Dividing the Pie

Thursday, December 16, 2010 | 0

By Mullen & Filippi

In this holiday season, pie is a traditional dessert. Dividing the pie equitably is sometimes a challenge, and can be a point of contention among those sharing it. Dividing the pie in workers’ compensation claims can also be challenging, as demonstrated by the cases discussed in this edition of the Bulletin.

A Smaller Slice For The Applicant. Congratulations go to Anne Hernandez and Isaac Escobedo of Mullen & Filippi’s Santa Rosa office for two recent decisions addressing what has been a contentious issue. Labor Code Section 4650(b) requires an employer to start paying permanent disability benefits within 14 days after the last payment of temporary disability "if the injury causes permanent disability." Labor Code Section 4658(d)(3)(A) allows a defendant to decrease the amount of permanent disability benefits owed by 15% if the employer makes a timely offer of permanent regular or modified work. The reduction applies to all benefits which "remained to be paid" from the date the offer was made. But what happens when the applicant returned to work before there was any finding of permanent disability, and because of Section 4650(b), all or part of the permanent disability is accrued by the date the offer of regular work is made? Anne and Isaac successfully convinced the Board that in their cases, the 15% reduction should apply to all permanent disability, including accrued benefits.

The two cases are Kruse v. City of San Rafael, ADJ6884562, and Paine v. City of Sebastopol, ADJ6671476. In Kruze, the applicant sustained an injury in April, 2008, but was only temporarily totally disabled for a brief period in December, 2008, after which he returned to his regular job. His treating physician found his condition to be permanent and stationary on June 11, 2009, and the employer made an offer of regular work pursuant to Labor Code Section 4658(d)(3)(A) on July 10, 2009.

In October 2009, the parties stipulated to 6% permanent disability, but could not agree whether the total amount owed was subject to the 15% reduction. A WCJ found in January, 2010 that the applicant was entitled to the full value of permanent disability without reduction because all the permanent disability was accrued pursuant to Labor Code Section 4650(b). On reconsideration, the Board found that there was no indication in the medical records until the permanent and stationary report that the injury caused permanent disability. As a result, all permanent disability "remained to be paid" as of the date the employer made the offer of regular work. Although, pursuant to Section 4650(b), the permanent disability payments were payable retroactive to 14 days after the last payment of temporary disability benefits, the employer was entitled to a reduction of 15% of the entire award.

In Paine, the parties stipulated at trial on Aug. 11, 2009 that applicant sustained industrial injury causing 7% permanent disability based on the November 26, 2008 report of primary treating physician Dr. Bragonier; that applicant had returned to her regular job on April 14, 2008; that defendant made an offer of regular work on Dec. 4, 2008; that a panel QME report from Dr. Trieb was received on March 9, 2009 and defendant first paid permanent disability benefits on March 12, 2009; and that defendant paid permanent disability advances at the rate of $195.50 per week for the period from April 14, 2008 forward. (Defendant claimed the 15% reduction per Labor Code Section 4658(d)(3)(A).) Based on these facts, the WCJ issued Findings, Award and Order finding that defendant was not entitled to the 15% reduction in benefits.

On reconsideration, the WCJ argued that defendant was not entitled to the 15% reduction because it had not paid a reasonable estimate of permanent disability either when applicant returned to work, or when Dr. Bragonier’s report was received. However, the Board held that neither Dr. Bragoniers report nor the rest of the medical record put defendant on notice as to applicant’s permanent and stationary status prior to Dr. Trieb’s March 9, 2009 report.

The Board then remanded the matter back to the WCJ to determine whether defendant had complied with the requirements of Sections 4061(a)(2) and 4650(b). Section 4061(a)(2) requires the defendant to provide notice to the employee upon termination of temporary disability benefits that permanent disability may be payable but the amount cannot be determined, and the employee’s medical condition will be monitored until it is permanent and stationary, at which time the employer will advise the employee of the amount the employer has determined to be payable. Section 4650(b) requires the employer to commence permanent disability payments within 14 days after the last payment of temporary disability “if the injury causes permanent disability.”

Defendant produced evidence that it had provided applicant with the appropriate notices pursuant to Sections 4061(a)(2) and 4650(b). Nonetheless, the WCJ continued to find the 15% reduction inapplicable, finding that Dr. Bragoniers report put defendant on notice regarding the extent of permanent disability. In response to a second Petition for Reconsideration, the Board found that Dr. Bragonier’s report did not put defendant on notice of the extent of permanent disability because Dr. Bragonier did not provide a WPI rating for applicant’s condition. Finding that defendant had met all statutory requirements, the Board held that defendant was entitled to the 15% reduction of the permanent disability award. 

Two factors are key to these decisions. First, in each case, the Board found that the defendant did not have notice of permanent disability before the offer of regular work was made. Second, the defendant had sent to the applicant all the notices required by the applicable statutes. These cases establish that, where an injured worker has returned to work before being found permanent and stationary, the medical reports do not support a finding of permanent disability before an offer of regular or modified work is made, and the defendant has sent the required notices to the applicant, the employer is entitled to a 15% reduction of all permanent disability benefits owed, including retroactively owed benefits. Great job Anne and Isaac!

It’s All In How You Slice It.  Unlike most injuries, a psychiatric injury is only compensable if it is caused more than 50% by industrial factors, and is not compensable if at least 35 to 40% was caused by lawful, non-discriminatory good faith personnel actions. While most of the time apportioning liability to non-industrial causes is to an employer's advantage, when good faith personnel actions are involved, sometimes the employer would have been better off if all of the disability was found to be related to work. A recent published decision by the 1st District Court of Appeal illustrates the point.

The case, San Francisco Unified School District v. WCAB (Cardozo), involved a teacher who claimed cumulative trauma psychiatric injury from teaching. According to the court, the parties agreed to Dr. Allan Kipperman as AME, but at a hearing, the judge referred applicant to an independent medical examiner, Dr. Gordon Baumbacher, for an opinion on apportionment of causation of the injury, including the extent to which her condition was caused by good faith personnel actions. Dr. Baumbacher found that 15% was caused by non-industrial factors and 85% was caused by factors associated with work. He further found that of that 85%, 60% was caused by work stress and 40% was the result of good faith personnel actions.

Using these numbers, Dr. Baumbacher concluded that 51% of her injury (60% of 85%) was caused by work stress, 34% (40% of 85%) was caused by good faith personnel actions, and 15% was caused by non-industrial factors. Relying on Dr. Baumbacher, the WCJ found the injury compensable. The School District sought reconsideration, which was denied.

On appeal, the School District argued that only industrial causes should be included in determining whether good faith personnel actions were a substantial cause of the injury, because including non-industrial causes penalizes the employer if the employee has preexisting non-industrial disability. The School District further argued that the WCJ's finding was inconsistent with the stated intent of Labor Code Section 3208.3, "to establish a new and higher threshold of compensability for psychiatric injury".

The Court was not persuaded. Finding that Section 3208.3(b)(3) plainly states that "all sources combined" are to be considered in calculating the percentage of injury caused by good faith personnel actions, the Court held that the percentage of causation attributed to non-industrial causes must be included in the calculation.

It seems counterintuitive that where 40% of the events of employment contributing to a psychiatric injury are the result of good faith personnel actions, the existence of even a small percentage of non-industrial causation can turn it into a compensable claim. The School District had a valid point. However, the statute does say that “all sources combined” are to be considered in determining the percentage resulting from good faith personnel actions. What this decision teaches us is that when we are evaluating a psyche injury claim, we need to think about the whole pie.

Don’t Wait Too Long To Claim Your Piece. When I was growing up, and someone could not decide which kind of pie they wanted, and then complained when the kind they finally decided on was already gone, my father used to quote the old adage: “He who hesitates is lost.” The same is true for those who do not timely file their claims, as demonstrated by two recent WCAB decisions.

Maria De Los Angeles Segura v. Technicolor, et al., involved a lien claim by Westlake Spine and Outpatient Surgery Center (Westlake). Westlake provided services in Jan. 5, 2005, and sent the defendant a bill for the services. In March, 2005, the defendant paid less than the full amount of the bill. After further communication, the defendant informed Westlake in April, 2005 that nothing further would be paid. Applicant’s case was settled at a Mandatory Settlement Conference on June 7, 2006, of which Westlake had notice. Westlake did not appear at the MSC. On January 10, 2008, Westlake filed a lien, but did not serve it on defendant until Feb. 19, 2010. On Feb. 24, 2010, defendant served a copy of the Compromise & Release and Order Approving Compromise & Release on Westlake.

On June 30, 2010, a judge found that Westlake’s lien was reimbursable. However, on reconsideration, the Board found that the lien was barred by the Statute of Limitations. The Board discussed Labor Code Section 4903.5(a), which provides that a lien claim cannot be filed after six months from the date on which a judge issues a final decision, findings or order, including an order approving compromise and release, or after five years from the date of injury, or after one year from the date the services were provided, whichever is later.

Finding that Westlake failed to file a lien within one year of the date of service in 2005, and failed to appear at the June 7, 2006 Mandatory Settlement Conference of which it had notice, the Board found that defendant had no obligation to assume Westlake intended to pursue a lien, or to serve a copy of the Order Approving Compromise & Release on Westlake. Although Section 4904(a) provides that if notice is given to the insurer setting forth the nature and extent of any claim allowable as a lien, the claim is a lien, the Board held that this section “does not create an automatic “notice of lien” every time a defendant pays less that the amount billed by the lien claimant.” Westlake’s lien was also filed more than five years from the date of injury. The Board held that Westlake’s lien was filed outside the time limits of Section 4903.5(a), and no further payment was due.

Lani Brockman v. Ukiah Valley Medical Center, another case defended by Mullen & Filippi’s Anne Hernandez and Isaac Escobedo, involved a claim for temporary disability benefits requested more than five years after the date of injury. In this case, a Findings, Award and Order issued March 1, 2006 found that applicant was entitled to continuing temporary disability benefits as a result of a low back injury on April 18, 2001. However, on March 11, 2008, a judge issued an Order Terminating Continuing Award of Temporary Disability based on an AME report finding her permanent and stationary. That order was not challenged and became final.

In March, 2010, the AME issued a report finding that applicant was once again totally temporarily disabled as a result of deep vein thrombosis allegedly resulting from the initial injury, and applicant requested an expedited hearing seeking an award of additional temporary disability benefits. The judge awarded further temporary disability benefits.

On reconsideration, defendant argued that the judge did not have jurisdiction to award further temporary disability because it was more than five years after the date of injury and the statute of limitations barred the award. The Board agreed, finding that since there had been an order terminating temporary disability, the Board had no jurisdiction to award further temporary disability unless the additional period of temporary disability began within five years from the date of injury, and the applicant had filed a petition to reopen within five years from the date of injury. Since these requirements were not met, the claim was barred.

This case has an interesting twist. Although there had been an award of temporary disability and then an order terminating entitlement to that benefit, the case remained open on other issues because there had not yet been an award of permanent disability benefits. On reconsideration, the judge argued that since the case had not been finally adjudicated, it remained open for all purposes. While acknowledging that the claim remained open on those issues not yet decided, the Board found that because there had been an order terminating temporary disability, the WCAB did not have continuing jurisdiction over that issue.

While the statute of limitations in workers’ compensation claims is sometimes perceived to be loosely applied, these decisions by the Board remind us that it does have teeth, and if you wait too long to pursue your claim, you lose.

A Correction and An Update. In August, 2010, we reported in the Bulletin about the Court of Appeal decision in the Guzman case. We have since learned that there was an error in that report. Although we accurately quoted the decision as finding that rebuttal of an AMA Guides rating is only appropriate in a case which is “complex or extraordinary,” elsewhere in the article we stated the standard as “complex and extraordinary.” A dedicated reader noticed this and pointed out the error. We acknowledge that there is a difference between “complex or extraordinary” and “complex and extraordinary." At this time, however, it is not clear what the Court meant by either term, and how significant a difference this is remains to be seen. We anticipate that this will be an issue for litigation in the foreseeable future.

The Supreme Court has denied review of the Guzman decision, and it is now final, so there will be no further explanation offered in that case. The companion Almaraz case remains pending before the Fifth District Court of Appeal, and it remains possible that Court will issue a decision which either contradicts the Guzman decision or supports it and offers a clarification. However, applicants counsel requested on Dec. 1, 2010 that the pending writ now be denied. We will report further as the situation develops.

In the meantime, we wish you a pleasant holiday season, and as much pie as your heart desires.

Mullen & Filippi is a workers' compensation defense law firm with offices in 12 locations throughout California. This column was reprinted with permission from the firm's quarterly newsletter.