State News : Texas

Last month we informed you of Commissioner Brannan’s decision to authorize contested case

hearings to be held in the Metro Center Building, a.k.a., “Austin Central.” The expansion of

hearings sites was initiated as a “quick fix” to the surplus of recent work comp claims in the Austin

area and the Division’s inability to set disputes within the statutorily-mandated 60-day deadline for want of docket space. Officially, Austin has just one Hearing Officer, and the field office has only

one hearing room. Originally this temporary solution was to have extended only into September,

but because the high volume of cases has continued without abatement, the project has been

extended through at least December. How much longer this “temporary” remedy remains temporary

is anyone’s guess.

Maximum Attorney Fees Rate MIGHT Increase. The proposed rule would establish a new

maximum rate of $200/hour for attorneys and $65/hour for legal assistants. The proposed change

serves as the Division’s recognition that the cost of goods and services has increased significantly

in the last quarter-century. However, the Division’s hourly rate for legal services, which it adopted

in 1991, has not been updated until now. The low rates were beginning to discourage attorneys from

taking workers’ compensation cases when other, higher paying work is available. The increased rate

will provide injured workers with greater access to quality representation which is important to the

health of the system. The proposed new attorney fee rules will be found at DWC Rules 152.3, 152.4,

and 152.6.

DD Requests to be Attached to the DD Orders . . . Finally. Over the last few years, the DWC has

more than once reminded (admonished?) system participants to exchange the DWC 32 with the

opposing party when a DD request is made to the Division so that all are informed of what

information is being asked of the DD. The reminders were ineffective. Frequently, Carriers would

receive an order for a DD exam on extent of injury, for example, without having received the DWC

32. In the absence of the DWC 32, the Carriers were left without an understanding of what was the

injury the DD was asked to address. To resolve the “failure to exchange” problem, the Division has

elected a practical solution. Effective September 1, 2016, the Division will attach the DWC 32 to

the DD Order. Despite this practical solution, system participants are reminded that DWC 32s must

still be exchanged with all parties.

The Hearing Officer determined that the claimant, a truck driver, who stopped to assist a motorist

injured in an accident that did not involve the claimant sustained a compensable injury when his

knee later began to swell. The road on which he had been traveling was still blocked by the

accident, so after he rendered his aid, the claimant turned around and followed an alternate route to

his office. The Appeals Panel disagreed with the Hearing Officer’s determination that the claimant

had remained in the course and scope of his employment when he stopped to assist the motorist.

Although such aid rendered in the event of an emergency could arise during the course and scope

of employment if the employment is not deserted and the claimant’s actions are reasonable for

advancing the employer’s work interests, there was no evidence in this case that the claimant was

performing any action that he thought necessary for the employer’s business interests. His assistance of the motorist did not serve to clear the road, and an alternate route was available to him

to proceed with his work duties.

No Way Around it: Evidence of Impairment is Limited on Judicial Review is Limited to that

Presented to Division

The long-running litigation related to injured worker Daniel Samudio’s correct impairment rating

continues following the Texas Supreme Court’s decision in American Zurich Ins. Co. v. Samudio,

370 S.W.3d 363 (Tex. 2012) (Samudio I). TEXAS LABOR CODE § 410.306(c), provides, “Except as

provided by Section 410.307, evidence of extent of impairment shall be limited to that presented to

the division. The court or jury, in its determination of the extent of impairment, shall adopt one of

the impairment ratings under Subchapter G, Chapter 408.” In Samudio I, the Court held that if on judicial review a trial court finds that no valid impairment rating was presented to the Division in

the underlying contested case, the trial court may remand the claim to the Division to determine a

valid rating. Samudio I, at 368. The case was remanded to the trial court following Samudio I.

On remand, Mr. Samudio filed a motion for summary judgment on the issue of the correct

impairment rating. Attached to the motion was an affidavit and medical report supporting the 20%

impairment rating awarded by the Division in the contested case. The Carrier objected that this

evidence of impairment was not admissible because it was not presented to the Division. The trial

court overruled the objection, admitted the evidence, and granted summary judgment for Samudio.

The Houston Court of Appeals reversed and rendered explaining, “the evidence that Samudio

presented at summary judgment is precisely the type of evidence that the statute forbids, and

therefore, the trial court could not consider it.” American Zurich Ins. Co. v. Samudio, No. 01-15-

00478-CV, 2016 WL 4485818 *6 (Tex. App.–Houston [1st Dist.] Aug. 25, 2016) (Samudio II). The

court held that the Carrier had established as a matter of law that the 20% impairment rating was

invalid. Id.

An analysis by the Texas Department of Insurance shows that Texas’ use of the closed formulary

for prescription drugs in the workers’ compensations system is having a positive impact on both

Carrier’s wallets and on injured workers. Reporting on the study, www.workerscompensation.com

noted that total drug costs fell by 15%, N-drug costs fell by 80%, and prescriptions for N-drug

opioids fell 81%. The combination of lower costs and better care through less addictive prescriptions

shows the closed-formulary is working in Texas. For more information, visit here. In regard to

states which legalized marijuana, reports are that although opioid use is down, accidental poisonings

of children are on the rise.

The 2016 Rio Olympic Games brought the Zika virus to the forefront of national worry. The tropical

disease can cause brain damage and birth defects to infants of mothers infected in the womb, and

new studies suggest that Zika may cause brain damage in infected adults as well. As Zika creeps its

way into the United States from the tropical climates to our south, employers and carriers will likely

be presented with claims from injured workers alleging they contracted the disease in the course and

scope of employment. These claims will likely be very fact specific and require a challenging

causation analysis showing if, when and how the claimant contracted the disease while working.

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.