Tag: 2018 News

Respondents Low Desert Empire Pizza, Inc., Hi Desert Empire Pizza, Inc., Ten Cap, Inc., and Capten, Inc. sued several related insurance entities – Applied Underwriters, Inc. (Applied), Applied Underwriters Captive Risk Assurance Company, Inc. (AUCRA, and together with Applied, appellants) and California Insurance Company (CIC) (together with appellants, defendants).

Desert Pizza challenged the legality of defendants’ EquityComp workers’ compensation insurance program, which consists of an insurance policy and two related side agreements.

Applied and AUCRA moved to compel arbitration based on arbitration provisions in the side agreements, and Desert Pizza countered that the provisions were unenforceable because defendants failed to file them with California’s Insurance Commissioner for approval, as required in Insurance Code section 11658 (Section 11658).

The trial court agreed and denied the motions to compel arbitration. The Court of Appeal affirmed the denial in the unpublished case of Low Desert Empire Pizza, Inc. v. Applied Underwriters, Inc.

This case involves the intersection of California’s workers’ compensation insurance laws and the Federal Arbitration Act (FAA).

This is one of several actions in this state and across the country challenging the legality of defendants’ EquityComp program based on their failure to seek and obtain regulatory approval of side agreements to the insurance policy. (E.g., Citizens of Humanity, LLC v. Applied Underwriters, Inc. (2017) 17 Cal.App.5th 806 (Citizens of Humanity); Minnieland Private Day Sch., Inc. v. Applied Underwriters Captive Risk Assur. Co. (4th Cir. 2017) 867 F.3d 449; Citizens of Humanity, LLC v. Applied Underwriters Captive Risk Assur. Co. (2018) 299 Neb. 545.)

California’s Insurance Commissioner recently issued an administrative decision concluding appellants’ failure to file a virtually identical EquityComp side agreement under Section 11658 rendered the arbitration provisions in that agreement void and unenforceable. (Matter of Shasta Linen Supply, Inc., Decision & Order, dated June 20, 2016, file No. AHB-WCA-14-31, at p. 43 (Shasta Linen).)

Even more recently, the Fourth Appellate District, Division One, reached the same conclusion. (Nielsen Contracting, Inc. v. Applied Underwriters, Inc. (2018) 22 Cal.App.5th 1096, 1118 (Nielsen), review den. Aug. 15, 2018.)

Thus, in this case, the Court of Appeal concluded that defendants’ violation of Section 11658 renders their arbitration provisions unenforceable, and affirmed the order denying the motions to compel arbitration.

Michael E. Barri, Tristar Medical Group, and Coalition for Sensible Workers’ Compensation Reform petitioned the court of appeals pursuant to Labor Code section 5955, seek orders directing the Workers’ Compensation Appeals Board to perform its duties and adjudicate Tristar’s lien claims and not enforce provisions contained in newly enacted anti-fraud legislation. (§§ 4615 & 139.21.) claiming certain provisions were unconstitutional.

The new anti-fraud scheme cast a very broad net to halt all proceedings relating to any workers’ compensation liens filed by criminally charged medical providers, as well as any entities “controlled” by the charged provider. The Legislature created this new scheme because existing laws permitted charged providers to collect on liens while defending their criminal cases, allowing continued funding of fraudulent practices.

Pursuant to these two new statutes, the Government gained authority to automatically stay liens filed by charged providers and noncharged entities, without considering if the liens were actually tainted by the alleged illegal misconduct. (§ 4615.) As a result, untainted liens may be stayed (and go unpaid) for a lengthy stretch of time because, in addition to the period required for completion of the criminal case, the statute provides for two post-conviction evidentiary hearings. In the first hearing, the administrative director decides whether to suspend the convicted provider from further participation in the workers’ compensation system. (§ 139.21, subd. (b).)

Following this hearing, the “special lien proceeding” attorney identifies and gathers liens to be adjudicated together by a workers compensation judge (WCJ) in a consolidated “special lien proceeding.” (§ 139.21, subd. (e)(2).) In this second hearing, the lienholder has the evidentiary burden to rebut the statutorily mandated presumption the consolidated liens are all tainted by the misconduct and should not be paid. (§ 139.21, subd. (g).)

In their petition, Barri, Tristar, and CSWCR maintain these statutory provisions go too far and are forcing many legitimate lien providers to stop treating injured workers because the process has become too onerous, expensive, and financially risky. They maintain the creation of a “significantly delayed post deprivation hearing,” the over-inclusive application to untainted liens, and the Government’s failure to provide adequate notice to noncharged entities, has effectively dismantled the safety net in place for injured workers. They suggest the true legislative purpose of the statutes goes beyond fraud prevention and serves the district attorney’s desire to financially cripple criminally charged lien claimants, hampering their ability to adequately defend themselves at trial.

The court of appeal took judicial notice of a number of related documents including the proceedings in federal court by other lien claimants -Vanguard Medical Management Billing, Inc. v. Baker, No. EDCV 17 CV 965 GW(DTBx). It found no merit to any of their claims and denied them the requested relief in the published case of Barri v WCAB.

The WCIRB has released The World of Cumulative Trauma Claims report which focuses on workers’ compensation claims for workplace injuries that result from repetitive mentally or physically traumatic activities extending over a period of time.

CT claims have always been a part of the California workers’ compensation system. Recently, although overall claim frequency and average indemnity and medical costs have been flat to declining, the proportion of claims involving CT has increased sharply. This report explores the world of CT claims including how they differ from specific injury claims and the key drivers of the recent CT claim increases.

CT claims have continued to grow at a significant rate through the economic recovery. CT claims are also much more likely to be reported late, so early estimates of CT claim proportions typically understate the true proportions for an accident year.

Like many cost components, CT claim rates differ significantly across the regions of California. While the proportion of CT claims has typically been higher in the Los Angeles Basin, these rates have diverged significantly over the last several years and are also showing a similar pattern in San Diego.

All of the recent growth in CT claims has been in the Los Angeles and San Diego regions. CT claim rates in other regions of California have declined and are lower than the 1998 levels.

Although the WCIRB does not use the phrase “epidemic” some might say this adjective accurately describes the phenomena in Southern California. According to Merriam-Webster, an epidemic is something that is “excessively prevalent”, or “affecting or tending to affect a disproportionately large number of individuals within a population, community, or region at the same time.”

Beginning in 2008, Construction CT claims increased in the Los Angeles Basin and has accelerated in recent years to be 4 times the 2007 lows.

Los Angeles Basin CT rates in Manufacturing diverted from the rest of the state starting in 1999 and accelerated rapidly starting in 2012. The Los Angeles Basin’s share of all Manufacturing claims has been consistent over time, suggesting that some shifting from specific claims to CT claims may be occurring. The recent CT rates of over 20% in the Los Angeles Basin are among the highest of any industry and the growth in this industry is one of the most significant drivers of recent CT claim growth.

The proportion of CT claims has increased in the Los Angeles Basin Trade industry in recent years though at a somewhat less significant rate than in other industries. The percentage of all Trade industry indemnity claims from the Los Angeles Basin has also increased which is partially attributable to the increases in CT claims.

The vast majority of indemnity claims in the Information industry are from the Los Angeles Basin. Unlike other industries, CT rates in the Information sector across California regions have cut in half from the high in 2004.

The Finance & Insurance industry typically has higher CT claim proportions than any other industry. CT claims decreased to historical lows in the Los Angeles Basin during the 2007 – 2008 financial crisis and rebounded since 2010 to more typical levels for this industry.

CT claims have increased significantly in the Los Angeles Basin Real Estate industry and in 2016 are 4 times the 2008 level. CT claims in Real Estate in other regions of California have also increased, but by a less significant magnitude.

The proportion of CT claims in the Administrative industry is increasing across all regions of California though at a faster pace in the Los Angeles Basin.

The ratio of Arts & Entertainment CT claims in the Los Angeles Basin reached a historical high of 15% in 2015, but shows some indications of decline in 2016 . The proportion of all Arts & Entertainment industry claims from the Los Angeles Basin has increased almost 10% in the last 3 years, driven in part by the CT claim growth.

Beginning in 2008 , the ratio of CT claims in the Los Angeles Basin Hospitality industry increased significantly, more than doubling through 2016. Growth in Los Angeles Basin CT claims from this large industry is one of the most significant drivers of the overall recent growth.

The full report available on the WCIRB website continues to report similar data supporting the conclusion that there is indeed a CT epidemic in the Los Angeles Basin.

A federal grand jury has indicted South Bay doctor and PQME Venkat Aachi, charging him with distributing hydrocodone outside the scope of his professional practice and without a legitimate medical need, and with health care fraud related to the submission of false and fraudulent claims regarding the health care benefits.

Aachi is listed on the DIR database as a PQME in Physical Medicine and Rehabilitation with offices in San Jose and Campbell California.

According to the indictment filed October 9, 2018, and unsealed Friday, October 12, 2018, on six occasions from November 27, 2017, through March 5, 2018, Aachi knowingly distributed hydrocodone to two individuals knowing that the distribution was outside the scope of his professional practice and not for a legitimate medical purpose.

Further, on July 2, 2018, Aachi allegedly submitted to an insurance company a false and fraudulent claim for payment for healthcare benefits, items, and services.

Aachi made an initial appearance on October 12, 2018, before U.S. Magistrate Judge Virginia K DeMarchi. At that time, he was arraigned on the indictment, entered a plea of not guilty, and was released on bond. Aachi is scheduled to appear next before Magistrate Judge DeMarchi on October 22, 2018, for a further bond hearing.

If convicted, Aachi faces a maximum 20 years in prison and a one-million dollar fine for each of the six distribution counts and an additional 10 years in prison for the insurance fraud count.

Assistant U.S. Attorney Shailika Kotiya is prosecuting the case with the assistance of Rawaty Yim.

This prosecution is the result of investigations by the DEA, FBI, HHS-OIG, and the California Department of Justice Bureau of Medi Cal Fraud and Elder Abuse (BMFEA).

Through the BMFEA, the California Department of Justice regularly works with other law enforcement agencies to investigate and prosecute fraud perpetrated on the Medi Cal program against a wide variety of healthcare providers, including doctors and pharmaceutical companies.

This case was investigated and prosecuted by member agencies of the Organized Crime Drug Enforcement Task Force, a focused multi-agency, multi-jurisdictional task force investigating and prosecuting the most significant drug trafficking organizations throughout the United States by leveraging the combined expertise of federal, state, and local law enforcement agencies.

Two Illinois-based nonprofit risk pools, who provide more than 203 local municipalities and other public entities with workers’ compensation and employee healthcare insurance, filed a joint lawsuit in the Circuit Court of Cook County against leading opioid manufacturers, distributors, professional associations, and prescribers. It is the first opioid lawsuit brought by insurance risk pools in Illinois.

The Intergovernmental Risk Management Agency (IRMA) and Intergovernmental Personnel Benefit Cooperative (IPBC), seek injunctive relief and financial compensation from defendants to recoup substantial costs resulting from the far-reaching impact of the over-prescription and abuse of opioid medication. IPBC’s costs include vast expenditures on hospitalizations due to overdose, addiction treatment services, and overdose reversal medications, while IRMA has paid millions of dollars in cases involving injured workers who were unnecessarily given long-term opioid prescriptions to treat chronic pain.

The suit alleges opioid manufacturers, including Purdue Pharma, Allergan, and Teva, engaged in aggressive and deceptive marketing campaigns; distributors including AmerisourceBergen, Cardinal Health, and McKesson failed to act as gatekeepers against overprescribing the addictive narcotics; professional organizations including Chicago-based American Academy of Pain Medicine and American Pain Society deceptively promoted the use of opioids for chronic pain management; and suburban Chicago doctors Paul Madison and Joseph Giacchino served as “pill mills,” doling out opioids to anyone who came through the door of their clinic.

The 217 page civil complaint  alleges that the defendants’ plan to flood the Illinois market with opioid medication worked: in 2015, eight million opioid prescriptions were filled in Illinois, the equivalent of 60 prescriptions per 100 people.

The lawsuit is the latest step in a proactive multi-pronged strategy IPBC and IRMA have enacted to address and reduce opioid abuse in their members’ employee communities.

“This lawsuit is about real costs incurred directly as a result of the opioid epidemic. We have seen fully employed, respectable public employees with work injuries who were prescribed opioids unnecessarily and became addicted, ultimately rendering them unable to return to work and costing our members millions,” said IRMA Executive Director Margo Ely. “Opioid abuse and addiction has cost our members through not only lost productivity, but very sad stories of lost careers and lives.”

“As a taxpayer-supported health insurance provider to public entities across Illinois, we have a fiduciary obligation to aggressively seek to recoup the millions of dollars in claim costs that have been wasted due to over-prescription of opioid medications and addiction treatment,” said IPBC Executive Director Dave Cook. “The impact of long-term opioid use and abuse has been significant to our organization financially, and to many of our members who have suffered as a result of defendants’ egregious behavior.”

Founded in 1979, the Intergovernmental Risk Management Agency (IRMA) was the first municipal risk pool in Illinois, and today, provides comprehensive risk management services, including workers’ compensation coverage, for 72 municipal groups in northeastern Illinois.

The Intergovernmental Personnel Benefit Cooperative (IPBC) is a public risk entity pool established in 1979 by Chicago area municipalities to administer some or all of the personnel benefit programs offered by participating members to employees and retirees.