The wait for a ruling in Valdez is over.

The California Court of Appeal, Second District, Division 7 has spoken in Elayne Valdez v. WCAB and Warehouse Demo Services. The Court reversed a WCAB holding that precluded use of reports from non-MPN treating physicians under all circumstances.

In Valdez the worker treated briefly with MPN physicians but was thereafter directed by her attorney to a non-MPN physician.

The circumstances as to whether the carrier had met its MPN requirements remains unclear. As the Court of Appeal noted:
“Whether petitioner was actually informed of the MPN and the need to treat with physicians who were a part of the MPN are therefore contested issues. In light of our disposition of the petition, however, we need not address and resolve these issues; they remain to be resolved on remand.”

In reaching its decision the Valdez court focused on Labor Code 4616; deciding that:
“We conclude that the rule of exclusion laid down by section 4616.6 applies only when there has been an independent medical review performed under the authority of section 4616.4. We therefore annul the decision of the WCAB and remand with directions for further proceedings that are consistent with this opinion.”

The Court reaffirms that :
“If the Legislature intended to exclude all non-MPN medical reports, the Legislature could have said so; it did not.”

Further, the Court of Appeals says:
“The WCAB noted that, as in Tenet, the employee was not free to ignore the dispute resolution mechanisms of sections 4061 and 4062. However, as is apparent, Tenet does not support the conclusion that “[a]ccordingly, the non-MPN reports are inadmissible to determine an applicant’s eligibility for compensation.”The statutory scheme does not exclude from consideration medical reports prepared by non-MPN physicians, but in fact provides that medical reports prepared by the employee’s treating physician may be submitted to the qualified medical evaluator.There is no statutory requirement that the employee’s treating physician be part of the employer’s MPN. Rather, the statute provides that medical records “relevant to the determination of the medical issue” may be provided to the qualified medical evaluator. “

Moreover, the Court notes:
“Our conclusion is buttressed by the employee’s undoubted right to contract with physicians of his or her choice. A rule excluding medical reports by such physicians for the sole reason that the report was not prepared by an MPN physician would eviscerate the right guaranteed by section 4605.”

Technical statutory interpretation questions aside, what does this mean as a practical matter?

There are cases where, for a variety of reasons, workers treat outside the MPN. To exclude reports in many of those cases would be to ignore important information on diagnosis and treatment progress.

After the WCAB issued its opinion in Valdez I had noted that the rule it enunciated was overly harsh and unlikely to withstand scrutiny.

That has now come to pass.

But if attorneys seeking to take “medical control” and doctor mills see this case as a green light to circumvent MPNs, I think they misread the case. Reports from non-MPN physicians may be admissible in proceedings and reviewable by QMEs/AMEs but whether the non-MPN physician will be paid is another matter. So I would not read Valdez to say that attorneys can routinely “take control” by circumventing a validly noticed and maintained MPN.

But there’s a fine line there if non-MPN reports are admissible. So the case goes back to the WCAB on the MPN issues.

Julius Young

After the Court of Appeals holding in Ogilvie, many of us have been waiting to see what the WCAB would do.

How would the WCAB interpret the 1st DCA’s Ogilvie decision?

In its decision the Court of Appeals rejected the mathematical formula that the WCAB had developed for possible rebuttal of the PD schedule but outlined 3 possible methodologies fro rebuttal of the schedule.

One method? A party could show a factual error in the application of a formula or the preparation of the schedule.

Another method? A party may prove that medical complications of the injury are not captured in the schedule.

But it is the third method that has drawn the most interest. A party may attempt to rebut the PDRS by demonstrating the effect of the injury on the employee’s rehabilitation. In outlining this method, the Court of Appeals noted no meaningful difference between the terms “diminished future earning capacity” and “ability to compete in the open labor market”.

But the Ogilvie court remanded the case back to the WCAB for further development of the record.

Subsequently the Ogilvie case itself was settled, so there was never to be another review of the Ogilvie case by the 1st DCA.

But if the logic of the old California Supreme Court LeBoeuf decision still lives, then would that be applicable only to 100% cases, or also to cases where the worker is less than totally permanently disabled?

A recent WCAB panel decision, Dahl v. Contra Costa County (ADJ1310387) answers that question. The panel of Commissioners Frank Brass, Alfonso Moresi, and Marguerite Sweeney hold that a LeBoeuf type of analysis may be properly applied in a case involving less than 100% permanent disability when it is shown that the injury impairs the employee’s rehabilitation.

Dahl was a case handled by Arjuna Farnsworth, my colleague at Boxer & Gerson.

Dahl’s rating would be 59% if the PDRS was not rebutted, and the WCJ ruled that the rating would be 59%, rejecting any attempt to rebut the rating by using vocational expert testimony if the case was less than 100%. essentially, the WCJ ruled that the attempt to rebut the schedule would fail under Ogilvie unless the worker could show a total loss of earning capacity.

Not so, said the WCAB panel.

What is particularly interesting about the panel decision in Dahl is that they seem to adopt the reasoning expressed by Commissioner Ronnie Caplane in her dissent in the earlier en banc decisions of the Appeals Board in Ogilvie.

The Dahl panel quotes Caplane’s dissent as follows:
“The percentage of her actual loss of future earnings as demonstrated by both parties’ expert witnesses is the most accurate reflection of her diminished future earning capacity. Therefore, her permanent disability rating should be the percentage pure earning capacity of her lost future
earning capacity…..”

“The method that I propose is comprehensive, analytically sound, and operationally simple. It would require vocational or other experts to estimate the injured employee’s post-injury earning capacity based upon medical opinions evaluating her permanent and earning capacity had she not suffered the industrial injury, both to be determined from the permanent and stationary date through her projected years in the work force. Such expert testimony is common in marriage dissolution cases, permanent injury cases, and employment cases.”

One is led to conclude that a solid majority on the WCAB now concludes that vocational expert testimony is a valid methodology to rebut the PDRS, and vocational experts can do this by assessing the percentage of diminished future earning capacity. In essence, the testimony is rebutting the entire PD string, not merely the FEC factor.

What is unclear is what future these concepts will have, as a coalition of forces wish to take this option away from workers.

Julius Young

Sometimes there is a great divide between what an injured work can receive in the workers’ comp system and in the civil justice system.

Being a no fault system, workers’ comp was not designed to “make workers whole”. Although workers’ comp benefits are payable regardless of who was at fault in causing the injury, those benefits do not fully compensate for wage losses, pain and suffering, loss of enjoyment in life and other such measures of damages.

Workers injured due to the negligence of “third parties” of due to defunctive products can pursue lawsuits in civil court to seek full compensation.

So it was in a case handled by two of my trial lawyer colleagues at Boxer & Gerson LLP in Oakland, Gary Roth and John Anton.

On May 12, 2012 it took a jury in federal court (U.S. District Court in San Francisco, Hon. Maxine Chesney presiding) just 10 hours of deliberation to return a unanimous verdict and award a Brentwood man and his wife $11.4 million for injuries sustained in a vehicle accident caused by defects on a Volvo garbage truck he was driving.

The $11.4 million award includes approximately $2.4 million for future medical expenses and loss of earning capacity, $7.5 million for pain and suffering and $1.5 million for his wife’s loss of consortium.

The worker was a Teamster driver operating a garbage truck for Waste Management in Livermore, Ca. when the right front hub of the truck fractured and the right front wheel fell off. The worker’s injury required 3 surgeries to date and perhaps more in the future.

The lawsuit filed by Boxer & Gerson alleged that the front hub was defective and that the garbage truck manufacturer, Volvo, and the components parts manufacturer were negligent, were aware of safety issues with the aluminum hubs, and did not warn users of the danger. In addition to Volvo, which built the cab and chassis, the complaint named Consolidated Metco, the manufacturer of the aluminum front hubs, and Wittke Manufacturing, an entity that modified the truck.

At trial, the 3 defendants alleged that the worker’s employer was at fault for overloading the trucks and for not noticing cracks in the hubs. But after hearing expert testimony, the jury allocated only 6% of fault to Waste Management, the worker’s employer.

62% of fault was assigned to Consoldiated Metco, 30% to Volvo Truck, and 12% to Wittke. 27 witnesses testified.

Thousands of such hubs are in service in trucks across the United States.
During the trial, Attorneys Roth and Anton argued that in spite of knowledge that the hubs were unsafe, the defendants had not sought to recall the aluminum hubs or notify users of the risk of failure during use.

Tort cases like this are an extra dimension that good lawyers can pursue to help some injured workers.

The case serves as a reminder that when an accident occurs, there may be a deeper story that needs to be explored.

Why did the accident occur? Are there design failures in the tools and equipment? Were items modified or remanufactured?

In some cases looking into these things may make a huge difference to a worker who has suffered a career ending injury, a worker who might otherwise receive a pitiful workers’ comp recovery under a strict AMA Guides system.

That’s the great divide. Kudos to Gary Roth and John Anton for helping span the great divide in this case.

Julius Young

If there is one thing that leaves injured workers frustrated, it’s the procedures that frequently result in treatment denials.

Between 2005 and 2010, medical cost containment expenses almost quadrupled. That includes expenses for utilization review and bill review.

Insurers assert that without cost containment procedures, medical treatment costs would be even higher, resulting in unsustainable premium increases.

The chorus of complaints about UR is particularly loud from workers who settled cases years ago and were awarded “future medical” as part of their case resolution.

From the employee’s perspective, they bargained for medical as part of a settlement or as part of a court award. Not only may they be required to change doctors to a new physician on an employer network. Now they find that almost everything that is prescribed is either delayed or denied.

So the worker who had been represented years ago calls his former attorney, asking for help.

In some instances, the worker may find that his attorney has retired. But even where the attorney is still in practice, the worker may have trouble obtaining help.

The attorney is busy handling current cases. While some attorneys will get involved in treatment denial issues for clients whose cases were handled years ago, others simply are not staffed to take on these issues as a project unless they can be paid for doing so.

The problem here is that under current law, attorneys representing injured workers are not compensated in most situations.

An attorney who decides to help fight treatment denials may expend a substantial amount of time and effort on UR appeals. Time spent talking to the client, tracking down the medical reports and UR paperwork. Analyzing time frames to see if UR time limits were observed. Using the QME process to appeal denials. Possible court appearances.

And even if there’s a victory for the worker, the victory may be on one treatment issue.

But this may be repeated again and again with ongoing treatment issues for this worker.

And that’s only one worker.

Many applicant attorneys have represented thousands of workers over their career. So it’s not hard to see why some applicant firms limit their involvement in challenging treatment denials. There simply are not enough hours in the day for many firms.

And that’s probably fine with many insurers, who are happy that attorneys are not incentivized to fight denials on behalf of workers.

This is the problem that AB 1687 (Fong) seeks to address.

AB 1687 would require that when injured workers are given explanations as to why the insurance company modified, delayed or denied medical services, they also be given a description of available options to appeal such a decision.

Furthermore, AB 1687 would allow attorneys to be compensated a reasonable fee for their efforts on behalf of injured workers to enforce previously awarded medical treatment.

Supporters of the bill include the California Professional Firefighters and the California Labor Foundation.

The bill has already cleared the California Assembly Insurance Committee and the Assembly Appropriations Committee.

But with Governor Brown’s likely unwillingness to sign piecemeal workers’ comp changes, the bill’s future may depend on what occurs later this year with other components of workers’ comp reforms.

Here is a link the current text of AB 1687: … sm_v98.pdf

Stay tuned.

Julius Young

The California Department of Insurance will be holding a hearing today in San Francisco on the WCIRB mid year filing requesting a hike in the advisory workers’ comp rate.

THe insurance market is not required to follow WCIRB recommendations or the rate finding of CDI. Rates continue to be far, far below the levels that were reached in before the 2003/2004 reforms.

Still, with the economy in a slow-mo recovery phase, Insurance Commissioner Jones is likely to look carefully at the request for any hike in the advisory rate. Prior Insurance Commissioner Poizner repeatedly swatted down requests for hikes in the “pure premium” rate.

What do the applicant attorneys think about the request?

Here is a statement addressed to Chris Citko of CDI from Brad Chalk, CAAA President (prepared with the help of Mark Gerlach, an insurance expert who consults for CAAA):

“Dear Mr. Citko,

The California Applicants’ Attorneys Association recommends disapproval of the pure premium rate filing submitted by the Workers’ Compensation Insurance Rating Bureau on April 12, 2012. The filing not only ignores the decision made by the Bureau’s Governing Committee just 6 months ago to refrain from filing mid-year rate changes absent “extraordinary circumstances,” but it also fails to comply with the directive from Commissioner Jones to include disaggregated medical cost containment data.

With regard to the justification for a mid-year filing, we see no conditions that could be considered “extraordinary circumstances.” Nor does the filing identify any “extraordinary circumstances” that would justify this proposal. The Executive Summary of the filing does state that the “system’s underlying costs have continued to deteriorate,” but that hardly qualifies as an “extraordinary circumstance.” And in any case, several charts in the Executive Summary show just the opposite – that cost pressures are abating.

For example, Chart 1 displays the estimated ultimate indemnity + medical + ALAE cost per claim over the period 2005 through 2013. This graph shows increases between 2005 and 2009, but little or no change from 2009 through 2011 (2012 and 2013 are disregarded as these figures are only projections based on the WCIRB’s inaccurate trend estimates). Charts displaying medical costs per indemnity claim, Chart 8, and indemnity costs per indemnity claim, Chart 9, show the same pattern – increases between 2005 and 2009, then leveling off between 2009 to 2011.

The projected ultimate on-level severity trends for both medical and indemnity benefits also follow this pattern (pages A:B-25 and A:B-26). The projected on-level severity for both medical and indemnity increased between 2005 and 2009, decreased in 2010, and then increased a minuscule 0.3% in 2011. In view of the sharp decrease in the on-level severity trend over the past two years, we recommend that the selected severity trends of 3% for indemnity and 7% for medical be rejected. These selected trends are not based on any actuarial computation, but were arbitrarily selected without any statistical justification. Reducing these trend factors to reflect the current experience will eliminate most or all of the indicated change in the pure premium advisory rates..

With regard to cost containment data, Commissioner Jones’ Decision and Order for the January 1, 2012 Pure Premium Rates included the following directive to the WCIRB – “With this order I am directing the WCIRB to include disaggregated medical cost containment expenses of insurers and an analysis of that data in its next filing.”

The WCIRB may contend that this directive was intended to apply to the next “annual” filing, and not to a mid-year filing. That argument misses the point. As explained by Commissioner Jones, reviewing this cost containment data is one part of analyzing the efficiency of insurers. Calendar year data from the WCIRB and limited transactional data from the CWCI both show that cost containment expenses are the fastest growing “medical” cost. In order to accurately identify the real cost drivers in the system, it is important that the WCIRB comply with the Commissioner’s directive.

In analyzing the efficiency of insurers, it is also important to look at the sharp growth in allocated loss adjustment expenses. Chart 10 shows that the average allocated loss adjustment expense per indemnity claim has nearly doubled since 2005. As we said in our comments regarding the January 1, 2012 Pure Premium Rate filing, the causes of this increase may be beyond the scope of this pure premium rate hearing. However, loss adjustment expenses have become a major cost driver in the system, and we recommend that the Commissioner direct the WCIRB to provide more detailed data on these expenses, as well as an analysis of that data, in its next filing.

Thank you for the opportunity to comment on this rate proposal.


S. Bradley Chalk, President

California Applicants’ Attorneys Association”

The hearing will be held at the CDI at 45 Fremont Street, 22nd Floor, starting at 1 p.m. today.

Stay tuned.

Julius Young