California: What in the World Is an “Adverse Inference”?

The world of workers’ compensation litigation must seem like a foreign country to lawyers who practice in the civil or criminal courts of California. We use odd phrases like “denied body parts” and “case opening document” and “failed QME appointment.” Corporate lawyers must be scratching their heads when they hear such language and wonder what in the world these terms mean. But sometimes phrases that are common in the non-workers’ compensation trial courts wind their way into action in front of workers’ compensation judges (WCJ). One such phrase is “adverse inference.” What does it mean? And when is it used? And no, it is not the same thing as an “alternative fact.”

I. When An Adverse Inference Might Apply

Commonly, the concept of “adverse inference” is used when a party willfully fails to serve evidentiary reports or records on opposing counsel. The WCJ, in the recent Noteworthy Panel Decision (NPD) of Williams v. Montgomery Elevator, AIG/Chartis, administered by Gallagher Bassett, 2016 Cal. Wrk. Comp. P.D. LEXIS 362, explained the process, as applied to the facts, as follows:

Even though ordered by the undersigned WCALJ on 9/16/2014 to produce records of what they were paying for applicant's in-home care, defendant failed to produce those records, so it is entirely appropriate to take a ­negative inference under Rule 10622 and determine that the information, if produced, would be adverse to defendant's position on this issue. In light of the negative inference, I find the $20 per hour demanded by applicant's attorney to be a reasonable value for applicant's home health care provided by her daughter, Tomeka. (Emphasis added.)

II. Adverse Inference Per 8 Cal. Code Reg. § 10622

This “adverse presumption” discussed in the Williams case above, appears in workers’ compensation regulation, 8 Cal. Code Reg. § 10622. See emphasized words in the quote below:

§10622. Failure to Comply.

Disclosure, service and filing of all medical reports in the possession and control of every party to a proceeding, except as otherwise expressly provided, is essential to and required in the expeditious determination of controversies.

The WCAB may decline to receive in evidence, either at or subsequent to hearing, any report offered under the provisions of Labor Code Section 5703 by a party who has failed to comply with the provisions of Rules 10600, 10608, 10615, 10616 or 10618. A medical or vocational expert report shall not be refused admission into evidence at a hearing, solely upon the ground of a late filing, where examination was diligently sought and said report came into possession or control of the party offering it within the preceding seven (7) days.

Where a willful suppression of a medical or vocational expert report is shown to exist in violation of these rules, it shall be presumed that the findings, conclusions and opinions therein contained would be adverse, if produced.

The remedies in this section are cumulative to all others authorized by law. (Emphasis added.)

III. When an “Adverse Inference” Does Not Apply

In the NPD of Callegas v. Candice, Inc., California Insurance Guarantee Association, administered by Broadspire, for California Compensation Insurance Company, in liquidation, 2014 Cal. Wrk. Comp. P.D. LEXIS 671, Mr. Callegas suffered an industrial injury on August 4, 1997. The underlying case settled by a Compromise and Release, with a Thomas finding on May 3, 2001. (See Thomas v. Sports Chalet, Inc. (1977) 42 Cal. Comp. Cases 625 (WCAB en banc)

The lien claimant, Dr. Konstat, waited over ten years, and then filed a Declaration of Readiness on July 16, 2012 to resolve his lien claim. Dr. Konstat, explained there was a delay in pursuing his rights, because he was never served with the Compromise & Release, so as to alert him that it was time to litigate his lien claim. The case was submitted, without testimony, on nine exhibits from Dr. Konstat, none of which supported his burdens of proof.

The WCJ issued a Notice of Intention (NIT) to sanction Dr. Konstat $2,000 and explained:

….it appears lien claimant proceeded to trial with evidence indisputably incapable of establishing its claim, thus wasting the resources of the WCAB and squandering valuable calendar time. As the Torres case held, lien claimants in that position are subject to sanctions, as well as potential attorney's fees and costs.

PRACTICE NOTE: It is incumbent upon all parties to carefully review the WCAB en banc decision of Torres v. AJC Sandblasting (2012) 77 Cal Comp Cases 1113 (WCAB en banc), as a reminder that parties should only proceed to trial if there is a “disputed issue” and there is sufficient evidence to meet each parties’ burden of proof. If not, sanctions may be imposed against the offending party.

In the Callegas case, the lien claimant filed a Petition for Reconsideration from the WCJ’s decision and argued that since defendant had not served him with the Compromise and Release, that should constitute a willful suppression of evidence. Therefore, the WCAB court should draw an “adverse inference” from that suppression of evidence pursuant to 8 Cal. Code Reg. § 10622 and they should overturn the WCJ’s decision and rule in favor of lien claimant. The WCAB rejected the lien claimant’s argument and affirmed the WCJ’s decision.

PRACTICE NOTE: The WCAB in the Callegas case chastised the lien claimant for filing a Petition for Reconsideration with regard to the NIT, explaining that the NIT was not a final order. Therefore, lien claimant should not have filed a Petition for Reconsideration on this issue, but should have filed a Petition for Removal instead. Practitioners should be mindful of this distinction, as the WCAB has been known to sanction parties for filing a Petition for Reconsideration (which takes away the WCJ’s jurisdiction) instead of a Petition for Removal (which does not take away the WCJ’s jurisdiction), when it is believed to be a delay tactic.

IV. Will Failure to Appear Result in an Adverse Inference?

Many other cases have utilized the legal directive of “adverse inference.” This issue arose in the NPD of Martinez v. Friendly Franchisees Corp. dba Carl's Jr., United States Fire Insurance Company, administered by Crum & Forster, 2015 Cal. Wrk. Comp. P.D. LEXIS 358. In this case, the applicant failed to appear at trial. As a result, defendant requested that applicant’s case be dismissed. The WCJ reminded the parties that although an applicant’s appearance is required at the Mandatory Settlement Conference (8 Cal. Code Reg. § 10563(c)), it is not mandated at trial. (The applicant is authorized to make their appearance through their attorney per 8 Cal. Code Reg. § 10562.) Since applicant made her appearance at trial through her attorney, her case was not dismissed. The WCJ explained these rules as follows:

In cases where defendant requires applicant's testimony, defendant must show that applicant's appearance was compulsory. There are multiple avenues to compel a represented applicant's presence at trial. The preferred method is for the parties to stipulate to produce those witnesses within their control. Stipulating to produce witnesses furthers civility and professional courtesy. If the parties cannot stipulate, defendant must either subpoena the applicant or send written notice to appear to the applicant's attorney at least ten days before trial. (Cal. Code Regs., tit. 8, § 10532 ; Code Civ. Proc. § 1987(a), (b); Dole Bakersfield v. Workers’ Comp. Appeals Bd., (Arguelles) (1998) 64 Cal.App.4th 1273, fn.3 [63 Cal.Comp.Cases 698].) If applicant fails to appear after written notice to appear or subpoena, defendant may request an order of contempt and/or sanctions in addition to an order compelling applicant's attendance. (See Code Civ. Proc. § 1987, subd. (b); Lab. Code, §§ 132, 5813.) Alternatively, defendant may request an adverse inference based on applicant's failure to testify and submit the case on the merits. (Evid. Code, § 513.) Here, there is nothing in the record to indicate that defendant complied with any provision that would have compelled applicant's appearance. (Emphasis added.)

PRACTICE TIP: Make sure that all witnesses for trial have been properly notified and, if necessary, subpoenaed. Defendants have been known to “assume” that the applicant would naturally appear at trial, as in this case. They are caught off guard when their Request for Dismissal is denied, as occurred in the Martinez, supra, NPD, noted above.

V. Conclusion

Although the concept of “adverse inference” is not often used in workers’ compensation litigation, parties should carefully review the law on this issue to understand the implications, if appropriately asserted at the time of trial.

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