Several California Courts of Appeal have recently addressed the issue of how to allocate legal responsibility for a worker’s permanent partial disability where a portion of the worker’s disability was caused by factors other than his or her current industrial injury. As explained below, these Courts have different opinions on how to apportion disability in light of recent changes in workers’ compensation laws.
Background
Apportionment is the process for allocating legal responsibility for a disability caused by an industrial injury when a worker has suffered from a previous industrial injury or from another nonindustrial condition or injury. As a general rule, an employer is held responsible only for the disability that is caused by the current industrial injury, and not for any disability that is attributable to a previous industrial injury or nonindustrial condition.
In Fuentes v. Workers’ Comp. Appeals Bd. (1976) 16 Cal3d 1, the California Supreme Court adopted a formula for apportioning liability for an industrial injury that apportions liability by subtracting “from the total disability that portion which [was] nonindustrial, the remainder being the amount of compensable disability.”
At the time the Supreme Court decided Fuentes, Labor Code section 4750 provided that when a previously disabled employee sustains an industrial injury, his or her employer is not liable for the combined disability but only the portion of disability due to the later injury. Senate Bill No. 899, signed into law on April 19, 2004, repealed section 4750 and added Labor Code sections 4663 and 4664. Section 4663 provides, in part, “[a]pportionment of permanent disability shall be based on causation,” and requires “[i]in order for a physician’s report to be considered complete on the issue of permanent disability, it must include an apportionment determination.” Under section 4663, a physician must determine “what approximate percentage of disability was caused by the direct result of injury arising out of and occurring in the course of employment and what approximate percentage of the permanent disability was caused by other factors both before and subsequent to the industrial injury, including prior industrial injuries. Section 4644 provides, in part, that an “employer shall only be liable . . . for the percentage of permanent disability caused by the injury arising out of and occurring in the course of employment.”
More recently, the court in E & J Gallo Winery v. Workers’ Comp. Appeals Board (2005) 134 Cal.App.4th 1536, was faced with the issue of how to apportion permanent partial disability. It held that liability should be apportioned by taking the dollar value of the previous award subtracted from the dollar value of the total current disability. The Gallo Court reasoned that the Fuentes Court adopted its formula solely because of section 4750. By repealing section 4750, the Legislature contemplated a variation in determining how to apportion disability; however, it did not specify any particular method to be used. The Gallo Court concluded that only its formula protected both the employee and the employer by ensuring that the employee is adequately compensated and that the employer is only held liable for the percentage of the employee’s disability caused by the current injury.
The court in Nabors v. Workers’ Compensation Appeals Board, 2006 WL 1550807, June 8, 2006, extended the holding in Gallo to apply in an action for permanent disability benefits for an employee who injured the same body part in two separate work-related incidents. The Nabors Court concluded that it could see no reason why the Gallo decision should not apply where an employer was insured by two different insurance carriers instead of being self-insured.
Recent Cases
Two additional Courts of Appeal have considered this same issue since the issuance of the Nabors opinion, holding that the formula adopted in those cases should be used, but concluding that it should be applied “in a slightly different way.” (Brodie v. Workers’ Compensation Appeals Board, (06 Cal. Daily Op. Serv. 8257, Cal.App. 1 Dist., Aug. 30, 2006).). However, the Third Appellate District disagreed with the other Courts of Appeal and concluded that Fuentes formula should continue to be applied. (Welcher v. Workers’ Compensation Appeals Board, (2006 Daily Journal D.A.R. 11,883, Cal.App. 3 Dist., Aug. 31, 2006).)
At issue in Brodie was the apportionment of disability for a firefighter who had sustained an industrial injury to his back, spine and right knee in 2000 and a cumulative injury to his back and spine in 2002. These injuries resulted in 74 percent permanent disability. During the previous 30 years, the firefighter had sustained several industrial injuries to these same body parts and had been awarded compensation based on a 44.5 percent permanent disability rating. After considering the Fuentes holding and the changes in the workers’ compensation law brought on by Senate Bill No. 899, the Brodie Court determined that Gallo and Nabors were correct, but that the formula should be applied in a different way than it was by the Gallo court.
Brodie noted that Gallo “applied a dollar credit equal to the amount of a previous disability award against the scheduled benefits for the current overall disability level.” Brodie concluded that subtracting the dollar amount previously awarded to the injured worker works a disadvantage to the employer because the prior permanent disability award might be many years old. Such an approach, “fails to take into account the relative worth of the prior award over time, as well as possible changes in benefit schedules or an employee’s average weekly earnings.”
The Brodie Court concluded that an award for permanent disability should be calculated by taking the value of the noncompensable portion of the permanent disability award, or in cases on a nonindustrial injury, the portion of disability existing prior to the present injury, and subtracting that value from the current overall award. The firefighter’s prior 44.5 percent disability is now valued at $38,675. This amount should be subtracted from the $106,375, which is the currently scheduled award for a 74 percent disability, resulting in an award of $67,700 for the last 29.5 percent of his disability.
The Welcher Court, however, concluded that the Legislature did not intend when it enacted sections 4663 and 4664 and repealed section 4750 to alter the apportionment method set out by the Supreme Court in Fuentes. The Welcher Court specifically stated that it disagreed with the decisions reached by Gallo and Nabors. The Welcher Court held the Fuentes formula is still the proper method to use when apportioning permanent disability awards.
Summary
The Gallo, Nabors, and Brodie Courts concluded that Senate Bill No. 899 evidenced a Legislative intent to depart from the long held practice of apportioning liability in the manner prescribed in Fuentes. However, as evidenced by the Welcher opinion, at least one Appellate District has held that it will continue to follow Fuentes in spite of legislative changes to the workers’ compensation law.
Update Note
More information about the passage of SB 899 is discussed in our Legal Alert entitled, "Workers Who Sustained Second Injuries Are Entitled To Benefits Based On The Overall Percentage of Permanent Disability, Less The Noncompensable Percentage of Permanent Disability Sustained In Earlier Injuries", January 4, 2007.
Legal Alert Disclaimer
Legal Alerts are published by Kronick Moskovitz Tiedemann & Girard as a timely reporting service to alert clients and other friends of recent changes in case law, opinions or codes. This alert does not represent the legal opinion of the firm or any member of the firm on the issues described, and the information contained in this publication should not be construed as legal advice. Should further analysis or explanation of the subject matter be required, please contact the attorney with whom you normally consult.