Practice Tips: Medical Evidence During the Delay Period

Friday, March 25, 2011 | 0

By Michael Sullivan
Sullivan & Associates

Here's a common scenario. An applicant files what is in the eyes of the defendant a highly doubtful claim for psychological injury. Perhaps the employer reports that the applicant was never a very reliable employee, and always seemed troubled. However, the defense attorney takes note that the applicant attorney is not one that usually files spurious claims. An investigation is done, and the report comes in.

The investigative report does indeed recite many non-industrial psyche problems. Witnesses report that the applicant had a troubled marriage, which ended recently in divorce; her teen-aged son was arrested on drug-possession charges, and she was fighting a lot with her sister. However, it is also learned that the employer was mistreating the applicant. In fact the employer's behavior seems clearly to have been sexual harassment. The employer concludes that a predominant cause defense may lie. That is, pursuant to LC 3208.3(b)(1), in "order to establish that a psychiatric injury is compensable, an employee shall demonstrate by a preponderance of the evidence that actual events of employment were predominant as to all causes combined," unless the injury resulted from a violent act.

(See Sullivan On Comp (SOC) section 5.30 "Psychiatric Injury Predominant Cause and Actual Events of Employment" for a full discussion of this defense. SOC is our recently published treatise on the whole of California workers' compensation law. Access to SOC is discussed at the end of this article. Herein we intermittently refer to relevant sections, in order to provide fuller discussion for readers that want it and have the subscription.)

The adjuster calls the defense lawyer and asks: Can we deny this case now, or do we need medical evidence? If we do need medical evidence, how can we get it before the 90 days to deny has run, given the delays at the Medical Unit of the DWC?

<b>Standards for denial Is medical evidence needed?</b>

These are good questions. We start with the idea that if a denial is not timely made, there can be serious consequences for the defense. Therefore the defense has every reason to issue a denial on time, if it is going to do so.

The consequences for late denial include a presumption that the injury is compensable. A second and more serious consequence is that the defense may not present any evidence on the issue of industrial injury that could have reasonably been discovered within the 90 day period. Such a barring of evidence can have the effect of eviscerating the defense's ability to defend the issue. (Note that a late denial does not mean that a case is accepted; in fact, there are many ways to overcome this problem for the defendant. See SOC section 5.16 "Presumption Of Injury 90-Day Rule.")

Given these consequences, why would a defendant hesitate to deny a case if it thought there was some basis for doing so? Why not just deny if there is not enough time? After all, the claim can always be picked up later, but there is only one chance to deny.

There are a few reasons a defendant might have for deciding not to make a questionable denial under the gun. Perhaps the defendant thinks it will eventually lose and wants to minimize the possibility of the applicant obtaining a lawyer. Or perhaps the employer will want to maintain MPN control, which it will lose if it denies the case (see SOC section 7.56 "MPN Escaping The Network"). Defendants may fear that the applicant will allege a bad faith denial and ask for penalties, although conducting an investigation is generally enough to avoid this problem (see SOC section 13.20 "Unreasonable Delay Duty To Investigate").

However the most common reason defendants are afraid to deny a claim with only a questionable basis is the Audit Unit of the State of California. The adjuster wants to make sure that the file is properly documented before a denial letter issues, in order to avoid the penalty that may issue from the State.

State penalties are no joke, and are a serious concern for all adjusting organizations. (See SOC section 3.54 "Claim Practices State Audits.") The standard for when a case may be properly denied is described in CCR 10109, CCR 10111.1(c)(6), CCR 10111.1(d)(1) and CCR 10111.2(b)(1)(2). These require that the defense act in good faith and that a refusal to provide benefits have a "factual, medical, or legal" basis. See e.g. Appeal of City of Glendale (1994) 22 CWCR 315 (administrative director decision) and Appeal of SCIF 21 CWCR 139 (administrative director decision). However, how much of a basis is needed? In the above example, is the investigation enough, or is medical evidence required?

If the investigation is strong enough, it often will suffice to stave off any charge by the Audit Unit that there was an insufficient basis for denial. Claimant and employer statements, personnel records, and prior medical records are often enough to satisfy this requirement. A showing of material factual inconsistencies can provide the grounds for a proper claim denial. In the above example, if the applicant was not found to be sexually harassed at work, there would probably be enough for a denial just on the investigation, since it showed a strong basis for the conclusion that her problems were nonindustrial.

However there are cases that require an expert medical opinion to reach the ultimate issue. This sort of situation commonly arises in claims practice, especially in psyche cases where an affirmative defense under LC 3208.3 is being raised. This is particularly true if the investigation produces only mixed results. The question of predominant cause of psyche injury ultimately requires an assessment of the actual disorder, and an expert medical opinion on causal factors. Where there are mixed industrial and non-industrial factors, it does appear that medical evidence is needed, as only a doctor can provide the diagnosis under the DSM-IV, and only a doctor can speak to the causes of that diagnosis. Medical evidence should be obtained in the hypothetical case here, before the decision to deny is made.

<b>Options where medical evidence is needed</b>

If medical evidence is required for a denial within the ninety day period, the defense can expect little help from the standard medical-legal process. The current drawbacks for the defense in the present system include taking too much time for the medical-legal evaluation and report to get done, banning the defense from unilateral communication with the evaluating physician,  and empowering the claimant to object to submission of non-medical evidence (i.e. witness statements, sub rosa film, and personnel records) to the evaluating physician. These limitations present a losing proposition for the defense. There is little chance of an AME or panel QME report getting done on time.  

Under LCs 4060 and 4062.2 the defense must propose an AME on a litigated case before turning to the Medical Unit of the DWC for a panel. Just getting a panel can take months. The appointment must be scheduled and attended, and then a medical report must issue. (The physician has thirty days under LC 139.2(j)(1) to issue the report. See SOC section 14.42 "Timeliness Requirements" for a full discussion.) An AME is often an unattractive option in a denied case, as these doctors tend to split the baby, and anyway, it is a rare AME who can schedule quickly.

So what can be done?

There are a couple of viable options here. One is the opinion of the primary treating physician. Why not ask this physician for an opinion on the issue of compensability? Note that LC 4062.3 prohibits ex parte communication with a medical-legal physician. However there is no prohibition, aside from privacy concerns, on communicating with the primary treating physician or any treating physician, for that matter.

The defense may decide to fill the doctor in on what it has learned through investigation. Perhaps the defense may even wish to meet with the physician to explain its case. (Note that service of witness statements or investigative reports may make such materials discoverable, where otherwise they may be subject to the protection of the work product privilege. See SOC section 14.8 "Witness Interviews and Statements.") Of course, in taking this approach, the defense must weigh carefully what it thinks the doctor might say. Certainly where the employer has medical control, as where there is a HCO or Medical Provider Network (or both), the employer is likely to be more confident. But the plan can backfire if the physician is for some reason hostile. Of course the defense must never use coercion or manipulative tactics.

A major concern when asking a treating physician to decide a complex issue is the physician's ability to write a comprehensive report. Treating physicians often lack the analytical and writing skills that are the hallmark of practiced medical-legal professionals. Of course, an imperfect report is still usually sufficient to support a denial, and the practitioner can seek a fuller report down the line.

Be that as it may, it is in the interest of the defense to obtain a favorable report from a treating physician that is substantive enough to be used in court if need be. That way the defense may proceed without the need for further reporting. Perhaps even a DOR can be filed. Of course, the applicant will want to contest the report through the medical-legal process, but even then the defense will have a leg up with a substantive treating physician's report behind it.

Note that the defense need not always turn to the primary treating physician for reporting. If that physician lacks the needed expertise or writing skills, he or she may request a full report from an appropriate secondary treating physician. Such a physician may be a specialist in the appropriate medical field. If a physician exists within the Network that is known not to be hostile to the defense, and to be capable of writing complete and well considered reports, the primary treating physician may specifically consider using that secondary physician. The primary treating physician may clearly do this under LC 4061.5 and CCR 9785. Of course, the primary treating physician must review and comment on the report he or she receives from the secondary treating physician.

What if there is no MPN, and the applicant is being treated by a physician hostile to the defense? If for this reason or some other the treating doctor is not an option, the employer may consider the use of LC 4050. That section allows that "Whenever the right to compensation under this division exists in favor of an employee, he shall, upon the written request of his employer, submit at reasonable intervals to examination by a practicing physician, provided and paid for by the employer."

LC 4050 also requires an applicant to "submit to examination at reasonable intervals by any physician selected by the administrative director or appeals board or referee thereof." Put simply, the employer has the right to have the applicant examined by a doctor of its choice. (See SOC section 14.34 "Reporting Under LC 4050." Note that this kind of reporting is not allowed under LC 4064, as thought by some, as discussed in section 14.35 "Reporting Under LC 4064.")

It is well established that a medical report obtained under LC 4050 is not admissible as evidence. Nunez v. WCAB (2006) 71 CCC 161, 169; Cortez v. WCAB (2006) 71 CCC 155, 160. Nor may the system be circumvented by having another doctor review the report, thus making it admissible. However such a report could be generated in order to guard against audit penalties where found to be necessary. As a side benefit, the physician producing the report may produce useful facts or analysis that may help the practitioner defend the case.

<i>Michael Sullivan is founder of Sullivan & Associates, a workers' compensation defense firm with four offices in Southern California, and author of "Sullivan on Comp," a treatise on the California workers' compensation system.</i>