Superior Court Decision May Impact Occupational and Medical Clinics

A Superior Court decision to award Palm Medical Group Inc. $1.13 million in a dispute with State Fund (Palm Medical Group v. State Compensation Insurance Fund (SCIF)) may affect hundreds of other occupational clinics in California that have been excluded from State Fund’s preferred provider network, according to Drew Pomerance, partner of Los Angeles based Roxborough Pomerance & Nye LLP, who represented the plaintiff.

A jury reached the decision after Palm Medical Group Inc. filed a lawsuit in 2003 against State Fund, the state’s largest workers’ compensation insurer, requiring State Fund to institute fair procedures when considering medical clinics for admission into its preferred provider network.

Since 1998, State Fund had consistently refused to admit Fresno based Palm Medical Group Inc. into its network without providing fair procedures, Pomerance claimed. He said State Fund had falsely accused Palm Medical of mishandling claims and poor patient care without an investigation. Pomerance argued that SCIF’s action was in direct violation of the common law doctrine of “Fair Procedure.”

The jury agreed, stating that State Fund dominated the workers compensation market in Fresno and throughout the state, and that the reasons for excluding Palm Medical were arbitrary and unreasonable. The jury also indicated that had State Fund considered Palm Medical fairly, it would have admitted the clinic into its network. Due to loss of business, the jury awarded Palm Medical $1.13 million in damages.

“This verdict is highly significant because it is the first jury verdict in California under the Doctrine of Fair Procedure that has awarded damages,” Pomerance said. “State Fund insures more than half of the workers’ compensation market in California and wields substantial economic power. It cannot arbitrarily exclude companies from its network and place them in a competitive disadvantage without due cause.”