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Written by Tracey Jones
Workers’ compensation claims based on alleged psychological and mental impairments, including anxiety disorders, depression, and/or post-traumatic stress disorder (PTSD), are becoming increasingly prevalent, and understanding the differences between them is key in being able to adequately defend against them.
Psychological Claims Resulting From Physical Injury
When psychological claims are being asserted as the direct result of a physical injury, the psychological component of the claim can be hard to defend against.
Typically, Courts will find physical injuries that result in chronic pain with associated depression and anxiety to be compensable without strong expert testimony refuting the mental component of the claim.Powell v. O’Reilly Auto Parts, Inc., 259 N.C. App. 251, 812 S.E.2d 408 (2018) (Unpublished). InPowell, the Full Commission determined that plaintiff’s pre-existing psychological conditions were compensable aggravations from her fall because even though she didn’t tell anyone about it before her accident, she was still credible, and the treating doctors’ testimony was sufficiently specific, and therefore competent, on causation.
When trying to combat a psychological component of a physical injury claim, there are three best practices to keep in mind:
1. It is imperative to hire an expert to perform an evaluation of plaintiff. This expert should use diagnostic neuropsychological testing to support his or her opinions about the lack of causation between plaintiff’s mental disabilities and his or her physical injuries.
2. Surveillance can be a very useful tool when trying to defend against these types of claims. Multiple days of surveillance will probably be necessary in order to combat the assertion that on “the day in question” plaintiff was having a “good day.”Kirby v. Mission Hospital, 848 S.E.2d 754, 2020 WL 6140500 (2020) (Unpublished).
3. Finally, even though the psychological component usually arises later and does not present itself immediately after the injury by accident, we strongly encourage carriers to include questions in the recorded statement regarding the name of the plaintiff’s primary care physician as well as whether the plaintiff has previously suffered from a mental illness and received treatment for the same, including anxiety and depression. Primary care physician records can offer a wealth of knowledge about past problems and treatment that sometimes get overlooked or simply forgotten by a plaintiff.
Psychological claims resulting from physical injury are typically the most difficult to defend in North Carolina, and are found compensable more often than psychological claims where there is no physical injury present. Good investigative practices at the outset of a physical injury claim are critical to the defense of psychological assertions down the road. A mental health expert and other investigative means should be utilized strategically to ensure the best possible chance of prevailing.
Non-Physical Injury By Accident Psychological Claims
Over the last several years, the increase in non-physical psychological workers’ compensation claims matches an overall increase in anxiety and depression in members of the general public. Nevertheless, true psychological claims, without a precipitating physical component, are much harder for a plaintiff to prove. The North Carolina Workers’ Compensation Act allows for recovery of psychological and mental disorders which are proven to be an “occupational disease” or the result of a compensable “injury by accident.” There are two ways to prove that a “mental claim” is compensable under the Workers’ Compensation Act:
1. Claiming that a discrete stressful event resulted in an injury by accident; and
2. Asserting that the claimant suffers from a stress-related occupational disease under N.C.G.S. § 97-53(13).
The North Carolina Workers’ Compensation Act defines an “accident’ as an unlooked for and untoward event which is not expected or designed by the injured employee. Davis v. Raleigh Rental Ctr., 58 N.C. App. 113, 116, 292 S.E.2d 763, 766 (1982). The essence of an accident is its unusualness and unexpectedness. Id.
The injury by accident theory does not appear as frequently in appellate cases as the occupational disease theory with respect to mental and psychological illnesses. In any event, like the cases brought under the occupational disease theory, the cases brought as injuries by accident have had varying outcomes.
Whether a psychological impairment should be considered a compensable injury by accident depends heavily on the underlying facts of each specific case.The “incident” that leads to the alleged psychological impairment must be unusual and not part of the employee’s normal work routine.
For example, Courts have held that a performance review, or a routine, problem-solving meeting is an ordinary incidence of employment, and a nervous breakdown and stress-induced anxiety following thereafter does not constitute an injury by accident.Pitillo v. N.C. Dep’t of Envtl. Health and Natural Res., 151 N.C. App. 641, 566 S.E.2d 807 (2002). On the other hand, being falsely accused of stealing from the company was considered unusual and rose to level of an accident. SeeBursell v. Gen. Elec. Co., 172 N.C. App. 73, 616 S.E.2d 342 (2005).
These claims are also subject to an analysis of pre-existing conditions and often require expert medical testimony. Expert witnesses must give an opinion to a reasonable degree of medical certainty that the medical condition and accident are related. It is not sufficient to say that just because the medical condition was absent before the injury, but was present thereafter, that the two are linked.
Non-physical psychological workers’ compensation claims are not as straightforward as psychological claims directly resulting from a physical injury. The plaintiff still has the burden of proof, and use of expert witness testimony can assist in determining whether the psychological impairment should be considered a compensable injury.
Non-Physical Occupational Disease Psychological Claims
As stated earlier, a plaintiff can recover for psychological or mental claims under an occupational disease theory. Occupational disease claims are governed by N.C.G.S. § 97-53. Although anxiety disorders, depression, and PTSD are not specifically enumerated in this statutory list of compensable occupational diseases, they are included in the “catch-all” provision of subsection 13.Smith-Price v. Charter Pines Behavioral Ctr., 160 N.C. App. 161, 584 S.E.2d 881 (2003) (holding that post-traumatic stress disorder is a compensable occupational disease).
The North Carolina Supreme Court in Rutledge v. Tultex Corp., 308 N.C. 85, 301 S.E.2d 359 (1983) explained what is required to prove an “occupational disease.” The three elements are:
1. The disease must be characteristic of, and peculiar to, the plaintiff’s particular trade, occupation or employment;
2. The disease must not be an ordinary disease of life to which the public is equally exposed outside the employment; and
3. There must be proof of causation (proof of a causal connection between the disease and the employment). “[T]he first two elements are satisfied if, as a matter of fact, the employment exposed the worker to a greater risk of contracting the disease than the public generally.”
North Carolina Appellate Courts have both upheld and rejected mental and psychological illness claims brought under an “occupational disease” theory of recovery. These cases typically turn on whether the plaintiff can show that his job responsibilities placed him at an increased risk of contracting the mental or psychological illness than the general public. Even if the plaintiff is successful in showing that his job placed him at an increased risk of developing the disease over the general public, he still has the burden of proving a causal nexus between the mental or psychological condition and his employment. Rutledge, 308 N.C. at 94, 301 S.E.2d at 365.
Often times the plaintiff has a pre-existing mental or psychological condition. It is imperative that prior medical history be obtained and investigated early on in a case. Although the Act allows for recovery when a pre-existing condition is materially aggravated or accelerated by one’s employment, it is crucial to determine whether it is a new or different condition which the plaintiff is experiencing rather than a mere continuation of a pre-existing condition. Anderson v. Nw. Motor Co., 233 N.C. 372, 64 S.E.2d 265 (1951) (holding that in North Carolina, an injury arising out of and in the course of employment which materially accelerates or aggravates a pre-existing disease or infirmity is compensable).
In addition to establishing that there was an aggravation or acceleration of his pre-existing condition, the plaintiff must also “show that the employment placed him at a greater risk for contracting the condition [than the general public], even where the condition may have been aggravated but not originally caused by the [claimant’s] employment.”Chambers v. Transit Management, 360 N.C. 609, 613, 636 S.E.2d 553, 555 (2006).
Unless the plaintiff is in the public sector and provides aid to the community, such as a law enforcement officer, EMS worker, firefighter, or some other community servant, most jobs do not place individuals at an increased risk of developing psychological claims. Bad bosses, poor work reviews and severe and extreme work related stress and pressure have historically not been found compensable.Day v. Travelers Insurance Co., 845 S.E.2d 208, 2020 WL 4462171, (2020) (holding that an adjuster’s job, while very stressful, does not place her at an increased risk of developing depression and anxiety as opposed to the public generally).
Most of these claims are decided on the underlying facts and each must be analyzed on a case by case basis. Regardless, the plaintiff retains the burden of proof. He must prove every element of the claim, whether an accident or an occupational disease, and meet the criteria for the same under the North Carolina Workers’ Compensation Act to receive an award of benefits.
Claims Handling Tips for Psychological Workers’ Compensation Claims
The burden of proof for a psychological workers’ compensation claim lies with the plaintiff. However, to prepare a proper defense, there are some key claims handling tips to take into account, which include:
1. Ensure a thorough recorded statement is taken as soon as notification of a claim is received. The recorded statement should:
· Address the plaintiff’s regular, normal job duties;
· Identify anything new or unusual with the plaintiff’s job and the length of time or duration of the new or unusual activity;
· Identify the plaintiff’s prior medical history including whether he or she has ever treated for depression, anxiety, or any other psychological illness. If so, pin down the exact illness diagnosed; the type and frequency of psychiatric treatment received before and after; any difference in the plaintiff’s complaints or intensity level with regards to his psychological illness; and, the name of the medical professional providing treatment;
· Always request the contact information for the plaintiff’s primary care physician so you can obtain the records before accepting the claim;
· Identify the plaintiff’s supervisor and the co-workers plaintiff interacted with on a daily basis (so that interviews and fact investigation can occur with these individuals); and,
· Identify the plaintiff’s hobbies and activities (if plaintiff is going to baseball games and/or concerts on a regular basis then it is unlikely that he or she has an inability to function in society or at work).
2. Conduct surveillance, if warranted, to investigate the plaintiff’s physical activities and demeanor outside of his treating relationship with medical providers.
3. Perform extensive employer interviews in the early stages of the case. These interviews should also involve the plaintiff’s co-workers so that any pre-existing problems or complaints can be identified as compared to the new complaints that may have arisen.
4. Retain a psychological professional to analyze the issues, the type of job the plaintiff performs, and elicit opinions on causation.
5. Enroll the plaintiff in counseling instead of simply approving medications for psychological or mental illnesses. A plaintiff’s depression may drastically improve with counseling on a regular basis. Treatment notes often provide helpful information for the claim as well.
6. Control the claim by directing the plaintiff’s medical care. Make sure that only an approved, treating physician provides medications instead of allowing the plaintiff to go to his primary care physician for additional care for the same condition.
By engaging in these best practices early, during the investigative phase of the claim, a stronger defense can be prepared against psychological workers’ compensation claims when litigation does ensue.
If you have questions or wish to discuss this further, please contact Tracey Jones or your Teague Campbell workers’ compensation attorney.
Written by: John Tomei
Are all workers who perform services for an employer, including owner, partner, member, or executive officer, covered as “employees” under the North Carolina Workers’ Compensation Act to the extent they may be seeking workers’ compensation benefits?
How are those “employees,” if they are an owner, partner, member, or executive officer, included in or excluded from a standard Workers’ Compensation and Employers Liability Insurance Policy in North Carolina?
The answer to the first question is covered by the provisions of the Act itself and, more specifically, its definition of an “Employee” under N.C.G.S. § 97-2(2). This issue often arises in the context of sole proprietors, partners of a business, or members of a limited liability company (LLC), as well as executive officers of a corporation (including nonprofit corporations), who may be seeking workers’ compensation benefits for themselves following an injury. Thus, a threshold determination is the nature of the employer’s organization and its treatment under the Act. The answer to the second question is addressed by the language in the policy provisions.
N.C.G.S. § 92-2(2) provides, in part, the following:
Any sole proprietor or partner of a business or any member of a limited liability company may elect to be included as an employee under the workers’ compensation coverage of such business if he or she is actively engaged in the operation of the business and if the insurer is notified of his election to be so included. Any such sole proprietor or partner or member of a limited liability company shall, upon such election, be entitled to employee benefits and be subject to employee responsibilities prescribed in this Article.
What this means for employers is that under the Act, a sole proprietor, partner of a business, or any member of a limited liability company (LLC) is presumed to be excluded from coverage, unless:
As with many situations in the workers’ compensation and insurance coverage worlds, submission of proper documentation to the carrier is crucial.
N.C.G.S. § 97-2(2) further provides, in part, the following:
Except as otherwise provided herein, every executive officer elected or appointed and empowered in accordance with the charter and bylaws of a corporation shall be considered as an employee of such corporation under this Article. Any such executive officer of a corporation may, notwithstanding any other provision of this Article, be exempt from the coverage of the corporation’s insurance contract by such corporation’s specifically excluding such executive officer in such contract of insurance, and the exclusion to remove such executive officer from the coverage shall continue for the period such contract of insurance is in effect, and during such period such executive officers thus exempted from the coverage of the insurance contract shall not be employees of such corporation under this Article.
North Carolina case law has held that, where a corporate employer with less than the minimum number of employees to be subject to the Act procures a policy of workers’ compensation insurance, such employer is presumed to have accepted the provisions of the Act. Consequently, that policy covers its executive officers notwithstanding the premium on the policy being based on the compensation of a single non-executive employee and the parties intending to cover that employee only, unless notice of non-acceptance by the executive officer or officers is duly filed with the Industrial Commission. Laughridge v. South Mountain Pulpwood Co., 266 N.C. 769, 147 S.E. 2d 213 (1966).
For corporate executives, this portion of the Act dictates that, generally, executive officers of a corporation are considered to be employees of such corporations for workers’ compensation purposes, but they may specifically exempt and exclude themselves from workers’ compensation coverage. Keeping that in mind, for that exemption to be effective, they must notify the carrier in writing that they are exempting themselves from coverage.
Similar to the requirements for sole proprietors, partners of a business, or members of a limited liability company, submission of necessary documentation by for-profit corporations to the carrier is vital.
With regard to nonprofit corporations, N.C.G.S. § 97-2(2) further provides the following:
“Employee” shall not include any person elected or appointed and empowered as an executive officer, director, or committee member under the charter, articles, or bylaws of a nonprofit corporation subject to Chapter 47A, 47C, 47F, 55A, or 59B of the General Statutes, or any organization exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code, who performs only voluntary service for the nonprofit corporation, provided that the person receives no remuneration for the voluntary service other than reasonable reimbursement for expenses incurred in connection with the voluntary service.
When a nonprofit corporation, as described herein, employs one or more persons who do receive remuneration other than reasonable reimbursement for expenses, then any volunteer officers, directors, or committee members excluded from the definition of “employee” by operation of this paragraph shall be counted as employees for the sole purpose of determining the number of persons regularly employed in the same business or establishment pursuant to G.S. § 97-2(1). Other than for the limited purpose of determining the number of persons regularly employed in the same business or establishment, such volunteer nonprofit officers, directors, or committee members shall not be “employees” under the Act. Nothing herein shall prohibit a nonprofit corporation as described G.S. § 97-2 herein from voluntarily electing to provide for workers’ compensation benefits in the manner provided in G.S. § 97-93 for volunteer officers, directors, or committee members excluded from the definition of “employee” by operation of this paragraph.
Where does the Act leave us with regard to nonprofit corporations? For those nonprofit corporations which fall under specified North Carolina General Statutes or which are otherwise exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code, their executive officers, directors or committee members are not considered to be “Employees” under the Act. However, those persons must be volunteers and cannot receive remuneration for the services they provide, other than reasonable reimbursement for expenses incurred in connection with their voluntary service.
If, on the other hand, an organization employs one or more persons who do receive remuneration, then any volunteer officers, directors or committee members, are nonetheless counted as employees for the sole purpose of determining the number of persons regularly employed so as to be subject to the Act under N.C.G.S. § 97-2(1).
Note to non-profit employers: The Act does not prohibit a nonprofit corporation from voluntarily electing to provide workers’ compensation benefits for its volunteer officers, directors or committee members who would otherwise be excluded as “Employees” under the Act.
How are these types of employees included in or excluded from a standard Workers’ Compensation and Employers Liability Insurance Policy in North Carolina?
The standard Workers’ Compensation and Employers Liability Insurance Policy in North Carolina does not specifically address the question of whether or how sole proprietors, partners or corporate officers are included or excluded as “employees” under a workers’ compensation policy.
Nevertheless, the Policy specifically states, under “H. Statutory Provisions,” that “this insurance conforms to the parts of the workers’ compensation law that apply to… [b]enefits payable by this insurance…“ Further, the Policy provides that “[t]erms of this insurance that conflict with the workers’ compensation law are changed by the statement to conform to that law.”
As a result of these conformation clauses in the Policy, the provisions of the Act are included in the Policy as to its treatment of sole proprietors, partners and corporate officers as “employees.” Consistent with that inclusion, the standard Workers’ Compensation and Employers Liability Insurance Policy in North Carolina has an Endorsement which provides for the exclusion of partners, officers and others from coverage as employees of an insured. Similarly, another Endorsement provides for the inclusion of sole proprietors, partners, officers and others as employees of an insured.
These Endorsements, along with the standard North Carolina Workers Compensation and Employers Liability Policy, can be found at the North Carolina Rate Bureau’s website.
North Carolina workers’ compensation policy provisions are consistent with the Act as to sole proprietors, partners, corporate officers, and others, and their inclusion or exclusion from coverage as “employees” of their insured entities under a policy. Even so, these persons need to remember to abide by the Act’s requirements as to their inclusion or exclusion as “employees,” including the submission of proper documentation as such, when applying for and receiving a policy of workers’ compensation coverage in North Carolina.
Jumping through these necessary hoops will then enable a carrier to include the proper Endorsement(s) when a policy is issued, and avoid any later disputes between a carrier and insured.
Written by: Lindsay Underwood
A decision has been an issued by the North Carolina Supreme Court in a case that we have been following for quite a few years: Griffin v. Absolute Fire Control, Inc. The Supreme Court affirmed the ruling from the Court of Appeals that was issued in January 2020. The case is now remanded back to the Full Commission. Though we will have to wait and see what the Full Commission does, it is not a good disability decision for defendants.
For some factual history, Plaintiff worked as a pipe fitter and injured his back in 2014. He returned to work a month later with restrictions. His pre-injury job was outside his restrictions, so he was offered, and accepted, work in the fabrication shop. Plaintiff was ultimately assigned permanent restrictions. In 2016, Plaintiff underwent non-work related heart surgery and asked to return to work in the field, stating that walking would improve his back condition. Defendants allowed Plaintiff to return to work in the field as a helper. Plaintiff later requested a hearing seeking a determination on the suitability of the job. The Deputy Commissioner concluded Plaintiff was not disabled. The Full Commission determined the fabrication shop position was suitable because it was a real, actual position. The field helper position was never offered as suitable employment, and was classified as an accommodation offered to Plaintiff at his request. Therefore, Plaintiff failed to prove disability. Plaintiff appealed.
At the Court of Appeals level, Plaintiff made a futility argument. Under Russell, an employee can meet his burden of proving disability by showing he is capable of some work, but it would be futile to look for other work because of pre-existing conditions like age or lack of education. The Commission made factual findings that Plaintiff failed to show it would be futile. The Court of Appeals noted the Full Commission found that Plaintiff was 49 years old, had a 9th grade education, and worked as a pipe-fitter. Plaintiff had a permanent 20-pound lifting restriction, would sometimes need to leave work because of pain, and reached MMI in 2017. The Court of Appeals did not see how the Full Commission could conclude Plaintiff presented no evidence on futility given its findings were similar to other cases where courts supported futility. These factors included age, education, work experience, and restrictions.
The Court also disagreed with the suitable employment analysis. “Make work” positions are those that have been altered such that they are not ordinarily available on the job market. The Court reasoned that, whether a position existed with employers, beyond a given employer in a specific case, is an essential part of the make work analysis, as the Act does not allow employers to avoid paying benefits by offering a job that does not exist outside of that employers’ business.
Because the Commission’s findings failed to address whether the job was available with employers other than Defendant-Employer, the Commission’s assessment was flawed. Additionally, the Commission’s finding that “Defendant’s unique hiring practice of hiring based upon word of mouth and personal recommendations” meant the position was “available to individuals in the marketplace,” exemplified this shortcoming in the Court’s view and defined the marketplace based on the employer’s practices.
Now that this decision has been affirmed by the Supreme Court, the case will go back to the Full Commission for further review on remand. Consequently, we will need to see what the Full Commission does on remand before knowing the full impact of the Griffin decision. However, we anticipate that it will be argued that even where a plaintiff is working with his pre-injury employer, and there are jobs available to him with the pre-injury employer, the plaintiff could still prove disability if there is no evidence that the offered position is available in the general marketplace. We will continue to monitor this case while it is on remand to the Full Commission, but it is worth noting that there are still facts which are unique to this case that may allow this case to be distinguished going forward. For example, the employer in this case had a unique hiring practice, and the higher courts did not look favorably on this. Further, this case does not eliminate other “futility” factors that need to be present like age, education level, and work experience, to demonstrate that returning to work is futile
Plaintiffs routinely appear to rely on the futility argument for proving disability when they do not conduct their own reasonable job search. Defendants will need to analyze cases with that fact pattern very carefully. If the plaintiff has work restrictions, but has done no job search at all, be prepared to defend a disability argument based upon futility.
Written by: Bruce Hamilton
Wanda Taylor has been appointed by Gov. Cooper to the Full Commission. If confirmed by the General Assembly, Attorney Taylor will replace Commissioner Charlton Allen, who has stayed on following the expiration of his term on June 30, 2020. Attorney Taylor is a Fellow of the College of Workers’ Compensation Lawyers. She received her JD degree from UNC-Chapel Hill and her undergraduate degree from Duke University. She is currently the Director of Litigation/Counsel at Key Risk Insurance. Previously, attorney Taylor served as a Deputy Commissioner and Chief Deputy Commissioner at the Industrial Commission for 20 years. Ms. Taylor’s appointment is subject to approval/confirmation by the North Carolina Gen. Assembly.
Adrian Phillips has been appointed by Gov. Cooper to the Full Commission to fill the slot currently held by Commissioner Loutit, whose term is set to expire April 30, 2021. Attorney Phillips has served as a Deputy Commissioner at the Industrial Commission since 2002. Before joining the IC, attorney Phillips worked as an assistant attorney general in the tort claim section of the North Carolina Department of Justice. Prior to that, Ms. Phillips prosecuted Medicaid fraud cases for the North Carolina Department of Justice and served as an assistant district attorney and Caswell and Person Counties. Attorney Phillips received her JD from North Carolina Central University school of Law and her undergraduate degree at Bennett College. Ms. Phillips’ appointment is also subject to confirmation by the North Carolina Gen. Assembly.
Celeste Harris has been appointed as a Deputy Commissioner. Attorney Harris has been in private practice for 30 years representing injured workers and workers compensation matters and individuals in personal injury and Social Security disability matters. She is a North Carolina state board certified Specialist in Worker’s Compensation Law and a North Carolina certified mediator. She earned her law degree from St. Louis University of school of Law, attending Wake Forest University school of Law during her third year. Ms. Harris will be assigned to the Winston-Salem regional office of the IC.
Effective March 1, 2021, all carriers, third-party administrators, and self-insured employers are required to provide the Commission with an email address for receipt of claim-related documents. The designated email address shall be provided to the Commission at contactinfo@ic.nc.gov . The email address provided will be used in cases where the Commission does not have an individual email address for the claims representative assigned to the claim. Providing an email address is mandatory and will ensure timely receipt of claim-related documents. See Rule 11 NCAC 23A .0109 (d).
Written by: Tracey Jones
In the course of handling a workers’ compensation case, an adjuster will have to communicate with the employee’s treating physician to collect valuable medical information relevant to the diagnosis and ability to return to work. As noted in N.C.G.S § 97-25.6(c)(2), Written Communications with Healthcare Providers:
Defendants may communicate with the Plaintiff’s authorized health care provider in writing, without the express authorization of Plaintiff, to obtain certain relevant medical information not available in Plaintiff’s medical records, provided Defendants provide Plaintiff with contemporaneous written notice.
Without express authorization by the employee, but with contemporaneous written notice – Defendants may request the following additional information not available in the employee’s medical records:
Defendants must provide Plaintiff a copy of the healthcare provider’s response within ten business days of receipt.
When communicating with healthcare providers, NC adjusters and Defendants can use the following examples as a guide:
It is critical to keep in mind that all correspondence with the treating physician must be shared with the employee. All correspondence must occur with an authorized healthcare provider.
Written By: Elizabeth Ligon
The day is finally here and your case is settled. But is it really over? Let’s go over some key issues in regards to mutual consent in settlement agreements and make sure.
First things first, a settlement agreement is a contract, to be interpreted and tested by established rules relating to contracts. A valid contract exists only where there has been a “meeting of the minds” as to all the essential terms of the agreement. Material terms generally means anything essential to the bargain, such as amount of settlement. The fact that a few secondary issues remain to be resolved will not defeat enforcement. If a court finds the material terms of a contract are overly vague or not definitive enough to provide a basis for mutual consent, it will not enforce the agreement.
Often times a court will find no mutual consent where a settlement agreement includes a provision that a release will be drafted later. Disagreements as to the terms of the release have caused many settlement agreements to fail. Similarly, where parties provide in the settlement agreement that the release to be delivered later is to be “mutually agreeable to both parties”, courts have refused enforcement of the entire agreement because there was no meeting of the minds on that material term.
Keeping that in mind, North Carolina courts will not recognize lack of mutual consent when a party claims that it had not signed the agreement, and that the signature of his attorney was not authorized. North Carolina courts presume that an attorney acts under the authority and in favor of the client, even in settlement circumstances. One who challenges the actions of his attorney has the burden of rebutting the presumption and proving lack of authority.
Ensuring that mutual consent occurs and that all settlement terms are well documented is critical, but that is only part of the settlement agreement process.
Written By John Tomei
When the actions of an insured give rise to the need for a carrier to cancel a workers’ compensation policy, it is vitally important for the carrier to be aware of how to effectively cancel the policy under North Carolina law. The North Carolina Supreme Court has long established the principle that failure to comply with statutory requirements for cancelling an insurance policy renders the cancellation ineffective. Pearson v. Nationwide Mutual Ins. Co., 325 N.C. 246, 382 S.E.2d 745 (1989). Compliance with statutory requirements may seem straightforward but there are a few common pitfalls that prevent effective cancellation and create liability.
Cancellations of workers’ compensation insurance policies in North Carolina are governed by N.C.G.S. § 58-36-105, “Certain Workers’ Compensation Insurance Policy Cancellations Prohibited” (hereinafter the “Statute”). It is critical for an insurance carrier to be aware of the governing statute and the correct processes to effectively cancel a workers’ compensation insurance policy in North Carolina.
The Statute states:
(a) No policy of workers’ compensation insurance or employers’ liability insurance written in connection with a policy of workers’ compensation insurance shall be cancelled by the insurer before the expiration of the term or anniversary date stated in the policy and without the prior written consent of the insured, except for any one of the following reasons:
(1) Nonpayment of premium in accordance with the policy terms;
(2) An act or omission by the insured or his representative that constitutes material misrepresentation or nondisclosure of a material fact in obtaining the policy, continuing the policy, or presenting a claim under the policy;
(3) Increased hazard or material change in the risk assumed that could not have been reasonably contemplated by the parties at the time of assumption of the risk;
(4) Substantial breach of contractual duties, conditions, or warranties that materially affects the insurability of the risk;
(5) A fraudulent act against the company by the insured or his representative that materially affects the insurability of the risk;
(6) Willful failure by the insured or his representative to institute reasonable loss control measures that materially affect the insurability of the risk after written notice by the insurer;
(7) Loss of facultative reinsurance, or loss of or substantial changes in applicable reinsurance as provided in G.S. 58-41-30;
(8) Conviction of the insured of a crime arising out of acts that materially affect the insurability of the risk;
(9) A determination by the Commissioner that the continuation of the policy would place the insurer in violation of the laws of this State; or
(10) The named insured fails to meet the requirements contained in the corporate charter, articles of incorporation, or bylaws of the insurer, when the insurer is a company organized for the sole purpose of providing members of an organization with insurance coverage in this State.
(b) Any cancellation permitted by subsection (a) of this section is not effective unless written notice of cancellation has been given to the insured not less than 15 days before the proposed effective date of cancellation. The notice may be given by registered or certified mail, return receipt requested, to the insured and any other person designated in the policy to receive notice of cancellation at their addresses shown in the policy or, if not indicated in the policy, at their last known addresses. The notice shall state the precise reason for cancellation. Whenever notice of intention to cancel is given by registered or certified mail, no cancellation by the insurer shall be effective unless and until such method is employed and completed. Notice of intent to cancel given by registered or certified mail shall be conclusively presumed completed three days after the notice is sent if, on the same day that the notice is sent by registered or certified mail, the insurer also provides notice by first-class mail and by electronic means if available as defined in G.S. 58-2-255(a) to the insured and any other person designated in the policy to receive notice. Any such supplemental notice given by electronic means shall be effective for the limited purpose of establishing this conclusive presumption. Notice of cancellation, termination, or nonrenewal may also be given by any method permitted for service of process pursuant to Rule 4 of the North Carolina Rules of Civil Procedure. Failure to send this notice, as provided in this section, to any other person designated in the policy to receive notice of cancellation invalidates the cancellation only as to that other person’s interest.
(c) This section does not apply to any policy that has been in effect for fewer than 60 days and is not a renewal of a policy. That policy may be cancelled for any reason by giving at least 30 days prior written notice of and reasons for cancellation to the insured by registered or certified mail, return receipt requested.
(d) Cancellation for nonpayment of premium is not effective if the amount due is paid before the effective date set forth in the notice of cancellation.
(e) Copies of the notice required by this section shall also be sent to the agent or broker of record though failure to send copies of the notice to those persons shall not invalidate the cancellation. Mailing copies of the notice by regular first-class mail to the agent or broker of record satisfies the requirements of this subsection.
The central requirements of the Statute are that the insured be notified in writing of the precise reason for the cancellation of the policy and that the insured be given the required notice of such cancellation.
Some of the more common reasons for canceling a workers’ compensation policy include: failure to pay premiums, failure to submit to audits pursuant to the policy provisions, or other failures by the insured to otherwise cooperate with the carrier in providing coverage.
As mentioned above, when canceling a policy, it is critical for the carrier to state the precise reason, in writing, in its notice for the cancellation of the policy. Ideally, a citation to the particular section of the Statute, or at least tracking its language, would be best, since it would help to build a stronger case for effective cancellation in the event of litigation.
The Statute clearly sets out the manner by which the insured must be given notice of the cancellation of the policy. Specifically, the notice is not effective unless it is in writing and it is “given” to the insured, not less than 15 days before the proposed effective date of cancellation. Again, the written notice must be consistent with one or more of the 10 bases of cancellation as allowed under the Statute. Note that the Statute has no explicit requirement that the insured actually “receive” the notice of cancellation. Rather, the Statute clearly sets out the means by which the giving of the notice is rendered effective and how it can be proven as such. More specifically, the Statute provides that cancellation of a policy is effective once the mailing requirement is “employed and completed.” So, if the carrier can show its use and completion of the registered or certified mail and its return receipt process, such use is a showing of effective cancellation of a policy.
Importantly for a carrier, the Statute provides for a conclusive presumption of completion of the registered or certified mailing of notice of a cancellation of a policy, three days after the notice is sent. Specifically, on the same day that the notice is sent by registered or certified mail, if the insurer also provides notice by first-class mail and by electronic means if available (as defined in G.S. 58-2-255(a), which concerns and allows for electronic insurance communications and records) to the insured, this conclusive presumption applies. So, to enjoy this conclusive presumption, the best practice is for a carrier to (1) use the required registered or certified mail return receipt process and, (2) use the first class mail and electronic means of communications as allowed in the Statute for electronic insurance communications and records.
It is important to be aware that section (c) of the Statute has significantly different notice requirement for cancellation of those workers’ compensation insurance policies that have been in effect for less than 60 days and are not a renewal of a policy. More specifically, those policies may be canceled for any reason, and not just those set out in section (a)’s subsections (1) through (10), simply by giving the insured at least 30 days prior written notice of the reason for the cancellation.
In a homeowners insurance policy case which involved N.C.G.S. § 58-41-15, in Ha v. Nationwide Insurance Co., the Court held that an insured’s actual receipt of notice of the cancellation is necessary in these section (c) policy cancellations. In that statute, under its section (c), a carrier is required to “furnish” an insured with the notice of cancellation, rather than “giving” such notice to an insured in the workers’ compensation statute.
Keeping this in mind, it is not clear whether Ha would apply to a N.C.G.S. § 58-36-105 (c) cancellation of a workers’ compensation policy. In this writer’s opinion, the holding in Ha would very likely be found applicable to workers’ compensation policies. This is because of the very similar structure, language and provisions of each of the two statutes.
With all of this in mind, section (c) provides for the same registered or certified mail, return receipt requested process for giving an insured notice of a policy’s cancellation, as does section (b). However, it must be noted that section (c) does not provide for the conclusive presumption of completion of the registered and certified mailing of notice of a cancellation of a policy, as provided in section (b). So, in section (c), a carrier can only use and complete registered or certified mail and its return receipt process, to prove that an insured actually received the notice of cancellation of the policy to effectively cancel it under section (c)’s circumstances.
If a policy is canceled for nonpayment of premium, section (d) of the Statute provides that such cancellation is not effective if the amount due is paid before the effective date set forth in the notice of cancellation.
Finally, in section (e) of the Statute, it is required that copies of the notice required by the Statute be sent to the agent or broker of record. However, there is no sanction of invalidating the cancellation if copies of those notices are not sent to such persons. Nonetheless, it is the best practice to copy such persons, as that may serve to aid in proving that the notice of cancellation was also given to the insured.
The foremost considerations in effectively canceling a North Carolina workers’ compensation policy are 1.) N.C.G.S. § 58-36-105’s requirements that the precise reason be stated in writing, and 2.) that the notice be given consistent with both the 15-day timing, as well as the mailing requirements.
The Industrial Commission recently passed a number of rule changes which were scheduled to go into effect on two different dates.The first set of rule changes went into effect on December 1, 2020.
The rules that went into effect on December 1 included changing the medical charge threshold from $2,000 to $4,000 to dictate when employers need to file the first report of injury, or Form 19. There were also changes made concerning claims for death benefits, which allow the parties to either submit a Form 30 Agreement for Compensation for Death, or a proposed Opinion and Award. Another change provided that payment for a permanent disability will not be approved if claimant has returned to work with the defendant-employer and has permanent work restrictions, unless a job description is also provided as part of the filing. Finally, the last change was to the Form 90 Report of Earnings and dictates that form can only be served when defendants are paying ongoing temporary total disability or temporary partial disability benefits, and Defendants are now able to serve the Form 90 via e-mail, facsimile, certified mail, or any other method that provides proof of receipt.
The next set of changes go into effect on March 1, 2021.
Some of the rule changes provide updates to filing requirements. Specifically, these changes show that the Commission is working to make full use of the Electronic Document Filing Portal (“EDFP”). A number of documents that were previously exempt from EDFP filing, like the Notice of Appeal to the Court of Appeals, can now be filed via EDFP. These rule changes were delayed to an effective date of March 1, 2021, to coordinate with the rollout of the Commission’s new case management system. The new system was released in early 2021. Rule 11 NCAC 23A.0109 has now been updated to reflect changes in the contact information required to be provided to the Commission by the parties. This rule has been amended to streamline the provision of contact information by the parties, to make it easier for the Commission to reach the parties if necessary. Specifically, updated contact information can be provided via EDFP, or by email tocontactinfo@ic.nc.gov.
A change was made to 11 NCAC 23G .0104 to change the “physical attendance” requirements to remote requirements. "Attendance" is now defined as in-person whenever the mediation rules approved by the North Carolina Supreme Court require it. The rule now allows for the in-person requirement to be excused or modified by agreement of the parties. Further, the attendance requirement will be met with remote technology when the mediation rules approved by the North Carolina Supreme Court require attendance via remote technology. The rule also provides that all parties shall comply with public health and safety requirements in effect at such time of the mediation. This rule was revised in light of the ongoing COVID-19 crisis, and the ongoing need to have mediations via Zoom or WebEx.
Moving forward, we encourage our clients to be aware of these rules, particularly those concerning ongoing changes regarding the COVID-19 pandemic, which change often. To view an annotated copy of the rules effective March 1, 2021,click here.
The North Carolina Industrial Commission has adopted an Emergency Rule that in turn allows the Industrial Commission to implement Emergency Orders and Directives of the Chief Justice of the North Carolina Supreme Court. In short, the Industrial Commission wants its operating structure to be in sync with, and operate consistently with, the civil system when it comes to holding hearings, mediations and other procedural directives from the Chief Justice. As of January 14, 2021, and consistent with the January 14, 2021 Order of the Chief Justice of the Supreme Court of North Carolina, all Industrial Commission mediations are to be conducted remotely, unless all parties and persons required to attend the mediation, including the mediator, agree to conduct the mediation in-person, or unless the Industrial Commission orders that the mediation be conducted in-person. Additionally, all Deputy Commissioner Hearings shall be conducted remotely via WebEx video conference, unless the Deputy Commissioner grants an in-person hearing upon a showing of good cause as to why an in-person hearing should be allowed. Full Commission hearings shall continue to be conducted via Microsoft Teams video conference.
In November, 2020, Deputy Commissioner Tammy Nance was designated as the Chief Deputy Commissioner by Chair Phillip Baddour. Chief Deputy Commissioner Nance previously served as a Deputy Commissioner from 1987 to 1995. She was in private practice for several years representing both employers and employees in workers’ compensation matters and in 2011, returned to the Commission and served on the Full Commission until 2018. In 2019, Ms. Nance began serving as a Deputy Commissioner assigned to head up the Claims Administration Section.
Additionally, former representative Larry D. Hall, who most recently was serving as the Secretary of the North Carolina Department of Military and Veterans Affairs, was recently appointed as a Deputy Commissioner. Deputy Commissioner Hall represented Durham County in the North Carolina House of Representatives for 10 years and served as the House Minority Leader during his final four years.
Chair Philip Baddour provided an update at the North Carolina educational conference in October 2020. As of August 31, 2020, 1,508 Form 19’s had been filed listing COVID-19 and 119 Form 18’s have been filed listing COVID-19. Of the COVID-19 cases where a Form 60, 61 or 63 had been filed, 57% had been denied on a Form 61, 19% had been accepted on a Form 60, 18% had been paid without prejudice on a Form 63, section 1, and 6% had been paid without prejudice on a Form 63, section 2.
In addition, for the fiscal year 2019-2020, 27 claims had been filed for extended benefits under G. S. Section 97-29 (c). Seven of the claims had been mediated and three Deputy Commissioner Hearings had been held, but, as of the October conference, there had not yet been any decisions rendered.
Finally, seven Industrial Commission Rules were revised, and one new Industrial Commission Rule was added, all effective December 1, 2020.
Rules Effective 12-1-20.pdf (nc.gov).
The Rules affected were 11 NCAC 23A .0104, .0408, .0409, .0501, .0903, 11 NCAC 23E .0104, and 11NCAC 23L .0103 and new Rule 11NCAC 23B .0106.
Related Post: Overview of December 1, 2020 NCIC Rule Changes by Attorney Lindsay Underwood
Amendments to Rules 11 NCAC 23A .0108, .0109, .0302, 11 NCAC 23B .0104, .0105, 11 NCAC 23L .0101, .0102, .0103, and .0105 will also become effective March 1, 2021.
Rules Effective 3-1-21.pdf (nc.gov)
Bruce Hamilton is a Partner in Teague Campbell’s Raleigh office. He is the legal advisor for the NCASI and, for the past 30 years, his practice has focused exclusively on workers’ compensation defense.
Written by: Melissa P. Woodard and Tracey Jones
The current state of the law in North Carolina Workers’ Compensation in latent occupational disease claims is in flux right now. Considering current case law, there are often three options for calculating a plaintiff’s average weekly wage, and neither the plaintiffs’ bar nor the defense bar can be certain about how the Industrial Commission will rule.
The primary reason this issue remains unsettled is that these kinds of cases, namely asbestosis, byssinosis and silicosis claims, are not often tried. There are always multiple defendants and they require extensive expert testimony resulting in astronomical litigation costs for both sides. Attorneys are forced to address the average weekly wage issue at mediation and come to a compromise that does not always adhere to how the respective side would like to interpret N.C.G.S. § 97-2(5).
Under N.C.G.S. § 97-2(5), there are five methods of calculating the average weekly wage.
The first three apply when the plaintiff worked at the employer in the 52 months prior to diagnosis of the alleged occupational disease. Since asbestosis, byssinosis and silicosis typically do not manifest for many years after exposure and because last injurious exposure may be separated by subsequent employers or decades, these methods for calculating the average weekly wage are arguably inapplicable. Most often, the fifth method, which is essentially a catch-all, “whatever is most fair,” approach is used. This is where the three different approaches can be utilized.
The three approaches for determining “whatever is most fair” include:
The plaintiffs’ bar generally argues that the average weekly wage should be based on the last full year of wages the plaintiff earned regardless of any other circumstances. This argument may be considered “fair” under the Court of Appeals’ holdings in Lipe v. Star Davis Co. Inc. and Abernathy v. Sandoz Chemicals, which state that the average weekly wage should be based on the wages earned while working, not the actual wages earned when the employee died or was diagnosed. 237 N.C. App. 124, 767 S.E.2d 539 (2014); 151 N.C. App 252, 565 S.E.2d 218 (2002). In both cases, the plaintiff was diagnosed with an alleged occupational disease, but had retired years earlier. The Court held that he average weekly wage was based on the last years they worked, not zero, because using their actual earnings was “obviously unfair.” Id.
As an illustrative example, we will use Joe Smith, who worked for 30 years and retired in June 2008:
Based on his Social Security Earnings Report, Joe earned $52,000 in 2007, which was his last full year of employment, and $26,000 in 2008, where he worked less than 52 weeks. Joe did not have any reported wages since 2008. In 2019, Joe was diagnosed with asbestosis and has timely filed his claim. Using this approach, Joe’s average weekly wage would be $1,000 based on the 2007 wages since it was his last full year of wages.
In 2018, the Court of Appeals decided Penegar v. United Parcel Service, which holds that the average weekly wage can be based on post-retirement wages from another employer and need not be based solely on earnings from the last injurious employer, nor does it have to be solely based on full time wages. 259 N.C. App. 308, 815 S.E.2d 391 (2018).
In Penegar, the employee retired from UPS and then earned post-retirement wages with Union County in the amount of $4,272.92, resulting in an average weekly wage of $82.17. Id. The plaintiff argued the wages should be based on those from the last injurious employer, but the Court held the post-retirement wages were indicative of his actual earnings in the years prior to his diagnosis. Namely, the Court quoted N.C.G.S. § 97‑2(5), and emphasized that the average weekly wage should reflect what the plaintiff would have earned, not what he could have earned. In 2019, the Supreme Court of North Carolina denied a petition for discretionary review the plaintiff filed, essentially, but not overtly, affirming the holding.
Obviously, this seems to conflict with Abernathy and Lipe, but there is an argument that one can read the cases together without Penegar abrogating the prior case law. Under this argument, the average weekly wage should be based on the last year of wages, regardless of whether it was a full year. This is supported by the fact that either extrapolating 52 weeks of earnings from a partial year or using a previous year when the most recent earnings are not a full 52 weeks is based on the other statutory methods under N.C.G.S. § 97-2(5), not the fifth method, and the Penegar court clearly used the fifth method.
Using this approach and utilizing our Joe Smith example again, the average weekly wage would be $500.00 based on plaintiff’s 2008 part-time wages.
There is a caveat to this argument of which one should be aware, however. If, in our example, Joe worked for the same employer in 2007 and 2008, then there is a very good argument that one would have to use the 2007 wages under the other prongs of N.C.G.S. § 97-2. However, if Joe went to work for another employer in 2008 and worked part-time, then the 2008 wages could be used under the Penegar analysis.
Finally, the most defense-oriented argument would be that Penegar has abrogated prior case law on this issue based on the strict statutory interpretation the Court of Appeals employed: the average weekly wage “should ‘most nearly approximate the amount which the injured employee would be earning were it not for the injury[,]’ not what the injured employee could be earning.” 259 N.C. App. 308, 815 S.E.2d 391 (2018) (quoting N.C.G.S. § 97-2(5)).
Taken literally, if the employee has retired and has earned no wages in the 52 weeks prior to the diagnosis, his average weekly wage is $0.00 because he was not earning any wages. Based on this argument, it is a misapplication of the law to use wages prior to the most recent year because they show what the plaintiff could be earning, which is in direct contradiction to the Court’s holding in Penegar and the clear language in N.C.G.S. § 97-2(5).
Returning again to our plaintiff, Joe Smith:
Joe’s average weekly wage would be $0.00, resulting in the minimum compensation rate of $30.00 because he retired in 2008 and has not earned any wages at all for more than 10 years prior to his diagnosis.
These discrepancies in average weekly wage calculations create huge gaps in exposure for the defense. Assuming 500 weeks of indemnity entitlement, Joe Smith could recover up to $333,335.00 under the first argument, last full year wages, and up to $166,666.00 under the second argument, last year of wages. Under the third argument, Joe would be entitled to the minimum compensation rate, which would result in indemnity exposure of $15,000.00.
Based on our example with plaintiff Joe Smith, the difference in exposure only increases with higher wage earners. The Industrial Commission has yet to apply the Court of Appeals’ holding in Penegar to an occupational disease claim like Joe Smith’s diagnosis of asbestosis, and many attorneys and adjusters alike wait in anticipation to see how the law will be applied.