SB 815: The Wrong Bill at the Wrong Time

Saturday, September 9, 2006 | 0

By David J. DePaolo

SB 815 is hugely flawed and should not be signed by the Governor even if an insurance executive supports it.

Let's review: SB 815 seeks to amend Labor Code section 4658, the permanent disability indemnity section. This section is what converts percentage of disability in to money. It has been amended several times over the years in an effort to adjust "inequities" in the compensation of permanent disabilities.

SB 899 amended 4658 by adding subdivision "d." In addition to adjusting the number of weeks to be paid for each percentage of disability, subdivision "d" also provides for the 15% additure / debiture based on return to work status of the injured worker, and also limits the application of "the revised permanent disability schedule adopted by the administrative director pursuant to Section 4660" to cases where there had not been a P&S declaration or indication of permanent disability:

(2) If, within 60 days of a disability becoming permanent and stationary, an employer does not offer the injured employee regular work, modified work, or alternative work, in the form and manner prescribed by the administrative director, for a period of at least 12 months, each disability payment remaining to be paid to the injured employee from the date of the end of the 60-day period shall be paid in accordance with paragraph (1) and increased by 15 percent.
This paragraph shall not apply to an employer that employs fewer than 50 employees.
(3) (A) If, within 60 days of a disability becoming permanent and stationary, an employer offers the injured employee regular work, modified work, or alternative work, in the form and manner prescribed by the administrative director, for a period of at least 12 months, and regardless of whether the injured employee accepts or rejects the offer, each disability payment remaining to be paid to the injured employee from the date the offer was made shall be paid in accordance with paragraph (1) and decreased by 15 percent.
(B) If the regular work, modified work, or alternative work is terminated by the employer before the end of the period for which disability payments are due the injured employee, the amount of each of the remaining disability payments shall be paid in accordance with paragraph (1) and increased by 15 percent. An employee who voluntarily terminates employment shall not be eligible for payment under this subparagraph. This paragraph shall not apply to an employer that employs fewer than 50 employees.
(4) For compensable claims arising before April 30, 2004, the schedule provided in this subdivision shall not apply to the determination of permanent disabilities when there has been either a comprehensive medical-legal report or a report by a treating physician, indicating the existence of permanent disability, or when the employer is required to provide the notice required by Section 4061 to the injured worker.

SB 815 would add subdivisions (e), (f) and (g). Each of these subdivisions are worded the same but for the change to the number of weeks corresponding with disability percentage numbers. Each of these subdivisions state specifically that they are applicable only to injuries occurring after a certain date, as all prior subdivisions that had been added to 4658, including subdivision "d".

Using our normal, legally accepted rules of statutory construction, then, any application of subdivision "d" to injuries after 1/01/07 would thus terminate by the plain language (or lack of plain language) in 4658 as amended by SB 815. In other words, the 15% additure / debiture of permanent disability indemnity applicable to return-to-work status would cease for injuries on and after 1/01/07 under SB 815.

Likewise, compensable claims that arise prior to 4/30/2004 may, after 1/01/07, may be rated under the "old" PDRS because, by operation of proposed subdivision "e", subdivision "d" would no longer be applicable... (or at least that is one possible interpretation).

SB 815 is one of those last minute passage bills. Conceived on the fly, inadequately debated or researched, SB 815 would simply continue the legislative tradition heralded by SB 899 of legislation that is unclear, and abundant with unintentional consequence.

Schwarzenagger, in my humble opinion, will likely sign this bill. It is politically expedient to do so: 1) demonstrates to Labor that he is on their side and a small capitulation that SB 899 went too far; 2) he will not be in office when the full effect of SB 815 is in effect (since it takes years for most catastrophic cases, which SB 815 primarily targets, to get to PD rating status); and 3) he can boast to business that he remained tough on work comp reform by rejecting the host of other SB 899 dilution bills that were presented.

That a highly influential insurance company executive publicly supports SB 815 as "giving back" to the injured worker should also be pause for reflection, and looked at with a jaundiced eye. No business person supports any legislation unless there's a WIFM ("What's In it For Me"). Remember that indemnity is not an expense item on the carrier balance sheet. This is a cost that is passed directly on to the business being underwritten. SB 815 is a beautiful piece of legislation for the long term viability of private workers' compensation insurance in California for it will raise exponentially, over the long term, the experience modification of the poor businesses that have the unfortunate luck of a catastrophic claim on or after 1/01/07.

Thus, carriers can look like heroes for supporting a "benefit increase" that does not impact their bottom line, and brokers (whose commissions were severely impacted negatively by the recent reform bills) will finally make up some ground. Self-insureds and small business, however, get the proverbial "shaft" at the end of the day.

SB 815 is the wrong bill at the wrong time. I support an increase in benefits to injured workers, but not through this bill. The fundamental math in the current PDRS is the way to fix the permanent disability indemnity inequity, not SB 815.

David J. DePaolo is the president and CEO of WorkCompCentral, and has practiced law representing carriers and employers in the California workers' compensation system for over 20 years. -------------------------------

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