BILL ANALYSIS �
Senate Committee on Labor and Industrial Relations
Ted W. Lieu, Chair
Date of Hearing: April 27, 2011 2011-2012 Regular
Session
Consultant: Gideon L. Baum Fiscal:Yes
Urgency: No
Bill No: SB 863
Author: Lieu
Version: As Amended April 14, 2011
SUBJECT
Workers' compensation: liens.
KEY ISSUE
Should the Legislature require that all workers' compensation
liens must be in writing and filed within a specific period of
time?
PURPOSE
To require that workers' compensation liens are filed in writing
and that their filing is bound by a statute of limitations.
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 requires the administrative director of the
Division of Workers' Compensation (DWC) to adopt and
periodically revise an Official Medical Fee Schedule (OMFS) to
establish reasonable maximum medical fees for medical services.
(Labor Code �5307.1)
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 prohibits a lien claim for expense filed with the
WCAB six months from the final decision or order of the WCAB,
five years from the date of the injury, or one year from the
date services were provided, whichever is later. (Labor Code
�4903.5)
Existing law addresses allowance and payment of liens for
unemployment compensation benefits, and provides that if a
notice is given in writing to the insurer or employer of a lien,
the claim is a lien payable against any amount payable as
temporary or permanent disability compensation, subject to the
determination of the amount and approval of the lien by the
WCAB.
(Labor Code �4904)
This bill requires liens claimants to file its liens in writing
with the Workers' Compensation Appeals Board (WCAB), accompanied
by a full statement or itemized voucher supporting the lien and
justifying the right to reimbursement. The written lien filing
must also include proof of service on the injured worker,
employer, insurer, and other interested parties.
This bill prohibits the filing of a lien claim for expenses
after three years from the date services were provided, nor more
than 18 months after the date the services were provided if the
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Senate Committee on Labor and Industrial Relations
services were provided on or after July 1, 2012 . This bill
would also automatically dismiss any liens that were not filed
and served within this time period.
This bill clarifies that if a notice is given in writing to the
insurer or employer of a lien in favor of the Employment
Development Department (EDD), the claim is a lien payable
against any amount payable as temporary or permanent disability
compensation, subject to the determination of the amount and
approval of the lien by the WCAB.
This bill also contains technical language to ensure uniform
application of lien timelines and written lien filings.
This bill also provides language clarifying legislative intent
on lien filings and that amendments clarifying EDD and workers'
compensation liens are declarative of existing law.
COMMENTS
1. What is a Workers' Compensation Lien?
Within the workers' compensation system, liens involving
medical services or benefits are direct claims against the
defendant (either the employer or the insurer of the employer)
for medical benefits or services provided by the lien claimant
which the lien claimant believes the employer was required to
provide due to a worker's industrial injury. The lien
claimant may not pursue the lien against an injured worker
unless the injury is ruled to be non-industrial, and therefore
outside the workers' compensation system.
In short, liens serve as a vehicle for contesting the
employer's determination (or the determination of the
employer's insurer) of the amount payable for medical goods or
services.
2. Need for this bill?
In January of this year, the Commission on Health, Safety, and
Workers' Compensation (CHSWC) released a report on workers'
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Senate Committee on Labor and Industrial Relations
compensation liens. The report found that workers'
compensation liens are both a "cause and result of serious
distress in the workers' compensation system." The report
went on to state that 35% of the Los Angeles branch of the
Workers Compensation Appeals Board (WCAB) is consumed with
addressing workers compensation liens, and that statewide
450,000 liens are expected to be filed in 2011, with employers
and insurers setting aside $200 million per year on loss
adjustment expenses to handle medical liens. The report went
on to discuss and recommend a series of statutory changes that
could help to alleviate the situation.
This bill seeks to focus on several of the report's
less-controversial recommendations suggested by the CHSWC
report dealing with "stale liens": requiring that workers'
compensation liens must be in writing and cannot be implied,
and that a statute of limitations applies on the filing of the
workers' compensation liens.
On requiring that the liens be in writing, SB 863 seeks to
address several WCAB decisions which, when taken as a
totality, allow for a lien to be implied when a bill or notice
is provided to the employer or insurer, rather than actually
filed with the WCAB. This was highlighted in a 2007 WCAB
decision which utilized Labor Code Section 4904, which
addresses Employment Development Department (EDD) liens, but
contains open-ended language that appears to allow implied
liens.
These decisions have also undermined statute of limitation
language that came into effect in 2003, but, due to WCAB
decisions, does not universally control the length of time
that a lien can be filed. Prior to 2003, however, there was
no statute of limitations whatsoever. This has created a
market for third-parties to purchase "stale" or "zombie" liens
from medical providers and hospitals, which are old bills that
were in dispute at one time, but were paid at the fee
schedule. Frequently, the hospital or medical provider will
bill at a rate in excess of the fee schedule, allowing for
third parties to lien to remainder of the bill, no matter the
bill's age, if the bill is from before 2003. These liens
disputes cost a significant amount of money and do not provide
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Senate Committee on Labor and Industrial Relations
any benefits to injured workers.
By requiring a statute of limitations and clearly stating the
liens must be in writing, SB 863 would ensure that all parties
were aware of liens as they were created, as well prevent the
creation of third-party liens that create significant costs
within the workers compensation system without providing
benefits to the injured workers.
3. Proponent Arguments :
Proponents argue that there are currently hundreds of
thousands of liens clogging the workers compensation appeals
process, which prevents the appeals process from operating
appropriately and ensuring that injured workers receive the
benefits that they are constitutionally required to receive.
Proponents also note that these liens are frequently quite old
and not compensable because they are in excess of the fee
schedule. Proponents believe that SB 863 will help to clear
the appeals process from unnecessary liens by requiring that
liens be in writing and served on all parties, as well as
capped by a reasonable statute of limitations to ensure that
liens will be filed and processed in a timely manner.
4. Prior Legislation :
AB 749 (Calderon), Statutes of 2002, Chapter 6, among other
things, creates the current statute of limitations of workers'
compensation liens filings discussed earlier in this analysis.
SUPPORT
California Association of Joint Powers Authorities (CAJPA)
(Sponsor)
California Chamber of Commerce
California Coalition on Workers' Compensation
California Medical Association (CMA)
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Senate Committee on Labor and Industrial Relations
California Special Districts Association
California State Association of Counties (CSAC)
CSAC Excess Insurance Authority
League of California Cities
OPPOSITION
None on file.
Hearing Date: April 27, 2011 SB 863
Consultant: Gideon L. Baum Page 6
Senate Committee on Labor and Industrial Relations