Jose L. Martinez vs. Jack Neal & Sons, Inc.

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WORKERS’ COMPENSATION APPEALS BOARD 1 2 STATE OF CALIFORNIA 3 4 Case No. SRO 0107686 JOSE L. MARTINEZ, 5 6 Applicant, 7 vs. 8 9 10 11 JACK NEAL & SON, INC.; FREMONT COMPENSATION INSURANCE COMPANY, In Liquidation; CALIFORNIA INSURANCE GUARANTEE ASSOCIATION; and CAMBRIDGE INTEGRATED SERVICES, INC. (Servicing Facility), OPINION AND DECISION AFTER RECONSIDERATION (EN BANC) Defendants. 12 13 14 On June 10, 2004, the Appeals Board granted the petition for reconsideration filed by 15 defendant, California Insurance Guarantee Association (“CIGA”), in which CIGA challenged of 16 the Findings and Award issued by the workers’ compensation administrative law judge (“WCJ”) 17 on March 24, 2004. 18 (“applicant”), sustained industrial injury to his low back and psyche on August 13, 1999, while 19 employed as a heavy equipment operator by Jack Neal & Son, Inc. It was also found that, at the 20 21 22 23 24 25 26 27 In the WCJ’s decision, it was found that applicant, Jose L. Martinez time of applicant’s injury, the employer was insured by Fremont Compensation Insurance Company (“Fremont”), which is now insolvent and whose “covered claims” have become the liability of CIGA. (See Ins. Code, §1063 et seq.) In relevant part, it was further found that Fremont unreasonably delayed the provision of medical benefits. Therefore, the decision imposed a 10percent penalty against all medical benefits under Labor Code section 5814 (“section 5814”), to be paid by CIGA. CIGA’s petition contends in substance: (1) that, under Insurance Code section 1063.1(c)(8) (“section 1063.1(c)(8)”), as amended effective on January 1, 2004, it is no longer liable for any 1 section 5814 penalties for an insolvent insurer’s unreasonable delay in paying benefits, i.e., section 2 1063.1(c)(8) now excludes section 5814 penalties from the definition of “covered claims;” and (2) 3 that the amendments to section 1063.1(c)(8) apply to all awards issued on or after the January 1, 4 2004 effective date of the amendments. 5 Because of the important legal issue presented, and in order to secure uniformity of 6 decision in the future, the Chairman of the Appeals Board, upon a majority vote of its members, 7 assigned this case to the Appeals Board as a whole for an en banc decision. (Lab. Code, §115.)1 8 Based on our review of the relevant statutory and case law, we conclude that section 1063.1(c)(8), 9 as amended, applies to all awards issued on or after the amendments’ January 1, 2004 effective 10 date. Therefore, with respect to any award issued after 2003, CIGA may not be held liable for any 11 section 5814 (or 5814.5) penalties based on an insolvent insurer’s pre-liquidation unreasonable 12 delay or refusal in paying benefits because such penalties are now excluded from the definition of 13 “covered claims.” 14 I. BACKGROUND Applicant sustained an admitted industrial injury to his low back on August 13, 1999, for 15 16 which Fremont assumed liability. 17 On August 14, 2000, applicant’s primary treating physician, Gary P. McCarthy, M.D., 18 indicated that applicant would need surgical decompression of his back at L4-5, and ordered a 19 lumbar MRI. 20 On September 29, 2000, the radiologist issued a report on the lumbar MRI, stating it 21 showed degenerative disc desiccation at the L3-4, L4-5, and L5-S1 levels; moderate narrowing of 22 the left L5-S1 neural foraminal canal; and a congenitally small spinal canal. 23 On October 4, 2000, Dr. McCarthy discussed the MRI report and stated that applicant is a 24 candidate for (and wished to have) surgical decompression at L4-5 and L5-S1. At the same time, 25 26 27 1 The Appeals Board’s en banc decisions are binding precedent on all Appeals Board panels and WCJs. (Cal. Code Regs., tit. 8, §10341; Gee v. Workers’ Comp. Appeals Board (2002) 96 Cal.App.4th 1418, 1425, fn. 6 [67 Cal.Comp.Cases 236, 239, fn. 6].) MARTINEZ, JOSE L. 2 1 Dr. McCarthy also wrote a prescription for an L4-5 laminectomy/discectomy. 2 On October 4, 2000, Dr. McCarthy’s office faxed Fremont a request to authorize the 3 surgery, together with supporting documentation. Surgery was not then authorized. Further 4 requests for surgery were made on October 12 and 17, 2000. 5 On October 31, 2000, applicant was evaluated by Donald L. Trauner, M.D., as Fremont’s 6 qualified medical evaluator (“QME”) in orthopedics. On November 14, 2000, Dr. Trauner issued a 7 report agreeing with Dr. McCarthy that “decompression of [applicant’s] offending disc would be in 8 order.” On December 6, 2000, applicant’s counsel wrote Fremont to again request authorization for 9 10 the surgery recommended by Dr. McCarthy. 11 On January 5, 2001, Fremont authorized surgery. 12 As discussed above, the WCJ’s March 24, 2004 decision found that Fremont unreasonably 13 delayed the provision of surgery, and it imposed a 10-percent penalty against all medical benefits 14 under section 5814, to be paid by CIGA. On reconsideration, CIGA has not challenged the 15 determination that Fremont unreasonably delayed medical treatment. CIGA, however, does assert 16 that, under the amendments effective on January 1, 2004, section 1063.1(c)(8) now excludes 17 section 5814 penalties from the definition of “covered claims” for which CIGA is liable, and that 18 the amendments to section 1063.1(c)(8) apply to all awards issued on or after January 1, 2004. 19 /// 20 /// 21 /// 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// MARTINEZ, JOSE L. 3 1 II. DISCUSSION 2 CIGA’s statutory mandate is that it “shall pay and discharge [the] covered claims” of 3 insolvent insurers. (Ins. Code, §1063.2(a).) CIGA’s liability, however, is solely limited to the 4 payment of “covered claims.” (Cal. Ins. Guar. Ass’n v. Workers’ Compensation Appeals Bd. 5 (Karaiskos) (2004) 117 Cal.App.4th 350, 356 [69 Cal.Comp.Cases 183, 186]; Cal. Ins. Guar. 6 Ass’n v. Workers’ Compensation Appeals Bd. (Mangum) (2003) 112 Cal.App.4th 358, 363-364 [68 7 Cal.Comp.Cases 1444, 1447-1448]; Denny’s, Inc. v. Workers’ Compensation Appeals Bd. 8 (Bachman) (2003) 104 Cal.App.4th 1433, 1438 [68 Cal.Comp.Cases 1, 4].) 9 Insurance Code section 1063.1(c)(1) sets forth the general definition of “covered claims,” 10 which, as relevant here, includes “the obligations of an insolvent insurer ... (i) imposed by law and 11 within the coverage of an insurance policy of the insolvent insurer … [and] (vi) in the case of a 12 policy of workers’ compensation insurance, to provide workers’ compensation benefits under the 13 workers’ compensation law of this state … .” (Ins. Code, §1063.1(c)(1); Cal. Ins. Guar. Ass’n v. 14 Workers’ Compensation Appeals Bd. (Karaiskos), supra, 117 Cal.App.4th at p. 356 [69 15 Cal.Comp.Cases at p. 186; Cal. Ins. Guar. Ass’n v. Workers’ Compensation Appeals Bd. 16 (Mangum), supra, 112 Cal.App.4th at p. 364 [68 Cal.Comp.Cases at p. 1448].) 17 Insurance Code sections 1063.1(c)(3) through (c)(12) and 1063.2, however, set forth the 18 specific statutory exclusions to the general definition of “covered claims.” (American Nat. Ins. Co. 19 v. Low (2000) 84 Cal.App.4th 914, 920-921; Industrial Indemnity Co. v. Workers’ Comp. Appeals 20 Bd. (Garcia) (1997) 60 Cal.App.4th 548, 557 [62 Cal.Comp.Cases 1661, 1667]; Cal. Ins. Guar. 21 Ass’n v. Workers’ Comp. Appeals Bd. (Jenkins) (1992) 10 Cal.App.4th 988, 995 [57 22 Cal.Comp.Cases 660, 664]; Interstate Fire & Casualty Co. v. Cal. Ins. Guar. Ass’n (1981) 125 23 Cal.App.3d 904, 908.) 24 Prior to the amendments to section 1063.1(c)(8), CIGA was liable for section 5814 25 penalties imposed based on an insolvent insurance carrier’s pre-liquidation unreasonable delay in 26 paying benefits because section 5814 penalties were held to fall within the general definition of 27 “covered claims,” and not to fall within any of the statutory exclusions. (Hershman v. James MARTINEZ, JOSE L. 4 1 Eisenberg Medical Group (2002) 67 Cal.Comp.Cases 808 (Appeals Board en banc), writ den. sub 2 nom. Cal. Ins. Guar. Ass’n v. Workers’ Comp. Appeals Bd. (Hershman) (2002) 67 3 Cal.Comp.Cases 1606; see also, Carver v. Workers’ Comp. Appeals Bd. (1990) 217 Cal.App.3d 4 1539, 1543 [55 Cal.Comp.Cases 36, 39]; Cal. Ins. Guar. Ass’n v. Workers’ Comp. Appeals Bd. 5 (Novak) (2002) 67 Cal.Comp.Cases 315 (writ den.); Cal. Ins. Guar. Ass’n v. Workers’ Comp. 6 Appeals Bd. (Harris) (2002) 67 Cal.Comp.Cases 171 (writ den.).) 7 8 9 10 11 Effective January 1, 2004, however, section 1063.1(c)(8) was amended to state: “ ‘Covered claims’ does not include any amount awarded as punitive or exemplary damages, nor any amount awarded by the Workers’ Compensation Appeals Board pursuant to Section 5814 or 5814.5 because payment of compensation was unreasonably delayed or refused by the insolvent insurer.” (Emphasis added.) 12 In construing a statute, the Appeals Board’s fundamental purpose is to determine and 13 effectuate the Legislature’s intent. (DuBois v. Workers’ Comp. Appeals Bd. (1993) 5 Cal.4th 382, 14 387 [58 Cal.Comp.Cases 286, 289]; Nickelsberg v. Workers’ Comp. Appeals Bd. (1991) 54 Cal.3d 15 288, 294 [56 Cal.Comp.Cases 476, 480]; Moyer v. Workmen’s Comp. Appeals Bd. (1973) 10 16 Cal.3d 222, 230 [38 Cal.Comp.Cases 652, 657]; Cal. Ins. Guar. Ass’n v. Workers’ Compensation 17 Appeals Bd. (Karaiskos), supra, 117 Cal.App.4th at p. 355 [69 Cal.Comp.Cases at p. 185].) Thus, 18 the WCAB’s first task is to look to the language of the statute itself. (Ibid.) The best indicator of 19 legislative intent is the clear, unambiguous, and plain meaning of the statutory language. (DuBois 20 v. Workers’ Comp. Appeals Bd., supra, 5 Cal.4th at pp. 387-388 [58 Cal.Comp.Cases at p. 289]; 21 Gaytan v. Workers’ Comp. Appeals Bd. (2003) 109 Cal.App.4th 200, 214 [68 Cal.Comp.Cases 22 693, 702]; Boehm & Associates v. Workers’ Comp. Appeals Bd. (Lopez) (1999) 76 Cal.App.4th 23 513, 516 [64 Cal.Comp.Cases 1350, 1351].) 24 unambiguous, there is no room for interpretation and the WCAB must simply enforce the statute 25 according to its plain terms. (DuBois v. Workers’ Comp. Appeals Bd., supra, 5 Cal.4th at p. 387 26 [58 Cal.Comp.Cases at p. 289]; Atlantic Richfield Co. v. Workers’ Comp. Appeals Bd. (Arvizu) 27 MARTINEZ, JOSE L. 5 When the statutory language is clear and 1 (1982) 31 Cal.3d 715, 726 [47 Cal.Comp.Cases 500, 508]; Cal. Ins. Guar. Ass’n v. Workers’ 2 Compensation Appeals Bd. (Karaiskos), supra, 117 Cal.App.4th at p. 355 [69 Cal.Comp.Cases at 3 p. 185]; Reeves v. Workers’ Comp. Appeals Bd. (2000) 80 Cal.App.4th 22, 27 [65 Cal.Comp.Cases 4 359, 362]; Boehm & Associates v. Workers’ Comp. Appeals Bd. (Lopez), supra, 76 Cal.App.4th at 5 p. 516 [64 Cal.Comp.Cases at p. 1351]; Williams v. Workers’ Comp. Appeals Bd. (1999) 74 6 Cal.App.4th 1260, 1265 [64 Cal.Comp.Cases 995, 998].) 7 Here, section 1063.1(c)(8) expressly states that “covered claims” do not include “any 8 amount awarded by the [WCAB] pursuant to Section 5814 or 5814.5 ... .” (Emphasis added.) We 9 believe the clear and unambiguous import of this statutory language is that section 1063.1(c)(8) 10 applies prospectively to any section 5814 (or section 5814.5) awards issued on or after its effective 11 date, i.e., awards issued on or after January 1, 2004. The parties have not offered any other 12 interpretations. We have considered alternative readings of this language, and we find none of 13 them to be plausible. 14 Because the statutory language is clear and unambiguous, there is no need for construction; 15 therefore, we must simply give effect to section 1063.1(c)(8) in accordance with its plain meaning. 16 Accordingly, we will rescind the section 5814 penalty award against CIGA.2 17 For the foregoing reasons, 18 IT IS ORDERED as the Decision After Reconsideration of the Appeals Board (En Banc) 19 that the Findings and Award issued by the workers’ compensation administrative law judge on 20 March 24, 2004 be, and it is hereby, ADOPTED and AFFIRMED, with the exceptions that 21 Findings of Fact Nos. 14 and 15 and the Award in its entirety be, and they hereby are, STRICKEN 22 /// 23 /// 24 /// 25 /// 26 27 2 We note that, although the WCJ made a finding that applicant is entitled to a life pension of $69.57 per week, the WCJ did not include the life pension in the actual Award. We will correct this clerical error. MARTINEZ, JOSE L. 6 1 therefrom and that the following be, and they hereby are, SUBSTITUTED therefor: 2 FINDINGS OF FACT 3 *** 4 14. Fremont Compensation Insurance Company unreasonably delayed the provision of medical 5 treatment. 6 15. In accordance with Insurance Code section 1063.1(c)(8), California Insurance Guarantee 7 Association is not liable for any Labor Code section 5814 penalty relating to the unreasonable 8 delay in providing medical treatment by Fremont Compensation Insurance Company. *** 9 AWARD 10 11 AWARD IS MADE in favor of JOSE L. MARTINEZ and against CALIFORNIA 12 INSURANCE GUARANTEE ASSOCIATION (for Fremont Compensation Insurance Company, 13 In Liquidation), c/o CAMBRIDGE INTEGRATED SERVICES, INC. (Servicing Facility) of: 14 (A) Temporary disability indemnity at the rate of $490.00 per week from August 13, 1999 15 to and including January 23, 2002, less credit to defendant for any sums heretofore paid on account 16 thereof in an amount to be adjusted by the parties with jurisdiction reserved; 17 (B) Permanent disability indemnity in the total amount of $114,655.00 payable at the rate 18 of $230.00 per week beginning January 24, 2002 and continuing for 498.5 weeks, with a life 19 pension thereafter at the rate of $69.57 per week, with any accrued permanent disability indemnity 20 to be paid forthwith, less credit to defendant for any sums heretofore paid on account thereof in an 21 amount to be adjusted by the parties with jurisdiction reserved, less credit to defendant for its 22 overpayments of temporary disability indemnity for the period of January 24, 2002 through March 23 14, 2002, in an amount to be adjusted by the parties with jurisdiction reserved, and less an 24 attorney’s fee of $14,900.00, which is to be commuted from the far end of the permanent disability 25 indemnity award and is to be paid forthwith to Gilbert Dorame, Esq., whose lien is hereby allowed 26 in said amount; 27 MARTINEZ, JOSE L. 7 1 2 (C) All further medical treatment reasonably required to cure or relieve from the effects of the industrial injury to applicant’s low back and psyche, including treatment for chronic pain; and 3 4 (D) Reimbursement for self-procured medical expense in accordance with Findings of Fact Nos. 9 and 10, in an amount to be adjusted by the parties, with jurisdiction reserved. 5 WORKERS’ COMPENSATION APPEALS BOARD (EN BANC) 6 7 _________________________________________________ 8 MERLE C. RABINE, Chairman 9 _________________________________________________ 10 WILLIAM K. O'BRIEN, Commissioner 11 12 _________________________________________________ 13 JAMES C. CUNEO, Commissioner 14 _________________________________________________ 15 JANICE JAMISON MURRAY, Commissioner 16 17 _________________________________________________ 18 RONNIE G. CAPLANE, Commissioner 19 Not participating 20 ____________________________________ FRANK M. BRASS, Commissioner 21 22 23 DATED AND FILED AT SAN FRANCISCO, CALIFORNIA July 27, 2004 24 25 26 SERVICE BY MAIL ON SAID DATE TO ALL PARTIES AS SHOWN ON THE OFFICIAL ADDRESS RECORD, EXCEPT LIEN CLAIMANTS. tab 27 MARTINEZ, JOSE L. 8

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