CAJPA JOURNAL
Winter 2010 Edition
 Volume 25
February 1, 2010 
No. 5
In This Issue
President's Letter
Legislative Update
Master Your Meetings: Robert's Rules in Real Life
QME Sanctions Under New Regulations Adopted 2/17/09
Employment Litigation Boom: Is Your Agency Prepared for What's Ahead?
Public Employers: It's Time to Engage on Workers' Compensation
Welcome New Members
2010 Events
2010 Fall Conference
President's Letter 
By Janet Selby, Workers' Compensation Manager
Municipal Pooling Authority (MPA)
 
Past Presidents
Lots of folks are wondering what 2010 will look like for workers' compensation in California.  A good question, considering all of the legislative and regulatory activity we've seen in the past few years and the fact that this is Gov. Schwarzenegger's last year in office.  When considering this question recently, I started by consulting a handy resource for reliable answers to life's tough questions - my Magic 8 Ball (swag from one of our past conferences).  The response was, "Reply Hazy - Ask Again Later."  After talking with the real experts, people like CAJPA lobbyist Juli Broyles, it appears that good old M8 was not too far off the mark.
 
There are a few schools of thought about what will happen with workers' comp reforms this year.  One is that interest groups pushing for roll back of SB 899 reforms and increases in workers' comp benefits will continue pushing in 2010 and will make few, if any, concessions.  They are betting on a governor in 2011 that will be more sympathetic to their cause.  On the other hand, regardless of political party, the next governor will be dealing with some of the worst economic conditions in California history.  He or she will need to make decisions that help, not hurt, business.  The interests that support increasing benefits are a powerful force in Sacramento, but the political impact of the current economy may motivate them to compromise. 
 
In fact, some negotiating has already begun.  News surfaced late last year that representatives of labor and management had been quietly meeting to discuss a package deal that would increase permanent disability benefits and offset the cost with a number of key system reforms.  When the talks became public, their work was stalled by other interests but many think that the ideas will continue to be discussed in 2010.  It certainly makes sense that these two primary stakeholders - employers and employees - should take the lead in designing any significant future changes. 
 
There is no question that despite the improvements from SB 899 reforms, more is left to be done in California workers' comp.  According to the California Workers' Compensation Institute (CWCI), medical costs are again on the rise - the estimated ultimate medical cost per claim for 2008 is up 60% from 2004.  Both the number of prescriptions and drug payments per claim are on the rise, and new pharmacy cost drivers have emerged.  In 2009, the Workers' Compensation Appeals Board (WCAB) issued two significant decisions (Ogilvie II and Almaraz/Guzman II) that injected a large measure of subjectivity back in to the permanent disability (PD) rating system, causing many (including the Workers' Compensation Insurance Rating Bureau) to project higher PD costs going forward.  And stale medical liens are driving up administrative costs and increasing litigation.  These issues require targeted legislative and regulatory solutions if they are to be effectively managed.
 
Our annual CAJPA Capital Caucus Day is April 14, 2010.  One of CAJPA's core purposes is legislative advocacy and member involvement is vital to our success.  What goes on in Sacramento affects us all, and the issues are all the more critical against the backdrop of our current economy and the budget crises public entities are likely to face for the next several years.  CAJPA's voice needs to be heard.  We hope that you will mark your calendars now.  The experience is unique, educational and worthwhile.
Legislative Update
Juli Broyles photoBy Julianne Broyles, CAJPA Legislative Advocate
California Advocates
 
Gov. Arnold Schwarzenegger in January presented his proposed budget for 2010-2011 and immediately declared a fiscal emergency and a special legislative session to deal with the state's multi-billion-dollar deficit.
 
The on-going fiscal crisis and budget deficit, as in the past few years, are expected to again dominate the Capitol's focus as lawmakers and the governor grapple with revenues that are falling far short of expenditures and debt payments.
 
In calling a fiscal emergency special session, Gov. Schwarzenegger is asking for immediate legislative action to begin solving the crisis. He has again pledged no new taxes, although his budget proposal does include a plan to impose a fee on homeowner insurance policies to pay for responding to wild fires and other natural disasters.
 
Employers also are directly affected by the fiscal crisis. They have been subjected to new and increased assessments levied by the Legislature and collected by the Department of Industrial Relations.
 
Employer assessments intensified with the 2004 workers' compensation insurance reforms that made employers liable for 100 % of the funding for the Division of Workers' Compensation (DWC) (which is part of the Department of Industrial Relations).
 
In 2004, the assessments were about $120 million. Just five years later, the Legislature and administration have instituted even more assessments on employers without any prior discussion or notice as part of the closed-door budget discussions.
 
Today employers are assessed nearly $500 million annually to cover the expenses of various units within the DWC. A sizeable percentage of that total comes from local public entities (see chart).  These assessments are slated to increase again in 2010, in some cases 82% to 170% over last year's rates.
 
Because of the huge assessments, employers believe that oversight and accountability on expenditure of the money is critical. As a result, both public and private employer organizations will be pressing for enactment of statutory oversight in 2010. The administration has been resisting formalized oversight, preferring an informal advisory group to be established by the DWC.
 
Generally, it appears 2010 will be another uneven, contentious legislative year with multiple special sessions running concurrently with the regular session - a pattern that has continued from the past few years.
 
If any progress is to be made on any major issue, it likely will be part of the larger budget negotiations that have been conducted privately in the past between the governor and legislative leaders of both parties from the Senate and Assembly.
 
The negotiations, however, have been contentious because of the polarized points of view held by legislators and key players in the system. For instance, unions are calling for increases in workers' compensation benefits while employers remain adamant that any increase be coupled with realistic reforms.
 
At the same time, Democrats are calling for tax increases to cover shortfalls and Republicans are just as determined that no new taxes be enacted. The Legislature is just beginning the last of a two-year session and only time will tell how the fiscal crisis and related issues will be resolved.
 

DIR Assessments 2009/2010

Type

Assessment amount (All payors)

Workers Compensation Administration Revolving Fund Assessment

$233,309,000

Uninsured Employers Benefits Trust Fund Assessment

$36,805,000

Subsequent Injuries Benefits Trust Fund Assessment

$16,250,000

Occupational Safety and Health Fund Assessment

$56,496,000

Labor Enforcement and Compliance Fund Assessment

$32,420,000

Workers Compensation Fraud Account Assessment

$51,525,700

Total 2009/2010 Assessments on California Employers

$426,805,700

 

Master Your Meetings:
Robert's Rules in Real Life

AnnMacFarlane

By Ann G. Macfarlane, Professional Registered Parliamentarian
Jurassic Parliament
 
In our experience there are three major traps that affect the ability of a board of directors to get its work done. The first is lack of feedback. In many cases, boards are dealing with matters whose results will occur some time in the future - next month, next year, years down the line ... Sometimes the people who make a decision will not even be serving on the board when its consequences unfold. If raising our member fees by 10% means that 60% of our members fail to renew, we are in trouble, but it will take a while to discover it. Having no specific consequence in view can make folks a little heedless. As Dr. Samuel Johnson famously said, "Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully."
 
The second trap is lack of deadlines. Often boards are grappling with issues that are important but not urgent. It is all too easy to think, "Well, we don't have to make a decision yet" and postpone the matter to another meeting. It takes energy and character to face tough issues. This is where a good chair or president can help focus the board and its deliberations. A board has a fundamental duty to set the direction of the organization. Drift is not a direction.
 
The third trap is diffuse responsibility. By its nature a board is a collective body. Each individual member is responsible for his own action. Sometimes it feels as if, in consequence, nobody is responsible for the board's action. Members have to take a balanced perspective, knowing that their work is collective, yet at the same time, each member has the duty of studying the matter carefully and bringing her best thinking to the task. Remember to, gently, hold each other accountable.
 
Volunteer leaders who keep these traps in mind can help their board avoid them. We must be vigilant and energetic if we are to exercise properly the authority which, by law and custom, lies in the hands of directors of nonprofit and public organizations.

Ann G. Macfarlane is a Professional Registered Parliamentarian, a Certified Association Executive, and an Associate Member of CAJPA. She presented "Jurassic Parliament" at the Fall 2009 CAJPA Conference.
 
Jurassic Parliament 2009
QME Sanctions Under New Regulations Adopted 2/17/09
By Larry H. Fields, Partner
Malmquist, Fields and Camastra, LLP
 
On February 17, 2009, the Department of Industrial Relations (DIR) issued its Qualified Medical Evaluator Regulations.  In very significant sections, the regulations are specific and compelling as to the repercussions facing a QME who violates some of these sections.
 
By now, you have already become familiar with the new regulations. But have you considered the fallout in dealing with a case where there are Workers' Compensation Appeals Board (WCAB) rulings finding reports  from a QME that  are invalid or otherwise found  to  be inadmissible at trial?
 
The new QME regulations now contain potentially significant consequences for those QME's (and at times AME's) who violate newly amended or newly issued regulations governing their practice in  the area of workers' compensation forensic reporting. This brief analysis will focus on those consequences, particularly what power the Administrative Director has to deter the violators, especially as to providing sanctions.
 
The regulations dealing with QME discipline begin with 60(a).  This is not a new section but lets us know that the Administrative Director may suspend or terminate a physician from the QME list without a hearing where any of a number things take place.  These include situations where the physician's license has been revoked, suspended or terminated by his/her licensing board, convicted of a felony or misdemeanor related to the conduct of his/her practice, been placed on probation by his/her licensing board, or failed to pay the appropriate fee for being a QME panel member.
 
60(b) also states that the Administrative Director after allowing a hearing based on a complaint can suspend, terminate or place a QME on probation for 10 different types of violations.  Some of these include:  violation of Labor Code 139.3 or 4628 (disclosure requirements); failure to follow or comply with Labor Code 139.2(j)(1) to (6) or 139.2(b) or (c);  failure to comply with the appointment availability requirements set forth in 33; failure to disclose conflicts of interest set forth in 40 or 41 or 45; an ex parte communication in violation of Labor Code 4062.3; where the QME has solicited the injured worker to take over treatment; and failure to disclose a financial interest set forth in 1 and 29.
 
61 sets forth the hearing process.  Generally, the Medical Director will make a formal complaint setting forth a "prima facie" case to the Administrative Director.  If it is allowed then the Administrative Director will notify the QME in writing of the determination and allow a hearing if requested.  The hearing will take place before an Administrative Law Judge or hearing officer who then files a written proposed decision with the Administrative Director.  The decision is to set forth specific findings as to the violations in 60(b).  Thereafter, the QME has 30 days within which to file a petition for reconsideration with the Administrative Director.  Further appeal thereafter is to be by way of writ of mandate with a 30 day time limit.  Writs of mandate are generally filed in the superior courts.
 
62 (Part One) sets forth sanction guidelines for QMEs which include factors to be considered in determining discipline, mitigating evidence that can be presented by the physician, and terms of probation including optional sanctions.
 
62 (Part Two) sets forth the various disciplinary sanctions that can be imposed by the Administrative Director.  Thus, for example, where there is a violation of a material statutory or administrative duty the section sets forth a list of nine different instances calling for the maximum sanction of QME status revocation.  It also sets forth alternative sanctions, including minimum sanctions, for violation of a material or administrative duty in 18 different categories.  Space does not permit covering all of these and it is suggested that you take the time to review the same, as it will become apparent that potential QME violations are more prevalent than it would seem.
 
These new regulations are intended to put some "teeth" into the enforcement arm of the Administrative Director.  Additionally, by accessing the Medical Unit at the DWC website at www.dir.ca.gov/dwc/medicalunit/discipline, one can find a list of QME's who have been disciplined, a list of "precedential decisions", and even a complaint form.
 
So what do you do when you have learned that a panel QME who has submitted a report in your case is or has been disciplined?  The main issue is not whether the doctor's report is admissible into evidence (although admissibility should be placed in issue if you are the one seeking to exclude the report) but what weight should be given to the opinions in the report.  Depending on the nature of the violation and the discipline or sanction imposed, the party opposing the report should argue that it cannot be deemed to be substantial evidence in support of the claim for benefits by the party seeking its admission into evidence.  Having been disciplined is evidence of perhaps deliberate actions taken by the doctor which indicate his or her disregard for the statutory obligations under which QME selection is allowed.  In some cases statutory violations render the report inadmissible.  See Labor Code 4628(e) which indicates that the failure of the doctor to comply with the medical legal reporting requirements set forth in the section renders the report inadmissible and the defendant shall have no liability for payment of the doctor's bill.  Using Labor Code 4628 by analogy as to other violations of the QME regulations should be proffered to exclude the disciplined QME's report into evidence and perhaps non payment of the bill.
 
Larry H. Fields is the founding partner of The Law Offices of Malmquist, Fields and Camastra, a workers' compensation defense firm in Glendale, CA.
Employment Litigation Boom: Is Your Agency Prepared for What's Ahead?
stpehens
By John Stephens, Senior Vice President, P&C Public Agency Practice Leader, Keenan & Associates
 
Employment litigation against public entities has become a growth industry. Recent studies have shown employment litigation nationally has increased by approximately 30% over the past three years, while 43% of employment lawsuits are filed against public entities. During 2002-2008, the average jury verdict nationally against public entities was $648,057 with plaintiffs prevailing more than 50% of the time. In 2008, plaintiffs prevailed 61% of the time.  
 
In California, during 1995 - 2005, the mean amount of jury verdicts for employment cases was $1.3 million and the median verdict amount was $375,000. Regardless of the amounts, the most alarming statistic is that plaintiff verdicts are rapidly increasing and the only way to change this is to implement aggressive employment practices prevention, training and best practices.  
 
(If graph quality is distorted on screen, please print to read.)
 
stephenschart1b

All National Statistics are sourced from: Employment Practice Liability: Jury Award Trends And Statistics, 2009 Edition, Published by JVR.

Recent California Public Agency Verdicts  
 
stephenschart2b
 
Whether you are a city, county, school district, community college or transit agency you face significant employment liability risks.  The fact that plaintiffs nationally, in 2008, prevailed 61% of the time for employment lawsuits is an indication of how juries are responding to these matters. There is little leniency toward employers who fail to prevent employment-related abuse to occur within their agency and among their employees. Following are 8 recent employment-related lawsuit examples where the plaintiff prevailed against their California public employer: 
 
stephenschart3
 
Fight or Settle
It's not whether you are right or wrong, it's what can you prove in the court of law, or rather, in front of a jury.  The decision to settle a case rather than go to trial is often difficult.  You need to weigh the facts and merits of the case, but even if you choose to settle, the costs of settlement can be extreme.  The mean settlement of an employment case for the past three years (2006-2008) nationally is above $500,000.  The median settlement for these same years is about $75,000.

Some agencies choose to settle claims based upon pure economics. Settling is often the most "cost effective" solution.  While this may be true in the short term, this can create a precedent within your community as plaintiff attorneys line up to take aim at the bull's eye on your agency's back.  It's important to always weigh the pros and cons of settling any case. 
 
Of course, making the decision to fight an employment case must also be carefully evaluated.  The average cost of defending an employment litigation case through trial is between $150,000 - $200,000. And this does not include the hours and time it takes for your agency to deal with discovery issues, attending the trial and the adverse impact this has on morale.
 
What Can You Do
Albert Einstein once said, "Learn from yesterday, Live for today, Hope for tomorrow..."  While Einstein wasn't speaking about employment-related matters, I believe there is a lot to be gained from this.  As I put my Employment Practices Prevention hat on, I would offer this; "Yesterday is gone. Today, we are living in an online and mobile world. Tomorrow, Gen X, Y and Z will demand more mobile offerings." 
 
Yesterday, training was too infrequent, not effective or just plain obsolete.  Today, we live in a world where legislation, regulation and litigation against public agencies dominate.  At the same time, demographics are rapidly changing.  Baby Boomers are retiring and Gen X'ers and Y'ers will soon occupy the majority of the work force.  This will create both generational and communication challenges.  Finding time to train employees is a continual challenge, though today you have greater training flexibility.  As a Gen X'er writing this paper, I know my preferred method of learning: online training.  I want to learn on my time and at my pace. What amazes me are my 7, 5 and 3 year old computer savvy little girls who know more about computers than I knew in college.  They are proof we are truly living in an online and mobile world. 
 
Today, public agencies are being forced to operate with fewer and fewer resources and as a result, tomorrow will bring unprecedented employment litigation.  Training is critical.  All too often I see public agencies sued or settle for exorbitant amounts of money due to a situation that could have been prevented with proper training.  The reality is that a jury will not be sympathetic because your agency lacked resources and failed to provide the necessary or available training. 
 
Employment Practices Technology and Prevention Tools
Unless you are currently training 100% of your employees on a regular basis, you should explore online training.  Demographics are changing, resources are shrinking and an effective online training system could help reduce your agency's exposures and costs.  Online training allows you to reach hard to gather groups or those working in remote areas.  You'll want to make sure the training can be customized to make the courses and content relevant to your agency and your employees.  The main issues to consider are is it easy to use?  Is it compliant with California laws, such as AB 1825?  Does the online system provide data warehousing?  What is the cost?  
 
Bottom Line
California public agencies are being forced to do more with less, or as one public official told me, "We must now do less with less."  Employment Practices litigation is on the rise and in these economic conditions, claims and jury verdicts will continue increasing.  If you take anything out of this article, make sure you have open lines of communication with all departments within your agency (HR, Business, Risk Management, Legal) and explore online training.  We see too many claims go sideways because one department was doing what they thought was right and never involved others.  The more expertise you bring in on the front end, the better chance you have at defending the claim or settling for less. 
 
Lastly, I'd like to thank Louis Leone, Esq. of Stubbs & Leone, LLP for his assistance, research and employment litigation expertise, which enabled me to write this article.    
 
John Stephens is Senior Vice President P&C Public Agency Practice Leader for Keenan & Associates, the 14th largest insurance brokerage firm in the United States, and the largest independent broker in California.  
Public Employers: It's Time to Engage on Workers' Compensation
By Jason Schmelzer
California Coalition on Workers' Compensation (CCWC)
 
It is true that California's public and private sector employers have been protected from skyrocketing workers' compensation costs since the passage of SB 899 (Poochigian - R) in 2004.  According to the Oregon Department of Business and Consumer Services, California went from the second most expensive state in the US in 2006 to the thirteenth most expensive state in 2008.  While this is an impressive decline in cost, California employers should realize that our costs are still extraordinarily high when compared to other states, 121% of the median to be exact. 
 
The unfortunate truth is that California employers are likely only months away from another period of substantial increases in cost.  There are two major reasons for this coming rise in cost.  The first is related to developments within the workers' compensation system itself.  The Workers' Compensation Insurance Rating Bureau (WCIRB) has now twice recommended increases of over 20% in California's premium benchmark.  The WCIRB cites sharp increases in medical treatment costs and new case law that will drive permanent disability benefits and litigation costs higher.
 
The second reason that costs are primed to increase is political.  Governor Schwarzenegger has actively worked to ensure that California's public and private employers enjoy a balanced workers' compensation system.  There is no guarantee that the Capitol's corner office will be occupied by a like-minded executive starting in 2011.  It is very possible that California will elect a Governor that is sympathetic to calls for benefit increases, elimination of objective medical standards, and new penalties on employers.  The implementation of these policies would clearly push California's costs ever higher. 
 
Employers across the state are all facing unique pressures.  Public entities are struggling with unprecedented budget cuts, and businesses are struggling with worldwide recession.  What is absolutely clear is that employers do not have the ability to easily absorb a return to massive cost spikes. 
 
California's employers need to plan for the future - the very near future - and get re-engaged on workers' compensation before the pendulum can prematurely swing back the other way.  Public employers are vital to the success of any effort to hold the line on workers' compensation costs, especially as the legislature continues to look locally for general fund savings.
 
The California Coalition on Workers' Compensation (CCWC) is an association comprised of California's public and private employers.  CCWC's members, including cities, counties, joint powers authorities and businesses of all sizes, have worked together to maintain balance in California's workers' compensation system for nearly two decades.  CCWC was one of the organizations responsible for the successful negotiation and passage of SB 899 in 2004, and CCWC has been a tireless advocate for employers since.
 
CCWC encourages public employers to get re-engaged in workers' compensation policy so that we can help keep your costs low.  Consider for a second that the average cost of an indemnity claim in California is well over $50,000.  If public employers were to invest even 10% of the cost of one claim in the effort to keep costs low, the resulting savings would more than justify the cost.
Joseph Farrell Memorial Scholarship Recipient
The Scholarship Committee is pleased to announce 
 
Sherri Adams, Del Norte County
 
was recently awarded a scholarship to continue her education!
 
Congratulations!!!
 
Scholarships are available year-round - see the CAJPA website for details.
http://www.cajpa.org/Topics/Scholarship/Pages/default.aspx
 
*******
The Journal is a quarterly publication of the California Association of Joint Powers Authorities, a non-profit trade association formed in 1981 to serve as a communication and educational resource to California Joint Powers Authorities.
 
Editor: 
Jan DeGracia, Executive Director, North Bay Schools Insurance Authority
 
Association Manager: 
Jenifer A. McDonald
P.O. Box 255431 Sacramento, CA  95865-5431
Phone: (916) 485-5875 Fax: (916) 487-7105 www.cajpa.org
Welcome New Members
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MES Vision
 
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Reasoned Risk Management
2010 Events
Mark your calendar now and plan to attend these events:
 
Capital Caucus Day
April 14
 
Finance & Technology Spring Technical Workshop
April 28 & 29
 
Litigation, Insurance and Tort Liability Educational Program
May 6
 
Frank James Invitational Golf Tournament
September 7
 
2010 Fall Conference & Training Seminar
September 7 - 10
South Lake Tahoe
 
Visit the CAJPA website (www.cajpa.org) for details on events and current information on Committee and Board of Directors meeting dates and locations.
2010 Fall Conference 
iPool_Small
Check the CAJPA website for details on exhibiting and sponsoring at the 2010 Fall Conference that is set for September 7-10 in South Lake Tahoe.
 
Hotel room blocks are now open at the three host hotels - Harrah's, Harvey's and Embassy Suites.
 
Details on hotel pricing and how to make reservations are also posted on the website.