BILL ANALYSIS Ó
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: April 25, 2012 2011-2012 Regular
Session
Consultant: Gideon L. Baum Fiscal:Yes
Urgency: No
Bill No: SB 1105
Author: Lieu
As Introduced/Amended: April 16, 2012
SUBJECT
Workers' compensation: liens.
KEY ISSUE
Should the Legislature allow a self-insured employee welfare
benefit plan to file a living expense lien before the Workers
Compensation Appeals Board if the plan provided benefits to an
injured worker?
PURPOSE
To allow a self-insured employee welfare benefit to be
reimbursed through a living expense lien against a temporary
disability indemnity award for benefits provided from the
employee-funded employee welfare benefit plan.
ANALYSIS
Existing law establishes a workers' compensation system that
provides benefits to an employee who suffers from an injury or
illness that arises out of and in the course of employment,
irrespective of fault. This system requires all employers to
secure payment of benefits by either securing the consent of the
Department of Industrial Relations to self-insure or by securing
insurance against liability from an insurance company duly
authorized by the state.
Existing law provides that no claim for workers compensation or
workers compensation award is subject to be taken for the debts
of the party, except as provided through the workers'
compensation liens process. (Labor Code §4901)
Existing law provides that no workers' compensation benefit,
whether awarded or voluntarily paid, shall be paid to any
attorney at law or in fact or other agent, but shall be paid
directly to the claimant entitled thereto unless otherwise
ordered by the appeals board. No payment made to an attorney at
law or in fact or other agent in violation of this section shall
be credited to the employer. (Labor Code §4902)
Existing law permits the Workers' Compensation Appeals Board
(WCAB) to determine and allow liens against any sum to be paid
as compensation for a variety of services or expenses.
Allowable liens include a reasonable fee for legal services, the
reasonable expense incurred in the provision of medical
services, and the reasonable value of living expenses of an
injured employee subsequent to the injury. (Labor Code §4903)
Existing law provides that when a compromise of a workers'
compensation claim or an award is submitted to the appeals
board, arbitrator, or settlement conference referee for
approval, the parties shall file with the appeals board,
arbitrator, or settlement conference referee any liens served on
the parties. (Labor Code §4903.1)
Existing law provides that when the referee issues an award
finding that an injury or illness arises out of and in the
course of employment and makes an award for temporary disability
indemnity, the appeals board shall allow a lien as living
expense for benefits paid by a group disability policy providing
loss of time benefits.
Such lien can only be allowed:
a) To the extent that benefits have been paid for the same
day or days for which temporary disability indemnity is
awarded and shall not exceed the award for temporary
disability indemnity; and
b) If the group disability policy provides for reduction,
exclusion, or coordination of loss of time benefits on
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Senate Committee on Labor and Industrial Relations
account of workers' compensation benefits.
(Labor Code §4903.1 (a)(3))
This bill would allow a self-insured employee welfare benefit
plan to file a living expense lien in the same manner and with
the same restrictions as a group disability policy providing
loss of time benefits, with the exception of the requirement of
the plan providing a reduction, exclusion, or coordination of
loss of time benefits on account of workers' compensation
benefits, as this does not apply to an employee welfare benefit
plan.
This bill would also, for the purposes of filing the lien,
define a self-insured employee welfare benefit plan as:
a) Any plan or program of benefits provided by an employer
or an employee organization, or both, for the purpose of
providing hospital, medical, surgical, nursing, or dental
services, or indemnification for the costs incurred for
those services, to the employer's employees or their
dependents; and
b) A plan which provides benefits arising from a
disability, including but not limited to payment of living
expenses.
COMMENTS
1. Need for this bill?
SB 1105 seeks to address a narrow area of workers'
compensation liens: living expense liens filed by self-insured
employee welfare benefit plans. Unlike medical-legal liens,
which have been the focus of recent legislation and studies
and are a mechanism for contesting employer determinations on
appropriate medical care or reimbursement, this area of the
liens world is largely stable and non-controversial. This is
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Senate Committee on Labor and Industrial Relations
due to long-standing statutes and case law on claims and debts
in the workers' compensation system.
Since 1917, the workers' compensation system has prohibited
anyone from taking any portion of a workers' compensation
award due to debt. The only mechanism available to settle
claims against a workers' compensation award is through the
workers' compensation liens process, which is somewhat narrow.
As discussed in Ogden v. WCAB (1974) and favorably quoted in
Prudential v. WCAB, 22 Cal. 3d 776 (1978):
ÝT]he chapter on the payment of claims was intended to remove
workers' compensation awards from the operation of the usual
remedies available to creditors, to limit and regulate the
kinds of debts for which liens are allowed, and to insure the
award is available to the injured employee for his recovery
and rehabilitation.
In the Prudential decision, the California Supreme Court
further shielded injured workers for the possibility of
predatory collection against workers' compensation awards. In
that case, a worker had received payments in lieu of salary
through a group disability policy through Prudential Insurance
and the policy provided that such payments would be reduced by
a workers' compensation award. When the injured worker sought
benefits through the workers' compensation system, Prudential
Insurance sought to recover funds paid in excess of the
workers' compensation award through the workers' compensation
liens process.
In their decision, the Court refused to allow Prudential to
recover funds they had paid. Instead, the Court interpreted
the Legislature's statutory lien provisions as limiting liens
to medical costs and benefits or services provided directly
relating to those medical costs. In 1979, the Legislature
largely codified the spirit of the Prudential decision,
creating a narrow addition to allowable living expense liens
for group disability plans, but made clear that the lien could
not be in excess of awarded temporary disability benefits.
The sponsor of this measure, the California Correctional Peace
Officers Association, reports that their union-run employee
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Senate Committee on Labor and Industrial Relations
welfare benefit plans, which is an employee-funded entity,
provides salary continuation and living expense benefits from
the welfare benefit plan, with the understanding that the
funds of their fellow workers will be repaid at a later date
from future funds, which could include workers' compensation
awards. However, if injured worker declines to repay the
employee welfare benefit plan from a workers' compensation
award, the fund is prevented from recovering the funds,
leaving the employee-funded plan with a shortfall.
SB 1105 seeks to rectify this by broadening the narrow
exemption for group disability plans to include self-insured
employee welfare benefit plans. Like group disability plans,
self-insured employee benefit plans would be limited to
temporary disability benefits paid for the same day or days
for which temporary disability indemnity is awarded and shall
not exceed the award for temporary disability indemnity
benefits.
2. Proponent Arguments :
The sponsor of this measure, the California Correctional Peace
Officers Association (CCPOA) argues that would allow the CCPOA
Benefit Trust Fund and other self-insured employee welfare
benefit plans, to recover, through a lien, amounts advanced to
its members for living expenses while their workers'
compensation case is being delayed for investigation or
pending resolution before the Workers' Compensation Appeals
Board. CCPOA argues that, currently, the Trust has to
initiate a civil case if the member does not comply with
her/his agreement and return the funds advanced by the Trust
upon resolution of the case by the Board. SB 1105 would
simply allow the Trust to place a lien with the Board to
directly recover the monies in a straight-forward manner and
efficient manner.
3. Prior Legislation :
SB 457 (Calderon), Statutes of 2011, Chapter 564, requires the
Workers Compensation Appeals Board (WCAB) to allow a lien in
excess of the Official Medical Fee Schedule (OMFS) when it is
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Senate Committee on Labor and Industrial Relations
found that a self-insured employee welfare benefit plan
provided benefits outside of the workers' compensation system
SUPPORT
California Correctional Peace Officers Association (Sponsor)
OPPOSITION
None on file.
Hearing Date: April 25, 2012 SB 1105
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Senate Committee on Labor and Industrial Relations