Top 10 Developments in California Workers' Comp

By Julius Young

For those of you who aren't following the daily developments in the California comp world, a big-picture review may be of interest.

In many ways, it's been a sleepy start in 2008.

There's been a lull in definitive court rulings on workers' comp issues, and legislative activity has been low profile for the most part.

The year has been notable for several things that haven't happened.

Let's recap a handful of them. New QME regs are still in the comment phase and have not been finalized. The DWC has not revised the permanent disability rating schedule despite earlier statements it would be doing so. Important issues have not been resolved by the WCAB, including issues as to how to apportion old schedule ratings from AMA ratings. The WCAB has not ruled on the Scott Boughner case, a trial level decision challenging the validity of the 2005 rating schedule. And further court decisions clairifying the required methodology for DFEC testimony under the Costa case have not been forthcoming.

Here's my subjective list of the most important developments in California workers' comp for the first third of 2008, listed in no particular order:

1. The Governor reappointed two members to the WCAB (James Cuneo and Frank Brass), fills one other slot (Deirdre Lowe), but did not yet act to fill the other vacant slot.

2. Several appellate decisions held that the old (pre-2005) rating system applied where there was an indication of permanent disability even if the worker was not permanent and stationary pre-1/1/05. These cases rejected the holding of the 4th Appellate District in Vera v. WCAB (2007) that under Labor Code 4660(d) a worker's condition had to be permanent and stationary before 1/1/05 for the old schedule to apply. The leading decision was Genlyte Group, LLC v. WCAB (Zavala) from the 2nd District Court of Appeals. Courts following Genlyte (Zavala) included the 1st Appellate District in Tenet/Doctors Medical Center v. WCAB (Reddrick). With a conflict among appellate courts, it's possible that the California Supreme Court will ultimately hear the case. But for now, the weight of authority seems to be against Vera.

3. The 1st District Court of Appeals agreed to hear arguments in a constitutional challenge to the 24 visit cap on chiropractic care and physical therapy enacted in 2003. Arguments are scheduled for May.

4. The DWC continued its work on the EAMS paperless system. DWC representatives assured system stakeholders that the project is basically on track. Physicians and lien claimants expressed great misgivings over whether the system would have EDEX-like features to enable them to track case status. Legislative oversight hearings were held. There was varying concern over the number of users who may be able to access the system simultaneously. At April's end it appeared that the system will have an August "go-live" date for the WCAB itself. Rollout to "external users" will be later.

5.Benson, Benson, and more Benson. The December 2007 case Diane Benson vs. The Permanente Medical Group continued to roil the comp community. In Benson the WCAB ruled that under the 2004 comp reform law, the decades old Wilkinson case no longer requires that successive injuries to the same body part be rated together. As of late April 2008 Benson has been appealed (and briefed by many key comp stakeholders)but a writ not granted by the time of this post. Meanwhile, the apparent change in the law and the demise of Wilkinson has caused counsel for applicants and defendants to re-analyze many files, in some cases making for drastic change in case values.

Also notable at the board level: The WCAB rejected arguments for an estoppel-based extension of TD beyond the 104-week limit. In the case, Daniel Ramos v. Frito Lay & Sedgwick Management Claims, the trial judge ruled that under equitable estoppel principles, delays in providing surgery extended the worker's eligibility for temporary disability beyond 104 weeks from the date of commencement. The WCAB reversed, and a petition for writ is pending as of the date of this post.

6. The California 3rd District Court of Appeal ruled in Foster v WCAB (Zurich American) that a worker disabled as a result of two successive injuries (which both contributed to the need for temporary disability) could draw only 104 weeks of TD, not 208 weeks.

7. Legislative activity at the capitol in Sacramento began. Among the bills progressing were the following:

A bill to regulate workers' comp rates (AB 2692 by Ed Hernandez) appears to have died as of April 2008.

8. The California Court of Appeal upheld a verdict in favor of Palm Medical Group against SCIF for $1.31 million. SCIF had refused to include Palm Medical in its medical network. The theory of the case was the "fair procedure doctrine". Since SCIF's market share has fallen over the last few years from the 50% to 20% range, a medical provider today might have more trouble establishing an unfair exclusion case. On the other hand, the court noted that an inability to compete for patients in 16% to 31% of the market might be significant. This decision may make carriers and employers think twice before excluding providers from networks.

9. CIGA (the California Insurance Guarantee Association) came under more scrutiny. A hearing was held in March 2008 at the California Senate Banking, Finance and Insurance Committee over allegations that CIGA overpaid in sweetheart deals for services in instances where its third party administrators had relationships with certain vendors. As of the date of this post it appears that if there is any additional action on the issue, it could come from the Department of Insurance, which was said to be doing its own research on the issue.

10.The Workers Compensation Insurance rating Bureau (WCIRB) released an analysis of loss adjustment expense trends (known as "allocated loss adjustment expense" or "ALAE" and "unallocated loss adjustment expense" of "ULAE"). These expenses are essentially the insurer overhead. ALAE are the costs associated with handling claims that can be directly allocated to a particular claim (for example, investigation costs, defense attorney fees, copy service costs and the like). ULAE are the costs of handling claims that can't be directly allocated to a particular claim, i.e. more general insurer overhead items. Bottom line of the study? Benefits paid out to workers by California comp carriers are way down because of comp reform. But insurer overhead is significantly increased as a percentage of calendar year losses.

More on the implications of this study in future posts.

That's my Top 10.

Julius Young is an Oakland applicants' attorney who writes a blog on workers' compensation issues at http://www.workerscompzone.com. This column is reprinted from there with his permission.