At time of hearing, a workers’ compensation judge (WCJ) found that the report obtained by SCIF was inadmissible. Because of this, SCIF’s termination of TTD benefits was unreasonable. The WCJ awarded penalties for each time the TTD benefits were due and not paid. For each of these penalties, the applicant was awarded 10% penalties on all TTD payments made to date, as well as all future TTD payments as they became due.

According to one calculation, the effect of this multiple penalty assessment was to increase the penalties on the payments already paid to the applicant from $3,057.60 to a total of more than $33,633.60. The weekly increase would be from her regular $336.00 TTD rate to a total of $2,260.43 per week. Although these figures are being disputed, obviously the penalties are having a dramatic effect on the amount owed to the applicant.

A Petition for Reconsideration was filed on the WCJ’s finding. The Board overruled the WCJ. The Board found only one penalty. However, when a Petition for Writ of Review was filed, it was accepted. The Court of Appeal reinstated the multiple penalties found by the WCJ.

The result given by the Court of Appeal would appear to be neither fair, nor serve the interests of justice. A 10% penalty which is assessed is always assessed retroactive for all benefits paid to date. The penalty then goes prospectively for all benefits which are to be paid in the future. This aspect of the penalty alone has both remedial and penal aspects which are desirable. Certainly, it is important to make sure that payments are paid to injured workers in a timely fashion. On the other hand, penalties which increase a person’s TTD payment from $336.00 per week to a total of $2,260.43 per week, is ridiculous. This only has the effect of creating an undue burden on the insurance carrier, which in turn will have to pass on those costs to employers. The employer, in turn, must attempt to pass those costs on to the consumer. The net effect is to create an unfriendly business environment. This means higher costs, fewer jobs, lower wages and fewer benefits. Certainly this is wise based on the overall economic picture. Many will sacrifice simply to allow a windfall to a few injured workers who hit the “penalties jackpot.” I am sure that the issue is not dead. I am sure that this question will be raised before the other districts. Hopefully, the other Courts of Appeal will view this issue differently. If not, legislative change is warranted.

“Uninsured Employer’s Burden Found to Be a Non-dischargeable Debt in Bankruptcy Court”

he following case arises out of Arizona. However, it has significant ramifications for California in that the Federal Bankruptcy Court was involved. Federal law is uniformly applied throughout all the United States. Given the facts in this particular case, there is no reason to believe that a similar result would not be reached in California.

The employer, Karen Lee Camilli, was found to be illegally uninsured for workers’ compensation benefits. The Industrial Commission of Arizona (ICA) paid the workers’ compensation benefits to the injured worker. However, after the case was concluded, the ICA sought reimbursement from Ms. Camilli. Ms. Camilli filed bankruptcy.

The question before the bankruptcy court was whether or not such a debt was dischargeable or not. The ICA argued that the obligation was in the nature of an “excise tax.” If it was found to be an excise tax, the debt was non-dischargeable. In other words, Ms. Camilli’s bankruptcy would not free her of her obligation to repay the debt to ICA.

The bankruptcy court looked at a number of cases. The court stated, “The legal duty to provide workers’ compensation insurance for employees in Arizona is part of a complex system designed not merely to offset state expenditures, but to provide universal availability of workers’ compensation benefits to employees in the State. We therefore hold that Camilli’s obligation to the special fund meets the necessary elements to qualify as a ‘tax’ under federal bankruptcy law.” The court pointed to cases in other jurisdictions. The cases in states like Ohio, where workers’ compensation insurance by the state is mandatory, and the state insurance system monopolistic, generally hold that premiums and obligations to the state scheme have priority “tax” status. The court then cited various cases from West Virginia, Washington, Ohio, Michigan, New York, Nevada and Minnesota which supported the position.

This case could have significant ramifications for any uninsured employer. For one thing, Labor Code §3717(a)(2) states that there is a per se piercing of the corporate veil whenever a corporation is found to be an uninsured employer for purposes of workers’ compensation. Anyone owning 15% or more of that corporation is personally held joint and severally responsible for the corporation’s obligation.

Therefore, in view of the Camilli case, the option of bankruptcy probably will not relieve an uninsured employer in California of its workers’ compensation obligations. Say for instance someone lends money to a relative to start a business. As part of the security for the loan, they are given 15% of the shares of the corporation. If that business hires an employee who is subsequently injured, the corporation must have workers’ compensation insurance. If they don’t, the person owning the 15% of the shares can be held personally liable for the workers’ compensation payments if there is no insurance. Not only that, even if they file bankruptcy, most probably will not be dischargeable.

I am unaware of any cases in California where the Uninsured Employer’s Fund has attempted to exclude their debt from bankruptcy, but I suspect that it is only a matter of time until this is done. The Camilli case is yet one more reason for an employer to make sure that they do have workers’ compensation insurance.

In re Karen Lee Camilli, debtor, Industrial Commission of Arizona, Appellant, v. Karen Lee Camilli, Appellee, 96 Daily Journal D.A.R. 10885, September 6, 1996.

Surveillance Video Obtained After MSC Found Admissible For Rebuttal To Applicant’s Testimony

pplicant Larry Guinard sustained a workrelated injury on November 30, 1990. The injury occurred in Canada where the applicant resided at the time the work was being done. The defendants’ main office was located in California. The defendant was insured for workers’ compensation benefits through State Compensation Insurance Fund (SCIF).

An MSC was held on June 19, 1995. The applicant designated three medical reports to be offered as evidence. The defendants raised the issue of admissibility as to the reports.

The trial proceeded on August 21, 1995. On that date, over the applicant’s attorney’s objection, Workers’ Compensation Judge Clark admitted into evidence a videotape taken by an investigator hired by the defendants. Applicant’s attorney sought to introduce vocational rehabilitation reports which were not listed on the MSC statement. The defendants objected and the objection was sustained.

The WCJ found that the investigative reports and videotape were obtained after the MSC date. As such, they need not be listed. Further, the defendants were allowed an opportunity to rebut the applicant’s medical reports because they had not been served until time of trial. The applicant’s reports found the applicant permanent and stationary with a 100% permanent disability.

After reviewing all rebuttal evidence including the investigator’s report and videotape, WCJ Clark issued a Findings and Award for a total of 6 3/4% permanent disability. Future medical was awarded with regards to the applicant’s left shoulder.

A Petition for Reconsideration was filed and was denied. A Petition for Writ of Review was filed. This was denied as well.

Larry Guinard v. WCAB, 61 CCC 706.

“Lien Claimant May Not Use Applicant’s Deposition Booklet At Time Of Trial When They Fail To Prove Unavailability Of Applicant Pursuant To CCP §2025(u)(3)(B)”

pplicant, Sylvia Mejia, alleged that she sustained a work related injury while working for Rogers Binding and Mailing. The case was set for trial on February 7, 1994. However, neither the applicant nor her attorney appeared on that date. However, WCJ Bjelland continued on with the trial. Defendants put on witnesses. Later an F&A issued that the applicant did not sustain a work-related injury. All lien issues were deferred.

A DOR was filed by Dr. Fred Hafezi. A lien trial was held on October 12, 1995. The lien claimant attempted to introduce the applicant’s deposition in lieu of having the applicant appear to testify. However, the defense objected to the admissibility of the transcript on the basis that the lien claimant had not complied with CCP Section 2025(u)(3)(B)(v). This section provides that a deposition transcript may be substituted for live trial testimony whenever the deponent is “absent from the trial or other hearing and the proponent of the deposition has exercised reasonable diligence but has been unable to procure the deponent’s attendance by the court’s process.”

The lien claimant had used Crosby Small Claims Service to serve the applicant with a subpoena. An affidavit was supplied showing that two attempts for service had been made without success. However, the declaration under penalty of perjury stated that the attempt had been at 25244 Independent Place, San Bernardino, CA, 92408. The applicant’s address was actually 25144, not 25244. Following submission of the case, WCJ Bjelland issued a joint Findings and Award in which he sustained defendants’ objection to the admissibility of the deposition transcript on the ground that the lien claimant failed to show that he had exercised reasonable diligence to procure applicant’s attendance at the lien trial.

A Petition for Reconsideration was filed. The Board denied consideration. A Petition for Writ of Review was filed. However, this was denied as well.

Fred F. Hafezi, M.D. dba Whittier-Anaheim Physical Therapy Center v. WCAB, 61 CCC 708.