Workers' Compensation

Apportionment Now: Where we after Justice, Hikida, and Lindh

By Randy H. Pollak, Esq[1]

15 years after implementation of SB 899 and its “new regime” of apportionment law, one of the hottest litigated issues in workers’ compensation remains the scope of valid apportionment.  Case in point, on May 27, 2020, the Sixth district Court of Appeal published a major apportionment decision in County of Santa Clara v. WCAB (Justice), 2020 Cal. App. LEXIS 461. 

What is immediately important for the workers’ compensation practitioner is the Justice decision’s dramatic limitation of the potential scope of the Second District Court of Appeal’s decision in Hikida v. WCAB (2017) 12 Cal. App. 5th 1249.   Specifically, the Justice decision holds that apportionment is valid for permanent disability (PD) that resulted from industrial medical treatment.  However, Justice also confirms (and narrows) the essential holding from Hikida, which is simply stated as “Hikida precludes apportionment only where the industrial medical treatment is the sole cause of the permanent disability.”  (Justice, supra, 2020 Cal. App. LEXIS at p. 19.) 

In review, perhaps the most important take away from the Justice decision for the workers’ compensation system may be a seemingly durable apportionment framework going forward.  This article introduces that point for discussion. For an expanded analysis, please join my webinar on this topic on June 26, 2020. You can register for the webinar at https://calawyers.org/event/webinar-apportionment-now-where-we-are-after-justice-hikida-and-lindh/

Background

The foundation of apportionment law is at Labor Code section 4663, specifically (a) which provides “Apportionment of permanent disability shall be based on causation.” Furthermore, at (c) the Labor Code develops it with:

A physician shall make an apportionment determination by finding what approximate percentage of the permanent disability was caused by the direct result of injury arising out of and occurring in the course of employment and what approximate percentage of the permanent disability was caused by other factors both before and subsequent to the industrial injury, including prior industrial injuries…

This statement of apportionment law was a radical change from what existed prior to SB 899 (passed in 2004.)  The breadth of change was reviewed in the California Supreme Court case of Brodie v. WCAB (2007) 40 Cal. 4th 131, noting prior to SB 899, apportionment “based on causation was prohibited.” (Id. at p. 1326.)  Rather, “the new approach to apportionment is to look at the current disability and parcel out its causative sources—nonindustrial, prior industrial, current industrial—and decide the amount directly caused by the current industrial source.” (Id. at p. 1328.)

In the aftermath of passage of SB 899 and the new Labor Code section 4663, the Workers’ Compensation Appeals Board (WCAB) provided further guidance on its scope and applicability with its major En Banc decision in Escobedo v. Marshalls (2005) 70 Cal. Comp. Cases 604. Several notable statements of law were provided in that decision including but not limited to:

Physician must apportion to causation of PD, not causation of the injury. (Id. at p. 611.)

Apportionment can be based on any “other [non-industrial] factor,” either pre- or post-injury” (Id. at p. 614.)

Apportionment can be made to pathology and asymptomaticprior conditions. (Ibid.)

Evidence of prior disability or modified work is not required. (Ibid.)

The history of apportionment law in the 10+ years after SB 899 remained contentious amongst the industry participants.  Parties, doctors, judges, and the WCAB, attempted to adapt to this new regime with relative success. The extent of those “on the ground” struggles is not reflected very well in the relatively few published Court of Appeal decisions in that time addressing the scope of valid apportionment, virtually all siding with the employer. (see e.g., City of Jackson (Rice) (2017) 11 Cal. App. 5th 109; Benson v. WCAB (2009) 170 Cal. 4th 1535; E.L. Yeager Construction v. WCAB (2006) 145 Cal. App. 4th 922.)

Hikida

The first, and perhaps only, published divergence from the consistent streak of how the Courts of Appeal handled the scope of valid apportionment occurred in Hikida, supra, 12 Cal. App. 5th 1249.

In Hikida, the applicant was a long-term employee that brought a claim for a cumulative trauma injury resulting in carpal tunnel syndrome. The employee underwent a carpal tunnel release. Post-surgery the employee developed complex regional pain syndrome (CRPS). The Agreed Medical Evaluator (AME) in the case found the employee 100% disabled because of the CRPS, which was opined to be a direct consequence of the failed surgery.  However, the AME found 10% non-industrial apportionment to an underlying cause of the carpal tunnel syndrome. The WCAB upheld the apportionment and the applicant ultimately appealed to the Court of Appeal arguing that there should be no apportionment.

The second district Court of Appeals granted the writ of review and went on to issue a published decision. The second district found the defendant was liable for disability directly traceable to an unsuccessful industrially based medical intervention, without apportionment.  In reaching that conclusion, it cited to (amongst other cases) the California Supreme Court case of Granado v. WCAB (1968) 69 Cal. 2d. 399, which previously held that medical treatment is not apportionable.  Building on that, in part, the Hikida Court held the adverse consequences of industrially provided medical treatment cannot be apportioned. Therefore, the PD consequences could not be apportioned.

That exact holding and reasoning from Hikida were the subject of dispute after it was published. To be fair, some of the disagreement was related to what side (applicant or defense) was reading it.  Moreover, the highly unusual (and unfortunate) facts of the case also influenced a more limited interpretation by the defense side, namely the fact the worker in Hikida developed a completely new diagnosis from the medical treatment she underwent. (i.e., bad facts make bad law.)  Yet, there was some ambiguity in the Hikida decision since the Court stated its holding and rationale several times, and not always the same. For example, the first statement of the result was as follows:

We further conclude that despite significant changes in the law governing workers’ compensation in 2004, disability resulting from medical treatment for which the employer is responsible is not subject to apportionment. (Id. at p. 1252.)

Whereas, the next statement of the potential holding was as follows:

The issue presented is whether an employer is responsible for both the medical treatment and any disability arising directly from unsuccessful medical intervention, without apportionment. For the reasons discussed below, we conclude it is. (Italics added) (Id. at p. 1260.)

Nonetheless, the Hikida Court sums up the holding again with:

Nothing in the 2004 legislation had any impact on the reasoning that has long supported the employer’s responsibility to compensate for medical treatment and the consequences of medical treatment without apportionment. (Id. at p. 1263.)

Post Hikida

After Hikida, the interpretation advanced by the applicant’s bar was that PD resulting from industrial medical treatment could not be apportioned.  Whereas, the defense bar advanced 2 arguments, both narrowly interpreting Hikida: (1) Unsuccessful medical treatment resulting in PD disability could not be apportioned and/or (2) medical treatment resulting in an entirely new condition could not be apportioned. The arguments from both sides played themselves out in a series of conflicting WCAB decisions with varying results. (For a sampling of these various decisions, see generally, Gonzalez v. Recology Goldenstate, 2019 Cal. Comp. P.D. LEXIS 501; McFarland v. Charles Abbott Associates, 2019 Cal. Wrk. Comp. P.D. LEXIS 209; Lux v. County of Santa Barbara, 2019 Cal. Wrk. Comp. P.D. LEXIS 494; Herrera v. Maple Leaf Foods, 2018 Cal. Wrk. Comp. P.D. LEXIS 284; Burr v. The Best Domolition, 2018 Cal. Wrk. Comp. P.D. LEXIS 143.)

It is important to note the significance of interpreting the holding in Hikida broadly vs. narrowly. PD in California Workers’ Compensation cases is derived in part from the AMA Guides 5th edition, which provides a manual for ratings based on diagnosis, which includes consideration in the final rating for the medical treatment that has been completed and what may be needed on an ongoing basis.  For example, if someone has undergone a medical procedure (even if successfully) on an industrial basis, they will have a certain level of impairment associated with it.  Hence, if Hikida is read broadly that PD resulting from medical treatment cannot be apportioned, then a whole host of PD scenarios would be impacted, and apportionment would be invalid.  Whereas, if the narrower interpretation of Hikida were adopted, then either the medical treatment needed to be unsuccessful to be non-apportionable (still fairly impactful under various AMA Guides scenarios) or resulting in a new condition altogether (much rarer).

Lindh

After Hikida, and before Justice, came the First District Court of Appeal decision in City of Petaluma v. WCAB (Lindh) (2018) 29 Cal. App. 5th 1175.  The case addressed a separate issue of the scope of apportionment, specifically apportionment of risk factors. However, what is useful for the discussion in this article, and for the Justice Court, was the simplicity of its interpretation of Labor Code section 4663.

By way of background, a police officer was engaged in training wherein he was hit in the head several times.  Subsequently he lost vision in one eye.  It was also discovered he had underlying blood circulation condition that may have contributed to the blindness.  At the time of the injury, it was asymptomatic.  However, the QME ultimately stated that it was unlikely the applicant would have lost his vision in the eye but for the underlying condition.  The QME apportioned 85% to the non-industrial risk factor deemed a contributing cause to the overall disability.

The Judge in the case found the apportionment not valid because it was using purely risk factors. The WCAB on reconsideration agreed with the Judge.

The defendant filed a petition for writ of review with the 1st district Court of Appeal. Therein, the Court reversed the Judge and the WCAB and held plainly that post SB 899:

[T]he salient question is whether the disability resulted from both nonindustrial and industrial causes, and if so, apportionment is required. (Id. at. p. 1193.)

This simple statement of the law was influential to the Justice Court in its view of the scope of Labor Code section 4663.

Justice

On May 27, 2020, the Sixth District Court of Appeal issued its published decision in Justice, wherein it substantially curtailed the more expanded interpretation of the Hikida decision.

By way of background, the applicant brought a claim for injury to the knees and ultimately underwent knee replacement surgery. The medical-legal evaluator found the applicant had underlying “market osteoarthritis.” (Justice, supra, 2020 Cal. App. LEXIS at p. 2.) The medical-legal evaluator went onto find 50% of the overall disability was related to the applicant’s underlying non-industrial factors.

The judge in the case rejected the apportionment determination on the basis the Hikida case did not allow it because the PD resulted from the medical treatment.  (Knee replacement results under the AMA Guides.)  The conundrum of Hikida and its intersection with the AMA Guides was on full display when the judge noted:

[T]he surgeries were quite successful. While by no means curative, the surgeries appear to have significantly increased [Justice’s] ability to walk and engage in weight-bearing activities. Under the pre-2005 [Permanent Disability Rating Schedule (PDRS)] one suspects that the surgeries would have significantly decreased [her] work limitations and increased her ability to engage in gainful activity, resulting in a lower [permanent disability] rating. Since the current PDRS is based not upon functional capacity but upon diagnosis, the surgery has resulted in an impairment rating substantially higher than it was pre-surgery. The only real cause of this change in impairment rating was the surgery… (Id. at p. 5.)

On reconsideration, the WCAB agreed with the judge. The defendant filed a petition for writ of review, and the Sixth District reversed the judge and WCAB.

In strikingly direct statements of the law of apportionment (echoing Lindh), the Justice Court noted:

Where there is unrebutted substantial medical evidence that nonindustrial factors played a causal role in producing the permanent disability, the Labor Code demands that the permanent disability “shall” be apportioned. (Id. at p. 16.)

And:

There is no case or statute that stands for the principle that permanent disability that follows medical treatment is not subject to the requirement of determining causation and thus apportionment, and in fact such a principle is flatly contradicted by sections 4663 and 4664. (Id. at p. 18.)

Yet, the Justice Court reconciled itself with the Hikida decision by noting:

Understood in context [Labor Code sections 4663/4664], the Hikida court’s conclusion that there should be no apportionment makes sense only because the medical treatment in Hikida resulted in a new compensable consequential injury, namely CRPS, which was entirely the result of the industrial medical treatment. It was this new compensable consequential injury that, in turn, led entirely to the injured worker’s permanent disability. (Ibid.)

And finally:

Although parts of the Hikida opinion can be read to announce a broader rule that there should be no apportionment when medical treatment increases or precedes permanent disability, it is clear that the rule is actually much narrower. Put differently, Hikida precludes apportionment only where the industrial medical treatment is the sole cause of the permanent disability. (Id. at p. 19.)

Analysis

What results from the Justice decision is a reconciliation of the law and a framework for the parties, doctors, and the WCAB to handle contentious and complex issues of apportionment going forward.

The Labor Code and all published decisions leading up to Hikida, and after, have stated apportionment to causation is required based on the “new regime” of SB 899.  Hikida raised a novel point to deal with an awful set of facts.  But it went “against the grain” of the structure and history of Labor Code section 4663 and all published decisions. The Justice decision allows for Hikida to exist alongside all that history and law in a harmonized way.  On the one hand, if the medical treatment results in a new condition that becomes the sole cause of the applicant’s disability, then there can be no apportionment.  However, on the other hand, if the medical treatment results simply in PD, then apportionment is required.

Going forward, this approach is quite manageable as a legal framework.  The legal theory would be well stated, and the medical questions posed to the medical-legal examiner can be whether (1) there was a new condition brought on by the medical treatment and (2) whether it is the sole cause of the PD.

At the time of this article, the Justice decision can be further challenged to the California Supreme Court.  However, for now, as a published decision, it is binding on the WCAB. (see generally, Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal. 2d 450, 455.)

Conclusion

After Justice, Hikida, and Lindh, what emerges is a framework for litigants handling workers’ compensation cases with apportionment issues related to medical treatment leading to PD. Whether that is a negative or positive development clearly depends on which side of the litigation you are on.  This article asserts that the Justice decision is a reconciliation, and provides guidance for litigants, doctors, and the Board. The holding is simply stated and has practical utility in a deposition of a medical-legal evaluator, which is: whether the medical treatment resulted in PD … or did the medical treatment lead to a new condition that is solely the source of the PD?  Assuming no further published decisions to the contrary, or legislative action, this is a potentially durable framework in which to litigate these disputes.


[1] © 2020 by Randy H. Pollak. All rights reserved. The views expressed by the author and the information presented in these materials are intended for general educational/informational/entertainment purposes only and are not intended to act as legal advice applicable to any particular factual situation, nor should the views and information be construed to reflect the opinion of the presenter’s employer or any organizations that the presenter may be affiliated with, including the CLA.  You are advised not to adopt the presenter’s views without conducting your own, independent legal research and forming your own opinions.

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