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Medicare "Boot Camps" Hosted by Baylor Evnen
Baylor Evnen hosted training sessions in late June and early July to help carriers and self-insureds get up to speed on Medicare issues in this evolving area of the law. The training sessions coincided with the effective date of the Mandatory Insurer Reporting legislation enacted by Congress, and involved detailed discussions of the new reporting provisions, "best practices" for managing Medicare's priority right of reimbursement in personal injury claims, and issues concerning Medicare Set Aside accounts. A reference notebook including relevant Medicare documents and commentary was provided to seminar attendees.
Two additional Medicare training sessions are being planned: an Advanced Session devoted to managing Medicare's right to reimbursement, and a seminar on Legal Issues Concerning Coordination of Benefits with Medicare. The Legal Issues session will be held after October 1, 2009, to enable attorneys who attend to qualify for Mandatory Continuing Legal Education credits (application for credits is pending). If you are interested in participating in either of these training sessions, or in arranging a training session for your company or business, please contact Stephanie Stacy or Jill Schroeder.
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Notes From the Firm
Dallas Jones has been elected to serve a two-year term as the President of Nebraskans for Workers' Compensation Equity and Fairness, a position he has held for the past two years. The group, which is comprised of over 100 businesses and carriers, was established to represent the interests of Nebraska employers and carriers in the workers' compensation arena, and has been instrumental in passing legislation intended to lower workers' compensation costs and defeating legislation which would have increased them.
In July, Walt Zink was a featured speaker at the Forum for Motor Carrier General Counsels symposium in Vancouver,
British Columbia, on
Highway Accident Litigation. In May, he attended the American Law Firm Association's Annual International Transportation Practice Group Seminar in San Diego.
Andrea Snowden was recently elected to serve on the Judicial Nominating Commission for the Third Judicial District for both county court and district court.
Andrea Snowden was recently selected as a member of the 2009 class of Leadership Lincoln. Leadership Lincoln's goal is to cultivate a diverse group of community leaders to help strengthen the fabric of
life in Lincoln and Lancaster County. It offers educational programs and opportunities for community service, while working to develop well-informed, well-connected and well-coordinated citizens to help safeguard and direct our community's future.
Baylor Evnen sponsored two events at the 25th Annual Syracuse Germanfest in July. The firm sponsored the Kinder (Children's) Parade, which is a special parade for children 12 and under. This year, the theme for the parade was "Happy Birthday Germanfest," in recognition of the 25th anniversary of this event. Baylor Evnen attorneys Jenny Panko and Amanda Dutton coordinated the Kinder Parade. Baylor Evnen also was one of the sponsors for the "ribfest" at Germanfest.
Baylor Evnen was a "Hole Sponsor" for the 7th Annual Gateway Sertoma Golf Tournament, with proceeds benefiting the Tabitha Health Care Services "Meals on Wheels" program. Julie Karavas serves on the Tabitha Foundation Board of Directors.
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Noise-Induced Hearing Loss Is an Accident Caused
By Repetitive Trauma and Not an Occupational Disease
A long-unanswered question in Nebraska has been whether noise-induced hearing loss is an accident caused by repetitive trauma, or an occupational disease caused by a condition of employment. The question was recently answered by the Nebraska Supreme Court in the case of Risor v. Nebraska Boiler, 277 Neb. 679 (2009), when the Court held that noise-induced hearing loss should be analyzed under an accident theory caused by repetitive external trauma produced in the work environment.
James Risor was a 31-year employee of Nebraska Boiler. Risor began noticing he had hearing problems in the mid-1980s. He attributed his hearing loss to the noise in the Nebraska Boiler plant. He testified that his hearing problems were widely known among those who worked in the shop. Risor was able to continue working because he could read lips and his supervisors and coworkers used notes and hand signals to communicate with him.
Risor's hearing loss was confirmed in 1988 when he underwent testing at the veterans medical center in Omaha, Nebraska. Documents from 1988 diagnosed a profound bilateral hearing loss. The testing did not relate the hearing loss to Risor's employment at Nebraska Boiler.
On October 19, 1993, Nebraska Boiler, through its nurse, sent Risor to a physician for hearing testing. The hearing evaluation was conducted off site, during Risor's lunch break. Risor initially testified that he did not miss work for the October 19, 1993, evaluation. However, upon further questioning Risor testified that the physician's office was 10 to 15 minutes from the plant and he only had a 30 minute lunch break. Risor thought he probably missed some work for the testing, but Nebraska Boiler would have paid him for the missed time. Risor's hearing was again evaluated by Nebraska Boiler in 1999, 2000, 2002 and 2003. Risor continued to perform his regular job for Nebraska Boiler until he retired on February 12, 2004.
Risor's petition against Nebraska Boiler for the bilateral hearing loss was filed in January, 2004. The date of accident Risor pled for his bilateral hearing loss was June 25, 2002. Nebraska Boiler filed a First Report of Accident or Occupational Disease with the Nebraska Workers' Compensation Court on February 17, 2004. Following trial, the Court entered an Award finding Risor was permanently and totally disabled due to his bilateral total loss of hearing. The trial judge determined the date of accident to be October 19, 1993, under a repetitive trauma theory of accident, because October 19, 1993, was the first date Risor both received medical treatment and missed work because of his hearing loss. Risor's permanent total disability benefits were based upon his 1993 wages, but the trial judge found that because he continued working, the disability benefits commenced February 12, 2004, the date of Risor's retirement. The Workers' Compensation Court Review Panel later reversed this finding. The Review Panel recognized that by law, the total loss of two scheduled members (bilateral hearing loss) entitled Risor to permanent total disability payable from the date of injury of October 19, 1993.
The Nebraska Supreme Court affirmed the finding of the trial judge that noise-induced hearing loss is a repetitive trauma injury under the statutory definition of accident. The Court recognized that although repetitive trauma injuries typically involve the physical movements of the employee performing his or her job, there was nothing to preclude an external source of physical stress such as loud noise as the source of the repetitive trauma. The Supreme Court declined to analyze exposure to loud noise under an occupational disease theory, because it felt that noise exposure was not a condition peculiar to Risor's employment. To be an occupational disease, "the unique condition of the employment must result in a hazard which distinguishes it in character from employment generally." A variety of work environments exist which expose workers to loud noise.
The accident date of October 19, 1993, was also affirmed by the Supreme Court. Although Risor was aware of his hearing loss in the mid 1980s, the hearing loss was being accommodated with lip reading, hand signals and note writing, and testing confirmed profound bilateral hearing loss in 1988, there was no discontinuance of employment until Risor missed work for the hearing evaluation on October 19, 1993. Even though the lost time in October, 1993 was minimal, the Court recognized that there was no minimum time an employee must discontinue work to be eligible for benefits. Whether Risor missed work on October 19, 1993 was a factual finding that was supported by the record because Risor could not have driven to the appointment, conducted the hearing test, and returned to Nebraska Boiler in his allotted half hour lunch. The minor accommodations made by Risor's supervisor to communicate through lip reading, hand signals and note writing were also not a discontinuance of employment, since Risor continued his regular job duties and was not transferred away from the plant noise.
The finding that payment of the permanent total disability benefits began on the accident date of October 19, 1993, resulted in Risor receiving both his full wages and permanent total disability benefits concurrently. On appeal, Nebraska Boiler argued that it was entitled to a credit for the wages Risor continued to earn until his retirement. The Supreme Court rejected this argument, citing the Legislature's intent was to award permanency benefits for scheduled member injuries irrespective of whether the employee suffered a wage loss or was able to continue working. The finding of the Review Panel that Risor was entitled to compensation as of his accident date of October 19, 1993, despite being paid wages while he continued to work, was affirmed by the Court.
Nebraska Boiler also argued that Risor did not give timely notice of his injury "as soon as practicable." The Court held that to meet the notice requirement, Risor did not have to present Nebraska Boiler with an opinion that the noise in the plant was the cause of his hearing loss. The facts of the case were sufficient to support notice of the injury because precautions were taken by Nebraska Boiler to prevent noise in the plant from causing hearing loss, Nebraska Boiler accommodated the hearing loss dating back to the 1980s, a Nebraska Boiler nurse referred Risor for a hearing evaluation in 1993, and Nebraska Boiler was aware of the results of the 1993 hearing test.
Finally, the Supreme Court held that because Nebraska Boiler did not file a First Report of Accident or Occupational Injury with the Workers' Compensation Court until February 17, 2004, the statute of limitations for Risor to file his hearing loss claim was tolled. Whether an employer has sufficient knowledge of an injury to file a First Report is determined by whether "a reasonable person would conclude that an employee's injury is potentially compensable and that the employer should therefore investigate the matter further."
In conclusion, when faced with a hearing loss claim which occurred gradually over a period of time due to job-related noise exposure, the claim should be analyzed under an accident theory due to repetitive trauma. The date of accident is when the employee has both a discontinuance of employment and seeks medical treatment. | |
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Tax Court: LLC and LLP Members Are Not Per Se Passive Limited Partners:
Losses on Business Investments May be Deducted Against Salary
By: Julie M. Karavas
The passive loss rules of the Internal Revenue Code (I.R.C.) Section 469(h)(2) can have a substantial effect on investors. Whether a loss is characterized as passive depends on whether the taxpayer is materially participating in the business. I.R.C. Section 469(h)(2) provides an automatic rule of non-material participation for limited partner interests in a limited partnership, unless the Treasury regulations specify differently.
In the Midwest, we find that the passive loss rules affect farmers and ranchers as well as non-farmer investors in farm and ranch land and livestock operations. Before 1987 it was common for investors to purchase agricultural land and interests and to incur losses which the investor would use to offset against the investor's salary and other business income. However, with the enactment of the passive loss rules in 1986, deductions from passive trade or business activities generally may not be deducted against other income.
On June 30, 2009, the United States Tax Court held that a taxpayer's interests in a limited liability company (LLC) and in a limited liability partnership (LLP) are not to be treated the same as a limited partner in a limited partnership (LP), under the rules of I.R.C. Section 469(h)(2), and therefore are not automatically deemed passive losses under the statute. The I.R.C. provision was written before most LLC state statutes were enacted and before the creation of LLPs. The Treasury has never issued regulations as to whether the passive loss rule is to apply to these two new types of entities.
Paul and Alicia Garnett, a married couple residing in Nebraska, invested in LLCs and LLPs that were organized under Iowa law, and engaged in agricultural production activities in Iowa. The Garnetts claimed that they "materially participated" in the entities and accordingly deducted losses shown on their K-1s from the LLCs and LLPs. The IRS disagreed and assessed deficiencies from the losses from 2000 to 2002, reasoning that the losses were passive. The IRS referenced I.R.C. Section 469(h)(2) when it stated that "passive" losses are generally allowed only to the extent of "passive" income. Following is I.RC. Section 469(h)(2): Except as provided in regulations, no interest in a limited partnership as a limited partner shall be treated as an interest with respect to which a taxpayer materially participates.
The Garnetts argued that their interests in the LLCs and LLPs are not the same as the interests of "limited partners" under these rules, and thus, they should be subject to the regular "material participation" rules for determining whether a loss is passive. In order to find an answer, the Tax Court looked to state law rules governing LLCs and LLPs. The Tax Court found that Iowa law gives more power and authority to LLC and LLP members than Iowa law gives to traditional limited partners in an LP. Other distinguishing features were also present. The Court noted that LPs have two classes of partners; one which runs the business (general partners) and the other which typically involves passive investors (limited partners). A limited partner enjoys limited liability and that protection can be lost if the limited partner participates in the business. By comparison, an LLP is basically a general partnership in which the general partners have limited liability even when they participate in management. As noted by the Court, LLC members can participate in management and retain limited liability. Accordingly, the Tax Court said that limited liability wasn't enough to make a member of an LLC or LLP a "limited partner" under Section 469(h)(2).
The Tax Court's decision (Garnett, 132 T.C. No. 19) does not clearly settle the matter. In the Garnett case, the Court said that I.R.C. Section 469(h)(2) did not apply to the taxpayers. The IRS can still challenge the Garnetts' losses under the facts and circumstances test for material participation. In addition to the specific case, on a broader scale, the issue will continue to focus on the particular provisions of a state's LLC statute and whether there are sufficient factors under the state law that distinguish an LLC from an LP. And, until the IRS issues regulations specifically addressing passive losses as they relate to LLCs and LLPs, the state statutes will be the clearest guidance available.
While this ruling may be good news for active investors or entrepreneurs experiencing losses in the current economy, the ruling may be less welcome for profitable investors. Simply, if such deductions are allowed, assessments of self-employment taxes on LLC and LLP income may soon follow. Many investors have been successful in claiming large exemptions from self-employment taxes on such income by analogizing their status to a limited partner. If the Garnett ruling holds, the analogy fades and more income could be subject to tax.
If you have questions as to how this ruling may apply to your investment income situation, please contact your legal advisor or accountant. This information is not provided as advice for a specific matter, nor does its publication create an attorney-client relationship. For legal advice on a specific matter, consult an attorney.
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The Right of Contribution Among Joint Tortfeasors:
How to Avoid Buying the Whole Pie When All You Really Want Is Your Own Slice
By: Andrea D. Snowden
In a recent decision, the Nebraska Supreme Court gave the issue of the right of contribution among joint tortfeasors perhaps its most comprehensive treatment to date. In Estate of Powell v. Montange, 277 Neb. 846 (2009), the Estate of Dennis Powell, who died as a result of injuries sustained in a motor vehicle accident, sued Scott Montange, the driver of the vehicle in which Powell was a passenger, and Jerry and Liz Sand, the vehicle's owners. Montange and the Sands filed a third-party complaint for contribution against Sharon Klein, the driver of a second vehicle that they alleged was a cause of the accident. Later, Montange and the Sands settled with Powell's Estate and obtained a limited release which stated that Klein was not a party to the settlement.
As a result of their settlement with the Estate, Montange and the Sands sought contribution from Klein for all sums which exceeded any proportionate share of their negligence and asked that the trier of fact apportion Klein's negligence. Klein moved for summary judgment on the grounds that Montange and the Sands could not seek contribution from her because the limited release that they had entered into with the Estate covered only the parties identified in the release and could not serve as a basis for contribution against her. The District Court determined that Montange and the Sands were barred from seeking contribution from Klein because she was not a party to the settlement and had not, therefore, been released from liability to the Estate. The District Court reasoned that Klein received no benefit from the settlement and remained exposed to a lawsuit. Finding that there were no material issues of fact with regard to Montange and the Sands' claim against Klein on the basis of contribution, the District Court determined that Klein was entitled to judgment as a matter of law.
Montange and the Sands appealed the District Court's finding that the defendants could not seek contribution from Klein. The Nebraska Supreme Court noted that while it had previously recognized a right of contribution among joint tortfeasors who share a common liability, it had not before addressed whether a tortfeasor who enters into a settlement with a claimant can recover contribution from another tortfeasor whose liability for the injury or wrongful death is not extinguished by the settlement. Generally following the guidance of the Uniform Contribution Among Tortfeasors Act (UCATA), which Nebraska has not adopted, the Court adopted a four-part test that must be met in order to recover on a claim for contribution among joint tortfeasors: (1) There must be a common liability among the party seeking contribution and the parties from whom contribution is sought; (2) the party seeking contribution must have paid more than its pro rata share of the common liability; (3) the party seeking contribution must have extinguished the liability of the parties from whom contribution is sought; and (4) if such liability was extinguished by settlement, the amount paid in settlement must be reasonable.
Montange and the Sands argued that they should be able to seek contribution from Klein because, while Klein's liability was not extinguished by virtue of the settlement between Montange and the Sands and the Estate, Klein's liability had been extinguished by the applicable statute of limitations. The Court rejected this argument, reasoning that the right of contribution is an equitable doctrine under which the discharge of a common liability is a benefit to the tortfeasor from whom contribution is sought. The Court said that if Klein's liability was barred by the applicable statute of limitations and her liability was extinguished, it was not because of the settlement by Montange and the Sands. Montange and the Sands' settlement, then, was of no benefit to Klein and they did not establish that they extinguished Klein's liability for injury or wrongful death.
Applying the newly-announced test to the facts of the case before it, the Nebraska Supreme Court observed that Montange and the Sands entered into a settlement with the Estate prior to the entry of judgment against any of the tortfeasors, Montange and the Sands took no action to extinguish Klein's liability prior to entering into the settlement, and the settlement itself did not extinguish Klein's liability because she was not a party to the settlement. Because Klein still remained exposed to a lawsuit by the Estate, her liability had not been extinguished and Montange and the Sands failed to satisfy the requirement that the party seeking contribution must have extinguished the liability of the joint tortfeasor from whom contribution is sought. The Court held that the District Court had correctly determined that Montange and the Sands were barred from seeking contribution from Klein because they did not obtain a settlement or common release which extinguished Klein's liability.
It is important for insurers to consider the Nebraska Supreme Court's ruling in Estate of Powell v. Montange, when handling cases involving joint tortfeasors. As an insurer of a defendant, when you believe someone else was a cause of an accident, you should give careful thought when considering settlement with the plaintiff. A settling joint tortfeasor who seeks to make a claim based on contribution against other joint tortfeasors should consider obtaining a settlement or common release of liability as to all possible tortfeasors. And, remember, you will still need to show that you have discharged more than your fair share, that the party against whom contribution is sought is in fact liable, and that your settlement with the plaintiff is reasonable. If you do that, you will be in position to get contribution from other joint tortfeasors. |
| Nebraska Safety Council and Baylor Evnen Present Educational Series on Workers' Compensation
Beginning in September, the Nebraska Safety Council will host a series of free "lunch and learn" talks around the state on workers' compensation issues of interest to Nebraska employers. Baylor Evnen's James Hamilton will be the presenter at each talk, and the Safety Council is inviting anyone who may be interested to attend. The talks will provide practical tips for employers seeking to reduce workers' compensation exposure both before and after injuries occur, and will feature an open format with plenty of discussion among attendees.
If you would like to attend at any of the following locations, please register at the Nebraska Safety Council website:
Cozad Wednesday, September 9
Scottsbluff Thursday, September 10
Hastings Wednesday, September 16
Kearney Thursday, September 17
Grand Island Tuesday, September 22
Beatrice Wednesday, September 23
Fremont Thursday, September 24
Norfolk Wednesday, September 30
Lincoln Thursday, December 17 * All talks are scheduled from 12:00-1:00 p.m |
 Caroline Westerhold Admitted to Practice in Iowa
In our continuing effort to provide comprehensive services to our clients, Caroline M. Westerhold has become licensed to practice law in the state of Iowa. Caroline is a partner with Baylor Evnen and is a member of the firm's Workers' Compensation and Employment practice groups. She works with clients of all sizes, including regional and national clients. As part of her practice, Caroline counsels clients on a wide range of issues and emphasizes a preventative and proactive approach to workers' compensation and employment law. With her admission to Iowa, Caroline is now prepared to represent clients with interests in both Nebraska and Iowa.
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Legislative Update
Since Baylor Evnen's April e-Newsletter, two bills passed in Nebraska's Legislature that will impact our clients.
LB 630, which amends the Workers' Compensation Act,was signed by the Governor on May 26, 2009, and became effective on May 27, 2009. LB 630 has several provisions of interest. First, LB 630 provides that an employer of agricultural workers may give the requisite notice to unrelated employees that such employees are not covered by workers' compensation insurance after hire, and that notice will be effective to shield the employer from liability under the Act for any injuries that occur more than 30 days after the post-hire notice is given. LB 630 also delays the application of the DRG fee schedule to inpatient trauma services provided subsequent to January 1, 2011.
In addition, as is thoroughly discussed in the "Baylor Bulletin" released on May 27, 2009, LB 630 enables the parties to a workers' compensation claim to resolve the claim on a full and final basis, without court approval, unless:
1. The employee is not represented by counsel;
2. The employee, at the time the settlement is executed, is eligible for Medicare, is a Medicare beneficiary, or has a reasonable expectation of becoming eligible for Medicare within 30 months after the date the settlement is executed;
3. Medical, surgical, or hospital expenses incurred for treatment of the injury have been paid by Medicaid and Medicaid will not be reimbursed as part of the settlement;
4. Medical, surgical, or hospital expenses incurred for treatment of the injury will not be fully paid as part of the settlement; or
5. The settlement seeks to commute amounts of compensation due to dependents of the employee.
The bill directs the Workers' Compensation Court to develop a form release to be used in such cases, which form has now been provided by the Court.
LB 152 was also signed by the Governor, and amends the Uninsured and Underinsured Motorist Insurance Coverage Act in response to two recent Nebraska Supreme Court decisions. First, the bill includes a provision that provides that no policy subject to the Act shall define "insured" in a manner that excludes any person occupying the insured vehicle with the express or implied permission of the insured.
Second, the bill expands the exclusion of uninsured and underinsured motorist coverage under subdivision (1)(b) of Neb. Rev. Stat. § 44-6413 by stating that uninsured and underinsured motorist coverages shall not apply to bodily injury, sickness, disease, or death of an insured while occupying a vehicle owned by, but not insured by, the named insured or a spouse or relative residing with the named insured. The prior exclusion only applied to "motor" vehicles. This section of LB 152 was introduced in response to the Nebraska Supreme Court decision that held the owner of a farm tractor who sustained injuries while operating the tractor was entitled to underinsured motorist coverage under a motor vehicle liability policy on which he was the named insured, even though the tractor was not listed on the declarations page of the policy, reasoning that the exclusion in Section 44-6413 did not apply because a farm tractor is not considered a "motor vehicle" under the Act. LB 152 was passed to eliminate this result, and all vehicles owned by, but not insured by, the named insured will now presumably be excluded from uninsured and underinsured motorist coverage under the Act.
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Disclaimer
Content reflects the firm's opinions and views on general issues. It is not legal advice and cannot replace consultations with an attorney on specific matters. The Baylor Evnen newsletter provides substantive information that may assist you with current issues. It may be considered advertising under the rules of the Nebraska Supreme Court.
Baylor Evnen Curtiss Grimit & Witt, LLP is located in downtown Lincoln, Nebraska at Wells Fargo Center, 1248 O Street, Suite 600. Baylor Evnen is a full service law firm, serving individuals as well as small businesses. The firm has extensive experience in both civil and criminal litigation, estate planning, probate, real estate, commercial and corporate law.
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