State News

The Texas Third Court of Appeals issued its opinion in the lead Texas air ambulance case on January 31, 2018.PHI Air Medical, LLC v. Texas Mutual Insurance Company, Hartford Underwriters Insurance Company, TASB Risk Management Fund, Transportation Insurance Company, Truck Insurance Exchange, Twin City Fire Insurance Company, Valley Forge Insurance Company, et al., No. 03-17-00081-CV, (Tex. App.—Austin Jan. 31, 2018, no pet. h.).

The court of appeals’ opinion reverses the trial court’s judgment in favor of the carriers and remands the case to the trial court for further proceedings.  The court of appeals held that the federal Airline Deregulation Act (ADA) preempts Texas’ workers’ compensation laws that regulate reimbursement to air ambulance carriers.  The court also held that the McCarran-Ferguson Act (MFA) does not prevent ADA preemption in this case.  Whether the MFA applies to prevent inadvertent federal preemption depends on whether the state laws regulate the “business of insurance.”  The court held that the Texas statutes that direct workers’ compensation carriers how much to reimburse health care providers do not regulate the “business of insurance,” although the basis for that decision is not entirely clear.           

The U.S. Supreme Court has held that state laws that prescribe the terms of the insurance policy directly regulate the “business of insurance.”  The carriers argued that Texas’ workers’ compensation laws do precisely that in this case.  The terms of the workers’ compensation policy are literally the Workers’ Compensation Act and Division rules.  Workers’ compensation carriers are required to use a standard policy written by the Texas Department of Insurance which provides that carriers must pay the benefits required by the workers’ compensation law.  The policy itself is only two pages long because it incorporates Texas’ workers’ compensation laws.  Thus, the state actually writes the terms of the workers’ compensation policy which the U.S. Supreme Court has recognized falls squarely within the business of insurance.     

The court of appeals’ opinion leaves numerous unanswered questions including the Division’s authority to decide air ambulance fee disputes if it can’t apply its fee guidelines to determine reimbursement; the standards to be applied to determine reimbursement in the absence of the Division’s fee guidelines; and whether the carriers have any obligation to pay more than the amount provided by the Division’s fee guidelines since that is all they are contractually obligated to pay under their policies.

The insurance carriers will likely file a motion for rehearing with the court and if necessary, a petition for review in the Texas Supreme Court.  The federal preemption issue is also pending in federal district court in Austin in the case of Air Evac EMS, Inc. v. State of Texas, Ex Rel. Department of Insurance, Division of Workers' Compensation et al.  Briefing in that case is currently scheduled to end May 7, 2018.

-James Loughlin, Stone Loughlin & Swanson, LLP.

Arlington physician Arnold J. Morris, M.D. has failed – again – in his effort to enjoin the Texas Medical Board from attempting to discipline him for allegedly over-prescribing medications. The United States Court of Appeals for the Fifth Circuit has affirmed the district court’s dismissal of Dr. Morris’ lawsuit against the Board. The decision would appear to clear the way for the Board to resume its disciplinary action against him.

In his request for an injunction to stop the Board proceeding, Dr. Morris had enlisted the help of State Representative William Zedler, District 96 (R-Arlington). According to the report of the U. S. magistrate judge, at a hearing on his motion for a preliminary injunction Dr. Morris called Representative Zedler as a witness to support his claim that the complaint against him was “ginned up.”  That testimony reportedly revealed that Representative Zedler had called and emailed the Board president about the Board’s investigation of Dr. Morris. 

Apparently this is not the first time that Representative Zedler has intervened on behalf of doctors who were investigated by the Board. According to the “Ethics Explorer” section of theTexas Tribune, Representative Zedler previously has requested confidential records from the Board in order to assist doctors who were being investigated and at least two of the doctors, who were not his constituents, had contributed to his campaign.

- David Swanson, Stone Loughlin & Swanson, LLP.

March 1, 2018  is the deadline by which insurance carriers must begin using the new and improved versions of Plain Language Notices (PLNs). The Division of Workers’ Compensation revised the notices in September 2017. Use of the revised forms was optional prior to March 1 but now is mandatory and use of the old forms is a potential administrative violation.

Ever seen an administrative violation from the Division of Workers’ Compensation and wondered how in the world it came up with the amount of the penalty? So have we. But that may be about to change. The Division is in the early stages of drafting amendments to rules that will require a change to its procedure for assessing such penalties. The amendments to Rule 180.8 and 180.26 will, among other things, require the Division to explain the factors it considered in determining the amount of the penalty. 

The amendments are in response to changes to Labor Code §415.021 that became effective September 1, 2017. Those legislative changes apparently were prompted by concerns from system participants that the Division’s determination of penalty amounts was arbitrary.  

The Division has posted informal working drafts of the amendments on its website. It is seeking comment on the drafts through March 7, 2018. You may send an email to InformalRuleComments@tdi.texas.gov to comment on the drafts.

- David Swanson, Stone Loughlin & Swanson, LLP.

Telemedicine is catching on. The Division of Workers’ Compensation is accepting public comment on a proposed rule that would expand its use in the workers’ compensation system. 

Broadly defined, telemedicine is a doctor’s use of a video system to examine a patient in a different location. It is already permitted in the Texas workers’ compensation system to some degree. Currently, however, it is limited to “underserved” areas – typically rural regions with insufficient access to health care providers. Proposed Rule 133.30 would eliminate this restriction and allow the use of telemedicine anywhere in Texas. 

The potential effects of this change are significant. For example, suppose – just suppose – that there was a chiropractor in Dallas to whom Claimant attorneys routinely referred their clients because the chiropractor was perceived to be Claimant-friendly, liberally prescribing treatment and doling out off-work slips. Would this proposed rule tempt Claimant attorneys in other cities to refer their clients to this chiropractor as well? Would the chiropractor in Dallas become the treating doctor for workers living in Waco, Tyler, and Abilene as a result? Only time will tell.

Proposed Rule 133.30 is scheduled to be published on the Division website by March 2, 2018. The Division will be accepting comments on the proposed rule through April 2, 2018. You may comment on the rule by sending an email toRulecomments@tdi.texas.gov.

-David Swanson, Stone Loughlin & Swanson, LLP.

A Houston couple has been indicted by  the Department of Justice, which  alleges  that the pair fraudulently billed the  federal government millions of dollars  for compound cream medications for injured workers.   
 
George and Marene Tompkins ran Piney Point Pharmacy on Fondren Road in Houston. They have been charged with conspiring to obtain illegitimate prescriptions for compound creams for which they billed the Department of Labor under the Federal Employee Compensation Act  (FECA), which is the federal workers’ compensation program. The couple allegedly billed the federal government over $23 million for those compound creams from 2009 to 2016. 

On February 21, George and Marene  appeared before a U.S. magistrate judge and entered pleas of not guilty. If convicted of the charges against them they reportedly face up to 20 years in federal prison. 

Piney Point Pharmacy specialized in compounding. George referred to himself as the “Compound King” on the pharmacy’s website and the pharmacy’s tagline was “Special Meds for Your Special Needs.”

- David Swanson, Stone Loughlin & Swanson, LLP.

The Associate Attorneys at Cousineau, Waldhauser, & Kieselbach have prepared case summaries of all WCCA decisions issued between October 2017 and January 2018. Please click the link below to view the summaries or see the "Resources" section of the CWK website.

http://cwk-law.com/workers-compensation-court-appeals-wcca-summaries-october-2017-thru-january-2018/

The summaries were prepared by attorneys Parker Olson, Scott Ferriss, Bryan Wachter, and Megan Oliver.

 In our effort to provide you with key up to date information on Minnesota Workers’ Compensation law and cases, we hope that you will find this to be helpful. Contact shareholder Thomas P. Kieselbach with your feedback and requests.

Jennifer Fitzgerald, shareholder at Cousineau, Waldhauser, & Kieselbach, P.A., will be presenting on Traumatic Brain Injuries (TBIs) on April 3, 2018 at the Golden Valley Country Club in Golden Valley, MN. Dr. Nathaniel Nelson, a neuro-psychologist will be the featured speaker.

The seminar is organized by Anderson Insurance and Investment Agency (DBA Minnesota Comp Advisor). CWK is a sponsor of this event.

The seminar is for professional in risk management, insurance, human resources, loss control, accounting/financing and safety. If you are interested in attending contact Mary Wells or click the link below for more information:

http://cwk-law.com/wp-content/uploads/2018/02/Traumatic-Brain-Injuries-Seminar-CE-Invite.pdf

 Jennifer Fitzgerald is also listed in "Best Lawyers in America".

Written by: Kyla K. Block

Workers’ compensation employers’ subrogation lien rights have received attention in recent years in the appellate courts. The North Carolina Supreme Court recently issued an opinion in Easter-Rozzelle v. City of Charlotte which clarified the impact of a third party settlement made without the written consent of the employer on the workers’ compensation claim, claimant’s entitlement to benefits, and the employer’s resultant lien.

David Easter-Rozzelle sustained compensable injuries while working for the City of Charlotte (hereinafter “the City”). The City requested he obtain an updated work note and on the way to pick up the note, Mr. Easter-Rozzelle sustained injuries in a motor vehicle accident (“accident”).  After the accident, Mr. Easter-Rozzelle notified his supervisor and reported the accident to the City’s personnel office.

Mr. Easter-Rozzelle hired a personal injury attorney and settled the personal injury claim.  The settlement proceeds were disbursed without any reimbursement to the City.  Likewise, there was no Superior Court order eliminating the City’s lien and no Industrial Commission Order allowing distribution of the funds, as required under N.C.G.S. §97-10.2. Additionally, Mr. Easter-Rozzelle’s personal injury attorney alleged he was not “at work” when he sustained his injuries and the personal health insurance carrier should be responsible for those bills.

At the worker’s compensation mediation, Mr. Easter-Rozzelle’s workers’ compensation attorney first learned Mr. Easter-Rozzelle was injured while traveling to see his authorized treating physician. The attorney ultimately requested a hearing due to the City’s denial of the accident on the grounds that the City did not have notice of the accident and because Mr. Easter-Rozzelle reached a settlement with a third party and distributed funds without preserving the City’s lien.

The Deputy Commissioner found for the City, holding Mr. Easter-Rozzelle had no right to recover additional compensation from the City when the third-party settlement funds had already been disbursed.  The Full Commission reversed, concluding that the City had sufficient actual notice of the accident and subsequent injuries, and should have “at a minimum” investigated whether the accident was compensable under the Act.  The Full Commission also found the City was entitled to a statutory lien on recovery from the third-party proceeds of the personal injury claim, once the subrogation amount was determined by the parties’ agreement or by a Superior Court judge.

On appeal to the Court of Appeals, the City argued the Full Commission erred in concluding Mr. Easter-Rozzelle was entitled to recover additional compensation from the City for injuries sustained in the third-party accident when the settlement amount had already been disbursed in violation of N.C.G.S. § 97-10.2.  The Court agreed, holding where an employee is injured in the course of his employment by the negligent act of a third party, settles with the third party, and the proceeds of the settlement are disbursed in violation of N.C.G.S. § 97-10.2, the employee is barred from recovering compensation for the same injuries from his employer in a proceeding under the Workers’ Compensation Act.

The Supreme Court reversed, finding the Court of Appeals erroneously relied upon cases that had been superseded by statute and as such, misinterpreted the Act.  The Supreme Court held that an employee who: (1) had been injured at work; (2) was on his way to see his approved treating physician; (3) was injured again in an auto accident during the trip; (4) notified his employer of the new accident; and (5) settled with the third-party tortfeasor without notifying his employer was not barred from receiving workers’ compensation benefits.  The Court noted that an employer’s lien interest in third-party proceeds is mandatory, so there was no windfall to the employee because the employer is entitled to recover the amount of its lien by means of a credit against the employee’s ongoing workers’ compensation benefits.  The Court noted that N.C.G.S. § 97-10.2(j) contains no temporal requirement, and that either party may apply to the Superior Court judge to determine the amount of the employer’s lien.

The Court further highlighted that the City received actual notice of the accident, and as a result, had an opportunity to promptly investigate the claim and determine its compensability.  Had the City done so, it would have discovered Mr. Easter-Rozzelle had suffered compensable injuries, and it could have participated in the settlement process.

Risk Handling Hint: Employers need to communicate with their TPAs and carriers regarding notice of accidents, especially car accidents, which they think may be related to the workers’ compensation claim. Likewise, carriers and TPAs need to communicate with their contacts at employers and proactively ask whether there are any accidents after the date of injury, what the circumstances are, and whether there is additional liability or exposure.

Brian Sims suffered a terrible injury working for Express Scripts, Inc. (hereinafter ESI) on August 24, 2015 when his hand was caught in an industrial machine, leading to the amputation of his left hand and wrist.  He brought a civil law suit against his employer alleging willful and intentional conduct.  Express Scripts moved to dismiss the complaint as barred by the exclusive remedy rule in the Division of Workers’ Compensation.

In evaluating the motion to dismiss the complaint, the Court noted that plaintiff did allege that the conduct of defendants was intentional by altering or removing safety features or permitting the non-existence of safety features.  The Court said, “Plaintiff makes only conclusory statements that ESI acted ‘knowing with substantial certainty’ that injury would result from its actions; he alleges no facts or circumstances to support that claim. . . “  The Court added that plaintiff failed to indicate what specific safety features were missing, who altered or removed them, and how these safety features might have prevented Plaintiff’s injury.  The Court said, “Plaintiff’s mere recital of a requirement of the ‘intentional wrong’ exception cannot survive ESI’s motion to dismiss.”

The Court said it was not enough to just allege that a safety guard was missing:  “Here, Plaintiff has not identified what specific safety device was allegedly removed or altered and for what reason, nor that ESI was ‘substantially certain’ that injury to its workers would occur as a result of such conduct.”   The Court noted that removal of a safety device standing alone does not equate to “intentional wrong.”

The Court granted ESI’s motion to dismiss without prejudice, allowing plaintiff one more opportunity to provide a factual basis for the alleged intentional harm allegations.

This case underscores a strong theme in New Jersey case law, namely that it remains extremely difficult to surmount the exclusive remedy hurdle in this state.  It is not enough to file a complaint that provides the magic words regarding substantial certainty to cause injury.  One must provide factual support for the allegations or risk having the case dismissed.

This case can be found at Sims v. VC999 Packaging Sys., D. N.J. (January 24, 2018).

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John H. Geaney, Esq., is an Executive Committee Member and a Shareholder in Capehart Scatchard's Workers’ Compensation Group.  Mr. Geaney concentrates his practice in the representation of employers, self-insured companies, third-party administrators, and insurance carriers in workers’ compensation, the Americans with Disabilities Act and Family and Medical Leave Act. Should you have any questions or would like more information, please contact Mr. Geaney at 856.914.2063 or by e‑mail at jgeaney@capehart.com.