Pearson Ford v. Workers' Comp. Appeals Bd.
To be published in California Appellate Reports; Certified for Publication 11/1/17 (2017)
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Rule of Law:
A worker convicted of workers' compensation fraud is not barred from receiving benefits if there is substantial medical evidence, independent of the fraudulent misrepresentation, supporting an otherwise compensable industrial injury, and the claimant's credibility is not entirely destroyed regarding the underlying claim.
Facts:
- On March 24, 2006, Leopoldo Hernandez, while working at Pearson Ford, accidentally slammed a car trunk on his left hand, crushing a finger.
- From 2006 through 2010, Hernandez received treatment and examinations from several physicians for severe pain related to his hand and shoulder injury, consistent with his workers' compensation claim.
- In November 2008, a neurologist found neurological abnormalities and suggested Hernandez might have complex regional pain syndrome due to severe pain despite multiple medications.
- On March 31, 2009, Dr. Byron King, an Agreed Medical Examiner (AME), examined Hernandez but noted difficulty in assessing his left arm and hand because Hernandez would not permit grip or pinch strength tests, and Dr. King observed a total lack of use inconsistent with soft tissue condition.
- Between January and May 2010, Hernandez was examined three times by Dr. Walter Strauser, a pain specialist, consistently wearing a sling on his left arm and complaining of severe pain and inability to use his left hand, for which he received opiate prescriptions.
- Private investigators, hired by Pearson Ford's workers' compensation carrier, conducted video surveillance of Hernandez following his visits to Dr. Strauser in early 2010, observing him removing his sling and using his left hand to drive, get in and out of his truck, and carry groceries.
- After being made aware of the surveillance videos, Dr. King re-examined Hernandez on December 13, 2010, finding him much more cooperative, not wearing a sling, and demonstrating improved function of his left upper extremity, allowing for objective testing.
- Based on objective tests, Dr. King concluded that Hernandez suffered severe compromise to his left hand, moderately severe regional pain syndrome, and a 38 percent whole-person impairment (later adjusted to 57 percent in August 2011).
- In May 2012, Hernandez pled guilty to one count of violating Insurance Code section 1871.4, based on his May 2010 visit to Dr. Strauser, and was ordered to pay $9,000 in restitution.
Procedural Posture:
- Leopoldo Hernandez applied for and received workers' compensation benefits following his initial injury at Pearson Ford.
- On May 31, 2016, a Workers' Compensation Judge (WCJ) found Hernandez suffered a 70 percent permanent disability and was entitled to disability indemnity, a life pension, and future medical benefits, relying on Dr. King's medical conclusions.
- Pearson Ford filed a petition with the Workers' Compensation Appeals Board (WCAB) seeking reconsideration of the WCJ's determination.
- On July 18, 2016, the WCAB denied Pearson Ford's petition and adopted the WCJ's report and conclusions.
- Pearson Ford filed a petition for writ of review with the California Court of Appeal, Fourth Appellate District, which was issued.
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Issue:
Does a worker's conviction for workers' compensation fraud under Insurance Code section 1871.4 automatically bar all future workers' compensation benefits, even if there is independent medical evidence establishing a compensable injury not directly stemming from the fraud?
Opinions:
Majority - Benke, Acting P. J.
No, a worker's conviction for workers' compensation fraud under Insurance Code section 1871.4 does not automatically bar all future workers' compensation benefits if there is substantial, independent medical evidence establishing a compensable injury not directly stemming from the fraudulent misrepresentation. The court affirmed the Workers' Compensation Appeals Board's (WCAB) decision, relying on the interpretation of Insurance Code section 1871.5 from Tensfeldt v. Workers' Compensation Appeals Board (1998) and Farmers Ins. Group v. Workers Compensation Appeals Board (2002). Section 1871.5 explicitly states that only compensation "owed or received as a result of a violation of Section 1871.4" is barred. Tensfeldt emphasized that fraud cases must be determined "on an ad hoc basis," rejecting an "inflexible rule" to bar all benefits, and established a three-part test for allowing benefits despite a fraud conviction. The court found that Hernandez met all three Tensfeldt requirements: (1) Pearson Ford did not dispute the initial compensable industrial injury. (2) Dr. King, the AME, reviewed the surveillance videos but based his ultimate conclusion of a permanent disability on objective examinations and testing conducted when Hernandez was more cooperative, rather than on Hernandez's subjective, possibly fraudulent, reports to his pain management physicians. This constituted substantial medical evidence "not induced, caused by, or the result of Hernandez's separate exaggeration." (3) The WCAB's determination that Hernandez's credibility was not wholly destroyed was binding, especially since Dr. King relied on objective testing. The court distinguished this case from Tensfeldt, where the fraud concerned the fundamental compensability of the injury itself (where and how it occurred). Here, Hernandez's fraud related to exaggerating the extent of an already established and compensable injury. Barring all benefits would be a "draconian penalty" inconsistent with the liberal construction of workers' compensation law. The restitution order from the criminal case was also found not to prevent future benefits unrelated to the specific fraud. The court further found substantial evidence for the permanent injury, accepting Dr. King's expert opinion, which thoroughly explained any perceived departures from AMA Guides.
Analysis:
This case significantly clarifies the application of California Insurance Code section 1871.5 and the Tensfeldt test, particularly distinguishing between fraud related to the initial compensability of an injury and fraud concerning the extent of an already compensable injury. It reaffirms that a workers' compensation fraud conviction does not automatically forfeit all benefits, especially when objective medical evidence, independent of the fraudulent statements, supports the claim. This decision encourages a nuanced, fact-specific approach to fraud allegations, emphasizing that the legislative intent is to bar only those benefits directly resulting from the fraud, not to impose a "draconian penalty" on genuinely injured workers. Future cases will likely use this precedent to assess whether medical evidence can sufficiently "de-link" an award from fraudulent misrepresentations, particularly when medical experts rely on objective findings rather than solely on claimant reports.
