Tracing the Path of Reform of Workers Compensation in California
an interview with Michael Ward of Cuneo, Black, Ward, & Missler LLP
Kristin M. Bohm
Posted Monday, May 1, 2006
6 U.C. Davis Bus. L.J. 23 (2006)

Michael Keenan Ward is a legal specialist in workers’ compensation at the law firm of Cuneo, Black, Ward & Missler in Sacramento, California. Mr. Ward attended St. Mary’s College in Moraga, California, majoring in history. While at St. Mary’s College, he also studied world politics at Mills College in Oakland, California.

Mr. Ward received his Juris Doctorate from the University of the Pacific, McGeorge Law School. While in law school, Mr. Ward worked as a hearing officer for the California Department of Social Services. After graduating in 1976, he worked for the law firm of Hanna & Brophy. He is one of the co-founders of Cuneo, Black, Ward & Missler. At its founding, the firm's partners brought nearly fifty years of combined experience in workers' compensation law and subrogation.

Q: How have past significant reforms in workers’ compensation affected modern day practice? In your view, were these reforms generally effective?

A: From a more historical perspective, there were two acts in the early 1900’s: the Roseberry Act of 1911, and the Boynton Act of 1913. Together these acts took workers’ compensation out of the civil arena and put it into the administrative arena where we now find it. It was somewhat of a tradeoff for both sides, as the employer got the exclusive remedy, while in exchange, employees gave up utilization of the civil arena.

More recently, effective January 1, 2005, SB 899 has resulted in the use of American Medical Association (AMA) guidelines for disability in lieu of the previous guidelines. The reforms have essentially transformed litigation from fact directed to more procedural in nature.

In terms of effectiveness of the reforms, it may be too early to tell. Temporary and permanent disability payments have gone down favoring the employer, due in part to the two-year limitation on temporary disability and required use of the AMA guidelines for permanent disability. However, this effect may be short lived. There have been substantial efforts by the applicants’ bar to amend the AMA guidelines by statute or regulation. Moreover, the applicants’ bar has become creative in evaluating levels of permanent disability via the AMA guidelines. While there has been a short run positive effect for the employer in terms of payments, the impact has been negative on the injured worker, who has seen reduced benefits and access to medical care through the workers’ compensation system.

Q: What was the initial impact of the psyche reforms on workers’ compensation law?

A: The initial reform was done in 1990 to Labor Code section 3208.3, which re-defined the standard for establishing liability for a psyche injury. The reform increased the threshold level of causation from 1% to 10%, primarily to serve the purpose of reducing the number of psychiatric claims. As the 10% level proved to be insufficient, another reform in 1994 gave rise to the “predominant cause standard” for compensability, which established a threshold of more than 50% causation to be proven by a “preponderance of the evidence” standard. This reform had a much more significant impact on the number of claims. Not only did it establish a higher standard, but it also established the “good faith” and “post termination” defenses, all of which were a benefit to the employer.

Q: How have the psychiatric injury reforms impacted the practice over time?

A: The number of psyche claims has gone done significantly.

Q: Prior to January 1, 2003, a primary treating physician who evaluated the condition of an applicant had been entitled to a “presumption of correctness,” as opposed to the opinion given by a qualified medical examiner (QME). Why did insurance companies’ support this presumption and fight so hard to maintain it?

A: Insurance companies and proponents of the primary treating physician presumption were concerned about the costs of litigation getting out of hand. The number of medical evaluators on both sides became extraordinary and costs increased as a result. The initial feeling was that the primary treating physician presumption might eliminate or cut down costs. Another thought was that the employers would have a bit more control over the physicians than they would have with an evaluator selected by the other side. In practice, however, insurance companies eventually began to realize that applicant’s attorneys were using primary treating doctors who were “applicant oriented” – that is, they were prescribing more disability than the QMEs. In effect, the presumption of correctness was actually costing insurance companies more. Thus, the presumption of correctness eventually fell by the wayside.

Q: In your opinion, do Workers Compensation Appeals Board (WCAB) judges continue to recognize that a primary treating doctor should be more aware of a worker’s compensation applicant’s condition than a qualified medical examiner?

A: Primary treating doctors’ reports are given favored status under the Labor Code and are generally admissible in any case. The judge, however, need not rely upon these reports. Some other factors to consider are the reputation of the treating doctor, the reputation of the QME, and the credibility and thoroughness of the QME’s evaluation. The treating physician is more familiar with the individual, but this must be balanced against the thoroughness and objectivity of a QME.

Q: As of February 2005, the state Division of Workers’ Compensation has been developing new regulations to implement applicants’ rights to predesignate a personal physician. Do you think most applicants are aware of their right to “predesignate,” or is more legislation necessary to bring this awareness to light?

A: An employer is legally required to advise employees of their right to predesignate. I do not think most employees are aware of this right. But, I am also not persuaded that additional legislation would convince the employer of further obligations to relay this information to their employees. There are other remedies an injured worker might seek such as a penalty imposed upon the employer if the failure to advise results in a delay of care.

Judging from SB 899 and other reforms, I am wary of any further legislation as our Legislature has proven inept in the past in regulating the workers’ compensation system.

Q: In actual practice, how has the abandonment of the primary treating physician presumption affected insurance companies?

A: As mentioned before, applicants’ attorneys can sometimes figure out how to control primary treating doctors to the advantage of their clients. With that, came increased costs of medical care and increased temporary and permanent disability. In turn, there was a reaction and the presumption was eliminated. As a result, costs went down.

Q: Another post January 1, 2003 reform has been an increased penalty for uninsured employers. In practice, has the Labor Commissioner been able to effectively sanction employers for not carrying workers’ compensation insurance, or has this reform been significantly impacted by the budget crisis in California?

A: I have represented a number of uninsured employers over the years and, to my knowledge, none of them have ever been cited civilly or penalized for not carrying workers compensation insurance. The reason for this is probably that it has not been the Labor Commissioner’s highest priority to pursue sanctions. To my knowledge, there are maybe two cases in the past thirty years where the issue of not carrying workers compensation insurance has been litigated. As far as the budget is concerned, it could be one of the reasons for not initiating sanctions, but frankly, I think it is more of a priority issue.

Q: In terms of public perception, what has been the initial impact (negative or positive) of the current reforms in workers compensation law?

A: In terms of initial impact, the headlines have been more favorable to the business side of workers compensation. The rates for coverage have gone down substantially, the benefits paid out have gone down, and the number of workers compensation claims has gone down. We have also seen an overall decrease in the amount of litigation.

From the worker’s side, the perception and the effect have not been as positive. While the presumption had been that the reforms would help provide the injured worker with the best medical care available, though not unlimited, to treat his compensation injury, that has not been the case. On the contrary, the quality of medical care has been negatively affected. Other compensation benefits have also decreased.

Q: How have the current reforms affected the frequency of claims or increased the cost and extensiveness of litigation?

A: The number of claims the workers compensation system has experienced has gone down, though the long-term effects on litigation are yet to be seen. The complexity of claims, however, has gone up which does translate into more legal time being spent per file. At the same time, there have been some significant cost savings built into the reform, especially in terms of reduction in medical and legal cost. No longer is either side able to go out and get their own QME: you either agree to one doctor or one doctor is selected from a panel of three doctors. Also, there were reforms that capped the amount that could be charged by doctors for their reports. There is now a schedule to regulate or limit the costs of medical reports. Another interesting yet subtle effect of the current reforms has been the shrinkage of the doctor’s pool. This has caused delays in obtaining medical opinions necessary to bring cases to conclusion.

Q: Do you see any potential for the current reforms to end up increasing costs rather than decreasing costs, like the primary treating physician presumption did?

A: No. I do not see the current reforms as written increasing costs. What I do see, is their application being so detrimental to the injured worker that the current Democratic majority in the Legislature will respond in a way that will increase the costs to something above what we have now. Do I think that the costs will increase to the level present before SB 899? Probably not. But there is a substantial likelihood that the costs will increase over what we have had in the last fourteen months.

Q: What do you think future reforms in Workers Compensation law will be like?

A: There are two ways workers compensation laws are reformed: legislatively and through the courts. Legislatively, I suspect some adjustment to the permanent disability schedule. Judicially, the mindset of some judges has been such that there will be an effort at least at the trial level, possibly the Commissioner level, and at the appellate level, to interpret new reforms in a way that will benefit the injured worker. We have seen a more conservative approach in some cases which have been to the advantage of the employer. There is still a lot of room for interpretation. The recent California decision, Gallo v. Dykes, is a good example of this.

Q: What do you enjoy most about practicing workers compensation law?

A: Workers compensation is a specialty. Locally it is a very close-knit group of attorneys that get along very well together. Employers and adjusters are good people to work with, and often times the business relationships you develop turn into long-term friendships. The law itself is challenging and constantly changing, which keeps you learning. The challenge I like most is being able to create a plan and execute that plan in such a way that it will bring about the conclusion you desire.

Compensation Act of 1911 (the Roseberry Act), Cal. 399 (1911) and Workers' Compensation, Insurance and Safety Act of 1913 (the Boynton Act), Cal. 176 (1913)

2004 Cal. Adv. Legis. Serv. 34.

The interviewer and interviewee use the term “psyche” to refer to “psychiatric disorders.”

Cal. Lab. Code § 3208.3 (West 2006)

Gallo v. Dykes, 37 Cal. Rptr. 3d 208 (Cal. App. 2005)