On May 4, 2012, the Alabama Court of Civil Appeals released its decision in the case of Denmark v. Industrial Manufacturing Specialists, Inc. In that case, the Court addressed whether a 16 year old boy who suffered an ankle injury was entitled to double compensation, and whether he was entitled to be compensated according to the schedule for his leg or only for his foot. Lucas Denmark worked part time for IMS, cutting metal-bar stock using a band saw. In March 2006, he and another employee were loading bar stock onto a table, when some of it fell on his left ankle. Denmark had surgery and a metal plate was inserted in his ankle. Although he was eventually released to return to work without any restrictions, Denmark continued to complain of pain that radiated both down to his foot and up his leg. A Circuit Court Judge in Morgan County found that Denmark suffered a 10% partial loss of use of his left foot, and that since IMS had already paid TTD benefits in excess of the value of the 10% PPD, Denmark was not entitled to any additional compensation for his injuries. The trial Court also found that IMS had violated child labor laws by employing Denmark to operate a band saw, but found that he has not entitled to double compensation because there was no nexus between operating the saw and the injury.

Denmark appealed, asserting that the trial Court erred in failing to award him compensation for the partial loss of use of his leg as opposed to just his foot, and that it further erred in failing to award double compensation pursuant to § 25-5-34 after finding that IMS employed him in violation of child labor laws. Denmark argued that since his ankle is above his foot and the pain extended to his leg, he should be compensated for the partial loss of use of his leg. Denmark argued that the Court’s holdings in Boise Cascade Corp. v. Jackson, 997 So.2d 1026, 1032 n. 8 (Ala.Civ.App. 2000), Wolfe v. Dunlop Tire Corp., 660 So.2d 1345 (Ala.Civ.App. 2005), and Simpson v. Dallas Selma Cmty. Action Agency, 637 So.2d 1360 (1994) dictated that an injury extending from a larger scheduled member into a smaller scheduled member must be compensated as an injury to the larger member. However, the Court noted that according to § 25-5-57(a)(3)a.15 of the Act, the amputation of a leg between then knee and ankle shall be considered the equivalent of the loss of the foot. Since there was no evidence that Denmark’s pain extended up his leg beyond his knee, and based on the logic of § 25-5-57(a)(3)a.15, the trial Court properly found that Denmark’s injury was one limited to the foot, and not the leg.

However, the appellate Court reversed the trial Court’s decision regarding double compensation. There was no dispute that minors are prohibited from operating saws, and there was no dispute that moving large pieces of bar stock to put them into the saw was part of Denmark’s job. As such, the Court found that although Denmark was not actually operating the band saw at the time of the accident, Denmark was entitled to double compensation because he was working at a job that he was prohibited from doing due to his age.

As previously reported on August 5, 2011, the Alabama Court of Civil Appeals held in the case of Cascaden v. Winn-Dixie Montgomery, LLC that an employer need not rely upon an employee’s misrepresentation of his physical or mental condition in order to prevail on the misrepresentation defense contained in § 25-5-51 of The Alabama Workers’ Compensation Act. In Cascaden, the Court recognized that Alabama law actually provides for two separate defenses that involve an employee’s misrepresentation of his or her physical or mental condition: (1) a judicially created defense arising out of the Alabama Supreme Court’s decision in Ex parte Southern Energy Homes, Inc., 603 So.2d 1036 (Ala.1992), and (2) the defense created by § 25-5-51. According to the Court in Cascaden, the judicial misrepresentation defense applies only if the employer has relied on the false representation when making the decision to hire the employee, while the statutory misrepresentation defense, on the other hand, does not expressly require reliance on the part of the employer.

While the § 25-5-51 statutory defense relieves the employer of its obligation to pay compensation benefits (indemnity and vocational benefits), the Alabama Courts have not directly addressed whether medical benefits must still be paid when the employer successfully asserts the judicially created misrepresentation defense. However, based on the judicial history of that defense, it only stands to reason that medical benefits would not be owed. To arrive at this conclusion, we need to look no further than the Court’s opinion in Ex parte Southern Energy Homes. In that case, the employer’s core argument was that the Court should extend to cases involving accidental injuries the application of the workers’ compensation statute providing that an employee who misrepresents his physical condition regarding an occupational disease is barred from recovering all benefits. That statute, which is currently codified at § 25-5-115, is clear that an employee who falsely represents to his employer that he has never been compensated for an occupational disease will be barred from recovering compensation or other benefits under the Act or at common law. The Court in Ex parte Southern Energy Homes reasoned that it would not be a usurpation of the legislature to extend this defense to accidental injury cases, since it has long been a part of the common law that fraud in the inducement is a good defense to an action on a contract by one of the contracting parties, and that workers’ compensation is founded on the contractual relationship of the employer and employee. From this, one can infer that the Court found that when the employee is guilty of fraud in the inducement to the employment relationship (i.e., misrepresents his physical condition and he would not have been hired but for the misrepresentation), the employment contract between the employer and employee is voidable by the employer. Since The Alabama Workers’ Compensation Act only applies to employers and their employees, as those terms are defined in § 25-5-1, no benefits of any kind would be owed if there is no employer-employee relationship.

This of course leads to other interesting scenarios. Notwithstanding an employee’s misrepresentation providing a defense for the employer, an employer could also assert the employee’s fraud as a counterclaim to a lawsuit against the employer or even pursue that claim as a stand-alone action. While The Alabama Workers’ Compensation Act provides that an action for benefits is to be decided by a judge, an employer can demand a jury trial on its fraud claim. Additionally, in an action for fraud, punitive damages may even be available if a jury finds that the employee acted in a willful manner with the intent to defraud the employer.

MY TWO CENTS:

When facts are discovered that support a misrepresentation defense, it is important to determine, early on, whether or not the employer relied on the fraudulent representation. Although the § 25-5-51 affirmative defense, with no reliance element, is easier to prove, the common law defense offers more potential reward.

On April 20, 2012, the Alabama Court of Civil Appeals released its decision in the case of Ex parte Advantage Resourcing, Inc., in which it addressed both legal and medical causation. Hennon Hollinghead was allegedly injured on January 21, 2010, when he fell on a walkway between the parking lot and the shop where he regularly performed his work duties. The undisputed evidence presented at trial indicated that Hollinghead had begun walking from his car into the shop, turned around to get his two-way radio which he had left in his car, and then returned down the walkway back toward the shop until he slipped on a PVC pipe. Hollinghead sued Advantage, and the trial Court found in favor of Hollinghead. Advantage appealed, arguing that the trial Court erred in finding the alleged accident compensable, and that the Court erred in finding that the accident caused the injuries.

The Court of Appeals held that there was substantial evidence from which the trial Court could find a causal connection between the work and the injury. The appellate court cited Ex parte Byrom, 895 So.2d 942 (Ala., 2004), stating that in order to recover, a claimant must ‘establish a definite causal connection between the work and the injury such that a rational mind is able to trace the resultant personal injury to a proximate cause set in motion by the employment, and not by some other agency.’ The Court noted that the walkway was used by other employees, and the two-way radio was a "required tool of Hollinghead’s work." The Court further pointed to Benoit Coal Mining Co. v. Moore, 215 Ala. 220, 222-23, 109 So. 878, 880 (1926), which held ‘the movement of the employee in entering, at the appropriate time, the employer’s premises to discharge his function and his preparation to begin....his actual service are deemed naturally related and incidental acts in the course of the employment.’

Additionally, Advantage argued that the evidence presented at trial, namely the deposition testimony of three doctors and the live testimony of Hollinghead, was insufficient to establish medical causation. In support of this argument, Advantage presented evidence that Hollinghead had suffered a neck injury several years before the alleged accident, as well as medical records indicating that Hollinghead’s pain was arthritic in nature. Quoting Ex parte McInish, 47 So. 3d 767, 779 (Ala. 2008), the Court held that ‘it is the overall substance and effect of the whole of evidence, when viewed in the full context of all the lay and expert evidence, and not in the witness’s use of any magical words or phrases, that the causation test finds its application." Additionally, the appellate Court noted that in order to establish medical causation, a claimant need not prove that the work-accident is the sole cause or even the dominant cause of the injury, but that it is sufficient to establish that it was a contributing cause. Based on this, the Court of Appeals affirmed the trial Court’s ruling.

On April 20, 2012, the Alabama Court of Civil Appeals released its decision in the case of Mobile Airport Authority v. Robert Etheredge affirming the trial court’s permanent and total disability award. The employee had suffered a scheduled injury to his foot on March 31, 2008. The foot injury resulted in a dual electrode intraspinal neurostimulator being implanted. The employee was then returned to work in January of 2007. The employer did not dispute the compensability of the foot injury.

It was further alleged that after returning to work in January of 2007, an altered gait as a result of the foot injury, and bouncing created by the use of a tractor to mow the grass for the employer resulted in the aggravation of a pre-existing degenerative low back condition. The employee also alleged that in December of 2007, while working through the pain in his back and foot, he was operating the tractor and ran over a hole causing him to experience searing pain in his low back. It was determined by the authorized treating physician, who implanted the stimulator, that the jolt from this incident caused the stimulator leads to migrate out of the epidural space preventing it from providing any pain control. The stimulator was reimplanted and the employee continued various forms of treatment but never returned to work. The authorized treating physician opined that the altered gait and traumatic jolt of the 2007 tractor accident combined to aggravate or accelerate the pre-existing degenerative disc disease. An IME was done and the opinion was given that the degenerative disc disease was natural wear and tear and neither the implantation nor the dislodging of the stimulator could have aggravated the degenerative condition. The IME doctor did agree that the 2007 tractor jolt could have aggravated the pre-existing condition.

On August 12, 2009, the employee filed a complaint seeking benefits for a September 2007 foot injury. On March 19, 2010, the employee amended the complaint asserting that the foot injury occurred on March 31, 2006 and after which he suffered an injury to his back in the latter part of 2007 or early 2008 that aggravated his preexisting degenerative disc disease. The employer answered and acknowledged the March 31, 2006 foot injury but denied notice of the second alleged occurrence causing the aggravation of the pre-existing disc disease.

The trial court ruled that the employee suffered a compensable foot injury that resulted in an altered gait and contributed to the low-back pain. The trial court further noted that the employee had a second work-related injury to his low back in December of 2007, of which the employer received notice. The trial court ruled that the employee’s pre-existing degenerative disc disease in his low back was aggravated or accelerated by the combination of the altered gait, created by the foot injury, and the traumatic jolt in December of 2007.

On appeal the employer asserted the following issues: 1. The back injury was barred by the applicable statute of limitations, 2. The finding that the employer had notice of the 2007 tractor accident was not supported by substantial evidence and 3. The back injury was a cumulative stress injury and compensable only if proven by clear and convincing evidence that it arose out of and in the course of the employment.

1. Statute of Limitations

The employer argued that the December 2007 back injury was a separate injury and did not relate back to the original complaint. Therefore, when it was asserted on March 19, 2010 for the first time the statute of limitations had run. The trial court ruled that the back injury resulted from not only the 2007 incident but also the altered gait created by the foot injury. Due to the altered gait and resulting back injury being the natural consequence of the foot injury, the back injury was not barred even though the December 2007 incident occurred more than 2 years before the claim was asserted.

The Court of Appeals ruled that while the claim seeking compensation of the 2007 incident was not timely asserted, the 2006 foot injury was also a contributing cause of the back injury. Due to evidence presented at trial establishing that the back injury was also caused by the foot injury, i.e. the altered gait, the back injury claim was not barred. The Court of Civil Appeals stated that it was immaterial that the authorized treating physician stated that had it not been for the 2007 tractor incident the rate of degenerative change would not have been the same because the altered gait only had to contribute to the aggravation or acceleration.

2. Notice

The Court of Civil Appeals agreed with the trial court on two issues dealing with notice in this matter:

(1) That by telling the workers’ compensation adjustor handling the foot injury about the 2007 tractor incident and then the surgery to reimplant the stimulator being approved as a result of the incident, there was sufficient evidence to support a finding that the employer’s representative had actual knowledge of the 2007 work related tractor incident that resulted in injury.

(2) That Alabama law supported the trial court’s finding that notice of the tractor incident was not required because the employer had notice of the foot injury and evidence supported that the altered gait, resulting from the foot injury, contributed to the aggravation of the pre-existing degenerative disc disease.

3. Burden of Proof for Cumulative Stress Injuries

The employer argued that because the employee alleged the back injury was the result of an altered gait, it was a cumulative stress disorder and subject to the clear and convincing evidence standard, which was not met. The Court of Civil Appeals agreed with this argument but stated that the burden was met. The Court of Civil Appeals pointed out that 3 witnesses testified that the employee did not have a limp (two treating physicians and the FCE evaluator) while 6 different sources of evidence supported that the employee did have a limp (the employee, 1 treating physician’s testimony, 2 treating physicians’ medical records, the employee’s supervisor and the trial court’s observations at trial). The Court of Civil Appeals stated that the trial court could have resolved the conflict by determining that the witnesses who did not see the limp only saw the plaintiff early in the day or while seated, when the limp was not present or was less pronounced.

In regards to the burden of proof and medical causation, the Court of Civil Appeals stated there was no conflict that the altered gait had developed as a natural consequence of the foot injury and was a contributing cause of the disc derangements. As a result, the Court of Civil Appeals opined that the finding was based upon evidence that would produce a firm conviction in the mind of the trial court as to each element of the claim and a high probability that the conclusion is correct, as required with the clear and convincing evidence standard.

On April 13, 2012, the Alabama Court of Civil Appeals released its opinion in Maxim Healthcare Services, Inc. v. Freeman, in which the Court addressed an employee’s burden of proof as to medical causation of an alleged injury. Freeman worked as a LPN for Maxim Healthcare Services, Inc., a nursing referral agency. In December 2008, she was allegedly lifting a patient from a toilet to place her in a wheelchair when the wheelchair moved, causing Freeman to over-extend herself. As a result, Freeman complained of a burning sensation in her lower back that extended into her hips and legs. Freeman filed a lawsuit against Maxim for workers’ compensation benefits. The parties stipulated that Freeman suffered an injury to her left hip and leg but Maxim denied that Freeman’s alleged back problems were the result of any compensable accident. At trial, the Court received the testimony of Freeman’s authorized treating physician and her own personal primary care physician. The authorized treating physician testified that some of Freeman’s back pain was pre-existing but some of it was related to the accident. However, the authorized treating physician further testified that she had ordered an FCE for Freeman and that the FCE showed that Freeman could return to work without restrictions. Freeman’s personal physician testified that in his opinion, the December 2008 accident was the source and cause of Freeman’s back pain. The primary care doctor admitted that he lacked the qualifications to disagree with the authorized treating physician’s opinions, and stated that he "deferred to her opinions and conclusions", as well as the results of the FCE. The trial Court found that Freeman established both legal and medical causation, and Maxim appealed, arguing that the testimony of Freeman and her primary care doctor was insufficient to establish medical causation.

In its appeal, Maxim relied on the holdings of three particular cases: Ex parte Southern Energy Homes, Inc., 873 So. 2d 1116 (Ala. Civ. App. 2003); Jackson Landscaping, Inc. v. Hooks, 844 So. 2d 1267 (Ala. Civ. App. 2002); and Valtex, Inc. v. Brown, 897 So. 2d 332 (Ala. Civ. App. 2004).

In its decision in Freeman, the Court noted that although the Court in Ex parte Southern Energy Homes had previously found that a worker’s testimony standing alone did not constitute substantial evidence of medical causation, the facts of Freeman were different in that the testimony of Freeman’s primary care physician established a causal link between the December 2008 accident and Freeman’s complaints of back pain. The Court also differentiated the facts in Freeman from those in Hooks by stating that in Hooks, one of the doctors testified that the workers’ back injury was not related to his on the job accident and the other doctor testified that there was a possibility that there could have been a causal relationship between the accident and the injury. In contrast, one of Freeman’s physicians testified that he could state within a reasonable degree of medical certainty that Freeman’s back pain was the result of the accident. Additionally, the Court noted that, in Hooks, the employee did not complain of back pain until almost sixteen months after the alleged accident, whereas Freeman began complaining of back pain immediately following her accident. Finally, the Court in Freeman differentiated this case from the facts of Brown, in that Brown was a non-accidental injury case where the worker was required to produce clear and convincing evidence of medical causation. The Court in Freeman held that since Freeman had established that an accident occurred, she only had to establish medical causation by a preponderance of the evidence, and that her primary care physician’s testimony, along with her own testimony, was sufficient to meet that burden of proof. Based on these findings, the Court of Appeals affirmed the trial Court’s judgment.

The Alabama Court of Civil Appeals recently released its opinion in the case of Nuss Lumber Co., Inc. v. The Estate of Andy Monghan, in which the Court addressed the employer’s right to recoup workers’ compensation benefits paid when the employee recovers from third parties. In January 2002, Monghan was injured in an automobile accident while working for Nuss Lumber. Nuss ultimately paid Monghan a substantial amount of workers’ compensation benefits and incurred substantial expenses for medical treatment. Monghan sued Nuss Lumber and also named several third parties who he claimed caused the automobile accident as defendants in the action. Nuss then filed a counter-claim asserting its rights under §25-5-11 (a) of The Alabama Workers’ Compensation Act, seeking repayment of the benefits it had paid on account of Monghan, which totaled more than $1.3 million. In October 2005, Monghan entered into a settlement with the third parties, whereby more than $500,000 was paid in a lump sum, and whereby Monghan would receive nearly $30,000 per month over the next several years from an annuity. While the parties agreed on the amount that Nuss was entitled to recover from the third party settlement funds, there was a disagreement as to the matter in which Nuss’ interest would be satisfied. The Trial Court initially ruled that Nuss was entitled to a lump sum payment of approximately $350,000 and that the remaining balance of more than $1 million would be paid in monthly installments of approximately $15,000 per month. However, Nuss contended that it was entitled to recover the full amount of its lien before the estate could collect any funds from the settlement. The Court of Civil Appeals agreed and stated that Nuss was entitled to recover all of the currently available funds and that it also had priority as to funds that become available in the future through the annuity payments. The Court noted that §25-5-11 (a) of The Alabama Workers’ Compensation Act works to relieve an employer of the financial burden of a work related injury when there is a culpable third party to shift the burden to, and that it also prevents double recovery for the same injury by the employee. As such, the Court held that denying immediate recovery to Nuss would be a contravention of §25-5-11 (a). However, the Court ruled that Nuss could not force Monghan’s estate to liquidate the annuity so that Nuss could make an immediate and full recovery.

On March 30, 2012, the Alabama Court of Civil Appeals released its decision in the case of McDaniel v. Helmerich & Payne International Drilling Co., In this case, the Appellate Court addressed whether an oil rig worker was a "traveling employee" for purposes of The Alabama Workers’ Compensation Act. Under what is generally known as the "coming and going rule", accidents which occur while a worker is traveling on a public road either going to or coming from work are deemed to have occurred outside of the course of the employee’s employment and are therefore not compensable under the Act. However, Alabama law has long recognized the "traveling employee" exception to this rule, which states that an accident occurring on the employer’s premises occurs in the course of employment, and the premises includes the entire area devoted by the employer to the industry with which the employee is associated.

The employee in McDaniel lived in Louisiana but had been assigned to work in Mobile County, Alabama, to move an oil rig from one drilling site to another. The employer offered McDaniel lodging at a crew trailer at the site where the rig would be moved. On the morning of January 10, 2008, McDaniel woke up in the crew trailer and began driving to the site where the rig was being disassembled. However, along his route, McDaniel was injured in car accident. It was undisputed that the employer did not provide McDaniel with a vehicle, per diem for food, mileage, gas reimbursement, a cellphone, or any other benefits common to traveling employees. As such, the employer argued that the traveling employee exception to the coming and going rule did not apply, and therefore, McDaniel’s accident was not compensable. The trial Court agreed, but McDaniel appealed, arguing that travel was an integral part of his job and was for the benefit of his employer. The Court of Appeals held that since McDaniel was required by his employer to drive from his home in Louisiana to report to the oil rig sites in Mobile County, he was "geographically limited by the necessity of being available for work on the employer’s job site" and therefore, "encountered special hazards on the road that could be avoided were travel not a necessary component of the employment."

The Court noted that the primary reason for the distinction between a commuter and a traveling employee is that the travel undertaken by a traveling employee provides substantial benefit to both the employee and the employer. The Court further noted that in order for the traveling employee exception to apply to the coming and going rule, the activity giving rise to the injury must confer some benefit upon the employer, although the benefit need not be pecuniary, but instead may be as intangible as a well-fed and well-rested employee. Although the evidence at trial indicated that McDaniel was not required to stay in the crew trailer the night before the accident, the fact that the trailer was rented and provided by the employer at the job site indicated that the employer was deriving a substantial benefit from McDaniel staying there and then traveling to another job site. The Court further noted that there was no evidence that McDaniel was performing a special or personal errand or mission at the time of the accident, and was therefore carrying on his employer’s business at the time of the wreck. Based on these findings the Court of Appeals reversed the Trial Court’s judgment and remanded the case to the Trial Court to enter a judgment finding that McDaniel’s accident arose out of and in the course of his employment.

If the total amount of Social Security Disability Insurance (SSDI) and WC monthly payments exceeds 80% of the claimant’s (monthly) Average Current Earnings, then the SSDI payments are reduced by the amount exceeding the 80% threshold. Under the current tax code, workers’ compensation benefits are generally not taxable, but SSDI payments are taxable using a statutory formula that take a variety of factors into account. So what is the tax status of the set-off amount? Is it tax-free as a workers’ compensation payment or taxable as a SSDI payment?

The U.S. Tax Court recently addressed this issue in Sherar v. IRS. Even though the decision creates no binding authority or precedent, it did contain some startling revelations involving the tax status of workers’ compensation benefits for a claimant also receiving SSDI payments. The Court ruled that the set-off amount of workers’ compensation benefits is treated as though it were a SSDI benefit and, therefore, taxable. The Court’s rationale behind the decision was the legislative intent behind the relevant portion of the tax code, which the Court determined to be "to equalize the Federal tax treatment of Social Security benefits that are received by taxpayers who may or may not be eligible to receive workers’ compensation benefits."

My Two Cents:

Part of the set-off calculation contains a threshold that the total benefits must reach before the set-off must occur. If a claimant’s settlement is structured correctly, the claimant could, in theory, avoid the set-off completely. If not, claimants currently on disability or who wish to apply for disability will have to consider the tax implications and interplay between workers’ compensation and SSDI benefits.

Ex Parte Liberty Mutual Insurance Co. - Petition for Writ of Mandamus

Released March 16, 2012

The Alabama Court of Civil Appeals addressed discovery issues in an outrage claim when it ruled on Liberty Mutual’s Petition for Writ of Mandamus seeking relief from the Trial Court’s order. The Mobile Circuit Court had directed Liberty Mutual to produce the following documents in an outrage case: 1) lawsuits filed against Liberty Mutual alleging outrage or similar claims in Alabama, Georgia, Mississippi, Florida, Texas, and Tennessee, covering the 10-year period preceding the date of the subject injury; 2) personnel files for employees handling workers’ compensation claims, including their certificates, licenses, resumes and complaints or reprimands; and 3) policy and procedure manuals related to or involving peer review.

The basis for the outrage was denial of medical treatment recommended by the authorized treating physician in violation of Alabama law related to the utilization review process. Brunson alleged that Liberty Mutual developed a scheme to deny medical treatment recommended by the authorized treating physician by selecting peer review doctors that would use Liberty Mutual’s criteria for determining medical necessity. The Court pointed out that outrage claims have failed when the denial of medical treatment is based on the carrier merely asserting their legal rights in a permissible way. Garvin v. Shewbert, 564 So. 2d 428, 431 (Ala. 1990). Based on this, the court pointed out that Brunson would first have to show that the denial of his claim, or the manner in which it was denied, did not comply with the law.

The Court of Civil Appeals ruled Liberty Mutual should only have to produce lawsuits filed in Alabama that alleged that medical benefits, otherwise payable under the Act, were denied as the result of Liberty Mutual directing the course of medical treatment through some scheme of denying treatment for lack of reasonable medical necessity using criteria other than that set out in Alabama’s utilization review statutes and administrative regulations. Since Brunson’s claim was based on compliance with Alabama law, the lawsuits in other states were irrelevant and were not reasonably calculated to lead to the discovery of admissible evidence.

The Court of Appeals also ruled that personnel files are generally deemed protected from disclosure. However, there is a "rule-of-reason" test that has been applied to "public records," i.e. records of publicly employed persons. The Court of Appeals felt that privately employed persons should be afforded at least the same level and expectation of privacy afforded under this test. Therefore, the material sought must be clearly relevant and the need for discovery must be compelling because the information is not otherwise readily obtainable. While the Court of Appeals ruled that all employees’ resumes, credentials, general training, education etc . . . were not relevant, they did require Liberty Mutual to produce certain personnel records. The Court of Appeals stated that the following personnel documents would be discoverable: any information in employees’ personnel files that handled Brunson’s claim, any information regarding any training they received to assess medical necessity or deny worker’s compensation claims in Alabama on grounds other than that set out under Alabama law, and any information they received regarding incentives or the like for furthering the alleged unlawful scheme.

The Court of Appeals also order Liberty Mutual to produce the policy and procedure manuals related to the peer review process because they could contain directions for employees to determine medical necessity in a manner other than provided by Alabama utilization-review process.

The National Workers’ Compensation Defense Network will host a conference on June 6 & 7, 2012 in New Orleans. The June 6 evening reception will be held at the National WWII Museum. Founded by renowned historian and Pulitzer Prize winning author, Stephen Ambrose, the National WWII Museum tells the story of the American Experience in the war that changed the world — why it was fought, how it was won, and what it means today — so that all generations will understand the price of freedom and be inspired by what they learn.  The conference will be held the next day and will include the following topics:  Closed Head Injuries, Thinking Outside the WC Box, WC at or Near the Water, Objective Testing for Malingering, Strategies and Consequences of Termination of Injured Workers, MSA Update, WC in the Oilfield and Overseas, and a Two Minute Update for Every State.   

Registration is now open. Click here to register!  For more information concerning the NWCDN, go to www.nwcdn.com.

The AWCO will be putting on its 31^st Annual Spring Conference on May 3^rd and 4^th at the Wynfrey Hotel in Birmingham, Alabama. This is always a great conference with a wide array of speakers from the legal and medical communities addressing numerous topics affecting workers’ compensation claims in Alabama. There will also be a Workers’ Compensation 101 and 102 class on May 3^rd that is designed for adjusters that are new to handling workers’ compensation claims in Alabama.

Registration beings at 7:00 a.m on May 3^rd and the conference ends at 12:00 pm on May 4^th. If you are interested in attending or know someone that is, please contact the AWCO President, Henry Levens, and he will send you a conference brochure and registration sheet. His e-mail address is Henry.Levens@willis.com.

On December 31, 2011, this Blawg addressed proposed legislation that would substantially change the Alabama Workers’ Compensation Act. As an update, SB 77 was referred to the Senate Business and Labor Committee. At the request of the Alabama Trial Lawyers Association, Committee Chair, Rusty Glover, has scheduled a public hearing for February 22, 2012 at 9:00 a.m. in room 610.

To be continued...

Representative Paul DeMarco (R) of Birmingham, has introduced HB 104 seeking to amend §25-5-51 of the Alabama Workers’ Compensation Act. HB 104 relates to injuries caused by an employee who is impaired by drugs or alcohol. As initially drafted, the billed would have prevented an employee, or the employee’s estate, from receiving medical and indemnity benefits if the injury or death was the direct result of impairment or intoxication caused by the employee’s alcohol consumption or drug use. The bill then provided that, once the employee had a positive drug or alcohol screen according to the U.S. Department of Transportation, the burden would be on the employee to demonstrate that the impairment was not the cause of the injury or death.

Unfortunately, the bill was weakened by two amendments added by the House Judicial Committee. In addition, the Medical Association added an amendment that requires an employer to notify a medical provider in writing if the employee was guilty of a drug or alcohol offense thus ending the coverage through the employer.

The Trial Lawyers Association further weakened the bill with its amendment requiring the employer to petition the court once a positive drug or alcohol screen is received for a determination on whether medical and indemnity benefits can be terminated. Medical benefits would be due until the date the Court ruled they were no longer owed as a result of the positive drug screen. At the hearing, if the test resulted in a blood alcohol level equal to or greater .08 as stated in §32-5A-191 (a)(1) of the Alabama Code, there would be a rebuttable presumption that the employee was impaired. If conclusively established that the employee was impaired and the employee proves by a preponderance of the evidence that the impairment did not proximately cause or contribute to the accident, then the Court could deny the petition filed by the employer. If only rebuttably presumed impaired and the employee proves by a preponderance of the evidence that a) he or she was not impaired, or b) though impaired, the impairment did not proximately cause or contribute to the accident, the Court may then deny the employer’s petition. If the employee was given written warning that the refusal to submit to or cooperate with testing would result in the forfeiture of benefits, the employer’s responsibility to pay compensation and medical benefits would terminate as of the date of the refusal.

With the two amendments the bill gained committee approval and is awaiting further action by the House. We will continue to monitor the status of this bill during this legislative session.

On February 10, 2012, the Alabama Supreme Court released it opinion in Ex parte Water Works and Sanitary Sewer Board of the City of Montgomery wherein it ruled that the Alabama Insurance Guaranty Association (AIGA) has a six year statute of limitations to seek reimbursement from a high net worth insured. In this case the Water Works and Sanitary Sewer Board of the City of Montgomery (hereinafter Board) was insured by an insurance company that went insolvent (Legion). The insurance company was, however, a member insurer of the AIGA. Therefore, in July 2003, the AIGA took over the claim filed by the Board’s employee related to an injury that occurred in 2001. In November of 2003 the claim was settled and paid by the AIGA.

On October 7, 2003, AIGA sought to determine the Board’s net worth pursuant to the AIGA Act, which states that the AIGA can seek reimbursement from any insured whose net worth exceeds twenty-five million dollars. After several attempts the Board finally responded to the net worth request in August of 2009 stating that its net worth exceeded twenty-five million dollars. AIGA filed the underlying declaratory judgment action seeking to enforce its right to reimbursement. The Board took the position that the AIGA’s claim was limited to payments made within two years of filing the action based on a two-year statute of limitations. The AIGA took the position that the claim was subject to a six year statute of limitations. The trial court awarded the AIGA amounts paid on the claim during the two years immediately prior to the declaratory judgment action. The AIGA appealed and the Court of Civil Appeals ruled that the action did not sound in tort or contract but was a statutory right to reimbursement similar to a common law action of debt subject to the six year statute of limitations. The Board petitioned the Alabama Supreme Court.

The Alabama Supreme Court affirmed the Court of Civil Appeals’ decision and held the claim filed by the AIGA was subject to the six year statute of limitations not the two year statute of limitations. The Supreme Court opined that the action was a statutory right permitting the recovery of a liquidated sum. This claim would therefore fall under actions for the recovery of money upon a loan pursuant to §6-2-34 (5), which states "actions for the recovery of money upon a ... liquidated account" are subject to a six year statute of limitations. The case was remanded to the trial court for a determination based on the application of the six year statute of limitations.

The Alabama Court of Civil Appeals recently released its decision in the case of G.A. West & Co., Inc. v Claiborne Johnston. On Thursday, September 14, 2006, Johnston stepped into a ditch, and either slipped on a pipe or lost his balance. Johnston was able to right himself before he fell, but he allegedly felt an excruciating pain in his lower back, hips and thighs. Johnston testified that he immediately yelled out in pain, and that he told his supervisor, Dale Clements (who was in the ditch with Johnston at the time), that he had hurt his hips when he slipped. Johnston finished his shift that day, and was off work the next 3 days. When he returned to work on Monday, Johnston told Clements that he was still hurting from the incident and needed to see a doctor. According to Johnston, Clements did not respond, so Johnston called Dr. William Bose. Dr. Bose had previously performed two hip replacement surgeries on Johnston in 2002 and 2005. Dr. Bose examined Johnston and determined that he had not injured his hips, and referred Johnston to Dr. James West. Dr. West had previously treated Johnston for a fractured coccyx due to injury in 2005 with another employer, and had assigned a 5% impairment rating to Johnston’s body-as-a-whole as a result of that injury. According to Dr. West, Johnston suffered a new injury to his lumbar spine as a result of injury at G.A. West & Co.

A year after the injury, Johnston went to the office of G.A. West’s company nurse, and told her that he had suffered an injury the prior year. He further told the nurse that he first thought the injury was related to his hips or his coccyx, but had since learned it was related to his lumbar spine. Johnston asked G.A. West to consider paying for his treatment. G.A. West declined, and Johnston filed a lawsuit seeking permanent and total disability benefits. G.A. West & Co. asserted that it did not have proper notice of the alleged injury; that Johnston had knowingly and intentionally misrepresented his physical condition in writing at the time he entered into the employment relationship; that Johnston had deliberately concealed a work related injury; that Johnston had a pre-existing condition that accounted for some of his disability; and that Johnston was not permanently and totally disabled because he was capable of being vocationally retrained. The trial court found in favor of Johnston on all issues, and G.A. West & Co. appealed on all of the above grounds. A very brief analysis of each of the issued raised on appeal by G.A. West is below.

Misrepresentation

When Johnston was hired, he completed a pre-employment questionnaire that asked if he had any prior on-the-job injuries, other injuries or illnesses, or was taking any prescription medications. Johnston admitted that he had injured his coccyx in April of 2005 and had been assigned a 5% impairment rating. However, he answered "no" to the remaining questions, although he was taking Mobic regularly and had two previous hip replacement surgeries. Additionally, a 2005 MRI of Johnston’s back revealed bulging discs at the L4-5 level of Johnston’s lumbar spine, and medical records obtained through discovery indicated that Johnston had complained of back pain for more than 20 years. Based on this, G.A. West & Co. argued that Johnston was barred from recovering benefits under § 25-5-51 of the Alabama Workers’ Compensation Act, because he misrepresented his physical condition at the time he was hired. The appellate Court noted that in order to prevail on that defense, G.A. West & Co. had the burden of proving that in the course of entering into the employment relationship, G.A. West provided Johnston with the written warning set forth in § 25-5-51, Johnston knowingly and falsely misrepresented his physical condition in writing, and that condition was aggravated or reinjured in an accident arising out of and in the course of Johnston’s employment. The Court noted that while Johnston had a history of back issues, the evidence did not establish that Johnston was ever informed that he had any serious back related injury or illness. Additionally, the Court failed to find any causal connection between Johnston’s use of prescription medications or his prior hip replacement surgeries and his September 2006 injury that would predispose him to further injury. As such, the Court found that G.A. West failed to meet its burden of proof on the misrepresentation defense.

Notice

While it was undisputed that Johnston failed to give written notice as provided under the Act, the Court found that G.A. West had oral notice sufficient to cause it to investigate the alleged accident further. The Court noted that since Johnston’s supervisor was with him and witnessed the alleged accident, G.A. West had sufficient notice that work-related activity prompted Johnston’s exclamation of pain.

Estoppel

On appeal, G.A. West argued that Johnston was estopped from recovering workers’ compensation benefits because he deliberately concealed his work-related injury. The appellate Court found that G.A. West failed to raise that issue before the trial court. Relying on precedent set in Dueitt v. Scott Paper Co., 695 So.2d 40, 44 (Ala.Civ.App. 2004), the Court of Appeals stated that it could not consider an issue that had not been properly raised in the trial court.

Pre-Existing Condition

G.A. West argued that the trial court erred when it failed to allocate at least a portion of Johnston’s alleged disability to his previous injuries pursuant to § 25-5-58 of the Act. However, the appellate court noted that "the law presumes that there is no preexisting injury or infirmary when the employee is able to fully perform his or her job duties in a normal manner prior to the subject injury." As such, the appellate court found that the trial court’s findings were based on substantial evidence.

Causation

G.A. West further argued that Johnston failed to establish medical causation of his injury, because Dr. West could not state with any certainty that Johnston’s herniated disc was caused by the September 2006 accident. The appellate court noted medical causation may be established by a combination of lay testimony and expert medical testimony. Since Dr. West considered the accident to be the cause of Johnston’s injuries, and Dr. West testified that Johnston’s injuries were potentially compatible with an accident like Johnston’s, the trial Court had substantial evidence on which to base its finding of compensability.

Permanent & Total Disability

Finally, G.A. West argued that Johnston was not permanently and totally disabled because he was capable of being vocationally retrained. In support of its argument, G.A. West pointed out that Johnston had been employed by various employers since the accident; that Dr. West had only restricted Johnston to the light to medium job categories; that Dr. West did not testify that Johnston was incapable of working; Johnston had a commercial drivers’ license; and Dr. West agreed with Johnston’s plan to find work as an equipment operator. Johnston, on the other hand, testified that he couldn’t perform the equipment operator jobs without pain; he had to nap during the day because he slept poorly at night due to pain; he had performed manual labor jobs all of his life; and he only had a tenth grade education. The Court of Appeals found that the trial court could have implicitly found that Johnston was incapable of being retrained for gainful employment due to his pain, sleep difficulties, and limitations on standing, sitting, and walking. The Court further pointed out that an employee doesn’t have to be completely helpless to be permanently and totally disabled, but only must be unable to maintain employment similar in remuneration.

Re-posted (in part) with permission from Kansas WC defense attorney, Kim Martens (Hite, Fanning & Honeyman, L.L.P., Wichita, Kansas)

As an employer, you probably have been frustrated at one time or another with your State’s workers’ compensation system and what it has put you through. However, have you ever really considered what would/could happen to you as an employer if the workers’ compensation system was NOT the exclusive remedy for the injured worker’s claim, and what you as an employer would be put through if you were subjected to a civil tort suit for that injured employee’s work accident claim?

It’s happening right now, in several States in the "undocumented worker injury claim" context. A number of States are toying with the idea of enacting State laws totally banning undocumented injured workers from receiving benefits through the state workers’ compensation system.

This question will be explored by a panel of experts at in the upcoming American Bar Association’s National Trends And Emerging Issues Affecting Workers’ Compensation Laws Seminar in San Antonio, TX at the Westin Riverwalk Hotel, March 8-10. At 3 p.m on March 8th, the panel of experts will explore the following topic: "A telescopic look at a PARALLEL UNIVERSE for undocumented injured worker claims—is the civil tort claim alternative to workers’ compensation benefits BETTER or WORSE for employers, carriers and injured workers?"

If you as an employer thought a defense legal cost tab of $10,000 to $15,000 to defend an undocumented injured worker claim in your state WC system was high, wait until you hear from our panel of experts what defending that same action in the civil tort claim context would cost you, and what indirect costs you would face, that you would otherwise avoid, if the dispute remained in the WC adjudication process.

If this topic intrigues you, join us at the conference by registering at the following link:

www.americanbar.org/groups/tort_trial_insurance_practice.html

West Fraser, Inc. v. Windell Caldwell, Sr.

On January 13, 2012, the Alabama Court of Civil Appeals released an opinion wherein it reversed a Trial Court’s finding of compensability. The matter was bifurcated at the trial court level and the issue of compensability was tried first. At trial, the employee testified that he hurt his back on December 17, 2009. Although he went to the doctor, the medical records did not indicate a workers’ compensation injury. Rather, the records indicated that the employee had been experiencing the problems for one week. The employee denied making that statement. The employee returned to a different doctor on December 19, 2009 and the records from that visit revealed that the employee denied an injury. The employee testified that he must have been misquoted. On December 21, 2009, the employee returned to the doctor for the third time and, this time, he referenced an injury date of December 21. The next day, the employer received a letter from the employee’s attorney which, according to the employer, was its first notice of an injury. Although his orthopedic surgeon initially opined that the plaintiff’s complaints were consistent with his work injury allegations, he backed off that testimony when confronted with the above mentioned medical records. In addition, the employer’s witnesses testified that the employee did not follow proper reporting procedures. In finding in favor of the employee, the Judge relied heavily on the employee’s exemplary work history.

In reversing the Trial Court opinion, the Court of Appeals relied on the fact that the employee repeatedly indicated to his doctors that his injury was not work related before changing his tune on the third visit. In a footnote, the Court indicated that it recognized the possibility that two separate medical providers on two different occasions could make the same error on two separate days. However, it further noted that the law in Alabama does not allow an employer to be held liable on a mere possibility.

Hale v. Hyundai Motor Manufacturing Alabama, LLC (hereinafter HMMA)

On January 6, 2012 the Alabama Court of Civil Appeals released an opinion on the issue of collateral estoppel in a retaliatory discharge case based on the employee allegedly being terminated due to his filing a workers’ compensation claim. The Trial Court granted summary judgment in favor of the HMMA and Hale appealed. On appeal Hale argued that HMMA is estopped from arguing the discharge was due to misconduct because the unemployment board’s decision determined that the employee had not committed misconduct. The Alabama Court of Civil Appeals disagreed with Hale and affirmed the Trial Court’s ruling.

Hale was injured on the job and suffered from carpal tunnel syndrome. He underwent two surgeries and was returned to work at light duty. Subsequent to being released to light duty Hale missed nine days and took one day of bereavement leave. HMMA corresponded with Hale on numerous occasions indicating that he needed to provide documentation related to the nine absences and bereavement leave or it would result in his termination. Hale never provided documentation as requested and even admitted to this despite providing explanations. He was subsequently terminated on March 13, 2009 for violating HMMA’s absentee policy and violating the serious misconduct policy, which included serious and/or excessive violations of HMMA’s attendance policy and intentional misrepresentation or falsification of information regarding employment or reports to HMMA. Violation of the serious misconduct policy placed an employee outside the normal corrective action plan.

Hale sought unemployment benefits and on appeal it was determined, for purposes of unemployment, that Hale had not committed misconduct as defined by the unemployment statute: deliberate, willful or wanton disregard of the employer’s interests or of standards of behavior which the employer has right to expect of its employees. In making the determination the hearing officer stated that Hale had compelling reasons for the acts which he was discharged for. Therefore, the violation was not misconduct such that unemployment should be denied.

On appeal Hale asserted that the Supreme Court’s decisions in Wal-Mart Stores, Inc. v. Hepp, 882 So. 2d 329 (Ala. 2003) and Wal-Mart Stores, Inc. v. Smitherman, 743 So. 2d 442 (Ala. 1999) were controlling. In both of theses cases, the Supreme Court found that the employee was collaterally estopped from arguing he or she was discharge for a reason other than misconduct in a retaliatory discharge claim when they were found to be disqualified from unemployment benefits due to misconduct connected with their work. As such, Hale asserted that the "reverse argument is also true" barring HMMA from arguing that Hale was discharged for a legitimate reason because that reason was determined not to be misconduct that would disqualify Hale from receiving unemployment benefits. The Alabama Court of Civil Appeals disagreed because the issues are not identical due to the posture of the parties.

The Court of Civil Appeals ruled that the unemployment hearing officer found that Hale did not commit misconduct for purposes of unemployment-compensation statue: deliberate, willful or wanton disregard of the employer’s interests or of standards of behavior which the employer has a right to expect from its employees. However, that does not mean that Hale was not discharged for a valid reason under HMMA policies, HMMA’s reasons for the discharge were not legitimate and that HMMA terminated Hale for the sole reason that Hale filed a workers’ compensation claim. In Hepp and Smitherman, the unemployment decision found that the employee committed misconduct so there is a compelling conclusion that the employer had a legitimate reason for the termination. However, the reverse is not true. Alabama is an at-will employment state, so HMMA can terminated for any reason (aside from terminating solely because a filed a worker’s compensation claim), even if that reason does not amount to misconduct as defined in the unemployment context. As a result, HMMA is not collaterally estopped from asserting that Hale was terminated because he violated HMMA policies.

White Tiger Graphics, Inc v. Paul Clemons

On January 13, 2012 the Alabama Court of Civil Appeals addressed a judicial estoppel issue involving an employee claiming he was permanently and totally disabled during the same period of time he was receiving unemployment benefits. The Trial Court found that employee was permanently and totally disabled despite receiving unemployment benefits during the same period. The Alabama Court of Civil Appeals affirmed.

For judicial estoppel to apply the following criteria must be met: 1) a parties later position must be inconsistent with its earlier position; 2) the party was successful in the prior proceeding so that acceptance of an inconsistent position later would create perception that the first or second court was misled; and 3) the party asserting the inconsistent position would derive an advantage or impose an unfair detriment on the opposing party of not estopped. Hamm v. Norfolk So. Ry. Co., 52 So. 2d 484, 494 (Ala. 2010). The purpose being to protect the integrity of the judicial process by preventing parties from deliberately changing positions to suit there needs according to the circumstances. Id.

In order to received unemployment benefits the employee must be physically and mentally able to perform work of a character which he is qualified to perform by past experience or training. Ala. Code § 25-4-77 (a)(3). In order to received a permanent and total disability award the injury or impairment must permanently and totally incapacitate the employee from working and being retrained for gainful employment. Dolgencorp, Inc. V. Hudson, 924 So. 2d 727, 734 (Ala. Civ. App. 2005). This does not mean the employee is helpless, only unable to perform his or her trade and unable to obtain other reasonably gainful employment. Id.

The plaintiff testified at his hearing for unemployment benefits, that he felt like he was able to work, had tried to find work he was qualified for and would give it his best shot. The employer asserted that if the employee takes the position that he is able to work in order to receive unemployment benefits, the employee can not, at the same time, claim he is unable to perform his normal trade.

The Alabama Court of Civil Appeals found that an employee so limited that he can not perform services other than those that are so limited in quality, dependability or quantity that a reasonably stable market does not exist, may be classified as totally disabled. According to the Court of Appeals, this criteria would not be inconsistent with the employee saying he is willing and able to perform work he is qualified to do and give it his best shot. Therefore, the employee would not be judicially estopped from claiming he was permanently and totally disabled during the same time period he was receiving unemployment benefits because there is not an inconsistency.

In a concurring opinion, Judge Terry Moore opined that the employee’s testimony did create somewhat of a contradiction. However, since the employee testified that he was willing and able to give it his best shot, it could not be said that judicial estoppel precluded a finding that he could not work despite his best efforts. In addition, Judge Moore pointed out that the Alabama Worker’s Compensation Act does not address whether or not the receipt of unemployment benefits would prevent a permanent and total disability award or workers’ compensation benefits in general.

On January 13, 2012, the Alabama Court of Civil Appeals released its decision in the case of Goodyear Tire & Rubber Company v. Brian Haygood wherein it upheld the trial court’s ruling that Haygood was permanently and totally disabled due to pain in his foot. Under the "exceedingly high standard" previously set out in the case of Norandal U.S.A., Inc. v. Graben, pain can be used as a basis for removing an otherwise scheduled injury from the schedule when it is totally or virtually totally disabling to the body as a whole. To qualify as an exception to the schedule, the pain must be such that it completely or almost completely prevents the employee from engaging in physical activities with the uninjured parts of his body.

Haygood allegedly injured his foot while working at Goodyear in 2009, and sought permanent and total disability benefits. One of Haygood’s doctors stated that Haygood had pain of partially neuropathic origin, a milder version of complex regional pain syndrome (CRPS). Another of Haygood’s doctors had assigned a medical impairment rating of 10% to Haygood’s right foot, which the doctor translated to a 7% impairment to the lower extremity and a 3% to Haygood’s body-as-a-whole. At trial, Haygood testified that, due to pain from the injury which he consistently rated as a 9 or 10 on a scale of 1 to 10, he could not walk without a cane, he often cried, and had to lie down up to 23 hours per day. Haygood also testified to his inability to sleep, stand, drive, shop, ride his motorcycle, and do other things that he stated were routine in most people’s daily lives. The trial Court found that Haygood struggled with pain even while at rest and, as such, his CRPS-like pain prevented him from engaging in physical activities with the uninjured parts of his body. Based on this finding, the Court of Appeals affirmed the trial court’s ruling that Haygood was permanently and totally disabled due to pain that was totally or virtually totally disabling.