The Defense Perspective:
The Delay or Termination of Benefits: When to Pull the Trigger
and What to Do When It’s Done Wrong
by Michael McDonald, Esq.
In this series, Michael G.
McDonald, Esq. of the McDonald Law Corporation offers practical
advice to WC lawyers and adjustors.
A recent situation raised a number of issues concerning
termination of benefits. Our office stipulated a case at
a life pension level. The long story short: the applicant’s
benefits were terminated a few days before the award issued,
because the carrier believed they had paid out more permanent
disability indemnity than was due at that time. They resumed
payments months later after ordered by the Board, but by
then a penalty and sanctions petition had been filed and
a demand for applicant’s attorney fees to enforce
the award under Labor Code §5814.5.
Although both counsel requested an accounting, none was
provided that the attorneys could understand. Applicant’s
counsel set the case for hearing. At the hearing, the parties
agreed to proceed to mediation on the accounting, possible
penalties and overpayments. The judge appointed a special
master to oversee the accounting. This case highlights
the problems defendants have in determining when and how
to terminate permanent indemnity payments after an award
has issued, and the expensive pitfalls if the right procedures
are not followed.
The seminal case concerning delay in payment is Kerley
v. WCAB (1971) 4 Cal.3d 223, 36 CCC 152 (en banc).
In that case the California Supreme Court held that there
must be genuine doubt from a medical or legal standpoint
as to the liability for benefits, and the burden rests
on the defendant to present substantial evidence on which
a finding of such doubt may be based. The court noted defendants
must provide reasonable advances until the permanent disability
level is established.
Over the years, the WCAB and the courts have issued reams
of decisions regarding penalties. These decisions include
such classics as Avalon Bay Foods v. WCAB (Moore) (1998)
63 CCC 902; State Compensation Insurance Fund v. WCAB
(Stuart) (1998) 63 CCC 916; Harris v. WCAB (2000)
65 CCC 449.
The theme of penalty cases is the defendant failed to provide
sufficient evidence at trial to support its burden of proof
of a legitimate existence of doubt or establishing a business
reality for the delay in payment.
As attorneys in the workers’ compensation system,
we should be problem solvers. Taking a traditional Positional
Dispute Approach, taught to us in law school, creates additional
costs of time and money to our system and clients. The
PDA approach is adversarial and aggressive in nature. This
approach may be “fun” for many of us, but it
results in the failure to listen and misunderstanding of
our opponent’s positions.
A better approach for our workers’ compensation system
is the Problem
Solving Approach. According to Michael Palmer, CEO
of The Negotiation Center, this new approach requires a
change in attitude of the attorney. A problem solving attorney
views the situation as a shared problem, one that the parties
can resolve for mutual advantage. This approach requires
the parties to develop a working relationship, communicate,
understand the interests of the parties, and assess proposals
and outcomes.
In the case noted above, my opponent and I worked hard
to determine the proper amounts to be credited against
the permanent disability award. My numbers did not match
my client’s; my numbers did not match my opponent’s;
my opponent’s numbers did not match my client’s
numbers. To complicate the matter, my client believed the
payments had all issued. This required me to review all
of their work and have multiple discussions to come to
an understanding of their position. Applicant’s counsel
set the case for hearing to resolve the dispute, since
the defendant would not reinstate benefits.
Some other issues and facts have not been noted here. Even
though the attorneys were regularly communicating, the
better approach would have been to have the defendant file
for the hearing since the defendant raised the issue of
payments. This action plan would have the benefit of focusing
the parties to resolve the conflict more timely than when
it happened, as well as developing proposals.
Practice Points
- Make sure all benefit notices issued
timely
- Verify the numbers, dates, categories
of payments
- Confirm the information with opposing
counsel and client
- If no agreement to the numbers, file
for a status conference
- Keep an open mind and listen to the other
side
- Communicate regularly on the issue
The parties in the case I described are
well aware of the time and cost associated with further hearings,
witness preparation and testimony, and that the potential loss
or losses would mean a Labor Code §5814 multiple penalty
assessment. That being the case, the informal special master
conference allowed the parties to state their positions without
the formal need to have witnesses present. In the instant case,
if this matter were to go to a formal hearing, defendants would
certainly need to have multiple witnesses testify. This takes
the adjuster, the supervisor and other parties away from their
daily responsibilities putting other injured workers at risk
for not receiving proper benefits or the required legal notices.
The meeting with the special master will be discussed in a later
article. Suffice it to say, the parties took the problem solving
approach and we hope to resolve all issues very soon.
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