Honeywell and 'Pay During Delay'

Sunday, February 13, 2005 | 0

In a long awaited decision the California Supreme Court ruled on February 10, 2005 that the injured worker must actually deliver the claim form to the employer before the 90 "5402" clock starts to run. Unless the employer engages in egregious conduct designed to "frustrate the employees pursuit of compensation", negligent failure by the employer does not start the 90 days.

In other words, constructive notice does not count.

The question in the back of everyone's minds though is whether the Supreme Court's logic extends to the "pay during delay" of medical care under the SB 899 changes to Labor Code section 5402(c).

The case, Honeywell vs. WCAB (S113201, 2/10/05) , is an affirmation of an earlier Second Appellate District ruling that overturned the Workers' Compensation Appeals Board decision which held that the 90 days in which to deny a claim ran from the date of the employer's knowledge of a claim. "[T]he WCAB erred in this regard," the Supreme Court said in its introduction.

But SB 899 modified the statute in question during the pendency of the court's consideration of the legal issue. The real question is: when does the employer's obligation to provide medical treatment up to $10,000 begin to run?

First, a review of the facts and the ruling in Honeywell is in order.

The injured worker in Honeywell, William Wagner, claimed work-related injuries to his body and psyche due to employment from January 1, 1995, through October 16, 1998.

Wagner's company medical record contains a July 20, 1998, entry reflecting Wagner's statements that management was prejudiced against him and hampered his promotion and transfer, that he "can't take it anymore," and that his doctor had prescribed him medications for work stress.

On October 16, 1998, Wagner's wife, Linda Wagner, left a message with Honeywell's disability coordinator, Nyssa Hawkins, that Wagner had been admitted to a psychiatric facility with a nervous breakdown and that his work supervisor and others had pushed her husband over the edge with their "head games." Linda Wagner also asked for disability forms. On October 20, 1998, Hawkins confirmed receipt of a doctor's note verifying disability and told Linda Wagner disability forms would be sent. The hospitalization records indicate Wagner was depressed and suicidal; they mention stress and aspects of his family and personal history, as well as identifying "work problems" as a subject for "continued work in aftercare."

On January 11, 1999, in response to Wagner's January 10 submission of a medical leave request form on which a box was checked that the injury was work related, Linda Wood, who handled workers' compensation for Honeywell, wrote Wagner that she had received the information from the medical department and was enclosing a claim form and a pamphlet explaining workers' compensation.

On January 15, 1999, Wagner served a completed claim form on Honeywell. Honeywell denied the claim by letter of March 31, 1999.

The basic issue in Honeywell, of course, was whether the claim would be presumptively compensable under 5402 because the claim was not denied until well after 90 days from the date the employer had knowledge of an industrial injury, but within 90 days from the date the claim form was served on the employer. The WCAB held that section 5402's 90-day period begins either when the employee files a claim form or when an employer is "reasonably certain" of an industrial injury or claim and breaches the duty to provide the claim form.

The Court held that the statutory language of 5402 was clear and unambiguous, and that "the 90-day period for the employer to deny liability runs only from the date the worker files a claim form with the employer." Egregious conduct by the employer designed to frustrate the employee's pursuit of compensation could estop the employer from denying the 90-day period had commenced, but a merely negligent failure to provide the employee a claim form, in the court's view, could not start the period running and create a presumption of compensability.

How does this affect the employer's obligation to provide up to $10,000 in medical treatment prior to the denial of a claim?

The provision in question, subparagraph (b) of 5402 ("If liability is not rejected within 90 days after the date the claim form is filed under Section 5401, the injury shall be presumed compensable under this division. The presumption of this subdivision is rebuttable only by evidence discovered subsequent to the 90-day period"), remained unchanged in the SB 899 amendment.

However, SB 899 added subparagraph (c): "Within one working day after an employee files a claim form under Section 5401, the employer shall authorize the provision of all treatment, consistent with Section 5307.27 or the American College of Occupational and Environmental Medicine's Occupational Medicine Practice Guidelines, for the alleged injury and shall continue to provide the treatment until the date that liability for the claim is accepted or rejected. Until the date the claim is accepted or rejected, liability for medical treatment shall be limited to ten thousand dollars ($10,000)."

The operative language in subparagraph (c) reads similar to the "clear and unambiguous" language of subparagraph (b), requiring the filing of a claim form.

The Court's dictum is indicative of the likely outcome a challenge would face:

"Under these provisions [section 5402], (1) the employee bears the initial burden of notifying the employer of an injury, unless such notice is unnecessary because the employer already knows of the injury or claimed injury from other sources. (2) The employer then bears the burden of informing the worker of his or her possible compensation rights and providing a claim form, but (3) it is up to the employee whether and when to initiate a claim for compensation by filing the prescribed form with the employer. Only when the form has been filed is (4) the employer (or its insurer) put to the additional burden of promptly investigating the claim and determining whether to contest liability, an investigation that must be completed within 90 days." (Emphasis original.)

Since the plain language of the amended 5402 references the same initiating act, "filing," then it is likely the court will also find that the duty on the employer to provide medical treatment also arises at that time.

But this creates a disincentive for the unscrupulous employer.

The Court in Honeywell said that the incentive for an employer to ensure timely delivery of the claim form to the employee for further processing is the extension of the statute of limitations for making a claim:

"The possibility of such tolling creates a significant incentive to provide the form promptly. Certain failures to provide a claim form could, as well, subject the employer to administrative sanctions."

However, this rationale doesn't take in to account the new employer mandate that up to ten thousand dollars in medical treatment be provided until the claim is denied. With employer fraud estimated to be in the billions of dollars annually, it is easy to envision a dishonest employer feign negligent withholding of the claim form in order to gain time to conduct an investigation and delay the provision of medical benefits.

The Honeywell Court said that the intentional withholding of a claim form would subject the employer to equitable estopple to deny the claim or in the least offer rebuttal evidence to the presumption of AOE/COE. In the post SB 899 era, if the employer intentionally withheld a claim form to minimize the impact of ten thousand dollars worth of medical, such a tactic may back fire and the employer would still be liable for the medical treatment, regardless of the ultimate outcome of an AOE/COE determination, assuming the Supreme Court's rationale stays intact on the next 5402 challenge.

by David J. DePaolo, Editor in Chief, WorkCompCentral

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