Why No Court Does Apportionment Right

Saturday, September 9, 2006 | 0

By David J. DePaolo

August will go down in workers' compensation history as Apportionment Month. California courts of appeal issued in quick succession a couple of decisions that has thrown an already arcane legal concept into complete disarray, leaving hundreds of millions of dollars of benefits in limbo as litigants look to the Supreme Court to settle the issue.

But there is a fundamental problem with all of the apportionment cases that none of the court opinions have tackled, and which, in my opinion, renders ALL of the legal reasoning in each of them WRONG.

Very simply, each and every one of these decisions fails to distinguish between the legal nature of permanent disability before Senate Bill 899 and after reform. The concept of permanent disability before and after SB 899 is fundamentally different, yet the courts refer to "permanent disability" in both eras as though they are the same. They aren't. As a consequence, injured workers are being disproportionately deprived of compensation.

Before SB 899 permanent disability compensated the injured worker for diminution of ability to compete in the open labor market (Labor Code section 4660 prior to amendment by SB 899), and was based on body part (see the PDRS, circa 1997). As a consequence, it was possible for an injured worker with multiple injuries to have cumulative permanent disability in excess of 100% because a prior rating or award did not necessarily evidence a prior level of disability (Amico v. WCAB (1974) 43 Cal.App.3d 596).

After SB 899, the concept of permanent disability radically changed to compensate the injured worker for loss of future earning capacity (Labor Code section 4660 after amendment by SB 899). Permanent disability is now based on the whole person impairment under the AMA Guides 5th (except where the Guides are rebutted), and consequently an injured worker can never have permanent disability, regardless of the total number of prior injuries or disabilities where there have been prior awards regarding "any one region" of the body, in excess of 100% (Labor Code section 4664).

Yet all of the appellate decisions that have issued on the topic of apportionment seem to ignore this obvious distinction.

The Nabors court treated a 2001 49% stipulated disability award for a 1996 injury the same as though the award issued subsequent to SB 899 by taking the award at face value. The court in E & J Gallo (Dykes) likewise treated a 1999 stipulation to 20.5% as though it were rated post SB 899, and the Brodie court also made no distinction between the earlier 44.5% permanent disability rating and the subsequent SB 899 award. The Welcher court was the most egregious in failing to make any such distinction by giving Kenneth Dee Welcher's July 1990 injury award the same affect as a post SB 899 disability. (In addition, the
Welcher
court conveniently ignored the plain language of 4664 by applying apportionment to disparate regions of the body in two of the cases that were consolidated for the opinion, but that's another column.)

In each of these situations, the character of the pre-SB 899 disability award was not challenged. I do not know whether this was an issue brought up in appellate filings and the courts decided to ignore the issue, or whether this was an issue that simply was off the parties' collective radar screens, but now that the matter is likely headed to the Supreme Court, this is an issue that must be clarified.

In my opinion, the most startling fact in all of these cases is that there is nothing in Labor Code section 4664 that mandates treating an earlier disability award the same as a post SB 899 disability determination.

LC 4664 says, (a) the employer is only liable for the percentage of disability directly caused by the injury, (b) that if there was a prior award it "shall be conclusively presumed that the prior permanent disability exists at the time of any subsequent industrial injury." (And, as some observers have pointed out, the subsequent sentence, "(t)his presumption is a presumption affecting the burden of proof," seems to indicate that in fact, this is not a conclusive presumption).

There is nothing here that mandates treating a pre-SB 899 award as though the disability was determined in accordance with SB 899 following a whole person impairment evaluation under the AMA Guides 5th. Nothing. Nada. And yet the courts and the parties seem to make no distinction.

The Welcher court had the greatest opportunity to address the issue, but the concept seems to have clearly escaped analysis: "In each of the four cases before us, the primary question is whether the WCAB properly apportioned permanent disability by subtracting the percentage of permanent disability caused by factors other than the current industrial injury from the overall percentage of permanent disability to determine the percentage of permanent disability for which the employer or its insurer is liable, before determining the compensation payable for that percentage of disability under section 4658. To answer this question, we must construe the new apportionment statutes, sections 4663 and 4664.

" ...

"Here, it was established law under Fuentes for almost 30 years that permanent disability is apportioned by subtracting the percentage of the disability attributable to factors other than the current industrial injury from the overall percentage of disability to determine the percentage of the disability that is compensable, then determining the amount of permanent disability benefits payable under section 4658 by reference to the compensable percentage of disability. Thus, we begin with the question of whether, by repealing the former law (including former section 4750) and enacting new sections 4663 and 4664, the Legislature clearly expressed or necessarily implied an intent to abandon this approach and adopt instead the approach advocated by the claimants here (and the appellate court in Gallo) -- namely, converting the percentages of disability into their monetary equivalents under section 4658 before performing the necessary subtraction.

"...

"The purpose of this language in former section 4750 was to ensure that the employer was not "required to compensate the employee for an aggregate disability which included a previous injury" (Fuentes, supra, 16 Cal.3d at p. 6), but instead was required to compensate the employee only for the permanent disability stemming from the current industrial injury.

"Of course, to accomplish this result, it was always necessary to compare the claimant's present overall level of permanent disability to his or her previous level of disability in order to identify the portion of the overall permanent disability that stemmed from the current industrial injury. This is what formula A from Fuentes did. Under that formula (for the claimant in that case), "24.25%, representing [the portion of the claimant's permanent disability of] nonindustrial origin, [wa]s deducted from the 58 percent total [or overall] disability with a net compensable disability of 33.75%." (Fuentes, supra, 16 Cal.3d at p. 5.) Thus, contrary to the Gallo court's conclusion, even under former section 4750 as the Supreme Court applied that statute in Fuentes, "the level of permanent disability caused by a subsequent injury" could not be determined except by "reference to... the employee's prior condition." (Gallo, supra, 134 Cal.App.4th at p. 1549.)

"Accordingly, the enactment of sections 4663 and 4664 did not represent a reversal of policy on this point. Now, as then, the level of permanent disability caused by the current industrial injury can be determined only by reference to the level of disability attributable to other factors -- including the claimant's prior condition. Once the level of permanent disability caused by the current industrial injury has been isolated from the level of disability attributable to other factors, then compensation can be awarded for the portion of the disability attributable to the current injury. It is in the awarding of compensation, once the level of disability attributable to the current injury has been isolated, that the claimant's prior condition is necessarily ignored."

The Welcher court touched on the issue, but missed the point, with a citation from Strong v. City & County of San Francisco (2005) 70 Cal.Comp.Cases 1460: "Under this preexisting law, it was not the part of the body involved in the subsequent industrial injury that was important; rather, it was the nature of the disability resulting from the new injury in relation to the pre-existing disability that was determinative.' (Strong, supra, 70 Cal.Comp.Cases at pp. 1466-1467.)"

In this author's humble opinion (and I've been wrong many times before) ANY award prior to SB 899 must be evaluated pursuant to LC 4663, and requires medical opinion as to the nature and extent of pre-existing permanent disability as determined via AMA Guide 5th whole body impairment. Now that the law on apportionment is completely upended and unsettled, it is my hope that the litigants who find themselves before the California Supreme Court bring to the court's attention the disparity between the two permanent disability rating systems, and the inequity that results when one compares apples to oranges.

David DePaolo is the CEO of workcompcentral.com Inc.

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The views and opinions expressed by the author are not necessarily those of workcompcentral.com, its editors or management.