About 1 Million Liens Remain After Jan. 1 Automatic Dismissal

Wednesday, January 13, 2016 | 9

As of New Year's Day, there were fewer liens remaining in California's workers' compensation system than were filed in 2012 alone, according to data provided by the Division of Workers' Compensation.

While there's no guarantee all of the 998,596 claims for which lien holders paid the activation fee or filing fee mandated by Senate Bill 863 are being pursued, state regulators for the first time have an idea of how many liens filed before 2013 are still viable.

Claimants have paid a fee for almost all of the liens still in the system – there are about 100,000 liens filed since 2013 that are "exempt" from the filing fee, according to DWC data – after the start of the New Year. They either paid the $150 fee imposed by Senate Bill 863 for any lien filed since the start of 2013, or they have paid a $100 activation fee for any lien filed before 2013. 

Any lien filed before 2013 that was not "activated" by midnight on Dec. 31 was dismissed by operation of law on Jan. 1.

The DWC on Tuesday said a total of 461,650 liens filed before 2013 were activated ahead of the New Year's Eve deadline. Those fees poured nearly $46.2 million into the Workers' Compensation Administration Revolving Fund, which is funded largely by employer assessments and used primarily to pay operational expenses of the DWC.

At the same time, the DWC said 536,945 new liens were filed between the start of 2013 and the end of 2015, adding another $80.4 million to the Revolving Fund.

An additional 95,179 liens filed between 2013 and 2015 were exempt from paying fees under a provision in SB 863 that exempts insurance companies, health maintenance organizations and employer-sponsored benefit plans from filing fees, according to data provided by the DWC. 

The 1.1 million liens remaining in the system may not have a huge impact on the day-to-day practices throughout the industry, but it's still a number that people would like to know, according to Suzanne Honor-Vangerov, managing attorney for the lien unit at workers' compensation defense firm Floyd, Skeren & Kelly.

She said the total number of liens in the system doesn't mean much for practitioners, but is helpful to assess how well the lien provisions in SB 863 worked. 

"The industry as a whole, I'm sure, wants the aggregate number," she said. "We still have to look on a case-by-case basis and see if they paid the fees and what got bumped off."

Prior to the automatic dismissal of unactivated liens at the start of the year, the DWC was unable to estimate the number of active claims in the system filed before 2013. While the number of liens filed annually is available, there was no way for the division to know whether a claim was still being pursued or how many were duplicates.

More than 6.5 million liens were filed between 2000 and the end of the third quarter of 2015, including 5.9 million filed before 2013, according to data from the Commission on Health and Safety and Workers' Compensation and the Workers' Compensation Insurance Rating Bureau.

That figure includes 1.2 million liens filed in 2012 alone, despite the hope that the activation fee provision in SB 863 would prevent a spike in lien filings that year. More liens were filed in 2012 than any other year since 2000.

Information from the DWC does not show how many liens were dismissed, the total claimed value of those liens or the aggregate claimed value for the liens remaining in the system.

According to the WCIRB, between 86% and 91% of new liens filed since 2011 came from Los Angeles, Orange, Riverside, San Bernardino or Ventura County.

The fact that fewer than less than 10% of the pre-2013 liens were activated before the start of the year could be explained by a couple of factors, according to Reid Steinfeld, general counsel for collections firm Grant & Weber.

He said it's possible that some service providers who typically have lower-value liens, such as copy services or interpreters, decided it was not worth it to pay the $100 activation fee to preserve claims filed before 2013. 

At the same time, Steinfeld said it's possible service providers are trying to resolve billing disputes without filing liens. And the looming deadline for the automatic dismissal could have provided additional incentive to settle claims filed before 2013, he said.

"Lien claimants have had two years to resolve the older cases, so that may be why the numbers are not as great as one would have thought," he said.

Claimants actually got an extra year to decide whether they wanted to pay the activation fee because of a constitutional challenge to the activation fee provisions in SB 863.

The bill required all pre-2013 liens not activated by the end of 2014 be dismissed by operation of law.

However, in the summer of 2013 a group of lien claimants asked the U.S. District Court for Central California to strike down the activation fee provisions on the grounds they violate due process, constitute an improper government taking of private property or violate equal protection.

In November 2013, U.S. District Court Judge George H. Wu dismissed the due process and improper taking arguments. But he issued a temporary injunction prohibiting the DWC from collecting activation fees or dismissing unactivated liens pending the outcome of the equal protection argument raised in Angelotti Chiropractic v. Baker.

The U.S. 9th Circuit Court of Appeals in June affirmed the lower court's ruling that the activation fee did not deprive lien claimants of due process or amount to an unconstitutional government taking of private property. The appellate court also said exempting insurance companies, HMOs and employer-sponsored benefit plans did not violate equal protections as the plaintiffs argued.

In November, Wu lifted the injunction and signed an order requiring the DWC to relaunch the activation fee website by Nov. 9. He give lien holders until midnight on Dec. 31 to activate their claims. 

The Angelotti plaintiffs filed a petition asking the U.S. Supreme Court to review the case last week.

Fees for a little more than half of the 461,650 liens activated ahead of the Jan. 1 deadline were paid in November and December. According to the DWC's data, 207,167 liens had already been activated when Wu issued his injunction. The remaining 254,483 liens were activated after Wu lifted the injunction.

The DWC data also shows no letup in the increased number of new liens being filed in 2015.

After the lien provisions took effect in 2013, the volume of new liens coming into the system dropped significantly. 

In 2013, 186,300 new liens were filed, 60% fewer than the 436,900 liens filed in 2011, according to the Workers' Compensation Insurance Rating Bureau. In 2014, another 190,100 new liens were filed, 59% fewer than were filed in 2011.

But the WCIRB in November reported 256,200 liens were filed through the first nine months of 2014. And the WCIRB projected anywhere from 341,000 to 391,000 liens would be filed for the entire year, which would be a reduction of 16% to 26% compared to 2011.

According to the DWC's data 310,796 new liens were filed in 2015, 29% fewer than were filed four years earlier.