On December 30, 2011, the U.S. Department of Labor issued a new regulation excluding all workers employed in the repair of any recreational vessel (regardless of length) from coverage under the Longshore and Harbor workers’ Compensation Act. A recreational vessel is defined as a vessel that is manufactured or operated primarily for pleasure or leased, rented, or chartered to another for pleasure.

At the edges, the new regulation will not impact marina operators, because the LHWCA excludes from the term “employee” those “individuals employed by a marina and who are not engaged in construction, replacement, or expansion of such marina (except for routine maintenance),” provided the worker is subject to a state compensation law.

Louis Dubrel testified that before his work-accident “I used to do it all . . .I used to be Superman . . [but now I’m so disabled] I’m Mighty Mouse.” Unfortunately for Dubrel, following this testimony his employer presented video showing “Mighty Mouse” was actually still “doing it all” - including winning prize money as a jockey racing horses! On Monday, January 30, 2012, New Jersey’s Appellate Division agreed that Dubrel’s fraud was "flagrantly galling" and upheld the denial of all benefits. On January 31, 2012, a state Grand Jury indicted Dubrel for insurance fraud and perjury.  

This case, involving twin brother evidence, horse racing prize money, and surveillance video is a great starting point for talking about the nuts and bolts of trying a case where fraud becomes an issue.

But first, the law.

Under the New Jersey Worker's Compensation Act fraud section (§57.4(c)(1)),

"if a person purposely or knowingly makes, when making a claim for benefits…a false or misleading statement, representation or submission concerning any fact which is material to that claim for the purpose of obtaining the benefits, the Division may order the immediate termination or denial of benefits with respect to that claim and a forfeiture of all rights of compensation or payments sought with respect to the claim."

On my blog I’ve often discussed (see here, and here) the use of videotape surveillance in New Jersey courts. I've also written about the Gross v. City of Neptune decision – a 2005 case in which the employer was barred from using surveillance which was obtained after the trial began because the surveillance was not referred to on the "Pre Trial Memorandum." The Pre Trial Memorandum is executed by the parties and the Judge and lists all of the witnesses both parties will call as well as the issues in dispute. In the Gross case, because the employer did not reveal that they had videotape evidence on the pretrial memorandum the judge of compensation ruled the videotape evidence was “surprise testimony” and could not come into the case. The Appellate Division upheld that exclusion.

New case: showing how “new” video – not revealed on the Pre Trial Memorandum or provided in discovery before trial – can get into a New Jersey case.

Louis Dubrel claimed he sustained permanent injuries to his neck and low back from an injury at work in February 2004. Dubrel testified “Now I’m Mighty Mouse.” According to the claimant, before his debilitating injuries he was able to travel, go fishing with his kids, and ride off-road motorcycles. The petitioner also testified that he used to ride, train, and race horses. At trial in 2009, the petitioner testified that "I can't ride [horses], not a shot." He further testified that he could no longer perform household chores and that it was even a challenge to dress himself.

After testifying that he had to give up his horse racing hobby – the claims adjuster – who happened to be a horse enthusiast herself – found references on a popular horse racing website showing that the claimant had actually jockeyed less than two weeks before he testified – and had recently won prize money! Based on what she learned, the adjuster assigned surveillance.

Surveillance was successful in obtaining videotape of the claimant, as he worked on his farm, doing carpentry, taking care of animals, etc. In the video and according to the surveillance investigator, the claimant was unimpaired in his activities of daily living. The claimant was then presented with the videotape and informed that the employer was going to call the surveillance agent and the adjuster at trial.

The video was shown, over the objections of the petitioner’s counsel. The adjuster testified, too, about what she had discovered on the horse racing websites. In his own defense, the claimant was able to show he actually had a twin brother. However, the petitioner never attempted to demonstrate or argue that it was actually the twin brother who was caught on videotape or engaging in the horse racing activities.

The judge of compensation stated that the claimant had "made an unambiguous claim that he no longer drives horses" but that testimony was made "just one week after he was the driver of [his horse] Finest Firewater in a qualifying race in Delaware" and concluded that there was "no charitable explanation they could characterize these statements made by the petitioner under oath as anything other than false." The judge found that it was clear from the context of the petitioner's remarks that the statements were made to obtain workers compensation benefits fraudulently.

Practice Tips

In this new decision the Appellate Division approved the inclusion of surveillance video obtained after the claimant testified because it was “relevant to prove or disprove a fact in issue.” The Appellate Court found that the video surveillance and the information about the petitioner’s horse racing and prize winnings were not “surprise witnesses” and the Compensation judge had not abused his discretion by letting that testimony into the case.

The Appellate Court ruled that although surveillance tapes made after the start of trial should generally be excluded, an exception arises where the employer could not be aware of the circumstances necessitating the surveillance before the start of the trial.

In cases like this one, where the claimant testifies that he can do “nothing,” denies participation in specific activities, or testifies he is as weak as a fictional cartoon mouse, additional investigation and even surveillance should be considered to disprove those claims.

Decision: Louis Dubrel v. Maple Crest Auto Group, A-3321-10T3 (App. Div. Decided January 30, 2012) 

New York has a "Special Fund for Reopened Cases" to assume liability for reopener workers’ compensation claims. When a claimant moves to reopen a "stale" case, the employer/carrier requests relief from the "Special Fund for Reopened Cases." By shifting cases over to the Special Fund, the carrier/employer shifts the burden for paying compensation to the Special Fund.

Filing requirements.

There are forms available to the employee seeking “reopener” of the closed claim. A new medical record can be sufficient to reopen the case if it provides notice to the Worker's Compensation Board of the change in condition – in that case, Form C-27 (Medical Proof of Change in Condition in Support of Application for Reopening) should be used. The medical report must demonstrate a new condition and not merely the continuing effects of the original disability or injury.

Time factors.

There are time limitations for the shift of exposure to the Special Fund. These rules are as follows:

• More than seven years from the date of a compensable injury or death and the claim has been disposed of without a compensation award being issued;
• More than seven years has elapsed from the compensable injury or death which was compensated and also more than three years has elapsed from the last date of payment of compensation;
• After death, occurring more than seven years from a compensable injury and either more than three years unless payment of compensation or from acclaimed disposed of without an award.
• Payment for continuing medical care does not bar the transfer of liability under section 25–a (see Beder v Big Apple Circus, decided May 26, 2011, Appellate Division, Third Department).
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This is important factor to consider – as the Worker's Compensation Board does not consider payments for medical services "compensation." Oftentimes in a reopener case, the claimant has been receiving ongoing medical care and indemnity benefits have ceased.

“Closed” status – not as simple as it could be.

In 2011 there were at least nine reported decisions on whether or not the workers compensation claim had been "truly closed” by the Worker's Compensation Board and the requisite amount of time had elapsed, thereby creating a viable claim for relief from the Special Fund for Reopened Cases.

Since 2001 the Board has been marking cases as "No Further Action" rather than stating a case is "closed." This "No Further Action" marking  confuses the issue as to whether or not a case is truly closed at the time of adjudication.

• In the most recent case decided on this topic, Hosey v Central New York DDSO, decided January 5, 2012, the Appellate Division found that the underlying case had not been "truly closed" and therefore the employer could not get the benefit of reimbursement from Special Funds for what they were calling a "reopener claim." In the Hosey decision, the claimant had a 2000 back injury and returned to work in 2002. The claimant continued to work with no additional lost time but had some work restrictions and received ongoing payments for medical treatment. Although his treating physician in 2002 indicated the claimant had a permanent disability referable to the work injury, the issue of permanency was never formally addressed. Although seven years elapsed and the claimant returned to work, the Special Fund argued that the issue of permanent residual disability had remained unresolved and therefore the case was still "open." Despite the fact that no lost time benefits have been issued for the prior seven years, and after three years of litigation on this issue, the Appellate Division upheld the denial of reimbursement for reopener benefits to the employer.
  
• In another case, Sauers v Kmart, decided December 1, 2011, the Appellate Division returned the case to the Worker's Compensation Board for review of a denial of reopener reimbursement. In this decision, the requisite seven year period had elapsed during which time the claimant had not received any medical treatment. Nor had any lost time benefits been issued. However, it was learned that approximately 2 weeks prior to the seven year anniversary of the injury the claimant had seen her treating doctor who recommended she undergo a surgery. The claimant did not want to pursue the surgery that time. Then, a few weeks later, but after the seven year period elapsed, the claimant decided to request the surgery. The employer argued that the case was closed and the appropriate seven-year period had elapsed. They argued that by the claimant decided not to pursue surgery, within the seven year period, the time period had elapsed and the employer should be reimbursed for further medical and lost time. However, the Appellate Division refused to follow that argument and instead referred the matter back to the Worker's Compensation Board for additional proceedings.
  
• The Appellate Division considered whether the case of a claimant who had already pled guilty for fraudulently collecting workers comp benefits while working was “truly closed.” In that case, the claimant made an argument that her condition had worsened and that she was due further benefits. The claimant had a ready been disqualified from obtaining further indemnity (wage replacement benefits) as she had been deemed a fraud after trial pursuant to §114a of the Worker's Compensation Act. In this interesting case, the Appellate Division found because the claimant was a fraud and therefore not do any lost wage benefits the claim was truly closed at that time and that the only payments ongoing were for consequential medical treatment. Therefore, the employer in this case was able to shift responsibility for the alleged reopener or worsening of the claimant's underlying medical condition to the Special Fund for reopener cases. (Palermo v Primo Paint Corporation, decided October 6, 2011).
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Practice tips for adjusters.

First, identify claims where significant time has elapsed from last payment of lost time or permanency benefits. The passage of time is critical to establishing Special Fund exposure.

Next, confirm the case was “truly closed” at a prior proceeding by settlement or by Order of the Workers’ Compensation Law Judge. This will usually involve reviewing old EC-23’s (decisions) in the electronic case file. Knowledge of these reopening rules in the instances where cases been "truly closed" can significantly reduce exposure for New York employers and carriers.

As this issue continues to be raised before the Board and continues to be a steady source of Appellate Division review, it is clear that the rules concerning whether or not cases "truly closed” are nuanced and require a close analysis of the facts and the applicable law in your case.

Consequential injury under the Longshore/Defense Base Act.

When an employee sustains an injury at work followed by a subsequent injury or aggravation outside of work, the employer is liable for the entire disability and for medical expenses due to both injuries if the subsequent injury is the natural or unavoidable result of the original work injury and would have occurred notwithstanding the subsequent injury. If the subsequent progression of the condition is not a natural or unavoidable result of the work injury, but is the result of an intervening cause, the employer is relieved of liability for disability attributable to the intervening cause.

Widow claims husband's death was "natural result" of work injury.

In a notable recent case, a longshoreman had an admitted leg injury at work. The employer voluntarily paid temporary total disability and medical benefits. The claimant was prescribed pain medications (Fentanyl patch, oxycodone). Two-and-a-half years later, the claimant underwent an (unrelated) tonsillectomy. He was prescribed pain medications following the (unrelated) surgery, which he took in addition to his "work related" pain meds. Three weeks later, he was dead. The autopsy revealed that Employee died from a multi-drug overdose related to his use of pain killers for both the leg injury and the subsequent non-work related surgeries. The widow filed a claim for death benefits.

Failure to comply with doctor recommendations was an "intervening cause" of death - case dismissed.

At trial the employer was able to prove that the decedent did not tell his doctors that he was taking pain pills for both the work injury and the non-work injury. The trial judge found that the decedent’s failure to inform his doctors of his pain killer abuse was the action that led to his death. The decision was upheld on appeal to the benefits Review Board.

Case: Sinegal v. Island Operating Company, BRB 11-0199 (Decided October 25, 2011).

Is there a notice defense in New York?

New York employers must provide statutory benefits to employees who have an accident and sustain an injury, which arises out of and in the course of employment. The employee must provide notice to the employer within 30 days after the accident. WCL § 18. Timely notice gives the employer the ability to fully investigate the circumstances of the accident when information is available and witnesses can recall the event. Failure to give proper notice may prejudice the rights of the employer to the extent that it may be found to be relieved of its obligation to provide benefits under the law.

What constitutes Employer Prejudice?

Notice must come within 30 days – but the claimant can report it later – and get benefits – if the employer is not prejudiced by this late reporting. Whether or not late reporting prejudices the employer is a fact question for the Board.

New Case on employer prejudice.

In a new case decided December 15, 2011, the Appellate Division reviewed the denial of a claim based on the failure of the claimant to provide timely notice to the employer. In Dudas v. Town of Lancaster, the claimant allegedly injured his ankle in a slip on ice while working at Town Hall on February 28, 2007. The employee continued to work and did not seek medical treatment until 10 days later. The claimant reported the injury as work-related on June 27, 2007. The employer filed denial pleadings raising "notice" as a defense (see my "best practices" recommendations for filing denial pleadings). The employer also obtained the original emergency room intake records, in which the claimant was recorded as stating he was injured when he "fell off a porch" - a story at odds with his "slip on ice at Town Hall" claim.

Here, the Board disallowed the claim and the Appellate Division upheld that denial, as the claimant's failure to report the injury within the time period required by law (30 days) prejudiced the employer's ability to investigate the underlying accident.
Case: Dudas v. Town of Lacaster, 2011 Slip Op. 09050 (N.Y. App. Div., Decided December 15, 2011).

What are the time limits on filing an occupational?

In New Jersey, occupational disease claims must be filed "within two years after the date the claimant first had knowledge" of the nature of his disability and its relation to his employment. Knowledge means recognition of the most notable characteristics of the disease sufficient to bring home a substantial realization of its extent and seriousness. Knowledge of the "nature" of a disability includes knowledge that the injury is compensable. In Earl v. Johnson & Johnson, 158 N.J. 155 (1999)., the Court found that although petitioner's respiratory problems began in 1989, the petitioner was not aware that the condition had deteriorated into a permanent disability until undergoing pulmonary function tests in 1993 and it is from that time that the statute of limitations runs.

When will an out-of-time defense be sucessful?

The New Jersey Appellate Division just upheld the dismissal of a high school teacher's lung cancer claim despite the fact that the teacher was able to demonstrate asbestos exposure over a twenty year period. The workers' compensation judge focused on the petitioner's knowledge of knowledge of exposure and cognizance that his lung cancer condition might have been related to the asbestos exposures in his workplace

The petitioner argued that "knowledge" of causation could not be imputed to him. However, the Respondent was able to demonstrate that the claimanthad "better than a master's degree," an intimate familiarity with the school environment including the ongoing remediation programs he personally observed, and the fact that the claimant actually testified about the asbestos exposure hazards in the school in public hearings that took place before the school board.

Given this backdrop of obvious knowledge regarding the workplace exposure to asbestos, the Workers' Compensation Law Judge ruled that waiting until 2004 to file his workers' compensation claim was beyond the statute of limitations, because the claimant was diagnosed with cancer in 2000, and the statute started running at that time. The petitioner did not file his claim within the two year limitation of the Act, and his case was dismissed. The Appellate Court upheld the dismissal.

Practical tips.

In the asbestos case, the employer was well armed with the petitioner's own prior testmony, given directly to the employer (remeber: the claimant was a teacher and the respondent was the school board), in which he publicly declared his knowlege of the hazardous condition in the workpace. IN most cases, public declaratiosn made by a pettiioner years before he or she files an occupational claim, publicaly acknoweleging their understanding of a specific hazard in the workplace, will not be available. But another case, also recently decided, demonstrates that good claim investigation can uncover similar evidence that a claimant knew of the alleged occupational injury long before the filing of their formal claim.

In Graf v. Mtichell Park Flooring, decided December 19, 2011, the claimant brought an occupational claim against a sucession of employers, alleging that use of a floor sander at work created a permanent residual disability. He recieved treatment with a chiropractor in 1999, and the record of that care was obtained by the employer. The Judge of Compensation relied on that record as demonstrating that the claimant "knew the nature and extent of his claimed disability" at the time of that treatment (in 1999). The Appellate Division upheld dismissing his workers' compensation claim, which wasn't filed until 2004, as being filed beyond the two-year statute of limitations.

Cases: Russo v. Hoboken Board of Education, A-1861-10T4 (N.J. App. Div., Decided November 29, 2011) and Graf v. Mtichell Park Flooring, A-1775-10T1 (N.J. App. Div., decided December 19, 2011).

Most-Requested Articles of 2011 . . .

New York 

10) Challenging Wages in Concurrent Employment Cases Post reform.
9) Overview of the New Permanent Disability Guidelines Effective January 2012.
8) When Are "Exotic Performers" not Employees in New York?
7) New York Workers' Compensation settlements.
6) Suicide and Compensation.
5) Applying the "Attachment to the workforce" test to ongoing benefits.
4) Effective Use of video at trial in New York.
3) Applying the Medical Treatment Guidelines to Out-of-state claimant
2) Rejecting Variances Based on Defective Filings.
1) The Medical Treatment Guidelines in Practice.

New Jersey

9) Using Facebook and other Social Media to Nail Frauds in New Jersey.
8) Attorneys' Fee Trends in New Jersey.
7) Reconstructing Wages in New Jersey.
6) Trying a Medical Provider Claim - the Burn Surgeon's Case.
5) Using a "Tie-Breaker" to Resolve a Medical Treatment Dispute.
4) Was It Too Much Facebook or Too Much Work that Killed Cathleen Renner?
3) Using Video at Trial in New Jersey.
2) Penalties for Carrier's Actions in New Jersey and New York.
1) Love and Bullets for Valentines Day.

Longshore and Defense Base Act

5) Initial Reporting under the Longshore Act.
4) Defenses under the Longshore Act.
3) Calculating Wages under the Defense Base Act.
2) The "True Doubt" Rule.
1) New Longshore Rates in Effect.

The workers’ compensation law provides two separate ways for a compensation carrier to obtain reimbursement from the proceeds of a claimant’s third-party settlement:

1. Assert a lien against the recovery for the amount of benefits already disbursed by the carrier. N.Y. Work. Comp. Law § 29(1); or
2. Offset the claimant’s future compensation benefits by the amount of the claimant’s net recovery in the third-party action. N.Y. Work. Comp. Law § 29(4).

Asserting a Lien for Past Benefits Conferred

The workers compensation carrier “shall have a lien on the proceeds of any recovery from” a third party settlement less reasonable and necessary expenditures, such as attorney’s fees. N.Y. Work. Comp. Law § 29(1). The employee may apply on notice to the lienor to the court for an order apportioning reasonable and necessary expenditures including attorneys fees. The court shall apportion such expenditures equitably between the employee and the lienor. Id.

Offsetting Future Compensation Benefits

The carrier must affirmatively preserve its right to offsets, or it may involuntarily waive such right. See Hilton v. Truss Systems, Inc., 82 A.D.2d 711, 444 N.Y.S.2d 229 (3d Dep’t 1981), order aff’d, 56 N.Y.2d 877, 453 N.Y.S.2d 428, 438 N.E.2d 1143 (1982). The claimant’s third-party settlement recovery less the carrier’s lien is credited by the carrier against future compensation payments. The net amount the claimant receives offsets future compensation payments, and no future payments will be made until the credit is exhausted. The carrier may waive the lien or the offset. N.Y. Work. Comp. Law § 29.