Not a Lexis Advance subscriber? Try it out for free.

Workers' Compensation

California Workers’ Compensation Reform SB 863 Analysis: Lien Provisions

 By David Bryan Leonard, Esq.

***WARNING: The following analysis is based on the 8/24/2012 version of SB 863. On 8/31/2012, the Legislature passed SB 863. Be sure to check the final version of SB 863 posted on the Legislature website.***

The proposed scope and change envisioned by SB 863 is huge. Like SB 899, its impact will reverberate for years.  Unforeseen consequences, systemic pressure on all forms of public and private health care, and societal trends resulting from changes to the social bargain envisioned by constitutional creation of the Workers’ Compensation Act are sure to be a future challenge and consequence.

The proposed Workers’ Compensation reform of SB 863 demand significant changes to the benefits available to California’s injured worker. While the change proposed by this Legislation involves reform of the entire workers’ compensation system, it is recognized that there are various individual classifications of benefits and litigation phases within the system. SB 863 specifically targets the way liens are created and resolved. This article with be limited to the topic of Liens and the changes proposed by SB 863.

The author’s commentary is set forth at the end of this article.

A. Changed Subject Matter Of Liens (Labor Code Section 4903-Amended)

Only specified services and benefits are subject to being claimed as a lien. SB 863 changes what can be the subject matter of liens. Section 4903(b) does not allow medical legal costs as defined by 4620 et seq. It also prohibits the allowance of medical treatment liens that are subject to Independent Medical Review (“IMR”) or Independent Bill Review (“IBR”). While the modifications to the medical legal process result in the deletion of 4620, the Legislature has specifically decided to exclude any cost subject to IMR or IBR from being eligible as a proper subject matter of a lien. Hence, any dispute that can be resolved by IMR or IBR cannot be the subject matter of a lien. In addition, liens from the Asbestos Workers Account are no longer included.

B. Filing Fees And New Methods Of Filing Lien Claims (Labor Code Section 4903.05-Added)

The required content of liens has been changed by Section 4903.05 (a). All liens must be filed with the appeals board in writing upon a form approved by the appeals board. The lien claim must include a full statement or itemized voucher supporting the lien and justifying the right to reimbursement with proof of service upon the parties.

Section 4903.05 (b) requires that all medical bills for services defined by Labor Code 4600 must be filed electronically.

SB 863 reinstates the lien filing fee process in Section 4903.05 (c). After January 1, 2013 a filing fee of one hundred and fifty dollars ($150) must be paid for all medical treatment liens not excluded by IMR or IBR, and for all requests of costs. The filing fee must be filed before a lien is filed.

To insure compliance, all proposed liens must include proof that the filing fee of $150 has been paid to the Workers' Compensation Administration Revolving Fund.  Each individually recognized medical provider must file a filing fee. The claims of two or more providers of goods or services cannot be merged into a single lien.  As a penalty, any lien submitted after December 31, 2012 shall be automatically deemed invalid if proof of proper payment is not shown. An automatic denial will not preserve or extend any applicable statute of limitations on lien filing.  In addition, any lien filed for goods or services that is not the proper subject of a lien may be  dismissed upon request of a party by verified petition or on the appeals board's own motion.  As discussed above, disputes subject to IMR or IBR are the proper subject matter of a lien. If an improper lien is filed with the board, and the lien is dismissed, the lien claimant will not be entitled to reimbursement of the filing fee.

The only exclusions from the lien filing fee cost is for:

(1) A health care service plan licensed pursuant to Section 1349 of the Health and Safety Code;

(2) A group disability insurer under a policy issued in this state pursuant to the provisions of Section 10270.5 of the Insurance Code;

(3) A self-insured employee welfare benefit plan issued in this state as defined in Section 10121 of the Insurance Code, or

(4) A publicly funded program providing medical benefits on a nonindustrial basis.

C. Pre-2013 Liens Subject To Activation Fee (Labor Code Section 4903.06-Added)

In addition to changing the subject matter of a lien, imposing a filing fee, and changing the required content of liens filed after December 31, 2012, the Legislature has also added Labor Code Section 4903.06 in order to initiate recovery of a retroactive filing fee for all liens in existence prior to January 1, 2012. In recognition of the changes to 4903(b), the Legislature maintains the prior subject matter of liens but will require a lien activation fee of one hundred dollars ($100). This fee will be collected by the administrative director and deposited in the Workers' Compensation Administration Revolving Fund.

Unless a medical provider, or claimant seeking costs, paid the circa 2003 filing fees, all prior lien claims still in existence after January 1, 2013, will be subject to a lien activation fee. By January 1, 2014, all lien claimants must have paid the lien activation fee of $100 to the Division of Workers' Compensation. Failure to pay the activation fee by 2014 will result in automatic dismissal of the lien.

In addition, any Declaration of Readiness to Proceed (DOR) filed by a lien claimant with a pre-2013 lien shall include proof of payment of the $100 filing fee. This means that in order to access the WCAB, participants with older liens will have to have filed the filing fee prior to filing a DOR. Furthermore, all lien claimants which did not file the declaration of readiness to proceed, but remain a lien claimant of record at the time of a lien conference, must submit proof of payment of the activation fee to the WCJ at the lien conference. If the fee has not been paid or no proof of payment is available, the lien shall be dismissed with prejudice. These capture mechanisms require payment of the activation fee at time that WCAB intervention is requested and must be paid prior to the expiration of the 2014 payment deadline.

D. Orders Allowing Reimbursement Of Lien Fees (Labor Code Section 4903.07-Added)

Recognizing that lien claimants may feel unfairly targeted by the imposition of filing fees and activation costs, SB 683 adds Labor Code Section 4903.07 to allow the reimbursement of filing fees under certain circumstance. Unless the parties agree to settle the dispute, before the WCAB can award reimbursement of the filing fees, all of the following conditions must be met:

1. At least 30 days before filing a 2013 lien, or a declaration of readiness for which the lien activation fee was paid, the lien claimant has made written demand for full, final and complete settlement of the lien.

2. The defendant fails to accept the settlement demand in writing within 20 days of receipt of the settlement demand.

3. After submission of the lien dispute to the appeals board or an arbitrator, a final award is made in favor of the lien claimant that is equal to or greater than the amount of the settlement demand excluding interest and fees.

E. Liens And The Resolution Of The Case In Chief (Labor Code Section 4903.1-Amended)

SB 863 also proposes the amendment of Labor Code Section 4903.1 concerning the resolution of liens at the time the case in chief is resolved. Section 4903.1(b) was rewritten to specifically require the WCJ to disallow treatment liens if the provider either knew or in the exercise of reasonable diligence should have known that the condition being treated was caused by the employee's present or prior employment, unless at the time the expense was incurred at least one of the following conditions was met:

(1) The expense was incurred for services authorized by the employer.

(2) Employer Refused To Provide Treatment Per 5402(c)

(3) The expense was necessarily incurred for an emergency medical condition as defined by subdivision (b) of Section 1317.1 of the Health and Safety Code.

It appears that 4903.1(b) was crafted with the intent to bolster changes by the Legislation to the MPN process. While the MPN process is subject to discussion in a separate analysis, for the purposes of discussing 4903.1(b), it appears the Legislature wants to add teeth to the prohibition against unauthorized, self-procured treatment obtained outside of an MPN process.

F. Bifurcation and Lesser Status Of Lien Medical Treatment Hearings (Labor Code Section 4903.4-Amended)

Finally, in regards to the lien process the Legislature has proposed amendment of Labor Code Section 4903.4 concerning the bifurcation of lien issues after the injured workers case has settled. Subsection (a) allows the appeals board to resolve treatment disputes in a separate proceeding.

However, subsection (b) relegates the hearing of liens on a separate to a lower level of importance which will be based upon the resources available to the appeals board and other considerations as the appeals board deems appropriate and shall not be subject to Section 5501.

G. Lien Filing Statute of Limitations (Labor Code Section 4903.5-Amended)

SB 863 also amends the statute of limitations periods for the filing of lien claims set forth in Labor Code Section 4903.5. For services after July 1, 2013, no treatment lien can be filed after three (3) years from the date the services were provided, nor more than 18 months after the date the services were provided.   An extension is provided for health insurance plans which must file treatment liens within 12 months after the entity first has knowledge, knew, or in the exercise of reasonable diligence should have known that an industrial injury is being claimed, but in no event later than five years from the date the services were provided to the employee. Furthermore, an injured worker is not liable for payment of a lien if it has not been filed and served within the allowable period.

Procedurally, a lien claimant shall not file a declaration of readiness to proceed case until the case-in-chief has been resolved unless the lien claimant is the applicant as provided in Section 5501 or as otherwise permitted by rules of practice and procedure adopted by the appeals board.

H. Medical Records, Mandatory Filing And Notice Time Lines For Lien Claims (Labor Code Section 4903.6-Amended)

4903.6. (a) has been amended to require that except as necessary to meet the statute of limitations detailed in section 4903.5 above,  a medical treatment lien claim (or application for adjudication filed by a lien claimant) shall not be filed or served until the expiration of  both of the following have occurred:

1. Sixty (60)days has elapsed after the date of acceptance or rejection of liability for the claim, or expiration of the time provided for investigation of liability pursuant to subdivision (b) of Section 5402, whichever date is earlier and

2.  Either of the following:

(A) The time provided for payment of medical treatment bills pursuant to Section 4603.2 has expired and the reasonable fee has been determined pursuant to Section 4603.6, and, the medical necessity of the medical treatment has been determined pursuant to Sections 4610.5 and 4610.6.

(B) The time provided for payment of medical-legal expenses pursuant to Section 4622 has expired and, if the employer objected to the amount of the bill, the reasonable fee has been determined pursuant to Section 4603.6.

When a lien claimant retains or changes representation by an attorney or non-attorney, it must  notify the parties and the appeals board within five working days of  the change. The notice shall set forth the legal name, address, and telephone number of the new representative.

Regarding the service of medical records, unless the lien claimant is a physician, as defined in Section 3209.3, a lien claimant is not entitled to any medical information about an injured worker without prior written approval of the appeals board. Any board order authorizing disclosure of medical information to a lien claimant other than a physician shall specify the information to be provided to the lien claimant and include a finding that such information is relevant to the proof of the matter for which the information is sought.

I. Assignment Of Lien Claims (Labor Code Section 4903.8-Added)

The Legislature had decided to address the issue of lien assignment with the creation of Labor Code Section 4903.8. To begin, all orders for payment will issue only to the person who was entitled to payment at the time the expenses were incurred. Payment will not be allowed to an assignee unless the provider has ceased doing business and has assigned all right, title, and interests in the remaining accounts receivable to the assignee.

If a partial or total assignment has been made, a true and correct copy of the assignment shall be filed and served to the parties.  If there has been more than one assignment of the same receivable or bill, the appeals board may set the matter for hearing. A declaration under the penalty of perjury by a natural person competent to testify to the facts may be required. If required, the declaration must state:

(1) The services or products described in the bill for services or products were actually provided to the injured employee.

(2) The billing statement attached to the lien truly and accurately describes the services or products that were provided to the injured employee.

If the assigned lien does not comply, the lien shall be deemed to be invalid, whether or not accepted for filing by the appeals board, and shall not operate to preserve or extend any time limit for filing of the lien.


The proposed reform Legislation of SB 863 is a dramatic attempt to change the ways medical treatment liens are created and processed within the Workers’ Compensation Act. Some proposed changes include removing certain treatment and billing disputes from the jurisdiction of the WCAB. Other changes include outright disallowance.

The resolution of the majority of medical treatment disputes will now be handled by the Administrative Director’s (“AD”) office through the application of binding independent medical and billing review.

Other changes that impact liens include mandatory filing fees which are subject to reimbursement in specific circumstances. Finally, the reform tightens up the MPN process and eliminates grounds for outside treatment.  In total, the scope of reform is vast. The positive benefits to the employer are clear. Reductions to the safety net for injured workers whose treatment benefits are not being satisfied within the MPN process are severe. The level of suffering experienced by the injured worker and the added costs to society resulting from these proposed changes are anyone’s guess.

© Copyright 2012 LexisNexis. All rights reserved.


LexisNexis Workers’ Compensation eNewsletter

LexisNexis Series on California Workers' Comp Reform SB 863:

***WARNING: The following analyses are based on the 8/24/2012 and/or 8/27/2012 version of SB 863. On 8/31/2012, the Legislature passed SB 863. Be sure to check the final version of SB 863 posted on the Legislature website.***