California High Court Rejections of Appeals Expected to Raise Costs for Workers’ Compensation System

The California Supreme Court has refused to hear several appeals on cases this year that threaten to bring higher costs for workers’ compensation and greater uncertainty for insurers.

The Supreme Court announced on Aug. 24 that it was not going to review the decision of the Fifth District Court of Appeal in the case State Compensation Insurance Fund v. W.C.A.B. [Workers’ Compensation Appeals Board], known popularly as the Almaraz case after the applicant in the original case, Mario Almaraz.

The rejection means that one of the pillars of the reforms to the California workers’ compensation system fashioned in 2004 has been knocked down.

The Supreme Court rejection of the Almaraz case comes on the heels of final decisions in two other cases that also allow for greater physician discretion in assessing impairment — also, perhaps, promising more disputes and more variability.

One of those cases is popularly known as the Guzman case. It was paired with the Almaraz case by the Workers’ Compensation Appeals Board, as it addressed the same issue. The other case is known popularly as the Ogilvie case. This case likewise concerned whether claimants could challenge the schedule for assessing impairments. It said that they could.

“It’s pretty unequivocal that costs will continue to go up in California,” said Jerry Azevedo, of the Workers’ Compensation Action Network, which represents the interests of employers.

“We have to look to other ways to restore the predictability that the legislators [who enacted the 2004 reforms] were looking for,” he added.

The Almaraz case involved a trucker driver, Mario Almaraz, who sustained a back injury on the job. According to the 2004 reforms, physicians examining persons making workers’ compensation claims were supposed to follow the AMA Guides 5th edition very strictly when assessing the injured workers’ degree of permanent disability. Almaraz’s physician rated his disability at 12 percent, but also noted that the 12 percent degree of impairment did not adequately describe the extent and impact of the injury. His injury prevented him from prolonged sitting, so he could not do trucking at all.

Almaraz appealed to the Workers’ Compensation Appeals Board. His attorneys argued that a physician had to have latitude from the schedules in the AMA Guides when the Guides did not adequately capture the injury. The Appeals Board agreed, though it said that when a physician decides to rebut the schedule he still has to remain inside the Guides in finding his rationale for the disability rating he gives.

That is the decision the Fifth District Court of Appeals affirmed.

In the Guzman case, Joyce Guzman sustained an industrial injury to her bilateral upper extremities while employed as a secretary by the Milpitas Unified School District. Her doctor concluded that her injury caused 3 percent whole person impairment (WPI) under the AMA Guides, and also that her injury caused a 25 percent loss of her pre-injury capacity for pushing, pulling, grasping, gripping, keyboarding and fine manipulation.

Azevedo said that freeing physicians to use their discretion this way undermines what the reformers were trying to achieve in 2004 — imposing a strict schedule to ensure that compensation awards were standard and predictable — and opens the door to more cases going to court, and perhaps some higher claims awards.

The Schwarzenegger administration’s efforts to “return sanity” to the permanent disability (PD) system was dealt yet another — perhaps fatal — blow, said Don Barthel, a partner at Bradford and Barthel LLP. “It appears clear that PD awards will continue to increase and an objectively-based PD system will continue to be whittled away,” Barthel wrote in a recent article on InsuranceJournal.com.

Together the cases have dramatically undercut the “uniformity, consistency and objectivity” in permanent disability that reforms sought to produce, according to Barthel.

“To a large extent, Almaraz/Guzman has returned California to the ‘bad ole days’ of PD. When reserving PD for a case, adjusters again must focus less on the objectively verifiable organic findings, and more on the ‘wild cards’ of litigation: patient motivation, secondary gain, aggressiveness of legal counsel, political bent of reporting physicians, and the judicial temperament of the assigned workers’ compensation judge,” he wrote.

Topics California Workers' Compensation Talent