Zenith Insurance Co. v. Workers' Compensation Appeals Board
Filed January 29, 2008, Second District, Division Seven
Cite as 2008 SOS 692

Judgment on Worker’s Denied Petition Annulled and Remanded

Gilberto Capi injured his lower back while working as a book binder for International Coil Bindery. The company workers' compensation claims was then insured by Zenith Insurance Company.

Capi received outpatient medical treatment for his injury from various health providers, including Beach Cities Surgery Center (Beach Cities) and Pain Intervention Therapy of San Diego (PIT; together the lien claimants).

Zenith settled Capi's claims via a compromise and release but it disputed the reimbursement claims made by several of Capi's health care providers, including the claims for facility fees sought by the lien claimants.

At a hearing with a worker’s compensation judge (WCJ), Zenith informed the WCJ that it had filed a civil action against the lien claimants and others which alleged that the lien claimants had illegally billed them for facility fees. Among other issues, the insurance company also charged that the health providers were unlicensed and unaccredited in violation of the Business and Professions Code and the Health and Safety Code. (Zenith Ins. Co. v. Brett L. Allen et al.(Super. Ct. San Diego County, 2004, No. GIN036344).)

As proof, Zenith also presented a copy of its civil complaint to the WCJ and requested additional time to complete discovery and for the matter to be stayed pending resolution of its civil action. A pretrial conference statement listed the issues in dispute, including whether the lien claimants engaged in a fraudulent scheme involving billing improprieties.

The WCJ refused to continue the matter and the case proceeded to trial. In his findings of fact and order, the WCJ allowed the liens of Beach Cities and PIT, in the respective amounts of $22,100 and $24,000.

In conclusion, the WCJ also recommended denial of reconsideration, and held that Zenith had waived the issues in its petition by not raising them at trial. As such, the company could not shift the burden of proof to the lien claimants because it did not frame the issues in this fashion.

In response, Zenith filed a petition for reconsideration with the Worker’s Compensation Adjudication Board (WCAB), challenging the findings and order awarding of facility fees to the lien claimants. Further, the insurance company held the following arguments:

• the awards were unjust or unlawful because the WCJ refused to stay the claims or allow it to present evidence regarding the legal status of the lien claimants


• The awards were not supported by the evidence because the lien claimants failed to meet their burden of proving that they were licensed or accredited to operate an outpatient facility and thus were not entitled to collect facility fees.

The Board adopted the recommendation of the WCJ and denied reconsideration.

In response, Zenith filed a petition for review.

In review, the Second District appeals court found that the Board erred in denying the petition for reconsideration because the lien claimants failed to establish their licensure or accreditation as an essential element of their lien claims. Accordingly, the Board's decision was not supported by substantial evidence and is annulled.

Further, the appeals court also held that under Labor Code Sec. 4061(a), which provides for notice of permanent disability indemnity "together with the last payment of temporary disability indemnity," an injured worker who received his last payment of temporary disability indemnity in 2005 was subject to new Schedule For Rating Permanent Disabilities, pursuant to provision of Senate Bill 899 ( applying new schedule to prior injuries "when the employer is not required to provide the notice required by Section 4061 to the injured worker.")

According to the court, the WCAB must look to the entire record to determine whether a medical-legal report or treating physician report (rendered prior to Jan. 1, 2005) is substantial evidence "indicating the existence of permanent disability" under Sec. 4660(d).

In conclusion, the appellate court annulled the order denying reconsideration. As a result, the matter is remanded to the Board to grant the petition for reconsideration and conduct further proceedings and further development of the record. (Lab. Code, § 5906.)