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New York Workers’ Compensation Trends and Developments 2017

January 10, 2018 (12 min read)

Legislative and administrative action produced significant changes in the Workers’ Compensation Law and practice in 2017. As with 2013 reforms, Governor Cuomo resorted to inclusion of provisions in the Executive Budget to fast track reforms to key areas of the Workers’ Compensation Law in April 2017.

Workers’ Compensation Legislation

2017 reform legislation included a number of changes to the law regarding permanently partially disabled claimants. The most significant was the amendment of N.Y. Work. Comp. Law § 15(3)(w) to provide that a claimant who is entitled to benefits at the time of classification is no longer required to demonstrate an ongoing attachment to the labor market in order to continue to receive permanent partial disability (“PPD”) benefits. The amendment was enacted on April 10, 2017, but applies regardless of date of injury. It served to counter case law which has held that attachment to the labor market was always a factor in maintaining entitlement to permanent partial disability benefits. Claimants not entitled to benefits on the date of classification because, for instance, they are working or had been found withdrawn from the labor market before classification, must still prove labor market attachment to qualify for PPD benefits. However, claimants seeking temporary partial disability benefits must still demonstrate labor market attachment. The amendment in effect eliminates the attachment to the labor market defense in a great many permanent partial disability cases and is expected to cut litigation on and compromise of many cases in which the claimant was entitled to benefits at the time of classification. It is expected that litigation on labor market attachment will be accelerated to periods before classification when a claimant is receiving only temporary partial disability benefits.

Also liberalized was the “safety net” threshold for determining “extreme hardship”, which allows a claimant with a capped PPD to apply to the Board for redetermination of classification to permanent total or total industrial disability thus permitting potential entitlement to lifetime rather than capped benefits. The threshold for “extreme hardship” is lowered from greater than 80% to greater than 75% Loss of Wage Earning Capacity (“LWEC”) and applies retroactively to claimants who had already been classified with LWEC of greater than 75%. The legislation also gives claimants, for whom a Board Panel reduced an LWEC finding to below the safety net threshold (now any LWEC greater than 75%), a right to request Full Board review of such a decision. Subsequent to the amendment, the Board also created a new form for claimants to use in applying for “extreme hardship” redetermination.

In response to the extended time being taken for classification before capped PPD benefits begin, the reform legislation enacted a “safety valve” to provide that periods of temporary disability extending beyond 130 weeks (2 ½ years) from the date of injury shall be credited against the maximum benefits cap for permanent partial disability. Unlike the statutory changes favoring claimants, this change in the law has no retroactive application at all. It applies only to injuries with dates of accident April 10, 2017 or later, such that this rule would have no effect on any cases until years from now.

In what was expected to be perhaps the most impactful legislation, the reform package directed the Chair of the Workers’ Compensation Board to adopt new Guidelines for determining impairment for schedule loss of use (“SLU”). Awards for schedule loss of use have been dramatically increasing in size since the 2007 reform legislation which, among other changes, has led to more than doubling of the maximum weekly indemnity rate. Schedule awards have been based on Guidelines published in 1996 which were based almost entirely on loss of range of motion. Roll back on the growing cost of SLU awards, many of which were granted to claimants who had little or no lost time from work, has been industry’s priority for workers’ compensation reform for a number of years. The 2017 legislation mandated that new Guidelines “be reflective of advances in modern medicine that enhance healing and result in better outcomes.” The statute gave the Chair until September 1, 2017 to propose such Guidelines. The Board did issue Proposed Permanent Impairment Guidelines for Schedule Loss of Use awards as required by the statute on 9/1/17. The 9/1/17 Proposed Guidelines would have radically changed the methodology for assessing schedule loss of use. The Guidelines placed injuries to various limbs in three categories of severity based largely on diagnosis and results. Examiners were to award points for loss of range of motion, loss of strength, and pain if there is a deficit in motion or strength. Additionally, Law Judges were permitted to award up to 15% more of the member for “loss of earning power”, a term which was not defined. The use of categories and the limited number of points to be awarded for strength and motion loss were expected to result in lower schedule loss of use awards, despite the addition of pain and loss of earning power to the assessment.

The 9/1/17 Proposed Guidelines were met with vehement and broad scale opposition, especially from labor and the claimant’s bar. In response to this pressure, the Board proposed Revised Guidelines on 11/22/17 which largely retained the range of motion methodology of the 1996 Guidelines for assessing permanent impairment. While some range of motion normalcies were lowered and the Guidelines specifically allowed consideration of the range of motion of the contralateral member when available, it was expected that the 11/22/17 Guidelines would not significantly lower schedule loss of use assessments. The 11/22/17 Guidelines were adopted by the Board, effective 1/1/18, without any significant change. Discussion of all the legislation mentioned above effecting classified and scheduled permanent disabilities is covered extensively in Chapter 5 of this year’s New York Workers’ Compensation Handbook, 2018 Edition (on sale in March 2018).

The 2017 Reform Legislation also authorized the Board to establish performance standards for carriers and self-insured employers by regulation and issue aggregate penalties without hearings for failing to meet those standards. In effect, the legislation gave statutory authorization to the Board’s payor compliance project which had already issued standards for overall carrier compliance with respect to timely filing, payments, and controversies of claims. The aggregate penalties are to be imposed administratively and the cost of such penalties are to be borne solely by insurance carriers without being passed on to employers. It appears that these bulk penalties will largely aggregate penalties under N.Y. Work. Comp. Law § 25(3)(e) ($50.00 for failure to file a notice or report required by the Board).

The 2017 reform legislation also required the Board to establish a Comprehensive Prescription Drug Formulary, including a tiered list of high quality, cost effective medications that are preapproved to be prescribed and dispensed as well as additional non-preferred drugs that can be prescribed with prior approval. The formulary is supposed to be in place as of December 31, 2017 but as of this writing, its provisions are not available.

2017 legislation also changed the standard for adjudicating stress claims by first responders, such as police officers, firefighters, and emergency medical care providers. Rather than having to prove that they experienced stress “greater than that of similarly situated workers”, the new legislation provides that a “work related emergency cannot be disallowed if the stress sustained is not greater than that which normally occurs in the normal work environment.” The new legislation also provides that a worker with medical evidence not receiving benefits must be given a hearing by the Board within 45 days of a request.

Also as part of the 2017 reform package, the Board is empowered to execute an Assumption of Workers’ Compensation Liability Insurance Policy (ALP) to secure present and future liabilities of the Special Funds under §§ 15-8 and 25-a, as well as the Uninsured Employers’ Fund. Such a policy would presumably be used to relieve the Board and the Special Funds of the responsibility of managing and defending claims under those funds. As of this writing, the Board has not executed such a policy.

Administrative Actions

In September 2017, the Workers’ Compensation Board Chair and former General Board Counsel, Kenneth J. Munnelly, retired from the Workers’ Compensation Board. In his place, Governor Cuomo appointed attorney and current Board Commissioner, Clarissa M. Rodriguez, as the new Chair.

The Workers’ Compensation Board has undertaken many administrative actions this past year. Most visible at this point is its phasing in of “Virtual Hearings” in Board districts to allow parties and their attorneys or representatives to appear at hearings via video conference without actually appearing at offices of the Workers’ Compensation Board. As part of the implantation of virtual hearing process, all representatives appearing for Workers’ Compensation hearings must sign in electronically, even if they are attending a hearing in person.

The New York Paid Family Leave Act, administered by the Workers’ Compensation Board, becomes effective January 1, 2018 as part of employers’ disability benefit insurance program. The Board has promulgated regulations and delineated processes for determining Paid Family Leave claims. Chapter 14 of this year’s New York Workers’ Compensation Handbook, 2018 Edition, discusses these developments in detail.

Maximum Rate and Insurance Premiums

Other developments included the raising of the maximum weekly indemnity rate to $870.61 effective July 1, 2017 based upon the annual indexing of that rate to the state average weekly wage enacted as part of the 2007 Workers’ Compensation reform legislation. Meanwhile, the Department of Financial Services announced a 4.5% premium decrease effective October 1, 2017. The decrease was said to be based in part on the effects of the April 2017 legislative reforms.

Case Law Developments and Case Summaries

Over 100 new decisions on workers’ compensation issues from the Appellate Division and Court of Appeals are summarized and analyzed in Part II of this year’s New York Workers’ Compensation Handbook, 2018 Edition. Some of the decisions having the most significant impact are referenced below.

Reopened Case Fund under N.Y. Work. Comp. Law § 25-a:

In what was probably the most significant decision of the year, the New York Court of Appeals reversed the decision of the Appellate Division which had held that closure of the Special Fund for Reopened Cases under N.Y. Work. Comp. Law § 25-a to new claims, effective January 1, 2014, violated the Takings, Contract, and Due Process clauses of the United States Constitution. The Court of Appeals found that the retroactive effect of the closure on cases for which insurers could not charge extra premiums because claims no longer qualified for §25-a relief did not rise to the level of a constitutional violation. The “rational legislative purpose” of saving businesses the cost of assessments to support the Fund and assuring effective administration of claims by insurers was sufficient to overcome the fact that those insurers were left with unfunded liabilities. Accordingly, the § 25-a Fund remains closed to any new claims to shift responsibility to the Fund as of 1/1/14. Those claims remain the liability of the insurance company or self-insured employer against which they were first made. See American Economy Insurance Co. v. State of New York, 2017 N.Y. LEXIS 3195 (Oct. 24, 2017).

Misquitta v. Getty Petroleum, 150 A.D.3d 1363, 54 N.Y.S.3d 206 (3d Dept. 2017) seemed to present an exception to the closure of the Reopened Case Fund to claims after 1/1/14. Decedent had an accidental injury claim which was ruled to be the responsibility of the Reopened Case Fund in 2000. He died in May 2014 due to coronary artery disease found to be due to his underlying accident case. Even though his death occurred after the closure of the Fund to new claims as of 1/1/14, the Court held that the death case was the liability of the Special Fund because the original claim from which the death arose was the Special Funds’ responsibility. While a death claim is separate, if due to an underlying disability claim, the liability for the death claim remains with the carrier on the prior claim.

Carrier credit on third party settlement:

When a carrier pays its apportioned share of litigation costs for its credit from a third party recovery against its ongoing compensation obligations as required by the Court of Appeals decision in Burns v. Varriale, 9 N.Y.3d 207 (2007), a question arises as to whether those Burns payments in effect reduce the total amount that can be taken as a credit. The Appellate Division in Lala v. Siteworks Contracting Corp., 151 A.D.3d 1150, 56 N.Y.S.3d 368 (3d Dept. 2017) held that the total amount of the credit to the carrier is the total of the net settlement reduced by those ongoing Burns payments, not the total net recovery figure without reduction for Burns payments.

Reversing the Board and the Appellate Division, the Court of Appeals held that Burns did apply and the carrier did have to pay its share of litigation costs as it took its credit against the balance due on a schedule loss of use award made after the third party action settlement. See Terranova v. Lehr Construction Co., 2017 N.Y. LEXIS 3781, 2017 NY Slip Op 08799 (Court of Appeals, December 19, 2017).

Additional Compensation under N.Y. Work. Comp. Law § 15(3)(v):

When claimants have been found to have a schedule loss of use of 50% or more of an arm, hand, leg or foot, they can apply for additional benefits after the end of their schedule loss of use award. In the past those additional benefits if awarded were payable until age 62. However, in Mancini v. Office of Children and Family Services, 151 A.D.3d 1494, 57 N.Y.S.3d 725 (3d Dept. 2017) the Appellate Division indicated that the benefits are limited by the durational cap set based upon the loss of wage earning capacity finding under § 15(3)(w). However, the benefits will still end at age 62 even if the durational cap were to run beyond age 62.

Apportionment Against a Prior Injury in a Schedule Loss of Use Award in the Absence of Being Disabled in a Compensation Sense from the Prior Injury:

The general rule is against apportionment to a prior non-compensable condition, that did not prevent the employee from effectively performing his or her job duties before the compensable accident. However in Sanchez v. STS Steel, 154 A.D.3d 1027, 2017 N.Y. App. Div. LEXIS 7001 (3d Dept. 2017) the Appellate Division affirmed the exception to the general rule when the prior injury would have resulted in a schedule loss of use finding if it were compensable. This reaffirmed the principle first announced in Scally v Ravena Coeymans Selkirk Cent. School District, 31 A.D.3d 836, 838 (2006). However, the apportionment only applies to the permanency and it does not apply to temporary disability or medical expenses.

Ronald E. Weiss
Ronald Balter

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