Yesterday morning, the California Supreme Court heard oral arguments in the first case to reach the court involving the Schwarzenegger workers' comp reform, SB 899.

Actually, the court was hearing arguments in multiple cases. At issue in these cases (Welcher, Brodie and Dykes) are three formulas for compensating a worker for a later injury where there has been a prior percentage disability award. The Welcher formula (subtract percentages from percentages) favors insurers, while the Dykes formula (subtract dollars from dollars) is more worker-friendly. The Brodie court adopted something of a compromise.

These cases involve an important issue. But whatever the court does will have a significance far beyond the specific issue at hand. Welcher, Brodie and Dykes will probably result in the court sending an overall message as to how it intends to deal with ambiguities in SB 899, the Schwarzenegger comp reform.

SB 899 was literally passed in the middle of the night in the Spring of 2004 without active debate by the legislature. One thing almost all observers -- whether insurer or worker advocates -- agree on is that SB 899 is poorly drafted.

Will the court cite the perceived legislative intent to deal with a 2004 workers' comp "crisis" and resolve all ambiguities in favor of insurers?

Or will the court follow the doctrine that where there is ambiguity in the law, the Labor Code 3202 "liberal construction" in favor of the worker in California dictates the law be interpreted in a worker-friendly manner?

Both of these concepts were prominent in yesterday's oral argument. Apparently, Justice Joyce Kennard was particularly active in the oral argument. But experienced court watchers have cautioned against trying to read the tea leaves.

There are many other workers' comp issues percolating through the California appellate court system. The Supreme Court's approach in Welcher/Brodie/Dykes could tell us in short order how many of those issues will be resolved.

Stay tuned.

Julius Young
www.boxerlaw.com

2007 is flying by, and it is time for Workerscompzone to note the most significant events in California workers' comp during the first quarter of 2007 (caution: note that the law on some of the following is in flux and may change depending on further court decisions or legislative action).

In no particular order, these are the top 10 stories so far:

1. The California Supreme Court agrees to hear arguments in several cases dealing with the rules of "apportionment." The court hears those arguments this week in Los Angeles. The court is faced with at least three different Court of Appeal approaches (Brodie v. WCAB, Welcher v. WCAB and the Dykes case) to the question of whether insurers can subtract a prior percentage of disability from a later one or whether there are other appropriate formulas for deducting a prior disability from a later one.

2. The Schwarzenegger administration and the state agency known as CHWSC (also called "Cheese Whiz") unveil studies which confirm that the 2004 reforms resulted in permanent disability awards being slashed by 50% or more. To learn more, see my post as follows:
http://www.workerscompzone.com/index.ph ... 4e069ef8f9

3. Court decisions are rendered on the issue of when the "new" 2005 Schwarzenegger schedule applies to pre-1/1/05 injuries, but many of those cases remain tied up in appeals which may establish the final rules. See my post as follows:
http://www.workerscompzone.com/index.ph ... 4e069ef8f9

4. The Workers' Compensation Insurance Rating Bureau calls on Insurance Commissioner Steve Poizner to recommend an 11% reduction in workers' compensation rates. But insurer payouts to workers are only a fraction of total premium collected. See my post as follows:
http://www.workerscompzone.com/index.ph ... 4e069ef8f9

5. A UCLA institute commissioned by the Schwarzenegger administration to study injured worker opinion on medical treatment revealed the results of its study. See my post as follows:
http://www.workerscompzone.com/index.ph ... 4e069ef8f9

6. An important California Court of Appeal case (Dwight Smith v. WCAB) affirms that injured workers have the right to force the insurer to pay the worker's attorney fees incurred in enforcing a medical award. See my post as follows:
http://www.workerscompzone.com/index.ph ... 4e069ef8f9

7. Governor Schwarzenegger appoints Alfonso Moresi as a member of the statewide Workers' Compensation Appeals Board, filling the slot of the termed out Merle Rabine, a Gray Davis appointee. See my post as follows:
http://www.workerscompzone.com/index.ph ... 4e069ef8f9

8. The Schwarzenegger administration struggles to come up with a set of regulations on utilization review oversight. See my post as follows:
http://www.workerscompzone.com/index.ph ... 4e069ef8f9

9. The 2-year cap on temporary disability enacted as part of the 2004 SB 899 comp reform becomes a major issue in litigation and in the legislature. In an informational hearing held in March 2007 at the Assembly Insurance Committee, there was some indication that even some employers might support a change on this.

10. Turmoil at California's largest workers' comp carrier, the State Compensation Insurance Fund (SCIF). Several executives recently left the fund, California Insurance Commissioner Steve Poizner called for an audit of SCIF, and there will likely be legislative hearings on SCIF's governance. To read more, click here:
http://www.insurancejournal.com/news/we ... tm?print=1

In the 2nd quarter of 2007, look for major developments as the California Supreme Court decides the Brodie, Welcher and Dykes cases and as the Schwarzenegger administration unveils its plans for a revision of the permanent disability rating schedule.

Julius Young
www.boxerlaw.com

The rates California workers' comp insurers charge employers were deregulated in the early 1990s. Since then, the California Insurance Commissioner makes a non-binding recommendation on rates.

The rates recommended by the Insurance Commissioner often follow the recommendations of an industry group, the Workers' Compensation Insurance Rating Bureau of California, commonly known as the WCIRB.

On March 28, 2007, the WCIRB recommended that California workers' compensation rates drop by 11.3%. Insurance Commissioner Steve Poizner could adopt this recommendation or could make his own independent assessment. When John Garamendi was Insurance Commissioner, he did not always follow WCIRB recommendations. In any event, Poizner's decision is not binding on insurers, who are free to set their own pricing.

According to an article in today's Sacramento Bee by Gilbert Chan, if this cut is adopted, the total reductions in rates since 2003 would total 64%. Rates would be cut to $3.21 per $100 of payroll after having reached a high of $6.47 per $100 of payroll several years ago.

Keep in mind that not all these savings have been passed along to all employers. Many businesses have complained that they have not seen major savings after the 2003 and 2004 comp reforms.

And of the comp premiums collected, how much is being distributed to injured workers in different forms of benefits? WCIRB statistics for 2004 show that out of $23.6 billion collected in premiums, benefits to workers were paid in the amount of $8.5 billion, and $5.4 billion went towards insurer expenses. In 2004, that left profits for insurers of $9.7 billion. Shocking? A system designed to handle injured worker medical treatment and disability payments paid out only slightly more than a third of premiums collected. Carrier profits consumed more than 40% of premiums collected.

I'd call that a recipe for some serious structural reform. As they head into discussions this year of what employers can afford and what an adequate compensation system would look like, perhaps the regulators and politicians should consider some of these statistics.

Julius Young
www.boxerlaw.com

Is the glass half empty or half full? Listeners to the testimony in Sacramento at today's California Assembly Insurance Committee hearing on the effect of recent changes on permanent disability and temporary disability may have wondered... are these guys all on the same planet?

Representatives of the big employer-sided interests in California testified. Manufacturers, insurers, self-insured governmental entities. For labor, there was Angie Wei of the California Labor Federation. Linda Atcherley testified on behalf of the California Applicants Atttorneys, as did insurance consultant Mark Gerlach.

The message from the employer community remains consistent: there was a crisis; SB 899 has lowered runaway and crippling workers' comp costs, so don't tinker with the system. The employer community insists that more data and further studies of the results of SB 899 (and the new rating schedule that followed it) are needed before changes are made.

Wei, Atcherly, Gerlach and other speakers noted that there is a different crisis now. A crisis for injured workers. Gerlach pointed out that inaction is a recipe for death by study. Wei, Gerlach and Atcherley all noted that the recent CHWSC study documents the predictions of prior studies. The CHWSC study shows that ratings under the new permanent disability rating schedule are on average 50% lower than under the "old" pre-Schwarzenegger schedule (see link to the CHWSC study below). Gerlach pointed out that the RAND study had questioned the adequacy of pre-2004 benefits, and that benefits have now been reduced by 50% from pre-2005 levels. Wei noted that the Labor Fed had prepared a position paper on the issue (I'll try to post it soon).

The Insurance Committee was told that the DWC (i.e. Schwarzenegger administration) will soon release the results of its analysis of data on uncompensated wage loss. The DWC indicated that proposals for revisions in the permanent disability rating schedule would then be made, and the project would enter a 120-day rule-making phase.

Interestingly, that could put final DWC action on this topic either just before or just after the usual end of the legislative session, which normally closes in early August. Thus, what the DWC does or does not do in its rule-making process could become part of a larger negotiated legislative solution this year.

The one area that seemed ripe for agreement between the sides is on the issue of the two-year temporary disability cap. Several business lobbyists testified that they could support a cap on the number of eligible weeks of TD, but spread out over a longer period (for example, a 204-week cap on TD weeks that could be used over a three or four year period). I expect we will see a bill in this area.

To see the CHWSC report, click the following:
http://www.dir.ca.gov/CHSWC/Reports/Mem ... an2007.pdf

To see the recent DWC paper on the status of its study, click the following:
http://www.dir.ca.gov/dwc/WageLossForIn ... withTD.htm

Julius Young
www.boxerlaw.com

On Wednesday, March 28 at 9 AM, the California Assembly's Insurance Committee (chaired by San Jose Democrat Joe Coto) will hold a public information hearing on the effect of recent revisions to the workers' comp permanent disability rating schedule.

The Schwarzenegger administration (through the staff of the Division of Workers' Compensation) has been conducting a study of return to work rates and earnings losses of California injured workers. Portions of the study have been released (see below to download those studies), but the study is not complete.

Meanwhile, Cheese Whiz (the California Commission on Health, Safety and Workers' Comp, CHWSC) has continued to study the issue, and recently issued a report. The CHWSC report released on February 23, 2007 verified that the impact of the 2003 and 2004 workers' comp reforms (and the new rating schedule that was adopted) has been to drastically reduce permanent disability awards.

The March 28 hearing may provide insight into how the various system stakeholders will "spin" this information and information as to where the administration is headed in its DWC study. I will be covering the results of the hearing over the next several days.

To see the DWC study released last week, click here:
http://www.dir.ca.gov/dwc/WageLossForIn ... withTD.htm

And to see a PDF version of the CHWSC study of ratings through January 2007 (prepared by Berkeley's Frank Neuhaeuser), you can click here:
http://www.dir.ca.gov/CHSWC/Reports/Mem ... an2007.pdf

Stay tuned.

Julius Young
www.boxerlaw.com