State News : West Virginia

Market Trends for West Virginia – October 1, 2012

By: Mary Jane Pickens

NCCI’s George Ortiz announced on August 15, 2012, that the West Virginia Offices of the Insurance Commissioner advised NCCI that the proposed overall average workers’ compensation loss cost level change of -9.1% and -14.3% decrease in the assigned risk rates have been approved as filed. The changes are effective as of November 1, 2012. 

As noted in NCCI’s previously released summary of the filing, the two primary drivers for the lost cost level change are (1) that West Virginia claims experience has significantly improved in calendar-accident year 2011, and (2) NCCI employed West Virginia-specific data in determining Loss Adjustment Expense provision, particularly the Defense and Cost Containment Expense (DCCE). The Loss Adjustment Expense is the cost of adjusting losses, excluding the amount of the loss itself.

In the old West Virginia Workers Compensation System rates were calculated on 94 classifications and employer’s premiums were calculated by using the classification with the highest rate associated with that employer’s payroll. In July 2006 the NCCI classification system was implemented in West Virginia and advisory costs for 477 classifications were filed. Because of the changes in the classification system NCCI did not have the statistical data to use its standard method of calculating loss costs. Previous filings for West Virginia utilized loss costs filed with regional states. With the 2012 filing NCCI implemented its standard classification ratemaking methodology. The NCCI classification system more accurately reflects the overall cost of losses and expenses associated with each type of risk. 

 The latest loss cost filing reflected average changes by industry groups as follows:

Manufacturing                 -4.8%

Contracting                      -14.5%

Office & Clerical               -10.5%

Goods & Services              - 4.1%

Miscellaneous                     -4.1%

This resulted with an overall loss cost level change of -7.6%.

The residual market provides coverage for employers that are unable to obtain coverage in the voluntary market.   The policy count grew in the residual market grew 50 %, from 885 to 1,325.  Much of the growth in the residual market policies was from volunteer fire departments. Currently 381, or 14.2%, of the residual market are volunteer fire departments.  Premium volume in the residual market increased from $7.4 million in 2010 to 10.4 million in 2011.

In 2011 the Offices of the Insurance Commissioner issued a Request for Proposal for servicing carriers. As a result of the competitive bid process the weighted average servicing carrier allowance decreased from 25.42% of net premium to 21.21%. This change was the major contributor to the decrease in the expense provision for the assigned risk rates. The three servicing carriers are American Mining, Guard and Travelers.

NCCI reported in its 2012 Filing Summary that this year marks the seventh consecutive overall average loss cost level decrease filed in West Virginia since the conversion from a Monopolistic state fund to private competition.  With the approval of NCCI’s filing, the cumulative impact of loss cost level changes since NCCI’s 2006 is -40.4%.

Mr. Ortiz reported that an official circular will be released shortly and additional information will be available onwww.ncci.com.

West Virginia Supreme Court of Appeals – Case Law Update October 1, 2012

By: Dill Battle

The September 2012 Term of the West Virginia Supreme Court of Appeals convened on September 5, 2012. The Court has not produced a published decision in this term. However, the Court has issued 14 Memorandum Decisions under the revised rules of appellate procedure. The case update discusses several cases.

Compensability of Psychiatric Conditions

The Court addressed the denial of a psychiatric consultation to determine the compensability of psychiatric conditions in Maynard v. WVOIC and Dillard Smith Construction Co. (No. 10-1120)(W. Va. 09/18/2012). The Court applied the recent case of Hale v. WVOIC and Rockspring Development, Inc., 724 S.E.2d 752 (W.Va. 2012). The Maynard Court repeated its instructions inHale that a three-step process must be followed when a claimant is seeking to add a psychiatric disorder as a compensable injury in his/her workers’ compensation claim: (1) the claimant’s treating physician refers the claimant to a psychiatrist for an initial consultation; (2) following the initial psychiatric consultation, the psychiatrist is to make a detailed report consistent with the procedure described in W.Va. C.S.R. § 85-20-12.4; and (3) the claims administrator, aided by the psychiatrist’s report, is to determine whether the psychiatric condition should be added as a compensable injury in the claim. 

In another case applying theHale decision, the Court in Jones v. WVOIC and Trumbull Corp. (Nos. 11-0293 and 11-0867)(W. Va. 09/14/2012), found that claimant was entitled to an initial psychiatric consultation because possible symptoms of depression did not manifest until 2009, thus a 2006 evaluation was premature on the issue of possible compensable depression related to chronic pain from physical injuries suffered in 2003. 

Compensability - Intoxication

In Paynter v. WVOIC and Wendy’s International, Inc. (No. 11-0333)(W. Va. 09/14/2012), the Court affirmed the Board of Review’s Order affirming the Office of Judges decision that affirmed the Claim Administrator’s order rejecting a claim for benefits due to claimant’s intoxication. The Court agreed that the claimant was not entitled to workers’ compensation benefits under W. Va. Code § 23-4-2(a) because a swab test taken by Wendy’s was positive for benzodiazepines and opiates.

Apportionment of Preexisting Impairment – Carpal Tunnel Syndrome

In Canaday v. WVOIC and Kokosing-Frucon, LLC (No. 11-0065)(W. Va. 09/18/2012), the Court addressed apportionment of preexisting impairment in a carpal tunnel syndrome case. The Court found that while the claimant suffers from certain risk factors for the development of carpal tunnel syndrome, the medical evidence fails to establish any evidence of carpal tunnel symptoms prior to the work-related injury.  While W. Va. Code §23-4-9b provides for apportioning impairment awards for pre-existing conditions, there is no evidence establishing that the claimant’s carpal tunnel syndrome is a preexisting condition sufficient for this statute to apply.  Therefore, pursuant to Davies v. West Virginia Office of Ins. Comm’r, 227 W.Va. 330, 708 S.E.2d 524 (2011), the claimant is entitled to a 6% permanent partial disability award for each affected hand.

Statute of Limitations – Permanent Partial Disability Benefits

In Lovas v. WVOIC and Consolidation Coal Co. (No. 11-0288)(W. Va. 09/14/2012), the Court affirmed the decisions of the Board of Review and Office of Judges that a claimant’s request for additional permanent partial disability benefits was time barred by W. Va. Code§23-4-16(a)(2).  Claimant argued that permanent partial disability in relation to dysphagia had never been evaluated or litigated. The evidence showed that the claimant’s initial permanent partial disability award was received on November 22, 1999, and that claimant did not apply to reopen a claim for an additional permanent partial disability award within five years of the date of the initial award.

For further inquiries regarding West Virginia law contact Mr. Battle at (304) 340-3823 or at dbattle@spilmanlaw.com.

Case Report - Bowens v. Allied Warehousing Services, Inc., (W. Va. June 15, 2012)

By: Dill Battle

The Supreme Court of Appeals of West Virginia recently decided that a second employer can be considered a “special employer” giving rise to special employment status for workers’ compensation immunity purposes.  The specific issue of whether a temporary employer can obtain workers’ compensation immunity protection from common law suits based upon the commonly accepted “special employer” rule was an issue of first impression in West Virginia.  Justice Benjamin wrote the June 15, 2012 opinion in Bowens v. Allied Warehousing Services, Inc., Case No. 11-0210, where the West Virginia Court joined the majority of jurisdictions and found that a second employer meeting the requisite criteria set forth in 3 Larson’s Workers’ Compensation §67.01 (2011 ed.) may be deemed a special employer for workers’ compensation immunity purposes.

            Bowens worked for a temporary employment agency, Manpower, and was assigned to operate a forklift for Allied Warehousing.  While operating the forklift, Bowens suffered injuries and filed a workers’ compensation claim listing Manpower as his employer.  Allied had no involvement in the workers’ compensation proceeding.  After Bowens’ temporary total disability benefits were suspended by an administrative law judge decision, he sued Allied asserting various claims including negligence, unsafe workplace, negligent hiring, workers’ compensation fraud and common law fraud.  The Court affirmed the Circuit Court of Wayne County’s dismissal of the workers’ compensation fraud and common law fraud claims and granted summary judgment to Allied finding it to be a special employer of Bowens for the purpose of workers’ compensation immunity.

The Court adopted the widely accepted test set forth in 3 Larson’s Workers’ Compensation §67.01 (2011 ed.) and by the United States Fourth Circuit Court of Appeals in Maynard v. Kenova Chemical Co., 626 F.2d 359 (4th Cir. 1980).  The test provides three basic elements which must be satisfied to determine whether a second employer is a special employer giving rise to a special employment status for workers’ compensation purposes: (1) whether the employee has made a contract of hire, express or implied, with the second employer; (2) whether the work being done is essentially that of the second employer; and (3) whether the second employer has the right to control details of the work.  Bowens at pp. 23-24.  When all three of the above conditions are satisfied in relation to both employers, both employers will be liable for workers’ compensation and both will have the benefit of the exclusivity defense of tort claims. 

            Additionally, when analyzing the factors as they applied to the facts of the case, the Court found that whether an individual is a special employee for workers’ compensation purposes is generally a question of fact.  However, a court may find special employment status as a matter of law where the pleadings, depositions, answers to interrogatories, together with affidavits establish that these is no genuine issue of material fact to the contrary.  Through established facts that Allied controlled all the details of Bowens’s day to day work, the Court found that Allied’s authority to exercise complete supervision and control over Bowens while he was on Allied’s premises established Allied as Bowens’s special employer within the meaning of West Virginia’s workers’ compensation statutes.

Market Trends for West Virginia – June 1, 2012

By: Mary Jane Pickens

According to the National Council on Compensation Insurance, which manages the nation’s largest database of workers compensation insurance information and is the statistical agent for the workers’ compensation system in 33 states, the market “descriptor” for 2012 is “conflicted,” following “precarious” in 2010 and “deteriorating” in 2011.  At its Annual Issues Symposium in May 2012, NCCI presented considerable information on trends in property and casualty lines generally, and workers’ compensation specifically. While claim frequency went up by 3% in 2010, that appears to be an anomaly.  In 2011 claim frequency continued to drop.  Net written premium increased in NCCI states by 7.5%.  Of this amount, 3% represented an increase in employer wages.  Wages are now at pre-2008 levels, but with fewer workers. And while fewer people are unemployed, the length of unemployment is longer. 

NCCI filed for more loss cost increases in states than it did for decreases.  The largest increase in loss cost filings was 10.5% in Virginia, and the largest decrease was in -9.3% in Alabama (West Virginia was the second largest decrease with -8.1%).  Indemnity claim costs increased modestly in 2011 (2%), as did medical costs (4%).  The combined loss ratio in 2011 for private carriers is about 115%; for residual market is about 121%; and for state funds it is running in the 130’s.  In the residual market, the largest growth by policy size is seen in risks exceeding $100,000.00.  The first quarter of 2012 shows an even more dramatic uptick in the residual market among these large risks. 

On May 21, 2012, Commissioner Michael D. Riley addressed the Insurance Commissioner’s 3^rd Annual West Virginia Workers’ Compensation Educational Conference.  Commissioner Riley discussed several areas of focus at the OIC for 2012, particularly Failure to Timely Act (“FTA”) petitions.  The OIC is analyzing the FTA data and will investigate carriers and administrators that have repeated failures to timely act as required by the statutes and regulations in West Virginia.  Commissioner Riley stated that he wants to see FTA petitions eradicated.  Commissioner Riley also discussed market conduct studies and self-insurer audits that the OIC is conducting.  According to Commissioner Riley, one area of focus in these examinations and audits will be unreasonable denials under W. Va. Code § 23-2C-21(c) and W. Va. C.S.R. § 93-1-19.

It should be noted that at the OIC’s Educational Conference and in her latest report to the Industrial Council, Chief Administrative Law Judge Rebecca A. Roush presented statistics on claimants’ FTA petitions.  In 2010, 87 such petitions were filed, and in 81% of these matters, the Office of Judges (“OOJ”) concluded that the carrier/TPA did not act timely.  Medical treatment and compensability decisions were the most common source of the petitions in 2010.  In 2011, 88 such petitions were filed.  While only 67% have resulted in a finding that the carrier/TPA did not timely act, 25% were still pending resolution by the OOJ at the time of the report.  Compensability decisions were the most common source of the petitions in 2011, followed by a comparable number of FTA petitions on medical treatment and failure to comply with decisions by the OOJ, the Board of Review, and the West Virginia Supreme Court of Appeals.

In addition, Judge Roush carefully reviewed all of the information that a claims adjuster must include in an order for it to be considered in compliance with legal requirements in West Virginia.  This has been an ongoing area of concern for the OOJ and the Insurance Commissioner.  Finally, Judge Roush covered the law surrounding a claimant’s right to attorney fees in the event of an unreasonable denial of compensability, medical treatment or TTD, however statistics were not offered.  

West Virginia Supreme Court of Appeals – Case Law Update June 1, 2012

By: Dill Battle

The January 2012 Term of the West Virginia Supreme Court of Appeals ends June 30.  The Court produced one reported workers’ compensation decision in the January term.  However, the Court was very active and issued 105 Memorandum Decisions in the workers’ compensation practice area.  In a presentation to the West Virginia Self Insurers Association on May 10, 2012, Justice Brent Benjamin noted that workers’ compensation appeals were 532 in 2011 (compared to the high-water mark of 2894 petitions in 2007).

On March 22, 2012, the Court issued a new reported decision on the addition of psychiatric diagnoses as a secondary condition to a compensable injury.  In Hale v. WVOIC and Rockspring Development, Inc., 724 S.E.2d 752 (W.Va. 2012), the Court continues its recent trend of weakening the Rule 20 medical management guidelines.  The Court addressed whether a claimant must get prior authorization from a claims administrator before seeking an initial psychiatric consultation.  In a unanimous opinion, the Court held that W.Va. C.S.R. § 85-20-12.5(a) was invalid because it is in direct conflict with W.Va. C.S.R. § 85-20-9.10(g) and W.Va. Code § 23-4-1(a), and because it requires the claims administrator to make a psychiatric treatment decision without having the benefit of an expert psychiatric report, as required by W.Va. C.S.R. § 85-20-12.4. Hale, 724 S.E.2d at 757.  The Court provided a roadmap for claims administrators when it held that W.Va. C.S.R. § 85-20-12.4 sets forth a three-step process that must be followed when a claimant is seeking to add a psychiatric disorder as a compensable injury in his/her workers' compensation claim: (1) the claimant's treating physician refers the claimant to a psychiatrist for an initial consultation; (2) following the initial psychiatric consultation, the psychiatrist is to make a detailed report consistent with the procedure described in W.Va. C.S.R. § 85-20-12.4; and (3) the claims administrator, aided by the psychiatrist's report, is to determine whether the psychiatric condition should be added as a compensable injury in the claim.  Id.

The Hale decision is a pragmatic decision based on the facts of the case although it seems like a relatively light burden for a treating doctor who suspects a psychiatric consequence to seek authorization for a consultation.  In that sense it is no different than asking for a neurosurgical or orthopedic referral.  However, carriers, self-insured employers, and claims administrators are still allowed to make the ultimate decision about whether to add the psychiatric diagnosis aided by a detailed psychiatrist's report.

Federal Black Lung Update

By: Karin Weingart

On March 26, 27, and 28, 2012, the United States Supreme Court heard oral arguments on what is probably the most controversial piece of legislation in recent history, the Patient Protection and Affordable Care Act (PPACA).

Oral arguments covered four key legal issues stemming from the PPACA: 

The third listed issue has particular relevance to anyone involved in federal black lung claims.  Section 1556 of the PPACA reinstated the “15-year presumption” of Section 411(c)(4) of Title IV of the Federal Coal Mine Health and Safety Act of 1969, 30 U.S.C. §921(c)(4), for claims filed after January 1, 2005, that were pending on or after March 23, 2010.  The presumption provides that if a claimant establishes at least fifteen years of qualifying coal mine employment, and that he has a totally disabling respiratory impairment, there is a rebuttable presumption that he is totally disabled due to pneumoconiosis. The PPACA also revived Section 422(l) of the Act, 30 U.S.C. §932(l), which provides that an eligible survivor of a miner who was receiving benefits at the time of his or her death is automatically entitled to survivor’s benefits without having to establish that the miner’s death was due to pneumoconiosis. 30 U.S.C. §932(l).

Although constitutional arguments specific to Section 1556 of the PPACA have failed, if the US Supreme Court rules that one or more of PPACA’s key provisions is unconstitutional or otherwise illegal and that the lack of a severability clause therefore defeats the entire bill, the black lung amendments will also fail.  A final decision may be published in June.

[Note - the Supreme Court ruled on June 28, 2012, in the case of National Federation of Independent Business v. Sebelius, Secretary of Health and Human Services.  The Court found constitutional most of the provisions of the PPACA.]

West Virginia Legislative and Regulatory Update – June 1, 2012

By: Dill Battle

At its March 22, 2012 meeting, the Workers’ Compensation Industrial Council approved a change to W.Va. C.S.R. § 85-11, “Employer Default, Enforcement, Collections and Related Matters.”  After a comment period, several non-substantive changes were made by the OIC. 

Also at the March 22 meeting Commissioner Riley reported to the Industrial Council regarding a comparison between the Voluntary Market and Self-Insured Market.  He compared market share for the private market to the self-insurance market.  Based on a report of policy accounts from NCCI’s Proof of Coverage System, Commissioner Riley reported that at the end of 2011 there were 34,000 workers’ compensation policies and 90 active self-insureds in West Virginia.  Also, the estimated average employee accounts cover 590,000 employees by the private market and 80,000 employees for self-insureds in West Virginia.  Finally, the private market provides about $21 billion in wages compared to $3.5 billion payroll for self-insureds. 

On May 29, 2012, Insurance Commissioner Michael Riley issued Informational Letter #181 that summarizes 2012 insurance legislation from the 20012 Regular Session of the West Virginia Legislature.  In an election year, the session was quiet with respect to workers’ compensation issues. 

114 CSR 42 – Continuing Education for Individual Insurance Producers (Amended Rule – Effective April 20, 2012)

            This rule, which sets forth the continuing education requirements for producers, previously established the 2-year reporting period as beginning on July 1 of every even-numbered year.  This rule amendment allows the Commissioner to establish different 2-year reporting periods, which in turn permits the period to be set to coincide with licensing periods that are tied to each producer’s birth month.  According to the Commissioner, this change brings West Virginia into compliance with uniformity and reciprocity standards adopted by the NAIC that provide that “the biennial CE compliance period shall coincide with the producer’s license continuation date.”

 114 CSR 94 – Workers’ Compensation Insurance for State Agencies (New Rule effective April 20, 2012)

            BrickStreet, as the successor to the state-run workers’ compensation system, was required to provide coverage to government agencies since 2006, but it was authorized to refuse to renew the policy of any such agency beginning in July 2011.  See W.Va. Code §23-2C-15(b).  In 2011, the Legislature made the Insurance Commissioner responsible for “managing the workers’ compensation risks” of all “executive agencies” (i.e. those under a cabinet secretary) and certain other state agencies.  See W.Va. Code §33-2-21a(b).  This new rule (initially promulgated as an emergency rule) includes conditions for participation by and removal of “discretionary participants” (non-executive state agencies), provides for an annual “open enrollment” period during which non-executive agencies may enroll, and permits the Commissioner to require the execution of a participation agreement.

West Virginia Supreme Court’s Access to Justice Commission

By: Dill Battle

The Workers’ Compensation Subcommittee of the West Virginia Supreme Court’s Access to Justice Commission continues its study of several areas related to access to the workers’ compensation system for indigent and pro se claimants.  At its April 24, 2012 meeting the committee discussed proposed changes to W.Va. C.S.R. § 85-1 concerning access to file materials.  The Committee is also studying recovery of attorney fees in medical treatment litigation which is currently not allowed in W.Va. Code § 23-5-16.

For further inquiries regarding West Virginia law contact Mr. Battle at (304) 340-3823 or at dbattle@spilmanlaw.com.