California: Is Shipley on Life Support? The Implications of Zurich

By Hon. Susan V. Hamilton, Former Assistant Secretary and Deputy Commissioner, California Workers’ Compensation Appeals Board

In the 1785 poem, To a Mouse, Robert Burns observed that the best laid plans of mice and men often go awry. Burns’ observation is relevant in the case of some petitions for reconsideration filed before the Workers’ Compensation Appeals Board (Appeals Board). As in all judicial systems, on occasion there are delays, administrative irregularities, or unanticipated events (e.g., COVID-19) that prevent the Appeals Board from acting on a petition for reconsideration within the required 60-day period from the date of filing (Lab. Code § 5909). Such delays and irregularities have not impeded the ability of the Appeals Board to issue a decision beyond the 60-day period based on principles of fundamental fairness and due process. In Shipley v. Workers’ Comp. Appeals Bd. (1992) 7 Cal. App. 4th 1104, 57 Cal. Comp. Cases 493, the Court of Appeal proclaimed that a petitioner’s right to reconsideration by the Appeals Board “is statutorily provided and cannot be denied him without due process” because “[a]ny other result offends not only elementary due process principles but common sensibilities.” (Shipley, supra, a p. 1108). Shipley has long provided a pragmatic solution in those instances when things have gone awry and a petition for reconsideration has not been acted upon within the specified time. Or so we thought.

On December 18, 2023, the 2nd District Court of Appeal issued a decision that casts doubt on the viability of Shipley. (Zurich American Ins. Co. v. Workers’ Comp. Appeals Bd. (Zurich) (2023) 97 Cal. App. 5th 1213, 89 Cal. Comp. Cases 1). It held that the language and purpose of Lab. Code § 5909 shows a clear legislative intent to terminate the Appeals Board’s jurisdiction to consider a petition for reconsideration after the 60 days in which it is permitted to act on a petition have elapsed, and decisions on a petition issued beyond the 60-day period are void and in excess of the Appeals Board’s jurisdiction. The opinion expresses disagreement with the conclusion reached decades ago in Shipley, supra, that a petitioner has a due process right to review by the Appeals Board even after expiration of the 60-day period.

The Facts in Zurich

Briefly, Zurich involved a coverage dispute between the California Insurance Guarantee Association (CIGA), who was administering the industrial claim of an injured worker due to insolvency of the employer’s insurer, and another insurer (other insurer) upon whom CIGA sought to impose liability. The coverage dispute was arbitrated, and the workers’ compensation arbitrator found that CIGA failed to establish insurance coverage by the other insurer and ordered CIGA to continue administration of the industrial claim. CIGA filed a timely petition for reconsideration of the arbitrator’s decision, and the other insurer filed an answer to the petition. The Appeals Board did not act on CIGA’s petition within the 60-day period set forth in Lab. Code § 5909 because of an administrative irregularity. After 60 days had elapsed from the filing of CIGA’s petition for reconsideration and the expiration of the 45-day period within which CIGA could have filed a petition for review in the Court of Appeal under Lab. Code § 5950, the other insurer filed a petition with the Appeals Board requesting it be dismissed as a party since the arbitrator’s decision had become final. Sometime later, the Appeals Board issued an order granting CIGA’s petition for reconsideration to enable it to further study the facts and legal issues involved in the dispute. The Appeals Board’s order noted that pursuant to Shipley, supra, its opinion and order granting reconsideration issued timely within 60 days of its receipt of notice of CIGA’s petition for reconsideration.

The other insurer filed a petition for writ of mandate in the appellate court in which it asked the court to issue an order directing the Appeals Board to rescind the order granting CIGA’s petition for reconsideration. The other insurer also requested that it be dismissed as a defendant in the workers’ compensation proceeding. The Court of Appeal issued an order directing the Appeals Board to address two issues in its response to the mandate action. First, whether there were any communications between it and CIGA while the petition for reconsideration was pending and before the Appeals Board issued its order granting CIGA’s petition for reconsideration. Second, whether the Shipley exception to the time limit in Lab. Code § 5909 should be limited to situations in which the party who has filed the petition for reconsideration relies to its detriment on communications from the Appeals Board about the status of the petition.

The Appeals Board’s response stated that CIGA was not required to and did not contact it while its petition for reconsideration was pending and, further, that CIGA had a due process right to have its petition for reconsideration considered by the Appeals Board regardless of CIGA’s diligence. CIGA concurred with the Appeals Board’s response. The other insurer asserted that the Appeals Board lacked jurisdiction to consider CIGA’s petition for reconsideration upon expiration of the 60-day period, and that Shipley should not apply because of CIGA’s lack of diligence.

The Zurich Court’s Holding

In an opinion that examined the constitutional mandate underlying California’s workers’ compensation system, the specific language in Lab. Code § 5909, the legislative history of that section, and relevant case law, the Court of Appeal concluded that the Appeals Board exceeded its jurisdiction when it granted CIGA’s petition for reconsideration after the expiration of the 60-day period in Lab. Code § 5909. The court’s opinion observes that this conclusion is consistent with language in Evans v. Workers’ Comp. Appeals Bd. (Evans) (1968) 68 Cal. 2d 753, 33 Cal. Comp. Cases 350, in which the Supreme Court stated, in passing, that the Appeals Board retained jurisdiction to issue a new decision that complied with Lab. Code § 5908.5 in the Evans case because it had granted reconsideration within the statutory period in Lab. Code § 5909. It also found Shipley inapplicable and opined that any Shipley exception is limited to those situations in which a petitioner has acted diligently, and the Appeals Board’s misleading conduct deprives the petitioner of administrative or judicial review. The Court of Appeal ordered the Appeals Board to rescind its order granting CIGA’s petition for reconsideration and directed it to dismiss the other insurer as a party defendant.

While the implications of Zurich may not have been of seismic proportion, the decision certainly sent shock waves throughout California’s workers’ compensation community. A recent Appeals Board panel decision provides insight into how that panel has interpreted and applied Zurich. That case is Joseph Mayor v. Ross Valley Sanitary District (Mayor) February 2, 2024, ADJ10036954.

The Facts in Mayor

In Mayor the applicant sustained injury AOE/COE to various body parts as the result of a specific injury and claimed injury to additional body parts that were disputed by defendant. The parties obtained medical reporting from a QME, and each party obtained reporting from a vocational expert.

The case then proceeded to trial on issues, including the nature and extent of the injury, temporary disability, permanent disability, attorney fees, and the relevance of vocational evidence. Trial was held over multiple days over a course of approximately 10 months. On March 2, 2023, the WCJ issued a decision finding that applicant was permanently and totally disabled, based on the reporting of applicant’s vocational rehabilitation expert, which rebutted the scheduled rating of 53% permanent disability because applicant was not feasible for vocational retraining.

By a petition for reconsideration filed on March 23, 2023, defendant contended that applicant’s vocational expert did not adequately explain why he dismissed 49 different occupations into which applicant was otherwise capable of being retrained. Defendant also argued that the WCJ disregarded the apportionment identified by medical-legal evaluators, without adequate explanation. Finally, defendant claimed that case law has eliminated the relevance of vocational reporting.

Applicant filed an answer to the petition, contending that the finding of permanent and total disability is supported by work restrictions and functional losses described by doctors in the medical reporting and records; that there is no basis for apportionment; that the vocational evidence confirms applicant’s industrial injury was the entire cause of his disability; and that vocational evidence is admissible based on statute and case law authority.

Although defendant filed the petition for reconsideration on March 23, 2023, it was not received by the Appeals Board until June 15, 2023. On August 14, 2023, the Appeals Board granted defendant’s petition to further study the facts and legal issues in the case. The order granting reconsideration included a notification pursuant to Shipley that a grant of reconsideration is timely if issued within 60 days of the Appeals Board’s receipt of the notice of the petition.

On January 26, 2024, the Appeals Board panel issued an opinion and decision after reconsideration that rescinded the WCJ’s March 23, 2023 decision and ordered the matter returned to the trial level for further proceedings and decision,

On February 2, 2024, on its own motion under Lab. Code §§ 5900(b), 5906, 5911, the Appeals Board panel rescinded its January 26, 2024 decision and issued a new decision that addresses the timeliness of its August 14, 2023 decision.

The Panel’s Analysis

At the outset the panel explains that its January 26, 2024 decision failed to address relevant issues pertaining to the timeliness of its earlier August 14, 2023 Opinion and Order Granting Reconsideration, as well as September 13, 2023 correspondence from applicant’s attorney. Therefore, it chose to exercise its authority to grant reconsideration on its own motion per Lab. Code §§ 5900(b), 5906, and 5911, and to issue a new decision after reconsideration that fully addresses the relevant issues. (See Lab. Code § 5908.5).

The panel then jumps right to the issue of the timeliness of its August 14, 2023 Order Granting Reconsideration. While the panel agrees that Lab. Code § 5909 deems a petition for reconsideration denied unless the Appeals Board acts on it within 60 days of filing, it points to the opinion in Shipley wherein the court specifically considered the language in Lab. Code § 5909 and stated, “[w]hile this language appears mandatory and jurisdictional, the time periods must be based on a presumption that a claimant’s file will be available to the board; any other results deprives a claimant of due process and the right to a review by the board.” (Shipley, supra, at p. 1107). Shipley held that the time to act on the petition for reconsideration was tolled during the period the case file was misplaced and unavailable to the Appeals Board. (Id.)

The panel’s discussion emphasizes the rationale underpinning the finding in Shipley: specifically, the fundamental Constitutional principle that the Appeals Board must accomplish substantial justice in all cases without undue encumbrance (Cal. Const., art. XIV, §4), as well as the policy embodied in Lab. Code § 3202 that the workers’ compensation act be liberally construed by the courts for the purpose of extending benefits for the protection of persons injured in the course of their employment.

The discussion by the panel regarding the role of reconsideration within California's workers' compensation system is of notable importance. In this context, it is elucidated that the Appeals Board serves as an appellate court with limited jurisdiction, tasked with reviewing and adjudicating appeals stemming from decisions made by WCJs. Legislatively, the Appeals Board, and solely the Appeals Board, is granted authority to conduct a thorough review of the case record in each instance of reconsideration. This prerogative is established under statute (LeVesque v. Workmen’s Comp. Appeals Bd. (1970) 1 Cal. 3d 627, 35 Cal. Comp. Cases 16; see Lab. Code § 5906). Although parties involved in workers' compensation proceedings retain the option to challenge Appeals Board decisions through a writ of review, the scope of review by the appellate court is circumscribed by statute. Unlike the Appeals Board, the appellate court lacks the capacity to undertake a trial de novo, admit additional evidence, or exercise independent judgment regarding the evidence presented (Lab. Code § 5952).

The panel acknowledges the significant role reconsideration holds in the appeals process for workers’ compensation claims, which prompted the enactment of Lab. Code § 5908.5. This statute mandates that the Appeals Board furnish a comprehensive rationale supporting its rulings, including the evidence it utilized. Consequently, the detailed explanations and evidence relied on by the Appeals Board in its decisions facilitates judicial scrutiny, offering appellate courts thorough insights into the rationale behind the Board's actions. This requirement acts as a safeguard against hasty or arbitrary decisions by mandating a meticulous examination of facts and reasoned analysis to support the Board’s determinations (LeVesque, supra at p. 634).

The automatic denial of a petition for reconsideration because it was not received by the Appeals Board within 60 days from the date of filing stemming from irregularities beyond the petitioner’s control strikes at the core of fundamental due process and substantial justice, the panel contends. This denial deprives the petitioner of the comprehensive de novo review of the record they are entitled to by statute. The panel underscores Shipley’s acknowledgement of the constitutional ramifications should Lab. Code § 5909 be strictly enforced. Shipley, therefore, ruled that the Appeals Board’s obligation to act on the petition was suspended during the period when the case file was misplaced, ensuring the petitioner’s constitutional right to due process and a thorough review by the Appeals Board. Footnote 6 of the opinion contains citations to numerous appellate decisions that have followed Shipley when considering the statutory mandate of 60 days and the parties’ constitutional right to due process and a complete review by the Appeals Board. Footnote 7 observes the appellate court’s opinion in Zurich reflects a split of authority on application of Shipley since it disagreed with the conclusion in Shipley that a petitioner has a due process right to review by the Appeals Board of a petition for reconsideration after 60 days have elapsed.

What Is the Significance of Mayor?

The February 2, 2024 Opinion and Order Granting Petition for Reconsideration and Decision After Reconsideration in Mayor is simply a panel decision. It has not been designated as a “significant panel decision” or an “en banc” decision. While it may not be binding precedent, it provides a clear understanding that in the eyes of the Mayor panel, Shipley remains alive and well.

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