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The DEU Violates the Labor Code and Costs You Money (Here's How to Prove It) FUN WITH APPORTIONMENT by Phil Billman, B&B Rating Services Manager 
The Problem
This is not another long-winded treatise on how to get an apportionment determination approved by a WCJ. This article assumes that the apportionment is already approved or otherwise stipulated. Rather, this essay is aimed at ensuring that the DEU's misapplication of the 2005 Permanent Disability Rating Schedule (PDRS) and relevant apportionment labor codes1 does not cost you money! The 2005 PDRS and AMA Guides (5th) introduce numerous ways to add and combine numbers. Inasmuch as the PDRS and Guides are, for legal purposes, mere regulations, whereas the applicable Labor Code sections are statutory, Labor Code 4663 and 4664 trump any conflict that may arise as between the Labor Code and Regulations. The DEU, too, has gotten into the mix, dictating an apportionment methodology that frustrates Labor Code intent and increases your PD exposure. What is the DEU doing wrong? Imagine this: You have a medical report that awards PD to various body parts. The resulting PD, once combined, results in something less than 100%. The doctor also provides legal apportionment of 50% for each and every body part? How much PD will you owe? You might conclude that, given that (a) the overall PD is less than 100%, and (b) the employer is liable for no more than 50% of the PD attributable to any injured body part, the PD owed must be something less than 50% (after all, 50% x 100% PD = 50% PD). While your logic is airtight, the DEU would very likely say "wrong," instead reporting to the WCJ that you owe well over 50% PD. Huh? How could this be? The DEU applies apportionment to the PD for each involved body part, and then proceeds to combine the apportioned PD. For example, if the doctor, using Labor Code 4663, apportions away 50% of the PD for a neck, arm, and leg injury, the DEU's rating with apportionment looks like this: 50%(16.01.02.04 - 50 - [5]64 - 250E - 61 - 61) 31% PD 50%(17.01.07.00 - 30 - [5]38 - 250F - 38 - 38) 19% PD Thereafter, the DEU will combine these three apportioned numbers (31%, 24% and 19% PD) in descending order. You might ask, "So what?" What's wrong with that? Answer: Nothing is "wrong" with this, if you are willing to allow the DEU to disregard the labor code and cost your client more money. The Solution LC §4663(c) states in part: A physician shall make an apportionment determination by finding what approximate percentage of the permanent 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. LC §4664(a) states: The employer shall only be liable for the percentage of permanent disability directly caused by the injury arising out of and occurring in the course of employment. As noted above, the Labor Code talks about permanent disability being apportioned, not the pieces that make up the permanent disability. So do the DEU's apportionment calculations violate the labor code and cost you more money? Here is an example taken from a real-life report. The doctor apportioned away 70% of the PD for each body part, thus leaving apportioning 30% of the PD to the affects of the industrial injury. Combined before apportionment – 25 c 12 = 34; 34 c 7 = 39; 39 c 7 = 43; 43 c 6 = 46% PD Combined after apportionment – 8 c 4 = 12; 12 c 2 = 14; 14 c 2 = 16; 16 c 2 = 18% PD Looks good, right? WRONG! The total PD suffered before apportionment is 46% PD. What is 30% of 46? 46% x 30% = 14% PD! So why is the DEU calculating that you must pay 18% PD? The law says you don't have to. Nice and easy if the doctor applies apportionment uniformly. What if the apportionment is different for each body part? According to the DEU, apportionment would be calculated as follows: Combined before apportionment – 91 c 34 = 94; 94 c 19 = 95; 95 c 19 = 96; 96 c 18 = 97% PD Combined after apportionment (DEU method) – 46 c 11 = 52; 52 c 10 = 57; 57 c 6 = 60; 60 c 6 = 62% PD Wait a minute! No single body part is more than 50% industrial and you are paying 64% of the total unapportioned PD! The total unapportioned PD is 97%! If no single body part suffered PD that was more than 50% industrial, how can you possibly be required to pay 62%, representing more than 50% of the total PD? Shouldn't you be required to pay something less than 49%, that is something less than half of the total PD (Total PD = 97% x 50% = 49% PD)? There is a B&B Alternative Apply apportionment to the increase in PD caused by that body part. It takes a little longer, but it can and will save thousands, tens of thousands, and even hundreds of thousands of dollars on your cases! In this second approach the PD has been combined before apportionment; therefore the PD increases are added to arrive at a total PD after apportionment of 48% PD. For a 2009 DOI, with a maximum earner, the employer is paying an additional 14% PD or $25,357.50 using the DEU method! Great, but how often do you have this number of body parts and this level of impairment? Let's look at one example of two body parts at lower levels of apportionment. The DEU Way Combined before apportionment – 16 c 10 = 24% PD Combined after apportionment – 11 c 8 = 18% PD B&B's Alternative Method Add the apportioned increase to arrive at 17% PD. In this case, the employer is paying an additional 1% PD or $1,150 using the DEU method (2009 DOI, max earner)! Can you really afford to let the DEU misapply the law and overstate your PD exposure? NEXT ISSUE – How a Water Glass Answers All Your Questions! Phil Billman is Manager of the Ratings Department. Do you have an AMA Guides, PDRS, or apportionment rating question? Big or small, simple or complicated, Phil Billman has the answer. Call him at (916) 569-0790 or email him at pbillman@bradfordbarthel.com. A highly respected workers' compensation expert, Phil is frequently invited to lecture on the AMA Guides and PDRS issues. 1See Labor Code Sections 4663 and 4664. |
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