discovered the large-scale organized auto insurance fraud ring was engaged in multiple types of schemes including holding vehicles hostage and collusive collisions. Three additional residents have been charged for their alleged involvement in the organized ring.

The Inland Empire Automobile Insurance Task Force began its investigation in November 2022 after they found out a California Highway Patrol (CHP) non-sworn employee, Rosa Isela Santistevan, 55, of Irvine, was unlawfully selling traffic collision report face pages, which contained personal information of people who had been involved in collisions throughout Southern California.

After the task force served numerous search warrants they seized over 3,500 CHP traffic collision report face pages from the residence of Esmeralda Parga, 26, of Pomona, who the task force determined was connected to Santistevan through the organized ring’s ringleader, Andre Angelo Reyes, 36, of Corona. The conspiracy began after Reyes befriended Santistevan and other CHP employees by donating to various CHP events and parties. Santistevan printed and unlawfully sold thousands of traffic collision face pages to Reyes who would then provide the reports to E. Parga. E. Parga would then contact the parties involved in the collision, pretending to be from their insurance company and coordinate having their vehicle towed to a repair center that they misrepresented as approved by the insurance company.

Unbeknownst to the victims, E. Parga did not represent the insurance company and was stealing the victims’ vehicles. Reyes and E. Parga would then dispatch tow trucks, whose drivers cooperated in the scheme and would pick up the vehicles and tow them to CA Collision, owned by Anthony Gomez, 35, of Jurupa Valley. Once the vehicles were at CA Collision, CA Collision would hold the vehicle hostage and demand cash payment from the insurance companies to have the vehicles released.

During the numerous search warrants, additional evidence was obtained showing the alleged ring was engaged in other types of insurance fraud schemes, including collusive collisions. One of those collisions was recorded by a defendant and discovered on the defendant’s phone during a search warrant. The video depicts the defendants intentionally crashing a BMW sedan into a Polaris Slingshot. The defendants then claimed two separate crashes occurring on the freeway. Reyes was also involved in this scheme along with four other conspirators.

This investigation resulted in 15 suspects being charged with insurance fraud, grand theft by trick, and false impersonation. The charges involved 19 fraudulent claims resulting in a loss of $353,035. Twelve of the 15 suspects were arrested over the weekend.

Defendants include:

– – Andre Angelo Reyes, 36, of Corona; booked into the Robert Presley Detention Center and bail is set at $700,000.
– – Rosa Isela Santistevan, 55, of Irvine; booked into the Orange County Jail and bail is set at $700,000.
– – Esmeralda Parga, 26, of Pomona; booked into the West Valley Detention Center and bail is set at $700,000.
– – Anthony Gomez, 35, of Jurupa Valley; booked into the West Valley Detention Center and bail is set at $700,000.
– – Ezequiel Baltazar Orozco, 30, of Los Angeles; charged but not yet in custody.
– – Antonio Terrazas Perez Jr., 19, of Los Angeles; booked into the West Valley Detention Center and bail is set at $150,000.
– – Erika Garcia, 31, of Los Angeles; charged but not yet in custody.
– – Israel Avila Sandoval, 45, of Pomona; booked into the West Valley Detention Center and bail is set at $150,000.
– – Luis Alberto Ramirez Jr., 32, of San Bernardino; booked into the West Valley Detention Center and bail is set at $100,000.
– – Robert Arzac, 49, of West Covina; booked into the Orange County Jail and bail is set at $50,000.
– – Antonio Ramirez Perez, 44, of Los Angeles; booked into the West Valley Detention Center and bail is set at $350,000.
– – Brian Anthony Lopez, 25, of Anaheim
– – Emily Marie Boatman, 26, of Ontario; booked into the West Valley Detention Center and bail is set at $700,000.
– – Ricardo Parga Jr., 23, of Pomona; booked into the West Valley Detention Center and bail is set at $50,000.
– – Steven Anthony Alfaro, 38, of Buena Park; charged but not yet in custody.

The San Bernardino County District Attorney’s Office is prosecuting this case. The San Bernardino County Auto Theft Task Force assisted in obtaining evidence, and executing search and arrest warrants for this case. The investigating task force includes the California Department of Insurance, California Highway Patrol, San Bernardino County District Attorney’s Office, and the Riverside County District Attorney’s Office.

WCIRB Releases Fourth Quarter 2023 Experience Report

The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) has released its Quarterly Experience Report. This report is an update on California statewide insurer experience valued as of December 31, 2023.

Highlights of the report include:

– – After five consecutive increases, the projected loss ratio, including the cost of COVID-19 claims, dropped 2 points in accident year 2022, driven by a significant increase in premium due to higher payrolls and very modest changes in claim frequency and severity.
– – The accident year 2023 loss ratio is modestly higher than 2022, driven by the declining impact of COVID-19 claims and generally flat claim frequency and severity trends.
– – The average charged rate for 2023 continues to decrease; it is 5% lower than 2022 and the lowest in decades.
– – Indemnity claims had been settling more quickly through the first quarter of 2020, primarily driven by the reforms of Senate Bill No. 863 (SB 863) and Senate Bill No. 1160 (SB 1160).
– – Average claim closing rates declined sharply beginning in the second quarter of 2020 due to the pandemic.
– – Average claim closing rates have flattened in 2022 and 2023 and remain below the pre-pandemic level.
– – Projected severity on indemnity claims for 2023 is 3% higher than 2022 and 22% above 2017. – – The average severity in 2023 is the highest it has been in more than a decade, since before the SB 863 reforms.
– – Average Medical Cost Containment Program (MCCP) costs per claim have decreased by 14% since 2013, corresponding with the decline in average medical costs following the SB 863 reforms. Although MCCP costs increased modestly in 2023, MCCP cost levels have been generally declining over the last several years.
– – Pharmaceutical costs per claim decreased by 88% from 2012 through 2023. After increasing during the early pandemic period in 2020, average pharmaceutical costs per claim reverted to the pre-pandemic trend in 2021 and declined another 12% in 2022 and 2023.
– – Projected total statewide ultimate losses for 2005 through 2023 evaluations are below insurers’ reported amounts.

Join WCIRB actuaries to discuss the highlights of the September 1, 2024 Pure Premium Rate Filing and December 31, 2023 experience. They will also discuss their research into the impact of economic changes on the California workers’ compensation system. Please submit your questions when you register so that we may answer them during the webinar on Thursday, May 16, 2024, 10:00 AM – 11:00 AM PT. Please register for the webinar.

County DA Sues Major Carriers for Illegal Claim Evaluation Scheme

Alameda County District Attorney Pamela Price announced that her Consumer Justice Bureau has sued multiple automobile insurance companies and their affiliated software developers, alleging they worked together to create and use automobile valuation software to systematically undervalue “totaled” vehicles and pay California insurance consumers less than the actual value owed under the policies.

The civil consumer protection Complaint alleges this automobile undervaluation scheme violates numerous California laws, including California’s Insurance Code, Unfair Competition Law, and False Advertising Law. The Complaint demands civil penalties, restitution for California consumers, injunctive relief, and associated fees and costs.

“A vehicle is the lynchpin to life in California. Many residents live paycheck to paycheck and go deeply into debt just to buy a car. When an insurance company underpays its customers for a totaled vehicle, that can result in missed loan payments, damaged credit scores, impacted borrowing, and the inability to buy a replacement vehicle. That can lead to job losses and even homelessness. California residents and small businesses try their best to follow the law. They expect their insurance companies and affiliates to do the same,” said District Attorney Pamela Price.

The 69-page Complaint filed in Alameda Superior Court on April 26, 2024, amended on April 30, alleges that multiple automobile insurance companies – including The Progressive Corporation and its affiliates (“Progressive Insurance”), United Services Automobile Association and its affiliates (“USAA”) – owed duties of good faith and fair dealing to “hundreds of thousands of California residents and businesses each year.” Despite these legal duties, the Complaint alleges the insurance companies use specially designed automotive valuation software to undervalue totaled vehicles to pay vehicle owners less money than they are owed.

The Complaint further alleges that the software developers (including CCC Information Systems and Mitchell International) worked with these automobile insurance companies to build into the software the means to manipulate and lower the reported “actual cash value” of the totaled vehicles and that the modified software is sold exclusively to automobile insurance companies. Specifically, the Complaint alleges that the software uses a deceptive set of so-called “comparable” vehicles and outcome-determinative adjustments to allow the insurance companies to lower the reported “actual cash value” of the totaled vehicles. The insurance companies then allegedly make “lowball” settlement offers to their customers and refuse to negotiate in good faith, relying on the purportedly “independent” software-generated deflated “actual cash value”. The Complaint alleges that these insurance companies failed to disclose to their customers that they worked with the software developers to create exclusive versions of this software for their use or that they used the means built into that software to lower the “actual cash value” on which they base their settlement offers.

The Complaint further alleges that once the insured accepts the lowball offer, the insurance companies can resell the same vehicle at auction to minimize its losses further: “Inherent to the Scheme is this loss recoupment opportunity: the [insurance company] would rather total a vehicle than repair it because of the opportunity to recoupIf [it] pays to repair the vehicle, it has no ability to recoup any of that loss.”

The Complaint alleges this scheme harms all Californians paying insurance companies for what they expect to be a fair deal but is especially impactful on “disadvantaged Californians, including senior citizens, economically disadvantaged persons, and persons of color.” Under California’s Unfair Competition Law and False Advertising Law increased civil penalties are imposed for unlawful acts that target specially protected California citizens like seniors and veterans.

The Complaint alleges the scheme impacts California businesses as well, including (1) car manufacturers and dealers (by systematically lowering the market value of their vehicles); (2) gap insurance providers (whose “gap insurance” policies must make up the difference between an outstanding loan amount and undervalued amount paid); (3) automobile loan institutions (i.e., when underpaid car owners can no longer pay their car loans); and (4) car repair facilities (that lose out on potential repair business when vehicles are systematically totaled instead of repaired).

“Public safety includes protecting consumers from powerful companies that seek only to maximize profits,” said District Attorney Pamela Price. “We are seeking to level the playing field for vehicle owners who face what looks like a rigged game when their car or truck is totaled because a loss of a vehicle can destabilize a person’s life.”

Alameda County residents who believe their insurance company may have undervalued their totaled vehicle may complete a Consumer Fraud Complaint Form with the Alameda County District Attorney’s Office Consumer Justice Bureau. A link to that complaint form is here: Alameda County District Attorney Consumer Complaint Form.

Failure to Object to Extended Time for Arbitration Fees is Not an “Agreement”

When Andrew Reynosa was employed by Advanced Transportation Services on March 3, 2017, he signed the company’s Arbitration Agreement which provided in part that he would arbitrate disputes he had with his employer.

On April 26, 2019, Reynosa filed a “complaint for damages” against ATS with the superior court of Tulare County. On July 8, 2019, the parties stipulated Reynosa would submit his claims to binding arbitration pursuant to the aforementioned agreement and the court proceeding would be stayed pending completion thereof.

On September 9, 2019, Reynosa filed a demand for arbitration with arbitration provider Judicate West. Under the heading “WHAT RULES OF ARBITRATION DO YOU PREFER,” he marked the checkbox for “CCP § 1280 et se[q].” Retired judge John L. Wagner would serve as the neutral arbitrator.

Certain arbitration fees were paid by the parties, and in July 2019 the case proceeded to unsuccessful mediation, and then multiple arbitration hearings at various states of discovery. Interim invoices were prepared along the way by Judicate West, and payments were made and posted.

On March 20, 2023, Reynosa filed a “motion to terminate arbitration and request for monetary and evidentiary sanctions” with the court. In the motion, Reynosa – citing section 1281.98 – asserted ATS materially breached the arbitration agreement because (1) it was given invoices on July 21, 2021, and December 12, 2022, respectively; (2) each payment was due within 30 days after the date of receipt; and (3) each payment was rendered after the grace period elapsed. Hence, Reynosa was “statutorily entitled to unilaterally withdraw his claims from arbitration and proceed in court . . . .”

In an attached declaration, Reynosa’s attorney, Deborah P. Gutierrez, averred that on March 17, 2023, she “inquired with [Judicate West’s case manager] if ATS had timely paid the arbitration fees in this matter” and the case manager “confirmed that Defendant had . . . paid the December 12, 202[2] [invoice] on February 22, 2023 . . . .”

In a minute order, Retired Judge Wagner conceded ATS’s payments were late but noted Reynosa “did have the opportunity to request this relief before significant work was done and non-refundable arbitration fees were paid” and nonetheless “elected on numerous occasions to proceed with the arbitration process after the alleged tardy payments occurred.” Wagner stated: (1) “[t]he first tardy payment was made on September [17], 2021, more than 18 months ago,” but Reynosa “sat on his rights under § 1281.98 and did nothing”; and (2) “[t]he last tardy payment was on February 22, 2023”; during the March 7, 2023 case management conference, Reynosa “successfully resisted [ATS]’[s] request for a continuation of the present April 17, 2023, hearing date” and Wagner “shortened the refundable date for the arbitration hearing fees to March 20, 2023”; and Reynosa “waited until that very date to file [his] Motion to Terminate Arbitration and advised [Wagner] of the filing of that motion on March 24, 2023, after the shortened non-refundable period had ended,” prejudicing ATS financially. Wagner vacated the hearing dates and stayed the arbitration proceeding “pending a decision on [Reynosa]’s Motion to Terminate Arbitration by the Tulare Superior Court.”

On April 18, 2023, the superior court held a hearing on Reynosa’s withdrawal motion and it was denied. The Court of Appeal reversed in the published case of Reynosa v. Superior Court -F086342 (May 2024).

The opinion noted that the clear and unequivocal language of section 1281.98, subdivision (a)(1) “establishes a simple bright-line rule that a drafting party’s failure to pay outstanding arbitration fees within 30 days after the due date results in its material breach of the arbitration agreement.” § 1281.97 “contains no exceptions for substantial compliance,unintentional nonpayment, or absence of prejudice”

Nevertheless, the superior court concluded the parties “mutually agreed upon” the February 23, 2023 due date, emphasizing Reynosa “did not object to the extended payment deadline when proposed.”

Under section 1281.98, subdivision (a)(2), “[a]ny extension of time for the due date shall be agreed upon by all parties.” The verb “agree” – of which “agreed” is the past participle – is essentially undefined by the statute.

“In our view, the construction of ‘agreed’ in section 1281.98, subdivision (a)(2) advanced by ATS and adopted by the superior court undermines the legislative intent: by letting a claimant’s silence, failure to object, or other seemingly acquiescent conduct (not amounting to direct expression) constitute a sufficient manifestation of his or her agreement to an extension, the need for the arbitration provider or the business/employer to actively procure such consent – e.g., by having the claimant sign an acknowledgement form – is obviated.”

Reynosa did not directly express agreement with the February 23, 2023 due date. Therefore, pursuant to section 1281.98, subdivision (a)(2), the December 12, 2022 invoice was due upon receipt. Pursuant to section 1281.98, subdivision (a)(1), ATS had until January 11, 2023, to pay the arbitration fees and costs. By submitting payment on February 22, 2023, the company materially breached the arbitration agreement.