• Note the time and date you were served with the lawsuit directly on your copy of the lawsuit.
• Make a copy of all of the papers you have received, keeping one for yourself and sending the original to your insurance broker.
• Call your insurance broker to let him or her know that lawsuit papers are coming.

• Designate a media spokesperson (and at least one back-up). These persons should be trained in advance of a crisis about what is and is not appropriate information to release to the media.
• Make sure that everyone knows the identity of the designated spokespersons(s). Nonauthorized persons, including staff, volunteers and board members, should not talkto the media.
• Do not admit wrongdoing. Keep in mind that anything said to the media by anyone in a position of authority can be used against the organization in any litigation that results. As tempting as it might be to admit liability to "get it off your chest," you can be sure that this admission will greatly diminish your attorney's ability to defend you in a lawsuit.
• Remember that "no comment" says a lot. "No comment" fills pages in the minds and imaginations of readers and viewers. What is the organization trying to hide? Isn't there anything it can say about this dreadful event? Count on the fact that a skillful reporter will find someone to comment about the incident — including your organization's handling of the crisis. Remember to think carefully about what you say and what you don't say.
• Stay calm and "on message." The key is focusing on the message you want to deliver. Advance preparation is necessary.
• Deliver a positive, truthful message about your organization. While it is important not to evade a reporter's questions altogether, always begin your response with a positive message about your organization which incorporates your commitment to safety. For example, "The mission of the Youth Activities Center is to promote safe recreational activities for disadvantaged children in this community. Our commitment to safety is reflected in our safety training programs for athletes, rigorous screening and training program for volunteer coaches, and provision of appropriate safety gear for all participants."
• Do not improvise your answers. If you do not know the information asked by the reporter, admit that fact and if appropriate, pledge to find out as soon as practical. Establish a time and place to provide information updates.
• Show concern and compassion. Compassion for victims and those who are disadvantaged by circumstance, physical disability or economic status is at the heart of the work of many community-based nonprofits. The public expects a nonprofit spokesperson to demonstrate compassion. Never dismiss an incident where victims are involved as inconsequential.

Let's hit a few highlights of 2011. In the past, I've described certain scary trends in health care in the United States:

• US spending on health care is lapping our peer countries while our life expectancy is declining comparatively. This is a major drain on our economy and is costing us jobs.
• We have a huge amount of unnecessary surgery and testing. It's getting worse, not better. (Read The Treatment Trap by Rosemary Gibson and Janardan Prasad Singh for real life examples.)
• In health plans today, a small number of members are spending most of the money. I've seen very large plans in which 10% of members are spending 80% of plan dollars. These "outliers" are usually in the middle of serious acute health crises and are way beyond wellness, preventive, value-based purchasing, Health Savings Account incentives, consumer driven health care, public/private partnerships, etc. "Outliers" often need specialized tertiary or quaternary care.
• There is huge variation between tertiary and quaternary referral centers in terms of getting the diagnoses right, having the best outcomes, and saving lives. The best referral centers are the most cost effective too.
• Most specialists in the United States don't coordinate care or diagnoses. As a consequence, a large number of "outliers" are misdiagnosed and/or have bad treatment and surgical plans. This is a huge opportunity for benefit plans.
• Alas ... we know that true reform can never and will never come from Washington. Members of Congress will see to it that clinics and hospitals in their districts are protected.
• Health insurers understand this but are often not supported by corporate benefit executives when they delete poor performing doctors and hospitals from their networks.
• Most benefit executives are looking for the deepest discounts when selecting a network, not the lowest net cost, a big difference. Lowest net cost comes from getting diagnoses right, avoiding bad surgery, and coordinating care. Those traits trump deepest discount every time. A small but growing number of large corporations are getting this one right.
• If the system is to be reformed it will be done by corporate benefit executives. Congress can't. Insurers can't.
• Most of the clinicians who over-test and do a poor job of getting diagnoses and treatment plans right aren't going to improve until someone takes their patients away. Period.

The question is, how to take their patients away. There's a way.

If you are a benefit executive:

• Ask your Third Party Administrator, carrier, or Preferred Provider Organization to start figuring out who the "A players" are and load your networks with them. Ask them to identify the "C clinicians" and begin the process of deleting them from your network. The savings potential from this is huge. Plus, you will be protecting your employees and improving the quality of their care.
• Educate your employees about this.
• For your outlier population, implement centers of excellence for their specialized needs.
• If your company has more than 5,000 covered lives or so, you should develop and implement direct contracts with the best of the best centers of excellence, ones like the Mayo Clinic and the Cleveland Clinic. Great companies like Pepsi, Walmart, and Lowes have done just this, plus many others. You can do it too.

Rescission of an insurance policy is serious business. Such action could result in serious financial difficulties to insureds, especially if it occurs after a major loss. Furthermore, costly and protracted litigation almost inevitably follows to contest the rescission.

Fortunately, insureds and their brokers can minimize the potential for rescission by simply exercising greater care to ascertain the accuracy of underwriting information, and by providing all material information to insurers. Also, rescission decisions are made by insurers only if they are convinced that they have adequate justification for them.

An insurer may rescind its policy in the event of material misrepresentation or concealment of a fact by the insured. Misrepresentation is the false statement of a fact by the insured. Concealment is the neglect to reveal a fact that the insured knows and ought to communicate to the insurer.

Misrepresentation or concealment is material if it affects the underwriting decision of the insurer. For example, the premium would have been higher had the insurer been aware of the true and complete facts.

Property-casualty policies typically include conditions pertaining to the subject of rescission, such as:

• The policy is issued in reliance upon the truth of representations made by the insured.
• The policy is void if the insured intentionally conceals or misrepresents a material fact.
• The insured, by accepting the policy, agrees that the statements in the policy declarations are accurate and complete.

In most cases, rescission is based on materially misrepresented facts in the policy application, or in underwriting information provided by the insured or its broker. However, unless there is a satisfactory answer to each of the following questions, the rescission is not justifiable:

• Is the fact known only to the insured? If the insurer possesses a fact that differs from what the insured had provided, then it must attempt to reconcile it before proceeding further with consideration of rescission.
• Is it false? The insurer must have incontrovertible evidence to demonstrate that the fact obtained from the insured is false.
• Is the falsity material? Materiality is determined within the context of probable and reasonable influence on the insurer by the false fact. Consequently, if the insurer’s underwriting decision is not affected, then the falsity cannot be deemed material.
• Is it reasonable to rely on it? The insurer cannot reasonably rely on a fact received from the insured alone if it is aware of a conflicting fact.
• Did the insurer rely on it? There must be clear evidence to demonstrate that the insurer did rely on materially false facts when making its underwriting decision.

State insurance codes and legal precedents also have an impact on the insurer’s decision-making process concerning rescission.

For example, the California Insurance Code allows policy rescission even in cases of unintentional misrepresentation or unintentional concealment, and it provides that materiality is to be determined solely by the probable and reasonable influence of the facts on the insurer.

Also, case law precedent prevents insurers from relying solely on representations contained in the policy application or underwriting information if an inspection of the insured’s property is conducted.

A policy may be rescinded even after a loss that would otherwise be covered by the policy. Since rescission could have severe negative financial impact on the insured, the insurer must be certain that the reasons for rescission are based on solid grounds and able to withstand potential legal challenge.

In a 2001 case, an insurer rescinded their policy following a major fire loss, alleging material misrepresentation and concealment by the insured, pertaining to several matters, including square footage of the premises.

The pre-trial discovery proceedings included examination of ambiguous questions contained in the insurer’s application form, and the accuracy of the inspection report provided by an independent inspection company retained by the insurer.

Major weaknesses emerged in the insurer’s justifications for its decision to rescind the policy, including:

• The insurer previously issued policies for a previous owner, covering the same premises, and therefore it had prior knowledge of the underwriting information, including square footage, which differed from what the insured had provided.
• Just because the square footage information provided by the insured differed from the prior information in the insurer’s underwriting files, it was not sufficient for the insurer to conclude that the insured’s statement is false, especially since its insurer failed to make any attempt to reconcile the difference.
• The square footage figures provided by the insured and its broker in the application was lower than the figure in the inspection report that was ordered by the insurer after it issued the policy. In asserting materiality, the insurer disregarded another inspection report subsequently ordered by the insured, which confirmed the original figures in the application for the policy.

Based on the above points, it was not reasonable for the insurer to rely on the square footage information provided by the insured, and the insurer’s contention that it did rely on the square footage data provided by the insured was questionable.

Although this case was resolved and the insured received payment for its claim, the pre-trial discovery process took over a year, with detrimental financial consequences to the insured.

The lesson from cases like this is that all parties should take thorough measures to ensure the accuracy and completeness of underwriting information, and that conflicts or ambiguities are promptly resolved before coverage is bound.

Since the latter half of the 90's, the handwriting has been on the wall for newspaper companies that media's future was digital. Heck, the newspapers' own business sections reported on this trend. Despite this, the majority of the industry focused on traditional strategies such as taking on debt to acquire other newspapers or investing in new printing presses, leading to disastrous consequences.

To be fair, there were some digital investments made, including hiring top-drawer talent. However, over time, the digital teams were marginalized and ultimately the talent that had the capability to transform these organizations left for opportunities where their hands weren't tied. In other words, the commitment wasn't deep enough to effect a true transformation.

Now consider healthcare in the U.S.: There's a clear understanding that the industry must shift its focus towards outcomes from "do more, bill more" orientation. If ever there was an industry that should understand that it's more effective to address underlying conditions than treating the symptom, it should be healthcare. Or, as a famous early newspaper publisher stated, "an ounce of prevention is worth a pound of cure." Prevention-focused countries such as Denmark have dramatically lowered the need for hospitals. Once at 155 hospitals, they are at less than a third of that today. I find this easily-known fact is news to healthcare providers I speak with.

Whether they don't know these facts or are ignoring them, the fact is there are incredibly large capital investment projects on the docket for many health systems. Since 62% of hospitals are mission-based, non-profit organizations, it's astonishing that they are more focused on capital projects than addressing the overall health of their communities. No one has made the case, for instance, that chronic conditions that consume 75% of the $2.6 trillion tab in the U.S. is best addressed by building more buildings. Some make the case that there's a growing healthcare real estate bubble while costs of chronic conditions continue to expand.

In healthcare, it's as though we are building better firehouses and investing in more firefighting equipment while we do the equivalent of leaving oily rags around, letting kids play with fireworks on dry hillsides, and building structures with one exit. We may have the best "firefighting" tools and talent in the world but we'd be much better off if we prevented those "fires" from starting in the first place.

Dr. Ted Epperly recently finished his term as the head of the American Academy of Family Physicians and runs the Family Medicine Residency of Idaho program, which includes 80 physicians serving over 20,000 patients. On a tour of his facility, he stopped to comment on the scene in the waiting room of their biggest clinic, something that's typical of the many doctor's office waiting rooms we've all experienced. He described the scene as a failure compared to the vision of what he's planning on implementing.

In Epperly's vision, he describes a dashboard that pulls from the registry of all of their patients. Rather than reactively waiting for someone to present himself or herself in the clinic, he envisions a system that proactively is monitoring the array of conditions his patient population experiences. For example, it will ensure diabetics are having regular foot and eye exams and blood glucose levels are being consistently monitored. If someone hasn't scheduled an appointment already, it will proactively reach out to him or her rather than waiting for some health crisis.

Epperly has been a leading proponent of a concept in healthcare called the Patient-Centered Medical Home (PCMH), akin to the philosophy that Denmark has adopted so successfully. In many respects, the Patient-Centered Medical Home is simply an updated version of the Marcus Welby model of medicine with more of a team-based model coupled with technology.

While some may have noticed that there are several Patient-Centered Medical Home pilots that were included in the federal health reform law, there's a little-noticed facet of the law the CTO for the United States, Aneesh Chopra, points out in this video segment. That is, if the payment models that reward positive health outcomes over activity proves out in the eyes of the Actuary for Medicare and Medicaid program to be cost savings, there is carte blanche authority to expand these models broadly to entire Medicare population. This could rapidly expand the deployment of the Patient-Centered Medical Home concept and accelerate the need for the associated HealthTech. The video below explains this in more detail and explicitly speaks to the opportunity for startups.

Another healthcare provider plans to send home patients with an array of personal biometric devices. The output of these devices will be a more complete view of an individual's health. There's an explosion of personal biometric devices ranging from personal blood pressure monitors to some being built into clothing and widely deployed in places such as Denmark.

For the cost of a small wing of one of these new Taj Mahal structures, healthcare providers could have a team of innovators working on scenarios such as those described above and many others. Those that avoid sticking to the old tried and true methods of differentiation that worked in the past will be light years ahead as the transformation of healthcare takes hold. If they don't, employers who are paying the bulk of healthcare costs are taking matters into their own hands and building their own onsite clinics.

Whether the innovation comes from within or from non-obvious competition such as employers or pharma companies, there's a distinct advantage in having a blank slate where cost effective systems and models of delivering care can be delivered. For the providers, they'd be well advised to develop their own innovation teams unfettered by the current model so they can develop models that will ensure the provider's long-term survival.

Although we think that the first important legal battle for captive insurance occurred during the economic substance cases that started in the 1970s, the reality is two cases from the 1950s (US. v. Weber and Consumers Oil Corp v. US) have all the hallmarks of modern-day captive insurance programs. Most importantly, at their conclusion, these cases offered the IRS the opportunity to clearly outline specific rules and regulations related to captives. However, the IRS declined to do so, instead issuing a Revenue Ruling stating they would not follow the conclusion of the cases and instead continue to litigate captive insurance cases.

First, let's set the stage by explaining what caused the need to create one of these captives in the first place: the Trenton Flood of 1955

• The worst natural catastrophe to befall Trenton was the flood of 1955.
• City streets were turned into rivers and hundreds of families were evacuated as the normally placid Delaware River surged over its banks.
• Flood damage totaled $100 million in New Jersey, mostly in property damage, with $500,000 coming from the destruction of Mercer County roads.
• In the weeks leading up to the flood, the area had been scorched with temperatures hitting the 90s nearly every day in July and early August.
• Worse yet, there had been little rain to ease the record-setting temperatures, as most towns considered water rationing measures.
• The earth became parched, reservoirs dried up, and sewers backed up due to a loss of water pressure.
• Area residents, especially Burlington County farmers who had suffered severe crop damage due to the heat, were probably praying for rain, ignoring the adage, "Be careful what you wish for."
• After the drought came the deluge, as Mother Nature flashed her fickle side.
• The drought broke on August 7, when 2.9 inches of rain fell on Trenton.

As a result, finding flood insurance in the New Jersey area in the years afterwards was nearly impossible. To solve this problem, The Consumers Oil Company established its own trust fund:

The plaintiff, by a written agreement with three of its officers and directors, established a ‘trust fund’ which was to be administered by the latter and held by them as insurance against possible liability for property damage resulting from flood. The trust agreement was subject to automatic termination upon cessation of the plaintiff's business, and was unilaterally revocable by the plaintiff upon determination that continuance of the trust was no longer feasible ‘as a matter of business expediency and sound business operation.’ (Paragraphs 10 and 11 of the Agreement.) The balance in the fund was repayable to the plaintiff upon termination or revocation of the agreement. The agreement was executed on December 16, 1955, and was in effect during the years here in question.

The plaintiff made two payments into the trust fund, and attempted to deduct these amounts from its income tax — a deduction which was disallowed by the service. The court agreed, largely because this scenario looked remarkably similar to a reserve fund:

The fund thus created remained wholly within the control of the plaintiff and the balance remaining therein was subject to repayment upon either the cessation of its business or the unilateral revocation of the agreement. The payments entailed nothing more than a voluntary segregation of funds out of income as a reserve against a contingent liability and were, therefore, not allowable deductions.

Central to the court's decision was the structure of the trust established by the company. The trust was administered by directors of the company, making it look remarkably similar to a reserve fund. In addition, the trust automatically terminated on the cessation of the company's business or if the company decided termination was warranted by business exigencies. This would allow the company to bring the earnings back on their income statement, which could allow them to manipulate their earnings &mbash; a primary reason why the IRS fought against the establishment of reserves.

There are two important issues to mention regarding this case's facts. First, the company did not set up an insurance company; instead, they set-up a trust. There was no claims department, no formal insurance contract etc. Under current law, this transaction would violate the third prong of the Harper Test (the arrangement would not be for insurance in its commonly accepted sense). Secondly, there is no mention of any tax evasion concepts; that is, no one went to the company and said, "I've got a great way to lower your taxes." What did happen is business exigencies (risk management) drove the transaction. This is incredibly important, as we will see this as a fundamental part of the captive cases going forward.

The story goes like this ... You're sitting at your desk when you're informed that someone from Cal/OSHA has just arrived for an "unannounced drop-in" inspection. You ask yourself, what could they possibly want? Well hang on to your hats because the inspector wants to see everything.

Since we are all seeing more and more government agencies looking for ways to get into your wallet, I thought it appropriate to share with you the list of items Cal/OSHA is now demanding. This so you can be prepared in case you are visited by one of the many agencies now actively looking to levy fines.

• Facility Layout (i.e. Floor plan, process flow diagram, equipment map, etc.) L/C 6313(a)
• Cal/OSHA Log 300 (Current year and the previous 5 years) T8CCR14301(b)
• No. of employees for 2012_______No. of employee hours for 2012________
• Cal/OSHA 5020 (Employer's First Report of Injury/Illness). T8CCR14304(a)
• Cal/OSHA 5021 (Doctor's First Report of Injury/Illness). T8CCR14007
• Workers Compensation Insurance "Experience Modification" Worksheet. L/C6314.1
• Injury and Illness Prevention Program (SB198-T8CCR3203(a)
• Inspection Records T8CCR3203(b);Training Record T8CCR3203(b)
• Safety Committee Meeting Minutes (if used) T8CCR3203(c)
• Emergency Action Plan T8CCR3220
• Fire Prevention Plan T8CCR3221
• Hazard Communication Program T8CCR5194(e)
• Material Safety Data Sheets (MSDS) T8CCR5194(g)
• Respiratory Protection Program T8CCR5144(f)
• Hearing Conservation Program (Noise) T8CCR5097(a)
• Workplace Exposure Records (Airborne contaminants, noise, etc.) T8CCR5155(e)
• Permits T8CCR341, 461 (e.g. Air tanks/compressors)
• Maintenance records for equipment (Various Sections of T8CCR)
• Forklift Training Records
• Business License Numbers
• Lock Out/Tag Out Program
• Other (This is a catch-all just in case they forgot something)

The various items requested come from a Cal/OSHA Document Request Sheet. Many of them will not apply to your particular situation. However, it offers you an excellent roadmap to follow as you review the current status of the various items that do apply to you.

It is also important to review the various posters that must be displayed. When making a physical inspection, you will be asked to show where they are posted and that they are current. The following is a list of what you need and where you can find them.

1. Labor Law — You can purchase a complete poster from the California Chamber. The cost is $32 dollars each for English and Spanish and you will probably need both. Their number is 800-331-8877 to order.
2. As an added bonus, you will also get the new NLRA poster. The newest effective date for posting is 1 April 2012. You will need to post this one as well.
3. Wage Orders – Those specific to your industry must also be posted. You can visit http://www.management-advantage.com/products/IWCOrders.htm and then select the one that is most appropriate for your situation.

Finally, effective 1 January 2012 there is a new "Notice to Employee" form that needs to be given to each NEW employee at time of hire. It is mandated under Labor Code section 2810.5 and may be found at www.dir.ca.gov/DLSE.

And Just In Case You Think The State Is Not Serious ...
Cal/OSHA just issued citations, with penalties of $256,445 against a warehouse operator and its temp staffing contractor following nine inspections of four warehouses in Chino.

The investigators uncovered 31 general and 29 serious violations. There were also two serious, accident-related and two regulatory citations issued.

Two fines of $18,000 each were for failure to implement an Injury and Illness Prevention Program (IIPP) at one of the warehouses. These were for a situation where one of the workers suffered serious heat illness. Serious citations were also issued for failure to provide fall protection systems for workers, unstable storage stacks, unlocked bailer and compactor controls, and numerous unguarded machines. They also got written up for failure to enforce forklift speed limits and problems with emergency eye washes.

They were also cited for unsafe electrical systems, lack of personal protective equipment, the lack of a heat related prevention program and an ineffective injury and illness prevention program.

So You Ask "What Should I Do?"
Review all of the related programs listed above for current compliance. Inspect your physical plant for potential violations. You should be able to request help from the Loss Control department of your current workers compensation carrier. They usually have a staff of experts that can come to your facility and help identify solutions.

This article is an excerpt from the February 2012 edition of From The Hotline published by Stuart Baron & Associates and Workers' Compensation Claims Control. It is used with permission under the copyright of Stuart Baron & Associates.

The Veterans Opportunity to Work (VOW) to Hire Heroes Act, passed with bipartisan support and signed by President Obama, allows military veterans to sue their employers for workplace harassment. The key provisions of the Act seek to reduce unemployment rates for veterans of Iraq and Afghanistan, but the legislation also amends the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) to recognize claims of hostile work environment harassment because of the individual’s military status.

By amending USERRA to prohibit discrimination with respect to the "terms, conditions, or privileges of employment," the Act establishes the same standard for hostile environment claims on account of military status as that governing Title VII harassment cases based on sex, race, religion, or ancestry. Like sexual harassment cases, employees who sue will be able to establish harassment claims under USERRA even when they have not suffered a tangible loss of employment or benefits. The same affirmative defenses available to employers will apply.

Prevention Strategies: Employers should have accessible internal complaint and reporting procedures and promptly investigate complaints. Then, where warranted, take immediate and appropriate corrective action to stop hostile behaviors toward military service members and to prevent future harassment. Then, include military status in your harassment prevention training for managers and supervisors.

The USERRA amendments follow the U.S. Supreme Court decision in Staub v. Proctor Hospital, in which the court ruled in favor of an Army reservist who was fired because of anti-military bias. There was evidence that two of his supervisors wanted him fired because his military duties had caused him to be absent from work one weekend a month and a few weeks per year. It was not clear that the human resources officer — who was the person who actually fired Staub based on the supervisors’ write ups — had any negative feelings about Staub due to his military status or even knew about their military bias. Justice Scalia wrote for the unanimous Court: "... if a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA."

California Military and Veterans Code §394 also prohibits discrimination against members of the armed forces. This statute provides that no person shall discriminate against any enlisted member of the military or naval forces of the United States because of that membership. Section 394 also provides that "no employer or person" shall discharge any person from employment because of the performance of any ordered military duty, or prejudice or harm him/her in any manner in his employment, position, or status by reason of performance of military service or duty. In Haligowski v. Superior Court, the California Court of Appeal was asked to decide whether an employee may hold supervisors personally liable for discrimination under section 394. The Court concluded that, like California FEHA, section 394 allows servicemen and servicewomen to hold their employers, but not individual supervisors, liable for discrimination. This applies to discrimination in all terms and conditions of employment, not just hostile environment harassment.

Prevention Strategies: Make sure that Administrators, Department Heads and front line leaders are informed about the broad protections for active members of the military or those who have records of previous service. Update your policies to address current standards.

This article is an excerpt from the February 2012 edition of Attention to Prevention News published by Eyres Law Group, LLP. It is used with permission under the copyright of Proactive Law Press, LLC.

Questioning the need for a medical-legal examiner occurs more often than one would think. The decision can result in protracted and drawn out discussions and debate. Do you really need one? It depends, though it is often not necessary. Litigation in the Workers' Compensation arena is a game of strategy. It may surprise many to know that the legal issues and evidence in a claim often outweigh the medical issues and evidence, despite emphasis being placed in the exact opposite manner. There is no one-size-fits-all solution. However, the use of a medical-legal evaluation is simply not necessary in many psychiatric claims.

Whether or not an injury "arises out of and in the course of employment" (AOE/COE) is the cornerstone of any claim. There is no claim unless injury is proven. There are two sides to the equation, yet we see the majority of medical opinions focus primarily on an "event" happening at work (COE). We often see little discussion and medical opinion addressing whether or not the injury actually arose from a condition or incident from employment (AOE). Little time is spent on the history of the applicant and other stressors. Why? At the time of an examination, a doctor hears only one side of the story. From the moment an applicant enters a doctor's office after reporting a claim, it is their opportunity to present their side of the story. They tell the doctor where the event occurred, what they were doing, and why they feel it is related to work. It is a one-sided event. Add in the subjective complaints and presto! We have a compensable injury. However, injury, pain, or other problems are not compensable merely because signs manifest while on the job.

How many times during the investigation stage of the claim (Labor Code § 5402) have you seen a complete picture of the claim provided to a primary treating physician? Are all the records available subpoenaed? Are the deposition of the applicant and witnesses complete? Is surveillance performed? Are all the stressors in one's life completely examined? Rarely ever will you see this level of investigation completed in the delay period. The investigation is generally not completed until well after a claim is denied. As the deadline for a decision on compensability draws closer, examiner and attorney alike may be nervous from straying from the warm embrace of a medical-legal evaluation. An opinion from a doctor on causation. Despite the multiple legal issues to consider in AOE/COE litigation, we rely upon the medical-legal process and a medical professional who often is not the best person to decide.

The Challenge Of The Psychiatric Claim
Psychiatric claims are classified either as a separate injury or a compensable consequence injury. The type of injury largely dictates whether or not a medical-legal examination is a good idea. They are a difficult injury to litigate and to defend because of their subjective nature, and due to the emotional investment of the applicant. The questions addressed by medical professionals and in the deposition process are delicate and embarrassing. We must also not forget that a primary or secondary treating physician will likely have already commented on the compensability of a psychiatric injury allegation when it is time to contemplate a medical-legal evaluation. Though their medical determination may be weak and flawed in a number of ways, evaluators often do not like to stray significantly from the findings of their peers. Thus, it can be difficult to get a medical-legal evaluator to completely disagree with the finding of another physician.

What "Else" Do You Have?
The decision on the use of a medical-legal examination depends largely on what "else" you have to prove your defense. In the courtroom, it is not what you know, but what you can prove! Do you have other discovery completed? Is there a deposition completed which addresses not only the history of the applicant, but also discusses all non-industrial stressors and comments on activities of daily living? Is there surveillance which demonstrates the applicant is dishonest when speaking with his medical providers? And perhaps most important, do we have an employer who is honest and willing to participate in the litigation process?

The formula for success is straight forward. The more evidence you have in your favor, the less likely a medical-legal evaluation is needed. And, the more it may actually hurt your case.

Deposition: A strong deposition will be able to give the judge a clear picture into not only the current alleged state of the applicant, but the reasons they are in their present state of mind. A judge only sees what the outside world sees. The same goes for medical providers. They do not go home with the applicant, run errands with them, or do anything with the applicant outside of the court room. What other factors have affected their present state of mind?

We must find out if there a history of abuse or domestic violence in their life. We must ask what types of relationships they have with others. If these relationships are affected, we must ask how and why. Is the applicant a felon? Were their stressors at work associated with personnel decisions, or other reasons? I once had an individual tell me in a deposition that the very recent, untimely and disturbing death of a long-term spouse had no psychological effect on him, yet lifting an item which resulted in back pain somehow made it unbearable to cope with life from a psychological perspective. This did not make sense to me.

Just as important as asking background questions, are questions about activities of daily living. In another case I handled, the psychological treating physician stated that the psychiatric injury affected this applicant in almost every aspect of daily life. Yet in the deposition, the applicant admitted to an almost identical life post-injury. The only changes were limitations on two chores, and a different method of obtaining a good cardio workout. How is that significantly "life altering?" The point is, we must draw out all the important psychological factors of an individual's life to really know what is the root cause of their psychological complaints.

Surveillance: The value of good surveillance cannot be measured. Surveillance which shows even the fairly mundane activities can hold great weight because of the frequent assertion that the psychological injury prevents even the most mundane of activities. It is also beneficial for impeachment purposes, to challenge the overall credibility of the applicant. If they are proven to be dishonest, both judge and doctor must consider the possibility that they are dishonest in their subjective complaints and allegations.

Subpoenaed records: Always, always, always check for other records. If there is a location mentioned in a medical report or at a deposition, it must always be considered for a subpoena. EAMS case searches are free and a great source for prior claims information. Index and EDEX searches should be mandatory on all claims. Updated searches every 6 months are a good idea. Once a claim has been filed in the past with a psychiatric component, the chance of a second claim with a psychiatric component is much more likely. Subsequent injuries and accidents are commonplace.

Employer participation and witnesses: A cooperative and honest employer witness is perhaps the most important tool to have. The applicant is almost always a sympathetic witness. The employer witness must also be one as well. They must be able to show that the items contained in a personnel file are accurate and that the actions of the employer were appropriate. This is especially true in litigation of good faith personnel decisions. A cooperative employer will make it easier to give you access to other witnesses and can often point you to activities the applicant was engaged in which may account for the alleged injury.

The Use Of An Agreed Medical Evaluator (AME)
Regarding all injuries in general, I am no longer a real believer in the use of Agreed Medical Evaluators. Agreed Medical Evaluators are highly unlikely to arrive at a decision that a claim is not compensable. Why? First, they see themselves as a negotiator of sorts between the parties. As such, they will follow in the footsteps of King Solomon and recommend "splitting the baby." For the applicant, they find a compensable injury, a recommendation for active treatment, and a finding of temporary disability. The defendant often walks away with a discount on future medical care, a more favorable interpretation of the testing for a lower GAF score, and some consideration for apportionment.

Second, they follow the money. Show me an Agreed Medical Evaluator that consistently finds injuries to be non-industrial, and I will show you an Agreed Medical Evaluator that is no longer used by the applicant. Show me an Agreed Medical Evaluator that finds low GAF scores, no apportionment, and drags temporary disability out, and I will show you an Agreed Medical Evaluator that is no longer used by the defendant. If you want to challenge the AOE/COE allegations of a psychiatric injury, an Agreed Medical Evaluator is not the way to go.

The Roll Of The Dice With A Qualified Medical Evaluator (QME)
If a Qualified Medical Evaluator is considered, bear in mind that you proceed at your own risk. There is no guarantee your panel of three providers will be stacked in your favor. The list could be all conservative, all liberal, or a mix of both. The strike process will not always be favorable. And let us not forget that applicant attorneys by in large do not like the Qualified Medical Evaluator process. Thus, they will find ways to escape the process. Such as requesting multiple reports in an attempt to have an unfavorable Qualified Medical Evaluator violate the time frames required for response. Or simply using the treating physician as a "rebuttal Qualified Medical Evaluator," if you will. Their argument is that all "relevant" medical evidence is to be considered by the trier of fact. Thus, the treating physician must have a say on the Qualified Medical Evaluator's findings.

The Fight Against The Treating Physician
After assessing the arguments above, one would then ask, how do we overcome the findings of the treating physician? It may seem unreasonable to go to trial without medical evidence to refute the findings of the treating physician, and without the Qualified Medical Evaluator potentially doing this for you, your options are limited. I believe the best way to overcome many "applicant" treating physicians, is to simply use their reporting against them. It is common knowledge that every area of the State has their own set of physicians that receive the bulk of applicant attorney referrals. And we all know why — because they always give the answer the applicant attorney wants. I have also come to realize that the local Workers' Compensation Appeals Board judges also know these names, as they see them over and over again. This is an advantage. By reputation, they may already be under scrutiny before their report is ever read by a judge. Further, these reports are often largely boilerplate and contain similar language from report to report.

We also see that their reporting is incomplete. When completing a history they often do not go into the same depth as defendants do when completing a deposition. They often do not review deposition transcripts, or subpoenaed records. Failure to serve these documents or to request review falls on the applicant. Their analysis of testing is often brief and questionable when discussing AOE. Questionable or conflicting results are rarely discussed, or simply dismissed. Once the defendant has completed their depositions, subpoenas, and other forms of investigation, it makes no sense not to immediately file for a hearing and bring the issue of AOE/COE to trial, bifurcated from the other issues.

Another option is the Labor Code § 4050 evaluation. Yes, the reporting may not be admissible, but there are ways to have it entered into the record. More importantly however is its value in preparation for the deposition with the applicant or with the treating physician if needed. A review by a qualified psychiatrist or psychologist will enable you to challenge the tests applied by the treating physician, and to better understand which questions you may wish to pose to either party. It will help you evaluate the strengths of your case and more importantly, the weaknesses. This will later help in drafting of a trial brief, submission of evidence, and examination questions at the time of trial. And, it may also provide the insight for both examiner and defense attorney to accept a claim if proper.

What Are Your Injury Types?

The stand-alone psychiatric claim. Recommendation: Use of a medical-legal evaluation is likely not necessary. The stand-alone psychiatric injury is not a very common occurrence and usually manifests itself after a traumatic experience, such as witnessing a crime, or being the victim of one. An excellent example is a bank teller who was present at the time of a bank robbery, and may have had a violent act performed against them, or have witnessed a violent act against a co-worker or customer. The legislation specifically included a special provision for these types of injuries, to establish a lower threshold for a compensability decision. Labor Code § 3208.1 (b)(2) establishes a finding of substantial cause of the injury with a preponderance of the evidence. Due to the traumatic nature of the event, the AOE side of our equation becomes much easier for the applicant to assert (35 to 40% instead of 50+%), and much more difficult to defend. Even with substantial evidence of non-industrial factors, it is an uphill battle. If the claim is denied, the applicant will treat with an applicant-oriented treater. And as discussed above, they will focus primarily on the COE side of the equation.

With this in mind, why take the chance of another medical provider evaluating a sympathetic witness and noting the event was traumatic and thus clearly industrial? I do not see a non-compensable finding in these scenarios unless the evidence of pre-existing factors and a demonstration of "normal" activities of daily living is substantial. And the finding of a compensable decision by the medical-legal evaluator will only hurt your case. Unless you have strong evidence elsewhere to support a non-industrial finding, a medical-legal evaluation is likely unnecessary.

The compensable consequence psychiatric injury. Recommendation: Use of a medical-legal evaluation is likely not necessary. How many times has an examiner witnessed the following scenario: Worker sustains an accepted injury and receives care. Worker then procures the services of an applicant's attorney. Said attorney immediately transfers care to an "applicant-oriented" medical provider. During the first evaluation, this provider provides a form with check off box options that includes questions such as, "Since your injury, have you had problems with sleep?" "Since your injury, have you felt anxious or depressed?" "Since your injury, have any other body parts been bothering you?" The report from the new treating physician mentions psychiatric issues for the first time.

These are questions that are meant to draw out "yes" answers and increase the size of claims. Notice that they are phrased to imply these problems exist because of the claim, and not because of daily life. You do not see follow up questions that seek to clarify why they are having issues with sleep, anxiety, or depression. Or why the applicant has had at least one night of bad sleep since injury. Yet with a "yes" answer, a new compensable consequence claim is born, and the opportunity for yet another medical-legal evaluation.

We do not need to discuss the 6 month threshold argument brought forth in the Wal-Mart1 Which means the applicant must reach the threshold of 50+% causation. Many of the arguments and defenses discussed for the "stand alone" claim apply here. You still need most if not all of the tools at your disposal, and the deposition becomes even more important. That is your opportunity to challenge the timing of the filing of the compensable consequence claim, or the manifestation of psychological symptoms.

The defendant must ask the applicant why there was no mention of depression or anxiety until after a change of treating physician. If they state that they did make mention of these issues to the provider, then it behooves the defendant to go back to prior providers and seek clarification. Point out there is no mention of these symptoms in their old reporting, in the physical therapy records, or that of the physician who offers a second opinion on invasive medical care. A rebuttal against the claims of the applicant is worth its weight in gold.

In light of these often unexplained changes, coupled with non-industrial stressors and firm evidence to support normal behavior and activities of daily living, a medical-legal evaluation is likely not necessary. Again, the applicant will already have a treating physician arguing there is an injury. However, their reporting may be incomplete. An Agreed Medical Evaluator or Qualified Medical Evaluator might be sympathetic to the applicant and each evaluation is subjective. They may clean up some of the treating physician report issues. The trier of fact must consider all legal evidence and medical evidence to ultimately arrive at a legal conclusion. It is more difficult to find a predominant cause where there is limited medical evidence to justify a finding. It makes no sense to do the applicant's job for them.

Good-faith personnel decision claims. Recommendation: The use of a medical-legal evaluation may be necessary. Defense of a psychiatric claim on a basis of a good faith personnel action is a mutli-step process, per the Rolda case.² Under Labor Code § 3208.3(b)(3), a physician must find actual employment events are a substantial cause of injury. A treating physician may provide you with the correct percentages to argue your case. If they do not, a medical-legal evaluation will be necessary. Fortunately, regular treating physicians and medical-legal evaluators will want to establish that multiple employment actions resulted in at least a substantial cause of the injury, if not a predominate cause. It is important to try to have a multitude of personnel actions be found as contributing to the overall injury, as it makes reaching the threshold for arguing your defense easier. For an excellent analysis on complex good faith personnel issues, see the Cardozo decision.³

In conclusion, there will be no approach that can be used for strategy in all claims, and each case has a unique fact scenario. When considering the use of a medical-legal evaluation, all factors must be considered and carefully analyzed before rendering a final decision. If your evidence is strong and your witnesses are reliable, examiners and attorneys alike should never be afraid to proceed without the use of a medical-legal evaluation for psychiatric injuries.

¹ Department of Corrections v. WCAB (1999) 76 Cal.App.4th 810

² Rolda v. Pitney Bowes, Inc. (2001) 66 Cal.Comp.Cases 241, 245-247

³ San Francisco Unified School District v. WCAB (2010) 1 Cal. App. 4th, ADJ3474065

The landscape of punitive damages for maritime employers is changing. Punitive damages have, in the past, been generally available under general maritime law but rarely implemented since the 1990 Supreme Court decision in Miles v. Apex Marine Corp., 498 U.S. 19 (1990).¹ Developments arising out of the litigation from the BP/Transocean disaster leave maritime employers with an increased exposure to punitive damages under other maritime causes of action.

On August 26th, 2011, the Federal judge managing the litigation on the Deepwater Horizon blowout and subsequent oil spill disaster ruled that punitive damages are payable under general maritime law.

The judge stated: "These Plaintiffs assert plausible claims for punitive damages against Responsible and non-Responsible parties."² This ruling was made regarding the economic and environmental claims and may possibly be applied to crew injury and death claims in future litigation.

On October 21, 2011, BP was denied their appeal against the punitive damages ruling made on August 26, 2011. The plaintiff's attorney arguing against the BP appeal stated to the Federal judge in charge: "Everything we know from the Supreme Court is that there will be punitive damages no matter what."³

The BP/Transocean disaster has brought much attention to compensation for injured or killed employees working in the maritime environment. There have been a number of bills submitted to Congress requesting that punitive damages also be payable under the Jones Act. While at least one of these bills has been passed in the House, none have made it through the Senate or have been passed into law as of the time of this advisory. The BP trial starts in late February 2012, and it is possible new rulings regarding punitive damages and the Jones Act will be made.

Punitive damages are a more serious threat to maritime employers than land-based employers because:

1. Maritime Employer Liability (MEL) claims are tort based and employees can sue their employers under maritime law.
2. There are no caps or limits on Maritime Employer Liability claims, and attorney fees do not have to be approved.
3. Seamen's claims are generally treated more liberally and typically receive greater benefits than land-based compensation systems.
4. The interpretation of maritime law can vary from court to court, creating uncertainty.

These factors mean that Maritime Employer Liability claims can be unpredictable. Evidence of the volatility of punitive damages under maritime law was the $25,000,000 verdict in Doe vs. Maersk Line Ltd in December of 2010 which was one of the top 100 verdicts made in 2010 in the USA. This is a case that came down to the captain's word versus the seaman's word that the captain denied medical attention to the seaman for an injury arising out of very peculiar circumstances that occurred on shore-leave and while the seaman was reportedly intoxicated.

Maritime Employer Liability claims typically start with a claim for Maintenance & Cure and then are coupled with actions of Un-seaworthiness (general maritime law) and Negligence (Jones Act). These combined legal actions involving Maintenance & Cure, Un-seaworthiness and Jones Act negligence are known as the Seaman's Trinity. Maritime employers can control punitive damages under Maintenance & Cure by making sure their claims are properly managed and payments made to injured employees are made promptly. If punitive damages for injuries become eligible under the doctrine of Unseaworthiness and Jones Act negligence, maritime employers will have less control over punitive damage judgments made against them.

Maritime Employer Liability and Protection & Indemnity policies typically exclude punitive damages. In the past, this was not an issue because punitive damages were generally not allowable since Miles v. Apex. With the recent changes in maritime law, and possible future changes in maritime law, maritime employers are facing the emerging risk of punitive damages which have been shown to lead to high, unexpected verdicts.

¹ Miles v. Apex Marine Corp., 498 U.S. 19 (1990)

² Page 27, MDL No. 2179 US District Court

³ Courthouse News Service, Monday, October 24th, 2011 "Judge denies BP appeal that might have killed thousands of claims," http://www.courthousenews.com/2011/10/24/40864.htm.

The new year brings with it a host of laws that were signed by Governor Brown this past fall. In fact, there were 750 bills that were sent to the Secretary of State and chaptered in 2011. Most of these became effective January 1. A number of new laws reflect intensified efforts by policymakers to address the abuses in the underground economy. Given the state of the "above ground" economy, and the State of California's fiscal distress, getting all businesses to play by the rules has a new sense of urgency in Sacramento and across the State.

To aid in the ramping up of this effort, Governor Brown signed Assembly Bill 469 (Swanson), the Wage Theft Prevention Act of 2011, and Senate Bill 459 (Corbett). AB 469 requires a new notice by an employer at time of hire that sets forth certain basic wage and hour information as well as contact information for the employer and the employer's workers' compensation insurer. This new form is available at the Department of Industrial Relations (DIR) website. While many of us may think this is standard operating procedure for all businesses, one influential study done by UCLA, "Wage Theft and Workplace Violations in Los Angeles" (2010) documented widespread violations of California's wage and hour laws, workers' compensation laws, and employment classification laws (independent contractors). AB 469 allows an employee to recover attorneys fees for actions to enforce a court order for unpaid wages.

SB 459 creates significant new liabilities for the willful misclassification of an employee as an independent contractor. These liabilities include joint liability for any non-attorney who advises an employer to misclassify an employee as an independent contractor. Among the law's provisions, the Labor and Workforce Development Agency is now required to report to the Contractors State License Board any contractor who is fined under this new law. Also, an employer who has been found to have committed a serious violation is required to post a notice either on its website or in a place visible to all employees and the general public, signed by an officer of the business, that it has violated this new law and provide a number for any other employee who feels they have been misclassified to contact the Labor and Workforce Development Agency.

To emphasize the priority given to combating the underground economy, the Department of Industrial Relations announced the creation of the the Labor Enforcement Task Force (LETF) in late December of 2011. The Labor Enforcement Task Force includes the Department of Industrial Relations, the Employment Development Department (EDD), the Contractors State License Board, the Board of Equalization, and the Bureau of Automotive Repair. In addition, the Labor Enforcement Task Force will work closely with Insurance Commissioner Dave Jones and Attorney General Kamala Harris.

As noted by the California Department of Justice (DOJ), the Attorney General's Office "...has prosecuted cases involving: wage, tax, and insurance issues including the theft of wages, unpaid overtime, denial of breaks, and misclassification of employees as independent contractors; patterns of safety violations leading to fatal workplace injuries; workers' compensation insurance premium fraud; and the illegal avoidance of workers' compensation coverage for employees."

Clearly, the creation of the Labor Enforcement Task Force is designed to increase scrutiny over businesses who seek to avoid their obligations and to bring more cases to the Department of Justice and local district attorneys for prosecution. The underground economy is a multi-billion dollar problem, estimated to cost California $7 billion in annual lost tax revenues. Given California's $13 billion budget deficit, it is easy to see why enforcement efforts are ramping up. But lost tax revenues are only part of the costs generated by unscrupulous employers. Misclassifying employees as independent contractors or misreporting wages also drives up workers' compensation costs for insured employers. It should also come as no surprise that employers who are breaking the rules when it comes to wages, hours, and classification of employment are also more likely to pay for workplace injuries under the table, if at all.

California's employment laws are complex and the penalties for non-compliance significant. AB 469 and SB 459 will add to that complexity. But one thing is clear — the State of California intends to enforce these new laws very aggressively and employers who think they can cut corners in order to reduce their labor and insurance costs will be in for a long and costly legal battle.