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Tag: 2018 News

Unlicensed Comp Carrier Fined $4M

The California Insurance Commissioner issued a Decision and Order imposing a $4,345,000 penalty on American Labor Alliance and CompOne USA for selling workers’ compensation and liability policies to employers of farmworkers without being properly licensed with the Department of Insurance.

Central Valley based American Labor Alliance attracted customers by marketing low workers’ compensation premium rates. It had contracted with fewer than 100 employers and had a small membership roll before 2016, but its membership surged after it introduced its workers’ comp benefit, according to documents from the department. It had more than 400 employers with 30,000 members as of February 2017. “Two-thirds of those employees are seasonal agricultural workers employed by roughly 50 farm labor contractors,” according to documents from the department.

American Labor Alliance and CompOne USA are subsidiaries of Agricultural Contracting Services Association, which is a Nevada not-for-profit corporation headquartered in Clovis, Calif., according to documents from the Department of Insurance. It characterizes itself as a “union labor organization” operating in California, New York and Georgia. Neither Agricultural Contracting Services Association nor any of its subsidiaries is licensed by the California Department of Insurance.

Despite a Cease and Desist Order issued by the Department of Insurance in October 2016 against the Agricultural Contracting Services Association, Incorporated and its affiliates, the American Labor Alliance and CompOne USA, and Board Chair Marcus Asay, and a Decision and Order issued by Commissioner Jones in November 2017 ordering them to refrain from selling insurance policies in California, the company continued to transact insurance without a license.

The new Decision and Order imposes the $4.3 million penalty that represents $5,000 for each of the 869 days that the companies sold workers’ compensation insurance without a license.

Pursuant to California Insurance Code section 12921.8, the Commissioner may also impose a monetary penalty which shall be the greater of five times the amount of money received by the company for which the license was required, or five thousand dollars ($5,000) for each day the company transacted insurance without a license.

FBI agents on behalf of the U.S. Department of Labor served warrants for workplace injury benefit program records in July 2017 at the headquarters office of American Labor Alliance.

Employers transacting business with Agricultural Contracting Services Association, Inc., American Labor Alliance, or affiliate CompOne USA, should contact the Department of Insurance Investigation Division at 661-253-7500 for assistance in determining the validity of their workers’ compensation coverage.

DIR Publishes 2017 Fatal Occupational Injuries Report

The Department of Industrial Relations reports that 376 Californians died on the job in 2017, the same as in 2016.

California’s workplace fatality rate remains stable with slight fluctuations over the past eight years. On the national level, the rate of fatalities decreased from 3.6 to 3.5 per 100,000 workers. There were 376 fatal injuries on the job in California in 2017 and 2016, compared to 388 in 2015, 344 in 2014, and 396 in 2013.

The data comes from the Census of Fatal Occupational Injuries (CFOI), which is conducted annually in conjunction with the U.S. Bureau of Labor Statistics (BLS). Figures for 2017 are the latest numbers available.

Key findings from the latest census in California include:

–  More than one in five (22%) of all California workplace deaths identified in 2017 were attributed to trips, slips and falls; with 88% of those deaths involving falls to a lower level.

–  Assaults and violent acts in the workplace accounted for one of every five (20%) of all workplace deaths in the state in 2017.

–  Nearly two of every five (37%) California workplace deaths identified in 2017 occurred in transportation-related incidents.

The percentage of Latino deaths in the workplace continues to be an area the department is monitoring. DIR remains committed to its workplace safety outreach and education efforts with a focus on high-hazard work, especially for monolingual Spanish-speaking workers.

DIR conducts the California Census annually in conjunction with the U.S. Bureau of Labor Statistics. CFOI produces comprehensive, accurate and timely counts of fatal work injuries. This Federal-State cooperative program was implemented in all 50 states and the District of Columbia in 1992. DIR protects and improves the health, safety and economic well-being of over 18 million wage earners, and helps their employers comply with state labor laws.

Its Division of Occupational Safety and Health, commonly known as Cal/OSHA, helps protect workers from health and safety hazards on the job in almost every workplace in California. Cal/OSHA does not have authority when injuries occur on public roadways where other state or federal agencies have jurisdiction, such as the California Highway Patrol.

Cal/OSHA’s Consultation Services Branch provides free and voluntary assistance to employers to improve their safety and health programs. Employers should call (800) 963-9424 for assistance from Cal/OSHA Consultation Services. Cal/OSHA has also published a wealth of helpful guides for employers and workers.

Comp RICO Fails in California Federal Court

The Racketeer Influenced and Corrupt Organizations Act, commonly referred to as the RICO Act or simply RICO, is federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. In order to prevail in a RICO action, a plaintiff must prove a “predicate offense” one of which is fraud. In addition to the predicate offense, a plaintiff must also prove a “pattern of racketeering activity.”

The plaintiffs bar has sought to apply RICO laws as a penalty in workers’ compensation claims for at least a decade with poor results. Conceptually they allege that an employer, carrier or third party administrator concocts a fraudulent scheme that is used over and over to prevent workers from obtaining just benefits.

Plaintiff efforts to succeed at RICO in the federal 6th Circuit (Kentucky, Michigan, Ohio, and Tennessee) ultimately ended in failure. In one the the last tries, a Michigan claimant alleged that employer/carrier defrauded him with “false” medical testimony, and filed federal Racketeer Influenced and Corrupt Organizations Act RICO case, In that case, Brown v. Ajax Paving Industries, 752 F.3d 656 (2014), the United States Court of Appeals for the Sixth Circuit followed the prior ruling in Jackson v. Sedgwick Claims Management Services, a carbon copy of this case, 731 F.3d 556, 558 (6th Cir.2013) (en banc).

Essentially in the 6th Circuit, RICO cannot be based on an underlying workers’ compensation claim because the court held that “loss or diminution of benefits the plaintiff expects to receive under a workers’ compensation scheme does not constitute an injury to ‘business or property’ under RICO.”

The effort to win comp related RICO cases then moved to the 9th Circuit (nine western states including California and Arizona) arguably the most liberal Circuit in the federal system. In Laurie Miller et al. v. York Risk Services Group, nine plaintiffs worked as firefighters or engineers for the Phoenix fire department, and York adjusted the department’s workers comp claims. The plaintiffs alleged, in part, that York worked with the City of Phoenix to wrongfully deny or delay their workers comp benefits in violation of the federal RICO Act. Before the case went to trial, it was settled at the end of 2015. Thus the concept was not tested in the 9th Circuit Court of Appeals.

Now they have lost another RICO case this time filed in California.

John Black, and a group of police officers and fire fighters assert a RICO claim involving the City of Rialto and the City of Stockton, CorVel Enterprises, York Risk Services Group and others. These plaintiffs allege “York, CorVel, and Rialto engaged in a pattern of fraudulently denying and delaying legitimate claims in order to lower the liability of the city, while at the same time maximizing the TPA’s revenues (and allowing the TPA to maintain and obtain contracts with other public entities based on their ‘outstanding’ financial performance at the expense of public servants)”

In 2016 the federal trial judge reviewed the 4th amended complaint and dismissed the case without leave to amend. The decision was based in part upon a determination that a workers’ compensation benefit is not a property right subject to RICO, a ruling consistent with the 6th Circuit.

The 9th Circuit Court of Appeals just affirmed the dismissal in the unpublished case of Black v CorVel Enterprises Comp Inc. The 9th Circuit Court of Appeals ruled that “Appellants fail to establish any property interest in their workers’ compensation benefits prior to a final award of benefits” citing  Angelotti, 791 F.3d at 1081. “Therefore, the district court properly dismissed Appellants’ 42 U.S.C. §1983 claims.”

Additionally they said “we find the exclusive remedy provision of the WCA preempts Appellants’ IIED and UCL claims. Charles J. Vacanti, M.D., Inc. v. State Comp. Ins. Fund, 14 P. 3d 234, 244-45 (Cal. 2001). Appellants’ alleged injury is ‘a normal part of the [workers’ compensation] claims process.’ Id. at 250 (citing Marsh & McLennan, Inc. v. Superior Court, 774 P.2d 762, 767 (Cal. 1989)). Therefore, the district court properly dismissed Appellants’ state law claims pursuant to the exclusive remedy provision of the WCA.”

Irvine Physician Arrested for Prescribing Opioids

Special Agents with the DEA arrested an Orange County doctor on federal charges that allege he illegally distributed opioid and other powerful narcotics by writing prescriptions for “patients” without medical examinations and to at least five individuals who suffered overdose deaths.

One man who allegedly obtained prescriptions from the doctor was involved in a car accident last month that killed a bicyclist who was a captain with the Costa Mesa Fire & Rescue Department.

Dzung Ahn Pham, 57, of Tustin, who owns Irvine Village Urgent Care, was arrested pursuant to a criminal complaint that charges him with two counts of illegally distributing oxycodone. The complaint alleges that Pham issued prescriptions for the controlled substance outside the usual course of professional practice and without a legitimate medical purpose.

The affidavit in support of the criminal complaint alleges that Pham was selling prescriptions to “patients” who were drug addicts and/or who were selling the drugs on the black market. A review of the CURES database shows that Pham issued “an extremely high amount” of prescriptions over a three-year period, and the types of drugs prescribed to certain patients would lead to “higher risks for addiction, overdose and overdose death,” according to the affidavit.

Investigators learned that a CVS pharmacy in Irvine stopped accepting prescriptions from Pham more than five years ago when the doctor could not justify the number of opioid pills he was prescribing to individual patients.

During two undercover operations this past summer that are discussed in the affidavit, a DEA agent quickly and easily obtained prescriptions for narcotics, including “a triple threat,” also referred to as a “Holy Trinity, [which] is the combined use of an opioid (such as hydrocodone), a benzodiazepine (such as Valium), and carisoprodol (a muscle relaxer like Soma).” Pham allegedly steered the undercover agent to an Irvine pharmacy that filled many of his prescriptions.

The affidavit contains text messages in which “patients” seek prescriptions, sometimes asking for specific quantities of particular narcotics in specific dosages. “[A]t least 84 of those patients had their prescriptions filled on the same day or within the next two days of their text messages,” according to the affidavit.

The affidavit also details a text message sent by Pham, who expressed concern after receiving information that the individual who fatally shot 12 people last month at the Borderline Bar and Grill in Thousand Oaks had in his possession prescriptions for someone else, but which Pham had prescribed.

Between 2013 and September 2018, Pham deposited over $5 million, mostly in cash, into bank accounts held by Pham and his wife, according to the affidavit, which notes the he also deposited approximately $1.7 million, likely derived from insurance payments, into a business bank account.

WC Mileage Increases to $.58 in 2019

The Internal Revenue Service has announced that the standard mileage rate for business miles will increase to 58.0 cents per mile as of January 1, 2019, up 3.5 cents from the rate for 2018.

As a result, the California Workers’ Compensation Institute (CWCI) notes that effective for travel on or after January 1, 2019, the rate that California workers’ compensation claims administrators pay injured workers for travel related to medical care or evaluation of their injuries will also increase to 58.0 cents per mile.

The new workers’ compensation medical mileage rate will apply for 2019 travel dates, regardless of the date of injury on the claim, but for 2018 travel dates claims administrators should continue to pay the current rate of 54.5 cents per mile.

California Labor Code §4600 (e)(2), working in conjunction with Government Code §19820 and Department of Personnel Administration regulations, requires claims administrators to reimburse injured workers for such expenses at the rate adopted by the Director of the Department of Personnel Administration for non-represented (excluded) state employees, which is tied to the IRS published mileage rate.

In a Newswire issued December 14, the IRS announced that as of January 1, 2019, the standard mileage rate will increase to 58 cents per business mile driven. The IRS bases the standard mileage rate on an annual study of the fixed and variable costs of operating an automobile, which includes the cost of gasoline and depreciation.

There have been multiple mileage rate changes over the past decade, so the California Division of Workers’ Compensation has posted downloadable mileage-expense forms on the forms section of its website which show applicable rates based on travel date.

A new form with the 2019 rate will be posted shortly, but should not be used until reimbursements are made for 2019 travel. In the meantime, claims organizations should alert their staff and programmers that the medical mileage rate will increase to 58.0 cents per mile for travel on or after January 1, 2019.

Lower Cost Generic Opioid Addiction Drugs on Fast Track

This year, the FDA has approved the first generic version of Suboxone (buprenorphine and naloxone) sublingual film for the treatment of opioid dependence. Mylan Technologies Inc. and Dr. Reddy’s Laboratories SA received approval to market buprenorphine and naloxone sublingual film in multiple strengths. The approval comes with potential to increase access to these treatments for those with opioid use disorder.

The FDA is taking new steps to advance the development of improved treatments for opioid use disorder, and to make sure these medicines are available to the patients who need them,” said FDA Commissioner Scott Gottlieb, MD, in a statement. “That includes promoting the development of better drugs, and also facilitating the market for entry of generic versions of approved drugs to help ensure broader access.”

The film is applied under the tongue and serves as a medication-assisted treatment (MAT) – a comprehensive approach combining FDA-approved medications (methadone, buprenorphine, or naltrexone) with counseling and other behavioral therapies to treat patients with opioid use disorder.

Regular adherence to MAT with buprenorphine has been shown to reduce opioid withdrawal symptoms, as well as the desire to use opioids. According to the Substance Abuse and Mental Health Services Administration, those receiving MAT treatment for opioid use disorder cut their risk of mortality from all causes in half.

In response to the generic challenge, Indivior Plc said it will launch a cheaper version of its blockbuster opioid addiction treatment, Suboxone, as it seeks to claw back market share lost to copycat versions of the drug.

The British drugmaker is also looking to reduce its dependence on Suboxone, which accounts for about 80 percent of its revenue, by focusing on another opioid addiction drug Sublocade and schizophrenia treatment Perseris.

It expects four generic versions of Suboxone in the market, including its own, Chief Executive Shaun Thaxter said in a call with analysts.

Last week Indivior won a fresh hold against a knock-off version from Dr. Reddy’s Laboratories, while Teva Pharmaceuticals said in September it would hold off launching its version until Indivior’s other cases were resolved.

Indivior said it expects its cheaper Suboxone copy to generate revenue in the range of tens of millions of dollars, but did not specify when it would be launched.

The company said it was confident of the drug generating peak net revenue of more than $1 billion.

Opioid-Murder Conviction of LA Physician Affirmed

It’s rare for prosecutors to bring homicide charges against a physician for a patients death. But the Los Angeles district attorney’s office claimed that the second-degree murder convictions in 2015 of a Los Angeles area doctor were the first against a U.S. doctor for recklessly prescribing drugs,

In 2007 Dr. Hsiu Ying Lisa Tseng, a licensed physician practicing internal medicine and osteopathy, joined Advance Care AAA Medical Clinic in Rowland Heights, a general medical practice operated by her husband.

By 2010, the clinic had developed a reputation as a place where patients could easily obtain prescriptions for controlled substances, including opioids, sedatives, muscle relaxants, and drugs used to treat drug addiction. According to one visitor, the clinic looked “like a parole office” with “drug dealing.”

Beginning in 2008, pharmacists began to refuse to fill prescriptions written by Tseng because the prescriptions raised “red flags”; the patients’ profiles, conduct, and the combination of substances and quantities Tseng prescribed indicated no legitimate medical purpose for writing the prescriptions. When Tseng learned of this, she referred her patients to “mom and pop” pharmacies, which continued to fill her prescriptions.

That same year, law enforcement investigators, including investigators from the coroner’s office, began calling Tseng to discuss the deaths of several of her patients and to apprise her that the patients had died of suspected drug overdoses shortly after obtaining prescriptions from her.

A dozen of Tseng’s patients died, though prosecutors only brought three murder charges because of other factors involved in some of those deaths, such as drugs prescribed by other doctors and a possible suicide. In 2012, Tseng was charged with three counts of second degree murder, 20 counts of unlawfully prescribing controlled substances to patients, and one count of obtaining a controlled substance by fraud.

After a a six-week trial, a jury found Tseng guilty of three counts of second degree murder, 19 counts of unlawfully prescribing controlled substances, and one count of obtaining a controlled substance by fraud. Jurors deliberated for 10 days before reaching the verdicts. The trial court sentenced her to 30 years to life in state prison. Tseng appealed, and the Court of Appeal affirmed in the partially published opinion of People v Hsiu Ying Lisa Tseng.

She claimed on appeal that substantial evidence did not support the murder convictions and that the trial court erred in (1) admitting evidence of six uncharged patient deaths; (2) failing to unseal and quash a search warrant of her financial records; (3) failing to grant a mistrial based on prosecutorial misconduct; (4) reopening closing argument; and (5) failing to apply Penal Code section 654 to the murder conviction sentences.

The Court of Appeal concluded that “None of her arguments are meritorious.”

Judge Puts Obamacare on Life Support

A federal judge in Texas put an end to Obamacare, the Affordable Care Act, on Friday night, ruling in the case of Texas v. Azar, that the entire health-care law is unconstitutional because of a recent change in federal tax law. The ruling came on the eve of the deadline Saturday for Americans to sign up for coverage in the federal insurance exchange created under the law.

As part of the tax overhaul passed last year, the ACA penalty for not having health insurance was abolished. This went into effect in January, 2018.Officials in 20 states led by Texas Attorney General Ken Paxton – argued that with elimination of the health insurance requirement there is no longer a tax, and therefore the law loses its constitutionality.

In a 55-page opinion, federal judge Reed O’Connor agreed, and writes regarding the lawsuit: “The court finds the individual mandate can no longer be fairly read as an exercise of Congress’s tax power and is still impermissible under the interstate commerce clause ― meaning the individual mandate is unconstitutional“. [T]he court finds the individual mandate is essential to and inseverable from the remainder of the ACA.”

Since the lawsuit was filed in January, many health-law specialists have viewed its logic as weak but nevertheless have regarded the case as the greatest looming legal threat to the 2010 law, which has been assailed repeatedly in the courts.

The Supreme Court upheld the law as constitutional in 2012 and 2015, though the first of those opinions struck down the ACA’s provision that was to expand Medicaid nationwide, letting each state choose instead. No matter how O’Connor ruled, legal experts have been forecasting that the Texas case would be appealed and could well place the law again before the high court, giving its conservative newest member, Justice Brett M. Kavanaugh, a first opportunity to take part.

It is expected that this ruling will be appealed to the Supreme Court. Pending the appeal process, the law remains in place. A spokeswoman for California Attorney General Xavier Becerra, who leads a group of states opposing the lawsuit, said that the Democratic defenders of the law are ready to challenge the ruling in the U.S. Court of Appeals for the 5th Circuit.

It was not immediately clear what the legal path will be from here. Technically, O’Connor granted summary judgment to the lawsuit’s plaintiffs – the Texas attorney general, with support from 18 GOP counterparts and a governor.

Because the judge did not grant an injunction, as the plaintiffs had asked for, “it’s unclear whether this is a final judgment, whether it’s appealable, whether it can be stayed,” said Timothy Jost, a health-law expert who is a professor emeritus at Washington and Lee University. Jost, an ACA proponent, predicted that a stay would lock in the law during appeals, saying that, otherwise, “it’s breathtaking what [O’Connor]’s doing here on a Friday night after the courts closed.”

Background Check Insufficient to Support FEHA Claim

Peerless Building Maintenance Inc., operates a janitorial services company with over 500 employees.

A neighbor told Miguel Alvarez that Peerless might be hiring people to clean offices and he might consider applying for a job. Alvarez went to Peerless’s office in Chatsworth and submitted a job application.

When he submitted his job application, Alvarez could perform the duties of a janitor and he had no work restrictions. He did not request, and did not require, any accommodation from Peerless.

Peerless had a practice of running background checks on applicants for janitor positions. The background checks included workers’ compensation claim histories.

Peerless did not call Alvarez and did not hire him. According to Peerless, this was because it had lost Alvarez’s job application and could not contact him. Alvarez did not contact Peerless to ask about the status of his job application. In May or June 2016, Alvarez took a position painting houses and doing construction work for another company.

Alvarez filed a civil suit against Peerless. The theory of his lawsuit was that he was perceived as having had a history of FEHA disabilities. Alvarez did not allege that he was presently disabled or even that he was perceived as being presently disabled.

Peerless moved for summary judgment which the court granted. The court of appeal sustained the dismissal in the unpublished case of Miguel Alvarez v Peerless Building Maintenance Inc.

The plaintiff has the initial burden of producing evidence that establishes a prima facie case of discrimination. If the plaintiff establishes a prima facie case, creating a presumption of discrimination, the burden shifts to the employer to provide a legitimate, nondiscriminatory reason for the challenged action.

While the employer’s knowledge of the employee’s disability can be inferred from the circumstances, knowledge will only be imputed to the employer when the fact of disability is the only reasonable interpretation of the known facts. Vague or conclusory statements revealing an unspecified incapacity are not sufficient to put an employer on notice of its obligations under FEHA.

Alvarez’s background check listed one worker’s compensation matter. It did not contain any further information or details about the accident, Alvarez’s injury, or the workers’ compensation case. There was no evidence to suggest it knew, should have known, or perceived that Alvarez had a disability or a history of disabilities.

Alvarez asserted that Peerless learned that he “had two injured discs in his lower back as a result of his prior work which prevents him from performing some major life activities, but would not have prevented him from working as a janitor.” In fact, however, the record contains no evidence that Peerless had information about Alvarez’s injured discs at any time before Alvarez filed his lawsuit.

WCIRB Publishes 2018 Experience Report

The WCIRB has released its quarterly update on California statewide insurer experience valued as of September 30, 2018. The report is mostly good news for California employers and industrial insurance carriers.

California written premium for the first nine months of 2018 is $13.1 billion, which is 3% below the written premium reported for the first nine months of 2017. Written premium for 2017 was 2% below that for 2016. The decrease in 2017 following 7 consecutive years of increases is primarily driven by decreases in insurer charged rates more than offsetting increases in employer payroll.

The projected industry average charged rate per $100 of payroll for policies incepting in the first nine months of 2018 is $2.28, which is 10% below the average rate charged in 2017. The January 1, 2019 approved advisory pure premium rates are on average 42% below those for January 1, 2015.

The WCIRB projects an ultimate accident year combined loss and expense ratio of 87% for 2017, which is 4 points higher than 2016 projections as premium levels have lowered while average claim severities moderately increased. Despite the projected increase, the combined ratios for 2014 to 2017 remain the lowest since the 2004 to 2006 period.

Indemnity claims continue to settle quicker, improving significantly over the last 6 years.

Claim frequency increased by 11% from 2009 to 2014, but has decreased by 4% from 2014 through the first 9 months of 2018. Frequency increases since 2011 have largely been attributed to increases in cumulative injury claims and claims from the Los Angeles Basin area.

Cumulative trauma (CT) claim rates increased by over 75% from 2005 to 2015. The ratio for 2016 declined modestly suggesting the CT claim growth is beginning to level off. Recent sharp increases in CT claims is focused entirely in the Los Angeles and San Diego areas.

Decreases in medical severities from 2011 to 2015 were driven by the medical cost savings arising from SB 863. The projected 2017 medical severity increase of 2% represents very modest growth compared to other post-reform periods of medical inflation in California.

The WCIRB projects the average cost (or “severity”) of a 2017 indemnity claim to be approximately $69,500, which is 2% higher than the projected severity for 2016. Total claim severity growth over the last several years has been relatively modest as increases in average indemnity and ALAE costs have been in part offset by declines in average medical costs through 2016.

The full report is available in the Research section of the WCIRB website, WCIRB Quarterly Experience Report – As of September 30, 2018