Can an E/C Unalaterally Suspend Benefits Based on Suspicions?

Saturday, December 30, 2006 | 0

By George Kagan

Whether, after Wetherington, an E/C may suspend benefits administratively where it believes a Claimant has committed acts prohibited under S440.105(4)/S440.09?

Wetherington v. Pavilion Apartments; Case No.: 1D05-3824 (Fla. 1st DCA, 12/6/06) rehearing denied 12/14/06

WHAT HAS HAPPENED:

CAUTION! In promulgating our Landmark Alerts, MKRS believes it necessary to do more than pass along information that is readily available. Hard but also practical analysis is the value added benefit we strive to confer on our esteemed claims and employer clients, even where analysis leads to criticism of Claims, Court, Bar or legislative action. This alert is one of those. As it takes more time to carefully and respectfully set forth criticism of judicial acts, please allow for extra time to consider information imparted in this alert!

In what MKRS believes to be an unusual statement, one which may or may not be controlling precedent, the District Court has observed (MKRS' characterization):

"The Workers' Compensation Act contains no authority for the suspension of benefits based on a payor's unilateral determination that a Claimant has violated Section 440.09 and Section 440.105 Florida Statutes (2004)."

The Court reasons such administrative suspension jeopardizes an injured worker's right to due process of law.

In short, the Court does not presently believe an E/C has the prerogative to suspend benefits administratively where it suspects "fraud" has occurred but rather, while continuing to pay, E/C must bring it's suspicion to the JCC to decide whether benefits may be terminated. BUT! Is that what the Court actually ruled - and if so - is that good law?

MKRS respectfully suggests the answer to both questions must be: No.

ANALYSIS:

A. In Wetherington, based on its belief proscribed acts occurred, E/C suspended benefits including PTD and the matter came to hearing. The JCC determined elements supporting suspension were not established and reinstated benefits. E/C appealed. In affirming, the Court gave a harsh depiction of E/C's conduct and that of it's counsel in the prosecution of the appeal itself. However, although administrative suspension did not seem to be an issue addressed by the JCC, the District Court issued the statements regarding administrative prerogatives noted above. Given that circumstance (i.e., not a point in contention by the parties), and language of the opinion which seems to fall just short of a holding, MKRS believes the Court has not genuinely "ruled" on the question, therefore, Wetherington is not controlling precedent as might absolutely preclude an E/C's administrative suspension -- even though the Court clearly signals its belief the E/C has no such power -- thereby strongly suggesting how it is likely to rule in a future, direct challenge. SO THEN: why are we making such a fuss here? Please read on.

B. MKRS maintains the Act does contain clear, direct and express authority for the suspension of benefits based precisely on an E/C "payor's unilateral determination that a Claimant has violated Section 440.09 and Section 440.105." MKRS believes the E/C not only possess a then administrative prerogative to suspend benefits administratively, such prerogative is the cornerstone of the "self executing" design of the law.

In a self executing Act, E/C has the power to suspend benefits -- for good reason or bad - and the injured worker's "due process" rights are preserved in the myriad procedures (e.g., petitions), tools (e.g., IME) and benefits provided by law to facilitate challenge to any and all administrative decisions (e.g., E/C-paid attorney's fees -- for trial and appeal, penalties [a hefty 20%], interest, and costs -- all of which serving is inducements for and E/C not to suspend precipitously if it intends to stay in business. Furthermore, suspension based on "fraud" is a "total" denial, justifying imposition of penalties, interest, costs and fees on all back benefits - - and fees on all future benefits (within the parameters of S 440.34). Let us also recall, S440.09 is captioned "Coverage," meaning, denial thereunder is a determination there is no coverage for such claim.

C. In support of its analysis, MKRS points first to Section 440.20(3):

"Upon making initial payment of indemnity benefits, or upon suspension or cessation of payments for any reason, the carrier shall immediately notify the injured employee, the employer, and the Department that it has commenced, suspended, or ceased payment of compensation." Emphasis added.

The statutory authority quoted above is the source for Rule 69L-3.012, Workers' Compensation Claims Rule:

"(1) If the claims-handling entity denies entitlement to any benefit, it shall send a copy of form DFS-F2-DWC-12.to the employee, employer and any additional party requesting payment or authorization. The form DFS-F2-DWC-12 shall be mailed within 14 days of the date the claims handling entity decided to deny or rescind the denial of benefits.

(2) If the claims-handling entity initially denies the compensability of, or coverage for, a case it shall. . ." Emphasis added

Further, MKRS finds older cases of the First District which rely on earlier precedent of the Florida Supreme Court, which setting in motion description of the act as "self executing" in nature. E.g., HG Boddiford Painting Contractors v. Boddiford, 426 So.2d 1243 (Fla. 1st DCA 1983):

"The Florida Workmen's' Compensation Law Contemplates that compensation shall be payable there under without an award, as is indicated by the provision of section 440.20 that, 'Compensation under this Chapter shall be paid periodically, promptly in the usual manner and directly to the person entitled thereto, without an award, except for where liability to pay compensation is controverted by the employer.'

For this reason the law is commonly referred to as being "automatic" or "self-executing." It is only when an employer fails to pay compensation when due or controverts the right to compensation, that resort to the claim, hearing, and determination provisions of the Act becomes necessary." (Original, underscoring added, BodderfordBoddiford, supra, p. 1247-1248, citing Dunn at 558)HYPERLINK l "BM__ftn2"[2]

MKRS poses the question; If no order was needed to start benefits, why would one be needed in order to stop them - and, only in this one instance (prohibited acts) - which begs the question - is there a difference where the E/C never starts paying but denies initially? Why would that be any different, or, does the Court suggest benefits cannot be resisted even initially where prohibited acts are suspected?

Just a few further thoughts. There is no specific authority for suspension of benefits on any specific substantive ground (e.g. MMI, MCC), apart from operation of the 120 day rule (in terms of accepting or denying basic compensability). [Note there are some suspensions as sanctions for procedural violations, e.g., failure to attend IME/EMA; failure to sign release under 440.15(9)(c)] As such, why would there need to be a specific statutory enabling cause for suspensions in this one area (prohibited conduct)? Further, the legislature has set forth an instance where E/C has no such prerogative: i.e., where there is an earlier order governing the benefits in question: in that case the E/C must go before the JCC to alter any aspect of the award (S440.28), demonstrating the legislature knows where curbs on administrative prerogatives should be installed - - and it has done so. Finally, in terms of this brief sketch of MKRS' concerns, if such ruling takes hold, other illogical, even inequitable consequences might follow - - such as a potential claim for back benefits "improperly suspended" prior to a JCC's determination that "fraud" in fact occurred. Only a claimant found to have committed "fraud" might have such extraordinary right to back benefits -- following a "fraudulent act" -- but accrued before the JCC's determination fraud was committed.

SO THEN: WHAT ARE WE SAYING??

What we are saying is this; MKRS believes, presented with an actual "case and controversy," i.e., one fully briefed by contending parties, the Court will likely find the authority it did not find in Wetherington (and which, because it was not directed to do so by the parties, it may not have looked too hard for). It is hoped the Court will then withdraw or alter the observation found in Wetherington (assuming the Supreme Court is not called upon to act). Therefore, in light of all the forgoing (and other reasons and authorities), MKRS cautiously suggests;

ARE YOU FEELING LUCKY?

In keeping with the self-executing design of the law and fully in accord with Section 440.20(3), it remains appropriate for an E/C to suspend benefits on any cognizable ground -- and no sanction or redress is applicable to such proper, even necessary, claims handling function.

Let's put it this way: if you find yourself in receipt of a "post Wetherington" motion for sanctions based on administrative suspension, it seems appropriate to ask; (1) What, beyond the Court's observation in Wetherington, is the authority for same? (2) What, in the source law, in the cases, or in the rules, is the sanction? If answers are hard to come by - - in terms of a creature of statute such as the workers' compensation law - - that is not auspicious support for any "new kind of" motion.

ALTERNATIVELY; THE "SAFE" APPROACH at this point is to heed the District Court's concerns and behave accordingly: where a Claimant is suspected of having committed proscribed acts, benefits must continue until a timely raised defense may be asserted via, say, already scheduled pending final hearing or a specially set evidentiary "motion" (i.e., one with ample notice, and all the formality and length of a final hearing).

SPECIAL CAVEAT

The sharply worded critical opinion in Wetherington involved a highly esteemed carrier client of MKRS, defended by another of its well respected, long established panel defense firms. Owing to the unique circumstances presented, MKRS was invited to participate in discussions leading to, and actual prosecution of it'sa good faith Motion for Rehearing in Wetherington (one based also in part on a perception the actions of E/C and it's counsel were not so egregious as depicted), but which the Court denied on December 14,, 2006 (which is why we have waited before sending this Alert). As of this date, a decision has also just not yet been made whether to seek Supreme Court review on the basis of perceived conflict suggested above. We will of course keep our esteemed clients posted on changed developments, but for now.

BOTTOM LINE:

The Court in Wetherington issued a strong signal it does not believe an E/C can unilaterally, that is, administratively, suspend benefits where it suspects Claimant has committed prohibited acts (S440.105/S440.09(4)). MKRS believes the language of the Opinion does not constitute a true holding, which, if correct, would leave the question "open" for testing another day (thus empowering those who believe as we do the E/C in a self-executing act must posses the right to initial action -- followed by an injured workers' reaction, if any, as all safeguards are provided to make such Claimant not only "whole" but then some (penalties, costs, fees, interest). The "safer" course is to heed the Court's thinking, but doing so may lead to unintended and unsettling results hard to reconcile not in keeping with public policy, e.g., entitlement to "back benefits" even where it is found these were procured through "fraud." Until and unless the Court clarifies the question, MKRS urges its clients to proceed cautiously and is, as always, available for consultation in individual cases prior to administrative action.

Supplied by H. George Kagan of the MKRS law firm. Kagan can be reached by e-mail at href=mailto:GeorgeK@mkrs.comGeorgeK@mkrs.com, or phone at (800)761.MKRS.

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