California Supreme Court rules on workers compensation cost-of-living adjustment case

The following article was published in Business Insurance on August 11, 2011:

California Supreme Court rules on workers compensation COLA case

By Roberto Ceniceros

California’s Supreme Court handed employers and insurers a victory Thursday in a closely watched dispute over annual cost-of-living adjustments for certain workers compensation claimants.

The court in Christine Baker as Administrator vs. Workers’ Compensation Appeals Board and X.S. weighed how California’s Legislature intended for COLAs to be calculated.

It had to determine whether a law adopted in 2002 required COLAs to be calculated in one of three ways: either prospectively from the Jan. 1 after the year in which the worker first becomes entitled to receive benefits; retroactively to Jan. 1 after the year in which the worker is injured; or retroactively to Jan. 1, 2004, for every case regardless of the date of injury or the date the first benefit payment becomes due.

COLA date disputed

The case involved an unnamed accountant/controller injured in 2004 who was eligible to receive $728 weekly for life.

A dispute arose, however, when the applicant claimed weekly payments that started on Oct. 20, 2006, should be increased to reflect COLAs from the Jan. 1 after the Jan. 20, 2004, date on which he was injured.

But the Subsequent Injury Benefit Trust Fund, which is responsible for payments to the claimant, maintained that the annual adjustments to the $728 weekly payment should not commence until Jan. 1, 2007. That was the Jan. 1 after the date the applicant became permanent and stationary and actually began receiving his payments.

An appeals court eventually agreed with the California Applicants’ Attorney Assn., which filed amicus briefs in the case, and concluded that the law calls for COLAs to be added starting on Jan. 1, 2004, regardless of the date of injury.

The appeals court reasoned that otherwise for a worker “that does not become permanent and stable for a number of years, setting the COLAs from the permanent and stationary date causes that worker to see his or her payment exposed to the ravages of inflation.”

Prospective calculation favored

But on Thursday, the Supreme Court sided with the California Chamber of Commerce and the State Compensation Insurance Fund to overturn the appeals court’s finding.

The high court concluded that the Legislature intended that COLAs be “calculated and applied prospectively commencing on the Jan. 1 following the date on which the injured worker first becomes entitled to receive, and actually begins receiving, such benefit payments.”

It remanded the case to the appeals court for proceedings consistent with its view.

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