A Mother's Burden

The universal standard for employer/carrier liability in workers' compensation is AOE/COE: arising out of and occurring in the course of employment.

An analysis of case facts where there is an AOE/COE dispute requires bifurcation of these two standards. Arising out of: the employee was on the job, basically. Occurring in the course of: the employee's injury or death was a consequence of performing some beneficial service for the employer.

That last part arises frequently when an employee is goofing off and gets hurt - the "horseplay" exception. When an employee is playing games at work, unless of course sanctioned by the employer, he or she is not providing any beneficial service to the employer, removing any injury from a compensable determination.

Sometimes the facts get very, very close though, and in particular in workplace violence cases.

The Georgia Court of Appeals ruled as such in a murder case, allowing the mother or a worker shot twice in the head by a temporary staffer with a felonious history, to pursue a wrongful death case against the staffing agency and the business.

Christopher Lema had obtained a temporary position at an OA Logistics warehouse in Pooler, GA, through temporary agency, StaffChex.

The contract OA had with StaffChex required StaffChex to perform criminal background checks on each worker before work began.

However, Lema started working at the OA facility before the background check was done. Regardless, though, the check would reveal no criminal history because Lema had applied for his job using an alias.

Lema had a felony record for drug crimes and tampering with evidence. He had been released from incarceration eight months prior to going to work at the OA facility.

On Feb. 24, 2012 at around 3 p.m. Lema walked into the office of Jessica Rodriguez, an OA employee, and tried to kiss her. After Rodriguez pushed him off, Lema walked out of the office.

28-year old Nickifor Zephyrine just happened to be standing outside the office at the time waiting to inquire about refueling his forklift. Lema took out a .22 caliber pistol and shot Zephyrine twice in the head. He then re-entered Rodriguez's office and attempted to rape her. Rodriguez was able to escape and fled from the office.

Her screams drew attention from coworkers, who reported seeing Lema strip off his clothes, drop his gun and run naked across the parking lot toward a nearby wooded area, where he was apprehended by police without incident within minutes of the shooting.

Zephyrine was taken to Memorial University Medical Center, where he died that evening.

In 2013, Lema pled guilty to charges of felony murder, false imprisonment, battery and being a felon in possession of a firearm.

Zephyrine’s mother later filed suit against OA and StaffChex, contending they had been negligent in hiring Lema because there were numerous red flags in Lema's job application, including a misspelling of his fake name, and, according to the civil complaint, "he looked nothing like the picture on the identification card he presented to StaffChex."

OA and Staffchex moved for summary judgment, arguing the wrongful death suit against them was barred by the exclusive remedy provision of the Georgia Workers' Compensation Act, which was granted at the trial level.

Zephyrine’s mother appealed, arguing the fact that he had been killed while at work was insufficient to establish that the murder had arisen out of his employment, and the Court of Appeals agreed.

It was "beyond dispute," the Court said, "that Zephyrine's death arose in the course of his employment because it occurred while he was on duty performing his job functions at his employment location."

But, the court said the murder did not arise out of Zephyrine's employment as a matter of law.

"The words 'arising out of' mean that there must be some causal connection between the conditions under which the employee worked and the injury which he received," the court said.

In this case, the court said, the record was "devoid of any connection between the attack and Zephyrine’s work or workplace."

WorkCompCentral legal reporter Sherri Okamoto reviewed various state positions on work place violence in her story on this case - the conclusion is that they are very fact specific, which means lots of litigation over liability between, usually, insurance companies.

The tragedy, in my mind, isn't whether this is a case that is barred by the exclusive remedy of work comp, but rather that there are different silos of liability in the first place.

One of the guiding principles of workers' compensation from its inception was to eliminate protracted litigation. This case, for example, has taken four years just to get to the stage where a court says there is potential civil liability.

Even if Zephyrine's mother is ultimately successful, she has had to live with this tragedy for over four years.

I'm convinced there's a better way.

To read the Georgia Court of Appeals decision, click here.

Long Way Down

Maybe I will, and maybe I won't.

I like the ambivalence of that - and that vagary is only possible when I go to Big Sur.

The last time my wife and I went to Big Sur a couple of years ago was following a big slide at the north portion of coast, about 10 miles below Carmel. That slide cut off all of the normal traffic that would flow from the Monterey Peninsula, so the coast was eerily quiet.

Big Sur makes you forget...

The night prior to our departure from Lucia Lodge we learned there had been a slide south of our position, leaving the only way in and out of Big Sur via a hair raising single lane road with multiple pin point tight turns, and no guard rails, up over the Santa Lucia range and into Fort Hunter Liggett/Camp Roberts to Highway 101 (post script - Nacimiento-Fergusson Rd).

We would have enjoyed staying a few more nights and the complete solitude afforded by the slides and difficulty people would face getting into the area, but work schedules for both of us compelled our departure.

Going up and over the ridge required careful navigation because most of the road was single lane with many blind corners.

And I mentioned the lack of guard rails... a couple thousand feet at the bottom of a canyon was not where I wanted to be!

No guardrails and a LONG way down...

There wasn't a lot of opposing traffic, but enough to keep you alert.

Kind of like the news this morning - enough workers' compensation fraud to keep you alert.

There's the story of a Florida fire inspector who failed to advise state officials that he was working while simultaneously collecting about $143,000 in benefits.

And the Bell Gardens, CA police officer who tried to pin his injury to his job when in fact he got injured during a try out for another police department.

Or the California trucking company owner who misrepresented his in state payroll to avoid some $108,000 in premiums.

Speaking of trucking, an Ohio man was sentenced for working as a truck driver while drawing permanent total disability benefits. 

An insurance agent in Georgia failed to forward some $30,000 in premium payments to carriers, and a U.S. Postal Service employee was prosecuted for doing massages for profit while claiming total disability because of a shoulder injury. 

And in San Bernardino, CA a couple pleaded guilty to workers' compensation fraud charges after an investigation revealed that the teacher's aide was exaggerating her injuries with the assistance of her boyfriend, who pushed a wheelchair that she didn't need to use. 

So maybe I will, and maybe I won't - post to this blog during the few days of hiding in the Santa Lucia mountains that is.

In the meantime, I know that there is no shortage of new and interesting ways that people find to get around limitations in the system that are perceived to inhibit personal gain at the expense of everyone else.

The problem, as we see, is that the road is twisty, single lane with no guard rails. It's a long way to the bottom.

Controlling Opioid Roaches

While health care expert and noted blogger Joe Paduda told the audience at the annual California Workers' Compensation Institute's (CWCI) meeting in San Francisco yesterday that opioids are the biggest problem facing the industry today, Georgia lawmakers were passing a bill that they hope will take the "roach" element out of the state.

First, Paduda: “This is such an inherently huge problem,” he said. “It’s the biggest problem facing the industry today. If we don’t get our arms around it, it is going to eat the industry alive.”

CWCI's new president, Alex Swedlow, said that the organization's research into opioids occurred because it was the number two cost driver after attorney involvement.

The reason, as Paduda explained, is because after six months of opioid use there is addiction, declination of functioning, destruction of health, extension of disability, and ultimately death.

Paduda cited an Appalachian community school where 13 kids were left parentless last year because of opioid deaths. There are only 110 kids in the entire school...

“We’ve become the addiction-creation industry,” Paduda said. “That’s our fault. We’re the ones enabling the physicians to prescribe the wrong drugs. We’re paying for them.”

Georgia has decided that it isn't going to pay for them anymore. Or at least is going to slow down the process.

House, HB 178 will require the Georgia Composite Medical Board – the agency that licenses Georgia doctors – to begin licensing pain clinics on July 1, 2013.

The bill would apply to any medical practice that advertises the treatment of pain, uses pain in the name of the clinic or treats more than 50% of non-terminal patients with drugs on Schedules II and III of the U.S. Drug Enforcement Administration's controlled substances list.

The bill "grandfathers in" clinics that are operating by July 1 and are at least partly owned by Georgia-licensed physicians.

Bill supporters say Georgia became a haven for pill mills that moved north when the Florida Legislature passed its own pain clinic bill in 2011. The Florida legislation imposed tough licensing standards on pain clinics and banned physicians from dispensing of Schedule II and III drugs, except in limited instances.

Georgia Senate Health and Human Services Committee Chairwoman Renee Unterman, R-Buford, a prime sponsor of the pill-mill bill, told the Senate on Thursday the number of pain clinics in Georgia jumped from 10 in 2010 to more than 140 last year because of the northward migration from Florida.

"There are a lot of bad apples in these pain clinics. They fled like roaches from Florida, and, when they heard that we were going to come in and start regulating them, the clinics started shutting down and moving to another state," Unterman said.

"Millions and millions of dollars can be made at these pain clinics because they keep people addicted to drugs."

Unterman has the issue firmly in grasp - the addiction model of opioids creates a nice recurring revenue stream for the purveyors of the drugs. In the meantime the costs to workers' compensation claims is exponentially increased, as reflected by CWCI's data.

Paduda says the work comp industry has an obligation to do something about opioids - and I agree. The issue that we face in work comp is the liberal requirement to provide virtually any medical treatment requested by or on behalf of an injured worker (more likely than not, on behalf of...). States are now giving tools to the industry to "just say no" (thanks Nancy Reagan!) with treatment guidelines, control via networks, etc.

Insurance companies, such as California's State Fund, are taking initiatives by telling their network doctors that strict adherence to treatment guidelines when it comes to prescriptive medication must be followed and that failure to do so, or offer a medically sound reason for not doing so, will result in non-payment and/or elimination from the network.

That kind of financial hard talk works. CWCI's data shows that California's share of the opioid problem is leveling off.

Can the industry do more? Sure - California needs to see a declination in opioid usage, not just a flattening of the trend. But the tools start with the laws that provide the underlying structure.

Christine Baker told the CWCI audience that the administration will address opioid abuse with treatment guidelines. Division of Workers’ Compensation Medical Director Dr. Rupali Das and the Commission on Health and Safety and Workers’ Compensation are both working on opioid treatment guidelines, she said.

To be sure, California has its issues. We're a big state, lots of people, lots of money, lots of problems.

Paduda commented that we in California think we have problems, but he said it is nothing like Florida, where the legislature has been struggling to get something done about physician dispensed repackaged drugs for many sessions.

He said that he was asked by a Florida legislator where he got his data from concerning the social and business costs of prescription medication - CWCI was Paduda's answer. The legislator asked why he was using California data - the response from Paduda: because Florida doesn't have a CWCI...

In Politics, Impropriety Is In the Eye of the Beholder

Georgia doesn't come up often on the workers' compensation scene because, frankly, not a lot of new or exciting things happen in that state, though its gross domestic product of about $395 billion is the size of Austria.

But this doesn't mean that interesting things don't happen at all in Georgia. Workers' compensation trends to have a way of circulating among the states and sometimes a smaller state initiates those trends.

One of the trends that Georgia may initiate is capping medical benefits. In this case, capping medical benefits is in exchange for boosting indemnity benefits.

John Poole, executive director of the Georgia Self-Insurers Association, told WorkCompCentral Tuesday that self-insurers and the Georgia Chamber of Commerce have endorsed a package of reforms agreed to by the Georgia Workers' Compensation Advisory Council in October.

Like most states, Georgia currently requires insurers and self-insured employers to pay lifetime medical benefits for all workers regardless of how catastrophic an injury is. Indemnity benefits are capped at 400 weeks, except in the case of catastrophic injuries. Catastrophic injuries are defined by Georgia law as severe paralysis, amputation, severe brain and closed head injuries, second or third-degree burns and industrial blindness.

The draft legislation would also cap medical benefits at 400 weeks, except in the case of catastrophic injuries.

"Capping medical benefits should give employers better leverage in settlements and should help with the thorny issue of Medicare set-asides," Poole said.

Curiously, the reform package has the backing of claimants' attorneys and has a good chance of passage during the 2013 session of the Georgia General Assembly, which convenes on Monday, according to the report.

Atlanta claimants' attorney Marvin Price, who is reported to have helped negotiate the deal, said claimants' lawyers have accepted the compromise package because business stands to get some reforms from Republican Gov. Nathan Deal and the GOP-dominated state House and Senate.

"It's a compromise, and it's a major change. But we had to agree to it to avoid some other really Draconian changes," Price said.

The maximum weekly benefits under the proposal would increase in 2013 from $500 to $525. Claimants' lawyers sought to index future benefits to the statewide average weekly wage.

I understand the dilemma. Still, is it really acceptable to have claimants' attorneys negotiating away injured worker benefits - particularly something as significant as lifetime medical - when they stand to benefit from the flip side of the bargain, i.e. increased indemnity? Because like most other attorneys representing injured workers, Georgia lawyers work on a contingency basis, getting a percentage of a workers' indemnity award.

This irony was made even more poignant when, as also reported in WorkCompCentral this morning, a disbarred Georgia claimants' attorney admitted in federal court on Tuesday that he pocketed $2.5 million of his clients' money for personal use.

According to the story, Miles Lamar Gammage of Cedartown, Ga., admitted to defrauding more than 50 injured workers out of settlement funds, federal prosecutors told the Atlanta Journal-Constitution.

Prosecutors told the Journal-Constitution that Gammage, 59, didn't notify clients when they received settlements, forged their names on checks and deposited them into bank accounts that he controlled. When clients demanded their money, Gammage would extend them "interest-free loans" or "advance" them the funds, the newspaper said.

I'm not saying that the good claimants' attorneys are not looking out for the best interests of injured workers in Georgia, but I do remember from my ethics classes in law school that the APPEARANCE of impropriety is nearly the same, ethically, as actual impropriety.

Workers' compensation is a political animal made up of special interests negotiating for the preservation and/or expansion of their wants and needs. In political negotiations, I guess, impropriety is in the eye of the beholder.

Just sayin'...

SEUS and the Effects of Collapse

Legislators in Georgia will need to review a law that, likely unintentionally, will place one of the state's counties into a deeply troubling financial situation because of the insolvency of a workers' compensation carrier.

In 2009, Southeastern U.S. Insurance Co. (SEUS) went under amidst a very public probe and investigation based on allegations of misappropriation of funds, lavish executive spending and, of course, payola, as former Insurance Commissioner John Oxendine won court approval to force SEUS into liquidation in 2009. The suburban Atlanta insurer had 209 policyholders at the time of its collapse, including 40 cities, counties and school boards. 

SEUS had about $38.9 million in outstanding liabilities and holdings that included a 6,000-acre plantation and hunting preserve along the Chattahoochee River in South Georgia.

Georgia has a state Insurers Insolvency Pool that pays for a workers' compensation claims that would otherwise be covered by a carrier that has gone under but Official Code of Georgia 33-36-3 precludes the Insolvency Pool from paying any third-party claims for any insured with a net worth of more than $25 million.

When SEUS went into liquidation an estimated 88 workers – including eight with catastrophic injuries – had claims that weren't covered by the Insolvency Pool. Some were exempt because of the net-worth exclusion. Others were excluded because SEUS originally started as a captive of the professional employer organization (PEO) industry. Captives were initially not allowed in the pool.

SEUS converted to a stock insurance carrier in 2006.

Lumpkin County, Ga., was a SEUS customer and at the time had net assets of $66.8 million.

The county, along with cities and school boards left with claims in the wake of SEUS' failure, had argued the net-worth test should not be applied to local governments. Lumpkin County also argued in court filings that the bulk of its net worth is bridges, roads and government buildings that should be discounted as "restricted net assets."

The county said it has about $5.6 million in unrestricted net assets available to pay claims.

Lumpkin County lost at the trial level. The DeKalb County Superior Court Judge ruled that all of the counties assets were to be counted.

The Georgia Supreme Court on Monday agreed and ruled that the state Insurers Insolvency Pool is not required to pay for the county's workers' compensation claims.

Written by Justice Harold D. Melton in Lumpkin County v. Georgia Insurers Insolvency Pool, Case No. S12A1451, the court held that Georgia law is clear and that the county is exempt from protection by the pool.

"This court . . . is not in the business of rewriting unambiguous statutory authority," Melton said in the ruling. "A court of law is not authorized to rewrite the statute by inserting additional language that would expand its application."

Seems to me that if Lumpkin County wants a different result it will need to do some lobbying.

The case result is difficult in these challenging economic times as more and more liabilities are foisted upon local government from the federal and state governments.

And unfortunately this is just another example over the years of the delicate, tenuous position carriers play in the global scope of government and finance. The cascading effect of an insurance company's collapse lasts for years, and can have serious effect on an economy.

GA Case Tests Medical Privacy

An interesting battle on medical privacy in workers' compensation claims is pending before the Georgia Supreme Court (oral argument was heard July 10), and the case serves up some interesting issues for consideration.

In Arby's Restaurant Group et al. v. McRae, No. S12G0714, claimant Laura McRae accidentally drank a cup of lye and suffered third-degree burns to her esophagus while at work six years ago.

An administrative law judge ordered claimant Laura McRae to allow attorneys for her employer to speak with her treating gastroenterologist and when McRae refused, the judge sanctioned her by removing her claim from the hearing calendar.

The State Board of Workers' Compensation Appellate Division upheld the judge's action, as did the superior court, but last December, a narrow majority of the Georgia Court of Appeals reversed.

The four-judge majority acknowledged that the Georgia's Workers' Compensation Act requires a claimant to waive her medical privacy to the extent that she places her medical condition at issue in a workers' compensation claim; however the justices concluded that this is not tantamount to allowing an employer "unbridled access to ex parte communications" with a claimant's treating physicians.

The state Supreme Court heard oral argument in the case on July 10 and numerous amicus briefs have also been filed including those by the Georgia Self-Insurers Association, Georgia Manufacturers Association, Georgia Poultry Federation, the Dougherty County School System, YKK (USA) Inc., the Georgia Association of Manufacturers, the Georgia Trial Lawyers Association and University of Georgia School of Law Professor Thomas Eaton.

While medical privacy in workers' compensation is a state by state issue, in my opinion there are distinct and incompatible issues when it comes to an employer's "need to know" and protection of an employee's basic rights.

Typically medical privacy issues will only arise in litigated settings where the employer is contesting some claim to benefits and usually this is related to indemnity. Sometimes, where the claimant has an injury claim that progressively inflates to claim other body parts than that originally injured will require more information, but more often than not the issue arises when a claim for temporary disability is exceeding a normal pattern or there is an issue of apportionment when it comes to permanent disability.

In those situations the employer does not need, nor should it have, wholesale medical information. The issues are distinct and can be well defined to protect one's medical privacy.

When the issue isn't a contest about benefits, then it is a return to work issue. Return to work comes in two flavors - the employee claiming an ability to return to work, and the employer claiming the employee can return to work but refuses to do so.

The latter issue is really about indemnity - already commented on in this post.

The former issue is nearly moot - if the employee presents documented evidence of ability to return to work then that should be sufficient.

In the case of McRae, the issue in fact IS all about indemnity. In September 2009, McRae's treating gastroenterologist prepared a medical narrative report in which the physician concluded that, despite exhaustive therapy, McRae had reached maximum medical improvement and had a 65 percent permanent body impairment. In October 2009 McRae requested a hearing on her claim for temporary total disability and permanent partial disability.

Arby's attorneys tried to schedule an ex parte consultation with the treating physician, but the physician declined to meet with them absent express permission from her patient. The attorneys then moved the ALJ to remove McRae's hearing from the calendar or issue an order authorizing the treating physician to talk to them outside the presence of McRae or her attorney. The ALJ ordered McRae to expressly authorize her physician to speak with counsel for her employer, and denied McRae's request for a certificate of immediate review by the Appellate Division. In denying the request, the ALJ concluded that McRae could informally contact the treating physician herself and inquire about any communications made between [the physician] and the Employer/Insurer.

Arby's attorneys have a perfectly reasonable method of obtaining the information they seek without jeopardizing McRae's rights to privacy or otherwise influencing the physician's opinion without due process and that is to take the physician's deposition with McRae's attorney present.

The Georgia appellate court got it right when it opined that "while the Act requires an employee to authorize her treating physician to release relevant medical records and information, it does not require an employee to authorize her treating physician to communicate ex parte with the employer's lawyers in order to continue receiving benefits.  Giving the employer's counsel unbridled access to ex parte communications with an employee's treating physicians would create numerous potential dangers, as noted in Baker [Baker v. Wellstar Health Sys., 288 Ga. 336, 338(2) (703 S.E.2d 601) (2010)], among them the potential to influence the physician's testimony, to probe into irrelevant but highly prejudicial matters, and the disclosure of information never disclosed to the patient."

I suspect the Supreme Court will err on the side of protecting the employee's privacy as well since the alternative method of obtaining this information, by deposition, is reasonable, is not extraordinarily expensive, provides due process protections to BOTH employee and employer and perhaps the most compelling reason, is testimony under oath that can be used as evidence.

Payroll Zero? Not a Chance When Subs Are Unlicensed!

Yesterday we examined a case in Florida demonstrating an employer's folly in failing to report an alleged industrial claim timely.

Today's news (and blog post) concerns an employer's folly in failing to adequately estimate payroll obligation when applying for workers' compensation insurance.

Georgia is one of those states without an insurer of last resort and relies upon an "assigned risk pool" to cover those employers that carriers otherwise don't want to write. To be eligible to write the good business in Georgia a carrier must submit itself to the pool. Coverage obligations are randomly assigned.

James Smith, a contractor, enlisted the help of his general agent, Norris Strickland, which submitted an application on Smith's behalf to the Georgia Workers' Compensation Assigned Risk Insurance Plan because they couldn't find insurance on the open market.

After Smith's application was processed, his policy was randomly assigned to Amtrust North America. Based on Smith's representation that his estimated employee payroll was zero, Amtrust issued a one-year policy starting in January 2007 with an initial premium of $765. The carrier renewed the policy the following year.

Since workers' compensation premiums are based on the actual amount paid to workers, Amtrust could not determine the actual policy premium due to it until after the conclusion of the 2007 policy term. Amtrust conducted an audit of Smith's payroll records and calculated that an additional premium payment of $42,653 was owed, based on wages Smith had paid to uninsured contractors in 2007.

Amtrust then cancelled the renewed policy and demanded payment of $44,457 in premium owed for the period between January and May 2008.

When Smith refused to pay the additional premiums demanded by Amtrust, the company sued for their recovery.

Smith filed a motion for summary judgment, asserting that he was not obligated to pay because he did not sign a written contract with Amtrust, he did not authorize anyone to do so on his behalf and he did not otherwise assent to the terms of Amtrust's insurance policy.

In response, Amtrust moved for partial summary judgment, arguing that Smith was liable to pay additional premiums because Norris Strickland acted as Smith's agent when it submitted an insurance application on his behalf, the parties were bound to the terms of the policy once Smith's application was approved and Smith assented to terms of the policy by accepting coverage without objection.

State Court Judge Raymond S. Gordon Jr. denied Amtrust's partial summary judgment motion and granted Smith's motion for summary judgment, deciding that Smith was not liable for the additional premiums.

Amtrust appealed, reiterating the arguments it had made at trial. The Georgia Court of Appeals ruled in the carrier's favor on Monday.

The opinion by Judge M. Yvette Miller concluded that Norris Strickland was Smith's agent, not Amtrust's.

The court also said that Smith's express consent was not required for him to be bound by the terms of the assigned risk policy provided by Amtrust because state law obligated Amtrust to participate in the risk pool and determined the amount Amtrust could charge as premium for issuing policies to pool applicants.

Since the premium amount demanded by Amtrust in 2008 was admitted based on an estimate rather than a completed audit, a triable issue remained as to the amount owed by Smith.

Lessons for employers in assigned risk states:

1. Accurately estimate payroll;
2. Don't hire unlicensed contractors as subcontractors.

I sort of feel sorry for Smith. This decision likely put him out of business, at least doing business in the manner that got him in trouble with Amtrust.

But at the same time, this case sends an important message: don't gamble on insurance applications by falsifying or understating facts necessary for underwriting.

Smith's attorney told WorkCompCentral news that she felt that the insurance industry in the state was usurious. The reality is that her client attempted an illegal competitive advantage and got caught.

The case is Amtrust North America v. Smith, No. A11A1645.