Doctrine of Unintended Consequences; LC 4903.5, 4903.05

Sunday, November 21, 2004 | 0

Once again the doctrine of unintended consequences has reared its head. The 1999-2000 Annual Report issued by The Commission on Health and Safety and Workers' Compensation (CHWSC) determined that "statutory limitations be established on the filing of lien claims on workers' compensation cases." (Click here to review the report: http://www.dir.ca.gov/chswc/2000annrpt.pdf.)

In the 1999-2000 Annual Report, CHWSC determined that one of the most persistent administrative problems facing the Division of Workers' Compensation in recent years has been a large increase in lien filings and the resultant development of a backlog of lien claims at some DWC district offices.

Commission staff reviewed this increase in lien filings, and found that in many instances, liens were being filed regarding payments made over 10 years ago for workers' compensation cases. As a consequence the Commission recommended a statute of limitations on lien filings.

As a result, the Legislature promulgated Labor Code 4903.5 in AB 749 and created a Statute Of Limitations (SOL) during which a lien claimant must file its lien.

Labor Code 4903.5 reads in pertinent part: (a) No lien claim for expenses as provided in subdivision (b) of Section 4903 may be filed after six months from the date on which the appeals board or a workers' compensation administrative law judge issues a final decision, findings, order, including an order approving compromise and release, or award, on the merits of the claim, after five years from the date of the injury for which the services were provided, or after one year from the date the services were provided, whichever is later.

(b) Notwithstanding subdivision (a), any health care provider, health care service plan, group disability insurer, employee benefit plan, or other entity providing medical benefits on a nonindustrial basis, may file a lien claim for expenses as provided in subdivision (b) of Section 4903 within six months after the person or entity first has knowledge that an industrial injury is being claimed.

In 2003, SB 228 added a new Labor Code, LC 4903.05, requiring lien claimants to pay a $100.00 fee to file their liens pursuant to subdivision (b) of Section 4903. The rationale for this filing fee was to offset user-funding requirements imposed on employers.

Pursuant to LC 4903.05(d), the Court Administrator adopted regulation section 10250. Relevant to this discussion are subsections (b), (e) and (g) (emphasis added): (b) When filing the initial lien in writing, the medical provider or medical-legal lien claimant shall submit a check or money order in the amount of one hundred dollars ($100), made payable to "DWC Revolving Fund." The check or money order for the filing fee shall be attached to the front of the lien form and shall contain the words "lien filing fee" and the Workers' Compensation Appeals Board case number, if available, in the memo section of the check or money order. (e) No initial lien, filed in writing, shall be accepted for filing on or after the effective date of these regulations unless accompanied by full payment for the filing fee required by Labor Code Section 4903.05. Any initial lien delivered for filing on or after the effective date of these regulations without payment of the initial lien filing fee shall be discarded without notice to the party submitting it, unless a postage paid, pre-addressed return envelope is submitted with the lien. Until receipt of proper payment, the lien shall not be deemed to have been received or filed for any purpose. (g) The WCAB will not order or enforce payment of any medical treatment or medical-legal lien filed on or after the effective date of these regulations without prior payment of the filing fee required by Labor Code Section 4903.05.

The 2002 RAND Study on the WCAB judicial processes concluded that because of the burden on carriers it was more cost efficient to pay nuisance value on old lien claims than retrieve old files. My experience certainly bears this out.

Years ago, I used to represent Cedars-Sinai Medical Center (CSMC) before the Workers' Compensation Appeals Board. When I first started doing collections for CSMC, the claims examiner or the claims adjuster for the payor would usually offer to pay me "nuisance value" to resolve the claim, rather than dig out the file from "the salt mines" and have defense counsel make multiple appearances before the WCAB.

However, being as I was receiving a percentage of the amount collected for CSMC, and the more I collected for CSMC, the more I received as payment for my services, I refused to accept "nuisance value" and informed the claims examiner or claims adjuster that I would settle for nothing less than full value. At first, my demands were met with heavy resistance.

However, after I took a few claims, from each payor, all the way to a lien trial, and got CSMC paid the full amount of their claim, plus the statutory increase (10%) and interest (10% per annum), these same claims examiners and claims adjusters who had previously only offered "nuisance value" for an eight (8) year old claim were now very willing to pay the full amount due, if I would just waive the statutory increase and interest. (e.g. $10,000.00 principal paid exactly 8 years later = $10,000.00 principal + $1,000.00 statutory increase + $1,000.00 statutory interest x 8 years = $8,000.00, totaling $19,000.00.)

Now, with the implementation of a statute of limitation (SOL), there should logically be a significant reduction of stale lien claims being litigated before the WCAB in the years to come.

However, LC 4903.5 is not retroactive, and the courts have not yet addressed the issue of the applicability of LC 4903.5 as a bar to recovery for a lien claimant's bill, where the LC 4903.5 SOL had been reached prior to the effective date of LC 4903.5, January 1, 2003.

LC 4903.05

As indicated previously, lien claimants now have to pay a $100.00 fee to the Division of Workers' Compensation Revolving Fund in order to file an initial lien. "Until receipt of proper payment, the lien shall not be deemed to have been received or filed for any purpose." (CCR 10250(e).) Indeed, "[t]he WCAB will not order or enforce payment of any medical treatment or medical-legal lien filed on or after the effective date of these regulations without prior payment of the filing fee required by Labor Code Section 4903.05." (CCR 10250(g).)

Clearly, as defined in CCR 10250, no initial lien can be filed with the WCAB without payment of the $100.00 filing fee, and the WCAB has no jurisdiction over the lien until payment of the $100.00 filing fee is paid, and the lien is filed.

The Unintended Consequences of LC 4903.5 and LC 4903.05

As a result of LC 4903.05 / CCR 10250, the WCJ has no authority to sign off on a Stipulation and Order to Pay Lien Claimant' until the lien claimant has paid the $100.00 filing fee then filed its lien with itemized billing. Implicitly, the lien claimant with an outstanding balance, who has not paid the $100.00 filing fee and filed a lien, also does not have any standing to participate in the MSC, a case-in-chief trial, a status conference (lien conference), or a lien trial.

Once the lien claimant has paid the $100.00 filing fee, and filed the lien, the lien claimant now has standing to participate at the MSC, the case-in-chief trial, the status conference (lien conference), and if necessary, a lien trial.

Once the $100.00 filing fee is paid, and a lien is filed with the WCAB, the lien claimant has an obligation to either appear at each conference, or have a person with settlement authority available by telephone.

If the lien claimant who has paid the $100.00 filing fee and filed a lien fails to appear at a conference, or have a person with settlement authority available by telephone, the WCJ may dismiss the lien claim after issuing a ten (10) day notice of intention to dismiss with or without prejudice. (See CCR 10562(d)(1) & (e)(1).)

The obverse side of that coin is of interest: If the lien claimant, was not served with the notice of a conference or a trial, and if the lien claimant has not paid the $100.00 filing fee and filed its lien, the WCJ has no authority to dismiss the lien claim after issuing a ten (10) day notice of intention to dismiss with or without prejudice.

I have found that unless I file and serve a lien as required by CCR 10770, and pay the lien filing fee pursuant to LC 4903.05 / CCR 10250, I am not informed of any upcoming conferences or trials by the WCAB, or by the defendant(s).

However, I can keep track of the proceedings in any case in which I have a financial interest, without filing a lien, simply by doing an inquiry with EDEX. This allows me to keep the $100.00 filing fee in my bank longer, thus earning more interest, rather than immediately paying the $100.00 filing fee to the DWC's Revolving Fund, filing my lien with itemized billing, and waiting years for the case-in-chief to conclude before the defendant and the WCAB will address my outstanding balance due.

Because I was not "served with notice of a conference" (CCR 10562) by the defendant or the WCAB, and because I have not paid the $100.00 filing fee and filed my lien with itemized billing, the WCJ cannot dismiss my lien claim after issuing a ten (10) day notice of intention to dismiss with or without prejudice.

If I choose, I can watch and wait until after the MSC, the case-in-chief trial, the status conference (lien conference), and the lien trial has already taken place. Then, as long as I pay the $100.00 filing fee, and file my lien within the time limits of LC 4903.5, I have standing to proceed and I can file a DOR for a status conference (lien conference).

Being as I am a low-dollar lien claimant, the defendant(s) will have to expend more on legal fees simply showing up at the status conference (lien conference) and a lien trial (which is usually continued many times due to the WCJ giving priority to scheduled expedited hearings, trials in which there is continuing testimony, or the beginning of an applicant's case-in-chief trial), then they would spend if they just paid my outstanding billing upon telephonic demand. This gives me a tremendous advantage in pressing the defendant(s) for the full amount due, plus the statutory increase and interest.

My accountant has told me that I earn far more on my invested dollar by allowing interest to accrue at 10% per annum for several years, then if I get paid today, and let the funds sit in my bank account. Additionally, although it is possible for me to earn more on my invested dollar in the stock market, investing in the stock market is far more risky.

The defendant(s), who fail to notify all providers (who have furnished treatment or medical-legal services and submitted billing to the defendant(s) prior to resolution of the case-in-chief) of upcoming conferences cannot avail themselves of claiming prejudice and seeking protection behind the skirts of the laches defense.

Being as defendant(s) regularly fail to notify each and every injured worker's providers of upcoming conferences, despite the fact the provider has not paid the $100.00 filing fee and filed their lien, and accordingly the provider is not on the official address record, the defendant(s) has/have unclean hands, and may face multiple status conferences (lien conferences) as well as multiple lien trials on any given case.

The solution to avoiding multiple lien conferences and multiple lien trials is for the defendant to simply serve notice of each hearing on each and every known provider, regardless of whether it is for treatment, or for medical-legal expenses, and regardless of whether the provider has perfected a lien, paid the $100.00 filing fee, then filed the lien with the WCAB.

The 2002 RAND Study identified many ways in which the WCAB can be streamlined into a lean, mean, dispute resolution machine. Unfortunately for the WCAB docket, as well as the litigants appearing before the WCAB, this doctrine of unintended consequences can and may result in a spike in the number of multiple lien conferences and multiple lien trials on each and every case.

by York McGavin. York can be contacted at ymcgavin@socal.rr.com.

-------------------

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