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