SCHOOL'S OUT FOR SUMMER - From The Law Offices of Mullen & Filippi

Thursday, June 14, 2007
School’s out for Summer! Are you ready for Vacation?

It’s time to pack up the kids (and dog) and head out for that well-deserved vacation. Or, just suit up, and hit the pool. But, before we go, let’s see what this semester’s report card bears.

Move to the head of the class (aka: use the new disability rating schedule) Since the Brodie-Welcher decisions by the California Supreme Court on May 3rd allowing employers to subtract percentages when calculating apportionment and resulting in significant PD award savings, final exams for the term have resulted in another “A+” grade for the Defense:

The Court of Appeals (1st District) has decided in favor of “our school” (employers) on application of the new 2005 PD rating system to pre-2005 injuries. In Costco v. Chavez, applicant’s injury occurred in 2004, and the QME reported in late 2004 that applicant was not P&S. But the report did not mention whether permanent disability was expected or not. Temporary disability continued into 2005, when applicant was found P&S by the AME. Both the trial Judge and the WCAB ruled that the old 1997 Permanent Disability Rating Schedule (PDRS) applied, based on finding that a comprehensive medical/legal report issued prior to 1/1/05 need not show permanent disability in order to anchor the claim within the old rating schedule.

On appeal Applicant, Applicants’ Attorneys Association (CAAA) and the San Francisco office of Mullen & Filippi on behalf of Defendant, argued before the Court of Appeals. The Court ruled in favor of Defendant, stating that because no pre-2005 medical/legal report indicated the existence of permanent disability, Applicant’s PD must be rated under the 2005 schedule. The Court also found that the commencement of TTD payments (rather than termination) was insufficient to trigger the requirements of PD notification found in Labor Code Section 4061, again resulting in application of the 2005 rating schedule.

This decision supports use of the new 2005 PD rating schedule for pre-2005 injuries where there is no pre-1/1/05 report showing permanent disability, and TTD has not yet been terminated. The complete Costco appellate decision may be read through this link.

Although school may be out for now, other challenges to the use of the new schedule for old injuries are sure to come. We will fight those battles… next semester.

If you think gas prices are high… On your way out of town, the price of gas at the pump is not the only thing you’ll notice has gone up. The Department of Labor has posted the State’s Average Weekly Wage (SAWW) for the period ending 3/31/07 of $914.16, an increase of 3.93% over last year. This brings the minimum and maximum TD rates up to $137.45 and $916.31 beginning 1/1/08. This will apply to TD rate limits on new claims, as well as claims over two years old (due to the bump-up statute), provided the two year cap has not been reached for injuries on or after 4/19/04. So, mark you 2008 calendar for these coming increases in TD rates.

The increase in SAWW also increase payments on life pension awards for injuries on or after 1/1/03.

Don’t be Delinquent. Effective May 26, 2007, new administrative penalties went into effect. Here’s how it works:

The DWC shall monthly submit report cards (actually, copies of decisions, findings and awards of Labor Code Section 5814 violations) to the Audit Unit. Reporting of multiple such violations by a claims administrator at a single adjusting location may prompt an investigation, consisting of an audit of claims and/or utilization review files. The AD may then issue a Notice of Assessment for delay of benefits. These assessments range from $1,000 up to $15,000, depending on the benefit delayed.

Repeat violations earn a return trip to the “Principal’s Office” for:

One Swat: $30,000 fine for unreasonable delay or failure to comply with existing compensation order;

Two Swats: $100,000 fine where AD finds a general business practice of compensation delay.
Fines are doubled and tripled for reoccurrence within five years, up to $400,000 for a single Order.

That’s pretty steep tuition. Fortunately, penalties may be mitigated by a showing of such factors as: the consequences of the violation, good faith of claims administrator, first offense defense, and size and duration of claims adjusting operation. Also, an Appeal may be filed, followed by a hearing and Determination and Order, which itself is can be appealed to the WCAB.

Utilization Regulations Adopted

Claims examiners beware!

Finally, just before school let out, the “Principal” (Administrative Director) adopted regulations governing Utilization Review (UR). The Section 9792 Regulations take effect immediately (no rest for the weary). The Regulations provide for periodic investigation of claims administrators every five years, UR review organizations every three years, and “target investigations” in the interim where prompted by complaints about UR to the Administrative Director (AD). Upon receipt of a “Notice of Utilization Review Investigation” the claims administrator is required to transmit all requested records to the AD within fourteen days (similar response is required by a UR review organization when they receive a Notice). A further “Notice of Investigation Commencement” may issue fourteen calendar days prior to the on-site investigation. (Special Target Investigations require response and production of documents within ten business days).

Numerous fines “shall be assessed” for a variety of compliance violations (Regulation 9792.12), ranging up to $50,000.00 for failure to establish a UR plan, and up to $400,000.00 for repeated failure to meet UR compliance performance standards. For claims administrators, specific penalties apply for failure to timely approve, modify, or deny requests for authorization, or for tardy notification of need for additional material.

Summons to Principal’s Office

Following an investigation, the AD may issue an Order to Show Cause Re: Assessment of Administrative Penalty (Reg. 9792.15). The claims administrator or review organization shall have thirty days to file an answer contesting any of the asserted UR violations with the AD. Within sixty days of the Order to Show Cause, the AD shall notice a hearing. Following an evidentiary hearing, the AD shall issue a Determination and Order Assessing Penalty, if any. Appeal may be filed within thirty days.

Well, just when we thought it was safe to go in the water, based on the new Regulations it looks like it might be time for summer school. Ugh! Yes, there are sharks in the water. But, better to be aware than to dive into unknown waters.

We hope this news and update will help you to be prepared, and allow you to enjoy the summer season.

Need Assistance? Are you interested in having M&F attorneys design a customized training or claim review round-table meeting for your office? We'd be happy to provide on-site assistance as required to help you meet the challenges of today's claims administration issues, and to assist you in complying with all regulatory guidelines. Contact us today at education@mulfil.com for further details or to schedule a seminar!
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DISCLAIMER — The purpose of this e-mail is to review the latest developments in workers' compensation law and related issues which may be of particular interest to the workers' compensation community. The information contained herein has been abridged from various sources and should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.