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The Defense Perspective:
The Delay or Termination of Benefits: When to Pull the Trigger and What to Do When It’s Done Wrong

by Michael McDonald, Esq.

In this series, Michael G. McDonald, Esq. of the McDonald Law Corporation offers practical advice to WC lawyers and adjustors.

A recent situation raised a number of issues concerning termination of benefits. Our office stipulated a case at a life pension level. The long story short: the applicant’s benefits were terminated a few days before the award issued, because the carrier believed they had paid out more permanent disability indemnity than was due at that time. They resumed payments months later after ordered by the Board, but by then a penalty and sanctions petition had been filed and a demand for applicant’s attorney fees to enforce the award under Labor Code §5814.5.

Although both counsel requested an accounting, none was provided that the attorneys could understand. Applicant’s counsel set the case for hearing. At the hearing, the parties agreed to proceed to mediation on the accounting, possible penalties and overpayments. The judge appointed a special master to oversee the accounting. This case highlights the problems defendants have in determining when and how to terminate permanent indemnity payments after an award has issued, and the expensive pitfalls if the right procedures are not followed.

The seminal case concerning delay in payment is Kerley v. WCAB (1971) 4 Cal.3d 223, 36 CCC 152 (en banc). In that case the California Supreme Court held that there must be genuine doubt from a medical or legal standpoint as to the liability for benefits, and the burden rests on the defendant to present substantial evidence on which a finding of such doubt may be based. The court noted defendants must provide reasonable advances until the permanent disability level is established.

Over the years, the WCAB and the courts have issued reams of decisions regarding penalties. These decisions include such classics as Avalon Bay Foods v. WCAB (Moore) (1998) 63 CCC 902; State Compensation Insurance Fund v. WCAB (Stuart) (1998) 63 CCC 916; Harris v. WCAB (2000) 65 CCC 449.

The theme of penalty cases is the defendant failed to provide sufficient evidence at trial to support its burden of proof of a legitimate existence of doubt or establishing a business reality for the delay in payment.

As attorneys in the workers’ compensation system, we should be problem solvers. Taking a traditional Positional Dispute Approach, taught to us in law school, creates additional costs of time and money to our system and clients. The PDA approach is adversarial and aggressive in nature. This approach may be “fun” for many of us, but it results in the failure to listen and misunderstanding of our opponent’s positions.

A better approach for our workers’ compensation system is the Problem Solving Approach. According to Michael Palmer, CEO of The Negotiation Center, this new approach requires a change in attitude of the attorney. A problem solving attorney views the situation as a shared problem, one that the parties can resolve for mutual advantage. This approach requires the parties to develop a working relationship, communicate, understand the interests of the parties, and assess proposals and outcomes.

In the case noted above, my opponent and I worked hard to determine the proper amounts to be credited against the permanent disability award. My numbers did not match my client’s; my numbers did not match my opponent’s; my opponent’s numbers did not match my client’s numbers. To complicate the matter, my client believed the payments had all issued. This required me to review all of their work and have multiple discussions to come to an understanding of their position. Applicant’s counsel set the case for hearing to resolve the dispute, since the defendant would not reinstate benefits.

Some other issues and facts have not been noted here. Even though the attorneys were regularly communicating, the better approach would have been to have the defendant file for the hearing since the defendant raised the issue of payments. This action plan would have the benefit of focusing the parties to resolve the conflict more timely than when it happened, as well as developing proposals.

Practice Points

  • Make sure all benefit notices issued timely
  • Verify the numbers, dates, categories of payments
  • Confirm the information with opposing counsel and client
  • If no agreement to the numbers, file for a status conference
  • Keep an open mind and listen to the other side
  • Communicate regularly on the issue

The parties in the case I described are well aware of the time and cost associated with further hearings, witness preparation and testimony, and that the potential loss or losses would mean a Labor Code §5814 multiple penalty assessment. That being the case, the informal special master conference allowed the parties to state their positions without the formal need to have witnesses present. In the instant case, if this matter were to go to a formal hearing, defendants would certainly need to have multiple witnesses testify. This takes the adjuster, the supervisor and other parties away from their daily responsibilities putting other injured workers at risk for not receiving proper benefits or the required legal notices.

The meeting with the special master will be discussed in a later article. Suffice it to say, the parties took the problem solving approach and we hope to resolve all issues very soon.

> The Doctor's Office: Psychology
> Computer Corner: Saving Graces
> Defense Perspective: Termination of Benefits
> MSAs: Rx Drugs & Rated Ages
> QME Process: Reform or Roulette?
> QME Flowchart

About the Author:

Michael G. McDonald is the founder of McDonald Law Corporation in Concord, California and a Certified Specialist in Workers' Compensation Law, State Bar of California. He is a Director for the California Workers’ Compensation Defense Attorneys Association.

Michael G. McDonald, Esq.
McDonald Law Corporation
1800 Sutter Street, Suite 430
Concord, CA 94520-2563
Voice: (925) 363-4380
Fax: (925) 363-4352
Other locations: Sacramento, San Jose and Fresno www.mcdonaldlawcorp.com

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