You Want me to Send the Check Where?

Friday, November 7, 2014 | 1

Every now and then a circumstance occurs that shocks the conscience and sensibilities of even the most sophisticated and savvy insured. I could not avoid noticing the utter dismay of an employer when I advised them that yes, the applicant may really be entitled to benefits despite his arrest for attempted murder.

INCARCERATION IN ITSELF DOES NOT CONSTITUTE GOOD CAUSE TO FORGO THE PAYMENT OF BENEFITS.

Along with events like pregnancy and being drafted into the military, incarceration falls into a category referred to as “intervening events.” An arrest and/or incarceration does not in and of itself justify terminating liability to pay temporary disability.

ELIGIBILITY FOR BENEFITS

It can be unnerving for an insured to learn that criminal activity, including felonies and violent crimes, does not preclude eligibility for workers’ compensation benefits. If a worker became eligible for benefits prior to a criminal indictment, the employer's liability for benefits does not sua sponte terminate. Incarceration does not automatically preclude an applicant from being eligible for the payment of temporary total disability benefits.

PROOF OF TEMPORARY DISABILITY STATUS

Perhaps one saving grace is that eligibility for benefits, of course, requires substantial medical evidence; that is, medical reports which find applicant continues to be temporarily totally disabled. Confinement periods exceeding 45-60 days may adversely impact applicant’s ability to prove a continuing eligibility for benefits when there was no recent medical report. The lack of contemporaneous medical evidence certifying TTD is an excellent opportunity to suspend the accrual of temporary disability until there is up-to-date evidence certifying disability.

In a case I shall never forget, applicant was taken from the scene of a car accident and unceremoniously delivered back to prison for a parole violation. Although he was not at fault for the accident (which involved a fatality), the marijuana joint stuffed in his sock was a parole violation. A few years later upon his release, he did what any self-respecting career criminal would do after being successfully prosecuted – he hired himself an attorney to collect on his workers’ compensation injury.

Applicant X worked for the employer for less than two weeks. In fact, that period of employment was the entirety of his employment career, having spent the better part of his adult life in prison.

Thanks to our duly agreed upon AME, applicant was found to need orthopedic care and modified duties. Oh and yes, he was temporarily disabled from the time of the accident and continuing.

OVERPAYMENT OF BENEFITS DURING INCARCERATION

Does an employer have recourse when benefits were overpaid to an incarcerated applicant?

Typically the insurer learns that a doctor has declared the applicant permanent and stationary via a medical report issued many weeks after the evaluation. In the meantime, lacking evidence of P&S status, temporary disability benefits continue. When the report is received, permanent disability advances should commence. The problem is, applicant is in jail.

There is no “incarceration exception” to the handling of benefit overpayment. If applicant is not at fault for the overpayment, the insurer is not as a matter of right entitled to take credit for overpayments against applicant’s permanent disability indemnity.

In the course of negotiating settlement by Compromise and Release (C&R), parties are often able to come to a mutually disagreeable solution to the overpayment. Depending on the amount of the overpayment, the insurer may just agree to waive a request for credit in order to facilitate finalizing settlement, or the parties may agree to a split in the overpayment.

If the applicant was at fault in creating a situation of an overpayment, such as knowingly collecting EDD benefits and temporary disability benefits contemporaneously, the insurer is in a strong position to assert credit for an overpayment in the C&R.

Unfortunately, when the status of a case is in limbo due to an unavailable applicant, there is no effective remedy to recoup the overpayment while waiting for the release of the applicant.

PETITION FOR DISMISSAL FOR FAILURE TO PROSECUTE

Are there any excellent remedies to facilitate closure of a claim where the applicant is incarcerated? You bet! Petition to dismiss the claim for the applicant’s failure to prosecute.

If you have continued reading this far, you may be able to predict the WCAB’s position on dismissing claims if the applicant is unavailable due to incarceration. Yes, you are correct. Unavailability due to incarceration does not automatically constitute good cause to grant a dismissal. Any other options? You bet. Applicant is probably in dire need of funds (bail, retaining a defense attorney, etc.). Thus, it is exactly the right time to start negotiating a settlement with applicant’s counsel.

Having your applicant spend some time in the pokey is not the Godsend it would appear to be. It is often just a delay in the ultimate closure of the claim. Nevertheless, Petitions for Dismissal and settlement overtures can go a long way in getting that file closed!

Nanci C. Freeman is an associate attorney with Bradford & Barthel, LLP in Los Angeles. This column was reprinted with permission from the law firm's blog.