Credit for Overpayment of Permanent Disability - IEA Training

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Credit for Overpayment of Permanent Disability

It is not uncommon for a defendant to overpay permanent disability (PD) benefits. An overpayment might occur for several reasons. The defendant might not receive the physician’s report declaring the applicant permanent and stationary until long after the evaluation. Or a defendant simply might make a mistake and pay more PD than required.

Labor Code § 4909 states, “Any payment, allowance, or benefit received by the injured employee … [that] was not then due and payable … shall not, in the absence of any agreement, be an admission of liability for compensation on the part of the employer, but any such payment, allowance, or benefit may be taken into account by the appeals board in fixing the amount of the compensation to be paid.” LC 4909 is widely understood as empowering the Workers’ Compensation Appeals Board (WCAB) with discretion to grant or deny credit for overpayments.

Effective Jan. 1, 2020, the WCAB adopted California Code of Regulations § 10555, which specifies the requirements of a petition for credit “[w]hen a dispute arises as to a credit for any payments or overpayments of benefits pursuant to Labor Code section 4909.” So, the WCAB rules now require a petition for credit when there’s an issue regarding overpayment of benefits.

As explained in the Initial Statement of Reasons for the WCAB’s amendments to its Rules of Practice and Procedure, CCR 10555 was added to “clarif[y] the procedure for an employer claiming a credit pursuant to Labor Code section 4909 for overpayment of benefits.” The WCAB explained that “[T]his rule makes clear that an employer must not unilaterally take credit for alleged overpayment of benefits, but must file a petition for credit with the WCAB to have the issue adjudicated.”[1]

Recently, however, in Ramrakha v. State of California, Richard J. Donovan Correctional Facility, 2023 Cal. Wrk. Comp. P.D. LEXIS 82, the WCAB held that failure to file a petition for credit complying with CCR 10555 is not a basis for denying a claim for credit. In that case, the applicant filed claims for injuries in 2001 and 2003, and a cumulative trauma injury through 2013. The defendant paid permanent disability benefits from the 2003 claim and sought to take credit for overpayments in the claim toward the other claims. The WCAB granted reconsideration of a WCJ’s decision to deny credit based on the defendant’s failure to file a petition for credit.

The WCAB first noted that the defendant provided the applicant’s attorney with a petition for credit that complied with CCR 10555 on the date of trial, although the petition was not filed with the WCAB until after trial. It explained that the better practice was to submit a petition for credit as soon as a dispute arises as to a credit for any payments or overpayments of benefits pursuant to LC 4909. Nevertheless, the WCAB stated that “[T]he rule includes nothing that authorizes or requires disallowance of credit for failure to comply with the rule’s requirements regarding the content of ‘any petition for credit.'” So it concluded that “[D]efendant’s alleged failure to timely comply with WCAB Rule 10555(a) is not a basis for disallowing its claim for credit.”

The WCAB explained that credit pursuant to LC 4909 is within its discretionary authority, and that it may consider weighing the equities between the parties, as well as whether the applicant’s compensation award will be seriously impaired if credit is allowed. After reviewing the facts of the case, the WCAB concluded that the defendant should receive credit for payments in the 2003 injury against its liability in the 2001 injury. That’s because the QME originally did not apportion between the injuries, and the defendant issued PD payments from the 2003 injury. Because the parties later stipulated that the 2001 injury resulted in 25 percent PD and the 2003 injury resulted in 4 percent PD, the WCAB found that the defendant’s payment of PD for the two specific injuries was consistent with the intent of LC 4909.

But the WCAB disallowed credit for payments in the 2003 injury for the defendant’s liability toward the 2013 claim. The WCAB found that the defendant did not show why it continued to advance PD for 3 ½ years when it had doubts about that doctor’s apportionment. It also found that credit would result in a material impairment of the applicant’s permanent disability award for the 2013 injury, so credit was not allowed for that injury.

This decision is consistent with the existing case law that failure to strictly comply with WCAB requirements for a petition do not deprive the board of jurisdiction to decide a dispute. The rules of procedure serve the convenience of the WCAB and facilitate the proceedings, but do not deprive it of the power to dispense with compliance when the purposes of justice require it, particularly when the violation is formal and does not substantially prejudice the other party. (Beaida v. WCAB (1968) 33 CCC 345, 349.) The WCAB historically has recognized that a declaration of readiness to proceed or other informal document may serve as a petition in other settings.

Of course, the best course would be for a defendant to file a petition for credit meeting the requirements of CCR 10555. But as long as the defendant has properly notified the applicant and the WCAB that it seeks credit for overpayments of benefits, its failure to file a formal petition will not be a basis for disallowing a claim for credit.

Ultimately, whether credit is to be allowed is a matter of discretion for the WCAB to weigh in light of the circumstances of a particular case. A defendant must be prepared to present evidence to support its claim for credit. The WCAB is more likely to award credit when benefits are paid in good faith through little or no fault by the defendant.

  1. See Initial Statement of Reasons for the Amendments to the WCAB’s Rules of Practice and Procedure (Rules) effective Jan. 1, 2020, pps. 2-3. This document is available on the DIR website.

  • Sure Log

    Sure Log

    Attorney of Counsel Michael Sullivan & Associates, LLP.

    Mr. Log is a specialist in workers’ compensation defense and related labor law issues. He analyzes files for litigation and settlement, conducts research, reviews records to facilitate completion of discovery and drafts a variety of documents, including trial and appellate briefs. He was instrumental in a 2009 case that ended vocational rehabilitation in California.

    Mr. Log prepares seminar material and co-authors white papers on significant topics in workers’ comp law, including “An Analysis of the New Regulations Regarding Disputes Over Medical-Legal Expense and Medical Treatment,” “Special Report: A First Look at SB 863,” about the 2012 legislation’s wide-ranging changes to the state’s workers’ compensation system, and “SB 863: Five Years Later.”

    Mr. Log is also Co-Author of “Sullivan on Comp,” a 16-chapter objective analysis of California workers’ compensation law, updated monthly.