Avoiding a 4650 Penalty in a Reversed Denied Case

Sunday, September 12, 2004 | 0

The WCAB has issued an en banc decision addressing the issue of exposure for penalties under LC 4650 where a defendant disputes a claim of injury and after liability is determined makes payment of benefits within 14 days of the denial of the final appeal. In the case of Leinon v Fishermans Grotto & Mid-Century Ins Co, published 8/25/04, the WCAB determined that:

"Based on our review of the relevant statutory and case law, we hold that where injury, disability or indemnity rate is disputed, no section 4650(d) penalty arises if the disputed disability indemnity payments are made within 14 days of a final order, decision or award imposing liability for those benefits or within 14 days of a defendant's acceptance of liability for the injury and disability benefits. We also hold that an order, decision or award becomes final for purposes of section 4650(d) when a defendant has exhausted all of its appellate rights or has not pursued them"

This case has a fairly lengthy history. The original F & A issued on May 30,2001, followed by appeals to the WCAB, the Court of Appeals with a writ denial (See Fisherman's Grotto, Mid-Century Insurance Company, Petitioners v. Workers' Compensation Appeals Board, James Leinon, Respondents, 66 Cal. Comp. Cas 1550) and finally a denial of hearing in the Supreme Court on January 3, 2002. On or about January 9, 2002, defendants issued checks making payment on the May 30, 2001 award but did not include any penalties under LC 4650(d).

Applicant raised the issue of penalty for failure to include LC 4650 payments and the WCJ awarded those benefits in subsequent proceedings with defendant appealing to the WCAB. The WCAB determined that this was an issue of general importance to the compensation community and accepted defendant's Petition for Reconsideration and assigned the case to the WCAB as a whole for consideration.

The court reviewed the history of LC 4650 and the prior case law on this issue to arrive at its decision:

"We conclude that it is consistent with the language and purpose of the statute to construe the section 4650(d) penalty as being applicable only where liability for injury and disability benefits is not in dispute."

The Board also addressed the issue of when a benefits become "due" and concludes that the obligation does not become due until all appellate rights are exhausted or no further appeal is taken. The board also concludes that there is no "grace period" for consideration of appeal:

"However, there is no 'grace period' for delay in payment provided by the statutory right to reconsideration or appellate review. (See Jensen v. Workers' Comp. Appeals Bd. (1985) 170 Cal. App. 3d 244, 247 [216 Cal. Rptr. 33] [50 Cal. Comp. Cases 369, 371]; California Highway Patrol v. Workers' Comp. Appeals Bd. (Erebia) (2003) 68 Cal. Comp. Cases 227, 232 [writ denied].) Thus, if a defendant does not file a petition for reconsideration from an award of disputed benefits but does not pay within 14 days of the award, it must include a section 4650(d) penalty. Likewise, if a defendant does not file a petition for writ of review from an adverse decision after reconsideration but does not pay within 14 days of that decision, it must include a section 4650(d) penalty."

This decision certainly takes some of the sting out of appealing an adverse decision and seeking legal recourse from an adverse WCAB decision. However if an employer/carrier is to avoid a claim of penalty when the award is actually paid, it must make the decision whether to proceed to the next level fairly expeditiously after any adverse appellate decision since benefits must commence within 14 days of an adverse decision that is not appealed further even though there may be 20 or 45 days to file the next level of appeal.

It would certainly make sense for an employer and their attorney, at the commencement of the appellate process to make a decision how far they wish to proceed and once they reach that level, be prepared to make payment of any compensation that is due and owing. It is also important for a defendant to remember that even if LC 4650 penalties are not due, that WC awards carry interest from the date of the Award and unless the award is altered in the appellate process, the interest runs from the date of the initial issuance by the trial level, not from the denial of the final appeal.

It is also important to remember that failure to make payment of a LC 4650 penalty may carry greater consequences under the recent amendments to LC 5814 since the penalty for delay is now up to 25% of the delayed benefit. In a case such as this, where injury is at issue, a penalty for failure to pay LC 4650 payments can also incur a penalty under LC 5814 that can be very significant (but limited to no more than $10,000 per violation with credit for the LC 4650 penalty also).

By attorney Richard "Jake" Jacobsmeyer, managing partner of the Concorde office of Adelson, Testan, Brundo & Popolardo. Jake can be reached at richardjacobsmeyer@atblaw.net.

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