Newsletter: Recent Court Decisions

April  2003

FEDERAL PREEMPTION VERSUS. STATE LAW ACTIONS INVOLVING ERISA COVERED HMOs - Kimberly A. Wilson

In a recent decision dated 3/27/03, the Florida Supreme Court held that the federal ERISA law does not pre-empt a state law action against an HMO for vicarious liability based upon the alleged malpractice by the contract physician.

In Villazon v. Prudential Healthcare Plan, Inc., 28 F.L.W. S267, Mrs. Villazon died of a cancerous tongue condition that was allegedly mistreated or misdiagnosed. Mrs. Villazon's husband ("Villazon") filed an action for wrongful death against his wife's treating physician and her HMO carrier.

Mrs. Villazon had become a member of the HMO through her employer. There was no disagreement that the HMO was within the purview of ERISA.

The action alleged that Mrs. Villazon's HMO was vicariously responsible for her death. Mrs. Villazon was a subscriber under a health maintenance contract through which the HMO agreed to provide Mrs. Villazon with comprehensive health care services. The action also alleged that the HMO had a non-delegable duty to provide Mrs. Villanon with quality health care.

While Villazon argued that the HMO controlled the referral process and required authorization before the performance of diagnostic tests and therapeutic procedures, he did not allege his wife was denied proper medical testing and referrals to specialists. In other words, he did not contend the HMO was directly liable for treatment or authorization; but rather, the HMO was vicariously responsible for the alleged malpractice of the HMO contract physician, denying Villazon contended the HMO contract Physician was an "agent" of the HMO.

In reaching its decision, the Court acknowledged the threshold issue for ERISA preemption is "if the claim relates to the manner in which the ERISA plan is administered."

The Court held, however, that a wrongful death claim brought in a state court against an HMO based upon vicarious liability for the alleged malpractice committed by the contract physician was not federally pre-empted by ERISA. This action did not "relate to the manner in which the ERISA plan is administered."

After concluding ERISA did not preempt Villazon's state court action, the case was remanded to the trial court to determine whether there was an issue of genuine fact as to whether an agency relationship existed between the physician and the HMO, such that would render the HMO vicariously responsible for the alleged malpractice of the physician.

Therefore, the Florida Supreme Court has held that this state law claim is not federally pre-empted by ERISA. However, whether the HMO will ultimately be deemed responsible under the facts of this case will depend upon whether the trier of fact finds an agency relationship existed between the HMO and contract physician such that the HMO would be vicariously responsible for the alleged malpractice of the contract physician.

INJURIES ARISING OUT OF AND IN THE COURSE OF EMPLOYMENT - Ideopathic Injuries - Heather M. Byrer-Kile

Bryant v. David Lawrence Mental Health Center, 672 So.2d 629 (Fla. 1st DCA 1996).

In Bryant, the employee was injured when she squatted to lift a bag of laundry off the floor of a laundry room and felt immediate pain in her right knee. She sustained a tear of the lateral meniscus and filed a workers' compensation claim. The Employer/Carrier argued her injury was idiopathic and personal in nature and not related to her job. The Judge of Compensation Claims agreed and found that the claimant did not lose her balance, fall, twist or experience any other unusual movement. Therefore the Judge denied the compensability of the claim because the injury did not arise of out the claimant's employment. The Judge found the employee was not exposed to any greater risk than she may experience in her everyday life and to which the population, as a whole, is exposed.

The theory behind creating the workers' compensation system was to provide insurance coverage for the employee from employment that would substantially contribute to the risk of injury and to which the employee would not necessarily be exposed during his or her non-employment life. The workers' compensation system was not designed to provide coverage for a condition personal to the employee that simply occurred during work hours.

The Appellate Court indicated that a two (2) prong test should actually be used to determine whether an injury is ideopathic in nature verses an injury occurring as a result of job related duties. The Employer/Carrier has the burden of first asserting that the injury is personal in nature and then providing evidence that the claimant had an actual pre-existing condition. If the Employer/Carrier proves the existence of a pre-existing condition, then the Judge of Compensation Claims is to determine whether the employment exposed the employee to a risk of injury greater than the employee would normally encounter in everyday life. If the Judge determines the risk was no greater than what the average person would experience, the claim should be denied.

Here, the Appellate Court held that the Judge of Compensation Claims had erred indenying compensability because as the Employer/Carrier failed to present any evidence of a pre-existing condition; therefore, the Employer/Carrier did not meet the requirement of the first prong. The Court indicated without this evidence, the employee did experience an injury that arose out of her employment, and was compensable The trial court was reversed.

This case is important because it demonstrates the difficulty in defending an ideopathic injury verses a work-place injury. Whether the injury is ideopathic and not subject to workers' compensation coverage hinges upon if the claimant had a pre-existing condition that is well-documented. Furthermore, the Judge has to find that employee was working in an environment that a risk of injury was no greater then what the employee would normally encounter in every day life.

INSURANCE COVERAGE OF SPOLIATION OF EVIDENCE CLAIM - Amy Meghan Neaher

Humana Workers' Compensation Services, et al. vs. Home Emergency Services, Inc. 28 Fla. L. Weekly S227, Supreme Court of Florida, (March 13, 2003).

This case came before the Florida Supreme Court to decide if an insurance policy covered a lawsuit by an employee for negligent spoliation of evidence.

In this case, Humana Workers' Compensation Services (Humana) is the insurer of Home Emergency Services, Inc. (HES) under a two-part insurance policy. Part One of the policy provides that Humana will defend HES against a claim for workers' compensation benefits and will pay workers' compensation benefits required on HES' behalf. Part Two of the policy entitled "Employers Liability Insurance," states in part:

While this insurance policy was in effect, an employee of HES, Alberto Milian, was injured when he fell from a ladder during the course of his employment. He was paid workers' compensation benefits under Part One of HES' insurance policy. Milian intended to pursue a claim against the ladder's manufacturer and distributor for product liablilty. The employer, HES agreed to maintain the ladder in its possession for Milian. The ladder was latter misplaced or destroyed. Milian then filed a tort suit against his employer, HES for negligent spoliation of the evidence.

Milian's complaint alleged that HES breached its contractual duty to maintain evidence and breached a statutory duty under section 440.39(7), Florida Statutes (1995), which imposes a duty on an employer to cooperate with an employee in the prosecution of claims and potential claims against third-party tortfeasors.

Subsequently, HES requested coverage and defense from Humana pursuant to Part Two of its policy, the Employers Liability Insurance portion. Humana took the position that the policy did not cover such claims. Humana filed a Petition for Declaratory Relief. Both parties filed a Motion for Summary Judgment. The trial court granted summary judgment in favor of Humana, concluding that the spoliation claim was not "bodily injury" and, therefore, not covered by the policy.

HES appealed the decision to the Third District Court, which reversed the trial court and held the policy did cover the spoliation claim. The Third District Court relied on a decision made in a case related to the case at hand, Lincoln Insurance Co. v. Home Emergency Services, Inc. In Lincoln, HES had requested coverage from its commercial general liablility carrier, Lincoln Insurance Company (Lincoln), under a policy that provided coverage for "damages because of a bodily injury" if "caused by an occurrence" which was defined as an "accident". The Third District Court held that Milian's fall from the ladder was an "occurrence" and, therefore, the policy covered HES' in defending against the spoliation claim.

However, Humana sought review by the Florida Supreme Court on the basis that the Fourth District Court, in Norris v. Colony Insurance Co., held that negligent spoliation was not covered by an insurance policy which required bodily injury to be caused by an "occurrence" which was defined as an "accident". Therefore, the Third District Court's decision conflicted with the Fourth District Court's decision.
The Supreme Court of Florida held that it was bound by the plain language of the policy in Section Two. The court looked to Section Two to decide whether a claim for spoliation of evidence is a claim for "bodily injury by accident" as stated in Section Two. The Court concluded that in this case, the "accident" was the negligent loss of the ladder. The accident did not result in bodily injury, but in the loss of a ladder not being available as evidence. The Court held that Milian's spoliation claim does not seek compensation for the bodily injury he sustained in the fall, but for the loss of a probable expectancy of recovery in the third-party suit.

Therefore, the Third District's ruling was overturned and Humana did not have to provide coverage to the employer, HES.

WORKERS' COMPENSATION BENEFITS & THE DRUG-FREE WORK PLACE - Carol Kamel

Although many employers encourage a "drug-free" workplace, others take the initiative to implement a DRUG FREE WORKPLACE PROGRAM (DFWP) as defined in Florida Statutes 440.102 in conjunction with rules adopted by the Agency For Health Care Administration (AHCA). In addition to encouraging and promoting a drug-free environment, these Employers may also qualify for reduced rates under the section 440.102(2), Fla Statues.

Another benefit to being designated as a bona fide DFWP is the enforcement of Florida Statutes section 440.101 and 440.102. For instance, if an injured worker is non-compliant or refuses to undergo appropriate drug testing after a work-place accident, the claimant may potentially forfeit rights to indemnity benefits and medical treatment under the statute.

In a recent decision, the First District Court of Appeal ruled that because the claimant refused to undergo a second drug test, she forfeited her rights to indemnity and medical benefits under chaper 440. Van Duyn v. Truck Driver Services, Inc. 805 So.2d 1107 (Fla. 1st/DCA 2002).

In Van Duyn, it was undisputed that the claimant voluntarily complied with an initial drug test. However, since that sample was "un-useable" and she failed to provide a second sample upon request, the Judge of Compensation Claims ruled that she forfeited her right to workers' compensation benefits. Van Duyn v. Truck Driver Services, Inc. 805 So.2d 1107 (Fla. 1st DCA 2002).

Van Duyn "signed a chain of custody" form acknowledging she refused to provide a useable sample Id at 1108. Although the claimant argued that she was not offered the opportunity to return in 24 hours to take another drug test as provided in the Florida Administrative Code, the JCC ruled and the First DCA affirmed that by leaving the clinic prior to undergoing a second drug test, the claimant forfeited her rights and benefits. Ultimately, the statute was strictly interpreted to the benefit of the Employer/Carrier.

As such, all employers are encouraged not only to promote a drug-free environment, but to implement an approved Drug Free Work Place Program so this potential defense can be,used when appropriate in a workers' compensation claims.

CORRECT STANDARD OF CAUSATION FOR PSYCHIATRIC INJURIES - Helen Alysandratos

The First District Court of Appeals in Cromarte v. City of St. Petersburg, 28 Fla. L. Weekly D770(Fla. 1st DCA, March 18, 2003) recently reversed an Order of the Judge of Compensation Claims denying a claim for psychiatric care and treatment. The Order denying psychiatric care was unclear as to whether the Judge of Compensation Claims had applied the correct standard of causation. The First District Court of Appeals relied upon its earlier decision in Claims Management, Inc. v. Drewno, 727 So.2d 395 (Fla. 1st DCA 1999)(on reh'g) as the basis for determining the correct standard of causation as it relates to compensability of psychiatric injuries. In Drewno, the trial court held that a Claimant only needs to prove a mental injury or manifestation is directly and proximately linked to the initial physical injury. See Drewno, 727 So.2d at 398. The First District Court of Appeals rejected the argument that a Claimant must demonstrate that the initial physical injury was the major contributing cause of the psychiatric injury.

During the course and scope of his employment as a maintenance worker, the claimant sustained a closed head injury. Subsequently, he alleged suffering from depression. The Judge of Compensation Claims appointed an expert medical advisor as conflicting opinions were offered by the claimant's treating physicians. Although the expert medical advisor concluded that the Claimant suffered from dementia secondary to the physical injury, the Judge of Compensation Claims rejected the expert medical advisor's testimony. The JCC concluded that the Claimant's medical records and treating physician's reports provided clear and convincing evidence to reject the expert medical advisor's opinion.

The Judge of Compensation Claims correctly set forth that "recovery for a mental or emotional injury is only available where the alleged mental injury is the direct and immediate result of a physical injury." The JCC also addressed Section 440.09, Florida Statutes (1997) wherein "mental or nervous injuries occurring as a manifestation of an injury compensable under this section shall be demonstrated by clear and convincing evidence." However, the JCC inaccurately indicated that the holding in Drewno stood for the proposition that the Claimant must prove the physical injury was the major contributing cause of the subsequent psychological injury. Furthermore, the JCC was extremely vague in simply stating that a causal relationship must exist between the physical injury and the need for psychiatric treatment. The JCC did not offer any further explanation as to the nature of the causal relationship.

Due to the insufficiency of the Order and the JCC's failure to apply the correct legal standard, the First District Court of Appeals determined this was grounds for reversal of the final order. The case was remanded with directions for the JCC to apply the correct standard of causation.

In conclusion, when determining whether a psychiatric injury is compensable, a Claimant only needs to prove that it is directly and proximately linked to the initial physical injury. The First District Court of Appeals in Drewno determined that the test for proximate medical causation "requires a Claimant to demonstrate his or her resultant mental conditions within a reasonable degree of medical certainty and by objective medical findings, with the proof being established by clear and convincing evidence."Drewno 727 So. 2d at 399.

EMPLOYER'S IMMUNITY AND TEMPORARY EMPLOYEES - Amy Meghan Neaher

James Watson vs. Job Corp., and Res-Care, Inc., 28 Fla. L. Weekly 3DCA D685 (March 12, 2003)

In Watson, the claimant was employed by Nurse Finders, a temporary employment agency. The claimant was placed at Job Corp. and suffered a workers' compensation injury. The claimant sued Job Corp for negligence. Job Corp won summary judgment on the basis that Job Corp. was entitled to workers' compensation immunity. The claimant appealed.

The Court held that section 440.11(2), Florida Statutes (2002), extends an employer's immunity from tort liability to work-related injuries of employees obtained through a help supply services company and also applies to companies that hire workers through temporary employment agencies.

Therefore, Job Corp. is entitled to the statutory employer immunity and the lower court decision was affirmed.