The case of Judy A. Ferguson v. WCAB, 60 CCC 275, has raised the stakes for a serious and willful claim. This particular case held that the 50% increase is to be calculated on the basis of the entire workers’ compensation award, including non-indemnity payments. The major question was whether or not the 50% increase applied to medical expenses. The court held very clearly that it did.

A 50% increase on indemnity payments is reason alone to be very concerned about a serious and willful claim. However, if you add to that the consideration that you

A serious and willful claim is an uninsurable risk. Also, many workers’ compensation insurance policies specifically exclude providing a defense for a serious and willful claim. As such, once a serious and willful claim is made, the insured could be looking at a very large risk without even a paid-for defense.

I think that the first order of business for any employer receiving a letter from the insurance company stating that a serious and willful claim has been filed, and that no legal defense will be provided, is to obtain a legal opinion as to the extent of the insurance coverage. Given the fact that the courts will give a very broad interpretation to any coverage issues, an insured may very well have coverage even though an insurance company thought that no coverage was to be provided. This is a very complicated area of the law and does require a specialist to make a determination. For the same reason, an insurance company should be very sure that they are not obligated to provide a defense on a serious and willful claim before notifying an insured that no coverage exists for such a defense. If an insurance company wrongfully refuses to provide representation, they could very well be looking at a bad faith claim.

It is my impression that more and more decisions regarding serious and willful claims are being issued in favor of the injured worker. A simple slip-and-fall could in fact constitute a serious and willful claim under the right circumstances. It is very easy to see how such a claim could easily befall any employer.

It should be noted that the $250.00 cost limitation is with regards to cost and expenses. The cost and expenses which relate to a serious and willful claim would be such expenses as court reporter costs, expert fees and related costs. This actually is to the employer’s benefit in that there really is no limitation of costs which the employer can expend for experts, etc. On the other hand, unless the applicant or the applicant’s attorney is wanting to invest in the case with his or her own money, most probably these expenses will be kept at a minimum. Since many serious and willful claims are in many respects similar to a liability claim, experts can not only be helpful, but they can be necessary. Therefore, it is not unusual for an employer to enlist the services of an expert regarding an accident, while the injured worker will forego such an advantage based upon the $250.00 limitation.

I expect to see many more serious and willful claims in the future. I attribute this to the changing case law which seems to be expanding the areas for which an injured worker can make such a claim.

Statute Deterring Workers’ Compensation Fraud Does Not Lessen Insurer’s Protection to Report Fraud To Police

n 1990, a car salesman, Richard Moreno, was sent by his workers’ compensation attorney to see a doctor, Marappa Gopinath, about a lower back injury sustained two years before, in 1988, when the salesman slipped and fell on the showroom floor. On the date of the examination, January 17, 1991, Dr. Gopinath wrote a workers’ compensation report stating the patient’s condition had deteriorated, and he had become “increasingly symptomatic and painful.” However, Dr. Gopinath concluded the injury was permanent and stationary and required no additional treatment.

The next day, January 18, the same car salesman saw Dr. Gopinath again, this time regarding a workers’ compensation claim for a lower back injury that took place four days before -- on January 14, 1991 -- when the salesman was lifting a desk. Dr. Gopinath wrote another worker’s compensation report. That report noted the salesman’s statement that he had “continued symptoms with regards to his lumbosacral spine.” The report further stated that the salesman told Dr. Gopinath “he was completely asymptomatic for at least two weeks prior to the above-stated trauma (that is, the January 14 injury).” The report concluded the salesman would need time to recover, and placed him on total temporary disability. The possibility of a disc injury could not be ruled out. The doctor also noted he was prescribing a course of physical therapy and gave the salesman prescriptions for anti-inflammatory, analgesic and muscle relaxant drugs.

The first report went to one workers’ compensation insurer, defendant Pacific Compensation (whose parent company is Fremont); the second report went to another carrier, defendant Ohio Casualty. The two insurers found out about each other’s claim when the salesman’s attorney requested consolidation of the workers’ compensation cases involving the two claims. Both claims were settled within the workers’ compensation system in June 1991.

In February 1992, the two insurers reported Dr. Gopinath to the Department of Insurance and the Los Angeles District Attorneys’ office for insurance fraud, for billing both companies for a single incident, and changing the date on the two reports to show two different injuries. The doctor was arrested and tried for presenting multiple claims for the same injury.

Dr. Gopinath was acquitted. It turned out that the first appointment had been scheduled in December 1990, before the January 14, 1991, injury, and when the salesman showed up for that appointment on January 17, 1991, he told Dr. Gopinath’s receptionist of the January 14 injury. However, since Dr. Gopinath did not have authorization from the salesman’s attorneys to see him about the new injury at that time, the salesman never told the doctor or his assistant of the January 14, 1991 injury. After the examination, the receptionist contacted the salesman’s workers’ compensation attorney and got authorization for Dr. Gopinath to see him about that injury the next day. The receptionist never told the doctor of her conversation with the salesman.

After his acquittal, Dr. Gopinath filed a complaint against the two insurers. His complaint charged the two insurers with having instigated “an aggressive campaign” to destroy his career, beginning in June 1991, just after the workers’ compensation cases were settled. In particular, the insurers were alleged to have known, in June 1991, that the salesman had sustained two separate injuries with two separate employers leading to two separate medical examinations.

The complaint listed five causes of action: interference with economic advantage, intentional infliction of emotional distress, malicious prosecution, civil RICO, and loss of consortium. The insurers filed a demurrer. The trial court overruled the demurrer, reasoning as follows: A statute enacted in 1991, §1877.5 of the Insurance Code, provides insurers with certain immunity. That is, when insurers furnish information to a local district attorney’s office or the Fraud Claims Bureau in the Department of Insurance, they are immune from “any civil liability in a cause or action of any kind” -- provided they acted “in good faith, without malice, and reasonably believe[d] that the action taken was warranted by the then known facts, obtained by reasonable efforts. In short, the statute only provides a qualified immunity. The complaint however, alleged the insurers reported the doctor with malice; and, on demurrer, a court must assume that the allegations in the complaint are true. Moreover, the trial court reasoned, any immunity otherwise afforded the insurers by virtue of §47 of the Civil Code was eliminated by the specific existence of the Insurance Code statute, because the specific controls the general.

A writ of mandate was filed. This writ was granted in part. The Fourth Appellate District, Division Three, held that the relatively recent legislation to deter workers’ compensation fraud did not leave insurers with less protection to report insurance fraud to police and prosecutors than they had before the legislation was enacted. The Court stated that Civil Code §47 gives everybody, including insurers, the right to report crimes to police, the local prosecutor, or the appropriate regulatory agency, even if the report is made in bad faith. As such, the complaint dealing with those issues alone, were to be stricken by way of demurrer.

Fremont Compensation Insurance Company v. the Superior Court of Orange County, 96 Daily Journal D.A.R., 4663

This is a particularly important case to insurers seeking to report suspected workers’ compensation fraud. The troubling part of Insurance Code §1877.5 is that the qualified immunity for reporting suspected fraud does not extend to reports made in bad faith. Fortunately, the Court of Appeal has indicated that Civil Code §47 applies. This section does give a broad protection to anyone reporting suspected crimes to the police, the Department of Insurance Fraud, or the District Attorneys office. If the Court of Appeal had held otherwise, most probably it would have had a chilling effect on insurers’ willingness to report suspected workers’ compensation fraud.

Requirements for Delay Notices

received an inquiry with regards to Title 8, California Code of Regulations section 9812(J). This section states in part, “If the claims administrator cannot determine whether the employer has any liability for an injury, other than an injury causing death, within 14 days of the date of knowledge of injury, the claims administrator shall advise the employee within the 14-day period of delay...”

The question posed to me was regarding what constituted notice of injury. There was also a question as to what the claims person has to do when the claims form has not been signed and returned by the employee.

Section 9812 must be read in light of §9811 which gives some of the definitions. In particular, Subsection (c) states, “ ‘Date: of knowledge of injury and disability’ means the date the employer had knowledge of (a) a worker’s injury or claim of injury, and (2) the worker’s inability or claimed inability to work because of the injury.”

So it is clear that notice of the injury is not only knowledge of the injury, but knowledge of the “claim of injury”. This is a very broad definition which takes into consideration what the employee thinks an injury is.

Further, Subsection (h) of §9811 provides, “ ‘injury’ means any injury as defined as Labor Code §3208 which results in lost time beyond the date of injury, medical treatment beyond first aid, or death.” Therefore, specifically excluded from the requirements to send out delay notices are first aid cases. First aid is defined as an injury which results in any one-time treatment of minor scratches, cuts, burns, splinters, or other minor industrial injury. This does not include serious exposure to a hazardous substance as defined in Subdivision (i) of §6302. See Labor Code §5401.