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CA Court Hands Workers Comp Insurers a Win in Cost-of-Living Case

Source: A.M. Best

Posted on 16 Aug 2011

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The California Supreme Court has handed down an opinion that is expected to benefit employers and insurers in disputes over how annual cost-of-living adjustments ought to be calculated for some workers' compensation claimants.

The case garnered industry attention in the state because of its potential to increase the amount claimants are entitled to receive under a 2002 law that outlined how adjustments are calculated.

A key portion of the 2002 law was "no model of clarity" and left the court with three options for how that provision should be interpreted, the opinion said.

That provision could be read as allowing cost-of-living adjustments to be calculated either prospectively from the Jan. 1 after the year in which the worker first becomes entitled to receive benefits; retroactively to Jan. 1 after the year in which the worker sustains the injury; or retroactively to Jan. 1, 2004, for every case involving an industrial injury, regardless of when the injury occurred or the date the first benefit payment becomes due. The latter interpretation is the one the California Court of Appeals decided upon before the case was appealed.

But the California Supreme Court's opinion opted for the first interpretation, meaning that cost-of-living adjustments should be calculated prospectively from the Jan. 1 after the year in which the worker first becomes entitled to receive benefits.

The case stems from a 2004 injury sustained by an unnamed accountant and controller injured who was set to receive $728 each week for life.

The problem arose when the claimant argued that the weekly payments that began being issued on Oct. 20, 2006 should be adjusted to include cost-of-living increases from the Jan. 1 after the Jan. 20, 2004 date of his injury. At stake was roughly $3,500 in allegedly unpaid cost-of-living adjustments.

After different interpretations of the 2002 law were reached by an administrative law judge and the Workers' Compensation Appeals Board, the case was appealed to the California Court of Appeals.

The appeals court determined that the claimant was entitled to begin receiving cost-of-living adjustments on Jan. 1, 2004, regardless of the date of the injury.

The California Supreme Court disagreed, siding with arguments put forward by the California Chamber of Commerce and the State Compensation Insurance Fund of California.