The Division of Workers’ Compensation covered-up settlements, public actions, with repeated false and misleading statements made by Department officials.
The back story is that DWC settled enforcement actions for nearly $1.3 million against six claims adjusting firms. DIR charged the adjusting firms with offenses including failing to submit medical records to IMR reviewers. The enforcement actions were the first taken since IMR became the law of the land. DIR announced the proposed fines but the actual settlements (which were for far less) and agreements were kept hidden (see related story).
But it is the cover-up that is most interesting, so here is the story.
In what can only be called an amazing circumstance, the settlement agreements DWC used to settle the enforcement actions have clauses requiring non-disclosure by DWC except under very particular circumstances. In some cases, there is a requirement that the claims adjusting firms, in other words, the settling parties, be notified before disclosure. The notification includes requests made under the Public Records Act. It is these clauses that put the cover-up in action.
It was Division lawyers who managed the cover-up.
It ultimately took eight months of repeated questioning and dogged work by this news organization to get to the truth. Along the way efforts to obtain information about the cases or copies of any settlements were stymied by and met with incomplete and inaccurate information given to the public information officers (PIOs) by agency’s attorney(s).
It was not a one-time misunderstanding. The lying happened many times over a period of many months.
If DIR’s public information officers’ representations are to be believed, and we have seen no evidence to indicate otherwise, they too were kept in the dark about the existence of the settlements until the end.
Here’s how it worked: Workers’ Comp Executive requested information from the PIO staff who passed it along to the lawyers (listed below), the lawyers answered with false information, and then the PIOs provided the information to Workers’ Comp Executive.
The PIOs didn’t want to say which attorney(s) gave them the information. But, in a telephonic meeting and under questioning by Workers’ Comp Executive, Director Christine Baker, who was clearly horrified that all of this happened, directed PIO staff to tell us. It is important to note here that, once advised, Director Baker acted with integrity towards full disclosure.
What Workers’ Comp Executive learned is that its questions were routed back and forth between the PIOs and DIR staff attorney Alan Hersh who signed off on each of the settlements, and attorney James Robbins, who is the Public Records Act Officer.
Exactly why the attorney(s) decided to cover up the existence of the settlements becomes apparent when questionable language to limit disclosure that was inserted into the settlements is exposed in the sunshine to the light of day.
DIR Limited Disclosure
The cover-up appears to be linked to specific language inserted into the settlements with the private adjusters – language that the Department says now is not typically used in their settlement agreements.
One example, and we now have them all, is the settlement with Zurich Insurance.
The language in the agreement with Zurich even requires the Division to notify Zurich when it receives a request for a copy of the settlement, and then to delay responding to the request.
Here is the Zurich disclosure limiting language word for word:
“If the DWC receives a request, subpoena or order for disclosure of this Agreement or any information related to this agreement, it agrees as follows:
(a) The DWC will promptly notify Zurich of the request, subpoena or order by sending a copy of the request, subpoena or order at issue by email or facsimile to Zurich’s agent for service in California [Agent for service detail omitted]
(b) The DWC will not disclose any information relating to this Agreement in response to the request, subpoena or order prior to one week before any statutory deadline or proposed deadline by the DWC of a disclosure required in response to a lawful request for information made pursuant to the California Public Records Act (Cal. Government Code section 6250 et. Seq.), or any other similar freedom of information statute or regulation; or, as regards a subpoena or order, prior to the date specified in the subpoena or order.”
The language above shows the Department’s agreement not to release information about the settlements of these enforcement actions except under very specific circumstances. DWC officials admit that the language is not typically used in its settlements. Of the six settlements, only the one with the State Fund omits the disclosure limiting language.
For the record, the settlements of enforcement actions are public documents. DIR officials, however, continue to reserve the right to continue using this disclosure limiting language in future settlements.
The language may conflict with requirements under the Public Records Act and clearly was intended to subvert the Act.
“The Public Records Act clearly covers them [the settlements],” according to David Snyder, Executive Director of the First Amendment Coalition (FAC). “It is unfortunate they did this,” Snyder told Workers’ Comp Executive. The Coalition supports publishers and reporters in 1st Amendment and public records issues and actions.
A staple of effective regulatory enforcement is the publicizing of the actions taken against bad actors to put others on notice to comply. The Department regularly releases the results of its enforcement sweeps and publicizes the names of the small contractors or restaurant operators it catches violating the law. Not so here. Frequently, it proclaims the large fines it has assessed but isn’t so forthcoming when it does not collect.
Critics note that the Division’s lack of transparency about the enforcements and settlements is antithetical to its usual notion of using publicity of enforcement actions to gain wider compliance in the industry.
Regardless, the misinformation had the effect of keeping the settlements hidden from public view for nearly a year in two of the cases and over six months in others. In addition to misleading this publication, the Department also was not forthcoming with reporters at another publication.
Cover up? Incomplete response? Error of omission or commission? The reality may be some combination of the above with a lot of wordsmithing thrown in. DIR’s top brass says there was no intent to mislead the public, but in the end, that is what happened.
“We take full responsibility for an incomplete response, and we apologize,” says Director Christine Baker. “That’s all I can say.”
Misleading The Public
The cover up originally stems from the August 2015 orders to show cause DWC issued to eight claims adjusters with proposed fines amounting to $8.25 million. The action was the first significant move by the Division to crack down on payer caused delays in the IMR system, and Workers’ Comp Executive broke the story that fall.
The adjusters and carriers include: AmTrust North America; Broadspire Services; Corvel, Gallagher Basset; Sedgwick CMS; Zurich North America; the State Compensation Insurance Fund and Los Angeles County – in other words, some of the largest carriers and claims shops for large self-insured employers in the state.
At no point, until more than a year later in December 2016 did the Division acknowledge that any of the cases had been settled. All the while it maintained that hearings were still to be held in the matter. DIR’s lack of transparency on this issue is not only troubling to this publication, but also to advocates for injured workers.
“While CAAA appreciates the recent enforcement actions that the DIR has taken against carriers and claims adjusters who are causing the delays in the workers’ compensation system and thus increased costs, we also believe if there is going to be any long-term change in this behavior or what we like to call a ‘culture of delay and denial’ there has to be accountability and transparency to the process,” says Diane Worley of the California Applicant Attorneys’ Association.
“I also look at it as a matter of education. There are carriers and claims adjusters who have better and more efficient claims handling practices and perhaps the major violators can learn how they do it ‘better’ if there is a public sharing of the information pertaining to their violations.”
The Proof: A Lengthy History
In response to this publication’s inquiries in November 2015, DWC officials said the claims adjusters were disputing the orders and that hearings were scheduled for February and March 2016. When these dates came and went with no information about the cases Workers’ Comp Executive intuited something amiss and set about looking for answers.
Our initial follow-up was on March 25, 2016. All told we sent nearly a dozen e-mails asking for information about the issue. The emails were specific.
At each point of inquiry, the Department failed to reveal the existence of any settlements let alone provide an honest accounting of what had been resolved at that point in time. At the earliest inquiry, there were already two cases settled and by the next inquiry a third had settled. At the height of the cover up seven of the eight cases were either settled or dismissed but no information was provided despite all of the requests.
These facts were not divulged. Instead, DIR repeated the falsehood that hearings would be held at some future date or delayed answering by saying they were checking on the status of the cases.
For example, on April 11, 2016, Workers’ Comp Executive sent this message to the Division: “I’ve been trying for days to get an update on these hearings that were supposed to have been held in February and March – what’s the status? Did the cases settle before hearing? Were the hearings held? Any decision reached? If so what is the outcome?”
The Division’s response on April 15, 2016: “Pre-hearing conferences have been set for May and June.”
The truth is that AmTrust settled with the Division on Jan. 20, 2016, Zurich settled on Jan. 29, 2016 and State Fund settled on March 30, 2016. These cases were finished. There would be no hearings held – ever as the cases reached “a full and final settlement.” The settlements bore the signature of the Division’s acting administrative director at the time, as well as that of attorney Hersh.
Later, on July 13, we asked again: “Any update on these? Any settled? Any going to hearing?” The Division replied on July 25, 2016, that “The pre-hearing conferences were rescheduled for August and September.”
Still, no mention of the three cases already signed, sealed, delivered and paid. Plus, the Division now omitted the fact that Sedgwick settled on May 12, 2016, and Corvel settled May 23, 2016. Again, these cases were finished, and no hearings would be held – ever. These too were signed off on by Hersh and the acting Administrative Director.
The Division says now that at some point it dismissed the order against LA County maintaining that it issued the OSC in error. It has given no explanation of what that error might have been and did not disclose that it was dismissed until Dec. 5, 2016.
The agency was also not forthcoming with another news organization.
When that other publication eventually reported on the existence of the original OSCs in early March 2016, – some three months after Workers’ Comp Executive’s initial reports, the Division – despite a written public records act request – did not disclose the facts to them either. Two of the cases had already settled in January 2016. Another would settle in a matter of weeks.
The Division at the time also refused to say whether it had collected any of the proposed penalties. The settlements Workers’ Comp Executive obtained show that at this time the Division should have already collected $260,000 on proposed penalties of $1,440,000 – a fact the public was also not allowed to know until now.
It is important to note that once all of this came to light, the Department of Industrial Relations senior executives responded to every question and request for information. It has been contrite and has promised to take action concerning the involved parties and to fix the failed process which allowed this all to happen.
Offsetting the good, and most troubling, is that DIR has not agreed to cease using the disclosure limiting language.