State News

January 2012 Workers’ Compensation Law Update

2012 MQRP Audit Includes More Scrutiny for Pill Mills

On January 13, 2012, the Division announced it has finalized the Medical Quality Review Calendar Year 2012 Annual Audit Plan.  Review categories include the following:

·           Health care providers rendering pain management services including opioids;

·           Designated Doctor Examinations ? potentially includes the quality of designated doctor reports and the appropriateness and medical necessity of additional testing ordered by designated doctors; and

·           Insurance Carriers and/or Utilization Review Agents? potentially includes the appropriateness of medical necessity decisions and the appropriateness of the professional certification of the peer reviewer.

For each of these categories, the scope, methodology, and selection criteria remain to be determined.  The Division indicated it would do so at a later date with stakeholder input.

Recoupment No Longer Limited to AWW Miscalculations

The Division has adopted new rules 126.15 regarding procedures for resolving underpayments of income benefits and 126.16 regarding procedures for recouping overpayments of income benefits.

New rule 126.16 expands the procedures for recoupment to include reasons for recoupment other than AWW miscalculations.  Former rule 128.1 did not provide a procedure for recouping overpayments made for reasons other than AWW miscalculations.

In the preamble to new rule 126.16, the Division has seemingly left the door open to arguments that the cause of the overpayment may be a consideration in deciding whether to allow recoupment:

The suggested language would serve to restrict the hearing officer’s ability to fully consider the cause of the overpayment. Cause is best addressed in case specific reviews. There may be instances where the hearing officer may determine there should be no recoupment from future income benefits allowed, just as there may be instances where the hearing officer may allow a 100% reduction of income benefits.

However, this statement is inconsistent with section 408.0815 and the language of rule 126.16 which indicates that the cause of the overpayment goes only to the rate of recoupment and not entitlement to recoupment itself.  It is also inconsistent with earlier AP decisions such as 040876 which held that “[t]he IC is entitled to recoupment pursuant to Section 128.1(e)(2)  even when the overpayment was due to the IC’s error in calculating the proper AWW. Section 128.1(e)(2) supercedes prior AP decisions which looked to the equities in determining an IC’s right to recoup an overpayment.”

News from Around the Country – Learning From Others’ Mistakes

In Washington State, concerns about a high incidence of fatal overdoses of methadone have prompted the state to issue a public-health advisory warning of the unique risks of methadone.  The advisory was sent to pharmacists, drugstores, and health care professionals.  Methadone is reported to be different than other opioids in that it has a long half-life.  As a result, it can stay in the body for days, building to a toxic level that depresses the respiratory system.  The Seattle Times reported that since 2003, at least 2,173 people in Washington have died from accidental overdoses involving methadone.  Methadone was previously designated as a preferred drug by Washington State.  Hopefully, Washington State’s experience with methadone will serve as a warning for anyone in Texas who might be in favor of taking methadone off the “N” list and putting it on the “Y” list.

Eliminating Preauthorization of Drugs in Legacy Claims

The Division has proposed to exempt drugs from the general requirement under rule 134.600(p)(12) that preauthorization is necessary for all treatments and services that exceed or are not addressed by the commissioner’s adopted treatment guidelines.  Under this proposed rule, only drugs that are listed in the closed formulary with a status of “N” would require preauthorization.  Preauthorization would not be required for “Y” drugs whose prescribed use is inconsistent with or outside the ODG.  For example, the long-term use of certain muscle relaxants and benzodiazepines would not require preauthorization. As a result, for legacy claims not subject to the closed formulary, there would be no preauthorization of drugs under any circumstances.  In light of the overutilization of drugs in Texas workers’ compensation claims and the significant adverse health consequences, this change is not recommended.

In the introduction, the Division describes this proposed rule as a clarifying amendment to existing law.  However, this proposed rule actually represents a change in the law.  Rule 134.506(d) states that “drugs included in the open formulary prescribed and dispensed for legacy claims not subject to a certified network do not require preauthorization, except as required by Labor Code §413.014” (emphasis added).  Section 413.014 requires preauthorization for any service specified by the commissioner as requiring preauthorization, and current rule 134.600 requires preauthorization for any services that are inconsistent with the treatment guidelines.

The First Big Comp Case of the Year – Port Elevator?Brownsville, L.L.C. v. Casados, No. 10–0523, 2012 WL 247985 (Tex. Jan. 27, 2012)

On January 27, 2012, the Texas Supreme Court issued an opinion reversing the Corpus Christi-Edinburg Court of Appeals and reaffirming the long-standing rule against split workforces which requires employers to elect workers’ compensation coverage for all employees – except for limited statutory and common law exceptions.  In that case, a temporary staffing agency employee provided to a grain elevator company suffered a work-related fatal injury. Both the temporary staffing agency and grain elevator had workers’ compensation coverage.  The staffing company’s carrier offered to pay burial expenses and paid the required sum into the SIF since the deceased employee had no eligible beneficiaries.  The grain elevator’s carrier denied coverage on the grounds that the deceased employee was an employee of the staffing agency.  The employee’s parents sued the grain elevator which then asserted the exclusive remedy defense.  The employee’s parents argued that the exclusive remedy defense did not apply because the grain elevator’s policy did not cover the employee.  The court rejected this argument.  Because the grain elevator had workers’ compensation coverage, it could not split its work force by electing coverage for some employees but not coverage for all, and none of the exceptions to the rule against splitting workforces was applicable.

The employee’s parents cited three specific reasons the grain elevator’s policy did not cover the employee: 1) the grain elevator did not pay premiums for temporary employees; 2) the deceased employee was not covered by any code classification; and 3) the grain elevator’s carrier denied coverage.  The court rejected each of these arguments in turn.  First, the court reiterated that premiums are an issue between the employer and the insurer and do not affect the employee’s coverage.  It further stated that even a clear and unambiguous attempt to exclude the employee from coverage would violate the rule against splitting workforces.  Second, whether the employee was covered by any job classification in the grain elevator’s policy is not relevant because the rule against split workforces requires that all employees be covered absent a few limited exceptions, none of which were applicable in this case.  Third, in response to the argument that the carrier’s denial of coverage means that the employee was not covered, the court stated the employee was covered by the grain elevator’s policy citing its earlier  holding in Wingfoot. That case held that the employee should be able to pursue benefits from either the staffing company’s carrier or the client company’s carrier.  This raises some interesting questions for carriers that may find themselves in similar situations in the future.  The court did not mention the related principle that an employer’s entitlement to the exclusive remedy defense is not dependent on the carrier’s acceptance of the claim.  Expect to hear more about this case.

Other Recent Cases

Liberty Insurance Corp. v. Camero, No. 05–10–00740–CV, 2011 WL 6146189 (Tex. App.??Dallas, Dec. 12, 2011).

The claimant’s doctor requested preauthorization for knee surgery.  The request was denied.  Neither the doctor nor the claimant requested reconsideration.  Seven months later, preauthorization was requested again and the surgery was approved.  The claimant sued the carrier for bad faith alleging that the carrier originally denied preauthorization for knee surgery without a reasonable basis to do so.  The Dallas Court of Appeals held that because there had been no determination by the Division that surgery was medically necessary when the first request for preauthorization was made, the trial court was without jurisdiction to award damages allegedly resulting from delayed surgery.

Salinas v. Pankratz, No. 13–10–00241–CV, 2012 WL 112812 (Tex. App??Corpus Christi?Edinburg, Jan. 12, 2012).

The court held that the Entergy decision applies to prevent the claimant’s suit against a general contractor.  The court also rejected the employee’s discrimination claim under section 451.001 of the Act which provides that an employer may not discharge, or in any manner discriminate, against an employee because the employee, among other things, filed a workers’ compensation claim in good faith or hired a lawyer to represent him in a claim.  The employee argued that he was discriminated against under section 451.011 because he was not notified whether it was the general contractor or subcontractor that had agreed to provide his workers’ compensation coverage.  The court held that the failure to give notice about coverage does not amount to an act of section 451 discrimination.

State Office of Risk Management v. Joiner, No. 06–11–00076–CV, 2012 WL 90108 (Tex. App.??Texarkana, Jan. 12, 2012).

The court rejected the Division’s interpretation of rule 130.1(c)(3), as set forth by the appeals panel, that if a physician’s report of impairment fails to base the claimant’s condition on the date of maximum medical improvement that impairment rating is invalid and should not be considered.  The court of appeals also held that because the issue of whether the treating doctor’s report was invalid under the AMA Guides was not decided by the appeals panel or the trial court, it could not decide that issue for the first time on appeal.

Barnes v. United Parcel Service, Inc., No. 01–09–00648–CV, 2012 WL 112252 (Tex. App??Houston [1st Dist.] Jan. 12, 2012).

The employee sustained a fatal heart attack at work.  The hearing officer found that the employee’s work was not a substantial contributing factor to the heart attack but rather it was the natural progression of a preexisting heart condition. The hearing officer concluded that the employee’s heart attack was not a compensable injury because his work was not a substantial contributing factor.  The  employer was subsequently sued for gross negligence.  The court held that the gross negligence suit could proceed because it concluded that the causation standard for compensability of a heart attack under section 408.008 is different from that of a plaintiff suing for gross negligence.

Rayford H. Taylor
Of Counsel
Casey Gilson P.C.
Six Concourse Parkway, Suite 2200
Atlanta, Georgia 30328
770-512-0300 -Ext. 529
770-512-0070 -Fax
rtaylor@caseygilson.com
www.caseygilson.com

Flores v. Dependable Tire Co., Inc.

The Court of Appeals held the evidence was sufficient to support Workers’ Compensation Board’s finding that claimant did not sustain a change in condition based on injuries sustained in an intervening motor vehicle accident while leaving a doctor’s appointment related to his compensable work-related back injury.

Employer sought judicial review of Workers’ Compensation Board’s finding that automobile accident did not break the chain of causation of claimant’s work-related back injury, and that his condition was directly and causally related to the work injury.

The record establishes that Flores sustained a compensable on-the-job injury on February 12, 2008, when he injured his back while lifting a large tire.  He did not return to work.  His claim was accepted by the employer, Dependable Tire Co., Inc., which paid indemnity benefits to Flores.

On November 18, 2008, as Flores was leaving a doctor’s appointment related to the February compensable injury, the vehicle in which he was riding was struck from the rear, and he was slammed into the dashboard, causing him to lose consciousness.  The vehicle in which Flores was traveling was provided by the employer.  Although Flores testified that he did not choose the transport service provided to him, there was evidence the employer’s insurance company provided the vehicle because his attorney requested it and that the employer was not involved in scheduling Flores’s appointments.  As a result of the collision, Flores complained of pain in this neck and back, as well as in his chest, abdomen, pelvis and knees.  He was diagnosed as having acute chest, abdomen, and pelvic blunt trauma, neck sprain, and acute contusions to both knees.

In April of 2009, Flores returned to the treating physician, but did not report the November automobile accident to him.  Nevertheless, the doctor noted that Flores again reported his pain level as an eight out of ten; that the accident aggravated Flores’s neck and back injuries; but that his diagnosis of lumbar disk herniation and cervical disk herniation was the same before and after the accident.

Affirming the ALJ’s award, the Board concluded the accident did not break the chain of causation of Flores’s injury and that his condition was directly and causally linked to the work injury.  The Board adopted the ALJ’s conclusions without expressly analyzing the issue of whether the accident should be considered work-related.

655105-1

Hearn v. Dollar Rent A Car, Inc., et al.

Court ordered Employer/Insurer to issue settlement check to Claimant but without listing Medicare as a co-payee when release recognized Claimant’s responsibility to pay Medicare lien.

Minnie Hearn filed her complaint against DTG, York, and Dollar based upon a dispute as to whether a $20,000 settlement check should include Medicare as a payee.  The settlement arose from a November 28, 2002 automobile accident in which the driver of a car rented from DTG struck Hearn’s vehicle.  DTG “contractually retained York as an independent Third Party Administrator (“TPA”) to handle claims in Georgia against DTG’s renters.”

During settlement discussions between Hearn’s attorney and a claims adjuster with York, the issue of Medicare’s involvement arose.  According to the claims adjuster, she relied upon the attorney’s representation that Medicare did not have an enforceable lien when she agreed not to include Medicare as a payee on the check.

The attorney’s version was that “from day one” he and the claims adjuster both knew Hearn had been on disability and that Medicare paid some of her bills relating to the accident.  In support, he pointed to the medical bills he provided to the claims adjuster in May of 2004 indicating Medicare had made adjustments, write-offs, and payments.

On October 5, 2004, the claims adjuster offered in writing to settle Hearn’s claim for $20,000.  There was no mention of Medicare being an additional payee on any settlement check in this letter.  Hearn signed the release, which included her agreement to indemnify against “all further liability, loss, damage, claims of subrogation and expense.”  She also agreed to release “known and unknown liens including Medicare.”  After returning the executed release to the adjuster, the settlement check included Medicare as a payee.

Under Medicare statutory and regulatory framework, York faced potential liability for both the amount of any Medicare lien and double the amount if Hearn failed to satisfy any such lien within 60 days of receiving the settlement check.  The adjuster stated the potential liability was the basis for adding Medicare to the settlement check.  Hearn sued to require another check be issued without Medicare being listed as a payee.

After reviewing and considering the Medicare reimbursement statutes and regulations relevant to the specific facts of this case, the Court concluded that public policy does not preclude a court from enforcing an agreement to omit Medicare as a co-payee on a settlement check where, as here, the plaintiff signed a release that acknowledged her responsibility to pay any Medicare claim and agreed to indemnify the released parties.

655131-1

March 2012 Workers’ Compensation Law Update

Dr. Donovan and Friends!  Organized Crime In The Workers’ Compensation System?

Allstate Insurance Company and its affiliates recently filed suit against a number of providers.  William Donovan, M.D., Lorenzo Farolan, M.D., Omar Vidal, M.D., David Dent, D.O., Northshore Orthopedics Association, and Memorial MRI are on the hot seat.  The claims asserted are for racketeering, conspiracy, and fraud.  The complaint alleges that certain law firms and chiropractors associated with them referred patients to the defendants’ enterprise, which converted minor soft-tissue bodily injury claims into major medical claims through inter-enterprise referrals.  The plaintiffs claim that patients were referred to Memorial MRI for MRIs, which were reviewed by a specified radiologist, who embellished the findings to justify referral to Northshore Orthopedics for neurodiagnostic testing (conducted by a specified neurologist, who also embellished the results to justify additional testing and procedures), additional MRIs, surgical injections including ESIs, and additional orthopedic consultations, typically ending with a surgical recommendation.  The suit is currently pending in the U.S. District Court for the Southern District of Texas in Houston.

Watch this case!!  Case To Proceed Against Carrier For Obstruction of Workers’ Comp Claim

The Federal 8^th Circuit Court of Appeals ruled that an employee may proceed on a suit against an employer and it’s workers’ compensation carrier for the intentional obstruction of a claim.  Despite conflicting statements, the carrier denied compensability of the claim.  The court found that there are genuine issues of material fact regarding whether the employer intentionally obstructed the employee’s receipt of benefits by making false statements and delaying payment of benefits for 17 months.  Nunn v. Noodles & Company; Zurich American Insurance Co., No. 11-1531 (8^th Cir. Ct. 2012), decided March 22, 2012.

Nurses Playing Doctor?

House Bill 915 includes proposed amendments to several sections of the Texas Occupations Code that would allow  qualified advanced practice registered nurses to apply to the board for “prescribing and ordering authority.”  Approved applicants would be authorized to: (1) prescribe, procure, administer and dispense “dangerous drugs and controlled substances;” (2) diagnose, prescribe, and institute therapy or referrals of patients to other providers; and (3) plan and initiate a treatment plan that includes ordering and prescribing medical devices and equipment, nutrition, and diagnostic and supportive services, including home health care, hospice, physical therapy and occupational therapy.  The legislation requires the board to adopt rules to establish any specialized education or training a registered nurse must have to qualify.  The rules must require completion of 3,600 hours of practice as an advanced practice nurse with authority to carry out or sign prescription drug orders, and must establish a system for assigning identification numbers to nurses who meet the requirements.

Division Prepares For Implementation of Pharmacy Closed Formulary For Legacy Claims

On February 6, 2012, the Division issued a memo reminding system participants that beginning on September 1, 2013, legacy claims will also be subject to the closed formulary, requiring preauthorization before a pharmacy can fill or dispense drugs excluded from the closed formulary.  Carriers are required to identify all legacy claims that have been prescribed a drug excluded from the closed formulary after September 1, 2012 and send notice to the employee, prescribing doctor, and pharmacy.  The Division is urging all affected parties to begin the process well in advance of the deadlines to avoid last minute complications.

Efforts to Curb Drug Abuse Raise Privacy Concerns

Prescription Access Texas, a database maintained by the Texas Department of Public Safety, will go online this summer, allowing registered physicians, pharmacists and law enforcement officials  access to the agency’s records of who is prescribing, filling, and buying controlled substances.  During next year’s legislative session, Texas lawmakers will consider requiring doctors and pharmacies to check the database before writing or filling prescriptions for controlled substances.  While concerns have been expressed that this would be a violation of patient privacy, the DPS says the data will be used to identify fraud in an effort to curb prescription drug abuse and prevent accidental overdose, which have increased dramatically in recent years. To see the full article, go to http://dfw.cbslocal.com/2012/02/10/doctor-shopping-database-concerns-privacy-advocates.

Enforcement Actions for 2011 Posted

As usual, the vast majority of enforcement actions were against carriers, and most of the sanctions imposed against health care providers were for failure to timely file or properly complete required forms and reports, but a few doctors were sanctioned for complaints related to the quality of care.  But there are a few exceptions.  Dr. Quoc Thai Nguyen of Houston was fined $2,500 for ‘failure to provide health care consistent with public health, safety, and welfare.”  Dr. Alexander Orlov of Lufkin was removed from the workers’ compensation system due to an undisclosed criminal offense.  Dr. Anthony Francis Valdez of El Paso was ordered to cease and desist from participating in the WC system for providing services to injured workers after he was denied admission to the ADL.  Dr. James Crockett of Marlin was removed from the system for “providing diagnoses and treatments found to be improper, unfair and/or unreasonable and not supported by documentation and/or physical examination of the employee.” Dr. Edward Wolski of Denton was fined $5,000 for filing unwarranted complaints against system participants.  Another highlight: Vista Hospital of Dallas was fined $18,000 for “submitting charges for services not furnished,” among other things. A full list of the enforcement actions can be viewed  at www.tdi.texas.gov/news/2012/news20129.html.

Revised Forms For Requesting Change of Treating Doctor and Advance of Benefits

The Division revised DWC Form-047 (employee request for advance of income benefits) and Form-053 (employee request to change treating doctor, non-network claims).  The revised versions of these forms can be downloaded from the TDI’s website.  Previous versions of these forms will no longer be accepted after June 1, 2012.

Congratulations Are In Order!

Jane Stone with Stone Loughlin & Swanson and Steve Tipton with Flahive Ogden & Latson were recently named  Fellows of the College of Workers’ Compensation.  The College of Workers’ Compensation Lawyers is a national organization that was established to honor those attorneys who have distinguished themselves in their practice in the field of workers’ compensation, demonstrating their commitment to furthering the objectives of the College through scholarship, teaching, lecturing, and/or distinguished published writings on workers’ compensation or related fields of law.

Rayford H. Taylor
Of Counsel
Casey Gilson P.C.
Six Concourse Parkway, Suite 2200
Atlanta, Georgia 30328
770-512-0300 -Ext. 529
770-512-0070 -Fax
rtaylor@caseygilson.com
www.caseygilson.com

Harris v. Eastman Youth Development Center

The Court of Appeals held that whether claimant’s low-back pain was compensable wasnot an issue before ALJ at hearing on claimant’s request to have work-related injury declared catastrophic, so ALJ erred in determining that issue.

In June 2002, Harris was employed as a cook at the Eastman Youth Development Center when she was kicked in the left knee by a resident. The injury initially kept her out for six weeks, but she eventually returned to work on light duty. Approximately four to five months later, the pain in her knee worsened, and she developed low-back pain. The treating physician determined that her low-back pain was related to the alteration of her gait as a result of the knee injury. She stopped working in April 2003 and underwent two procedures to her knee. The treating physician ultimately recommended a total knee replacement and hoped the surgery would alleviate the pain in Harris’s knee and back.

After undergoing the total knee replacement surgery in 2007, Harris continued to experience worsening low-back pain and sought treatment. In March 2010, Harris again sought a catastrophic designation of her claim and continued payment for the weight-loss program. The

ALl denied both requests and, in doing so, also determined that any degeneration of Harris’s back as a result of the knee injury had been resolved by the knee surgery and that the Employer was no longer responsible for Harris’s low-back pain. The ALl further determined the continuing pain in Harris’s back was attributable to her “morbid obesity”. Therefore, the back injury was not causally related to the knee injury.

On appeal, the Appellate Court agreed with Harris that the ALl erred by making a determination as to the compensability of her low-back pain when that issue was not before the ALl Because there is no evidence Harris “had notice and an opportunity to be heard on the issue of compensability, or gave implied consent to trial of that issue, the ALI erred as a matter of law in making factual findings on that issue.”

On remand, the ALI was instructed to make a determination as to whether Harris’s claim met the criteria of a catastrophic injury. The ALI was advised to decide that issue without addressing the

compensability of her low-back pain which the Court noted the ALI had previously determined was compensable.

659080

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

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 …