MARK W. HAMBERGER       DAVID L. SNYDER RONALD E. WEISS              F. DANIEL BOWERS DAVID F. DAVIS                  MARK C. SOMERS SUSAN R. DUFFY                  RENEE E. HEITGER BARBARA J.  PLECKAN         RUSSELL D. HALL PETER M. KAPLAN               MARY KAY  LAFORCE                                GREGORY A. SAXUM SPECIAL COUNSEL		HAMBERGER & WEISS ATTORNEYS AT LAW ONE SOUTH WASHINGTON STREET SUITE 500 ROCHESTER, NEW YORK 14614 Tel.  585-262-6390             Fax  585-262-6399 www.hambergerandweiss.com E-Mail: rochester@hwcomp.com                    Writer's Ext.:  234          Writer=s E-Mail:  rweiss@hwcomp.com		JANICE M. ATWOOD          S. PHILIP UNWIN PRUDENCE F. PHILBIN       JOSEPH P. DECOURSEY NICOLE CHRISTOU            KEVIN R. DOERING RICHARD L. HOLSTEIN     KRISTIN M. MACHELOR KAREN M. DARLING           CORY L. LOUDENSLAGER JOSHUA S. ROBERTS           MEREDITH A. VACCA COLLEEN L. WILLIS          TIMOTHY R. HEDGES KIM M. BREWER                  JOHN A. TERZULLI MELANIE M. WOJCIK         JOHN M. CORDON, JR. VAN M. THAI                        KERRY M. MORRISS JOHN M. COYLE                  KIMBERLY A. JETTY RODNEY D. BUTLER           JULIA E. ROBERTS

 

THE 2007 WORKERS= COMPENSATION BENEFIT INCREASE & REFORM BILL

 

This white paper attempts to analyze provisions of the 2007 Workers' Compensation Benefit Increase & Reform Bill that affect handling of Workers' Compensation claims.  This legislation was announced by the Governor, legislative leaders and the Business Council and AFL-CIO on February 27, 2007 as a landmark accord designed to increase benefits to claimants and make reforms saving employers 10-15% of premium costs.  The Act was passed by the Senate and Assembly on March 6, 2007 and signed into law by Governor Spitzer on March 13, 2007.  It is effective immediately unless otherwise indicated.

 

                                                                   Benefit Rates

 

(Applicable to accidents on or after 7/1/07)

 

Maximum weekly indemnity benefits levels are raised from $400.00 for new accidents as follows:

 

$                   $500.00 for accidents or deaths on and after 7/1/07

$                   $550.00 for accidents or deaths on and after 7/1/08

$                   $600.00 for accidents or deaths on and after 7/1/09

$                   Two-thirds of the New York State average weekly wage for accidents or deaths on and after 7/1/10, reindexed to the State average weekly wage annually on 7/1 thereafter

 

The minimum weekly rate is raised from $40.00 to $100.00 for accidents on and after 7/1/07.  If the claimant=s wages are less than $100.00 per week, claimant will receive his or her full wages. 

 

                              Caps on Permanent Partial Disability Indemnity Benefits

 

(Applicable to accidents on or after 3/13/07)

 

Compensation for claimants classified with permanent partial disabilities is to continue to be two-thirds of the difference between the average weekly wage and the claimant=s wage earning capacity.  For accidents and dates of disablement on and after the legislation=s effective date (3/13/07), weekly benefits for permanent partial disabilities are capped based on percentage loss of wage earning capacity according to the following schedule:

 

 

% Loss of Wage Earning Capacity	Maximum Benefit Weeks	Number of Years
1% - 15%	225	4.33
16% - 30%	250	4.81
31% - 40%	275	5.29
41% - 50%	300	5.77
51% - 60%	350	6.23
61% - 70%	375	7.21
71% - 75%	400	7.69
76% - 80%	425	8.17
81% - 85%	450	8.65
86% - 90%	475	9.13
91% - 95%	500	9.62
96% - 99%	525	10.10

 

COMMENTS:  The caps on indemnity benefits for PPD apply only to cases with dates of accident or disablement on or after 3/13/07.  Since in practice claims are not stable for classification until two or more years after the date of injury, this means that any savings to employers or carriers that may be realized from the caps will not accrue until some years from now.  Employers and carriers will presumably be able to take down reserves on some new cases expected to classify.  In the meantime, some provisions of the new statute, especially the mandatory ATF payment discussed below, may add greatly to carrier costs.

 

The capping of permanent partial disability benefits will inspire more claims for permanent total disability on which compensation is for life.  On the same date that he signed the legislation, Governor Spitzer sent a letter to the WCB Chair, Superintendent of Insurance and Commissioner of Labor to direct that task forces be established, including one to design and implement medical guidelines by 12/1/07.  It is hoped that these new medical guidelines will make the determination of permanent total versus partial disability as objective as possible.  Nevertheless, litigation on the issue of PPD v. PTD will probably increase and lead to negotiation by the parties and perhaps more '32 settlements on this issue.

 

A significant concern also exists with regard to the other end of the scale as to what will qualify a claimant to be classified as a permanent partial disability at the lowest threshold.  A mere 1% permanent loss of wage earning capacity will be sufficient to entitle a claimant to a permanent partial disability classification and benefits after classification up to 225 weeks.

 

Note that the caps apply only to accidents or deaths occurring on or after the effective date of the Act, 3/13/07.  They do not apply to cases with dates of accident prior to 3/13/07 regardless of the date of classification.

 

The combination of caps, rate increases, and the ATF payment described below make determination of the date of accident or disablement much more significant than in the past. Assessment of rates, likelihood of classification and return to work among other factors will figure into your litigation strategy. The dilemma can be illustrated by the following example. 

 

EXAMPLE:  The claimant files an occupational disease claim in July 2007.  On 3/1/07, he first sees his doctor and is diagnosed with the disease.  On 5/1/07, he sees his doctor again and the doctor renders an opinion that his disease is causally related to his work.  On 7/1/07, the claimant begins to lose time from work due to the disease.  Assume the claimant's average weekly wage is $750.00.  Assume also the claimant remains out of work and is eventually classified with a permanent partial disability.  Assume also that the employer is insured by a private carrier.  The carrier's liability will vary greatly depending on which of the above three dates is chosen by the Board to be the date of disablement. 

 

(1)        If the date of disablement is 7/1/07, the claimant will be entitled to a $500.00 maximum rate.  PPD benefits will be capped, and if the claimant is out of work at the time of classification the present value of those capped benefits will have to be paid into the ATF.

 

(2)        If the date of disablement is 5/1/07, the maximum rate will be $400.00. PPD benefits will be capped and if the claimant is out of work at the time of classification the present value of the capped benefits will have to be paid into ATF. 

 

 

 

(3)        If the date of disablement is 3/1/07, the maximum rate would be $400.00.  PPD benefits will not be capped, and if the claimant were out of work at the time of classification, the present value of PPD benefits over the claimant's lifetime, without cap, would have to be paid into the ATF.  One can see here that potentially the worst result for the carrier would be a 3/1/07 date of disablement even though it may entail paying the claimant $100.00 per week less in benefits at the outset. 

 

1.                  The maximum benefit period cap is calculated from the date the claimant is classified as being permanently partially disabled.

 

COMMENTS:  This means that for a claimant who is classified with a 10% loss of wage earning capacity and has received two years of indemnity benefits before classification, an additional 4.33 years of benefits (for a total of 6.33 years) may be paid.  For some levels of disability, the cap may exceed the level at which cases are currently settled under WCL '32 and will be at higher benefit rates.  Claimants= attorneys may try to delay classification to maximize benefits.

 

Self-insured employers and the State Insurance Fund will always want to accelerate classification.  Private insurance carriers will have a dilemma.  An early PPD finding will start the clock on the cap but trigger an ATF payment, absent a '32 settlement (see below).

 

2.                  Percentage losses of wage earning capacity are not defined in the statute.

 

COMMENTS:  The Workers' Compensation Law has always stated that permanent partial disability indemnity rates are to be based on loss of wage earning capacity.  In practice, however, rates have been set based on medical opinions regarding degree of disability expressed in accordance with the Board=s Medical Guidelines.  These guidelines evaluate disability as mild, moderate and marked with percentages of 25%, 33-1/3%, 50%, 66-2/3% and 75%;  not in 15%, 10% and 5% increments for loss of wage earning capacity, as in the new statute.

 

Unlike the cap legislation proposed in 1996, which incorporated the AMA Medical Guidelines, the new statute makes no mention of AMA or any other guidelines for determining degree of disability.  The task force directed by the Governor to design new medical guidelines is to have them finalized by 12/1/07.  It is hoped that these guidelines will be based upon objective medical criteria only.  Whether the caps serve to pay out more or less to permanent partially disabled claimants than the present system will depend in large part on how the percentage loss of earning capacity is determined.

 

 

 

 

The Law Judge is charged with deciding percentage loss of wage earning capacity. Even with objective medical guidelines, therefore, the determination of percentage loss is bound to be somewhat subjective and may lead to much more negotiation or litigation than under the old system.

 

3.                  How the maximum permanent partial benefit cap is to be paid out is not defined in the statute. 

 

Question 1:  At what weekly rate is a claimant found to have a particular percentage loss of wage earning capacity to be paid?  In the past, if the claimant had a $600.00 AWW and was found to have a moderate (50%) permanent partial disability, benefits for lost time after classification would be at $200.00 per week (50% of the $400.00 rate).  Under the new statute, assume that a claimant, with a date of accident between 3/13/07 and 6/30/07, is classified with a 15% loss of earning capacity, which would cap entitlement to benefits for permanent partial disability at 225 weeks.  Would lost time benefits for that schedule be paid at $60.00 per week ($400.00 x 15%), or at the full $400.00 rate?  (Note that if the accident occurred on or after 7/1/07 the $100.00 minimum rate would apply).  This remains an open question.

 

We would argue that nothing in the law has changed the way in which the weekly partial disability benefit is calculated; it is based on loss of wage earning capacity so that the rate in this example should be $60.00 per week.  If the answer in this example were that benefits would be paid at $400.00 per week, the new capped system could very well result in payment of higher weekly benefits to  permanently partially disabled claimants than under the current system.

 

Question 2:  Do all defenses to permanent partial disability benefits remain?  In the past, a claimant needed to be out of work or at least have reduced earnings to collect permanent partial disability benefits after classification.  We assume that this remains the case.  We also assume that the defense of voluntary labor market withdrawal would remain available to employers and some carriers (about which we will say more below) paying permanent partial disability benefits.

 

Question 3:  How is the maximum permanent partial benefit (cap) measured?  We know that the cap applies beginning with the date of classification for accident dates on or after 3/13/07.  In the case of an individual with a 15% loss of earning capacity, the maximum benefit would be 225 calendar weeks.  Does this maximum benefit period expire 225 weeks after the date the claimant is classified?  Or if the claimant is working during some of the first 225 weeks (4.33 years) after the classification, would the claimant be able to receive the remainder, if any, of the 225 weeks of benefits if any of those weeks fell beyond 4.33 calendar years after the classification date?  This could be a particular problem in cases involving claimants who are working at the time of classification, but years later retire and successfully claim that their permanent partial disability contributed to the retirement. Will such individuals be entitled to have the full benefit cap to commence as of the retirement, years after classification?   If so, and the retirement was more than seven years after the date of accident and three years after the last payment of compensation, will the Stale Claim Fund under '25-a become liable for the indemnity?

 

4.                  Medical benefits continue after completion of the indemnity cap, but carriers and employers may apply to suspend or discontinue medical services.  Law Judge decisions stopping treatment will be subject to independent review by an outside agent chosen by the Board.

 

COMMENTS:  Caps on PPD benefits present the opportunity to transfer liability for medical benefits to the Stale Claim Fund under WCL '25-a three years from the last indemnity payment in cases that may have otherwise entailed lifelong medical coverage.

 

5.                  Safety Net provisions are created as a new WCL '35 for PPD claimants who are Acapped out@.

 

A.                A return to work task force under the Commissioner of Labor is to report findings and recommendations by 12/1/07.

 

B.                 The claimant=s right to apply at any time for total industrial disability under current case law is incorporated into the statute.

 

C.                 Extreme hardship.  Claimants with greater than 80% loss of wage earning capacity may apply within a year prior to scheduled expiration of indemnity benefits for PTD or TID reclassification due to factors (undefined) reflecting extreme hardship.

 

COMMENT:  Expect claimants to push for classifications of greater than 80% to be afforded this considerable safety net.  Employers and carriers will want to work to avoid classifications above this level.  What constitutes extreme hardship meriting reclassification will need a great deal of refinement. 

 

D.                Annual Safety Net Reporting.  The Commissioner of Labor is to report annually starting 12/1/08 regarding the number of permanent partial disability claimants who (i) have returned to work; (ii) have been re-categorized as totally industrially disabled; (iii)  continue to receive benefits; and (iv) have not returned to work but whose indemnity benefits have expired.  The Commissioner is also to report on steps necessary to minimize the number of workers who have not returned to work or have been re-categorized from permanent partial disability.

 

                                                              The ATF Surprise

 

                                                               (Applicable 7/1/07)

 

WCL '27(2) was amended to provide:

 

[I]f any such award made on or after July first, two-thousand seven requires payment for permanent partial disability under paragraph w or subdivision three of section fifteen of this article by an insurance carrier which is a stock corporation or mutual association...

 

a mandatory payment of the present value of the award must be made into the Aggregate Trust Fund (ATF).

 

ALERT:  This provision, sought by some in Labor, impacts the way in which PPD indemnity benefits are to be paid by private insurance carriers for cases classified as PPD on and after 7/1/07.  It does not apply to self-insured employers or the State Insurance Fund.  Although the amendment does not apply to any classifications prior to 7/1/07, it does apply regardless of accident or disablement date.  Benefits awarded for classifications made between 3/13/07 and 7/1/07 would not require a payment into ATF by private carriers.  Any classification made on or after 7/1/07 on a case covered by a private carrier on which the claimant is out of work at the time of classification will require the carrier to pay the present value of the benefits to ATF immediately after classification.  This may lead to some startlingly large payments into ATF.

 

EXAMPLE 1:  A claimant with a 4/1/07 accident is out of work and classified after 7/1/07 with a capped  PPD at 75% loss of earning capacity at $400.00 per week.  The claimant could receive capped payments for 400 weeks (7.69 years) totaling $160,000.00.  It is approximately $140,000.00 that would be payable to ATF as the present value immediately after classification.

 

EXAMPLE 2:  A claimant with a 7/1/07 accident is classified after 7/1/07 with a capped PPD 75% loss of wage earning capacity at $500.00 per week.  The claimant would receive capped payments for 400 weeks (7.69 years) totaling $200,000.00. A present value of at least $160,000.00 would be payable to ATF.

 

EXAMPLE 3:  If a claimant with a pre-3/13/07 date of accident is out of work and classified on or after 7/1/07, the present value of his classification award payable to ATF would be based on his weekly rate over his life expectancy.  Assume claimant is a 50-year-old male with a 28.5 year life expectancy and a $400.00 per week classification rate.  The estimated benefit payout would be $592,800.00 [$400.00 x 1482 weeks (28.5 years)], present valued at approximately $300,000.00.

 

 

SPECIAL ALERT:  Because the ATF payment is required of private carriers, and only for classifications on or after 7/1/07, carriers will want to try to have claims ripe for permanency assessment classified before 7/1/07.  On the other hand, expect claimants= attorneys to attempt to delay such classifications on private carrier cases until on or after 7/1/07.

 

1.                  The prospect of mandatory payment into ATF will serve as a disincentive to  claimants insured by private carriers from returning to work before classification.  Attorneys for such claimants  can be expected to demand, and carriers will want to consider, entering into '32 settlements below the present value payment carriers would have to make into ATF.

 

2.                  On cases headed for classification on or after 7/1/07, carriers and employers will want to investigate, raise and litigate the issue of voluntary labor market withdrawal now.  A finding of voluntary labor market withdrawal, which would result in no compensation being awarded to the claimant at the time of actual classification, could result in no payment into ATF, as opposed to the prospect of a payment of hundreds of thousands of dollars.  Carriers and employers should be sending out benefit affidavits, making bona fide offers of light duty work,

 

and conducting surveillances on such cases now in an effort to develop a voluntary labor market withdrawal defense that can be raised before classification.

 

3.                  Claimants= attorneys may contend that the amendment applies to any Aaward@ to a PPD claimant made on or after 7/1/07, i.e. bringing the weekly award to date even if the claimant was classified before that date.  We believe this interpretation would be in error, as the term Aaward@ in WCL '27 means the first award upon the classification in cases of permanent total disability or the finding of entitlement to death benefits, but it is possible the statute could be interpreted otherwise.  If the interpretation that the ATF payment is required any time a monetary award for a permanent partial disability is made, even if it is on a previously classified case, the effect on carriers could be cataclysmic.  Claimants= attorneys could seek a reopening of all existing permanent partial disability cases simply to have weekly awards brought to date to force substantial '32 settlements from carriers who would otherwise face mandatory ATF payments.

 

4.                  Even after payment into the ATF, the carrier retains liability for medical.  This legislation provides an inducement for carriers prior to an ATF contribution to enter into '32 settlements for indemnity only, to position themselves to transfer medical liability to the '25-a Fund.

 

 

 

 

5.                  No payment into ATF is required if a '15-8 has been established, or if a '15-8 claim or third party action is pending.  Within the new limitations on filing of '15-8 claims described below, insurance carriers should expedite '15-8 filings on any cases with pre-7/1/07 dates of accident that may be headed for an ATF payment.

 

6.                  Other items that can forestall an ATF payment include showing that the claimant=s medical status is unstable and not ready for classification, or that entitlement to compensation because of fraud under WCL '114-a is in issue.  Carriers will need to engage IMEs and investigators on these issues.

 

7.                  Carriers may face multiple payments into ATF.  If after the carrier has paid the present value of a PPD classification into ATF, the claimant is reclassified as PTD or TID, a second ATF payment would be required from the carrier immediately following the PTD or TID classification.

 

8.                  The mandatory present value payment into the ATF upon the making of a classification award seems to contradict the amendments to WCL '32 which require the making of '32 settlement offers by carriers.  The amendment to '32 requires private carriers, the State Fund and self-insured employers to make an offer of a '32 settlement either within two years after the claim is indexed by the Board or six months after the claimant is classified with a permanent disability, whichever is later.  On the face of it, the amendments to WCL '32 and '27(2) would seem to require the carrier to make a '32 settlement offer to a classified claimant, even though it may have already paid the entire present value of the claimant=s permanency award into the ATF.  It is noted that the ATF is empowered but not required to make '32 offers.  This inconsistency should be resolved at some point by legislative or judicial clarification.

 

9.                  WCL '27(4) does provide that if an award, the present value of which has been paid into ATF, is subsequently modified or changed by the Board for any reason other than subsequent death or re-marriage, so as to suspend or lessen the amount of payment that the claimant was expected to receive, ATF shall refund the difference to the carrier, minus actuarial costs.  This provision offers private carriers the possibility, in some cases, of securing partial refunds of the mandatory payments made to ATF after classification.  Entitlement to such a refund would require a showing that the claimant has returned to work after classification or has voluntarily withdrawn from the labor market.  It is our view that the carrier should be allowed to be an active participant in any proceedings after the ATF payment has been made, because the carrier continues with medical liability and has a demonstrable financial interest in pursuing defenses that may permit obtaining a refund from ATF.  Carriers will need to remain vigilant and monitor work status on cases on which an ATF payment has been made in order to develop a basis for possible refund.

 

Section 27(4) also provides that if the present value of a permanent partial disability award for a definite number of weeks has been paid into ATF and the claimant dies prior to the end of such definite number of weeks, ATF shall refund the unexpended present value of the disability benefits not payable to beneficiaries.  In the past, this provision applied to the present value of schedule awards that were directed by Board discretion to be paid into ATF (a practice not employed in recent decades).  It remains to be seen whether this provision, meant to require a refund for unexpended schedule loss of use payments, would be found applicable to ATF payments upon a classification where the benefits are capped to a specified number of weeks.  If so, it would provide the possibility that refund of the ATF payment would apply upon the death of the claimant.  However, it must be noted that this provision would not appear to allow for a refund of an ATF payment based upon a classification of uncapped benefits (which would be the case if the accident occurred before 3/13/07) since that portion of '27(4) regarding refunds by ATF for awards not based on a definite number of weeks expressly states that death is not an event that would trigger a refund.

 

The uncertainty about obtaining any reimbursement from the ATF on any present value PPD payment will still give private carriers a huge incentive to settle cases under '32 before the ATF payment is directed.

 

10.              Since payment into the ATF is required of private insurance carriers but not self-insured employers or the State Insurance Fund, which administers ATF, private carriers may be put at a substantial competitive disadvantage with self-insurers and the State Insurance Fund.

 

ATF is permitted to settle claims under WCL '32, but the carrier will not be entitled to any refund of the difference between its deposit and the settlement amount.

 

The bill also provides that in death cases the calculation of the payment to the ATF is to presume that dependent children will remain in school until age 23 and remain eligible for benefits, but refund to the carrier is required if that does not occur.

 

Containment of Medical Costs

 

The legislation amends and adds to WCL '13 to provide what are potentially significant cost savings on the medical side of Workers' Compensation claims.  Most do not take effect until 120 days after the bill became law (approximately July 12, 2007).

 

Pharmaceutical Fee Schedule - WCL '13-o is added, directing the Chair, for the first time, to adopt a pharmaceutical fee schedule setting forth the maximum fees for prescription medicines.  Pharmacies are directed to provide generic drug equivalents if available, unless the physician prescribes otherwise.  Usual and customary fees are to be charged for any drugs not included in the fee schedule, which is to be updated by the Chair every April 1^st.  Mail order supply of prescriptions is permitted, provided fees do not exceed the fee schedule.

 

Payment of Pharmacy Bills - WCL '13-i is added to provide that pharmacy bills be paid within 45 days of receipt unless liability is controverted.  In that case, any undisputed part of the bill must be paid within 45 days and written explanation for non-payment given to the claimant or pharmacy including whatever clarifying information is needed.  If payment is not made timely, interest is added.  Carriers and employers are permitted to arrange for direct billing with pharmacies.  Employers and carriers may also require a claimant to receive all prescription medicine from a pharmacy with which it has a contract, except in cases of emergency.  Claimants are to be notified how to fill and refill prescriptions with such pharmacies.

 

Dental Care, Prosthetic Devices and Additional Fee Schedules - WCL '13(a) is amended to add dental care and prosthetic devices to the list of specific covered treatments and also to direct the Chair to expand fee schedules to include all Amedical, dental, surgical, optometric or other attendance or treatment, nurse and hospital service, medicine, optometric services, crutches, eyeglasses, false teeth, artificial eyes, orthotics, prosthetic devices, functional assistive and adaptive devices and apparatus.@

 

Pre-authorization - WCL '13-a is amended to increase from $500.00 to $1,000.00 the cost of a special service requiring advance authorization.  The Board is also directed to maintain a list of pre-authorized procedures.

 

Diagnostic Testing Networks - WCL '13-a is amended to permit carriers to contract with networks for diagnostic testing, such as x-rays and MRIs, and upon notification, require claimants to undergo diagnostic tests with those networks.  (Effective immediately).

 

Judgments for Unpaid Awards or Medical Bills - Section 54-b is amended to ease the obtaining of judgments for unpaid compensation awards or medical bills.  (Effective immediately).

 

                                               Special Disability Fund Under '15-8

 

Section 78 of the Act states:

 

It is found and declared that the Special Disability Fund no longer serves the purposes for which it was created, [and] adds to the time and expense of proceedings before the Workers' Compensation Board and to employers= costs for Workers' Compensation insurance...

 

The legislation accordingly enacts many changes to phase out the Special Disability Fund.

 

 

 

 

 

 

Limits on AClaims for Reimbursement@ (Filing of C-250 or C-251.3)

 

1.                  No Aclaim for reimbursement@ under '15-8 (the C-250) can be filed for accidents or disablements on or after 7/1/07. 

 

2.                  No Aclaim for reimbursement@ (C-250) may be filed after 7/1/10 (i.e. for older cases previously closed without findings of permanency but later reopened), and no written submissions or evidence in support of a claim for reimbursement may be submitted after 7/1/10 in any '15-8 claim regardless of date of filing.

 

3.                  Sections 15-8(ee) and 15-8(f) are amended to make these time limits applicable for Special Disability Fund claims in dust diseases.  Section '14-6 is amended to apply the time limits to applications for reimbursement for payments made on account of concurrent employment from the Special Disability Fund (the C-251.3).

 

Limits on ARequests for Reimbursement@ (Monetary reimbursement after '15-8 or '14-6 is established)  All requests for reimbursement from the Special Disability Fund on established '15‑8 and '14-6 claims must be submitted to the Fund by no later than:

 

1.                  One year from the payment of the expense, or

 

2.                  One year from the effective date of this statute (3/13/08).

 

Filing Fee - A $250.00 filing fee to be deposited in the Special Disability Fund must accompany all Aclaims for reimbursement@ (C-250s) as of the effective date of the legislation (3/13/07).  Upon a final ruling that the claim is eligible for '15-8 reimbursement, the Special Disability Fund will refund $200.00 of the fee.

 

Settlements - Settlements of established '15-8 claims are to be accomplished by the newly created Waiver Agreement Management Office AWAMO@ (see below). 

 

PRACTICE POINTS:  The statute presents an elaborate scheme for closing out the Special Disability Fund.  You will not be able to obtain Second Injury Fund relief on any claim with a date of accident or disablement on or after 7/1/07.

 

1.                  If you have what looks like a good '15-8 claim in an occupational disease case, you will want to try to have a pre-7/1/07 disablement date established.

 

2.                  On cases involving accidents and disablements pre-7/1/07, the time to file the '15-8 claim, even upon a reopening, ends on 7/1/10.

 

3.                  Likewise, all written submissions and evidence in support of a '15-8 claim, such as prior medical records and M&S opinions, must be submitted prior to 7/2/10.  You should expedite all C-250 filings and the securing of prior medical records and M&S opinions.  The prohibition against written submissions after 7/1/10 may even apply to briefs or other written statements.  It is suggested that as that deadline approaches any and all written records on '15-8 claims not yet established be submitted not only to Special Funds but to the Workers' Compensation Board to avoid timely filing questions.

 

4.                  On March 23, 2007, the Chair of the Board issued Subject Number 046-179 regarding the $250.00 filing fee to accompany claims for reimbursement.  The Subject states that for every C-250 filed on and after 3/13/07, an original and one copy of the C-250 form and a check made payable to ASpecial Disability Fund@ in the amount of $250.00 must be submitted to:

 

WCB Finance Office

20 Park Street, Room 301

Albany, NY  12207

 

The Subject also notes that if multiple C-250s are filed at the same time, one check in an amount equal to $250.00 for each claim may be submitted, but a spreadsheet must also be submitted which includes the claimant name, WCB Case Number and check number for each claim.  It is noted that failure to submit the $250.00 filing fee for each claim will result in return of the C-250 to the carrier.

 

The Subject also notes that the Board has revised the C-250 to reflect the new filing fee and revised mailing address.  It should be obtained from the Board=s web site (www.wcb.state.ny.us).

 

COMMENTS:  This amendment means that any C-250 filed since 3/13/07 without a filing fee has not been effectively filed.  If a carrier has a C-250 on any case that has been filed on or after 3/13/07 that was not accompanied by the $250.00 filing fee and there is still time to make a timely filing, a further filing should be made in accordance with the Board=s Subject, i.e. an original and copy plus the $250.00 check to the Special Disability Fund should be submitted to the WCB finance office.

 

In practical terms, the requirement that the filing fee check be submitted with a C-250 and that it be submitted to the WCB Finance Office ends the practice often used of attorneys filing C-250s with the Law Judge at hearings at which classifications occur or when the 104 week filing period is about to run.  Carriers will have to make sure that they have made timely submission to the WCB Finance Office.  We would suggest, at least until the practice has been regularized, that the original and copy of the C-250 and the filing fee be sent via certified mail return receipt requested with a cover letter noting the filing of the forms and check to ensure proof of timely filing.

 

The Board=s Subject Number fails to make mention of the C-251.3 form, which constitutes the claim for reimbursement regarding concurrent employment cases under WCL '14-6, even though the statute clearly makes the filing fee applicable to '14-6 claims as well.  Pending further clarification, you should assume that the same procedure outlined in Subject Number 046-179 applies to '14-6 claims.  An original and one copy of the C-251.3 form with a $250.00 check payable to the Special Disability Fund should be submitted to the WCB Finance Office.  Ensuring timely filing of C-251.3 forms may be even more problematic than the filing of C-250s.  Case law requires that the C-251.3 be filed before the award based upon concurrent employment is made.  Such forms are quite commonly filed by attorneys at hearings at which concurrent employment awards are made.  This practice may now end.  Often times, it is not been clear until the claimant has produced payroll records and has testified that there truly is concurrent employment under '14-6.  If the carrier has filed a C-251.3 with the $250.00 filing fee and '14-6 is not established, it would appear that no portion of the $250.00 filing fee would be refunded.  On the other hand, if concurrent employment were ultimately found to exist, it would likewise appear that the Special Disability Fund would have to refund $200.00 of that fee to the carrier.  Carriers are advised to investigate the issue of concurrent employment and whenever the issue of concurrent employment is raised by a claimant on a pre-7/1/07 accident, an original and one copy of a C-251.3 plus the $250.00 fee for the Special Disability Fund should be promptly submitted to the WCB Finance Office.

 

With regard to the $200.00 refund of the filing fee, if the claim is found eligible for reimbursement from the Special Disability Fund, it would appear that the refund is in order even if only partial, i.e. 50%, '15-8 liability is established.  The statute pins the refund Aupon any final ruling that a claim is eligible for reimbursement from the Fund.@

 

Because of the filing fee, private carriers will probably decide against filing a C-250 that is not likely to be viable, unless a filing is needed to stave off an ATF payment.

 

5.                  WCL '14-6 provides that the compensation rate include earnings from claimant=s concurrent employment and  remains law.  Therefore, even in cases with dates of accident or disablement after 7/1/07, employers will still be liable to pay claimants compensation based both upon earnings at the employment-of-record and concurrent employment.  The application of the limits on filing claims for reimbursement from the Special Disability Fund on '14-6 claims for concurrent employment means that for post-7/1/07 accidents or disablements, the employer or carrier liable on the case will have to pay compensation for concurrent employment, without receiving any reimbursement from the Special Disability Fund.  This could serve to discourage the hiring of part-time workers known to have other employment. Since employers or carriers in the future will be bearing liability on concurrent employment claims without Special Disability Fund reimbursement, you and your counsel will want to closely analyze and, when merited, aggressively challenge such claims.

 

See Practice Point for above with regard to the effect of the filing fee on '14-6 claims. 

 

6.                  There is some question as to whether the statute accomplishes a phase out of the Special Disability Fund on dust disease cases under WCL '15-8(ee).  As noted above, the means for limiting claims under '15-8(d) and (e) (non-dust death claims) and '14-6 (concurrent employment) claims is to provide that no claim for reimbursement (C-250 or C-251.3) is to be filed for dates of accident on or after 7/1/07 or any time after 7/1/10.  Historically, however, no C-250 claim form had to be filed by the carrier or employer in '15-8(ee) dust disease cases.  Section '15-8(ee) applied as a matter of law if the case was established for a '15-8(ee) covered dust disease. 

 

The new statute provides that '15-8 relief on dust disease claims shall be subject to the same limitations as the statute imposes under '15-8(h) (i.e. the above noted time limits on filing Aclaims for reimbursement@ and Arequests for reimbursement@).  This implies that for the first time, in order to recover on a '15-8(ee) claim regarding a dust disease, a claim form, (probably a C-250) must be filed for any disablement prior to 7/1/07.  There would be no '15-8(ee) relief on dust disease claims with disablements on or after 7/1/07.

 

The C‑250 form, though entitled ANotice of Claim for Reimbursement out of the Special Disability Fund under '15-8", was not intended in the past to apply to claims for '15-8(ee) relief; it is designed to set out the prior permanent impairments that constitute the basis for '15-8(d) or '15-8(e) relief.  At this point, however, the C‑250 is the only form that exists for making a claim under any of the subsections of '15-8. Since the statute now appears to require the filing of a form to obtain relief under '15-8(ee), the Board should promulgate a new form. 

 

In the meantime, it is recommended that carriers and employers file C-250s on dust disease claims with dates of disablement prior to 7/1/07. We recommend that an original and one copy of the C-250 together with the $250.00 check payable to the Special Disability Fund be submitted to the Board Finance Office in accordance with Subject Number 046-179 and be accompanied by a letter noting that the claim is being filed pursuant to '15-8(ee) on the basis that this is a dust disease.  This would explain why much of the body of the C-250 will be left blank.

Pending clarification, it can be argued that carriers and employers on dust disease cases would remain entitled to Special Disability Fund relief even on cases with dates of disablement on or after 7/1/07.  Nonetheless, we recommend filing a C-250, or whatever form is promulgated by the Board, in the future even on such dust disease cases.

 

The same time limits for Arequests for reimbursement@ from the Special Disability Fund (either one year from the effective date of the statute or one year from the date of the payment upon which the request for reimbursement is made, whichever is later) do apply to '15‑8(ee) claims.

 

7.                  The new time limits on submitting Arequests for reimbursement@ on established '15-8 claims also present potentially costly challenges.  Requests for reimbursement have to be made either:  1) one year from the effective date of the amendment to the law, or 2) one year following the payment of expenses to be reimbursed.  This means that for all payments made prior to 3/13/07, a request for reimbursement from Special Funds must be submitted to Special Funds by 3/13/08.  That date can be presumed to be the cut-off date for reimbursement for any request for reimbursement for a payment made before the effective date of this statute -- no matter how far back it goes.  If you are behind on any requests for reimbursement from Special Funds, you should bring them up to date now.

 

8.                  For the future, you will have to be certain that all Arequests for reimbursement@ from Special Funds are made at least annually, or they will likewise be waived.  Failure to appreciate these provisions could leave a lot of Special Funds reimbursement money on the table, unclaimed or unclaimable.

 

9.                  Perhaps even more compelling is that carriers and self-insured employers review all pending '15-8 claims on which have reached or may be reaching the threshold for '15-8 reimbursement.  It will be important to get these '15-8 claims pre-tried with Special Funds  and '15-8 established as soon as possible, or risk not being able to obtain reimbursement for past benefits. Remember that for any medical or indemnity expense paid at any time prior to 3/13/07 the Arequest for reimbursement@ must be made to the Special Disability by 3/13/08.

 

EXAMPLE:  Assume for example you have a '15-8 claim not yet conceded on a case established for a 1/1/01 accident.  If '15-8 were established you may be entitled to reimbursement for medical and indemnity payments from approximately 1/1/06 forward.  The new statute provides, however, that any Arequest for reimbursement@ for benefits paid prior to 3/13/07 must be made by 3/13/08. Thus in a case in which you have no '15-8 concession, you will have to be sure to obtain prior relevant medical records and an M&S opinion if appropriate, pre-try the case to attempt to get a concession from Special Funds, and obtain a decision from the Board that '15-8 applies prior to 3/13/08, so you can make your Arequest for reimbursement@.  If all of that is not accomplished before 3/13/08 and the request for reimbursement is not submitted to Special Funds by that date, the carrier would forfeit reimbursement that would otherwise be due on this claim from 1/1/06 to 3/13/07.

 

Settlements

 

                                                              (Applicable 3/13/07)

 

Mandatory '32 Offers - WCL '32 is amended to require that every insurance carrier (which means private carriers, the State Fund and self-insured employers) must offer the claimant the opportunity of entering into a '32 settlement agreement either: 1) within two years after the claim was indexed by the Board, or 2) six months after the claimant is classified with a permanent disability, whichever is later.  In the case of death, the '32 settlement offer must be made within six months of establishment of entitlement to benefits for all beneficiaries.  The offer must state what portion of the settlement is for:  i) compensation (indemnity); ii) medical benefits, including prescriptions; and iii) the attorney=s fee. 

 

COMMENTS:  This provision, sought by Labor, makes the offer of '32 settlement agreements by carriers and employers mandatory, and it imposes time limits on such offers.  The statute states that the offer shall settle upon and determine Athe compensation and other benefits due.@  This would seem to imply that such offers must include both compensation and medical payments.  In prescribing that the settlement be broken down as between compensation and medical payments, the legislation seems to recognize the part played by the Medicare Secondary Payor laws, which require a set-aside or allocation amount in a settlement for future medical payments. 

 

It does appear, however, that within two years of the indexing or within six months of a classification, at least an offer that includes medical must be made.  The statute does not state that the settlement offer must be Areasonable@, although future Board regulations or decisions may attempt to prescribe a reasonability factor.  The statute also fails to prescribe any sanction if no settlement offer is made.  The statute does not state whether a case has to be open or closed for the offer to be made.  Presumably a case closed within two years of its indexing without continuing compensation will not require the making of a '32 offer.

 

The law does not purport to proscribe entering into indemnity only settlements, which would present the potential for shifting the cost of medical benefits to the Special Fund under WCL '25-a. 

 

 

Special Funds and ATF - WCL '32 is also amended to provide that Special Funds and the ATF may enter into '32 settlement agreements.  As indicated above, if ATF enters into a '32 settlement agreement which aggregates less than the amount the carrier deposited into the ATF, the carrier will not be refunded the difference.

 

 

 

 

Waiver Agreement Management Office (AWAMO@) - In an effort to close out as many established '15-8 cases as possible, sections (e) through (i) are added to WCL '32 to establish the Waiver Agreement Management Office (AWAMO@).  WAMO is to be established and supervised by the Chair of the WCB and is charged with negotiating and seeking Board approval of settlements on behalf of the Special Disability Fund.

 

The statute provides that no consultation or approval of an employer, carrier or the Special Funds Conservation Committee will be required before WAMO enters into a '32 agreement or before the Board may approve the '32 agreement.  This appears effectively to prohibit employers or carriers from withdrawing from any '32 agreement negotiated by WAMO.  WAMO must give written notice to an employer or carrier within 14 days of submission of the '32 settlement agreement to the Board.  The Board considers an Section 32 Agreement to be submitted to the Board on the date of the '32 hearing.  The parties are given 10 days after that hearing within which to withdraw from the settlement agreement and, if no withdrawal, on the sixteenth day following the hearing the Board's decision is to become final. 

 

Accordingly, this Section of the statute means that the carrier or employer does not even need to be notified by WAMO until two days before the final decision approving the agreement is issued. Furthermore, the employer or carrier has to pay the Section 32 settlement amount within ten days of the Board's Notice of Decision approving the settlement and then seek reimbursement from the Special Disability Fund for the settlement amount after that payment is made. This means that the carrier or employer could have as few as twelve days between first notice of the settlement and the date the settlement must be paid.

 

WAMO is specifically empowered to enter into joint agreements with carriers and employers that apportion responsibility between the Special Funds and the carrier or employer.  Such agreements would require employer or carrier approval and signature and presumably would involve cases with partial '15-8 reimbursement or settlements that involve multiple files, some on which Special Funds is liable and some not.  WAMO is authorized to contract with any third party to manage, administer or settle claims.

 

ALERT:  WAMO is designed to aggressively settle outstanding established '15-8 claims, thus further closing down the Special Disability Fund.  It does not appear that employers and carriers will be permitted to withdraw from '32 settlement agreements entered into by WAMO.  In fact, it appears that the employer and carrier will not even necessarily need to be advised of the existence of the agreement until just about the time of its final approval. 

 

It remains to be seen who will be required to make payment of the WAMO '32 settlements in the first instance.  Under the law as it has existed, carriers and employers have had to make payment in the first instance of settlements reimbursable by Special Funds under '15-8 and then request reimbursement for the settlement amount from the Special Disability Fund.  Nothing in the statute purports to change this arrangement.  The new provisions for settlements by WAMO put carriers and employers on '15-8 cases in a position of not only just learning about but also having to make a final payment on the WAMO processed '32 settlement  within twelve days of first notification of the settlement.  If such payment is not made timely, a 20% penalty would presumably be imposed upon employer or carrier by the law. There is no provision for WAMO to reimburse the employer or carrier for such a penalty.  It is noted that currently the Special Disability Fund is unfunded, but under the new statutory scheme WAMO will be funded through the sale of bonds.  It is hoped that remedial legislation or regulation can be adopted to address this situation and perhaps make WAMO liable to pay the settlement amount in the first instance.

 

A further question arises as to whether settlements negotiated by WAMO will respect the Medicare Secondary Payor laws and provide adequate set-asides to protect Medicare=s interests.  If they do not and Medicare through CMS seeks to redress this failure, it remains to be seen whether WAMO or the carrier or employer would shoulder the liability.

 

Sanctions & Penalties

 

Employer Fraud (Effective 4/12/07) - The legislation focuses on fraud by employers, in an apparent response to the recent reports of widespread failure of employers to secure compensation coverage in New York.  Failure to secure compensation for five or fewer employees is a misdemeanor punishable by a fine of $1,000.00 to $5,000.00 (increased from $500.00 to $2,500.00).  Failure to secure compensation for five or more employees is a Class E Felony punishable by a fine of $5,000.00 to $50,000.00 as well as imprisonment up to four years.  A subsequent conviction for failure to secure compensation is a Class D felony punishable by a fine of $10,000.00 to $50,000.00 and imprisonment for up to seven years.

 

An employer understating or concealing payroll, or intentionally and materially misrepresenting or concealing job duties or information pertinent to premium calculation is deemed to have failed to secure compensation and may be sanctioned accordingly.

 

The Chair of the Board is empowered to investigate employer records with subpoenas if needed and issue AStop Work Orders@ against employers failing to secure compensation.  This provision is modeled on reforms made in Florida which are reportedly effective.

 

The assessment on employers for failure to secure compensation is increased from $250.00 to $1,000.00 for each 10-day period of non-compliance, or two times the cost of compensation for its payroll for the period.

Sanctions for Frivolous Claims  (Effective 3/13/07) - A new subdivision added to WCL '114-a is aimed at discouraging so-called Afrivolous claims@.  It provides that if the Board or a court determines that proceedings in a claim for compensation, including appeals, have been instituted or continued Awithout reasonable ground@, then:

 

1.                  The cost of proceedings shall be assessed against the party who has instituted or continued the proceedings and paid into the Board=s Administrative Expense Fund, and

 

2.                  Attorney=s fees shall be assessed against the attorney or licensed representative who has instituted or continued the proceedings, payable to the Administrative Expense Fund.  Attorneys and licensed representatives are prohibited from recouping such fees from their clients.

 

COMMENTS:  It remains to be seen what effect the amendment to '114-a will have on the bringing and defending of compensation claims.  The amendment is not limited to the maintaining of fraud claims under '114-a and could apply to any proceedings, be they a claimant=s claim for benefits or any defense asserted by a carrier.  It would appear that the Board would have to make a final determination on whether a claim or defense was Awithout reasonable ground@ before it can make a decision imposing costs or attorneys= fees.  Some claimant's attorneys may try to use this provision where the carrier does not prevail in its fraud defense, to discourage carriers from alleging claimant fraud. On the other hand, employers could use this provision to attempt to chasten frivolous claims by claimants.  It is noted that the 1996 reform legislation did contain a provision to impose penalties on attorneys for unnecessary adjournments in the expedited hearing part, but that provision has resulted in very few, if any, penalties on attorneys.

 

Altering an IME Report (Effective 3/13/07) - WCL '13-n was amended to provide that the material altering an IME report shall result in revocation of the registration of the IME organization, imposition of a penalty of up to $10,000.00 and referral to the Attorney General for prosecution.

 

Incarceration (Effective 3/13/07) - WCL '10 is amended to provide that claimants incarcerated upon conviction of a felony are ineligible for all benefits, but able to re-apply for compensation and medical benefits upon release from custody.

 

COMMENTS:  Under case law, a claimant incarcerated upon conviction for any crime or even civil contempt, not just a felony, is ineligible for indemnity benefits for the period of incarceration.  Does this statutory change mean that only convicted felons are ineligible during incarceration?  Apparently so.

 

In disqualifying a claimant from receipt of medical as well indemnity benefits, the statute goes beyond current case law. It appears that there is no obligation to resume payment of either indemnity or medical to a released felon until the Board has ruled in favor of the claimant's  application for resuming benefits.

                                                           Hearings and Appeals

 

Pre-hearing conferences - The time within which to schedule a pre-hearing conference on a controverted case is reduced to 45 days, but this period begins to run only after receipt of both a Notice of Controversy (C-7) and a medical report referencing an injury.  Formerly, the conference was to be scheduled within 60 days, but that was from the time of receipt of a bare C-7.  (Applies to claims for dates of accident, disablement or death on or after 3/13/07).

 

Rocket Docket - The time for transfer of cases with unresolved issues to an expedited hearing part is reduced from two years to one year from the raising of the issues before the Board.  Controverted cases may now be added by the Chair to the expedited hearing part.  (Applies to claims for dates of accident, disablement or death on or after 3/13/07).

 

Appeals - Section 23 is amended to make clear that an appeal to the Appellate Division will not stay payment of any medical costs required to be paid under '13 and such costs are to be reimbursed by the Board to the successful appellant.  The penalty for a Notice of Appeal or Application for Board Review found to be for the purpose of delay or upon frivolous grounds is raised from $250.00 to $500.00.  (Applies to appeals filed on or after 3/13/07).

 

COMMENTS:  These changes are meant to further limit appeals and speed up the hearing process on controverted claims.  Carriers and employers will have to investigate and obtain documentation on an even more expedited basis than in the past.

 

This new legislation represents the most substantial change to the New York Workers' Compensation Law in a generation.  As noted above, many questions regarding the law and how it is interpreted remain to be resolved.  If you have any questions or wish to discuss any aspect of this new legislation, please feel free to contact us.

 

Very truly yours,

 

 

HAMBERGER & WEISS