California: Confused by Subsequent Injuries Benefits Trust Fund Cases?

A recent panel decision simplifies SIBTF.

Let’s face it—cases involving a claim against the Subsequent Injuries Benefits Trust Fund (SIBTF) can be intimidating and have confounded even the most experienced practitioner. Just take a look at Labor Code section 4751, the statute underlying SIBTF. It is hard not to get lost through its verbiage. Daunting as a SIBTF claim may be, there is good news. The recent Appeals Board panel decision in Harris v. Numac Company; State Compensation Ins. Fund; SIBTF (February 26, 2020) 2020 Cal. Wrk. Comp. P.D. LEXIS __ is a primer on all things SIBTF—a literal “SIBTF for Dummies” that will enable each of us to become more comfortable with SIBTF cases.

The underlying facts in Harris are straightforward. Applicant developed pneumonia on January 8, 2005, while working in wet and cold weather. He had a prior injury to his back and had received a permanent disability rating of 38%. Applicant was later diagnosed with stage II sarcoidosis, which expert opinion identified as being of non-industrial origin and asymptomatic until it was triggered into reactivation by the industrial episode of pneumonia. Applicant filed an application claiming an industrial injury to his respiratory system, injury in the form of sarcoidosis, and an injury to his psyche. A trial was held, and a decision issued finding that applicant sustained a specific industrial injury to his lungs, skin (sarcoidosis), and psyche that caused 65% permanent disability.

Applicant also filed a claim for SIBTF, alleging a pre-existing disability to his back.

Defendant disputed the SIBTF claim and the matter was tried. The WCJ issued a decision in applicant’s favor. In finding that applicant met the threshold for SIBTF liability under section 4751, the WCJ separated out applicant’s respiratory impairment from skin and psyche impairments. He then excluded adjustment for age and occupation from the lung impairment and apportioned 66% as industrial, resulting in 48% permanent disability. To this 48% current (aka “subsequent”) respiratory disability, the WCJ added 38% from applicant’s pre-existing permanent disability resulting from his prior back injury. This resulted in 86% permanent disability, to which the WCJ added 34%, the non-industrial portion of applicant’s current respiratory disorder that the WCJ found to be pre-existing. The WCJ then found that applicant’s combined pre-existing and current (aka “subsequent”) disabilities caused 100% permanent disability.

SIBTF sought reconsideration, contending that applicant’s pre-existing 34% lung impairment was not labor disabling, that the WCJ improperly added prior disabilities to the current disability, and that applicant’s SIBTF claim is barred by the statute of limitations.

The Appeals Board panel granted reconsideration and in its Decision after Reconsideration finds no bar to applicant’s claim by the statute of limitation. It finds that applicant met the 35% threshold requirement per section 4751(b) because the current injury caused 81% permanent disability when considered alone and without regard to apportionment and adjustment for age and occupation. It further finds that the combined effects of the current injury and applicant’s pre-existing disability equals 100%, which is calculated by adding 65% current disability (attributable to respiratory disorder, contact dermatitis and psyche) and 38% prior disability to applicant’s back. Accordingly, it finds the employer liable for the current 65% permanent disability and SIBTF liable for the remainder of the combined disability.

The panel begins its decision by recognizing the legislative purpose underlying the statute, that is, to encourage the employment of the disabled as a part of a “complete system of workmen’s compensation contemplated by our Constitution.” (Subsequent Injuries Fund v. Indus. Acc. Comm. (Patterson) (1952) 39 Cal. 2d 83, 17 Cal. Comp. Cases 142; Ferguson v. Indus. Acc. Comm. (1958) 50 Cal. 2d 469, 475.) It reminds us that origins of the pre-existing disability may be congenital, developmental, pathological or due to an industrial or non-industrial accident. It then provides a listing of the components of section 4751, which can be summarized as follows:

(1) The employee must have a pre-existing permanent partial disability, which may be of industrial or non-industrial origin (1 CA Law of Employee Injuries & Workers’ Comp. § 8.09[1].);

(2) The employee must sustain a subsequent industrial injury that results in additional permanent partial disability (Lab. Code, § 4751);

(3) When the pre-existing disability and the subsequent disability are combined, the resulting disability must be greater than what the employee’s disability would have been if he only sustained the subsequent disability and not the pre-existing disability (id.);

(4) When the pre-existing disability is combined with the subsequent disability, the resulting permanent disability must be equal to 70% or more (id.); and

(5) One of the following must be met:

(a) the pre-existing disability must have affected a hand, an arm, a foot, a leg or an eye, and the subsequent injury must affect an opposite and corresponding member and the disability from the subsequent injury must be equal to 5% or more of the total without adjustment for age, occupation or apportionment. (§ 4751; Bookout v. Workers; Comp. Appeals Bd. (1976) 62 Cal. App. 3d 214.)

(b) The permanent disability resulting from the subsequent industrial injury, when considered alone and without regard to or adjustment for the employee’s age, occupation, or apportionment must be equal to 35 percent or more of the total. (id.)

Next, the panel explains that although not explicitly stated in section 4751, case precedent requires the pre-existing disability or impairment to be actually labor disabling, citing Ferguson v. Indus. Acc. Comm. (1958) 50 Cal. 469, 477. Further, it points out that actual labor disablement, rather than employer knowledge, is the key factor to be considered in determining whether the employee is entitled to SIBTF benefits under section 4751. Moreover, that pre-existing disability does not need to be reflected in an actual loss of earnings but it should be of a nature that could support an award of permanent partial disability (See Escobedo v. Marshalls (2005) 70 Cal. Comp. Cases 604, 619 (Appeals Board en banc).)

The panel agrees that SIBTF has liability in this matter and that applicant’s combined disability is 100%, but it finds error in the manner in which the WCJ applied section 4751. First, with regard to the existence of pre-existing disability or impairment, the panel observes that the WCJ found both a 38% pre-existing permanent orthopedic disability attributable to the prior back injury, as well as a 34% respiratory impairment, which is the non-industrial portion of applicant’s current respiratory disorder. The WCJ considered this 34% respiratory disability to be pre-existing, but the panel rejected this finding because applicant’s sarcoidosis was dormant, asymptomatic, and not labor disabling until it was reactivated by the episode of industrial pneumonia. Thus, it could not be considered a pre-existing disability for purposes of SIBTF liability. On the contrary, applicant’s pre-existing back disability was labor disabling because it is independently capable of supporting an award, as evidenced by the 38% permanent disability rating.

Second, the panel finds error in the manner in which the WCJ combined applicant’s pre-existing and current disabilities. This aspect of the panel’s decision is especially illuminating. It acknowledges a distinction between combining two or more disabilities or impairments arising from a single injury with combining non-overlapping, successive disabilities. As to the former, the combination of multiple disabilities caused by a single injury is generally performed by use of the Combined Values Chart (CVC) in the 2005 Permanent Disability Rating Schedule or the Multiple Disabilities Table (MDT) in the 1997 Permanent Disability Rating Schedule. The rationale behind the use of the CVC and the MDT to combine multiple disabilities/impairments arising from a single injury is to avoid any overlap between disabilities/impairments and/or pyramiding. Even though neither the CVC nor the MDT expressly provides that their application is restricted to the rating of multiple disabilities arising from a single injury, the panel references language indicative of that intent in both. It then recognizes that non-overlapping, successive disabilities are entirely different. They do not arise from a single injury, but, instead, from a pre-existing injury or impairment and a subsequent injury. Therefore, the panel chose to follow the holding in Bookout, supra, and combine applicant’s pre-existing disability with his subsequent disability by simple addition.

Although the WCJ did properly use addition to combine applicant’s non-overlapping prior and subsequent disabilities, he incorrectly determined the percentage of permanent disability caused by the subsequent injury. Applicant’s subsequent injury involved his respiratory system, skin (sarcoidosis) and psyche. After adjustment for age, occupation and apportionment, it produced a rating of 65% permanent disability. Rather than accept the 65% rating as the starting point to decide if applicant met the thresholds in section 4751, the WCJ chose to only consider the respiratory component of the industrial injury. The panel finds no legal basis for the separation of the respiratory impairment from the other impairments and states that such separation contravenes the purpose of section 4751, which is intended to provide compensation for an employee’s combined permanent disability with the employer responsible only for the industrial portion and SIBTF responsible for the remainder.

To determine SIBTF liability, the WCJ should have included all three of applicant’s impairments. Those three impairments (respiratory, skin, and psyche) were properly combined by the CVC since they arose from a single injury. However, section 4751 has been interpreted to exclude adjustments for age, occupation and apportionment for purposes of establishing the 35% threshold. Without consideration of age, occupation and apportionment, applicant’s 65% rating is 81%, which exceeds the 35% threshold.

Since applicant met the threshold under section 4751, the final step is add together applicant’s current disability with his prior disability. That is, the current respiratory, skin and psyche disability of 65% is added to his prior back disability of 38%, which equals 100%. Applicant’s employer is liable for the current 65% disability and the SIBTF is liable for the remainder of the combined disability.

Finally, the panel decision addresses the timeliness of applicant’s application for SIBTF benefits. Applicant filed the SIBTF application two months after DEU issued the rating of his subsequent injury, and 20 days before the WCJ issued the decision finding applicant sustained 65% permanent disability as a result of the injury to his respiratory system, skin, and psyche. The panel emphasizes that there is no statutory time limit to file for SIBTF benefits. Instead, case precedent has established that an application for SIBTF benefits will not be barred if an applicant files a claim against the SIBTF within a reasonable time after he learns from a WCJ’s findings on the issue of permanent disability that the SIBTF has liability. (Subsequent Injuries Fund v Workmen’s Comp. Appeals Bd. (Talcott) (1970) 2 Cal. 3d 56 [35 Cal. Comp. Cases 80].) Here, applicant filed his application for SIBTF benefits two months after DEU issued a rating of his subsequent injury and 20 days before the WCJ issued the decision finding 65% disability. Therefore, it was timely.

Perhaps you’ve never litigated a claim involving the SIBTF. No doubt one day you will, so it makes good sense to keep Harris handy as a reference point. The key factors to keep in mind in any SIBTF litigation are really quite straightforward. Hopefully this list will be a helpful guide:

• To file an application against the SIBTF, the employee must have a pre-existing permanent partial disability.
• The employee’s pre-existing permanent partial disability can be of industrial or non-industrial origin, but it must be labor disabling (Ferguson, supra, 50 Cal. 2d at p. 477).
• The employee must sustain a subsequent industrial injury that results in additional permanent partial disability.
• When the pre-existing disability and the subsequent disability are combined, the resulting disability must be greater than what the employee’s disability would have been if he only sustained the subsequent disability and not the pre-existing disability.
• When the pre-existing disability is combined with the subsequent disability, the resulting permanent disability must be equal to 70% or more.
• One of the following must be met:
  • the pre-existing disability must have affected a hand, an arm, a foot, a leg or an eye, and the subsequent injury must affect an opposite and corresponding member and the disability from the subsequent injury must be equal to 5% or more of the total without adjustment for age, occupation or apportionment. (§ 4751; Bookout, supra, 62 Cal. App. 3d 214.)
  • (b) The permanent disability resulting from the subsequent industrial injury, when considered alone and without regard to or adjustment for the employee’s age, occupation, or apportionment must be equal to 35 percent or more of the total. (id.)

• There is no statutory time limit within which to file an application against SIBTF, but an application must be filed within a reasonable time after an applicant learns from the board’s findings on permanent disability that the SIBTF may have liability. (SIF (Talcott), supra, 2 Cal. 3d at p. 65.)

Practitioners should check the subsequent history of any cases before citing to them.

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