Workers’ Compensation Reform in South Carolina

Stanford E. Lacy

Samuel F. Painter

David T. Pearlman

The Workers’ Compensation Reform Act of 2007

A/K/A

The Defense Attorneys’ Full Employment Bill of 2007

A walk through the new compensation reform bill

Effective Date of Reform Bill

• July 1, 2007

• “…[A]pplies to injuries that occur on or after that date.”

Changes in the Appeals Process

• Old system went from hearing commissioner to full commission to Circuit Court to Court of Appeals to Supreme Court.

• Clogged Circuit Court dockets.

• Circuit Courts not familiar with comp law.

Simplifying the Process

• Eliminate Circuit Courts from the process.• Under new law, appeals will go from the

Commission directly to the Court of Appeals.

• BUT…if the employer appeals to the Court of Appeals on question of law, employee is entitled to TTD AND medical treatment. (§42-17-60) This is new.

• Interest accrues a legal rate during appeal.

Employer/Carrier Fraud

• §38-55-530 makes criminal false statements to gain an economic advantage in an insurance transaction.

• The reform bill amended this statute to include the following as false statements:– Intentional false report of business activities;– Misclassification by employer of employees;– Failure to timely reduce reserves;– Failure to account for SIF reimbursement or subrogation.– Failure to provide verifiable information to rating bureaus

and the Dept. of Ins.

Employer/Carrier Fraud

• Economic benefit or advantage includes:– A favorable insurance premium;– Payment schedule;– Insurance award; or– Insurance settlement.

• S.C. Attorney General is authorized to hire a forensic accountant.

Sanctions

• First offense, economic advantage less than $1000: Misdemeanor, fine $100 to $500, and/or imprisonment not more than 30 days.

• First offense, economic advantage $1000 to $10,000: Misdemeanor, fine $2,000 to $10,000, and/or imprisonment not to exceed three years

Sanctions

• First offense, economic advantage $10,000 to $50,000: Felony, fine $10,000 to $50,000 and/or up to five years in prison

• First offense, economic advantage is $50,000 or more: Felony, fine $20,000 to $100,000 and or ten years in prison

• Second or subsequent offense, regardless of economic advantage: Felony, fined $20,000 to $100,000 and/or ten years in prison.

• Mandatory full restitution.

Revisit the Medically Complex Case

• Tiller v. National Health Care Center of Sumter

• Supreme Court overruled previous Court of Appeals decisions requiring medical evidence of causation in medically complex cases.

• Held Commission as fact finder could find compensability with or without medical evidence if supported by the record.

Set Proof Standard in Medically Complex Cases

• Codify the old rule.• “Medically complex” means “sophisticated cases

requiring highly scientific procedures or techniques for diagnosis or treatment, excluding MRIs, CAT scans, x-rays or other similar diagnostic techniques.”

• Requires employee to establish by medical evidence injury is job-related.

• Medical evidence means expert opinion to a reasonable degree of medical certainty.

Legislatively Define or Limit Terms

• Courts liberally applied terms.

• Reform Act amends §42-1-160 to clarify many of these terms.

• This code section is the heart of the Act. It is the section that proclaims “‘Injury’ and ‘personal injury’ mean only injury by accident arising out of and in the course of employment…”

Changes to §42-1-160• Stress, mental injury and mental illness

• Not considered a personal injury unless Claimant proves by a preponderance of evidence:– Conditions of employment extraordinary and

unusual in comparison to the normal conditions of the particular employment; and

– causation by medical evidence.

Changes to §42-1-160

• Stress, mental injuries, heart attacks, strokes, embolisms or aneurisms not compensable if they result from events incidental to normal employee/employer relations including, but not limited to, personnel actions such as disciplinary actions, work evaluations, transfers, etc. except when these actions are taken in an extraordinary and unusual manner.

Changes to §42-1-160• Mental injuries, illness or stress allegedly

aggravated by physical injury NOT compensable unless the aggravation is:– Admitted by employer/carrier;– Authorized doctor opines in his notes

condition is at least partially causally related;– Authorized psychologist or psychiatrist finds it

causally related; OR– Employee’s doctor notes as causally-related.

Latest in Cat Scans

Changes in §42-1-160

• “Medical evidence” means expert opinion or testimony stated to a reasonable degree of medical certainty, documents, records or other material that is offered by a “licensed health care provider.”

Changes in §42-1-160

• “Accident” as used in §42-1-160 does NOT mean “a series of events in employment, of a similar or like nature, occurring regularly, continuously, or at frequent intervals in the course of such employment, over extended periods of time.”

• Repetitive trauma now governed by §42-1-172.

The new §42-1-172

• “Repetitive trauma injury” means an injury which is gradual in onset and caused by the cumulative effects of repetitive traumatic events.

• Causation must be supported by medical evidence.

• Medical evidence means expert opinion to a reasonable medical certainty by a “licensed and qualified medical physician.”

The new §42-1-172

• When claimant reaches MMI, he may be entitled to benefits under §42-9-10, §42-9-20 OR §42-9-30.

Before, Truckers Who Were Owners/Operators Were

Employees• Courts held truckers who are

owner/operators of their rigs were deemed employees of the motor carriers with whom they contracted in South Carolina.

• Much confusion.

Extreme Owner-Operator

Solution: Bright Line Test for Independent Contractor Status

• Amend §42-1-360 to exempt owner/operators as independent contractors.

• Must own or holds under a bona fide lease-purchase or installment-purchase agreement a tractor-trailer, tractor or other vehicle.

• Must provide the vehicle and individual services to a motor carrier under a valid independent contractor agreement.

New rules for Forms 50 and 51• Form 50: Must plead body parts and

conditions with specificity. “Whole body” not allowed except in death cases.

• Body part not listed can be compensable if– Proven by greater weight of evidence it is

causally related to the accident;– No knowledge of injury when Form 50

prepared; OR– Condition is listed on the PHB.

New rules for Forms 50 and 51

• Form 51: Defenses must be described with specificity. No longer accept “all defenses apply.”

• Defense not listed in Form 51 can be considered if:– Defendants had no knowledge of fact

supporting the defense when Form 51 prepared, AND

– Defense is set forth in PHB.

More Housecleaning: Some Administrative Amendments

• If there is a vacancy on the Commission, the majority of the Commission can deputize someone to take testimony and recommend an award. (Crocker’s old job.) (§42-3-20(A))

• Chairman serves two years. If governor does not appoint a successor, Commission may elect interim chairman. (§42-3-20(B))

• Each commissioner may employ an AA. (§42-3-60)

• Commission maintain files for 15 years instead of 5. (§42-3-230)

Penalties for Failure to Provide Medical Treatment

• Adjuster who fails to provide medical treatment when ordered must pay the claimant’s attorneys’ fees and cost of enforcing the order.

• Commission may impose sanctions for willful disobedience of an order, including, but not limited to, a fine of up to $500 for each day of the violation.

• The rules for refusing medical care have not significantly changed.

Penalties for Failure to Pay Benefits

• Commission must notify Dept. of Ins. of an insurer’s or an adjuster’s failure to authorize and pay benefits for medical treatment.

• If Dept. of Ins. finds violation of Title 38, it may impose penalties per §38-2-10.– Fine up to $15,000 ($30,000 if willful).– Suspend or revoke authority to do business.

Penalties for Failure to Pay Benefits

• If the commission finds a “pattern” of failure to pay benefits pursuant to an award, the chairman must report to the Dept. of Ins.

• Pattern means failure to pay award at least 3 times within a 2 year period.

• After a hearing, if nonpayment was intentional, insurer’s license may be revoked.

Changes to Scheduled Member Statute

• Loss of shoulder, 300 weeks. (§42-9-30(14))

• Loss of hip, 280 weeks. (§42-9-30(17))

• 50% of the back is presumed perm total (500 weeks), but the presumption is rebuttable.

The 600 week shoulders

Ellison case

• Supreme Court in Ellison v. Frigidaire Home Products held claimant with broken leg was perm total under §42-9-400 because the injury combined with pre-existing conditions unaffected by the accident.

New Law Requires Aggravation

• Add new §42-9-35• Require employee prove “by preponderance of the

evidence, including medical evidence” that subsequent injury “aggravated the preexisting condition” or the preexisting condition “aggravates the injury.”

• Award limited to single scheduled member unless the subsequent injury affects another body part or system.

• “Medical evidence” means opinion of “licensed health care provider.”

• Knowledge of the preexisting condition is not a requirement.

Apportionment (different employers)

• Old law: If claimant has permanent disability from previous injury in a different employment and further injures that body part in subsequent accident, claimant was only entitled to the degree of disability that resulted from the later accident UNLESS the claim qualified for SIF at which time claimant received the combination of disabilities.

Apportionment (different employers)

• New law: the same except claimant can receive additional benefits if the subsequent injury qualifies under §42-9-35.

• Subsequent injury aggravates preexisting condition or visa versa.

Apportionment (same employer)

• Until June 30, 2008, if employee sustains injury after previous injury, he is paid for both by extending the period and not by increasing the weekly compensation. Limit 500 weeks.

• If injury to another member, employee is entitled only to disability caused by subsequent injury UNLESS it qualifies for SIF.

Apportionment (same employer)

• After July 1, 2008, the law is the same except claimant my be entitled to additional benefits under §42-9-95.

• SIF not available for accidents after July 1, 2008.

New Rules on Clinchers

• If both parties are represented by an attorney, clincher need only be filed with the commission. No commissioner approval is required.

New Rules on Clinchers

• If Claimant is not represented by an attorney, approval by one commissioner is still required..

New Standards of Proof in Occupational Disease Claims

• Employee must prove continuous exposure to the normal working conditions “of that particular trade, process, occupation, or employment.”

• Employee must establish disease “arose directly and naturally from exposure in this State”…by a preponderance of the evidence.

• Medical evidence means opinion of licensed health care provider.

Notice for Repetitive Trauma Cases

• Notice must be given to the employer within 90 days of the date the employee discovered, or could have discovered by exercising reasonable diligence, that his condition is compensable.

• Reasonable excuse for failure to give notice and no prejudice to the employer.

Statute of Limitations for Repetitive Trauma Cases

• Must file with the commission within two years “after employee knew or should have known that his injury is compensable…”

• No more than seven years after last injurious exposure.

• Seven year limitation applies regardless of whether employee was aware of his condition.

Clarification of Availability of Medical Benefits.

• Requires medical treatment that “tends to lessen the period of disability” be supported by “expert medical evidence to a reasonable degree of medical certainty.”

• Settlement on Form 16– Provide meds for one year after full payment – No meds after one year.– Form 16 can provide for more meds.

It’s Never Too Early for Rehab.

Clarification of Availability of Medical Benefits

• All orders awarding permanency must contain a finding as to whether or not further medical treatment must be provided to the employee.

• If so, order must be as specific as possible what treatment or modalities are to be provided.

Clarification of Availability of Medical Benefits

• Employer is NOT required to provide medical treatment where there has been a lapse in treatment with an authorized treating physician in excess of one year unless:– Settlement agreement or commission order

provides otherwise; OR– Employee made a reasonable attempt to obtain

treatment from the authorized doctor but, thorough no fault of his own, was unable to obtain such treatment.

Regulations for Rehab Professionals

• §42-15-80 was amended to require the commission to promulgate regulations “establishing the role of rehabilitation professionals and other similarly situated professionals” in comp.

Rehab at its best.

Brown v. Bi-Lo, Inc.

• Access to doctors by employers and carriers was severely limited.

Revise Code to Allow Access

• §42-15-95 amended to allow access.

• When an employee seeks treatment under the Act, he is considered to have given his consent to release of medical records.

• Requests for medical files must still be in writing.

• Commission is to promulgate regulations.

Revise Code to Allow Access

• Doctors may now discuss an employee’s medical history, diagnosis, causation, etc., with carrier, employer, etc, BUT – Claimant must told of the meeting and have the

opportunity to be present;– Claimant must be advised of the nature of the

meeting; AND– Claimant must be given a copy of any written

questions prior to the meeting.

Caveats

• If you stay within the statute, the doctor does not breach his duty of confidentiality.

• BUT, if you go outside of the statute, not only does the doctor have a problem, any information obtained from the doctor will be excluded for the proceedings.

Change of Condition changes

• Change of condition must be established by a preponderance of the evidence that “there has been a change of condition caused by the original injury, after the last payment of compensation.”

• For repetitive trauma, must file within one year of last compensation payment.

• Same for occupational disease.

Bye, bye Second Injury Fund• §42-7-320 is added to the Act to provide for the

orderly dissolution of the SIF.– June 30, 2008 The last date of accident to be

considered by the SIF.– December 31, 2010 The last day the SIF will accept

notice of a potential claim.– June 30, 2011 The last day the SIF will accept

information for consideration.– December 31, 2011 The last day the SIF will accept

a claim for reimbursement.– July 1, 2013 Programs and appropriations of the SIF

are terminated.

Crossman and his faithful dog Fido ride off into the sunset.

Changes to §42-9-400• After July 1, 2007

– Arthritis no longer on the list of presumed conditions– Paragraph 34 abrogated

• Notice of a claim to SIF must include:– Date of accident– Employee’s name– Employer’s name and address– Insurance carrier’s name, address and NCCI code– Insurance carrier’s claim number, policy number, and

policy effective date.

Effective Date of Reform Bill

• July 1, 2007

• “…[A]pplies to injuries that occur on or after that date.”

Governor’s Executive Order 2007-16

• “I do hereby direct the Commission and each of its individual commissioners in all contested cases to strictly apply the AMA Guides or any other accepted medical treatise or authority in making their injury compensation determinations…”

Governor’s Executive Order 2007-16

• “…and for the Commission and each of its individual commissioners, on a quarterly basis beginning January 1, 2008, to provide written confirmation to the Office of the Governor that they have used, for the immediately preceding quarter, such objective standards in making such compensation awards.”

Questions?