State News : Michigan

Under the heading “It isn’t so bad here in Michigan” or “It could be worse and we are working hard to correct it,” the director of the Michigan Workers’ Compensation Agency wrote an article that was published in the Workers’ Compensation Section Newsletter.
We feel that the article by Jack Nolish does a good job of explaining our current situation and what we have and are doing about it to fairly resolve all disputes.
Below please find Jack’s article reproduced with his permission:

Notes from the Director

By Jack Nolish, Director, WCA

I was born on Friday the 13th. My mother told me it was about high noon. As long as I can remember I have not had a fear of that date. Rather, it has provided some very interesting birthday parties. I am not what you might call a Triskaideka­phobiac. I do not fear the number. However, as of this time, I am confronting a 13 that is really causing me a problem. While Magistrate McAree is now on sick leave for a couple weeks, and after the departure of three of our Magistrates recently to Social Security, we are down to 13 magistrates. We had 26 when I took the bench in February, 2004 and that was a reduced number down from 30. Hopefully, McAree will en­joy a speedy recovery and we will get back to 14 in short order. That number is still short of our now authorized number of 17. The Qualifications Advisory Committee has finished inter­viewing candidates and a new list of potential magistrates has gone to the Governor. You are probably aware, however, that the selection of magistrates is made by the Governor with the advice and consent of the Senate. You are also aware that there has been some difficulty with the Governor’s appointments in the last several weeks so it is difficult to know when the bench will be back to its newly reduced “full strength.” This reduction in magistrate positions is already manifesting itself in docket delays and longer periods to reach decisions in cases. Justice delayed is justice denied for all parties. Even at 17, we will have per magistrate docket loads approaching 1,000 in an era where cases are more complicated than ever.

I do wish to congratulate Ken Birch on his appointment by Governor Granholm to serve as Chair of the Board of Magistrates. As you can see from my remarks above, he is coming in to a challenging environment and I wish him well. I look forward to working with Ken to deal with these dif­ficult times.

Although the number of contested case filings continues to be historically low, there has been a recent influx of over 500 contested case filings due to the Delphi bankruptcy and the re-negotiation of the GM Disability hourly pension plan. It will be some time before these complicated matters will be resolved.

We are trying desperately to weather a perfect storm. The confluence of severe state budget reductions; Social Security’s expansion; and the business community’s unwillingness to support funding the WCA through means other than the state general fund, have combined with the upcoming round of magistrate appointments, to produce a situation where the teeter-totter of the adjudication system docket has tottered. We are now understaffed and there is simply no way to put a positive spin on the situation. The next waive of problems comes soon when 6 of the remaining magistrates are up for re-appointment in the end of January, 2011. The expiration of those terms will create further problems in moving the docket and re-appointment or the making of new appoint­ments for those positions is unlikely to occur for several months. You may have heard that there is an election coming but the new administration will not be in place until the first of the year.

The Agency itself has undergone significant reductions including staffing reduced from a peak of over 200 to the present level of 134. You are well aware of the reduction in fixed hearing sites from 14 to 8 and the reduction of tempo­rary traveling magistrate sites from 9 to 3.

We are in the midst of getting information about those staff electing to take the early retirements. I am aware of 10 but the window for acceptance is open through November 5 and over 40% of our over-all staff is eligible under the plan. We have not been advised about replacement options in terms of replacing one for one or some other ratio. Since we have been operating under years of hiring freezes, we have an aging staff with little in the way of next generation replace­ments. I have been director since 12/05 and I have hired one person as a replacement for a retirement and that occurred a couple years ago.

These factors combine to produce serious erosion in the underlying bed rock of Workers Compensation. The 100 year old fundamental concept of simplified, no-fault entitlement to limited benefits for job related injuries being exchanged for the exclusive remedy protection for employers is jeopar­dized when we cannot adjudicate the rights of the parties in a timely fashion.

These personnel problems notwithstanding, when com­pared to the rest of the nation, Michigan’s Workers’ Compen­sation program continues to have relatively low costs. During this political season, you may hear about business costs in Michigan being a significant barrier to economic develop­ment. As for Workers’ Compensation, the facts do not sup­port such a conclusion.

• In its 2008 biennial nationwide workers’ compensation insurance premium study, the Oregon Department of Consumer and Business Services reported that:

• Michigan was below the national median of all states for workers’ compensation insurance premiums.

• Michigan insurance premiums are significantly lower in cost than Alabama and Mississippi, states that are often mentioned as low cost labor states.

• Based on the 10th Edition of Workers Compensation Research Institute (WCRI) studies, Michigan’s workers’compensation program is described as… “a competi­tive asset for the state…” Michigan is in a study group consisting of Indiana, Wisconsin, Minnesota, Iowa, Ten­nessee, Pennsylvania, Texas, Maine, Florida, California, Maryland, North Carolina and some additional refer­ences to Louisiana, Ohio and Kentucky. The core study group represents some 60% of all WC benefits paid in the country.

• WCRI concludes: “The Michigan workers’ compen­sation system provided a better value proposition for both employers and injured workers.”

• Michigan indemnity costs per claim with more than seven days of lost time that were lower than the study states, including several states that Michigan often competes with for business.

• The average medical cost per claim was 34% lower than the median studied states.

• The duration of disability benefit payment was 5 to 6 weeks shorter than Massachusetts and Pennsylvania; 15 weeks shorter than Louisiana.

• Michigan has lower costs overall as Michigan employ­ers paid 20% less for workers’ compensation costs for an average case than the median of the comparison states (IN; IL; WI; MN; IA; TN and PA. Not in the study but with the same result were KY and OH.)

• Michigan has lower medical costs and utilization per claim than typical when compared to the 14-state study group including lower prescription drug utiliza­tion and costs.

• Medical costs grew at a slower rate than the typical state.

• Michigan WCA has a national leadership role in Elec­tronic Data Exchange (EDI). In its continuing efforts to cut operational costs and improve customer service:

• We have six insurance groups currently (represent­ing 10 individual insurance companies) filing various mandated insurance forms electronically, including the Accident Fund (the state’s largest writer of work­ers’ compensation policies).

• When fully implemented next year, approximately 50% of all insurance filings received by the agency will be electronic. Last year, we had 293,964 such filings. Over the last 4 years, we have gone from 0% to 36% electronic. Since we have over 200 companies writing WC coverage in Michigan, those that write relatively few policies will still need to have a paper filing option available.

• Now in the works is the implementation of systems for electronic filing of claims information. Please remember, however, that we are working with a COBAL programmed mainframe computer system that is some 20 years old.

• The Health Care Services division, now down to only two people, is developing a web-based system for filing of the Annual Medical Payment Report and the renewal of the Certification of a Carrier’s Professional Health Care Review Program. This will reduce paperwork and staff requirements once it is operational. I think many of you know, however, that getting a new system operational can present “challenges.” Our cost containment rules and process continues to be a successful tool in keeping medi­cal costs well under control.

• CMS, Medicare, continues to be a significant cost fac­tor in terms of both time and money. Although the total number of cases delayed awaiting resolution of CMS issues has gone down for the first time since we started tracking the numbers, in 2010 as of 9/9, over $9,000,000 has been placed in set-aside accounts and conditional payment reimbursements have totaled over $350,000. These payments have occurred in 642 of the 4,204 redemptions that occurred in the time period and are in percentage equivalent of what we have seen in the last three years of tracking.

• We have been advised that CMS will have a new contractor in place in about 2 months that will be handling the set-asides and conditional payments. I suspect there will be some transitional issues but hope things will move smoothly.

• The new contractor is: “Medicare Secondary Payer Recovery Contractor” found by Googling MSPRC.

Lastly, in the good news/bad news column is the fact that since we began using the state Average Weekly Wage in 1982 as a factor in the determination of weekly wage loss benefits, the AWW has gone down from the 2009 figure of $834.79 per week to 2010 figure of $828.73. This has resulted in a reduction in the maximum weekly benefit rate being capped at $748, down from $752. This is good news for those pay­ing weekly benefits, not so good for those entitled to receive them. WCRI has reported that our rate capping system has resulted in Michigan injured workers’ benefits being lower than what they would be in other states in about 1/3 of our cases.

The Workers’ Compensation Agency and indeed Workers’ Compensation itself faces significant challenges in the com­ing years. It will be several months before the new adminis­tration comes into office and whatever impact that may have becomes evident. At this juncture, we do not know if there will be any restructuring or other significant changes. Stay tuned …

Gallup v Jackson County Road Commission, 2010 ACO #102

This is a new decision from the Workers’ Compensation Appellate Commission regarding the specific proofs required under Stokes v Chrysler, LLC, 481 Mich 266 (2008).  Magistrate Goolsby issued an open award of benefits for left knee and right shoulder injuries.

On appeal, the Commission affirmed the finding of the right shoulder injury.  However, it reversed the award of wage loss benefits on the premise that the plaintiff failed to establish “disability.”  The Commission stated:

“The plaintiff’s proofs focused on his ability or inability to perform his past jobs instead of focusing on his transferable skills.  The plaintiff needed either vocational testimony or additional lay testimony to establish the universe of jobs he is qualified and trained to perform…[b]ecause the plaintiff failed to prove the universe of jobs he is qualified and trained to perform, he necessarily also failed to prove his work-related injury prevents him from performing those jobs.  While the plaintiff could have gone a long way in establishing disability by conducting serious job search efforts, the record is also lacking in those proofs.  Accordingly, we reverse the award of wage loss benefits.”

This case again reaffirms that Stokes has established that vocational proofs are a necessary part of Michigan workers’ compensation litigation, and that the burdens considered by the Stokes decision must be addressed in all cases.  While it is the plaintiff’s burden to establish the “universe of jobs” that he or she is qualified to perform, it is also important for the defense to obtain expert vocational opinions regarding, among other things, the availability of those jobs.

Update on Trammel

The Michigan Court of Appeals and the Michigan Supreme Court have now denied Leave to Appeal in the Trammel case, and the WCAC’s decision is now final.  The Michigan Supreme Court also denied a Motion for Reconsideration.  A concurring opinion written by Justice Corrigan acknowledged that the WCAC’s opinion may ultimately authorize “more benefits than the Legislature intended for workers claiming limb loss” under MCL 418.361(2), particularly in light of the increasing success of joint replacement surgery.  However, she believed that these concerns were best addressed through the Legislature and not through the judicial system.

The Michigan Supreme Court recently denied leave in two cases – Harvlie v Jack Post Corp and Mansour v AZ Automotive – that involved the award of attorney fees on medical bills.  The cases were held in abeyance following the outcome of Petersen v Magna Corp.  Leave was denied because the majority of the Court was not persuaded that, after Petersen, there were any questions presented that warranted review by the Court.

Three of the Justices disagreed with the decision to deny leave because Petersen held that the Magistrate “may” award attorney fees on medical without providing a workable standard under which such an award is proper or improper.

Specific Loss Award Kicks In After Knee Replacement Surgery

Timothy Trammel reported a left knee injury while working for Consumers Energy in June of 1984.  Following arthroscopic surgery, he returned to work without restrictions and then reported a second left knee injury occurring on December 12, 2005.  He underwent a total knee replacement surgery on April 12, 2006 and returned to unrestricted employment for Consumers Energy less than two months later.  He eventually retired from active employment in October of 2007.

The plaintiff was awarded specific loss of the left leg by Magistrate Decker because the deterioration of the left leg prior to the knee replacement was “tantamount to amputation.”  The Workers’ Compensation Appellate Commission then issued an en banc decision on June 8, 2009 affirming the specific loss award.  Trammel v Consumers Energy Company, 2009 ACO #126.  Both the Magistrate’s and the Appellate Commission’s decisions were based upon an interpretation of the recent Michigan Supreme Court case of Cain v Waste Management, Inc, (after remand), 472 Mich 236 (2005).

Plaintiff Cain suffered an industrial accident resulting in the amputation of his right leg, along with a severe crushing injury to his left leg which was “saved” with extensive surgery and bracing.  Plaintiff claimed permanent and total disability under Section 361(3)(b) for the one amputated leg and the other non-amputated leg.  The Michigan Supreme Court awarded Permanent & Total disability benefits on the basis of plaintiff’s “uncorrected” status to the left leg.  They also ruled that the “uncorrected” status should be applied in determining whether an individual has incurred a specific loss of the leg.

Subsequent to the Cain decision, there have been numerous Applications for Hearing filed in cases involving joint replacements, primarily the hip or knee.  The Trammel case represents the first time such a claim has been reviewed by the Appellate Commission.  The defendant has filed an Application for Leave to Appeal to the Michigan Court of Appeals.  We will be monitoring the progress of that appeal.  If left undisturbed, the Trammel case should be considered by employers and carriers any time an employee undergoes a joint replacement following a work injury, even if the surgery (“correction”) is completely successful.

Our office has been directly involved in numerous such cases following the Cain decision in both Permanent & Total disability and specific loss type claims.

Please feel free to contact our office with any specific questions.  This should be a very interesting topic of discussion moving forward.

Bifurcated Redemptions

As some of you may already know, the Workers’ Compensation Agency is no longer approving bifurcated redemptions, pursuant to a recent memorandum authored by Chief Magistrate Murray Gorchow.  Previously, bifurcated redemptions had been recommended by both CMS and the Agency.  It allowed the parties to “redeem out” most elements of a pending claim while leaving medical still open.  When CMS did issue its opinion regarding conditional payments or the necessity of a Medicare Set-Aside, the second half of the redemption closing out the medical could proceed.  This was particularly beneficial due to the often lengthy process of obtaining CMS approval. 

However, due to some issues regarding whether CMS will be seeking repayment of conditional payments out of the “first half” of a bifurcated redemption, that practice can no longer be utilized.  For CMS to require reimbursement out of the first half of a redemption defeats the purpose of bifurcation, as the wait to receive those letters from CMS can be very lengthy.  Magistrate Gorchow still indicated that bifurcation may be considered in extremely limited instances, however it is no longer a standard practice. 

Please note that this does not mean that bifurcated redemptions will never be heard.  There are still factual situations where bifurcation is appropriate.  For example, a case where the facts establish the likelihood of a very small amount of conditional payments when compared to the relative size of a larger settlement amount would likely be appropriate to bifurcate.

Please feel free to contact our firm with any additional questions you may have!

Stokes v Chrysler LLC

Recent Opinion from Michigan Supreme Court

            This recent decision from the Michigan Supreme Court addressed the Sington requirement that a plaintiff must show that he or she is disabled from all jobs paying the maximum wages within his or her qualifications and training.  The Court’s opinion addressed specific factors that must be considered by the Magistrate, the proofs that must be presented by the plaintiff and the defendant, as well as some practical discovery applications.

            The plaintiff bears the burden of proving a disability by a preponderance of the evidence pursuant to MCL § 418.301(4).  To establish a disability, the plaintiff must prove a work-related injury and a reduction of his or her maximum wage earning capacity in work suitable to his or her qualifications and training.  The Michigan Supreme Court noted in Stokes that the plaintiff must do the following:

1)                  disclose all of his or her qualifications and training;

2)                  consider other jobs that pay the maximum pre-injury wage within his or her qualifications and training;

3)                  show that the work-related injury prevents performing any of the jobs identified as within his or her qualifications and training; and,

4)                  show that he or she cannot obtain any of the jobs that he or she may be capable of performing.

It is important that plaintiff now must engage in a type of “transferable skills analysis,” where his or her qualifications and training extend beyond just jobs that he or she has had previously.  After these factors are established, the plaintiff has met the initial burden of showing disability.  The defense must then produce evidence to refute the plaintiff’s showing by proving that there are actual jobs within the plaintiff’s qualifications, training, and physical restrictions for which the plaintiff either did not apply or refused.  Following that production, the plaintiff then may come forward with additional evidence to refute the defendant’s evidence.  The defense is entitled to discovery necessary to present its case.

            Note the importance of ensuring that the available jobs pay the maximum pre-injury wage.  If this is not the case, then Sington may not be applicable.  There is still some question whether a plaintiff who failed to find employment due to poor economic conditions would be entitled to benefits.  Previous cases seem to suggest that benefits could be denied.  The Court in Stokes did not address that issue directly.

As a practical matter, investigation should be taken during the early stages of a claim to determine exactly what the plaintiff’s qualifications and training may be (e.g., past educational experiences, special skills they may possess, etc.).  The Court clearly states in the recent Stokes opinion that “[t]he employer is entitled to discovery before the hearing to enable the employer to meet [its] production burden.”  A good initial investigation will help the attorney to identify what discovery is necessary when the case proceeds to litigation.  Interrogatories are appropriate in light of the recent Stokes decision, in order to get a better and more thorough understanding of an individual’s qualifications and training.  A wage earning capacity evaluation/labor market survey may be appropriate in certain cases.  The Court stated that face-to-face interviews of the plaintiff by defendant’s vocational expert are allowed as part of the discovery process.

Kashou v Coca-Cola Enterprises, Inc, 2008 ACO #89

This is an interesting new case from the Workers’ Compensation Appellate Commission regarding wage earning capacity.  The Magistrate granted an open award of benefits, but found a residual wage earning capacity of $280.00 per week as of January 17, 2007.  The plaintiff testified that he tried to obtain employment pursued by the vocational counselor.  The Magistrate’s decision to find a residual wage earning capacity was specifically influenced by the plaintiff’s presentation in her courtroom.  She believed that the plaintiff greatly exaggerated his impairment, which would have clearly prevented a potential employer from wanting to hire him.  As of January 17, 2007, the Magistrate believed that the plaintiff could perform positions listed by the vocational counselor.

We presume that this case will be appealed.  Note, however, that the opinion goes out of its way to describe the specific effect that the plaintiff’s poor credibility had on its decision.  This, as well as the decision’s language that this case is not to be used as precedent to “secure reduction of weekly indemnity in cases involving all but the most severely disabled” makes this a limited but interesting issue.  Pursuant to this holding, however, the Magistrate can imply a false presentation to potential employers based on the false presentation of an individual during trial.  This false presentation as to the extent of impairment to potential employers may result in the Magistrate calculating a residual wage earning capacity.

            Recent Amendments to the MSPA

Recent amendments to the Medicare Secondary Payor Act, which were adopted by Congress in late 2007, change the reporting provisions for any claimant who is a Medicare recipient.  As a practical matter, as soon as a claim is filed in any workers’ compensation case, the insurer or self-insurer should immediately discover whether or not the claimant is a Medicare beneficiary.  If the injured employee is entitled to Medicare, CMS must be notified and provided with his or her identity and basic claim information.  If the Act is not complied with, Medicare can enforce fines of up to $1,000.00 per day.

At this point, there are still a lot of questions.  The Secretary of Health and Human Services has not yet specified what reporting deadline is required to comply with this amendment.  Additionally, the law is not scheduled to take effect until June 2009.  The Secretary will be issuing a directive as to how an insurer or self-insurer complies with these new requirements before that time.  From past experience, we know that these directives are generally published on CMS’ website.  We will continue to check their website periodically in order to stay informed of all requirements when the information is eventually published.  We will keep you updated in that regard.

The Medicare amendment also addresses issues related to reporting dealing with other types of claims, such as liability and medical malpractice claims.

On December 7, 2007 the Michigan Supreme Court issued the latest order interpreting Simpson v Borbolla Construction & Concrete Supply, Inc, and the application of Rakestraw to pre-existing work-related conditions.

Simpson v Borbolla Construction & Concrete Supply, Inc, 133274 (S Ct December 7, 2007)

Plaintiff Dennis Simpson injured his left wrist while working as an iron worker in 1979.  He continued to work as an iron worker for various employers through October 23, 2000.  The left wrist fracture developed necrosis, which led to bone loss and traumatic arthritis.  His last day worked was with Borbolla Construction & Concrete Supply, Inc.  He worked for them only one day.

Magistrate Thomas Burden granted benefits against Borbolla Construction for plaintiff’s left wrist injury.  The WCAC affirmed.  The Michigan Court of Appeals affirmed on the basis that the “medically distinguishable condition” standard of Rakestraw only applied to pre-existing non-occupational injuries, and did not apply to pre-existing work-related injuries.  The Michigan Supreme Court recently issued an Order vacating the decision of the Michigan Court of Appeals.  It determined that the Court of Appeals erroneously held that Rakestraw does not apply to pre-existing work-related conditions.  However, it affirmed the award of benefits based on the reasoning in the WCAC opinion.

As the Court of Appeals decision has now been vacated, Rakestraw will clearly apply to all pre-existing conditions, regardless of whether they are work-related or non-work related in origin.

The reasoning in the WCAC opinion supported the Magistrate’s decision that Borbolla Construction is fully liable for benefits even though plaintiff only worked for them for one day.  The WCAC believed that Rakestraw’s “medically distinguishable condition” standard applied to all pre-existing conditions.  Please note that a recent Michigan Supreme Court order in the case of Fahr v General Motors Corp, 133500 (S Ct June 22, 2007) described a “medically distinguishable condition” as requiring pathologic change as opposed to merely a worsening of symptoms. Thus, it was their duty to determine whether plaintiff now had a “medically distinguishable condition” from his injury in 1979.  They answered affirmatively, stating that his ongoing work as an iron worker caused or accelerated an arthritic change in condition that disabled him upon his last day worked. 

The WCAC also had to determine whether plaintiff established a “last day worked injury” by showing that he was performing similar work.  The Commission reasoned, “[p]laintiff was not required to prove a discrete contribution from the single day plaintiff worked for the defendant…where it is the cumulative effect of work that constitutes the injury.”  Simpson v Borbolla Construction & Concrete Supply, Inc, 2005 ACO #153.  Though he only worked for one day with Borbolla Construction, he performed similar iron working jobs to those he had performed throughout his career.  Thus, the last employer is liable for benefits pursuant to MCL § 418.301(1).

Overall, a plaintiff must still prove a “medically distinguishable condition” pursuant to Rakestraw as of his or her last day worked.  However, once this medically distinguishable condition is established, the last employer who subjected plaintiff to the conditions that resulted in the disability will be liable for benefits, even if the employee only worked for one day.

On May 23, 2007 the Appellate Commission issued their latest decision interpreting the wage earning capacity issue or “Sington issue”.  See below for the Court of Appeals interpretation in Stokes v DaimlerChrysler

 Sington Analysis from the Appellate Commission as reported in

Welch v Means Industrial, Inc, 2007 ACO #121

The plaintiff, John Welch, was an employee of the defendant, Means Industrial, where he worked in a variety of different positions.  He suffered a cervical injury while employed as a forklift operator and a lumbar injury while employed as a box maker.  He also had experience as a shipping and receiving clerk, machine operator/welder, crane operator, furnace operator/bolt assembler, weld cell worker, cell leader, and vibe attendant.  The Magistrate granted an open award of benefits, determining that the plaintiff established a disability because he was precluded from working without restrictions, and the defendant had failed to offer him a job within those restrictions.  The defendants appealed, arguing that these findings were insufficient to establish disability under Sington v Chrysler Corp, 467 Mich 144 (2002).

The WCAC agreed and reversed the Magistrate’s open award.  Under Sington, disability can only be established if there is a loss of wage earning capacity in work suitable to an employee’s qualifications and training.  Therefore, the plaintiff needs to establish his or her qualifications and training in order to identify the pool of relevant jobs, and then show that those jobs are not reasonably available or do not pay the equivalent of his or her maximum wage earning capacity.

Pursuant to Stokes v DaimlerChrysler, 272 Mich App 571 (2006), plaintiff’s proofs will essentially consist of the employee’s resume.  Namely, there should be a listing and description of employee’s pre-injury employment, the pay for those jobs, a description of the employee’s training and qualifications, and testimony that the employee is unable to perform those jobs within his or her training and qualifications.

Specifically, taking into account both Sington and Stokes, a Magistrate’s decision must include findings on the following:

1)                  Plaintiff’s pre-injury qualifications and training;

2)                  Exact extent of plaintiff’s work-related physical or emotional limitations;

3)                  Work suitable to plaintiff’s qualifications and training within those limitations;

4)                  Whether that work is reasonably available;

5)                  Whether current pay for that kind of work is equivalent to plaintiff’s maximum wage   earning capacity.

Charfoos Reiter Hébert

www.michigancompdefense.com