Calif. Returns Workers’ Comp to ‘Bad Ole Days’

By Don Barthel | June 27, 2011

When the Fifth District Court of Appeal (DCA) in California refused to review the Workers’ Compensation Appeals Board’s (WCAB) en banc decision in State Compensation Insurance Fund (SCIF) v. WCAB (Almaraz) on June 16, the Schwarzenegger administration’s efforts to return sanity to the state’s workers’ compensation permanent disability system was dealt yet another — perhaps fatal — blow. While SCIF could appeal this decision to the California Supreme Court, that body’s failure last year to accept a defense petition in Joyce Guzman v. Milpitas Unified School District (Guzman), a Sixth DCA case that dealt with precisely the same legal issues as Almaraz, suggests such an effort would likely be futile.

With Almaraz and Guzman effectively at the end of their long legal odysseys, it appears clear that California’s permanent disability system will —for the foreseeable future — be guided by the Sixth District Court’s affirmation of the WCAB’s en banc decision in Guzman. Restated, it appears clear that PD awards will continue to increase and an objectively-based PD system will continue to be whittled away.

California Experiments With Objectivity

Prior to former Governor Schwarnegger’s successful passage of SB 899 in 2004, permanent disability (PD) was determined by physicians relying on, amongst other things, (a) injured employee’s subjective complaints, and (b) doctors’ subjective determinations as to appropriate work restrictions. Objective, verifiable, reproducible findings rarely factored in the equation in any significant way, thereby allowing for significant variation in PD awards from patient to patient, even when they suffered the same injury causing the same or similar personal economic detriment.

For example, a physician’s determination that an employee should be precluded from heavy lifting, repetitive bending and stooping entitled the patient to 25 percent PD. A determination that the patient suffered from constant severe pain in the spine — even in the complete absence of objective findings — equated to 100 percent PD (worth, in some cases, many millions of dollars). Thus, the size of a PD award often depended more on the creativity of the reporting physician and/or the aggressiveness of the worker’s attorney than his objectively verifiable medical condition or diminished ability to compete in the open labor market.

SB 899 sought to curtail PD fluctuation and abuse by curtailing reliance on physician’s subjective opinions regarding work restrictions and dramatically diminishing reliance on patient’s pain complaints. In fact, the legislature expressly called for a PD system that “promote[d] consistency, uniformity, and objectivity.” The bedrock of this new PD system was the legislative mandate that all workers’ compensation physicians assess PD by relying exclusively on the “American Medical Associate’s Guide to the Evaluation of Permanent Impairment” (5th Ed.) (Guides). Shortly after the Guides began being used in California on Jan. 1, 2005, PD awards became far more predictable and decreased significantly .

Politics Miss Middle Ground

With PD awards dropping across the state, injured workers, their attorneys, judges, and even some in the defense community expressed concern that PD levels had decrease too much. A number of legislative efforts were introduced that would have increased PD rates, without undercutting the uniformity, consistency and objectivity achieved by strictly applying the AMA Guides as written.

In late 2008, Governor Schwarzenegger “terminated” Senator Perata’s SB 1717, the third attempt by the then soon to be termed out Senator to double PD awards. Not surprisingly, this refusal to allow PD rates to increase outraged the applicant’s bar. Interestingly, however, many in the defense community were similarly disappointed by the governor’s refusal to extend an olive branch to his opponents. Keenly aware that mounting political pressure to increase PD awards needed a constructive outlet such SB 1717, some in the insurance community encouraged the governor to meet his opponents half-way, lest sufficient pressures mounted that would blow-up the PD system in a wholly non-consistent, non-uniform and arbitrary manner.

Thar She Blows!

Within months of Schwarzenegger again vetoing a PD increase, the WCAB rocked the PD world with Almaraz vs. Environmental Recovery Services (SCIF); Guzman vs. Milpitas Unified School Dist (Keenan), 2/03/2009 (Almaraz/Guzman I). While the shocking dictates of Almaraz/Guzman I were modified by the WCAB’s revisiting of the matter in Almaraz/Guzman II and, more recently, the 6th DCA’s Guzman, the damage was effectively wrecked in 2009.

The WCAB shocked the workers’ compensation world by announcing that the AMA Guides – the bedrock to ensuring consistency, uniformity and objectivity – could effectively be rewritten by an examining physician who determined (or was convinced by counsel) that he or she had a “more accurate” manner to measure an injured worker’s permanent impairment.

While the WCAB may have seemed to provide some temperate language by instructing that, “when determining an injured employee’s whole person impairment, it is not permissible to go outside the four corners of the AMA Guides”, any illusion of restraint was largely undercut by the commissioners’ invitation to physicians to “utilize any chapter, table, or method in the AMA Guides that most accurately reflects the injured employee’s impairment.” Indeed, in scenarios where — pre-Almaraz/Guzman – the analyses of a particular type of injury was limited to one chapter and one or two tables in the Guides — physicians were now welcome search throughout eighteen chapters and more than two hundred tables for a “more accurate” impairment percentage!

Let The Games Begin

Not surprisingly, doctors throughout California quickly determined that their own creative application of the Guides (applications never foreseen by the AMA Guides editors) were “more accurate”. And, perhaps equally not surprising, these “more accurate” methods — based, as they are, on a physician’s own subjective assessment of patient welfare — increasingly import reliance on non-verifiable, wildly varying pain complaints, resulting in sky-rocketing PD awards and litigation costs.

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 WCJ.

So long, “consistency, uniformity, and objectivity”, we hardly knew ye!

Defensive Measures

All is not lost! While the defense community can no longer simply sit back and rely on physicians properly applying the AMA Guides as written to ensure moderate, predictable and appropriate PD awards, there are a number of steps that the defense community can take to combat expensive misapplication of the AMA Guides and Almaraz/Guzman inflationary tactics:

  1. Avoid AMEs: Agreed Medical Examiners (AMEs) are far more likely to misapply the AMA Guides ala Almaraz/Guzman than Primary Treating Physicians or Panel Qualified Medical Examiners (PQMEs). For the reasons I recently detailed in an article entitled “The AME Trap (aka Why Agreed Medical Examiners Make Me Disagreeable) (http://www.bradfordbarthel.com/blog/V6N2/One-1.htm), employers should rarely strongly consider pushing a case towards an AME!
  2. Analyze That Report: Over three-quarters of AMA Guides-based reports are WRONG! Having personally overseen the analysis of nearly 10,000 Guides-based reports, I’ve been constantly shocked at the consistency with which physicians misapply the Guides for fun and profit! Indeed, more than 8 out of 10 reports we analyze from physicians throughout California include mistakes — accidental or otherwise — resulting in overstatements of impairment and PD. Yes, 4 out of 5 reports you received overstate the PD…sometimes by hundreds of thousands of dollars! With so much riding on it — and with such a high rate of inaccuracy — a professional analysis of physician reports to provide guidance for (a) requesting a supplemental report, (b) cross-examining the physician, and/or (c) attacking the report via Points & Authorities, is money well spent.

Barthel is a partner at is a partner at Bradford and Barthel LLP. His legal career has been dedicated to the defense of employers’ rights in the arenas of labor law, employment law, and workers’ compensation. During the past 19 years, his practice has exclusively focused on workers’ compensation defense and related matters. He is an acknowledged expert regarding the AMA Guides. E-mail: dbarthel@bradfordbarthel.com.

About Don Barthel

Bradford & Barthel

Latest Comments

  • June 29, 2011 at 2:28 pm
    CA Claims Mgr says:
    The truly infuriating (and sad) thing is, the manipulation and greed is so pervasive in SoCal's WC system that it's status quo to judges, attorneys and physicians. It is not t... read more
  • June 28, 2011 at 1:55 pm
    GL GURU says:
    And furthermore, yeah there are abusive claim handlers out there. they are the minority. Most claims people don't get big fat bonuses. On the contrary a lot of the bonus mone... read more
  • June 28, 2011 at 1:51 pm
    GL GURU says:
    Bad Ol' Days is right on the money! Carriers were leaving because of the lunacy in the WC market. The new law brought sanity to it and carriers came back. You are going to ... read more
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