California Workers’ Compensation Industry Taking Ogilvie Ruling in Stride

By | August 8, 2011

The most recent twist in the long-running Ogilvie case over the setting of disability payments for permanently injured workers may not be the big blow to the California workers’ compensation system some initially feared.

On July 29, California’s First District Court of Appeal annulled the award by the California Workers’ Compensation Appeals Board in the case of Ogilvie vs. WCAB and sent the case back to the appeals board for further review.

But it upheld the WCAB’s position that the schedule used in setting permanent disability benefits is open to challenge.

In 2009 in the Ogilvie case, the WCAB decided for the first time that injured workers could challenge the schedule used in adjusting workers’ compensation awards so that they reflect the injured worker’s diminished capacity for future employment.

Prior to that ruling, workers were not allowed to challenge the payment schedule or how it was applied.

After the WCAB 2009 decision, experts warned that a decision upholding the right of claims applicants to challenge the permanent disability schedules could add $800 million annually to the costs of workers’ compensation insurers through increased awards and increased numbers of lengthy challenges.

Workers’ compensation insurers and workers have been operating under uncertainty while the Ogilvie case has been under appeal.

While the industry at first feared the impact of the Ogilvie case, now that the right of injured workers to challenge the payment schedules has been affirmed, experts said they think the impact may be neutral, or even positive, because the decision lessens the uncertainty.

“The judgment to this point is that [the decision] is going to have a beneficial effect,” said Mark Webb, assistant general counsel at Pacific Compensation Insurance Co., Thousand Oaks, Calif.

“The decision . . . moves us forward to more certainty,” said Mark E. Gearheart, the counsel for the worker in the closely-watched case, Wanda Ogilvie, told Insurance Journal.

Both Webb and Gearheart said that there have been some large awards in permanent disability cases while the system has been operating under the interim standards and in some ways those awards rendered moot the concerns that Ogilvie would open a Pandora’s Box of huge awards. The most recent decision, while it upholds what happened in Ogilvie, actually clarifies the situation somewhat and makes very large awards a bit less likely, they said.

The Ogilvie case involved a bus driver for the city of San Francisco, Wanda Ogilvie ,who was injured while riding in her bus while it was being towed. She hurt her knee and her back, and eventually she had a knee replacement and was advised to have back surgery, though she did not.

Instead, three years after the injury, she opted for a disability retirement. At that time, she was examined by two qualified medical examiners who were charged with determining her permanent disability rating, on which the permanent disability award is based. Together, their examinations resulted in Ogilvie being given a 28 percent disability rating, which determines how many weeks of compensation she is entitled to receive.

The medical examiners used the Permanent Disability Rating Schedule tables that were established in 2004, when then Gov. Arnold Schwarzenegger reformed the workers’ compensation system to help control costs.

Ogilvie challenged that rating in a trial before a workers’ compensation judge. Two vocational rehabilitation experts submitted their assessments. They rated her disability higher, at about 50 percent. The vocational rehabilitation experts used their own methodology, taking into account her education, skills, work history and the local job market.

The judge agreed with Ogilvie that the medical examiners’ rating was too low and assessed her level of disability using three different methodologies of his own devising. He came to a 40 percent disability rating.

The city of San Francisco appealed.

In 2009, WCAB backed the judge’s right to rebut the state’s disability schedule, though they disagreed with his methodologies and came up with their own.

That decision sent ripples through the workers’ compensation community because the state’s schedule, compiled by the RAND Institute for Civil Justice, was a central element of the 2004 reform effort to control costs. If it could be challenged, the predictability for insurers would be lost.

Now the First District Court of Appeals has upheld the judge and the WCAB that the schedule can be challenged, but it laid specific conditions about how the schedule could be challenged.

The court said a person cannot challenge the schedule itself, but can argue that it was not applied to them correctly. It also said a person can argue that the schedule is wrong in their case because their particular injury prevents the rehabilitation they might otherwise have. Finally, employers can argue that the schedule does not apply to them because their individual injury is somehow different from the injuries of the group of people on which the schedule is based.

The appeals court decision sends Ogilvie’s case back to the WCAB to reconsider with the court’s new directions.

“Because we cannot conclude on this record whether Ogilvie effectively rebutted application of the rating schedule, we reverse the decision of the Workers’ Compensation Board of Appeals, annul the award benefits to Ogilvie, and remand further proceedings consistent with our opinion,” Judge Peter Siggins wrote.

Donald Barthel, a workers’ compensation attorney who practices in Sacramento, and who has written about the Ogilvie case, said that in some ways the decision makes things easier and in some ways it complicates matters, and together that is a wash.

He predicts that two cases still being decided that are sometimes lumped together with the Ogilvie case may have a bigger impact. Those cases, the State Compensation Insurance Fund v. the Workers’ Compensation Appeals Board (known as Almaraz) and Joyce Guzman v. Milpitas Unified School District, question whether a physician assessing a permanent disability has to hew strictly to the guide stipulated by the 2004 reforms, in an effort to impose some uniformity, or whether the physician can deviate based on his own opinion. The courts so far have decided that a doctor can deviate from the guide.

On the positive side, Barthel said that the Ogilvie decision opens the way for an update and revision of the disability rating schedule. By law, the schedule is supposed to be updated every five years. The update was supposed to be done 20 months ago. It was held off while Ogilvie was being decided. Now it can be revised, and there is opportunity to improve it, Barthel said.

Gearheart agrees a revision is overdue.

“The current PDRS (Permanent Disability Rating Schedule) is remarkably inaccurate,” said Gearheart.

A date for the new WCAB hearing on the Ogilvie case has not been set, according to Gearheart, who said that, in the meantime, Ogilvie has been getting by on her partial retirement.

Meanwhile, workers’ compensation insurers are dealing with rising costs. The California Workers’ Compensation Insurance Rating Bureau recently reported that in 2010 the industry took in $9.7 billion in direct earned premium, while it incurred losses and expenses of $11.2 billion.

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