Thursday, February 23, 2012

Are Liens the "Problem", or DWC's Problems Underscored by Liens?

A recurring theme in California workers' compensation "reform" discussions of late is the issue of liens.

For those of you who do not work in the California system, the state has a rather unique process where by service reimbursement claims, or other claims such as for child support or living expenses, can be protected by the filing of a lien against the injured worker's litigation case.

Technically under the law it is a "lien against compensation" but this term has been loosely interpreted to give lien claimants an autonomous right to seek collection independent of what is actually paid to the injured worker.

The Division of Workers' Compensation (DWC) has declared that liens are a significant source of system inefficiency and is in the process of making changes to deal with them.

But there are many unanswered questions and conclusions being made at the DWC level that do not follow logic, and consequently I fear the implementation of rules, regulations or system changes that have not been thought out and may result in unintended consequences.

According to the Commission on Health and Safety and Workers' Compensation (CHSWC), the number of liens being filed into the system in 2003 totaled 598,000. In 2004 a $100 filing fee on liens was credited with reducing that number to 224,205.

But because the DWC was not set up to be a collection agency enforcement of the filing fee itself became an administrative burden, leading to repeal of the fee in 2006.

Now, according to CHSWC, liens being filed has increased to 517,722 in 2011.

But didn't DWC just spend $60 million on a computer system to make filing of forms, including liens, more efficient? If the Electronic Adjudication Management System (EAMS) is really working on the public end, then just FILING of liens should not impose any additional pressure on the system.

Theoretically, lien claimants should be using EAMS to file their liens into the system, and there should really be no additional burden on the DWC...

Unless EAMS isn't doing the job efficiently - perhaps the issue is that too many liens are being filed on Optical Character Recognition (OCR) forms, which require an inordinate amount of clerical time to input, rather than lien claimants getting the data into the computer system themselves.

OCR forms increase clerical burden because EAMS has a poor scanning station workflow and the equipment installed in the District Offices doesn't work as intended. It just takes too long to get a lien package through the scan station because there is always something wrong with a form or business rule – the data entry constraints are too tight and clerks have to essentially retype all of the data manually into the system.

This could explain the administration's frustration with liens, because otherwise who cares what is FILED? Filing does not take up DWC resources, unless filing requires an inordinate amount of interaction by DWC clerical staff. Admitting to this problem, however, would be a source of embarrassment for the administration.

DWC also complains that liens are taking up court time that should otherwise be devoted to adjudicating injured worker's claims to benefits, citing in particular statistics pointing to the problem being uniquely Southern California based.

What's wrong with this picture is that it doesn't make any sense. Southern California is subject to the same rules and regulations as Northern California, but the north doesn't have a "lien problem" like the south does.

Why is this? Has anyone stopped to understand how one part of the state can have a singular issue that is not experienced in the other part of the state? If a situation is unique to one geographical zone, does it make any sense to subject the entire state to rules or regulations to correct that problem?

I have had this anomaly explained to me that the "culture" in Southern California is different than in the north. I'm not sure what this means. Are judges less tolerant of aberrant behavior in the north than the south (in which case it seems that JUDICIAL reform is needed)? Are there more lien based service providers in the south than the north (which doesn't make sense either because there are more judicial resources in the south which, theoretically, means there should not be a significant difference in the ratio of lien claims to judges)?

Additionally, on page 9 of the CHSWC Lien Report it states that in Los Angeles, the busiest Board in the state for liens, there are 144 Lien Trials set per MONTH. That equates to 6.5 per day if using a 22 working day calendar.

Of those 6.5 per day, it says that 35% are settled, not taking the Judge's time, so that makes 4.22 Lien Trials set per day. (Maybe the Judge's take Friday's off, but everybody else works 5 days per week, so I don’t accept Fridays off). Four lien trials per day is not a HUGE lien problem in the biggest District Office in the state with by far and away the most judges. While many more lien ISSUES appear at the LA office on a daily basis, these are not taking up the Judge or courtroom time, because the parties are simply using this location as a mandatory settlement area.

Liens are not “consuming 35% of the court’s calendar” as the CHSWC Lien Report states on page 1. If liens really are taking up 35% of the court’s calendar then the court has a CALENDARING problem, and not a LIEN problem. They need to manage their calendar and courtrooms more efficiently in light of how liens are actually used in the system, which would be an EASY fix and require no legislation or regulation changes (or public hearings).

Here's another thought - the reason the massive volume of liens are FILED in the first place is because it is the ONLY way a lien claimant can get noticed of hearings, get service of settlement documents, legally get information on a case, and have any kind of threat with the insurance carrier or third party administrator to ultimately get paid.

Finally, DWC has been on an austerity budget the past few years, with a hiring freeze while judges and other staff members were leaving the agency for greener pastures. So while lien filings, and presumably the amount of lien hearings, were still below 2003 levels the amount of adjudicatory resources available to deal with the volume decreased ... a lot.

DWC is now on a hiring spree - how will these additional resources impact the burden on District Offices?

DWC is taking "reform" issues on the road in April. Included in these issues is what to do about the lien "problem". I suggest that CHSWC and DWC answer some of the questions raised in this editorial before seeking solutions.


  1. Just a few thoughts regarding the understanding on why liens are being filed. One of the realities for lien claimants filing a lien is that although an invoice has been sent and received by an adjuster, lien claimants are being told directly to file a lien as the adjuster will not deal with them otherwise.

    Another reason is the adjusters tell lien claimants to deal with their attorney at court, forcing lien claimants to go to court to resolve payment issues. A final reason, is basically unreasonable partial payments, or non-payments based on internal policies and procedures of carriers and TPA's.

    Perhaps one thing to question is whether adjusters or third-party lien reps are receiving compensation for the reduction of payments?

  2. Bravo!!

    I've spent hours researching this and have found no evidence to support the "lien problem" or "lien phenomenon". Where is the evidence?

    The January 2011 CHSWS report has many recommendations. One of those, and highly charged, includes fee schedules. Ironically the report states multiple times that the data used for its conclusions is not "statistically useful". And, "Neither we not the commentators were able to propose a method of gathering statistically useful information from lien claimants.. we could not reliably recognize.. data."

    The argument that fee schedules will reduce liens, reflect fair market value of liens or reduce litigation has no evidence. I don't think we need to be opposed to a fee schedule, but opposed to EVIDENCE that supports a fee schedule. Their data is baseless so their conclusions are baseless.

    The due diligence that will be necessary for the DWC to gain proper data is a waste of already strapped government resources. The reduction of costs on the lien system can be had through civil procedure enforcement. Lack of enforcement, frivolous objections, lack of communication and greed are the cause. These issues can be resolved with leadership not legislation. Let's not pass the buck here. There's no need for change-for-change's-sake.

    I agree with Dave, there are some questions that need to be answered.

  3. Daniel and Dan - I hope both of you make these observations known to DWC. Both are absolutely vital observations that need to be communicated in my opinion.

  4. The DWC is rolling out JET for more efficient filing of multiple documents. It would seem that requiring all Liens to be E-Filed by statute would delete the personnel burden, list them on EAMS faster, and provide more efficient notices to all parties.

    Granting costs to Defendant if LC fails to show that the prior payments were insufficient could decrease the nuisance "begging" appearances where LCs clog up the courtroom seeking charges above Fee Schedule and the WCJs encourage resolution to avoid Trial time. Feeding the pigeons just increases the problem. Don't get me wrong; if the LC legitimately is entitled to additional payment, they should have their day. If they are not entitled to any more money, they should have a downside risk to wasting the WCAB resources.

    One major problem is that most LCs show up for the Conference with nothing but a bill and an open hand. They typically have ZERO idea what the services are objectively worth under the Fee Schedule, and just know their sheet of paper shows a balance due.

  5. WCAB - good comments. I hope you provide some of these ideas when the DWC roadshow comes around!