The Good and Bad of Costa

Saturday, December 16, 2006 | 0

By Mike Sullivan

This is the case of Joey Costa v. Hardy, and it pertains to the permanent disability schedule. It has, in essence, two findings, one good and one bad. I give a brief summary here.

1. The board decided that the new schedule is in and of itself valid and refused to rule otherwise. The new schedule remains in place.

2. The board confirmed that evidence extrinsic to the schedule is permissible to rebut the schedule's conclusions regarding the loss of earning capacity. Furthermore it concluded that costs for expert testimony in this regard could be levied against the defense pursuant to Labor Code Section 5811.

First, the good.

This case represents the board level result of a long attempt by CAAA to show that the new PD schedule should be thrown out. The basis for this attempt was the way (former Division of Workers' Compensation Administrative Director) Andrea Hoch had put together the new schedule. The claim was -- and will still be on its way to the appeals court -- that the then administrative director had not used a Rand study and other empirical data required by the new Labor Code Section 4660 when she assembled the new schedule, especially the FEC adjustment. Therefore, claimed California Applicants' Attorneys Association, the schedule was invalid. CAAA also complained loudly that the new PD schedule had dramatically reduced benefits, a result contrary to what the Rand study had proposed. This campaign by CAAA was begun in the civil courts, but ultimately it was rejected as the WCAB had jurisdiction. Now that an en banc decision has been made against them, there will certainly be an appeal.

The good news for the defense is that this attempt has now failed at the board level. In Costa we have a unanimous decision by all of the commissioners. They reviewed the law, and set out the standard. The board is not to disturb regulations published by the administrative director unless her position is truly "arbitrary and capricious." It was found that there was no evidence in the record of such abuse. The board went through the evidence and demonstrated that she did in fact act in accordance with the Rand study. There was no other "empirical evidence" available, and she therefore was not outside of the legal requirements by failing to include this. In publishing the new schedule, she acted in a timely fashion as demanded by law. It was found that there was no solid documentation demonstrating that PD benefits had been unfairly reduced by the new schedule. Regardless, the point was that the board should not disturb the quasi-legislation put out by the administrative director, if there is any reasonable basis for it. They refused to do so, and the new schedule stands.

There is also bad news for the defense.

The applicant attorneys have been attempting in some cases to introduce external evidence to show a higher PD than would be indicated by the schedule. Usually this has taken the form of a report by an ex-rehab counselor, who purports to be an expert on an applicant's loss of earning capacity. The eventual goal of CAAA is to establish a common practice of having a vocational expert agreed upon in most cases to establish the real loss of earning capacity, beyond what the schedule allows, thus rendering the schedule almost meaningless. The defense has taken the position that under the language of the new law, no extrinsic evidence will be allowed. Only the new schedule can speak to what PD is in any given case.

Extrinsic evidence was sought by the board itself in the Costa case, and they took care to justify this action. More importantly, the commissioners described how extrinsic evidence had been allowed to show PD beyond the schedule before Senate Bill 899. It was pointed out that under SB 899 the provision of Labor Code Section 4660(c) had not changed. There, it is specified that the schedule is "prima facie" evidence of permanent disability, now defined as a loss of earning capacity. This is a foreign concept to some practitioners, since the old PD schedule was used with little to no dispute in almost every case before SB 899. However the board points to clear precedent where extrinsic evidence was used to prove a higher level of PD than the schedule would allow.

The most commonly known is the LeBouef case, where expert testimony was allowed to show that an applicant was not vocationally feasible and thus totally permanently disabled. Also, cases were cited that had simply shown the old PD schedule to be unreasonable in light of the facts. It was decided that these cases are still good, and that the new schedule could still be rebutted. Costa concluded that "The effect, if any, of the changes to Section 4660 as to what evidence may actually rebut a rating under the new PDRS will be decided, at least initially, on a case by case basis."

Thus the applicant attorney's efforts to introduce extrinsic evidence is alive and well. Nevertheless it should be pointed out that the vocational expert offered in the Costa case was thrown out, as she made key mistakes that resulted in her failure to rebut the schedule, including false assumptions and incorrect calculations, and the report was not timely served. It remains clear that evidence must be presented which rebuts the prima facie showing of the new PD schedule. This area is now more than ever ripe for extensive litigation.

That is even more true because of a rather glib conclusion by the board at the end of Costa. It was determined that the expert should be paid her (reasonable) costs under Labor Code Section 5811. This is a key area of concern for CAAA, who has shown partial restraint in using this strategy, out of a fear as to who will pay for such expert opinion. It has been a matter of some debate as to whether fees for experts such as this would constitute legitimate costs. Costa in a conclusory fashion stated that these costs were allowed. Note that this decision was explicitly based at least in part of the fact that the expert was listed as a witness and had testified without objection. The second introductory paragraph to this case states that "the costs of such rebuttal evidence may be allowable." Thus the finding on this point is ambiguous.

Attorney Michael Sullivan can be reached by e-mail at mike@mikeslaw.com, or by phone at (310) 337-4480.

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