State News

The widow and son of a deceased employee receiving workers’ compensation death benefits from
Texas Mutual recovered a settlement from a third-party. Texas Mutual asserted its statutory
subrogation rights and suspended benefits based on its future credit. The widow and son brought
bad faith claims against Texas Mutual. Texas Mutual filed a motion to dismiss on the grounds that
the plaintiffs’ claims fall within the exclusive jurisdiction of the Division of Workers’
Compensation. The trial court denied Texas Mutual’s motion to dismiss. Texas Mutual filed a
petition for writ of mandamus against the trial court judge which the El Paso Court of Appeals
conditionally granted. Citing the Texas Supreme Court cases of Ruttiger, Morris, and most recently,
In re Crawford, the court of appeals stated that the Division has exclusive jurisdiction over any
cause of action or claim which arises from the investigation, handling, or settlement of a workers’
compensation claim. The court noted that in deciding whether a cause of action falls within the
exclusive jurisdiction of the Division, it must look at the substance of the claim rather than the label
assigned to it by the plaintiffs. Here, plaintiffs’ claims, no matter how artfully pled, arose from
Texas Mutual’s assertion of its subrogation interest and suspension of benefits, issues over which
the Division has exclusive jurisdiction.
In re Texas Mutual Insurance Co., No. 08–15–00343–CV, 2016 WL 921317 (Tex. App.--El Paso
Mar. 9, 2016, no pet. h.).

Ronald Santorsola signed an employment agreement which required arbitration of claims alleging
workers' compensation retaliation. He reported an injury two months after he was hired and filed
a workers' compensation claim. A month later, he was terminated. He sued his former employer
under section 451.001 of the Texas Labor Code, alleging that he was terminated for filing a workers'
compensation claim. His employer sought to enforce the arbitration agreement. Mr. Santorsola
argued the agreement was unconscionable and unenforceable because it contained an agreement
requiring him to split the arbitrator's fee with his former employer that would deter him from
arbitrating his claim because he would not be able to afford it. The trial court agreed with Mr.
Santorsola ruling that the agreement was unconscionable and unenforceable. The Corpus Christi
Court of Appeals held that the trial court did not abuse its discretion in so ruling because the
fee-splitting agreement contained no cap on the amount the employee would be required to pay and
no provision allowing the arbitrator to modify the terms of payment.
AOF Services, LLC, v. Santorsola, No. 13–14–00641–CV, 2016 WL 1165829 (Tex. App.--Corpus
Christi Mar. 24, 2016, no pet. h.).

Marisa Lopez-Wagley has been named Deputy Commissioner of Enforcement. The Division’s
enforcement section which was managed by TDI will once again be managed by the Division.
Nick Canaday has been hired as the Division’s General Counsel to replace Dirk Johnson. Mr.
Canaday represented the Division while at the Office of the Attorney General and has many years
of workers’ compensation experience in private practice. He also has the rare distinction of having
successfully argued a case to the United States Supreme Court.

The Division is seeking input on the development of a new Compound Medications Plan-Based
Audit for physicians that prescribe compound drugs.
Many of you are probably familiar with the recent increase in the number of compound drugs being
prescribed by some physicians. By far, the most common type of compound drug being prescribed
is topical creams. These are usually pain creams or scar creams. These creams are often billed at
astronomical sums, sometimes over $10,000.00 for a one month supply. These creams often contain
common, inexpensive ingredients and have no proven efficacy over FDA approved drugs.
CBS News ran a national story last year on insurance companies receiving outrageous billing for
unwanted prescription creams. The story reported on a Dallas compounding pharmacy under federal
investigation for its practices.
The ODG Treatment Guidelines do not recommend compound drugs as a first line therapy. Rather,
commercially available, FDA-approved drugs should be given an adequate trial. The ODG also
notes,
Recently, some pharmacies have been making and marketing stock compound drugs
for the WC patient population. Among the FDA “Red Flags” for Enforcement Action
on Compounded Drugs is: "Compounding drugs in anticipation of receiving
prescriptions, except in very limited quantities in relation to amounts compounded
after receiving valid prescriptions."
One has to wonder whether the physicians prescribing these compound creams have some
motivation for doing so other than the patient’s best interests. These physicians should keep in mind
that if they have a compensation arrangement with or financial interest in the pharmacy, they are
required to disclose it in accordance with DWC Rule 180.24.

The Division adopted amendments to rule 132.7, regarding duration of death benefits for eligible
spouses, and rule 132.13, regarding burial benefits, to conform the rules to 2015 legislative changes.
The changes allow spouses of first responders to remarry and continue to receive death benefits.
The changes do not apply to non-first responder spouses so they should not remarry if they want to
continue to receive death benefits. The changes also increase the maximum burial benefit from
$6,000 to $10,000 for injuries occurring on or after September 1, 2015.

The revised DWC Form-042 Claim for Workers’ Compensation Death Benefits restructures the
form to increase readability, highlight additional required documentation, and revise the title to
Claim for Workers’ Compensation Death Benefits.
The all-new DWC Form-154 Workers’ Compensation Complaint form provides a simple,
standardized form for filing workers’ compensation complaints. The Division notes that a person
does not have to use the form and a complaint may also be submitted through its website, email, fax,
written correspondence, or even in person.
The form defines a complaint as a “written allegation that a system participant has violated Title 5,
Subtitle A, of the Texas Labor Code or Texas Department of Insurance, Division of Workers’
Compensation (TDI-DWC) rules.”

On March 15, 2016, the Centers for Disease Control and Prevention published its guidelines for
prescribing opioids for chronic pain to address the country’s prescription drug abuse epidemic.
Among the recommendations are that opioids should not be first-line therapy for chronic pain. The
recommendations states, “Nonpharmacologic therapy and nonopioid pharmacologic therapy are
preferred for chronic pain. Clinicians should consider opioid therapy only if expected benefits for
both pain and function are anticipated to outweigh risks to the patient.”
The recommendations also recommend a low starting dosage: “When opioids are started, clinicians
should prescribe the lowest effective dosage. Clinicians should use caution when prescribing opioids
at any dosage, should carefully reassess evidence of individual benefits and risks when considering
increasing dosage to =50 morphine milligram equivalents (MME)/day, and should avoid increasing
dosage to =90 MME/day or carefully justify a decision to titrate dosage to =90 MME/day.”
In a related development, the FDA has announced plans to add a boxed warning - its most serious
type - to all immediate-release opioid painkillers. The label will specify that the drugs should only
be used when other medications alternative therapies cannot control patients’ pain.

In an interview with NPR, United States Department of Labor Secretary Thomas Perez called laws
in Texas and Oklahoma that allow employers to opt out of providing traditional workers’
compensation insurance a “pathway to poverty” for people who get injured on the job.
Mr. Perez said the Labor Department is commissioning a report about the opt-out trend and cutbacks
in workers' comp benefits “to document the precise nature of this problem across the country.” It’s
also been reported that the Labor Department is currently investigating a large provider of opt-out
plans in Texas to determine “whether the company's plans or models contain provisions that
interfere with or prevent the exercise of ERISA rights by covered employees.”
On March 18th, Stanford law professor Alison Morantz released her study of the impact of nonsubscription
on 15 large companies that provided their Texas employees with a workers’
compensation alternative. She found that the costs per worker fell by about 44 percent.
Ms. Morantz did not examine whether workers were better off with the alternative plans or whether
the savings came at their expense. However, she concluded her “findings suggest an urgent need
for policymakers to examine the economic and distributional effects of converting workers’
compensation from a cornerstone of the social welfare state into an optional program that exists
alongside privately-provided forms of occupational injury insurance.”
Last month, we reported that the Oklahoma Workers’ Compensation Commission declared
unconstitutional the recently enacted state law allowing employers to opt-out of the state-regulated
workers’ compensation system, i.e., become non-subscribers, as they are referred to in Texas.

Permanent partial disability awards are often mysterious, partly because New Jersey compensation is so different from our neighboring states.  For those who are used to the laws in Pennsylvania and New York, permanency awards in New Jersey can make no sense.  Here is a sample of common questions about our system in New Jersey:

Question:How can someone who is back to his or her job doing full duty receive an award for permanent partial disability?

Answer: Unlike most states whose compensation systems focus on lost wages, New Jersey has two indemnity payments. The first, temporary disability benefits, depends on actual lost wages. They are similar to payments in other states.  These benefits end at maximal medical improvement or return to work, whichever occurs first.  But permanency payments are based onloss of function, not directly related to lost wages.  The loss of function need not arise at work; it can be loss of function in non-work activities, like sports, hobbies, home activities or the like. Someone who is back to work doing the same job following surgery will still get an award of partial permanent disability.

For example, if an employee has rotator cuff repair surgery and returns to work performing the same job duties as before the accident, the employee is still eligible for a permanency award if he or she has lost function in the activities of daily living. 

Question: What kind of testimony does a Judge of Compensation need to hear to decide to make an award of permanent partial disability?

Answer: The New Jersey Supreme Court said inPerez v. Pantasote, 95N.J. 105 (1984) that an employee must provide both objective evidence of impairment in the body member plus either evidence of a lessening of working ability or a substantial impact on non-work activities. The first part of this test is easy to prove if there is a positive MRI or surgical record given that this would be considered objective medical proof of impairment. The second part of the test depends on the testimony of the claimant in court.  The claimant will describe the impact of the injury on work or non-work activities, discussing activities that he or she can no longer perform or have had to curtail.  If there are no complaints about work activities, the Judge will focus on statements that the claimant makes about hobbies, household chores, and basic daily activities like sleeping that have been affected by the work accident.

Question: Does a claimant who has had surgery ever not receive an award for permanent partial disability?

Answer: There are many claimants who never file for permanent disability awards who have had surgery.  One is not eligible for such an award unless he or she files a claim petition in the Division of Workers’ Compensation.  Almost every claimant who has surgery and who files a claim petition will receive an award of permanent partial disability because there will almost always be testimony that the surgery has left the claimant with a substantial impairment of work or non-work activities.  The only exception would be a claimant who came to court and testified that the work injury and surgery had no impact at all on work or non-work activities.  The undersigned has never encountered this in his practice.

Question: How does an adjuster reserve a case following surgery? Is there a particular formula that a judge uses to determine an award?

Answer: There is no cheat sheet or document that New Jersey judges use to make awards.  Unlike almost every state, New Jersey doesnot follow the AMA Guidelines to Impairment.  Every case must be assessed on its own merits, and the Judge must factor in the objective evidence and the testimony regarding the impact of the injury on work and non-work activities.  Both sides obtain permanency evaluations, and the judge reviews all of these reports.  The permanency evaluators are generally far apart in their assessment of disability.

As a general rule, operated cases are worth more than unoperated cases on the theory that if a medical condition requires surgery, it is probably more serious than one that does not require surgery.  For most operated cases involving one surgery to the back or shoulder, for instance, a practitioner knows that the loss of function which may ultimately be awarded may be around 25% of partial total, give or take a few percentages points.  An award of 25% of partial total means that the worker has lost about a quarter of his or her function. So an operated rotator cuff  case with no serious complications may be reserved around 25%.  The ultimate award will depend on the objective medical evidence and the testimony before the particular judge who is hearing the case.  Experienced adjusters and defense counsel have a sense of how to reserve for operated and unoperated cases.

Question: Have disability award percentages changed over the 36 years since the 1980 Amendments?

Answer: Not really.  The big change since the 1980 Amendments has been the escalation in theamount of the award, not the percentage of the award.  An operated herniated disc surgery without complications in 1980 would generally be reserved for 25%, as it is today, give or take a few percentage points.  However, the dollars have dramatically increased.  For example, in 1979 before the amendments took effect, an award of 50% permanent partial disability was valued at $12,000.  Today in 2016, an award of 50% permanent partial disability would be valued at $

One kind of injury where percentage awards have increased are head injuries.  Medicine and science have revealed a great deal more about head injuries and concussions in the past 10 years, resulting in much higher awards than in the 1980s. 

Question: Why are finger injuries often put in terms of the hand and not the schedule for fingers?

Answer:  New Jersey has scheduled awards and unscheduled awards.  Fingers and hands have their own schedules.  They are not like partial total awards for parts of the body not on a schedule, such as the back, neck shoulder, hip, trunk, and internal injuries.  Scheduled awards are valued lower than unscheduled awards.  A loss of function of 25% of the index finger is paid over 12.5 weeks. A loss of function of 25% of the hand is paid over 61.25 weeks. By comparison, an award of 25% for a back injury is paid over 150 weeks.  Claimants argue that the loss of function of the finger impacts the function of the hand and therefore contend that they should receive an award in terms of the hand, not the finger.

In the end, the Judge of Compensation has to decide whether the finger injury impacts the hand to such a degree that the award should be converted to a hand injury.  If the finger injury only impacts the function of the finger, then the award is in terms of the finger.  The Judge reviews the evaluation reports submitted by counsel for guidance.  Sometimes the judge will convert the weeks for the finger to the exact same number of weeks in the hand, meaning no dollar increase in the award; other times, the judge may award a percentage in the hand that is somewhat higher than the weeks for the finger schedule.

 There is general recognition that finger and hand awards are very low in New Jersey relative to unscheduled losses.  There are bills being proposed to raise such awards.  For instance, an award of 50% of the hand amounts to $    at 2016 rates; an award of 50% of partial total for the back amounts to $     .

Question:  How can an employer produce evidence that may result in lower permanency awards?

Answers:  There are a number of things employers and carriers can do to reduce the percentage of the award.

1)      Credits for previous disability reduce awards, so that if an employer can show that the claimant had the same condition in the past or a related condition, the judge will consider awarding a credit to the employer.  Credits are dollars that come off the award. This is why employers should furnish post-offer medical exams to defense counsel, as these exams often reference a condition that existed at the time of hire.  This is also why defense counsel review ISO reports, DMV reports and prior family doctor records.

2)      Employers who are aware of social or athletic activities or second jobs that employees currently participate in should transmit this information to defense counsel.  This information is directly relevant since it bears on the impact of the accident on work or non-work activities.  So if the employer is well aware that the employee seeking a permanency award is actively golfing and playing basketball but that employee has told his medical evaluator that he can no longer do these activities, this information needs to get to defense counsel.  In one case the undersigned had an employee with two surgeries to her leg who said that she could no longer golf as a result of the surgeries.  The employer obtained a tip from a newspaper that the employee was an active member of a golf club and had one a best ball event.  Our office contacted the golf club, which furnished the number of rounds that the employee played each week, and the Judge of Compensation reduced a very large award to a minimal award.  

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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. 

The following blog article is published with the permission of guest blogger, Brian Francis.

Dateline: NEW ORLEANS- A few blocks from the commotion of New Orleans’ Bourbon Street, just outside the French Quarter, a group of one hundred and fifty worker’s compensation professionals recently met at the Roosevelt Hotel to discuss trends and issues affecting the worker’s compensation system.

In contrast to the noise and distractions of the French Quarter, the tempo in the conference room was focused deliberation. The conversations were important because in the end they affect the delivery of health care to injured employees throughout the United States. Conversely, from a business perspective, the exchanges have an impact on the financial health of employers, insurers and self-insurers.

The American Bar Association’s (ABA) mid-winter worker’s compensation meeting is the high water mark for issues concerning claims and litigation. The event, which is sponsored by the ABA’s Labor & Employment Law Section (LEL), and the Tort & Insurance Practice Section (TIPS), is a two-day thought-provoking conference. The program brings together a multi-jurisdictional cross section of plaintiff and defense bar members, judges and magistrates, insurance regulators, workers’ compensation insurance executives, self-insurers, reinsurers and physicians and medical professionals.

The majority of seasoned insurance executives in attendance were able to recall when “workman’s” compensation (comp) was a fairly predictable and profitable line of insurance coverage. Comp possessed ideally insurable attributes such as foreseeable loss expectancy and a few core statutory issues affecting compensability. Together, these made “work comp” a stable, and at times, profitable line of insurance coverage.

Today, there is no shortage of critical issues creating volatility and obscured predictability. The once profitable line of coverage faces a myriad of complex issues such as: evidenced-based medicine, attacks on the exclusive remedy doctrine,  an aging workforce, medical fee schedules, home-based employment, professional employment organizations, natural disasters, terrorism and the aggregation of losses, undocumented workers, nanotechnology, ADA and FMLA regulations, Medicare Set-Asides, obesity and co-morbidity issues, social media, RICO violations, the Federalization of Workers’ Compensation, Opt-in and Opt-Out ERISA plans and claims of bad faith conduct; so much for predictability and profitability.

While two days of meetings are insufficient to address all of these issues, the panel-format presentations were well-composed, articulate and balanced. Panels discussed topics such as: the loss mitigation of high value claims, the management of psychological injuries, compound drug use, effective claim management, social media and claimant credibility. Presentations were composed of the views of a cross-section of defense/insurer, plaintiff/employee and union/employer perspectives.

For those followers of the FN&H Alabama Workers’ Comp Blawg, both Counsel Mike Fish and Joshua Holden contributed to the ABA meeting. Josh Holden’s presentation addressed issues pertaining to Social Media uses and their associated pitfalls, while Mike Fish was a participant in a lightning round presentation of 60 Legal Tips in 60 minutes.

The ABA does not restrict its membership to attorneys. Associate memberships are available to any and all non-attorney specialist in the area of Workers’ Compensation. Membership should be attractive to those insurance professionals charged with the profitability of a workers’ compensation program. Whether your corporate role is chief underwriter, home office or regional claims manager, or self-insured program manager, I’m confident that either of the ABA committees (LEL or TIPS) would welcome your expertise and participation. To learn more about membership or associate membership visit: www.americanbar.org and click on the “join or renew tab. For question about the ABA contact Mike Fish or Joshua Holden at 205 332 3430.

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Guest blogger, Brian Francis, is a Principal and Manager in a Michigan based third party administrator.