State Supreme Court Ruling Protects Employers, Preserves Workers’ Comp Exclusivity

The California Supreme Court recently ruled in favor of employers, finding that an employee’s tort claims against a doctor who reviewed workers’ compensation cases is preempted by the workers’ compensation law.

In December 2016, the California Chamber of Commerce filed a friend-of-the-court brief in the case of King v. CompPartners, Inc. (S232197), arguing that the appellate court erred by ruling that utilization review doctors—who look at records to decide whether a worker’s treatment was appropriate, but do not examine the patient personally—have established a physician-patient relationship and therefore owe a duty of care to the injured workers.

The CalChamber had urged the state high court to reverse the appellate court decision, stating: “Letting this decision stand would result in wildly expanding potential liability in a system specifically designed to limit liability in exchange for certainty of benefits.”

Background

According to court filings, the plaintiff in the case, Kirk King, sustained a back injury while on the job in February 2008. In July 2011, King suffered anxiety and depression due to chronic back pain resulting from the injury. He was prescribed an antianxiety drug.

Two years later, CompPartners Inc. conducted a utilization review of the medical treatment to determine if the drug was medically necessary. A CompPartners doctor, Naresh Sharma, decided King’s prescription was not medically necessary and the prescription was decertified.

King and his wife sued, asserting he was injured due to seizures he suffered because of the sudden cessation of the drug. His lawsuit contended that Sharma and a second doctor employed by CompPartners had a duty to warn King of the dangers of abruptly ceasing the medication.

The trial court rejected the lawsuit on the grounds that the claim should have been handled through the workers’ compensation system. The Fourth Appellate District Court of Appeal partly reversed the ruling, finding that the trial court should have allowed King to amend his complaint because it was plausible that, when more details are provided, they could support a conclusion that Sharma had a duty to warn King about the risk of seizures.

Supreme Court Decision

Justice Leondra R. Kruger authored the August 23 ruling with two concurring opinions. The Supreme Court examined two main issues:

1. Are the injuries the Kings allege the sort of injuries that are covered by the workers’ compensation exclusive remedy?

2. Are the defendants entitled to the protections of workers’ compensation exclusivity?

The Court found the answer to the first question straightforward—“[b]ecause the Kings allege injuries that are derivative of a compensable workplace injury, their claims fall within the scope of the workers’ compensation bargain and are therefore compensable within the workers’ compensation system.”

Although the Court of Appeal agreed with this conclusion insofar as the allegation was based on an erroneous medical necessity determination, the Court of Appeal had found the exclusivity provisions did not apply to the extent the complaint was based on a failure to warn of the adverse consequences of abruptly stopping the medication. The Supreme Court found this distinction to be an error: “The utilization review provisions of the WCA [Workers’ Compensation Act] govern not only the substance of a utilization review decision . . . but also the content of the responses communicating the decision.”

To answer the second question, the Supreme Court noted that “it has long been held that workers’ compensation exclusivity preempts tort claims against certain other persons and entities” beyond the employer. Tort claims against insurers, “as the ‘alter ego’ of the employer” and independent claims administrators and adjusters are preempted.

“The question is whether the WCA, properly interpreted, also preempts tort claims against utilization reviewers hired by employers to carry out their statutory claims processing functions. Viewing the question against the backdrop of our precedents, we conclude the answer is yes.”

The Supreme Court acknowledged the Kings’ policy arguments that utilization reviewers should be held accountable to the same extent as treating physicians. The Court however recognized that the statute’s treatment of utilization reviewers is consistent with the tradeoff underlying the workers’ compensation system—“swift and certain payments for medical treatment without having to prove fault, but, in exchange, [employees] give up their right to sue in tort. . . .”

In addition, allowing plaintiffs to bring tort suits against utilization reviewers would be contrary to the Legislature’s goal of replacing the cumbersome and lengthy dispute process with one that balances speed and accuracy. The Supreme Court also pointed out that the workers’ compensation exclusivity does not bar tort remedies resulting from acts that “fall outside the risks encompassed within the compensation bargain.”

Concurring Opinions

Although Justice Goodwin H. Liu concurred with the ruling, he noted that the Legislature “may wish to examine whether the existing safeguards provide sufficient incentives for competent and careful utilization review.”

Justice Mariano-Florentino Cuéllar noted in his concurrence the importance of the common law remedies and “why courts must continue to proceed with caution when considering . . . whether a statute abrogates tort causes of action that ordinarily serve to incentivize good behavior, compensate for injuries, and right moral wrongs.”

The CalChamber amicus brief was prepared by Randall G. Poppy of Finnegan Marks Theofel Desmond APC.

Staff Contact: Heather Wallace

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Heather Wallace
Heather Wallace has been CalChamber associate general counsel since November 2011. She is a seasoned litigator with experience on employment law, health care, intellectual property and more. She came to the CalChamber from the Managed Risk Medical Insurance Board (MRMIB), where she was senior staff counsel, providing legal advice on the Healthy Families Program, the Pre-Existing Condition Insurance Plan and the Major Risk Medical Insurance Program. She holds a B.A. in history from the University of New Orleans and earned her J.D. with honors from Santa Clara University School of Law, where she was technical editor of the Computer and High Technology Law Journal.