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Why are California Workers’ Compensation Claims so Costly?

California’s Labor Code Section 3202 states that courts should liberally construe the section to extend benefits for those injured in the course of their employment. The California Supreme Court has consistently interpreted the Labor Code and wage orders liberally.

Key Insights

The AVERAGE workers’ compensation settlement reaches about $35,000.

On an admitted claim, you can expect to see most, if not all, doctor bills paid timely throughout the litigation of the claim, so once a case is settled, reserves can be reduced and the case closed in most circumstances, aside from perhaps a return-to-work voucher of $4,000 if the applicant does not return to work for the employer.

Per the labor code, within one day of the employee filing a claim, the employer shall authorize treatment for the alleged injury and shall continue to provide treatment until liability is accepted or denied. Until the claim is accepted or denied, the employer is responsible for up to $10,000 in medical expenses.

On a denied claim, however, along with the settlement comes an average of 3 – 12+ liens on a file, including EDD (State Disability).

  • When a denied file settles, that is not the end of litigation. Doctors, medical facilities, Diagnostic Imaging facilities, Health Care Organizations, and EDD can all file liens, with their invoices of outstanding charges for services performed. Exposure from these lien claimants can combine total balances of $25,000 – $100,000 easily. It is incumbent upon the employer to pay, adjust or litigate the liens to determine payment reimbursement.
  • EDD lien exposure alone can be over $65,000, representing 1 year of temporary disability, if any doctor certifies the injured worker for TD.
  • Continuous Trauma “injury” claims (“CT Claims”): Unlike a specific injury which can be verified more easily and admitted or denied based on factual and witness verification, continuous trauma claims are much more difficult to defend, as these generally cannot be defended on witness accounts or factual denials at all. Courts have required medical doctor findings to justify denying a continuous trauma claim. This results in the need to obtain costly medical evaluations as set forth below. A trial judge will NOT rely on any type of lay testimony to deny an applicant’s continuous trauma claim. We can only defend a CT claim if a doctor finds no injury; if we have a procedural defense, like failing to file a claim timely, (which is also construed liberally in favor of the applicant); or if we have a legal defense, like a post termination defense where we can prove the applicant neither treated or reported an injury prior to termination and only after the applicant becomes aware of the continuous trauma injury, then we can deny the CT claim without any medical evidence.
  • In Southern California, the rate of continuous trauma claim filing and “skin and content” body part filings are a phenomenon. The vast majority of CT claims are filed in Los Angeles and 40% are filed following termination of the employee. There are many law firms that will attempt to add as many body parts as possible to increase the potential value of a claim to the injured worker through the compounding of permanent disability for each body part. Not only does that potentially increase the potential settlement exposure, but by doing so, it also adds substantial costs to the defense of such claims as follows:
    • Treatment liens in the various fields of medicine increase claim costs and potential exposure for significant liens, especially on denied claims. In admitted injury claims, we can control medical treatment costs somewhat better because we control the panel of doctors the injured worker is sent to. The doctors also tend to be slightly more conservative.
    • As soon as we deny a claim, the applicant has the right to self-procure treatment from any and all doctors that will provide services on a lien basis. This is where they rack up tens of thousands of dollars of medical bills. Also, because the carrier is not paying TD, EDD files a lien for up to one year of benefits to be as much as $65,000, which then has to be paid, negotiated or litigated to resolve.
  • Medical Legal Reporting: For each medical specialty claim alleged, i.e., orthopedic, neurological, psychological, internal, dental, etc., a medical legal report is generally required before case settlement. This report generally evaluates the disability to determine a settlement. For each medical specialty needed will cost a MINIMUM OF $2,000 each report. However, that is the BARE MINIMUM. For example, if a 20-year-old employee filed a claim for orthopedic and psychological injuries, we would need both an orthopedic and psychological medical legal report to address them. If that 20-year-old has minimal medical history and minimal medical records to be reviewed by the doctor, then the total cost to defendant carrier is about $4,000. However, if the employee were 65 years old and makes the same claims, but because of their age and a more substantial medical record history, the doctor would need to review all the relevant records. Because the doctor gets paid $3.00 per page for reviewing records, if the 65-year-old applicant has a medical history and about 2,500 pages of relevant medical records that need to be reviewed, then EACH SEPARATE MEDICAL LEGAL EXAM WOULD COST ABOUT $9,000.00. For the two exams alone, whether this case is admitted or denied, it would cost the defendant carrier $18,000.00. This does not even count supplemental reports needed from these doctors, if any.
  • Liens: As indicated above, liens are required to be paid, adjusted or litigated by the defense. Even if the claim is denied, the carrier must still pay, adjust or litigate the payment of these liens. Many times, on the strength of the denial of the claim, the liens can be resolved for between 10-50% of the original lien claim. Because of the liberality of the workers’ compensation system, it is rarely a good idea to litigate before a liberal Judge any case in chief or lien claim for fear of an adverse decision. Claims should be taken to trial when there is a belief there is a much better than 50/50 chance of prevailing. In the discussion about EDD liens above, even if we settle the lien for $.10 on the dollar, which is $6,500, reducing our exposure by 90%, so it is still pretty significant.
  • Post Termination Claims: Post termination claims are claims that are filed by applicants following termination (not resignation). As fully 40% of these claims are filed as CT claims, this is another significant area of cost and needed defense by employers. As discussed above, CT claims are already difficult to defend, but when added to a post termination filing, it becomes even more difficult and litigious to defend. In California, we have the affirmative ‘post termination defense,’ where the employer can legally deny a claim filed after an employee is terminated if the employee had knowledge of the injury while employed, but:
    • The employee never reported the ‘injury;’ AND
    • There was no evidence of relevant medical treatment prior to the termination.
    • As mentioned above, only a doctor can conclude if a continuous trauma ‘injury’ occurred. And in the quirks of the California workers’ compensation system, if the employee did not go see a doctor until AFTER his termination, and the doctor’s conclusion that the employee suffered a CT injury while working for the employer was the employee’s first ‘knowledge’ that a CT injury occurred (as only a doctor can make that conclusion), since the applicant ‘knew’ the CT injury was AFTER he was terminated, then the employer can no longer deny/defend the claim on a post termination defense. These are some of the most difficult claims to defend and they make up an enormous amount of litigation.
  • Discovery Costs: In the normal course of investigation of a claim, a deposition is generally a good idea to assess the applicant’s credibility and obtain a history of relevant injuries, accidents and medical records. The average cost for a deposition is at least $2,500. In addition, required by the Labor Code, the defendant employer must pay the applicant’s own attorney for his/her time appearing at the deposition, preparing the applicant for the deposition and for reviewing the transcript with the applicant when concluded.
  • In addition, the attorney is entitled to payment for all travel time to/from the deposition, if any. The applicant is also entitled to mileage payment to/from the deposition. All that time is paid at around $400/hour. Moreover, throughout the course of litigation, there are at least two hearings scheduled per claim. These account for disputed issues as well as trials. Trials may not be set unless there is a preliminary hearing set first. So, if we were to take a case to trial, then there would be at least two hearings, with a minimum cost of around $1,700 – $2,500 for that.

What Does This All Mean in Terms of Cost?

The bottom line is that the deck is stacked against the employer when it comes to defending claims. This is why it is vital to ensure all claims are seen through a cost/benefit lens. Taking a denied claim to trial will many times cost two times to three times and more the cost of an early settlement. Plus, there is no guarantee of a defense verdict.

Advantages to Early Settlement

By settling early in the litigation process, an employer avoids exposure for permanent disability, temporary disability, medical costs for treatment and medical legal evaluations, extensive discovery process and cost of subpoenaing records, and attendance at hearings and depositions. If we consider the average claim settlement to be $35,000 with a focus on limiting exposure of these additional litigation costs, there is potential to save the following:

  • Treatment Costs
  • Medical Legal Costs
  • Litigation Costs including attendance at depositions and hearings, record subpoena, etc.
  • Future Medical Costs
  • Lien Reimbursement Costs

Combined, even if we deny and defend a claim, exposure could be well over $100,000 overall. If a claim is not settled via Compromise and Release the injured worker has up to five years to file for New and Further Disability.



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