Court Case Update, Countrywide: June 2018

Challenges to State Adoption of Third-Party Guides

Recent Decision:

The Court of Appeals of Kansas ruled in Pardo v. UPS, that the workers compensation law requiring the use of the 6th Edition of the American Medical Association (AMA) Guides to rate disability for injuries occurring after January 1, 2015, was unconstitutional as applied to the claimant. The court found that mandatory use of theAMA Guides’ 6th Edition—which prevented the assignment of an impairment rating for the claimant’s work-related injury and resulted in a denial of workers compensation benefits—unconstitutionally deprived the claimant of an adequate remedy for his injury.

Ongoing Cases:

Kansas has another pending challenge to the mandatory use of the 6th Edition of the AMA Guides to assign disability ratings in Johnson v. US Food Service. The Court of Appeals of Kansas heard oral arguments in Johnson on April 17, 2018. Oklahoma also has at least three pending challenges to use of the 6th Edition of the AMA Guides, including Hill v. American Medical Response, on which the Oklahoma Supreme Court heard oral arguments on March 19, 2018. In addition, a group of injured workers brought a constitutional challenge to Texas’ use of the Official Disability Guidelines (ODG) in Holt v. Texas Department of Insurance Division of Workers’ Compensation. Similar to the AMA Guide challenges, the claimants argue that the use of the ODG is an improper delegation of legislative authority. The case is currently pending in an appellate court.

Developments in the courts may spur legislative action to address court rulings, similar to the legislation introduced in Pennsylvania in response to the state’s supreme court decision striking the “most recent edition” of the AMA Guides in Protz v. Workers Compensation Appeals Board. With numerous states adopting the AMA Guides and ODG to aid in the administration of workers compensation, stakeholders will continue to watch how the courts rule in these challenges.

Developments in Marijuana

As highlighted in NCCI’s Hot Topics Focus on Marijuana Legalization: Five Things You Need to Know, legalization of medical and recreational marijuana is an ongoing trend across the states. While states continue to adopt laws decriminalizing marijuana use, the courts continue to consider cases involving the impact of these state marijuana laws on workers compensation and the workplace.

Marijuana Reimbursement Under Workers Compensation:

To date, five states have authorized reimbursement—Connecticut, Minnesota, New Jersey, New York, and New Mexico. The following cases address the marijuana reimbursement issue:

• Maine — In Bourgoin v. Twin Rivers Paper Co., the Maine Supreme Court recently found that an employer is not required to reimburse for medical marijuana as a workers compensation treatment. The court determined that because marijuana remains illegal under the federal Controlled Substances Act, Maine’s medical marijuana law is preempted and cannot be used as the basis to require reimbursement.

• Vermont — In Hall v. Safelite Group, Inc., the Vermont Department of Labor denied reimbursement for marijuana treatment for a workers compensation claimant, finding that although marijuana would constitute necessary medical treatment, the state medical marijuana law should not be construed to require employers to reimburse for the cost of medical marijuana.

• New York — In Vornado Realty, the New York Workers Compensation Board held that it has the authority to require that insurers reimburse for marijuana as a workers compensation treatment when marijuana is prescribed by a certified medical provider under a 2017 amendment to the Public Health Law, which allows medical marijuana prescriptions for chronic pain.

• Connecticut — Petrini v. Marcus Dairy, Inc., a case reviewing a workers compensation commission decision that use of medical marijuana is reimbursable and constitutes reasonable and necessary medical treatment, was settled in March 2018 before the Connecticut Supreme Court rendered a decision.

Marijuana and the Workplace:

In February 2018, a Maine law went into effect that legalizes recreational marijuana and provides protection from adverse employment action based on marijuana use outside of the workplace. While states like Maine endeavor to add clarity to marijuana’s impact and relationship to the workplace, courts across the country continue to review employment-related marijuana questions.

• Arizona — The case of Terry v. UPS, Inc., pending in the federal District Court for the District of Arizona, is slated to address whether an Arizona employer that fired an employee for testing positive for marijuana violated state and federal discrimination laws if the employee is an authorized medical marijuana user. Arizona’s medical marijuana law contains anti-discrimination provisions. 

• Connecticut — The case of Noffsinger v. SSC Niantic Operating Co. is still pending in the federal District Court for the District of Connecticut after the court denied the defendant’s motion to dismiss, finding that a medical marijuana user could sue a prospective employer for rescinding a job offer based on a positive drug test. 

• Massachusetts — Barbuto v. Advantage Sales and Marketing, LLC, was settled in March 2018, after the state’s highest court ruled that a medical marijuana user, terminated after testing positive for marijuana, could proceed with a claim against her employer based on the state’s disability discrimination statute. As the case settled before the courts determined liability, it remains to be seen whether employers in Massachusetts will ultimately face liability for adverse employment actions taken against medical marijuana users.

• Montana — The case of Carlson v. Charter Communications, pending in the federal Court of Appeals for the Ninth Circuit, is expected to address questions related to the federal Drug-Free Workplace Safety Act of 1988 and the constitutionality of Montana’s Medical Marijuana Act. The case involves a wrongful discharge and discrimination suit brought against an employer that terminated an employee—a state authorized medical marijuana user—who tested positive for marijuana after a workplace motor vehicle accident.

The legalization of recreational and medical marijuana at the federal and state levels is dynamic. At the federal level, marijuana remains illegal and classified as a Schedule I drug under the Controlled Substances Act, and in February 2018, a federal court dismissed the case of Washington v. Sessions that sought to declare unconstitutional the classification of marijuana as a Schedule I drug (the case was subsequently appealed on March 30, 2018). However, several bills addressing the legalization of marijuana are pending before Congress. In April 2018, Senate Minority Leader Chuck Schumer announced plans to introduce new legislation to decriminalize marijuana, and in June 2018, the House and the Senate each introduced bills to amend the Controlled Substances Act to allow for state regulation of marijuana without federal interference.

At the state level, 2018 saw at least 25 states consider legislation to legalize medical and/or recreational marijuana, and one state, Vermont, legalized recreational use. With the recent enactment of Maine’s marijuana law providing protections for recreational users, and at least nine states (AZ, CT, DE, IL, ME, MN, NV, NY, and RI) having anti-discrimination or reasonable accommodation provisions in their medical marijuana laws, it is likely that the courts will continue to see challenges relating to workplace policies and reimbursement of marijuana in workers compensation. For the foreseeable future, the marijuana landscape will likely remain a state-by-state patchwork with courts being actively engaged in interpreting law.

Air Ambulance Reimbursement: State v. Federal Law

The issue of whether state laws establishing air ambulance reimbursement rates are preempted by the federal Airline Deregulation Act of 1978 (ADA) continues to be debated in federal and state forums.

Recent Decisions:

On May 8, 2018, the federal Court of Appeals for the Eleventh Circuit held, in Bailey v. Rocky Mountain Holdings, LLC, that the ADA preempts a provision of Florida’s automobile insurance law. The court found that fees billed for air ambulance services provided in auto accidents are governed by the ADA and are not subject to the state’s auto insurance statute prohibiting medical providers from billing policyholders for amounts not paid by the insurer. On May 22, 2018, in Scarlett v. Air Methods Corp., the federal District Court for the District of Colorado dismissed a proposed class-action lawsuit and upheld the constitutionality of the ADA, finding that the ADA is not arbitrary or irrational and preempts the application of state common law principles to determine a reasonable price for air ambulance services. And on June 15, 2018, the Court of Appeals of Kansas ruled in Eaglemed, LLC v. Travelers Insurance, that the ADA preempts Kansas state law regulating air ambulance charges.

Ongoing State and Federal Cases:

Texas

• State case — In early 2018, a Texas court of appeals in PHI Air Medical, LLC v. Texas Mutual Insurance Co., ruled that the ADA preempts state workers compensation laws that limit reimbursement rates and implement fee schedules for air ambulance services. The decision has been appealed and is currently pending in the Texas Supreme Court.

• Federal case — Air Evac EMS, Inc. v. State of Texas, Department of Insurance, is still pending in the federal District Court for the Western District of Texas. In addition to the ADA preemption issue, this case also challenges the workers compensation prohibition against balance billing, which prevents a healthcare provider from pursuing a private claim against a workers compensation claimant.

West Virginia

• Federal cases — Two air ambulance challenges out of West Virginia are pending in the federal courts: Air Evac EMS, Inc. v. Cheatham, currently in the federal Court of Appeals for the Fourth Circuit after the federal district court found that the ADA preempts state laws limiting reimbursements rates, and Cox v. Air Methods Corp., in the federal District Court for the Southern District of West Virginia.

While state and federal courts have recently found that the ADA preempts state law, it remains to be seen if ultimate clarity on the issue will be provided by the courts. With potential for insurers — and possibly employers and injured workers—being required to pay full air ambulance fees billed in workers compensation cases, stakeholders may expect to see increasing efforts to advance pending federal legislation. S.471, currently pending in the Senate Committee on Commerce, Science, and Transportation, proposes to preserve state authority to regulate air ambulance billing. H.R.4, which passed the House and is currently on the Senate Legislative Calendar, proposes to create an advisory committee charged with establishing increased air ambulance fee transparency and consumer protections. More recently, on May 1, 2018, members of the National Association of Insurance Commissioners sent a letter to members of Congress expressing their support for S.471 and H.R.4.

More information on air ambulances and workers compensation can be found in NCCI’s Keeping an Eye on Air Ambulance Costs

Attorney Fee Challenges

Courts throughout the country continue to review questions relating to attorney fees in workers compensation cases. In the Holt v. Texas Department of Insurance Division of Workers’ Compensation case (previously mentioned herein as a challenge to the ODG), claimants challenge Texas’ 25% cap on attorney fee awards. Workers compensation attorney fees also appear to be an ongoing issue in Florida, with the Florida First District Court of Appeal reversing a judge of compensation claims administrative decision denying attorney fees in Portu v. City of Coral Gables, and finding in Willoughby v. Madison Correction Institute that the JCC cannot reduce stipulated/agreed upon attorney fees to be paid by the employer/carrier (based on the court’s November 2017 rulings in Gomez v. Frank Crum, Inc. and Banegas v. ACR Environmental, Inc.).

In Arkansas, the state’s supreme court ruled in Arkansas Game and Fish Commission v. Gerard, that the employer/carrier is responsible for the full award of attorney fees, including the portion commonly paid by the claimant, when the benefit-offset statute reduced the claimant’s receipt of indemnity benefit payments to $0.

And in a case of first impression, the Alaska Supreme Court ruled in Burke v. Raven Electric, Inc., that a statute that bars the assessment of attorney fees against an injured worker in a non-prevailing claim extends to a non-prevailing claim by a beneficiary/representative of a deceased claimant (the court also upheld the constitutionality of the exclusive remedy and death benefit statutes from a due process and equal protection challenge).

While the courts continue to decide cases involving attorney fee issues, state legislatures also continue to discuss changes to the attorney fee award structure in workers compensation. For example, in Florida, since the Florida Supreme Court in 2016 struck down the attorney fee schedule as unconstitutional in Castellanos v. Next Door Company, legislation was introduced to address attorney fee awards in both the 2017 and 2018 sessions. However, the most recent Florida legislative session ended in March 2018, without any of the workers compensation attorney fee bills becoming law.

Other State Developments

Oklahoma Update

Challenges to various aspects of Oklahoma’s reformed workers compensation law—such as the temporary total disability maximum and vocational rehab provisions—are continuing into 2018. More recently, in Strickland v. Stephens Production Co., the Oklahoma Supreme Court held a portion of a statute that granted automatic exclusive remedy protection to owner/operators of an oil and gas well site, as an unconstitutional special law. The court ruled that the statutory provision arbitrarily carved out a subclass of employers (oil and gas well owner/operators) that are automatically given immunity, regardless of the facts of the case.

Kansas — Benefit Offsets Upheld

In Hamilton v. Walmart, the Kansas Court of Appeals followed a previous ruling by the Kansas Supreme Court in Hoesli v. Tripplet, Inc., and upheld a state law requiring that Social Security retirement benefit payments be offset from a compensation award.

Kentucky — Pending Federal and State Cases

A constitutional challenge to Kentucky’s medical fee schedule being applied to an out of state hospital is pending in the federal District Court for the Eastern District of Kentucky in Doctors Hospital of Augusta, LLC v. Commonwealth of Kentucky. In Napier v. Enterprise Mining Co., a Kentucky Court of Appeals decision striking down a statute that eliminated income benefits when a hearing impairment resulted in less than 8% total impairment per the AMA Guides, has been appealed to the Kentucky Supreme Court.

South Dakota — Agricultural Worker Exclusion

In Bangtson v. Charles Baker Trucking, LLC, the federal District Court for the District of South Dakota is faced with a question similar to what was found unconstitutional by the New Mexico Supreme Court in the 2016 Rodriguez v. Brand West Dairy case. In Bangtson, an injured worker raises a due process and equal protection constitutional challenge to the South Dakota Workers Compensation Act’s exclusion for farm and agricultural laborers. These provisions have also been under review by legislatures across the states. For example, in the 2018 legislative session, Oklahoma passed a bill (HB 2722) amending its workers compensation statutes to add “ranching” workers to the existing agriculture worker exclusion for workers compensation coverage. In New York, the legislature is considering a bill (S 2721) that would amend the law to offer workers compensation benefits to farm laborers.

Missouri — Enhanced Mesothelioma Benefits

In Missouri, courts are reviewing the application of a workers compensation provision that provides additional benefits for mesothelioma claims filed after January 1, 2014. Recently, in Accident Fund Insurance Co. v. Casey, the state supreme court upheld the constitutionality of the law and found that the employer’s current workers compensation policy and insurer—which was not the insurer in 1990 when the deceased worker was last exposed to asbestos, which caused mesothelioma—provide coverage for the additional mesothelioma benefits. In Hegger v. Amerisure Insurance Co., the court of appeals is considering whether the workers compensation insurer of an employer that ceased to exist before the statute became effective in 2014 can be liable for the enhanced benefits to the estate of a deceased worker who was last exposed in 1984.

Montana — Constitutional Challenges

In Ramsbacher v. Jim Palmer Trucking, the Montana Supreme Court recently upheld as constitutional a workers compensation statute that extends exclusive remedy protection to the professional employer organization (PEO) and to the PEO client, as the “immediate employers” of an injured PEO employee. The Montana Supreme Court will also review a lower court decision dismissing a constitutional challenge to the workers compensation independent medical examinations statute, inRobinson v. State Compensation Mutual Insurance Fund.

Massachusetts — Misclassification

In Ives Camargo’s Case, the Massachusetts Supreme Judicial Court confirmed that the differing definitions and methods to determine employment status found throughout the state’s laws do not apply when determining whether an injured worker is an employee eligible for workers compensation benefits. Specifically, the court found that the definition of employee in the independent contractor statute does not displace the definition under workers compensation law and therefore, is not applicable to workers compensation claims.

Vermont — Workers Compensation for Interns and Volunteers

In Lyons v. Chittenden Central Supervisory Union, the Supreme Court of Vermont concluded that student teaching experience required to obtain a state license is considered “wages” so as to qualify an unpaid student teaching intern as a “worker or employee” eligible for workers compensation. More recently, in Perrault v. Chittenden County Transportation Authority, the Supreme Court of Vermont concluded that a driver providing public transportation services was not an employee eligible for workers compensation benefits but, rather, was a volunteer. The driver’s receipt of a per-mile payment for services constituted a reimbursement of expenses and did not qualify as “wages” required to establish an employment relationship.

California — Exclusive Remedy for Utilization Review

On May 29, 2018, the California Supreme Court heard oral arguments in King v. CompPartners, Inc., a case that is expected to determine whether a utilization review physician and service provider receive workers compensation exclusive remedy protection, or whether utilization review physicians owe a duty of care to the injured worker and may be subject to civil liability for injuries resulting from their decisions.

Texas — Right to Recover from a Third Party

In Wausau Underwriters Insurance Co. v. Wedel, the Texas Supreme Court held that an insurer that waived its right of recovery for workers compensation benefits paid to an injured worker, could not recover reimbursement for those payments from settlement proceeds the injured worker received from a liable third party. The court found that the insurer’s waiver of the right to recover directly from a third party that caused work related injuries also waived indirect recovery from the settlement proceeds paid by the liable third party to the injured employee.

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