State News : Texas

On July 5, 2016, the DWC’s Deputy Commissioner for Hearings and Appeals Panel Director issued a joint memorandum reminding system participants of the prohibition against improper contact with Division staff or management for the purpose of influencing the outcome of a decision while the case is still pending.  Citing 28 Texas Administrative Code 142.3(a), the memo reminds parties that direct or indirect communications with the Hearing Officer on any facts, issues, law, or rules pertaining to an active dispute are verboten until the decision has been issued and appeals remedies have been exhausted.  Although the memo omits specific instances of such infractions, the need for the reminder presumably arose by way of some attorneys seeking to alter Hearing Officer decisions through contact with DWC managers or the members of the Appeals Panel instead of through the appeals process itself. 

Beginning in June, Commissioner Brannan authorized contested case hearings to be held in the Metro Center Building, a.k.a., “Austin Central,” on a temporary basis.  Despite its population, Austin has but one official Hearing Officer.  The current field office lacks the space needed to accommodate a second hearing room and, by extension, a second Hearing Officer.  Due to a recent surge in the number of claims, hearings were often unavoidably set in excess of the statutorily-mandated 60-day deadline for want of space on the docket.  Hence, the Division decided to schedule CCH’s with attorney-represented claimants in the Tippy Foster Room in the Metro Center Building on Mondays and ombudsman-assisted claimants on Wednesdays.  The Division’s two traveling Hearing Officers, both of whom are based in Metro, will preside.  This secondary docket is set to last only through September, but if the number of Austin-based workers’ comp claims continues unabated, the temporary solution may become permanent.

San Antonio Hearing Officer David Northup has announced his retirement from the Division of Workers’ Compensation.  A decades-long employee of the Division, Judge Northup served as a Judge Advocate General in the United States Army and as a member of the Division’s Appeals Panel before becoming a Hearing Officer.  His retirement is effective August 13, 2016.  We wish him only the best in his future endeavors.

On July 27, 2016, the DWC released its updated list of health care providers in the workers’ comp system whose practice has been restricted, who have been removed from the designated doctor list, or who incurred some other form of disciplinary action.  The list of disciplinary actions and enforcement orders signifies what appears to be a welcome trend in combating unnecessary functional capacity evaluations, which have emerged recently as something of a ruse for extending disability and MMI dates.  Among the noteworthy admonished:

·         Ray Altamirano, M.D., of San Antonio was fined $1,000.00 and removed from the Texas workers’ compensation system as a health care provider for two years for providing improper, unreasonable, or unnecessary medical care, for failing to keep adequate medical records, and for failing to document aberrant drug test results.

·         Tuan Anh Trinh, D.O., of Dallas was fined $4,800.00 for improperly ordering a functional capacity evaluation that was not reasonable or medically necessary. 

·         Scott Neuberger, D.C., of Houston was fined $5,600.00 for failing to document or incorporate results of a functional capacity evaluation in medical records and for failing to document any reasonable medical necessity requiring said FCE. 

·         James Galbraith, M.D., of Dallas was fined $4,800.00 for improperly ordering functional capacity evaluations that were not reasonable or necessary. 

·         Stephen Esses, M.D., of Houston, was fined $35,000.00 for failure to maintain efficient utilization of health care and ordering tests that were improper, unreasonable, or unnecessary. 

For questions, contact Jane Stone at Stone Loughlin & Swanson, LLP.   

A contractor hired a sub-contractor to perform work at one of its refineries.  The contract between them established that the sub-contractor would acquire insurance coverage and a waiver of the insurer’s subrogation rights.  It also contained an indemnity provision in which each agreed to indemnify the other for injuries arising out of its own negligence.  

The sub-contractor did obtain work comp coverage before two of its employees were severely injured on the job.  They received work comp benefits and then filed suit, eventually settling with the contractor.  There was no dispute that it was the negligence of the contractor that led to the accident. 

Because the Carrier would not acknowledge waiver of subrogation, it was named as a third party defendant.  The Carrier argued that the waiver of subrogation applied only to liabilities assumed by the subcontractor, not the contractor.

The contractor sought to convince the court that only the waiver provision, and not the underlying contract, controlled.  However, since the insurance policy references the contract, the court determined that the contract must also be considered. 

Because the subcontractor was required to indemnify the contractor only for thesub-contractor’s own negligence, it had not assumed liability for the contractor’snegligence, and was therefore not contractually obligated to induce the Carrier to waive subrogation against the contractor.  The court concluded that the Carrier had not waived its subrogation rights. The Insurance Company of the State of Pennsylvania v. Kevin Roberts and Exxon Mobil Corporation,– S.W.3d –, No. 01-15-00453-CV, 2016 (Tex. App.– Houston July 14, 2016).

Another case dealing with subrogation came out of the same Court on July 26.  The injured worker, an employee of a contractor, was fatally electrocuted while using an electric transfer pump on an oil rig owned by the operator.  Workers’ compensation coverage was supplied through the contractor, and death benefits were paid to the decedent’s family, who thereafter brought a wrongful death suit.  The Carrier intervened to establish its subrogation rights. 

The contract between the operator and the contractor established that the operator would obtain waivers of its insurers’ subrogation rights against the operator.  The contract also included two indemnity provisions.  In one, the contractor agreed to release and indemnify the operator from liability for claims arising out of the death of a contractor employee.  However, in another, the contractor would not be liable for any loss or damage resulting from the use of materials furnished by the operator, and the operator would indemnify the contractor from any such liability. 

The Carrier argued that the defective electric transfer pump was rightfully classified as a “material” furnished by the operator and therefore permitted subrogation against the operator under the second indemnity provision.  Plaintiffs argued that the pump was not a “material,” but rather “equipment,” which would not activate the second indemnity provision, and no subrogation rights would follow.

The court agreed with the Carrier that, although undefined in the contract, the term “materials” is used throughout the contract interchangeably with other terms such as “equipment.”  Without a distinction between the two terms, the court determined the contractor had not assumed liability for damage caused by the transfer pump provided by the operator, and was therefore not contractually obligated to cause its insurer to waive its subrogation rights. New Hampshire Insurance Company v. Mora, – S.W.3d –, No. 01-15-00406-CV, 2016 (Tex. App.– Houston July 26, 2016).  For questions, contact Jane Stone at Stone Loughlin & Swanson, LLP.  

From Robert Wilson, President & CEO of WorkersCompensation.com, comes word that the final report has been released from the 2016 Workers’ Compensation Summit held in Dallas on May 11 & 12, 2016.  SLS partner Jane Stone was among those in attendance as a representative of the National Workers’ Compensation Defense Network. With the goals of increased efficiency, lower costs, and greater fairness to workers and employers, the report identifies and prioritizes the “imperative issues” affecting workers’ compensation systems nationally.  Three problem areas emerged as most important following a survey of participants. First, benefit adequacy.  Some states currently face constitutional challenges to their work comp systems after significantly reducing benefits.  Next, regulatory complexity, which raises overall costs via increased litigation.  Finally, delayed treatment while a claim that will eventually be compensable is investigated and appealed. 

On the problem of delayed treatment, Paul Sighinolfi, Chairman of the Maine Workers’ Compensation Board, apprised attendees of Maine’s legislative solution, which mandates that treatment for those covered by general health or disability policies cannot be denied merely because a workers’ compensation claim has been filed.  Rather than delay treatment while investigating the claim and determining whether it is a compensable work comp injury, which might only serve to worsen the underlying condition and add to medical costs, treatment proceeds first under one’s own health insurance or disability policy, and liability & reimbursement issues are addressed later in subrogation.   For questions, contact Jane Stone at Stone Loughlin & Swanson, LLP.   

As you know, Kids’ Chance is a scholarship program for children whose parents have been killed

or seriously injured at work. Donations are tax deductible and we welcome contributions. More

important is that we are looking for eligible scholarship recipients. If you know of an eligible child,

please contact Kids’ Chance in care of Jane Stone, who is on the founding board, at

jstone@slsaustin.com, or call her at 512-343-1300. A big kick-off event is planned for the Fall, too,

and if you or your company are interested in being a sponsor (with appropriate attribution), please

let us know. The deadline for sponsorships is fast approaching.

The US National Toxicology Program, a federal interagency group under the NIH, is said to have

linked radiation from cell phone exposure to cancer in rats in a new study. The researchers exposed

rodents for two years (apparently, a rodents’s life span) to radiation levels designed to roughly match

what a human with heavy cell phone use or exposure might experience. The study results are a long

way from determining if the results of the experiments would be the same if the subjects were

humans. We wonder if the danger to humans will be more or less than the dangers of using a cell

phone while driving (or walking). In any event, if cell phone usage is a work requirement for a

particular injured worker who develops cancer, or gets hit by a bus while distracted by his phone,

there may be some workers’ compensation claims filed.

As many of you know, a broad-based conference was recently held in Dallas by invitation only to

discuss common national issues in workers’ compensation in light of a perceived trend to “opt-out”

plans and the specter of nationalization or doing away with a workers’ compensation system altogether. SLS partner Jane Stone was invited to the Summit as a representative of the National

Workers’ Compensation Defense Network. You may have been following the progress of the

Summit on Bob Wilson’s website. The purpose was to open a dialogue as to what is right in

worker’s compensation programs, and what can be improved. The discussions were lively to say

the least, given that the attendees were so diverse in their views and experiences. The conversations

lasted for 2 days among regulators, judges, insurance professionals, physicians, academics, union

representatives, lawyers (from all sides), and injured workers (both satisfied with the system and

unhappy with it). After the initial conference, the attendees responded to a survey to determine the

priority of topics that were most important. The results of the survey will be published sometime

after July 4th.

Treatment for opioid dependence has long been an issue in workers’ compensation. Now that the

FDA has approved implants which will provide a constant, low dose of the drug buprenorphine to

a patient who is already stable on other forms of the drug, such as pills or sublingual films, requests

for the implant should begin to show up in preauthorization requests, given that buprenorphine is

an “N” drug.

The State Office of Administrative Hearings recently decided to deny payment for compounded

medications which are usually various topical creams which are touted as relieving pain or healing

scars. Texas insurance carriers have been seeing bills of more than $12,000 for a one month

prescription. It was thought by some that so long as the compound didn’t contain an “N” drug from

the DWC’s closed formulary, preauthorization under DWC Rule 134.600 was not required. But the

insurance carrier in this case decided to deny payment based on the defense that Rule 134.600

requires that investigational or experimental drugs be preauthorized. SOAH determined, based on

expert testimony from Dr. Suzanne Novak and her expertise in the application of the ODG treatment

guidelines, that compounded drugs are by their very nature investigational and experimental. That

being the case, the creams would require preauthorization. Many in the pharmacy and treatment

industries disagree, but for now, at least we know which way the wind is blowing.

The Texas Supreme Court issued a decision blowing apart an attempt at settlement of a partial SIBs

quarter. Bonnie Jones and the workers’ comp carrier had taken a dispute over the 14th quarter of

SIBs through the agency and into district court. The DWC had determined that Ms. Jones was not entitled to benefits for that quarter and Ms. Jones took the case up. In the district court proceedings,

Ms. Jones agreed to a partial payment for the quarter and the proposed judgment incorporating the

settlement was sent to the DWC. The Labor Code requires that all proposed judgments be submitted

to the DWC so the agency can decide if there is a reason to intervene in the case. After reviewing

the proposed judgment, the DWC exercised its right to intervene and oppose the judgment on the

basis that the agency had already found that Jones had not fulfilled the mandatory work search

requirements for the 14th quarter, and that a partial SIBs award, even if both parties agreed, “flouts

the statutory formula’s edict to calculate the monetary entitlement in a precise way.” The trial court

went ahead and granted the judgment anyway, and the court of appeals affirmed, citing the longstanding

general policy of encouraging settlement. But, as stated in the Supreme Court’s opinion,

the trial court and court of appeals“ignor[ed] the particularities that the revamped workers’ comp

scheme provides.” Bottom line: SIBs entitlement is all or nothing for each quarter – no partial

settlements allowed. One wonders whether the parties attempted the same settlement at the agency

level. It seems an odd case for the agency to spend resources to pursue what seems to be an issue

of minor significance. Texas Dept. of Ins., Division of Workers’ Compensation v. Bonnie Jones and

American Home Assurance Company, (Tex. 2016) No. 15-0025, opinion issued June 24, 2016.

So far, all we know is that the scam involved Federal workers’ compensation claims, but it is hard

to believe that Texas workers’ comp was not hit as well. More to come on that, but in the meantime,

spread the word. Attorney Tshombe Anderson was arrested last Friday, and his wife Brenda

Anderson and sister Lydia Bankhead are in federal custody. The fronts they are alleged to have used

were Best First Administration Durable Medical Equipment of Austin, Union Medical Supplies &

Equipment LLC, Sky-Care Medical Supplies & Equipment LLC, and American Federal Union

Claims Advocates LLC. This story ran in the Dallas Morning News, and here’s the link:

http://crimeblog.dallasnews.com/2015/08/dallas-attorney-and-family-members-charged-with-defraudingworkers-

comp-out-of-22-million.html/ .