WEST VIRGINIA WORKERS’ COMPENSATION ADJUSTER TRAINING SEMINAR CHARLESTON TOWN CENTER MARRIOTT CHARLESTON, WEST VIRGINIA

1. WEST VIRGINIA WORKERS’ COMPENSATION ADJUSTER TRAINING SEMINAR CHARLESTON TOWN CENTER MARRIOTT CHARLESTON, WEST VIRGINIA May 22, 2008 WELCOME! West Virginia OFFICES OF THE INSURANCE COMMISSIONER Jane L. Cline WV Insurance Commissioner

2. INTRODUCTION AND OVERVIEW Mary Jane Pickens General Counsel Offices of the Insurance Commissioner

3. PROGRAM HISTORY • 1913 Monopolistic Workers’ Compensation Fund Created • WC Fund, WC Division, WC Commission • 1995 Statutory Reforms • Benefit Modifications • PTD Modifications • 2003 Statutory Reforms • Rule of Liberality Eliminated • Benefit Modifications

4. PROGRAM HISTORY • 2005 Statutory Reforms • Privatization of Workers’ Compensation • WC Fund Terminated • BrickStreet Mutual Insurance Company Created • Uninsured Fund Created • Claims Prior to 7/1/2005 transferred to “Old Fund” • Administration responsibility for Old Fund given to OIC • Regulatory Responsibility for WC transferred to OIC • 2008 Fully Privatized WC Market • Market opens for competition on July 1, 2008

5. APPLICABLE LAWS • Workers’ Compensation Statute • Chapter 23 • Workers’ Compensation Regulations • Rules: • Rule 1: Claims Management • Rule 2: Claims Index • Rule 5: PTD • Rule 8: WC Policies and Coverage Issues • Rule 15: Rehabilitation • Rule 18: Self-Insurance • Rule 20: Medical Management

6. OVERVIEW • Approximately 34,000 Novated Employers • Top Ten Premium Classes include: • Coal Mine Underground • Coal Mine Surface • Carpentry • Hospital Professional Employees • Trucking –Local Hauling Only • Clerical Office Employees • Drivers, Chauffeurs and their Helpers NOC –Commercial • College –All Other Employees • College –Professional Employees and Clerical • Excavation and Drivers

7. STATE OF THE MARKET • 21 New Companies have been licensed to write workers’ compensation coverage. • 128 Filings as of May 18, 2008 • NCCI Designated as Rating Organization. • NCCI named Residual Market Plan Administrator • 2008 Legislative Amendments

8. CLAIMS INDEX • Purpose is to provide a uniform system for gathering injured workers claims information and making available to other insurers • Maintained by the OIC • Contains basic demographic data by SSN to assist insurers in obtaining contact information of other insurers who posses detailed info of a prior claim • Claims index is populated using EDI Reporting • Claims index applications are available online at www.wvinsurance.gov

9. CLAIMS INDEX • Basic Demographic Information: • The Jurisdictional Claim Number (JCN) is a unique number assigned to the claim when it is filed with the Index • The Administrative Claim Number is assigned by the carrier • The injured worker’s full name and social security number • DLE or DOI • Body Part Injured • Carrier or TPA Name • Carrier or TPA Contact Information.

10. EDI REPORTING: FROI/SROI • EDI-mandated FROI and SROI reporting was initially implemented beginning in 2004 when self-insured employers began self-administering claims.  The scope of the mandate was expanded in 2008 to include the private carriers selling workers’ compensation coverage in West Virginia.  • Compliance with FROI reporting requirements is required on the date a trading partner begins to provide services and/or write workers’ compensation coverage in West Virginia. 

11. EDI REPORTING: FROI/SROI • WV utilizes EDI Release 3 • No WV state specific data elements • EDI Implementation Guide available at www.wvinsurance.gov • WV contracts with Claims Harbor for EDI reporting • Compliance with FROI reporting requirements is required when an insurer begins writing in WV.

12. EDI REPORTING: FROI/SROI • SROI data reporting is required beginning 07/01/08. If needed, WV will permit additional time for testing and phase-in of SROI reporting. This grace period ends 12/31/08. SROI reporting must retroactively include data back to the initial underwriting in WV • Prior approval from WVOIC is required if the SROI testing will extend past the date when the private carrier enters the WV market • Testing of the SROI data must be successfully completed prior to the carrier sending information

13. 2008 LEGISLATIVE AMENDMENTS • Proof of Coverage • Third Party Administrators • Claims Litigation • Two Party System • Brochure to Claimants • Sixty Day Protest Period • Conditional Payments of Benefits • Re-Designation Provision • Carriers’ Offices in State • Information on Officers • Return to Work

14. PROOF OF COVERAGE SYSTEM • Proof of Coverage notification requirements to the OIC have been amended in W. Va. Code § 23-2C-15. • Notice of new coverage has changed from 10 to 30 days of the effective date of coverage, or the private carrier’s receipt of notice of the employer’s operations in this state, whichever is later. • Notice of termination of coverage due to cancellation has changed from 3 days after to at least 10 days prior to effective date of termination of coverage. • Termination of coverage at the request of the employer must be given within 10 days of the carrier’s receipt of the employer’s request. • Transfer of a policyholder between insurance companies within the same group is not considered a cancellation or refusal to renew a workers’ compensation insurance policy.

15. THIRD-PARTY ADMINISTRATORS • The TPA Act applies to both carriers and self-insured employers. • Both carriers and self-insured employers may contract with a TPA licensed or registered by OIC. • Any TPA doing work in connection with workers’ compensation coverage offered or provided by an insurer is fully subject to the general TPA act in the Insurance Code. • Any TPA that directly or indirectly underwrites or collects charges or premiums or adjusts or settles WC claims on residents of WV on behalf of an insurer is subject to the provisions of W. Va. Code § 33-46-1, et seq. • Insurance Commissioner shall propose rules to regulate the use of TPAs by private carriers and self-insured employers, including rules setting forth mandatory provisions for agreements between TPA’s and self-insured employers or private carriers. • TPA’s operating in WV on effective date of HB 4636 have until July 1, 2008 to be licensed.

16. CLAIMS LITIGATION • W. Va. Code § 23-5-1 is amended relating to corrected orders. If an order initially denies benefits but is later determined to be not supported by the evidence, the order may still be corrected within the current two-year jurisdictional time limit for correcting orders. An order granting benefits cannot be corrected to deny benefits based upon the initial order not being supported by the evidence. • A protest to the initial decision filed prior to entry of the corrected decision is deemed to be a protest from the corrected decision unless the ALJ enters an order dismissing the protest as moot in light of the correction. • Corrected orders in the case of fraud may be made at any time (no change from current law).

17. TWO PARTY SYSTEMCLAIMANT BROCHURE • Amendments clarify that parties to a claim are the claimant and, if applicable, the claimant’s dependents, and the employer. With respect to claims involving state-funded claims, the Insurance Commissioner is a party. • Insurer has sole authority to act on employer’s behalf in litigation of the claim. • Soon after receipt of the claim, but no later than the date of the initial decision the OIC, carrier or self-insured employer must send the claimant a brochure approved by the OIC setting forth the claims process.

18. SIXTY DAY PROTEST PERIOD • The time for protesting carrier or self-insured employer decisions to the OOJ has been extended from 30 days to 60 days. • The 60 day protest period is still jurisdictional and a condition of the right to litigate the finding or action. • “Employer protest” is retained in connection with decisions based on OP Board findings, state-funded claims, and decisions based on PPD recommendations of treating physicians of 15% or less.

19. CONDITIONAL PAYMENT OF BENEFITS • W. Va. Code § 23-5-1 is also amended to add a new process to ensure that claimants receive prompt treatment and benefits when a decision to deny benefits is protested and the only controversy relating to compensability is whether the application was filed properly as a new claim or a reopening of a prior claim (aggravation/progression of earlier injury). • This new process applies only to claims with applications filed on or after July 1, 2008. • The party that denies the application must begin conditional payment of benefits and must promptly give notice to the OOJ that another identifiable person may be liable.

20. CONDITIONAL PAYMENT OF BENEFITS • The OOJ must promptly order the appropriate persons to be joined as parties to the proceeding. • At any time during a proceeding in which conditional payments are being made the OOJ may, pending final determination of the person properly liable for payment of the claim, order that such conditional payments of benefits be paid by another party. • Conditional payments will not be an admission or conclusive finding of liability. • The OOJ shall direct reimbursement between/among carriers, the OIC or self-insured employers as necessary, after determination is made as to properly liable party.

21. RE-DESIGNATION PROVISION • The new law expressly authorizes the OOJ to re-designate a new application for benefits as a reopening petition or vice versa, with the re-designated filing to relate back to the date of the original filing. • Similarly, if the claimant files with the wrong carrier or self-insured employer, the OOJ may substitute the proper party, and the re-designated application or petition will also relate back to the date of the incorrect filing.

22. CARRIERS’ OFFICES IN STATE • The new law removed language that required private carriers have an adjuster with a business address and telephone number in West Virginia. • A permanent physical presence of an adjuster in West Virginia is not required under the statutes. • The definition of “private carrier” was amended to remove the requirement that carriers had to maintain an office in West Virginia.

23. RETURN TO WORK • Previously W. Va. Code §23-4-7b contained provisions for trial return-to-work programs. These provisions sunsetted in 2007. • The new law changes revives the concept by directing that the Insurance Commissioner propose legislative exempt rules re-establishing a trial return to work program. • The bill also provides that the program must be optional with the employer and must allow for the suspension of TTD benefits during any trial return to work.

24. OIC RULES PROJECTS • Regulation of TPA’s • Return to Work • Utilization Review • Professional Employer Organizations • Rule 1: Claims Handling • Rule 18: Self-Insurance

25. CARRIER LICENSING • To transact insurance in the State of West Virginia the insurer must have a valid license issued by the West Virginia Insurance Commissioner. • West Virginia only accepts UCAA Applications. • To obtain a license in West Virginia, insurers must follow the procedures outlined in the NAIC's UCAA Applications.

26. TPA LICENSING • To transact business in the State of West Virginia the TPA must have a valid license issued by the West Virginia Insurance Commissioner. • Application and Filing Fee • Application should include the following: • Organizational Documents • Identification of Principal Officers • Audited Financial Statements • Business Plan • Surety Bond, if applicable • List of All Plans to Be Administered • Annual Report required first day of July of each year

27. ADJUSTER LICENSING • Resident and Non-Resident Adjusters must be licensed in WV. • Adjusters do not need to reside within WV to practice. • Reciprocity: Adjusters domiciled in states requiring the passage of an examination to obtain an adjusters license do not need to take the WV adjuster licensing examination. • 114CSR25(3) provides a limited exception to the licensing requirement. This exception applies to a person located in a central office of the insurer, outside of WV, who adjusts claims by telephone only and who does not enter the state in the course of adjusting claims. • This exception applies to out-of-state adjusters who adjust claims via email, facsimile, regular or overnight mail, or similar methods of communication, so long as the adjuster is always located in a central office of an insurer outside of West Virginia.

28. APPROVAL FOR SELF-INSURANCE • An employer must meet the financial responsibility requirements and procedural requirements set forth in W. Va. Code §23-2-9, and in Rule 18. • Approval of the Industrial Council required. • Must file an application with the Insurance Commissioner. • Application must include disclosure of the employer's management and financial structures and the employer's audited financial statements for each of the three (3) fiscal years preceding the date of application must be attached to the application. The employer shall also disclose to the commissioner all of the business entities acquired, bought, transferred or merged by or into the employer applicant. • Application Fee of $2,500.00

29. COMPENSABILITY Daniel G. Murdock Associate Counsel Legal Services Offices of the Insurance Commissioner

30. COMPENSABILITY What Workers’ Compensation is not: • Workers’ Compensation “is not a health and accident fund.” Barnett v. State Workmens’s Comp. Comm’r, 172 S.E.2d 698, 700 (W. Va. 1970) • The employer, by maintaining workers’ compensation insurance, “does not thereby become the employee’s insurer against all ills or injuries which may befall him.” Jordan v. State Workmen’s Comp. Comm’r, 191 S.E.2d 497, 501 (W. Va.1972)

31. COMPENSABILITY Coverage must be provided for employees (or, in cases of fatalities, employees’ dependants) “who have received personal injuries in the course of and resulting from their covered employment.” W. Va. Code § 23-4-1(a) See also: W. Va. Code § 23-2-1 and 23-2-1a for definitions of employees and “covered employment.”

32. COMPENSABILITY There are two types of “personal injuries”: • Occupational Injuries • Occupational Diseases

33. COMPENSABILITY Occupational Injuries are personal injuries caused by: “[A]n isolated fortuitous event received by an employee in the course of and resulting from his employment with his employer.” Dickerson v. State Workmen’s Comp. Comm’r, 173 S.E.2d 388, 391 (W. Va. 1970). An occupational injury may result in disability to more than one part of the body, but is only one injury. Id. Mere negligence or carelessness of the employee, causing his or her injury, does not preclude compensation Archibald v. Ott, 87 S.E. 791 (W. Va. 1916)

34. COMPENSABILITY However: “An employee who is injured gradually by reason of the duties of employment, and eventually becomes disabled, is no less the recipient of a personal injury than one who suffers a single disabling trauma.” Lilly v. State Workmen’s Comp. Comm;r, 225 S.E.2d 214 (W. Va. 1976).

35. COMPENSABILITY Occupational Diseases are defined by statute: For the purposes of this chapter, occupational disease means a disease incurred in the course of and resulting from employment. No ordinary disease of life to which the general public is exposed outside of the employment is compensable except when it follows as an incident of occupational disease as defined in this chapter. Except in the case of occupational pneumoconiosis, a disease shall be considered to have been incurred in the course of or to have resulted from the employment only if it is apparent to the rational mind, upon consideration of all the circumstances:

36. COMPENSABILITY (1) That there is a direct causal connection between the conditions under which work is performed and the occupational disease; (2) That it can be seen to have followed as a natural incident of the work as a result of the exposure occasioned by the nature of the employment; (3) That it can be fairly traced to the employment as the proximate cause; (4) That it does not come from a hazard to which workmen would have been equally exposed outside of the employment; (5) That it is incidental to the character of the business and not independent of the relation of employer and employee; and (6) That it appears to have had its origin in a risk connected with the employment and to have flowed from that source as a natural consequence, though it need not have been foreseen or expected before its contraction. W. Va. Code 23-4-1(f)

37. COMPENSABILITY TIMELINESS Claims must be filed within the time periods set forth at West Virginia Code § 23-4-15 or the claim is “forever barred.” Occupational Injury: For occupational injury claims (i.e., all claims for compensation that are not occupational disease or occupational pneumoconiosis claims), the application for compensation must be filed with the private carrier within six (6) months from the date of injury. Occupational Disease: For occupational disease claims other than occupational pneumoconiosis claims, the application for compensation must be filed with the private carrier within three (3) years from the latter of either: 1) the date of last exposure to the occupational hazard causing the disease; or 2) the date upon which the claimant knew, or reasonably should have known, of the existence of the occupational disease.

38. COMPENSABILITY ISSUES OF FACT – Occupational Injury “In The Course Of”:“In the course of” relates to the time, place and circumstances of the injury, and “resulting from” relates to its origin. Whether the injury is the result of a mere accident or is occasioned by a negligent act of the employer, the only essential condition entitling the injured employee to be compensated out of the fund is that the injury must occur in the course of and resulting from employment. Cox v. United States Coal & Coke Co., 92 S.E. 559 (W. Va. 1917). “Resulting From”: In determining whether an injury resulted from claimant’s employment, a causal connection between the injury and the employment must be shown to have existed. Emmel v. State Comp. Dir., 145 S.E.2d 29 (W. Va. 1965)

39. COMPENSABILITY ISSUES OF FACT – Occupational Injury (cont’d) A causal connection is supplied when there is a nexus between the injury and some condition, activity, environment or requirement of the employment. To find a nexus, attempt to determine if the injury occurred during the period of employment or the place where the employee might reasonably have been, and while he or she was reasonably fulfilling the duties of employment of doing something incidental thereto or to the conditions under which those duties were to be performed. 82 Am Jur 2d Workers’ Compensation §263.

40. COMPENSABILITY ISSUES OF FACT – Occupational Disease A claimant is not required to prove that the conditions of his or her employment were the exclusive or sole cause of the disease nor must the claimant show that the disease is peculiar to one industry, work environment, or occupation.

41. COMPENSABILITY ISSUES OF FACT – STANDARDS OF PROOF The resolution of any issue shall be based on a weighing of the evidence pertaining to the issue and a finding that a preponderance of the evidence supports either the claimant or the employer. A preponderance of the evidence means that there is more evidentiary weight existing favoring one side's position. Weighing of evidence shall include an assessment of: • Relevance • Credibility, materiality and reliability of evidence in the context of the issue presented. If an equal amount of evidentiary weight exists, the resolution that is most consistent with the claimant's position will be adopted. W. Va. Code § 23-4-1g

42. COMPENSABILITY ISSUES OF FACT – BURDEN OF PROOF The claimant has the burden of establishing by positive evidence, or by evidence from which the inference can fairly and reasonably be drawn, that he or she sustained the injury. An award of benefits can not be made unless the claim is supported by satisfactory proof. Emmel v. State Comp. Dir., 145 S.E.2d 29 (W. Va. 1965) The claimant is not required to establish the claim by clear and unequivocal proof, but is only required to establish it by evidence sufficient to make a reasonable person conclude that he or she was injured while performing his or her duties in the course of employment. Eady v. State Comp. Comm’r, 132 S.E.2d 642 (W. Va. 1963) The claimant is given the benefit of all reasonable inferences the record will admit favorable to him or her. It is not necessary that the claimant prove to the exclusion of all else the causal connection between the injury and the employment. Myers v. State Workmen’s Comp. Comm’r, 239 S.E.2d 124 (W. Va. 1977)

43. COMPENSABILITY ISSUES OF FACT – BURDEN OF PROOF (cont’d) Medical evidence is not always required to establish the compensability of an injury. Pennington v. State Workmen’s Comp. Comm’r, 222 S.E.2d 579 (W. Va. 1976) Neither is an eyewitness to the event which is alleged to have caused the injury an indispensable prerequisite. Ramey v. State Comp. Comm’r, 146 S.E. 2d 579 (W. Va. 1966) These principles, however, do not relieve the claimant of the burden of establishing his or her claim, and the claim must be established by proper and satisfactory proof. Bilchak v. State Workmen’s Comp. Comm’r, 168 S.E. 2d 723 (W. Va. 1969)

44. COMPENSABILITY PARTICULAR COMPENSABILITY ISSUES Existing Malady (Pre-existing Condition) An employee is not deprived of compensation because he or she is afflicted with some malady at the time the employee enters the employment. Martin v. State Workmen’s Comp. Comm’r, 149 S.E. 824 (W. Va. 1929) The fact that an employee, injured in performing services arising out of and incidental to employment, was already afflicted with a progressive disease that might someday have produced physical disability, is no reason why the employee should not be allowed compensation for the injury which, added to the disease, superinduced physical disability. Charlton v. State Workmen’s Comp. Comm’r, 236 S.E.2d 241 (W. Va. 1977) An employee is not disqualified because of a pre-existing infirmity from prosecuting a claim based upon a new injury arising from his or her employment. But, if there is evidence of a pre-existing like injury, the new claim will not be treated as compensable unless it is directly attributable to a definitive incident resulting from employment. Jordan v. State Workmen’s Comp. Comm’r, 191 S.E.2d 497 (W. Va. 1972).

45. COMPENSABILITY PARTICULAR COMPENSABILITY ISSUES (cont’d) Going To and From Work: Considerable case law exists concerning whether or not an injury received by a claimant while en route to or from work is compensable. While there are some general governing provisions, such claims are fact specific, thus requiring case-by-case analysis. The applicable law is found in W. Va. Code §23-4-1.

46. COMPENSABILITY PARTICULAR COMPENSABILITY ISSUES (cont’d) Going To and From Work (cont’d): General Rule: Injuries arising from the ordinary use of streets and highways are not compensable unless the employee’s use of the highway in that instance is required in the performance of his or her duties. Barkley v. State Workmen’s Comp. Comm’r, 266 S.E.2d 456 (W. Va. 1980) An injury incurred by a worker in the course of travel to his or her place of work, and not on the premises of the employer, is not compensable unless the place of injury was brought within the scope of employment by an express or implied requirement in the contract of employment of its use by the employee in going to and returning from work. . Bilchak v. State Workmen’s Comp. Comm’r, 168 S.E.2d 723 (W. Va. 1969); Harris v. State Workmen’s Comp. Comm’r, 208 S.E.2d 291 (W. Va. 1974)

47. COMPENSABILITY PARTICULAR COMPENSABILITY ISSUES (cont’d) Going To and From Work (cont’d): Zone of Employment: In order for a claim to be held compensable, a claimant’s injury must have been sustained within the “zone of employment”. Bennett v. Buckner, 149 S.E.2d 201 (W. Va. 1966) a. In determining the “zone of employment”, each case must be decided on its own facts and circumstances. Carper v. Workmen’s Comp. Comm’r, 1 S.E.2d 165 (W. Va.1939); Bennett v. Buckner, 149 S.E.2d 201 (W. Va. 1966) b. However, the term “zone of employment” implies reasonable proximity to one’s place of employment. Carper v. Workmen’s Comp. Comm’r, 1 S.E.2d 165 (W. Va.1939); Bilchak v. State Workmen’s Comp. Comm’r, 168 S.E. 2d 723 (W. Va. 1969)

48. COMPENSABILITY PARTICULAR COMPENSABILITY ISSUES (cont’d) Going To and From Work (cont’d): General Rule Examples: Williams v. Compensation Commissioner, 20 S.E.2d 116 (W. Va. 1942): Where a workman resides in a house owned by his employer located two or three miles from his place of work and of his own accord elects not to make use of either of two highways from his residence but travels a route through a railway tunnel not owned by the employer and is injured at a place about one-third of a mile from the employer’s premises such injury is not compensable, although the route traveled was substantially shorter and more convenient than the highway and had long been used by the claimant and his fellow-workmen without objection from the employer.

49. COMPENSABILITY PARTICULAR COMPENSABILITY ISSUES (cont’d) Going To and From Work (cont’d): General Rule Examples: Andrews v. State Compensation Commissioner, 167 S.E. 588 (W. Va. 1933): The claimant alleged his supervisor asked him to arrive at work early in order to complete some tasks before the start of his regular shift. The claimant said he arrived at the plant at the designated time and proceeded to the employee’s locker room on the fifth floor of the plant to change into his work clothes. Thereafter, the claimant departed to the first floor of the plant where the pre-shift work was to be performed. While proceeding to the first floor of the plant, the claimant sustained an injury. During discovery, a representative of the employer testified the claimant had no business being in the part of the plant where the injury allegedly took place. The employer also testified that the claimant stated he was walking around the plant looking for a knife. The claimant was found to be outside the “zone of employment,” and the claim was denied.

50. COMPENSABILITY PARTICULAR COMPENSABILITY ISSUES (cont’d) Going To and From Work (cont’d): General Rule Examples (cont’d): Canoy v. State Compensation Commissioner, 170 S.E. 184 (W. Va. 1933): Where an employee of a mining company was killed while crossing a highway in walking from the mine to his home, the highway being commonly used by the employees of the mine, it was held that his was “in the course of employment” and his widow was entitled to workers’ compensation benefits.