California: Is the Justice Court’s Interpretation of Hikida Correct?

What clues can we garner from the panel decision in Durazo?

The Court of Appeal decision in Hikida v. Workers’ Compensation Appeals Bd. (2017) 12 Cal. App. 5th 1249 [82 Cal. Comp. Cases 679] (Hikida) resolved the issue of the proper application of Labor Code sections 4663 and 4664 when it held that the injured employee was entitled to a non-apportioned award of permanent disability because that permanent disability resulted from the unsuccessful surgical intervention for her industrial carpal tunnel injury. The court’s rationale was straightforward and persuasive: the new regime of apportionment based on causation was not intended to alter the long-standing rule that employers are responsible for all medical treatment necessitated in any part by an industrial injury, including the consequences of that medical treatment without apportionment. At least we thought that Hikida put to rest that issue. Then came the decision of the Court of Appeal in County of Santa Clara v. Workers’ Comp. Appeals Bd. (2020) 49 Cal. App. 5th 605 [84 Cal. Comp. Cases 467] (Justice) that turned our understanding of Hikida on its head when it held that Hikida only precludes apportionment where the industrial medical treatment is the sole cause of the permanent disability.

Recall that in Hikida the employee sustained an industrial carpal tunnel injury that was surgically treated. After the surgery, she developed chronic regional pain syndrome (CRPS). The AME found her 100% permanently disabled, which he attributed entirely to the failed carpal tunnel surgery, but then concluded that her carpal tunnel injury was 90% industrial and 10% non-industrial. The Appeals Board panel affirmed the award of 90% permanent disability after apportionment, but on review the Court of Appeal reversed, concluding that non-industrial apportionment of the injured employee’s CRPS related permanent disability was not justified because that permanent disability resulted entirely from the unsuccessful industrial carpal tunnel surgery.

Contrast Justice. In that case the employee sustained a bilateral knee injury that was industrially treated with bilateral knee replacement surgery. The surgery significantly improved the injured employee’s ability to walk and weight bear, but it also resulted in a higher level of permanent disability under the methodology employed by the 2005 Permanent Disability Rating Schedule. Although the AME found 50% non-industrial apportionment due to pre-existing degenerative bilateral knee arthritis, the WCJ issued a non-apportioned award, following the Hikida principle. An Appeals Board panel affirmed the decision, but the Court of Appeal disagreed and distinguished Hikida. It reasoned that the carpal tunnel surgery the employee in Hikida underwent to treat her industrial condition caused a new and more disabling condition in the form of CRPS. Long-standing precedent, the Justice court recognized, made the employer responsible for the new consequential injury without apportionment. The court further recognized a factual distinction in Justice. Specifically, in Justice the injured employee’s permanent disability was not caused entirely by the industrial medical treatment. That treatment (bilateral knee replacement surgery) did not result in a new unexpected consequential injury. In fact, the knee replacement surgery actually improved the employee’s ability to walk and weight bear. Further, substantial medical opinion confirmed that her permanent disability was caused 50% by industrial factors and 50% by non-industrial factors.

On May 8, 2020, an Appeals Board panel issued its Opinion and Decision after Reconsideration in Durazo v. Solomon Dental Corporation, 2020 Cal. Wrk. Comp. P.D. LEXIS ___. Durazo is significant because it ultimately may resolve whether a conflict exists between Hikida and Justice and, if so, which of the two is the most persuasive. Briefly, in Durazo the employee sustained an admitted industrial injury to her left knee. The knee injury was surgically treated, but with poor results. The employee’s treating physician acknowledged pre-existing osteoarthritis but opined that there was no basis for apportionment because the permanent disability was solely the result of the industrial injury and the poor results of the surgery. The orthopedic consult similarly found permanent disability without apportionment, based on the employee’s poor response to the knee surgery. The Panel QME agreed that the employee had a poor result from the surgery but recommended that permanent disability be apportioned 50% to pre-existing osteoarthritis.

On March 15, 2018, the WCJ issued a Findings, Award and Order by which she found 41% permanent disability without apportionment. The WCJ’s Opinion on Decision explains that the finding of permanent disability stems from the poor surgical result following the knee surgery and, in accord with the holding in Hikida, the employer is responsible for both medical treatment and permanent disability arising directly from unsuccessful medical treatment without apportionment even where the need for surgery was necessitated by both industrial and non-industrial conditions.

Defendant sought reconsideration contending, among other particulars, that the WCJ erred by failing to follow the substantial medical opinion of the panel QME and apportion the award of permanent disability 50% to pre-existing osteoarthritis; and that Hikida does not apply to the facts in the case. An Appeals Board panel granted reconsideration to enable further study of the legal issues and facts involved in the case. While the matter was still pending on reconsideration, the decision in Justice issued.

In its August 25, 2020 Decision after Reconsideration, the panel observes that the Court of Appeal’s decision in Justice issued after both the Court of Appeal’s decision in Hikida and the Durazo Findings, Award and Order, which relied on Hikida. Consequently, neither the WCJ nor the parties in Durazo had an opportunity to consider the effect of Justice, if any, upon the issues of permanent disability and apportionment in the case. Consistent with principles of due process, the panel chose to rescind the WCJ’s March 15, 2018 decision and return the matter to the trial level for further proceedings and a new decision.

While the panel’s Opinion and Decision after Reconsideration specifically declines to express an opinion on how the dispute in Durazo should ultimately be resolved, it makes a number of observations that are particularly noteworthy. Foremost, the opinion reminds us that if there is a conflict between Hikida and Justice, the WCAB is free to choose between those conflicting lines of authority until either the Supreme Court resolves such conflict or the Legislature enacts legislation that addresses the uncertainty in the law. Next, the opinion observes that it may be necessary for the evidentiary record to be further developed, and lists two possible areas that might warrant further development: (1) the opinions of the orthopedic consult regarding overall permanent disability; and (2) whether the knee replacement surgery may have eliminated the employee’s pre-existing osteoarthritis, in which case the surgery might be considered the sole cause of her permanent disability. It seems safe to say that we shouldn’t expect a rapid decision from the trial level. The panel’s observations raise important considerations that should ultimately help determine whether Justice correctly distinguished the holding in Hikida. Stay tuned!

Panel decisions are not binding authority. Practitioners should check the subsequent history of any cases before citing to them.

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