2010 Year in Review: The Top 10 Workers’ Compensation Events in California

2010 Year in Review: The Top 10 Workers’ Compensation Events in California

   In a totally arbitrary and perhaps capricious, non-parametric, unscientific but somewhat peer reviewed way, here are the top ten workers’ compensation events that occurred in 2010.  Can you predict what the top ten workers’ compensation events will be in 2011?  Here are 2010’s selections, in no order of preference or precedence:

1.   “Guzman III” (Milpitas USD vs. WCAB)

2.   No New PDRS

3.   Life After Ogilvie II and Before Ogilvie III

4.   Blackledge (Blackledge vs. Bank of America)

5.   Duncan (Duncan vs. WCAB)

6.   The Dreaded Rule 30, Regs, Regs and More Regs and Mendoza

7.   Ex-parte Communications

8.   The New (Old) Governor Brown

9.   Proposed WC Reform Again

10. C&Rs and WCMSAs

1.   “GUZMAN III"

In the continuing saga of applying strict interpretations of the AMA Guides as opposed to applying anything “within the four corners of the AMA Guides,” the 6th District Court of Appeal in August 2010 in Milpitas Unified School District vs. WCAB (Guzman) 75 Cal. Comp. Cases 837 decided in a somewhat controversial way that the WCAB en banc decision was correct to the extent that a strict application of the AMA Guides can be rebutted with an alternative rating method that falls within the AMA Guides 5th Edition so long as the alternative method constitutes substantial evidence.

Some people are interpreting the DCA decision to mean that in only complex and extraordinary cases where a medical condition that causes permanent impairment is not listed in the AMA Guides can alternative rating methods that fall within the four corners of the AMA Guides apply; otherwise, in all other cases, a strict interpretation of the Guides cannot be rebutted.  However, a close reading of the DCA decision indicates that the Court of Appeal, in upholding the WCAB en banc decision in Almaraz-Guzman II, 74 Cal. Comp. Cases 1084 (2009), is really focusing on the ultimate goal in all cases - to provide the most accurate and reliable WPI rating that reflects the permanent disability an injured worker has as a result of an industrial injury.  In all cases, the WPI rating must be based on substantial medical evidence and reasonable medical probability as defined in existing case law and as applied by the WCAB en banc decision.  Therefore, a party can rebut any strict WPI rating using the four corners of the AMA Guides 5th Edition.

The DCA decision in Guzman III adopted one element from the original Almaraz-Guzman I decision – that a physician may use updated medical information outside the AMA Guides 5th Edition in order to obtain a diagnosis of a medical condition that is not listed in the Guides or that is but whose diagnostic criteria is obsolete as of the publication date of the 5th Edition (November 2000).  So, for example, in cases such as complex regional pain syndrome, a physician can use current diagnostic criteria from the International Association for the Study of Pain that has been updated twice since November 2000 and then may apply any chapter, table or method that provides the most accurate WPI rating from the 5th Edition of the Guides.

The California Supreme Court denied a Petition for Hearing by the Milpitas USD in November 2010.  The Almaraz case is pending in the 5th DCA at the time of publication of this newsletter.  So as of the end of 2010, parties are still scrambling to determine the most accurate WPI ratings from their treating and evaluating physicians by way of reports, supplemental reports, deposition testimony, re-examinations of the Applicants and more supplemental reports – well, you know what we mean.

2.  WHAT PDRS?

The 2005 PDRS was born from the April 19, 2004 enactment of SB 899.  The manager of the DEU (now retired) and his team developed the 2005 PDRS from scratch in record time (in 8 months) based on old, flimsy loss earnings data that were from studies of the 1988 PDRS work restriction based schedule and from injuries occurring through 1991.  The 2005 PDRS was not based on impairment ratings from the AMA Guides 5th Edition because no such wage loss data existed prior to 2005.  So without current case law, the use of the 2005 PDRS originally resulted in a reduction on PD awards between 40% and 70%.

By 2008, wage loss data was available that was more accurate, more reliable and based on WPI ratings from the AMA Guides 5th Edition and not from work restrictions.  A proposed “2009 PDRS” emerged from that new data that would have increased PD dollar amounts by a modest 16%.  Under pressure from the Schwarzenegger administration, the Administrative Director did not adopt the proposed “2009 PDRS” because of the “Great Recession.”

Labor Code section 4660(c) mandates that the PDRS be revised every 5 years:  “The Administrative Director shall amend the schedule for the determination of the percentage of permanent disability in accordance with this section once every five years.”  By December 20, 2009, the actual 5th anniversary of the 2005 PDRS, no proposed “2010 PDRS” was adopted by the DWC.  The DWC, due to political pressure from above, announced in early 2010 that no revised PDRS would be adopted as mandated by the Labor Code, despite having new and reliable wage loss data over the last six years. 

While some of us are howling that the DWC has willfully violated a statute, the rest of us are happily applying “Guzman III” and “Ogilvie II” instead.  See Number 1 above and Number 3 next.

3.  LIFE AFTER OGILVIE II AND BEFORE OGILVIE III

Now that you have re-learned algebra, you probably thought you could rebut a scheduled DFEC adjustment factor simply by plugging in the math and boom! You have increased your WPI rating by 18%.  Wrong.  You have two problems in 2010 – one a writ of mandate was granted by the 5th DCA in Ogilvie so we anxiously await a decision whether or not the DCA also likes the Rand studies and the mathematics.  Second, the WCAB panels in 2010 have issued their own opinions about how an Ogilvie rebuttal really should work.  It’s called producing “evidence.”

So how many of you actually checked the EDD LMID data on line?  We thought so – not too many of you.  The WCAB panels in 2010 have required a few more things besides just plugging numbers into the Ogilvie formula in order to successfully rebut a scheduled DFEC adjustment factor.  Trial judges and WCAB panels are requiring solid evidence that an injured worker truly has lost wages that are greater than anticipated under a scheduled permanent disability rating.

Now you need to apply the Montana criteria (see Argonaut vs. IAC (Montana) 27 Cal. Comp. Cases 130 (1962)) and take into account most if not all of the laundry list of factors there, plus you need to show that after an injured worker is permanent and stationary or MMI, there was a significant period of time thereafter that the applicant’s diminished future earning capacity is due to the industrial injury and impairment caused by the injury.

From the defense side, just showing that an injured worker has not lost income due to his or her industrial injury and resultant permanent impairment doesn’t mean you automatically apply the math and reduce or eliminate a scheduled DFEC adjustment factor.  Remember, both sides need evidence to rebut a scheduled DFEC adjustment factor and speculation is not evidence.

It will be interesting to see in 2011 whether the DCA throws out the math, keeps it as is or keeps the math but adopts the approach the WCAB panels have used since Ogilvie II was issued by the en banc WCAB on September 3, 2009.

4.  BLACKLEDGE

We bet the store that most of you have not read this case.  It can be summarized as follows:  “The doctor does this, the judge does that, the parties do nothing and the rater cannot do much.”  Seriously our beloved readers, please read the case – Blackledge vs. Bank of America, 75 Cal. Comp. Cases 613, a WCAB en banc decision that issued in June 2010.

Speaking of WPI ratings, it only took six years for the WCAB to tell us the role of the doctor, the role of the WCJ, the role of the parties and the role of the DEU raters when it comes to the development of formal rating instructions.  Of course, this issue only arises if the parties cannot agree to a final permanent disability rating and a judge has to decide that issue.

We now know that a judge cannot just say to a rater “Rate Dr. Smith’s permanent and stationary report” using the Rating Instruction Template courtesy of EAMS.  Author’s note:  That is the only derogatory thing we can say about EAMS in 2010, otherwise the DWC may take back its award for community service.  All kidding aside, the old way of just directing a DEU rater to rate Dr. Smith’s P&S report will no longer fly with the WCAB.  It is safe to say that WCJs have a harder job now – they have to decide if a doctor’s conclusions constitute substantial evidence which means that the judges have to learn and understand the AMA Guides 5th Edition.

The DEU rater can only rate what a WCJ tells him or her to rate and the rater cannot play judge and offer an opinion on the validity of a doctor’s opinion on a WPI rating during the formal rating process.  The WCJ cannot even ask a DEU rater a simple question without possibly being accused of having a dreaded ex-parte communication.  See our discussion of other “dreadful” things in 2010 such as Rule 30 and “Ex-parte Communications” below.  But we digress…

So the doctor decides the WPI ratings using the four corners of the AMA Guides 5th Edition, the WCJ decides which ones apply based on which ones constitute substantial evidence, the DEU rater rates based on the WCJ’s instructions without questioning the judge or acting like one and the parties need to develop the record before a formal rating instruction is issued by a judge.

5.  DUNCAN

Now that you have your final permanent disability rating and you have successfully applied Guzman III, Ogilvie II, the 2005 PDRS and Blackledge, what if your PD rating is 70% or higher and your date of injury is on or after 1/1/03?  This case originally started as “XYZZX SJ02 vs. WCAB” but the name was changed again to protect the innocent.  Mr. Duncan is personally a very nice man but he is also the Director of the Department of Industrial Relations who oversees all of the agencies under the DIR including the DWC and Cal OSHA.  His name will become famous from this case even though it is likely Governor Brown will change the guard once he is inaugurated in January 2011.

It seems that the legislature forgot about Labor Code section 4659(c) when it enacted SB 899.  Section 4659(c) is the SAWW annual cost of living increases in life pension and permanent total disability cases where the date of injury is on or after 1/1/03 and was part of AB 749 that Governor Davis enacted in October 2002 prior to his recall a year later.  On March 29, 2010, the California Supreme Court accepted this case, called Duncan vs. WCAB (XYZZX SJ02) from the 6th DCA.

The issue is whether or not increases in the weekly payments of life pensions and permanent total disability (PTD) cases are calculated retroactively to 1/1/04 up through the date of first payment of the life pension or if life pensions and PTD benefit increases occur prospectively as of the first of January of each year after the date of injury. The whole case rests on statutory construction, and we wait for a decision on it.

Meanwhile in many PTD cases, attorneys are waiving SAWW increases for any years prior to the date of injury in order to avoid the reopening of a decision in the event the Supreme Court reverses the 6th DCA decision that allows retroactive increases.  As to life pensions between 70% and 99%, those pensions will not become payable until some time in 2011 at the earliest so no one is affected by the DCA decision yet since it takes at least 8 years to pay out a 70% or greater award before a life pension kicks in.

What is still in question despite Duncan pending at the Supreme Court is whether the SAWW increases apply in death benefit cases.

6.  THE DREADED RULE 30, REGS, REGS AND MORE REGS AND MENDOZA

The QME regulations were revamped and revised effective February 17, 2009.  Most lawyers who practice workers’ compensation law are too busy to go to the DWC website, read proposed regulations in the forum section and write feedback about how a proposed regulation will affect everyone in the system.  That’s what happened to Rule 30.  It was embedded in Title 8, California Code of Regulations sections 1 through 159, which are the “new” QME regulations.  Your head is spinning when you read and summarize all of them.

In fact, the DWC has enacted 500 regulations in the last 18 months.  When you started learning all of these regulations in January 2010, by the time you get to December 2010, you are only part way there.

The WCAB in its en banc decision rescued us from Rule 30 in Mendoza vs. Huntington Hospital, 75 Cal. Comp. Cases 634 in June 2010.  So we lived for a year and a half with the rule that allowed us to essentially obtain a default judgment and get a finding on injury AOE/COE against a claims administrator who was asleep at the wheel who failed to obtain a panel QME report prior to denial of an injury.  Remember Labor Code sections 4060, 4061 and 4062 all state that the reports of treating physicians are admissible, which means if Applicant self procured treatment in an injury denied case and Defendant failed to obtain a panel QME on injury AOE/COE prior to the denial, the Applicant shows up to trial with admissible medical reports and Defendants show up with nada.

The WCAB wants a fair fight and felt that Rule 30 went too far and denied employers due process since the statute, Labor Code section 4060, says any party can request a panel QME pursuant to section 4062.2 “at any time after a claim form is filed.”  We guess we have too many “gotcha” rules anyway so good-bye to Rule 30, it is no longer the “Dreaded Rule 30,” it is the “Dead Rule 30.”  May it rest in peace.

7.  EX-PARTE COMMUNICATIONS

So you think the WCAB flip-flops in panel decisions about the same or similar issues?  Do you think trial judges change their minds about an issue from one case to another?  How about the Court of Appeal?  In the same case?  By the same Justices?  Three months apart?  Here, from May 2010 through August 2010, the justices went from a bold line in the sand to a very gray area with many shades of gray.

In Alvarez vs. WCAB (Paredes) 75 Cal. Comp. Cases 397 (“Alvarez I”), the DCA said having a panel QME call about missing medical records and speaking to a defense attorney who promptly hangs up on him constitutes an ex-parte communication and therefore a new panel QME list must be issued.  This was in May 2010.  This story sounds like something that happens in a professional football game when a coach throws out the red “challenge” flag – the referee goes into a booth, watches the prior play in slow motion and then either says the ruling on the field stands or he reverses the initial call.

In the Alvarez case, the DCA fumbled.  After further review, in August 2010, the same DCA panel reconsidered its earlier decision and said maybe getting a call from a doctor wasn’t so bad – it may have been “inconsequential” since our practice of workers’ compensation law is so informal.  See Alvarez vs. WCAB (Paredes) 75 Cal. Comp. Cases 817, “Alvarez II”).  Then the DCA remanded the case back to the trial level to determine whether what the panel QME did was inconsequential or not.  This decision went from solid rock to jello.

Do us a favor – if you have an AME or panel QME, communicate by way of joint letters and stop the game playing with Labor Code section 4062.3 before AND after a medical-legal exam.  That is how reasonable, honest attorneys should deal with each other.  Anything else is sharp practices.  Kudos go to the defense attorney in Alvarez for being honest.  But the parties should still get a new panel QME list because it is the right thing to do and balances the equation properly. 

After all, Alvarez involves a death case and a lot is at stake when you are relying on an unknown, randomly selected doctor to evaluate a case like that.

8.  THE NEW (OLD) GOVERNOR BROWN

Yes, there is life after “Arnold” and we look forward to seeing him again in “Terminator 25” or whatever number is next.  The changing of the guards always brings some uncertainty into our workers’ compensation system.  We have seen six “reforms” of the system during the last 30 years; the last one was a doosy.  We were lucky enough to participate in the Rand study of the workers’ compensation system in 2000 and one of the findings that stood out was how the system changes based on which stakeholders have the most clout.

The November 2010 election of Jerry Brown as governor, who won over Meg Whitman by a margin of 12% of the vote, brings in the changing of the guard of our state leadership.  Many of you are expecting a return of our old workers’ compensation system in which case we won’t have any more books to write.  Some of you are expecting a huge increase in benefits, modification of apportionment and total elimination of Benson.

For those of us who want increased workers’ compensation benefits and any other wholesale changes in our system, remember “it is the budget deficit, stupid.”  Our new governor has a history of appointing people in leadership positions who already know what they are doing and who are good at it.  He is very cautious about what he does.

We hope the same applies to the existing leadership of the DWC – these people have done the best they could under terrible circumstances (how do you spell furloughs?  Why did the governor take, er, “borrow” money from our 100% user funded workers’ compensation program to fund other state agencies?).  Don’t blame the DWC leadership here – we think Governor Brown will use common sense and will replace some people with good people who know the comp system and who are good at what they do.  There will not be wholesale reform again, only common sense ones which we should embrace. 

Perhaps a modest PD benefit increase under a new PDRS, perhaps increased TD weeks over five years in serious cases, perhaps getting rid of UR if the doctor is from the employer’s MPN, perhaps regulating workers’ compensation insurance premiums again, perhaps nothing new at all.

9.  PROPOSED WORKERS’ COMPENSATION REFORM - AGAIN

Is our workers’ compensation system a product of politics or is it just an extension of labor versus management, unions versus business?  No one wants just the Chamber of Commerce calling the shots, just as no one wants just the union locals or injured worker advocacy groups calling the shots when it comes to our workers’ compensation system.  Either reform is a “job killer” without any evidence of that, or reform doesn’t go far enough and injured workers are destitute and living on the streets - no real evidence of that either.  Where’s the middle ground?  Is there middle ground?

The year 2010 continued that debate.  The Chamber is again championing reform – through its representative in CHS&WC - by proposing a purely administrative system, devoid of lawyers, judges and due process.  This is the same song that they championed unsuccessfully during Governor Brown’s prior terms, and during every term of every governor since.  The latest has been referred to as the “Duncan” proposal and we won’t bore you with the details here but suffice it to say that if these proposals ever get legs, we will all be handling divorce cases from now on.

The employer community which has had the ear of the governor’s office since 2003 now is pointing out a “perfect storm” brewing in California workers’ compensation – a proposed WCIRB 27% increase in pure premiums in 2011, skyrocketing medical expenses, dilution of PD reforms with Guzman III and Ogilvie II and the standard management statement that our current workers’ compensation system is “not sustainable.”  One of the employer reps actually said to one of us that California should use the Department of Managed Care as a place to appeal UR denials.  Can you imaging doing that in a case where an MRI is denied?  We all might as well go to Texas where ERISA applies in many work related injury cases which has pure administrative appeals and no “WCAB” judicial action.  This is quite silly and unrealistic in light of the fact that California is mainly a blue state.

Seriously, if you are a new attorney or you have just recently started practicing workers’ compensation law – take our advice:  Learn the AMA Guides 5th Edition, take our MCLE classes in workers’ compensation law, become a certified specialist and live happily ever after. 

As long as self-insured employers, insurance companies and TPAs have money, and as long as employees get hurt at work, there will be a need for attorneys.  This is true throughout the United States and continues to this day in most 50 states, including believe it or not, Texas.  Reforms will occur maybe under Governor Brown and maybe not.  The economy, the politics, and the budget deficit will drive any changes in our system.  Right now, we are relying on case law development to drive the system reforms – see our discussion above.  Perhaps a few more years of that may not be so bad.

10.   C&Rs AND WCMSAs

There is a new party in town who wants to participate in your case, whether you like it or not.  This party is not invited to the table – it crashes our festivities while we are trying to settle our cases.  This party exists not out of a federal statute or regulation but out of an office memo.  This party creates angst among all of us.  Its initials are “CMS.”

In 2010, we have seen significant delays in getting C&R approvals because there is a Medicare set-aside issue – you need to get one, you don’t need to get one, you don’t know if you need to get one, “my client insists we get one,” when is the C&R getting approved?  What if it is approved prior to CMS approval of a set-aside?  How many of us are hearing “I settled my case and signed the paperwork six months ago – where is my money?”

The funniest thing about CMS is that all of this stuff is voluntary!  There is no statutory or regulatory requirement to have a WCMSA.  Some stuffed shirt bureaucrat in Baltimore came up with an office memoranda he sent to all CMS regional offices in 2001 and all hell has broken out since then.

One thing we have learned in this CMS mess is that sometimes it is easier to just go to trial on a big case than it is to deal with Medicare issues.  Or agree to a Stipulated Award and call it a day.  Despite our whining, you do have to be careful with large C&R settlements now for four reasons – avoid a reduction in social security disability benefits due to the “80% Rule,” make sure CMS gets paid for any medical treatment for an industrial injury prior to settlement that was paid by Medicare for a Medicare covered injured worker, make sure the settlement of future medical treatment considers Medicare’s interests and don’t forget to comply with MMSEA and SCHIP Extension Act, section 111 reporting if you are an RRE.

Some of this stuff is delayed until 2012.  We all need a respite.  Hopefully CMS will get its act together and finally realize it should have 50 ways to obtain reimbursement for conditional payments of medical treatment and 50 ways to protect itself from shifting future medical treatment from a workers’ compensation claims administrator to Medicare without delaying our cases unnecessarily.

CONCLUSION

The year 2010 was a very interesting year with all of the challenges we had from the WCAB, the courts, regulators and each other.  There are probably at least ten more “Top Ten Events In Workers’ Compensation In 2010” but we picked the ones that won’t get us fired.  Read the CCCs from this year – if you peruse the advance sheets you can quickly pick out the key cases that impact the workers’ compensation system.  Good luck in 2011 and we’ll see you then.

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