Call to Order and Roll Call
The 2nd meeting of the 2016 Kentucky Workers' Compensation Task Force was held on Friday, September 16, 2016, at 10:00 AM, in Room 171 of the Capitol Annex. Representative Chris Harris, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Alice Forgy Kerr, Co-Chair; Representative Chris Harris, Co-Chair; Senator Dennis Parrett, Representative Adam Koenig; Steve Barger, Chris Bartley, John Bolton, Carl Breeding, Ray Daniels, Joe Dawahare, Larry Gardner, Ched Jennings, Michelle Landers, Bill Londrigan, Dwight Lovan, Derrick Ramsey, Jeff Roberts, Melissa Stevens, Tim Sturgill, and Tim Wilson.
Guests: Attorneys, Scott Miller and Terri Smith Walters, and Donna H. Terry, former Workers’ Compensation Administrative Law Judge
LRC Staff: Carla Montgomery, Andrew Manno, Adanna Hydes, and Sasche Allen.
Approval of Minutes
A motion to approve the minutes of the August 19, 2016 meeting was made by Representative Adam Koenig, seconded by Senator Dennis Parrett, and approved by voice vote.
Introductions
Co-Chair Chris Harris gave an overview of the progress of the task force and introduced the panel of speakers to the members with their biographies.
Scott Miller
Mr. Miller offered his insight from a plaintiffs’ attorney perspective. He expressed that workers’ compensation is not a partisan issue or a business and labor issue, but rather an issue concerning Kentucky families and injured workers. The workers’ compensation system in Kentucky is a social system that should cover everyone and offer indemnity and medical benefits in a timely manner. The challenge is serving the interests of injured workers while also balancing the competing interests. The last time any changes were made to the system was in 2000, which was supposed to balance out the harsh changes that were made in 1996, but things have been stagnant since that time.
With the last changes being made 16 years ago, Mr. Miller mentioned several areas that he believes need to be changed in Kentucky’s workers’ compensation system. One area of concern was the current number of administrative law judges (ALJ). There is a 40 percent shortage of ALJs, which puts a larger workload on the current judges, does not allow for each case to be carefully examined, and may lead to more appeals. He recommended that the current open positions be filled with persons experienced in workers’ compensation or administrative law. However, filling the positions with smart and capable individuals is the most important thing.
Mr. Miller suggested a change to KRS 342.730(4) to increase the age upon which income benefits terminate. People are working longer, well past social security age, according to recent statistics. Therefore, the age at which benefits can be terminated should be moved to 70 years of age or a minimum of five years after the work related injury. That would cost the system less than a half percent.
Attorneys’ fees were also an area of concern for Mr. Miller. There has not been an increase in attorneys’ fees in 20 years. On the low cases you may have to advance costs that are a third of the recovery. On the higher cases an attorney can expect a one to two percent fee due to the $12,000 maximum. An attorney can also expect a one to two year period before receiving a fee. Mr. Miller proposed that attorneys’ fees be increased as an incentive to current and future attorneys to 20 percent of the first $50,000 and 15 percent of the next $50,000, with cost of living being taken into account when it comes to the attorney fee maximum. If cost of living were taken into consideration over the last 20 years, then the current cap would be approximately $22,000.
Mr. Miller suggested that a provision is needed to allow lump sum payments for small weekly awards. He believes that the interest rate for past due benefits should be lowered to 6 percent or tied to the federal rate. The current rate is 12 percent. Temporary partial disability (TTD) benefits should be considered. Kentucky needs to get injured workers back to work, but if TTD benefits are paid, then workers would still get the TTD amount for light duty plus temporary partial disability (TPD). Mr. Miller also suggested a better way to handle complex medical issues in post award medial disputes for pro se claimants. A university evaluator could be picked to handle complex medical issues, especially involving opioids or pain medicines.
Terri Smith Walters
Ms. Walters stated that the task force members are the people with the ability to collectively balance the interests of workers and employers in Kentucky and formulate some sound recommendations for the delivery of income, medical, and vocation benefits. She also said that she was speaking on the state of the workers’ compensation system in the Commonwealth from a defense standpoint. She indicated that of all the recent cases she has seen, one third to 40 percent are being filed by laid off workers. Two recent decisions that are influencing the opinions of many defense attorneys are Hale v. CDR Operations Inc. and CONSOL of Kentucky Inc. v. Goodgame. Both decisions have to do with cumulative traumatic injuries and effect employers. Members of the defense community think that legislative changes need to be made due to these two decisions.
The Hale v. CDR Operations Inc. decision has been interpreted to hold that the employer where the injured worker last worked is responsible for the payment of a cumulative traumatic award in its entirety. In this case, the employee had worked for an employer for 10 years, then went to work for a new employer for three months, with a similar nature of work as to what the employee had done for the previous employer. The court determined that, in the absence of any type of apportionment provision in the statute, it had no other choice than to rule that the last employer had to be responsible for the entire award. This issue can be addressed with some type of minimum employee requirements or some apportionment.
The CONSOL of Kentucky Inc. v. Goodgame takes the rule of discovery in Kentucky as the manifestation date for cumulative trauma, meaning that the injury manifests when the employee is first advised by a physician that the condition is work related. The statute of limitations and repose both run from that date in a cumulative trauma and a hearing loss claim. When considering a specific injury in Kentucky, a person has two years from the date of the accident to file a claim unless the person has been paid TTD benefits, in which the person would have two years from the last TTD payment. Due to the decision made in CONSOL of Kentucky Inc. v. Goodgame a cumulative traumatic injury is inconsistent with the rule in occupational disease cases, such as black lung, which states that a person has three years to file a claim from the last date of exposure to the occupational hazard or three years from the date that the person has symptoms that are sufficient to reasonably apprise that the person has the condition.
Ms. Walters also suggested that the percentage amount on interest payable should be reduced from 12 percent to 6 percent and a provision regarding relief from interest when a claim is delayed due to unreasonable failure of an employee to participate should be added. Ms. Walters feels that drug screens should be done in accordance with the requirements of the Kentucky Board of Medical Licensure requirements. In addition, if a claim is determined to be compensable, then medical records should be given to the employer within 15 or 30 days of the request.
Ms. Walters stated that vocational rehabilitation should be used more frequently and encouraged by putting timelines on vocational rehab requests at the beginning of the claim. Improvements of vocational benefits paid would include adding language to KRS 342.700 to provide for the request for vocational retraining to be filed by either party within 45 days of the filing of the claim so that the issue is litigated fully. If the ALJ orders a referral for evaluation in his award, then that particular ALJ retains jurisdiction over the claim until the report is received. A vocational conference is then scheduled with mandatory attendance by the parties. Ms. Walters proposed more restrictions on the use of schedule two narcotics in workers’ compensation claims. She suggested that an employer would not be responsible for paying for narcotics once a claimant reached medical maximum improvement unless a claimant proves by clear and convincing evidence that it is necessary.
Ms. Walters suggested that if an award is valued at $25,000 or less, then the claimant can elect a lump sum for indemnity benefits. If a lump sum of income benefits is elected, then a lump sum of the medical benefits in the amount of 2 percent of the indemnity value of the award would be given. Ms. Walters suggested an amendment to KR 342.730 (4) to add an offset provision regarding wages paid during a period of TTD. She also suggested an amendment to KRS 342.125 (3) regarding the timeline for reopening a claim and an amendment to the subrogation statute to include medical benefits.
Ms. Walters provided a handout spelling out suggested changes to the workers’ comp system.
Donna H. Terry
Ms. Terry informed the task force members that they could reach out to her for information and to ask questions, being an objective observer of the workers’ compensation system as a retired administrative law judge and current mediator. She gave an overview of the state’s workers’ compensation system history, including the 1987 decision to go from a part time board to an ALJ system with live hearings. Over time the number of administrative law judges went from 10, 15, and the current number of 17. She said that injured workers deserve a quick delivery of benefits while the employers deserve to quickly be informed of their liability for benefits. The system should stay as bipartisan and professional as possible in an effort to attract the best ALJs.
One topic Ms. Terry addressed was the possibility of a summary judgement system. In this type of system, cases that seemed to initially lack merit would be dismissed. The problem with this type of system would be providing proper due process. Every person is constitutionally entitled to due process in an administrative proceeding and present his or her case. In a workers’ compensation case, every application for benefits has to be accompanied by a medical report that says an injury occurred and that there is some type of causal relationship between that injury and whatever is going on in the worker’s condition. Any attempt to have a summary judgement system at the very beginning of handling a case would be overturned.
Another area addressed is the idea of mediation. Ms. Terry pointed out that there is already a Kentucky Revised Statute pertaining to mediation. KRS 342.276 states “The commissioner shall establish a program to provide an opportunity for mediation of disputes as to the entitlement to benefits under this chapter. The commissioner shall promulgate administrative regulations necessary to establish and implement the mediation program, which shall prescribe the qualifications and duties of mediators; a process for the designation of mediators; procedures for the conduct of mediation proceedings; and the issues which shall be subject to mediation. Recommendations by mediators are without administrative or judicial authority and are not binding on the parties unless the parties enter into a settlement agreement incorporating the recommendations. Administrative law judges may participate in the mediation process but shall not issue findings or orders as a result of the process unless agreed to by the parties.” Ms. Terry said there have been several attempts by the current and past commissioners to set up mediation programs but most have been discontinued. ALJs do some form of mediation by doing benefit review conferences that are essentially settlement conferences. Her recommendation would be to have one or two ALJs be trained as mediators, only if the current open ALJ positions are filled, and handle complex workers’ compensation cases that may involve multiple injuries, multiple employers, or extraterritorial jurisdiction.
In response to several inquiries from Mr. Jeff Roberts, Ms. Donna Terry said that workers’ compensation is a very specialized area of law with its own statutes, but the rules of evidence still apply. Although it is requested that each ALJ have five years of experience in workers’ compensation law or a comparable area, there have been many excellent judges who did not have a workers’ compensation background and were able to learn the area and process quickly. She stated that the time frame from when the initial claim is filed until the decision by the judge is 60 days proof for a plaintiff, 30 days proof for a defendant, and a rebuttal poof period. All periods can be extended. This makes the total time about six months, which is a short amount of time compared to other litigation systems.
Answering a series of questions from Mr. Jeff Roberts, Ms. Terri Smith Walters said that prior to the Hale v. CDR Operations Inc. decision, the courts relied on referring to an older case when the state still had a special fund. In the case of Hale v. CDR Operations Inc., there are several unknown variables including insurance carrier changes when the employee went to a new employer. She said she believes some type of apportionment should be addressed or minimum employment because a person could work for a company for three weeks and that employer can be responsible for benefits. Ms. Walters also stated there is not any other area that has a provision that identifies an exact rating of impairment in order to qualify for benefits besides hearing loss, which is eight percent.
Addressing Mr. Jeff Roberts, Mr. Scott Miller said that the structure of attorney fees in Kentucky can make it difficult for plaintiffs with claims that may have a low impairment rating to obtain representation, but that could be fixed by addressing attorney fees. After Mr. Roberts gave Mr. Miller a brief scenario, Mr. Miller said an employee making an hourly wage of $10 with a 40 hour work week would receive a TTD rating of $266.67. If that person had a five percent permanent impairment rating and they were unable to return to work, then they would receive $27 a week. He also addressed lump sum payments saying a person should not have to give up their medical benefits in order to obtain a lump sum. He said that there are very few states that have a cap on attorney fees, and he agrees with Mr. Roberts’ comment that an attorney begins to work for free when a settlement of at least $145,000 is reached. He said he does not see certain issues arise in larger Kentucky cities that he sees in smaller towns across the state.
In response to Mr. Joe Dawahare, Mr. Miller said although the workers’ compensation system is a social system, there are issues that come up that require a person to obtain legal representation such as preexisting issues or impairment ratings. There are times that a person needs an attorney to explain the process and possible outcomes, but there is a vast amount of people who do not seek legal representation. Ms. Donna Terry said there are people who file without legal representation, however, certain legal issues arise that require a person to obtain an attorney. Commissioner Dwight Lovan added that most people do not start with an attorney when benefits are voluntarily paid but seek legal representation later in the process. Many people who lack legal counsel in post-award medical disputes. Mr. Miller pointed out there are not any unrepresented insurance companies or employers. Ms. Terri Smith Walters said that medical providers are often a party to a suit, and although plaintiff attorneys are not representing them, they try to work to get the medical provider compensated. Ms. Melissa Stevens pointed out that with medical fee disputes the employer or carrier cannot represent themselves and are required to obtain an attorney.
Replying to a sequence of queries from Mr. Ched Jennings, Mr. Scott Miller said he did not think it was necessary to make it mandatory for ALJs and board members to have at least five years of experience with exclusively workers’ compensation law because although it would help for a person to know the system, it is something that can be taught. Ms. Terri Smith Walters agreed with Mr. Miller. She added that because an ALJ has the same salary as a circuit court judge, then it would be better for an ALJ to serve a six year term, as a circuit court judge does, instead of a four year appointment. All guest speakers indicated that attorney fees could be raised, although Ms. Terri Smith Walters said she did not think that they should be raised as high as Mr. Scott Miller suggested. When asked if the increase in injured workers’ benefits should be considered before the increase in attorney fees, Mr. Scott Miller said he is in favor of addressing workers’ benefits but thinks raising attorney fees is imperative. Ms. Donna Terry stated, as a private citizen, she believes injured workers’ benefits should be addressed before attorney fees. Ms. Terri Smith Walters expressed there may not be a correlation between the two, but she can understand the dilemma that plaintiff attorneys face when determining if they should take on a case that may have a low impairment rating. All guest speakers agreed that the workers’ compensation bar is a very specialized area. Ms. Terri Smith Walters agreed with Mr. Jennings when he stated there are few counties in Kentucky that have workers’ compensation practitioners. After Mr. Jennings posed a scenario, which included a claimant from the Ashland area of Kentucky, Ms. Walters said she has not been told that traveling to a benefit review conference or a hearing is a barrier to those claimants seeking benefits. Mr. Scott Miller said that he can see how it would be difficult for a person, specifically in the Ashland area, to travel to the hearing locations for that particular area of the state. He said it all goes back to needing more attorneys that practice workers’ compensation. Ms. Donna Terry made the point that there cannot be a hearing site in every city of the state. Mr. Miller said that although he takes on about 50 new cases a year, there is always a possibility for a previous client to request his representation for a medical dispute, which he usually will not refuse to take on. His main focus is to get his clients their necessary medical care. Obtaining medical records to support his client's case is difficult. Mr. Jennings asked Ms. Terri Smith Walters a series of questions regarding medical disputes. She said she does not personally request utilization reviews or peer reviews, as those requests come from and are paid by her clients. She stated the average cost of an independent medical exam could be between $300 and $3500. Her firm handles no more than five medical dispute cases per month. Some of the disputes do not require a brief or a hearing. She stated the average attorney fees for medical disputes in the case of her firm are around $600 due to limited involvement and she is required to file motions for approval of attorney fees with the Department of Workers’ Claims. Very few of the medical disputes have an appeal, but most of those cases involve an actively practicing workers’ compensation attorney. Normally, attorneys representing claimants will tell their clients to go to their physician to obtain a medical report, but there are times doctors participate in conferences telephonically.
Answering a question regarding occupational disease, hearing loss, and cumulative trauma claims from Mr. Tim Wilson, Ms. Terri Smith Walters stated that there should be some type of universal statute of limitations and she agrees with the decision made in the Manalapan Mining Company Inc. v. Lunsford case. She also said she supports a minimum period of employment concerning cumulative trauma. Responding to another question from Mr. Wilson, Mr. Scott Miller said that age related claims under the present law allow injured workers to receive a maximum of either two years of benefits or benefits are capped at the normal retirement age. Mr. Miller and Ms. Terry agreed that employees in the workforce are working longer and working to older ages compared to 25 years ago. Mr. Miller agreed that there is value in keeping older workers in the workforce. Mr. Miller said as a plaintiff attorney there is always a risk of loss in any case taken, and there is a contingent nature. Ms. Terri Smith Walters agreed with Mr. Wilson when he said that as a defense attorney, her firm gets paid for every case handled, unlike Mr. Miller. Ms. Donna Terry said over the years, with amendments and additional case law, the complexity of litigation has substantially increased. Mr. Miller agreed with Mr. Wilson when he stated the litigation costs for complex cases involving occupational diseases have increased over the years. Mr. Miller said Mr. Wilson was correct when he said for a person with a zero to five percent impairment, they only receive 0.65 percent of the value of their impairment. Mr. Miller noted there was not always a correlation between impairment ratings and the degree of occupational disability or limitations. Mr. Miller noted this is a fundamental problem with the system. The ALJ has no discretion to determine occupational disability based on the injury and its effect on the claimant.
A discussion took place regarding the cost to the insurance carrier of issuing a benefit check. Ms. Walters indicated there were not many low awards where this issue would come into play. Mr. Wilson indicated he had heard the cost of issuing the check may often be more than the amount of the check. Michelle Landers indicated the cost of issuing the check was nowhere near the $28 figure cited by Mr. Wilson. Melissa Stevens noted most payments are direct deposit so the cost is minimal. Ms. Landers indicated most payments are automated.
Mr. Bill Londrigan questioned Mr. Miller on the issue of capping average weekly wage. He stated such a cap unduly affects high wage earners as it causes a loss of income. Mr. Miller noted most high wage earners want to return to work as soon as possible. Those claimants also do not understand why they are making much less while on TTD.
Addressing a statement from Mr. Carl Breeding about the value of vocational retraining, Mr. Scott Miller said that vocational training is a great idea and he always discusses it with his clients. He noted that vocational benefits are limited to one year.
Responding to Ms. Melissa Stevens, Ms. Donna Terry said there would be a violation of due process with a summary judgement implementation in workers’ compensation. A discussion was held regarding an insufficient Form 101 being returned to the filer. Ms. Terry noted there are already steps in place to ensure that the Form 101 has all required information and to return the Form 101 if necessary and to allow the filer to correct deficiencies. Answering another question from Ms. Stevens, Ms. Terri Smith Walters reiterated that her suggestion that a claimant can elect a lump sum for indemnity benefits if the award were less than $25,000.00 and have a buyout of medical expenses tied to the settlement. Ms. Donna Terry said there may be some constitutional issue with Ms. Walters’ suggestion. Ms. Stevens brought up the issue as to whether vocational rehabilitation can be mandated. She noted that many states mandate vocational retraining. She questioned whether penalties can be assessed if the claimant refuses to undergo recommended vocational training. Ms. Walters noted a breakdown in the vocational process after the award is final. She suggested leaving the case in the jurisdiction of the ALJ until the vocational evaluation is completed and recommendations are made and followed.
Mr. Jeff Roberts stated that the current statute addresses the penalty for refusal to complete vocational retraining. A discussion was held regarding whether the penalty relates to refusal to complete a vocational evaluation or actually undergo training. Commissioner Lovan explained the different aspects of enforcing vocational rehabilitation and indicated that often times vocational rehabilitation is seen as a throw away item during settlement discussions and is not seriously considered. He stated that the ALJ can order benefits upon presentation of a vocational plan by either party. Mr. Jennings indicated that the resources are not available to provide meaningful services.
Mr. Joe Dawahare asked Mr. Miller if an increase in attorney fees would necessarily result in a reduction in benefits to the claimant since the claimant pays the attorney fee. Mr. Miller said he did not necessarily agree with the statement that an increase in attorney fees would necessarily result in a decrease in the injured workers’ benefits.
Steve Barger commented that the task force should aim to eliminate any adversarial aspects of the system and referred to the mandate set forth in HCR 185. He requested more discussion within the group. Co-chair Harris encouraged all members of the task force to discuss the issues with each other and come to any consensus on ways to improve the workers' compensation system for all parties.
There being no further business, the meeting was adjourned at 12:26 p.m.