WCAB Provides Teeth to Lien Litigation

Monday, November 26, 2012 | 0

After going virtually the entire calendar year without a substantive en banc decision, the California Workers' Compensation Appeals Board has issue a new opinion which provides significant guidance to the workers compensation community in one of the emerging battleground areas that is likely to develop under SB 863.

 In Torres v AJC Sandblasting, the WCAB has provided a detailed discussion of the obligation of lien claimants in litigating their claims before the WCAB as principal parties and provided some teeth for workers' compensation judges to punish conduct which fails to recognize the requirements for lien claimants to prevail.  In effect the WCAB is holding that lien claims filed with no intention other than to try an extort money from defendants where there is no legitimate basis for the lien claim is fraught with potential consequences far beyond simply having the lien denied.
 
It is decision the WCAB acknowledges that it is not creating new law but instead is building upon existing law to create an outline for conduct, particularly by lien claimants, before the WCAB. The Boards holding is summarized as follows:
 
(1) Labor Code sections 3202.5 and 5705 mandate that a lien claimant must prove  by  a  preponderance  of  the  evidence  all  elements  necessary  to  establish  the  validity of their lien before the burden of proof  shifts to the defendant.   Keifer and Garcia, insofar as they held that a lien claimant can establish a prima facie right to recovery simply by introducing a billing statement showing that services were  provided  to  a  worker  in  connection  with  a  claimed  injury,  have  been  nullified by sections 3202.5 and 5705 and subsequent case law.
 
(2) Proceeding  to  trial  without  any  evidence  or  with  evidence  that  is  utterly  incapable of meeting  its burden  of proof is frivolous and constitutes bad  faith within the meaning of section 5813 justifying an award of sanctions, attorney's fees and costs against the party or lien claimant, its attorney(s) or hearing representative(s), individually or jointly and severally.
 
The Board provides a detailed analysis of case law beginning with the Keifer and Garcia line of cases which had suggested a lien claimant could meet its burden with very limited information and effectively required a defendant to rebut a lien claim once the lien documentation was filed.  The WCAB notes that since these decisions issue, Labor Code  3202.5 has been amended to specifically provide that all parties, including lien claimants, must present evidence to meet their burden of proof.   Labor Code  3202.5 was relied upon by the Courts of Appeal in multiple decisions (citing Beverly Hills Multispecialty Group, Inc. v. Workers' Camp. Appeals Bd. (Pinkney) (1994) 26 Cal.App.4th 789 [59 Cal.Comp.Cases 461 and Zenith Insurance  Company v. Workers' Camp. Appeals Bd. (Capi) (2006) 138 Cal.App.4th 373 among others) as well as the WCAB in its en banc decisions in Kunz and Tapia. 
 
The WCAB further noted:
 
Repeatedly,  the  Court  of Appeals  and  WCAB  have  declared  that  the  holdings  in Keifer  and Garcia, which allowed a lien claimant to establish a prima facie case of entitlement to reimbursement and shift the burden of proof to a defendant merely by offering evidence that it furnished treatment for a condition, which an employee claimed to be industrial and was settled by a C&R, have been abrogated by sections 3202.5 and 5705
 
In the case at issue, the issue of injury was disputed and the parties stipulated that the applicant claimed to have been injured.  There was however no evidence presented that supported the claim of injury.  Further the WCJ pointed out to lien claimant that there was no evidence to support to claim of injury and that in the absence of any evidence on that issue the lien claimant could not meet its burden to prove its lien and was wasting the courts time.  In spite of the WCJs admonition, the lien claimant persisted in proceeding to trial with no evidence but an unsigned billing form.  The trial judge not only denied the lien claim but awarded sanctions for proceeding to trial where the lien claimant did not even make an attempt to meet its required burden.
 
This appeal followed with the WCAB taking this case as an opportunity to emphasize the necessity of all parties, including lien claimants, to be prepared to meet their burden on the issues they have raised and that are necessary to establish their case.  The Board noted the lien claimant not only failed to present evidence on the issue of injury AOE-COE but also failed to present substantial evidence to support their claim for reimbursement.  The only documentation presented was an unsigned form or uncertain authorship with a series of unexplained code numbers.
 
Unitech bore the burden of proving that applicant sustained an industrial injury, that it rendered medical treatment in connection with that injury and that the treatment was reasonable and necessary to cure or relieve the effects of the industrial injury.  Prior to trial, Unitech was warned that the evidence it proposed to introduce was utterly incapable of proving its claim. By electing to proceed anyway with only an unauthenticated billing statement, Unitech acted in bad faith, and wasted valuable court time on a claim that was "indisputably without merit" and frivolous.
 
Unitech failed and continues to fail to offer a reasonable  excuse for its conduct as allowed by Rule  1056l(b)(6)(B).  Its assertion that the introduction of its bill established a prima facie case thereby shifting the burden to defendant to refute the validity of its claim is utterly without merit and flagrantly disregards  20  years  of  statutory  developments  and  case  law.  This  conduct  is  inexcusable  and  the imposition  of sanctions and attorney's  fees under  section 5813 and WCAB Rule  10561 are absolutely warranted in this case.
 
The WCAB remanded the case to the WCJ to further clarify the basis for the sanctions and also to consider whether sanctions should be imposed on Unitech, Green Lien (its lien representative) or the actual lien hearing representative for the failure to present evidence that supported its lien claim.
 
 
COMMENTARY:
 
This decision comes at a perfect time as we approach implementation of SB 863 with its myriad of changes in lien practice including when self-procured medical can be reimbursed, when liens can be filed (after IMR and IBR in most cases) and when employers/carriers and TPAs bear no responsibility for treatment (Outside MPN treatment where an employee was validly within an MPN) etc.  This decision will help put teeth into enforcement of the new stricter statute of limitation provisions, the requirement to appeal bill review decisions within 90 days, to appeal adverse UR decisions to IMR (and the adverse consequences of providing treatment which has been denied and not appealed) as well as the much stricter time frames for filing liens after 1/1/13.
 
One of the comments that has arisen with many of the new requirements and time frames is how to enforce the new statutory provisions?  Are lien claimants going to simply proceed as if the changes never occurred and attempt to obtain settlements on liens that are otherwise barred by means of attrition?  The holding in Torres suggests there are teeth in addressing such conduct if defendants are willing to force the issue.
 
Interestingly, one lien representative recently confided to me that he made his living on the chaotic fringes of the workers compensation system and that SB 863 appeared to be designed to reduce that chaos at the fringes.  This case suggests that making a living on the fraying edges of the workers' compensation system may carry diminishing returns with consequences that will make the practice much more accountable.
 
Is there any question this is exactly what the WCAB intended?

<i>Richard M. "Jake" Jacobsmeyer is a partner with the Shaw, Jacobsmeyer, Crain & Claffey defense law firm in Oakland.</i>