State News

A new BRC pilot program has been implemented in the Dallas field office wherein the parties are
put into different rooms and the BRO shuttles between rooms to facilitate potential agreements as
to the issues. Given that BRCs are typically allotted only 45 minutes, it will be interesting to see
if this type of mediation, which is called “caucus based,” is more effective than what the parties have
come to expect after 25 years of practice before the Division.

The much awaited coding change from ICD 9 to ICD 10 is finally here. It is hard to say what
impact it will have on adjusters and other system participants, but change of any kind has unintended
consequences. And many of us are, frankly, resistant to change! One obvious difference is that
diagnoses will now be even more specific, resulting in more care being taken in evaluating initial
claims of injury. And evaluating extent of injury issues, and the relationship between disability and
the accepted or disputed claimed diagnoses,will require an even higher level of expertise. ICD 10
codes can be accessed on the internet, and we will be keeping the sites busy. There are several
sites, such as www.icd10data.com/Convert that provide crosswalks between ICD 9 codes and ICD
10 codes and descriptions for the new codes.
Here are a couple of entertaining examples of the trend toward specificity: W51.XXA: Accidental
striking against or bumped into by another person, V97.33XD: Sucked into jet engine, subsequent
encounter, S10.87XA: Other superficial bite of other specified part of neck, initial encounter, R46.1:
Bizarre personal appearance. Over time you may be lucky enough to see one of these in a comp
case. After all, there are now well over 60,000 codes in ICD 10, compared to around 13,000 codes
in ICD 9.

Vincent Burley was a resident of Georgia, and in May 2000, U.S. Foods, Inc. offered him employment as a delivery truck driver.  This offer of employment was extended by letter, which Mr. Burley signed.  He was in South Carolina when he signed the offer letter and was assigned to South Carolina by the company.  His responsibilities as a delivery truck driver included deliveries in Georgia and South Carolina, but no travel to North Carolina.  In 2002, U.S. Foods merged with another company and stopped operating in South Carolina.  U.S. Foods gave Mr. Burley the option of either terminating his employment and receiving a severance package, or transferring his assignment and supervision to North Carolina.  He elected to transfer to North Carolina.  After the transfer, Mr. Burley made deliveries to different customers and earned more money, but still never had any deliveries in North Carolina.  On September 23, 2009, he suffered a back injury during a delivery in Georgia.  His claim was accepted under the Georgia Workers’ Compensation Act and he received benefits for the injury.  On July 8, 2011, Mr. Burley filed a claim for benefits with the North Carolina Industrial Commission.

After the hearing, the Deputy Commissioner held that the Commission did not have jurisdiction over the claim.  The Full Commission affirmed, and the Court of Appeals reversed.  The Court held that Mr. Burley’s transfer to the North Carolina division involved modification of his employment contract, which was enough to find that a contract was “made” within North Carolina for purposes of establishing jurisdiction.  There was a dissent by Judge Dillon noting that the modification of the employment contract was insufficient for the Commission to have jurisdiction. 

The Supreme Court reversed the Court of Appeals holding that modification of an employment contract does not change the location of that contract.  The Court indicated that there can be only one contract of employment.  The Court noted that once an identifiable site has been established and there has been an offer and acceptance of the employment contract, that location will be used for purposes of jurisdiction regardless of subsequent contract modifications.  The Court further noted that N.C.G.S. § 97-36 included plain language regarding where a contract for employment was “made” and not where the contract was “modified.”

In this case, Mr. Burley executed his contract in South Carolina when hired by U.S. Foods.  The Court held that the subsequent internal transfer of supervision and assignment failed to establish a new employment contract, and the site of the original contract controlled for jurisdiction.  The Court characterized Mr. Burley’s situation as a mere internal transfer of supervision without a change in work capacity.  Justice Hudson dissented, noting that the Court’s holding barred jurisdiction even where there were substantial modifications to the employment contract and employment relationship.  Judge Hudson noted that this went against the spirit of the North Carolina Workers’ Compensation Act to be liberally construed to provide benefits to injured employees.  Instead, Judge Hudson saw the modification as establishing a new employment contract based on the facts of the case, thus changing the location of the contract to North Carolina for purposes of jurisdiction.

Risk Handling Hints:  The decision in Burley seems to establish that, short of a drastic modification of the employment contract, there will be only one location for purposes of jurisdiction.  The location where the employment contract was made, once “identifiable,” will be the site for jurisdiction.  The Court did not outline specific factors to consider when determining whether a modification is significant enough to establish a new employment contract.

Cases in the Third Circuit Court of Appeals have great importance for New Jersey employers in connection with the FMLA.  The case ofHansler v. Lehigh Valley Hosp. Network, 790 F.3d 499 (2015 U. S. App. LEXIS 10444) (3d Cir. June 22, 2015) is worthy of study.  It involved a technical partner who was hired in 2011 and began to have shortness of breath, nausea, and vomiting in 2013.  The cause of these symptoms was unknown at the time she submitted her medical certification for intermittent leave under the FMLA.  The medical certification form requested intermittent leave at a frequency of two times weekly starting March 1, 2013 and lasting for a probable duration of one month – or until April 1, 2013.

Hansler was unable to work on March 13, 14, 23, 24 and 25.  Lehigh Valley terminated her employment at the end of her shift on March 28, 2013 for excessive absenteeism.  The hospital did not seek further information about the medical certification submitted on March 13^th.   Hansler protested that she had requested FMLA leave but the hospital advised her that her request was denied.  However, Hansler was unaware of this until she got a letter around the last day of her absences.  This letter stated that he leave request was denied because her condition did not qualify as a serious health condition.  In early April 2013 Hansler was diagnosed with diabetes and high blood pressure.  She alleged in her law suit that these previously unknown diagnoses were the cause of her absences.

In her law suit for interference with her FMLA rights, Hansler argued that she had a chronic serious health condition and the hospital failed to allow her seven days to cure the vague certification she submitted. Lehigh Valley countered that a chronic condition must continue over an extended period of time, and one month is not enough.  The District Court agreed with Lehigh Valley but the Third Circuit Court of Appeals reversed in favor of Hansler.  It said there is a difference between a negative medical certification and an incomplete or vague certification in that the latter requires the employer to allow the employee seven days to cure.

The Court gave an example of a negative certification as one in which the medical certification flatly says that the employee is not incapacitated from working.   There would be no need to ask the employee to cure this sort of certification.  But in this case, the court found:

In short, we hold today simply that when a certification submitted by an employee is ‘vague, ambiguous, or non-responsive’ (or ‘incomplete,’ for that matter) as to any of the categories of information required under 29, U.S.C. 2613(b), the employer ‘shall advise the employee . . . what additional information is necessary to make the certification complete and sufficient’ and ‘must provide the employee with seven calendar days . . . to cure any such deficiency.’ 29 C.F.R. 825.305(c). The plain and mandatory language of the statute and regulations requires no less.

The Third Circuit presented the following rationale for its holding: “Rather, because a ‘sufficient certification’ for intermittent leave under 29U.S.C. 2513(b) must address both ‘the expected duration of the intermittent leave’ and the ‘probable duration of the condition,’ and because the certification here failed to specify whether the ‘probable duration of the one month’ referred to the duration of the leave request, the duration of the medical condition, or both, the certification was not a ‘negative certification,’ but was instead ‘vague, ambiguous, or non-responsive,’ meeting the definition of ‘insufficient.’”  In short, the Court felt that the certification was vague in regard to the meaning of duration:  was it the duration of the leave request or the medical condition?

The Court said that Lehigh Valley should have advised Hansler that the certification was insufficient and stated in writing what additional information was required.  In addition, the hospital should have allowed her an opportunity to cure or clear up the ambiguity.  The Court was also critical of Lehigh Valley for not advising Hansler right away that her request had been denied.  The Court concluded, “Faced with nascent symptoms from a yet-to-be diagnosed condition, an employee’s physician may need some additional time to provide the required elements of a certification.”

This case is important because it focuses on a situation where an employer tends to jump the gun in termination decisions.  If in doubt, the employer should allow the seven days to cure unless it is absolutely clear from the certification that the employee is not incapacitated from working and therefore does not have a covered serious health condition. 

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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.  

Florida’s First District Court of Appeal (“1st DCA”) did not agree. It reversed and remanded the case to the JCC to apply theDaubert standard which the JCC had, as described above, declined to do. In its brief opinion, the 1st DCA reiterated the applicability ofDaubert and referred the JCC toBooker v. Sumter County Sheriff’s Office/North American Risk Services, 166 So. 3d 189 (Fla. 1st DCA 2015) for the specifics regarding theDaubert analysis. Given that inBooker the 1st DCA had noted that “[t]he test for admissibility, given its broad application to all manner of expert opinion testimony, must be flexible” and went on to provide “some of the flexible and non-exclusive factors which a judge may consider” (emphasis added), perhaps all the JCC needed to do was say that he consideredDaubert and accepted the employer/carrier’s independent medical examination report as sufficiently trustworthy. It does, nevertheless, appear that the 1st DCA intendsDaubert to be applied in every instance in which an expert’s opinion is not otherwise deemed admissible without its application.

The case of Jose Moreira v. Carlos Peixoto, et. al., A-5741-12T1 (App. Div. September 10, 2015) presents a complex tale of insurance fraud that ends with an important clarification about the lien rights of an employer and the potential challenges to lien calculations by employees.

Jose Moreira was injured working privately on a house owned by a manager of Macedos Construction Company, Inc. (Macedos).  The company (Macedos) fraudulently reported to its workers’ compensation carrier, Virginia Surety Company (VSC) that Moreira was a full-time employee of the company.  In addition to this misrepresentation, Moreira signed a written statement to VSC’s adjuster stating that he was a full-time employee of Macedos who had been hired and injured on the same day, namely October 1, 2005.  Moreira also filed a claim petition asserting that he worked for Macedos when he was injured.  Based on these misrepresentations, VSC paid $260,864 in workers’ compensation benefits for Moreira.

Astonishingly, Moreira next filed a civil law suit against Macedos, alleging that he was a “business invitee” of Macedos on the day of his accident and not an employee.  He settled this case for $3.7 million against Macedos.  VSC filed a counterclaim against Macedos alleging that the company committed fraud under the Insurance Fraud Prevention Act and under the New Jersey Workers’ Compensation Fraud Act.  The jury in the fraud trial exonerated Moreira of fraud, but the jury did find Macedos guilty of fraud under both Acts.  For reasons that are unclear, the jury awarded VSC no damages for the fraud violations.  However, the judge awarded VSC $1,031,330 for counsel fees and trebled that amount under the Insurance Fraud Prevention Act.

Next VSC pressed its subrogation rights against Moreira since he recovered $3.7 million dollars in his settlement with Macedos.  Even though Moreira had filed a claim petition asserting that he was an employee, he raised a rather bold defense.  He contended that since he was not in fact an employee of Macedos, the workers’ compensation lien did not apply.  The judge ruled that Moreira could not have it both ways, stating that since “Moreira was believed to be an employee of Macedos and actually received the workers’ compensation benefits, the lien was valid even though Moreira was not an employee.”  This meant that VSC would be entitled to reimbursement of two thirds of its payments or about $172,877.

On appeal to the Appellate Division, Moreira argued both that he was not an employee and should not have to pay back the lien.  Further, he argued that VSC failed to prove that the medical costs were reasonable and necessary.  The Appellate Division rejected flatly the non-employee argument:

Here, Moreira held himself out as an employee of Macedos when he submitted the written statement to VSC’s adjuster and applied for workers’ compensation benefits.  Although the jury found he did not act fraudulently, he still received workers’ compensation benefits on his representations.  Thus, permitting Moreira to retain the workers’ compensation benefits paid by VSC would allow him to obtain a double recovery to which he had no more right than if he was a legitimate employee of Macedos.  Accordingly, we conclude that VSC has a valid lien on the settlement proceeds.

The next issue which the court considered related back to an important case,Raso v. Ross Steel Erectors, 319N.J. Super. 373 (App. Div.),certif. denied, 161N.J. 148 (1999).  That case focused on what payments are lienable underN.J.S.A. 34:15-40 and held that ordinarily rehabilitation nursing expenses are only lienable if the employer can prove the care benefited the employee and was reasonable and necessary.  Moreira argued that the judge improperly included in the lien calculations non-reimbursable payments made to VSC’s claims administrator and a medical case management company. 

The Appellate Division made a key distinction at the outset between care selected by the employee and care selected by the carrier. “Moreira cannot argue that the workers’ compensation payments VSC made directly to him or to health care providers he selected were not reasonable and necessary to cure or relieve his injuries.”  Having said this, the court went on to discuss the differences between care chosen by the employee or by the employer/carrier:

Because N.J.S.A. 34:15-15 addresses the different issue of what an insurer can be forced to pay, and because an employee should not be able to select treatment providers and accept treatment and then claim it was unnecessary, we decline to extendRaso beyond insurer-selected medical providers.  Moreover, we do not require the insurer to carry its burden regarding insurer-selected providers until the plaintiff provides some evidence, such as a medical report or medical witness as inRaso, that the treatment was unnecessary, which Moreira did not do here.

In essence, the court held that as to care selected by Moriera, those bills could not be questioned at all regarding reasonableness and necessity.  As to care selected by the carrier, Moreira must first offer evidence that the treatment was not necessary before he can challenge the reasonableness and necessity of the care. 

Lastly, the court remanded the case for a determination of whether VSC included non-reimbursable payments made to VSC’s claim administrator and a medical case management company in calculating the lien amount.  The court cautioned, “Just as ‘medical expenses’ under N.J.S.A. 34:15-40(b) should not include the salaries an insurer pays its employees for administrative work, it also should not include the fees the insurer pays an outside entity to do outsourced administrative work.”

This case is important for many reasons, and it is regrettable that it has not been published.  It offers one of the few serious discussions of theRaso case in regard to when an employee can challenge the reasonable and necessary standard with respect to lien inclusion.  It sets a new distinction between care chosen by the employee and care chosen by the carrier.  The case also provides a warning to employers to be careful not to include administrative charges in lien calculations.  For this reason, claimants’ and plaintiffs’ counsel routinely ask for a breakdown of the lien calculations to make sure the lien numbers are valid.  The case is also helpful in discussing two parallel fraud statutes, namely the Insurance Fraud Prevention Act and the New Jersey Workers’ Compensation Fraud Act.

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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.  

PENNSYLVANIA EDITS IMPAIRMENT RATING EVALUATIONS

By Kevin L. Connors, Esquire

“We cannot solve our problems with the same thinking we used when we created them”, citing Albert Einstein.

On September 18, 2015, the Pennsylvania Commonwealth Court invalidated an Impairment Rating Evaluation that had been conducted under Section 306(a.2) of the Pennsylvania Workers’ Compensation Act, concluding that the Impairment Rating Evaluation at issue was invalid, as the IRE had been conducted under the Sixth Edition of the AMA Guides to the Evaluation of Permanent Impairment, when the IRE was not conducted in reliance upon the “most recent edition of the American Medical Association’s Guides to the Evaluation of Permanent Impairment’’, when the “most recent edition” of the AMA Guides, when Section 306(a.2) of the Act was enacted, in 1996, was the Fourth Edition, not the Sixth Edition, which is the most current, or, if using English literally, is the “most recent” edition of the AMA Guides.

WTH?

The case decided by the Commonwealth Court was Protz v. WCAB, decided on September 18, 2015.

The Opinion was written by the President Judge, Pellegrini.

The undisputed facts were that the Claimant was injured in 2007, that her injury involved an injury to her right knee, that she initially received temporary compensation benefits, followed by a suspension of compensation benefits when she returned to work, and a subsequent reinstatement of her workers’ compensation benefits, due to a recurrence of her work injury.

Consistent with Section 306(a.2), the Employer requested that an IRE physician be designated, with the designated IRE physician then finding that the Claimant’s Impairment Rating was 10%, in reliance upon the Sixth Edition of the AMA’s Guides to the Evaluation of Permanent Impairment.

A prior IRE of the Claimant, performed in 2009, resulted in the determination that the Claimant had not reached maximum medical improvement, with the Employer filing a Notice of Change after the Claimant’s second IRE in 2011.

In response to the Notice of Change, the Claimant filed a Petition to Review, claiming that her injury had been incorrectly described, as well as challenging the unilateral conversion of her temporary total disability benefits.

The Claimant’s Review Petition was ultimately granted, with the Workers’ Compensation Judge finding that the Employer was not entitled to automatically convert the Claimant’s total disability benefits to partial disability benefits, resulting in the Notice of Change being set aside.

The Employer then filed a Modification Petition, seeking to convert the Claimant’s temporary total disability benefits to temporary partial disability benefits.

The Employer’s Petition was ultimately granted by the Workers’ Compensation Judge, finding the Claimant’s Impairment Rating was less than 50%, resulting in the Claimant’s compensation benefits being converted from temporary total to temporary partial disability benefits.

The Claimant appealed that Decision to the Appeal Board, with the Appeal Board affirming the Judge’s Decision, finding that constitutionality challenges to Section 306(a.2) had been addressed by the Commonwealth Court inJohnston v. WCAB, 982 A.2d 1253 (Pa. Cmwlth. 2009), in which it had been determined that the Claimant’s constitutional rights to due process were not violated by IRE procedures.

The Claimant next appealed to the Commonwealth Court, challenging the constitutionality of Section 306(a.2) of the Act, arguing that it was an unconstitutional delegation of legislative authority.

In support of Claimant’s constitutional challenge, the Claimant argued that the “most recent” edition of the AMA Guides was the Fourth Edition when the Act was amended to allow IREs, and that the AMA Guides had undergone two revisions since the Fourth Edition, with each subsequent edition providing substantially different standards than those set forth in the Fourth Edition, potentially resulting in Claimants, who would have been considered more than 50% impaired under the Fourth Edition, to be less than 50% impaired under the Sixth Edition.

Arguing in support of the validity of the IRE, the Employer argued that the constitutional challenge argument had already been previously addressed by prior Court Decisions, which had decided that Section 306(a.2) did not constitute an unlawful delegation of legislative authority under Stanish v. WCAB, 11 A.3d 569 (Pa. Cmwlth. 2010), as well as underWingrove v. WCAB, 83 A.3d 270 (Pa. Cmwlth.), appeal denied, 94 A.3d 1011 (Pa. 2014).

Determining that the Legislature had failed to prescribe any intelligible standards to guide the AMA’s determination regarding the methodology being used in grading impairment under Section 306(a.2), with the Commonwealth Court finding that Section 306(a.2) was “wholly devoid of any articulations of public policy governing the AMA in this regard and of adequate standards to guide and restrain the AMA’s exercise of this delegated determination by which physicians and WCJs are bound”, the Commonwealth Court held that Section 306(a.2) only requires IREs to be conducted under the “most recent version of the AMA Guides”, in the course of determining a Claimant’s Impairment Rating, and the Court found, in reliance upon that basis alone, that Section 306(a.2) of the Act was unconstitutional, resulting in the IRE in Protz being invalidated.

Determining that Section 306(a.2) lacked a mechanism requiring governmental review of the Guides with the promulgation of supporting regulations, the Commonwealth Court determined that the delegation of Legislative/regulatory authority, in terms of which Impairment Rating Standards should be utilized, was being referred to a private party, the AMA, and not to a governmental agency, in violation of constitutional requirements.

So holding, the Commonwealth Court has issued the following ORDER:

                        “AND NOW, this 18^th day of September, 2015, upon finding Section 306(a.2) of the Workers’ Compensation Act, Act of June 2, 1915, P.L. 736,as amended, 77 P.S. §511.2, added by the Act of June 24, 1996, P.L 350, an unconstitutional delegation of legislative authority insofar as it purports to adopt a new version of the American Medical Association’sGuides to the Evaluation of Permanent Impairment (Guides), the order of the Workers’ Compensation Appeal Board dated May 22, 2014, in the above-captioned case is vacated.  This matter is remanded to the Workers’ Compensation Appeal Board with instruction to remand further to the Workers’ Compensation Judge to apply the Fourth Edition of theGuides in effect when the provision was enacted in adjudicating Derry Area School District’s petition to modify benefits.

                        Jurisdiction relinquished.”

Yes, there was a Dissent, authored by Judge Simpson.  The Dissent argues that the General Assembly delegated initial Impairment Ratings to independent, Pennsylvania-licensed, board-certified, and clinically-active physicians, with the ultimate resolution of the impairment rating issues being determined by impartial Workers’ Compensation Judges after a full adjudicative process.

That is not the complete picture, but certainly one that we would be happy to continue living under.

Judge Simpson’s Dissent begins with the premise that “legislative enactments enjoy a strong presumption that they do not violate the Constitution”, underWingrove.

In reliance thereupon, Judge Simpson argues that the General Assembly delegated the initial determination of Impairment Ratings to impartial, Pennsylvania-licensed, board-certified, clinically-active physicians, and that the AMA itself does not participate in conducting Impairment Ratings under the Act.

Moreover, the General Assembly had provided numerous standards to guide Impairment Rating decisions made by physicians, of which one standard was the most recent edition of the AMA Guides.

For that reason, Judge Simpson did not believe that the legislative deference to the AMA’s professional expertise in periodically updating complex medical standards in the AMA’s Guides amounted to an unconstitutional delegation of legislative power, such that the updated editions should have been legally sufficient to support determinations made by impartial physicians conducting Impairment Rating Evaluations.

No less true, when the Employer must litigate a Modification Petition to support converting the Claimant’s disability benefit status from temporary total to temporary partial disability benefits, the Impairment Rating is simply evidence, in a proceeding ultimately determined by an impartial Workers’ Compensation Judge, concerning impairment issues.

As such, the issue of impairment is a disputed issue, subject to controverting evidence.

A second Dissenting Opinion is authored by Justice Covey, who also did not believe that the Majority had correctly invalidated the IRE inProtz, as Covey argued that the Majority’s Decision directly contradicted and effectively overruled anen banc Decision by the Pennsylvania Commonwealth Court in Pennsylvania Builders Association v. Department of Labor and Industry, 4 A.3d 215 (Pa. Cmwlth. 2010), wherein it was held that the General Assembly would not be expected to enact laws that would keep abreast of every advance in science and invention, as that is an unreasonable burden to impose upon the General Assembly.

So, what do you do now?

Well, in all likelihood, any IREs that are in the pipeline, are ones that were conducted under the Sixth Edition of the AMA’s Guides, because that is what everyone has been doing, as more recent Editions of the AMA’s Guides have come out, the “more recent” Guides have been the ones that have been used by the IRE-designated physicians to conduct IREs.

Who knew?

Well, with kudos to Claimant’s Counsel for a clever procedural argument in Protz, the presumption is that the Protz Decision will be appealed to the Pennsylvania Supreme Court, with it being expected that the Commonwealth Court will be overturned, with the Supreme Court holding that the “most recent edition” is actually what it sounds like, the last in time.

If that is the case, then invalidated IREs under Protz become validated IREs.

In the interim, the Protz Decision would at least support the argument that any IREs to be conducted prior to the Pennsylvania Supreme Court overturningProtz should be done in reliance upon the Fourth Edition, not the Sixth Edition, of the AMA’s Guides, but who actually knows?

At least for the immediate future, until this issue is resolved by the Pennsylvania Supreme Court, theProtz Decision clearly seems to mandate that the validity of an IRE is dependent upon it being conducted in reliance upon the Fourth Edition, and not the Sixth Edition, of the AMA’s Guides.

Who knows if the Fourth Edition is still even available to IRE physicians?

“Those are my principals, if you don’t like them… well, I have others”, citing Groucho Marx.

ConnorsO’Dell LLP

Trust us, we just get it!  It is trust well spent!

We defend Employers, Self-Insureds, Insurance Carriers, and Third Party Administrators in Workers’ Compensation matters throughout  Pennsylvania.  We have over 100 years of cumulative experience defending our clients against compensation-related liabilities, with no attorney in our firm having less than ten (10) years of specialized experience, empowering our Workers’ Compensation practice group attorneys to be more than mere claim denials, enabling us to create the factual and legal leverage to expeditiously resolve claims, in the course of limiting/reducing/extinguishing our clients’ liabilities under the Pennsylvania Workers’ Compensation Act.

Every member of our Workers’ Compensation practice group is AV rated.  Our partnership with the NWCDN magnifies the lens for which our professional expertise imperiously demands that we always be dynamic and exacting advocates for our clients, navigating the frustrating and form-intensive minefield pervasive throughout Pennsylvania Workers’ Compensation practice and procedure.

Employers always struggle with this dilemma:  if a claimant receives an award for knee surgery related to a repair of a torn meniscus, does that mean that future knee treatment for arthritis in the knee must be the responsibility of the employer? This issue arises often when the subject at issue is a possible total knee replacement.  The case ofWake v. Township of Toms River, A-5876-13T2 (App. Div. September 16, 2015) provides guidance.

The petitioner, Jan Wake, received an award for the knee following a surgery to remove the posterior horn and the entire middle portion of the lateral meniscus.  Petitioner had preexisting arthritis in the knee.  The award that was entered in court referred to the work accident causing an “acute exacerbation of bi-compartmental degenerative joint disease.”  Several years later the petitioner reopened the case seeking further treatment related to arthritic problems in the knee. 

 Petitioner argued that the language of the prior order in referring to an “acute exacerbation of bi-compartmental degenerative joint disease” required the Township to accept future knee treatment because the language meant that the underlying condition of arthritis had been worsened.  Petitioner’s expert said that the removal of the posterior and lateral meniscus removed all of the shock absorbers between the two arthritic bones.  That materially exacerbated petitioner’s preexisting arthritis.

Respondent’s expert disagreed.  He said that the petitioner’s need for knee treatment is causally related to the prior degenerative arthritic condition and not the work related injury.  The expert further said that petitioner “would be suffering from the same symptomology had the work-related injury not occurred.”

The Judge of Compensation, the Honorable Ronald Allen, held that petitioner’s knee condition was degenerative in nature and agreed with respondent’s expert that the deterioration in the knee was due solely to advancing arthritis unaffected by the meniscal repair surgery.  The Judge dismissed the claim petition and petitioner appealed. 

The Appellate Division affirmed the dismissal of the case:

It is well settled that a worker seeking benefits based upon increased incapacity bears the ‘burden of proving by a preponderance of the evidence not only the fact of increase but also that it is causally related to the original accident and resulting injury.’

The Appellate Division found that there was sufficient credible evidence to support Judge Allen’s reasoning.

This case is important for employers and defense practitioners because it is widely assumed that if someone with an arthritic knee has work-related surgery to repair a meniscal tear, this automatically means the employer must pay should the knee condition decline and require a total knee replacement.  But total knee replacement is generally due to severe arthritic conditions, not meniscal tears.  Petitioner has the burden of proving that the surgery to repair the meniscus in some way contributed to the worsening of the arthritic condition.  In this case, the language of the prior award did not help the employer because it referred to an acute exacerbation of bi-compartmental degenerative joint disease.  Nonetheless, the employer won no doubt in part to solid testimony from its expert.

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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. 

In the past month three clients have asked what they should do when there is a third party award larger than the comp award and the adjuster needs to pay a permanency award.  For example:  the claimant recovers $750,000 in a third party law suit.  The total medical and temporary disability benefits are $150,000, and the permanency award is 50% of partial total at 2013 rates or 300 weeks at $551 per week for a total of $165,300.  The claimant has already repaid $100,000 minus $750 for costs of suit to resolve the lien on the medical and temporary disability benefits. Now only the permanency award needs to be paid.  Does the adjuster pay the permanency award over 300 weeks or does the adjuster pay one lump sum to the claimant?

            This situation happens quite frequently, and the answer to the question can be found in the case ofOwens v. C&R Waste Material, 76 N.J. 584 (1977).  That case involved an award in workers’ compensation for total and permanent disability benefits; however, the third party recovery was higher than the total workers’ compensation payments.  The employer argued that the payments for permanency should be made over 450 weeks.  The employee argued that the adjuster should pay one third of the permanency amount due in one check. 

First, the New Jersey Supreme Court made clear that in a situation where the third party award is larger than the total workers’ compensation benefits,the employer is relieved of all liability to the claimant, other than to pay the employer’s share of the attorney’s fee in the third party case.  That percentage is usually one third.  That point must be emphasized because it means that the employer is not really paying workers’ compensation benefits in this situation:  the employer is just reimbursing petitioner for counsel fees.

Next, the court dealt with the argument that it is unfair to require the employer to accelerate the permanency payments in one lump sum because the employee might die during the period of the payments of total and permanent disability.  The employer further argued that if the employee should die during the period of permanency payments and not be survived by dependents, then all the employer would have to pay is a contribution to funeral expenses. 

The Supreme Court rejected the employer’s argument:

We disagree and conclude that the legislative intent as expressed in N.J.S.A. 34:15-40 is that the computation of the employer’s pro rata share of the attorney’s fee in the third party recovery should be based on the potential compensation liability from which it has been released and does not depend on the happenstance of whether such liability were to terminate prematurely.

The Court added, “Since the obtaining by the employer of this tangible benefit coincides with the third-party recovery, it follows that the obligation to share legal expenses attributable to that recovery should be satisfied at the same time those expenses are borne by the employee.”

So, let’s go back to the initial example above.  Does the employer pay $551 per week over 300 weeks reduced by two thirds or does it just issue one lump check in the amount of $55,100, which is  one third of $165,300?  Under the rationale ofOwens, the answer is the employer pays one lump sum check for $55,100.  It does not make the payments over a period of 300 weeks.

While it is true that Owens was a claim for total and permanent disability, the rationale should be the same whether the award is for partial or total permanent disability.  The point is that the employer is not paying the employee workers’ compensation benefits.  It is reimbursing the employee for its share of counsel fees, and the Supreme Court felt that this should be done

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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.  

Key City Transport, Inc. and Great West Casualty Co. v. James Delire, Court of Appeals of Iowa, No. 14-1755

 Claimant, James Delire, was hired by Key City Transport as an over-the-road driver and commenced work on May 23, 2008. During his third week, Claimant was injured while unloading large windows.

 Dr. Setter diagnosed Claimant with a severe right shoulder sprain and cervical and thoracic sprains. Dr. Mendel then diagnosed Claimant with a possible slap lesion with a labral injury or impingement. Dr. Mendel proposed arthroscopic surgery. Surgery was performed in February 2009. Following additional treatment and therapy, Dr. Mendel recommended a second shoulder surgery, which he performed in February 2010. Dr. Mendel also performed a right carpal tunnel release, a right cubital tunnel release, a right arthroscopic glenohumeral joint and labral debridement and synovectomy, a right shoulder bio-tenodesis, and another subacromial decompression. Claimant met with Dr. Mendel in August 2010. Dr. Mendel opined Claimant had reached MMI and released him without any work restrictions.

Claimant began to experience pain in his left shoulder from overcompensation. In June of 2011, Claimant was told by Key City to make a ten-hour trip to Michigan. Claimant became upset and emotional. Bitter told Claimant to obtain a letter from a mental health professional opining he was able to drive. Claimant attempted to obtain mental health treatment, but the workers’ compensation carrier did not approve the sought-after treatment. Claimant never performed any work for Key City after this time.

 On June 26, 2011, Claimant filed his arbitration petition for the injury occurring in 2008. On February 12, 2012, Claimant filed a petition for alternate care and requested another appointment with Dr. Mendel. Dr. Mendel recommended another MRI, which revealed a small full-thickness tear of the rotator cuff. Great West denied the claim as not being work related. Claimant followed up with Dr. Mendel, who did not recommend surgery at that time. Dr. Mendel noted Claimant seemed depressed, and Dr. Mendel recommended a psychiatric evaluation. Key City scheduled a psychiatric IME with Dr. Jennisch. Dr. Jennisch concluded Claimant had an adjustment reaction with a combination of depressive and anxious features. Claimant requested Great West authorize mental health treatment, but it was not authorized.

The deputy commissioner issued an arbitration decision in September 2013. The deputy found Claimant’s left shoulder injury was “a sequela from compensating for the right shoulder injury.” The deputy concluded it was not possible to evaluate Claimant’s industrial disability because it was “highly doubtful claimant has actually reached maximum medical improvement.” The deputy awarded running healing period benefits “until such time as the requirements for termination of healing period benefits are met.”

Key City appealed. The appeal decision adopted the arbitration decision except the commissioner recalculated Claimant’s weekly compensation rate. The commissioner explained the record did not contain evidence of any weeks of work representative of Claimant’s earnings, but Claimant had been told that similarly-situated drivers earned $70,000 to $75,000. Thus, the commissioner concluded that claimant’s weekly compensation rate should be based on an annual income of $70,000.

 Key City petitioned for judicial review, challenging the weekly benefit rate, medical causation, and the award of healing period benefits. Claimant filed a crosspetition, challenging the commissioner’s determination of the weekly benefit rate. The district court affirmed the agency’s findings regarding medical causation and the award of healing period benefits. The district court reversed the agency’s calculation of the weekly benefit rate, explaining the process used could not be upheld “as either rational, logical, or justifiable.” The court remanded to the agency “to undertake the proper analysis of the facts contained within the record already made in coming to a proper rate calculation.” Claimant timely appealed, and Key City cross-appealed.

 Key City contends the district court erred in affirming the deputy commissioner’s findings of fact and conclusions of law regarding medical causation and in affirming the deputy’s award of running healing period benefits.  The Court of Appeals emphasizes that the relevant question is not whether the evidence would support a different finding, the relevant question is whether substantial evidence supports the finding actually made. The Court concludes that it does. It notes that Dr. Robin Epp, who conducted an IME, found that Claimant’s cervical and thoracic spine injuries were causally related to his work injury and also that Claimant’s shoulder injuries were linked to the work injury. Also, the agency relied on Dr. Jennisch’s determination that Claimant’s work injury was a substantial factor in causing Claimant’s mental health condition.

 As to the healing period benefits, the Court of Appeals notes that the agency awarded Claimant healing period benefits for several periods, including running healing period benefits from and after June 15, 2011. The agency made the award based on several considerations. First, Claimant did not successfully return to work. His routes were limited in distance. He did not perform loading and unloading. His employer precluded him from driving without a release from a mental health professional. Second, the agency found that Claimant had not in fact reached MMI. The agency found Claimant had physical and mental health conditions untreated and relevant to an industrial disability determination. As such, the Court concludes the agency’s findings on the issue of healing period benefits are supported by substantial evidence and its application of the facts to the law was not irrational, illogical, or wholly unjustifiable. 

Claimant contends the district court erred when it overturned the commissioner’s weekly rate calculation. The Court of Appeals agrees with the district court in finding that the commissioner’s use of hypothetical annual earnings to obtain weekly earnings cannot be upheld as rational, logical, or justifiable when the acceptable methods of determining Claimant’s weekly earnings are set forth by statute. The record does not contain any evidence of the earnings of “other employees in a similar occupation.” Nor does it contain evidence of any representative week “had the employee worked the customary hours for the full pay period in which the employee was injured, as regularly required by the employee’s employer for the work or employment for which the employee was employed.” 

The Court of Appeals therefore affirms the judgment of the district court.

 Call Mark Bosscher or Lee Hook with any questions @ 515-243-2100.  We’d be happy to help, whether it be a quick or a complex issue!