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Owner Controlled Insurance Program Liability Claims Challenges, Part 4

An Owner Controlled Insurance Program general liability policy is, in most respects, similar to the industry standard general liability policy. An Owner Controlled Insurance Program claim is analyzed by taking the same systematic approach that is used with other insurance claims. Companies and insureds alike should resist the temptation to treat the Owner Controlled Insurance Program differently and/or disregard the policy language. Only in taking consistent approaches will the insurance company make sure that the most appropriate legal and business decisions are made.|

This is the fourth article in an 11-part series on Owner Controlled Insurance Programs. Preceding and subsequent articles in this series can be found here: Part 1, Part 2, Part 3, Part 5, Part 6, Part 7, Part 8, Part 9, Part 10, and Part 11. Owner Controlled Insurance Programs From The Perspective Of Liability Claims An Owner Controlled Insurance Program general liability policy is, in most respects, similar to the industry standard general liability policy. An Owner Controlled Insurance Program claim is analyzed by taking the same systematic approach that is used with other insurance claims. Companies and insureds alike should resist the temptation to treat the Owner Controlled Insurance Program differently and/or disregard the policy language. Only in taking consistent approaches will the insurance company make sure that the most appropriate legal and business decisions are made. From a legal perspective, the insurance company will be questioned on its policy interpretation and claims handling. The insurer's obligation to the insured to defend and indemnify is measured by the policy as issued. Coverage under the policy is not based on side agreements, or understandings between the sponsor, the broker, and the underwriters. If there are unintended claims being paid, the underwriters need to be alerted and the policy language changed. An insurance company can waive reliance on a restrictive policy and provide greater benefits than the contract provides. Waller v. Fire Insurance Exchange (1995) 11 Cal.4th 1. However, the company may not unilaterally narrow the coverage and provide less than that provided by the policy. The exception to this rule is, of course, if there is proof that the policy as issued failed to comply with the mutual intent of the parties, in which case the policy may be reformed. (See, e.g., Cal. Civ. Code Sec. 3399; Truck v. Wilshire Insurance (1970) 8 Cal.App.3d 553.) The following are some of the highlights of the commercial general liability form that are particularly applicable to construction claims involving Owner Controlled Insurance Programs. Separation of Insureds A general liability policy contains a condition, titled "Separation of Insureds.” That provision provides:
Except with respect to the limits of insurance, and any rights and duties specifically assigned in this coverage part to the first Named Insured, this insurance applies: a) As if each Named Insured were the only Named Insured; and b) Separately to each Insured against whom claim is made or "suit” is brought.
In the typical Owner Controlled Insurance Program, each contractor and subcontractor qualifies as a "named insured.” The insurance company must view each named insured separately, as if that contract were the only contract to apply. Each named insured under the policy is given equal coverage. The carrier's duty to provide a defense and indemnity exists separate and distinct from every other contractor under the policy. Each named insured has an obligation to tender the loss to the insurer and must cooperate with the insurer in the investigation of the claim or suit, and in its own defense.

Harry Griffith

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Harry Griffith

The late Harry Griffith had over 25 years of experience in insurance coverage, trial and appellate work. He was a partner of Branson, Brinkop, Griffith & Strong, LLP, and supervised the coverage group within the firm, which consisted of eight coverage attorneys. Mr. Griffith published numerous opinions in the area of insurance coverage. Mr. Griffith was a named California Super Lawyer both for 2009 and 2010.

Healthcare Reform and the Courts, Part 1

The Patient Protection and Affordable Care Act is over 2,700 pages long and affects virtually every aspect of healthcare delivery and its related financing (the insurance component) including Medicare, Medicaid and private insurers.|

The decisions to date, the ones to come and their meaning to agents and our industry This is the first article in a 3-part series on Healthcare Reform and the Courts. Subsequent articles in this series can be found here: Part 2 and Part 3. A lot of agents have been wondering what the outcome will be with the legal challenges against the Patient Protection and Affordable Care Act. I will attempt to articulate what I think might happen. My discussion will be limited to certain aspects of the bill — primarily with regard to the individual mandate and the question over severability. So I will be excluding a fair amount. Remember, the Patient Protection and Affordable Care Act is over 2,700 pages long and affects virtually every aspect of healthcare delivery and its related financing (the insurance component) including Medicare, Medicaid and private insurers. It even deals with student loans. Also, my discussion will be limited primarily to one challenge to the law — the one that involved dozens of states suing the federal government in a Florida court. There are a number of other legal challenges against the federal government that might lead another observer to draw a different conclusion on how these challenges will ultimately pan out down the road. But given the clout and importance of the states, many observers including myself have been particularly interested in that one. Before I address what I think might happen with the Supreme Court, I think it is important to understand the status of the States' lawsuit and how they got here. So I will be first explaining why the states sued the federal government, how the court ruled and the subsequent action by a district appeals court. The Reason The States Sued The Feds The primary reason over two dozen states and other parties (the plaintiffs) sued the federal government is because of the individual mandate. They simply do not think that the federal government has the authority to mandate citizens to buy health insurance. The states believe that the decision about whether or not to compel someone to buy insurance is theirs to make and not the federal government's. By the way, this is why folks aren't challenging the likes of Massachusetts which has a similar mandate in place. Massachusetts has the authority as a state to do this. In more technical terms, the states believe that the federal government via the Patient Protection and Affordable Care Act is stretching what's known as the "Commerce Clause" beyond what it was designed to do and is an overreach of power by the federal government. It all harkens back to our history and the compromises that came together to form our nation. The federal government has powers but so do the states. The original 13 individual states wanted to retain a certain amount of autonomy when they formed the union. So there are powers unique to the federal government and there are powers unique to the states. The Commerce Clause was created about a hundred years ago and has evolved over time. It was created to address the question of which governmental entity has the power of regulating business when business is transacted across state lines. For example, let's say that California has the authority to regulate the California Widget Makers. Colorado has the authority to regulate the Colorado Widget Makers, too. But the way they regulate their Widget Makers is different than how California regulates its Widget Makers. The regulations are different and were promulgated out of the customs and needs of the unique populations. Let's now assume that Joe's California based widget company has decided to expand its customer base beyond California and into Colorado. Which regulations apply to Joe? Colorado's or California's? The Commerce Clause exists, in part, because it answers this question and creates consistency for the likes of Joe because he only has to play by one set of rules and not two. Back to the Patient Protection and Affordable Care Act. So the law mandates that people will have to buy individual coverage starting in 2014. The states are saying "no, whether or not they should be forced to buy coverage is our call, not yours." The feds are saying it's their call because a persons decision about whether to obtain or go without coverage transcends state lines and affects everyone throughout the country. The states disagree. But how they're saying no via their lawsuit in Florida is interesting because their argument is based on this: The Commerce Clause only applies to those people who are engaged in commerce. Those who choose not to buy a product are therefore not involved in commerce and the mandate, therefore, should not apply to them. They say the feds cannot force people out of inactivity into activity. The feds counter by saying that because of regulations that compel hospitals to care for people regardless of whether they have coverage or not, that while someone may appear to be inactive, they're really not because they'll eventually need care, they will get it and the rest of us will end up footing the bill via cost shifting (keep in mind that about 20% of our commercial premiums are a direct result of doctors and hospitals charging carriers more to make up for the lack of payments they're getting from the feds and the uncompensated care they're giving to folks who don't have any coverage). In their lawsuit, the states also asked that if the court agreed with them about the individual mandate, that the whole law should be thrown out and ruled unconstitutional. The basis of their argument is that there is no severability clause anywhere in the 2,700 plus pages of the law. A severability clause basically enables the bulk of the law to survive even if a portion of it is thrown out. These clauses are typical in business contracts (such as agent agreements). But there isn't one in the Patient Protection and Affordable Care Act and the states said that it should be thrown out if the mandate goes down.

John Nelson

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John Nelson

John Nelson has long been a champion of legislative and educational efforts in the health insurance industry. He is a Chief Executive Officer of Warner Pacific Insurance Services, one of the nation’s largest health insurance general agencies serving over 35,000 small employers with over $1.5 billion of inforce premium.

Owner Controlled Insurance Program Liability Claims Challenges, Part 3

There is a distinction in the policies, discussed in more detail in this article, between a "named insured” and an "insured.” The rights of the contractor and the application of the policy may be very different if each contractor is a "named insured” or an "insured.”|

This is the third article in an 11-part series on Owner Controlled Insurance Programs. Preceding and subsequent articles in this series can be found here: Part 1, Part 2, Part 4, Part 5, Part 6, Part 7, Part 8, Part 9, Part 10, and Part 11. Liability Owner Controlled Insurance Program From The Underwriting Perspective (continued) Who Qualifies as Named Insureds? Deciding who qualifies as an insured has a great impact on what risks are ultimately assumed. Does the policy apply to damage caused by contractors at the project; does it include material suppliers; does the program cover design liability, including reworking portions of the project that do not meet the intended strength and stability requirements? Deciding who is not an insured is also important. Any party that is not a part of the Owner Controlled Insurance Program is a source of recovery or offset to a loss covered by the Owner Controlled Insurance Program. There is a distinction in the policies, discussed in more detail below, between a "named insured” and an "insured.” The rights of the contractor and the application of the policy may be very different if each contractor is a "named insured” or an "insured.” Liability Insurance Protects the Contractor, Not the Owner Presenting a Claim The purchaser of the Owner Controlled Insurance Program is the owner. However, the "insured” under a wrap-up policy that is entitled to defense and indemnity is the contractor. There is a natural tension between the owner who wishes to purchase complete protection for himself and the contractors, who are entitled to that protection. Under a liability policy, the carrier defends the insured (each contractor) against claims by others (i.e., the owner) for bodily injury or property damage. Thus, in providing liability coverage, the owner is assuring that the contractor can defend himself and that he has the financial ability to pay the claims. Since the policy covers the contractors, who are entitled to be "defended” against covered claims, the investigation must be conducted on behalf of the "insured,” and all privileges maintained. Accordingly, a liability investigation would be conducted on the part of the contractor, not the owner; absent an agreement to the contrary, the owner is not entitled to any reports on the investigation. In some cases, there is a claim for damage to a portion of the building under construction. In that case, the owner will want that damage repaired and will point to the Owner Controlled Insurance Program, as carrier for the contractors, to do so. It may ask the carrier for the status of the investigation, including the results of any testing that has occurred. However, no liability insurer wants to be accused of waiving its insured's privileges by sharing the reports of investigation with the plaintiff, who is in that case the owner of the project. Therefore, the carrier must be very careful to guard those privileges while promptly handling the claim and in making sure the owner of the project understands this relationship at the outset. Do the Owner Controlled Insurance Program Coverages Work Together? The broker and underwriter need to address the unintended consequences of insuring all parties on the project, while assuring that the endorsements to the liability policy are consistent with the underwriting intent. By way of example, the typical Owner Controlled Insurance Program may contain builders risk, workers compensation, and general liability/umbrella coverage. Here are a few examples of overlapping coverage:
  1. The workers compensation claim by an employee of a subcontractor and a "third party” liability claim by that same employee against the general contractor or another subcontractor (overlapping workers compensation and general liability);
  2. A builders risk claim by the owner for damage to the structure caused during construction and a liability claim against the subcontractor who caused the damage in the first instance (overlapping builders risk and general liability); and
  3. An alleged poor design causes a "loss of use” claim because an affected business is shut down after construction; for example, due to a redirected street. This claim may generate an eminent domain lawsuit (overlapping design E&O and general liability).
The decisions concerning the basic scope of coverage and the overlap with other policies, to the extent they can be anticipated by underwriters, need to be addressed in the policy contracts.

Harry Griffith

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Harry Griffith

The late Harry Griffith had over 25 years of experience in insurance coverage, trial and appellate work. He was a partner of Branson, Brinkop, Griffith & Strong, LLP, and supervised the coverage group within the firm, which consisted of eight coverage attorneys. Mr. Griffith published numerous opinions in the area of insurance coverage. Mr. Griffith was a named California Super Lawyer both for 2009 and 2010.

Designing And Funding Succession And Exit Plans For Successful Business Owners, Part 1

With the help of his trusted advisors, the business owner must understand that, only with proper planning today can the family maximize and protect the value of the years of hard work he/she has put into the company. Attention must be paid to planning for retirement, transitioning to a lesser role in the company, and the impact of his/her own mortality.|

Introduction Succession and exit planning for owners of successful businesses is crucial yet challenging. A business owner is typically focused on the bottom line and tied up in the operations of the company. Less immediate issues like ensuring that the business will thrive when he/she is not around, securing a comfortable retirement, providing for the family if something unexpected happens, treating children fairly, and leaving a legacy are critically important to address but receive little, if any, attention. With the help of his trusted advisors, the business owner must understand that, only with proper planning today can the family maximize and protect the value of the years of hard work he/she has put into the company. Attention must be paid to planning for retirement, transitioning to a lesser role in the company, and the impact of his/her own mortality. A comprehensive succession and exit plan considers the central role that the business plays in an owner's overall financial, retirement, and estate plan. When approached on a total needs basis, succession and exit planning present opportunities for the business owner and his advisors to address:
  1. Business continuation. Transitioning the business to a family member, key employee, or third party.
  2. Executive retention. Ensuring continued success of the business through retention of key employees using special benefits (Golden Handcuffs).
  3. Retirement. Securing a comfortable retirement (which is, perhaps, not primarily dependent on the business).
  4. Legacy issues. Preserving the business for family members or monetizing its value to provide financial security for surviving family members while treating heirs fairly.
This is the first of a four-part series addressing succession and exit planning. It is focused on five common business owner situations and the planning strategies to consider in each one. It can help the owner and his advisors determine which type of continuation arrangements to consider depending on the situation at hand. It also contemplates how cash value life insurance is used to strategically fund succession plans. Life insurance often plays a major role in the financial stability of businesses for the same basic reasons as that of an individual: protection against premature death or disability, or retirement, and the delivery of cash exactly when it's required. Situation #1: The business has multiple owners who want to eventually sell their interests to each other. A Buy-Sell Agreement is a legally binding contract which states that upon the occurrence of a "triggering event" (typically an owner's death, disability, retirement, or otherwise separation from the company), the owner's interest in the company must be sold back to the business or to any remaining owners at agreed upon terms. These agreements are crucial for small and closely-held companies, as in many cases, the void created by death or departure of a business owner creates a significant financial burden on the business as well as the remaining partners. When structured properly, a Buy-Sell Agreement allows for continuity of management, a source of income for the business owner and his family, and a clear direction for future ownership of the business. Depending on the type of Buy-Sell Agreement, the business itself or the individual partners acquire a policy on each owner/partner so that upon the occurrence of the triggering event, the funds needed to “buy out” the individual's ownership interest are readily available. To limit this potential risk, most Buy-Sell Agreements are funded with permanent life insurance policies that provide a death benefit in the event of demise as well as a cash value component upon disability, retirement, or departure of the owner. A Cross Purchase Buy-Sell is a specific type of continuation plan best suited for businesses that have only a few owners who want to eventually sell their interests to each other. A Cross-Purchase Buy-Sell Agreement states that, at the occurrence of a triggering event, the departing owners or the estates of the decedent business owners must sell their interests to the remaining owners at an agreed upon or determinable price. The agreement can apply to one or more of the owners; not all have to participate. The participating owners typically purchase cash value life insurance policies on each other in order to fund the future purchase obligation. Each participating owner pays the premiums and is the owner and beneficiary of their respective policies. At an owner's death or departure from the company, the other participating owners use the life insurance death benefit proceeds (at an owner's passing) or cash surrender value (in case of disability or retirement) to purchase the owner's interest. This allows the remaining owners to continue the business with minimal interruption and the departing owner or his estate to walk away with cash. From a tax perspective, it is interesting to remember that the purchasing owners may receive an increase in basis equal to the purchase price of their new interest, but the cash value of the life insurance policy owned on co-owners' lives may be included in the decedent business owner's estate.1 Since each owner buys a policy on the others, too many participating owners may result in an overwhelming number of life insurance policies. To address this problem, an Entity Purchase Buy-Sell (Stock Redemption) can be used for companies with multiple (three or more) owners who want to eventually sell their interests to each other. The Entity Purchase Buy-Sell requires the business itself, rather than the owners individually, to purchase the participating owners' interests when a triggering event occurs. The business is the purchaser and beneficiary of cash value life insurance policies on each of the participants' lives to be used to fund the future purchase obligation. Upon the triggering event, the business uses the life insurance death benefit proceeds or cash surrender value to purchase the business owner's interest in the company leaving the departing owner or his estate with cash at just the right moment.2 Situation #2: The business has multiple owners who want to eventually sell their interests to each other, but the intent may or may not be mutual, so flexibility is desired on how the purchase is ultimately handled. When flexibility is worth a bit more complication, a Wait-and-See Buy-Sell allows the participating business owners to postpone the choice between Cross-Purchase and Entity Purchase Buy-Sell until the death or departure of an owner. It requires the business and the participating owners to purchase the interests at an agreed upon or determinable price upon the occurrence of a triggering event. Usually the business is given the option of first right of refusal; the remaining participating owners can purchase any portion not taken by the business. The participating owners purchase and are the beneficiaries of cash value life insurance policies on the lives of the other participating owners. At the first owner's death or departure from the company, the business decides whether to exercise its purchase option. If it does, the participating business owners contribute funds from the life insurance death benefit proceeds or cash surrender value to the business. The business purchases all or a portion of the shares and the remaining participating owners receive an increase in tax basis equal to their share of the contributions.3 If the business waives its Entity Purchase option or only purchases a portion of the shares, then the Cross-Purchase option may be exercised by the participating business owners. Any outstanding shares must be purchased by the business and funded with contributions from the remaining business owners. Situation #3: The business has multiple owners, some of whom have intent to sell their interests to each other, but the intent is not mutual. A One-Way Buy-Sell is designed for the owner of a business who may want to sell to someone who does not have current ownership in the business or to one or more co-owners that have no reciprocal intent to sell. The One-Way Buy-Sell allows the business owner to have a willing buyer for the interests in the business, the sale of which may provide a source of income for the business owner's family. The buyer is usually a key executive, family member, or third-party to whom the business owner wants to transfer the business. It ensures that the owner can sell his interest to an appropriate buyer, because the agreement requires the buyer to purchase the participating owners' interests at an agreed upon or determinable price upon the occurrence of a triggering event. The buyer purchases a cash value life insurance policy on the business owner's life to fund the future purchase obligation. The buyer pays the premium and is the beneficiary of the policy. The business may provide the buyer (especially if it's a family member or key employee) with a taxable bonus in order to assist with the premium payments. At the owner's death or departure, the buyer uses the life insurance death benefit proceeds or cash surrender value to purchase the business owner's interest. An Entity Purchase Buy-Sell could also be worthwhile to consider in this situation, because it obligates the business, rather than the co-owners, to buy out the decedent or departing business owner's interest in the company. Please refer to description, above. Situation #4: The owner wants to sell business interests to a non-owner, such as a family member, key employee, or third party. Consider a One-Way Buy-Sell; please refer to description, above. Situation #5: The owner has no readily available successor or buyer of the business interests, and would consider having the business become employee-owned. An Employee Stock Ownership Plan (ESOP) is a special type of tax qualified profit-sharing plan that invests primarily in employer securities. If an S or C-Corporation owner does not have an heir, co-owner, or outside buyer interested in taking over the business, or wants the business to end up being employee-owned, an ESOP can be a way to create a source of funds to buy-out the owner's interest in the company. Not only does the Employee Stock Ownership Plan create a buyer for the owner's stock, but a C-Corporation business owner can use the sale proceeds to purchase qualified replacement property and defer taxation on the sale of the stock to the Employee Stock Ownership Plan. This allows the owner to sell all or a part of the business to the Employee Stock Ownership Plan without immediate taxation and to use the proceeds to diversify assets through the purchase of qualified securities. After a company feasibility study is conducted and approved for an Employee Stock Ownership Plan, the company establishes and makes tax-deductible contributions to a trust. All full-time employees with a year or more of service are typically included. The company contributes new shares of its own stock or cash to buy the existing shares of stock from an owner who desires to sell. In today's low interest rate environment, it may make sense for the Employee Stock Ownership Plan to borrow the money to buy new or existing shares, with the company making cash contributions to the Employee Stock Ownership Plan to repay the loan. Once the stock is in the Employee Stock Ownership Plan, it is allocated to the accounts for the individual employees on a non-discriminatory (qualified) basis and it vests over time. When employees leave the company, they receive the vested Employee Stock Ownership Plan shares, which the company is typically required to buy back at an appraised fair market value. Cash value life insurance owned by the company is oftentimes used to fund the company's repurchase obligation. Policy cash values can accumulate tax-deferred and can potentially be accessed income tax-free for annual stock repurchases. In addition, any death benefit proceeds paid may be received by the company income tax-free, and can create an immediate source of funds for stock repurchase in the event of an untimely death of a major participant or shareholder. Conclusion I hope you found this article intriguing. Part 2 of this four-part series will address executive retention as a way ensure the continued success of the business through attracting, rewarding and retaining key employees with special benefits. 1 Neither Grant, Hinkle & Jacobs nor Insurance Thought Leadership is a tax or law firm and this is not meant to be relied upon as tax advice or to avoid IRS penalties; please consult your tax and/or legal professional before embarking on any business succession plan. 2The death benefit proceeds, although typically income tax-free to beneficiaries under IRC §101(a)(1), are taxable to the employer unless it qualifies for an exception under IRC §101(j). 3 See 1, above. 4 See 2, above.

Scott Hinkle

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Scott Hinkle

Scott Hinkle is a Shareholder of Grant, Hinkle & Jacobs, Inc., located in Solana Beach, California. Mr. Hinkle has over fifteen years of experience in the financial services arena. He specializes in the development and implementation of advanced business succession and estate planning strategies for business owners and high net worth individuals.

Shouldn't Your Insurance Coverage Become More Than An Expense?

Most businesses buy their insurance coverage and while it may seem expensive they are content knowing that unforeseen circumstances driven by an unforeseeable event won't financially devastate their company. What if there was a way to shift this traditional model? I think there are a great many of us who have had the thought that if my premiums aren't used to pay losses for my business why shouldn't I get some of that money back? After all, why should the insurance company make a windfall profit because I do a great job of risk management and preventing losses before they happen? The purpose of this article is to tell you that there is a way to recoup part of your premiums, while still getting competitive premiums. Insurance is a financial transaction as well as a way to purchase protection for your business. Most of us are familiar with the basics of paying premiums, checking to be sure we have adequate limits of insurance and can tolerate the cost of a claim under our selected deductible. At the same time, we aren't nearly as familiar with the way our premiums are used by the policy issuing Insurance Carrier. Insurance Carriers use a pooling system to provide protection to policy holders and at the same time maintain adequate financial reserves sufficient to pay claims individually or in the event of a catastrophe. By pooling premiums Insurance Carriers need to write a mix of accounts, both low hazard as well as higher hazard. In addition, the pool needs a balance of profitable and unprofitable accounts, which creates a subsidy for the unprofitable accounts, but enough premiums in the aggregate to pay all claims. The ultimate goal of the Insurance Carrier is to break even or maybe make a small profit when considering a traditional balance sheet review of their business revenues versus expenses. Unlike many other businesses, the Insurance carrier has a second and more rewarding way to generate profits from the insurance transaction. This additional source of profits is carried on their balance sheets as both assets and restricted assets in the liability column. A simple example of how this works is easily seen in life insurance. The Insurance Carrier can issue a policy with a 1 million dollar benefit and pay that amount the next day in worst case situations. Obviously, the carrier didn't collect the full premium nor will they on that policy. The assets held on the balance sheet as restricted assets are used to pay this loss. The same dynamics work with the same characteristics in business insurance. The principal lines of business coverage are workers' compensation, auto liability, general liability and health insurance. The existence of restricted assets on the insurance carrier's balance sheet is also the source of investment income. These assets in commercial insurance are primarily reserve dollars set aside after the occurrence of a claim that are not yet paid. In addition, the carriers set aside reserves allocated for claims, but not yet allocated to a specific claim. Over a period of years these restricted assets can grow to be several times the annual premium written by the Insurance Carrier. Restricted Assets are invested in secure non-equity investments such as bonds until needed to make claims payments. In many instances, the insurance carrier can generate investment income in the range of 5-50% of annual premium income. This allows insurance carriers to cover unexpected losses and have capital available for growth of their policy count with new business. Business owners need to know that there are programs and insurance coverage methods that will allow them to take advantage of these income streams for their own benefit. Insurance carriers, while accustomed to taking risk when writing insurance policies, are very comfortable giving up the income potential in return for policyholders taking a portion of that risk. Working for only fee income allows insurance carriers to increase income while limiting risk. At the same time, moving to a program with an alternative structure is a good option for a business. It allows a business to reduce insurance cost through recapture of premiums as dividends. It is a "win-win" situation for everybody and allows a business to build an asset while continuing to protect their business against catastrophic losses. A careful feasibility study can be completed that will quantify the risk/reward equation for a business owner. Completion of the feasibility study will allow a business to make an informed decision as to whether taking a defined risk is adequately rewarded with reduced cost and dividends, over time.   In addition to building assets on your balance sheet with an alternative approach to insuring risk, you can also gain better oversight of your insurance costs and claims management. Every company of average size should consider having a feasibility study completed. If you are interested in having such a study completed for your company, feel free to contact me.

Chuck Coppage

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Chuck Coppage

Chuck Coppage manages the Alternative Markets Division for <a href="http://www.iwins.com">InterWest Insurance Services</a> where he assists in identifying clients who would benefit from insurance solutions involving risk transfer as part of their overall financial management strategy.

Owner Controlled Insurance Program Liability Claims Challenges, Part 2

In the context of underwriting risks associated with an Owner Controlled Insurance Program, there are four critical issues: (1) marketing, (2) determining who qualifies as named insureds under the program, (3) remembering that the policy protects the contractor rather than the owner for many claims, and (4) how the liability policy interacts with other Owner Controlled Insurance Program coverages.|

This is the second article in an 11-part series on Owner Controlled Insurance Programs. Preceding and subsequent articles in this series can be found here: Part 1, Part 3, Part 4, Part 5, Part 6, Part 7, Part 8, Part 9, Part 10, and Part 11. Liability Owner Controlled Insurance Program From The Underwriting Perspective In the context of underwriting risks associated with an Owner Controlled Insurance Program, there are four critical issues: (1) marketing, (2) determining who qualifies as named insureds under the program, (3) remembering that the policy protects the contractor rather than the owner for many claims, and (4) how the liability policy interacts with other Owner Controlled Insurance Program coverages. Marketing The starting point for any insurance relationship between a sophisticated carrier and a project owner is through brokers in an arms-length transaction. The insured (or its broker) presents a risk to the insurance company and requests that coverage be quoted. The insurance company decides whether it is interested in that risk and the amount that it will charge in its premium. In marketing the Owner Controlled Insurance Program, however, the underwriter may become actively involved in convincing the client that the insurance company is the best to underwrite such a large and sophisticated risk. As discussed below, the owner is often the party seeking damages from an enrolled contractor for damage caused by the latter's work. The owner is thereby a potential claimant as well as the named insured. Statements concerning coverage therefore need to be measured carefully. The underwriter or marketing representative is an employee or an authorized representative of the insurance company. He or she is an agent of the insurance company binding the principal to his statements. (Marsh & McLennan of California, Inc. vs. City of Los Angeles (1976) 62 Cal.App.3d 108.) A statement made by an agent is binding upon his or her principal, as if the principal itself had made the statement. (California Civil Code §2298, et seq.; House of Grain vs. Finerman & Sons (1953) 116 Cal.App.2d 485.) Statements made in the marketing of an Owner Controlled Insurance Program have the potential to create confusion and resulting tension. Some of the more common areas of misunderstanding we have encountered include the following: Who is responsible for explaining the Owner Controlled Insurance Program coverage, deductibles, etc., to the prospective insureds? As to the sponsor of the program, the owner, the broker will have the relationship and ordinarily represent their interest in the transaction. However, what about the contractors? We have experienced claims where contractors claim that simply setting foot on the Owner Controlled Insurance Program insured project entitles them to coverage. Exactly what is the process to become enrolled in the insurance program, and when does coverage become effective? In many cases it is the issuance of a workers compensation policy. However, sometimes there is a lapse in the paperwork, and a job site accident occurs before the enrollment is completed. There are ways that Owner Controlled Insurance Program administrators have created to document enrollment. As a general matter, problem areas exist whenever there is an issue beyond the terms of the insurance policy as issued. The owner, broker, and underwriter need to be aware that the ultimate "insureds” under the program are not a part of the marketing and program design. Communications that do not clearly spell out the rights and responsibilities of all the program participants can lead to confusion or, worse, to coverage gaps and uninsured losses which in turn lead to litigation for all of the parties, including the broker, the sponsor, and the carrier.

Harry Griffith

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Harry Griffith

The late Harry Griffith had over 25 years of experience in insurance coverage, trial and appellate work. He was a partner of Branson, Brinkop, Griffith & Strong, LLP, and supervised the coverage group within the firm, which consisted of eight coverage attorneys. Mr. Griffith published numerous opinions in the area of insurance coverage. Mr. Griffith was a named California Super Lawyer both for 2009 and 2010.

Owner Controlled Insurance Program Liability Claims Challenges, Part 1

Owner Controlled Insurance Programs, or OCIPs, are the logical consequence of insurance underwriters and project owners trying to control costs and speed the resolution of construction-related insurance claims (including builders risk, workers compensation, and liability claims).|

Owner Controlled Insurance Programs (OCIPs) present unique challenges in settling claims. Critical aspects of the underwriting process directly affect how coverage will apply to covered contractors and subcontractors. This series examines critical policy provisions that will impact the claims process and offers strategies for smoothing the claim resolution process. A variety of challenging Owner Controlled Insurance Program scenarios will be used to guide brokers, claim professionals, and underwriters in the settlement of claims. This is the first article in an 11-part series on Owner Controlled Insurance Programs. Subsequent articles in this series can be found here: Part 2, Part 3, Part 4, Part 5, Part 6, Part 7, Part 8, Part 9, Part 10, and Part 11. Owner Controlled Insurance Programs, or OCIPs, are the logical consequence of insurance underwriters and project owners trying to control costs and speed the resolution of construction-related insurance claims (including builders risk, workers compensation, and liability claims). Indeed, it would be difficult to find an experienced claim manager who has not slapped his head (or someone else's) in exasperation over the amount of time and money that it takes to resolve a construction bodily injury or construction defect claim. For owners, there is a built-in incentive to find a better way to more efficiently manage the claims that inevitably occur on a large construction project. The amount of money spent on insurance premiums is a significant portion of the cost of construction. Moreover, the amount of money spent, not to mention the time commitment, is substantial because of the number of people and interests to protect. From an insurance company's perspective, an Owner Controlled Insurance Program premium is significant. Further, the ability to receive the premium for all parties on the job site while simultaneously eliminating the allocated expense makes Owner Controlled Insurance Programs an attractive underwriting risk. An Owner Controlled Insurance Program, or wrap-up policy, may include all or part of the insurance needed on a project, including builders risk, workers compensation, and liability insurance. Experienced professionals in each line of insurance each have their own unique perspective on the process and the effect of insuring all parties on the project. Here, we concentrate on liability claims and policies. As viewed from the perspective of the people who are attempting to resolve liability claims under an Owner Controlled Insurance Program, the industry is maturing. Underwriters, owners, contractors, construction managers, and brokers are becoming more sophisticated with regard to underwriting and claims presentation. Specifically, in our practice we have noted the following trends in the handling of such claims "in the trenches”:
  1. Owners, as the sponsor of the program, assert control over claims under the insurance program, which can create tension with the insurance company and the contractors on the project.
  2. Brokers are increasingly sophisticated and acting as coverage advisors for the insureds to maximize recovery under the Owner Controlled Insurance Program policies.
  3. There are often differences between the insurance policy issued by the company and the coverage as represented to enrolled subcontractors.
  4. There is an increasing tendency for owners, brokers, and contractors to treat the Owner Controlled Insurance Program as a single program, a concept that is sometimes at odds with the concept of liability insurance.
  5. Inconsistencies between liability policy language, Owner Controlled Insurance Program manuals provided to contractors, and the actual subcontracts blur the definition of what is the governing Owner Controlled Insurance Program contract. 
  6. Lack of complete enrollment by all subcontractors on the project or phase complicates the claims process and impacts the cost of the program.
  7. The timing of the inception of a "rolling wrap” can create hybrid liability claims that are partial wrap and partial non-wrap for purposes of a construction defect claim.
  8. Lack of sophistication by subcontractors and their counsel creates tension in the claims process.
The insured contractors must bear in mind what an Owner Controlled Insurance Program is and what it is not. An Owner Controlled Insurance Program is an insurance policy, intended to provide all of the contractors on a job site with necessary coverage. From the perspective of the claims department, the Owner Controlled Insurance Program is not a new kind of insurance. Therefore, this series concentrates on applying existing rules in the context of an all-encompassing policy.

Harry Griffith

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Harry Griffith

The late Harry Griffith had over 25 years of experience in insurance coverage, trial and appellate work. He was a partner of Branson, Brinkop, Griffith & Strong, LLP, and supervised the coverage group within the firm, which consisted of eight coverage attorneys. Mr. Griffith published numerous opinions in the area of insurance coverage. Mr. Griffith was a named California Super Lawyer both for 2009 and 2010.

Translating Safety Management Compliance

Requiring safety management programs is not an either/or dilemma of compliance or safety, and effective safety management does reduce injuries and associated costs.|

OSHA is currently in the process of developing an Injury and Illness Prevention Program (I2P2) management standard intended to be extended to all fifty states. As California is one of only fourteen states to currently have a safety management program requirement in place (Title 8, Section 3203), significant attention has been paid to California's program, the perceived costs and benefits of making safety program management mandatory, and the lessons learned along the way. Besides cost-benefit, another issue that is often raised is whether mandated compliance, through threat of citation and/or poorly conceived requirements, actually diminishes levels of safety. Dan Petersen, a well-regarded safety professional wrote, "Most organizations I am familiar with have come to believe that, when it comes to safety and health, they have two distinct concerns, which seem to have little to do with each other: preventing accidents and regulatory compliance." Based on my experience, both as a safety director and a risk management consultant, I am of the opinion that requiring safety management programs is not an either/or dilemma of compliance or safety, and that effective safety management does reduce injuries and associated costs. The fundamental issue has been one of translation — which is to say that the companies that struggle with safety management (as opposed to those that reject the requirements out of hand) are simply unable to translate safety requirements into manageable and sustainable day-to-day policies and procedures, and they ultimately give up. This is an issue Cal-OSHA has addressed but not overcome. On July 15, 2011, John Howard, Cal-OSHA Chief, gave a presentation entitled Injury and Illness Prevention Program: The California Experience, in Washington D.C. to the Small Business Roundtable. He summarized the pitfalls encountered rolling out the requirement and Cal-OSHA's efforts at supporting implementation (translation). I have not found the transcript of the presentation, but the supporting PowerPoint provides a good overview of the specific topics he touched on. Early criticisms of SB 198 were that it was “overly broad and burdensome” and that many employers lacked the expertise to develop (translate) requirements into an effective program. Within three years of enactment, the legislature had modified some requirements and Cal-OSHA had produced several model programs (translations) that could be used by a variety of businesses. The programs were followed with the introduction of compliance checklists (translations) that were intended to guide users to the regulatory top of the mountain. However, and as Howard notes, the downside of these support tools was that they often resulted in “paper compliance” that did nothing to enhance actual safety management. What he did not note is that they also did not provide effective compliance translation. Currently Cal-OSHA Consultation provides on-site assistance and has developed a variety of eTools, including an online IIPP “wizard” to support companies with the development and implementation of their Injury and Illness Prevention Program. Unfortunately, many companies are leery of requesting on-site help, and it is not at all clear whether the web-enabled support helps companies struggling with the core issue of day-to-day management of their safety program. I do not believe that it does, and would offer the following suggestions to those who have struggled with IIPP implementation:
  1. Cal-OSHA starts with the written program. You should not (but do keep your old program intact while you build the new one).
  2. Do start with the supervisors who oversee the productive part of whatever you do.
  3. Introduce a weekly or bi-monthly form that documents day-to-day behavior reinforcement. A month later add a weekly safety assessment/fix to the mix, the next month add weekly group meetings, all on the same form. Provide training and define expectations as each new component is added. To effectively support these required activities create forms that must be filled out completely in a given time frame. The frequency of completing a form can be adjusted depending on risks inherent in a work area, but the form should always be designed to be filled out completely in any given cycle. Learn about performance support and job aids, and develop multi-level performance support forms to guide and document your program. Job Aids Basics – Joe Willmore Job Aids & Performance Support – Allison Rossett & Lisa Schafer A simple checklist-style form that includes only basic details can guide and capture essential activities — including behavior reinforcement, safety assessment/fix, and tailgate training. Keep each form to a single page. Also, consider desktop/smart phone/tablet applications as alternatives to paper forms.
  4. This approach is completely scalable. Delegate to all departments and levels — design interlocking performance support forms that culminate in a monthly Safety Activity Report submitted by the safety manager to the owner/CEO. If supervisors are required to engage in behavior support conversations, then the department manager's monthly form should include confirmation that the supervisors are fulfilling the required behavioral support activities and an assessment of the quality of their work, and so on.
  5. Look to the Injury and Illness Prevention Program requirements for those activities that should at some point be integrated into the Safety Performance Support Forms — likely activities include either doing, assessing, or assuring the doing of: behavior enforcement and reinforcement; training (new employee, new hazard, tailgate, etc.); inspection; day-to-day hazard identification and correction; accident investigation; employee suggestions, and so on.
  6. Incorporate other compliance areas (HazCom, Heat Illness Prevention, Lockout/Tagout) into your performance support forms as training, inspection, and behavior reinforcement activities.
  7. Six months after you start this process consider rewriting your IIPP to reflect what you are actually doing.
Download a sample form that will help you begin.

Russell Lee

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Russell Lee

Russell Lee is not a risk management consultant; he is an organizational change consultant with extensive experience in risk management and loss prevention. He provides companies with the tools and guidance to develop the internal processes and linkages to effectively and sustainably manage risk and reduce losses.

Employers Must Prove A Lawful Reason For Denying Reinstatement After FMLA Leave

On March 17, 2011, California's Ninth Circuit Court of Appeals ruled that the employer has the burden of proving it had a legitimate reason for not reinstating an employee to her former position following FMLA leave. The employee is not required to prove that her employer lacked a reasonable basis for its refusal.|

The Family & Medical Leave Act (FMLA) and California Family Rights Act (CFRA) allow employees to take up to 12 weeks of job protected leave for a qualifying reason and to return to the same or an equivalent position at the end of the leave. Interference with Family & Medical Leave Act rights can land you in a lawsuit that may be tough to defend. On March 17, 2011, California's Ninth Circuit Court of Appeals ruled that the employer has the burden of proving it had a legitimate reason for not reinstating an employee to her former position following FMLA leave. The employee is not required to prove that her employer lacked a reasonable basis for its refusal. Ms. Sanders worked as a utility billing clerk for the City of Newport, Oregon for 10 years. After the City started to use a different type of billing paper, she began to suffer health problems. A specialist diagnosed multiple-chemical sensitivity that was triggered by handling the new billing paper. Sanders requested and received FMLA leave. The City properly notified her that she needed to preent a fitness-for-duty certificate from her doctor "prior to being restored to employment." Sander's doctor cleared her to return with the sole restriction to avoid the billing paper, which the City had already stopped using during her leave. Yet, the City fired her, alleging that "it could not guarantee her workplace would be safe for her due to her chemical sensitivity." She sued alleging interference with her Family & Medical Leave Act right to reinstatement. The case went to trial and the jury was instructed that Sanders must prove that "she was denied reinstatement or discharged from employment without reasonable cause after she took FMLA leave." The jury sided with the City, and Sanders appealed, arguing that the jury instructions were wrong. The appellate court agreed, emphasizing that to prove a Family & Medical Leave Act interference claim, the "employee must only establish that (a) her employer was governed by the Family & Medical Leave Act, (b) she met the eligibility requirements, (c) she provided sufficient notice of intent to take leave, and (d) the employer denied her Family & Medical Leave Act benefits to which she was entitled. Evidence that an employer failed to reinstate her "to her original (or an equivalent) position establishes a prima facie denial of the employee's rights under the Family & Medical Leave Act." In California, the right to reinstatement is even stronger, as the California Family Rights Act mandates "the employer shall guarantee that the employee is reinstated to the same or comparable position unless it is legally excused from doing so." California Family Rights Act leave "shall not be deemed to be granted unless the employer provides the (written) guarantee." (Govt. Code §12945.2(a)). A California Family Rights Act "comparable position" means "virtually identical to the employee's original position in pay, benefits, working conditions, privileges, and status." This includes responsibilities and authority. Under the California Family Rights Act, you can only require a "fitness for duty statement" to return to work if you have a "uniformly applied practice of requiring such a release from other employees as a condition of returning to work following illness, injury, or disability." The right of reinstament is not aboslute. Under the Family & Medical Leave Acts and California Family Rights Act regulations, if an employee is unable to perform an essential job function because of a physical or mental condition, the Family & Medical Leave Act does not mandate a return to work. But remember: an employee who takes leave for a "serious health condition" is also likely to meet the definition of "disability" under California's Fair Employment & Housing Act (FEHA) and the expanded Federal Law. Before refusing reinstatement you must always conduct an interactive process to determine whether the employee can return to work with a reasonable accomodation. And finally, if the employee has exhausted all available FMLA/CFRA leave and job modifications are not reasonable, you must consider whether a leave of absence for a finite and reasonable period of time — as a resonable accommodation — would serve to allow the employee to recover sufficiently to return to work, with or without work restrictions. Authors Patricia S. Eyres collaborated with Stu Baron in writing this article. Stu is both President of Workers’ Compensation Claims Control and a principal in the law firm of Stuart Baron & Associates. This article is an excerpt from the May 2011 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.

Patricia Eyres

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Patricia Eyres

Patricia S. Eyres ("Patti") calls herself a "recovering litigator," who knows first-hand the value of paying attention to prevention. After spending 18 years defending companies in the courtroom, she resolved to help business leaders recognize potential legal landmines before they explode into lawsuits.

Attacking Non-Medical Provider Network Treatment Billing and Liens

Where unauthorized treatment is obtained outside a validly established and properly noticed Medical Provider Network, reports from the non-Medical Provider Network doctors are inadmissible. Defendant is not liable for the cost of the non-Medical Provider Network reports.|

Elayne Valdez v. Warehouse Demo Services; Zurich North America, adjusted by ESIS, (2011 Cal. Wrk. Comp. LEXIS 55), April 20, 2011 Summary After treating in an established Medical Provider Network, applicant's counsel designated a non-Medical Provider Network treating physician who began to actively treat the applicant. After an issue over temporary disability benefits surfaced, applicant's attorney demanded benefits be provided based on the non-Medical Provider network reporting. At trial, the Workers' Compensation Judge deferred the non-Medical Provider Network treatment issue listed by the defendants on the Minutes of Hearing, indicating it was not related to temporary total disability. After the defense lost the temporary disability issue, they filed for Reconsideration, contending the non-Medical Provider Network reports were inadmissible, and, therefore, there was no substantial evidence to support the temporary disability award. Reconsideration was granted.1 Issue #1 If an applicant has improperly obtained medical treatment outside of the employer's Medical Provider Network, are the reports of the non-Medical Provider Network treating physician admissible in evidence? Holding: No Issue #2 Is the inadmissibility of the non-Medical Provider Network reports applicable to the determination of both treatment and benefits? Holding: Yes (though this was a split decision) Where unauthorized treatment is obtained outside a validly established and properly noticed Medical Provider Network, reports from the non-Medical Provider Network doctors are inadmissible. Defendant is not liable for the cost of the non-Medical Provider Network reports. The Workers' Compensation Appeals Board has ruled non-Medical Provider Network physicians do not qualify as "treating physicians" pursuant to Labor Code Section 4600, nor as medical-legal evaluators under Labor Code Section 4061/4062. Pursuant to Labor Code Section 4616.6, such reports are not admissible on medical treatment issues. Since the reports are neither treating physician reports nor validly obtained medical legal reports, they are not admissible. "...Therefore, the non-Medical Provider Network physician is not authorized to be a Primary Treating Physician, and accordingly, is not authorized to report or render an opinion on 'medical issues necessary to determine the employee's eligibility for compensation' under section Section 4061.5 and AD Rule Section 9785(d) [Cal. Code Regs. Tit. 8, §9785(d)]. Moreover, for disputes involving temporary and/or permanent disability, neither an employee nor an employer is allowed to unilaterally seek a medical opinion to resolve the dispute, but must proceed under Section 4061 and Section 4062[1]. Accordingly, the non-Medical Provider Network reports are not admissible to determine an applicant's eligibility for compensation, e.g., temporary disability indemnity." What Will Applicant Attorneys Argue? The start of an applicant's argument over non-Medical Provider Network care will undoubtedly begin with Labor Code Section 4600. Labor Code Section 4600 states: "An employer is obligated to provide all medical treatment 'that is reasonably required to cure or relieve the injured worker from the effects of his or her injury'" [Labor Code Section 4600(a)]. Labor Code Section 4600(a) further provides: "In the case of his or her neglect or refusal to reasonably do so, the employer is liable for the reasonable expense incurred by or on behalf of the employee in providing treatment." Applicant's attorney will undoubtedly rely on the Knight decision, 71 Cal. Comp. Cases 1423, which states defendants' failure to provide the required notices to an employee of rights under the Medical Provider Network can render the employer liable for reasonable medical care. Note, these are also the two of the prime arguments used by lien claimants when demanding reimbursement for their liens! Despite these arguments, the Valdez court has opined that remedies are already available to the applicant, should there be a dispute over reasonable or necessary medical care. There is no need to self-procure or go outside the Medical Provider Network! Pursuant to Section 4616.3(c), where an injured worker "disputes either the diagnosis or treatment prescribed by the treating physician," he or she "may seek the opinion of another physician in the [Medical Provider Network]," and of "a third physician in the [Medical Provider Network]," if the diagnosis or treatment of the second physician is disputed. The Board further noted even after these remedies had been exhausted, the employee could request an independent medical review of the treatment recommendations as a 4th-level of dispute resolution, via the panel Qualified Medical Evaluator or Agreed Medical Evaluator process. After the initial medical evaluation arranged by the employer within the Medical Provider Network pursuant to section Section 4616.3(a), "[t]he employer shall notify the employee of his or her right to be treated by a physician of his or her choice," including "the method by which the list of participating providers may be accessed by the employee." [Labor. Code Section 4616.3(b); Cal. Code Regs., Tit. 8, §9767.6(d).] In addition, AD Rule Section 9767.6(e) (Cal. Code Regs., tit. 8, Section 9767.6(e)) provides that "[a]t any point in time after the initial evaluation with a Medical Provider Network physician, the covered employee may select a physician of his or her choice from within the Medical Provider Network." What about obtaining a separate consultation with a private treating physician at the expense of the applicant? The Workers' Compensation Appeals Board did consider whether the employee's right to obtain an evaluation under Labor Code Section 46052 with his or her own consulting physician rendered the reports admissible. That idea was rejected. Relying on the previously stated reasoning regarding admissibility of reports under Labor Code Sections 4616.6 and 4061/4062, the majority ruled use of Labor Code Section 4605 does not generate reports which meet the criterion of admissibility. The Workers' Compensation Appeals Board also opined that such reports were not only inadmissible but not the financial obligation of the defendant. Strategies for Addressing Reports, Liens, Payments of Indemnity Benefits If we assert that treatment is not valid, we need to provide evidence of submission of MPN notices and posting requirements, which is why it is imperative employers have employees sign documentation acknowledging receipt of the Medical Provider Network documentation.3 Employers should keep track of Medical Provider Network documentation in personnel files, and document how the information was distributed to each employee. Declarations regarding service of documents and proper posting of notices can be obtained from human resource contacts and safety supervisors. Administrative Director Regulation Section 10114.2 allows such declarations to be admitted into evidence where properly served before trial.4 The employee's deposition also provides an opportunity to document Medical Provider Network implementation. It will often be an excellent strategy to confront the employee with a picture of the employer's notices, which he might well remember once shown, as well as any copies of notices. Regardless of the resulting testimony, the defense may still be able to rebut assertions that notices were not properly provided. How many of us have walked into a break room or common area and not seen a posted notice? Hardly ever! In the event temporary total disability or temporary partial disability is demanded based on non-Medical Provider Network care, first establish that the Medical Provider Network is proper. If you are certain the Medical Provider Network is properly established and the information properly disseminated, issue a benefits denial notice arguing the non-Medical Provider Network care was improperly obtained, inadmissible, and, therefore, cannot support the claim for benefits. While you wait for the inevitable Declaration of Readiness to be filed, collect the information as discussed above. Liens If the court in Valdez determined that the defendant is not financially liable for treatment procured outside the Medical Provider Network or under Labor Code Section 4605, why should we pay for liens? Why should we not hold the applicant liable? Ultimately, the decision on liens will come down to negotiation and the desire to settle the claim, as well as the wishes of our clients. That being said, we can:
  • Agree to settle the claim if favorable and argue the liens are inadmissible at lien conferences and trials.
  • Put the employee/applicant attorney on notice that our clients will withhold sufficient sums from permanent disability to cover the lien claim. Failure to do so may expose our clients to the costs of the lien.
  • Not resolve the claim with the employer agreeing to hold the applicant harmless on liens.
Finally, see also Scudder v. Verizon California regarding admissibility of non-Medical Provider Network care. In that case, the Workers' Compensation Appeals Board determined applicant's pre-designated treating physician did not refer him to the doctors. Instead, applicant's attorney made the request for treatment to a physician (non-Medical Provider Network), who in turn made a referral to another non-Medical Provider Network for a surgical consultation. Always map out from where the referrals for care come!

1 The court assumed that The Medical Provider Network was validly established and that all proper notices regarding the Medical Provider Network were provided to the applicant.

2 4605. Nothing contained in this chapter shall limit the right of the employee to provide, at his own expense, a consulting physician or any attending physicians whom he desires.

3 For examples of half-page notices that can be provided to clients and to employers, please contact me.

4 The written affidavit or declaration of any witness may be offered and shall be received into evidence provided that (i) the witness was named in a witness list exchanged either through agreement of the parties or pursuant to an order issued under section 10113.5 (c), (ii) the statement is made by affidavit or by declaration under penalty of perjury, (iii) copies of the statement have been delivered to all opposing parties at least 20 days prior to the hearing, and (iv) no opposing party has, at least 10 days before the hearing, delivered to the proponent of the evidence a written demand that the witness be produced in person to testify at the hearing. The Hearing Officer shall disregard any portion of the statement received pursuant to this regulation that would be inadmissible if the witness were testifying in person, but the inclusion of inadmissible matter does not render the entire statement inadmissible.

Timothy Rose

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Timothy Rose

Timothy Rose is a Workers' Compensation Insurance Defense attorney with the Law Offices of <a href="http://www.bradfordbarthel.com">Bradford &amp; Barthel, LLP</a>. He earned his Juris Doctorate at the Thomas Jefferson School of Law in July of 2007. Prior to his work with Bradford &amp; Barthel, Timothy was a claims examiner with American International Group, Inc. and Insurance Company of the West, Inc.