Can an E/C Suspend Benefits for Suspected Fraud?

Saturday, January 27, 2007 | 0

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

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 its suspicion to the JCC to decide whether benefits may be terminated.

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.

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 itss 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 statement 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 an 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.

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." br>
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 &" br>
Further, MKRS finds older cases of the First District which rely on earlier precedent of the Florida Supreme Court, which set in motion the 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 thereunder without an award is indicated by the provision of section440.20(1)[1]. 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 become necessary."

A few further thoughts. There is no specific authority for suspension of benefits on any specific ground (e.g. MMI, MCC), apart from operation of the 120 day rule (in terms of accepting or denying basic compensability). 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 before the JCC's determination fraud was committed.

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. It is hoped the Court will then withdraw or alter the observation found in Wetherington (assuming the Supreme Court does not act: see next subheading). Therefore, in light of all the forgoing (and other reasons and authorities), MKRS cautiously suggests:

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.

* The alternative is to simply heed the District Court's concerns and behave accordingly. If a Claimant is suspected of having committed proscribed acts benefits continue until a timely raised defense is ruled upon at a final hearing or evidentiary "motion" hearing. But; beware the Polston case described under NEWS below. For now, there must be a pending petition before the E/C can challenge benefits!

LATEST NEWS!

* The decision has been made to seek Supreme Court review of Wetherington and MKRS' jurisdictional brief was filed with the Supreme Court of Florida on Jan. 19, 2007. We will of course keep our esteemed clients posted on changed developments, but for now.

* Jan. 4, 2007, JCC Remsnyder entered an Order finding the language of Wetherington to be both inappropriate and only dicta, and while a JCC's Order is not binding or controlling on other parties or Courts, it's a start! (Carroso v. Sunwest PEO of Florida, OJCC Case No.: 06-000280DSR)

* Additionally, a test appeal was filed with the District Court (via Writ of Certiorari) challenging the "catch-22" combination of Wetherington (no power to suspend administratively) and the Polston case, 920 So. 2nd 766 (JCC without jurisdiction to consider a "proscribed acts" defense Section 440.09(4) where there is no Petition pending) - a paradox which seems to put workers suspected of (and even ultimately found to have committed) "fraudulent" acts in the driver's seat, for no good statutory or public purpose we can discern.

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

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