UNDERSTANDING & IMPLEMENTING AB 749 - II
Saturday, February 1, 2003 | 0
The first part (Temporary Disability Benefits) of this 6 part article series by California attorney Richard Jacobsmeyer was published in the Attorney segment. The balance of this series will be published in the Insurance segment.
B. Permanent Disability Benefits (reference can be made to the Stand Alone Indemnity Calculator):
AB 749 provides for significant increases across the board for permanent disability benefits affecting both minimum and maximum rates, life pension rates and the period of time for payment of benefits.
1. Maximum and Minimum P.D. rates under 70%:
These benefits increase across the board in a sort of hopscotch fashion over the next 4 years:
| Effective Date/Disability | Min Wage | Max Wage | Min PD Rate | Max PD Rate |
| Thru 12/31/02 <10% | $105.00 | $210.00 | $ 70 | $140 |
| Thru 12/31/02 10%-24% | $105.00 | $240.00 | $ 70 | $160 |
| Thru 12/31/02 24%-69% | $105.00 | $255.00 | $ 70 | $170 |
| 1/1/2003 < 70% | $150.00 | $277.50 | $100 | $185 |
| 1/1/2004 < 70% | $157.50 | $300.00 | $105 | $200 |
| 1/1/2005 < 70% | $157.50 | $330.00 | $105 | $220 |
| 1/1/2006 < 70% | $195.00 | $345.00 | $130 | $230 |
Note that the rates at each level do not change each year. Minimum permanent disability stays the same in 2004 and 2005 and then go up again.
One of the beneficial changes in the calculation of permanent disability after 1/1/03 is the elimination of the multiple levels of benefits based upon the level of the permanent disability rating for disabilities below 70%. After 1/1/03 all permanent disability below 70% is paid at one rate. Permanent disability will certainly be more expensive, but it will be easier to male permanent disability advances without being criticized for the rate of payment. Claims handlers will no longer have to determine if advances should be made at $140, $160 or $170 per week.
2. Maximum and Minimum for P.D. over 70% :
| Effective Date | Min Wage | Max Wage | Min PD Rate | Max PD Rate |
| To 12/31/02 | $105 | $345 | $70 | $230 |
| 1/1/2003 | $150 | $345 | $100 | $230 |
| 1/1/2004 | $157.50 | $375 | $105 | $250 |
| 1/1/2005 | $157.50 | $405 | $105 | $270 |
| 1/1/2006 | $195.00 | $405 | $130 | $270 |
The rates at 70% and above also increase but the again the changes are in a sort of hopscotch fashion touching minimum rates in 2003 which then remaining the same for 2 years. Maximum rates are not affected until 1/1/04 and then again in 2005 and do not change thereafter.
3. Number of Weeks for Benefits :
The number of weeks for payment of benefits increases by one week for each percentage of disability at the ratings below 10% after 1/1/04. The net effect of this change, along with the significant increase in the initial permanent disability benefit of almost 33% (from $140 to $185) is to increase ratings under 20% at a much higher rate than the value for ratings above 20%. By 2006, when the last scheduled change goes into effect, the ratings below 20% will be increased almost 100%. The value for such ratings will literally be $1000 per point of P.D. (As an example, a 15% disability, now valued at $8040 will rise to $15,007.50 for injuries after 1/1/06.) One of the more common complaints of those who sought these benefit increases before the legislature was the lack of increase in permanent disability benefits for injured workers at the lower permanent disability levels where benefits had not changed since 1984. These claimants will not only get a rate increase but the total number of weeks has gone up by as much as 1/3. Since the vast majority of claims involve permanent disability benefits below 20% it is anticipated that the significant raise in those benefits will result in attorneys representing injured workers at lower levels of disability because the benefits will justify the time and effort whereas currently many applicant attorneys do not feel that they can economically handle cases at 10% to 15% permanent disability.
Caveat:
As a result of the increases in the permanent disability benefit rates, claims handlers will need to be careful in calculating permanent disability rates. As the rates increase, the likelihood that an injured worker may not make sufficient earnings to justify maximum permanent disability rates will also increase.
4. Presumption of Earnings for Minor:
Labor Code section 4455 has been changed for calculation of earnings of an injured minor. Previously a minor was entitled to permanent disability benefits based upon their projected earnings by age 18 in the occupation in which they were injured or that the employee could reasonably have been expected to be promoted to by age 18. Failing any other information their earnings were presumed to be $105 per week. At the time this provision was passed, $105 was the maximum permanent disability rate. However as permanent disability rates increased, this section languished in obscurity.
Effective 1/1/03 however the presumption of earnings for permanent disability will still be based on earnings at age 18 in the occupation that the injury occurred or a position that the employee could reasonably be expected to achieve by promotion by age 18, but in the absence of any additional information, earnings will be presumed to be maximum.
Previously, in disputes over earnings for minors, applicant attorneys had hired vocational experts to testify as to the employees earning capacity at age 18 etc in order to avoid the harsh result of an award of minimum permanent disability benefits. Now the shoe is on the other foot.. Employers will be presenting evidence of earnings at age 18 in order to prevent awards at maximum benefits where such results would be inappropriate. In permanent total disability cases, an award of benefits for a minor at maximum rates can result in a payout in excess of $1.5 million for injuries after 1/1/03 and rise to 2.2 million after 1/1/05[1]. This does not take into account the effect of the COLA that will raise benefits each year (see discussion below under Life Pensions.)
C. Life Pension Benefits:
All injured workers with permanent disability awards of 70% or more are entitled to a life pension. For permanent disability ratings between 70% and 99% the life pension is based upon the permanent disability rating and applicant's earnings with the maximum calculation being based on $257.69.[2] This amount is paid beginning after the last payment of applicant's regular permanent disability award. Life pension awards will be increased beginning on 1/1/06 when the maximum earnings for a life pension award will double to $515.38 per week.
For Permanent Total Disability (PTD) or 100% disability awards, the injured worker is entitled to receive weekly payments at his or her temporary disability rate for life. Therefore PTD awards are automatically raised each time the temporary disability rate is increased, both as to maximum and minimum rates. PTD benefits are the only benefit which is based upon the temporary disability rate that is not adjusted pursuant to Labor Code section 4661.5. These benefits have, under current law, been fixed at one rate based upon the temporary disability benefit in effect for the injured employee's date of injury. However for injuries after 1/1/03, PTD benefits will no longer be fixed as of the date of injury (see next section).
1. Life Pension COLA:
Effective 1/1/03 all injuries which result in an award of a life pension (any rating over 70%, including 100%) for injuries after 1/1/03 shall be increased annually based upon % increase in "State Average Weekly Wage". The first calculations for these increases will be made after 1/1/04 for injuries after 1/1/03. Unlike increases in the rates that are tied to temporary disability ( such as vocational rehabilitation maintenance allowance, dependency benefits and VR supplements) the increases in life pensions are not tied to the earnings rate. The increases will be applied directly to the benefit itself and do not require increased earnings to justify the increasing benefits.
As an example, in order for an injured worker to be eligible for a temporary disability rate increase under Labor Code section 4661.5, it is necessary that there be sufficient earnings to justify the increased rate. If the injured worker's earning were $1200 per week, the temporary disability rate (and all rates tied to temporary disability) will never rise higher than $800 per week. However a PTD award will increase regardless of earnings level. If the injured worker obtains an award of PTD benefits of $800 per week, the rate will rise each year after that based upon the SAWW and is not limited by the injured worker's earnings at the time of injury. It is certainly conceivable that for lengthy awards we could see substantial increases in the level of a PTD award based upon the application of this COLA.[3]
What is unclear about the impact of the COLA is when the cost of living increment will begin. We do not know if the amount of a life pension, which may not begin being paid for 10 or more years after the date of injury, will have to be adjusted for the 10 years of increases in the SAWW that have occurred since the date of injury; or whether the COLA will not begin until the benefit itself commences. Traditionally COLAs have been applied to benefits as they came due and would not accrue during the time the regular permanent disability award is being paid. However most systems, where COLAs play a role to not have the benefit of Labor Code section 3202 to require liberal interpretation of the law in order to maximize the injured workers rights and benefits. This issue will require litigation to make it clear.
Implementation issues:
Increases in PD rates bring increased claims for new injuries, extension of CT claims into the new year and Petitions to Reopen old claims; all with intent to combine injuries to obtain higher PD rates under Wilkinson v W.C.A.B. and its progeny. Wilkinson allows the combination of several injuries resulting in PERMANENT DISABILITY to combine into a single disability rating under certain circumstances. Due to the progressive nature of the dollar values for permanent disability, combining separate injuries into a single rating will invariably result in a higher overall permanent disability benefits. As an example if one is to consider 2 separate injuries to the back for a dates of injury in 1999 and 2003 the following demonstrates the impact of applying Wilkinson:
| Date of Injury | PD Rating | w/o Wilkinson | PD Rating | With Wilkinson |
| 1999 | 20% | $11,280.00 | ||
| 2003 | 20% | $13,042.50 | 40% | $36,260 | Total Value of PD | $24,322.5 | $36,260 |
As a result of combining the separate injuries into a single rating the injured worker receives an additional $11,937.50 in permanent disability benefits. All of the different permutations involved in applying Wilkinson are well beyond the scope of this article. Suffice it to say that the change in PERMANENT DISABILITY rates provides substantial additional incentives to applicant attorneys to use every tactic available to combine multiple injuries into the same permanent disability rating.
There are some simple rules that can be applied in determining whether the record supports combining multiple injuries into a single rating. To obtain the benefits of the Wilkinson case and obtain a single rating, the applicant must show each of the following: 1. At least one part of the body is involved in all injuries sought to be combined. (There is no limit to the number of injuries that can be combined into a single rating provided the criterion are met); and
b. All of the injuries became P & S at the same time. This criterion can be applied to old awards as long as the W.C.A.B. has jurisdiction to reopen the old award and combine the level of permanent disability with a newer injury. If the old case has been settled by C & R or is beyond the board's jurisdiction to reopen, then it cannot be combined with a new injury into a single unified permanent disability rating.
Strategies to avoid Wilkinson application:
1. Close out all existing cases with C & R:
Consider C & R with open medical care if necessary: It has been a source of bewilderment to me that so many defendants believe there is some benefit to a Stipulated Award vis a vis a C & R with open medical benefits. It often appears to me that a defendant will refuse to settle with a partial C & R in a fit of pique because the injured worker will not close out medical care. The injured worker is entitled to medical care if the wish to retain that benefit. An injured worker who wishes to retain their award of medical care should not be viewed as un-cooperative, they are simply exercising their rights under the law. There is no logical reason to tie the two benefits together.
Other than for clear cut life pension cases (where the right to reopen may actually have some effect), there is no discernable advantage to a defendant to stipulating to a level of permanent disability when the disability aspects can be settled by a C & R even if this means leaving open medical care. The advantages should be obvious. After all, when was the last time any defendant reopened a 28% permanent disability award, reduced the benefit and recovered any part of the award? It simply does not happen. Contrast that with how often an injured worker reopens a case for additional temporary disability or increased permanent disability. This is a relatively common event. A C & R closes out those possibilities, and also eliminates problems with late payment of awards, old penalty issues and the ability to reopen to combine a new and old injury into a single award. A C & R, either with or without a medical care award, will have advantage of fixing value of PD and not allow it to be combined with future injuries in order to obtain the higher PD rates.
2. Treat Petitions to Reopen very aggressively, do not allow to them sit without action an "bookmark" file for future combination of disability.
3. Recognize if newly filed CT claims have legitimate basis or are simply an effort to extend claim into new rates. Example: If applicant is working modified duty then activity should not cause additional injury.
4. If settling multiple injuries, prepare settlement documents to make certain you obtain benefit of jurisdictional limitations of W.C.A.B. (5 years from date of injury) by identifying disability for each injury. This can be done in paragraph 8 of the Stipulations with Request for Award form. Example: When stipulating to PD in 1997 and 1999 injuries, do not just stipulate to all PD in 1999 injury and dismiss 1997 injury. Define portions of PD for each injury. After 2002, the 1997 injury cannot be reopened to combine with 2003 injury. Applicant will only be able to reopen 1999 injury to combine PD to get new rates.
-------------------
FOOTNOTES
1 Assuming a life expectancy of 50 or more years
2 To calculate a life pension subtract 60 from the actual percentage awarded and multiply the result by .015 and that result by the earnings( not to exceed $257.69). An 80% rating would get a life pension of $ based upon the following formula: ((80 -60) x .015) x $257.69 = $77.31 After 1/1/06 substitute $515.38 as the maximum earnings rate and the Life Pension amount would be $154.62
3 Assuming an inflation rate of 3% annually in the SAWW, it would take slightly over 23 years for the PTD rate to double
This is the second of a six part series authored by attorney Jake Jacobsmeyer, of the firm Adelson, Testan & Brundo. He can be reached by e-mail at RichardJacobsmeyer@atblaw.net, or by phone at (925) 609-1990.
Comments