in the 2/1/2009
of Inside Counsel.
gambling, drug trafficking
"crime," according to the 6th Circuit, is conspiring to defraud
injured employees of their workers compensation benefits.
the first decision of its kind,
the appeals court recently stunned employment attorneys across America
holding that employers alleged to have schemed with their insurance
and/or physicians to wrongfully deny workers compensation benefits can
sued for treble damages and attorneys fees under the civil fraud
the Racketeer Influenced and Corrupt Organizations Act (RICO).
RICO originally targeted
criminal organizations such as the Mafia and Hells Angels, counsel warn
v. Cassens Transport Co. exposes legitimate businesses to RICO
and intrusive discovery into their handling of workers compensation
was frankly quite
surprised," says Robert Abell, a solo employment law practitioner in
Lexington, Ky. Abell suggests the ruling should "raise a flag of
caution" for any self-insured employers, insurance adjusters and
who might appear to reflexively deny workers compensation claims.
6th Circuit revived the RICO
civil fraud claims of six truckers. They allege that their self-insured
employer, Cassens Transport Co., along with the Cassens claims adjuster
doctor who found them ineligible for benefits, committed mail and wire
a scheme to wrongfully deny them benefits under the Michigan Workers’
Disability Compensation Act (WDCA).
plaintiffs contend that the
company deliberately selected doctors who could be relied upon to
medical opinions supporting decisions to cut off or deny benefits. The
defendants vigorously deny the allegations.
6th Circuit paved the way for
the suit to proceed by overturning a 2005 ruling by the U.S. District
the Eastern District of Michigan dismissing the action for failing to
claim for available relief. The unanimous appeals panel ruled Oct. 23
plaintiffs had sufficiently alleged at least 13 predicate acts
fraudulent communications by mail and wire, and that the plaintiffs
workers compensation benefits and incurred medical care and attorneys
to the defendants’ alleged "pattern of racketeering activity."
recent U.S. Supreme Court
case law, the 6th Circuit reversed its earlier stance that the Cassens
couldn’t sue under RICO because they didn’t plead that they had relied,
their detriment, on the defendants’ allegedly fraudulent
Supreme Court ruled last June that detrimental reliance isn’t necessary
6th Circuit also rejected the
defense argument that federal RICO claims for workers compensation
pre-empted by the WDCA. RICO does not invalidate the state law since
doesn’t even address fraudulent benefit denials, the panel reasoned.
defendants have asked the 6th
Circuit to review the case en banc.
judgment is a "shocking
development" that has made some employers second-guess their bona fide
interactions with their workers compensation carriers, says Claudia
senior attorney at Plunkett Cooney in Detroit.
employers must await
judicial guidance on some outstanding issues. "How much assistance and
much cooperation between the clinic, the carrier and the employers will
in trouble?" Orr says. "Is it if you are cooperative in two cases
[or] three cases? Does it depend on the kind of questioning, support
responses that you are providing to the workers comp carrier?"
ruling "certainly has the
potential for increasing litigation," suggests Orange Park, Fla., solo
workers compensation attorney David McCranie.
says one tricky question will be
ascertaining the difference between fraud and a doctor’s honest belief
or her medical assessment. "Insurance companies always pick doctors who
they think are likely to say that a claimant’s injuries are not so bad
some other physician might say," McCranie says. But, he adds, "I have
not personally seen a situation where an insurance company picked a
knowing that the doctor’s opinion is going to be fraudulent."
Marshall Lasser, the attorney
who represents the plaintiffs in Brown, contends there are
earn six-figure incomes by frequently turning thumbs down on valid
believe in Michigan alone
there are thousands of workers over the years who have been made to
horribly because of the actions of insurance companies in wrongful,
termination or denial of claims, and fraudulent opinions by doctors,"
turned to RICO for a remedy
because the WDCA gives no relief for fraud. He says he plans to launch
suits against other companies, including possible class actions.
has very big
sticks," Lasser notes. Because plaintiffs must prove a pattern of
racketeering, RICO permits "wide-open" discovery beyond the specific
claims pleaded, he maintains. And if the case goes to trial, he warns,
am going to discover every single comp claim that ever existed in the
years ... so it’s going to open a real can of worms."
such forewarnings, Abell
predicts employers won’t face a flood of litigation, but he does
that the decision could be "significant on the outer margins of
repeated, extremely outrageous, abusive practices."
any event, the case should remind
human resources not to get too cozy with insurers and medical personnel.
discussion with the workers comp carrier and physician clinic about
comp claims could land them in a lot of trouble," Orr says. "They
need to be cautious about inserting themselves in the process and not
lending their opinions as to whether a claim is valid."