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New York Workers’ Compensation State of Mind

May 23, 2013 (13 min read)
Attention Lexis Online Subscribers: Citations link to Bracketed citations link to Lexis Advance.
The 2013 Edition of New York Workers’ Compensation Handbook is now available. The following article is excerpted from the Handbook:
The year 2012 saw growing controversy over the cost and the effectiveness of the 2007 reforms to the Workers’ Compensation Law. The New York Compensation Insurance Rating Board requested an 11.5% increase in premium rates which it ascribed to the increase in workers’ compensation indemnity rates without corresponding savings from implementation of the durational caps. In response, the Commissioner of Financial Services actually directed a 1.2% rate decrease. Organizations on both sides of the table, including the Business Council of New York State and the Workers’ Compensation Alliance, issued conflicting reports on the reasons for increased costs in the system. The Rating Board and business groups have also argued that the requirement that private carriers make mandatory present value deposits into the Aggregate Trust Fund for permanent partial disability awards have increased workers’ compensation costs. Business groups have called for repeal of the mandatory ATF deposits and updating the standards for schedule loss of use awards, among other proposals, as changes needed to save costs.
The 2007 reforms also legislated a phase out of the Special Disability Fund. Reports document assessments on employers and carriers for support of the Special Disability Fund under WCL § 15(8) [WCL § 15] and the Special Fund for Reopened Cases under WCL § 25-a [WCL § 25-a] as well as support of the Workers’ Compensation Board continue to grow and are now at 18.8% of premium, the highest in the nation and nearly five times the national average for states with such funds. It was foreseeable that at least over the course of a few years, the Special Disability Funds’ costs would grow rather than diminish, since the main device employed for phasing out the Fund was to limit claims to pre-7/1/07 injuries. In the short term this just increased the number of claims made for Special Disability Fund relief. Most established § 15(8) [WCL § 15] claims require the Special Disability Fund to pay benefits for claimants’ lifetimes. Thus, barring WCL § 32 [WCL § 32] settlements to be funded by the Special Disability Fund or the Waiver Agreement Management Office, the Special Disability Funds liabilities will be substantial for many years to come.
Many expect the Governor to propose further reform to the Workers’ Compensation Law designed to reduce costs in the 2013 session of the legislature. [Editor’s Note: See Governor’s 4/8/2013 press release “Governor Cuomo Details $1.2 Billion in Savings Resulting from Major Reforms to Workers Compensation and Unemployment Insurance Included in Recently Enacted State Budget”.]
Pursuant to the 2007 reforms, the maximum indemnity rate was increased to $792.07 for injuries occurring on or after July 1, 2012, based upon the State Average Weekly Wage for 2011, which was announced by the Commissioner of Labor on March 31, 2012. The maximum rate will be adjusted every July1st based upon the prior year’s State Average Weekly Wage.
Meanwhile, the workers’ compensation system has struggled with implementation of the 2012 New York State Guidelines for Determining Permanent Impairment and Loss of Wage Earning Capacity, which were promulgated on January 1, 2012. The Guidelines, which employ evidence based medicine, provide a more objective framework for measuring degree of medical impairment and extent of functional capacity. However, they do not offer any formula for measuring loss of wage earning capacity after degree of medical impairment and extent of functional capacity are determined. That determination is left to Workers’ Compensation Law Judges to consider along with factors, including age, educational background, work history and English literacy. The lack of precision in how the three elements are to determine loss of wage earning capacity determinations has held up imposition of the durational caps on cases despite the Board’s attempt with the new Guidelines to “fast track” classifications.
It is probably true that the business community’s expectations that the 2007 reform legislation would relieve workers’ compensation costs were far too high. The reforms provided immediate increases in maximum indemnity rates that have now almost doubled the maximum rate but were reliant on durational caps to be imposed in future cases as the main means for savings. The durational caps only realize costs savings once the caps are actually exhausted, and that will not occur until years into the future. The same can be said of the phase out of the Special Disability Fund, which, in the short term, has increased the Funds’ costs. Add to this the increased costs from the mandatory ATF deposits, and an increase rather than savings in compensation costs is not surprising.
Costs have been relieved somewhat by the Pharmacy Fee Schedule and the increased use of pharmacy and diagnostic networks permitted by the reform legislation. The Medical Treatment Guidelines (“MTG”), adopted by the Board in 2010, may yet lead to the significant savings in medical costs. In 2013 the Board will add Guidelines for treatment of carpal tunnel syndrome to those already existing for treatment for injuries to the back, neck, shoulder, and knee. The Board is working on guidelines for management of chronic pain and has implemented a rule that 10 chiropractic or occupational or physical therapy visits per year are authorized for chronic pain, with no variance allowed for more such treatment. In order to relieve the back up of hearings on requests by providers for variances from the MTGs, the Board’s new rules make adjudication of a variance request by the Board Office of the Medical Director the default alternative for resolution of variance requests.
The Court of Appeals, New York’s highest court, rendered three decisions in workers’ compensation cases this past year that involved questions expected to have significant impact on workers’ compensation cases. For the first time the Court decided a case involving the defense of attachment to the labor market in Zamora v. New York Neurological Associates, 19 N.Y.3d 186, 970 N.E.2d 823, 947 N.Y.S.2d 788 (2012) [19 N.Y.3d 186]. The Court held that resolving whether a claimant has maintained a sufficient attachment to the labor market is always a question for the Board to resolve before awarding non-schedule permanent partial disability benefits. The inference that a claimant’s reduced earnings resulted from the permanent partial disability, said the Court, is not mandatory but only one that the Board may draw. The claimant in the Zamora case terminated her particular job rather than taking an involuntary retirement from employment because of her disability. Nevertheless, the Court held that the rule it announced applied whether the loss of earnings resulted from claimant’s withdrawal from a particular job or involuntary retirement from employment. Consequentially, the defense bar may argue that a claimant with a permanent partial disability is not entitled to benefits because of an inadequate proof of attachment to the labor market in both retirement and non-retirement withdrawals from the employment. On the other hand, the claimant’s bar may argue that Zamora should be held solely to its facts and not apply to cases involving involuntary retirements. In either event, the Court effectively resurrected the attachment to the labor market defense. The nearly irrefutable inference of compensability found by the Appellate Division in both withdrawal from employment and retirement cases no longer applies.
The Court revisited the issue of how the carrier is to pay its equitable share of litigation costs incurred in obtaining a settlement of a third party action, which serves to relieve the workers’ compensation carrier of liability for indemnity and medical benefits in Bissell v. Town of Amherst, 18 N.Y.3d 697, 967 N.E.2d 176, 943 N.Y.S.2d 798 (2012) [18 N.Y.3d 697]. In its last previous pronouncement on the subject in the case of Burns v. Varriale, 9 N.Y.3d 207, 879 N.E.2d 140, 849 N.Y.S.2d 1 (2007) [9 N.Y.3d 207], the Court held that a carrier’s ongoing liability for future permanent partial disability (PPD) benefits was so speculative that it could not be subject to a present value calculation at the time of the third party action settlement. Until the Burns decision, based upon Kelly v. State Insurance Fund, 60 N.Y.2d 131, 456 N.E.2d 791, 468 N.Y.S.2d 850 (1983) [60 N.Y.2d 131], it was assumed that such PPD cases were subject to present value calculations, which regularly served to reduce carriers’ recovery on their workers’ compensation liens and even require “fresh money” payments before the carrier could begin to exercise its credit against the net third party action proceeds. The Court in Burns adopted a rule for PPD payments that the carrier’s cost of litigation was payable as the liability extinguished accrued, a pay as you go rule. In the Bissell case, the Court expanded the Burns pay as you go rule to payment of litigation costs for relief of future medical expenses. In Bissell, the claimant was classified as a having a permanent total disability such that pursuant to the Kelly case, the present value of the future indemnity liability extinguished was calculable based upon claimant’s life expectancy and subjected the compensation carrier to a lump sum payment for its cost of litigation. Even though the jury in the Bissell case had rendered a verdict as to the cost of the claimant’s future medical expenses, the Court held that this calculation could not be binding on a workers’ compensation carrier. Accordingly, a carrier’s equitable share of litigation expenses for extinguishment of medical liability was only payable as the future medical costs accrued. Bissell was thus a hybrid Kelly-Burns case. Some have speculated that in the future the Court may abandon the Kelly approach entirely and hold that even in permanent total, death and schedule loss cases, a carrier’s liability for its equitable share of litigation costs will be paid only as that liability would have accrued, a la Burns.
The third case decided by the Court, Schmidt v. Falls Dodge, Inc., 19 N.Y.3d 178, 970 N.E.2d 399, 947 N.Y.S.2d 376 (2012) [19 N.Y.3d 178], overruled Appellate Division case law since 2003 regarding concurrent payments in multiple cases when one case involves a schedule award. Reiterating a rule laid down in its decision in LaCroix v. Syracuse Exec. Air Service, Inc., 8 N.Y.3d 348, 834 N.Y.S.2d 676, 866 N.E.2d 1004 (2007) [8 N.Y.3d 348], the Court held that since balances on schedule loss of use awards are to be paid periodically over a period of time, they cannot be paid when the claimant is already receiving weekly payments on a companion case, which combined with the schedule award would exceed the claimant’s maximum benefit rate. This meant that in a case involving an uncapped permanent partial disability with an award being paid at the maximum rate, the claimant potentially may never receive payment on the schedule award. The Court limited its ruling in Schmidt to the situation presented in that case in which the schedule award was made pursuant to the law as it existed prior to August 26, 2009. On that date, WCL § 25(1)(b) [WCL § 25] was amended to require a lump sum payment of schedule award balances when the claimant requested such a payment. Nevertheless, the conflict between that section and WCL § 15(6) [WCL § 15] regarding maximum rate to be paid a claimant still exists and may be the subject of a future Court decision.
Revisions to New York Workers’ Compensation Handbook, 2013 Edition (LexisNexis)
In this year’s edition, every chapter of the New York Workers’ Compensation Handbook has been revised to account for changes in the law and practice noted above and many more changes resulting from case law and in particular administrative actions by the Workers’ Compensation Board.
Part II of this edition includes summaries and your authors’ commentaries on 98 decisions of the Appellate Division and Court of Appeals on workers’ compensation cases handed down over the course of the past year. Parts III and IV contain up to date statutes and regulations pertaining to workers’ compensation in New York. The Reference Directory at the beginning of the Handbook and the Tables in Part V have also been updated.
As in years past, the 2013 edition of the New York Workers’ Compensation Handbook was the product of work by many individuals who diligently supplied their time, knowledge, and effort to this project. In this regard, Mr. Weiss wishes to acknowledge and express his appreciation for the efforts and assistance given by the partners, associates, and staff of his firm, and in particular his new partner, Joseph DeCoursey, and associate, Daniel Kuhn, but most especially his legal assistant, Carrie Wells.
Mr. Balter would like this year to dedicate this book to John Sciortino. Mr. Weiss joins in this dedication to his colleague and friend. Within days of receiving one of highest honors in workers’ compensation, induction into The College of Workers’ Compensation Lawyers, John passed away suddenly on March 12, 2012. John was the long time President of the Injured Workers Bar Association. In addition to his role in the IWBA, John was also active in the New York State Bar Association’s TICL Section’s Workers Compensation Division. In these roles John worked tirelessly to protect the rights of injured workers, employers, insurance companies and the attorneys who practice before the New York State Workers’ Compensation Board. He was tireless in his dedication to protecting the rights of others because it was the right thing to do. John would make the trip from Rochester to Albany many times a year to meet with New York State officials and to watch committee meetings set up by the Workers’ Compensation Board that could have led to less access to the court house at the Workers’ Compensation Board. His leadership, professionalism and most of all his friendship will be missed by all.
While the final product is the work of the authors, the New York Workers’ Compensation Handbook was built on original chapters to which other legal scholars recognized in the pages immediately following this Foreword contributed. Once again, the authors wish to thank Thomas A. Robinson for his work in identifying cases considered in Part II of this Book. As always, we thank our editor, Robin Kobayashi, for her all of her skills and patience in guiding this edition to its publication.
  Ronald E. Weiss
  Ronald Balter
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